<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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Commission file number 0-25648
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AFG Investment Trust D
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(Exact name of registrant as specified in its charter)
Delaware 04-3157232
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 N. Washington St., Fifth Floor, Boston, MA 02114
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
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Securities registered pursuant to Section 12(b) of the Act NONE
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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- ---------------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
2,089,030 Trust Beneficiary Interests
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(Title of class)
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes XX No
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State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. Not applicable. Securities are nonvoting for this purpose.
Refer to Item 12 for further information.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders for
the year ended December 31, 1996 (Part I and II)
<PAGE>
AFG INVESTMENT TRUST D
FORM 10-K
TABLE OF CONTENTS
PAGE
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PART I
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 5
ITEM 3. LEGAL PROCEEDINGS 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 5
PART II
ITEM 5. MARKET FOR THE TRUST'S SECURITIES AND RELATED SECURITY
HOLDER MATTERS 6
ITEM 6. SELECTED FINANCIAL DATA 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 7
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE TRUST 8
ITEM 11. EXECUTIVE COMPENSATION 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 10
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K 13-15
2
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PART I
ITEM 1. BUSINESS.
(a) General Development of Business
AFG Investment Trust D (the "Trust") was organized as a Delaware business
trust in accordance with the Delaware Business Trust Act (the "Act") on
August 31, 1992 for the purpose of acquiring and leasing to third parties a
diversified portfolio of capital equipment. Participants' capital initially
consisted of contributions of $1,000 from the Managing Trustee, AFG ASIT
Corporation, $1,000 from the Special Beneficiary, Equis Financial Group
Limited Partnership (formerly American Finance Group), a Massachusetts
limited partnership ("EFG" or the "Advisor"), and $100 from the Initial
Beneficiary, AFG Assignor Corporation, a wholly-owned affiliate of EFG. The
Trust issued 204,355 Beneficiary Interests to 260 investors on October 26,
1993, its first Interim Close. Sixteen subsequent Interim Closings in 1993,
1994 and 1995 have resulted in the issuance by the Trust of an additional
1,884,675 Beneficiary Interests to 2,375 investors. In total, the Trust
issued 2,089,030 Beneficiary Interests representing a total purchase price of
$52,225,750 to 2,635 investors. The Trust's Final Closing occurred on
February 6, 1995. The Trust has one Managing Trustee, AFG ASIT Corporation, a
Massachusetts corporation and affiliate of EFG, and one Special Beneficiary,
EFG. The Managing Trustee and the Special Beneficiary are not required to
make any other capital contributions except as may be required under the
Amended and Restated Declaration of Trust (the "Trust Agreement").
(b) Financial Information About Industry Segments
The Trust is engaged in only one industry segment: the business of
acquiring capital equipment and leasing the equipment to creditworthy lessees
on a full-payout or operating lease basis. Full-payout leases are those in
which aggregate noncancellable rents equal or exceed the Purchase Price of
the leased equipment. Operating leases are those in which the aggregate
noncancellable rental payments are less than the Purchase Price of the leased
equipment. Industry segment data is not applicable.
(c) Narrative Description of Business
The Trust was organized to acquire a diversified portfolio of capital
equipment subject to various full-payout and operating leases and to lease
the equipment to third parties as income-producing investments. More
specifically, the Trust's primary investment objectives are to acquire and
lease equipment which will:
1. Generate monthly cash distributions;
2. Preserve and protect Trust capital; and
3. Maximize residual value for ultimate sale.
The Trust has the additional objective of providing certain federal
income tax benefits.
Significant operations commenced coincident with the Trust's initial
purchase of equipment and associated lease commitments on October 26, 1993.
The acquisition of the equipment and its associated leases is described in
detail in Note 3 to the financial statements included in Item 14, herein. The
Trust is expected to terminate by December 31 of the eleventh year following
its Closing Date, or December 31, 2006.
The Trust has no employees; however, it entered into an Advisory
Agreement with EFG. EFG's role, among other things, is to (i) evaluate,
select, negotiate, and consummate the acquisition of equipment, (ii) manage
the leasing, re-leasing, financing, and refinancing of equipment, and (iii)
arrange the resale of equipment. The Advisor is compensated for such services
as described in the Trust Agreement, Item 13 herein and in Note 4 to the
financial statements included in Item 14, herein.
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The Trust's investment in equipment is, and will continue to be, subject
to various risks, including physical deterioration, technological
obsolescence and defaults by lessees. A principal business risk of owning and
leasing equipment is the possibility that aggregate lease revenues and
equipment sale proceeds will be insufficient to provide an acceptable rate of
return on invested capital after payment of all debt service costs and
operating expenses. Consequently, the success of the Trust is largely
dependent upon the ability of the Managing Trustee and its Affiliates to
forecast technological advances, the ability of the lessees to fulfill their
lease obligations and the quality and marketability of the equipment at the
time of sale.
In addition, the leasing industry is very competitive. Although all funds
available for acquisitions have been invested in equipment, subject to
noncancellable lease agreements, the Trust will encounter considerable
competition when equipment is re-leased or sold at the expiration of primary
lease terms. The Trust will compete with lease programs offered directly by
manufacturers and other equipment leasing companies, including business
trusts and limited partnerships organized and managed similarly to the Trust,
and including other EFG-sponsored partnerships and trusts, which may seek to
re-lease or sell equipment within their own portfolios to the same customers
as the Trust. Many competitors have greater financial resources and more
experience than the Trust, the Managing Trustee and EFG.
The Trust Agreement provides for the reinvestment of Cash From Sales or
Refinancings in additional equipment until February 1999, a period of four
years following the Final Closing. Upon the expiration of each primary lease
term, the Managing Trustee will determine whether to sell or re-lease the
Trust's equipment, depending on the economic advantages of each alternative.
Over time, the Trust will begin to liquidate its portfolio of equipment.
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1996, 1995 and 1994 is
incorporated herein by reference to Note 2 to the financial statements in the
1996 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with
the Securities and Exchange Commission.
Default by a lessee under a lease agreement may cause equipment to be
returned to the Trust at a time when the Managing Trustee or the Advisor is
unable to arrange the sale or re-lease of such equipment. This could result
in the loss of a portion of potential lease revenues and weaken the Trust's
ability to repay related indebtedness.
EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Equipment Manager or Advisor to the Trust and several
other Direct-Participation equipment leasing programs sponsored or
co-sponsored by EFG (the "Other Investment Programs"). The Company arranges
to broker or originate equipment leases, acts as remarketing agent and asset
manager, and provides leasing support services, such as billing, collecting,
and asset tracking.
The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by
Gary D. Engle, its President and Chief Executive Officer. Equis Corporation
also owns a controlling 1% general partner interest in EFG's 99% limited
partner, GDE Acquisition Limited Partnership ("GDE LP"). Equis Corporation
and GDE LP were established in December 1994 by Mr. Engle for the sole
purpose of acquiring the business of AFG.
In January 1996, the Company sold certain assets of AFG relating
primarily to the business of originating new leases, and the name "American
Finance Group," and its acronym to a third party (the "Buyer"). AFG changed
its name to Equis Financial Group Limited Partnership after the sale was
concluded. Pursuant to terms of the sale agreements, EFG agreed not to
compete with the Buyer's lease origination business for a period of five
years; however, EFG is permitted to originate certain equipment leases,
principally those involving non-investment grade lessees and ocean-going
vessels, which are not in competition with the Buyer. In addition, the sale
agreements specifically reserved to EFG the rights to continue using the name
American Finance Group and its
4
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acronym in connection with the Trust and the Other Investment Programs and to
continue managing all assets owned by the Trust and the Other Investment
Programs, including the right to satisfy all required equipment acquisitions
utilizing either brokers or the Buyer. Geoffrey A. MacDonald, Chairman of
Equis Corporation and Gary D. Engle agreed not to compete with the sold
business on terms and conditions similar to those for the Company.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
Not applicable.
ITEM 2. PROPERTIES.
Incorporated herein by reference to Note 3 to the financial statements in
the 1996 Annual Report.
ITEM 3. LEGAL PROCEEDINGS.
Incorporated herein by reference to Note 7 to the Financial Statements in
the 1996 Annual Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Incorporated herein by reference to Note 8 to the financial statements in
the 1996 Annual Report.
5
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PART II
ITEM 5. MARKET FOR THE TRUST'S SECURITIES AND RELATED SECURITY HOLDER MATTERS.
(a) Market Information
There is no public market for the resale of the Interests and it is not
anticipated that a public market for resale of the Interests will develop.
(b) Approximate Number of Security Holders
At December 31, 1996, there were 2,287 Beneficiaries in the Trust.
(c) Dividend History and Restrictions
Pursuant to Article VIII of the Trust Agreement, the Trust's
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings (each as defined below) are determined and distributed to the
Trust's Participants monthly. Each monthly distribution may vary in amount.
Currently, there are no restrictions that materially limit the Trust's
ability to distribute Distributable Cash From Operations and Distributable
Cash From Sales or Refinancings or that the Trust believes are likely to
materially limit the future distribution of Distributable Cash From
Operations and Distributable Cash From Sales or Refinancings. The Trust
expects to continue to distribute Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings on a monthly basis.
Distributions in 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Managing Special
Total Trustee Beneficiary Beneficiaries
---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Total 1996 distributions $3,190,518 $31,905 $263,218 $2,895,395
Total 1995 distributions 4,802,610 48,026 396,215 4,358,369
---------- ------- -------- ----------
Total $7,993,128 $79,931 $659,433 $7,253,764
---------- ------- -------- ----------
---------- ------- -------- ----------
</TABLE>
Distributions payable at December 31, 1996 and 1995 were $314,216 and
$241,702, respectively.
"Distributable Cash From Operations" means the net cash provided by the
Trust's normal operations after general expenses and current liabilities of
the Trust are paid, reduced by any reserves for working capital and
contingent liabilities to be funded from such cash, to the extent deemed
reasonable by the Managing Trustee, and increased by any portion of such
reserves deemed by the Managing Trustee not to be required for Trust
operations and reduced by all accrued and unpaid Equipment Management Fees
and, after Payout, further reduced by all accrued and unpaid Subordinated
Remarketing Fees. Distributable Cash From Operations does not include any
Distributable Cash From Sales or Refinancings.
"Distributable Cash From Sales or Refinancings" means Cash From Sales or
Refinancings as reduced by (i)(a) amounts reinvested in additional equipment
in accordance with Sections 4.2(b)(v) and 4.2(b)(vi) of the Trust Agreement,
or (b) the proceeds from the sale of an interest in a joint venture which are
reinvested in additional equipment, (ii) any accrued and unpaid Equipment
Management Fee and Acquisition Fees and Acquisition Expenses paid with
respect to additional equipment acquired through reinvestment of Cash From
Sales or Refinancings in accordance with Section 4.2(b)(v) of the Trust
Agreement and (iii) after Payout, any accrued and unpaid Subordinated Resale
Fees.
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"Cash From Sales or Refinancings" means cash received by the Trust from
sale or refinancing transactions, as reduced by (i)(a) all debts and
liabilities of the Trust required to be paid as a result of sale or
refinancing transactions, whether or not then due and payable (including any
liabilities on an item of equipment sold which are not assumed by the buyer
and any remarketing fees required to be paid to persons not affiliated with
the Managing Trustee, but not including any Subordinated Resale Fees whether
or not then due and payable) and (b) general expenses and current liabilities
of the Trust and (c) any reserves for working capital and contingent
liabilities funded from such cash to the extent deemed reasonable by the
Managing Trustee and (ii) increased by any portion of such reserves deemed by
the Managing Trustee not to be required for Trust operations. In the event
the Trust accepts a note in connection with any sale or refinancing
transaction, all payments subsequently received in cash by the Trust with
respect to such note shall be included in Cash From Sales or Refinancings,
regardless of the treatment of such payments by the Trust for tax or
accounting purposes. If the Trust receives purchase money obligations in
payment for equipment sold, which are secured by liens on such equipment, the
amount of such obligations shall not be included in Cash From Sales or
Refinancings until the obligations are fully satisfied.
Each distribution of Distributable Cash From Operations and Distributable
Cash From Sales or Refinancings of the Trust shall be made 90.75% to the
Beneficiaries, 8.25% to the Special Beneficiary and 1% to the Managing
Trustee.
"Payout" is defined as the first time when the aggregate amount of all
distributions to the Beneficiaries of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings equals the aggregate amount of
the Beneficiaries' original capital contributions plus a cumulative annual
distribution of 10% (compounded quarterly and calculated beginning with the
last day of the month of the Trust's Closing Date) on their aggregate
unreturned capital contributions. For purposes of this definition, capital
contributions shall be deemed to have been returned only to the extent that
distributions of cash to the Beneficiaries exceed the amount required to
satisfy the cumulative annual distribution of 10% (compounded quarterly) on
the Beneficiaries' aggregate unreturned capital contributions, such
calculation to be based on the aggregate unreturned capital contributions
outstanding on the first day of each month.
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings ("Distributions") must be distributed within 45 days after the
completion of each calendar month. Each Distribution is described in a
statement sent to the Beneficiaries.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated herein by reference to the section entitled "Selected
Financial Data" in the 1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the 1996 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated herein by reference to the financial statements and
supplementary data included in the 1996 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
7
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE TRUST.
(a-b) Identification of Directors and Executive Officers
The trust has no directors or officers. As indicated in Item 1 of this
report, AFG ASIT Corporation is the Managing Trustee of the Trust. Under the
Trust Agreement, the Managing Trustee is solely responsible for the operation of
the Trust's properties and the Beneficiaries have no right to participate in the
control of such operations. The names, titles and ages of the Directors and
Executive Officers of the Managing Trustee as of March 15, 1997 are as follows:
DIRECTORS AND EXECUTIVE OFFICERS
OF THE MANAGING TRUSTEE (See Item 13)
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<TABLE>
<CAPTION>
Name Title Age Term
<S> <C> <C> <C>
Geoffrey A. MacDonald Chairman and a member of the 48 Until a
Executive Committee of EFG successor
and President and a Director is duly
of the Managing Trustee elected
and
Gary D. Engle President and Chief Executive 48 qualified
Officer and member of the
Executive Committee of EFG and a
Director of the Managing Trustee
Gary M. Romano Executive Vice President and Chief 37
Operating Officer of EFG and
Clerk of the Managing Trustee
Michael J. Butterfield Vice President, Finance and Treasurer 37
of EFG and Treasurer of the
Managing Trustee
James A. Coyne Senior Vice President of EFG and 36
Vice President of the Managing
Trustee
James F. Livesey Vice President, Aircraft and 47
Vessels of EFG
Sandra L. Simonsen Senior Vice President, Information 46
Systems of EFG
Gail D. Ofgant Vice President, Lease Operations 31
of EFG
</TABLE>
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Directors or
Executive Officers.
8
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(e) Business Experience
Mr. MacDonald, age 48, is a co-founder, Chairman and a member of the
Executive Committee of EFG and President and a Director of the Managing
Trustee. Mr. MacDonald was also a co-founder, Director and Senior Vice
President of EFG's predecessor corporation from 1980 to 1988. Mr. MacDonald
is Vice President of American Finance Group Securities Corp. and a limited
partner in Atlantic Acquisition Limited Partnership ("AALP"). Prior to
co-founding EFG's predecessors, Mr. MacDonald held various executive and
management positions in the leasing and pharmaceutical industries. Mr.
MacDonald holds an M.B.A. from Boston College and a B.A. degree from the
University of Massachusetts (Amherst).
Mr. Engle, age 48, is President and Chief Executive Officer and a member
of the Executive Committee of EFG and President of AFG Realty Corporation.
Mr. Engle is Vice President and a Director of certain of EFG's affiliates and
a Director of the Managing Trustee. On December 16, 1994, Mr. Engle acquired
control of the Managing Trustee, EFG and each of EFG's subsidiaries. Mr.
Engle controls the general partner of AALP and is also a limited partner in
AALP. From 1987 to 1990, Mr. Engle was a principal and co-founder of Cobb
Partners Development, Inc., a real estate and mortgage banking company. From
1980 to 1987, Mr. Engle was Senior Vice President and Chief Financial Officer
of Arvida Disney Company, a large scale community development company owned
by Walt Disney Company. Prior to 1980, Mr. Engle served in various management
consulting and institutional brokerage capacities. Mr. Engle has an M.B.A.
from Harvard University and a B.S. degree from the University of
Massachusetts (Amherst).
Mr. Romano, age 37, is Executive Vice President and Chief Operating
Officer of EFG and certain of its affiliates and Clerk of the Managing
Trustee. Mr. Romano joined EFG in November 1989 and was appointed Executive
Vice President and Chief Operating Officer in April 1996. Prior to joining
EFG, Mr. Romano was Assistant Controller for a privately-held real estate
company which he joined in 1987. Mr. Romano held audit staff and manager
positions at Ernst & Whinney (now Ernst & Young LLP) from 1982 to 1986. Mr.
Romano is a C.P.A. and holds a B.S. degree from Boston College.
Mr. Butterfield, age 37, joined EFG in June 1992 and became Vice
President, Finance and Treasurer of EFG and certain of its affiliates in
April 1996 and is Treasurer of the Managing Trustee. Prior to joining EFG,
Mr. Butterfield was an Audit Manager with Ernst & Young LLP, which he joined
in 1987. Mr. Butterfield was employed in public accounting and industry
positions in New Zealand and London (U.K.) prior to coming to the United
States in 1987. Mr. Butterfield attained his Associate Chartered Accountant
(A.C.A.) professional qualification in New Zealand and has completed his
C.P.A. requirements in the United States. He holds a Bachelor of Commerce
degree from the University of Otago, Dunedin, New Zealand.
Mr. Coyne, age 36, is Senior Vice President of EFG. Mr. Coyne joined EFG
in 1989, remained until May 1993, and rejoined EFG in November 1994. From May
1993 through November 1994, he was with the Raymond Company, a private
investment firm, where he was responsible for financing corporate and real
estate acquisitions. From 1985 through 1989, Mr. Coyne was affiliated with a
real estate investment company and an equipment leasing company. Prior to
1985 he was with the accounting firm of Ernst & Whinney (now Ernst & Young
LLP). He has a BS in Business Administration from John Carroll University, a
Masters Degree in Accounting from Case Western Reserve University and is a
Certified Public Accountant.
Mr. Livesey, age 47, is Vice President, Aircraft and Vessels, of EFG. Mr.
Livesey joined EFG in October, 1989, and was promoted to Vice President in
January 1992. Prior to joining EFG, Mr. Livesey held sales and marketing
positions with two privately-held equipment leasing firms. Mr. Livesey holds
an M.B.A. from Boston College and B.A. degree from Stonehill College.
Ms. Simonsen, age 46, joined EFG in February 1990 and was promoted to
Senior Vice President, Information Systems in April 1996. Prior to joining
EFG, Ms. Simonsen was Vice President, Information Systems with Investors
Mortgage Insurance Company which she joined in 1973. Ms. Simonsen provided
systems consulting for a subsidiary of American International Group and
authored a software program published by IBM. Ms. Simonsen holds a B.A.
degree from Wilson College.
9
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Ms. Ofgant, age 31, joined EFG in July 1989, and is currently Vice
President, Lease Operations. Ms. Ofgant held the position of Manager, Lease
Operations at EFG through March, 1996. Prior to joining EFG, Ms. Ofgant was
employed by Security Pacific National Trust Company. Ms. Ofgant holds a BS
Degree in Finance from Providence College.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
ITEM 11. EXECUTIVE COMPENSATION.
(a) Cash Compensation
Currently, the Trust has no employees. However, under the terms of the
Trust Agreement, the Trust is obligated to pay all costs of personnel
employed full or part-time by the Trust, including officers or employees of
the Managing Trustee or its Affiliates. There is no plan at the present time
to make any officers or employees of the Managing Trustee or its Affiliates
employees of the Trust. The Trust has not paid and does not propose to pay
any options, warrants or rights to the officers or employees of the Managing
Trustee or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Trust has no employees, as discussed in Item 11(a), pursuant
to section 10.4(c) of the Trust Agreement, the Trust incurs a monthly charge
for personnel costs of the Advisor for persons engaged in providing
administrative services to the Trust. A description of the remuneration paid
by the Trust to the Managing Trustee and its Affiliates for such services is
included in Item 13, herein and in Note 4 to the financial statements
included in Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the Managing
Trustee or its Affiliates which results or may result from their resignation,
retirement or any other termination.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
By virtue of its organization as a trust, the Trust has no outstanding
securities possessing traditional voting rights. However, as provided in
Section 11.2(a) of the Trust Agreement (subject to Section 11.2(b)), a
majority interest of the Beneficiaries have voting rights with respect to:
1. Amendment of the Trust Agreement;
2. Termination of the Trust;
3. Removal of the Managing Trustee; and
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4. Approval or disapproval of the sale of all or substantially all of the
assets of the Trust (except in the orderly liquidation of the Trust upon its
termination and dissolution).
No person or group is known by the Managing Trustee to own beneficially
more than 5% of the Trust's 2,089,030 outstanding Interests as of March 1,
1997.
The ownership and organization of EFG is described in Item 1 of this
report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Managing Trustee of the Trust is AFG ASIT Corporation, an affiliate
of EFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Trust are paid by EFG on behalf of
the Trust and EFG is reimbursed at its actual cost for such expenditures.
Fees and other costs incurred during the years ended December 31, 1996, 1995
and 1994, which were paid or accrued by the Trust to EFG or its Affiliates,
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Reimbursements for selling commissions -- $ 411,805 $2,167,363
Reimbursements for organization and
offering costs -- 147,073 774,058
Equipment acquisition fees $36,120 210,276 75,846
Equipment management fees 1,071,560 737,323 303,749
Administrative charges 48,638 21,000 14,000
Reimbursable operating expenses due
to third parties 527,519 328,804 175,636
Interest on notes payable affiliate -- 117 39,828
---------- ---------- ----------
Total $1,683,837 $1,856,398 $3,550,480
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
American Finance Group Securities Corp., an affiliate of EFG, was paid
the entire amount of selling commissions incurred at each of the Closings of
the Trust. Commissions of $2,579,168, relating to the Closings during 1994
and 1995, were then paid to the Soliciting Dealers responsible for the sales.
No Soliciting Dealer commissions were earned by American Finance Group
Securities Corp. for Interests sold to an unrelated party.
As provided under the terms of the Trust Agreement, EFG is compensated
for its services to the Trust. Such services include all aspects of
acquisition, management and sale of equipment. For acquisition services, EFG
is compensated by an amount equal to .28% of Asset Base Price paid by the
Trust. For acquisition services resulting from reinvestment, EFG is
compensated by an amount equal to 3% of Equipment Base Price paid by the
Trust. For management services, EFG is compensated by an amount equal to the
lesser of (i) 5% of gross operating lease rental revenue and 2% of gross full
payout lease rental revenue received by the Trust or (ii) fees which the
Managing Trustee reasonably believes to be competitive for similar services
for similar equipment. Both of these fees are subject to certain limitations
defined in the Trust Agreement. Compensation to EFG for services connected to
the remarketing of equipment is calculated as the lesser of (i) 3% of gross
sale proceeds or (ii) one-half of reasonable brokerage fees otherwise payable
under arm's length circumstances. Payment of the remarketing fee is
subordinated to Payout and is subject to certain limitations defined in the
Trust Agreement.
Administrative charges represent amounts owed to EFG, pursuant to Section
10.4(c) of the Trust Agreement, for persons employed by EFG who are engaged
in providing administrative services to the Trust. Reimbursable operating
expenses due to third parties represent costs paid by EFG on behalf of the
Trust which are reimbursed to EFG.
11
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All equipment was purchased from EFG, one of its Affiliates, or directly
from third-party sellers. The Trust's Purchase Price is determined by the
method described in Note 2 to the Trust's financial statements included in
Item 14, herein.
All rents and proceeds from the sale of equipment are paid by the lessee
directly to either EFG or to a lender. EFG temporarily deposits collected
funds in a separate interest-bearing escrow account prior to remittance to
the Trust. At December 31, 1996, the Trust was owed $1,865,582 by EFG for
such funds and the interest thereon. This balance includes equipment sale
proceeds of approximately $1,618,000 which relate to the sale of certain
vessel equipment in December 1996. Debt proceeds of $1,980,073, which relate
to the leveraging of certain rail equipment in the Trust's portfolio, were
deposited into the escrow account on December 31, 1996. These funds were
remitted to the Trust in January 1997.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Trust
None.
(d) Transactions with Promoters
See Item 13(a) above.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors...................................*
Statement of Financial Position
at December 31, 1996 and 1995....................................*
Statement of Operations
for the years ended December 31, 1996, 1995 and 1994.............*
Statement of Changes in Participants' Capital
for the years ended December 31, 1996, 1995 and 1994.............*
Statement of Cash Flows
for the years ended December 31, 1996, 1995 and 1994.............*
Notes to the Financial Statements................................*
(2) Financial Statement Schedules:
None required.
(3) Exhibits:
Except as set forth below, all Exhibits to Form 10-K, as set
forth in Item 601 of Regulation S-K, are not applicable.
<TABLE>
<CAPTION>
Exhibit
Number
- ------------
<S> <C>
4 Amended and Restated Declaration of Trust included as
Exhibit A to the Prospectus which is included in Registration
Statement on Form S-1 (No. 33-42946).
13 The 1996 Annual Report to security holders, a copy of
which is furnished for the information of the Securities and
Exchange Commission. Such Report, except for those portions
thereof which are incorporated herein by reference, is not
deemed "filed" with the Commission.
23 Consent of Independent Auditors.
</TABLE>
* Incorporated herein by reference to the appropriate portion of the 1996
Annual Report to security holders for the year ended December 31, 1996. (See
Part II)
13
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number
- ------------
<S> <C>
99 (a) Lease agreement with Stena Bulk AB was filed in the
Registrant's Annual Report on Form 10-K for the period ended
December 31, 1993 as Exhibit 28 (c) and is incorporated
herein by reference.
99 (b) Lease agreement with British Airways Plc was filed in the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 as Exhibit 28 (d) and is incorporated
herein by reference.
99 (c) Lease agreement with Diamond Shamrock Refining & Marketing
Company was filed in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 as Exhibit 28 (e)
and is incorporated herein by reference.
99 (d) Lease agreement with Emery Worldwide was filed in the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995 as Exhibit 99 (f) and is incorporated
herein by reference.
99 (e) Lease agreement with Chantel Shipping Corporation was filed
in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 as Exhibit 99 (g) and is
incorporated herein by reference.
</TABLE>
(b) Reports on Form 8-K
None.
14
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of AFG Investment Trust D of our report dated March 14, 1997, included in
the 1996 Annual Report to Participants of AFG Investment Trust D.
ERNST & YOUNG LLP
Boston, Massachusetts
March 14, 1997
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AFG INVESTMENT TRUST D
By: AFG ASIT Corporation,
a Massachusetts corporation and the
Managing Trustee of the Registrant.
By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle
------------------------- ----------------------------
Geoffrey A. MacDonald Gary D. Engle
Chairman and a member of the President and Chief Executive
Executive Committee of EFG and Officer and a member of the
President and a Director of the Executive Committee of EFG and a
Managing Trustee Director of the Managing Trustee
(Principal Executive Officer)
Date: March 31, 1997 Date: March 31, 1997
------------------------ ---------------------------
By: /s/ Gary M. Romano By: /s/ Michael J. Butterfield
------------------------ ----------------------------
Gary M. Romano Michael J. Butterfield
Executive Vice President and Chief Vice President, Finance and
Operating Officer of EFG and Clerk Treasurer of EFG and Treasurer
of the Managing Trustee of the Managing Trustee
(Principal Financial Officer) (Principal Accounting Officer)
Date: March 31, 1997 Date: March 31, 1997
------------------------ ---------------------------
16
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
No annual report has been sent to the Beneficiaries. A report will be
furnished to the Beneficiaries subsequent to the date hereof.
No proxy statement has been or will be sent to the Beneficiaries.
17
<PAGE>
AFG INVESTMENT TRUST
AFG Investment Trust D
Annual Report to the Participants, December 31, 1996
<PAGE>
AFG INVESTMENT TRUST D
INDEX TO ANNUAL REPORT TO THE PARTICIPANTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SELECTED FINANCIAL DATA .................................................................. 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...................................................... 3-7
FINANCIAL STATEMENTS:
Report of Independent Auditors ........................................................... 8
Statement of Financial Position
at December 31, 1996 and 1995 ........................................................... 9
Statement of Operations
for the years ended December 31, 1996, 1995 and 1994 .................................... 10
Statement of Changes in Participants' Capital
for the years ended December 31, 1996, 1995 and 1994 .................................... 11
Statement of Cash Flows
for the years ended December 31, 1996, 1995 and 1994 .................................... 12
Notes to the Financial Statements ....................................................... 13-22
ADDITIONAL FINANCIAL INFORMATION:
Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed ................................................. 23
Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings ................................................. 24
Schedule of Costs Reimbursed to the Managing Trustee and its
Affiliates as Required by Section 10.4 of the Amended and
Restated Declaration of Trust ........................................................... 25
</TABLE>
1
<PAGE>
SELECTED FINANCIAL DATA
The following data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the financial statements.
For the years ended December 31, 1996, 1995, 1994 and for the period
October 26, 1993 (commencement of operations) to December 31, 1993:
<TABLE>
<CAPTION>
SUMMARY OF
OPERATIONS 1996 1995 1994 1993
- ---------------------------------------------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Lease revenue....................................... $ 27,093,125 $ 17,068,315 $ 7,972,559 $ 133,330
Net income (loss)................................... $ 630,535 $ 3,629,331 $ 1,294,001 $ (206,328)
Per Beneficiary Interest:
Net income(loss)................................. $ 0.27 $ 1.59 $ 0.88 $ (0.54)
Cash distributions... ........................... $ 1.39 $ 2.10 $ 2.40 $ 0.57
Financial Position
- ------------------
Total assets........................................ $ 75,192,549 $ 87,519,870 $ 57,613,787 $ 25,565,922
Total long-term obligations......................... $ 32,827,977 $ 42,655,805 $ 17,244,814 $ 11,234,064
Participants' capital............................... $ 40,884,836 $ 43,444,819 $ 39,294,051 $ 13,502,915
</TABLE>
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year ended December 31, 1996 compared to the year ended
December 31, 1995 and the year ended December 31, 1995 compared
to the year ended December 31, 1994
OVERVIEW
- --------
As an equipment leasing trust, AFG Investment Trust D (the "Trust") was
organized to acquire a diversified portfolio of capital equipment subject to
lease agreements with third parties. The Trust was designed to progress
through three principal phases: acquisitions, operations, and liquidation.
During the operations phase, a period of approximately six years, all
equipment in the Trust's portfolio will progress through various stages.
Initially, all equipment will generate rental revenues under primary term
lease agreements. During the life of the Trust, these agreements will expire
on an intermittent basis and equipment held pursuant to the related leases
will be renewed, re-leased or sold, depending on prevailing market conditions
and the assessment of such conditions by Equis Financial Group Limited
Partnership (formerly American Finance Group), a Massachusetts limited
partnership ("EFG") to obtain the most advantageous economic benefit. Over
time, a greater portion of the Trust's original equipment portfolio will
become available for remarketing and cash generated from operations and from
sales or refinancings will begin to fluctuate. Ultimately, all equipment will
be sold and the Trust will be dissolved. The Trust's operations commenced in
1993.
RESULTS OF OPERATIONS
- ---------------------
For the year ended December 31, 1996, the Trust recognized lease revenue
of $27,093,125 compared to $17,068,315 and $7,972,559 for the years ended
December 31, 1995 and 1994, respectively. Lease revenue increased from 1994
to 1996 due to the acquisition of additional equipment throughout this
period, including the effects of reinvestment, and the recognition of early
termination proceeds received in 1996 in connection with the Trust's sale of
its interest in a vessel (see discussion below). The Trust's original
equipment acquisition and leveraging processes were completed in 1995. In the
near-term, aggregate rental revenues are expected to increase due to
reinvestment of available proceeds in other equipment, including proceeds
resulting from the Trust's sale of its interest in a vessel to the lessee.
Over time, the level of lease revenue will decline due to the expiration of
the Trust's primary lease term agreements. The Trust also earns interest
income from temporary investments of rental receipts and equipment sales
proceeds in short-term instruments.
The Trust's equipment portfolio includes certain assets in which the
Trust holds a proportionate ownership interest. In such cases, the remaining
interests are owned by EFG or an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enables the Trust to
further diversify its equipment portfolio by participating in the ownership
of selected assets, thereby reducing the general levels of risk which could
result from a concentration in any single equipment type, industry or lessee.
The Trust and each affiliate individually report, in proportion to their
respective ownership interests, their respective shares of assets,
liabilities, revenues, and expenses associated with the equipment.
During the year ended December 31, 1996, the Trust sold equipment having
a net book value of $7,388,546 to existing lessees and third parties. These
sales resulted in a net loss, for financial statement purposes, of
$5,149,874. The equipment sales in 1996 include the Trust's interest in a
vessel with an original cost and net book value of $9,296,103 and $6,482,211,
respectively, which the Trust sold to an existing lessee in December 1996. In
connection with this sale, the Trust realized aggregate cash proceeds of
$6,835,834, consisting of early termination proceeds of $5,217,665 and sale
proceeds of $1,618,169. For financial statement purposes, the Trust
recognized a net loss of $4,864,042, excluding early termination proceeds
recognized as lease revenue on the accompanying Statement of Operations. The
equipment was sold prior to the expiration of the related lease term. The
Trust intends to reinvest these proceeds, net of associated debt, in other
equipment in 1997.
3
<PAGE>
During 1995, the Trust sold equipment having a net book value of
$3,657,058 to existing lessees and third parties. These sales resulted in a
net gain, for financial statement purposes, of $1,466,398. The equipment
sales included certain railroad equipment with an original cost and net book
value of $4,313,181 and $3,469,324, respectively, which the Trust sold to a
third party in December 1995. In connection with this sale, the Trust
realized sales proceeds of $2,658,456 and the purchaser assumed related debt
and interest of $2,170,369 and $95,675, respectively, which resulted in a net
gain, for financial statement purposes, of $1,455,176. This equipment was
sold prior to the expiration of the related lease term. The majority of the
Trust's sales proceeds were reinvested in other equipment in 1995 with the
balance having been reinvested in 1996. There were no equipment sales during
1994.
It cannot be determined whether future sales of equipment will result in
a net gain or a net loss to the Trust, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at
the time of sale. In addition, the amount of gain or loss reported for
financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
advances, and many other events can converge to enhance or detract from asset
values at any given time. EFG attempts to monitor these changes in order to
identify opportunities which may be advantageous to the Trust and which will
maximize total cash returns for each asset.
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset,
together with its residual value. The latter consists of cash proceeds
realized upon the asset's sale in addition to all other cash receipts
obtained from renting the asset on a re-lease, renewal or month-to-month
basis. The Trust classifies such residual rental payments as lease revenue.
Consequently, the amount of gain or loss reported in the financial statements
is not necessarily indicative of the total residual value the Trust achieved
from leasing the equipment.
Depreciation and amortization expense was $13,981,912, $11,013,576 and
$5,554,146 for the years ended December 31, 1996, 1995 and 1994,
respectively. For financial reporting purposes, to the extent that an asset
is held on primary lease term, the Trust depreciates the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset
on a straight-line basis over such term. For purposes of this policy,
estimated residual values represent estimates of equipment values at the date
of primary lease expiration. To the extent that an asset is held beyond its
primary lease term, the Trust continues to depreciate the remaining net book
value of the asset on a straight-line basis over the asset's remaining
economic life. (See Note 2 to the financial statements herein) The increase
in depreciation expense from 1994 to 1996 reflects the acquisition of
equipment during 1994, 1995 and 1996 and the corresponding length of
ownership during the respective years.
The Trust recorded a write-down of the carrying value of its interest in
a Boeing 747 aircraft, representing an impairment, during the year ended
December 31, 1996. The resulting charge, $2,400,000 ($1.04 per Beneficiary
Interest) in 1996 was based on a comparison of the estimated net realizable
value and corresponding net carrying value for the Trust's interest in the
aircraft. Net realizable value was estimated based on (i) third-party
appraisals of the Trust's aircraft and (ii) EFG's assessment of prevailing
market conditions for similar aircraft. In recent years, market values for
used commercial jet aircraft have deteriorated, particularly with respect to
certain older aircraft, set to commence in 2000. In addition, consistent
price competition and other pressures within the airline industry have
inhibited sustained profitability for many carriers. Most major airlines have
had to re-evaluate their aircraft fleets and operating strategies. Such
issues complicate the determination of net realizable value for specific
aircraft, and particularly used aircraft, because cost-benefit and market
considerations may differ significantly between the major airlines. Aircraft
condition, age, passenger capacity, distance capability, fuel efficiency, and
other factors also influence market demand and market values for passenger
jet aircraft.
Interest expense was $3,480,122 or 12.8% of lease revenue in 1996,
$3,228,379 or 18.9% of lease revenue in 1995 and $939,055 or 11.8% of lease
revenue in 1994. Interest expense in the near-term is expected to increase
due to anticipated leveraging to be obtained to finance the acquisition of
reinvestment equipment, discussed
4
<PAGE>
above. Thereafter, interest expense will decline in amount and as a
percentage of lease revenue as the principal balance of notes payable is
reduced through the application of rent receipts to outstanding indebtedness.
Management fees were 4%, 4.3% and 3.8% of lease revenue for the years
ended December 31, 1996, 1995 and 1994, respectively. Management fees are
based on 5% of gross lease revenue generated by operating leases and 2% of
gross lease revenue generated by full payout leases.
Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as
printing, distribution and remarketing expenses. Collectively, operating
expenses represented 2.1% of lease revenue during both the years 1996 and
1995 and 2.4% of lease revenue during 1994. Operating expenses were higher in
1996 than 1995 and 1994 due to remarketing fees incurred in connection with
the sale of certain vessel equipment and fees incurred in connection with the
refinancing of the Trust's interest in the vessel described below. In 1995,
the Trust incurred legal costs in connection with the equipment acquisition
process. The amount of future operating expenses cannot be predicted with
certainty; however, such expenses are usually higher during the acquisition
and liquidation phases of a trust. Other fluctuations typically occur in
relation to the volume and timing of remarketing activities.
LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS
- ------------------------------------------------------------
The Trust by its nature is a limited life entity which was established
for specific purposes described in the preceding "Overview". As an equipment
leasing program, the Trust's principal operating activities derive from asset
rental transactions. Accordingly, the Trust's principal source of cash from
operations is provided by the collection of periodic rents. These cash
inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. Operating
activities generated net cash inflows of $17,921,048, $12,432,491 and
$6,098,294 for the years ended December 31, 1996, 1995, and 1994,
respectively. In the near-term, net cash inflows generated from operating
activities are expected to increase due to additional reinvestment of the
cash proceeds from the vessel transaction previously discussed. Thereafter,
renewal, re-lease and equipment sale activities will cause the Trust's
primary-term lease revenue and corresponding sources of operating cash to
decline. Overall, expenses associated with rental activities, such as
management fees, and net cash flow from operating activities will decline as
the Trust experiences a higher frequency of remarketing events.
Ultimately, the Trust will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold
to the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.
Cash expended for asset acuisitions and cash realized from asset disposal
transactions are reported under investing activities on the accompanying
Statement of Cash Flows. The Trust expended $1,243,539, $52,331,336 and
$27,166,357 to acquire equipment during the years ended December 31, 1996,
1995 and 1994, respectively, including new equipment acquired pursuant to the
reinvestment provisions of the Trust's prospectus of approximately $1,200,000
and $5,400,000 during the years ended December 31, 1996 and 1995,
respectively. The reinvestment equipment was financed through a combination
of leveraging and sale proceeds. During the year ended December 31, 1996, the
Trust realized equipment sale proceeds of $2,238,672, including $1,618,169 of
proceeds from the vessel transaction, compared to $2,857,412, including
$2,658,456 of proceeds from the rail transaction, during the same period in
1995. Future inflows of cash from asset disposals will vary in timing and
amount and will be influenced by many factors including, but not limited to
the frequency and timing of lease expirations, the type of equipment being
sold, its condition and age, and future market conditions.
The Trust obtained long-term financing in connection with certain
equipment leases. The origination of such indebtedness and the subsequent
repayments of principal are reported as components of financing activities.
Cash inflows of $9,862,477, $36,133,500 and $9,136,155 in 1996, 1995 and
1994, respectively, resulted from 5
<PAGE>leveraging a portion of the Trust's equipment portfolio with
third-party lenders. In September 1996, the Trust received $5,416,667 from
the refinancing of its interest in a vessel. The Trust repaid the existing
debt associated with the vessel of $1,912,591 plus accrued interest thereon.
(Subsequently, the indebtedness resulting from this refinancing was retired
as a result of the asset being sold to the lessee.) EFG also provided interim
financing of $5,275,161 to the Trust until third-party financing was
finalized. Each note payable is recourse only to the specific equipment
financed and to the minimum rental payments contracted to be received during
the debt amortization period (which period generally coincides with the lease
rental term). As rental payments are collected, a portion or all of the
rental payment is used to repay the associated indebtedness. In the
near-term, the amount of cash used to repay debt obligations will continue to
increase as a result of anticipated leveraging to be obtained in connection
with the acquisition of reinvestment equipment, discussed above. The amount
of cash used to repay debt in 1996 increased as a result of leveraging
obtained in 1996 and 1995 and the refinancing described above. Thereafter,
the amount will decline as the principal balance of notes payable is reduced
through the collection and application of rents. However, the Trust has
balloon payment obligations of $282,421 and $1,476,981 at the expiration of
the primary lease terms related to the Trust's proportionate ownership
interest in an MD-87 jet aircraft leased by Reno Air, Inc. and certain rail
equipment, respectively.
Financing activities also included cash inflows from capital
contributions from the Beneficiaries (net of selling commissions and
organization and offering costs) of $5,324,047 and $28,020,904 in 1995 and
1994, respectively. Substantially all of these funds were used to purchase
equipment. The Trust's Final Closing of capital contributions occurred on
February 6, 1995.
Cash distributions to the Managing Trustee, the Special Beneficiary and
the Beneficiaries are declared and generally paid within fifteen days
following the end of each month. The payment of such distributions is
presented as a component of financing activities. For the year ended December
31, 1996, the Trust declared total cash distributions of Distributable Cash
From Operations and Distributable Cash From Sales and Refinancings of
$3,190,518. In accordance with the Trust Agreement, the Beneficiaries were
allocated 90.75% of these distributions, or $2,895,395; the Special
Beneficiary was allocated 8.25%, or $263,218; and the Managing Trustee was
allocated 1%, or $31,905.
For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each has accumulated a capital deficit at December 31, 1996. This
is the result of aggregate cash distributions to these Participants being in
excess of their aggregate capital contributions ($1,000 each) and their to
the financial statements--Allocation of Profits and Losses.) Ultimately, the
existence of a capital deficit for the Managing Trustee or the Special
Beneficiary for financial reporting purposes is not indicative of any further
capital obligations to the Trust by either the Managing Trustee or the
Special Beneficiary. However, for income tax purposes, the Trust Agreement
requires that income be allocated first to those Participants having negative
tax capital account balances so as to eliminate any such balances. In
accordance with the Trust Agreement, upon the dissolution of the Trust, the
Managing Trustee will be required to contribute to the Trust an amount equal
to any negative balance which may exist in the Managing Trustee's tax capital
account. No such requirement exists with respect to the Special Beneficiary.
At December 31, 1996, the Managing Trustee has a positive tax capital account
balance. (See Note 6 to the financial statements.)
At December 31, 1996, the Trust had aggregate future minimum lease
payments of $49,905,144 from contractual lease agreements (see Note 2 to the
financial statements), of which $32,827,977 will be used to amortize the
principal balance of notes payable (see Note 5 to the financial statements).
Additional cash inflows will be realized from future remarketing activities,
such as lease renewals and equipment sales, as well as from lease revenues
generated by equipment acquisitions from the Trust's anticipated reinvestment
activities. Presently, the Trust expects to acquire approximately $36,000,000
of reinvestment equipment using working capital of approximately $9,000,000
and additional indebtedness, which will be amortized from the associated
rental streams. However, the extent of the Trust's total future reinvestment
activities may exceed this projection as a result of future equipment sales,
the timing and extent of which cannot be predicted with certainty. This is
because the timing and extent of equipment sales is often dependent upon the
needs and interests of the existing lessees. Some lessees may choose to renew
their lease contracts, while others may elect to return the equipment. In the
latter instances, the equipment could be re-leased to another lessee or sold
to a third party.
6
<PAGE>
Accordingly, as the Trust matures and a greater level of its equipment assets
become available for remarketing, the cash flows of the Trust will become
less predictable. In addition, the Trust will have cash outflows to satisfy
interest on indebtedness and to pay management fees and operating expenses.
Ultimately, the Trust is expected to meet its future disbursement obligations
and to distribute any excess of cash inflows over cash outflows to the
Participants in accordance with the Trust Agreement. However, several
factors, including month-to-month lease extensions, lessee defaults,
equipment casualty events, and early lease terminations could alter the
Trust's anticipated cash flows as described herein and in the accompanying
financial statements and result in fluctuations to the Trust's periodic cash
distribution payments.
Cash distributions paid to the Participants consist of both a return of
and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Trust and will be
dependent upon the collection of all future contracted rents, the generation
of renewal and/or re-lease rents, and the residual value realized for each
asset at its disposal date. Future market conditions, technological changes,
the ability of EFG to manage and remarket the assets, and many other events
and circumstances, could enhance or detract from individual asset yields and
the collective performance of the Trust's equipment portfolio.
It is the intention of the Managing Trustee to maintain a cash
distribution level that is consistent with the operating cash flows of the
Trust and to optimize the long-term value of the Trust. A distribution level
that is higher than the Trust's operating cash flows could compromise the
Trust's working capital position, as well as its ability to refurbish or
upgrade equipment in response to lessee requirements or other market
circumstances and, during its reinvestment period, to purchase replacement
equipment as original equipment is remarketed. Accordingly, in order to
better align monthly cash distributions with the Trust's operating cash
flows, the Managing Trustee reduced the level of monthly cash distributions
from an annualized rate of $2.52 per Beneficiary Interest (the rate
established and paid from the Trust's inception through September 1995) to an
annualized rate of $1.26 per Beneficiary Interest commencing in October 1995.
In October 1996, the Managing Trustee increased the annualized distribution
rate to $1.64 per Beneficiary Interest and expects that the Trust will be
able to sustain this distribution rate throughout 1997. However, the nature
of the Trust's principal cash flows gradually will shift from rental receipts
to equipment sale proceeds as the Trust matures. As this occurs, the Trust's
cash flows will become more volatile in that certain of the Trust's equipment
leases will be renewed and certain of its assets will be sold. In some cases,
the Trust may be required to expend funds to refurbish or otherwise improve
the equipment being remarketed in order to make it more desirable to a
potential lessee or purchaser. The Trust's Advisor, EFG, and the Managing
Trustee will attempt to monitor and manage these events to maximize the
residual value of the Trust's equipment and will consider these factors, in
addition to the collection of contractual rents, the retirement of scheduled
indebtedness and the Trust's future working capital and equipment
requirements, in establishing future cash distribution rates. Ultimately, the
Participants should expect that cash distribution rates will fluctuate over
the long term as a result of future remarketing activities.
7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Participants of AFG Investment Trust D:
We have audited the accompanying statement of financial position of AFG
Investment Trust D as of December 31, 1996 and 1995, and the related
statements of operations, changes in participants' capital, and cash flows
for the years ended December 31, 1996, 1995 and 1994. These financial
statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of AFG Investment
Trust D at December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years ended December 31, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Additional Financial
Information identified in the Index to the Annual Report to the Participants
is presented for purposes of additional analysis and is not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in our audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
ERNST & YOUNG LLP
Boston, Massachusetts
March 14, 1997
8
<PAGE>
AFG INVESTMENT TRUST D
STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents...................................... $ 6,640,347 $ 669,998
Rents receivable............................................... 3,347,306 2,854,161
Accounts receivable--affiliate................................. 3,845,655 109,551
Equipment at cost, net of accumulated depreciation of
$29,093,445 and $15,958,176 at December 31, 1996 and 1995,
respectively................................................. 61,357,491 83,883,410
Organization costs, net of accumulated amortization of $3,250
and $2,250 at December 31, 1996 and 1995, respectively....... 1,750 2,750
------------- -------------
Total assets................................................... $ 75,192,549 $ 87,519,870
------------- -------------
------------- -------------
LIABILITIES AND PARTICIPANTS' CAPITAL
- -------------------------------------
Notes payable.................................................. $ 32,827,977 $ 42,655,805
Accrued interest............................................... 727,187 677,345
Accrued liabilities............................................ 23,250 43,851
Accrued liabilities--affiliate................................. 214,247 97,588
Deferred rental income......................................... 200,836 358,760
Cash distributions payable to participants..................... 314,216 241,702
------------- -------------
Total liabilities.............................................. 34,307,713 44,075,051
------------- -------------
Participants' capital (deficit):
Managing Trustee............................................ (62,865) (37,265)
Special Beneficiary......................................... (525,884) (314,685)
Beneficiary Interests (2,089,030 Interests; initial purchase
price of $25 each)......................................... 41,473,585 43,796,769
------------- -------------
Total participants' capital.................................... 40,884,836 43,444,819
------------- -------------
participants' capital.......................................... $ 75,192,549 $ 87,519,870
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of
these financial statements
9
<PAGE>
AFG Investment Trust D
STATEMENT OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Income:
Lease revenue........................................................ $ 27,093,125 $ 17,068,315 $ 7,972,559
Interest income...................................................... 197,035 423,700 308,028
Gain (loss) on sale of equipment..................................... (5,149,874) 1,466,398 --
------------- ------------- ------------
Total income...................................................... 22,140,286 18,958,413 8,280,587
------------- ------------- ------------
Expenses:
Depreciation and amortization........................................ 13,981,912 11,013,576 5,554,146
Write-down of equipment.............................................. 2,400,000 -- --
Interest expense..................................................... 3,480,122 3,228,262 899,227
Interest expense--affiliate.......................................... -- 117 39,828
Equipment management fees--affiliate................................. 1,071,560 737,323 303,749
Operating expenses--affiliate........................................ 576,157 349,804 189,636
------------- ------------- ------------
Total expenses.................................................... 21,509,751 15,329,082 6,986,586
------------- ------------- ------------
Net income........................................................... $ 630,535 $ 3,629,331 $ 1,294,001
------------- ------------- ------------
------------- ------------- ------------
Net income per Beneficiary Interest.................................. $ 0.27 $ 1.59 $ 0.88
------------- ------------- ------------
------------- ------------- ------------
Cash distributions declared per Beneficiary Interest................. $ 1.39 $ 2.10 $ 2.40
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
10
<PAGE>
AFG Investment Trust D
STATEMENT OF CHANGES IN PARTICIPANTS' CAPITAL
for the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
MANAGING SPECIAL BENEFICIARIES
TRUSTEE BENEFICIARY ---------------------------
AMOUNT AMOUNT INTERESTS AMOUNT TOTAL
-------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,1993........ $(3,234) $ (33,934) $ 615,220 $ 13,540,083 13,502,915
Participants' capital
contribution..................... -- -- 1,238,493 30,962,325 30,962,325
Less:
Selling commissions............. -- -- -- (2,167,363) (2,167,363)
Organization and offering costs. -- -- -- (774,058) (774,058)
Net income--1994................... 12,940 106,755 -- 1,174,306 1,294,001
Cash distributions declared........ (35,238) (290,711) -- (3,197,820) (3,523,769)
--------- --------- --------- ------------ -----------
Balance at December 31, 1994....... (25,532) (217,890) 1,853,713 39,537,473 39,294,051
Participants' capital
contribution..................... -- -- 235,317 5,882,925 5,882,925
Less:
Selling commissions ............ -- -- -- (411,805) (411,805)
Organization and
offering costs ................ -- -- -- (147,073) (147,073)
Net income--1995................... 36,293 299,420 -- 3,293,618 3,629,331
Cash distributions declared........ (48,026) (396,215) -- (4,358,369) (4,802,610)
--------- --------- --------- ------------ -----------
Balance at December 31,1995........ (37,265) (314,685) 2,089,030 43,796,769 43,444,819
Net income--1996................... 6,305 52,019 -- 572,211 630,535
Cash distributions declared........ (31,905) (263,218) -- (2,895,395) (3,190,518)
--------- --------- --------- ------------ -----------
Balance at December 31, 1996....... $(62,865) $ (525,884) $ 2,089,030 $ 41,473,585 $ 40,884,836
--------- --------- --------- ------------ -----------
--------- --------- --------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
11
<PAGE>
AFG INVESTMENT TRUST D
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from (used in) operating activities:
Net income........................................................... $ 630,535 $ 3,629,331 $ 1,294,001
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization..................................... 13,981,912 11,013,576 5,554,146
Write-down of equipment........................................... 2,400,000 -- --
(Gain) loss on sale of equipment.................................. 5,149,874 (1,466,398) --
Changes in assets and liabilities:
Decrease (increase) in:
Rents receivable................................................ (493,145) (1,832,104) (606,831)
Accounts receivable -affiliate.................................. (3,736,104) 458,361 (452,105)
Increase (decrease) in:
Accounts payable................................................ -- -- (59,556)
Accrued interest................................................ 49,842 412,865 291,570
Accrued liabilities............................................. (20,601) (18,284) 50,635
Accrued liabilities -affiliate.................................. 116,659 49,350 23,148
Deferred rental income.......................................... (157,924) 185,794 3,286
------------- ------------- -------------
Net cash from operating activities.......................... 17,921,048 12,432,491 6,098,294
------------- ------------- -------------
------------- ------------- -------------
Cash flows from (used in) investing activities:
Purchase of equipment........................................... (1,243,539) (52,331,336) (27,166,357)
Proceeds from equipment sales................................... 2,238,672 2,857,412 --
------------- ------------- -------------
Net cash from (used in) investing activities................ 995,133 (49,473,924) (27,166,357)
Cash flows from (used in) financing activities:
Proceeds from capital contributions............................. -- 5,882,925 30,962,325
Payment of selling commissions.................................. -- (411,805) (2,167,363)
Payment of organization and offering costs...................... -- (147,073) (774,058)
Proceeds from notes payable..................................... 9,862,477 36,133,500 9,136,155
Proceeds from notes payable--affiliate.......................... -- -- 5,275,161
Principal payments--notes payable............................... (19,690,305) (8,552,140) (3,125,405)
Principal payments--notes payable--affiliate.................... -- -- (5,665,329)
Distributions paid.............................................. (3,118,004) (4,992,336) (3,196,705)
------------- ------------- -------------
Net cash from (used in) financing activities................ (12,945,832) 27,913,071 30,444,781
Net increase (decrease) in cash and cash equivalents................. 5,970,349 (9,128,362) 9,376,718
Cash and cash equivalents at beginning of year....................... 669,998 9,798,360 421,642
------------- ------------- -------------
Cash and cash equivalents at end of year............................. $ 6,640,347 $ 669,998 $ 9,798,360
------------- ------------- -------------
------------- ------------- -------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.......................... $ 3,430,280 $ 2,818,802 $ 646,022
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
During 1995, the Trust sold equipment to a third party which assumed
related debt and interest of $2,170,369 and $95,675, respectively.
The accompanying notes are in integral part of these financial
statements.
12
<PAGE>
AFG INVESTMENT TRUST D
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1--ORGANIZATION AND TRUST MATTERS
- --------------------------------------
The Trust was organized as a Delaware business trust in accordance with
the Delaware Business Trust Act on August 31, 1992 for the purpose of
acquiring and leasing to third parties a diversified portfolio of capital
equipment. Participants' capital initially consisted of contributions of
$1,000 from the Managing Trustee, AFG ASIT Corporation, $1,000 from the
Special Beneficiary, Equis Financial Group Limited Partnership (formerly
American Finance Group), a Massachusetts limited partnership ("EFG"), and
$100 from the Initial Beneficiary, AFG Assignor Corporation, a wholly-owned
affiliate of EFG. The Trust's first Interim Closing occurred on October 26,
1993 and resulted in the purchase price of $5,108,875. As of December 31,
1995, the Trust had concluded an additional sixteen Interim Closings which
collectively resulted in the issuance of 1,884,675 Beneficiary Interests to
2,375 investors, having an aggregate subscription price of $47,116,875. The
trust's final closing occurred on February 6, 1995. In total, the trust has
issued 2,089,030 Beneficiary Interests representing a total purchase price of
$52,225,750 to 2,635 investors. The Trust's Managing Trustee, AFG ASIT
Corporation, a Massachusetts corporation and affiliate of EFG, is responsible
for the general management and business affairs of the Trust. EFG is the
Special Beneficiary of the Trust and also acts as Advisor to the Trust. As
Advisor, EFG provides services in connection with the acquisition and
remarketing of the Trust's assets. The Managing Trustee and the Special
Beneficiary are not required to make any other capital contributions except
as may be required under the Amended and Restated Declaration of Trust (the
"Trust Agreement").
Significant operations commenced coincident with the Trust's initial
purchase of equipment and the associated lease commitments on October 26,
1993. Pursuant to the Trust Agreement, each distribution of Distributable
Cash From Operations and Distributable Cash From Sales or Refinancings of the
Trust shall be made 90.75% to the Beneficiaries, 8.25% to the Special
Beneficiary and 1% to the Managing Trustee.
Under the terms of the Management Agreement between the Trust and EFG,
management services are provided by EFG to the Trust at fees which the
Managing Trustee believes to be competitive for similar services. (Also see
Note 4.)
EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Equipment Manager or Advisor to the Trust and several
other Direct-Participation equipment leasing programs sponsored or
co-sponsored by EFG (the "Other Investment Programs"). The Company arranges
to broker or originate equipment leases, acts as remarketing agent and asset
manager, and provides leasing support services, such as billing, collecting,
and asset tracking.
The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by
Gary D. Engle, its President and Chief Executive Officer. Equis Corporation
also owns a controlling 1% general partner interest in EFG's 99% limited
partner, GDE Acquisition Limited Partnership ("GDE LP"). Equis Corporation
and GDE LP were established in December 1994 by Mr. Engle for the sole
purpose of acquiring the business of AFG.
In January 1996, the Company sold certain assets of AFG relating
primarily to the business of originating new leases, and the name "American
Finance Group," and its acronym to a third party (the "Buyer"). AFG changed
its name to Equis Financial Group Limited Partnership after the sale was
concluded. Pursuant to terms of the sale agreements, EFG agreed not to
compete with the Buyer's lease period of five years; however, EFG is
permitted to originate certain equipment leases, principally those involving
non-investment grade lessees and ocean-going vessels, which are not in
competition with the Buyer. In addition, the sale
13
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
agreements specifically reserved to EFG the rights to continue using the name
American Finance Group and its acronym in connection with the Trust and the
Other Investment Programs and to continue managing all assets owned by the
Trust and the Other Investment Programs, including the right to satisfy all
required equipment acquisitions utilizing either brokers or the Buyer.
Geoffrey A. MacDonald, Chairman of Equis Corporation and Gary D. Engle agreed
not to compete with the sold business on terms and conditions similar to
those for the Company.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
STATEMENT OF CASH FLOWS
- -----------------------
The Trust considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time,
the Trust invests excess cash with large institutional banks in reverse
repurchase agreements with overnight maturities. Under the terms of the
agreements, title to the underlying securities passes to the Trust. The
securities underlying the agreements are book entry securities. Approximately
$9,000,000 of the Trust's working capital at December 31, 1996, including
approximately $6,000,000 of cash, is expected to be used to acquire
reinvestment equipment in 1997 and 1998.
REVENUE RECOGNITION
- -------------------
Rents are payable to the Trust monthly, quarterly or semi-annually and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable.
Rents received prior to their due dates are deferred. In certain instances,
the Trust may enter primary-term, renewal or re-lease agreements which expire
beyond the Trust's anticipated dissolution date. This circumstance is not
expected to prevent the orderly wind-up of the Trust's business activities as
the Managing Trustee and the Advisor would seek to sell the then-remaining
equipment assets either to the lessee or to a third party, taking into
consideration the amount of future non-cancelable rental payments associated
with the attendant lease agreements. Future minimum rents of $49,905,144 are
due as follows:
<TABLE>
<S> <C>
For the year ending December 31, 1997.......................... $17,982,522
1998.......................... 13,080,840
1999.......................... 9,188,608
2000.......................... 5,365,027
2001.......................... 2,551,644
Thereafter.......................... 1,736,503
----------
Total.......................................................... $49,905,144
----------
----------
</TABLE>
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
---- ------ ------
Emery Worldwide.............................................. -- $2,402,532 --
Chantel Shipping Corporation................................. -- $1,717,796 --
Stena Bulk AB................................................ $6,959,077 $1,894,280 $1,894,283
British Airways Plc.......................................... -- -- $1,680,000
Diamond Shamrock Refining and Marketing Company.............. -- -- $1,159,454
</TABLE>
14
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
In 1996, the Trust realized early termination proceeds of $5,217,665
related to the sale of the Stena vessel to the existing lessee. Refer to Note
3 to the financial statements for further discussion of this transaction.
During March 1996, the Trust acquired an 8.86% proportionate ownership
interest in an MD-87 jet aircraft leased by Reno Air, Inc. (the "Reno
Aircraft") -See Note 3 herein. The Trust will receive approximately $159,000
of rental revenue in each of the years in the period ending December 31,
2002. Rents from the Reno Aircraft, as provided for in the lease agreement,
are adjusted monthly for changes of the London Inter-Bank Offered Rate
("LIBOR"). Future rents from the Reno Aircraft included above reflect the
most recent LIBOR effected rental payment.
USE OF ESTIMATES
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
EQUIPMENT ON LEASE
- ------------------
All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. Equipment cost represents Asset Base Price plus
acquisition fees and was determined in accordance with the Trust Agreement
and certain regulatory guidelines. Asset Base Price is affected by the
relationship of the seller to the Trust as summarized herein. Where the
seller of the equipment was EFG or an Affiliate, Asset Base Price was the
lower of (i) the actual price paid for the equipment by EFG or the Affiliate
plus all actual costs accrued by EFG or the Affiliate while carrying the
equipment less the amount of all primary term rents earned by EFG or the
Affiliate prior to selling the equipment or (ii) fair market value as
determined by the Managing Trustee in its best judgment, including all liens
and encumbrances on the equipment and other actual expenses. Where the seller
of the equipment was a third party who did not manufacture the equipment,
Asset Base Price was the lower of (i) the price invoiced by the third party
or (ii) fair market value as determined by the Managing Trustee. Where the
seller of the equipment was a third party who also manufactured the
equipment, Asset Base Price was the manufacturer's invoice price, net of any
manufacturer rebates or incentives, which price was considered to be
representative of fair market value.
DEPRECIATION AND AMORTIZATION
- -----------------------------
The Trust's depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond to each
asset's primary lease term, which term generally represents the period of
greatest revenue potential for each asset. Accordingly, to the extent that an
asset is held on primary lease term, the Trust depreciates the difference
between (i) the cost of the asset and (ii) the estimated residual value of
the asset on a straight-line basis over such term. For purposes of this
policy, estimated residual values represent estimates of equipment values at
the date of primary lease expiration. To the extent that an asset is held
beyond its primary lease term, the Trust continues to depreciate the
remaining net book value of the asset on a straight-line basis over the
asset's remaining economic life. Periodically, the Managing Trustee evaluates
the net carrying value of equipment to determine whether it exceeds estimated
net realizable value. For purposes of this comparison, "net carrying value"
represents, at a given date, the net book value (equipment cost less
accumulated depreciation for financial reporting purposes) of the Trust's
equipment and "net realizable value" represents, at the same date, the
aggregate undiscounted cash flows resulting from future contracted lease
payments plus the estimated residual value of the Trust's equipment. The
Managing Trustee evaluates significant equipment assets, such as aircraft and
vessels, individually. All other assets are evaluated collectively by
equipment type unless the Managing Trustee learns of specific circumstances,
such as a lessee default, technological obsolescence, or other market
15
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
developments, which could affect the net realizable value of particular
assets. Adjustments to reduce the net carrying value of equipment are
recorded in those instances where estimated net realizable value is
considered to be less than net carrying value. Such adjustments are reflected
separately on the accompanying Statement of Operations as Write-Down of
Equipment.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
advances, and many other events can converge to enhance or detract from asset
values at any given time. EFG attempts to monitor these changes in order to
identify opportunities which may be advantageous to the Trust and which will
maximize total cash returns for each asset.
Organization costs are amortized using the straight-line method over a
period of five years.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES--AFFILIATE
- ---------------------------------------------------
The Trust reports the unpaid cost of equipment purchased from third-party
vendors as Accounts Payable. Unpaid operating expenses paid by EFG on behalf
of the Trust and accrued but unpaid administrative charges are reported as
Accrued Liabilities--Affiliate. (See Note 4.)
ALLOCATION OF PROFITS AND LOSSES
- --------------------------------
For financial statement purposes, net income or loss is allocated to each
Participant according to their respective ownership percentages (90.75% to
the Beneficiaries, 8.25% to the Special Beneficiary and 1% to the Managing
Trustee). See Note 6 concerning allocation of income or loss for income tax
purposes.
NET INCOME AND CASH DISTRIBUTIONS PER BENEFICIARY INTEREST
- ----------------------------------------------------------
Net income and cash distributions per Beneficiary Interest are based on
2,089,030 Beneficiary Interests outstanding during the year ended December
31, 1996 and the weighted average number of Beneficiary Interests outstanding
during the years ended December 31, 1995 and 1994 after allocation of the
Managing Trustee's and Special Beneficiary's shares of net income and cash
distributions. The weighted average number of Beneficiary Interests
outstanding during the years ended December 31, 1995 and 1994 were 2,073,427,
and 1,332,575, respectively. The weighted average number of Beneficiary
Interests was calculated based on the total number of Beneficiary Interests
outstanding and the number of days each Beneficiary Interest was outstanding
during the respective periods.
PROVISION FOR INCOME TAXES
- --------------------------
No provision or benefit from income taxes is included in the accompanying
financial statements. The Participants are responsible for reporting their
proportionate shares of the Trust's taxable income or loss and other tax
attributes on their tax returns.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
- ----------------------------------------------
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Trust
16
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
adopted Statement 121 in the first quarter of 1996. The adoption of Statement
121 did not have a material effect on the financial statements of the Trust.
NOTE 3--EQUIPMENT
- -----------------
The following is a summary of equipment owned by the Trust at December
31, 1996. Remaining Lease Term (Months), as used below, represents the number
of months remaining from December 31, 1996 under contracted lease terms and
is presented as a range when more than one lease agreement is contained in
the stated equipment category. In the opinion of EFG, the acquisition cost of
the equipment did not exceed its fair market value.
<TABLE>
<CAPTION>
Remaining
Lease Term Equipment
Equipment Type (Months) at Cost Location
- ---------------------------------- ------------- ----------- --------------------------------------
<S> <C> <C> <C>
Aircraft 12-74 $ 22,779,945 MA/NV/OH/Foreign
Locomotives 29-43 17,205,933 IL/NE/PA
Vessels 70 13,875,360 Foreign
Computers and peripherals 1-24 6,953,607 AL/CA/CO/FL/GA/IL/IN/KS/MA/MD
MI/MN/NC/NE/NY/OH/TN/T X/WI Foreign
Construction and mining 15-66 6,205,962 FL/IL/MI/PA/VA/Foreign
Materials handling 12-64 6,124,033 AK/CA/CO/GA/IL/IN/MI/MN/MS/ NC
NJ/NY/OH/OR/TX/WV/WI
Retail store fixtures 6-37 4,930,049 CO/NM/OK/TX
Manufacturing 17-24 3,849,128 CA/NJ
Miscellaneous 12-48 3,564,568 FL/LA/NC/TX
Communications 12-14 1,834,800 CA/LA
Tractors and heavy duty trucks 1-25 1,274,458 CA/CT/NJ/TN/TX/UT/IN/SC
Trailers/intermodal containers 18-40 812,037 GA/KY/NC/OH
Research and test 3-40 664,901 MI/NC/WI
Furniture and fixtures 12-14 271,945 NC
Photocopying 2-3 65,711 CT/WI
Motor vehicles 24 38,499 MI
-----------
</TABLE>
<TABLE>
<S> <C>
Total equipment cost....................... 90,450,936
Accumulated depreciation................... (29,093,445)
-------------
Equipment, net of accumulated
depreciation....................... $61,357,491
-------------
-------------
</TABLE>
In December 1996, the Trust sold its ownership interest in a vessel with
a cost and net book value of $9,296,103 and $6,482,211, respectively. In
connection with this sale, the Trust realized early termination proceeds of
$5,217,665 and sale proceeds of $1,618,169 which resulted in a net loss, for
financial statement purposes, of $4,864,042. This equipment was sold prior to
the expiration of the related lease term. The Trust intends to reinvest these
proceeds, net of associated debt, in other equipment in 1997.
In March 1996, the Trust acquired an 8.86% ownership interest in the Reno
Aircraft, pursuant to the reinvestment provisions of the Trust's prospectus,
at a cost of $1,239,741. To acquire its interest in the Reno Aircraft, the
Trust obtained leveraging of $997,888 from a third-party lender and utilized
cash proceeds of $241,853.
17
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
In certain cases, the cost of the Trust's equipment represents a
proportionate ownership interest. The remaining interests are owned by EFG or
an affiliated equipment leasing program sponsored by EFG. The Trust and each
affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment. Proportionate equipment ownership
enables the Trust to further diversify its equipment portfolio by
participating in the ownership of selected assets, thereby reducing the
general levels of risk which could result from a concentration in any single
equipment type, industryequipment having a proportionate original cost of
$15,368,258, representing approximately 17% of total equipment cost.
Certain of the equipment and related lease payment streams were used to
secure term loans with third-party lenders. The preceding summary of
equipment includes leveraged equipment having an original cost of
approximately $79,483,000 and a net book value of approximately $54,628,000
at December 31, 1996. (See Note 5.)
Generally, the costs associated with maintaining, insuring and operating
the Trust's equipment are incurred by the respective lessees pursuant to
terms specified in their individual lease agreements with the Trust.
As equipment is sold to third parties, or otherwise disposed of, the
Trust will recognize a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the
proceeds realized upon sale or disposition. The ultimate realization of
estimated residual value in the equipment will be dependent upon, among other
things, EFG's ability to maximize proceeds from selling or re-leasing the
equipment upon the expiration of the primary lease terms. At December 31,
1996, the Trust was not holding any equipment not subject to a lease and no
equipment was held for sale or re-lease.
The Trust recorded a write-down of the carrying value of its interest in
an aircraft, representing an impairment, during the year ended December 31,
1996. The resulting charge, $2,400,000 ($1.04 per Beneficiary Interest) in
1996 was based on a comparison of the estimated net realizable value and
corresponding carrying value for the Trust's interest in the aircraft.
NOTE 4--RELATED PARTY TRANSACTIONS
- ----------------------------------
All operating expenses incurred by the Trust are paid by EFG on behalf of
the Trust and EFG is reimbursed at its actual cost for such expenditures.
Fees and other costs incurred during the years ended December 31, 1996, 1995
and 1994, which were paid or accrued by the Trust to EFG or its Affiliates,
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Reimbursements for selling commissions.................................. -- $ 411,805 $ 2,167,363
Reimbursements for organization and offering costs...................... -- 147,073 774,058
Equipment acquisition fees.............................................. $ 36,120 210,276 75,846
Equipment management fees............................................... 1,071,560 737,323 303,749
Administrative charges.................................................. 48,638 21,000 14,000
Reimbursable operating expenses due to third parties.................... 527,519 328,804 175,636
Interest on notes payable--affiliate.................................... -- 117 39,828
------------ ------------ ------------
Total................................................................... $ 1,683,837 $ 1,856,398 $ 3,550,480
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
18
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
American Finance Group Securities Corp., an affiliate of EFG, was paid
the entire amount of selling commissions incurred at each of the Closings of
the Trust. Commissions of $2,579,168, relating to the Closings during 1994
and 1995, were then paid to the Soliciting Dealers responsible for the sales.
No Soliciting Dealer commissions were earned by American Finance Group
Securities Corp. for Interests sold to an unrelated party.
As provided under the terms of the Trust Agreement, EFG is compensated
for management and sale of equipment. For acquisition services, EFG is
compensated by an amount equal to .28% of Asset Base Price paid by the Trust.
For acquisition services resulting from reinvestment, EFG is compensated by
an amount equal to 3% of Equipment Base Price paid by the Trust. For
management services, EFG is compensated by an amount equal to the lesser of
(i) 5% of gross operating lease rental revenue and 2% of gross full payout
lease rental revenue received by the Trust or (ii) fees which the Managing
Trustee reasonably believes to be competitive for similar services for
similar equipment. Both of these fees are subject to certain limitations
defined in the Trust Agreement. Compensation to EFG for services connected to
the remarketing of equipment is calculated as the lesser of (i) 3% of gross
sale proceeds or (ii) one-half of reasonable brokerage fees otherwise payable
under arm's length circumstances. Payment of the remarketing fee is
subordinated to Payout and is subject to certain limitations defined in the
Trust Agreement.
Administrative charges represent amounts owed to EFG, pursuant to Section
10.4(c) of the Trust Agreement, for persons employed by EFG who are engaged
in providing administrative services to the Trust. Reimbursable operating
expenses due to third parties represent costs paid by EFG on behalf of the
Trust which are reimbursed to EFG.
All equipment was purchased from EFG, one of its Affiliates, or directly
from third-party sellers. The Trust's Purchase Price is determined by the
method described in Note 2, Equipment on Lease.
All rents and proceeds from the sale of equipment are paid by the lessee
directly to either EFG or to a lender. EFG temporarily deposits collected
funds in a separate interest-bearing escrow account prior to remittance to
the Trust. At December 31, 1996, the Trust was owed $1,865,582 by EFG for
such funds and the interest thereon. This balance includes equipment sale
proceeds of approximately $1,618,000 which relate to the sale of certain
vessel equipment in December 1996. Debt proceeds of $1,980,073, which relate
to the leveraging of certain rail equipment in the Trust's portfolio, were
deposited into the escrow account on December 31, 1996. These funds were
remitted to the Trust in January 1997.
NOTE 5--NOTES PAYABLE
- ---------------------
Notes payable at December 31, 1996 consisted of installment notes of
$32,827,977 payable to banks and institutional lenders. The notes bear
interest rates ranging between 5.1% and 13.75% except for one note which
bears a fluctuating interest rate based on LIBOR plus a margin (5.5% at
December 31, 1996). All of the installment notes are non-recourse and are
collateralized by the equipment and assignment of the related lease payments.
Generally, the installment notes will be fully amortized by noncancellable
rents. However, the Trust has balloon payment obligations of $282,421 and
$1,476,981 at the expiration of the primary lease terms related to the Reno
Aircraft and certain rail equipment, respectively. The carrying value of
notes payable approximates fair value at December 31, 1996.
The annual maturities of the installment notes payable are as follows:
19
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
<TABLE>
<S> <C>
For the year ending December 31, 1997................................... $11,864,259
1998................................... 7,581,931
1999................................... 5,334,484
2000................................... 4,774,982
2001................................... 1,729,169
Thereafter................................... 1,543,152
-----------
Total................................... $32,827,977
-----------
-----------
</TABLE>
The weighted average interest rate on short-term borrowings from EFG for
the purchase of equipment was 11% and 9.1% during the years ended December
31, 1995 and 1994, respectively.
NOTE 6--INCOME TAXES
- --------------------
The Trust is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts
of the Trust.
For financial statement purposes, the Trust allocates net income or loss
to each class of participant according to their respective ownership
percentages (90.75% to the Beneficiaries, 8.25% to the Special Beneficiary
and 1% to the Managing Trustee). This convention differs from the income or
loss allocation requirements for income tax and Dissolution Event purposes as
delineated in the Trust Agreement. Pursuant to the Trust Agreement, for
income tax purposes, the Trust allocates net income, to the extent available,
pro-rata to any Participant with a negative capital account balance so as to
eliminate any such balance. In accordance with the Trust Agreement, upon
dissolution of the Trust, the Managing Trustee will be required to contribute
to the Trust an amount equal to any negative balance which may exist in the
Managing Trustee's tax capital account. At December 31, 1996, the Managing
Trustee had a negative tax capital account balance.
The following is a reconciliation between net income (loss) reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION> 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net income......................................................................... $ 630,535 $ 3,629,331 $ 1,294,001
Tax depreciation in excess of
financial statement depreciation.............................................. (5,450,339) (6,896,894) (3,178,196)
Write-down of equipment............................................................ 2,400,000 -- --
Tax gain (loss) in excess of
book gain (loss).............................................................. (720,447) 388,382 --
Prepaid rental income.............................................................. (157,924) 185,794 3,286
Other.............................................................................. 3,790 (42,786) 46,633
------------- ------------- -------------
Net loss for federal income tax reporting purposes................................. $(3,294,385) $ (2,736,173) $ (1,834,276)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The following is a reconciliation between participants' capital reported
for financial statement and federal income tax reporting purposes for the
years ended December 31, 1996 and 1995:
20
<PAGE>
<TABLE>
<CAPTION>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
1996 1995
------------- -------------
<S> <C> <C>
Participants' capital.......................................... $ 40,884,836 $ 43,444,819
Add back selling commissions and organization and offering
costs........................................................ 4,956,447 4,956,447
Financial statement distributions in excess of tax
distributions................................................ 29,065 22,129
Cumulative difference between federal income tax and financial)
statement income (loss)...................................... (13,293,561) (9,368,641)
------------- -------------
Participants' capital for federal income tax reporting
purposes..................................................... $ 32,576,787 $ 39,054,754
------------- -------------
------------- -------------
</TABLE>
Financial statement distributions in excess of tax distributions and
cumulative difference between federal income tax and financial statement
income (loss) represent timing differences.
NOTE 7--LEGAL PROCEEDINGS
- -------------------------
On July 27, 1995, EFG, on behalf of the Trust and other EFG-sponsored
investment programs, filed an action in the Commonwealth of Massachusetts
Superior Court Department of the Trial Court in and for the County of
Suffolk, for damages and declaratory relief against a lessee of the Trust,
National Steel Corporation ("National Steel"), under a certain Master Lease
Agreement ("MLA") for the lease of certain equipment. EFG is seeking the
reimbursement by National Steel of certain sales and/or use taxes paid to the
State of Illinois and other remedies provided by the MLA. On August 30, 1995,
National Steel filed a Notice of Removal which removed the case to the United
States District Court, District of Massachusetts. On September 7, 1995,
National Steel filed its Answer to EFG's Complaint along with Affirmative
Defenses and Counterclaims, seeking declaratory relief and alleging breach of
contract, implied covenant of good faith and fair dealing and specific
performance. EFG filed its Answer to these counterclaims on September 29,
1995. Though the parties have been discussing settlement with respect to this
matter for some time, to date, the negotiations have been unsuccessful.
Notwithstanding these discussions, EFG recently filed an Amended and
Supplemental Complaint alleging further default under the MLA and the matter
remains pending before the Court. The Trust has not experienced any material
losses as a result of this action.
NOTE 8--SOLICITATION STATEMENT
- ------------------------------
On October 26, 1996, the Managing Trustee, on behalf of the Trust, filed
a Solicitation Statement with the Securities and Exchange Commission which
was subsequently sent to the Beneficiaries pursuant to Regulation 14A of
Section 14 of the Securities Exchange Act. The Solicitation Statement sought
to solicit the consent of the Beneficiaries to a proposed amendment ("the
Amendment") to the Trust Agreement.
The Amendment would (i) amend the provisions of the Trust Agreement
governing the redemption of Interests to permit the Trust to offer to redeem
outstanding interests at such times, in such amounts, in such manner and at
such prices as the Managing Trustee may determine from time to time, in
accordance with applicable law; and (ii) add a provision to the Trust
Agreement that would permit the Trust to issue, at the discretion of the
Managing Trustee and without further consent or approval of the
Beneficiaries, an additional class
21
<PAGE>
AFG Investment Trust D
Notes to the Financial Statements
(Continued)
of security with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as the Managing Trustee
may fix. Such a security, if it were more expansive Interest redemption
opportunities for Beneficiaries without using Trust funds which may otherwise
be available for current cash distributions; and (b) make a special one-time
distribution to the Beneficiaries.
Pursuant to the Trust Agreement, the adoption of the Amendment required
the consent of the Beneficiaries holding more than fifty percent in the
aggregate of the Interests held by all Beneficiaries. A majority of
Beneficiary Interests, representing 1,210,746 or 58% of all Beneficiary
Interests, voted in favor of the Amendment; 229,836 or 11% of all Beneficiary
Interests voted against the Amendment; and 39,233 or 2% of all Beneficiary
Interests abstained. Approximately 71% of all Beneficiary Interests
participated in the vote. Accordingly, the Amendment was adopted.
NOTE 9--SUBSEQUENT EVENT
- ------------------------
On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 with the United States Securities and Exchange Commission which covers,
among other things, the creation and sale of a new class of beneficiary
interest in the Trust (the "Class B Interests"). A portion of the proceeds
from the offering of the Class B Interests would be used to make a one-time
special cash distribution to existing Beneficiaries (the "Class A
Beneficiaries") of the Trust and to enable the Trust to redeem a portion of
the existing Beneficiary Interests (the "Class A Interests"). The
characteristics of the Class B Interests, associated risk factors, and other
matters of importance to the Beneficiaries and prospective purchasers of the
Class B Interests are contained in the Registration Statement. Presently, the
Registration Statement is undergoing regulatory review and has not been
declared effective.
22
<PAGE>
ADDITIONAL FINANCIAL INFORMATION
<PAGE>
AFG INVESTMENT TRUST D
SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST
OF EQUIPMENT DISPOSED
for the years ended December 31, 1996, 1995 and 1994
The Trust classifies all rents from leasing equipment as lease revenue.
Upon expiration of the primary lease terms, equipment may be sold, rented on
a month-to-month basis or re-leased for a defined period under a new or
extended lease agreement. The proceeds generated from selling or re-leasing
the equipment, in addition to any month-to-month revenues, represent the
total residual value realized for each item of equipment. Therefore, the
financial statement gain or loss, which reflects the difference between the
net book value of the equipment at the time of sale or disposition and the
proceeds realized upon sale or disposition, may not reflect the aggregate
residual proceeds realized by the Trust for such equipment.
The following is a summary of cash excess associated with equipment
dispositions occurring in the years ended December 31, 1996 and 1995. No
equipment was disposed of during the year ended December 31, 1994.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Rents earned prior to disposal of equipment,
net of interest charges........................................... $ 11,043,130 $ 811,471
Sale proceeds, including assumption of debt and interest,
realized upon disposition of equipment............................. 2,238,672 5,123,456
------------ ------------
Total cash generated from rents and equipment
sale proceeds...................................................... 13,281,802 5,934,927
Original acquisition cost of equipment disposed........................ 10,634,189 4,550,441
------------ ------------
Excess of total cash generated to cost of equipment disposed........... 2,647,613 $ 1,384,486
------------ ------------
------------ ------------
</TABLE>
23
<PAGE>
AFG INVESTMENT TRUST D
STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS,
SALES AND REFINANCINGS
for the year ended December 31, 1996
<TABLE>
<CAPTION>
SALES AND
OPERATIONS REFINANCINGS TOTAL
------------- ------------- -------------
<S> <C> <C> <C>
Net income (loss).................................................... $ 5,780,409 $ (5,149,874) $ 630,535
Add:
Depreciation and amortization..................................... 13,981,912 -- 13,981,912
Write-down of equipment........................................... 2,400,000 -- 2,400,000
Management fees................................................... 1,071,560 -- 1,071,560
Book value of disposed equipment.. ............................ -- 7,388,546 7,388,546
Less:
Principal repayment of notes ..................................... (17,777,714) (1,912,591) (19,690,305)
------------- ------------- -------------
Cash from operations, sales and refinancings...................... 5,456,167 326,081 5,782,248
Less:
Management fees................................................... (1,071,560) -- (1,071,560)
------------- ---------- ------------
Distributable cash from operations,
sales and refinancings............................................ 4,384,607 326,081 4,710,688
Other sources and uses of cash:
Cash at beginning of year......................................... 546,090 123,908 669,998
Proceeds from notes payable....................................... 3,447,922 6,414,555 9,862,477
Purchase of equipment............................................. -- (1,243,539) (1,243,539)
Net change in receivables and accruals............................ (4,241,273) -- (4,241,273)
Less:
Cash distributions paid........................................... -- (3,118,004) (3,118,004)
------------- ------------- -------------
Cash at end of year................................................ $ 4,137,346 $ 2,503,001 $ 6,640,347
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
24
<PAGE>
AFG INVESTMENT TRUST D
SCHEDULE OF COSTS REIMBURSED TO THE
MANAGING TRUSTEE AND ITS AFFILIATES AS
REQUIRED BY SECTION 10.4 OF THE AMENDED AND
RESTATED DECLARATION OF TRUST
December 31, 1996
For the year ended December 31, 1996 the Trust reimbursed the Managing
Trustee and its Affiliates for the following costs:
<TABLE>
<S> <C>
Operating expenses................................................ $ 658,922
</TABLE>
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,640,347
<SECURITIES> 0
<RECEIVABLES> 6,992,961
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,994,711
<PP&E> 90,450,936
<DEPRECIATION> 29,093,445
<TOTAL-ASSETS> 75,192,549
<CURRENT-LIABILITIES> 1,479,736
<BONDS> 32,307,713
0
0
<COMMON> 0
<OTHER-SE> 40,884,836
<TOTAL-LIABILITY-AND-EQUITY> 75,192,549
<SALES> 27,093,125
<TOTAL-REVENUES> 22,140,286
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,029,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,480,122
<INCOME-PRETAX> 630,535
<INCOME-TAX> 0
<INCOME-CONTINUING> 650,535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 630,535
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
