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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AFG INVESTMENT TRUST D
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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AFG INVESTMENT TRUST D
88 Broad Street
Boston, Massachusetts 02110
This Solicitation Statement is being furnished to each holder
(individually, a "Beneficiary," and, collectively, the "Beneficiaries") of
Class A Beneficiary Interests ("Class A Interests") and Class B Subordinated
Beneficiary Interests ("Class B Interests; the Class A Interests and the Class B
Interests, collectively, the "Interests") in AFG Investment Trust D, a Delaware
business trust (the "Trust"), in connection with the solicitation by the Trust
of the consent of the Beneficiaries to a proposed amendment (the "Amendment") to
the Second Amended and Restated Declaration of Trust of the Trust (the "Trust
Agreement"). AFG ASIT Corporation, a Massachusetts corporation, is the Managing
Trustee of the Trust (the "Managing Trustee").
The Managing Trustee is proposing the Amendment for consideration by the
Beneficiaries for two primary reasons. First, the Managing Trustee believes
that investing Trust funds in additional assets other than equipment may provide
returns in excess of those currently available to the Trust. Second, the
Amendment will implement certain provisions of a memorandum of understanding to
settle a pending class and derivative action brought on behalf of various
entities and investors, including the Beneficiaries, in the event that the
parties to the action are able to agree upon a final settlement of the action.
The Amendment would modify the Trust Agreement so that:
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- in the event of final settlement of the action, the Trust would
be required to grant certain rights (including a special cash
distribution) to the Class A Beneficiaries;
- the Trust would be permitted to invest in instruments that the
Managing Trustee believes would provide higher rates of return to
the Trust; and
- expenses of the Trust could be reduced through the acquisition of
indebtedness at a lower cost.
Specifically, the Amendment would:
(i) subject to attaining a settlement in the class and derivative action
(a) provide for a special distribution of $1,572,405 (the "1998 Special
Distribution") to the Class A Beneficiaries of record as of September 1, 1997,
or their successors and assigns from the proceeds of the offering of the
Class B Interests (the "Class B Proceeds"); (b) provide for the retention
of $3,537,910 by the Trust which would otherwise be distributed to Equis II
Corporation, an Affiliate of the sponsor of the Trust, Equis Financial Group
Limited Partnership ("EFG"), and provide that such amount will be retained
and invested by the Trust in additional Assets (as defined below); and (c)
require Equis II Corporation to vote its Class B Interests in proportion to
the votes of the Class A Beneficiaries on matters concerning related party
transactions, management fees and acquisition fees and other compensation;
(ii) permit the Trust, directly or indirectly, to (a) invest in, acquire,
own, lease, hold, manage, operate, sell, exchange or otherwise dispose of any
personal property, including equipment and other personal property and
securities of any
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type and description, whether or not related to such personal property (such
personal property, including securities, collectively, "Assets"), and (b) enter
into any lawful transaction and engage in any business lawful activities related
or incidental thereto or in furtherance of the foregoing;
(iii) permit the Trust to lease assets to any lessee selected by the
Managing Trustee as an appropriate lessee, without the need to meet a minimum
credit rating, and so to modify the definition of "Creditworthy" as it currently
appears in the Trust Agreement; permit the Trust to incur recourse and
cross-collaterialized debt and remove the current limitation as to the amount of
debt which may be incurred by the Trust; modify the requirements with respect to
joint ventures with Affiliates of the Managing Trustee and EFG; and otherwise
modify the investment objectives and policies of the Trust, as hereinafter
described in this Solicitation Statement;
(iv) extend the period of time that the Managing Trustee may reinvest the
Trust's cash from sales or refinancings of Assets from February 6, 1999, to
December 31, 2002;
(v) provide that the acquisition fee payable by the Trust on Assets
purchased from reinvestment proceeds after the Amendment Date be reduced from 3%
to 1% and the annual management fee with respect to all equipment acquired after
the Amendment Date be reduced from 5% to 2%, and the Managing Trustee will
receive an annual management fee on securities and other non-equipment Assets
(other than cash and cash equivalents) equal to 1% of the fair market value (or,
if unobtainable, the cost) of such Assets; and
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(vi) make various other changes to the Trust Agreement necessary or
appropriate to effectuate the foregoing.
This Solicitation Statement and the accompanying consent form are being
mailed to Beneficiaries of record as of the close of business on _________,
1998. Pursuant to Section 11.2 of the Trust Agreement, the adoption of the
Amendment requires the consent of Beneficiaries holding more than 50% in the
aggregate of the Interests held by all Beneficiaries. As of the date of this
Solicitation Statement, there were 1,935,755 Class A Interests and 3,142,083
Class B Interests outstanding. Accordingly, under the Trust Agreement, the
consent of Beneficiaries holding more than 2,538,919 Interests will be required
for the adoption of the Amendment.
Affiliates of the Managing Trustee own 44,084 Class A Interests, all of
which will be voted in favor of the Amendment.
While under no requirement to do so, Equis II Corporation has advised the
Managing Trustee that it will vote all of its 3,140,683 Class B Interests with
respect to the Amendment in the same manner in which the majority of the Class A
Interests are actually voted (i.e., for this purpose the Class A Interests for
which no consent form is actually received or which abstain will not be taken
into account). Accordingly, the Amendment will be adopted or rejected based
upon the majority of the Class A Interests actually voted. This undertaking by
Equis II Corporation relates solely to the Amendment and is made in connection
with the memorandum of understanding relating to the class and derivative action
hereinafter described. In the event that a settlement in the class and
derivative action is not attained in accordance with the memorandum of
understanding, Equis II Corporation will no
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longer be bound by this undertaking with respect to any future votes by
Beneficiaries.
Under applicable law, no dissenters' rights (i.e., rights of nonconsenting
Beneficiaries to exchange their Interests in the Trust for payment of their fair
value) are available to any Beneficiary of the Trust regardless of whether such
Beneficiary has or has not consented to the Amendment.
The consent form enclosed with this Solicitation Statement, to be valid,
must be signed by the record owner(s) of the Interests and returned to the
Managing Trustee by _______________ (subject to extension at the discretion of
the Managing Trustee). A properly executed consent form received by the
Managing Trustee will be voted in accordance with the direction indicated on the
form. If no direction is indicated, a properly executed consent form received
by the Managing Trustee will be voted in favor of the Amendment. Voting on the
Amendment will be conducted only by written consent and no formal meeting of the
Beneficiaries will be held. THE MANAGING TRUSTEE RECOMMENDS THAT YOU CONSENT TO
THE AMENDMENT.
BENEFICIARIES ARE ASKED TO VOTE BY MARKING AND SIGNING THE ACCOMPANYING
CONSENT FORM AND RETURNING IT PROMPTLY IN THE ENCLOSED ENVELOPE SO THAT IT IS
RECEIVED BY _________, 1998. THE CONSENT FORM MAY ALSO BE RETURNED BY FACSIMILE
AT (201) 804-8693.
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TABLE OF CONTENTS
SUMMARY OF AMENDMENT...........................................................7
BACKGROUND AND PURPOSES OF AMENDMENT...........................................9
RISK FACTORS..................................................................19
CONFLICTS OF INTEREST.........................................................21
CONSENT OF BENEFICIARIES......................................................22
ADDITIONAL INFORMATION CONCERNING THE TRUST...................................24
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SUMMARY OF AMENDMENT
Consenting to the Amendment would, among other things, permit the Trust to
do the following:
1. PROVIDE FOR A SPECIAL DISTRIBUTION TO CLASS A BENEFICIARIES.
Subject to attaining a settlement in the Class Action Lawsuit (as
hereafter defined), the Amendment would require that the Trust make a special
distribution to the Class A Beneficiaries of record as of September 1, 1997,
or their successors and assigns of $1,572,405 for all Class A Interests (or
approximately $0.75 per Class A Interest) (the "1998 Special Distribution").
See "BACKGROUND AND PURPOSES OF AMENDMENT - Pending Litigation." In July,
1997, the Trust issued 3,142,083 Class B Interests for $15,710,415 (the
"Class B Proceeds") and made a special distribution from such proceeds to the
Class A Beneficiaries. The 1998 Special Distribution also will be made from
the Class B Proceeds and will correspondingly reduce the amounts which may be
returned to Equis II Corporation as a Class B Capital Distribution.
2. PROVIDE FOR AN ADDITIONAL COMMITMENT OF FUNDS TO THE TRUST.
Subject to reaching final settlement of the Class Action Lawsuit, the
Amendment would require Equis II Corporation unconditionally to commit
$3,537,910 of the Class B Proceeds to the Trust to be used exclusively for Trust
purposes and waive all rights to receive a return of such funds as a Class B
Capital Distribution.
3. PERMIT THE TRUST TO ACQUIRE PROPERTY IN ADDITION TO EQUIPMENT.
Previously, the Trust was permitted to acquire only equipment to be
leased to creditworthy lessees. The Amendment would permit the Trust to acquire
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equipment for lease to lessees whose credit rating is less than would be
otherwise required pursuant to the current Trust Agreement, and to acquire
securities and other personal property. See BACKGROUND AND PURPOSES OF
AMENDMENT for a discussion of the reasons for these proposed changes in the
acquisition policies of the Trust and the investment intentions of the Managing
Trustee if the Amendment is adopted.
4. MAKE OTHER CHANGES TO THE TRUST AGREEMENT.
The Amendment would also effect other changes to the Trust Agreement,
including permitting the Trust to incur recourse and cross-collateralized debt
and removing the current limitations on the amount of debt which may be incurred
by the Trust, and modifying the requirements with respect to joint ventures with
affiliates and the investment objectives and policies of the Trust.
5. EXTEND THE TRUST'S REINVESTMENT PERIOD.
Currently, the Trust may reinvest proceeds from sales or refinancings
in additional equipment only through February 6, 1999. The Amendment would
extend the reinvestment period through December 31, 2002 (the "Additional
Reinvestment Period").
6. MODIFY CERTAIN FEES PAYABLE TO THE MANAGING TRUSTEE AND EFG.
The Amendment would reduce acquisition fees payable by the Trust on
assets purchased from reinvestment proceeds during the Additional Reinvestment
Period from 3% to 1% and reduce the annual management fee with respect to
equipment acquired after the Amendment Date from 5% to 2% on all leases and also
provide that the Managing Trustee will receive an annual management fee on
securities and other non-equipment Assets (other than cash or
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cash equivalents) equal to 1% of the fair market value (or, if unobtainable,
the cost) of such assets.
7. IMPOSE VOTING RESTRICTIONS ON CLASS B INTERESTS.
Subject to obtaining a settlement in the Class Action Lawsuit as
described herein, the Amendment would require Equis II Corporation to vote its
Class B Interests in proportion to the votes of the Class A Beneficiaries on
matters concerning related party transactions, management fees and acquisition
fees and other compensation.
BACKGROUND AND PURPOSES OF AMENDMENT
The Trust is soliciting the consent of the Beneficiaries to permit the
Trust to do various things, including to acquire assets in addition to
equipment. The following is a discussion of the background of the Trust,
certain pending litigation and purposes of the Amendment. The exact language of
the Amendment is set forth in Exhibit A to this Solicitation Statement.
ORGANIZATION OF TRUST
AFG Investment Trust D is a Delaware business trust which was created on
September 22, 1993, for the purpose of acquiring and leasing to third parties a
diversified portfolio of capital equipment. The Managing Trustee of the Trust
and three other Delaware business trusts (collectively, the "AFG Investment
Trusts" or the "Trusts") is AFG ASIT Corporation, a Massachusetts corporation
which was organized on August 13, 1991, and is a wholly-owned subsidiary of
Equis II Corporation and an affiliate of Equis Financial Group Limited
Partnership (formerly American Finance Group), a Massachusetts limited
partnership ("EFG" or the "Advisor"). EFG is the Special Beneficiary of, and
Advisor to, the Trust. The
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principal executive office of the Trust, the Managing Trustee and EFG is at 88
Broad Street, Boston, Massachusetts 02110.
The Trust issued an aggregate of 2,089,030 beneficiary interests through
17 serial closings during the period commencing October 26, 1993 and ending
February 6, 1995 (the "Class A Interests"), which are currently held by 2,083
investors (the "Class A Beneficiaries"). On July 18, 1997, the Trust issued
3,142,083 Class B Subordinated Interests (the "Class B Interests") of which
(i) 3,140,683 are currently held by Equis II Corporation, and (ii) 1,400 are
held by 4 other investors (collectively, the "Class B Beneficiaries"). Class
A Interests and Class B Interests basically have identical voting rights and,
therefore, Equis II Corporation has control over the Trust on all matters on
which Beneficiaries may vote.
The net proceeds of the offering of the Class B Interests (the "Class B
Proceeds") were intended to be applied to make a one-time special cash
distribution to the Class A Beneficiaries of $1.47 per Class A Interest (the
"Special Class A Distribution") and thereafter were intended by the Managing
Trustee to be applied for a period of 24 months (i.e. through July 17, 1999) to
redeem a portion of the Class A Interests. Any Class B Proceeds not so applied
during the 24-month period were intended to be distributed in accordance with
the Trust Agreement to the Class B Beneficiaries as the Class B Capital
Distribution. The Trust has paid $1.47 as the Special Class A Distribution and
has applied $1,606,322 to redeem Class A Interests through March 6, 1998. The
Trust currently retains $10,712,105 in Class B Proceeds.
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PENDING LITIGATION
On June 24, 1997, Leonard Rosenblum, J/B Investment Partners, Small and
Rebecca Barmack, Partners, and Barbara Hall (collectively, the "Plaintiffs")
commenced an action (the "Class Action Lawsuit") on behalf of a proposed class
of investors in a number of investment programs sponsored by EFG, including the
Trust (the "EFG Programs"), and derivatively on behalf of the EFG Programs
against EFG and a number of its Affiliates, including the Managing Trustee, as
defendants (collectively, the "Defendants"). The Class Action Lawsuit is
currently pending in the United States District Court for the Southern District
of Florida.
The Plaintiffs asserted, among other things, claims on behalf of the Trusts
for violations of the Securities Act of 1934 and claims on behalf of the
proposed class and the EFG Programs for common law fraud, breach of contract,
breach of fiduciary duty and/or aiding and abetting the breach of fiduciary duty
against the various managing general partners and the managing trustee of the
EFG Programs, including the Managing Trustee of the Trust, and other entities
and individuals.
The Defendants have denied, and continue to deny, that any of them have
committed or threatened to commit any violations of law or breaches of duty to
the Plaintiffs or any of the EFG Programs, including the Trusts. The Defendants
and Plaintiffs have entered into a memorandum of understanding (the "Memorandum
of Understanding") setting forth terms pursuant to which a Stipulation of the
Action may be agreed upon (the "Settlement"). The Defendants entered into the
Memorandum of Understanding and will be seeking to effectuate the Settlement
because, among other things, the Settlement would eliminate the burden and
expense of further litigation.
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Several of the terms of the Memorandum of Understanding are reflected in
the proposed Amendment. Subject to attaining the Settlement, the Managing
Trustee will agree to:
(a) cause the Trust to make the 1998 Special Distribution in the
amount of $1,572,405 from the Class B Proceeds to the Class A Beneficiaries
of record as of September 1, 1997 or their successors and assigns;
(b) cause the Trust to retain $3,537,910 from the portion of the
Class B Proceeds which would otherwise be distributed to Equis II
Corporation as a Class B Capital Distribution; and
(c) restrict the exercise of voting rights by Equis II Corporation
by requiring it to vote its Class B Interests in accordance with the
majority of Class A Interests on matters concerning related party
transactions, management fees and acquisition fees and other compensation.
The terms of the proposed Settlement providing for the 1998 Special
Distribution and limiting the Class B Capital Distribution are expected to
provide additional cash to Class A Beneficiaries and to the Trust, to align more
closely the economic interests of the Class A and Class B Beneficiaries, and to
increase substantially the continued investment by Equis II Corporation in and
its dependence on the long term economic results of the Trust. The Managing
Trustee desires and recommends that the Amendment be adopted because it believes
the Trust and in turn the Class A Beneficiaries and Class B Beneficiaries would
earn higher rates of return if the investment objectives and policies of the
Trust are modified as described herein.
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There is no assurance that the Settlement will be attained. However,
Equis II Corporation will vote its Class B Interests with respect to the
Amendment in the same manner in which the majority of the Class A Interests are
actually voted.
PURPOSES OF AMENDMENT
The Trust was formed to acquire and thereafter lease a diversified
portfolio of equipment to third parties. The primary investment objectives of
the Trust currently are to: (1) preserve and protect Trust capital by leasing
equipment to creditworthy lessees to obtain a creditworthy lease portfolio;
(2) generate cash distributions to the Beneficiaries; and (3) acquire leases of
a diversified portfolio of equipment and to maximize proceeds to the Trust from
the ultimate sale of such equipment.
The proposed Amendment would significantly modify these investment
objectives, primarily by permitting the Trust to acquire personal property in
addition to equipment, including securities. If the Amendment is adopted, the
primary investment objectives of the Trust will be to: (1) preserve and protect
Trust capital; (2) generate cash distributions to the Beneficiaries from Assets;
and (3) acquire, own, lease and manage Assets, including securities, and
(4) maximize proceeds to the Trust from the ultimate sale of such Assets. The
achievement of the Trust of any of these objectives, including the generation of
any specific level of distributions, cannot be assured or guaranteed.
To attain its original investment objectives, the Trust had established
certain investment policies with respect to, among other things, the selection
of lessees, the types of assets which may be acquired and other matters. If the
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proposed Amendment is adopted, these policies will be revised in a manner which
the Managing Trustee believes will enable the Trust better to attain its revised
investment objectives. This Solicitation Statement should be read carefully as
it describes certain consequences of, and risks and conflicts of interest
related to these changes. See "RISK FACTORS" and "CONFLICTS OF INTEREST."
The Managing Trustee believes that investing Trust funds in assets in
addition to equipment could provide returns in excess of those currently
available to the Trust, thereby resulting in increased cash distributions to the
Beneficiaries. The current investment policies of the Trust, in the judgment of
the Managing Trustee, are narrow and limit the ability of the Managing Trustee
to take advantage of opportunities to acquire assets for the Trust which may
provide attractive returns to the Beneficiaries, including to Equis II
Corporation.
The Managing Trustee believes that recent declines in interest rates
enhance the desirability of the Trust's equipment already subject to fixed rate
leases with creditworthy lessees. This may present opportunities for the Trust
to generate cash by selling a portion of such equipment at prices favorable to
the Trust or by refinancing certain leases at favorable interest rates. This in
turn would allow the Trust to seek to attain its investment objective of
providing higher distributions to the Beneficiaries, but only if the Trust could
reinvest the proceeds of such sales or refinancings in assets that generate
higher rates of return. (It should be noted that the Trust will continue its
present policy of not reinvesting unless sufficient distributions are made by
the Trust during the relevant period of operations to enable the Beneficiaries
to pay any state and federal income taxes arising from sale or refinancing
transactions.)
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The Managing Trustee believes that in order to improve total returns to the
Beneficiaries it needs maximum flexibility to pursue attractive investment
opportunities, the timing and extent of which vary in relation to changes in the
economy and financial markets.
If the Amendment is adopted, the types of assets which the Trust may
acquire will be substantially expanded and the Trust will no longer be limited
by asset or lessee concentration requirements. Further, the Trust will not be
required to lease Assets to only those lessees whose senior debt obligations
have been assigned a credit rating of at least "B" by Moody's Investor Service,
Inc. (or its equivalent as assigned by another nationally recognized credit
agency or determined by the Managing Trustee) as currently required.
Nonetheless, the Managing Trustee currently anticipates continuing
investment by the Trust primarily in the equipment leasing or equipment finance
business. Such investment may take place through the acquisition of debt and
equity securities of leasing companies or equipment leasing limited
partnerships, direct finance leases, loans secured by equipment and variable
rate leases. The Managing Trustee also may consider leasing equipment to
companies in exchange for lease payments made through a combination of both cash
and securities of the lessee (e.g., options and warrants).
The equity securities in which the Trust may invest may include common
stocks, preferred stocks and securities convertible into common stocks, as well
as warrants to purchase such securities. The debt securities in which the Trust
may invest may include equipment trust certificates, bonds, debentures, notes,
and mortgage-related securities. Certain of such securities may include
lower-rated
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securities which may provide the potential for higher yields and therefore may
entail higher risk.
The Trust's investments in securities may be subject to significant
business, financial, market and other risks. There can be no assurance that the
Trust will correctly evaluate such investments and their attendant risks or that
such investments will be profitable to the Trust. In addition, the securities
may fluctuate in value and such fluctuations could be material. See "RISK
FACTORS."
Currently, the Managing Trustee may reinvest Trust cash from sales or
refinancings in additional equipment only for a period of four years following
the initial closing of the offering of the Trust's Class A Interests (i.e.,
through February 6, 1999). The Amendment would extend the reinvestment period
through December 31, 2002 (the "Additional Reinvestment Period").
Under the Trust Agreement, the Trust may enter into joint ventures with
Affiliates of the Managing Trustee or EFG or any other investment programs
sponsored by EFG; provided that, among other things, the affiliated joint
venturers have substantially identical investment objectives and the investment
by each participant in the joint venture is on substantially the same terms and
conditions. If the Amendment is adopted, the Trust will be permitted to enter
into joint ventures with affiliated joint venturers that have different
investment objectives. Investment by the joint venturers may be on varying
terms and conditions reflecting their respective participations; provided that
the Managing Trustee will enter into such joint ventures only if it believes
that it is in the best interests of the Beneficiaries to do so, and the Trust's
participation is on terms and conditions which are fair to the Trust and the
Beneficiaries, taking into account the
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participation of the other affiliated venturers, and will allow the Trust to
better attain its revised investment objectives. See "CONFLICTS OF INTEREST."
The Managing Trustee believes that the requirements that all affiliated
venturers have substantially identical objectives and invest on substantially
the same terms and conditions unnecessarily limit the opportunity of the Trust
to co-invest with Affiliates of the Managing Trustee. It may be beneficial to
each venturer, including the Trust, that the venture be structured so that each
venturer participates in a manner taking into account its particular investment
objectives. For example, if an Affiliate of the Trust does not have as one of
its primary objectives current cash distributions, it may be beneficial to
provide the Trust a priority return on current cash flow while the other
venturer has a priority return on sale or residual proceeds. Further, the Trust
has a finite life and is not a taxable entity whereas another venturer may have
an infinite life and may be a taxable entity.
The Trust requires liquid assets to fund the repair, maintenance or
upgrading of equipment. Most of the Trust's leases are triple net, requiring
the lessee to maintain and repair equipment during the lease term. However, as
equipment ages and is returned to the Trust, upgrades or other improvements
thereto may be required to improve the marketability of the equipment. In
instances where a lease has a number of years to run prior to expiration, the
Trust may hold significant liquid assets to satisfy potential upgrades and
improvements, while not needing to use such assets in the near term. Currently,
the Trust is permitted only to invest its cash in certain limited investments,
generally bank deposits and government securities. The Managing Trustee
believes that
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permitting the Trust to invest in other types of securities with varying
terms, including longer-term securities that are marketable or traded on an
exchange, will provide a greater overall return to the Trust.
Currently, the amount of outstanding debt which may be incurred by the
Trust may not exceed 60% of the purchase price of assets owned by the Trust.
The Amendment would remove this limitation. The Managing Trustee believes that
it may be advisable in the future for the Trust to increase its debt
obligations. Further, long-term debt financing for the Trust currently is
required to be nonrecourse to the Trust and may not be secured by assets of the
Trust other than the assets purchased with the proceeds of the loan. The
Amendment would permit the Trust to issue cross-collateralized and recourse
debt. Although the Trust does not anticipate obtaining recourse debt, it may be
advisable from time to time to borrow against an asset with a limited lease
payment stream. In such event, the interest rate a lender would charge would be
substantially higher than a recourse loan to the Trust. Further, the use of
cross-collateralized debt might permit the Trust to obtain a lower cost of
financing. Securitized debt, which includes debt secured by a group of leases
(and as such is cross-collateralized) is among the lowest cost debt available to
leasing and finance companies.
The proportion of the Trust's assets invested in any one type of security
or any single issuer will not be limited. The Managing Trustee will have full
authority relating to the bases and methods for selection of securities, and the
Trust will not be subject to any policy limitations on the amounts and nature of
any non-equipment related securities purchased, sold or held, provided that the
Trust will
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conduct its activities in such a manner so as not to be deemed an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
Conducting activities in such a manner so as not to be deemed an investment
company under the 1940 Act generally means that the Trust does not intend to
enter the business of investing in securities and that no more than 40% of the
Trust's total assets will be invested in securities. While the Trust intends to
operate so as to not be treated as an investment company under the 1940 Act, if
it did not meet the exclusions under the 1940 Act in the future, the Trust would
be required to register as an investment company under the 1940 Act.
RISK FACTORS
INTRODUCTION. The Trust was created for the purpose of acquiring and
leasing to third parties a diversified portfolio of capital equipment and will
continue to be subject to the business, investment and tax risks associated with
such activities. In addition, adoption of the Amendment will subject the Trust
and its Beneficiaries to additional risks, including those hereinafter
discussed.
ADDITIONAL INVESTMENTS IN GENERAL. Under terms of the Trust Agreement, the
Managing Trustee has full power over the business and affairs of the Trust.
Therefore, Beneficiaries are not given an opportunity to approve or disapprove
of decisions, including potential investments, made by the Trust and the Trust
will be able to invest in assets in addition to equipment without further
consent of the Beneficiaries.
The Managing Trustee will have full authority relating to the bases and
methods for selection of securities, and the Trust will not be subject to any
policy limitations on the amounts and nature of any securities purchased, sold
or held,
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provided that the Trust will conduct its activities in such a manner so as not
to be deemed an investment company under the 1940 Act.
LESSEES WITH LOWER CREDIT RATING. The Managing Trustee may cause the Trust
to lease assets to lessees whose credit rating is lower than the credit
standards currently in effect. There can be no assurance as to the ability of
any lessee to perform its financial and other obligations under its lease. New
lessees may have a lower credit rating than that of the original lessees,
thereby increasing the possibility of default.
INVESTMENTS IN SECURITIES. Investments in securities will pose risks
different from those associated with investments in equipment. For example,
equity securities fluctuate in value, often based on factors unrelated to the
value of the issuer of the securities, and such fluctuations can be pronounced.
In addition, even though interest-bearing debt securities are investments which
may promise a stable stream of income, the prices of such securities generally
are inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. Also, some securities which may
provide the potential for higher yields may also entail a commensurately greater
risk of loss.
REINVESTMENT PERIOD EXTENDED. The Amendment will extend the Reinvestment
Period through December 31, 2002 and the Managing Trustee will seek to invest in
additional assets which will increase the level of distributions to the
Beneficiaries. However, reinvestment will have the effect of significantly
deferring distributions which would otherwise have been made from proceeds of
sales or refinancings, and there is no assurance that the future distributions
will be significantly increased as a result.
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CROSS-COLLATERALIZED, RECOURSE AND INCREASED DEBT. Permitting the Trust to
issue cross-collateralized debt or recourse debt may result in a significantly
greater loss to the Trust than from non-recourse or non-cross-collateralized
debt in the event that the Trust defaults on such debt. Further, permitting
the Trust to increase its debt level above current limitations may subject
the Trust to increased risk of default and loss of its assets.
THE 1940 ACT. The Trust intends to conduct its activities so as not to be
deemed an investment company under the 1940 Act. However, if it does not in the
future meet the requirements for exclusion from the 1940 Act, the Trust would be
subjected to substantial reporting and regulatory constraints which could
adversely affect its operations and the level of distributions made to the
Beneficiaries.
1998 SPECIAL DISTRIBUTION AND OTHER BENEFITS OF SETTLEMENT. The 1998
Special Distribution, the reduction in the Class B Capital Distribution and
restrictions on the voting of Equis II Corporation as Class B Beneficiary will
be made or effected only if the Settlement is attained in the Class Action
Lawsuit, as to which there can be no assurance.
CONFLICTS OF INTEREST
The Managing Trustee's selection of non-equipment investments may be
influenced by factors other than the best interests of the Trust and
maximization of Beneficiary distributions. Such factors may include, but are
not limited to, whether EFG or its Affiliates have independent investments in
such assets which may benefit from investments by the Trust. The Amendment
would permit the Trust to engage in joint ventures with affiliates which have
differing investment objectives and policies and on terms which differ
significantly from those of the Trust. While
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the Managing Trustee is required to structure such transactions so that they
are fair to the Trust, the Managing Trustee and its Affiliates will have a
conflict of interest because of participation by EFG and its Affiliates.
Further, it should be noted that the Trust Agreement provides that the
Managing Trustee and its Affiliates are permitted to have other business
interests and may engage in other business ventures of any nature whatsoever,
and may compete directly or indirectly with the business of the Trust.
CONSENT OF BENEFICIARIES
This Solicitation Statement is being furnished to Beneficiaries in
connection with the solicitation by the Trust of the consent of the
Beneficiaries to the Amendment. NO FORMAL MEETING OF BENEFICIARIES WILL BE
HELD.
A properly executed consent form received by the Managing Trustee will be
voted in accordance with the direction indicated by the Beneficiary on the form.
If no direction is indicated, a properly executed consent form received by the
Managing Trustee will be voted in favor of the Amendment. To be counted, a
consent form must be received by the Managing Trustee no later than
_____________, 1998, subject to extension at the discretion of the Managing
Trustee. The consent form may be returned to the Managing Trustee by mail or
hand-delivery c/o Corporate Investor Communications, Inc., 111 Commerce Road,
Carlstadt, NJ 07072. A stamped envelope addressed to the Managing Trustee is
enclosed. The consent form may also be returned to the Managing Trustee by
facsimile at (201) 804-8693. To be valid, a consent form must be signed by the
record owner(s) of the Interests represented thereby as listed in the records of
the Trust as of ___________, 1998. Pursuant to Section 12.1 of the Trust
Agreement, a
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written consent may not be withdrawn or voided once it is received by the
Managing Trustee. All questions as to the validity (including time of
receipt) of all consent forms will be determined by the Managing Trustee,
which determinations will be final and binding. As of _________, 1998, there
were 1,935,755 Class A Interests and 3,142,083 Class B Interests outstanding.
Accordingly, under the Trust Agreement, the Consent of Beneficiaries holding
more than 2,538,919 Interests will be required for the adoption of the
Amendment.
Affiliates of the Managing Trustee own 44,084 Class A Interests, all of
which will be voted in favor of the Amendment.
While under no obligation to do so, Equis II Corporation has advised the
Managing Trustee that it will vote all of its Class B Interests with respect to
the Amendment in the same manner in which the majority of the Class A Interests
are actually voted (i.e., for this purpose, the Class A Interests for which no
consent form is actually received or which abstain will not be taken into
account.) The Amendment will be adopted or rejected based upon the vote of the
majority of the Class A Interests actually voted (including the votes of
Affiliates of the Managing Trustee). Accordingly, the Amendment will be adopted
no matter how few Class A Interests are voted, provided a majority of those
Interests are voted in favor of the Amendment.
This Solicitation Statement has been prepared under the direction of the
Managing Trustee. The costs of preparing and mailing this Solicitation
Statement and the enclosed consent form and soliciting consent will be paid by
the Trust. In addition to soliciting the consent of Beneficiaries by mail,
representatives of the Managing Trustee may, at the Trust's expense, solicit the
consent of Beneficiaries
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by telephone, telegraph, in person or by other means. In addition, the
Managing Trustee has retained Corporate Investor Communications, Inc. to
solicit the consent. The fees of Corporate Investor Communications, Inc. will
be paid by the Trust and are estimated to be $2,000.
Pursuant to Section 11.2 of the Trust Agreement, the consent of
Beneficiaries holding more than 50% in the aggregate of the Interests held by
all Beneficiaries is required for approval of the Amendment. Upon receipt of
the requisite approval, it will be binding on all Beneficiaries, whether or not
they consented.
THE MANAGING TRUSTEE RECOMMENDS THAT THE AMENDMENT BE APPROVED AND URGES
EACH BENEFICIARY TO COMPLETE AND RETURN THE ENCLOSED CONSENT FORM IMMEDIATELY.
ANY BENEFICIARY WITH QUESTIONS RELATING TO THE AMENDMENT SHOULD TELEPHONE THE
TRUST AT (888) 204-8031.
ADDITIONAL INFORMATION CONCERNING THE TRUST
The Class A Interests are registered under the Securities Exchange Act of
1934 and as a result the Trust files annual and quarterly reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information may be inspected at the Commission's public
reference facilities, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as the following regional offices: 7 World Trade Center, 13th floor,
New York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and copies of such materials may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Trust's Annual Report on
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Form 10-K for the year ended December 31, 1996, and its Quarterly Reports for
the three-month, six and nine periods ended March 31, 1997, June 30 and
September 30, respectively, may be obtained by Beneficiaries from the Trust by
writing to the Trust c/o Equis Financial Group at 88 Broad Street, Boston,
Massachusetts 02110.
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EXHIBIT A
The full text of the proposed Amendment to the Trust Agreement is as
follows:
AMENDMENT NO. 1
to
SECOND AMENDED AND RESTATED DECLARATION OF TRUST
THE SECOND AMENDED AND RESTATED DECLARATION OF TRUST OF AFG INVESTMENT
TRUST D made and agreed to by the Trustees and the Beneficiaries as of July 15,
1997 (the "Trust Agreement"), is hereby amended as of _________, 1998, as
follows:
1. "Section 1.2 LOCATION" is hereby deleted and the following substituted
in lieu thereof: The Trust shall maintain an office at 88 Broad Street, Boston,
Massachusetts 02110, and may have such other offices or places of business as
the Managing Trustee may from time to time determine as necessary or expedient.
2. The purposes of the Trust are as set forth in Section 1.4, as
supplemented and modified by the Solicitation Statement.
3. The following terms are hereby added to "ARTICLE II -- Definitions"
in replacement of the corresponding terms in such Article:
"Assets" means, collectively, any personal property, including equipment,
other personal property and Securities of any type and description, whether or
not related to such personal property, and any interest of the Trust therein,
whether directly or indirectly through a nominee, Joint Venture or otherwise.
<PAGE>
"Asset Management" means personnel and services necessary to the
activities of the Trust relating to its Assets including but not limited to
leasing and re-leasing of Assets, collecting revenues, paying operating
expenses, determining that the Assets are used in accordance with all
operative contractual arrangements, providing clerical and bookkeeping
services necessary to the operation of Assets and management of any Securities.
4. The following terms are hereby added to "ARTICLE II -- Definitions" in
their proper alphabetical position:
"Class Action Lawsuit" means the class and derivative action
brought on June 24, 1997, by Leonard Rosenblum, J/B Investment Partners, Small
and Barbara Barmack, Partners, and Barbara Hall against EFG and a number of its
Affiliates, together with any related class and derivative actions.
"Securities" means securities of any type or description which are
acquired by the Trust.
"Solicitation Statement" means the Solicitation Statement of the Trust
dated _________, 1998, as amended or supplemented from time to time, pursuant to
which the Consent of the Beneficiaries was obtained, among other things, to
modify the investment objectives and policies of the Trust.
5. Section 4.2(b)(iv) is hereby deleted and the following substituted in
lieu thereof:
(iv) for a period continuing through December 31, 2002, to
reinvest Cash from Sales and Refinancings in additional Assets; provided,
however, that the Lease of any Asset so acquired shall have a term which
shall expire not later than eleven years after Final Closing, or, if such
term is scheduled to
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expire more than eleven years after Final Closing, that such asset
will be sold within such period; and provided, further, that sufficient
Distributions are made during the relevant period of Trust operations to
enable the Beneficiaries to pay any state and federal income taxes arising
from the Sale or Refinancing transaction (assuming the Beneficiaries are in
a combined federal and state marginal tax bracket of 33% or the rate
effective at the time of the Sale or Refinancing transaction);
6. Clause (vii) of Section 4.5 is hereby deleted.
7. The first sentence of Section 5.1(c) of the Trust Agreement is hereby
deleted and the following inserted in lieu thereof:
(c) For Asset Management, the Trust shall pay an Asset
Management Fee, payable monthly, equal to the lesser of (A) the fees which
the Managing Trustee reasonably believes to be competitive for similar
services for similar assets or (B) either (i) 5% of gross lease rental
revenues of the Trust from Operating Leases and 2% of gross lease rental
revenues of the Trust from Full Payout Leases for the month for which such
payment is being made with respect to any Assets acquired by the Trust on
or prior to March 31, 1998, or (ii) 2% of gross lease rentals with respect
to leases of Assets acquired on or after April 1, 1998, or (iii) 1/12th of
1% of the fair market value (or, if unattainable, the cost) of any
Securities or other Assets (other than equipment).
8. Section 7.1 of the Trust Agreement is hereby deleted and the following
inserted in lieu thereof:
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The Managing Trustee shall use its best efforts to cause the Trust to
follow the investment objectives and policies set forth in the Class A
Prospectus, as modified by the Solicitation Statement. The Managing Trustee
may not make substantial or material modifications in such investment
objectives without Majority Consent. All funds held by the Trust which are
not invested in Assets (including subscription payments upon their release to
the Trust) may be invested by the Trust in Permitted Investments. The Trust
shall not redeem or repurchase Interests except to the extent that such
Interests are forfeited in order to (a) prevent the assets of the Trust from
being deemed plan assets or (b) prevent Foreign Beneficiaries from remaining
Trust Beneficiaries under certain circumstances provided herein or (c) as
permitted by Section 9.6. The Managing Trustee shall use its best efforts and
in particular shall only acquire Securities in such a manner to ensure that
the Trust shall not be deemed an investment company, as such term is defined
in the Investment Company Act of 1940.
9. Section 8.1(d) is hereby deleted and the following is hereby
substituted in lieu thereof:
(d) Promptly after the Class B Closing the Trust will make the
Special Class A Distribution to the Class A Beneficiaries. Promptly after
settlement of the Class Action Lawsuit, the Trust will make the Second
Special Class A Distribution to the Class A Beneficiaries of record as of
September 1, 1997, or their successors and assigns.
10. The following sentence is hereby added at the end of Section 8.1(e).
In the event that a final settlement of the Class Action Lawsuit has been
attained on or
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prior to July 17, 1999, then up to $3,537,910 of any remaining Class B
Proceeds will be retained by the Trust and invested in additional Assets.
Except as specifically amended hereby, the Trust Agreement as in effect
prior to this Amendment thereof remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment No. 1 as of __________________, 1998.
MANAGING TRUSTEE: CLASS A AND B BENEFICIARIES:
AFG ASIT Corporation By: AFG ASIT Corporation, as
Attorney-in-Fact for each
By: such Person pursuant to
_____________________________ Article XIII of the Trust
Authorized Officer Agreement
DELAWARE TRUSTEE: By:
Wilmington Trust Company _____________________________
Authorized Officer
By:
_____________________________
Authorized Officer
SPECIAL BENEFICIARY:
Equis Financial Group
(formerly named American
Finance Group)
By:
_____________________________
Authorized Officer
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AFG INVESTMENT TRUST D
88 Broad Street
Boston, Massachusetts 02110
Consent of Beneficiary
(SOLICITED ON BEHALF OF THE MANAGING TRUSTEE)
I have received and reviewed the Solicitation Statement dated
_______________, 1998 (the "Solicitation Statement"), from AFG Investment
Trust D (the "Trust") concerning the proposed amendment to the Trust Agreement
of the Trust. I hereby vote
______ FOR ______ AGAINST ______ ABSTAIN
for purposes of Article XII, Section 12.1, of the Trust Agreement to the
amendment of the Trust Agreement as set forth in the Solicitation Statement.
A properly executed Consent of Beneficiary received by the Managing Trustee
will be voted in accordance with the direction indicated hereby. If no
direction is indicated, a properly executed Consent of Beneficiary received by
the Managing Trustee will be voted in favor of the Amendment.
Aggregate Number of Class A and Class B Beneficiary Interests: __________
IF THE BENEFICIARY IS AN INDIVIDUAL
(IF JOINT TENANTS OR TENANTS-IN-COMMON,
BOTH OWNERS MUST SIGN):
____________________________________ ______________________________________
Signature Date Signature Date
____________________________________ ______________________________________
Print Name Print Name
IF THE BENEFICIARY IS A CORPORATION,
PARTNERSHIP OR TRUST:
____________________________________
Print Name of Entity
By: ________________________________
Signature Date
____________________________________
Print Name and, if applicable, Title
PLEASE RETURN THIS CONSENT FORM NO LATER THAN _______________________ (SUBJECT
TO EXTENSION AT THE DISCRETION OF THE MANAGING TRUSTEE), TO:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE ROAD
CARLSTADT, NEW JERSEY 07072-2586
UNIT HOLDER QUESTIONS: CALL (888) 204-8031
FAX VOTES TO: (201) 804-8693
