Afg Investment Trust C 10QSB 2004 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-21444

AFG Investment Trust C

(Name of Small Business Issuer in its charter)

Delaware04-3157232

(State or other jurisdiction of (I.R.S. Employer Identification No.)

incorporation or organization)

1050 Waltham Street, Suite 310, Lexington, MA02421

(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code : (781) 676-0009

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months

(or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X. NO.

Shares of Class A interests outstanding as of November 12, 2004: 1,786,753

Shares of Class B interests outstanding as of November 12, 2004: 3,024,740

Transitional Small Business Disclosure Format: YES. NO X.

AFG INVESTMENT TRUST C

FORM 10-QSB

INDEX

PART I. FINANCIAL INFORMATION:	Page
Item 1. Financial Statements (unaudited)
Condensed Balance Sheets
at September 30, 2004 and December 31, 2003	3
Condensed Statements of Operations
for the Three and Nine Months Ended September 30, 2004 and 2003	4
Condensed Statement of Changes in Participants’ Capital
for the Nine Months Ended September 30, 2004	5
Condensed Statements of Cash Flows
for the Nine Months Ended September 30, 2004 and 2003	6
Notes to the Condensed Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations	14
Item 3. Controls and Procedures	22
PART II. OTHER INFORMATION:
Item 1 - 5.	24
Item 6. Exhibits and reports on Form 8-K	26

AFG INVESTMENT TRUST C

CONDENSED BALANCE SHEETS

(in thousands of dollars, except share amounts)

(unaudited)

		September 30, 2004			December 31, 2003
Assets
Cash and cash equivalents	$	1,311		$	1,698
Accounts receivable - affiliate		15			162
Loan receivable - EFG/Kettle Development LLC		528			528
Interest in EFG/Kettle Development LLC		4,356			4,235
Interest in EFG Kirkwood, LLC		2,754			2,491
Interest in MILPI Holdings, LLC		8,300			7,686
Interest in C & D IT, LLC		1,157			1,157
Other assets		427			373
Total assets	$	18,848		$	18,330
Liabilities and participants' capital
Accrued liabilities	$	289		$	202
Total liabilities		289			202
Commitments and Contingencies
Participants' capital (deficit):
Managing Trustee		(12	)		(2	)
Special beneficiary		-			-
Class A beneficiary interests (1,786,753 interests,
initial purchase price of $25 each)		20,099			19,740
Class B beneficiary interests (3,024,740 interests,
initial purchase price of $5 each)		-			-
Treasury interests (224,261 Class A interests at cost)		(2,339	)		(2,339	)
Accumulated other comprehensive income		811			729
Total participants' capital		18,559			18,128
Total liabilities and participants' capital	$	18,848		$	18,330

AFG INVESTMENT TRUST C

CONDENSED STATEMENTS OF OPERATIONS

(in thousands of dollars, except per share and share amounts)

(unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2004			2003			2004		2003
Revenue
Lease revenue	$ 34			$ 1,115			$ 268		$ 3,613
Interest income		7			30			24		84
Gain on sale of equipment		2			2			33		1
Other revenue		-			-			13		-
Total revenue		43			1,147			338		3,698
Expenses
Depreciation and amortization		2			413			11		1,455
Interest expense		-			379			-		1,179
Impairment of assets		1,935			-			2,818		-
Management fees - affiliates		48			96			151		295
Operating expenses		199			149			526		373
Operating expenses -affiliates		135			13			288		89
Total expenses		2,319			1,050			3,794		3,391
Income (Loss) from Equity Interests
Equity in net income of other investments		106			-			71		-
Equity in net income of EFG/Kettle Development LLC and affiliates		32			54			39		27
Equity in net (loss) income of EFG Kirkwood LLC		(563	)		(510	)		263		261
Equity in net income of MILPI Holdings, LLC		1,935			45			3,432		432
Total income (loss) from equity interests		1,510			(411	)		3,805		720
Net (loss) income	$	(766	)	$	(314	)	$	349	$	1,027
Net (loss) income
per Class A Beneficiary Interest	$	(0.42	)	$	-		$	0.20	$	0.60
per Class B Beneficiary Interest	$	-		$	(0.07	)	$	-	$	(0.02	)
Average Class A Beneficiary Interests outstanding		1,786,753			1,786,953			1,786,753		1,786,953
Average Class B Beneficiary Interests outstanding		3,024,740			3,024,740			3,024,740		3,024,740

The accompanying notes are an integral part of these financial statements.

AFG INVESTMENT TRUST C

CONDENSED STATEMENT OF CHANGES IN PARTICIPANTS’ CAPITAL

For the Nine Months Ended September 30, 2004

(in thousands of dollars, except share amounts)

(unaudited)

	Managing Trustee			Special Beneficiary		Class A Beneficiaries				- Class B Beneficiaries				Treasury					Accumulated Other Comprehensive
	Amount			Amount		Interests		Amount		Interests		Amount		Interests		Amount			Income		Total
Balances at December 31, 2003	$	(2	)	$	-		1,786,753	$	19,740		3,024,740	$	-		224,261	$	(2,339	)	$	729	$	18,128
Net (loss) income		(10	)		-		-		359		-		-		-		-			-		349
Foreign currency translation adjustment		-			-		-		-		-		-		-		-			82		82
Comprehensive income																						431
Balances at September 30, 2004	$	(12	)	$	-		1,786,753	$	20,099		3,024,740	$	-		224,261	$	(2,339	)	$	811	$	18,559

The accompanying notes are an integral part of these financial statements.

AFG INVESTMENT TRUST C

CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30,

(in thousands of dollars)

(unaudited)

	2004			2003
Cash flows provided by (used in) operating activities
Net income	$	349		$	1,027
Adjustments to reconcile net income to net income to
net cash provided by (used in) operating act ivies :
Depreciation and amortization		11			1,455
Gain on disposition of equipment		(33	)		(1	)
Impairment of assets		2,818			-
Change in equity interests		(3,888	)		(286	)
Changes in assets and liabilities:
Accounts receivable - affiliate		147			29
Other assets		(5	)		(223	)
Accrued liabilities		88			20
Deferred rental income		-			(19	)
Net cash (used in) provided by operating activities		(513	)		2,002
Cash flows provided by investing activities
Proceeds from equipment dispositions		44			4
Net cash provided by investing activities		44			4
Cash flows used in financing activities
Principal payments - notes payable		-			(1,805	)
Net cash used in financing activities		-			(1,805	)
Net (decrease) increase in cash and cash equivalents		(469	)		201
Effect of foreign exchange rate change		82			(434	)
Cash and cash equivalents at beginning of period		1,698			1,168
Cash and cash equivalents at end of period	$	1,311		$	935
Supplemental information
Cash paid during the year for interest	$	-		$	1,055
Noncash transactions Increase in interest in MILPI Holdings, LLC related to issuance of partnership interests and purchase of interest in Rancho Malibu	$	-		$	1,184
Increase in interest in C & D IT, LLC related to issuance of partnership interests	$	-		$	157

The accompanying notes are an integral part of these financial statements.

AFG INVESTMENT TRUST CNOTES TO THE CONDENSED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The unaudited financial statements presented herein are prepared in conformity with generally accepted accounting principles in the United States of America and the instructions for preparing Form 10-QSB under Rule 310 of Regulation S-B of the Securities and Exchange Commission (“SEC”). Rule 310 provides that disclosures that would substantially duplicate those contained in the most recent annual report to shareholders may be omitted from interim financial statements. The accompanying unaudited condensed financial statements have been prepared on that basis and, therefore, should be read in conjunction with the financial statements and notes presented in the 2003 Annual Report (Form 10-KSB) of AFG Investment Trust C (the “Trust”) on file with the United States Securities and Exchange Commissi on. Except as disclosed herein, there have been no material changes to the information presented in the notes to the 2003 Annual Report in Form 10-KSB.

In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Trust’s condensed balance sheets at September 30, 2004 and December 31, 2003, condensed statements of operations for the three and nine month periods ended September 30, 2004 and 2003, condensed statements of changes in participants’ capital for the nine months ended September 30, 2004 and condensed statements of cash flows for the nine months ended September 30, 2004 and 2003 have been made and are reflected.

Certain amounts previously reported have been reclassified to conform to the September 30, 2004 financial statement presentation. These reclassifications did not affect total assets, total liabilities, participants’ capital or net income (loss).

NOTE 2 - INTEREST IN EFG/KETTLE DEVELOPMENT LLC

The Trust and AFG Investment Trust D ("Trust D") each own 50% of EFG/Kettle Development LLC (“Kettle Valley”), a Delaware limited liability company, which owns a non-controlling 49.9% indirect ownership interest in Kettle Valley Development Limited Partnership which owns a real estate development in Kelowna, British Columbia in Canada, called Kettle Valley.

The Trust’s ownership interest in Kettle Valley and affiliates is accounted for on the equity method. The Trust recorded net income of $32,000 and $39,000 during the three and nine months ended September 30, 2004, respectively compared to net income of $0.1 million and $27,000 for the same periods in 2003. During the nine months ended September 30, 2004, the Trust recorded a net foreign currency translation adjustment of $0.1 millionreflecting a strengthening of the Canadian dollar against the U.S. dollar which is included in accumulated other comprehensive income and reported as part of statements of changes in participants’ capital.

The table below provides Kettle Valley Development Limited Partnership’s summarized consolidated statements of operations data for the three and nine months ended September 30, 2004 and 2003 (in thousands of dollars):

		Three Months Ended September 30, 2004		Three Months Ended September 30, 2003		Nine Months Ended September 30, 2004		Nine Months Ended September 30, 2003
Total revenues	$	1,198	$	1,258	$	4,408	$	3,747
Total expenses		1,074		1,044		4,193		3,653
Net income	$	124	$	214	$	215	$	94

NOTE 3 - INTEREST IN EFG KIRKWOOD LLC

The Trust, Trust D and two affiliated corporations, Equis II Corporation (“Equis II”) and Semele Group, Inc. (“Semele”), own EFG Kirkwood LLC ("EFG Kirkwood"). The Trust, Trust D and Equis II collectively own 100% of the Class A membership interests in EFG Kirkwood and Semele owns 100% of the Class B membership interests in EFG Kirkwood. The Trust holds a non-controlling interest of 40% of EFG Kirkwood’s Class A membership interests.

The Trust’s ownership interest in EFG Kirkwood is accounted for on the equity method.For thethree and nine months ended September 30, 2004, the Trust recorded a loss of $0.6 million and income of $0.3 million, respectively compared to loss of $0.5 million and income $0.3 million for the three and nine months ended September 30, 2003, which represented its pro- rata share of the net income (loss) of EFG Kirkwood.

The table below provides EFG Kirkwood’s summarized consolidated statements of operations data for the three and nine months ended September 30, 2004 and 2003, respectively (in thousands of dollars):

	Three Months Ended September 30, 2004	Three Months Ended September 30, 2003	Nine Months Ended September 30, 2004	Nine MonthsEnded September 30, 2003
Equity (loss) income on investments	$ (1,407)	$ (1,286)	$ 654	$ 638

EFG Kirkwood owns membership interests in Mountain Resort Holdings LLC (“Mountain Resort”) and Mountain Springs Resorts LLC (“Mountain Springs”). The operating companies have a fiscal year end of April 30th which is different from the Trust. The table below provides comparative summarized statements of operations data for Mountain Resort and Mountain Springs for the three and nine months ended September 30, 2004 and 2003 (in thousands dollars):

	Three Months Ended September 30, 2004			Three Months Ended September 30, 2003			Nine Months Ended September 30, 2004			Nine Months Ended September 30, 2003
Mountain Resort
Total revenues	$                                    3,176			$                                    3,247			$                                   23,284			$                                  24,775
Total expenses		5,915			5,321			21,879			21,938
Net (loss) income	$	(2,739	)	$	(2,074	)	$	1,405		$	2,837
Mountain Springs
Total revenues	$	2,114		$	2,050		$	14,310		$	12,779
Total expenses		3,969			4,128			14,691			14,176
Net loss	$	(1,855	)	$	(2,078	)	$	(381	)	$	(1,397	)

EFG Kirkwood guarantees the payment of obligations under a revolving line of credit between DSC/Purgatory LLC (“Purgatory”), a subsidiary of Mountain Springs, and a third party lender. Another shareholder in Mountain Springs also guarantees this line of credit. Either party may be called on by the lender to fulfill Purgatory’s obligations. The amount of the guarantee consists of the outstanding balance of the line of credit which cannot exceed the maximum borrowing capacity under the line of $3.5 million. As of September 30, 2004, borrowings outstanding on the line of credit were $2.3 million. The line of credit expires in October 2005.

NOTE 4 -INTEREST IN MILPI HOLDINGS LLC

On June 3, 2004, the Trust filed a proxy statement soliciting the beneficial interest holders on several articles proposed by the Managing Trustee. On July 28, 2004, the shareholders voted in favor of each of the proposals, one of which included the sale of the Trust’s membership interest in MILPI Holdings, LLC (“MILPI”) for $8.3 million. The transaction was completed in November 2004. (See Note 11 to the financial statements)

The impairment test underAPB No. 18 “The Equity Method of Accounting for Investments in Common Stock”, considers whether the fair value of the equity investment has declined and whether that decline is other than temporary.The Trust impaired its interest in MILPI to reflect MILPI at an amount equal to the sales proceeds expected to be received in connection with the sale. As a result, the Trust recorded an impairment of $1.9 million and $2.8 million in the three and nine months ended September 30, 2004.

The table below provides summarized consolidated statements of operations data for MILPI for the three and nine months ended September 30, 2004 and 2003, respectively (in thousands of dollars):

.	Three Months	Three Months	Nine Months	Nine Months
.	Ended	Ended	Ended	Ended
.	September 30,	September 30,	September 30,	September 30,
	2004	2003	2004	2003
Total revenues	$      5,278	$      1,581	$     10,264	$      4,779
Equity income in managed programs	597	125	1,356	666
Total expenses	1,584	1,665	3,239	3,762
Income before income taxes	4,291	41	8,381	1,683
Provision for (benefit from) taxes	421	(51)	1,612	547
Net income	$      3,870	$           92	$        6,769	$      1,136

NOTE 5 - RELATED PARTY TRANSACTIONS

Various operating expenses incurred by the Trust are paid by Equis Financial Group Limited Partnership (“EFG”) on behalf of the Trust and EFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during the three and nine months ended September 30, 2004 and 2003, which were paid or accrued by the Trust to EFG or its affiliates, are as follows (in thousands of dollars):

		Three Months Ended September 30, 2004		Three Months Ended September 30, 2003		Nine Months Ended September 30, 2004		Nine Months Ended September 30, 2003
Management fees	$	48	$	96	$	151	$	295
Administrative charges		135		13		288		89
Total	$	183	$	109	$	439	$	384

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.

All rents and proceeds from the sale of equipment are paid directly to either EFG or to a lender. EFG temporarily deposits collected funds in a separate interest-bearing escrow account prior to remittance to the Trust. At September 30, 2004, the Trust was owed $6,000 by EFG for such funds and the interest thereon. These funds were remitted to the Trust in October 2004.

NOTE 6 - COMPREHENSIVE INCOME (LOSS)

Statement of Financial Accounting No. 130, “Reporting Comprehensive Income” (“SFAS 130”) establishes standards for reporting and displaying comprehensive net income and its components in participants’ capital. SFAS 130 requires foreign currency translationadjustments to be included in comprehensive income.However, it has no impact on the Trust’s net income as presented in the financial statements.

The following are the components of comprehensive income (in thousands of dollars):

	Three Months	Three Months	Nine Months	Nine Months
	Ended	Ended	Ended	Ended
	September 30,	September 30,	September 30,	September 30,
	2004	2003	2004	2003
Net (loss) income	$     (766)	$     (314)	$     349	$    1,027
Foreign currency translation gain (loss)	240	(19)	82	434
Comprehensive (loss) income	$     (526)	$     (333)	$    431	$   1,461

NOTE 7 - CONTINGENCIES

The SEC staff has informed the Trust that it believes the Trust may be an unregistered investment company within the meaning of the The Investment Company Act of 1940 (the “Act”). The Trust, after consulting with counsel, does not believe that it is an unregistered investment company. However, it is possible that the Trust may have unintentionally engaged in an activity or activities that may be construed to fall within the scope of the Act.

On June 9, 2004, Robert Lewis, as plaintiff, (“Lewis” or the “Plaintiff”) filed a class and derivative action, captionedRobert Lewis v. Gary D. Engle, James A. The Plaintiff filed a purported class action lawsuit in the Court of Chancery of the State of Delaware In and For New Castle County against Semele, Equis II Corporation (“Equis II”), AFG ASIT Corporation (the “Managing Trustee”), PLM MILPI Holdings LLC (“PLM”), Gary D. Engle (“Engle”) and James A. Coyne (“Coyne”) (collectively, the “Defendants”) . AFG ASIT Corporation is the Managing Trus tee of the Trust. Semele is the indirect corporate parent of the Managing Trustee. Semele is the direct corporate parent of Equis II, which is the direct owner of the Managing Trustee. Engle is the Chairman and Chief Executive Officer of Semele. Coyne is the President and Chief Operating Officer of Semele. Engle and Coyne together own a majority of the shares of Semele, which in turn owns a majority of the outstanding interests in the Trust. PLM is a limited liability company ultimately owned by Engle and Coyne.

The Lewis action is brought on behalf of a purported class consisting of the public beneficiaries of the Trust. The complaint alleges breaches of fiduciary duty and self-dealing in connection with the proposed liquidation of the Trust, proposed amendments to the governing Trust Agreement and a proposed sale of some of the Trust’s assets to PLM. The complaint is in two counts, one alleging a lack of entire fairness in connection with the proposed asset sale and amendments and the second alleging a breach of the duty of disclosure with regard to a Consent Solicitation Statement issued in connection with the vote of those holding interests in the Trust on the proposed sale and amendments. The complaint seeks: 1) class certification: 2) preliminary and permanent injunctions against the consent solicitation and the proposed sale and amendments; and 3) damages in an unspecified amount payable to the purported class and the Trust.

The Defendants have denied and continue to deny all allegations of liability or wrongdoing in the complaint. After the Defendants answered the complaint on September 15, 2004, the parties entered into negotiations that resulted in a settlement (the “Settlement”). The Stipulation of Settlement was signed by counsel for the parties on November 3, 2004 and provides,interalia, for

1. A payment of $1.7 million by the Defendants to the Trust;

2. Retention of an independent financial expert to provide an opinion as to the financial fairness of the purchase price for the sale by the Trust of its interest in MILPI Holdings LLC to an affiliate of the Defendants; and

3. Appointment of a Liquidating Trustee to manage and wind-up the business and affairs of the Trust.

The Stipulation of Settlement states that the Defendants do not admit any liability or wrongdoing.

The Stipulation of Settlement will be presented to the Court of Chancery for its approval after a hearing on a date yet to be determined. The Settlement will not be final until the members of the class have had an opportunity to object and the Court has approved the Settlement

The Trust is subject to various claims and proceedings in the normal course of business. Management believes that the disposition of such matters is not expected to have a material adverse effect on the financial position of the Trust or its results of operations.

NOTE 8 - SEGMENT REPORTING

The Trust has three principal operating segments: 1) Equipment Leasing 2) Equipment Management and 3) Real Estate Ownership, Development & Management. The Equipment Leasing segment includes acquiring and leasing equipment to third parties. The Trust is no longer allowed to purchase new equipment as its acquisition phase has ended. The Equipment Management segment included the majority of the Trust's equity interest in MILPI, which owns 100% of PLM International, Inc., a company in the equipment leasing management business, excluding its ownership in RMLP, Inc. The Real Estate segment includes the ownership, management and development of commercial properties, recreational properties, condominiums, interval ownership units, townhomes, single family homes and land sales included in the Trust’s ownership i nterests in EFG Kirkwood, C & D IT LLC, Kettle Valley and MILPI through its subsidiary RMLP, Inc. Other includes corporate assets, which consist of cash and certain receivables. Other operating expenses consist of primarily management fees and professional services, such as audit and legal fees.

The Trust’s reportable segments offer different products or services and are managed separately because each requires different operating strategies and management expertise. There are no material intersegment sales or transfers.

Segment information for the three and nine months ended September 30, 2004 and 2003 is summarized below (in thousands of dollars).

For the Three Months Ended		Equipment			Equipment			Real
September 30, 2004		Leasing			Management			Estate			Other			Total
Revenue:
Lease revenue	$	34		$	-		$	-		$	-		$	34
Interest income		-			-			5			2			7
Gain on sale of equipment		2			-			-			-			2
Total revenue		36			-			5			2			43
Expenses:
Depreciation		2			-			-			-			2
Impairment of assets		-			1,935			-			-			1,935
Management fees - affiliates		2			25			21			-			48
Operating expenses		-			-			-			199			199
Operating expenses - affiliates		135			-			-			-			135
Total expenses		139			1,960			21			199			2,319
Equity Interests:
Equity in net income of other investments		-			-			106			-			106
Equity in net income of EFG/Kettle Development LLC		-			-			32			-			32
Equity in net loss of EFG Kirkwood LLC		-			-			(563	)		-			(563	)
Equity in net income of MILPI Holdings, LLC		-			1,935			-			-			1,935
Total income (loss) from equity interests		-			1,935			(425	)		-			1,510
Net loss	$	(103	)	$	(25	)	$	(441	)	$	(197	)	$	(766	)
For the Three Months Ended		Equipment			Equipment			Real
September 30, 2003		Leasing			Management			Estate			Other			Total
Revenue:
Lease revenue	$	1,115		$	-		$	-		$	-		$	1,115
Interest income		-			-			27			3			30
Gain on sale of equipment		2			-			-			-			2
Total revenue		1,117			-			27			3			1,147
Expenses:
Depreciation and amortization		413			-			-			-			413
Interest expense		379			-			-			-			379
Management fees - affiliates		49			25			22			-			96
Operating expenses		6			-			-			143			149
Operating expenses - affiliates		13			-			-			-			13
Total expenses		860			25			22			143			1,050
Equity Interests:
Equity in net income of EFG/Kettle Development LLC		-			-			54			-			54
Equity in net loss of EFG Kirkwood LLC		-			-			(510	)		-			(510	)
Equity in net income of MILPI Holdings, LLC		-			37			8			-			45
Total income (loss) from equity interests		-			37			(448	)		-			(411	)
Net income (loss)	$	257		$	12		$	(443	)	$	(140	)	$	(314	)
For the Nine Months Ended		Equipment			Equipment			Real
September 30, 2004		Leasing			Management			Estate			Other			Total
Revenue:
Lease revenue	$	268		$	-		$	-		$	-		$	268
Interest income		-			-			15			9			24
Gain on sale of equipment		33			-			-			-			33
Other revenue		-			-			-			13			13
Total revenue		301			-			15			22			338
Expenses:
Depreciation and amortization		11			-			-			-			11
Impairment of assets		-			2,818			-			-			2,818
Management fees - affiliates		13			73			64			1			151
Operating expenses		48			-			-			478			526
Operating expenses - affiliates		288			-			-			-			288
Total expenses		360			2,891			64			479			3,794
Equity Interests:
Equity in net income of other investments		-			-			71			-			71
Equity in net income of EFG/Kettle Development LLC		-			-			39			-			39
Equity in net income of EFG Kirkwood LLC		-			-			263			-			263
Equity in net income of MILPI Holdings, LLC		-			3,429			3			-			3,432
Total income from equity interests		-			3,429			376			-			3,805
Net (loss) income	$	(59	)	$	538		$	327		$	(457	)	$	349
Total assets at September 30, 2004	$	78		$	6,756		$	10,674		$	1,340		$	18,848
For the Nine Months Ended		Equipment			Equipment			Real
September 30, 2003		Leasing			Management			Estate			Other			Total
Revenue
Lease revenue	$	3,613		$	-		$	-		$	-		$	3,613
Interest income		-			-			74			10			84
Gain on sale of equipment		1			-			-			-			1
Total revenue		3,614			-			74			10			3,698
Expenses
Depreciation and amortization		1,455			-			-			-			1,455
Interest expense		1,179			-			-			-			1,179
Management fees - affiliates		158			73			64			-			295
Operating expenses		12			-			-			361			373
Operating expenses - affiliates		89			-			-			-			89
Total expenses		2,893			73			64			361			3,391
Equity Interests
Equity in net income of EFG/Kettle Development LLC		-			-			27			-			27
Equity in net income of EFG Kirkwood LLC		-			-			261			-			261
Equity in net income of MILPI Holdings, LLC		-			348			84			-			432
Total income from equity interests		-			348			372			-			720
Net income (loss)	$	721		$	275		$	382		$	(351	)	$	1,027

NOTE9—RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, theFASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). FIN 46 requires the Trust to evaluate all existing arrangements to identify situations where the Trust has a “variable interest,” commonly evidenced by a guarantee arrangement or other commitment to provide financial support, in a “variable interest entity,” commonly a thinly capitalized entity, and further determine when such variable interest requires the Trust to consolidate the variable interest entities’ financial statements with its own. The Trust is required to perfo rm this assessment by December 31, 2004 and consolidate any variable interest entities for which the Trust will absorb a majority of the entities’ expected losses or receive a majority of the expected residual gains.

The Trust is still in the process of evaluating its impact and has not completed its analysis or concluded on the impact that FIN 46 will have on the Trust.

NOTE 10 - LIQUIDATION OF THE TRUST

The Trust by its nature is a limited life entity. The Trust has a scheduled termination date of December 31, 2004. The Managing Trustee anticipates that any assets remaining in the Trust at December 31, 2004 will be transferred to a liquidating trust with an unaffiliated third party as the Trustee.

NOTE 11 - SUBSEQUENT EVENTS

On November 7, 2004 a fire broke out at the Mountain Resorts Holdings power generation subsidiary, Mountain Utilities. The fire did extensive damage to the facility resulting in power outage to its entire service area. Mountain Utilities was able to restore power using temporary power supplies and the ski resort closing was limited to four days. No injuries were sustained. The resort is currently in the process of thoroughly assessing the damage and estimating the time for repair. Management has met with the resort’s insurance adjusters to ensure the appropriate actions have been taken to restore business. Mountain Resort Holdings, LLC has a $10.0 million property damage policy with a $25,000 deductible and a $4.0 million business interruption policy with a $25,000 deductible. Management cannot determine th e long term financial impact of the event at this time.

On November 8, 2004, the Trust sold its membership interest in MILPI pursuant to a Membership Interest Purchase Agreement dated August 5, 2004, such sale having been approved by a vote of the beneficial interest holders on July 28, 2004. The Trust’s membership interest was sold for $8.3 million. An entity controlled by Gary D. Engle and James A. Coyne, the President and Executive Vice President, respectively, of the managing trustee of the Trust, purchased the Trust’s interest in MILPI.

AFG INVESTMENT TRUST C

FORM 10-QSB

PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Information

Certain statements in this quarterly report of AFG Investment Trust C (the “Trust”) that are not historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to a variety of risks and uncertainties. There are a number of important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made herein. These factors include, but are not limited to, the collection of the Trust’s contracted rents, the realization of residual proceeds for the Trust’s equipment, the performance of the Trust’s non-equipment assets, and future economic conditions.

Contingencies and Litigation

The Securities and Exchange Commission staff has informed the Trust that it believes the Trust may be an unregistered investment company within the meaning of The Investment Company Act of 1940 (the “Act”). The Trust, after consulting with counsel, does not believe that it is an unregistered investment company. However, it is possible that the Trust may have unintentionally engaged in an activity or activities that may be construed to fall within the scope of the Act

On June 9, 2004, Robert Lewis, as plaintiff, (“Lewis” or the “Plaintiff”) filed a class and derivative action, captionedRobert Lewis v. Gary D. Engle, James A. The Plaintiff filed a purported class action lawsuit in the Court of Chancery of the State of Delaware In and For New Castle County against Semele, Equis II Corporation (“Equis”), AFG ASIT Corporation (the “Managing Trustee”), PLM MILPI Holdings LLC (“PLM”), Gary D. Engle (“Engle”) and James A. Coyne (“Coyne”) (collectively, the “Defendants”) . AFG ASIT Corporation is the Managing Trustee of the Trust. Semele is the indirect corporate parent of the Managing Trustee. Semele is the direct corporate parent of Equis II, which is the direct owner of the Managing Trustee. Engle is the Chairman and Chief Executive Officer of Semele. Coyne is the President and Chief Operating Officer of Semele. Engle and Coyne together own a majority of the shares of Semele, which in turn owns a majority of the outstanding interests in the Trust. PLM is a limited liability company ultimately owned by Engle and Coyne.

The Lewis action is brought on behalf of a purported class consisting of the public beneficiaries of the Trust. The complaint alleges breaches of fiduciary duty and self-dealing in connection with the proposed liquidation of the Trust, proposed amendments to the governing Trust Agreement and a proposed sale of some of the Trust’s assets to PLM. The complaint is in two counts, one alleging a lack of entire fairness in connection with the proposed asset sale and amendments and the second alleging a breach of the duty of disclosure with regard to a Consent Solicitation Statement issued in connection with the vote of those holding interests in the Trust on the proposed sale and amendments. The complaint seeks: 1) class certification: 2) preliminary and permanent injunctions against the consent solicitation and the proposed sale and amendments; and 3) damages in an unspecified amount payable to the purported class and the Trust.

The Defendants have denied and continue to deny all allegations of liability or wrongdoing in the complaint. After the Defendants answered the complaint on September 15, 2004, the parties entered into negotiations that resulted in a settlement (the “Settlement”). The Stipulation of Settlement was signed by counsel for the parties on November 3, 2004 and provides,interalia, for

1. A payment of $1.7 million by the Defendants to the Trust;

2. Retention of an independent financial expert to provide an opinion as to the financial fairness of the purchase price for the sale by the Trust of its interest in MILPI Holdings LLC to an affiliate of the Defendants; and

3. Appointment of a Liquidating Trustee to manage and wind-up the business and affairs of the Trust.

The Stipulation of Settlement states that the Defendants do not admit any liability or wrongdoing.

The Stipulation of Settlement will be presented to the Court of Chancery for its approval after a hearing on a date yet to be determined. The Settlement will not be final until the members of the class have had an opportunity to object and the Court has approved the Settlement

The Trust is subject to various claims and proceedings in the normal course of business. Management believes that the disposition of such matters is not expected to have a material adverse effect on the financial position of the Trust or its results of operations.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires AFG ASIT Corporation (the “Managing Trustee”) to make estimates and assumptions that affect the amounts reported in the financial statements. On a regular basis, the Managing Trustee reviews these estimates and assumptions including those related to revenue recognition, asset lives and depreciation, impairment of long-lived assets and contingencies. These estimates are based on the Managing Trustee’s historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results may differ from these estimates under differen t assumptions or conditions. The Managing Trustee believes, however, that the estimates, including those for the above-listed items, are reasonable.

The Managing Trustee believes the following critical accounting policies, among others, are subject to significant judgments and estimates used in the preparation of these financial statements:

Revenue Recognition: Rents are payable to the Trust monthly or quarterly and no significant amounts are calculated on factors other than the passage of time. The Trust’s leases are accounted for as operating leases and are noncancellable. Rents received prior to their due dates are deferred.

Asset lives and depreciation method: The Trust’s primary business involved the purchase and subsequent lease of long-lived equipment. 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 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 purpo ses of this policy, estimated residual values represent estimates of equipment values at the date of the 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.

Impairment of long-lived assets: The Trust evaluates long-lived assets for impairment whenever events or circumstances indicate that the carrying bases of such assets may not be recoverable. Whenever circumstances indicate that an impairment may exist, the company evaluates future cash flows of the asset to the carrying value. If projected undiscounted future cash flows are lower than the carrying value of the asset, a loss is recorded. The loss recorded is equal to the difference between the carrying amount and the fair value of the asset. The fair value of the asset is determined based on a valuation model, which includes expected discounted future cash flows of the asset, current market prices and management’ ;s market knowledge.

The Managing Trustee evaluates the net realizable value of significant equipment assets, such as aircraft, 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 developments, which could affect the net realizable value of particular assets. Adjustments to reduce the net carrying value of equipment are reflected separately on the accompanying Statements ofOperations as impairment of equipment.

Results of Operations

Segment Reporting

The Trust has three principal operating segments: 1) Equipment Leasing 2) Equipment Management and 3) Real Estate Ownership, Development & Management. The Equipment Leasing segment includes acquiring and leasing equipment to third parties. The Trust is no longer allowed to purchase new equipment as its acquisition phase has ended. The Equipment Management segment includes the majority of the Trust's equity interest in MILPI, which owns 100% of PLM International, Inc., a company in the equipment leasing management business, excluding its ownership in RMLP, Inc. The Real Estate segment includes the ownership, management and development of commercial properties, recreational properties, condominiums, interval ownership units, townhomes, single family homes and land sales included in the Trust’s ownership i nterests in EFG Kirkwood, C & D IT LLC, Kettle Valley and MILPI through its subsidiary RMLP, Inc. Other includes corporate assets, which consist of cash and certain receivables. Other operating expenses consist primarily management fees and professional services such as audit and legal fees.

The Trust’s reportable segments offer different products or services and are managed separately because each requires different operating strategies and management expertise. There are no material intersegment sales or transfers.

Equipment Leasing

For the three and nine months ended September 30, 2004, the Trust recognized lease revenue of $34,000 and $0.3 million, respectively, compared to $1.1 million and $3.6 million, respectively, for same periods in 2003. The decrease in lease revenue in the three and nine months ended September 30, 2004 compared to the same periods in 2003 resulted primarily from decrease in lease revenue as a result of the disposition of equipment.

During the three and nine months ended September 30, 2004, the Trust sold equipment having a net book value of $10,000 to unaffiliated third parties. These sales resulted in a gain of $2,000 and $33,000, respectively, for the three and nine month periods ended September 30, 2004. During the three and nine months ended September 30, 2003, the Trust sold equipment having a net book value of $4,000 to unaffiliated third parties. These sales resulted in a gain of $2,000 and $1,000, respectively.

Depreciation expense was $2,000 and $11,000 for the three and nine months ended September 30, 2004, respectively compared to $0.4 million and $1.5 million, respectively, for the same periods in 2003. Depreciation decreased by $0.4 million and $1.5 million during the three and nine months ended September 30, 2004 compared to the same period in 2003. The decrease in depreciation for the respective periods is attributable to the disposition of the Trust’s equipment portfolio. Depreciation is expected to continue to decline in the future as the Trust’s equipment portfolio is sold and not replaced.

The Trust did not incur interest expense on third party debt during the nine months ended September 30, 2004. During the three and nine months ended September 30, 2003, the Trust incurred $0.4 million and $1.2 million of interest expense. The decrease in interest expense is attributable to the repayment of the Trust’s debt in 2003.

Management fees-affiliate from equipment leasing were $2,000 and $13,000 for the three and nine months ended September 30, 2004, respectively, compared to $49,000 and $0.2 million, respectively, for the same periods in 2003. 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, subject to certain limitations. The decrease in management fees- affiliates for the respective periods is attributable to the disposition of the Trust’s leasing equipment.

Operating expenses and operating expenses - affiliates were $0.1 million and $0.3 million for the three and nine months ended September 30, 2004, respectively, compared to $19,000 and $0.1 million, respectively, for the same periods in 2003. The increase in operating expenses is attributable to an increase in selling and remarketing costs related to the disposition of the Trust’s assets. Operating expenses consist primarily of administrative charges as well as printing and remarketing expenses. 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.

Equipment Management

For the three and nine months ended September 30, 2004 the Trust recorded income from equity investments in the equipment management segment of $1.9 million and $3.4 million, respectively, compared to $37,000 and $0.3 million, respectively, for the same periods in 2003, which represented its pro-rata share of the net income of MILPI accounted for under the equity method of accounting.

During the three and nine months ended September 30, 2004, MILPI recognized revenues of $5.3 million and $10.3 million, respectively, compared to $1.6 million and $4.8 million, respectively, for the same periods in 2003. Revenues for the three months ended September 30, 2004 consisted primarily of management fees of $1.0 million, $3.8 million of acquisition and lease negotiation fees, $0.1 million gain on disposition of equipment and lease revenue of $0.3 million. Revenues for the nine months ended September 30, 2004 consisted primarily of management fees of $3.0 million, $5.1 million of acquisition and lease negotiation fees, $1.3 million gain on disposition of equipment and $0.6 million of lease revenue. Revenues for the three months ended September 30, 2003 are comprised primarily of management fees of $1.0 m illion, $0.2 million of acquisition and lease negotiation fees and $0.4 million of operating lease revenue. For the nine months ended September 30, 2003, revenues were comprised of management fees of $3.2 million, $0.7 million of acquisition and lease negotiation fees, $0.2 million gain on disposition of equipment and $0.5 million of lease revenue. Acquisition and lease negotiation fees increased in the nine months ended September 30, 2004 by $4.4 million compared to the same period in 2003 as a result of more equipment being placed in PLM managed programs during 2004 compared to 2003. Gain on disposition of assets increased $1.1 million in the nine months ended September 30, 2004 due to an increase in the amount of assets sold in the comparable periods.

During the three and nine months ended September 30, 2004, MILPI incurred total expenses of $1.6 million and $3.2 million, respectively, compared to $1.6 million and $3.8 million, respectively, for the same period in 2003. Expenses for the three months ended September 30, 2004 are comprised primarily of operational support expenses of $1.0 million and depreciation and amortization expense of $0.4 million. For the nine months ended September 30, 2004, expenses are comprised primarily of operational support expenses of $2.3 million and depreciation and amortization expense of $0.8 million. Expenses for the three months ended September 30, 2003 are comprised of operational support expenses of $0.9 million, depreciation and amortization expense of $0.5 million and a $0.2 million impairment of MILPI’s investment s in the managed programs. For the nine months ended September 30, 2003, expenses are comprised primarily of operational support expenses of $2.6 million, depreciation and amortization expense of $0.8 million and $0.4 million impairment of MILPI’s investments in the managed programs. The decrease in total expenses for the three and nine month periods ended September 30, 2004 compared to the same periods in 2003, is primarily attributable to an decrease in operational support expense of $0.4 million. In addition, the decrease is attributable to an impairment charge of $0.2 million to MILPI’s investments in the managed growth funds which was recorded during 2003.

During the three and nine months ended September 30, 2004, MILPI incurred income tax expense of $0.4 million and $1.6 million, respectively, with an effective tax rate of 19% for the nine month period. For the three and nine month period ended September 30, 2003, MILPI had an income tax benefit of $0.1 million and an income tax expense of $0.5 million, respectively, with an effective tax rate of 33% for the nine month period. The effective tax rate decreased 13% during the nine month period ended September 30, 2004 compared to the same period in 2003 due to an increased amount of income being earned at MILPI Holdings, LLC, which is a non-taxable entity.

On November 8, 2004, the Trust sold its membership interest in MILPI pursuant to a Membership Interest Purchase Agreement dated August 5, 2004, such sale having been approved by a vote of the beneficial interest holders on July 28, 2004. The Trust’s membership interest was sold for $8.3 million. An entity controlled by an affiliate of Gary D. Engle and James A. Coyne, the President and Executive Vice President, respectively, of the managing trustee of the Trust, purchased the Trust’s interest in MILPI.

Real Estate

Interest income in the real estate segment for the three and nine months ended September 30, 2004 was $5,000 and $15,000 compared to $27,000 and $0.1 million for the same periods in 2003. Interest income is generated from loans made to affiliates. Interest income decreased in the three and nine months ended September 30, 2004 compared to the same period in 2003 due to the Trust renegotiating the terms of its loan to Kettle Valley.

Management fees paid to EFG for non-equipment assets were $21,000 and $0.1 million for the three and nine months ended September 30, 2004, respectively, compared to $22,000 and $0.1 million or the three and nine months ended September 30, 2003. Management fees for non-equipment assets, excluding cash, are 1% of the original equipment cost of such assets under management.

Kettle Valley

Kettle Valley is a real estate development company located in Kelowna, British Columbia, Canada. The project, which is being developed by Kettle Valley Development Limited Partnership, consists of approximately 280 acres of land that is zoned for 1,120 residential units in addition to commercial space. To date, 265 residential units have been constructed and sold and 13 additional units are under construction.

The Trust indirectly has an approximate 25% ownership interest in Kettle Valley. For the three and nine months ended September 30, 2004, the Trust recorded income of $32,000 and $39,000, respectively, compared to income of $0.1 million and $27,000 for the same periods in 2003. During the nine months ended September 30, 2004, the Trust recorded a foreign currency translation gain of $0.1 million, included in accumulated other comprehensive income and reported as part of statements of changes in participants’ capital,reflecting a strengthening of the Canadian dollar against the U.S. dollar at the end of the third quarter of 2004.

During the three and nine months ended September 30, 2004, Kettle Valley recorded revenues of $1.2 million and $4.4 million, respectively, compared to revenues of $1.3 million and $3.7 million for the same periods in 2003. Total expenses incurred during the three and nine months ended September 30, 2004 were $1.1 million and $4.2 million, respectively, compared to $1.0 million and $3.7 million in the same periods in 2003. The increase in revenues and total expenses during the nine months ended September 30, 2004 compared to the same period in 2003 is the result of an increase in the number of lot and home sales.

EFG Kirkwood

The Trust owns 40% of the Class A membership interests of EFG Kirkwood, a joint venture between the Trust, AFG Investment Trust D (“Trust D”) and two affiliated companies, Equis II and Semele Group, Inc. (“Semele”). AFG ASIT Corporation, the Managing Trustee of the Trust and a subsidiary of Semele, also is the manager of EFG Kirkwood. EFG Kirkwood’s assets consist of two minority interest investments accounted for under the equity method of accounting. The investments consist of an interest in two ski resorts: Mountain Resort Holdings LLC (“Mountain Resort”) and Mountain Springs Resorts LLC (“Mountain Springs”).

Mountain Resort, through four wholly owned subsidiaries, owns and operates the Kirkwood Mountain Resort, a ski resort located in northern California, a public utility that services the local community, and land that is held for residential and commercial development. Mountain Springs, through a wholly owned subsidiary, owns a controlling interest in DSC/Purgatory LLC ("Purgatory") in Durango, Colorado.

For thethree and nine months ended September 30, 2004, the Trust recorded a loss of $0.6 million and income of $0.3 million, respectively compared to net loss of $0.5 million and income $0.3 million for the three and nine months ended September 30, 2003, from its ownership interest in EFG Kirkwood. This income (loss) represents the Trust’s share of the net income (loss) of EFG Kirkwood recorded under the equity method of accounting. See below for discussion of the operating results of the resorts.

Mountain Resort Operating Results

During the three and nine months ended September 30, 2004, Mountain Resort recorded total revenues of approximately $3.2 million and $23.3 million compared to $3.2 million and $24.8 million for the same periods in 2003. The decrease in total revenues from 2003 to 2004 is the result of a decrease in ski related revenue. The decrease in ski-related revenues resulted from a decrease in visitors to the resort compared to the same period last year, as a result of unfavorable weather conditions during the winter season.

During the three and nine months ended September 30, 2004, Mountain Resort recorded total expenses of $5.9 million and $21.9 million, compared to $5.3 million and $21.9 million for the same periods in 2003, respectively. The increase in expenses during the three months ended September 30, 2004 is primarily due to an increase in operational support costs during the period.

On November 7, 2004 a fire broke out at the Mountain Resorts Holdings power generation subsidiary, Mountain Utilities. The fire did extensive damage to the facility resulting in power outage to its entire service area. Mountain Utilities was able to restore power using temporary power supplies and the ski resort closing was limited to four days. No injuries were sustained. The resort is currently in the process of thoroughly assessing the damage and estimating the time for repair. Management has met with the resort’s insurance adjusters to ensure the appropriate actions have been taken to restore business. Mountain Resort Holdings, LLC has a $10.0 million property damage policy with a $25,000 deductible and a $4.0 million business interruption policy with a $25,000 deductible. Management cannot determine th e long term financial impact of the event at this time.

Mountain Springs Operating Results

During the three and nine months ended September 30, 2004, Mountain Springs recorded total revenues of $2.1 million and $14.3 million, compared to $2.1 million and $12.8 million for the same periods of 2003. The increase in total revenues from 2003 to 2004 is the result of an increase in visitors to the resort compared to the same periods of 2003, as a result of improved weather conditions during the winter season.

Total expenses were $4.0 million and $14.7 million for the three and nine months ended September 30, 2004 compared to $4.1 million and $14.2 million for the same period in 2003. The increase in total expenses for the three and nine months ended September 30, 2004 compared to the same periods in 2003 is a result of an increased cost of sales corresponding to the increase in revenues.

Liquidity and Capital Resources and Discussion of Cash Flows

The Trust by its nature is a limited life entity. The Trust has a scheduled termination date of December 31, 2004. The Managing Trustee anticipates that any assets remaining in the Trust at December 31, 2004 will be transferred to a liquidating trust with an unaffiliated third party as the Trustee.

On November 8, 2004, the Trust sold its membership interest in MILPI pursuant to a Membership Interest Purchase Agreement dated August 5, 2004, such sale having been approved by a vote of the beneficial interest holders on July 28, 2004. The Trust’s membership interest was sold for $8.3 million. An entity controlled by an affiliate of Gary D. Engle and James A. Coyne, the President and Executive Vice President, respectively, of the managing trustee of the Trust, purchased the Trust’s interest in MILPI.

The Trust's principal operating activities derive from asset rental transactions. These cash inflows are used to pay management fees and operating costs. Operating activities used cash of $0.5 million during the nine months ended September 30, 2004.

Accounts receivable-affiliate decreased by $0.1 million or 91% during the nine months ended September 30, 2004. Receivable from affiliates consists of rent or proceeds from the sale of equipment by Equis Financial Group Limited Partnership (“EFG”), an affiliated entity. All rents and proceeds from the sale of equipment are paid directly to either EFG or to a lender. EFG temporarily deposits collected funds in a separate interest-bearing escrow account and remits to the Trust on a monthly basis. At September 30, 2004, the Trust was owed $6,000 by EFG for such funds compared to $0.1 million at December 31, 2003. The Trust was paid in full by EFG in October 2004.

The Trust’s investment in Kettle Valley increased by $0.1 million during the first nine months of 2004 or 3%. The increase is due to the Trust recording a net foreign currency translation adjustment of $0.1 millionreflecting a strengthening of the Canadian dollaragainst the U.S. dollar.

Investment in EFG Kirkwood increased by $0.3 million or 11% during the nine month period ended September 30, 2004. The increase is attributable to equity income of $0.3 million being recorded during 2004 from this equity investment.

The Trust’s interest in MILPI increased by $0.6 million or 8% during the nine month period ended September 30, 2004. The increase in the investment was attributable to equity income of $3.4 million recorded during the nine months ended September 30, 2004 partially offset by an $2.8 million impairment recorded to adjust the interest in MILPI to the sales price of $8.3 million.

Accrued liabilities increased by $0.1 million or 43% during the period ended September 30, 2004. The increase in accrued liabilities is due to accrued expenses related to selling and remarketing costs incurred at during the nine month period related to the disposition of the Trust’s assets.

During the nine months ended September 30, 2004, the Trust sold equipment with a net book value of $10,000 to unrelated third parties. These sales resulted in a gain on sale of $33,000. Future inflows of cash from equipment 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.

EquityInterest Investments

TheTrust owns equity interest investments in an equipment management and several real estate companies, which are accounted for under the equity method of accounting. The financial position and liquidity of these companies have a material impact on the Trust. A description of the Trust’s minority interest investments and a brief summary of the financial position are summarized below:

TheTrust has minority interest investments in the following entities as of September 30, 2004 (in thousands of dollars):

	September 30, 2004
Interest in MILPI Holdings, LLC	$	8,300
Interest in EFG/Kettle Development LLC		4,356
Interest in EFG Kirkwood, LLC		2,754
Interest in C & D IT, LLC		1,157
Investment - other		176
Total	$	16,743

MILPI Holdings, LLC

MILPI Holdings, LLC operates in the equipment management and real estate segments. As of September 30, 2004, MILPI had $19.9 million of equity investments in several equipment leasing programs, which comprised approximately 37% of MILPI’s total assets. At September 30, 2004, MILPI had $5.5 million in cash and cash equivalents which represents 10% of MILPI’s total assets. At September 30, 2004, MILPI had $13.3 million in railcar equipment which represented 25% of its total assets. MILPI’s investment in RMLP, Inc. totaled $10.0 million at September 30, 2004 representing 19% of its total assets. As of September 30, 2004, MILPI had $7.5 million outstanding borrowings under its warehouse facility. The warehouse credit facility is shared by MILPI and several of its managed equipment leasing programs. Al l borrowings are guaranteed by MILPI.

MILPI had positive cash flows from operations of $5.4 million during the nine months ended September 30, 2004. Cash flows from operations were used to finance operating costs and purchase additional assets to increase the Company’s railcar portfolio. MILPI did not declare or pay dividends in the first nine months of 2004.

On November 8, 2004, the Trust sold its membership interest in MILPI pursuant to a Membership Interest Purchase Agreement dated August 5, 2004, such sale having been approved by a vote of the beneficial interest holders on July 28, 2004. The Trust’s membership interest was sold for $8.3 million. An entity controlled by an affiliate of Gary D. Engle and James A. Coyne, the President and Executive Vice President, respectively, of the managing trustee of the Trust, purchased the Trust’s interest in MILPI.

Kettle Valley

Kettle Valley is a real estate development company located in Kelowna, British Columbia, Canada. Kettle Valley has historically operated at a net loss and has sustained negative cash flows from operations. As of September 30, 2004, the company has approximately $17.1 million in current assets, including $15.8 million of land under development. At September 30, 2004, Kettle Valley has $4.9 million in short term debt, of which $2.4 million represents related party debt. The real estate is in the early phase of development and may incur losses and negative cash flow in the future. Kettle Valley expects to pay existing obligations with the sales proceeds from future lot sales. As of September 30, 2004, 265 lots have been sold and 13 homes are currently under construction. Kettle Valley did not pay dividends in the f irst nine months of 2004 or in 2003 and does not anticipate paying dividends in the near future until lots sales and cash flow from home construction and sales are sufficient to support operations. Future capital needs that may be required by Kettle Valley are expected to be financed by the other equity holders or outside investors.

EFG Kirkwood

EFG Kirkwood was formed for the purpose of acquiring a minority interest in two real estate investments. The investments consist of an interest in two ski resorts: Mountain Resort and Mountain Springs. EFG Kirkwood has no other significant assets other than its interest in the ski resorts.

Mountain Springs: Mountain Springs, through a wholly owned subsidiary, owns a controlling interest in Purgatory in Durango, Colorado. Purgatory is a ski and mountain recreation resort covering 2,500 acres, situated on 40 miles of terrain with 75 ski trails. Mountain Spring's primary cash flows come from its ski operations during the ski season, which is heavily dependent on snowfall. Additional cash flow is provided by its real estate development activities and by the resort’s summer recreational programs. When out of season, operations are funded by available cash and through the use of a $3.5 million dollar line of credit, which is guaranteed by EFG Kirkwood as well as another investor in Mountain S prings. The line of credit was renewed in October 2004 for an additional year.

At September 30, 2004, Mountain Springs had current assets of $3.8 million, which consisted of cash of $1.5 million, accounts receivable of $1.5 million and inventories and other assets totaling $0.8 million. Long-term assets consist primarily of buildings, equipment and real estate totaling approximately $20.4 million.

Liabilities totaled approximately $24.2 million at September 30, 2004 and consisted primarily of debt and notes outstanding.

Mountain Springs also owns 51% of Durango Mountain Land Company, which owns 500 acres of real estate under development, which will develop, and otherwise operate this real estate.

Mountain Springs did not pay dividends in the first nine months of 2004 or in 2003 and does not anticipate paying dividends in the near future until cash flow from operations and residential sales are sufficient to support operations.

Mountain Resort: Mountain Resort is primarily a ski and mountain recreation resort with more than 2,000 acres of terrain, located approximately 32 miles south of Lake Tahoe. The resort receives approximately 70% of its revenues from winter ski operations, primarily ski, lodging, retail and food and beverage services with the remainder of the revenues generated from summer outdoor activities, including mountain biking, hiking and other activities. Mountain Resort’s primary cash flows come from its ski operations during the ski season, which is heavily dependent on snowfall. Excess cash flows will be used to finance development on the real estate surrounding the resort.

At September 30, 2004, Mountain Resort had current assets of approximately $8.9 million, which consisted of cash of $5.5 million, accounts receivable of $2.5 million, and inventory and other assets of $0.9 million. Long-term assets consisted primarily of buildings, equipment and real estate totaling $37.1 million.

Liabilities were approximately $25.8 million, which consisted primarily of long-term senior notes and affiliated debt.

Both Mountain Springs and Mountain Resort are subject to a number of risks, including weather-related risks and the risks associated with real estate development and resort ownership. The ski resort business is seasonal in nature and insufficient snow during the winter season can adversely affect the profitability of a given resort. Many operators of ski resorts have greater resources and experience in the industry than the Trust, its affiliates and its joint venture partners.

On November 7, 2004 a fire broke out at the Mountain Resorts Holdings power generation subsidiary, Mountain Utilities. The fire did extensive damage to the facility resulting in power outage to its entire service area. Mountain Utilities was able to restore power using temporary power supplies and the ski resort closing was limited to four days. No injuries were sustained. The resort is currently in the process of thoroughly assessing the damage and estimating the time for repair. Management has met with the resort’s insurance adjusters to ensure the appropriate actions have been taken to restore business. Mountain Resort Holdings, LLC has a $10.0 million property damage policy with a $25,000 deductible and a $4.0 million business interruption policy with a $25,000 deductible. Management cannot determine th e long term financial impact of the event at this time.

Mountain Resorts did not pay dividends in the first nine months of 2004 or in 2003 and does not anticipate paying dividends in the near future until cash flow from operations and residential sales are sufficient to support operations.

C&D IT LLC

The Trust and Trust D each own 50% of C & D IT LLC, a Delaware limited liability company, to which each Trust contributed $1.0 million, for a 25% interest in the Rancho Malibu Limited Partnership. The Trust’s ownership interest in C & D IT LLC is accounted for on the equity method. C & D IT LLC did not pay or declare any dividends in 2004 and none are expected for the foreseeable future.

Outlook for the Future

Several other factors may affect the Trust’s operating performance during the remainder of 2004 and beyond including:

-asset sales

-changes in the real estate markets in which the Trust has ownership interest.

The future out look for the different operating segments of the Trust is as follows:

Asset Sales

The Trust by its nature is a limited life entity. The Trust has a scheduled termination date of December 31, 2004. The Managing Trustee anticipates that any assets remaining in the Trust at December 31, 2004 will be transferred to a liquidating trust with an unaffiliated third party as the Trustee.

Equipment Management

On November 8, 2004, the Trust sold its membership interest in MILPI pursuant to a Membership Interest Purchase Agreement dated August 5, 2004, such sale having been approved by a vote of the beneficial interest holders on July 28, 2004. The Trust’s membership interest was sold for $8.3 million. An entity controlled by an affiliate of Gary D. Engle and James A. Coyne, the President and Executive Vice President, respectively, of the managing trustee of the Trust, purchased the Trust’s interest in MILPI.

Real Estate

The Trust has a minority interest in two ski resorts, which are subject to the risks of the tourism industry. The resorts are subject to a number of risks, including weather-related risks. The ski resort business is seasonal in nature and insufficient snow during the winter season can adversely affect the profitability of a given resort. Many operators of ski resorts have greater resources and experience in the industry than the Trust, its affiliates and its joint venture partners.

The Trust also has a minority interest in several real estate development companies, some of which are located at the resorts. The risks generally associated with real estate include, without limitation, the existence of senior financing or other liens on the properties, general or local economic conditions, property values, the sale of properties, interest rates, real estate taxes, other operating expenses, the supply and demand for properties involved, zoning and environmental laws and regulations, and other governmental rules.

The Trust ‘s investment in real estate development companies have experienced an increase in residential sales as a result of interest rates being at historical lows. There is a risk that residential sales could materially decline if interest rates increase.

The Trust's involvement in real estate development also introduces financials risk, including the potential need to borrow funds to develop the real estate projects. While the Trust's management presently does not foresee any unusual risks in this regard, it is possible that factors beyond the control of the Trust, its affiliates and joint venture partners, such as a tightening credit environment, could limit or reduce its ability to secure adequate credit facilities at a time when they might be needed in the future. Alternatively, the Trust could establish joint ventures with other parties to share participation in its development projects.

Because the investments in the ski resorts include real estate development companies, the risks and uncertainties associated with the tourism industry can adversely affect the value of the real estate development companies associated with these investments. Decrease in tourism, weather-related conditions or other risks discussed above can permanently decrease the value of the investment and future operations.

The Trust does not anticipate receiving dividend distributions from the real estate investments in the near future due to the uncertainty of the current market conditions.

As the Managing Trustee anticipates significant asset sales in 2004, some or all of the Trust’s assets may be marketed for sale in 2004.

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 tax balance, which may exist in the Managing Trustee's capital account, as computed for tax purposes. At September 30, 2004, the Managing Trustee did not have a negative tax capital account balance. No such requirement exists with respect to the Special Beneficiary.

Item 3. Controls and Procedures

Limitations on the Effectiveness of Controls

The Trustee’s management, including its President and Chief Financial Officer (CFO), does not expect that our internal controls or disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of control can provide absolute assurance that all control issues and instances of fraud, if any, within the Trust have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or by management override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Notwithstanding the forgoing limitations, we believe that our internal controls and disclosure controls provide reasonable assurance that the objectives of our controls system are met.

Quarterly Evaluation of the Trust’s Disclosure Controls and Internal Controls

(1) As of the end of the period covered by this report, the Trustee carried out an evaluation, under the supervision and with the participation of the Trustee’s management, including it’s Chief Executive Officer and CFO, of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and CFO concluded that the Trust’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Trust 6;s required to be included in the Trust’s exchange act filings.

(2)             There have been no significant changes in the Trust’s internal controls or in other factors which could significantly affect internal controls subsequent to the date of the Trustee carried out its evaluations

AFG INVESTMENT TRUST C

FORM 10-QSB

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Response: None

Item 2. Changes in Securities

Response: None

Item 3. Defaults upon Senior Securities

Response: None

Item 4. Submission of Matters to a Vote of Security Holders

Response: None

Item 5. Other Information

Response: None

Item 6. Exhibits and reports on Form 8-K

a). Exhibits

10.1	Membership Interest Purchase Agreement dated August 5, 2004
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

b). Reports on Form 8-K

Response: None

SIGNATURE PAGE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AFG Investment Trust C

By: AFG ASIT Corporation, a Massachusetts

corporation and the Managing Trustee of

the Registrant.

By: /s/ Richard K Brock

Richard K Brock

Chief Financial Officer and Treasurer of AFG ASIT Corp.

(Duly Authorized Officer and

Principal Financial and Accounting Officer)

Date: November 12, 2004

Exhibit Index

10.1	Membership Interest Purchase Agreement dated August 5, 2004
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 31.1

Certification:

I, Gary D. Engle, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of AFG Investment Trust C;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ Gary D. Engle  

Gary D. Engle

Chairman and Chief Executive Officer

(Principal Executive Officer)

November 12, 2004

Exhibit 31.2

Certification:

I, Richard K Brock, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of AFG Investment Trust C;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ Richard K Brock  

Richard K Brock

Chief Financial Officer and Treasurer of AFG ASIT Corp.,

the Managing Trustee of the Trust

(Principal Financial and Accounting Officer) 

                        ��       November 12, 2004

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the

Sarbanes - Oxley Act of 2002

In connection with the Quarterly Report of AFG Investment Trust C (the “Trust”), on Form 10-QSB for the period ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Principal Executive Officer of the Trust’s Managing Trustee, hereby certifies pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report of the Trust filed today fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

/s/ Gary D. Engle  

Gary D. Engle

President of AFG ASIT Corporation,

the Managing Trustee of the Trust

(Principal Executive Officer)

November 12, 2004

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the

Sarbanes - Oxley Act of 2002

In connection with the Quarterly Report of AFG Investment Trust C (the “Trust”), on Form 10-QSB for the period ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Principal Financial and Accounting Officer of the Trust’s Managing Trustee, hereby certifies pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report of the Trust filed today fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

/s/ Richard K Brock  

Richard K Brock

Chief Financial Officer and Treasurer of AFG ASIT Corp.,

the Managing Trustee of the Trust

(Principal Financial and Accounting Officer)

November 12, 2004