UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________________ to _______________________
Commission file number 0-21444
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AFG Investment Trust C
(Exact name of registrant as specified in its charter)
Delaware 04-3157232
- ----------------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88 Broad Street, Sixth Floor, Boston, MA 02110
- ----------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
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Securities registered pursuant to Section 12(b) of the Act NONE
--------------------
Title of each class Name of each exchange on which registered
- --------------------------- ------------------------------------------------
- --------------------------- ------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
2,011,014 Class A Trust Beneficiary Interests
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes XX No
---- ----
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. Not applicable. Securities are nonvoting for this purpose.
Refer to Item 12 for further information.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders for
the year ended December 31, 1999 (Part I and II)
AFG Investment Trust C
FORM 10-K
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for the Trust's Securities and Related Security Holder
Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 7
PART III
Item 10. Directors and Executive Officers of the Trust 8
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners and Management 10
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14-15
2
PART I
Item 1. Business.
(a) General Development of Business
AFG Investment Trust C (the "Trust") was organized as a Delaware business
trust in accordance with the Delaware Business Trust Act (the "Act") on August
31, 1992 for the purpose of acquiring and leasing to third parties a diversified
portfolio of capital equipment. Participants' capital initially consisted of
contributions of $1,000 from the Managing Trustee, AFG ASIT Corporation, $1,000
from the Special Beneficiary, Equis Financial Group Limited Partnership
(formerly known as American Finance Group), a Massachusetts limited partnership
("EFG"), and $100 from the Initial Beneficiary, AFG Assignor Corporation, a
wholly-owned affiliate of EFG or the "Advisor". The Trust issued an aggregate of
2,011,014 Beneficiary Interests (hereinafter referred to as Class A Interests)
at a subscription price of $25.00 each ($50,275,350 in total) to 2,477 investors
through 9 serial closings commencing December 15, 1992 and ending September 2,
1993. On July 18, 1997, the Trust issued 3,024,740 Class B Interests at $5.00
each ($15,123,700 in total), of which (i) 3,019,220 interests are held by Equis
II Corporation, an affiliate of EFG, and (ii) 5,520 interests are held by 10
other Class A investors. The Trust repurchased 218,661 Class A Interests on
October 10, 1997 at a cost of $2,291,567 using proceeds from the issuance of
Class B Interests. On April 28, 1998, the Trust repurchased 5,200 additional
Class A Interests at a cost of $46,800. Accordingly, there are 1,787,153 Class A
Interests currently outstanding. The Class A and Class B Interest holders are
collectively referred to as the "Beneficiaries".
The Trust has one Managing Trustee, AFG ASIT Corporation, a Massachusetts
corporation, and one Special Beneficiary, Semele Group Inc. ("Semele"). Semele
purchased the Special Beneficiary Interests from EFG during the fourth quarter
of 1999. EFG continues to act as Advisor to the Trust and provides services in
connection with the acquisition and remarketing of the Trust's assets. The
Managing Trustee is responsible for the general management and business affairs
of the Trust. AFG ASIT Corporation is a wholly owned subsidiary of Equis II
Corporation and an affiliate of EFG. 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 the Beneficiaries may vote. Gary
D. Engle, has voting control of Equis II Corporation. The Managing Trustee and
the Special Beneficiary are not required to make any other capital contributions
except as may be required under the Second Amended and Restated Declaration of
Trust, as amended (the "Trust Agreement").
(b) Financial Information About Industry Segments
Historically, the Trust has been engaged in only one industry segment: the
business of acquiring capital equipment and leasing the equipment to
creditworthy lessees on a full-payout or operating lease basis. Full-payout
leases are those in which aggregate undiscounted, noncancellable rents equal or
exceed the Purchase Price of the leased equipment. Operating leases are those in
which the aggregate undiscounted, noncancellable rental payments are less than
the Purchase Price of the leased equipment. In connection with a Solicitation
Statement and consent of Beneficiaries in 1998, the Trust Agreement was modified
to permit the Trust to invest in assets other than equipment. During 1999, the
Trust made certain non-equipment investments that the Managing Trustee believes
have the potential to enhance the Trust's overall economic performance for the
benefit of all of the Beneficiaries. Industry segment data is not applicable.
(c) Narrative Description of Business
The Trust was organized to acquire a diversified portfolio of capital
equipment subject to various full-payout and operating leases and to lease the
equipment to third parties as income-producing investments. Significant
operations commenced coincident with the Trust's initial purchase of equipment
and associated lease commitments on December 15, 1992. The acquisition of the
equipment and its associated leases is described in detail in Note 3 to the
financial statements included in Item 14 herein. Pursuant to the Trust
Agreement, the Trust is scheduled to be dissolved by December 31, 2004. The
Trust was a Nominal Defendant in a Class Action Lawsuit, the resolution of which
is described in Note 9 to the accompanying financial statements.
3
The Trust has no employees; however, it entered into a Advisory Agreement
with EFG. EFG's role, among other things, is to (i) evaluate, select, negotiate
and consummate the acquisition of equipment, (ii) manage the leasing,
re-leasing, financing and refinancing of equipment, and (iii) arrange the resale
of equipment. The Advisor is compensated for such services as described in the
Trust Agreement, Item 13 herein, and in Note 6 to the financial statements
included in Item 14, herein.
The Trust's investment in equipment is, and will continue to be, subject to
various risks, including physical deterioration, technological obsolescence and
defaults by lessees. A principal business risk of owning and leasing equipment
is the possibility that aggregate lease revenues and equipment sale proceeds
will be insufficient to provide an acceptable rate of return on invested capital
after payment of all debt service costs and operating expenses. In addition, the
leasing industry is very competitive. The Trust is subject to considerable
competition when equipment is re-leased or sold at the expiration of primary
lease terms. The Trust must compete with lease programs offered directly by
manufacturers and other equipment leasing companies, including business trusts
and limited partnerships organized and managed similarly to the Trust and
including other EFG-sponsored partnerships and trusts, which may seek to
re-lease or sell equipment within their own portfolios to the same customers as
the Trust. Many competitors have greater financial resources and more experience
than the Trust, the Managing Trustee and the Advisor. In addition, default by a
lessee under a lease agreement may cause equipment to be returned to the Trust
at a time when the Managing Trustee or the Advisor is unable to arrange the sale
or re-lease of such equipment. This could result in the loss of a portion of
potential lease revenues and weaken the Trust's ability to repay related
indebtedness.
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1999, 1998 and 1997 is
incorporated herein by reference to Note 2 to the financial statements in the
1999 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the
Securities and Exchange Commission.
The Trust Agreement originally provided for the reinvestment of Cash From
Sales or Refinancings in additional equipment until September 2, 1997, a period
of four years following the Final Closing. In connection with the Solicitation
Statement and consent of Beneficiaries in 1998, the Trust's reinvestment
provisions were reinstated until December 31, 2002 (see Note 6 to the financial
statements included in Item 14 herein) and the Trust was permitted to invest in
assets other than equipment. Upon the expiration of each primary lease term, the
Managing Trustee will determine whether to sell or re-lease the Trust's
equipment, depending on the economic advantages of each alternative. Over time,
the Trust will begin to liquidate its portfolio of equipment. Similarly, any
non-equipment investments will be liquidated as the Trust nears its scheduled
dissolution date.
EFG is a Massachusetts limited partnership formerly known as American Finance
Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Manager or Advisor to the Trust and several other
direct-participation equipment leasing programs sponsored or co-sponsored by AFG
(the "Other Investment Programs"). The Company arranges to broker or originate
equipment leases, acts as remarketing agent and asset manager, and provides
leasing support services, such as billing, collecting, and asset tracking.
The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President, Chief Executive Officer and sole Director. Equis
Corporation also owns a controlling 1% general partner interest in EFG's 99%
limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Equis
Corporation and GDE LP were established in December 1994 by Mr. Engle for the
sole purpose of acquiring the business of AFG.
In January 1996, the Company sold certain assets of AFG relating primarily to
the business of originating new leases, and the name "American Finance Group,"
and its acronym, to a third party. AFG changed its name to Equis Financial Group
Limited Partnership after the sale was concluded. Pursuant to terms of the sale
agreements, EFG specifically reserved the rights to continue using the name
American Finance Group and its
4
acronym in connection with the Trust and the Other Investment Programs and to
continue managing all assets owned by the Trust and the Other Investment
Programs.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
Not applicable.
Item 2. Properties.
Incorporated herein by reference to Note 3 to the financial statements in the
1999 Annual Report.
Item 3. Legal Proceedings.
Incorporated herein by reference to Note 9 to the financial statements in the
1999 Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
5
PART II
Item 5. Market for the Trust's Securities and Related Security Holder Matters.
(a) Market Information
There is no public market for the resale of the Interests and it is not
anticipated that a public market for resale of the Interests will develop.
(b) Approximate Number of Security Holders
At December 31, 1999, there were 1,946 record holders (1,935 Class A
Interests and 11 Class B Interests) in the Trust.
(c) Dividend History and Restrictions
Historically, cash distributions have been declared and paid within 45 days
after the completion of each calendar month and described in a statement sent to
the Beneficiaries. Distributions prior to Class B Payout (defined below) were
allocated to the Class A and Class B Beneficiaries as follows: first, 100% to
the Class A Beneficiaries up to $0.41 per Class A Interest; second, 100% to the
Class B Beneficiaries up to $0.164 per Class B Interest, reduced by the Class B
Distribution Reduction Factor (defined below); third, 100% to the Class A
Beneficiaries up to an additional $0.215 per Class A Interest; and fourth, until
Class B Payout was attained, 80% to the Class B Beneficiaries and 20% to the
Class A Beneficiaries.
During the past year, the Managing Trustee evaluated and pursued a number of
potential new investments, several of which the Managing Trustee concluded had
market returns that it believed were less than adequate given the potential
risks. Most transactions have involved the equipment leasing, business finance
and real estate development industries. Although the Managing Trustee intends to
continue to evaluate additional new investments, it anticipates that the Trust
will be able to fund these new investments with cash on hand or from other
sources, such as the proceeds from future asset sales or refinancings and new
indebtedness. As a result, the Trust declared a special cash distribution to the
Trust Beneficiaries totaling $15,200,000 which was paid on January 19, 2000.
After the special distribution on January 19, 2000, the Trust adopted a new
distribution policy and suspended the payment of regular monthly cash
distributions. Looking forward, the Managing Trustee does not expect to
reinstate cash distributions until expiration of the Trust's reinvestment period
in December 2001; however, the Managing Trustee periodically will review and
consider other one-time distributions. In addition to maintaining sale proceeds
for reinvestment, the Managing Trustee expects that the Trust will retain cash
from operations to pay down debt and for the continued maintenance of the
Trust's assets. The Managing Trustee believes that this change in policy is in
the best interests of the Trust over the long term and will have the added
benefit of reducing the Trust's distribution expenses.
Class A Payout means the first time when the aggregate amount of all
distributions actually made to the Class A Beneficiaries equals $25 per Class A
Interest (minus all uninvested capital contributions returned to the Class A
Beneficiaries) plus a cumulative annual distribution of 10% compounded quarterly
and calculated beginning with the last day of the month of the Trust's initial
Class A Closing.
Class B Payout means the first time when the aggregate amount of all
distributions actually made to the Class B Beneficiaries equals $5 per Class B
Interest plus a cumulative annual return of 8% per annum compounded quarterly
with respect to capital contributions returned to them as a Class B Capital
Distribution and 10% per annum, compounded quarterly, with respect to the
balance of their capital contributions calculated beginning August 1, 1997, the
first day of the month following the Class B Closing. Class B Payout occurred on
January 19, 2000 in conjunction with the special cash distribution paid on that
date.
6
As Class B Payout has been attained, all further distributions will be made
to the Class A Beneficiaries and the Class B Beneficiaries in amounts so that
each Class A Beneficiary receives, with respect to each Class A Interest, an
amount equal to 400%, divided by the difference between 100% and the Class B
Distribution Reduction Factor, of the amount so distributed with respect to each
Class B Interest. The Class B Distribution Reduction Factor means the percentage
determined as a fraction, the numerator of which is the aggregate amount of any
cash distributions paid to the Class B Beneficiaries as a return of their
original capital contributions (on a per Class B Subordinated Interest basis),
discounted at 8% per annum (commencing August 1, 1997, the first day of the
month following the Class B Closing) and the denominator of which is $5.00.
Distributions in 1999 and 1998 were as follows:
Managing Special
Total Trustee Beneficiary Beneficiaries
----------- ----------- ---------- -----------
Total 1999 distributions
Class A Interests $ 8,838,796 $ 74,065 $ 611,038 $ 8,153,693
Class B Interests 12,185,755 121,858 1,005,324 11,058,573
----------- ----------- ---------- -----------
Total $21,024,551 $ 195,923 $1,616,362 $19,212,266
=========== =========== ========== ===========
Total 1998 distributions
Class A Interests $ 3,228,082 $ 32,280 $ 266,317 $ 2,929,485
Class B Interests 6,523,016 18,762 154,783 6,349,471
----------- ----------- ---------- -----------
Total $ 9,751,098 $ 51,042 $ 421,100 $ 9,278,956
=========== =========== ========== ===========
Distributions payable were $15,200,000 and $399,296 at December 31, 1999 and
1998, respectively.
Item 6. Selected Financial Data.
Incorporated herein by reference to the section entitled "Selected Financial
Data" in the 1999 Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1999 Annual Report.
Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference to the financial statements and
supplementary data included in the 1999 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
7
PART III
Item 10. Directors and Executive Officers of the Trust.
(a-b) Identification of Directors and Executive Officers
The Trust has no Directors or Officers. As indicated in Item 1 of this
report, AFG ASIT Corporation is the Managing Trustee of the Trust. Under the
Trust Agreement, the Managing Trustee is solely responsible for the operation of
the Trust's properties and the Beneficiaries have no right to participate in the
control of such operations. The names, titles and ages of the Directors and
Executive Officers of the Managing Trustee as of March 15, 2000 are as follows:
DIRECTORS AND EXECUTIVE OFFICERS
OF THE MANAGING TRUSTEE (See Item 13)
Name Title Age Term
- ------------------------ -------------------------------- -------- ----
Geoffrey A. MacDonald Chairman and a member of the Until a
Executive Committee of EFG successor
and President and a Director is duly
of the Managing Trustee 51 elected
and
Gary D. Engle President and Chief Executive Officer qualified
and a member of the Executive
Committee of EFG and a Director
of the Managing Trustee 51
Gary M. Romano Executive Vice President and Chief
Operating Officer of EFG and
Clerk of the Managing Trustee 40
Michael J. Butterfield Senior Vice President, Finance and
Treasurer of EFG and Treasurer of
the Managing Trustee 40
James A. Coyne Executive Vice President, Capital
Markets of EFG and Senior Vice
President of the Managing Trustee 39
Sandra L. Simonsen Senior Vice President, Information
Systems of EFG 49
Gail D. Ofgant Senior Vice President, Lease
Operations of EFG 34
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Directors or
Executive Officers.
8
(e) Business Experience
Mr. MacDonald, age 51, is a co-founder, Chairman and a member of the
Executive Committee of EFG and President and a Director of the Managing Trustee.
Mr. MacDonald was also a co-founder, Director, and Senior Vice President of
EFG's predecessor corporation from 1980 to 1988. Mr. MacDonald is President of
American Finance Group Securities Corp. Prior to co-founding EFG's predecessors,
Mr. MacDonald held various executive and management positions in the leasing and
pharmaceutical industries. Mr. MacDonald holds a M.B.A. from Boston College and
a B.A. degree from the University of Massachusetts (Amherst).
Mr. Engle, age 51, is President and Chief Executive Officer of EFG and
sole shareholder and Director of its general partner, Equis Corporation and a
member of the Executive Committee of EFG and President of AFG Realty
Corporation. Mr. Engle joined EFG in 1990 as Executive Vice President and
acquired control of EFG and its subsidiaries in December 1994. Mr. Engle is
Vice President and a Director of certain of EFG's subsidiaries and
affiliates, and controls the general partner of Old North Capital Limited
Partnership ("ONC"). Mr. Engle is also Chairman, Chief Executive Officer, and
a member of the Board of Directors of Semele Group, Inc. ("Semele"). From
1987 to 1990, Mr. Engle was a principal and co-founder of Cobb Partners
Development, Inc., a real estate and mortgage banking company. From 1980 to
1987, Mr. Engle was Senior Vice President and Chief Financial Officer of
Arvida Disney Company, a large-scale community development company owned by
Walt Disney Company. Prior to 1980, Mr. Engle served in various management
consulting and institutional brokerage capacities. Mr. Engle has a MBA from
Harvard University and a B.S. degree from the University of Massachusetts
(Amherst).
Mr. Romano, age 40, became Executive Vice President and Chief Operating
Officer of EFG, and Secretary of Equis Corporation in 1996 and is Secretary or
Clerk of several of EFG's subsidiaries and affiliates. Mr. Romano joined EFG in
November 1989, became Vice President and Controller in April 1993 and Chief
Financial Officer in April 1995. Mr. Romano assumed his current position in
April 1996. Prior to joining EFG, Mr. Romano was Assistant Controller for a
privately held real estate development and mortgage origination company that he
joined in 1987. Previously, Mr. Romano was an Audit Manager at Ernst & Whinney
(now Ernst & Young LLP), where he was employed from 1982 to 1986. Mr. Romano is
a Certified Public Accountant and holds a B.S. degree from Boston College.
Mr. Coyne, age 39, is Executive Vice President, Capital Markets of EFG and
President, Chief Operating Officer and a member of the Board of Directors of
Semele. Mr. Coyne joined EFG in 1989, remained until May 1993, and rejoined EFG
in November 1994. In September 1997, Mr. Coyne was appointed Executive Vice
President of EFG. From May 1993 through November 1994, he was employed by the
Raymond Company, a private investment firm, where he was responsible for
financing corporate and real estate acquisitions. From 1985 through 1989, Mr.
Coyne was affiliated with a real estate investment company and an equipment
leasing company. Prior to 1985, he was with the accounting firm of Ernst &
Whinney (now Ernst & Young LLP). He has a B.S. in Business Administration from
John Carroll University, a Masters Degree in Accounting from Case Western
Reserve University and is a Certified Public Accountant.
Mr. Butterfield, age 40, is Senior Vice President, Finance and Treasurer of
EFG and certain of its affiliates and is Treasurer of the Managing Trustee and
Semele. Mr. Butterfield joined EFG in June 1992, became Vice President, Finance
and Treasurer of EFG and certain of it's affiliates in April 1996 and in July
1998, was promoted to Senior Vice President, Finance and Treasurer of EFG and
certain of its affiliates. Prior to joining EFG, Mr. Butterfield was an Audit
Manager with Ernst & Young LLP, which he joined in 1987. Mr. Butterfield was
employed in public accounting and industry positions in New Zealand and London
(UK) prior to coming to the United States in 1987. Mr. Butterfield attained his
Associate Chartered Accountant (A.C.A.) professional qualification in New
Zealand and has completed his CPA requirements in the United States. He holds a
Bachelor of Commerce degree from the University of Otago, Dunedin, New Zealand.
Ms. Simonsen, age 49, joined EFG in February 1990 and was promoted to Senior
Vice President, Information Systems of EFG in April 1996. Prior to joining EFG,
Ms. Simonsen was Vice President, Information Systems with Investors Mortgage
Insurance Company, which she joined in 1973. Ms. Simonsen provided systems
consulting for a subsidiary of American International Group and authored a
software program published by IBM. Ms. Simonsen holds a B.A. degree from Wilson
College.
9
Ms. Ofgant, age 34, is Senior Vice President, Lease Operations of EFG and
certain of its affiliates. Ms. Ofgant joined EFG in July 1989, was promoted to
Manager Lease Operations in April 1994, and became Vice President of Lease
Operations in April 1996. In July 1998, Ms. Ofgant was promoted to Senior Vice
President of Lease Operations. Prior to joining EFG, Ms. Ofgant was employed by
Security Pacific National Trust Company. Ms. Ofgant holds a B.S. degree in
Finance from Providence College.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
Item 11. Executive Compensation.
(a) Cash Compensation
Currently, the Trust has no employees. However, under the terms of the Trust
Agreement, the Trust is obligated to pay all costs of personnel employed full or
part-time by the Trust, including officers or employees of the Managing Trustee
or its Affiliates. There is no plan at the present time to make any officers or
employees of the Managing Trustee or its Affiliates employees of the Trust. The
Trust has not paid and does not propose to pay any options, warrants or rights
to the officers or employees of the Managing Trustee or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Trust has no employees, as discussed in Item 11(a), pursuant to
section 10.4(c) of the Trust Agreement, the Trust incurs a monthly charge for
personnel costs of EFG for persons engaged in providing administrative services
to the Trust. A description of the remuneration paid by the Trust to the
Managing Trustee and its Affiliates for such services is included in Item 13,
herein and in Note 6 to the financial statements included in Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the Managing Trustee or
its Affiliates which results or may result from their resignation, retirement or
any other termination.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
By virtue of its organization as a trust, the Trust has no outstanding
securities possessing traditional voting rights. However, as provided in Section
11.2(a) of the Trust Agreement (subject to Section 11.2(b)), a majority interest
of the Beneficiaries have voting rights with respect to:
1. Amendment of the Trust Agreement;
2. Termination of the Trust;
10
3. Removal of the Managing Trustee; and
4. Approval or disapproval of the sale of all, or substantially all, of
the assets of the Trust (except in the orderly liquidation of the Trust
upon its termination and dissolution).
As of March 1, 2000, the following person or group owns beneficially more
than 5% of the Trust's outstanding Beneficiary interests:
Name and Amount Percent
Title Address of of Beneficial of
of Class Beneficial Owner Ownership Class
- ------------------------ ----------------------- ---------------- -------
Interests Representing Equis II Corporation
Class B Beneficiary 88 Broad Street 3,019,220 Interests 99.82%
Boston, MA 02110
No person or group is known by the Managing Trustee to own beneficially more
than 5% of the Trust's 1,787,153 outstanding Class A Interests as of March 1,
2000.
Equis II Corporation is controlled by EFG's President and Chief Executive
Officer, Gary D. Engle.
The ownership and organization of EFG is described in Item 1 of this report.
Item 13. Certain Relationships and Related Transactions.
The Managing Trustee of the Trust is AFG ASIT Corporation, an affiliate of
EFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Trust are paid by EFG on behalf of the
Trust and EFG is reimbursed at its actual cost for such expenditures. Fees and
other costs incurred during the years ended December 31, 1999, 1998 and 1997,
which were paid or accrued by the Trust to EFG or its Affiliates, are as
follows:
1999 1998 1997
----------- ----------- --------
Acquisition fees $ 75,281 $ -- $ 1,121,157
Equipment management fees 513,019 659,939 725,116
Offering costs -- -- 151,237
Administrative charges 192,348 90,744 84,834
Reimbursable operating expenses
due to third parties 650,915 702,535 656,425
---------- ---------- -----------
Total $1,431,563 $1,453,218 $ 2,738,769
========== ========== ===========
EFG and its Affiliates were reimbursed for their out-of-pocket offering costs
incurred on behalf of the Trust in an amount equal to 1% of the gross proceeds
realized by the four trusts which sold Class B Interests pursuant to a
Registration Statement on Form S-1 in 1997. The amount of reimbursement made by
the Trust was prorated in proportion to the number of Beneficiary Interests sold
in the Trust.
As provided under the terms of the Trust Agreement, EFG is compensated for
its services to the Trust. Such services include all aspects of acquisition,
management and sale of equipment. For acquisition services, EFG was compensated
by an amount equal to .28% of Asset Base Price paid by the Trust for each asset
acquired for the Trust's initial asset portfolio. For acquisition services
during the initial reinvestment period, which expired on September 2, 1997, EFG
was compensated by an amount equal to 3% of Asset Base Price paid by the Trust.
In
11
connection with a Solicitation Statement and consent of Beneficiaries in 1998,
the Trust's reinvestment provisions were reinstated through December 31, 2002
and the Trust was permitted to invest in assets other than equipment.
Acquisition fees paid to EFG in connection with such reinvestment assets are
equal to 1% of Asset Base Price paid by the Trust. For management services, EFG
is compensated by an amount equal to (i) 5% of gross operating lease rental
revenue and 2% of gross full payout lease rental revenue received by the Trust
with respect to assets acquired on or prior to March 31, 1998. For management
services earned in connection with assets acquired on or after April 1, 1998,
EFG is compensated by an amount equal to 2% of gross lease rental revenue
received by the Trust. Both of these fees are subject to certain limitations
defined in the Trust Agreement. For non-equipment investments other than cash,
the Managing Trustee receives an annualized management fee of 1%. Compensation
to EFG for services connected to the remarketing of equipment is calculated as
the lesser of (i) 3% of gross sale proceeds or (ii) one-half of reasonable
brokerage fees otherwise payable under arm's length circumstances. Payment of
the remarketing fee is subordinated to Payout and is subject to certain
limitations defined in the Trust Agreement.
Administrative charges represent amounts owed to EFG, pursuant to Section
10.4(c) of the Trust Agreement, for persons employed by EFG who are engaged in
providing administrative services to the Trust. Reimbursable operating expenses
due to third parties represent costs paid by EFG on behalf of the Trust which
are reimbursed to EFG at actual cost.
All equipment was purchased from EFG or directly from external vendors. The
Trust's Purchase Price is determined by the method described in Note 2 to the
Trust's financial statements included in Item 14, herein.
All rents and proceeds from the sale of equipment are paid by the lessee
directly to either EFG or to a lender. EFG temporarily deposits collected funds
in a separate interest-bearing escrow account prior to remittance to the Trust.
At December 31, 1999, the Trust was owed $940,527 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in January 2000.
Old North Capital Limited Partnership ("ONC"), a Massachusetts limited
partnership formed in 1995 and an affiliate of EFG, owns 9,210 Class A Interests
or less than 1% of the total outstanding Class A Interests of the Trust. The
general partner of ONC is controlled by Gary D. Engle. In addition, the limited
partnership interests of ONC are owned by a subsidiary of Semele Group, Inc.
("Semele"). Gary D. Engle is Chairman and CEO of Semele.
On July 18, 1997, the Trust issued 3,024,740 Class B Interests at $5.00 per
interest, thereby generating $15,123,700 in aggregate Class B capital
contributions. Class A Beneficiaries purchased 5,520 Class B Interests,
generating $27,600 of such aggregate capital contributions, and the Special
Beneficiary, EFG, purchased 3,019,220 Class B Interests, generating $15,096,100
of such aggregate capital contributions. The Trust incurred offering costs in
the amount of $151,237 in connection with this offering.
Subsequently, EFG transferred its Class B Interests to a special-purpose
company, Equis II Corporation, a Delaware corporation. EFG also transferred its
ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to Equis
II Corporation. As a result, Equis II Corporation has voting control of the
Trust through its ownership of a majority of all of the Trust's outstanding
voting interests, as well as its ownership of AFG ASIT Corporation. Equis II
Corporation is controlled by EFG's President and Chief Executive Officer, Gary
D. Engle. Accordingly, control of the Managing Trustee did not change as a
result of the foregoing transactions. During the fourth quarter of 1999, Semele
Group Inc. purchased an 85% interest in Equis II Corporation; however, voting
control with respect to the Class B Interests owned by Equis II Corporation
remains vested in Mr. Engle.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Trust
None.
12
(d) Transactions with Promoters
See Item 13(a) above.
13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors...............................*
Statement of Financial Position
at December 31, 1999 and 1998................................*
Statement of Operations
for the years ended December 31, 1999, 1998 and 1997.........*
Statement of Changes in Participants' Capital
for the years ended December 31, 1999, 1998 and 1997.........*
Statement of Cash Flows
for the years ended December 31, 1999, 1998 and 1997.........*
Notes to the Financial Statements............................*
(2) Financial Statement Schedules:
None required.
(3) Exhibits:
Except as set forth below, all Exhibits to Form 10-K, as set
forth in Item 601 of Regulation S-K, are not applicable.
Exhibit
Number
- -------
4 Second Amended and Restated Declaration of Trust.
10.1 Guarantee Agreement dated March 8, 2000 between AFG Investment Trust
A, AFG Investment Trust B, AFG Investment Trust C, and AFG
Investment Trust D (each a Guarantor) and Heller Affordable Housing
of Florida, Inc. (among others as Beneficiaries) is filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1999 as Exhibit 10.1 and is included herein.
10.2 Guarantee Fee Agreement dated March 8, 2000 between AFG Investment
Trust A, AFG Investment Trust B, AFG Investment Trust C, and AFG
Investment Trust D (each a Guarantor) and Echelon Commercial LLC is
filed in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999 as Exhibit 10.2 and is included herein.
* Incorporated herein by reference to the appropriate portion of the 1999 Annual
Report to security holders for the year ended December 31, 1999 (see Part II).
14
Exhibit
Number
- -------
10.3 Guarantors' Contribution Agreement dated March 8, 2000 by and among
AFG Investment Trust A, AFG Investment Trust B, AFG Investment Trust
C, and AFG Investment Trust D (each a Guarantor) is filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1999 as Exhibit 10.3 and is included herein.
13 The 1999 Annual Report to security holders, a copy of which is
furnished for the information of the Securities and Exchange
Commission. Such Report, except for those portions thereof which are
incorporated herein by reference, is not deemed "filed" with the
Commission.
23 Consent of Independent Auditors.
99(a) Lease agreement with Hyundai Electronics America, Inc. is filed in
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999 as Exhibit 99 (a) and is included herein.
99(b) Lease agreement with Scandinavian Airlines System was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1998 as Exhibit 99 (a) and is incorporated herein by reference.
(b) Reports on Form 8-K
None.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AFG Investment Trust C
By: AFG ASIT Corporation,
a Massachusetts corporation and the
Managing Trustee of the Registrant.
By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle
------------------------------ ------------------------------
Geoffrey A. MacDonald Gary D. Engle
Chairman and a member of the President and Chief Executive
Executive Committee of EFG and Officer and a member of the
President and a Director of the Executive Committee of EFG and a
Managing Trustee Director of the Managing Trustee
(Principal Executive Officer)
Date: March 30, 2000 Date: March 30, 2000
----------------------------- ------------------------------
By: /s/ Gary M. Romano By: /s/ Michael J. Butterfield
------------------------------ -----------------------------
Gary M. Romano Michael J. Butterfield
Executive Vice President and Chief Senior Vice President, Finance and
Operating Officer of EFG and Clerk Treasurer of EFG and Treasurer
of the Managing Trustee of the Managing Trustee
(Principal Financial Officer) (Principal Accounting Officer)
Date: March 30, 2000 Date: March 30, 2000
----------------------------- -----------------------------
16