UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1997
----------------------------------------------
OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____________________ to ____________________

_____________________

For Quarter Ended March 31, 1997 Commission File No. 0-21390

AFG INVESTMENT TRUST B
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 04-3157230
- --------------------------------------- ------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

98 North Washington Street, Boston, MA 02114
- ---------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (617) 854-5800
--------------------------

- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)

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 X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court 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 NO
----- -----

AFG INVESTMENT TRUST B

FORM 10-Q

INDEX

PAGE
--------

PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements

Statement of Financial Position
at March 31, 1997 and December 31, 1996 3

Statement of Operations
for the three months ended March 31, 1997 and 1996 4

Statement of Cash Flows
for the three months ended March 31, 1997 and 1996 5

Notes to the Financial Statements 6-9

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14

PART II. OTHER INFORMATION:

Items 1--6 15

AFG INVSTMENT TRUST B

STATMENT OF FINANCIAL POSITION
March 31, 1997 and December 31, 1996

(Unaudited)

MARCH 31, DECEMBER 31,
1997 1996
------------- -------------

ASSETS
Cash and cash equivalents...................................... $ 3,337,820 $ 2,829,093

Rents receivable............................................... 366,938 339,293

Accounts receivable--affiliate................................. 225,359 154,395

Equipment at cost, net of accumulated depreciation of
$13,171,894 and $12,161,949 at March 31, 1997 and December
31, 1996, respectively....................................... 12,275,979 13,307,711

Organization costs, net of accumulated amortization of $4,583
and $4,333 at March 31, 1997 and December 31, 1996,
respectively................................................. 417 667
----------- -----------
Total assets........................................... $16,206,513 $16,631,159
----------- -----------
----------- -----------
LIABILITIES AND PARTICIPANTS' CAPITAL
Notes payable.................................................. $ 3,915,823 $ 4,352,811
Accrued interest............................................... 41,956 36,571
Accrued liabilities............................................ 18,750 23,250
Accrued liabilities--affiliate................................. 53,178 47,178
Deferred rental income......................................... 124,760 45,550
Cash distributions payable to participants..................... 200,199 200,199
----------- -----------
Total liabilities...................................... 4,354,666 4,705,559
----------- -----------
Participants' capital (deficit):
Managing Trustee........................................... (31,120) (30,382)
Special Beneficiary........................................ (263,978) (257,894)
Beneficiary Interests (665,494 Interests; initial purchase
price of $25 each)...................................... 12,146,945 12,213,876
----------- -----------
Total participants' capital............................ 11,851,847 11,925,600
----------- -----------
Total liabilities and participants' capital............ $16,206,513 $16,631,159
----------- -----------
----------- -----------

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

AFG INVESTMENT TRUST B

STATEMENT OF OPERATIONS
for the three months ended March 31, 1997 and 1996

(Unaudited)

1997 1996
------------ ------------

Income:

Lease revenue................................................... $1,348,618 $1,479,254

Interest income................................................. 39,200 4,551

Gain (loss) on sale of equipment................................ 3,160 (184,016)
---------- ----------
Total income................................................. 1,390,978 1,299,789
------------ ----------
Expenses:

Depreciation and amortization................................... 1,020,428 1,145,057

Interest expense................................................ 45,110 110,025

Equipment management fees--affiliate............................ 57,259 62,453

Operating expenses--affiliate................................... 41,637 16,893
---------- ----------
Total expenses............................................... 1,164,434 1,334,428
---------- ----------
Net income (loss)................................................. $ 226,544 $ (34,639)
---------- ----------
---------- ----------
Net income (loss) per Beneficiary Interest........................ $ 0.31 $ (0.05)
---------- ----------
---------- ----------
Cash distributions declared per Beneficiary Interest.............. $ 0.41 $ 0.32
---------- ----------
----------- ----------

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

AFG INVESTMENT TRUST B

STATMENT OF CASH FLOWS
for the three months ended March 31, 1997 and 1996

(Unaudited)

1997 1996
------------ -----------

Cash flows from (used in) operating activities:
Net income (loss)................................................. $ 226,544 $ (34,639)

Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization................................ 1,020,428 1,145,057
(Gain) loss on sale of equipment............................. (3,160) 184,016

Changes in assets and liabilities
Decrease (increase) in:
rents receivable............................................. (27,645) 277,621
accounts receivable--affiliate............................... (70,964) (112,870)
Increase (decrease) in:
accrued interest............................................. 5,385 (50,495)
accrued liabilities.......................................... (4,500) (250)
accrued liabilities--affiliate............................... 6,000 21,225
deferred rental income....................................... 79,210 87,542
---------- -----------
Net cash from operating activities........................ 1,231,298 1,517,207
---------- -----------

Cash flows from (used in) investing activities:
Purchase of equipment........................................... -- (1,441,796)
Proceeds from equipment sales................................... 14,714 1,694,513
---------- -----------
Net cash from investing activities........................ 14,714 252,717
---------- -----------

Cash flows from (used in) financing activities:
Proceeds from notes payable..................................... -- 997,888
Principal payments--notes payable............................... (436,988) (1,251,120)
Distributions paid.............................................. (300,297) (230,998)
---------- -----------
Net cash used in financing activities..................... (737,285) (484,230)
---------- -----------
Net increase in cash and cash equivalents......................... 508,727 1,285,694

Cash and cash equivalents at beginning of period.................. 2,829,093 337,293
---------- -----------
Cash and cash equivalents at end of period........................ $3,337,820 $ 1,622,987
---------- -----------
---------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest........................ $ 39,725 $ 160,520
---------- -----------
---------- -----------

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

AFG INVESTMENT TRUST B

NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1997

(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing
Form 10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in
conjunction with the footnotes presented in the 1996 Annual Report. Except as
disclosed herein, there has been no material change to the information
presented in the footnotes to the 1996 Annual Report.

In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at March 31, 1997 and December 31, 1996 and results of operations
for the three month periods ended March 31, 1997 and 1996 have been made and
are reflected.

NOTE 2--CASH

At March 31, 1997, the Trust had $3,225,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.

NOTE 3--REVENUE RECOGNITION

Rents are payable to the Trust monthly, quarterly or semi-annually and no
significant amounts are calculated on factors other than the passage of time.
Rents from Reno Air, Inc. ("Reno Air"), as provided for in the lease
agreement, are adjusted monthly for changes in the London Inter-Bank Offered
Rate ("LIBOR"). Future rents from Reno Air, included below, reflect the most
recent LIBOR effected rental payment. The leases are accounted for as
operating leases and are noncancellable. Rents received prior to their due
dates are deferred. Future minimum rents of $6,300,854 are due as follows:

For the year ending March 31, 1998 $4,569,601
1999 941,638
2000 284,922
2001 225,603
2002 159,480
Thereafter 119,610
----------
Total $6,300,854
----------
----------

AFG INVESTMENT TRUST B

NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

NOTE 4--EQUIPMENT

The following is a summary of equipment owned by the Trust at March 31,
1997. In the opinion of Equis Financial Group ("EFG"), (formerly American
Finance Group), the acquisition cost of the equipment did not exceed its fair
market value.

REMAINING
LEASE TERM EQUIPMENT
EQUIPMENT TYPE (MONTHS) AT COST
- ------------------------------------------------------------------ ------------- -------------

Aircraft.......................................................... 9-71 $ 8,018,105
Computers and peripherals......................................... 1-21 4,509,566
Materials handling................................................ 1-43 4,466,295
Communications.................................................... 12-21 3,039,531
General plant and warehouse....................................... 9 1,576,077
Construction and mining........................................... 1-46 1,200,577
Retail store fixtures............................................. 6-12 1,107,881
Tractors and heavy duty trucks.................................... 8-30 605,644
Manufacturing..................................................... 5-9 449,902
Furniture and fixtures............................................ 7 284,019
Trailers/intermodal containers.................................... 9-15 128,443
Photocopying...................................................... 1-8 61,833
------------
Total equipment cost 25,447,873

Accumulated depreciation (13,171,894)
------------

Equipment, net of accumulated depreciation $ 12,275,979
------------
------------

At March 31, 1997, the Trust's equipment portfolio included equipment
having a proportionate original cost of $11,023,146, representing
approximately 43% of total equipment cost.

At March 31, 1997, the cost and net book value of equipment held for sale
or re-lease was approximately $451,000 and $100,000, respectively. The
Managing Trustee is actively seeking the sale or re-lease of all equipment
not on lease.

NOTE 5--RELATED PARTY TRANSACTIONS

All operating expenses incurred by the Trust are paid by EFG on behalf of
the Trust and EFG is reimbursed at its actual cost for such expenditures.
Fees and other costs incurred during the three month periods ended March 31,
1997 and 1996, which were paid or accrued by the Trust to EFG or its
Affiliates, are as follows:

1997 1996
--------- ----------
Equipment acquisition fees.............................. -- $ 52,786
Equipment management fees............................... $57,259 62,453
Administrative charges.................................. 10,530 5,250
Reimbursable operating expenses
due to third parties.................................. 31,107 11,643
------- --------
Total......................................... $98,896 $132,132
------- --------
------- --------

AFG INVESTMENT TRUST B

NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

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
March 31, 1997, the Trust was owed $225,359 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in April 1997.

NOTE 6--NOTES PAYABLE

Notes payable at March 31, 1997 consisted of installment notes of
$3,915,823 payable to banks and institutional lenders. The notes bear
interest rates ranging between 5.7% and 7.7%, except for one note which bears
a fluctuating interest rate based on LIBOR plus a margin (5.7% at March 31,
1997). All of the installment notes are non-recourse and are collateralized
by the equipment and assignment of the related lease payments. Generally, the
installment notes will be fully amortized by noncancellable rents. However,
the Trust has a balloon payment obligation of $282,421 at the expiration of
the primary lease term related to the Reno Air aircraft. The carrying amount
of notes payable approximates fair value at March 31, 1997.

The annual maturities of the notes payable are as follows:

For the year ending March 31, 1998 $2,650,656
1999 542,127
2000 111,702
2001 120,800
2002 130,639
Thereafter 359,899
----------
Total $3,915,823
----------
----------

NOTE 7--LEGAL PROCEEDINGS

On July 27, 1995, EFG, on behalf of the Trust and other EFG-sponsored
investment programs, filed an action in the Commonwealth of Massachusetts
Superior Court Department of the Trial Court in and for the County of
Suffolk, for damages and declaratory relief against a lessee of the Trust,
National Steel Corporation ("National Steel"), under a certain Master Lease
Agreement ("MLA") for the lease of certain equipment. EFG is seeking the
reimbursement by National Steel of certain sales and/or use taxes paid to the
State of Illinois and other remedies provided by the MLA. On August 30, 1995,
National Steel filed a Notice of Removal which removed the case to the United
States District Court, District of Massachusetts. On September 7, 1995,
National Steel filed its Answer to EFG's Complaint along with Affirmative
Defenses and Counterclaims, seeking declaratory relief and alleging breach of
contract, implied covenant of good faith and fair dealing and specific
performance. EFG filed its Answer to these counterclaims on September 29,
1995. Though the parties have been discussing settlement with respect to this
matter for some time, to date, the negotiations have been unsuccessful.
Notwithstanding these discussions, EFG recently filed an Amended and
Supplemental Complaint alleging a further default by National Steel under the
MLA and EFG recently filed a Summary Judgment on all claims and
counterclaims. The matter remains pending before the Court. The Trust has not
experienced any material losses as a result of this action.

NOTE 8--SOLICITATION AND REGISTRATION STATEMENTS

On October 26, 1996, the Managing Trustee, on behalf of the Trust, filed
a Solicitation Statement with the Securities and Exchange Commission which
was subsequently sent to the Beneficiaries pursuant to Regulation

AFG INVESTMENT TRUST B

NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

14A of Section 14 of the Securities Exchange Act. The Solicitation Statement
sought to solicit the consent of the Beneficiaries to a proposed amendment
("the Amendment") to the Amended and Restated Declaration of Trust (the
"Trust Agreement").

The Amendment would (i) amend the provisions of the Trust Agreement
governing the redemption of Interests to permit the Trust to offer to redeem
outstanding interests at such times, in such amounts, in such manner and at
such prices as the Managing Trustee may determine from time to time, in
accordance with applicable law; and (ii) add a provision to the Trust
Agreement that would permit the Trust to issue, at the discretion of the
Managing Trustee and without further consent or approval of the
Beneficiaries, an additional class of security with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties as the Managing Trustee may fix. Such a security, if it
were to be offered and sold, would provide the Trust with the funds to (a)
implement more expansive Interest redemption opportunities for Beneficiaries
without using Trust funds which may otherwise be available for current cash
distributions; and (b) make a special one-time distribution to the
Beneficiaries.

Pursuant to the Trust Agreement, the adoption of the Amendment required
the consent of the Beneficiaries holding more than fifty percent in the
aggregate of the Interests held by all Beneficiaries. A majority of
Beneficiary Interests, representing 369,960 or 55.6% of all Beneficiary
Interests, voted in favor of the Amendment; 69,792 or 10.5% of all
Beneficiary Interests voted against the Amendment; and 24,444 or 3.7% of all
Beneficiary Interests abstained. Approximately 69.8% of all Beneficiary
Interests participated in the vote. Accordingly, the Amendment was adopted.

On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 (which was amended on April 11, 1997 and May 9, 1997) with the Securities
and Exchange Commission which covers, among other things, the creation and
sale of a new class of beneficiary interests in the Trust (the "Class B
Interests"). A portion of the proceeds from the offering of the Class B
Interests would be used to make a one-time special cash distribution to
existing Beneficiaries (the "Class A Beneficiaries") of the Trust and to
enable the Trust to redeem a portion of the existing Beneficiary Interests
(the "Class A Interests"). The characteristics of the Class B Interests,
associated risk factors, and other matters of importance to the Beneficiaries
and prospective purchasers of the Class B Interests are contained in the
Registration Statement. Presently, the Registration Statement is undergoing
regulatory review and has not been declared effective.

AFG INVEST TRUST B

FORM 10-Q

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Three months ended March 31, 1997 compared to the three months ended March
31, 1996:

OVERVIEW

As an equipment leasing trust, AFG Investment Trust B (the "Trust") was
organized to acquire a diversified portfolio of capital equipment subject to
lease agreements with third parties. The Trust was designed to progress
through three principal phases: acquisitions, operations, and liquidation.
During the operations phase, a period of approximately six years, all
equipment in the Trust's portfolio will progress through various stages.
Initially, all equipment will generate rental revenues under primary term
lease agreements. During the life of the Trust, these agreements will expire
on an intermittent basis and equipment held pursuant to the related leases
will be renewed, re-leased or sold, depending on prevailing market conditions
and the assessment of such conditions by EFG to obtain the most advantageous
economic benefit. Over time, a greater portion of the Trust's original
equipment portfolio will become available for remarketing and cash generated
from operations and from sales or refinancings will begin to fluctuate.
Ultimately, all equipment will be sold and the Trust will be dissolved. The
Trust's operations commenced in 1992.

RESULTS OF OPERATIONS

For the three months ended March 31, 1997, the Trust recognized lease
revenue of $1,348,618 compared to $1,479,254 for the same period in 1996. The
decrease in lease revenue from 1996 to 1997 is due to the Trust's sale of its
interest in a Boeing 747-SP aircraft leased to United Air Lines, Inc. (the
"United Aircraft") in February 1996, as discussed below, primary lease term
expirations and the sale of other equipment. The Trust also earns interest
income from temporary investments of rental receipts and equipment sales
proceeds in short-term instruments.

The Trust's equipment portfolio includes certain assets in which the
Trust holds a proportionate ownership interest. In such cases, the remaining
interests are owned by EFG or an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enables the Trust to
further diversify its equipment portfolio by participating in the ownership
of selected assets, thereby reducing the general levels of risk which could
result from a concentration in any single equipment type, industry or lessee.
The Trust and each affiliate individually report, in proportion to their
respective ownership interests, their respective shares of assets,
liabilities, revenues, and expenses associated with the equipment.

During the three months ended March 31, 1997, the Trust sold equipment
having a net book value of $11,554 to existing lessees and third parties.
These sales resulted in a net gain, for financial statement purposes, of
$3,160.

On February 5, 1996, the Trust concluded the sale of its interest in the
United Aircraft to the lessee, United Air Lines Inc., ("United"), as reported
in Note 3 to the Trust's 1996 Annual Report. The Trust recognized a net loss
of $560,982 in connection with this transaction, of which $384,782 was
recognized as Write-Down of Equipment in 1995. The remainder of $176,200 was
recognized as a loss on sale of equipment on the accompanying Statement of
Operations for the three months ended March 31, 1996. In addition to lease
rents, the Trust received net sale proceeds of $1,684,292 from United for the
aircraft. A portion of such sale proceeds was reinvested in other equipment
in March 1996 through the acquisition of an 8.86% ownership interest in an
aircraft (the "Reno Aircraft") at an aggregate cost to the Trust of
$1,239,741. To acquire its interest in the Reno Aircraft, the Trust obtained
long-term financing of $997,888 from a third-party lender and utilized cash
proceeds of

AFG INVEST TRUST B

FORM 10-Q

PART I. FINANCIAL INFORMATION

$241,853 from the sale of the United Aircraft. During the three months ended
March 31, 1996, the Trust sold other equipment having a net book value of
$18,037 to existing lessees and third parties. These sales resulted in a net
loss, for financial statement purposes, of $7,816.

It cannot be determined whether future sales of equipment will result in
a net gain or a net loss to the Trust, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at
the time of sale. In addition, the amount of gain or loss reported for
financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.

The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
advances, and many other events can converge to enhance or detract from asset
values at any given time. EFG attempts to monitor these changes in order to
identify opportunities which may be advantageous to the Trust and which will
maximize total cash returns for each asset.

The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset,
together with its residual value. The latter consists of cash proceeds
realized upon the asset's sale in addition to all other cash receipts
obtained from renting the asset on a re-lease, renewal or month-to-month
basis. The Trust classifies such residual rental payments as lease revenue.
Consequently, the amount of gain or loss reported in the financial statements
is not necessarily indicative of the total residual value the Trust achieved
from leasing the equipment.

Depreciation and amortization expense was $1,020,428 and $1,145,057 for
the three months ended March 31, 1997 and 1996, respectively. For financial
reporting purposes, to the extent that an asset is held on primary lease
term, the Trust depreciates the difference between (i) the cost of the asset
and (ii) the estimated residual value of the asset on a straight-line basis
over such term. For purposes of this policy, estimated residual values
represent estimates of equipment values at the date of primary lease
expiration. To the extent that an asset is held beyond its primary lease
term, the Trust continues to depreciate the remaining net book value of the
asset on a straight-line basis over the asset's remaining economic life.

Interest expense was $45,110 or 3.3% of lease revenue for the three
months ended March 31, 1997 compared to $110,025 or 7.4% of lease revenue for
the same period in 1996. Interest expense in future periods will continue to
decline as the principal balance of notes payable is reduced through the
application of rent receipts to outstanding indebtedness.

Management fees were 4.2% of lease revenue during each of the three month
periods ended March 31, 1997 and 1996. Management fees are based on 5% of
gross lease revenue generated by operating leases and 2% of gross lease
revenue generated by full payout leases.

Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as
printing, distribution and remarketing expenses. Collectively, operating
expenses represented 3.1% and 1.1% of lease revenue during the three months
ended March 31, 1997 and 1996, respectively. The increase in operating
expenses from 1996 to 1997 was due primarily to professional service costs
incurred in connection with the Solicitation and Registration Statements
described in Note 8 to the accompanying financial statements. 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.

AFG INVEST TRUST B

FORM 10-Q

PART I. FINANCIAL INFORMATION

LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS

The Trust by its nature is a limited life entity which was established
for specific purposes described in the preceding "Overview". As an equipment
leasing program, the Trust's principal operating activities derive from asset
rental transactions. Accordingly, the Trust's principal source of cash from
operations is provided by the collection of periodic rents. These cash
inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. Operating
activities generated net cash inflows of $1,231,298 and $1,517,207 in the
three months ended March 31, 1997 and 1996, respectively. Future renewal,
re-lease and equipment sale activities will cause a gradual decline in the
Trust's primary-term lease revenue and corresponding sources of operating
cash. Overall, expenses associated with rental activities, such as management
fees, and net cash flow from operating activities will decline as the Trust
experiences a higher frequency of remarketing events.

The Trust's equipment is leased by a number of creditworthy,
investment-grade companies and, to date, the Trust has not experienced any
material collection problems and has not considered it necessary to provide
an allowance for doubtful accounts. Notwithstanding a positive collection
history, there is no assurance that all future contracted rents will be
collected or that the credit quality of the Trust's lessees will be
maintained. Collection risk could increase in the future, particularly as the
Trust remarkets its equipment and enters re-lease agreements with different
lessees. The Managing Trustee will continue to evaluate and monitor the
Trust's experience in collecting accounts receivable to determine whether a
future allowance for doubtful accounts may become appropriate.

Ultimately, the Trust will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold
to the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.

Cash expended for asset acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. The Trust expended $1,441,796 to
acquire equipment during the three months ended March 31, 1996. This amount
reflects the acquisition of an ownership interest in a commercial jet
aircraft at a cost of $1,239,741, pursuant to the reinvestment provisions of
the Trust's prospectus and an original equipment acquisition of $202,055. The
reinvestment equipment was financed through a combination of leveraging and
the sale proceeds available from the aircraft transaction, discussed above.
There were no equipment acquisitions during the same period in 1997. During
the three months ended March 31, 1997, the Trust realized equipment sale
proceeds of $14,714. During the same period in 1996, the Trust realized
equipment sale proceeds of $1,694,513, including $1,684,292 of proceeds from
the United Aircraft. Future inflows of cash from asset disposals will vary in
timing and amount and will be influenced by many factors including, but not
limited to, the frequency and timing of lease expirations, the type of
equipment being sold, its condition and age, and future market conditions.

The Trust obtained long-term financing in connection with certain
equipment leases. The origination of such indebtedness and the subsequent
repayments of principal are reported as components of financing activities.
Cash inflows of $997,888 in 1996, resulted from leveraging a portion of the
Trust's equipment portfolio with third-party lenders. Each note payable is
recourse only to the specific equipment financed and to the minimum rental
payments contracted to be received during the debt amortization period (which
period generally coincides with the lease rental term). As rental payments
are collected, a portion or all of the rental payment is used to repay the

AFG INVEST TRUST B

FORM 10-Q

PART I. FINANCIAL INFORMATION

associated indebtedness. In future periods, the amount of cash used to repay
debt obligations will decline as the principal balance of notes payable is
reduced through the collection and application of rents. However, the Trust
has a balloon payment obligation of $282,421 at the expiration of the primary
lease term related to the Reno Aircraft.

Cash distributions to the Managing Trustee, the Special Beneficiary and
the Beneficiaries are declared and generally paid within 45 days following
the end of each calendar month. The payment of such distributions is
presented as a component of financing activities. For the three months ended
March 31, 1997, the Trust declared total cash distributions of Distributable
Cash From Operations and Distributable Cash From Sales and Refinancings of
$300,297. In accordance with the Trust Agreement, the Beneficiaries were
allocated 90.75% of these distributions, or $272,520; the Special Beneficiary
was allocated 8.25%, or $24,774; and the Managing Trustee was allocated 1%,
or $3,003.

For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each have accumulated a capital deficit at March 31, 1997. This
is the result of aggregate cash distributions to these Participants being in
excess of their aggregate capital contributions ($1,000 each) and their
respective allocations of financial statement net income or loss. Ultimately,
the existence of a capital deficit for the Managing Trustee or the Special
Beneficiary for financial reporting purposes is not indicative of any further
capital obligations to the Trust by either the Managing Trustee or the
Special Beneficiary. However, for income tax purposes, the Trust Agreement
requires that income be allocated first to those Participants having negative
tax capital account balances so as to eliminate any such balances. In
accordance with the Trust Agreement, upon the dissolution of the Trust, the
Managing Trustee will be required to contribute to the Trust an amount equal
to any negative balance which may exist in the Managing Trustee's tax capital
account. No such requirement exists with respect to the Special Beneficiary.
At December 31, 1996, the Managing Trustee had a positive tax capital account
balance.

At March 31, 1997, the Trust had aggregate future minimum lease payments
of $6,300,854 from contractual lease agreements (see Note 3 to the financial
statements), of which $3,915,823 will be used to amortize the principal
balance of notes payable (see Note 6 to the financial statements). Additional
cash inflows will be realized from future remarketing activities, such as
lease renewals and equipment sales, the timing and extent of which cannot be
predicted with certainty. This is because the timing and extent of equipment
sales is often dependent upon the needs and interests of the existing
lessees. Some lessees may choose to renew their lease contracts, while others
may elect to return the equipment. In the latter instances, the equipment
could be re-leased to another lessee or sold to a third party. Accordingly,
as the Trust matures and a greater level of its equipment assets become
available for remarketing, the cash flows of the Trust will become less
predictable. In addition, the Trust will have cash outflows to satisfy
interest on indebtedness and to pay management fees and operating expenses.
Ultimately, the Trust is expected to meet its future disbursement obligations
and to distribute any excess of cash inflows over cash outflows to the
Participants in accordance with the Trust Agreement. However, several
factors, including month-to-month lease extensions, lessee defaults,
equipment casualty events, and early lease terminations could alter the
Trust's anticipated cash flows as described herein and in the accompanying
financial statements and result in fluctuations to the Trust's periodic cash
distribution payments.

Cash distributions paid to the Participants consist of both a return of
and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Trust and will be
dependent upon the collection of all future contracted rents, the generation
of renewal and/or re-lease rents, and the residual value realized for each
asset at its disposal date. Future market conditions, technological changes,
the ability of EFG to manage and remarket the assets, and many other events
and circumstances, could enhance or detract from individual asset yields and
the collective performance of the Trust's equipment portfolio.

AFG INVEST TRUST B

FORM 10-Q

PART I. FINANCIAL INFORMATION

It is the intention of the Managing Trustee to maintain a cash
distribution level that is consistent with the operating cash flows of the
Trust and to optimize the long-term value of the Trust. A distribution level
that is higher than the Trust's operating cash flows could compromise the
Trust's working capital position, as well as its ability to refurbish or
upgrade equipment in response to lessee requirements or other market
circumstances. Accordingly, in order to better align monthly cash
distributions with the Trust's operating cash flows, the Managing Trustee
reduced the level of monthly cash distributions from an annualized rate of
$2.52 per Beneficiary Interest (the rate established and paid from the
Trust's inception through September 1995) to an annualized rate of $1.26 per
Beneficiary Interest commencing in October 1995. In October 1996, the
Managing Trustee increased the annualized distribution rate to $1.64 per
Beneficiary Interest and expects that the Trust will be able to sustain this
distribution rate throughout 1997. However, the nature of the Trust's
principal cash flows gradually will shift from rental receipts to equipment
sale proceeds as the Trust matures. As this occurs, the Trust's cash flows
will become more volatile in that certain of the Trust's equipment leases
will be renewed and certain of its assets will be sold. In some cases, the
Trust may be required to expend funds to refurbish or otherwise improve the
equipment being remarketed in order to make it more desirable to a potential
lessee or purchaser. The Trust's Advisor, EFG, and the Managing Trustee will
attempt to monitor and manage these events to maximize the residual value of
the Trust's equipment and will consider these factors, in addition to the
collection of contractual rents, the retirement of scheduled indebtedness and
the Trust's future working capital and equipment requirements, in
establishing future cash distribution rates. Ultimately, the Participants
should expect that cash distribution rates will fluctuate over the long term
as a result of future remarketing activities.

AFG INVEST TRUST B

FORM 10-Q

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
Response:

Refer to Note 7 to the financial statements herein.

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(a). Exhibits
Response: None

Item 6(b). Reports on Form 8-K
Response: None

SIGNATURE PAGE

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 B

By: AFG ASIT Corporation, a Massachusetts
corporation and the Managing Trustee of
the Registrant.

By: /s/ Michael J. Butterfield
-----------------------------------------------------
Michael J. Butterfield
Treasurer AFG ASIT Corporation
(Duly Authorized Officer and
Principal Accounting Officer)

Date: May 15, 1997
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By: /s/ Gary Romano
-----------------------------------------------------
Gary M. Romano
Clerk of AFG ASIT Corporation
(Duly Authorized Officer and
Principal Financial Officer)

Date: May 15, 1997
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