UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
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OR
[v] 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
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(Exact name of registrant as specified in its charter)
Delaware 04-3157232
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88 Broad Street, Sixth Floor, Boston, MA 02110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
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Securities registered pursuant to Section 12(b) of the Act NONE
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Title of each class Name of each
exchange on which
registered
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Securities registered pursuant to Section 12(g) of the Act:
2,011,014 Class A Trust Beneficiary Interests
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained herein,
to the best of registrant's knowledge, in definite proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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, 2000 (Part I and II)
AFG Investment Trust C
FORM 10-K
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Trust's Securities and Related Security
Holder Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 8. Financial Statements and Supplementary Data 8
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 8
PART III
Item 10. Directors and Executive Officers of the Trust 9
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners and Management 11
Item 13. Certain Relationships and Related Transactions 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 14-15
2
PART I
Item 1. Business.
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(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" or the "Advisor"), and $100 from the Initial Beneficiary, AFG Assignor
Corporation, a wholly-owned affiliate of EFG. 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 a wholly owned subsidiary of Semele
Group Inc. ("Semele"), 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. 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 equipment 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. Except with respect to interested transactions, Class A
Interests and Class B Interests have identical voting rights and, therefore,
Equis II Corporation generally has control over the Trust on all matters on
which the Beneficiaries may vote. With respect to interested transactions,
holders of Class B Interests which are the Managing Trustee or any of its
affiliates must vote their interests as a majority of the Class A Interests have
been voted. Equis II Corporation is a wholly owned subsidiary of Semele. 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
The Trust is engaged in two industry segments: equipment leasing and real
estate ownership, development and management. Historically, the Trust has
acquired capital equipment and leased 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. With the consent of the Beneficiaries in 1998, the Trust
Agreement was modified to permit the Trust to invest in assets other than
equipment. During 1999 and 2000, the Trust has made real estate acquistions that
the Managing Trustee believes have the potential to enhance the Trust's overall
economic performance.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" incorporated herein by reference to the 2000 Annual Report.
(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. Information concerning
the acquisition of the equipment and its associated leases is included 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 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
3
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. In addition, the Managing Trustee is
compensated for services provided related to the Trust's non-equipment
investment other than cash. See 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
credit quality 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.
Another risk is that the credit quality of the lease may deteriorate after a
lease is made. 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, many of which have greater resources, 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. 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. In addition, a significant portion of the Trust's
equipment portfolio consists of used passenger jet aircraft. Aircraft condition,
age, passenger capacity, distance capability, fuel efficiency, and other factors
influence market demand and market values for passenger jet aircraft.
The Trust has an interest in an aircraft which, based on equipment cost,
accounts for approximately 58% of the Trust's equipment portfolio at December
31, 2000. This aircraft currently operates in international markets. All rents
due under the aircraft's lease are denominated in U.S. dollars. However, the
operation of the aircraft in international markets exposes the Trust to certain
political, credit and economic risks. Regulatory requirements of other countries
governing aircraft registration, maintenance, liability of lessors and other
matters may apply. Political instability, changes in national policy,
competitive pressures, fuel shortages, recessions and other political and
economic events adversely affecting world or regional trading markets or a
particular foreign lessee could also create the risk that a foreign lessee would
be unable to perform its obligations to the Trust. The recognition in foreign
courts of judgments obtained in United States courts may be difficult or
impossible to obtain and foreign procedural rules may otherwise delay such
recognition. It may be difficult for the Trust to obtain possession of an
aircraft used outside the United States in the event or default by the lessee or
to enforce its rights under the related lease. Moreover, foreign jurisdictions
may confiscate or expropriate aircraft without paying adequate compensation.
Notwithstanding the foregoing, the ultimate realization of residual value for
any aircraft is dependent upon many factors, including EFG's ability to sell and
re-lease the aircraft. Changes in market conditions, industry trends,
technological advances, and other events could converge to enhance or detract
from asset values at any given time. Accordingly, EFG will attempt to monitor
changes in the airline industry in order to identify opportunities which may be
advantageous to the Trust and which will maximize total cash returns for each
aircraft.
The Trust has a 50.6% ownership interest in EFG/Kettle Development LLC
("Kettle Valley"). Kettle Valley is a joint venture among the Trust and an
affiliated trust, formed for the purpose of acquiring a 49.9% indirect ownership
interest in a real estate development in Kelowna, British Columbia in Canada.
The real estate development consists of approximately 280 acres of land under
development. The project is zoned for 1,000 residential units in addition to
commercial space. To date, 95 residential units have been constructed and 4 are
under construction, all of which have been sold. An unaffiliated third party has
retained the remaining 50.1% indirect ownership interest in the development. AFG
ASIT Corporation manages Kettle Valley and the development is managed by a
Canadian affiliate of EFG.
The Trust also has an ownership interest in EFG Kirkwood. EFG Kirkwood is a
joint venture among the Trust, certain affiliated Trusts and Semele and is
managed by AFG ASIT Corporation. EFG Kirkwood is a member in two joint ventures,
Mountain Resort Holdings LLC ("Mountain Resort") and Mountain Springs Resort LLC
("Mountain Springs"). See Note 5 to the financial statements included in Item
14, herein.
4
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 the Purgatory Ski resort in Durango,
Colorado.
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 involvement in real estate development also introduces financials
risks, 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.
Ski 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 effect 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 Investment Company Act of 1940 (the "Act") places restrictions on the
capital structure and business activities of companies registered thereunder.
The Trust has active business operations in the financial services industry,
primarily equipment leasing, and in the real estate industry through its
interests in EFG Kirkwood and Kettle Valley. The Trust does not intend to engage
in investment activities in a manner or to an extent that would require the
Trust to register as an investment company under the Act. However, it is
possible that the Trust may unintentionally engage in an activity or activities
that may be construed to fall within the scope of the Act. If the Trust was
determined to be an investment company, its business would be adversely
affected. The Managing Trustee is engaged in discussions with the staff of the
Securities and Exchange Commission regarding whether or not the Trust may be an
inadvertent investment company by virtue of its recent acquisition activities.
If necessary, the Trust intends to avoid being deemed an investment company by
disposing of or acquiring certain assets that it might not otherwise dispose of
or acquire.
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 2000, 1999 and 1998 is
incorporated herein by reference to Note 2 to the financial statements in Item
14. 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 Closing. In the 1998 amendment to the Trust Agreement,
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
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
5
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 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.
In December 2000, the Trust and three affiliated Trusts (collectively, the
"Trusts") formed MILPI Holdings, LLC ("MILPI"), which formed MILPI Acquisition
Corp. ("MILPI Acquisition"), a wholly owned subsidiary of MILPI. The Trusts
collectively paid $1.2 million for their membership interests in MILPI and MILPI
purchased the common stock of MILPI Acquisition for an aggregate purchase price
of $1.2 million. MILPI Acquisition entered into a definitive agreement (the
"Agreement") with PLM International, Inc. ("PLM"), an equipment leasing and
asset management company, for the purpose of acquiring up to 100% of the
outstanding common stock of PLM, for an approximate purchase price of up to $27
million. In connection with the acquisition, on December 29, 2000, MILPI
Acquisition commenced a tender offer to purchase any and all of PLM's
outstanding common stock.
Pursuant to the cash tender offer, MILPI Acquisition acquired 83% of the PLM
common stock in February 2001 for a total purchase price of approximately $21.7
million. Under the terms of the Agreement, with the approval of the holders of
50.1% of the outstanding common stock of PLM, MILPI Acquisition will merge into
PLM, with PLM being the surviving entity. PLM filed a proxy statement with the
Securities and Exchange Commission (the "SEC") on February 9, 2001 for a special
meeting of its shareholders to vote on the merger proposal. Because MILPI
Acquisition owns 83% of the PLM common stock, its vote alone would be sufficient
to assure the approval of the merger proposal at the special meeting and MILPI
has agreed to vote all of its shares in favor of the merger proposal. Once the
merger is approved, the Trusts would then jointly own 100% of the outstanding
common stock of PLM through their 100% interest in MILPI. However, completion of
the SEC staff's review of the proxy statement for the approval of the merger is
dependent in part on the satisfactory resolution of the Trust's discussions with
the staff regarding its possible status as an inadvertent investment company. If
the merger is approved, the Trusts may be required to provide an additional $4.7
million to acquire the remaining 17% of PLM's outstanding common stock.
The Trust has a 34% membership interest in MILPI and its share of the
aggregate membership interests in MILPI at December 31, 2000 was $408,000. Equis
II Corporation has voting control of the Trusts and owns the Managing Trustee of
the Trusts. Semele owns Equis II Corporation. Mr. Engle and Mr. Coyne are
officers and directors of, and own significant stock in, Semele. Mr. Engle and
Mr. Coyne are officers and directors of MILPI Acquisition.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
Not applicable.
Item 2. Properties.
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Incorporated herein by reference to Note 3 to the financial statements
included in Item 14.
Item 3. Legal Proceedings.
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Incorporated herein by reference to Note 9 to the financial statements
included in Item 14.
Item 4. Submission of Matters to a Vote of Security Holders.
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None.
6
PART II
Item 5. Market for the Trust's Securities and Related Security Holder Matters.
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(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, 2000, there were 1,948 record holders (1,939 of Class A
Interests and 9 of Class B Interests) in the Trust.
(c) Dividend History and Restrictions
Historically, cash distributions had 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.
After the amendment of the Trust Agreement in 1998, 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, in 1999,
the Trust declared a special cash distribution to the Trust Beneficiaries
totaling $15,200,000, which was paid in January 2000.
After the special distribution in January 2000, the Trust adopted a new
distribution policy and suspended the payment of regular monthly cash
distributions. It is currently expected that, the Managing Trustee will not
reinstate cash distributions until expiration of the Trust's reinvestment period
in December 2002; 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.
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 in
January 2000 in conjunction with the special cash distribution paid on that
date.
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
7
distributions paid to the Class B Beneficiaries as a return of their original
capital contributions (on a per Class B 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.
In any given year, it is possible that Beneficiaries will be allocated
taxable income in excess of distributed cash. This discrepancy between tax
obligations and cash distributions may or may not continue in the future, and
cash may or may not be available for distribution to the Beneficiaries adequate
to cover any tax obligation. The Trust Agreement requires that sufficient
distributions be made to enable the Beneficiaries to pay any state and federal
income taxes arising from any sale or refinancing transactions, subject to
certain limitations.
No distributions were declared for the year ended December 31, 2000.
Distributions declared in 1999 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
=============== =============== =============== ===============
Distributions payable were $15,200,000 at December 31, 1999 and paid in
January 2000.
Item 6. Selected Financial Data.
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Incorporated herein by reference to the section entitled "Selected Financial
Data" in the 2000 Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
2000 Annual Report.
Item 8. Financial Statements and Supplementary Data.
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Incorporated herein by reference to the financial statements and
supplementary data included in the 2000 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
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None.
8
PART III
Item 10. Directors and Executive Officers of the Trust.
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(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, 2001 are as follows:
DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING TRUSTEE (See Item 13)
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Name Title Age Term
- ------------------------------------ --------------------------------------------- ------- ---------------
Geoffrey A. MacDonald Chairman of EFG and President Until a
and a Director of the Managing Trustee 52 successor
is duly
Gary D. Engle President and Chief Executive elected
Officer of EFG and a and
Director of the Managing Trustee 52 qualified
James A. Coyne Executive Vice President of EFG and
Senior Vice President of the Managing
Trustee 41
Michael J. Butterfield Executive Vice President and Chief
Operating Officer of EFG and
Treasurer of the Managing Trustee 41
Gail D. Ofgant Senior Vice President, Lease Operations
of EFG and Senior Vice President of
the Managing Trustee 35
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Directors or
Executive Officers.
9
(e) Business Experience
Mr. MacDonald, age 52, is Chairman of EFG and has been President and a
Director of the Managing Trustee since 1991. Mr. McDonald was a co-founder of
EFG's predecessor, American Finance Group, which was established in 1980, and
President of American Finance Group Securities Corporation. Prior to co-founding
American Finance Group, Mr. MacDonald held various positions in the equipment
leasing industry and the ethical pharmaceutical industry with Eli Lilly &
Company. Mr. MacDonald holds an M.B.A. from Boston College and a B.A. degree
from the University of Massachusetts (Amherst).
Mr. Engle, age 52, is President and Chief Executive Officer of EFG, sole
shareholder and Director of its general partner, Equis Corporation, and a Vice
President and Director of several of EFG's subsidiaries and affiliates. Mr.
Engle has been a Director of the Managing Trustee since 1991 and is President of
AFG Realty Corporation. Mr. Engle is also Chairman and Chief Executive Officer
of Semele Group Inc. ("Semele") and is President and a Director of Equis II
Corporation. Mr. Engle controls the general partners of Atlantic Acquisition
Limited Partnership ("AALP") and Old North Capital Limited Partnership ("ONC").
Mr. Engle joined EFG in 1990 as an Executive Vice President and acquired control
of EFG and its subsidiaries in December 1994. Mr. Engle co-founded Cobb Partners
Development, Inc., a real estate and mortgage banking company, where he was a
principal from 1987 to 1989. From 1980 to 1987, Mr. Engle was Senior Vice
President and Chief Financial Officer of Arvida Disney Company, a large-scale
community development organization owned by Walt Disney Company. Prior to 1980,
Mr. Engle served in various management consulting and institutional brokerage
capacities. Mr. Engle has an M.B.A. degree from Harvard University and a B.S.
degree from the University of Massachusetts (Amherst).
Mr. Coyne, age 41, is Executive Vice President of EFG, became Vice President
of the Managing Trustee in 1997 and has been Senior Vice President of the
Managing Trustee since 1998. Mr. Coyne is President and Chief Operating Officer
of Semele and President, and is Executive Vice President /Capital Markets of
Equis Corporation, the general partner of EFG. He is also a Director and
President of Equis II Corporation. Mr. Coyne joined EFG in 1989 and remained
with the company until May 1993 when he resigned to join the Raymond Company, a
private investment firm, where he was responsible for financing corporate and
real estate acquisitions. Mr. Coyne remained with the Raymond Company until
November 1994 when he re-joined EFG. From 1985 to 1989, Mr. Coyne was employed
by Ernst & Whinney (now known as Ernst & Young LLP). Mr. Coyne holds a Masters
degree in accounting from Case Western Reserve University and a B.S. in Business
Administration from John Carroll University and is a Certified Public
Accountant.
Mr. Butterfield, age 41, is Executive Vice President and Chief Operating
Officer of EFG and has been Treasurer of the Managing Trustee since 1996. Mr.
Butterfield also serves as Treasurer of various subsidiaries and affiliates of
EFG. Mr. Butterfield is also Chief Financial Officer of Semele and Vice
President, Finance. Mr. Butterfield joined EFG in June 1992 and became a Vice
President in 1996 and Executive Vice President and Chief Operating Officer in
2000. Prior to joining EFG, Mr. Butterfield was an audit manager with Ernst &
Young LLP, which he joined in 1987. Mr. Butterfield was also 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 C.P.A. requirements in the United States. Mr. Butterfield holds a Bachelor
of Commerce degree from the University of Otago, Dunedin, New Zealand.
Ms. Ofgant, age 35, is Senior Vice President, Lease Operations of EFG and
became Vice President of the Managing Trustee in 1997. Ms. Ofgant is also Senior
Vice President of certain of EFG's affiliates, including Senior Vice President
of the Managing Trustee since 1998. Ms. Ofgant joined EFG in July 1989 and held
various positions with the company before becoming Senior Vice President in
1998. From 1987 to 1989, Ms. Ofgant was employed by Security Pacific National
Trust Company. Ms. Ofgant holds a B.S. degree from Providence College.
10
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
Not applicable.
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) Stock Options and Stock Appreciation Rights.
Not applicable.
(e) Long-Term Incentive Plan Awards Table.
Not applicable.
(f) Defined Benefit or Actuarial Plan Disclosure.
Not applicable.
(g) Compensation of Directors
None.
(h) 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;
11
2. Termination of the Trust;
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 15, 2001, 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
- ------------------------------- ---------------------------------------- -------------------------- -------------
Class B Beneficiary Equis II Corporation
Interests 88 Broad Street 3,019,220 Interests 99.82%
Boston, MA 02110
Equis II Corporation is a wholly owned subsidiary of Semele. Gary D. Engle is
Chairman and Chief Executive Officer of Semele, President and Chief Executive
Officer of EFG and sole shareholder and Director of EFG's general partner. James
A. Coyne, Executive Vice President of EFG, is Semele's President and Chief
Operating Officer. Mr. Engle and Mr. Coyne are both members of the Board of
Directors of, and own significant stock in, Semele.
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 15,
2000.
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, 2000, 1999 and 1998,
which were paid or accrued by the Trust to EFG or its Affiliates, are as
follows:
2000 1999 1998
---------- ---------- ----------
Acquisition fees...................... $ 15,484 $ 75,281 $ --
Management fees....................... 431,078 513,019 659,939
Administrative charges................ 197,789 192,348 90,744
Reimbursable operating expenses
due to third parties............... 345,574 650,915 702,535
---------- ---------- ----------
Total............. $ 989,925 $1,431,563 $1,453,218
========== ========== ==========
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 the 1998 Amendment to the Trust Agreement, 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 such equipment reinvestment assets are equal to 1% of Asset Base
Price paid by the Trust.
12
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 equipment acquired on or prior to
March 31, 1998. For management services earned in connection with equipment
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. For non-equipment
investments other than cash, the Managing Trustee receives an annualized
management fee of 1% of such assets under management. 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 this fee and the other fees described above
are 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, 2000, the Trust was owed $424,853 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in January 2001.
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 Semele. Gary D. Engle is Chairman and
CEO of Semele.
In 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 then Special Beneficiary, EFG, purchased
3,019,220 Class B Interests, generating $15,096,100 of such aggregate capital
contributions.
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. See Item 1
(a) of this report regarding certain voting restrictions related to the Class B
Interests. Equis II Corporation is owned by Semele. Gary D. Engle is Chairman
and Chief Executive Officer of Semele. James A. Coyne is Semele's President and
Chief Operating Officer. Mr. Engle and Mr. Coyne are both members of the Board
of Directors of, and own significant stock in, Semele.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Trust
None.
(d) Transactions with Promoters
Not applicable.
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, 2000 and 1999................................*
Statement of Operations
for the years ended December 31, 2000, 1999 and 1998.........*
Statement of Changes in Participants' Capital
for the years ended December 31, 2000, 1999 and 1998.........*
Statement of Cash Flows
for the years ended December 31, 2000, 1999 and 1998.........*
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
- ---------
2 Agreement and Plan of Merger, dated as of December 22, 2000, between
MILPI Acquisition Corp. and PLM International, Inc. was filed in the
Registrant's Form 8-K dated December 28, 2000 as Exhibit 2.1 and is
incorporated by reference.
4 Second Amended and Restated Declaration of Trust was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1998 as Exhibit 4 and is incorporated herein by reference.
4.1 Amendment No. 2 to Second Amended and Restated Declaration of Trust
is filed in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 and is included herein.
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) was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1999 as Exhibit 10.1 and is incorporated herein by reference.
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 was
filed in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999 as Exhibit 10.2 and is incorporated herein
by reference.
* Incorporated herein by reference to the appropriate portion of the 2000 Annual
Report to security holders for the year ended December 31, 2000 (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) was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1999 as Exhibit 10.3 and is incorporated herein by reference.
10.4 Amended and Restated Guarantee Agreement dated December 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, 2000 and is included herein.
13 The 2000 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. was filed in
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999 as Exhibit 99 (a) and is incorporated herein by
reference.
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.
99(c) Lease agreement with Scandinavian Airlines System Amendment No. 3 is
filed in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 and is included herein.
99(d) Operating Agreement of MILPI Holdings, LLC dated as of December 13,
2000 by and among the persons identified on Schedule A thereto was
filed in the Registrant's Amendment No. 1 as Schedule TO dated
January 29, 2001 ("Schedule TO/A No. 1") as Exhibit (b)(1) and is
incorporated herein by reference.
99(e) Subscription Agreement dated as of December 15, 2000 by and among
MILPI Holdings, LLC and MILPI Acquisition Corp. was filed in the
Registrant's Schedule TO/A No. 1 as Exhibit (b)(2) and is
incorporated herein by reference.
(b) Reports on Form 8-K
Form 8-K dated December 22, 2000 for the definitive agreement
entered into by MILPI Acquisition Corp., an indirect subsidiary of
the registrant, to acquire PLM International, Inc. for an
approximate cash purchase price of $27 million.
Form 8-K dated December 22, 2000 to include the amended and restated
voting and tender agreement entered into by MILPI Acquisition Corp.,
an indirect subsidiary of the registrant, to acquire PLM
International, Inc. for an approximate cash purchase price of $27
million.
Form 8-K dated February 7, 2001 for the consummation of the tender
offer by MILPI Acquisition Corp., an indirect subsidiary of the
registrant, of PLM International, Inc.
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 of EFG and President President and Chief Executive
and a Director of the Managing Trustee Officer of EFG and a Director
of the Managing Trustee
(Principal Executive Officer)
Date: April 17, 2001 Date: April 17, 2001
-------------------------------------- --------------------------
By: /s/ Michael J. Butterfield
----------------------------------------
Michael J. Butterfield
Executive Vice President and
Chief Operating Officer of EFG
and Treasurer of the Managing Trustee
(Principal Financial and Accounting Officer)
Date: April 17, 2001
--------------------------------------
16
Exhibit Page
- ------- ----
4.1 Amendment No. 2 to Second Amended and Restated Declaration
of Trust.
10.4 Amended and Restated Guarantee Agreement dated December 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).
13 The 2000 Annual Report.
23 Consent of Independent Auditors.
99(c) Lease agreement with Scandinavian Airlines System Amendment
No. 3