----

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

**Form 10-QSB**

 
| **ý** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

**For thequarterly period ended June 30, 2001**

**OR**
| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

**For thetransition period from            to            .**

**CommissionFile Number 0-16886**

| **Semele Group Inc.**                           |
|-------------------------------------------------|
| ****                                            |
| (Name of Small  Business Issuer in its charter) |

 

| **Delaware**                               | **36-3465422**                        |
|--------------------------------------------|---------------------------------------|
| (State or other  jurisdiction of           | (I.R.S. Employer  Identification No.) |
| incorporation or  organization)            |                                  |
|                                       |                                  |
| **200 Nyala Farms, Westport, Connecticut** | **06880**                             |
| (Address of principal  executive offices)  | (Zip Code)                            |

Issuer'stelephone number, including area code : (203) 341-0555

Checkwhether the Issuer (1) filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the past 12 months (or for such shorter periodthat the Issuer was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.   YES ý.   NO o.

Sharesof common stock outstanding as of August 14, 2001:  2,078,718

TransitionalSmall Business Disclosure Format:   YES o.   NO ý.

Certain statements in this quarterlyreport that are not historical fact constitute "forward-lookingstatements" within the meaning of the Private Securities Litigation ReformAct of 1995.  Without limiting theforegoing, words such as "anticipates," "expects,""intends," "plans," and similar expressions are intended toidentify forward-looking statements. These statements are subject to a numberof risks and uncertainties including the Company's ability to successfullyimplement a growth-oriented business plan. Actual results could differ materially from those described in anyforward-looking statements.

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INDEX

| **PART I.  FINANCIAL INFORMATION:**                                                                   |                                                                                        |
|------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|                                                                                                       |                                                                                        |
| Item 1.  Financial Statements                                                                         |                                                                                        |
|                                                                                                       |                                                                                        |
|                                                                                                       | Consolidated balance sheets  at June 30, 2001 and December 31, 2000                         |   |
|                                                                                                       |                                                                                        |   |
|                                                                                                       | Consolidated  statements of operations for the six months ended June 30, 2001 and 2000      |   |
|                                                                                                       |                                                                                        |   |
|                                                                                                       | Consolidated  statements of operations for the three months ended June 30, 2001 and 2000    |   |
|                                                                                                       |                                                                                        |   |
|                                                                                                       | Consolidated  statement of stockholders’ equity for the six months ended June 30, 2001 |   |
|                                                                                                       |                                                                                        |   |
|                                                                                                       | Consolidated  statements of cash flows for the six months ended June 30, 2001 and 2000      |   |
|                                                                                                       |                                                                                        |   |
|                                                                                                       | Notes  to the Consolidated Financial Statements                                             |   |
|                                                                                                       |                                                                                        |   |
| Item  2.  Management’s Discussion and  Analysis of Financial Condition and Results of Operations |                                                                                        |
|                                                                                                       |                                                                                        |
| **PART II.  OTHER INFORMATION:**                                                                      |                                                                                        |
|                                                                                                       |                                                                                        |
| Items 1 – 6                                                                                           |                                                                                        |   |
|                                                                                                            |                                                                                             |  |  |

 

**PART I - FINANCIAL INFORMATION**

**Item 1.**  **Financial Statements**

**SEMELE GROUP INC.Consolidated Balance SheetsJune 30, 2001 and December 31, 2000(Unaudited)**

|                                                                                                                                            | **June  30,** |        | **December  31,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|---------------|-------------|-------------------|--------|
|                                                                                                                                            | **2001**      |        | **2000**          |   |
|                                                                                                                                            | ****          |        | ****              |   |
| **ASSETS**                                                                                                                                      |          |        |              |   |
| Cash and cash  equivalents (See Note 2 – Consolidated Statements of Cash Flows)                                                            | $             | 16,264,416  |              | $      | 27,830,365 |   |
| Restricted cash                                                                                                                                 | 420,412       |        | —            |   |
| Rents and other  receivables                                                                                                                    | 1,294,611     |        | 1,231,871         |   |
| Due from affiliates                                                                                                                             | 5,292,792     |        | 4,718,511         |   |
| Equipment held for  lease, net of accumulated depreciation of $47,884,580 and $53,615,656 at June  30, 2001 and December 31, 2000, respectively | 68,653,370    |        | 73,577,695        |   |
| Real estate held for  development                                                                                                               | 12,250,914    |        | 11,388,698        |   |
| Land                                                                                                                                            | 1,929,000     |        | 1,929,000         |   |
| Buildings, net of  accumulated depreciation of $1,707,580 and $1,530,263 at June 30, 2001 and  December 31, 2000, respectively                  | 10,225,417    |        | 10,402,734        |   |
| Ownership interests in  affiliated companies                                                                                                    | 44,319,851    |        | 21,685,891        |   |
| Other assets                                                                                                                                    | 4,896,361     |        | 3,070,215         |   |
| Goodwill, net of  accumulated amortization of $96,714 at June 30, 2001                                                                          | 1,257,286     |        | —            |   |
|                                                                                                                                            |               |        |                   |   |
| Total assets                                                                                                                                    | $             | 166,804,430 |              | $      | 155,834,980 |   |
|                                                                                                                                            |               |        |                   |   |
|                                                                                                                                            |          |        |              |   |
| **LIABILITIES**                                                                                                                                 |          |        |              |   |
| Accounts payable and  accrued expenses                                                                                                          | $             | 9,288,512   |              | $      | 2,799,086 |   |
| Distributions declared  and payable                                                                                                             | 52,063        |        | 52,063            |   |
| Deferred rental income                                                                                                                          | 77,509        |        | 77,771            |   |
| Other liabilities                                                                                                                               | 3,013,206     |        | 3,013,206         |   |
| Indebtedness                                                                                                                                    | 56,083,188    |        | 60,220,752        |   |
| Indebtedness and other  obligations to affiliates                                                                                               | 38,268,200    |        | 36,609,567        |   |
| Deferred income taxes                                                                                                                           | 1,366,000     |        | —            |   |
|                                                                                                                                            |               |        |                   |   |
| Total liabilities                                                                                                                               | 108,148,678   |        | 102,772,445       |   |
|                                                                                                                                            |               |        |                   |   |
|                                                                                                                                            |          |        |              |   |
| Minority interests                                                                                                                              | 71,086,321    |        | 66,398,578        |   |
|                                                                                                                                            |               |        |                   |   |
|                                                                                                                                            |          |        |              |   |
| **STOCKHOLDERS’ DEFICIT**                                                                                                                  |          |        |              |   |
| Common stock, $0.10  par value; 5,000,000 shares authorized; 2,916,647 shares issued at June 30,  2001 and December 31, 2000                    | 291,665       |        | 291,665           |   |
| Additional paid in  capital                                                                                                                     | 144,680,487   |        | 144,680,487       |   |
| Accumulated deficit                                                                                                                             | (143,169,715  | )           | (144,075,189      | )      |
| Deferred compensation,  164,279 shares at June 30, 2001 and December 31, 2000                                                                   | (816,767      | )           | (816,767          | )      |
| Treasury stock at  cost, 837,929 shares at June 30, 2001 and December 31, 2000                                                                  | (13,416,239   | )           | (13,416,239       | )      |
|                                                                                                                                            |               |        |                   |   |
| Total stockholders’  deficit                                                                                                               | (12,430,569   | )           | (13,336,043       | )      |
|                                                                                                                                            |               |        |                   |   |
|                                                                                                                                            |          |        |              |   |
| Total liabilities,  minority interests and stockholders’ deficit                                                                           | $             | 166,804,430 |              | $      | 155,834,980 |   |
|                                                                                                                                            |               |        |                   |   |
|                                                                                                                                            |          |        |              |   |
| Book value per share,  2,078,718 shares outstanding at both June 30, 2001 and December 31, 2000                                                 | $             | (5.98       | )                 | $      | (6.42 | ) |
|                                                                                                                                            |               |        |                   |   |

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

**SEMELE GROUP INC.****ConsolidatedStatements of OperationsFor the Six Months Ended June 30, 2001 and 2000(Unaudited)**

|                                                                                                                                                                                          | **2001**   |      | **2000**   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------|------------|--------|
|                                                                                                                                                                                          | ****       |      | ****       |   |
| **REVENUES**                                                                                                                                                                                  |       |      |       |   |
| Rental income                                                                                                                                                                                 | $          | 7,716,506 |       | $      | 9,789,364 |   |
| Fee income                                                                                                                                                                                    | 3,355,000  |      | —     |   |
| Interest income                                                                                                                                                                               | 576,911    |      | 993,197    |   |
| Interest income from  affiliates                                                                                                                                                              | 130,870    |      | 118,046    |   |
| Gain on sales of  marketable securities                                                                                                                                                       | —     |      | 215,198    |   |
| Gain on sales of  equipment                                                                                                                                                                   | 631,290    |      | 1,086,238  |   |
| Losses from real  estate held for development                                                                                                                                                 | —     |      | (141,231   | )      |
| Equity income in affiliated  companies                                                                                                                                                        | 1,857,960  |      | —     |   |
| Other income                                                                                                                                                                                  | 969,448    |      | 713,631    |   |
|                                                                                                                                                                                          |            |      |            |   |
| Total revenues                                                                                                                                                                                | 15,237,985 |      | 12,774,443 |   |
|                                                                                                                                                                                          |            |      |            |   |
|                                                                                                                                                                                          |       |      |       |   |
| **EXPENSES**                                                                                                                                                                                  |       |      |       |   |
| Depreciation expense                                                                                                                                                                          | 5,230,521  |      | 5,638,630  |   |
| Amortization expense                                                                                                                                                                          | 193,920    |      | 93,803     |   |
| Interest on indebtedness                                                                                                                                                                      | 2,613,375  |      | 3,002,484  |   |
| Interest on  indebtedness and other obligations to affiliates                                                                                                                                 | 870,477    |      | 1,496,636  |   |
| General and  administrative expenses                                                                                                                                                          | 4,308,705  |      | 1,441,272  |   |
| Fees and expenses to  affiliates                                                                                                                                                              | 380,306    |      | 509,433    |   |
|                                                                                                                                                                                          |            |      |            |   |
|                                                                                                                                                                                          |       |      |       |   |
| Total expenses                                                                                                                                                                                | 13,597,304 |      | 12,182,258 |   |
|                                                                                                                                                                                          |            |      |            |   |
|                                                                                                                                                                                          |       |      |       |   |
| Income before income  taxes and minority interest                                                                                                                                             | 1,640,681  |      | 592,185    |   |
|                                                                                                                                                                                          |       |      |       |   |
| Income taxes                                                                                                                                                                                  | 422,000    |      | —     |   |
| Minority interest in  income of consolidated subsidiaries                                                                                                                                     | 313,207    |      | 399,184    |   |
|                                                                                                                                                                                          |            |      |            |   |
|                                                                                                                                                                                          |       |      |       |   |
| Net income                                                                                                                                                                                    | $          | 905,474   |       | $      | 193,001 |   |
|                                                                                                                                                                                          |            |      |            |   |
| Net income per share  of common stock – basic and fully diluted (based on the  weighted average number of shares  outstanding of  2,078,718 and  1,402,105, respectively) | $          | 0.44      |       | $      | 0.14 |   |
|                                                                                                                                                                                          |            |      |            |   |

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

**SEMELE GROUP INC.Consolidated Statements ofOperationsFor the Three Months Ended June 30, 2001 and 2000(Unaudited)**

|                                                                                                                                                                                          | **2001**   |      | **2000**  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------|-----------|--------|
|                                                                                                                                                                                          | ****       |      | ****      |   |
| **REVENUES**                                                                                                                                                                                  |       |      |      |   |
| Rental income                                                                                                                                                                                 | $          | 4,023,557 |      | $      | 4,821,318 |   |
| Fee income                                                                                                                                                                                    | 2,136,666  |      | —    |   |
| Interest income                                                                                                                                                                               | 290,499    |      | 474,819   |   |
| Interest income from  affiliates                                                                                                                                                              | 65,435     |      | 65,435    |   |
| Gain on sales of  equipment                                                                                                                                                                   | 32,278     |      | 529,098   |   |
| Losses from real  estate held for development                                                                                                                                                 | —     |      | (19,611   | )      |
| Equity loss in affiliated  companies                                                                                                                                                          | (1,846,113 | )         | —    |   |
| Other income                                                                                                                                                                                  | 697,025    |      | 120,279   |   |
|                                                                                                                                                                                          |            |      |           |   |
|                                                                                                                                                                                          |       |      |      |   |
| Total revenues                                                                                                                                                                                | 5,399,347  |      | 5,991,338 |   |
|                                                                                                                                                                                          |            |      |           |   |
|                                                                                                                                                                                          |       |      |      |   |
| **EXPENSES**                                                                                                                                                                                  |       |      |      |   |
| Depreciation expense                                                                                                                                                                          | 2,661,062  |      | 2,775,151 |   |
| Amortization expense                                                                                                                                                                          | 96,960     |      | 48,604    |   |
| Interest on  indebtedness                                                                                                                                                                     | 1,305,011  |      | 1,454,637 |   |
| Interest on  indebtedness and other obligations to affiliates                                                                                                                                 | 432,905    |      | 681,809   |   |
| General and  administrative expenses                                                                                                                                                          | 1,139,841  |      | 637,026   |   |
| Fees and expenses to  affiliates                                                                                                                                                              | 206,053    |      | 252,817   |   |
|                                                                                                                                                                                          |            |      |           |   |
|                                                                                                                                                                                          |       |      |      |   |
| Total expenses                                                                                                                                                                                | 5,841,832  |      | 5,850,044 |   |
|                                                                                                                                                                                          |            |      |           |   |
|                                                                                                                                                                                          |       |      |      |   |
| Income (loss) before  income taxes and minority interest                                                                                                                                      | (442,485   | )         | 141,294   |   |
|                                                                                                                                                                                          |       |      |      |   |
| Income taxes                                                                                                                                                                                  | 332,000    |      | —    |   |
| Minority interest in  income (loss) of consolidated subsidiaries                                                                                                                              | (1,188,508 | )         | 81,044    |   |
|                                                                                                                                                                                          |            |      |           |   |
|                                                                                                                                                                                          |       |      |      |   |
| Net income                                                                                                                                                                                    | $          | 414,023   |      | $      | 60,250 |   |
|                                                                                                                                                                                          |            |      |           |   |
|                                                                                                                                                                                          |       |      |      |   |
| Net income per share  of common stock – basic and fully diluted (based on the  weighted average number of shares  outstanding of  2,078,718 and  1,608,514, respectively) | $          | 0.20      |      | $      | 0.04 |   |
|                                                                                                                                                                                          |            |      |           |   |

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

**SEMELEGROUP INC.Consolidated Statement ofStockholders’ EquityFor the Six Months Ended June 30, 2001(Unaudited)**

|                                                    | **Common** |       | **Additional**      |       | **Accumulated** |       | **Deferred**     |         | **Treasury** |       |      |       |
|---------------------------------------------------------|------------|------------|---------------------|------------|-----------------|------------|------------------|--------------|--------------|------------|-----------|------------|
|                                                    | **Stock**  |       | **Paid in Capital** |       | **Deficit**     |       | **Compensation** |         | **Stock**    |       | **Total** | ** ** |
|                                                    |            |       |                     |       |                 |       |                  |         |              |       |           |       |
| Stockholder’s equity  (deficit), December 31, 2000 | $          | 291,665    |                | $          | 144,680,487     |       | $                | (144,075,189 | )            | $          | (816,767  | )          | $ | (13,416,239 | ) | $ | (13,336,043 | ) |
|                                                    |       |       |                |       |            |       |             |         |         |       |      |       |
| Net income                                              | —     |       | —              |       | 905,474         |       | —           |         | —       |       | 905,474   |       |
|                                                    | ****       | ** ** | ****                | ** ** | ****            | ** ** | ****             | ** **   | ****         | ** ** | ****      | ** ** |
|                                                    |       |       |                |       |            |       |             |         |         |       |      |       |
| Stockholder’s equity  (deficit), June 30, 2001     | $          | 291,665    |                | $          | 144,680,487     |       | $                | (143,169,715 | )            | $          | (816,767  | )          | $ | (13,416,239 | ) | $ | (12,430,569 | ) |
|                                                    |            |       |                     |       |                 |       |                  |         |              |       |           |       |

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

**SEMELE GROUP INC.Consolidated Statements ofCash FlowsFor the Six Months Ended June 30, 2001 and 2000(Unaudited)**

|                                                                                               | **2001**                                                     |        | **2000**    |        |
|----------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-------------|-------------|-------------|
|                                                                                               | ****                                                         |        | ****        |        |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                             |                                                         |        |        |        |
| Net income                                                                                         | $                                                            | 905,474     |        | $           | 193,001 |   |
| Adjustments to  reconcile net income to net cash provided by (used in)  operating activities: |                                                         |        |        |        |
|                                                                                               | Depreciation and  amortization expense                       | 5,424,441   |        | 5,732,433   |   |
|                                                                                               | Amortization of  goodwill related to PLM investment programs | 1,025,000   |        | --          |   |
|                                                                                               | Deferred income tax                                          | (478,000    | )           | --          |   |
|                                                                                               | Loss on disposition of  assets, net                          | 82,000      |        | --          |   |
|                                                                                               | Equity income from PLM  investment programs                  | (1,208,000  | )           | --          |   |
|                                                                                               | Accretion of bond  discount                                  | --          |        | (11,174     | ) |
|                                                                                               | Gain on sale of  marketable securities                       | --          |        | (215,198    | ) |
|                                                                                               | Gain on sale of  equipment                                   | (631,290    | )           | (1,086,238  | ) |
|                                                                                               | Equity income in  affiliated companies                       | (1,857,960  | )           | —      |   |
|                                                                                               | Minority interests                                           | 324,464     |        | 432,004     |   |
|                                                                                               | Rents and other  receivables                                 | 982,260     |        | 559,368     |   |
|                                                                                               | Other assets                                                 | 1,190,648   |        | (369,824    | ) |
|                                                                                               | Due from affiliates                                          | 632,719     |        | 6,209,030   |   |
|                                                                                               | Accounts payable and  accrued expenses                       | (12,050,574 | )           | (55,058     | ) |
|                                                                                               | Distributions declared  and payable                          | --          |        | (9,374,323  | ) |
|                                                                                               | Deferred rental income                                       | (262        | )           | (497,107    | ) |
|                                                                                               |                                                         |             |        |             |   |
| Net cash (used in)  provided by operating activities                                               | (5,659,080                                                   | )           | 1,516,914   |        |
|                                                                                               |                                                              |        |             |        |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                             |                                                         |        |        |        |
|                                                                                               | Proceeds from  equipment sales                               | 1,174,411   |        | 2,514,011   |   |
|                                                                                               | Proceeds from assets  held for sale                          | 10,250,000  |        | --          |   |
|                                                                                               | Cash distribution from  PLM investment programs              | 1,211,000   |        | --          |   |
|                                                                                               | Purchase of property,  plant and equipment                   | (55,000     | )           | --          |   |
|                                                                                               | Proceeds from sale of  marketable securities                 | --          |        | 536,520     |   |
|                                                                                               | Purchase of PLM, net  of cash acquired                       | (15,901,721 | )           | --          |   |
|                                                                                               | Ownership interests in  affiliated companies                 | --          |        | (1,501,844  | ) |
|                                                                                               | Costs capitalized to  real estate held for development       | (862,216    | )           | (131,758    | ) |
|                                                                                               | Restricted cash                                              | 2,109,588   |        | --          |   |
|                                                                                               |                                                         |             |        |             |   |
| Net cash (used in)  provided by investing activities                                               | (2,073,938                                                   | )           | 1,416,929   |        |
|                                                                                               |                                                              |        |             |        |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                             |                                                         |        |        |        |
|                                                                                               | Redemption of stock  options                                 | (604,000    | )           | --          |   |
|                                                                                               | Proceeds from  indebtedness                                  | 1,884,140   |        | 6,091,738   |   |
|                                                                                               | Principal payments on  indebtedness                          | (6,021,704  | )           | (23,520,553 | ) |
|                                                                                               | Indebtedness and other  obligations to affiliates            | 908,633     |        | (10,933,090 | ) |
|                                                                                               |                                                         |             |        |             |   |
| Net cash used in  financing activities                                                             | (3,832,931                                                   | )           | (28,361,905 | )           |
|                                                                                               |                                                              |        |             |        |
| Net decrease in cash  and cash equivalents                                                         | (11,565,949                                                  | )           | (25,428,062 | )           |
| Cash and cash  equivalents at beginning of period                                                  | 27,830,365                                                   |        | 54,568,088  |        |
|                                                                                               |                                                              |        |             |        |
| Cash and cash  equivalents at end of period                                                        | $                                                            | 16,264,416  |        | $           | 29,140,026 |   |
|                                                                                               |                                                              |        |             |        |
| Supplemental  disclosure of cash flow information:                                                 |                                                         |        |        |        |
|                                                                                               | Cash paid during the  period for interest                    | $           | 2,533,024   |        | $ | 4,417,191 |   |
|                                                                                               |                                                         |             |        |             |   |
|                                                                                               | Cash paid during the  period for income taxes                | $           | 6,301,000   |        | $ | -- |   |
|                                                                                               |                                                         |             |        |             |   |

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

**Notes to the ConsolidatedFinancial Statements****June 30, 2001(Unaudited)**

**NOTE 1 – BASIS OF PRESENTATION**

Theconsolidated financial statements presented herein are prepared in conformitywith generally accepted accounting principles and the instructions forpreparing Form 10-Q under Rule 10-01 of Regulation S-X of the Securities andExchange Commission and are unaudited. Rule 10-01 provides that footnote disclosures that would substantiallyduplicate those contained in the most recent annual report to shareholders maybe omitted from interim financial statements. The accompanying consolidated financial statements have been prepared onthat basis and, therefore, should be read in conjunction with the footnotespresented in the 2000 Annual Report. Except as disclosed herein, there have been no material changes to theinformation presented in the footnotes to the 2000 Annual Report.

In the opinion of management, alladjustments (consisting of normal and recurring adjustments) considerednecessary to present fairly the Company’s consolidated financial position atJune 30, 2001 and December 31, 2000 and its consolidated results of operationsfor each of the three and six month periods ended June 30, 2001 and 2000 havebeen made and are reflected.  Referenceto “Semele” or the “Company” in these financial statements means Semele GroupInc., it subsidiaries and consolidated affiliates. The Company’s consolidatedstatements of operations for the three and six months ended June 30, 2000 andcash flows for the six months ended June 30, 2000 have been restated to reflectthe acquisition of Equis II Corporation.

Certain 2000 amounts have beenreclassified to conform to the 2001 presentation.

USE OF ESTIMATESThe preparation of financial statementsin conformity with accounting principles generally accepted in the UnitedStates requires management to make estimates and assumptions that affect thereported amounts of assets, liabilities, revenues and expenses, and relateddisclosures contained in the financial statements.  Actual results could differ from those estimates and changes insuch estimates could affect amounts reported in future periods and could bematerial.

**NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES**

CONSOLIDATED STATEMENTSOF CASH FLOWSThe Company considers all short-terminvestments with an original maturity of three months or less to be cashequivalents.  Generally, excess cash isinvested in either (i) reverse repurchase agreements with overnight maturitiesat large institutional banks or (ii) domestic money market funds that invest inhigh-quality U.S. dollar denominated securities, including U.S. governmentsecurities.  At June 30, 2001, theCompany and its consolidated affiliates had invested approximately $15.5million in cash equivalents.  Thecomposition of the Company’s consolidated cash position at June 30, 2001 andDecember 31, 2000 is summarized in the table below.  The availability of cash held by the AFG Trusts and AFGInternational to Semele is subject to terms and conditions over the use anddisbursement of cash and other matters contained in the trust and partnershipagreements that govern the AFG Trusts and AFG International.   The Company has voting control over mostmatters concerning these entities, including the declaration, authorization,and amount of cash distributions.

 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **2001**   |       | **2000**  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|-----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | ****       |       | ****      |   |
| Semele Group Inc. and  wholly-owned subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $          | 1,061,926  |      | $      | 1,797,445 |   |
| AFG Investment Trust A                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 567,527    |       | 2,764,972 |   |
| AFG Investment Trust B                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 847,376    |       | 5,126,793 |   |
| AFG Investment Trust C                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 1,458,193  |       | 8,848,816 |   |
| AFG Investment Trust D                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 1,678,056  |       | 9,042,889 |   |
| AFG International  Limited Partnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 288,338    |       | 249,450   |   |
| PLM International,  Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 10,363,000 |       | —    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |            |       |           |   |
|                                                                                               Total | $          | 16,264,416 |      | $      | 27,830,365 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |            |       |           |   |

Approximately $4.4 million of cash withinthe AFG Trusts may be expended to complete the purchase of PLM International,Inc.  (See Note 3 – Acquisitions.)

REVENUE RECOGNITIONThe Company earns rental income from adiversified portfolio of equipment held for lease and from two special-purposecommercial buildings.  Rents are duemonthly, quarterly or semi-annually and no significant amounts are earned basedon factors other than the passage of time. Substantially all of the Company’s leases are triple net, non-cancelableleases and are accounted for as operating leases in accordance with SFAS No.13, “Accounting for Leases.”  Rentsreceived prior to their due dates are deferred.  At June 30, 2001 and December 31, 2000, deferred rental incomewas $77,509 and $77,771, respectively.

GOODWILLGoodwill was recorded in connection with the acquisition of PLM International,Inc. in February 2001. (See Note 3 – Acquisitions.)  The amount of goodwill represents the excess of the purchaseprice and related costs incurred to purchase PLM over the value assigned itsnet tangible assets, including certain identifiable management contracts andpartnership interests of PLM.  Goodwillis being amortized on a straight-line basis over seven years.

**NOTE 3 – ACQUISITIONS**

PLM INTERNATIONAL, INC.On December 22, 2000, an affiliate of the Company, MILPI Acquisition Corp.,entered into an agreement and plan of merger to acquire PLM International,Inc., a San Francisco based equipment leasing and asset managementcompany.  The plan of merger involved atender offer by MILPI Acquisition Corp. to purchase all of the outstandingcommon stock of PLM for cash.

MILPI Acquisition Corp. is a wholly ownedsubsidiary of MILPI Holdings LLC, which was formed by four Delaware businesstrusts (collectively referred to as the AFG Trusts) on December 22, 2000.  The AFG Trusts are consolidated affiliatesof the Company engaged in the equipment leasing and real estatebusinesses.  The AFG Trusts collectivelypaid $1.2 million for their membership interests in MILPI Holdings and MILPIHoldings purchased the common stock of MILPI Acquisition Corp. for an aggregatepurchase price of $1.2 million at December 31, 2000.  MILPI Acquisition Corp. then entered into a definitive agreementwith PLM to acquire up to 100% of the outstanding common stock of PLM, for anapproximate purchase price of up to $27 million.  In connection with the acquisition, on December 29, 2000, MILPIAcquisition Corp. commenced a tender offer to purchase any and all of PLM’soutstanding common stock.

Pursuant to the cash tender offer, MILPIAcquisition Corp. acquired 83% of PLM’s common stock in February 2001 for atotal purchase price of approximately $21.7 million. Under the terms of theagreement, MILPI Acquisition Corp. will merge into PLM, with PLM becoming thesurviving entity, upon the approval of the holders of 50.1% of PLM’soutstanding common stock.  PLM filedpreliminary proxy materials with the Securities and Exchange Commission onFebruary 9, 2001 relating to a special meeting of its shareholders to vote onthe merger proposal.  Because MILPIAcquisition Corp. owns 83% of PLM’s common stock, its vote alone would besufficient to assure the approval of the merger proposal at the specialmeeting, as MILPI Holdings has agreed to vote all of its shares in favor of themerger proposal.  Once the merger isapproved, the AFG Trusts would then jointly own 100% of the outstanding commonstock of PLM through their 100% interest in MILPI Holdings. In connection withits review of the preliminary proxy materials, the staff of the SEC hasinformed the AFG Trusts that own MILPI Acquisition Corp. and that were offerorsin the tender offer, that it believes the trusts may be unregistered investmentcompanies within the meaning of the Investment Company Act of 1940 (the “Act”).The managingtrustee of the trusts is engaged in discussions with the staff regarding thismatter.  The AFG Trusts believe that they are notinvestment companies; however, itis possible that the trusts may have unintentionally engaged in an activity oractivities that may be construed to fall within the scope of the Act.  If necessary, each of the trusts intends toavoid being deemed an investment company by means that may include disposing oracquiring certain assets that it might not otherwise dispose or acquire.  The parties do not intend to schedule thespecial meeting of stockholders of PLM International pending resolution of thisissue.  If themerger is approved, the AFG Trusts may be required to provide an additional$4.4 million to acquire the remaining 17% of PLM’s outstanding commonstock.  Mr. Engle and Mr. Coyne areofficers and directors of MILPI Acquisition Corp.

The Company has accounted for theacquisition of PLM using the purchase method of accounting.  As of June 30, 2001, the allocation of thepurchase price to acquired assets and liabilities is preliminary and subject tofurther assessment.  The following tablesummarizes the pro forma consolidated results of operations of the Company,including PLM, for the six-month period ended June 30, 2001 and the six-monthperiod ended June 30, 2000, assuming the purchase had been effected prior toJanuary 1, 2000.

|                                                    | **For the six months  ended  June 30, 2001** |       | **For the six months  ended  June 30, 2000** |    |
|---------------------------------------------------------|----------------------------------------------|------------|----------------------------------------------|---------|
|                                                    |                                         |       |                                         |    |
| Total revenues                                          | $                                            | 15,237,985 |                                         | $       | 16,623,443 |   |
| Net income (loss) from  continuing operations           | $                                            | 905,474    |                                         | $       | (477,713 | ) |
| Income from  discontinued operations, net of income tax | —                                       |       | $                                            | 496,000 |   |
| Net income                                              | $                                            | 905,474    |                                         | $       | 18,287 |   |
|                                                    |                                         |       |                                         |    |
| *Per share information:*                                |                                         |       |                                         |    |
| Net income (loss) from  continuing operations           | $                                            | 0.44       |                                         | $       | (0.34 | ) |
| Income from  discontinued operations, net of income tax | —                                       |       | $                                            | 0.35    |   |
| Net income                                              | $                                            | 0.44       |                                         | $       | 0.01 |   |

**NOTE 4 – REAL ESTATE HELD FORDEVELOPMENT**

TheCompany owns 274 acres of undeveloped land north of Malibu, California calledRancho Malibu. Approximately 40 acres of the property are zoned for developmentof a 46-unit residential community.  Theremainder is divided as follows: (i) 167 acres are dedicated to a publicagency, (ii) 47 acres are deed restricted within privately-owned lots, and(iii) 20 acres are preserved as private open space.  At June 30, 2001, the Company’s basis in Rancho Malibu was $12,250,914.  During the six months ended June 30, 2001,the Company capitalized $862,216 of costs, including $25,000 paid for transferdevelopment credits required under California statute and $438,550 forinterest.  During the six months endedJune 30, 2000, the Company capitalized $131,758 of costs, including $20,700paid for transfer development credits. At June 30, 2001, the Company had obtained all transfer developmentcredits required for the project.

During the six months ended June 30,2000, the Company incurred and expensed pre-development costs of approximately$141,000.  These costs consistedprincipally of property taxes and professional expenses, involving legal andother services, in connection with the zoning and entitlement processes at the stateand local levels.

**NOTE 5 – LAND AND BUILDINGS**

The Company has ownership interests intwo commercial buildings that are leased to a major university.  The buildings are used in connection withthe university’s international education programs and include both classroomand dormitory space.  The combined costof both buildings, one located in Washington, D.C. and one located in Sydney,Australia, is $11,932,997.  At June 30,2001 and December 31, 2000, the buildings had a net book value of $10,225,417 and$10,402,734, respectively.  The combinedland cost associated with the buildings is $1,929,000.  Indebtedness associated with the buildingsis summarized in Note 10.

Future minimum rental payments due inconnection with the leases for both buildings are scheduled as follows:

| For the year ending  June 30, | 2002   | $       | 1,150,504 |   |
|-------------------------------|--------|---------|-----------|--------|
|                          | 2003   | 600,710 |      |
|                          |   |         |      |
|                          | Total  | $       | 1,751,214 |   |
|                          |   |         |      |

**NOTE 6 – EQUIPMENT HELD FORLEASE**

Thefollowing is a summary of all equipment in which the Company has an interest atJune 30, 2001.  Substantially all of theequipment is leased under triple net lease agreements meaning that the lesseesare responsible for maintaining, insuring and operating the equipment inaccordance with the terms of the respective lease agreements.  Remaining lease term (months), as usedbelow, represents the number of months remaining under contracted lease termsand is presented as a range when more than one lease agreement is contained inthe stated equipment category.  In theopinion of management, the acquisition cost of the equipment did not exceed itsfair market value.

| Equipment  Type                             |   | Remaining  Lease Term  (Months) |       | Equipment  Cost |       |
|---------------------------------------------|--------|---------------------------------|------------|-----------------|------------|
|                                             |   |                                 |       |                 |       |
| Aircraft                                    |   | 12-48                           |       | $               | 79,628,529 |   |
| Locomotives                                 |   | 0-33                            |       | 12,886,831      |       |
| Manufacturing                               |   | 0-26                            |       | 9,095,342       |       |
| Materials handling                          |   | 0-23                            |       | 7,649,576       |       |
| Construction and  mining                    |   | 0-18                            |       | 3,744,859       |       |
| Computers and  peripherals                  |   | 0-5                             |       | 3,025,206       |       |
| Research and test                           |   | 0                               |       | 338,749         |       |
| Tractors & heavy  duty trucks           |   | 25                              |       | 105,350         |       |
| Trailers/intermodal  containers             |   | 0                               |       | 56,976          |       |
| Communications                              |   | 0                               |       | 6,532           |       |
|                                        |   |                            |       |                 |       |
| Total  equipment cost                       |   | 116,537,950                     |       |
| Accumulated  depreciation                   |   | (47,884,580                     | )          |
|                                        |   |                            |       |                 |       |
| Equipment,  net of accumulated depreciation |   | $                               | 68,653,370 |            |
|                                        |   |                            |       |                 |       |

The equipment is owned by the Company’sconsolidated affiliates as follows:

| AFG Investment Trust A |   | $          | 2,521,479 |        |
|------------------------|--------|------------|-----------|-------------|
| AFG Investment Trust B |   | 3,730,660  |      |
| AFG Investment Trust C |   | 51,781,966 |      |
| AFG Investment Trust D |   | 58,503,845 |      |
|                   |   |            |      |
|                   | Total  |       | $         | 116,537,950 |   |
|                   |   |            |      |
|                        |        |            |           |             |  |

The preceding summary of equipmentincludes leveraged equipment having an original cost of $91,771,035 and a netbook value of $64,667,708 at June 30, 2001. Indebtedness associated with the equipment is summarized in Note10.  Generally, indebtedness onleveraged equipment will be amortized by the rental streams derived from thecorresponding lease contracts, although certain aircraft have balloon debtobligations that will not be amortized by scheduled lease payments.  Such obligations may result in futurerefinancings to extend the repayment periods or the sale of the associatedassets to retire the indebtedness. Future minimum rental payments due inconnection with all equipment are scheduled as follows:

| For the year ending  June 30, | 2002   |   | $         | 10,698,037 |   |
|-------------------------------|--------|--------|-----------|------------|--------|
|                          | 2003   |   | 9,534,525 |       |
|                          | 2004   |   | 3,384,448 |       |
|                          | 2005   |   | 506,792   |       |
|                          |   |   |           |       |
|                          | Total  |   | $         | 24,123,802 |   |
|                          |   |        |      |

**NOTE 7 – OTHER ASSETS**

Other assets, at June 30, 2001, primarilyconsist of the following: (i) cash surrender value of PLM’s officers’ lifeinsurance policies totaling approximately $2.1 million (ii) deposits totalingapproximately $1,007,000, (iii) equity holdings in third-party companiestotaling $602,164, and (iv) deferred financing costs, net of accumulatedamortization, totaling $455,001.   AtDecember 31, 2000, other assets had the following principal components: (i) membershipinterests totaling $1.2 million in a limited liability company established tofacilitate the acquisition of PLM, (ii) deposits totaling approximately$764,000, (iii) equity holdings in third-party companies totaling $602,164, and(iv) deferred financing costs, net of accumulated amortization, totaling$482,700.  Deferred financing costs areamortized over the terms of the loans to which they pertain on a straight-linebasis. For the six months ended June 30, 2001 and 2000, amortization expenseresulting from deferred financing costs was $32,206 and $28,803, respectively.

**NOTE 8 – GUARANTY OBLIGATIONS**

On March 8, 2000, the AFG Trusts enteredinto a guaranty agreement whereby the trusts, jointly and severally, guaranteedthe payment obligations under a master lease agreement between EchelonCommercial LLC, as lessee, and Heller Affordable Housing of Florida, Inc., andtwo other entities, as lessor.  EchelonCommercial LLC is controlled by Gary D. Engle. The lease payments of Echelon Commercial LLC to Heller are supported bylease payments to Echelon Commercial LLC from various sub-lessees who areparties to commercial and residential lease agreements under the master leaseagreement.  Effective December 8, 2000,the guaranty of lease payments by the AFG Trusts was capped at a maximum of $7million (reduced by agreement from $34.5 million at inception of the guarantydue to principal reductions of the guaranty amount).  The guaranty amount is reduced according to a prescribed formulaas payments under the master lease agreement are collected by Heller.  In consideration for their guaranty, the AFGTrusts collectively received an upfront cash fee equal to $500,000 and receivean additional annualized fee equal to 4% of the average guaranty amountoutstanding during each quarterly period. Accrued but unpaid fees accrue and compound interest quarterly at anannualized interest rate of 7.5% until paid. The trusts will receive minimum aggregate fees for their guaranty of notless than $1 million, excluding interest. During the six months ended June 30, 2001, the AFG Trusts collectivelyrecognized income from the guaranty agreement of $217,582 compared to $588,167(including the upfront fee) during the period March 8, 2000 to June 30,2000.  These amounts are included inother income on the accompanying consolidated statement of operations for thesix months ended June 30, 2001 and 2000, respectively.**NOTE 9 – RELATED PARTY TRANSACTIONS
ADMINISTRATIVE SERVICESA number of the Company’s administrative functions are performed by EquisFinancial Group Limited Partnership (EFG), a Massachusetts limited partnership,pursuant to the terms of a services agreement dated May 7, 1997.  EFG is controlled by Gary D. Engle, theCompany’s Chairman and Chief Executive Officer.  Administrative expenses consist primarily of professional andclerical salaries and certain rental expenses for which EFG is reimbursed atactual cost.  The Company incurred totaladministrative costs of $75,061 and $78,478 during the six months ended June30, 2001 and 2000, respectively.

EFG also provides asset management andother services to the AFG Trusts and is compensated for those services basedupon the nature of the underlying transactions.  For equipment reinvestment acquisition services, EFG is paid anacquisition fee equal to 1% of base purchase price.  For management services, EFG is paid a management fee equal to 5%of lease revenues earned from operating leases and 2% of lease revenues earnedfrom full-payout leases. Operating expenses incurred by the trusts are paid byEFG on their behalf and EFG is reimbursed at its actual cost for suchexpenditures.  Fees and other costsincurred during the six months ended June 30, 2001 and 2000, which were paid oraccrued by the trusts to EFG or its affiliates, are as follows:
 **2001** **2000**    Equipment management  fees$305,245 $430,955 Acquisition fees— 15,365 Administrative charges264,678 318,023 Reimbursable operating  expenses due to third parties2,036,763 514,313     Total$2,606,686 $1,278,656    
SUMMARY OF CONSOLIDATEDOPERATIONS

Total revenues and net income (loss)generated by the Company and its principal subsidiaries for the six monthsended June 30, 2001 and 2000 are summarized below:
 **Total  Revenues** **Net  Income (Loss)**  **** **** Six months ended June  30, 2001:     Semele Group Inc.$1,566,824 $(413,138) Equis II Corporation9,167,789 (42,581) PLM International,  Inc.5,571,000 636,000  Adjustments and  eliminations(1,067,628)725,193      Combined$15,237,985 $905,474    Six months ended June  30, 2000:     Semele Group Inc.$1,900,408 $(2,351,464) Equis II Corporation12,028,695 1,352,162  Adjustments and  eliminations(1,154,660)1,192,303      Combined$12,774,443 $193,001    
DUE FROM AFFILIATESAmounts due from affiliates are summarized below:
 **June  30,  2001** **December  31,  2000**    Loan  obligations due from Mr. Engle and Mr. Coyne$2,937,205 $2,937,205 Interest  receivable on loan obligations due from Mr. Engle and  Mr. Coyne399,424 257,029 Due  from affiliates of PLM International, Inc. (1)898,000 — Guaranty  fee receivable514,640 364,925 Rents  receivable from EFG escrow  (2)391,244 1,007,073 Advances  to Kettle Valley Development LP152,279 152,279     Total$5,292,792 $4,718,511    (1)Consists  primarily of management fees receivable due from investment programs managed  by PLM.  (2)All  rents and proceeds from the sale of equipment are paid directly to either EFG  or to a lender.  EFG temporarily  deposits collected funds in a separate interest-bearing escrow account and  remits such amounts to the Company or its affiliates on a monthly basis.
INDEBTEDNESSAND OTHER OBLIGATIONS TO AFFILIATESA summary of the Company’s indebtedness andother obligations to affiliates appears below.
 **June  30,  2001** **December  31,  2000**    Principal  balance of indebtedness to affiliates$34,949,392 $34,949,392 Accrued  interest due to affiliates2,680,578 1,457,597 Other  (1)638,230 202,578    Total$38,268,200 $36,609,567    (1)Consists  primarily of amounts due to EFG for administrative services and operating  expenses.
In connection with a transaction in 1997,the Company borrowed $4,419,500 from certain affiliates controlled by Mr.Engle, including $462,353 from AFG Investment Trust A.  The corresponding note obligations bearinterest at an annualized rate of 10% and require mandatory principalrepayments to the extent the Company realizes any net cash proceeds from thesale or refinancing of Rancho Malibu. The notes mature on April 30, 2003. During the each of the six months ended June 30, 2001 and 2000, theCompany incurred interest expense of $219,159 in connection with thisindebtedness.   The obligation to AFGInvestment Trust A ($462,353) and related interest expense ($22,928 in 2001)have been eliminated in consolidation.

GUARANTY OF AFFILIATE’SLEASE OBLIGATIONSOn March 8, 2000, the AFG Trusts becameguarantors of the lease payment obligations of Echelon Commercial LLC under acertain master lease agreement.  EchelonCommercial LLC is an affiliate of the Company and the AFG Trusts and iscontrolled by Gary D. Engle.  (See Note8 – Guaranty Obligations.)OWNERSHIP INTERESTS IN AFFILIATED COMPANIES The Company has equity interests in the following affiliates: **June  30,  2001** **December  31,  2000**    PLM International,  Inc. equity interests in investment programs$20,841,000 $— EFG  Kirkwood LLC12,440,979 10,224,163 EFG/Kettle  Development LLC7,457,596 8,527,542 Equity  Interests in Partnerships3,580,276 2,934,186    Total$44,319,851 $21,685,891    
*Asset Management – PLM International, Inc.*In February 2001, the AFG Trusts, through MILPI Acquisition Corp., acquiredapproximately 83% of the common stock of PLM International, Inc., a SanFrancisco based equipment leasing and asset management company.  MILPI Acquisition Corp. is a wholly ownedsubsidiary of MILPI Holdings LLC, which was formed by the AFG Trusts onDecember 22, 2000 to acquire PLM’s common stock.  PLM specializes in transportation equipment leasing and managesseveral syndicated investment programs (generally organized as or similar tolimited partnerships) that are engaged in the business of leasingtransportation equipment.  (See alsoNote 3 – Acquisitions, PLM International, Inc.)  The carrying basis of PLM’s equity interests in certain of itsinvestment programs was $20,841,000 at June 30, 2001.

*Winter Resorts – EFG Kirkwood LLC*On May 1, 1999, the Company and the AFG Trusts formed a joint venture, EFGKirkwood LLC, for the purpose of acquiring preferred and common stock interestsin Kirkwood Associates, Inc.  The AFGTrusts collectively purchased 100% of the Class A membership interests in EFGKirkwood and the Company purchased 100% of the Class B membership interests inEFG Kirkwood.  Generally, the Class Ainterest holders are entitled to certain preferred returns prior todistribution payments to the Class B interest holder.  The AFG Trusts’ interests in EFG Kirkwood constitute 50% of thevoting securities of that entity under the operating agreement for the LLC,which gives equal voting rights to the Class A and Class B membershipinterests.

On April 30, 2000, Kirkwood Associates’ownership interests in certain assets and substantially all of its liabilitieswere transferred to Mountain Resort Holdings LLC (Mountain Resort).  On May 1, 2000, EFG Kirkwood exchanged itsinterests in Kirkwood Associates for membership interests in Mountain Resort,thereby obtaining 37.9% of the membership interests in Mountain Resort.  Mountain Resort, through four wholly ownedsubsidiaries, owns and operates Kirkwood Mountain Resort, a ski resort locatedin northern California, a public utility that services the local community, andland that is held for residential and commercial development.

Subsequent to acquiring its interest inMountain Resort, EFG Kirkwood acquired 50% of the membership interests inMountain Springs Resorts LLC (Mountain Springs).  Mountain Springs, through a wholly owned subsidiary, owns 80% ofthe common stock and 100% of the Class B Preferred stock in an entity that ownsPurgatory Ski resort in Durango, Colorado. The Company’s ownership interest in EFG Kirkwood had an original cost of$10,735,380, including an acquisition fee of $98,866 that was paid to EFG.  The Company’s ownership interest in EFGKirkwood is accounted for using the equity method.  The Company recorded net income of $2,216,816 from its interestin EFG Kirkwood for the six months ended June 30, 2001.
**Residential Community – EFG/Kettle Development LLC*On March 1, 1999, the Company and two of the AFG Trusts formed EFG/KettleDevelopment LLC, a Delaware limited liability company, for the purpose ofacquiring a 49.9% indirect ownership interest in a real estate developmentproject in Kelowna, British Columbia, Canada called Kettle Valley.  The project, which is being developed byKettle Valley Development Limited Partnership, consists of approximately 280acres of land that is zoned for 1,120 residential units in addition tocommercial space.  To date, 97residential units have been constructed and sold and 10 additional units areunder construction.  A subsidiary of theCompany became general partner of Kettle Valley Development Limited Partnershipon March 1, 1999.   The remaining equityinterests in the project are owned by a third party.

The Company’s ownership interest had acost of $8,837,500 that was funded with cash of $6,204,347 and a non-recourseinstallment note of $2,633,153.  Thenote matures on December 1, 2001 and bears interest at an annualized rate of7.5%.  The outstanding principal balanceof the note was $434,579 and $938,513 at June 30, 2001 and December 31, 2000,respectively.   The cost of the Company’s ownership interestexceeded its equity interest in the underlying net assets of Kettle ValleyDevelopment Limited Partnership by approximately $1,300,000.  This difference is being amortized on astraight-line basis over the estimated project development period of 10 years,resulting in amortization expense of $65,000 during each of the six monthperiods ended June 30, 2001 and 2000. This amount is included as an offset to equity income in affiliatedcompanies on the accompanying consolidated statement of operations for 2001 and2000.  The Company accounts for itsownership interest using the equity method of accounting.  During the six months ended June 30, 2001,the Company decreased its investment in Kettle Valley by $1,004,946 to reflectits share of the project’s net loss.

*Equity Interests in Partnership* On August 31, 1998, the Company acquired Ariston Corporation for$12.45 million, consisting of cash of $2 million and a purchase-money note of$10.45 million.  Ariston was purchasedfrom EFG and owns equity interests in (i) a real estate limited partnershipcalled AFG International Limited Partnership, which owns two commercialbuildings leased to a major educational institution (see Note 5), and (ii) a98% limited partner interest in Old North Capital Limited Partnership, whichowns equity interests in each of the AFG Trusts and 11 other limitedpartnerships established by EFG’s predecessor. The remaining 2% equity interests in Old North Capital, including thoseof the general partner, are owned by Mr. Engle, Mr. Coyne, and a third partyand controlled by Mr. Engle.  Theacquisition of Ariston was accounted for under the purchase method ofaccounting and the balance sheets and statements of operations of Ariston wereconsolidated effective September 1, 1998. The purchase-money note bears interest at an annualized rate of 7%, butrequires principal amortization and payment of interest only to the extent ofcash distributions paid to the Company in connection with the partnershipinterests owned by Ariston.  The notematures on August 31, 2003 and is recourse to the common stock of Ariston.  In October 1998, Ariston declared and paid acash distribution of $2,020,000 to the Company; however, future cashdistributions by Ariston require the consent of EFG until such time that theCompany’s obligation to EFG under the note is repaid.  On January 26, 2000, the Company made principal and interestpayments of $2,031,504 and $50,798, respectively, in connection with thisnote.  The outstanding principal balanceof this obligation at June 30, 2001 and December 31, 2000 was $8,418,496.  Ariston’s ownership interests in limitedpartnerships (11 in total) are accounted for using the equity method.  During the six months ended June 30, 2001, theCompany recorded net income of $646,090 related to these interests. Ariston’sequity interests in the AFG Trusts are eliminated in consolidation.

**NOTE 10 – NOTES PAYABLE TO THIRD PARTIES**

At June 30, 2001, the Company hadaggregate indebtedness to third parties of $56,083,188, including two noteobligations totaling $5,906,674 associated with the Company’s two commercialbuildings.  (See Note 5.)  One loan, with a balance of $5,382,426,matures on June 1, 2010 and carries a fixed annual interest rate of 7.86% andthe other loan, with a balance of $524,248, matures on December 31, 2002 andcarries a variable annual interest rate equal to prime plus 1.50% (8.25% atJune 30, 2001).  The remainder of theCompany’s indebtedness to third parties is non-recourse installment debtpertaining to equipment held on operating leases.  (See Note 6.)  Generally,this debt is secured by the equipment and will be fully amortized over theterms of the lease agreements corresponding to each asset.  However, in certain instances (involvingprincipally aircraft), retirement of the debt obligations is partiallydependent upon the residual value of the equipment.  At June 30, 2001, the Company has balloon debt obligations due atthe expiration of the equipment leases of $36,594,449. Interest rates onequipment debt obligations range from 6.76% to 9.95% at June 30, 2001.

Management believes that the carryingamount of the Company’s notes payable to third parties approximates fair valueat June 30, 2001 based on its experience and understanding of the market forinstruments with similar terms. The annual maturities of the Company’sindebtedness to third parties is summarized below:
 **Buildings** **Equipment** **Total**     For  the year ending June 30, 2002$574,727 $5,572,342 $6,147,069  2003621,749 10,162,781 10,784,530  2004552,885 33,953,002 34,505,887  2005476,668 488,389 965,057  2006578,280 — 578,280  Thereafter3,102,365 — 3,102,365       Total$5,906,674 $50,176,514 $56,083,188     
The Company’s indebtedness to thirdparties is divided among the Company’s consolidated affiliates as follows: 
AFG Investment Trust A$471,038 AFG Investment Trust B471,038 AFG Investment Trust C24,128,362 AFG Investment Trust D25,106,076 Old North Capital  Limited Partnership524,248 AFG International  Limited Partnership5,382,426   Total $56,083,188   
**NOTE 11– DEFERRED STOCK COMPENSATION**

In1997, the Company established a deferred compensation plan for Mr. Engle andMr. Coyne.  Pursuant to terms of theplan, both Mr. Engle and Mr. Coyne may receive shares of the Company’s commonstock instead of cash compensation.  The number of shares allocated to them is determined at the end of eachmonth by dividing the average closing price of the Company’s stock for the lastten trading days of the month into the dollar amount that otherwise would havebeen paid to them as cash compensation for the month.  The shares (which are fully vested) are held in a rabbi trustestablished for the benefit of Mr. Engle and Mr. Coyne, but are not expected tobe transferred to them until termination of their employment.  The Company treats the issuance of sharesunder the plan as compensation and, therefore, recognizes an expense equal tothe amount of cash compensation that would have been paid to each individual.During the six months ended June 30, 2001, the Company did not issue sharesunder the plan but accrued compensation expense for both officers.  During the six months ended June 30, 2000,the Company issued 23,894 shares under the plan.  During each of the six month periods ended June 30, 2001 and2000, the Company recorded aggregate compensation expense of $120,000.  These expenses are included in general andadministrative expenses on the accompanying consolidated statements ofoperations for each of the six month periods ended June 30, 2001 and 2000.

**NOTE 12 – LITIGATION**

TheCompany has been involved in certain legal and administrative claims as eitherplaintiffs or defendants in connection with matters that generally areconsidered incidental to its business. There are no matters known to the Company’s management, or currentlypending against the Company, that in management’s opinion would, upon theirresolution, have a material effect on the Company’s consolidated financialposition, results of consolidated operations or liquidity.

**NOTE 13– SUBSEQUENT EVENTS**

InApril 2001, the Company received a letter from the Nasdaq Stock Market, Inc.wherein the staff determined that the Company had failed to meet certainminimum standards for continued listing on the Nasdaq SmallCap Market.  The Company appealed this decision andrequested an oral hearing before the Nasdaq Listing Qualifications Panel, whichwas held on June 28, 2001.  On August 7,2001, Nasdaq notified the Company of the panel’s decision to de-list theCompany’s stock from The Nasdaq SmallCap Market effective at the opening ofbusiness on August 8, 2001.  As a resultof the foregoing, the Company’s securities are traded on the OTC BulletinBoard, commonly referred to as the “over-the-counter” market.   The Company’s trading symbol on thatexchange is “VSLF.OB.”  This changecould have an adverse affect on the Company’s share price and stockholders’liquidity.

**MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION OR PLAN OF OPERATION**

Certainstatements in this quarterly report that are not historical fact constitute"forward-looking statements" within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Without limiting the foregoing, words such as "anticipates,""expects," "intends," "plans," and similarexpressions are intended to identify forward-looking statements. Thesestatements are subject to a number of risks and uncertainties including theCompany's ability to successfully implement a growth-oriented businessplan.  Actual results could differmaterially from those described in any forward-looking statements.

**General**

SemeleGroup Inc. (the Company) is a Delaware corporation that was organized on April14, 1987 as Banyan Strategic Land Fund II to invest primarily in short-term,junior, pre-development, and construction mortgage loans.  Subsequently, the Company became owner of variousreal estate assets through foreclosure proceedings in connection with itsmortgages.  For the years 1993, 1994 and1995, the Company elected to be treated as a real estate investment trust(REIT) for income tax purposes. Effective January 1, 1996, the Company revoked its REIT status and becamea taxable “C” corporation.  Since then,the Company has attempted to seek out ways to maximize shareholder value andtake advantage of investment opportunities where its significant losscarryforwards for federal income tax purposes (approximately $99 million atDecember 31, 2000) could make it a value-added buyer.  In recent years, the Company made certain investments withaffiliated parties where its income tax loss carryforwards could be utilizedand which permitted the Company to diversify its asset mix beyond its principalreal estate asset, consisting of 274 acres of land located in SouthernCalifornia known as Rancho Malibu. Today, the Company is engaged in various real estate activities,including residential property development, and holds investments in othercompanies operating in niche financial markets, principally involving realestate and equipment leasing.

InApril 2001, the Company received a letter from the Nasdaq Stock Market, Inc.wherein the staff determined that the Company had failed to meet certainminimum standards for continued listing on the Nasdaq SmallCap Market.  The Company appealed this decision andrequested an oral hearing before the Nasdaq Listing Qualifications Panel, whichwas held on June 28, 2001.  On August 7,2001, Nasdaq notified the Company of the panel’s decision to de-list theCompany’s stock from The Nasdaq SmallCap Market effective at the opening ofbusiness on August 8, 2001.  As a resultof the foregoing, the Company’s securities are traded on the OTC BulletinBoard, commonly referred to as the “over-the-counter” market.   The Company’s trading symbol on thatexchange is “VSLF.OB.”  This changecould have an adverse affect on the Company’s share price and stockholders’liquidity.

**RecentAcquisitions**

PLMINTERNATIONAL, INC.On December 22, 2000, an affiliate of the Company, MILPI Acquisition Corp.,entered into an agreement and plan of merger to acquire PLM International,Inc., a San Francisco based equipment leasing and asset management company.  The plan of merger involved a tender offerby MILPI Acquisition Corp. to purchase all of the outstanding common stock ofPLM for cash.

MILPIAcquisition Corp. is a wholly owned subsidiary of MILPI Holdings LLC, which wasformed by four Delaware business trusts (collectively referred to as the AFGTrusts) on December 22, 2000.  The AFGTrusts are consolidated affiliates of the Company engaged in the equipmentleasing and real estate businesses. MILPI Acquisition Corp. entered into adefinitive agreement with PLM to acquire up to 100% of the outstanding commonstock of PLM, for an approximate purchase price of up to $27 million.  In connection with the acquisition, onDecember 29, 2000, MILPI Acquisition Corp. commenced a tender offer to purchaseany and all of PLM’s outstanding common stock.

Pursuantto the cash tender offer, MILPI Acquisition Corp. acquired 83% of PLM’s commonstock in February 2001 for a total purchase price of approximately $21.7million. Under the terms of the agreement, MILPI Acquisition Corp. will mergeinto PLM, with PLM becoming the surviving entity, upon the approval of theholders of 50.1% of PLM’s outstanding common stock.  PLM filed preliminary proxy  materials with theSecurities and Exchange Commission on February 9, 2001 relating  to  aspecial meeting of its shareholders to vote on the merger proposal.  Because MILPI Acquisition Corp. owns 83% ofPLM’s common stock, its vote alone would be sufficient to assure the approvalof the merger proposal at the special meeting, as MILPI Holdings has agreed tovote all of its shares in favor of the merger proposal.  Once the merger is approved, the AFG Trustswould then jointly own 100% of the outstanding common stock of PLM throughtheir 100% interest in MILPI Holdings. In connection with its review of thepreliminary proxy materials, the staff of the SEC has informed the AFG Truststhat own MILPI Acquisition Corp. and that were offerors in the tender offer,that it believes the trusts may be unregistered investment companies within themeaning of the Investment Company Act of 1940 (the “Act”).

The managingtrustee of the trusts is engaged in discussions with the staff regarding thismatter.  The AFG Trusts believe that they are notinvestment companies; however, itis possible that the trusts may have unintentionally engaged in an activity oractivities that may be construed to fall within the scope of the Act.  If necessary, each of the trusts intends toavoid being deemed an investment company by means that may include disposing oracquiring certain assets that it might not otherwise dispose or acquire.  The parties do not intend to schedule thespecial meeting of stockholders of PLM International pending resolution of thisissue.  If themerger is approved, the AFG Trusts may be required to provide an additional$4.4 million to acquire the remaining 17% of PLM’s outstanding commonstock.  Mr. Engle and Mr. Coyne areofficers and directors of MILPI Acquisition Corp.

EQUISII CORPORATIONDuring the fourth quarter of 1999, the Company issued $19.586 million ofpromissory notes to acquire an 85% equity interest in Equis II Corporation(Equis II), a Massachusetts corporation having a controlling interest in theAFG Trusts.  During the first quarter of2000, the Company sought and obtained shareholder approval for the issuance of510,000 shares of common stock to purchase the remaining 15% equity interest ofEquis II.  On April 20, 2000, theCompany issued 510,000 shares of common stock for that purpose.  The market value of the shares issued was$2,358,750 ($4.625 per common share) based upon the closing price of theCompany’s common stock on April 20, 2000.

**Liquidityand Capital Resources**

TheCompany’s acquisition of Equis II Corporation and the resulting consolidationof the AFG Trusts significantly changed the nature of the Company’sconsolidated operations.  In addition,the Company’s 2001 consolidated financial statements have been further affectedby the AFG Trusts' collective purchase of approximately 83% of the common stockof PLM.  The acquisition of PLM has beenaccounted for using the purchase method of accounting.  The financial position and results ofoperations of PLM have been consolidated in the accompanying financialstatements commencing at the date of acquisition; and, therefore, the Company’sconsolidated results of operations are not fully comparable between the firstsix months of 2001 and the first six months of 2000.

Eachof the AFG Trusts is a Delaware business trust whose form of organization andmanagement is similar to that of a limited partnership.  The trusts are limited-life entities thathave scheduled dissolution dates.  TheAFG Trusts were organized to acquire a diversified portfolio of capital equipmentsubject to lease agreements with third parties. The net capital of the trustswas raised initially from a series of offerings in the public marketplace.  These equity interests are referred to asClass A Interests, the majority of which are owned by approximately 5,300third-party investors.  In 1997, thecapital structure of the trusts was expanded to include a new form of equityinterest referred to as the Class B Interests, the majority of which are ownedby Equis II Corporation.  In addition,the investment objectives of the trusts were expanded in 1998 to permitbusiness activities other than equipment leasing.  The Class B Interests owned by Equis II represent approximately62% of the aggregate voting interests in each of the trusts.  Accordingly, the Company’s purchase of EquisII Corporation resulted in the Company obtaining voting control over the AFGTrusts; and, as a result, the accompanying financial statements consolidate theoperating results and financial positions of the trusts.  The Company’s consolidated financialstatements contain a significant minority interest component that reflects thatportion of the Company’s consolidated net assets and results of operationsattributable to the economic interests of other parties in the AFG Trusts andPLM or in certain other consolidated affiliates in which the Company does notown a 100% economic interest.

Asignificant portion of the trusts’ equipment was financed under note agreementsthat are secured by the equipment and associated lease streams.   Rental income generated by the trusts’lease agreements is used to repay the trusts’ debt obligations and to fund thetrusts’ operating expenses, including management fees.  Certain management fees are paid to AFG ASITCorporation, a wholly-owned subsidiary of the Company, which functions asmanaging trustee of the trusts.  Thesefees are eliminated in consolidation. All other management fees are paid to Equis Financial Group LimitedPartnership (EFG), an affiliate of the Company.  The trusts’ debt obligations at June 30, 2001 are expected to beretired through the collection of contracted rents, with the exception ofballoon payment obligations totaling $36,594,449 associated with the trusts’SAS and Emery aircraft.  (See additionaldiscussion of aircraft matters under Results of Operations.)  Repayment of the balloon debt obligationswill be dependent upon the negotiation of future lease contracts, futurerefinancing arrangements or sales or, alternatively, the use of workingcapital.  At June 30, 2001, the trustswere due future contracted lease payments from third-party lessees totaling$24,123,802 and owed third-party lenders $13,582,065 of principal debtobligations, excluding balloon payment obligations.

Thetrusts’ lease agreements are triple net lease agreements whereby the lesseesare responsible for all costs of operating, maintaining and insuring theequipment.  The leases expire on anintermittent basis and equipment held pursuant to each lease is renewed,re-leased or sold at lease expiration, depending on prevailing market conditionsand the assessment of such conditions by AFG ASIT Corporation, as managingtrustee, and EFG, as adviser, to obtain the most advantageous economicbenefit.  As the original leaseagreements of the trusts expire and their equipment portfolios are disposed of,the cash flow streams of the trusts will become increasingly irregular.  This will occur partly because the portfolioof equipment within the trusts will continue to diminish and partly because thetiming and extent of remarketing activities will be subject, as always, to theneeds and interests of the existing lessees. Some lessees may choose to renew their lease contracts, while others mayelect to return the equipment.  In thelatter instances, the equipment could be re-leased to another lessee or sold.

Generally,the lessees of the trusts are of sound credit quality.  Since their inception, the AFG Trusts havenot experienced significant collection problems and have not considered itnecessary to provide an allowance for doubtful accounts.  However, there is no assurance that the trusts’positive collection histories will continue or that the composition of theirlessee customers from a credit quality perspective will not deteriorate.  Collection risk could increase in thefuture, particularly as the trusts’ sell their equipment and enter re-leaseagreements with different lessees.  AFGASIT Corporation, as managing trustee, will continue to evaluate the trusts’experiences in collecting rents to determine whether a future allowance fordoubtful accounts may become appropriate.

Since1997, the Company has effected several highly leveraged purchase transactionswith related parties.  Mostsignificantly, the Company purchased Equis II Corporation for $21.945 millionfrom the Company’s Chief Executive Officer, Gary D. Engle, certain trustsestablished for the benefit of Mr. Engle’s children, and James A. Coyne, theCompany’s President.  A significantportion of the purchase price, or $19.586 million, was financed underinstallment debt owed to the sellers. In 2000, a portion of this indebtedness was retired by issuing 326,462shares of common stock, as permitted by the authorization of shareholdersobtained on November 2, 2000.  TheCompany’s other principal purchase transactions with related parties since1997, involving Ariston Corporation, the Special Beneficiary Interests, and AFGASIT Corporation were acquired from EFG, a limited partnership that iscontrolled by Mr. Engle. At June 30, 2001 and December 31, 2000, the Companyowed Mr. Engle, Mr. Coyne or their affiliates approximately $35 million.  The Company expects that all of the purchaseprice indebtedness for Equis II Corporation, Ariston Corporation, and theSpecial Beneficiary Interests will be repaid through the collection of futurecash distributions generated in connection with these assets and the collectionof amounts due from Mr. Engle and Mr. Coyne in connection with their respectivedebt obligations to certain subsidiaries of the Company.   The purchase price indebtedness for AFG ASITCorporation was repaid in 1999.  One ofthe Company’s debt obligations to related parties, totaling approximately $4million, is due to several limited partnerships controlled by Mr. Engle.  The Company expects to repay this debt usinga portion of the proceeds generated by developing Rancho Malibu.

Mr.Engle controls the timing and authorization of cash distributions to be paidfrom all of the affiliates upon which amortization of the Company’s relatedparty debt obligations is predominantly dependent.  Moreover, as a result of the issuance of common stock inconnection with the Equis II acquisition, voting control of the Company isvested in Mr. Engle and Mr. Coyne.  AtJune 30, 2001, Mr. Engle owns or controls 40.3% and Mr. Coyne owns or controls17.6% of the Company’s outstanding common stock. 

Lookingforward, the Company does not anticipate any near term incremental free cashflow as a result of its recent purchases from related parties.  Substantially all of the net cash flowgenerated by these acquisitions will be used to repay corresponding purchaseprice indebtedness.  The Company's cashand cash equivalents balance declined from approximately $27.8 million atDecember 31, 2000 to approximately $16.3 million at June 30, 2001 principallyas a result of the PLM acquisition in February 2001.  The Company's near-term liquidity will be significantlyinfluenced by the completion of the PLM acquisition which may requireadditional cash of approximately $4.4 million to acquire the remaining 17% ofPLM’s outstanding stock. (See Note 3 to the accompanying consolidated financialstatements.)  In addition, the Companyis continuing its plans to develop Rancho Malibu while evaluating potentialjoint venture partners.  The Companyalso may seek construction financing in the future in connection with theproject.

**Resultsof Operations**

AtJune 30, 2001, the AFG Trusts collectively held approximately $116.5 million ofequipment assets having a net book value of approximately $68.7 million.Approximately 68% of those assets consisted of three commercial jet aircraft onlease to Scandinavian Airlines System (SAS), Emery Worldwide, and Aerovias deMexico, S.A. de C.V.  The latteraircraft, which is owned jointly between the AFG Trusts and certain affiliatedlimited partnerships, had been leased to Reno Air until June 2001.  The AFG Trusts collectively receivedapproximately $298,000 of early-termination rents from Reno in June 2001 andReno further agreed to pay a negotiated sum for aircraft maintenance.  The balloon debt obligation, previouslyscheduled to be paid after the expiration of the Reno lease in January 2003,was refinanced in connection with the re-lease to Aerovias de Mexico.  As a result, the AFG Trusts’ share of theballoon debt, which was approximately $1,130,000, will be amortized by thefuture rents from the re-lease agreement. The AFG Trusts’ collective ownership interest in this aircraft isapproximately 35%.  Lease revenues fromall three aircraft collectively represented 58% of the Company’s consolidatedlease revenues during both the three and six month periods ended June 30, 2001,respectively, compared to 46% for each of the same periods in 2000.  Lease revenues from SAS represented 41% and43% of the Company’s consolidated rental income during the three and six monthsended June 30, 2001, respectively, compared to and 37% for each of the sameperiods in 2000.  The growingsignificance of aircraft rents in relation to other rents reflected between2000 and 2001 is the result of lease expirations and equipment sales involvingassets other than aircraft.

Feeincome results from the Company’s acquisition of PLM and consists principallyof management fees and acquisition and lease negotiation fees earned inconnection with the investment programs managed by PLM.

Interestincome decreased from $474,819 and $993,197 for the three and six month periodsended June 30, 2000 to $290,499 and $576,911 for the three and six monthperiods ended June 30, 2001.  Thedecline was caused principally from the disbursement of approximately $21.7million of cash to acquire 83% of PLM. Interest income is generated from the temporary investment of rentalreceipts and equipment sales proceeds in short-term instruments.  Generally, future interest income willfluctuate as a result of changing interest rates, the collection of rentalincome and the proceeds generated from equipment sales, among other factors.

Duringthe three months ended June 30, 2001, the Company recognized net gains of$32,278 on the sale of equipment compared to net gains of $529,098 for thethree months ended June 30, 2000.  Forthe six months ended June 30, 2001, the Company recognized net gains of$631,290 on the sale of equipment compared to net gains of $1,086,238 for thesame period in 2000.  The ultimateeconomic performance of the Company’s consolidated equipment portfolio is andwill continue to be dependent upon many factors, including market conditions,industry trends, technological advances and many other events that can convergeto enhance or detract from asset values at any given time.   The gross yield on each equipment asset isa function of its primary-term rents and its residual value in relation tocost.  Residual value consists of cashproceeds realized from the sale of an asset in addition to all other cashreceipts obtained from renting the asset on a re-lease, renewal ormonth-to-month basis.  These paymentsare classified as rental income. Consequently, the amount of net gains reported in the Company’sfinancial statements is not necessarily indicative of the total residual valueachieved from leasing the equipment.

Duringthe three month period ended June 30, 2001, the Company recognized equitylosses in affiliated companies of $1,846,113. Those losses partially offset prior equity income in affiliatedcompanies, resulting in net equity income from affiliated companies of$1,857,960 for the six months ended June 30, 2001.  The loss reported during the three months ended June 30, 2001 wascaused by the Company’s ownership interests in EFG Kirkwood LLC, which hasequity interests in two ski resorts. The resorts are located in the western United States and experiencedgood operating conditions during the past winter season which contributed tofirst quarter earnings.  However, theoperating results of ski resorts are highly seasonal and losses generally areexpected during the summer and autumn months. Accordingly, the Company does not expect positive operating results fromEFG Kirkwood LLC prior to the commencement of the 2001-2002 winter season.

Duringthe six months ended June 30, 2001 and 2000, the AFG Trusts collectivelyrecorded income of approximately $218,000 and $588,000, respectively, for feesrelating to their guaranty of certain lease obligations of an affiliate,Echelon Commercial LLC.  These fees areincluded in other income on the Company’s 2001 and 2000 consolidated statementof operations.

Approximately$177,000 of the Company’s depreciation expense in each of the six months endedJune 30, 2001 and 2000 pertains to its two commercial buildings.  The remainder of depreciation expensepertains mostly to equipment held for lease. For financial reporting purposes, to the extent that an asset is held onprimary lease term, depreciation is computed by allocating the difference between(i) the cost of each asset and (ii) the estimated residual value of theasset on a straight-line basis over such term. For purposes of this policy, estimated residual value represents anestimate of equipment value at the date of primary lease term expiration.  To the extent that an asset is held beyondits primary lease term, depreciation is computed by allocating the thenremaining net book value of each asset on a straight-line basis over theasset's remaining economic life.

Interestexpense on indebtedness to third parties decreased from $1,454,637 and$3,002,484 for the three and six month periods ended June 30, 2000 to$1,305,011 and $2,613,375 for the three and six month periods ended June 30,2001.  The decline in consolidatedinterest expense to third parties reflects the retirement of debt obligationsattributable mostly to equipment on lease. Interest expense on indebtedness and other obligations to affiliatesdecreased from $681,809 and $1,496,636 for the three and six month periodsended June 30, 2000 to $432,905 and $870,477 for the three and six monthperiods ended June 30, 2001.  Thedecline was caused by the capitalization of interest costs in connection withreal estate held for development, $222,151 and $438,550 during the three andsix month periods ended June 30, 2001, respectively, and from the repayment ofa portion of the Company’s purchase-price indebtedness for Equis II Corporationand the Special Beneficiary Interests. (See Note 4 to the financial statements concerning the Company’s realestate held for development.)

Generaland administrative expenses increased principally due to the consolidation ofPLM’s operating and administrative expenses and higher overall operating costswithin the AFG Trusts.  Fees andexpenses to affiliates principally represent equipment management fees paid toEFG for services rendered.  Equipmentmanagement fees are based upon a percentage of rental income.  The decline in fees from $509,433 in 2000 to$380,306 in 2001 is primarily a function of lower rental income within the AFGTrusts.

Overall,the Company’s consolidated net income increased from $60,250 and $193,001during the three and six months ended June 30, 2000, respectively, to $414,023and $905,474 during the three and six month periods ended June 30, 2001,respectively.  The improvement isattributable principally to the acquisition of PLM.

PERSHARE RESULTS

Forthe three months ended June 30, 2001, the Company reported consolidated netincome of $414,023 ($0.20 per share) compared to consolidated net income of$60,250 ($0.04 per share) for 2000.  Netincome per share for the three months ended June 30, 2001 is based on theweighted average number of shares outstanding during the period of 2,078,718compared to 1,608,514 for 2000.

Forthe six months ended June 30, 2001, the Company reported consolidated netincome of $905,474 ($0.44 per share) compared to consolidated net income of$193,001 ($0.14 per share) for 2000. Net income per share for the six months ended June 30, 2001 is based onthe weighted average number of shares outstanding during the period of2,078,718 compared to 1,402,105 for 2000.

**PART II – OTHER INFORMATION**
Item 1.Legal Proceedings Response:   None   Item 2.Changes in Securities Response:   None   Item 3.Defaults upon Senior Securities Response:  None   Item 4.Submission of Matters to a Vote of Security  Holders Response:   None   Item 5.Other Information Response:   None   Item 6(a).Exhibits Response:    None   Item 6(b).Reports on Form 8-K Response:    None
**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned there­untoduly authorized.

**SEMELEGROUP INC.**
By:/s/ Gary D. EngleDate:  August 14, 2001 Gary D. Engle, Chairman, Chief Executive  Officer and Director    By:/s/ James A. CoyneDate:  August 14, 2001 James A. Coyne, President, Chief Operating  Officer and Director    By:/s/ Michael J. ButterfieldDate:  August 14, 2001 Michael J. Butterfield, Vice  President and Chief Financial Officer 
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