<PAGE>

                             AMERICAN INCOME FUND I


                           AMERICAN INCOME FUND I-C,

                      a Massachusetts Limited Partnership



                Annual Report to the Partners, December 31, 1996
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                     INDEX TO ANNUAL REPORT TO THE PARTNERS

<TABLE>
<CAPTION>


                                                                    Page
                                                                    ----
<S>                                                                <C>
SELECTED FINANCIAL DATA                                               2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                 3-7

FINANCIAL STATEMENTS:

Report of Independent Auditors                                        8

Statement of Financial Position
at December 31, 1996 and 1995                                         9

Statement of Operations
for the years ended December 31, 1996, 1995 and 1994                 10

Statement of Changes in Partners' Capital
for the years ended December 31, 1996, 1995 and 1994                 11

Statement of Cash Flows
for the years ended December 31, 1996, 1995 and 1994                 12

Notes to the Financial Statements                                 13-22


ADDITIONAL FINANCIAL INFORMATION:

Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed                              23

Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings                              24

Schedule of Costs Reimbursed to the General
Partner and its Affiliates as Required by
Section 9.4 of the Amended and Restated
Agreement and Certificate of Limited Partnership                     25

</TABLE>

                                      -1-
<PAGE>

                            SELECTED FINANCIAL DATA


    The following data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
financial statements.

    For each of the five years in the period ended December 31, 1996:

<TABLE>
<CAPTION>


Summary of
Operations                         1996          1995           1994           1993           1992
-----------------------------  ------------  -------------  -------------  -------------  ------------
<S>                            <C>           <C>            <C>            <C>            <C>
Lease revenue                   $ 4,130,156   $ 4,648,578    $ 7,199,896    $ 6,525,598    $ 6,574,464

Net income (loss)               $   552,157   $  (779,251)   $   (22,729)   $  (186,064)   $   902,192

Per Unit:
         Net income (loss)      $      0.65   $     (0.92)   $     (0.03)   $     (0.22)   $      1.07

         Cash distributions     $      1.38   $      2.00    $      2.88    $      3.00    $      3.00


     Financial Position
-----------------------------

Total assets                    $13,848,889   $12,687,300    $16,390,469    $22,927,882    $29,030,172

Total long-term obligations      $6,547,519    $4,574,713    $ 5,323,875    $ 9,589,147    $12,923,280

Partners' capital               $ 6,821,321   $ 7,432,059    $ 9,902,794    $12,357,031    $15,080,320

</TABLE>

                                      -2-
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

               Year ended December 31, 1996 compared to the year
          ended December 31, 1995 and the year ended December 31, 1995
                  compared to the year ended December 31, 1994

Overview
--------

  American Income Fund I-C, a Massachusetts Limited Partnership (the
"Partnership") was organized in 1991 as a direct-participation equipment leasing
program to acquire a diversified portfolio of capital equipment subject to lease
agreements with third parties.  The Partnership's stated investment objectives
and policies contemplated that the Partnership would wind-up its operations
within approximately seven years of its inception.  The value of the
Partnership's equipment portfolio decreases over time due to depreciation
resulting from age and usage of the equipment, as well as technological changes
and other market factors.  In addition, the Partnership does not replace
equipment as it is sold; therefore, its aggregate investment value in equipment
declines from asset disposals occurring in the normal course.  As a result of
the Partnership's age and a declining equipment portfolio, the General Partner
is evaluating a variety of transactions that will reduce the Partnership's
prospective costs to operate as a publicly registered limited partnership and,
therefore, enhance overall cash distributions to the limited partners.  Such a
transaction may involve the sale of the Partnership's remaining equipment or a
transaction that would allow for the consolidation of the Partnership's expenses
with other similarly-organized equipment leasing programs.  In order to increase
the marketability of the Partnership's remaining equipment, the General Partner
expects to use the Partnership's available cash and future cash flow to retire
indebtedness.  This will negatively effect short-term cash distributions.


Results of Operations
---------------------

  For the year ended December 31, 1996, the Partnership recognized lease revenue
of $4,130,156 compared to $4,648,578 and $7,199,896 for the years ended December
31, 1995 and 1994, respectively. The decrease in lease revenue from 1994 to 1996
reflects the effects of primary lease term expirations and the sale of
equipment.  The Partnership concluded an aircraft exchange in March 1996 (see
discussion below).  As a result of this exchange, the Partnership replaced its
ownership interest in a Boeing 747-SP, having aggregate quarterly lease revenues
of $213,302, with interests in six other aircraft (three Boeing 737 aircraft
leased by Southwest Airlines, Inc., two McDonnell Douglas MD-82 aircraft leased
by Finnair OY and one McDonnell Douglas MD-87 aircraft leased by Reno Air,
Inc.), having aggregate quarterly lease revenues of $326,254.  The Finnair
Aircraft and the Reno Aircraft were exchanged into the Partnership on March 25
and March 26, 1996, respectively.  Accordingly, revenue for the year ended
December 31, 1996 does not fully reflect the rents ultimately anticipated from
the like-kind exchange.  For the year ended December 31, 1994, the Partnership
recognized lease revenue from related parties of $275,937.  No lease revenue
from related parties was recognized during 1995 and 1996.  Lease revenue from
related parties reflects revenue earned on containers formerly leased to ICCU
Containers, S.p.A. (See Note 4 to the financial statements herein).

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

  Interest income for the year ended December 31, 1996 was $98,806 compared to
$51,136 and $37,331 for the years ended December 31, 1995 and 1994,
respectively.  Interest income is typically generated from temporary investment
of rental receipts and equipment sale proceeds in short-term instruments. The
increase in

                                      -3-
<PAGE>

interest income in 1996 compared to 1995 is a result of interest of
$44,994 earned on cash held in a special-purpose escrow account in connection
with the like-kind exchange transactions, discussed below.  During the years
ended December 31, 1996 and 1995, the Partnership earned interest income of
$18,531 and $25,817, respectively, on a note receivable from EFG resulting from
the settlement with ICCU Containers, S.p.A. (See Note 4 to the financial
statements herein).  All amounts due from EFG pursuant to this note had been
received at December 31, 1996.  The amount of future interest income is expected
to fluctuate in relation to prevailing interest rates, the collection of lease
revenue, and the proceeds from equipment sales.

  In 1996, the Partnership sold equipment having a net book value of $336,314 to
existing lessees and third parties.  These sales resulted in a net gain, for
financial statement purposes, of $356,452 compared to a net gain in 1995 of
$48,107 on equipment having a net book value of $517,800, and a net loss in 1994
of $246,330 on equipment having a net book value of $780,613.

  In 1994, the Partnership recorded a write-down of the carrying value of its
33.07% ownership interest in a Boeing 747-SP aircraft ("the Aircraft") leased to
United Air Lines, Inc. ("United").  The resulting charge, representing an
impairment, of $1,202,000 ($1.42 per limited partnership unit) was based on a
comparison of the estimated net realizable value and corresponding carrying
value for the Partnership's interest in the Aircraft.  Net realizable value was
estimated based on (i) third-party appraisals of the Partnership's aircraft and
(ii) EFG's assessment of prevailing market conditions for similar aircraft.  In
recent years, market values for used commercial jet aircraft have deteriorated.
Consistent price competition and other pressures within the airline industry
have inhibited sustained profitability for many carriers.  Most major airlines
have had to re-evaluate their aircraft fleets and operating strategies.  Such
issues complicate the determination of net realizable value for specific
aircraft, and particularly used aircraft, because cost-benefit and market
considerations may differ significantly between the major airlines.  Aircraft
condition, age, passenger capacity, distance capability, fuel efficiency, and
other factors also influence market demand and market values for passenger jet
aircraft.

  The Aircraft suffered a market decline due to its nature as a Special Purpose
(SP) aircraft which was designed to travel long distances on a non-stop basis.
Distance capability was achieved, in part, by reducing the number of passenger
seats contained on a traditional 747 aircraft.  In recent years, new aircraft
have become available which compete with the 747-SP in both passenger capacity
and fuel efficiency.  This development has depressed market values of used 747-
SP aircraft and was the basis for the write-down recognized by the Partnership
in 1994.

  In September 1995, the Partnership transferred its 33.07% ownership interest
in the United Aircraft, pursuant to the rules of a like-kind exchange for income
tax reporting purposes.  The Partnership received aggregate cash consideration
of $2,723,865 including $213,301 for rent accrued through the transfer date.  A
portion of the consideration was used to satisfy the balance of outstanding debt
and interest of $414,925.  The net cash consideration of $2,095,639 was
deposited into a special-purpose escrow account through a third-party exchange
agent pending the completion of the aircraft exchange.  The Partnership's
interest in the Aircraft had a net book value of $3,475,960 at the date of
transfer and resulted in a net loss for financial reporting purposes of
$965,396.

  In November 1995, the Partnership partially replaced the United Aircraft with
a 14.35% interest in the Southwest Aircraft, at an aggregate cost of $2,101,054.
To acquire the interests in the Southwest Aircraft, the Partnership obtained
financing of $1,567,878 from a third-party lender and utilized $533,176 of the
cash consideration received from the transfer of the United Aircraft.  The
remaining ownership interest of 85.65% in the Southwest Aircraft is held by
affiliated equipment leasing programs sponsored by EFG.

  Additionally, in March 1996, the Partnership completed the replacement of the
United Aircraft with the acquisitions of an 11.87% ownership interest in the
Finnair Aircraft and a 21.31% ownership interest in the Reno Aircraft at a total
cost to the Partnership of $3,322,913 and $2,894,892, respectively.  To acquire
the ownership interest in the Finnair Aircraft, the Partnership paid $1,110,980
in cash and obtained financing of $2,211,933 from a third-party lender.  To
acquire the ownership interest in the Reno Aircraft, the Partnership paid
$494,780 in cash and obtained financing of $2,400,112 from a third-party lender.
The remaining ownership interests of 88.13% and 78.69% of the Finnair Aircraft
and Reno Aircraft, respectively, are held by affiliated equipment leasing
programs sponsored by EFG.

                                      -4-
<PAGE>

  During 1995, the Partnership transferred its ownership interest in certain
trailers, previously leased to The Atchison Topeka and Santa Fe Railroad to a
third party for cash consideration of $89,000.  The trailers had an aggregate
net book value of $49,693 at the date of transfer resulting in a net gain, for
financial statement purposes, of $39,307.  A portion of the consideration was
used to satisfy outstanding debt of $3,596.  The transaction was structured as a
like-kind exchange for income tax reporting purposes.  In 1995, the Partnership
replaced these trailers with comparable trailers and leased such equipment to a
new lessee.  The net carrying value of the new trailers, $329,323, was net of
$39,307, representing the amount of gain deferred on the original trailers.  The
Partnership funded this transaction with $85,404 of the net cash consideration
received and a third-party installment note payable of $283,226.

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

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

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

  Depreciation and amortization expense was $3,163,960, $3,930,328 and
$4,838,506 for the years ended December 31, 1996, 1995 and 1994, respectively.
For financial reporting purposes, to the extent that an asset is held on primary
lease term, the Partnership depreciates the difference between (i) the cost of
the asset and (ii) the estimated residual value of the asset at the date of
primary lease expiration on a straight-line basis over such term.  For the
purposes of this policy, estimated residual values represent estimates of
equipment values at the date of primary lease expiration.  To the extent that
equipment is held beyond its primary lease term, the Partnership continues to
depreciate the remaining net book value of the asset on a straight-line basis
over the asset's remaining economic life.

  Interest expense was $556,255 or 13.5% of lease revenue in 1996, $377,734 or
8.1% of lease revenue in 1995 and $668,913 or 9.3% of lease revenue in 1994.
The increase in interest expense in 1996 compared to 1995 was due primarily to
interest incurred in connection with the leveraging obtained to finance the
like-kind exchange transactions, discussed above.  Interest expense in future
periods is expected to decline in amount and as a percentage of lease revenue as
the principal balance of notes payable is reduced through the application of
rent receipts to outstanding debt.  In addition, the General Partner expects to
use a portion of the Partnership's available cash and future cash flow  to
retire indebtedness (see Overview).

  Management fees were approximately 3.4% of lease revenue for the year ended
December 31, 1996, compared to 3% of lease revenue during the years ended
December 31, 1995 and 1994, respectively.  Management fees are based on 5% of
gross lease revenue generated by operating leases and 2% of gross lease revenue
generated by full payout leases.

  Operating expenses consist principally of administrative charges, professional
service costs, such as audit and legal fees, as well as printing, distribution
and remarketing expenses.  In certain cases, equipment storage or repairs and
maintenance costs may be incurred in connection with equipment being remarketed.
Operating expenses represented 4.6%, 3% and 1.2% of lease revenue during the
years ended December 31, 1996, 1995 and 1994, respectively.  The increase in
operating expenses from 1995 to 1996 was due principally to costs

                                      -5-
<PAGE>

incurred in connection with the like-kind exchange transactions, discussed
above. The increase in operating expenses from 1994 to 1995 is attributable
principally to an increase in professional service costs and to legal costs
incurred in connection with the like-kind exchange of certain cargo containers
(See Note 4 to the financial statements herein.) The amount of future operating
expenses cannot be predicted with certainty; however, such expenses are usually
higher during the acquisition and liquidation phases of a partnership. Other
fluctuations typically occur in relation to the volume and timing of remarketing
activities.


Liquidity and Capital Resources and Discussion of Cash Flows
------------------------------------------------------------

  The Partnership by its nature is a limited life entity which was established
for specific purposes described in the preceding "Overview".  As an equipment
leasing program, the Partnership's principal operating activities derive from
asset rental transactions.  Accordingly, the Partnership's principal source of
cash from operations is provided by the collection of periodic rents.  These
cash inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs.  Operating
activities generated net cash inflows of $3,646,728, $4,129,166, and $6,300,158
for the years ended 1996, 1995, and 1994 respectively.  Future renewal, re-lease
and equipment sale activities will cause a decline in the Partnership's lease
revenue and corresponding sources of operating cash.  Overall, expenses
associated with rental activities, such as management fees, and net cash flow
from operating activities will also continue to decline as the Partnership
experiences a higher frequency of remarketing events.

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

  Cash expended for equipment acquisitions and cash realized from asset disposal
transactions are reported under investing activities on the accompanying
Statement of Cash Flows.  During the year ended December 31, 1996, the
Partnership expended $43,297 in cash in connection with the like-kind exchange
transactions referred to above.  During 1996, the Partnership realized $692,766
in equipment sale proceeds compared to $565,907 and $534,283 in 1995 and 1994,
respectively.  Future inflows of cash from asset disposals will vary in timing
and amount and will be influenced by many factors including, but not limited to,
the frequency and timing of lease expirations, the type of equipment being sold,
its condition and age, and future market conditions.

  The Partnership obtained long-term financing in connection with certain
equipment leases.  The repayments of principal related to such indebtedness are
reported as a component of financing activities. Each note payable is recourse
only to the specific equipment financed and to the minimum rental payments
contracted to be received during the debt amortization period (which period
generally coincides with the lease rental term).  As rental payments are
collected, a portion or all of the rental payment is used to repay the
associated indebtedness.  In future years, the amount of cash used to repay debt
obligations is scheduled to decline as the principal balance of notes payable is
reduced through the collection and application of rents.  However, the amount of
cash used to repay debt obligations may fluctuate due to the use of the
Partnership's available cash and future cash flow to retire indebtedness (see
Overview).  In addition, the Partnership has balloon payment obligations at the
expiration of the respective primary lease terms related to the Finnair Aircraft
and the Reno Aircraft of $1,127,840 and $679,276, respectively.

  Cash distributions to the General and Limited Partners are declared and
generally paid within fifteen days following the end of each calendar quarter.
The payment of such distributions is presented as a component of financing
activities.  For the year ended December 31, 1996, the Partnership declared
total cash distributions of Distributable Cash From Operations and Distributable
Cash From Sales and Refinancings of $1,162,895.  In accordance with the Amended
and Restated Agreement and Certificate of Limited Partnership, the Limited

                                      -6-
<PAGE>

Partners were allocated 95% of these distributions, or $1,104,750, and the
General Partner was allocated 5%, or $58,145.  The fourth quarter 1996 cash
distribution was paid on January 13, 1997.

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

  The future liquidity of the Partnership will be influenced by the foregoing
and will be greatly dependent upon the collection of contractual rents and the
outcome of residual activities.  The General Partner anticipates that cash
proceeds resulting from these sources will satisfy the Partnership's future
expense obligations.  However, the amount of cash available for distribution in
future periods will fluctuate.  Equipment lease expirations and asset disposals
will cause the Partnership's net cash from operating activities to diminish over
time; and equipment sale proceeds will vary in amount and period of realization.
In addition, the Partnership may be required to incur asset refurbishment or
upgrade costs in connection with future remarketing activities.  Accordingly,
fluctuations in the level of quarterly cash distributions will occur during the
life of the Partnership.

                                      -7-
<PAGE>

                        REPORT OF INDEPENDENT AUDITORS
                        ------------------------------


To the Partners of American Income Fund I-C,
a Massachusetts Limited Partnership:


    We have audited the accompanying statements of financial position of
American Income Fund I-C, a Massachusetts Limited Partnership as of December 31,
1996 and 1995, and the related statements of operations, changes in partners'
capital, and cash flows for each of the three years in the period ended December
31, 1996.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Income Fund I-C, a
Massachusetts Limited Partnership at December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.

    Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The Additional Financial Information
identified in the Index to Annual Report to the Partners is presented for
purposes of additional analysis and is not a required part of the basic
financial statements.  Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.



                                                               ERNST & YOUNG LLP



Boston, Massachusetts
March 14, 1997

                                      -8-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                        STATEMENT OF FINANCIAL POSITION
                           December 31, 1996 and 1995

<TABLE>
<CAPTION>


                                                   1996           1995
                                               -------------  -------------

ASSETS
------

<S>                                            <C>            <C>
Cash and cash equivalents                       $ 1,187,478    $   799,133

Contractual right for equipment                          --      1,562,463

Rents receivable                                    469,090        716,657

Accounts receivable - affiliate                      89,539         13,652

Note receivable - affiliate                              --        210,144

Equipment at cost, net of accumulated
   depreciation of $13,677,519 and
   $13,427,155 at December 31, 1996
   and 1995, respectively                        12,102,782      9,384,501

Organization costs, net of accumulated
   amortization of $5,000 and $4,250 at
   December 31, 1996 and 1995, respectively              --            750
                                                -----------    -----------

       Total assets                             $13,848,889    $12,687,300
                                                ===========    ===========


LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

Notes payable                                   $ 6,547,519    $ 4,574,713
Accrued interest                                     79,752         42,509
Accrued liabilities                                  22,750        157,002
Accrued liabilities - affiliate                      33,067         23,344
Deferred rental income                              133,044        140,519
Cash distributions payable to partners              211,436        317,154
                                                -----------    -----------

       Total liabilities                          7,027,568      5,255,241
                                                -----------    -----------

Partners' capital (deficit):
   General Partner                                 (541,473)      (510,936)
   Limited Partnership Interests
   (803,454.56 Units; initial purchase
   price of $25 each)                             7,362,794      7,942,995
                                                -----------    -----------

       Total partners' capital                    6,821,321      7,432,059
                                                -----------    -----------

       Total liabilities and partners'          $13,848,889    $12,687,300
         capital                                ===========    ===========
</TABLE>

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

                                      -9-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                            STATEMENT OF OPERATIONS
             for the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>


                                          1996          1995          1994
                                       -----------  ------------  ------------

Income:
<S>                                    <C>          <C>           <C>
   Lease revenue                        $4,130,156   $4,648,578    $6,923,959
   Lease revenue - related party                --           --       275,937
   Interest income                          98,806       51,136        37,331
   Interest income - affiliate              18,531       25,817            --
   Gain (loss) on sale of equipment        356,452       48,107      (246,330)
   Loss on exchange of equipment                --     (965,396)           --
                                        ----------   ----------    ----------
       Total income                      4,603,945    3,808,242     6,990,897
                                        ----------   ----------    ----------

Expenses:
   Depreciation and amortization         3,163,960    3,930,328     4,838,506
   Write-down of equipment                      --           --     1,202,000
   Interest expense                        556,255      377,734       668,913
   Equipment management fees
   - affiliate                             140,227      140,863       215,086
   Operating expenses - affiliate          191,346      138,568        89,121
                                        ----------   ----------    ----------
       Total expenses                    4,051,788    4,587,493     7,013,626
                                        ----------   ----------    ----------

Net income (loss)                       $  552,157   $ (779,251)   $  (22,729)
                                        ==========   ==========    ==========
Net income (loss)
   per limited partnership unit         $     0.65   $    (0.92)   $    (0.03)
                                        ==========   ==========    ==========
Cash distributions declared
   per limited partnership unit         $     1.38   $     2.00    $     2.88
                                        ==========   ==========    ==========
</TABLE>

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

                                      -10-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                   STATEMENT OF CHANGES IN PARTNERS' CAPITAL
              for the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>



                                  General        Limited Partners
                                  Partner    -------------------------
                                  Amount       Units        Amount          Total
                                -----------  ----------  -------------  -------------

<S>                             <C>          <C>         <C>            <C>
Balance at December 31, 1993     $(264,688)  803,454.56   $12,621,719    $12,357,031
Net loss - 1994                     (1,136)          --       (21,593)       (22,729)
Cash distributions declared       (121,575)          --    (2,309,933)    (2,431,508)
                                 ---------   ----------   -----------    -----------
Balance at December 31, 1994      (387,399)  803,454.56    10,290,193      9,902,794
Net loss - 1995                    (38,963)          --      (740,288)      (779,251)
Cash distributions declared        (84,574)          --    (1,606,910)    (1,691,484)
                                 ---------   ----------   -----------    -----------
Balance at December 31, 1995      (510,936)  803,454.56     7,942,995      7,432,059
Net income - 1996                   27,608           --       524,549        552,157
Cash distributions declared        (58,145)          --    (1,104,750)    (1,162,895)
                                 ---------   ----------   -----------    -----------
Balance at December 31, 1996     $(541,473)  803,454.56   $ 7,362,794    $ 6,821,321
                                 =========   ==========   ===========    ===========
</TABLE>

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

                                      -11-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                            STATEMENT OF CASH FLOWS
              for the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>


                                              1996          1995          1994
                                          ------------  ------------  ------------
<S>                                       <C>           <C>           <C>
Cash flows from (used in) operating
 activities:

Net income (loss)                         $   552,157   $  (779,251)  $   (22,729)
Adjustments to reconcile net income
 (loss) to net cash from operating
    activities:
   Depreciation and amortization            3,163,960     3,930,328     4,838,506
   Write-down of equipment                         --            --     1,202,000
   (Gain) loss on sale of equipment          (356,452)      (48,107)      246,330
   Loss on exchange of equipment                   --       965,396            --

Changes in assets and liabilities:
   Decrease (increase) in:
       Rents receivable                       247,567       (83,479)     (102,786)
       Accounts receivable - affiliate        (75,887)      (26,934)      133,866
       Note receivable - affiliate            210,144       160,120            --
   Increase (decrease) in:
       Accrued interest                        37,243       (30,951)      (10,367)
       Accrued liabilities                   (134,252)       44,560        31,420
       Accrued liabilities - affiliate          9,723        16,307         7,037
       Deferred rental income                  (7,475)      (18,823)      (23,119)
                                          -----------   -----------   -----------
         Net cash from operating
          activities                        3,646,728     4,129,166     6,300,158
                                          -----------   -----------   -----------

Cash flows from (used in) investing
 activities:
   Purchase of equipment                      (43,297)           --            --
   Proceeds from equipment sales              692,766       565,907       534,283
                                          -----------   -----------   -----------
         Net cash from investing
          activities                          649,469       565,907       534,283
                                          -----------   -----------   -----------

Cash flows used in financing activities:
   Principal payments - notes payable      (2,639,239)   (3,106,835)   (4,265,272)
    Distributions paid                     (1,268,613)   (1,902,919)   (2,537,225)
                                          -----------   -----------   -----------
         Net cash used in financing
          activities                       (3,907,852)   (5,009,754)   (6,802,497)
                                          -----------   -----------   -----------

Net increase (decrease) in cash and
   cash equivalents                           388,345      (314,681)       31,944

Cash and cash equivalents at beginning
 of year                                      799,133     1,113,814     1,081,870
                                          -----------   -----------   -----------
Cash and cash equivalents at end of year  $ 1,187,478   $   799,133   $ 1,113,814
                                          ===========   ===========   ===========

Supplemental disclosure of cash flow
 information:
   Cash paid during the year for
    interest                              $   519,012   $   408,685   $   679,280
                                          ===========   ===========   ===========
</TABLE>

Supplemental disclosure of non-cash investing and financing activities:
  See Notes 3 and 4 to the financial statements.

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

                                      -12-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                               December 31, 1996


NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS
---------------------------------------------

  The Partnership was organized as a limited partnership under the Massachusetts
Uniform Limited Partnership Act (the "Uniform Act") on March 1, 1991, for the
purpose of acquiring and leasing to third parties a diversified portfolio of
capital equipment.  Partners' capital initially consisted of contributions of
$1,000 from the General Partner (AFG Leasing VI Incorporated) and $100 from the
Initial Limited Partner (AFG Assignor Corporation).  On May 31, 1991 the
Partnership issued 803,454.56 units of limited partnership interests (the
"Units") to 909 investors.  Included in the 803,454.56 units were 7,293.56 bonus
units.  The Partnership's General Partner, AFG Leasing VI Incorporated, is a
Massachusetts corporation formed in 1990 and an affiliate of Equis Financial
Group Limited Partnership (formerly American Finance Group), a Massachusetts
limited partnership ("EFG").  The General Partner is not required to make any
other capital contributions except as may be required under the Uniform Act and
Section 6.1(b) of the Amended and Restated Agreement and Certificate of Limited
Partnership (the "Restated Agreement, as amended").

     Significant operations commenced on May 31, 1991 when the Partnership made
its initial equipment acquisition.  Pursuant to the Restated Agreement, as
amended, Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings will be allocated 95% to the Limited Partners and 5% to the General
Partner.

     Under the terms of a Management Agreement between the Partnership and EFG,
management services are provided by EFG to the Partnership at fees which the
General Partner believes to be competitive for similar services.  (Also see Note
4.)

    EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG").  AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980.  EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Equipment Manager or Advisor to the Partnership and
several other Direct-Participation equipment leasing programs sponsored or co-
sponsored by EFG (the "Other Investment Programs").  The Company arranges to
broker or originate equipment leases, acts as remarketing agent and asset
manager, and provides leasing support services, such as billing, collecting, and
asset tracking.

    The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President and Chief Executive Officer.  Equis Corporation also
owns a controlling 1% general partner interest in EFG's 99% limited partner, GDE
Acquisition Limited Partnership ("GDE LP").  Equis Corporation and GDE LP were
established in December 1994 by Mr. Engle for the sole purpose of acquiring the
business of AFG.

    In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym, to a third party (the "Buyer").  AFG changed its name
to Equis Financial Group Limited Partnership after the sale was concluded.
Pursuant to terms of the sale agreements, EFG agreed not to compete with the
Buyer's lease origination business for a period of five years; however, EFG is
permitted to originate certain equipment leases, principally those involving
non-investment grade lessees and ocean-going vessels, which are not in
competition with the Buyer.  In addition, the sale agreements specifically
reserved to EFG the rights to continue using the name American Finance Group and
its acronym in connection with the Partnership and the Other Investment Programs
and to continue managing all assets owned by the Partnership and the Other
Investment Programs, including the right to satisfy all required equipment
acquisitions utilizing either brokers or the Buyer.  Geoffrey A. MacDonald,
Chairman of Equis Corporation and Gary D. Engle agreed not to compete with the
sold business on terms and conditions similar to those for the Company.

                                      -13-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements
                                  (Continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Statement of Cash Flows
-----------------------

    The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents.  From time to time, the
Partnership invests excess cash with large institutional banks in reverse
repurchase agreements with overnight maturities.  Under the terms of the
agreements, title to the underlying securities passes to the Partnership.  The
securities underlying the agreements are book entry securities.

Revenue Recognition
-------------------

    Rents are payable to the Partnership monthly, quarterly or semi-annually and
no significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred.  Future minimum rents of
$8,703,278 are due as follows:

<TABLE>


<S>                                 <C>    <C>
For the year ending December 31,     1997   $2,900,359
                                     1998    1,931,581
                                     1999    1,309,273
                                     2000      794,761
                                     2001      760,321
                               Thereafter    1,006,983
                                           -----------

                                    Total   $8,703,278
                                           ===========

</TABLE>

    Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1996, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>


                                1996       1995       1994
                              ---------  ---------  ---------

<S>                           <C>        <C>        <C>
United Air Lines, Inc.               --   $632,629   $833,364
National Steel Corporation           --   $488,580         --
Gearbulk Shipowning Ltd.       $543,909   $542,655         --
General Motors Corporation     $516,616         --         --
Southwest Airlines, Inc.       $413,280         --         --

</TABLE>

    In September 1995, the Partnership transferred its ownership interest in a
Boeing 747-SP-21 commercial jet aircraft to the existing lessee, United Air
Lines Inc. ("United"), pursuant to the rules for a like-kind exchange
transaction for income tax reporting purposes (See Note 3 herein).  In November
1995, the Partnership partially replaced the United aircraft with a 14.35%
interest in three Boeing 737-2H4 aircraft leased to Southwest Airlines Inc.
("Southwest").  The Partnership will receive approximately $413,000 of rental
revenue in each of the years in

                                      -14-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (continued)

the period ending December 31, 1999, and $34,000 in the year ending December 31,
2000, pursuant to the Southwest lease agreement.

    Additionally, in March 1996, the Partnership completed the replacement of
the United Aircraft with the acquisitions of an 11.87% interest in two
McDonnell-Douglas MD-82 Aircraft leased by Finnair OY (the "Finnair Aircraft")
and a 21.31% ownership interest in a McDonnell-Douglas MD-87 aircraft leased by
Reno Air, Inc. (the "Reno Aircraft").  The Partnership will receive
approximately $511,000 of rental revenue in each of the years in the period
ending December 31, 1998, and approximately $128,000 in the year ending December
31, 1999, pursuant to the Finnair Aircraft lease agreement.  With respect to the
Reno Aircraft lease agreement, the Partnership will receive approximately
$380,000 of rental revenue in each of the years in the period ending December
31, 2002.  Pursuant to the Reno Aircraft lease agreement, rents are adjusted
monthly for changes of the London Inter-Bank Offered Rate ("LIBOR").  Future
rents reported above reflect the most recent LIBOR effected rental payment.

Use of Estimates
----------------

    The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes.  Actual results could differ from those estimates.

Equipment on Lease
------------------

    All equipment was acquired from EFG, one of its Affiliates or from third-
party sellers.  Equipment cost represents asset base price plus acquisition fees
and was determined in accordance with the Restated Agreement, as amended, and
certain regulatory guidelines.  Asset base price is affected by the relationship
of the seller to the Partnership as summarized herein.  Where the seller of the
equipment was EFG or an affiliate, asset base price was the lower of (i) the
actual price paid for the equipment by EFG or the affiliate plus all actual
costs accrued by EFG or the affiliate while carrying the equipment less the
amount of all rents earned by EFG or the Affiliate prior to selling the
equipment or (ii) fair market value as determined by the General Partner in its
best judgment, including all liens and encumbrances on the equipment and other
actual expenses.  Where the seller of the equipment was a third party who did
not manufacture the equipment, asset base price was the lower of (i) the price
invoiced by the third party or (ii) fair market value as determined by the
General Partner.  Where the seller of the equipment was a third party who also
manufactured the equipment, asset base price was the manufacturer's invoice
price, which price was considered to be representative of fair market value.

Depreciation and Amortization
-----------------------------

    The Partnership's depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit.  The
principal period of economic benefit is considered to correspond to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset.  Accordingly, to the extent that an asset is
held on primary lease term, the Partnership depreciates the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset on
a straight-line basis over such term.  For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration.  To the extent that an asset is held beyond its primary lease
term, the Partnership continues to depreciate the remaining net book value of
the asset on a straight-line basis over the asset's remaining economic life.
Periodically, the General Partner evaluates the net carrying value of equipment
to determine whether it exceeds estimated net realizable value.  Adjustments to
reduce the net carrying value of equipment are recorded in those instances where
estimated net realizable value is considered to be less than net carrying value.
Such adjustments are reflected separately on the accompanying Statement of
Operations as Write-Down of Equipment.

                                      -15-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

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

    Organization costs were amortized using the straight-line method over a
period of five years.

Accrued Liabilities - Affiliate
-------------------------------

    Unpaid operating expenses paid by EFG on behalf of the Partnership and
accrued but unpaid administrative charges are reported as Accrued Liabilities -
Affiliate. (See Note 4.)

Allocation of Profits and Losses
--------------------------------

    For financial statement purposes, net income or loss is allocated to each
Partner according to their respective ownership percentages (95% to the Limited
Partners and 5% to the General Partner).  See Note 6 for allocation of income or
loss for income tax purposes.

Net Income (Loss) and Cash Distributions Per Unit
-------------------------------------------------

    Net income (loss) and cash distributions per Unit are based on 803,454.56
Units outstanding during each of the three years in the period ended December
31, 1996 and computed after allocation of the General Partner's 5% share of net
income (loss) and cash distributions.

Provision for Income Taxes
--------------------------

    No provision or benefit from income taxes is included in the accompanying
financial statements.  The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their tax returns.

Impact of Recently Issued Accounting Standards
----------------------------------------------

    In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount.  Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of.  The
Partnership adopted Statement 121 in the first quarter of 1996.  The adoption of
Statement 121 did not have a material effect on the financial statements of the
Partnership.


NOTE 3 - EQUIPMENT
------------------

    The following is a summary of equipment owned by the Partnership at December
31, 1996.  In the opinion of EFG, the acquisition cost of the equipment did not
exceed its fair market value.

                                      -16-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

<TABLE>
<CAPTION>


                                  Lease Term     Equipment
Equipment Type                     (Months)       at Cost               Location
--------------------------------  -----------  -------------  -----------------------------

<S>                               <C>          <C>            <C>
Aircraft                               39-81   $  8,318,862   NV/TX/Foreign
Materials handling                      4-60      6,342,059   CA/CO/FL/GA/IA/IL/KY/MI/MN/MO
                                                              NC/NY/OH/OR/TX/Foreign
Vessels                                   72      2,605,381   Foreign
Trailers/intermodel containers         66-99      2,187,937   CA/IL/OK
Tractors and heavy duty trucks          3-78      1,945,458   CA/IL/IN/MI/OR
Furniture and fixtures                    90      1,914,145   MI/TN
Construction and mining                36-60        762,152   IL/WI
Retail store fixtures                     48        517,488   FL
Motor vehicles                         48-60        394,669   MI/OH/WI
Computers and peripherals               6-37        345,281   CA/MI/NY
Communications                         12-60        295,245   MA/OH/TX/WV
Research and test                         24        116,406   CO
Manufacturing                             72         35,218   MI
                                               ------------

                        Total equipment cost     25,780,301

                    Accumulated depreciation    (13,677,519)
                                               ------------

Equipment, net of accumulated depreciation     $ 12,102,782
                                               ============
</TABLE>

    The Partnership recorded a write-down of an aircraft carrying value,
representing an impairment, during the year ended December 31, 1994.  The
resulting charge, of $1,202,000 ($1.42 per limited partnership unit) was based
on a comparison of the estimated net realizable value and corresponding carrying
value for the Partnership's interest in the aircraft.

    In September 1995, the Partnership transferred its 33.07% ownership interest
in the United Aircraft, pursuant to the rules of a like-kind exchange for income
tax reporting purposes (See Note 2 herein).  In November 1995, the Partnership
partially replaced the United Aircraft with a 14.35% interest in the Southwest
Aircraft, at an aggregate cost of $2,101,054.  To acquire the interests in the
Southwest Aircraft, the Partnership obtained financing of $1,567,878 from a
third-party lender and utilized $533,176 of the cash consideration received from
the transfer of the United Aircraft.  The remaining ownership interest of 85.65%
in the Southwest Aircraft is held by affiliated equipment leasing programs
sponsored by EFG.

    Additionally, in March 1996, the Partnership completed the replacement of
the United Aircraft with the acquisitions of an 11.87% ownership interest in the
Finnair Aircraft and a 21.31% ownership interest in the Reno Aircraft at a total
cost of $3,322,913 and $2,894,892, respectively.  To acquire the ownership
interest in the Finnair Aircraft, the Partnership paid $1,110,980 in cash and
obtained financing of $2,211,933 from a third-party lender.  To acquire the
ownership interest in the Reno Aircraft, the Partnership paid $494,780 in cash
and obtained financing of $2,400,112 from a third-party lender.  The remaining
ownership interests of 88.13% and 78.69% in the Finnair Aircraft and Reno
Aircraft, respectively, are held by affiliated equipment leasing programs
sponsored by EFG.

                                      -17-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

    During 1995, the Partnership transferred its ownership interest in certain
trailers, previously leased to The Atchison Topeka and Santa Fe Railroad to a
third party for cash consideration of $89,000.  The trailers had an aggregate
net book value of $49,693 at the date of transfer resulting in a net gain, for
financial statement purposes, of $39,307.  A portion of the consideration was
used to satisfy outstanding debt of $3,596.  The transaction was structured as a
like-kind exchange for income tax reporting purposes.  In 1995, the Partnership
replaced these trailers with comparable trailers and leased such equipment to a
new lessee.  The net carrying value of the new trailers, $329,323, was net of
$39,307, representing the amount of gain deferred on the original trailers.  The
Partnership funded this transaction with $85,404 of the net cash consideration
received and a third-party installment note payable of $283,226.

          In certain cases, the cost of the Partnership's equipment represents a
proportionate ownership interest.  The remaining interests are owned by EFG or
an affiliated equipment leasing program sponsored by EFG.  The Partnership and
each affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment.  Proportionate equipment ownership
enables the Partnership to further diversify its equipment portfolio by
participating in the ownership of selected assets, thereby reducing the general
levels of risk which could result from a concentration in any single equipment
type, industry or lessee.  At December 31, 1996, the Partnership's equipment
portfolio included equipment having a proportionate original cost of
$13,431,527, representing approximately 52% of total equipment cost.

    Certain of the equipment and related lease payment streams were used to
secure term loans with third-party lenders.  The preceding summary of equipment
includes leveraged equipment having an original cost of approximately
$15,525,000 and a net book value of approximately $10,798,000 at December 31,
1996.  (See Note 5.)

    Generally, the costs associated with maintaining, insuring and operating the
Partnership's equipment are incurred by the respective lessees pursuant to terms
specified in their individual lease agreements with the Partnership.

    As equipment is sold to third parties, or otherwise disposed of, the
Partnership recognizes a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the proceeds
realized upon sale or disposition.  The ultimate realization of estimated
residual value in the equipment is dependent upon, among other things, EFG's
ability to maximize proceeds from selling or re-leasing the equipment upon the
expiration of the primary lease terms.  The summary above includes equipment
held for sale or re-lease with a cost and net book value of approximately
$839,000 and $67,000, respectively, at December 31, 1996.  The General Partner
is actively seeking the sale or re-lease of all such equipment.


NOTE 4 - RELATED PARTY TRANSACTIONS
-----------------------------------

    All operating expenses incurred by the Partnership are paid by EFG on behalf
of the Partnership and EFG is reimbursed at its actual cost for such
expenditures.   Fees  and  other  costs  incurred  during  the  years ended
December 31, 1996, 1995 and 1994, which were paid or accrued by the Partnership
to EFG or its Affiliates, are as follows:

                                      -18-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

<TABLE>
<CAPTION>

                                      1996       1995       1994
                                    ---------  ---------  ---------

<S>                                 <C>        <C>        <C>
Equipment management fees            $140,227   $140,863   $215,086
Administrative charges                 40,295     21,000     12,000
Reimbursable operating
   expenses due to third parties      151,051    117,568     77,121
                                     --------   --------   --------
   Total                             $331,573   $279,431   $304,207
                                     ========   ========   ========
</TABLE>
    As provided under the terms of the Management Agreement, EFG is compensated
for its services to the Partnership.  Such services include all aspects of
acquisition, management and sale of equipment.  For acquisition services, EFG is
compensated by an amount equal to 2.23% of Equipment Base Price paid by the
Partnership.  For management services, EFG is compensated by an amount equal to
the lesser of (i) 5% of gross operating lease rental revenue and 2% of gross
full payout lease rental revenue received by the Partnership or (ii) fees which
the General Partner reasonably believes to be competitive for similar services
for similar equipment.  Both of these fees are subject to certain limitations
defined in the Management Agreement.  Compensation to EFG for services connected
to the sale of equipment is calculated as the lesser of (i) 3% of gross sale
proceeds or (ii) one-half of reasonable brokerage fees otherwise payable under
arm's length circumstances.  Payment of the remarketing fee is subordinated to
Payout and is subject to certain limitations defined in the Management
Agreement.

    Administrative charges represent amounts owed to EFG, pursuant to Section
9.4(c) of the Restated Agreement, as amended, for persons employed by EFG who
are engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid by EFG
on behalf of the Partnership which are reimbursed to EFG.

    In 1991, the Partnership acquired 900 intermodal cargo containers, at a cost
of $1,840,140, and leased such containers to ICCU Containers, S.p.A. ("ICCU"),
an affiliate of Clou Investments (U.S.A.), Inc. ("CLOU"), which formerly owned a
minority interest in AFG Holdings Illinois Limited Partnership, formerly a
partner in AFG. The ability of ICCU to fulfill all of its obligations under the
lease contract deteriorated, in EFG's view, in 1994.  As a result, EFG, on the
Partnership's behalf,  negotiated with other parties to either assume the lease
obligations of ICCU or acquire the containers.  As a result of these
negotiations, the Partnership transferred 740 containers, having a net book
value of $756,502, to a third party on November 30, 1994.  The Partnership
received, as settlement from ICCU and the third party, consideration as follows:
(i) a contractual right to receive comparable containers with an estimated fair
market value of $852,207 and (ii) beneficial assignment of an existing EFG note
payable to CLOU which had a principal balance of $370,264 at the date of the
transaction.  The note had an effective interest rate of 8% and a quarterly
amortization schedule which matured on December 31, 1996.  All amounts due from
EFG pursuant to this note had been received at December 31, 1996 in accordance
with the original amortization schedule.  A portion of the consideration
received was used to satisfy the Partnership's accounts receivable balance of
$183,128 outstanding from ICCU at November 30, 1994.

    An additional 158 containers, having a net book value of $161,523, were
pending settlement at December 31, 1994. On March 31, 1995, 82 of these
containers, having a net book value of $77,841 were transferred to the third
party and the Partnership received $92,551 as consideration for these
containers. The remaining 76 containers, having a net book value of $33,298,
represent less than 1% of the Partnership's equipment portfolio at December 31,
1996. The remaining two containers of the original equipment group were disposed
of in 1992 for stipulated payments as a result of casualty events.

                                      -19-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

          By April 1995, the Partnership replaced 822 of the original containers
with comparable containers and leased such containers to a new lessee pursuant
to the rules for completing a like-kind exchange for income tax reporting
purposes.  The carrying value of the new containers, $1,958,040, was reduced by
$282,842, representing the amount of gain deferred on the original containers,
and $14,710, the amount of gain deferred on the 82 containers settled during
1995.  The Partnership obtained approximately $925,000 of long-term financing in
connection with the replacement containers.

    All equipment was purchased from EFG, one of its Affiliates or from third-
party sellers.  The Partnership's Purchase Price is determined by the method
described in Note 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 prior to remittance to the Partnership.
At December 31, 1996, the Partnership was owed $89,539 by EFG for such funds and
the interest thereon.  These funds were remitted to the Partnership in January
1997.

          On August 18, 1995, Atlantic Acquisition Limited Partnership ("AALP"),
a newly formed Massachusetts limited partnership owned and controlled by certain
principals of EFG, commenced a voluntary cash Tender Offer (the "Offer") for up
to approximately 45% of the outstanding units of limited partner interest in
this Partnership and 20 affiliated partnerships sponsored and managed by EFG.
The Offer was subsequently amended and supplemented in order to provide
additional disclosure to unitholders; increase the offer price; reduce the
number of units sought to approximately 35% of the outstanding units; and extend
the expiration date of the Offer to October 20, 1995.  Following commencement of
the Offer, certain legal actions were initiated by interested persons against
AALP, each of the general partners (4 in total) of the 21 affected programs, and
various other affiliates and related parties.  One action, a class action
brought in the United States District Court for the District of Massachusetts
(the "Court") on behalf of the unitholders (limited partners), sought to enjoin
the Offer and obtain unspecified monetary damages.  A settlement of this
litigation was approved by the Court on November 15, 1995. The Plaintiffs filed
an appeal in this matter.  On November 26, 1996, the United States Court of
Appeals for the First Circuit handed down a decision affirming the Court's
approval of the settlement.  A second class action, brought in the Superior
Court of the Commonwealth of Massachusetts (the "Superior Court") seeking to
enjoin the Offer, obtain unspecified monetary damages, and intervene in the
first class action, was dismissed by the Superior Court. The limited partners of
the Partnership tendered approximately 16,536 units or 2.06% of the total
outstanding units of the Partnership to AALP.  The operations of the Partnership
were not adversely affected by these proceedings or settlements.  On December 1,
1996, EFG purchased a Class D interest, representing a 49% economic interest in
AALP.


NOTE 5 - NOTES PAYABLE
----------------------

    Notes payable at December 31, 1996 consisted of installment notes of
$6,547,519 payable to banks and institutional lenders. The installment notes
bear interest rates ranging between 7.04% and 10.65%, except one note which
bears a fluctuating interest rate based on LIBOR plus a margin (5.5% at December
31, 1996).  All of the installment notes are non-recourse and are collateralized
by the equipment and assignment of the related lease payments.  Generally, the
installment notes will be fully amortized by noncancellable rents.  However, the
Partnership has balloon payment obligations at the expiration of the respective
primary lease terms related to the Finnair Aircraft and the Reno Aircraft of
$1,127,840 and $679,276, respectively.  The carrying value of notes payable
approximates fair value at December 31, 1996.

                                      -20-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

    The annual maturities of the installment notes payable are as follows:
<TABLE>

    <S>                                 <C>          <C>
    For the year ending December 31,     1997         $1,242,741
                                         1998          1,122,971
                                         1999          2,009,012
                                         2000            480,701
                                         2001            483,565
                                   Thereafter          1,208,529
                                                     -----------

                                    Total             $6,547,519
                                                     ===========

</TABLE>
NOTE 6 - INCOME TAXES
---------------------

    The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.

    For financial statement purposes, the Partnership allocates net income or
loss to each class of partner according to their respective ownership
percentages (95% to the Limited Partners and 5% to the General Partner).  This
convention  differs  from the income or loss allocation requirements for income
tax and Dissolution Event purposes as delineated in the Restated Agreement, as
amended.  For income tax purposes, the Partnership allocates net income or net
loss in accordance with the provisions of such agreement.  The Restated
Agreement, as amended, requires that upon dissolution of the Partnership, the
General Partner will be required to contribute to the Partnership an amount
equal to any negative balance which may exist in the General Partner's tax
capital account.  At December 31, 1996, the General Partner had a positive tax
capital account balance.

    The following is a reconciliation between net income (loss) reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>


                                          1996         1995          1994
                                       ----------  ------------  ------------

<S>                                    <C>         <C>           <C>
Net income (loss)                       $552,157    $ (779,251)   $  (22,729)
   Financial statement depreciation
   in excess of (less than) tax
    depreciation                         (67,047)      850,430     1,197,869
   Write-down of equipment                    --            --     1,202,000
   Prepaid rental income                  (7,475)      (18,823)      (23,119)
   Other                                 404,699     1,367,074       316,627
                                        --------    ----------    ----------

Net income for federal income tax
   reporting purposes                   $882,334    $1,419,430    $2,670,648
                                        ========    ==========    ==========

</TABLE>

    The principal component of "Other" consists of the difference between the
tax gain on equipment disposals and the financial statement gain (loss) on
disposals.

                                      -21-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

    The following is a reconciliation between partners' capital reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1996 and 1995:

<TABLE>
<CAPTION>

                                              1996          1995
                                          ------------  ------------

<S>                                       <C>           <C>
Partners' capital                          $6,821,321    $7,432,059

   Add back selling commissions and
    organization and offering costs         2,234,203     2,234,203

   Financial statement distributions in
    excess of tax distributions                10,572        15,857

   Cumulative difference between
    federal income tax and financial
    statement income (loss)                  (557,342)     (887,519)
                                           ----------    ----------
Partners' capital for federal income
 tax reporting purposes                    $8,508,754    $8,794,600
                                           ==========    ==========
</TABLE>

    Financial statement distributions in excess of tax distributions and
cumulative difference between federal income tax and financial statement income
(loss) represent timing differences.


NOTE 7 - LEGAL PROCEEDINGS
--------------------------

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

                                      -22-
<PAGE>

                       ADDITIONAL FINANCIAL INFORMATION

                                      -23-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

        SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST
                             OF EQUIPMENT DISPOSED

              for the years ended December 31, 1996, 1995 and 1994


   The Partnership classifies all rents from leasing equipment as lease revenue.
Upon expiration of the primary lease terms, equipment may be sold, rented on a
month-to-month basis or re-leased for a defined period under a new or extended
lease agreement.  The proceeds generated from selling or re-leasing the
equipment, in addition to any month-to-month revenue, represent the total
residual value realized for each item of equipment.  Therefore, the financial
statement gain or loss, which reflects the difference between the net book value
of the equipment at the time of sale or disposition and the proceeds realized
upon sale or disposition may not reflect the aggregate residual proceeds
realized by the Partnership for such equipment.

   The following is a summary of cash excess associated with equipment
dispositions occurring in the years ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>

                                             1996         1995         1994
                                          -----------  -----------  -----------

<S>                                       <C>          <C>          <C>
Rents earned prior to disposal of
   equipment, net of interest charges      $2,585,344   $1,926,993   $1,949,544

Sale proceeds realized upon disposition
   of equipment                               692,766      565,907      534,283
                                           ----------   ----------   ----------
Total cash generated from rents
   and equipment sale proceeds              3,278,110    2,492,900    2,483,827

Original acquisition cost of equipment
   disposed                                 3,249,160    2,199,677    1,858,821
                                           ----------   ----------   ----------
Excess of total cash generated to cost
   of equipment disposed                   $   28,950   $  293,223   $  625,006
                                           ==========   ==========   ==========
</TABLE>

                                      -23-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

           STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS,
                             SALES AND REFINANCINGS

                      for the year ended December 31, 1996

<TABLE>
<CAPTION>

                                                    Sales and
                                    Operations    Refinancings       Total
                                  --------------  -------------  --------------

<S>                               <C>             <C>            <C>
Net income                          $   195,705      $ 356,452     $   552,157

Add:
   Depreciation and amortization      3,163,960             --       3,163,960
   Management fees                      140,227             --         140,227
   Book value of disposed
    equipment                                --        336,314         336,314

Less:
   Principal reduction of notes
    payable                          (2,639,239)            --      (2,639,239)
                                    -----------   ------------     -----------
   Cash from operations, sales
    and refinancings                    860,653        692,766       1,553,419


Less:
   Management fees                     (140,227)            --        (140,227)
                                    -----------   ------------     -----------
   Distributable cash from
    operations, sales and
    refinancings                        720,426        692,766       1,413,192

Other sources and uses of cash:
   Cash at beginning of year            799,133             --         799,133
   Purchase of equipment                (43,297)            --         (43,297)
   Net change in receivables and
   accruals                             287,063             --         287,063

Less:
   Cash distributions paid             (575,847)      (692,766)     (1,268,613)
                                    -----------   ------------     -----------

Cash at end of year                 $ 1,187,478             --     $ 1,187,478
                                    ===========   ============     ===========
</TABLE>

                                      -24-
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                      SCHEDULE OF COSTS REIMBURSED TO THE
                 GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED
                   BY SECTION 9.4 OF THE AMENDED AND RESTATED
                AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP

                               December 31, 1996



    For the year ended December 31, 1996, the Partnership reimbursed the General
Partner and its Affiliates for the following costs:

<TABLE>

     <S>                                     <C>
     Operating expenses                      $189,920
</TABLE>

                                      -25-