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

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended      June 30, 1997

                                       OR

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

For the transition period from _______________________to_______________________

                               -----------------------

For Quarter Ended June 30, 1997                      Commission File No. 0-21390

                             AFG Investment Trust B
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

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

88 Broad Street, Boston, MA                                  02110
---------------------------------------                      ---------
(Address of principal executive offices)                     (Zip Code)

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

98 North Washington Street, Boston, MA 02114
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No|_|

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes|_| No|_|
<PAGE>

                             AFG Investment Trust B

                                    FORM 10-Q

                                      INDEX

                                                                        Page
                                                                        ----
PART I.  FINANCIAL INFORMATION:

    Item 1.   Financial Statements

      Statement of Financial Position
        at  June 30, 1997 and December 31, 1996                            3

      Statement of Operations
        for the three and six months ended June 30, 1997 and 1996          4

      Statement of Cash Flows
        for the six months ended June 30, 1997 and 1996                    5

      Notes to the Financial Statements                                 6-10

    Item 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations                      11-15

PART II.  OTHER INFORMATION:

    Items 1 - 6                                                           16
<PAGE>

                             AFG Investment Trust B

                         STATEMENT OF FINANCIAL POSITION
                       June 30, 1997 and December 31, 1996

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       June 30,            December 31,
                                                                         1997                  1996
                                                                  -----------------      -----------------
<S>                                                               <C>                    <C>              
ASSETS

Cash and cash equivalents                                         $       3,403,578      $       2,829,093

Rents receivable                                                            721,966                339,293

Accounts receivable - affiliate                                             207,538                154,395

Equipment at cost, net of accumulated depreciation
   of $14,162,079 and $12,161,949 at June 30, 1997
   and December 31, 1996, respectively                                   11,257,177             13,307,711

Organization costs, net of accumulated amortization
   of $4,833 and $4,333 at June 30, 1997
   and December 31, 1996, respectively                                          167                    667
                                                                  -----------------      -----------------

        Total assets                                              $      15,590,426      $      16,631,159
                                                                  =================      =================

LIABILITIES AND PARTICIPANTS' CAPITAL

Notes payable                                                     $       3,416,423      $       4,352,811
Accrued interest                                                             57,847                 36,571
Accrued liabilities                                                          15,000                 23,250
Accrued liabilities - affiliate                                              37,200                 47,178
Deferred rental income                                                      101,626                 45,550
Cash distributions payable to participants                                  200,199                200,199
                                                                  -----------------      -----------------

        Total liabilities                                                 3,828,295              4,705,559
                                                                  -----------------      -----------------

Participants' capital (deficit):
   Managing Trustee                                                         (32,017)               (30,382)
   Special Beneficiary                                                     (271,380)              (257,894)
   Beneficiary Interests
   (665,494 Interests; initial purchase price of $25 each)               12,065,528             12,213,876
                                                                  -----------------      -----------------

        Total participants' capital                                      11,762,131             11,925,600
                                                                  -----------------      -----------------

        Total liabilities and participants' capital               $      15,590,426      $      16,631,159
                                                                  =================      =================
</TABLE>


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


                                      3
<PAGE>

                             AFG Investment Trust B

                             STATEMENT OF OPERATIONS
            for the three and six months ended June 30, 1997 and 1996

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months                         Six Months
                                                              Ended June 30,                     Ended June 30,
                                                          1997             1996               1997            1996
                                                    ---------------  ---------------    --------------  --------------
<S>                                                 <C>              <C>                <C>             <C>           
Income:

    Lease revenue                                   $     1,361,952  $     1,405,472    $    2,710,570  $    2,884,726

    Interest income                                          38,874           37,459            78,074          42,010

    Gain (loss) on sale of equipment                          3,303          (90,809)            6,463        (274,825)
                                                    ---------------  ---------------    --------------  --------------

         Total income                                     1,404,129        1,352,122         2,795,107       2,651,911
                                                    ---------------  ---------------    --------------  --------------


Expenses:

    Depreciation and amortization                         1,010,685        1,086,792         2,031,113       2,231,849

    Interest expense                                         70,676          113,169           115,786         223,194

    Equipment management fees
      - affiliate                                            57,244           59,042           114,503         121,495

    Operating expenses - affiliate                           54,942           31,397            96,579          48,290
                                                    ---------------  ---------------    --------------  --------------

         Total expenses                                   1,193,547        1,290,400         2,357,981       2,624,828
                                                    ---------------  ---------------    --------------  --------------

Net income                                          $       210,582  $        61,722    $      437,126  $       27,083
                                                    ===============  ===============    ==============  ==============
Net income
  per Beneficiary Interest                          $          0.29  $          0.08    $         0.60  $         0.04
                                                    ===============  ===============    ==============  ==============
Cash distributions declared
  per Beneficiary Interest                          $          0.41  $          0.32    $         0.82  $         0.63
                                                    ===============  ===============    ==============  ==============
</TABLE>


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


                                       4
<PAGE>

                             AFG Investment Trust B

                             STATEMENT OF CASH FLOWS
                 for the six months ended June 30, 1997 and 1996

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          1997              1996
                                                                                   ----------------  ----------------
<S>                                                                                <C>               <C>             
Cash flows from (used in) operating activities:
Net income                                                                         $        437,126  $         27,083

Adjustments to reconcile net income to net 
    cash from operating activities:
        Depreciation and amortization                                                     2,031,113         2,231,849
           (Gain) loss on sale of equipment                                                  (6,463)          274,825

Changes in assets and liabilities 
    Decrease (increase) in:
        rents receivable                                                                   (382,673)           81,710
        accounts receivable - affiliate                                                     (53,143)         (112,210)
    Increase (decrease) in:
        accrued interest                                                                     21,276            (9,541)
        accrued liabilities                                                                  (8,250)           (7,500)
        accrued liabilities - affiliate                                                      (9,978)           10,513
        deferred rental income                                                               56,076           126,428
                                                                                   ----------------  ----------------
           Net cash from operating activities                                             2,085,084         2,623,157
                                                                                   ----------------  ----------------

Cash flows from (used in) investing activities:
    Purchase of equipment                                                                        --        (1,441,796)
    Proceeds from equipment sales                                                            26,384         1,776,161
                                                                                   ----------------  ----------------

           Net cash from investing activities                                                26,384           334,365
                                                                                   ----------------  ----------------

Cash flows from (used in) financing activities:
    Proceeds from notes payable                                                                  --           997,888
    Principal payments - notes payable                                                     (936,388)       (1,808,366)
    Distributions paid                                                                     (600,595)         (461,996)
                                                                                   ----------------  ----------------

           Net cash used in financing activities                                         (1,536,983)       (1,272,474)
                                                                                   ----------------  ----------------

Net increase in cash and cash equivalents                                                   574,485         1,685,048

Cash and cash equivalents at beginning of period                                          2,829,093           337,293
                                                                                   ----------------  ----------------

Cash and cash equivalents at end of period                                         $      3,403,578  $      2,022,341
                                                                                   ================  ================

Supplemental disclosure of cash flow information:
       Cash paid during the period for interest                                    $         94,510  $        232,735
                                                                                   ================  ================
</TABLE>


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


                                       5
<PAGE>

                             AFG Investment Trust B

                        Notes to the Financial Statements
                                  June 30, 1997

                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

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

     In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at June 30, 1997 and December 31, 1996 and results of operations for
the three and six month periods ended June 30, 1997 and 1996 have been made and
are reflected.

NOTE 2 - CASH

     At June 30, 1997, the Trust had $3,300,000 invested in reverse repurchase
agreements secured by U.S. Treasury Bills or interests in U.S. Government
securities.

NOTE 3 - REVENUE RECOGNITION

     Rents are payable to the Trust monthly, quarterly or semi-annually and no
significant amounts are calculated on factors other than the passage of time.
Rents from Reno Air, Inc. ("Reno Air"), as provided for in the lease agreement,
are adjusted monthly for changes in the London Inter-Bank Offered Rate
("LIBOR"). Future rents from Reno Air, included below, reflect the most recent
LIBOR effected rental payment. The leases are accounted for as operating leases
and are noncancellable. Rents received prior to their due dates are deferred.
Future minimum rents of $4,733,092 are due as follows:

     For the year ending June 30, 1998                 $3,321,864
                                  1999                    697,443
                                  2000                    271,003
                                  2001                    203,562
                                  2002                    159,480
                            Thereafter                     79,740
                                                       ----------

                                 Total                 $4,733,092
                                                       ==========


                                       6
<PAGE>

                             AFG Investment Trust B
                        Notes to the Financial Statements

                                   (Continued)
NOTE 4 - EQUIPMENT

     The following is a summary of equipment owned by the Trust at June 30,
1997. In the opinion of Equis Financial Group ("EFG"), the acquisition cost of
the equipment did not exceed its fair market value.

<TABLE>
<CAPTION>
                                                            Remaining
                                                            Lease Term                             Equipment
        Equipment Type                                       (Months)                               at Cost
-----------------------------                               ----------                          -------------
<S>                                                             <C>                             <C>          
Aircraft                                                        6-68                            $   8,018,105
Computers and peripherals                                       1-18                                4,506,396
Materials handling                                              1-40                                4,466,295
Communications                                                  9-18                                3,039,422
General plant and warehouse                                        6                                1,576,077
Construction and mining                                         1-43                                1,200,577
Retail store fixtures                                            3-9                                1,101,551
Tractors and heavy duty trucks                                  5-27                                  605,644
Manufacturing                                                    2-6                                  449,902
Furniture and fixtures                                             4                                  284,019
Trailers/intermodal containers                                  6-12                                  128,443
Photocopying                                                     1-5                                   42,825
                                                                                                -------------

                                                Total equipment cost                               25,419,256

                                            Accumulated depreciation                              (14,162,079)
                                                                                                -------------

                          Equipment, net of accumulated depreciation                              $11,257,177
                                                                                                =============
</TABLE>

     At June 30, 1997, the Trust's equipment portfolio included equipment having
a proportionate original cost of $11,023,146, representing approximately 43% of
total equipment cost.

     At June 30, 1997, the cost and net book value of equipment held for sale or
re-lease was approximately $382,000 and $84,000, respectively. The Managing
Trustee is actively seeking the sale or re-lease of all equipment not on lease.

NOTE 5 - RELATED PARTY TRANSACTIONS

     All operating expenses incurred by the Trust are paid by EFG on behalf of
the Trust and EFG is reimbursed at its actual cost for such expenditures. Fees
and other costs incurred during the six month periods ended June 30, 1997 and
1996, which were paid or accrued by the Trust to EFG or its Affiliates, are as
follows:

<TABLE>
<CAPTION>
                                                                     1997                      1996
                                                               --------------           ---------------
<S>                                                            <C>                      <C>    
Equipment acquisition fees                                                 --           $        52,786
Equipment management fees                                      $      114,503                   121,495
Administrative charges                                                 30,654                    10,500
Reimbursable operating expenses
  due to third parties                                                 65,925                    37,790
                                                               --------------           ---------------

                                               Total           $      211,082           $       222,571
                                                               ==============           ===============
</TABLE>

                                       7
<PAGE>

                             AFG Investment Trust B
                        Notes to the Financial Statements

                                   (Continued)

     All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Trust. At
June 30, 1997, the Trust was owed $207,538 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in July 1997.

NOTE 6 - NOTES PAYABLE

     Notes payable at June 30, 1997 consisted of installment notes of $3,416,423
payable to banks and institutional lenders. The notes bear interest rates
ranging between 5.7% and 7.7%, except for one note which bears a fluctuating
interest rate based on LIBOR plus a margin (5.69% at June 30, 1997). All of the
installment notes are non-recourse and are collateralized by the equipment and
assignment of the related lease payments. Generally, the installment notes will
be fully amortized by noncancellable rents. However, the Trust has a balloon
payment obligation of $282,421 at the expiration of the primary lease term
related to the Reno Aircraft. The carrying amount of notes payable approximates
fair value at June 30, 1997.

     The annual maturities of the notes payable are as follows:

     For the year ending June 30, 1998                  $ 2,330,118
                                  1999                      388,838
                                  2000                      113,911
                                  2001                      123,188
                                  2002                      133,221
                            Thereafter                      327,147
                                                        -----------

                                 Total                  $ 3,416,423
                                                        ===========

NOTE 7 - LEGAL PROCEEDINGS

     On June 24, 1997, four plaintiffs (the "Plaintiffs") owning limited partner
units or beneficiary interests in eight investment programs sponsored by EFG
filed a lawsuit, as a derivative action, on behalf of the Trust and 27 other
investment programs (collectively, the "Nominal Defendants") in the Superior
Court of the Commonwealth of Massachusetts for the County of Suffolk against EFG
and certain of EFG's affiliates, including the Managing Trustee of the Trust and
four other wholly-owned subsidiaries of EFG which are the general partner or
managing trustee of one or more of the investment programs, (collectively, the
"Managing Defendants"), and certain other entities and individuals that have
control of the Managing Defendants and the Nominal Defendants (the "Controlling
Defendants"). The Plaintiffs assert claims of breach of fiduciary duty, breach
of contract, unjust enrichment, and equitable relief and seek various remedies,
including compensatory and punitive damages to be determined at trial.

     The Managing Trustee and EFG are in the early stages of evaluating the
nature and extent of the claims asserted in this lawsuit and cannot predict its
outcome with any degree of certainty. However, based upon all of the facts
presently being considered by management, the Managing Trustee and EFG do not
believe that any likely outcome will have a material adverse effect on the
Trust. The Managing Trustee, EFG and their affiliates intend to vigorously
defend against the lawsuit.

     On July 27, 1995, EFG, on behalf of the Trust and other EFG-sponsored
investment programs, filed an action in the Commonwealth of Massachusetts
Superior Court Department of the Trial Court in and for the County of Suffolk,
for damages and declaratory relief against a lessee of the Trust, National Steel
Corporation ("National Steel"), under a certain Master Lease Agreement ("MLA")
for the lease of certain equipment. EFG is seeking the 


                                       8
<PAGE>

                             AFG Investment Trust B
                        Notes to the Financial Statements

                                   (Continued)

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

NOTE 8- ISSUANCE OF CLASS B INTERESTS AND OFFER TO REDEEM CLASS A INTERESTS

     On October 26, 1996, the Trust filed a Solicitation Statement with the
United States Securities and Exchange Commission (the "SEC") which subsequently
was sent to the Beneficiaries pursuant to Regulation 14A of Section 14 of the
Securities Exchange Act. The Solicitation Statement sought the consent of the
Beneficiaries to a proposed amendment (the "Amendment") to the Amended and
Restated Declaration of Trust (the "Trust Agreement") which would (i) amend the
provisions of the Trust Agreement governing the redemption of Beneficiary
Interests to permit the Trust to offer to redeem outstanding Beneficiary
Interests at such times, in such amounts, in such manner and at such prices as
the Managing Trustee might determine from time to time, in accordance with
applicable law; and (ii) add a provision to the Trust Agreement that would
permit the Trust to issue, at the discretion of the Managing Trustee and without
further consent or approval of the Beneficiaries, an additional class of
security with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as the Managing Trustee
might affix. The funds obtained through the issuance of such a security would be
used by the Trust to (a) expand redemption opportunities for Beneficiaries
without using Trust funds which might otherwise be available for cash
distributions; and (b) make a special one-time cash distribution to the
Beneficiaries.

      Pursuant to the Trust Agreement, the adoption of the Amendment required
the consent of the Beneficiaries holding more than 50% in the aggregate of the
Beneficiary Interests held by all Beneficiaries. A majority of Beneficiary
Interests, representing 369,960 or 55.6% of all Beneficiary Interests, voted in
favor of the Amendment; 69,792 or 10.5% of all Beneficiary Interests voted
against the Amendment; and 24,444 or 3.7% of all Beneficiary Interests
abstained. Approximately 69.8% of all Beneficiary Interests participated in the
vote. Accordingly, the Trust Agreement was amended.

      On February 12, 1997, the Trust filed a Registration Statement on Form S-1
with the SEC, which became effective June 10, 1997. The Registration Statement
covered the issuance and sale of a new class of beneficiary interests in the
Trust (the "Class B Interests"). The characteristics of the Class B Interests,
associated risk factors and other matters of importance to the Beneficiaries and
purchasers of the Class B Interests were set forth in a Prospectus sent to the
Beneficiaries. On July 17, 1997, the offering closed and on July 18, 1997 the
Trust issued 1,000,961 Class B Interests at $5.00 per interest, thereby
generating $5,004,805 in aggregate Class B capital contributions. Class A
Beneficiaries purchased 3,588 Class B Interests, generating $17,940 of such
aggregate capital contributions, and the Special Beneficiary, EFG, purchased
997,373 Class B Interests, generating $4,986,865 of such aggregate capital
contributions.

      Subsequently, EFG transferred its Class B Interests to a special-purpose
company, Equis II Corporation, a Delaware corporation. EFG also transferred its
ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to Equis
II Corporation. As a result, Equis II Corporation has voting control of the
Trust through its ownership of the majority of all of the Trust's outstanding
voting interests, as well as its ownership of AFG ASIT 



                                       9
<PAGE>

                             AFG Investment Trust B
                        Notes to the Financial Statements

                                   (Continued)

Corporation. Equis II Corporation is controlled by EFG's President and Chief
Executive Officer, Gary D. Engle. Accordingly, control of the Managing Trustee
did not change as a result of the foregoing transactions.

      As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee intends to use a portion of the net cash proceeds realized
from the offering of the Class B Interests to pay a one-time special cash
distribution to the Class A Beneficiaries of the Trust. The Managing Trustee
expects to declare and pay this special cash distribution on or before August
31, 1997.

      On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A Beneficiary Interests of the Trust by filing a Form
13E-4, Issuer Tender Offer Statement, with the SEC and distributing to the Class
A Beneficiaries information (the "Tender Documents") concerning the offer. The
Trust will use a portion of the net proceeds realized from the offering of the
Class B Interests to purchase the Class A Beneficiary Interests tendered as a
result of the offer. The Tender Documents describe, among other things, the
terms of the offer and the purchase price per Class A Beneficiary Interest being
offered by the Trust.

NOTE 9- SUBSEQUENT EVENT

     On July 7, 1997, a lessee of the Trust, Montgomery Ward and Company, Inc.,
filed for protection under Chapter 11 of the Bankruptcy Code. The Trust has not
been officially notified by the Bankruptcy Court to date. Equipment leased to
this lessee had a cost and net book value of approximately $2,700,000 and
$990,000, respectively, at the time of the bankruptcy filing. Currently, the
Trust is unable to make a determination as to the significance of this
bankruptcy.


                                       10
<PAGE>

                             AFG Investment Trust B

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION

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

     Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to a variety of risks
and uncertainties. There are a number of important factors that could cause
actual results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to, the
ability of EFG to collect all rents due under the attendant lease agreements and
successfully remarket the Trust's equipment upon the expiration of such leases.

Three and six months ended June 30, 1997 compared to the three and six months
ended June 30, 1996:

Overview

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

Results of Operations

     For the three and six months ended June 30, 1997, the Trust recognized
lease revenue $1,361,952 and $2,710,570, respectively, compared to $1,405,472
and $2,884,726 for the same periods in 1996. The decrease in lease revenue from
1996 to 1997 is due to primary lease term expirations and the sale of equipment.
In the future, the level of lease revenue will continue to decline due to the
continued expiration of the Trust's primary lease term agreements and equipment
sales. The Trust also earns interest income from temporary investments of rental
receipts and equipment sales proceeds in short-term instruments.

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

     During the three and six months ended June 30, 1997, the Trust sold
equipment having a net book value of $8,367 and $19,921, respectively to
existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $3,303 and $6,463, respectively.

     On February 5, 1996, the Trust concluded the sale of its interest in the
United Aircraft to the lessee, United Air Lines Inc., ("United"), as reported in
Note 3 to the Trust's 1996 Annual Report. The Trust recognized a net loss of
$560,982 in connection with this transaction, of which $384,782 was recognized
as Write-Down of Equipment in 


                                       11
<PAGE>

                             AFG Investment Trust B

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION

1995. The remainder of $176,200 was recognized as a loss on sale of equipment on
the accompanying Statement of Operations for the six months ended June 30, 1996.
In addition to lease rents, the Trust received net sale proceeds of $1,684,292
from United for the aircraft. A portion of such sale proceeds was reinvested in
other equipment in March 1996 through the acquisition of an 8.86% ownership
interest in an aircraft (the "Reno Aircraft") at an aggregate cost to the Trust
of $1,239,741. To acquire its interest in the Reno Aircraft, the Trust obtained
long-term financing of $997,888 from a third-party lender and utilized cash
proceeds of $241,853 from the sale of the United Aircraft. During the three and
six months ended June 30, 1996, the Trust sold other equipment having a net book
value of $172,457 and $190,494, respectively, to existing lessees and third
parties. These sales resulted in a net loss, for financial statement purposes,
of $90,809 and $98,625, respectively.

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

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

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

     Depreciation and amortization expense for the three and six months ended
June 30, 1997 was $1,010,685 and $2,031,113, respectively, compared to
$1,086,792 and $2,231,849 for the same periods in 1996. For financial reporting
purposes, to the extent that an asset is held on primary lease term, the Trust
depreciates the difference between (i) the cost of the asset and (ii) the
estimated residual value of the asset on a straight-line basis over such term.
For purposes of this policy, estimated residual values represent estimates of
equipment values at the date of primary lease expiration. To the extent that an
asset is held beyond its primary lease term, the Trust continues to depreciate
the remaining net book value of the asset on a straight-line basis over the
asset's remaining economic life.

     Interest expense was $70,676 and $115,786 or 5.2% and 4.3% of lease revenue
for the three and six months ended June 30, 1997, respectively, compared to
$113,169 and $223,194 or 8.1% and 7.7% of lease revenue for the same periods in
1996. In the future, interest expense 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.

     Management fees were approximately 4.2% of lease revenue for each of the
three and six month periods ended June 30, 1997 and 1996. Management fees are
based on 5% of gross lease revenue generated by operating leases and 2% of gross
lease revenue generated by full payout leases.

     Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as printing,
distribution and remarketing expenses. Collectively, operating expenses
represented 4% and 3.6% of lease revenue for the three and six months ended June
30, 1997, respectively, compared to 2.2% 


                                       12
<PAGE>

                             AFG Investment Trust B

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION

and 1.7% of lease revenue for each of the same periods in 1996. The increase in
operating expenses from 1996 to 1997 was due primarily to professional service
costs incurred in connection with the Solicitation and Registration Statements
described in Note 8 to the accompanying financial statements. The amount of
future operating expenses cannot be predicted with certainty; however, such
expenses are usually higher during the acquisition and liquidation phases of a
trust. Other fluctuations typically occur in relation to the volume and timing
of remarketing activities.

Liquidity and Capital Resources and Discussion of Cash Flows

     The Trust by its nature is a limited life entity which was established for
specific purposes described in the preceding "Overview". As an equipment leasing
program, the Trust's principal operating activities derive from asset rental
transactions. Accordingly, the Trust's principal source of cash from operations
is provided by the collection of periodic rents. These cash inflows are used to
satisfy debt service obligations associated with leveraged leases, and to pay
management fees and operating costs. Operating activities generated net cash
inflows of $2,085,084 and $2,623,157 for the six months ended June 30, 1997 and
1996, respectively. Future renewal, re-lease and equipment sale activities will
cause a gradual decline in the Trust's primary-term lease revenue and
corresponding sources of operating cash. Overall, expenses associated with
rental activities, such as management fees, and net cash flow from operating
activities will decline as the Trust experiences a higher frequency of
remarketing events.

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

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

     Cash expended for asset acquisitions and cash realized from asset disposal
transactions are reported under investing activities on the accompanying
Statement of Cash Flows. During the six months ended June 30, 1997, the Trust
realized equipment sale proceeds of $26,384. During the same period in 1996, the
Trust realized equipment sale proceeds of $1,776,161, including $1,684,292 of
proceeds from the United Aircraft. Future inflows of cash from asset disposals
will vary in timing and amount and will be influenced by many factors including,
but not limited to, the frequency and timing of lease expirations, the type of
equipment being sold, its condition and age, and future market conditions. The
Trust expended $1,441,796 to acquire equipment during the six months ended June
30, 1996. This amount reflects the acquisition of an ownership interest in a
commercial jet aircraft at a cost of $1,239,741, pursuant to the reinvestment
provisions of the Trust's prospectus and an original equipment acquisition of
$202,055. The reinvestment equipment was financed through a combination of
leveraging and the sale proceeds available from the aircraft transaction,
discussed above. There were no equipment acquisitions during the same period in
1997.

     The Trust obtained long-term financing in connection with certain equipment
leases. The origination of such indebtedness and the subsequent repayments of
principal are reported as components of financing activities. Cash inflows of
$997,888 in 1996, resulted from leveraging a portion of the Trust's equipment
portfolio with third-party 


                                       13
<PAGE>

                             AFG Investment Trust B

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION

lenders. Each note payable is recourse only to the specific equipment financed
and to the minimum rental payments contracted to be received during the debt
amortization period (which period generally coincides with the lease rental
term). As rental payments are collected, a portion or all of the rental payment
is used to repay the associated indebtedness. In future periods, the amount of
cash used to repay debt obligations will decline as the principal balance of
notes payable is reduced through the collection and application of rents.
However, the Trust has a balloon payment obligation of $282,421 at the
expiration of the primary lease term related to the Reno Aircraft.

     Cash distributions to the Managing Trustee, the Special Beneficiary and the
Beneficiaries are declared and generally paid within 45 days following the end
of each calendar month. The payment of such distributions is presented as a
component of financing activities. For the six months ended June 30, 1996, the
Trust declared total cash distributions of Distributable Cash From Operations
and Distributable Cash From Sales and Refinancings of $600,595. In accordance
with the Trust Agreement, the Beneficiaries were allocated 90.75% of these
distributions, or $545,040; the Special Beneficiary was allocated 8.25%, or
$49,549; and the Managing Trustee was allocated 1%, or $6,006.

     For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each have accumulated a capital deficit at June 30, 1997. This is
the result of aggregate cash distributions to these Participants being in excess
of their aggregate capital contributions ($1,000 each) and their respective
allocations of financial statement net income or loss. Ultimately, the existence
of a capital deficit for the Managing Trustee or the Special Beneficiary for
financial reporting purposes is not indicative of any further capital
obligations to the Trust by either the Managing Trustee or the Special
Beneficiary. However, for income tax purposes, the Trust Agreement requires that
income be allocated first to those Participants having negative tax capital
account balances so as to eliminate any such balances. In accordance with the
Trust Agreement, upon the dissolution of the Trust, the Managing Trustee will be
required to contribute to the Trust an amount equal to any negative balance
which may exist in the Managing Trustee's tax capital account. No such
requirement exists with respect to the Special Beneficiary. At December 31,
1996, the Managing Trustee had a positive tax capital account balance.

     At June 30, 1997, the Trust had aggregate future minimum lease payments of
$4,733,092 from contractual lease agreements (see Note 3 to the financial
statements), of which $3,416,423 will be used to amortize the principal balance
of notes payable (see Note 6 to the financial statements). Additional cash
inflows will be realized from future remarketing activities, such as lease
renewals and equipment sales, the timing and extent of which cannot be predicted
with certainty. This is because the timing and extent of equipment sales is
often dependent upon the needs and interests of the existing lessees. Some
lessees may choose to renew their lease contracts, while others may elect to
return the equipment. In the latter instances, the equipment could be re-leased
to another lessee or sold to a third party. Accordingly, as the Trust matures
and a greater level of its equipment assets become available for remarketing,
the cash flows of the Trust will become less predictable. In addition, the Trust
will have cash outflows to satisfy interest on indebtedness and to pay
management fees and operating expenses. Ultimately, the Trust is expected to
meet its future disbursement obligations and to distribute any excess of cash
inflows over cash outflows to the Participants in accordance with the Trust
Agreement. However, several factors, including month-to-month lease extensions,
lessee defaults, equipment casualty events, and early lease terminations could
alter the Trust's anticipated cash flows as described herein and in the
accompanying financial statements and result in fluctuations to the Trust's
periodic cash distribution payments.

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


                                       14
<PAGE>

                             AFG Investment Trust B

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION

many other events and circumstances, could enhance or detract from individual
asset yields and the collective performance of the Trust's equipment portfolio.

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

      On February 12, 1997, the Trust filed a Registration Statement on Form S-1
with the SEC, which became effective June 10, 1997. The Registration Statement
covered the issuance and sale of a new class of beneficiary interests in the
Trust (the "Class B Interests"). The characteristics of the Class B Interests,
associated risk factors and other matters of importance to the Beneficiaries and
purchasers of the Class B Interests were set forth in a Prospectus sent to the
Beneficiaries. On July 17, 1997, the offering closed and on July 18, 1997 the
Trust issued 1,000,961 Class B Interests at $5.00 per interest, thereby
generating $5,004,805 in aggregate Class B capital contributions. Class A
Beneficiaries purchased 3,588 Class B Interests, generating $17,940 of such
aggregate capital contributions, and the Special Beneficiary, EFG, purchased
997,373 of such Class B Interests, generating $4,986,865 of such aggregate
capital contributions.

      As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee intends to use a portion of the net cash proceeds realized
from the offering of the Class B Interests to pay a one-time special cash
distribution to the Class A Beneficiaries of the Trust. The Managing Trustee
expects to declare and pay this special cash distribution on or before August
31, 1997.

      On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A Beneficiary Interests of the Trust by filing a Form
13E-4, Issuer Tender Offer Statement, with the SEC and distributing to the Class
A Beneficiaries information (the "Tender Documents") concerning the offer. The
Trust will use a portion of the net proceeds realized from the offering of the
Class B Interests to purchase the Class A Beneficiary Interests tendered as a
result of the offer. The Tender Documents describe, among other things, the
terms of the offer and the purchase price per Class A Beneficiary Interest being
offered by the Trust.


                                       15
<PAGE>

                             AFG Investment Trust B

                                    FORM 10-Q

                           PART II. OTHER INFORMATION

        Item 1.                    Legal Proceedings
                                   Response:

                                   Refer to Note 7 to the financial statements
                                   herein.

        Item 2.                    Changes in Securities
                                   Response:

                                   On July 18, 1997, the Trust issued 1,000,961
                                   Class B Interests at $5.00 per interest,
                                   generating $5,004,805 in aggregate Class B
                                   capital contributions. Class A Beneficiaries
                                   purchased 3,588 Class B Interests, generating
                                   $17,940 of such aggregate capital
                                   contributions, and the Special Beneficiary,
                                   EFG, purchased 997,373 Class B Interests,
                                   generating $4,986,865 of such aggregate
                                   capital contributions. Subsequently, EFG
                                   transferred its Class B Interests to a
                                   special-purpose company, Equis II
                                   Corporation. (See Note 8 to the accompanying
                                   financial statements.)

                                   The Trust Agreement grants limited voting
                                   rights to the Class A Beneficiaries and Class
                                   B Beneficiaries. However, each Class A
                                   Beneficiary and Class B Beneficiary is
                                   entitled to cast one vote for each Interest
                                   owned by him or her. Equis II Corporation has
                                   voting control of the Trust through its
                                   ownerhsip of its Class B Interests.

                                   Future cash distributions with respect to the
                                   Class B Interests will be subordinate to
                                   certain distributions with respect to the
                                   Class A Interests.

        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


                                       16
<PAGE>

                                 SIGNATURE PAGE

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.

                             AFG Investment Trust B

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

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

                               Date:    August 14, 1997

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

                               Date:    August 14,1997


                                       17