<PAGE>
                                 UNITED STATES
 
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-Q
 
(Mark One)
 
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
 
               For the quarterly period ended September 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 September 30, 1997                 Commission File No. 0-21444


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

Delaware                                                  04-3157232
------------------------------                            ----------------
(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
                                                       -----------------------

------------------------------------------------------------------------------
      (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 C
 
                                   FORM 10-Q
 
                                     INDEX

                                                                      PAGE
                                                                      -----

 
PART I. FINANCIAL INFORMATION:
 
  Item 1. Financial Statements
 
   Statement of Financial Position at September 30, 1997  
    and December 31, 1996.........................................       3
 
   Statement of Operations for the three and nine months
    ended September 30, 1997 and 1996.............................       4
 
   Statement of Cash Flows for the nine months ended   
    September 30, 1997 and 1996...................................       5
 
   Notes to the Financial Statements..............................    6-11
 
  Item 2. Management's Discussion and Analysis of   
          Financial Condition and Results of Operations...........   12-17
 
PART II. OTHER INFORMATION:
 
  Items 1-6.......................................................      18







                                             2

<PAGE>

                             AFG INVESTMENT TRUST C
 
                        STATEMENT OF FINANCIAL POSITION
 
                    SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                      SEPTEMBER 30,  DECEMBER 31,
                                                                                          1997           1996
                                                                                      -------------  ------------
<S>                                                                                   <C>            <C>
 
ASSETS
 
Cash and cash equivalents...........................................................   $11,874,866    $10,634,493
Restricted cash.....................................................................    12,011,598             --
Rents receivable....................................................................     1,025,623      2,139,372
Accounts receivable--affiliate......................................................       676,462      6,484,537
Equipment at cost, net of accumulated depreciation of $48,732,516 and $43,782,922 at
  September 30, 1997 and December 31, 1996, respectively............................    65,794,022     35,868,028
Organization costs, net of accumulated amortization of $4,833 and $4,083 at
  September 30, 1997 and December 31, 1996, respectively............................           167            917
                                                                                       -----------    -----------
    Total assets....................................................................   $91,382,738    $55,127,347
                                                                                       -----------    -----------
                                                                                       -----------    -----------
LIABILITIES AND PARTICIPANTS' CAPITAL
 
Notes payable.......................................................................   $45,801,266    $19,084,751
Accrued interest....................................................................       148,833        188,983
Accrued liabilities.................................................................        22,500         23,985
Accrued liabilities--affiliate......................................................       154,206        264,123
Deferred rental income..............................................................       157,972        209,535
Cash distributions payable to participants..........................................       451,805        302,484
                                                                                       -----------    -----------
    Total liabilities...............................................................    46,736,582     20,073,861
                                                                                       -----------    -----------
 Participants' capital (deficit):
 
  Managing Trustee..................................................................      (157,325)      (103,527)
  Special Beneficiary...............................................................    (1,275,631)      (861,348)
  Class A Beneficiary Interests (2,011,014 Interests; initial purchase price of $25
    each)...........................................................................    31,866,638     36,018,361
  Class B Beneficiary Interests (3,024,740 Interests; initial purchase price of $5
    each)...........................................................................    14,212,474             --
                                                                                       -----------    -----------
    Total participants' capital.....................................................    44,646,156     35,053,486
                                                                                       -----------    -----------

    Total liabilities and participants' capital.....................................   $91,382,738    $55,127,347
                                                                                       -----------    -----------


</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       3

<PAGE>

                             AFG INVESTMENT TRUST C
 
                            STATEMENT OF OPERATIONS
 
        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                      THREE MONTHS              NINE MONTHS
                                                                  ENDED SEPTEMBER 30,       ENDED SEPTEMBER 30,
                                                                  ----------------------  ------------------------
 
<S>                                                               <C>         <C>         <C>          <C>
                                                                     1997        1996        1997          1996
                                                                  ----------  ----------  -----------  -----------
 
Income:
 
  Lease revenue.................................................  $3,875,875  $5,097,913  $11,933,449  $15,712,736
 
  Interest income...............................................     321,611      79,947      730,878      177,062
 
  Loss on sale of equipment.....................................    (567,125)    (67,351)    (356,822)    (598,749)
                                                                  ----------  ----------  -----------  -----------
 
    Total income................................................   3,630,361   5,110,509   12,307,505   15,291,049
                                                                  ----------  ----------  -----------  -----------
 
Expenses:
 
  Depreciation and amortization.................................   3,276,517   3,780,959    9,710,932   11,659,346
 
  Interest expense..............................................     284,830     434,711      886,502    1,320,246
 
  Equipment management fees--affiliate..........................     168,713     202,279      505,854      622,979
 
  Operating expenses--affiliate.................................     258,492     165,336      486,986      279,681
                                                                  ----------  ----------  -----------  -----------
 
    Total expenses..............................................   3,988,552   4,583,285   11,590,274   13,882,252
                                                                  ----------  ----------  -----------  -----------
 
Net income (loss)...............................................  $ (358,191) $  527,224  $  717,231  $ 1,408,797
                                                                  ----------  ----------  -----------  -----------
                                                                  ----------  ----------  -----------  -----------
 
Net income (loss)
  per Class A Beneficiary Interest..............................  $       --  $     0.24  $      0.32  $      0.64
                                                                  ----------  ----------  -----------  -----------
                                                                  ----------  ----------  -----------  -----------
  per Class B Beneficiary Interest..............................  $    (0.12) $       --  $     (0.12) $        --
                                                                  ----------  ----------  -----------  -----------
                                                                  ----------  ----------  -----------  -----------
 Cash distributions declared 
  per Class A Beneficiary Interest..............................  $     1.73  $     0.35  $      2.55  $      0.98
                                                                  ----------  ----------  -----------  -----------
                                                                  ----------  ----------  -----------  -----------
  per Class B Beneficiary Interest..............................  $     0.13  $       --  $      0.13  $        --
                                                                  ----------  ----------  -----------  -----------
                                                                  ----------  ----------  -----------  -----------
</TABLE>
 
   The accompanying notes are an integral part of these financial statemets.
 


                                       4
<PAGE>

                             AFG INVESTMENT TRUST C
 
                            STATEMENT OF CASH FLOWS
 
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                              1997          1996
                                                                                           ------------   ------------
<S>                                                                                        <C>            <C>
 
Cash flows from (used in) operating activities:
Net income...............................................................................  $    717,231   $  1,408,797

Adjustments to reconcile net income to net cash from operating activities:
    Depreciation and amortization........................................................     9,710,932     11,659,346
    Loss on sale of equipment............................................................       356,822        598,749

Changes in assets and liabilities
  Decrease (increase) in:
    rents receivable.....................................................................     1,113,749      1,356,421
    accounts receivable--affiliate.......................................................     5,808,075       (293,955)
  Increase (decrease) in:
    accrued interest.....................................................................       (40,150)      (136,754)
    accrued liabilities..................................................................        (1,485)        (1,250)
    accrued liabilities--affiliate.......................................................      (109,917)        83,466
    deferred rental income...............................................................       (51,563)         7,034
                                                                                           ------------   ------------
  
      Net cash from operating activities.................................................    17,503,694     14,681,854
                                                                                           ------------   ------------
Cash flows from (used in) investing activities:
  Purchase of equipment..................................................................   (38,887,683)    (1,805,100)
  Proceeds from equipment sales..........................................................       778,820      4,284,841
                                                                                           ------------   ------------
 
      Net cash from (used in) investing activities.......................................   (38,108,863)     2,479,741
                                                                                           ------------   ------------
 
Cash flows from (used in) financing activities:
  Proceeds from capital contributions....................................................    15,123,700             --
  Payment of offering costs..............................................................      (151,237)            --
  Proceeds from notes payable............................................................    31,951,256      8,581,221
  Principal payments--notes payable......................................................    (7,118,876)   (14,125,616)
  Distributions paid.....................................................................    (5,947,703)    (2,094,112)
                                                                                           ------------   ------------
 
      Net cash from (used in) financing activities.......................................    33,857,140     (7,638,507)
                                                                                           ------------   ------------
 
Net increase in cash and cash equivalents and restricted cash............................    13,251,971      9,523,088

Cash and cash equivalents at beginning of period.........................................    10,634,493        279,116
                                                                                           ------------   ------------
Cash and cash equivalents and restricted cash at end of period...........................  $ 23,886,464   $  9,802,204
                                                                                           ------------   ------------
                                                                                           ------------   ------------
Supplemental disclosure of cash flow information:
  Cash paid during the period for interest...............................................  $    926,652   $  1,457,000
                                                                                           ------------   ------------
                                                                                           ------------   ------------
Supplemental disclosure of non-cash investing and financing activities:
 
  See Note 4 to the financial statements herein.
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.

                                       5

<PAGE>
                             AFG INVESTMENT TRUST C

                         NOTES TO FINANCIAL STATEMENTS
 
                               SEPTEMBER 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 September 30, 1997 and December 31, 1996 and results of 
operations for the three and nine month periods ended September 30, 1997 and 
1996 have been made and are reflected.
 
NOTE 2--CASH
 
    At September 30, 1997, the Trust had $23,780,000 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 $29,435,878 are due as follows:
 

    For the year ending September 30, 1998     $14,844,287
                                      1999       5,402,102
                                      2000       3,009,467
                                      2001       2,157,534
                                      2002       2,027,510
                                Thereafter       1,994,978
                                               -----------

                                     Total     $29,435,878
                                               -----------
                                               -----------

    During August 1997, the Trust acquired a 50.6% proportionate ownership 
interest in a Boeing 767-300ER aircraft leased by Scandinavian Airlines 
System (the "SAS Aircraft")--See Note 4 herein. The Trust will receive 
approximately $4,132,000 of rental revenue during the year ending September 
30, 1998 and $1,033,000 in the year ending September 30, 1999. Scandinavian 
Airlines System has two one year renewal options in place which will commence 
following the expiration of the primary lease term on December 29, 1998. If 
the options are exercised, the renewal rental payments will be the lesser of 
90% of the primary lease term rents or the then current fair market value 
rents for such equipment.

                                       6

<PAGE>

                              AFG INVESTMENT TRUST C
                           NOTES TO FINANCIAL STATEMENTS 

                                     (CONTINUED)
 
NOTE 4--EQUIPMENT
 
    The following is a summary of equipment owned by the Trust at September 
30, 1997. In the opinion of Equis Financial Group Limited Partnership 
("EFG"), the acquisition cost of the equipment did not exceed its fair market 
value.

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

Aircraft........................................           3-63  $  47,400,169
Computers & peripherals.........................           0-27     11,314,334
Retail store fixtures...........................           0-24     11,112,212
Manufacturing...................................          15-71     10,328,381
Locomotives.....................................          33-78      9,179,510
Materials handling..............................           0-65      9,079,377
Construction & mining...........................           0-39      7,958,503
Commercial printing.............................              3      3,542,761
Communications..................................            3-8      2,004,394
Research & test.................................           0-13      1,667,223
Tractors and heavy duty trucks..................            0-6        285,299
Furniture & fixtures............................           1-11        239,785
Trailers/intermodal containers..................              7        229,361
Photocopying....................................            0-9        118,652
Energy systems..................................              0         63,900
Medical.........................................             11          2,206
Miscellaneous...................................             12            471
                                                  -------------  -------------
 
Total equipment cost............................                   114,526,538
 
Accumulated depreciation........................                   (48,732,516)
                                                                 -------------
 
Equipment, net of accumulated depreciation......                 $  65,794,022
                                                                 -------------
                                                                 -------------

 
    On February 5, 1996, the Trust concluded the sale of its interest in a 
Boeing 747-SP to the lessee, United Air Lines, Inc., ("United"). The Trust 
recognized a net loss of $1,313,122 in connection with this transaction, of 
which $880,717 was recognized as Write-Down of Equipment in 1995. The 
remainder of $432,405 was recognized as a loss on sale of equipment on the 
accompanying financial statements for the nine month period ended September 
30, 1996. In addition to lease rents, the Trust received net sale
proceeds of $4,048,779 from United for the aircraft.. In March 1996, the Trust
acquired an 8.86% ownership interest in an aircraft leased to Reno Air, Inc.
(the "Reno Aircraft"), pursuant to the reinvestment provisions of the Trust
Agreement, at a cost of $1,239,741. To acquire its interest in the Reno
Aircraft, the Trust obtained leveraging of $997,888 from a third-party lender
and utilized cash of $241,853 from the sale of the United Aircraft. Additional
cash proceeds of $565,359 were utilized during the nine months ended September
30, 1996 to acquire certain construction and mining and other equipment. In
August 1997, the Trust acquired a 50.6% ownership interest in the SAS Aircraft,
pursuant to the reinvestment provisions of the Trust Agreement, at a cost of
$30,895,171. To acquire the interest in the SAS Aircraft, the Trust obtained
leveraging of $25,654,667 from a third-party lender and utilized cash of
$5,240,504. Various other equipment, having a cost of $7,992,512 was acquired in
1997 using cash of $1,695,923 and leveraging of $6,296,589.



                                     7

<PAGE>

                              AFG INVESTMENT TRUST C
                           NOTES TO FINANCIAL STATEMENTS 

                                     (CONTINUED)

    During August 1997, the Trust and another EFG-sponsored investment 
program exchanged certain locomotives for a proportionate interest in certain 
other locomotives. The Trust's original locomotives had a cost and net book 
value of $4,819,218 and $3,151,503, respectively, and had associated 
indebtedness of $1,235,989 at the time of the exchange. The replacement 
locomotives were recorded at their estimated fair value of $4,574,485 and the 
Trust assumed associated debt of $3,120,127. The exchange resulted in the 
recognition of a net loss, for financial statement purposes, of $461,153.
 
    At September 30, 1997, the Trust's equipment portfolio included equipment 
having a proportionate original cost of $59,469,686, representing 
approximately 52% of total equipment cost.
 
    At September 30, 1997, the cost and net book value of equipment held for 
sale or re-lease was approximately $636,000 and $116,000, respectively. The 
Managing Trustee is actively seeking the sale or re-lease of all equipment 
not on lease. In addition, the summary above also includes equipment being 
leased on a month-to-month basis.
 
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 each of the nine month periods ended 
September 30, 1997 and 1996, which were paid or accrued by the Trust to EFG 
or its Affiliates, are as follows:

                                                           1997         1996
                                                           -----        ----

Reimbursement of offering costs....................  $    151,237    $     --
Equipment acquisition fees.........................     1,121,158      52,473
Equipment management fees..........................       505,854     622,979
Administrative charges.............................        62,148      15,750
Reimbursable operating expenses due to 
  third parties....................................       424,838     263,931
                                                     ------------  ----------
 
      Total........................................  $  2,265,235  $  955,133
                                                     ------------  ----------
                                                     ------------  ----------

    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
September 30, 1997, the Trust was owed $676,462 by EFG for such funds. These
funds were remitted to the Trust in October 1997.
 
NOTE 6--NOTES PAYABLE
 
    Notes payable at September 30, 1997 consisted of installment notes of 
$45,801,266 payable to banks and institutional lenders. The notes bear 
interest rates ranging between 5.1% and 14.46%, except for one note which 
bears a fluctuating interest rate based on LIBOR (5.66% at September 30, 
1997) plus a margin. 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 balloon payment obligations at the expiration 
of the primary lease terms related to the Reno Aircraft, certain rail 
equipment and the SAS Aircraft of $282,421, $2,867,081 and $22,704,268, 


                                    8

<PAGE>

                              AFG INVESTMENT TRUST C
                           NOTES TO FINANCIAL STATEMENTS 

                                     (CONTINUED)

respectively. In addition, the Managing Trustee expects to use a portion of 
the Trust's available cash to retire certain indebtedness. The carrying 
amount of notes payable approximates fair value at September 30, 1997.
 
    The annual maturities of the notes payable are as follows:
 

        For the year ending September 30, 1998        $8,793,276
                                          1999        26,277,885
                                          2000         5,119,456
                                          2001         1,730,036
                                          2002         1,745,058
                                    Thereafter         2,135,555
                                                     -----------
                                         Total       $45,801,266
                                                     -----------
                                                     -----------

NOTE 7--PROFIT AND LOSS ALLOCATION AND DISTRIBUTION OF DISTRIBUTABLE CASH

    Effective for the third quarter of 1997, the allocation of net income or 
loss, for financial statement purposes, and distributions of distributable 
cash are made to each Participant in accordance with the Trust Agreement, as 
Amended. (see Note 9).
 
NOTE 8--LEGAL PROCEEDINGS
 
    On July 27, 1995, EFG, on behalf of the Trust and other EFG-sponsored 
investment programs, filed an action in the Commonwealth of Massachusetts 
Superior Court Department of the Trial Court in and for the County of 
Suffolk, for damages and declaratory relief against a lessee of the Trust, 
National Steel Corporation ("National Steel"), under a certain Master Lease 
Agreement ("MLA") for the lease of certain equipment. EFG is seeking the 
reimbursement by National Steel of certain sales and/or use taxes paid to the 
State of Illinois and other remedies provided by the MLA. On August 30, 1995, 
National Steel filed a Notice of Removal which removed the case to the United 
States District Court, District of Massachusetts. On September 7, 1995, 
National Steel filed its Answer to EFG's Complaint along with Affirmative 
Defenses and Counterclaims, seeking declaratory relief and alleging breach of 
contract, implied covenant of good faith and fair dealing and specific 
performance. EFG filed its Answer to these counterclaims on September 29, 
1995. Though the parties have been discussing settlement with respect to this 
matter for some time, to date, the negotiations have been unsuccessful. 
Notwithstanding these discussions, EFG recently filed an Amended and 
Supplemental Complaint alleging a further default by National Steel under the 
MLA and EFG recently filed a request for 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.
 
    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.


 
                                       9

<PAGE>

                              AFG INVESTMENT TRUST C
                           NOTES TO FINANCIAL STATEMENTS 

                                     (CONTINUED)

    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.
 
NOTE 9--ISSUANCE OF CLASS B 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 1,215,771 or 60.5% of all Beneficiary 
Interests, voted in favor of the Amendment; 174,315 or 8.7% of all 
Beneficiary Interests voted against the Amendment; and 49,787 or 2.5% of all 
Beneficiary Interests abstained. Approximately 72% 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 3,024,740 Class B Interests at $5.00 
per interest, thereby generating $15,123,700 in aggregate Class B capital 
contributions. Class A Beneficiaries purchased 5,520 Class B Interests, 
generating $27,600 of aggregate capital contributions, and the Special 
Beneficiary, EFG, purchased 3,019,220 Class B Interests, generating 
$15,096,100 of such aggregate capital contributions.
 
    Subsequently, EFG transferred its Class B Interests to a special-purpose 
company, Equis II Corporation, a Delaware corporation. EFG also transferred 
its ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to 
Equis II Corporation. As a result, Equis II Corporation has voting control of 
the Trust through its ownership of the majority of all of the Trust's 
outstanding voting interests, as well as its ownership of AFG ASIT 
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 used a portion of the net cash proceeds realized from 
the offering of the Class B Interests to pay a one-time special cash 

                                      10

<PAGE>

                              AFG INVESTMENT TRUST C
                           NOTES TO FINANCIAL STATEMENTS 

                                     (CONTINUED)

distribution of approximately $1.47 per Class A Beneficiary Interest to the 
Class A Beneficiaries of the Trust. The Managing Trustee declared and paid 
this special cash distribution, aggregating $2,960,865 to the Class A 
Beneficiaries on August 15, 1997.
 
NOTE 10--OFFER TO REDEEM CLASS A INTERESTS
 
    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. On October 10, 1997, the Trust used $2,291,567 of the net proceeds 
realized from the offering of the Class B Interests to purchase 218,661 of 
the Class A Beneficiary Interests tendered as a result of the offer.






 
                                       11
<PAGE>

                                AFG Investment Trust C

                                      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 to successfully remarket the Trust's equipment upon the 
expiration of such leases. 

Three and nine months ended September 30, 1997 compared to the three and nine
months ended September 30, 1996: 

Overview

    As an equipment leasing trust, AFG Investment Trust C (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 nine months ended September 30, 1997, the Trust 
recognized lease revenue of $3,875,875 and $11,933,449, respectively, 
compared to $5,097,913 and $15,712,736 for the same periods in 1996.  The 
decrease in lease revenue from 1996 to 1997 is attributable principally to 
the sale of the Trust's interest in a vessel (which generated approximately 
$362,134 of gross quarterly rents in 1996) to the lessee in December 1996 and 
primary lease term expirations.  In the near-term, lease revenue is expected 
to increase, due to reinvestment of available proceeds in other equipment, 
including cash proceeds realized from the Trust's sale of its interest in a 
Boeing 747-SP aircraft leased to United Airlines, Inc. (the "United 
Aircraft") in February 1996, as discussed below and the net proceeds 
resulting from the Trust's sale of its interest in the vessel.  Over time, 
the level of lease revenue will decline due to the expiration of the Trust's 
lease agreements.

    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.

    Interest income for the three and nine months ended September 30, 1997 
was $321,611 and $730,878, respectively, compared to $88,422 and $97,115 for 
the same periods in 1996.  Interest income was generated 



                                          12


<PAGE>
                                AFG Investment Trust C

                                      FORM 10-Q

                           PART I.  FINANCIAL INFORMATION

from temporary investment of available cash in short-term money market 
instruments. Interest income was higher in the three and nine months ended 
September 30, 1997 than in the same periods in 1996 due to interest earned on 
sale proceeds associated with the aircraft and vessel, discussed above.  The 
amount of future interest income is expected to fluctuate in relation to 
prevailing interest rates and the collection of lease revenue and equipment 
sales proceeds.

    During August 1997, the Trust and another EFG-sponsored investment 
program exchanged certain locomotives for a proportionate interest in certain 
other locomotives.  The Trust's original locomotives had a cost and net book 
value of $4,819,218 and $3,151,503, respectively, and had associated 
indebtedness of $1,235,989 at the time of the exchange.  The replacement 
locomotives were recorded at their estimated fair value of $4,574,485 and the 
Trust assumed associated debt of $3,120,127.  The exchange resulted in the 
recognition of a net loss, for financial statement purposes, of $461,156.

    On February 5, 1996, the Trust concluded the sale of its interest in a 
Boeing 747-SP to the lessee, United Air Lines, Inc., ("United").  The Trust 
recognized a net loss of $1,313,122 in connection with this transaction, of 
which  $880,717 was recognized as Write-Down of Equipment in 1995.  The 
remainder of $432,405 was recognized as a loss on sale of equipment on the 
accompanying Statement of Operations for the nine months ended September 30, 
1996.  In addition to lease rents, the Trust received net sale proceeds of 
$4,048,779 from United for the aircraft.  The Managing Trustee actively 
pursued the reinvestment of all such proceeds in other equipment during the 
third quarter of 1997 resulting in the acquisition of a 50.6% ownership 
interest in an aircraft (the "SAS Aircraft") at an aggregate cost to the 
Trust of $30,895,171.  To acquire the interest in the SAS Aircraft, the Trust 
obtained long-term financing of $25,654,667 from a third party lender and 
utilized cash of $5,240,504.  Reinvestment during 1996 included 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 nine months ended 
September 30, 1996, the Trust sold other equipment having a net book value of 
$224,944 and $402,406, respectively, to existing lessees and third parties.  
These sales resulted in net losses for financial statement purposes, of 
$67,351 and $166,344, respectively.

    It cannot be determined whether future sales of equipment will result in 
a net gain or 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 to 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 nine months ended 
September 30, 1997 was $3,276,517 and $9,710,932, respectively, compared to 
$3,780,959 and $11,659,346 for the same periods in 1996.  

                                      13

<PAGE>
                                AFG Investment Trust C

                                      FORM 10-Q

                           PART I.  FINANCIAL INFORMATION

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 $284,830 and $886,502, or 7.3% and 7.4% of lease 
revenue for the three and nine months ended September 30, 1997, respectively, 
compared to $434,711 and $1,320,246, or 8.5% and 8.4% of lease revenue for 
the same periods in 1996.  The Managing Trustee expects to use a portion of 
the Trust's available cash to retire indebtedness and will continue to reduce 
the balance of notes payable through the application of rent receipts to 
outstanding debt.  Accordingly, interest expense will decline in amount and 
as a percentage of lease revenue as the principal balance of notes payable is 
reduced.

    Management fees were 4.4% and 4.2% of lease revenue for the three and 
nine months ended September 30, 1997, respectively, compared to 4% of lease 
revenue for each of the same periods in 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 accounting, insurance and legal fees, as 
well as printing, distribution and remarketing expenses.  Collectively, 
operating expenses represented 6.7% and 4.1% of lease revenue for the three 
and nine months ended September 30, 1997, respectively, compared to 3.2% and 
1.8% of lease revenue for 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 9 to the accompanying financial statements and 
an increase in administrative charges.  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.  For the 
nine months ended September 30, 1997, operating activities generated net cash 
inflows of $11,391,360, after reductions for equipment sale proceeds of 
$2,265,436 received in connection with the sale of the vessel and debt 
proceeds of $3,846,898 which relate to the leveraging of certain rail 
equipment in the Trust's portfolio.  These sale and debt proceeds were due 
from EFG at December 31, 1996 and received by the Trust in January 1997.  For 
the nine months ended September 30, 1996, the Trust generated net cash 
inflows from operating activities of $14,681,854. Over time, renewal, 
re-lease and equipment sale activities will cause the Trust's primary-term 
lease revenue and corresponding sources of operating cash to decline.  
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 


                                             14
<PAGE>

                                AFG Investment Trust C

                                      FORM 10-Q

                           PART I.  FINANCIAL INFORMATION

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 equipment acquisitions and cash realized from asset 
disposal transactions are reported under investing activities on the 
accompanying Statement of Cash Flows.  The Trust expended $38,887,683 and 
$1,805,100 during the nine months ended September 30, 1997 and 1996, 
respectively, to acquire equipment pursuant to the reinvestment provisions of 
the Trust Agreement.  Acquisitions for the nine months ended September 30, 
1997 include the SAS Aircraft discussed previously and an equipment basis 
adjustment of $1,884,139 related to the lease exchange described in Note 4 to 
the accompanying financial statements.  During the nine months ended 
September 30, 1997, the Trust realized net sale proceeds of $778,820 compared 
to $4,284,841 (including the proceeds from the United sale) for the same 
period in 1996.  Future inflows of cash from asset disposals will vary in 
timing and amount and will be influenced by many factors including, but not 
limited to, the frequency and timing of lease expirations, the type of 
equipment being sold, its condition and age, and future market conditions.

    The Trust obtained long-term financing in connection with certain 
equipment leases.  The origination of such indebtedness and the subsequent 
repayments of principal are reported as components of financing activities.  
Cash inflows of $31,951,256 and $8,581,221 in 1997 and 1996, respectively, 
resulted from leveraging a portion of the Trust's equipment portfolio with 
third-party lenders (see Results of Operations).  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 the near-term, the amount of cash used to repay 
debt obligations is expected to increase as a result of leveraging obtained 
in connection with the acquisition of reinvestment equipment.  In addition, 
the Managing Trustee expects to use a portion of the Trust's available cash 
to retire certain indebtedness.  Thereafter, the amount of indebtedness will 
decline as the principal balance of notes payable is reduced through the 
collection and application of rents.  However, the Trust has balloon payment 
obligations of $282,421, $2,867,081 and $22,704,268 at the expiration of the 
primary lease terms related to the Reno Aircraft, certain rail equipment and 
the SAS Aircraft, respectively.

    For financial reporting purposes, the Managing Trustee and the Special 
Beneficiary each has accumulated a capital deficit at September 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.  For income tax purposes, income is 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.


                                   15

<PAGE>

                                AFG Investment Trust C

                                      FORM 10-Q

                           PART I.  FINANCIAL INFORMATION

    At September 30, 1997, the Trust had aggregate future minimum lease 
payments of $29,435,878 from contractual lease agreements (see Note 3 to the 
financial statements), which 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.

    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 3,024,740 Class B Interests at $5.00 
per interest, thereby generating $15,123,700 in aggregate Class B capital 
contributions.  Class A Beneficiaries purchased 5,520 Class B Interests, 
generating $27,600 of aggregate capital contributions, and the Special 
Beneficiary, EFG, purchased 3,019,220 Class B Interests, generating 
$15,096,100 of such aggregate capital contributions.  The Trust incurred 
costs in the amount of $151,237 in connection with this offering. 

    Subsequently, EFG transferred its Class B Interests to a special-purpose 
company, Equis II Corporation, a Delaware corporation.  EFG also transferred 
its ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to 
Equis II Corporation.  As a result, Equis II Corporation has voting control 
of the Trust through its ownership of a majority of all of the Trust's 
outstanding voting interests, as well as its ownership of AFG ASIT 
Corporation.  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 used 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 
declared and paid this special cash distribution of approximately $1.47 per 
Class A Beneficiary Interest, aggregating $2,960,865, to Class A 
Beneficiaries on August 15, 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.  On October 10, 1997, the Trust used $2,291,567 of the net proceeds 
realized from the offering of the Class B Interests to purchase 218,661 of 
the Class A Beneficiary Interests tendered as a result of the offer.

    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 


                                   16

<PAGE>

                                AFG Investment Trust C

                                      FORM 10-Q

                           PART I.  FINANCIAL INFORMATION

determined with any certainty until conclusion of the Trust and will be 
dependent upon the collection of all future contracted rents, the generation 
of renewal and/or re-lease rents, and the residual value realized for each 
asset at its disposal date.  Future market conditions, technological changes, 
the ability of EFG to manage and remarket the assets, and many other events 
and circumstances, could enhance or detract from individual asset yields and 
the collective performance of the Trust's equipment portfolio.

    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 Class A Beneficiary Interest (the rate established and paid from 
the Trust's inception through September 1995) to an annualized rate of $1.26 
per Class A Beneficiary Interest commencing in October 1995.  In October 
1996, the Managing Trustee increased the annualized distribution rate to 
$1.64 per Class A Beneficiary Interest and expects that the Trust will be 
able to sustain this distribution rate throughout 1997.  For the Class B 
Beneficiaries, the Managing Trustee established an annualized distribution of 
$0.66 per Class B Beneficiary Interest commencing in August 1997.  The 
Managing Trustee expects to maintain this distribution throughout 1997.  
Future distributions, with respect to Class B Interests, will be subordinate 
to certain distributions to Class A Interests.  

    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 Beneficiaries should expect that cash distribution 
rates will fluctuate over the long term as a result of future remarketing 
activities.

    Cash distributions to the Managing Trustee, the Special Beneficiary, and 
the Beneficiaries are declared and generally paid within fifteen days 
following the end of each month.  The payment of such distributions is 
presented as a component of financing activities.  For the nine months ended 
September 30, 1997, the Trust declared total cash distributions of 
Distributable Cash From Operations and Distributable Cash From Sales and 
Refinancings of $6,097,024.  In accordance with the Trust Agreement, the 
Beneficiaries were allocated 90.75% of these distributions, or $5,533,049 
($5,127,669 to Class A Beneficiaries and $405,380 to Class B Beneficiaries); 
the Special Beneficiary was allocated 8.25% or $503,005; and the Managing 
Trustee was allocated 1%, or $60,970.


                                  17



<PAGE>



                                AFG Investment Trust C
                                           
                                      FORM 10-Q
                                           
                             PART II.  OTHER INFORMATION



    Item 1.             Legal Proceedings
                        Response:  Refer to Note 8 to the financial statements 
                        herein.

    Item 2.             Changes in Securities
                        Response:  

                        On July 18, 1997, the Trust issued 3,024,740 Class B 
                        Interests at $5.00 per interest, generating 
                        $15,123,700 in aggregate Class B capital 
                        contributions.  Class A Beneficiaries purchased 5,520 
                        Class B Interests, generating $27,600 of such 
                        aggregate capital contributions, and the Special 
                        Beneficiary, EFG, purchased 3,019,220 Class B 
                        Interests, generating $15,096,100 of such aggregate 
                        capital contributions. Subsequently, EFG transferred 
                        its Class B Interests to a special-purpose company, 
                        Equis II Corporation.  (See Note 9 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 ownership 
                        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

                                       18

<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 C
                                           
                                           
                   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:  November 14, 1997
                        -------------------------------------------


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


                 Date:  November 14, 1997
                        --------------------------------------------








                                       19