<PAGE>

                                 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, 1998
                               ------------------------------------------------

                                       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, 1998                     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 June 30, 1998 and December 31, 1997                               3

      Statement of Operations
        for the three and six months ended June 30, 1998 and 1997            4

      Statement of Cash Flows
        for the six months ended June 30, 1998 and 1997                      5
 
      Notes to the Financial Statements                                   6-14


    Item 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations                        15-20


PART II. OTHER INFORMATION:

      Items 1 - 6                                                           21


                                       2

<PAGE>

                             AFG Investment Trust C
                        STATEMENT OF FINANCIAL POSITION
                      June 30, 1998 and December 31, 1997

                                  (Undaudited)

<TABLE>
<CAPTION>

                                                            June 30,      December 31,
                                                             1998             1997
                                                         ------------     ------------
<S>                                                      <C>              <C>         
ASSETS

Cash and cash equivalents                                $ 13,544,880     $  8,843,640
Restricted cash                                             9,519,389        9,566,189
Rents receivable                                              752,369          819,736
Accounts receivable - affiliate                             1,359,126          904,426
Equipment at cost, net of accumulated depreciation
  of $49,097,373 and $50,635,609 at June 30, 1998
  and December 31, 1997, respectively                      55,296,232       61,902,787
                                                         ------------     ------------
    Total assets                                         $ 80,471,996     $ 82,036,778
                                                         ------------     ------------
                                                         ------------     ------------

LIABILITIES AND PARTICIPANTS' CAPITAL

Notes payable                                            $ 37,658,473     $ 39,928,173
Accrued interest                                              609,033          240,434
Accrued liabilities                                           138,570           11,550
Accrued liabilities - affiliate                                24,247          118,703
Deferred rental income                                        224,829          126,942
Cash distributions payable to participants                    449,675          451,804
                                                         ------------     ------------
  Total liabilities                                        39,104,827       40,877,606
                                                         ------------     ------------
Participants' capital (deficit):
  Managing Trustee                                              3,583         (123,674)
  Special Beneficiary                                          29,553       (1,000,794)
  Class A Beneficiary Interests (1,787,153 Interests;
    initial purchase price of $25 each)                   30,320,750        30,858,790
  Class B Beneficiary Interests (3,024,740 Interests;
    initial purchase price of $5 each)                    13,351,650       (13,716,417)
  Treasury Interests (223,861 Interests at Cost)          (2,338,367)       (2,291,567)
                                                         ------------     ------------
    Total participants' capital                            41,367,169       41,159,172
                                                         ------------     ------------
    Total liabilities and participants' capital          $ 80,471,996     $ 82,036,778
                                                         ------------     ------------
                                                         ------------     ------------

</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 six months ended June 30, 1998 and 1997

                                  (Unaudited)

<TABLE>
<CAPTION>

                                            Three Months                    Six Months
                                            Ended June 30,                 Ended June 30,
                                         1998            1997           1998           1997
                                      -----------     -----------    -----------    -----------
<S>                                   <C>             <C>            <C>            <C>        
Income:

  Lease revenue                       $ 4,077,757     $ 4,063,164    $ 8,179,332    $ 8,057,574
  Interest income                         295,366         211,436        559,444        409,267
  Gain (loss) on sale of equipment       (218,327)        175,766      2,065,984        210,303
                                      -----------     -----------    -----------    -----------
  Total income                          4,154,796       4,450,366     10,804,760      8,677,144
                                      -----------     -----------    -----------    -----------
Expenses:

  Depreciation and amortization         2,693,747       3,168,569      5,541,624      6,434,415
  Interest expense                        774,591         290,750      1,619,558        601,672
  Equipment management fees
  -- affiliate                            176,100         167,750        352,323        337,141
  Operating expenses - affiliate          219,893          99,230        327,787        228,494

  Total expenses                        3,864,331       3,726,299      7,841,292      7,601,722

Net income                            $   290,465     $   724,067    $ 2,963,468    $ 1,075,422
                                      -----------     -----------    -----------    -----------
                                      -----------     -----------    -----------    -----------
Net income
  per Class A Beneficiary Interest    $      0.09     $      0.33    $      0.52    $      0.49
                                      -----------     -----------    -----------    -----------
                                      -----------     -----------    -----------    -----------
  per Class B Beneficiary Interest    $      0.04     $      --      $      0.21    $      --
                                      -----------     -----------    -----------    -----------
                                      -----------     -----------    -----------    -----------
Cash distributions declared
  per Class A Beneficiary Interest    $      0.41     $      0.41    $      0.82    $      0.82
                                      -----------     -----------    -----------    -----------
                                      -----------     -----------    -----------    -----------
  per Class B Beneficiary Interest    $      0.16     $      --      $      0.33    $      --
                                      -----------     -----------    -----------    -----------
                                      -----------     -----------    -----------    -----------

</TABLE>


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


                                       4

<PAGE>

                             AFG Investment Trust C
                            STATEMENT OF CASH FLOWS
                for the six months ended June 30, 1998 and 1997

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                 1998              1997
                                                             ------------     ------------
<S>                                                          <C>              <C>         
Cash flows from (used in) operating activities:
Net income                                                   $  2,963,468     $  1,075,422
Adjustments to reconcile net income to net cash
  from operating activities:
  Depreciation and amortization                                 5,541,624        6,434,415
  Gain on sale of equipment                                    (2,065,984)        (210,303)
Changes in assets and liabilities Decrease (increase) in:
  rents receivable                                                 67,367         (609,442)
  accounts receivable - affiliate                                (454,700)       5,823,058
  Increase (decrease) in:
  accrued interest                                                368,599          124,109
  accrued liabilities                                             127,020           (8,985)
  accrued liabilities - affiliate                                 (94,456)        (171,799)
  deferred rental income                                           97,887           94,988
                                                             ------------     ------------
  Net cash from operating activities                            6,550,825       12,551,463
                                                             ------------     ------------
Cash flows from (used in) investing activities:
  Purchase of equipment                                              --         (1,142,548)
  Proceeds from equipment sales                                 3,130,915          690,689
                                                             ------------     ------------
  Net cash from (used in) investing activities                  3,130,915         (451,859)
                                                             ------------     ------------
Cash flows used in financing activities:

  Principal payments - notes payable                           (2,269,700)      (3,243,987)
  Distributions paid                                           (2,710,800)      (1,814,899)
                                                             ------------     ------------
  Net cash used in financing activities                        (4,980,500)      (5,058,886)
                                                             ------------     ------------
Net increase in cash and cash equivalents                       4,701,240        7,040,718
Cash and cash equivalents at beginning of period                8,843,640       10,634,493
                                                             ------------     ------------
    Cash and cash equivalents at end of period               $ 13,544,880     $ 17,675,211
                                                             ------------     ------------
                                                             ------------     ------------
Supplemental disclosure of cash flow information:
    Cash paid during the period for interest                 $  1,250,959     $    477,563
                                                             ------------     ------------
                                                             ------------     ------------
</TABLE>


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


                                       5

<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (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 1997 Annual Report. Except as disclosed herein, there
has been no material change to the information presented in the footnotes to the
1997 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, 1998 and December 31, 1997 and results of operations for
the three and six months ended June 30, 1998 and 1997 have been made and are
reflected.


NOTE 2 -- CASH

     At June 30, 1998, the Trust had $22,951,483 invested in federal agency
discount notes and reverse repurchase agreements secured by U.S. Treasury Bills
or interests in U.S. Government securities. Such cash includes $9,519,389 which
is classified as Restricted Cash and represents the remaining net proceeds
realized from the offering of the Class B Interests less the portion thereof
used to pay a special distribution to the Class A Beneficiaries and to redeem
Class A Interests (see Notes 8 and 9). A portion of these funds will be used to
pay a Class B Capital Distribution (see Note 11). The remainder is expected to
be used according to terms negotiated in conjunction with settling the Class
Action Lawsuit described in Note 7.


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.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. In certain instances, the Trust
may enter primary-term, renewal or re-lease agreements which expire beyond the
Trust's anticipated dissolution date. This circumstance is not expected to
prevent the orderly wind-up of the Trust's business activities as the Managing
Trustee and the Advisor would seek to sell the then-remaining equipment assets
either to the lessee or to a third party, taking into consideration the amount
of future non-cancelable rental payments associated with the attendant lease
agreements. Future minimum rents of $18,694,645 are due as follows:

<TABLE>

     <S>                                          <C>            
     For the year ending June 30, 1999             $     8,204,886
                                  2000                   3,490,205
                                  2001                   2,440,726
                                  2002                   2,076,704
                                  2003                   1,850,540
                            Thereafter                     631,584
                                                   ---------------
                                 Total             $    18,694,645
                                                   ---------------
                                                   ---------------

</TABLE>


                                       6

<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


NOTE 4 -- EQUIPMENT

     The following is a summary of equipment owned by the Trust at June 30,
1998. Remaining Lease Term (Months), as used below, represents the number of
months remaining from June 30, 1998 under contracted lease terms and is
presented as a range when more than one lease agreement is contained in the
stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or re-lease or being leased on a month-to-month
basis. In the opinion of Equis Financial Group Limited Partnership ("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                                                        0-54     $  47,400,169
Computers & peripherals                                         0-18        10,730,507
Manufacturing                                                   6-62        10,328,381
Locomotives                                                    24-69         9,179,509
Construction & mining                                              0         7,557,664
Materials handling                                                 6         7,459,961
Retail store fixtures                                           0-15         7,424,973
Communications                                                    12         2,004,394
Research & test                                                    4         1,667,223
Furniture & fixtures                                               2           203,261
Tractors and heavy duty trucks                                     0           148,079
Photocopying                                                       0           118,652
Trailers/intermodal containers                                     0           104,255
Energy systems                                                     0            63,900
Medical                                                            2             2,206
Miscellaneous                                                      3               471
                                                                         -------------

                               Total equipment cost                        104,393,605

                           Accumulated depreciation                        (49,097,373)
                                                                         -------------
         Equipment, net of accumulated depreciation                      $  55,296,232
                                                                         -------------
                                                                         -------------
</TABLE>

     At June 30, 1998, the Trust's equipment portfolio included equipment having
a proportionate original cost of $56,546,502, representing approximately 54% of
total equipment cost.

     At June 30, 1998, the cost and net book value of equipment held for sale or
re-lease was approximately $9,198,000 and $4,981,000, respectively. This
equipment includes the Trust's proportionate interest in a McDonnell Douglas
MD-82 aircraft formerly leased to Alaska Airlines, Inc. with a cost and net book
value of $7,333,098 and $4,692,000, respectively. The Managing Trustee is
currently holding discussions with a potential lessee regarding the re-lease of
this aircraft. The Managing Trustee is actively seeking the sale or re-lease of
all equipment not on lease. In addition, the summary above includes equipment
being leased on a month-to-month basis.


                                       7
<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


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 six month periods ended June 30,
1998 and 1997, which were paid or accrued by the Trust to EFG or its Affiliates,
are as follows:

<TABLE>
<CAPTION>

                                           1998        1997
                                         --------    --------
<S>                                      <C>         <C>     
Equipment acquisition fees               $   --      $ 33,278
Equipment management fees                 352,323     337,141
Administrative charges                     45,372      39,462
Reimbursable operating expenses
     due to third parties                 282,415     189,032
                                         --------    --------
                          Total          $680,110    $598,913
                                         --------    --------
                                         --------    --------
</TABLE>

     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, 1998, the Trust was owed $1,359,126 by EFG for such funds and the
interest thereon. These funds were remitted to the Trust in July 1998.

     Refer to Note 8 regarding the purchase of Class B Interests by an
affiliate, Equis II Corporation and a change in ownership of the Managing
Trustee.


NOTE 6 -- NOTES PAYABLE

     Notes payable at June 30, 1998 consisted of installment notes of
$37,658,473 payable to banks and institutional lenders. The notes bear interest
rates ranging between 6.1% and 14.46%, except for one note which bears a
fluctuating interest rate based on LIBOR (5.66% at June 30, 1998) 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 of $22,704,268, $2,867,081 and $282,421 at
the expiration of the primary lease terms related to an aircraft leased to
Scandinavian Airlines System, certain rail equipment and its interest in an
aircraft leased to Reno Air, Inc., respectively. The carrying amount of notes
payable approximates fair value at June 30, 1998.

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

     <S>                                        <C>           
     For the year ending June 30, 1999          $   26,342,101
                                  2000               2,149,186
                                  2001               4,837,363
                                  2002               1,761,108
                                  2003               1,953,486
                            Thereafter                 615,229

                                 Total          $   37,658,473
                                                --------------
                                                --------------

</TABLE>


                                       8

<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


NOTE 7 -- LEGAL PROCEEDINGS

     On or about January 15, 1998, certain plaintiffs (the "Plaintiffs") filed a
class and derivative action, captioned Leonard Rosenblum, et al. v. Equis
Financial Group Limited Partnership, et al., in the United States District Court
for the Southern District of Florida (the "Court") on behalf of a proposed class
of investors in 28 equipment leasing programs sponsored by EFG, including the
Trust (collectively, the "Nominal Defendants"), against EFG and a number of its
affiliates, including the Managing Trustee, as defendants (collectively, the
"Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had filed
an earlier derivative action, captioned Leonard Rosenblum, et al. v. Equis
Financial Group Limited Partnership, et al., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit."

     The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.

     On July 16, 1998, counsel for the Defendants and the Plaintiffs executed a
Stipulation of Settlement setting forth the terms pursuant to which a settlement
of the Class Action Lawsuit is intended to be achieved and which, among other
things, is expected to reduce the burdens and expenses attendant to continuing
litigation. The Stipulation of Settlement was based upon and supersedes a
Memorandum of Understanding between the parties dated March 9, 1998 which
outlined the terms of a possible settlement.

     The Stipulation of Settlement was filed with the Court on July 23, 1998 and
remains pending. Ultimately, the Court must review and approve the Stipulation
of Settlement prior to its becoming effective. Further, the Stipulation of
Settlement prescribes certain conditions necessary to effecting a settlement and
contemplates various changes that, if effected, would alter the future
operations of the Nominal Defendants (see Note 10). To the extent that the
Stipulation of Settlement is approved by the Court, the complete terms thereof
will be communicated to all of the beneficiaries (or partners) of the Nominal
Defendants.

     There can be no assurance that the Stipulation of Settlement will be
approved by the Court. However, the Managing Trustee and its affiliates, in
consultation with counsel, concur that there is a reasonable basis to believe
that the Stipulation of Settlement will be approved by the Court. In the absence
of a Stipulation of Settlement approved by the Court, the Defendants intend to
defend vigorously against the claims asserted in the Class Action Lawsuit. The
Managing Trustee and its affiliates cannot predict with any degree of certainty
the ultimate outcome of such litigation.

     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 discussed settlement with respect to this
matter for some time, the negotiations were unsuccessful. Notwithstanding these
discussions, EFG filed an Amended and Supplemental Complaint alleging further
default under the MLA and EFG filed a motion for Summary Judgment on all claims
and counterclaims. The Court held a hearing on EFG's motion in December 


                                       9

<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


1997 and the Court recently entered a decision dismissing certain of National
Steel's counterclaims and finding in favor of EFG on certain issues and in favor
of National Steel on other issues. The parties have since resumed settlement
discussions. The Trust does not anticipate that it will experience any material
losses as a result of this action.


NOTE 8 -- 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 were
intended to 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
Class A Interests held by all Beneficiaries. A majority of the Class A
Interests, representing 1,215,771 Interests or 60.5% of all Class A Interests,
voted in favor of the Amendment; 174,315 Interests or 8.7% of all Class A
Interests voted against the Amendment; and 49,787 Interests or 2.5% of all Class
A Interests abstained. Approximately 72% of all Class A Interests participated
in the vote. Accordingly, the Amendment was adopted.

      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 offering costs in the amount of $151,237 and
professional service costs of $153,842 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 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 distribution of
approximately $1.47 per Class A 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.


                                       10

<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


NOTE 9 -- REDEMPTION OF CLASS A INTERESTS

     On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A 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 issuance of the Class B Interests to purchase 218,661 of the Class A
Interests tendered as a result of the offer. The Tender Documents described,
among other things, the terms of the offer and the purchase price per Class A
Interest being offered by the Trust. On April 28, 1998, the Trust used an
additional $46,800 of such proceeds to purchase 5,200 of the remaining Class A
Interests.


NOTE 10 -- SOLICITATION STATEMENT

     On May 5, 1998, the Trust filed a definitive Solicitation Statement with
the United States Securities and Exchange Commission in connection with the
solicitation by the Trust of the consent of the Beneficiaries to a proposed
amendment (the "Amendment") to the Second Amended and Restated Declaration of
Trust (the "Trust Agreement"). The Solicitation Statement and Consent of
Beneficiary were mailed to all of the Beneficiaries of the Trust on May 6, 1998.
The Beneficiaries were requested to use the Consent of Beneficiary to vote on
seven proposals and return their votes on or before June 5, 1998. Equis II
Corporation, which has voting control of the Trust, agreed to vote all of its
Class B Interests in the same manner in which the majority of the Class A
Interests were actually voted. Accordingly, the Amendment would be adopted or
rejected based upon the voting results of the majority of Class A Interests that
were actually voted (including 9,210 Class A Interests owned by affiliates of
EFG), regardless of how few Class A Interests were actually voted.

     The results of the voting are presented herein and reflect that a majority
of Class A Interests were voted in favor of each of the proposals. Therefore,
the Trust Agreement will be amended to (i) broaden the Trust's stated investment
policies and objectives and permit the Trust to invest in assets other than
leased equipment and (ii) modify the Trust's financing provisions to eliminate
any cap on the amount of aggregate Trust indebtedness and permit the Trust to
use cross-collateralized and other recourse debt structures.

     In addition, subject to attaining a settlement in the Class Action Lawsuit
described in Note 7 herein, the Trust Agreement will be modified in the
following principal respects: (i) the Trust will pay a Special Cash Distribution
to the Class A Beneficiaries of record as of September 1, 1997, or to their
successors or assigns, totaling $1,513,639 (or approximately $0.75 per Class A
Beneficiary Interest) using a portion of the Class B capital contributions that
otherwise would be distributed as a Class B Capital Distribution to Equis II
Corporation, the parent company of the Managing Trustee and an affiliate of EFG;
(ii) Equis II Corporation will be required to reduce its prospective Class B
Capital Distributions by $3,405,688 and treat such amount as a long-term equity
investment in the Trust; (iii) certain voting restrictions will be placed upon
the Class B Interests owned by Equis II Corporation; (iv) the Trust's
reinvestment period, which originally expired on September 2, 1997, will be
reinstated until December 31, 2002; and (v) acquisition fees paid to EFG in
connection with reinvestment assets acquired after the Amendment date will be
reduced from a maximum of 3% to 1% and management fees earned in connection with
such assets will be reduced from a maximum of 5% to 2%.

     The voting results submitted by the Beneficiaries on the Consent of
Beneficiary forms returned to the Managing Trustee in connection with the
Solicitation Statement are summarized below:


                                       11
<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


Proposal 1. Subject to attaining a settlement in the Class Action Lawsuit,
provide for a special cash distribution to Class A Beneficiaries.

<TABLE>
<CAPTION>

                                        Class A Interests  Class B Interests
<S>                                             <C>               <C>      
Total Interests of record                       1,792,353         3,024,740
Total votes returned                              777,118         3,021,172
Percentage returned                                  43.4%             99.9%
Votes in favor                                    701,884         3,021,172
Percentage (of total returned) in favor              90.3%              100%
Votes against                                      55,460                0
Percentage (of total returned) against                7.1%               0
Votes abstaining                                   19,774                0
Percentage (of total returned) abstaining             2.6%               0
</TABLE>

Proposal 2. Subject to attaining a settlement in the Class Action Lawsuit,
provide for an additional commitment of funds to the Trust by Equis II
Corporation.

<TABLE>
<CAPTION>

                                        Class A Interests  Class B Interests
<S>                                             <C>               <C>      
Total Interests of record                       1,792,353         3,024,740
Total votes returned                              777,118         3,021,172
Percentage returned                                  43.4%             99.9%
Votes in favor                                    692,734         3,021,172
Percentage (of total returned) in favor              89.2%              100%
Votes against                                      57,010                0
Percentage (of total returned) against                7.3%               0
Votes abstaining                                   27,374                0
Percentage (of total returned) abstaining             3.5%               0
</TABLE>

Proposal 3. Permit the Trust to acquire property in addition to equipment.

<TABLE>
<CAPTION>

                                        Class A Interests  Class B Interests
<S>                                             <C>               <C>      
Total Interests of record                       1,792,353         3,024,740
Total votes returned                              777,118         3,021,172
Percentage returned                                  43.4%             99.9%
Votes in favor                                    667,243         3,020,372
Percentage (of total returned) in favor              85.9%             99.9%
Votes against                                      89,741               800
Percentage (of total returned) against               11.5%              0.1%
Votes abstaining                                   20,134                 0
Percentage (of total returned) abstaining             2.6%                0

</TABLE>


                                       12

<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


 Proposal 4.  Extend the Trust's reinvestment period.

<TABLE>
<CAPTION>

                                        Class A Interests  Class B Interests

<S>                                             <C>               <C>      
Total Interests of record                       1,792,353         3,024,740
Total votes returned                              777,118         3,021,172
Percentage returned                                  43.4%             99.9%
Votes in favor                                    642,353         3,020,372
Percentage (of total returned) in favor              82.7%             99.9%
Votes against                                     104,351               800
Percentage (of total returned) against               13.4%              0.1%
Votes abstaining                                   30,414                 0
Percentage (of total returned) abstaining             3.9%                0

</TABLE>

Proposal 5. Modify certain fees payable to the Managing Trustee and EFG.

<TABLE>
<CAPTION>

                                        Class A Interests  Class B Interests

<S>                                             <C>               <C>      
Total Interests of record                       1,792,353         3,024,740
Total votes returned                              777,118         3,021,172
Percentage returned                                  43.4%             99.9%
Votes in favor                                    668,233         3,020,372
Percentage (of total returned) in favor              85.9%             99.9%
Votes against                                      75,835               800
Percentage (of total returned) against                9.8%              0.1%
Votes abstaining                                   33,050                 0
Percentage (of total returned) abstaining             4.3%                0

</TABLE>


Proposal 6. Subject to attaining a settlement in the Class Action Lawsuit,
impose voting restrictions on Class B Interests.

<TABLE>
<CAPTION>

                                        Class A Interests  Class B Interests
<S>                                             <C>               <C>      
Total Interests of record                       1,792,353         3,024,740
Total votes returned                              777,118         3,021,172
Percentage returned                                  43.4%             99.9%
Votes in favor                                    679,154         3,021,172
Percentage (of total returned) in favor              87.4%              100%
Votes against                                      67,910                 0
Percentage (of total returned) against                8.7%                0
Votes abstaining                                   30,054                 0
Percentage (of total returned) abstaining             3.9%                0

</TABLE>


                                       13

<PAGE>

                             AFG Investment Trust C
                       Notes to the Financial Statements
                                 June 30, 1998

                                  (Continued)


Proposal 7. Remove the current limitations on the amount and terms of the debt
the Trust may incur and modify the requirements with respect to joint ventures.

<TABLE>
<CAPTION>

                                        Class A Interests  Class B Interests
<S>                                             <C>               <C>      
Total Interests of record                       1,792,353         3,024,740
Total votes returned                              777,118         3,021,172
Percentage returned                                  43.4%             99.9%
Votes in favor                                    637,343         3,019,772
Percentage (of total returned) in favor              82.0%             99.9%
Votes against                                     104,505               800
Percentage (of total returned) against               13.5%              0.1%
Votes abstaining                                   35,270               600
Percentage (of total returned) abstaining             4.5%              0.0%

</TABLE>


NOTE 11 - SUBSEQUENT EVENT

     The Managing Trustee and certain of its affiliates were named as defendants
in the Class Action Lawsuit discussed in Note 7 herein. In connection with this
litigation and subject to a settlement being effected, the Managing Trustee has
agreed to adopt certain modifications to the Trust Agreement as described in the
Solicitation Statement referred to in Note 10 herein. One aspect of the proposed
settlement would result in using of a portion of Equis II Corporation's Class B
Capital Contribution to the Trust to (i) pay a second special cash distribution
to Class A Beneficiaries totaling $1,513,639, approximately $.75 per Class A
Interest, and (ii) invest $3,405,688 in the Trust's long-term business
activities. The remainder of the Class B Capital Contributions (not otherwise
used to repurchase Class A Interests in the Tender Offer closed on October 10,
1997 or to pay for offering and related costs associated with the Class B
Interests or to pay the first special cash distribution), $4,646,862 in total,
was returned to Equis II Corporation and the other third party Class B capital
contributors on July 6, 1998.


                                       14

<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 of AFG Investment Trust C (the
"Trust") 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 outcome of the Class Action Lawsuit
described in Note 7 to the accompanying financial statements, and the ability of
Equis Financial Group Limited Partnership (formerly American Finance Group)
("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.

     The Year 2000 Issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. EFG's computer
programs were designed and written using four digits to define the applicable
year. As a result, EFG does not anticipate system failure or miscalculations
causing disruptions of operations. Based on recent assessments, EFG determined
that minimal modification of software is required so that its network operating
system will function properly with respect to dates in the year 2000 and
thereafter. EFG believes that with these modifications to the existing operating
system, the Year 2000 Issue will not pose significant operational problems for
its computer systems. EFG will utilize internal resources to upgrade software
for Year 2000 modifications and anticipates completing the Year 2000 project by
December 31, 1998, which is prior to any anticipated impact on its operating
system. The total cost of the Year 2000 project is expected to be insignificant
and have no effect on the results of operations of the Trust.

Three and six months ended June 30, 1998 compared to the three and six months
ended June 30, 1997:

Overview

     As an equipment leasing trust, 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
fluctuate. Presently, the Trust is a Nominal Defendant in a Class Action
Lawsuit. The outcome of the Class Action Lawsuit could alter the future business
operations of the Trust. See Note 7 to the accompanying financial statements.
The Trust's operations commenced in 1992.


Results of Operations

     For the three and six months ended June 30, 1998, the Trust recognized
lease revenue of $4,077,757 and $8,179,332, respectively, compared to $4,063,164
and $8,057,574 for the same periods in 1997. The increase in lease revenue from
1997 to 1998 is attributable to the acquisition of additional equipment in 1997
pursuant to the reinvestment provisions of the Amended and Restated Declaration
of Trust (the "Trust Agreement"). The level of lease revenue to be recognized by
the Trust in the future is expected to be impacted by the Amendment to the Trust
Agreement described in Note 8 to the accompanying financial statements; however
the extent of such impact cannot be determined at this time. Over the long term,
the level of lease revenue will decline due to the expiration of the Trust's
primary lease term agreements.


                                       15

<PAGE>

                             AFG Investment Trust C
                       
                                    FORM 10-Q

                         PART I. FINANCIAL INFORMATION


     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 six months ended June 30, 1998 was
$295,366 and $559,444, respectively, compared to $211,436 and $409,267 for the
same periods in 1997. Interest income was generated from temporary investments
of available cash in short-term money market instruments. Interest income in
1998 includes interest earned on unexpended proceeds from the issuance of Class
B Interests (see below). 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 the three and six months ended June 30, 1998, the Trust sold
equipment having a net book value of $930,201 and $1,064,931, respectively, to
existing lessees and third parties. These sales resulted in a net loss, for
financial statement purposes, of $218,327 for the three months ended June 30,
1998 and a net gain, for financial statement purposes, of $2,065,984, for the
six months ended June 30, 1998, compared to a net gain of $175,766 and $210,303
on equipment having a net book value of $352,857 and $480,386 for the same
periods in 1997.

     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 six months ended
June 30, 1998 was $2,693,747 and $5,541,624, respectively, compared to
$3,168,569 and $6,434,415 for the same periods in 1997. 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 $774,591 and $1,619,558, or 19.0% and 19.8% of lease
revenue, for the three and six months ended June 30, 1998, respectively,
compared to $290,750 and $601,672, or 7.2% and 7.5% of lease revenue, for the
same periods in 1997. Interest expense increased due to additional leveraging
obtained to 


                                       16

<PAGE>

                             AFG Investment Trust C

                                    FORM 10-Q

                         PART I. FINANCIAL INFORMATION


finance the acquisition of reinvestment equipment during 1997. In the future,
interest expense is expected to decline in amount as the principal balance of
notes payable is reduced through the application of rent receipts to outstanding
indebtedness.

     Management fees were 4.3% of lease revenue for each of the three and six
months ended June 30, 1998, respectively, compared to 4.1% and 4.2% of lease
revenue for the same periods in 1997. 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, insurance and legal fees, as well as
printing, distribution and remarketing expenses. Operating expenses were
$219,893 and $327,787 for the three and six months ended June 30, 1998,
respectively, compared to $99,230 and $228,494 for the same periods in 1997. The
Trust accrued $108,000 for certain legal expenses related to the Class Action
Lawsuit described in Note 7 to the financial statements. The increase in
operating expenses from 1997 to 1998 was partially offset by professional
service costs incurred in 1997 in connection with the Solicitation and
Registration Statements filed in 1997. 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 six months ended June 30, 1998,
operating activities generated net cash inflows of $6,550,825 compared to
$6,439,129 for the same period in 1997. (The latter has been adjusted to reflect
(i) equipment sale proceeds of $2,265,436 received in connection with the sale
of a vessel and (ii) debt proceeds of $3,846,898 from leveraging certain rail
equipment, both of which amounts were due from EFG at December 31, 1996 and
reflected as cash inflows on the accompanying 1997 Statement of Cash Flows.) In
the future, operating cash flows may increase due to the acquisition of
reinvestment equipment. Subsequently, 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 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.


                                       17

<PAGE>

                             AFG Investment Trust C

                                    FORM 10-Q

                         PART I. FINANCIAL INFORMATION


     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 $1,142,548 during the
six months ended June 30, 1997, to acquire equipment pursuant to the
reinvestment provisions of the Trust Agreement. There were no equipment
acquisitions during the corresponding period in 1998. During the six months
ended June 30, 1998, the Trust realized net sale proceeds of $3,130,915 compared
to $690,689 for the same period in 1997. 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 repayments of principal related to such indebtedness are reported as
a component of financing activities. Each note payable is recourse only to the
specific equipment financed and to the minimum rental payments contracted to be
received during the debt amortization period (which period generally coincides
with the lease rental term). As rental payments are collected, a portion or all
of the rental payment is used to repay the associated indebtedness. In the
near-term, the amount of cash used to repay debt obligations is scheduled to
increase as a result of leveraging obtained in connection with the acquisition
of reinvestment equipment. Thereafter, the amount 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 $22,704,268,
$2,867,081 and $282,421 at the expiration of the primary lease terms related to
the Trust's proportionate ownership interest in a Boeing 767-300 ER aircraft
leased to Scandinavian Airlines System ("SAS"), certain rail equipment and an
aircraft leased to Reno Air, Inc., respectively. SAS has the option to renew its
lease agreement for two one-year periods at the expiration of the primary lease
term on December 29, 1998. Repayment of the associated indebtedness will be
partly dependent on whether SAS decides to renew its lease or the outcome of
alternative remarketing efforts.

     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. At December 31, 1997, the Managing Trustee had a negative tax capital
account balance of $4,832.

     At June 30, 1998, the Trust had aggregate future minimum lease payments of
$18,694,645 from contractual lease agreements (see Note 3 to the financial
statements), a portion of which will be used to amortize the principal balance
of notes payable of $37,658,473 (see Note 6 to the financial statements and
discussion above). 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 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 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. The Trust incurred offering costs in
the amount of $151,237 and professional service costs of $153,842 in connection
with this offering. Subsequently, EFG transferred its Class B Interests to a
special-purpose company, Equis II Corporation, 


                                       18

<PAGE>

                             AFG Investment Trust C

                                    FORM 10-Q

                         PART I. FINANCIAL INFORMATION


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 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
(see also Note 8 to the accompanying financial statements).

      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 of
approximately $1.47 per Class A Interest to the Class A Beneficiaries of the
Trust. The Managing Trustee declared and paid this special cash distribution,
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. On October 10, 1997,
the Trust used $2,291,567 of the net proceeds realized from the issuance of the
Class B Interests to purchase 218,661 of the Class A Interests tendered as a
result of the offer. On April 28, 1998, the Trust used an additional $46,800 of
such proceeds to purchase 5,200 of the remaining Class A Interests. The
remaining net proceeds from the Class B offering of $9,519,389 will be used to
pay a Class B Capital Distribution and according to terms negotiated in
connection with settling the Class Action Lawsuit described in Note 7 (see also
Notes 9, 10 and 11 to the accompanying financial statements).

     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 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 Interest (the rate established and paid
from the Trust's inception through September 1995) to an annualized rate of
$1.26 per Class A Interest commencing in October 1995. In October 1996, the
Managing Trustee increased the annualized distribution rate to $1.64 per Class A
Interest and has sustained this distribution rate through the six months ended
June 30, 1998. For the Class B Beneficiaries, the Managing Trustee established
and paid, from the Trust, an annualized distribution of $0.66 per Class B
Interest commencing July 18, 1997. Future distributions, with respect to Class B
Interests, will be subordinate to certain distributions with respect to Class A
Interests.

     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 six months ended June 30, 1998, the
Trust declared total cash distributions of $2,708,671. The Beneficiaries were
allocated $2,457,923 ($1,465,808 for Class A Beneficiaries and $992,115 for
Class B Beneficiaries); the Special Beneficiary was allocated $223,641; and the
Managing Trustee was allocated $27,107.

     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 


                                       19

<PAGE>

                             AFG Investment Trust C

                                    FORM 10-Q

                         PART I. FINANCIAL INFORMATION


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.


                                       20

<PAGE>

                             AFG Investment Trust C

                                   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:  None

        Item 3.            Defaults upon Senior Securities
                           Response:  None

        Item 4.            Submission of Matters to a Vote of Security Holders
                           Response:

                           Refer to Note 10 to the financial statements herein.

        Item 5.            Other Information
                           Response:  None

        Item 6(a).         Exhibits
                           Response:  None

        Item 6(b).         Reports on Form 8-K
                           Response:  None


                                       21

<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 AFG ASIT Corporation
                              (Duly Authorized Officer and
                              Principal Accounting Officer)


                     Date:    August 14, 1998
                              ---------------------------------------


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


                     Date:    August 14, 1998
                              ---------------------------------------


                                       22