UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-QSB
 
 
 
 [ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2004
 
 OR
 
 [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to .
 
 
 Commission File Number 0-25648
 
 
 AFG Investment Trust D
 (Name of Small Business Issuer in its charter)
 
 
 
 Delaware  04-3157233
 (State or other jurisdiction of       (I.R.S. Employer Identification No.)
 incorporation or organization)
 
 
 1050 Waltham Street, Suite 310, Lexington, MA  02421
 (Address of principal executive offices)      (Zip Code)
 
 
 Issuer's telephone number, including area code : (781) 676-0009
 
 
 Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X . NO  .
 
 
 Shares of Class A interests outstanding as of August 13, 2004: 1,934,755
 Shares of Class B interests outstanding as of August 13, 2004: 3,142,083
 
 
 Transitional Small Business Disclosure Format: YES  . NO X .
 
 
 
 
 
 
    
 
 
 
 AFG INVESTMENT TRUST D
 
 FORM 10-QSB
 
 INDEX
 
 PART I. FINANCIAL INFORMATION:
PageItem 1. Financial Statements (unaudited)Condensed Balance Sheetsat June 30, 2004 and December 31, 2003
3Condensed Statements of Operationsfor the Three and Six Months Ended June 30, 2004 and 2003
4Condensed Statement of Changes in Participants Capitalfor the Six Months Ended June 30, 2004
5Condensed Statements of Cash Flowsfor the Six Months Ended June 30, 2004 and 2003
6Notes to the Condensed Financial Statements
7Item 2. Management's Discussion and Analysis of FinancialCondition and Results of Operations
13Item 3. Controls and Procedures
21PART II. OTHER INFORMATION:Item 1  5.
22Item 6. Exhibits and reports on Form 8-K
22 
 
 
    AFG INVESTMENT TRUST D
 CONDENSED BALANCE SHEETS
 (in thousands of dollars, except share amounts)
 (unaudited)
 
 June 30,
2004

December 31,
2003AssetsCash and cash equivalents
$                           770

$                      725Accounts receivable  affiliate
999

43Loan receivable - EFG/Kettle Development LLC
516

516Investment  affiliate
-

286Interest in EFG/Kettle Development LLC
3,987

4,134Interest in EFG Kirkwood, LLC
2,488

1,868Interest in MILPI Holdings, LLC
8,300

7,752Interest in C & D IT, LLC
1,157

1,157Other assets, net of accumulated amortization of $369and $331 at June 30, 2004 and December 31, 2003, respectively
286

311Equipment at cost, net of accumulated depreciationof $13,488 and $16,186 at June 30, 2004 and December
31, 2003, respectively
1,017

2,425Total assets
$                      19,520

$                   19,217Liabilities and participants' capitalNote payable
$                       3,845

$                    4,452Accrued liabilities
143

270Deferred rental income
-

20Total liabilities
3,988

4,742Commitments and ContingenciesParticipants' capital (deficit):Managing Trustee
9

(17)Special beneficiary
74

-Class A beneficiary interests (1,934,755 interests,initial purchase price of $25 each)
16,348

15,395Class B beneficiary interests (3,142,083 interests,initial purchase price of $5 each)
158

-Treasury interests (154,275 Class A interests at cost)
(1,615)

(1,615)Accumulated other comprehensive income
558

712Total participants' capital
15,532

14,475Total liabilities and participants' capital
$                    19,520

$                 19,217 
 
 
 
 AFG INVESTMENT TRUST D
 CONDENSED STATEMENTS OF OPERATIONS
 (in thousands of dollars, except per share amounts)
 (unaudited)
 
 For the Three Months Ended
For the Six Months EndedJune 30,
June 30,2004
2003
2004
2003RevenueLease revenue

$
379

$
1,202

$
762

$
2,416Interest income


7


29


13


48Gain on sale of equipment


737


92


789


107Other revenue


382


-


382


1Total revenue


1,505


1,323


1,946


2,572ExpensesDepreciation and amortization


530


938


1,163


1,915Interest expense


54


449


111


902Impairment of assets


949


-


949


-Management fees - affiliates


63


105


127


211Operating expenses


190


138


331


284Operating expenses -affiliates


111


35


153


70Total expenses


1,897


1,665


2,834


3,382Income (Loss) from Equity InterestsEquity in net loss of other investments


(25
)

-


(24
)

-Equity in net income (loss) of EFG/Kettle Development LLC and affiliates


22


12


7


(26
)Equity in net (loss) income of EFG Kirkwood LLC


(393
)

(286
)

619


577Equity in net income (loss) of MILPI Holdings, LLC


680


(8
)

1,497


387Total income (loss) from equity interests


284


(282
)

2,099


938Net (loss) income

$
(108
)
$
(624
)
$
1,211

$
128Net (loss) incomeper Class A Beneficiary Interest

$
-

$
(0.04
)
$
0.49

$
0.22per Class B Beneficiary Interest

$
(0.02
)
$
(0.11
)
$
0.05

$
(0.07
)Average Class A Beneficiary Interests outstanding


1,934,755


1,934,755


1,934,755


1,934,755Average Class B Beneficiary Interests outstanding


3,142,083


3,142,083


3,142,083


3,142,083 
 The accompanying notes are an integral part of these financial statements.   AFG INVESTMENT TRUST D
 CONDENSED STATEMENTS OF CHANGES IN PARTICIPANTS CAPITAL
 For the Six Months Ended June 30, 2004
 (in thousands of dollars, except shares)
 (unaudited)
 
 
 Managing Trustee

Special Beneficiary

Class A Beneficiaries

-
Class B Beneficiaries

Treasury

Accumulated Other ComprehensiveAmount

Amount

Interests

Amount

Interests

Amount

Interests

Amount

Income (Loss)

TotalBalances at December 31, 2003
$          (17)

$             -

1,934,755

$         15,395

3,142,083

$              -

154,275

$            (1,615)

$             712

$              14,475Net income
26

74

-

953

-

158

-

-

-

1,211Foreign currency translation adjustment
-

-

-

-

-

-

-

-

(154)

(154)Comprehensive income


















1,057Balances at June 30, 2004
$             9

$            74

1,934,755

$         16,348

3,142,083

$          158

154,275

$            (1,615)

$            558

$             15,532 
 The accompanying notes are an integral part of these financial statements.   
 
 AFG INVESTMENT TRUST D
 CONDENSED STATEMENTS OF CASH FLOWS
 For the Six Months Ended June 30,
 (in thousands of dollars)
 (unaudited)
 
 2004

2003Cash flows provided by (used in) operating activitiesNet income
$                  1,211

$                 128Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization
1,163

1,915Gain on disposition of equipment
(789)

(107)Impairment of assets
949

-Gain on investment  affiliate liquidation distribution
(382)

-Change in equity interests
(1,945)

(496)Changes in assets and liabilities:Accounts receivable  affiliate
(956)

(531)Other assets
(40)

(83)Accrued liabilities
(127)
`
8Deferred rental income
(20)

(9)Net cash (used in) provided by operating activities
(936)

825Cash flows provided by investing activitiesProceeds from equipment sales
1,073

365Dividend received from investment  affiliate
15

137Proceeds from investment affiliate liquidation distribution
654

-Net cash provided by investing activities
1,742

502Cash flows used in financing activitiesPrincipal payments - note payable
(607)

(1,226)Net cash used in financing activities
(607)

(1,226)Net increase in cash and cash equivalents
199

101Effect of foreign exchange rate changes
(154)

(442)Cash and cash equivalents at beginning of year
725

438Cash and cash equivalents at end of period
$               770

$                 97Supplemental informationCash paid during the period for interest
$               113

$               780 
 
 The accompanying notes are an integral part of these financial statements.   
 NOTE 1  BASIS OF PRESENTATION
 
 The unaudited financial statements presented herein are prepared in conformity with generally accepted accounting principles in the United States of America and the instructions for preparing Form 10-QSB under Rule 310 of Regulation S-B of the Securities and Exchange Commission (SEC). Rule 310 provides that disclosures that would substantially duplicate those contained in the most recent annual report to shareholders may be omitted from interim financial statements. The accompanying unaudited condensed financial statements have been prepared on that basis and, therefore, should be read in conjunction with the financial statements and notes presented in the 2003 Annual Report (Form 10-KSB) of AFG Investment Trust D (the Trust) on file with the United States Securities and Exchange Commission. Except as disclosed herein, there have been no material changes to the information presented in the notes to the 2003 Annual Report in Form 10-KSB.
 
 In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Trusts balance sheets at June 30, 2004, statements of operations for the three and six month periods ended June 30, 2004 and 2003, statements of changes in participants capital for the six months ended June 30, 2004 and statements of cash flows for the six months ended June 30, 2004 and 2003 have been made and are reflected.
 
 Certain amounts previously reported have been reclassified to conform to the June 30, 2004 financial statement presentation. These reclassifications did not affect total assets, total liabilities, participants capital or net income (loss).
 
 NOTE 2 - EQUIPMENT
 
 The following is a summary of equipment owned by the Trust at June 30, 2004 and December 31, 2003. Remaining Lease Term (Months), as used below, represents the number of months remaining from June 30, 2004 under contracted lease terms. A remaining lease term equal to zero reflects equipment either off-lease or being leased on a month-to-month basis. Equipment consists of the following at June 30, 2004 and December 31, 2003 (in thousands of dollars):
 
 RemainingLease Term as ofJune 30, 2004Equipment Type

(Months)
June 30, 2004
December 31, 2003Aircraft


6

$
13,608

$
13,608Locomotives


0


673


4,272Construction and mining


0


-


306Materials handling


0


178


379Other


0


46


46Total equipment cost





14,505


18,611Accumulated depreciation





(13,488
)

(16,186
)Equipment, net of accumulated depreciation


-

$
1,017

$
2,425 
 Depreciation expense on equipment was $1.1 million and $1.8 million for the six months ended June 30, 2004 and 2003, respectively.
 
 At June 30, 2004, the Trusts ownership interest in aircraft and related lease payment streams are used to secure a term loan with a third-party lender. The preceding summary of equipment includes leveraged equipment having an original cost of $13.6 million and a net book value of $1.0 million at June 30, 2004.
 
 The summary above includes fully depreciated off-lease equipment held for re-lease with an original cost of $0.2 million.
 
 NOTE 3 - INTEREST IN EFG/KETTLE DEVELOPMENT LLC
 
 The Trust and AFG Investment Trust C ("Trust C") each own 50% of EFG/Kettle Development LLC (Kettle Valley), a Delaware limited liability company, which owns a non-controlling 49.9% indirect ownership interest in a real estate development in Kelowna, British Columbia in Canada, called Kettle Valley.
 
 The Trusts ownership interest in Kettle Valley and affiliates is accounted for on the equity method. The Trust recorded net income of $22,000 and $7,000 during the three and six months ended June 30, 2004, respectively compared to net income of $12,000 and a net loss of $26,000 for the same periods in 2003. During the six months ended June 30, 2004, the Trust recorded a foreign currency translation adjustment of $0.2 million reflecting a strengthening of the U.S. dollar against the Canadian dollar which is included in accumulated other comprehensive income (loss) and reported as part of statements of changes in participants capital .
 
 The table below provides Kettle Valley Development Limited Partnerships summarized consolidated statements of operations data for the three and six months ended June 30, 2004 and 2003 (in thousands of dollars):
 
 Three Months Ended
June 30,
2004
Three Months Ended
June 30,
2003
Six Months Ended
June 30,
2004
Six Months Ended
June 30,
2003Total revenues

$
2,028

$
1,959

$
3,210

$
2,489Total expenses


1,938


1,925


3,119


2,609Net income (loss)

$
90

$
34

$
91

$
(120
) 
 NOTE 4 - INTEREST IN EFG KIRKWOOD LLC
 
 The Trust, Trust C and two affiliated corporations, Equis II and Semele Group, Inc. (Semele), own EFG Kirkwood LLC ("EFG Kirkwood"). The Trust, Trust C and Equis II collectively own 100% of the Class A membership interests in EFG Kirkwood and Semele owns 100% of the Class B membership interests in EFG Kirkwood. The Trust holds a non-controlling interest of 30% of EFG Kirkwoods Class A membership interests.
 
 The Trusts ownership interest in EFG Kirkwood is accounted for on the equity method.  For the  three and six months ended June 30, 2004, the Trust recorded a loss of $0.4 million and income of $0.6 million, respectively, compared to a loss of $0.3 million and income of $0.6 million for the same periods in 2003, which represented its pro-rata share of the net income (loss) of EFG Kirkwood.
 
 The table below provides EFG Kirkwoods summarized consolidated statements of operations data for the three and six months ended June 30, 2004 and 2003, respectively (in thousands of dollars):
 
 Three Months Ended
June 30,
2004
Three Months Ended
June 30,
2003
Six Months Ended
June 30,
2004
Six Months
Ended
June 30,
2003Equity (loss) income on investments

$
(1,311
)
$
(951
)
$
2,062

$
1,924 
 EFG Kirkwood owns membership interests in Mountain Resort Holdings LLC (Mountain Resort) and Mountain Springs Resorts LLC (Mountain Springs). The operating companies have a fiscal year end of April 30th which is different from the Trust. The table below provides comparative summarized statements of operations data for Mountain Resort and Mountain Springs for the three and six months ended June 30, 2004 and 2003 (in thousands dollars):
 
 Three Months Ended
June 30,
2004
Three Months Ended
June 30,
2003
Six Months Ended
June 30,
2004
Six Months
Ended
June 30,
2003Mountain ResortTotal revenues

$
4,122

$
5,003

$
20,107

$
21,686Total expenses


5,781


5,821


16,323


17,052Net (loss) income

$
(1,659
)
$
(818
)
$
3,784

$
4,634Mountain SpringsTotal revenues

$
1,155

$
870

$
12,197

$
9,711Total expenses


3,375


2,979


10,724


9,376Net (loss) income

$
(2,220
)
$
(2,109
)
$
1,473

$
335 
 
 EFG Kirkwood guarantees the payment of obligations under a revolving line of credit between DSC/Purgatory LLC (Purgatory), a subsidiary of Mountain Springs, and a third party lender. Another shareholder in Mountain Springs also guarantees this line of credit. Either party may be called on by the lender to fulfill Purgatorys obligations. The amount of the guarantee consists of the outstanding balance of the line of credit which cannot exceed the maximum borrowing capacity under the line of $3.5 million. As of June 30, 2004, borrowings outstanding on the line of credit were $1.7 million. The line of credit expires in October 2004.
 
 NOTE 5  INTEREST IN MILPI HOLDINGS LLC
 
 On February 17, 2004, the Trust filed a proxy statement soliciting the shareholders on several articles proposed by the Managing Trustee. On March 23, 2004, the shareholders voted in favor of each of the proposals, of which included the sale of the Trusts membership interest in MILPI Holdings, LLC (MILPI) for $8.3 million. The transaction was completed in August 2004.
 
 The impairment test under APB No. 18 The Equity Method of Accounting for Investments in Common Stock, considers whether the fair value of the equity investment has declined and whether that decline is other than temporary. The Trust impaired its interest in MILPI to reflect MILPI at an amount equal to the sales proceeds to be received in connection with the sale. As a result, the Trust recorded an impairment of $0.9 million.
 
 The table below provides summarized consolidated statements of operations data for MILPI for the three and six months ended June 30, 2004 and 2003, respectively (in thousands of dollars):
 
 .
Three Months
Three Months
Six Months
Six Months.
Ended
Ended
Ended
Ended.
June 30,
June 30,
June 30,
June 30,2004
2003
2004
2003Total revenues
$          1,877
$              1,212
$              4,986
$                   3,198Equity income in managed programs
587
233
759
541Total expenses
585
1,370
1,655
2,097Income before income taxes
1,879
75
4,090
1,642Provision for taxes
518
116
1,191
598Net income (loss)
$           1,361
$                (41)
$             2,899
$                    1,044 
 NOTE 6  INVESTMENT - AFFILIATE
 
 The Trust owns 7.25 limited partnership units (the "Units") in AFG International Limited Partnership (the "Partnership"), a real estate limited partnership sponsored by Equis Financial Group Limited Partnership (EFG) that owned two commercial buildings leased to an investment grade educational institution. The Trust purchased the Units for approximately $0.7 million. The Trust owns approximately 23% of the Partnership. The Trust accounts for its investment in the Partnership under the equity method of accounting.
 
 The investment  affiliate is in the process of liquidating all of it assets. In April 2004, Partnership sold one of its commercial buildings to an unrelated third party. The Trust received a liquidating cash distribution of $0.7 million related to the sale. In addition, the Trust received regular distributions of $15,000 and $0.1 million during the six months ended June 30, 2004 and 2003, respectively.
 
 NOTE 7 - RELATED PARTY TRANSACTIONS
 
 Various operating expenses incurred by the Trust are paid by EFG on behalf of the Trust and EFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during the three and six months ended June 30, 2004 and 2003, which were paid or accrued by the Trust to EFG or its affiliates, are as follows (in thousands of dollars):
 
 Three Months Ended
June 30,
2004
Three Months Ended
June 30,
2003
Six Months Ended
June 30,
2004
Six Months Ended
June 30,
2003Management fees

$
63

$
105

$
127

$
211Administrative charges


111


35


153


70Total

$
174

$
140

$
280

$
281 
 Administrative charges represent amounts owed to EFG, pursuant to Section 10.4(c) of the Trust Agreement, for persons employed by EFG who are engaged in providing administrative services to the Trust.
 
 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, 2004, the Trust was owed $1.0 million by EFG for such funds and the interest thereon. These funds were remitted to the Trust in July 2004.
 
 NOTE 8 - NOTE PAYABLE
 
 Note payable at June 30, 2004 consists of a note with a balance of $3.8 million, which bears a fluctuating interest rate based on LIBOR plus 3.5% (5.4% at June 30, 2004). The installment note is non-recourse and is collateralized by the Trusts aircraft and assignment of the related lease payments. This note will be partially paid down by the remaining contracted lease payments. The Trust has a balloon payment obligation of $3.0 million at the maturity of the debt in January 2005.
 
 NOTE 9  CONTINGENCIES
 
 The SEC staff has informed the Trust that it believes the Trust may be an unregistered investment company within the meaning of the The Investment Company Act of 1940 (the Act). The Trust, after consulting with counsel, does not believe that it is an unregistered investment company. However, it is possible that the Trust may have unintentionally engaged in an activity or activities that may be construed to fall within the scope of the Act. If necessary, the Trust intends to avoid being deemed an investment company by means that may include disposing assets that they might not otherwise dispose of.
 
 The Trust is subject to various claims and proceedings in the normal course of business. Management believes that the disposition of such matters is not expected to have a material adverse effect on the financial position of the Trust or its results of operations.
 
 NOTE 10 - SEGMENT REPORTING
 
 The Trust has three principal operating segments: 1) Equipment Leasing 2) Equipment Management and 3) Real Estate Ownership, Development & Management. The Equipment Leasing segment includes acquiring and leasing equipment to third parties. The Trust is no longer allowed to purchase new equipment as its acquisition phase has ended. The Equipment Management segment includes the majority of the Trust's equity interest in MILPI, which owns 100% of PLM International, Inc., a company in the equipment leasing management business, excluding its ownership in RMLP, Inc. The Real Estate segment includes the ownership, management and development of commercial properties, recreational properties, condominiums, interval ownership units, townhomes, single family homes and land sales included in the Trusts ownership interests in EFG Kirkwood, C & D IT LLC, Kettle Valley and MILPI through its subsidiary RMLP, Inc. Other includes corporate assets, which consist of cash and certain receivables. Other operating expenses consist of primarily management fees and professional services, such as audit and legal fees.
 
 The Trusts reportable segments offer different products or services and are managed separately because each requires different operating strategies and management expertise. There are no material intersegment sales or transfers.
 
 Segment information for the three and six months ended June 30, 2004 and 2003 is summarized below (in thousands of dollars).
 
 For the Three Months Ended

Equipment
Equipment
RealJune 30, 2004

Leasing
Management
Estate
Other
TotalRevenue:Lease revenue

$ 379
$ -
$ -
$ -
$ 379Interest income


-


-


5


2


7Gain on sale of equipment


737


-


-


-


737Other revenue





-


382


-


382Total revenue


1,116


-


387


2


1,505Expenses:Depreciation and amortization


530


-


-


-


530Interest expense


54


-


-


-


54Impairment of assets


-


949


-


-


949Management fees - affiliates


18


25


20


-


63Operating expenses


27


-


-


163


190Operating expenses - affiliates


111


-


-


-


111Total expenses


740


974


20


163


1,897Equity Interests:Equity in net loss of other investments


-


-


(25
)

-


(25
)Equity in net income of EFG/Kettle Development LLC


-


-


22


-


22Equity in net loss of EFG Kirkwood LLC


-


-


(393
)

-


(393
)Equity in net income of MILPI Holdings, LLC


-


660


20


-


680Total loss from equity interests


-


660


(376
)

-


284Net income (loss)

$
376

$
(314
)
$
(9
)
$
(161
)
$
(108
)For the Three Months Ended


Equipment


Equipment


RealJune 30, 2003


Leasing


Management


Estate


Other


TotalRevenue:Lease revenue

$
1,202

$
-

$
-

$
-

$
1,202Interest income


-


-


27


2


29Gain on sale of equipment


92


-


-


-


92Total revenue


1,294


-


27


2


1,323Expenses:Depreciation and amortization


938


-


-


-


938Interest expense


449


-


-


-


449Management fees  affiliates


60


25


20


-


105Operating expenses


18


-


-


120


138Operating expenses - affiliates


35


-


-


-


35Total expenses


1,500


25


20


120


1,665Equity Interests:Equity in net income of EFG/Kettle Development LLC


-


-


12


-


12Equity in net loss of EFG Kirkwood LLC


-


-


(286
)

-


(286
)Equity in net loss of MILPI Holdings, LLC


-


(8
)

-


-


(8
)Total loss from equity interests


-


(8
)

(274
)

-


(282
)Net loss

$
(206
)
$
(33
)
$
(267
)
$
(118
)
$
(624
)For the Six Months Ended


Equipment


Equipment


RealJune 30, 2004


Leasing


Management


Estate


Other


TotalRevenue:Lease revenue

$
762

$
-

$
-

$
-

$
762Interest income


-


-


10


3


13Gain on sale of equipment


789


-


-


-


789Other revenue





-


382


-


382Total revenue


1,551


-


392


3


1,946Expenses:Depreciation and amortization


1,163


-


-


-


1,163Interest expense


111


-


-


-


111Impairment of assets


-


949


-


-


949Management fees - affiliates


37


49


40


1


127Operating expenses


51


-


-


280


331Operating expenses - affiliates


153


-


-


-


153Total expenses


1,515


998


40


281


2,834Equity Interests:Equity in net loss of other investments


-


-


(24
)

-


(24
)Equity in net income of EFG/Kettle Development LLC


-


-


7


-


7Equity in net income of EFG Kirkwood LLC


-


-


619


-


619Equity in net income of MILPI Holdings, LLC


-


1,494


3


-


1,497Total income from equity interests


-


1,494


605


-


2,099Net income (loss)

$
36

$
496

$
957

$
(278
)
$
1,211Total assets at June 30, 2004

$
2,052

$
6,459

$
10,190

$
819

$
19,520For the Six Months Ended


Equipment


Equipment


RealJune 30, 2003


Leasing


Management


Estate


Other


TotalRevenueLease revenue

$
2,416

$
-

$
-

$
-

$
2,416Interest income


-


-


46


2


48Gain on sale of equipment


107


-


-


-


107Other revenue


1


-


-


-


1Total revenue


2,524


-


46


2


2,572ExpensesDepreciation and amortization


1,915


-


-


-


1,915Interest expense


902


-


-


-


902Management fees - affiliates


121


49


40


1


211Operating expenses


18


-


-


266


284Operating expenses - affiliates


70


-


-


-


70Total expenses


3,026


49


40


267


3,382Equity InterestsEquity in net loss of EFG/Kettle Development LLC


-


-


(26
)

-


(26
)Equity in net income of EFG Kirkwood LLC


-


-


577


-


577Equity in net income of MILPI Holdings, LLC


-


387


-


-


387Total income from equity interests


-


387


551


-


938Net (loss) income

$
(502
)
$
338

$
557

$
(265
)
$
128 
 NOTE 11RECENT ACCOUNTING PRONOUNCEMENTS
 
 In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires the Trust to evaluate all existing arrangements to identify situations where the Trust has a variable interest, commonly evidenced by a guarantee arrangement or other commitment to provide financial support, in a variable interest entity, commonly a thinly capitalized entity, and further determine when such variable interest requires the Trust to consolidate the variable interest entities financial statements with its own. The Trust is required to perform this assessment by December 31, 2004 and consolidate any variable interest entities for which the Trust will absorb a majority of the entities expected losses or receive a majority of the expected residual gains.
 
 The Trust is still in the process of evaluating its impact and has not completed its analysis or concluded on the impact that FIN 46 will have on the Trust.
 
 NOTE 12  SUBSEQUENT EVENTS
 
 Subsequent to June 30, 2004 the Trusts investment  affiliate sold the remaining commercial building to an unrelated third party.
 
 On August 5, 2004, the Trust sold its interest in MILPI for $8.3 million to an entity controlled by Jim Coyne and Gary Engle.
 
 On August 11, 2004, the Managing Trustee declared an $8.0 million distribution to the beneficial interest holders of the Trust on that date. The Trust is expected to pay the distribution on or before September 10, 2004.
  
 AFG INVESTMENT TRUST D
 
 FORM 10-QSB
 
 PART I. FINANCIAL INFORMATION
 
 
 
 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
 Forward-looking Information
 
 Certain statements in this quarterly report of AFG Investment Trust D (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 collection of the Trusts contracted rents, the realization of residual proceeds for the Trusts equipment, the performance of the Trusts non-equipment assets, and future economic conditions.
 
 Contingencies and Litigation
 
 The Securities and Exchange Commission staff has informed the Trust that it believes the Trust may be an unregistered investment company within the meaning of The Investment Company Act of 1940 (the Act). The Trust, after consulting with counsel, does not believe that it is an unregistered investment company. However, it is possible that the Trust may have unintentionally engaged in an activity or activities that may be construed to fall within the scope of the Act. If necessary, the Trust intends to avoid being deemed an investment company by means that may include disposing assets that they might not otherwise dispose of.
 
 The Trust is subject to various claims and proceedings in the normal course of business. Management believes that the disposition of such matters is not expected to have a material adverse effect on the financial position of the Trust or its results of operations.
 
 Critical Accounting Policies and Estimates
 
 The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires AFG ASIT Corporation (the Managing Trustee) to make estimates and assumptions that affect the amounts reported in the financial statements. On a regular basis, the Managing Trustee reviews these estimates and assumptions including those related to revenue recognition, asset lives and depreciation, impairment of long-lived assets and contingencies. These estimates are based on the Managing Trustees historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Managing Trustee believes, however, that the estimates, including those for the above-listed items, are reasonable.
 
 The Managing Trustee believes the following critical accounting policies, among others, are subject to significant judgments and estimates used in the preparation of these financial statements:
 
 Revenue Recognition: Rents are payable to the Trust monthly or quarterly and no significant amounts are calculated on factors other than the passage of time. The Trusts leases are accounted for as operating leases and are noncancellable. Rents received prior to their due dates are deferred.
 
 Asset lives and depreciation method: The Trusts primary business involves the purchase and subsequent lease of long-lived equipment. The Trust's depreciation policy is intended to allocate the cost of equipment over the period during which it produces economic benefit. The principal period of economic benefit is considered to correspond to each asset's primary lease term, which generally represents the period of greatest revenue potential for each asset. Accordingly, to the extent that an asset is held on primary lease term, the 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 the 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.
 
 Impairment of long-lived assets: The Trust evaluates long-lived assets for impairment whenever events or circumstances indicate that the carrying bases of such assets may not be recoverable. Whenever circumstances indicate that an impairment may exist, the company evaluates future cash flows of the asset to the carrying value. If projected undiscounted future cash flows are lower than the carrying value of the asset, a loss is recorded. The loss recorded is equal to the difference between the carrying amount and the fair value of the asset. The fair value of the asset is determined based on a valuation model, which includes expected discounted future cash flows of the asset, current market prices and managements market knowledge. The fair market value of long-lived assets secured by non-recourse debt is determined based on a valuation model which includes expected future cash flows and the recoverable value. The recoverable value is determined based on managements decision to either sell, re-lease or return the asset to the lender.
 
 The Managing Trustee evaluates the net realizable value of significant equipment assets, such as aircraft, individually. All other assets are evaluated collectively by equipment type unless the Managing Trustee learns of specific circumstances, such as a lessee default, technological obsolescence, or other market developments, which could affect the net realizable value of particular assets. Adjustments to reduce the net carrying value of equipment are recorded in those instances where estimated net realizable value is considered to be less than net carrying value and are reflected separately on the accompanying Statements of Income as impairment of equipment.
 
 Results of Operations
 
 Segment Reporting
 
 The Trust has three principal operating segments: 1) Equipment Leasing 2) Equipment Management and 3) Real Estate Ownership, Development & Management. The Equipment Leasing segment includes acquiring and leasing equipment to third parties. The Trust is no longer allowed to purchase new equipment as its acquisition phase has ended. The Equipment Management segment includes the majority of the Trust's equity interest in MILPI, which owns 100% of PLM International, Inc., a company in the equipment leasing management business, excluding its ownership in RMLP, Inc. The Real Estate segment includes the ownership, management and development of commercial properties, recreational properties, condominiums, interval ownership units, townhomes, single family homes and land sales included in the Trusts ownership interests in EFG Kirkwood, C & D IT LLC, Kettle Valley and MILPI through its subsidiary RMLP, Inc. Other includes corporate assets, which consist of cash and certain receivables.
 
 The Trusts reportable segments offer different products or services and are managed separately because each requires different operating strategies and management expertise. There are no material intersegment sales or transfers.
 
 Equipment Leasing
 
 For the three and six months ended June 30, 2004, the Trust recognized lease revenue of $0.4 million and $0.8 million, respectively, compared to $1.2 million and $2.4 million, respectively, for same period in 2003. The decrease in lease revenue in the three and six months ended June 30, 2004 compared to the same periods in 2003 resulted primarily from lease term expirations and the disposition of equipment. Future equipment sales will result in a reduction in the lease revenue recognized as the Trust is no longer allowed to purchase equipment. The lease for the Trusts remaining asset on lease, an aircraft, expires in January 2005.
 
 During the three and six months ended June 30, 2004, the Trust sold equipment having a net book value of $0.3 million to existing lessees and third parties. These sales resulted in a gain of $0.8 million for both periods ended June 30, 2004. During the three and six months ended June 30, 2003, the Trust sold equipment having a net book value of $0.3 million to existing lessees and third parties. These sales resulted in a gain of $0.1 million for both periods ended June 30, 2003.
 
 Depreciation expense was $0.5 million and $1.2 million for the three and six months ended June 30, 2004, respectively compared to $0.9 million and $1.9 million, respectively, for the same periods in 2003. Depreciation and amortization decreased by $0.4 million and $0.7 million during the three and six months ended June 30, 2004 compared to the same period in 2003. The decrease in depreciation for the respective periods is attributable to the disposition of the Trusts leasing equipment. Depreciation and amortization is expected to continue to decline in the future as the Trusts equipment portfolio is sold and not replaced.
 
 Interest expense on third party debt was $0.1 million for both the three and six months ended June 30, 2004, respectively, compared to $0.4 million and $0.9 million, respectively, for the same periods in 2003. The decrease in interest expense for each of the respective periods is attributable to lower average outstanding debt balances in the periods ended June 30, 2004 compared to the same periods in 2003. Interest expense in the equipment leasing segment is expected to decline in the future.
 
 Management fees- affiliate from equipment leasing were $18,000 and $37,000 for the three and six months ended June 30, 2004, respectively, compared to $0.1 million for the same periods in 2003. 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, subject to certain limitations. The decrease in management fees- affiliates for the respective periods is attributable to the disposition of the Trusts leasing equipment.
 
 Operating expenses and operating expenses  affiliates were $0.2 million for both the three and six months ended June 30, 2004, respectively, compared to $0.1 million for both the same periods in 2003. The increase in operating expenses is attributable to an increase in selling and remarketing costs related to the disposition of the Trusts assets. Operating expenses consist primarily of administrative charges as well as printing and remarketing expenses. 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.
 
 Equipment Management
 
 For the three and six months ended June 30, 2004 the Trust recorded income of $0.7 million and of $1.5 million, respectively, compared to a loss of $8,000 and income of $0.4 million, respectively, for the same periods in 2003, which represented its pro-rata share of the net income of MILPI under the equity method of accounting. PLM is primarily an equipment leasing and asset management company.
 
 During the three and six months ended June 30, 2004, MILPI recognized revenues of $1.9 million and $5.0 million, respectively, compared to $1.2 million and $3.2 million, respectively, for the same periods in 2003. Revenues for the three months ended June 30, 2004 consisted primarily of management fees of $1.0 million, $0.5 million of acquisition and lease negotiation fees, $0.1 million gain on disposition of equipment and lease revenue of $0.1 million. Revenues for the six months ended June 30, 2004 consisted primarily of management fees of $1.9 million, $1.3 million of acquisition and lease negotiation fees, $1.2 million gain on disposition of equipment and $0.4 million of lease revenue. Revenues for the three months ended June 30, 2003 are comprised primarily of management fees of $0.8 million and $0.3 million of gain on disposition of equipment. For the six months ended June 30, 2003, revenues were comprised of management fees of $2.2 million, $0.5 million of acquisition and lease negotiation fees, $0.2 million gain on disposition of equipment and $0.1 million of lease revenue. Acquisition and lease negotiation fees increased in the six months ended June 30, 2004 by $0.7 million compared to the same period in 2003 as a result of more equipment being placed in PLM managed programs during 2004 compared to 2003.
 
 During the three and six months ended June 30, 2004, MILPI incurred total expenses of $0.6 million and $1.7 million, respectively, compared to $1.4 million and $2.1 million, respectively, for the same period in 2003. Expenses for the three months ended June 30, 2004 are comprised of operational support expenses of $0.4 million and depreciation and amortization expense of $0.2 million. For the six months ended June 30, 2004, expenses are comprised primarily of operational support expenses of $1.3 million and depreciation and amortization expense of $0.3 million.
 
 Expenses for the three months ended June 30, 2003 are comprised of operational support expenses of $0.9 million, depreciation and amortization expense of $0.2 million and $0.3 million impairment of MILPIs investments in the managed programs. For the six months ended June 30, 2003, expenses are comprised primarily of operational support expenses of $1.7 million, depreciation and amortization expense of $0.3 million and $0.3 million impairment of MILPIs investments in the managed programs.
 
 The decrease in total expenses for the three and six month periods ended June 30, 2004 compared to the same periods in 2003, is primarily attributable to an decrease in general and administrative costs of $0.4 million. In addition, the decrease is attributable to an impairment charge of $0.3 million to MILPIs investments in the managed growth funds which was recorded during 2003. A similar charge was not recorded in 2004.
 
 During the three and six months ended June 30, 2004, MILPI incurred income tax expense of $0.5 million and $1.2 million, respectively, with an effective tax rate of 29% for the six month period. For the three and six month period ended June 30, 2003, MILPI incurred income tax expense of $0.1 million and $0.6 million, respectively, with an effective tax rate of 36% for the six month period. The effective tax rate decreased 7% during the six month period ended June 30, 2004 compared to the same period in 2003 due to an increased amount of income being earned at MILPI Holdings, LLC, which is a non-taxable entity.
 
 On February 17, 2004, the Trust filed a proxy statement soliciting the shareholders on several articles proposed by the Managing Trustee. On March 23, 2004, the shareholders voted in favor of each of the proposals, of which included the sale of the Trusts membership interest in MILPI for $8.3 million. The transaction was completed in August 2004. The Trust adjusted the fair value of interest in MILPI to reflect the sales proceeds received in connection with the sale. As a result, the Trust recorded an impairment of $0.9 million to adjust its interest in MILPI to the sales price of $8.3 million.
 
 Real Estate
 
 Interest income in the real estate segment for the three and six months ended June 30, 2004 was $5,000 and $10,000 compared to $27,000 and $46,000 for the same periods in 2003. Interest income is generated from loans made to affiliates. Interest income decreased in the three and six months ended June 30, 2004 compared to the same period in 2003 due to the Trust renegotiating the terms of its loan to Kettle Valley.
 
 Management fees paid to EFG for non-equipment assets were $20,000 and $40,000 for each of the three and six months ended June 30, 2004 and 2003, respectively. Management fees for non-equipment assets, excluding cash, are 1% of the original equipment cost of such assets under management.
 
 Kettle Valley
 
 Kettle Valley is a real estate development company located in Kelowna, British Columbia, Canada. The project, which is being developed by Kettle Valley Development Limited Partnership, consists of approximately 280 acres of land that is zoned for 1,120 residential units in addition to commercial space. To date, 251 residential units have been constructed and sold and 26 additional units are under construction.
 
 The Trust indirectly has an approximate 25% ownership interest in Kettle Valley. For the three and six months ended June 30, 2004, the Trust recorded income of $22,000 and $7,000, respectively, compared to income of $12,000 and a loss of $26,000 for the same periods in 2003. During the six months ended June 30, 2004, the Trust recorded a foreign currency translation loss of $0.2 million, included in accumulated other comprehensive income and reported as part of statements of changes in participants capital, reflecting a strengthening of the U.S. dollar against the Canadian dollar at the end of the second quarter of 2004.
 
 During the three and six months ended June 30, 2004, Kettle Valley recorded revenues of $2.0 million and $3.2 million, respectively, compared to revenues of $2.0 million and 2.5 million for the same periods in 2003. Total expenses incurred during the three and six months ended June 30, 2004 were $1.9 million and $3.1 million, respectively, compared to $1.9 million and $2.6 million in the same periods in 2003. The increase in revenues and total expenses during the six months ended June 30, 2004 compared to the same period in 2003 is the result of an increase in the number of lot and home sales.
 
 EFG Kirkwood
 
 The Trust owns 30% of the Class A membership interests of EFG Kirkwood, a joint venture between the Trust, Trust C and two affiliated companies, Equis II and Semele Group, Inc. (Semele). AFG ASIT Corporation, the Managing Trustee of the Trust and a subsidiary of Semele, also is the manager of EFG Kirkwood. EFG Kirkwoods assets consist of two minority interest investments accounted for under the equity method of accounting. The investments consist of an interest in two ski resorts: Mountain Resort Holdings LLC (Mountain Resort) and Mountain Springs Resorts LLC (Mountain Springs).
 
 Mountain Resort, through four wholly owned subsidiaries, owns and operates the Kirkwood Mountain Resort, a ski resort located in northern California, a public utility that services the local community, and land that is held for residential and commercial development. Mountain Springs, through a wholly owned subsidiary, owns a controlling interest in DSC/Purgatory LLC ("Purgatory") in Durango, Colorado.
 
 For the three and six months ended June 30, 2004, the Trust recorded a loss of $0.4 million and income of $0.6 million, respectively, from its ownership interest in EFG Kirkwood. For the three and six months ended June 30, 2003, the Trust recorded a loss of $0.3 million and income of $0.6 million, respectively, This income represents the Trusts share of the net income (loss) of EFG Kirkwood recorded under the equity method of accounting. Due to the seasonal nature of EFG Kirkwoods operations, the financial results of the six months ended June 30, 2004 and 2003 are not indicative of future periods. These six month periods include the periods of peak income activity for the resorts. See below for discussion of the operating results of the resorts.
 
 Mountain Resort Operating Results
 
 During the three and six months ended June 30, 2004, Mountain Resort recorded total revenues of approximately $4.1 million and $20.1 million compared to $5.0 million and $21.7 million for the same periods in 2003. The decrease in total revenues from 2003 to 2004 is the result of a decrease in ski related revenue. The decrease in ski-related revenues resulted from a decrease in visitors to the resort compared to the same period last year, as a result of unfavorable weather conditions during the winter season. The decrease was partially offset by an increase in residential-related revenues as a result of improved real estate sales volume during 2004 compared to 2003.
 
 During the three and six months ended June 30, 2004, Mountain Resort recorded total expenses of $5.8 million and $16.3 million, compared to $5.8 million and $17.1 million for the same periods in 2003, respectively. The decrease in total expenses is due to the reduction of operational support.
 
 Mountain Springs
 
 During the three and six months ended June 30, 2004, Mountain Springs recorded total revenues of $1.2 million and $12.2 million, compared to $0.9 million and $9.7 million for the same periods of 2003. The increase in total revenues from 2003 to 2004 is the result of an increase in visitors to the resort compared to the same period last year, as a result of improved weather conditions during the winter season.
 
 Total expenses were approximately $3.4 million and $10.7 million for the three and six months ended June 30, 2004 compared to $3.0 million and $9.4 million for the same period in 2003. The increase in total expenses for the three and six months ended June 30, 2004 compared to the same periods in 2003 is a result of an increased cost of sales corresponding to the increase in revenues.
 
 Liquidity and Capital Resources and Discussion of Cash Flows
 
 The Trust by its nature is a limited life entity. The Trust has a scheduled termination date of December 31, 2006. In the first quarter of 2004, the beneficial interest holders approved a resolution, which among other things, allow the Trust to adopt a plan of liquidation and dissolution prior to 2006. The Managing Trustee anticipates that this will be adopted in 2004. The beneficial interest holders also authorized the sale of MILPI Holdings, LLC to an entity controlled by Gary Engle and Jim Coyne. This transaction was completed in August 2004. The Trust could have other significant asset sales in 2004.
 
 The Trust's principal operating activities derive from asset rental transactions. These cash inflows are used to satisfy debt service obligations associated with the assets, and to pay management fees and operating costs. Operating activities used cash of $0.9 million during the six months ended June 30, 2004.
 
 Accounts receivable-affiliate increased by $1.0 million or 2,223% during the six months ended June 30, 2004. Receivable from affiliates consists of rent or proceeds from the sale of equipment by EFG, an affiliated entity. During the six months ended June 30, 2004, the Trust sold its remaining 6 off-lease locomotives with a net book value of $0.3 million. In connection with the sale, the Trust received $1.0 million in sales proceeds. All rents and proceeds from the sale of equipment are paid directly to either EFG or to a lender. EFG temporarily deposits collected funds in a separate interest-bearing escrow account and remits to the Trust on a monthly basis. At June 30, 2004, the Trust was owed $1.0 million by EFG for such funds compared to $43,000 at December 31, 2003. The Trust was paid in full by EFG in July 2004.
 
 The Trusts interest in affiliate decreased by $0.3 million or 100% during the six month period ended June 30, 2004. In April 2004, the Trusts investment  affiliate sold one of its commercial buildings to an unrelated third party. The Trust received a cash distribution of $0.7 million related to the sale. In addition, the Trust received distributions of $15,000 during the six months ended June 30, 2004.
 
 The Trusts investment in Kettle Valley decreased by $0.1 million during the first six months of 2004 or 4%. The decrease is due to the Trust recording a net foreign currency translation adjustment of $0.2 million reflecting a strengthening of the U.S. dollar  against the Canadian dollar.
 
 Investment in EFG Kirkwood increased by $0.6 million or 33% during the six month period ended June 30, 2004. The increase is attributable to equity income of $0.6 million being recorded during 2004 from this equity investment.
 
 The Trusts interest in MILPI increased by $0.5 million or 7% during the six month period ended June 30, 2004. The increase in the investment was attributable to equity income of $1.5 million recorded during the quarter, which is primarily related to gains on the disposition of equipment, partially offset by a $0.9 million impairment recorded to adjust the interest in MILPI to the sales price of $8.3 million. The Trust sold its interest in MILPI in August 2004. The Trust received $8.3 million in sales proceeds from the sale.
 
 Equipment held for lease decreased by $1.4 million or 58% during 2004. The decrease is primarily attributable to depreciation expense recorded during the period. In addition, the Trust sold equipment with a net book value of $0.3 million to existing lessees and third parties.
 
 The Trusts balance in note payable decreased by $0.6 million or 14% during the six month period ended June 30, 2004. The decrease in attributable to principal payments made during the period.
 
 Accrued liabilities decreased by $0.1 million or 47% during the period ended June 30, 2004. A decrease in accrued liabilities is due to accrued expenses related to selling and remarketing costs accrued at December 31, 2003 related to the disposition of the Trusts off-lease locomotives. A similar liability was not owed at June 30, 2004.
 
 At June 30, 2004, the Trust was due aggregate future minimum lease payments of $0.7 million from contractual lease agreements, a portion of which will be used to pay down the principal balance of note payable of $3.8 million. Additional cash inflows may 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.
 
 During the six months ended June 30, 2004, the Trust sold equipment with a net book value of $0.3 million to existing lessees and third parties. These sales resulted in a gain on sale of $0.8 million. Future inflows of cash from equipment 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.
 
 Equity Interest Investments
 
 The Trust owns equity interest investments in equipment management and several real estate companies, which are accounted for under the equity method of accounting. The financial position and liquidity of these companies have a material impact on the Trust. A description of the Trusts minority interest investments and a brief summary of the financial position are summarized below:
 
 The Trust has minority interest investments in the following entities as of June 30, 2004 (in thousands of dollars):
 
 June 30,
2004
December 31,
2003Interest in MILPI Holdings, LLC
$               8,300
$              7,752Interest in EFG/Kettle Development LLC
3,987
4,134Interest in EFG Kirkwood, LLC
2,488
1,868Interest in C & D IT, LLC
1,157
1,157Investment  affiliate
-
286Investment - other
53
79Total
$15,985
$15,276 
 MILPI Holdings, LLC
 
 MILPI Holdings, LLC operates in the equipment management and real estate segments. As of June 30, 2004, MILPI had $19.1 million of equity investments in several equipment leasing programs, which comprised approximately 41% of MILPIs total assets. At June 30, 2004, MILPI had $9.7 million in cash and cash equivalents which represents 21% of MILPIs total assets. At June 30, 2004, MILPI had $3.3 million in railcar equipment which represented 7% of its total assets. MILPIs investment in RMLP, Inc. totaled $10.4 million at June 30, 2004 representing 22% of its total assets. As of June 30, 2004, MILPI had $3.2 million outstanding borrowings in the warehouse facility. The warehouse credit facility is shared by MILPI and several of its managed equipment leasing programs. All borrowings are guaranteed by MILPI.
 
 MILPI had positive cash flows from operations of $2.1 million during the six months ended June 30, 2004. Cash flows from operations were used to finance operating costs and purchase additional assets to increase the Companys railcar portfolio. MILPI did not declare or pay dividends in the first six months of 2004.
 
 On March 23, 2004, the beneficial interest holders approved three proposals. These included a proposal to sell the Trusts interest in MILPI for $8.3 million to an entity controlled by Jim Coyne and Gary Engle. This transaction was completed in 2004
 
 Kettle Valley
 
 Kettle Valley is a real estate development company located in Kelowna, British Columbia, Canada. Kettle Valley has historically operated at a net loss and has sustained negative cash flows from operations. As of June 30, 2004, the company has approximately $20.8 million in current assets, including $19.7 million of land under development. At June 30, 2004, Kettle Valley has $5.5 million in short term debt, of which $3.0 million represents related party debt. The real estate is in the early phase of development and may incur losses and negative cash flow in the future. Kettle Valley expects to pay existing obligations with the sales proceeds from future lot sales. As of June 30, 2004, 251 lots have been sold and 26 homes are currently under construction. Kettle Valley did not pay dividends in the first six months of 2004 or in 2003 and does not anticipate paying dividends in the near future until lots sales and cash flow from home construction and sales are sufficient to support operations. Future capital needs that may be required by Kettle Valley are expected to be financed by the other equity holders or outside investors.
 
 EFG Kirkwood
 
 EFG Kirkwood was formed for the purpose of acquiring a minority interest in two real estate investments. The investments consist of an interest in two ski resorts: Mountain Resort and Mountain Springs. EFG Kirkwood has no other significant assets other than its interest in the ski resorts.
 
 Mountain Springs: Mountain Springs, through a wholly owned subsidiary, owns a controlling interest in Purgatory in Durango, Colorado. Purgatory is a ski and mountain recreation resort covering 2,500 acres, situated on 40 miles of terrain with 75 ski trails. Mountain Spring's primary cash flows come from its ski operations during the ski season, which is heavily dependent on snowfall. Additional cash flow is provided by its real estate development activities and by the resorts summer recreational programs. When out of season, operations are funded by available cash and through the use of a $3.5 million dollar line of credit, which is guaranteed by EFG Kirkwood as well as another investor in Mountain Springs.
 
 At June 30, 2004, Mountain Springs had current assets of $2.7 million, which consisted of cash of $0.6 million, accounts receivable of $1.3 million and inventories and other assets totaling $0.8 million. Long-term assets consist primarily of buildings, equipment and real estate totaling approximately $20.5 million.
 
 Liabilities totaled approximately $17.4 million at June 30, 2004 and consisted primarily of debt and notes outstanding.
 
 Mountain Springs also owns 51% of Durango Mountain Land Company, which owns 500 acres of real estate under development, which will develop, and otherwise operate this real estate.
 
 Mountain Springs did not pay dividends in the first six months of 2004 or in 2003 and does not anticipate paying dividends in the near future until cash flow from operations and residential sales are sufficient to support operations.
 
 Mountain Resort: Mountain Resort is primarily a ski and mountain recreation resort with more than 2,000 acres of terrain, located approximately 32 miles south of Lake Tahoe. The resort receives approximately 70% of its revenues from winter ski operations, primarily ski, lodging, retail and food and beverage services with the remainder of the revenues generated from summer outdoor activities, including mountain biking, hiking and other activities. Mountain Resorts primary cash flows come from its ski operations during the ski season, which is heavily dependent on snowfall. Excess cash flows will be used to finance development on the real estate surrounding the resort.
 
 At June 30, 2004, Mountain Resort had current assets of approximately $9.5 million, which consisted of cash of $6.0 million, accounts receivable of $2.5 million, and inventory and other assets of $1.0 million. Long-term assets consisted primarily of buildings, equipment and real estate totaling $38.8 million.
 
 Liabilities were approximately $24.2 million, which consisted primarily of long-term senior notes and affiliated debt.
 
 Both Mountain Springs and Mountain Resort are subject to a number of risks, including weather-related risks and the risks associated with real estate development and resort ownership. The ski resort business is seasonal in nature and insufficient snow during the winter season can adversely affect the profitability of a given resort. Many operators of ski resorts have greater resources and experience in the industry than the Trust, its affiliates and its joint venture partners.
 
 Mountain Resorts did not pay dividends in the first six months of 2004 or in 2003 and does not anticipate paying dividends in the near future until cash flow from operations and residential sales are sufficient to support operations.
 
 C&D IT LLC
 
 The Trust and Trust C each own 50% of C & D IT LLC, a Delaware limited liability company, to which each Trust contributed $1.0 million, for a 25% interest in the Rancho Malibu Limited Partnership. The Trusts ownership interest in C & D IT LLC is accounted for on the equity method. C & D IT LLC did not pay or declare any dividends in 2004 and none are expected for the foreseeable future.
 
 Investment - affiliate
 
 The Trust owns 7.25 limited partnership units (the "Units") in AFG International Limited Partnership (the "Partnership"), a real estate limited partnership sponsored by Equis Financial Group Limited Partnership (EFG) that owned two commercial buildings leased to an investment grade educational institution. The Trust purchased the Units for approximately $0.7 million. The Trust owns approximately 23% of the Partnership. The Trust accounts for its investment in the Partnership under the equity method of accounting.
 In April 2004, the Partnership sold one of its commercial buildings to an unrelated third party. The Trust received a liquidation cash distribution of $0.7 million related to the sale. In addition, the Trust received regular distributions of $15,000 during the six months ended June 30, 2004.
 
 Outlook for the Future
 
 Several other factors may affect the Trusts operating performance during the remainder of 2004 and beyond including:
 
 -asset sales
 -changes in markets for the Trusts equipment;
 -changes in the regulatory environment in which the Trusts equipment operates; and
 -changes in the real estate markets in which the Trust has ownership interest.
 
 The future out look for the different operating segments of the Trust is as follows:
 
 Asset Sales
 
 The Trust has a scheduled termination date of December 31, 2006. In the first quarter of 2004, the beneficial interest holders approved a resolution, which among other things, allow the Trust to adopt a plan of liquidation and dissolution prior to 2006. The Managing Trustee anticipates that this will be adopted in 2004. The beneficial interest holders also authorized the sale of MILPI Holdings, LLC to an entity controlled by Gary Engle and Jim Coyne. This sale was completed in August 2004. In April 2004, the Partnership sold one of its commercial buildings to an unrelated third party. The Trust received a liquidation cash distribution of $0.7 million related to the sale. The Partnership anticipates selling its remaining commercial building in the third quarter of 2004. The Trust could have other significant asset sales in 2004.
 
 Real Estate
 
 The Trust has a minority interest in two ski resorts, which are subject to the risks of the tourism industry. The resorts are subject to a number of risks, including weather-related risks. The ski resort business is seasonal in nature and insufficient snow during the winter season can adversely affect the profitability of a given resort. Many operators of ski resorts have greater resources and experience in the industry than the Trust, its affiliates and its joint venture partners.
 
 The Trust also has a minority interest in several real estate development companies, some of which are located at the resorts. The risks generally associated with real estate include, without limitation, the existence of senior financing or other liens on the properties, general or local economic conditions, property values, the sale of properties, interest rates, real estate taxes, other operating expenses, the supply and demand for properties involved, zoning and environmental laws and regulations, and other governmental rules.
 
 The Trust s investment in real estate development companies have experienced an increase in residential sales as a result of interest rates being at historical lows. There is a risk that residential sales could materially decline if interest rates increase.
 
 The Trust's involvement in real estate development also introduces financials risk, including the potential need to borrow funds to develop the real estate projects. While the Trust's management presently does not foresee any unusual risks in this regard, it is possible that factors beyond the control of the Trust, its affiliates and joint venture partners, such as a tightening credit environment, could limit or reduce its ability to secure adequate credit facilities at a time when they might be needed in the future. Alternatively, the Trust could establish joint ventures with other parties to share participation in its development projects.
 
 Because the investments in the ski resorts include real estate development companies, the risks and uncertainties associated with the tourism industry can adversely affect the value of the real estate development companies associated with these investments. Decrease in tourism, weather-related conditions or other risks discussed above can permanently decrease the value of the investment and future operations.
 
 The Trust does not anticipate receiving dividend distributions from the real estate investments in the near future due to the uncertainty of the current market conditions.
 
 As the Managing Trustee anticipates significant asset sales in 2004, some or all of the Trusts assets may be marketed for sale in 2004.
 
 Equipment Leasing and Equipment Management
 
 The Trusts equipment management activities consist of its ownership interest in MILPI Holdings, LLC. In the first quarter of 2004, the beneficial interest holders approved the sale of MILPI Holdings, LLC to an entity controlled by Gary Engle and Jim Coyne. This transaction was completed in August 2004.
 
 The Trusts remaining equipment leasing assets consist primarily of an aircraft. The aircraft which is financed with non recourse debt, is on lease until 2005, at which time the balance of the debt financing the aircraft is due. The Managing Trustee anticipates this plane will either be sold or returned to the lender in accordance with the debt agreement.
 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 capital account. At June 30, 2004, the Managing Trustee did not have a negative capital account balance. No such requirement exists with respect to the Special Beneficiary.
 Item 3. Controls and Procedures
 
 Limitations on the Effectiveness of Controls
 
 The Trustees management, including its President and Chief Financial Officer (CFO), does not expect that our internal controls or disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
 
 Because of the inherent limitations in all control systems, no evaluation of control can provide absolute assurance that all control issues and instances of fraud, if any, within the Trust have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or by management override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
 Notwithstanding the forgoing limitations, we believe that our internal controls and disclosure controls provide reasonable assurance that the objectives of our controls system are met.
 
 Quarterly Evaluation of the Trusts Disclosure Controls and Internal Controls
 
 (1)  As of the end of the period covered by this report, the Trustee carried out an evaluation, under the supervision and with the participation of the Trustees management, including its Chief Executive Officer and CFO, of the effectiveness of the design and operation of the Trusts disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 (the Exchange Act). Based upon that evaluation, the Chief Executive Officer and CFO concluded that the Trusts disclosure controls and procedures are effective in timely alerting them to material information relating to the Trusts required to be included in the Trusts exchange act filings.
 
 (2) There have been no significant changes in the Trusts internal controls or in other factors which could significantly affect internal controls subsequent to the date of the Trustee carried out its evaluations
  
 AFG INVESTMENT TRUST D
 FORM 10-QSB
 PART II. OTHER INFORMATION
 
 Item 1.  Legal Proceedings
 Response: None
 
 Item 2.  Changes in Securities
 Response: None
 
 Item 3.  Defaults upon Senior Securities
 Response: None
 
 Item 4.  Submission of Matters to a Vote of Security Holders
 Response: None
  Item 5.  Other Information
 Response: None
 
 Item 6.  Exhibits and reports on Form 8-K
 
 a).  Exhibits
 
 10.1
Membership Interest Purchase Agreement dated August 5, 200431.1
Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
 b).  Reports on Form 8-K
 
 The Company filed a Form 8-K with the SEC on August 5, 2004 reporting under Item 2 ( Acquisition or Disposition of Assets ), that the Trust has sold its interests in MILPI Holdings, LLC to PLM MILPI Holdings LLC , a Delaware limited liability company owned and controlled by Gary D. Engle and James A. Coyne, who are the President and Executive Vice President, respectively, of the managing trustee of the Trust.
 
 
 
  SIGNATURE PAGE
 
 
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 AFG Investment Trust D
 
 
 By:  AFG ASIT Corporation, a Massachusetts
 corporation and the Managing Trustee of
 the Registrant.
 
 
 By:  /s/ Richard K Brock
 Richard K Brock
 Chief Financial Officer and Treasurer of AFG ASIT Corp.
 (Duly Authorized Officer and
 Principal Financial and Accounting Officer)
 
 
 Date:  August 13, 2004
 
 
 
  Exhibit Index
 
 10.1
Membership Interest Purchase Agreement dated August 5, 200431.1
Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002