Item 2. Properties.
The assets of the Trust consist of, among other things, a segregated pool of simple interest retail installment sales contracts and purchase money loans (the "Receivables") secured by new and used automobiles and light-duty trucks. Information regarding the Trust is included in the monthly report to Certificateholders for the month of December 1996 filed on Form 8-K on December 23, 1996.
Item 3.

Item 3. Legal Proceedings.
The registrant knows of no material pending legal proceedings with respect to the Trust, involving the Trust, Norwest Bank Minnesota, National Association (the "Trustee"), Chase Manhattan Bank USA, N.A. (the "Servicer") or the Registrant.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of Certificateholders during the fiscal year covered by this report.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
To the knowledge of the registrant, the Certificates are traded in the over-the-counter market to a limited extent.
The records of the Trust indicate that as of December 31, 1996, there was one Certificateholder of record.
Item 6.

Item 6. Selected Financial Data.
Omitted.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Omitted.
Item 8.

Item 8. Financial Statements and Supplementary Data.
Omitted.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
Omitted.
Item 11.

Item 11. Executive Compensation.
Omitted.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of December 31, 1996, there were seven beneficial owners holding more than 5% of the Series 1996-B Certificates.
Item 13.

Item 13. Certain Relationships and Related Transactions.
Omitted.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports of Form 8-K.
(a) The following documents are filed as part of this Annual Report on Form 10-K:
Exhibit Number Description - -------------- -----------
99.1 Annual Servicer's Certificate for the year ended December 31, 1996.
99.2 Annual Statement of Compliance for the year ended December 31, 1996.
99.3 Annual Independent Public Accountant's Servicing Statement for the year ended December 31, 1996.
(b), (c), (d) Omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 31, 1997
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION As Servicer
By: /s/ Keith Schuck ---------------- Name: Keith Schuck Title: Vice President
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report, proxy statement, form of proxy or other proxy soliciting material has been sent to Certificateholders during the period covered by this Annual Report on Form 10-K and the registrant does not intend to furnish such materials to Certificateholders subsequent to the filing of this report.
INDEX TO EXHIBITS -----------------
Exhibit Number Description -------------- -----------
99.1 Annual Servicer's Certificate for the year ended December 31, 1996.
99.2 Annual Statement of Compliance for the year ended December 31, 1996.
99.2 Annual Independent Public Accountant's Servicing Statement for the year ended December 31, 1996.
Exhibit 99.1 ------------
ANNUAL SERVICER'S CERTIFICATE
CHASE MANHATTAN BANK USA, N.A.
____________________________________________________________
Chase Manhattan Grantor Trust 1996-B ___________________________________________________________
The undersigned, a duly authorized representative of Chase Manhattan Bank USA, N.A. ("Chase USA"), as Servicer pursuant to the Pooling and Servicing Agreement dated as of September 1, 1996 (the "Pooling and Servicing Agreement") by and between Chase USA and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), does hereby certify that:
1. A review of the activities of the Servicer during the period from September 1, 1996 until December 31, 1996 was conducted under my supervision.
2. Based on such review, the Servicer has, to the best of my knowledge, fully performed in all material respects all its obligations under the Pooling and Servicing Agreement throughout such period and no material default in the performance of such obligations has occurred or is continuing except as set forth in paragraph 3 below.
3. None
IN WITNESS WHEREOF, the undersigned has duly executed this certificate this 27th day of March 1997.
/s/ Keith Schuck ------------ Keith Shuck Vice President
Exhibit 99.2 ------------
Letterhead of The Chase Manhattan Bank
Chase Manhattan Bank USA, N.A. Wilmington, DE
March 27, 1997
Management Report on Internal Control Over Servicing of Securitized Automobile Financing Receivables
Management of Chase Manhattan Bank USA, N.A. is responsible for establishing and maintaining an effective system of internal control over servicing of securitized automobile financing receivables, which is designed to provide reasonable assurance regarding the proper servicing of securitized automobile financing receivables. The system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.
There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to servicing of securitized automobile financing receivables. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time.
Management of Chase Manhattan Bank USA, N.A. assessed its system of internal control over servicing of securitized automobile financing receivables as of December 31, 1996 in relation to criteria for effective internal control described in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 1996, Chase Manhattan Bank USA, N.A. maintained an effective system of internal control over servicing of securitized automobile financing receivables.
/s/Keith Schuck Keith Schuck Vice President Chase Manhattan Bank USA, N.A.
Exhibit 99.3 ------------
Letterhead of Price Waterhouse LLP 1177 Avenue of the Americas New York, NY 10036 Telephone 212-596-7000 Facsimile 212-596-8910
Report of Independent Accountants
March 27, 1997
To the Board of Directors of The Chase Manhattan Bank USA, N.A.
We have examined management's assertion that, as of December 31, 1996, The Chase Manhattan Bank USA, N.A. maintained an effective system of internal control over servicing of securitized automobile financing receivables, included in the accompanying Management Report on Internal Control Over Servicing of Securitized Automobile Financing Receivables.
Our examination was made in accordance with standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control structure over servicing of securitized automobile financing receivables, testing and evaluating the design and operating effectiveness of the internal control structure, and such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.
Because of inherent limitations in any internal control structure, errors or irregularities may occur and not be detected. Also, projections of any evaluation of the system of internal control over servicing of securitized automobile financing receivables to future periods are subject to the risk that the internal control structure may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assertion that, as of December 31, 1996, The Chase Manhattan Bank USA, N.A. maintained an effective system of internal control over servicing of securitized automobile financing receivables, is fairly stated, in all material respects,based upon the criteria for effective internal control described in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This report is intended solely for the information and use of the Board of Directors and management of The Chase Manhattan Bank USA, N.A. and Norwest Bank of Minnesota, National Association as Trustee and Collateral Agent for the Chase Manhattan Grantor Trust 1996-B, and should not be used for any other purpose, except that copies may be distributed by the Trustee to Certificateholders, Standard & Poor's Corporation, Moody's Investor Service, Inc. and Fitch Investors Service, L.P.
Signed: Price Waterhouse LLP


ITEM 1 -- BUSINESS
GENERAL
UST Inc. was formed on December 23, 1986 as a Delaware corporation. Pursuant to a reorganization approved by stockholders at the 1987 Annual Meeting, United States Tobacco Company (originally incorporated in 1911) became a wholly owned subsidiary of UST Inc. on May 5, 1987. UST Inc., through its subsidiaries (collectively "Registrant" unless the context otherwise requires), is engaged in manufacturing and marketing consumer products in the following industry segments:
TOBACCO PRODUCTS: Registrant's primary activities are manufacturing and marketing smokeless tobacco (snuff and chewing tobacco). Registrant also imports and markets pipe tobacco.
WINE: Registrant produces and markets wine and craft beers.
OTHER: Registrant's international operation which markets moist smokeless tobacco and manufactures and markets premium cigars, and its video entertainment business are included in this segment. Registrant also operates certain commercial agricultural properties.
INDUSTRY SEGMENT DATA
Registrant hereby incorporates by reference the Consolidated Industry Segment Data pertaining to the years 1994 through 1996 set forth on page 31 of its Annual Report to stockholders for the fiscal year ended December 31, 1996 ("Annual Report"), which page is included in Exhibit 13.
TOBACCO PRODUCTS
PRINCIPAL PRODUCTS
Registrant's principal smokeless tobacco products and brand names are as follows:
Moist -- COPENHAGEN, SKOAL LONG CUT, SKOAL, SKOAL BANDITS, SKOAL FLAVOR PACKS
Dry -- BRUTON, CC, RED SEAL
It has been claimed that the use of tobacco products may be harmful to health. Registrant believes that an unresolved controversy continues to exist among scientists concerning the claims made about tobacco and health. In 1986, federal legislation was enacted regulating smokeless tobacco products by, inter alia, requiring health warning notices on smokeless tobacco packages and advertising and prohibiting the advertising of smokeless tobacco products on electronic media. A federal excise tax was imposed in 1986, which was increased in 1991 and 1993. On August 28, 1996, the Food and Drug Administration (FDA) published regulations asserting unprecedented jurisdiction over nicotine in tobacco as a "drug" and purports to regulate smokeless tobacco products as a "medical device." The final regulations include severe restrictions on the advertising, marketing and promotion of smokeless tobacco products and will require Registrant to comply with a wide range of labeling, reporting and other requirements. Registrant and other smokeless tobacco manufacturers have filed suit against FDA seeking a judicial declaration that FDA has no authority to regulate smokeless tobacco products. Also, in recent years, other proposals have been made at the federal level for additional regulation of tobacco products including, inter alia, the requirement of additional warning notices, the disallowance of advertising and promotion expenses as deductions under federal tax law, a significant increase in federal excise taxes, a ban or further restriction of all advertising and promotion, regulation of environmental tobacco smoke and increased regulation of the manufacturing and marketing of tobacco products by new or existing federal agencies. Substantially similar proposals will likely be considered in 1997. In recent years, various state and local governments continued the regulation of tobacco products, including, inter alia, the imposition of significantly higher taxes, sampling and advertising bans or restrictions, ingredients disclosure requirements, regulation of environmental tobacco smoke and anti-tobacco advertising campaigns. Additional state and local legislative and regulatory actions will likely be considered in 1997. Registrant is unable to assess the future effects these various actions may have on its tobacco business.
During 1996, media reports discussed proposals for a comprehensive legislative solution to resolve claims against the tobacco industry. Registrant believes that any such legislation would involve significant, if not insurmountable, difficulties in reconciling the views of many competing interests. Nevertheless, Registrant may be called upon to address such proposals and to that end may participate in discussions with appropriate parties. Should such circumstances arise, Registrant does not contemplate making any comment as to the existence or progress of any such discussions. Until a legislative solution is finalized, Registrant will not be able to assess the financial effect, if any, on its tobacco business.
RAW MATERIALS
Except as noted below, raw materials essential to Registrant's business are generally purchased in domestic markets under competitive conditions.
The major portion of tobacco used in Registrant's products is purchased from domestic suppliers. Various factors, including the level of domestic tobacco production can affect the amount of tobacco purchased by Registrant from domestic and foreign sources. Tobaccos used in the manufacture of smokeless tobacco products are processed and aged by Registrant for a period of two to three years prior to their use.
Registrant or its suppliers purchase certain flavoring components used in Registrant's tobacco products from foreign sources.
At the present time, Registrant has no reason to believe that future raw material requirements for its tobacco products will not be satisfied. However, the continuing availability and the cost of tobacco from both domestic and foreign sources is dependent upon a variety of factors which cannot be predicted, including weather, growing conditions, disease, local planting decisions, overall market demands and other factors.
WORKING CAPITAL
The principal portion of Registrant's operating cash requirements relates to its need to maintain significant inventories of leaf tobacco, primarily for manufacturing of smokeless tobacco products, to ensure a three year aging process prior to use.
CUSTOMERS
Registrant markets tobacco products throughout the United States principally to chain stores and tobacco and grocery wholesalers. Approximately 30% of Registrant's gross sales of tobacco products are made to four customers, one of which, McLane Co. Inc., a national distributor, accounts for more than 10% of Registrant's consolidated revenue. Registrant has maintained satisfactory relationships with these customers for many years.
COMPETITIVE CONDITIONS
The tobacco manufacturing industry in the United States is composed of at least four domestic companies larger than Registrant and many smaller ones. The larger companies concentrate on the manufacture and marketing of cigarettes; one of which also manufactures and markets smokeless tobacco products. Registrant is a well established and major factor in the smokeless tobacco sector of the overall tobacco market. Consequently, Registrant competes actively with both larger and smaller companies in the marketing of its tobacco products. Registrant's principal methods of competition in the marketing of its tobacco products include quality, advertising, promotion, sampling, product recognition and distribution.
WINE
Registrant is an established producer of premium varietal and blended wines. CHATEAU STE. MICHELLE and COLUMBIA CREST varietal table wines and DOMAINE STE. MICHELLE sparkling wine are produced by Registrant in the state of Washington and marketed throughout the United States. Registrant also produces and markets two California premium wines under the labels of VILLA MT. EDEN and CONN CREEK. 53% of Registrant's wine sales are made to ten distributors, no one of which accounts for more than 24% of total wine sales. Substantially all wines are sold through state-licensed distributors with whom Registrant maintains satisfactory relationships.
In addition, Registrant owns and operates a microbrewery located in Yakima, Washington, which produces and markets craft beers primarily under the brand name BERT GRANT'S ALE. Registrant is a minor factor in the total nationwide business of producing craft beers.
It has been claimed that the use of alcohol beverages may be harmful to health. Registrant believes that an unresolved controversy continues to exist among scientists concerning the claims made about alcohol beverages and health. In 1988, federal legislation was enacted regulating alcohol beverages by requiring health warning notices on alcohol beverages. Effective in 1991, the federal excise tax on wine was increased from $.17 a gallon to $1.07 a gallon for those manufacturers that produce more than 250,000 gallons a year, such as Registrant. In recent years at the federal level, proposals were made for additional regulation of alcohol beverages including, inter alia, an excise tax increase, modification of the required health warning notices and the regulation of labeling, advertising and packaging. Substantially similar proposals will likely be considered in 1997. Also in recent years, increased regulation of alcohol beverages by various states included, inter alia, the imposition of higher taxes, the requirement of health warning notices and the regulation of advertising and packaging. Additional state and local legislative and regulatory actions affecting the marketing of alcohol beverages will likely be considered during 1997. Registrant is unable to assess the future effects these regulatory and other actions may have on the sale of its wines and craft beers.
Registrant uses grapes harvested from its own vineyards, as well as grapes purchased from independent growers located primarily in Washington State. Due to adverse weather conditions, total grapes harvested and purchased in 1996 were significantly less than that in the prior year. Because of the fluctuation in grape harvest yields from year to year as well as the increasing demand for premium varietal wines, Registrant has taken steps that it believes will ensure that future raw material requirements for its wine products will be satisfied.
Registrant's principal competition comes from many larger, well-established national companies, as well as many smaller wine producers. Registrant's principal methods of competition include quality, price, consumer and trade wine tastings, competitive wine judging and advertising. Registrant is a minor factor in the total nationwide business of producing wines.
OTHER
Included in this segment are the international operation which markets moist smokeless tobacco and manufactures and markets the premium cigar brands, DON TOMAS and ASTRAL; video entertainment business; and agricultural properties. None of the above, singly, constitutes a material portion of Registrant's operations.
ADDITIONAL BUSINESS INFORMATION
ENVIRONMENTAL REGULATIONS
Registrant does not believe that compliance with federal, state and local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment will have a material effect upon the capital expenditures, earnings or competitive position of Registrant.
NUMBER OF EMPLOYEES
Registrant's average number of employees during 1996 was 4,467.
TRADEMARKS
Registrant markets consumer products under a large number of trademarks. All of Registrant's trademarks either have been registered or applications therefor are pending with the United States Patent and Trademark Office.
SEASONAL BUSINESS
No material portion of the business of any industry segment of Registrant is seasonal.
ORDERS
Backlog of orders is not a material factor in any industry segment of Registrant.
ITEM 2

ITEM 2 -- PROPERTIES
Set forth below is information concerning principal facilities and real properties of Registrant.
Such principal properties in Registrant's industry segments were utilized only in connection with Registrant's business operations. Registrant believes that the above properties at December 31, 1996 were suitable and adequate for the purposes for which they were used, and were operated at satisfactory levels of capacity.
All principal properties are owned in fee by Registrant.
ITEM 3

ITEM 3 -- LEGAL PROCEEDINGS
Registrant has been named in certain health care cost reimbursement/class action litigation against the major domestic cigarette companies and others seeking damages and other relief. The complaints in these cases on their face predominantly relate to the usage of cigarettes; within that context, certain complaints contain a few allegations relating specifically to smokeless tobacco products. These actions are in varying stages of pretrial activities.
Registrant believes that these pending litigation matters will not result in any material liability for a number of reasons, including the fact that Registrant has had only limited involvement with cigarettes and Registrant's current percentage of total tobacco industry sales is relatively small. Prior to 1986, Registrant manufactured some cigarette products which had a de minimis market share. From May 1, 1982 to August 1, 1994, Registrant distributed a small volume of imported cigarettes and is indemnified against claims relating to those products.
Registrant has been named in three actions brought by individual plaintiffs, all of whom are represented by the same Louisiana attorney, against a number of smokeless tobacco manufacturers, cigarette manufacturers and certain other organizations seeking damages and other relief in connection with injuries allegedly sustained as a result of tobacco usage, including smokeless tobacco products.
Registrant has also been named in an action entitled Morgan v. United States Tobacco Company, et al, (No. 68,655-B), Tenth Judicial District Court for the Parish of Natchitoches, State of Louisiana, served on January 27, 1997. This action is brought by an individual plaintiff and purports to state a class action on behalf of "[a]ll nicotine dependent persons who are residents of Louisiana who have purchased and used smokeless tobacco manufactured by defendants" (including the estates, representatives, administrators, spouses, children, relatives and "significant others" thereof) and seeks unspecified compensatory damages, costs of medical monitoring and other general, special and equitable relief. This action is brought against Registrant and certain other organizations by various plaintiffs' counsel, including counsel who initiated a similar action on behalf of Kansas residents which ultimately was dismissed by court order in 1995.
Registrant believes, and has been so advised by counsel handling these cases, that it has a number of meritorious defenses to all such pending litigation. All such cases are, and will continue to be, vigorously defended, and Registrant believes that the ultimate outcome of all such pending litigation will not have a material adverse effect on the consolidated financial statements of Registrant.
ITEM 4

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to instruction 3 to Item 401(b) of Regulation S-K, the name, office, age and business experience of each executive officer of Registrant as of February 28, 1997 is set forth below:
None of the executive officers of Registrant has any family relationship to any other executive officer or director of Registrant.
After election, all executive officers serve until the next annual organization meeting of the Board of Directors and until their successors are elected and qualified.
Mr. Barrett has served as Executive Vice President since October 7, 1991. He also has served as President of UST Enterprises Inc. since July 1, 1991. Mr. Barrett served as Senior Vice President from January 1, 1991 to October 6, 1991, and served as a member of the Board of Directors from July 27, 1989 through December 13, 1990. Mr. Barrett has been employed by Registrant since January 1, 1991.
Mr. Gierer has served as Chairman of the Board and Chief Executive Officer since December 1, 1993 and has served as President since September 27, 1990. Mr. Gierer also served as Chief Operating Officer from September 27, 1990 to November 30, 1993 and as Executive Vice President and Chief Financial Officer from February 17, 1988 to September 26, 1990. Mr. Gierer has been employed by Registrant since March 16, 1978.
Mr. Peter has served as Executive Vice President since October 29, 1990. He also has served as President of UST International Inc. since January 1, 1993. Mr. Peter served as Senior Vice President from July 27, 1989 to October 28, 1990 and as Vice President from June 23, 1988 to July 26, 1989. Mr. Peter has been employed by Registrant since February 1, 1988.
Mr. Verheij has served as Executive Vice President and General Counsel since May 7, 1996. Mr. Verheij served as Senior Vice President and General Counsel from December 1, 1994 to May 6, 1996, as Senior Vice President and Associate General Counsel from April 4, 1994 to November 30, 1994, as Vice President and Associate General Counsel from December 17, 1992 to April 3, 1994, as Assistant General Counsel from January 1, 1991 to December 16, 1992 and as Senior Corporate Counsel from October 1, 1988 to December 31, 1990. Mr. Verheij has been employed by Registrant since November 24, 1986.
PART II
ITEM 5

ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Registrant hereby incorporates by reference the information with respect to the market for its common stock, $.50 par value ("Common Stock"), and related security holder matters set forth on pages 29 and 30 of its Annual Report, which pages are included in Exhibit 13. Registrant's Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange. As of February 28, 1997, there were approximately 11,800 stockholders of record of its Common Stock.
ITEM 6

ITEM 6 -- SELECTED FINANCIAL DATA
Registrant hereby incorporates by reference the Consolidated Selected Financial Data -- 11 Years set forth on pages 46 and 47 of its Annual Report, which pages are included in Exhibit 13.
ITEM 7

ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Registrant hereby incorporates by reference the Management's Discussion and Analysis of Results of Operations and Financial Condition set forth on pages 23-30 of its Annual Report, which pages are included in Exhibit 13.
ITEM 8

ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates by reference the report of independent auditors and the information contained in the financial statements, including the notes thereto set forth on pages 31-45 of its Annual Report, which pages are included in Exhibit 13.
ITEM 9

ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10

ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Registrant hereby incorporates by reference the information with respect to the names, ages and business histories of the directors of Registrant which is contained in Table I and the accompanying text set forth under the caption "Election of Directors" in its Notice of 1997 Annual Meeting and Proxy Statement. Information concerning executive officers of Registrant is set forth herein following Item 4 of this Report.
ITEM 11

ITEM 11 -- EXECUTIVE COMPENSATION
Registrant hereby incorporates by reference the information with respect to executive compensation which is contained in Tables II through V (including the notes thereto) and the accompanying text set forth under the caption "Compensation of Executive Officers" in its Notice of 1997 Annual Meeting and Proxy Statement.
ITEM 12

ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Registrant hereby incorporates by reference the information with respect to the security ownership of management which is contained in Table I and the accompanying text set forth under the caption "Election of Directors" in its Notice of 1997 Annual Meeting and Proxy Statement.
ITEM 13

ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Registrant hereby incorporates by reference information with respect to indebtedness of management which is contained in Table VI and the accompanying text set forth under the caption "Indebtedness of Management" in its Notice of 1997 Annual Meeting and Proxy Statement.
PART IV
ITEM 14

ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
(1) The following consolidated financial statements of Registrant included in the Annual Report are incorporated by reference in Item 8 and included in Exhibit 13:
Consolidated Statement of Earnings -- Years ended December 31, 1996, 1995 and 1994
Consolidated Statement of Financial Position -- December 31, 1996 and
Consolidated Statement of Cash Flows -- Years ended December 31, 1996, 1995 and 1994
Consolidated Statement of Changes in Stockholders' Equity -- Years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
(3) The following exhibits are filed by Registrant pursuant to Item 601 of Regulation S-K:
- --------------- (b) No current reports on Form 8-K were filed during the fourth quarter of Registrant's most recent fiscal year.
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of the rules governing the preparation of this Report.
SIGNATURE PAGE
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
UST Inc. Date: February 28, 1997 By: VINCENT A. GIERER, JR. ---------------------------------- VINCENT A. GIERER, JR. CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
EXHIBIT INDEX
- --------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of the rules governing the preparation of this Report.


Item 2 Properties
See the Annual Report filed pursuant to Item 14 Below.
Item 3

Item 4 Submission Of Matters To A Vote Of Security Holders
None
Part II
Item 5

Item 5 Market For Registrant's Common Equity And Related Stockholder Matters
Each of the Certificates, representing investors' interests in the Trust, are represented by a single certificate registered in the name of Cede & Co., the nominee of The Depository Trust Company. Accordingly, Cede & Co. is the sole holder of record of the Certificates, which it held on behalf of approximately 20 brokers, dealers, banks and other direct participants in the DTC system at December 31, 1995.
To the best knowledge of the Registrant, there is no established public trading market for the Certificates.
Item 6

Item 6 Selected Financial Data
Not Applicable
Item 7

Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations
Not Applicable
Item 8

Item 8 Financial Statements and Supplementary Data
Not Applicable
Item 9

Item 9 Changes In And Disagreements With Accountants On Accounting and Financial Disclosure
None
Part III
Item 10

Item 10 Directors and Executive Officers of the Registrant
Not Applicable
Item 11

Item 11 Executive Compensation
Not Applicable
Item 12

Item 12 Security Ownership Of Certain Beneficial Owners and Management
Each of the Certificates, representing investor's interests in the Trust, are represented by a single certificate registered in the name of Cede & Co., the nominee of the Depository Trust Company("DTC"), and an investor holding an interest in the Trust is not entitled to receive a Certificate representing such interest except in certain limited circumstances. Accordingly, Cede & Co. is the sole holder of record of the Certificates, which it held on behalf of approximately 20 brokers, dealers, banks and other direct participants in the DTC system at December 31, 1995. Such direct participants may hold Certificates for their own accounts or for the accounts of their customers. The following table sets forth, with respect to each of the Certificates, the identity of each direct DTC participant that holds positions in such Certificate in excess of 5% of the outstanding principal amount thereof at December 31, 1996.
$ 247,582,000 5.80% Auto Receivables Backed Certificates:
Aggregate Amount of Percent of Name Certificates Held Class Bank of New York 100,102,000 40.4% Bankers Trust Company 29,437,000 11.9% Boston Safe Deposit & Trust Co 32,130,000 13.0% Smith Barney Harris Upham & Co 23,265,000 9.4% SSB-Custodian 21,840,000 8.8% Chase Manhattan Bank, N.A. 14,990,000 6.1%
The address of each of the above participants is:
C/O The Depository Trust Company 7 Hanover Square, 22nd Floor New York, NY 10004
Item 13

Item 13 Certain Relationships and Related Transactions
None
Part IV
Item 14

Item 14 Exhibits, Financial Statement Schedules and Reports On Form 8-K
(a) The following documents are filed as part of this Report:
i) Summary of annual distributions on the Certificates to Certificateholders for the year ended December 31, 1996.
ii) Annual Accountant's Report dated December 20, 1996 and related Report of Management dated December 20, 1996 relating to sufficiency of accounting controls
No proxy soliciting material has been distributed by the Trust.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Chevy Chase Auto Receivables Trust 1995-2 By: Chevy Chase Bank, F.S.B. As Seller and Servicer
Joel A. Friedman Date: 03/31/97 By: ___________________________________________ Joel A. Friedman Senior Vice President and Controller


ITEM 1. BUSINESS.
(a) General Development of Business
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP (the Partnership) was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the Uniform Act) on December 30, 1987, for the purpose of acquiring and leasing to third parties a diversified portfolio of capital equipment. Partners' capital initially consisted of contributions of $1,000 from the Managing General Partner (AFG Leasing Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On April 15, 1988, the Partnership issued 519,926 units, representing assignments of limited partnership interests (the Units) to 1,129 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. The 519,926 Units include 76 bonus units. On December 31, 1996, the General Partners of the Partnership caused the Partnership's Amended and Restated Agreement and Certificate of Limited Partnership (the Restated Agreement, as amended) to be canceled by filing a Certificate of Cancellation with the Massachusetts Secretary under the Uniform Act. Accordingly, the Partnership was dissolved on December 31, 1996.
The Partnership originally had five General Partners: AFG Leasing Incorporated, a Massachusetts corporation and wholly owned subsidiary of American Finance Group (AFG), a Massachusetts general partnership, which subsequently became Equis Financial Group Limited Partnership (collectively referred to herein as AFG), Kestutis J. Makaitis, Daniel J. Roggemann, Martin F. Laughlin and Geoffrey A. MacDonald (collectively the General Partners). Messrs. Makaitis, Roggemann, and Laughlin subsequently elected to withdraw as Individual General Partners. In connection with the Partnership's wind-up and dissolution, the General Partner interest of AFG Leasing Incorporated was merged with and into AFG Leasing IV Incorporated effective October 17, 1996. Accordingly, AFG Leasing IV Incorporated became the Managing General Partner of the Partnership commencing October 17, 1996. AFG Leasing IV Incorporated is a Massachusetts corporation established in 1987 and a wholly-owned subsidiary of AFG and is also the general partner or managing general partner of certain affiliated partnerships sponsored by AFG.
(b) Financial Information About Industry Segments
The Partnership was engaged in only one industry segment: the business of acquiring capital equipment and leasing the equipment to creditworthy lessees on a full payout or operating lease basis. (Full payout leases are those in which aggregate noncancellable rents exceed the Purchase Price of the leased equipment. Operating leases are those in which the aggregate noncancellable rental payments are less than the Purchase Price of the leased equipment.) Industry segment data is not applicable.
(c) Narrative Description of Business
The Partnership was organized to acquire a diversified portfolio of capital equipment subject to various full payout and operating leases and to lease the equipment to third parties as income-producing investments. More specifically, the Partnership's primary investment objectives were to acquire and lease equipment which would:
1. Generate quarterly cash distributions;
2. Preserve and protect invested capital; and.
3. Maintain substantial residual value for ultimate sale.
The Partnership had the additional objective of providing certain federal income tax benefits.
The Closing Date of the Offering of Units of the Partnership was April 15, 1988. The initial purchase of equipment and the associated lease commitments occurred on April 19, 1988. The Partnership completed the disposition of its entire equipment portfolio on September 30, 1996 and the dissolution of the Partnership occurred on December 31, 1996.
The Partnership had no employees; however, it entered into a Management Agreement with AFG (the Manager). The Manager's role, among other things, was to (i) evaluate, select, negotiate, and consummate the acquisition of equipment, (ii) manage the leasing, re-leasing, financing, and refinancing of equipment, and (iii) arrange the resale of equipment. The Manager was compensated for such services as described in the Restated Agreement, as amended, Item 13 herein and in Note 4 to the financial statements included in Item 14, herein.
The Partnership's investment in equipment was subject to various risks, including physical deterioration, technological obsolescence and defaults by lessees. A principal business risk of owning and leasing equipment is the possibility that aggregate lease revenues and equipment sale proceeds will be insufficient to provide an acceptable rate of return on invested capital after payment of all debt service costs and operating expenses. Consequently, the success of the Partnership was largely dependent upon the ability of the Managing General Partner and its Affiliates to forecast technological advances, the ability of the lessees to fulfill their lease obligations and the quality and marketability of the equipment at the time of sale.
Revenue from major individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1996, 1995 and 1994 is incorporated herein by reference to Note 2 to the financial statements in the 1996 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the Securities and Exchange Commission.
Equis Financial Group Limited Partnership (Equis) is a Massachusetts partnership formerly known as American Finance Group (AFG). AFG was established in 1988 as a Massachusetts general partnership and succeeded American Finance Group, Inc., a Massachusetts corporation organized in 1980. Equis and its subsidiaries (collectively, the Company) are engaged in various aspects of the equipment leasing business, including Equis' role as Equipment Manager or Advisor to the Partnership and several other Direct-Participation equipment leasing programs sponsored or co-sponsored by AFG (the Other Investment Programs). The Company arranges to broker or originate equipment leases, acts as remarketing agent and asset manager, and provides leasing support services, such as billing, collecting and asset tracking.
The general partner of Equis, with a 1% controlling interest, is Equis Corporation, a Massachusetts corporation owned and controlled entirely by Gary D. Engle, its President and Chief Executive Officer. Equis Corporation also owns a controlling 1% general partner interest in Equis' 99% limited partner, GDE Acquisition Limited Partnership (GDE LP). Equis Corporation and GDE LP were established in December 1994 by Mr. Engle for the sole purpose of acquiring the business of AFG.
In January 1996, the Company sold certain assets of AFG relating primarily to the business of originating new leases, and the name "American Finance Group," and its acronym to a third party (the Buyer). AFG changed its name to Equis Financial Group Limited Partnership after the sale was concluded. Pursuant to terms of the sale agreements, Equis agreed not to compete with the Buyer's lease origination business for a period of five years; however, Equis is permitted to originate certain equipment leases, principally those involving noninvestment grade lessees and ocean-going vessels, which are not in competition with the Buyer. In addition, the sale agreements specifically reserved to Equis the rights to continue using the name American Finance Group and its acronym in connection with the Partnership and the Other Investment Programs and to continue managing all assets owned by the Partnership and the Other Investment Programs, including the right to satisfy all required equipment acquisitions utilizing either brokers or the Buyer. Geoffrey A. MacDonald, Chairman of Equis Corporation and Gary D. Engle agreed not to compete with the sold business on terms and conditions similar to those for the Company.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
Not applicable.
ITEM 2.

ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Partnership is a party or which involve any of its equipment or leases.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE PARTNERSHIP'S SECURITIES AND RELATED SECURITY HOLDER MATTERS.
(a) Market Information
There was no public market for the resale of the Units.
(b) Approximate Number of Security Holders
At December 31, 1996, there were no recordholders of Units in the Partnership.
(c) Dividend History and Restrictions
Pursuant to Article VI of the Restated Agreement, as amended, the Partnership's Distributable Cash From Operations and Distributable Cash From Sales or Refinancings were determined and distributed to the Partners quarterly.
Distributions in 1996 and 1995 were as follows:
GENERAL RECOGNIZED TOTAL PARTNERS OWNERS
Total 1996 distributions $1,744,901 $ 17,449 $1,727,452
Total 1995 distributions 590,825 5,908 584,917 ---------- ---------- ---------- Total $2,335,726 $ 23,357 $2,312,369 ========== ========== ==========
Distributions payable were $98,470 at December 31, 1995. There were no distributions payable at December 31, 1996.
Distributable Cash From Operations means the net cash provided by the Partnership's normal operations after general expenses and current liabilities of the Partnership are paid, reduced by any reserves for working capital and contingent liabilities to be funded from such cash, to the extent deemed reasonable by the Managing General Partner, and increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations and reduced by all accrued and unpaid Equipment Management Fees and, after Payout, further reduced by all accrued and unpaid Subordinated Remarketing Fees. Distributable Cash From Operations does not include any Distributable Cash From Sales or Refinancings.
Distributable Cash From Sales or Refinancings means Cash From Sales or Refinancings as reduced by (i)(a) amounts realized from any loss or destruction of equipment which the Managing General Partner determines shall be reinvested in similar equipment for the remainder of the original lease term of the lost or destroyed equipment, or in isolated instances, in other equipment, if the Managing General Partner determines that investment of such proceeds will significantly improve the diversity of the Partnership's equipment portfolio, and subject in either case to satisfaction of all existing indebtedness
secured by such equipment to the extent deemed necessary or appropriate by the Managing General Partner, and (b) the proceeds from the sale of an interest in equipment pursuant to any agreement governing a joint venture which the Managing General Partner determines will be invested in additional equipment or interests in equipment and which ultimately are so reinvested and (ii) any accrued and unpaid Equipment Management Fees and, after Payout, any accrued and unpaid Subordinated Remarketing Fees.
Cash From Sales or Refinancings means cash received by the Partnership from sale or refinancing transactions, as reduced by (i)(a) all debts and liabilities of the Partnership required to be paid as a result of sale or refinancing transactions, whether or not then due and payable (including any liabilities on an item of equipment sold which are not assumed by the buyer and any remarketing fees required to be paid to persons not affiliated with the General Partners, but not including any Subordinated Remarketing Fees whether or not then due and payable) and (b) any reserves for working capital and contingent liabilities funded from such cash to the extent deemed reasonable by the Managing General Partner and (ii) increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations. In the event the Partnership accepts a note in connection with any sale or refinancing transaction, all payments subsequently received in cash by the Partnership with respect to such note shall be included in Cash From Sales or Refinancings, regardless of the treatment of such payments by the Partnership for tax or accounting purposes. If the Partnership receives purchase money obligations in payment for equipment sold, which are secured by liens on such equipment, the amount of such obligations shall not be included in Cash From Sales or Refinancings until the obligations are fully satisfied.
Each distribution of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings of the Partnership shall be made 99% to the Recognized Owners and 1% to the General Partners until Payout and 85% to the Recognized Owners and 15% to the General Partners after Payout.
Payout is defined as the first time when the aggregate amount of all distributions to the Recognized Owners of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings equals the aggregate amount of the Recognized Owners' original capital contributions plus a cumulative annual return of 10% (compounded quarterly and calculated beginning with the last day of the month of the Partnership's Closing Date) on their aggregate unreturned capital contributions. For purposes of this definition, capital contributions shall be deemed to have been returned only to the extent that distributions of cash to the Recognized Owners exceed the amount required to satisfy the cumulative annual return of 10% (compounded quarterly) on the Recognized Owners' aggregate unreturned capital contributions, such calculation to be based on the aggregate unreturned capital contributions outstanding on the first day of each fiscal quarter. The Partnership did not achieve Payout.
Distributable Cash From Operations and Distributable Cash From Sales or Refinancings (Distributions) were distributed within 60 days after the completion of each quarter, beginning with the first full quarter following the Partnership's Closing Date. The Partnership has distributed $14,457,141 to the Recognized Owners and $146,032 to the General Partners since inception. Substantially all of the distributions to the Recognized Owners represent a return of capital.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA.
Incorporated herein by reference to the section entitled Selected Financial Data in the 1996 Annual Report.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Incorporated herein by reference to the section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations in the 1996 Annual Report.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated herein by reference to the financial statements and supplementary data included in the 1996 Annual Report.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
(a-b) Identification of Directors and Executive Officers
The Partnership has had no Directors or Officers. As indicated in Item 1 of this report, AFG Leasing IV Incorporated was the Managing General Partner of the Partnership. Under the Restated Agreement, as amended, the Managing General Partner was responsible for the operation of the Partnership's properties and the Recognized Owners have had no right to participate in the control of such operations. The names, titles and ages of the Directors and Executive Officers of the Managing General Partner of the Partnership as of March 15, 1997 were as follows:
DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER OF THE PARTNERSHIP (SEE ITEM 13)
NAME TITLE AGE TERM
Geoffrey A. MacDonald Chairman, and a member of the 48 Until a Executive Committee of Equis and successor is President and a Director of the duly elected General Partner and qualified
Gary D. Engle President and Chief Executive 48 Officer and a member of the Executive Committee of Equis
Gary M. Romano Executive Vice President and Chief 37 Operating Officer of Equis and Clerk of the General Partner
Michael J. Butterfield Vice President, Finance and 37 Treasurer of Equis and Treasurer of the General Partner
James F. Livesey Vice President, Aircraft and 47 Vessels of Equis
Sandra L. Simonsen Senior Vice President, Information 46 Systems of Equis
Gail D. Ofgant Vice President, Lease Operations of 31 Equis
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Partners, Directors or Executive Officers.
(e) Business Experience
Mr. MacDonald, age 48, is a co-founder of Equis' predecessor, AFG, Chairman and a member of the Executive Committee of Equis and President and a Director of the Managing General Partner. Mr. MacDonald served as a co-founder, Director and Senior Vice President of AFG's predecessor corporation from 1980 to 1988. Mr. MacDonald is Vice President of American Finance Group Securities Corp. and a limited partner in Atlantic Acquisition Limited Partnership (AALP). Prior to co-founding AFG's predecessor, Mr. MacDonald held various executive and management positions in the leasing and pharmaceutical industries. Mr. MacDonald holds an M.B.A. from Boston College and a B.A. degree from the University of Massachusetts (Amherst).
Mr. Engle, age 48, is President, Chief Executive Officer and a member of the Executive Committee of Equis and President of AFG Realty Corporation. Mr. Engle is Vice President, and a Director of certain of Equis' affiliates. On December 16, 1994, Mr. Engle acquired control of AFG, the Managing General Partner and each of AFG's subsidiaries. Mr. Engle controls the general partner of AALP and is also a limited partner in AALP. From 1987 to 1990, Mr. Engle was a principal and co-founder of Cobb Partners Development, Inc., a real estate and mortgage banking company. From 1980 to 1987, Mr. Engle was Senior Vice President and Chief Financial Officer of Arvida Disney Company, a large-scale community development company owned by Walt Disney Company. Prior to 1980, Mr. Engle served in various management consulting and institutional brokerage capacities. Mr. Engle has an M.B.A. from Harvard University and a B.S. degree from the University of Massachusetts (Amherst).
Mr. Romano, age 37, is Executive Vice President and Chief Operating Officer of Equis and certain of its affiliates and Clerk of the Managing General Partner. Mr. Romano joined AFG in November 1989 and was appointed Executive Vice President and Chief Operating Officer in April 1996. Prior to joining AFG, Mr. Romano was Assistant Controller for a privately-held real estate company which he joined in 1987. Mr. Romano held audit staff and manager positions at Ernst & Whinney from 1982 to 1986. Mr. Romano is a C.P.A. and holds a B.S. degree from Boston College.
Mr. Butterfield, age 37, is Vice President, Finance and Treasurer of Equis and Treasurer of the Managing General Partner. Mr. Butterfield joined AFG in June 1992 and was appointed Vice President, Finance and Treasurer in April 1996. Prior to joining AFG, Mr. Butterfield was an Audit Manager with Ernst & Young LLP, which he joined in 1987. Mr. Butterfield was employed in public accounting and industry positions in New Zealand and London (U.K.) prior to coming to the United States in 1987. Mr. Butterfield attained his Associate Chartered Accountant (A.C.A.) professional qualification in New Zealand and has completed his C.P.A. requirements in the United States. He holds a Bachelor of Commerce degree from the University of Otago, Dunedin, New Zealand.
Mr. Livesey, age 47, is Vice President, Aircraft and Vessels of Equis. Mr. Livesey joined AFG in October 1989, and was promoted to Vice President in January 1992. Prior to joining AFG, Mr. Livesey held sales and marketing positions with two privately-held equipment leasing firms. Mr. Livesey holds an M.B.A. from Boston College and B.A. degree from Stonehill College.
Ms. Simonsen, age 46, joined AFG in February 1990 and was promoted to Senior Vice President, Information Systems of Equis in April 1996. Prior to joining AFG, Ms. Simonsen was Vice President, Information Systems with Investors Mortgage Insurance Company which she joined in 1973. Ms. Simonsen provided systems consulting for a subsidiary of American International Group and authored a software program published by IBM. Ms. Simonsen holds a B.A. degree from Wilson College.
Ms. Ofgant, age 31, is Vice President, Lease Operations of Equis and certain of its affiliates. Ms. Ofgant joined AFG in June 1989, and was promoted to Manager, Lease Operations in April 1994. In April 1996, Ms. Ofgant was appointed Vice President, Lease Operations. Prior to joining AFG, Ms. Ofgant was employed by Security Pacific National Trust Company. Ms. Ofgant holds a B.S. degree in Finance from Providence College.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION.
(a) Cash Compensation
The Partnership had no employees. However, under the terms of the Restated Agreement, as amended, the Partnership was obligated to pay all costs of personnel employed full or part-time by the Partnership, including officers or employees of the Managing General Partner or its Affiliates. The Partnership did not pay any options, warrants or rights to the officers or employees of the Managing General Partner or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Partnership had no employees, as discussed in Item 11(a), pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership incurred a monthly charge for personnel costs of the Manager for persons engaged in providing administrative services to the Partnership. A description of the remuneration paid by the Partnership to the Manager for such services is included in Item 13, herein and in Note 4 to the financial statements included in Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the General Partners or the Managing General Partner or its Affiliates which would have resulted from their resignation, retirement or any other termination.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
By virtue of its organization as a limited partnership, the Partnership had outstanding no securities possessing traditional voting rights. However, as provided in Section 11.2(a) of the Restated Agreement, as amended (subject to Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners had voting rights with respect to:
1. Amendment of the Restated Agreement;
2. Termination of the Partnership;
3. Removal of the General Partners; and
4. Approval or disapproval of the sale of all, or substantially all, of the assets of the Partnership (except in the orderly liquidation of the Partnership upon its termination and dissolution).
The ownership and organization of AFG is described in Item 1 of this report.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Managing General Partner of the Partnership is AFG Leasing IV Incorporated, an affiliate of AFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Partnership were paid by AFG on behalf of the Partnership and AFG was reimbursed at its actual cost for such expenditures. Fees and other costs incurred during each of the three years in the period ended December 31, 1996, which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows:
1996 1995 1994
Equipment management fees $ 20,877 $ 32,101 $ 52,235 Interest expense--affiliate -- -- 8,315 Administrative charges 29,985 17,904 12,000 Reimbursable operating expenses due to third parties 88,389 74,232 96,386 -------- -------- -------- Total $139,251 $124,237 $168,936 ======== ======== ========
As provided under the terms of the Management Agreement, AFG was compensated for its services to the Partnership. Such services included all aspects of acquisition, management and sale of equipment. For acquisition services, AFG was compensated by an amount equal to 4.75% of Equipment Base Price
paid by the Partnership. For management services, AFG was compensated by an amount equal to the lesser of (i) 5% of gross lease rental revenue or (ii) fees which the Managing General Partner reasonably believed to be competitive for similar services for similar equipment. Both of these fees were subject to certain limitations defined in the Management Agreement. As Payout was not achieved, AFG received no compensation for services connected to the sale of equipment, under its subordinated remarketing agreement.
Interest expense--affiliate represents interest incurred on legal costs in connection with a state sales tax dispute involving certain equipment owned by the Partnership and other affiliated investment programs sponsored by AFG. Legal costs incurred by AFG to resolve this matter and the interest thereon was allocated to the Partnership and other affected investment programs. Administrative charges represent amounts owed to AFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by AFG who were engaged in providing administrative services to the Partnership. Reimbursable operating expenses due to third parties represent costs paid by AFG on behalf of the Partnership which were reimbursed to AFG.
All equipment was purchased from AFG, one of its affiliates, including other equipment leasing programs sponsored by AFG, or from third-party sellers. The Partnership's Purchase Price was determined by the method described in Note 2 to the financial statements, included in Item 14, herein.
All rents and proceeds from the sale of equipment were paid directly to either AFG or to a lender. AFG temporarily deposited collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership.
On August 18, 1995, Atlantic Acquisition Limited Partnership (AALP), a newly formed Massachusetts limited partnership owned and controlled by certain principals of AFG, commenced a voluntary cash Tender Offer (the Offer) for up to approximately 45% of the outstanding units of limited partner interest in this Partnership and 20 affiliated partnerships sponsored and managed by AFG. The Offer was subsequently amended and supplemented in order to provide additional disclosure to unitholders; increase the offer price; reduce the number of units sought to approximately 35% of the outstanding units; and extend the expiration date of the Offer to October 20, 1995. Following commencement of the Offer, certain legal actions were initiated by interested persons against AALP, each of the general partners (4 in total) of the 21 affected programs, and various other affiliates and related parties. One action, a class action brought in the United States District Court for the District of Massachusetts (the Court) on behalf of the unitholders (limited partners), sought to enjoin the Offer and obtain unspecified monetary damages. A settlement of this litigation was approved by the Court on November 15, 1995. The Plaintiffs filed an appeal in this matter. On November 26, 1996, the United States Court of Appeals for the First Circuit handed down a decision affirming the Court's approval of the settlement. A second class action, brought in the Superior Court of the Commonwealth of Massachusetts (the Superior Court) seeking to enjoin the Offer, obtain unspecified monetary damages, and intervene in the first class action, was dismissed by the Superior Court. The Recognized Owners of the Partnership tendered 37,924 units or 7.29% of the total outstanding units of the Partnership to AALP. In September 1996, AALP sold these units to Equis for $127,989.
On September 30, 1996, the Partnership sold all of its remaining equipment assets. The remarketing effort, described in Notes 1 and 4 to the financial statements, was undertaken jointly by 15 individual equipment leasing programs, consisting of the Partnership and 14 affiliated partnerships (Other Affected Partnerships). Thirteen of the programs, including the Partnership, sold all of their equipment assets (the Liquidated Programs); and two programs sold only their proportionate ownership interests in certain assets owned jointly with one or more of the Liquidated Programs (collectively, the Sale Assets). Substantially all of the Partnership's equipment assets of material value represented partial ownership interests whereby the Partnership owned less than a 100% interest in the equipment it sold. The remaining interests in such assets were owned by one or more of the Other Affected Partnerships.
On September 30, 1996, the Partnership and each of the Other Affected Partnerships executed individual purchase and sale agreements with RSL Finance Limited Partnership II (the Buyer) for all of the Sale Assets, except for one McDonnell Douglas MD-82 aircraft leased to Northwest Airlines, Inc. (the NWA Aircraft), hereafter the Sale Assets, as Revised. The NWA Aircraft, in which the Partnership owned a proportionate interest of 6.2%, was purchased by the lessee pursuant to a separate negotiation. The Partnership realized $470,647 of net sale proceeds for the Sale Assets, as Revised and $813,087 for the NWA Aircraft. The latter included early termination rental payments of $101,324 from the lessee. At the date of sale, the Sale Assets, as Revised and the NWA Aircraft had net book values of $262,011 and $751,575, respectively. In aggregate, the Partnership and the Other Affected Partnerships realized, prior to transaction costs, $32,997,000 for all of the Sale Assets, as Revised and $13,200,000 for the NWA Aircraft. Net proceeds from the NWA Aircraft were allocated to the owners of the NWA Aircraft according to their respective percentage ownership interests. Net proceeds from the Sale Assets, as Revised were allocated to the Partnership and to each of the Other Affected Partnerships based upon an apportionment of the sales price among all equipment comprising the Sale Assets, as Revised according to each asset's estimated re-sale value, as determined by an independent appraiser.
The Buyer is a limited partnership established to acquire the Sale Assets, as Revised, and has no direct affiliation with the Partnership, the Other Affected Partnerships, the General Partners or AFG. The sole general partner of the Buyer is RSL Holdings, Inc. (RSL). An affiliate of RSL purchased a significant limited partnership interest in a direct-participation equipment leasing program co-sponsored by AFG in 1992. AFG acquired this interest in 1993 for cash and assumption of indebtedness. There have been no other business dealings between the Buyer and AFG and their affiliates.
On October 10, 1996, the Managing General Partner entered into a Cross Partnership Agreement (the Agreement) with the general partners of certain of the Other Affected Partnerships participating in the sales transactions described above. Pursuant to the Agreement, the Partnership and each of the other partnerships agreed to set aside a contingency reserve for future liabilities. The Agreement provides that obligations of any individual partnership which are not associated with the sales transactions will directly reduce that partnership's reserve balance, whereas costs pertaining to the sales transactions will be allocated against the reserve balances of the Partnership and each of the other partnerships on a proportionate basis. If the reserve balance of the Partnership is depleted to zero, the reserve balances contributed by the other partnerships will be debited on a proportionate basis to cover the deficit. If the reserve balances of any one of the other partnerships is depleted to zero, the reserve balance of the Partnership and any other partnerships having a positive reserve balance shall be debited on a
proportionate basis to cover the deficit. Upon termination of the Agreement, any remaining monies will be distributed to the partners of those partnerships with positive reserve balances. At December 31, 1996, the Partnership had a contingency reserve balance of $160,868. To the extent that this contingency reserve is not necessary to satisfy any unforeseen liabilities of the Partnership, it will be remitted to the Partners.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
(d) Transactions with Promoters
See Item 13(a) above.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors *
Statement of Financial Position at December 31, 1995 *
Statement of Changes in Net Assets in Liquidation for the Period October 1, 1996 to December 31, 1996 *
Statement of Operations for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 *
Statement of Changes in Partners' Capital for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 *
Statement of Cash Flows for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 *
Notes to the Financial Statements *
(2) Financial Statement Schedules:
None required.
(3) Exhibits: Except as set forth below, all Exhibits to Form 10-K, as set forth in Item 601 of Regulation S-K, are not applicable.
* Incorporated herein by reference to the appropriate portion of the 1996 Annual Report to security holders for the year ended December 31, 1996. (See Part II).
EXHIBIT NUMBER
4 Amended and Restated Agreement and Certificate of Limited Partnership included as Exhibit A to the Prospectus which is included in Registration Statement on Form S-1 (No. 33-11160).
13 The 1996 Annual Report to security holders, a copy of which is furnished for the information of the Securities and Exchange Commission. Such Report, except for those portions thereof which are incorporated herein by reference, is not deemed filed with the Commission.
23 Consent of Independent Auditors.
99(a) Lease agreement with Marsh Supermarkets, Inc. was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 as Exhibit 28(c) and is incorporated herein by reference.
99(b) Lease agreement with Northwest Airlines, Inc., was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 as Exhibit 28(d) and is incorporated herein by reference.
99(c) Lease agreement with ING Aviation Lease, was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 as Exhibit 99(d) and is incorporated herein by reference.
99(d) Lease agreement with Equicor, Inc. was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 as Exhibit 28(e) and is incorporated herein by reference.
(b) Reports on Form 8-K
Report on Form 8-K was filed on October 3, 1996 describing the remarketing process and terms of sales.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of American Income Partners III-D Limited Partnership of our report dated March 7, 1997, included in the 1996 Annual Report to the Partners of American Income Partners III-D Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts March 7, 1997
SIGNATURES
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.
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated, a Massachusetts corporation and Managing General Partner of the Registrant
By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle ------------------------------- --------------------------- Geoffrey A. MacDonald Gary D. Engle Chairman, and a member of the President and Chief Executive Executive Committee of Equis and Officer and a member of the President and a Director of the Executive Committee of Equis Managing General Partner (Principal Executive Officer)
Date: March 28, 1997 Date: March 28, 1997 ------------------------------ --------------------------
By: /s/ Gary M. Romano By: /s/ Michael J. Butterfield ------------------------------- --------------------------- Gary M. Romano Michael J. Butterfield Executive Vice President and Vice President, Finance and Chief Operating Officer of Equis and Treasurer of Equis and Treasurer Clerk of the Managing General Partner of the Managing General Partner (Principal Financial Officer) (Principal Accounting Officer)
Date: March 28, 1997 Date: March 28, 1997 ------------------------------ --------------------------
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report has been sent to the Recognized Owners. A report will be furnished to the Recognized Owners subsequent to the date hereof.
No proxy statement has been or will be sent to the Recognized Owners.