<PAGE>
                                                                      Exhibit 13

                             AMERICAN INCOME FUND I

                            AMERICAN INCOME FUND I-E,

                       a Massachusetts Limited Partnership

                Annual Report to the Partners, December 31, 1999
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

                     INDEX TO ANNUAL REPORT TO THE PARTNERS

                                                                    Page
                                                                    ----

SELECTED FINANCIAL DATA                                                2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                  3-8

FINANCIAL STATEMENTS:

Report of Independent Auditors                                         9

Statement of Financial Position
at December 31, 1999 and 1998                                         10

Statement of Operations
for the years ended December 31, 1999, 1998 and 1997                  11

Statement of Changes in Partners' Capital
for the years ended December 31, 1999, 1998 and 1997                  12

Statement of Cash Flows
for the years ended December 31, 1999, 1998 and 1997                  13

Notes to the Financial Statements                                  14-26

ADDITIONAL FINANCIAL INFORMATION:

Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed                               27

Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings                               28

Schedule of Costs Reimbursed to the General
Partner and its Affiliates as Required by
Section 9.4 of the Amended and Restated
Agreement and Certificate of Limited Partnership                      29
<PAGE>

                                 SELECTED FINANCIAL DATA

   The following data should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and the financial
statements.

   For each of the five years in the period ended December 31, 1999:

<TABLE>
<CAPTION>
    Summary of
    Operations                    1999         1998          1997          1996          1995
------------------            -----------   -----------   -----------   -----------   -----------
<S>                           <C>           <C>           <C>           <C>           <C>
Lease revenue                 $ 2,106,199   $ 2,430,065   $ 5,115,146   $ 5,328,237   $ 5,590,621

Net income                    $ 1,649,283   $   137,523   $ 1,252,723   $ 1,062,652   $   261,733

Per Unit:
   Net income                 $      1.77   $      0.15   $      1.35   $      1.14   $      0.28

   Cash distributions         $      1.01   $      1.01   $      1.27   $      2.40   $      2.75

Financial Position
------------------

Total assets                  $14,289,258   $14,457,880   $15,908,093   $18,074,828   $18,755,667

Total long-term obligations   $ 2,651,371   $ 3,688,947   $ 4,768,982   $ 6,586,970   $ 5,839,543

Partners' capital             $10,912,512   $10,136,041   $10,706,355   $10,865,261   $12,035,442
</TABLE>


                                       2
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

             Year ended December 31, 1999 compared to the year ended
             December 31, 1998 and the year ended December 31, 1998
                  compared to the year ended December 31, 1997

      Certain statements in this annual report of American Income Fund I-E, a
Massachusetts Limited Partnership (the "Partnership") 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 factors that could cause actual results
to differ materially from those expressed in any forward-looking statements made
herein. These factors include, but are not limited to, the outcome of the Class
Action Lawsuit described in Note 8 to the accompanying financial statements and
the remarketing of the Partnership's equipment.

Overview

      The Partnership was organized in 1991 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment subject
to lease agreements with third parties. Presently, the Partnership is a Nominal
Defendant in a Class Action Lawsuit, the outcome of which could significantly
alter the nature of the Partnership's organization and its future business
operations. See Note 8 to the accompanying financial statements. Pursuant to the
to the Amended and Restated Agreement and Certificate of Limited Partnership
(the "Restated Agreement, as amended"), the Partnership is scheduled to be
dissolved by December 31, 2002.

Year 2000 Issue

      The Partnership uses information systems provided by Equis Financial Group
Limited Partnership ("EFG") and has no information systems of its own. EFG
completed all Year 2000 readiness work prior to December 31, 1999 and did not
experience any significant problems. Additionally, EFG is not aware of any
outside customer or vendor that experienced a Year 2000 issue that would have a
material effect on the Partnership's results of operations, liquidity, or
financial position. However, EFG has no means of ensuring that all customers,
vendors and third-party servicers have conformed to Year 2000 standards. The
effect of this risk to the Partnership is not determinable.

Results of Operations

      For the year ended December 31, 1999, the Partnership recognized lease
revenue of $2,106,199 compared to $2,430,065 and $5,115,146 for the years ended
December 31, 1998 and 1997, respectively. The decrease in lease revenue from
1998 to 1999 reflects the effects of lease term expirations and equipment sales.
The decrease in lease revenue from 1997 to 1998 partially resulted from the
exchange of the Partnership's interest in a vessel during 1997 (see below). In
1997, the Partnership recognized lease revenue of $1,148,884 related to this
vessel, including $878,320 representing a prepayment of the remaining contracted
rent due under the vessel's lease agreement. Other reductions in lease revenue
form 1997 to 1998 resulted from lease term expirations and the sale of
equipment. In the future, lease revenue will continue to decline due to lease
term expirations and equipment sales.

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


                                       3
<PAGE>

      Interest income for the year ended December 31, 1999 was $395,312 compared
to $306,920 and $152,995 for the years ended December 31, 1998 and 1997,
respectively. Interest income is generated principally from temporary investment
of rental receipts and equipment sale proceeds in short-term instruments.
Interest income included $93,872 in both 1999 and 1998 and $18,514 in 1997
earned on a note receivable from Semele Group, Inc. ("Semele") (see Note 4 to
the accompanying financial statements). The note receivable from Semele is
scheduled to mature in April 2001. The amount of future interest income is
expected to fluctuate as a result of changing interest rates and the amount of
cash available for investment, among other factors. See discussion below
regarding an investment made by the Partnership in 2000.

      During the year ended December 31, 1999, the Partnership sold equipment
having a net book value of $1,223,569 to existing lessees and third parties.
These sales resulted in a net gain, for financial statement purposes, of
$908,298 compared to a net gain in 1998 of $208,143 on equipment having a net
book value of $108,381, and a net gain in 1997 of $359,630 on equipment having a
net book value of $535,501.

      In 1997, the Partnership exchanged its interest in a vessel with an
original cost and net book value of $5,160,573 and $2,386,249, respectively (see
below and Note 4 to the accompanying financial statements). In connection with
this exchange, the Partnership realized proceeds of $1,578,208, which resulted
in a net loss, for financial statement purposes, of $808,041. In addition, as
this vessel was disposed of prior to the expiration of the related lease term,
the Partnership received prepayment of the remaining contracted rent due under
the vessel's lease agreement (see above).

      During 1997, the Partnership and another EFG-sponsored investment program
also exchanged certain locomotives for a proportionate interest in replacement
locomotives. The Partnership's original locomotives had a cost and net book
value of $1,572,197 and $1,047,043, respectively, and had associated
indebtedness of $411,997 at the time of the exchange. The replacement
locomotives were recorded at their fair value of $1,524,829 and the Partnership
assumed associated debt of $1,040,043. The locomotive exchange resulted in the
recognition of a net loss, for financial statement purposes, of $150,260.

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

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

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

      Depreciation expense was $948,344, $1,438,667, and $2,679,339 for the
years ended December 31, 1999, 1998 and 1997, respectively. For financial
reporting purposes, to the extent that an asset is held on primary lease term,
the Partnership depreciates the difference between (i) the cost of the asset and
(ii) the estimated residual value of the asset at the date of primary lease
expiration on a straight-line basis over such term. For purposes of this policy,
estimated residual values represent estimates of equipment values at the date of
primary lease expiration. To the extent that equipment is held beyond its
primary lease term, the Partnership continues to


                                       4
<PAGE>

depreciate the remaining net book value of the asset on a straight-line basis
over the asset's remaining economic life.

      Interest expense was $234,357 or 11.1% of lease revenue in 1999, compared
to $338,932 or 13.9% of lease revenue in 1998 and $355,277 or 6.9% of lease
revenue in 1997. Interest expense in future periods will decline as the
principal balance of notes payable is reduced through the application of rent
receipts to outstanding debt. See additional discussion below regarding the
refinancing of certain of the debt in 2000.

      Management fees were approximately 4.7% of lease revenue during the year
ended December 31, 1999, compared to 4.5% and 3.6% during the years ended
December 31, 1998 and 1997, respectively. 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.

      Write-down of investment securities-affiliate was $377,849 for the year
ended December 31, 1998. The General Partner determined that the decline in
market value of its Semele common stock was other-than-temporary. As a result,
the Partnership wrote down the cost of the Semele common stock from $15 per
share to $4.125 per share (the quoted price of Semele stock on NASDAQ at
December 31, 1998). See further discussion below.

      Operating expenses were $478,472, $541,742 and $199,019 for the years
ended December 31, 1999, 1998 and 1997, respectively. During 1999, the
Partnership accrued approximately $131,000 for the completion of a D-Check
incurred to facilitate the remarketing of the Finnair Aircraft having a lease
agreement which expired in January 2000 (see Note 9 to the accompanying
financial statements). In addition, in 1999 the Partnership incurred
approximately $52,000 in connection with the remarketing of an aircraft in which
it held an ownership interest. The Partnership sold its interest in this
aircraft during 1999. Operating expenses in 1999 also include approximately
$50,000 accrued for certain legal and Consolidation expenses related to the
Class Action Lawsuit described in Note 8 to the financial statements. During
1998, the Partnership incurred or accrued approximately $334,000 for such
expenses related to the Class Action Lawsuit. Other operating expenses consist
principally of professional service costs, such as audit and legal fees, as well
as printing, distribution and other remarketing expenses. In certain cases,
equipment storage or repairs and maintenance costs may be incurred in connection
with other equipment being remarketed.

Liquidity and Capital Resources and Discussion of Cash Flows

      In connection with a preliminary settlement agreement for the Class Action
Lawsuit described in Note 8 to the accompanying financial statements, the
Partnership is permitted to invest in new equipment or other business
activities, subject to certain limitations. On March 8, 2000, the Partnership
invested $4,790,000 in a debt instrument that matures in September 2002. (See
Notes 8 and 9 to the accompanying financial statements for additional
information concerning this transaction.)

      The Partnership by its nature is a limited life entity. As an equipment
leasing program, the Partnership's principal operating activities derive from
asset rental transactions. Accordingly, the Partnership's principal source of
cash from operations is provided by the collection of periodic rents. These cash
inflows are used to satisfy debt service obligations associated with leveraged
leases, and to pay management fees and operating costs. Operating activities
generated net cash inflows of $1,469,365, $2,642,701 and $4,412,819 for the
years ended 1999, 1998 and 1997 respectively. Net cash from operating activities
in 1997 included lease termination rents as described above. Future renewal,
re-lease and equipment sale activities will cause a decline in the Partnership's
lease revenues and corresponding sources of operating cash. Overall, expenses
associated with rental activities, such as management fees, and net cash flow
from operating activities will also continue to decline as the Partnership
experiences a higher frequency of remarketing events.

      Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During 1999, the
Partnership realized net proceeds of $2,131,867, compared to


                                       5
<PAGE>

$316,524 and $896,006 in 1998 and 1997, respectively. Future inflows of cash
from asset disposals will vary in timing and amount and will be influenced by
many factors including, but not limited to, the frequency and timing of lease
expirations, the type of equipment being sold, its condition and age, and future
market conditions.

      At December 31, 1999, the Partnership was due aggregate future minimum
lease payments of $3,301,588 from contractual lease agreements (see Note 2 to
the financial statements), a portion of which will be used to amortize the
principal balance of notes payable of $2,651,371 (see Note 6 to the financial
statements). At the expiration of the individual primary and renewal lease terms
underlying the Partnership's future minimum lease payments, the Partnership will
sell the equipment or enter re-lease or renewal agreements when considered
advantageous by the General Partner and EFG. Such future remarketing activities
will result in the realization of additional cash inflows in the form of
equipment sale proceeds or rents from renewals and re-leases, the timing and
extent of which cannot be predicted with certainty. This is because the timing
and extent of remarketing events often is 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.

      In December 1998, the Partnership and certain affiliated investment
programs owning interests in two McDonnell Douglas MD-82 aircraft (collectively,
the "Programs") entered into lease extension agreements with Finnair OY. The
lease extensions, effective upon the expiration of the existing primary lease
terms on April 28, 1999, extended the leases for nine months and two years,
respectively. In aggregate, these lease extensions will provide additional lease
revenue of approximately $573,000 to the Partnership over the terms of the
leases.

      The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness are
reported as a component of financing activities. Each note payable is recourse
only to the specific equipment financed and to the minimum rental payments
contracted to be received during the debt amortization period (which period
generally coincides with the lease rental term). As rental payments are
collected, a portion or all of the rental payment is used to repay the
associated indebtedness. In future years, the amount of cash used to repay debt
obligations is scheduled to decline as the principal balance of notes payable is
reduced through the collection and application of rents. However, the
Partnership has balloon payment obligations at the expiration of the lease terms
related to aircraft leased by Reno Air, Inc. of $555,597 and Finnair OY (see
below). On April 29, 1999, the Programs entered into agreements with a
third-party lender to extend the maturity dates of the Programs' indebtedness
related to the Finnair Aircraft. Consistent with the extension terms of the
lease agreements related to the Finnair Aircraft discussed above, the maturity
dates of the indebtedness were extended to January 2000 and April 2001,
respectively. The Partnership has balloon payment obligations of $326,883 and
$87,154 related to this indebtedness that is due on the respective maturity
dates. In February 2000, the Programs refinanced the indebtedness maturing in
January 2000 (see Note 9 to the accompanying financial statements). The Reno Air
indebtedness matures in January 2003.

      As a result of the vessel exchange in 1997 (see Results of Operations),
the Partnership became the beneficial owner of 425,743 shares of Semele common
stock (valued at $638,615 ($1.50 per share) at the time of the exchange
transaction). This investment was reduced by a dividend of $85,149 received in
1997 representing a return of equity to the Partnership. The Partnership also
received a beneficial interest in the Semele Note of $938,718 in connection with
the exchange. The Semele Note bears an annual interest rate of 10% and is
scheduled to mature in April 2001. The note also requires mandatory principal
reductions, if and to the extent that net proceeds are received by Semele from
the sale or refinancing of its Rancho Malibu property (see Note 4 to the
financial statements).

      On June 30, 1998, Semele effected a 1-for-300 reverse stock split followed
by a 30-for-1 forward stock split resulting in a reduction of the number of
shares of Semele common stock owned by the Partnership to 42,574 shares. During
the year ended December 31, 1998, the Partnership decreased the carrying value
of its investment in Semele common stock to $4.125 per share (the quoted price
of the Semele stock on NASDAQ at December 31, 1998) resulting in an unrealized
loss in 1998 of $143,690. In 1997, the Partnership recorded an unrealized loss
of $234,159 related to its Semele common stock. These losses were reported as
components of


                                       6
<PAGE>

comprehensive income, included in partners' capital. At December 31, 1998, the
General Partner determined that the decline in market value of the Semele common
stock was other-than-temporary. As a result, the Partnership wrote down the cost
of the Semele common stock to $4.125 per share for a total realized loss of
$377,849 in 1998. During the year ended December 31, 1999, the Partnership
increase the carrying value of its investment in Semele common stock to $5.75
per share (the quoted price of the Semele stock on NASDAQ SmallCap market at
December 31, 1999), resulting in an unrealized gain of $69,184. This gain was
reported as a component of comprehensive income, included in partners' capital.

      There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. Liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of fewer revenue-producing assets that are
available to cover prospective cash disbursements. Insufficient liquidity could
inhibit the Partnership's ability to sustain its operations or maximize the
realization of proceeds from remarketing its remaining assets.

      In particular, the Partnership must contemplate the potential liquidity
risks associated with its investment in commercial jet aircraft. The management
and remarketing of aircraft can involve, among other things, significant costs
and lengthy remarketing initiatives. Although the Partnership's lessees are
required to maintain the aircraft during the period of lease contract, repair,
maintenance, and/or refurbishment costs at lease expiration can be substantial.
For example, an aircraft that is returned to the Partnership meeting minimum
airworthiness standards, such as flight hours or engine cycles, nonetheless may
require heavy maintenance in order to bring its engines, airframe and other
hardware up to standards that will permit its prospective use in commercial air
transportation. At December 31, 1999, the Partnership had ownership interests in
six commercial jet aircraft. Three of the aircraft are Boeing 737 aircraft
formerly leased to Southwest Airlines, Inc. The lease agreements for each of
these aircraft expired on December 31, 1999 and Southwest elected to return the
aircraft. The aircraft are Stage 2 aircraft, meaning that they are prohibited
from operating in the United States after December 31, 1999 unless they are
retro-fitted with hush-kits to meet Stage 3 noise regulations promulgated by the
Federal Aviation Administration. The cost to hush-kit an aircraft, such as the
Partnership's Boeing 737s, can approach $2 million. At this time, the General
Partner is attempting to remarket these assets without further capital
investment by either re-leasing the aircraft to a user outside of the United
States or selling the aircraft as they are without retro-fitting the aircraft to
conform to Stage 3 standards. The remaining three aircraft in the Partnership's
portfolio already are Stage 3 compliant. One of these aircraft had a lease term
that expired in January 2000 and is being held in storage pending the outcome of
ongoing remarketing efforts. The final two aircraft in the Partnership's
portfolio have lease terms expiring in April 2001 and January 2003.

      Cash distributions to the General and Limited Partners have been declared
and generally paid within fifteen days following the end of each calendar
quarter. The payment of such distributions is presented as a component of
financing activities. For the year ended December 31, 1999, the Partnership
declared total cash distributions of Distributable Cash From Operations and
Distributable Cash From Sales and Refinancings of $941,996. In accordance with
the Restated Agreement, as amended, the Limited Partners were allocated 95% of
these distributions, or $894,896 and the General Partner was allocated 5%, or
$47,100. The fourth quarter 1999 cash distribution was paid on January 14, 2000.

      Cash distributions paid to the Limited Partners consist of both a return
of and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset at
its disposal date.

      The Partnership's capital account balances for federal income tax and for
financial reporting purposes are different primarily due to differing treatments
of income and expense items for income tax purposes in comparison


                                       7
<PAGE>

to financial reporting purposes (generally referred to as permanent or timing
differences; see Note 7 to the financial statements). For instance, selling
commissions and organization and offering costs pertaining to syndication of the
Partnership's limited partnership units are not deductible for federal income
tax purposes, but are recorded as a reduction of partners' capital for financial
reporting purposes. Therefore, such differences are permanent differences
between capital accounts for financial reporting and federal income tax
purposes. Other differences between the bases of capital accounts for federal
income tax and financial reporting purposes occur due to timing differences.
Such items consist of the cumulative difference between income or loss for tax
purposes and financial statement income or loss, the difference between
distributions (declared vs. paid) for income tax and financial reporting
purposes, and the treatment of unrealized gains or losses on investment
securities for book and tax purposes. The principal component of the cumulative
difference between financial statement income or loss and tax income or loss
results from different depreciation policies for book and tax purposes.

      For financial reporting purposes, the General Partner has accumulated a
capital deficit at December 31, 1999. This is the result of aggregate cash
distributions to the General Partner being in excess of its capital contribution
of $1,000 and its allocation of financial statement net income or loss.
Ultimately, the existence of a capital deficit for the General Partner for
financial reporting purposes is not indicative of any further capital
obligations to the Partnership by the General Partner. The Restated Agreement,
as amended, requires that upon the dissolution of the Partnership, the General
Partner will be required to contribute to the Partnership an amount equal to any
negative balance which may exist in the General Partner's tax capital account.
At December 31, 1999, the General Partner had a positive tax capital account
balance.

      The Partnership is a Nominal Defendant in a Class Action Lawsuit described
in Note 8 to the accompanying financial statements. The proposed settlement to
that lawsuit, if effected, will materially change the future organizational
structure and business interests of the Partnership, as well as its cash
distribution policies. In addition, commencing with the first quarter of 2000,
the General Partner believes that it will be in the Partnership's best interests
to suspend the payment of quarterly cash distributions pending final resolution
of the Class Action Lawsuit. Accordingly, future cash distributions are not
expected to be paid until the Class Action Lawsuit is adjudicated.


                                       8
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Partners of American Income Fund I-E,
a Massachusetts Limited Partnership:

      We have audited the accompanying statements of financial position of
American Income Fund I-E, a Massachusetts Limited Partnership, as of December
31, 1999 and 1998, and the related statements of operations, changes in
partners' capital, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Income Fund I-E, a
Massachusetts Limited Partnership at December 31, 1999 and 1998, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.

      Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Additional Financial
Information identified in the Index to Annual Report to the Partners is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

                                                               ERNST & YOUNG LLP

Boston, Massachusetts
March 10, 2000


                                       9
<PAGE>

                                       13
                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

                         STATEMENT OF FINANCIAL POSITION
                           December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                      1999                  1998
                                                 -------------         -------------
<S>                                              <C>                   <C>
ASSETS
------

Cash and cash equivalents                        $   6,089,722         $   4,468,062

Rents receivable                                       171,582               301,563

Accounts receivable - affiliate                        555,112               112,684

Note receivable - affiliate                            938,718               938,718

Investment securities - affiliate                      244,801               175,617

Equipment at cost, net of accumulated
   depreciation of $6,929,313 and $10,116,949
   at December 31, 1999 and 1998, respectively       6,289,323             8,461,236
                                                 -------------         -------------
     Total assets                                $  14,289,258         $  14,457,880
                                                 =============         =============

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

Notes payable                                    $   2,651,371         $   3,688,947
Accrued interest                                        25,556                36,297
Accrued liabilities                                    398,951               295,500
Accrued liabilities - affiliate                         17,512                17,592
Deferred rental income                                  47,861                48,008
Cash distributions payable to partners                 235,495               235,495
                                                 -------------         -------------

     Total liabilities                               3,376,746             4,321,839
                                                 -------------         -------------
Partners' capital (deficit):
  General Partner                                     (428,725)             (467,548)
  Limited Partnership Interests
  (883,829.31 Units; initial purchase price
  of $25 each)                                      11,341,237            10,603,589
                                                 -------------         -------------

     Total partners' capital                        10,912,512            10,136,041
                                                 -------------         -------------

     Total liabilities and partners' capital     $  14,289,258         $  14,457,880
                                                 =============         =============
</TABLE>

                 The accompanying notes are an integral part of
                           these financial statements


                                       10
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

                             STATEMENT OF OPERATIONS
              for the years ended December 31, 1999, 1998 and 1997

                                       1999            1998            1997
                                   ------------    ------------    ------------
Income:

   Lease revenue                   $  2,106,199    $  2,430,065    $  5,115,146

   Interest income                      301,440         213,048         134,481

   Interest income - affiliate           93,872          93,872          18,514

   Gain on sale of equipment            908,298         208,143         359,630

   Loss on exchange of equipment             --              --        (958,301)
                                   ------------    ------------    ------------

      Total income                    3,409,809       2,945,128       4,669,470
                                   ------------    ------------    ------------

Expenses:

   Depreciation                         948,344       1,438,667       2,679,339

   Interest expense                     234,357         338,932         355,277

   Equipment management fees
      - affiliate                        99,353         110,415         183,112

   Write-down of investment
      securities - affiliate                 --         377,849              --

   Operating expenses - affiliate       478,472         541,742         199,019
                                   ------------    ------------    ------------

      Total expenses                  1,760,526       2,807,605       3,416,747
                                   ------------    ------------    ------------

Net income                         $  1,649,283    $    137,523    $  1,252,723
                                   ============    ============    ============

Net income
   per limited partnership unit    $       1.77    $       0.15    $       1.35
                                   ============    ============    ============

Cash distributions declared
   per limited partnership unit    $       1.01    $       1.01    $       1.27
                                   ============    ============    ============

                 The accompanying notes are an integral part of
                           these financial statements


                                       11
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

                    STATEMENT OF CHANGES IN PARTNERS' CAPITAL
              for the years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                              General        Limited Partners
                                              Partner     -----------------------
                                              Amount         Units        Amount          Total
                                          ------------    ----------   ------------    ------------
<S>                                       <C>             <C>          <C>             <C>
Balance at December 31, 1996              $   (431,088)   883,829.31   $ 11,296,349    $ 10,865,261

    Net income - 1997                           62,636            --      1,190,087       1,252,723

    Unrealized loss on investment
      securities                               (11,708)           --       (222,451)       (234,159)
                                          ------------    ----------   ------------    ------------

Comprehensive income                            50,928            --        967,636       1,018,564
                                          ------------    ----------   ------------    ------------

Cash distributions declared                    (58,873)           --     (1,118,597)     (1,177,470)
                                          ------------    ----------   ------------    ------------

Balance at December 31, 1997                  (439,033)   883,829.31     11,145,388      10,706,355

   Net income - 1998                             6,877            --        130,646         137,523

   Unrealized loss on investment
     securities                                 (7,184)           --       (136,506)       (143,690)

   Less: Reclassification adjustment
     for write-Down of investment
     securities                                 18,892            --        358,957         377,849
                                          ------------    ----------   ------------    ------------

Comprehensive income                            18,585            --        353,097         371,682
                                          ------------    ----------   ------------    ------------

Cash distributions declared                    (47,100)           --       (894,896)       (941,996)
                                          ------------    ----------   ------------    ------------

Balance at December 31, 1998                  (467,548)   883,829.31     10,603,589      10,136,041

   Net income - 1999                            82,464            --      1,566,819       1,649,283

   Unrealized gain on investment
     securities                                  3,459            --         65,725          69,184
                                          ------------    ----------   ------------    ------------

Comprehensive income                            85,923            --      1,632,544       1,718,467
                                          ------------    ----------   ------------    ------------

Cash distributions declared                    (47,100)           --       (894,896)       (941,996)
                                          ------------    ----------   ------------    ------------

Balance at December 31, 1999              $   (428,725)   883,829.31   $ 11,341,237    $ 10,912,512
                                          ============    ==========   ============    ============
</TABLE>

                 The accompanying notes are an integral part of
                           these financial statements


                                       12
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

                             STATEMENT OF CASH FLOWS
              for the years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                 1999           1998           1997
                                             -----------    -----------    -----------
<S>                                          <C>            <C>            <C>
Cash flows from (used in) operating
  activities:
Net income                                   $ 1,649,283    $   137,523    $ 1,252,723

Adjustments to reconcile net income
  to net cash from operating activities:
   Depreciation                                  948,344      1,438,667      2,679,339
   Gain on sale of equipment                    (908,298)      (208,143)      (359,630)
   Write-down of investment
     securities - affiliate                           --        377,849             --
   Loss on exchange of equipment                      --             --        958,301

Changes in assets and liabilities:
   Decrease (increase) in:
      Rents receivable                           129,981            (90)       563,486
      Accounts receivable affiliate             (442,428)       696,759       (570,057)
   Increase (decrease) in:
      Accrued interest                           (10,741)         4,801        (64,627)
      Accrued liabilities                        103,451        286,300        (14,050)
      Accrued liabilities - affiliate                (80)       (33,178)        16,547
      Deferred rental income                        (147)       (57,787)       (49,213)
                                             -----------    -----------    -----------

       Net cash from operating activities      1,469,365      2,642,701      4,412,819
                                             -----------    -----------    -----------

Cash flows from investing activities:
   Dividend received                                  --             --         85,149
   Proceeds from equipment sales               2,131,867        316,524        896,006
                                             -----------    -----------    -----------

        Net cash from investing activities     2,131,867        316,524        981,155
                                             -----------    -----------    -----------

Cash flows used in financing activities:
   Principal payments - notes payable         (1,037,576)    (1,080,035)    (2,446,034)
   Distributions paid                           (941,996)      (941,996)    (1,255,968)
                                             -----------    -----------    -----------
        Net cash used in financing
          activities                          (1,979,572)    (2,022,031)    (3,702,002)
                                             -----------    -----------    -----------

Net increase in cash and cash equivalents      1,621,660        937,194      1,691,972

Cash and cash equivalents at
   beginning of year                           4,468,062      3,530,868      1,838,896
                                             -----------    -----------    -----------

Cash and cash equivalents at end of year     $ 6,089,722    $ 4,468,062    $ 3,530,868
                                             ===========    ===========    ===========

Supplemental disclosure of cash
  flow information:
   Cash paid during the year for interest    $   245,098    $   334,131    $   419,904
                                             ===========    ===========    ===========
</TABLE>

Supplemental disclosure of non-cash investing and financing activities:
  See Note 4 to the financial statements regarding the carrying value of the
  Partnership's investment securities - affiliate.

                 The accompanying notes are an integral part of
                           these financial statements


                                       13
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                December 31, 1999

NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS

      American Income Fund I-E, a Massachusetts Limited Partnership (the
"Partnership") was organized as a limited partnership under the Massachusetts
Uniform Limited Partnership Act (the "Uniform Act") on August 29, 1991, 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 General Partner (AFG Leasing VI Incorporated) and $100 from the
Initial Limited Partner (AFG Assignor Corporation). On December 4, 1991, the
Partnership concluded an Interim Closing and issued 587,079.96 units of limited
partnership interest (the "Units") to 654 investors for a purchase price of
$14,569,875. Included in the 587,079.96 units were 4,284.96 bonus units. On
January 31, 1992, the Partnership concluded its Final Closing. An additional
296,749.35 units (including 626.35 bonus units) were purchased for an additional
purchase price of $7,403,075 and an additional 735 investors became Limited
Partners of the Partnership. As of January 31, 1992, an aggregate total of
883,829.31 units (including 4,911.31 bonus units) had been purchased for an
aggregate total purchase price of $21,972,950 and an aggregate of 1,089
investors had become Limited Partners of the Partnership. The Partnership's
General Partner, AFG Leasing VI Incorporated, is a Massachusetts corporation
formed in 1990 and an affiliate of Equis Financial Group Limited Partnership
(formerly known as American Finance Group), a Massachusetts limited partnership
("EFG"). The General Partner is not required to make any other capital
contributions except as may be required under the Uniform Act and Section 6.1(b)
of the Amended and Restated Agreement and Certificate of Limited Partnership
(the "Restated Agreement, as amended").

      Significant operations commenced on December 4, 1991 when the Partnership
made its initial equipment acquisition. Pursuant to the Restated Agreement, as
amended, Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings will be allocated 95% to the Limited Partners and 5% to the General
Partner.

      Under the terms of a Management Agreement between the Partnership and EFG,
management services are provided by EFG to the Partnership at fees which the
General Partner believes to be competitive for similar services (see Note 5).

      EFG is a Massachusetts limited 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. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Equipment Manager or Advisor to the Partnership and
several other direct-participation equipment leasing programs sponsored or
co-sponsored by EFG (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 EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President, Chief Executive Officer and sole Director. Equis
Corporation also owns a controlling 1% general partner interest in EFG's 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. AFG changed its name to Equis
Financial Group Limited Partnership after the sale was concluded. Pursuant to
terms of the sale agreements, EFG specifically reserved 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.


                                       14
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Cash Flows

      The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time, the
Partnership invests excess cash with large institutional banks in federal agency
discount notes and in repurchase agreements with overnight maturities. Under the
terms of the agreements, title to the underlying securities passes to the
Partnership. The securities underlying the agreements are book entry securities.
At December 31, 1999, the Partnership had $5,975,921 invested in federal agency
discount notes, repurchase agreements secured by U.S. Treasury Bills or
interests in U.S. Government securities, or other highly liquid overnight
investments.

Revenue Recognition

      Rents are payable to the Partnership monthly, quarterly or semi-annually
and no significant amounts are calculated on factors other than the passage of
time. The leases are accounted for as operating leases and are noncancellable.
Rents received prior to their due dates are deferred. In certain instances, the
Partnership may enter renewal or re-lease agreements which expire beyond the
Partnership's anticipated dissolution date. This circumstance is not expected to
prevent the orderly wind-up of the Partnership's business activities as the
General Partner and EFG would seek to sell the then-remaining equipment assets
either to the lessee or to a third party, taking into consideration the amount
of future noncancellable rental payments associated with the attendant lease
agreements. See also Note 8 regarding the Class Action Lawsuit. Future minimum
rents of $3,301,588 are due as follows:

For the year ending December 31, 2000  $ 1,085,602
                                 2001      891,724
                                 2002      835,254
                                 2003      440,072
                                 2004       48,936
                                       -----------

                                Total  $ 3,301,588
                                       ===========

      Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1999, 1998 and 1997 is as
follows:

                                      1999            1998           1997
                                    ---------      ---------      -----------

Finnair OY                          $ 415,268      $ 418,516      $        --
Southwest Airlines, Inc.            $ 340,916      $ 338,112      $        --
Reno Air, Inc.                      $ 302,809      $ 306,806      $        --
General Motors Corporation          $ 286,911      $ 363,440      $        --
Trans Ocean Container Corp.         $      --      $ 279,105      $        --
Gearbulk Shipowning Ltd.            $      --      $      --      $ 1,148,884
National Steel Corporation          $      --      $      --      $   729,633

Use of Estimates

      The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.


                                       15
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

Equipment on Lease

      All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. Equipment Cost means the actual cost paid by the
Partnership to acquire the equipment, including acquisition fees. Where
equipment was acquired from EFG or an Affiliate, Equipment Cost reflects the
actual price paid for the equipment by EFG or the Affiliate plus all actual
costs incurred by EFG or the Affiliate while carrying the equipment, including
all liens and encumbrances, less the amount of all primary term rents earned by
EFG or the Affiliate prior to selling the equipment. Where the seller of the
equipment was a third party, Equipment Cost reflects the seller's invoice price.

Depreciation

      The Partnership'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 term 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 Partnership depreciates the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset on
a straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, the Partnership continues to depreciate the remaining net book value of
the asset on a straight-line basis over the asset's remaining economic life.
Periodically, the General Partner evaluates the net carrying value of equipment
to determine whether it exceeds estimated net realizable value. 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.

      The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time.

Investment Securities - Affiliate

      The Partnership's investment in Semele Group, Inc. is considered to be
available-for-sale and as such is carried at fair value with unrealized gains
and losses reported as a separate component of partners' capital.
Other-than-temporary declines in market value are recorded as write-down of
investment in the Statement of Operations (see Note 4). Unrealized gains or
losses on the Partnership's available-for-sale securities, are required to be
included in comprehensive income. During the year ended December 31, 1999, total
comprehensive income amounted to $1,718,467.

Accrued Liabilities - Affiliate

      Unpaid operating expenses paid by EFG on behalf of the Partnership and
accrued but unpaid administrative charges and management fees are reported as
Accrued Liabilities - Affiliate (see Note 5).

Contingencies

   It is the Partnership's policy to recognize a liability for goods and
services during the period when the goods or services are received. To the
extent that the Partnership has a contingent liability, meaning generally a
liability the payment of which is subject to the outcome of a future event, the
Partnership recognizes a liability in accordance with Statement of Financial
Accounting Standards No. 5 "Accounting for Contingencies" ("SFAS No. 5"). SFAS
No. 5 requires the recognition of contingent liabilities when the amount of
liability can be reasonably estimated and the liability is likely to be
incurred.


                                       16
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

      The Partnership is a Nominal Defendant in a Class Action Lawsuit. In 1998,
a settlement proposal to resolve that litigation was negotiated and remains
pending (see Note 8). The Partnership's estimated exposure for costs anticipated
to be incurred in pursuing the settlement proposal is approximately $384,000
consisting principally of legal fees and other professional service costs. These
costs are expected to be incurred regardless of whether the proposed settlement
ultimately is effected and, therefore, the Partnership accrued and expensed
approximately $334,000 of these costs in 1998 following the Court's approval of
the settlement plan. The cost estimate is subject to change and is monitored by
the General Partner based upon the progress of the settlement proposal and other
pertinent information. As a result, the Partnership accrued and expensed an
additional $50,000 for such costs during 1999.

Allocation of Profits and Losses

      For financial statement purposes, net income or loss is allocated to each
Partner according to their respective ownership percentages (95% to the Limited
Partners and 5% to the General Partner). See Note 7 for allocation of income or
loss for income tax purposes.

Net Income and Cash Distributions Per Unit

      Net income and cash distributions per Unit are based on 883,829.31 Units
outstanding during each of the three years in the period ended December 31, 1999
and are computed after allocation of the General Partner's 5% share of net
income and cash distributions.

Provision for Income Taxes

      No provision or benefit from income taxes is included in the accompanying
financial statements. The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their tax returns.

NOTE 3 - EQUIPMENT

      The following is a summary of equipment owned by the Partnership at
December 31, 1999. Remaining Lease Term (Months), as used below, represents the
number of months remaining from December 31, 1999 under contracted lease terms
and is presented as a range when more than one lease agreement is contained in
the stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or re-lease or being leased on a month-to-month
basis. In the opinion of EFG, the acquisition cost of the equipment did not
exceed its fair market value.


                                       17
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

<TABLE>
<CAPTION>
                                   Remaining
                                  Lease Term      Equipment
      Equipment Type                (Months)       at Cost            Location
-------------------------         ----------    ------------    --------------------
<S>                                  <C>        <C>             <C>
Aircraft                             0-36       $  6,805,620    NV/TX/Foreign
Trailers/intermodal containers         42          1,756,524    CA
Materials handling                   0-24          1,605,111    CT/IL/MI/OH/PA/SC/TX
Railroad                               51          1,522,810    NE
Retail store fixtures                   7            687,947    FL
Construction and mining                 0            500,670    WV
Communications                          0            315,882    FL
Photocopying                            0             24,072    CA/CT
                                                ------------

                      Total equipment cost        13,218,636

                  Accumulated depreciation        (6,929,313)
                                                ------------

Equipment, net of accumulated depreciation      $  6,289,323
                                                ============
</TABLE>

      In certain cases, the cost of the Partnership's equipment represents a
proportionate ownership interest. The remaining interests are owned by EFG or an
affiliated equipment leasing program sponsored by EFG. The Partnership and each
affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment. Proportionate equipment ownership
enabled the Partnership to further diversify its equipment portfolio at
inception by participating in the ownership of selected assets, thereby reducing
the general levels of risk which could have resulted from a concentration in any
single equipment type, industry or lessee. At December 31, 1999, the
Partnership's equipment portfolio included equipment having a proportionate
original cost of $10,086,014, representing approximately 76% of total equipment
cost.

      Certain of the equipment and related lease payment streams were used to
secure term loans with third-party lenders. The preceding summary of equipment
includes leveraged equipment having an original cost of approximately $6,610,000
and a net book value of approximately $4,934,000 at December 31, 1999 (see Note
6).

      Generally, the costs associated with maintaining, insuring and operating
the Partnership's equipment are incurred by the respective lessees pursuant to
terms specified in their individual lease agreements with the Partnership.

      As equipment is sold to third parties, or otherwise disposed of, the
Partnership recognizes a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the proceeds
realized upon sale or disposition. The ultimate realization of estimated
residual value in the equipment is dependent upon, among other things, EFG's
ability to maximize proceeds from selling or re-leasing the equipment upon the
expiration of the primary lease terms. The summary above includes equipment held
for re-lease or sale with an original cost of approximately $2,220,000 and a net
book value of approximately $610,000 at December 31, 1999. This equipment
includes the Partnership's interest in three Boeing 737 aircraft formerly leased
to Southwest Airlines, Inc. having a cost of $1,718,913 and a net book value of
$609,927 at December 31, 1999. The General Partner is actively seeking the sale
or re-lease of all equipment not on lease.


                                       18
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

NOTE 4 - INVESTMENT SECURITIES - AFFILIATE / NOTE RECEIVABLE - AFFILIATE

      On April 30, 1997, the vessel partnerships, in which the Partnership and
certain affiliated investment programs are limited partners and through which
the Partnership and the affiliated investment programs shared economic interests
in three cargo vessels (the "Vessels") leased by Gearbulk Shipowning Ltd
(formerly Kristian Gerhard Jebsen Skipsrederi A/S) (the "Lessee"), exchanged
their ownership interests in the Vessels for aggregate consideration of
$11,565,375, consisting of 1,987,000 newly isssued shares (at $1.50 per share)
of common stock in Semele Group, Inc. ("Semele") (formerly Banyan Strategic Land
Fund II), a purchase money note of $8,219,500 (the "Note") and cash of $365,375.
Semele is a Delaware corporation organized on April 14, 1987 and has its common
stock listed on NASDAQ Small Cap Market effective January 5, 1999 (previously
NASDAQ). At the date of the exchange transaction, the common stock of Semele had
a net book value of approximately $1.50 per share and closing market value of
$1.00 per share. Semele has one principal real estate asset consisting of an
undeveloped 274 acre parcel of land near Malibu, California ("Rancho Malibu").

      The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Semele and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Semele or by any other party that otherwise would not have
been paid to EFG had the Partnership sold its beneficial interest in the Vessels
directly to the Lessee. The Lessee prepaid all of its remaining contracted
rental obligations and purchased the Vessels in two closings occurring on May 6,
1997 and May 12, 1997. The Note was repaid with $3,800,000 of cash and delivery
of a $4,419,500 note from Semele (the "Semele Note").

      As a result of the exchange transaction and its original 67% beneficial
ownership interest in Hato Arrow, one of the three Vessels, the Partnership
received $879,195 in cash, became the beneficial owner of 425,743 shares of
Semele common stock (valued at $638,615 ($1.50 per share) at the time of the
exchange transaction) and received a beneficial interest in the Semele Note of
$938,718. The Semele Note bears an annual interest rate of 10% and is scheduled
to mature in April 2001.The note requires mandatory principal reductions, if and
to the extent that net proceeds are received by Semele from the sale or
refinancing of Rancho Malibu. The Partnership recognized interest income of
$93,872 in both 1999 and 1998 and $18,514 in 1997 on the Semele Note. The
Partnership's interest in the vessel had an original cost and net book value of
$5,160,573 and $2,386,249, respectively. The proceeds realized by the
Partnership of $1,578,208 resulted in a net loss, for financial statement
purposes, of $808,041. In addition, as this vessel was disposed of prior to the
expiration of the related lease term, the Partnership received a prepayment of
the remaining contracted rent due under the vessel's lease agreement of
$878,320.

      Cash equal to the amount of the Semele Note was placed in escrow for the
benefit of Semele in a segregated account pending the outcome of certain
shareholder proposals. Specifically, as part of the exchange, Semele agreed to
seek consent ("Consent") from its shareholders to: (1) amend its certificate of
incorporation and by-laws; (2) make additional amendments to restrict the
acquisition of its common stock in a way to protect Semele's net operating loss
carry-forwards, and (3) engage EFG to provide administrative services to Semele,
which services EFG will provide at cost. On October 21, 1997, such Consent was
obtained from Semele's shareholders. The Consent also allowed for (i) the
election of a new Board of Directors nominated by EFG for terms of up to three
years and an increase in the size of the Board to as many as nine members,
provided a majority of the Board shall consist of members independent of Semele,
EFG or any affiliate; and (ii) an amendment extending Semele's life to perpetual
and changing its name from Banyan Strategic Land Fund II. Contemporaneously with
the Consent being obtained, Semele declared a $0.20 per share dividend to be
paid on all shares, including those beneficially owned by the Partnership. A
dividend of $85,149 was paid to the Partnership on November 17, 1997. This
dividend represented a return of equity to the Partnership, which
proportionately reduced the Partnership's investment in Semele. Subsequent to
the exchange transaction, Gary D. Engle, President and Chief Executive Officer
of EFG, was elected to the Board of Directors and appointed Chief Executive
Officer of Semele and James


                                       19
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

A. Coyne, Executive Vice President of EFG was appointed Semele's President and
Chief Operating Officer, and was elected to the Board of Directors.

      On June 30, 1998, Semele effected a 1-for-300 reverse stock split followed
by a 30-for-1 forward stock split resulting in a reduction of the number of
shares of Semele common stock owned by the Partnership to 42,574 shares. In
accordance with the Financial Accounting Standard Board's Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities, marketable
equity securities classified as available-for-sale are required to be carried at
fair value. During the year ended December 31, 1998, the Partnership decreased
the carrying value of its investment in Semele common stock to $4.125 per share
(the quoted price of the Semele stock on NASDAQ at December 31, 1998) resulting
in an unrealized loss in 1998 of $143,690. In 1997, the Partnership recorded an
unrealized loss of $234,159 related to its Semele common stock. These losses
were reported as components of comprehensive income, included in partners'
capital. At December 31, 1998, the General Partner determined that the decline
in market value of the Semele common stock was other-than-temporary. As a
result, the Partnership wrote down the cost of the Semele common stock to $4.125
per share for a total realized loss of $377,849 in 1998. During the year ended
December 31, 1999, the Partnership increased the carrying value of its
investment in Semele common stock to $5.75 per share (the quoted price of the
Semele stock on NASDAQ SmallCap market at December 31, 1999), resulting in an
unrealized gain of $69,184. This gain was reported as a component of
comprehensive income, included in partners' capital.

NOTE 5 - RELATED PARTY TRANSACTIONS

      All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the years ended December 31,
1999, 1998 and 1997, which were paid or accrued by the Partnership to EFG or its
Affiliates, are as follows:

                                     1999            1998            1997
                                  ----------      ----------      ----------

Equipment management fees         $   99,353      $  110,415      $  183,112
Administrative charges               115,923          66,924          63,126
Reimbursable operating expenses
   due to third parties              362,549         474,818         135,893
                                  ----------      ----------      ----------
                   Total          $  577,825      $  652,157      $  382,131
                                  ==========      ==========      ==========

      As provided under the terms of the Management Agreement, EFG is
compensated for its services to the Partnership. Such services include
acquisition and management of equipment. For acquisition services, EFG was
compensated by an amount equal to 2.23% of Equipment Base Price paid by the
Partnership. For management services, EFG is compensated by an amount equal to
5% of gross operating lease rental revenues and 2% of gross full payout lease
rental revenue received by the Partnership. Both acquisition and management fees
are subject to certain limitations defined in the Management Agreement.

      Administrative charges represent amounts owed to EFG, pursuant to Section
9.4(c) of the Restated Agreement, as amended, for persons employed by EFG who
are engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid by EFG
on behalf of the Partnership which are reimbursed to EFG at actual cost.

      All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. The Partnership's Purchase Price was determined by the
method described in Note 2, Equipment on Lease.


                                       20
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

      All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Partnership.
At December 31, 1999, the Partnership was owed $555,112 by EFG for such funds
and the interest thereon. These funds were remitted to the Partnership in
January 2000.

      Certain affiliates of the General Partner own Units in the Partnership as
follows:

      -------------------------------------------------------------------
                                                           Percent of
                                                             Total
                                          Number of       Outstanding
                 Affiliate               Units Owned         Units
      -------------------------------------------------------------------
      Atlantic Acquisition Limited
      Partnership                          23,472            2.66%
      -------------------------------------------------------------------
      Old North Capital Limited
      Partnership                         87,118.15          9.86%
      -------------------------------------------------------------------

      Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital
Limited Partnership ("ONC") are both Massachusetts limited partnerships formed
in 1995 and affiliates of EFG. The general partners of AALP and ONC are
controlled by Gary D. Engle. In addition, the limited partnership interests of
ONC are owned by Semele. Gary D. Engle is Chairman and CEO of Semele.

NOTE 6 - NOTES PAYABLE

      Notes payable at December 31, 1999 consisted of installment notes of
$2,651,371 payable to banks and institutional lenders. The installment notes
bear interest rates ranging between 8.09% and 8.65%, except for one note which
bears a fluctuating interest rate based on LIBOR plus a margin (6.4625% at
December 31, 1999). All of the installment notes are non-recourse and are
collateralized by the equipment and assignment of the related lease payments.
Generally, the installment notes will be fully amortized by noncancellable
rents. However, the Partnership has balloon payment obligations at the
expiration of the lease terms related to aircraft leased by Reno Air, Inc.
($555,597) and Finnair OY ($326,883 and $87,154). The Finnair OY indebtedness
matures in January 2000 and April 2001, respectively. (See Note 9 regarding the
refinancing of the January 2000 balloon payment in February 2000). The Reno Air
indebtedness matures in January 2003. The carrying amount of notes payable
approximates fair value at December 31, 1999.

The annual maturities of the installment notes payable are as follows:

For the year ending December 31, 2000    $  894,374
                                 2001       548,825
                                 2002       419,826
                                 2003       740,223
                                 2004        48,123
                                          ---------

                                Total    $2,651,371
                                         ==========

NOTE 7 - INCOME TAXES

      The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.


                                       21
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

      For financial statement purposes, the Partnership allocates net income to
each class of partner according to their respective ownership percentages (95%
to the Limited Partners and 5% to the General Partner). This convention differs
from the income or loss allocation requirements for income tax and Dissolution
Event purposes as delineated in the Restated Agreement, as amended. For income
tax purposes, the Partnership allocates net income or loss in accordance with
the provisions of such agreement. The Restated Agreement, as amended, requires
that upon dissolution of the Partnership, the General Partner will be required
to contribute to the Partnership an amount equal to any negative balance which
may exist in the General Partner's tax capital account. At December 31, 1999,
the General Partner had a positive tax capital account balance.

      The following is a reconciliation between net income or loss reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                 1999              1998              1997
                                             ------------      ------------      ------------
<S>                                          <C>               <C>               <C>
Net income                                   $  1,649,283      $    137,523      $  1,252,723

   Financial statement depreciation
      less than tax depreciation                 (722,770)         (586,707)         (124,537)
   Deferred rental income                            (147)          (57,787)          (49,213)
   Other                                        1,244,412           448,330             3,340
                                             ------------      ------------      ------------

Net income (loss) for federal income tax
   reporting purposes                        $  2,170,778      $    (58,641)     $  1,082,313
                                             ============      ============      ============
</TABLE>

      The principal component of "Other" consists of the difference between the
tax and financial statement gain or loss on equipment disposals.

      The following is a reconciliation between partners' capital reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                               1999              1998
                                                                           ------------      ------------
<S>                                                                        <C>               <C>
Partners' capital                                                          $ 10,912,512      $ 10,136,041

   Add back selling commissions and organization and offering costs           2,466,957         2,466,957

   Unrealized gain on investment securities                                     (69,184)               --

   Financial  statement  distributions in excess of tax  distributions               --            11,775

   Cumulative difference between federal income tax and
   financial statement income (loss)                                         (2,182,687)       (2,704,182)
                                                                           ------------      ------------
Partners' capital for federal income tax reporting purposes                $ 11,127,598      $  9,910,591
                                                                           ============      ============
</TABLE>

      Unrealized gain on investment securities, financial statement
distributions in excess of tax distributions and cumulative difference between
federal income tax and financial statement income (loss) represent timing
differences.


                                       22
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

NOTE 8 - LEGAL PROCEEDINGS

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

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

      On July 16, 1998, counsel for the Defendants and the Plaintiffs executed a
Stipulation of Settlement setting forth terms pursuant to which a settlement of
the Class Action Lawsuit is intended to be achieved and which, among other
things, is expected to reduce the burdens and expenses attendant to continuing
litigation. The Stipulation of Settlement was preliminarily approved by the
Court on August 20, 1998 when the Court issued its "Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
for Notice of, and Hearing on, the Proposed Settlement" (the "August 20 Order").

      On March 12, 1999, counsel for the Plaintiffs and the Defendants entered
into an amended stipulation of settlement (the "Amended Stipulation") which was
filed with the Court on March 12, 1999. The Amended Stipulation was
preliminarily approved by the Court by its "Modified Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
For Notice of, and Hearing On, the Proposed Settlement" dated March 22, 1999
(the "March 22 Order"). The Amended Stipulation, among other things, divided the
Class Action Lawsuit into two separate sub-classes that could be settled
individually. On May 26, 1999, the Court issued an Order and Final Judgment
approving settlement of one of the sub-classes. Settlement of the second
sub-class, involving the Partnership and 10 affiliated partnerships
(collectively referred to as the "Exchange Partnerships"), remains pending due,
in part, to the complexity of the proposed settlement pertaining to this class.

      In February 2000, counsel for the Plaintiffs and the Defendants entered
into a second amended stipulation of settlement (the "Second Amended
Stipulation") which modified certain of the settlement terms contained in the
Amended Stipulation. The Second Amended Stipulation was preliminarily approved
by the Court by its "Second Modified Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing For Notice of, and
Hearing On, the Proposed Settlement" dated March 6, 2000 (the "March 2000
Order"). Prior to issuing a final order approving the settlement of the second
sub-class involving the Partnership, the Court will hold a fairness hearing that
will be open to all interested parties and permit any party to object to the
settlement. The investors of the Partnership and all other plaintiff sub-class
members will receive a Notice of Settlement and other information pertinent to
the settlement of their claims that will be mailed to them in advance of the
fairness hearing.

      The settlement of the second sub-class is premised on the consolidation of
the Exchange Partnerships' net assets (the "Consolidation"), subject to certain
conditions, into a single successor company ("Newco"). Under the proposed
Consolidation, the partners of the Exchange Partnerships would receive both
common stock in Newco and a cash distribution; and thereupon the Exchange
Partnerships would be dissolved. In addition, EFG would contribute certain
management contracts, operations personnel, and business opportunities to Newco
and cancel


                                       23
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

its current management contracts with all of the Exchange Partnerships. Newco
would operate principally as a finance company and would use its best efforts to
list its shares on the NASDAQ National Market or another national exchange or
market as soon after the Consolidation as Newco deems that market conditions and
its business operations are suitable for listing its shares and Newco has
satisfied all necessary regulatory and listing requirements. The potential
benefits and risks of the Consolidation will be presented in a Solicitation
Statement that will be mailed to all of the partners of the Exchange
Partnerships as soon as the associated regulatory review process is completed
and at least 60 days prior to the fairness hearing. A preliminary Solicitation
Statement was filed with the Securities and Exchange Commission on August 24,
1998 and remains pending. Class members will be notified of the actual fairness
hearing date when it is confirmed.

      One of the principal objectives of the Consolidation is to create a
company that would have the potential to generate more value for the benefit of
existing limited partners than other alternatives, including continuing the
Partnership's customary business operations until all of its assets are disposed
in the ordinary course of business. To facilitate the realization of this
objective, the Amended Stipulation provided, among other things, that commencing
March 22, 1999, the Exchange Partnerships could collectively invest up to 40% of
the total aggregate net asset values of all of the Exchange Partnerships in any
investment, including additional equipment and other business activities that
the general partners of the Exchange Partnerships and EFG reasonably believed to
be consistent with the anticipated business interests and objectives of Newco,
subject to certain limitations. The Second Amended Stipulation, among other
things, quantified the 40% limitation using a whole dollar amount of $32 million
in the aggregate.

      On March 8, 2000, the Exchange Partnerships collectively invested $32
million as permitted by the Second Amended Stipulation approved by the Court.
The Partnership's portion of the aggregate investment is $4,790,000. The
investment consists of a term loan to Echelon Residential Holdings LLC, a
newly-formed real estate development company that will be owned by several
investors, including James A. Coyne, Executive Vice President of EFG. Mr.
Coyne, in his individual capacity, is the only investor in Echelon
Residential Holdings LLC who is related to EFG. The loan proceeds were used
by Echelon Residential Holdings LLC in the formation of a subsidiary, Echelon
Residential LLC, that in turn acquired various real estate assets from
Echelon International Corporation, a Florida based real estate company. The
loan has a term of 30 months maturing on September 7, 2002 and bears interest
at the annual rate of 14% for the first 24 months and 18% for the final six
months of the term. Interest accrues and compounds monthly but is not payable
until maturity. Echelon Residential Holdings LLC has pledged a security
interest in all of its right, title and interest in and to its membership
interests in Echelon Residential LLC to the Exchange Partnerships as
collateral.

      In the absence of the Court's authorization to enter into new investment
activities, the Partnership's Restated Agreement, as amended, would not permit
such activities without the approval of limited partners owning a majority of
the Partnership's outstanding Units. Consistent with the Amended Stipulation,
the Second Amended Stipulation provides terms for unwinding any new investment
transactions in the event that the Consolidation is not effected or the
Partnership objects to its participation in the Consolidation.

      The Second Amended Stipulation, as well as the Amended Stipulation and the
original Stipulation of Settlement, prescribe certain conditions necessary to
effect a final settlement, including providing the partners of the Exchange
Partnerships with the opportunity to object to the participation of their
partnership in the Consolidation. Assuming the proposed settlement is effected
according to present terms, the Partnership's share of legal fees and expenses
related to the Class Action Lawsuit and the Consolidation is estimated to be
approximately $384,000, of which approximately $334,000 was accrued and expensed
by the Partnership in 1998 and approximately $50,000 was accrued and expensed in
1999.


                                       24
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

      While the Court's August 20 Order enjoined certain class members,
including all of the partners of the Partnership, from transferring, selling,
assigning, giving, pledging, hypothecating, or otherwise disposing of any Units
pending the Court's final determination of whether the settlement should be
approved, the March 22 Order permitted the partners to transfer Units to family
members or as a result of the divorce, disability or death of the partner. No
other transfers are permitted pending the Court's final determination of whether
the settlement should be approved. The provision of the August 20 Order which
enjoined the General Partners of the Exchange Partnerships from, among other
things, recording any transfers not in accordance with the Court's order remains
effective.

      There can be no assurance that settlement of the sub-class involving the
Exchange Partnerships will receive final Court approval and be effected. There
also can be no assurance that all or any of the Exchange Partnerships will
participate in the Consolidation because if limited partners owning more than
one-third of the outstanding Units of a partnership object to the Consolidation,
then that partnership will be excluded from the Consolidation. Notwithstanding
the extent of delays experienced thus far in achieving a final settlement of the
Class Action Lawsuit with respect to the Exchange Partnerships, the General
Partner and its affiliates, in consultation with counsel, continue to feel that
there is a reasonable basis to believe that a final settlement of the sub-class
involving the Exchange Partnerships ultimately will be achieved. However, in the
absence of a final settlement approved by the Court, the Defendants intend to
defend vigorously against the claims asserted in the Class Action Lawsuit.
Neither the General Partner nor its affiliates can predict with any degree of
certainty the cost of continuing litigation to the Partnership or the ultimate
outcome.

      In addition to the foregoing, the Partnership is a party to other lawsuits
that have arisen out of the conduct of its business, principally involving
disputes or disagreements with lessees over lease terms and conditions as
described below:

Action involving National Steel Corporation

      EFG, on behalf of the Partnership and certain affiliated investment
programs (collectively, the "Plaintiffs"), filed an action in the Commonwealth
of Massachusetts Superior Court, Department of the Trial Court in and for the
County of Suffolk on July 27, 1995, for damages and declaratory relief against a
lessee of the Partnership, National Steel Corporation ("National Steel"). The
Complaint sought reimbursement from National Steel of certain sales and/or use
taxes paid to the State of Illinois in connection with equipment leased by
National Steel from the Plaintiffs and other remedies provided under the Master
Lease Agreement ("MLA"). On August 30, 1995, National Steel filed a Notice of
Removal, which removed the case to United States District Court, District of
Massachusetts. On September 7, 1995, National Steel filed its Answer to the
Plaintiff's Complaint along with Affirmative Defenses and Counterclaims and
sought declaratory relief, alleging breach of contract, implied covenant of good
faith and fair dealing, and specific performance. The Plaintiffs filed an Answer
to National Steel's Counterclaims on September 29, 1995. The parties discussed
settlement with respect to this matter for some time; however, the negotiations
were unsuccessful. The Plaintiffs filed an Amended and Supplemental Complaint
alleging further default under the MLA and filed a motion for Summary Judgment
on all claims and Counterclaims. The Court held a hearing on the Plaintiff's
motion in December 1997 and later entered a decision dismissing certain of
National Steel's Counterclaims, finding in favor of the Plaintiffs on certain
issues and in favor of National Steel on other issues. On May 11, 1999, the
parties executed a comprehensive settlement agreement to resolve all outstanding
issues, including reimbursement to the Partnership for the disputed sales tax
items referenced above. This matter did not have a material effect on the
Partnership's financial position or results of operations.


                                       25
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

NOTE 9 - SUBSEQUENT EVENTS

Refinancing of Indebtedness

      In February 2000, the Partnership and certain affiliated investment
programs (collectively, the "Programs") refinanced the indebtedness maturing in
January 2000 associated with the McDonnell-Douglas MD-82 aircraft formerly
leased to Finnair OY. The Programs received debt proceeds of $4,720,000 in
aggregate, consisting of $3,370,000 to refinance the existing indebtedness and
an additional $1,350,000 required to perform a D-Check on the aircraft. The note
bears a fluctuating interest rate based on LIBOR plus a margin with interest
payments due monthly. The Partnership's share of the indebtedness is $458,501
which is due at maturity on August 9, 2000. The aircraft was returned in January
2000 upon its lease term expiration and is currently being stored in a
warehouse.

Other

      On March 8, 2000, the Exchange Partnerships (see Note 8) collectively
loaned $32 million to Echelon Residential Holdings LLC, a newly-formed real
estate development company that will be owned by several investors, including
James A. Coyne, Executive Vice President of EFG. Mr. Coyne, in his individual
capacity, is the only investor in Echelon Residential Holdings LLC who is
related to EFG.

      The Partnership's participation in the loan is $4,790,000. Echelon
Residential Holdings LLC, through a subsidiary (Echelon Residential LLC),
used the loan proceeds to acquire various real estate assets from Echelon
International Corporation, a Florida based real estate company. The loan has
a term of 30 months maturing on September 7, 2002 and bears interest at the
annual rate of 14% for the first 24 months and 18% for the final six months
of the term. Interest accrues and compounds monthly but is not payable until
maturity. In connection with the transaction, Echelon Residential Holdings
LLC has pledged a security interest in all of its right, title and interest
in and to its membership interests in Echelon Residential LLC to the Exchange
Partnerships as collateral.

                                       26
<PAGE>

                             ADDITIONAL FINANCIAL INFORMATION

<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

         SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST
                              OF EQUIPMENT DISPOSED

              for the years ended December 31, 1999, 1998 and 1997

      The Partnership classifies all rents from leasing equipment as lease
revenue. Upon expiration of the primary lease terms, equipment may be sold,
rented on a month-to-month basis or re-leased for a defined period under a new
or extended lease agreement. The proceeds generated from selling or re-leasing
the equipment, in addition to any month-to-month revenue, represent the total
residual value realized for each item of equipment. Therefore, the financial
statement gain or loss, which reflects the difference between the net book value
of the equipment at the time of sale or disposition and the proceeds realized
upon sale or disposition may not reflect the aggregate residual proceeds
realized by the Partnership for such equipment.

      The following is a summary of cash excess associated with equipment
dispositions occurring in the years ended December 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                         1999              1998              1997
                                                    ------------      ------------      ------------
<S>                                                 <C>               <C>               <C>
Rents earned prior to disposal of
   equipment, net of interest charges               $  5,548,630      $  2,495,772      $  3,493,529

Sale proceeds realized upon disposition
   of equipment                                        2,131,867           316,524           896,006
                                                    ------------      ------------      ------------

Total cash generated from rents
   and equipment sale proceeds                         7,680,497         2,812,296         4,389,535

Original acquisition cost of equipment
   disposed                                            5,359,549         2,214,718         3,181,390
                                                    ------------      ------------      ------------

Excess of total cash generated to cost
   of equipment disposed                            $  2,320,948      $    597,578      $  1,208,145
                                                    ============      ============      ============
</TABLE>


                                       27
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

            STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS,
                             SALES AND REFINANCINGS

                      for the year ended December 31, 1999

<TABLE>
<CAPTION>
                                                                 Sales and
                                               Operations       Refinancings          Total
                                              ------------      ------------      ------------
<S>                                           <C>               <C>               <C>
Net income                                    $    740,985      $    908,298      $  1,649,283
Add:
   Depreciation                                    948,344                --           948,344
   Management fees                                  99,353                --            99,353
   Book value of disposed equipment                     --         1,223,569         1,223,569

Less:
   Principal reduction of notes payable         (1,037,576)               --        (1,037,576)
                                              ------------      ------------      ------------
   Cash from operations, sales
     and refinancings                              751,106         2,131,867         2,882,973

Less:
   Management fees                                 (99,353)               --           (99,353)
                                              ------------      ------------      ------------

   Distributable cash from operations,
   sales and refinancings                          651,753         2,131,867         2,783,620

Other sources and uses of cash:
   Cash at beginning of year                     4,468,062                --         4,468,062
   Net change in receivables and accruals         (219,964)               --          (219,964)

Less:
   Cash distributions paid                              --          (941,996)         (941,996)
                                              ------------      ------------      ------------

Cash at end of year                           $  4,899,851      $  1,189,871      $  6,089,722
                                              ============      ============      ============
</TABLE>


                                       28
<PAGE>

                            AMERICAN INCOME FUND I-E,
                       a Massachusetts Limited Partnership

                       SCHEDULE OF COSTS REIMBURSED TO THE
                 GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED
                   BY SECTION 9.4 OF THE AMENDED AND RESTATED
                AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP

                                December 31, 1999

     For the year ended December 31, 1999, the Partnership reimbursed the
General Partner and its Affiliates for the following costs:

   Operating expenses                        $ 373,647


                                       29