INDEPENDENT AUDITORS' REPORT






The Partners
Montgomery Partnership

We have audited the  accompanying  balance sheet of the  Montgomery  Partnership
(the  Partnership)  as of  December  31,  1999  and the  related  statements  of
operations,  changes in partners' capital, and cash flows of for the years ended
December 31, 1999 and 1997. 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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance  about  whether  the  statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements.  An audit also includes assessing
the accounting principles used and significant estimates made by management,  as
well as  evaluating  the overall  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements,  the Partnership is expected
to terminate in 2000, as the marine vessel in the Partnership has been sold.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of the Partnership as of December
31,  1999,  and the results of its  operations  and its cash flows for the years
ended  December  31,  1999  and  1997  in  conformity  with  generally  accepted
accounting  principles.  The  accompanying  1998 financial  statements  were not
audited  by us,  and  accordingly,  we  express  no opinion or any other form of
assurance on them.



/s/ KPMG
SAN FRANCISCO, CALIFORNIA
June 9, 2000


<PAGE>

<TABLE>
<CAPTION>


                                            MONTGOMERY PARTNERSHIP
                                           (A LIMITED PARTNERSHIP)
                                                BALANCE SHEETS
                                                 DECEMBER 31,
                                          (IN THOUSANDS OF DOLLARS)




                                                                               1999                1998
  ASSETS                                                                                         (unaudited)
                                                                          ---------------------------------------

  <S>                                                                     <C>                 <C>
  Marine vessel held for lease, at cost                                   $             --    $         19,411
  Less accumulated depreciation                                                         --             (14,908)
                                                                          --------------------------------------
      Net equipment                                                                     --               4,503

  Accounts receivable                                                                   30                 100
  Prepaid expenses                                                                      --                  27
                                                                          ---------------------------------------
        Total assets                                                      $             30    $          4,630
                                                                          ======================================


  LIABILITIES AND PARTNERS' CAPITAL

  Liabilities:
  Accounts payable and accrued expenses                                   $            290    $            404
  Due to affiliates                                                                      6                   8
  Reserve for repairs                                                                   --                 500
                                                                          ---------------------------------------
    Total liabilities                                                                  296                 912

  Partners' capital (deficit):
  Limited partners                                                                     (69)              3,875
  General partner                                                                     (197)               (157)
                                                                          ---------------------------------------
    Total partners' capital (deficit)                                                 (266)              3,718
                                                                          ---------------------------------------

        Total liabilities and partners' capital                            $            30    $          4,630
                                                                          =======================================


</TABLE>













      See accompanying auditors' report and notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>

                                            MONTGOMERY PARTNERSHIP
                                           (A LIMITED PARTNERSHIP)
                                           STATEMENTS OF OPERATIONS
                                       FOR THE YEARS ENDED DECEMBER 31,
                                          (IN THOUSANDS OF DOLLARS)


                                                                            1999             1998          1997
                                                                                          (unaudited)
                                                                           ---------------------------------------
  REVENUES

  <S>                                                                    <C>             <C>             <C>
  Lease revenue                                                          $   2,106       $    2,466      $   2,229
  Interest and other income (losses)                                            11              (9)            --
  Gain on disposition of the marine vessel                                   3,812              --             --
                                                                         -------------------------------------------
      Total revenues                                                         5,929           2,457          2,229
                                                                         -------------------------------------------

  EXPENSES

  Depreciation expense                                                         702             911          1,087
  Marine operating expense                                                   1,135           1,409          1,585
  Repairs and maintenance                                                      251             500            818
  Insurance expense to affiliate                                                --              --            175
  Other insurance expense                                                      173              69            320
  Management fees to affiliate                                                 105             123            111
  Administrative expenses to affiliate                                          21              31             36
  Administrative expenses and other                                             32              25             40
                                                                         -------------------------------------------
      Total expenses                                                         2,419           3,068          4,172
                                                                         -------------------------------------------
  Net income (loss)                                                      $   3,510       $    (611)     $  (1,943)
                                                                         ===========================================

</TABLE>





      See accompanying auditors' report and notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>
                                        MONTGOMERY PARTNERSHIP
                                           (A LIMITED PARTNERSHIP)
                             STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
                            FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
                                          (IN THOUSANDS OF DOLLARS)


                                                                             Limited         General
                                                                            Partners         Partner         Total
                                                                          ---------------------------------------------

  <S>                                                                      <C>              <C>            <C>
    Partners' capital (deficit) as of December 31, 1996 (unaudited)        $     6,462      $  (131)       $   6,331

  Net loss                                                                      (1,924)         (19)          (1,943)

  Cash contribution                                                                139            1              140
                                                                           --------------------------------------------

    Partners' capital (deficit) as of December 31, 1997                          4,677         (149)           4,528

  Net loss                                                                        (605)          (6)            (611)

  Cash distribution                                                               (197)          (2)            (199)
                                                                           --------------------------------------------

    Partners' capital (deficit) as of December 31, 1998 (unaudited)              3,875         (157)           3,718


  Net income                                                                     3,475           35            3,510

  Cash distribution                                                             (7,419)         (75)          (7,494)
                                                                           --------------------------------------------

    Partners' deficit as of December 31, 1999                              $       (69)     $  (197)      $     (266)
                                                                           ============================================




</TABLE>











      See accompanying auditors' report and notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>

                                            MONTGOMERY PARTNERSHIP
                                           (A LIMITED PARTNERSHIP)
                                           STATEMENTS OF CASH FLOWS
                                       FOR THE YEARS ENDED DECEMBER 31,
                                          (IN THOUSANDS OF DOLLARS)


                                                                    1999          1998          1997
                                                                               (unaudited)
                                                                ------------------------------------------

  OPERATING ACTIVITIES

  <S>                                                           <C>                 <C>      <C>
  Net income (loss)                                             $    3,510      $   (611)    $  (1,943)
  Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
    Depreciation                                                       702           911         1,087
    Gain on disposition of the marine vessel                        (3,812)           --            --
    Changes in operating assets and liabilities:
      Accounts receivable                                               70           (24)           62
      Prepaid expenses                                                  27           (12)          119
      Accounts payable and accrued expenses                           (114)         (159)          453
      Due to affiliates                                                 (2)           (2)           (3)
      Reserve for repairs                                             (500)           96            85
                                                                -----------------------------------------
        Net cash (used in) provided by operating activities           (119)          199          (140)
                                                                -----------------------------------------


  Investing activities
  Proceeds from disposition of vessel                                7,613            --            --
                                                                -----------------------------------------
        Net cash provided by investing activities                    7,613            --            --

  Financing activities

  Cash (distributions) contributions - limited partners             (7,419)         (197)          139
  Cash (distributions) contributions - General Partner                 (75)           (2)            1
                                                                -----------------------------------------
        Net cash (used in) provided by financing activities         (7,494)         (199)          140
                                                                -----------------------------------------

  Net change in cash and cash equivalents                               --            --            --
  Cash and cash equivalents at beginning of year                        --            --            --
                                                                -----------------------------------------
  Cash and cash equivalents at end of year                      $       --      $     --     $      --
                                                                =========================================


</TABLE>













      See accompanying auditors' report and notes to financial statements.


<PAGE>


                             MONTGOMERY PARTNERSHIP
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

Montgomery Partnership, a California limited partnership (the Partnership),  was
formed  during  December  1990.  The  Partnership  was formed for the purpose of
purchasing a bulk-carrier marine vessel and commenced significant  operations in
January 1991. The  Partnership  has no employees nor  operations  other than the
operation  of the marine  vessel.  The  Partnership  is owned 99% by the limited
partners  and 1% by  the  General  Partner.  The  Partnership  has  two  limited
partners;  PLM Equipment Growth Fund IV (EGF IV) and PLM Equipment Growth Fund V
(EGF  V),  (the  Limited  Partners).  The  General  Partner  is  the  Montgomery
Corporation (MC) which is owned by EGF IV and EGF V. The Limited  Partnership is
owned 50% by EGF IV and 50% by EGF V.

The  Partnership  is expected to terminate  during 2000 as the marine vessel has
been  sold  as of  December  31,  1999.  The  General  Partner  will  contribute
additional  capital,  as needed, to eliminate any deficit balance in the capital
account prior to the Partnership's termination.

These accompanying  financial statements have been prepared on the accrual basis
of accounting in accordance with generally accepted accounting principles.  This
requires  management to make estimates and assumptions  that affect the reported
amounts  of  assets  and  liabilities,  disclosures  of  contingent  assets  and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

     OPERATIONS

The marine vessel in the Partnership  was managed under a continuing  management
agreement by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of
PLM  Financial  Services Inc.  (FSI).  FSI is a  wholly-owned  subsidiary of PLM
International,  Inc. (PLM International).  IMI received a monthly management fee
from  the  Partnership  for  managing  the  marine  vessel  (Note  2).  FSI,  in
conjunction  with its  subsidiaries,  sells  equipment to investor  programs and
third parties,  manages pools of transportation  equipment under agreements with
investor  programs,  and is the  general  partner  of EGF IV,  EGF V, and  other
limited partnerships.

     CASH AND CASH EQUIVALENTS

All cash generated from operations is distributed to the partners,  accordingly,
the Partnership has no cash balance at December 31, 1999 and 1998.

     ACCOUNTING FOR LEASES

The marine vessel in the Partnership was leased under  operating  leases.  Under
the operating  lease method of accounting,  the leased asset is recorded at cost
and depreciated over its estimated useful life.  Rental payments are recorded as
revenue over the lease term as earned in accordance  with Statement of Financial
Accounting  Standards No. 13,  "Accounting for Leases".  Lease origination costs
were capitalized and amortized equally over 36 months.

     DEPRECIATION

Depreciation was computed using the  double-declining  balance method,  taking a
full month's  depreciation in the month of acquisition,  based upon an estimated
useful life of 12 years. The depreciation  method changed to straight-line  when
annual  depreciation  expense  using  the  straight-line  method  exceeded  that
calculated by the  double-declining  balance  method.  Acquisition  fees of $0.8
million,  that were  paid to FSI,  were  capitalized  as part of the cost of the
equipment. Major expenditures


<PAGE>


                             MONTGOMERY PARTNERSHIP
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     DEPRECIATION (CONTINUED)

that were  expected to extend the marine  vessel's  useful life or reduce future
equipment operating expenses,  were capitalized and amortized over the estimated
remaining life of the marine vessel.

     MARINE VESSEL

In accordance with the Financial Accounting Standards Board's Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of", FSI reviewed the carrying  value of the  Partnership's  marine
vessel  at  least  quarterly,  and  whenever  circumstances  indicated  that the
carrying  value of this asset may not be  recoverable  in  relation  to expected
future market  conditions,  for the purpose of assessing  recoverability  of the
recorded  amounts.  If  projected  undiscounted  future  cash flows and the fair
market value of the marine vessel was less than the carrying value of the marine
vessel,  a loss on  revaluation  would have been  recorded.  No reduction to the
carrying value of the marine vessel was required during 1999, 1998, or 1997.

     REPAIRS AND MAINTENANCE

Repair and  maintenance  cost are generally the  obligation of the  Partnership.
Costs  associated  with marine  vessel  dry-docking  were  estimated and accrued
ratably over the period prior to such dry-docking. The marine vessel dry-docking
reserve account was included in the balance sheet as reserve for repairs.

     NET INCOME (LOSS) AND CASH DISTRIBUTION TO LIMITED PARTNERS

The net income (loss) and cash  distributions  of the  Partnership are generally
allocated  99% to the limited  partners and 1% to the General  Partner.  The net
income (loss) and cash distributions are allocated to the limited partners based
on their  percentage of ownership in the  Partnership.  The limited partners 99%
share of net income  (loss) and cash  distributions  are allocated 50% to EGF IV
and 50% to EGF V.

Cash distributions are recorded when paid.

     COMPREHENSIVE INCOME

     The Partnership's net income is equal to comprehensive  income for the year
ended December 31, 1999, 1998 , and 1997.

2.   GENERAL PARTNER

MC contributed $100 of the  Partnership's  initial  capital.  MC is owned by two
shareholders,  EGF IV owns  50% and EGF V owns  50%.  Dividends  are paid to the
shareholders annually, when declared,  based on the percentage of ownership each
shareholder owns.

3.   TRANSACTIONS WITH AFFILIATES

Under the equipment  management  agreement,  IMI, subject to certain reductions,
receives a monthly  management fee  attributable to owned equipment equal to the
lesser of (i) the fees that would be charged by an  independent  third party for
similar  services for similar  equipment or (ii) 5% of the gross lease  revenues
attributable to equipment that is subject to operating leases. The Partnership's
management  fee expense to affiliate  was $0.1 million  during 1999,  1998,  and
1997. The Partnership reimbursed FSI $21,000,  $31,000, and $36,000 during 1999,
1998, and 1997,  respectively,  for data processing and administrative  expenses
directly attributable to the Partnership.



<PAGE>


                             MONTGOMERY PARTNERSHIP
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

3.   TRANSACTIONS WITH AFFILIATES (CONTINUED)

The  Partnership  paid $-0-,  $29,000 and $0.2 million in 1999,  1998, and 1997,
respectively,  to  Transportation  Equipment  Indemnity  Company Ltd.  (TEI), an
affiliate of FSI, which provided marine  insurance  coverage and other insurance
brokerage services. A substantial portion of this amount was paid to third-party
reinsurance  underwriters  or placed in risk  pools  managed by TEI on behalf of
affiliated programs and PLM International,  which provide threshold coverages on
marine  vessel  loss  of  hire  and  hull  and  machinery  damage.  All  pooling
arrangement funds are either paid out to cover applicable losses or refunded pro
rata by TEI.  During  1998,  the  Partnership  received  a $29,000  loss-of-hire
insurance  refund from TEI due to lower claims from the insured  Partnership and
other insured affiliated programs. During 1999 and 1998, TEI did not provide the
same  level of  insurance  coverage  as had been  provided  during  1997.  These
services  were  provided  by an  unaffiliated  third  party.  PLM  International
liquidated TEI in 2000.

Partnership  management fees payable to IMI was $6,000 and $8,000 as of December
31, 1999 and 1998, respectively.

4.   MARINE VESSEL ON LEASE

During 1999, the Partnership  sold the marine vessel with net book value of $3.8
million for proceeds of $7.6 million.

The  Partnership's  marine  vessel was leased to operators  of  utilization-type
leasing pools that include  equipment  owned by  unaffiliated  parties.  In such
instances,  revenues earned by the Partnership consist of a specified percentage
of the total  revenues  generated by leasing the pooled  equipment to sublessees
after deducting certain direct operating expenses of the pooled equipment.

The marine vessel lease was being accounted for as an operating lease. There are
no future minimum rentals under non-cancelable  leases at December 31, 1999. Per
diem and  short-term  rentals  consisting  of  utilization  rate lease  payments
included in lease  revenues  amounted to $2.1  million in 1999,  $2.5 million in
1998, and $2.2 million in 1997.

5.   GEOGRAPHIC INFORMATION

The  Partnership's  marine  vessel was leased to multiple  lessees in  different
regions that operated worldwide.

6.   INCOME TAXES

The  Partnership  is not  subject  to  income  taxes,  as any  income or loss is
included  in the tax  returns of the  individual  partners  owning  the  Limited
Partners.  Accordingly,  no  provision  for  income  taxes  has been made in the
financial statements of the Partnership.

As of  December  31,  1999,  there were no  temporary  differences  between  the
financial statements carrying value of assets and the income tax basis.


<PAGE>


                             MONTGOMERY PARTNERSHIP
                             (A LIMITED PARTNERSHIP)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

7.   CONCENTRATIONS OF CREDIT RISK

Financial   instruments,   which   potentially   subject  the   Partnership   to
concentrations of credit risk, consist principally of lease receivables.

No single lessee  accounted for more than 10% of the  consolidated  revenues for
the years ended  December  31,  1999,  1998,  or 1997.  CO. TBN by Messrs.  Apex
Marine,  New York purchased the marine vessel from the  Partnership and the gain
from the sale accounted for 64% of total consolidated revenues during 1999.

As of December 31, 1999, the General  Partner  believes the  Partnership  had no
other  significant  concentrations  of credit  risk that  could  have a material
adverse effect on the Partnership.