CANADIAN AIR TRUST #3
                                    (A TRUST)

                              FINANCIAL STATEMENTS











                          INDEPENDENT AUDITORS' REPORT






The Owners
Canadian Air Trust #3

We have audited the  accompanying  statements of operations,  changes in owners'
equity,  and cash flows of the  Canadian  Air Trust #3 (the  Trust) for the year
ended December 31, 1998. These financial  statements are the  responsibility  of
the owner's  management.  Our  responsibility  is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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  audit  provides  a
reasonable basis for our opinion.

As described in Note 1 to the financial statements,  the Trust was liquidated in
2000, as the aircraft in the Trust has been sold.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the results of its operation and cash flows of the Trust
for the year ended December 31, 1998, in conformity with  accounting  principles
generally  accepted in the United States of America.  The accompanying  2000 and
1999 financial statements were not audited by us, and accordingly, we express no
opinion or any other form of assurance on them.


/s/  KPMG LLP

SAN FRANCISCO, CALIFORNIA
June 20, 2000







                              CANADIAN AIR TRUST #3
                                    (A TRUST)
                                 BALANCE SHEETS
                                  DECEMBER 31,
                            (IN THOUSANDS OF DOLLARS)





                                                      2000               1999
                                                  (unaudited)        (unaudited)
                                                --------------------------------
  ASSETS

  Accounts receivable                           $         --  $           315

                                                --------------------------------
        Total assets                            $         --  $           315
                                                ================================


  LIABILITIES AND OWNERS' EQUITY

  Liabilities:
  Due to affiliates                             $        --  $              4
                                                --------------------------------
    Total liabilities                                    --                 4

  Owners' equity                                         --               311
                                                --------------------------------

        Total liabilities and owners' equity    $        --  $            315
                                                ================================



















      See accompanying auditors' report and notes to financial statements.






                              CANADIAN AIR TRUST #3
                                    (A TRUST)
                              STATEMENTS OF INCOME
                        FOR THE YEARS ENDED DECEMBER 31,
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

                                                             2000                1999                1998
                                                          (unaudited)         (unaudited)
                                                       ---------------------------------------------------------
  REVENUES

<S>                                                    <C>                  <C>                    <C>
  Lease revenue                                        $            --      $           --         $     1,933
  Interest income                                                   14                  50                  74
  Gain from the sale of aircraft                                    --                  --              13,733
                                                       ---------------------------------------------------------
    Total revenues                                     $            14      $           50         $    15,740
                                                       ---------------------------------------------------------

  EXPENSES

  Depreciation and amortization expense                             --                  --               1,262
  Management fees to affiliate                                      --                  --                  36
  Insurance expense                                                 --                  --                  18
  Administrative expenses to affiliates                             --                  --                  40
  Administrative expenses                                           --                  --                   6
                                                       ---------------------------------------------------------
    Total expenses                                                  --                  --               1,362
                                                       ---------------------------------------------------------

        Net income                                     $            14      $           50         $    14,378
                                                       =========================================================
</TABLE>























      See accompanying auditors' report and notes to financial statements.






                              CANADIAN AIR TRUST #3
                                    (A TRUST)
                     STATEMENTS OF CHANGES IN OWNERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
                            (IN THOUSANDS OF DOLLARS)







   Owners' equity at December 31, 1997 (unaudited)          $        13,085

  Owners' capital contribution                                        1,199

  Net income                                                         14,378

  Distributions paid                                                (28,104)
                                                            -----------------

   Owners' equity at December 31, 1998                                  558

  Net income (unaudited)                                                 50

  Distributions paid (unaudited)                                       (297)
                                                            -----------------

    Owners' equity at December 31, 1999 (unaudited)                     311

  Net income (unaudited)                                                 14

  Distributions paid (unaudited)                                       (325)
                                                            -----------------

    Owners' equity at December 31, 2000 (unaudited)         $            --
                                                            =================





















      See accompanying auditors' report and notes to financial statements.






                              CANADIAN AIR TRUST #3
                                    (A TRUST)
                            STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

                                                                      2000                1999              1998
                                                                  (unaudited)         (unaudited)
                                                               ---------------------------------------------------------

  OPERATING ACTIVITIES

<S>                                                             <C>                <C>               <C>
  Net income                                                    $            14    $            50   $         14,378
  Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
    Depreciation and amortization                                            --                 --              1,262
    Gain from the sale of aircraft                                           --                 --            (13,733)
    Changes in operating assets and liabilities:
      Accounts receivable                                                   315                249              1,313
      Prepaid deposits                                                       --                 --                  5
      Accounts payable and accrued expenses                                  --                 (2)                (4)
      Due to affiliates                                                      (4)                --                (21)
                                                                -------------------------------------------------------
        Net cash provided by operating activities                           325                297              3,200
                                                                -------------------------------------------------------

  INVESTING ACTIVITIES

  Payment for capitalized repairs                                            --                 --             (1,199)
  Payment of acquisition fees                                                --                 --                (54)
  Payment for lease negotiation fees                                         --                 --                (12)
  Proceeds from the sale of aircraft                                         --                 --             24,970
                                                                -------------------------------------------------------
        Net cash provided by investing activities                            --                 --             23,705
                                                                -------------------------------------------------------

  FINANCING ACTIVITIES

  Owners' capital contribution                                               --                 --              1,199
  Distributions paid                                                       (325)              (297)           (28,104)
                                                                -------------------------------------------------------
        Net cash used in financing activities                              (325)              (297)           (26,905)
                                                                -------------------------------------------------------

  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.






                              CANADIAN AIR TRUST #3
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

In 1995, a Trust  Agreement  (the Trust) was entered into between PLM  Equipment
Growth Fund V (EGF V), a California  limited  partnership,  PLM Equipment Growth
Fund VI (EGF VI), a  California  limited  partnership,  PLM  Equipment  Growth &
Income Fund VII (EGF VII), a California  limited  partnership,  and Professional
Lease Management Income Fund I (Fund I), a Delaware Limited  Liability  Company,
(the  Owners).  The Trust was entered  into for the purpose of  purchasing  five
Boeing 737-200  commercial  aircraft.  The Trust had no employees nor operations
other than the operation of the five Boeing 737-200's.

The  Trust  contained  a  provision  for  allocating  specific  aircraft  to the
beneficial owners under certain  circumstances.  One of the commercial aircraft,
owned by EGF V, was transferred to the limited  partnership  during 1996. All of
the remaining  aircraft in the Trust had been sold as of December 31, 1998.  The
Trust was liquidated in 2000.

PLM Financial Services Inc., (FSI) is the General Partner of EGFs V, VI, and VII
and  the  Manager  of  Fund  I.  FSI  is  a   wholly-owned   subsidiary  of  PLM
International, Inc.

The aircraft were purchased  during 1996 for $28.1  million.  EGF V, EGF VI, and
EGF VII (the EGF's)  collectively paid acquisition and lease negotiation fees of
$1.0  million  to  PLM  Worldwide  Management  Services  (WMS),  a  wholly-owned
subsidiary of PLM International, Inc., based on the prorata share of the cost of
the  aircraft  purchased.  No fees were paid by Fund I. Upon the purchase of the
aircraft,  a lease with Canadian Airlines  International was entered into with a
term expiring in March 2002.

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.  All amounts as of and for the years ended  December  31,
2000 and 1999 are unaudited.

     OPERATIONS

The  aircraft in the Trust were  managed  under a  management  agreement  by PLM
Investment  Management,  Inc.  (IMI),  a  wholly-owned  subsidiary  of FSI.  IMI
received a monthly management fee from the Trust for managing the aircraft (Note
2). FSI, in conjunction with its subsidiaries, sells transportation equipment to
investor programs and third parties,  manages pools of transportation  equipment
under agreements with the investor programs, and is a general partner in limited
partnerships.

     CASH AND CASH EQUIVALENTS

All cash  generated from  operations is distributed to the owners,  accordingly,
the Trust had no cash balance at December 31, 2000 and 1999.







                              CANADIAN AIR TRUST #3
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     ACCOUNTING FOR LEASES

The  aircraft  in the Trust were  leased  under an  operating  lease.  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 in accordance  with Financial  Accounting  Standards
Board Statement No. 13 "Accounting  for Leases".  Lease  origination  costs were
amortized over the life of the lease.

     DEPRECIATION

Depreciation  of aircraft  equipment  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.  Acquisition  fees of $0.8
million  were  paid  to WMS and  were  capitalized  as  part of the  cost of the
equipment and amortized over the life of the aircraft.

     AIRCRAFT

In accordance with the Financial  Accounting  Standards Board 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 aircraft under the Trust
at least quarterly, and whenever circumstances indicated that the carrying value
of the aircraft 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 fair value were less than the
carrying value of the aircraft,  a loss on revaluation would have been recorded.
No reductions to the carrying value of the aircraft were required during 1998.

     REPAIRS AND MAINTENANCE

Repair and  maintenance  for the  aircraft  was  usually the  obligation  of the
lessee.

     NET INCOME AND CASH DISTRIBUTIONS TO OWNERS

The net income and cash  distributions of the Trust are allocated to the Owners.
Net income is  generally  allocated  to the Owners  based on number of  aircraft
owned. Certain depreciable and amortizable amounts are allocated specifically to
the EGF's,  such as depreciation on acquisition  fees and  amortization on lease
negotiation  fees.  Cash  distributions  are  allocated  based on the  number of
aircraft owned.

     COMPREHENSIVE INCOME

The  Trust's  net income is equal to  comprehensive  income for the years  ended
December 31, 2000, 1999, and 1998.

2.   TRANSACTIONS WITH AFFILIATES

Under the equipment management agreement,  IMI received a monthly management fee
equal to the  lessor 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 Trust's  management  fee expense to affiliate  was $-0-,  $-0-,  and $36,000
during 2000, 1999, and 1998, respectively.






                              CANADIAN AIR TRUST #3
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

2.   TRANSACTIONS WITH AFFILIATES (continued)

The Trust  reimbursed FSI $-0-,  $-0-, and $40,000 during 2000,  1999, and 1998,
respectively,   for  data  processing  and   administrative   expenses  directly
attributable to the Trust.

The balance due to  affiliates as of December 31, 1999,  included  $3,000 due to
affiliates for management  fees and $1,000 due to an affiliated  partnership for
expenses  paid on its  behalf.  There  was no  balance  due to  affiliate  as of
December 31, 2000.

3.   GEOGRAPHIC INFORMATION

The aircraft were leased and operated in Canada.

4.   INCOME TAXES

The Trust is not subject to income  taxes,  as any income or loss is included in
the tax returns of the Owners of the Trust. Accordingly, no provision for income
taxes has been made in the financial statements of the Trust.

5.   CONCENTRATIONS OF CREDIT RISK

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

The aircraft in the Trust were on lease to only one customer  during 1998.  This
lessee, Canadian Airlines International, accounted for all of the lease revenue.
Triton Aviation Services,  Ltd.  purchased all the commercial  aircraft with the
existing  lease attached from the Trust and the gain from the sale accounted for
87% of total consolidated revenues during 1998.