INDEPENDENT AUDITORS' REPORT






The Owners
TAP Trust

We have audited the  accompanying  balance sheet of the TAP Trust as of December
31, 1999,  and the  statements of income,  changes in owners'  equity,  and cash
flows  for the  years  ended  December  31,  1999,  and  1997.  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  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 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.

As described in Note 1 to the financial statements, the TAP Trust was liquidated
in 1999, as the aircraft and aircraft equipment in the TAP Trust has been sold.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of the TAP Trust 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>



                                                  TAP TRUST
                                                  (A TRUST)
                                                BALANCE SHEETS
                                                 DECEMBER 31,
                                          (IN THOUSANDS OF DOLLARS)





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

  <S>                                                                    <C>               <C>
  Aircraft and aircraft equipment held for lease, at cost                $           --    $        30,900
  Less accumulated depreciation                                                      --            (18,728)
                                                                         -----------------------------------
      Net equipment                                                                  --             12,172

  Prepaid expenses                                                                   --                  5
                                                                         -----------------------------------
        Total assets                                                     $           --    $        12,177
                                                                         ===================================


  Liabilities and owners' equity

  Liabilities:
  Accounts payable and accrued expenses                                  $            --    $           14
  Due to affiliates                                                                   --                20
                                                                         -----------------------------------
    Total liabilities                                                                  -                34

  Owners' equity                                                                      --            12,143
                                                                         -----------------------------------

        Total liabilities and owners' equity                             $            --    $       12,177
                                                                         ===================================


</TABLE>










      See accompanying auditors' report and notes to financial statements.


<PAGE>

<TABLE>
<CAPTION>




                                                  TAP TRUST
                                                  (A TRUST)
                                             STATEMENTS OF INCOME
                                       FOR THE YEARS ENDED DECEMBER 31,
                                          (IN THOUSANDS OF DOLLARS)


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

  <S>                                                             <C>                 <C>                 <C>
  Lease revenue                                                   $           --      $         4,680     $     10,591
  Interest and other income                                                    2
  Gain on sale of aircraft and aircraft equipment                          9,525                   --               --
                                                                  -------------------------------------------------------
    Total revenues                                                         9,527                4,680           10,591
                                                                  -------------------------------------------------------

  Expenses

  Depreciation and amortization expense                                      411                3,876            5,137
  Management fees to affiliate                                                --                  234              530
  Repairs and maintenance                                                     12                   37               --
  Insurance expense                                                           13                   50               38
  Administrative expenses to affiliates                                       15                   78              137
  Administrative expenses                                                     37                   95                4
                                                                  -------------------------------------------------------
    Total expenses                                                           488                4,370            5,846
                                                                  -------------------------------------------------------

        Net income                                                $        9,039      $           310     $      4,745
                                                                  =======================================================
</TABLE>













      See accompanying auditors' report and notes to financial statements.


<PAGE>


                                    TAP TRUST
                                    (A TRUST)
                     STATEMENTS OF CHANGES IN OWNERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1999 , 1998, AND 1997
                            (IN THOUSANDS OF DOLLARS)







  Owners' equity at December 31, 1996 (unaudited)           $       27,023

  Net income                                                         4,745

  Distributions paid                                                (7,896)

                                                            ----------------
  Owners' equity at December 31, 1997                               23,872

  Net income                                                           310

  Distributions paid                                               (12,039)
                                                            ----------------

  Owners' equity at December 31, 1998 (unaudited)                   12,143

  Net income                                                         9,039

  Distributions paid                                               (21,182)
                                                            ----------------

    Owners' equity at December 31, 1999                                 --
                                                            ================









      See accompanying auditors' report and notes to financial statements.


<PAGE>

<TABLE>
<CAPTION>




                                                  TAP TRUST
                                                  (A TRUST)
                                           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                                                    $         9,039    $           310   $          4,745
  Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
    Depreciation and amortization                                           411              3,876              5,137
    Gain on sale of aircraft and aircraft equipment                      (9,525)                --                 --
    Changes in operating assets and liabilities:
      Accounts receivable                                                    --              8,237             (2,354)
      Prepaid expenses                                                        5                  2                  1
      Accounts payable and accrued expenses                                 (14)                 7                 (3)
      Due to affiliates                                                     (20)              (393)               368
                                                                --------------------------------------------------------
        Net cash (used in) provided by operating activities                (104)            12,039              7,894
                                                                ------------------- -------------------------------------

  Investing activities

  Proceeds from sale of aircraft and aircraft equipment                  21,286                 --                 --
                                                                --------------------------------------------------------
        Net cash provided by investing activities                        21,286                 --                 --
                                                                --------------------------------------------------------

  Financing activities

  Distributions paid                                                    (21,182)           (12,039)            (7,896)
                                                                -------------------------------------------------------
        Net cash used in financing activities                           (21,182)           (12,039)            (7,896)
                                                                -------------------------------------------------------

  Net change in cash and cash equivalents                                    --                 --                 (2)
  Cash and cash equivalents at beginning of year                             --                 --                  2
                                                                --------------------------------------------------------
  Cash and cash equivalents at end of year                      $            --    $            --   $             --
                                                                ========================================================


</TABLE>














      See accompanying auditors' report and notes to financial statements.


<PAGE>





                                    TAP TRUST
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

In August 1995, PLM Equipment  Growth Fund III (EGF III),  PLM Equipment  Growth
Fund V (EGF V), PLM  Equipment  Growth & Income  Fund VII (EGF VII),  California
limited partnership's, and Professional Lease Management Income Fund I (Fund I),
a  Delaware  Limited  Liability  Company,  (the  Owners)  entered  into a  Trust
Agreement  (the  Trust)  with  PLM  Transportation   Equipment   Corp.(TEC),   a
wholly-owned subsidiary of PLM International, Inc., by the terms of which TEC is
owner trustee for the benefit of the Owners as equal co-beneficiaries. The Trust
was  established  for the  purpose of  purchasing  3 Boeing  737-200  commercial
aircraft and aircraft equipment spare parts (aircraft equipment).  The Trust has
no employees nor operations other than the operation of the aircraft  equipment.
The Trust  estate is owned 16.67% by EGF III and EGF V and 33.33% by EGF VII and
Fund I.

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

The  aircraft  and aircraft  equipment  were  purchased in August 1995 for $30.0
million. EGF III, EGF V, and EGF VII paid acquisition and lease negotiation fees
of $1.1 million to FSI. No fees were paid by Fund I. The aircraft  equipment was
purchased with an existing lease to Transportes  Aeros  Portugueses  with a term
expiring in January 1999. In March 1999, the aircraft and aircraft equipment was
sold for  proceeds of $21.3  million  resulting in a gain of $9.5  million.  The
Trust was liquidated in 1999, as the aircraft equipment has been sold.

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 aircraft and aircraft  equipment in the Trust was managed under a continuing
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  equipment  (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 has no cash balance at December 31, 1999 and 1998.

     ACCOUNTING FOR LEASES

The  aircraft  and  aircraft  equipment  under  the Trust  was  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  were  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 equally over 48 months.



<PAGE>



                                    TAP TRUST
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     DEPRECIATION

Depreciation of aircraft  equipment was computed on the double declining balance
method,  taking a full month's  depreciation in the month of acquisition,  based
upon an estimated useful life of 8 years. Acquisition fees of $0.9 million, that
were paid to FSI,  were  capitalized  as part of the cost of the  equipment  and
amortized over the life of the aircraft.

     AIRCRAFT AND AIRCRAFT EQUIPMENT

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 and aircraft
equipment  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 1999, 1998, and 1997.

     REPAIRS AND MAINTENANCE

Repair and maintenance  for the aircraft and aircraft  equipment are 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.
The net income is generally allocated to the Owners based on their percentage of
ownership  in  the  Trust.  Certain  depreciable  and  amortizable  amounts  are
allocated  specifically  to EGF III,  EGF V, EGF VII,  such as  depreciation  on
acquisition fees and amortization on lease negotiation fees. Cash  distributions
were allocated 16.67% to EGF III and EGF V, and 33.33% to EGF VII and Fund I.

     COMPREHENSIVE INCOME

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

2.   GENERAL PARTNER AND 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, $0.2 million,  and $0.5
million during 1999, 1998, and 1997.

The Trust  reimbursed FSI $15,000,  $0.1 million,  and $0.1 million during 1999,
1998, and 1997,  respectively,  for data processing and administrative  expenses
directly attributable to the Trust.

Trust  management  fees payable to IMI was $20,000 as of December  31, 1998.  No
management fees were payable as of December 31, 1999.



<PAGE>



                                    TAP TRUST
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

3.   EQUIPMENT

Revenues  were earned by placing  the  aircraft  and  aircraft  equipment  on an
operating lease.

An existing  lease was  assumed  upon the  acquisition  with  Transportes  Aeros
Portugueses and a one year extension was signed through January 1999, upon which
the aircraft went off-lease.  In March 1999, the aircraft and aircraft equipment
were sold for proceeds of $21.3 million resulting in a gain of $9.5 million. The
Trust was  liquidated in 1999,  as the aircraft and aircraft  equipment had been
sold.

The  aircraft  and  aircraft  equipment  lease  was  being  accounted  for as an
operating lease. There are no future minimum rentals under non-cancelable leases
at December 31, 1999.

4.   GEOGRAPHIC INFORMATION

The aircraft and aircraft equipment was leased and operated internationally.

5.   INCOME TAXES

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

6.   CONCENTRATIONS OF CREDIT RISK

Financial instruments,  which potentially subject the Trust to concentrations of
credit risk, consist principally of lease receivables. The aircraft and aircraft
equipment in the Trust was on lease to only one customer during 1999,  1998, and
1997.  This lessee,  Transportes  Aeros  Portugueses  , accounted for all of the
lease revenue.

Casino  Express  Airlines  purchased  three  commercial  aircraft,  the aircraft
eingines  and  aircraft  equipment  from the  Trust  and the gain  from the sale
accounted for all of the consolidated revenues during 1999.