.
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              --------------------
                                   FORM 10-K/A


[X]       ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(D)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.

[ ]       TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

                       COMMISSION FILE NUMBER 33-83216-01
                             -----------------------



               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
             (Exact name of registrant as specified in its charter)


       DELAWARE                                             94-3209289
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)

 ONE MARKET, STEUART STREET TOWER
  SUITE 800, SAN FRANCISCO, CA                              94105-1301
(Address of principal executive offi                        (Zip code)


        Registrant's telephone number, including area code (415) 974-1399
                             -----------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Aggregate market value of voting stock:  N/A

An index of exhibits filed with this Form 10-K is located at page 28.

Total number of pages in this report:  48.



<PAGE>


                                     PART I
ITEM 1.  BUSINESS

(A)  Background

In  August  1994,  PLM  Financial  Services,   Inc.  (FSI  or  the  Manager),  a
wholly-owned subsidiary of PLM International, Inc. (PLMI International or PLMI),
filed a  Registration  Statement  on Form S-1 with the  Securities  and Exchange
Commission  with respect to a proposed  offering of 5,000,000 Class A units (the
units) in  Professional  Lease  Management  Income  Fund I,  L.L.C.,  a Delaware
Limited  Liability  Company (the Fund).  The Fund's offering became effective on
January 23, 1995. The Fund engages in the business of investing in a diversified
equipment portfolio consisting primarily of used,  long-lived,  low-obsolescence
capital equipment that is easily transportable by and among prospective users.

The Fund's primary objectives are:

     (1) to invest in a  diversified  portfolio  of  low-obsolescence  equipment
having long lives and high residual values,  at prices that the Manager believes
to be below inherent values,  and to place the equipment on lease or under other
contractual  arrangements with creditworthy  lessees and operators of equipment.
All  transactions  over $1.0 million must be approved by the PLMI Credit  Review
Committee  (the  Committee),  which  is  made up of  members  of  PLMI's  senior
management.  In  determining a lessee's  creditworthiness,  the  Committee  will
consider,  among other factors, the lessee's financial statements,  internal and
external credit ratings, and letters of credit;

     (2) to generate cash distributions, which may be substantially tax-deferred
(i.e.,  distributions that are not subject to current taxation) during the early
years of the Fund;

     (3) to create a significant  degree of safety  relative to other  equipment
leasing investments through the purchase of a diversified  equipment  portfolio.
This  diversification  reduces the  exposure to market  fluctuations  in any one
sector. The purchase of used, long-lived,  low-obsolescence equipment, typically
at prices that are substantially  below the cost of new equipment,  also reduces
the  impact  of  economic  depreciation  and  can  create  the  opportunity  for
appreciation  in certain  market  situations,  where supply and demand return to
balance from oversupply conditions; and

     (4) to increase  the Fund's  revenue base by  reinvesting  a portion of its
operating  cash flow in additional  equipment  during the first six years of the
Fund's  operation in order to grow the size of its  portfolio.  Since net income
and  distributions  are  affected  by a variety of factors,  including  purchase
prices,  lease rates,  and costs and expenses,  growth in the size of the Fund's
portfolio  does not  necessarily  mean that the Fund's  aggregate net income and
distributions will increase upon the reinvestment of operating cash flow.

The  offering of units of the Fund closed on May 13,  1996.  As of December  31,
1998, there were 4,999,581 units outstanding.  The Manager  contributed $100 for
its  Class B  Member  interest  in the  Fund.  The  Manager  paid out of its own
corporate  funds (as a capital  contribution to the Fund) all  organization  and
syndication expenses incurred in connection with the offering;  therefore,  100%
of the net cash  proceeds  received  by the Fund  from the sale of Class A Units
were used to purchase equipment and establish any required cash reserves.

Beginning in the Fund's seventh year of operation,  which  commences  January 1,
2003, the Manager will stop  reinvesting  cash flow and surplus  funds,  if any,
less reasonable reserves, which will be distributed to the partners. Between the
eighth  and  tenth  years of  operations,  the  Manager  intends  to  begin  its
dissolution and liquidation in an orderly fashion, unless the Fund is terminated
earlier upon sale of all of the equipment or by certain  other events.  However,
under certain circumstances,  the term of the Fund may be extended,  although in
no event will the Fund extend beyond December 31, 2010.


<PAGE>


Table 1, below,  lists the  equipment  and the cost of  equipment  in the Fund's
portfolio,  and  the  cost  of  investments  in  unconsolidated  special-purpose
entities, as of December 31, 1998 (in thousands of dollars):
<TABLE>
<CAPTION>

                                                      TABLE 1


 Units                 Type                                          Manufacturer                          Cost
------------------------------------------------------------------------------------------------------------------------

Owned equipment held for operating leases:
   <S>                                                <C>                                            <C>
      2   Anchor handling supply marine
            vessels                                   Moss Point                                     $       17,700
      1   Oil tanker marine vessel                    Hyundai                                                17,000
      1   Bulk carrier marine vessel                  Hitachi Shipbuilding & Engineering Co.                 12,257
   0.61   Mobile offshore drilling unit               AT & CH de France                                      20,356<F1>(1)
      4   737-200A stage II commercial
             aircraft                                 Boeing                                                 20,605
    362   Pressurized tank railcars                   Various                                                 9,504
    100   Covered hopper railcars                     Various                                                 5,445
    246   Box railcars                                Various                                                 4,972
    152   Foodservice refrigerated trailers           Various                                                 6,999
    445   Piggyback trailers                          Various                                                 6,696
     29   Over the road refrigerated trailers         Various                                                   833
     25   Over the road dry trailers                  Various                                                   259
                                                                                                     -------------------

          Total owned equipment held for operating leases                                            $      122,626<F2>(2)
                                                                                                     ===================

Investments in unconsolidated special-purpose entities:

   0.33   Two trusts consisting of a total of:
            Three 737-200A stage II
               commercial aircraft                    Boeing
            Two stage II JT8D aircraft engines        Pratt Whitney
            Portfolio of rotable components           Various                                        $        9,999<F3>(3)
   0.50   Trust owning an MD-82
            stage III commercial aircraft             McDonnell Douglas                                       7,775<F4>(4)
   0.50   Trust owning an MD-82
            stage III commercial aircraft             McDonnell Douglas                                       6,825<F4>(4)
   0.50   Container cargo feeder marine
            vessel                                    O. C. Staalskibsvaerft A/F                              3,836<F4>(4)
                                                                                                     -------------------

              Total investments in unconsolidated special-purpose entities                           $       28,435<F1>(1)
                                                                                                     ===================

<FN>
<F1> (1) Jointly owned by Fund I and two affiliated programs.
<F2> (2) Includes equipment and investment purchased with the proceeds from
capital contributions, undistributed cash flow from operation and Fund
borrowings.  Includes costs capitalized, subsequent to the date of purchase.
<F3> (3) Jointly owned by Fund I and three affiliated programs.
<F4> (4) Jointly owned by Fund I and an affiliated program.
</FN>
</TABLE>

The equipment is generally  leased under  operating  leases for a term of one to
six years.

As of December 31, 1998,  approximately  33% of the Fund's trailer equipment was
in rental facilities operated by PLM Rental,  Inc., an affiliate of the Manager,
doing  business as PLM Trailer  Leasing.  Revenues  collected  under  short-term
rental agreements with the rental yards' customers are credited to the owners of
the related equipment as received. Direct expenses associated with the equipment
are charged  directly to the Fund. An allocation of other  indirect  expenses of
the rental yard operations is charged to the Fund monthly.

The lessees of the  equipment  include,  but are not limited to:  Transportation
Airline Portugal,  Norfolk Southern,  Varig South America, Trans World Airlines,
Seacor Smit Inc., and Burlington Northern Rail.

(B)  Management of Fund Equipment

The Fund has entered into an equipment  management agreement with PLM Investment
Management,  Inc. (IMI), a wholly-owned subsidiary of FSI, for the management of
the  Fund's  equipment.   The  Fund's  management   agreement  with  IMI  is  to
co-terminate with the dissolution of the Fund unless the Class A members vote to
terminate the agreement  prior to that date or at the discretion of the Manager.
IMI has agreed to perform all  services  necessary  to manage the  equipment  on
behalf  of the  Fund and to  perform  or  contract  for the  performance  of all
obligations  of the lessor under the Fund's  leases.  In  consideration  for its
services and pursuant to the Operating  Agreement,  IMI is entitled to a monthly
management fee. (See Notes 1 and 2 to the audited financial statements).

(C)  Competition

(1)  Operating Leases versus Full Payout Leases

Generally,  the  equipment  owned by or invested in the Fund is leased out on an
operating   lease  basis   wherein  the  rents   received   during  the  initial
noncancelable  term of the lease are insufficient to recover the Fund's purchase
price of the  equipment.  The  short to  mid-term  nature  of  operating  leases
generally command a higher rental rate than longer-term,  full payout leases and
offers lessees relative flexibility in their equipment commitment.  In addition,
the rental  obligation  under an operating  lease need not be capitalized on the
lessee's balance sheet.

The Fund  encounters  considerable  competition  from  lessors that utilize full
payout  leases  on new  equipment,  i.e.  leases  that have  terms  equal to the
expected  economic  life  of  the  equipment.  While  some  lessees  prefer  the
flexibility offered by a shorter-term  operating lease, other lessees prefer the
rate  advantages  possible with a full payout lease.  Competitors may write full
payout  leases at  considerably  lower rates and for longer  terms than the Fund
offers,  or larger  competitors with a lower cost of capital may offer operating
leases at lower rates, which may put the Fund at a competitive disadvantage.

(2)  Manufacturers and Equipment Lessors

The Fund competes with equipment  manufacturers  who offer operating  leases and
full payout leases.  Manufacturers may provide ancillary  services that the Fund
cannot  offer,  such as  specialized  maintenance  service  (including  possible
substitution  of  equipment),   training,   warranty   services,   and  trade-in
privileges.

The Fund also competes with many equipment  lessors,  including ACF  Industries,
Inc.  (Shippers Car Line Division),  GATX Corporation,  General Electric Railcar
Services  Corporation,  General Electric Capital Aviation Services  Corporation,
Xtra  Corporation  and other  investment  programs  that lease the same types of
equipment.

(D)  Demand

The Fund operates in the following  operating  segments:  marine vessel leasing,
aircraft leasing, railcar leasing, trailer leasing, and mobile offshore drilling
unit leasing.  Each equipment  leasing segment engages in short-term to mid-term
operating leases to a variety of customers.  Except for those aircraft leased to
passenger  air  carriers,  the  Fund's  equipment  and  investments  are used to
transport materials and commodities, rather than people.

The following  section describes the international and national markets in which
the Fund's capital equipment operates:

(1)  Marine Vessels

The Fund owns or has  investments  in small to  medium-sized  dry bulk  vessels,
product tankers, and container vessels that trade in worldwide markets and carry
commodity  cargoes.  Demand for commodity  shipping  closely  follows  worldwide
economic growth patterns, which can alter demand by causing changes in volume on
trade  routes.  The Manager  operates the several of the Fund's  marine  vessels
through  spot and period  charters,  an  operating  approach  that  provides the
flexibility to adapt to changing market  situations.  The anchor handling supply
vessels operates through bare-boat charters.

(a) Anchor Handling Supply Vessels

The Fund owns a U.S.  flag  anchor-handling/tug/supply  boat that  supports  rig
drilling  operations  in the  U.S.  Gulf of  Mexico.  Although  the  boat can be
utilized in other geographic regions, the more desirable market is the U.S. Gulf
of Mexico  because of the U.S.  maritime  law  stipulating  that only U.S.  flag
vessels  be  used in this  region.  Demand  for  anchor-handling  boats  depends
primarily on the demand for floating drilling services by oil companies.  Demand
for such services remained strong, and kept utilization of the 20 to 26 boats in
the Gulf close to 100%  --during both 1997 and 1998, no more than two boats were
idle at any one time.  Prospects for 1999 indicate that the strong market in the
Gulf of Mexico will continue through the first half of the year. Activity during
the second  half of 1999 will  depend on the  strength of oil and gas prices and
the effects such prices have on drilling.  Even if oil company capital  spending
programs  are cut  back  because  of weak  oil and gas  prices,  demand  will be
sustained at a base level by ongoing projects.  The U.S. Gulf of Mexico fleet of
anchor-handling/tug/supply  vessels is relatively  small, and should continue to
realize relatively high utilization, even if drilling is reduced.

(b) Oil Tanker Vessel

The Fund owns a small to  medium-sized  product  tanker that trades in worldwide
markets and carry  commodity  cargoes.  Demand for  commodity  shipping  closely
follows  worldwide  economic growth patterns,  which can alter demand by causing
changes in volume on trade  routes.  The  Manager  operates  the Fund's  vessels
through  spot and period  charters,  an  operating  approach  that  provides the
flexibility to adapt to changing market situations.

Product  tanker  markets  experienced  a year in which a fall in  product  trade
volume and an increase in total fleet size  induced a decline in freight  rates.
Charter rates for  standard-sized  product tankers  averaged  $10,139 per day in
1998,  compared  to $13,277 per day in 1997.  The  weakening  in rates  resulted
primarily  from a decrease  in product  import  levels to the United  States and
Japan.  Significantly lower crude oil prices worldwide induced higher volumes of
imports of crude oil to the United States, thereby lessening domestic demand for
refined products.  Product trade in 1998 fell by an estimated 5% worldwide.  The
crude oil trade,  which is closely  related to  product  trades,  especially  in
larger vessels,  remained stable in 1998. Crude trade grew 1% in volume,  led by
imports to Europe, which grew 6%.

Overall,  the entire product tanker fleet grew only 1% in 1998. Supply growth in
1998 was moderated by high  scrapping  levels,  especially  of larger ships.  In
1999,  the fleet is expected to receive an  additional 9% in capacity from newly
built  deliveries,  most  of  which  will  be in  large  tankers  (above  80,000
deadweight  (dwt) tons) carrying crude  products.  Smaller tankers (below 80,000
dwt tons) are  expected  to  receive 7% in new  deliveries  over  current  fleet
levels.

While these new deliveries  represent a high  percentage of the existing  fleet,
the tanker  markets are now  beginning to feel the effects of the United  States
Oil Pollution Act of 1990.  Under the act,  older  tankers are  restricted  from
trading to the United  States  once they exceed 25 years old if they do not have
double  bottoms  and/or double hulls.  Similar  though  somewhat less  stringent
restrictions  are in place in other  countries  with  developed  economies.  The
retirement  of older,  noncomplying  tankers  may allow the fleet to absorb what
would  otherwise  be an  excessive  number of new orders in  relation to current
demand prospects. Given that a large proportion of the current tanker fleet does
not meet these regulatory requirements, coupled with anticipated flat demand yet
continuing high delivery  levels,  charter rates for 1999 are not anticipated to
increase significantly from 1998 levels.

(c) Bulk Carrier Vessels

Freight rates for dry bulk vessels  decreased  for all ship sizes in 1998,  with
the largest  vessels  experiencing  the  greatest  declines.  After a relatively
stable year in 1997,  rates  declined due to a decrease in cargo tonnage  moving
from the Pacific  Basin and Asia to western  ports.  The size of the overall dry
bulk carrier  fleet  decreased by 3%, as measured by the number of vessels,  but
increased  by 1%, as measured by dwt  tonnage.  While  scrapping  of ships was a
significant factor in 1998 (scrapping  increased by 50% over 1997) overall there
was no material  change in the size of the dry bulk vessel fleet,  as deliveries
and scrappings were nearly equal.

Total dry trade (as  measured  in  deadweight  tons) was flat,  compared to a 3%
growth in 1997. As a result, the market had no foundation for increasing freight
rates, and charter rates declined as trade not only failed to grow, but actually
declined due to economic  disruptions in Asia.  Overall  activity is expected to
remain flat in 1999, with trade in two of the three major commodities  static or
decreasing in volume.  Iron ore volume is expected to decrease,  and grain trade
is anticipated to be flat, while a bright spot remains in an estimated  increase
in steam coal trade.

Ship values experienced a significant decline in 1998, as expectations for trade
growth  were  dampened.  The  decline in ship  values was also driven by bargain
pricing for newbuilding in Asian yards.

The uncertainty in forecasts is the Asian economic situations;  if there is some
recovery  from the  economic  shake-up  that started in the second half of 1997,
then  1999 has  prospects  for  improvement.  The  delivery  of ships in 1999 is
expected to be less than in 1998, and high scrapping levels should continue. Dry
bulk  shipping  is a cyclical  business -- inducing  capital  investment  during
periods of high freight rates and discouraging  investment during periods of low
rates. The current environment thus discourages investment. However, the history
of the industry  implies that this period will be followed by one of  increasing
rates and investment in new ships, driven by growth in demand. Over time, demand
grows at an average of 3% a year,  so when  historic  levels of growth in demand
resume, the industry is expected to experience a significant increase in freight
rates and ship values.

(d) Container Feeder Vessels

Container vessels transport  containerized cargo. They are called feeder vessels
when they move containers from small,  outlying ports to main transportation hub
ports,  from which  containers are moved by regularly  scheduled liner services.
Container  vessels  typically  carry up to about 1,000  20-foot-equivalent  unit
containers  (TEUs).  This trade has been  characterized by growth in both supply
and demand for the past several years;  however, in 1998, patterns changed.  All
containerized  trade,  as measured by TEU  movement,  grew 8% in shipments  from
Asia, but declined 14% in shipments to Asia, for a composite  decline of 1% over
1997 levels.  This  flattening of trade  represents a significant  change in the
container shipping markets, which have shown robust growth ever since containers
were introduced as a shipping medium.

As with other shipping markets, the lack of growth in demand has occurred at the
same  time  that the  capacity  to meet  previously  projected  growth  has been
underway,  and  charter  rates have  decreased  accordingly.  The total fleet of
containerized  vessels has  increased in capacity by over 60% since 1988.  While
some of this  growth  has come from  very  large  vessels,  which  have  created
container  shipping  demand due to lower unit costs,  the expansion of the fleet
has eroded charter rates, since demand has not grown as quickly.  For the larger
container vessels (above 1,000 TEU per ship), rate erosion may continue, because
ships on order could add as much as 16% to existing  capacity  through 2001. For
feeder  ships (less than 1,000 TEU),  only 9% of existing  capacity is on order,
and most remaining orders will be delivered in 1999. While these deliveries will
suppress  prospects for improving  feeder vessel charter rates in 1999, the lack
of planned  deliveries  beyond then provides  some  potential for rate and value
increases.

(2)  Aircraft

(a)  Commercial Aircraft

The world's major  airlines  experienced a fourth  consecutive  year of profits,
showing a combined  marginal net income (net income  measured as a percentage of
revenue)  of 6%,  compared  to the  industry's  historical  annual  rate  of 1%.
Airlines recorded positive marginal net annual income of 2% in 1995, 4% in 1996,
6% in 1997,  and 6% in 1998.  The two factors that have led to this  increase in
profitability are improvements in yield management systems and reduced operating
costs,  particularly  lowered fuel costs.  These higher levels of  profitability
have allowed many airlines to re-equip their fleets with new aircraft, resulting
in a record number of orders for manufacturers.


Major  airlines  increased  their fleets from 7,181 aircraft in 1997 to 7,323 in
1998,  which has  resulted  in more used  aircraft  available  on the  secondary
market. Despite these increases, the number of Stage II aircraft in these fleets
(similar to those  owned by the Fund)  decreased  by 26% from 1997 to 1998,  and
sharper  decreases are expected in 1999.  This trend is due to Federal  Aviation
Regulation  section  C36.5,  which  requires  airlines to convert  100% of their
fleets to Stage III  aircraft,  which  have  lower  noise  levels  than Stage II
aircraft,  by the year 2000 in the United States and the year 2002 in Canada and
Europe.  Stage II aircraft can be modified to Stage III with the installation of
a  hushkit  that  significantly  reduces  engine  noise.  The  cost  of  hushkit
installation ranges from $1.0 to $2.0 million for the types of aircraft owned by
the Fund.


Orders for new aircraft  have risen rapidly  worldwide in recent  years:  691 in
1995,  1,182 in 1996, 1,328 in 1997, and an estimated 1,500 in 1998. As a result
of this increase in orders,  manufacturers  have expanded their production,  and
new aircraft deliveries have increased from 482 in 1995, 493 in 1996, and 674 in
1997, to an estimated 825 in 1998.


The industry now has in place two of the three  conditions that led to financial
problems in the early 1990s: potential excess orders and record deliveries.  The
missing element is a worldwide recession. Should a recession occur, the industry
will experience  another period of excess aircraft capacity and surplus aircraft
on the ground.


The Fund's  fleet of aircraft is a mix of Stage II and Stage III  aircraft.  The
Stage II aircraft are either positioned with air carriers that are outside Stage
III-legislated areas or anticipated to be sold or leased outside Stage III areas
before the year 2000.


(b)  Aircraft Engines


Availability has decreased over the past two years for the Pratt & Whitney Stage
II JT8D engine,  which powers many of the Fund's Stage II  commercial  aircraft.
This  decrease in supply is due  primarily  to the limited  production  of spare
parts to support  these  engines.  Due to the fact that  demand for this type of
aircraft  currently exceeds supply, the Fund expects to sell its JT8D engines in
1999.


(c)  Rotables


Aircraft  rotables,  or  components,  are  replacement  spare  parts  held in an
airline's  inventory.  They are  recycled  parts that are first  removed from an
aircraft or engine, overhauled,  and then recertified,  returned to an airline's
inventory,  and ultimately  refit to an aircraft in as-new  condition.  Rotables
carry  identification  numbers that allow them to be individually tracked during
their use.


The types of rotables owned and leased by the Fund include landing gear, certain
engine components,  avionics,  auxiliary power units, replacement doors, control
surfaces, pumps, and valves. The market for the Fund's rotables remains stable.


The Fund expects to sell the rotables used on its Stage II aircraft  during 1999
as part of a package to sell several  aircraft,  engines,  and rotables  jointly
owned by the Fund and an affiliated program.

(3)  Railcars

(a)  Pressurized Tank Railcars

Pressurized tank cars transport primarily two chemicals: liquefied petroleum gas
(natural  gas) and  anhydrous  ammonia  (fertilizer).  Natural  gas is used in a
variety of ways in businesses,  electric plants, factories,  homes, and now even
cars.  The demand for  fertilizer  is driven by a number of  factors,  including
grain prices,  the status of  government  farm subsidy  programs,  the amount of
farming acreage and mix of crops planted,  weather patterns,  farming practices,
and the value of the U.S. dollar.

In North  America,  1998 carload  originations  of both  chemicals and petroleum
products  remained  relatively  constant,  compared to 1997. The 98% utilization
rate of the Fund's pressurized tank cars was consistent with this statistic.

(b)  Covered Hopper (Grain) Railcars

Covered hopper railcars are used to transport grain to domestic food processors,
poultry  breeders,  cattle feed lots, and for export.  Demand for covered hopper
cars softened.  In 1998, as total North American  grain  shipments  declined 8%,
compared to 1997,  with grain  shipments  within Canada  contributing to most of
this  decrease.  This has put downward  pressure on lease rates,  which has been
exacerbated by a significant increase in the number of covered hopper cars built
in the last few years.  Since 1988, there has been a nearly 20% increase in rail
transportation  capacity  assigned to agricultural  service.  In 1996, just over
one-half of all new railcars  built were  covered  hopper  cars;  in 1997,  this
percentage dropped somewhat, to 38% of all cars built.

The Fund's  covered hopper cars were not impacted by the decrease in lease rates
during 1998, as all of the cars continued to operate on long-term leases.

(c)  Box Railcars

Box cars are used primarily to transport paper and paper  products.  Carloadings
of paper and paper products fell slightly in 1998, compared to 1997,  decreasing
by 2% both in the United  States and Canada.  Prices moved  modestly  higher for
most grades of paper during the year, and a variety of positive industry factors
indicates that the upturn could continue for some time.  However,  the financial
difficulties  now being  experienced in parts of Asia may have a negative effect
on future paper industry trends.

All of the Fund's box cars continued to operate on long-term leases during 1998.

(4)  Trailers

(a)  Foodservice Refrigerated Trailers

Foodservice  distribution  trailers are highly  specialized,  multi-temperature,
multi-compartmental,  refrigerated  trailers  used to  transport  food and other
perishable goods on short-haul  deliveries to restaurants,  grocery stores, food
processors,  and warehouses.  Consumer demand is fueling  double-digit growth in
the  foodservice  industry,  reflecting  the consumer trend toward eating fresh,
easy-to-prepare foods.  Heightened fears about food safety and increased service
demands from customers have  accelerated  the  development of new technology for
refrigerated  trailers  and caused  foodservice  distributors  to upgrade  their
fleets.

The foodservice  industry's desire to utilize late-model trailers has helped the
Manager expand its  specialized  refrigerated  trailer fleet,  as companies have
found that leasing  provides easy,  affordable  access to late-model  equipment.
Overall  utilization  and fleet size  increased  significantly  in 1998, and the
trend is expected to continue in 1999.

(b)  Intermodal Trailers

Intermodal  (piggyback)  trailers  are used to ship goods  either by truck or by
rail.  Activity  within the North American  intermodal  trailer market  declined
slightly in 1998, with trailer shipments down 4% from 1997 levels, due primarily
to rail service problems  associated with the mergers in this area.  Utilization
of the intermodal  per diem rental fleet,  consisting of  approximately  170,000
units, was 73%. Intermodal utilization in 1999 is expected to decline another 2%
from 1998 levels,  due to a slight leveling off of overall economic  activity in
1999, after a robust year in 1998.

The Manager has initiated  expanded  marketing and asset management  efforts for
its  intermodal  trailers,  from which it expects  to achieve  improved  trailer
utilization and operating results.  During 1998,  average  utilization rates for
the Fund's intermodal trailer fleet approached 80%.

(c)  Over-the-Road Refrigerated Trailers

The temperature-controlled  over-the-road trailer market remained strong in 1998
as  freight  levels  improved  and  equipment   oversupply  was  reduced.   Many
refrigerated  equipment  users retired  older  trailers and  consolidated  their
fleets, making way for new,  technologically  improved units.  Production of new
equipment is backlogged  into the third quarter of 1999. In light of the current
tight  supply of  trailers  available  on the  market,  it is  anticipated  that
trucking companies and other refrigerated  trailer users will look outside their
own fleets more  frequently  by leasing  trailers on a short-term  basis to meet
their equipment needs.

This  leasing  trend should  benefit the Fund,  which makes most of its trailers
available for  short-term  leasing from rental yards owned and operated by a PLM
International subsidiary. The Fund's utilization of refrigerated trailers showed
improvement in 1998, with utilization  rates approaching 70%, compared to 60% in
1997.



<PAGE>


(d)  Over-the-Road Dry Trailers

The U.S.  over-the-road  dry trailer market continued to recover in 1998, with a
strong domestic economy resulting in heavy freight volumes.  The leasing outlook
continues  to be  positive,  as  equipment  surpluses  of recent years are being
absorbed by a buoyant  market.  In addition to high freight  volumes,  declining
fuel  prices  have led to a strong  trucking  industry  and  improved  equipment
demand.

The Fund's dry van fleet experienced  strong  utilization  throughout 1998, with
utilization rates remaining well above 70% throughout the year.

(5)  Mobile Offshore Drilling Units

For the  first  half of 1998,  overall  worldwide  demand  for  mobile  offshore
drilling  units (rigs)  continued  the increases  experienced  in 1996 and 1997.
During the second  half of the year,  demand  softened  --  particularly  in the
shallow-water  U.S. Gulf markets -- due to decreases in worldwide oil prices and
U.S.  gas  prices.  Day rates in the  shallow-water  sector  showed  significant
decreases;  however,  day rates for deep-water floating rigs maintained the gain
attained earlier in the year. Future prospects for offshore drilling markets are
favorable,  since low oil and gas prices, along with economic growth in general,
tend to stimulate demand for oil and gas. In the short term, 1999 is expected to
be a flat  year for  growth  in the  offshore  markets,  with the  exception  of
long-term projects already planned or contracted by large  international oil and
gas exploration and development companies.

The Fund  currently has an interest in one drillship,  a floating  drilling rig.
The floating rig market has  experienced  the most  improvement of all rig types
since 1995.  Technological  advances and more efficient operations have improved
the economics of drilling and  production  in the  deepwater  locations in which
floating rigs are utilized. Overall, demand for floating rigs increased from 128
rig-years in 1996 to 131 rig-years in 1997,  and stayed at that level in 1998 (a
rig-year is the equivalent of one rig employed for 12 consecutive  months).  The
increase  in demand and  utilization  during this  period  prompted  significant
increases in contract day rates and an associated  increase in market values for
floating  rigs.  Currently  177  floating  rigs  (151  semisubmersibles  and  26
drillships) are operating  internationally  and 39 floating rigs are on order or
undergoing conversion, scheduled for delivery between 1999 and 2001. All but six
of these newbuildings and conversions have already been contracted for more than
two  years.   This  high  level  of  commitment  should  prevent  a  significant
deterioration in the market as the rigs are delivered

(E)  Government Regulations

The use,  maintenance,  and  ownership  of equipment  are  regulated by federal,
state, local and/or foreign government authorities.  Such regulations may impose
restrictions  and  financial  burdens on the Fund's  ownership  and operation of
equipment.   Changes  in  government   regulations,   industry   standards,   or
deregulation  may also  affect  the  ownership,  operation,  and  resale  of the
equipment.  Substantial  portions of the Fund's  equipment  portfolio are either
registered or operated internationally. Such equipment may be subject to adverse
political,  government, or legal actions, including the risk of expropriation or
loss arising  from  hostilities.  Certain of the Fund's  equipment is subject to
extensive safety and operating  regulations,  which may require its removal from
service or extensive  modification of such equipment to meet these  regulations,
at considerable cost to the Fund.
Such regulations include but are not limited to:

     (1) the U.S. Oil Pollution  Act of 1990,  which  established  liability for
     operators  and owners of vessels and mobile  offshore  drilling  units that
     create environmental pollution.  This regulation has resulted in higher oil
     pollution  liability  insurance.  The  lessee  of the  equipment  typically
     reimburses the Fund for these additional costs;

     (2) the U.S. Department of Transportation's  Aircraft Capacity Act of 1990,
     which limits or  eliminates  the  operation of  commercial  aircraft in the
     United  States  that  do not  meet  certain  noise,  aging,  and  corrosion
     criteria.  In addition,  under U.S.  Federal  Aviation  Regulations,  after
     December 31, 1999, no person may operate an aircraft to or from any airport
     in the  contiguous  United  States  unless that  aircraft has been shown to
     comply with Stage III noise levels.  The Fund has Stage II aircraft that do
     not meet  Stage III  requirements.  The cost to  install a hush kit to meet
     quieter Stage III requirements is approximately $1.5 million,  depending on
     the type of aircraft.  These Stage II aircraft will remain with the current
     lessee,  which operate in a country that does not require this  regulation.
     The Fund's 33% interest in two trusts that is comprised of a total of three
     Stage  II  narrowbody  aircraft,  two  Stage  II  aircraft  engines,  and a
     portfolio of rotable components are also scheduled for sale during 1999;

     (3) the Montreal  Protocol on  Substances  that Deplete the Ozone Layer and
     the United  States  Clean Air Act  Amendments  of 1990,  which call for the
     control and  eventual  replacement  of  substances  that have been found to
     cause or contribute  significantly to harmful effects on the  stratospheric
     ozone layer and that are used  extensively as refrigerants in over-the-road
     refrigerated trailers;

     (4)  the  U.S.   Department   of   Transportation's   Hazardous   Materials
     Regulations,  which regulate the classification and packaging  requirements
     of  hazardous  materials  and which apply  particularly  to the Fund's tank
     railcars,  issued a statement which requires the Fund to initially  inspect
     approximately  23% of the tank  railcars  for a  protective  coating to the
     outside of the tank and the inside of the metal tank jacket whenever a tank
     is  insulated.  If any of the  tank  railcars  inspected  fail to meet  the
     requirements, an additional percentage of the tank railcars will need to be
     inspected.  If all the tank  railcars  in the initial  inspection  meet the
     issued  requirements,  the remaining  railcars will be eliminated  from the
     inspection program. The Fund owns 30 of these tank railcars.  Tank railcars
     that  fail  the  inspection,  will  have  to  be  repaired  at  a  cost  of
     approximately  $25,000  each  before it can go back into  service by August
     2000. The initial  inspection of tank railcars will be completed by the end
     of March 1999.

As of December 31, 1998, the Fund was in compliance with the above  governmental
regulations.  Typically,  costs related to extensive equipment  modifications to
meet government regulations are passed on to the lessee of that equipment.

ITEM 2.  PROPERTIES

The Fund neither owns nor leases any properties  other than the equipment it has
purchased or interests in entities which own equipment for leasing purposes.  As
of December 31, 1998, the Fund owned a portfolio of  transportation  and related
equipment and investments in equipment owned by  unconsolidated  special-purpose
entities (USPEs),  as described in Item I, Table 1. The Fund acquired  equipment
with the  proceeds  of the Fund  offering  of $100.0  million,  proceeds of debt
financing of $25.0  million,  and by reinvesting a portion of its operating cash
flow in additional equipment.

The Fund  maintains its principal  office at One Market,  Steuart  Street Tower,
Suite 800, San  Francisco,  California  94105-1301.  All office  facilities  are
provided by FSI without reimbursement by the Fund.

ITEM 3.  LEGAL PROCEEDINGS

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters  were  submitted  to a vote of the Fund's  members  during the fourth
quarter of its fiscal year ended December 31, 1998.




<PAGE>


                                     PART II

ITEM 5.    MARKET FOR THE FUND'S EQUITY AND RELATED UNITHOLDER MATTERS

Pursuant  to the terms of the  operating  agreement,  the  Manager is  generally
entitled  to  a  1%  interest  in  the  profits  and  losses  and  15%  of  cash
distributions.  The Manager will be specially  allocated  (i) 100% of the Fund's
organizational and offering cost amortization  expenses and (ii) income equal to
the excess of cash distribution over the Manager`s 1% share of net profits.  The
effect on the Class A  members  of this  special  income  allocation  will be to
increase  the net loss or  decrease  the net  profits  allocable  to the Class A
members by an equal amount. After the investors receive cash distributions equal
to their  original  capital  contributions  the  Manager's  interest in the cash
distributions  of the Fund will  increase to 25%. The Manager is the sole holder
of such  interests.  The  remaining  interests  in the  profits  and  losses and
distributions   of  the  Fund  are  owned  as  of  December  31,  1998,  by  the
approximately 5,032 holders of Units in the Fund.

There are  several  secondary  markets in which Class A units  trade.  Secondary
markets are characterized as having few buyers for limited partnership interests
and,  therefore,  are generally  viewed as inefficient  vehicles for the sale of
units. Presently,  there is no public market for the units and none is likely to
develop.  To prevent the units from being considered publicly traded and thereby
to avoid taxation of the Fund as an association  treated as a corporation  under
the  Internal  Revenue  Code,  the units will not be  transferable  without  the
consent of the Manager,  which may be withheld in its absolute  discretion.  The
Manager  intends to monitor  transfers of units in an effort to ensure that they
do not  exceed the  percentage  or number  permitted  by  certain  safe  harbors
promulgated by the Internal Revenue Service. A transfer may be prohibited if the
intended  transferee is not an U.S.  citizen or if the transfer  would cause any
portion of the units of a "Qualified Plan" as defined by the Employee Retirement
Income  Security Act of 1974 and  Individual  Retirement  Accounts to exceed the
allowable  limit.  The Fund may redeem a certain number of units each year under
the terms of the Fund's operating  agreement,  beginning  November 13, 1998. The
purchase price paid by the Fund for  outstanding  Class A Units upon  redemption
will be equal to 105% of the amount  Class A Members paid for the Class A Units,
less the amount of cash distributions  Class A Members have received relating to
such Class A Units.  The price may not bear any  relationship to the fair market
value of a Class A Unit.  As of  December  31,  1998,  the Fund  had  agreed  to
purchase approximately 28,000 units for an aggregate price of approximately $0.4
million.  The Manager  anticipates  that these units will be  repurchased in the
second and third  quarters of 1999. In addition to these units,  the Manager may
purchase additional units on behalf of the Fund in the future.














                      (This space intentionally left blank)


<PAGE>


ITEM 6.    SELECTED FINANCIAL DATA

Table 2, below, lists selected financial data for the Fund:

                                     TABLE 2

                        For the Years Ended December 31,
         (in thousands of dollars, except weighted-average unit amounts
<TABLE>
<CAPTION>



                                                      1998            1997            1996            1995
                                                ---------------------------------------------------------------


<S>                                             <C>             <C>             <C>             <C>
Operating results:
 Total revenues                                 $    28,301     $   22,920      $   11,295      $    4,150
 Net gain on disposition of
  equipment                                           2,759          1,682              --              25
 Equity in net income (loss) of
  unconsolidated special-purpose
  entities                                            2,390          1,453            (256)             69
 Net income (loss)                                    4,316         (2,052)         (2,392)           (618)

At year-end:
 Total assets                                   $    99,635     $  108,524      $   87,755      $   62,589
 Total liabilities                                   28,905         29,337           1,466           1,187
 Note payable                                        25,000         25,000              --              --

Cash distribution                               $    11,765     $   11,763      $    9,832      $    1,303

Cash distribution representing
 a return of capital to Class A members         $     7,405     $    9,998      $    8,471      $    1,180

Per weighted-average Class A unit:

Net income (loss)                               $      0.52     $    (0.75)

Cash distribution                               $      2.00     $     2.00          Various, according to
                                                                                        interim closings
Cash distribution representing a return
 of capital                                     $      1.48     $     2.00


</TABLE>












                      (This space intentionally left blank)


<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

(A)  Introduction

Management's  discussion  and  analysis of  financial  condition  and results of
operations relates to the Financial  Statements of Professional Lease Management
Income Fund I, L.L.C.  (the Fund).  The  following  discussion  and  analysis of
operations  focuses  on the  performance  of the  Fund's  equipment  in  various
segments in which it  operates  and its effect on the Fund's  overall  financial
condition.

(B)  Results of Operations -- Factors Affecting Performance

(1)  Re-leasing Activity and Repricing Exposure to Current Economic Conditions

The exposure of the Fund's equipment portfolio to repricing risk occurs whenever
the  leases  for  the  equipment  expire  or are  otherwise  terminated  and the
equipment must be remarketed.  Major factors influencing the current market rate
for the Fund's equipment include,  but are not limited to, supply and demand for
similar or comparable types of transport capacity, desirability of the equipment
in the leasing market,  market conditions for the particular industry segment in
which the equipment is to be leased,  overall economic  conditions,  and various
regulations  concerning the use of the equipment.  Equipment that is idle or out
of  service  between  the  expiration  of one  lease  and  the  assumption  of a
subsequent lease can result in a reduction of contribution to the Fund. The Fund
experienced  re-leasing or repricing activity in 1998, primarily in its trailer,
marine vessel and railcars portfolios.

(a)  Trailers:  The Fund's  trailer  portfolio  operates  in  short-term  rental
facilities or with short-line railroad systems. The relatively short duration of
most leases in these operations exposes the trailers to considerable  re-leasing
and repricing activity.  Contributions from the Fund's trailers were higher than
projected due to higher utilization and lease rates than in previous years.

(b) Marine  vessels:  Certain of the Fund's marine  vessels and investment in an
entity  which  owns a  marine  vessel  operated  in  the  time  charter  markets
throughout  1998.  Time charters of a short duration (such as a single voyage of
10 - 45 days), or may be of extended duration (as much as three years) in weaker
cheaper  markets.  Short  duration  charters are the dominant forms of contract.
During 1998,  the Fund's marine vessels  experienced a decrease in  contribution
due to lower re-lease rates as a result of a soft bulk carrier vessel market.

(c) Railcars:  While this equipment experienced some re-leasing activity,  lease
rates in this market remain relatively constant.

(2)  Equipment Liquidations and Nonperforming Lessees

Liquidation of Fund equipment and investments in unconsolidated  special-purpose
entities (USPEs),  unless accompanied by an immediate  replacement of additional
equipment earning similar rates (see  Reinvestment  Risk,  below),  represents a
reduction in the size of the  equipment  portfolio and may result in a reduction
of  contribution  to the Fund.  Lessees not performing  under the terms of their
leases, either by not paying rent, not maintaining or operating the equipment in
accordance with the conditions of the leases, or other possible  departures from
the leases,  can result not only in  reductions  in  contribution,  but also may
require the Fund to assume  additional  costs to protect its interests under the
leases,  such as repossession or legal fees. The Fund  experienced the following
in 1998:

(a) Liquidations:  During 1998, the Fund received proceeds of $15.8 million from
the sale and  disposal of aircraft,  trailers,  railcars and its interest in two
trusts containing eight aircraft.

(b) Nonperforming Lessees: In the fourth quarter of 1998, the Manager terminated
the  lease  with a  former  charterer  due to  financial  difficulties  that the
charterer encountered.  Currently, the marine vessel in which the Fund has a 50%
interest, is on lease with another charterer at a significantly lower rate.



<PAGE>


(3)  Reinvestment Risk

Reinvestment risk occurs when; the Fund cannot generate  sufficient surplus cash
after  fulfillment of operating  obligations  and  distributions  to reinvest in
additional equipment during the reinvestment phase of Fund; equipment is sold or
liquidated for less than threshold amounts; proceeds from disposition or surplus
cash  available for  reinvestment  cannot be  reinvested at the threshold  lease
rates; or proceeds from  dispositions or surplus cash available for reinvestment
cannot be deployed in a timely manner.

During the first six years of  operations  through  December 31, 2002,  the Fund
intends to  increase  its  equipment  portfolio  by  investing  surplus  cash in
additional  equipment  after  fulfilling   operating   requirements  and  paying
distributions to the Members.  Subsequent to the end of the reinvestment period,
the Fund will  continue to operate for an  additional  two years,  then begin an
orderly liquidation over an anticipated two-year period.

Other  nonoperating  funds  for  reinvestment  are  generated  from  the sale of
equipment prior to the Fund's planned  liquidation  phase,  the receipt of funds
realized  from the  payment  of  stipulated  loss  values on  equipment  lost or
disposed  of during  the time it is  subject  to lease  agreements,  or from the
exercise  of  purchase  options in certain  lease  agreements.  Equipment  sales
generally  result from  evaluations by the Manager that  continued  ownership of
certain equipment is either  inadequate to meet Fund performance  goals, or that
market conditions,  market values, and other  considerations  indicate it is the
appropriate time to sell certain equipment.

During 1998, the Fund acquired two marine vessels (a deposit of $0.9 million was
paid in December 1997 for the purchase of one of these marine vessels) for $26.2
million,  a hush kit for an aircraft  for $1.2  million and 39 railcars for $1.0
million.  In addition,  the Fund  purchased a 50% interest in an MD-82 stage III
commercial  aircraft  for $6.8  million (a deposit of $0.7  million  was paid in
December  of 1997) and a 50%  interest  in another  MD-82  stage III  commercial
aircraft for $7.8  million.  The  remaining  interests  are owned by  affiliated
programs.

(4)  Equipment Valuation

In accordance  with  Financial  Accounting  Standards  Board  statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Manager reviews the carrying value of the Fund's  equipment
portfolio at least  quarterly in relation to expected  future market  conditions
for the purpose of assessing the recoverability of the recorded amounts.  If the
undiscounted  projected future lease revenues plus residual values are less than
the  carrying  value  of the  equipment,  a loss  on  revaluation  is  recorded.
Reductions of $1.0 million to the carrying  value of partially  owned  equipment
were required  during 1998. No reductions were required to the carrying value of
equipment during 1997 or 1996.

As of December 31, 1998, the Manager  estimated the current fair market value of
the Fund's equipment portfolio, including the Fund's interest in equipment owned
by  USPEs,  to be  $118.0  million.  This  estimate  is based on  recent  market
transactions  for equipment  similar to the Fund's  equipment  portfolio and the
Fund's interest in equipment owned by USPEs. Ultimate realization of fair market
value by the Fund may differ  substantially  from the  estimate  due to specific
market conditions, technological obsolescence, and government regulations, among
other factors that the Manager cannot accurately predict.

(C)  Financial Condition -- Capital Resources, Liquidity, and Unit Redemption
Plan

The Manager  purchased the Fund's  equipment  portfolio with capital raised from
its initial  equity  offering of $100.0  million and permanent debt financing of
$25.0  million.  No  further  capital  contributions  from  Class A Members  are
permitted under the terms of the Fund's operating agreement.  The Fund relies on
operating cash flow to meet its operating  obligations,  make cash distributions
to Members,  and  increase the Fund's  equipment  portfolio  with any  remaining
available surplus cash. The total outstanding debt, currently $25.0 million, can
be increased with borrowings from the short-term Committed Bridge Facility in an
aggregate  principal  amount not to exceed the lesser of $10.0 million or 50% of
the aggregate  principal amount of the Notes outstanding at the time of issuance
and not to remain outstanding for more than 180 days.

The  Fund  intends  to rely  on  operating  cash  flow  to  meet  its  operating
obligations, make cash distributions to Class A Members, and increase the Fund's
equipment portfolio through reinvestment of any remaining surplus cash available
in additional equipment.

For the year ended  December  31,  1998,  the Fund  generated  $23.7  million in
operating cash (net cash provided by operating  activities plus  non-liquidating
cash  distributions  from  USPEs)  to meet its  operating  obligations  and make
distributions of $11.8 million to the members.

Pursuant  to the  terms of the  operating  agreement,  beginning  in the  fourth
quarter of 1998, the Fund may, at the sole discretion of the Manager,  redeem up
to 2% of the outstanding Class A units each year. The purchase price paid by the
Fund for outstanding  Class A Units upon redemption will be equal to 105% of the
amount  Class A  Members  paid for the  Class A Units,  less the  amount of cash
distributions  Class A Members have received relating to such Class A Units. The
price may not bear any  relationship to the fair market value of a Class A Unit.
As of December 31, 1998,  the Fund had agreed to purchase  approximately  28,000
units  for an  aggregate  price  of  approximately  $0.4  million.  The  Manager
anticipates that these Class A units will be repurchased in the second and third
quarters  of 1999.  In  addition  to  these  units,  the  Manager  may  purchase
additional units on behalf of the Fund in the future.

The Fund has a $25.0  million note  payable.  The loan was funded in March 1997.
The note  bears  interest  at a fixed  rate of 7.33%  per  annum and has a final
maturity in 2006. Interest on the note is payable  semi-annually.  The note will
be repaid in five principal payments of $3.0 million on December 31, 2000, 2001,
2002, 2003, and 2004 and two principal  payments of $5.0 million on December 31,
2005, and 2006. The agreement  requires the Fund to maintain  certain  financial
covenants related to fixed-charge coverage.

The  Manager  has  entered  into a joint  $24.5  million  credit  facility  (the
Committed  Bridge  Facility) on behalf of the Fund, PLM Equipment Growth Fund VI
(EGF VI) and PLM Equipment  Growth & Income Fund VII (EGF VII),  both affiliated
investment programs;  and TEC Acquisub,  Inc. (TECAI), an indirect  wholly-owned
subsidiary of the Manager.  The Committed Bridge Facility may be used to provide
interim  financing  of up to (i) 70% of the  aggregate  book value or 50% of the
aggregate net fair market value of eligible  equipment  owned by the Fund,  plus
(ii) 50% of unrestricted  cash held by the borrower.  The Fund, EGF VI, EGF VII,
and TECAI  collectively  may borrow up to $24.5 million of the Committed  Bridge
Facility.  Outstanding borrowings by one borrower reduce the amount available to
each of the other borrowers under the Committed Bridge  Facility.  The Committed
Bridge  Facility also provides for a $5.0 million Letter of Credit  Facility for
the eligible  borrowers.  Individual  borrowings may be outstanding  for no more
than 179 days,  with all advances due no later than December 14, 1999.  Interest
accrues at either the prime rate or adjusted LIBOR plus 1.625% at the borrower's
option and is set at the time of an advance of funds. Borrowings by the Fund are
guaranteed by the Manager. As of December 31, 1998, no eligible borrower had any
outstanding borrowings.  As of March 25, 1999, EGF VI had outstanding borrowings
of $3.7 million and TECAI had outstanding  borrowings of $8.3 million;  no other
eligible borrower had any outstanding  borrowings.  The Manager believes it will
be able to renew the Committed  Bridge Facility upon its expiration with similar
terms as those in the current Committed Bridge Facility.

The  Manager  has  not  planned  any  expenditures,  nor  is  it  aware  of  any
contingencies  that would  cause it to require  any  additional  capital to that
mentioned above.

(D)  Results of Operations -- Year to Year Detail Comparison

(1)  Comparison of the Fund's Operating  Results for the Years Ended December
31, 1998 and 1997

(a)   Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as  repair  and  maintenance,
equipment operating,  and asset-specific  insurance expenses) on owned equipment
increased  during the year ended  December 31, 1998,  when  compared to the same
period of 1997.  Gains or losses from the sale of equipment and certain expenses
such as depreciation and amortization  and general and  administrative  expenses
relating  to  the  operating  segments  (see  Note 5 to  the  audited  financial
statements),  are not  included  in the  owned  equipment  operation  discussion
because they are more indirect in nature, not a result of

<PAGE>



operations but more the result of owning a portfolio of equipment. The following
table presents  lease revenues less direct  expenses by segment (in thousands of
dollars):

                                                 For the Years Ended
                                                    December 31,
                                                1998             1997
                                              ----------------------------

  Marine vessels                              $  5,794            2,085
  Aircraft                                       4,525            4,994
  Mobile offshore drilling unit                  3,936            4,989
  Rail equipment                                 3,323            2,712
  Trailers                                       3,263            3,250

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $8.7
million and $2.9 million,  respectively,  for the year ended  December 31, 1998,
compared to $3.7 million and $1.6 million, respectively,  during the same period
of 1997.  Marine vessel  contribution  increased due to the purchase of a marine
vessel at the end of the second  quarter of 1997 and a marine  vessel in each of
the first and second quarters of 1998.

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $4.6 million and
$42,000, respectively, during the year ended December 31, 1998, compared to $5.0
million and  $43,000,  respectively,  during the same  period of 1997.  Aircraft
contribution  decreased  due to the sale of an aircraft at the end of the second
quarter of 1998.

Mobile offshore drilling unit (rig): Rig lease revenues and direct expenses were
$4.0 million and $0.1  million,  respectively,  for the year ended  December 31,
1998,  compared to $5.1  million and $0.1  million,  respectively,  for the year
ended  December  31,  1997.  Lease  revenue  increased  $0.6  million and direct
expenses increased $0.1 million during 1998, compared to the same period in 1997
due to the increase of the Fund's  investment  in an entity that owns a rig late
in the first quarter of 1997. This increase in net contribution  was offset,  in
part,  by a decrease in lease  revenue of $1.6  million and a decrease in direct
expenses of $22,000 during 1998 as a result of the sale of one of the Fund's rig
in the fourth  quarter of 1997 as part of the original  purchase  agreement that
gave the charterer the option to purchase the rig.

Rail equipment: Railcar lease revenues and direct expenses were $4.0 million and
$0.6 million,  respectively,  for the year ended December 31, 1998,  compared to
$3.4  million and $0.7  million,  respectively,  during the same period of 1997.
Lease revenues  increased in the year ended  December 31, 1998,  compared to the
same period of 1997 due to the purchase of rail  equipment in the first  quarter
of 1998.  Railcar  expenses  decreased due to lower running repairs  required on
certain railcars during 1997, that were not needed during 1998.

Trailers:  Trailer  revenues  and direct  expenses  were $3.9  million  and $0.6
million,  respectively,  for the year ended December 31, 1998,  compared to $3.7
million and $0.4 million,  respectively,  during the same period in 1997.  Lease
revenues  increased  during 1998, due to higher  utilization  earned on trailers
operating in the short-term  rental  facilities when compared to 1997.  Expenses
increased due to repairs  required on certain  trailers during 1998,  which were
not needed in 1997 and to the purchase of additional trailers.

(b)   Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $22.0 million for the year ended  December 31, 1998
decreased from $23.6 million for the same period in 1997.  Significant variances
are explained as follows:

(i) A $2.6 million decrease in depreciation and amortization  expenses from 1997
levels  resulted from an  approximately  $5.6 million  decrease in  depreciation
expense due to the Fund's  double-declining  balance  depreciation method, which
results  in  greater  depreciation  in the  first  years an asset is  owned,  an
approximately  $1.9 million decrease in depreciation  expense due to the sale of
the aircraft in the second  quarter of 1998,  and the sale of the rig at the end
of 1997.  The decline was  partially  offset by an  approximately  $4.9  million
increase in depreciation  expense from the purchase of equipment during 1998 and
1997.

(ii) A $0.2 million increase in management fees to affiliate reflects the higher
levels of lease revenues in 1998, when compared to 1997.

(iii) A $0.3 million increase in minority interest due to an increase in revenue
of $0.1  million  offset by a decrease in direct and  indirect  expenses of $0.2
million during 1998 when compared to 1997.

(iv) A $0.4  million  increase in interest  expense was due to a higher  average
debt balance outstanding during 1998 compared to 1997.

(c)   Net Gain on Disposition of Owned Equipment

Net gain on the  disposition  of equipment for the year ended December 31, 1998,
totaled $2.8 million, and resulted from the sale of an aircraft, rail equipment,
and trailers with an aggregate  net book value of $2.6 million,  for proceeds of
$5.4  million.  Net gain on the  disposition  of  equipment  for the year  ended
December 31, 1997 totaled $1.7  million,  and resulted from the sale of trailers
and a rig  with an  aggregate  net  book  value  of $9.2  million,  for net sale
proceeds of $10.9 million.

(d)  Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs)

Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method are presented as follows (in thousands of dollars):
<TABLE>
<CAPTION>

                                                                             For the Years Ended
                                                                                December 31,
                                                                            1998              1997
                                                                         ----------------------------

  <S>                                                                    <C>                <C>
  Aircraft, aircraft engines and rotable components                      $   3,834          $   1,795
  Marine vessel                                                             (1,444)              (342)
                                                                         -----------------------------
       Equity in net income of USPEs                                     $   2,390          $   1,453
                                                                         =============================
</TABLE>


Aircraft,  aircraft engines and rotable components: As of December 31, 1998, the
Fund owned interests in two trusts that each own a commercial  aircraft,  and an
interest  in two  trusts  that  own a total of three  commercial  aircraft,  two
aircraft engines, and a portfolio of aircraft rotables. As of December 31, 1997,
the Fund owned an interest in two trusts that each own four commercial aircraft,
and an interest in two trusts that own a total of three commercial aircraft, two
aircraft engines,  and a portfolio of aircraft  rotables.  During the year ended
December 31, 1998,  lease revenues of $4.3 million and the gain from the sale of
the Fund's interest in two trusts that owned commercial aircraft of $6.3 million
were offset by depreciation, direct and administrative expenses of $6.8 million.
During the year ended  December 31, 1997,  lease revenues and expenses were $5.9
million and $4.2 million,  respectively.  Lease revenues  decreased $1.4 million
due to the  sale  of the  Fund's  investment  in  two  trusts  containing  eight
commercial  aircraft  and a decrease  of $2.0  million due to a lower lease rate
earned on certain  equipment.  The decrease in lease revenues was offset in part
by an increase in lease revenue of $1.8 million due to the Fund's  investment in
two additional  trusts owning a total of two aircraft  during 1998. The increase
in  expenses  was  due  primarily  to  depreciation  on  the  investment  in two
additional trusts during 1998, which was partially offset in part by the sale of
the Fund's interest in the two trusts.

Marine vessel:  As of December 31, 1998 and 1997, the Fund had an interest in an
entity that owns a marine vessel.  Marine vessel revenues and expenses were $0.9
million and $2.3 million,  respectively,  for the year ended  December 31, 1998,
compared to $1.2 million and $1.6 million, respectively,  during the same period
in 1997.  Lease revenues  decreased  primarily due to the marine vessel that the
Fund owns an interest in being  off-hire for 58 days in 1998  compared to 2 days
in the same period in 1997. Expenses increased due to the loss on revaluation of
equipment of $1.0 million for the year ended  December 31, 1998,  which resulted
from the Fund reducing the carrying  value of its interest in an entity owning a
marine vessel to its estimated net realizable value. There was no revaluation of
the carrying value in the interest  owning a marine vessel required during 1997.
The increase in expenses  were offset in part by the  decreases in  depreciation
expense  of  $0.1  million  due to  the  use  of  the  double-declining  balance
depreciation method, which results in greater depreciation in the first years an
asset is owned and reduced repairs and  maintenance  expenses of $0.1 million in
the year ended December 31, 1998, compared to the same period in 1997.



<PAGE>


(e)   Net Income (Loss)

As a result of the foregoing,  the Fund's net income for the year ended December
31, 1998 was $4.3  million,  compared to a net loss of $2.1  million  during the
same period of 1997.  The Fund's  ability to  acquire,  operate,  and  liquidate
assets,  secure leases, and re-lease those assets whose leases expire is subject
to many factors,  and the Fund's performance in the year ended December 31, 1998
is not necessarily  indicative of future periods. In the year ended December 31,
1998, the Fund  distributed  $10.0 million to the Class A members,  or $2.00 per
weighted-average Class A unit.

(2)  Comparison of the Fund's Operating Results for the Year Ended December 31,
1997 and 1996

(a)   Owned Equipment Operations

Lease  revenues  less  direct  expenses  (defined  as  repair  and  maintenance,
equipment operating,  and asset-specific  insurance expenses) on owned equipment
increased  during the year ended  December 31, 1997,  when  compared to the same
period of 1996.  Gains or losses from the sale of equipment and certain expenses
such as depreciation and amortization  and general and  administrative  expenses
relating  to  the  operating  segments  (see  Note 5 to  the  audited  financial
statements),  are not  included  in the  owned  equipment  operation  discussion
because they are more indirect in nature,  not a result of  operations  but more
the result of owning a portfolio of  equipment.  The  following  table  presents
lease revenues less direct expenses by segment (in thousands of dollars):

                                        For the Years Ended
                                          December 31,
                                       1997             1996
                                     ----------------------------

  Aircraft                           $  4,994            1,994
  Mobile offshore drilling unit         4,989               --
  Trailers                              3,250            1,880
  Rail equipment                        2,712            2,371
  Marine vessels                        2,085            1,242

Aircraft:  Aircraft  lease  revenues and direct  expenses  were $5.0 million and
$43,000, respectively, during the year ended December 31, 1997, compared to $2.0
million and  $21,000,  respectively,  during the same  period of 1996.  Aircraft
contribution  increased due to the purchase of four 737-200A Stage II commercial
aircraft  in the third  quarter of 1996.  These  aircraft  were on lease for the
entire year of 1997.

Mobile offshore drilling unit (rig): Rig lease revenues and direct expenses were
$5.1 million and $0.1  million,  respectively,  for the year ended  December 31,
1997. Lease revenue increased $3.5 million and direct expenses increased $48,000
during  1997,  compared  to the same  period in 1996 due to the  increase of the
Fund's  investment  in an entity  that owns a rig late in the first  quarter  of
1997. In addition,  lease  revenue  increased  $1.6 million and direct  expenses
increased  $22,000  during 1998 as a result of the purchase of one of the Fund's
rig in the first quarter of 1997.  This rig was sold in December 1997 as part of
the original  purchase  agreement that gave the charterer the option to purchase
the rig. The Fund did not own any rigs in the year ended December 31, 1996.

Trailers:  Trailer  revenues  and direct  expenses  were $3.7  million  and $0.4
million,  respectively,  for the year of 1997, compared to $2.1 million and $0.2
million,  respectively,  during the same  period in 1996.  Trailer  contribution
increased due to the purchase of additional  trailers  throughout 1996 and 1997.
These trailers were operating in the short-term rental facilities for the entire
year of 1997.

Rail equipment: Railcar lease revenues and direct expenses were $3.4 million and
$0.7 million,  respectively,  for the year ended December 31, 1997,  compared to
$3.1  million and $0.8  million,  respectively,  during the same period of 1996.
Lease  revenues  rose 10% in the year of 1997,  compared  to the same  period of
1996.  The  increase  was due to  railcars  owned  and on lease  for all of 1997
compared to being  owned and on lease for part of the year ended 1996.  Expenses
decreased  due to lower  running  repairs in the year ended  December  31, 1997,
compared  to the same period of 1996.  Although  the Fund  purchased  additional
railcars in the last two months of 1996,  these  railcars  were off lease in the
first eight months of 1997 and did not make a significant  net  contribution  to
the Fund in 1997.

Marine  vessels:  Marine  vessel lease  revenues and direct  expenses  were $3.7
million and $1.6 million,  respectively,  for the year ended  December 31, 1997,
compared to $2.7 million and $1.4 million, respectively,  during the same period
of 1996. Marine vessel  contribution  increased $1.2 million due to the purchase
of a marine  vessel at the end of the second  quarter of 1997.  This increase in
contribution  due to this  additional  vessel,  was  offset  slightly  by a $0.2
million decrease in lease revenue due to lower re-lease rates for another marine
vessel as a result of a softer bulk carrier  vessel market and higher  insurance
expense of $0.2 million on the dry bulk vessel.

(b)   Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses of $23.6 million for the year ended  December 31, 1997
increased  from  $11.0  million  for the same  period in 1996.  The  significant
variances are explained as follows:

(i) A $9.9 million increase in depreciation and amortization  expenses from 1996
levels reflects the purchase of equipment during 1997 and 1996.

(ii)  A $1.4  million  increase  in  interest  expense  was  due  to the  Fund's
borrowings under the long-term senior note agreement in 1997.

(iii) A $0.8  million  increase  in  administrative  expenses  from 1996  levels
resulted  primarily  from increased  administrative  costs  associated  with the
short-term trailer rental facilities due to additional trailers operating in the
facilities in the first year of 1997, compared to the same period of 1996.

(iv) A $0.5 million increase in management fees to affiliate reflects the higher
levels of lease  revenues  in 1997,  compared  to 1996,  due to the  purchase of
equipment throughout 1996 and 1997.

(c)   Net Gain on Disposition of Owned Equipment

Net gain on the  disposition  of equipment for the year ended  December 31, 1997
totaled $1.7 million, and resulted from the sale of trailers and the sale of the
rig with a net book value of $9.2 million,  for proceeds of $11.0 million net of
sales  commissions  of $0.1 million.  There was no  disposition  of equipment in
1996.

(d)   Interest and Other Income

Interest and other  income  decreased  $1.0  million due to lower cash  balances
available for  investment in the year ended  December 31, 1997,  compared to the
same period of 1996.

(e)   Equity in Net Income (Loss) of USPEs

Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method are presented as follows (in thousands of dollars):
<TABLE>
<CAPTION>


                                                                             For the Years Ended
                                                                                December 31,
                                                                            1997             1996
                                                                         ----------------------------

  <S>                                                                    <C>               <C>
  Aircraft, aircraft engines and rotable components                      $  1,795          $   260
  Mobile offshore drilling unit                                                --              (94)
  Marine vessel                                                              (342)            (422)
                                                                         -----------------------------
       Equity in net income (loss) of USPEs                              $  1,453             (256)
                                                                         =============================
</TABLE>

Aircraft,  aircraft engines and rotable components:  As of December 31, 1997 and
1996, the Fund owned an interest in a trust that owns four commercial  aircraft,
an interest in another trust that owns four commercial aircraft, and an interest
in two trusts that own three commercial  aircraft,  two aircraft engines,  and a
portfolio  of rotable  components.  Aircraft  revenues  and  expenses  were $5.9
million and $4.2 million,  respectively,  for the year ended  December 31, 1997,
compared to $5.6 million and $5.4 million, respectively,  during the same period
in 1996.  The increase in revenues of $0.3 million was due to the purchase of an
interest  in a trust  that  owns  commercial  aircraft  at the end of the  first
quarter  of 1996.  These  aircraft  were on lease for the  entire  year of 1997,
compared to only six months in the same period in 1996.  Expenses  decreased due
to the use of the double-declining balance depreciation method, which results in
greater depreciation in the first years an asset is owned.

Mobile offshore drilling unit: As of December 31, 1996, the Fund had an interest
in an entity that owns a mobile offshore  drilling unit (rig)  purchased  during
the fourth quarter of 1996. During the year ended December 31, 1996, revenues of
$6,000 were offset by depreciation and administrative  expenses of $0.1 million.
During 1997,  the Fund  purchased an additional  26% interest in a rig therefore
bringing its  ownership  interest in this entity to 61%. In  addition,  the Fund
transferred this investment to owned equipment during 1997.

Marine vessel:  As of December 31, 1997 and 1996, the Fund had an interest in an
entity that owns a marine vessel.  Marine vessel revenues and expenses were $1.2
million and $1.6 million,  respectively,  for the year ended  December 31, 1997,
compared to $0.9 million and $1.3 million, respectively,  during the same period
in 1996.  The  increase in revenues of $0.3 million and expenses of $0.1 million
was due to the purchase of an interest in an entity that owns a marine vessel in
the second quarter of 1996.  This marine vessel was on lease for the entire year
of 1997 compared to only seven months in 1996. In addition,  expenses  increased
$0.2 million due to required  repairs  needed on this marine  vessel in the year
ended  December  31,  1997.  Similar  repairs were not required on the vessel in
1996.

(f)   Net Loss

As a result of the  foregoing,  the Fund's net loss for the year ended  December
31, 1997 was $2.1  million for the year of 1997,  compared to a net loss of $2.4
million during the same period of 1996. The Fund's ability to acquire,  operate,
and liquidate  assets,  secure  leases,  and re-lease  those assets whose leases
expire is subject to many factors,  and the Fund's  performance  during the year
ended December 31, 1997 is not necessarily  indicative of future periods. In the
year ended December 31, 1997, the Fund distributed  $10.0 million to the Class A
members, or $2.00 per weighted-average Class A unit.

(E)  Geographic Information

Certain of the Fund's  equipment  operates in  international  markets.  Although
these  operations  expose the Fund to certain  currency,  political,  credit and
economic risks,  the Manager believes these risks are minimal or has implemented
strategies  to control the risks.  Currency  risks are at a minimum  because all
invoicing, with the exception of a small number of railcars operating in Canada,
is  conducted  in U.S.  dollars.  Political  risks  are  minimized  by  avoiding
countries that do not have a stable judicial  system and established  commercial
business  laws.  Credit  support  strategies  for lessees  range from letters of
credit  supported by U.S. banks to cash deposits.  Although these credit support
mechanisms generally allow the Fund to maintain its lease yield, there are risks
associated  with  slow-to-respond  judicial  systems  when  legal  remedies  are
required to secure payment or repossess  equipment.  Economic risks are inherent
in all international  markets and the Manager strives to minimize this risk with
market analysis prior to committing  equipment to a particular  geographic area.
Refer to Note 6 to the audited financial statements for information on the lease
revenues,  net  income  (loss),  and net book  value  of  equipment  in  various
geographic regions.

Revenues and net operating income by geographic  region are impacted by the time
period  the  assets are owned and the  useful  life  ascribed  to the assets for
depreciation  purposes.  Net  income  (loss)  from  equipment  is  significantly
impacted by depreciation  charges,  which are greatest in the early years due to
the  use  of  the   double-declining   balance  method  of   depreciation.   The
relationships of geographic  revenues,  net income (loss), and net book value of
equipment are expected to change significantly in the future, as assets come off
lease  and  decisions  are  made to  either  redeploy  the  assets  in the  most
advantageous geographic location or sell the assets.

The Fund's owned  equipment on lease to United States  (U.S.)-domiciled  lessees
consists of trailers,  railcars,  and  interests in entities  that own aircraft.
During  1998,  lease  revenue in the U.S.  accounted  for 26% of the total lease
revenues generated by wholly-owned and partially-owned equipment while reporting
a net loss of $2.0 million  compared to the total  aggregate  net income for the
fund of $4.3 million. The loss was due primarily to the double-declining balance
method  of  depreciation  on the two  additional  aircraft  that the  Fund  owns
interests,  purchased during 1998, which results in greater  depreciation in the
first years an asset is owned.

South American operations consists of four aircraft that generated revenues that
accounted for 15% of the total lease  revenues  from wholly and  partially-owned
equipment, while the net income in this region accounted for $2.3 million of the
total aggregate net income of $4.3 million for the entire Fund.

The Fund's equipment on lease to Canadian-domiciled lessees consist or consisted
of railcars, aircraft and interests in entities that owned two trusts containing
eight  commercial  aircraft.  Lease revenues in Canada accounted for 9% of total
lease  revenues  from wholly and  partially-owned  equipment  while a net income
accounted  for $7.2  million of the total  aggregate  net income for the Fund of
$4.3 million.  The primary reason for this relationship is that the Fund sold an
aircraft and its two trusts containing eight commercial  aircraft for a net gain
of $6.3 million.

European  operations  consist of  interests  in entities  that own  aircraft and
aircraft  rotables that generated  lease revenues that accounted for 5% of total
lease revenues from wholly-owned and partially-owned equipment revenues. The net
income  generated in this region  accounted for $0.3 million of the $4.3 million
in total aggregate net income for the entire Fund.

Two wholly-owned  marine vessels,  an investment in an entity that owns a marine
vessel and an investment in an entity that owns a mobile offshore drilling unit,
which  were  leased  in the rest of the  world  accounted  for 45% of the  lease
revenues from wholly and  partially-owned  equipment  while the net loss in this
region  accounted for $1.1 million compared to the total aggregate net income of
$4.3 million for the entire Fund.  The primary reason for this  relationship  is
that the Fund reduced the carrying  value of its interest in an entity  owning a
marine vessel to its estimated net realizable value.

(F)  Effects Of Year 2000

It is possible that the Manager's currently installed computer systems, software
products,  and other business systems, or the Fund's vendors,  service providers
and customers,  working  either alone or in  conjunction  with other software or
systems,  may not accept  input of,  store,  manipulate,  and output dates on or
after January 1, 2000 without error or interruption (a problem commonly known as
the "Year 2000"  problem).  As the Fund relies  substantially  on the  Manager's
software  systems,  applications and control devices in operating and monitoring
significant  aspects of its  business,  any Year 2000  problem  suffered  by the
Manager could have a material adverse effect on the Fund's  business,  financial
condition and results of operations.

The Manager has  established a special Year 2000  oversight  committee to review
the  impact of Year 2000  issues on its  software  products  and other  business
systems in order to determine  whether  such  systems will retain  functionality
after  December 31, 1999.  The Manager (a) is  currently  integrating  Year 2000
compliant   programming  code  into  its  existing  internally   customized  and
internally  developed  transaction  processing  software  systems  and  (b)  the
Manager's  accounting and asset management  software systems have either already
been made Year 2000  compliant or Year 2000  compliant  upgrades of such systems
are  planned to be  implemented  by the Manager  before the end of fiscal  1999.
Although  the  Manager  believes  that its Year 2000  compliance  program can be
completed  by the  beginning  of  1999,  there  can  be no  assurance  that  the
compliance  program will be completed by that date. To date,  the costs incurred
and allocated to the Fund to become Year 2000  compliant have not been material.
To date, the cost incurred,  the Manager  believes the future costs allocable to
the Fund to become Year 2000 compliant will not be material.

It is possible that certain of the Fund's  equipment  lease portfolio may not be
Year 2000 compliant. The Manager is currently contacting equipment manufacturers
of the Fund's leased  equipment  portfolio to assure Year 2000  compliance or to
develop remediation  strategies.  The Manager does not expect that non-Year 2000
compliance  of the  Fund's  leased  equipment  portfolio  will  have an  adverse
material impact on its financial statements.

Some risks  associated  with the Year 2000 problem are beyond the ability of the
Fund or Manager to  control,  including  the extent to which  third  parties can
address  the Year 2000  problem.  The  Manager is  communicating  with  vendors,
services  providers  and  customers in order to assess the Year 2000  compliance
readiness of such parties and the extent to which the Fund is  vulnerable to any
third-party  Year 2000  issues.  There  can be no  assurance  that the  software
systems of such  parties  will be  converted  or made Year 2000  compliant  in a
timely  manner.  Failure  by the  Manager  or such  other  parties to make their
respective  systems Year 2000 compliant could have a material  adverse effect on
the business,  financial  position and results of  operations  of the Fund.  The
Manager will make an ongoing effort to recognize and evaluate potential exposure
relating to third-party Year 2000  non-compliance and will develop a contingency
plan if the  Manager  determines  that  third-party  non-compliance  will have a
material adverse effect on the Fund's business, financial position or results of
operation.

The Manager is currently  developing a contingency  plan to address the possible
failure of any systems due to the Year 2000  problems.  The Manager  anticipates
these plans will be completed by September 30, 1999.

(G)  Accounting Pronouncements

In June 1998, the Financial  Accounting  Standards Board issued  "Accounting for
Derivative   Instruments   and  Hedging   Activities,"   (SFAS  No.  133)  which
standardizes  the  accounting  for  derivative  instruments,  including  certain
derivative instruments embedded in other contracts,  by requiring that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position and measure  them at fair value.  This  statement is effective  for all
quarters of fiscal years beginning after June 15, 1999. As of December 31, 1998,
the  Manager is  reviewing  the  effect  this  standard  will have on the Fund's
consolidated financial statements.

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of Position  98-5,  "Reporting  on the Costs of Start-Up  Activities"
which  requires  start-up  activities and  organization  costs to be expensed as
incurred.  The  statement  requires  that initial  application  be reported as a
cumulative  effect  of a change  in  accounting  principle.  This  statement  is
effective  for the Fund's  fiscal year ended  December  31,  1999,  with earlier
application  permitted.  The  Manager  does  not  expect  the  adoption  of this
statement to have an adverse material impact on the Fund's financial statements.

(H)  Inflation

Inflation had no significant  impact on the Fund's operations during 1998, 1997,
or 1996.

(I)  Forward-Looking Information

Except for historical  information contained herein, the discussion in this Form
10-K contains  forward-looking  statements that involve risks and uncertainties,
such  as  statements  of  the  Fund's  plans,  objectives,   expectations,   and
intentions.  The cautionary  statements made in this Form 10-K should be read as
being applicable to all related forward-looking  statements wherever they appear
in this Form 10-K. The Fund's actual results could differ  materially from those
discussed here.

(J)  Outlook for the Future

Several factors may affect the Fund's operating  performance in 1999 and beyond,
including  changes in the  markets for the Fund's  equipment  and changes in the
regulatory environment in which that equipment operates.

The Fund's  operation of a  diversified  equipment  portfolio in a broad base of
markets is intended to reduce its exposure to volatility in individual equipment
sectors.

The ability of the Fund to realize  acceptable  lease rates on its  equipment in
the different equipment markets is contingent on many factors,  such as specific
market  conditions  and  economic  activity,   technological  obsolescence,  and
government or other regulations.  The  unpredictability of some of these factors
makes it difficult for the Manager to clearly  define trends or influences  that
may impact the  performance  of the Fund's  equipment.  The Manager  continually
monitors both the equipment  markets and the performance of the Fund's equipment
in these  markets.  The  Manager  may make an  evaluation  to reduce  the Fund's
exposure  to those  equipment  markets  in which it  determines  that it  cannot
operate  equipment and achieve  acceptable rates of return.  Alternatively,  the
Manager may make a determination  to enter those  equipment  markets in which it
perceives  opportunities  to profit from  supply-demand  instabilities  or other
market imperfections.

The Fund  intends to use excess cash flow,  if any,  after  payment of expenses,
loan  principal  and  interest  on debt,  and  cash  distributions,  to  acquire
additional  equipment during the first six years of the Fund's  operations which
concludes  December 31, 2002. The Manager  believes that these  acquisitions may
cause the Fund to generate additional earnings and cash flow for the Fund.

(1)  Repricing and Reinvestment Risk

Certain of the Fund's aircraft,  marine vessels,  mobile offshore drilling unit,
and trailers will be remarketed in 1999 as existing leases expire,  exposing the
Fund to some repricing risk/opportunity.  Additionally, the Manager may elect to
sell certain  underperforming  equipment or equipment whose continued  operation
may become  prohibitively  expensive.  In either  case,  the Manager  intends to
re-lease or sell  equipment at  prevailing  market rates;  however,  the Manager
cannot  predict these future rates with any  certainty at this time,  and cannot
accurately  assess the effect of such activity on future Fund  performance.  The
proceeds  from the sold or liquidated  equipment  will be redeployed to purchase
additional equipment, as the Fund is in its reinvestment phase.

(2)  Impact of Government Regulations on Future Operations

The Manager operates the Fund's equipment in accordance with current  applicable
regulations  (see Item 1,  Section  E,  Government  Regulations).  However,  the
continuing  implementation  of  new  or  modified  regulations  by  some  of the
authorities  mentioned  previously,  or others,  may adversely affect the Fund's
ability to continue to own or operate equipment in its portfolio.  Additionally,
regulatory  systems vary from country to country,  which may increase the burden
to the Fund of meeting  regulatory  compliance for the same  equipment  operated
between countries. Currently, the Manager has observed rising insurance costs to
operate certain vessels in U.S. ports, resulting from implementation of the U.S.
Oil Pollution Act of 1990. Ongoing changes in the regulatory  environment,  both
in the United States and internationally, cannot be predicted with accuracy, and
preclude  the  Manager  from  determining  the  impact of such  changes  on Fund
operations,  purchases,  or sale  of  equipment.  Under  U.S.  Federal  Aviation
Regulations,  after  December 31, 1999,  no person may operate an aircraft to or
from any airport in the  contiguous  United States unless that aircraft has been
shown to comply with Stage III noise levels. The Fund has Stage II aircraft that
do not meet Stage III requirements. These Stage II aircraft will remain with the
current  lessee,  which  operate  in  a  country  that  does  not  require  this
regulation.  The Fund's 33%  interest in two trusts that is comprised of a total
of three Stage II  narrowbody  aircraft,  two Stage II aircraft  engines,  and a
portfolio  of  rotable  components  are also  scheduled  for sale  during  1999.
Furthermore,   the  U.S.  Department  of  Transportation's  Hazardous  Materials
Regulations,  which regulate the  classification  and packaging  requirements of
hazardous  materials and which apply  particularly  to the Fund's tank railcars,
issued a statement  which requires the owner to inspect a certain  percentage of
the tank  railcars for a  protective  coating to the outside of the tank and the
inside of the metal tank jacket whenever a tank is insulated. The Fund owns tank
railcars  that need to be inspected  and, if needed,  repaired  before it can go
back into service by August 2000.

(3)  Additional Capital Resources and Distribution Levels

The Fund's  initial  contributed  capital was composed of the proceeds  from its
initial offering of $100.0 million, supplemented by permanent debt in the amount
of $25.0 million. The Manager has not planned any expenditures,  nor is it aware
of any  contingencies  that would cause it to require any additional  capital to
that  mentioned  above.  The Fund intends to rely on operating cash flow to meet
its operating  obligations,  make cash  distributions to limited partners,  make
debt payments,  and increase the Fund's  equipment  portfolio with any remaining
surplus cash available.

Pursuant to the Fifth Amended and Restated  Operating  Agreement of Professional
Lease Management Income Fund I, L.L.C. (the operating agreement),  the Fund will
cease to reinvest surplus cash in additional  equipment beginning in its seventh
year of operations  which commences on January 1, 2003.  Prior to that date, the
Manager intends to continue its strategy of selectively redeploying equipment to
achieve competitive  returns. By the end of the reinvestment period, the Manager
intends to have assembled an equipment portfolio capable of achieving a level of
operating  cash flow for the remaining  life of the Fund  sufficient to meet its
obligations  and sustain a  predictable  level of  distributions  to the Class A
Unitholders.

The Manager will evaluate the level of  distributions  the Fund can sustain over
extended periods of time and, together with other considerations, may adjust the
level  of  distributions  accordingly.  In the  long  term,  the  difficulty  in
predicting market conditions  precludes the Manager from accurately  determining
the impact of changing market conditions on liquidity or distribution levels.

The Fund's  permanent  debt  obligation  begins to mature in December  2000. The
Manager  believes that  sufficient cash flow will be available in the future for
repayment of debt.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Fund's  primary  market risk exposure is that of currency  risk.  74% of the
Fund's total lease revenues from  wholly-and  partially-owned  equipment in 1998
came from  non-United  States  domiciled  lessees.  Most of the  leases  require
payment in United States (U.S.)  currency.  If these lessees  currency  devalues
against the U.S. dollar, the lessees could potentially  encounter  difficulty in
making the U.S. dollar denominated lease payment.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  financial  statements  for the Fund are  listed on the  Index to  Financial
Statements included in Item 14(a) of this Annual Report on Form 10-K.

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.






                      (This space intentionally left blank)



<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE  OFFICERS OF PLM  INTERNATIONAL  AND PLM
         FINANCIAL SERVICES, INC.

As of the date of this annual  report,  the directors and executive  officers of
PLM  International  and of PLM  Financial  Services,  Inc.  (and  key  executive
officers of its subsidiaries) are as follows:
<TABLE>
<CAPTION>

Name                                     Age     Position
---------------------------------------- ------- ------------------------------------------------------------------

<S>                                      <C>     <C>
Robert N. Tidball                        60      Chairman of the Board, Director, President, and Chief Executive
                                                 Officer, PLM International, Inc.;
                                                 Director, PLM Financial Services, Inc.;
                                                 Vice President, PLM Railcar Management Services, Inc.;
                                                 President, PLM Worldwide Management Services Ltd.

Randall L.-W. Caudill                    51      Director, PLM International, Inc.

Douglas P. Goodrich                      52      Director and Senior Vice President, PLM International, Inc.;
                                                 Director and President, PLM Financial Services, Inc.; President,
                                                 PLM Transportation Equipment Corporation; President, PLM Railcar
                                                 Management Services, Inc.

Warren G. Lichtenstein                   33      Director, PLM International, Inc.

Howard M. Lorber                         50      Director, PLM International, Inc.

Harold R. Somerset                       63      Director, PLM International, Inc.

Robert L. Witt                           58      Director, PLM International, Inc.

J. Michael Allgood                       50      Vice President and Chief Financial Officer, PLM International,
                                                 Inc. and PLM Financial Services, Inc.

Robin L. Austin                          52      Vice President, Human Resources, PLM International, Inc. and PLM
                                                 Financial Services, Inc.

Stephen M. Bess                          52      President, PLM Investment Management, Inc.; Vice President and
                                                 Director, PLM Financial Services, Inc.

Richard K Brock                          36      Vice President and Corporate Controller, PLM International, Inc.
                                                 and PLM Financial Services, Inc.

James C. Chandler                        50      Vice President, Planning and Development, PLM International,
                                                 Inc. and PLM Financial Services, Inc.

Susan C. Santo                           36      Vice President, Secretary, and General Counsel, PLM
                                                 International, Inc. and PLM Financial Services, Inc.

Janet M. Turner                          42      Vice President, Investor Relations and Corporate Communications,
                                                 PLM International, Inc. and PLM Investment Management, Inc.

</TABLE>

Robert N.  Tidball  was  appointed  Chairman  of the  Board in  August  1997 and
President and Chief Executive Officer of PLM International in March 1989. At the
time of his  appointment  as  President  and  Chief  Executive  Officer,  he was
Executive Vice President of PLM International.  Mr. Tidball became a director of
PLM International in April 1989.
 Mr.  Tidball was appointed a Director of PLM Financial  Services,  Inc. in July
1997 and was elected President of PLM Worldwide  Management  Services Limited in
February 1998. He has served as an officer of PLM Railcar  Management  Services,
Inc.  since June 1987. Mr. Tidball was Executive Vice President of Hunter Keith,
Inc., a  Minneapolis-based  investment  banking firm, from March 1984 to January
1986.  Prior to  Hunter  Keith,  he was Vice  President,  General  Manager,  and
Director  of North  American  Car  Corporation  and a director  of the  American
Railcar Institute and the Railway Supply Association.

Randall L.-W.  Caudill was elected to the Board of Directors in September  1997.
He is  President  of  Dunsford  Hill  Capital  Partners,  a San  Francisco-based
financial  consulting firm serving emerging growth companies.  Prior to founding
Dunsford  Hill Capital  Partners,  Mr.  Caudill held senior  investment  banking
positions at Prudential  Securities,  Morgan Grenfell Inc., and The First Boston
Corporation. Mr. Caudill also serves as a director of Northwest Biotherapeutics,
Inc., VaxGen, Inc., SBE, Inc., and RamGen, Inc.

Douglas  P.  Goodrich  was  elected  to the  Board of  Directors  in July  1996,
appointed  Senior  Vice  President  of PLM  International  in  March  1994,  and
appointed Director and President of PLM Financial  Services,  Inc. in June 1996.
Mr.  Goodrich  has also served as Senior Vice  President  of PLM  Transportation
Equipment Corporation since July 1989 and as President of PLM Railcar Management
Services,  Inc. since September 1992,  having been a Senior Vice President since
June 1987.  Mr.  Goodrich was an executive  vice  president of G.I.C.  Financial
Services  Corporation of Chicago,  Illinois, a subsidiary of Guardian Industries
Corporation, from December 1980 to September 1985.

Warren G.  Lichtenstein  was elected to the Board of Directors in December 1998.
Mr.  Lichtenstein  is the Chief  Executive  Officer of Steel  Partners II, L.P.,
which is PLM International's  largest  shareholder,  currently owning 16% of the
Company's common stock. Additionally,  Mr. Lichtenstein is Chairman of the Board
of Aydin Corporation,  a NYSE-listed defense  electronics  concern, as well as a
director of Gateway  Industries,  Rose's Holdings,  Inc., and Saratoga  Beverage
Group,  Inc. Mr.  Lichtenstein is a graduate of the University of  Pennsylvania,
where he received a Bachelor of Arts degree in economics.

Howard M.  Lorber was elected to the Board of  Directors  in January  1999.  Mr.
Lorber is President and Chief Operating  Officer of New Valley  Corporation,  an
investment banking and real estate concern. He is also Chairman of the Board and
Chief  Executive  Officer  of  Nathan's  Famous,  Inc.,  a  fast  food  company.
Additionally,  Mr. Lorber is a director of United Capital  Corporation and Prime
Hospitality  Corporation and serves on the boards of several  community  service
organizations.  He is a graduate of Long Island University,  where he received a
Bachelor  of Arts  degree and a Masters  degree in  taxation.  Mr.  Lorber  also
received charter life  underwriter and chartered  financial  consultant  degrees
from the American  College in Bryn Mawr,  Pennsylvania.  He is a trustee of Long
Island University and a member of the Corporation of Babson College.

Harold R. Somerset was elected to the Board of Directors of PLM International in
July 1994.  From February 1988 to December 1993, Mr.  Somerset was President and
Chief Executive  Officer of California & Hawaiian Sugar Corporation (C&H Sugar),
a subsidiary of Alexander & Baldwin,  Inc. Mr. Somerset joined C&H Sugar in 1984
as Executive Vice President and Chief  Operating  Officer,  having served on its
Board of Directors  since 1978.  Between 1972 and 1984, Mr.  Somerset  served in
various  capacities  with  Alexander & Baldwin,  Inc., a publicly  held land and
agriculture company headquartered in Honolulu,  Hawaii, including Executive Vice
President of Agriculture  and Vice President and General  Counsel.  Mr. Somerset
holds a law  degree  from  Harvard  Law  School  as well as a  degree  in  civil
engineering  from the  Rensselaer  Polytechnic  Institute and a degree in marine
engineering from the U.S. Naval Academy.  Mr. Somerset also serves on the boards
of directors for various other companies and organizations, including Longs Drug
Stores, Inc., a publicly held company.

Robert L. Witt was elected to the Board of Directors  in June 1997.  Since 1993,
Mr. Witt has been a principal with WWS  Associates,  a consulting and investment
group specializing in start-up situations and private  organizations about to go
public.  Prior to that, he was Chief Executive Officer and Chairman of the Board
of Hexcel  Corporation,  an international  advanced materials company with sales
primarily in the aerospace,  transportation, and general industrial markets. Mr.
Witt also serves on the boards of  directors  for various  other  companies  and
organizations.

J. Michael Allgood was appointed Vice President and Chief  Financial  Officer of
PLM International in October 1992 and Vice President and Chief Financial Officer
of PLM Financial Services,  Inc. in December 1992. Between July 1991 and October
1992,  Mr.  Allgood  was a  consultant  to  various  private  and  public-sector
companies  and  institutions   specializing  in  financial   operations  systems
development.  In October 1987, Mr. Allgood  co-founded  Electra Aviation Limited
and its holding  company,  Aviation  Holdings Plc of London,  where he served as
Chief Financial Officer until July 1991. Between June 1981 and October 1987, Mr.
Allgood  served as a first vice  president  with  American  Express Bank Ltd. In
February 1978,  Mr. Allgood  founded and until June 1981 served as a director of
Trade Projects  International/Philadelphia  Overseas  Finance  Company,  a joint
venture with  Philadelphia  National Bank. From March 1975 to February 1978, Mr.
Allgood served in various capacities with Citibank, N.A.

Robin  L.  Austin  became  Vice  President,  Human  Resources  of PLM  Financial
Services,  Inc. in 1984, having served in various capacities with PLM Investment
Management,  Inc., including Director of Operations, from February 1980 to March
1984.  From June 1970 to September 1978, Ms. Austin served on active duty in the
United  States Marine Corps and served in the United States Marine Corp Reserves
from 1978 to 1998.  She retired as a Colonel of the United  States  Marine Corps
Reserves  in 1998.  Ms.  Austin  has  served  on the Board of  Directors  of the
Marines'  Memorial  Club  and is  currently  on the  Board of  Directors  of the
International Diplomacy Council.

Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July
1997.  Mr. Bess was appointed  President of PLM Investment  Management,  Inc. in
August  1989,   having  served  as  Senior  Vice  President  of  PLM  Investment
Management,  Inc. beginning in February 1984 and as Corporate  Controller of PLM
Financial Services, Inc. beginning in October 1983. Mr. Bess served as Corporate
Controller  of  PLM,  Inc.  beginning  in  December  1982.  Mr.  Bess  was  Vice
President-Controller  of Trans Ocean Leasing  Corporation,  a container  leasing
company, from November 1978 to November 1982, and Group Finance Manager with the
Field  Operations  Group of Memorex  Corporation,  a  manufacturer  of  computer
peripheral equipment, from October 1975 to November 1978.

Richard K Brock was appointed  Vice  President  and Corporate  Controller of PLM
International and PLM Financial Services, Inc. in June 1997, having served as an
accounting  manager  beginning in September 1991 and as Director of Planning and
General  Accounting  beginning  in  February  1994.  Mr.  Brock  was a  division
controller of Learning Tree International,  a technical education company,  from
February 1988 through July 1991.

James C.  Chandler  became  Vice  President,  Planning  and  Development  of PLM
International  in  April  1996.  From  1994 to 1996  Mr.  Chandler  worked  as a
consultant to public  companies,  including PLM, in the  formulation of business
growth  strategies.  Mr.  Chandler was Director of Business  Development at Itel
Corporation from 1987 to 1994, serving with both the Itel  Transportation  Group
and Itel Rail.

Susan C. Santo  became Vice  President,  Secretary,  and General  Counsel of PLM
International and PLM Financial Services,  Inc. in November 1997. She has worked
as an  attorney  for PLM  International  since  1990 and  served  as its  Senior
Attorney since 1994.  Previously,  Ms. Santo was engaged in the private practice
of law in San  Francisco.  Ms. Santo  received her J.D.  from the  University of
California, Hastings College of the Law.

Janet M. Turner became Vice President of Investor  Services of PLM International
in  1994,   having  previously  served  as  Vice  President  of  PLM  Investment
Management,  Inc.  since 1990.  Before 1990,  Ms.  Turner held the  positions of
manager of systems development and manager of investor relations at the Company.
Prior  to  joining  PLM  in  1984,   she  was  a  financial   analyst  with  The
Toronto-Dominion Bank in Toronto, Canada.

The directors of PLM  International,  Inc. are elected for a three-year term and
the directors of PLM Financial Services, Inc. are elected for a one-year term or
until their successors are elected and qualified.  No family relationships exist
between  any  director or  executive  officer of PLM  International  Inc. or PLM
Financial Services,  Inc., PLM Transportation Equipment Corp., or PLM Investment
Management, Inc.

ITEM 11. EXECUTIVE COMPENSATION

The Fund has no  directors,  officers,  or  employees.  The Fund has no pension,
profit sharing, retirement, or similar benefit plan in effect as of December 31,
1998.



<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (A) Security Ownership of Certain Beneficial Owners

         The  Manager is  generally  entitled  to a 1%  interest  in profits and
         losses and a 15% interest in the Fund's cash distributions,  subject to
         certain special  allocation of income  provisions.  After the investors
         receive  cash  equal  to  their  original  capital  contribution,   the
         Manager's  interest in the  distributions  of the Fund will increase to
         25%. As of December 31,  1998,  no investor was known by the Manager to
         beneficially own more than 5% of the Units of the Fund.

     (B) Security Ownership of Management

         Neither the Manager and its  affiliates  nor any  executive  officer or
         director of the Manager and its affiliates  owned any Units of the Fund
         as of December 31, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Transactions with Management and Others

         During  1998,  management  fees to IMI  were  $1.4  million.  The  Fund
         reimbursed  FSI and/or its affiliates  $1.0 million for  administrative
         and data  processing  services  performed  on behalf of the Fund during
         1998. The Fund paid Transportation Equipment Indemnity Fund Ltd. (TEI),
         a wholly owned,  Bermuda-based subsidiary of PLM International,  $2,000
         for  insurance   coverages   during  1998,   these  amounts  were  paid
         substantially to third-party reinsurance underwriters or placed in risk
         pools  managed  by TEI on behalf  of  affiliated  partnerships  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. The Fund received a $16,000 loss-of-hire insurance refund from TEI
         due to lower claims from the insured Fund and other insured  affiliated
         programs.

         During 1998, the USPEs paid or accrued the following fees to FSI or its
         affiliates  (based  on the  Fund's  proportional  share of  ownership):
         management fees - $0.2 million;  and administrative and data processing
         services - $0.1 million.  The Fund's  proportional share of a refund of
         $5,000 from TEI was received during 1998 from lower loss-of-hire claims
         from the insured USPE's and other insured affiliated programs.













                     (This space intentionally left blank.)



<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (A) 1.   Financial Statements

              The  financial  statements  listed  in the  accompanying  Index to
              Financial  Statements  are filed as part of this Annual  Report on
              Form 10-K.

     (B) Reports on Form 8-K

              None.

     (C) Exhibits

      4.     Operating  Agreement  of Fund,  incorporated  by  reference  to the
             Fund's Registration Statement on Form S-1 (Reg. No. 33-55796) which
             became effective with the Securities and Exchange Commission on May
             25, 1993.

     10.1    Management  Agreement  between Fund and PLM Investment  Management,
             Inc.,   incorporated  by  reference  to  the  Fund's   Registration
             Statement on Form S-1 (Reg. No.  33-55796)  which became  effective
             with the Securities and Exchange Commission on May 25, 1993.

     10.2    $25.0  Million  Note  Agreement,  dated as of  December  30,  1996,
             incorporated  by reference to the Fund's Annual Report on Form 10-K
             filed with the  Securities  and  Exchange  Commission  on March 14,
             1997.

     10.3    Fourth Amended and Restated Warehousing Credit Agreement,  dated as
             of December 15, 1998, with First Union National Bank.

     24.     Powers of Attorney.


<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the Fund has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

The Fund has no directors  or officers.  The Manager has signed on behalf of the
Fund by duly authorized officers.


                                  PROFESSIONAL LEASE MANAGEMENT INCOME
Date: January 5, 2000             FUND I

                                  By:  PLM Financial Services, Inc.
                                       Manager



                                  By:  /s/ Douglas P. Goodrich
                                       ----------------------------------
                                       Douglas P. Goodrich
                                       President and Director



                                  By:   /s/ Richard K Brock
                                        ---------------------------------
                                        Richard K Brock
                                        Vice President and
                                        Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the  following  directors of the Fund's  Manager on the
dates indicated.


Name                             Capacity                        Date


*_________________________
  Robert N. Tidball              Director - FSI                  January 5, 2000


*_________________________
  Douglas P. Goodrich            Director - FSI                  January 5, 2000


*_________________________
  Steven M. Bess                 Director - FSI                  January 5, 2000





* Susan C. Santo, by signing her name hereto,  does sign this document on behalf
of the persons  indicated  above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.



/s/ Susan C. Santo
-------------------------
Susan C. Santo
Attorney-in-Fact


<PAGE>




                   PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
                          (A LIMITED LIABILITY COMPANY)
                          INDEX TO FINANCIAL STATEMENTS

                                  (Item 14(a))


                                                                  Page

Independent auditors' report                                       31

Balance sheets as of December 31, 1998 and 1997                    32

Statements of operations for the years ended
     December 31, 1998, 1997 and 1996                              33

Statement of changes in members' equity for the years ended
     December 31, 1998, 1997, and 1996                             34

Statements of cash flows for the years ended
     December 31, 1998, 1997, and 1996                             35

Notes to financial statements                                   36-47


All other  financial  statement  schedules  have been  omitted  as the  required
information  is not pertinent to the  Registrant or is not material,  or because
the  information  required  is included in the  financial  statements  and notes
thereto.



<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Members
Professional Lease Management Income Fund I, L.L.C.:


We have audited the  accompanying  financial  statements of  Professional  Lease
Management Income Fund I, L.L.C. (the Fund) as listed in the accompanying  index
to financial  statements.  These financial  statements are the responsibility of
the  Fund's  management.  Our  responsibility  is to express an opinion on these
financial statements based on our audits.

We have  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.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of Professional Lease Management
Income Fund I, L.L.C.  as of December 31, 1998 and 1997,  and the results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December  31,  1998 in  conformity  with  generally  accepted  accounting
principles.




/s/ KPMG LLP
------------------------------------
SAN FRANCISCO, CALIFORNIA
March 12, 1999, except as to note 10,
  which is as of December 22, 1999




<PAGE>



               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                                 BALANCE SHEETS
                                  DECEMBER 31,
                 (in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>


                                                                                         1998                   1997
                                                                                     -------------------------------------
     Assets

     <S>                                                                              <C>                   <C>
     Equipment held for operating leases, at cost                                     $   122,626          $     99,488
     Less accumulated depreciation                                                        (44,350)              (30,318)
                                                                                     -------------------------------------
       Net equipment                                                                       78,276                69,170

     Cash and cash equivalents                                                              3,720                19,179
     Accounts receivable, less of allowance for doubtful accounts
       of $43 in 1998 and $70 in 1997                                                       1,876                 2,047
     Investments in unconsolidated special-purpose entities                                15,224                16,486
     Equipment acquisition deposits                                                            --                   920
     Debt placement fees, less accumulated amortization
         of $34 in 1998 and $16 in 1997                                                       143                   160
     Organization and offering costs, less accumulated amortization                           132                   221
         of $310 in 1998 and $222 in 1997
     Prepaid expenses and other assets                                                        264                   341
                                                                                     -------------------------------------
              Total assets                                                            $    99,635          $    108,524
                                                                                     =====================================

     Liabilities and member's equity

     Liabilities
     Accounts payable and accrued expenses                                            $       465          $        597
     Due to affiliates                                                                        400                 2,021
     Lessee deposits and reserves for repairs                                               3,040                 1,719
     Note payable                                                                          25,000                25,000
                                                                                     -------------------------------------
       Total liabilities                                                                   28,905                29,337
                                                                                     -------------------------------------

     Minority interest                                                                      5,705                 6,713

     Members' equity
     Class A members (4,999,581 Units at December 31, 1998 and
         1997)                                                                             64,893                72,298
     Class B member                                                                           132                   176
                                                                                     -------------------------------------
         Total members' equity                                                             65,025                72,474
                                                                                     -------------------------------------
          Total liabilities and members' equity                                       $    99,635          $    108,524
                                                                                     =====================================

</TABLE>


















                 See accompanying notes to financial statements.


<PAGE>



               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                            STATEMENTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31,
         (in thousands of dollars, except weighted-average unit amounts


<TABLE>
<CAPTION>


                                                                      1998                 1997               1996
                                                             -------------------------------------------------------
  REVENUES

  <S>                                                         <C>                <C>                 <C>
  Lease revenue                                               $      25,149      $       20,833      $      9,939
  Interest and other income                                             393                 405             1,356
  Net gain on disposition of equipment                                2,759               1,682                --
                                                             -------------------------------------------------------
    Total revenues                                                   28,301              22,920            11,295
                                                             -------------------------------------------------------

  EXPENSES

  Depreciation and amortization                                      16,774              19,347             9,408
  Repairs and maintenance                                             2,024               1,414             1,363
  Equipment operating expenses                                        2,069                 995               926
  Insurance expense to affiliate                                        (14)                 24                 7
  Other insurance expense                                               312                 419               180
  Management fees to affiliate                                        1,368               1,125               585
  Interest expense                                                    1,833               1,418                 9
  General and administrative expenses to affiliates                     966                 925               313
  Other general and administrative expenses                             692                 729               640
  Minority interest                                                     351                  29                --
                                                             -------------------------------------------------------
    Total expenses                                                   26,375              26,425            13,431
                                                             -------------------------------------------------------

  Equity in net income (loss) of
    unconsolidated special-purpose entities                           2,390               1,453              (256)
                                                             -------------------------------------------------------

  Net income (loss)                                           $       4,316      $       (2,052)     $     (2,392)
                                                             =======================================================

  MEMBERS' SHARE OF NET INCOME (LOSS)

  Class A members                                             $       2,595      $       (3,728)     $     (3,705)
  Class B member                                                      1,721               1,676             1,313
                                                             -------------------------------------------------------

  Total                                                       $       4,316      $       (2,052)     $     (2,392)
                                                             =======================================================

  Net income (loss) per weighted-average
    Class A unit                                              $        0.52      $        (0.75)     $        N/A
                                                             =======================================================

  Cash distribution                                           $      11,765      $       11,763      $      9,832
                                                             =======================================================

  Cash distribution per weighted-average
    Class A unit                                              $        2.00      $         2.00      $        N/A
                                                             =======================================================

</TABLE>










                 See accompanying notes to financial statements.


<PAGE>




               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                     STATEMENT OF CHANGES IN MEMBERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
                            (in thousands of dollars)


<TABLE>
<CAPTION>


                                                              Class A              Class B              Total
                                                       ---------------------------------------------------------

    <S>                                                <C>                  <C>                 <C>
    Members' equity as of December 31, 1995            $       54,836       $         306       $       55,142

  Members' capital contributions                               43,364               5,069               48,433

  Syndication costs                                                --              (5,062)              (5,062)

  Net income (loss)                                            (3,705)              1,313               (2,392)

  Cash distributions                                           (8,471)             (1,361)              (9,832)
                                                       ---------------------------------------------------------

    Members' equity as of December 31, 1996                    86,024                 265               86,289

  Net income (loss)                                            (3,728)              1,676               (2,052)

  Cash distributions                                           (9,998)             (1,765)             (11,763)
                                                       ---------------------------------------------------------

    Members' equity as of December 31, 1997                    72,298                 176               72,474

  Net income                                                    2,595               1,721                4,316

  Cash distributions                                          (10,000)             (1,765)             (11,765)
  --------------------------------------------------------------------------------------------------------------

    Members' equity as of December 31, 1998            $       64,893       $         132       $       65,025
                                                       =========================================================

</TABLE>
























                 See accompanying notes to financial statements.


<PAGE>



                             PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                                    (A DELAWARE LIMITED LIABILITY COMPANY)
                                           STATEMENTS OF CASH FLOWS
                                       FOR THE YEARS ENDED DECEMBER 31,
                                          (in thousands of dollars)
<TABLE>
<CAPTION>

     OPERATING ACTIVITIES                                                       1998           1997           1996
                                                                            -------------------------------------------
     <S>                                                                    <C>            <C>           <C>
     Net income (loss)                                                      $    4,316     $   (2,052)   $    (2,392)
     Adjustments to reconcile net income (loss) to net cash
           provided by (used in) operating activities:
       Depreciation and amortization                                            16,774         19,347          9,408
       Net gain on dispositions of equipment                                    (2,759)        (1,682)           --
       Equity in net (income) loss of unconsolidated special
           purpose entities                                                     (2,390)        (1,453)          256
       Changes in operating assets and liabilities:
         Restricted cash                                                            --            223           (223)
         Accounts receivable, net                                                  173           (513)          (737)
         Prepaid expenses                                                           77            164            (89)
         Accounts payable and accrued expenses                                    (132)           167           (235)
         Due to affiliates                                                         115            122           (225)
         Lessee deposits and reserve for repairs                                 1,321            846            738
         Minority interest                                                      (1,008)        (1,425)            --
                                                                            -------------------------------------------
               Net cash provided by operating activities                        16,487         13,744          6,501
                                                                            -------------------------------------------

     INVESTING ACTIVITIES
     Payments for purchase of equipment                                        (27,477)       (24,444)       (34,193)
     Equipment acquisition deposits                                                 --           (920)           --
     Investment in and equipment purchased and placed
           in unconsolidated special-purpose entities                          (13,917)          (683)       (16,067)
     Liquidation distributions from unconsolidated special-
           purpose entities                                                     10,385             --             --
     Distributions from unconsolidated special-purpose entities                  7,184          4,092          5,059
     Proceeds from disposition of equipment                                      5,380         10,901             --
                                                                            -------------------------------------------
              Net cash used in investing activities                            (18,445)       (11,054)       (45,201)
                                                                            -------------------------------------------

     FINANCING ACTIVITIES
     Proceeds from note payable                                                     --         25,000             --
     (Decrease) increase due to affiliates                                      (1,736)         1,736             --
     Cash distributions to Class A members                                     (10,000)        (9,998)        (8,471)
     Cash distributions to Class B member                                       (1,765)        (1,765)        (1,361)
     Class A members capital contribution                                           --             --         43,364
     Debt placement fees                                                            --           (176)           --
     Decrease in subscriptions in escrow                                            --             --         (6,260)
     Increase in restricted cash from
           subscriptions in escrow, net                                             --             --          6,316
                                                                            -------------------------------------------
           Net cash (used in) provided by financing activities                 (13,501)       14,797          33,588
                                                                            -------------------------------------------

     Net (decrease) increase in cash and cash equivalents                      (15,459)       17,487          (5,112)
     Cash and cash equivalents at beginning of year                             19,179         1,692           6,804
                                                                            -------------------------------------------

     Cash and cash equivalents at end of year                               $    3,720     $  19,179     $     1,692
                                                                            ===========================================

     SUPPLEMENTAL INFORMATION
     Interest paid                                                          $    1,833     $    1,418     $        9
                                                                            ===========================================

</TABLE>





                 See accompanying notes to financial statements.


<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

1.   BASIS OF PRESENTATION

     ORGANIZATION

     Professional  Lease  Management  Income Fund I, L.L.C.,  a Delaware Limited
     Liability  Company  (Fund) was formed on August 22, 1994,  to engage in the
     business of owning,  leasing,  or otherwise investing in predominately used
     transportation and related equipment. PLM Financial Services, Inc. (FSI) is
     the  Manager  of  the  Fund.  FSI  is  a  wholly-owned  subsidiary  of  PLM
     International, Inc. (PLM International).

     On May 13,  1996,  the Fund ceased its  offering  for Class A Units.  As of
     December 31, 1998, there were 4,999,581 Units outstanding.

     The Fund will  terminate on December 31, 2010,  unless  terminated  earlier
     upon sale of all  equipment or by certain  other  events.  Beginning in the
     Fund's seventh year of operations,  which commences on January 1, 2003, the
     Manager will stop  reinvesting  excess cash, if any, which less  reasonable
     reserves, will be distributed to the members.  Between the eighth and tenth
     years of operations, the Manager intends to begin an orderly liquidation of
     the Fund's assets.

     The Manager (Class B Member)  controls and manages the affairs of the Fund.
     The Manager paid out of its own corporate funds (as a capital  contribution
     to  the  Fund)  all  organization  and  syndication  expenses  incurred  in
     connection  with the  offering;  therefore,  100% of the net cash  proceeds
     received by the Fund from the sale of Class A Units were  initially used to
     purchase  equipment and  established  any required cash  reserves.  For its
     contribution, the Manager is generally entitled to a 1% interest in profits
     and losses and 15%  interest  in the Fund's cash  distributions  subject to
     certain   special   allocation   provisions  (see  Net  Income  (Loss)  and
     Distributions  Per Class A Unit,  below).  After the investors receive cash
     distributions  equal to their original capital  contributions the Manager's
     interest in the cash distributions of the Fund will increase to 25%.

     The  operating  agreement  includes  a  redemption   provision.   Upon  the
     conclusion of the 30-month period immediately  following the termination of
     the offering,  beginning  November 13, 1998, the Fund may, at the Manager's
     sole  discretion,  redeem up to 2% of the outstanding  units each year. The
     purchase  price  paid by the  Fund  for  outstanding  Class  A  Units  upon
     redemption will be equal to 105% of the amount Class A Members paid for the
     Class A Units, less the amount of cash  distributions  Class A Members have
     received  relating  to such  Class A  Units.  The  price  may not  bear any
     relationship to the fair market value of a Class A Unit. As of December 31,
     1998,  the Fund  agreed to  repurchase  approximately  28,000  units for an
     aggregate price of approximately $0.4 million. The Manager anticipates that
     these units will be  repurchased  in the second and third quarters of 1999.
     The  Manager  may  purchase  additional  units on behalf of the Fund in the
     future.

     These  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  equipment  of the  Fund  is  managed,  under a  continuing  management
     agreement,  by  PLM  Investment  Management,  Inc.  (IMI),  a  wholly-owned
     subsidiary of the FSI. IMI receives a monthly  management fee from the Fund
     for  managing  the  equipment  (see Note 2). FSI, in  conjunction  with its
     subsidiaries,  sells  equipment  to investor  programs  and third  parties,
     manages pools of equipment under agreements with investor programs,  and is
     a general partner of other programs.



<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

1.   BASIS OF PRESENTATION (CONTINUED)

     ACCOUNTING FOR LEASES

     The Fund's leasing operations  generally consist of 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.  Lease  origination  costs are
     capitalized and amortized over the term of the lease.

     DEPRECIATION AND AMORTIZATION

     Depreciation  of  transportation  equipment  held for  operating  leases is
     computed  on the  double-declining  balance  method  taking a full  month's
     depreciation in the month of acquisition, based upon estimated useful lives
     of 15 years for  railcars,  and  typically 12 years for most other types of
     equipment.  Certain  aircraft are  depreciated  under the  double-declining
     balance method over the lease term. The  depreciation  method is changed to
     straight-line  when annual  depreciation  expense  using the  straight-line
     method exceeds that calculated by the double-declining balance method. Debt
     placement  fees are  amortized  over the term of the related loan (see Note
     7).  Organization  costs  are  amortized  over  a 60  month  period.  Major
     expenditures  that are expected to extend the useful lives or reduce future
     operating  expenses of equipment are  capitalized  and  amortized  over the
     estimated remaining life of the equipment.

     TRANSPORTATION EQUIPMENT

     In  accordance  with  the  Financial   Accounting  Standards  Board  issued
     Statement No. 121,  "Accounting for the Impairment of Long-Lived Assets and
     for Long-Lived  Assets to Be Disposed Of", the Manager reviews the carrying
     value of the Fund's  equipment  at least  annually  in relation to expected
     future market conditions for the purpose of assessing recoverability of the
     recorded  amounts.  If projected  undiscounted  future  lease  revenue plus
     residual  values are less than the carrying value of the equipment,  a loss
     on  revaluation  is  recorded.  Reductions  of $1.0 million to the carrying
     value of partially owned equipment were required during 1998. No reductions
     were required to the carrying value of wholly and partially-owned equipment
     during 1997 or 1996.

     Equipment held for operating leases is stated at cost.

     INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES

     The Fund has interests in unconsolidated  special-purpose  entities (USPEs)
     that own transportation equipment.  Where the Fund owns greater than 50% of
     the assets within the USPE, the assets and  liabilities  are  consolidated.
     Where  the Fund  owns  less than 50% of the  assets  within  the USPE,  the
     interests are accounted for using the equity method.

     The Fund has interests in unconsolidated  special-purpose  entities (USPEs)
     that own transportation equipment.  These interests are accounted for using
     the equity method.

     The  Fund's  interests  in USPEs are  managed  by IMI.  The  Fund's  equity
     interest in the net income  (loss) of USPEs is reflected  net of management
     fees paid or payable to IMI.

     REPAIRS AND MAINTENANCE

     Repair and  maintenance  costs  related to marine  vessels,  railcars,  and
     trailers are usually the obligation of the Fund. Maintenance costs and most
     of the other  equipment are the  obligation of the lessee.  If they are not
     covered by the lessee,  they are generally  charged  against  operations as
     incurred.  To  meet  the  maintenance   requirements  of  certain  aircraft
     airframes  and  engines,  reserve  accounts  are  prefunded  by the lessee.
     Estimated costs  associated with marine vessel  drydockings are accrued and
     charged to income  ratably  over the period prior to such  drydocking.  The
     reserve  accounts are included in the balance sheet as lessee  deposits and
     reserve for repairs.


<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

1.   BASIS OF PRESENTATION (CONTINUED)

     NET INCOME (LOSS) AND DISTRIBUTIONS PER UNIt

     The net profits and net loss of the Fund are generally  allocated 1% to the
     Class B  Members  and 99% to the  Class A  Members.  The  Class B Member or
     Manager will be specially  allocated (i) 100% of the Fund's  organizational
     and offering cost amortization expenses and (ii) income equal to the excess
     of cash distribution over the Manager`s 1% share of net profits. The effect
     on the  Class  A  members  of this  special  income  allocation  will be to
     increase the net loss or decrease the net profits  allocable to the Class A
     members by an equal  amount.  During 1998,  the Manager  received a special
     allocation of income of $1.6 million ($1.8 million in 1997 and $1.4 million
     in 1996). Cash distributions of the Fund are generally allocated 85% to the
     Class A members and 15% to the Manager and may include amounts in excess of
     net income.  After the investors receive cash distributions  equal to their
     original  capital   contributions  the  Manager's   interest  in  the  cash
     distributions  of the Fund will  increase to 25%.  The Class A members' net
     income (loss) is allocated among the Class A members based on the number of
     Class A units  owned by each  member  and on the number of days of the year
     each member is in the Fund.

     Cash  distributions are recorded when paid. Monthly  unitholders  receive a
     distribution check 15 days after the close of the previous month's business
     and quarterly  unitholders  receive a distribution  check 45 days after the
     close of the quarter.

     Cash  distributions  to Class A  Unitholders  in excess of net  income  are
     considered a return of capital.  Cash  distributions to Class A Unitholders
     of $7.4  million,  $10.0  million and $8.5 million in 1998,  1997 and 1996,
     respectively, were deemed to be a return of capital.

     Cash distributions  relating to the fourth quarter of 1998, 1997, and 1996,
     of $2.3 million for each year,  were paid during the first quarter of 1999,
     1998, and 1997, respectively.

     NET INCOME (LOSS) PER WEIGHTED-AVERAGE CLASS A UNIT

     Net  income  (loss)  per  weighted-average  Class A unit  was  computed  by
     dividing  net  income  (loss)  attributable  to  Class  A  members  by  the
     weighted-average  number of Class A units  deemed  outstanding  during  the
     period.  The  weighted-average  number of Class A units deemed  outstanding
     during the years ended December 31, 1998 and 1997 was 4,999,581.

     CASH AND CASH EQUIVALENTS

     The Fund considers highly liquid  investments that are readily  convertible
     to known amounts of cash with  original  maturities of three months or less
     as cash equivalents.  The carrying amount of cash equivalents  approximates
     fair market value due to the short-term nature of the investments.

     COMPREHENSIVE INCOME

     During 1998, the Partnership adopted Financial Accounting Standards Board's
     Statement  No.  130,  "Reporting   Comprehensive  Income,"  which  requires
     enterprises  to report,  by major  component  and in total,  all changes in
     equity from nonowner sources.  The Partnership's net income (loss) is equal
     to  comprehensive  income for the years ended December 31, 1998,  1997, and
     1996.

     RECLASSIFICATION

     Certain amounts in the 1997 financial  statements have been reclassified to
     conform to the 1998 presentation.



<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

2.   MANAGER AND TRANSACTIONS WITH AFFILIATES

     An  officer of PLM  Securities  Corp.,  a  wholly-owned  subsidiary  of the
     Manager,  contributed  the $100 of the Fund's  initial  capital.  Under the
     equipment  management  agreement,   IMI,  subject  to  certain  reductions,
     receives a monthly management fee attributable to either owned equipment or
     interests  in  equipment  owned by the USPEs 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) the sum of (A) for that  equipment
     for which IMI provides only basic equipment management services,  (a) 2% of
     the gross lease revenues attributable to equipment which is subject to full
     payout net  leases,  (b) 5% of the gross  lease  revenues  attributable  to
     equipment that is subject to operating  leases,  and (B) for that equipment
     for which IMI provides  supplemental  equipment management services,  7% of
     the gross lease revenues  attributable  to equipment for which IMI provides
     both  management  and additional  services.  Fund  management  fees of $0.2
     million  were  payable at  December  31, 1998 and 1997,  respectively.  The
     Fund's  proportional  share  of the  USPE's  management  fee  payable  were
     $40,000,  and $0.2 million as of December 31, 1998 and 1997,  respectively.
     The Fund's  proportional  share of USPE  management  fees was $0.2 million,
     $0.3 million,  and $0.2 million during 1998, 1997, and 1996,  respectively.
     The Fund  reimbursed FSI $1.0 million,  $0.9 million,  and $0.3 million for
     data processing  expenses and other  administrative  services  performed on
     behalf of the Fund during 1998,  1997,  and 1996.  The Fund's  proportional
     share  of  the  USPE's   administrative   and  data   processing   expenses
     reimbursable to FSI was $0.1 million during 1998, 1997, and 1996.

     The Fund  paid  $2,000,  $24,000,  and  $7,000  in 1998,  1997,  and  1996,
     respectively,  to Transportation  Equipment Indemnity Company,  Ltd. (TEI),
     which  provides  marine  insurance  coverage for Fund  equipment  and other
     insurance  brokerage services.  TEI is an affiliate of the Manager.  During
     1998, the Fund received a $16,000  loss-of-hire  insurance  refund from TEI
     due to lower  claims from the  insured  Fund and other  insured  affiliated
     programs. The Fund's proportional share of USPE's marine insurance coverage
     paid to TEI was $10,000 and $1,000  during 1997 and 1996,  respectively.  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.  The Fund's  proportional  share of a refund of $5,000 was received
     during  1998,  from lower  loss-of-hire  insurance  claims from the insured
     USPEs and other insured affiliated programs. PLMI plans to liquidate TEI in
     1999. During 1998, TEI did not provide the same level of insurance coverage
     as had been provided during previous years. These services were provided by
     an unaffiliated third party.

     Transportation Equipment Corporation (TEC) will also be entitled to receive
     an  equipment  liquidation  fee equal to the  lesser of (i) 3% of the sales
     price  of  equipment  sold  on  behalf  of the  Fund,  or  (ii)  50% of the
     "Competitive  Equipment Sale  Commission," as defined in the agreement,  if
     certain  conditions  are  met.  TEC  is a  wholly-owned  subsidiary  of the
     Manager.  In certain  circumstances,  the  Manager  will be  entitled  to a
     monthly  re-lease fee for re-leasing  services  following the expiration of
     the initial lease, charter or other contract for certain equipment equal to
     the lesser of (a) the fees which would be charged by an  independent  third
     party for comparable  services for comparable  equipment or (b) 2% of gross
     lease  revenues  derived from such  re-lease,  provided,  however,  that no
     re-lease  fee shall be payable if such fee would cause the  combination  of
     the equipment management fee paid to IMI and the re-lease fees with respect
     to such transactions to exceed 7% of gross lease revenues.

     As of December 31, 1998,  approximately 33% of the Fund's trailer equipment
     was in rental facilities operated by PLM Rental,  Inc., an affiliate of the
     Manager,  doing business as PLM Trailer Leasing.  Revenues  collected under
     short-term  rental agreements with the rental yards' customers are credited
     to the  owners  of the  related  equipment  as  received.  Direct  expenses
     associated  with  the  equipment  are  charged  directly  to the  Fund.  An
     allocation of indirect expenses of the rental yard operations is charged to
     the Fund monthly.

     The  Fund  had  an  interest  in  certain  equipment  in  conjunction  with
     affiliated programs during 1998, 1997, and 1996 (see Note 4).


<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

2.   MANAGER AND TRANSACTIONS WITH AFFILIATES (CONTINUED)

     The balance  due to  affiliates  as of December  31,  1998,  included  $0.2
     million due to FSI and its affiliates for management  fees. The balance due
     to affiliates as of December 31, 1997, included $0.2 million due to FSI and
     its  affiliates  for  management  fees and $1.8  million due to  affiliated
     USPEs.

3.   Equipment

     The  components  of owned  equipment  as of December 31, are as follows (in
     thousands of dollars):

  Equipment Held for Operating Leases                1998              1997
  -----------------------------------
                                               ---------------------------------

  Marine vessels                               $       46,957    $       20,756
  Aircraft                                             20,605            24,605
  Mobile offshore drilling unit                        20,356            20,356
  Rail equipment                                       19,920            18,958
  Trailers                                             14,788            14,813
                                               -------------------=-------------
                                                      122,626            99,488
  Less accumulated depreciation                       (44,350)          (30,318)
                                               ---------------------------------
    Net equipment                              $       78,276    $       69,170
                                               =================================

     Revenues are earned by placing the  equipment  under  operating  leases.  A
     portion  of  the  Fund's   marine   vessels  is  leased  to   operators  of
     utilization-type leasing pools that include equipment owned by unaffiliated
     parties.  In such  instances,  revenues  received by the Fund  consist of a
     specified  percentage of revenues generated by leasing the pooled equipment
     to sublessees  after  deducting  certain direct  operating  expenses of the
     pooled  equipment.  Rents for railcars  are based on mileage  traveled or a
     fixed rate; rents for all other equipment are based on fixed rates.

     As of December 31, 1998,  all owned  equipment  in the Fund  portfolio  was
     either on lease or operating in  PLM-affiliate  short-term  trailer  rental
     yards  except  for 3  railcars  with a  carrying  value of  $37,000.  As of
     December 31, 1997, all owned  equipment in the Fund portfolio was either on
     lease or operating in PLM-affiliated short-term trailer rental yards except
     for one railcar with a carrying value of $22,000 million.

     During  the year  ended  December  31,  1998,  the Fund  purchased  39 rail
     equipment,  two  marine  vessels (a  deposit  of $0.9  million  was paid in
     December  1997 for the purchase of one of these marine  vessels) and a hush
     kit for an  aircraft  for a total of $28.4  million.  During the year ended
     December  31, 1997,  the Fund  purchased  25  trailers,  a mobile  offshore
     drilling unit, and a marine vessel for a total of $19.3 million.

     During  the year  ended  December  31,  1998,  the Fund  sold an  aircraft,
     trailers  and rail  equipment  with a net book value of $2.6  million,  for
     proceeds of $5.4 million. During the year ended December 31, 1997, the Fund
     sold  trailers and a mobile  offshore  drilling  unit with an aggregate net
     book  value of $9.2  million,  for  proceeds  of $11.0  million,  net sales
     commission of $0.1 million.

     Periodically,  PLM International purchases groups of assets whose ownership
     may  be  allocated  among  affiliated   programs  and  PLM   International.
     Generally,  in these cases, only assets that are on lease will be purchased
     by the affiliated  programs.  PLM  International  will generally assume the
     ownership  and  remarketing  risks  associated  with  off-lease  equipment.
     Allocation of the purchase  price will be  determined  by a combination  of
     third-party  industry  sources and recent  transactions  or published  fair
     market value  references.  During 1996,  PLM  International  realized  $0.7
     million  of gains on the sale of 69  off-lease  railcars  purchased  by PLM
     International  as part of a group of assets in 1994 that had been allocated
     to the Fund, PLM Equipment  Growth Funds IV and VI, PLM Equipment  Growth &
     Income Fund VII, and PLM International.


<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A Delaware Limited Liability Company)
                         NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

3.   EQUIPMENT (CONTINUED)

     All owned  equipment on lease is being  accounted for as operating  leases.
     Future minimum rent under noncancelable operating leases as of December 31,
     1998 for the  owned  equipment  during  each of the  next  five  years  are
     approximately $11.2 million,  1999; $6.5 million, 2000; $4.0 million, 2001;
     $0.7 million, 2002; and $0.3 million, 2003 and thereafter.

4.   INVESTMENTS IN UNCONSOLIDATED SPECIAL PURPOSE ENTITIES

     The net investments in USPEs include the following  jointly-owned equipment
     as of December 31, (and related  assets and  liabilities)  (in thousands of
     dollars):
<TABLE>
<CAPTION>

                                                                                 1998                     1997
     ------------------------------------------------------------------------------------------------------------------

     <S>                                                                   <C>                      <C>
     50% interest in a trust owning an MD-82 commercial aircraft           $         6,441          $            --
     33% interest in two trusts owning a total of three 737-200A
               stage II commercial aircraft, two stage II aircraft
     engines,
               and a portfolio of aircraft rotables                                  3,929                    7,788
     50% interest in a trust owning an MD9-82 stage III commercial
               aircraft                                                              3,342                      682
     50% interest in a trust owning a cargo marine vessel                            1,265                    2,638
     25% interest in a trust that owned four 737-200A stage II
               commercial aircraft                                                     137                    3,163
     25% interest in a trust that owned four 737-200A stage II
               commercial aircraft                                                     110                    2,215
                                                                          =============================================
         Net investments                                                   $        15,224          $        16,486
                                                                          =============================================
</TABLE>


     The  Fund had  interests  in two  USPEs  that own  multiple  aircraft  (the
     Trusts).  These Trusts contain  provisions under certain  circumstances for
     allocating  specific  aircraft to the  beneficial  owners.  During the year
     ended  December 31, 1998,  the Fund and  affiliated  programs each sold the
     commercial  aircraft designated to it in one of these Trusts. The Fund sold
     the  commercial  aircraft  assigned  to it with a net  book  value  of $2.3
     million, for proceeds of $5.9 million.

     In the  second  Trust,  the Fund and  affiliated  programs  each sold their
     designated  aircraft during the year ended December 31, 1998. The Fund sold
     the  commercial  aircraft  assigned  to it with a net  book  value  of $1.8
     million, for proceeds of $4.5 million.

     During  1998,  the Fund  purchased  a 50%  interest  in a MD-82  stage  III
     commercial aircraft for $6.8 million (a deposit of $0.7 million was paid in
     December  of 1997)  and a 50%  interest  in a MD-82  stage  III  commercial
     aircraft for $7.8 million.

     During 1997,  the Fund  purchased an additional  26% interest in a drilling
     marine vessel for $5.1 million  increasing  its ownership  interest in this
     entity to 61%. This investment was  transferred to owned  equipment  during
     1997.

     During 1998,  the Fund reduced its interest in an entity owning a container
     feeder  vessel by $1.0  million to reflect its share of the net  realizable
     value.


<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

4.   INVESTMENTS IN UNCONSOLIDATED SPECIAL PURPOSE ENTITIES (CONTINUED)

     The following summarizes the financial  information for the special-purpose
     entities  and the Fund's  interests  therein as of and for the years  ended
     December 31, 1998, 1997 and 1996 (in thousands of dollars):
<TABLE>
<CAPTION>

                               1998                        1997                         1996
                             ---------                   ----------                   ----------
                                       Net                          Net                          Net
                         Total      Interest of       Total      Interest of      Total        Interest
                         USPEs          Fund          USPEs          Fund         USPEs         of Fund
                         -------------------------    -------------------------------------------------------

    <S>                  <C>         <C>          <C>            <C>            <C>           <C>
    Net investments      $   35,630  $  15,224    $  59,369      $   16,486     $   80,846    $  25,349
    Lease revenues           13,601      5,200       24,283           7,125         24,676        6,566
    Net income (loss)        14,377      2,390       10,831           1,453         (3,071)        (256)
</TABLE>


     All partially  owned equipment on lease is being accounted for as operating
     leases.  Future  minimum rent under  noncancelable  operating  leases as of
     December 31, 1998 for the partially owned equipment during each of the next
     five years are approximately $4.7 million,  1999; $2.1 million,  2000; $2.1
     million, 2001; $0.9 million, 2002; and $0.9 million, 2003 and thereafter.

5.   OPERATING SEGMENTS

     The Fund operates in five primary  operating  segments:  aircraft  leasing,
     mobile offshore drilling unit (rig) leasing, marine vessel leasing, trailer
     leasing,  and railcar  leasing.  Each equipment  leasing segment engages in
     short-term to mid-term operating leases to a variety of customers.

     The Manager  evaluates the  performance  of each segment based on profit or
     loss from  operations  before  allocation  of  general  and  administrative
     expenses,  interest  expenses and certain other expenses.  The segments are
     managed separately due to different business strategies for each operation.



<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

5.   OPERATING SEGMENTS (CONTINUED)

     The  following  tables  present a summary  of the  operating  segments  (in
     thousands of dollars):
<TABLE>
<CAPTION>

                                                                 Marine
                                          Aircraft     Rig       Vessel   Trailer    Railcar     All
    For the Year Ended December 31, 1998  Leasing    Leasing    Leasing   Leasing    Leasing   Other<F1>1   Total
    ------------------------------------  -------    -------    -------   -------    -------   ------       -----

    REVENUES
      <S>                                  <C>       <C>        <C>       <C>        <C>       <C>        <C>
      Lease revenue                        $ 4,567   $  4,046   $  8,684  $  3,894   $  3,958  $     --   $ 25,149
      Interest income and other                 13         --         13        --         19       348        393
      Net gain (loss) on disposition
        of equipment                         2,710         --         --         9         40        --      2,759
                                          -------------------------------------------------------------------------
        Total revenues                       7,290      4,046      8,697     3,903      4,017       348     28,301

    EXPENSES
      Operations support                        42        110      2,890       631        634        83      4,390
      Depreciation and amortization          4,624      2,798      5,490     1,738      2,018       106     16,774
      Interest expense                          --         --         --        --         --     1,833      1,833
      Management fee                           213        202        434       256        263        --      1,368
      General and administrative expenses       69         47        121       816         27       579      1,659
      Minority interest                         --        351         --        --         --        --        351
                                          -------------------------------------------------------------------------
        Total costs and expenses             4,948      3,508      8,935     3,441      2,942     2,601     26,375
                                          -------------------------------------------------------------------------
    Equity in net income (loss) of USPEs     3,834         --     (1,444)       --         --        --      2,390
                                          ------------------------------------------------------------------------
    Net income (loss)                      $ 6,176   $    538   $ (1,682) $    462   $  1,075  $ (2,253)  $  4,316
                                          =========================================================================

    As of December 31, 1998
    Total assets                           $ 20,387  $ 14,392   $ 37,916  $  8,682   $ 13,109  $  5,149   $ 99,635
                                          =========================================================================

                                                                 Marine
                                          Aircraft     Rig       Vessel   Trailer    Railcar     All
    For the Year Ended December 31, 1997  Leasing    Leasing    Leasing   Leasing    Leasing    Other<F1>1  Total
    ------------------------------------  -------    -------    -------   -------    -------    ------      -----

    REVENUES
      Lease revenue                        $ 5,037   $  5,059   $  3,690  $  3,670   $  3,377  $     --   $ 20,833
      Interest income and other                 14         --         --        --          1       390        405
      Net gain (loss) on disposition
        of equipment                            --      1,675         --         7         --        --      1,682
                                          -------------------------------------------------------------------------
        Total revenues                       5,051      6,734      3,690     3,677      3,378       390     22,920

    EXPENSES
      Operations support                        43         70      1,606       420        666        47      2,852
      Depreciation and amortization          8,007      4,670      2,363     2,059      2,143       105     19,347
      Interest expense                          --         --         --        --         --     1,418      1,418
      Management fee                           203        253        185       248        216        20      1,125
      General and administrative expenses       21         85         72       861        129       486      1,654
      Minority interest                         --         29         --        --         --        --         29
                                          -------------------------------------------------------------------------
        Total costs and expenses             8,274      5,107      4,226     3,588      3,154     2,076     26,425
                                          -------------------------------------------------------------------------
    Equity in net income (loss) of USPEs     1,795         --       (342)       --         --        --      1,453
                                          ------------------------------------------------------------------------
    Net income (loss)                     $ (1,428) $  1,627    $   (878) $     89   $    224  $ (1,686 ) $ (2,052)
                                          =========================================================================

    As of December 31, 1997
    Total assets                          $  26,291 $ 16,808    $ 19,657  $ 10,432   $ 14,150  $ 21,186   $ 108,524
                                          =========================================================================

<FN>
<F1> (1) Includes costs not identifiable to a particular segment such as
amitorization expense and interest expense and certain interest income and
other, operations support expenses, and general and administrative expenses.
</FN>
</TABLE>

<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

5.   OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>

                                                                 Marine
                                          Aircraft     Rig       Vessel   Trailer    Railcar     All
    For the Year Ended December 31, 1996  Leasing    Leasing    Leasing   Leasing    Leasing   Other<F1>1   Total
    ------------------------------------  -------    -------    -------   -------    -------   ------       -----

    REVENUES
      <S>                                  <C>       <C>        <C>       <C>        <C>       <C>        <C>
      Lease revenue                        $ 2,015   $     --   $  2,669  $  2,117   $  3,138  $     --   $  9,939
      Interest income and other                 --         --         --        --         --     1,356      1,356
                                          -------------------------------------------------------------------------
        Total revenues                       2,015         --      2,669     2,117      3,138     1,356     11,295

    Expenses
      Operations support                        21         --      1,434       237        767        17      2,476
      Depreciation and amortization          4,044         --      1,844     1,676      1,756        88      9,408
      Interest expense                          --         --         --        --         --         9          9
      Management fee                            51         --        134       144        221        35        585
      General and administrative expenses        5         --         15       294         29       610        953
                                          -------------------------------------------------------------------------
        Total costs and expenses             4,121         --      3,427     2,351      2,773       759     13,431
                                          -------------------------------------------------------------------------
    Equity in net income (loss) of USPEs       260        (94)      (422)       --         --        --       (256)
                                          -------------------------------------------------------------------------
    Net income (loss)                      $ (1,846) $    (94)  $ (1,180) $   (234)  $    365  $    597   $ (2,392)
                                          =========================================================================
    As of December 31, 1996
    Total assets                           $ 35,882  $  6,906   $ 12,889  $ 12,261   $ 16,212  $  3,605   $ 87,755
                                          =========================================================================

<FN>
<F1> (1) Includes costs not identifiable to a particular segment such as
amitorization expense and interest expense and certain interest income and
other, operations support expenses, and general and administrative expenses.
</FN>
</TABLE>


6.   GEOGRAPHIC INFORMATION

     The  Fund  owns   certain   equipment,   which  is  leased   and   operated
     internationally.   A  limited  number  of  the  Fund's   transactions   are
     denominated in a foreign  currency.  Gains or losses resulting from foreign
     currency transactions are included in the results of operations and are not
     material.

     The Fund leases its aircraft, railcars and trailers to lessees domiciled in
     four geographic regions:  United States, Canada, Europe, and South America.
     The marine vessels and mobile offshore drilling unit are leased to multiple
     lessees in  different  regions who  operate  the marine  vessels and mobile
     offshore drilling unit worldwide.

     The following table sets forth lease revenue  information by region for the
     owned  equipment and  investments in USPEs for the years ended December 31,
     are as follows (in thousands of dollars):
<TABLE>
<CAPTION>


                                       Owned Equipment                           Investments in USPEs
                          -------------------------------------------------------------------------------------
           Region            1998            1997           1996           1998           1997           1996
    -----------------------------------------------------------------------------------------------------------

      <S>                 <C>             <C>             <C>            <C>           <C>            <C>
      United States       $   6,172       $    6,296      $  4,573       $ 1,783       $     --       $     --
      South America           4,567           4,057            966            --             --             --
      Canada                  1,680           1,731          1,731           945          2,405          2,110
      Europe                     --              --             --         1,560          3,530          3,530
      Rest of the world      12,730           8,749          2,669           912          1,190            926
                          -------------------------------------------------------------------------------------
       Lease Revenues     $  25,149          20,833      $   9,939      $  5,200       $  7,125       $  6,566
                          =====================================================================================
</TABLE>




<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

6.   GEOGRAPHIC INFORMATION (CONTINUED)

     The  following  table sets forth income  (loss)  information  by region for
     owned  equipment and  investments in USPEs for the years ended December 31,
     are as follows (in thousands of dollars):
<TABLE>
<CAPTION>

                                       Owned Equipment                           Investments in USPEs
                           -------------------------------------------------------------------------------------
            Region            1998           1997           1996          1998           1997           1996
     -----------------------------------------------------------------------------------------------------------


       <S>                 <C>            <C>            <C>          <C>          <C>            <C>
       United States       $   1,070      $    214       $  (201)     $ (3,037)    $      --      $      --
       South America           2,342        (2,446)       (1,918)           --            --             --
       Canada                    466           (28)          128         6,718            142           (896)
       Europe                     --            --            --           153          1,653          1,156
       Rest of the world         300         1,204          (774)       (1,444)          (342)          (516)
                           -------------------------------------------------------------------------------------
     Regional
         Income (loss)         4,178        (1,056)       (2,765)        2,390          1,453           (256)
       Administrative
         and other            (2,252)       (2,449)          629            --             --             --
                           -------------------------------------------------------------------------------------

     Net income (loss)     $   1,926      $ (3,505)      $(2,136)     $  2,390     $    1,453      $    (256)
                           =====================================================================================
</TABLE>


     The  net  book  value  of  owned  assets  and  the  net  investment  in the
     unconsolidated  special-purpose entities at December 31, are as follows (in
     thousands of dollars):
<TABLE>
<CAPTION>

                                           Owned Equipment                            Investments in USPEs
                              ------------------------------------------    ------------------------------------------
               Region            1998           1997           1996            1998           1997           1996
       ---------------------------------------------------------------------------------------------------------------

         <S>                  <C>            <C>            <C>              <C>            <C>            <C>
         United States        $  15,751      $  24,901      $  26,401        $  9,782      $      --      $      --
         South America            6,429         10,022         17,858              --          4,006             --
         Canada                   6,040          2,102          4,664             248          4,614          6,665
         Europe                      --             --             --           3,929          5,180          8,767
         Rest of the world       50,056         32,145          9,221           1,265          2,686          9,917
                              ========================================================================================
       Net book value         $  78,276      $  69,170      $  58,144        $ 15,224      $  16,486      $  25,349
                              ========================================================================================
</TABLE>


7.   NOTES PAYABLE

     In December  1996,  the Fund  entered  into an  agreement  to issue a $25.0
     million  long-term  note to one  institutional  investor.  The  note  bears
     interest  at a fixed  rate of 7.33% per annum and has a final  maturity  in
     2006.  Interest  on the note is  payable  semi-annually.  The note  will be
     repaid in five  principal  payments of $3.0  million on December  31, 2000,
     2001,  2002,  2003, and 2004 and two principal  payments of $5.0 million on
     December 31, 2005,  and 2006.  The agreement  requires the Fund to maintain
     certain financial  covenants related to fixed-charge  coverage The loan was
     funded in March 1997. The Manager estimates,  based on recent transactions,
     that the fair value of the $25.0 million fixed-rate note is $25.7 million.

     The Manager has entered into a joint $24.5  million  credit  facility  (the
     Committed Bridge Facility) on behalf of the Fund, PLM Equipment Growth Fund
     VI (EGF VI),  and PLM  Equipment  Growth & Income Fund VII (EGF VII),  both
     affiliated investment programs; and TEC Acquisub, Inc. (TECAI), an indirect
     wholly-owned  subsidiary  of the  Manager,  which  may be used  to  provide
     interim  financing of up to (i) 70% of the  aggregate  book value or 50% of
     the  aggregate  net fair market  value of eligible  equipment  owned by the
     Fund,  plus (ii) 50% of unrestricted  cash held by the borrower.  The Fund,
     EGF VI, EGF VII,  and TECAI  collectively  may  borrow up to $24.5  million
     under the Committed Bridge Facility. Outstanding borrowings by one borrower
     reduce  the  amount  available  to each of the  other  borrowers  under the
     Committed Bridge Facility.  The Committed Bridge Facility also provides for
     a $5.0  million  Letter  of Credit  Facility  for the  eligible  borrowers.
     Individual  borrowings may be outstanding  for no more than 179 days,  with
     all advances  due no later than  December  14,  1999.  Interest  accrues at
     either the prime rate or  adjusted  LIBOR plus  1.625%,  at the  borrower's
     option,  and is set at the time of an advance of funds.  Borrowings  by the
     Fund are guaranteed by the

<PAGE>



               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

7.   NOTES PAYABLE (CONTINUED)

     Manager.  As of December 31, 1998, no eligible borrower had any outstanding
     borrowings  under this  Facility.  The Manager  believes it will be able to
     renew the Committed  Bridge Facility upon its expiration with similar terms
     as those in the current Committed Bridge Facility.

8.   CONCENTRATIONS OF CREDIT RISK

     As of December 31, 1998,  the Fund's  customers  that  accounted for 10% or
     more of the  total  consolidated  revenues  for  the  owned  equipment  and
     partially owned equipment during 1998, 1997, and 1996 were TAP Air Portugal
     (12% in 1997, and 20% in 1996) and Canadian  Airlines Int'l.  (11% in 1997,
     and 17% in  1996).  No  single  lessee  accounted  for more than 10% of the
     consolidated  revenues  for the year  ended  December  31,  1998.  In 1998,
     however, Triton Aviation Services, Ltd. purchased three commercial aircraft
     from  the  Fund and the  gain  from  the  sale  accounted  for 23% of total
     consolidated  revenues from wholly and partially owned equipment.  In 1997,
     Hercules Rig  Corporation,  also a lessee,  purchased  the mobile  offshore
     drilling unit that they were leasing from the Fund.  The lease revenues and
     the gain from the sale  accounted  for 11% of total  consolidated  revenues
     during 1997.

     As of December  31, 1998 and 1997,  the  Manager  believes  the Fund had no
     significant  concentrations  of credit  risk  that  could  have a  material
     adverse effect on the Fund.

9.   INCOME TAXES

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

     As of December 31, 1998, there were temporary  differences of approximately
     $27.5 million  between the financial  statement  carrying values of certain
     assets and  liabilities and the federal income tax basis of such assets and
     liabilities,   primarily  due  to  differences  in  depreciation   methods,
     equipment  reserves,  provisions for bad debts,  lessee's prepaid deposits,
     and the tax treatment of syndication costs.

10.  RESTATEMENT

     The financial statements have been restated to reflect the consolidation of
     the Fund's majority  interests in greater than 50% owned USPE's  previously
     reported  under the  equity  method  of  accounting  for the  years  ending
     December 31, 1998 and 1997.

     As a result of the  consolidation,  total assets,  total  liabilities,  and
     minority interests changed as of December 31, 1998 and 1997 as follows:
<TABLE>
<CAPTION>

                                           1998                                1997
                               As reported         Amended          As reported        Amended
                          ----------------------------------   ---------------------------------
     <S>                         <C>               <C>              <C>             <C>
     Total assets                $ 93,466          $ 99,635         $  101,482      $  108,524
     Total liabilities             28,441            28,905             29,008          29,337
     Minority interests                --             5,705                 --           6,713

</TABLE>


<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

10.  RESTATEMENT (CONTINUED)

     Additionally,  as a result  of the  consolidation,  total  revenues,  total
     expenses,  and equity in net income of USPEs  changed  for the years  ended
     December 31, 1998 and 1997 as follows:
<TABLE>
<CAPTION>


                                             1998                          1997
                                 As reported       Amended      As reported     Amended
                                ---------------------------   --------------------------
            <S>                   <C>            <C>            <C>           <C>
            Total revenues        $  24,255      $  28,301      $  19,445     $  22,920
            Total expenses           22,867         26,375         22,767        26,425
            Equity in net
            income of USPEs           2,928          2,390          1,270         1,453
            Net income            $   4,316      $   4,316      $  (2,050)    $  (2,052)
</TABLE>


     The consolidation of the Fund's majority interests in USPE's did not change
     members'  capital  or net  income  (loss)  as of and for the  years  ending
     December 31, 1998 and 1997.

11.  SUBSEQUENT EVENT

     During  February and March 1999,  the Fund sold part of its interest in two
     trusts that owned a total of three stage II commercial  aircraft with a net
     book value of $3.4 million for proceeds of $6.0  million.  The Fund expects
     that its  remaining  interest in the two trusts that still own two stage II
     aircraft  engines and a portfolio of aircraft  rotables will be sold before
     the end of March 1999.









                     (This space intentionally left blank.)


<PAGE>


               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                                INDEX OF EXHIBITS


  Exhibit                                                              Page

    4.     Operating Agreement of Fund.                                 *

   10.1    Management Agreement between Fund and                        *
           PLM Investment Management, Inc.

   10.2    $25.0 Million Note Agreement, dated as of December 30, 1996. *

   10.3    Fourth Amended and restated Warehousing Credit Agreement, dated
           as of December 15, 1998, with First Union National Bank      *

   24.     Powers of Attorney.                                          *






* Incorporated by reference.  See page 28 of this report.