CANADIAN AIR TRUST #2
                                    (A TRUST)

                              FINANCIAL STATEMENTS












                          INDEPENDENT AUDITORS' REPORT






The Owners
Canadian Air Trust #2

We have audited the accompanying balance sheet of the Canadian Air Trust #2 (the
Trust) as of December 31, 1998, and the statements of income, changes in owners'
equity, and cash flows for the years then ended. These financial  statements are
the responsibility of the owner's  management.  Our responsibility is to express
an opinion on these financial statements based on our audit.

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

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

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


/S/  KPMG LLP

SAN FRANCISCO, CALIFORNIA
June 9, 2000







                              CANADIAN AIR TRUST #2
                                    (A TRUST)
                                 BALANCE SHEETS
                                  DECEMBER 31,
                            (IN THOUSANDS OF DOLLARS)





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

  Accounts receivable                           $         --  $            244
                                                --------------------------------

        Total assets                            $         --  $            244
                                                ================================


  LIABILITIES AND OWNERS' EQUITY

  Liabilities:
  Due to affiliates                             $        --  $               5
                                                --------------------------------
    Total liabilities                                     -                  5

  Owners' equity                                         --                239
                                                --------------------------------

        Total liabilities and owner's equity    $        --  $             244
                                                ================================


























      See accompanying auditors' report and notes to financial statements.






                              CANADIAN AIR TRUST #2
                                    (A TRUST)
                              STATEMENTS OF INCOME
                        FOR THE YEARS ENDED DECEMBER 31,
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

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

<S>                                                    <C>                  <C>                    <C>
  Lease revenue                                        $            --      $           --         $     1,599
  Interest income                                                   31                  29                  47
  Gain from the sale of aircraft                                    --                  --               8,196
                                                       ---------------------------------------------------------
    Total revenues                                                  31                  29               9,842
                                                       ---------------------------------------------------------

  EXPENSES

  Depreciation and amortization expense                             --                  --                 853
  Management fees to affiliate                                      --                  --                  26
  Repairs and maintenance expense                                   --                  --                  --
  Insurance expense                                                 --                  --                  16
  Administrative expenses to affiliates                             --                  --                  37
  Administrative expenses                                           --                  --                   5
                                                       ---------------------------------------------------------
    Total expenses                                                  --                  --                 937
                                                       ---------------------------------------------------------

        Net income                                     $            31      $           29         $     8,905
                                                       =========================================================

</TABLE>





















      See accompanying auditors' report and notes to financial statements.






                              CANADIAN AIR TRUST #2
                                    (A TRUST)
                     STATEMENTS OF CHANGES IN OWNERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
                            (IN THOUSANDS OF DOLLARS)








   Owners' equity at December 31, 1997                      $        15,599

  Net income                                                          8,905

  Distributions paid                                                (24,066)
                                                            -----------------

   Owners' equity at December 31, 1998                                  438

  Net income                                                             29

  Distributions paid                                                   (228)
                                                            -----------------

    Owners' equity at December 31, 1999 (unaudited)                     239

  Net income                                                             31

  Distributions paid                                                   (270)
                                                            -----------------

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






















      See accompanying auditors' report and notes to financial statements.





                              CANADIAN AIR TRUST #2
                                    (A TRUST)
                            STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

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

  OPERATING ACTIVITIES

<S>                                                             <C>                <C>               <C>
  Net income                                                    $            31    $            29   $          8,905
  Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
    Depreciation and amortization                                            --                 --                853
    Gain from the sale of aircraft                                           --                 --             (8,196)
    Changes in operating assets and liabilities:
      Accounts receivable                                                   244                194                958
      Prepaid deposits                                                       --                 --                  6
      Accounts payable and accrued expenses                                  --                 --                (23)
      Due to affiliates                                                      (5)                 5                (41)
      Lessee deposits                                                        --                 --               (288)
                                                                -------------------------------------------------------
        Net cash provided by operating activities                           270                228              2,174
                                                                -------------------------------------------------------

  INVESTING ACTIVITIES

  Transfer of equipment to owner                                             --                 --              1,413
  Proceeds from the sale of aircraft                                         --                 --             13,313
                                                                -------------------------------------------------------
        Net cash provided by investing activities                            --                 --             14,726
                                                                -------------------------------------------------------

  FINANCING ACTIVITIES

  Proceeds from affiliates                                                   --                 --              7,166
  Distributions paid                                                       (270)              (228)           (24,066)
                                                                -------------------------------------------------------
        Net cash used in financing activities                              (270)              (228)           (16,900)
                                                                -------------------------------------------------------

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


  Supplemental information
  Noncash transfer of equipment at net book value to
    owner                                                       $            --    $            --   $          1,413
                                                                =======================================================

</TABLE>






      See accompanying auditors' report and notes to financial statements.






                              CANADIAN AIR TRUST #2
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

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

The  Trust  contained  a  provision  for  allocating  specific  aircraft  to the
beneficial owners under certain  circumstances.  Two of the commercial aircraft,
one owned by EGF III and another owned by EGF V, were transferred to the owner's
limited  partnership  during 1998 and 1996,  respectively.  All of the remaining
aircraft  in the Trust  had been sold as of  December  31,  1998.  The Trust was
liquidated in 2000.

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

The aircraft were purchased during 1995 for $30.1 million.  EGF III, EGF IV, EGF
V, EGF VI,  and EGF VII (the  EGF's)  collectively  paid  acquisition  and lease
negotiation fees of $1.4 million to PLM Worldwide  Management  Services (WMS), a
wholly-owned subsidiary of PLM International,  Inc., based on the pro-rata share
of the cost of the  aircraft  purchased.  No fees  were paid by Fund I. Upon the
purchase of the  aircraft,  a lease with  Canadian  Airlines  International  was
entered into with a term expiring in September 2001.

These accompanying  financial statements have been prepared on the accrual basis
of accounting in accordance with generally accepted accounting principles.  This
requires  management to make estimates and assumptions  that affect the reported
amounts  of  assets  and  liabilities,  disclosures  of  contingent  assets  and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those  estimates.  All amounts as of and for the years ended  December  31,
2000 and 1999 are unaudited.

     OPERATIONS

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

     CASH AND CASH EQUIVALENTS

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







                              CANADIAN AIR TRUST #2
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     ACCOUNTING FOR LEASES

The aircraft  under the Trust were leased under an  operating  lease.  Under the
operating  lease method of  accounting,  the leased assets were recorded at cost
and depreciated over its estimated useful life. Rental payments were recorded as
revenue over the lease term in accordance  with Financial  Accounting  Standards
Board Statement No. 13 "Accounting  for Leases".  Lease  origination  costs were
amortized equally over 36 months.

     DEPRECIATION

Depreciation  of aircraft  equipment  was  computed  using the  double-declining
balance method,  taking a full month's depreciation in the month of acquisition,
based  upon an  estimated  useful  life of 12  years.  Acquisition  fees of $1.2
million  were  paid  to WMS and  were  capitalized  as  part of the  cost of the
equipment and amortized over the life of the aircraft.

     AIRCRAFT

In accordance with the Financial  Accounting  Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", FSI reviewed the carrying value of the aircraft under the Trust
at least quarterly, and whenever circumstances indicated that the carrying value
of the aircraft may not be  recoverable  in relation to expected  future  market
conditions for the purpose of assessing  recoverability of the recorded amounts.
If  projected  undiscounted  future cash flows and fair value were less than the
carrying value of the aircraft,  a loss on revaluation would have been recorded.
No reductions to the carrying  value of the aircraft were required  during 2000,
1999, or 1998.

     REPAIRS AND MAINTENANCE

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

     NET INCOME AND CASH DISTRIBUTIONS TO OWNERS

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

     COMPREHENSIVE INCOME

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







                              CANADIAN AIR TRUST #2
                                    (A TRUST)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

2.   TRANSACTIONS WITH AFFILIATES

Under the equipment management agreement,  IMI received a monthly management fee
equal to the  lessor of (i) the fees that  would be  charged  by an  independent
third party for similar  services for similar  equipment or (ii) 5% of the gross
lease revenues  attributable  to equipment that is subject to operating  leases.
The Trust's  management  fee expense to affiliate  was $-0-,  $-0-,  and $26,000
during 2000, 1999, and 1998, respectively.

The Trust  reimbursed FSI $-0-,  $-0-, and $37,000 during 2000,  1999, and 1998,
respectively,   for  data  processing  and   administrative   expenses  directly
attributable to the Trust.

Trust  management  fees payable to IMI was $5,000 as of December  31,  1999.  No
Trust management fees were payable to IMI as of December 31, 2000.

3.   GEOGRAPHIC INFORMATION

The aircraft were leased and operated in Canada.

4.   INCOME TAXES

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

5.   CONCENTRATIONS OF CREDIT RISK

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

The aircraft in the Trust were on lease to only one customer  during 1998.  This
lessee, Canadian Airlines International, accounted for all of the lease revenue.
Triton Aviation  Services,  Ltd.  purchased three  commercial  aircraft with the
existing  lease attached from the Trust and the gain from the sale accounted for
83% of total consolidated revenues during 1998.

As of December 31, 2000, the manager believes the Trust had no other significant
concentrations  of credit risk that could have a material  adverse effect on the
Trust.