Exhibit 21












                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
Phoenix Leasing Associates II, Inc.:

We have audited the accompanying  consolidated balance sheets of Phoenix Leasing
Associates  II, Inc. (a Nevada  corporation)  and Subsidiary as of June 30, 1997
and 1996.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance  about  whether  the  balance  sheets are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in the balance  sheets.  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 balance  sheets  referred to above present  fairly,  in all
material respects, the financial position of Phoenix Leasing Associates II, Inc.
and  Subsidiary  as of June 30,  1997 and 1996,  in  conformity  with  generally
accepted accounting principles.


San Francisco, California                                 ARTHUR ANDERSEN LLP
  September 5, 1997


                                   Page 1 of 8


<PAGE>



               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                            June 30,
                                                       1997          1996
                                                   ------------  -----------

Cash and cash equivalents ........................ $       172   $       951
Due from PLI .....................................   1,357,879       982,581
Due from CDF V ...................................      69,225        76,830
                                                   -----------   -----------
        Total Assets ............................. $ 1,427,276   $ 1,060,362
                                                   ===========   ===========


                      LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:

  Accounts payable and accrued expenses .......... $     4,798   $     4,399
  Deficit investment in CDF V ....................      58,197        87,750
                                                   -----------   -----------
        Total Liabilities ........................      62,995        92,149
                                                   -----------   -----------

Minority Interest in Consolidated Subsidiary .....      21,548         1,299
                                                   -----------   -----------

Shareholder's Equity:

  Common Stock, without par value, 100 shares
    authorized and outstanding ...................   4,000,100     4,000,100
  Retained earnings ..............................   1,342,633       966,814
  Less:
    Note receivable from affiliate ...............  (4,000,000)   (4,000,000)
                                                   -----------   -----------

        Total Shareholder's Equity ...............   1,342,733       966,914
                                                   -----------   -----------

        Total Liabilities and Shareholder's Equity $ 1,427,276   $ 1,060,362
                                                   ===========   ===========


                 The accompanying notes are an integral part of
                              these balance sheets.


                                        2


<PAGE>



               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                                  JUNE 30, 1997


Note 1.   Organization:

    Phoenix Leasing Associates II, Inc. (the Company), was formed under the laws
of Nevada on June 14,  1990.  The  Company  has a June 30 fiscal  year-end.  The
Company is a wholly-owned  subsidiary of Phoenix Leasing  Incorporated  (PLI), a
California  corporation,  and was  originally  formed  to serve  as the  general
partner of Phoenix Leasing Cash  Distribution Fund V, L.P. (CDF V), a California
limited partnership.

    On August 17, 1990,  the Company  organized  Phoenix  Leasing  Associates II
L.P., a California limited  partnership  (PLAIILP) to replace the Company as the
general  partner in CDF V. The  limited  partner of PLAIILP is Lease  Management
Associates,  Inc., a Nevada corporation controlled by an officer of the Company,
who also owns the  parent  company  of PLI.  As the  general  partner  of CDF V,
PLAIILP earns  acquisition and management fees and receives the profits,  losses
and distributions which are to be allocated to the Company (Note 6). The Company
is the  general  partner of PLAIILP  and, as of June 30, 1997 and 1996 has a 50%
ownership  interest.  This ownership interest is subject to change in accordance
with the  PLAIILP  Partnership  Agreement.  Profits,  losses  and  distributions
attributable  to  acquisition  fees paid to  PLAIILP by CDF V are  allocated  in
proportion to the partners' ownership interests.  All other profits,  losses and
distributions are allocated to the Company.  The financial statements as of June
30, 1997 and 1996 are presented on a consolidated basis as discussed in Note 2.

Note 2.   Principles of Consolidation:

    The consolidated  financial statements as of June 30, 1997 and 1996, include
the accounts of the Company and its subsidiary,  PLAIILP, over which the company
exerts significant control and influence.  All significant intercompany accounts
and transactions  have been eliminated in  consolidation.  The minority interest
represents the limited partner's interest in PLAIILP.

    The  Company  records  its  investment  in CDF V under the equity  method of
accounting.  As general  partner,  the Company has  complete  authority  in, and
responsibility  for, the overall management and control of CDF V, which includes
responsibility  for  supervising  CDF  V's  acquisition,   leasing,  remarketing
activities and its sale of equipment.

Note 3.   Use of Estimates:

    The  preparation of  consolidated  financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of contingent  assets and liabilities at the date of the consolidated
financial statements.
Actual results could differ from those estimates.

Note 4.   Notes Receivable from Affiliate:

    PLI, the sole shareholder of the Company,  as of June 30, 1997 and 1996, has
issued demand promissory notes to the Company totaling $4,000,000.  There are no
restrictions  or covenants  associated  with this note which would  preclude the
Company from receiving the principal or interest  amounts under the terms of the
notes.  The notes  bear  interest  at a rate equal to the lesser of 10% or prime
rate plus 1%, as determined by Citibank,  N.A., New York, New York.  Interest is
payable by PLI on the first business day of each calendar quarter. The principal
amount is due and payable upon demand by the Company.

Note 5.   Income Taxes:

    The Company's  income or loss for tax reporting  purposes is included in the
consolidated  and combined tax returns  filed by Phoenix  American  Incorporated
(PAI),  an  affiliated  Nevada  corporation.  These  returns are prepared on the
accrual basis of accounting.

    Under "Statement of Financial  Accounting Standards No. 109 - Accounting for
Income  Taxes," the Company  computes  taxes as if it was a stand alone company.
The resulting tax provisions of $160,448 and $234,305 as  of June 30,  1997  and


                                        3


<PAGE>



and 1996, respectively, were transferred to PAI in accordance with a Tax Sharing
Agreement between the Company and PAI.

Note 6.   Compensation and Fees:

    PLAIILP  receives  acquisition  fees equal to three  percent of the purchase
price of assets  acquired or financed by CDF V in connection  with the analysis,
selection and acquisition or financing of assets, and the continuing analysis of
the overall portfolio of the CDF V's assets,  and management fees equal to three
percent of CDF V's gross revenues in connection  with managing the operations of
CDF V. In addition,  PLAIILP receives an interest in CDF V's profits, losses and
distributions.  Management fees of $32,599 and $76,521 and  acquisition  fees of
$36,626  and $309 are  included  in Due from CDF V as of June 30, 1997 and 1996,
respectively.

Note 7.   Related Parties:

    Phoenix  Securities,  Inc., an affiliate of the Company,  receives a fee for
wholesaling  activities performed in connection with the offering of the limited
partnership units of CDF V.

    The Company has entered into an agreement with PLI, whereby PLI will provide
management   services  to  PLAIILP  in  connection   with  the   operations  and
administration  of CDF V. In consideration for the services and activities to be
performed  by PLI  pursuant to this  agreement,  the Company pays PLI fees in an
amount equal to: Three  percent of CDF V's  cumulative  gross  revenues plus the
lesser of three  percent of the  purchase  price of  equipment  acquired  by and
financing  provided to businesses by CDF V or 100% of the net cash  attributable
to the  acquisition  fee which has been  distributed to the Company plus 100% of
all other net cash from operations of PLAIILP. Management fees paid to PLI equal
$704,067 and $759,627 for the year ended June 30, 1997 and 1996, respectively.


                                        4


<PAGE>


















                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of
Phoenix Leasing Associates II L.P.:

We have audited the accompanying balance sheets of Phoenix Leasing Associates II
L.P. (a  California  limited  partnership)  as of June 30, 1997 and 1996.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance  about  whether  the  balance  sheets are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in the balance  sheets.  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 balance  sheets  referred to above present  fairly,  in all
material respects,  the financial position of Phoenix Leasing Associates II L.P.
as of June 30, 1997 and 1996, in conformity with generally  accepted  accounting
principles.


San Francisco, California                                 ARTHUR ANDERSEN LLP
  September 5, 1997


                                        5


<PAGE>



                       PHOENIX LEASING ASSOCIATES II L.P.

                                 BALANCE SHEETS

                                     ASSETS

                                                          June 30,
                                                     1997          1996
                                                   -------       -------

Cash and cash equivalents ........................ $    77       $   848
Due from CDF V ...................................  69,225        76,830
Due from General Partner .........................  13,832        14,561
                                                   -------       -------
        Total Assets ............................. $83,134       $92,239
                                                   =======       =======


                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

  Accounts payable and accrued expenses .......... $ 2,399       $ 2,200
  Deficit investment in CDF V ....................  58,197        87,750
                                                   -------       -------
        Total Liabilities ........................  60,596        89,950
                                                   -------       -------

Partners' Capital:

  General Partner (99 partnership units) .........     990           990
  Limited Partner (99 partnership units) .........  21,548         1,299
                                                   -------       -------
        Total Partners' Capital ..................  22,538         2,289
                                                   -------       -------

        Total Liabilities and Partners' Capital .. $83,134       $92,239
                                                   =======       =======


                 The accompanying notes are an integral part of
                              these balance sheets.


                                        6


<PAGE>



                       PHOENIX LEASING ASSOCIATES II L.P.

                           NOTES TO THE BALANCE SHEETS

                                  JUNE 30, 1997


Note 1.   Organization:

    Phoenix Leasing  Associates II L.P., a California  limited  partnership (the
Partnership), was formed under the laws of the State of California on August 17,
1990, to act as the general partner of Phoenix Leasing Cash Distribution Fund V,
L.P. (CDF V), a California limited  partnership.  The Partnership's  fiscal year
ends on June 30 of each year. The general  partner of the Partnership is Phoenix
Leasing  Associates II, Inc.  (PLAII),  a Nevada  corporation  and  wholly-owned
subsidiary of Phoenix Leasing Incorporated (PLI), a California corporation.  The
limited  partner of the  partnership  is Lease  Management  Associates,  Inc., a
Nevada  corporation  controlled  by an officer of PLAII,  who owns the  ultimate
parent of PLAII.

    The  Partnership  records its investment in CDF V under the equity method of
accounting.  As general partner,  the Partnership has complete authority in, and
responsibility  for, the overall management and control of CDF V, which includes
responsibility  for supervising CDF V's  acquisition,  leasing,  remarketing and
sale of equipment.

Note 2.   Income Taxes:

    The  Partnership  is not  subject to federal and state  income  taxes on its
income.  Federal and state income tax regulations  provide that items of income,
gain,  loss  and  deductions,  credits  and  tax  preference  items  of  limited
partnerships  are  reportable  by the  individual  partners in their  respective
income tax returns.  Accordingly,  no liability for such taxes has been recorded
on the Partnership's balance sheets.

Note 3.   Use of Estimates:

    The  preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements. Actual results could differ from those estimates.

Note 4.   Compensation and Fees:

    The  Partnership  receives  acquisition  fees equal to three  percent of the
purchase  price of assets  acquired or financed by CDF V in connection  with the
analysis,  selection and acquisition or financing of assets,  and the continuing
analysis of the overall  portfolio of CDF V's assets,  and management fees equal
to three  percent of CDF V's gross  revenues in  connection  with  managing  the
operations of CDF V. In addition,  the  Partnership  receives an interest in CDF
V's profits,  losses and  distributions.  Management fees of $32,599 and $76,521
and  acquisition  fees of $36,626 and $309 are  included in Due from CDF V as of
June 30, 1997 and 1996, respectively.

Note 5.   Allocation of Profits, Losses and Distributions:

    Profits and losses  attributable to acquisition fees paid to the Partnership
by  CDF V are  allocated  to the  partners  in  proportion  to  their  ownership
interests.  All other profits and losses are  allocated to PLAII.  Distributions
are made in accordance with the terms of the partnership agreement.

Note 6.   Related Parties:

    Phoenix  Securities,  Inc., an affiliate of the Partnership,  receives a fee
for  wholesaling  activities  performed in  connection  with the offering of the
limited partnership units of CDF V.

    PLAII has  entered  into an  agreement  with PLI  whereby  PLI will  provide
management  services to the  Partnership  in connection  with the operations and
administration  of CDF V. In consideration for the services and activities to be
performed  by PLI pursuant to this  agreement,  PLAII pays PLI fees in an amount
equal to: Three percent of CDF V's cumulative  gross revenues plus the lesser of
three  percent of the  purchase  price of  equipment  acquired by and  financing
provided  to  businesses  by CDF V or  100% of the net  cash  attributed  to the


                                        7


<PAGE>



acquisition  fee which has been  distributed to PLAII plus 100% of all other net
cash  from  operations  of the  Partnership.  Management  fees paid to PLI equal
$704,067 and $759,627 for the year ended June 30, 1997and 1996, respectively.


                                        8