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
September  30,  1999 and June  30,  1998.  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 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 balance sheets referred to above present fairly, in
all material respects,  the financial position of Phoenix Leasing Associates II,
Inc. and  subsidiary  as of September  30, 1999 and June 30, 1998, in conformity
with generally accepted accounting principles.





San Francisco, California,                                   ARTHUR ANDERSEN LLP
December 28, 1999


                                   Page 1 of 9
<PAGE>


               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                      September 30,   June 30,
                                                          1999          1998
                                                          ----          ----


Cash and cash equivalents                             $     1,128   $       367
Due from Phoenix Leasing Incorporated                   2,083,737     1,569,493
Due from Phoenix Leasing Cash Distribution
  Fund V, L.P                                             146,168       268,759
Investment in Phoenix Leasing Cash Distribution
  Fund V, L.P.                                             40,766          --
                                                      -----------   -----------

         Total Assets                                 $ 2,271,799   $ 1,838,619
                                                      ===========   ===========


                      LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:

     Accounts payable and accrued expenses            $     4,269   $       729
     Deficit investment in Phoenix Leasing Cash
       Distribution Fund V, L.P.                             --          20,766
                                                      -----------   -----------

         Total Liabilities                                  4,269        21,495
                                                      -----------   -----------

Minority Interest in Consolidated Subsidiary               82,962        89,649
                                                      -----------   -----------


Shareholder's Equity:

     Common Stock, without par value, 100 shares
       authorized and outstanding                       4,000,100     4,000,100
     Retained earnings                                  2,184,468     1,727,375
     Less:
       Note receivable from affiliate                  (4,000,000)   (4,000,000)
                                                      -----------   -----------

         Total Shareholder's Equity                     2,184,568     1,727,475
                                                      -----------   -----------

         Total Liabilities and Shareholder's Equity   $ 2,271,799   $ 1,838,619
                                                      ===========   ===========

      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

                               September 30, 1999

Note 1.  Organization:

         Phoenix Leasing  Associates II, Inc.,  (the Company),  was formed under
the laws of Nevada on June 14, 1990. 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.

         Effective  July 1, 1998, the Company and all its  subsidiaries  changed
its fiscal year end from June 30 to September 30.

         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  September  30, 1999 and June 30,
1998 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.


Note 2.  Principles of Consolidation:

         The  consolidated  balance sheets as of September 30, 1999 and June 30,
1998,  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   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 September 30, 1999 and
June 30,  1998,  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


                                       3
<PAGE>

               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 1999

Note 4.  Notes Receivable from Affiliate (continued):

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:

         During the year ended June 30, 1998,  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
liability of $165,356 as of June 30, 1998 was  transferred  to PAI in accordance
with the Tax Sharing Agreement between the Company and PAI.

         Effective  July 1, 1998, the Company and all its  subsidiaries  adopted
treatment as an "S"  Corporation  pursuant to the Federal Income Tax Regulations
for tax reporting  purposes.  Federal and state income tax  regulations  provide
that  taxes  on  the  income  or  loss  of the  Company  are  reportable  on the
shareholder's individual return.


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 $55,771 and $91,441 and
acquisition  fees of $90,397 and $177,318 as of September  30, 1999 and June 30,
1998,  respectively,  are included in Due from Phoenix Leasing Cash Distribution
Fund V, L.P. on the Balance Sheet.


Note 7.  Related Parties:

         Phoenix Securities,  Inc., an affiliate of the Company,  received 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
$606,367,  and $753,849 for the twelve months ended  September 30, 1999 and June
30, 1998,  respectively,  and $207,319 for the three months ended  September 30,
1998.


                                       4
<PAGE>

               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 1999


Note 8.  Commitments and Contingencies:

         On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing  Incorporated,  Phoenix  Leasing  Associates,  II and III  LP.,  Phoenix
Securities  Inc.  and  Phoenix  American   Incorporated   (the  "Companies")  in
California  Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution  Funds I through V (the
"Partnerships").  The  Companies  were served with the  Complaint on December 9,
1997. The Complaint sought  declaratory and other relief  including  accounting,
receivership,  imposition of a constructive  trust and judicial  dissolution and
winding up of the Partnerships,  and damages based on fraud, breach of fiduciary
duty and  breach  of  contract  by the  Companies  as  general  partners  of the
Partnerships.

         Plaintiffs  severed  one cause of action  from the  Complaint,  a claim
related to the marketing and sale of CDF V, and  transferred  it to Marin County
Superior Court (the "Berger  Action").  Plaintiffs  then dismissed the remaining
claims in  Sacramento  Superior  Court and  refiled  them in a separate  lawsuit
making similar  allegations (the "Ash Action").  That complaint was subsequently
transferred to Marin County as well.

         Plaintiffs  have amended the Berger Action twice.  Defendants  recently
answered the complaint.  Discovery has recently commenced.  The Companies intend
to vigorously defend the Complaint.

         Defendants have filed a demurrer to the Ash Complaint, which plaintiffs
amended three times.  Discovery has not yet commenced.  The Companies  intend to
vigorously defend the complaint.


                                       5
<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 September 30, 1999
and June 30, 1998.  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 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 balance sheets referred to above present fairly, in
all material  respects,  the financial position of Phoenix Leasing Associates II
L.P. as of September 30, 1999 and June 30, 1998, in  conformity  with  generally
accepted accounting principles.





San Francisco, California,                                   ARTHUR ANDERSEN LLP
December 28, 1999


                                       6
<PAGE>



                       PHOENIX LEASING ASSOCIATES II L.P.

                                 BALANCE SHEETS

                                     ASSETS


                                                          September 30, June 30,
                                                              1999        1998
                                                              ----        ----


Cash and cash equivalents                                  $    580    $    343
Due from Phoenix Leasing Cash Distribution
  Fund V, L.P                                               146,168     268,759
Investment in Phoenix Leasing Cash Distribution
  Fund V, L.P.                                               40,766        --
                                                           --------    --------

         Total Assets                                      $187,514    $269,102
                                                           ========    ========



                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

     Accounts payable and accrued expenses                 $  2,135    $    365
     Due to General Partner                                 101,427     157,332
     Deficit investment in Phoenix Leasing Cash
       Distribution Fund V, L.P.                               --        20,766
                                                           --------    --------

         Total Liabilities                                  103,562     178,463
                                                           --------    --------


Partners' Capital:

     General Partner (99 partnership units)                     990         990
     Limited Partner (99 partnership units)                  82,962      89,649
                                                           --------    --------

         Total Partners' Capital                             83,952      90,639
                                                           --------    --------

         Total Liabilities and Partners' Capital           $187,514    $269,102
                                                           ========    ========

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

                                       7
<PAGE>


                       PHOENIX LEASING ASSOCIATES II L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 1999


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 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.

         Effective  July 1, 1998, the  Partnership  changed its fiscal year from
June 30 to September 30.

         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  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 balance sheets in conformity with generally accepted
accounting  principles  requires  management to makes  estimates and assumptions
that affect the reported  amounts of assets and  liabilities  and  disclosure of
contingent  assets and  liabilities  at the date of the balance  sheets.  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 $55,771 and $91,441
and  acquisition  fees of $90,397 and $177,318 as of September 30, 1999 and June
30,  1998,  respectively,   are  included  in  Due  from  Phoenix  Leasing  Cash
Distribution Fund V, L.P. on the Balance Sheet.


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.

                                       8
<PAGE>

                       PHOENIX LEASING ASSOCIATES II L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 1999

Note 6.  Related Parties:

         Phoenix Securities,  Inc., an affiliate of the Partnership,  received 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
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
$606,367 and $753,849 for the twelve  months ended  September  30, 1999 and June
30, 1998,  respectively,  and $207,319 for the three months ended  September 30,
1998.


Note 7.  Commitments and Contingencies:

         On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing  Incorporated,  Phoenix  Leasing  Associates,  II and III  LP.,  Phoenix
Securities  Inc.  and  Phoenix  American   Incorporated   (the  "Companies")  in
California  Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution  Funds I through V (the
"Partnerships").  The  Companies  were served with the  Complaint on December 9,
1997. The Complaint sought  declaratory and other relief  including  accounting,
receivership,  imposition of a constructive  trust and judicial  dissolution and
winding up of the Partnerships,  and damages based on fraud, breach of fiduciary
duty and  breach  of  contract  by the  Companies  as  general  partners  of the
Partnerships.

         Plaintiffs  severed  one cause of action  from the  Complaint,  a claim
related to the marketing and sale of CDF V, and  transferred  it to Marin County
Superior Court (the "Berger  Action").  Plaintiffs  then dismissed the remaining
claims in  Sacramento  Superior  Court and  refiled  them in a separate  lawsuit
making similar  allegations  (the"Ash Action").  That complaint was subsequently
transferred to Marin County as well.

         Plaintiffs  have amended the Berger Action twice.  Defendants  recently
answered the complaint.  Discovery has recently commenced.  The Companies intend
to vigorously defend the Complaint.

         Defendants have filed a demurrer to the Ash Complaint, which plaintiffs
amended three times.  Discovery has not yet commenced.  The Companies  intend to
vigorously defend the complaint.


                                       9