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, 2001 and 2000. 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 auditing standards generally
accepted in the United States.  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, 2001 and 2000,  in  conformity  with
accounting principles generally accepted in the United States.



                                                                 ARTHUR ANDERSEN

San Francisco, California,
November 30, 2001

                                  Page 1 of 10
<PAGE>

               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                             September 30,
                                                           2001         2000
                                                           ----         ----

Cash ................................................. $       631  $    35,703
Due from Phoenix Leasing Cash Distribution
  Fund V, L.P. .......................................     170,986      184,586
Investment in Phoenix Leasing Cash Distribution
  Fund V, L.P. .......................................      53,850       35,436
                                                       -----------  -----------

         Total Assets ................................ $   225,467  $   255,725
                                                       ===========  ===========


                      LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:

     Accounts payable and accrued expenses ........... $     3,334  $     4,550
                                                       -----------  -----------

         Total Liabilities ...........................       3,334        4,550
                                                       -----------  -----------

Minority Interest in Consolidated Subsidiary .........     159,608      159,608
                                                       -----------  -----------


Shareholder's Equity:

     Common Stock, without par value, 100 shares
       authorized and outstanding ....................   4,000,100    4,000,100
     Retained earnings ...............................   2,940,612    2,586,309
     Less:
       Note receivable from affiliate ................  (4,000,000)  (4,000,000)
       Due from Phoenix Leasing Incorporated and
         affiliates ..................................  (2,878,187)  (2,494,842)
                                                       -----------  -----------

         Total Shareholder's Equity ..................      62,525       91,567
                                                       -----------  -----------

         Total Liabilities and Shareholder's Equity .. $   225,467  $   255,725
                                                       ===========  ===========

      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, 2001


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.

         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  controls 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, 2001 and 2000 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, 2001 and 2000,
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, 2000 and
1999, 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.

                                       3
<PAGE>

               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2001


Note 5.  Income Taxes:

         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 $12,367 and $24,330 and
acquisition  fees of $158,619 and  $160,256,  as of September 30, 2001 and 2000,
respectively, are included in Due from Phoenix Leasing Cash Distribution Fund V,
L.P. on the consolidated balance sheets.

Note 7.  Related Parties:

         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
$371,758 and $606,730 for the twelve  months ended  September 30, 2001 and 2000,
respectively.

Note 8.  Commitments and Contingencies:

         On October 28, 1997, a Class Action  Complaint  (the  "Complaint")  was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix   Securities  Inc.  and  Phoenix  American  Inc.  (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  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.

                                       4
<PAGE>

               PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2001


Note 8.  Commitments and Contingencies (continued):

         Plaintiffs  severed  one cause of action  from the  Complaint,  a claim
related to the marketing and sale of Cash  Distribution  Fund V, and transferred
it to Marin  County  Superior  Court  (the  "Berger  Action").  Plaintiffs  then
dismissed the remaining claims in Sacramento Superior Court and re-filed them in
a separate lawsuit making similar allegations (the "Ash Action").

         The Ash  complaint  includes six causes of action:  breach of fiduciary
duty,  constructive  fraud,  judicial  dissolution of Cash Distribution Fund IV,
judicial  dissolution of Cash Distribution Fund V, accounting and alter ego. The
Companies  recently  answered the complaint and  discovery  has  commenced.  The
plaintiffs' depositions have been taken and plaintiffs recently took depositions
of the Companies.

         The Berger  complaint  relates to  alleged  misrepresentations  made in
connection  with the offering of Cash  Distribution  Fund V. The Companies  have
answered the complaint and discovery has commenced.  A class has been certified.
The  plaintiffs'  deposition  have  been  taken  and  plaintiffs  recently  took
depositions of defendants.

         On August 28, 2000, the Ash and Berger actions were  consolidated  (the
"Consolidated Action") pursuant to stipulation by both parties.

         On July 11, 2001, the parties  agreed to a memorandum of  understanding
outlining a settlement of the Consolidated  Action.  The terms of the settlement
are confidential.  The Court has granted preliminary approval of the settlement.
The settlement will not materially  effect the financial  position or results of
operations of the Partnership.

                                       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, 2001
and 2000. 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 auditing standards generally
accepted in the United States.  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, 2001 and 2000, in conformity with accounting principles
generally accepted in the United States.





San Francisco, California,
November 30, 2001

                                       6
<PAGE>

                       PHOENIX LEASING ASSOCIATES II L.P.

                                 BALANCE SHEETS

                                     ASSETS


                                                                September 30,
                                                               2001       2000
                                                               ----       ----

Cash .....................................................   $    252   $ 35,343
Due from Phoenix Leasing Cash Distribution
  Fund V, L.P ............................................    170,986    184,586
Investment in Phoenix Leasing Cash Distribution
  Fund V, L.P. ...........................................     53,850     35,436
                                                             --------   --------

         Total Assets ....................................   $225,088   $255,365
                                                             ========   ========



                       LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

     Accounts payable and accrued expenses ...............   $  1,667   $  2,275
     Due to General Partner ..............................     62,823     92,492
                                                             --------   --------

         Total Liabilities ...............................     64,490     94,767
                                                             --------   --------
Partners' Capital:

     General Partner (99 partnership units) ..............        990        990
     Limited Partner (99 partnership units) ..............    159,608    159,608
                                                             --------   --------

         Total Partners' Capital .........................    160,598    160,598
                                                             --------   --------

         Total Liabilities and Partners' Capital .........   $225,088   $255,365
                                                             ========   ========

      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, 2001


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.

         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 $12,367 and $24,330
and acquisition fees of $158,619 and $160,256 as of September 30, 2001 and 2000,
respectively, are included in Due from Phoenix Leasing Cash Distribution Fund V,
L.P. on the balance sheets.

                                       8
<PAGE>

                       PHOENIX LEASING ASSOCIATES II L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2001


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:

         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
$371,758 and $606,730 for the twelve  months ended  September 30, 2001 and 2000,
respectively.

Note 7.  Commitments and Contingencies:

         On October 28, 1997, a Class Action  Complaint  (the  "Complaint")  was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix   Securities  Inc.  and  Phoenix  American  Inc.  (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  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 Cash  Distribution  Fund V, and transferred
it to Marin  County  Superior  Court  (the  "Berger  Action").  Plaintiffs  then
dismissed the remaining claims in Sacramento Superior Court and re-filed them in
a separate lawsuit making similar allegations (the "Ash Action").

         The Ash  complaint  includes six causes of action:  breach of fiduciary
duty,  constructive  fraud,  judicial  dissolution of Cash Distribution Fund IV,
judicial  dissolution of Cash Distribution Fund V, accounting and alter ego. The
Companies  recently  answered the complaint and  discovery  has  commenced.  The
plaintiffs' depositions have been taken and plaintiffs recently took depositions
of the Companies.

         The Berger  complaint  relates to  alleged  misrepresentations  made in
connection  with the offering of Cash  Distribution  Fund V. The Companies  have
answered the complaint and discovery has commenced.  A class has been certified.
The  plaintiffs'  deposition  have  been  taken  and  plaintiffs  recently  took
depositions of defendants.

                                       9
<PAGE>

                       PHOENIX LEASING ASSOCIATES II L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2001


Note 7.  Commitments and Contingencies (continued):

         On August 28, 2000, the Ash and Berger actions were  consolidated  (the
"Consolidated Action") pursuant to stipulation by both parties.

         On July 11, 2001, the parties  agreed to a memorandum of  understanding
outlining a settlement of the Consolidated  Action.  The terms of the settlement
are confidential.  The Court has granted preliminary approval of the settlement.
The settlement will not materially  effect the financial  position or results of
operations of the Partnerships.

                                       10