Exhibit 21 - Page 1 of 10















                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------


To the Venturers of
Phoenix Joint Venture 1994-1

We have audited the accompanying  balance sheets of Phoenix Joint Venture 1994-1
(a  California  general  partnership)  as of December  31, 1996 and 1995 and the
related  statements  of  operations,  venturers'  capital and cash flows for the
years ended December 31, 1996,  1995 and for the period from inception  (October
28, 1994) to December  31, 1994.  These  financial  statements  and the schedule
referred to below are the responsibility of the Joint Venture's management.  Our
responsibility  is to express an opinion on these  financial  statements and the
schedule 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 financial  statements  referred to above present fairly, in
all material respects, the financial position of Phoenix Joint Venture 1994-1 as
of December 31, 1996 and 1995,  and the results of its  operations  and its cash
flows for the two years then ended and for the period  from  inception  (October
28, 1994) to December 31, 1994, in conformity with generally accepted accounting
principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole.  Schedule II is presented for purposes of
complying  with the  Securities  and  Exchange  Commission's  rules and is not a
required  part  of the  basic  financial  statements.  This  schedule  has  been
subjected to the auditing procedures applied in our audit of the basic financial
statements  and, in our opinion,  is fairly  stated in all material  respects in
relation to the basic financial statements taken as a whole.



                                                         ARTHUR ANDERSEN LLP


San Francisco, California
  January 17, 1997


<PAGE>


                                                       Exhibit 21 - Page 2 of 10

                          PHOENIX JOINT VENTURE 1994-1
                                  BALANCE SHEET
                             (Amounts in Thousands)


                                                              December 31,
                                                          1996           1995
                                                          ----           ----

ASSETS

Cash and cash equivalents                               $  291         $  433

Accounts receivable (net of allowance for
  losses on accounts receivable of $51
  and $191 at December 31, 1996 and 1995,
  respectively)                                            230            215

Credits receivable, net                                  1,079          1,237

Assigned monthly rentals, net                              512            691

Equipment on operating leases and held for
  lease (net of accumulated depreciation of
  $1,002 and $849 at December 31, 1996 and
  1995, respectively)                                      521          1,004

Capitalized acquisition fees (net of accumulated
  amortization of $29 and $22 at December 31, 1996
  and 1995, respectively)                                    5             17
                                                        ------         ------

    Total Assets                                        $2,638         $3,597
                                                        ======         ======

LIABILITIES AND VENTURERS' CAPITAL

Liabilities

  Accounts payable and accrued expenses                 $  318         $  399
                                                        ------         ------

  Total Liabilities                                        318            399
                                                        ------         ------

Venturers' Capital                                       2,320          3,198
                                                        ------         ------

  Total Liabilities and Venturers' Capital              $2,638         $3,597
                                                        ======         ======

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                       Exhibit 21 - Page 3 of 10

                          PHOENIX JOINT VENTURE 1994-1
                             STATEMENT OF OPERATIONS
                             (Amounts in Thousands)


                                                                For the period
                                                                from inception
                                                              (October 28, 1994)
                                              December 31,         through
                                             1996      1995   December 31, 1994
                                            ------    ------  -----------------

INCOME

  Rental income                             $1,587    $2,767       $  389

  Gain on sale of equipment                    329       417         --

  Earned income, assigned monthly rentals       33        81           20

  Other income                                  92       109           17
                                            ------    ------       ------

    Total Income                             2,041     3,374          426
                                            ------    ------       ------


EXPENSES

  Lease related operating expenses             641     1,179          169

  Depreciation                                 332       955           77

  Amortization, acquisition fees                 7        21            1

  Management fees to General Partner            97       174           20

  Provision for (recovery of) losses
   on receivables                             (132)      191         --

  General and administrative expenses            1         1         --
                                            ------    ------       ------

    Total Expenses                             946     2,521          267
                                            ------    ------       ------


NET INCOME                                  $1,095    $  853       $  159
                                            ======    ======       ======

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                       Exhibit 21 - Page 4 of 10

                          PHOENIX JOINT VENTURE 1994-1
                         STATEMENT OF VENTURERS' CAPITAL
                             (Amounts in Thousands)


Balance at inception, October 28, 1994                           $    0

  Net income                                                        159

  Contributions                                                   4,576
                                                                 ------
Balance, December 31, 1994                                        4,735

  Net income                                                        853

  Distributions                                                  (2,390)
                                                                 ------
Balance, December 31, 1995                                        3,198

  Net income                                                      1,095

  Distributions                                                  (1,973)
                                                                 ------
Balance, December 31, 1996                                       $2,320
                                                                 ======

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                       Exhibit 21 - Page 5 of 10

                          PHOENIX JOINT VENTURE 1994-1
                             STATEMENT OF CASH FLOWS
                             (Amounts in Thousands)


                                                                For the period
                                                                from inception
                                                              (October 28, 1994)
                                                December 31,        through
                                               1996      1995  December 31, 1994
                                              ------    ------ -----------------

Operating Activities:

  Net income                                  $1,095    $  853      $  159
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
    Depreciation                                 332       955          77
    Amortization of acquisition fees               7        21           1
    Amortization of discount on credits          (73)      (92)        (17)
    Gain on sale of equipment                   (329)     (417)       --
    Provision for (recovery of) losses
      on accounts receivable                    (132)      191        --
    Decrease (increase) in accounts receivable   117       (17)       (389)
    Decrease in credits receivable               231       278        --
    Increase (decrease) in accounts payable
      and accrued expenses                       (81)      103         295
    Accrued interest, assigned monthly rentals  --        --           (20)
                                              ------    ------      ------

Net cash provided by operating activities      1,167     1,875         106
                                              ------    ------      ------

Investing Activities:

  Principal payments, assigned
   monthly rentals                               179       199        --
  Proceeds from sale of equipment                480       681        --
  Payment of acquisition fees                      5       (38)       --
                                              ------    ------      ------

Net cash provided by investing activities        664       842        --
                                              ------    ------      ------

Financing Activities:

  Distributions to Venturers                  (1,973)   (2,390)       --
                                              ------    ------      ------

Net cash used by financing activities         (1,973)   (2,390)       --
                                              ------    ------      ------

Increase (decrease) in cash and
 cash equivalents                               (142)      327         106

Cash and cash equivalents, beginning
 of period                                       433       106        --
                                              ------    ------      ------

Cash and cash equivalents, end of period      $  291    $  433      $  106
                                              ======    ======      ======

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                       Exhibit 21 - Page 6 of 10

                          PHOENIX JOINT VENTURE 1994-1

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1996


Note 1.    Organization.

        Phoenix Joint Venture 1994-1 (the "Joint Venture"), a California general
partnership,  was formed on October 28, 1994 for the purpose of  investing  in a
pool of  reproduction  equipment  and  receivables  by several  Phoenix  Leasing
Partnerships (the "Venturers").

        Income or loss is allocated to each Venturer based upon their respective
interest in the Joint Venture. Distributions are made in the same manner.

        As compensation  for its management  services,  the Joint Venture pays a
management fee to Phoenix Leasing  Incorporated  (PLI) based upon the management
fee  rate of each  respective  Venturer  of the  Joint  Venture  applied  to the
Venturers'  respective  interest in the Joint  Venture's  gross revenues for the
quarter, which revenue generally incudes rental and note receipts, proceeds from
the sale of equipment and other income. Any revenues subject to a management fee
at the Joint  Venture  level  will not be  subject  to a  management  fee at the
Venturers' level.

        As compensation  for services  performed in connection with the analysis
of equipment  available to the Joint Venture,  the Managing Venturer receives an
acquisition fee based on the acquisition fee rate of each respective Venturer of
the Joint Venture  applied to the  Venturer's  respective  interest in the Joint
Venture's purchase price of equipment acquired by the Joint Venture.

        Acquisition  fees are  amortized  over the average  expected life of the
assets, principally on a straight-line basis.


Note 2.    Summary of Significant Accounting Policies.

        Leasing  Operations - The Joint Venture's leasing  operations consist of
reproduction equipment  manufactured by Xerox Corporation.  The leases have been
classified as operating leases.

        Under  the  method  of  accounting  for  operating  leases,  the  leased
equipment  is recorded as an asset at cost and  depreciated  on a  straight-line
basis over the estimated  useful life of five years.  Rental income for the year
is determined on the basis of rental payments due for the period under the terms
of the lease.  Maintenance  and repairs of the leased  equipment  are charged to
expense as incurred.

        The Joint Venture's policy is to review  periodically the probability of
recovering its  undepreciated  cost of equipment.  Such reviews  address,  among
other  matters  recent  and  anticipated  technological  developments  affecting
reproduction equipment and competitive factors within the reproduction equipment
marketplace.  Although  remarketing  rental rates are expected to decline in the
future  with  respect  to some of the Joint  Venture's  rental  equipment,  such
rentals  are  expected to exceed  projected  expenses,  including  depreciation.
Should subsequent reviews of the equipment  portfolio indicate that rentals plus
anticipated  sales proceeds will not exceed  expenses in any future period,  the
Joint  Venture  will  revise  its   depreciation   policy  and  may   accelerate
depreciation as appropriate.

        The Joint  Venture has also been  assigned the monthly  rental  payments
from a pool of engineering  and graphics  reprographic  equipment owned by Xerox
Corporation.  The Joint Venture has recorded these assigned  monthly  rentals at
the  discounted  value of the  expected  cash flows.  The excess of the assigned
monthly rentals over the present value of the expected cash flows is recorded as
unearned income.  Unearned income is credited to income monthly over the term of
the  agreement  on a  declining  basis to provide an  approximate  level rate of
return on the unrecovered cost of the investment.

        Non-Cash Investing Activities. In October 1994, the Venturers formed the
Joint Venture to which they contributed the credits issued by Xerox Corporation,
the equipment  purchased and the assigned monthly rentals from Xerox Corporation
as described in Notes 1, 3, 4 and 5 of the financial  statements.  The following
non-cash  activities from this  transaction  were excluded from the statement of
cash flow.


<PAGE>


                                                       Exhibit 21 - Page 7 of 10

                                                           Amounts
                                                        In Thousands
                                                        ------------

           Credit receivable                              $ 1,406
           Equipment purchased                              2,300
           Assigned monthly rentals                           870
                                                          -------

                                                          $ 4,576
                                                          =======

        Cash and Cash Equivalents - Cash and cash equivalents  includes deposits
at banks and investments in money market funds.

        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  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.


Note 3.    Credits Receivable.

        The Joint  Venture  owns  credits  issued by Xerox  Corporation  for the
purchase of products and services from Xerox  Corporation and its  subsidiaries.
The  Credits  granted are  non-transferrable  and are good for a period of seven
years at which time they  expire.  The credits  will be used by Phoenix  Leasing
Incorporated  and affiliates,  who will reimburse the Joint Venture for the fair
market value of the credits used.

        The credits receivable consist of the following at December 31,

                                                     1996         1995
                                                   -------      -------
                                                  (Amounts in Thousands)

           Credits receivable                      $ 1,171      $ 1,402
           Unamortized discount                        (92)        (165)
                                                   -------      -------

           Credits receivable, net                 $ 1,079      $ 1,237
                                                   =======      =======


Note 4.    Assigned Monthly Rentals.

        The Joint Venture has the right to receive  payments on a pool of leased
equipment  pursuant to the terms of an agreement with Xerox Corporation  entered
into on October 28, 1994. Title to this equipment  continues to be held by Xerox
Corporation.  All of the  monthly  rental  payments  received  pursuant  to this
equipment,  net of certain  administrative  and other costs, are passed along to
the Joint  Venture and are  applied  towards the  outstanding  assigned  monthly
rental balance and income.  The end date of this agreement is the earlier of the
Joint Venture's  receipt of $1.2 million in aggregate  payments,  60 months from
the pool start  date or the date on which no  equipment  remains  subject to the
terms of the agreement.  As of December 31, 1996 and 1995, the Joint Venture has
received  cumulative assigned monthly rentals receipts of $491,000 and $280,000,
respectively, pursuant to this agreement.


Note 5.    Equipment on Operating Leases.

        Equipment on lease  consists of  reproduction  equipment  classified  as
operating leases.  During the initial terms of the existing operating leases the
Joint Venture will not recover all the  undepreciated  cost and related expenses
of its rental  equipment and therefore  must remarket a portion of its equipment
in future years.

        Minimum rentals to be received on  non-cancelable  operating  leases for
the years ended December 31, are as follows:



<PAGE>


                                                       Exhibit 21 - Page 8 of 10

                                                      (Amounts in Thousands)

           1997.........................................      $ 232
           1998.........................................         39
           1999 and future..............................          8
                                                              -----

               Total                                         $  279
                                                             ======

        The Joint Venture has an agreement with Xerox Corporation, whereby Xerox
Corporation provides administration, maintenance and repairs of leased equipment
on behalf of the Joint Venture. The agreement terminates upon the earlier of (1)
the Joint Venture receiving a specified dollar amount; (2) 66 months, or (3) the
date on which no equipment  remains.  As compensation for these services,  Xerox
deducts a fee from the monthly rentals and sales proceeds.

        Also pursuant to the vendor agreement,  Xerox Corporation  undertakes to
remarket  and  refurbish  off-lease  equipment  on a best  efforts  basis.  This
agreement permits the Joint Venture to assume the remarketing  function directly
if  certain  conditions  contained  in  the  agreement  are  not  met.  For  its
remarketing  services,  Xerox Corporation is paid a remarketing and refurbishing
fee based on a specified percentage of the monthly rentals received by the Joint
Venture.  On March 15, 1996, the agreement was amended to reduce the remarketing
and refurbishing fees paid to Xerox.

        The Joint  Venture  also  receives  contingent  rental  payments  on its
reproduction  equipment  that  is not  included  in the  minimum  rentals  to be
received.  The  contingent  rentals  consist of a monthly rental payment that is
based upon actual machine usage.


Note 6.    Accounts Payable and Accrued Expenses.

        Accounts  payable  and  accrued  expenses  consist of the  following  at
December 31:

                                                     1996         1995
                                                   -------      -------
                                                  (Amounts in Thousands)

           Equipment lease operations              $   312      $   368
           PLI and affiliates                            6           31
                                                   -------      -------

               Total                               $   318      $   399
                                                   =======      =======


Note 7.    Income Taxes.

        Federal  and state  income  tax  regulations  provide  that taxes on the
income or loss of the Joint  Venture are  reportable  by the  Venturers on their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.

        The net  differences  between the tax basis and the reported  amounts of
the Partnership's assets and liabilities are as follows at December 31:

                            Reported Amounts       Tax Basis      Net Difference
                            ----------------       ---------      --------------
                                            (Amounts in Thousands)
1996
----
        Assets                   $ 2,638            $ 2,930          $ (292)

        Liabilities                  318                316               2

1995
----
        Assets                   $ 3,597            $ 4,081          $ (484)

        Liabilities                  399                395               4


<PAGE>


                                                       Exhibit 21 - Page 9 of 10



Note 8.    Related Entities.

        The Joint  Venture  is  sponsored  and  funded by  various  partnerships
managed  by PLI.  PLI  serves  in the  capacity  of  general  partner  in  other
partnerships  and managing  venturer in other joint  ventures,  all of which are
engaged in the equipment leasing and financing business.


Note 9.    Fair Value of Financial Instruments.

        The  following  methods and  assumptions  were used to estimate the fair
value of each  class of  financial  instrument  for which it is  practicable  to
estimate that value.

Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.

Credits Receivable, Net
The fair value of credits  receivable,  net is estimated by the present value of
future cash flow discounted at an approximate fair value rate.

Assigned Monthly Rents, Net
The carrying  amount of assigned  monthly rents,  net is estimated by taking the
present  value  of the  projected  cash  flow  expected  to be  received  on the
portfolio of equipment that was assigned from Xerox pursuant to the agreement.

        The estimated fair values of the Joint Venture's  financial  instruments
at December 31, 1996 and 1995  approximate the carrying  amounts reported in the
balance sheet.




<PAGE>

<TABLE>
                                                                                        Exhibit 21 - Page 10 of 10

                                           PHOENIX JOINT VENTURE 1994-1

                                                    SCHEDULE II
                                              (Amounts in Thousands)



SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


<CAPTION>
           COLUMN A                COLUMN B         COLUMN C        COLUMN D          COLUMN E          COLUMN F
        Classification            Balance at       Charged to      Charged to        Deductions        Balance at
                                 Beginning of       Expense          Revenue                             End of
                                    Period                                                               Period
------------------------------  --------------- ----------------  -------------  ------------------- --------------

<S>                                  <C>             <C>              <C>               <C>               <C> 
Year ended December 31, 1994
  Allowance for credits receivable   $ 320           $   0            $   0             $   0             $ 320
                                     -----           -----            -----             -----             -----

    Totals                           $ 320           $   0            $   0             $   0             $ 320
                                     =====           =====            =====             =====             =====


Year ended December 31, 1995
  Allowance for credits receivable   $ 320           $   0            $   0             $  80             $ 240
  Allowance for losses on accounts
    receivable                           0             191                0                 0               191
                                     -----           -----            -----             -----             -----

    Totals                           $ 320           $ 191            $   0             $  80             $ 431
                                     =====           =====            =====             =====             =====


Year ended December 31, 1996
  Allowance for credits receivable   $ 240           $   0            $   0             $  38             $ 202
  Allowance for losses on accounts
    receivable                         191               0              132                 8                51
                                     -----           -----            -----             -----             -----

    Totals                           $ 431           $   0            $ 132             $  46             $ 253
                                     =====           =====            =====             =====             =====
</TABLE>