<PAGE>


                                                       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, 1995 and 1994 and the
related statements of operations, venturers' capital and cash flows for the year
ended December 31, 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 at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for the year ended December 31, 1995 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 9, 1996


<PAGE>

<TABLE>
                                                                                                       Exhibit 21 - Page 2 of 10

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

<CAPTION>
                                                                                                     December 31,
                                                                                                 1995           1994
                                                                                                 ----           ----

ASSETS
<S>                                                                                          <C>            <C>
Cash and cash equivalents                                                                    $     433      $     106

Accounts receivable (net of allowance for losses on accounts
  receivable of $191 and $0 at December 31, 1995 and 1994, respectively)                           215            389

Credits receivable, net                                                                          1,237          1,423

Assigned monthly rentals, net                                                                      691            890

Equipment on operating leases and held for lease (net of
  accumulated depreciation of $849 and $77 at December
  31, 1995 and 1994, respectively)                                                               1,004          2,223
 
Capitalized acquisition fees (net of accumulated amortization
  of $22 and $1 at December 31, 1995 and 1994, respectively)                                        17             38
                                                                                             ---------      ---------

     Total Assets                                                                            $   3,597      $   5,069
                                                                                             =========      =========

LIABILITIES AND VENTURERS' CAPITAL

Liabilities

   Accounts payable and accrued expenses                                                     $     399      $     334
                                                                                             ---------      ---------

     Total Liabilities                                                                               399            334
                                                                                             ---------      ---------

Venturers' Capital                                                                               3,198          4,735
                                                                                             ---------      ---------

     Total Liabilities and Venturers' Capital                                                  $   3,597      $   5,069
                                                                                             =========      =========

                                             The accompanying notes are an integral
                                                    part of these statements.
</TABLE>
<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
                                                   1995    December 31, 1994
                                              -----------   -----------------

INCOME

   Rental income                                  $2,767        $  389

   Gain on sale of equipment                         417          --

   Earned income, assigned monthly rentals            81            20

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

     Total Income                                  3,374           426
                                                  ------        ------


EXPENSES

   Lease related operating expenses                1,179           169

   Depreciation                                      955            77

   Amortization, acquisition fees                     21             1

   Management fees to General Partner                174            20

   Provision for losses on receivables               191          --

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

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


NET INCOME                                        $  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
                                                               =======


                     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
                                                     1995      December 31, 1994
                                                 ------------  -----------------

Operating Activities:

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

Net cash provided by operating activities              1,794          106
                                                     -------        -----

Investing Activities:

   Principal payments, notes receivable                  280           --
   Proceeds from sale of equipment                       681           --
   Payment of acquisition fees                           (38)          --
                                                     -------        -----

Net cash provided by investing activities                923           --
                                                     -------        -----

Financing Activities:
  
   Distributions to Venturers                         (2,390)          --
                                                     -------        -----

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

Increase in cash and cash equivalents                    327          106

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

Cash and cash equivalents, end of period             $   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, 1995


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 will be 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 amounts reported in the financial
statements  and  accompanying  notes.  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,

                                                           1995         1994
                                                           ----         ----
                                                        (Amounts in Thousands)

         Credits receivable                             $ 1,402      $ 1,680
         Unamortized discount                              (165)        (257)
                                                        -------      -------
  
         Credits receivable, net                        $ 1,237      $ 1,423
                                                        =======      =======


Note 4.  Assigned Monthly Rentals.

         The Joint Venture has obtained the right to receive  payments on a pool
of  leased  equipment   pursuant  to  the  terms  of  an  agreement  with  Xerox
Corporation.  Title to this equipment continues to be held by Xerox Corporation.
As a result of this  agreement,  the Joint Venture has been assigned the monthly
rentals  from  a  designated  pool  of  engineering  and  graphics  reprographic
equipment  that are  subject  to lease.  The  agreement  provides  for the Joint
Venture to receive monthly  payments from such pool of equipment for a period of
either three or five years,  depending upon the  performance of the portfolio as
measured during the first two years. All of the monthly rental payments pursuant
to this equipment,  net of certain  administrative  and other costs,  are passed
along to the Joint Venture and will be applied towards the outstanding  assigned
monthly rentals balance and income.

         The assigned monthly rentals consist of the following at December 31,

                                                           1995         1994
                                                           ----         ----
                                                         (Amounts in Thousands)

         Assigned monthly rentals                         $ 720      $ 1,000
         Less:  Unearned income                             (29)        (110)
                                                          -----      -------

         Assigned monthly rentals, net                    $ 691      $   890
                                                          =====      =======



<PAGE>


                                                       Exhibit 21 - Page 8 of 10

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:

                                                          (Amounts in Thousands)

         1996 ...........................................          $362
         1997 ...........................................           194
         1998 ...........................................            57
         1999 and future ................................             3
                                                                   ----
         Total                                                     $616
                                                                   ====

         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.

         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:

                                                           1995         1994
                                                           ----         ----
                                                         (Amounts in Thousands)

         Equipment lease operations                        $368         $275
         PLI and affiliates                                  31           59
                                                           ----         ----

           Total                                           $399         $334
                                                           ====         ====


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 is as follows at December 31:



<PAGE>


                                                       Exhibit 21 - Page 9 of 10

                                    Reported Amounts   Tax Basis  Net Difference
                                    ----------------   ---------  --------------
                                                (Amounts in Thousands)
1995

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

         Liabilities                       399              395               4

1994

         Assets                         $5,069           $4,916           $ 153

         Liabilities                       334              334               0


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.

         During the year ended  December 31,  1995,  the Joint  Venture  adopted
Statement of Financial  Accounting  Standard  No. 107,  "Disclosures  about Fair
Value of Financial  Instruments," which requires disclosure of the fair value of
financial  instruments  for which it is practicable to estimate fair value.  The
following  methods and assumptions  were used to estimate the fair value of each
class of financial instrument 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 approximates  fair value and
is estimated by taking a 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, 1995 are as follows:

                                                      Carrying
                                                       Amount      Fair Value
                                                      --------     ----------
                                                       (Amounts in Thousands)

         Assets
           Cash and cash equivalents                   $  433       $  433
           Credits receivable, net                      1,237        1,237
           Assigned monthly rents, net                    691          691




<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
                                           =======           ======               ===               ======             =======

</TABLE>