Page 1 of 28


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   -----------

                                    FORM 10-K

  X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-----   ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1996        Commission File Number 0-8868


                        PHOENIX LEASING INCOME FUND 1977
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

           California                                   94-2446904
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


2401 Kerner Boulevard, San Rafael, California           94901-5527
--------------------------------------------------------------------------------
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code:     (415) 485-4500
                                                        --------------

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:  Units of Limited
Partnership Interest

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ________

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                               Yes _X_       No ___

As of December  31,  1996,  16,521 Units of Limited  Partnership  interest  were
outstanding.  No  market  exists  for the  Units  of  Partnership  interest  and
therefore there exists no aggregate market value at December 31, 1996.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE



<PAGE>


                                                                    Page 2 of 28




                        PHOENIX LEASING INCOME FUND 1977

                          1996 FORM 10-K ANNUAL REPORT


                                TABLE OF CONTENTS


                                                                         Page

                                     PART I

Item 1.  Business..................................................        3
Item 2.  Properties................................................        4
Item 3.  Legal Proceedings.........................................        4
Item 4.  Submission of Matters to a Vote of Security Holders.......        4


                                     PART II

Item 5.  Market for the Registrant's Securities and Related
          Security Holder Matters..................................        4
Item 6.  Selected Financial Data...................................        5
Item 7.  Management's Discussion and Analysis of Financial 
          Condition and Results of Operations......................        6
Item 8.  Financial Statements and Supplementary Data...............        8
Item 9.  Disagreements on Accounting and Financial Disclosure......       24


                                    PART III

Item 10. Directors and Executive Officers of the Registrant........       24
Item 11. Executive Compensation....................................       25
Item 12. Security Ownership of Certain Beneficial Owners and
          Management...............................................       25
Item 13. Certain Relationships and Related Transactions............       26


                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on
          Form 8-K.................................................       26


Signatures.........................................................       27



<PAGE>


                                                                    Page 3 of 28


                                     PART I

Item 1.       Business.

Summary of Business Activities.

         Phoenix Leasing Income Fund 1977, a California limited partnership (the
"Partnership"),  was organized on June 30, 1976. The  Partnership was registered
with the Securities and Exchange Commission with an effective date of August 24,
1977 and shall continue to operate until its termination  date unless  dissolved
sooner due to the sale of substantially  all of the assets of the Partnership or
a vote of the Limited  Partners.  The Partnership will terminate on December 31,
1997. The General Partners originally consisted of Phoenix Leasing Incorporated,
a California  corporation and three individual General Partners, Gus Constantin,
Daniel B. Murray and Paul J. Ronan. The General  Partners  remaining are Phoenix
Leasing  Incorporated  and  Gus  Constantin.   The  General  Partners  or  their
affiliates  also are or have been a general  partner  in several  other  limited
partnerships formed to invest in capital equipment and other assets.

         The initial public offering was for 20,000 units of limited partnership
interest at a price of $1,000 per unit. The Partnership  sold 20,000 units for a
total  capitalization  of  $20,000,000.  Of the  proceeds  received  through the
offering, the Partnership has incurred $2,163,000 in organizational and offering
expenses.

         From the initial  formation  of the  Partnership  through  December 31,
1996,  the total  investments  in equipment  leases and  financing  transactions
(loans),  including the  Partnership's  pro-rata interest in investments made by
joint  ventures,  approximate  $52,470,000.  The  average  initial  firm term of
contractual  payments from equipment subject to lease was 23.43 months,  and the
average  initial  net  monthly  payment  rate as a  percentage  of the  original
purchase price was 3.09%. The average initial firm term of contractual  payments
from loans was 65 months.

         The Partnership's  principal objective is to produce current income and
to build and  maintain a balanced  portfolio  of leases and loans,  through  the
acquisition  and  financing  of  various  types  of  assets  including  computer
peripherals, terminal systems, small computer systems, communications equipment,
IBM-software  compatible  mainframes,   office  systems  and  telecommunications
equipment and to lease such equipment and products to third parties  pursuant to
either Operating Leases or Full Payout Leases.

         The  principal  markets  for  the  types  of  equipment  in  which  the
Partnership   has   invested  are  (1)  major   corporations   and  other  large
organizations seeking to reduce the cost of their peripheral equipment and large
computer  systems,  (2) major  corporations  with numerous  operating  locations
seeking to improve the timeliness and  responsiveness  of their data  processing
systems,  and (3) small organizations  interested in improving the efficiency of
their   overall   operations   by  moving  from   manually   operated  to  small
computer-based management systems.

         In addition to  acquiring  equipment  for lease to third  parties,  the
Partnership  either  directly or through the investment in Joint  Ventures,  has
provided limited financing to certain emerging growth  companies,  manufacturers
and  their   lessees  with  respect  to  equipment   leased   directly  by  such
manufacturers to third parties. The Partnership maintains a security interest in
the  equipment  financed  and in the  receivables  due under any lease or rental
agreement  relating to such  equipment.  Such security  interests  will give the
Partnership the right,  upon a default by the manufacturer or lessee,  to obtain
possession of the equipment.

         The  Partnership  will  not  incur  debt to  finance  the  purchase  of
equipment.  However, the Registrant can enter into joint venture agreements with
certain other  partnerships  managed by the General  Partner which would finance
the  acquisition  of equipment  through the use of  indebtedness  which would be
nonrecourse to the Partnership.

         Competition.  The  equipment  leasing  industry is highly  competitive.
Leases are offered on a wide  variety of  equipment  ranging  from  construction
equipment to entire  manufacturing  facilities.  The equipment  leasing industry
offers  to  users  an  alternative  to the  purchase  of  nearly  every  type of
equipment.   The  General  Partner  intends  to  concentrate  the  Partnership's
activities,  however, in markets in which the General Partner has expertise. The
computer  equipment  industry  is  extremely  competitive.  Competitive  factors
include pricing,  technological  innovation and methods of financing  (including
use of various short-term and long-term financing plans, as well as the outright
purchase  of  equipment).   Generally,  the  impact  of  these  factors  to  the
Partnership  would be the  realization of increased  equipment  remarketing  and
storage costs, as well as lower residuals  received from the sale or remarketing
of such equipment.

<PAGE>


                                                                    Page 4 of 28


         There is strong  competition in non-computer  related equipment markets
in which the  Partnership  will  engage as well.  There is,  however,  no single
dominant company or factor in those other markets.

Other.

         A brief  description of the type of assets in which the Partnership has
invested as of December 31, 1996, together with information  concerning the uses
of assets is set forth in Item 2.


Item 2.       Properties.

         The  Partnership  is engaged in the  equipment  leasing  and  financing
industry and as such,  does not own or operate any  principal  plants,  mines or
real property. The primary assets held by the Partnership are its investments in
leases and loans either directly or through its investment in joint ventures.

         As of  December  31,  1996,  the  Partnership  owns  equipment  and has
outstanding loans to borrowers with an aggregate original cost of $666,000.  The
equipment and loans have been made to customers  located  throughout  the United
States.  The following table  summarizes the type of equipment owned or financed
by the  Partnership,  including  its pro rata  interest  in joint  ventures,  at
December 31, 1996.

                                                                  Percentage of
                    Asset Types               Purchase Price(1)    Total Assets
                    -----------               -----------------    ------------
                                           (Amounts in Thousands)

       Financing Related to Cable TV Systems         $500               75%
       Reproduction Equipment                          99               15
       Small Computer Systems                          47                7
       Financing of Solar Systems                      20                3
                                                     ----             ----

       TOTAL                                         $666              100%
                                                     ====             ====

(1)  These  amounts  include the  Partnership's  pro rata  interest in equipment
     joint  ventures  of $89,000,  financing  joint  ventures  of  $20,000,  and
     original cost of outstanding loans of $500,000, at December 31, 1996.


Item 3.       Legal Proceedings.

         The  Registrant is not a party to any pending legal  proceedings  which
would have a material adverse impact on its financial position.


Item 4.       Submission of Matters to a Vote of Security Holders.

         No matters were  submitted to a vote of Limited  Partners,  through the
solicitation of proxies or otherwise, during the year covered by this report.


                                     PART II

Item 5.       Market for the Registrant's Securities and Related Security Holder
              Matters.

         (a)  The Registrant's  limited  partnership  interests are not publicly
              traded.   There  is  no  market  for  the   Registrant's   limited
              partnership interests and it is unlikely that any will develop.

         (b)  Approximate number of equity security investments:

                                                      Number of Unit Holders
                        Title of Class                as of December 31, 1996
              ----------------------------------      -----------------------

              Limited Partners                                  1,943





<PAGE>


                                                                    Page 5 of 28


Item 6.       Selected Financial Data.


                                  1996      1995     1994     1993     1992
                                  ----      ----     ----     ----     ----
                             (Amounts in Thousands Except for Per Unit Amounts)

Total Income                    $   79    $  259   $  239   $  188   $  230

Net Income (Loss)                 (244)      159      161       31       29

Total Assets                       959     1,370    1,763    1,769    1,975

Distributions to Partners          164       532      165      248      124

Net Income (Loss) per Limited
 Partnership Unit               (13.19)     8.42     8.46     1.41     1.42

Distributions per Limited
 Partnership Unit                 9.95     29.22     9.98    15.00     7.50

         The above selected  financial  data should be read in conjunction  with
the financial statements and related notes appearing elsewhere in this report.



<PAGE>


                                                                    Page 6 of 28


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

Results of Operations

     Phoenix Leasing Income Fund 1977 (the  Partnership)  reported a net loss of
$244,000  during the year ended  December 31, 1996, as compared to net income of
$159,000  and  $161,000  for  the  years  ended  December  31,  1995  and  1994,
respectively. The decreased earnings during 1996 is attributable to the decrease
in total revenues combined with an increase in total expenses.

     Total revenues  decreased by $180,000  during 1996, as compared to the same
period in 1995,  and  increased by $20,000  during 1995, as compared to the same
period in 1994. During the year ended December 31, 1995 the Partnership received
payment  for the  settlement  of two  outstanding  notes  receivable  from cable
television  system  operators that had been in default and the  Partnership  had
suspended the accrual of interest  income.  The amount received in excess of the
net carrying value of these notes was recognized as interest income.  There were
no such payments during 1996.

     Rental income decreased during the year ended December 31, 1996,  primarily
as a result of the majority of the remaining equipment lease portfolio being off
lease.  Because the Partnership is in its liquidation  stage, it is not expected
that the Partnership will acquire additional  equipment.  As a result,  revenues
from  equipment  leasing  activities are expected to decline as the portfolio is
liquidated  and the  remaining  equipment is  re-leased  at lower rental  rates.
Rental  income  increased  slightly  during  1995,  primarily as a result of the
recognition as rental income of prepaid rent that had  previously  been recorded
as a liability. During this period it was determined that these payments were no
longer a liability and the amount was subsequently  recognized as rental income.
Other income  increased during 1995, as compared to the same period in 1994, due
to the increase in the Partnership's  cash balances combined with an increase in
interest  rates earned on such balances.  At December 31, 1996, the  Partnership
owned equipment with an aggregate original cost, excluding the Partnership's pro
rata interest in joint  ventures,  of $47,000 as compared to $78,000 at December
31, 1995.

     Total  expenses  increased  by $223,000  and $22,000  during 1996 and 1995,
respectively, as compared to the same periods in the previous year. The increase
during  1996 is  primarily  the  result  of  increased  legal  expenses  and the
additional  provision  booked for its  remaining  note  receivable  from a cable
television  system operator that is in default.  Based on a recent  appraisal of
the cable systems  collateralizing this impaired note, the carrying value of the
note  receivable  exceeded  the  market  value  of the  cable  systems  and  the
Partnership recognized an additional provision for losses of $182,000 during the
year ended December 31, 1996. The increased expenses during 1995, as compared to
1994, is primarily  the result of an increase in management  fees to the General
Partner.  The increase in management fees is the direct result of the receipt of
a payoff on the outstanding notes receivable during 1995.

Joint Ventures

     The  Partnership  has made  investments in various  equipment and financing
joint ventures along with other affiliated  partnerships  managed by the General
Partner for the purpose of spreading the risk of investing in certain  equipment
leasing and  financing  transactions.  These joint  ventures  are not  currently
making  any  significant  additional  investments  in new  equipment  leasing or
financing  transactions.  As a  result,  the  earnings  and cash  flow from such
investments  generally are  anticipated to continue to decline as the portfolios
are re-leased at lower rental rates and eventually liquidated.

     Earnings from joint  ventures  increased by $4,000 during 1996, as compared
to 1995, and decreased by $38,000 during 1995, as compared to the same period in
1994. The small increase in earnings  during 1996 was due to one joint venture's
increased  net  income  due to  decreasing  expenses  in  excess  of  decreasing
revenues.  Earnings  decreased  during 1995 due to the closure of several  joint
ventures  during 1995.  Overall,  the joint  ventures  experienced a decrease in
total expenses,  such as depreciation and lease related expenses.  The equipment
owned by  several  of the joint  ventures  has been  fully  depreciated  thereby
causing depreciation expense to decline. Lease related expenses decreased in one
joint  venture  as a  result  of  decreases  in  remarketing,  refurbishing  and
maintenance expenses.


     Inflation  affects the  Partnership  in  relation  to the  current  cost of
equipment  placed on lease and the residual  values  realized when the equipment
comes  off-lease and is sold.  During the last several years  inflation has been
low, thereby having very little impact upon the Partnership.




<PAGE>


                                                                    Page 7 of 28


Liquidity and Capital Resources

     The  Partnership's  primary source of liquidity  comes from rental and note
receipts. The Partnership has contractual obligations from lessees and borrowers
for fixed terms at stated  amounts.  The  Partnership  also has  investments  in
equipment  leasing and financing  joint ventures in which it receives a share of
the  profits  and  receives  cash  distributions.  The future  liquidity  of the
Partnership  will  depend  upon the  General  Partner's  success  in  collecting
contractual amounts owed.

     The Partnership  reported net cash used by leasing and financing activities
of $117,000  during  1996,  as compared to  $633,000  and  $184,000  provided by
leasing  and  financing  activities  during  1995 and 1994,  respectively.  This
decrease  is  due to  the  majority  of the  Partnership's  assets  having  been
liquidated.  The cash flow was higher during 1995 due to the payoff of two notes
receivable from cable television  system operators that had been in default.  At
December 31, 1996,  the  Partnership  has one remaining note  receivable  from a
cable  television  system  operator  that  is in  default  and is not  currently
providing any cash flows to the Partnership.

     Distributions  from  joint  ventures  declined  $26,000  for the year ended
December 31, 1996 as compared to 1995,  yet  increased  $22,000  during the year
ended December 31, 1995 as compared to 1994.  Distributions  from joint ventures
consisted  primarily of cash  received  from the  Partnership's  investments  in
equipment joint ventures. The decrease in distributions,  during 1996, is due to
the closure of some equipment  joint ventures during the year ended December 31,
1995.  This  decrease  was  offset  by  the  increased  distribution  from a new
equipment  joint venture that was formed upon the receipt of a legal  settlement
during October of 1994.

     The  Partnership  owned  equipment  held for lease with a purchase price of
$31,000  and a net book value of $0 at December  31,  1996,  1995 and 1994.  The
General  Partner  is  actively  engaged,  on  behalf  of  the  Partnership,   in
remarketing and selling the Partnership's off-lease equipment portfolio.

The  Limited  Partners  received   $164,000,   $483,000  and  $165,000  in  cash
distributions  during  the  years  ended  December  31,  1996,  1995  and  1994,
respectively.  As a result,  the cumulative  cash  distributions  to the Limited
Partners are  $28,604,000,  $28,440,000 and $27,957,000 as of December 31, 1996,
1995  and  1994,  respectively.   The  General  Partner  did  not  receive  cash
distributions  during the 1996 and 1994, but did receive cash  distributions  of
$49,000  during  1995.  In addition,  the General  Partner  received  payment of
liquidation  fees of $22,000,  $14,000 and $22,000  during 1996,  1995 and 1994,
respectively.  The Partnership  made a special cash  distribution to partners on
October 15, 1995,  due to the increase in its cash  balance  resulting  from the
receipt of  payoffs  from two notes  receivable  from  cable  television  system
operators that had been in default. Due to the decrease in the cash generated by
leasing  operations,   the  Partnership  is  no  longer  making  quarterly  cash
distributions to Partners.  Distributions  are now being made on an annual basis
with  the  annual  distribution  date  being  January  15.  However,  since  the
Partnership is closing this year the next  distribution  to partners is expected
to be made at the termination of the Partnership. The amount of the distribution
will be  dependent  upon the  amount of cash  available  after  the  Partnership
liquidates its remaining assets and liabilities.  The Partnership will reach the
end of its term on December 31, 1997.

     Cash  generated  from  leasing  and  financing  operations  has been and is
anticipated  to continue to be  sufficient  to meet the  Partnership's  on-going
operational expenses.

     Forward-looking  statements  in this  report are made  pursuant to the safe
harbor  provisions  of the  Private  Securities  Litigation  Reform Act of 1995.
Actual  results could differ from those  anticipated  by some of the  statements
made above. Limited Partners are cautioned that such forward-looking  statements
involve risks and uncertainties including without limitation the following:  (i)
the  Partnership's  plans are subject to change at any time at the discretion of
the General Partner of the Partnership,  (ii) future technological  developments
in the industry in which the Partnership operates, (iii) competitive pressure on
pricing or services,  (iv) substantial  customer defaults or cancellations,  (v)
changes  in  business  conditions  and the  general  economy,  (vi)  changes  in
government regulations affecting the Partnership's core businesses and (vii) the
ability of the Partnership to sell its remaining assets.


<PAGE>


                                                                    Page 8 of 28


















               Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                        PHOENIX LEASING INCOME FUND 1977

                          YEAR ENDED DECEMBER 31, 1996



<PAGE>


                                                                    Page 9 of 28


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of Phoenix Leasing Income Fund 1977:

We have audited the  accompanying  balance sheets of Phoenix Leasing Income Fund
1977 (a California limited partnership) as of December 31, 1996 and December 31,
1995, and the related  statements of  operations,  partners'  capital,  and cash
flows for each of the three years in the period ended  December 31, 1996.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the 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  Leasing Income Fund
1977 as of  December  31, 1996 and  December  31,  1995,  and the results of its
operations,  partners' capital and the cash flows for each of the three years in
the period ended  December 31,  1996,  in  conformity  with  generally  accepted
accounting principles.

Our audits  were  conducted  for the  purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental  schedule listed in Item
14,  Subsection (a)2 are presented for purposes of complying with the Securities
and Exchange  Commission's  rules and regulations under the Securities  Exchange
Act of  1934  and are not  otherwise  a  required  part of the  basic  financial
statements.  The  supplemental  schedule  has  been  subjected  to the  auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth  therein in  relation  to the basic  financial  statements  taken as a
whole.



San Francisco, California                                   KROHN AND CROAK
  January 17, 1997



<PAGE>


                                                                   Page 10 of 28


                        PHOENIX LEASING INCOME FUND 1977
                                 BALANCE SHEETS
                 (Amounts in Thousands Except for Unit Amounts)


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

Cash and cash equivalents                                  $  369    $  595

Accounts receivable (net of allowance for losses on
   accounts receivable of $0 and $1 at December 31,
   1996 and 1995, respectively)                                17         1

Notes receivable (net of allowance for losses on
   notes receivable of $274 and $92 at December 31,
   1996 and 1995)                                             525       707

Equipment on operating leases and held for lease (net of
   accumulated depreciation of $15 and $31 at
   December 31, 1996 and 1995, respectively)                 --        --

Investment in joint ventures                                   44        64

Other assets                                                    4         4
                                                           ------    ------

     Total Assets                                          $  959    $1,371
                                                           ======    ======


LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

   Accounts payable and accrued expenses                   $   39    $   44
                                                           ------    ------

     Total Liabilities                                         39        44
                                                           ------    ------

Partners' Capital:

   General Partners                                           (26)     --

   Limited Partners,  20,000 units authorized and
   issued,  16,521 units outstanding at December 31,
   1996 and 1995                                              945     1,327

   Unrealized gains on available-for-sale securities            1      --
                                                           ------    ------

     Total Partners' Capital                                  920     1,327
                                                           ------    ------

     Total Liabilities and Partners' Capital               $  959    $1,371
                                                           ======    ======


                     The accompanying notes are an integral
                            part of these statements.

<PAGE>


                                                                   Page 11 of 28


                        PHOENIX LEASING INCOME FUND 1977
                            STATEMENTS OF OPERATIONS
               (Amounts in Thousands Except for Per Unit Amounts)


                                                For the Years Ended December 31,
                                                    1996       1995      1994
                                                   -----      -----     -----

INCOME

   Rental income                                 $     6     $   41    $   27

   Equity in earnings from joint ventures, net        32         28        66

   Interest income, notes receivable                  17        156        60

   Settlement                                       --         --          70

   Other income                                       24         34        16
                                                  ------      -----     -----

     Total Income                                     79        259       239
                                                  ------      -----     -----


EXPENSES

   Depreciation                                     --         --          15

   Lease related operating expenses                 --         --           2

   Management fees to General Partner                  2         37        11

   Liquidation fees to General Partner                22         14        22

   Provision for (recovery of) losses on
     receivables                                     182          5       (15)

   Legal Expense                                      86          4         7

   General and administrative expenses                31         40        36
                                                  ------      -----     -----

     Total Expenses                                  323        100        78
                                                  ------      -----     -----


NET INCOME (LOSS)                                $  (244)    $  159    $  161
                                                  ======      =====     =====

NET INCOME (LOSS) PER LIMITED
   PARTNERSHIP UNIT                              $(13.19)    $ 8.42    $ 8.46
                                                  ======      =====     =====

ALLOCATION OF NET INCOME (LOSS):

   General Partners                              $   (26)    $   20    $   21

   Limited Partners                                 (218)       139       140
                                                  ------      -----     -----

                                                 $  (244)    $  159    $  161
                                                  ======      =====     =====

                     The accompanying notes are an integral
                            part of these statements.

<PAGE>

<TABLE>
                                                                                     Page 12 of 28


                                  PHOENIX LEASING INCOME FUND 1977
                                  STATEMENTS OF PARTNERS' CAPITAL
                           (Amounts in Thousands Except for Unit Amounts)

<CAPTION>
                                                   General
                                                   Partners' Limited Partners' Unrealized   Total
                                                    Amount   Units     Amount     Gains    Amount
                                                    ------   -----     ------     -----    ------
<S>                                             <C>         <C>      <C>        <C>       <C>
Balance, December 31, 1993                      $     8     16,521   $ 1,696    $  --     $ 1,704

Distributions to partners ($9.98 per limited
   partnership unit)                               --         --        (165)      --        (165)

Net income                                           21       --         140       --         161
                                                -------    -------   -------    -------   -------

Balance, December 31, 1994                           29     16,521     1,671       --       1,700

Distributions to partners ($29.22 per limited
   partnership unit)                                (49)      --        (483)      --        (532)

Net income                                           20       --         139       --         159
                                                -------    -------   -------    -------   -------

Balance, December 31, 1995                         --       16,521     1,327       --       1,327

Distributions to partners ($9.95 per limited
   partnership unit)                               --         --        (164)      --        (164)

Unrealized gains on available-for-sale
     securities                                    --         --        --            1         1

Net loss                                            (26)      --        (218)      --        (244)
                                                -------    -------   -------    -------   -------

Balance, December 31, 1996                      $   (26)    16,521   $   945    $     1   $   920
                                                =======    =======   =======    =======   =======



                                The accompanying notes are an integral
                                      part of these statements.
</TABLE>
<PAGE>


                                                                   Page 13 of 28


                        PHOENIX LEASING INCOME FUND 1977
                            STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)


                                                For the Years Ended December 31,
                                                    1996      1995      1994
                                                    ----      ----      ----

Operating Activities:

   Net income (loss)                                $(244)    $ 159     $ 161

   Adjustments to reconcile net income(loss) to
     net cash provided (used) by operating
     activities:
       Depreciation                                  --        --          15
       Loss (gain) on sale of equipment                (1)       (1)        5
       Equity in earnings from joint ventures, net    (32)      (28)      (66)
       Recovery of early termination, financing
         leases                                      --          (3)       (5)
       Provision for losses on notes receivable       182      --        --
       Provision for (recovery of) losses on
         accounts receivable                         --           8       (10)
       Gain on sale of securities                      (1)     --        --
       Settlement                                    --        --         (42)
       Decrease (increase) in accounts receivable     (16)        1         9
       Decrease in accounts payable and
         accrued expenses                              (5)      (19)       (2)
       Decrease in other assets                      --           6      --
                                                    -----     -----     -----

   Net cash provided (used) by operating activities  (117)      123        65
                                                    -----     -----     -----

Investing Activities:

   Principal payments, financing leases              --           3        38
   Principal payments, notes receivable              --         507        81
   Proceeds from sale of equipment                      1         1         2
   Proceeds from sale of securities                     2      --        --
   Distributions from joint ventures                   52        78        56
   Purchase of equipment                             --        --         (43)
                                                    -----     -----     -----


   Net cash provided by investing activities           55       589       134
                                                    -----     -----     -----

Financing Activities:

   Distributions to partners                         (164)     (532)     (165)
                                                    -----     -----     -----

   Net cash used by financing activities             (164)     (532)     (165)
                                                    -----     -----     -----

Increase (decrease) in cash and cash equivalents     (226)      180        34

Cash and cash equivalents, beginning of period        595       415       381
                                                    -----     -----     -----

Cash and cash equivalents, end of period            $ 369     $ 595     $ 415
                                                    =====     =====     =====


                     The accompanying notes are an integral
                            part of these statements.

<PAGE>


                                                                   Page 14 of 28


                        PHOENIX LEASING INCOME FUND 1977

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1996


Note 1.       Organization and Partnership Matters.

         Phoenix Leasing Income Fund 1977, a California limited partnership (the
"Partnership"),  was formed on June 30, 1976, to invest in capital  equipment of
various types and to lease such equipment to third parties on either a long-term
or short-term  basis.  Minimum  investment  requirements  were met September 30,
1977, at which time the Partnership commenced  operations.  The Partnership will
terminate on December 31, 1997.

         The  Partnership  has also  made  investments  in joint  ventures  with
affiliated  partnerships  managed  by the  General  Partner  for the  purpose of
spreading the risks of financing or acquiring  certain capital  equipment leased
to third parties (see Note 6).

         On June 20, 1984,  Daniel B. Murray  resigned as General Partner of the
Partnership and the Partnership  repurchased his equity  interest.  Mr. Murray's
interest was valued  pursuant to the  partnership  agreement  at $410,873.  Such
amount was paid in five equal annual  installments,  the first of which was made
on July 15,  1984.  Interest  has been  imputed  at  10.5%.  As a result  of the
Partnership's  repurchase  of Mr.  Murray's  General  Partner  interest,  future
distributions and income or loss applicable to this interest will be reallocated
to the  remaining  General  and Limited  Partners  on a pro rata basis.  Phoenix
Leasing  Incorporated  and Gus Constantin  remain as the General Partners of the
Partnership.

         The General Partners are allocated  11.688% (15% prior to repurchase of
Mr. Murray's  interest,  as discussed  above) of all profits,  losses,  and cash
distributions.  Cash distributions in excess of allocated cumulative net profits
represent a liquidation fee which cannot exceed, in the aggregate,  11.688% (15%
of profits prior to the repurchase of Mr. Murray's  interest) of net contributed
capital.  The cumulative  liquidation fee paid or accrued to date is $1,914,000.
The fee represents an expense of the Partnership  and is specially  allocated to
the Limited Partners.

         The  Limited  Partners  are not  required  to make  additional  capital
contributions,  nor are they  otherwise  liable for  deficit  balances  in their
adjusted capital accounts, if any, as defined in the Partnership agreement.

         As compensation for management services, the General Partner receives a
fee,  payable  quarterly  in an amount  equal to 5% of the  Partnership's  gross
revenues for the quarter from which such payment is being made,  which  revenues
shall  include  rental  receipts,  maintenance  fees,  proceeds from the sale of
equipment and notes receivable payments.


Note 2.       Summary of Significant Accounting Policies.

         Leasing  Operations.  The Partnership's  leasing operations  originally
consisted of both  financing  and  operating  leases.  The  financing  method of
accounting for leases records as unearned  income at the inception of the lease,
the excess of net rentals  receivable and estimated residual value at the end of
the lease term, over the cost of equipment  leased.  Unearned income is credited
to income monthly over the term of the lease on a declining  basis to provide an
approximate  level  rate of return on the  unrecovered  cost of the  investment.
Initial direct costs of consummating  new leases are capitalized and included in
the cost of the equipment.

         Under the  operating  method  of  accounting  for  leases,  the  leased
equipment  is recorded as an asset at cost and  depreciated  on a  straight-line
basis over the estimated useful life, ranging up to seven years.

         The  Partnership's  policy  is  to  review  periodically  the  expected
economic life of its rental  equipment in order to determine the  probability of
recovering its  undepreciated  cost. Such reviews  address,  among other things,
recent and anticipated  technological  developments affecting computer equipment
and competitive factors within the computer  marketplace.  Although  remarketing
rental  rates are  expected to decline in the future with respect to some of the
Partnership'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
the net book value of the equipment in any future period,  the Partnership  will
revise its depreciation policy as appropriate.


<PAGE>


                                                                   Page 15 of 28


         Rental  income  for the  year is  determined  on the  basis  of  rental
payments due for the period under the terms of the lease.  Maintenance,  repairs
and minor renewals of the leased equipment are charged to expense.

         Portfolio Valuation Methodology. The Partnership will use the portfolio
method of accounting for the net realizable value of the Partnership's equipment
and loan portfolio.

         Investment  in  Joint  Ventures.  Investments  in  net  assets  of  the
equipment and financing joint ventures reflect the Partnership's equity basis in
the ventures. Under the equity method of accounting,  the original investment is
recorded at cost and is adjusted  periodically  to recognize  the  Partnership's
share of earnings,  losses,  cash contributions and cash distributions after the
date of acquisition.

         Investment  in  Available-for-Sale   Securities.  The  Partnership  has
investments  in stock in  public  companies  that  have  been  determined  to be
available  for sale.  Available-for-sale  securities  are  stated at their  fair
market  value,  with the  unrealized  gains and  losses  reported  in a separate
component of partners' capital.

         Financial  Accounting  Pronouncements.  In March  1995,  the  Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed  of," which  requires that  long-lived  assets and certain
identifiable  intangibles  to be held  and used by an  entity  be  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability,  the entity  would  estimate  the future cash flows  expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows  (undiscounted  and without interest charges) is less
than the  carrying  amount  of the  asset,  an  impairment  loss is  recognized.
Measurement  of an  impairment  loss  for  long-lived  assets  and  identifiable
intangibles  that an entity  expects to hold and use should be based on the fair
value of the asset.  Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. At January 1, 1996, the adoption
of  Statement  No. 121 did not  materially  impact the  Partnership's  financial
position or results of operations.

         Reclassification.  Certain 1995 and 1994 amounts have been reclassified
to conform to the 1996 presentation.

         Cash and Cash Equivalents.  Cash and cash equivalents includes deposits
at banks,  investments in money market funds and other highly liquid  short-term
investments with original maturities of less than 90 days.

         Credit  and  Collateral.   The   Partnership's   activities  have  been
concentrated  in  the  equipment  leasing  and  financing  industry.   A  credit
evaluation  is performed  by the General  Partner for all leases and loans made,
with  the  collateral  requirements  determined  on a  case-by-case  basis.  The
Partnership's  loans are generally  secured by the equipment or assets  financed
and, in some cases,  other collateral of the borrower.  In the event of default,
the  Partnership  has the right to foreclose upon the collateral  used to secure
such loans.

         Non Cash Investing Activities.  During the quarter ended June 30, 1995,
the  Partnership  received a final  distribution of common stock from one of its
investments in equipment  joint  ventures.  The market value of the stock at the
final distribution date was $2,000 and is included in Other Assets.

         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  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.




<PAGE>


                                                                   Page 16 of 28


Note 3.       Accounts Receivable.

         Accounts receivable consist of the following at December 31:

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

General Partner and affiliates                             $17       $ 1
Lease payments                                              --         1
                                                           ---       ---
                                                            17         2
Less:  allowance for losses on
       accounts receivable                                  --        (1)
                                                           ---       ---

Total                                                      $17       $ 1
                                                           ===       ===

Note 4.       Notes Receivable.

         Notes receivable consist of the following at December 31:

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

Notes receivable from cable television
  system operators with interest of 16%
  per  annum, receivable in installments
  of 96 months, collateralized by a security
  interest in the cable  system  assets
  This loan has a graduated repayment
  schedule followed by a balloon payment                   $ 799     $ 799

Less:  allowance for losses on notes receivable             (274)      (92)
                                                           -----     -----

Total                                                      $ 525     $ 707
                                                           =====     =====

         The  Partnership's   notes  receivable  from  cable  television  system
operators provides for a monthly payment rate in an amount that is less than the
contractual  interest  rate.  The  difference  between the payment  rate and the
contractual interest rate is added to the principal and therefore deferred until
the maturity date of the note. Upon maturity of the note, the original principal
and  deferred  interest is due and  payable in full.  Although  the  contractual
interest  rate may be higher,  the amount of interest  being  recognized  on the
Partnership's  outstanding notes receivable to cable television system operators
is being limited to the amount of the payments  received,  thereby deferring the
recognition of a portion of the deferred interest until the loan is paid off.

         Generally,  notes receivable are classified as impaired and the accrual
of  interest  on such notes are  discontinued  when the  contractual  payment of
principal  or  interest  has become 90 days past due or  management  has serious
doubts about further  collectibility of the contractual  payments.  Any payments
received  subsequent  to the  placement  of the note  receivable  on to impaired
status will generally be applied towards the reduction of the  outstanding  note
receivable  balance,  which may include  previously  accrued interest as well as
principal.  Once the principal and accrued  interest balance has been reduced to
zero, the remaining payments will be applied to interest income.

         At December 31, 1996 and 1995,  the recorded  investment  in notes that
are considered to be impaired were $799,000 and $0, respectively,  for which the
related  allowance  for losses were $274,000 and $0,  respectively.  The average
recorded  investment in impaired  loans during the year ended  December 31, 1996
and 1995 were approximately $799,000 and $158,000, respectively. The Partnership
recognized  interest income on impaired notes  receivable  during the year ended
December 31, 1996 and 1995 totaling $19,000 and $0, respectively.

         The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:

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

        Beginning balance                                  $ 92      $ 92
             Provision for losses                           182       --
             Write downs                                    --        --
                                                           ----      ----
        Ending balance                                     $274      $ 92
                                                           ====      ====
<PAGE>


                                                                   Page 17 of 28


Note 5.       Equipment on Operating Leases.

         Equipment  on  lease  consists  primarily  of small  computer  systems,
subject to operating leases.

         The  Partnership's  operating  leases are for  initial  lease  terms of
approximately 12 to 36 months.  During the remaining terms of existing operating
leases  the  Partnership  will not  recover  all of the  undepreciated  cost and
related expenses of its rental equipment,  and therefore must remarket a portion
of its equipment in future years.

         The Partnership has agreements with the manufacturers of certain of its
equipment,  whereby such manufacturers undertake to remarket off-lease equipment
on a best efforts basis.  These agreements  permit the Partnership to assume the
remarketing  function directly if certain conditions contained in the agreements
are not met.  For  their  remarketing  services,  the  manufacturers  are paid a
percentage  of net  monthly  rentals.  Certain  manufacturers  are  entitled  to
additional fees after the Partnership has recovered certain amounts.

         The Partnership has entered into direct lease arrangements with certain
lessees.   Generally,  it  is  the  responsibility  of  the  lessee  to  provide
maintenance on leased equipment.  The General Partner  administers the equipment
portfolio of leases acquired through the direct leasing program.  Administration
includes  the  collection  of rents  from the  lessees  and  remarketing  of the
equipment.

         Minimum rentals to be received on  noncancelable  operating  leases for
the year ended December 31 are as follows:

                                                                Operating
                                                                ---------
                                                          (Amounts in Thousands)

         1997..........................................           $  1
                                                                  ----

              Total                                               $  1
                                                                  ====


Note 6.       Investment in Joint Ventures.

Equipment Joint Ventures

         The  Partnership  owns a limited or  general  partnership  interest  in
equipment joint ventures.  These  investments are accounted for using the equity
method of accounting.  The other partners of the ventures are entities organized
and managed by the General Partner.

         The purpose of the  equipment  joint  ventures is the  acquisition  and
leasing of various types of equipment.  As of December 31, 1996, Phoenix Leasing
Income Fund 1977, is participating in the following equipment joint ventures:

                                                             Weighted
                        Joint Venture                   Percentage Interest
                        -------------                   -------------------


             PLI Limited Partnership Fund A(2)                   3.94%
             Leveraged Joint Venture 1985(1)                    17.20
             Leveraged Joint Venture 1986(2)                     5.25
             Arroyo Joint Venture VI(1)                         19.98
             Arroyo Joint Venture VII(1)                        12.90
             Arroyo Joint Venture IX(1)                         17.76
             Arroyo Joint Venture XV(2)                          1.46
             Arroyo Joint Venture XVII(1)                        7.42
             Leverged Joint Venture 1987-1(1)                    7.03
             Leveraged Joint Venture 1987-2                      5.37
             Leveraged Joint Venture 1987-3                      3.76
             Phoenix Micro Joint Venture(3)                     28.47
             Phoenix Joint Venture 1994-1                        1.86




<PAGE>


                                                                   Page 18 of 28


(1) Closed during 1994
(2) Closed during 1995
(3) Closed during 1996

         An analysis of the Partnership's investment in equipment joint ventures
is as follows:

                  Net Investment                                  Net Investment
                   at Beginning              Equity in  Equity in     at End
Date                of Period  Contributions  Earnings Distributions of Period
----                ---------  -------------  -------- ------------- ---------
                                    (Amounts in Thousands)

Year Ended
  December 31, 1994    $ 19         $  85       $66         $54         $116
                       ====         =====       ===         ===         ====

Year Ended
  December 31, 1995    $116         $-          $27         $79         $ 64
                       ====         =====       ===         ===         ====

Year Ended
  December 31, 1996    $ 64         $-          $31         $51         $ 44
                       ====         =====       ===         ===         ====

         The aggregate  combined  financial  information of the equipment  joint
ventures  as of  December  31,  and for the years  then  ended is  presented  as
follows:

                             COMBINED BALANCE SHEETS

                                     ASSETS
                                                             December 31,
                                                            1996       1995
                                                            ----       ----
                                                        (Amounts in Thousands)

Cash and cash equivalents                                  $  351    $  512
Accounts receivable                                         1,311     1,459
Operating lease equipment                                     526     1,021
Other assets                                                  512       691
                                                           ------    ------

     Total Assets                                          $2,700    $3,683
                                                           ======    ======

                        LIABILITIES AND PARTNERS' CAPITAL


Accounts payable                                           $  372    $  454
Partners' capital                                           2,328     3,229
                                                           ------    ------

     Total Liabilities and Partners' Capital               $2,700    $3,683
                                                           ======    ======

                        COMBINED STATEMENTS OF OPERATIONS

                                     INCOME

                                              For the Years Ended December 31,
                                                  1996      1995      1994
                                                  ----      ----      ----
                                                   (Amounts in Thousands)

Rental income                                    $1,847    $2,526    $1,208
Gain on sale of equipment                           328       547       188
Other income                                        262       718       288
                                                 ------    ------    ------

     Total Income                                 2,437     3,791     1,684
                                                 ------    ------    ------



<PAGE>


                                                                   Page 19 of 28


                                    EXPENSES

Depreciation                                        332       957        81
Lease related operating
  expenses                                          718     1,311       588
Management fee to the
  General Partner                                   104       194        63
Interest expense                                   --           1         1
Other expenses                                        5       200        21
                                                 ------    ------    ------

     Total Expenses                               1,159     2,663       754
                                                 ------    ------    ------

     Net Income                                  $1,278    $1,128    $  930
                                                 ======    ======    ======

         As of December 31, 1996 and 1995, the  Partnership's  pro rata interest
in the  equipment  joint  ventures'  net book value of off-lease  equipment  was
$1,000 and $2,000, respectively.

         The General  Partner earns a management fee of 5% of the  Partnership's
respective interest in gross revenues of each equipment joint venture, excluding
TOFI I. Revenues  subject to management  fees at the joint venture level are not
subject to management fees at the  Partnership  level.  Revenues  generated from
equipment  joint  ventures are subject to the same  management fee percentage as
revenues from  equipment  purchased  and  maintained  in the  Partnership's  own
portfolio.

Financing Joint Ventures

         The  Partnership  has invested in financing  joint  ventures  which are
consolidated for reporting purposes into Phoenix Funding  Partnership (PFP). The
Partnership's current investment in PFP consists of one financing joint venture.
The purpose of the financing  joint  ventures is to provide on a limited  basis,
financing to  manufacturers  and their lessees for equipment  leased directly by
manufacturers  to third  parties.  All loans to  manufacturers  are  secured  by
equipment.  The Partnership  uses the equity method of accounting to account for
the PFP.

         PFP periodically  reviews the probability of recovering the outstanding
note balances.  Such reviews address, among other things, current cash receipts,
costs of  collection  efforts,  the current  economic  situation  and  potential
uncollectible  receivables.  If the review  indicates that future cash receipts,
net of  anticipated  future  expenses,  does not  exceed  the  outstanding  note
balances, PFP provides a reserve for any anticipated loan loss as appropriate.

         Due to a high degree of  uncertainty  relating to the collection of the
entire amount of contractually owed principal and interest over the lives of the
notes receivable,  the PFP loan portfolio  applies all cash receipts  (principal
and interest) to the  outstanding  note  balances.  Under this method,  interest
income will not be recognized until the outstanding note balances are recovered.

         The  following  information  summarizes  the  Partnership's  respective
interest in the original loan proceeds of the financing joint ventures.

                                                         Weighted
             Joint Venture                          Percentage Interest
             -------------                          -------------------

       Phoenix Funding Partnership                          3.56%



<PAGE>


                                                                   Page 20 of 28


       An analysis of the  Partnership's  investment  account in financing joint
ventures is as follows:

                 Net Investment                                   Net Investment
                  at Beginning              Equity in   Equity in     at End
Date               of Period  Contributions  Earnings Distributions of Period
----               ---------  ------------- --------- ------------- ---------
                                     (Amounts in Thousands)

Year Ended
  December 31, 1994  $    2       $--         $--          $2          $--
                     ======       ===         =====        ==          ===

Year Ended
  December 31, 1995  $ --         $--         $   1        $1          $--
                     ======       ===         =====        ==          ===

Year Ended
  December 31, 1996  $ --         $--         $   1        $1          $--
                     ======       ===         =====        ==          ===

         The aggregate  combined  financial  information of the financing  joint
ventures  as of  December  31,  and for the years  then  ended is  presented  as
follows:

                             COMBINED BALANCE SHEETS

                                     ASSETS
                                                           December 31,
                                                          1996      1995
                                                          ----      ----
                                                      (Amounts in Thousands)

Cash and cash equivalents                                  $11       $12
Accounts receivable                                          6        --
                                                           ---       ---

     Total Assets                                          $17       $12
                                                           ===       ===

                        LIABILITIES AND PARTNERS' CAPITAL

Partners' capital                                          $17       $12
                                                           ---       ---

     Total Liabilities and Partners' Capital               $17       $12
                                                           ===       ===


                        COMBINED STATEMENTS OF OPERATIONS

                                     INCOME

                                            For the Years Ended December 31,
                                                1996      1995      1994
                                                ----      ----      ----
                                                 (Amounts in Thousands)

Interest income                                  $ 8       $ 2       $--
Other income                                      20        67         1
                                                 ---       ---       ---

     Total Income                                 28        69         1
                                                 ---       ---       ---

                                    EXPENSES

Management fee to the
  General Partner                                  1         4         4
Other expenses                                     1         2         3
                                                 ---       ---       ---

     Total Expenses                                2         6         7
                                                 ---       ---       ---

     Net Income (loss)                           $26       $63       $(6)
                                                 ===       ===       ===



<PAGE>


                                                                   Page 21 of 28


         The General  Partner earns a management fee of 5% of the  Partnership's
respective interest in gross payments received for each financing joint venture.
Revenues  subject to a management fee at the joint venture level are not subject
to  management  fees at the  Partnership  level.  Revenues  generated  from  the
financing  joint venture are subject to the same  management  fee  percentage as
revenues from  equipment  purchased  and  maintained  in the  Partnership's  own
portfolio.


Note 7.       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                         $ 1       $ 1
        General Partners and Affiliates                      1         2
        Other                                               37        41
                                                           ---       ---

             Total                                         $39       $44
                                                           ===       ===


Note 8.       Settlement.

         On July 1, 1991,  Phoenix Leasing  Incorporated,  as General Partner to
the Partnership  and sixteen other  affiliated  partnerships,  filed suit in the
Superior  Court  for the  County  of  Marin,  Case  No.  150016,  against  Xerox
Corporation,  a  corporation  with which the General  Partner  had entered  into
contractual   agreements  for  the  acquisition  and  administration  of  leased
equipment. The lawsuit was settled out of court effective as of October 28, 1994
pursuant to the terms of a Confidential Settlement Agreement and Mutual Release.
The settlement  agreement  generally  provides for  compensation  payable to the
Partnership  and its  affiliates in cash and kind,  including the  assignment by
Xerox of certain goods and services. The agreement further provides for the sale
by Xerox to the  Partnership  and its affiliates of equipment  subject to lease.
The suit that was filed in the Superior Court for the County of Marin, Case No.
150016, has been dismissed with prejudice on the merits.

         The  Partnership's  pro rata share of the Xerox settlement was $70,000,
which consists of cash of $28,000,  and assigned monthly rentals and credits for
goods and services valued at $42,000.  In addition,  the  Partnership  purchased
additional  leased  equipment at an aggregate cost of $43,000.  The Partnership,
along with sixteen other affiliated partnerships managed by the General Partner,
contributed  its share of the assigned  monthly  rentals,  credits for goods and
services and purchased  equipment leases to a joint venture,  in exchange for an
interest in the joint venture.


Note 9.       Liquidation Fees.

         The General  Partner is entitled to 11.688% of all cash  distributions.
Distributions   in  excess  of  the  General   Partners'   capital  account  are
characterized  as liquidation  fees. If the  Partnership  were to dissolve,  the
General  Partner  would be liable to the  Partnership  for the negative  capital
account to the extent of the  liability.  For the years ended December 31, 1996,
1995 and 1994,  the  liquidation  fees  accrued  to the  General  Partners  were
$22,000, $14,000 and $22,000, respectively. The fee represents an expense of the
Partnership and is specially allocated to the Limited Partners.


Note 10.      Income Taxes.

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



<PAGE>


                                                                   Page 22 of 28


         The net  difference  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              $    959            $ 1,220            $  (261)

         Liabilities               39                 21                 18

1995
----

         Assets              $  1,370            $ 1,475            $  (105)

         Liabilities               43                 42                  1


Note 11.      Related Entities.

         The General  Partner serves in the capacity of general partner in other
partnerships,  all of which are engaged in the  equipment  leasing and financing
business.

         The General Partner incurs certain  expenses,  such as data processing,
equipment storage and equipment remarketing costs, for which it is reimbursed by
the Partnership. Equipment remarketing costs are incurred as the General Partner
remarkets  certain  equipment  on  behalf  of the  Partnership.  These  expenses
incurred by the General  Partner are reimbursed at the lower of the actual costs
or an amount equal to 90% of the fair market value for such services.

Note 12.      Net Income (Loss) and Distributions per Limited Partnership Unit.

         Net income (loss) and  distributions  per limited  partnership unit was
based on the limited  partners' share of net income (loss) and distributions and
the weighted  average number of units  outstanding of 16,521 for the years ended
December 31, 1996, 1995 and 1994.


Note 13.      Fair Value of Financial Instruments.

         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.

Notes Receivable
The fair value of notes  receivable  is  estimated by  discounting  the expected
future cash flows using the current  rates at which  similar loans would be made
to borrowers with similar credit ratings.

Available-for-Sale Securities
The fair values of  investments in  available-for-sale  securities are estimated
based on quoted market prices.



<PAGE>


                                                                   Page 23 of 28


         The estimated fair values of the  Partnership's  financial  instruments
are as follows at December 31:

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

1996
----

         Assets
              Cash and cash equivalents        $     369          $     369
              Securities, available-for-sale           2                  2
              Notes receivable                       525                525

1995
----

         Assets
              Cash and cash equivalents        $     595          $     595
              Securities, available-for-sale           2                  2
              Notes receivable                       707              1,069



<PAGE>


                                                                   Page 24 of 28


Item 9.       Disagreements on Accounting and Financial Disclosure Matters.

         None.

                                    PART III

Item 10.      Directors and Executive Officers of the Registrant.

         The  registrant  is  a  limited  partnership  and,  therefore,  has  no
executive officers or directors. The corporate general partner of the registrant
is Phoenix Leasing Incorporated, a California corporation. Gus Constantin serves
as an individual  general  partner.  The  directors  and  executive  officers of
Phoenix Leasing Incorporated (PLI) are as follows:

         GUS CONSTANTIN,  age 59, is President,  Chief  Executive  Officer and a
Director of PLI. Mr.  Constantin  received a B.S. degree in Engineering from the
University of Michigan and a Master's Degree in Management Science from Columbia
University.  From 1969 to 1972,  he served as Director,  Computer and  Technical
Equipment of DCL Incorporated  (formerly Diebold Computer Leasing Incorporated),
a  corporation  formerly  listed on the  American  Stock  Exchange,  and as Vice
President  and  General  Manager  of DCL  Capital  Corporation,  a  wholly-owned
subsidiary of DCL Incorporated. Mr. Constantin was actively engaged in marketing
manufacturer  leasing programs to computer and medical  equipment  manufacturers
and in directing DCL Incorporated's IBM System/370 marketing  activities.  Prior
to  1969,  Mr.  Constantin  was  employed  by IBM as a data  processing  systems
engineer for four years. Mr. Constantin is an individual general partner in four
active partnerships and is an NASD registered  principal.  Mr. Constantin is the
founder of PLI and the  beneficial  owner of all of the common  stock of Phoenix
American Incorporated.

         PARITOSH K. CHOKSI,  age 43, is Senior Vice President,  Chief Financial
Officer,  Treasurer and a Director of PLI. He has been associated with PLI since
1977.  Mr. Choksi  oversees the finance,  accounting,  information  services and
systems  development  departments of the General  Partner and its Affiliates and
oversees the structuring,  planning and monitoring of the partnerships sponsored
by the General Partner and its Affiliates.  Mr. Choksi graduated from the Indian
Institute of Technology, Bombay, India with a degree in Engineering. He holds an
M.B.A. degree from the University of California, Berkeley.

         GARY W.  MARTINEZ,  age 46, is Senior Vice  President and a Director of
PLI. He has been associated with PLI since 1976. He manages the Asset Management
Department,  which is responsible for lease and loan portfolio management.  This
includes credit analysis,  contract terms, documentation and funding; remittance
application,  change processing and maintenance of customer  accounts;  customer
service, invoicing,  collection,  settlements and litigation;  negotiating lease
renewals,  extensions,  sales and buyouts; and management information reporting.
From 1973 to 1976, Mr.  Martinez was a Loan Officer with Crocker  National Bank,
San  Francisco.  Prior to 1973,  he was an Area Manager with  Pennsylvania  Life
Insurance  Company.  Mr. Martinez is a graduate of California State  University,
Chico.

         BRYANT J. TONG, age 42, is Senior Vice President,  Financial Operations
of PLI. He has been with PLI since 1982.  Mr. Tong is  responsible  for investor
services and overall company  financial  operations.  He is also responsible for
the technical and  administrative  operations of the cash management,  corporate
accounting,  partnership accounting,  accounting systems,  internal controls and
tax  departments,  in addition to Securities  and Exchange  Commission and other
regulatory  agency  reporting.  Prior to his association  with PLI, Mr. Tong was
Controller-Partnership  Accounting with the Robert A. McNeil Corporation for two
years and was an auditor with Ernst & Whinney  (succeeded by Ernst & Young) from
1977 through 1980.  Mr. Tong holds a B.S. in Accounting  from the  University of
California, Berkeley, and is a Certified Public Accountant.

         CYNTHIA  E.  PARKS,  age 41, is Vice  President,  General  Counsel  and
Assistant  Secretary  of PLI.  Prior to joining  PLI in 1984,  she was with GATX
Leasing  Corporation,  and had  previously  been  Corporate  Counsel  for  Stone
Financial  Companies,  and an Assistant  Vice  President of the Bank of America,
Bank Amerilease  Group. She has a bachelor's degree from Santa Clara University,
and earned her J.D. from the University of San Francisco School of Law.

         Neither the General  Partner nor any  Executive  Officer of the General
Partner has any family relationship with the others.

         Phoenix  Leasing  Incorporated  or its  affiliates  and  the  executive
officers of the General  Partner  serve in a similar  capacity to the  following
affiliated limited partnerships:

              Phoenix Leasing American Business Fund, L.P.
              Phoenix Leasing Cash Distribution Fund V, L.P.


<PAGE>


                                                                   Page 25 of 28


              Phoenix Income Fund, L.P.
              Phoenix Leasing Cash  Distribution  Fund IV
              Phoenix High Tech/High Yield Fund
              Phoenix Leasing Cash Distribution Fund III
              Phoenix Leasing Cash Distribution Fund II
              Phoenix Leasing Income Fund VII
              Phoenix Leasing Income Fund VI and
              Phoenix Leasing Growth Fund 1982


Item 11.      Executive Compensation.

<TABLE>
         Set forth is the information  relating to all direct  remuneration paid
or accrued by the Registrant during the last year to the General Partner.

<CAPTION>

         (A)                       (B)                                    (C)                                 (D)

                                                                  Cash and cash-                        Aggregate of
Name of Individual           Capacities in                        equivalent forms                      contingent forms
or persons in group          which served                         of remuneration                      of remuneration
-------------------          ------------            -------------------------------------------       -----------------
                                                              (C1)                     (C2)
                                                                              Securities or property
                                                Salaries, fees, directors'    insurance benefits or
                                                fees, commissions, and        reimbursement, personal
                                                bonuses                       benefits
                                                ------------------------      --------------------
                                                              (Amounts in Thousands)
<S>                                                            <C>                        <C>                      <C>
Phoenix Leasing              General Partner                   $17(1)                     $0                       $0
  Incorporated

Gus Constantin               General Partner                     7(2)                      0                        0
                                                               ---                         -                        -

All General Partners         General Partners                  $24                        $0                       $0
                                                               ===                         =                        =

(1) consists of management and liquidation fees.
(2) consists of liquidation fees.
</TABLE>

Item 12.      Security Ownership of Certain Beneficial Owners and Management.

         (a)  No person  owns of record,  or is known by the  Registrant  to own
              beneficially,  more  than  five  percent  of any  class of  voting
              securities of the Registrant.

         (b)  The General Partner of the Registrant  owns the equity  securities
              of the Registrant set forth in the following table:



<PAGE>


                                                                   Page 26 of 28


           (1)                                (2)                     (3)
    Title of Class                  Amount Beneficially Owned   Percent of Class
    --------------                  -------------------------   ----------------

    General Partner Interest:
      Mr. Gus Constantin,           Represents a 3.896% Interest      33.3%
      Individual General Partner    in the Registrant's Profits,
                                    Losses and Distributions.

    General Partner Interest:
      Phoenix Leasing Incorporated, Represents a 7.792% Interest      66.7%
      Corporate General Partner     in the Registrant's Profits,
                                    Losses and Distributions.

    Limited Partner Interest:
      Phoenix Leasing Incorporated, .50 units                            -
      Corporate General Partner

Item 13.      Certain Relationships and Related Transactions.

         None.


                                     PART IV

Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

                                                                     Page No.
                                                                     --------
(a)      1.   Financial Statements:

              Report of Independent Public Accountants                   9
              Balance Sheets                                            10
              Statements of Operations                                  11
              Statements of Partners' Capital                           12
              Statements of Cash Flows                                  13
              Notes to the Financial Statements                      14-23

         2.   Financial Statement Schedules:

              Report of Independent Public Accountants on the
                Financial Statement Schedules                            9
              Schedule II - Valuation and Qualifying Accounts
                and Reserves                                            28

         All other schedules are omitted because they are not applicable, or not
required,  or because the  required  information  is  included in the  financial
statements or notes thereto.

(b)      Reports on Form 8-K:

         No reports on Form 8-K were filed for the quarter  ended  December  31,
1996.

(c)      Exhibits.

         21.  Additional Exhibits
              a)  Balance Sheets of Phoenix Leasing Incorporated  E21 1-12

              b)  Financial Statements for Significant Subsidiaries:
                  Phoenix Joint Venture 1994-1                   E21 13-23

         27.  Financial Data Schedule.



<PAGE>


                                                                   Page 27 of 28


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                            PHOENIX LEASING INCOME FUND 1977
                                                      (Registrant)

                                            BY: PHOENIX LEASING INCORPORATED,
                                                A CALIFORNIA CORPORATION
                                                GENERAL PARTNER


         Date:  March 25, 1997              By: /S/  GUS CONSTANTIN
                --------------                  -------------------
                                                Gus Constantin, President

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

     Signature                         Title                          Date
     ---------                         -----                          ----


/S/ GUS CONSTANTIN      President, Chief Executive Officer and a  March 25, 1997
----------------------  Director of Phoenix Leasing Incorporated  --------------
(Gus Constantin)        General Partner

/S/ PARITOSH K. CHOKSI  Chief Financial Officer,                  March 25, 1997
----------------------  Senior Vice President,                    --------------
(Paritosh K. Choksi)    Treasurer and a Director of
                        Phoenix Leasing Incorporated
                        General Partner


/S/ BRYANT J. TONG      Senior Vice President,                    March 25, 1997
----------------------  Financial Operations of                   --------------
(Bryant J. Tong)        (Principal Accounting Officer)
                        Phoenix Leasing Incorporated
                        General Partner


/S/  GARY W. MARTINEZ   Senior Vice President and a Director of   March 25, 1997
----------------------  Phoenix Leasing Incorporated              --------------
(Gary W. Martinez)      General Partner


/S/  MICHAEL K. ULYATT  Partnership Controller of                 March 25, 1997
----------------------  Phoenix Leasing Incorporated              --------------
(Michael K. Ulyatt)     General Partner


<PAGE>

<TABLE>
                                                                                                                  Page 28 of 28


                                                PHOENIX LEASING INCOME FUND 1977

                                                           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 losses on accounts
         receivable                          $ 23               $  0               $10               $ 9               $  4
     Allowance for early termination
         of financing leases                    8                  0                 5                 0                  3
     Allowance for losses on notes
         receivable                            92                  0                 0                 0                 92
                                             ----               ----               ---               ---               ----

              Totals                         $123               $  0               $15               $ 9               $ 99
                                             ====               ====               ===               ===               ====


Year ended December 31, 1995
     Allowance for losses on accounts
         receivable                          $  4               $  8               $ 0               $11               $  1
     Allowance for early termination
         of financing leases                    3                  0                 3                 0                  0
     Allowance for losses on notes
         receivable                            92                  0                 0                 0                 92
                                             ----               ----               ---               ---               ----

              Totals                         $ 99               $  8               $ 3               $11               $ 93
                                             ====               ====               ===               ===               ====


Year ended December 31, 1996
     Allowance for losses on accounts
         receivable                          $  1               $  0               $ 0               $ 1               $  0
     Allowance for losses on notes
         receivable                            92                182                 0                 0                274
                                             ----               ----               ---               ---               ----

              Totals                         $ 93               $182               $ 0               $ 1               $274
                                             ====               ====               ===               ===               ====

</TABLE>