Exhibit 21







                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
Phoenix Leasing Associates III, Inc.:

         We  have  audited  the  accompanying  consolidated  balance  sheets  as
restated  -- see Note 2 -- of Phoenix  Leasing  Associates  III,  Inc. (a Nevada
corporation)  and subsidiary as of September 30, 2000 and 1999.  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

         In our opinion, the balance sheets referred to above present fairly, in
all material respects, the financial position of Phoenix Leasing Associates III,
Inc.  and  subsidiary  as of September  30, 2000 and 1999,  in  conformity  with
accounting principles generally accepted in the United States.


                                                             ARTHUR ANDERSEN LLP

San Francisco, California,
December 1, 2000 (except with respect to the matters
discussed in Notes 2 and 10 as to which the date
is November 30, 2001)


<PAGE>

               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS



                                     ASSETS

                                                          Restated (Note 2.)
                                                            September 30,
                                                          2000          1999
                                                          ----          ----

Cash ...............................................  $    39,875   $     7,480
Due from Phoenix Leasing American Business Fund,
  L.P. .............................................      169,359       126,325
Investment in Phoenix Leasing American Business
  Fund, L.P. .......................................       93,497        57,944
                                                      -----------   -----------

         Total Assets ..............................  $   302,731   $   191,749
                                                      ===========   ===========



                 LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)

Liabilities:

     Accounts payable and accrued expenses .........  $     4,550   $     4,270
                                                      -----------   -----------

         Total Liabilities .........................        4,550         4,270
                                                      -----------   -----------

Minority Interest in Consolidated Subsidiary .......      153,069        80,134
                                                      -----------   -----------


Shareholder's Equity:

     Common stock, without par value, 100 shares
       authorized and outstanding ..................    1,562,343     1,562,343
     Retained earnings .............................      434,321       193,834
     Less:
       Note receivable from affiliate ..............   (1,562,243)   (1,562,243)
       Due from Phoenix Leasing Incorporated and
         affiliates.................................     (289,309)      (86,589)
                                                      -----------   -----------

         Total Shareholder's Equity ................      145,112       107,345
                                                      -----------   -----------

         Total Liabilities and Shareholder's
           Equity ..................................  $   302,731   $   191,749
                                                      ===========   ===========

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

                                       2

<PAGE>


               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2000

Note 1.  Organization:

         Phoenix Leasing Associates III, Inc. (the Company) was formed under the
laws of Nevada on November 12, 1992. The Company is a wholly owned subsidiary of
Phoenix Leasing Incorporated (PLI), a California corporation, and was originally
formed to serve as the general partner of Phoenix Leasing American Business
Fund, L.P. (the Program), a California limited partnership.

         On December 14, 1992, the Company organized Phoenix Leasing  Associates
III, L.P., a California limited partnership (PLAIIILP) to replace the Company as
the general  partner in the  Program.  The limited  partner of PLAIIILP is Lease
Management  Associates,  Inc., a Nevada corporation  controlled by an officer of
the Company,  who also owns the parent company of PLI. As the general partner of
the Program, PLAIIILP earns the acquisition and management fees and receives the
profits,  losses and distributions  which are allocated to the Company (Note 7).
The Company is the general partner of PLAIIILP and, as of September 30, 2000 and
1999, has a 62.5%  ownership  interest.  This  ownership  interest is subject to
change in  accordance  with the  PLAIIILP  Partnership  Agreement.  Profits  and
distributions  attributable to acquisition  fees paid to PLAIIILP by the Program
are  allocated in proportion to the  partners'  ownership  interests.  All other
profits,  losses and distributions  are allocated to the Company.  The financial
statements  as of September  30, 2000 and 1999 are  presented on a  consolidated
basis as discussed in Note 3.

Note 2.  Restatement:

         The  previously  reported  financial  statements  for the  years  ended
September 30, 2000 and 1999 have been restated. The Company had paid for certain
organization  and  syndication  costs  associated with the formation and initial
equity raising of the Program of $871,697. These costs were being amortized on a
straight-line  basis over the  remaining  life of the  Program.  The Company has
determined that these costs should have been expensed in the period incurred.

         The following summarizes the restatements as of September 30,

                                         2000                      1999
                                         ----                      ----

                                Previously              Previously
                                Reported    Restated    Reported     Restated
                                --------    --------    --------     --------

Deferred organizational and
   syndication costs, net of
    amortization                $ 418,097   $    -       $504,497   $      -

Total Shareholder's Equity      $ 852,518   $ 145,112    $698,431   $ 107,345

         In addition,  the Company  reclassified  the Due from  Phoenix  Leasing
Incorporated and affiliates from Assets to Shareholder's Equity.


                                       3
<PAGE>
               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2000


Note 3.  Principles of Consolidation:

         The  consolidated  balance  sheets as of  September  30,  2000 and 1999
include the accounts of the Company and its subsidiary PLAIIILP. All significant
intercompany  accounts and transactions  have been eliminated in  consolidation.
The  minority  interest  in  consolidated   subsidiary  represents  the  limited
partner's interest in PLAIIILP.

         The Company  records  its  investment  in the Program  under the equity
method of accounting. As general partner, the Company has complete authority in,
and responsibility  for, the overall  management of the Program,  which includes
responsibility   for   supervising  the  Program's   acquisition,   leasing  and
remarketing activities, and its sale of equipment.

Note 4.  Use of Estimates:

         The preparation of consolidated financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of contingent  assets and liabilities at the date of the consolidated
financial statements. Actual results could differ from those estimates.

Note 5.  Note Receivable from Affiliate:

         PLI, the sole shareholder of the Company,  as of September 30, 2000 and
1999 has issued a demand promissory note to the Company totaling $1,562,243. The
note provides that its principal amount automatically  increases to five percent
of the aggregate  capital  contributions to the Program by its limited partners.
There are no  restrictions  or covenants  associated  with this note which would
preclude the Company from receiving the principal or interest  amounts under the
terms of the note.  The note bears interest at a rate equal to the lesser of ten
percent or the prime rate as determined by Citibank,  N.A.,  New York, New York,
plus one percent.  Interest is payable by PLI on the first  business day of each
calendar  quarter.  The  principal  amount is due and payable upon demand by the
Company.

Note 6.  Income Taxes:

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

Note 7.  Compensation and Fees:

         PLAIIILP  receives  acquisition  fees  equal  to  four  percent  of the
purchase price of assets  acquired or financed by the Program in connection with
the  analysis,  selection  and  acquisition  or  financing  of  assets,  and the
continuing  analysis of the  overall  portfolio  of the  Program's  assets,  and
management  fees  equal  to two  percent  of the  Program's  gross  revenues  in
connection  with managing the operations of the Program.  In addition,  PLAIIILP
receives an interest in the Program's profits, losses and distributions.

                                       4
<PAGE>
               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2000


Note 7.  Compensation and Fees (continued):

Management  fees of $16,710  and $39,261 and  acquisition  fees of $152,649  and
$94,633 are included in Due from Phoenix Leasing American Business Fund, L.P. on
the balance sheet as of September 30, 2000 and 1999, respectively.

Note 8.  Related Parties:

         The Company has entered  into an agreement  with PLI,  whereby PLI will
provide  management  services to PLAIIILP in  connection  with the operation and
administration of the Program.  In consideration for the services and activities
to be performed by PLI pursuant to this agreement,  the Company pays PLI fees in
an amount equal to two percent of the Program's  cumulative  gross revenues plus
the  lesser  of two and one half  percent  of the  purchase  price of  equipment
acquired by and  financing  provided to businesses by the Program or 100% of the
net cash  attributable to the acquisition fee which has been  distributed to the
Company plus 100% of all other net cash from operations of PLAIIILP.  Management
fees paid to PLI  equal  $477,888  and  $442,290  for the  twelve  months  ended
Sepember 30, 2000 and 1999, respectively.

Note 9.  Commitments and Contingencies:

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

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

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

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


                                       5
<PAGE>
               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2000


Note 9.  Commitments and Contingencies (continued):

         On August 28, 2000, the Ash and Berger actions were  consolidated  (the
"Consolidated  Action")  pursuant to  stipulation  by both  parties.  Plaintiffs
recently  served a first  request for  production  in the  Consolidated  Action;
defendants responded to the first request for production on November 27, 2000.

Note 10. Subsequent Event:

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






                                       6
<PAGE>










                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of
Phoenix Leasing Associates III L.P.:

         We have audited the accompanying balance sheets as restated -- see Note
2 -- of Phoenix Leasing Associates III L.P. (a California  limited  partnership)
as  of  September  30,  2000  and  1999.  These  financial  statements  are  the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

         In our opinion, the balance sheets referred to above present fairly, in
all material respects,  the financial position of Phoenix Leasing Associates III
L.P. as of September 30, 2000 and 1999, in conformity with accounting principles
generally accepted in the United States.



                                                             ARTHUR ANDERSEN LLP

San Francisco, California,
December 1, 2000 (except with respect to the matters
discussed in Notes 2 and 9 as to which the date
is November 30, 2001)



                                       7
<PAGE>

                       PHOENIX LEASING ASSOCIATES III L.P.

                                 BALANCE SHEETS


                                     ASSETS

                                                             Restated (Note 2.)
                                                                September 30,
                                                              2000        1999
                                                              ----        ----

Cash ...............................................  $    39,498   $       547
Investment in Phoenix Leasing American
  Business Fund, L.P. ..............................       93,497        57,944
Due from Phoenix Leasing American Business
  Fund, L.P. .......................................      169,359       133,894
                                                      -----------   -----------

         Total Assets ..............................  $   302,354   $   192,385
                                                      ===========   ===========


                  LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Liabilities:

     Accounts payable and accrued expenses .........  $     2,274   $     2,135
     Due to General Partner ........................      564,408       613,913
                                                      -----------   -----------

         Total Liabilities .........................      566,682       616,048
                                                      -----------   -----------


Partners' Capital (Deficit):

     General Partner (70 partnership units) ........     (417,397)     (503,797)
     Limited Partner (42 partnership units) ........      153,069        80,134
                                                      -----------   -----------

         Total Partners' Capital (Deficit) .........     (264,328)     (423,663)
                                                      -----------   -----------

         Total Liabilities and Partners' Capital ...  $   302,354   $   192,385
                                                      ===========   ===========


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

                                       8
<PAGE>

                      PHOENIX LEASING ASSOCIATES III, L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2000

Note 1.  Organization:

         Phoenix Leasing Associates III L.P., a California  limited  partnership
(the  Partnership),  was  formed  under the laws of the State of  California  on
December 14, 1992,  to act as the general  partner of Phoenix  Leasing  American
Business Fund, L.P. (the Program), a California limited partnership. The general
partner of the Partnership is Phoenix Leasing Associates III, Inc.  (PLAIII),  a
Nevada corporation and wholly owned subsidiary of Phoenix Leasing  Incorporated,
a  California  corporation.  The  limited  partner of the  Partnership  is Lease
Management  Associates,  Inc., a Nevada corporation  controlled by an officer of
PLAIII, who owns the ultimate parent of PLAIII.

         The Partnership  records its investment in the Program under the equity
method of accounting. As general partner, the Partnership has complete authority
in, and  responsibility  for,  the  overall  management  of the  Program,  which
includes  responsibility for supervising the Program's acquisition,  leasing and
remarketing activities, and its sale of equipment.

Note 2.  Restatement:

         The  previously  reported  financial  statements  for the  years  ended
September 30, 2000 and 1999 have been  restated.  The  Partnership  had paid for
certain  organization  and syndication  costs  associated with the formation and
initial  equity  raising of the  Program  of  $871,697.  These  costs were being
amortized  on a  straight-line  basis over the  remaining  life of the  Program.
Management  has  determined  that these costs  should have been  expensed in the
period  incurred.

         The following summarizes the restatements as of September 30,

                                         2000                      1999
                                         ----                      ----

                                Previously               Previously
                                Reported    Restated     Reported    Restated
                                --------    --------     --------    --------

Deferred organizational and
   syndication costs, net of
    amortization                $418,097   $     -       $504,497    $    -

Partners Capital (Deficit)      $153,769   $ (264,328)   $ 80,134    $(423,663)


                                       9
<PAGE>

                      PHOENIX LEASING ASSOCIATES III, L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2000

Note 3.  Income Taxes:

         The Partnership is not subject to federal and state income taxes on its
income.  Federal and state income tax regulations  provide that items of income,
gain,  loss  and  deductions,  credits  and  tax  preference  items  of  limited
partnerships  are  reportable  by the  individual  partners in their  respective
income tax returns. Accordingly, no liability for such taxes will be recorded on
the Partnership's balance sheets.

Note 4.  Use of Estimates:

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements. Actual results could differ from those estimates.

Note 5.  Compensation and Fees:

         The Partnership  receives acquisition fees equal to four percent of the
purchase price of assets  acquired or financed by the Program in connection with
the  analysis,  selection  and  acquisition  or  financing  of  assets,  and the
continuing  analysis of the  overall  portfolio  of the  Program's  assets,  and
management  fees  equal  to two  percent  of the  Program's  gross  revenues  in
connection  with  managing  the  operations  of the Program.  In  addition,  the
Partnership   receives  an  interest  in  the  Program's  profits,   losses  and
distributions.  Management fees of $16,710 and $39,261 and  acquisition  fees of
$152,649 and $94,633 are included in Due from Phoenix Leasing American  Business
Fund,   L.P.  on  the  balance  sheets  as  of  September  30,  2000  and  1999,
respectively.

Note 6.  Allocation of Profits, Losses and Distributions:

         Profits  and  losses  attributable  to  acquisition  fees  paid  to the
Partnership  by the Program are allocated to the partners in proportion to their
ownership  interests.  All other  profits  and losses are  allocated  to PLAIII.
Distributions  are  made  in  accordance  with  the  terms  of  the  partnership
agreement.

Note 7.  Related Parties:

         PLAIII has entered into an agreement with Phoenix Leasing  Incorporated
(PLI),  whereby  PLI will  provide  management  services to the  Partnership  in
connection  with  the  operations  and   administration   of  the  Program.   In
consideration for the services and activities to be performed by PLI pursuant to
this  agreement,  PLAIII pays PLI fees in an amount equal to: two percent of the
Program's  cumulative gross revenues plus the lesser of two and one half percent
of the  purchase  price of  equipment  acquired  by and  financing  provided  to
businesses  by  the  Program  or  100%  of  the  net  cash  attributable  to the
acquisition fee which has been  distributed to PLAIII plus 100% of all other net
cash  from  operations  of the  Partnership.  Management  fees paid to PLI equal
$477,888 and $442,290 for the twelve  months ended  September 30, 2000 and 1999,
respectively.


                                       10
<PAGE>
                      PHOENIX LEASING ASSOCIATES III, L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2000

Note 8.  Commitments and Contingencies:

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

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

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

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

         On August 28, 2000, the Ash and Berger actions were  consolidated  (the
"Consolidated  Action")  pursuant to  stipulation  by both  parties.  Plaintiffs
recently  served a first  request for  production  in the  Consolidated  Action;
defendants responded to the first request for production on November 27, 2000.

Note 9.  Subsequent Event:

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




                                       11