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 of Phoenix
Leasing  Associates  III,  Inc.  (a Nevada  corporation)  and  subsidiary  as of
September 30, 2001 and 2000. These financial  statements are the  responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

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

         In our opinion, the balance sheets referred to above present fairly, in
all material respects, the financial position of Phoenix Leasing Associates III,
Inc.  and  subsidiary  as of September  30, 2001 and 2000,  in  conformity  with
accounting principles generally accepted in the United States.



                                                             ARTHUR ANDERSEN LLP

San Francisco, California,
November 30, 2001

                                  Page 1 of 10

<PAGE>

               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

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

Cash ................................................ $       241  $    39,875
Due from Phoenix Leasing American Business Fund, L.P.     160,616      169,359
Investment in Phoenix Leasing American Business
  Fund, L.P. ........................................      93,743       93,497
                                                      -----------  -----------

         Total Assets ............................... $   254,600  $   302,731
                                                      ===========  ===========



                      LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:

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

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

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


Shareholder's Equity:

     Common stock, without par value, 100 shares
       authorized and outstanding ...................   1,562,343    1,562,343
     Retained earnings ..............................     657,699      434,321
     Less:
       Note receivable from affiliate ...............  (1,562,243)  (1,562,243)
       Due from Phoenix Leasing Incorporated and
         affiliates .................................    (559,602)    (289,309)
                                                      -----------  -----------

         Total Shareholder's Equity .................      98,197      145,112
                                                      -----------  -----------

         Total Liabilities and Shareholder's Equity . $   254,600  $   302,731
                                                      ===========  ===========

      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, 2001


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 6).
The Company is the general partner of PLAIIILP and, as of September 30, 2001 and
2000, 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, 2001 and 2000 are  presented on a  consolidated
basis as discussed in Note 2.

Note 2.  Principles of Consolidation:

         The  consolidated  balance  sheets as of  September  30,  2001 and 2000
include the accounts of the Company and its subsidiary 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 3.  Use of Estimates:

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


Note 4.  Note Receivable from Affiliate:

         PLI, the sole shareholder of the Company, as of September 30, 20001 and
2000 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

                                       3
<PAGE>

               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2001


Note 4.  Note Receivable from Affiliate (continued):

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 5.  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 6.  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.
Management  fees of $7,967 and $16,710  and  acquisition  fees of  $152,649  and
$152,649 are included in Due from Phoenix Leasing  American  Business Fund, L.P.
on the balance sheet as of September 30, 2001 and 2000, respectively.

Note 7.  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  $195,861  and  $477,888  for the  twelve  months  ended
September 30, 2001 and 2000, respectively.

Note 8.  Commitments and Contingencies:

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

                                       4
<PAGE>

               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2001


Note 8.  Commitments and Contingencies (continued):

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

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

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

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

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

                                       5
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


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

         We have  audited the  accompanying  balance  sheets of Phoenix  Leasing
Associates III L.P. (a California limited  partnership) as of September 30, 2001
and 2000. These financial statements are the responsibility of the Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

         In our opinion, the balance sheets referred to above present fairly, in
all material respects,  the financial position of Phoenix Leasing Associates III
L.P. as of September 30, 2001 and 2000, in conformity with accounting principles
generally accepted in the United States.



                                                             ARTHUR ANDERSEN LLP

San Francisco, California,
November 30, 2001

                                       6
<PAGE>

                       PHOENIX LEASING ASSOCIATES III L.P.

                                 BALANCE SHEETS


                                     ASSETS

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

Cash ..................................................... $     148  $  39,498
Investment in Phoenix Leasing American Business Fund, L.P.    93,743     93,497
Due from Phoenix Leasing American Business Fund, L.P. ....   160,616    169,359
                                                           ---------  ---------

         Total Assets .................................... $ 254,507  $ 302,354
                                                           =========  =========


                       LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

     Accounts payable and accrued expenses ............... $   1,667  $   2,274
     Due to General Partner ..............................   430,767    564,408
                                                           ---------  ---------

         Total Liabilities ...............................   432,434    566,682
                                                           ---------  ---------


Partners' Capital (Deficit):

     General Partner (70 partnership units) ..............  (330,996)  (417,397)
     Limited Partner (42 partnership units) ..............   153,069    153,069
                                                           ---------  ---------

         Total Partners' Capital (Deficit) ...............  (177,927)  (264,328)
                                                           ---------  ---------

         Total Liabilities and Partners' Capital ......... $ 254,507  $ 302,354
                                                           =========  =========

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

                                       7
<PAGE>

                       PHOENIX LEASING ASSOCIATES III L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2001


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.  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 3.  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 4.  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 $7,967 and $16,710 and  acquisition  fees of
$152,649 and $152,649 are included in Due from Phoenix Leasing American Business
Fund,   L.P.  on  the  balance  sheets  as  of  September  30,  2001  and  2000,
respectively.

                                       8
<PAGE>

                       PHOENIX LEASING ASSOCIATES III L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2001


Note 5.  Allocation of Profits, Losses and Distributions:

         Profits  and  losses  attributable  to  acquisition  fees  paid  to the
Partnership  by 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 6.  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
$195,861 and $477,888 for the twelve  months ended  September 30, 2001 and 2000,
respectively.

Note 7.  Commitments and Contingencies:

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

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

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

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

                                       9
<PAGE>

                       PHOENIX LEASING ASSOCIATES III L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2001


Note 7.  Commitments and Contingencies (continued):

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

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

                                       10