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, 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

San Francisco, California,
December 1, 2000

                                  Page 1 of 10
<PAGE>




               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS



                                     ASSETS

                                                            September 30,
                                                          2000          1999
                                                          ----          ----

Cash ...............................................  $    39,875   $     7,480
Deferred organizational and syndication costs,
     net of amortization of $453,600 and $367,200
     as of September 30, 2000 and 1999,
     respectively ..................................      418,097       504,497
Due from Phoenix Leasing American Business
     Fund, L.P. ....................................      169,359       126,325
Due from Phoenix Leasing Incorporated and
     affiliates ....................................      289,309        86,589
Investment in Phoenix Leasing American Business
     Fund, L.P. ....................................       93,497        57,944
                                                      -----------   -----------

         Total Assets ..............................  $ 1,010,137   $   782,835
                                                      ===========   ===========



                      LIABILITIES AND SHAREHOLDER'S EQUITY

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 .............................      852,418       698,331
     Less:
       Note receivable from affiliate ..............   (1,562,243)   (1,562,243)
                                                      -----------   -----------

         Total Shareholder's Equity ................      852,518       698,431
                                                      -----------   -----------

         Total Liabilities and Shareholder's
              Equity ...............................  $ 1,010,137   $   782,835
                                                      ===========   ===========


      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 2.

Note 2.  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 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, 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


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

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2000

Note 4.  Note Receivable from Affiliate (continued):

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.  Organization and Syndication Costs:

         Prior to the  organization of PLAIIILP,  the Company,  on behalf of the
Program,  paid certain  organization  and syndication  costs associated with the
formation and initial  equity  raising of the Program.  The Company funded these
reimbursable  costs  through an advance from PLI.  Beginning  December 14, 1992,
PLAIIILP  began  paying  these  reimbursable  costs  through  advances  from the
Company.  Any costs in excess of 15% of equity raised at the  termination of the
offering  period was paid by PLAIIILP  through  advances  from the Company.  The
Company has funded these advances from PLI and earnings.

         On a  consolidated  basis,  the  Company  has paid  unreimbursed  costs
totaling $871,697,  as of September 30, 2000 and 1999. Management has determined
that the 15% cap on total  organization and syndication  costs has been exceeded
and the $871,697 was not reimbursed  from the Program at the  termination of the
offering  period.  The  Company  does expect to recover  the  $871,697  over the
remaining life of the Program through  earnings and management fees. In order to
match the offering expenses with the resulting earnings, the Company has elected
to amortize the $871,697 excess organization and syndication costs on a straight
line basis over the remaining life of the Program.

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.
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


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

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                               September 30, 2000


Note 8.  Related Parties (continued):

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
September 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.

         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.

         The Companies intend to vigorously defend the Consolidated Action.


                                       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, 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.





San Francisco, California,
December 1, 2000


                                       6
<PAGE>

                       PHOENIX LEASING ASSOCIATES III L.P.

                                 BALANCE SHEETS


                                     ASSETS

                                                               September 30,
                                                              2000        1999
                                                              ----        ----

Cash ...................................................    $ 39,498    $    547
Deferred organizational and syndication costs,
     net of amortization of $453,600 and $367,200
     as of September 30, 2000 and 1999,
     respectively ......................................     418,097     504,497
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 ..................................    $720,451    $696,882
                                                            ========    ========


                       LIABILITIES AND PARTNERS' CAPITAL

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:

     General Partner (70 partnership units) ............         700         700
     Limited Partner (42 partnership units) ............     153,069      80,134
                                                            --------    --------

         Total Partners' Capital .......................     153,769      80,834
                                                            --------    --------

         Total Liabilities and Partners' Capital .......    $720,451    $696,882
                                                            ========    ========

      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, 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.  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.  Organization and Syndication Costs:

         The Partnership on behalf of the Program pays certain  organization and
syndication  costs  associated  with the formation and initial equity raising of
the Program.  The Partnership  funded these reimbursable costs primarily through
advances  from  PLAIII.  Any  costs in  excess  of 15% of  equity  raised at the
termination  of the  offering  period  will be paid  by the  Partnership.  As of
September  30,  2000 and 1999 the  Partnership  has paid  unreimbursed  costs of
$871,697.  Management has determined that the 15% cap on total  organization and
syndication  costs has been  exceeded and that the  $871,697 was not  reimbursed
from the Program at the  termination  of the offering  period.  The Company does
expect to recover the $871,697  over the remaining  life of the Program  through
earnings and management  fees. In order to match the offering  expenses with the
resulting  earnings,  the Company has elected to amortize  the  $871,697  excess
organization  and syndication  costs on a straight line basis over the remaining
life of the Program.


                                       8
<PAGE>
                       PHOENIX LEASING ASSOCIATES III L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2000


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.

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").


                                       9
<PAGE>
                       PHOENIX LEASING ASSOCIATES III L.P.

                           NOTES TO THE BALANCE SHEETS

                               September 30, 2000


Note 8.  Commitments and Contingencies (continued):

         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.

         The Companies intend to vigorously defend the Consolidated Action.


                                       10