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 June 30, 1997
and 1996.  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  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance  about  whether  the  balance  sheets are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in the balance  sheets.  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 sheets  referred to above present  fairly,  in all material
respects,  the financial  position of Phoenix  Leasing  Associates III, Inc. and
Subsidiary as of June 30, 1997 and 1996, in conformity  with generally  accepted
accounting principles.


San Francisco, California                                    ARTHUR ANDERSEN LLP
  September 5, 1997

                                   Page 1 of 8


<PAGE>

<TABLE>


                    PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                                CONSOLIDATED BALANCE SHEETS

                                          ASSETS


                                                                         June 30,
                                                            ---------------------------------
                                                                 1997               1996
                                                            ---------------    --------------
<S>                                                         <C>                <C>
Cash and cash equivalents.................................. $           870    $        1,282
Deferred organizational and syndication costs,
 net of amortization of $172,800 and $86,400
 at June 30, 1997 and 1996, respectively...................         698,898           622,469
Due from Phoenix Leasing American Business Fund, L.P.......         171,423           118,065
Investment in American Business Fund, L.P..................          20,493            -
                                                            ---------------    --------------
         Total Assets...................................... $       891,684    $      741,816
                                                            ===============    ==============


                           LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:

   Accounts payable and accrued expenses................... $         4,798    $        4,400
   Due to PLI..............................................         431,535           434,111
   Deficit investment in American Business Fund, L.P.......          -                 47,036
                                                            ---------------    --------------
         Total Liabilities.................................         436,333           485,547
                                                            ---------------    --------------

Minority Interest in Consolidated Subsidiary...............          78,139            20,072
                                                            ---------------    --------------

Shareholder's Equity:

   Common Stock, without par value, 100 shares
     authorized and outstanding............................       1,562,343         1,391,325
   Retained earnings.......................................         377,112           236,097
   Less:
     Note receivable from PLI..............................      (1,562,243)       (1,391,225)
                                                            ---------------    --------------

         Total Shareholder's Equity........................         377,212           236,197
                                                            ---------------    --------------

         Total Liabilities and Shareholder's Equity........ $       891,684    $      741,816
                                                            ===============    ==============



                          The accompanying notes are an
                      integral part of these balance sheets.
</TABLE>
                                        2

<PAGE>



               PHOENIX LEASING ASSOCIATES III, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                                  JUNE 30, 1997


Note 1.      Organization:

     Phoenix Leasing  Associates III, Inc., (the Company),  was formed under the
laws of Nevada on November 12, 1992. The Company and its subsidiary have June 30
fiscal  year-ends.  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 will earn the acquisition and management fees and receive
the profits,  losses and distributions  which are to be allocated to the Company
(Note 7). The Company is the general partner of PLAIIILP and, as of December 31,
1996 and June 30, 1997 has a 62.5% ownership  interest.  This ownership interest
is subject to change in  accordance  with the  PLAIIILP  Partnership  Agreement.
Profits,  losses 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 June 30, 1997 and 1996 are presented on
a consolidated basis as discussed in Note 2.

Note 2.    Principles of Consolidation:

     The consolidated financial statements as of June 30, 1997 and 1996, 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.

     PLAIIILP will record its  investment in the Program under the equity method
of  accounting.  As general  partner  of  PLAIIILP,  the  Company  has  complete
authority in, and responsibility  for, the overall management and control of the
Program,   which  includes   responsibility   for   supervising   the  Program's
acquisition, leasing, 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 June 30, 1997 and 1996, has
issued  a  demand  promissory  note  to  the  Company  totaling  $1,562,243  and
$1,391,225,   respectively.   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  notes.  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:

     The Company's income or loss for tax reporting  purposes is included in the
consolidated  and combined tax returns  filed by Phoenix  American  Incorporated
(PAI),  an  affiliated  Nevada  corporation.  These  returns are prepared on the
accrual basis of accounting.


                                        3

<PAGE>



Under  "Statement of Financial  Accounting  Standards  No. 109 - Accounting  for
Income  Taxes," the Company  computes  taxes as if it was a stand alone company.
The  resulting tax  provisions of $55,858 and $113,031,  as of June 30, 1997 and
1996,  respectively,  were  transferred to PAI in accordance  with a Tax Sharing
Agreement between the Company and PAI.

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 excessof 15% of equity raised at the  termination  of the
offering period will be 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 June 30, 1997. Management has estimated that the 15% cap on total
organization and syndication costs would be exceeded and that the $871,697 would
not be reimbursed  from the Program at the  termination of the offering  period.
The Company does expect to recover the $871,697 over the remaining 10 years 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 10 year 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 will receive an interest in
the Program's profits, losses and distributions.  Management fees of $27,637 and
$65,660 and  acquisition  fees of $143,786  and $52,406 are included in Due from
Phoenix  Leasing  American  Business  Fund,  L.P.  as of June 30, 1997 and 1996,
respectively.

Note 8.    Related Parties:

     Phoenix Securities,  Inc., an affiliate of the Company,  received a fee for
wholesaling  activities performed in connection with the offering of the limited
partnership units of the Program.

     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  $759,338  and  $990,452 for the year ended June 30, 1997
and 1996, respectively.

                                        4

<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 June 30, 1997 and 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 audits to obtain
reasonable  assurance  about  whether  the  balance  sheets are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in the balance  sheets.  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 June 30, 1997 and 1996, in conformity with generally  accepted  accounting
principles.


San Francisco, California                                   ARTHUR ANDERSEN LLP
  September 5, 1997


                                        5

<PAGE>

<TABLE>


                       PHOENIX LEASING ASSOCIATES III L.P.

                                 BALANCE SHEETS

                                     ASSETS

                                                                            June 30,
                                                               ---------------------------------
                                                                     1997               1996
                                                               --------------     --------------
<S>                                                            <C>                 <C>
Cash and cash equivalents...................................   $           646    $          976
Deferred organizational and syndication
 costs, net of amortization of $172,800
 and $86,400 as of June 30, 1997 and 1996, respectively.....           698,897           622,469
Investment in American Business Fund, L.P...................            20,493              -
Due from Phoenix Leasing American Business Fund, L.P........           171,423           118,065
                                                               ---------------    --------------

         Total Assets.......................................   $       891,459    $      741,510
                                                               ===============    ==============


                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

   Accounts payable and accrued expenses....................   $         2,399    $        2,200
   Due to General Partner...................................           810,221           671,502
   Deficit investment in American Business Fund, L.P........              -               47,036
                                                               ---------------    --------------
         Total Liabilities..................................           812,620           720,738

Partners' Capital:

   General Partner (70 partnership units)...................               700               700
   Limited Partner (42 partnership units)...................            78,139            20,072
                                                               ---------------    --------------
         Total Partners' Capital............................            78,839            20,772
                                                               ---------------    --------------

         Total Liabilities and Partners' Capital............   $       891,459    $      741,510
                                                               ===============    ==============



                     The accompanying notes are an integral
                       part of these financial statements.
</TABLE>
                                        6

<PAGE>



                       PHOENIX LEASING ASSOCIATES III L.P.

                           NOTES TO THE BALANCE SHEETS

                                  JUNE 30, 1997


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 Partnership has
a June 30 fiscal  year-end.  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 and control 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 June
30, 1997 the Partnership has paid unreimbursed costs of $871,697. Management has
estimated that the 15% cap on total  organization and syndication costs would be
exceeded and that the $871,697  would not be reimbursed  from the Program at the
termination  of the  offering  period.  The  Company  does expect to recover the
$871,697  over the remaining 10 years 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 10 year remaining life
of the Program.

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  will  receive an  interest  in the  Program's  profits,  losses and
distributions.  Management fees of $27,637 and $65,660 and  acquisition  fees of
$143,786 and $52,406 are included in Due from Phoenix Leasing American  Business
Fund, L.P. as of June 30, 1997 and 1996, respectively.


                                        7

<PAGE>


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:

     Phoenix Securities,  Inc., an affiliate of the Partnership,  receives a fee
for  wholesaling  activities  performed in  connection  with the offering of the
limited partnership units of the Program.

     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 shall pay 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  attributed 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 $758,833 and
$990,452 for the years ended June 30, 1997 and 1996, respectively.

                                        8