Page 1 of 27


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549

                                 --------------

                                    FORM 10-K

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


For the fiscal year ended December 31, 1996       Commission File Number 0-25278


                  PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

          California                                      68-0293258
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

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

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

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

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

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

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

                               Yes __X__ No _____

As of December 31, 1996,  1,588,681 Units of Limited  Partnership  interest were
outstanding.  No  market  exists  for the  Units  of  Partnership  interest  and
therefore there exists no aggregate market value at December 31, 1996.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE



<PAGE>


                                                                    Page 2 of 27




                  PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.

                          1996 FORM 10-K ANNUAL REPORT


                                TABLE OF CONTENTS


                                                                          Page

                                     PART I

Item 1.    Business......................................................   3
Item 2.    Properties....................................................   4
Item 3.    Legal Proceedings.............................................   5
Item 4.    Submission of Matters to a Vote of Security Holders...........   6


                                     PART II

Item 5.    Market for the Registrant's Securities and Related Security
           Holder Matters................................................   6
Item 6.    Selected Financial Data.......................................   6
Item 7.    Management's Discussion and Analysis of Financial Condition 
           and Results of Operations.....................................   7
Item 8.    Financial Statements and Supplementary Data...................  10
Item 9.    Disagreements on Accounting and Financial Disclosure Matters..  23


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant............  23
Item 11.   Executive Compensation........................................  24
Item 12.   Security Ownership of Certain Beneficial Owners and Management  24
Item 13.   Certain Relationships and Related Transactions................  25


                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on 
           Form 8-K......................................................  25


Signatures...............................................................  26



<PAGE>


                                                                    Page 3 of 27


                                     PART I

Item 1.    Business.

General Development of Business.

        Phoenix  Leasing  American  Business  Fund,  L.P., a California  limited
partnership  (the  "Partnership"),  was  organized  on  December  3,  1992.  The
Partnership was registered  with the Securities and Exchange  Commission with an
effective  date of October  19,  1993 and shall  continue  to operate  until its
termination date unless dissolved sooner due to the sale of substantially all of
the assets of the Partnership or a vote of the Limited Partners. The Partnership
will terminate on December 31, 2007. The General Partner is a California limited
partnership,  Phoenix Leasing  Associates III L.P., the general partner of which
is Phoenix Leasing Associates III, Inc., a Nevada corporation and a wholly-owned
subsidiary  of Phoenix  Leasing  Incorporated,  a  California  corporation.  The
General Partner or its affiliates also is or has been a general partner in other
limited partnerships formed to invest in capital equipment and other assets.

        The registration was for 2,500,000 units of limited partnership interest
at a price of $20 per unit.  The  Partnership  completed its public  offering on
October 6, 1996. The Partnership sold 1,603,335 units for a total capitalization
of $32,066,700.  Of the proceeds received through the offering,  the Partnership
has  incurred  $4,808,933  in  organizational  and  offering  expenses for a net
capitalization of $27.3 million.

        From the initial formation of the Partnership through December 31, 1996,
the total  investments in equipment  leases and financing  transactions  (loans)
including the  Partnership's  pro rata interest in an investment made by a joint
venture,  approximate $50,619,000.  The average initial firm term of contractual
payments from equipment subject to lease was 48 months,  and the average initial
net monthly  payment rate as a percentage  of the  original  purchase  price was
2.88%.  The average initial firm term of contractual  payments from loans was 45
months and the weighted average interest was 16.18%.

        The Partnership has acquired siginificant amounts of equipment or assets
with the net  offering  proceeds.  In  addition,  the  Partnership  has acquired
equipment  through  the  use  of  debt  financing,  however,  the  ratio  of the
outstanding debt to net capital  contributions  less any investment in Leveraged
Joint Ventures at the end of the  Partnership's  offering period will not exceed
four to five (80%).  The cash flow  generated by such  investments  in equipment
leases or financing  transactions  will be used to provide for debt service,  to
provide cash  distributions to the Partners and the remainder will be reinvested
in capital equipment or other assets.

        The  Partnership  will maintain  working  capital  reserves in an amount
which  will  fluctuate  from  time to  time  depending  upon  the  needs  of the
Partnership,  but which  will be at least  one  percent  of the  gross  offering
proceeds during the Partnership's operational phase.


Narrative Description of Business.

        The objectives of the Partnership are to: (1) produce cash distributions
on a continuing basis over the life of the Program through leasing equipment and
financing  assets   primarily  to  companies   engaged  in  the  development  of
technologies and other growth industry businesses,  franchisees, and other third
party lessees and  customers;  (2) reinvest,  during the operating  phase of the
Program (after payment of expenses,  including  debt service  requirements,  and
distributions to the Partners),  in additional  equipment and assets to increase
the  overall  size  of  the  portfolio;  and  (3)  commence  liquidation  of the
Partnership's  portfolio  of  investments  seven  years  after  the close of the
offering of units of limited partnership interests.

        To achieve these objectives the Partnership has invested and will invest
in various types of capital equipment and other assets,  and provide leasing and
secured  financing  of the same to  third  parties  on  either  a  long-term  or
short-term  basis.  The  Partnership  has  invested  and will invest in, or have
collateral in, various types of assets including: (1) production, manufacturing,
fabrication and test equipment; (2) lab and medical equipment; (3) furniture and
fixtures;   (4)  personal  computers  and  workstations,   computer   peripheral
equipment, computer mainframes, CAE/CAD/CAM equipment, communications equipment,
office systems and computer software products;  (5) property management systems,
including  computer  reservations  systems,  and  phone  and  telecommunications


<PAGE>


                                                                    Page 4 of 27


systems;  and (6)  various  types of  other  equipment,  furnishings,  fixtures,
leasehold  improvements  and  assets,  including  to a  limited  extent  certain
intangible assets.

        A substantial  portion of the net offering  proceeds of the  Partnership
has been invested in equipment leases subject to full payout leases. Full payout
leases are leases under which the noncancellable  rental payments due during the
initial term of the lease are at least  sufficient to recover the purchase price
of the  equipment.  Operating  leases,  which  generally  have  terms of shorter
duration than full payout  leases,  are leases that will return to the lessor an
amount less than the purchase price of the equipment  from rental  payments over
the initial term of the lease. Upon the expiration of the initial lease term, it
is necessary to extend the lease term with the existing lessee, enter into a new
lease with another lessee or sell the equipment.

        Competition. The Partnership will be competing for equipment leasing and
financing  business with many  well-established  companies having  substantially
greater financial  resources.  The types of businesses the Partnership  competes
with will be banks, finance companies, leasing companies and other institutional
or governmental  lenders.  Competitive  factors include  pricing,  technological
innovation, payment terms, collateral requirements and methods of financing. The
General Partner intends to concentrate the  Partnership's  activities in markets
in which the General Partner and its affiliates have developed an expertise.

Other.

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


Item 2.    Properties.

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

        As of December 31, 1996, the Partnership has acquired  equipment and has
provided  financing  (loans) to  borrowers  with an aggregate  original  cost of
$50,619,000.  The  equipment  and  loans  have been  made to  customers  located
throughout  the  United  States.  The total  investment  in leases  and loans at
December 31, 1996 is classified as 57% emerging growth industry businesses,  40%
franchised  businesses and 3% other  businesses.  The following table summarizes
the type of equipment  owned or financed by the  Partnership,  including its pro
rata interest in a joint venture, at December 31, 1996:


<PAGE>


                                                                    Page 5 of 27


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

Equipment:
Computer Hardware                              $ 15,549                 31%
Furniture and Fixtures                            7,651                 15
Lab Test Equipment                                5,144                 10
Leasehold Improvements                            4,839                 10
Commercial Equipment                              3,733                  7
Miscellaneous Equipment                           2,807                  6
Manufacturing Equipment                           1,267                  3
Communications Equipment                            661                  1
Software                                            617                  1
                                               --------              -----

    Total Equipment                              42,268                 84

Financing:
Financing to Emerging Growth Companies            6,732                 13
Financing to Other Businesses                     1,619                  3
                                               --------              -----

    Total Financing                               8,351                 16
                                               --------              -----

        Total Assets                           $ 50,619                100%
                                               ========              =====

(1)   These amounts include the  Partnership's  pro rata interest in a financing
      joint  venture of  $290,000,  cost of  equipment  on  financing  leases of
      $35,634,000 and cost of assets sold of $4,535,000 at December 31, 1996.

                               Asset Breakdown By
                            Industrial Classification
                            -------------------------

                                                               Percentage of
           Industry                                                Assets
           --------                                                ------

Hospitality                                                          22%
Software                                                             22
Biomedical                                                           16
Restaurants                                                          15
Semiconductor & Other Computer Equipment Manufacturing                7
Communications                                                        9
Retailers                                                             3
Automotive                                                            1
Miscellaneous Business Services                                       3
Other                                                                 2
                                                                    ---
        Total                                                       100%
                                                                    ===

Item 3.    Legal Proceedings.

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


<PAGE>


                                                                    Page 6 of 27


                                     PART II


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

        No matters  were  submitted to a vote of Limited  Partners,  through the
solicitation of proxies or otherwise, during the fourth quarter.


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

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

        (b)Approximate number of equity security investments:

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

           Limited Partners                                     1,630


Item 6.    Selected Financial Data.


                                   1996      1995      1994(1)   1993(1)(2)
                                   ----      ----      -------   ----------
                              (Amounts in Thousands Except for Per Unit Amounts)

Total Income                    $ 6,488   $ 4,100     $ 2,150      $  --

Net Income                        1,973     1,143         435         --

Total Assets                     34,797    36,053      25,676          253

Long-term Debt Obligations        4,015     8,994       9,365         --

Distributions to Partners         4,285     2,052         570         --

Net Income per Limited
 Partnership Unit                  1.28      1.10        1.27         --

Distributions per Limited
 Partnership Unit                  2.94      2.05        1.69         --

(1) The Registrant  met  minimum  investment  requirements on  January 27, 1994.
    Therefore,  the  earnings for  1994 and  1993 do not  reflect a full year of
    operations.
(2) The year 1993 is for the period of  inception  (December  3,  1992)  through
    December 31, 1993.

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


<PAGE>


                                                                    Page 7 of 27


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

Results of Operations

        Phoenix Leasing American  Business Fund, L.P. (the  Partnership)  became
effective with the Securities and Exchange Commission on October 9, 1993 and met
its minimum  investment  requirements  of  $1,200,000  on January 27, 1994.  The
Partnership  concluded  its  public  offering  on  October  6, 1996 and has sold
1,603,335  units of limited  partnership  interest,  resulting in total  capital
contributions of $32,067,000 as of December 31, 1996.

        The Partnership  reported net income of $1,973,000 during the year ended
December 31, 1996, as compared to net income of $1,143,000  and $435,000  during
1995 and 1994,  respectively.  The increased net income during 1996, as compared
to 1995,  resulted from an increase in earnings from financing leases,  interest
income from notes  receivable as well as from a gain on sale of securities.  The
increased  net income during the year ended 1995, as compared to the same period
in 1994, was  attributable to an increase in earned income from financing leases
and interest income from notes receivable.

        Total  revenues are comprised  primarily of earned income from financing
leases for 1996, 1995 and 1994. Earned income from financing leases increased by
$852,000 and $1,463,000 during 1996 and 1995,  respectively,  as compared to the
same period in the previous  year.  The increase in earned income from financing
leases is directly  attributable to the  Partnership's  new investments  made in
equipment  leasing  transactions  during both years.  During 1996 and 1995,  the
Partnership  invested  $8.5  million  and $11.8  million,  respectively,  in new
financing  leases.  The  Partnership's  net  investment in financing  leases was
$22,732,000  at December 31, 1996,  as compared to  $24,984,000  at December 31,
1995.  The net investment in financing  leases will decrease as the  Partnership
amortizes  income over the lease term using the interest  method of  accounting.
This effect will be  mitigated  to some degree as the  Partnership  continues to
make additional investments in equipment financing leases.

        Total revenues for the year ended December 31, 1996 also includes a gain
on the sale of securities of $1,258,000 which is due to the exercise and sale of
stock warrants held by the  Partnership.  The Partnership has been granted stock
warrants as part of its lease or  financing  agreements  with  certain  emerging
growth  companies.  As of December  31,  1996,  the  Partnership  had  remaining
investments  in stock  warrants of public  companies  with  unrealized  gains of
approximately  $228,000,  as compared to $998,000 at December  31,  1995.  These
stock  warrants  contain  certain  restrictions,  but are generally  exercisable
within one year.

        Total   expenses  are  comprised   primarily  of  interest   expense  on
outstanding   borrowings,   depreciation  and  amortization.   Interest  expense
decreased by $168,000  during the year ended December 31, 1996 as compared 1995,
but  increased  by $391,000  during 1995,  as compared to 1994.  The increase in
depreciation  expense of $1,141,000 during 1996, as compared to 1995, was due to
payment  defaults of certain  financing  leases that have been  reclassified  to
equipment and are being depreciated over their remaining  estimated useful life.
The increase in amortization of acquisition fees of $210,000 and $170,000 during
1996 and 1995,  respectively,  as compared  to the same  period in the  previous
year, is  attributable to an increase in the equipment lease and note portfolio.
These  fees  are  amortized  over the  estimated  useful  life of the  equipment
acquired and notes funded.  The  Partnership  reported  small  increases in most
other  expense  categories  during  1996 as compared  to 1995.  The  Partnership
increased its allowance for losses on  receivables  during 1995 by $354,000,  as
compared  to  1994,  as a result  of an  increase  in the  growth  of the  lease
portfolio since 1994. The Partnership  reported  increases in most other expense
categories,  except for general and administrative  expenses which experienced a
decrease during 1995, as compared to the same period in 1994.

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

Liquidity and Capital Resources

        During the public  offering  stage,  which concluded on October 6, 1996,
the   Partnership's   primary   source  of  liquidity   has  come  from  capital
contributions  and borrowings.  As another source of liquidity,  the Partnership
has entered into  contractual  obligations  with lessees and borrowers for fixed
terms at fixed  payment  amounts.  The future  liquidity of the  Partnership  is
dependent upon the payment of the Partnership's contractual obligations from its
lessees and borrowers.



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                                                                    Page 8 of 27


        The Partnership  reported net cash from leasing and financing activities
of  $13,462,000  during  the year  ended  December  31,  1996,  as  compared  to
$8,499,000 and $3,117,000 during the same period in 1995 and 1994, respectively.
This increase is reflective  of the increase in the  Partnership's  portfolio of
leases and notes receivable.

        The  Partnership  received  capital   contributions  from  investors  of
$8,077,000 and incurred  organizational  and offering costs of $1,200,000 during
the year ended December 31, 1996, as compared to capital contributions  received
of  $10,709,000  and  $13,278,000  and  organizational  and  offering  costs  of
$1,585,000  and  $1,972,000  during the years ended  December 31, 1995 and 1994,
respectively.

        The  Partnership  combined these funds with proceeds from  borrowings to
invest in equipment leases and notes receivable.  During the year ended December
31, 1996,  the  Partnership  invested $8.5 million in equipment  leases and $1.7
million in notes receivable, as compared to investments of $11.8 million and $22
million  in  equipment  leases  and  $3.9  million  and  $2.7  million  in notes
receivable  (including its pro rata interest in joint ventures)  during the same
period in 1995 and 1994, respectively.  As of December 31, 1996, the Partnership
had acquired leased  equipment with an aggregate  original cost of $42.3 million
and invested $8.3 million in notes  receivable  (including its pro rata interest
in joint ventures), as compared to acquisitions of $33.8 million and $22 million
of leased  equipment and  investments  of $6.6 million and $2.7 million in notes
receivable  (including its pro rata interest in joint  ventures) at December 31,
1995 and 1994, respectively.

        As of December 31, 1996, the Partnership  reported  equipment being held
for lease with an original cost of $1,913,000  and a net book value of $674,000,
as compared to equipment  being held for lease with an original cost of $891,000
and $0 and a net book value of $345,000  and $0 at  December  31, 1995 and 1994,
respectively.  The General Partner,  on behalf of the  Partnership,  is actively
engaged in the  remarketing  and selling of the  Partnership's  equipment  as it
comes available.

        The average  initial term of all leases  entered  into,  at December 31,
1996,  was 48 months and the average net monthly  payment as a percentage of the
cost of the equipment placed in service was 2.88%. The average term of all loans
funded by the Partnership was 45 months and the weighted  average  interest rate
was 16.18%.  The  Partnership  plans to reinvest the cash generated by operating
and financing activities in new leasing and financing transactions over the life
of the Partnership. The investments made by the Partnership at December 31, 1996
were classified as approximately  57% emerging growth industry  businesses,  40%
franchised businesses, and 3% other businesses.

        The Partnership negotiated a $20 million term line of credit from a bank
in November  1993 for the purchase of equipment  and other  property  subject to
lease and is to be repaid in 49 equal  monthly  installments  of  principal  and
interest  at a  variable  rate.  The $20  million  term line of credit was fully
utilized by the  Partnership  prior to its expiration date of November 30, 1995.
As of December 31, 1996, the Partnership had repaid  approximately $12.1 million
of this loan.

        The Partnership entered into a second line of credit in the amount of $6
million on November  15, 1994 with  another  bank.  This credit line was for the
purchase of equipment and other personal  property  assets subject to lease with
interest tied to the lender's  prime rate. On June 25, 1996,  the bank agreed to
an extension of the  commitment  termination  date under the agreement from June
30, 1996 to December 31, 1996.  As of December 31,  1996,  the  Partnership  had
borrowed $3 million  under this loan  agreement,  approximately  $1.1 million of
which has been repaid.

        Payments of the  Partnership's  borrowings  discussed  above are payable
monthly.  The  Partnership  made  payments of  principal  of  $5,279,000  on its
outstanding  debt  during the year ended  December  31,  1996,  as  compared  to
$4,646,000  and  $2,860,000  during the years ended  December 31, 1995 and 1994,
respectively.

        The cash distributed to partners during the year ended December 31, 1996
was $4,285,000, as compared to $2,052,000 and $570,000 during the same period in
1995 and 1994,  respectively.  In accordance with the partnership agreement, the
limited  partners are entitled to 96% of the cash available for distribution and
the  General  Partner is  entitled  to four  percent.  As a result,  the limited
partners  received  $4,119,000,  $1,977,000  and $554,000 in cash  distributions
during the year ended  December  31,  1996,  1995 and 1994  respectively.  As of
December 31, 1996, the cumulative  cash  distributions  to limited  partners was
$6,650,000 as compared to $2,531,000 and $554,000 at December 31, 1995 and 1994,
respectively.  The General Partner received $166,000, $75,000 and $16,000 during
the years ended December 31, 1996,1995 and 1994,  respectively.  The Partnership
plans to make  distributions  to  partners  during  1997 at the same rate as the
current distribution.

<PAGE>


                                                                    Page 9 of 27


        On April 15,  1996,  the  Partnership  made a special  distribution,  in
addition  to the  regular  distribution,  to  partners of record as of March 31,
1996. The amount of this  distribution was  approximately  2.5% of the partners'
original  contribution.  This  special  distribution  was made as the  result of
proceeds received from the sale of marketable securities.

        The cash to be  generated  from  leasing  and  financing  operations  is
anticipated to be sufficient to meet the  Partnership's  continuing  operational
expenses and debt service.

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



<PAGE>


                                                                   Page 10 of 27






















               Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.

                               YEAR ENDED DECEMBER 31, 1996



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                                                                   Page 11 of 27














                         REPORT OF INDEPENDENT AUDITORS
                         ------------------------------

The Partners
Phoenix Leasing American Business Fund, L.P.

We have audited the financial  statements of Phoenix Leasing  American  Business
Fund, L.P. (a California limited  partnership)  listed in the accompanying index
to financial  statements  (Item  14(a)).  Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and the schedule are the  responsibility  of the Partnership's  management.  Our
responsibility  is to express an opinion on these  financial  statements and the
schedule based on our audits.

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

In our opinion,  the financial  statements  listed in the accompanying  index to
financial statements (Item 14(a)) present fairly, in all material respects,  the
financial  position of Phoenix Leasing American  Business Fund, L.P. at December
31, 1996 and 1995,  and the results of its operations and its cash flows for the
years ended  December 31, 1996,  1995 and 1994,  in  conformity  with  generally
accepted  accounting  principles.  Also, in our opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.


                                                            ERNST & YOUNG LLP


San Francisco, California
  January 20, 1997


<PAGE>


                                                                   Page 12 of 27


                  PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
                                 BALANCE SHEETS
                 (Amounts in Thousands Except for Unit Amounts)


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

Cash and cash equivalents                               $ 5,134        $ 2,757

Accounts receivable (net of allowance for
  losses on accounts receivable of $134
  and $103 at December 31, 1996 and 1995,
  respectively)                                             323            290

Notes receivable (net of allowance for losses
  on notes receivable of $241 and $144 at
  December 31, 1996 and 1995, respectively)               4,643          4,963

Net investment in financing leases (net of
  allowance for early terminations of $404
  and $50 at December 31, 1996 and 1995,
  respectively)                                          22,732         24,984

Capitalized acquisition fees (net of accumulated
  amortization of $902 and $404 at December 31,
  1996 and 1995, respectively)                            1,111          1,200

Other assets                                                854          1,859
                                                        -------        -------

    Total Assets                                        $34,797        $36,053
                                                        =======        =======


LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

  Accounts payable and accrued expenses                 $ 1,125        $ 1,242

  Notes payable                                           9,765         14,494
                                                        -------        -------

    Total Liabilities                                    10,890         15,736
                                                        -------        -------

Partners' Capital:

  General Partner                                            17              3

  Limited Partners,  2,500,000 units authorized,
    1,603,335 and 1,199,457 units issued and
    1,588,681 and 1,197,927 units outstanding
    at December 31, 1996 and 1995, respectively          23,662         19,316

  Unrealized gain on marketable securities
    available-for-sale                                      228            998
                                                        -------        -------

    Total Partners' Capital                              23,907         20,317
                                                        -------        -------

    Total Liabilities and Partners' Capital             $34,797        $36,053
                                                        =======        =======

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                                   Page 13 of 27


                  PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
                            STATEMENTS OF OPERATIONS
               (Amounts in Thousands Except for Per Unit Amounts)



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

INCOME

  Earned income, financing leases                $ 4,099   $ 3,247   $ 1,784

  Interest income, notes receivable                  796       568       224

  Gain on sale of securities                       1,258      --           8

  Other income                                       335       285       134
                                                 -------   -------   -------

    Total Income                                   6,488     4,100     2,150
                                                 -------   -------   -------

EXPENSES

  Depreciation and amortization                    1,340       199        43

  Amortization of acquisition fees                   497       287       117

  Lease related operating expenses                   149        45        23

  Management fees to General Partner                 345       211        98

  Reimbursed administrative costs to
   General Partner                                   403       357       256

  Interest expense                                 1,085     1,253       862

  Provision for losses on receivables                487       458       104

  General and administrative expenses                209       147       212
                                                 -------   -------   -------

    Total Expenses                                 4,515     2,957     1,715
                                                 -------   -------   -------

NET INCOME                                       $ 1,973   $ 1,143   $   435
                                                 =======   =======   =======

NET INCOME PER LIMITED PARTNERSHIP UNIT          $  1.28   $  1.10   $  1.27
                                                 =======   =======   =======

ALLOCATION OF NET INCOME:

  General Partner                                $   184   $    86   $    20

  Limited Partners                                 1,789     1,057       415
                                                 -------   -------   -------

                                                 $ 1,973   $ 1,143   $   435
                                                 =======   =======   =======

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                                   Page 14 of 27


                         PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
                                STATEMENTS OF PARTNERS' CAPITAL
                        (Amounts in Thousands Except for Unit Amounts)


                                  General                      Unrealized
                                 Partner's  Limited Partners'    Gains    Total
                                  Amount   Units        Amount  (Losses)  Amount
                                 --------- ------------------- ---------- ------

Balance, December 31, 1993           $-           50  $      1  $ -    $      1

Partners' contributions               -      663,923    13,278    -      13,278

Syndication costs                      (7)       -      (1,984)   -      (1,991)

Distributions to partners ($1.69
  per limited partnership unit)       (16)       -        (554)   -        (570)

Net income                             20        -         415    -         435
                                     ----  ---------  --------  -----  --------

Balance, December 31, 1994             (3)   663,973    11,156    -      11,153

Partners' contributions               -      535,484    10,709    -      10,709

Syndication costs                      (5)       -      (1,601)   -      (1,606)

Redemptions of capital                -       (1,530)      (28)   -         (28)

Change for the year in unrealized
  gains on available-for-sale
  securities                          -          -         -      998       998

Distributions to partners ($2.05
  per limited partnership unit)       (75)       -      (1,977)   -      (2,052)

Net income                             86        -       1,057    -       1,143
                                     ----  ---------  --------  -----  --------

Balance, December 31, 1995              3  1,197,927    19,316    998    20,317

Partners' contributions               -      403,878     8,077    -       8,077

Syndication costs                      (4)       -      (1,207)   -      (1,211)

Redemptions of capital                -      (13,124)     (194)   -        (194)

Change for the year in unrealized
  gains on available-for-sale
  securities                          -          -         -     (770)     (770)

Distributions to partners ($2.94
  per limited partnership unit)      (166)       -      (4,119)   -      (4,285)

Net income                            184        -       1,789    -       1,973
                                     ----  ---------  --------  -----  --------

Balance, December 31, 1996           $ 17  1,588,681  $ 23,662  $ 228  $ 23,907
                                     ====  =========  ========  =====  ========

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                                   Page 15 of 27


                  PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
                            STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)

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

Operating Activities:

  Net income                                     $  1,973  $  1,143  $    435

  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Depreciation and amortization                 1,340       199        43
      Amortization of acquisition fees                497       287       117
      Gain on sale of equipment                       (49)     --         (55)
      Provision for early termination,
       financing leases                               354       305      --
      Provision for losses on notes receivable         97        78        66
      Provision for losses on accounts receivable      36        75        38
      Equity in earnings from joint venture, net      (39)      (44)     --
      Gain on sale of securities                   (1,258)     --          (8)
      Increase in accounts receivable                 (69)     (508)     (131)
      Increase in accounts payable and
        accrued expenses                              120       193       744
      Decrease (increase) in other assets             130        54      (495)
                                                 --------  --------  --------
  Net cash provided by operating activities         3,132     1,782       754
                                                 --------  --------  --------

Investing Activities:

  Principal payments, financing leases              8,387     5,773     2,072
  Principal payments, notes receivable              1,943       944       291
  Distributions from joint ventures                    86        64      --
  Proceeds from sale of equipment                     766      --         562
  Proceeds from sale of securities                  1,274      --           8
  Investment in joint venture                        --        --        (290)
  Investment in financing leases                   (8,488)  (11,778)  (22,003)
  Investment in notes receivable                   (1,720)   (3,854)   (2,488)
  Investment in securities                            (16)     --        --
  Payment of acquisition fees                        (656)     (444)     (911)
                                                 --------  --------  --------

  Net cash provided (used) by investing
   activities                                       1,576    (9,295)  (22,759)
                                                 --------  --------  --------

Financing Activities:

  Proceeds from notes payable                       1,000     5,700    16,300
  Payments of principal, notes payable             (5,729)   (4,646)   (2,860)
  Partners' contributions                           8,077    10,709    13,278
  Syndication costs                                (1,200)   (1,585)   (1,972)
  Distributions to partners                        (4,285)   (2,052)     (570)
  Redemptions of capital                             (194)      (28)     --
                                                 --------  --------  --------

  Net cash provided (used) by financing
   activities                                      (2,331)    8,098    24,176
                                                 --------  --------  --------

Increase in cash and cash equivalents               2,377       585     2,171

Cash and cash equivalents, beginning of period      2,757     2,172         1
                                                 --------  --------  --------

Cash and cash equivalents, end of period         $  5,134  $  2,757  $  2,172
                                                 ========  ========  ========

Supplemental Cash Flow Information:

  Cash paid for interest expense                 $  1,037  $  1,204  $    814

                 The accompanying notes are an integral part of
                                these statements.

<PAGE>


                                                                   Page 16 of 27


                  PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1996


Note 1.    Organization and Partnership Matters.

        Phoenix  Leasing  American  Business  Fund,  L.P., a California  limited
partnership  (the  "Partnership"),  was formed on December 3, 1992, to invest in
capital  equipment  of various  types and to lease such  equipment to or provide
financing to, on either a long-term or short-term  basis,  companies  engaged in
the   development  of  technologies   and  other  growth  industry   businesses,
franchisees,  and additional third party lessees and customers.  The Partnership
met minimum  investment  requirements  on January 27,  1994.  The  Partnership's
termination date is December 31, 2007.

        For financial reporting purposes,  Partnership net income and net losses
will be allocated 99% to the Limited Partners and 1% to the General Partner.  In
addition, the General Partner will be allocated gross rental and interest income
in amounts equal to the  distributions  that it receives  from the  Partnership.
Syndication  costs will be  allocated  1% to the General  Partner and 99% to the
Limited Partners.

        The General Partner is entitled to receive 4% of all distributions until
the Limited Partners have recovered the greater of 177% of their initial capital
contributions or 100% of their initial capital  contributions  plus a cumulative
return of 11% per annum. Thereafter, the General Partner will receive 15% of all
cash  distributions.  From inception of the Partnership until December 31, 1999,
the  General   Partner's   interest  in  Cash  Available  for   Distribution  is
subordinated  in  any  calendar  quarter  until  the  Limited  Partners  receive
quarterly distributions equal to 2.75% of their capital contributions (i.e., 11%
per annum), prorated for any partial period.

        In the event the General  Partner  has a deficit  balance in its capital
account  at the  time  of  Partnership  liquidation,  it  will  be  required  to
contribute the amount of such deficit to the Partnership.

        As compensation for management services,  the General Partner receives a
fee, payable monthly,  subject to certain limitations,  in an amount equal to 2%
of the  Partnership's  gross revenues for the quarter from which such payment is
being made,  which  revenues  shall  include,  but are not  limited  to,  rental
receipts,  maintenance  fees,  proceeds  from the sale of equipment and interest
income.

        The General  Partner  will be  compensated  for  services  performed  in
connection  with the  analysis  of  assets  available  to the  Partnership,  the
selection  of such  assets  and the  acquisition  thereof,  including  obtaining
lessees for the equipment,  negotiating and concluding  master lease  agreements
with certain lessees. As compensation for such acquisition services, the General
Partner will receive a fee equal to 4%, subject to certain  limitations,  of (a)
the purchase price of equipment  acquired by the Partnership or equipment leased
to  customers  by  manufacturers,  the  financing  for which is  provided by the
Partnership,   or  (b)  financing  provided  to  businesses  payable  upon  such
acquisition  or financing,  as the case may be.  Acquisition  fees are amortized
over the life of the assets principally on a straight-line basis.

        Phoenix  Securities,  Inc.,  an  affiliate of the General  Partner,  has
contracted with or employs certain persons who will receive certain compensation
for  wholesaling  activities  performed in  connection  with the offering of the
units through broker-dealers.

        A schedule of compensation  paid and  distributions  made to the General
Partner for the years ended December 31, follows:

                                                  1996      1995      1994
                                                 ------    ------    ------
                                                    (Amounts in Thousands)
      Management fees                            $  345    $  211    $   98
      Acquisition fees                              408       625       980
      Wholesaling activities in connection
        with the offering of units                  162       214       266
      Cash distributions                            166        75        16
                                                 ------    ------    ------

                                                 $1,081    $1,125    $1,360
                                                 ======    ======    ======



<PAGE>


                                                                   Page 17 of 27


        In accordance with section 13.2(a) of the amended and restated agreement
of limited partnership,  the estimated annual average Unit valuation (unaudited)
is  estimated by the General  Partner to be equal to the original  cost ($20 per
limited partnership unit) at December 31, 1996.


Note 2.    Summary of Significant Accounting Policies.

        Leasing  Operations.  The  Partnership's  leasing  operations  currently
consist of financing and operating  leases.  The financing  method of accounting
for leases records as unearned income at the inception of the lease,  the excess
of net rentals  receivable and estimated  residual value at the end of the lease
term, over the cost of equipment  leased.  Unearned income is credited to income
monthly  over  the  term  of the  lease  on a  declining  basis  to  provide  an
approximate  level  rate of return on the  unrecovered  cost of the  investment.
Initial direct costs of consummating  new leases are capitalized and included in
the cost of equipment.  The Partnership  reviews its estimates of residual value
at least  annually.  If a decline  in value  has  occurred  which is other  than
temporary, a reduction in the investment is recognized currently.

        Under  the  operating  method  of  accounting  for  leases,  the  leased
equipment  is recorded as an asset at cost and  depreciated  on a  straight-line
basis over the estimated useful life,  ranging up to three years.  Rental income
for the year is  determined  on the basis of rental  payments due for the period
under the terms of the lease.  Maintenance  and repairs of the leased  equipment
are charged to expense.

        The Partnership's policy is to review periodically the expected economic
life of its rental equipment in order to determine the probability of recovering
its  undepreciated  cost. Such reviews address,  among other things,  recent and
anticipated  technological  developments affecting high technology equipment and
competitive factors within the high technology marketplace. Although remarketing
rental  rates are  expected to decline in the future with respect to some of the
Partnership's  rental  equipment,  such rentals are expected to exceed projected
expenses,  including  depreciation.  Should subsequent  reviews of the equipment
portfolio  indicate that rentals plus anticipated sales proceeds will not exceed
expenses in any future  period,  the  Partnership  will revise its  depreciation
policy as  appropriate.  As a result of such periodic  reviews,  the Partnership
recognized additional  depreciation expense of $271,000, $0 and $0 ($.19, $0 and
$0 per limited partnership unit) for the years ended December 31, 1996, 1995 and
1994, respectively).

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

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

        Investment  in  Available-for-Sale   Securities.   The  Partnership  has
investments  in stock and stock  warrants  in  public  companies  that have been
determined to be available for sale. Available-for-sale securities are stated at
their fair market  value,  with the  unrealized  gains and losses  reported in a
separate  component  of  partners'  capital.  The  stock  warrants  held  by the
Partnership   were  granted  by  certain  lessees  or  borrowers  as  additional
compensation  for leasing or  financing  equipment.  At the date of grant,  such
warrants were determined to have no fair market value and were recorded at their
historical cost of $0.

        Non-Cash Investing  Activities.  During the year ended December 31, 1996
and 1995,  the  Partnership  recorded an unrealized  loss on  available-for-sale
securities  which has been  included in Other  Assets of $770,000  and a gain of
$998,000, respectively.

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

        Use of Estimates.  The preparation of financial statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.




<PAGE>


                                                                   Page 18 of 27


Note 3.    Accounts Receivable.

        Accounts receivable consist of the following at December 31:

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

        Lease payments                                     $  292    $  219
        General Partner and Affiliates                        105       105
        Interest                                               24        17
        Other                                                  36        52
                                                           ------    ------
                                                              457       393
        Less:  allowance for losses on 
               accounts receivable                           (134)     (103)
                                                           ------    ------

          Total                                            $  323    $  290
                                                           ======    ======


Note 4.    Notes Receivable.

        Notes receivable consist of the following at December 31:

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

        Notes receivable from emerging growth
          companies with stated interest ranging
          from 10% to 22% per annum, receivable
          in installments ranging from 30 to 49 
          months, collateralized by the equipment
          financed.                                        $3,572    $4,259

        Notes receivable from other businesses with
          stated interest ranging from 15% to 16% per
          annum, receivable in installments ranging
          from 48 to 85 months, collateralized by the
          equipment financed.                               1,312       848
                                                           ------    ------
                                                            4,884     5,107
        Less: allowance for losses on notes receivable       (241)     (144)
                                                           ------    ------

           Total                                           $4,643    $4,963
                                                           ======    ======

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

        At December 31, 1996 and 1995, the recorded investment in notes that are
considered  to be  impaired  were  $68,000 and $0,  respectively,  for which the
related  allowance  for  losses  were $0. The  average  recorded  investment  in
impaired   loans  during  the  year  ended  December  31,  1996  and  1995  were
approximately $23,000 and $0, respectively.  The Partnership recognized interest
income of $8,000 on impaired notes receivable during the year ended December 31,
1996.

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

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

        Beginning balance                                  $  144    $   66
          Provision for losses                                 97        78
          Write downs                                        --         --
                                                           ------    ------
        Ending balance                                     $  241    $  144
                                                           ======    ======

<PAGE>


                                                                   Page 19 of 27


Note 5.    Net Investment in Financing Leases.

        Equipment on lease consists primarily of furniture,  fixtures,  computer
hardware and other capital equipment.

        The  Partnership  has  entered  into  direct  lease   arrangements  with
franchised businesses,  companies engaged in the development of technologies and
other  growth  industry  businesses  such as the  semiconductor,  biotechnology,
medical  device,  software,  communications,  data  storage,  computer,  retail,
hospitality and others, located throughout the United States.  Generally,  it is
the responsibility of the lessee to provide maintenance on leased equipment. The
General Partner  administers the equipment  portfolio of leases acquired through
the direct leasing program. Administration includes the collection of rents from
the lessees and remarketing of the equipment.

        The net  investment  in financing  leases  consists of the  following at
December 31:

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

        Minimum lease payments to be received            $ 27,811    $ 31,395
        Less: unearned income                              (4,675)     (6,361)
              allowance for early terminations               (404)        (50)
                                                         --------    --------

        Net investment in financing leases               $ 22,732    $ 24,984
                                                         ========    ========

        Minimum rentals to be received on noncancelable financing leases for the
years ended December 31, are as follows:
                                                               Financing
                                                               ---------
                                                         (Amounts in Thousands)

        1997...............................................    $ 12,285
        1998...............................................       8,577
        1999...............................................       5,113
        2000...............................................       1,594
        2001 and future....................................         242
                                                               --------

           Total                                               $ 27,811
                                                               ========


Note 6.    Accounts Payable and Accrued Expenses.

        Accounts  payable  and  accrued  expenses  consist of the  following  at
December 31:

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

        Security deposits                                $   550     $   498
        Equipment lease operations                           408         319
        Other                                                 64          87
        Syndication costs                                     52          40
        General Partner and Affiliates                        51         298
                                                         -------     -------

           Total                                         $ 1,125     $ 1,242
                                                         =======     =======



<PAGE>


                                                                   Page 20 of 27


Note 7.    Notes Payable.

        Notes payable consist of the following at December 31:

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

        Notes payable to banks, collateralized by
           all assets of the Partnership with variable
           rates of interest tied to the banks' base
           rate or IBOR rate, with payment terms of
           48 months.                                    $ 9,765     $14,494
                                                         =======     =======

        Principal payments due for the years ended December 31, are as follows:

                                                        (Amounts in Thousands)

        1997.............................................     $  5,750
        1998.............................................        2,890
        1999.............................................        1,104
        2000.............................................           21
                                                              --------

           Total.........................................     $  9,765
                                                              ========

        On November  15, 1994,  the  Partnership  entered into a loan  agreement
pursuant  to  which  it may  borrow  funds  in  the  aggregate  amount  of up to
$6,000,000 to finance or refinance the purchase of equipment and other  personal
property assets subject to lease.  This  commitment to loan funds  terminated on
December 31, 1996. As of December 31, 1996, $3,000,000 had been borrowed and was
outstanding by the Partnership under this loan agreement.

        Interest on the notes payable is tied to various  indexes.  The weighted
average  interest rate for these notes is 7.95% at December 31, 1996.  The terms
of the Partnership's  outstanding notes payable contain,  among other covenants,
requirements for maintaining  certain  financial ratios and restrictions on cash
distributions to partners in the event of default.

        The amounts  borrowed  under the loan  agreements are secured by any and
all assets of the  Partnership,  whether  now owned or  hereafter  acquired  and
regardless of whether such assets were acquired with funds borrowed  pursuant to
the loan agreement.  The loan agreements impose certain  restrictions  regarding
the  Partnership's  ability  to borrow  additional  funds  from  other  lenders,
including a restriction requiring  intercreditor  agreements with respect to any
such borrowings.  In this regard, the respective lenders under the Partnership's
loan  agreements  have  entered  into an  intercreditor  agreement  relating  to
borrowings by the Partnership under the loan agreements.


Note 8.    Income Taxes.

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

        The net  differences  between the tax basis and the reported  amounts of
the Partnership's assets and liabilities are as follows at December 31:



<PAGE>


                                                                   Page 21 of 27


                                Reported Amounts     Tax Basis    Net Difference
                                ----------------     ---------    --------------
                                             (Amounts in Thousands)
1996
----
        Assets                     $ 34,797           $ 30,073        $ 4,724
        Liabilities                  10,890             10,455            435

1995
----
        Assets                     $ 36,053           $ 31,328        $ 4,725
        Liabilities                  15,736             15,484            252

        The  following  is a  reconciliation  between  net income for  financial
reporting  purposes and net income for federal income tax purposes for the years
ended December 31:

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

       Net income for financial reporting purposes      $ 1,973   $ 1,143

       Adjustments for tax purposes:
          Tax depreciation in excess of book             (7,859)   (8,119)
          Difference in rental income recognition         8,003     5,551
          Excess of book gain on sale of equipment
            over tax gain on sale of equipment              (34)     (389)
          Book valuation allowances not recognized
            for tax purposes                                488       448
          Other                                             (28)       (2)
                                                        -------   -------

       Net loss for federal income tax purposes         $ 2,543   $(1,368)
                                                        =======   =======


Note 9.    Related Entities.

        Affiliates  of the  General  Partner  serve in the  capacity  of general
partners  in other  partnerships,  all of which  are  engaged  in the  equipment
leasing and financing business.


Note 10.   Net Income and Distributions per Limited Partnership Unit.

        Net income and distributions per limited  partnership unit were based on
the Limited  Partner's  share of net income and  distributions  and the weighted
average number of units  outstanding  of 1,399,791,  962,988 and 663,973 for the
years ended December 31, 1996, 1995 and 1994, respectively.  For the purposes of
allocating  income (loss) to each individual  Limited  Partner,  the Partnership
allocates net income  (loss) based upon each  respective  Limited  Partner's net
capital contributions.


Note 11.   Reimbursed Costs to the General Partner and Affiliates.

        The General  Partner and affiliates  incur certain  adminstrative  costs
such  as  data   processing,   investor   and   lessee   communications,   lease
administration,  accounting,  equipment storage and equipment  remarketing,  for
which it is  reimbursed  by the  Partnership.  These  expenses  incurred  by the
General  Partner and  affiliates are to be reimbursed at the lower of the actual
costs or an amount equal to 90% of the fair market value for such services.

        The reimbursed  costs to the General Partner are $537,000,  $381,000 and
$507,000 at December 31, 1996, 1995 and 1994, respectively.

        In addition,  the General  Partner will receive a management  fee and an
acquisition fee (see Note 1).




<PAGE>


                                                                   Page 22 of 27


Note 12.   Fair Value of Financial Instruments.

        The  following  methods and  assumptions  were used to estimate the fair
value of each class of financial  instrument which it is practicable to estimate
that value.

Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.

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

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

Notes Payable
The  carrying   amount  of  the   Partnership's   variable  rate  notes  payable
approximates fair value.

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

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

1996
----
        Assets
           Cash and cash equivalents                 $ 5,134       $ 5,134
           Securities, available-for-sale                229           229
           Notes receivable                            4,643         4,951
        Liabilities
           Notes payable                               9,765         9,765

1995
----
        Assets
           Cash and cash equivalents                 $ 2,757       $ 2,757
           Securities, available-for-sale                998           998
           Notes receivable                            4,963         5,188
        Liabilities
           Notes payable                              14,494        14,494

 Note 13.  Subsequent Events.

        In January 1997, cash distributions of $36,000 and $414,000 were made to
the General and Limited Partners, respectively.




<PAGE>


                                                                   Page 23 of 27


Item 9.    Disagreements on Accounting and Financial Disclosure Matters.

        None.


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant.

        The registrant is a limited partnership and, therefore, has no executive
officers or directors.  The General Partner of the Registrant is Phoenix Leasing
Associates III L.P., a California  limited  partnership,  the Corporate  General
Partner of which is Phoenix Leasing  Associates III, Inc., a Nevada  corporation
and  a  wholly-owned   subsidiary  of  Phoenix  Leasing  Incorporated  (PLI),  a
California corporation.  The directors and executive officers of Phoenix Leasing
Associates III, Inc. (PLA) are as follows:

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

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

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

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

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


<PAGE>


                                                                   Page 24 of 27


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

           Phoenix Leasing Cash Distribution Fund V, L.P.
           Phoenix Income Fund, L.P.
           Phoenix High Tech/High Yield Fund
           Phoenix Leasing Cash Distribution Fund IV
           Phoenix Leasing Cash Distribution Fund III
           Phoenix Leasing Cash Distribution Fund II
           Phoenix Leasing Income Fund VII
           Phoenix Leasing Income Fund VI
           Phoenix Leasing Growth Fund 1982 and
           Phoenix Leasing Income Fund 1977


Item 11.   Executive Compensation.
<TABLE>
        Set forth is the information relating to all direct remuneration paid or
accrued by the Registrant during the last year to the General Partner.
<CAPTION>
        (A)                 (B)                               (C)                              (D)

                                                        Cash and cash-                    Aggregate of
Name of Individual      Capacities in                   equivalent forms                  contingent forms
or persons in group     which served                    of remuneration                   of remuneration
-------------------     -------------  -------------------------------------------------  ----------------
                                                  (C1)                    (C2)
                                                                 Securities or property
                                       Salaries, fees, directors insurance benefits or
                                       fees, commissions, and    reimbursement, personal
                                       bonuses                   benefits
                                       ------------------------- -----------------------
                                                      (Amounts in Thousands)
<S>                     <C>                      <C>                      <C>                   <C>
Phoenix Leasing
  Associates III L.P.   General Partner          $753(1)                  $0                    $0
                                                  ===                      =                     =
</TABLE>
(1)  Consists of management and acquisition fees.


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

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

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





<PAGE>


                                                                   Page 25 of 27


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

    General Partner Interest   Represents a 4% interest in             100%
                               the Registrant's profits and    
                               distributions, until the Limited
                               Partners have recovered their
                               capital contributions plus a
                               cumulative return of 11% per 
                               annum, compounded quarterly, on
                               the unrecovered portion thereof.
                               Thereafter, the General Partner
                               will receive 15% interest in the
                               Registrant's profits and
                               distributions.

    Limited Partner Interest   950 units                               .06


Item 13.   Certain Relationships and Related Transactions.

        None.


                                     PART IV

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

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

           Balance Sheets as of December 31, 1996 and 1995                12
           Statements of Operations for the year ended December
             31, 1996, 1995 and 1994                                      13
           Statements of Partners' Capital for the year ended 
             December 31, 1996, 1995 and 1994                             14
           Statements of Cash Flows for the year ended December
             31, 1996, 1995 and 1994                                      15
           Notes to Financial Statements                               16-22

        2. Financial Statement Schedule:

           Schedule II - Valuation and Qualifying Accounts
             and Reserves                                                 27


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

(b)     Reports on Form 8-K:

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

(c)     Exhibits

        27.  Financial Data Schedule


<PAGE>


                                                                   Page 26 of 27


                                   SIGNATURES

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

                                  PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.,
                                         a California limited partnership
                                                  (Registrant)

                                  By: PHOENIX LEASING ASSOCIATES III L.P.,
                                      a California limited partnership,
                                      General Partner

                                      By: PHOENIX LEASING ASSOCIATES III, INC.,
                                          a Nevada corporation,
                                          General Partner



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


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

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


/S/ GUS CONSTANTIN       President and a Director                 March 25, 1997
-----------------------  of Phoenix Leasing Associates III, Inc.  --------------
(Gus Constantin)                      


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


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


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


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


<PAGE>
<TABLE>

                                                                                               Page 27 of 27


                                 PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.

                                                  SCHEDULE II
                                            (Amounts in Thousands)



SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


<CAPTION>
           COLUMN A                COLUMN B         COLUMN C        COLUMN D          COLUMN E          COLUMN F
        Classification            Balance at       Charged to      Charged to        Deductions        Balance at
                                 Beginning of       Expense          Revenue                             End of
                                    Period                                                               Period
------------------------------  --------------- ----------------  -------------  ------------------- --------------

<S>                                  <C>              <C>             <C>              <C>                <C>
Year ended December 31, 1994
  Allowance for losses on accounts
    receivable                       $   0            $ 38            $ 0              $   0              $  38
  Allowance for losses on notes
    receivable                           0              66              0                  0                 66
                                     -----            ----            ---              -----              -----

    Totals                           $   0            $104            $ 0              $   0              $ 104
                                     =====            ====            ===              =====              =====
  

Year ended December 31, 1995
  Allowance for losses on accounts
    receivable                       $  38            $ 75            $ 0              $  10              $ 103
  Allowance for early termination,
    financing leases                     0             305              0                255                 50
  Allowance for losses on notes
    receivable                          66              78              0                  0                144
                                     -----            ----            ---              -----              -----

    Totals                           $ 104            $458            $ 0              $ 265              $ 297
                                     =====            ====            ===              =====              =====


Year ended December 31, 1996
  Allowance for losses on accounts
    receivable                       $ 103            $ 36            $ 0              $   5              $ 134
  Allowance for early termination,
    financing leases                    50             354              0                  0                404
  Allowance for losses on notes
    receivable                         144              97              0                  0                241
                                     -----            ----            ---              -----              -----

    Totals                           $ 297            $487            $ 0              $   5              $ 779
                                     =====            ====            ===              =====              =====

</TABLE>