Exhibit 21

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


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

We have audited the accompanying  consolidated balance sheets of Phoenix Leasing
Associates,  Inc. (a Nevada  corporation) and Subsidiary as of June 30, 1997 and
1996. These consolidated  balance sheets 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 audit 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  consolidated  balance  sheet
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,  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>



                 PHOENIX LEASING ASSOCIATES, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                               June 30,
                                                         1997            1996
                                                      -----------   ------------

Cash and cash equivalents .........................   $       186   $     1,317
Due from PLI ......................................     1,449,134     1,009,215
Due from PIFLP ....................................        17,565        50,329
Investment in PIFLP ...............................           380         --
                                                      -----------   -----------
         Total Assets .............................   $ 1,467,265   $ 1,060,861
                                                      ===========   ===========


                      LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:

   Accounts payable and accrued expenses ..........   $     4,798   $     4,400
   Deficit investment in PIFLP ....................          --           5,988
                                                      -----------   -----------
         Total Liabilities ........................         4,798        10,388
                                                      -----------   -----------

Minority Interest in Consolidated Subsidiary ......         6,214         6,214
                                                      -----------   -----------

Shareholder's Equity:

   Common Stock, no par value, 100 shares
     authorized and outstanding ...................     4,382,225     4,382,225
   Retained earnings ..............................     1,456,153     1,044,159
   Less:
     Notes receivable from affiliate ..............    (4,382,125)   (4,382,125)
                                                      -----------   -----------

         Total Shareholder's Equity ...............     1,456,253     1,044,259
                                                      -----------   -----------

         Total Liabilities and Shareholder's Equity   $ 1,467,265   $ 1,060,861
                                                      ===========   ===========



                     The accompanying notes are an integral
                         part of these balance sheets.
                                        2

<PAGE>



                 PHOENIX LEASING ASSOCIATES, INC. AND SUBSIDIARY

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                                  JUNE 30, 1997


Note 1.       Organization:

     Phoenix Leasing Associates,  Inc. (PLA) was formed under the laws of Nevada
on September 13, 1989.  PLA's fiscal year ends on June 30. PLA is a wholly owned
subsidiary of Phoenix Leasing Incorporated (PLI), a California corporation.

     As of June 30, 1997,  PLA has a 50% ownership  interest in Phoenix  Leasing
Associates  L.P.  (PLALP),  a California  limited  partnership.  This  ownership
interest is subject to change upon agreement of the partners. PLA is the general
partner of PLALP,  which was formed to serve as the  general  partner in Phoenix
Income Fund, L.P. (PIFLP), a California limited partnership. The limited partner
of PLALP is Lease Management  Associates,  Inc., a Nevada corporation controlled
by an  officer  of PLA,  who also owns the  parent of PLI.  Profits  and  losses
attributable  to  acquisition  fees  paid to  PLALP by PIFLP  are  allocated  in
proportion to the partners' ownership interests. All other profits and losses of
PLALP are allocated to PLA. Distributions to the partners are made in accordance
with the terms of the partnership  agreement.  PLA and its 50%-owned subsidiary,
PLALP, are hereinafter referred to as the Company.

Note 2.       Principles of Consolidation:

     The consolidated financial statements as of June 30, 1997 and 1996, include
the accounts of PLA and its subsidiary, PLALP, over which PLA exerts significant
control and influence.  All significant  intercompany  accounts and transactions
have been  eliminated in  consolidation.  The minority  interest  represents the
limited partner's interest in PLALP.

     The Company  records its  investments  in PIFLP under the equity  method of
accounting.  As general  partner,  the Company has  complete  authority  in, and
responsibility  for, the overall management and control of PIFLP, which includes
responsibility  for  supervising  PIFLP'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.       Notes Receivable from Affiliate:

     PLI, the sole  shareholder in PLA, as of June 30, 1997 and 1996, has issued
demand promissory notes to PLA totaling $4,382,125. There are no restrictions or
covenants  associated  with these notes which would  preclude PLA from receiving
the principal or interest  amounts under the terms of the notes.  The notes bear
interest  at a rate  equal to the  lesser of 10% or the  prime  rate plus 1%, as
determined by Citibank,  N.A., New York, New York. Interest is payable by PLI on
the first business day of each calendar  quarter.  The principal amounts are 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.

     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 $171,626 and $256,590 as of June 30, 1997 and
1996,  respectively,  were  transferred to PAI in accordance  with a Tax Sharing
Agreement between the Company and PAI.


                                        3

<PAGE>



Note 6.       Compensation and Fees:

     The Company receives acquisition fees equal to four percent of the purchase
price of assets  acquired or financed by PIFLP in connection  with the analysis,
selection and acquisition or financing of assets, and the continuing analysis of
the overall portfolio of PIFLP's assets,  and management fees equal to three and
one half  percent of PIFLP  gross  revenues  in  connection  with  managing  the
operations of PIFLP.  In addition,  the Company  receives an interest in PIFLP's
profits, losses and distributions.  Management fees of $17,565 and $50,329 as of
June 30, 1997 and 1996 are included in Due from PIFLP.

Note 7.       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 PIFLP.

     The  Company  has  entered  into an  agreement  with PLI,  whereby PLI will
provide  management  services to PLALP in  connection  with the  operations  and
administration  of PIFLP. 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: Three and one half percent of PIFLP's cumulative gross revenues
plus the lesser of four percent of the purchase  price of equipment  acquired by
and  financing  provided  to  businesses  by  PIFLP  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 PLALP.  Management fees paid
to PLI equal  $615,151and  $980,163  for the year ended June 30,  1997 and 1996,
respectively.

                                        4

<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


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

We have audited the  accompanying  balance sheets of Phoenix Leasing  Associates
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  balance  sheets  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  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 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>



                         PHOENIX LEASING ASSOCIATES L.P.

                                 BALANCE SHEETS

                                     ASSETS

                                                                  June 30,
                                                             1997       1996
                                                            -------   -------

Cash and cash equivalents ................................. $    47   $ 1,182
Investment in PIFLP .......................................     379      --
Due from PIFLP ............................................  17,566    50,329
                                                            -------   -------
         Total Assets ..................................... $17,992   $51,511
                                                            =======   =======


                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

   Accounts payable and accrued expenses .................. $ 2,399   $ 2,200
   Deficit investment in PIFLP ............................    --       5,987
   Due to General Partner .................................   8,389    36,120
                                                            -------   -------
         Total Liabilities ................................  10,788    44,307
                                                            -------   -------

Partners' Capital:

   General partner (99 partnership units) .................     990       990
   Limited partner (99 partnership units) .................   6,214     6,214
                                                            -------   -------
         Total Partners' Capital ..........................   7,204     7,204
                                                            -------   -------

         Total Liabilities and Partners' Capital .......... $17,992   $51,511
                                                            =======   =======



                     The accompanying notes are an integral
                         part of these balance sheets.
                                        6

<PAGE>



                         PHOENIX LEASING ASSOCIATES L.P.

                           NOTES TO THE BALANCE SHEETS

                                  JUNE 30, 1997


Note 1.       Organization and Partnership Matters:

     Phoenix Leasing  Associates  L.P., a California  limited  partnership  (the
Partnership),  was formed under the laws of the State of  California  on October
13, 1989. The  Partnership is the general  partner of Phoenix Income Fund,  L.P.
(PIFLP), a California limited partnership,  which was formed on October 1, 1990,
to invest in capital  equipment of various types and to lease such  equipment to
third  parties on either a long-term  or  short-term  basis.  The  Partnership's
fiscal year ends on June 30 of each year. The general partner of the Partnership
is Phoenix Leasing Associates, Inc. (PLA), a Nevada corporation and wholly owned
subsidiary of Phoenix Leasing Incorporated (PLI), a California corporation.  The
limited  partner of the  Partnership  is Lease  Management  Associates,  Inc., a
Nevada  corporation  controlled by an officer of PLA, who also owns the ultimate
parent of PLA.

     The Partnership  records its investment in PIFLP under the equity method of
accounting.  As general partner,  the Partnership has complete authority in, and
responsibility  for, the overall management and control of PIFLP, which includes
responsibility for supervising  PIFLP's  acquisition,  leasing,  remarketing and
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 has been recorded
on the Partnership's balance sheets.

Note 3.       Use of Estimates:

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

Note 4.       Compensation and Fees:

     The  Partnership  receives an acquisition  fee equal to four percent of the
purchase  price of assets  acquired or financed by PIFLP in connection  with the
analysis,  selection and acquisition or financing of assets,  and the continuing
analysis of the overall  portfolio of PIFLP's assets,  and management fees equal
to three and one half  percent of PIFLP's  gross  revenues  in  connection  with
managing the  operations  of PIFLP.  In addition,  the  Partnership  receives an
interest  in PIFLP's  profits,  losses  and  distributions.  Management  fees of
$17,565 and $50,329 as of June 30, 1997 and 1996  respectively,  are included in
Due from PIFLP.

Note 5.       Allocation of Profits, Losses and Distributions:

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

Note 6.       Related Parties:

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

     PLA has  entered  into an  agreement  with PLI  whereby  PLI  will  provide
management  services to the  Partnership  in connection  with the operations and
administration  of PIFLP. In consideration for the services and activities to be
performed by PLI pursuant to this agreement, PLA shall pay PLI fees in an amount
equal to: Three and one half percent of PIFLP's  cumulative  gross revenues plus
the  lesser of  four  percent of the purchase price of equipment acquired by and

                                        7
<PAGE>


financing  provided to businesses by PIFLP or 100% of the net cash  attributable
to the acquisition fee which has been  distributed to PLA plus 100% of all other
net cash from operations of the  Partnership.  Management fees paid to PLI equal
$615,151 and $980,163 for the year ended June 30, 1997 and 1996, respectively.

                                        8