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, 1998 and
1997.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the 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,  Inc.
and  Subsidiary  as of June 30,  1998 and 1997,  in  conformity  with  generally
accepted accounting principles.

                                                             ARTHUR ANDERSEN LLP

San Francisco, California
  September 9, 1998

                                  Page 1 of 8
<PAGE>

                 PHOENIX LEASING ASSOCIATES, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                               June 30,
                                                         1998           1997
                                                         ----           ----


Cash and cash equivalents ..........................  $       366   $       186
Due from PLI .......................................    1,854,784     1,449,134
Due from PIFLP .....................................       29,602        17,565
Investment in PIFLP ................................         --             380
                                                      -----------   -----------

         Total Assets ..............................  $ 1,884,752   $ 1,467,265
                                                      ===========   ===========


                      LIABILITIES AND SHAREHOLDER'S EQUITY


Liabilities:

   Accounts payable and accrued expenses ...........  $       730   $     4,798
   Deficit investment in PIFLP .....................            7          --
                                                      -----------   -----------

         Total Liabilities .........................          737         4,798
                                                      -----------   -----------

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 ...............................    1,877,701     1,456,153
   Less:
     Notes receivable from affiliate ...............   (4,382,125)   (4,382,125)
                                                      -----------   -----------

         Total Shareholder's Equity ................    1,877,801     1,456,253
                                                      -----------   -----------

         Total Liabilities and Shareholder's Equity   $ 1,884,752   $ 1,467,265
                                                      ===========   ===========


      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, 1998


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,  1998,  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  balance sheets as of June 30, 1998 and 1997,  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   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  balance  sheets 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
balance sheets. Actual results could differ from those estimates.

Note 4.  Notes Receivable from Affiliate:

         PLI,  the sole  shareholder  in PLA, as of June 30, 1998 and 1997,  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.


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

                    NOTES TO THE CONSOLIDATED BALANCE SHEETS

                                  June 30, 1998


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  liabilities of $185,507 and $171,626 as of June 30,
1998 and 1997,  respectively,  were  transferred to PAI in accordance with a Tax
Sharing Agreement between the Company and PAI.

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 $29,602 and
$17,565 as of June 30,  1998 and 1997,  respectively,  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  $438,140  and $615,151 for the years ended June 30, 1998 and 1997,
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, 1998 and 1997.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the 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, 1998 and 1997,  in conformity  with  generally  accepted  accounting
principles.

                                                             ARTHUR ANDERSEN LLP

San Francisco, California
  September 9, 1998


                                       5
<PAGE>

                         PHOENIX LEASING ASSOCIATES L.P.

                                 BALANCE SHEETS

                                     ASSETS

                                                                    June 30,
                                                                1998       1997
                                                                ----       ----


Cash and cash equivalents ................................    $   298    $    47
Investment in PIFLP ......................................       --          380
Due from PIFLP ...........................................     29,602     17,565
                                                              -------    -------

         Total Assets ....................................    $29,900    $17,992
                                                              =======    =======

                       LIABILITIES AND PARTNERS' CAPITAL


Liabilities:

   Accounts payable and accrued expenses .................    $   365    $ 2,399
   Deficit investment in PIFLP ...........................          7       --
   Due to General Partner ................................     22,324      8,389
                                                              -------    -------

         Total Liabilities ...............................     22,696     10,788
                                                              -------    -------

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 .........    $29,900    $17,992
                                                              =======    =======

      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, 1998


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  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 balance sheets 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 balance  sheets.  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
$29,602 and $17,565 as of June 30, 1998 and 1997,  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.


                                       7
<PAGE>
                        PHOENIX LEASING ASSOCIATES L. P.

                           NOTES TO THE BALANCE SHEETS

                                  June 30, 1998


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
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
$438,140 and $615,151 for the years ended June 30, 1998 and 1997, respectively.



                                       8