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

                   For the fiscal year ended December 31,1996

                         Commission file number: 0-25780
                             PRESIDIO CAPITAL CORP.
             (Exact name of registrant as specified in its charter)

     British Virgin Islands                                       N/A
 (State or other jurisdiction of                            (I.R.S. Employer
   incorporation or organization)                           Identification No.)

      c/o Hemisphere Management (Cayman) Limited
      Zephyr House, Mary Street, Grand Cayman
      Cayman Islands, British West Indies                         N/A
      (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:  (441) 295-9166
Securities registered pursuant to Section 12(b) of the Act:     None
Securities registered pursuant to Section 12(g) of the Act:     None

                    Common Stock, par value US $.01 per share
                                (Title of class)

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  [  ]

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. [ X ]

Indicate by check mark whether the  registrant  filed all  documents and reports
required to be filed by Section 12, 13 or 15(d) of the  Securities  Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [ X ]   No  [  ]

The number of shares outstanding of each of the issuers classes of common stock,
as of the last practicable date:

As of March 1, 1997,  there were 8,797,255 Class A Common Shares,  U.S. $.01 per
share, par value, outstanding.
<PAGE>
                                TABLE OF CONTENTS



           Item   
 
PART I.    1.    Business

           2.    Properties

           3.    Legal Proceedings

           4.    Submission of Matters to a Vote of Security Holders


PART II.   5.    Market Price for the Registrant's Common Stock and
                 Related Stockholder Matters

           6.    Selected Consolidated Financial Data

           7.    Management's Discussion and Analysis of Financial Condition
                 and Liquidation Activities

           8.    Financial Statements and Supplemental Data

           9.    Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure

PART III.  10.   Directors and Executive Officers of the Registrant

           11.   Security Ownership of Certain Beneficial Owners and Management

           12.   Certain Relationships and Related Transactions

PART IV.   13.   Financial Statements, Exhibits, and Reports on Form 8-K

SIGNATURES
<PAGE>
         The  statements  contained in this Annual Report on Form 10-K which are
not historical or current may contain  forward-looking  statements  that involve
risks and uncertainties,  including, but not limited to, business conditions and
changes in the general  economy,  and the ability of the Presidio  Capital Corp.
("Presidio")  and its subsidiaries  (collectively  the "Company") to effectively
manage its operating businesses and to liquidate its assets.

PART I
Item 1.  BUSINESS.

General
       The Company is engaged in the sale,  liquidation or other  disposition of
the assets (the "Acquired Assets") of Integrated Resources, Inc. ("Integrated"),
title or rights to which were  acquired  by the  Company  pursuant  to the Sixth
Amended  Plan  of  Reorganization  Submitted  by the  Steinhardt  Group  and the
Official  Committee  of  Subordinated  Bondholders,  as  amended  (the  "Plan"),
confirmed  August 8, 1994 in Integrated's  Chapter 11  reorganization  case. The
Acquired Assets included deferred origination fees, installment  obligations and
other  indebtedness  owed by  various  real  estate  investment  or "net  lease"
partnerships  to the Company under written  agreements  ("Contract  Rights") and
various  operating  businesses,  real  estate  and other  assets.  As assets are
liquidated or sold,  proceeds from disposition,  as well as other available cash
is distributed to Presidio's shareholders.

       The Company is managed by Presidio  Management  Company,  LLC  ("Presidio
Management"),  a limited liability company,  and Steinhardt  Management Company,
Inc. ("Steinhardt Management"), and is administered by Wexford Management LLC, a
Connecticut  limited  liability company  ("Wexford").  Presidio and its non-U.S.
subsidiaries are administered offshore by Hemisphere Management (Cayman) Limited
("Hemisphere").   See  "Material   Agreements  and   Instruments"  and  "Certain
Relationships and Related Transactions."

Background

       Presidio was organized on August 29, 1994, in the British  Virgin Islands
under The  International  Business  Companies Act (Cap. 291). In connection with
the Plan,  Integrated(1)  transferred  to the  Company  title and  rights to the
Acquired  Assets and the Company  assumed  certain of  Integrated's  obligations
effective  November  3, 1994 (the  "Consummation  Date").  Pursuant to the Plan,
Presidio controlled and was entitled to the remaining assets of Integrated as of
the Consummation Date.

       The  following  summarizes  the material  events  relating to the Company
which occurred pursuant to the Plan on the Consummation Date:

(i)    an asset  purchase  agreement,  dated as of May 5, 1994 (as amended,  the
       "Asset Purchase  Agreement")  was consummated  pursuant to which Presidio
       acquired, directly or indirectly, from Integrated the Acquired Assets;

(ii)   holders of allowed and disputed  Integrated  senior general unsecured and
       subordinated  claims  (aggregating  approximately  $1.9 billion) received
       Presidio's 8.8 million Class A Common Shares, U.S. $.01 par value ("Class
       A Shares"),  and 8.8 million  shares of the common stock of XRC Corp.,  a
       Delaware  corporation  which succeeded to assets of Integrated with a net
       value of less than $5 million pursuant to the Plan.
-------------
(1) Pursuant to Article 3 of Regulation S-X,  Integrated is considered to be the
predecessor of Presidio.
<PAGE>
(iii)  IRPartners,(2) contributed approximately $35.8 million to the Company for
       the  purchase  of the  Acquired  Assets and the  funding of the Plan.  In
       consideration therefor, Presidio issued to IR Partners 1.2 million of its
       Class  B  Common   Shares,   U.S.$.01  par  value   ("Class  B  Shares"),
       representing a 12% economic interest in Presidio. See "Security Ownership
       of Certain Beneficial Owners and Management";

(iv)   a reserve for disputed  claims in the Integrated case was established and
       funded by Presidio  with $46 million in cash and 162,932  Class A Shares.
       At December 31, 1996 approximately $1.6 million in cash and 16,395 shares
       remained  in  reserve.  See  "Management's  Discussion  and  Analysis  of
       Financial Condition and Liquidation Activities";

(v)    Presidio paid $23.1 million in the aggregate for the  consummation  of an
       agreement  of  settlement  relating to 47 lawsuits  (including  six class
       action suits) brought by various investors in partnerships  syndicated by
       Integrated;

(vi)   Presidio's   Board  of  Directors  was  increased  to  five  members  and
       classified into two classes by the addition of three directors  appointed
       by the Integrated  creditors'  committees  (the "Class A Directors")  and
       Presidio  issued  4,550  Class  A  Shares  to each  of its  then  Class A
       Directors; and


------------
(2)  IR Partners is a general  partnership whose general partners are Steinhardt
     Management,  certain  of its  affiliates  and  accounts  managed  by it and
     Roundhill Associates,  L.P. ("Roundhill Associates").  Roundhill Associates
     is a limited partnership whose general partner is Charles E. Davidson,  the
     principal  of  Presidio  Management  and the  Chairman of the Board of both
     Presidio and Wexford.  Joseph M. Jacobs,  the President and Chief Executive
     Officer of Presidio and the President of Wexford,  has a limited  partner's
     interest  in  Roundhill  Associates.  Robert  Holtz,  a  Vice-President  of
     Presidio and Senior Vice-President of Wexford, also has a limited partner's
     interest in Roundhill Associates.
<PAGE>

(vii)  Presidio entered into various other agreements  described under "Material
       Agreements and Instruments" below.

Description of Assets of the Company

       Set forth below is a description of the Company's  assets,  together with
the principal  strategies  that the Company  currently plans to use to liquidate
such assets.  The description of the Company's assets has been divided into four
major categories:  Contract Rights, Operating Businesses,  Real Estate and Other
Assets.

Contract Rights.

       The Contract Rights evidence deferred origination fees and contract right
obligations   owed  in  connection  with   Integrated's   (or  its  affiliates')
organization  and  syndication,  from 1978 to 1985,  of more than 100  privately
offered net lease partnerships (the  "Partnerships").  The Partnerships invested
in  commercial  real estate leased  primarily to investment  grade tenants under
long-term, "triple net" leases. The leases generally provide for 25-year primary
terms and tenant  renewal  options for additional  periods  aggregating up to 30
years.  The  leases  are  generally  non-cancelable  except in  certain  limited
circumstances.

       The  Partnerships   were  originally   organized  by  Integrated  or  its
affiliates  for the purpose of  investing  in  commercial  properties.  When the
Partnerships were originally organized and funded, Integrated (or one or more of
its affiliates) became entitled by agreement to receive certain syndication fees
and other  compensation  from the  Partnerships in  consideration of the various
financial and other services which  Integrated (or its  affiliates) had rendered
to the Partnerships,  as well as in exchange for providing the Partnerships with
the opportunity to purchase the properties.

       Contract Right Modification. Pursuant to the Agreement to Modify Contract
Agreements,  dated as of September  29,  1994,  and amended on October 20, 1995,
among Presidio and  substantially all of the  Partnerships,  modifications  were
made in various  ways which  intended to make the  Contract  Rights more readily
saleable and or financeable.
 
       Securitization  and  Related  Transactions.  In a private  securitization
transaction  completed on March 28, 1996 (the "Closing Date"),  the Company sold
117 of the 123 Contract Rights owned directly or indirectly by the Company. Such
securitized  transaction,  which was unanimously approved by Presidio's Board of
Directors,  yielded proceeds before expenses and reserves of approximately  $233
million, approximately $205 million of which has been distributed to Presidio or
one of its  subsidiaries.  Of the remaining  funds, $20 million is being held in
reserve accounts  managed by a Grantor Trust (see  Securitization,  below).  The
following  describes  the  structure  of  such   securitization.   During  1996,
approximately $9.4 million of the reserves were returned to the Company.
<PAGE>
       Securitization.  On the Closing  Date,  Presidio CR Holdings,  L.P.  (the
"Seller"),  a limited  partnership that is indirectly  wholly-owned by Presidio,
Presidio and Integrated Resources Life Companies Inc., a wholly-owned subsidiary
of Presidio ("IRL" and, with Presidio,  the "Affiliated  Sellers"),  sold all of
their right,  title and interest in 117  Contract  Rights to the Contract  Right
Grantor  Trust  (the  "Grantor  Trust"),  formed  pursuant  to a  Grantor  Trust
Agreement,  dated as of January 1, 1996,  as amended and restated by the Amended
and Restated Grantor Trust Agreement (the "Grantor Trust  Agreement"),  dated as
of January 1, 1996,  among the Seller,  the  Affiliated  Sellers,  Bankers Trust
Company,  as servicer and Union Bank, as trustee (the "Grantor Trust  Trustee").
The Grantor Trust issued a certificate (the "Grantor Trust T-1  Certificate") to
a trust  (the  "Trust")  formed  pursuant  to a Pooling  Agreement,  dated as of
January 1, 1996,  among the Grantor  Trust,  acting  through  the Grantor  Trust
Trustee,  as  depositor,  Bankers  Trust  Company,  as  servicer,  and The First
National  Bank of  Chicago,  as trustee in  exchange  for the  Certificates  (as
defined below).

       The Grantor Trust also issued a second  certificate  and certain  related
assets (the "Grantor Trust T-2 Certificate") to T-Two Partners, L.P., a Delaware
limited  partnership  (the "T-2  Holder"),  in exchange  for  approximately  $20
million in cash and the assumption of certain liabilities. The Grantor Trust T-1
Certificate  evidences  the  interest  of  the  Trust  in  the  Contract  Rights
transferred to the Grantor Trust,  and are secured by  substantially  all of the
payment stream from the primary term of such Contract Rights.  The Grantor Trust
T-2 Certificate evidences the balance of all payments on such Contract Rights as
well as the six other  Contract  Rights  sold  directly  to the  Grantor  Trust.
Payments made in respect of the Grantor Trust T-2 Certificate  will be deposited
in a reserve fund as security for the T-2 Holder's  obligation  to indemnify the
Trust against losses on the Contract Rights.

       The Trust  consists,  among  other  things,  of all the right,  title and
interest  arising from and in connection with the Grantor Trust T-1 Certificate.
A "real estate mortgage  investment conduit" ("REMIC") election has been made in
connection  with  certain  assets  of the  Trust  for U.S.  Federal  income  tax
purposes.  The  Trust  issued  five  classes  of  certificates:  the  Class  A-1
Certificates,  the Class B-1  Certificates,  the Class C-1  Certificates and the
Class D-1 Certificates (collectively,  the "Offered Certificates") and the Class
R Certificate (collectively, with the Offered Certificates, the "Certificates").
The  Class R  Certificate  was  transferred  to T-Two  Corp,  a new  corporation
affiliated with the T-2 Holder.
<PAGE>
       Upon the transfer of the  Certificates  to the Grantor  Trust in exchange
for the  Grantor  Trust T-1  Certificate,  the  Grantor  Trust sold the  Offered
Certificates  to  Bear,  Stearns  &  Co.  Inc.  ("Bear  Stearns")  in a  private
placement,  which Bear Stearns,  in turn, sold in transactions  pursuant to Rule
144A under the Securities  Act. The Grantor Trust applied  substantially  all of
the proceeds from the sale of the Offered Certificates to the purchase price for
the Contract Rights.

       Presidio  Loan.  On the Closing  Date,  Presidio  loaned $31.5 million to
Roundhill  Associates L.P. and Roundhill  Associates II L.P.,  both  Connecticut
limited partnerships (collectively, the "T-2 Organizers").  Charles E. Davidson,
Chairman of the  Company,  is the  managing  general  partner  with a 50 percent
partnership interest in each of the T-2 Organizers;  Joseph M. Jacobs, President
of the Company, is a limited partner with a 45 percent  partnership  interest in
each of the T-2 Organizers; and Robert Holtz, Vice President of the Company, has
the remaining 5% limited partnership  interest in the T-2 Organizers.  Such loan
(i) is obligated to be repaid on the completion of the rights offering discussed
below but no later than March 28, 1999,  (ii) bears  interest at the rate of 25%
per annum and (iii) is secured by a pledge of 100% of the  membership  interests
in a  Delaware a limited  liability  company,  T-Two  Holding  LLC ("T-2  LLC").
Principal  and  interest  due to  Presidio  under  the  terms of this  loan were
approximately  $37.5  million at December 31, 1996 and are  approximately  $38.8
million at March 1, 1997.

       Capitalization  of T-2  LLC.  In  order to  capitalize  T-2 LLC,  the T-2
Organizers contributed the entire $31.5 million loan from Presidio to T-2 LLC in
exchange for 100% of the  membership  interests of T-2 LLC. T-2 LLC  contributed
$20.0  million of such amount to the T-2 Holder in  exchange  for all of the T-2
Holder's limited partnership interest (which constitutes 99% of the T-2 Holder's
partnership  interests)  and $9.9 million to T-Two Corp.  in exchange for 99% of
the common stock of T-Two Corp. The capital  contribution  to (i) the T-2 Holder
was used to fund its purchase of the Grantor Trust T-2  Certificate  and related
assets,  as well as for working  capital  purposes and (ii) T-Two Corp. is being
used to fund T-Two Corp.'s tax liabilities and working capital. T-2 LLC retained
the balance of such funds for working capital purposes.

       Rights  Offering.  Pursuant to a Rights Offering  Agreement,  dated as of
March  19,  1996,  among  T-2  LLC,  Presidio  and the T-2  Organizers,  the T-2
Organizers are obligated to conduct a rights offering, or equivalent transaction
in favor of Presidio shareholders.  Until the rights offering is completed,  T-2
LLC is  precluded  from  making any  distributions  to its  members.  The rights
offering will be an offering of  transferable  rights to purchase the equivalent
of 100% of the membership interests in T-2 LLC. The rights offering will be made
to shareholders of Presidio common shares at an exercise price and on such terms
as are approved by a majority of the Class A Directors, except that interests in
T-2 LLC may  only be held by  U.S.  persons.  Pursuant  to the  Rights  Offering
Agreement,  the T-2 Organizers will sell their  membership  interests in T-2 LLC
upon  completion of the rights  offering in the same  percentage that the rights
issued in the rights  offering are  subscribed in exchange  therefore,  and will
receive  out of the  proceeds  of the  rights  offering  an amount  equal to the
following:  (i) the purchase  price for such  membership  interests,  (ii) their
interest  payments on the $31.5 million loan from Presidio,  (iii) their net tax
liability as a consequence  of owning the interests  being sold,  computed based
upon the  marginal  effective  tax rates of the  individual  partners of the T-2
<PAGE>
Organizers, minus 12% of the losses, if any, recognized by them as a consequence
of their  ownership of such interest,  plus (iv) $50,000,  which  represents the
anticipated  out-of-pocket  expenses of the  affiliates of the T-2 Organizers in
maintaining  their  investments  through certain entities in the T-2 Holders (as
described  below) in a manner that was designed to facilitate  the completion of
the Contract Rights securitization.

         Presidio and the T-2 Organizers  are working on the rights  offering of
T-2 LLC, and contemplate  making the offering during the second or third quarter
of 1997.

         T-Two  Structure.  The  general  partner of the T-2 Holder is a limited
partnership, T-Two General, L.P. ("T-2 GP"), the 1% corporate general partner of
which is owned by Messrs.  Davidson  and Jacobs and the 99% limited  partnership
interests  of which  was  owned  by  Joseph  Jacobs.  Such  limited  partnership
interests have been sold to individual  retirement accounts of Messrs.  Davidson
and Jacobs. T-2 Holder and another affiliate of Messrs. Davidson and Jacobs, T-2
Management LLC (formerly CD/JJ,  LLC) ("T-2  Management"),  are required to make
contributions  to T-2 LLC and its related  entities in the same aggregate amount
that a 1% interest  holder in T-2 LLC would have to make to acquire and retain a
1% interest  in T-2 LLC.  T-2  Management  acquired a 1% interest in T-Two Corp.
which,  as noted above,  is the holder of the Class R Certificate  issued in the
Contract Rights securitization.

       Remaining Contract Rights.  During 1996, two tenants purchased its leased
property  from the  Company,  as permitted  under the terms of their  respective
leases, for an aggregate of approximately $3.8 million. At December 31, 1996 the
Company owns four  Contract  Rights,  which in the aggregate are valued at $41.1
million.  On March 12, 1997,  one of the  Partnerships  exercised its option and
prepaid approximately $40.0 million representing the remaining balance due under
one of the Contract Right obligations.
<PAGE>
Operating Businesses.

       The acquired assets included interests in several partnerships which have
invested in operating businesses.  The Company and Presidio Management have been
working closely with existing  management in order to maximize value  consistent
with  the  Company's  fiduciary  obligations  to the  limited  partners  of such
partnerships.

         Cable  Interests.  The Company acquired  Integrated's  interests in six
limited partnerships which solely invested in cable television systems. Of these
six partnerships,  five have sold substantially all of their cable system assets
and four of those have  distributed  the majority of the funds received to their
respective partners,  while one (ACT IV) has made a distribution of funds to its
partners for which a subsidiary of Presidio  received $2.1 million in 1996.  The
balance of funds remaining in such four  partnerships  are being held in reserve
to cover any  additional  contingent  liabilities  of such  partnerships.  These
liabilities  include  potential  taxes,  professional  fees,  closing  costs and
defense of the partnership litigation relating to the sales of the partnerships'
assets.

       A discussion of other  material  operating  business  investments  of the
Company follows:

         Intergen  Company,  L.P.  ("Intergen").  Intergen  markets  biochemical
products from animal,  human,  synthetic and semi-synthetic  sources,  primarily
from bovine  (cow)  plasma and serum.  The  products  are sold  primarily to the
pharmaceutical  and  biotechnology  industries  for  research,  development  and
manufacturing of products.  The Company holds a general partnership  interest in
Intergen  Investors,   L.P.  which  entitles  the  Company  to  30%  of  profits
distributed  after an 8% per  annum  priority  return to the  limited  partners.
Intergen Investors, L.P. owns approximately 75% of Intergen.  Additionally,  the
Company  holds a  Deferred  Origination  Note  with an  accreted  face  value of
approximately $5 million at December 31, 1996.

       Majco  Building  Specialties,  L.P.  ("Majco").  The Company,  through an
indirect wholly- owned subsidiary,  owned a general partnership  interest in the
general partner of Majco. In 1995,  Majco  consummated the sale of substantially
all of its  assets  for a gross  sales  price of $66.6  million.  The  Company's
allocable  distribution  from  this  sale  was  approximately  $12  million.  In
addition,  certain amounts were withheld in an escrow account.  During 1996, the
Company received  approximately  $588,000 in distributions  from this escrow and
believes its remaining interest in the escrow is approximately $1.0 million.

       Northeastern  Television  Investors,  L.P. ("NETV").  Presidio holds a 9%
accreting promissary note due 1999 in the principal amount of $400,000 which was
received by  Integrated  when its  interests  in NETV were sold on December  17,
1993.
 
Real Estate.

       The  Company   continues  to  manage   publicly-  and   privately-offered
investment  programs organized by Integrated which have invested in residential,
retail and commercial real estate and mortgages. The Company retains an interest
in the following series of investment programs which have been  publicly-offered
and are in existence:  High Equity Partners  ("HEP" or the "HEP  Partnerships");
Resources Pension Shares 5; Vista Properties,  one  publicly-offered  investment
<PAGE>
program which made  highly-leveraged  commercial  real estate  investments;  and
Resources Accrued Mortgage  Investors,  two investment  programs which made zero
coupon loans to public and private real estate  investment  programs  (including
programs in which the Company retains an interest).

       In addition to the  foregoing  interests,  the  Company  retains  various
interests in real property issued by privately-offered  investment programs. The
Company  believes  that the  liquidation  values of these assets are  immaterial
relative  to the total  assets of the  Company,  still  such  interests  include
wraparound  mortgages  secured  by  subordinated  liens  on  various  commercial
properties, investment program interests and other notes and mortgages issued by
investment programs.

       The Company plans to liquidate most of its interests in the  subsidiaries
which serve as the general  partners of and  advisers to  publicly-offered  real
estate investment  programs.  Management is considering a variety of liquidation
alternatives to maximize the value of such interests, including, but not limited
to,  individual  sales,  bulk  sales,  securitizations  and  converting  limited
partnerships to publicly traded corporations. The Company's ability to sell such
interests  could be affected by actual or potential  claims of limited  partners
against the interests  being conveyed by the Company,  the settlement of pending
litigation  involving such limited  partnerships  and compliance with applicable
provisions of Regulation S-K of the federal  securities law. Both the timing of,
and the amount that the Company will be able to realize upon,  the sale of these
assets depends upon numerous factors,  including market  conditions,  prevailing
interest rates and issues specific to the individual properties.
 
       Information on specific real estate investments follows:

       HEP.  The HEP  Partnerships  are a series  of three  public  partnerships
(HEP-85,  HEP-86 and HEP-88),  which  invested in  unleveraged  commercial  real
estate  between  1985-1989.  The  HEP  Partnerships'  portfolios  consist  of 18
properties with an original cost of approximately $253 million.  The real estate
properties in which such Partnerships either own or maintain a material interest
consist  of  eight  shopping  centers,   locations   currently  leased  to  five
supermarkets,   three  office  buildings,   two  office  parks,  two  industrial
warehouses  and  one  parcel  of  land.   Subsidiaries  of  Presidio  (the  "HEP
Subsidiaries") serve as general partners and hold a 5.0% interest in each of the
HEP  Partnerships.  For  managing the affairs of the HEP  Partnerships,  the HEP
Subsidiaries  receive partnership  management fees, property management fees and
certain expense  reimbursements  in the aggregate of approximately  $4.5 million
per year.

       HEP is subject to a class  action  lawsuit as  described in Item 3 "Legal
Proceedings".

       On January 14, 1997,  the  Superior  Court of  California,  County of Los
Angeles, issued an order denying final approval of a proposed settlement of such
proceedings. The Company is considering alternate strategies with respect to the
HEP Partnerships.  The Company acquired 4.7% of the outstanding  limited partner
units of HEP-85,  0.6% of the  outstanding  limited  partner units of HEP-86 and
0.6% of the outstanding limited partner units of HEP-88, during 1996.
<PAGE>
       Resources Pension Shares 5 ("RPS-5"). RPS-5 is a public partnership which
invested  approximately  $50 million in first mortgage loans on commercial  real
estate. Subsidiaries of Presidio serve as general partner of RPS-5. For managing
the  affairs  of the  partnership,  servicing  mortgage  loans made by RPS-5 and
acting as a  supervisory  manager on the  properties,  subsidiaries  of Presidio
received a partnership  management fee, a mortgage  servicing fee and a property
management fee of  approximately  $900,000 for the year ended December 31, 1996.
During 1996 Presidio acquired 9.4% of the outstanding  limited partner interests
in RPS-5.

       Other Real Estate. The Company also acquired from Integrated interests in
or rights to numerous other real estate-related  assets including  approximately
10  subordinated  purchase  money  mortgages on net leased real estate which are
collateralized  by second liens on commercial  real estate  properties  owned by
limited partnerships.  The Company believes that the liquidation values of these
other real estate  interests are immaterial  relative to the total assets of the
Company. In 1996, Presidio received $3.7 million related to such assets.

Other Assets.

       The  Company  acquired  title or  rights to  various  other  assets  from
Integrated on the  Consummation  Date.  These interests  include  receivables on
leased   equipment,   expected   proceeds  from   liquidation  of  interests  in
equipment-related  limited  partnerships.  The Company  intends to pursue  value
maximizing  alternatives  to sell or wind up its  interests in these  assets.  A
description of the more significant other assets follows:
 
       Equipment Leasing  Activities.  As of March 1, 1997 the Company,  through
its  subsidiaries,   owns  interests  in  10  publicly-  and   privately-offered
investment  programs (the "Leasing  Programs")  which have invested in equipment
subject to leases to third  parties.  These  programs  are in the form of single
investor  transactions,  limited partnerships and grantor trusts. In April 1995,
the Company engaged  Fieldstone  Private Capital Group L.P.  ("Fieldstone"),  an
entity  unaffiliated  with the Company or its  subsidiaries,  for the purpose of
managing  such  interests.  In  consideration  for  such  services,   Fieldstone
receives:  (i) aggregate fixed fees; (ii)  performance fees depending upon their
ability to reduce  contingent  liabilities and  successfully  manage any pending
litigations;  and (iii)  reimbursement of their out-of-pocket  expenses.  Actual
fees, including performance fees, paid to and accrued for Fieldstone in 1995 and
1996 aggregated approximately $1.5 million and $1.3 million,  respectively.  The
engagement of Fieldstone  expires on November 3, 1997,  but may be terminated by
Presidio upon 60 days notice to Fieldstone or at any time for cause, as defined.

       As of March 1, 1997,  Fieldstone  manages for the Company three series of
publicly-offered  investment  programs which have invested in various  equipment
subject to leases  with  third  parties:  National  Lease  Income  Fund 6, L.P.,
Aircraft Income  Partners L.P. and American  Leasing  Investors  VIII-B L.P. The
Company through  Fieldstone  also manages seven,  privately  offered  investment
programs  which have invested in commercial  and corporate  aircraft and various
other equipment,  in each case subject to leases with third parties. In addition
to its involvement in equipment  leasing  investment  programs,  the Company has
direct  ownership  interests in aircraft and aircraft  engines subject to leases
with commercial airline end-users. The equipment group also realizes revenues by
managing the assets owned by  investment  programs  after their  expiration.  At
present, the equipment group is involved in three such transactions.
<PAGE>
       The Company  anticipates that the investment  programs which own aircraft
may encounter severe competition in attempting to re-lease aircraft as they come
off-lease due in part to the substantial  costs  associated with maintaining and
bringing  used  aircraft  into   compliance   with  FAA  noise  and  maintenance
requirements  adopted since 1990.  Additionally,  such investment  programs will
also have to compete with newer, more  fuel-efficient  aircraft that comply with
noise  requirements  adopted by the FAA.  The Company  also  believes  that as a
result of the factors  listed above there has been a significant  decline in the
re-sale  value  of  narrow-body  aircraft  of the  types  owned  by the  various
investment programs.

       IRLife Co. In 1990,  Integrated  sold the majority of its core  financial
services businesses  (including its insurance  subsidiary  Integrated  Resources
Life Co. ("Life")) to Broad,  Inc. In connection with the sale,  certain cash in
Life was  restricted  by order of the Iowa  Insurance  Commissioner  from  being
distributed to Integrated.  Approval for distribution  was contingent,  in part,
upon the  resolution of various  contingent  liabilities,  including  contingent
claims  relating to state guarantee funds for failed  insurance  companies.  The
right to receive  this  remaining  receivable  from Life was  transferred  to an
indirect   wholly  owned   subsidiary  of  Presidio,   in  connection  with  the
consummation  of the Plan.  On July 1,  1996,  the Iowa  Insurance  Commissioner
concluded that all contingent  liabilities had been satisfied,  and approved the
transfer  of all  remaining  cash from  Life to the  Company.  As a result,  the
Company received approximately $13.4 million on July 2, 1996.

       Tax  Sheltered  Annuities  ("TSA").  Integrated  sold its TSA business to
Metropolitan Life Insurance Company of America ("Met Life") effective  September
30, 1989 in consideration for a deferred payment arrangement.
 
       On  November  21,  1996  the  Company  sold in a  private  securitization
transaction,  its rights to this deferred payment stream. Proceeds realized, net
of the underwriting discount,  rating agency fees and reserves was approximately
$20.5 million.
 
       The securitization notes that were sold are backed solely by the deferred
payment stream and not by Presidio.  As part of this  transaction,  certificates
evidencing  a residual  beneficial  interest  were  issued and sold to two newly
formed  companies,  T-2,  TSA LLC ("T-2 TSA") and T-2 TSA II LLC ("T-2 TSA II").
The purchasers of the residual equity  certificates  are entitled to receive the
deferred payment stream payments, upon satisfaction in full of the notes sold in
the  securitization.  The rights of the residual equity  certificates  are fully
subordinated to the notes.  The purchasers of the residual  equity  certificates
are each  owned 99% by T-2 LLC.  The  purchase  of this  residual  interest  was
financed  through a $1 million loan from  Presidio to T-2 LLC. This loan accrues
interest at 15% and matures on March 31, 2001.  This note can be prepaid without
penalty,  and it is anticipated  that  prepayment will occur with the successful
completion  of the rights  offering for T-2 LLC as  previously  described  under
Contract Rights.

       First  Britannia.  The Company owns 836,956  common and 85,937  preferred
shares in a private U.K. fund which has invested in mezzanine  debt of leveraged
buy out transactions.
<PAGE>
Material Agreements and Instruments

       The  management  and  liquidation  of the  Company is governed by several
arrangements,  as well as by the provisions of a letter (the "No Action Letter")
from  the  Securities  and  Exchange   Commission  (the   "Commission").   These
arrangements were developed  through the negotiations of various  constituencies
(including  the  official  creditors'  committees)  involved  in the  Integrated
bankruptcy. These arrangements are for the most part contained in the Management
Agreements   with   Presidio   Management   and   Steinhardt   Management,   the
Administrative  Services Agreement with Wexford, the Indemnification  Agreements
(the "Indemnification  Agreements") and Indemnification  Security Agreement (the
"Indemnification Security Agreement") with certain former officers and directors
of Integrated,  the indemnification and indemnification trust agreements entered
into with  officers  and  directors of  Presidio.  The  material  terms of these
agreements and  instruments  and the No Action Letter are  summarized  below and
elsewhere in this Form 10-K. The summaries of such  agreements  and  instruments
and the No  Action  Letter  included  in this  Form  10-K do not  purport  to be
complete and are subject to and qualified in their  entirety by reference to all
of the provisions of such  agreements and  instruments and the No Action Letter,
including the definitions thereof of certain terms.

The Management Agreements.

       Effective  as of  the  Consummation  Date,  the  Company  entered  into a
management   agreement  with  Presidio  Management  (the  "Presidio   Management
Agreement")  and  a  management   agreement  with  Steinhardt   Management  (the
"Steinhardt  Management  Agreement"  and together  with the Presidio  Management
Agreement,  the "Management  Agreements").  Pursuant to the Presidio  Management
Agreement,  Presidio  Management  oversees the management of the Company and the
management and liquidation of the Company's  assets.  Pursuant to the Steinhardt
Management  Agreement,  Steinhardt  Management will be available to consult with
Presidio Management in connection with certain material transactions relating to
the Company's  assets.  Each  Management  Agreement  provides for a fixed fee of
$1.25 million per year, payable in equal monthly installments.
<PAGE>
       Pursuant to the Presidio  Management  Agreement,  Presidio Management has
full discretion and authority,  without the need for any subsequent  approval of
the Board of Directors or shareholders of Presidio, or any subsidiary, except as
expressly  required by Presidio's  Articles of Association or otherwise required
by law,  to manage and to  liquidate  the  Company's  assets  (whether  by sale,
hypothecation,   securitization   or  otherwise)  in  such  manner  as  Presidio
Management   considers   appropriate,   subject  to  restrictions  on  affiliate
transactions and except as follows:

         1.       Presidio  Management  may  not  enter  into  any  contract  or
                  arrangement  for the  provision  of services  to Presidio  (i)
                  which is  terminable by the other party thereto as a result of
                  the termination of the Presidio  Management  Agreement or (ii)
                  which is not terminable by Presidio without premium or penalty
                  on not more  than 60 days  notice,  unless  in each  case such
                  contract  or   arrangement   is  approved  by  a  majority  of
                  Presidio's  Class A Directors or, if  Presidio's  Board is not
                  then  classified,  by a majority of  Presidio's  directors (in
                  each  case  excluding  any  director   nominated  by  Presidio
                  Management,   Steinhardt   Management   or   either  of  their
                  affiliates).

         2.       The Presidio  Management  Agreement  also  prohibits  Presidio
                  Management from  contractually  restricting its employees from
                  being retained independently by Presidio following termination
                  of the Presidio Management Agreement.

Pursuant to the Presidio Management  Agreement,  Presidio Management is required
to provide each of Presidio's  directors reasonable prior notice of any material
transaction involving the Company's assets where such transaction,  or series of
related transactions,  has a fair market value or a cost exceeding $5.0 million.
The Steinhardt  Management  Agreement requires Steinhardt  Management to provide
notice to each of Presidio's  directors of any such  transaction of which it has
knowledge (to the extent such notice is not given by Presidio Management).

         Under the Presidio Management Agreement, Presidio Management may direct
Presidio to pay up to 50% of the $1.25 million annual management fee directly to
Joseph M. Jacobs or a corporation  controlled by him.  Presidio  Management  has
directed  Presidio to pay 50% of such  management  fee to Mr.  Jacobs.  In March
1996,  the Board of Directors of Presidio  approved the  assignment  of Presidio
Management's  Agreement to Wexford. In October 1996 this assignment was revoked,
and a new agreement  whereby Presidio  Management has retained Wexford to assist
in the  performance  of such duties,  as manager,  was entered into.  Charles E.
Davidson,  the Chairman of Presidio,  has a significant interest in both Wexford
and Presidio Management.

         The term of each of the  Management  Agreements  expires on November 3,
1997. The Management Agreements may be terminated without cause by Presidio upon
not less than 10 days notice.  Each  Management  Agreement is also terminable if
Presidio  Management  or  Steinhardt  Management,  as the case may be,  has been
grossly  negligent  or has  committed  willful  malfeasance  in carrying out its
duties, or is in material breach of its obligations thereunder.  In the event of
early termination of either of the Management Agreements,  Presidio shall pay on
<PAGE>
the date of the termination a lump sum amount equal to the aggregate  management
fee  that  would  have  been  payable  had the  Management  Agreement  not  been
terminated,  unless  Presidio  has  deposited  such amount with an escrow  agent
satisfactory to Presidio  Management or Steinhardt  Management,  as the case may
be, with a  distribution  thereof upon entry of a final court order  determining
that such  termination  was not for cause.  If either  Management  Agreement  is
terminated by Presidio,  the other Management  Agreement shall be deemed to have
been similarly terminated.

         Presidio  Management  and  Steinhardt  Management  are each required to
render their  services at their own  expense.  Presidio is  responsible  for all
other expenses relating to its assets, including,  without limitation,  services
of  attorneys,  accountants  and  other  third  party  professionals,  employees
provided  to  Presidio  and  other  operating  expenses,  and must  periodically
reimburse  Presidio  Management  for any  such  expenses  advanced  by  Presidio
Management.

Administrative Services Agreement.

         Wexford  entered  into  an  Administrative   Services   Agreement  (the
"Administrative   Services   Agreement")   with  Presidio  to  provide   certain
administrative  and  management  services to the Company.  Joseph M. Jacobs is a
Member and the President of Wexford.  Robert Holtz is a Member and a Senior Vice
President  of  Wexford.  Jay L.  Maymudes is the Chief  Financial  Officer and a
Senior Vice President of Wexford. Charles E. Davidson, the Chairman of the Board
of Presidio,  is a Member and Chairman of Wexford.  Wexford provides  management
and other services to third parties that are not related to the Company.

         Pursuant to the Administrative Services Agreement, Wexford oversees the
day-to-day  management of the Company.  In such capacity,  Wexford has agreed to
make available (i) Mr. Jacobs to serve as the Chief Executive Officer, President
and a Class B Director of Presidio,  (ii) Mr.  Holtz to serve as Vice  President
and  Secretary  of  Presidio,  (iii) Mr.  Maymudes  to serve as Chief  Financial
Officer,  Vice  President  and  Treasurer of Presidio,  (iv) persons to serve as
officers  and  directors  of  Presidio's  direct  or  indirect  subsidiaries  or
affiliates  and (v) such other persons as may be necessary to fulfill  Wexford's
obligations  under  such  agreement.  Presidio  retains  the right to remove any
employee  of  Wexford  serving  as an officer or  director  of the  Company.  As
described in the The Management Agreements, Wexford also serves as an advisor to
Presidio Management.

         The Administrative  Services Agreement expires on November 3, 1997, but
may be terminated by (A) Presidio or Presidio  Management (so long as it remains
the Manager  pursuant to the Presidio  Management  Agreement)  (i) upon 60 days'
prior written notice to Wexford or (ii) at any time for cause (as defined in the
Wexford Administrative Services Agreement) and (B) Wexford at its option upon 60
days' prior notice to Presidio.

         Pursuant to the Administrative Services Agreement,  Presidio has agreed
to indemnify Wexford and its direct or indirect officers,  directors,  partners,
employees and agents (including, without limitation, persons serving as officers
of the Company) from losses  occurring after the  Consummation  Date,  provided,
among other things,  that such losses resulted from (i) a mistake of judgment or
action or inaction  taken by such person in  connection  with  Wexford's  duties
under the Administrative Services Agreement honestly and in good faith that such
person  reasonably  believed to be in the best interests of Presidio or (ii) the
negligence,  dishonesty  or bad faith of any agent  selected by such person with
reasonable care on behalf of Presidio.
<PAGE>
         Presidio is  obligated  to pay Wexford  annual  amounts of $350,000 and
$125,000  in  respect of the  services  performed  by Messrs.  Jacobs and Holtz,
respectively,  and for its direct and indirect costs  properly  allocable to the
performance  of its  duties  under the  Administrative  Services  Agreement  and
providing officers and directors of the Company. Such expenses include,  without
limitation,  payroll, payroll taxes, costs of employee benefit plans approved by
Presidio  Management or by Presidio's board of directors,  accounting fees, rent
and other overhead expenses of Wexford,  and any required  severance payments to
Wexford's employees (other than Messrs.  Jacobs, Holtz and Maymudes).  Any other
bonus,  severance  or  similar  payments  is  subject to  approval  of  Presidio
Management or, in the case of such payments to Messrs. Jacobs, Holtz or Maymudes
or if required by Presidio's organizational documents or the Presidio Management
Agreement, the Board of Directors of Presidio.

         Indemnification Agreements and Indemnification Security Agreement.

         Presidio  has entered  into  Indemnification  Agreements  with  certain
former officers and directors of Integrated and its subsidiaries (the "Qualified
Indemnitees").  Pursuant to the Indemnification Agreements, Presidio assumed the
obligations of Integrated to indemnify the Qualified Indemnitees pursuant to the
orders of the Bankruptcy  Court,  Integrated's  charter documents and applicable
Delaware   corporate  law,  for  acts  or  omissions  taken  by  such  Qualified
Indemnitees  on or after February 13, 1990 (the date on which  Integrated  filed
for  protection  under Chapter 11 of the  Bankruptcy  Code),  provided that such
obligations  constitute  (or would  constitute)  an  administrative  claim under
Section 507(a)(1) of the Bankruptcy Code ("Qualified Indemnity Obligations").

         Presidio's   obligations  under  the  Indemnification   Agreements  are
unlimited  and are secured by certain  cash  collateral  and a pledge of all the
outstanding  shares of stock or  partnership  interests of Presidio's  direct or
indirect non-U.S.  subsidiaries  ("ForeignCo")  pursuant to the  Indemnification
Security  Agreement.  ForeignCo is subject to various  covenants  which require,
among other things, ForeignCo to maintain certain minimum net worth requirements
for the term of the Indemnification  Agreements, and which restrict, among other
things,  the payment of any dividends or other  distributions by Presidio to its
shareholders.  Presidio has also agreed to certain covenants restricting,  among
other things, sales and other transfers of assets to its affiliates.

         Under the Indemnification  Agreements and the Indemnification  Security
Agreement,  ForeignCo must maintain assets in excess of liabilities  (other than
Qualified Indemnity  Obligations) having a minimum fair market value (as defined
therein)  until  November 3, 1997,  of at least $20 million,  and  thereafter $5
million until the termination of the Indemnification Agreements.

         Restrictions Under the No Action Letter.

         On August 5, 1994,  Presidio  obtained  the No Action  Letter  from the
Staff of the Division of Investment  Management (the "Staff") of the Commission.
The No Action Letter applies to Presidio, as well as Presidio CR Holdings,  L.P.
(which prior to March 28, 1996 held all of the Contract  Rights)  along with the
direct and indirect U.S.  subsidiaries of Presidio (the "DomesticCos") set up to
acquire  assets  from  Integrated.   The  No  Action  Letter  provides  Presidio
assurances  that  the  Staff  would  not  recommend  enforcement  action  to the
Commission if Presidio did not register under the Investment Company Act of 1940
(the "Company Act").
<PAGE>
         Receipt  of the No  Action  Letter  was  based  on and  subject  to the
continued  accuracy of various  representations  as well as agreements to comply
with  certain  restrictions  set forth in the  letter  requesting  the No Action
Letter, and summarized in the No Action Letter. In order to obtain the No Action
Letter,  the  proposed  managers of Presidio  were also bound to comply with the
restrictions.  Consequently,  both Presidio Management and Steinhardt Management
have agreed to abide by the following restrictions:

         A. Liquidation. Presidio's activities must be geared to the liquidation
of its assets and the  distribution of the net proceeds  therefrom to holders of
its shares.  Presidio should (i) not identify in any communications  released to
its  shareholders,  the  press  and the  public,  as  well as in any  regulatory
filings,  that  its  purpose  or  plans  consist  of  any  activity  other  than
liquidation  and  distribution  of  proceeds  (see also item D below),  and (ii)
refrain  from any  "investment"  activities  which  are  inconsistent  with this
restriction (see items B and C below). Of course,  orderly liquidation of assets
may require (i) continuing to operate "going concern"  businesses  pending sale,
(ii)  reorganization  and  restructuring  of assets to facilitate  sales,  (iii)
securitizations  to  realize  value;  and (iv)  similar  actions  related to the
orderly liquidation of assets.

         B. No Trade or  Business.  Presidio may not conduct a trade or business
other than maintaining as a going concern each business acquired from Integrated
pending sale or liquidation thereof (see items A above and D below).

         C. No  Investments.  Presidio  must promptly  distribute  proceeds from
sales of its assets,  and may not make investments with such proceeds.  Presidio
may, however,  make temporary  investments in (a) money market instruments,  (b)
short-term  government  securities  (c) other  investment  grade short term debt
securities,  pending distribution of liquidation proceeds to holders of Presidio
shares or (d) other investments incidental to the liquidation.

         D. No "Holding Out" as Investment Company. Presidio may not hold itself
out to the public as an  investment  company,  but rather only as a  liquidating
entity.  Compliance with this condition requires that no communications released
to  shareholders,  the  press,  the  public  or in  regulatory  filings  contain
statements which would characterize holding shares in Presidio as an "investment
opportunity."  This  restriction  is  based  on the  concern  that  shareholders
themselves,  or potential  transferees,  would view  Presidio as an  "investment
company" rather than a liquidating entity,  which in turn might lead to interest
in trading in Presidio shares.

         E. 5-Year Term.  Presidio must dissolve on or before  November 3, 1999,
unless  updated  "no-action"  assurance is obtained from the Staff  permitting a
longer liquidation period.

         F. No Active Trading  Market.  In order to obtain the No Action Letter,
Presidio  represented  to the Staff that "it is  unlikely  that ...  trading [in
Presidio  shares]  will be active or that a  significant  market will develop of
holders far beyond the initial  holders ..." In granting  the No Action  Letter,
the Staff explicitly relied on this  representation,  which they restated as "an
active trading market in the common stock of [Presidio] is unlikely to develop."

         In support of this  representation,  Presidio and  Presidio  Management
agreed to restrictions on their own conduct,  as follows.  Neither  Presidio nor
Presidio Management may:
<PAGE>
         1.    cause Presidio's  shares to be listed on any national  securities
               exchange or NASDAQ;

         2.    engage the services of any market maker;

         3.    facilitate  the  development  of  an  active  trading  market  in
               Presidio's securities, nor encourage others to do so;

         4.    place any  advertisements in the media promoting an investment in
               Presidio; or

         5.    except as otherwise  required by the  Securities  Exchange Act of
               1934,  as  amended  (the  "Exchange  Act"),  collect  or  publish
               information  about  prices  at  which  Presidio's  shares  may be
               transferred.

         Notwithstanding  the foregoing  restrictions,  Presidio or its offshore
administrator may provide information to shareholders and their  representatives
regarding  matters  legitimately  related to their holdings of Presidio  shares,
including  information about current portfolio assets and cash held by Presidio,
status of  transactions  and  securitizations  of  portfolio  assets,  timing of
distributions  of  assets to  shareholders  and  prospects  for  liquidation  of
portfolio assets.  Shareholders may reasonably expect to obtain such information
from  time to  time,  even  if the  shareholder  requests  such  information  in
connection  with a proposed  transfer  of Presidio  shares.  This is because the
scope of the No Action Letter permits,  and even contemplates,  a limited amount
of  transfers  or even  trading  of stock of  Presidio  in order to  accommodate
liquidity needs of holders.

         G. Financial Reporting.  Presidio voluntarily agreed in the request for
the No  Action  Letter  to  issue  audited  year-end  financial  statements  and
unaudited  quarterly  financial  statements (all on a consolidated basis) to all
shareholders of record, in each case with  management's  discussion and analysis
thereof, regardless of whether compliance with the Exchange Act is required.

         Hemisphere Administration Agreements.

         Presidio and two of its non-U.S.  subsidiaries,  Presidio GP Corp.  and
Presidio  LP Corp.  (collectively,  the "BVI  Group"),  have each  entered  into
Administration  Agreements (the  "Hemisphere  Administration  Agreements")  with
Hemisphere,  pursuant to which  Hemisphere will act as the BVI Group's  offshore
administrator.  Pursuant to the Hemisphere Administration Agreements, Hemisphere
shall,  among  other  things,  (i)  provide  office  facilities,  personnel  and
accommodations required by the BVI Group in the Cayman Islands, (ii) communicate
with  shareholders  and the  general  public on the BVI  Group's  behalf,  (iii)
maintain corporate books and records and a shareholder  register,  (iv) call and
hold all meetings of  shareholders  and  directors,  (v) disburse all  necessary
payments on behalf of the BVI Group and (vi) accept subscriptions for shares and
make  redemptions  and  repurchases  of  shares,  in each  case,  subject to the
provisions of the Memorandum and Articles of the respective companies within the
BVI Group and under the supervision of their respective  directors and officers.
In  consideration  for such  services,  Hemisphere  receives an aggregate fee of
$36,000  per  annum   (subject  to  annual   review  and  reduction  in  certain
circumstances)  and  reimbursement  of  its  out-of-pocket   expenditures.   The
Hemisphere Administration Agreements are effective for successive one-year terms
unless and until  terminated by either party on 30 days'  written  notice to the
other  party,  or upon  written  notice of the  occurrence  of any  breach and a
failure to cure such breach within 10 days thereafter.
<PAGE>
Competition

         The Company is subject to substantial  competition in each of its lines
of business  and in each such line  competes  with others  having  substantially
greater financial and other resources than those available to the Company.

         Inasmuch  as the  Company  is not  presently  offering  new  investment
products,  the principal  competition faced by the Company is from other parties
that may be selling assets  similar to those held by the Company.  The principal
competitive  factors in connection with such sales relate to matters such as the
nature and quality of the assets to be disposed of, their prior  performance and
their future anticipated performance.

         In  addition,  to the extent  that cash  payments  to the  Company  are
dependent upon the performance of assets,  the Company's results will be subject
to competition from other  businesses  which own similar  properties and compete
for  tenants (in the case of real  property)  or compete  with other  businesses
owned by the Company.

Employees

         Presidio does not have any  employees.  Pursuant to the  Administrative
Services  Agreement,  Wexford  provides  all  of  the  administrative  personnel
required by the Company  (including  the Company's  executive  officers) and the
Company reimburses the expenses of Wexford.

Item 2. PROPERTIES.

         Certain  domestic  subsidiaries of Presidio  currently lease offices at
411 West Putnam Avenue, Greenwich,  Connecticut,  under a lease expiring in July
1998.  The lease of office space in Greenwich is in an office  building in which
Charles  E.  Davidson,  the  Chairman  of the Board of  Presidio,  and Joseph M.
Jacobs, the Chief Executive Officer and President of Presidio, have an ownership
interest  of  approximately   67%.  See  "Certain   Relationships   and  Related
Transactions."  The  Company  believes  such office  space is  adequate  for the
continuing operations of such domestic subsidiaries. 

Item 3. LEGAL PROCEEDINGS.

         Presidio and its subsidiaries are parties to various legal  proceedings
as successors to Integrated and its subsidiaries. The following is a description
of material litigation in which the Company is involved.

The Hallwood Group Incorporated v. Steinhardt  Management Company,  Inc., et al.
Presidio and two  subsidiaries,  Presidio LP Corp.  and  Presidio GP Corp.  (the
"Presidio  Defendants"),  have been named as  defendants  in this  action  which
commenced  in May 1995 in the  United  States  District  Court for the  Southern
District of New York.  The complaint  alleges that the Presidio  Defendants  are
affiliates  of Steinhardt  Management  and as such are liable for a $1.5 million
fee allegedly owed the plaintiff under a written  agreement  between  Steinhardt
Management  and the  plaintiff.  The Presidio  Defendants  have filed an answer,
dated July 7, 1995  denying the material  allegations  of the  complaint.  On or
about July 1, 1996, the plaintiff  amended its complaint to also name Charles E.
Davidson, Michael H. Steinhardt and IR Partners as defendants. At the same time,
the  plaintiff  also brought a related  State Court action  against  Presidio CR
Holdings,  L.P. Defendants answered  the Amended  Complaint  and the State Court
Complaint on August 23, 1996.  Document  discovery is complete,  and depositions
have been taken. The Company intends to vigorously defend the claims made by the
plaintiff  in this action.

WEBBCO v. Tele-Communications,  Inc., et al.; The Carter Revocable Trust v. Tele
Communications,  Inc., et al. IR-Daniels II and IR-Daniels III, two partnerships
(the "Daniels General Partners") in which an indirect  subsidiary of Presidio is
the co-general partner, and Integrated Cable Corp. have been named as defendants
in two Integrated Cable Corp. class action lawsuits  commenced in September 1994
in the United States District Court for the District of Colorado. The complaints
allege  that the Daniels  General  Partners,  which  serve as  managing  general
partners of two publicly held  partnerships  (the "Daniels  Partnerships"),  and
certain affiliated entities committed  violations of Sections 10(b) and 14(a) of
the Exchange Act and breached their fiduciary  duties to limited partners of the
Daniels  Partnerships in connection  with the sale of the Daniels  Partnerships'
assets.  The complaints  assert that the proxy  statements  issued in connection
with those sales  contained  material  false or  misleading  information  and/or
failed to disclose material information and assert that certain actions taken in
connection with the sales constituted breaches of fiduciary duty. The complaints
seek  unspecified  monetary  damages.  The  defendants  filed global  motions to
dismiss the complaint,  which were denied by the District Court.  The defendants
filed  summary  judgement  motion to  conclude  after  discovery  was  complete.
Subsequently,  discovery was completed,  however no judgement has been issued by
the District Court.  Ultimate conclusion is impossible to predict and defendants
intend to contest vigorously all allegations against them.

Mark Erwin,  Trustee,  et. al. v. Resources High Equity,  Inc.,et. al. (the "HEP
Action").  On or about May 11,  1993 the HEP  Partnerships  were  advised of the
existence  of an  action  (the  "HEP  Action")  in which a  complaint  (the "HEP
Complaint")  was filed in the Superior Court for the State of California for the
County of Los Angeles (the "Court") on behalf of a purported class consisting of
all of the purchasers of limited partnership  interests in the HEP Partnerships.
On April 7, 1994 the plaintiffs were granted leave to file an amended  complaint
(the "Amended Complaint").

On November 30, 1995, after the Court preliminarily approved a settlement of the
HEP Action but  ultimately  declined to grant final approval and after the Court
granted  motions to  intervene  by the  original  plaintiffs,  the  original and
intervening   plaintiffs  filed  a  Consolidated  Class  and  Derivative  Action
Complaint ( the "Consolidated  Complaint")  against certain  subsidiaries of the
Company  who  are  general  partners  of  the  HEP  Partnerships  (the  "General
Partners").  The  Consolidated  Complaint  alleges  various  state law class and
derivative  claims,  including claims for breach of fiduciary duties;  breach of
contract; unfair and fraudulent business practices under California Bus. & Prof.
Code Sec. 17200; negligence;  dissolution,  accounting and receivership,  fraud;
and negligent misrepresentation. The Consolidated Complaint alleges, among other
things,  that the General  Partners caused a waste of HEP Partnership  assets by
collecting  management fees in lieu of pursuing a strategy to maximize the value
of the  investments  owned by the limited  partners;  that the General  Partners
breached  their  duty  of  loyalty  and  due  care to the  limited  partners  by
expropriating  management fees from the  partnerships  without trying to run the
HEP Partnerships for the purposes for which they are intended;  that the General
Partners are acting improperly to enrich themselves in their position of control
over the HEP Partnerships and that their actions prevent non-affiliated entities
from  making  and  completing  tender  offers to  purchase  outstanding  limited
partnership units in the HEP Partnerships;  that by refusing to seek the sale of
the HEP Partnerships' properties, the General Partners have diminished the value
of the  limited  partners'  equity  in the HEP  Partnerships;  that the  General
Partners have taken a heavily  overvalued  partnership asset management fee; and
that limited  partnership  units were sold and marketed through the use of false
and misleading statements.
<PAGE>
In January, 1996, the parties to the HEP Action agreed upon a revised settlement
(the "Revised  Settlement").  The principal  features of the Revised  Settlement
were the  surrender  by the  General  Partners  of  certain  fees  that they are
entitled to receive,  the reorganization of the HEP Partnerships into a publicly
traded real estate  investment trust ("REIT"),  and the issuance of stock in the
REIT  to the  limited  partners  (in  exchange  for  their  limited  partnership
interests) and General Partners (in exchange for their existing  interest in the
HEP  Partnerships  and future  income).  The  principal  benefits of the Revised
Settlement were (1) substantially  increased  distributions to limited partners,
(2) market liquidity  through a NASDAQ listed security,  and (3) the opportunity
for growth and  diversification  that was not  permitted  under the  Partnership
structure. There were also other significant tax benefits,  corporate governance
advantages and other benefits of the Revised Settlement.

On July 18, 1996, the Court  preliminarily  approved the Revised  Settlement and
made a preliminary  finding that the Revised  Settlement was fair,  adequate and
reasonable to the class.  In August 1996, the Court approved the form and method
of  notice  regarding  the  Revised  Settlement  which  was sent to the  limited
partners.

Only approximately 2.5% of the limited partners of the HEP Partnerships  elected
to "opt out" of the Revised Settlement.  Despite this,  following the submission
of  additional  materials,  the  Court  entered  an order on  January  14,  1997
rejecting  the  Revised  Settlement  and  concluding  that there had not been an
adequate  showing that the settlement was fair and reasonable.  Thereafter,  the
plaintiffs  filed a motion  seeking  to have the  Court  reconsider  its  order.
Subsequently, the defendants withdrew the Revised Settlement and at a hearing on
February  24,  1997,  the Court  denied the  plaintiffs'  motion.  Also,  at the
February 24, 1997 hearing, the Court recused itself from considering a motion to
intervene and to file a new complaint in intervention by one of the objectors to
the Revised  Settlement,  and granted the request of one plaintiffs' law firm to
withdraw as class counsel and scheduled future hearings on various matters.

The HEP  Partnerships  and the General  Partners believe that each of the claims
asserted in the  Consolidated  Complaint are meritless and intend to continue to
vigorously  defend  the  HEP  Action.  

600 Grant Street  Associates  Limited  Partnership v. General  Electric  Capital
Corporation,  et al. Sivram Corp.  and Grant  Property  Corp.  (the  "Affiliated
Defendants"),  two  indirect  subsidiaries  of  Presidio,  have  been  named  as
defendants  in this action which was  commenced in December 1994 in the Court of
Common Pleas of Philadelphia County, Pennsylvania.  The complaint asserted three
causes of action  against  the  Affiliated  Defendants  for breach of  contract,
declaratory   relief  that  the  plaintiff  has  not  breached  its  contractual
obligations,  and an accounting. The claim for breach of contract sought damages
in excess of $50 million as well as punitive damages. During 1996, this case was
dismissed with prejudice.

Wright v. Integrated Aircraft Fund Management Corp., et. al. Integrated Aircraft
Fund Management  Corp.,  Integrated  Resources  Marketing,  Inc., and Integrated
Resources Equity Corp., three indirect subsidiaries of Presidio, have been named
as  defendants  in this  purported  class action which was commenced in February
1994 in the  Supreme  Court of the State of New York for the County of New York.
The first  amended  complaint  asserts  causes of actions  for fraud,  breach of
fiduciary  duty and  negligent  misrepresentation  based upon  alleged  material
misrepresentations  and  omissions  by the  defendants  in  connection  with the
offering for sale of limited  partnership units in the Aircraft Income Partners,
L.P. partnership. On October 2, 1995, the Supreme Court of the State of New York
for the County of New York granted a dismissal  of the amended  complaint in its
entirety without leave to replead. The time for appeal has expired.
<PAGE>
Integrated Resources Equity Corporation Litigation.  Integrated Resources Equity
Corporation  ("IREC"),  an indirect subsidiary of Presidio,  has been named as a
defendant or respondent in approximately 21 lawsuits and arbitration proceedings
arising  out  of  its  conduct  as a  broker-dealer  in  securities.  Integrated
Resources  Marketing  Corporation  ("IRMI"),   another  indirect  subsidiary  of
Presidio, has also been named as a defendant or a respondent in several of these
actions.  The majority of these  lawsuits  seek damages for former  customers of
IREC  arising  out of  purchases  or sales  of  securities.  IREC and the  other
defendants in these actions are  vigorously  defending  each of the lawsuits and
arbitration proceedings.

Israel Aircraft Industries v. Integrated Aircraft Corp. On or about December 14,
1995, a complaint was filed by Israel  Aircraft  Industries Ltd. (Bedek Aviation
Division)  ("IAI"),  in the Ontario Court (General  Division) in the Province of
Ontario,  City of Toronto (the "Ontario  Action").  The Ontario  Action named as
defendants  Integrated  Aircraft  Corp.  ("IAC") (a  wholly-owned  subsidiary of
Presidio  Equipment  Leasing),  Jetall Airways,  Inc ("Jetall"),  Jetall Holding
Corp. and Arie Tall. IAC had leased a Boeing 737-200  aircraft (the  "Aircraft")
to Jetall pursuant to a lease agreement dated August 6, 1993 (the "Lease") which
has since been  terminated.  The Lease  called for Jetall to  undertake  certain
repairs and  refurbishment  of the Aircraft,  in return for which, IAC agreed to
forgo  certain  rent and  reserve  payments  over the term of the Lease up to an
aggregate  amount of $850,000.  As an inducement to IAI to enter into a contract
with  Jetall to perform  the  required  work,  IAC's  agreement  to forgo  Lease
payments was confirmed to IAI by IAC pursuant to a letter agreement dated August
11, 1993 (the "August  Letter").  The complaint in the Ontario  Action  alleges,
among  other  things,  that IAC and Jetall  conspired  and  illegally  agreed to
interfere with the contractual  relationships  existing  between IAI and Jetall,
and that IAC induced  Jetall to breach its  agreement  with IAI.  The  complaint
seeks  actual  damages of  approximately  US$386,000  for breach of contract and
exemplary  damages in the amount of CDN$1 million for the alleged  conspiracy to
breach a  contract.  An initial  motion by IAC's  counsel to dismiss the Ontario
Action based on lack of jurisdiction,  inconvenient forum and failure to state a
claim was denied by the Ontario Court, and IAC's counsel filed an answer denying
all of the allegation in the complaint.

In December 1995,  shortly following IAI's filing of the Ontario Action,  Jetall
sought  protection  under one of the Canadian  bankruptcy  statutes.  During the
pendency of the Jetall bankruptcy  proceedings,  IAI asserted a lien against the
Aircraft under the Repair and Storage Liens Act in an effort to prevent IAC from
regaining  possession  of the Aircraft  from the Jetall  estate.  IAC's  counsel
brought a motion in a separate  division of the Ontario  Courts to declare  this
lien  invalid,  and as a result of favorable  ruling issued with respect to that
motion (which found that IAI's  interpretation  of the August Letter was without
merit),  IAC is now in a  position  to file a  summary  judgement  motion in the
Ontario Action seeking to dismiss all of the claims against IAC.

Presidio v. Koll Management Services,  Inc., Liquidity Financial Group, L.P. and
Liquidity Financial  Corporation.  On November 9, 1995, Presidio and the General
Partners  of the HEP  Partnerships,  commenced  an action in the  United  States
Bankruptcy Court for the Southern District of New York,  against Koll Management
Services,  Inc.  ("Koll"),  Liquidity  Financial  Group,  L.P. and the Liquidity
Financial  Corporation  (collectively,  "Liquidity").  The  plaintiffs  sought a
preliminary   and   permanent   injunction   to   prevent   violations   of  the
Confidentiality  and  Standstill  Agreement  (the  "Agreement")  which  had been
entered  into  between  Koll  and   Integrated   in  1994  during   Integrated's
<PAGE>
reorganization  proceeding  and damages in an amount to be proven at trial.  The
complaint alleged that Liquidity, which had become an affiliate of Koll and was,
for that reason,  bound by the Agreement,  was violating the Agreement by, among
other things, objecting to a settlement involving the HEP Partnerships which was
an integral part of the Integrated  Plan of  Reorganization,  and that Liquidity
was  otherwise   interfering  with  the  management  and  policies  of  the  HEP
Partnerships.

On November 21, 1995,  after a contested  hearing,  the Bankruptcy Court granted
plaintiffs' motion for a preliminary injunction.  The preliminary injunction has
been  extended  periodically  since its entry.  The  defendants  have denied the
material  allegations  of the  complaint,  and asserted  various  defenses.  The
parties are actively  engaged in  discovery.  On March 7, 1997,  the  defendants
filed a motion  seeking to dissolve the  preliminary  injunction.  The motion is
schedule to be heard by the Bankruptcy Court on April 11, 1997.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matter was submitted  during the fiscal year covered by this report,
to a vote of security holders.
<PAGE>
PART II

Item 5. MARKET  FOR REGISTRANT'S COMMON STOCK AND
          RELATED STOCKHOLDER MATTERS.

         Market Information

         There is no existing market for Presidio's Class A Shares and an active
trading market is unlikely to develop.  In connection with the No-Action Letter,
Presidio represented that neither it nor its managers will (i) cause the Class A
Shares to be listed on any national  securities  exchange or NASDAQ, (ii) engage
the  services  of any market  maker,  facilitate  the  development  of an active
trading market or encourage others to do so, (iii) place any  advertisements  in
the media promoting investment in the Class A Shares, or (iv) collect or publish
information regarding the price at which Class A Shares may be transferred.

         Conversion of Class B Shares.  The 1,200,000  Class B Shares held by IR
Partners are convertible in certain  circumstances  into an equivalent number of
Class A Shares which are reserved for such  conversion.  The Class B Shares will
automatically  convert  into a like number of Class A Shares upon the earlier of
(i)  the  first  anniversary  of the  termination  of  each  of  the  Management
Agreements,  (ii) the 90th day (or, if earlier,  the date of the annual meeting)
following  the date upon which more than 80% of  Presidio's  outstanding  common
stock is held by three or fewer entities (counting entities under common control
or  managed  by a common  adviser  as a single  entity)  or (iii) if  Steinhardt
Management  and  all  of  its  affiliates   (including  any  funds  under  their
management)  beneficially  own in the  aggregate  less than 5% of the  Company's
outstanding  shares.  In  addition,  in the  event a  holder  of  Class B shares
transfers  or  disposes  of any such  shares by  operation  of law or  following
termination of the Management  Agreements and the transferee is not an affiliate
of the transferor or of Steinhardt  Management,  such  transferred  shares shall
automatically be converted into a like number of Class A Shares.

         Restrictions  on Transfers of Class B Shares.  Until  November 3, 1997,
the Class B Shares are nontransferable except (i) transfers by operation of law,
(ii)  transfers to an  affiliate  of the holder  thereof,  (iii)  following  the
termination of each of the Management  Agreement or (iv) pursuant to liquidating
distributions  to such holder's  shareholders  or partners.  The  Memorandum and
Articles of Association  impose no such restrictions on the  transferability  of
the Class A Shares.  Otherwise  no Class A Shares  are  subject  to  outstanding
options, warrants or convertible securities.

         Holders and Dividends

         As of March 1, 1997,  there  were 277  holders of record of the Class A
Shares.

         Presidio has paid  dividends with respect to Class A Shares and Class B
Shares,  and  expects  to  declare  and pay  dividends  from time to time in the
future, depending on available cash balances generated by the liquidation of the
Acquired Assets.  Presidio's Articles of Association provide that Presidio shall
make  quarterly  distributions  of cash to the  holders  of Class A and  Class B
Shares in certain  circumstances  to the extent it appears to the  directors  of
Presidio to be justified by available  cash and surplus.  From  November 3, 1994
through December 31, 1996, the Company has paid approximately  $347.8 million in
the aggregate or $34.73 per share in dividends. Additionally, on March 19, 1997,
Presidio announced the approval for payment of a $1.65 per share ($16.5 million)
dividend  payable on April 3, 1997 to all shareholders of record as of March 25,
1997.
<PAGE>
         The  Indemnification   Agreements  and  the  Indemnification   Security
Agreement contain certain  restrictions on Presidio's  ability to pay dividends.
See "Business -- Material Agreements and Instruments."

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA.

         The following table sets forth selected consolidated  financial data at
the end of and for the  periods  set  forth  below.  The  selected  consolidated
financial data for  Integrated for the periods  December 31, 1992 to November 2,
1994 have been derived from audited financial statements.

         Presidio's  selected  consolidated  financial data at November 3, 1994,
and for the period ended December 31, 1994 and the years ended December 31, 1995
and 1996 have been derived from  Presidio's  consolidated  financial  statements
audited by  Deloitte & Touche  (the report for which  expresses  an  unqualified
opinion and includes an emphasis of a matter paragraph).

         The financial  statements of Integrated and Presidio have been prepared
on the liquidation basis of accounting for all periods  subsequent to October 1,
1993. The  liquidation  basis of accounting is appropriate  when  liquidation is
imminent,  a  company  is no  longer  viewed  as a  going  concern  and  the net
realizable  value of a company's assets is reasonably  determinable.  Under this
method of accounting,  assets are stated at their estimated net realizable value
and  liabilities  are  stated  at  their  anticipated  settlement  amounts.  The
valuations  presented in these  financial  statements are based on current facts
and circumstances and may differ materially from amounts ultimately realized.
<PAGE>
<TABLE>
<CAPTION>
                                                  TABLE OF SELECTED FINANCIAL DATA


                                                      INTEGRATED RESOURCES INC.

                                                            CONSOLIDATED

                                                                        For the period ended

                                          NOVEMBER 2, 1994     DECEMBER 31, 1993   SEPTEMBER 30, 1993    DECEMBER 31, 1992
                                          ----------------     -----------------   ------------------    -----------------
                                                      (in thousands, except per share amounts)
<S>                                           <C>             <C>                     <C>                 <C>              
INCOME STATEMENT DATA:

Revenues                                         N/A                   N/A             $  93,061              $124,098
General and administrative costs                 N/A                   N/A                25,659                60,927
Restructuring costs and expenses                 N/A                   N/A                10,683                25,464
Extraordinary items                              N/A                   N/A                 1,568                19,562
Net income                                       N/A                   N/A                38,763                23,829
Income per common share                          N/A                   N/A                  3.39                  2.08


STATEMENT OF CHANGES IN NET ASSETS
IN LIQUIDATION DATA:

Increase (Decrease)

Adjustment for adoption of
    liquidation accounting                    $    0          $   (19,207)
                                              ------          ------------
Net revaluation of assets and
    liabilities                                    0                38,928
Adjustment of liabilities to
    estimated settlement amounts                   0             1,032,210
Net change in net assets
    in liquidation                                 0             1,071,138


STATEMENT OF NET ASSETS
IN LIQUIDATION DATA:

Total assets                                $992,402           $ 1,052,330
Total liabilities - net of
  adjustment to estimated
  settlement amounts                        $992,402           $ 1,052,330
Net assets in liquidation                          0                     0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                  TABLE OF SELECTED FINANCIAL DATA


                                               PRESIDIO CAPITAL CORP. AND SUBSIDIARIES

                                                            CONSOLIDATED

                                               (in thousands of United States dollars)


                                                         ____________ For the period ended ___________

                                         DECEMBER 31, 1996     DECEMBER 31, 1995    DECEMBER 31, 1994      NOVEMBER 3, 1994
                                         -----------------     -----------------    -------------------   ----------------- 
<S>                                        <C>                  <C>                   <C>                    <C>

STATEMENTS OF CHANGES IN NET ASSETS
IN LIQUIDATION DATA:

Increase from revaluation of
  assets and liabilities                   $   39,659           $    73,808           $         0            $        0
Interest income                                 5,477                 7,038                     0                     0
Dividends paid/accrued                       (252,753)              (95,014)                    0                     0
Net change in net assets
  in liquidation                             (207,617)              (14,168)                    0                     0


STATEMENTS OF NET ASSETS
IN LIQUIDATION DATA:

Total assets                               $  212,528           $   455,750           $   518,795            $1,028,173
Total liabilities                              34,917                70,522               119,399               628,777
Net assets in liquidation                  $  177,611           $   385,228           $   399,396            $  399,396
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  
            CONDITION AND LIQUIDATION ACTIVITIES.

The following  section  includes (i) a discussion and analysis of the liquidity,
capital resources and liquidation  activities of the Company for the years ended
December  31,  1996,  December  31, 1995 and for the period  November 3, 1994 to
December  31,  1994,  and  (ii) a  discussion  and  analysis  of the  historical
liquidity,  capital  resources and liquidation  activities of Integrated for the
period January 1, 1994 to November 2, 1994.

Liquidity and Capital Resources -- The Company

Consummation Date Activities and Organization

The Company was organized in accordance with the Plan,  which was consummated on
November 3, 1994. The Plan called for the issuance of Presidio's  Class A Shares
to the  former  creditors  of  Integrated  ("Creditors")  and  the  issuance  of
Presidio's  Class B Shares to IR  Partners,  the  funder of the Plan.  Creditors
received a  combination  of cash,  approximately  8.8 million Class A Shares and
approximately  8.8  million  shares  of  XRC  Corp.  common  stock  in  lieu  of
forgiveness of approximately $1.4 billion of liabilities recorded by Integrated.
IR  Partners  paid  approximately  $35.8  million on the  Consummation  Date and
received 1.2 million  Class B Shares in  accordance  with the  provisions of the
Plan.  Substantially  all assets and remaining  liabilities  of Integrated  were
transferred  to and assumed by the  Company.  Additionally,  certain  assets and
liabilities  were  transferred to and assumed by XRC Corp.  (which serves as the
nominal  successor  corporation to Integrated as required under bankruptcy law).
The Company acts as a liquidating entity and accordingly net cash is distributed
subject  to  restrictions  imposed  by various  indemnification  agreements  and
amounts  not  retained  for  working  capital  requirements.  See  "Business  --
Background."

On the Consummation  Date, the Company disbursed  approximately  $456 million to
discharge various claims filed by Creditors.

The Company also  reserved $46 million for disputed  claims on the  Consummation
Date,  approximately  $1.6 million of which  remained in reserve at December 31,
1996.  Such claims are included in the estimated  costs of  liquidation  and are
currently being evaluated.  As settlements are reached on these claims,  cash is
either  disbursed  to the  claimant,  or released to the  Company.  In addition,
162,932 of the 8.8 million Class A Shares  reserved for Creditors  were reserved
for such  disputed  claims  on the  Consummation  Date.  These  shares  are also
released upon  settlement of the disputed  claims.  Reserved shares for disputed
claims that are expunged,  will be made available for sale to Creditors.  During
1996,  settlements  were made on certain  claims and 30,686 of such  shares were
disbursed.  As of December 31, 1996,  16,395 Class A Shares  remained in reserve
for disputed claims.

On the  Consummation  Date,  the  Company  deposited  amounts in various  escrow
accounts  as  security  for  indemnification  of  certain  former  officers  and
directors of Integrated and the Class A Directors of Presidio.

Indemnity for the former  officers and directors of Integrated is secured by $10
million  in cash and a pledge  of all of the  Company's  stock  and  partnership
interests  in all of its non-U.S.  subsidiaries.  These  subsidiaries  must meet
<PAGE>
certain minimum net worth  requirements for certain  specified periods after the
Consummation  Date.  All  distributions  made  by  Presidio  are  limited  by  a
requirement  that  Presidio has  sufficient  net assets after  distributions  to
discharge  any  pending  and  expected  Qualified  Indemnity  Obligations.   See
"Business -- Material  Agreements and Instruments -- Indemnification  Agreements
and Indemnification Security Agreement."

The Plan also provided for  indemnification of the Class A Directors of Presidio
(the "Class A Indemnification"). This indemnification agreement was secured by a
$1 million  escrow  deposit  made on the  Consummation  Date.  Presidio  is also
required to deposit the greater of  $750,000,  or 1% of  distributions  made per
quarter to this escrow account for additional  indemnification  security.  As of
December  31, 1996,  approximately  $6 million has been  deposited  (of which $3
million was  deposited in 1996),  and will be held in escrow for a period of six
years subsequent to the Consummation Date. The remaining Class A Indemnification
funds will  ultimitely be returned to Presidio.  All such  security  amounts are
classified in the accompanying  consolidated  financial statements as restricted
cash.

Current Liquidity

The  Company is  currently  liquidating  its assets  pursuant  to the Plan.  The
liquidation  basis of accounting  has been adopted and, as such,  comparisons of
results of  operations  to prior periods are not  meaningful.  The  Consolidated
Statements of Net Assets in Liquidation  of Presidio filed herewith  reflect the
net realizable value of assets,  estimated costs of liquidation  through the end
of the  process  and  estimated  costs  relating  to the  settlement  of certain
disputed claims.

The Company has accrued a liability of approximately  $29 million as of December
31, 1996, in anticipation  of costs needed to liquidate the entire  portfolio of
assets,  including expected  liabilities for the settlement of remaining claims.
The  actual  costs  may be  higher or lower  depending  on a number  of  factors
including  but not  limited  to the amount of time  necessary  to dispose of the
remaining assets, as well as current and future market conditions.

Presidio's  ability to make  distributions  to  shareholders  remains limited in
accordance  with the  terms of the  indemnification  obligations  of the  former
officers and directors of Integrated and its subsidiaries. Presidio has no basis
for believing that any of those  indemnification  obligations  will be material,
however,  pursuant  to the terms of such  agreements,  Presidio  is  required to
notify beneficiaries thereunder of dividends and certain other transfers of cash
made by  subsidiaries of Presidio to Presidio and to retain the value of certain
collateral granted as security for such  indemnification  obligations.  Although
such   restrictions   may  impede  the  timing  of   distributions  to  Presidio
shareholders,   Presidio  does  not  anticipate  that  those  restrictions  will
materially  impair its  liquidity.  Presidio  distributed  $263  million and $85
million to shareholders during 1996 and 1995, respectively,  for which notice to
the  beneficiaries  of  the  Indemnification   Agreements  was  provided.   Such
distributions were not challenged by the beneficiaries.  Additionally,  on March
19,  1997,  Presidio  announced  the  approval  for payment of a $1.65 per share
($16.5 million)  dividend payable on April 3, 1997 to all shareholders of record
as of March 25, 1997.

In accordance with  restrictions  under the No Action Letter,  Presidio has only
made temporary  investments in money market instruments,  short-term  government
securities or other investment grade short-term debt securities.  Because of the
liquid nature of such  investments,  compliance  with the No Action Letter would
generally be expected to increase liquidity.
<PAGE>
As of December  31, 1996,  Presidio had  restricted  cash of  approximately  $20
million,  primarily  comprised  of reserves for  disputed  bankruptcy  claims of
approximately  $1.6  million and  deposits  for escrow  accounts as security for
indemnification  of certain former  officers and directors of Integrated and the
Class A directors of Presidio of approximately $18 million.
<PAGE>
The Company's  primary objective is to liquidate its assets in the shortest time
period possible while realizing the maximum values for such assets. Although the
Company  considers its  assumptions and estimates as to the values and timing of
such  liquidations to be reasonable,  the period of time to liquidate the assets
and distribute  the proceeds of such assets is subject to significant  business,
economic and competitive uncertainties and contingencies.  The components of the
change in cash and cash equivalents, are as follows:
<TABLE>
<CAPTION>

                                                                         (Millions)

                                                                         Year Ended                   
                                                                         December 31,
                                                                  -------------------------  
                                                                     1996           1995  
                                                                  --------         --------
<S>                                                               <C>              <C>          
Cash Inflows
Contract rights securitization proceeds, net ...........          $  205.1         $ --
Other liquidating activities ...........................              59.4             40.3
Operating cash receipts ................................              25.5             48.3
Interest income ........................................               5.5              7.0
                                                                  --------         --------
   Total Cash Inflows ..................................             295.5             95.6
                                                                  --------         --------

Cash Outflows
Dividends paid .........................................             262.8             85.0
Loans to affiliates ....................................              32.5           --
Bankruptcy claims paid .................................               2.7             21.6
Steinhardt Management Co., Inc. expense reimbursement ..               0.2              2.1
Legal, accounting and consulting fees ..................               7.6              9.2
Legal and other expenses - Contract Rights .............              16.3             14.5
Management fees ........................................               2.5              2.3
General administrative and other .......................              11.1             14.2
                                                                  --------         --------
   Total Cash Outflows .................................             335.7            148.9
                                                                  --------         --------
Decrease in cash and cash equivalents ..................             (40.2)           (53.3)
                                                                  --------         --------

Cash and cash equivalents, beginning of period .........             118.8            172.1
                                                                  --------         --------
Cash and cash equivalents, end of period ...............          $   78.6         $  118.8
                                                                  ========         ========
</TABLE>
         The Acquired  Assets are  reflected in the financial  statements  filed
herewith  at  their  net  realizable  value  based  on  the  Company's   planned
disposition strategies.

         Presidio believes that cash on hand,  revenues generated from interests
in businesses that continue to operate and the proceeds from sales of businesses
and other assets will be sufficient to support Presidio's  operations and to pay
its current obligations as they become due.
<PAGE>
Liquidation Activities -- The Company

1996

Contract Rights

In May  1995,  Presidio  entered  into a series of  interest  rate  hedges  (the
"Hedges")  through the short sales of ten-year U.S.  government  treasury  notes
(the "Notes")  maturing in February and March 2005. These Notes had an aggregate
notional  value of $225  million,  and were  designed  to reduce  the  impact of
interest rate fluctuations on the projected  proceeds from future Contract Right
transactions. In March, 1996 the Company settled its position with regard to the
Hedges,  realizing a loss of $2.6  million  which was  effectively  offset by an
increase in total liquidation proceeds.

On March  28,  1996  (the  "Closing  Date"),  the  Company  and  certain  of its
subsidiaries  sold 117 of its 123  Contract  Rights in a private  securitization
transaction.  Net  proceeds  realized by the Company  after  securitization  and
related  hedge  position  costs  and  reserves  to be held for more than 90 days
relating to the securitization  were approximately $205 million.  As of December
31, 1996, there were four Contract Rights remaining which the Company  estimates
have an approximate net realizable value of $41 million.  On March 12, 1997, one
of the Partnerships exercised its option and prepaid approximately $40.0 million
representing  the  remaining  balance  due  under  one  of  the  Contract  Right
obligations.

The Company sold all of its right,  title and interest in the Contract Rights to
the Contract  Right Grantor Trust (the "Grantor  Trust"),  formed  pursuant to a
Grantor Trust  Agreement.  The Grantor Trust issued a certificate  (the "Grantor
Trust T-1  Certificate")  to a trust (the "Trust")  formed pursuant to a Pooling
Agreement dated as of January 1, 1996,  among the Grantor Trust,  acting through
the Grantor Trust Trustee, as depositor, Bankers Trust Company, as servicer, and
The First National Bank of Chicago,  as trustee in exchange for the Certificates
(as defined below).

The Grantor Trust also issued a second  certificate  and certain  related assets
(the  "Grantor  Trust T-2  Certificate")  to T-Two  Partners,  L.P.,  a Delaware
limited  partnership  (the "T-2  Holder"),  in exchange  for  approximately  $20
million in cash and the assumption of certain liabilities. The Grantor Trust T-1
Certificate  evidences  the  interest  of  the  Trust  in  the  Contract  Rights
transferred to the Grantor Trust,  and are secured by  substantially  all of the
payment stream from the primary term of such Contract Rights.  The Grantor Trust
T-2 Certificate evidences the balance of all payments on such Contract Rights as
well as the six other  Contract  Rights  sold  directly  to the  Grantor  Trust.
Payments made in respect to the Grantor Trust T-2 Certificate  will be deposited
in a reserve fund as security for the T-2 Holder's  obligation  to indemnify the
Trust against losses on the Contract Rights.

The Trust  consists,  among other things,  of all the right,  title and interest
arising from and in connection with the Grantor Trust T-1  Certificate.  A "real
estate  mortgage  investment  conduit"  ("REMIC")  election  has  been  made  in
connection  with  certain  assets  of the  Trust  for U.S.  Federal  income  tax
purposes.  The  Trust  issued  five  classes  of  certificates;  the  Class  A-1
Certificates,  the Class B-1  Certificates,  the Class C-1  Certificates and the
Class D-1 Certificates (collectively,  the "Offered Certificates") and the Class
R Certificate (collectively, with the Offered Certificates, the "Certificates").
The Class R Certificate was transferred to a new corporation affiliated with the
T-2 Holder, T-Two Corp.
<PAGE>
Upon the transfer of the  Certificates  to the Grantor Trust in exchange for the
Grantor Trust T-1 Certificate,  the Grantor Trust sold the Offered  Certificates
to Bear, Stearns & Co. Inc. ("Bear Stearns") in a private placement,  which Bear
Stearns,  in  turn,  sold in  transactions  pursuant  to  Rule  144A  under  the
Securities Act. The Grantor Trust applied substantially all of the proceeds from
the sale of the Offered  Certificates  as the  purchase  price for the  Contract
Rights.

On the Closing Date,  Presidio loaned an aggregate of $31.5 million to Roundhill
Associates  L.P. and  Roundhill  Associates  II, L.P. both  Connecticut  limited
partnerships (collectively, the "T-2 Organizers"). Charles E. Davidson, Chairman
of the Company,  is the managing  general partner with a 50 percent  partnership
interest  in each of the T-2  Organizers,  Joseph M.  Jacobs,  President  of the
Company, is a limited partner with a 45 percent partnership  interest in each of
the T-2  Organizers  and Robert Holtz,  Vice  President of the Company,  has the
remaining 5% limited partnership interest in the T-2 Organizers.  Such loans (i)
are obligated to be repaid on the  completion of the rights  offering  discussed
below but no later  than  March 28,  1999,  (ii) bear  interest  payable  on the
payment  of  principal  at the rate of 25% per annum and (iii) are  secured by a
pledge of 100% of the membership  interests in a newly-formed  limited liability
company  ("T-2  LLC").  Proceeds  for the loan were used to  capitalize  the T-2
Organizers interest in T-2 LLC.

The owners of T-2 LLC are  obligated to conduct a rights  offering or equivalent
transaction of interests in T-2 LLC. Until the rights offering is completed, T-2
LLC is  precluded  from  making any  distributions  to its  members.  The rights
offering will be an offering of  transferable  rights to purchase the equivalent
of 100% of the membership  interests in T-2 LLC, and will be made to the holders
of Presidio common stock. The T-2 Organizers will sell their membership interest
to T-2 LLC upon  completion of the rights offering to the extent that the rights
issued  in the  rights  offering  are  subscribed  and will  receive  out of the
proceeds of the rights  offering the following:  (i) the purchase price for such
interest, (ii) their interest payments on the $31.5 million loans from Presidio,
(iii) their net tax  liability as a  consequence  of owning the  interest  being
sold,  computed  based upon the marginal  effective tax rates of the  individual
partners of the T-2 Organizers,  minus 12% of the losses, if any,  recognized by
them as a  consequence  of their  ownership of such  interest  plus (iv) $50,000
representing the anticipated out-of-pocket expenses of the affiliates of the T-2
Organizers in maintaining their investments  through certain entities in the T-2
Holders in a manner  that was  designed  to  facilitate  the  completion  of the
Contract Rights securitization.

Presidio and the T-2 Organizers  are working on the rights  offering of T-2 LLC,
and contemplate making the offering during the second or third quarter of 1997.
<PAGE>
During 1996,  approximately  $9.4 million,  which was withheld from the Contract
Rights Securitization net proceeds as reserves were returned to the Company.

For the year ended December 31, 1996, two tenants of Partnerships whose Contract
Rights were not included in the  securitization  purchased their leased property
from the Company as permitted un der the terms of their leases for $3.8 million.

IR Life Co.

In 1990,  Integrated sold the majority of its core financial services businesses
(including its insurance subsidiary  Integrated Resources Life Co., ("Life")) to
Broad, Inc. In connection with the sale,  certain cash in Life was restricted by
order of Iowa  Insurance  Commissioner  from being  distributed  to  Integrated.
Approval for  distribution  was  contingent,  in part,  upon the  resolution  of
various contingent  liabilities,  including  contingent claims relating to state
guarantee  funds for failed  insurance  companies.  The right to this  remaining
receivable from Life was  transferred to an indirect wholly owned  subsidiary of
Presidio,  in connection  with  Presidio's  purchase of  Integrated's  estate in
November 1994. On July 1, 1996, the Iowa Insurance  Commissioner  concluded that
all contingent liabilities had been satisfied,  and approved the transfer of all
remaining  cash from Life to the  Company.  As a result,  the  Company  received
approximately  $13.4  million on July 2, 1996,  which was $5.9 million more than
had been estimated by the Company.

TSA Securitization

In November 1996,  Presidio sold in a private  securitization  transaction,  the
Company's rights to a deferred payment stream which was originally  generated by
Integrated's  tax shelter  annuity  business  (the "TSA Payment  Stream").  This
transaction   yielded  net  proceeds  of   approximately   $20.5  million.   The
securitization  notes will not and have not been registered under the Securities
Act of  1933,  and  may not be  offered  or sold  in the  United  States  absent
registration or applicable exemption of registration requirement.

As part of this transaction,  certificates evidencing 99% of the entire residual
beneficial   interest  in  the  TSA  Payment  Stream,   have  been  issued  (the
"Certificates"),  and have been sold to T-2 TSA,  LLC (the  "Certificateholder")
and  Certificate(s)  evidencing the remaining 1% beneficial  ownership  interest
have  been  sold to T-2 TSA II LLC  (the  "Affiliated  Purchaser").  Each of the
Affiliated  Purchaser and the  Certificateholder is a Delaware limited liability
company  whose  members  are  T-2  Management,  LLC  and  T-2  LLC.  Each of the
Certificateholder and the Affiliated Purchaser have purchased its Certificate(s)
<PAGE>
for cash equal to the estimated  fair value  thereof.  The Company has loaned to
T-2 LLC  $1,000,000  (the "TSA  Loan"),  with  interest  at 15% per  annum,  the
proceeds of which were contributed to the  Certificateholder and used to acquire
the Certificates.  The TSA Loan matures on the earlier of March 31, 2001, or the
successful completion of a rights offering. The proceeds from a rights offering,
will be used in part to repay T-2 LLC's obligation to the Company.

HEP Partnerships

The HEP Partnerships are a series of three public partnerships  (HEP-85,  HEP-86
and HEP-88) which  invested in unleveraged  commercial  real estate between 1985
and 1989.  The HEP  Partnerships'  portfolios  consist of 18 properties  with an
original cost of approximately $253 million. The real estate properties in which
the HEP Partnerships either own or maintain a material interest consist of seven
shopping centers, locations currently leased to three supermarkets,  four office
buildings,  two office parks, one industrial  warehouses and one parcel of land.
Subsidiaries of Presidio (the "HEP Subsidiaries")  serve as general partners and
hold a 5.0% interest in each of the HEP  Partnerships.  For managing the affairs
of the HEP Partnerships,  the HEP Subsidiaries  receive  partnership  management
fees,   property   management  fees  and  certain  expense   reimbursements   of
approximately $4.5 million per annum.

HEP is  subject  to a  class  action  lawsuit  as  described  in  Item 3  "Legal
Proceedings".
 
Wrap Mortgage

On June 25, 1996 certain direct and indirect  wholly owned  subsidiaries  of the
Company sold a wraparound mortgage position and general partnership interest for
a sales price of approximately  $1.7 million.  The wraparound  mortgage was sold
subject to the buyer assuming the obligation of the underlying first mortgage.

Limited Partnership Interests

During 1996, Resources Funding Corp. ("RFC"), a wholly owned indirect subsidiary
of the Company  received  $1.4 million  under the  confirmed  Chapter 11 plan of
reorganization of Congrecare Coral Oaks Partners Ltd. ("Investor  Partnership"),
a limited  partnership  in which RFC is managing  partner.  This  payment was in
respect of RFC's  unsecured  claim against the Investor  Partnership.  The claim
resulted  from an  agreement  entered  into by and  among  RFC and the  Investor
Partnership,  among others,  dated January 28, 1988 pursuant to which RFC agreed
to obtain  letters  of credit on  behalf  of the  Investor  Partnership  for its
operating deficit and working capital needs.  These letters of credit were drawn
upon by the Investor  Partnership.  RFC was never reimbursed for the draws under
the letters of credit. On February 16, 1996, the Investor  Partnership filed for
protection  under  Chapter 11 of the United States  Bankruptcy  Code in order to
implement a settlement it had reached with its primary secured lender. RFC filed
a claim in the  bankruptcy  court  proceeding  for the amount  drawn down on the
letters  of  credit  and the  interest  thereon  as well as  related  costs  and
expenses.  The $1.4 million received by RFC represents the distribution  made by
the Investor Partnership under its Chapter 11 plan on account of such claim.
<PAGE>
During  1996,  the  Company  continued  to review  the  status of  resolved  and
unresolved  claims  against  Integrated.  Through  various  settlements  reached
between  the  Company  and one of its wholly  owned  indirect  subsidiaries  and
various  lenders,  all claims  relating  to $4  million of capital  contribution
obligations  of the  subsidiary  which were  guaranteed by Integrated  have been
dismissed.  It was  concluded  that the claims made on behalf of the  guarantees
have been fully  satisfied  under the terms of the Plan. As such,  Net Assets in
Liquidation  have been increased  during 1996 by  approximately  $4 million as a
result of the dismissal of the obligations.

Operating Business

During 1996, the Company  received  liquidating  distributions  of approximately
$4.0 million on behalf of the Company's remaining interests in cable ventures.

Operating Real Estate

During 1996,  the Company  received  $2.3 million from Fillmore  Center  Project
Corporation  ("FCPC") in which the Company owned 86% of the stock. The proceeds,
net of legal expenses,  represent a portion of a $3 million  settlement  payment
received by FCPC in connection with the foreclosure of its principal assets.

1995

Contract Rights

         In October  1995,  certain of the Company's  subsidiaries  modified the
contract  right  obligations  pursuant to the Agreement to Modify certain of the
Contract  Right  Agreements,  dated as of September 29, 1994  (collectively  the
"Modification").  Among other  things,  the  Modification  provided  for (i) the
<PAGE>
restatement  of the  Contract  Rights  as  promissory  notes in order to  better
evidence the existing  Contract  Right  obligations  and provide a more definite
payment schedule, (ii) the delivery of subordinate mortgages or negative pledges
in  order  to  secure  the  partnerships'   obligations  under  such  negotiable
promissory notes,  (iii) the creation of a paying agency arrangement (the paying
agent  agreement was executed  with Bankers  Trust  Company) in order to collect
monies  payable under leases in excess of amounts  required to service  existing
first  mortgage  indebtedness,  and (iv) the delivery of certain  estoppels  and
other certificates by the Partnerships and various tenants,  superior mortgagees
and  ground  lessors  in  order  to  provide  the  Company  with  more  detailed
information  regarding the  partnership,  the tenant,  the property and existing
operating  leases.  The  Modification  made the  Contract  Rights a more readily
saleable/financeable instrument.

         During the year ended  December 31, 1995,  13 tenants  purchased  their
leased  property  from the Company as permitted  under the terms of their leases
for $15.4 million.  During the year, the Company received  $900,000 as scheduled
payments on Contract  Rights and two tenants who had been leasing  property from
the Company  prepaid  $2.1  million as final  payments  on an existing  Contract
Right.

Operating Businesses

         The  Company,  through an  indirect  wholly-owned  subsidiary,  owned a
general   partnership   interest  in  the  general  partner  of  Majco  Building
Specialties,  L.P. ("Majco").  On September 29, 1995, Majco consummated the sale
of  substantially  all of its assets  for a gross  sale  price of $66.6  million
inclusive of $3.3 million which was paid into escrow.  The  Company's  allocable
share from this sale was  approximately  $12 million  (exclusive  of any amounts
from escrow) from its interest in Majco. The Company had valued this asset at $8
million at December 31, 1994.  In  addition,  approximately  $1.3 million of the
gross sales price is being held in escrow through December 1997.

         Presidio  owned a deferred fee  receivable  from Rotor Tool,  L.P., the
manufacturer of a comprehensive  line of high quality  semi-customized  portable
pneumatic  assembly  and  other  tools.  In  December  1995,  Rotor  Tool,  L.P.
consummated  the sale of 100% of all its common  stock  interests  in Rotor Tool
Company.  As a result,  Presidio  received  approximately  $3.55  million on the
deferred fee due from the partnership.

Other

         In December  1995, a subsidiary of the Company  received  approximately
$1.1  million as a  brokerage  commission  on a sale of assets of a  partnership
owning a health care facility in which the Company  served as a general  partner
of the general  partner.  Presidio had not previously  recorded a value for this
asset at December 31, 1994.

         During the fourth quarter of 1995, Presidio sold approximately  279,000
shares of stock in a publicly  traded  company  engaged in the mortgage  banking
business  for an  average  price of $21.53  per  share,  realizing  proceeds  of
approximately $6 million on the transactions.  Presidio had valued this asset at
$2 million at December 31, 1994.

         During  the  third  quarter  of 1995,  a third  party  note  receivable
relating to a property sold by Integrated in April 1993 was prepaid. The Company
received proceeds of $3.6 million, equal to the estimated net realizable value.
<PAGE>
         During the second  quarter of 1995,  the Company sold a first  mortgage
note and  assigned  its  interests  in a  wraparound  mortgage,  in two separate
transactions,  from  which  the  aggregate  proceeds  were  $500,000,  and which
resulted in the release of non-recourse  indebtedness  obligations and notes and
other receivables of approximately $353.9 million.

1994

         During the period from November 3, 1994 through December 31, 1994 there
were no material  dispositions of assets, except that (a) in November 1994 ACT 4
and  ACT  5,  partnerships  in  which  indirect  subsidiaries  of  Presidio  own
co-general  partnership  interests,  entered  into a  contract  for the  sale of
certain  assets  in cable  television  partnerships  and (b) in  December  1994,
Presidio  disposed  of rights  to  receive  56% of all  payments  relating  to a
Contract Right in settlement of the claims of certain creditors.

During  the  period  January  1,  1994 to  November  2, 1994  Integrated  had no
liquidation activities.
<PAGE>


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
         CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

                          
Financial Statements - Presidio Capital Corp. and Subsidiaries

Independent Auditors' Report

Consolidated  Statements of Net Assets in  Liquidation  at December 31, 1996 and
     1995

Consolidated  Statements of Changes in Net Assets in  Liquidation  for the Years
Ended  December  31,  1996  and  1995  and  for  the  period  November  3,  1994
(Consummation Date) through December 31, 1994

Notes to Consolidated Financial Statements

<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of
Presidio Capital Corp.

We have audited the accompanying consolidated financial statements of net assets
in liquidation of Presidio  Capital Corp. and  subsidiaries  (the  "Company") at
December 31, 1996 and 1995 and the related consolidated statements of changes in
net assets in liquidation for the years ended December 31, 1996 and 1995 and for
the period November 3, 1994  (Consummation  Date) through December 31, 1994 (all
expressed in thousand of United States dollars).  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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,  such consolidated  financial  statements present fairly, in all
material respects,  the net assets in liquidation of the Company at December 31,
1996 and 1995 and the  changes  in its net assets in  liquidation  for the years
ended  December  31,  1996  and  1995  and  for  the  period  November  3,  1994
(Consummation  Date)  through  December 31, 1994 in conformity  with  accounting
principles  generally  accepted  in the  United States of  America  on the basis
described in the succeeding paragraph.

As discussed in Note 1 to the consolidated financial statements, the Company was
formed in accordance with the Sixth Amended Plan of Reorganization  confirmed by
the United States Bankruptcy  Court for the purpose of purchasing  substantially
all of the assets of Integrated Resources, Inc. and liquidating and distributing
capital to the Company's shareholders. The Company adopted the liquidation basis
of  accounting   effective  November  3,  1994   (Consummation   Date)  and  the
consolidated  financial  statements  reflect  assets at estimated net realizable
amounts and liabilities at anticipated settlement amounts.

As emphasized in Notes 1 and 12 to the consolidated  financial  statements,  the
Company  determined the amounts realizable from the disposition of the remaining
assets, the amounts of certain liabilities,  and the outcome of litigation using
various assumptions about future events.



/s/Deloitte & Touche
--------------------
Deloitte & Touche

Cayman Islands
March 25, 1997

                     

<PAGE>
<TABLE>
<CAPTION>
                     PRESIDIO CAPITAL CORP. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION
                (Expressed in thousands of United States dollars)


                                                                December 31,
                                                          ----------------------     
                                                             1996         1995
                                                          --------      --------
<S>                                                       <C>           <C>
Assets:

Cash and cash equivalents (including
restricted cash of $20,527 and $21,603 at
December 31, 1996 and 1995,
respectively) ......................................      $ 78,639      $118,790
Investments ........................................        29,993        32,769
Contract rights receivable .........................        41,083       235,681
Notes and other receivables (net of non-
  recourse indebtedness of $ 0 and $17,599
at December 31, 1996 and 1995, respectively) .......        22,467        62,991
Loans to Affiliates ................................        38,532          --
Other assets .......................................         1,814         5,519
                                                          --------      --------

                    Total assets ...................      $212,528      $455,750
                                                          ========      ========
Liabilities:

Debt ...............................................      $    900      $  4,895
Dividends payable ..................................          --          10,014
Estimated costs of liquidation .....................        29,434        49,613
Estimated tax liability ............................         5,970         6,000
                                                          --------      --------
                    Total liabilities ..............        36,304        70,522
                                                          --------      --------

                      Net Assets in Liquidation ....      $176,224      $385,228
                                                          ========      ========


                 See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     PRESIDIO CAPITAL CORP. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
                (Expressed in thousands of United States dollars)



                                                                                  November 3,
                                                                                     1994
                                                                            (Consummation Date)
                                     Year Ended            Year Ended              through
                                  December 31, 1996     December 31, 1995      December 31, 1994
                                  -----------------     -----------------      -----------------
<S>                                   <C>                 <C>                   <C>   
Net Assets in Liquidation,
  beginning of period ......          $ 385,228             $ 399,396           $ 399,396
                                      ---------             ---------           ---------

Dividends declared .........           (252,753)              (95,014)               --

Accretion from loans to
   Affiliates ..............              6,032                  --                  --

Increase from revaluation of
   assets and liabilities ..             32,240                73,808                --

Interest income ............              5,477                 7,038                --
                                      ---------             ---------           ---------

Net change in net assets
  in liquidation ...........           (209,004)              (14,168)               --
                                      ---------             ---------           ---------

Net Assets in Liquidation,
   end of period ...........          $ 176,224             $ 385,228           $ 399,396
                                      =========             =========           =========


                 See notes to consolidated financial statements
</TABLE>
<PAGE>
                     PRESIDIO CAPITAL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Dollars in thousands, except share and per share amounts)


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Presidio Capital Corp. ("Presidio" and, collectively with its subsidiaries,  the
"Company") was organized on August 29, 1994, in the British Virgin Islands under
the International  Business  Companies Act (Cap. 291), to purchase,  directly or
through  its  subsidiaries,  substantially  all  of  the  assets  of  Integrated
Resources,  Inc.  ("Integrated") for the purpose of liquidation and distribution
of capital to shareholders.  The Company was formed in accordance with the Sixth
Amended  Plan  of  Reorganization   Submitted  by  the  Official   Committee  of
Subordinated Bondholders and the Steinhardt Group, (the "Plan") confirmed by the
United  States  Bankruptcy  Court  for the  Southern  District  of New York (the
"Bankruptcy  Court")  by order  dated  August 8, 1994.  The Plan was  officially
consummated on November 3, 1994 (the "Consummation Date").

The Plan gave  creditors of  Integrated  the right to receive 88% of  Presidio's
Class A shares in lieu of all or part of their cash  distribution  as defined in
the Plan. The remaining 12% of stock was issued to and purchased by IR Partners,
a general partnership among Steinhardt  Management Company Inc.,  ("Steinhardt")
certain of its affiliates and an affiliate of Charles E. Davidson, the principal
of Presidio Management Company, LLC ("Presidio  Management") and Chairman of the
Board of the  Company  and Joseph M.  Jacobs,  the Chief  Executive  Officer and
President of the Company,  for approximately $36 million,  under the terms of an
Asset  Purchase  Agreement.  In  addition  to the  issuance  of Class A  shares,
subsequent to the  Consummation  Date,  Presidio  disbursed  approximately  $456
million to the former  creditors in  satisfaction  of bankruptcy  claims against
Integrated.

The Company is co-managed by Presidio Management and Steinhardt, who direct on a
discretionary  basis,  the  disposition,  liquidation  and sale of the Company's
assets. The administration of these liquidating responsibilities is performed by
Wexford Management LLC ("Wexford").  Wexford is principally  responsible for the
implementation  of the day to day  operations as well as the  liquidation of the
Company. A fixed annual fee is paid to each of the co-managers.

Liquidation Basis

As a result of the  consummation  of the  Plan,  the  Company  has  adopted  the
liquidation  basis  of  accounting.  The  liquidation  basis  of  accounting  is
appropriate  when liquidation is imminent and the Company is no longer viewed as
a going  concern.  Under this method of  accounting,  assets are stated at their
estimated net realizable  values and liabilities are stated at their anticipated
settlement amounts.  The valuations  presented in these financial statements are
presented in U.S. dollars under U.S. Generally Accepted Accounting Principles.

The valuation of assets and liabilities  require many estimates and assumptions.
The actual  value of any  liquidating  distributions  depends  upon a variety of
factors  including,  among  others,  the  actual  market  prices  of any  assets
distributed in kind,  the proceeds from the sale of any of the Company's  assets
and the actual timing of distributions.
<PAGE>
The  valuations  presented  in the  accompanying  Statements  of Net  Assets  in
Liquidation  represent current estimates,  based on facts and circumstances,  of
the estimated net realizable value of assets and estimated costs of implementing
the Plan. The net values  ultimately  realized could be higher or lower than the
amounts recorded.

Consolidation

The consolidated  financial  statements include the accounts of Presidio and its
subsidiaries.  All significant  intercompany accounts and transactions have been
eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents include time deposits, certificates of deposit and all
instruments   (including   commercial  paper,   treasury  bills  and  repurchase
agreements)  with original  maturities of three months or less.  Restricted cash
represents  cash held in escrow as security  under various  officer and director
indemnification  agreements,  and  cash  reserved  for the  payment  of  certain
bankruptcy related claims.

Investments

Investments in corporate equity securities and interests in limited partnerships
are valued at their estimated net realizable value.

Non-Recourse Indebtedness

Non-recourse  indebtedness  represents  obligations  on wraparound  mortgages of
certain real estate subsidiaries. These obligations were collateralized by first
liens on commercial real estate properties owned by limited partnerships and are
recorded net of related receivables.

Estimated Costs of Liquidation

The estimated  costs of liquidation  represent the estimated  costs of operating
the Company  through its  expected  termination.  The  financial  statements  as
presented assume  completion of the liquidation by November 3, 1999. These costs
include management fees, estimated  reimbursable  expenses,  the fees of outside
professionals,  estimated liabilities for the settlement of remaining bankruptcy
claims and other costs, and are based on various assumptions. Actual total costs
of liquidation are likely to differ from estimated  costs and these  differences
may be material.

Income Taxes

Income taxes  include  taxes that will be payable on account of and upon sale or
disposition of interests in operating businesses, real estate or other assets.

Net Realizable Value

In determining the net realizable  values of the assets,  the Company  considers
each asset's  ability to generate  future cash flow,  offers received from third
parties,  if any, and other general  market  information.  Such  information  is
<PAGE>
considered in conjunction  with the Company's  current plans for its disposition
of  assets.  Computations  of  net  realizable  value  necessitate  the  use  of
assumptions and estimates.  Future events,  including  economic  conditions that
relate to real  estate  markets in  general,  may differ  from those  assumed or
estimated in the computations.  As a result, the amounts ultimately realized may
materially differ from those currently reflected in these financial statements.

Reclassifications

Certain  reclassifications  have been made to the financial statements shown for
the prior  periods in order to conform to the current year  classifications  for
the  Statements  of Changes  in Net Assets in  Liquidation.  The  Statements  of
Changes in Net  Assets  for  Integrated  has not been  reflected  for the period
January  1, 1994 to  November  2, 1994,  since  there was no  activity  for that
period.


NOTE 2 - INVESTMENTS

Investments held by the Company consist of:
<TABLE>
<CAPTION>
                                             
                                               December 31,       December 31,
                                                   1996              1995
                                                 -------           -------
<S>                                              <C>               <C>
Equity securities ..........................     $ 1,375           $ 1,630
Interests in limited partnerships ..........      28,618            31,139
                                                 -------           -------
                                                 $29,993           $32,769
                                                 =======           =======
</TABLE>

Investments  in  corporate  equity  securities  at  December  31, 1996 and 1995,
include  equity  interests in a privately  held company  which are valued at its
estimated net realizable value.

Interests  in limited  partnerships  include  general  and  limited  partnership
interests  in both public and  privately  held  partnerships  which  invested in
leveraged and unleveraged real estate and various  operating  businesses.  These
interests  include a series of three  public  partnerships  (HEP-85,  HEP-86 and
HEP-88) (the "HEP Partnerships")  which invested in unleveraged  commercial real
estate between 1985 and 1989.  The HEP  Partnerships'  portfolios  consist of 18
properties.  Subsidiaries of Presidio (the "HEP Subsidiaries")  serve as general
partners  and  hold a 5.0%  interest  in each of the HEP  Partnerships.  The HEP
Subsidiaries   receive   partnership   management   fees  and  certain   expense
reimbursements.  The net  realizable  value  of  these  interests  are  based on
expected  management fees and distributions  through estimated dates of disposal
and/or  expected net  liquidation  proceeds to be realized upon  dissolution  of
these partnership/investment interests.

The HEP Partnerships are subject to a class action lawsuit.

During  1996,  the  Company  purchased  certain  limited  partnership  units  in
partnerships  where they are general partners  (including the HEP Partnerships).
These  interests  are reflected at the  historical  cost of  approximately  $3.7
million.  These units were purchased with the intent of enhancing and preserving
the value of the Company's general partnership interests.
<PAGE>
NOTE 3 - CONTRACT RIGHTS

Presidio,  through two wholly-owned  non-U.S.  subsidiaries,  is entitled to (i)
certain  compensation  representing  deferred  acquisition fees plus interest in
connection  with  Integrated's  organization,  from 1978 to 1985,  of  privately
offered  net  lease  partnerships  (the  "Partnerships")  and (ii)  payment  for
providing the Partnerships with the opportunity to purchase certain  properties.
Such  Partnerships  invested in  commercial  real  estate  leased  primarily  to
investment grade tenants under non-cancelable, long term, triple net leases that
generally  provided for 25 year primary terms,  with options to renew granted to
the tenant for additional terms of up to 30 years.

On March  28,  1996  (the  "Closing  Date"),  the  Company  and  certain  of its
subsidiaries  sold 117 of its 123  Contract  Rights in a private  securitization
transaction.

The securitization  certificates that were sold are secured by substantially all
of the payment stream from the primary term of the related Contract Rights,  and
are not backed by the Company.  Most of the remaining  payment stream,  which is
effectively subordinated to the certificates sold in the securitization, will be
used to make payment to the holder of another  certificate,  (the "T-2  Holder")
99% of which was sold to a newly formed  company,  T-Two Holding,  LLC (the "T-2
LLC"),  an entity owned by certain  affiliates of Presidio  (the  "Affiliates").
These  Affiliates  are controlled by the Chairman of the Board and the President
of Presidio.  On the Closing Date,  Presidio  made two loans to the  Affiliates,
aggregating  $31.5  million;  the  proceeds of which were used to  purchase  the
Affiliates  interest in T-2 LLC.  These loans accrue  interest at 25% per annum,
and are reflected in the Company's  Notes and  Receivables  at a net  realizable
value of $37.5 million at December 31, 1996.  The owners of T-2 LLC will conduct
a  rights   offering,   or  equivalent   transaction,   enabling  the  Company's
shareholders to acquire 100% of the membership interests in T-2 LLC.

At December 31,  1996,  there were four  Contract  Rights  remaining,  which the
Company estimates have an approximate net realizable value of $41.1 million.  On
March 12,  1997,  one of the  Partnerships  exercised  its  option  and  prepaid
approximately $40.0 million, representing the remaining balance due under one of
the Contract Right obligations.

NOTE 4 - NOTES AND OTHER RECEIVABLES

Notes and other receivables  primarily consist of deferred payment  arrangements
on  assets  previously  liquidated  by  Integrated  and  economic  interests  of
equipment  leasing  subsidiaries  (including  management fees  receivable).  The
Company has recorded  liquidation values on deferred payment  arrangements based
on estimated  recoverable cash flows based on the specific  liquidation strategy
for each asset. The receivables  relating to the equipment leasing  subsidiaries
are based primarily on scheduled  lease payments as well as recurring  quarterly
distributions  and fees  received  from  partnerships  originally  sponsored  by
Integrated.
<PAGE>
<TABLE>
<CAPTION>

                                                      December 31,    December 31,
                                                          1996            1995
                                                       --------        --------
<S>                                                    <C>             <C>
Receivable from TSA Note (a) ..................        $   --          $ 29,030
Notes and other receivables (b) ...............          22,467          25,562
Receivable from sale of life insurance
  operations (c) ..............................            --             7,499
Other (d) .....................................            --            18,499
                                                       --------        --------
                                                         22,467          80,590
Less non-recourse indebtedness (d) ............            --           (17,599)
                                                       --------        --------

                                                       $ 22,467        $ 62,991
                                                       ========        ========
</TABLE>
(a)      In  November   1996,   Presidio   sold  in  a  private   securitization
         transaction,  the Company's  rights to a deferred  payment stream which
         was originally  generated by Integrated's  tax shelter annuity business
         (the "TSA  Payment  Stream").  This  transaction  yielded net  proceeds
         excluding legal expenses of approximately $20.5 million.  Additionally,
         the Company  received  $6.0  million in cash  collections  on this note
         during the holding period prior to completion of the securitization.

         As part of this transaction,  certificates evidencing 99% of the entire
         residual  beneficial  interest in TSA Payment Stream,  have been issued
         (the  "Certificates"),  and  have  been  sold to  T-Two  TSA,  LLC (the
         "Certificateholder")  and  Certificate(s)  evidencing  the remaining 1%
         beneficial  ownership  interest have been sold to T-Two TSA II LLC (the
         "Affiliated  Purchaser").  The  Certificateholder  and  the  Affiliated
         Purchaser  are  entitled  to  receive  the  TSA  Payment  Stream,  upon
         satisfaction  in full of the  notes  sold  in the  securitization.  The
         rights of the Certificates are fully subordinated to the notes. Each of
         the Affiliated  Purchaser and  Certificateholder  is a Delaware limited
         liability  company  whose members are T-Two  Management,  LLC and T-Two
         LLC. Each of the  Certificateholder  and the Affiliated  Purchaser have
         purchased  its  Certificates(s)  for cash equal to the  estimated  fair
         value thereof.  The Company has loaned T-Two LLC  $1 million  (the "TSA
         Loan"),  with interest at 15% per annum, the proceeds of which has been
         contributed   to  the   Certificateholder   and  used  to  acquire  the
         Certificates. The TSA Loan matures on the earlier of March 31, 2001, or
         the successful completion of the rights offering.

(b)      Includes  receivables,  net of liabilities  of the Company's  equipment
         leasing  subsidiaries of approximately $9.3 million and $7.7 million at
         December 31, 1996 and 1995, respectively.

(c)      In 1990,  Integrated  sold the majority of its core financial  services
         businesses  (including its insurance  subsidiary  Integrated  Resources
         Life Co. ("Life")) to Broad, Inc. In connection with the sale,  certain
         cash in Life was restricted by order of the Iowa Insurance Commissioner
         from being  distributed to Integrated.  Approval for  distribution  was
         contingent,   in  part,  upon  the  resolution  of  various  contingent
         liabilities,  including  contingent  claims relating to state guarantee
         funds for  failed  insurance  companies.  The  right to this  remaining
         receivable  from  Life was  transferred  to an  indirect  wholly  owned
<PAGE>
         subsidiary  of Presidio,  in  connection  with  Presidio's  purchase of
         Integrated's  estate  in  November  1994.  On July 1,  1996,  the  Iowa
         Insurance  Commissioner  concluded that all contingent  liabilities had
         been  satisfied,  and approved the transfer of all remaining  cash from
         Life to the Company.  As a result,  the Company received  approximately
         $13.4 million on July 2, 1996.

(d)      Includes  wraparound  mortgages due from certain  limited  partnerships
         with  interest at 7% to 14.55% and due in  installments  through  2014,
         which are collateralized principally by second liens on commercial real
         estate  properties  owned  by  limited  partnerships.  The  unamortized
         principal  amount  of  such  mortgages  receivable,  including  accrued
         interest,   exceeds  the  corresponding   unamortized   amount  of  the
         underlying  mortgages  payable  (non-recourse   indebtedness  of  $17.6
         million). The remaining wrap mortgage position was sold during 1996 for
         gross proceeds of $1.8 million.  This transaction  effectively relieved
         the Company of all its non-recourse indebtedness.

NOTE 5 - ESTIMATED COSTS OF LIQUIDATION

The estimated costs of liquidation include current accounts payable, obligations
under disputed  bankruptcy claims,  obligations of the Company and the estimated
future costs to liquidate the Company pursuant to the Plan.

Estimated costs of liquidation include the following:
<TABLE>
<CAPTION>

                                                       December 31,     December 31,
                                                           1996            1995
                                                       --------        --------
<S>                                                      <C>             <C>
Reserve for disputed claims ....................         $ 1,580         $ 7,000
Estimated general and administrative
     costs .....................................          20,443          31,298
Other ..........................................           7,411          11,315
                                                         -------         -------
                                                         $29,434         $49,613
                                                         =======         =======
</TABLE>
Pursuant to the  consummation  of the Plan,  certain  amounts were  reserved for
claims filed by creditors of Integrated,  which, due to either the nature of the
claim or the amount  requested,  have not yet been  resolved.  Reserves  for the
maximum  amounts under the provisions of the Plan were recorded.  As settlements
are  reached on these  claims,  cash is either  disbursed  to the  claimant,  or
released to the Company.  As of December 31, 1996 and 1995,  approximately  $1.6
million and $7.0 million remained in reserve for disputed claims, respectively.

Estimated  general and  administrative  costs are based upon  current  facts and
circumstances,  and have decreased from the prior year primarily due to payments
made in 1996.

Other liabilities represent reserves estimated to satisfy certain liabilities as
discussed in Note 12.
<PAGE>
A summary of the changes in estimated costs of liquidation are as follows:
<TABLE>
<CAPTION>
<S>                                                                  <C>

     Balance - December 31, 1995 (A)                                 $  49,613
                                                                     --------- 

     Amounts paid for bankruptcy claims,
         settlements, administration and operations (B)                (18,356)
     Adjustments to estimated costs of liquidation                      (1,823)
                                                                     ---------
     Balance - December 31, 1996 (A)                                 $  29,434
                                                                     =========  
</TABLE>

(A)  The  estimated  costs of  liquidation  may be  adjusted  in future  periods
     primarily  due to the timing and type of asset sales and the  resolution of
     disputed  claims.  Actual  costs of  liquidation  are likely to differ from
     estimated costs and these differences may be material.

(B)  Includes  payments of  approximately  $2.7  million on disputed  bankruptcy
claims that were settled during 1996.


NOTE 6 - ESTIMATED INCOME TAX LIABILITY

As a result of the inability of Presidio to use  Integrated's net operating loss
carryforwards, the Company has recorded an estimated tax liability.

Estimated tax liabilities consist of:
<TABLE>
<CAPTION>

                                                      December 31,      December 31,
                                                          1996              1995
                                                         ------           ------
<S>                                                      <C>              <C>

Contract rights ..............................           $3,200           $3,000
Other ........................................            2,770            3,000
                                                         ------           ------
Estimated income tax liability ...............           $5,970           $6,000
                                                         ======           ======
</TABLE>

Actual tax obligations may differ from estimated  amounts,  primarily due to the
timing of future liquidation activities and these differences may be material.

NOTE 7 - COMMON STOCK

The Company has 11.25  million  shares of common  stock  authorized,  with a par
value of U.S. $.01 per share.  Creditors of  Integrated  were issued 8.8 million
Class A shares (including  162,932 shares reserved in respect of disputed claims
of which 16,395 shares remained in reserve at December 31, 1996) and IR Partners
received 1,200,000 Class B shares.
<PAGE>
The rights and privileges of the Class A and Class B shares are identical except
with respect to elections of directors and certain  restrictions on the transfer
of Class B  shares.  Additionally,  13,650  shares  were  issued  to the Class A
directors on the Consummation Date (4,550 of which were forfeited to the Company
in February 1995 and later  reissued to a new director).  The 1,200,000  Class B
shares held by IR Partners  are  convertible  in certain  circumstances  into an
equivalent number of Class A shares.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

The Company  established  a reserve on the  Consummation  Date of $46 million in
cash ($1.6  million of which  remained  in reserve  at  December  31,  1996) and
162,932 Class A shares in respect of disputed claims against  Integrated (16,395
of which  remained in reserve at December  31,  1996).  These  claims  represent
claims unresolved as of the Consummation Date.  Additionally,  certain creditors
have disputed the amounts of cash and common shares  received upon completion of
the distribution  process. As such claims are resolved,  cash and or shares will
be disbursed to the prevailing claimant.  If claims are resolved in favor of the
Company,  reserved cash will revert back to the Company,  while reserved  shares
will be made available for purchase to the current Class A shareholders.

Presidio has reserved $11.1 million to provide for  indemnification of Qualified
Indemnities  (former officers and directors of Integrated and its  subsidiaries)
against  claims  relating to certain  pre-bankruptcy  conduct.  The indemnity is
secured  by  $10.0  million  in cash  collateral  as well  as the  stock  of the
Company's  non-U.S.  subsidiaries.  Under this agreement,  the Company must also
maintain  certain  minimum net worth  requirements  throughout  the  liquidation
process which may restrict Presidio's ability to pay future dividends.

Additionally, on the Consummation Date Presidio deposited into an escrow account
$1.0  million as  security  for the  indemnification  of the  Company's  Class A
Directors.  Presidio is  obligated to increase  such  security by the greater of
$750  thousand or 1% of  distributions  made in each  quarter up to a maximum of
$10.0  million.  During 1996,  the Company  deposited $3.0 million as additional
security  into this  account.  All security  amounts are reflected as restricted
cash.
<PAGE>
NOTE 9 - REVALUATION OF ASSETS AND LIABILITIES

The increase in Net Assets in Liquidation  resulting from  revaluation,  for the
years ended December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
                                                    Year Ended          Year Ended
                                                 December 31, 1996   December 31, 1995
                                                 -----------------   -----------------
<S>                                                 <C>                <C>
Increase in estimated net
   realizable value of assets (a) ........          $ 11,822           $ 66,988

Decrease in estimated costs
   of liquidation ........................             1,823              2,579

Return of overpayments and
   bankruptcy settlements ................             3,918              3,619

Gains/(losses) on
   liquidation and other (b) .............            16,064             (1,173)

(Increase)/decrease in estimated
   tax liability .........................            (1,387)             1,795
                                                    --------           --------
                                                    $ 32,240           $ 73,808
                                                    ========           ========
</TABLE>
         (a)  Increases  in 1996 relate  principally  to  Contract  Rights of $8
million and  increases  in 1995  relate  principally  to Contract  Rights of $30
million, TSA of $10 million and Investments of $10 million.

         (b) Increases in 1996  includes  gains on IR Life  transaction  of $5.9
million.

NOTE 10 - DIVIDENDS DECLARED

Presidio  has paid  $347.8  million or $34.73 per share  since the  Consummation
Date,  of which  $262.8  million,  or $26.24 per share was paid in cash in 1996.
Additionally,  on March 19, 1997, Presidio announced the approval for payment of
a $1.65 per  share  ($16.5  million)  dividend  payable  on April 3, 1997 to all
shareholders of record as of March 25, 1997.

NOTE 11 - RELATED PARTY TRANSACTIONS

On November 3, 1994, Presidio entered into an administrative  services agreement
with Concurrency Management Corp.  ("Concurrency"),  whereby Concurrency will be
responsible for the day to day administration of the Company.  Effective January
1, 1996,  this agreement was assigned to Wexford.  Concurrency was 100% owned by
Joseph M. Jacobs, the President and a director of Presidio. Charles E. Davidson,
the Chairman and a director of Presidio,  and the  beneficial  owner of Presidio
Management LLC, Joseph M. Jacobs and Robert Holtz, a Vice President of Presidio,
are members of Wexford.

The Company has also entered into management agreements with Presidio Management
and Steinhardt pursuant to which Presidio Management will manage the Company and
its liquidation and Steinhardt  will render certain  consulting  services to the
Company.
<PAGE>
These  agreements  require  the  Company  to pay both  Presidio  Management  and
Steinhardt  management  fees of $1.25  million  per year for a three year period
expiring  November 3, 1997.  Presidio  Management  has directed  that 50% of its
annual  management  fee be paid to Mr.  Jacobs.  In  March  1996,  the  Board of
Directors of Presidio approved the assignment of Presidio Management's Agreement
to Wexford. Additionally,  during 1996, Presidio reimbursed Wexford $5.5 million
in connection  with the operation and  administration  of the Company.  Presidio
also had a payable to Wexford of $2.0 million at December 31, 1996.

The Company has loaned  $32.5  million to certain  affiliates  of the Company in
connection with the  securitization  of certain  assets.  These loans which were
made  with  recourse,  will be repaid  upon  successful  completion  of a rights
offering to the shareholders of Presidio.  These affiliates are both officers of
Presidio as well as members of Wexford.  As of December  31,  1996,  these loans
have accreted interest of approximately $6.0 million.

NOTE 12 - LITIGATION

Presidio  and its  subsidiaries  are  parties to various  legal  proceedings  as
successors to Integrated and its subsidiaries. The following is a description of
material litigation in which the Company is involved.

The Hallwood Group Incorporated v. Steinhardt  Management Company,  Inc., et al.
Presidio and two  subsidiaries,  Presidio LP Corp.  and  Presidio GP Corp.  (the
"Presidio  Defendants"),  have been named as  defendants  in this  action  which
commenced  in May 1995 in the  United  States  District  Court for the  Southern
District of New York.  The complaint  alleges that the Presidio  Defendants  are
affiliates  of Steinhardt  Management  and as such are liable for a $1.5 million
fee allegedly owed the plaintiff under a written  agreement  between  Steinhardt
Management  and the  plaintiff.  The Presidio  Defendants  have filed an answer,
dated July 7, 1995  denying the material  allegations  of the  complaint.  On or
about July 1, 1996, the plaintiff  amended its complaint to also name Charles E.
Davidson, Michael H. Steinhardt and IR Partners as defendants. At the same time,
the  plaintiff  also brought a related  State Court action  against  Presidio CR
Holdings,  L.P.Defendants  answered  the Amended  Complaint  and the State Court
Complaint on August 23, 1996.  Document  discovery is complete,  and depositions
have been taken. The Company intends to vigorously defend the claims made by the
plaintiff  in this action. 

WEBBCO v. Tele-Communications,  Inc., et al.; The Carter Revocable Trust v. Tele
Communications,  Inc., et al. IR-Daniels II and IR-Daniels III, two partnerships
(the "Daniels General Partners") in which an indirect  subsidiary of Presidio is
the co-general partner, and Integrated Cable Corp. have been named as defendants
in two Integrated Cable Corp. class action lawsuits  commenced in September 1994
in the United States District Court for the District of Colorado. The complaints
allege  that the Daniels  General  Partners,  which  serve as  managing  general
partners of two publicly held  partnerships  (the "Daniels  Partnerships"),  and
certain affiliated entities committed  violations of Sections 10(b) and 14(a) of
the Exchange Act and breached their fiduciary  duties to limited partners of the
Daniels  Partnerships in connection  with the sale of the Daniels  Partnerships'
assets.  The complaints  assert that the proxy  statements  issued in connection
with those sales  contained  material  false or  misleading  information  and/or
failed to disclose material information and assert that certain actions taken in
connection with the sales constituted breaches of fiduciary duty. The complaints
seek  unspecified  monetary  damages.  The  defendants  filed global  motions to
dismiss the complaint,  which were denied by the District Court.  The defendants
filed  summary  judgement  motion to  conclude  after  discovery  was  complete.
Subsequently,  discovery was completed,  however no judgement has been issued by
the District Court.  Ultimate conclusion is impossible to predict and defendants
intend to contest vigorously all allegations against them.
<PAGE>
Mark Erwin,  Trustee,  et. al. v. Resources High Equity,  Inc.,et. al. (the "HEP
Action").  On or about May 11,  1993 the HEP  Partnerships  were  advised of the
existence  of an  action  (the  "HEP  Action")  in which a  complaint  (the "HEP
Complaint")  was filed in the Superior Court for the State of California for the
County of Los Angeles (the "Court") on behalf of a purported class consisting of
all of the purchasers of limited partnership  interests in the HEP Partnerships.
On April 7, 1994 the plaintiffs were granted leave to file an amended  complaint
(the "Amended Complaint").

On November 30, 1995, after the Court preliminarily approved a settlement of the
HEP Action but  ultimately  declined to grant final approval and after the Court
granted  motions to  intervene  by the  original  plaintiffs,  the  original and
intervening   plaintiffs  filed  a  Consolidated  Class  and  Derivative  Action
Complaint ( the "Consolidated  Complaint")  against certain  subsidiaries of the
Company  who  are  general  partners  of  the  HEP  Partnerships  (the  "General
Partners").  The  Consolidated  Complaint  alleges  various  state law class and
derivative  claims,  including claims for breach of fiduciary duties;  breach of
contract; unfair and fraudulent business practices under California Bus. & Prof.
Code Sec. 17200; negligence;  dissolution,  accounting and receivership,  fraud;
and negligent misrepresentation. The Consolidated Complaint alleges, among other
things,  that the General  Partners caused a waste of HEP Partnership  assets by
collecting  management fees in lieu of pursuing a strategy to maximize the value
of the  investments  owned by the limited  partners;  that the General  Partners
breached  their  duty  of  loyalty  and  due  care to the  limited  partners  by
expropriating  management fees from the  partnerships  without trying to run the
HEP Partnerships for the purposes for which they are intended;  that the General
Partners are acting improperly to enrich themselves in their position of control
over the HEP Partnerships and that their actions prevent non-affiliated entities
from  making  and  completing  tender  offers to  purchase  outstanding  limited
partnership units in the HEP Partnerships;  that by refusing to seek the sale of
the HEP Partnerships' properties, the General Partners have diminished the value
of the  limited  partners'  equity  in the HEP  Partnerships;  that the  General
Partners have taken a heavily  overvalued  partnership asset management fee; and
that limited  partnership  units were sold and marketed through the use of false
and misleading statements.

In January, 1996, the parties to the HEP Action agreed upon a revised settlement
(the "Revised  Settlement").  The principal  features of the Revised  Settlement
were the  surrender  by the  General  Partners  of  certain  fees  that they are
entitled to receive,  the reorganization of the HEP Partnerships into a publicly
traded real estate  investment trust ("REIT"),  and the issuance of stock in the
REIT  to the  limited  partners  (in  exchange  for  their  limited  partnership
interests) and General Partners (in exchange for their existing  interest in the
HEP  Partnerships  and future  income).  The  principal  benefits of the Revised
Settlement were (1) substantially  increased  distributions to limited partners,
(2) market liquidity  through a NASDAQ listed security,  and (3) the opportunity
for growth and  diversification  that was not  permitted  under the  Partnership
structure. There were also other significant tax benefits,  corporate governance
advantages and other benefits of the Revised Settlement.

On July 18, 1996, the Court  preliminarily  approved the Revised  Settlement and
made a preliminary  finding that the Revised  Settlement was fair,  adequate and
reasonable to the class.  In August 1996, the Court approved the form and method
of  notice  regarding  the  Revised  Settlement  which  was sent to the  limited
partners.
<PAGE>
Only approximately 2.5% of the limited partners of the HEP Partnerships  elected
to "opt out" of the Revised Settlement.  Despite this,  following the submission
of  additional  materials,  the  Court  entered  an order on  January  14,  1997
rejecting  the  Revised  Settlement  and  concluding  that there had not been an
adequate  showing that the settlement was fair and reasonable.  Thereafter,  the
plaintiffs  filed a motion  seeking  to have the  Court  reconsider  its  order.
Subsequently, the defendants withdrew the Revised Settlement and at a hearing on
February  24,  1997,  the Court  denied the  plaintiffs'  motion.  Also,  at the
February 24, 1997 hearing, the Court recused itself from considering a motion to
intervene and to file a new complaint in intervention by one of the objectors to
the Revised  Settlement,  and granted the request of one plaintiffs' law firm to
withdraw as class counsel and scheduled future hearings on various matters.

The HEP  Partnerships  and the General  Partners believe that each of the claims
asserted in the  Consolidated  Complaint are meritless and intend to continue to
vigorously defend the HEP Action.

600 Grant Street  Associates  Limited  Partnership v. General  Electric  Capital
Corporation,  et al. Sivram Corp.  and Grant  Property  Corp.  (the  "Affiliated
Defendants"),  two  indirect  subsidiaries  of  Presidio,  have  been  named  as
defendants  in this action which was  commenced in December 1994 in the Court of
Common Pleas of Philadelphia County, Pennsylvania.  The complaint asserted three
causes of action  against  the  Affiliated  Defendants  for breach of  contract,
declaratory   relief  that  the  plaintiff  has  not  breached  its  contractual
obligations,  and an accounting. The claim for breach of contract sought damages
in excess of $50 million as well as punitive damages. During 1996, this case was
dismissed with prejudice.

Wright v. Integrated Aircraft Fund Management Corp., et. al. Integrated Aircraft
Fund Management  Corp.,  Integrated  Resources  Marketing,  Inc., and Integrated
Resources Equity Corp., three indirect subsidiaries of Presidio, have been named
as  defendants  in this  purported  class action which was commenced in February
1994 in the  Supreme  Court of the State of New York for the County of New York.
The first  amended  complaint  asserts  causes of actions  for fraud,  breach of
fiduciary  duty and  negligent  misrepresentation  based upon  alleged  material
misrepresentations  and  omissions  by the  defendants  in  connection  with the
offering for sale of limited  partnership units in the Aircraft Income Partners,
L.P. partnership. On October 2, 1995, the Supreme Court of the State of New York
for the County of New York granted a dismissal  of the amended  complaint in its
entirety without leave to replead. The time for appeal has expired.

Integrated Resources Equity Corporation Litigation.  Integrated Resources Equity
Corporation  ("IREC"),  an indirect subsidiary of Presidio,  has been named as a
defendant or respondent in approximately 21 lawsuits and arbitration proceedings
arising  out  of  its  conduct  as a  broker-dealer  in  securities.  Integrated
Resources  Marketing  Corporation  ("IRMI"),   another  indirect  subsidiary  of
Presidio, has also been named as a defendant or a respondent in several of these
actions.  The majority of these  lawsuits  seek damages for former  customers of
IREC  arising  out of  purchases  or sales  of  securities.  IREC and the  other
defendants in these actions are  vigorously  defending  each of the lawsuits and
arbitration proceedings.

Israel Aircraft Industries v. Integrated Aircraft Corp. On or about December 14,
1995, a complaint was filed by Israel  Aircraft  Industries Ltd. (Bedek Aviation
Division)  ("IAI"),  in the Ontario Court (General  Division) in the Province of
Ontario,  City of Toronto (the "Ontario  Action").  The Ontario  Action named as
<PAGE>
defendants  Integrated  Aircraft  Corp.  ("IAC") (a  wholly-owned  subsidiary of
Presidio  Equipment  Leasing),  Jetall Airways,  Inc ("Jetall"),  Jetall Holding
Corp. and Arie Tall. IAC had leased a Boeing 737-200  aircraft (the  "Aircraft")
to Jetall pursuant to a lease agreement dated August 6, 1993 (the "Lease") which
has since been  terminated.  The Lease  called for Jetall to  undertake  certain
repairs and  refurbishment  of the Aircraft,  in return for which, IAC agreed to
forgo  certain  rent and  reserve  payments  over the term of the Lease up to an
aggregate  amount of $850,000.  As an inducement to IAI to enter into a contract
with  Jetall to perform  the  required  work,  IAC's  agreement  to forgo  Lease
payments was confirmed to IAI by IAC pursuant to a letter agreement dated August
11, 1993 (the "August  Letter").  The complaint in the Ontario  Action  alleges,
among  other  things,  that IAC and Jetall  conspired  and  illegally  agreed to
interfere with the contractual  relationships  existing  between IAI and Jetall,
and that IAC induced  Jetall to breach its  agreement  with IAI.  The  complaint
seeks  actual  damages of  approximately  US$386,000  for breach of contract and
exemplary  damages in the amount of CDN$1 million for the alleged  conspiracy to
breach a  contract.  An initial  motion by IAC's  counsel to dismiss the Ontario
Action based on lack of jurisdiction,  inconvenient forum and failure to state a
claim was denied by the Ontario Court, and IAC's counsel filed an answer denying
all of the allegation in the complaint.

In December 1995,  shortly following IAI's filing of the Ontario Action,  Jetall
sought  protection  under one of the Canadian  bankruptcy  statutes.  During the
pendency of the Jetall bankruptcy  proceedings,  IAI asserted a lien against the
Aircraft under the Repair and Storage Liens Act in an effort to prevent IAC from
regaining  possession  of the Aircraft  from the Jetall  estate.  IAC's  counsel
brought a motion in a separate  division of the Ontario  Courts to declare  this
lien  invalid,  and as a result of favorable  ruling issued with respect to that
motion (which found that IAI's  interpretation  of the August Letter was without
merit),  IAC is now in a  position  to file a  summary  judgement  motion in the
Ontario Action seeking to dismiss all of the claims against IAC.

Presidio v. Koll Management Services,  Inc., Liquidity Financial Group, L.P. and
Liquidity Financial  Corporation.  On November 9, 1995, Presidio and the General
Partners  of the HEP  Partnerships,  commenced  an action in the  United  States
Bankruptcy Court for the Southern District of New York,  against Koll Management
Services,  Inc.  ("Koll"),  Liquidity  Financial  Group,  L.P. and the Liquidity
Financial  Corporation  (collectively,  "Liquidity").  The  plaintiffs  sought a
preliminary   and   permanent   injunction   to   prevent   violations   of  the
Confidentiality  and  Standstill  Agreement  (the  "Agreement")  which  had been
entered  into  between  Koll  and   Integrated   in  1994  during   Integrated's
reorganization  proceeding  and damages in an amount to be proven at trial.  The
complaint alleged that Liquidity, which had become an affiliate of Koll and was,
for that reason,  bound by the Agreement,  was violating the Agreement by, among
other things, objecting to a settlement involving the HEP Partnerships which was
an integral part of the Integrated  Plan of  Reorganization,  and that Liquidity
was  otherwise   interfering  with  the  management  and  policies  of  the  HEP
Partnerships.

On November 21, 1995,  after a contested  hearing,  the Bankruptcy Court granted
plaintiffs' motion for a preliminary injunction.  The preliminary injunction has
been  extended  periodically  since its entry.  The  defendants  have denied the
material  allegations  of the  complaint,  and asserted  various  defenses.  The
parties are actively  engaged in  discovery.  On March 7, 1997,  the  defendants
filed a motion  seeking to dissolve the  preliminary  injunction.  The motion is
schedule to be heard by the Bankruptcy Court on April 11, 1997.
<PAGE>
The  Company is  involved  in certain  other  legal  proceedings  arising in the
ordinary  course of the  Company's  business.  The Company does not believe that
such claims or lawsuits,  individually or in the aggregate, will have a material
adverse effect on its financial condition or operations.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The names,  ages and positions of the directors and executive  officers
of Presidio  are set forth  below.  Pursuant to the Plan,  the Class A Directors
serve an initial  term which  expires  November  1997 and the Class B  Directors
serve an initial term of one year.  Thereafter,  all  directors  will be elected
annually and hold office until their  successors are elected and  qualified,  or
until the earlier of their  removal or  resignation.  All officers  serve at the
discretion of the Board of Directors.
<TABLE>
<CAPTION>
      Name                       Age                              Positions
      ----                       ---                              ---------
<S>                               <C>              <C>
Charles E. Davidson               43               Chairman of the Board and Class B Director

Joseph M. Jacobs                  44               Chief Executive Officer, President, and Class B Director

Martin L. Edelman                 56               Class A Director

Dean J. Takahashi                 39               Class A Director

Paul T. Walker                    61               Class A Director

Robert Holtz                      29               Vice President and Secretary

Jay L. Maymudes                   36               Vice President, Treasurer and Chief Financial Officer
</TABLE>

         Charles E. Davidson has been a director of Presidio and the Chairman of
the Board of Directors  of Presidio  since its  formation  in August  1994.  Mr.
Davidson is also Chairman of DLB Oil and Gas, Inc., an oil  exploration  company
and has served as Chairman of the Board and  director of  Resurgence  Properties
Inc.  ("Resurgence") since its formation in March 1994. He is also a director of
Technology  Service Group,  Inc., a company engaged in the design,  development,
manufacturing  and sale of public  communications  products and  services.  From
December  1985 to May 1994,  Mr.  Davidson was a general  partner of  Steinhardt
Partners, L.P. and Institutional Partners, L.P., private investment funds. He is
currently  the Chairman of the Board and a Member of Wexford and is the managing
partner of a number of private investment partnerships.
<PAGE>
         Joseph  M.  Jacobs  has  been a  director  of  Presidio  and the  Chief
Executive  Officer and President of Presidio since its formation in August 1994.
Since January  1996,  Mr. Jacobs has been the President and a Member of Wexford.
From April 1994 through December 31, 1995, Mr. Jacobs was the President and sole
shareholder of Concurrency. Mr. Jacobs has been a director of Resurgence and the
Chief  Executive  Officer,  President  and  Treasurer  of  Resurgence  since its
formation in March 1994. From 1982 through May 1994, Mr. Jacobs was employed by,
and since 1988 was the President of, Bear Stearns Real Estate Group Inc., a firm
engaged  in all  aspects  of  real  estate,  where  he was  responsible  for the
management of all activities, including maintaining worldwide relationships with
institutional  and  individual  real  estate  investors,   lenders,  owners  and
developers.

         Martin L. Edelman has been a director of Presidio  since February 1995.
Mr. Edelman has been of Counsel to Battle Fowler LLP, a New York law firm, since
January  1994.  From prior to 1989 to  December  1994,  he was a partner in such
firm. He is a director of Hospitality  Franchise Systems,  Inc., National Gaming
Corporation and numerous private companies.

         Dean J.  Takahashi has been a director of Presidio since November 1994.
Mr. Takahashi is a Senior Director of Investments - Endowment Management of Yale
University. Since 1986, he has been responsible for analysis and recommendations
regarding  asset  allocation  and  investment  policy  for Yale's  $5.0  billion
Endowment,  $200 million Staff Pension Plan, and various Life Income Funds.  Mr.
Takahashi currently is a director of Smith Offshore Exploration, and an Advisory
Board  Member of Highland  Capital  Partners,  APEX  European  Ventures,  Summit
Ventures, and Bain Capital.

         Paul T.  Walker has been a director of Presidio  since  November  1994.
Since  February  1995,  Mr.  Walker has been  President  of Walker,  Truesdell &
Associates,  a financial  consulting  firm located in New York City.  From March
1992 to April 1996, Mr. Walker was a Trustee of The DBL Liquidating  Trust which
was responsible for liquidating Drexel Burnham Lambert,  Inc. for the benefit of
creditors.  From 1957 to 1990, Mr. Walker was employed by, and from 1985 to 1990
was the Executive  Vice President and Senior Credit Policy Officer of, The Chase
Manhattan Bank.

         Robert Holtz has been a Vice  President and Secretary of Presidio since
its formation in August 1994.  Since  January 1996,  Mr. Holtz has been a Senior
Vice  President  and a Member of Wexford.  From April 1994 through  December 31,
1994, Mr. Holtz was a Vice President of  Concurrency.  Mr. Holtz has been a Vice
President  and Assistant  Secretary of  Resurgence  since its formation in March
1994.  From 1989 through May 1994, Mr. Holtz was employed by, and since 1993 was
a  Vice  President  of,  Bear  Stearns  Real  Estate  Group  Inc.  where  he was
responsible  for analysis,  acquisitions  and  management of the assets owned by
Bear Stearns Real Estate Group Inc. and its clients.

         Jay L.  Maymudes  has  been  a  Vice  President,  Treasurer  and  Chief
Financial  Officer of Presidio since its formation in August 1994. Mr.  Maymudes
has been the Chief  Financial  Officer and a Vice President of Resurgence  since
July 1994,  Secretary of Resurgence  since January 1995 and Assistant  Secretary
from July 1994 to January 1995.  Since January 1996,  Mr.  Maymudes has been the
Chief Financial Officer,  Treasurer and a Senior Vice President of Wexford. From
July 1994  through  December  31, 1995,  Mr.  Maymudes  was the Chief  Financial
Officer and a Vice  President of  Concurrency.  From  December 1988 through June
1994, Mr. Maymudes was the Secretary and Treasurer,  and since February 1990 was
the Senior Vice President, of Dusco, Inc., a real estate investment advisor.
<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following  table sets forth certain  information  known to Presidio
with respect to  beneficial  ownership of the Class A Shares as of March 1, 1997
(based on 8,797,255 Class A Shares outstanding on such date) by: (i) each person
who  beneficially  owns 5% or more of the  Class A  Shares,  (ii) the  executive
officers of Presidio, (iii) each of Presidio's directors, and (iv) all directors
and executive officers as a group:
<TABLE>
<CAPTION>
                                                                                   Beneficial Ownership
                                                                             --------------------------------
                                                                                Number of          Percentage
              Name of Beneficial Owner                                           Shares           Outstanding
              ------------------------                                           ------           -----------
<S>                                                                           <C>                     <C>
              Thomas F. Steyer                                                4,553,560 (1)           51.8%
              Fleur A. Fairman

              John M. Angelo                                                  1,231,762 (2)           14.0%
              Michael L. Gordon

              Intermarket Corp.                                               1,000,918 (3)           11.4%

              M. H. Davidson & Co.                                              474,205 (4)            5.4%

              Michael H.  Steinhardt                                                 -- (5)             --

              Joseph M. Jacobs                                                       -- (5)             --

              Robert Holtz                                                           -- (5)             --

              Jay L. Maymudes                                                        --                 --

              Charles E. Davidson                                                    -- (5)             --

              Martin L. Edelman                                                   4,550 (6)             *

              Dean J. Takahashi                                                   4,550 (6)             *

              Paul T. Walker                                                      4,550 (6)             *

              Directors and executive officers as a group (7 persons)            13,650                 *
-----------------------
*             Less than 1% of the outstanding Common Stock.
 
(1)  As the  managing  partners  of  each of  Farallon  Capital  Partners,  L.P.
     ("FCP"),  Farallon Capital Institutional Partners, L.P. ("FCIP"),  Farallon
     Capital  Institutional  Partners II, L.P. ("FCIP II") and Tinicum  Partners
     L.P. ("Tinicum"),  (collectively, the "Farallon Partnerships"), may each be
     deemed to own  beneficially  for purposes of Rule 13d-3 of the Exchange Act
     the 1,397,318, 1,610,730, 607,980 and 241,671 shares held, respectively, by
     each  of such  Farallon  Partnerships.  Farallon  Capital  Management,  LLC
     ("FCMLLC"),  the investment advisor to certain discretionary accounts which
     collectively  hold 695,861  shares and Enrique H. Boilini,  David I. Cohen,
<PAGE>
     Joseph F.  Downes,  Jason M. Fish,  Andrew B.  Fremder,  William F. Mellin,
     Stephen L.  Millham,  Meridee A. Moore and Thomas F. Steyer,  as a managing
     member of FCMLLC  (collectively the "Managing Members") may be deemed to be
     the  beneficial  owner of all of the  shares  owned  by such  discretionary
     accounts.   FCMLLC  and  each  Managing  Member  disclaims  any  beneficial
     ownership of such shares.

     Farallon Partners, LLC ("FPLLC") (the general partner of FCP, FCIP, FCIP II
     and Tinicum),  and each of Fleur A. Fairman,  Mr. Boilini,  Mr. Cohen,  Mr.
     Downes, Mr. Fish, Mr. Fremder,  Mr. Mellin, Mr. Millham,  Ms. Moore and Mr.
     Steyer,  each as  managing  member of FPLLC  (collectively,  the  "Managing
     Members"),  may be deemed to be the  beneficial  owner of all of the shares
     owned by FCP,  FCIP,  FCIP II and Tinicum.  FPLLC and each Managing  Member
     disclaims any beneficial ownership of such shares.

(2)  John M. Angelo and Michael L. Gordon,  the general partners and controlling
     persons  of AG  Partners,  L.P.,  which is the  general  partner of Angelo,
     Gordon & Co.,  L.P.,  may be  deemed  to have  beneficial  ownership  under
     Section 13(d) of the Exchange Act of the securities  beneficially  owned by
     Angelo, Gordon & Co., L.P. and its affiliates.  Angelo, Gordon & Co., L.P.,
     a  registered  investment  advisor,  serves as  general  partner of various
     limited partnerships and as investment advisor of third party accounts with
     power to vote and direct the  disposition  of Class A Shares  owned by such
     limited partnerships and third party accounts.

(3)  Intermarket   Corp.   serves  as  General   Partner  for  certain   limited
     partnerships  and  as  investment  advisor  to  certain   corporations  and
     foundations.  As a result of such  relationships,  Intermarket Corp. may be
     deemed to have the power to vote and the power to dispose of Class A shares
     held by such partnerships, corporations and foundations.

(4)  Marvin H.  Davidson,   Thomas L. Kempner Jr.,  Stephen M. Dowicz,  Scott E.
     Davidson  and  Michael  J.  Leffell,  the  general  partners,  members  and
     stockholders  of certain  entities that are general  partners or investment
     advisors of Davidson Kempner  Endowment  Partners,  L.P.,  Davidson Kempner
     Partners,  L.P.,  Davidson  Kempner  Institutional  Partners,  L.P.,  M. H.
     Davidson and Co., Davidson Kempner  International Ltd.  (collectively,  the
     "Investment  Funds"),  may be deemed   to be the  beneficial  owners  under
     Section 13(d) of the Exchange Act of the securities  beneficially  owned by
     the Investment Funds and their affiliates.

     In addition,  Mr. Kempner owns 800 shares and may be deemed to beneficially
     own certain securities held by certain  foundations and trusts. Mr. Kempner
     disclaims beneficial ownership of such shares.

(5)  Excludes 1,200,000 Class B Shares owned by IR Partners. Such Class B Shares
     are  convertible in certain  circumstances  into 1,200,000  Class A Shares;
     however,  such  shares are not  convertible  at  present.  IR Partners is a
     general  partnership  whose  general  partners are  Steinhardt  Management,
     certain  of  its  affiliates  and  accounts  managed  by it  and  Roundhill
     Associates.  Roundhill  Associates is a limited  partnership  whose general
     partner is Charles E. Davidson,  the principal of Presidio Management,  the
     Chairman  of the  Board of  Presidio  and a Member  of  Wexford.  Joseph M.
     Jacobs,  the Chief Executive Officer and President of Presidio and a Member
     and the  President  of  Wexford,  and Robert  Holtz,  a Vice  President  of
<PAGE>
     Presidio  and a Member of  Wexford,  have  limited  partner's  interest  in
     Roundhill  Associates.  Pursuant to Rule 13d-3 under the Exchange Act, each
     of Michael H. Steinhardt,  the controlling person of Steinhardt  Management
     and its  affiliates  and Charles E. Davidson may be deemed to be beneficial
     owners of such 1,200,000 shares.

(6)  Shares held by each Class A Director of Presidio were issued  pursuant to a
     Memorandum of Understanding  Regarding Compensation of Class A Directors of
     Presidio. See "Executive Compensation -- Compensation of Directors."
</TABLE>
The address of Thomas F. Steyer and the other individuals  mentioned in footnote
1 above (other than Fleur A. Fairman) is c/o Farallon  Capital  Partners,  L.P.,
One Maritime Plaza, San Francisco,  California 94111 and the address of Fleur A.
Fairman is c/o Farallon Capital Management,  Inc., 800 Third Avenue, 40th Floor,
New York,  New York 10022.  The address of Angelo,  Gordon & Co.,  L.P.  and its
affiliates is 245 Park Avenue, 26th Floor, New York, New York 10167. The address
for  Intermarket  Corp. is 667 Madison  Avenue,  New York,  New York 10021.  The
address  for M. H.  Davidson  and Co. is 885 Third  Avenue,  New York,  New York
10022.
 
Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Presidio Management Agreement

         Pursuant to the Presidio Management Agreement,  Presidio Management was
engaged to serve as manager of the Company. See "Business -- Material Agreements
and Instruments."  Charles E. Davidson, a director of Presidio, is the principal
and controlling Member of Presidio  Management.  Mr. Davidson is the controlling
person of one of the  general  partners  IR  Partners,  the owner of 1.2 million
Class B Shares.  Mr.  Davidson and his  affiliates  also provide  management and
other  services to third  parties that are not related to the Company.  Presidio
Management has directed that 50% of its annual  management fee be paid to Joseph
M. Jacobs,  the Chief Executive  Officer and President of Presidio and beginning
January 1, 1996,  50% of its annual  management  fee be paid to Wexford.  During
1996 Presidio  Management  and Mr. Jacobs each received  approximately  $600,000
under the terms of this agreement.

Administrative Services Agreement

         Pursuant to the Administrative  Services Agreement,  Wexford is engaged
to provide certain  administrative and management  services to the Company.  See
"Business -- Material  Agreements  and  Instruments."  Under the  Administrative
Services Agreement,  Presidio reimburses Wexford for Wexford's  compensation and
employee  benefit  costs  allocable  to  the  management  of  the  Company.  See
"Executive  Compensation."  Joseph M. Jacobs,  the Chief  Executive  Officer and
President of Presidio,  is the President and a Member of Wexford.  Mr. Jacobs is
also a  limited  partner  of  Roundhill  Associates,  which  serves as a general
partner of IR Partners, the owner of 1.2 million Class B Shares. Robert Holtz, a
Vice  President  and  Secretary of Presidio,  is a Senior Vice  President  and a
Member of Wexford. Jay L. Maymudes,  the Chief Financial Officer, Vice President
and  Treasurer of  Presidio,  is the Chief  Financial  Officer and a Senior Vice
President of Wexford.  Charles E.  Davidson,  a director and the Chairman of the
Board of Directors of Presidio, is a Member and the Chairman of Wexford. Wexford
also  provides  management  and other  services  to third  parties  that are not
related to Wexford.
<PAGE>
Steinhardt Management Agreement and Steinhardt Expense Reimbursement

         Pursuant to the Steinhardt Management Agreement,  Steinhardt Management
was engaged to render certain consulting services to Presidio.  See "Business --
Material Agreements and Instruments".  Steinhardt  Management and certain of its
affiliates  are partners of IR Partners  which owns 1.2 million  Class B Shares.
Steinhardt  Management  and its  affiliates  also provide  management  and other
services to third parties that are not related to the Company.

         Pursuant  to  the  Plan,   Steinhardt   Management   was   entitled  to
reimbursement  of its  out-of-pocket  expenses in  connection  with the Plan and
related matters in an amount not to exceed $7.5 million.  Steinhardt  Management
was paid such amount on the Consummation Date. Steinhardt  Management,  with the
support of the various Integrated  Creditors'  Committees,  sought reimbursement
from  Presidio for  additional  expenses  incurred by  Steinhardt  Management in
connection with the Plan of approximately  $1.96 million.  The Class A Directors
of Presidio unanimously approved the payment of such amount on January 18, 1995.
Subsequently,  Steinhardt  Management  sought  an  additional  reimbursement  of
approximately $161,000,  which was unanimously approved by the Class A Directors
of Presidio on March 28, 1995 and paid on April 27, 1995.
 
Greenwich, Connecticut Office Space

         Certain  domestic  subsidiaries of Presidio  currently lease offices at
411 West Putnam Avenue, Greenwich,  Connecticut,  under a lease expiring in July
1998.  The  owner  of  the  premises  located  in  Greenwich,  Connecticut  is a
partnership in which Charles E. Davidson,  Presidio's Chairman of the Board, and
Joseph M. Jacobs,  Presidio's  Chief  Executive  Officer and President,  have an
ownership interest of approximately 67%.

PART IV

Item 13.  FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Financial  Statements  filed as part of this report,  set forth in
Item 8 of this annual report on Form 10-K:

       Financial Statements - Presidio Capital Corp. and Subsidiaries
               Independent Auditors' Report

               Consolidated  Statements of Net Assets in Liquidation at December
                  31, 1996 and 1995

               Consolidated  Statements of Changes in Net Assets in  Liquidation
               for the Years Ended December 31, 1996 and 1995 and for the Period
               November 3, 1994  (Consummation  Date) through  December 31, 1994
               Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>

                   Description
                   -----------
Exhibit
-------
<S>                <C>                                                                                             <C>    
2.1                Disclosure  Statement  for  Sixth  Amended  Plan  of  Reorganization  submitted  by the          *
                   Steinhardt Group and the Official Committee of Subordinated  Bondholders,  dated May 5,
                   1994 (Volumes I and II only).

2.2                Sixth  Amended  Plan  of  Reorganization  Submitted  by the  Steinhardt  Group  and the          *
                   Official Committee of Subordinated Bondholders, dated May 5, 1994.

2.3                Confirmation Order, dated August 8, 1994.                                                        *


3.1                Memorandum of Association of the Registrant and Amendment dated October 31, 1994.                *

3.2                Articles of Association of the Registrant.                                                       *

10.1               Asset Purchase Agreement between  Steinhardt  Management  Company,  Inc. and Integrated          *
                   Resources, Inc., dated as of May 5, 1994.

10.2               First Amendment to Asset Purchase Agreement, dated as of August 8, 1994.                         *

10.3               Management  Agreement  between the Registrant  and Presidio  Management  Company,  LLC,          *
                   dated as of November 3, 1994.
10.4               Management  Agreement between the Registrant and Steinhardt  Management Company,  Inc.,          *
                   dated as of November 3, 1994.

10.5               Administrative  Services  Agreement  between the Registrant and Concurrency  Management          *
                   Corp, dated as of November 3, 1994.

10.6               Form of Class A Director Indemnification Agreement, dated November 3, 1994.                      *

10.7               Class A Director Indemnification Trust Agreement, dated as of  November 3, 1994.                 *

10.8               Form of Indemnification  Agreement with Qualified  Indemnitees,  dated as of August 29,          *
                   1994.

10.9               Indemnification Security Agreement, dated as of November 3, 1994.                                *

10.10              Note Payable to Presidio TSA Corp., dated November 3, 1994.                                      *

10.11              Security  Agreement between the Registrant and Presidio TSA Corp., dated as of November          *
                   3, 1994.
10.12              Agreement to Modify Contract Right Agreements, dated as of September 29, 1994.                   *


10.13              Discount Purchase Option Agreement, dated as of November 2, 1994.                                *

10.14              Second Amended and Restated  Settlement  Agreement,  dated as of September 29, 1994 (as          *
                   amended on October 5, 1994) by and among  Steinhardt  Management,  Presidio  and Beigel
                   Schy Lasky Rifkind Goldberg and Fertik (the B&S Settlement Agreement).

10.15              Asset Purchase  Agreement by and between Newport News  Cablevision,  Ltd. and Cox Cable          *
                   Hampton Roads, Inc., dated as of November 8, 1994.
<PAGE>

10.16              Asset  Purchase  Agreement by and between  American Cable TV Investors 4, Ltd. and Time          *
                   Warner  Cable  Ventures,  a division of Time Warner  Entertainment,  L.P.,  dated as of
                   February 8, 1995.

10.17              Office Lease, dated as of March 31, 1995, between Concurrency,  Inc., as Landlord,  and          *
                   Presidio FF&E Corp.,  as Tenant,  for the premises  located at 411 West Putnam  Avenue,
                   Greenwich, Connecticut 06830

10.18              Management  and  Administrative  Services  Agreement,   dated  March  31,  1995,  among          *
                   Fieldstone  Private Capital Group,  L.P.,  Presidio Capital Corp.,  Presidio ALI Corp.,
                   ALI Capital Corp.,  ALI Equipment  Management  Corp.,  Integrated  Resources  Equipment
                   Group,  Inc.,  Presidio  Equipment Leasing Corp., IAC Leasing Corp. III, Walker Leasing
                   Corp.,  Investors  Credit Corp., IR Birch Corp.,  Integrated  Equipment  Leasing Corp.,
                   Integrated  Aircraft  Corp.,  Integrated  Equipment  Holding Corp.,  Regional  Airlines
                   Leasing,  Presidio  Aircraft  Fund  Management  Corp.,  Integrated  Lease Plans,  Inc.,
                   Presidio Rail Corp.,  Integrated  Rail Corp.,  Presidio  High Equity Corp.,  Integrated
                   Container  Corp.,  Integrated  Resources  Aircraft Corp.,  Resources  Satellite  Corp.,
                   Integrated Aircraft Fund Management Corp.

10.19              Assignment of Administrative  Services Agreement between  Concurrency  Management Corp.          *
                   and Wexford Management LLC, effective January 1, 1996.

10.20              Asset Sale Agreement dated as of September 7, 1995, between Majco Building  Specialties          *
                   L.P. ("Seller") and CFM International.

10.21              Amendment No. 1 to Asset Sale Agreement, dated as of September 7, 1995, by and between           *
                   Majco Building Specialties, L.P. ("Seller") and CFM International Inc. ("Purchaser").
                   Subsidiaries of the Registrant

10.22              Stock  Purchase  Agreement,  dated  December  21,  1995  between  the  Rotor  Tool L.P.          *
                   ("Seller") and INTOOL, Inc. ("Buyer").

10.23              Resignation as Co-General Partner of ACT V dated January 17, 1996.                               *

10.24              Amended and Restated Grantor Trust Agreement, dated January 1, 1996.                             *

10.25              Secured  Promissory Note, dated March 28, 1996,  between Roundhill  Associates L.P. and
                   Roundhill Associates II L.P. and Presidio Capital Corp.                                          *

10.26              Rights Offering Agreement,  dated March 19, 1996, between T-Two Holding,  LLC, Presidio
                   Capital Corp., Roundhill Associates L.P. and Roundhill Associates L.P. II.

10.27              Promissory  Note,  dated  November  21, 1996,  between  T-Two
                   Holding, LLC and Presidio Capital Corp.

21                 Subsidiaries of the Registrant

99                 No Action  Letter  Response  of the Office of Chief  Counsel,  Division  of  Investment
                   Management,  dated  August 5, 1994,  and No Action  Request  Letter of  Schulte  Roth &
                   Zabel, LLP dated August 4, 1994.
</TABLE>
<PAGE>

     (c)  Reports on Form 8-K

          A Report on Form 8-K was filed on November 26, 1996,  reporting  under
Item 5, the sale in a private securitization transaction of Presidio's rights to
a deferred  payment stream that was  originally  generated by  Integrated's  tax
shelter annuity business.

          A Report on Form 8-K was filed on January 30,  1997,  reporting  under
Item 5, the  denial of final  approval  of the  proposed  settlement  of the HEP
Action.

         *Incorporated  herein by reference to Presidio's  Form 10  Registration
Statement.

         *Incorporated  herein by reference to Presidio's Form 10-K for the year
ended December 31, 1995.

<PAGE>


                                   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.

                                     PRESIDIO CAPITAL CORP.



                                      By:  /s/  Jay L. Maymudes
                                           Jay L. Maymudes
                                           Vice President,
                                           Treasurer and Chief Financial Officer

Date: April 15, 1997

     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 in the capacities and on the 15th day of April, 1997.

     Signature                                  Title
     ---------                                  -----

By: /s/ Charles E. Davidson             Chairman of the Board,
---------------------------             and Class B Director
     Charles E. Davidson                                     

By: /s/ Joseph M. Jacobs                Chief Executive Officer, President,
------------------------                and Class B Director
     Joseph M. Jacobs                                 

By: /s/ Martin L. Edelman               Class A Director
------------------------- 
     Martin L. Edelman

By: /s/ Dean J. Takahashi               Class A Director
-------------------------
     Dean J. Takahashi

By: /s/ Paul T. Walker                  Class A Director
----------------------
     Paul T. Walker

By: /s/ Jay L. Maymudes                 Chief Financial Officer, Vice President
-----------------------                 and Secretary (Principal Financial and 
     Jay L. Maymudes                    Accounting  Officer)