FORM 10K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the Fiscal Year Ended                                 Commission File Number
December 31, 2000                                                        0-17785

                         AIRCRAFT INCOME PARTNERS L.P.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

         Delaware                                              13-3430508
-------------------------------                           ----------------------
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                            Identification Number)

5 Cambridge Center, 9th Floor, Cambridge, MA                      02142
--------------------------------------------                  --------------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:           (617) 234-3000
                                                            ------------------

Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

Securities registered pursuant to Section 12(g) of the Act:

                      UNITS OF LIMITED PARTNERSHIP INTEREST

     Indicate by check mark whether 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 and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes   X     No
                                   -----

     There is no public market for the Limited Partnership Units. Accordingly,
information with respect to the aggregate market value of Limited Partnership
Units held by non-affiliates of Registrant has not been supplied.

     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 ]

                       Documents incorporated by reference
                      -------------------------------------
                                      None

                                                         Exhibit Index: page 33

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

Aircraft Income Partners L.P. (the "Registrant") was organized as a Delaware
limited partnership on October 8, 1987. The general partner of the Registrant is
Integrated Aircraft Fund Management Corp. (the "General Partner"). The General
Partner is ultimately a wholly-owned subsidiary of Presidio Capital Corporation,
a British Virgin Islands corporation ("Presidio"). See "Management/Employees"
below.

In 1989, the Registrant sold, pursuant to a registration statement filed with
the Securities Exchange Commission, 385,800 units of limited partnership
interest (the "Units") for gross proceeds aggregating $192,900,000. The
principal business of the Registrant is and has been to hold for investment and
ultimately sell used commercial jet aircraft as wall as related engines and
other aircraft parts. Substantially all of the net proceeds available for
investment had been invested in 18 aircraft (including an undivided 47.92231%
joint venture interest in one aircraft) which were leased to third parties for
various terms. At March 1, 2001, all of Registrant's aircraft had been sold or
otherwise disposed of. See "Disposition of Aircraft" below.

TAX ASSESSMENT

In September 1996, the Registrant received proposed notices of assessment from
the State of Hawaii with respect to general excise tax ("GET") aggregating
approximately $1,338,000 (including interest and penalties) for the years 1991,
1992, 1993 and 1994. In July 1998, the Registrant received additional proposed
notices of assessment for GET aggregating approximately $585,000 for the years
1995, 1996 and 1997. The state is alleging that GET is owed by the Registrant
with respect to rents received from Aloha Airlines, Inc. ("Aloha") and Hawaiian
Airlines, Inc. ("Hawaiian") under the leases between the Registrant and each of
the airlines.

The leases with both Aloha and Hawaiian provided for full indemnification of the
Registrant for such taxes, but the bankruptcy of Hawaiian may relieve Hawaiian
of its indemnification obligation for any periods prior to September 21, 1993,
when Hawaiian and its affiliates sought bankruptcy protection. In any event, it
is the Registrant, as taxpayer, which is ultimately liable for the GET, if it is
applicable.

The State of Hawaii has never previously applied the GET to rentals received by
a lessor of aircraft where the lessor's only contact with the State of Hawaii is
that it has leased its aircraft to airlines which are based in the state. Aloha
and Hawaiian, as well as the Registrant, have separately engaged tax counsel and
both airlines are cooperating with the Registrant in vigorously contesting the
proposed assessments.

The Registrant recently reached settlements with Aloha and Hawaiian pursuant to
which Aloha and Hawaiian agreed to indemnify the Registrant for any costs it may
ultimately incur.

MANAGEMENT/EMPLOYEES

Registrant does not have any employees. The business of the Registrant is
managed by the General Partner, its affiliates and agents. Through November 2,
1994, the General Partner was a wholly-owned subsidiary of Integrated Resources,
Inc. ("Integrated"). On November 3, 1994, as a result of the consummation of the
reorganization plan relating to Integrated's bankruptcy, indirect ownership of
the General Partner was purchased by Presidio. As a result, the General Partner
became ultimately wholly-owned by Presidio. Presidio, in turn, is controlled by
NorthStar Capital Investment Corp., a Maryland corporation ("NorthStar").

                                       2

<PAGE>

Presidio previously retained Wexford Management LLC ("Wexford") to provide
consulting and administrative services to Presidio and its affiliates, including
the General Partner and Registrant. The agreement with Wexford expired on May 3,
1998 at which time Presidio entered into a management agreement with NorthStar
Presidio Management Company, LLC ("NorthStar Presidio"). Under the terms of the
management agreement, NorthStar Presidio provided the day-to-day management of
Presidio and its direct and indirect subsidiaries and affiliates.

On October 21, 1999, Presidio entered into a Services Agreement with AP-PCC III,
L.P. (the "Agent") pursuant to which the Agent was retained to provide asset
management and investor relation services to Registrant and other entities
affiliated with Registrant.

As a result of this agreement, the Agent has the duty to direct the day to day
affairs of Registrant, including, without limitation, reviewing and analyzing
potential sale, financing or restructuring proposals regarding the Registrant's
assets, preparation of all reports, maintaining records and maintaining bank
accounts of Registrant. The Agent is not permitted, however, without the consent
of Presidio, or as otherwise required under the terms of the Limited Partnership
Agreement to, among other things, cause Registrant to sell or acquire an asset
or file for bankruptcy protection.

In order to facilitate the Agent's provision of the asset management services
and the investor relation services, effective October 25, 1999, the officers and
directors of the General Partner resigned and nominees of the Agent were elected
as the officers and directors of the General Partner. The Agent is an affiliate
of Winthrop Financial Associates, a Boston based company that provides asset
management services, investor relation services and property management services
to over 150 limited partnerships which own commercial property and other assets.
The General Partner does not believe this transaction will have a material
effect on the operations of Registrant.

DISPOSITION OF AIRCRAFT

     a.   Year ended December 31, 1997

     On May 22, 1997, a Boeing 737-297 Advanced aircraft owned by Registrant was
sold to an unaffiliated third party for proceeds of approximately $1,982,000
exclusive of selling expenses of approximately $60,000. The aircraft, which was
formerly leased to Aloha Airlines, Inc. ("Aloha"), had been off-lease since
October 15, 1996. At the time of the sale, the aircraft had a net carrying value
of approximately $1,290,000.

     b.   Year ended December 31, 1998

     On March 31, 1998, a Boeing 737-2H4 aircraft owned by Registrant was sold
to an unaffiliated third party for $3,500,000 exclusive of selling expenses of
approximately $106,000. The aircraft, which was formerly leased to Southwest,
had been off-lease since January 1998. At the time of sale, the aircraft had a
net carrying value of approximately $1,141,000.

     On May 19, 1998, a Boeing 737-297 Advanced aircraft owned by Registrant was
sold to an unaffiliated third party for proceeds of $4,100,000, exclusive of
selling expenses of approximately $124,000. The aircraft, which was formerly
leased to Aloha had a net carrying value of approximately $2,617,000 at the time
of sale.

     Between August 17, 1998 and September 23, 1998, Registrant sold its
interest in two Boeing 737-200 aircraft, four Boeing 727-200 aircraft (inclusive
of an undivided 47.92231% joint venture interest in one aircraft) and one
McDonnell Douglas DC9-51 aircraft. Aside from the DC9-51 aircraft, the six
aircraft had an original cost of approximately $71,235,500, represented 45.03%
of the net carrying value of Partnership's aircraft as of the end of June 30,
1998 and, at the time of sale, had a net carrying value of approximately
$7,744,000. Registrant's interest in the DC9-51 aircraft consisted of the right
to receive

                                       3

<PAGE>

deferred payments of $2,529,900 related to a September 1, 1996 installment sale.
The sales were made to an unaffiliated third party for gross sales proceeds,
exclusive of closing costs, of $18,000,000.

     c.   Year ended December 31, 1999

     On June 1, 1999, Registrant sold two aircraft to an unaffiliated third
party for sale proceeds of $1,910,000, exclusive of selling expenses of
approximately $86,000. At the time of sale, the aircraft had a net carrying
value of approximately $1,824,000. During the quarter of ended September 30,
1999, Registrant received an additional $111,550 relating to the sale of the
aircraft as a result of Registrant providing the records for the engines.

     In June 1999, Registrant and Continental agreed to settle certain
outstanding claims. Pursuant to the settlement, Registrant received $780,000 on
August 24, 1999 as well as 8,684 shares of Continental's Class A stock and
24,179 shares of Continental's Class B stock and an additional $90,861 on
September 22, 1999. On October 6, 1999, Registrant sold all of its Class A and
Class B shares for net proceeds aggregating approximately $1,213,000, which
equaled Registrant's cost basis in the stock. Subject to the resolution of third
party claims against additional stock reserved under Continental's Plan of
Reorganization, Registrant may receive additional shares of Class A and Class B
stock in the future.

     d.   Year ended December 31, 2000

     On January 19, 2000, Registrant sold to an unaffiliated third party a
McDonnell Douglas DC9-30 aircraft for gross proceeds of $650,000. Costs
associated with this sale amounted to approximately $77,000. At the time of the
sale the aircraft had a net carrying value of approximately $574,000.

COMPETITION

As a result of the Registrant liquidating all of its aircraft, Registrant is no
longer subject to competitive factors.

FOREIGN OPERATIONS

During 1998, Registrant operated three aircraft in foreign countries. Two of
such aircraft were leased to Ladeco S.A., a Chilean airline, and were operated
primarily in South America. A third aircraft was leased to Air Micronesia, a
stand-alone air carrier affiliated with Continental Airlines, Inc., and such
aircraft was operated primarily in Southeast Asia. All of such leases expired in
1998 (See Item 8, "Financial Statements and Supplementary Data - Note 10").
There were no foreign operations during 1999 or 2000.

ITEM 2. PROPERTIES

None

ITEM 3. LEGAL PROCEEDINGS

During 1997, the lease of three McDonnell Douglas Model DC9-32 aircraft owned by
Registrant was extended to September 1998 (2 aircraft) and December 1998 (one
aircraft) at a rental of $52,500 per month, per aircraft. Two of the aircraft
were returned in September 1998 and the third aircraft was returned in December
1998.

                                       4

<PAGE>

Upon return, Registrant conducted inspections of the aircraft to ascertain
whether the return conditions of the lease were satisfied. On May 5, 1999, First
Security Bank, N.A., acting not in its individual capacity, but solely as
trustee under a trust agreement in which Registrant is beneficiary, filed a
complaint in the United States District Court, Southern District of New York.
The complaint seeks damages in an amount to be determined at trial, but believed
to be in excess of $3,000,000 arising out of Continental's i) failure to return
the three DC9-32 aircraft in the return condition required by the lease and ii)
failure to make a rent payment provided for in the lease. The parties are
currently in the expert discovery stage. In addition, Continental has filed a
motion for summary judgment on substantially all of the Registrant's claims.

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

None

                                       5

<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) There is no developed public market for the Units of the Registrant.

As of March 1, 2001, there were approximately 14,590 record holders of Units,
owning an aggregate of 385,805 Units.

During the years ended December 31, 2000 and 1999, Registrant has made the
following cash distributions with respect to the Units to holders thereof as of
the dates set forth below in the amounts set forth opposite such dates:

DISTRIBUTION WITH RESPECT TO
QUARTER ENDED                              AMOUNT OF DISTRIBUTION PER UNIT (1)
-------------                              -----------------------------------
                                             2000                  1999
                                             ----                  ----
March 31                                     $9.33                 $--
June 30                                      $--                   $--
September 30                                 $--                   $--
December 31                                  $4.43                 $--

(1)  The amounts listed represent distributions of cash from operations and cash
     from sales. (See Item 7, "Management's Discussion and Analysis of Financial
     Condition and Results of Operations", for information relating to
     Registrant's future distributions.)

(b) Not applicable.

                                       6

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                               Year ended December 31,
                               ---------------------------------------------------------------------------------
                                     2000              1999              1998             1997              1996
                               ----------------  ----------------  ---------------  ----------------  ----------
<S>                            <C>               <C>               <C>              <C>               <C>
Revenues (1)                   $     242,950     $   1,985,465     $   4,521,384    $   8,231,951     $  10,317,005
Net Income (Loss) (2) (3)      $    (210,004)    $  (1,342,951)    $  11,331,319    $   1,706,235     $   5,988,174
Net income (Loss) Per
    Unit (2) (3)               $         .49     $       (3.13)    $       26.43    $        3.98     $       13.97
Distribution Per Unit          $       13.76     $        --       $       69.20    $       20.50     $       40.50
Total Assets                   $   1,886,585     $   8,019,742     $   9,787,877    $  30,567,247     $  40,045,819
Total Partners' Equity         $   1,795,808     $   7,904,489     $   9,247,440    $  27,580,239     $  34,661,785
</TABLE>

(1)  Included in this amount is $242,950, $346,552, $828,655, $659,851 and
     $582,674 of interest income for the years ended December 31, 2000, 1999,
     1998, 1997, 1996, respectively. Additionally, revenues include $1,638,913
     in settlement income for the year ended December 31, 1999.

(2)  Registrant provided allowances for equipment impairments of $2,659,828 and
     $1,350,000 for the year ended December 31, 1999 and 1998, respectively, to
     recognize the loss in value of certain aircraft. No allowance was
     considered necessary for the years ended December 31, 2000, 1997 and 1996.

(3)  Included in these amounts are gains on the disposition of various
     aircraft(s) of $0, $111,550, $11,126,432, $632,367, and $5,222,948 for the
     years ended December 31, 2000, 1999, 1998, 1997 and 1996, respectively.

                                       7

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-K and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's liquidity, capital resources and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Registrant's operations.
Accordingly, actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.

This item should be read in conjunction with the financial statements and other
items contained elsewhere in the report.

Liquidity and Capital Resources

The Registrant sold its remaining aircraft on January 19, 2000. In this regard,
once the outstanding legal issue against Continental Airlines, Inc. is settled
(see below), it is anticipated that the general partner will prepare a final
accounting, commence the dissolution and termination of the Registrant, and make
a final distribution to partners.

The Registrant's level of liquidity based upon cash and cash equivalents
decrease by $5,525,938 during the year ended December 31, 2000, as compared to
December 31, 1999. The decrease is due to $5,898,677 of cash used for partner
distributions (financing activities) and $201,243 of cash used in operations,
which was partially offset by $573,982 of cash from the sale of the McDonnell
Douglas DC-9-30 Aircraft (investing activities). At December 31, 2000, the
Registrant had approximately $1,853,000 in cash and cash equivalents which had
been invested primarily in money market mutual funds.

During 2000, the Registrant declared and paid approximately $5,900,000
distribution to the Unitholders. Of this amount, the limited partners
collectively received approximately $5,300,000 or $13.76 per Unit.

In November 1991, in connection with its reorganization under the United States
Bankruptcy Code, Continental Airlines, Inc. ("Continental") rejected the leases
of the three Boeing 727-100 aircraft owned by the Registrant, which had been out
of service since 1991. Due to the condition and the related market for such
aircraft, the Registrant provided aggregate allowances for equipment impairment
of approximately $6,483,000. During 1993, the Registrant sold all three Boeing
727-100 aircraft. The Registrant had retained its rights pursuant to a proof of
claim and an administrative claim filed in the Continental Bankruptcy case with
respect to such aircraft.

In September 1999, the Registrant and Continental agreed to settle the foregoing
claims. Pursuant to the settlement, the Registrant received $780,000 on August
24, 1999 as well as 8,684 shares of Continental's Class A stock and 24,179
shares of Continental's Class B stock and an additional $90,861 on September 22,
1999. On October 6, 1999, the Registrant sold all shares of stock for net
proceeds aggregating approximately $1,213,000, which equaled the Registrant's
cost basis in the stock. Subject to the resolution of third party claims against
additional stock reserved under Continental's Plan of Reorganization, the
Registrant may receive additional shares of Class A and Class B stock.

During 1997, the leases of three McDonnell Douglas Model DC9-32 aircraft owned
by the Registrant and leased to Continental were extended to September 1998 (2
aircraft) and December 1998 (1 aircraft) at a rental of $52,500 per month, per
aircraft. Two of the aircraft were returned in September 1998 and the third
aircraft was returned in December 1998.

                                       8

<PAGE>

Upon return, the Registrant conducted inspections of the aircraft to ascertain
whether the return conditions of the lease were satisfied. On May 5, 1999, First
Security Bank, N.A., acting not in its individual capacity, but solely as
trustee under a trust agreement in which the Registrant is beneficiary, filed a
complaint in the United States District Court, Southern District of New York.
The complaint seeks damages in an amount to be determined at trial, but believed
to be in excess of $3,000,000, arising out of Continental's i) failure to return
the three DC9-32 aircraft in the return condition required by the lease and ii)
failure to make a rent payment provided for in the lease. Continental has filed
an answer denying the allegations in the complaint. The parties are currently in
the expert discovering stage. Continental has filed a move for summary judgment
on a substantial portion the Registrant's claims. Two of the Registrant's DC9-32
aircraft were sold during 1999 and the remaining aircraft was sold on January
19, 2000.

On January 19, 2000, the Registrant sold to an unaffiliated third party its sole
remaining aircraft, a McDonnell Douglas DC9-30, for gross proceeds of $650,000.
Costs associated with the sale amounted to approximately $77,000. At the time of
the sale, the aircraft had a net carrying value of approximately $574,000.

In September 1996 and July 1998, the Registrant received proposed notices of
assessment from the State of Hawaii with respect to general excise tax of
approximately $1,923,000 (including interest and penalties) for the years 1991
through 1997. The state is alleging that GET is owed by the Registrant with
respect to rents received from Aloha Airlines, Inc. ("Aloha") and Hawaiian
Airlines, Inc. ("Hawaiian") under the leases between the Registrant and each of
the airlines.

The leases with both Aloha and Hawaiian provide for full indemnification of the
Registrant for such taxes, but the bankruptcy of Hawaiian may relieve Hawaiian
of its indemnification obligation for any periods prior to September 21, 1993,
when Hawaiian and its affiliates sought bankruptcy protection. In any event, it
is the Registrant, as taxpayer, which is ultimately liable for the GET, if it is
applicable.

The State of Hawaii has never previously applied the GET to rentals received by
a lessor of aircraft where the lessors only contact with the State of Hawaii is
the fact that it has leased its aircraft to airlines which are based in the
state. Aloha and Hawaiian, as well as the Registrant, have separately engaged
tax counsel and both airlines are cooperating with the Registrant in vigorously
contesting the proposed assessments.

The Registrant recently reached a settlement with Aloha and Hawaiian pursuant to
which Aloha and Hawaiian agreed to indemnify the Registrant for any costs it may
ultimately incur.

Upon resolution of the Continental proceeding described above, the managing
general partner will then prepare a final accounting of the Registrant's assets
and liabilities, commence the dissolution and termination of the Registrant, and
make a final distribution to partners.

Recently Issued Accounting Standards

The Financial Accounting Standards Board issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities Deferral of the Effective Date of
SFAS No. 133." The Statement deferred for one year the effective date of SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
Statement requires companies to recognize all derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether they qualify for hedge accounting. This
Statement is effective for fiscal years beginning after June 15, 2000. The
Partnership believes that the effect of SFAS 133 on its financial statements
will be immaterial.

Inflation has not had a material effect on the Registrant's recent operations or
financial condition and is not expected to have a material effect in the future.
Except as discussed above, management is not aware of any other known trends,
events commitments or uncertainties that will have a significant impact on
liquidity.

                                       9

<PAGE>

Results of Operations

2000 as Compared to 1999

Net loss decreased by $1,132,947 for the year ended December 31, 2000 compared
to the year ended December 31, 1999, principally due to no settlement income or
gain on sale of Aircraft, which was offset by no operating Aircraft expenses or
impairment provision.

Revenues decreased by $1,742,515 for the year ended December 31, 2000 compared
to the prior year due to a decrease in settlement income and lower interest
income. Interest income decreased for the year ended December 31, 2000 compared
to 1999 due to lower invested cash balances, resulting from the distributions to
partners in 2000.

Costs and expenses decreased by $2,987,012 for the year ended December 31, 2000
compared to the prior year principally due to no Aircraft operations, as all
equipment has been sold as of February 2000. The decrease in general and
administrative expenses is the result of lower professional fees.

1999 as Compared to 1998

Registrant generated net loss of approximately $1,343,000, as compared to net
income of approximately $11,331,000 for the year ended December 31, 1998. The
change in net income for 1999 compared to 1998 was principally due to the
following:

          i.) the gain on sale of aircraft of approximately $112,500 in 1999
     compared to a gain from sale of aircraft of approximately $11,126,000 in
     1998.

          ii.) reduction of revenue, which was approximately $1,985,000 in 1999,
     compared to approximately $4,521,000 in 1998.

          iii.) the reduction in costs and expenses, which were approximately
     $3,440,000 in 1999, compared to approximately $4,316,000 in 1998.

Registrant revenue decreased by approximately 56% for the year ended December
31, 1999 as compared to the year ended December 31, 1998. The decrease was due
to the following:

          i.) rental revenue decreased to zero from approximately $3,693,000 due
     to the expiration of all lease agreements in 1997 and due to the sale of
     certain aircraft in 1998 and 1999.

          ii.) interest income decreased by approximately 42% from 1999 compared
     to 1998 primarily due to lower cash balances available for investment and
     1998 including approximately $141,000 on interest income from an
     installment sale.

          iii.) increase in revenue as a result of $1,693,000 of settlement
     income. In June 1999, Registrant settled a legal claim with Continental,
     where Registrant received cash and stock in Continental, which subsequently
     sold and totaled approximately $1,693,000.

Costs and expenses decreased overall by approximately 20% for the year ended
December 31, 1999 as compared to the year ended December 31, 1998. The decrease
was primarily due to the following:

                                       10

<PAGE>

          i.) a decrease in depreciation expense of approximately $2,103,000 for
     1999 compared to 1998 due to Aircraft reaching their salvage value and/or
     being sold.

          ii.) a reduction in management fees due to no rental income in 1999.

          iii.) a decrease in operating expenses as a result of aircraft sales.

          iv.) an increase in general and administrative expenses of 67% due to
     a $200,000 increase in legal fees associated with the litigation and sale
     of 2 DC-9 Airplanes.

          v.) an increase in the allowance for equipment impairment.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Registrant is not subject to market risk as its cash and cash equivalents
are invested in short term money market mutual funds. The Registrant has no
loans outstanding.

                                       11

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          AIRCRAFT INCOME PARTNERS L.P.

                              FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                      INDEX

                                                                      Page
                                                                     Number
                                                                     ------
Independent Auditor's Reports                                          13

Financial statements - years ended
  December 31, 2000, 1999 and 1998

      Balance sheets                                                   15
      Statements of operations                                         16
      Statement of partners' equity                                    17
      Statements of cash flows                                         18
      Notes to financial statements                                    19

Schedule:

    II -- Valuation and Qualifying Accounts                            26

All other schedules have been omitted because they are inapplicable or the
information is included in the financial statements or notes thereto.

                                       12

<PAGE>


                          Independent Auditors' Report

To the Partners
Aircraft Income Partners L.P.

We have audited the accompanying balance sheet of Aircraft Income Partners L.P.
(a limited partnership) (the "Partnership") as of December 31, 2000, and the
related statements of operations, partners' equity and cash flows for the year
then ended. Our audit also included the financial statement schedule supplied
pursuant to Item 14(a)(2). These financial statements and the financial
statement schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audit.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aircraft Income Partners L.P.
(a limited partnership) as of December 31, 2000 and its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

                                                  /s/ Imowitz Koenig & Co., LLP

New York, New York
March 2, 2001




                                       13

<PAGE>

To the Partners of
Aircraft Income Partners L.P.
Cambridge, Massachusetts

                          INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying balance sheet of Aircraft Income Partners L.P.
(a limited partnership) as of December 31, 1999 and the related statements of
operations, shareholders' equity and cash flows for each of the two years in the
period ended December 31, 1999. Our audits also included the financial statement
schedule listed in the Index at Item 14(a)2. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Aircraft Income Partners L.P.
as of December 31, 1999 and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedule taken as a whole, presents
fairly, in all material respects the information set forth therein.

/s/ Hays & Company

March 15, 2000
New York, New York

                                       14

<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                                 BALANCE SHEETS

                                                               DECEMBER 31,
                                                         -----------------------
                                                            2000         1999
                                                         ----------   ----------

ASSETS

Equipment held for sale, net                             $     --     $  573,982
Cash and cash equivalents                                 1,885,262    7,411,200
Accounts receivables                                           --         26,250
Other receivables                                             1,323        8,310
                                                         ----------   ----------

           Total Assets                                  $1,886,585   $8,019,742
                                                         ==========   ==========

LIABILITIES AND PARTNERS' EQUITY

Liabilities:

Accounts payable and accrued expenses                    $   90,777   $  115,253
                                                         ----------   ----------

           Total Liabilities                                 90,777      115,253
                                                         ----------   ----------

Commitments and Contingencies

Partners' Equity:

Limited partners' equity (385,805 units
   issued and outstanding)                                1,607,404    7,105,085
General partner's equity                                    188,404      799,404
                                                         ----------   ----------

           Total Partners' Equity                         1,795,808    7,904,489
                                                         ----------   ----------

           Total Liabilities and Partners' Equity        $1,886,585   $8,019,742
                                                         ==========   ==========



                       See notes to financial statements.

                                       15

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                FOR THE YEARS ENDED DECEMBER 31,
                                                       --------------------------------------------------
                                                          2000                1999             1998
                                                       ------------       ------------       ------------
<S>                                                    <C>                <C>                <C>
Revenues:

   Rental Income                                       $       --         $       --         $  3,692,729
   Settlement Income                                           --            1,638,913               --
   Interest                                                 242,950            346,552            687,646
   Interest - installment note                                 --                 --              141,009
                                                       ------------       ------------       ------------

       Total revenues                                       242,950          1,985,465          4,521,384
                                                       ------------       ------------       ------------

Costs and Expenses:

   Depreciation                                                --                 --            2,102,680
   Provision for equipment impairment                          --            2,659,828          1,350,000
   General and administrative                               444,464            534,520            319,760
   Operating                                                  8,490            157,207            319,480
   Management fees                                             --                 --              180,200
   Other expenses                                              --               88,411             44,377
                                                       ------------       ------------       ------------

       Total costs and expenses                             452,954          3,439,966          4,316,497
                                                       ------------       ------------       ------------

       (Loss) income before gain of disposition
         of aircraft                                       (210,004)        (1,454,501)           204,887

       Gain on disposition of aircraft, net                    --              111,550         11,126,432
                                                       ------------       ------------       ------------

   Net (loss) income                                   $   (210,004)      $ (1,342,951)      $ 11,331,319
                                                       ============       ============       ============

Net (loss) income attributable to:

   Limited partners                                    $   (189,004)      $ (1,208,656)      $ 10,198,187

   General partner                                          (21,000)          (134,295)         1,133,132
                                                       ------------       ------------       ------------

                                                       $   (210,004)      $ (1,342,951)      $ 11,331,319
                                                       ============       ============       ============

Net (loss) income per unit of limited partnership
   interest (385,805 units outstanding)                $      (0.49)      $      (3.13)      $      26.43
                                                       ============       ============       ============
</TABLE>

                       See notes to financial statements.

                                       16

<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                         STATEMENTS OF PARTNERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>

                                                    LIMITED           GENERAL             TOTAL
                                                   PARTNERS'         PARTNER'S           PARTNERS'
                                                    EQUITY            EQUITY              EQUITY
                                                 ------------       ------------       ------------

<S>                                              <C>                <C>                <C>
Balance - January 1, 1998                        $ 24,813,260       $  2,766,979       $ 27,580,239

    Net income                                     10,198,187          1,133,132         11,331,319

    Distributions to partners
      ($69.20 per limited partnership unit)       (26,697,706)        (2,966,412)       (29,664,118)
                                                 ------------       ------------       ------------

Balance - December 31, 1998                         8,313,741            933,699          9,247,440

    Net loss                                       (1,208,656)          (134,295)        (1,342,951)
                                                 ------------       ------------       ------------

Balance - December 31, 1999                         7,105,085            799,404          7,904,489

    Net loss                                         (189,004)           (21,000)          (210,004)

    Distributions to partners
      ($13.76 per limited partnership unit)        (5,308,677)          (590,000)        (5,898,677)
                                                 ------------       ------------       ------------

Balance - December 31, 2000                      $  1,607,404       $    188,404       $  1,795,808
                                                 ============       ============       ============
</TABLE>

                       See notes to financial statements.

                                       17

<PAGE>



                          AIRCRAFT INCOME PARTNERS L.P.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                          --------------------------------------------------
                                                             2000               1999                1998
                                                          ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>
Cash Flows from Operating Activities:

Net (loss) income                                         $   (210,004)      $ (1,342,951)      $ 11,331,319

Adjustments to reconcile net (loss) income
   to net cash (used in)  provided by
   operating activities:
   Depreciation                                                   --                 --            2,102,680
   Provision for equipment impairment                             --            2,659,828          1,350,000
   Gain on disposition of aircraft, net                           --             (111,550)       (11,126,432)
   Changes in assets and liabilities:
       Accounts receivable                                      26,250            445,000             34,480
       Deferred costs                                             --               19,700             75,805
       Prepaid expenses                                           --                 --               13,170
       Other receivables                                         6,987             30,576             51,005
       Accounts payable and accrued expenses                   (24,476)          (425,184)           371,876
       Deferred income                                            --                 --             (133,217)
       Maintenance reserves                                       --                 --           (2,129,110)
       Deferred costs payable                                     --                 --              (50,000)
                                                          ------------       ------------       ------------

Net cash (used in) provided by operating activities           (201,243)         1,275,419          1,891,576
                                                          ------------       ------------       ------------

Cash Flows from Investing Activities:

   Proceeds from sale of aircraft, net                         573,982          1,935,977         25,157,627
   Proceeds from installment sale note receivable                 --                 --              382,006
                                                          ------------       ------------       ------------

Cash provided by investing activities                          573,982          1,935,977         25,539,633
                                                          ------------       ------------       ------------

Cash Flows from Financing Activities:

   Distribution to partners                                 (5,898,677)              --          (29,664,118)
                                                          ------------       ------------       ------------

Cash used in financing activities                           (5,898,677)              --          (29,664,118)
                                                          ------------       ------------       ------------

Net (decrease) increase in cash and cash equivalents        (5,525,938)         3,211,396         (2,232,909)

Cash and cash equivalents, beginning of period               7,411,200          4,199,804          6,432,713
                                                          ------------       ------------       ------------

Cash and cash equivalents, end of period                  $  1,885,262       $  7,411,200       $  4,199,804
                                                          ============       ============       ============
</TABLE>

                       See notes to financial statements.

                                       18

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2000, 1999 AND 1998

1.   ORGANIZATION

     Aircraft Income Partners L.P. (the "Partnership") was formed in October
     1987, under the Delaware Revised Uniform Limited Partnership Act for the
     purpose of engaging in the business of acquiring and leasing aircraft. The
     Partnership will terminate on December 21, 2010, or sooner, in accordance
     with the terms of the Agreement of Limited Partnership (the "Limited
     Partnership Agreement").

     Limited partners' units were originally issued at a price value of $500 per
     unit. Five limited partner units were issued to the original limited
     partner for a capital contribution of $2,500. In addition, the General
     Partner contributed a total of $9,950 to the capital of the Partnership.
     The Partnership ultimately sold an additional 385,800 limited partner units
     aggregating $192,900,000.

     The Partnership sold its remaining aircraft on January 19, 2000. In this
     regard, once the outstanding legal issue against Continental Airlines, Inc.
     is settled, it is anticipated that the general partner will prepare a final
     accounting, commence the dissolution and termination of the Partnership,
     and make a final distribution to partners (see Note 6).

     The general partner of the Partnership, Integrated Aircraft Fund Management
     Corp. ("IAFM"), is a wholly owned subsidiary of Presidio Capital Corp.
     ("Presidio").

     Subject to the rights of the limited partners under the Limited Partnership
     Agreement, Presidio controls the Partnership through its indirect ownership
     of all of the shares of IAFM. On August 28, 1997, an affiliate of NorthStar
     Capital Partners acquired all of the Class B shares of Presidio, the
     corporate parent of IAFM. This acquisition, when aggregated with previous
     acquisitions, caused NorthStar Capital Partners to acquire indirect control
     of IAFM. Effective July 31, 1998, Presidio is indirectly owned by NorthStar
     Capital Investment Corp. ("NorthStar"), a Maryland corporation.

     In August 1997, Presidio entered into a management agreement with NorthStar
     Presidio Management Company, LLC ("NorthStar Presidio"), an affiliate of
     NorthStar. Under the terms of the management agreement, NorthStar Presidio
     provided, until October 21, 1999, the day-to-day management of Presidio and
     its direct and indirect subsidiaries and affiliates.

     On October 21, 1999, Presidio entered into a new Services Agreement with
     AP-PCC III, L.P (the "Agent") pursuant to which the Agent was retained and
     is compensated by Presidio to provide asset management and investor
     relation services to the Partnership and other entities affiliated with the
     Partnership.

     As a result of this agreement, the Agent has the duty to direct the day to
     day affairs of the Partnership, including, without limitation, reviewing
     and analyzing potential sale, financing or restructuring proposals
     regarding the Partnership's assets, preparation of all Partnership reports,
     maintaining Partnership records and maintaining bank accounts of the
     Partnership. The Agent is not permitted, however, without the consent of
     Presidio, or as otherwise required under the terms of the Partnership
     Agreement to, among other things, cause the Partnership to acquire an asset
     or file for bankruptcy.

                                       19

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2000, 1999 AND 1998

1.   ORGANIZATION (CONTINUED)

     In order to facilitate the provision by the Agent of the asset management
     services and the investor relation services, effective October 25, 1999,
     the officers and directors of the general partner resigned and nominees of
     the Agent were elected as the officers and directors of the general
     partner. The Agent is an affiliate of Winthrop Financial Associates, a
     Boston based company that provides asset management services, investor
     relation services and property management services to over 150 limited
     partnerships which own commercial property and other assets. The general
     partner does not believe that this transaction will have a material effect
     on the operations of the Partnership.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Leases

     The Partnership accounts for all of its leases in accordance with the
     operating method. Under the operating method, revenue is recognized on a
     straight-line basis and expenses (including depreciation) are charged to
     operations as incurred. When the Partnership enters into a utilization
     arrangement, rents are recorded as earned based upon actual use of the
     related aircraft.

     LEASED AIRCRAFT AND EQUIPMENT HELD FOR SALE

     The cost of leased aircraft and equipment held for sale represented the
     initial cost of the aircraft to the Partnership plus miscellaneous
     acquisition and closing costs and are carried at the lower of depreciated
     cost or net realizable value.

     Depreciation was computed using the straight-line method over the estimated
     useful lives of such aircraft (15 years for McDonnell Douglas DC9-32
     aircraft, 12 to 12.5 years for Boeing 737-200 Advanced aircraft, Boeing
     727-200 Advanced aircraft and McDonnell Douglas DC9-51 aircraft). The
     Partnership capitalized major additions to its aircraft and depreciated
     such capital improvements over the remaining estimated useful life of the
     aircraft. No depreciation was taken on equipment held for sale.

     When aircraft were sold or otherwise disposed of, the cost and accumulated
     depreciation (and any related allowance for equipment impairment) were
     removed from the accounts and any gain or loss on such sale or disposal is
     reflected in operations. Normal maintenance and repairs were charged to
     operations as incurred. The Partnership provided allowances for equipment
     impairment based upon a periodic review of all aircraft in its portfolio
     when management believed that, based upon market analysis, appraisal
     reports and leases currently in place with respect to specific aircraft,
     the investment in such aircraft may not have been recoverable. The
     allowance was inherently subjective and is based upon management's best
     estimate of current conditions and assumptions about expected future
     conditions.

     Cash and Cash Equivalents

     For the purpose of the statements of cash flows, the Partnership considers
     all short-term investments, which have original maturity of three months or
     less to be cash equivalents. Substantially all of the Partnership's cash
     and cash equivalents are held at one financial institution.

                                       20

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2000, 1999 AND 1998

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Fair Value of Financial Instruments

     The fair value of financial instruments is determined by reference to
     market data and other valuation techniques as appropriate. The
     Partnership's financial instruments include cash and cash equivalents.
     Unless otherwise disclosed, the fair value of financial instruments
     approximates their recorded value.

     Net Income and Distributions per Unit of Limited Partnership Interest

     Net income (loss) and distribution per unit of limited partnership interest
     are computed based upon the number of outstanding units (385,805) during
     the year.

     Income Taxes

     No provisions have been made for federal, state and local income taxes,
     since they are the personal responsibility of the partners.

     The income tax returns of the Partnership are subject to examination by
     federal, state and local taxing authorities. Such examinations could result
     in adjustments to Partnership income or losses, which changes could affect
     the tax liability of the individual partners.

     ESTIMATES

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

     Recently Issued Accounting Standards

     The Financial Accounting Standards Board issued SFAS No. 137, "Accounting
     for Derivative Instruments and Hedging Activities - Deferral of the
     Effective Date of SFAS No. 133." The Statement deferred for one year the
     effective date of SFAS No. 133, "Accounting for Derivative Instruments and
     Hedging Activities". The Statement requires companies to recognize all
     derivatives on the balance sheet as assets or liabilities, measured at fair
     value. Gains or losses resulting from changes in the values of those
     derivatives would be accounted for depending on the use of the derivative
     and whether they qualify for hedge accounting. This Statement is effective
     for fiscal years beginning after June 15, 2000. The Partnership believes
     that the effect of SFAS 133 on its financial statements will be immaterial.

3.   CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES

     For the years ended December 31, 2000, 1999 and 1998 reimbursable expenses
     paid to NorthStar Presidio amounted to $0, $12,171 and $20,250,
     respectively.

                                       21

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2000, 1999 AND 1998

3.   CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

     IAFM is entitled to a 10 percent interest in the net income, loss and
     distributions from operations and cash from sales. IAFM received
     approximately $590,000 and $2,966,000 in distributions for the years ended
     December 31, 2000 and 1998, respectively. No distributions were paid with
     respect to the year ended December 31, 1999.

     In addition, IAFM receives the management fee provided for in the Limited
     Partnership Agreement which is equal to 4% of Distributions of Cash from
     Operations from Operating Leases and 2% of Distributions of Cash from
     Operations from Full Payout Leases, as such terms are defined in the
     Limited Partnership Agreement. In conjunction with such services, IAFM did
     not earn any management fees for the years ended December 31, 2000 and
     1999. However, IAFM earned management fees of $180,200 for the year ended
     December 31, 1998.

4.   AIRCRAFT SALES

     Year Ended December 31, 2000

     On January 19, 2000, the Partnership sold to an unaffiliated third party
     its sole remaining aircraft, a McDonnell Douglas DC9-30, for gross proceeds
     of $650,000. Costs associated with the sale amounted to approximately
     $77,000. At the time of the sale, the aircraft had a net carrying value of
     approximately $574,000.

     Year Ended December 31, 1999

     On June 1, 1999, the Partnership sold two McDonnell Douglas DC9-32 aircraft
     to an unaffiliated third party for gross sale proceeds of $1,910,000,
     exclusive of selling expenses of approximately $86,000. At the time of
     sale, the aircraft had a net carrying value of approximately $1,824,000.
     During the year ended December 31, 1999, the Partnership received an
     additional $111,550 relating to the sale of the aircraft as a result of the
     Partnership providing the records for the engines.

     Year Ended December 31, 1998

     On March 31, 1998, a Boeing 737-2H4 aircraft owned by the Partnership was
     sold to an unaffiliated third party for $3,500,000 exclusive of selling
     expenses of approximately $106,000. The aircraft, which was formerly leased
     to Southwest, had been off-lease since January 1998. At the time of sale,
     the aircraft had a net carrying value of approximately $1,141,000.

     On May 19, 1998, a Boeing 737-297 Advanced aircraft owned by the
     Partnership was sold to an unaffiliated third party for proceeds of
     $4,100,000, exclusive of selling expenses of approximately $124,000. The
     aircraft, which was formerly leased to Aloha had a net carrying value of
     approximately $2,617,000 at the time of sale.

                                       22

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2000, 1999 AND 1998

4.   AIRCRAFT SALES (CONTINUED)

     Year Ended December 31, 1998 (Continued)

     Between August 17, 1998 and September 23, 1998, the Partnership sold its
     interest in two Boeing 737-200 aircraft, four Boeing 727-200 aircraft
     (inclusive of an undivided 47.92231% joint venture interest in one
     aircraft) and one McDonnell Douglas DC9-51 aircraft. Aside from the DC9-51
     aircraft, the six aircraft had an original cost of approximately
     $71,235,000, represented 45.03% of the net carrying value of Partnership's
     aircraft as of the end of June 30, 1998 and, at the time of sale, had a net
     carrying value of approximately $7,744,000. The Partnership's interest in
     the DC9-51 aircraft consisted of the right to receive deferred payments of
     $2,529,900 related to a September 1, 1996 installment sale. The sales were
     made to an unaffiliated third party for gross sales proceeds, exclusive of
     closing costs, of $18,000,000.

5.   RECONCILIATION OF NET (LOSS) INCOME AND NET ASSETS PER FINANCIAL STATEMENTS
     TO TAX BASIS

     The principal differences between the financial statements and the tax
     basis of accounting have been accelerated depreciation, the tax treatment
     of an aircraft purchased subject to a tax benefit transfer lease, and bad
     debts provided for financial statement purposes in previous periods offset
     by provisions for equipment impairment. A reconciliation of net (loss)
     income per financial statements to the tax basis of accounting is as
     follows:

<TABLE>
<CAPTION>

                                                                            YEARS ENDED DECEMBER 31,
                                                        ------------------------------------------------------------------
                                                               2000                    1999                   1998
                                                        -------------------     -------------------    -------------------
<S>                                                      <C>                     <C>                    <C>
NET (LOSS) INCOME PER FINANCIAL STATEMENTS               $        (210,004)      $     (1,342,951)      $      11,331,319
Difference between financial statements
   and tax basis operating expenses                                   --                   (4,861)                   --
Difference between financial statements
   and tax basis depreciation                                         --                     --                  (983,590)
Difference between financial statements
   and tax basis in aircraft sold or disposed of                   573,987              1,824,427               4,965,770
Difference between financial statements
   and tax basis in reserves                                          --                     --                (1,574,249)
Provision for equipment impairment
   provided for financial statement purposes                          --                2,659,828               1,350,000
Difference between financial basis and tax
   basis liabilities                                                  --                     --                  (600,000)
Financial statement recognition of advance
   rental payments recognized in prior periods
   for tax purposes                                                   --                     --                  (133,218)
                                                         -----------------       ----------------       -----------------
NET INCOME (LOSS) PER TAX BASIS                          $         363,983       $      3,136,443       $      14,356,032
                                                         =================       ================       =================
</TABLE>

                                       23

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2000, 1999 AND 1998

5.   RECONCILIATION OF NET (LOSS) INCOME AND NET ASSETS PER FINANCIAL STATEMENTS
     TO TAX BASIS (CONTINUED)

     The differences between the Partnership's net assets per financial
     statements and tax basis of accounting are as follows:

<TABLE>
<CAPTION>

                                                                     YEARS ENDED DECEMBER 31,
                                                            --------------------------------------------
                                                                   2000                    1999
                                                            -------------------    ---------------------

<S>                                                          <C>                     <C>
          Net Assets Per Financial Statements                $       1,795,808       $        7,904,489
          Net carrying value of aircraft                                  --                   (573,982)
          Syndication costs                                         22,665,750               22,665,750
                                                             -----------------       ------------------
          Net Assets Per Tax Basis                           $      24,461,558       $       29,996,257
                                                             =================       ==================
</TABLE>

6.   COMMITMENTS AND CONTINGENCIES

     Tax Assessment

     In September 1996, the Partnership received proposed notices of assessment
     from the State of Hawaii with respect to general excise tax ("GET")
     aggregating approximately $1,338,000 (including interest and penalties) for
     the years 1991, 1992, 1993 and 1994. In July 1998, the Partnership received
     additional proposed notices of assessment for GET aggregating approximately
     $585,000 for the years 1995, 1996 and 1997. The state is alleging that GET
     is owed by the Partnership with respect to rents received from Aloha
     Airlines, Inc. ("Aloha") and Hawaiian Airlines, Inc. ("Hawaiian") under the
     leases between the Partnership and each of the airlines.

     The leases with both Aloha and Hawaiian provided for full indemnification
     of the Partnership for such taxes, but the bankruptcy of Hawaiian may
     relieve Hawaiian of its indemnification obligation for any periods prior to
     September 21, 1993, when Hawaiian and its affiliates sought bankruptcy
     protection. In any event, it is the Partnership, as taxpayer, which is
     ultimately liable for the GET, if it is applicable.

     The State of Hawaii has never previously applied the GET to rentals
     received by a lessor of aircraft where the lessor's only contact with the
     State of Hawaii is that it has leased its aircraft to airlines which are
     based in the state. Aloha and Hawaiian, as well as the Partnership, have
     separately engaged tax counsel and both airlines are cooperating with the
     Partnership in vigorously contesting the proposed assessments.

     The Partnership recently reached a settlement with Aloha and Hawaiian
     pursuant to which Aloha and Hawaiian agreed to indemnify the Partnership
     for any costs it may ultimately incur.

                                       24

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2000, 1999 AND 1998

6.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     Continental Airlines, Inc.

     In November 1991, in connection with its reorganization under the United
     States Bankruptcy Code, Continental Airlines, Inc. ("Continental") rejected
     the leases of the three Boeing 727-100 aircraft owned by the Registrant,
     which had been out of service since 1991. Due to the condition and the
     related market for such aircraft, the Registrant provided aggregate
     allowances for equipment impairment of approximately $6,483,000. During
     1993, the Registrant sold all three Boeing 727-100 aircraft. The Registrant
     had retained its rights pursuant to a proof of claim and an administrative
     claim filed in the Continental Bankruptcy case with respect to such
     aircraft.

     In September 1999, the Registrant and Continental agreed to settle the
     foregoing claims. Pursuant to the settlement, the Registrant received
     $780,000 on August 24, 1999 as well as 8,684 shares of Continental's Class
     A stock and 24,179 shares of Continental's Class B stock and an additional
     $90,861 on September 22, 1999. On October 6, 1999, the Registrant sold all
     shares of stock for net proceeds aggregating approximately $1,213,000,
     which equaled the Registrant's cost basis in the stock. Subject to the
     resolution of third party claims against additional stock reserved under
     Continental's Plan of Reorganization, the Registrant may receive additional
     shares of Class A and Class B stock.

     During 1997, the leases of three McDonnell Douglas Model DC9-32 aircraft
     owned by the Partnership and leased to Continental Airlines, Inc.
     ("Continental") were extended to September 1998 (2 aircraft) and December
     1998 (1 aircraft) at a rental of $52,500 per month, per aircraft. Two of
     the aircraft were returned in September 1998 and the third aircraft was
     returned in December 1998.

     Upon return, the Partnership conducted inspections of the aircraft to
     ascertain whether the return conditions of the lease were satisfied. On May
     5, 1999, First Security Bank, N.A., acting not in its individual capacity,
     but solely as trustee under a trust agreement in which the Partnership is
     beneficiary, filed a complaint in the United States District Court,
     Southern District of New York. The complaint seeks damages in an amount to
     be determined at trial arising out of Continental's i) failure to return
     the three DC9-32 aircraft in the return condition required by the lease and
     ii) failure to make a rent payment provided for in the lease. Continental
     has filed an answer denying the allegations in the complaint. Two of the
     Partnership's DC9-32 aircraft were sold during 1999 and the remaining
     aircraft was sold on January 19, 2000.

                                       25

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                 Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>

                                                     Balance at     Charged to       Charged to                          Balance at
                                                    Beginning of    Costs and          Other         Additions             End of
Description                                            Period        Expenses         Accounts      (Deductions)           Period
-----------                                         ------------   ------------     -------------   -------------        -----------
<S>                                                 <C>            <C>              <C>             <C>                  <C>
YEAR ENDED DECEMBER 31, 2000

  Equipment held for sale - valuation
    allowance for equipment impairment

    One McDonnell Douglas DC9-32 aircraft           $  2,284,162   $       --       $        --     $  (2,284,162) (B)   $      --
                                                    ------------   ------------     -------------   -------------        -----------

                                                    $  2,284,162   $       --       $        --     $  (2,284,162)       $      --
                                                    ============   ============     =============   =============        ===========

YEAR ENDED DECEMBER 31, 1999

  Equipment held for sale - valuation
    allowance for equipment impairment

    Three McDonnell Douglas DC9-32 aircraft         $  2,968,000   $ 2,659,828 (A)  $       --      $  (3,343,666) (B)   $ 2,284,162
                                                    ------------   ------------     -------------   -------------        -----------

                                                    $  2,968,000   $  2,659,828     $        --     $  (3,343,666)       $ 2,284,162
                                                    ============   ============     =============   =============        ===========

YEAR ENDED DECEMBER 31, 1998

  Leased aircraft - valuation
    allowance for equipment impairment

    Four Boeing 737-200 Advanced aircraft           $ 13,068,000   $       --                --       (13,068,000) (D)   $      --

    Four Boeing 727-200 Advanced aircraft              9,414,000           --                --        (9,414,000) (D)          --

    Three McDonnell Douglas DC9-32 aircraft            1,618,000           --                --        (1,618,000) (F)          --
                                                    ------------   ------------     -------------   -------------        -----------
                                                    $ 24,100,000   $       --       $        --     $ (24,100,000)       $      --
                                                    ============   ============     =============   =============        ===========
  Equipment held for sale - valuation
    allowance for equipment impairment

    Three McDonnell Douglas DC9-32 aircraft         $    --        $ 1,350,000 (E)  $        --     $   1,618,000  (F)   $ 2,968,000
                                                    ------------   ------------     -------------   -------------        -----------

                                                    $ 24,100,000   $  1,350,000     $        --     $ (22,482,000)       $ 2,968,000
                                                    ============   ============     =============   =============        ===========
</TABLE>

(A)  Represents valuation of allowance for equipment impairments recorded during
     1999 relating to certain equipment held for sale.

(B)  Represents reversal of valuation allowance due to the sale of certain
     equipment during the period.

(D)  Represents valuation allowances for equipment impairment relating to
     certain equipment sold during 1998.

(E)  Represents valuation allowance for equipment impairment relating to certain
     equipment held for sale at December 31, 1998

(F)  Represents valuation allowance for equipment that was transferred to
     Equipment held for sale during 1998.

                                       26

<PAGE>

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

     Effective July 28,2000, the Registrant dismissed its prior Independent
Auditors, Hays & Company (the "Prior Auditors"). Hays & Company's auditors'
report on the balance sheets of Aircraft Income Partners L.P. as of and for
years ended December 31, 1999 and 1998, and the related statements of
operations, partner's equity and cash flows for each of the three years in the
period ended December 31, 1999, did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. The decision to change Independent
Auditors was approved by the Registrant's managing general partner's directors.
During calendar year ended 1998 and 1999 and through July 28, 2000, there were
no disagreements between the Registrant and the Prior Auditors on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope of procedure which disagreements if not resolved to the satisfaction of
the Prior Auditors.

     Effective October 25, 2000, the Registrant engaged Imowitz Koenig & Co.,
LLP. as its Independent Auditors. The Registrant did not consult Imowitz Koenig
& Co., LLP. regarding any of the matters or events set forth in Item 304(a)(2)
of Regulation S-K prior to October 25, 2000.

                                       27

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Registrant has no officers or directors. The General Partner manages and
controls substantially all of Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business. The
names and positions held by the officers and directors of the General Partner
are described below.

<TABLE>
<CAPTION>

                              Position Held with the                    Has Served as a Director
Name                         Managing General Partner                       or Officer Since
-----                        ------------------------                   ------------------------
<S>                          <C>                                                 <C>
Michael L. Ashner            President and Director                              10-99

David G. King, Jr.           Vice President                                      11-97

Peter Braverman              Executive Vice President                            10-99

Lara K. Sweeney              Vice President and Secretary                        10-99

Carolyn Tiffany              Vice President and Treasurer                        10-99
</TABLE>

     Michael L. Ashner, age 48, has been the Chief Executive Officer of Winthrop
Financial Associates, A Limited Partnership ("WFA") since January 15, 1996. From
June 1994 until January 1996, Mr. Ashner was a Director, President and
Co-chairman of National Property Investors, Inc., a real estate investment
company ("NPI"). Mr. Ashner was also a Director and executive officer of NPI
Property Management Corporation ("NPI Management") from April 1984 until January
1996. In addition, since 1981 Mr. Ashner has been President of Exeter Capital
Corporation, a firm which has organized and administered real estate limited
partnerships. Mr. Ashner also currently serves as a Director of Interstate
Hotels Corporation, Nexthealth Corp., Great Bay Hotel and Casino Inc., Burnham
Pacific Properties, Inc. and NBTY, Inc.

     David G. King, Jr., 38, has been a Vice President and Assistant Treasurer
of NorthStar Capital Investment Corp. since November 1997. He is also a Vice
President of the General Partner. For more than the previous five years he was a
Senior Vice President of Finance at Olympia & York Companies (USA).

     Peter Braverman, age 49, has been a Vice President of WFA since January
1996. From June 1995 until January 1996, Mr. Braverman was a Vice President of
NPI and NPI Management. From June 1991 until March 1994, Mr. Braverman was
President of the Braverman Group, a firm specializing in management consulting
for the real estate and construction industries. From 1988 to 1991, Mr.
Braverman was a Vice President and Assistant Secretary of Fischbach Corporation,
a publicly traded, international real estate and construction firm.

     Lara K. Sweeney, age 28, has been a Senior Vice President of WFA since
January 1996. Prior to joining WFA, Ms. Sweeney was an officer of NPI and NPI
Management in the asset management and investor relations departments.

     Carolyn Tiffany, age 34, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. From October 1995 to present
Ms. Tiffany was a Vice President in the asset

                                       28

<PAGE>

management and investor relations departments of WFA until December 1997, at
which time she became the Chief Operating Officer of WFA.

Each director and officer of the General Partner will hold office until the next
annual meeting of stockholders of the General Partner and until his successor is
elected and qualified.

One or more of the above persons are also directors or officers of a general
partner (or general partner of a general partner) of a number of limited
partnerships which either have a class of securities registered pursuant to
Section 12(g) of the Securities and Exchange Act of 1934, or are subject to the
reporting requirements of Section 15(d) of such Act.

There are no family relationships among the officers and directors of the
General Partner.

ITEM 11. EXECUTIVE COMPENSATION

Registrant is not required to pay any compensation to the officers or directors
of the General Partner. The General Partner does not currently pay any
compensation to any of its officers or directors.

Certain officers and directors of the General Partner receive compensation from
affiliates of the General Partner (but not from Registrant) for services
performed for various affiliated entities, which may include services performed
for Registrant; however, the General Partner believes that any compensation
attributable to such services performed for Registrant is immaterial. See Item
13 "Certain Relationships and Related Transactions".

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (a) Security Ownership of Certain Beneficial Owners.

     No person or group is known by the Registrant to be the beneficial owner of
more than 5% of the outstanding Units at March 1, 2001.

     (b) Security Ownership of Management.

     At March 1, 2001, Presidio, the General Partner and their affiliates,
officers and directors owned as a group 2,519 Units representing less than 1% of
the total number of Units outstanding.

     (c) Changes in Control.

     There exists no arrangement known to the Registrant the operation of which
may at a subsequent date result in a change in control of the Registrant.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

No director or officer of the General Partner received any direct remuneration
from Registrant during the year ended December 31, 2000.

The General Partner did not receive management fees for the performance of
management services during 2000.

The General Partner's share of Registrant's taxable loss for the year ended
December 31, 2000 amounted to $36,398.

                                       29

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

1.   FINANCIAL STATEMENTS

     See Index to Financial Statements and Supplementary Data in Part II, Item
     8.

2.   FINANCIAL SCHEDULES

     Schedule II. Valuation and Qualifying Accounts (See Index to Financial
     Statements and Supplementary Data in Part II, Item 8).

3.   EXHIBITS

     3    Certificate of Limited Partnership.1

     4    Limited Partnership Agreement.1

     10.1 Agreement between Registrant and Integrated Aircraft Fund Management
          Corp.1

     10.2 Form of Trust Agreement between Integrated Aircraft Fund Management
          Corp., as beneficiary, and First Security Bank of Utah, N.A., as
          trustee.1

     10.3 Form of Lease Agreement between First Security Bank of Utah, N.A., as
          trustee, Integrated Aircraft Fund Management Corp. and Continental
          Airlines, Inc.1

          Note: substantially identical leases in all material respects except
          for the dates of term and rental amounts cover the equipment described
          under "Properties" as purchased on April 20, 1988 and the McDonnell
          Douglas DC-9-32 aircraft purchased on May 13, 1988.1

     10.4 Form of Lease Agreement I between First Security Bank of Utah, N.A.,
          as trustee, and Aloha Airlines, Inc.2

     10.5 Form of Lease Agreement II between First Security Bank of Utah, N.A.,
          as trustee, and Aloha Airlines, Inc.2

     10.6 Form of Lease Agreement between First Security Bank of Utah, N.A., as
          trustee, and Hawaiian Airlines, Inc.3

     10.7 Lease Agreement dated January 5, 1993 between First Security Bank of
          Utah, N.A., as trustee, and Continental Airlines, Inc.4

     10.8 Participation Agreement dated January 5, 1993 between First Security
          Bank of Utah, N.A., as trustee, Registrant and Continental Airlines,
          Inc.4

     10.9 Amendment dated as of December 1, 1993 to Lease Agreement II between
          First Security Bank of Utah, N.A., as trustee, and Aloha Airlines,
          Inc.5

    10.10 Lease Amendment, dated January 1, 1997, between First Security Bank
          of Utah N.A., as Trustee, and Hawaiian Airlines, Inc.6

                                       30

<PAGE>

    10.11 Lease Amendment and Extension Agreement, dated June 24, 1996, between
          First Security Bank of Utah N.A., as Trustee, and American Trans Air,
          Inc.6

    10.12 Lease Amendment and Extension Agreement, dated July 29, 1996, between
          First Security Bank of Utah N.A., as Trustee, and Aloha Airlines,
          Inc.6

    16.   Letter dated July 31, 2000 from Hays & Company.7

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

     1    Filed as an exhibit to Registrant's Registration Statement on Form S-1
          (33-18891), and incorporated herein by reference.

     2    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1989, and incorporated herein by
          reference.

     3    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1990, and incorporated herein by
          reference.

     4    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1992 and incorporated herein by
          reference.

     5    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1993 and incorporated herein by
          reference.

     6    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1996 and incorporated herein by
          reference.

     7    Filed as an exhibit to Registrant's Current Report on Form 8-K dated
          July 28, 2000.

b)   Current reports on Form 8-K filed during the last quarter of Registrant's
     fiscal year

          A Current Report on Form 8-K was filed on October 25, 2000 with
          respect to the Registrant's change of accountants (Item 4).

                                       31

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 29th day of March.

AIRCRAFT INCOME PARTNERS L.P.

By:      INTEGRATED AIRCRAFT FUND MANAGEMENT CORP.
         General Partner

<TABLE>
<CAPTION>

<S>                                                                                       <C>
                                                                                               DATE
                                                                                               ----
By:      /s/ MICHAEL L. ASHNER                                                            March 29, 2001
         ------------------------------
         Michael L. Ashner
         President and Director
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant in their
capacities as directors and/or officers (as to the Managing General Partner) on
the date indicated below.

<TABLE>
<CAPTION>

       SIGNATURE                                TITLE                             DATE
       ---------                                -----                             ----
<S>                                     <C>                                  <C>
/s/ MICHAEL L. ASHNER                   Director and President               March 29, 2001
------------------------------------
Michael L. Ashner

/s/ CAROLYN TIFFANY                     Vice President and Treasurer         March 29, 2001
------------------------------------
Carolyn Tiffany
</TABLE>


<PAGE>

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
<S>                                                                                  <C>
                                                                                      PAGE
EXHIBITS                                                                             NUMBER
--------                                                                             ------
     3    Certificate of Limited Partnership.1

     4    Limited Partnership Agreement.1

     10.1 Agreement between Registrant and Integrated Aircraft Fund Management
          Corp.1

     10.2 Form of Trust Agreement between Integrated Aircraft Fund Management
          Corp., as beneficiary, and First Security Bank of Utah, N.A., as
          trustee.1

     10.3 Form of Lease Agreement between First Security Bank of Utah, N.A., as
          trustee, Integrated Aircraft Fund Management Corp. and Continental
          Airlines, Inc.1

          Note: substantially identical leases in all material respects except
          for the dates of term and rental amounts cover the equipment described
          under "Properties" as purchased on April 20, 1988 and the McDonnell
          Douglas DC-9-32 aircraft purchased on May 13, 1988.1

     10.4 Form of Lease Agreement I between First Security Bank of Utah, N.A.,
          as trustee, and Aloha Airlines, Inc.2

     10.5 Form of Lease Agreement II between First Security Bank of Utah, N.A.,
          as trustee, and Aloha Airlines, Inc.2

     10.6 Form of Lease Agreement between First Security Bank of Utah, N.A., as
          trustee, and Hawaiian Airlines, Inc.3

     10.7 Lease Agreement dated January 5, 1993 between First Security Bank of
          Utah, N.A., as trustee, and Continental Airlines, Inc.4

     10.8 Participation Agreement dated January 5, 1993 between First Security
          Bank of Utah, N.A., as trustee, Registrant and Continental Airlines,
          Inc.4

     10.9 Amendment dated as of December 1, 1993 to Lease Agreement II between
          First Security Bank of Utah, N.A., as trustee, and Aloha Airlines,
          Inc.5

    10.10 Lease Amendment, dated January 1, 1997, between First Security Bank
          of Utah N.A., as Trustee, and Hawaiian Airlines, Inc.6

    10.11 Lease Amendment and Extension Agreement, dated June 24, 1996, between
          First Security Bank of Utah N.A., as Trustee, and American Trans Air,
          Inc.6

    10.12 Lease Amendment and Extension Agreement, dated July 29, 1996, between
          First Security Bank of Utah N.A., as Trustee, and Aloha Airlines,
          Inc.6

     16.  Letter dated July 31, 2000 from Hays & Company.7
</TABLE>

<PAGE>

     28   Prospectus of Registrant dated February 29, 1988, as supplemented by
          Supplements dated May 20, 1988, August 16, 1988, November 4, 1988,
          January 6, 1989 and February 28, 1989 filed pursuant to Rules 424(b)
          and 424(c) under the Securities Act of 1933.1

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

     1    Filed as an exhibit to Registrant's Registration Statement on Form S-1
          (33-18891), and incorporated herein by reference.

     2    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1989, and incorporated herein by
          reference.

     3    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1990, and incorporated herein by
          reference.

     4    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1992 and incorporated herein by
          reference.

     5    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1993 and incorporated herein by
          reference.

     6    Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1996 and incorporated herein by
          reference.

     7    Filed as an exhibit to Registrant's Current Report on Form 8-K dated
          July 28, 2000.