<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB

                  Annual Report Pursuant to Section 13 or 15(d)
                       of Securities Exchange Act of 1934

For the Fiscal Year Ended                                      Commission File
December 31, 2001                                              Number  0-17785
                                                                       -------

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

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


7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston, Massachusetts        02114
-----------------------------------------------------------------      --------
(Address of principal executive offices)                             (Zip  Code)

Registrant's telephone number including area code:                (617) 570-4600
                                                                  --------------

        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
                      -------------------------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. [ ]

Registrant's revenues for its most recent fiscal year were $65,530.

No market exists for the limited partnership interests of the Registrant, and,
therefore, a market value for such interests cannot be determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

<PAGE>

PART I

ITEM 1.       DESCRIPTION OF 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 controlled by NorthStar Capital Investment Corporation, a
Maryland corporation ("NorthStar"). 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) that were leased to third parties for
various terms. All of Registrant's aircraft have 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.

                                       2
<PAGE>

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. On October 21, 1999,
an affiliate of NorthStar and the then controlling entity of the General Partner
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 an affiliate of NorthStar, 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, 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

                                       3
<PAGE>

additional stock reserved under Continental's Plan of Reorganization, Registrant
may receive additional shares of Class A and Class B stock in the future.

         b. 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.

ITEM 2. DESCRIPTION OF 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.

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
against Continental Airlines, Inc. ("Continental"). Plaintiff seeks damages in
an amount to be determined at trial arising from Continental's failure to return
the three DC9-32 aircraft in the return condition required by the lease. On July
31, 2001, the Court denied Continental's motion for partial summary judgment.
Trial has been scheduled for November 5, 2002.


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

None


                                       4
<PAGE>

PART II


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

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

As of March 1, 2002, there were approximately 14,065 record holders of Units,
owning an aggregate of 385,805 Units.

During the years ended December 31, 2001 and 2000, 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)
----------------                         -----------------------------------
                                               2001                  2000
                                               ----                  ----
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 6, "Management's Discussion and Analysis or Plan of
    Operation", for information relating to Registrant's future distributions.)




                                       5
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ON PLAN OF
        OPERATIONS

The matters discussed in this Form 10-KSB 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-KSB 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
decreased by $409,162 during the year ended December 31, 2001, as compared to
December 31, 2000. The decrease is due to cash used in operations. At December
31, 2001, the Registrant had approximately $1,476,000 in cash and cash
equivalents which had been invested primarily in money market mutual funds.

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.

                                       6
<PAGE>

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.

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 arising out
of Continental's failure to return the three DC9-32 aircraft in the return
condition required by the lease. On July 31, 2001, the Court denied
Continental's motion for partial summary judgment. Trial has been scheduled for
November 5, 2002. Two of the Registrant's DC9-32 aircraft were sold during 1999
and the remaining aircraft was sold on January 19, 2000.

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.

Recently Issued Accounting Standards
------------------------------------

The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an amendment of SFAS No. 133."
These statements require 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. These statements were effective for fiscal years beginning after
June 15, 2000. There was no effect from these statements on the Partnership's
financial statements.

In July 2001, the FASB issued SFAS No. 141 "Business Combinations". SFAS No. 141
requires that all business combinations be accounted for under the purchase
method of accounting. SFAS No. 141 also changes the criteria for the separate
recognition of intangible assets acquired in a business combination. SFAS No.
141 is effective for all business combinations initiated after June 30, 2001.
This statement will not affect the Partnership's financial statements.

In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
Assets". SFAS No. 142 addresses accounting and reporting for intangible assets
acquired, except for those acquired in a business combination. SFAS No. 142
presumes that goodwill and certain intangible assets have indefinite useful
lives. Accordingly, goodwill and certain intangibles will not be amortized but
will rather be tested at least annually for impairment. SFAS No. 142 also
addresses accounting and reporting for goodwill and other intangible assets
subsequent to their

                                       7
<PAGE>

acquisition. SFAS No. 142 is effective for fiscal years beginning after December
15, 2001. This statement will not have a material effect on the Partnership's
financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This statement
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations
-Reporting the Effects of a Disposal of a Business and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions," for the disposal of a
segment of a business. This Statement also amends ARB No. 51, "Consolidated
Financial Statements," to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. The provisions of this Statement generally
are to be applied prospectively. The Partnership does not expect that this
statement will have a material effect on the Partnership's results of
operations.

Results of Operations
---------------------

Net loss increased by $252,172 for the year ended December 31, 2001 compared to
December 31, 2000, due to a decrease in revenues and an increase in costs and
expenses.

Revenues decreased by $177,420 for the year ended December 31, 2001 compared to
the prior year, due to a decrease in interest income. Interest income decreased
for the year ended December 31, 2001 due to lower interest rates and lower
reserves available for investment due to the distributions to partners in 2000.

Costs and expenses increased by $74,752 for the year ended December 31, 2001
compared to the prior year principally due to an increase in legal fees
associated with the Continental Airlines matter, which is included in general
and administrative expenses. Operating expense declined due to the sale of the
remaining asset in January 2000.

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.



                                       8
<PAGE>

Item 7.  Financial Statements

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                              FINANCIAL STATEMENTS
                              --------------------

                     YEARS ENDED DECEMBER 31, 2001 and 2000
                     --------------------------------------

                                      INDEX
                                      -----

                                                                         Page


Independent Auditors' Report..............................................10

Financial Statements:

Balance Sheets as of December 31, 2001 and 2000...........................11

Statements of Operations for the Years Ended
     December 31, 2001 and 2000...........................................12

Statements of Partners' Equity for the Years Ended
     December 31, 2001 and 2000...........................................13

Statements of Cash Flows for the Years Ended
     December 31, 2001 and 2000...........................................14

Notes to Financial Statements.............................................15








                                       9
<PAGE>

                          Independent Auditors' Report
                          ----------------------------


To the Partners
Aircraft Income Partners L.P.


We have audited the accompanying balance sheets of Aircraft Income Partners L.P.
(a limited partnership) (the "Partnership") as of December 31, 2001 and 2000,
and the related statements of operations, partners' equity and cash flows for
the years then ended. 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.
(a limited partnership) as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.



                                                   /s/ Imowitz Koenig & Co., LLP

New York, New York
February 11, 2002


                                       10


<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                                 BALANCE SHEETS
                                 --------------

<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                          ------------------------------------------
                                                                                 2001                   2000
                                                                          --------------------   -------------------
<S>                                                                       <C>                    <C>
ASSETS
------
Cash and cash equivalents                                                 $         1,476,100    $        1,885,262
Other receivables                                                                           -                 1,323
                                                                          --------------------   -------------------
           Total Assets                                                   $         1,476,100    $        1,886,585
                                                                          ====================   ===================

LIABILITIES AND PARTNERS' EQUITY
--------------------------------

Liabilities:

Accounts payable and accrued expenses                                     $           142,468    $           90,777
                                                                          --------------------   -------------------
           Total Liabilities                                                          142,468                90,777
                                                                          --------------------   -------------------

Commitments and Contingencies

Partners' Equity:

Limited partners' equity (385,805 units
   issued and outstanding)                                                          1,191,446             1,607,404
General partner's equity                                                              142,186               188,404
                                                                          --------------------   -------------------
           Total Partners' Equity                                                   1,333,632             1,795,808
                                                                          --------------------   -------------------
           Total Liabilities and Partners' Equity                         $         1,476,100    $        1,886,585
                                                                          ====================   ===================
</TABLE>


                       See notes to financial statements.

                                       11
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                            STATEMENTS OF OPERATIONS
                            ------------------------

<TABLE>
<CAPTION>
                                                                     FOR THE YEARS ENDED DECEMBER 31,
                                                               --------------------------------------------
                                                                      2001                    2000
                                                               -------------------    ---------------------
<S>                                                            <C>                    <C>
Revenues:

    Interest                                                   $           65,530     $            242,950
                                                               -------------------    ---------------------
       Total revenues                                                      65,530                  242,950
                                                               -------------------    ---------------------
Costs and Expenses:

    General and administrative                                            527,706                  444,464
    Operating                                                                   -                    8,490
                                                               -------------------    ---------------------
       Total costs and expenses                                           527,706                  452,954
                                                               -------------------    ---------------------
    Net loss                                                   $         (462,176)    $           (210,004)
                                                               ===================    =====================
Net loss attributable to:

    Limited partners                                           $        (415,958)     $           (189,004)

    General partner                                                       (46,218)                 (21,000)
                                                               -------------------    ---------------------
                                                               $         (462,176)    $           (210,004)
                                                               ===================    =====================

Net loss per unit of limited partnership
    interest (385,805 units outstanding)                       $            (1.08)    $              (0.49)
                                                               ===================    =====================
</TABLE>

                       See notes to financial statements.

                                       12
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                         STATEMENTS OF PARTNERS' EQUITY
                         ------------------------------

                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
                 ----------------------------------------------

<TABLE>
<CAPTION>
                                                                 LIMITED                 GENERAL                 TOTAL
                                                                PARTNERS'               PARTNER'S              PARTNERS'
                                                                  EQUITY                 EQUITY                  EQUITY
                                                        ------------------------   --------------------   ---------------------
<S>                                                     <C>                        <C>                    <C>
Balance - January 1, 2000                               $             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

    Net loss                                                           (415,958)               (46,218)               (462,176)
                                                        ------------------------   --------------------   ---------------------

Balance - December 31, 2001                             $             1,191,446    $           142,186    $          1,333,632
                                                        ========================   ====================   =====================
</TABLE>


                       See notes to financial statements.

                                       13
<PAGE>
                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                            STATEMENTS OF CASH FLOWS
                            ------------------------

<TABLE>
<CAPTION>
                                                                    FOR THE YEARS ENDED DECEMBER 31,
                                                               --------------------------------------------
                                                                     2001                   2000
                                                               -------------------    ---------------------
<S>                                                            <C>                    <C>
Cash Flows from Operating Activities:

Net loss                                                       $         (462,176)    $           (210,004)

Adjustments to reconcile net loss to net
    cash used in operating activities:

    Changes in assets and liabilities:
       Accounts receivable                                                      -                   26,250
       Other receivables                                                    1,323                    6,987
       Accounts payable and accrued expenses                               51,691                  (24,476)
                                                               -------------------    ---------------------

Net cash used in operating activities                                    (409,162)                (201,243)
                                                               -------------------    ---------------------

Cash Flows from Investing Activities:

    Proceeds from sale of aircraft, net                                         -                  573,982
                                                               -------------------    ---------------------

Cash provided by investing activities                                           -                  573,982
                                                               -------------------    ---------------------

Cash Flows from Financing Activities:

    Distribution to partners                                                    -               (5,898,677)
                                                               -------------------    ---------------------

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

Net decrease in cash and cash equivalents                                (409,162)              (5,525,938)

Cash and cash equivalents, beginning of period                          1,885,262                7,411,200
                                                               -------------------    ---------------------

Cash and cash equivalents, end of period                       $        1,476,100     $          1,885,262
                                                               ===================    =====================
</TABLE>

                       See notes to financial statements.

                                       14
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                           DECEMBER 31, 2001 AND 2000
                           --------------------------


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 is Integrated Aircraft Fund Management
Corp. (the "General Partner"), which is ultimately indirectly owned by NorthStar
Capital Investment Corp. ("NorthStar"), a Maryland corporation.

On October 21, 1999, Presidio Capital Corp. ("Presidio"), an affiliate of
NorthStar, entered into a 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. The General
Partner does not believe that this transaction will have a material effect on
the operations of the Partnership.

                                       15
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                           DECEMBER 31, 2001 AND 2000
                           --------------------------


2.   Summary of Significant Accounting Policies

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.

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 could affect the tax
liability of the individual partners.


                                       16
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                           DECEMBER 31, 2001 AND 2000
                           --------------------------


2.   Summary of Significant Accounting Policies (Continued)

Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 ("FASB") issued the Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of SFAS No.
133." These statements require 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. These statements were effective for fiscal years beginning after
June 15, 2000. There was no effect from these statements on the Partnership's
financial statements.

In July 2001, the FASB issued SFAS No. 141 "Business Combinations". SFAS No. 141
requires that all business combinations be accounted for under the purchase
method of accounting. SFAS No. 141 also changes the criteria for the separate
recognition of intangible assets acquired in a business combination. SFAS No.
141 is effective for all business combinations initiated after June 30, 2001.
This statement will not affect the Partnership's financial statements.

In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
Assets". SFAS No. 142 addresses accounting and reporting for intangible assets
acquired, except for those acquired in a business combination. SFAS No. 142
presumes that goodwill and certain intangible assets have indefinite useful
lives. Accordingly, goodwill and certain intangibles will not be amortized but
will rather be tested at least annually for impairment. SFAS No. 142 also
addresses accounting and reporting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. This statement will not have a material
effect on the Partnership's financial statements.


                                       17
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                           DECEMBER 31, 2001 AND 2000
                           --------------------------


2.   Summary of Significant Accounting Policies (Continued)

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This statement
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations
-Reporting the Effects of a Disposal of a Business and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions," for the disposal of a
segment of a business. This Statement also amends ARB No. 51, "Consolidated
Financial Statements," to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. The provisions of this Statement generally
are to be applied prospectively. The Partnership does not expect that this
statement will have a material effect on the Partnership's results of
operations.

3.   Conflicts of Interest and Transactions with Related Parties

The General Partner is entitled to a 10 percent interest in the net income, loss
and distributions from operations and cash from sales. The General Partner
received approximately $590,000 in distributions for the year ended December 31,
2000. No distributions were paid with respect to the year ended December 31,
2001.

In addition, the General Partner 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, the General Partner did not earn
any management fees for the years ended December 31, 2001 and 2000.

4.   Aircraft Sales

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.


                                       18
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                           DECEMBER 31, 2001 AND 2000
                           --------------------------


5.   Reconciliation of Net Loss 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. A reconciliation of net loss per
financial statements to the tax basis of accounting is as follows:

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                        ----------------------------------------
                                                                              2001                  2000
                                                                        -----------------    -------------------
<S>                                                                      <C>                  <C>
         Net loss per financial statements                               $     (462,176)      $       (210,004)
         Difference between financial statements
            and tax basis depreciation                                                 -                573,987
                                                                        -----------------    -------------------
         Net (loss) income per tax basis                                 $     (462,176)      $         363,983
                                                                        =================    ===================
</TABLE>

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,
                                                                     --------------------------------------------
                                                                            2001                    2000
                                                                     -------------------    ---------------------
<S>                                                                   <C>                     <C>
          Net assets per financial statements                         $       1,333,632       $        1,795,808
          Syndication costs                                                  22,665,750               22,665,750
                                                                     -------------------    ---------------------
          Net assets per tax basis                                    $      23,999,382       $       24,461,558
                                                                     ===================    ==== ================
</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.


                                       19
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------

                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------

                           DECEMBER 31, 2001 AND 2000
                           --------------------------


5.   Commitments and Contingencies (Continued)

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 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.

Continental Airlines, Inc.
--------------------------

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, 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
against Continental Airlines, Inc. ("Continental"). Plaintiff seeks damages in
an amount to be determined at trial arising from Continental's failure to return
the three DC9-32 aircraft in the return condition required by the lease. On July
31, 2001, the Court denied Continental's motion for partial summary judgment.
Trial has been scheduled for November 5, 2002.

Two of the Partnership's DC9-32 aircraft were sold during 1999 and the remaining
aircraft was sold on January 19, 2000.


                                       20
<PAGE>


ITEM 8. 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.





                                       21
<PAGE>

PART III

ITEM 9. 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 49, 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 Nexthealth
Corp., Great Bay Hotel and Casino Inc., Burnham Pacific Properties, Inc. and
NBTY, Inc.

     David G. King, Jr., 39, 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 50, 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.

                                       22
<PAGE>

     Lara K. Sweeney, age 29, 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 35, 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 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.

In addition, each of the foregoing officers and directors other than Mr. King
hold similar positions with Newkirk MLP Corp., GFB-AS Manager Corp. and Winthrop
Financial Associates, entities that through one or more subsidiaries manage over
200 limited partnerships that hold title to real property including, commercial
properties, residential properties and assisted living facilities.

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

ITEM 10. 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
12 "Certain Relationships and Related Transactions".

ITEM 11. 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, 2002.

     (b) Security Ownership of Management.

     At March 1, 2002, the General Partner, NorthStar and their affiliates,
officers and directors owned as a group 2,519 Units representing less than 1% of
the total number of Units outstanding.


                                       23
<PAGE>

     (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 12. 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, 2001.

The General Partner did not receive management fees for the performance of
management services during 2001.

The General Partner's share of Registrant's taxable income (loss) for the years
ended December 31, 2001 and 2000 amounted to ($46,218) and $36,398,
respectively.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Exhibits:

     The Exhibits listed on the accompanying Index to Exhibits are filed as part
of this Annual Report and incorporated in this Annual Report as set forth in
said Index.

(b) Reports on Form 8-K

     None




                                       24
<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 27th day of March, 2002.

AIRCRAFT INCOME PARTNERS L.P.

By:  INTEGRATED AIRCRAFT FUND MANAGEMENT CORP.
     General Partner
                                                                   DATE
                                                                   ----

By:  /s/ Michael L. Ashner                                     March 27, 2002
     ------------------------------
     Michael L. Ashner
     President and Director


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.


      SIGNATURE                     TITLE                             DATE
      ---------                     -----                             ----


/s/ Michael L. Ashner         Director and President             March 27, 2002
-------------------------
Michael L. Ashner

/s/ Carolyn Tiffany           Vice President and Treasurer       March 27, 2002
-------------------------
Carolyn Tiffany





                                       25
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBITS                                                                                      PAGE
--------                                                                                     NUMBER
                                                                                             ------
<S>        <C>                                                                           <C>
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)


                                       26
<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)

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.
</TABLE>



                                       27