UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
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Commission File No. 2-91762
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POLARIS AIRCRAFT INCOME FUND I
State of Organization: California
IRS Employer Identification No. 94-2938977
201 Mission Street, 27th Floor, San Francisco, California 94105
Telephone - (415) 284-7400
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
This document consists of 15 pages.
<PAGE>
POLARIS AIRCRAFT INCOME FUND I
FORM 10-Q - For the Quarterly Period Ended June 30, 1997
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Balance Sheets - June 30, 1997 and
December 31, 1996......................................... 3
b) Statements of Operations - Three and Six Months
Ended June 30, 1997 and 1996.............................. 4
c) Statements of Changes in Partners' Capital
(Deficit) - Year Ended December 31, 1996
and Six Months Ended June 30, 1997........................ 5
d) Statements of Cash Flows - Six Months
Ended June 30, 1997 and 1996.............................. 6
e) Notes to Financial Statements............................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 10
Part II. Other Information
Item 1. Legal Proceedings...................................... 13
Item 6. Exhibits and Reports on Form 8-K....................... 14
Signature ....................................................... 15
2
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Part 1. Financial Information
Item 1. Financial Statements
POLARIS AIRCRAFT INCOME FUND I
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
---- ----
ASSETS:
CASH AND CASH EQUIVALENTS $ 12,263,353 $ 10,065,652
RENT AND OTHER RECEIVABLES, net of
allowance for credit losses of $233,913
in 1997 and 1996 -- 18,816
NOTES RECEIVABLE, net of allowance for
credit losses of $177,537 in 1997 and 1996 -- 418,145
AIRCRAFT AND AIRCRAFT ENGINES, net
of accumulated depreciation of $52,500 in 1997
and $20,823,462 in 1996 907,500 3,751,387
OTHER ASSETS 4,877 --
------------ ------------
$ 13,175,730 $ 14,254,000
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):
PAYABLE TO AFFILIATES $ 41,477 $ 77,676
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 572,737 464,603
LESSEE SECURITY DEPOSITS 70,925 70,925
MAINTENANCE RESERVES 1,345,122 3,217,368
------------ ------------
Total Liabilities 2,030,261 3,830,572
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner (617,134) (624,341)
Limited Partners, 168,729 units
issued and outstanding 11,762,603 11,047,769
------------ ------------
Total Partners' Capital 11,145,469 10,423,428
------------ ------------
$ 13,175,730 $ 14,254,000
============ ============
The accompanying notes are an integral part of these statements.
3
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<TABLE>
POLARIS AIRCRAFT INCOME FUND I
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rent from operating leases $ 90,000 $ 480,000 $ 180,000 $ 988,900
Gain on sale of aircraft inventory 49,802 103,050 136,220 256,770
Gain on sale of aircraft 1,051,169 -- 1,832,673 --
Interest and other 186,222 128,082 333,933 252,875
----------- ----------- ------------ ----------
Total Revenues 1,377,193 711,132 2,482,826 1,498,545
----------- ----------- ------------ ----------
EXPENSES:
Depreciation 3,750 314,182 7,500 628,364
Management fees to general partner 4,500 24,000 9,000 34,500
Provision for credit losses -- -- -- 309,581
Operating 105,469 127,920 159,341 276,350
Administration and other 49,964 49,722 85,131 80,827
----------- ----------- ------------ ----------
Total Expenses 163,683 515,824 260,972 1,329,622
----------- ----------- ------------ ----------
NET INCOME $ 1,213,510 $ 195,308 $ 2,221,854 $ 168,923
=========== =========== ============ ==========
NET INCOME ALLOCATED
TO THE GENERAL PARTNER $ 12,135 $ 1,954 $ 157,188 $ 254,758
=========== =========== ============ ==========
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $ 1,201,375 $ 193,354 $ 2,064,666 $ (85,835)
=========== =========== ============ ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 7.12 $ 1.15 $ 12.24 $ (0.50)
=========== =========== ============ ==========
The accompanying notes are an integral part of these statements.
4
</TABLE>
<PAGE>
<TABLE>
POLARIS AIRCRAFT INCOME FUND I
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<CAPTION>
Year Ended December 31, 1996 and
Six Months Ended June 30, 1997
------------------------------
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Balance, December 31, 1995 $ (590,280) $ 14,417,273 $ 13,826,993
Net income (loss) 247,154 (838,569) (591,415)
Cash distributions to partners (281,215) (2,530,935) (2,812,150)
---------- ------------- -------------
Balance, December 31, 1996 (624,341) 11,047,769 10,423,428
Net income 157,188 2,064,666 2,221,854
Cash distributions to partners (149,981) (1,349,832) (1,499,813)
---------- ------------- -------------
Balance, June 30, 1997 $ (617,134) $ 11,762,603 $ 11,145,469
========== ============= =============
The accompanying notes are an integral part of these statements.
5
</TABLE>
<PAGE>
POLARIS AIRCRAFT INCOME FUND I
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
1997 1996
---- ----
OPERATING ACTIVITIES:
Net income $ 2,221,854 $ 168,923
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 7,500 628,364
Gain on sale of aircraft inventory (136,220) --
Gain on sale of aircraft (1,832,673) --
Net provision for credit losses -- 295,328
Changes in operating assets and liabilities
net of effects of sale of aircraft:
Decrease (increase) in rent and other
receivables 18,816 (277,421)
Increase in other assets (4,877) --
Increase (decrease) in payable to affiliates (36,199) 17,021
Increase in accounts payable and
accrued liabilities 108,134 224,671
Increase in maintenance reserves 176,814 497,101
------------ ------------
Net cash provided by operating activities 523,149 1,553,987
------------ ------------
INVESTING ACTIVITIES:
Principal payments on note receivable 418,145 68,223
Net proceeds from sale of aircraft inventory 136,220 --
Proceeds from sale of aircraft 2,620,000 --
------------ ------------
Net cash provided by investing activities 3,174,365 68,223
------------ ------------
FINANCING ACTIVITIES:
Cash distributions to partners (1,499,813) (2,812,150)
------------ ------------
Net cash used in financing activities (1,499,813) (2,812,150)
------------ ------------
CHANGES IN CASH AND CASH
EQUIVALENTS 2,197,701 (1,189,940)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10,065,652 9,807,315
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 12,263,353 $ 8,617,375
============ ============
The accompanying notes are an integral part of these statements.
6
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POLARIS AIRCRAFT INCOME FUND I
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Principles and Policies
In the opinion of management, the financial statements presented herein include
all adjustments, consisting only of normal recurring items, necessary to
summarize fairly Polaris Aircraft Income Fund I's (the Partnership's) financial
position and results of operations. The financial statements have been prepared
in accordance with the instructions of the Quarterly Report to the Securities
and Exchange Commission (SEC) Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto for the years ended December 31, 1996, 1995, and
1994 included in the Partnership's 1996 Annual Report to the SEC on Form 10-K
(Form 10-K).
2. Sale of two Boeing 737-200s
In January 1997, the Partnership received a deposit of $162,000 toward the sales
price of $1,620,000 for the sale of two Boeing 737-200s and two spare engines
formerly leased to Viscount Air Services, Inc. (Viscount). The Partnership
received the remaining $1,458,000 in March 1997. In addition, the Partnership
retained certain maintenance reserves and deposits received from the former
lessee of these aircraft aggregating approximately $968,000 that had been held
by the Partnership to offset potential future maintenance expenses for these
aircraft. As a result, the Partnership recognized a net gain of $781,504 on the
sale of these aircraft during the first quarter of 1997.
3. Sale of one Boeing 737-200
In April 1997, the Partnership received a deposit of $250,000 toward the sales
price of $1,000,000 for the sale of one Boeing 737-200 formerly leased to
Viscount and subleased to Nations Air Express, Inc. The Partnership received the
remaining $750,000 in May 1997. In addition, the Partnership retained certain
maintenance reserves and deposits received from the former lessee of this
aircraft aggregating approximately $1,081,000 that had been held by the
Partnership to offset potential future maintenance expenses for this aircraft.
As a result, the Partnership recognized a net gain of $1,051,169 on the sale of
this aircraft during the second quarter of 1997.
4. Nations Air Default and Litigation
As previously reported, First Security Bank, National Association (FSB), as
trustee for the Partnership, filed an action against Nations Air Express, Inc.
(Nations Air) to recover damages arising from Nations Air's possession and use
of an aircraft owned by FSB, as trustee for the Partnership. On March 31, 1997,
Nations Air entered into a comprehensive Settlement Agreement with FSB, Polaris
Holding Company (PHC), the Partnership, Polaris Aircraft Income Fund II, Polaris
Investment Management Corporation (General Partner) and GE Capital Aviation
Services (GECAS) (collectively, the "GECAS Parties"). Pursuant to the Settlement
Agreement, Nations Air filed a Stipulated Judgment whereby Nations Air agreed,
among other things, to purchase the aircraft owned by FSB as trustee for PHC
(the "PHC Aircraft") for $3.3 million payable no later than May 30, 1997.
Subsequent to March 31, 1997; GECAS, on behalf of FSB, and Nations Air agreed to
extend the date by which Nations Air or its designee must purchase the PHC
Aircraft to July 14, 1997. On that date FSB sold the PHC Aircraft to Nations
Air's designee and received the purchase price of $3.3 million. Pending receipt
7
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of certain certificates from Nations Air, FSB will execute a Satisfaction of
Judgment in this action, and the GECAS Parties will execute a release, releasing
Nations Air from any claims related to any transaction between the GECAS Parties
and Nations Air. The Partnership will receive approximately $518,000 as its
share of the settlement payment after legal expenses.
5. Engine Note Receivable
On April 25, 1997 the Partnership received $408,496 as payment in full, of the
outstanding engine finance sale note receivable, including accrued interest, due
from Rock-It Cargo USA, Inc. and Riverhorse Investments, Inc.
6. Engine Lease to CanAir
In April 1997, the Partnership and CanAir Cargo Ltd. (CanAir) agreed to a lease
extension for seven months beyond the original lease expiration date of May
1997. CanAir subsequently obtained an order under the Companies' Creditors
Arrangement Act of Canada, as discussed in Note 8 and Item 2, under the caption
"CanAir Cargo Ltd. - (CanAir) Order under the Companies' Creditors Arrangement
Act of Canada."
7. Related Parties
Under the Limited Partnership Agreement, the Partnership paid or agreed to pay
the following amounts for the current quarter to the general partner, Polaris
Investment Management Corporation, in connection with services rendered or
payments made on behalf of the Partnership:
Payments for
Three Months Ended Payable at
June 30, 1997 June 30, 1997
------------- -------------
Aircraft Management Fees $ 4,882 $ --
Out-of-Pocket Administrative Expense
Reimbursement 56,223 38,380
Out-of-Pocket Operating and
Remarketing Expense Reimbursement 48,033 3,097
---------- -----------
$ 109,138 $ 41,477
========== ===========
8. Subsequent Event
CanAir Cargo Ltd. (CanAir) Order under the Companies' Creditors Arrangement Act
of Canada Polaris Holding Company (PHC) and General Electric Capital Leasing
Canada, Inc. (GECL Canada) lease a total of five aircraft to CanAir, and the
Partnership leases three engines to CanAir. On July 28, 1997, CanAir obtained an
Order under the Companies' Creditors Arrangement Act of Canada (the CCAA Order)
from the Ontario Court, General Division. The CCAA Order restrains CanAir's
creditors, including lessors, from exercising any rights arising from CanAir's
default or non-performance of its obligations until October 28, 1997 or further
order of the court. CanAir has not met its July and August engine rent and
maintenance reserve payment obligations to the Partnership. GE Capital Aviation
Services, Inc. (GECAS), as agent for the PHC, GECL Canada and the Partnership,
8
<PAGE>
is currently negotiating with CanAir to determine if they can formulate a plan
of reorganization. It is too early in the process to predict any outcome.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
At June 30, 1997, Polaris Aircraft Income Fund I (the Partnership) owned three
spare engines and certain inventoried aircraft parts. The three spare engines
are leased to CanAir Cargo Ltd. (CanAir). In addition, the Partnership
transferred four aircraft to aircraft inventory during 1992 and 1993. These
aircraft have been disassembled for sale of their component parts. In May 1997,
the Partnership sold its one remaining aircraft out of its original portfolio of
eleven aircraft. The Boeing 737-200 aircraft sold in May 1997 was formerly
leased to Viscount Air Services, Inc. (Viscount) and subleased to Nations Air
Express, Inc. (Nations Air), was returned to the Partnership in February 1997.
Two engines formerly leased to Viscount, were returned to the Partnership in May
and October 1996 and were sold in March 1997. One additional engine from these
aircraft was sold to Viscount during 1995. Viscount's affiliates, Rock-It Cargo
USA, Inc. (Rock-It Cargo) and Riverhorse Investments, Inc. (Riverhorse
Investments) assumed the note for this engine sale in October 1996. The
Partnership has sold five aircraft and one airframe from its original aircraft
portfolio: a Boeing 737-200 Convertible Freighter in 1990, a McDonnell Douglas
DC-9-10 in 1992, a Boeing 737-200 in 1993 and the airframe from a Boeing 737-200
aircraft in April 1995 and two Boeing 737-200 aircraft in March 1997.
Remarketing Update
Engine Note Receivable - On April 25, 1997 the Partnership received $408,496 as
payment in full, of the outstanding engine finance sale note receivable,
including accrued interest, due from Rock-It Cargo and Riverhorse Investments.
Sale of two Boeing 737-200s - In January 1997, the Partnership received a
deposit of $162,000 toward the sales price of $1,620,000 for the sale of two
Boeing 737-200s and two spare engines formerly leased to Viscount. The
Partnership received the remaining $1,458,000 in March 1997. In addition, the
Partnership retained certain maintenance reserves and deposits received from the
former lessee of these aircraft aggregating approximately $968,000 that had been
held by the Partnership to offset potential future maintenance expenses for
these aircraft. As a result, the Partnership recognized a net gain of $781,504
on the sale of these aircraft during the first quarter of 1997.
Sale of one Boeing 737-200 - In April 1997, the Partnership received a deposit
of $250,000 toward the sales price of $1,000,000 for the sale of one Boeing
737-200 formerly leased to Viscount and subleased to Nations Air Express, Inc.
The Partnership received the remaining $750,000 in May 1997. In addition, the
Partnership retained certain maintenance reserves and deposits received from the
former lessee of this aircraft aggregating approximately $1,081,000 that had
been held by the Partnership to offset potential future maintenance expenses for
this aircraft. As a result, the Partnership recognized a net gain of $1,051,169
on the sale of this aircraft during the second quarter of 1997.
Engine Lease to Can Air - In April 1997, the Partnership agreed to a lease
extension for seven months beyond the original lease expiration date of May
1997. CanAir subsequently obtained an order under the Companies' Creditors
Arrangement Act of Canada, as discussed in Item 2, under the caption "CanAir
Cargo Ltd. - (CanAir) Order under the Companies' Creditors Arrangement Act of
Canada."
Partnership Operations
The Partnership recorded net income of $1,213,510, or $7.12 per limited
partnership unit for the three months ended June 30, 1997 compared to net income
of $195,308 or $1.15 per limited partnership unit, for the three months ended
June 30, 1996. The Partnership recorded net income of $2,221,854, or $12.24 per
limited partnership unit for the six months ended June 30, 1997, compared to net
income of $168,923, or an allocated net loss of $0.50 per limited partnership
unit, for the six months ended June 30, 1996. The increase in operating results
10
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during the three and six months ended June 30, 1997, as compared to the same
periods in 1996, is primarily the result of gains on the sale of aircraft in
1997, which were partially offset by decreases in rental income. Additionally,
the aircraft owned by the Partnership during 1997 had been depreciated down to
their estimated residual values in 1996, resulting in a decrease in depreciation
expense.
Another factor contributing to the improved earnings during the six months ended
June 30, 1997, as compared to the same period in 1996, was a decrease in the
provision for credit losses and a decrease in operating expense. The Partnership
recorded an allowance for credit losses during the first quarter of 1996 for
certain unpaid rent and accrued interest receivables from Viscount recognized
during the first quarter of 1996 as a result of Viscount's default on certain
obligations due the Partnership and Viscount's subsequent bankruptcy filing. The
aggregate allowance for credit losses of $309,581 for these obligations is
reflected as a provision for credit losses in the Partnership's statement of
operations for the six months ended June 30, 1996. In addition, the Partnership
recognized legal expenses of approximately $272,000 related to the Viscount
default and Chapter 11 bankruptcy filing. These legal costs are included in
operating expense in the Partnership's statement of operations for the six
months ended June 30, 1996.
Nations Air Default and Litigation
As previously reported, First Security Bank, National Association (FSB), as
trustee for the Partnership, filed an action against Nations Air Express, Inc.
(Nations Air) to recover damages arising from Nations Air's possession and use
of an aircraft owned by FSB, as trustee for the Partnership. On March 31, 1997,
Nations Air entered into a comprehensive Settlement Agreement with FSB, Polaris
Holding Company (PHC), the Partnership, Polaris Aircraft Income Fund II, Polaris
Investment Management Corporation (General Partner) and GE Capital Aviation
Services (GECAS) (collectively, the "GECAS Parties"). Pursuant to the Settlement
Agreement, Nations Air filed a Stipulated Judgment whereby Nations Air agreed,
among other things, to purchase the aircraft owned by FSB as trustee for PHC
(the "PHC Aircraft") for $3.3 million payable no later than May 30, 1997.
Subsequent to March 31, 1997; GECAS, on behalf of FSB, and Nations Air agreed to
extend the date by which Nations Air or its designee must purchase the PHC
Aircraft to July 14, 1997. On that date FSB sold the PHC Aircraft to Nations
Air's designee and received the purchase price of $3.3 million. Pending receipt
of certain certificates from Nations Air, FSB will execute a Satisfaction of
Judgment in this action, and the GECAS Parties will execute a release, releasing
Nations Air from any claims related to any transaction between the GECAS Parties
and Nations Air. The Partnership will receive approximately $518,000 as its
share of the settlement payment after legal expenses.
CanAir Cargo Ltd. (CanAir) Order under the Companies' Creditors Arrangement Act
of Canada
Polaris Holding Company (PHC) and General Electric Capital Leasing Canada, Inc.
(GECL Canada) lease a total of five aircraft to CanAir, and the Partnership
leases three engines to CanAir. On July 28, 1997, CanAir obtained an Order under
the Companies' Creditors Arrangement Act of Canada (the CCAA Order) from the
Ontario Court, General Division. The CCAA Order restrains CanAir's creditors,
including lessors, from exercising any rights arising from CanAir's default or
non-performance of its obligations until October 28, 1997 or further order of
the court. CanAir has not met its July and August engine rent and maintenance
reserve payment obligations to the Partnership. GE Capital Aviation Services,
Inc. (GECAS), as agent for the PHC, GECL Canada and the Partnership, is
currently negotiating with CanAir to determine if they can formulate a plan of
reorganization. It is too early in the process to predict any outcome.
11
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Liquidity and Cash Distributions
Liquidity - The Partnership has received all engine lease payments due from
CanAir through June 30, 1997. In addition to engine lease payments, the
Partnership receives maintenance reserve payments from CanAir. The net
maintenance reserves balances aggregate $1,345,122 as of June 30, 1997. To the
extent that CanAir is not in default under its lease, such funds may be paid to
CanAir as reimbursement for certain costs incurred by CanAir for maintenance
work performed on the Partnership's engines, as specified in the lease.
Maintenance reserve balances remaining at the termination of the lease, if any,
may be used by the Partnership to offset future maintenance expenses or
recognized as revenue. CanAir has not met its July and August 1997 engine rental
and maintenance reserve payment obligations to the Partnership, and has obtained
an Order Under the Companies' Creditors Arrangement Act of Canada as discussed
in Item 2 under the caption "CanAir Cargo Ltd. (CanAir) Order under the
Companies' Creditors Arrangement Act of Canada."
Cash Distributions - Cash distributions to limited partners were $1,349,832, or
$8.00 per limited partnership unit for the six months ended June 30, 1997, as
compared to $2,530,935, or $15.00 per limited partnership unit for the six
months ended June 30, 1996.
In accordance with the Limited Partnership Agreement, cash distributions are to
be allocated 90% to the limited partners and the 10% to the general partner. In
July 1997, the Partnership made a cash distribution to limited partners of
$6,116,426 ($36.25 per limited partnership unit) and $679,603 to the general
partner. Such distribution was comprised of cash from operations, sales proceeds
and excess cash reserves.
12
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Part II. Other Information
Item 1. Legal Proceedings
As discussed in Item 3 of Part I of Polaris Aircraft Income Fund I's (the
Partnership) 1996 Annual Report to the Securities and Exchange Commission (SEC)
on Form 10-K (Form 10-K) and in Item 1 of Part II of the Partnership's Quarterly
Report to the SEC on Form 10-Q (Form 10-Q) for the period ended March 31, 1997,
there are a number of pending legal actions or proceedings involving the
Partnership. Except as described below, there have been no material developments
with respect to any such actions or proceedings during the period covered by
this report.
Viscount Air Services, Inc. (Viscount) Bankruptcy - A trustee has been appointed
to administer Viscount's bankruptcy. On June 27, 1997, the Bankruptcy Court
heard oral argument on a hearing concerning confirmation of a liquidity Chapter
11 plan.
As previously reported, the Partnership is involved in litigation regarding
mechanics' liens asserted over one of the Partnership's engines by a maintenence
facility called BAE Aviation, Inc. dba Tucson Aerospace, and its subcontractors,
STS Services, Inc. and Piping Design Services, Inc. dba PDS Technical Services.
First Security Bank, National Association, the owner trustee of the
Partnership's engine, filed a summary judgment motion on May 2, 1997 and
obtained summary judgment that the alleged liens do not extend to the
Partnership's engine.
Mercury Air Group v. Aero Costa Rica (ACORI), S.A., et al. - On June 3, 1997,
Mercury Air Group (Mercury) entered into a Settlement Agreement with Polaris
Holding Company (Polaris) and First Security Bank, National Association
(formerly known as First Security Bank of Utah, N.A.) (FSB), as trustee for the
Partnership. Pursuant to the Settlement Agreement, Mercury filed a Notice of
Voluntary Dismissal with Prejudice in respect of its claims against Polaris and
FSB and discharged the lien against an aircraft owned by FSB as trustee for the
Partnership.
First Security Bank, National Association, as Owner Trustee v. Nations Air
Express, Inc. - As previously reported, on March 31, 1997, Nations Air Express,
Inc. (Nations Air) entered into a comprehensive Settlement Agreement with First
Security Bank, National Association (FSB), Polaris Holding Company (PHC), the
Partnership, Polaris Aircraft Income Fund II, Polaris Investment Management
Corporation (General Partner) and GE Capital Aviation Services (GECAS)
(collectively, the "GECAS Parties"). Pursuant to the Settlement Agreement,
Nations Air filed a Stipulated Judgment whereby Nations Air agreed, among other
things, to purchase the aircraft owned by FSB as trustee for PHC (the "PHC
Aircraft") for $3.3 million payable no later than May 30, 1997. Subsequent to
March 31, 1997; GECAS, on behalf of FSB, and Nations Air agreed to extend the
date by which Nations Air or its designee must purchase the PHC Aircraft to July
14, 1997. On that date FSB sold the PHC Aircraft to Nations Air's designee and
received the purchase price of $3.3 million. Pending receipt of certain
certificates from Nations Air, FSB will execute a Satisfaction of Judgment in
this action, and the GECAS Parties will execute a release, releasing Nations Air
from any claims related to any transaction between the GECAS Parties and Nations
Air. The Partnership will receive approximately $518,000 as its share of the
settlement payment after legal expenses.
Other Proceedings - Item 10 in Part III of the Partnership's 1996 Form 10-K and
Item 1 in Part II of the Partnership's Form 10-Q for the period ended March 31,
1997 discuss certain actions which have been filed against Polaris Investment
Management Corporation and others in connection with the sale of interests in
the Partnership and the management of the Partnership. With the exception of
Novak, et al v. Polaris Holding Company, et al, (which has been dismissed, as
discussed in the Partnership's 1996 Form 10-K) where the Partnership was named
as a defendant for procedural purposes, the Partnership is not a party to these
13
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actions. Except as discussed below, there have been no material developments
with respect to any of the actions described therein during the period covered
by this report.
The following actions have been settled pursuant to a settlement agreement
entered into on June 6, 1997:
- - Thelma Abrams, et al. v. Polaris Holding Company, et al.
- - Sara J. Bishop, et al. v. Kidder, Peabody & Co. Incorporated, et al.
- - Enita V. Elphick, et al. v. Kidder, Peabody & Co. Incorporated, et al.
- - Janet K. Johnson, et al. v. Polaris Holding Company, et al.
- - Wayne W. Kuntz, et al. v. Polaris Holding Company, et al.
- - Joyce H. McDevitt, et al. v. Polaris Holding Company, et al.
- - Mary Grant Tarrer, et al. v. Kidder, Peabody & Co. Incorporated, et al.
- - Harry R. Wilson, et al. v. Polaris Holding Company, et al.
- - George Zicos, et al. v. Polaris Holding Company, et al.
- - Michael J. Ouellette, et al. v. Kidder, Peabody & Co. Incorporated, et al.;
Thelma A. Rolph, et al. v. Polaris Holding Company, et al.; Carl L. Self, et al.
v. Polaris Holding Company, et al. - On or about March 21, 1997, three
complaints were filed in the Superior Court of the State of California, County
of Sacramento naming as defendants Kidder, Peabody & Company, Incorporated,
Polaris Holding Company, Polaris Aircraft Leasing Corporation, Polaris
Investment Management Corporation, Polaris Securities Corporation, Polaris Jet
Leasing, Inc., Polaris Technical Services, Inc., General Electric Company,
General Electric Capital Services, General Electric Capital Corporation, GE
Capital Aviation Services and Does 1-100. The first complaint, entitled Michael
J. Ouellette, et al. v. Kidder Peabody & Co., et al., was filed by over 50
individual plaintiffs who purchased limited partnership units in one or more of
Polaris Aircraft Income Funds I-VI. The second complaint, entitled Thelma A.
Rolph, et al. v. Polaris Holding Company, et al., was filed by over 500
individual plaintiffs who purchased limited partnership units in one or more of
Polaris Aircraft Income Funds I-VI. The third complaint, entitled Carl L. Self,
et al. v. Polaris Holding Company, et al., was filed by over 500 individual
plaintiffs who purchased limited partnership units in one or more of Polaris
Aircraft Income Funds I-VI. Each complaint alleges violations of state common
law, including fraud, negligent misrepresentation and breach of fiduciary duty,
and violations of the rules of the National Association of Securities Dealers,
Inc. Each complaint seeks to recover compensatory damages and punitive damages
in an unspecified amount, interest and rescission with respect to Polaris
Aircraft Income Funds I-VI and all other limited partnerships alleged to have
been sold by Kidder Peabody to the plaintiffs.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
27. Financial Data Schedule
b) Reports on Form 8-K
None.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
POLARIS AIRCRAFT INCOME FUND I
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
August 12, 1997 By: /S/Marc A. Meiches
- --------------------------- ------------------
Marc A. Meiches
Chief Financial Officer
(principal financial officer and
principal accounting officer of
Polaris Investment Management
Corporation, General Partner of
the Registrant)
15
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