<PAGE>
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 33-2794
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
State of Organization: California
IRS Employer Identification No. 94-2985086
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 14 pages.<PAGE>
<PAGE>
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
FORM 10-Q - For the Quarterly Period Ended September 30, 1994
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Balance Sheets - September 30, 1994 and
December 31, 1993 . . . . . . . . . . . . . . . . . . . . 3
b) Statements of Operations - Three Months and
Nine Months Ended September 30, 1994 and 1993 . . . . . . 4
c) Statements of Changes in Partners' Capital
(Deficit) - Year Ended December 31, 1993
and Nine Months Ended September 30, 1994 . . . . . . . . 5
d) Statements of Cash Flows - Nine Months
Ended September 30, 1994 and 1993 . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 13
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2<PAGE>
<PAGE>
<TABLE>
Part 1. Financial Information
Item 1. Financial Statements
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
BALANCE SHEETS
<CAPTION>
September 30, December 31,
1994 1993
---- ----
<S> <C> <C>
ASSETS:
CASH AND CASH EQUIVALENTS $ 15,758,018 $ 97,473
SHORT-TERM INVESTMENTS, at cost which approximates market value - 22,347,610
---------------- -------------
Total Cash and Cash Equivalents and Short-Term
Investments 15,758,018 22,445,083
RENT AND OTHER RECEIVABLES 248,097 37,733
NOTES RECEIVABLE 2,908,254 1,022,308
AIRCRAFT at cost, net of accumulated depreciation of
$85,532,851 in 1994 and $77,031,695 in 1993 96,426,436 104,927,592
AIRCRAFT INVENTORY 993,934 1,244,061
OTHER ASSETS 29,770 29,770
---------------- -------------
$ 116,364,509 $ 129,706,547
================ =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):
PAYABLE TO AFFILIATES $ 127,873 $ 52,274
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 31,751 2,556,325
LESSEE SECURITY DEPOSITS 169,962 189,564
MAINTENANCE RESERVES 1,808,934 869,363
DEFERRED INCOME 642,742 642,742
---------------- -------------
Total Liabilities 2,781,262 4,310,268
---------------- -------------
PARTNERS' CAPITAL (DEFICIT):
General Partner (1,066,907) (948,683)
Limited Partners, 499,997 units issued and outstanding 114,650,154 126,344,962
---------------- -------------
Total Partners' Capital 113,583,247 125,396,279
---------------- -------------
$ 116,364,509 $ 129,706,547
================ =============
The accompanying notes are an integral part of these statements.
</TABLE>
3<PAGE>
<PAGE>
<TABLE>
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rent from operating leases $ 3,657,700 $ 3,893,900 $ 10,851,095 $ 10,775,900
Net loss on sale of equipment - (773,204) - (513,395)
Interest and other 220,442 204,957 591,611 564,569
---------------- ---------------- ---------------- -----------------
Total Revenues 3,878,142 3,325,653 11,442,706 10,827,074
---------------- ---------------- ---------------- -----------------
EXPENSES:
Depreciation and amortization 2,833,719 2,658,940 8,501,156 8,100,362
Management and advisory fees 173,885 185,695 515,555 511,795
Operating 12,270 57,571 3,658,483 745,439
Administration and other 54,335 46,544 163,940 173,802
---------------- ---------------- ---------------- -----------------
Total Expenses 3,074,209 2,948,750 12,839,134 9,531,398
---------------- ---------------- ---------------- -----------------
NET INCOME (LOSS) $ 803,933 $ 376,903 $ (1,396,428) $ 1,295,676
================ ================ ================ =================
NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 320,506 $ 316,236 $ 923,436 $ 700,384
================ ================ ================ =================
NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS $ 483,427 $ 60,667 $ (2,319,864) $ 595,292
================ ================ ================ =================
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ 0.97 $ 0.12 $ (4.64) $ 1.19
================ ================ ================ =================
The accompanying notes are an integral part of these statements.
</TABLE>
4<PAGE>
<PAGE>
<TABLE>
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<CAPTION>
Year Ended December 31, 1993 and
Nine Months Ended September 30, 1994 (Unaudited)
-------------------------------------------------
General Limited Total
Partner Partners -----
------- --------
<S> <C> <C> <C>
Balance, December 31, 1992 $ (837,954) $ 137,297,163 $ 136,459,209
Net income (loss) 1,000,375 (952,261) 48,114
Cash distributions to partners (1,111,104) (9,999,940) (11,111,044)
----------------- -------------------- --------------------
Balance, December 31, 1993 (948,683) 126,344,962 125,396,279
Net income (loss) 923,436 (2,319,864) (1,396,428)
Cash distributions to partners (1,041,660) (9,374,944) (10,416,604)
----------------- -------------------- -------------------
Balance, September 30, 1994 (Unaudited) $ (1,066,907) $ 114,650,154 $ 113,583,247
================= ==================== ===================
The accompanying notes are an integral part of these statements.
</TABLE>
5<PAGE>
<PAGE>
<TABLE>
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
-------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (1,396,428) $ 1,295,676
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization 8,501,156 8,100,362
Net loss on sale of equipment - 513,395
Changes in operating assets and liabilities:
Decrease (increase) in rent and other receivables (210,364) 242,755
Increase in inventory - (599,175)
Decrease in other assets - 4,421
Increase (decrease) in payable to affiliates 75,599 (1,135,999)
Decrease in accounts payable and accrued liabilities (2,524,574) (28,499)
Increase (decrease) in lessee security deposits (19,602) 12,398
Increase in maintenance reserves 939,571 1,215,116
Decrease in deferred income - (1,783,800)
----------------- ----------------
Net cash provided by operating activities 5,365,358 7,836,650
----------------- ----------------
INVESTING ACTIVITIES:
Net proceeds from sale of aircraft inventory 250,127 625,608
Increase in notes receivable (2,284,848) -
Principal payments on notes receivable 398,902 3,281,646
----------------- ----------------
Net cash provided by (used in) investing activities (1,635,819) 3,907,254
----------------- ----------------
FINANCING ACTIVITIES:
Cash distributions to partners (10,416,604) (7,638,843)
----------------- ----------------
Net cash used in financing activities (10,416,604) (7,638,843)
----------------- ----------------
CHANGES IN CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (6,687,065) 4,105,061
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 22,445,083 19,846,799
----------------- ----------------
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 15,758,018 $ 23,951,860
================= ================
The accompanying notes are an integral part of these statements.
</TABLE>
6<PAGE>
<PAGE>
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
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 II'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, 1993,
1992, and 1991 included in the Partnership's 1993 Annual Report to the SEC on
Form 10-K (Form 10-K).
Cash and Cash Equivalents - This includes deposits at banks and investments in
money market funds.
Reclassification - Certain 1993 balances have been reclassified to conform to
the 1994 presentation.
2. Lease to Northwest Territorial Airways, Ltd. (NWT)
The lease of one aircraft to NWT was extended at the original lease rate
through March 1993, and at 80% of the original rate through March 1994. The
aircraft was returned to the Partnership in April 1994 and NWT subsequently
paid to the Partnership approximately $860,000 in lieu of meeting return
conditions as specified in the lease. The Partnership has negotiated a new
lease with NWT for 16 months commencing in June 1994. The new lease rate is
approximately 108% of the prior rate. During the off-lease period, the
Partnership performed certain maintenance and modification work on the
aircraft, which will likely be offset by the approximately $860,000 paid to the
Partnership by NWT.
3. Lease to Continental Micronesia, Inc. (Continental Micronesia)
Three Boeing 727-200 Advanced aircraft formerly on lease to Alaska Airlines,
Inc. were leased to Continental Micronesia at approximately 55% of the prior
rate from April and May 1993 until April 1998. The lease stipulates that the
Partnership will reimburse costs for cockpit modifications up to $600,000 per
aircraft, C-check labor costs up to $300,000 per aircraft for two of the
aircraft, and the actual cost of C-check parts for two of the aircraft. In
addition, the Partnership will provide financing for up to $815,000 for new
image modifications to be repaid with interest over the lease term for each
aircraft. In accordance with the cost sharing agreement, in January 1994, the
Partnership reimbursed Continental Micronesia $1.8 million for cockpit
modifications, which is included in aircraft at cost in the December 31, 1993
balance sheet, and $742,325 for C-check labor and parts, which was included in
operating expense in the year ended December 31, 1993 statement of operations
as discussed in the Form 10-K. In addition, the Partnership financed
$2,177,533 for new image modifications, which is being repaid with interest
over the lease terms of the aircraft, beginning in February 1994. The
Partnership has received all scheduled principal and interest payments due from
Continental Micronesia through September 30, 1994. The note receivable balance
as of September 30, 1994 was $1,876,344.
7<PAGE>
<PAGE>
4. Sale of Equipment
One hushkit set from the aircraft formerly leased to Pan American World
Airways, Inc. was sold in January 1993 to ALG, Inc. (ALG) for $1,750,000, which
resulted in a $259,809 gain in the first quarter 1993. ALG paid cash for a
portion of the sale price and issued an interest-bearing promissory note for
the balance of $1,132,363, which specifies 23 equal payments and a balloon
payment due in January 1995. The Partnership has received all payments due
under the note. The note receivable balances as of September 30, 1994 and
December 31, 1993 were $924,595 and $1,022,308, respectively.
5. Trans World Airlines, Inc. (TWA) Reorganization
As part of the TWA lease extension as discussed in the Form 10-K, the
Partnership agreed to share the cost of meeting certain Airworthiness
Directives (ADs) after TWA successfully reorganized. The agreement stipulates
that such costs incurred by TWA may be credited against monthly rentals,
subject to annual limitations and a maximum of $500,000 per aircraft through
the end of the lease. In accordance with the cost sharing agreement, TWA
submitted to the Partnership invoices for expenses paid to date by TWA to meet
the ADs. Expenses totaling $2.7 million were offset against rental payments
during 1993. Additional expenses totaling $3.6 million, which are included in
operating expense in the nine months ended September 30, 1994 statement of
operations, were offset against rental payments that were due to the
Partnership in the first four months of 1994. TWA may offset an additional
$2.7 million against rental payments, subject to annual limitations, over the
lease terms.
6. Viscount Restructuring
Rent Deferral - To assist Viscount with the funding of costs associated with
Federal Aviation Regulation compliance relating to the Partnership's aircraft,
the Partnership has entered into an agreement with Viscount to defer certain
rents due the Partnership on one aircraft for a period of six months. The
deferred rents, which aggregate $196,800, will be repaid by Viscount with
interest at a rate of 6% per annum beginning in October 1994, over the
remaining term of the lease.
Maintenance Advance - The Partnership has also agreed to extend a line of
credit to Viscount for a total of $127,000 to be used primarily for maintenance
expenses relating to the Partnership's aircraft. Payments of interest only at
variable rates in arrears are being paid by Viscount beginning in August 1994
through December 1994. Beginning in January 1995, level payments to amortize
the advance over a 30-month period will be due in arrears, together with
interest at a rate of 4% per annum over the 18-month U.S. Treasury Rate on
December 29, 1994. In accordance with the agreement, the Partnership advanced
Viscount $107,315 during the third quarter of 1994.
Option - The Partnership has the option to acquire approximately 0.6% of the
issued and outstanding shares of Viscount stock as of July 26, 1994 for an
option price of approximately $91,000. The option may be exercised at any time
during the option period, which expires on July 20, 1999.
8<PAGE>
<PAGE>
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:
<TABLE>
Payments for
Three Months Ended Payable at
September 30, 1994 September 30, 1994
------------------ ------------------
<S> <C> <C>
Aircraft Management Fees $ 167,973 $ 12,090
Out-of-Pocket Administrative
Expense Reimbursement 35,929 45,727
Out-of-Pocket Maintenance and
Expense Reimbursement 19,186 70,056
------------- -------------
$ 223,088 $127,873
============== =============
</TABLE>
8. Subsequent Events
Viscount Maintenance Advance - In accordance with the Viscount restructuring
agreement as discussed in Note 6, the Partnership advanced $19,685, the balance
of the line of credit, to Viscount in October 1994.
TWA Proposed Restructuring - TWA, lessee of 17 of the Partnership's McDonnell
Douglas DC-9-30 aircraft and one McDonnell Douglas DC-9-40 aircraft, has
proposed to its creditors, including the Partnership, a restructuring of its
debt. Such restructuring, if approved, would include a six-month moratorium on
its lease payments to the Partnership beginning in November 1994. TWA has
proposed that a portion of the lease rent due over that period be paid in
common stock of the airline and that the remainder be deferred and paid in
installments over the remaining terms of the leases. TWA has stated that if it
is unable to obtain approvals from its creditors for the restructuring, it
would seek to file a prepackaged bankruptcy plan under Chapter 11 of the
federal Bankruptcy Code.
TWA is continuing its negotiations with its creditors, including the
Partnership. TWA is current on its lease payments to the Partnership through
October 1994. However, should TWA cease lease payments beginning in November
1994 for a period of six months, the negative effect on the Partnership's cash
reserves would be significant. Rental revenues recognized from the
Partnership's leases with TWA currently account for approximately 74% of the
Partnership's total quarterly rental revenues.
9<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Polaris Aircraft Income Fund II (the Partnership) owns a portfolio of 24 used
commercial jet aircraft out of its original portfolio of 30 aircraft. The
portfolio consists of one Boeing 737-200 Combi aircraft leased to Northwest
Territorial Airways, Ltd. (NWT), 17 McDonnell Douglas DC-9-30 aircraft and one
McDonnell Douglas DC-9-40 aircraft leased to Trans World Airlines, Inc. (TWA),
one Boeing 737-200 aircraft leased to Viscount Air Services, Inc. (Viscount),
three Boeing 727-200 Advanced aircraft leased to Continental Micronesia, Inc.
(Continental Micronesia), and one Boeing 727-200 aircraft formerly leased to
Delta Airlines, Inc., that is being remarketed for sale or lease. The
Partnership also owns six Boeing 727-200 aircraft, previously leased to Pan
American World Airways, Inc., that were transferred to aircraft inventory and
have been disassembled for sale of their component parts.
Viscount Restructuring
As discussed in the Partnership's Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for the quarterly period ended June 30, 1994,
the Partnership agreed to extend a line of credit to Viscount for a total of
$127,000 to be used primarily for maintenance expenses relating to the
Partnership's aircraft. In accordance with the agreement, the Partnership
advanced Viscount $107,315 during the third quarter of 1994. The Partnership
advanced $19,685, the balance of the line of credit, to Viscount in October
1994.
Partnership Operations
The Partnership recorded net income of $803,933, or $0.97 per limited
partnership unit, for the three months ended September 30, 1994, compared to
net income of $376,903, or $0.12 per unit, for the same period in 1993. The
Partnership recorded a net loss of $1,396,428, or $4.64 per limited partnership
unit for the nine months ended September 30, 1994, compared to net income of
$1,295,676, or $1.19 per unit, for the same period in 1993. The net loss for
the nine months ended September 30, 1994 resulted from maintenance expenses
incurred from the Partnership's leases to TWA. As described in Item 7 of the
Partnership's 1993 Annual Report to the Securities and Exchange Commission on
Form 10-K, the leases with TWA provide for the offset against rent, subject to
certain limits, of maintenance expenses incurred to meet certain Airworthiness
Directives. During the nine months ended September 30, 1994, TWA offset $3.6
million against rental payments due the Partnership for such maintenance
expenses. The Partnership recognizes the $3.6 million offset as operating
expense.
The improvement in operating results for the three months ended September 30,
1994 as compared to the same period in 1993 was due primarily to a net loss on
sale of equipment recorded during 1993. During the third quarter of 1993, the
Partnership sold two hushkit sets and one engine at a combined loss of
$773,204. Partially offsetting the net loss for the nine months ended
September 30, 1993 was a gain of $259,809 recorded during the first quarter of
1993 on the sale of one additional hushkit set. No equipment sales have been
concluded in 1994.
Liquidity and Cash Distributions
Liquidity - The Partnership has received all lease payments due from current
lessees. However, to assist Viscount with the funding of costs associated with
Federal Aviation Regulation compliance relating to the Partnership's aircraft,
the Partnership has entered into an agreement with Viscount under which it
agreed to defer certain rents due the Partnership on one aircraft. These
deferred rents will be repaid by Viscount with interest over the remaining term
of the lease. The agreement with Viscount also stipulates that the Partnership
will advance Viscount $127,000, primarily for maintenance expenses incurred by
Viscount relating to the Partnership's aircraft. In accordance with the
agreement, the Partnership advanced Viscount $127,000 in four installments from
July 1994 through October 1994.
10<PAGE>
<PAGE>
As described more fully in Note 8 to the Financial Statements, TWA has proposed
to its creditors, including the Partnership, a restructuring of its debt. Such
restructuring, if approved, would include a six-month moratorium on its lease
payments to the Partnership beginning in November 1994. TWA is current on its
lease payments to the Partnership through October 1994. However, should TWA
cease lease payments beginning in November 1994 for a period of six months, the
negative effect on the Partnership's cash reserves would be significant.
Rental revenues recognized from the Partnership's leases with TWA currently
account for approximately 74% of the Partnership's total quarterly rental
revenues.
Payments of $250,127 have been received during the nine months ended September
30, 1994 from the sale of parts from the six disassembled aircraft. In January
1994, the Partnership reimbursed Continental Micronesia $1.8 million for
cockpit modifications and $742,325 for C-check labor and parts, the aggregate
of which is included in accounts payable and accrued liabilities in the
December 31, 1993 balance sheet. In addition, in January 1994, the Partnership
financed $2,177,533 for new image modifications, which is being repaid with
interest over the lease terms of the aircraft, beginning in February 1994. The
Partnership's cash reserves are being retained to cover potential costs of
maintaining and remarketing the Partnership's off-lease aircraft in addition to
meeting obligations under the TWA and Continental Micronesia lease agreements
and the Viscount restructuring agreement.
Cash Distributions - Cash distributions to limited partners during the three
months ended September 30, 1994 and 1993 were $3,124,981, or $6.25 per limited
partnership unit for each period. Cash distributions to limited partners
during the nine months ended September 30, 1994 and 1993 were $9,374,944 or
$18.75 per limited partnership unit, and $6,874,958, or $13.75 per unit,
respectively. The timing and amount of future cash distributions will depend
upon the Partnership's future cash requirements, the Partnership's ability to
remarket its off-lease aircraft, the receipt of rental payments from NWT, TWA,
Viscount and Continental Micronesia, the receipt of the deferred rental
payments and financing payments from Viscount, the receipt of modification
financing payments from Continental Micronesia, and the receipt of payments
generated from the aircraft disassembly process.
11<PAGE>
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
As discussed in Item 3 of Part I of Polaris Aircraft Income Fund II's (the
Partnership) 1993 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 Reports to the SEC on Form 10-Q for the quarterly periods ended March
31, 1994 and June 30, 1994, respectively, there are a number of pending legal
actions or proceedings to which the Partnership is a party or to which any of
its properties are subject. 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.
Pan American World Airways, Inc. (Pan Am) Bankruptcy - As discussed in Note 5
to the financial statements included in the 1993 Form 10-K (Part II, Item 8),
Pan Am commenced reorganization proceedings under Chapter 11 of the federal
Bankruptcy Code in January 1991 and ceased operations in September 1991. Pan
Am as debtor-in-possession has proposed an allowance of certain of the claims
filed by the Partnership in the Pan Am bankruptcy case. The Partnership is
currently negotiating the terms of the allowance with Pan Am.
Braniff Airlines, Inc. Bankruptcy - The Partnership has now been authorized to
release one-half of the 25% portion of the Partnership's administrative claim
payment previously held by Polaris Investment Management Corporation in a
separate, interest-bearing account pursuant to the stipulation approved by the
Bankruptcy Court in 1992.
Vern A. Kepford, et al. v. Prudential Securities, et al. - On July 14, 1994,
plaintiffs filed their Second Amended Original Petition which added plaintiffs.
On July 18, 1994, plaintiffs filed their response and opposition to defendants'
motion for partial summary judgment and also moved for a continuance on the
motion for partial summary judgment. Defendants objections and responses to
Plaintiffs' First Request for Production were filed on July 29, 1994. On
August 11, 1994, after plaintiffs again amended their petition by adding
numerous plaintiffs, the defendants withdrew their summary judgment motion and
motion to stay discovery, without prejudice to refiling these motions at a
later date.
Reuben Riskind, et al. v. Prudential Securities Inc., et al. - On August 31,
1994, plaintiffs filed their Fifth Amended Original Petition adding additional
plaintiffs. On that same day, plaintiffs also filed their Second Plea in
Intervention adding nearly 2,000 plaintiffs. On September 7, 1994, the court
determined to sever from the primary lawsuit four plaintiffs and set the action
for trial on November 7, 1994. On September 29, 1994, defendants removed the
severed action to the United States District Court, Western District of Texas,
Del Rio Division. On October 27, 1994, the action was remanded back to state
court. On October 4, 1994, plaintiffs filed their Sixth Amended Petition
adding as defendants: the Partnership, Polaris Aircraft Income Fund III,
Polaris Aircraft Income Fund IV, Polaris Aircraft Income Fund V, Polaris
Aircraft Income Fund VI, Polaris Holding Company, Polaris Aircraft Leasing
Corporation, Polaris Securities Corporation, General Electric Capital
Corporation, General Electric Financial Services, Inc., and General Electric
Company.
Other Proceedings - Item 10 of Part III of the Partnership's 1993 Form 10-K
discusses 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. Except as described
below, there have been no material developments with respect to any of the
other actions described therein during the period covered by this report.
12<PAGE>
<PAGE>
Weisl, et al., v. Polaris Holding Company, et al. - On April 19, 1994, the
Supreme Court of the State of New York, County of New York, granted the
defendants' motion to dismiss the complaint on the grounds that the statute of
limitations barred almost all of the claims in the action. On July 20, 1994,
the court entered an order dismissing almost all of the claims in the complaint
and amended complaint. Certain claims, however, remain pending. Plaintiffs
filed a notice of appeal on September 2, 1994.
Novak, et al. v. Polaris Holding Company, et al. - On August 11, 1994, the
court denied in part and granted in part defendants' motions to dismiss the
purported derivative complaint. Specifically, the court denied the motions as
to the claims for breach of fiduciary duty, but dismissed plaintiffs' claim for
constructive fraud with leave to plaintiffs to replead. On October 7, 1994,
defendants filed a notice of appeal.
Harner, et al. v. Prudential Bache Securities - On September 8, 1994, the Sixth
Circuit affirmed the lower court's decision dismissing the action.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
27. Financial Data Schedules
b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
quarter for which this report is filed.
13<PAGE>
<PAGE>
<TABLE>
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 II,
A California Limited Partnership
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
<S> <C>
November 10, 1994 By: /S/James F. Walsh
- ------------------------------------ ---------------------------
James F. Walsh
Chief Financial Officer
(principal financial
officer and principal
accounting officer
of Polaris Investment
Management Corporation,
General Partner of the
Registrant)
</TABLE>
14<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<PERIOD-TYPE> 9-MOS
<CASH> 15758018
<SECURITIES> 0
<RECEIVABLES> 3156351
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 182953221
<DEPRECIATION> 85532851
<TOTAL-ASSETS> 116364509
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 113583247
<TOTAL-LIABILITY-AND-EQUITY> 116364509
<SALES> 0
<TOTAL-REVENUES> 11442706
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12839134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1396428)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1396428)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1396428)
<EPS-PRIMARY> (4.64)
<EPS-DILUTED> 0
</TABLE>
