POLARIS AIRCRAFT INCOME FUND IV, 10-K, 1994-03-31

POLARIS AIRCRAFT INCOME FUND IV
10-K, 1994-03-31
EQUIPMENT RENTAL & LEASING, NEC

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1993

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to

Commission File No. 33-15551

POLARIS AIRCRAFT INCOME FUND IV

(A California Limited Partnership)
(Exact name of registrant as specified in its charter)

California 94-3039169
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)

Four Embarcadero Center, San Francisco, California 94111-4146
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (415) 362-0333

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

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

No formal market exists for the units of limited partnership interest and
therefore there exists no aggregate market value at December 31, 1993.

Documents incorporated by reference: None

This document consists of 41 pages.
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PART I

Item 1. Business

The principal objectives of Polaris Aircraft Income Fund IV (PAIF-IV or the
Partnership) are to purchase and lease used commercial jet aircraft in order to
provide quarterly distributions of cash from operations, to maximize the
residual values of aircraft upon sale and to protect Partnership capital through
experienced management and diversification. PAIF-IV was organized as a
California limited partnership on June 27, 1984 and will terminate no later than
December 2020.

PAIF-IV has many competitors in the aircraft leasing market, including airlines,
aircraft leasing companies, other limited partnerships, banks and several other
types of financial institutions. This market is highly competitive and there is
no single competitor who has a significant influence on the industry. In
addition to other competitors, the general partner, Polaris Investment
Management Corporation (PIMC), and its affiliates, including Polaris Aircraft
Leasing Corporation (PALC), Polaris Holding Company (PHC) and GE Capital
Corporation (GE Capital), acquire, lease, finance and sell aircraft for their
own accounts and for existing aircraft leasing programs sponsored by them.
Accordingly, in seeking to re-lease and sell its aircraft, the Partnership may
be in competition with the general partner and its affiliates.

A brief description of the aircraft owned by the Partnership is set forth in
Item 2, on page 4. The following table describes the material terms of the
Partnership's leases to American Trans Air, Inc. (ATA) and Continental Airlines,
Inc. (Continental) as of December 31, 1993:
<TABLE>
<CAPTION>
Number of Lease
Lessee Aircraft Type Aircraft Expiration Renewal Options
<S> <C> <C> <C> <C> <C>
ATA B727-200A 1 2/00 (1) up to three one-year periods (3)
B727-200A 1 3/00 (1) up to three one-year periods (3)

Continental B727-200 5 4/94 (2) none
DC-9-30 5 6/96 (2) none
</TABLE>
(1) These aircraft were formerly leased to USAir, Inc. (USAir) through December
1992. The lease rate is approximately 45% of the prior lease rate. The
lease includes an eleven month rent abatement period, beginning on the
delivery dates in February and March 1993. The ATA lease also specifies
that the Partnership incur certain maintenance costs not to exceed
approximately $817,000 and, in addition, the Partnership may finance
certain aircraft hushkits at an estimated cost of approximately $5.0
million, which will be partially recovered with interest through payments
from ATA over the lease terms. The Partnership loaned $1,164,800 to ATA in
1993 to finance the purchase by ATA of two spare engines. As part of the
lease transaction, ATA transferred unencumbered title to two of its Boeing

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727-100 aircraft to the Partnership in April and May 1993. One of the
aircraft was sold as discussed in Item 7 and the Partnership is remarketing
the second aircraft for sale or lease.

(2) The Continental leases were modified in 1991; the leases for the Boeing
727-200 aircraft were extended for ten months beyond the initial lease
expiration date in June 1993 at approximately 55% of the original lease
rates. Continental may terminate the leases for these aircraft at the
earlier of April 1994 or 60,000 cycles. The leases for the DC-9-30
aircraft were extended for 36 months beyond the initial lease expiration
date in June 1993 at approximately 79% of the original lease rates. The
Partnership also agreed to pay for certain aircraft maintenance,
modification and refurbishment costs, expected not to exceed approximately
$4.9 million, a portion of which will be recovered with interest through
payments from Continental over the extended lease terms.

(3) The rental rate during the renewal term remains the same as the current
rate.

The Partnership also owns one Boeing 737-200 and one Boeing 737-200 Advanced
aircraft formerly leased to Britannia Airways Limited (Britannia), one Boeing
737-200 and three Boeing 737-200 Advanced aircraft formerly leased to Thomson
Overseas Finance N.V. (T.O.F.) and subleased to Britannia, and two Boeing 727-
100 aircraft transferred from ATA as part of the ATA lease transaction (Item 7).
The four Boeing 737-200 Advanced aircraft were re-leased to various lessees in
February 1994 and one of the Boeing 727-100 aircraft was sold in February 1994
as discussed in Item 7. In addition, fourteen Boeing 727-100F aircraft were
sold to Emery Aircraft Leasing Corporation (Emery) in 1993 (Item 7).

Approximately 700 commercial aircraft are currently available for sale or lease.
The current surplus has negatively affected market lease rates and fair market
values of both new and used aircraft. Current depressed demand for air travel
has limited airline expansion plans, with new aircraft orders and scheduled
delivery being cancelled or substantially deferred. As profitability has
declined, many airlines have opted to downsize, liquidate assets or file for
bankruptcy protection. The Partnership has been forced to adjust its estimates
of the residual values realizable from its aircraft and aircraft inventory,
which resulted in an increase in depreciation expense in 1993, 1992 and 1991, as
discussed in Note 3 to the financial statements of the Form 10-K (Item 8). A
discussion of the current market condition for the type of aircraft owned by the
Partnership follows:

Boeing 727-100 The Boeing 727 was the first tri-jet introduced into commercial
service. The Boeing 727-100 is a short to medium range jet carrying
approximately 125 passengers on trips of up to 1,500 miles. The operating
characteristics of the aircraft, as well as the cost of aging aircraft and
corrosion control Airworthiness Directives (ADs), have significantly reduced the
possibility of re-leasing this type of aircraft.

Boeing 727-100 Freighter The Boeing 727 was the first tri-jet introduced into
commercial service. The Boeing 727-100F is a short to medium range jet which
has been converted to carry freight on trips of up to 1,500 miles. The high

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cost of complying with Aging Aircraft and Corrosion ADs have contributed to a
general decline in the market demand for this aircraft. Additionally, the
demand for Boeing 727-100 Freighter aircraft is diminishing as major freight
operators look to larger, more efficient aircraft to meet future requirements.

Boeing 727-200 and Boeing 727-200 Advanced The Boeing 727 was the first
tri-jet introduced into commercial service. The Boeing 727 is a short to medium
range jet used for trips of up to 1,500 miles. The Boeing 727-200 aircraft was
introduced in 1967 and 299 were built between 1967 and 1972. In 1972, Boeing
introduced the Boeing 727-200 Advanced model, a higher gross weight version with
increased fuel capacity. Noise suppression hardware, commonly known as a
"hushkit," has been developed which, when installed on the aircraft, bring the
Boeing 727-200 and the Boeing 727-200 Advanced into compliance with Federal
Aviation Administration (FAA) Stage 3 noise limits as discussed in the Industry
Update section of Item 7. The cost of the hushkit is approximately $1.75
million for the Boeing 727-200 aircraft and approximately $2.5 million for the
Boeing 727-200 Advanced aircraft. However, while technically feasible, hushkits
may not be cost effective on all aircraft due to the age of some of the aircraft
and the time required to fully amortize the additional investment. Certain ADs
applicable to all models of the Boeing 727 have been issued to prevent fatigue
cracks and control corrosion. Demand for Boeing 727-200 aircraft is currently
very soft due to the general oversupply of narrowbody aircraft.

Boeing 737-200 and Boeing 737-200 Advanced The Boeing 737-200 aircraft was
introduced in 1967 and 950 were delivered from 1967 through 1971. In 1971,
Boeing introduced the Boeing 737-200 Advanced model, a higher gross weight
aircraft with increased fuel capacity as compared to its predecessor, the
non-advanced model. This two engine, two pilot aircraft provides operators with
107 to 120 seats, meeting their requirements for economical lift in the 1,100
nautical mile range. A domestic company is selling hushkits which bring Boeing
737s into compliance with Stage 3 noise restrictions at a cost of approximately
$3.0 million per aircraft. The market for this type of aircraft, as for all
Stage 2 narrowbody aircraft, is currently soft.

McDonnell Douglas DC-9-30 The McDonnell Douglas DC-9-10, a short to medium
range twin-engine jet, was introduced in 1965. The DC-9-30, which is a
stretched version of the DC-9-10, was introduced in 1967. This model offered
improved performance when carrying heavier loads. Over 970 DC-9 aircraft were
produced and there are approximately 56 operators worldwide. Providing
reliable, inexpensive lift, these aircraft fill thin niche markets, mostly in
the United States. Hushkits at a cost of approximately $1.6 million are
available to bring these aircraft into compliance with Stage 3 requirements.
The market for this type of aircraft is currently soft.

It is expected that the FAA will continue to propose and adopt ADs similar to
those discussed above for the Boeing 737s and Boeing 727s, which will require
modifications at some point in the future to prevent fatigue cracks and control
corrosion. Likewise demand, and hence value, of the aircraft may be diminished
to the extent that the costs of bringing DC-9 aircraft into compliance with any
ADs reduces the economic efficiency of operating these aircraft.

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The general partner believes that the current soft market reflects, in addition
to the factors cited above, the airline industry's reaction to the significant
expenditures potentially necessary to bring these aircraft into compliance with
certain ADs issued by the FAA relating to aging aircraft, corrosion prevention
and control and structural inspection and modification.

Item 2. Properties

PAIF-IV owns five McDonnell Douglas DC-9-30 and five Boeing 727-200 aircraft
leased to Continental, two Boeing 727-200 Advanced aircraft leased to ATA, one
Boeing 737-200 and one Boeing 737-200 Advanced aircraft formerly leased to
Britannia, one Boeing 737-200 and three Boeing 737-200 Advanced aircraft
formerly leased to T.O.F. (and subleased to Britannia), and two Boeing 727-100
aircraft transferred from ATA as part of the ATA lease transaction (Item 7), one
of which was sold in February 1994. Fourteen Boeing 727-100 Freighter aircraft
were sold to Emery in 1993 (Item 7). The four Boeing 737-200 Advanced aircraft,
formerly leased or sub-leased to Britannia, were re-leased to various lessees in
February 1994 (Item 7). The table below describes the Partnership's aircraft
portfolio in greater detail:

Cycles
Year of As of 10/31/93
Aircraft Type Serial Number Manufacture (1)

Boeing 727-100 18805 1967 44,985 (2)
Boeing 727-100 19153 1967 32,254
Boeing 727-200 19513 1968 56,765
Boeing 727-200 19797 1968 56,739
Boeing 727-200 19801 1968 56,748
Boeing 727-200 20387 1970 52,976
Boeing 727-200 20464 1972 47,224
Boeing 727-200A 22001 1980 22,876
Boeing 727-200A 22983 1982 19,450
Boeing 737-200 19711 1969 38,840
Boeing 737-200 20236 1969 39,673
Boeing 737-200A 20807 1974 29,183
Boeing 737-200A 21335 1977 24,088
Boeing 737-200A 21336 1977 24,256
Boeing 737-200A 21694 1978 22,930
McDonnell Douglas DC-9-30 45791 1968 59,016
McDonnell Douglas DC-9-30 47111 1967 61,922
McDonnell Douglas DC-9-30 47112 1967 61,983
McDonnell Douglas DC-9-30 47521 1971 48,321
McDonnell Douglas DC-9-30 47524 1971 48,304

(1) Cycle information as of 12/31/93 is not yet available.
(2) Aircraft sold in February 1994.

Item 3. Legal Proceedings

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Continental - On August 23, 1991, the court overseeing Continental's bankruptcy
case approved the negotiated agreement reached by Continental and the
Partnership as discussed in Note 6 to the financial statements of the 1993
Annual Report to the Securities and Exchange Commission on Form 10-K (Form 10-K)
(Item 8). The Bankruptcy Court retains jurisdiction over Continental for the
purpose of approving the terms of a stipulated settlement in which Continental
would continue to operate certain of the Partnership's aircraft under lease.

Prudential Securities Incorporated (Prudential) Settlement - On October 21,
1993, the U.S. Securities and Exchange Commission announced a settlement with
Prudential of an administrative proceeding alleging violations of the anti-fraud
provisions of the federal securities laws. It is our understanding that, in
connection with this settlement, Prudential has agreed to establish certain
claim resolution procedures and expedited arbitration procedures for persons
with claims against Prudential arising from their purchase of various limited
partnership interests through Prudential. Information regarding the Prudential
settlement and claims procedures may be obtained by calling toll-free 1-800-774-
0700.

Other Proceedings Item 10 discusses certain actions which have been filed
against the general partner in connection with certain public offerings,
including that of the Partnership.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

a) PAIF-IV's units representing assignments of limited partnership interest
(Units) are not publicly traded. The Units are held by Polaris Depositary IV on
behalf of the Partnership's investors (Unit Holders). Currently there is no
market for PAIF-IV's Units and it is unlikely that any market will develop.

b) Number of Security Holders:

Number of Record Holders
Title of Class as of December 31, 1993

Limited Partnership Interest: 16,881

General Partnership Interest: 1

c) Dividends:

The Partnership distributed cash to partners on a quarterly basis beginning
December 1987. Cash distributions to Unit Holders during 1993 and 1992
totalled $41,247,030 and $22,498,380, respectively. Cash distributions per
limited partnership unit were $82.50 and $45.00 in 1993 and 1992,
respectively.

Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 22,349,368 $ 32,661,004 $ 27,395,653 $ 37,408,597 $ 37,520,747

Net Income 4,226,843 13,817,873 6,168,184 20,092,887 20,146,648

Net Income allocated to
Limited Partners 2,309,897 11,430,081 3,328,980 16,766,496 16,881,209

Net Income per Limited
Partnership Unit 4.62 22.86 6.66 33.54 33.76

Cash Distributions per
Limited Partnership Unit 82.50 45.00 55.56 62.52 61.29

Total Assets 115,637,336 157,429,093 168,579,507 193,124,362 207,801,871

Partners' Capital 114,589,756 156,192,946 167,373,273 192,069,533 206,707,479

</TABLE>

7
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Polaris Aircraft Income Fund IV (the Partnership) owns 19 commercial jet
aircraft. The portfolio includes five DC-9-30 and five Boeing 727-200 aircraft
leased to Continental Airlines, Inc. (Continental), two Boeing 727-200 Advanced
aircraft leased to American Trans Air, Inc. (ATA), two Boeing 737-200 Advanced
aircraft formerly leased or subleased to Britannia Airways Limited (Britannia)
which were leased to GB Airways Limited (GB Airways) in February 1994, and two
Boeing 737-200 Advanced aircraft formerly leased or subleased to Britannia,
which were leased to TBG Airways Limited (TBG Airways) in February 1994. ATA
transferred to the Partnership two Boeing 727-100 aircraft in 1993 as part of
the ATA lease transaction. One of these Boeing 727-100 aircraft was sold to
Total Aerospace Services, Inc. (Total Aerospace) in February 1994 and one is
being remarketed for sale or lease. Also being remarketed for sale or lease are
two Boeing 737-200 aircraft formerly leased or subleased to Britannia. Out of
an original portfolio of 33 aircraft, one Boeing 727-100 Freighter formerly
leased to Emery Aircraft Leasing Corporation (Emery) was declared a casualty
loss due to an accident in 1991 and fourteen Boeing 727-100 Freighters were sold
to Emery in 1993 as described below.

Partnership Operations

The Partnership recorded net income of $4,226,843, $13,817,873 and $6,168,184,
for the years ended December 31, 1993, 1992 and 1991, respectively. Net income
per limited partnership unit was $4.62, $22.86 and $6.66, in 1993, 1992 and
1991, respectively. The sharp decrease in net income for 1993 from 1992 is
primarily attributable to declines in rental revenue. The Emery aircraft were
sold at the termination of the extended leases in January and April 1993, and no
further rentals were received, compared to a full year of rental payments in
1992. The Britannia lease extension in June 1993 through October, November and
December 1993 were at rates ranging from 53% to 85% of the original rates. In
addition, the ATA lease rates are 45% of the previous USAir, Inc. (USAir) rates
earned in 1992. Partially offsetting these declines are a full year of interest
and rental income recognized on the first Continental rent deferral and three
months recognized on the additional deferral. Revenues during 1993 included an
aggregate net loss of $492,319 recognized on the sale of aircraft to Emery.

Further impacting the lower net income for 1993 were aircraft operating
expenses, including maintenance and remarketing costs, necessary to re-lease the
727-200 Advanced aircraft from USAir to ATA.

Depreciation expense was increased to reflect industry-wide declines in demand,
as discussed in the industry update section. Depreciation adjustments for 1993
were approximately $0.6 million in 1993 compared to adjustments of $0.1 million
and $3.6 million for 1992 and 1991, respectively.

Cash Distributions and Liquidity

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Cash Distributions Distributions of cash available from operations commenced
in the fourth quarter of 1987. Cash distributions from operations to limited
partners totalled $18,748,650, $22,498,380 and $27,778,000, or $37.50, $45.00
and $55.56 per limited partnership unit in 1993, 1992 and 1991, respectively.
In July 1993, a cash distribution of the sale proceeds from the Emery sale was
made totalling $22,498,380, or $45.00 per limited partnership unit. The amount
of future cash distributions will depend on the Partnership's future cash
requirements, the successful re-lease of the off-lease aircraft and receipt of
rental payments from Continental, ATA, GB Airways and TBG Airways. A portion of
the Partnership's cash reserves will be applied toward costs specified below.

Liquidity The Partnership has received all rental payments due from its
lessees. The agreement with Continental stipulates that the Partnership pay for
the costs of certain maintenance work, Airworthiness Directives compliance,
aircraft modification and refurbishment costs, which are not to exceed
approximately $4.9 million, and which will partially be recovered with interest
through payments from Continental over the extended lease terms. In 1993, no
rental payments were received during the ATA rent suspension period. The ATA
lease also specifies that the Partnership incur certain maintenance costs not to
exceed approximately $817,000 and, in addition, the Partnership may finance
certain aircraft hushkits at an aggregate cost of approximately $5.0 million, a
portion of which will be partially recovered with interest through payments from
ATA over the lease terms. The Partnership will use a portion of its cash
reserves of approximately $16.4 million as of December 31, 1993 to finance these
costs. The remainder of the reserves will be retained to cover potential costs
of remarketing the Partnership's aircraft, including remarketing or sale of the
five Boeing 727-200 aircraft coming off-lease from Continental in April 1994.

Remarketing Update

Sale of aircraft to Emery One of the aircraft leased to Emery was sold to
Emery at the end of its lease term in January 1993 for $1.5 million, in
accordance with the purchase option in the lease. The Partnership recorded a
loss on sale of $555,676. Subsequently, Emery exercised its option to purchase
the remaining 13 Boeing 727-100 Freighter aircraft for $2.0 million each at the
end of April 1993. The Partnership reported an aggregate gain of $63,357 on
these sales. Proceeds from the sale were distributed to the partners in July
1993 as previously discussed.

Lease to ATA - In December 1992, the Partnership negotiated a seven-year lease
with ATA for the ex-USAir aircraft at current fair market lease rates, which are
approximately 45% of the prior rates. The leases are renewable for up to three
one-year periods. The Partnership has permitted a rent suspension period of
approximately eleven months, beginning on the delivery dates in February and
March 1993. The Partnership also agreed to incur certain maintenance costs and
may provide financing for hushkits and spare engines for use on the aircraft.

ATA transferred unencumbered title to two of its Boeing 727-100 aircraft to the
Partnership as part of the lease transaction in 1993. One of the aircraft was
sold as discussed below and the Partnership is remarketing the second aircraft
for sale or lease.

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The Partnership loaned $1,164,800 to ATA in 1993 to finance the purchase by ATA
of two spare engines. This loan is reflected in notes receivable in the
accompanying balance sheet of the Partnership's 1993 Form 10-K (Item 8). During
1993, the Partnership received all scheduled principal and interest payments due
under the notes totalling $87,139. The balance of the note at December 31, 1993
was $1,103,089.

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Sale to Total Aerospace - In February 1994, the Partnership sold one of the
Boeing 727-100 aircraft that was transferred to the Partnership by ATA, as
discussed above, to Total Aerospace for $425,000. The Partnership will record a
gain on sale of $425,000 in 1994.

Lease to GB Airways - In February 1994, the Partnership leased two Boeing 737-
200 Advanced aircraft that were formerly on lease to Britannia to GB Airways.
Lease payments for an interim lease term through March 1994 are at a variable
rate based on usage. Thereafter and through March 1996, the lease rate is 58%
of the original rate received from Britannia. The rate is then adjusted through
the end of the lease in October 1996 to 67% of the original rate received from
Britannia. GB Airways has the option to extend the lease for one year at the
initial rate. The lease stipulates that the Partnership share in the cost of
certain modification and refurbishment costs which are inestimable at this time.

Lease to TBG Airways - In February 1994, the Partnership leased the remaining
two Boeing 737-200 Advanced aircraft that were formerly on lease to Britannia to
TBG Airways. Lease payments for an interim lease term through April 1994 are at
a variable rate based on usage. Thereafter and through the end of the lease in
October 1998, the rate is increased annually from 55% to as much as 80% of the
original rate received from Britannia. The lease stipulates that the
Partnership share in the cost of certain modification and refurbishment costs
which are inestimable at this time. TBG Airways has the option to early
terminate the lease in April 1997 after paying a termination fee of $250,000.
TBG Airways also has the option to purchase the aircraft at the end of the lease
term for $8.0 million each.

Aircraft Casualty Incident

In May 1991, one of the Partnership's Boeing 727-100 Freighter aircraft leased
to Emery was damaged as a result of fire while it was on the ground. Emery paid
to the Partnership the casualty value specified in the lease of $4,310,000,
which was equal to the Partnership's cost for the aircraft, resulting in a gain
of $1,391,503. A portion of the proceeds from the casualty occurrence were
distributed to unit holders in July 1991. The distribution of $3,874,721, or
$7.75 per limited partnership unit, represented a distribution from casualty
proceeds, as opposed to a distribution of cash from operations.

Continental Lease Modification

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Partnership of certain aircraft modification and refurbishment costs, not to
exceed approximately $4.9 million, a portion of which will be recovered with
interest through payments from Continental over the extended lease term. The
Partnership's balance sheets reflect the net reimbursable costs incurred of
$419,212 and $206,777 as of December 31, 1993 and 1992, respectively, as notes
receivable in the balance sheet of the Partnership's 1993 Form 10-K (Item 8). A
portion of these will be capitalized and depreciated over the remaining lease
term. Under certain circumstances related to a possible future substantial
downsizing, Continental will be entitled to reject the existing leases. These
circumstances are not currently expected to materialize.

The Partnership recognized rent receivable from Continental of $960,152 in its
financial statements for the year ended December 31, 1990. As a result of the
terms of the agreement, which included an extended deferral of the dates when
Continental will remit its rental payments for the period from December 3, 1990
through September 30, 1991 (the Deferred Amount), the Partnership has not
recognized the Deferred Amount as rental revenue until it is received, or until
the contingencies regarding collectability are removed. Accordingly, the rent
receivable recognized at December 31, 1990 was reversed in the first quarter of
1991. The unrecognized Deferred Amounts as of December 31, 1993 and 1992 were
$3,281,033 and $5,476,604, respectively. In accordance with the aforementioned
agreement, Continental began making supplemental payments for accrued unpaid
rent plus interest on July 1, 1992. During 1993 and 1992, the Partnership
received supplemental payments of $3,186,649 and $1,593,324, respectively, of
which $2,195,572 and $973,395 was recognized as rental income in 1993 and 1992,
respectively.

Additional Continental Deferral Agreement As part of its reorganization plan,
Continental requested additional concessions from its aircraft lessors. As a
result, the Partnership and Continental reached an agreement to defer rental
payments for a period of three months, beginning in November 1992, for a total
of $1,935,000 (Additional Deferred Amount), with repayment over the shorter of
three and one-half years or the remaining lease term. Repayment began
October 1, 1993. The unrecognized Additional Deferred Amount as of December 31,
1993 was $1,810,282. Continental continues to pay all other amounts due under
the prior agreement. During 1993, the Partnership received supplemental
payments of $170,070, of which $124,718 was recognized as rental income in 1993.

The Partnership's right to receive payments under the agreements fall into
various categories of priority under the Bankruptcy Code. In general, the
Partnership's claims are administrative claims, with the exception of certain
deferred amounts. If Continental's reorganization is not successful, it is
likely that a portion of the Partnership's claims will not be paid in full.

Refund of Hushkit Deposits

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resolution with the Partnership of certain allegedly disputed contractual
issues. In April 1992, the general partner, on behalf of the Partnership,
commenced legal action to require Federal Express to refund the remaining
balance of the deposit, with interest, plus legal fees and other damages, and
Federal Express filed a cross-complaint against the Partnership alleging breach
of contract. A settlement was reached and payment of the deposit, with
interest, was received by the Partnership in November 1992.

Reconciliation of Book Income to Taxable Income

The following is a reconciliation between net income per limited partnership
unit reflected in the financial statements of Form 10-K (Item 8) and information
provided to unit holders for federal income tax purposes:
<TABLE>
<S> <C>
1993 book net income per limited partnership unit $ 4.62

Adjustments for tax purposes:
Book net rental income in excess of tax (1.42)
Tax depreciation in excess of book depreciation (8.64)
Reversal of Continental rental income recognized for book (3.32)
Reversal of Continental interest income recognized for book (.55)
Tax gain on sale in excess of book gain on sale 16.48
Reversal of book rental income previously recognized for tax (1.85)
Items capitalized for tax and expensed for book 1.11
Reversal of management fees previously expensed for tax .17

1993 taxable income per limited partnership unit $ 6.60
</TABLE>
The differences between net income for book purposes and net income for tax
purposes result from the timing differences of certain income and deductions.
The Partnership computes depreciation using the straight line method for
financial reporting and tax purposes; however, the aircraft are depreciated
using a shorter life for tax purposes. Thus, the current year tax depreciation
expense is greater than book depreciation expense and provides unit holders with
the benefit of deferring taxation on a portion of their cash distributions. The
Partnership also periodically evaluates the ultimate recoverability of the
carrying values and the economic lives of its aircraft for book purposes and,
accordingly, recognized adjustments which increased depreciation expense by
approximately $0.6 million, or $1.19 per limited partnership unit, during 1993.
The depreciation differences resulted in a larger tax gain on sale of aircraft
then the book gain. Finally, certain costs were capitalized for tax purposes
and expensed for book purposes.

In addition, there are differences between the recognition of certain deferred
rental income for book and tax purposes. As previously discussed, one of the
Partnership's lessees, Continental, filed for Chapter 11 bankruptcy protection.
The Partnership and Continental subsequently reached agreement as to the payment
of deferred and future rentals. The original deferred rentals were converted
into promissory notes bearing interest at a 12% rate, to be repaid by
Continental over periods of up to 48 months beginning in July 1992. The
subsequent deferred rentals will likely be converted to notes under a similar

13
<PAGE>

<PAGE>

agreement. For book purposes, the Partnership will not recognize any of these
deferred rentals, or the related interest, as income, nor will it accrue
management fee expense on such rentals, until the amounts due are received from
Continental. However, for tax purposes, these amounts have been accrued over
the period in which they were earned. In addition, the Partnership received
title to two aircraft from its' lessee ATA. For tax purposes, the fair market
value of these aircraft was recorded as rental income. For book purposes,
rental income was accrued for the ATA rent suspension period. These recognition
differences resulted in a book net rental income in excess of tax.

14
<PAGE>

<PAGE>

Industry Update

Maintenance of Aging Aircraft The process of aircraft maintenance begins at
the aircraft design stage. For aircraft operating under Federal Aviation
Administration (FAA) regulations, a review board consisting of representatives
of the manufacturer, FAA representatives and operating airline representatives
is responsible for specifying the aircraft's initial maintenance program. This
program is constantly reviewed and modified throughout the aircraft's
operational life.

Since 1988, the FAA, working with the aircraft manufacturers and operators, has
issued a series of Airworthiness Directives (ADs) which mandate that operators
conduct more intensive inspections, primarily of the aircraft fuselages. The
results of these mandatory inspections may uncover the need for repairs or
structural modifications that may not have been required under existing
maintenance programs.

In addition, an AD adopted in 1990 requires replacement or modification of
certain structural items on a specific timetable. These structural items were
formerly subject to periodic inspection, with replacement when necessary. The
FAA estimates the cost of compliance with this AD to be approximately $1.0
million and $0.9 million per Boeing 727 and Boeing 737 aircraft, respectively,
if none of the required work had been done previously. The FAA also issued
several ADs in 1993 updating inspection and modification requirements for Boeing
737 aircraft. The FAA estimates the cost of these requirements to be
approximately $90,000 per aircraft. In general, the new maintenance
requirements must be completed by the later of March 1994, or 75,000 and 60,000
cycles for each Boeing 737 and 727 respectively. A similar AD was adopted on
September 24, 1990, applicable to McDonnell Douglas aircraft. The AD requires
specific work to be performed at various cycle thresholds between 50,000 and
100,000 cycles, and on specific date or age thresholds. The estimated cost of
compliance with all of the components of this AD is $1.0 million per aircraft.

In December 1990, the FAA adopted another AD intended to mitigate corrosion of
structural components, which would require repeated inspections from 5 years of
age throughout the life of an aircraft, with replacement of corroded components
as needed. Integration of the new inspections into each aircraft operator's
maintenance program was required by December 31, 1991 on Boeing aircraft. A
similar directive was issued in late 1992 for McDonnell Douglas aircraft.

The Partnership's existing leases require the lessees to maintain the
Partnership's aircraft in accordance with an FAA-approved maintenance program
during the lease term. At the end of the leases, each lessee is generally
required to return the aircraft in airworthy condition including compliance with
all ADs for which action is mandated by the FAA during the lease term, except
for certain instances. In negotiating subsequent leases, market conditions
generally require that the Partnership bear some or all of the costs of
compliance with future ADs or ADs that have been issued, but which did not
require action during the previous lease term. The ultimate effect on the
Partnership of compliance with the FAA maintenance standards is not determinable
at this time and will depend on a variety of factors, including the state of the

15
<PAGE>

<PAGE>

commercial aircraft market, the timing of the issuance of ADs, and the status of
compliance therewith at the expiration of the current leases.

Aircraft Noise Another issue which has affected the airline industry is that
of aircraft noise levels. The FAA has categorized aircraft according to their
noise levels. Stage 1 aircraft, which have the highest noise level, are, with
few exceptions, no longer allowed to operate from civil airports in the United
States. Stage 2 aircraft meet current FAA requirements. Stage 3 aircraft are
the most quiet and Stage 3 is the standard for all new aircraft.

On September 24, 1991, the FAA issued final rules on the phase-out of Stage 2
aircraft by the end of this decade. The current U.S. fleet is comprised of
approximately 51% Stage 3 aircraft and 49% Stage 2 aircraft. The key features
of the rule include:

Compliance can be accomplished through a gradual process of phase-in or
phase-out (see below) on each of three interim compliance dates: December
31, 1994, 1996 and 1998 (with waivers available in certain specific cases
to December 31, 2003).

All operators have the option of achieving compliance through a gradual
phase-out of Stage 2 aircraft (i.e., eliminate 25% of its Stage 2 fleet on
each of the compliance dates noted above), or a gradual phase-in of Stage 3
aircraft (i.e., 55%, 65% and 75% of an operator's fleet must consist of
Stage 3 aircraft by the respective compliance dates noted above).

Carryforward credits will be awarded to operators for early additions of
Stage 3 aircraft to their fleets. These credits may be used to reduce
either the number of Stage 2 aircraft it must phase-out or the number of
Stage 3 aircraft it must phase-in by the next interim compliance date. The
credits must be used by that operator, however, and cannot be transferred
or sold to another operator.

The federal rule does not prohibit local airports from issuing more stringent
phase-out rules. In fact, several local airports have adopted more stringent
noise requirements which restrict the operation of Stage 2 and certain Stage 3
aircraft.

Other countries have also adopted noise policies. The European Economic
Community (EEC) adopted a non-addition rule in 1989, which directed each member
country to pass the necessary legislation to prohibit airlines from adding Stage
2 aircraft to their fleets after November 1, 1990. The rule has specific
exceptions for leased aircraft and does allow the continued use of Stage 2
aircraft which were in operation before November 1, 1990, although adoption of
rules requiring the eventual phase-out of Stage 2 aircraft is anticipated.

The Partnership's entire fleet consists of Stage 2 aircraft. Hushkit
modifications, which allow Stage 2 aircraft to meet Stage 3 requirements, are
currently available for the Partnership's aircraft. However, while technically
feasible, hushkits may not be cost effective on all models due to the age of
some of the aircraft and the time required to fully amortize the additional
investment. The general partner will evaluate, as appropriate, the potential

16
<PAGE>

<PAGE>

benefits of hushkitting some or all of the Partnership's aircraft. It is
unlikely, however, that the Partnership will incur such costs unless they can be
recovered through a lease.

Implementation of the Stage 3 standards have adversely affected the value of
Stage 2 aircraft, as these aircraft will require eventual modification to be
operated in the U.S. or other countries with Stage 3 standards.

Demand for Aircraft Approximately 700 commercial aircraft are currently
available for sale or lease. The current surplus has negatively affected market
lease rates and fair market values of both new and used aircraft. Current
depressed demand for air travel has limited airline expansion plans, with new
aircraft orders and scheduled delivery being cancelled or substantially
deferred. As profitability has declined, many airlines have opted to downsize,
liquidate assets, or file for bankruptcy protection.

Effects on the Partnership's Aircraft The Partnership has made downward
adjustments to its estimates of aircraft value for certain of its on-lease
aircraft. To ensure that the carrying value of each asset equals its estimated
residual value at the end of its expected holding period, where appropriate the
Partnership has increased depreciation expense. The Partnership also made
downward adjustments to the carrying values of certain of its off-lease aircraft
where depreciated cost exceeded the estimated net realizable value. During
1993, 1992 and 1991, the Partnership recognized downward adjustments totalling
$0.6 million, $0.1 million and $3.6 million, respectively, for certain of its
aircraft. These adjustments are included in depreciation expense in the
statements of income.

The Partnership's leases expire between April 1994 and March 2000. Current
market studies indicate that the Partnership's non-advanced Boeing and McDonnell
Douglas aircraft continue to be adversely affected by industry events.
Therefore, the Partnership will evaluate each aircraft as it comes off lease to
determine whether a re-lease or a sale at the then current market rates would be
most beneficial for unit holders.

Other Event

Effective October 18, 1993, James F. Walsh resigned as Senior Vice President and
Chief Financial Officer of Polaris Investment Management Corporation to assume
new responsibilities at GE Capital Corporation. Bobbe V. Sabella has assumed
the position of Vice President and Chief Financial Officer. Ms. Sabella has
served the general partner in various capacities since September 1986, most
recently as Vice President-Finance of Polaris Investment Management Corporation.

17
<PAGE>

<PAGE>

Item 8. Financial Statements and Supplementary Data

POLARIS AIRCRAFT INCOME FUND IV

(A California Limited Partnership)

FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993 AND 1992

TOGETHER WITH

AUDITORS' REPORT

18
<PAGE>

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Polaris Aircraft Income Fund IV:

We have audited the accompanying balance sheets of Polaris Aircraft Income Fund
IV (a California Limited Partnership) as of December 31, 1993 and 1992, and the
related statements of income, changes in partners' capital (deficit) and cash
flows for each of the three years ended December 31, 1993. These financial
statements and the schedules referred to below are the responsibility of the
general partner. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 the
general partner, 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 Polaris Aircraft Income Fund IV
as of December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the three years ended December 31, 1993, in conformity with
generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to the
financial statements are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in audits of the basic financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN & CO.

San Francisco, California,
January 21, 1994 (except with respect
to the matters discussed in Note 10, as
to which the date is February 24, 1994)

19
<PAGE>

POLARIS AIRCRAFT INCOME FUND IV
(A California Limited Partnership)

BALANCE SHEETS

DECEMBER 31, 1993 AND 1992
<CAPTION>
1993 1992

ASSETS:
<S> <C> <C>
CASH $ 628,222 $ 11,830

SHORT-TERM INVESTMENTS, at cost which approximates market value 19,845,972 20,889,000

Total Cash and Short-Term Investments 20,474,194 20,900,830

RENT AND OTHER RECEIVABLES 1,348,406 79,619

NOTES RECEIVABLE (Notes 3 and 6) 1,522,301 206,777

AIRCRAFT at cost, net of accumulated depreciation of
$56,432,464 in 1993 and $73,203,560 in 1992 92,256,548 136,020,658

OTHER ASSETS, net of accumulated amortization of
$2,069,479 in 1993 and $1,948,472 in 1992 35,887 221,209

$ 115,637,336 $ 157,429,093

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):

PAYABLE TO AFFILIATES $ 543,580 $ 70,698

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 14,000 80,500

LESSEE SECURITY DEPOSITS 490,000 150,000

DEFERRED INCOME - 934,949

Total Liabilities 1,047,580 1,236,147

PARTNERS' CAPITAL (DEFICIT):
General Partner (3,309,775) (643,718)

Limited Partners, 499,964 units issued and outstanding 117,899,531 156,836,664

Total Partners' Capital 114,589,756 156,192,946

$ 115,637,336 $ 157,429,093
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.

20 <PAGE>

POLARIS AIRCRAFT INCOME FUND IV
(A California Limited Partnership)

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<CAPTION>
1993 1992 1991
REVENUES:
<S> <C> <C> <C>
Rent from operating leases $ 20,972,613 $ 31,403,163 $ 25,286,486
Loss on sale of aircraft (Note 5) (492,319) - -
Gain on casualty occurrence (Note 4) - - 1,391,503
Interest 1,869,074 1,257,841 717,664

Total Revenues 22,349,368 32,661,004 27,395,653

EXPENSES:
Depreciation and amortization 16,254,034 16,872,193 19,573,974
Management and advisory fees 1,048,631 1,570,158 1,264,324
Operating 545,055 118,172 64,404
Administration and other 274,805 282,608 324,767

Total Expenses 18,122,525 18,843,131 21,227,469

NET INCOME $ 4,226,843 $ 13,817,873 $ 6,168,184

NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 1,916,946 $ 2,387,792 $ 2,839,204
NET INCOME ALLOCATED TO LIMITED PARTNERS $ 2,309,897 $ 11,430,081 $ 3,328,980

NET INCOME PER LIMITED PARTNERSHIP UNIT $ 4.62 $ 22.86 $ 6.66

</TABLE>
[FN]
The accompanying notes are an integral part of these statements.

21 <PAGE>

POLARIS AIRCRAFT INCOME FUND IV
(A California Limited Partnership)

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance, December 31, 1990 $ (284,450 ) $ 192,353,983 $ 192,069,533

Net income 2,839,204 3,328,980 6,168,184

Cash distributions to partners (3,086,444) (27,778,000) (30,864,444)

Balance, December 31, 1991 (531,690) 167,904,963 167,373,273

Net income 2,387,792 11,430,081 13,817,873

Cash distributions to partners (2,499,820) (22,498,380) (24,998,200)

Balance, December 31, 1992 (643,718) 156,836,664 156,192,946

Net income 1,916,946 2,309,897 4,226,843

Cash distributions to partners (4,583,003) (41,247,030) (45,830,033)

Balance, December 31, 1993 $ (3,309,775) $ 117,899,531 $ 114,589,756

</TABLE>
[FN]
The accompanying notes are an integral part of these statements.

22 <PAGE>

POLARIS AIRCRAFT INCOME FUND IV
(A California Limited Partnership)

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 4,226,843 $13,817,873 $ 6,168,184
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 16,254,034 16,872,193 19,573,974
Loss on sale of aircraft 492,319 - -
Gain on casualty occurrence - - (1,391,503)
Changes in operating assets and liabilities:
Decrease (increase) in rent and other receivables (1,268,787) 316,856 954,144
Decrease (increase) in other assets 64,315 (53,454) -
Increase (decrease) in payable to affiliates 472,882 70,279 (106,319)
Increase (decrease) in accounts payable and accrued liabilities (66,500) 51,809 15,549
Increase in lessee security deposits 340,000 150,000 -
Decrease in deferred income (934,949) - -

Net cash provided by operating activities 19,580,157 31,225,556 25,214,029

INVESTING ACTIVITIES:
Proceeds from sale of aircraft 27,500,000 - -
Increase in notes receivable (1,852,753) (292,175) -
Principal payments on notes receivable 175,993 85,398 -
Proceeds from casualty occurrence - - 4,310,000
Refund of deposit on hushkit options - 330,000 -

Net cash provided by investing activities 25,823,240 123,223 4,310,000

FINANCING ACTIVITIES:
Cash distributions to partners (45,830,033) (24,998,200) (30,864,444)

Net cash used in financing activities (45,830,033) (24,998,200) (30,864,444)

CHANGES IN CASH AND SHORT-TERM INVESTMENTS (426,636) 6,350,579 (1,340,415)

CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF YEAR 20,900,830 14,550,251 15,890,666

CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 20,474,194 $20,900,830 $ 14,550,251

</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
23 <PAGE>

<PAGE>

POLARIS AIRCRAFT INCOME FUND IV
(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1993

1. Accounting Principles and Policies

Accounting Method Polaris Aircraft Income Fund IV (PAIF-IV or the
Partnership), a California Limited Partnership, maintains its accounting
records, prepares financial statements and files its tax returns on the accrual
basis of accounting.

Aircraft and Depreciation The aircraft are recorded at cost, which includes
acquisition costs. Depreciation to an estimated residual value is computed
using the straight-line method over the estimated economic life of the aircraft
which was originally estimated to be 30 years from the date of manufacture.
Depreciation in the year of acquisition is calculated based upon the number of
days that the aircraft are in service.

The Partnership periodically reviews the estimated realizability of the residual
values at the end of each aircraft's economic life. For any downward adjustment
in estimated residual, or change in the estimated remaining economic life, the
depreciation expense over the remaining life of the aircraft is increased. If
the expected net income generated from the lease (rental revenue, net of
management fees, less adjusted depreciation and an allocation of estimated
administrative expense) results in a net loss, that loss will be recognized
currently. Off-lease aircraft are carried at the lower of depreciated cost or
estimated net realizable value. A further adjustment is made for those
aircraft, if any, that require substantial maintenance work.

Capitalized Costs Aircraft modification and maintenance costs which are
determined to increase the value or extend the useful life of the aircraft are
capitalized and amortized using the straight-line method over the appropriate
period. These costs are also subject to the periodic evaluation discussed
above.

Operating Leases The aircraft leases are accounted for as operating leases.
Lease revenues are recognized in equal installments over the terms of the
leases.

Other Assets Lease acquisition costs are capitalized as other assets and
amortized using the straight-line method over the term of the lease.

Income Taxes The Partnership files federal and state information income tax
returns only. Taxable income or loss is reportable by the individual partners.

24
<PAGE>

<PAGE>

Net Income Per Limited Partnership Unit Net income per limited partnership
unit is based on the limited partners' share of net income and the number of
units outstanding for the years ended December 31, 1993, 1992, and 1991.

Short-Term Investments The Partnership classifies all liquid investments with
original maturities of three months or less as short-term investments.

2. Organization

The Partnership was formed on June 27, 1984 for the purpose of acquiring and
leasing aircraft. The Partnership will terminate no later than December 2020.
Upon organization, both the general partner and the depositary contributed $500.
The Partnership recognized no profits or losses during the periods ended
December 31, 1984, 1985 and 1986. The offering of depositary units (Units),
representing assignments of limited partnership interest, terminated on
September 15, 1988, at which time the Partnership had sold 500,000 units of
$500, representing $250,000,000. All unit holders were admitted to the
Partnership on or before September 15, 1988. During November 1988, 36 units
were returned to the Partnership by an investor who did not meet the Investor
Suitability Standards described in the Prospectus. Allocations to affiliates
are described in Note 8.

Polaris Investment Management Corporation (PIMC), the sole general partner of
the Partnership, supervises the day-to-day operations of the Partnership. PIMC
is a wholly-owned subsidiary of Polaris Aircraft Leasing Corporation (PALC).
Polaris Holding Company (PHC) is the parent company of PALC. GE Capital
Corporation (GE Capital), an affiliate of General Electric Company, owns 100% of
PHC's outstanding common stock.

3. Aircraft

The Partnership owns 20 aircraft from its original portfolio of 33 used
commercial jet aircraft which were acquire, leased or sold as discussed below.

All aircraft acquired from an affiliate were purchased within one year of the
affiliate's acquisition at the affiliate's original price paid. Two aircraft
were transferred from a lessee as discussed below. The aircraft leases are
generally net leases, requiring the lessees to pay all operating expenses
associated with the aircraft during the lease term including Airworthiness
Directives (ADs) which have been or may be issued by the Federal Aviation
Administration (FAA) and require compliance during the lease term. The leases
generally state a minimum acceptable return condition for which the lessee is
liable under the terms of the lease agreement.

Two Boeing 727-100 These aircraft were transferred from ATA to the Partnership
in April and May 1993 as part of the ATA lease transaction. One of these
aircraft was sold in February 1994 as discussed in Note 10. The Partnership is
remarketing the second Boeing 727-100 aircraft for sale or lease.

25
<PAGE>

<PAGE>

Fifteen Boeing 727-100 Freighter These aircraft were acquired for $64,610,000
in 1988 and leased to Emery Aircraft Leasing Corporation (Emery) until August
1993, except for one aircraft which was retired in May 1991 due to a casualty
incident as discussed in Note 4. In January 1993, Emery purchased one of the
aircraft for $1.5 million, in accordance with the purchase option in the lease
(Note 5). In April 1993, Emery exercised its option to purchase the remaining
13 Boeing 727-100 Freighter aircraft for $2.0 million each (Note 5).

Two Boeing 737-200 and Four 737-200 Advanced These aircraft were acquired for
$55,000,000 in 1988 and leased or subleased to Britannia Airways Limited
(Britannia) until June 1993. The leases were extended beyond their initial
termination dates for approximately four months through the end of September
1993 at lease rates ranging from 53% to 85% of the original rates. The leases
were then again extended through various dates in October, November and December
1993, at the modified rates, which coincide with the commencement of maintenance
work required of the lessee to meet return conditions specified in the lease.
The four Boeing 737-200 Advanced aircraft were re-leased in February 1994 as
discussed in Note 10. The remaining two aircraft are being remarketed for sale
or lease.

Five Boeing 727-200 and Five McDonnell Douglas DC-9-30 These aircraft were
acquired for $64,875,000 in 1988 and leased to Continental Airlines, Inc.
(Continental) for terms of 60 months. Continental filed for Chapter 11
bankruptcy protection in December 1990. In 1991, the Partnership and
Continental entered into an agreement for Continental's continued lease of the
Partnership's aircraft. Note 6 contains a detailed discussion of the
Continental lease modifications.

Two Boeing 727-200 Advanced These aircraft were acquired for $27,000,000 in
1988 and leased to USAir, Inc. (USAir) until late 1992. USAir paid rent through
December 1992 although the aircraft were returned prior to that time.

In December 1992, the Partnership negotiated a seven year lease with ATA for the
aircraft at approximately 45% of the prior rate. The leases began in February
and March 1993. ATA is not required to begin making cash rental payments until
January 1994, although recognition of rental income will be spread over the
entire base lease term. The leases are renewable for up to three one-year
periods. ATA transferred to the Partnership two unencumbered Boeing 727-100
aircraft as part of the lease transaction as previously discussed.

The Partnership agreed to incur certain maintenance costs estimated at
approximately $817,000. In addition, the Partnership may finance aircraft
hushkits for use on the aircraft at an estimated cost of approximately $5.0
million, which will be partially recovered with interest through payment from
ATA over the lease terms. The Partnership loaned $1,164,800 to ATA in 1993 to
finance the purchase by ATA of two spare engines. This loan is reflected in
notes receivable in the accompanying balance sheet. During 1993, the
Partnership received all scheduled principal and interest payments due under the
notes. The balance of the notes at December 31, 1993 was $1,103,089.

26
<PAGE>

<PAGE>

The following is a schedule by year of future minimum rental payments under all
of the existing leases, including the deferred rental payments specified in the
Continental lease modification (Note 6):

Continental
Deferred Rental
Year Amount (1) Payments Total
1994 $1,981,818 $ 6,970,062 $ 8,951,880
1995 1,675,095 6,147,144 7,822,239
1996 1,267,713 3,852,144 5,119,857
1997 166,689 1,557,144 1,723,833
1998 and
thereafter - 3,341,372 3,341,372

$5,091,315 $ 21,867,866 $ 26,959,181

(1) Rental payments for the period from December 1990 through September 1991
are payable with interest commencing in July 1992 according to the Continental
lease modification agreement. Rental payments for the period from November 1992
through January 1993 are payable with interest commencing in October 1993
according to the agreement with Continental. These payments are shown
separately because of contingencies regarding collectability as discussed in
Note 6.

Future minimum rental payments may be offset or reduced by future costs as
discussed in Note 6.

During 1993, 1992 and 1991 the Partnership made downward adjustments to its
estimates of aircraft value for certain of its on-lease aircraft. To ensure
that the carrying value of each asset equals its estimated residual value at the
end of its expected holding period, where appropriate the Partnership has
increased depreciation expense as described in Note 1. The Partnership also
made downward adjustments to the carrying values of certain of its off-lease
aircraft where depreciated cost exceeded the estimated net realizable value.
During 1993, 1992 and 1991, the Partnership recognized downward adjustments
totalling $0.6 million, $0.1 million and $3.6 million, respectively, for certain
of its off-lease and on-lease aircraft. These adjustments are included in
depreciation expense in the statements of income.

4. Aircraft Casualty Incident

27
<PAGE>

<PAGE>

5. Sale of Aircraft to Emery One of the aircraft leased to Emery was sold
to Emery at the end of its lease term in January 1993 for $1.5 million, in
accordance with the purchase option in the lease. The Partnership recorded a
loss on sale of $555,676. Subsequently, Emery exercised its option to purchase
the remaining 13 Boeing 727-100 Freighter aircraft for $2.0 million each at the
end of April 1993. The Partnership reported an aggregate gain of $63,357 on
these sales.

6. Continental Lease Modification

As discussed in the Partnership's Form 10-K for the year ended December 31,
1990, Continental filed for Chapter 11 bankruptcy protection in December 1990.
Continental emerged from bankruptcy protection under a reorganization plan
approved by the Bankruptcy Court effective April 28, 1993. The modified
agreement approved by the Bankruptcy Court in 1991 specifies (i) extension of
the leases for the five Boeing 727-200s to the earlier of April 1994 or 60,000
cycles, and for the five DC-9-30 aircraft to June 1996; (ii) renegotiated rental
rates averaging approximately 67% of the original lease rates; (iii) payment of
ongoing rentals at the reduced rates beginning in October 1991; (iv) payment of
deferred rentals with interest beginning in July 1992; and (v) payment by the
Partnership of certain aircraft modification and refurbishment costs, not to
exceed approximately $4.9 million, a portion of which will be recovered with
interest through payments from Continental over the extended lease term. The
Partnership's balance sheets reflect the net reimbursable costs incurred of
$419,212 and $206,777 as of December 31, 1993 and 1992, respectively, as notes
receivable. A portion of such costs which the Partnership will bear will be
capitalized and depreciated over the remaining lease term. Continental will be
entitled, under certain circumstances related to a possible future substantial
downsizing by Continental, which is not currently anticipated, to reject the
existing leases.

Additional Continental Deferral Agreement As part of its reorganization plan,
Continental requested additional concessions from its aircraft lessors. As a

28
<PAGE>

<PAGE>

result, the Partnership and Continental reached an agreement to defer rental
payments for a period of three months beginning in November 1992, for a total of
$1,935,000 (Additional Deferred Amount), with repayment over the shorter of
three and one-half years or the remaining lease term. Repayment began
October 1, 1993. The unrecognized Additional Deferred Amount as of December 31,
1993 was $1,810,282. Continental continues to pay all other amounts due under
the prior agreement. During 1993, the Partnership received supplemental
payments of $170,070, of which $124,717 was recognized as rental income in 1993.

7. Refund of Hushkit Deposits

In 1990, the Partnership agreed to acquire up to 12 hushkits for Boeing 727
aircraft from Federal Express Corporation (Federal Express). Because certain
conditions to the purchase of the hushkits were not satisfied, the Partnership
requested return of its deposit of $330,000 plus interest as provided in the
purchase documents. Federal Express refused the Partnership's request, pending
resolution with the Partnership of certain allegedly disputed contractual
issues. In April 1992, the general partner, on behalf of the Partnership,
commenced legal action to require Federal Express to refund the remaining
balance of the deposit, with interest, plus legal fees and other damages, and
Federal Express filed a cross-complaint against the Partnership alleging breach
of contract. A settlement was reached and payment of the deposit, with interest,
was received by the Partnership in November 1992.

29
<PAGE>

<PAGE>

8. Related Parties

Under the Partnership Agreement, the Partnership paid or agreed to pay the
following amounts to PIMC and/or its affiliates in connection with services
rendered:

a. An aircraft management fee equal to 5% of gross rental revenues with
respect to operating leases or 2% of gross rental revenues with
respect to full payout leases of the Partnership, payable upon receipt
of the rent, subordinated to receipt by unit holders of distributions
equalling an 8% cumulative, non-compounded return on capital
contributions, as defined in the Partnership Agreement.

b. Reimbursement of certain out-of-pocket expenses incurred in connection
with the management of the Partnership and supervision of its assets.
In 1993, 1992, and 1991, the Partnership reimbursed PIMC for serviced
rendered or payments made on behalf of the Partnership of $2,147,152,
$584,749, and $433,111, respectively. Reimbursements totalling
$477,617 and $38,448 were payable to PIMC at December 31, 1993 and
1992, respectively.

c. A 10% interest in all cash distributions from operations and sales
proceeds, gross income in an amount equal to 9.09% of distributed cash
available from operations and 1% of net income or loss and taxable
income or loss, as such terms are defined in the Partnership
Agreement.

d. A subordinated sales commission of 3% of the gross sales price of each
aircraft for services performed upon disposition and reimbursement of
out-of-pocket and other disposition expenses. Subordinated sales
commissions shall be paid only after unit holders have received
distributions in an aggregate amount equal to their capital
contributions plus a cumulative non-compounded 8% per annum return on
their adjusted capital contributions, as defined in the Partnership
Agreement. The Partnership did not pay or accrue a sales commission
on any aircraft sales to date as the above subordination threshold has
not been met.

9. Income Taxes

Federal and state income tax regulations provide that taxes on the income or
loss of the Partnership are reportable by the partners in their individual
income tax returns. Accordingly, no provision for such taxes has been made in
the accompanying financial statements.

In 1993, the Partnership adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109). One of the requirements of SFAS
109 is for a public enterprise that is not subject to income taxes, because its
income is taxed directly to its owners, to disclose the net difference between

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<PAGE>

the tax basis and the reported amounts of the enterprise's assets and
liabilities.

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<PAGE>

The net differences between the tax basis and the reported amounts of the
Partnership's assets and liabilities at December 31, 1993 are as follows:

Reported Amounts Tax Basis Net Difference

Assets $115,637,336 $87,614,677 $28,022,659

Liabilities 1,047,580 1,302,146 (254,566)

10. Subsequent Events

Sale to Total Aerospace Services, Inc. (Total Aerospace) - In February 1994,
the Partnership sold one of the Boeing 727-100 aircraft that was transferred to
the Partnership by ATA, as discussed in Note 3, to Total Aerospace for $425,000.
The Partnership will record a gain on sale of $425,000 in 1994.

Lease to GB Airways Limited (GB Airways) - In February 1994, the Partnership
leased two Boeing 737-200 Advanced aircraft that were formerly on lease to
Britannia to GB Airways. Lease payments for an interim lease term through March
1994 are at a variable rate based on usage. Thereafter and through March 1996,
the lease rate is 58% of the original rate received from Britannia. The rate is
then adjusted through the end of the lease in October 1996 to 67% of the
original rate received from Britannia. GB Airways has the option to extend the
lease for one year at the initial rate. The lease stipulates that the
Partnership share in the cost of certain modification and refurbishment costs
which are inestimable at this time.

Lease to TBG Airways Limited (TBG Airways) - In February 1994, the Partnership
leased the remaining two Boeing 737-200 Advanced aircraft that were formerly on
lease to Britannia to TBG Airways. Lease payments for an interim lease term
through April 1994 are at a variable rate based on usage. Thereafter and
through the end of the lease in October 1998, the rate is increased annually
from 55% to as much as 80% of the original rate received from Britannia. The
lease stipulates that the Partnership share in the cost of certain modification
and refurbishment costs which are inestimable at this time. TBG Airways has the
option to early terminate the lease in April 1997 after paying a termination fee
of $250,000. TBG Airways also has the option to purchase the aircraft at the
end of the lease term for $8.0 million each.

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SCHEDULE V PROPERTY, PLANT, AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<CAPTION>
Balance at Beginning Additions Balance at
Classification of Period at Cost Retirements End of Period
<S> <C> <C> <C> <C> <C>
1993: Aircraft $ 209,224,218 361,236 60,896,442 $ 148,689,012

1992: Aircraft $ 209,224,218 - - $ 209,224,218

1991: Aircraft $ 213,576,849 - 4,352,631 $ 209,224,218

</TABLE>
<TABLE>

SCHEDULE VI ACCUMULATED DEPRECIATION, DEPLETION, AND
AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<CAPTION>
Balance at Beginning Additions Charged to Balance at
Classification of Period Expense Retirements End of Period
<S> <C> <C> <C> <C> <C>
1993: Aircraft $ 73,203,560 16,133,027 32,904,123 $ 56,432,464

1992: Aircraft $ 56,748,263 16,455,297 - $ 73,203,560

1991: Aircraft $ 39,058,080 19,124,317 1,434,134 $ 56,748,263

</TABLE>

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PART III

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

None.

Item 10. Directors and Executive Officers of the Registrant

PAIF-IV has no directors or officers. PIMC is the General Partner of the
Partnership and as such manages and controls the business of the Partnership.
The directors and officers of PIMC are:

Name Position

Herbert D. Depp Chairman of the Board; President;
Director

Howard L. Feinsand Senior Vice President; Director

John E. Flynn Senior Vice President Aircraft
Marketing

Richard J. Adams Senior Vice President Aircraft
Sales and Leasing

James T. Caleshu Senior Vice President and General
Counsel; Secretary

Bobbe V. Sabella Vice President and Chief Financial
Officer

Robert M.J. Ward Vice President International

James R. Weiland Vice President Technical

James W. Linnan Vice President Financial
Management

Robert W. Dillon Vice President Aviation Legal and
Insurance Affairs; Assistant
Secretary

Mr. Depp, 49, assumed the position of the President effective April 1991,
previously having served as Executive Vice President of PIMC and PALC since July
1989, Vice President Aircraft Marketing since June 1986, Vice President
Commercial Aircraft since August 1984, and Director of Marketing Aircraft
since November 1980. Mr. Depp assumed the position of Chairman effective April

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<PAGE>

1991. He has been a director of PIMC and of PHC since May 1990 and a director
of PALC since April 1991.

Mr. Feinsand, 46, joined PIMC and PALC as Vice President and General Counsel;
Assistant Secretary in April 1989. Effective July 1989, Mr. Feinsand assumed
the positions of Senior Vice President which he continues to hold, and
previously served as General Counsel and Secretary from July 1989 to August
1992. Mr. Feinsand also serves as a director of PIMC. Mr. Feinsand, an
attorney, was a partner in the New York law firm of Golenbock and Barell from
1987 through 1989. In his previous capacities, Mr. Feinsand served as counsel
to PIMC and PALC. Mr. Feinsand also serves as a director on the board of Duke
Realty Investments, Inc.

Mr. Flynn, 53, was elected Senior Vice President Aircraft Marketing effective
April 1991, having previously served as Vice President North America of PIMC
and PALC since July 1989. Mr. Flynn joined PALC in March 1989 as Vice President
Cargo. For the two years prior to the time he joined PALC, Mr. Flynn was a
Transportation Consultant.

Mr. Adams, 60, serves as Senior Vice President Aircraft Sales and Leasing of
PIMC and PALC effective August 1992; having previously served as Vice President
Aircraft Sales & Leasing, Vice President North America, and Vice President
Corporate Aircraft since he joined PALC in August 1986.

Mr. Weiland, 50, joined PIMC and PALC in September 1990 as Vice President
Technical. Prior to joining PIMC and PALC, Mr. Weiland had been President and
Chief Executive Officer of RAMCO, a company organized to build and operate an
aircraft maintenance facility, since 1986.

Mr. Caleshu, 54, joined PIMC and PALC in August 1992 as Senior Vice President
and General Counsel. Prior to joining PIMC and PALC, Mr. Caleshu, an attorney,
was a partner in the San Francisco firm of Pettit and Martin from 1966 to 1992.

Ms. Sabella, 37, was elected Vice President and Chief Financial Officer
effective October 1993, having previously served as Vice President - Finance
since April 1992, Vice President and Controller since January 1990 and Corporate
Controller of PIMC and PALC since September 1986.

Mr. Ward, 50, has served as Vice President International of PIMC and PALC
since October 1987, with responsibility for Asia, Central America, Pacific and
Latin America.

Mr. Linnan, 52, was elected Vice President Financial Management effective
April 1991, having previously served as Vice President Investor Marketing of
PIMC and PALC since July 1986.

Mr. Dillon, 52, was elected Vice President Aviation Legal and Insurance
Affairs effective April 1989. Previously, he has served as General Counsel of
PIMC and PALC since January 1986.

Disclosure pursuant to Section 16, Item 405 of Regulation S-K:

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<PAGE>

Based solely on its review of the copies of such forms received or written
representations from certain reporting persons that no Forms 3, 4, or 5 were
required for those persons, the Partnership believes that, during 1993 all
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were met.

As reported in the Partnership's 1990 Form 10-K, on June 8, 1990, a purported
class action entitled Harner, et al, v Prudential Bache Securities, (to which
the Partnership was not a party) was filed by certain purchasers of units in a
1983 and 1984 public offering in several corporate aircraft public partnerships.
PALC and PIMC were named as two of the defendants in this action. On September
24, 1991, the court entered an order in favor of PALC and PIMC granting their
motion for summary judgement and dismissing the plaintiffs' complaint with
prejudice. On March 13, 1992, Plaintiff filed a notice of appeal to the United
States Court of Appeals for the Sixth Circuit. On August 21, 1992, the court of
Appeals ordered consolidation of the Appellants' causes for the purposes of
briefing and submission. This appeal was fully briefed and oral argument was
held. Parties are waiting for the Court to issue a decision.

On October 27, 1992, a Class Action Complaint entitled Edwin Weisl, Jr. et al,
Plaintiffs, v the General Partner of the Partnership, its affiliates and others,
Defendants, Index No. 29239/92 was filed in the Supreme Court of the State of
New York for the County of New York. The Complaint sets forth various causes of
action which include allegations against certain or all of the defendants (i)
for alleged fraud in connection with certain public offerings, including that of
the Partnership, on the basis of alleged misrepresentation and alleged omissions
contained in the written offering materials and all presentations allegedly made
to investors; (ii) for alleged negligent misrepresentation in connection with
such offerings; (iii) for alleged breach of fiduciary duties; (iv) for alleged
breach of third party beneficiary contracts; (v) for alleged violations of the
NASD Rules of Fair Practice by certain registered broker dealers; and (vi) for
alleged breach of implied covenants in the customer agreements by certain
registered brokers. The Complaint seeks an award of compensatory and other
damages and remedies. On January 19, 1993, Plaintiff's filed a motion for class
certification. On March 1, 1993, Defendants filed motions to dismiss Complaint
on numerous grounds, including failure to state a cause of action and statute of
limitations. The court has not ruled on the motion for class certification or
the motions to dismiss the complaint. The Partnership is not named as a
defendant in this action.

On or around February 17, 1993, a civil action entitled Einhorn, et al v Polaris
Public Income Funds, et al, was filed in the Circuit Court of the 11th Judicial
Circuit in and for Dade County, Florida against, among others, PIMC and Polaris
Depositary Company. Plaintiffs seek class action certification on behalf of a
class of investors in the Polaris Aircraft Income Funds IV, V and VI who
purchased their interests while residing in Florida. Plaintiffs allege the
violation of Section 517.301, Florida Statutes, in connection with the offering
and sale of the Partnerships. Among other things, Plaintiffs assert that the
Defendants sold interests in the Partnerships while "omitting and failing to
disclose the material facts questioning the economic efficacy of" the
Partnerships. Plaintiffs seek rescission or damages, in addition to interest,

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<PAGE>

costs, and attorneys' fees. On April 5, 1993, defendants filed a motion to stay
this action pending the final determination of a prior filed action in the
Supreme Court for the State of New York entitled Weisl v Polaris Holding
Company. On that date, defendants also filed a motion to dismiss the Complaint
on the grounds of failure to attach necessary documents, failure to plead fraud
with particularity and failure to plead reasonable reliance. On April 13, 1993,
the court denied the defendants' motion to stay. On May 7, 1993, the Court
stayed the action pending an appeal of the denial of the motion to stay.
Defendants subsequently filed with the Third District Court of Appeal a petition
for writ of certiorari to review the Circuit Court order denying the motion to
stay. On October 19, 1993, the Court of Appeal granted the writ of certiorari,
quashed the order, and remanded the action with instruction to grant the stay.

On or around May 14, 1993, a purported class action entitled Michael Moross, et
al, v Polaris Holding Company, et al, was filed in the United States District
Court for the District of Arizona. This purported class action was filed on
behalf of investors in the Polaris Aircraft Income Funds I - VI by nine
investors in the Polaris Aircraft Income Funds. The Compliant alleges that
defendants violated Arizona state securities statues and committed negligent
misrepresentation and breach of fiduciary duty by misrepresenting and failing to
disclose material facts in connection with the sale of limited partnership units
in the above-named funds. An Amended Compliant was filed on September 17, 1993,
but has not been served upon defendants. On or around October 4, 1993,
defendants filed a notice of removal to the United States District Court for the
district of Arizona. Defendants also filed a motion to stay the action pending
the final determination of a prior filed action in the Supreme Court for the
State of New York entitled Weisl v. Polaris Holding Company ("Weisl") and to
defendants' time to respond to the Complaint until 20 days after disposition of
the motion to action pending resolution of the motions for class certification
and motions to dismiss pending in Weisl. On January 20, 1994, the court stayed
the action and required defendants to file status reports every sixty days
setting forth the status of the motions in Weisl.

On September 21, 1993, a purported derivative action entitled Novak, et al, v.
Polaris Holding Company, et al, was filed in the Supreme Court of the State of
New York, County of New York. This action was brought on behalf of Polaris
Aircraft Income Funds I - III (the "Partnerships"). The Complaint names as
defendants Polaris Holding Company, its affiliates and others. Polaris Aircraft
Income Funds I - III are named as nominal defendants. The Complaint alleges,
among other things, that defendants mismanaged the Partnerships, engaged in
self-dealing transactions that were detrimental to the Partnerships and failed
to make required disclosure in connection with the sale of the Partnership
units. The Complaint alleges claims of breach of fiduciary duty and
constructive fraud and seeks, among other things an award of compensatory and
punitive damages in an unspecified amount, re-judgment interest, and attorneys'
fees and costs. On January 13, 1994, certain of the defendants, including
Polaris Holding Company, filed motions to dismiss the Complaint on the grounds
of, among others, failure to state a cause of action and failure to plead the
alleged wrong in detail.

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<PAGE>

On or around March 13, 1991, a purported class action entitled Kahn v Polaris
Holding Company, et al, was filed in the Supreme Court of the State of New York,
County of New York. This purported class action on behalf of investors in
Polaris Aircraft Income Fund V ("PAIF V") was filed by one investor in the above
named fund. The Complaint names as defendants the Company, Polaris Holding
Company, its affiliates and others. The Complaint charges defendants with
common law fraud, negligent misrepresentation and breach of fiduciary duty in
connection with certain misrepresentations and omissions allegedly made in
connection with the sale of interest in PAIF V. Plaintiffs seek compensatory
and consequential damages in an unspecified amount, plus interest, disgorgement
and restitution of all earnings, profits and other benefits received by
defendants as a result of their alleged practices, and attorneys' fees and
costs.

Defendants' time to move, answer or otherwise plead with respect to the
Complaint has been extended by stipulation up to and including 30 days after the
Court rules on the pending motions to dismiss, or the motions are otherwise
resolved, in Weisl v Polaris Holding Company, et al. The Partnership is not
named as a defendant in this action.

Item 11. Management Remuneration and Transactions

PAIF-IV has no directors or officers. PAIF-IV is managed by PIMC, the General
Partner. In connection with management services provided, management and
advisory fees of $950,604 were paid to PIMC in 1993.

Item 12. Security Ownership of Certain Beneficial Owners and Management

a) No person owns of record, or is known by PAIF-IV to own beneficially
more than five percent of any class of voting securities of PAIF-IV.

b) The General Partner of PAIF-IV owns the equity securities of PAIF-IV as
set forth in the following table:

(4)
(1) (2) (3) Percent
Title Name of Amount and Nature of of
of Class Beneficial Owner Beneficial Ownership Class

General Polaris Represents a 10.0% interest of all 100%
Partner Investment cash distributions, gross income
Interest Management in an amount equal to 9.09% of
Corporation distributed cash available from
operations, and a 1% interest in
net income or loss

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c) There are no arrangements known to PAIF-IV, including any pledge by any
person of securities of PAIF-IV, the operation of which may at a
subsequent date result in a change in control of PAIF-IV.

Item 13. Certain Relationships and Related Transactions

None.

39
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<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

1. Financial Statements.

The following are included in Part II of this report:
Page No.

Report of Independent Public Accountants 19
Balance Sheets 20
Statements of Income 21
Statements of Changes in Partners' Capital (Deficit) 22
Statements of Cash Flows 23
Notes to Financial Statements 24

2. Financial Statement Schedules.

a) The following are included in Part II of this report:
Page No.

Schedule V Property, Plant and Equipment 33
Schedule VI Accumulated Depreciation, Depletion; and
Amortization of Property, Plant, and Equipment 33

All other schedules are omitted because they are not applicable, not
required or because the required information is included in the
financial statements or notes thereto.

3. Exhibits required to be filed by Item 601 of Regulation S-K and Reports on
Form 8-K.

a) Reports on Form 8-K:

None.

b) Exhibits required to be filed by Item 601 of Regulation S-K:

None.

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<PAGE>

SIGNATURES

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

<S> <C>
POLARIS AIRCRAFT INCOME FUND IV
(REGISTRANT)
By: Polaris Investment
Management Corporation
General Partner

March 28, 1994 By: /S/ Herbert D. Depp
Date Herbert D. Depp, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/S/Herbert D. Depp Chairman of the Board and President of Polaris March 28, 1994
(Herbert D. Depp) Investment Management Corporation, General Partner
of the Registrant

/S/Howard L. Feinsand Senior Vice President, Secretary and Director of March 28, 1994
(Howard L. Feinsand) Polaris Investment Management Corporation, General
Partner of the Registrant

/S/Bobbe V. Sabella Vice President and Chief Financial Officer of March 28, 1994
(Bobbe V. Sabella) Polaris Investment Management Corporation, General
Partner of the Registrant

</TABLE>
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