-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B/Joy4zF4EM+fYGT/inYECTsGpGYrq0sSUY9Je2SwIAGoEuL4TJ/Kc+yMAt/V7kx sOQBgJEXuEJXSyEV3f3OIA== 0000948524-98-000116.txt : 19981118 0000948524-98-000116.hdr.sgml : 19981118 ACCESSION NUMBER: 0000948524-98-000116 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND II CENTRAL INDEX KEY: 0000789895 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942985086 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-02794 FILM NUMBER: 98751807 BUSINESS ADDRESS: STREET 1: 201 HIGH RIDGE ROAD STREET 2: 27TH FL CITY: STAMFORD STATE: CT ZIP: 06927 BUSINESS PHONE: (203) 357- MAIL ADDRESS: STREET 1: 201 HIGH RIDGE ROAD STREET 2: 27TH FL CITY: STAMFORD STATE: CT ZIP: 06927 10-Q 1 SEPTEMBER 30, 1998 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q --------------- X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 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 High Ridge Road, Stamford, Connecticut 06927 Telephone - (203) 357-3776 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 17 pages. POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership FORM 10-Q - For the Quarterly Period Ended September 30, 1998 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - September 30, 1998 and December 31, 1997......................................... 3 b) Statements of Operations - Three and Nine Months Ended September 30, 1998 and 1997......................... 4 c) Statements of Changes in Partners' Capital (Deficit) - Year Ended December 31, 1997 and Nine Months Ended September 30, 1998.................. 5 d) Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1997......................... 6 e) Notes to Financial Statements............................. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 10 Part II. Other Information Item 1. Legal Proceedings.................................... 14 Item 6. Exhibits and Reports on Form 8-K..................... 15 Signature ..................................................... 16 2 Part 1. Financial Information ----------------------------- Item 1. Financial Statements POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership BALANCE SHEETS (Unaudited) September 30, December 31, 1998 1997 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $ 19,594,079 $ 31,587,494 RENT AND OTHER RECEIVABLES 935,101 935,629 AIRCRAFT, net of accumulated depreciation of $76,307,875 in 1998 and $70,346,578 in 1997 39,055,434 45,016,731 OTHER ASSETS 5,252 6,571 ------------ ------------ $ 59,589,866 $ 77,546,425 ============ ============ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT): PAYABLE TO AFFILIATES $ 239,206 $ 142,761 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 464,187 317,799 SECURITY DEPOSITS -- 50,000 DEFERRED INCOME 1,900,633 627,660 NOTES PAYABLE 12,267,895 15,667,509 ------------ ------------ Total Liabilities 14,871,921 16,805,729 ------------ ------------ PARTNERS' CAPITAL (DEFICIT): General Partner (3,655,883) (3,030,600) Limited Partners, 499,973 and 499,997 units outstanding in 1998 and 1997, respectively 48,373,828 63,771,296 ------------ ------------ Total Partners' Capital 44,717,945 60,740,696 ------------ ------------ $ 59,589,866 $ 77,546,425 ============ ============ The accompanying notes are an integral part of these statements. 3 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 1998 1997 1998 1997 ---- ---- ---- ---- REVENUES: Rent from operating leases $ 3,145,675 $ 3,145,676 $ 9,437,026 $ 11,646,396 Interest 259,838 626,445 867,132 1,316,784 Loss on sale of aircraft -- -- -- (26,079) Other 85,080 49,240 198,670 851,683 ------------ ------------ ------------ ------------ Total Revenues 3,490,593 3,821,361 10,502,828 13,788,784 ------------ ------------ ------------ ------------ EXPENSES: Depreciation 1,987,099 2,221,949 5,961,297 8,291,387 Management fees to general partner 121,617 42,815 364,851 409,518 Operating 61,617 35,332 261,042 117,259 Interest 309,360 415,571 1,008,874 1,267,556 Administration and other 67,149 87,134 260,784 280,045 ------------ ------------ ------------ ------------ Total Expenses 2,546,842 2,802,801 7,856,848 10,365,765 ------------ ------------ ------------ ------------ NET INCOME $ 943,751 $ 1,018,560 $ 2,645,980 $ 3,423,019 ============ ============ ============ ============ NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 189,252 $ 390,145 $ 1,241,283 $ 1,226,604 ============ ============ ============ ============ NET INCOME ALLOCATED TO LIMITED PARTNERS $ 754,499 $ 628,415 $ 1,404,697 $ 2,196,415 ============ ============ ============ ============ NET INCOME PER LIMITED PARTNERSHIP UNIT $ 1.51 $ 1.26 $ 2.81 $ 4.39 ============ ============ ============ ============
The accompanying notes are an integral part of these statements. 4 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) Year Ended December 31, 1997 and Nine Months Ended September 30, 1998 ------------------------------------ General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1996 $ (1,480,858) $ 73,696,567 $ 72,215,709 Net income 44,693 4,424,643 4,469,336 Cash distributions to partners (1,594,435) (14,349,914) (15,944,349) ------------ ------------ ------------ Balance, December 31, 1997 (3,030,600) 63,771,296 60,740,696 Net income 1,241,283 1,404,697 2,645,980 Capital redemptions (24 units) -- (3,072) (3,072) Cash distributions to partners (1,866,566) (16,799,093) (18,665,659) ------------ ------------ ------------ Balance, September 30, 1998 $ (3,655,883) $ 48,373,828 $ 44,717,945 ============ ============ ============ The accompanying notes are an integral part of these statements. 5 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, ------------------------------- 1998 1997 ---- ---- OPERATING ACTIVITIES: Net income $ 2,645,980 $ 3,423,019 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,961,297 8,291,387 Gain on sale of aircraft inventory (133,285) (49,240) Loss on sale of aircraft -- 26,079 Changes in operating assets and liabilities: Decrease (increase) in rent and other receivables 528 (929,403) Decrease in other assets 1,319 110,024 Increase in payable to affiliates 96,445 110,714 Increase in accounts payable and accrued liabilities 146,388 97,944 Decrease in security deposits (50,000) (66,000) Decrease in maintenance reserves -- (6,453) Increase (decrease) in deferred income 1,272,973 (394,580) ------------ ------------ Net cash provided by operating activities 9,941,645 10,613,491 ------------ ------------ INVESTING ACTIVITIES: Increase in aircraft capitalized costs -- (4,784,633) Payments to Purchaser related to sale of aircraft -- (1,001,067) Net proceeds from sale of aircraft -- 2,519,495 Principal payments on notes receivable -- 865,904 Net proceeds from sale of aircraft inventory 133,285 162,488 ------------ ------------ Net cash provided by (used in) investing activities 133,285 (2,237,813) ------------ ------------ FINANCING ACTIVITIES: Increase in notes payable -- 3,884,633 Principal payments on notes payable (3,399,614) (1,329,680) Capital redemptions (3,072) -- Cash distributions to partners (18,665,659) (13,249,920) ------------ ------------ Net cash used in financing activities (22,068,345) (10,694,967) ------------ ------------ CHANGES IN CASH AND CASH EQUIVALENTS (11,993,415) (2,319,289) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 31,587,494 22,224,813 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,594,079 $ 19,905,524 ============ ============ The accompanying notes are an integral part of these statements. 6 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited) Nine Months Ended September 30, ------------------------------- 1998 1997 ---- ---- SUPPLEMENTAL INFORMATION: Interest paid $ 1,010,384 $ 1,161,714 ============ ============ The accompanying notes are an integral part of these statements. 7 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 (GAAP). These statements should be read in conjunction with the financial statements and notes thereto for the years ended December 31, 1997, 1996, and 1995 included in the Partnership's 1997 Annual Report to the SEC on Form 10-K. 2. Related Parties Under the Limited Partnership Agreement, the Partnership paid or agreed to pay the following amounts for the current quarter to the general partner, Polaris Investment Management Corporation, in connection with services rendered or payments made on behalf of the Partnership: Payments for the Three Months Ended Payable at September 30, 1998 September 30, 1998 ------------------ ------------------ Aircraft Management Fees $112,500 $126,181 Out-of-Pocket Administrative and Selling Expense Reimbursement 113,104 33,019 Out-of-Pocket Operating Expense Reimbursement 4,510 80,006 -------- -------- $230,114 $239,206 ======== ======== 3. Claims Related to Lessee Defaults Braniff, Inc. (Braniff) Bankruptcy - As previously reported, the Bankruptcy Court disposed of the Partnership's claim in this Bankruptcy proceeding by permitting the Partnership to exchange a portion of its unsecured claim for Braniff's right (commonly referred to as a "Stage 2 Base Level right") under the Federal Aviation Administration noise regulations to operate one Stage 2 aircraft and by allowing the Partnership a net remaining unsecured claim of $769,231 in the proceedings. Braniff's bankrupt estate has made a payment in the amount of $200,000 in respect of the unsecured claims of the Partnership and other affiliates of Polaris Investment Management Corporation. Of this amount, $15,385 was allocated 8 to the Partnership, based on its pro rata share of the total claims, and recognized as revenue during the quarter ended March 31, 1998, which is included in other income. 4. Sale of Aircraft Inventory to Soundair, Inc. The Partnership sold its remaining inventory of aircraft parts from the six disassembled aircraft, to Soundair, Inc. The remaining inventory, with a net carrying value of $-0-, was sold effective February 1, 1998 for $90,000, less amounts previously received for sales as of that date. The net purchase price of $85,080 was paid in September 1998, and is included in other revenue. 5. Partners' Capital The Partnership Agreement (the Agreement) stipulates different methods by which revenue, income and loss from operations and gain or loss on the sale of aircraft are to be allocated to the general partner and the limited partners. Such allocations are made using income or loss calculated under GAAP for book purposes, which varies from income or loss calculated for tax purposes. Cash available for distributions, including the proceeds from the sale of aircraft, is distributed 10% to the general partner and 90% to the limited partners. The different methods of allocating items of income, loss and cash available for distribution combined with the calculation of items of income and loss for book and tax purposes result in book basis capital accounts that may vary significantly from tax basis capital accounts. The ultimate liquidation and distribution of remaining cash will be based on the tax basis capital accounts following liquidation, in accordance with the Agreement. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations At September 30, 1998, Polaris Aircraft Income Fund II (the Partnership) owned a portfolio of 14 used commercial jet aircraft out of its original portfolio of 30 aircraft. The portfolio consists of 14 McDonnell Douglas DC-9-30 aircraft leased to Trans World Airlines, Inc. (TWA). The Partnership entered into an agreement for the sale of its remaining inventory of aircraft parts, with a net carrying value of $0, from the six disassembled aircraft, to Soundair, Inc. The remaining inventory was sold effective February 1, 1998 for $90,000, less amounts previously received for sales as of that date. The net purchase price of $85,080 was paid in September 1998, and is included in other income. Partnership Operations The Partnership recorded net income of $943,751, or $1.51 per limited partnership unit during the three months ended September 30, 1998, compared to net income of $1,018,560, or $1.26 per limited partnership unit, for the same period in 1997. The Partnership recorded net income of $2,645,980, or $2.81 per limited partnership unit during the nine months ended September 30, 1998, compared to net income of $3,423,019, or $4.39 per limited partnership unit, for the same period in 1997. The decrease in year to date net income is primarily due to a decrease in other income. The Partnership recorded other income of $851,683 during the nine months ended September 30, 1997, as a result of the receipt of amounts due under a TWA maintenance credit and rent deferral agreement and from payments received from the sale of inventoried parts from the six disassembled aircraft. The variance in net income per limited partnership unit will differ from the variance of total net income from period to period due to the methods by which income or loss from operations and gain or loss on the sale of aircraft are allocated in accordance with the partnership agreement. Rental revenues, management fees and depreciation declined during the first nine months of 1998, as compared to the same period in 1997. This decline was the result of the sale of aircraft to Triton Aviation Services II LLC in 1997. The increase in the deferred income balance at September 30, 1998 is attributable to differences between the payments due and the rental income earned on the TWA leases for the 14 aircraft currently on lease to TWA. For income recognition purposes, the Partnership recognizes rental income over the life of the lease in equal monthly amounts. As a result, the difference between rental income earned and the rental payments due is recognized as deferred income. The rental payments due from TWA during the nine months ended September 30, 1998 exceeded the rental income earned, causing an increase in the deferred income balance. On January 30, 1997, one Boeing 737-200, formerly on lease to Viscount Air Services, Inc. (Viscount), was sold to American Aircarriers Support, Inc. on an "as-is, where-is" basis for $660,000 cash. In addition, the Partnership retained maintenance reserves from the previous lessee of $217,075, that had been held by the Partnership, which were recognized as additional sale proceeds. A net loss of $26,079 was recorded on the sale of the aircraft during the first six months of 1997. Interest income decreased during the three and nine months ended September 30, 1998, as compared to the same periods in 1997, primarily due to the December 1997 payoff of the Promissory note related to the aircraft sold to Triton Aviation Services II LLC in 1997. Operating expenses increased during the three and nine months ended September 30, 1998, as compared to the same periods in 1997, due to an increase in legal 10 expenses. During the nine months ended September 30, 1998, the Partnership recognized legal expenses of $144,000 related to the Viscount default and Chapter 11 bankruptcy filing, compared to approximately $88,000 during the same period in 1997. The Partnership also recognized legal expenses of approximately $93,000 during the nine months ended September 30, 1998, related to the sale of aircraft to Triton in 1997. The Partnership had been holding a security deposit, received from Jet Fleet in 1992, pending the outcome of bankruptcy proceedings. The bankruptcy proceeding of Jet Fleet Corporation was closed on August 6, 1997, and the bankruptcy proceeding of Jet Fleet International Airlines, Inc. was closed on February 10, 1998. Consequently, the Partnership recognized, during the quarter ended March 31, 1998, revenue of $50,000 that had been held as a deposit. Claims Related to Lessee Defaults Braniff, Inc. (Braniff) Bankruptcy - As discussed more fully in Note 3, Braniff's bankrupt estate has made a payment in the amount of $200,000 in respect of the unsecured claims of the Partnership and other affiliates of Polaris Investment Management Corporation. Of this amount, $15,385 was allocated to the Partnership, based on its pro rata share of the total claims, and recognized as revenue during the quarter ended March 31, 1998, which is included in other income. Liquidity and Cash Distributions Liquidity - The Partnership received all payments due from its sole lessee, TWA, during 1998, although the September 1998 lease payment was not received until October 1, 1998. This rent was included in rent and other receivables on the balance sheet at September 30, 1998. Payments totaling $133,285 and $162,488 were received during the nine months ended September 30, 1998 and 1997, respectively, from the sale of inventoried parts from the six disassembled aircraft. Polaris Investment Management Corporation, the general partner, has determined that the Partnership maintain cash reserves as a prudent measure to ensure that the Partnership has available funds in the event that the aircraft presently on lease to TWA require remarketing and for other contingencies, including expenses of the Partnership. The Partnership's cash reserves will be monitored and may be revised from time to time as further information becomes available in the future. Cash Distributions - Cash distributions to limited partners during the three months ended September 30, 1998 and 1997 were $1,874,898, or $3.75 per limited partnership unit and $3,799,977, or $7.60 per unit, respectively. Cash distributions to limited partners during the nine months ended September 30, 1998 and 1997 were $16,799,093, or $33.60 per limited partnership unit and $11,924,928 or $23.85 per unit, respectively. The increase in distributions for the nine months ended September 30, 1998, as compared to the same period in 1997, is due to the distribution of the proceeds received from the prepayment of a note due from Triton Aviation Services II LLC on December 30, 1997. The timing and amount of future cash distributions are not yet known and will depend on the Partnership's future cash requirements (including expenses of the Partnership), the need to retain cash reserves as previously discussed in the Liquidity section, and the receipt of rental payments from TWA. 11 Impact of the Year 2000 Issue The inability of business processes to continue to function correctly after the beginning of the Year 2000 could have serious adverse effects on companies and entities throughout the world. As discussed in prior filings with the Securities and Exchange Commission, the General Partner has engaged GE Capital Aviation Services, Inc. ("GECAS") to provide certain management services to the Partnership. Both the General Partner and GECAS are wholly-owned subsidiaries (either direct or indirect) of General Electric Capital Corporation ("GECC"). All of the Partnership's operational functions are handled either by the General Partner and GECAS or by third parties (as discussed in the following paragraphs), and the Partnership has no information systems of its own. GECC and GECAS have undertaken a global effort to identify and mitigate Year 2000 issues in their information systems, products and services, facilities and suppliers as well as to assess the extent to which Year 2000 issues will impact their customers. Each business has a Year 2000 leader who oversees a multi-functional remediation project team responsible for applying a Six Sigma quality approach in four phases: (1) define/measure -- identify and inventory possible sources of Year 2000 issues; (2) analyze -- determine the nature and extent of Year 2000 issues and develop project plans to address those issues; (3) improve -- execute project plans and perform a majority of the testing; and (4) control -- complete testing, continue monitoring readiness and complete necessary contingency plans. The progress of this program is monitored at each business, and company-wide reviews with senior management are conducted monthly. GECC and GECAS management plan to have completed the first three phases of the program for a substantial majority of mission-critical systems by the end of 1998 and to have nearly all significant information systems, products and services, facilities and suppliers in the control phase of the program by mid-1999. As noted elsewhere, the Partnership has fourteen aircraft remaining in its portfolio at this time. All of these remaining aircraft are on lease with Trans World Airlines,Inc.("TWA"). TWA has advised GECAS that it has adopted procedures to identify and address Year 2000 issues and that it has developed a plan to implement required changes in its equipment, operations and systems. To the extent, however, that TWA suffers any material disruption of its business and operations due to Year 2000 failure of equipment or information systems, such disruption would likely have a material adverse effect on the Partnership's operations and financial condition. Aside from maintenance and other matters relating to the Partnership's aircraft-related assets discussed above, the principal third-party vendors to the Partnership are those providing the Partnership with services such as accounting, auditing, banking and investor services. GECAS intends to apply the same standards in determining the Year 2000 capabilities of the Partnership's third-party vendors as GECAS will apply with respect to its outside vendors pursuant to its internal Year 2000 program. The scope of the global Year 2000 effort encompasses many thousands of applications and computer programs; products and services; facilities and facilities-related equipment; suppliers; and, customers. The Partnership, like all business operations, is also dependent on the Year 2000 readiness of infrastructure suppliers in areas such as utility, communications, transportation and other services. In this environment, there will likely be instances of failure that could cause disruptions in business processes or that could affect customers' ability to repay amounts owed to the Partnership or 12 vendors' ability to provide services without interruption. The likelihood and effects of failures in infrastructure systems, over which the Partnership has no control, cannot be estimated. However, aside from the impact of any such possible failures or the possibility of a disruption of TWA's business caused by Year 2000 failures, the General Partner does not believe that occurrences of Year 2000 failures will have a material adverse effect on the financial position, results of operations or liquidity of the Partnership. To date, the Partnership has not incurred any Year 2000 expenditures nor does it expect to incur any material costs in the future. However, the activities involved in the Year 2000 effort necessarily involve estimates and projections of activities and resources that will be required in the future. These estimates and projections could change as work progresses. 13 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) 1997 Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K (Form 10-K) and in Item 1 of Part II of the Partnership's Quarterly Report to the SEC on Form 10-Q (Form 10-Q) for the periods ended March 31, 1998 and June 30, 1998, there are a number of pending legal actions or proceedings involving the Partnership. Except as described below, there have been no material developments with respect to any such actions or proceedings during the period covered by this report. Viscount Air Services, Inc. (Viscount) Bankruptcy - As previously disclosed, First Security Bank, N.A., as owner trustee for the Partnership (the Owner Trustee), filed a motion for summary judgment on all claims in the lawsuit against BAE Aviation, Inc., STS Services, Inc. and Piping Design Services, Inc. (collectively, the Defendants). The motion was briefed and argued on August 10, 1998, and the court issued a Minute Entry granting the motion on September 24, 1998. Accordingly, the Owner Trustee has lodged a form of judgment dismissing the counterclaim and exonerating the bond previously posted by the Owner Trustee. The court has not yet entered judgment. Ron Wallace v. Polaris Investment Management Corporation, et al. - On November 9, 1998, defendants, acting through their counsel, entered into a settlement agreement with plaintiffs and with the plaintiff in a related action, Accelerated High Yield Income Fund v. Polaris Investment Management Corporation, et al. The settlement is subject to final approval by the Court. The settlement agreement does not provide for any payments to be made to the Partnership. Plaintiff's counsel is seeking reimbursement from the Partnership of an as yet to be determined amount of fees and expenses. A settlement notice setting forth the terms of the settlement will be mailed to the last known address of each unitholder of the Partnership by November 20, 1998. On November 10, 1998, the Court preliminarily approved the settlement. A hearing to determine whether the settlement should be finally approved by the Court is scheduled for December 22, 1998. Other Proceedings - Item 10 in Part III of the Partnership's 1997 Form 10-K and Item 1 in Part II of the Partnership's Form 10-Q for the periods ended March 31, 1998 and June 30, 1998 discuss certain actions which have been filed against Polaris Investment Management Corporation and others in connection with the sale of interests in the Partnership and the management of the Partnership. The Partnership is not a party to these actions. There have been no material developments with respect to any of the actions described therein during the period covered by this report. 14 Item 6. Exhibits and Reports on Form 8-K a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) 27. Financial Data Schedule (in electronic format only). 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. 15 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 November 16, 1998 By: /S/Marc A. Meiches - -------------------------------- ------------------ Mark A. Meiches Chief Financial Officer (principal financial officer and principal accounting officer of Polaris Investment Management Corporation, General Partner of the Registrant) 16 EX-27 2
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