UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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_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, 1995

___ 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. 2-91762

POLARIS AIRCRAFT INCOME FUND I
------------------------------
(Exact name of registrant as specified in its charter)

California 94-2938977
---------- ----------
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)

201 Mission Street, 27th Floor, San Francisco, California 94105
- --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (415) 284-7400

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 whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-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.___

No formal market exists for the units of limited partnership interest and
therefore there exists no aggregate market value at December 31, 1995.

Documents incorporated by reference: None

This document consists of 48 pages.

PART I

Item 1. Business

The principal objectives of Polaris Aircraft Income Fund I (PAIF-I 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-I was organized as a California
limited partnership on June 27, 1984 and will terminate no later than December
2010.

PAIF-I 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 GE Capital Aviation
Services, Inc. (GECAS), Polaris Aircraft Leasing Corporation (PALC), Polaris
Holding Company (PHC) and General Electric Capital Corporation (GE Capital),
acquire, lease, finance, sell and remarket aircraft for their own accounts and
for existing aircraft and aircraft leasing programs managed by them. Further,
GECAS provides a significant range of management services to GPA Group plc, a
public limited company organized in Ireland, together with its consolidated
subsidiaries (GPA), which acquires, leases and sells aircraft. Accordingly, in
seeking to re-lease and sell its aircraft, the Partnership may be in competition
with the general partner, its affiliates, and GPA.

A brief description of the aircraft owned by the Partnership is set forth in
Item 2. The following table describes certain material terms of the
Partnership's aircraft leases as of December 31, 1995 which consist of three
leases to Viscount Air Service, Inc. (Viscount). As discussed in Items 7 and 8,
Viscount defaulted on certain payments due to the Partnership. Viscount was then
notified on January 9, 1996 that the Partnership had elected to terminate the
leases (which is disputed by Viscount). Viscount subsequently filed a petition
for protection under Chapter 11 of the United States Bankruptcy Code (Items 3, 7
and 8) and currently has possession of the Partnership's aircraft and engines.
Viscount's ultimate compliance or non-compliance with end of lease maintenance
return conditions may require the Partnership to evaluate whether a sale or a
release of the Partnership's aircraft and engines would be most beneficial for
the Partnership's unit holders. As a result of Viscount's defaults and Chapter
11 bankruptcy filing, the Partnership may incur maintenance, remarketing,
transition and legal costs related to the Partnership's aircraft and engines.

Scheduled
Number Lease
Lessee Aircraft Type of Aircraft Expiration Renewal Options
------ ------------- ----------- ---------- ---------------

Viscount Boeing 737-200 1 8/99 (1) None
Viscount Boeing 737-200 1 9/97 (2) None
Viscount Boeing 737-200 1 9/97 (3) None

(1) The aircraft leased to Viscount was previously leased to Jet Fleet
Corporation. The lease with Viscount was at a variable rate based on
aircraft usage through August 1994. In 1994, the Partnership negotiated a
new lease with Viscount for five years through August 1999. The new fixed
lease rate is approximately 116% of the prior average variable rate.
Viscount subsequently entered into a sub-lease agreement for the aircraft
with Nations Air Express, Inc. (Nations Air) for a term of one year
through February 1996. The sublease was then extended through February

1998. Rent and maintenance reserve payments due to Viscount from Nations
Air are paid directly to the Partnership and are applied against payments
due the Partnership from Viscount. Nations Air is currently past-due on
its sub-lease rent payment due to the Partnership in March 1996. The
Partnership's termination of the Viscount lease (which is disputed by
Viscount) and Viscount's Chapter 11 bankruptcy filing, create uncertainty
as to the status of the Nations Air sub-lease.

The Partnership, Viscount and Nations Air have agreed to share in the cost
of certain heavy maintenance work performed on this aircraft. The
agreement stipulates that the Partnership loan Nations Air its portion of
the maintenance cost of $264,108 to be repaid by Nations Air in twelve
monthly installments, with interest at a variable rate, beginning in
November 1995. Nations Air is currently past due on two of its monthly
installments to the Partnership in 1996. The Partnership also loaned
Viscount its portion of the maintenance cost of $154,108 to be repaid by
Viscount in monthly installments of $10,000, with interest at a variable
rate, beginning in November 1995. As discussed in Items 7 and 8, Viscount
is currently in default on this loan. The Partnership's share of the
maintenance cost was approximately $903,000, of which approximately
$329,000 was paid from maintenance reserves previously paid to the
Partnership by Viscount and Nations Air.

(2) The aircraft leased to Viscount was previously leased to Braniff, Inc.
(Braniff). The new lease rate represents 35% of the rate specified under
the prior lease to Braniff.

(3) The aircraft leased to Viscount was previously leased to America West
Airlines (America West). The new lease rate represents 56% of the rate
specified under the prior lease to America West.

American Air Lease, Inc. (American Air Lease) defaulted under its lease of one
Boeing 737-200 aircraft in June 1991, and three Boeing 737-200s were off-lease
as a result of the Braniff bankruptcy. As a result of market conditions, all
four of these aircraft were transferred to aircraft inventory during 1993 and
1992 and disassembled for sale of their component parts.

In 1995, the Partnership sold the airframe from one Boeing 737-200 aircraft that
was previously leased to Cambodia International Airlines Company, Ltd. (Cambodia
International) until Cambodia International returned the aircraft to the
Partnership in September 1993. The Partnership has leased two engines from this
aircraft and one engine, previously leased to Viscount, to CanAir Cargo Ltd,
(CanAir) for three years beginning in May 1994. CanAir has an option to renew
the lease for one three-year period at the same rental rate. In addition, the
Partnership has leased one engine to Viscount for one year beginning in June
1995. One additional engine has been on-lease to Viscount through a joint
venture with Polaris Aircraft Income Fund II from April 1993 through November
1997. The following table describes certain material terms of the Partnership's
engine leases as of December 31, 1995.

Number Lease
Lessee Engine Type of Engines Expiration Renewal Options
- ------ ----------- ---------- ---------- ---------------

CanAir JT8D-9A 3 5/97 One three-year period
Viscount JT8D-9A 1 6/96 None
Viscount JT8D-9A 1 11/97 None

Industry-wide, approximately 475 commercial aircraft are currently available for
sale or lease, approximately 125 less than a year ago. From 1991 through 1994,
depressed demand for air travel limited airline expansion plans, with new

aircraft orders and scheduled deliveries being canceled or substantially
deferred. As profitability declined, many airlines took action to downsize or
liquidate assets and some airlines were forced to file for bankruptcy
protection. Following two years of good traffic growth accompanied by rising
yields, this trend is improving with new aircraft orders last year exceeding
deliveries for the first time since 1990. To date, this recovery has mainly
benefited Stage 3 narrow-bodies and younger Stage 2 narrow-bodies, many of which
are now being upgraded with noise suppression hardware, commonly known as
"hushkits," which, when installed on the aircraft, bring Stage 2 aircraft into
compliance with Federal Aviation Administration (FAA) Stage 3 noise restrictions
as discussed in the Industry Update section of Item 7. Older Stage 2
narrow-bodies have shown marginal signs of recovery. 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, as discussed in Items 7 and 8. A discussion of the current market
condition for the type of aircraft owned by the Partnership follows:

Boeing 737-200 - The Boeing 737-200 aircraft was introduced in 1967 and 150 were
delivered from 1967 through 1971. This two-engine, two-pilot aircraft provides
operators with 107 to 130 seats, meeting their requirements for economical lift
in the 1,100 nautical mile range. Hushkits which bring the Boeing 737-200
aircraft into compliance with FAA Stage 3 noise restrictions, are now available
at a cost of approximately $1.5 per aircraft. 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 Airworthiness Directives (ADs)
applicable to all models of this aircraft have been issued by the FAA to prevent
fatigue cracks and control corrosion as discussed in Item 7. The market for this
type of aircraft, as for all Stage 2 narrow body aircraft, has improved over the
previous year.

The general partner believes that, in addition to the factors cited above, the
deteriorated market for the Partnership's aircraft reflects 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 as discussed in the Industry Update section of Item 7.

Item 2. Properties

PAIF-I owns three commercial jet aircraft, five spare engines and certain
inventoried aircraft parts from its original portfolio of eleven commercial jet
aircraft. The Partnership's entire fleet consists of Stage 2 aircraft. The
Partnership's three Boeing 737-200 aircraft are currently in the possession of
Viscount which has filed for Chapter 11 bankruptcy protection in January 1996 as
discussed in Items 3, 7 and 8. In 1990, the Partnership sold its Boeing 737-200
Convertible Freighter aircraft formerly leased to Aloha Airlines, Inc. In July
1992, the Partnership sold its McDonnell Douglas DC-9-10 aircraft, which was
formerly leased to Hawaiian Airlines, Inc. In December 1994, Viscount exercised
its option to purchase one Boeing 737-200 aircraft it was leasing. In April
1995, the Partnership sold the airframe from one Boeing 737-200 aircraft
formerly leased to Cambodia International. During 1992, the Partnership
transferred three Boeing 737-200 aircraft, formerly on lease to Braniff, to
aircraft inventory. In 1993, one additional Boeing 737-200 aircraft, formerly on
lease to American Air Lease, was transferred to aircraft inventory. The
inventoried aircraft, which are not included in the following table, have been
disassembled for sale of their component parts. Three engines from the
inventoried aircraft and two engines from the former Cambodia International
aircraft are currently leased to CanAir or in the possession of Viscount as
previously discussed in Item 1.

The following table describes the Partnership's current aircraft portfolio in
greater detail:

Year of Cycles
Aircraft Type Serial Number Manufacture As of 11/30/95 (1)
- --------------- ------------- ----------- ------------------
Boeing 737-200 19606 1968 63,233
Boeing 737-200 19617 1969 59,339
Boeing 737-200 20125 1969 61,968

(1) Cycle information as of 12/31/95 is not yet available

Item 3. Legal Proceedings

American Air Lease, Inc. (American Air Lease) Settlement - On July 30, 1991, the
Partnership filed a complaint in the Superior Court of the State of California
for the City and County of San Francisco, seeking damages for unpaid rent and
other defaults against lessee American Air Lease, and guarantor Americom Leasing
Group, Inc. American Air Lease and the Partnership reached a settlement by which
American Air Lease agreed to provide the Partnership with certain cash payments,
return of the aircraft and a certain participation in the proceeds, if any, from
the default judgment American Air Lease obtained against its lessee, Pan African
Airways. By a court order dated December 16, 1992, the settlement was reduced to
a judgment. The Partnership has sought to enforce the cash award part of the
settlement against the lessee and the guarantor in New York courts and has
reached a settlement payment with the lessee and the guarantor. The Partnership
settled its claims against the insurers for payment of insurance proceeds of
$400,000 and received payment of such amount from the insurers in July 1995.

Markair, Inc. (Markair) Bankruptcy - On June 6, 1992, the Partnership
repossessed two Boeing 737-200 aircraft leased to Markair, and formerly leased
to Braniff, for Markair's failure to make rental payments when due. Markair
commenced reorganization proceedings under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the Third District of
Alaska, and on June 11, 1992, the Partnership filed a proof of claim in the case
to recover damages for past due rent and for Markair's failure to meet return
conditions with respect to the Partnership's aircraft. In August 1993, the
Bankruptcy Court approved a plan of reorganization for Markair and a stipulation
relating to the Partnership's claims against Markair. The stipulation approved
by the Bankruptcy Court allowed the Partnership to retain the security deposits
and maintenance reserves previously posted by Markair and also allowed the
Partnership an unsecured claim against Markair for $445,000, which was converted
to subordinated debentures during 1994. Markair has defaulted on its payment
obligations on such debentures. On April 14, 1995, Markair commenced new
reorganization proceedings under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the Third District of Alaska. On
October 25, 1995, Markair converted its Chapter 11 reorganization proceeding
into a proceeding under Chapter 7 of the United States Bankruptcy Code in the
same court. The trustee, Key Bank of Washington, is taking steps to protect the
interests of the debenture holders, including the Partnership, by filing proofs
of claim in this proceeding.

Braniff, Inc. (Braniff) Bankruptcy - In September 1989, Braniff filed a petition
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Middle District of Florida, Orlando Division. On
September 26, 1990 the Partnership filed a proof of claim to recover unpaid rent
and other damages, and on November 27, 1990, the Partnership filed a proof of
administrative claim to recover damages for detention of aircraft,
non-compliance with court orders and post-petition use of engines as well as

liquidated damages. On July 27, 1992, the Bankruptcy Court approved a
stipulation embodying a settlement among the Partnership, the Braniff creditor
committees and Braniff in which it was agreed that the Partnership would be
allowed an administrative claim in the bankruptcy proceeding of approximately
$2,076,923. The Partnership has received a check from the bankruptcy estate in
full payment of the allowed administrative claim, subject, however, to the
requirement of the stipulation that 25% of such proceeds be held in a separate,
interest-bearing account pending notification by Braniff that all the allowed
administrative claims have been satisfied. In the third quarter of 1994, the
Partnership was authorized to release one-half of the 25% portion of the
Partnership's administrative claim segregated pursuant to the stipulation
approved in 1992. At the end of 1994, the Partnership was advised that the
remaining one-half balance of the 25% segregated portion of the administrative
claim payment could be released. As the final disposition of the Partnership's
claim in the Bankruptcy proceedings, the Partnership was permitted by the
Bankruptcy Court to exchange a portion of its unsecured claim for Braniff's
right (commonly referred to as a "Stage 2 Base Level right") under the FAA noise
regulations to operate nine Stage 2 aircraft and has been allowed a net
remaining unsecured claim of $6,923,077 in the proceedings. The unsecured claim
will not be recorded as revenue by the Partnership until it is received. It
cannot be estimated at this time when and if this claim will be paid.

Jet Fleet Corporation (Jet Fleet) Bankruptcy - In September 1992, Jet Fleet,
lessee of one of the Partnership's aircraft, defaulted on its obligations under
the lease for the Partnership's aircraft by failing to pay reserve payments and
to maintain required insurance. The Partnership repossessed its aircraft on
September 28, 1992 at Sanford Regional Airport, Florida. Thereafter, Jet Fleet
filed for bankruptcy protection in the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division. On April 13, 1993, the Partnership
filed a proof of claim in the Jet Fleet bankruptcy to recover its damages.
However, no action on the Partnership's proof of claim has been taken by the
Bankruptcy Court.

Viscount Air Services, Inc. (Viscount) Bankruptcy - On January 24, 1996,
Viscount filed a petition for protection under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Arizona. Polaris Holding Company, the Partnership, Polaris Aircraft Income Fund
II, Polaris Aircraft Income Fund IV, and Polaris Aircraft Investors XVIII
(collectively, Polaris Entities) lease a total of ten aircraft and two spare
engines to Viscount. The aggregate outstanding obligations of Viscount to the
Polaris Entities is approximately $11.0 million. GE Capital Aviation Services,
Inc. (GECAS), as agent for the Polaris Entities, terminated the aircraft and
engine leases pre-petition, but Viscount disputes the effectiveness of the
termination and currently has possession of the aircraft and engines. GECAS and
Viscount are currently negotiating to determine if they can resolve their
differences by agreement. The outcome of this Chapter 11 proceeding cannot be
predicted.

Kepford, et al. v. Prudential Securities, et al. - On April 13, 1994, an action
entitled Kepford, et al. v. Prudential Securities, Inc. was filed in the
District Court of Harris County, Texas. The complaint names Polaris Investment
Management Corporation, Polaris Securities Corporation, Polaris Holding Company,
Polaris Aircraft Leasing Corporation, the Partnership, Polaris Aircraft Income
Fund II, Polaris Aircraft Income Fund III, Polaris Aircraft Income Fund IV,
Polaris Aircraft Income Fund V, Polaris Aircraft Income Fund VI, General
Electric Capital Corporation, Prudential Securities, Inc., Prudential Insurance
Company of America and James J. Darr, as defendants. Certain defendants were
served with a summons and original petition on or about May 2, 1994. Plaintiffs'
original petition alleges that defendants violated the Texas Securities Act, the
Texas Deceptive Trade Practices Act, sections 11 and 12 of the Securities Act of
1933 and committed common law fraud, fraud in the inducement, negligent
misrepresentation, negligence, breach of fiduciary duty and civil conspiracy by
misrepresenting and failing to disclose material facts in connection with the

sale of limited partnership units in the Partnership and the other Polaris
Aircraft Income Funds. Plaintiffs seek, among other things, an award of
compensatory damages in an unspecified amount plus interest thereon, and double
and treble damages under the Texas Deceptive Trade Practices Act.

Certain defendants, including Polaris Investment Management Corporation and the
Partnership, filed a general denial on June 29, 1994 and a motion for summary
judgment on June 17, 1994 on the basis that the statute of limitations has
expired. On June 29, 1994 and July 14, 1994, respectively, plaintiffs filed
their first amended original petition and second amended original petition, both
of which added plaintiffs. On July 18, 1994, plaintiffs filed their response and
opposition to defendants' motion for partial summary judgment and also moved for
a continuance on the motion for partial summary judgment. On August 11, 1994,
after plaintiffs again amended their petition to add numerous plaintiffs, the
defendants withdrew their summary judgment motion and motion to stay discovery,
without prejudice to refiling these motions at a later date.

Riskind, et al. v. Prudential Securities, Inc., et al. - An action entitled
Riskind, et al. v. Prudential Securities, Inc., et al. has been filed in the
District Court of the 165 Judicial District, Maverick County, Texas. This action
is on behalf of over 3,000 individual investors who purchased units in "various
Polaris Aircraft Income Funds," including the Partnership. The Partnership and
Polaris Investment Management Corporation received service of plaintiffs' second
amended original petition and, on June 13, 1994, filed an original answer
containing a general denial.

The second amended original petition names the Partnership, Polaris Investment
Management Corporation, Prudential Securities, Inc. and others as defendants and
alleges that these defendants violated the Texas Securities Act and the Texas
Deceptive Trade Practices Act and committed common law fraud, fraud in the
inducement, negligent misrepresentation, negligent breach of fiduciary duty and
civil conspiracy by misrepresenting and failing to disclose material facts in
connection with the sale of limited partnership units in the Partnership and the
other Polaris Aircraft Income Funds. Plaintiffs seek, among other things, an
award of compensatory damages in an unspecified amount plus interest thereon,
and double and treble damages under the Texas Deceptive Trade Practices Act.
Kidder, Peabody & Co. was added as an additional defendant by virtue of an
Intervenor's Amended Plea in Intervention filed on or about April 7, 1995.

Prudential Securities, Inc. reached a settlement with the plaintiffs. The trial
of the claims of one plaintiff, Robert W. Wilson, against Polaris Aircraft
Income Funds I-VI, Polaris Investment Management Corporation and various
affiliates of Polaris Investment Management Corporation, including General
Electric Capital Corporation, was commenced on July 10, 1995. On July 26, 1995,
the jury returned a verdict in favor of the defendants on all counts. Subsequent
to this verdict, all of the defendants (with the exception of Prudential
Securities, Inc., which had previously settled) entered into a settlement with
the plaintiffs. None of the Polaris Aircraft Income Funds were required to
contribute to this settlement.

Howland, et al. v. Polaris Holding Company, et al. - On or about February 4,
1994, a purported class action entitled Howland, et al. v. Polaris Holding
Company, et al. was filed in the United States District Court for the District
of Arizona on behalf of investors in Polaris Aircraft Income Funds I-VI. The
complaint names each of Polaris Investment Management Corporation, Polaris
Securities Corporation, Polaris Holding Company, Polaris Aircraft Leasing
Corporation, the Partnership, Polaris Aircraft Income Fund II, Polaris Aircraft
Income Fund III, Polaris Aircraft Income Fund IV, Polaris Aircraft Income Fund
V, Polaris Aircraft Income Fund VI, General Electric Capital Corporation,
Prudential Securities, Inc., Prudential Securities Group, Inc., Prudential
Insurance Company of America, George W. Ball, Robert J. Sherman, James J. Darr,
Paul J. Proscia, Frank W. Giordano, William A. Pittman, Joseph H. Quinn, Joe W.

Defur, James M. Kelso and Brian J. Martin, as defendants. The complaint alleges
that defendants violated federal RICO statutes, committed negligent
misrepresentations, and breached their fiduciary duties by misrepresenting and
failing to disclose material facts in connection with the sale of limited
partnership units in the Partnership and the other Polaris Aircraft Income
Funds. Plaintiffs seek, among other things, an accounting of all monies invested
by plaintiffs and the class and the uses made thereof by defendants, an award of
compensatory, punitive and treble damages in unspecified amounts plus interest
thereon, rescission, attorneys' fees and costs. On August 3, 1994, the action
was transferred to the Multi-District Litigation in the Southern District of New
York entitled In re Prudential Securities Limited Partnerships Litigation,
discussed in Part III, Item 10 below.

Adams, et al. v. Prudential Securities, Inc., et al. - On or about February 13,
1995, an action entitled Adams, et al. v. Prudential Securities, Inc. et al. was
filed in the Court of Common Pleas, Stark County, Ohio. The action names
Prudential Securities, Inc., Prudential Insurance Company of America, Polaris
Investment Management Corporation, Polaris Securities Corporation, Polaris
Aircraft Leasing Corporation, Polaris Holding Company, General Electric Capital
Corporation, the Partnership, Polaris Aircraft Income Fund IV, Polaris Aircraft
Income Fund V and James Darr as defendants. The complaint alleges that
defendants committed common law fraud, fraud in the inducement, negligent
misrepresentation, negligence, breach of fiduciary duty and civil conspiracy by
misrepresenting and failing to disclose material facts in connection with the
sale of limited partnership units in the Partnership and the other Polaris
Aircraft Income Funds. Plaintiffs seek, among other things, rescission of their
investments in the Partnership and the other Polaris Aircraft Income Funds, an
award of compensatory damages in an unspecified amount plus interest thereon,
and punitive damages in an unspecified amount. On or about March 15, 1995, this
action was removed to the United States District Court for the Northern District
of Ohio, Eastern Division. Subsequently, the Judicial Panel transferred this
action to the Multi-District Litigation filed in the united States District
Court for the Southern District of New York, which is described in Item 10 of
Part III below.

Other Proceedings - Part III, Item 10 discusses certain other actions which have
been filed against the general partner in connection with certain public
offerings, including that of the Partnership. With the exception of Novak, et al
v. Polaris Holding Company, et al, where the Partnership is named as a
defendant, the Partnership is not a party to these actions. In Novak, a
derivative action, the Partnership is named as a defendant for procedural
purposes but the plaintiffs in such lawsuit do not seek an award from the
Partnership.

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

None.

PART II

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

a) Polaris Aircraft Income Fund I's (PAIF-I or the Partnership) limited
partnership interests (Units) are not publicly traded. Currently there
is no formal market for PAIF-I'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, 1995
--------------------------- ------------------------

Limited Partnership Interest: 6,727

General Partnership Interest: 1

c) Dividends:

Distributions of cash from operations commenced in 1987. The
Partnership made cash distributions to limited partners of $1,434,196
and $1,349,832, or $8.50 and $8.00 per limited partnership unit during
1995 and 1994, respectively.

Item 6. Selected Financial Data

For the years ended December 31,

1995 1994 1993 1992 1991
---- ---- ---- ---- ----

Revenues $ 3,196,035 $ 3,081,215 $ 2,823,141 $ 3,541,108 $ 2,831,321

Net Income (Loss) 446,293 829,960 (3,084,396) (12,536,518) (15,804,784)

Net Income (Loss)
allocated to Limited
Partners 298,425 686,691 (3,193,583) (12,411,153) (15,731,092)

Net Income (Loss) per
Limited Partnership Unit 1.77 4.07 (18.93) (73.56) (93.23)

Cash Distributions per
Limited Partnership
Unit 8.50 8.00 8.30 -- 5.00

Amount of Cash
Distributions Included
Above Representing
a Return of Capital on
a Generally Accepted
Accounting Principle
Basis per Limited
Partnership Unit* 8.50 8.00 8.30 -- 5.00

Total Assets 16,288,799 16,487,091 16,831,113 22,733,308 36,090,023

Partners' Capital 13,826,993 14,974,251 15,644,104 20,284,557 32,821,075

* The portion of such distributions which represents a return of capital on an
economic basis will depend in part on the residual sale value of the
Partnership's aircraft and thus will not be ultimately determinable until the
Partnership disposes of its aircraft. However, such portion may be significant
and may equal, exceed or be smaller than the amount shown in the above table.

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

Polaris Aircraft Income Fund I (the Partnership) owns a portfolio of three used
Boeing 737-200 commercial jet aircraft, five spare engines and certain
inventoried aircraft parts out of its original portfolio of eleven aircraft. The
three aircraft are currently in the possession of Viscount Air Services, Inc.
(Viscount) which defaulted on it's obligations to the Partnership and
subsequently filed for Chapter 11 bankruptcy protection in January 1996 as
discussed below and in Items 3 and 8. Viscount has sub-leased one of these
aircraft to Nations Air Express, Inc. (Nations Air) through February 1998 as
discussed below. The lease of one aircraft to Cambodia International Airlines
Company, Ltd. (Cambodia International) was terminated early by the lessee in
September 1993 and the aircraft was returned to the Partnership. The airframe
from this aircraft was sold in April 1995 to Pinnacle Aircraft Leasing, Inc.
(Pinnacle Aircraft Leasing) as discussed below. The Partnership leased the two
engines from this aircraft and one additional engine to CanAir Cargo Ltd.
(CanAir). In addition, the Partnership transferred four aircraft to aircraft
inventory during 1992 and 1993. These aircraft have been disassembled for sale
of their component parts. Two engines from these aircraft remain in the
possession of Viscount. One additional engine from these aircraft was sold to
Viscount during 1995 as discussed below. The Partnership has sold three aircraft
and one airframe from its original aircraft portfolio: a Boeing 737-200
Convertible Freighter in 1990, a McDonnell Douglas DC-9-10 in 1992, a Boeing
737-200 in 1993 and the airframe from a Boeing 737-200 aircraft in April 1995 as
discussed below.

Remarketing Update

Sub-lease of Boeing 737-200 - Viscount entered into a sub-lease agreement for
one of the Partnership's Boeing 737-200 aircraft with Nations Air for a term of
one year through February 1996. The sublease has been extended through February
1998. Rent and maintenance reserve payments due to Viscount from Nations Air are
paid directly to the Partnership and are applied against payments due the
Partnership from Viscount. All payments, whether due from Viscount directly, or
indirectly from Nations Air, may be affected by Viscount's filing for protection
under Chapter 11 as discussed below. Nations Air is currently past due on
certain payments due the Partnership in 1996.

Sale of Boeing 737-200 Airframe - In April 1995, the Partnership sold the
airframe of the off-lease Boeing 737-200 aircraft, formerly leased to Cambodia
International, to Pinnacle Aircraft Leasing for $300,000. As previously
discussed, the two engines from this aircraft are currently on lease through May
1997 to CanAir. No gain or loss was recorded on the sale as the sales price of
the airframe equaled its net book value.

Sale of Engine to Viscount - One engine was transferred from aircraft inventory
to aircraft at an estimated fair value of $200,000 during 1995. The Partnership
incurred certain maintenance and refurbishment costs on this engine aggregating
$244,000, which were capitalized in 1995. The Partnership leased this engine to
Viscount for one year beginning in July 1995 at a rental rate of $10,500 per
month with a provision for early termination. The Partnership subsequently sold
this engine to Viscount for a sales price of $461,849 and recorded a gain on
sale of $17,849 in 1995. The Partnership agreed to accept payment of the sales
price in 57 installments of $10,500, with interest at a rate of 11.265% per
annum. The Partnership recorded a note receivable for the sales price. The
balance of the note receivable, which is secured by the engine, was $455,685 at
December 31, 1995. As discussed below, at December 31, 1995 Viscount was in
default on certain payments due the Partnership, including payments on this note
receivable. No allowance for credit losses was provided for this note receivable
from Viscount.

Partnership Operations

The Partnership recorded net income of $446,293, or $1.77 per limited
partnership unit for the year ended December 31, 1995, compared to net income of
$829,960, or $4.07 per limited partnership unit for the year ended December 31,
1994 and a net loss of $3,084,396, or $18.93 per limited partnership unit for
the year ended December 31, 1993. The net loss for 1993 resulted from the
Braniff Airlines, Inc. and other lessee defaults and the extended period that
the related aircraft were off lease due to market conditions. The Partnership
incurred substantial maintenance expenses to remarket these aircraft as well as
legal expenses related to the defaults. The significant improvement in the
Partnership's operating results for the year ended December 31, 1994, as
compared to 1993, is due primarily to significantly lower depreciation expense
and lower aircraft operating expenses in 1994. The decline in operating results
in 1995, as compared to 1994, is the result of a provision for credit losses of
$956,015 recorded for certain rent and loan receivables from Viscount combined
with higher operating expenses and partially offset by lower depreciation
expense in 1995.

The Partnership has recorded an allowance for credit losses in 1995 for certain
unsecured receivable balances from Viscount including unpaid rents, unpaid
deferred rents and accrued interest as of December 31, 1995 as a result of
Viscount's default on certain obligations due the Partnership and Viscount's
subsequent bankruptcy filing as discussed below. The aggregate allowance for
credit losses of $811,131 for these obligations is reflected in the provision
for credit losses in the Partnership's 1995 statement of operations (Item 8). In
addition, the Partnership recorded an allowance for credit losses equal to the
outstanding principal balance of $144,884 for the maintenance cost-sharing note
receivable from Viscount as discussed below.

Depreciation adjustments in 1995, 1994 and 1993 were $115,000, approximately
$260,000 and approximately $2.5 million, respectively, for declines in the
estimated realizable values of the Partnership's aircraft and aircraft
inventory, as discussed later in the Industry Update section. In addition, no
depreciation expense was recognized after the third quarter of 1993 on one
Boeing 737-200 aircraft as a result of the sale of this aircraft to Viscount.
Two additional Boeing 737- 200s were depreciated to their estimated residual
value in June 1994 and November 1994, respectively.

The Partnership incurred a significant increase in maintenance, repair and legal
expenses in 1993 in connection with the repossession of leased aircraft
following several lessee defaults. In 1994, all lessees performed as required by
their leases or, with respect to Viscount, the restructuring agreement as
discussed later, and operating expenses were reduced. In 1995, the Partnership
agreed to share in the cost of certain heavy maintenance work performed on the
Boeing 737-200 aircraft sub-leased to Nations Air by Viscount. The Partnership
recognized approximately $574,000 of this heavy maintenance work as operating
expense in 1995.

Liquidity and Cash Distributions

Liquidity - As discussed below, prior to January 1, 1996, the Partnership had
been in discussions with Viscount to restructure certain of Viscount's existing
financial obligations to the Partnership. While such discussions were underway,
Viscount had undertaken to pay in full, by the end of each month, beginning in
June 1995, the current month's obligations by making partial periodic payments
during that month. Viscount is presently in default on these financial
obligations to the Partnership. On January 24, 1996, Viscount filed a petition
for protection under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court in Tucson, Arizona. Legal counsel has been
retained and the general partner is evaluating the rights, remedies and courses

of action available to the Partnership with respect to Viscount's default and
bankruptcy filing. All payments, whether due from Viscount directly, or
indirectly from Nations Air, may be affected by Viscount's filing for protection
under Chapter 11. Nations Air is currently past-due on its sub-lease rent
payment due to the Partnership in March 1996.

As of December 31, 1995, the Partnership's aggregate rent, loan and interest
receivable from Viscount was approximately $1.8 million. In addition, delinquent
maintenance reserves due from Viscount aggregate approximately $0.3 million as
of December 31, 1995 for a total of approximately $2.1 million in outstanding
obligations. Viscount's failure to perform on its financial obligations with the
Partnership is expected to have a material adverse effect on the Partnership's
financial position. As a result of Viscount's defaults and Chapter 11 bankruptcy
filing, the Partnership may incur maintenance, remarketing, transition and legal
costs related to the Partnership's aircraft and engines.

The Partnership, Viscount and Nations Air agreed to share in the cost of certain
heavy maintenance work performed on the aircraft sub-leased to Nations Air. The
agreement stipulates that the Partnership loan Nations Air its portion of the
maintenance cost of $264,108 to be repaid by Nations Air in twelve monthly
installments, with interest at a variable rate, beginning in November 1995. The
unpaid balance of the note receivable was $245,597 at December 31, 1995. Nations
Air is currently past-due on two of its monthly installments to the Partnership
in 1996. The Partnership also loaned Viscount its portion of the maintenance
cost of $154,108 to be repaid by Viscount in monthly installments of $10,000,
with interest at a variable rate, beginning in November 1995. Viscount is
presently in default on this loan payment. In addition, during 1995 the
Partnership incurred maintenance and refurbishment costs aggregating $244,000 on
one engine, as previously discussed.

The Partnership receives maintenance reserve payments from its lessees that may
be reimbursed to the lessee or applied against certain costs incurred by the
Partnership for maintenance work performed on the Partnership's aircraft or
engines, as specified in the leases. Maintenance reserve balances remaining at
the termination of the lease, if any, may be used by the Partnership to offset
future maintenance expenses or recognized as revenue. The net maintenance
reserves balances aggregate $2,165,714 as of December 31, 1995.

Payments of approximately $604,000 have been received during 1995 from the sales
of parts from the four disassembled aircraft. The remaining net book value of
the aircraft inventory was fully recovered during 1995.

A portion of the Partnership's cash reserves balance is being retained to cover
the potential costs that the Partnership may incur relating to the Viscount
default and bankruptcy including potential aircraft maintenance, remarketing,
transition and legal costs.

Cash Distributions - Cash distributions to limited partners during 1995, 1994
and 1993 were $1,434,196, $1,349,832 and $1,400,451, respectively. Cash
distributions per limited partnership unit were $8.50, $8.00 and $8.30 during
1995, 1994 and 1993, respectively. The timing and amount of future cash
distributions to partners are not yet known and will depend upon the
Partnership's future cash requirements, including the potential costs that may
be incurred relating to the Viscount default and bankruptcy, the receipt of
delinquent and current rental and loan payments from Viscount and the receipt of
rental payments from CanAir.

Viscount Default and Bankruptcy Filing

In July 1994, the Partnership entered into a restructuring agreement with
Viscount to defer certain rents due the Partnership which aggregated $753,200;
to extend a line of credit to Viscount for a total of $486,000 to be used
primarily for maintenance expenses relating to the Partnership's aircraft; and
to give the Partnership the option to acquire approximately 2.3% of the issued
and outstanding shares of Viscount stock as of July 26, 1994 for an option price
of approximately $349,000. It was not practicable to estimate the fair value of
the stock options as of December 31, 1995, as they are not publicly traded,
although Viscount's recent bankruptcy filing would have an adverse impact on the
value of the stock options, if any.

The deferred rents, which were being repaid by Viscount with interest at a rate
of 6% per annum over the remaining terms of the leases, were recognized as
revenue in the period earned. The unpaid balances of the deferred rents, which
are reflected in rent and other receivables in the December 31, 1995 and 1994
balance sheets (Item 8), were $528,163 and $632,355, respectively. The line of
credit, which was advanced to Viscount during 1994, was being repaid by Viscount
over a 30-month period, beginning in January 1995, with interest at a rate of
11.53% per annum. The line of credit balances, which are reflected in notes
receivable in the December 31, 1995 and 1994 balance sheets, were $339,223 and
$486,000, respectively.

During 1995, the Partnership had been in discussions with Viscount to
restructure additional existing financial obligations of Viscount to the
Partnership. While such discussions were underway, Viscount had undertaken to
pay in full, by the end of each month, beginning in June 1995, the current
month's obligations by making partial periodic payments during that month.
Viscount is presently in default on these financial obligations to the
Partnership. On December 13, 1995, the Partnership issued a notice of default to
Viscount demanding, within 10 days, full payment of all delinquent amounts due
the Partnership. On January 9, 1996, Viscount was notified that the Partnership
had elected to terminate the leases and the Partnership demanded return of the
aircraft. On January 24, 1996, Viscount filed a petition for protection under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court in Tucson, Arizona. Viscount presently has possession of the Partnership's
aircraft and engines. Legal counsel has been retained and the general partner is
evaluating the rights, remedies and courses of action available to the
Partnership with respect to Viscount's default and bankruptcy filing. Although
payments from Nations Air for the aircraft sub-leased from Viscount continue to
be paid directly to the Partnership, the Partnership has received no additional
payments directly from Viscount subsequent to December 31, 1995. The
Partnership's termination of the Viscount lease (which is disputed by Viscount)
and Viscount's Chapter 11 bankruptcy filing, create uncertainty as to the status
of the Nations Air sub-lease.

The Partnership's three Boeing 737-200 commercial jet aircraft and two spare
engines were on lease to Viscount prior to the lease termination notifications.
Viscount had sub-leased one of the Partnership's aircraft to Nations Air through
February 1998 as previously discussed. Payments from Nations Air are paid
directly to the Partnership. In addition to the two spare engines on lease to
Viscount, one spare engine was sold to Viscount in November 1995 as previously
discussed. The payments on the engine finance sale note receivable from Viscount
are also currently in default. As of December 31, 1995, the Partnership's
aggregate rent, loan and interest receivable from Viscount was approximately
$1.8 million. In addition, delinquent maintenance reserves due from Viscount
aggregate approximately $0.3 million as of December 31, 1995 for a total of
approximately $2.1 million in outstanding obligations. All payments, whether due
from Viscount directly or indirectly from Nations Air, may be affected by
Viscount's filing for protection under Chapter 11.

As discussed above, the engine finance sale note receivable, the balance of
which at December 31, 1995 was $455,685, is secured by the engine. The balance
of the line of credit advanced to Viscount in 1994 of $339,223 at December 31,
1995, plus accrued interest, is guaranteed by certain affiliates of the
principal shareholder of Viscount. An allowance for credit losses has not been
provided for these notes. The Partnership has recorded an allowance for credit
losses for the remaining unsecured receivable balances from Viscount for the
aggregate of the unpaid rents, outstanding deferred rent balance and accrued
interest as of December 31, 1995. The aggregate allowance for credit losses of
$811,131 for these obligations is reflected in the provision for credit losses
in the Partnership's 1995 statement of operations (Item 8). In addition, the
Partnership recorded an allowance for credit losses equal to the outstanding
principal balance of $144,884 for the maintenance cost sharing note receivable
from Viscount previously discussed. Viscount's failure to perform on its
financial obligations with the Partnership is expected to have a material
adverse effect on the Partnership's financial position. As a result of
Viscount's defaults and Chapter 11 bankruptcy filing, the Partnership may incur
maintenance, remarketing, transition and legal costs related to the
Partnership's aircraft and engines, which cannot be estimated at this time. The
outcome of Viscount's Chapter 11 proceeding cannot be predicted.

Claims Related to Lessee Defaults

Receipt of American Air Lease, Inc. (American Air Lease) Claim - As discussed in
Item 3, the Partnership filed suit in 1991 seeking damages for unpaid rent and
other defaults against lessee American Air Lease and guarantor Americom Leasing
Group, Inc. (Americom). In November 1994, the Partnership received $91,452
representing settlement of Americom's and American Air Lease's obligation to pay
the original settlement judgement. The Partnership was also entitled to retain
security deposits in the amount of $74,075. Both amounts were recognized as
revenue in claims related to lessee defaults in the 1994 statement of operations
(Item 8). The Partnership settled its claim against the insurers of American Air
Lease for payment of insurance proceeds of $400,000. The Partnership received
the $400,000 in July 1995 and recognized the full amount as revenue in claims
related to lessee defaults in the 1995 statement of operations.

Markair, Inc. (Markair) Claim - As discussed in Item 3, the Partnership
terminated the leases and repossessed the two aircraft in June 1992 and Markair
filed a petition for reorganization under Chapter 11 of the United States
Bankruptcy Code. The Partnership filed a proof of claim in the case to recover
damages for past-due rent and for Markair's failure to meet return conditions
with respect to the Partnership's aircraft. In August 1993, the Bankruptcy Court
approved a plan of reorganization for Markair and a stipulation allows the
Partnership to retain the security deposits and maintenance reserves and an
unsecured claim against Markair for $445,000 which was converted to 10%
subordinated debentures during 1994. The security deposits and maintenance
reserves, which were held by the Partnership under the leases with Markair,
totaled $748,951, of which $47,877 was applied during 1993 to rent owed the
Partnership by Markair. The balance of $701,074 was recognized as revenue in
claims related to lessee defaults in the 1993 statement of operations. During
1994, the Partnership earned interest on the debentures of $33,284 and received
a nominal principal payment of $5,459. The Partnership recognized the interest
and principal payment as revenue in claims related to lessee defaults in the
1994 statement of operations (Item 8). During 1995, the Partnership received an
additional principal payment and a partial interest payment aggregating $9,698,
which was recorded as revenue in claims related to lessee defaults in the 1995
statement of operations. Markair has defaulted on its payment obligations on the
debentures, and the trustee, Key Bank of Washington, is taking steps to protect
the interests of the debenture holders, including the Partnership.

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. The
general partner understands that 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 result in the need for repairs or
structural modifications that may not have been required under pre-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 $900,000
per Boeing 737 aircraft, 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
cycles for each Boeing 737. The extent of modifications required to an aircraft
varies according to the level of incorporation of design improvements at
manufacture.

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.

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. An
aircraft returned to the Partnership as a result of a lease default would most
likely not be returned to the Partnership in compliance with all return
conditions required by the lease. In negotiating subsequent leases, market
conditions may require that the Partnership bear some or all of the costs of
compliance with future ADs or ADs that have been issued, 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 commercial
aircraft industry, 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 no
longer allowed to operate from civil airports in the United States. Stage 2
aircraft meet current FAA requirements, subject to the phase-out rules discussed
below. 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 68% Stage 3 aircraft and 32% 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. All Stage 2
aircraft must be phased out of operations in the contiguous United
States by December 31, 1999, 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 interim compliance dates noted above).

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 Union (EU)
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, with all Stage 2 aircraft phased-out by the
year 2002. The International Civil Aviation Organization has also endorsed the
phase-out of Stage 2 aircraft on a world-wide basis by the year 2002.

The Partnership's entire fleet consists of three 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 due to the age of the aircraft and
the time required to fully amortize the additional investment. The general
partner will evaluate, as appropriate, the potential benefits of installing
hushkits on some or all of the Partnership's aircraft. It is unlikely, however,
that the Partnership would incur such costs unless they can be substantially
recovered through a lease.

Implementation of the Stage 3 standards has 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 after the
applicable dates.

Demand for Aircraft - Industry-wide, approximately 475 commercial aircraft are
currently available for sale or lease, approximately 125 less than a year ago.
From 1991 through 1994, depressed demand for air travel limited airline
expansion plans, with new aircraft orders and scheduled deliveries being
canceled or substantially deferred. As profitability declined, many airlines
took action to downsize or liquidate assets and some airlines were forced to
file for bankruptcy protection. Following two years of good traffic growth
accompanied by rising yields, this trend is now improving with new aircraft
orders last year exceeding deliveries for the first time since 1990. To date,
this recovery has mainly benefited Stage 3 narrow-bodies and younger Stage 2
narrow-bodies, many of which are now being upgraded with hushkits, whereas older
Stage 2 narrow-bodies have shown marginal signs of recovery.

to aging aircraft, corrosion prevention and control and structural inspection
and modification as previously discussed.

Effects on the Partnership's Aircraft - The Partnership periodically reviews the
estimated realizability of the residual values at the projected end of each
aircraft's economic life based on estimated residual values obtained from
independent parties which provide current and future estimated aircraft values
by aircraft type. For any downward adjustment in estimated residual value or
decrease in the projected remaining economic life, the depreciation expense over
the projected remaining economic life of the aircraft is increased.

The Partnership made downward adjustments to the estimated residual value of
certain of its on-lease aircraft as of December 31, 1995 and 1993. No
adjustments to the estimated aircraft residual values were made during 1994. As
a result of the 1993 adjustments to the estimated residual values, the
Partnership is recognizing increased depreciation expense of approximately
$114,000 per year beginning in 1994 through the end of the estimated economic
lives of the aircraft. As a result of the 1995 adjustments to the estimated
residual values, the Partnership will recognize increased depreciation expense
of approximately $461,000 per year beginning in 1996 through the end of the
estimated economic life of the aircraft.

If the projected net cash flow for each aircraft (projected rental revenue, net
of management fees, less projected maintenance costs, if any, plus the estimated
residual value) is less than the carrying value of the aircraft, the Partnership
recognizes the deficiency currently as increased depreciation expense. The
Partnership recognized downward adjustments of $115,000, approximately $260,000
and approximately $2.5 million, or $0.67, $1.53 and $14.67 per limited
Partnership unit, in 1995, 1994 and 1993, respectively, to the book value for
certain of its aircraft and aircraft inventory (as discussed in Notes 3 and 6 to
the financial statement, Item 8) as a result of declining estimates in their
residual values.

Effective January 1, 1996, the Partnership adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In performing the review for recoverability,
the statement provides that the Partnership should estimate the future cash
flows expected to result from the use of the asset and its eventual disposition.
If the projected net cash flow for each aircraft (projected rental revenue, net
of management fees, less projected maintenance costs, if any, plus the estimated
residual value) is less than the carrying value of the aircraft, an impairment
loss is recognized. Pursuant to the statement, measurement of an impairment loss
for long-lived assets will be based on the "fair value" of the asset as defined
in the statement.

SFAS No. 121 states that the fair value of an asset is the amount at which the
asset could be bought or sold in a current transaction between willing parties,
i.e., other than in a forced or liquidation sale. Quoted market prices in active
markets are the best evidence of fair value and will be used as the basis for
the measurement, if available. If quoted market prices are not available, the
estimate of fair value will be based on the best information available in the
circumstances. Pursuant to the statement, the estimate of fair value will
consider prices for similar assets and the results of valuation techniques to
the extent available in the circumstances. Examples of valuation techniques
include the present value of estimated expected future cash flows using a
discount rate commensurate with the risks involved, option-pricing models,
matrix pricing, option-adjusted spread models, and fundamental analysis.

Beginning in 1996, the Partnership will periodically review its aircraft for
impairment in accordance with SFAS No. 121. Using an estimate of the fair value
of the Partnership's aircraft to measure impairment may result in greater
write-downs than would be recognized under the accounting method currently
applied by the Partnership. The Partnership uses information obtained from third
party valuation services in arriving at its estimate of fair value for purposes
of determining residual values. The Partnership will use similar information,
plus available information and estimates related to the Partnership's aircraft,
to determine an estimate of fair value to measure impairment as required by the
statement. The estimates of fair value can vary dramatically depending on the
condition of the specific aircraft and the actual marketplace conditions at the
time of the actual disposition of the asset. If assets are deemed impaired,
there could be substantial write-downs in the future.

To the extent that the Partnership's Boeing aircraft continue to be adversely
affected by industry events, the Partnership will evaluate each aircraft as it
comes off lease or is returned to the Partnership to determine whether a
re-lease or a sale at the then-current market rates would be most beneficial for
unit holders.

Item 8. Financial Statements and Supplementary Data

POLARIS AIRCRAFT INCOME FUND I

FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994

TOGETHER WITH

AUDITORS' REPORT

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Polaris Aircraft Income Fund I:

We have audited the accompanying balance sheets of Polaris Aircraft Income Fund
I (a California limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, changes in partners' capital (deficit) and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the general partner. Our
responsibility is to express an opinion on these financial statements 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 I
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

San Francisco, California,
January 31, 1996 (except with
respect to the matter discussed
in Note 12 , as to which the
date is March 22, 1996)

POLARIS AIRCRAFT INCOME FUND I

BALANCE SHEETS

DECEMBER 31, 1995 AND 1994

1995 1994
---- ----
ASSETS:

CASH AND CASH EQUIVALENTS $ 9,807,315 $ 7,486,952

RENT AND OTHER RECEIVABLES, net of
allowance for credit losses of $811,131 in 1995
and $0 in 1994 32,863 1,105,843

NOTES RECEIVABLE, net of allowance for
credit losses of $144,884 in 1995 and $0 in 1994 1,040,505 486,000

AIRCRAFT, net of accumulated depreciation of
$19,166,733 in 1995 and $24,013,057 in 1994 5,408,116 6,489,292

AIRCRAFT INVENTORY -- 919,004
------------ ------------

$ 16,288,799 $ 16,487,091
============ ============

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):

PAYABLE TO AFFILIATES $ 51,757 $ 102,288

ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 98,410 45,957

LESSEE SECURITY DEPOSITS 145,925 125,000

MAINTENANCE RESERVES 2,165,714 1,239,595
------------ ------------

Total Liabilities 2,461,806 1,512,840
------------ ------------

PARTNERS' CAPITAL (DEFICIT):

General Partner (590,280) (578,793)
Limited Partners, 168,729 units
issued and outstanding 14,417,273 15,553,044
------------ ------------

Total Partners' Capital 13,826,993 14,974,251
------------ ------------

$ 16,288,799 $ 16,487,091
============ ============

The accompanying notes are an integral part of these statements.

POLARIS AIRCRAFT INCOME FUND I

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1995 1994 1993
---- ---- ----
REVENUES:
Rent from operating leases $ 2,073,250 $ 1,765,947 $ 1,929,525
Claims related to lessee defaults 409,698 815,888 701,074
Gain on sale of equipment 17,849 -- --
Interest and other 695,238 499,380 192,542
----------- ----------- -----------

Total Revenues 3,196,035 3,081,215 2,823,141
----------- ----------- -----------

EXPENSES:
Depreciation and amortization 896,176 1,837,584 5,081,327
Management fees to general partner 63,294 84,066 100,667
Provision for credit losses 956,015 -- --
Operating 650,685 164,557 532,294
Interest -- -- 39,810
Administration and other 183,572 165,048 153,439
----------- ----------- -----------

Total Expenses 2,749,742 2,251,255 5,907,537
----------- ----------- -----------

NET INCOME (LOSS) $ 446,293 $ 829,960 $(3,084,396)
=========== =========== ===========

NET INCOME ALLOCATED
TO THE GENERAL PARTNER $ 147,868 $ 143,269 $ 109,187
=========== =========== ===========

NET INCOME (LOSS)
ALLOCATED TO
LIMITED PARTNERS $ 298,425 $ 686,691 $(3,193,583)
=========== =========== ===========

NET INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT $ 1.77 $ 4.07 $ (18.93)
=========== =========== ===========

The accompanying notes are an integral part of these statements.

POLARIS AIRCRAFT INCOME FUND I

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

General Limited
Partner Partners Total
------- -------- -----

Balance, December 31, 1992 $ (525,662) $ 20,810,219 $ 20,284,557

Net income (loss) 109,187 (3,193,583) (3,084,396)

Cash distributions to partners (155,606) (1,400,451) (1,556,057)
------------ ------------ ------------

Balance, December 31, 1993 (572,081) 16,216,185 15,644,104

Net income 143,269 686,691 829,960

Cash distributions to partners (149,981) (1,349,832) (1,499,813)
------------ ------------ ------------

Balance, December 31, 1994 (578,793) 15,553,044 14,974,251

Net income 147,868 298,425 446,293

Cash distributions to partners (159,355) (1,434,196) (1,593,551)
------------ ------------ ------------

Balance, December 31, 1995 $ (590,280) $ 14,417,273 $ 13,826,993
============ ============ ============

The accompanying notes are an integral part of these statements.

POLARIS AIRCRAFT INCOME FUND I

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1995 1994 1993
---- ---- ----
OPERATING ACTIVITIES:

Net income (loss) $ 446,293 $ 829,960 $(3,084,396)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 896,176 1,837,584 5,081,327
Gain on sale of equipment (17,849) -- --
Provision for credit losses 956,015 -- --
Changes in operating assets and liabilities:
Decrease (increase) in rent and other
receivables 261,849 (872,189) (111,421)
Decrease in inventory -- -- 250,000
Decrease in payable to affiliates (50,531) (40,195) (60,899)
Increase (decrease) in accounts payable
and accrued liabilities 52,453 31,957 (52,021)
Increase (decrease) in lessee security deposits 20,925 (99,075) (288,125)
Increase (decrease) in maintenance reserves 926,119 433,144 (45,697)
Decrease in deferred income -- -- (35,000)
----------- ----------- -----------

Net cash provided by operating activities 3,491,450 2,121,186 1,653,768
----------- ----------- -----------

INVESTING ACTIVITIES:
Proceeds from sale of airframe 300,000 -- --
Increase in capitalized costs (244,000) -- --
Increase in notes receivable (418,216) (486,000) --
Principal payments on notes receivable 180,676 1,597,385 271,295
Net proceeds from sale of aircraft inventory 604,004 912,263 199,621
Inventory disassembly costs -- (18,120) (93,050)
----------- ----------- -----------

Net cash provided by investing activities 422,464 2,005,528 377,866
----------- ----------- -----------

FINANCING ACTIVITIES:
Principal payments on notes payable -- -- (780,000)
Cash distributions to partners (1,593,551) (1,499,813) (1,556,057)
----------- ----------- -----------

Net cash used in financing activities (1,593,551) (1,499,813) (2,336,057)
----------- ----------- -----------

CHANGES IN CASH AND CASH
EQUIVALENTS 2,320,363 2,626,901 (304,423)

CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 7,486,952 4,860,051 5,164,474
----------- ----------- -----------

CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 9,807,315 $ 7,486,952 $ 4,860,051
=========== =========== ===========

The accompanying notes are an integral part of these statements.

POLARIS AIRCRAFT INCOME FUND I

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. Accounting Principles and Policies

Accounting Method - Polaris Aircraft Income Fund I (PAIF-I or the Partnership),
a California limited partnership, maintains its accounting records, prepares its
financial statements and files its tax returns on the accrual basis of
accounting. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most
significant estimates with regard to these financial statements are related to
the projected cash flows analysis in determining the fair value of assets.

Cash and Cash Equivalents - This includes deposits at banks and investments in
money market funds.

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 12 years. Depreciation in the year of acquisition
was calculated based upon the number of days that the aircraft were in service.

The Partnership periodically reviews the estimated realizability of the residual
values at the projected end of each aircraft's economic life based on estimated
residual values obtained from independent parties which provide current and
future estimated aircraft values by aircraft type. For any downward adjustment
in estimated residual value or decrease in the projected remaining economic
life, the depreciation expense over the projected remaining economic life of the
aircraft is increased.

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 estimated
useful life of the improvement. These costs are also subject to periodic
evaluation as discussed above.

Aircraft Inventory - Aircraft held in inventory for sale are reflected at the
lower of depreciated cost or estimated net realizable value. Proceeds from sales
are applied against inventory until the book value is fully recovered. The
remaining book value of the inventory was recovered in 1995.

Operating Leases - Certain of the aircraft leases are accounted for as operating
leases with the exception of one lease which was recognized as a sale in 1993 as
discussed in Note 3. Operating lease revenues are recognized in equal
installments over the terms of the leases.

Maintenance Reserves - The Partnership receives maintenance reserve payments
from certain of its lessees that may be reimbursed to the lessee or applied
against certain costs incurred by the Partnership or lessee for maintenance work
performed on the Partnership's aircraft or engines, as specified in the leases.
Maintenance reserve payments are recognized when received and balances remaining
at the termination of the lease, if any, may be used by the Partnership to
offset future maintenance expenses or recognized as revenue.

Operating Expenses - Operating expenses include costs incurred to maintain,
insure, lease and sell the Partnership's aircraft, including costs related to
lessee defaults and costs of disassembling aircraft inventory.

Net Income (Loss) Per Limited Partnership Unit - Net income (loss) per limited
partnership unit is based on the limited partners' share of net income (loss),
and the number of units outstanding for the years ended December 31, 1995, 1994
and 1993.

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

Financial Accounting Pronouncements - The Partnership adopted Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan," and the related SFAS No. 118 as of January 1, 1995. SFAS
No. 114 and SFAS No. 118 require that certain impaired loans be measured based
on the present value of expected cash flows discounted at the loan's effective
interest rate; or, alternatively, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. The
Partnership had previously measured the allowance for credit losses using
methods similar to that prescribed in SFAS No. 114. As a result, no additional
provision was required by the adoption of this pronouncement. The Partnership
has recorded an allowance for credit losses for a certain impaired loan and rent
receivables as a result of uncertainties regarding their collection. The
Partnership recognizes revenue on impaired loans and receivables only as
payments are received.

1995
Impaired loans or receivables with ----
allowances for credit losses $ 956,015
Impaired loans or receivables without
allowances for credit losses -
-----------
Total impaired loans 956,015
Allowance for credit losses (956,015)
-----------

$ -
===========
Allowance for credit losses,
beginning of year $ -
Provision for credit losses (956,015)
Write-downs -
Collections -
-----------
Allowance for credit losses,
end of year $ (956,015)
===========

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
the Partnership to disclose the fair value of financial instruments. Cash and
Cash Equivalents is stated at cost, which approximates fair value. The fair
value of the notes receivable is estimated by discounting future estimated cash
flows using current interest rates at which similar loans would be made to
borrowers with similar credit ratings and remaining maturities. The carrying
value of the maintenance cost sharing note receivable from Nations Air Express,
Inc. (Nations Air), as discussed in Note 3, approximates its estimated fair
value. The carrying value of the engine finance note receivable from Viscount
Air Service, Inc. (Viscount) discussed in Note 4 approximates the estimated fair
value of the collateral. The carrying value of the line of credit note
receivable from Viscount discussed in Note 8 approximates its estimated fair
value as this note is guaranteed by certain affiliates of the principal
shareholder of Viscount. The carrying value of the rents receivable and
maintenance cost sharing note receivable from Viscount is zero due to a recorded
allowance for credit losses equal to the balance of these outstanding amounts.
As of December 31, 1995, the estimated fair value of these receivables from
Viscount was also zero.

SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This statement will be
adopted by the Partnership as of January 1, 1996 and will be applied
prospectively. The Partnership estimates that the adoption of this pronouncement
will not have an immediate material impact on the Partnership's financial
position or results of operations unless events or circumstances change that
would cause projected net cash flows to be adjusted. The estimate of fair value
and measurement of impairment loss is described in Note 3.

Reclassification - Certain 1993 balances have been reclassified to conform to
the 1995 presentation.

2. Organization and the Partnership

The Partnership was formed on June 27, 1984 for the purpose of acquiring and
leasing aircraft. It will terminate no later than December 2010. Upon
organization, both the general partner and the initial limited partner
contributed $500. The Partnership recognized no profits or losses during the
period ended December 31, 1984. The offering of limited partnership units
terminated on December 31, 1985, at which time the Partnership had sold 168,729
units of $500, representing $84,364,500. All unit holders were admitted to the
Partnership on or before January 1, 1986.

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. General Electric
Capital Corporation (GE Capital), an affiliate of General Electric Company, owns
100% of PHC's outstanding common stock. PIMC has entered into a services
agreement dated as of July 1, 1994 with GE Capital Aviation Services, Inc.
(GECAS). Allocations to related parties are described in Note 9.

3. Aircraft

The Partnership owns three aircraft, five spare engines and certain inventoried
aircraft parts from its original portfolio of eleven used commercial jet

aircraft, which were acquired and 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. The aircraft
leases are net operating leases, requiring the lessees to pay all operating
expenses associated with the aircraft during the lease term. In addition, the
leases require the lessees to comply with Airworthiness Directives (ADs) which
have been or may be issued by the Federal Aviation Administration (FAA) and
require compliance during the lease term. In addition to basic rent, the lessees
are generally required to pay supplemental amounts based on flight hours or
cycles into a maintenance reserve account, to be used for heavy maintenance of
the engines or airframe. The leases generally state a minimum acceptable return
condition for which the lessee is liable under the terms of the lease agreement.
In the event of a lessee default, these return conditions are not likely to be
met.

The following table describes the Partnership's current aircraft portfolio in
greater detail:

Year of
Aircraft Type Serial Number Manufacture
------------- ------------- -----------
Boeing 737-200 19606 1968
Boeing 737-200 19617 1969
Boeing 737-200 20125 1969

One Boeing 737-200 Convertible Freighter - This aircraft was acquired for
$7,613,333 in 1985 and leased to Aloha Airlines, Inc. through October 1990. The
aircraft was then sold to Transport Aerien Transregional S.A. in 1990.

One McDonnell Douglas DC-9-10 - This aircraft was purchased for $4,400,000 in
1986 and leased to Hawaiian Airlines, Inc. (Hawaiian) until Hawaiian defaulted
on its lease in November 1990. In 1992, the Partnership entered into an
agreement with American International Airways, Inc. (American International) for
the installment sale of this aircraft. American International paid to the
Partnership a $100,000 down payment and monthly installment payments of $18,000.
In November 1994, American International paid to the Partnership the remaining
balance of the note of $586,963.

Nine Boeing 737-200 - These aircraft were purchased for $60,367,500 in 1986 and
leased to Western Airlines, Inc. (Western). In 1987, Delta Airlines, Inc.
acquired Western and assumed all obligations of Western through the expiration
of the aircraft leases with the Partnership. The aircraft were then leased to
Braniff, Inc. (Braniff) until 1989, when Braniff filed a petition under Chapter
11 of the United States Bankruptcy Code and returned the aircraft to the
Partnership (Note 5). Substantial maintenance work was completed on these
aircraft and the aircraft have been re-leased to various lessees or disassembled
as described below.

In 1992, three of the aircraft were transferred to aircraft inventory and have
been disassembled for sale of their component parts (Note 6). One engine from
these aircraft was leased to Viscount through a joint venture with Polaris
Aircraft Income Fund II from April 1993 through November 1997. Two additional
engines from these aircraft were subsequently transferred from aircraft
inventory in 1994. The Partnership leased these two engines to Viscount for 52
days. Rental revenue of $27,260 was recognized during 1994. One of these engines
was subsequently leased to CanAir Cargo Ltd. (CanAir) as discussed below. The
other engine was subsequently re-leased to Viscount for five months beginning in
December 1994 at a rental rate of $7,500 per month. The Partnership re-leased
this engine to Viscount for one year beginning in June 1995 at the same rental
rate.

One aircraft was leased to American Air Lease, Inc. (American Air Lease) from
February 1990 until the lessee's default in June 1991 at approximately 88% of
the prior rate (Note 5). The aircraft was transferred to aircraft inventory in
1993 and has been disassembled for sale of its component parts (Note 6).

One aircraft was leased to America West Airlines, Inc. from August 1990 until
June 1991 at approximately 70% of the prior rate. The aircraft was then leased
to Viscount at 56% of the prior rate from February 1992 until September 1997.

One aircraft was leased to Viscount from April 1992 through September 1997 at
35% of the prior rate.

Two aircraft were leased to Markair, Inc. (Markair) at approximately 57% of the
prior rate from May 1991 until the lessee's default in June 1992 (Note 5). One
of the Markair aircraft was then leased to Aviateca, S.A. (Aviateca) from July
1992 until December 1992 at 54% of the prior rate. In October 1993, this
aircraft was leased to Viscount. Rental payments for an interim lease term
through December 1, 1993 were at a variable rate based on usage. Thereafter and
through the end of the lease term in December 1996, the basic rent payments are
100% of the prior rate received from Aviateca. The Partnership recognized this
transaction as a sale in 1993 as a result of the nominal purchase price option
provided in the lease upon expiration of the lease in December 1996.
Depreciation expense was increased by approximately $1.5 million in 1993 to
reflect the writedown of the aircraft value to the sales price of $970,000. The
Partnership recorded a note receivable in 1993 for the sales price, which was
reduced by payments received from Viscount less interest. In December 1994,
Viscount exercised its option to purchase the aircraft. As specified in the
lease agreement, the Partnership applied to the note balance a security deposit
of $25,000 and maintenance reserves of $237,978, which were previously paid to
the Partnership by Viscount. Viscount paid the remaining balance of the note of
$437,022 to the Partnership and the Partnership transferred title to the
aircraft to Viscount.

The second aircraft formerly leased to Markair was leased to Cambodia
International Airlines Company, Ltd. (Cambodia International) from November 1992
through November 1994 at 62% of the prior rate. The lease provided the lessee an
early termination option after six months. The lessee exercised this option and
returned the aircraft to the Partnership in September 1993. The airframe from
this aircraft was sold in April 1995 as discussed in Note 4. The Partnership has
leased the two engines from this aircraft and one engine previously leased to
Viscount, as previously discussed, to CanAir beginning in May 1994 for 36
months. The rental rate was variable based on usage through August 1994.
Beginning in September 1994 through the end of the lease term in May 1997, the
rental rate is fixed at $10,000 per engine per month.

One aircraft was leased to Jet Fleet Corporation at approximately 44% of the
prior rate from May 1992 until the lessee's default in September 1992. The
aircraft was then leased to Viscount at a variable rate based on usage from
November 1992 until February 1993, although Viscount had the option to extend
the lease for five years and the option to purchase the aircraft at the end of
the extended lease term. Viscount elected not to extend the lease and the
Partnership agreed to allow Viscount to operate the aircraft under the same
terms, on a month-to-month basis through August 1994. Viscount performed certain
maintenance and modification work on the aircraft totaling approximately
$150,000, which the Partnership paid in 1994 from maintenance reserves
previously received by the Partnership from Viscount. The Partnership entered
into a new lease with Viscount for a five-year term which commenced in September
1994. The new lease rate is $40,000 per month, which is approximately 116% of
the prior average rate.

Viscount subsequently entered into a sub-lease agreement for the aircraft with
Nations Air for a term of one year through February 1996. The sublease was
extended through February 1998. Rent and maintenance reserve payments due to
Viscount from Nations Air are paid directly to the Partnership and are applied
against payments due the Partnership from Viscount. All payments, whether due
from Viscount directly or indirectly from Nations Air, may be affected by
Viscount's filing for protection under Chapter 11 as discussed in Note 12.

The Partnership, Viscount and Nations Air have agreed to share in the cost of
certain heavy maintenance work performed on the aircraft sub-leased to Nations
Air. The agreement stipulates that the Partnership loan Nations Air its portion
of the maintenance cost of $264,108 to be repaid by Nations Air in twelve
monthly installments, with interest at a variable rate, beginning in November
1995. The unpaid balance of the note receivable was $245,597 at December 31,
1995. The Partnership also loaned Viscount its portion of the maintenance cost
of $154,108 to be repaid by Viscount in monthly installments of $10,000, with
interest at a variable rate, beginning in November 1995. As discussed in Note 8,
at December 31, 1995 Viscount was in default on certain payments due the
Partnership, including payments on this note receivable. Note 12 contains a
further discussion of the Viscount situation subsequent to December 31, 1995.
The Partnership's share of the maintenance cost was approximately $903,000, of
which approximately $329,000 was paid from maintenance reserves previously paid
to the Partnership by Viscount and Nations Air. The Partnership has recognized
approximately $574,000 of this heavy maintenance work as operating expense in
the 1995 statement of operations.

The following is a schedule by year of future minimum rental revenue under the
existing leases, but excluding rental payments for two aircraft and two spare
engines leased to Viscount due to the bankruptcy filing discussed in Notes 8 and
12:

Year Amount
---- ------
1996 $ 840,000
1997 630,000
1998 80,000
1999 and thereafter -
----------

Total $1,550,000
==========

As discussed in Note 1, the Partnership periodically reviews the estimated
realizability of the residual values at the projected end of each aircraft's
economic life based on estimated residual values obtained from independent
parties which provide current and future estimated aircraft values by aircraft
type. For any downward adjustment in estimated residual value or decrease in the
projected remaining economic life, the depreciation expense over the projected
remaining economic life of the aircraft is increased.

As discussed in Note 1, if the projected net cash flow for each aircraft
(projected rental revenue, net of management fees, less projected maintenance

costs, if any, plus the estimated residual value) is less than the carrying
value of the aircraft, the Partnership recognizes the deficiency currently as
increased depreciation expense. The Partnership recognized downward adjustments
of $115,000, approximately $260,000 and approximately $2.5 million, or $0.67,
$1.53 and $14.67 per limited Partnership unit, in 1995, 1994 and 1993,
respectively, to the book value for certain of its aircraft (as discussed above)
and aircraft inventory (Note 6) as a result of declining estimates in their
residual values.

4. Sale of Equipment

Sale of Boeing 737-200 Aircraft - In April 1995, the Partnership sold the
airframe of the off-lease Boeing 737-200 aircraft, formerly leased to Cambodia
International (Note 3), to Pinnacle Aircraft Leasing, Inc. for $300,000. As
discussed in Note 3, the two engines from this aircraft are currently on lease
through May 1997 to CanAir. No gain or loss was recorded on the sale as the
sales price of the airframe equaled its net book value.

Sale of Engine - One engine was transferred from aircraft inventory to aircraft
at an estimated fair value of $200,000 during 1995. The Partnership incurred
certain maintenance and refurbishment costs on this engine aggregating $244,000,
which were capitalized in 1995. The Partnership leased this engine to Viscount
for one year beginning in July 1995 at a rental rate of $10,500 per month with
an early termination option. The Partnership subsequently sold this engine to
Viscount for a sales price of $461,849 and recorded a gain on sale of $17,849 in
1995. The Partnership agreed to accept payment of the sales price in 57
installments of $10,500, with interest at a rate of 11.265% per annum. The
Partnership recorded a note receivable for the sales price. The balance of the
note receivable was $455,685 at December 31, 1995. As discussed in Note 8, at
December 31, 1995 Viscount was in default on certain payments due the
Partnership, including payments on this note receivable. No allowance for credit
losses was provided for this note receivable from Viscount as the balance of the
note receivable is secured by the engine. Note 12 contains a further discussion
of the Viscount situation subsequent to December 31, 1995.

5. Claims Related to Lessee Defaults

Receipt of Braniff Bankruptcy Claim - In July 1992, the Bankruptcy Court
approved a stipulation embodying a settlement among PIMC, on behalf of the
Partnership, the Braniff Creditor committees and Braniff in which it was agreed
that First Security Bank of Utah, National Association, acting as trustee for
the Partnership, would be allowed an administrative claim in the bankruptcy
proceeding of approximately $2,076,923. In 1992, the Partnership received full
payment of the claim, subject, however, to the requirement that 25% of total
proceeds be held by PIMC in a separate, interest-bearing account pending
notification by Braniff that all of the allowed administrative claims have been
satisfied. During 1994, the Partnership was advised that the 25% portion of the
administrative claim proceeds with interest could be released by PIMC to the
Partnership. As a result, the Partnership recognized $611,618 as revenue in
claims related to lessee defaults in the 1994 statement of operations.

American Air Lease - The Partnership filed suit in 1991 seeking damages for
unpaid rent and other defaults against lessee American Air Lease and guarantor
Americom Leasing Group, Inc. (Americom). American Air Lease and the Partnership
reached a settlement consisting of certain cash payments, return of the aircraft
and participation in any recovery proceeds of American Air Lease's default
judgment against its lessee, Pan African Airways. Concurrent with the
court-approved settlement agreement, in December 1992, the lease was terminated
and the Partnership took possession of the aircraft. The Partnership proceeded
to recover under the judgment through collection of insurance claim proceeds
from insurers and judicial enforcement in New York against American Air Lease.
The aircraft was transferred to aircraft inventory in 1993 and has been
disassembled for sale of its component parts (Note 6). In November 1994, the
Partnership received $91,452 representing settlement of Americom's and American
Air Lease's obligation to pay the original settlement judgement. The Partnership
was also entitled to retain security deposits in the amount of $74,075. Both
amounts were recognized as revenue in claims related to lessee defaults in the
1994 statement of operations. The Partnership settled its claim against the
insurers of American Air Lease for payment of insurance proceeds of $400,000.
The Partnership received the $400,000 in July 1995 and recognized the full
amount as revenue in claims related to lessee defaults in the 1995 statement of
operations.

Markair - The Partnership terminated the leases and repossessed the two aircraft
in June 1992, and Markair filed a petition for reorganization under Chapter 11
of the United States Bankruptcy Code. The Partnership filed a proof of claim in
the case to recover damages for past-due rent and for Markair's failure to meet
return conditions with respect to the Partnership's aircraft. In August 1993,

the Bankruptcy Court approved a plan of reorganization for Markair and a
stipulation allows the Partnership to retain the security deposits and
maintenance reserves and an unsecured claim against Markair for $445,000 which
was converted to 10% subordinated debentures during 1994. The security deposits
and maintenance reserves, which were held by the Partnership under the leases
with Markair, totaled $748,951, of which $47,877 was applied during 1993 to rent
owed the Partnership by Markair. The balance of $701,074 was recognized as
revenue in claims related to lessee defaults in the 1993 statement of
operations. During 1994, the Partnership earned interest on the debentures of
$33,284 and received a nominal principal payment of $5,459. The Partnership
recognized the interest and principal payment as revenue in claims related to
lessee defaults in the 1994 statement of operations. During 1995, the
Partnership received an additional principal payment and a partial interest
payment aggregating $9,698, which was recorded as revenue in claims related to
lessee defaults in the 1995 statement of operations. Markair has defaulted on
its payment obligations on the debentures, and the trustee, Key Bank of
Washington, is taking steps to protect the interests of the debenture holders,
including the Partnership.

6. Disassembly of Aircraft

In an attempt to maximize the economic return from its off-lease aircraft, the
Partnership entered into an agreement with Soundair, Inc. (Soundair) on October
31, 1992, for the disassembly of certain of the Partnership's aircraft and the
sale of their component parts. The Partnership recognized the estimated cost of
disassembly of approximately $250,000 for the four aircraft during 1993 and is
receiving the proceeds from the sale of such parts, net of overhaul expenses if
necessary, and commissions paid to Soundair.

During 1995, 1994 and 1993, the Partnership recorded downward adjustments to the
inventory value of $115,000, $261,170 and $959,112, respectively, to reflect the
current estimate of net realizable aircraft inventory value. These adjustments
are reflected as increased depreciation expense in the corresponding years'
statement of operations. During 1994, two engines were removed from the
disassembly program at an aggregate value of $360,000 and leased as discussed in
Note 3. During 1995, one additional engine was removed from the disassembly
program at an aggregate value of $200,000 and subsequently sold as discussed in
Note 4.

During 1994 and 1993, the Partnership paid $18,120 and $93,050, respectively,
for aircraft disassembly costs. Proceeds from sales are applied against
inventory until book value is fully recovered. The Partnership received net
proceeds from the sale of aircraft inventory of $604,562, $912,263 and $199,621
during 1995, 1994 and 1993, respectively. The remaining net book value of the
inventory was fully recovered during 1995. Proceeds of $558 received in 1995 in
excess of the net book value were recorded as other revenue in the 1995
statement of operations.

7. Note Payable

In December 1988, the Partnership borrowed $5,200,000 from Bank of America
National Trust and Savings Association, at an interest rate of 10.17%. The
Partnership was required to make principal payments in twenty quarterly
installments and monthly interest payments commencing December 31, 1988. The
Partnership paid interest expense on the note of $39,810 during 1993. The
Partnership repaid the note payable upon maturity in September 1993.

8. Viscount Restructuring Agreement and Default

In July 1994, the Partnership entered into a restructuring agreement with
Viscount to defer certain rents due the Partnership which aggregated $753,200;
to extend a line of credit to Viscount for a total of $486,000 to be used
primarily for maintenance expenses relating to the Partnership's aircraft; and
to give the Partnership the option to acquire approximately 2.3% of the issued
and outstanding shares of Viscount stock as of July 26, 1994 for an option price
of approximately $349,000. It was not practicable to estimate the fair value of
the stock options as of December 31, 1995, as they are not publicly traded,
although Viscount's recent bankruptcy filing (Note 12) would have an adverse
impact on the value of the stock options, if any.

The deferred rents, which were being repaid by Viscount with interest at a rate
of 6% per annum over the remaining terms of the leases, were recognized as
revenue in the period earned. The unpaid balances of the deferred rents, which
are reflected in rent and other receivables in the December 31, 1995 and 1994
balance sheets, were $528,163 and $632,355, respectively. The line of credit,
which was advanced to Viscount during 1994, was being repaid by Viscount over a
30- month period, beginning in January 1995, with interest at a rate of 11.53%
per annum. The line of credit balances, which are reflected in notes receivable
in the December 31, 1995 and 1994 balance sheets, were $339,223 and $486,000,
respectively.

The Partnership's three Boeing 737-200 commercial jet aircraft and two spare
engines were on lease to Viscount prior to the lease termination notifications.
Viscount had sub-leased one of the Partnership's aircraft to Nations Air through
February 1998 as discussed in Note 3. Payments from Nations Air are paid
directly to the Partnership. In addition to the two spare engines on lease to
Viscount, one spare engine was sold to Viscount in November 1995 as discussed in
Note 4. The payments on the engine finance sale note receivable from Viscount
are also currently in default. As of December 31, 1995, the Partnership's
aggregate rent, loan and interest receivable from Viscount was approximately
$1.8 million. In addition, delinquent maintenance reserves due from Viscount
aggregate approximately $0.3 million as of December 31, 1995 for a total of
approximately $2.1 million in outstanding obligations. All payments, whether due
from Viscount directly or indirectly from Nations Air, may be affected by
Viscount's filing for protection under Chapter 11.

As discussed in Note 4, the engine finance sale note receivable, the balance of
which at December 31, 1995 was $455,685, is secured by the engine. The balance
of the line of credit advanced to Viscount in 1994 of $339,223 at December 31,
1995, plus accrued interest, is guaranteed by certain affiliates of the
principal shareholder of Viscount. An allowance for credit losses has not been
provided for these notes. The Partnership has recorded an allowance for credit
losses for the remaining unsecured receivable balances from Viscount for the
aggregate of the unpaid rents, outstanding deferred rent balance and accrued
interest as of December 31, 1995. The aggregate allowance for credit losses of

$811,131 for these obligations is reflected in the provision for credit losses
in the accompanying 1995 statement of operations. In addition, the Partnership
recorded an allowance for credit losses equal to the outstanding principal
balance of $144,884 for the maintenance cost sharing note receivable from
Viscount discussed in Note 3. Viscount's failure to perform on its financial
obligations with the Partnership is expected to have an adverse effect on the
Partnership's financial position.

9. Related Parties

Under the Limited Partnership Agreement (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 of the Partnership, payable upon receipt
of the rent. In 1995, 1994 and 1993, the Partnership paid management
fees to PIMC of $98,922, $80,346 and $96,392, respectively. Management
fees payable to PIMC at December 31, 1995 and 1994 were $2,000 and
$37,628, respectively.

b. Reimbursement of certain out-of-pocket expenses incurred in connection
with the management of the Partnership and its assets. In 1995, 1994
and 1993, $146,375, $201,083 and $189,728 were reimbursed to PIMC by
the Partnership for administrative expenses. Administrative
reimbursements of $36,472 and $30,933 were payable to PIMC at December
31, 1995 and 1994, respectively. Partnership reimbursements to PIMC
for maintenance and remarketing costs of $302,657, $264,295 and
$731,174 were paid in 1995, 1994, and 1993, respectively. Maintenance
and remarketing reimbursements of $13,285 and $33,727 were payable to
PIMC at December 31, 1995 and 1994, respectively.

c. A 10% interest to PIMC in all cash distributions 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 to PIMC 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 will be paid only after limited
partners 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.

e. One engine from the Partnership's aircraft was leased to Viscount,
prior to the lease termination notifications (Note 12), through a
joint venture agreement with Polaris Aircraft Income Fund II from
April 1993 through November 1997 at a fair market rental rate. The
Partnership recognized rental revenue on this engine of $146,000,
$146,000 and $98,000 in 1995, 1994 and 1993, respectively.

10. 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.

The net differences between the tax basis and the reported amounts of the
Partnership's assets and liabilities at December 31, 1995 and 1994 are as
follows:

Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
1995: Assets $ 16,288,799 $ 29,774,131 $(13,485,332)
Liabilities 2,461,806 492,567 1,969,239

1994: Assets $ 16,487,091 $ 29,880,086 $(13,392,995)
Liabilities 1,512,840 273,244 1,239,596

11. Reconciliation of Book Net Income (Loss) to Taxable Net Income (Loss)

The following is a reconciliation between net income (loss) per limited
partnership unit reflected in the financial statements and the information
provided to limited partners for federal income tax purposes:

For the years ended December 31,

1995 1994 1993
---- ---- ----

Book net income (loss) per limited partnership unit $ 1.77 $ 4.07 $ (18.93)
Adjustments for tax purposes represent differences
between book and tax revenue and expenses:
Rental and maintenance reserve revenue recognition 6.10 2.54 1.25
Depreciation 2.85 9.37 16.82
Gain or loss on sale of aircraft (6.83) - (5.69)
Capitalized costs 4.24 0.53 0.06
Basis in inventory 0.90 (5.98) (11.71)
Other revenue and expense items (2.44) 2.58 -
------- --------- -----------

Taxable net income (loss) per limited partnership unit $ 6.59 $ 13.11 $ (18.20)
======= ========= ==========

The differences between net income and loss for book purposes and net income and
loss for tax purposes result from the temporary differences of certain revenue
and deductions.

For book purposes, rental revenue is generally recorded as it is earned. For tax
purposes, certain temporary differences exist in the recognition of revenue.
Increases in the Partnership's book maintenance reserve liability were
recognized as rental revenue for tax purposes. Disbursements from the
Partnership's book maintenance reserves are capitalized or expensed for tax
purposes, as appropriate.

The Partnership computes depreciation using the straight-line method for
financial reporting purposes and generally an accelerated method for tax
purposes. 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 book
depreciation expense. As a result, the current year book depreciation expense is
greater than the tax depreciation expense computed under the accelerated method.
These differences in depreciation methods result in book to tax differences on
the sale of aircraft. In addition, certain costs were capitalized for tax
purposes and expensed for book purposes.

For book purposes, aircraft held in inventory are reflected at the lower of
depreciable cost or estimated net realizable value. Differences in book and tax
revenue and loss from inventory result from the differences in the book and tax
carrying value of the inventory.

12. Subsequent Event

Viscount Default and Bankruptcy Filing - As discussed in Note 8, as of December
31, 1995 Viscount was delinquent on certain rent, deferred rent, maintenance
reserve and note payments due the Partnership. On January 9, 1996, Viscount was
notified that the Partnership had elected to terminate the leases and the
Partnership demanded return of the aircraft. On January 24, 1996, Viscount filed
a petition for protection under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court in Tucson, Arizona. Viscount presently has
possession of the Partnership's aircraft and engines. Legal counsel has been
retained and the general partner is evaluating the rights, remedies and courses
of action available to the Partnership with respect to Viscount's default and
bankruptcy filing.

Although payments from Nations Air for the aircraft sub-leased from Viscount, as
discussed in Note 3, continue to be paid directly to the Partnership, the
Partnership has received no additional payments from Viscount subsequent to
December 31, 1995. In addition, Nations Air is currently past-due on certain of
its 1996 payments to the Partnership. The Partnership's termination of the
Viscount leases (which is disputed by Viscount) and Viscount's Chapter 11
bankruptcy filing create uncertainty as to the status of the Nations Air
sub-lease. As a result of Viscount's defaults and Chapter 11 bankruptcy filing,
the Partnership may incur maintenance, legal, remarketing, transition and sale
costs related to the Partnership's aircraft and engines, which cannot be
estimated at this time. The outcome of Viscount's Chapter 11 proceeding cannot
be predicted.

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

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Polaris Aircraft Income Fund I (PAIF-I or the Partnership) has no directors or
officers. Polaris Holding Company (PHC) and its subsidiaries, including Polaris
Aircraft Leasing Corporation (PALC) and Polaris Investment Management
Corporation (PIMC), the general partner of the Partnership (collectively
Polaris), restructured their operations and businesses (the Polaris
Restructuring) in 1994. In connection therewith, PIMC entered into a services
agreement dated as of July 1, 1994 (the Services Agreement) with GE Capital
Aviation Services, Inc. (GECAS), a Delaware corporation which is a wholly owned
subsidiary of General Electric Capital Corporation, a New York corporation (GE
Capital). GE Capital has been PHC's parent company since 1986. As subsidiaries
of GE Capital, the Servicer and PIMC are affiliates.

The officers and directors of PIMC are:

Name PIMC Title
---- -----------

James W. Linnan President; Director
Richard J. Adams Vice President; Director
Norman C. T. Liu Vice President; Director
Edward Sun Vice President
John E. Flynn Vice President
Robert W. Dillon Vice President; Assistant Secretary
Marc A. Meiches Chief Financial Officer
Richard L. Blume Secretary

Substantially all of these management personnel will devote only such portion of
their time to the business and affairs of PIMC as deemed necessary or
appropriate.

Mr. Linnan, 54, assumed the position of President and Director of PIMC effective
March 31, 1995. Mr. Linnan had previously held the positions of Vice President
of PIMC effective July 1, 1994, Vice President - Financial Management of PIMC
and PALC effective April 1991, and Vice President - Investor Marketing of PIMC
and PALC since July 1986.

Mr. Adams, 62, Senior Vice President - Aircraft Marketing, North America, served
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. Effective July 1, 1994, Mr. Adams held the
positions of Vice President and Director of PIMC.

Mr. Liu, 38, has assumed the position of Vice President of PIMC effective May 1,
1995 and has assumed the position of Director of PIMC effective July 31, 1995.
Mr. Liu presently holds the position of Executive Vice President - Marketing of
GECAS, having previously held the position of Executive Vice President - Capital
Funding and Portfolio Management of GECAS. Prior to joining GECAS, Mr. Liu was
with General Electric Capital Corporation for nine years. He has held management
positions in corporate Business Development and in Syndications and Leasing for
Transportation and Industrial Funding Corporation (TIFC). Mr. Liu previously
held the position of managing director of Kidder, Peabody & Co., Incorporated.
Mr. Sun, 46, has assumed the position of Vice President of PIMC effective May 1,
1995. Mr. Sun presently holds the position of Senior Vice President - Structured
Finance of GECAS. Prior to joining GECAS, Mr. Sun held various positions with
TIFC since 1990.

Mr. Flynn, 55, Vice President - Marketing of GECAS, served as Senior Vice
President - Aircraft Marketing for PIMC and PALC effective April 1991, having
previously served as Vice President North America of PIMC and PALC effective
July 1989. Mr. Flynn joined PALC in March 1989 as Vice President - Cargo. For
the two years prior to joining PALC, Mr. Flynn was a transportation consultant.
Effective July 1, 1994, Mr. Flynn held the position of Vice President of PIMC.

Mr. Dillon, 54, became Vice President - Aviation Legal and Insurance Affairs,
effective April 1989. Previously, he served as General Counsel of PIMC and PALC
effective January 1986. Effective July 1, 1994, Mr. Dillon held the positions of
Vice President and Assistant Secretary of PIMC. Mr. Dillon presently holds the
position of Senior Vice President of GECAS.

Mr. Blume, 54, has assumed the position of Secretary of PIMC effective May 1,
1995. Mr. Blume presently holds the position of Executive Vice President and
General Counsel of GECAS. Prior to joining GECAS, Mr. Blume was counsel at GE
Aircraft Engines since 1987.

Mr. Meiches, 43, has assumed the position of Chief Financial Officer of PIMC
effective October 9, 1995. Mr. Meiches presently holds the positions of
Executive Vice President and Chief Financial Officer of GECAS. Prior to joining
GECAS, Mr. Meiches has been with General Electric Company (GE) and its
subsidiaries since 1978. Since 1992, Mr. Meiches held the position of Vice
President of the General Electric Capital Corporation Audit Staff. Between 1987
and 1992, Mr. Meiches held Manager of Finance positions for GE Re-entry Systems,
GE Government Communications Systems and the GE Astro-Space Division.

Certain Legal Proceedings:

On October 27, 1992, a class action complaint entitled Weisl, Jr. et al., v.
Polaris Holding Company, et al. 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, plaintiffs filed a motion for class
certification. On March 1, 1993, defendants filed motions to dismiss the
complaint on numerous grounds, including failure to state a cause of action and
statute of limitations. On July 20, 1994, the court entered an order dismissing
almost all of the claims in the complaint and amended complaint. Certain claims,
however, remain pending. Plaintiffs filed a notice of appeal on September 2,
1994. 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, Polaris
Investment Management Corporation and Polaris Depositary Company. Plaintiffs
seek class action certification on behalf of a class of investors in Polaris
Aircraft Income Fund IV, Polaris Aircraft Income Fund V and Polaris Aircraft
Income Fund 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 units in such Polaris Aircraft Income
Funds. Among other things, plaintiffs assert that the defendants sold interests
in such Polaris Aircraft Income Funds while "omitting and failing to disclose
the material facts questioning the economic efficacy of" such Polaris Aircraft
Income Funds. Plaintiffs seek rescission or damages, in addition to interest,
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 lower court's 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.
The Partnership is not named as a defendant in this action.

On or around May 14, 1993, a purported class action entitled 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 Polaris Aircraft Income Funds I - VI by nine investors in such
Polaris Aircraft Income Funds. The complaint alleges that defendants violated
Arizona state securities statutes 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 complaint 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 April 18, 1995, this action was transferred
to the Multi-District Litigation described below. The Partnership is not named
as a defendant in this action.

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 the
Partnership, Polaris Aircraft Income Fund II and Polaris Aircraft Income Fund
III. The complaint names as defendants Polaris Holding Company, its affiliates
and others. Each of the Partnership, Polaris Aircraft Income Fund II and Polaris
Aircraft Income Fund III is named as a defendant for procedural purposes, but no
recovery is sought from these defendants. The complaint alleges, among other
things, that defendants mismanaged the Partnership and the other Polaris
Aircraft Income Funds, engaged in self-dealing transactions that were
detrimental to the Partnership and the other Polaris Aircraft Income Funds and
failed to make required disclosure in connection with the sale of the units in
the Partnership and the other Polaris Aircraft Income Funds. 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. On
August 11, 1994, the court denied in part and granted in part defendants'
motions to dismiss. Specifically, the court denied the motions as to the claims
for breach of fiduciary duty, but dismissed plaintiffs' claim for constructive
fraud with leave to replead. On October 7, 1994, defendants filed a notice of
appeal. On November 15, 1994, defendants submitted an answer to the remaining
causes of action. On July 7, 1995, defendants filed briefs in support of their
appeal from that portion of the trial court's order denying the motion to
dismiss. On March 14, 1996, the appellate court reversed the trial court's order
denying the motion to dismiss, and dismissed the complaint.

On or around March 13, 1993, 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 was filed by one investor in the fund. The
complaint names as defendants Polaris Investment Management Corporation, 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 interests in Polaris Aircraft Income Fund 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 was extended by stipulation up to and including
April 24, 1995. On April 18, 1995, the action was discontinued without
prejudice. The Partnership is not named as a defendant in this action.

On June 8, 1994, a consolidated complaint captioned In re Prudential Securities
Inc. Limited Partnerships Litigation was filed in the United States District
Court for the Southern District of New York, purportedly consolidating cases
that had been transferred from other federal courts by the Judicial Panel on
Multi-District Litigation. The consolidated complaint names as defendants
Prudential entities and various other sponsors of limited partnerships sold by

Prudential, including Polaris Holding Company, one of its former officers,
Polaris Aircraft Leasing Corporation, Polaris Investment Management Corporation
and Polaris Securities Corporation. The complaint alleges that the Prudential
defendants created a scheme for the sale of approximately $8-billion of limited
partnership interests in 700 assertedly high-risk limited partnerships,
including the Partnership, to approximately 350,000 investors by means of false
and misleading offering materials; that the sponsoring organizations (including
the Polaris entities) participated with the Prudential defendants with respect
to, among other things, the partnerships that each sponsored; and that all of
the defendants conspired to engage in a nationwide pattern of fraudulent conduct
in the marketing of all limited partnerships sold by Prudential. The complaint
alleges violations of the federal Racketeer Influenced and Corrupt Organizations
Act and the New Jersey counterpart thereof, fraud, negligent misrepresentation,
breach of fiduciary duty and breach of contract. The complaint seeks rescission,
unspecified compensatory damages, treble damages, disgorgement of profits
derived from the alleged acts, costs and attorneys fees. On October 31, 1994,
Polaris Investment Management Corporation and other Polaris entities filed a
motion to dismiss the consolidated complaint on the grounds of, inter alia,
statute of limitations and failure to state a claim. The Partnership is not
named as a defendant in this action. Prudential Securities, Inc., on behalf of
itself and its affiliates has made an Offer of Settlement. A class has been
certified for purposes of the Prudential Settlement and notice to the class has
been sent. Any questions concerning Prudential's Offer of Settlement should be
directed to 1-800- 327-3664, or write to the Claims Administrator at:

Prudential Securities Limited Partnerships
Litigation Claims Administrator
P.O. Box 9388
Garden City, New York 11530-9388

A further litigation captioned Romano v. Ball et. al, an action by Prudential
Insurance Company policyholders against many of the same defendants (including
Polaris Investment Management Corporation and Polaris Aircraft Leasing
Corporation), has also been commenced by policy holders of the Prudential
Insurance Company as a purported derivative action on behalf of the Prudential
Insurance Company. The complaint alleges claims under the federal Racketeer
Influenced and Corrupt Organizations Act, as well as claims for waste,
mismanagement and intentional and negligent misrepresentation, and seeks
unspecified compensatory, treble and punitive damages. The case is being
coordinated with In re Prudential.

On or about February 6, 1995, a class action complaint entitled Cohen, et al. v.
J.B. Hanauer & Company, et al. was filed in the Circuit Court of the Fifteenth
Judicial Circuit in and for Palm Beach County, Florida. The complaint names J.B.
Hanauer & Company, General Electric Capital Corporation, General Electric
Financial Services, Inc., and General Electric Company as defendants. The action
purports to be on behalf of "approximately 5,000 persons throughout the United
States" who purchased units in Polaris Aircraft Income Funds I through VI. The
complaint sets forth various causes of action which include allegations against
certain or all of the defendants (i) for violation of Section 12(2) of the
Securities Act of 1933, as amended, by a registered broker dealer and for
violation of Section 15 of such act by all defendants 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
fraud in connection with such offerings; (iii) for alleged negligent
misrepresentation in connection with such offerings; (iv) for alleged breach of
fiduciary duties; (v) for alleged breach of third party beneficiary contracts;
(vi) for alleged violations of the NASD Rules of Fair Practice by a registered
broker dealer; and (vii) for alleged breach of implied covenants in the customer
agreements by a registered broker dealer. The complaint seeks an award of

compensatory and punitive damages and other remedies. On June 7, 1995,
plaintiffs filed an amended complaint which did not include as defendants
General Electric Capital Corporation, General Electric Financial Services, Inc.,
and General Electric Company, thus effectively dismissing without prejudice the
case against these entities. The Partnership is not named as a defendant in this
action.

On or about January 12, 1995, a class action complaint entitled Cohen, et al. v.
Kidder Peabody & Company, Inc., et al. was filed in the Circuit Court of the
Fifteenth Judicial Circuit in and for Palm Beach County, Florida, and on March
31, 1995 the case was removed to the United States District Court for the
Southern District of Florida. An amended class action complaint (the "amended
complaint"), which re-named this action Bashein, et al. v. Kidder, Peabody &
Company Inc., et al., was filed on June 13, 1995. The amended complaint names
Kidder Peabody & Company, Inc., General Electric Capital Corporation, General
Electric Financial Services, Inc., and General Electric Company as defendants.
The action purports to be on behalf of "approximately 20,000 persons throughout
the United States" who purchased units in Polaris Aircraft Income Funds III
through VI. The amended complaint sets forth various causes of action
purportedly arising in connection with the public offerings of Polaris Aircraft
Income Fund III, Polaris Aircraft Income Fund IV, Polaris Aircraft Income Fund
V, and Polaris Aircraft Income Fund VI. Specifically, plaintiffs assert claims
for violation of Sections 12(2) and 15 of the Securities Act of 1933, fraud,
negligent misrepresentation, breach of fiduciary duty, breach of third party
beneficiary contract, violation of NASD Rules of Fair Practice, breach of
implied covenant, and breach of contract. Plaintiffs seek compensatory damages,
interest, punitive damages, costs and attorneys' fees, as well as any other
relief the court deems just and proper. Defendants moved to dismiss the amended
complaint on June 26, 1995. On October 2, 1995, the court denied the defendants'
motion to dismiss. The Partnership is not named as a defendant in this action.

On or around April 13, 1995, a class action complaint entitled B & L Industries,
Inc., et al. v. Polaris Holding Company, et al. was filed in the Supreme Court
of the State of New York. The complaint names as defendants Polaris Holding
Company, Polaris Aircraft Leasing Corporation, Polaris Investment Management
Corporation, Polaris Securities Corporation, Peter G. Pfendler, Marc P.
Desautels, General Electric Capital Corporation, General Electric Financial
Services, Inc., General Electric Company, Prudential Securities Inc., and Kidder
Peabody & Company Incorporated. The complaint sets forth various causes of
action purportedly arising out of the public offerings of Polaris Aircraft
Income Fund III and Polaris Aircraft Income Fund IV. Plaintiffs allege claims of
fraud, negligent misrepresentation, breach of fiduciary duty, knowingly inducing
or participating in breach of fiduciary duty, breach of third party beneficiary
contract, violation of NASD Rules of Fair Practice, breach of implied covenant,
and unjust enrichment. Plaintiffs seek compensatory damages, interest, general,
consequential and incidental damages, exemplary and punitive damages,
disgorgement, rescission, costs, attorneys' fees, accountants' and experts'
fees, and other legal and equitable relief as the court deems just and proper.
On October 2, 1995, defendants moved to dismiss the complaint. The Partnership
is not named as a defendant in this action.

On or around August 15, 1995, a complaint entitled Mary C. Scott v. Prudential
Securities Inc. et al. was filed in the Court of Common Pleas, County of Summit,
Ohio. The complaint names as defendants Prudential Securities Inc., Polaris
Aircraft Income Fund II, Polaris Aircraft Income Fund III, Polaris Aircraft
Income Fund IV, Polaris Aircraft Income Fund VI, P-Bache/A.G. Spanos Genesis
Income Partners LP 1, Prudential-Bache Properties, Inc., A.G. Spanos Residential
Partners - 86, Polaris Securities Corporation and Robert Bryan Fitzpatrick.
Plaintiff alleges claims of fraud and violation of Ohio securities law arising
out of the public offerings of Polaris Aircraft Income Fund II, Polaris Aircraft
Income Fund III, Polaris Aircraft Income Fund IV, Polaris Aircraft Income Fund
VI, and P-Bache/A.G. Spanos Genesis Income Partners LP 1. Plaintiff seeks
compensatory damages, general, consequential and incidental damages, punitive

damages, rescission, costs, attorneys' fees and other and further relief as the
Court deems just and proper. The Partnership is not named as a defendant in this
action. On September 15, 1995, defendants removed this action to the United
States District Court, Eastern District of Ohio. On September 18, 1995,
defendants sought the transfer of this action to the Multi-District Litigation
and sought a stay of all proceedings by the district court, which stay was
granted on September 25, 1995. The Judicial Panel transferred this action to the
Multi-District Litigation on or about February 7, 1996.

On or around September 27, 1995, a complaint entitled Martha J. Harrison v.
General Electric Company, et al., was filed in the Civil District Court for the
Parish of Orleans, State of Louisiana. The complaint names as defendants General
Electric Company and Prudential Securities Incorporated. Plaintiff alleges
claims of tort, breach of fiduciary duty in tort, contract and quasi-contract,
violation of sections of the Louisiana Blue Sky Law and violation of the
Louisiana Civil Code concerning the inducement and solicitation of purchases
arising out of the public offering of Polaris Aircraft Income Fund IV. Plaintiff
seeks compensatory damages, attorney's fees, interest, costs and general relief.
The Partnership is not named as a defendant in this action.

On or around December 8, 1995, a complaint entitled Overby, et al. v. General
Electric Company, et al. was filed in the Civil District Court for the Parish of
Orleans, State of Louisiana. The complaint names as defendants General Electric
Company and General Electric Capital Corporation. Plaintiffs allege claim of
tort, breach of fiduciary duty, in tort, contract and quasi-contract, violation
of sections of the Louisiana Blue Sky Law and violation of the Louisiana Civil
Code in connection with the public offering of Polaris Aircraft Income Funds III
and IV. Plaintiffs seek compensatory damages, attorneys' fees, interest, costs
and general relief. The Partnership is not named as a defendant in this action.

In or around November 1994, a complaint entitled Lucy R. Neeb, et al. v.
Prudential Securities Incorporated et al., was filed in the Civil District Court
for the Parish of Orleans, State of Louisiana. The complaint named as defendants
Prudential Securities, Incorporated and Stephen Derby Gisclair. On or about
December 20, 1995, plaintiffs filed a First Supplemental and Amending Petition
adding as additional defendants General Electric Company, General Electric
Capital Corporation and Smith Barney, Inc. Plaintiffs allege claims of tort,
breach of fiduciary duty, in tort, contract and quasi-contract, violation of
sections of the Louisiana Blue Sky Law and violation of the Louisiana Civil Code
in connection with the public offering of Polaris Aircraft Income Funds III and
IV. Plaintiffs seek compensatory damages, attorneys' fees, interest, costs and
general relief. The Partnership is not named as a defendant in this action.

In or about January of 1995, a complaint entitled Albert B. Murphy, Jr. v.
Prudential Securities, Incorporated et al., was filed in the Civil District
Court for the Parish of Orleans, State of Louisiana. The complaint named as
defendants Prudential Securities Incorporated and Stephen Derby Gisclair. On or
about January 18, 1996, plaintiff filed a First Supplemental and Amending
Petition adding defendants General Electric Company and General Electric Capital
Corporation. Plaintiff alleges claims of tort, breach of fiduciary duty in tort,
contract and quasi-contract, violation of sections of the Louisiana Blue Sky Law
and violation of the Louisiana Civil Code in connection with the public offering
of Polaris Aircraft Income Funds III and IV. Plaintiffs seek compensatory
damages, attorneys' fees, interest, costs and general relief. The Partnership is
not named as a defendant in this action.

On or about January 22, 1996, a complaint entitled Mrs. Rita Chambers, et al. v.
General Electric Co., et al., was filed in the Civil District Court for the
Parish of Orleans, State of Louisiana. The complaint names as defendants General
Electric Company and General Electric Capital Corporation. Plaintiffs allege
claims of tort, breach of fiduciary duty in tort, contract and quasi-contract,
violation of sections of the Louisiana Blue Sky Law and violation of the
Louisiana Civil Code in connection with the public offering of Polaris Aircraft
Income Fund IV. Plaintiffs seek compensatory damages, attorneys' fees, interest,
costs and general relief. The Partnership is not named as a defendant in this
action.

Other Proceedings - Part I, Item 3 discusses certain other actions arising out
of certain public offerings, including that of the Partnership, to which both
the Partnership and its general partner are parties.

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

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 1995 all
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were met.

Item 11. Executive Compensation

PAIF-I has no directors or officers. PAIF-I is managed by PIMC, the General
Partner. In connection with management services provided, management and
advisory fees of $98,922 were paid to PIMC in 1995 in addition to a 10% interest
in all cash distributions as described in Note 9 to the financial statements
(Item 8).

Item 12. Security Ownership of Certain Beneficial Owners and Management

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

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

Title Name of Amount and Nature of Percent
of Class Beneficial Owner Beneficial Ownership of Class
- -------- ---------------- -------------------- --------

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

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

Item 13. Certain Relationships and Related Transactions

None.

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 21
Balance Sheets 22
Statements of Operations 23
Statements of Changes in Partners' Capital (Deficit) 24
Statements of Cash Flows 25
Notes to Financial Statements 26

2. Reports on Form 8-K.

None.

3. Exhibits required to be filed by Item 601 of Regulation S-K.

27. Financial Data Schedules (Filed electronically only).

4. Financial Statement Schedules.

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

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.

POLARIS AIRCRAFT INCOME FUND I
(REGISTRANT)
By: Polaris Investment
Management Corporation
General Partner

March 25, 1996 By: /S/ James W. Linnan
- --------------------------- ---------------------------
Date James W. Linnan, 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/James W. Linnan President and Director of Polaris March 25, 1996
- ------------------ Investment Management Corporation, --------------
(James W. Linnan) General Partner of the Registrant

/S/Norman C. T. Liu Vice President and Director of Polaris March 25, 1996
- ------------------- Investment Management Corporation, --------------
(Norman C. T. Liu) General Partner of the Registrant

/S/Marc A. Meiches Chief Financial Officer of Polaris March 25, 1996
- ------------------ Investment Management Corporation, --------------
(Marc A. Meiches) General Partner of the Registrant