<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 1997

                                       OR



          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934



For the transition period from                  to



Commission file number 1-5896



                           HUDSON GENERAL CORPORATION

             (Exact Name of Registrant as specified in its charter)


          Delaware                                         13-1947395

(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)



      111 Great Neck Road, Great Neck, N.Y.                         11021
     (Address of principal executive offices)                     (Zip Code)



Registrant's telephone number, including area code             (5l6) 487-8610



Securities registered pursuant to Section 12(b) of the Act:



                                                     Name of each exchange on
         Title of each class                             which registered

         Common Stock, $1 par value                American Stock Exchange, Inc.



Securities registered pursuant to Section 12(g) of the Act:

                                      None

                                (Title of Class)



Indicate by a 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. [X]

Aggregate market value of voting stock held by non-affiliates of Registrant
based on the closing price on July 31, 1997 was $57,033,559.

The number of shares outstanding (net of treasury stock) of the Registrant's
common stock as of July 31, 1997 was 1,735,849 shares.

Specific portions of the following documents are incorporated herein by
reference in the parts hereof indicated, and only such specific portions are to
be deemed filed as part of this report:
<TABLE>
<CAPTION>
                  Document                                        Part
                  --------                                        ----
<S>                                                                <C>
1997 Proxy Statement of Registrant (to be filed with the           III
Commission pursuant to Regulation 14A no later than 120 days
after the close of its fiscal year)

Registrant's 1997 Annual Report to Shareholders              I, II, IV
</TABLE>




                                        1
<PAGE>   2
PART I

ITEM 1.           BUSINESS

                  General Development of Business

                  Hudson General Corporation (the "Corporation" or "Registrant")
was organized in Delaware in 1961. Effective June 1, 1996, pursuant to the terms
of a Unit Purchase and Option Agreement dated February 27, 1996 (the Purchase
Agreement) between the Corporation and Lufthansa Airport and Ground Services
GmbH (LAGS), a German corporation and an indirect wholly-owned subsidiary of
Deutsche Lufthansa AG, the Corporation transferred substantially all of the
assets and liabilities of its aviation services business (the Aviation Business)
to Hudson General LLC (Hudson LLC), a newly formed limited liability company. In
exchange for the transfer of such assets and liabilities and the assumption by
Hudson LLC, as co-obligor with the Corporation, of all of the Corporation's 7%
convertible subordinated debentures, the Corporation received a 74% interest in
Hudson LLC. In addition, Hudson LLC sold LAGS a 26% interest in Hudson LLC, for
a purchase price of $23,686,000 in cash (after certain adjustments), of which
$15,848,000 was paid at the closing, and deferred payments of $2,650,000 and
$5,188,000 plus interest thereon were made, respectively, in September 1996 and
December 1996. The Purchase Agreement also provided for the grant to LAGS of an
option (the LAGS Option), exercisable on October 1 of each year from 1996
through 2000, effective as of the preceding July 1, pursuant to which LAGS may
increase its equity ownership in Hudson LLC from 26% to a maximum of 49%, for a
price based on a formula related to the average earnings of the Aviation
Business over the four fiscal years preceding the exercise of the option,
subject to certain minimum and maximum amounts. Effective December 1996, the
Purchase Agreement was amended so that the LAGS Option now expires on October 1,
1999.


                                        2
<PAGE>   3
                  Hudson LLC is principally engaged in providing a broad range
of services to the aviation industry. The services, which are conducted by
Hudson LLC and its subsidiaries, include aircraft ground handling; aircraft
fueling; fuel management; ground transportation; snow removal; cargo
warehousing; and sale, leasing and maintenance of airline ground support
equipment. In addition to its interest in Hudson LLC, the Corporation is a 50%
partner with Oxford First Corporation in a joint venture for the development and
sale of land on the Island of Hawaii (see Note 3 to Item 14(a)(1) Financial
Statements).

Narrative Description of Business

                  Hudson LLC's snow removal and aircraft de-icing services are
seasonal in nature. The majority of the results of these operations are normally
reflected in the second and third quarters of the Corporation's fiscal year, and
fluctuate depending upon the severity of the winter season. Additional
information required to be provided under this item is incorporated by reference
from pages 3-8 of the Registrant's 1997 Annual Report to Shareholders.

General Information

                  The Corporation does not spend a material amount for research
and development activities.

                  During the years ended June 30, 1996 and 1995, sources of the
Corporation's revenues which exceeded 10% of consolidated revenues in any year
were: aircraft ground handling services (including de-icing) $85,948,000 and
$74,334,000; aircraft fueling services (including fixed base operations)
$23,701,000 and $22,923,000; ground transportation services $21,108,000 and
$23,802,000; and snow removal services $17,487,000 and $3,706,000, respectively.
(Note: In fiscal 1996, revenues are for the eleven

                                        3
<PAGE>   4
months ended May 31, 1996. Foreign revenues included above are translated at the
average rates of exchange in their respective fiscal years.)

                  No customer of the Corporation accounted for more than 10% of
consolidated revenues during fiscal 1997.

                  Hudson LLC's services are generally subject to competitive 
bidding, and Hudson LLC competes principally with airlines and other aviation
services companies, some of which are larger and have resources greater than
Hudson LLC. The major bases of competition are the prices at which services are
offered and the quality and efficiency in the performance of services.

                  The compliance with federal, state and local provisions which
have been enacted or adopted regulating the discharge of materials into the
environment did not have a material effect upon the Corporation's or Hudson
LLC's capital expenditures or results of operations for fiscal 1997 and 1996, or
competitive position. However, the federal government and many state and local
governments have enacted or proposed legislation and regulations with respect to
storage facilities for fuel, petroleum-based products and chemicals, the
disposal of hazardous waste materials, storm water discharges, and financial
responsibility for possible liability exposures relating to fuel storage
facilities. Compliance with such legislation and regulations has resulted in
expenditures by the Corporation and Hudson LLC, including expenditures for the
testing, decommissioning and/or replacement of certain of its fuel and de-icing
fluid storage facilities, and the cleanup of fuel spills. The Corporation was
and Hudson LLC is presently engaged in several such decommissioning and cleanup
projects, and it is anticipated that additional such expenditures, the amount of
which is presently not expected to be material, will be required.

                  In addition, airport authorities are coming under increasing
pressure to clean up previous contamination at their facilities, and are seeking
financial contributions from airport tenants and companies which

                                        4
<PAGE>   5
operate at their airports. The Corporation cannot predict at this time the
amount, if any, that it or Hudson LLC may be required to pay in connection with
such airport authority initiatives.

                  The Corporation and Hudson LLC employ approximately 40 and
4,300 persons, respectively.

Financial Information About Foreign and Domestic Operations and Export Sales

                  The Corporation, through its ownership interest in Hudson LLC,
operates in only one industry segment. For information as to foreign operations,
see Note 6 to Item 14(a)(1) Financial Statements and Note 5 to Item 14(a)(2)
Financial Statements of Hudson LLC. For information relating to the
Corporation's investment in a joint venture to develop and sell land in Hawaii
(the Venture), see Note 3 to Item 14(a)(1) Financial Statements.

                                        5
<PAGE>   6
ITEM 2.           PROPERTIES

                  The Corporation's executive offices at 111 Great Neck Road,
Great Neck, New York contain approximately 13,000 square feet and are under
lease through December 31, 2002.

                  Hudson LLC leases office, warehouse, hangar and maintenance
shop space as well as fuel storage facilities at various airport locations in
the United States and Canada. These leases expire at various dates through 2009
and contain various renewal options through 2020. A portion of this leased space
has been sublet to non-affiliated sublessees. The properties owned and leased by
Hudson LLC are suitable and adequate to conduct its business.

                  For information relating to the Corporation's interest in land
in Hawaii, see Note 3 to Item 14(a)(1) Financial Statements and page 8 of the
Registrant's 1997 Annual Report to Shareholders.

                                        6
<PAGE>   7
ITEM 3.           LEGAL PROCEEDINGS

                  In 1988, Texaco Canada Inc. (Texaco) (now known as McColl-
Frontenac Inc.) instituted a lawsuit (the Texaco Lawsuit) in the Supreme Court
of Ontario, Canada against the Corporation, the Corporation's Canadian
subsidiary (now owned by Hudson LLC) and Petro-Canada Inc. (the corporation
which supplied aviation fuel for the Corporation's Canadian fixed base
operations). The Texaco Lawsuit's allegations, as amended, are that the
defendants interfered with contractual and fiduciary relations, conspired to
injure, and induced the breach of a fuel supply agreement between Texaco and
Innotech Aviation Limited (Innotech) in connection with the purchase by the
Corporation from Innotech in 1984 of certain assets of Innotech's airport ground
services business. The Texaco Lawsuit seeks compensatory and punitive damages
totaling $110,000,000 (Canadian) (approximately $80,000,000 (U.S.)) plus all
profits earned by the defendants subsequent to the alleged breach. The trial,
which began in May 1996, concluded after several adjournments on May 7, 1997, at
which time the trial judge indicated that he intended to issue his decision on
or about June 30, 1997. However, to date the judge has not yet rendered his
decision.

                  Innotech (which due to a name change is now called Aerospace
Realties (1986) Limited (Aerospace)) had agreed to defend and indemnify the
Corporation against claims of whatever nature asserted in connection with,
arising out of or resulting from the fuel supply agreement with Texaco. By a
letter dated February 15, 1996, the Corporation was notified by Aerospace that
Aerospace had entered into a liquidation phase and could no longer defray the
cost of defending the Texaco Lawsuit or pay for any damages resulting therefrom.

                  The Corporation has agreed to indemnify and hold harmless
Hudson LLC, LAGS and each affiliate of LAGS against all losses related to the
Texaco Lawsuit. The Corporation's management believes, and counsel for the

                                        7
<PAGE>   8
Corporation has advised based on the facts as disclosed at trial, that the
Corporation will successfully defend this action.

                                        8
<PAGE>   9
ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not
                applicable

ADDITIONAL ITEM

                      EXECUTIVE OFFICERS OF THE CORPORATION
<TABLE>
<CAPTION>
      Name              Age      Position with Corporation
      ----              ---      -------------------------
<S>                     <C>      <C>
Jay B. Langner          67       Chairman of the Board, Chief Executive Officer and
                                 Director

Michael Rubin           50       President and Director

Paul R. Pollack         55       Executive Vice President, Chief Operating Officer
                                 and Director

Fernando DiBenedetto    48       Senior Vice President - Operations

Raymond J. Rieder       47       Senior Vice President and Chief Marketing
                                 Officer

Barry I. Regenstein     40       Vice President, Chief Financial Officer and
                                 Controller

Noah E. Rockowitz       48       Vice President, Secretary and General Counsel
</TABLE>

           No family relationships exist among the executive officers of the
Corporation. Each of the executive officers holds office at the pleasure of the
Board of Directors, except as noted below.

           Mr. Langner has served as a Director of the Corporation since 1961
and as Chairman since 1977. He served as President from 1989 until September
1996, and previously served in such capacity from 1961 until 1979. The
Corporation has an employment contract with Mr. Langner pursuant to which Mr.
Langner has agreed to render services to the Corporation as Chairman and Chief
Executive Officer for a period ending January 31, 2001.

           Mr. Rubin was elected as a Director of the Corporation in November
1996.  Mr. Rubin has served as President of the Corporation since September
1996 and prior to such time served as Executive Vice President and Chief
Financial Officer of the Corporation since 1990.  He has been Treasurer of
the Corporation since 1983.  Previously, Mr. Rubin had been Vice President-
Finance since 1985.  He has been employed in various capacities with the
Corporation since 1971.  Mr. Rubin is a Certified Public Accountant.

                                        9
<PAGE>   10
           Mr. Pollack was elected as a Director of the Corporation in November
1996.  Mr. Pollack has served as Executive Vice President and Chief Operating
Officer of the Corporation since 1990, and prior thereto as Senior Vice
President since 1984.  He has served as President of Hudson LLC since
September 1996.  He has been employed in various capacities with the
Corporation, including as a divisional officer, since 1968.  Mr. Pollack is a
Certified Public Accountant.

           Mr. DiBenedetto has served as Senior Vice President-Operations since
1994. Prior thereto he was Vice President-Operations since 1984. He has been
employed in various capacities with the Corporation, including as a divisional
officer, since 1970.

           Mr. Rieder has served as Senior Vice President and Chief Marketing
Officer of the Corporation since 1990, and prior thereto as Vice President-
Marketing since 1984. Mr. Rieder has served as Executive Vice President of
Hudson LLC since September 1996. He has been employed in various capacities with
the Corporation, including as a divisional officer, since 1967.

           Mr. Regenstein was elected Chief Financial Officer of the Corporation
in July 1997 and has served as the Corporation's Controller since 1987 and as
a Vice President since 1994.  He has been employed in various capacities with
the Corporation since 1982.  Mr. Regenstein is a Certified Public Accountant.

           Mr. Rockowitz has served as Vice President-General Counsel since 1985
and as Secretary since 1986. Prior to joining the Corporation in 1985, he had
been Corporate Secretary and Assistant General Counsel of Belco Petroleum
Corporation since 1978.

           The Corporation has employment contracts with Messrs. Rubin, Pollack
and Rieder which currently extend until December 31, 1998 and are subject to
extension for additional three year periods unless on or before the September
30th preceding any then-existing expiration date, the Corporation notifies the
executive that it elects not to so extend the term. The Corporation also


                                       10
<PAGE>   11
has employment contracts with Messrs. DiBenedetto, Regenstein and Rockowitz
which currently extend until December 31, 1997 and are subject to extension for
additional two year periods unless on or before the September 30th preceding any
then-existing expiration date, the Corporation notifies the executive that it
elects not to so extend the term.

                                       11
<PAGE>   12
PART II

ITEM 5.         MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
                MATTERS

                The information required to be provided under Part II, Item 5(a)
and (c) is incorporated by reference from page 13 of the Registrant's 1997
Annual Report to Shareholders under the caption "Selected Consolidated Financial
Data". At June 30, 1997, there were 197 holders of record of the Corporation's
common stock.

                The Corporation's Revolving Credit Agreement, as amended (Credit
Agreement), permits the payment of dividends (see Note 7 to Item 14(a)(1)
Financial Statements) and the purchase, redemption or retirement by the
Corporation of its stock so long as certain financial covenants are maintained.

                In fiscal 1997, the Board of Directors authorized the repurchase
of up to 400,000 shares of the Corporation's common stock, which purchases could
be made from time to time in either open market or privately negotiated
transactions. Prior to the fiscal 1997 authorizations, the Corporation still had
the authority to purchase up to 35,700 shares from a previous authorization.
During fiscal 1997, the Corporation repurchased 243,000 shares in the open
market for an aggregate purchase price of $9,152,000.

                                       12
<PAGE>   13
ITEM 6.         SELECTED FINANCIAL DATA

                The information required to be provided under Part II, Item 6 is
incorporated by reference from page 13 of the Registrant's 1997 Annual Report to
Shareholders under the caption "Selected Consolidated Financial Data".

ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATIONS

                The information required to be provided under Part II, Item 7 is
incorporated by reference from pages 9-12 of the Registrant's 1997 Annual Report
to Shareholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

ITEM 8.         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                The consolidated financial statements and the required financial
statement schedule of the Corporation and the independent auditors' reports
thereon of KPMG Peat Marwick LLP, independent auditors, for the Corporation's
fiscal years ended June 30, 1997, 1996 and 1995 are filed pursuant to Items
14(a)(1) and (2) of this Report. The financial statements and the required
financial statement schedule of Hudson LLC and the independent auditors' report
thereon of KPMG Peat Marwick LLP, independent auditors, for the fiscal year
ended June 30, 1997 and the month ended June 30, 1996 and the financial
statements and the required financial statement schedule of the Venture and the
independent auditors' report thereon of KPMG Peat Marwick LLP, independent
auditors, for the fiscal years ended June 30, 1997, 1996 and 1995, are filed
pursuant to Item 14(d) of this Report. All such financial statements and
financial statement schedules are included herein, except for the consolidated
financial statements of the Corporation which are incorporated herein by
reference.

                                       13
<PAGE>   14
                Selected quarterly financial data of the Registrant for the
fiscal years ended June 30, 1997 and 1996 appears in Note 13 to Item 14(a)(1)
Financial Statements.

ITEM 9.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE - Not Applicable

PART III

ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                The information required to be provided under Part III, Item 10,
relative to Directors of the Registrant is incorporated by reference from the
Registrant's 1997 definitive proxy statement to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A no later than
120 days after the close of its fiscal year and, relative to executive officers,
to Part I of this report under the caption "Executive Officers of the
Corporation".

ITEM 11.        EXECUTIVE COMPENSATION

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                The information required to be provided under Part III, Items
11, 12 and 13 is incorporated by reference from the Registrant's 1997 definitive
proxy statement to be filed with the Commission pursuant to Regulation 14A no
later than 120 days after the close of its fiscal year.

                                       14
<PAGE>   15
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)
FINANCIAL STATEMENTS OF THE REGISTRANT, all of which are incorporated herein by
reference to the Registrant's 1997 Annual Report to Shareholders.

Independent Auditors' Report of KPMG Peat Marwick LLP, independent auditors,
appearing on page 24 of the 1997 Annual Report to Shareholders.

Consolidated Balance Sheets of Hudson General Corporation and Subsidiaries at
June 30, 1997 and 1996, appearing on page 15 of the 1997 Annual Report to
Shareholders.

Consolidated Statements of Earnings of Hudson General Corporation and
Subsidiaries for the Years Ended June 30, 1997, 1996 and 1995, appearing on page
14 of the 1997 Annual Report to Shareholders.

Consolidated Statements of Cash Flows of Hudson General Corporation and
Subsidiaries for the Years Ended June 30, 1997, 1996 and 1995, appearing on page
17 of the 1997 Annual Report to Shareholders.

Consolidated Statements of Stockholders' Equity of Hudson General Corporation
and Subsidiaries for the Years Ended June 30, 1997, 1996 and 1995, appearing on
page 16 of the 1997 Annual Report to Shareholders.

Notes to Consolidated Financial Statements appearing on pages 18-24 of the 1997
Annual Report to Shareholders.
<TABLE>
<CAPTION>
                                                                                Location
                                                                                in 10-K
                                                                                --------
<S>                                                                                <C>
(a)(2)

FINANCIAL STATEMENT SCHEDULE OF THE REGISTRANT FOR THE YEARS ENDED
JUNE 30, 1997, 1996 AND 1995

Independent Auditors' Report of KPMG Peat Marwick LLP on Financial                  F1
Statement Schedule

II - Valuation and Qualifying Accounts                                              F2


FINANCIAL STATEMENTS OF HUDSON GENERAL LLC AND SUBSIDIARIES:

Independent Auditors' Report of KPMG Peat Marwick LLP.                              F4

Consolidated Balance Sheets of Hudson General LLC and Subsidiaries at               F6
June 30, 1997 and 1996.

Consolidated Statements of Earnings of Hudson General LLC and                       F5
Subsidiaries for the Year Ended June 30, 1997 and the Period June 1,
1996 (Inception) to June 30, 1996.

Consolidated Statements of Members' Equity of Hudson General LLC and                F7
Subsidiaries for the Year Ended June 30, 1997 and the Period June 1,
1996 (Inception) to June 30, 1996.

Consolidated Statements of Cash Flows of Hudson General LLC and                     F8
</TABLE>



                                       15
<PAGE>   16
<TABLE>
<CAPTION>
                                                                                Location
                                                                                in 10-K
                                                                                --------
<S>                                                                                <C>
Subsidiaries for the Year Ended June 30, 1997 and the Period June 1,
1996 (Inception) to June 30, 1996.

Notes to Consolidated Financial Statements.                                         F9-F17

FINANCIAL STATEMENT SCHEDULE OF HUDSON GENERAL LLC AND
SUBSIDIARIES FOR THE YEAR ENDED JUNE 30, 1997 AND THE 
PERIOD JUNE 1, 1996 (INCEPTION) TO JUNE 30, 1996:

II - Valuation and Qualifying Accounts                                               F18

FINANCIAL STATEMENTS OF KOHALA JOINT VENTURE AND SUBSIDIARY:

Independent Auditors' Report of KPMG Peat Marwick LLP.                               F20

Consolidated Balance Sheets of Kohala Joint Venture and Subsidiary at                F21
June 30, 1997 and 1996.

Consolidated Statements of Operations and Partners' Deficit of Kohala                F22
Joint Venture and Subsidiary for the Years Ended June 30, 1997, 1996
and 1995.

Consolidated Statements of Cash Flows of Kohala Joint Venture and                    F23
Subsidiary for the Years Ended June 30, 1997, 1996 and 1995.

Notes to Consolidated Financial Statements.                                        F24-F31

FINANCIAL STATEMENT SCHEDULE OF KOHALA JOINT VENTURE AND
SUBSIDIARY FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995:

II - Valuation and Qualifying Accounts                                               F32
</TABLE>

Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required or because the information required
therein is set forth in all material respects in the financial statements,
including the notes thereto.

                                       16
<PAGE>   17
(a)(3)                     Exhibits
------                     --------
<TABLE>
<CAPTION>
        EXHIBIT
           NO.                           EXHIBIT DESCRIPTION
        -------                          -------------------
<S>                     <C>
           3.1          Restated Certificate of Incorporation of the Registrant, as
                        amended to date, filed as Exhibit 3.1 to Quarterly Report on Form
                        10-Q for the quarter ended December 31, 1986, incorporated herein
                        by reference.

           3.2(a)       Amendment to By-laws of the Registrant.

           3.2(b)       By-laws of the Registrant, as amended to date.

           4.4(a)       Revolving Credit Agreement dated as of November 25, 1992 among Hudson 
                        General Aviation Services Inc., various banking institutions named 
                        therein and Bank of Boston Canada, as agent, filed as Exhibit 4.4(i) 
                        to Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, 
                        incorporated herein by reference.

           4.4(b)       First Amendment to the Revolving Credit Agreement dated as of
                        November 25, 1992 among Hudson General Aviation Services Inc.,
                        various banking institutions named therein and The Chase
                        Manhattan Bank of Canada, as successor agent, dated as of March
                        15, 1995, filed as Exhibit 4.4(f) to Annual Report on Form 10-K
                        for the fiscal year ended June 30, 1995, incorporated herein by
                        reference.

           4.4(c)       Second Amendment to the Revolving Credit Agreement dated as of
                        November 25, 1992, among Hudson General Aviation Services Inc.,
                        ABN Amro Bank Canada and The Chase Manhattan Bank of Canada individually 
                        and as successor agent, dated as of June 1, 1996, filed as Exhibit 4.4(c) 
                        to Annual Report on Form 10-K for the fiscal year ended June 30, 1996,
                        incorporated herein by reference.

           4.4(d)       Revolving Credit Agreement dated as of June 1, 1996 among Hudson General 
                        Corporation and The First National Bank of Boston, European American Bank, 
                        The Chase Manhattan Bank, N.A. and The First National Bank of Boston, as 
                        agent, filed as Exhibit 4.4(d) to Annual Report on Form 10-K for the fiscal 
                        year ended June 30, 1996, incorporated herein by reference.

           4.4(e)       Amended and Restated Revolving Credit Agreement dated as of
                        November 25, 1992 among Hudson General Corporation, Hudson
                        General LLC and The First National Bank of Boston, European
                        American Bank, The Chase Manhattan Bank, N.A. and The First
                        National Bank of Boston, as agent, as amended and restated as of
                        June 1, 1996, filed as Exhibit 4.4(e) to Annual Report on Form
                        10-K for the fiscal year ended June 30, 1996, incorporated herein
                        by reference.

           10.1(a)      Development Agreement dated April 29, 1981 between Kahua Ranch, Limited, 
                        and the Registrant, filed as Exhibit 3 to Quarterly Report on Form 10-Q 
                        for the quarter ended March 31, 1981, incorporated herein by reference.

           10.1(b)      Amended and Restated Joint Venture Agreement dated April 29, 1981
                        between Hudson Kohala Inc. and The Hilton Head Company of Hawaii,
</TABLE>

                                       17
<PAGE>   18
<TABLE>
<CAPTION>
        EXHIBIT
           NO.                           EXHIBIT DESCRIPTION
        -------                          -------------------
<S>                     <C>
                        Inc. (now Oxford Kohala, Inc.), filed as Exhibit 4 to Quarterly
                        Report on Form 10-Q for the quarter ended March 31, 1981,
                        incorporated herein by reference.

           10.1(c)      First Amendment to the Joint Venture Agreement, Amendment and 
                        Restatement dated April 29, 1981, such Amendment being effective 
                        as of June 30, 1984, filed as Exhibit 10 to Quarterly Report on 
                        Form 10-Q for the quarter ended September 30, 1984, incorporated 
                        herein by reference.

           10.1(d)      Receivable Sales Agreement dated January 3, 1990, with
                        amendment letters dated June 22, 1990 and August 2, 1990,
                        between the Registrant and Oxford First Corporation and Oxford
                        Kohala, Inc., filed as Exhibit 10.1(d) to Annual Report on
                        Form 10-K for the fiscal year ended June 30, 1990,
                        incorporated herein by reference.

           10.1(e)      Commitment Agreement to Purchase Receivables dated January 3, 1990, 
                        with amendment letter dated August 2, 1990, between Kohala Joint 
                        Venture and The Oxford Finance Companies, Inc., filed as Exhibit 10.1(e) 
                        to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, 
                        incorporated herein by reference.

           10.1(f)      Agreement constituting an amendment to the Joint Venture Agreement, 
                        Amendment and Restatement dated April 29, 1981, dated November 2, 1990 
                        among the Registrant, Hudson Kohala Inc., Oxford Kohala, Inc. and Oxford 
                        First Corporation relating to receivables of the Kohala Joint Venture, 
                        filed as Exhibit 10.1(f) to Quarterly Report on Form 10-Q for the quarter 
                        ended September 30, 1990, incorporated herein by reference.

           10.1(g)      Agreement constituting an amendment to the Joint Venture
                        Agreement, Amendment and Restatement dated April 29, 1981, dated
                        September 5, 1991 among the Registrant, Hudson Kohala Inc.,
                        Oxford Kohala, Inc. and Oxford First Corporation relating to
                        distributions from the Kohala Joint Venture, filed as Exhibit
                        10.1(g) to Annual Report on Form 10-K for the fiscal year ended
                        June 30, 1991, incorporated herein by reference.

           10.1(h)      Agreement constituting an amendment to the Joint Venture
                        Agreement, Amendment and Restatement dated April 29, 1981, dated
                        September 26, 1991 among the Registrant, Hudson Kohala Inc.,
                        Oxford Kohala, Inc. and Oxford First Corporation relating to
                        distributions from the Kohala Joint Venture, filed as Exhibit
                        10.1(h) to Quarterly Report on Form 10-Q for the quarter ended
                        September 30, 1991, incorporated herein by reference.

           10.1(i)      Second Amendment to the Joint Venture Agreement, Amendment and 
                        Restatement dated April 29, 1981, such Amendment being effective as 
                        of October 1, 1994, filed as Exhibit 10.1(i) to Quarterly Report on 
                        Form 10-Q for the quarter ended September 30, 1994, incorporated
                        herein by reference.

           10.2*        1981 Non-Qualified Stock Option and Stock Appreciation Rights
                        Plan, filed as Exhibit 15.1 to Form S-8 Registration Statement
                        under the Securities Act of 1933, Registration No. 2-75137,
                        incorporated herein by reference.
</TABLE>

                                       18
<PAGE>   19
<TABLE>
<CAPTION>
        EXHIBIT
           NO.                           EXHIBIT DESCRIPTION
        -------                          -------------------
<S>                     <C>
          10.3*         1981 Incentive Stock Option and Stock Appreciation Rights Plan,
                        filed as Exhibit 15.2 to Form S-8 Registration Statement under
                        the Securities Act of 1933, Registration No. 2-75137, incorporated
                        herein by reference.

          10.4(a)*      Form of Severance Agreement, dated as of June 3, 1986, between the
                        Registrant and Michael Rubin, filed as Exhibit 10.5(a) to Annual
                        Report on Form 10-K for the fiscal year ended June 30, 1988,
                        incorporated herein by reference.

          10.4(b)*      Amendment effective January 23, 1996, amending the Form of
                        Severance Agreement between the Registrant and Michael Rubin dated
                        as of June 3, 1986, filed as Exhibit 10.4(c) to Quarterly Report
                        on Form 10-Q for the quarter ended March 31, 1996, incorporated
                        herein by reference.

          10.4(c)*      Amended schedule of executive officers entitled to benefits of
                        Severance Agreements, filed as Exhibit 10.4(d) to Quarterly Report
                        on Form 10-Q for the quarter ended March 31, 1996, incorporated
                        herein by reference.

          10.5(a)*      Employment Agreement dated July 28, 1988, between the Registrant
                        and Jay B. Langner, filed as Exhibit 10.6(a) to Annual Report on
                        Form 10-K for the fiscal year ended June 30, 1988, incorporated
                        herein by reference.

          10.5(b)*      Amendment dated April 16, 1990, amending the Employment Agreement
                        between the Registrant and Jay B. Langner dated as of July 28,
                        1988, filed as Exhibit 10.5(b) to Annual Report on Form 10-K for
                        the fiscal year ended June 30, 1990, incorporated herein by
                        reference.

          10.5(c)*      Amendment dated August 16, 1994, amending the Employment Agreement
                        between the Registrant and Jay B. Langner dated as of July 28,
                        1988, as amended, filed as Exhibit 10.5(c) to Annual Report on
                        Form 10-K for the fiscal year ended June 30, 1994, incorporated
                        herein by reference.

          10.5(d)*      Amendment effective January 23, 1996, amending the Employment
                        Agreement between the Registrant and Jay B. Langner dated July 28,
                        1988, as amended, filed as Exhibit 10.5(e) to Quarterly Report on
                        Form 10-Q for the quarter ended March 31, 1996, incorporated
                        herein by reference.

          10.5(e)*      Severance Agreement dated April 16, 1990 between the Registrant and
                        Jay B. Langner, filed as Exhibit 10.5(c) to Annual Report on Form
                        10-K for the fiscal year ended June 30, 1990, incorporated herein
                        by reference.

          10.5(f)*      Amendment effective January 23, 1996, amending the Severance
                        Agreement between the Registrant and Jay B. Langner dated April
                        16, 1990, filed as Exhibit 10.5(f) to Quarterly Report on Form
                        10-Q for the quarter ended March 31, 1996, incorporated herein by
                        reference.
</TABLE>

                                       19
<PAGE>   20
<TABLE>
<CAPTION>
        EXHIBIT
           NO.                           EXHIBIT DESCRIPTION
        -------                          -------------------
<S>                     <C>
           10.6(a)*     Form of Employment Agreement, dated February 8, 1990, between the
                        Registrant and Michael Rubin, filed as Exhibit 10.7(a) to Annual
                        Report on Form 10-K for the fiscal year ended June 30, 1990,
                        incorporated herein by reference.

           10.6(b)*     Amendment effective January 23, 1996, amending the Form of
                        Employment Agreement between the Registrant and Michael Rubin,
                        dated February 8, 1990, filed as Exhibit 10.7(c) to Quarterly
                        Report on Form 10-Q for the quarter ended March 31, 1996,
                        incorporated herein by reference.

           10.6(c)*     Amended schedule of executive officers entitled to benefits of
                        Employment Agreements, filed as Exhibit 10.7(d) to Quarterly
                        Report on Form 10-Q for the quarter ended March 31, 1996,
                        incorporated herein by reference.

           10.7*        Description of Executive Incentive Program adopted by the
                        Compensation Committee of the Board of Directors on December 1,
                        1993, as amended on May 17, 1996, filed as Exhibit 10.9 to Annual
                        Report on Form 10-K for the fiscal year ended June 30, 1996,
                        incorporated herein by reference.

           10.8(a)      Unit Purchase and Option Agreement, dated February 27, 1996
                        between the Registrant and Lufthansa Airport and Ground Services
                        GmbH, a German corporation, filed as Exhibit 99.1 to Form 8-K
                        dated March 6, 1996, incorporated herein by reference.

           10.8(b)      Limited Liability Company Agreement dated May 31, 1996, effective
                        as of June 1, 1996, among the Registrant, LAGS (USA) Inc. and
                        Hudson General LLC, filed as Exhibit 99.3 to Form 8-K dated May
                        31, 1996, incorporated herein by reference.

           10.8(c)      First Amendment to the Unit Purchase and Option Agreement dated
                        February 27, 1996 between the Registrant and Lufthansa Airport and
                        Ground Services GmbH, a German corporation, dated as of December
                        12, 1996, filed as Exhibit 10.10(c) to Quarterly Report on Form
                        10-Q for the quarter ended December 31, 1996, incorporated herein
                        by reference.

           10.8(d)      Third Amendment to the Limited Liability Company Agreement dated
                        May 31, 1996, effective as of June 1, 1996, among the Registrant,
                        LAGS (USA) Inc. and Hudson General LLC dated as of December 12,
                        1996, filed as Exhibit 10.10(d) to Quarterly Report on Form 10-Q
                        for the quarter ended December 31, 1996, incorporated herein by
                        reference.

           11           Computation of Earnings Per Share Information - primary and fully
                        diluted.

           13           The Registrant's 1997 Annual Report to Shareholders, which report,
                        except for those portions thereof which are expressly incorporated
                        by reference in this filing, is furnished for the information of
                        the Commission and is not to be deemed to be filed as part of this
                        filing.

           21           Subsidiaries of the Registrant.

           23           Consent of KPMG Peat Marwick LLP, the Corporation's independent
                        auditors, to the incorporation by reference into the
</TABLE>

                                       20
<PAGE>   21
<TABLE>
<CAPTION>
        EXHIBIT
           NO.                           EXHIBIT DESCRIPTION
        -------                          -------------------
<S>               <C>
                  Corporation's Registration Statement on Form S-8, as amended,
                  Registration No. 2-75137.

         (b)      No reports on Form 8-K have been filed by the Registrant
                  during the last quarter of the period covered by this report.

         (c)      Reference is made to Item 14(a)(3) above.

         (d)      Reference is made to Item 14(a)(2) above.


         *        Denotes management contract for compensatory plan or
                  arrangement.
</TABLE>

                                       21
<PAGE>   22
                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned Chief Executive Officer, President and Chief Financial
Officer/Controller, thereunto duly authorized on the 11th day of September

1997.

HUDSON GENERAL CORPORATION

        /s/    Signature                         Title
               ---------                         -----

        /s/    Jay B. Langner            Chairman of the Board, and
               --------------            Chief Executive Officer
               Jay B. Langner                                           

        /s/    Michael Rubin             President
               --------------
               Michael Rubin

        /s/    Barry I. Regenstein       Chief Financial Officer and Controller
               -------------------
               Barry I. Regenstein

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 their capacities as Directors on the 11th day of September 1997.

        /s/      Jay B. Langner             /s/     Michael Rubin
                 --------------                     -------------
                 Jay B. Langner                     Michael Rubin

        /s/      Milton H. Dresner          /s/     Hans H. Sammer
                 -----------------                  --------------
                 Milton H. Dresner                  Hans H. Sammer

        /s/      Paul R. Pollack            /s/     Richard D. Segal
                 ---------------                    ----------------
                 Paul R. Pollack                    Richard D. Segal

        /s/      Edward J. Rosenthal        /s/     Stanley S. Shuman
                 -------------------                -----------------
                 Edward J. Rosenthal                Stanley S. Shuman

                                       22
<PAGE>   23
                          Independent Auditors' Report

The Board of Directors and Stockholders
Hudson General Corporation:

Under date of August 15, 1997, we reported on the consolidated balance sheets of
Hudson General Corporation and subsidiaries as of June 30, 1997 and 1996, and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1997, as
contained in the fiscal 1997 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1997. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related financial statement schedule listed in item 14(a)2. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.




                                             KPMG PEAT MARWICK LLP

Jericho, New York
August 15, 1997

                                       23
<PAGE>   24
SCHEDULE II

HUDSON GENERAL CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED JUNE 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
                      COLUMN A           COLUMN B                                  COLUMN C              COLUMN D        COLUMN E

                                                                       ..........ADDITIONS.........

                                        BALANCE AT             CHARGED TO        CHARGED TO             DEDUCTIONS      BALANCE AT
                                        BEGINNING               COSTS AND          OTHER                   FROM             END
                     DESCRIPTION         OF YEAR                EXPENSES          ACCOUNTS               RESERVES         OF YEAR
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>                 <C>                    <C>              <C>
1997 - Allowance for doubtful
        accounts receivable...          $      ---           $     ---           $       ---            $     ---        $      ---
                                        ==========           =========           ===========            =========        ==========
1996 - Allowance for doubtful
        accounts receivable..           $1,579,000           $ 362,000           $(1,820,000)(B,C,D)    $ 121,000(A)     $      ---
                                        ==========           =========           ===========            =========        ==========

1995 - Allowance for doubtful
        accounts receivable...          $1,631,000           $ 178,000           $   (85,000)(B,C)      $ 145,000(A)     $1,579,000
                                        ==========           =========           ===========            =========        ==========
</TABLE>


NOTES:

        (A)      Write-offs.
        (B)      Foreign exchange.
        (C)      Recoveries.
        (D)      Includes transfer of $1,804,000 to Hudson General LLC.

                                       24
<PAGE>   25
                               HUDSON GENERAL LLC
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                  AND SCHEDULE

                                   (FORM 10-K)

                             JUNE 30, 1997 AND 1996

                   (WITH INDEPENDENT AUDITORS' REPORT THEREON)

                                       25
<PAGE>   26
INDEPENDENT AUDITORS' REPORT

The Board of Member Representatives
Hudson General LLC

We have audited the accompanying consolidated balance sheets of Hudson General
LLC and subsidiaries as of June 30, 1997 and 1996 and the related consolidated
statements of earnings, members' equity and cash flows for the year ended June
30, 1997 and the period June 1 (inception) to June 30, 1996. We have also
audited financial statement schedule II. These consolidated financial statements
and the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule 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
management, 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hudson General LLC
and subsidiaries at June 30, 1997 and 1996 and the results of their operations
and their cash flows for the year ended June 30, 1997 and the period June 1
(inception) to June 30, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

                                         KPMG PEAT MARWICK LLP

Jericho, New York
August 15, 1997

                                       26
<PAGE>   27
CONSOLIDATED STATEMENTS OF EARNINGS

Hudson General LLC and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
                                                                  Period June 1
                                                  YEAR ENDED      (Inception) to
                                                   JUNE 30,           June 30,
                                                      1997              1996
                                                   ---------          --------
<S>                                                <C>                <C>
Revenues .................................         $ 167,729          $ 12,096
                                                   ---------          --------

Costs and expenses:

    Operating ............................           128,749             9,259
    Depreciation and amortization ........             7,510               673
    Selling, general & administrative ....            13,625             1,317
                                                   ---------          --------

       Total costs and expenses ..........           149,884            11,249
                                                   ---------          --------

Operating income .........................            17,845               847
Interest income ..........................             1,137               217
Interest expense .........................              (958)             (168)
                                                   ---------          --------
Earnings before provision for income taxes            18,024               896

Provision for income taxes ...............             2,085                41
                                                   ---------          --------

Net earnings .............................         $  15,939          $    855
                                                   =========          ========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       27
<PAGE>   28
CONSOLIDATED BALANCE SHEETS
Hudson General LLC and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
                                                                          June 30,
                                                                --------------------------
                                                                  1997              1996
                                                                --------          --------
<S>                                                             <C>               <C>
Assets
Current assets:

   Cash and cash equivalents ..........................         $ 12,324          $ 19,269
   Accounts and notes receivable - net ................           15,289            18,055
   Inventory ..........................................            1,272             1,115
   Prepaid expenses and other assets ..................            1,439             1,202
                                                                --------          --------
         Total current assets .........................           30,324            39,641

Property, equipment and leasehold rights at cost,
   less accumulated depreciation and amortization .....           44,948            37,442
Long-term receivables - net ...........................            1,361             2,028
Deferred income taxes .................................              174               852
Excess cost over fair value of net assets acquired ....              713               761
                                                                --------          --------
                                                                $ 77,520          $ 80,724
                                                                ========          ========
Liabilities and Members' Equity
Current liabilities:

   Accounts payable ...................................         $ 18,528          $ 15,104
   Income taxes payable ...............................            1,280               350
   Accrued expenses and other liabilities .............           17,511            17,735
   Advances from Hudson General Corporation - net .....              361             7,233
                                                                --------          --------
         Total current liabilities ....................           37,680            40,422
                                                                --------          --------

Long-term debt, subordinated ..........................             --              28,751
Note payable to Hudson General Corporation ............            4,630              --
                                                                --------          --------
         Total noncurrent liabilities .................            4,630            28,751
                                                                --------          --------

Members' Equity:

   Contributed capital ................................           19,966            12,123
   Retained earnings ..................................           16,794               855
   Equity adjustments from foreign currency translation           (1,550)           (1,427)
                                                                --------          --------
         Total members' equity ........................           35,210            11,551
                                                                --------          --------
                                                                $ 77,520          $ 80,724
                                                                ========          ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       28
<PAGE>   29
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

Hudson General LLC and Subsidiaries

Year Ended June 30, 1997 and the Period June 1 (Inception) to June 30, 1996 (in
thousands)
<TABLE>
<CAPTION>
                                                                                                Equity
                                                                                            Adjustments from
                                                              Contributed       Retained    Foreign Currency     Members'
                                                                Capital         Earnings      Translation         Equity
                                                                -------         --------      -----------         ------
<S>                                                             <C>             <C>             <C>              <C>
Balance, June 1, 1996 (Inception) .....................         $  --           $  --           $  --            $   --

    Equity contributions ..............................          12,123            --            (1,470)           10,653

    Equity adjustment from foreign currency translation            --              --                43                43

    Net earnings ......................................            --               855            --                 855
                                                               ----------------------------------------------------------

Balance, June 30, 1996 ................................          12,123             855          (1,427)           11,551

    Equity contributions ..............................           7,843            --              --               7,843

    Equity adjustment from foreign currency translation            --              --              (123)             (123)

    Net earnings ......................................            --            15,939            --              15,939
                                                               ----------------------------------------------------------

Balance, June 30, 1997 ................................         $19,966         $16,794         ($1,550)         $ 35,210
                                                               ==========================================================
</TABLE>



See accompanying notes to consolidated financial statements.

                                       29
<PAGE>   30
CONSOLIDATED STATEMENTS OF CASH FLOWS

Hudson General LLC and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
                                                                                           Period June 1
                                                                         YEAR ENDED       (Inception) to
                                                                          JUNE 30,           June 30,
                                                                            1997               1996
                                                                            ----               ----
<S>                                                                       <C>               <C>
Cash flows from operating activities:

Net earnings ....................................................         $ 15,939          $    855
Adjustments to reconcile net earnings to net cash provided (used)
    by operating activities
       Depreciation and amortization ............................            7,510               673
       Provision for losses on accounts receivable - net ........              188                15
       Loss (gain) on sale of equipment .........................              (60)               67
       Change in other current assets and liabilities:
         Accounts and notes receivables - net ...................            2,533            (7,011)
         Inventory ..............................................             (162)              (40)
         Prepaid expenses and other assets ......................             (242)             (256)
         Accounts payable .......................................            3,435             2,365
         Income taxes payable ...................................              940                38
         Accrued expenses and other liabilities .................             (179)           (1,698)
       Decrease in long-term receivables - net ..................              666                36
       Decrease in deferred income taxes ........................              676              --
       Other - net ..............................................               44                 5
                                                                          --------          --------
         Net cash provided (used) by operating activities .......           31,288            (4,951)
                                                                          --------          --------

Cash flows from investing activities:
    Purchases of property and equipment .........................          (15,218)           (1,825)
    Proceeds from sale of property and equipment ................              166                23
                                                                          --------          --------
         Net cash used by investing activities ..................          (15,052)           (1,802)
                                                                          --------          --------

Cash flows from financing activities:
    Capital contributions .......................................            7,843            15,848
    Advances from (repayments to) Hudson General Corporation ....           (7,302)            7,233
    Principal repayment of note payable to Hudson General
       Corporation ..............................................          (21,283)             --
    Principal repayments on long-term debt ......................           (2,408)              (70)
                                                                          --------          --------
         Net cash (used) provided by financing activities .......          (23,150)           23,011
                                                                          --------          --------

Effect of exchange rate changes on cash .........................              (31)                9
                                                                          --------          --------
Net (decrease) increase in cash and cash equivalents ............           (6,945)           16,267
Cash and cash equivalents at beginning of period ................           19,269             3,002
                                                                          --------          --------
Cash and cash equivalents at end of period ......................         $ 12,324          $ 19,269
                                                                          ========          ========
</TABLE>



See accompanying notes to consolidated financial statements.

                                       30
<PAGE>   31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Hudson General LLC and Subsidiaries

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The consolidated financial statements include the
accounts of Hudson General LLC and its subsidiaries (Hudson LLC). All material
intercompany accounts and transactions have been eliminated in consolidation.

Description of Business: Hudson LLC provides a broad and diverse range of
services to the aviation industry at twenty-four (24) airports throughout the
United States and Canada. These services include aircraft ground handling;
aircraft fueling; fuel management; ground transportation; snow removal; cargo
warehousing; and sale, leasing and maintenance of airline ground support
equipment.

Inventories:  Inventories are carried at the lower of average cost or market.

Depreciation and Amortization: Depreciation of property and equipment is
provided on the straight-line method over their estimated useful lives.
Leasehold rights are amortized over the original and anticipated renewal terms
of the underlying leases.

Excess Cost over Fair Value of Net Assets Acquired: The excess cost over fair
value of net assets acquired, net of accumulated amortization of $1,275,000 and
$1,232,000 at June 30, 1997 and June 30, 1996, respectively, is amortized on a
straight-line basis over periods not to exceed forty years. Hudson LLC
periodically reviews its intangible assets and analyzes the propriety of
maintaining the stated values.

Income Taxes: Hudson LLC has adopted Statement of Financial Accounting Standards
(SFAS) No. 109 "Accounting for Income Taxes", which requires the use of the
liability method of accounting for deferred income taxes.

Financial Instruments: Hudson LLC believes that the book values of its monetary
assets and liabilities approximate fair values as a result of the short-term
nature of such assets and liabilities.

Foreign Currency Translation: The financial position and results of operations
of Hudson LLC's Canadian operations are measured using local currency as the
functional currency. Assets and liabilities are translated into U.S. dollars at
year-end rates of exchange, and revenues and expenses are translated at the
average rates of exchange for the year. Gains or losses resulting from
translating foreign currency financial statements are accumulated as a separate
component of members' equity.

Statements of Cash Flows: For purposes of the consolidated statements of cash
flows, Hudson LLC considers all securities with an original maturity of three
months or less at the date of acquisition to be cash equivalents. In fiscal 1997
income taxes (net of refunds) of

                                       31
<PAGE>   32
$843,000 was paid. Interest of $933,000 was paid in fiscal 1997. No income taxes
or interest was paid during the month of June 1996.

Use of Estimates: 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.

Long-Lived Assets: Effective July 1, 1996 Hudson LLC adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires
that long-lived assets and certain identifiable intangibles to be held and used
or disposed of by an entity be reviewed for possible impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The adoption of SFAS No. 121 did not have any impact on
Hudson LLC's financial position or results of operations.

Reclassifications: Certain reclassifications of June 1996 balances have been 
made to conform with the fiscal 1997 presentation.

2.   FORMATION AND STRUCTURE OF HUDSON GENERAL LLC

Effective June 1, 1996, pursuant to the terms of the Unit Purchase and Option
Agreement dated February 27, 1996 (the Purchase Agreement) between Hudson
General Corporation (the Corporation) and Lufthansa Airport and Ground Services
GmbH (LAGS), a German corporation and an indirect wholly-owned subsidiary of
Deutsche Lufthansa AG, the Corporation transferred substantially all of the
assets and liabilities of its aviation services business (the Aviation Business)
to Hudson LLC, a newly formed limited liability company (the Transaction). In
exchange for the transfer of such assets and liabilities and the assumption by
Hudson LLC, as co-obligor with the Corporation, of all of the Corporation's 7%
convertible subordinated debentures, the Corporation received a 74% interest in
Hudson LLC. In addition, Hudson LLC sold LAGS a 26% interest in Hudson LLC, for
a purchase price of $23,686,000 in cash (after certain adjustments), of which
$15,848,000 was paid at the closing, and deferred payments (the Deferred
Payments) of $2,650,000 and $5,188,000 plus interest thereon were made,
respectively, in September 1996 and December 1996. The Purchase Agreement also
provided for the grant to LAGS of an option, exercisable on October 1 of each
year from 1996 through 2000, effective as of the preceding July 1, pursuant to
which LAGS may increase its equity ownership in Hudson LLC from 26% to a maximum
of 49%, for a price based on a formula related to the average earnings of the
Aviation Business over the four fiscal years preceding the exercise of the
option, subject to certain minimum and maximum amounts. Effective December 1996,
the Purchase Agreement was amended so that this option now expires on October 1,
1999.

Pursuant to the Purchase Agreement, Hudson LLC, the Corporation and LAGS USA
Inc., a wholly owned subsidiary of LAGS (LAGS USA), entered into a Limited
Liability Company Agreement effective June 1, 1996 (the LLC Agreement). The LLC
Agreement, as amended, stipulates that the Corporation and LAGS USA will share
profits and losses in the same

                                         32
<PAGE>   33
proportion as their respective equity interests in Hudson LLC, except that the
Corporation is entitled to all interest earned on the Deferred Payments. In
addition, LAGS USA will not share in any pre-tax earnings, as defined, of the
Aviation Business in excess of $14,690,000 and $15,863,000 in fiscal 1997 and
1998, respectively, unless the aggregate of the pre-tax earnings of the Aviation
Business for fiscal 1997 and 1998 exceeds $30,553,000. In addition, 100% of
Hudson LLC's net earnings in June 1996 were allocated to the Corporation.

In June 1996, primarily as a result of the Corporation retaining certain trade
receivables, the Corporation made net advances of $7,233,000 on behalf of Hudson
LLC. Such balance was repaid to the Corporation by Hudson LLC (together with
accrued interest at the Corporation's incremental borrowing rate) during fiscal
1997. As of June 30, 1997, Hudson LLC's net advances from the Corporation were
$361,000.

Pursuant to the LLC Agreement, as amended: (i) the Corporation will continue to
manage the Aviation Business and will be entitled to charge Hudson LLC an
overhead fee equal to the sum of 3% of Hudson LLC's consolidated domestic
revenues and 1% of Hudson LLC's consolidated Canadian revenues (the Corporation
and LAGS USA agreed to raise these overhead fees for fiscal 1998 to 3-1/2% and
1-1/4%, respectively); and (ii) there will be a Member Board on which the
Corporation has three votes and LAGS USA has two votes. The LLC Agreement, as
amended, allows either Member to veto certain major transactions and to veto any
reduction in distributions stipulated in the LLC Agreement, as amended. The LLC
Agreement, as amended, provides that distributions will be paid annually in an
amount at least equal to 50% of domestic net income and 10% of Canadian pre-tax
earnings, as defined, from the Aviation Business. Such distributions, totaling
approximately $8,300,000 for fiscal 1997 and the month of June 1996, are
expected to be made during the first half of fiscal 1998.

3.      SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Accounts, notes and long-term receivables - net at June 30, 1997 and June 30,
1996 consisted of the following:
<TABLE>
<CAPTION>
                                                                                JUNE 30,        June 30,
                                                                                 1997            1996
                                                                                -------         -------
                                                                                      (in thousands)
<S>                                                                             <C>             <C>
Rental and service fees receivable ....................................         $14,762         $17,500
Note receivable .......................................................           1,888           2,414
Equipment rental contracts and other notes receivable
     (less unearned finance income of $39,000 in 1996) ................            --               169
                                                                                -------         -------
                                                                                 16,650          20,083
Less:  current portion (net of allowance for doubtful
     accounts of $1,670,000 and $1,784,000) ...........................          15,289          18,055
                                                                                -------         -------

Long-term portion .....................................................         $ 1,361         $ 2,028
                                                                                =======         =======
</TABLE>


On January 6, 1994, the Corporation assigned its leases and ceased operations at
Long Island MacArthur Airport in Islip, New York (LIMA) where the Corporation
had provided ground

                                       33
<PAGE>   34
handling and fueling services to commercial airlines and related fixed base
operation services to general aviation aircraft. At the closing, the Corporation
was paid $150,000 in cash and received a promissory note from the purchaser of
its leases in the amount of $3,750,000, payable over seven years with interest
at the rate of 7%. The outstanding balance of the note receivable at June 30,
1997 and 1996 was $1,888,000 and $2,414,000, respectively. The promissory note
is secured by the assigned leases and other assets located at LIMA.

Hudson LLC provides various services at airports throughout the United States
and Canada. Hudson LLC grants credit to customers based upon an analysis of its
customers' financial position and then-existing conditions in the aviation
industry. Five of Hudson LLC's customers had individual balances outstanding
greater than 5%, and aggregating 40%, of accounts and notes receivable-net at
June 30, 1997. Bad debt expenses were $188,000 and $17,000 for fiscal 1997 and
the month of June 1996, respectively.

Accrued expenses and other liabilities at June 30, 1997 and 1996 consisted of
the following:
<TABLE>
<CAPTION>
                                                            1997                1996
                                                            ----                ----
                                                                 (in thousands)
<S>                                                      <C>                 <C>
Salaries and wages............................           $  6,327            $  6,204
Insurance.....................................              5,608               3,798
Operating expenses payable....................              3,102               3,318
Other.........................................              2,474               4,415
                                                         --------            --------
                                                         $ 17,511            $ 17,735
                                                         ========            ========
</TABLE>


Maintenance and repair expenses were $8,760,000 and $664,000 for fiscal 1997 and
the month of June 1996, respectively.

4.   PROPERTY, EQUIPMENT AND LEASEHOLD RIGHTS

The number of years over which major classes of assets are being depreciated and
amortized, and the costs and related accumulated depreciation and amortization
as of June 30, 1997 and 1996 are set forth below:
<TABLE>
<CAPTION>
                                                                   Estimated
                                                                  Useful Lives       1997                    1996
                                                                  ------------       ----                    ----

                                                                                          (in thousands)
<S>                                                                  <C>           <C>                     <C>
Operating equipment...........................................       2 - 12        $85,349                 $72,916
Leasehold rights..............................................           25          2,400                   2,400
Buildings.....................................................           20          1,474                   1,468
Office furnishings and equipment..............................       3 - 10          3,868                   3,365
Leasehold improvements........................................       2 - 28          6,464                   6,220
                                                                                   -------                 -------
                                                                                    99,555                  86,369

Accumulated depreciation and amortization                                          (54,607)                (48,927)
                                                                                   -------                 -------
                                                                                   $44,948                 $37,442
                                                                                   =======                 =======
</TABLE>


                                       34
<PAGE>   35
5.   CANADIAN OPERATIONS

The consolidated financial statements include: assets of $18,635,000 and
$16,671,000, and net assets of $12,406,000 and $10,831,000 at June 30,1997 and
1996, respectively; and revenues of $45,987,000 and $3,197,000 and earnings of
$1,784,000 and $52,000 for fiscal 1997 and the month of June 1996, respectively,
related to Hudson LLC's Canadian operations.

6.   LONG-TERM DEBT

In connection with the Transaction, the revolving credit agreement that the
Corporation had with a group of banks dated November 25, 1992, as amended, was
amended and restated as of June 1, 1996, and Hudson LLC assumed and agreed to
become jointly and severally liable for any obligations thereunder (the LLC
Credit Agreement). Pursuant to the LLC Credit Agreement, Hudson LLC may borrow
funds (including outstanding letters of credit) up to a limit of $18,000,000
(the LLC Limit) until September 30, 1998. At such time, and at the end of each
subsequent quarter, the LLC Limit will be reduced by one-sixteenth of the LLC
Limit that was in effect on June 30, 1998 until June 30, 2002, at which time the
LLC Credit Agreement terminates. The limit may also be reduced by asset sales in
excess of certain amounts. There were no direct borrowings outstanding at June
30, 1997 and 1996 and $3,020,000 and $3,045,000 of outstanding letters of credit
at June 30, 1997 and 1996, respectively. The LLC Credit Agreement provides
Hudson LLC with the option of selecting a rate of interest at either the base
rate or 1 3/8% above the LIBO rate, as defined.

The LLC Credit Agreement requires that Hudson LLC maintain certain minimum
effective net worth requirements, as defined, which are subject to incremental
annual increases and further stipulates that Hudson LLC not incur a consolidated
net loss for any fiscal year. The LLC Credit Agreement also requires that Hudson
LLC meet certain other financial covenants. Hudson LLC has granted the banks a
security interest in substantially all of its domestic assets.

Hudson LLC also has an agreement with a group of banks to provide a credit
facility for its Canadian subsidiary (the Canadian Agreement) in the amount of
$5,000,000 (Cdn) (the Canadian Limit). The Canadian Limit will be reduced
commencing September 30, 1998 on the same basis as the LLC Limit. The Canadian
Agreement provides Hudson LLC with the option of selecting a rate of interest at
either 1/2% above the prime rate or 1 5/8% above the cost of funds rate, as
defined. In connection with the Canadian Agreement, Hudson LLC has guaranteed
the obligations of its Canadian subsidiary and granted the banks a security
interest in substantially all of its Canadian accounts receivable and certain of
its other assets.

In July 1986, the Corporation issued $30,000,000 of 7% convertible subordinated
debentures due 2011 (the Debentures). In connection with the Transaction,
effective June 1, 1996, Hudson LLC assumed the obligations of the Debentures and
the Corporation remained as a co-obligor. The Debentures were convertible at any
time prior to maturity into shares of the Corporation's common stock.

At June 1, 1996, there was $28,821,000 principal balance of the Debentures
outstanding. During June and August 1996, the Debentures were called for
redemption and as a result, $2,408,000

                                       35
<PAGE>   36
principal balance of the Debentures were redeemed during fiscal 1997. In
addition, during fiscal 1997 and the month of June 1996, $26,343,000 and
$70,000, respectively, of the Debentures were converted into shares of the
Corporation's common stock and to such extent Hudson LLC became indebted, on a
subordinated basis, to the Corporation (the Corporate Subordinated Debt).
At September 5, 1996, no Debentures remained outstanding.

During fiscal 1997, Hudson LLC utilized the proceeds from the Deferred Payments
together with a portion of the proceeds received at the closing of the
Transaction to repay $21,283,000 of the outstanding balance of the Corporate
Subordinated Debt. At June 30, 1997 the balance of the Corporate Subordinated
Debt was $5,130,000. The noncurrent portion of such debt in the amount of
$4,630,000 is shown as "Note payable to Hudson General Corporation" in the
accompanying consolidated balance sheets. Hudson LLC is obligated to repay
$500,000 of such debt to the Corporation on July 15, 1997 and $1,500,000 on each
July 15th thereafter until the entire principal balance is satisfied. The
current portion of this debt at June 30, 1997, in the amount of $500,000 (which
was paid in July 1997), is included in "Advances from Hudson General Corporation
- net" in the accompanying consolidated balance sheets. Interest on the
Corporate Subordinated Debt is payable semi-annually in January and July at the
rate of 7% per annum.

7.  INCOME TAXES

Provision for income taxes consisted of the following for fiscal 1997 and the
month of June 1996.
<TABLE>
<CAPTION>
                                                           1997          1996
                                                          ------        ------
                                                              (in thousands)
<S>                                                       <C>            <C>
Foreign:
    Current .....................................         $1,061         $ 41
    Deferred ....................................            659           --

State:

    Current .....................................            344           --
    Deferred ....................................             21           --
                                                          ------         ----
                                                          $2,085         $ 41
                                                          ======         ====
</TABLE>


Deferred tax assets (liabilities) are comprised of the following as of June 30,
1997 and 1996 (Deferred tax assets were transferred to Hudson LLC from the
Corporation on June 1, 1996):
<TABLE>
<CAPTION>
                                                                         1997                 1996
                                                                         ----                 ----

Deferred tax assets:                                                          (in thousands)
<S>                                                                      <C>                  <C>
    Reserves for doubtful accounts, claims, etc.....................     $277                 $196
    Minimum tax credit carryforward.................................      ---                   65
    Property, equipment and leasehold rights, principally
       depreciation - foreign.......................................      --                   591
                                                                          ---                 ----
           Total deferred tax assets................................      277                  852
                                                                          ---                 ----
</TABLE>


                                       36
<PAGE>   37
<TABLE>
<CAPTION>
                                                                         1997                 1996
                                                                         ----                 ----

                                                                              (in thousands)
<S>                                                                      <C>                  <C>

Deferred tax liabilities:

    State and local income taxes................................         (21)                  ---
    Property, equipment and leasehold rights, principally
       depreciation - foreign...................................         (82)                  ---
                                                                      ------
           Total deferred tax liabilities.......................        (103)                  ---
                                                                      ------
               Net deferred tax asset...........................      $  174                  $852
                                                                      ======                  ====
</TABLE>


Hudson LLC has adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109
requires that deferred income taxes be recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.

In April 1997, Hudson LLC's Canadian subsidiary was notified by Canadian
taxation authorities of their intention to disallow loss and depreciation
deductions and carryforwards related to an internal recapitalization in fiscal
1990 by the Corporation of such Canadian subsidiary. If the position of the
Canadian taxation authorities (as currently proposed) is sustained, a foreign
income tax liability of approximately $3,900,000, plus interest, would result.
The Corporation has agreed to indemnify and hold harmless Hudson LLC, LAGS and
each affiliate of LAGS against any liability resulting from this matter. The
Corporation's management disagrees with the position of the Canadian taxation
authorities and intends to vigorously contest any potential assessments made by
them. Accordingly, no provision has been made in the accompanying consolidated
financial statements for foreign income taxes related to this matter.

As a limited liability company, Hudson LLC has elected to be taxed as a
partnership under the provisions of the Internal Revenue Code, and therefore,
the U.S. taxable results and available tax credits of Hudson LLC pass directly
to the Members' U.S. corporate income tax returns in the manner prescribed in
the LLC Agreement, as amended.

8.   RETIREMENT PLANS

As of January 1, 1997, Hudson LLC established a 401(k) Profit Sharing Plan
covering substantially all of its domestic employees not subject to collective
bargaining agreements (the LLC Plan). Pursuant to the LLC Plan, Hudson LLC makes
a matching contribution equal to 25% of the Compensation (as defined in the
Plan) that each participant elects to defer (up to 5% of the participant's
Compensation) and contribute to the LLC Plan. In addition, Hudson LLC may make a
discretionary annual contribution. Prior to January 1, 1997 such employees were
covered under the Corporation's 401(k) Profit Sharing Plan (the Plan), which
contains terms and conditions similar to those of the LLC Plan. During fiscal
1997 and the month of June 1996, Hudson LLC contributed $766,000 and $11,000,
respectively, to the LLC Plan and the Plan representing employer matching and
discretionary contributions for Hudson LLC's covered employees.

                                       37
<PAGE>   38
Hudson LLC maintains a Group Registered Retirement Savings Plan (RRSP) covering
substantially all of its Canadian employees not subject to collective bargaining
agreements. Under the RRSP, Hudson LLC may make a discretionary annual
contribution. During fiscal 1997 and the month of June 1996, Hudson LLC
contributed $114,000 and $44,000, respectively, to the RRSP.

Net retirement expense was $861,000 and $91,000 for fiscal 1997 and the month of
June 1996, respectively.

9.   COMMITMENTS AND CONTINGENCIES

(a)  Leases

Minimum rental payments for leased premises and operating equipment for future
fiscal years under non-cancelable operating leases (including $3,563,000 to be
paid subsequent to June 30, 1997 for operating equipment on lease to Hudson LLC
from the Corporation and excluding $1,591,000 to be received subsequent to June
30, 1997 under non-cancelable subleases) are: $5,240,000 in 1998; $4,482,000 in
1999; $3,626,000 in 2000; $3,105,000 in 2001; $2,602,000 in 2002; and $8,115,000
thereafter.

Total rental expense incurred amounted to $6,486,000 and $475,000 (excluding
sublease income of $755,000 and $36,000) for fiscal 1997 and the month of June
1996, respectively.

(b)  Litigation

In 1988, Texaco Canada Inc. (Texaco) (now known as McColl-Frontenac Inc.)
instituted a lawsuit (the Texaco Lawsuit) in the Supreme Court of Ontario,
Canada against the Corporation, the Corporation's Canadian subsidiary (now owned
by Hudson LLC) and Petro-Canada Inc. (the corporation which supplied aviation
fuel for the Corporation's Canadian fixed base operations). The Texaco Lawsuit's
allegations, as amended, are that the defendants interfered with contractual and
fiduciary relations, conspired to injure, and induced the breach of a fuel
supply agreement between Texaco and Innotech Aviation Limited (Innotech) in
connection with the purchase by the Corporation from Innotech in 1984 of certain
assets of Innotech's airport ground services business. The Texaco Lawsuit seeks
compensatory and punitive damages totaling $110,000,000 (Canadian)
(approximately $80,000,000 (U.S.)) plus all profits earned by the defendants
subsequent to the alleged breach. The trial, which began in May 1996, concluded
after several adjournments on May 7, 1997, at which time the trial judge
indicated that he intended to issue his decision on or about June 30, 1997.
However, to date the judge has not yet rendered his decision.

Innotech (which due to a name change is now called Aerospace Realties (1986)
Limited (Aerospace)) had agreed to defend and indemnify the Corporation against
claims of whatever nature asserted in connection with, arising out of or
resulting from the fuel supply agreement with Texaco. By a letter dated February
15, 1996, the Corporation was notified by Aerospace that Aerospace had entered
into a liquidation phase and could no longer defray the cost of defending the
Texaco Lawsuit or pay for any damages resulting therefrom.

The Corporation has agreed to indemnify and hold harmless Hudson LLC, LAGS and
each affiliate of LAGS against all losses related to the Texaco Lawsuit. The
Corporation's management believes,

                                       38
<PAGE>   39
and counsel for the Corporation has advised based on the facts as disclosed at
trial, that the Corporation will successfully defend this action.

                                       39
<PAGE>   40
SCHEDULE II

HUDSON GENERAL LLC AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED JUNE 30, 1997 AND PERIOD JUNE 1 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<CAPTION>
             COLUMN A                  COLUMN B                        COLUMN C                 COLUMN D           COLUMN E
                                                          . . . . . . ADDITIONS. . . . . .
                                      BALANCE AT            CHARGED TO       CHARGED TO         DEDUCTIONS         BALANCE AT
                                     BEGINNING OF           COSTS AND          OTHER              FROM               END
           DESCRIPTION                  PERIOD              EXPENSES          ACCOUNTS           RESERVES          OF PERIOD
--------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                   <C>              <C>                <C>                <C>
1997 - Allowance for doubtful
       accounts receivable            $1,784,000            $188,000         $ 30,000(B,C)      $(332,000)(A)      $1,670,000
                                      ==========            ========         ========           =========          ==========



1996 - Allowance for doubtful
       accounts receivable            $1,804,000(D)         $ 14,000         $(31,000)(B,C)     $   3,000(A)       $1,784,000
                                      ==========            ========         ========           =========          ==========
</TABLE>




   NOTES:

       (A) Write-offs.
       (B) Foreign exchange.
       (C) Recoveries.
       (D) Represents transfer of $1,804,000 from Hudson General
           Corporation.

                                       40
<PAGE>   41
                              KOHALA JOINT VENTURE
                                 AND SUBSIDIARY

                       Consolidated Financial Statements
                                  and Schedule

                                  (Form 10-K)

                          June 30, 1997, 1996 and 1995

                  (With Independent Auditors' Report Thereon)

                                       41
<PAGE>   42
                          INDEPENDENT AUDITORS' REPORT

         The Board of Directors
         Hudson General Corporation

         The Board of Directors
         Oxford First Corporation:

         We have audited the accompanying consolidated balance sheets of the
         Kohala Joint Venture and subsidiary as of June 30, 1997 and 1996, and
         the related consolidated statements of operations and partners'
         deficit, and cash flows for each of the years in the three-year period
         ended June 30, 1997. We have also audited financial statement schedule
         II. These consolidated financial statements and the financial statement
         schedule are the responsibility of the Venture's management. Our
         responsibility is to express an opinion on these consolidated financial
         statements and the financial statement schedule 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 management, as well
         as evaluating the overall financial statement presentation. We believe
         that our audits provide a reasonable basis for our opinion.

         For the years ended June 30, 1997, 1996 and 1995, the Venture incurred
         net losses of $22,584,200, $6,042,200 and $5,495,300, respectively, and
         at June 30, 1997, the amount of the partners' deficit was $37,958,300.
         In fiscal 1997, the Venture recorded a $17,000,000 write-down of its
         real estate assets. In fiscal 1996 and 1995 the partners advanced
         $2,714,400 and $2,346,100, respectively, to the Venture. Additional
         contributions from the partners may be required in fiscal 1998.

         In our opinion, the consolidated financial statements referred to above
         present fairly, in all material respects, the financial position of the
         Kohala Joint Venture and subsidiary as of June 30, 1997 and 1996 and
         the results of their operations and their cash flows for each of the
         years in the three-year period ended June 30, 1997, in conformity with
         generally accepted accounting principles. Also, in our opinion, the
         related financial statement schedule, when considered in relation to
         the basic consolidated financial statements taken as a whole, presents
         fairly, in all material respects, the information set forth therein.

                                                          KPMG PEAT MARWICK LLP

         Jericho, New York
         August 15, 1997

                                       42
<PAGE>   43
                       KOHALA JOINT VENTURE AND SUBSIDIARY

                           Consolidated Balance Sheets

                             June 30, 1997 and 1996
<TABLE>
<CAPTION>
                                         ASSETS                                     1997                 1996
                                                                               ------------          -----------
<S>                                                                            <C>                   <C>
Cash                                                                           $    730,000              266,800
Accounts receivable                                                                  39,200               48,300
Accrued interest receivable                                                         179,200              237,600
Mortgage notes receivable, net (including amounts from related parties
     of $142,700 and $386,500 in 1997 and 1996, respectively)                     2,561,000            4,926,000
Land and development costs, net                                                   9,264,200           26,709,400
Property, plant and equipment, net                                                1,560,900            1,646,000
Model home, net                                                                        --                593,600
Foreclosed real estate, net                                                       2,853,600            2,200,200
Other                                                                                28,700               85,700
                                                                               ------------          -----------
                                                                               $ 17,216,800           36,713,600
                                                                               ============          ===========

                        LIABILITIES AND PARTNERS' DEFICIT

Liabilities:

     Note payable                                                                      --                576,200
     Partner advances and accrued interest payable                               54,012,600           50,219,500
     Accounts payable and accrued expenses                                        1,162,500            1,292,000
                                                                               ------------          -----------
                               Total liabilities                                 55,175,100           52,087,700

Contingencies

Partners' deficit                                                               (37,958,300)         (15,374,100)
                                                                               ------------          -----------
                                                                               $ 17,216,800           36,713,600
                                                                               ============          ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       43
<PAGE>   44
                       KOHALA JOINT VENTURE AND SUBSIDIARY

           Consolidated Statements of Operations and Partners' Deficit

                    Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
                                                         1997                 1996                1995
                                                    ------------          -----------          ----------
<S>                                                 <C>                   <C>                  <C>
Net sales                                           $  1,455,300              676,800             503,600
Cost of sales                                          1,106,400              365,400             191,300
Write-down of real estate assets                      17,000,000                 --                  --
Selling, general and administrative
     expenses                                          2,340,000            2,952,400           2,851,600
                                                    ------------          -----------          ----------
Operating loss                                       (18,991,100)          (2,641,000)         (2,539,300)

Other (income) expense:
     Interest expense                                  3,858,300            3,755,400           3,514,500
     Interest income and other                          (265,200)            (354,200)           (558,500)
                                                    ------------          -----------          ----------
Net loss                                             (22,584,200)          (6,042,200)         (5,495,300)

Partners' deficit, beginning of year                 (15,374,100)          (9,331,900)         (3,836,600)
                                                    ------------          -----------          ----------
Partners' deficit, end of year                      $(37,958,300)         (15,374,100)         (9,331,900)
                                                    ============          ===========          ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       44
<PAGE>   45
                       KOHALA JOINT VENTURE AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                    Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
                                                                                  1997                1996                1995
                                                                              -----------          ----------          ----------
<S>                                                                           <C>                  <C>                 <C>
Cash flows from operating activities:
     Proceeds from land sales                                                 $   765,500             105,200              23,000
     Interest income received                                                     266,800             347,300             579,000
     Proceeds from water company sales                                            294,500             341,300             246,600
     Land and development cost expenditures                                      (115,200)           (159,000)           (243,700)
     Interest paid                                                               (118,100)           (212,000)           (477,400)
     Selling, general and administrative expenditures paid                     (1,533,700)         (1,847,500)         (2,062,800)
     Collections on mortgage notes                                              1,279,500           1,678,300           1,404,500
     Proceeds from sale of and deposits relating to assets
        held in foreclosure                                                       209,100              57,000              89,800
                                                                              -----------          ----------          ----------
                     Net cash provided by (used in)
                           operating activities                                 1,048,400             310,600            (441,000)
                                                                              -----------          ----------          ----------
Cash flows from investing activities:
     Purchases of property, plant and equipment                                   (12,500)            (21,000)            (10,900)
     Proceeds from sale of property, plant and equipment                              500                --                  --
                                                                              -----------          ----------          ----------
                  Net cash used in investing activities                           (12,000)            (21,000)            (10,900)
                                                                              -----------          ----------          ----------
Cash flows from financing activities:
     Net advances received from partners                                             --             2,714,400           2,346,100
     Contributions in aid of construction received                                   --                  --                 6,000
     Payments on notes payable                                                   (573,200)         (2,826,200)         (1,932,300)
                                                                              -----------          ----------          ----------
                  Net cash (used in) provided by financing activities            (573,200)           (111,800)            419,800
                                                                              -----------          ----------          ----------
                  Net increase (decrease) in cash and
                     cash equivalents                                             463,200             177,800             (32,100)

Cash and cash equivalents at beginning of year                                    266,800              89,000             121,100
                                                                              -----------          ----------          ----------
Cash and cash equivalents at end of year                                      $   730,000             266,800              89,000
                                                                              ===========          ==========          ==========
Non cash financing:
     Issuance of note payable for land development                            $      --                  --               576,200
                                                                              ===========          ==========          ==========
</TABLE>
See accompanying notes to consolidated financial statements.

                                       45
<PAGE>   46
                       KOHALA JOINT VENTURE AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                          June 30, 1997, 1996 and 1995

(1)   Summary of Significant Accounting Policies

     (a)  Description of the Business

      The Kohala Joint Venture (the Venture) is a partnership which was formed
          to acquire, develop and sell approximately 4,000 contiguous acres of
          land in Hawaii (the Project). The Partners in the Venture are Hudson
          Kohala, Inc. (Hudson, a wholly-owned subsidiary of Hudson General
          Corporation) and Oxford Kohala, Inc. (Oxford, a wholly-owned
          subsidiary of Oxford First Corporation) (Oxford First) (together, the
          Partners). The terms of the partnership are contained in the Restated
          Joint Venture Agreement dated April 29, 1981, as amended (the
          Agreement). The Project is being developed in four successive phases.
          The first two phases, containing approximately 2,100 acres, have been
          developed and substantially sold. The third phase, containing
          approximately 550 acres, has also been developed and has 85 parcels
          available for sale. The fourth phase has yet to be developed, except
          to the extent common improvements (main roadway, water wells, etc.)
          have been completed. The Partners plan to reevaluate the fourth phase
          of the Project.

     (b)  Principles of Consolidation

      The consolidated financial statements include the accounts of the Venture
          and its 99% owned subsidiary, the Kohala Ranch Water Company (KRWC)
          (note 8). All significant intercompany accounts and transactions have
          been eliminated in consolidation.

     (c)  Partners' Deficit and Allocation of Profits and Losses

      Partners' deficit includes the Partners' capital accounts in the Venture
          and the minority interest (the remaining 1%) of the Partners in KRWC.

      In  accordance with the Agreement, profits are shared equally by the
          Partners. Losses are shared by the Partners on a pro-rata basis, based
          first on their respective capital accounts and then on their
          respective combined advances to the Venture including accrued interest
          (note 6).

     (d)  Revenue Recognition and Land Sales

      All sales to date have been from the first, second and third phases of the
          Project. Revenue is being recognized under the full accrual method of
          accounting. The minimum down payment for sales to be recorded is 10%.

     (e)  Interest Income on Mortgage Notes Receivable

      Interest is not accrued on mortgage notes receivable in arrears 90 days or
          more.

     (f)  Capitalization of Costs

      Land and development costs (including interest) are initially
          capitalized and subsequently carried at the lower of average cost or
          fair value. These costs are charged to cost of sales when the
          corresponding land sale is recorded based upon the relative fair value
          of the parcel sold to the aggregate fair value of all parcels in the
          phase. As indicated in note 2, the Venture recorded a $17,000,000
          write-down of its real estate assets in fiscal 1997.

                                                                     (Continued)

                                       46
<PAGE>   47
                                        2

                       KOHALA JOINT VENTURE AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

      The Venture capitalized interest costs, as appropriate, for each phase
          of the Project. Effective July 1, 1994, as a result of the lack of
          further development activity, capitalization of interest was
          discontinued.

     (g)  Estimated Costs to Complete

      At  June 30, 1997, the Venture estimated that $2,479,000 of additional
          costs were necessary to complete the development of Phase III. The
          portion of such amount relating to unsold parcels has been offset
          against land and development costs, net in the accompanying
          consolidated balance sheets.

     (h)  Property, Plant and Equipment

      Property, plant and equipment is recorded at the lower of cost or fair
          value.

      Depreciation is provided on the straight-line method. The number of years
          over which major classes of assets are depreciated and the costs and
          related accumulated depreciation as of June 30, 1997 and 1996 are set
          forth below:
<TABLE>
<CAPTION>
                                                             Estimated
                                                            useful lives          1997           1996
                                                            ------------          ----           ----
<S>                                                          <C>             <C>              <C>
                Water distribution systems                   20-50 years     $ 2,773,700      2,773,700
                Plant structures and equipment                3-10 years         182,900        190,400
                                                                             -----------      ---------
                                                                               2,956,600      2,964,100

                Accumulated depreciation                                        (867,200)      (789,600)
                Contributions in aid of construction                            (528,500)      (528,500)
                                                                             -----------      ---------
                                                                             $ 1,560,900      1,646,000
                                                                             ===========      =========
</TABLE>

      Contributions in aid of construction represent contributions by customers
          for plant additions made for the benefit of the customer. Accordingly,
          such contributions are recorded as a reduction against property, plant
          and equipment.

      During fiscal 1997, the Venture sold the model home. Depreciation expense
          relating to the model home was $85,800 for fiscal 1997 and $93,600 for
          both fiscal years 1996 and 1995.

      Depreciation expense was $183,400, $173,600 and $176,400 for fiscal 1997,
          1996 and 1995, respectively.

                                                                     (Continued)

                                       47
<PAGE>   48
                                        3

                       KOHALA JOINT VENTURE AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

     (i)  Impairment of Long-Lived Assets

      Effective July 1, 1996, the Venture adopted Statement of Financial
          Accounting Standards (SFAS) No.121, "Accounting for the Impairment of
          Long Lived Assets and for Long Lived Assets to Be Disposed Of". SFAS
          No.121 addresses accounting for the impairment of long-lived assets
          (including real estate), certain identifiable intangibles and goodwill
          relating to those assets to be held and used and for long lived assets
          and certain identifiable intangibles to be disposed of. The adoption
          of SFAS No.121 did not have an effect on the Venture's consolidated
          financial position or results of operations.

     (j)  Income Taxes

      As  a partnership, the Venture is not a taxable entity under the
          provisions of the Internal Revenue Code. The taxable results and
          available tax credits of the Venture and KRWC pass directly to the
          Partners' corporate income tax returns in the manner prescribed in the
          Agreement.

     (k)  Statements of Cash Flows

      For the purposes of presenting the consolidated statements of cash flows,
          the Venture considers all securities with an original maturity of
          three months or less at the date of acquisition to be cash
          equivalents.

      A reconciliation of net loss to net cash provided by (used in) operating
          activities for fiscal 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
                                                                          1997                1996                1995
                                                                          ----                ----                ----
<S>                                                                  <C>                   <C>                 <C>
Net loss                                                             $(22,584,200)         (6,042,200)         (5,495,300)
Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
        Write-down of real estate assets                               17,000,000                --                  --
        Depreciation and amortization                                     183,400             173,600             176,400
        Provision for losses and discounts on
           mortgages receivable                                           600,000             600,000             988,500
        Provision for losses on foreclosed real estate                       --               356,300                --
        Sale of assets held in foreclosure                                209,100              57,000              89,800
        Interest expense in excess of interest paid                     3,740,200           3,543,400           3,037,100
        Mortgage loans originated on land sales                          (339,900)           (206,000)           (209,500)
        Cash collections on mortgage loans                              1,279,500           1,678,300           1,404,500
        Excess of cost of sales over land and
           development costs paid                                         991,200             206,400              52,400
        Accrued interest on mortgages receivable                           58,400               2,200              23,900
        Cash for water sales in excess of accrual                           9,100              (4,900)             (4,300)
        Real estate tax accruals                                          (48,000)             35,700            (434,400)
        Other                                                             (50,400)            (89,200)            (70,100)
                                                                     ------------          ----------          ----------
Total adjustments                                                      23,632,600           6,352,800           5,054,300
                                                                     ------------          ----------          ----------
Net cash provided by (used in) operating activities                  $  1,048,400             310,600            (441,000)
                                                                     ============          ==========          ==========
</TABLE>

                                                                     (Continued)

                                       48
<PAGE>   49
                                        4

                       KOHALA JOINT VENTURE AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(l)   Use of Estimates

      The preparation of the consolidated 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 at the date of the consolidated financial
          statements and the reported amounts of revenues and expenses during
          the reported period. Management has made significant estimates as to
          the amounts required for allowance for uncollectible accounts and the
          allowance for losses on foreclosed real estate, as well as the
          recoverability of land and development costs. Actual results could
          differ from those estimates.

(2)   Write-down of Real Estate Assets

      In the fourth quarter of fiscal 1997, the Venture recorded a charge of
          $17,000,000 to write-down its real estate assets to their estimated
          fair values. The charge is a result of the continuing periodic
          evaluation of the carrying value of the Venture's real estate assets.
          The Partners concluded, as a result of their most recent in-depth
          analysis of an updated independent appraisal of such assets and the
          consideration of other factors affecting the development of the
          property, that the carrying value of the real estate assets should be
          reduced. Factors considered by the Partners included the Partners'
          plans to reevaluate the fourth phase of the Project which has to date
          only had limited development, the current condition of the Hawaiian
          real estate market and general economic conditions.

(3)   Mortgage Notes Receivable

      Effective July 1, 1995, the Venture adopted SFAS No.114, "Accounting by
          Creditors for Impairment of a Loan" and SFAS No.118, "Accounting by
          Creditors for Impairment of a Loan -- Income Recognition and
          Disclosures". SFAS No.114 addresses the accounting by creditors for
          impairment of a loan by specifying how allowances for credit losses
          related to certain loans should be determined. The Venture deems
          certain loans impaired when, based upon current information and
          events, it is probable that the Company will be unable to collect all
          amounts due, both principal and accrued interest. The Venture measures
          impairment based on a loan's observable market price or
          the fair value of the collateral since the loan is collateral
          dependent and foreclosure is probable. The amount of the valuation
          allowance is determined by comparing principal plus accrued interest
          to the fair value of the underlying collateral. The Venture recognizes
          an impairment by adjusting its existing valuation allowance with a
          corresponding charge to bad debt expense. Subsequent changes in fair
          value, if any, are treated in the same manner.

      At June 30, 1997 and 1996, mortgage notes receivable from land sales
          consisted of the following:
<TABLE>
<CAPTION>
                                                 1997                 1996
                                                 ----                 ----
<S>                                          <C>                  <C>
Mortgage notes receivable                    $ 5,796,600           7,944,700
Allowance for uncollectible accounts          (3,166,300)         (2,949,400)
Reserve for cash discounts and other
     allowances                                  (69,300)            (69,300)
                                             -----------          ----------
Mortgage notes receivable, net               $ 2,561,000           4,926,000
                                             ===========          ==========
</TABLE>


                                                                     (Continued)

                                       49
<PAGE>   50
                                        5

                       KOHALA JOINT VENTURE AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

      At June 30, 1997 and 1996, 20 and 29 mortgage notes receivable were 90
          days or more in arrears, aggregating $3,705,500 and $5,145,000,
          respectively. Accrued interest receivable on delinquent mortgage notes
          receivable was $171,900 and $218,000 as of June 30, 1997 and 1996,
          respectively.

      Stated interest rates on mortgage notes receivable outstanding at June 30,
          1997 and 1996, range from 6% to 11% (averaging 8.9% as of June 30,
          1997 and 9.4% as of June 30, 1996).

      The Venture typically provides financing in connection with the sale of
          land parcels. None of the Venture's mortgage notes receivable
          comprised more than 5% of the total mortgage notes receivable balance
          at June 30, 1997 and 1996. The Venture is the first lien holder on all
          outstanding mortgage notes receivable.

      Purchasers of land parcels are entitled to discounts if certain conditions
          are met. Discounts are generally given if the purchase price is paid
          in cash at the closing. If the cash is paid within specified periods
          after the closing, a reduced sales discount is given. Reserves have
          been established for estimated discounts to be taken by purchasers
          under the various discount programs.

      Scheduled collections of principal during the next five fiscal years and
          thereafter are as follows:
<TABLE>
<CAPTION>
                     Year                            Amount
                     ----                            ------
<S>                                               <C>
                     1998                         $4,543,300
                     1999                            114,000
                     2000                            160,100
                     2001                            151,500
                     2002                            827,700
                                                  ----------
                                                  $5,796,600
                                                  ==========
</TABLE>

(4)   Land and Development Costs

      Land and development costs include all costs directly associated with the
          acquisition and development of the land parcels. Major components of
          land and development costs are the initial costs to acquire the land,
          roadways, water drainage, electrical and telephone lines, and various
          project management expenditures, as well as unamortized capitalized
          interest of $6,590,912 and $6,680,400 as of June 30, 1997 and 1996,
          respectively.

(5)   Foreclosed Real Estate

      Foreclosed real estate represents land parcels that were reacquired in
          connection with previously financed mortgages. Such parcels are valued
          at the lower of their remaining receivable balance outstanding, or
          their estimated fair value (determined in the same manner as the
          allowance for uncollectible accounts), as follows:

                                       50
<PAGE>   51
                                        6

                       KOHALA JOINT VENTURE AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
                                                      1997                 1996
                                                      ----                 ----
<S>                                               <C>                   <C>
              Foreclosed real estate              $ 3,530,300           2,903,300
              Allowance for losses                   (676,700)           (703,100)
                                                  -----------          ----------
              Foreclosed real estate, net         $ 2,853,600           2,200,200
                                                  ===========          ==========
</TABLE>

      During fiscal 1997 and 1996, ten and four mortgage notes receivable were
          transferred to foreclosed real estate, respectively, and five and one
          parcels in foreclosed real estate were sold. The carrying values of
          the mortgage notes receivable transferred and parcels sold were
          $1,212,500 and $585,500 in fiscal 1997 and $581,100 and $559,400 in
          fiscal 1996, respectively.

(6)   Partner Advances Payable

      The Partners have agreed to make equal advances to the Venture for all
          costs necessary for the orderly development of the Project. During
          fiscal 1997, the Partners each advanced $300,000 to the Venture. Such
          advances were repaid by the Venture on June 30, 1997. Additional
          contributions from the Partners may be required in fiscal 1998.
          Advances earn interest from the date of the advance compounded
          quarterly at the prime rate minus 1% (7.50% and 7.25% at June 30, 1997
          and 1996, respectively).

      On October 13, 1994, Oxford First filed for reorganization under Chapter
          11 of the Bankruptcy Code. Pursuant to an order of the Bankruptcy
          Court, Oxford First (through its subsidiary, the Oxford Finance
          Companies, Inc.) was permitted to transfer certain amounts to Oxford.
          The amounts so authorized were not sufficient to allow Oxford to make
          its full share of required advances. Hudson opted to make additional
          advances (the Additional Advances) to cover Oxford's funding
          deficiency. During November 1995, Oxford resumed making advances, and
          in January 1996, Oxford repaid to Hudson the entire amount of the
          Additional Advances of $702,000 together with $37,000 of interest
          thereon. The Venture has been informed by Oxford, that Oxford First
          has substantially met all its financial obligations under its
          confirmed plan of reorganization and is no longer restricted in the
          amount of required advances it may make to the Venture.

      Advances accrued an average rate of interest of 7.3% during both fiscal
          1997 and 1996 and 7.2% during fiscal 1995.

(7)   Note Payable

      During fiscal 1991, the Venture entered into agreements with banks
          pursuant to which $8,797,000 of the Venture's mortgage receivables
          were sold. An additional sale of $3,148,000 of mortgage receivables to
          a bank was completed during fiscal 1992. These transactions were
          accounted for as financing arrangements. On April 30, 1996, the
          Venture repurchased $1,373,000 of such mortgage receivables which
          represented the entire outstanding balance thereof. The maximum
          amounts of notes payable outstanding during fiscal 1996 and 1995 were
          $2,826,000 and $4,758,500, respectively. The average amounts
          outstanding for fiscal 1996 and 1995, based upon month-end balances,
          were $1,561,000 and $3,860,100, respectively. The weighted average
          interest rates for fiscal 1996 and 1995 were 11.3% and 11.9%,
          respectively.

                                                                     (Continued)

                                       51
<PAGE>   52
                                        7

                       KOHALA JOINT VENTURE AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

      At June 30, 1996, the Company had a note payable outstanding in the
          amount of $576,200 relating to certain development costs. The note was
          repaid in December 1996 and bore interest at the prime rate plus 1%.

(8)   Kohala Ranch Water Company

      KRWC provides water to the Project and is owned by the Venture (99%),
          Hudson (.5%), and Oxford (.5%). The assets of KRWC are comprised
          principally of property, plant and equipment. KRWC recorded revenues
          of $285,400, $336,300 and $251,000 and incurred net losses of
          $566,900, $489,700 and $487,000 for fiscal 1997, 1996 and 1995,
          respectively.

(9)   Related Party Transactions

      Certain directors and officers of the Partners and certain employees of
          the Venture purchased parcels in the Project at discounts from prices
          generally offered to the general public. The Venture provided mortgage
          financing on all such sales pursuant to which the Venture received a
          down payment equal to 5% of the gross sales price before discounts and
          a purchase money mortgage. The purchase money mortgages bore interest
          at a rate of 8% or 9% per annum and provided for monthly principal
          payments based on a 30 year amortization schedule with a balloon
          payment due after seven years. In fiscal 1995, certain balloon payment
          due dates on such mortgages were extended for one year. At June 30,
          1997 and 1996, mortgage notes receivable (including past due balloon
          payments) of $142,700 and $386,500, respectively, were due from
          related parties. During fiscal 1996, two mortgage notes receivable in
          the aggregate amount of $271,100 from former officers of Oxford First
          became delinquent and were foreclosed; the remaining balances are
          included in "Foreclosed real estate, net" in the accompanying
          consolidated balance sheets.

(10)  Contingencies

      During fiscal 1992, the County of Hawaii passed an ordinance pursuant to
          which the Venture, after subdivision approvals are obtained, would be
          able to develop and subdivide the fourth phase of the Project into
          1,490 units. Shortly after passage of the ordinance, a lawsuit against
          the County of Hawaii was filed in the Circuit Court of Hawaii by two
          local residents of Hawaii (Plaintiffs) seeking to invalidate such
          ordinance on various grounds, including that the ordinance was adopted
          without following State of Hawaii procedure relating to the
          preparation of an Environmental Impact Statement. During fiscal 1993,
          the Judge in this action granted Plaintiffs' motion for partial
          summary judgment without indicating any effect on zoning of the fourth
          phase. The County and the Venture appealed this ruling. The appeal was
          heard before the Hawaii Supreme Court in March 1994, and in May 1997,
          the Supreme Court vacated the summary judgment which was previously
          granted and remanded certain related issues to the Circuit Court for
          that Court to decide. The Venture cannot, at this time, determine the
          impact of the Supreme Court's ruling and the Circuit Court's
          proceedings on the timing of the development of the fourth phase or
          the expenditures related thereto.

                                                                     (Continued)

                                       52
<PAGE>   53
                                        8

                       KOHALA JOINT VENTURE AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(11)  Disclosure About Fair Value of Financial Instruments

      SFAS 107, "Disclosures About Fair Value of Financial Instruments", defines
           the fair value of a financial instrument as the amount at which the
           instrument could be exchanged in a current transaction between
           willing parties. The carrying values of all of the Venture's monetary
           assets and liabilities approximate fair value. Carrying values for
           delinquent mortgage notes receivable are based on the fair value of
           the underlying collateral obtained from an independent appraisal. The
           carrying values of the remaining mortgage notes receivable
           approximate market values, since the mortgage notes receivable are
           yielding, on average, a return that is consistent with current market
           rates offered for similar financing.

                                       53
<PAGE>   54
                                                                     Schedule II

                              KOHALA JOINT VENTURE
                                 AND SUBSIDIARY

                        Valuation and Qualifying Accounts

                    Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
          Column A                    Column B                 Column C                       Column D         Column E
          --------                    --------                 --------                       --------         --------
                                                               Additions
                                                        ---------------------------
                                     Balance at         Charged to       Charged to          Deductions       Balance at
                                     beginning          costs and          other                from            end of
        Description                   of year           expenses         accounts             reserves           year
        -----------                   -------           --------         --------             --------           ----
<S>                                  <C>                <C>              <C>                  <C>              <C>
1997 - Allowance for
     uncollectible accounts          $2,949,400          600,000             --                383,100(B)      3,166,300
                                     ==========         ========         ========             ========         =========
1996 - Allowance for
     uncollectible accounts          $2,464,200          600,000             --                114,800(B)      2,949,400
                                     ==========         ========         ========             ========         =========
1995 - Allowance for
     uncollectible accounts          $1,661,800          988,500             --                186,100(B)      2,464,200
                                     ==========         ========         ========             ========         =========
1997 - Allowance for loss on
     foreclosed real estate          $  703,100             --               --                 26,400(B)        676,700
                                     ==========         ========         ========             ========         =========
1996 - Allowance for loss on
     foreclosed real estate          $  486,400          356,300             --                139,600(B)        703,100
                                     ==========         ========         ========             ========         =========
1995 - Allowance for loss on
     foreclosed real estate          $  745,900             --           (259,500)(A)             --             486,400
                                     ==========         ========         ========             ========         =========
</TABLE>

(A)    Recoveries and other adjustments
(B)    Write-offs

                                       54
<PAGE>   55
                    HUDSON GENERAL CORPORATION & SUBSIDIARIES

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
                                                                                   Sequentially
     Exhibit                                                                         Numbered
       No.                    Exhibit                                                  Pages
       ---                    -------                                                 -------
<S>               <C>                                                              <C>
      3.2(a)      Amendment to By-laws of the Registrant.                               56-57

      3.2(b)      By-laws of the Registrant, as amended to date.                        58-95

        11        Computations of Earnings Per Share Information                        96-98

                  - Primary and Fully Diluted.

        13        The Registrant's 1997 Annual Report to Shareholders, which           99-127
                  report, except for those portions thereof which are expressly
                  incorporated by reference in this filing, is furnished for the
                  information of the Commission and is not to be deemed to be
                  filed as part of this filing.

        21        Subsidiaries of the Registrant.                                     128-129

        23        Consent of KPMG Peat Marwick LLP, the Corporation's                 130-131
                  independent auditors, to the incorporation by reference
                  into the Corporation's Registration Statement on Form
                  S-8, as amended, Registration No. 2-75137.

        27        Financial Data Schedule.                                            132
</TABLE>


                                       55