UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                              --------------------

                                    FORM 10-K

                              --------------------

             _X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2003

                                       OR

        ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                    For the transition period from ___ to ___

                           Commission File No.33-2794

                         POLARIS AIRCRAFT INCOME FUND II,
                        A California Limited Partnership
                        --------------------------------
             (Exact name of registrant as specified in its charter)

                 California                               94-2985086
       -------------------------------             -----------------------
       (State or other jurisdiction of             (IRS Employer I.D. No.)
       incorporation or organization)

        201 High Ridge Road, Stamford, Connecticut                06927
        ------------------------------------------             ----------
         (Address of principal executive offices)              (Zip Code)

       Registrant's telephone number, including area code: (203) 357-3776

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

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

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes      No  X
                                       ---     ---
No formal  market  exists  for the units of  limited  partnership  interest  and
therefore there exists no aggregate market value at December 31, 2003.

                    Documents incorporated by reference: None

                       This document consists of 36 pages.
<PAGE>

                                     PART I


Item 1.       Business

Polaris Aircraft Income Fund II, a California  Limited  Partnership  (PAIF-II or
the Partnership), was formed primarily to purchase and lease used commercial jet
aircraft in order to provide quarterly distributions of cash from operations, to
maximize the residual  values of aircraft  upon sale and to protect  Partnership
capital  through  experienced   management  and  diversification.   PAIF-II  was
organized  as a  California  Limited  Partnership  on June  27,  1984  and  will
terminate no later than December 2010.

PAIF-II has many competitors in the aircraft leasing market, including airlines,
aircraft leasing companies, other limited partnerships,  banks and several other
types of financial institutions.  This market is highly competitive and there is
no  single  competitor  who has a  significant  influence  on the  industry.  In
addition to other competitors,  Polaris Investment Management  Corporation (PIMC
or the General  Partner),  and its  affiliates,  including  GE Capital  Aviation
Services,  Inc. (GECAS),  Polaris Aircraft Leasing Corporation  (PALC),  Polaris
Holding  Company (PHC) and General  Electric  Capital  Corporation (GE Capital),
acquire,  lease,  finance, sell and remarket aircraft for their own accounts and
for existing  aircraft and aircraft leasing  programs managed by them.  Further,
GECAS  provides a  significant  range of aircraft  management  services to third
parties,  including  without  limitation,  Airplanes  Group,  together  with its
subsidiaries (APG), which leases and sells aircraft.  Accordingly, in seeking to
re-lease and sell its aircraft,  the Partnership may be in competition  with the
General  Partner,  its  affiliates,  APG, and other third  parties to whom GECAS
provides aircraft management services from time to time.

As of December 31,  2003,  the  Partnership  had 10  McDonnell  Douglas  DC-9-30
aircraft held for sale  previously  on operating  lease to TWA Airlines LLC (TWA
LLC) a wholly owned subsidiary of American Airlines,  Inc.  (American).  The ten
aircraft are being stored in New Mexico and remarketed for sale. Upon completion
of such sales,  the Partnership  plans to liquidate all its assets in an orderly
manner,  make a final  distribution,  and terminate the Partnership  thereafter;
however,  it is uncertain when this  liquidation will occur. The General Partner
is actively  seeking  buyers for the  aircraft;  however  the actual  timing for
completing  such  sales and the prices  obtained  will  depend  upon a number of
factors outside the control of the General Partner, including market conditions.
Thus, there can be no assurance as to either the timing of such sales or whether
such  sales may be  completed  on terms  deemed  favorable  to the  Partnership.
However,  the  General  Partner  intends to seek to complete  such sales  during
calendar year 2004 (see Note 13).

See additional  discussion of TWA LLC and Trans World Airlines,  Inc. ("TWA") in
Note 5 to the financial statements.


Item 2.       Properties

At December  31,  2003,  the  Partnership  owned 10  McDonnell  Douglas  DC-9-30
(DC-9-30)  aircraft held for sale on the ground in New Mexico.  Originally,  the
portfolio consisted of 30 aircraft.  The Partnership sold three DC-9-30 aircraft
to Aeroturbine,  Inc. in October 2001. The Partnership sold one DC-9-30 aircraft
to Amtec Corp. in February 2002 (see Note 13).


                                       2
<PAGE>


The following table describes the Partnership's  aircraft  portfolio at December
31, 2003:

                                                   Year of            Cycles
Aircraft Type                  Serial Number      Manufacture     As of 12/31/03
-------------                  -------------      -----------     --------------
McDonnell Douglas DC-9-30         47107              1968             88,776
McDonnell Douglas DC-9-30         47135              1968             85,853
McDonnell Douglas DC-9-30         47137              1968             85,637
McDonnell Douglas DC-9-30         47249              1968             91,605
McDonnell Douglas DC-9-30         47251              1968             89,725
McDonnell Douglas DC-9-30         47343              1969             88,520
McDonnell Douglas DC-9-30         47345              1969             86,860
McDonnell Douglas DC-9-30         47357              1969             83,337
McDonnell Douglas DC-9-30         47411              1969             84,397
McDonnell Douglas DC-9-30         47412              1969             83,504

The DC-9-30 is a short- to  medium-range  twin-engine jet that was introduced in
1967.  Providing  reliable,  inexpensive  lift,  these  aircraft fill thin niche
markets,  mostly in the United  States.  Hushkits  are  available to bring these
aircraft into  compliance  with Stage 3 noise  restrictions.  Hushkits have been
installed  on  the  remaining   Partnership   aircraft.   Certain  Airworthiness
Directives  (ADs)  applicable to the DC-9-30 have been issued to prevent fatigue
cracks and control corrosion.


Item 3.       Legal Proceedings

Please  refer  to  Note  5 to  the  Financial  Statements  for  the  only  legal
proceedings in which the Partnership is a party.

Other Proceedings - Part III, Item 10 discusses certain other actions which have
been filed  against  the  General  Partner in  connection  with  certain  public
offerings,  including that of the Partnership. The Partnership is not a party to
these actions.


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

None.


                                       3
<PAGE>


                                     PART II

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

a)       PAIF-II's  Limited  Partnership  Interests  (Units)  are  not  publicly
         traded.  Currently  there is no market  for  PAIF-II's  Units and it is
         unlikely that any market will develop.

b)       Number of Security Holders:

                                                      Number of Record Holders
                 Title of Class                        as of December 31, 2003
               ------------------                   ----------------------------

         Limited Partnership Interest:                         13,194

         General Partnership Interest:                            1

c)       Dividends:

         The  Partnership  distributed  cash to partners  on a  quarterly  basis
         beginning  July 1986. As of January 2002, the  Partnership  switched to
         making  distributions on an annual basis. Cash distributions to Limited
         Partners  during  2003  and 2002  totaled  $6,248,876  and  $4,999,659,
         respectively.  Cash  distributions  per Limited  Partnership  Unit were
         $12.50 and $10.00 in 2003 and 2002, respectively.




                                       4
<PAGE>


Item 6.       Selected Financial Data

<TABLE>
<CAPTION>
                                                For the years ended December 31,
                                                --------------------------------

                                 2003           2002         2001           2000            1999
                                 ----           ----         ----           ----            ----

<S>                         <C>            <C>           <C>           <C>              <C>
Revenues                    $  2,305,349   $  5,912,312  $ 10,034,851  $ 13,729,468     $ 13,559,480

Net Income (Loss)           $   (398,226)  $  1,813,623  $  4,325,509  $ (7,634,415)    $  6,622,183

Net Income (Loss)
  Allocated to Limited
  Partners                  $   (996,571)  $  1,282,066  $  3,142,429  $ (8,317,954)    $  5,742,360

Net Income (Loss) per
  Limited Partnership Unit  $      (1.99)  $       2.56  $       6.29  $     (16.64)    $      11.49

Cash Distributions per
  Limited Partnership
  Unit                      $      12.50   $      10.00  $      22.80  $      15.20     $      16.40

Limited Partnership Units        499,757        499,910       499,966       499,973          499,973

Amount of Cash
  Distributions Included
  Above Representing
  a Return of Capital on
  a Generally Accepted
  Accounting Principle
  Basis per Limited
  Partnership Unit*         $       0.00   $       0.00  $       0.00  $       1.46**   $      16.40

Total Assets                $  5,700,559   $ 13,905,238  $ 19,794,199  $ 31,992,732     $ 51,760,515

Partners' Capital           $  5,455,112   $ 12,796,533  $ 16,538,087  $ 24,878,560     $ 40,956,964
</TABLE>


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

** During 2000,  total  cumulative  distributions,  per unit,  reached $500, the
initial capital contribution per unit, such that all further distributions would
be considered a return on capital.


                                       5
<PAGE>


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

Critical Accounting Policies

In  response to the  Securities  and  Exchange  Commission's  (SEC)  Release No.
33-8040,  "Cautionary  Advice  Regarding  Disclosure  About Critical  Accounting
Policies," we identified the most critical accounting  principles upon which our
financial   reporting  depends.   We  determined  the  critical   principles  by
considering  accounting  policies  that involve the most  complex or  subjective
decisions or assessments. We identified our most critical accounting policies to
be those  related  to lease  revenue  recognition,  depreciation  policies,  and
valuation of aircraft.  We state these  accounting  policies in the notes to the
financial statements and in relevant sections in this discussion and analysis.

Business Overview

At  December  31,  2003,  Polaris  Aircraft  Income  Fund  II  (PAIF-II  or  the
Partnership)  owned a portfolio of 10 used McDonnell Douglas DC-9-30  commercial
jet  aircraft  (DC-9-30)  out of its original  portfolio  of 30 aircraft.  These
DC-9-30  aircraft  were being  stored in New Mexico and were being  marketed for
sale.  The  Partnership  sold three  DC-9-30  aircraft to  Aeroturbine,  Inc. in
October 2001. The Partnership sold one DC-9-30 aircraft to Amtec  Corporation in
February  2002 that  resulted  in a net gain of $65,000 to the  Partnership.  On
November  26,  2003,  a Letter of Intent  was  signed by Newjet  Corporation  to
purchase four of the DC-9-30 aircraft owned by the Partnership. In January 2004,
the  Partnership  entered  into  a  sale  and  purchase  agreement  with  Newjet
Corporation  and on  February  9,  2004 the  Partnership  received  proceeds  of
$450,000 for the sale of the four aircraft.  The Partnership  plans to liquidate
all its assets in an orderly manner,  make a final  distribution,  and terminate
the Partnership thereafter;  however, it is uncertain when this liquidation will
occur. The General Partner is actively seeking buyers for the aircraft;  however
the actual timing for completing  such sales and the prices obtained will depend
upon a number of factors outside the control of the General  Partner,  including
market  conditions.  Thus,  there can be no assurance as to either the timing of
such sales or whether such sales may be  completed on terms deemed  favorable to
the Partnership.  However,  the General Partner intends to seek to complete such
sales during calendar year 2004.


Industry Update

Demand for Aircraft - At year end 2003, there were approximately  17,300 western
built  passenger and freighter jet aircraft in the world fleet. As a result of a
slowdown  in travel  that began in the spring of 2001 as well as the large shift
in  travel  levels in the wake of the  September  11th  tragedy,  2,125 of those
aircraft are currently  stored or out of active service.  Air travel as measured
by global revenue  passenger miles for 2003 is expected to be  approximately  1%
less  than the poor  results  from the year  2002  when the  final  numbers  are
compiled.  The traffic  levels in 2004 are expected to show growth from this low
base as evidenced by growth shown in the fourth quarter 2003. The war with Iraq,
SARS and continued  threat of global  terrorism  impacted  2003 traffic  levels,
particularly  through spring and summer.  While  production rates are relatively
low and retirements are fairly high, the number of surplus  aircraft is still at
record levels.

The  unprecedented,  sustained and worldwide decrease in demand has had profound
implications to airlines as well as aircraft owners and  manufacturers.  Network
airlines are still experiencing losses, and are struggling to match capacity and
pricing to demand.  Manufacturers  have  attempted to deliver the aircraft  that
were in the  backlog  and the  modest  orders in  2002-2003,  and  achieve  some

                                       6
<PAGE>

stability  in their  production  lines.  Trading  values  and lease  rates  have
declined  further,  particularly  on older  aircraft as the demand  shock took a
cyclical  downturn  into a deep  trough.  As  manufacturers  reduce  production,
airlines  accelerate  retirements  of older  aircraft,  and as a recovering  air
travel market begins to reduce the aircraft  surplus,  this cyclical downturn is
expected  to reverse  itself and the  market is  expected  to return to a stable
condition.  This will take more time as  manufacturers  cannot  drop  production
overnight  and owners will be reluctant to scrap  aircraft that they own despite
the lack of a current market for them.

Low cost  carriers  were able to prosper  in this  environment  of  commoditized
airfare  pricing.  The bulk of the  orders  that  were  actually  placed  during
2002-2003 came from low cost carriers such as Easyjet.  Asia is recovering  well
from the SARS  epidemic  and is now showing  traffic  growth again after a sharp
decline for carriers in affected areas last year.

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

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

Under the  Previous  Leases (see Note 5 to the  financial  statements),  TWA was
generally  required to return the  aircraft  in  airworthy  condition  including
compliance with all ADs for which action is mandated by the FAA during the lease
term. Three of the  Partnership's  Aircraft were returned by TWA without meeting
the  return  conditions  specified  in  the  Previous  Leases,  and  the  return
conditions  under the modified lease terms and conditions for the  Partnership's
remaining  Aircraft  were  quite  limited.  The  costs  of  compliance  with FAA
maintenance  standards  caused the Partnership to sell for scrap value the three
Aircraft being  returned by TWA under the Rejected  Leases (see Note 5), and the
aircraft returned in 2001 was likewise marketed at scrap value. Similarly,  such
costs  will  likely  cause  the   Partnership   to  sell  for  scrap  value  the
Partnership's ten remaining Aircraft.

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

Hushkit   modifications,   which   allow  Stage  2  aircraft  to  meet  Stage  3
requirements,  are currently  available for the Partnership's  aircraft and were
added to the Partnership's aircraft in 1996 and 1997.

Other  countries  have also adopted  noise  policies.  The  European  Union (EU)
adopted a non-addition  rule in 1989, which directed each member country to pass
the necessary  legislation to prohibit  airlines from adding Stage 2 aircraft to
their fleets after November 1, 1990, with all Stage 2 aircraft phased-out by the
year 2002. The International  Civil Aviation  Organization has also endorsed the
phase-out  of  Stage  2  aircraft  on a  world-wide  basis  by  the  year  2002.
Legislation  had been  drafted  and was under  review by the EU for  sometime to

                                       7
<PAGE>

adopt anti-hushkitting  regulations within member states. The legislation sought
to ban  hushkitted  aircraft  from being added to member  states  registers  and
precluded  all  operation of  hushkitted  aircraft  within the EU after  certain
specific  dates.  Due to criticism by the US  Government,  the enactment of this
legislation has been withheld.  However, the effect of this proposal has been to
reduce the  demand for  hushkitted  aircraft  within the EU and its  neighboring
states, including the former Eastern Block states.


Partnership Operations

The Partnership reported a net loss of $398,226 which resulted in a net loss per
Limited  Partnership  unit of $1.99 for the year ended  December  31,  2003,  as
compared to net income of  $1,813,623  and $2.56 per Limited  Partnership  unit,
respectively, for the year ended December 31, 2002, and net income of $4,325,509
and  $6.29  per  Limited  Partnership  unit,  respectively,  for the year  ended
December 31, 2001.  Variances in net income may not  correspond  to variances in
net income per Limited  Partnership  unit due to the allocation of components of
income and loss in accordance with the Partnership Agreement.

The decrease in net income in 2003,  as compared to 2002,  is  primarily  due to
decreases in rental and interest income,  and an absence of any recognized gains
on sale of  aircraft,  along with an increase in  operating  and  administration
expenses,  partially  offset by decreases in depreciation and management fees to
the General Partner,  as discussed below. The decrease in net income in 2002, as
compared to 2001, is primarily  due to decreases in rental and interest  income,
partially  offset by increases in gain on sale of aircraft  inventory  and other
income  and  decreases  in   depreciation,   legal,   operating,   interest  and
administration and other expenses.

Rent from operating leases decreased in 2003, as compared to 2002, primarily due
to fewer  aircraft on lease.  Additionally,  the decrease in rent from operating
leases was also  caused by lower  recognition  of deferred  revenue in 2003,  as
compared  to 2002.  Rental  income  decreased  in  2002,  as  compared  to 2001,
primarily  due to the lower lease rates and fewer  aircraft on lease as a result
of the 2001 TWA  bankruptcy.  Additionally,  the decrease in rent from operating
leases was also caused by lower recognition of deferred revenue. As discussed in
Note 5 to the financial statements, the deferred revenue balance existing at the
time of the lease  revisions  in March  2001 was  recognized  over the new lease
terms for the Assumed  Leases,  while it was recognized upon lease rejection for
the three Rejected Aircraft.

Interest income  decreased in 2003 as compared to 2002, and in 2002, as compared
to 2001, primarily due to lower interest rates and lower average cash balances.

There were no sales of aircraft in 2003. In 2002, a gain of $65,000 was recorded
from the sale of an aircraft.  In 2001,  three  aircraft were sold at their book
value resulting in no overall gain or loss.

Lessee return condition  settlements increased during 2003, as compared to 2002,
and in 2002,  as compared to 2001.  The  increases  during 2003,  and 2002,  are
primarily  due to the  number of  aircraft  being  returned  as the lease  terms
expire.  The amount of return  condition  settlement  for each aircraft can vary
significantly  due to the fact that TWA LLC is required to return the  installed
engines on each aircraft with a target level of average cycle life  remaining to
replacement  for all life limited parts.  If the average cycle life remaining on
the  installed  engines on an  aircraft is below the target  level,  a financial
adjustment is payable by TWA LLC to the Partnership (but no payment will be owed
by the  Partnership  to TWA LLC if cycle life  remaining  at return  exceeds the
target level).

                                       8
<PAGE>


Lessee settlement income increased during 2003, as compared to 2002, and in 2002
as  compared to 2001.  The  payments  received  during  2003  resulted  from two
distributions  by TWA's bankrupt  estate  representing a portion of the $422,989
administrative  rent claims  initially filed by the Partnership  pursuant to the
bankruptcy.   The  payment  made  during  2002   represents   settlement  of  an
administrative  claim filed in the TWA bankruptcy  proceeding in connection with
certain  legal  expenses  incurred by the  Partnership.  Note 5 to the financial
statements includes a further discussion of these items. The payment in 2001 was
the  Partnership's  pro rata  share of the  final  distribution  from  Braniff's
bankrupt estate in respect of the unsecured  claims of the Partnership and other
affiliates of PIMC.

There was an absence of other income in 2003 and 2002, as compared to 2001,  due
to the receipt of default  interest in 2001 from TWA resulting  from late rental
payments  subsequent  to the  TWA  bankruptcy  filing.  Note 5 to the  financial
statements includes a further discussion of this item.

Depreciation  expense  decreased in 2003,  as compared to 2002,  and in 2002, as
compared to 2001 primarily as a result of fewer aircraft  remaining on lease and
being depreciated;  however, as discussed below, 2003 depreciation  expense also
includes a fair  market  adjustment  for  aircraft  held for sale as compared to
2002, which had no such impairment expense.

The Partnership periodically reviews the estimated realizability of the residual
values at the projected end of each aircraft's  economic life based on estimated
fair values at that time. The Partnership's  future earnings are impacted by the
net effect of the  adjustments to the carrying value of the aircraft  (which has
the  effect  of  decreasing  future  depreciation  expense),  and  the  downward
adjustments to the estimated residual values (which has the effect of increasing
future depreciation expense).

Aircraft  held for sale are carried at the lower of cost or fair value less cost
to sell.  During the year ended  December 31, 2003, the  Partnership  recognized
additional  depreciation  expense of $804,293,  or $1.61 per Limited Partnership
Unit, on aircraft held for sale due to changes in estimated  fair market values.
No such adjustments to market value through additional depreciation expense were
made during 2002.

If the projected net cash flow for each aircraft on operating  lease  (projected
rental revenue,  net of management  fees, less projected  maintenance  costs, if
any, plus the estimated  residual  value) is less than the carrying value of the
aircraft,  the Partnership recognizes an impairment loss for the amount by which
the carrying amount exceeds its fair value. The impairment loss is recognized as
depreciation  expense. The Partnership  recognized impairment losses aggregating
approximately  $200,000,  or $0.41 per Limited  Partnership  unit,  in 2001,  as
increased  depreciation  expense  as a  result  of the  TWA  bankruptcy  and the
modified lease terms with TWA LLC. The Partnership  decided to accept American's
proposal  to take  assignment  of  eleven  of the  fourteen  existing  leases on
modified  terms  and  conditions.  This  acceptance  constituted  an event  that
required the  Partnership  to review the aircraft  carrying  values  pursuant to
Statement of Financial  Accounting Standards 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (as amended by
SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets").  As
a result of a review of the aircraft,  future cash flows  expected to be derived
from the aircraft over projected  lease terms were less than the carrying values
of the  aircraft,  so the  Partnership  has  recorded  impairment  losses  as of
September 30, 2001. Management believes the assumptions related to fair value of
impaired  assets   represented  the  best  estimates  based  on  reasonable  and
supportable assumptions and projections.

Management fees to the General  Partner  decreased in 2003, as compared to 2002,
primarily  as a result  of fewer  aircraft  being on lease  during  2003 and all
aircraft being off-lease as of December 31, 2003. Management fees to the General

                                       9
<PAGE>

Partner increased  slightly in 2002, as compared to 2001,  primarily as a result
of the deferred  management fees being  recognized for three rejected leases and
leases expiring during 2001 due to the TWA bankruptcy.

There was no  interest  expense in 2003 and 2002 due to  outstanding  debt being
fully  repaid in 2001.  The interest  expense in 2001 was from debt  incurred to
install hushkits on the  Partnership's  aircraft.  In November 1996 and February
1997, hushkits were installed on the 14 Partnership aircraft. The leases then in
place for these 14 aircraft were then extended for a period of eight years.  The
rent payable by TWA under the leases was  increased by an amount  sufficient  to
cover the monthly debt service payments on the hushkits and fully repay,  during
the term of the TWA leases, the amount borrowed.

Operating expenses increased during 2003, as compared to 2002,  primarily due to
maintenance and storage related costs  associated with the aircraft as they come
off lease and are  prepared  for and kept in storage  while being held for sale.
During 2003, six aircraft were returned and prepared for storage. As of December
31,  2003,  ten  aircraft  remain in  storage  while  being  marketed  for sale.
Operating  expense  decreased  in 2002,  as compared to 2001,  primarily  due to
reduced  costs  associated  with the storage of aircraft  from the time of their
return to the time of their sale.  During 2002,  four aircraft were prepared for
storage and stored for an average of 5 months each.  During 2001,  four aircraft
were  prepared  for  storage  and stored  for an  average of 6 months  each at a
facility that was more expensive than the facility  aircraft are now flown to at
lease expiration.

Legal expenses were significantly  higher in 2001, as compared to 2003 and 2002,
primarily due to the costs incurred in connection with the TWA bankruptcy.

Administration  and other expense increased slightly during 2003, as compared to
2002,  primarily  due to increased  audit fees and  printing and postage  costs.
Administration  and other  expenses  decreased  in 2002,  as  compared  to 2001,
primarily due to costs incurred in 2001 that were related to the TWA bankruptcy.
This includes audit fees, as well as additional printing and postage expenses.


Liquidity and Cash Distributions

Liquidity - The Partnership received all rent payments due in 2003 and 2002 from
its sole  lessee,  TWA  Airlines  LLC for the  aircraft  while on  lease.  As of
December 31, 2003,  no further rent  payments  will be received  since all lease
terms have expired.

PIMC, the General Partner,  has determined that cash reserves be maintained as a
prudent  measure to ensure that the  Partnership has available funds for winding
up the affairs of the Partnership and for other  contingencies.  The Partnership
plans  to  liquidate  all  its  assets  in  an  orderly  manner,  make  a  final
distribution, and terminate the Partnership thereafter; however, it is uncertain
when this liquidation will occur. The General Partner is actively seeking buyers
for the aircraft;  however the actual timing for  completing  such sales and the
prices  obtained will depend upon a number of factors outside the control of the
General Partner, including market conditions. Thus, there can be no assurance as
to either the timing of such sales or  whether  such sales may be  completed  on
terms deemed favorable to the Partnership.  However, the General Partner intends
to seek to complete such sales during calendar year 2004. The Partnership's cash
reserves  will be  monitored  and may be  revised  from time to time as  further
information becomes available in the future.

Cash  Distributions - Cash  distributions  to Limited  Partners were $6,248,876,
$4,999,659  and  $11,399,384,  in  2003,  2002  and  2001,  respectively.   Cash

                                       10
<PAGE>

distributions  per Limited  Partnership unit were $12.50,  $10.00 and $22.80, in
2003, 2002 and 2001, respectively. The General Partner has determined that it is
in  the  best  interests  of  the   Partnership  to  suspend  any  further  cash
distributions  until the  Partnership is in a position to dissolve,  wind up and
terminate, and make a final distribution of its remaining cash. In reaching this
conclusion,  the General Partner considered the anticipated costs of storing and
insuring the aircraft  pending  sale,  the  anticipated  costs of marketing  and
preparing  the  aircraft  for sale,  the  anticipated  costs of  winding  up the
Partnership's  business,  the  uncertainty  as to the period of time required to
sell the aircraft and wind up the  Partnership,  the uncertainty as to the terms
on  which  the  Partnership's  aircraft  may be  sold  and the  desirability  of
maintaining  a  prudent  level  of  cash  reserves  for  Partnership  needs  and
contingencies.

The  Partnership  does not have any material off balance  sheet  commitments  or
obligations.

Sale of Aircraft

On October 19, 2001,  PIMC,  on behalf of the  Partnership,  sold three  DC-9-30
aircraft.  for $565,000 cash. The  Partnership  recognized  neither a loss nor a
gain on the transaction due to an impairment  expense being taken during 2001 in
anticipation  of the sales.  On February 13, 2002, the General  Partner sold one
DC-9-30 for $250,000, resulting in a gain of $65,000.

On November  26, 2003,  a Letter of Intent was signed by Newjet  Corporation  to
purchase four of the DC-9-30 aircraft owned by the Partnership. In January 2004,
the  Partnership  entered  into  a  sale  and  purchase  agreement  with  Newjet
Corporation  and on  February  9, 2004,  the  Partnership  received  proceeds of
$450,000 for the sale of the four aircraft.

Aircraft Impairment Assessment

The Partnership periodically reviews the estimated realizability of the residual
values at the projected end of each  aircraft's  economic life. For any downward
adjustment in estimated  residual  value or decrease in the projected  remaining
economic life, the depreciation  expense over the projected  remaining  economic
life of the aircraft is increased.

If the projected net cash flow for each aircraft on operating  lease  (projected
rental revenue,  net of management  fees, less projected  maintenance  costs, if
any, plus the estimated  residual  value) is less than the carrying value of the
aircraft,  an impairment loss is recognized for the amount by which the carrying
amount exceeds its fair values.

The  Partnership  uses  available  information  and  estimates  related  to  the
Partnership's  aircraft,  to  determine  an  estimate  of fair  value to measure
impairment  as required  by SFAS No.  144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets" (SFAS 144) and to determine residual values. The
estimates of fair value can vary dramatically  depending on the condition of the
specific  aircraft  and the  actual  marketplace  conditions  at the time of the
actual  disposition of the asset. If assets are deemed impaired,  there could be
substantial write-downs in the future.

Aircraft  held for sale are carried at the lower of cost or fair value less cost
to sell.  During the year ended  December 31, 2003, the  Partnership  recognized
additional  depreciation  expense of $804,293,  or $1.61 per Limited Partnership
Unit,  on  aircraft  held for sale due to  decreases  in  estimated  fair market
values.

The  Partnership  made downward  adjustments to the estimated  residual value of
certain of its  aircraft  on-lease  as of  September  30,  2001.  This  decrease
reflected the weakening used aircraft market and reflected the additional  facts

                                       11
<PAGE>

and circumstances  resulting from the advanced  negotiations with a buyer, which
resulted in a sale of three held for sale  aircraft on October  19,  2001.  As a
result,  the Partnership  decreased the residual values as of September 30, 2001
to reflect the depressed market.  This decrease in residual values was reflected
in greater depreciation expense over the remaining life of the aircraft.


Item 7A.      Quantitative and Qualitative Disclosures About Market Risk

The following discussion about market risk disclosures involves  forward-looking
statements.  Market  risks may  include  exposure  to changes in equity  prices,
interest rates and foreign currency exchange rates.  Actual results could differ
materially  from  those  projected  in  the  forward-looking   statements.   The
Partnership  does not use  derivative  financial  instruments  for  speculative,
trading or any other purpose.

Equity Price Risk - The  potential for changes in the market value of marketable
securities is referred to as "market  risk".  The  Partnership  does not own any
marketable securities.

Interest Rate Risk - Exposure to market risk  resulting from changes in interest
rates relates  primarily to the Partnership's  lease portfolio.  Income and cash
flows would not be impacted  by changes in the  general  level of U.S.  interest
rates since the  Partnership's  leases are fixed rate. The General Partner would
not expect an immediate  10% increase or decrease in current  interest  rates to
have a  material  effect on the fair  market  value of the  Partnership's  lease
portfolio.

Foreign  Currency  Risk - The  Partnership  does not have any  foreign  currency
denominated  assets or liabilities or purchase  commitments and have not entered
into any foreign currency contracts. Accordingly, the Partnership is not exposed
to fluctuations in foreign currency exchange rates.



                                       12
<PAGE>


Item 8.       Financial Statements and Supplementary Data











                        POLARIS AIRCRAFT INCOME FUND II,
                        A California Limited Partnership




              FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002


            AND FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


                                TOGETHER WITH THE


                         REPORT OF INDEPENDENT AUDITORS







                                       13
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS



The Partners
Polaris Aircraft Income Fund II

We have audited the accompanying  balance sheets of Polaris Aircraft Income Fund
II (a California Limited Partnership), as of December 31, 2003 and 2002, and the
related  statements of operations,  changes in partners'  capital  (deficit) and
cash  flows  for  years  then  ended.   These   financial   statements  are  the
responsibility  of the  General  Partner.  Our  responsibility  is to express an
opinion on these financial  statements  based on our audits.  The 2001 financial
statements  were  audited by other  auditors who have ceased  operations.  Those
auditors expressed an unqualified opinion on those financial statements in their
report dated February 1, 2002.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by the  General  Partner,  as  well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion, the 2003 and 2002 financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Polaris Aircraft
Income  Fund II as of  December  31,  2003  and  2002,  and the  results  of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States.




                                                           /s/ Ernst & Young LLP


San Francisco, California,
February 13, 2004


                                       14
<PAGE>


This is a copy of the audit report  previously  issued by Arthur Andersen LLP in
connection  with the Polaris  Aircraft  Income Fund II's filing on Form 10-K for
the year ended  December  31, 2001.  This audit report has not been  reissued by
Arthur Andersen LLP in connection with this filing on Form 10-K.



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of
Polaris Aircraft Income Fund II,
A California Limited Partnership:

We have audited the accompanying  balance sheets of Polaris Aircraft Income Fund
II, A California  Limited  Partnership as of December 31, 2001 and 2000, and the
related  statements of operations,  changes in partners'  capital  (deficit) and
cash flows for each of the three years in the period  ended  December  31, 2001.
These financial  statements are the  responsibility of the General Partner.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by the  General  Partner,  as  well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Polaris Aircraft Income Fund
II, A California  Limited  Partnership as of December 31, 2001 and 2000, and the
results of its  operations and its cash flows for each of the three years in the
period  ended  December 31,  2001,  in  conformity  with  accounting  principles
generally accepted in the United States.


ARTHUR ANDERSEN LLP


San Francisco, California,
    February 1, 2002 (except with respect to the matter discussed in Note 12, as
    to which the date is February 13, 2002)



                                       15
<PAGE>

                        POLARIS AIRCRAFT INCOME FUND II,
                        A California Limited Partnership

                                 BALANCE SHEETS

                           DECEMBER 31, 2003 AND 2002

                                                         2003           2002
                                                         ----           ----
ASSETS:

CASH AND CASH EQUIVALENTS                           $  4,649,947   $ 10,605,028

RENT AND OTHER RECEIVABLES                                 1,612        241,560

AIRCRAFT HELD FOR SALE                                 1,049,000        740,000

AIRCRAFT ON OPERATING LEASE, net of accumulated
depreciation of $0 in 2003 and $46,906,230 in
2002                                                        --        2,318,650
                                                    ------------   ------------

       Total Assets                                 $  5,700,559   $ 13,905,238
                                                    ============   ============

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):

PAYABLE TO AFFILIATES                               $    120,867   $     81,151

ACCOUNTS PAYABLE AND ACCRUED
  LIABILITIES                                            124,580        551,766

DEFERRED INCOME                                             --          475,788
                                                    ------------   ------------

       Total Liabilities                                 245,447      1,108,705
                                                    ------------   ------------

PARTNERS' CAPITAL (DEFICIT):
  General Partner                                     (3,651,782)    (3,555,808)
  Limited Partners, 499,757 units (499,910 in
     2002) issued and outstanding                      9,106,894     16,352,341
                                                    ------------   ------------

       Total Partners' Capital                         5,455,112     12,796,533
                                                    ------------   ------------

       Total Liabilities and Partners' Capital      $  5,700,559   $ 13,905,238
                                                    ============   ============


        The accompanying notes are an integral part of these statements.

                                       16
<PAGE>


                        POLARIS AIRCRAFT INCOME FUND II,
                        A California Limited Partnership

                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

                                            2003           2002          2001
                                            ----           ----          ----
REVENUES:
    Rent from operating leases          $ 1,929,121    $ 5,424,084   $ 9,341,022
    Interest                                 49,026        158,165       647,909
    Gain on sale of aircraft
      inventory                                --           65,000          --
    Lessee return condition
      settlements                           215,460        191,615         4,864
    Lessee settlement                       111,742         73,448         8,530
    Other                                      --             --          32,526
                                        -----------    -----------   -----------

         Total Revenues                   2,305,349      5,912,312    10,034,851
                                        -----------    -----------   -----------

EXPENSES:
    Depreciation                          2,009,650      3,505,903     4,616,341
    Management fees to General
      Partner                                50,609        126,059       124,065
    Interest                                   --             --          13,525
    Operating                               347,040        178,072       376,626
    Legal                                    16,110         24,483       229,465
    Administration and other                280,166        264,172       349,320
                                        -----------    -----------   -----------

         Total Expenses                   2,703,575      4,098,689     5,709,342
                                        -----------    -----------   -----------

NET INCOME (LOSS)                       $  (398,226)   $ 1,813,623   $ 4,325,509
                                        ===========    ===========   ===========

NET INCOME ALLOCATED TO
    THE GENERAL PARTNER                 $   598,345    $   531,557   $ 1,183,080
                                        ===========    ===========   ===========

NET INCOME (LOSS) ALLOCATED
    TO THE LIMITED PARTNERS             $  (996,571)   $ 1,282,066   $ 3,142,429
                                        ===========    ===========   ===========

NET INCOME (LOSS) PER LIMITED
    PARTNERSHIP UNIT                    $     (1.99)   $      2.56   $      6.29
                                        ===========    ===========   ===========

UNITS USED TO CALCULATE
    NET INCOME (LOSS) PER
    LIMITED PARTNERSHIP UNIT                499,757        499,910       499,966

        The accompanying notes are an integral part of these statements.

                                       17
<PAGE>



                        POLARIS AIRCRAFT INCOME FUND II,
                        A California Limited Partnership

              STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)

              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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


Balance, December 31, 2000           $ (3,448,329)  $ 28,326,889   $ 24,878,560

    Net income                          1,183,080      3,142,429      4,325,509

    Cash distributions to partners     (1,266,598)   (11,399,384)   (12,665,982)
                                     ------------   ------------   ------------

Balance, December 31, 2001             (3,531,847)    20,069,934     16,538,087

    Net income                            531,557      1,282,066      1,813,623

    Cash distributions to partners       (555,518)    (4,999,659)    (5,555,177)
                                     ------------   ------------   ------------

Balance, December 31, 2002             (3,555,808)    16,352,341     12,796,533

    Net income (loss)                     598,345       (996,571)      (398,226)

    Cash distributions to partners       (694,319)    (6,248,876)    (6,943,195)
                                     ------------   ------------   ------------

Balance, December 31, 2003           $ (3,651,782)  $  9,106,894   $  5,455,112
                                     ============   ============   ============


        The accompanying notes are an integral part of these statements.

                                       18
<PAGE>


                        POLARIS AIRCRAFT INCOME FUND II,
                        A California Limited Partnership

                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>
                                                      2003           2002           2001
                                                      ----           ----           ----
<S>                                              <C>            <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss)                              $   (398,226)  $  1,813,623   $  4,325,509
  Adjustments to reconcile net income (loss) to
     net cash provided by operating activities:
     Depreciation                                   2,009,650      3,505,903      4,616,341
     Gain on sale of aircraft inventory                  --          (65,000)          --
     Changes in operating assets and liabilities:
       Decrease in rent and other receivables         239,948        163,262        447,796
       Decrease in other assets                          --             --           13,915
       Increase (decrease) in payable to
         affiliates                                    39,716       (556,500)       342,317
       Increase (decrease) in accounts payable
         and accrued liabilities                     (427,186)       (66,823)        12,693
       Decrease in deferred income                   (475,788)    (1,524,084)    (3,719,682)
                                                 ------------   ------------   ------------

          Net cash provided by operating
            activities                                988,114      3,270,381      6,038,889
                                                 ------------   ------------   ------------

INVESTING ACTIVITIES:
  Net proceeds from sale of aircraft
    inventory                                            --          250,000        565,000
                                                 ------------   ------------   ------------

          Net cash provided by investing
            activities                                   --          250,000        565,000
                                                 ------------   ------------   ------------

FINANCING ACTIVITIES:
  Principal payments on notes payable                    --             --         (493,388)
  Cash distributions to partners                   (6,943,195)    (5,555,177)   (12,665,982)
                                                 ------------   ------------   ------------

          Net cash used in financing activities    (6,943,195)    (5,555,177)   (13,159,370)
                                                 ------------   ------------   ------------

CHANGES IN CASH AND CASH
  EQUIVALENTS                                      (5,955,081)    (2,034,796)    (6,555,481)

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                                10,605,028     12,639,824     19,195,305
                                                 ------------   ------------   ------------

CASH AND CASH EQUIVALENTS AT
  END OF YEAR                                    $  4,649,947   $ 10,605,028   $ 12,639,824
                                                 ============   ============   ============

Supplemental Disclosure of Non-Cash Investing
---------------------------------------------
Activities:
----------
   Reclassification of aircraft on operating
     leases to aircraft held for sale            $  1,025,000   $    740,000   $    185,000
                                                 ============   ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       19
<PAGE>

                        POLARIS AIRCRAFT INCOME FUND II,
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


Note 1.       Organization and the Partnership

Polaris Aircraft Income Fund II, a California  Limited  Partnership  (PAIF-II or
the  Partnership)  was formed on June 27, 1984 for the purpose of acquiring  and
leasing  aircraft.  The Partnership  will terminate no later than December 2010.
Upon  organization,  both the General  Partner of the  Partnership  (the General
Partner) and the initial  Limited  Partner  contributed  $500.  The  Partnership
recognized no profits or losses  during the periods ended  December 31, 1984 and
1985. The offering of Limited Partnership units terminated on December 31, 1986,
at which  time the  Partnership  had sold  499,997  units of $500,  representing
$249,998,500.  All  partners  were  admitted  to the  Partnership  on or  before
December 1, 1986. During January 1998, 24 units were redeemed by the Partnership
in accordance with section 18 of the Limited Partnership Agreement.  During 2002
and 2003, 56 and 153 units were abandoned,  respectively.  At December 31, 2003,
there were 499,757 units outstanding.

As of December 31, 2003,  the  Partnership  owned ten aircraft,  which are being
marketed for sale.  Upon  completion  of such sales,  the  Partnership  plans to
liquidate all its assets in an orderly manner,  make a final  distribution,  and
terminate  the  Partnership  thereafter;  however,  it is  uncertain  when  this
liquidation  will occur.  The General Partner is actively seeking buyers for the
aircraft;  however the actual  timing for  completing  such sales and the prices
obtained will depend upon a number of factors outside the control of the General
Partner,  including  market  conditions.  Thus,  there can be no assurance as to
either the timing of such sales or whether  such sales may be completed on terms
deemed  favorable to the  Partnership.  However,  the General Partner intends to
seek to complete such sales during calendar year 2004 (see Note 13).

Polaris Investment  Management  Corporation  (PIMC), the sole General Partner of
the Partnership,  supervises the day-to-day operations of the Partnership.  PIMC
is a wholly-owned  subsidiary of Polaris  Aircraft Leasing  Corporation  (PALC).
Polaris  Holding Company (PHC) is the parent company of PALC.  General  Electric
Capital Corporation (GE Capital), an affiliate of General Electric Company, owns
100% of PHC's  outstanding  common  stock.  PIMC  has  entered  into a  services
agreement  dated as of July 1,  1994 with GE  Capital  Aviation  Services,  Inc.
(GECAS). Allocations to related parties are described in Notes 8 and 9.


Note 2.       Accounting Principles and Policies

Accounting  Method - The  Partnership  maintains  its  accounting  records,  and
prepares  its  financial  statements  on the accrual  basis of  accounting.  The
preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United  States  (GAAP)  requires  management  to make
estimates and assumptions that affect reported amounts and related  disclosures.
Actual results could differ from those estimates. The most significant estimates
with  regard  to these  financial  statements  are the  residual  values  of the
aircraft,  the useful lives of the aircraft and the estimated  amount and timing
of  cash-flows  associated  with  each  aircraft  which  are  used to  determine
impairment, if any.

                                       20
<PAGE>


Cash and Cash  Equivalents - This includes  deposits at banks and investments in
money  market  funds.  Cash and  cash  equivalents  are  stated  at cost,  which
approximates fair value.

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

The Partnership periodically reviews the estimated realizability of the residual
values at the projected end of each  aircraft's  economic life. For any downward
adjustment in estimated  residual  value or decrease in the projected  remaining
economic life, the depreciation  expense over the projected  remaining  economic
life of the aircraft will be increased.

If the  projected  net cash flow for each  aircraft on lease  (projected  rental
revenue, net of management fees, less projected  maintenance costs, if any, plus
the estimated  residual  value) is less than the carrying value of the aircraft,
an impairment loss is recognized.  Pursuant to Statement of Financial Accounting
Standards  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets" (SFAS 144), as discussed in Note 3,  measurement  of an impairment  loss
will be based on the  "fair  value" of the asset as  defined  in the  statement.
Aircraft  held for sale are carried at the lower of cost or fair value less cost
to sell.

Capitalized  Costs - Aircraft  modification  and  maintenance  costs,  which are
determined to increase the value or extend the useful life of the aircraft,  are
capitalized  and  amortized  using the  straight-line  method over the estimated
useful life of the  improvement or the remaining  lease term, if shorter.  These
costs are also subject to periodic impairment evaluation as discussed above.

Operating  Leases - The aircraft  leases are accounted for as operating  leases.
Lease  revenues  are  recognized  in equal  installments  over the  terms of the
leases.  Due to the fact that the Partnership  received  greater payments in the
beginning  of the  lease  than at the end of the  lease  under  the terms of the
leases in effect at the time of the TWA bankruptcy  filing (the Previous Leases)
(See Note 5), this has resulted in deferred  income on the balance sheet.  As of
December  31, 2003,  deferred  income and  deferred  management  fees were fully
amortized as all  remaining  lease terms ended  during 2003.  As of December 31,
2003, there are no leases in place.

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

Net  Income  (Loss)  Per  Limited  Partnership  Unit - Net  income  per  Limited
Partnership unit is based on the Limited  Partners' share of net income or loss,
allocated in accordance with the Partnership Agreement,  and the number of units
outstanding of 499,757 for the year ended  December  2003,  499,910 for the year
ended December 2002 and 499,966 for the year ended December 2001.

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

Fair Value of Financial  Instruments - The recorded amounts of the Partnership's
cash and cash equivalents,  rent and other  receivables,  payable to affiliates,
accounts  payable and accrued  liabilities  as of December 31, 2003  approximate

                                       21
<PAGE>

their fair value because of the liquidity  and/or  short-term  maturity of these
instruments.

Reclassification  - Certain  2002 and 2001  amounts  have been  reclassified  to
conform  to the 2003  presentation.  These  reclassifications  had no  impact on
previously reported net income or partners' capital.


Note 3.       Aircraft

At December 31, 2003, the  Partnership  owned a portfolio of 10 used  commercial
jet aircraft out of its original portfolio of 30 aircraft,  which were acquired,
leased or sold as discussed  below.  The remaining 10 aircraft are off lease and
held for sale as of December 31, 2003.  The aircraft  leases were net  operating
leases,  requiring the lessees to pay all operating expenses associated with the
aircraft during the lease term. The leases generally stated a minimum acceptable
return  condition  for which the  lessee is liable  under the terms of the lease
agreement.

The following table describes the Partnership's  aircraft  portfolio at December
31, 2003:

                                                                     Year of
Aircraft Type                            Serial Number             Manufacture
-------------                            -------------             -----------
McDonnell Douglas DC-9-30                    47107                    1968
McDonnell Douglas DC-9-30                    47135                    1968
McDonnell Douglas DC-9-30                    47137                    1968
McDonnell Douglas DC-9-30                    47249                    1968
McDonnell Douglas DC-9-30                    47251                    1968
McDonnell Douglas DC-9-30                    47343                    1969
McDonnell Douglas DC-9-30                    47345                    1969
McDonnell Douglas DC-9-30                    47357                    1969
McDonnell Douglas DC-9-30                    47411                    1969
McDonnell Douglas DC-9-30                    47412                    1969

Initially  there were 17 McDonnell  Douglas  DC-9-30 and one  McDonnell  Douglas
DC-9-40 which were acquired for  $122,222,040  during 1986,  and leased to Ozark
Air Lines, Inc. (Ozark).  In 1987, Trans World Airlines,  Inc. (TWA) merged with
Ozark and assumed the leases. The leases were modified and extended in 1991. Two
of the  aircraft  had a lease  expiration  date of  February  1998 and two other
aircraft had a lease  expiration date of November 1998. These four aircraft were
sold to Triton  Aviation  Services II LLC in June 1997. The leases for 11 of the
aircraft that previously had lease  expiration dates in 1998 were extended until
November  2004.  The leases for three of the aircraft that  previously had lease
expiration  dates in 1998 were  extended in February  1997 for eight years until
February 2005. As a result of the bankruptcy of TWA in 2001,  modified terms and
conditions  were  accepted  that  were   substantially  less  favorable  to  the
Partnership than the terms and conditions  specified in the Previous Leases (see
Note 5 to the financial  statements).  In particular,  rather than returning the
aircraft at the previously  scheduled expiry date under the Previous Leases, TWA
LLC,  who,  in  2001,  assumed  11 of the 14 then  existing  TWA  leases  of the
Partnership's  aircraft under modified terms,  would return each aircraft at the
time when such  aircraft  required a heavy  maintenance  check of the  airframe,
provided that the aggregate  average  number of months for which all 11 aircraft
were on lease to TWA LLC was not less  than 22 months  from and after  March 12,
2001.  In addition,  TWA LLC reduced the rental rate for each of the aircraft to
$40,000 per month. Further, at lease expiry, TWA LLC was required to return each
airframe in a  "serviceable"  condition,  rather than being required to meet the
more stringent maintenance requirements of the Previous Leases. Finally, TWA LLC

                                       22
<PAGE>

was  required to return the  installed  engines on each  aircraft  with a target
level of average cycle life remaining to replacement  for all life limited parts
of 25%. If the  average  cycle life  remaining  on the  installed  engines on an
aircraft was below the 25% target level,  a financial  adjustment was payable by
TWA LLC to the  Partnership  (but no payment was owed by the  Partnership to TWA
LLC if cycle life remaining at return  exceeded the target  level).  For five of
the six aircraft returned to the Partnership  during 2003,  $215,460 was paid by
the lessee for engines being returned below such target levels. For three of the
four aircraft returned to the Partnership during 2002,  $191,615 was paid by the
lessee for engines being returned below such target levels

As  discussed  in Note 1, the  Partnership  periodically  reviews the  estimated
realizability  of the residual  values at the projected  end of each  aircraft's
economic life. The Partnership's  future earnings are impacted by the net effect
of the  adjustments to the carrying values of the aircraft (which has the effect
of decreasing future depreciation  expense) and the downward  adjustments to the
estimated   residual   values  (which  has  the  effect  of  increasing   future
depreciation expense).

Aircraft  held for sale are carried at the lower of cost or fair value less cost
to sell.  During the year ended  December 31, 2003, the  Partnership  recognized
additional  depreciation  expense of $804,000  on aircraft  held for sale due to
changes in estimated fair market values.  During the quarter ended September 30,
2003,  the  Partnership  had reduced the carrying value of all the aircraft held
for sale by a total of $853,000 through depreciation  expense;  however,  during
the three months ended  December 31, 2003  depreciation  expense was reduced and
carrying  value  increased by $49,000 for four of the  aircraft,  based on their
estimated future net selling price. Specifically, on November 26, 2003, a Letter
of Intent was  signed by Newjet  Corporation  to  purchase  four of the  DC-9-30
aircraft owned by the  Partnership  for a total  purchase price of $450,000.  In
January 2004,  the  Partnership  entered into a Purchase and Sale agreement with
Newjet Corporation and on February 9, 2004, the Partnership received proceeds of
$450,000 for the sale of the four aircraft.  Management believes the assumptions
related to the fair value of impaired assets represents the best estimates based
on reasonable and supportable assumptions and projections.

The  Partnership  made an adjustment to reduce the estimated net book values and
residual values of its aircraft on-lease as of September 30, 2001 as a result of
the anticipated sale of three aircraft. The Partnership recognized an impairment
loss as  increased  depreciation  expense in 2001 of  approximately  $200,000 or
$0.41 per Limited  Partnership unit. The Partnership  recorded impairment losses
on aircraft  that were deemed  impaired  to the extent that the  carrying  value
exceeded the fair value.  For aircraft held for sale,  the  Partnership  records
losses to the extent  that  carrying  value  exceeds the fair value less cost to
sell.  Management believes the assumptions related to the fair value of impaired
assets  represented  the best  estimates  based on  reasonable  and  supportable
assumptions and projections.


Note 4.       Sale of Aircraft

On October 19, 2001,  PIMC,  on behalf of the  Partnership,  sold three  DC-9-30
aircraft  for $565,000 cash.  The  Partnership  recognized  neither a loss nor a
gain on the  transaction  due to an  impairment  expense  being  taken  on these
aircraft  during 2001 in  anticipation  of the sales.  On February 13, 2002, the
General Partner sold one DC-9-30 for $250,000 for a gain of $65,000.  During the
year  ended  December  31,  2003,  the  inventory  of spare  parts  owned by the
Partnership  carried  at a net book value of zero were sold;  no  proceeds  were
received for this sale.

                                       23
<PAGE>


Note 5.       TWA Bankruptcy Filing and Transaction with American Airlines

Trans World Airlines, Inc. (TWA) filed a voluntary petition in the United States
Bankruptcy  Court  of the  District  of  Delaware  (the  Bankruptcy  Court)  for
reorganization  relief under  Chapter 11 of the  Bankruptcy  Code on January 10,
2001. One day prior to filing its bankruptcy petition, TWA entered into an Asset
Purchase Agreement with American Airlines, Inc. (American) that provided for the
sale to American of substantially all of TWA's assets and permitted  American to
exclude certain TWA contracts (including aircraft leases) from the assets of TWA
to be acquired by American. On February 28, 2001, American presented the General
Partner with a written  proposal to assume,  on modified  terms and  conditions,
eleven of the fourteen then existing leases (collectively, the Previous Leases).
The General Partner decided to accept American's proposal.

On April 9,  2001,  the  American  acquisition  of the  selected  TWA assets was
consummated.  As a result of this closing,  TWA LLC, assumed the Previous Leases
applicable to eleven of the fourteen Aircraft, and simultaneously, such Previous
Leases were amended to  incorporate  modified  terms (as so assumed and amended,
the Assumed Leases). The Assumed Leases were substantially less favorable to the
Partnership than the Previous Leases. In particular, the monthly rental rate for
each aircraft was reduced from $85,000 to $40,000, and the reduced rate was made
effective  as of March  12,  2001 by a rent  credit  granted  to TWA LLC for the
amount of rent  above  $40,000  previously  paid by TWA in respect of the period
from and after March 12, 2001.  In addition,  the term of each Assumed Lease was
scheduled to expire at the time of the next scheduled heavy maintenance check of
the applicable aircraft,  compared to the scheduled expiry dates of November 27,
2004 and February 7, 2005 under the Previous Leases, provided that the aggregate
average number of months for which all eleven  aircraft were on lease to TWA LLC
was not less  than 22  months  from and  after  March  12,  2001.  Finally,  the
maintenance  condition  of the  aircraft to be met at lease  expiry was eased in
favor of TWA LLC, as compared to the corresponding conditions required under the
Previous Leases.

With respect to the three  aircraft  that TWA LLC did not elect to acquire,  TWA
officially   rejected  the  Previous   Leases   applicable  to  these   aircraft
(collectively,  the Rejected Leases) as of April 20, 2001. One of these aircraft
was  leased  to TWA for the  period  of March  12,  2001 to April  12,  2001 for
$85,000.  All three aircraft were returned to the Partnership.  As aircraft were
returned to the  Partnership  they were  parked in storage in Arizona  while the
General  Partner  remarketed  them for  sale.  The three  aircraft  were sold on
October 19, 2001,  for $565,000,  resulting in neither a gain nor a loss for the
Partnership.  In addition,  the General Partner filed administrative rent claims
in the  amount of  $422,989  in the TWA  bankruptcy  proceeding  in an effort to
recover the fair value of TWA's  actual  use,  if any,  of these three  aircraft
under the Rejected Leases during the 60-day period following TWA's filing of its
bankruptcy  petition.  These  administrative  rent claims  were  approved by the
estate with the plan of reorganization on June 25, 2002 (the Plan) and are to be
paid to the Partnership  through periodic  distributions over the subsequent one
to two years from the date of  reorganization.  These funds are being recognized
as income on a cash basis as they are received.  During the year ended  December
31, 2003, the Partnership  received payments totaling $111,742 from a portion of
these administrative rent claims  distributions.  The General Partner also filed
administrative  claims in the amount of $95,359 in the TWA bankruptcy proceeding
in  connection  with  certain  legal  expenses  incurred by the  Partnership  in
connection  with the  bankruptcy  proceeding.  The  administrative  claims  were
settled for $73,448 with the estate under the Plan and  settlement  was received
by the Partnership on September 26, 2002. Furthermore, the General Partner filed
general  unsecured  claims for damages arising from TWA's breach of the Rejected
Leases.  However, there can be no assurances as to whether, or when, the General
Partner  will be  successful  in  asserting  the value of the general  unsecured
claims or be able to collect any amounts out of the TWA bankruptcy estate.

                                       24
<PAGE>


The Accounting Treatment of the TWA Transaction
In accordance with GAAP, the Partnership recognized rental income and management
fees on a straight  line basis over the  original  lease  terms of the  Previous
Leases. As a result,  deferred revenue and accrued management fees were recorded
each month since the inception of each Previous Lease,  resulting in balances of
deferred  rental income and accrued  management fees of $5,068,954 and $232,533,
respectively,  as of March 12, 2001.  Since the Previous Leases were effectively
modified on March 12, 2001, the Partnership  recognized the balances of deferred
revenue and accrued  management fees over the new lease terms, from the date the
leases were modified.  For the three Rejected  Leases,  the deferred revenue and
accrued  management  fees  amounting to $950,130 and $38,432 were  recognized as
rental revenue and a reduction of management fee,  respectively,  in March 2001.
For the  Assumed  Leases,  the  deferred  revenue and  accrued  management  fees
associated with each aircraft were recognized over the new lease terms,  ranging
from four months to 30 months as of March 31, 2001. As of December 31, 2002, the
Partnership  had  a  deferred  revenue  balance  of  $475,788,  and  a  deferred
management  fee  balance of $22,058  included  in Payable to  Affiliates  on the
Balance  Sheet,  which  would  be  recognized  over the  remaining  lives of the
aircraft leases, up to 9 months.  As of December 31, 2003,  deferred revenue and
deferred  management  fees were fully  recognized as all  remaining  lease terms
ended during 2003.


Note 6.       Notes Payable

In  connection  with  reconditioning  of certain  aircraft  to meet noise  level
restriction undertaken in 1996 and 1997, the Partnership issued notes payable to
the manufacturer of noise  suppression  devices to finance the related purchase.
The notes  payables  bore interest at a rate of 10% per annum and were repaid in
2001.  Cash paid for interest in 2001 was $12,841.  No debt was  outstanding nor
was interest incurred in 2002 and 2003.


Note 7.       Claims Related to Lessee Defaults

Braniff,  Inc.  (Braniff)  Bankruptcy.  On January 16, 2001,  Braniff's bankrupt
estate made a $110,890  final payment in respect of the unsecured  claims of the
Partnership  and other  affiliates of PIMC, of which $8,530 was allocated to the
Partnership  based on its pro rata share of the total  claims.  This matter with
Braniff is now closed.


Note 8.       Related Parties

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

a.       An aircraft  management  fee equal to 5% of gross rental  revenues with
         respect to operating leases or 2% of gross rental revenues with respect
         to full payout leases of the  Partnership,  payable upon receipt of the
         rent. In 2003,  2002 and 2001 the  Partnership  paid management fees to
         PIMC of $85,533, $490,933 and $0, respectively. Management fees payable
         to  PIMC  at  December   31,  2003  and  2002  were  $0  and   $34,925,
         respectively.

b.       Reimbursement of certain out-of-pocket  expenses incurred in connection
         with the management of the  Partnership  and supervision of its assets.
         In 2003, 2002 and 2001, $653,378, $384,423, and $475,321, respectively,
         were reimbursed by the Partnership to PIMC for administrative and legal
         expenses.  Administrative  and legal  reimbursements  of $76,807 and $0

                                       25
<PAGE>

         were   payable   at   December   31,   2003  and  2002,   respectively.
         Reimbursements for operational costs of $334,421, $335,851 and $392,194
         were paid by the  Partnership  in 2003,  2002 and  2001,  respectively.
         Operational  reimbursements  of $44,060  and  $46,226  were  payable at
         December 31, 2003 and 2002, respectively.

c.       A 10% interest to PIMC in all cash  distributions  and sales  proceeds,
         gross income in an amount equal to 9.09% of distributed  cash available
         from  operations  and 1% of net  income or loss and  taxable  income or
         loss, as such terms are defined in the Partnership Agreement. After the
         Partnership  has sold or disposed of aircraft  representing  50% of the
         original  aircraft cost,  gains from additional sales or disposals must
         be allocated to the General Partner's capital account until the General
         Partner's capital account is no longer in a deficit position.

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

e.       In the event that, immediately prior to the dissolution and termination
         of the Partnership, the General Partner shall have a deficit balance in
         its  tax  basis  capital  account,   then  the  General  Partner  shall
         contribute in cash to the capital of the Partnership an amount which is
         equal to such deficit (see Note 9).


Note 9.       Partners' Capital

The Partnership  Agreement (the Agreement) stipulates different methods by which
revenue,  income  and  loss  from  operations  and  gain or loss on the  sale of
aircraft  are to be allocated  to the General  Partner and the Limited  Partners
(see Note 8). Such  allocations are made using income or loss  calculated  under
GAAP for book purposes,  which,  as more fully described in Note 11, varies from
income or loss calculated for tax purposes.

Cash  available  for  distributions,  including  the  proceeds  from the sale of
aircraft,  is  distributed  10% to the  General  Partner  and 90% to the Limited
Partners. Cash distributions of $694,319 and $6,248,876 were paid in 2003 to the
General Partner and the Limited Partners,  respectively. Cash distributions paid
in 2002 were  $555,518  and  $4,999,659  to the General  Partner and the Limited
Partners, respectively.

The different methods of allocating items of income, loss and cash available for
distribution  combined with the calculation of items of income and loss for book
and  tax  purposes  result  in  book  basis  capital   accounts  that  may  vary
significantly  from tax basis capital  accounts.  The ultimate  liquidation  and
distribution  of remaining cash will be based on the tax basis capital  accounts
following liquidation, in accordance with the Agreement.

Had all the assets of the  Partnership  been  liquidated at December 31, 2003 at
the current  carrying  value,  the tax basis capital  (deficit)  accounts of the
General  Partner and the Limited  Partners is estimated to be  $(1,013,827)  and
$36,384,162, respectively.

                                       26
<PAGE>


Note 10. Income Taxes

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

The net  differences  between  the tax basis  and the  reported  amounts  of the
Partnership's  assets  and  liabilities  at  December  31,  2003 and 2002 are as
follows (unaudited):

                        Reported Amounts       Tax Basis         Net Difference
                        ----------------       ---------         --------------

2003:    Assets           $  5,700,559        $ 35,615,782       $(29,915,223)
         Liabilities           245,447             245,447               -

2002:    Assets           $ 13,905,238        $ 43,177,964       $(29,272,726)
         Liabilities         1,108,705             597,992            510,713


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

The  following  is a  reconciliation  between  net  income  (loss)  per  Limited
Partnership  unit  reflected in the  financial  statements  and the  information
provided to Limited Partners for federal income tax purposes (unaudited):

                                              For the years ended December 31,
                                              --------------------------------

                                              2003          2002          2001
                                              ----          ----          ----

Book net income (loss) per Limited
  Partnership unit                           $(1.99)       $ 2.56        $ 6.29
Adjustments for tax purposes represent
   differences between book and tax
   revenue and expenses:
     Rental revenue                           (0.94)        (3.02)        (5.93)
     Management fee expense                   (0.07)        (0.72)         0.25
     Depreciation                              1.22          3.77          5.05
     Loss on sale of aircraft or inventory      -            -            (1.56)
                                             ------        ------        ------

Taxable net income (loss) per Limited
  Partnership unit                           $(1.78)       $ 2.59        $ 4.10
                                             ======        ======        ======

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

For book  purposes,  rental  revenue is generally  recorded as it is earned on a
straight line basis for operating  leases.  For tax purposes,  certain temporary
differences  exist in the  recognition of revenue which is generally  recognized
when received.  For tax purposes,  management fee expense is accrued in the same
year as the tax  basis  rental  revenue.  Increases  in the  Partnership's  book
maintenance  reserve  liability  were  recognized  as  rental  revenue  for  tax
purposes.

The  Partnership  computes  depreciation  using  the  straight-line  method  for
financial  reporting  purposes  and  generally  an  accelerated  method  for tax
purposes.   The   Partnership   also   periodically   evaluates   the   ultimate

                                       27
<PAGE>

recoverability of the carrying values and the economic lives of its aircraft for
book purposes and,  accordingly,  recognized  adjustments,  which increased book
depreciation  expense. As a result, the current year tax depreciation expense is
less than the book  depreciation  expense.  These  differences  in  depreciation
methods result in book to tax differences on the sale of aircraft.  In addition,
certain costs were capitalized for tax purposes and expensed for book purposes.


Note 12.      Selected Quarterly Financial Data

The following is a summary of the quarterly  results of operations for the years
ended December 31, 2003 and 2002 (unauditied):

2003                            March 31      June 30     Sept. 30      Dec. 31
                                --------      -------     --------      -------

Total Revenues                 $1,007,459   $  830,108   $  372,701   $   95,081
Net Income (Loss)              $  269,488   $  236,223   $ (919,175)  $   15,238
Net Income (Loss) - General
  Partner                      $  605,022   $    2,362   $   (9,192)  $      153
Net Income (Loss) - Limited
  Partners                     $ (335,534)  $  233,861   $ (909,983)  $   15,085
Net Income (Loss) Per Limited
Partnership Unit               $    (0.67)  $     0.47   $    (1.82)  $     0.03


2002                            March 31      June 30     Sept. 30     Dec. 31
                                --------      -------     --------     -------

Total Revenues                 $1,869,320   $1,475,293   $1,425,232   $1,142,467
Net Income                     $  638,011   $  408,164   $  479,664   $  287,784
Net Income - General Partner   $  519,800   $    4,083   $    4,796   $    2,878
Net Income - Limited Partners  $  118,211   $  404,081   $  474,868   $  284,906
Net Income Per Limited
Partnership Unit               $     0.24   $     0.81   $     0.95   $     0.56


Note 13.      Subsequent Events

On  February  15,  2004,  the  Partnership  distributed  $874,575 to the Limited
Partners,  or $1.75 per  Limited  Partnership  Unit,  and $97,175 to the General
Partner.

In January 2004, the Partnership entered into a Sale and Purchase Agreement with
Newjet  Corporation  for  the  sale  of  four  DC-9-30  aircraft  owned  by  the
Partnership.  On February 9, 2004,  the  Partnership  received  cash proceeds of
$450,000 from Newjet  Corporation  for the sale of the four aircraft.  Under the
terms  of  the  agreement,  the  aircraft  were  sold  in an  "as-is,  where-is"
condition.


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

On  August 1,  2002,  the  Board of  Directors  of the  general  partner  of the
Partnership,  on behalf of the  Partnership,  adopted  a  resolution  dismissing
Arthur Andersen LLP (Andersen) as the Partnership's auditors and appointed Ernst
& Young LLP (E&Y) to replace Andersen.

                                       28
<PAGE>


Andersen's reports on the Partnership's financial statements as of and for each
of the years ended December 31, 2001 and 2000 did not contain an adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.

During the years ended  December  31, 2001 and 2000 and through the date hereof,
there were no disagreements with Andersen on any matter of accounting principles
or practices,  financial  statement  disclosure,  or auditing scope or procedure
which, if not resolved to Andersen's satisfaction, would have caused Andersen to
make  reference  to the  subject  matter in  connection  with its  report on the
Partnership's  financial statements for such years; and there were no reportable
events as described in Item 304(a)(1)(v) of Regulation S-K.

During the years ended  December  31, 2001 and 2000 and through the date hereof,
the  Partnership  did  not  consult  E&Y  with  respect  to the  application  of
accounting principles to a specified transaction,  either completed or proposed,
or the  type of  audit  opinion  that  might be  rendered  on the  Partnership's
financial statements,  or any other matters or reportable events as set forth in
Items 304(a)(2)(i) and (ii) of Regulation S-K.

The Partnership has provided  Andersen with a copy of the foregoing  statements.
Because the Partnership has been informed by Andersen that as of July 1, 2002 it
would not be providing  the letter  stating  that it was in  agreement  with the
statements  contained  herein,  no such  letter is attached to this filing as an
Exhibit.  The  inability to obtain such letter from Andersen and not attaching a
letter to this filing is permitted by Item 304T(b)(2) of Regulation S-K.


Item 9A.      Controls and Procedures

(a)      Evaluation of disclosure controls and procedures

PIMC management reviewed the Partnership's  internal controls and procedures and
the  effectiveness of these controls.  As of December 31, 2003, PIMC management,
including its Chief Executive Officer and Chief Financial  Officer,  carried out
an  evaluation  of  the  effectiveness  of  the  design  and  operation  of  the
Partnership's disclosure controls and procedures pursuant to Rules 13a-14(c) and
15d-14(c) of the Securities  Exchange Act of 1934.  Based upon that  evaluation,
the Chief  Executive  Officer and Chief  Financial  Officer  concluded  that the
Partnership's  disclosure  controls  and  procedures  are  effective  in  timely
alerting them to material information relating to the Partnership required to be
included in its periodic SEC filings.

(b)      Change to internal controls

There  was no change  in the  Partnership's  internal  controls  over  financial
reporting  or in other  factors  during  the  Partnership's  last  quarter  that
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Partnership's  internal  controls  over  financial  reporting.   There  were  no
significant  deficiencies  or material  weaknesses,  and therefore no corrective
actions taken.


                                       29
<PAGE>



                                    PART III

Item 10.      Directors and Executive Officers of the Registrant

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

The officers and directors of PIMC are:

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

         William Carpenter          President; Director
         Stephen E. Yost            Chief Financial Officer
         Diarmuid Hogan             Vice President; Director
         Norman C. T. Liu           Vice President; Director
         Charles Meyers             Secretary
         Robert W. Dillon           Assistant Secretary

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

Mr.  Carpenter,  40,  assumed the  position of  President  and  Director of PIMC
effective  October 1, 2001. Mr.  Carpenter  holds the position of Executive Vice
President and Chief Risk Manager of GECAS,  having  previously held the position
of Vice President - Chief Risk Manager of GECAS (Acting). Prior to joining GECAS
eight  years ago,  Mr.  Carpenter  was an  aerospace  engineer  specializing  in
aircraft  handling  qualities.  Prior to that, Mr.  Carpenter was a commissioned
officer and pilot in the United States Armed Forces.

Mr. Yost, 42, assumed the position of Chief Financial  Officer of PIMC effective
April 17, 2002. Mr. Yost  presently  holds the position of Senior Vice President
and Manager  Transaction  Advisory for GECAS. Mr. Yost has been with the General
Electric Company (GE) and its  subsidiaries  since 1994. Prior to joining GECAS,
Mr. Yost held the position of European  Controller for GE Capital Fleet Services
and prior to that,  Controller of GE Capital Commercial  Finance.  Mr. Yost is a
Certified  Public  Accountant  and prior to joining GE was an audit manager with
Coopers & Lybrand.

Mr.  Hogan,  35,  assumed the  position of Vice  President  and Director of PIMC
effective October 1, 2003. Mr. Hogan presently holds the position of Senior Vice
President,  Financial  Planning and Analysis for GECAS.  Mr. Hogan has been with
the General Electric Company (GE) and its subsidiaries  since 1995. Mr. Hogan is
a member of the  Institute  of  Chartered  Accountants  in Ireland  and prior to
joining GE was an audit senior with KPMG.

                                       30
<PAGE>


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

Mr. Meyer,  51,  assumed the position of Secretary on October 1, 2003. Mr. Meyer
presently  holds the  position of Senior  Vice  President - Taxes and Senior Tax
Counsel of GECAS.  Prior to joining GECAS, Mr. Meyer was the Senior Tax Director
- Research and Planning for Northwest Airlines.

Mr. Dillon,  62, assumed the position of Assistant  Secretary of PIMC on July 1,
1994.  Mr.  Dillon  presently  holds the position of Senior Vice  President  and
Associate  General  Counsel  of GECAS.  Mr.  Dillon  held the  position  of Vice
President  - Aviation  Legal and  Insurance  Affairs of PHC,  from April 1989 to
October  1997.  Previously,  he  served  as  General  Counsel  of PIMC  and PALC
effective January 1986.


Certain Legal Proceedings:

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

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

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

                                       31
<PAGE>


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

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

In or  around  December  1994,  a  complaint  entitled  John J.  Jones,  Jr.  v.
Prudential Securities Incorporated, et al. was filed in the Civil District Court
for the Parish of Orleans, State of Louisiana. The complaint named as defendants
Prudential  Securities,  Incorporated  and Stephen Derby  Gisclair.  On or about
March 29, 1996,  plaintiffs  filed a First  Supplemental  and Amending  Petition
adding as additional  defendants  General  Electric Company and General Electric
Capital Corporation. The Partnership is not named as a defendant in this action.
Plaintiff alleges claims of tort, breach of fiduciary duty in tort, contract and
quasi-contract, violation of section of the Louisiana Blue Sky Law and violation
of the Louisiana  Civil Code  concerning  the  inducement  and  solicitation  of
purchases  arising out of the public  offering of Polaris  Aircraft  Income Fund
III. Plaintiff seeks compensatory damages,  attorneys' fees, interest, costs and
general relief.

On or around  February  16,  1996, a complaint  entitled  Henry Arwe,  et al. v.
General Electric  Company,  et al. was filed in the Civil District Court for the
Parish of Orleans, State of Louisiana. The complaint named as defendants General
Electric Company and General Electric  Capital  Corporation.  The Partnership is
not named as a  defendant  in this  action.  Plaintiffs  allege  claims of tort,
breach of  fiduciary  duty in tort,  contract and  quasi-contract,  violation of
sections of the Louisiana Blue Sky Law and violation of the Louisiana Civil Code
concerning  the  inducement  and  solicitation  of purchases  arising out of the
public  offering of Polaris  Aircraft  Income Funds III and IV.  Plaintiffs seek
compensatory damages, attorneys' fees, interest, costs and general relief.

On or about May 7, 1996, a petition  entitled  Charles  Rich.  et al. v. General
Electric Company and General Electric Capital Corporation was filed in the Civil
District  Court for the Parish of Orleans,  State of  Louisiana.  The  complaint
names as  defendants  General  Electric  Company  and General  Electric  Capital
Corporation.  The  Partnership  is not  named  as a  defendant  in this  action.
Plaintiffs  allege claims of tort concerning the inducement and  solicitation of
purchases  arising out of the public  offering of Polaris  Aircraft Income Funds
III and IV. Plaintiffs seek  compensatory  damages,  attorneys' fees,  interest,
costs and general relief.

On or about March 4, 1996,  a petition  entitled  Richard J.  McGiven v. General
Electric Company and General Electric Capital Corporation was filed in the Civil
District  Court for the Parish of Orleans,  State of  Louisiana.  The  complaint
names as  defendants  General  Electric  Company  and General  Electric  Capital

                                       32
<PAGE>

Corporation.  The  Partnership  is not  named  as a  defendant  in this  action.
Plaintiff  alleges claims of tort concerning the inducement and  solicitation of
purchases  arising out of the public offering of Polaris Aircraft Income Fund V.
Plaintiff seeks  compensatory  damages,  attorneys'  fees,  interest,  costs and
general relief.

On or about March 4, 1996, a petition  entitled Alex M. Wade v. General Electric
Company and General Electric Capital Corporation was filed in the Civil District
Court for the Parish of Orleans,  State of  Louisiana.  The  complaint  names as
defendants  General Electric  Company and General Electric Capital  Corporation.
The  Partnership is not named as a defendant in this action.  Plaintiff  alleges
claims of tort concerning the inducement and  solicitation of purchases  arising
out of the public  offering of Polaris  Aircraft  Income Fund V. Plaintiff seeks
compensatory damages, attorneys' fees, interest, costs and general relief.


Item 11.      Executive Compensation

The  Partnership  has no directors or officers.  The  Partnership  is managed by
PIMC, the General  Partner.  In connection  with management  services  provided,
management  and advisory  fees of $85,533 were paid to PIMC in 2003, in addition
to a 10%  interest  in all  cash  distributions  as  described  in Note 8 to the
financial statements (Item 8).


Item 12.      Security Ownership of Certain Beneficial Owners and Management

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

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

<TABLE>
<CAPTION>
           Title         Name of                  Amount and Nature of               Percent
         of Class   Beneficial Owner              Beneficial Ownership              of Class
         --------   ----------------              --------------------              --------

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


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


Item 13.      Certain Relationships and Related Transactions

None.


                                       33
<PAGE>

Item 14.      Principal Accounting Fees and Services

Audit Fees - For  audits of the years  ended  December  31,  2003 and 2002,  the
Partnership  paid or accrued fees of $22,000 and $27,000,  respectively,  to its
independent  auditors Ernst and Young LLP. Audit fees for 2003 and 2002 were for
professional  services  provided  for  the  quarterly  review  of the  financial
statements in the Partnership's  Form 10-Q and the annual audit of the financial
statements in the Partnership's Form 10-K.

Tax Fees - For the year ended  December 31, 2003 and 2002, the  Partnership  was
billed $0 and  $2,750,  respectively,  by  Deloitte  & Touche  for the review of
Federal and State partnership tax returns.




                                       34
<PAGE>


                                     PART IV

Item 15.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

1.       Financial Statements.

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

                  Report of Independent Auditors                           14
                  Balance Sheets                                           16
                  Statements of Operations                                 17
                  Statements of Changes in Partners' Capital (Deficit)     18
                  Statements of Cash Flows                                 19
                  Notes to Financial Statements                            20

2.       Reports on Form 8-K.

         No reports on Form 8-K were filed during the quarter ended December 31,
2003.

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

              31.1   CEO Certification Pursuant to Section 302 of the
                     Sarbanes-Oxley Act of 2002.
              31.2   CFO Certification Pursuant to Section 302 of the
                     Sarbanes-Oxley Act of 2002.
              32.1   Certification Pursuant to 18 U.S.C. Section 1350, as
                     Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
                     of 2002.
              99.1   Code of Ethics

4. Financial Statement Schedules.

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



                                       35
<PAGE>


                                   SIGNATURES



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


                                             POLARIS AIRCRAFT INCOME FUND II,
                                             A California Limited Partnership
                                             (REGISTRANT)
                                             By: Polaris Investment
                                                 Management Corporation
                                                 General Partner




       March 30, 2004                           By: /S/ William Carpenter
---------------------------                         ----------------------------
         Date                                       William Carpenter, President


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


     Signature                           Title                         Date
     ---------                           -----                         ----

/S/William Carpenter   President and Director of Polaris          March 30, 2004
--------------------   Investment Management Corporation,         --------------
(William Carpenter)    General Partner of the Registrant

/S/Stephen E. Yost     Chief Financial Officer of Polaris         March 30, 2004
------------------     Investment Management Corporation,         --------------
(Stephen E. Yost)      General Partner of the Registrant

/S/Diarmuid Hogan      Vice President and Director of Polaris     March 30, 2004
-----------------      Investment Management Corporation,         --------------
(Diarmuid Hogan)       General Partner of the Registrant

/S/Norman C. T. Liu    Vice President and Director of Polaris     March 30, 2004
-------------------    Investment Management Corporation,         --------------
(Norman C. T. Liu)     General Partner of the Registrant



                                       36