IR PASS-THROUGH CORP.
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, CT 06830
(203) 862-7000
Fax: (203) 862-7461
Writer's Direct Dial:
862-7000
Integrated ARROs Fund I (the "Fund")
August, 1997
Dear Unitholder:
Enclosed for your review are the Fund's unaudited financial statements as of
June 30, 1997. As you are aware, the Funds' investments are passive in nature
and consist of interest-bearing payment obligations which originated from a
series of net lease real estate partnerships. As such, the primary source of
payment for these obligations is the lease payments received from the
partnership's corporate tenants. We are pleased to report that all tenant
obligations continue to be met and, on an overall basis, the credit ratings of
these tenants have not materially changed since the initial offering of the
Units.
As previously reported, the Fund has made arrangements with Royal Alliance
Associates (212-551-5100) to act as a market maker and with DCC Securities Corp.
(212-527-0220) to facilitate trading, as a broker, between buyers and sellers of
Units. Please contact these firms directly if you have any questions regarding
such activities.
If you have any specific questions regarding your holdings in the Fund, please
call the Trustee, at 800-874-6205.
Sincerely,
Integrated ARROs Fund I
By: IR Pass-through Corp., Sponsor
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund I
Statement of Assets and Liabilities
June 30, 1997
(unaudited)
<S> <C>
Assets
Cash ........................................................ $ 101,551
Receivable - Trustee ........................................ 1,205,826
Investments in payment obligations, at
minimum termination value (cost $2,771,874) .......... 10,089,681
-----------
Total assets ................................................ 11,397,058
-----------
Liabilities
Distributions payable ....................................... 101,551
-----------
Net Assets .................................................. $11,295,507
===========
Net Asset Value per unit (2,771 units
outstanding) ................................................ $ 4,076.33
===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund I
Statement of Operations
Six Months Ended June 30, 1997
(unaudited)
<S> <C>
Investment income:
Interest and discount earned $ 584,759
===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund I
Statement of Changes in Net Assets
Six Months Ended June 30, 1997
(unaudited)
<S> <C>
Increase in net assets from operations:
Net investment income ...................................... $ 584,759
------------
Net increase in net assets resulting from operations ....... 584,759
Total declared as distributions to Unitholders ............. (152,346)
------------
Net increase in net assets ................................. 432,413
Net assets:
Beginning of period ........................................ 10,863,094
------------
End of period .............................................. $ 11,295,507
============
See notes to financial statements
</TABLE>
<PAGE>
Integrated ARROs Fund I
Notes to Financial Statements
1. GENERAL
The accompanying unaudited financial statements, notes and discussions
should be read in conjunction with the audited financial statements,
related notes and discussions contained in the Form N-SAR Semi-Annual
Report for the year ended December 31, 1996, which is herein
incorporated by reference.
The financial information contained herein is unaudited; however, in
the opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All of
the aforementioned adjustments are of a normal recurring nature and
there have not been any non-recurring adjustments included in the
results reported for the current period.
Integrated ARROs Fund I (the "Fund") is a grantor trust created under
the laws of the State of New York and registered under the Investment
Company Act of 1940 as a closed-end, non-diversified management
investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
The Payment Obligations are valued at the lower of fair market value
(as determined by the Board of Directors of the Sponsor) or Minimum
Termination Amount (as defined in the Trust Indenture).
Federal Income Taxes
The Fund is classified as a grantor trust. As a consequence, the Fund
is not subject to Federal Income Taxation.
3. CONFLICTS OF INTEREST
Entities directly or indirectly owned by former officers and/or
directors of IR-Pass Through Corporation (the "Sponsor") and/or
Integrated Resources, Inc. ("Integrated") or its post-bankruptcy
successor, Presidio Capital Corp. ("Presidio") are the general partners
of the underlying net lease partnerships from which the payment
obligations are due (the "Partnerships"). Such general partners have a
fiduciary responsibility to make decisions which are in the best
interest of their respective Partnership. There may be circumstances in
which such general partners may make decisions on behalf of the
Partnerships which could conflict with or have an adverse effect on the
rights of unitholders of the Fund. Although the Partnerships must
comply with the terms of the Payment Obligations, there can be no
assurance that the decisions of the general partners on behalf of the
Partnerships would not adversely affect the value of the units and/or
the ability of the Partnerships to fulfill their obligations under the
Payment Obligations.
<PAGE>
3. CONFLICTS OF INTEREST (CONTINUED)
Subject to the rights of the Unitholders under the Trust Indenture,
Presidio is responsible for the administration of the Fund through its
indirect ownership of all of the shares of the Sponsor. Wexford
Management LLC ("Wexford") provides administrative services to
Presidio, who provides services for the Fund.
4. COMMITMENTS AND CONTINGENCIES
The Sponsor will bear all costs of administering the Fund through the
period in which the Fund will be receiving only primary term payments.
However, upon the period when the Fund begins receiving renewal term
payments, the Fund shall bear a portion of such costs equal to the
percentage of the renewal term payments received by the Fund in such
year to all of the payments received by the Fund in such year.
Based on a present value estimate of legal, accounting, trustee fees,
and printing and mailing costs, the Sponsor projected at the time of
the settlement of the Sponsor's claim in Integrated's bankruptcy in
1994, that the $450,000 received by the Sponsor would enable the
Sponsor to meet its obligations to the Fund, and its similar
obligations to Fund II, through approximately the year 2000. However,
at that time there was no assurance that the $450,000 paid by
Integrated, plus any interest accrued (the "Settlement Fund"), would in
fact be sufficient to fund the Sponsor's obligations through the year
2000. As of June 30, 1997, approximately $70,000 remained of the
original Settlement Fund. It was also projected at the time of the
settlement, that in the year 2000 the securities held by the Fund would
begin to generate cash which could be used to administer the Fund.
There can be no assurance that such cash will be generated or that the
remaining amount of the Settlement Fund will be sufficient to fund the
Sponsor's obligations throught the year 2000.
5. DISTRIBUTION PAYABLE
The Sponsor declared a $101,551 ($36.65 per unit ) distribution payable
to unitholders of record as of June 30, 1997. Such distribution was
paid on July 15, 1997.
6. SIGNIFICANT TRANSACTION
In May 1996, the tenant at the Huntsville, Texas property, one of five
properties owned by Elway Associates, exercised the economic
discontinuance clause contained in its lease. This clause generally
allows the tenant to purchase the property for a predetermined amount
set forth in the lease upon declaring continued use and occupancy of
the property economically unsuitable. As a result, Elway Associates
wired proceeds of $1,149,699 to the Fund's Trustee in partial
satisfaction of the Elway payment obligation. The amount received in
this case is substantially in excess of the portion of the Minimum
Termination Amount allocable to the Huntsville, Texas lease. While the
Trust Indenture provides for acceptance of involuntary sale (economic
discontinuance) proceeds in prepayment of a payment obligation in which
<PAGE>
6. SIGNIFICANT TRANSACTION (CONTINUED)
the underlying partnership has a single property (lease), it does not
specifically provide for acceptance of involuntary sale (economic
discontinuance) proceeds in partial prepayment of a payment obligation
where the underlying partnership has more than one property (lease)
comprising the payment obligation, as is the case here. The Sponsor
believes that the original intent of the Trust indenture was to allow
for such partial prepayment. However, the Trustee has not agreed to
allow the Elway payment in partial satisfaction of the associated
payment obligation and has placed the Elway proceeds in an interest
bearing account, separate from that of the Fund, pending a resolution
of this issue. The Elway proceeds and any interest earned thereon have
been reflected as a receivable from the Trustee on the accompanying
financial statements. The Sponsor is exploring several alternatives to
resolve this issue. The financial statements reflect the receipt of the
cash by the Trustee and an adjustment of the net assets as a result of
the transaction as if the payment were applied in partial satisfaction
of the associated payment obligation. The Elway primary and renewal
term payments were reduced on a prorata basis to reflect the
involuntary sale of the Huntsville, Texas property. It is not clear
what action, if any, the Trustee will take with respect to the Elway
proceeeds or future partial satisfactions of payment obligations.
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund I
Schedule of Selected Per Unit Operating Performance, Ratios and Supplemental Data
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
---------- -----------
(unaudited) (audited)
<S> <C> <C>
Per Unit Operating Performance
Net asset value, beginning of period ............... $ 3,920.28 $ 3,295.59
Net investment income .............................. 211.03 678.56
Distributions from net investment income ........... (54.98) (53.87)
---------- -----------
Net asset value, end of period ..................... $ 4,076.33 $ 3,920.28
========== ===========
Total investment return ............................ $ 211.03 $ 678.56
========== ===========
Ratios/Supplemental Data
Net assets, end of period .......................... $ 11,295,507 $10,863,094
Ratio of expenses to average net assets ............ N/A N/A
Ratio of net investment income to average net assets 5.30% (1) 18.81%
Portfolio turnover rate ............................ N/A N/A
- --------
(1) Not annualized
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund I
Schedule of Portfolio Investments
June 30, 1997
Partnership/ Discount To
Date Payment Original Simple Arrive at
Obligation Property Type of Principal Interest Accrued Minimum Termination
Incurred Lessee Location property Amount Rate Interest Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Walando Walgreen Orlando, FL Office/ $ 820,000 13.0% $ 1,737,000 $ 1,557,031
03/18/81 Company Warehouse
Building
Santex Albertson's Venice, FL Retail 570,000 17.0% 1,551,000 1,064,508
07/01/81 (2) Inc. Livermore, CA Facilities
Lando Albertson's Portland, OR Retail 783,451 16.0% 1,968,000 1,816,209
10/21/81 Inc. Orlando, FL Facilities
(amended Huntsville, AL
04/15/82)
Denville Xerox Lewisville, TX Plant 963,048 15.0% 2,244,000 2,225,597
12/27/81 Corporation Facility
(amended
01/27/84)
Elway Safeway Billings, MT Retail 1,429,042 18.5% 4,044,000 3,458,524
03/18/82 Stores, Inc. Huntsville, TX (5) Facilities
Fort Worth, TX
Aurora, CO
Mamoth Lakes, CA
Walstaff Walgreen Flagstaff, AZ Warehouse/ 1,159,771 16.0% 2,824,000 2,324,317
04/15/82 Arizona Distribution
(amended Drug Co. Building
06/17/82) (3)
Walcreek Hercules Walnut Creek, Office 1,306,709 18.5% 3,608,000 2,472,154
08/1/82 Credit Inc. CA Building
(amended (4)
06/29/83,
12/3/84)
---------- ----------- -----------
$7,032,021 $17,976,000 $14,918,340
========== =========== ===========
(1) Primary Term of the applicable net lease.
(2) Two Payment Obligations, one for each property, treated as one.
(3) Guaranteed by Walgreen Company.
(4) Guaranteed by Hercules Incorporated
(5) In May 1996, the tenant at the Huntsville, Texas property exercised the
economic discontinuance clause in its lease.
(6) As adjusted, due to the exercise of economic discontinuance in the
Huntsville, Texas lease.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund I
Schedule of Portfolio Investments -- Continued
June 30, 1997
Partnership
Date Payment Periodic Minimum
Obligation Property Payment During Termination
Incurred Lessee Location Primary Term (1) Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walando Walgreen Orlando, FL 5/1/96-4/1/06 $ 999,969
03/18/81 Company $11,833/mo
Santex Albertson's Venice, FL 9/1/96-8/1/06 1,056,492
07/01/81 (2) Inc. Livermore, CA $13,342/mo
Lando Albertson's Portland, OR 7/1/97-1/1/07 935,242
10/21/81 Inc. Orlando, FL $62,656/semi.
(amended Huntsville, AL
04/15/82)
Denville Xerox Lewisville, TX 8/1/98-7/1/08 981,451
12/27/81 Corporation $12,038/mo
(amended
01/27/84)
Elway Safeway Billings, MT 7/1/97-6/1/07 2,014,518
03/18/82 Stores, Inc. Huntsville, TX (5) $22,027/mo (6)
Fort Worth, TX
Aurora, CO
Mamoth Lakes, CA
Walstaff Walgreen Flagstaff, AZ 12/1/98-6/1/03 1,659,454
04/15/82 Arizona $156,738/semi.
(amended Drug Co.
06/17/82) (3)
Walcreek Hercules Walnut Creek, 10/1/97-9/1/07 2,442,555
08/1/82 Credit Inc. CA $30,155/mo
(amended (4)
06/29/83,
12/3/84)
-----------
$10,089,681
===========
(1) Primary Term of the applicable net lease.
(2) Two Payment Obligations, one for each property, treated as one.
(3) Guaranteed by Walgreen Company.
(4) Guaranteed by Hercules Incorporated
(5) In May 1996, the tenant at the Huntsville, Texas property exercised the
economic discontinuance clause in its lease.
(6) As adjusted, due to the exercise of economic discontinuance in the
Huntsville, Texas lease.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INEGRATED ARROS FUND I
SCHEDULE OF ACCRUED INTEREST ON OUTSTANDING PAYMENT OBLIGATIONS -- JANUARY 1, 1997 THROUGH JUNE 30, 1997
DATE ACCRUED INTEREST DATE ACCRUED INTEREST DATE ACCRUED INTEREST DATE ACCRUED INTEREST
<S> <C> <C> <C> <C> <C> <C> <C>
01-Jan-97 17,401,157 23-Feb-97 17,569,398 16-Apr-97 17,737,639 08-Jun-97 17,905,879
02-Jan-97 17,404,232 24-Feb-97 17,572,572 17-Apr-97 17,740,813 09-Jun-97 17,909,053
03-Jan-97 17,407,506 25-Feb-97 17,575,747 18-Apr-97 17,743,987 10-Jun-97 17,912,228
04-Jan-97 17,410,680 26-Feb-97 17,578,921 19-Apr-97 17,747,162 11-Jun-97 17,915,402
05-Jan-97 17,413,855 27-Feb-97 17,582,095 20-Apr-97 17,750,336 12-Jun-97 17,918,576
06-Jan-97 17,417,029 28-Feb-97 17,585,270 21-Apr-97 17,753,510 13-Jun-97 17,921,751
07-Jan-97 17,420,203 29-Feb-97 17,588,444 22-Apr-97 17,756,685 14-Jun-97 17,924,925
08-Jan-97 17,423,378 01-Mar-97 17,591,618 23-Apr-97 17,759,859 15-Jun-97 17,928,100
09-Jan-97 17,426,552 02-Mar-97 17,594,793 24-Apr-97 17,763,033 16-Jun-97 17,931,274
10-Jan-97 17,429,727 03-Mar-97 17,597,967 25-Apr-97 17,766,208 17-Jun-97 17,934,448
11-Jan-97 17,432,901 04-Mar-97 17,601,141 26-Apr-97 17,769,382 18-Jun-97 17,937,623
12-Jan-97 17,436,075 05-Mar-97 17,604,316 27-Apr-97 17,772,556 19-Jun-97 17,940,797
13-Jan-97 17,439,250 06-Mar-97 17,607,490 28-Apr-97 17,775,731 20-Jun-97 17,943,971
14-Jan-97 17,442,424 07-Mar-97 17,610,664 29-Apr-97 17,778,905 21-Jun-97 17,947,146
15-Jan-97 17,445,598 08-Mar-97 17,613,839 30-Apr-97 17,782,079 22-Jun-97 17,950,320
16-Jan-97 17,448,773 09-Mar-97 17,617,013 01-May-97 17,785,254 23-Jun-97 17,953,494
17-Jan-97 17,451,947 10-Mar-97 17,620,188 02-May-97 17,788,428 24-Jun-97 17,956,669
18-Jan-97 17,455,121 11-Mar-97 17,623,362 03-May-97 17,791,602 25-Jun-97 17,959,843
19-Jan-97 17,458,296 12-Mar-97 17,626,536 04-May-97 17,794,777 26-Jun-97 17,963,017
20-Jan-97 17,461,470 13-Mar-97 17,629,711 05-May-97 17,797,951 27-Jun-97 17,966,192
21-Jan-97 17,464,644 14-Mar-97 17,632,885 06-May-97 17,801,126 28-Jun-97 17,969,366
22-Jan-97 17,467,819 15-Mar-97 17,636,059 07-May-97 17,804,300 29-Jun-97 17,972,540
23-Jan-97 17,470,993 16-Mar-97 17,639,234 08-May-97 17,807,474 30-Jun-97 17,975,715
24-Jan-97 17,474,167 17-Mar-97 17,642,408 09-May-97 17,810,649
25-Jan-97 17,477,342 18-Mar-97 17,645,582 10-May-97 17,813,823
26-Jan-97 17,480,516 19-Mar-97 17,648,757 11-May-97 17,816,997
27-Jan-97 17,483,690 20-Mar-97 17,651,931 12-May-97 17,820,172
28-Jan-97 17,486,865 21-Mar-97 17,655,105 13-May-97 17,823,346
29-Jan-97 17,490,039 22-Mar-97 17,658,280 14-May-97 17,826,520
30-Jan-97 17,493,214 23-Mar-97 17,661,454 15-May-97 17,829,695
31-Jan-97 17,496,388 24-Mar-97 17,664,628 16-May-97 17,832,869
01-Feb-97 17,499,562 25-Mar-97 17,667,803 17-May-97 17,836,043
02-Feb-97 17,502,737 26-Mar-97 17,670,977 18-May-97 17,839,218
03-Feb-97 17,505,911 27-Mar-97 17,674,151 19-May-97 17,842,392
04-Feb-97 17,509,085 28-Mar-97 17,677,326 20-May-97 17,845,566
05-Feb-97 17,512,260 29-Mar-97 17,680,500 21-May-97 17,848,741
06-Feb-97 17,515,434 30-Mar-97 17,683,675 22-May-97 17,851,915
07-Feb-97 17,518,608 31-Mar-97 17,686,849 23-May-97 17,855,089
08-Feb-97 17,521,783 01-Apr-97 17,690,023 24-May-97 17,858,264
09-Feb-97 17,524,957 02-Apr-97 17,693,198 25-May-97 17,861,438
10-Feb-97 17,528,131 03-Apr-97 17,696,372 26-May-97 17,864,613
11-Feb-97 17,531,306 04-Apr-97 17,699,546 27-May-97 17,867,787
12-Feb-97 17,534,480 05-Apr-97 17,702,721 28-May-97 17,870,961
13-Feb-97 17,537,654 06-Apr-97 17,705,895 29-May-97 17,874,136
14-Feb-97 17,540,829 07-Apr-97 17,709,069 30-May-97 17,877,310
15-Feb-97 17,544,003 08-Apr-97 17,712,244 31-May-97 17,880,484
16-Feb-97 17,547,177 09-Apr-97 17,715,418 01-Jun-97 17,883,659
17-Feb-97 17,550,352 10-Apr-97 17,718,592 02-Jun-97 17,886,833
18-Feb-97 17,553,526 11-Apr-97 17,721,767 03-Jun-97 17,890,007
19-Feb-97 17,556,701 12-Apr-97 17,724,941 04-Jun-97 17,893,182
20-Feb-97 17,559,875 13-Apr-97 17,728,115 05-Jun-97 17,896,356
21-Feb-97 17,563,049 14-Apr-97 17,731,290 06-Jun-97 17,899,530
22-Feb-97 17,566,224 15-Apr-97 17,734,464 07-Jun-97 17,902,705
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 10,090
<RECEIVABLES> 1,206
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,397
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3
<SHARES-COMMON-PRIOR> 3
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,295
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 585
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 152
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 11,078
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4,076.33
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
