IR Pass-through Corporation
c/o NorthStar Presidio Management Company LLC
411 West Putnam Avenue, Suite 270
Greenwich, CT 06830
Integrated ARROS Fund I (the "Fund")
- ------------------------------------
September, 1999
Dear Unitholder:
Enclosed for your review are the Fund's unaudited financial statements as of
June 30, 1999. As you are aware, the Fund's investments are passive in nature
and consist of interest-bearing payment obligations that 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.
(800-945-0440) 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) 735-7777.
Sincerely,
Integrated ARROS Fund I
By: IR Pass-through Corporation, Sponsor
<PAGE>
Integrated ARROs Fund I
Statement of Assets and Liabilities
June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Cash $ 393,554
Investment in payment obligations, at
minimum termination value (cost $2,771,874) 10,361,808
------------
Total Assets 10,755,362
============
Liabilities
Distributions payable 393,554
------------
Net Assets $ 10,361,808
============
Net Asset Value per unit (2,771 units outstanding) $ 3,739.37
============
</TABLE>
<PAGE>
Integrated ARROs Fund I
Statement of Operations
Six Months Ended June 30, 1999
(unaudited)
Investment income:
Interest and discount earned $ 747,521
============
<PAGE>
Integrated ARROs Fund I
Statement of Changes in Net Assets
June 30, 1999
(unaudited)
Decrease in net assets from operations:
Net investment income $ 747,521
------------
Net increase in net assets resulting from operations 747,521
Total declared as distributions to Unitholders (790,246)
------------
Net decrease in net assets (42,725)
Net Assets:
Beginning of period 10,404,533
------------
End of period $ 10,361,808
============
<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, 1998, 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
IR Pass-through Corporation is the Sponsor of the Fund and was/is a
wholly owned subsidiary of Integrated Resources, Inc.("Integrated") and
its post-bankruptcy successor, Presidio Capital Corp. ("Presidio").
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. NorthStar
Presidio Management Company LLC
<PAGE>
provides administrative services to Presidio, who in turn provides
services to the Fund.
4. COMMITMENTS AND CONTINGENCIES
The original prospectus of the Fund contemplated the Sponsor bearing
all costs of administering the Fund only through the period in which
the Fund will be receiving primary term payments. However, upon the
period when the Fund will be receiving renewal term payments, the Fund
was to bear a portion of such equal 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 filed a claim in
Integrated's bankruptcy in 1994 and received $450,000 (the "Settlement
Fund") in settlement of such claim. It was projected at the time of the
settlement that such amount would be sufficient to enable the Sponsor
to meet its obligations to the Fund, and its similar obligations to
ARROs Fund II, through approximately the year 2000. However, there was
no assurance given at the time of the settlement that the Settlement
Fund, together with interest earned, would in fact be sufficient to
fund the Sponsor's obligations through the year 2000. As of June 30,
1998, the Settlement Fund has been fully depleted. As a result of the
full depletion of the Settlement Fund during the first six months of
1998, the Fund has had to pay administrative expenses from current
payment obligations received. Consequently, the Fund paid $35,254 in
expenses from the proceeds of the January 1999 through July 1999
payment obligations received.
5. DISTRIBUTION PAYABLE
The Sponsor declared a $393,554 ($142.03 per unit) distribution payable
to unitholders of record as of June 30, 1999. Such distribution was
paid on July 15, 1999.
<PAGE>
Integrated ARROs Fund I
Schedule of Selected Per Unit Operating Performance, Ratios and
Supplemental Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
Per Unit Operating Performance (unaudited) (audited)
- ------------------------------ ----------- ---------
<S> <C> <C>
Net asset value, beginning of period $ 3,754.79 $ 4,159.59
Net investment income 269.77 634.59
Distributions from net investment
income and partial prepayments (285.18) (1,039.38)
Net asset value, end of period $ 3,739.37 $ 3,754.79
Total investment return $ 269.77 $ 634.59
Ratios/Supplemental Data
Net assets, end of period $ 10,361,808 $ 10,404,533
Ratio of expenses to average net assets 0.34% 0.13%
Ratio of net investment income to
average net assets 7.20(1) 16.04%
Portfolio turnover rate N/A N/A
</TABLE>
<PAGE>
Integrated ARROs Fund I
Schedule of Portfolio Investments
June 30, 1999
<TABLE>
<CAPTION>
Discount to
Partnership/ Arrive at
Date Payment Original Simple Minimum Periodic Minimum
Obligation Property Type of Principal Interest Accrued Termination Payment During Termination
Incurred Lessee Location(s) Property Amount Rate Interest Amount rimary Term (1) Amount
-------- ------ ----------- -------- ------ ---- -------- ------ --------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Walando Walgreen Orlando, FL Office/ $820,000 13.0% $1,498,788 1,338,731 5/1/96-4/1/06 $980,057
03/18/81 Company Warehouse $11,883/mo
Building
Santex (2) Albertson's Venice, FL Retail 570,000 17.0% $1,291,368 862,043 9/1/96-8/1/06 999,325
07/01/81 Inc. Livermore, CA Facilities $13,342/mo
Lando Albertson's Portland, OR Retail 783,451 16.0% $1,968,281 1,804,633 7/1/97-1/1/07 947,099
10/21/81 Inc. Orlando, FL Facilities $62,656/semi
(amended Huntsville, AL
04/15/82)
Denville Xerox Lewisville, TX Plant 963,048 15.0% 2,400,134 2,239,788 8/1/98-7/1/08 1,123,394
12/22/81 Corporation Facility $12,038/mo
(amended
01/27/84)
Elway Safeway Billings, MT Retail 1,429,042 18.5% 4,019,288 3,418,449 7/1/97-6/1/07 2,029,881
03/18/82 Stores, Inc. Fort Worth, TX Facilities (5) $22,027/mo(6) (5)
Aurora, CO
Mamoth Lakes, CA
Walstaff Walgreen Flagstaff, AZ Warehouse/ 1,159,762 16.0% 2,881,773 2,157,724 12/1/98-6/1/03 1,883,811
04/15/82 Arizona Distribution $156,738/semi
(amended Drug Co. Building
06/17/82) (3)
Walcreek Hercules Walnut Creek, Office 1,306,709 18.5% $3,095,940 2,004,408 10/1/97-9/1/07 2,398,242
08/01/82 Credit Inc. CA Building $30,155/mo
(amended (4)
06/29/83,
12/3/84)
========== =========== ============ ===========
$7,032,012 $17,155,572 $13,825,776 $10,361,808
========== =========== ============ ===========
</TABLE>
(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) As adjusted, due to the exercise of economic discontinuance in
the Huntsville, Texas lease.
<PAGE>
INTEGRATED ARROS FUND I
SCHEDULE OF ACCRUED INTEREST ON OUTSTANDING PAYMENT OBLIGATIONS
JANUARY 1, 1999 THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
ACCRUED ACCRUED ACCRUED ACCRUED
DATE INTEREST DATE INTEREST DATE INTEREST DATE INTEREST
--------- ---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
01-Jan-99 17,185,021 23-Feb-99 17,264,739 17-Apr-99 17,255,011 09-Jun-99 17,088,546
02-Jan-99 17,188,213 24-Feb-99 17,267,930 18-Apr-99 17,258,203 10-Jun-99 17,091,737
03-Jan-99 17,191,405 25-Feb-99 17,271,122 19-Apr-99 17,261,395 11-Jun-99 17,094,929
04-Jan-99 17,194,596 26-Feb-99 17,274,314 20-Apr-99 17,264,586 12-Jun-99 17,098,121
05-Jan-99 17,197,788 27-Feb-99 17,277,506 21-Apr-99 17,267,778 13-Jun-99 17,101,313
06-Jan-99 17,200,980 28-Feb-99 17,280,697 22-Apr-99 17,270,970 14-Jun-99 17,104,504
07-Jan-99 17,204,172 01-Mar-99 17,194,444 23-Apr-99 17,274,162 15-Jun-99 17,107,696
08-Jan-99 17,207,363 02-Mar-99 17,197,636 24-Apr-99 17,277,353 16-Jun-99 17,110,888
09-Jan-99 17,210,555 03-Mar-99 17,200,828 25-Apr-99 17,280,545 17-Jun-99 17,114,080
10-Jan-99 17,213,747 04-Mar-99 17,204,019 26-Apr-99 17,283,737 18-Jun-99 17,117,271
11-Jan-99 17,216,939 05-Mar-99 17,207,211 27-Apr-99 17,286,929 19-Jun-99 17,120,463
12-Jan-99 17,220,130 06-Mar-99 17,210,403 28-Apr-99 17,290,120 20-Jun-99 17,123,655
13-Jan-99 17,223,322 07-Mar-99 17,213,595 29-Apr-99 17,293,312 21-Jun-99 17,126,847
14-Jan-99 17,226,514 08-Mar-99 17,216,786 30-Apr-99 17,296,504 22-Jun-99 17,130,038
15-Jan-99 17,229,706 09-Mar-99 17,219,978 01-May-99 17,210,251 23-Jun-99 17,133,230
16-Jan-99 17,232,897 10-Mar-99 17,223,170 02-May-99 17,213,442 24-Jun-99 17,136,422
17-Jan-99 17,236,089 11-Mar-99 17,226,362 03-May-99 17,216,634 25-Jun-99 17,139,613
18-Jan-99 17,239,281 12-Mar-99 17,229,553 04-May-99 17,219,826 26-Jun-99 17,142,805
19-Jan-99 17,242,473 13-Mar-99 17,232,745 05-May-99 17,223,018 27-Jun-99 17,145,997
20-Jan-99 17,245,664 14-Mar-99 17,235,937 06-May-99 17,226,209 28-Jun-99 17,149,189
21-Jan-99 17,248,856 15-Mar-99 17,239,129 07-May-99 17,229,401 29-Jun-99 17,152,380
22-Jan-99 17,252,048 16-Mar-99 17,242,320 08-May-99 17,232,593 30-Jun-99 17,155,572
23-Jan-99 17,255,240 17-Mar-99 17,245,512 09-May-99 17,235,785
24-Jan-99 17,258,431 18-Mar-99 17,248,704 10-May-99 17,238,976
25-Jan-99 17,261,623 19-Mar-99 17,251,896 11-May-99 17,242,168
26-Jan-99 17,264,815 20-Mar-99 17,255,087 12-May-99 17,245,360
27-Jan-99 17,268,007 21-Mar-99 17,258,279 13-May-99 17,248,551
28-Jan-99 17,271,198 22-Mar-99 17,261,471 14-May-99 17,251,743
29-Jan-99 17,274,390 23-Mar-99 17,264,663 15-May-99 17,254,935
30-Jan-99 17,277,582 24-Mar-99 17,267,854 16-May-99 17,258,127
31-Jan-99 17,280,774 25-Mar-99 17,271,046 17-May-99 17,261,318
01-Feb-99 17,194,520 26-Mar-99 17,274,238 18-May-99 17,264,510
02-Feb-99 17,197,712 27-Mar-99 17,277,430 19-May-99 17,267,702
03-Feb-99 17,200,904 28-Mar-99 17,280,621 20-May-99 17,270,894
04-Feb-99 17,204,096 29-Mar-99 17,283,813 21-May-99 17,274,085
05-Feb-99 17,207,287 30-Mar-99 17,287,005 22-May-99 17,277,277
06-Feb-99 17,210,479 31-Mar-99 17,290,196 23-May-99 17,280,469
07-Feb-99 17,213,671 01-Apr-99 17,203,943 24-May-99 17,283,661
08-Feb-99 17,216,863 02-Apr-99 17,207,135 25-May-99 17,286,852
09-Feb-99 17,220,054 03-Apr-99 17,210,327 26-May-99 17,290,044
10-Feb-99 17,223,246 04-Apr-99 17,213,518 27-May-99 17,293,236
11-Feb-99 17,226,438 05-Apr-99 17,216,710 28-May-99 17,296,428
12-Feb-99 17,229,629 06-Apr-99 17,219,902 29-May-99 17,299,619
13-Feb-99 17,232,821 07-Apr-99 17,223,094 30-May-99 17,302,811
14-Feb-99 17,236,013 08-Apr-99 17,226,285 31-May-99 17,306,003
15-Feb-99 17,239,205 09-Apr-99 17,229,477 01-Jun-99 17,063,012
16-Feb-99 17,242,396 10-Apr-99 17,232,669 02-Jun-99 17,066,203
17-Feb-99 17,245,588 11-Apr-99 17,235,861 03-Jun-99 17,069,395
18-Feb-99 17,248,780 12-Apr-99 17,239,052 04-Jun-99 17,072,587
19-Feb-99 17,251,972 13-Apr-99 17,242,244 05-Jun-99 17,075,779
20-Feb-99 17,255,163 14-Apr-99 17,245,436 06-Jun-99 17,078,970
21-Feb-99 17,258,355 15-Apr-99 17,248,628 07-Jun-99 17,082,162
22-Feb-99 17,261,547 16-Apr-99 17,251,819 08-Jun-99 17,085,354
</TABLE>
