IR PASS-THROUGH CORPORATION
c/o CONCURRENCY MANAGEMENT CORP
411 West Putnam Avenue
Greenwich, CT 06830
(203) 862-7000
Fax: (203) 862-7461
Writer's Direct Dial:
862-7000
ARROS Fund II (the "Fund")
August, 1995
Dear Unitholder:
Enclosed for your review are the Fund's unaudited financial statements as of
June 30, 1995. 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 IFTC at 800-874- 6205.
Sincerely,
ARROS Fund II
By: IR Pass-through Corporation, Sponsor
<PAGE>
Integrated ARROs Fund II
Statement of Financial Condition
June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
Assets
Investments in payment obligations,
at minimum termination value (cost $7,446,008) ............ $18,916,568
===========
Net Assets ................................................... $18,916,568
===========
Net Asset Value per unit (based on
7,446 units outstanding) .................................. $ 2,540.50
===========
</TABLE>
See notes to financial statements
<PAGE>
Integrated ARROs Fund II
Statement of Operations
Six Months Ended June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
Investment income:
Interest ........................................... $1,051,683
----------
</TABLE>
See notes to financial statements
<PAGE>
Integrated ARROs Fund II
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
---------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Increase in net assets
from operations:
Investment income ........... $ 1,051,683 $ 1,924,727
Net assets:
Beginning of period ............ 17,864,885 15,940,158
------------ ------------
End of period .................. $ 18,916,568 $ 17,864,885
============ ============
</TABLE>
See notes to financial statements
<PAGE>
Integrated ARROs Fund II
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, 1994, 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 II (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 will
not be subject to federal income taxation.
3. CONFLICTS OF INTEREST
Entities directly or indirectly owned by current and former officers and/or
directors of IR-Pass Through Corporation (the "Sponsor"), and/or Integrated
Resources, Inc. ("Integrated") 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
general partners of 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.
Subject to the rights of the Unitholders under the Trust Indenture, Presidio
Capital Corp. ("Presidio") will be responsible for the administration of the
Fund through its indirect ownership of all of the shares of the Sponsor.
Presidio is managed by Presidio Management Company, LLC ("Presidio
Management"), a company controlled by a director of Presidio. Presidio
Management is responsible for the day to day management of Presidio and has
been delegated the authority to make certain major decisions on behalf of
Presidio. Presidio may, however terminate its agreement with Presidio
Management, with or without cause. Concurrency Management Corp.
("Concurrency"), through an Administrative Service Agreement with Presidio
Management, will provide administrative services to Presidio, who will
provide 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.
The Sponsor projects, based on a present value estimate of legal, accounting,
trustee fees, and printing and mailing costs, that the $450,000 previously
received by the Sponsor from Integrated Resources, Inc. ("Integrated") in
settlement of the Sponsor's claim, will enable the Sponsor to meet its
obligations to the Fund, and its similar obligations to Fund I, through
approximately the year 2000, at which time, the Sponsor believes, securities
held by the Fund and Fund I should begin to generate cash which could be used
to administer the Fund and Fund I. There can be no assurance that such cash
will be generated or that the $450,000 paid by Integrated will be sufficient
to fund the Sponsor's obligations through the year 2000.
The general partner of Trefar Associates ("Trefar") entered into a contract
of sale as of February 1, 1995 with Xerox Corporation, the lessee of the
property owned by Trefar. This contract is contingent upon several events
including a two-thirds approval vote by the limited partners. The anticipated
closing of this sale is April 1, 1996, at which time the Fund expects to
realize proceeds of approximately $5,000,000 based on the approximate minimum
termination value of the investment. If such proceeds are received, the Fund
will not recognize any material gain or loss on the transaction as it is
carrying its investment at the minimum termination value.
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Schedule Of Portfolio Investments
JUNE 30, 1995
(Unaudited)
Partnership/
Date Payment Simple
Obligation Property Type of Principal Interest Accrued Market
Incurred Lessee Location Property Amount Rate Interest Discount
------------- ------ -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Bradall Albertson's, Boise, ID Department $ 1,940,000 16.500% $ 4,015,776 $ 2,241,007
12/16/82 Inc. Snohomish, WA Stores
Las Cruces, NM
Sioux Falls, SD
Bradenton, FL
Dalhill The Kroger Houston, TX Supermarkets 1,485,000 19.625% 3,923,599 1,687,572
1/15/82 Company Dallas, TX
Columbus, OH
Cincinnati, OH
Louisville, KY (2)
Trefar Xerox Freemont, CA Manufacturing/ 3,702,463 17.00% 8,792,949 7,774,928
7/14/81 Corporation Warehouse/
(amended Distribution
3/31/84) Facility
Walmad Walgreen Windsor, WI Warehouse/ 1,500,000 18.500% 3,704,871 2,056,421
2/25/82 Company Distribution
Facility
Zebon The Dow Creole, AL Plant 2,198,000 15.125% 4,046,805 2,632,967
5/1/83 Chemical Prudhoe Bay Facilities
Company Station, AK
Mt. Pleasant, MI
Hebron, OH
Kellyville, OK
Tulsa, OK
Bryan, TX
Levelland, TX
----------- ----------- -----------
$10,825,463 $24,484,000 $16,392,895
=========== =========== ===========
</TABLE>
(1) Primary Term of the applicable net lease.
(2) Two properties.
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Schedule Of Portfolio Investments
JUNE 30, 1995
(Unaudited)
(Continued)
Partnership/
Date Payment Periodic
Obligation Property Type of Payments During Estimated
Incurred Lessee Location Property Primary Term(1) Value
------------- ------ -------- -------- --------------- -------
<S> <C> <C> <C> <C> <C>
Bradall Albertson's, Boise, ID Department 7/1/98-1/1/08 $ 3,714,769
12/16/82 Inc. Snohomish, WA Stores $387,871/semi.
Las Cruces, NM
Sioux Falls, SD
Bradenton, FL
Dalhill The Kroger Houston, TX Supermarkets 1/31/97-12/31/06 3,721,027
1/15/82 Company Dallas, TX $57,242/mo.
Columbus, OH
Cincinnati, OH
Louisville, KY (2)
Trefar Xerox Freemont, CA Manufacturing/ 11/1/97-10/1/07 4,720,484
7/14/81 Corporation Warehouse/ $70,823/mo.
(amended Distribution
3/31/84) Facility
Walmad Walgreen Windsor, WI Warehouse/ 4/1/97-3/1/02 3,148,450
2/25/82 Company Distribution $23,125/mo.;
Facility 4/1/02-3/1/07
$92,551/mo.
Zebon The Dow Creole, AL Plant 12/1/98-6/1/03 3,611,838
5/1/83 Chemical Prudhoe Bay Facilities $558,719/semi.
Company Station, AK
Mt. Pleasant, MI
Hebron, OH
Kellyville, OK
Tulsa, OK
Bryan, TX
Levelland, TX
-----------
$18,916,568
===========
</TABLE>
(1) Primary Term of the applicable net lease.
(2) Two properties.
<PAGE>
Integrated ARROs Fund II
Schedule of Selected Per Unit Operating Performance,
Ratios and Supplemental Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
---------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Per Unit Operating Performance
------------------------------
Net Asset Value, Beginning of Period .... $ 2,399.26 $ 2,140.77
--------- ---------
Net Investment Income ................... $ 141.24 $ 258.49
--------- ---------
Net Asset Value, End of Period .......... $ 2,540.50 $ 2,399.26
========= =========
Total Investment Return ................. $ 141.24 $ 258.49
========= =========
Ratios/Supplemental Data
------------------------
Net Assets, End of Period ............... $18,916,568 $17,864,885
Ratio of Expenses to
Average Net Assets .................... N/A N/A
Ratio of Net Income to Average
Net Assets ............................ 5.72%(1) 11.39%
Portfolio Turnover Rate ................. N/A N/A
</TABLE>
(1) Not annualized
<PAGE>
For period ending 6-30-95
File Number 811-4393
Signature Page
This report is signed on behalf of the Registrant in the town of Greenwich in
the State of Connecticut on the 18th day of August, 1995.
IR Pass-through Corporation
(Sponsor of Integrated ARROs
Fund II, the Registrant during
the period ending 6/30/95)
Witness: /s/ Jay L. Maymudes By: /s/ Robert Holtz
------------------------------ --------------------------------
Name: Jay L. Maymudes Robert Holtz, President
Title: Vice President,
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 18,917
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 7
<SHARES-COMMON-PRIOR> 7
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1,052
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<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> 18,391
<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> 2,540.50
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
