IR PASS-THROUGH CORP.
c/o Northstar Presidio Management Company LLC
411 West Putnam Avenue, Suite 270
Greenwich, CT 06830
(203) 862-7444
Fax: (203) 862-7460
Integrated ARROs Fund II (the "Fund")
February, 1998
Dear Unitholder:
Enclosed for your review are the Fund's audited financial statements as of
December 31, 1997. As you are aware, the Funds' 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
partnerships' 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, Investors Fiduciary Trust Company at 800-874-6205.
Sincerely,
Integrated ARROs Fund II
By: IR Pass-through Corp., Sponsor
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Unitholders, Sponsor, and Trustee of
Integrated ARROs Fund II:
We have audited the accompanying financial statements of financial condition of
Integrated ARROs Fund II (the "Fund") as of December 31, 1997 and 1996,
including the schedule of portfolio investments as of December 31, 1997, and the
related statements of operations and changes in net assets for the years then
ended and the schedule of selected per unit operating performance, ratios and
supplemental data for each of the five years in the period ended December 31,
1997. These financial statements and the selected per unit operating
performance, ratios and supplemental data are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the selected per unit operating performance, ratios and
supplemental data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the selected per
unit operating performance, ratios and supplemental data are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the selected per unit operating
performance, ratios and supplemental data referred to above present fairly, in
all material respects, the financial position of Integrated ARROs Fund II as of
December 31, 1997 and 1996, the results of its operations and changes in its net
assets for the years then ended, and the selected per unit operating
performance, ratios and supplemental data for the each of the five years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
<PAGE>
As explained in Note 2, the financial statements include investments in payment
obligations valued at $13,091,652 and $12,510,015 for the years ended December
31, 1997 and 1996, respectively, whose values have been stated at the lower of
fair market value as estimated by the Board of Directors of the Sponsor in the
absence of readily ascertainable market values or Minimum Termination Value. We
have reviewed the procedures used by the Board of Directors in arriving at its
estimate of value of such investments and have inspected underlying
documentation, and, in the circumstances, we believe the procedures are
reasonable and the documentation appropriate. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the investments
existed, and the differences could be material.
DELOITTE & TOUCHE, LLP
New York, New York
February 13, 1998
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Statements of Financial Condition
December 31,
---------------------------
Assets 1997 1996
----------- -----------
<S> <C> <C>
Cash ............................................. $ 219,180 $ 4,281,103
Investments in payment obligations, at minimum
termination value (cost $4,349,927)............... 13,091,652 12,510,015
----------- -----------
Total Assets ..................................... 13,310,832 16,791,118
Liabilities
Distributions Payable ............................ 219,180 4,288,244
----------- -----------
Net Assets ....................................... $13,091,652 $12,502,874
=========== ===========
Net Asset Value per unit (7,446 units outstanding) $ 1,758.21 $ 1,679.14
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Statements of Operations
Year Ended December 31,
--------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Investment income:
Interest and discount earned $ 1,408,248 $ 2,201,473
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Statements of Changes in Net Assets
Year Ended December 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Increase in net assets from operations:
Net investment income .............................. $ 1,408,248 $ 2,201,473
------------ ------------
Net increase in net assets resulting from operations 1,408,248 2,201,473
Total declared as distributions to Unit Holders .... (819,470) (9,731,607)
------------ ------------
Net increase (decrease) in net assets ............. 588,778 (7,530,134)
Net assets:
Beginning of period ................................ 12,502,874 20,033,008
------------ ------------
End of period ...................................... $ 13,091,652 $ 12,502,874
============ ============
</TABLE>
See notes to financial statements
<PAGE>
Integrated ARROs Fund II
Notes to Financial Statements
1. ORGANIZATION
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.
The Fund was formed in July 1987 for the purpose of realizing
appreciation in value and deferring the receipt of income through
investments in a portfolio consisting of five contract rights for the
payment of money (the "Payment Obligations"). The Payment Obligations
were sold to the Fund by IR Pass-through Corporation (the "Sponsor"),
formerly a wholly-owned subsidiary of Integrated Resources, Inc.
("Integrated"). The Payment Obligations were entered into by five
privately offered, single purpose limited partnerships (the
"Partnership(s)") previously sponsored by Integrated that have acquired
and net leased commercial real estate. Pursuant to the Consummation of a
Plan of Reorganization ("the Plan"), on November 3, 1994, the Sponsor is
a wholly-owned indirect subsidiary of Presidio Capital Corp. ("Presidio")
(See Footnote 3). All capitalized terms, herein not defined, have the
same meaning as defined in the Trust Indenture.
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 the Sponsor and/or Integrated or its post bankruptcy successor,
Presidio are the general partners of the Partnerships. Such general
partners have a fiduciary responsibility to make decisions that 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 that 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 - (CONT'D)
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 ("NorthStar Presidio") provides
administrative services to Presidio, who in turn provides services to the
Fund. The board of directors of Presidio is authorized to designate the
officers and directors of the Sponsor, whose names, titles, principal
occupations during the past five years and the date they began office is
set forth in Note 5, Commitments and Contingencies.
4. THE PAYMENT OBLIGATIONS
The five Payment Obligations acquired by the Fund were issued from 1981
to 1983 for the sale to the Partnerships of rights to acquire interests
in properties or for services rendered. Two of the five Payment
Obligations (Trefar and Zebon) were satisfied in full during 1996 (see
Footnote 7).
Payments on the remaining three Payment Obligations are scheduled over a
period not in excess of 40 years from commencement of the initial terms
("Primary Terms") (approximately 25 years), of the respective net leases.
Interest at simple interest rates ranging from 16.5% to 19.625% accrues
on the principal amount for each Payment Obligation. Payments on the
Payment Obligations are scheduled to commence approximately 15 years
after commencement of the Primary Terms of a net lease.
If a net lease is not extended by the lessee beyond the Primary Term, the
Partnership's obligation to pay the balance of the principal of a Payment
Obligation and accrued interest does not accelerate. In such event, the
Partnership may either seek to re-lease or to sell the property, but
there can be no assurance that such a sale or new lease would be made or
that it would be made timely. If a sale is made, the balance of the
principal and accrued interest thereon may be declared by the holder of
the Payment Obligation, in its discretion, to be immediately due and
payable. Upon any disposition by a Partnership of its interest in the
property, the Partnership shall be obligated to pay the holder of the
Payment Obligation (after satisfaction of any obligations senior to that
of the Payment Obligation which are then due and payable) first, accrued
unpaid interest and then the unpaid principal balance of the payment
Obligation. If such sale is not made, so long as the Partnership
continues to make timely payments under the Payment Obligation, generally
there is no right of the Fund to accelerate payment thereof. There are
significant limitations on the amounts that the Fund may receive in the
event of a sale or other disposition of a Partnership's property. As
such, it is possible that the Fund may not realize the entire outstanding
principal and interest thereon of the related Payment Obligation.
5. COMMITMENTS AND CONTINGENCIES
The Trust Indenture provides that 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, 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.
<PAGE>
The Trust Indenture provides that the above obligations of the Sponsor
were to be funded through the retention of a portion of the proceeds from
the sale of the Units. However, the Sponsor did not segregate from the
general assets of its then parent, Integrated, a portion of the sale
proceeds for this purpose. Integrated filed for bankruptcy on February
13, 1990 under Chapter 11 of the United States Bankruptcy code. While
Integrated's bankruptcy did not directly affect the Fund, and had no
effect on the portfolio of the Fund, the bankruptcy did affect the
Sponsor, which had no source of revenues other than Integrated. The
Sponsor therefore filed a claim in Integrated's bankruptcy proceedings
for the amounts necessary to fund the Sponsor's obligations to the Fund
and to Integrated ARROs Fund I, an affiliate. As Integrated's liabilities
far exceeded its assets, and the Sponsor's claim was that of an unsecured
general creditor, it was unlikely that amounts eventually paid on the
Sponsor's claim would be sufficient to fund the Sponsor's obligations.
However, in 1994 in full settlement of the Sponsor's claim, Integrated
paid the Sponsor $450,000. The Sponsor projected at that time, based on a
present value estimate of legal, accounting, trustee fees, and printing
and mailing costs, that this amount would enable the Sponsor to meet its
obligations to the Fund, and its similar obligations to Fund I, 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 December 31, 1997, approximately
$61,000 remained of the original Settlement Fund. There can be no
assurance that the remaining amount of the Settlement Fund will be
sufficient to fund the Sponsor's obligations through the year 2000. When
the cash in the Settlement Fund is exhausted, the Trustee may establish a
reserve fund, set aside out of the proceeds of the Payment Obligations,
to pay the costs of administering the Fund.
<PAGE>
5. COMMITMENTS AND CONTINGENCIES (CONT'D)
Set forth below is certain information with respect to the Sponsor's
directors and officers. The business address for each of them is c/o
Northstar Presidio Management Company, LLC, 411 West Putnam Avenue, Suite
270, Greenwich, Connecticut 06830.
<TABLE>
<CAPTION>
DIRECTOR/OFFICER
NAME POSITION WITH SPONSOR SINCE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
---- --------------------- ----- --------------------- ------ ------------
<S> <C> <C> <C>
W. Edward Scheetz Director November 1997 Mr. Scheetz co-founded NorthStar Capital
Partners LLC ("NorthStar Capital") with
David Hamamoto in July 1997. From 1993
through 1997 Mr. Scheetz was a partner
at Apollo Realty Advisors L.P. From 1989
to 1993 Mr. Scheetz was a principal with
Trammell Crow Ventures.
David Hamamoto Director November 1997 Mr. Hamamoto co-founded NorthStar
Capital with Edward Scheetz in July
1997. From 1988 to 1997 Mr. Hamamoto was
a partner and co-head of the real estate
principal investment area at Goldman
Sachs & Co.
Richard Sabella Director and President November 1997 Mr. Sabella joined NorthStar Capital in
November 1997. From 1989 to 1997 Mr.
Sabella was the head of real estate and
a partner at the law firm of Cahill,
Gordon & Reindel. Prior to that Mr.
Sabella was associated with the law
firms of Milgrim, Thomajian, Jacobs &
Lee, P.C. and Cravath Swaine & Moore.
David King Director, Executive Vice President November 1997 Mr. King joined NorthStar Capital in
and Assistant Treasurer November 1997. From 1990 Assistant
Treasurer to 1997 Mr. King was
associated with Olympia & York Companies
(USA) where he held the position of
Senior Vice President of Finance. Prior
to that Mr. King was employed with
Bankers Trust in its real estate finance
group.
Kevin Reardon Director, Vice President, Secretary November 1997 Mr. Reardon joined NorthStar Capital in
and Treasurer October 1997. From 1996 to 1997 Mr.
Reardon held the position of Controller
at Lazard Freres Real Estate Investors.
From 1993 to 1996 Mr. Reardon was the
Director of Finance in charge of
European expansion at the law Firm of
Dewey Ballantine. Prior to that Mr.
Reardon held a financial position at
Hearst-ABC Viacom International
Services.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR/OFFICER
NAME POSITION WITH SPONSOR SINCE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
---- --------------------- ----- --------------------- ------ ------------
<S> <C> <C> <C>
Allan Rothschild Executive Vice President and December 1997 Mr. Rothschild joined NorthStar Presidio
General Counsel in December 1997. From Counsel 1995 to
1997 Mr. Rothschild was Senior Vice
President and General Counsel at Newkirk
Limited Partnership. From 1987 to 1995
Mr. Rothschild was associated with the
law firm of Proskauer, Rose LLP in its
real estate group.
Lawrence Schachter Senior Vice President and Chief January 1998 Mr. Schachter joined NorthStar Presidio
Financial Officer in January 1998. From 1996 to 1998 Mr.
Schachter was Controller at CB
Commercial/Hampshire LLC. From 1995 to
1996 Mr. Schachter was Controller at
Goodrich Associates. From 1992 to 1995
Mr. Schachter was Controller at
Greenthal/Harlan Realty Services Co.
Adam Anhang Vice President November 1997 Mr. Anhang joined NorthStar Capital in
August 1997. From 1996 to 1997 Mr.
Anhang was employed by The Athena Group
as part of its Russia and former Soviet
Union development team. Prior to that
Mr. Anhang was a student at the Wharton
School of the University of
Pennsylvania.
Marc Gordon Vice President November 1997 Mr. Gordon joined NorthStar Capital in
October 1997. From 1993 to 1997 Mr.
Gordon was Vice President in the real
estate investment-banking group at
Merrill Lynch. Prior to that Mr. Gordon
was associated with the law firm of
Irell & Manella in its real estate and
banking group.
Charles Humber Vice President November 1997 Mr. Humber joined NorthStar Capital in
September 1997. From 1996 to 1997 Mr.
Humber was employed with Merrill Lynch
in its real estate investment-banking
group. Prior to that Mr. Humber was a
student at Brown University.
</TABLE>
<PAGE>
6. DISTRIBUTION PAYABLE
The Trustee declared a $219,180 ($29.44 per unit) distribution payable to
unitholders of record as of December 31, 1997. Such distribution was paid
on January 15, 1998.
7. SIGNIFICANT TRANSACTIONS
The general partner of one of the Partnerships, Trefar Associates
("Trefar"), sold the Trefar property on August 26, 1996 to Xerox
Corporation, the lessee of the property (a voluntary sale under the terms
of the Trust Indenture). As a result, Trefar paid $5,413,809 (the Minimum
Termination Amount) to the Fund in full satisfaction of the Trefar
payment obligation. Such proceeds along with interest earned thereon were
distributed to Unitholders in October 1996.
The general partner of one of the Partnerships, Zebon Associates
("Zebon"), sold all of the eight Zebon properties on December 2, 1996 to
an affiliate of the sub-sub-lessee of the properties (a voluntary sale
under the terms of the Trust Indenture). As a result, Zebon paid
$4,267,806 to the Trust in full satisfaction of Zebon payment obligation.
Such proceeds along with interest earned thereon were distributed to
Unitholders in January 1997.
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Schedule of Selected Per Unit Operating Performance, Ratios and Supplemental Data
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Per Unit Operating Performance
Net asset value, beginning of period .... $ 1,679.14 $ 2,690.44 $ 2,399.26 $ 2,140.77 $ 1,902.45
Net investment income ................... 189.13 295.66 291.18 258.49 238.32
Distributions from net investment income (110.06) (1,306.96) -- -- --
-------------- -------------- -------------- -------------- --------------
Net asset value, end of period .......... $ 1,758.21 $ 1,679.14 $ 2,690.44 $ 2,399.26 $ 2,140.77
============== ============== ============== ============== ==============
Total investment return ................. $ 189.13 $ 295.66 $ 291.18 $ 258.49 $ 302.11
============== ============== ============== ============== ==============
Ratios/Supplemental Data
Net assets, end of period ............... $ 13,091,652 $ 12,502,874 $ 20,033,008 $ 17,864,885 $ 15,940,158
Ratio of expenses to average net assets . N/A N/A N/A N/A N/A
Ratio of net investment income to average
Net assets............................... 11.00% 13.53% 11.44% 11.39% 11.79%
Portfolio turnover rate ................. N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Schedule of Portfolio Investments
December 31, 1997
Partnership/
Date Payment Original Simple
Obligation Property Type of Principal Interest Accrued
Incurred Lessee Location property Amount Rate Interest
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bradall Albertson's Boise, ID Department $1,940,000 16.500% $ 4,818,000
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% 4,654,000
01/15/82 Company Dallas, TX
Columbus, OH
Cincinnati, OH
Louisville, KY (2)
Trefar Xerox Freemont, CA (3) Manufacturing/ 0 17.000% 0
07/14/81 Corporation Warehouse/
(amended Distribution
03/31/84) Facility
Walmad Walgreen Windsor, WI Warehouse/ 1,500,000 18.500% 4,400,000
02/25/82 Company Distribution
Facility
Zebon (4) The Dow Creole, AL Plant 0 15.125% 0
05/01/83 Chemical Prudhoe Bay Station, AK Facilities
Company Mt. Pleasant, MI
Hebron, OH
Kellyville, OK
Tulsa, OK
Bryan, TX
Levelland, TX
========== ===========
$4,925,000 $13,872,000
========== ===========
</TABLE>
(1) Primary Term of the applicable net lease.
(2) Two properties.
(3) Property sold August 26, 1996 and payment obligation satisfied.
(4) All properties sold December 2, 1996 and payment obligation satisfied.
<PAGE>
<TABLE>
<CAPTION>
Integrated ARROs Fund II
Schedule of Portfolio Investments -- Continued
December 31, 1997
Partnership Discount To
Date Payment Arrive at Periodic Minimum
Obligation Property Type of Minimum Termination Payment During Termination
Incurred Lessee Location property Value Primary Term (1) Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bradall Albertson's Boise, ID Department $1,851,885 7/1/98-1/1/08 $ 4,906,115
12/16/82 Inc. Snohomish, WA Stores $387,871/semi.
Las Cruces, NM
Sioux Falls, SD
Bradenton, FL
Dalhill The Kroger Houston, TX Supermarkets 1,875,310 1/31/97-12/31/06 4,263,690
01/15/82 Company Dallas, TX $57,242/mo.
Columbus, OH
Cincinnati, OH
Louisville, KY (2)
Trefar Xerox Freemont, CA (3) Manufacturing/ 0 11/1/97-10/1/07 0
07/14/81 Corporation Warehouse/ $70,823/mo.
(amended Distribution
03/31/84) Facility
Walmad Walgreen Windsor, WI Warehouse/ 1,978,153 4/1/97-3/1/02 3,921,847
02/25/82 Company Distribution $23,125/mo.;
Facility 4/1/02-3/1/07
$92,551/mo.
Zebon (4) The Dow Creole, AL Plant 0 12/1/98-6/1/03 0
05/01/83 Chemical Prudhoe Bay Station, AK Facilities $558,719/semi. (3)
Company Mt. Pleasant, MI
Hebron, OH
Kellyville, OK
Tulsa, OK
Bryan, TX
Levelland, TX
========== ===========
$5,705,348 $13,091,652
========== ===========
</TABLE>
(1) Primary Term of the applicable net lease.
(2) Two properties.
(3) Property sold August 26, 1996 and payment obligation satisfied.
(4) All properties sold December 2, 1996 and payment obligation satisfied.
<PAGE>
<TABLE>
<CAPTION>
INTEGRATED ARROS FUND II
SCHEDULE OF ACCRUED INTEREST ON OUTSTANDING PAYMENT OBLIGATIONS
JANUARY 1, 1997 THROUGH DECEMBER 31, 1997
ACCRUED ACCRUED ACCRUED ACCRUED ACCRUED
DATE INTEREST DATE INTEREST DATE INTEREST DATE INTEREST DATE INTEREST
---- -------- ---- -------- ---- -------- ---- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01-Jan-97 12,986,373 23-Feb-97 13,115,465 17-Apr-97 13,244,557 09-Jun-97 13,373,649 01-Aug-97 13,502,742
02-Jan-97 12,988,808 24-Feb-97 13,117,901 18-Apr-97 13,246,993 10-Jun-97 13,376,085 02-Aug-97 13,505,177
03-Jan-97 12,991,244 25-Feb-97 13,120,336 19-Apr-97 13,249,429 11-Jun-97 13,378,521 03-Aug-97 13,507,613
04-Jan-97 12,993,680 26-Feb-97 13,122,772 20-Apr-97 13,251,864 12-Jun-97 13,380,956 04-Aug-97 13,510,049
05-Jan-97 12,996,116 27-Feb-97 13,125,208 21-Apr-97 13,254,300 13-Jun-97 13,383,392 05-Aug-97 13,512,484
06-Jan-97 12,998,551 28-Feb-97 13,127,643 22-Apr-97 13,256,736 14-Jun-97 13,385,828 06-Aug-97 13,514,920
07-Jan-97 13,000,987 01-Mar-97 13,130,079 23-Apr-97 13,259,171 15-Jun-97 13,388,264 07-Aug-97 13,517,356
08-Jan-97 13,003,423 02-Mar-97 13,132,515 24-Apr-97 13,261,607 16-Jun-97 13,390,699 08-Aug-97 13,519,791
09-Jan-97 13,005,858 03-Mar-97 13,134,951 25-Apr-97 13,264,043 17-Jun-97 13,393,135 09-Aug-97 13,522,227
10-Jan-97 13,008,294 04-Mar-97 13,137,386 26-Apr-97 13,266,478 18-Jun-97 13,395,571 10-Aug-97 13,524,663
11-Jan-97 13,010,730 05-Mar-97 13,139,822 27-Apr-97 13,268,914 19-Jun-97 13,398,006 11-Aug-97 13,527,099
12-Jan-97 13,013,165 06-Mar-97 13,142,258 28-Apr-97 13,271,350 20-Jun-97 13,400,442 12-Aug-97 13,529,534
13-Jan-97 13,015,601 07-Mar-97 13,144,693 29-Apr-97 13,273,786 21-Jun-97 13,402,878 13-Aug-97 13,531,970
14-Jan-97 13,018,037 08-Mar-97 13,147,129 30-Apr-97 13,276,221 22-Jun-97 13,405,313 14-Aug-97 13,534,406
15-Jan-97 13,020,473 09-Mar-97 13,149,565 01-May-97 13,278,657 23-Jun-97 13,407,749 15-Aug-97 13,536,841
16-Jan-97 13,022,908 10-Mar-97 13,152,000 02-May-97 13,281,093 24-Jun-97 13,410,185 16-Aug-97 13,539,277
17-Jan-97 13,025,344 11-Mar-97 13,154,436 03-May-97 13,283,528 25-Jun-97 13,412,621 17-Aug-97 13,541,713
18-Jan-97 13,027,780 12-Mar-97 13,156,872 04-May-97 13,285,964 26-Jun-97 13,415,056 18-Aug-97 13,544,148
19-Jan-97 13,030,215 13-Mar-97 13,159,308 05-May-97 13,288,400 27-Jun-97 13,417,492 19-Aug-97 13,546,584
20-Jan-97 13,032,651 14-Mar-97 13,161,743 06-May-97 13,290,835 28-Jun-97 13,419,928 20-Aug-97 13,549,020
21-Jan-97 13,035,087 15-Mar-97 13,164,179 07-May-97 13,293,271 29-Jun-97 13,422,363 21-Aug-97 13,551,456
22-Jan-97 13,037,522 16-Mar-97 13,166,615 08-May-97 13,295,707 30-Jun-97 13,424,799 22-Aug-97 13,553,891
23-Jan-97 13,039,958 17-Mar-97 13,169,050 09-May-97 13,298,143 01-Jul-97 13,427,235 23-Aug-97 13,556,327
24-Jan-97 13,042,394 18-Mar-97 13,171,486 10-May-97 13,300,578 02-Jul-97 13,429,670 24-Aug-97 13,558,763
25-Jan-97 13,044,830 19-Mar-97 13,173,922 11-May-97 13,303,014 03-Jul-97 13,432,106 25-Aug-97 13,561,198
26-Jan-97 13,047,265 20-Mar-97 13,176,357 12-May-97 13,305,450 04-Jul-97 13,434,542 26-Aug-97 13,563,634
27-Jan-97 13,049,701 21-Mar-97 13,178,793 13-May-97 13,307,885 05-Jul-97 13,436,978 27-Aug-97 13,566,070
28-Jan-97 13,052,137 22-Mar-97 13,181,229 14-May-97 13,310,321 06-Jul-97 13,439,413 28-Aug-97 13,568,505
29-Jan-97 13,054,572 23-Mar-97 13,183,665 15-May-97 13,312,757 07-Jul-97 13,441,849 29-Aug-97 13,570,941
30-Jan-97 13,057,008 24-Mar-97 13,186,100 16-May-97 13,315,192 08-Jul-97 13,444,285 30-Aug-97 13,573,377
31-Jan-97 13,059,444 25-Mar-97 13,188,536 17-May-97 13,317,628 09-Jul-97 13,446,720 31-Aug-97 13,575,813
01-Feb-97 13,061,879 26-Mar-97 13,190,972 18-May-97 13,320,064 10-Jul-97 13,449,156 01-Sep-97 13,578,248
02-Feb-97 13,064,315 27-Mar-97 13,193,407 19-May-97 13,322,500 11-Jul-97 13,451,592 02-Sep-97 13,580,684
03-Feb-97 13,066,751 28-Mar-97 13,195,843 20-May-97 13,324,935 12-Jul-97 13,454,027 03-Sep-97 13,583,120
04-Feb-97 13,069,187 29-Mar-97 13,198,279 21-May-97 13,327,371 13-Jul-97 13,456,463 04-Sep-97 13,585,555
05-Feb-97 13,071,622 30-Mar-97 13,200,714 22-May-97 13,329,807 14-Jul-97 13,458,899 05-Sep-97 13,587,991
06-Feb-97 13,074,058 31-Mar-97 13,203,150 23-May-97 13,332,242 15-Jul-97 13,461,335 06-Sep-97 13,590,427
07-Feb-97 13,076,494 01-Apr-97 13,205,586 24-May-97 13,334,678 16-Jul-97 13,463,770 07-Sep-97 13,592,863
08-Feb-97 13,078,929 02-Apr-97 13,208,022 25-May-97 13,337,114 17-Jul-97 13,466,206 08-Sep-97 13,595,298
09-Feb-97 13,081,365 03-Apr-97 13,210,457 26-May-97 13,339,550 18-Jul-97 13,468,642 09-Sep-97 13,597,734
10-Feb-97 13,083,801 04-Apr-97 13,212,893 27-May-97 13,341,985 19-Jul-97 13,471,077 10-Sep-97 13,600,170
11-Feb-97 13,086,236 05-Apr-97 13,215,329 28-May-97 13,344,421 20-Jul-97 13,473,513 11-Sep-97 13,602,605
12-Feb-97 13,088,672 06-Apr-97 13,217,764 29-May-97 13,346,857 21-Jul-97 13,475,949 12-Sep-97 13,605,041
13-Feb-97 13,091,108 07-Apr-97 13,220,200 30-May-97 13,349,292 22-Jul-97 13,478,385 13-Sep-97 13,607,477
14-Feb-97 13,093,544 08-Apr-97 13,222,636 31-May-97 13,351,728 23-Jul-97 13,480,820 14-Sep-97 13,609,912
15-Feb-97 13,095,979 09-Apr-97 13,225,072 01-Jun-97 13,354,164 24-Jul-97 13,483,256 15-Sep-97 13,612,348
16-Feb-97 13,098,415 10-Apr-97 13,227,507 02-Jun-97 13,356,599 25-Jul-97 13,485,692 16-Sep-97 13,614,784
17-Feb-97 13,100,851 11-Apr-97 13,229,943 03-Jun-97 13,359,035 26-Jul-97 13,488,127 17-Sep-97 13,617,220
18-Feb-97 13,103,286 12-Apr-97 13,232,379 04-Jun-97 13,361,471 27-Jul-97 13,490,563 18-Sep-97 13,619,655
19-Feb-97 13,105,722 13-Apr-97 13,234,814 05-Jun-97 13,363,907 28-Jul-97 13,492,999 19-Sep-97 13,622,091
20-Feb-97 13,108,158 14-Apr-97 13,237,250 06-Jun-97 13,366,342 29-Jul-97 13,495,434 20-Sep-97 13,624,527
21-Feb-97 13,110,594 15-Apr-97 13,239,686 07-Jun-97 13,368,778 30-Jul-97 13,497,870 21-Sep-97 13,626,962
22-Feb-97 13,113,029 16-Apr-97 13,242,121 08-Jun-97 13,371,214 31-Jul-97 13,500,306 22-Sep-97 13,629,398
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTEGRATED ARROS FUND II
SCHEDULE OF ACCRUED INTEREST ON OUTSTANDING PAYMENT OBLIGATIONS
JANUARY 1, 1997 THROUGH DECEMBER 31, 1997
ACCRUED ACCRUED
DATE INTEREST DATE INTEREST
---- -------- ---- --------
<S> <C> <C> <C>
23-Sep-97 13,631,834 15-Nov-97 13,760,926
24-Sep-97 13,634,269 16-Nov-97 13,763,362
25-Sep-97 13,636,705 17-Nov-97 13,765,797
26-Sep-97 13,639,141 18-Nov-97 13,768,233
27-Sep-97 13,641,577 19-Nov-97 13,770,669
28-Sep-97 13,644,012 20-Nov-97 13,773,104
29-Sep-97 13,646,448 21-Nov-97 13,775,540
30-Sep-97 13,648,884 22-Nov-97 13,777,976
01-Oct-97 13,651,319 23-Nov-97 13,780,412
02-Oct-97 13,653,755 24-Nov-97 13,782,847
03-Oct-97 13,656,191 25-Nov-97 13,785,283
04-Oct-97 13,658,626 26-Nov-97 13,787,719
05-Oct-97 13,661,062 27-Nov-97 13,790,154
06-Oct-97 13,663,498 28-Nov-97 13,792,590
07-Oct-97 13,665,934 29-Nov-97 13,795,026
08-Oct-97 13,668,369 30-Nov-97 13,797,461
09-Oct-97 13,670,805 01-Dec-97 13,799,897
10-Oct-97 13,673,241 02-Dec-97 13,802,333
11-Oct-97 13,675,676 03-Dec-97 13,804,769
12-Oct-97 13,678,112 04-Dec-97 13,807,204
13-Oct-97 13,680,548 05-Dec-97 13,809,640
14-Oct-97 13,682,983 06-Dec-97 13,812,076
15-Oct-97 13,685,419 07-Dec-97 13,814,511
16-Oct-97 13,687,855 08-Dec-97 13,816,947
17-Oct-97 13,690,291 09-Dec-97 13,819,383
18-Oct-97 13,692,726 10-Dec-97 13,821,819
19-Oct-97 13,695,162 11-Dec-97 13,824,254
20-Oct-97 13,697,598 12-Dec-97 13,826,690
21-Oct-97 13,700,033 13-Dec-97 13,829,126
22-Oct-97 13,702,469 14-Dec-97 13,831,561
23-Oct-97 13,704,905 15-Dec-97 13,833,997
24-Oct-97 13,707,341 16-Dec-97 13,836,433
25-Oct-97 13,709,776 17-Dec-97 13,838,868
26-Oct-97 13,712,212 18-Dec-97 13,841,304
27-Oct-97 13,714,648 19-Dec-97 13,843,740
28-Oct-97 13,717,083 20-Dec-97 13,846,176
29-Oct-97 13,719,519 21-Dec-97 13,848,611
30-Oct-97 13,721,955 22-Dec-97 13,851,047
31-Oct-97 13,724,390 23-Dec-97 13,853,483
01-Nov-97 13,726,826 24-Dec-97 13,855,918
02-Nov-97 13,729,262 25-Dec-97 13,858,354
03-Nov-97 13,731,698 26-Dec-97 13,860,790
04-Nov-97 13,734,133 27-Dec-97 13,863,225
05-Nov-97 13,736,569 28-Dec-97 13,865,661
06-Nov-97 13,739,005 29-Dec-97 13,868,097
07-Nov-97 13,741,440 30-Dec-97 13,870,533
08-Nov-97 13,743,876 31-Dec-97 13,872,968
09-Nov-97 13,746,312
10-Nov-97 13,748,747
11-Nov-97 13,751,183
12-Nov-97 13,753,619
13-Nov-97 13,756,055
14-Nov-97 13,758,490
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 13,092
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,311
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 219
<TOTAL-LIABILITIES> 219
<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> 13,092
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 1,408
<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> 819
<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> 12,798
<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> 1,758.21
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
