IR PASS-THROUGH CORP.
c/o Winthrop Management LLC
Five Cambridge Center
Cambridge, MA 02142
(617) 234-3000
Integrated ARROs Fund II (the "Fund")
September, 2000
Dear Unitholder:
Enclosed for your review are the Fund's unaudited financial statements as of
June 30, 2000. 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.
(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, Bankers Trust Company at (800) 735-7777.
Sincerely,
Integrated ARROs Fund II
By: IR Pass-through Corp., Sponsor
<PAGE>
Integrated ARROs Fund II
Statement of Assets and Liabilities
June 30, 2000
(unaudited)
Assets
Cash $209,237
Investment in payment obligations, at
minimum termination value (cost $4,349,927) 12,447,610
-----------
Total Assets 12,656,847
===========
Liabilities
Distributions payable 209,237
-----------
Net Assets $12,447,610
===========
Net Asset Value per unit (7,446 units outstanding) $1,671.72
===========
See notes to financial statements
<PAGE>
Integrated ARROs Fund II
Statement of Operations
Six Months Ended June 30, 2000
(unaudited)
Investment income:
Interest and discount earned $ 709,791
=========
See notes to financial statements
<PAGE>
Integrated ARROs Fund II
Statement of Changes in Net Assets
June 30, 2000
(unaudited)
Decrease in net assets from operations:
Net investment income $ 709,791
---------------
Net increase in net assets resulting from operations 709,791
Total declared as distributions to Unitholders (843,618)
---------------
Net decrease in net assets (133,827)
Net Assets:
Beginning of period 12,581,437
---------------
End of period $12,447,610
===============
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, 1999, 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 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"). Presidio is
an indirect but wholly owned subsidiary of NorthStar Capital Investment
Corp., the majority shareholder of 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. AP-PCC III, L.P.
<PAGE>
("AP-PCC"), an unaffiliated third party, 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 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 I,
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
had 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 $33,689 in expenses from the proceeds of the
January 2000 through June 2000 payment obligations received.
5. DISTRIBUTION PAYABLE
The Sponsor declared a $209,237 ($28.10 per unit) distribution payable to
unitholders of record as of June 30, 2000. Such distribution was paid on
July 17, 2000.
<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, 2000 December 31, 1999
Per Unit Operating Performance (unaudited) (audited)
------------------------------ ------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period $1,689.69 $1,724.70
Net investment income 95.33 196.15
Distributions from net investment
income and partial prepayments (113.30) (231.16)
-------------- --------------
Net asset value, end of period $1,671.72 $1,689.69
============== ==============
Total investment return $95.33 $196.15
============== ==============
Ratios/Supplemental Data
Net assets, end of period $12,447,610 $12,581,437
Ratio of expenses to average net assets 0.27% 0.26%
Ratio of net investment income to
average net assets 5.67%(1) 11.49%
Portfolio turnover rate N/A N/A
</TABLE>
(1) Not annualized.
<PAGE>
Integrated ARROs Fund II
Schedule of Portfolio Investments
June 30, 2000
<TABLE>
<CAPTION>
06/30/98
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% $4,066,490
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% 3,035,374
01/15/82 Company Dallas, TX
Columbus, OH
Cincinnati, OH
Louisville, KY (2)
Walmad Walgreen Windsor, WI Warehouse/ 1,500,000 18.500% 4,191,961
02/25/82 Company Distribution
Facility
--------------- ---------------
$4,925,000 $11,293,825
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
Partnership / Discount To
Date Payment Arrive at Minimum Periodic Minimum
Obligation Property Type of Termination Payment During Termination
Incurred Lessee Location Property Amount Primary Term (1) Amount
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bradall Albertson's Boise, ID Department $1,676,903 7/1/98-1/1/08 $4,329,587
12/16/82 Inc. Snohomish, WA Stores $387,871/semi.
Las Cruces, NM
Sioux Falls, SD
Bradenton, FL
Dalhill The Kroger Houston, TX Supermarkets $813,014 1/31/97-12/31/06 3,707,360
01/15/82 Company Dallas, TX $57,242/mo.
Columbus, OH
Cincinnati, OH
Louisville, KY (2)
Walmad Walgreen Windsor, WI Warehouse/ $1,281,297 4/1/97-3/1/02 4,410,664
02/25/82 Company Distribution $23,125/mo.;
Facility 4/1/02-3/1/07
$92,551/mo.
----------------- --------------
$3,771,214 $12,447,611
================= ==============
</TABLE>
(1) Primary Term of the applicable net lease.
(2) Two properties.
<PAGE>
INTEGRATED ARROS FUND II
SCHEDULE OF ACCRUED INTEREST ON OUTSTANDING PAYMENT OBLIGATIONS
JANUARY 1, 2000 THROUGH JUNE 30, 2000
<TABLE>
<CAPTION>
ACCRUED ACCRUED ACCRUED ACCRUED
DATE INTEREST DATE INTEREST DATE INTEREST DATE INTEREST
--------- ---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
01-Jan-00 11,254,798 23-Feb-00 11,303,523 16-Apr-00 11,271,881 08-Jun-00 11,240,239
02-Jan-00 11,257,234 24-Feb-00 11,305,959 17-Apr-00 11,274,317 09-Jun-00 11,242,675
03-Jan-00 11,259,669 25-Feb-00 11,308,394 18-Apr-00 11,276,753 10-Jun-00 11,245,111
04-Jan-00 11,262,105 26-Feb-00 11,310,830 19-Apr-00 11,279,188 11-Jun-00 11,247,547
05-Jan-00 11,264,541 27-Feb-00 11,313,266 20-Apr-00 11,281,624 12-Jun-00 11,249,982
06-Jan-00 11,266,976 28-Feb-00 11,315,702 21-Apr-00 11,284,060 13-Jun-00 11,252,418
07-Jan-00 11,269,412 29-Feb-00 11,237,770 22-Apr-00 11,286,495 14-Jun-00 11,254,854
08-Jan-00 11,271,848 01-Mar-00 11,240,206 23-Apr-00 11,288,931 15-Jun-00 11,257,289
09-Jan-00 11,274,283 02-Mar-00 11,242,642 24-Apr-00 11,291,367 16-Jun-00 11,259,725
10-Jan-00 11,276,719 03-Mar-00 11,245,077 25-Apr-00 11,293,803 17-Jun-00 11,262,161
11-Jan-00 11,279,155 04-Mar-00 11,247,513 26-Apr-00 11,296,238 18-Jun-00 11,264,596
12-Jan-00 11,281,591 05-Mar-00 11,249,949 27-Apr-00 11,298,674 19-Jun-00 11,267,032
13-Jan-00 11,284,026 06-Mar-00 11,252,384 28-Apr-00 11,301,110 20-Jun-00 11,269,468
14-Jan-00 11,286,462 07-Mar-00 11,254,820 29-Apr-00 11,303,545 21-Jun-00 11,271,904
15-Jan-00 11,288,898 08-Mar-00 11,257,256 30-Apr-00 11,225,614 22-Jun-00 11,274,339
16-Jan-00 11,291,333 09-Mar-00 11,259,692 01-May-00 11,228,050 23-Jun-00 11,276,775
17-Jan-00 11,293,769 10-Mar-00 11,262,127 02-May-00 11,230,485 24-Jun-00 11,279,211
18-Jan-00 11,296,205 11-Mar-00 11,264,563 03-May-00 11,232,921 25-Jun-00 11,281,646
19-Jan-00 11,298,640 12-Mar-00 11,266,999 04-May-00 11,235,357 26-Jun-00 11,284,082
20-Jan-00 11,301,076 13-Mar-00 11,269,434 05-May-00 11,237,793 27-Jun-00 11,286,518
21-Jan-00 11,303,512 14-Mar-00 11,271,870 06-May-00 11,240,228 28-Jun-00 11,288,954
22-Jan-00 11,305,948 15-Mar-00 11,274,306 07-May-00 11,242,664 29-Jun-00 11,291,389
23-Jan-00 11,308,383 16-Mar-00 11,276,741 08-May-00 11,245,100 30-Jun-00 11,293,825
24-Jan-00 11,310,819 17-Mar-00 11,279,177 09-May-00 11,247,535
25-Jan-00 11,313,255 18-Mar-00 11,281,613 10-May-00 11,249,971
26-Jan-00 11,315,690 19-Mar-00 11,284,049 11-May-00 11,252,407
27-Jan-00 11,318,126 20-Mar-00 11,286,484 12-May-00 11,254,843
28-Jan-00 11,320,562 21-Mar-00 11,288,920 13-May-00 11,257,278
29-Jan-00 11,322,997 22-Mar-00 11,291,356 14-May-00 11,259,714
30-Jan-00 11,325,433 23-Mar-00 11,293,791 15-May-00 11,262,150
31-Jan-00 11,327,869 24-Mar-00 11,296,227 16-May-00 11,264,585
01-Feb-00 11,249,938 25-Mar-00 11,298,663 17-May-00 11,267,021
02-Feb-00 11,252,373 26-Mar-00 11,301,099 18-May-00 11,269,457
03-Feb-00 11,254,809 27-Mar-00 11,303,534 19-May-00 11,271,892
04-Feb-00 11,257,245 28-Mar-00 11,305,970 20-May-00 11,274,328
05-Feb-00 11,259,680 29-Mar-00 11,308,406 21-May-00 11,276,764
06-Feb-00 11,262,116 30-Mar-00 11,310,841 22-May-00 11,279,200
07-Feb-00 11,264,552 31-Mar-00 11,232,910 23-May-00 11,281,635
08-Feb-00 11,266,988 01-Apr-00 11,235,346 24-May-00 11,284,071
09-Feb-00 11,269,423 02-Apr-00 11,237,781 25-May-00 11,286,507
10-Feb-00 11,271,859 03-Apr-00 11,240,217 26-May-00 11,288,942
11-Feb-00 11,274,295 04-Apr-00 11,242,653 27-May-00 11,291,378
12-Feb-00 11,276,730 05-Apr-00 11,245,089 28-May-00 11,293,814
13-Feb-00 11,279,166 06-Apr-00 11,247,524 29-May-00 11,296,249
14-Feb-00 11,281,602 07-Apr-00 11,249,960 30-May-00 11,298,685
15-Feb-00 11,284,037 08-Apr-00 11,252,396 31-May-00 11,220,754
16-Feb-00 11,286,473 09-Apr-00 11,254,831 01-Jun-00 11,223,190
17-Feb-00 11,288,909 10-Apr-00 11,257,267 02-Jun-00 11,225,625
18-Feb-00 11,291,345 11-Apr-00 11,259,703 03-Jun-00 11,228,061
19-Feb-00 11,293,780 12-Apr-00 11,262,138 04-Jun-00 11,230,497
20-Feb-00 11,296,216 13-Apr-00 11,264,574 05-Jun-00 11,232,932
21-Feb-00 11,298,652 14-Apr-00 11,267,010 06-Jun-00 11,235,368
22-Feb-00 11,301,087 15-Apr-00 11,269,446 07-Jun-00 11,237,804
</TABLE>
