IR PASS-THROUGH CORP.
c/o Winthrop Management LLC
7 Bulfinch Place, Suite 500
P.O. Box 9507
Boston, MA 02114-9507
(617) 570-4600
Integrated ARROs Fund I (the "Fund")
October, 2004
Dear Unitholder:
Enclosed for your review are the Fund's unaudited financial statements as of
June 30, 2004. 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 I
By: IR Pass-through Corp., Sponsor
Integrated ARROs Fund I
Statement of Financial Condition
June 30, 2004
(unaudited)
Assets
Cash and Cash Equivalents $ 298,927
Investments in payment obligations, at minimum
termination value (cost $2,302,742) 8,853,535
----------
Total Assets 9,152,462
==========
Liabilities
Distributions Payable 298,927
----------
Net Assets $8,853,535
==========
Net Asset Value per unit (2,771 units outstanding) $ 3,195.07
==========
See notes to financial statements
Integrated ARROs Fund I
Statement of Operations
Six Months Ended June 30, 2004
(unaudited)
Investment Income:
Interest and discount earned, net of fund expenses $746,506
========
See notes to financial statements
Integrated ARROs Fund I
Statement of Changes in Net Assets
June 30, 2004
(unaudited)
Increase in net assets from operations:
Net investment income $ 746,506
-----------
Net increase in net assets resulting from operations 746,506
Total declared as distributions to Unit Holders (622,746)
-----------
Net increase in net assets 123,760
Net assets:
Beginning of period 8,729,775
-----------
End of period $ 8,853,535
===========
See notes to financial statements
Integrated ARROs Fund I
Schedule of Selected Per Unit Operating Performance, Ratios
and Supplemental Data
Six Months Ended Year Ended
June 30, 2004 December 31, 2003
(unaudited) (audited)
---------------- -----------------
Per Unit Operating Performance
Net asset value, beginning of period $ 3,150.41 $ 3,604.93
Net investment income 269.40 872.44
Distributions (224.74) (1,326.96)
----------- -----------
Net asset value, end of period $ 3,195.07 $ 3,150.41
=========== ===========
Total investment return $ 269.40 $ 872.44
=========== ===========
Ratios/Supplemental Data
Net assets, end of period $ 8,853,535 $ 8,729,775
Ratio of expenses to average net assets 0.45% 0.41%
Ratio of net investment income to average
net assets 8.49% (1) 25.83%
Portfolio turnover rate N/A N/A
(1) Not annualized.
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, 2003, 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.
Cash and Cash Equivalents
Cash and cash equivalents represents payment obligations received by the
Fund and which were invested in U. S. Treasury bills with maturities of
three months or less.
Use of Estimates
The preparation of the financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the reported amounts for Investments in payment
obligations and the reported amounts for Net investment income. Actual
results could differ from these estimates.
3. THE SPONSOR
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.
("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 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
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 $39,859 in expenses from the proceeds of the
January 2004 through June 2004 payment obligations received.
5. DISTRIBUTION PAYABLE
The Trustee declared a $298,927 ($107.88 per unit) distribution payable to
unitholders of record as of June 30, 2004. Such distribution was paid on
July 15, 2004.
Integrated ARROs Fund I
Schedule of Portfolio Investments
June 30, 2004
Discount To
Arrive at Lower
Partnership / of Fair Market Value
Date Payment Original Simple or Minimum
Obligation Property Type of Principal Interest Accrued Termination
Incurred Lessee Location(s) Property Amount Rate Interest Amount
- ------------------------------------------------------------------------------------------------------------------
Walando Walgreen Orlando, FL Office/ $820,000 13.0% $1,318,955 $1,108,781
03/18/81 Company Warehouse
Building
Santex (2) Albertson's Venice, FL Retail 570,000 17.0% 975,482 671,157
07/01/81 Inc. Livermore, CA Facilities
Lando Albertson's Portland, OR Retail 783,451 16.0% 1,905,998 1,564,307
10/21/81 Inc. Orlando, FL Facilities
(amended Huntsville, AL
04/15/82)
Denville Xerox Lewisville, TX Plant 963,048 15.0% 2,400,339 2,091,823
12/22/81 Corporation Facility
(amended
01/27/84)
Elway Safeway Billings, MT Retail 1,429,042 18.5% 4,019,896 3,097,808
03/18/82 Stores, Inc. Fort Worth, TX Facilities (4)
Aurora, CO
Mamoth Lakes, CA
Walcreek Hercules Walnut Creek, Office 1,306,709 18.5% 2,495,679 1,601,188
08/01/82 Credit Inc. CA Building
(amended (3)
06/29/83,
12/3/84)
---------- ----------- -----------
$5,872,250 $13,116,349 $10,135,064
========== =========== ===========
Lower of
Partnership / Fair Market Value
Date Payment Periodic or Minimum
Obligation Payment During Termination
Incurred Primary Term (1) Amount
- ----------------------------------------------
Walando 5/1/96-4/1/06 $1,030,174
03/18/81 $11,883/mo
Santex (2) 9/1/96-8/1/06 874,325
07/01/81 $13,342/mo
Lando 7/1/97-1/1/07 1,125,142
10/21/81 $62,656/semi
(amended
04/15/82)
Denville 8/1/98-7/1/08 1,271,564
12/22/81 $12,038/mo
(amended
01/27/84)
Elway 7/1/97-6/1/07 2,351,130
03/18/82 $22,027/mo (4) (4)
Walcreek 10/1/97-9/1/07 2,201,200
08/01/82 $30,155/mo
(amended
06/29/83,
12/3/84)
----------
$8,853,535
==========
(1) Primary Term of the applicable net lease.
(2) Two Payment Obligations, one for each property, treated as one.
(3) Guaranteed by Hercules Incorporated
(4) As adjusted, due to the exercise of economic discontinuance in the
Huntsville, Texas lease.
INTEGRATED ARROS FUND I
SCHEDULE OF ACCRUED INTEREST ON OUTSTANDING PAYMENT OBLIGATIONS
JANUARY 1, 2004 THROUGH JUNE 30, 2004
ACCRUED ACCRUED ACCRUED ACCRUED
DATE INTEREST DATE INTEREST DATE INTEREST DATE INTEREST
- --------- ---------- --------- ---------- --------- ---------- --------- ----------
01-Jan-04 13,141,870 23-Feb-04 13,194,255 16-Apr-04 13,157,194 08-Jun-04 13,057,477
02-Jan-04 13,144,547 24-Feb-04 13,196,931 17-Apr-04 13,159,870 09-Jun-04 13,060,153
03-Jan-04 13,147,223 25-Feb-04 13,199,607 18-Apr-04 13,162,546 10-Jun-04 13,062,829
04-Jan-04 13,149,899 26-Feb-04 13,202,283 19-Apr-04 13,165,222 11-Jun-04 13,065,505
05-Jan-04 13,152,575 27-Feb-04 13,204,959 20-Apr-04 13,167,898 12-Jun-04 13,068,181
06-Jan-04 13,155,251 28-Feb-04 13,207,635 21-Apr-04 13,170,574 13-Jun-04 13,070,857
07-Jan-04 13,157,927 29-Feb-04 13,210,311 22-Apr-04 13,173,250 14-Jun-04 13,073,533
08-Jan-04 13,160,603 01-Mar-04 13,123,542 23-Apr-04 13,175,926 15-Jun-04 13,076,209
09-Jan-04 13,163,279 02-Mar-04 13,126,218 24-Apr-04 13,178,602 16-Jun-04 13,078,885
10-Jan-04 13,165,955 03-Mar-04 13,128,894 25-Apr-04 13,181,278 17-Jun-04 13,081,561
11-Jan-04 13,168,631 04-Mar-04 13,131,570 26-Apr-04 13,183,954 18-Jun-04 13,084,237
12-Jan-04 13,171,307 05-Mar-04 13,134,246 27-Apr-04 13,186,630 19-Jun-04 13,086,913
13-Jan-04 13,173,983 06-Mar-04 13,136,922 28-Apr-04 13,189,306 20-Jun-04 13,089,589
14-Jan-04 13,176,659 07-Mar-04 13,139,598 29-Apr-04 13,191,982 21-Jun-04 13,092,265
15-Jan-04 13,179,335 08-Mar-04 13,142,274 30-Apr-04 13,194,658 22-Jun-04 13,094,941
16-Jan-04 13,182,011 09-Mar-04 13,144,950 01-May-04 13,107,889 23-Jun-04 13,097,617
17-Jan-04 13,184,687 10-Mar-04 13,147,626 02-May-04 13,110,565 24-Jun-04 13,100,293
18-Jan-04 13,187,363 11-Mar-04 13,150,302 03-May-04 13,113,241 25-Jun-04 13,102,969
19-Jan-04 13,190,039 12-Mar-04 13,152,978 04-May-04 13,115,917 26-Jun-04 13,105,645
20-Jan-04 13,192,715 13-Mar-04 13,155,654 05-May-04 13,118,593 27-Jun-04 13,108,321
21-Jan-04 13,195,391 14-Mar-04 13,158,330 06-May-04 13,121,269 28-Jun-04 13,110,997
22-Jan-04 13,198,067 15-Mar-04 13,161,006 07-May-04 13,123,945 29-Jun-04 13,113,673
23-Jan-04 13,200,743 16-Mar-04 13,163,682 08-May-04 13,126,621 30-Jun-04 13,116,349
24-Jan-04 13,203,419 17-Mar-04 13,166,358 09-May-04 13,129,297
25-Jan-04 13,206,095 18-Mar-04 13,169,034 10-May-04 13,131,973
26-Jan-04 13,208,771 19-Mar-04 13,171,710 11-May-04 13,134,649
27-Jan-04 13,211,447 20-Mar-04 13,174,386 12-May-04 13,137,325
28-Jan-04 13,214,123 21-Mar-04 13,177,062 13-May-04 13,140,001
29-Jan-04 13,216,799 22-Mar-04 13,179,738 14-May-04 13,142,677
30-Jan-04 13,219,475 23-Mar-04 13,182,414 15-May-04 13,145,353
31-Jan-04 13,222,151 24-Mar-04 13,185,090 16-May-04 13,148,029
01-Feb-04 13,135,382 25-Mar-04 13,187,766 17-May-04 13,150,705
02-Feb-04 13,138,058 26-Mar-04 13,190,442 18-May-04 13,153,381
03-Feb-04 13,140,734 27-Mar-04 13,193,118 19-May-04 13,156,057
04-Feb-04 13,143,410 28-Mar-04 13,195,794 20-May-04 13,158,733
05-Feb-04 13,146,086 29-Mar-04 13,198,470 21-May-04 13,161,409
06-Feb-04 13,148,762 30-Mar-04 13,201,146 22-May-04 13,164,085
07-Feb-04 13,151,438 31-Mar-04 13,203,822 23-May-04 13,166,761
08-Feb-04 13,154,114 01-Apr-04 13,117,053 24-May-04 13,169,437
09-Feb-04 13,156,790 02-Apr-04 13,119,729 25-May-04 13,172,113
10-Feb-04 13,159,466 03-Apr-04 13,122,405 26-May-04 13,174,789
11-Feb-04 13,162,142 04-Apr-04 13,125,081 27-May-04 13,177,465
12-Feb-04 13,164,818 05-Apr-04 13,127,757 28-May-04 13,180,141
13-Feb-04 13,167,494 06-Apr-04 13,130,433 29-May-04 13,182,817
14-Feb-04 13,170,170 07-Apr-04 13,133,109 30-May-04 13,185,493
15-Feb-04 13,172,846 08-Apr-04 13,135,785 31-May-04 13,188,170
16-Feb-04 13,175,522 09-Apr-04 13,138,461 01-Jun-04 13,038,745
17-Feb-04 13,178,198 10-Apr-04 13,141,137 02-Jun-04 13,041,421
18-Feb-04 13,180,874 11-Apr-04 13,143,814 03-Jun-04 13,044,097
19-Feb-04 13,183,550 12-Apr-04 13,146,490 04-Jun-04 13,046,773
20-Feb-04 13,186,226 13-Apr-04 13,149,166 05-Jun-04 13,049,449
21-Feb-04 13,188,903 14-Apr-04 13,151,842 06-Jun-04 13,052,125
22-Feb-04 13,191,579 15-Apr-04 13,154,518 07-Jun-04 13,054,801
INTEGRATED ARROS FUND I
-----------------------
FORM N-CSR/S JUNE 30, 2004
--------------------------
CERTIFICATIONS UNDER SECTION 302 AND 906 OF THE SARBANES OXLEY ACT
I, Richard J McCready, certify that:
1. I have reviewed this report on Form N-CSR/S of Integrated Arros Fund I;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(C) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal half-year (the registrant's second fiscal half-year
in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: October 15, 2004
/s/ Richard J. McCready
-----------------------
Richard J. McCready
President, Secretary
and Director
INTEGRATED INTEGRATED ARROS FUND I
----------------------------------
FORM N-CSR/s JUNE 30, 2004
--------------------------
CERTIFICATIONS UNDER SECTION 302 AND 906 OF THE SARBANES OXLEY ACT
I, Steven B. Kauff, certify that:
1. I have reviewed this report on Form N-CSR/S of Integrated Arros Fund I;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(C) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date
within 90 days prior to the filing date of this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal half-year (the registrant's second fiscal half-year
in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: October 15, 2004 /s/ Steven B. Kauff
-------------------------
Steven B. Kauff
Vice President, Treasurer
and Director