<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ___________
Commission File #0-18456
Inland Mortgage Investors Fund III, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3604866
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2901 Butterfield Road, Oak Brook, Illinois 60521
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 708-218-8000
N/A
----------------------------------------------
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
-1-
<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Balance Sheets
March 31, 1996 and December 31, 1995
(unaudited)
Assets
------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents (Note 1)................ $ 65,098 68,800
Accrued interest receivable....................... 10,513 10,366
Mortgage loans receivable (Note 3)................ 1,213,664 1,215,249
----------- ----------
Total assets...................................... $ 1,289,275 1,294,415
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable................................ $ 4,491 1,106
Distributions payable........................... 20,273 20,588
Due to Affiliates (Note 2)...................... 5,540 2,158
----------- ----------
Total liabilities............................. 30,304 23,852
----------- ----------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Supplemental Capital Contributions............ 306,874 306,874
Supplemental distributions to Limited Partners (306,874) (306,874)
Cumulative net income......................... 17,555 16,623
Cumulative distributions...................... (12,490) (11,558)
----------- ----------
5,565 5,565
----------- ----------
Limited Partners:
Units of $500. Authorized 40,000 Units,
5,674.50 Units outstanding at March 31, 1996
and December 31, 1995 (net of offering costs
of $422,642, of which $115,754 was paid to
Affiliates)................................. 2,414,607 2,414,607
Supplemental Capital Contributions from
General Partner............................. 306,874 306,874
Cumulative net income......................... 730,613 722,864
Cumulative distributions...................... (2,198,688) (2,179,347)
----------- ----------
1,253,406 1,264,998
----------- ----------
Total Partners' capital....................... 1,258,971 1,270,563
----------- ----------
Total liabilities and Partners' capital........... $ 1,289,275 1,294,415
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Operations
For the three months ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Income:
Interest on mortgage loans receivable (Note 3).. $ 30,923 44,278
Interest on investments......................... 480 675
----------- ----------
31,403 44,953
----------- ----------
Expenses:
Professional services to Affiliates............. 2,228 3,448
Professional services to non-affiliates......... 15,500 15,460
General and administrative expenses to
Affiliates.................................... 4,028 4,243
General and administrative expenses to
non-affiliates................................ 966 854
----------- ----------
22,722 24,005
----------- ----------
Net income........................................ $ 8,681 20,948
=========== ==========
Net income allocated to:
General Partner................................. 932 1,705
Limited Partners................................ 7,749 19,243
----------- ----------
Net income........................................ $ 8,681 20,948
=========== ==========
Net income allocated to the one
General Partner Unit............................ $ 932 1,705
=========== ==========
Net income allocated to Limited Partners per
Limited Partnership Units of 5,674.50........... $ 1.37 3.39
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 8,681 20,948
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in assets and liabilities:
Accrued interest receivable................. (147) 29
Accounts payable............................ 3,385 (54)
Due to Affiliates........................... 3,382 5,143
----------- ----------
Net cash provided by operating activities......... 15,301 26,066
----------- ----------
Cash flows from investing activities:
Principal payments collected.................... 1,585 1,431
----------- ----------
Net cash provided by investing activities......... 1,585 1,431
----------- ----------
Cash flows from financing activities:
Cash distributions.............................. (20,588) (56,357)
----------- ----------
Net cash used in financing activities............. (20,588) (56,357)
----------- ----------
Net decrease in cash and cash equivalents......... (3,702) (28,860)
Cash and cash equivalents at beginning of period.. 68,800 99,103
----------- ----------
Cash and cash equivalents at end of period........ $ 65,098 70,243
=========== ==========
Supplemental schedule of non-cash investing and
financing activities:
Accrued distributions payable..................... $ 20,273 35,525
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 1996
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1995, which are
included in the Partnership's 1995 Annual Report as certain footnote
disclosures which would substantially duplicate those contained in such audited
financial statements have been omitted from this Report.
(1) Organization and Basis of Accounting
Inland Mortgage Investors Fund III, L.P. (the "Partnership"), was formed in
September 1988 pursuant to the Delaware Revised Uniform Limited Partnership Act
to make or acquire loans collateralized by mortgages on improved, income
producing properties. On January 9, 1989, the Partnership commenced an Offering
of 40,000 (subject to an increase up to 50,000) Limited Partnership Units
("Units") pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933. The Offering terminated January 9, 1991, with total
sales of 5,674.50 Units, resulting in gross offering proceeds of $2,837,249,
not including the General Partner's contribution of $500 for one Unit. All of
the holders of these Units were admitted to the Partnership. Inland Real Estate
Investment Corporation is the General Partner.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Offering costs have been offset against the Limited Partners' capital accounts.
The Partnership considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents and are carried at
cost, which approximates fair value due to the short maturity of those
instruments.
Interest income on mortgage loans receivable is accrued when earned. The
accrual of interest, on loans that are in default, is discontinued when, in the
opinion of the General Partner, the borrower has not complied with loan work-
out arrangements. Once a loan has been placed on a non-accrual status, all cash
received is applied against the outstanding loan balance until such time as the
borrower has demonstrated an ability to make payments under the terms of the
original or renegotiated loan agreement. The Partnership intends to pursue
collection of all amounts currently due from the borrowers.
The fair value of the mortgage loans receivable and related mortgage interest
receivable is based upon contractual payments to be received and current market
interest rates for issuance of mortgage loans with similar terms and
maturities. The estimated fair value of the mortgage loans receivable at March
31, 1996 approximates their carrying value.
-5-
<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1996
(unaudited)
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
Disclosure of the estimated fair value of financial instruments is made in
accordance with the requirements of Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Instruments." The estimated
fair value amounts have been determined by using available market information
and appropriate valuation methodologies.
In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present
fairly the financial position and results of operations. Interim periods are
not necessarily indicative of results to be expected for the year.
(2) Transactions with Affiliates
The General Partner and its Affiliates are entitled to reimbursement for
salaries and expenses of employees of the General Partner and its Affiliates
relating to the administration of the Partnership. Such costs are included in
professional services to Affiliates and general and administrative expenses to
Affiliates, of which $5,540 and $2,158 remained unpaid at March 31, 1996 and
December 31, 1995, respectively.
The General Partner was required to make Supplemental Capital Contributions, if
necessary, from time to time in sufficient amounts to allow the Partnership to
make cumulative return to the Limited Partners amounting to at least 8% per
annum on their Invested Capital through January 9, 1994. The cumulative amount
of such Supplemental Capital Contributions is $306,874, all of which has been
paid.
The Partnership has arranged for Inland Mortgage Servicing Corporation
("IMSC"), a subsidiary of the General Partner, to service the Partnership's
mortgage loans receivable. The services include processing mortgage collections
and escrow deposits and maintaining related records. For these services, the
Partnership is obligated to pay fees at an annual rate equal to 1/4 of 1% of
the outstanding mortgage loans receivable of the Partnership. Such fees of $759
and $1,101 for the three months ended March 31, 1996 and 1995, respectively,
have been incurred and paid to IMSC and are included in general and
administrative expenses to Affiliates.
-6-
<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1996
(unaudited)
(3) Mortgage Loans Receivable
Mortgage loans receivable are collateralized by first mortgages on improved,
income producing properties located in the Chicago metropolitan area. As
additional collateral, the Partnership holds assignments of rents and leases or
personal guarantees of the borrowers. Generally, the mortgage notes are payable
in equal monthly installments based on 20 or 30 year amortization periods.
(4) Subsequent Events
In April 1996, the Partnership paid a distribution of $20,273 to the Partners,
of which $19,341 was distributed to the Limited Partners, including $1,624 of
principal amortization and $17,717 of net interest income; and $932 was
distributed to the General Partner.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
On January 9, 1989, the Partnership commenced an Offering of 40,000 (subject to
an increase to 50,000) Limited Partnership Units pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Offering
terminated on January 9, 1991 with total sales of 5,674.50 Units being sold to
the public at $500 per Unit resulting in $2,837,249 gross offering proceeds
which were received by the Partnership, not including the General Partner's
contribution for one Unit of $500. The Partnership funded seven loans between
October 1990 and June 1992 utilizing $2,302,064 of capital proceeds collected.
As of March 31, 1996, cumulative distributions to the Limited Partners totaled
$2,198,688, including $1,098,293 of repayment proceeds and principal
amortization, $51,147 from working capital reserves, $742,374 from operations
and $306,874 in Supplemental Capital Contributions from the General Partner.
As of March 31, 1996, the Partnership had cash and cash equivalents of $65,098.
The Partnership intends to use such remaining funds to pay distributions and
for working capital requirements.
The mortgage loans receivable of the Partnership are generating sufficient cash
flow to cover the operating expenses of the Partnership. To the extent that
cash flow was insufficient to meet the minimum 8% annualized return to
investors through January 9, 1994, as well as any other financial needs, the
Partnership received Supplemental Capital Contributions from the General
Partner. The sources of future liquidity and distributions to the Limited and
General Partners are expected to be from the collection of interest and
repayment of principal of the Partnership's mortgage loan investments. To the
extent that these sources are insufficient to meet the Partnership's needs, the
Partnership may rely on advances from Affiliates of the General Partner, other
short-term financing, or may liquidate certain mortgage loans or other assets.
At March 31, 1996, the Partnership had three mortgage loans receivable totaling
$1,213,664. The maturity dates range from October 2000 to April 2002. When and
as the Partnership receives Repayment Proceeds as a result of the sale or
repayment of a loan, the Repayment Proceeds which are available for
distribution will be distributed to the Limited Partners. When the loans are
repaid, cash flows from operating activities will decrease as a result of the
decrease in interest income earned by the Partnership.
Results of Operations
The maturity dates of the three remaining mortgage loans receivable range from
October 2000 to April 2002. As the loans are repaid by the borrowers and
Repayment Proceeds are distributed to the Limited Partners, interest income
will decrease accordingly.
-8-
<PAGE>
The decrease in interest on mortgage loans receivable for the three months
ended March 31, 1996, as compared to the three months ended March 31, 1995, is
due to the payoff of the loan collateralized by the property located at 9617-18
and 9806-12 Mayline in July 1995 and the partial paydowns of the loan
collateralized by the property located at 7432 Washington in the second and
third quarters of 1995.
Professional services to Affiliates decreased for the three months ended March
31, 1996, as compared to the three months ended March 31, 1995, due to a
decrease in accounting fees.
PART II
Items 1 through 6(b) are omitted because of the absence of conditions under
which they are required.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INLAND MORTGAGE INVESTORS FUND III, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: May 13, 1996
/S/ MARK ZALATORIS
By: Mark Zalatoris
Vice President
Date: May 13, 1996
/S/ CYNTHIA M. HASSETT
By: Cynthia M. Hassett
Principal Financial Officer and
Principal Accounting Officer
Date: May 13, 1996
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 65,098
<SECURITIES> 0
<RECEIVABLES> 1,224,177
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,611
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,289,275
<CURRENT-LIABILITIES> 30,304
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,258,971
<TOTAL-LIABILITY-AND-EQUITY> 1,289,275
<SALES> 0
<TOTAL-REVENUES> 31,403
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,681
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,681
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,681
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
</TABLE>
