<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For The Fiscal Year Ended December 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file #0-18456
Inland Mortgage Investors Fund III, L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3604866
(State of organization) (I.R.S. Employer Identification Number)
2901 Butterfield Road, Oak Brook, Illinois 60521
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 708-218-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
(Title of class)
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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. Not applicable.
The Prospectus of the Registrant dated January 9, 1989, as supplemented and
filed pursuant to Rule 424(b) and 424(c) under the Securities Act of 1933 is
incorporated by reference in Parts I, II and III of this Annual Report on Form
10-K.
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
TABLE OF CONTENTS
PART I
------
Page
Item 1. Business........................................................ 3
Item 2. Properties...................................................... 3
Item 3. Legal Proceedings............................................... 3
Item 4. Submission of Matters to a Vote of Security Holders............. 3
PART II
-------
Item 5. Market for the Partnership's Limited Partnership
Units and Related Security Holder Matters....................... 4
Item 6. Selected Financial Data......................................... 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 6
Item 8. Financial Statements and Supplementary Data..................... 8
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures............................ 20
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.............. 20
Item 11. Executive Compensation.......................................... 25
Item 12. Security Ownership of Certain Beneficial Owners and
Management...................................................... 26
Item 13. Certain Relationships and Related Transactions.................. 26
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K..................................................... 27
SIGNATURES............................................................... 28
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<PAGE>
PART I
Item 1. Business
The Registrant, Inland Mortgage Investors Fund III, L.P. (the "Partnership"),
was formed in September 1988 pursuant to the Delaware Revised Uniform Limited
Partnership Act. 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 on January 9, 1991, with total sales of 5,675.50
Units resulting in gross offering proceeds of $2,837,749, which includes the
General Partner's $500 contribution. All of the holders of these Units were
admitted to the Partnership. As of December 31, 1995, the Partnership funded
seven loans utilizing $2,302,064 of capital proceeds collected. The Limited
Partners of the Partnership share in the benefits of ownership in proportion to
the number of Units held. Inland Real Estate Investment Corporation is the
General Partner.
The Partnership is engaged solely in the business of making and acquiring loans
collateralized by mortgages on improved, income producing properties. As of
December 31, 1995, the Partnership made and acquired mortgage loans
collateralized by properties located near Chicago, Illinois. The loans are being
serviced by Inland Mortgage Servicing Corporation, a subsidiary of the General
Partner. The Partnership does not segregate revenues or assets by geographic
region, and such a presentation would not be material to an understanding of the
Partnership's business taken as a whole.
The Partnership had no employees during 1995.
The terms of transactions between the Partnership and Affiliates of the General
Partner of the Partnership are set forth in Item 11 below and Note (2) of the
Notes to Financial Statements (Item 8 of this Annual Report) to which reference
is hereby made.
Item 2. Properties
The Registrant owns no real properties.
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during 1995.
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<PAGE>
PART II
Item 5. Market for the Partnership's Limited Partnership Units and Related
Security Holder Matters
As of December 31, 1995, there were 246 holders of Units of the Partnership.
There is no public market for Units nor is it anticipated that any public market
for Units will develop. Reference is made to Item 6 below for a discussion of
cash distributions made to the Limited Partners.
The Partnership's Liquidity Plan is available to Limited Partners. See
"Distribution Reinvestment Plan" and "Liquidity Plan," pages 42-43 and page 18,
respectively, of the Prospectus of the Partnership dated January 9, 1989, which
is incorporated herein by reference.
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<PAGE>
Item 6. Selected Financial Data
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
For the years ended December 31, 1995, 1994, 1993, and 1992 and 1991
(not covered by Report of Independent Accountants)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total assets......... $1,294,415 1,875,618 1,894,010 2,460,285 2,410,129
========== ========== ========== ========== ==========
Total income......... $ 155,161 180,342 216,738 199,840 174,009
========== ========== ========== ========== ==========
Net income........... $ 104,502 128,545 171,779 152,192 125,705
========== ========== ========== ========== ==========
Net income
allocated to the one
General Partner Unit. $ 5,299 6,259 1,718 1,522 1,257
========== ========== ========== ========== ==========
Net income
allocated per Limited
Partner Unit (b)..... $ 17.48 21.55 29.97 26.55 21.96
========== ========== ========== ========== ==========
Distributions
declared to Limited
Partners (c)......... $ 647,086 152,116 765,348 232,679 230,901
========== ========== ========== ========== ==========
Distributions per
Unit to Limited
Partners (b)....... $ 114.03 26.81 134.87 41.00 40.75
========== ========== ========== ========== ==========
(a) The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Annual
Report.
(b) The net income per Unit and distribution per Unit are based upon the
weighted average number of Units outstanding (5,674.50 during 1995, 1994,
1993 and 1992 and 5,666.68 during 1991).
(c) This amount represents the total distributions to the Limited Partners, a
portion of which may have been funded by the General Partner.
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<PAGE>
Item 7. 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 a total of 5,675.50 Units being sold to the public at
$500 per Unit resulting in gross offering proceeds of $2,837,749, which includes
the General Partner's $500 contribution. As of December 31, 1994, the
Partnership has funded seven loans utilizing $2,302,064 of capital proceeds
collected. As of December 31, 1995, cumulative distributions to the Limited
Partners totaled $2,179,347, of which $1,147,815 represents principal
amortization and repayments and $306,874 represents Supplemental Capital
Contributions from the General Partner.
As of December 31, 1995, the Partnership had cash and cash equivalents of
$68,800. The Partnership intends to use such remaining funds to pay
distributions and for working capital requirements.
The mortgage receivables of the Partnership are currently generating sufficient
cash flow to cover the operating expenses of the Partnership. To the extent that
cash flow was insufficient to meet the required 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.
Results of Operations
The decrease in interest income on mortgage loans for the year ended December
31, 1995, as compared to the year ended December 31, 1994, 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.
The decrease in interest on mortgage loans receivable for the year ended
December 31, 1994, as compared to the year ended December 31, 1993, is due to
the payoff of the Edgebrook loans in June 1993.
Other income for the year ended December 31, 1993 is due to prepayment penalties
received from the prepayment of the Edgebrook loans.
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<PAGE>
Professional services to non-affiliates increased for the year ended December
31, 1994, as compared to the year ended December 31, 1993, due to accounting
fees relating to audits of the loans collateralized by the Mayline Avenue and
Washington properties, which were required pursuant to disclosure requirements
of the Securities and Exchange commission.
Inflation
To provide a hedge against the effects of inflation, the Partnership invested a
portion of its offering proceeds in first mortgage loans with adjustable
interest rates, as described in Note (4) of the Notes to Financial Statements
(Item 8 of this Annual Report). To date, the operations of the Partnership have
not been significantly affected by inflation.
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<PAGE>
Item 8. Financial Statements and Supplementary Data
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Index
Page
----
Report of Independent Accountants........................................ 9
Financial Statements:
Balance Sheets, December 31, 1995 and 1994............................. 10
Statements of Operations, for the years ended
December 31, 1995, 1994 and 1993..................................... 11
Statements of Partners' Capital, for the years ended
December 31, 1995, 1994 and 1993.................................... 12
Statements of Cash Flows, for the years ended
December 31, 1995, 1994 and 1993..................................... 13
Notes to Financial Statements.......................................... 14
Schedules not filed:
All schedules have been omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.
5540 W. 103rd St., Oak Lawn, Illinois:
Report of Independent Certified Public Accountants*
Statement of Operating Income and Expenses for the year ended
December 31, 1995*
Notes to Statement of Operating Income and Expenses for the year ended
December 31, 1995*
5009 & 5013 Florence Avenue, Downers Grove, Illinois:
Report of Independent Certified Public Accountants*
Statement of Operating Income and Expenses for the year ended
December 31, 1995*
Notes to Statement of Operating Income and Expenses for the year ended
December 31, 1995*
7432 Washington, Forest Park, Illinois:
Report of Independent Certified Public Accountants*
Statement of Operating Income and Expenses for the year ended
December 31, 1995*
Notes to Statement of Operating Income and Expenses for the year ended
December 31, 1995*
* The Partnership will subsequently file these reports on or before May 15,
1996.
-8-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Partners of Inland Mortgage
Investors Fund III, L.P.
We have audited the financial statements of Inland Mortgage Investors Fund III,
L.P. listed in the index on page 8 of this Form 10-K. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements 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 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 referred to above present fairly, in
all material respects, the financial position of Inland Mortgage Investors Fund
III, L.P. as of December 31, 1995 and 1994 and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 25, 1996
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Balance Sheets
December 31, 1995 and 1994
Assets
------
1995 1994
---- ----
Cash and cash equivalents (Note 1)................ $ 68,800 99,103
Accrued interest receivable....................... 10,366 14,817
Mortgage loans receivable (Note 4)................ 1,215,249 1,761,698
----------- -----------
Total assets...................................... $ 1,294,415 1,875,618
============ ============
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable................................ $ 1,106 665
Distributions payable........................... 20,588 56,357
Due to Affiliates (Note 2)...................... 2,158 150
----------- -----------
Total liabilities............................. 23,852 57,172
----------- -----------
Partners' capital (Notes 1, 2 and 3):
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......................... 16,623 11,324
Cumulative distributions...................... (11,558) (6,259)
----------- -----------
5,565 5,565
----------- -----------
Limited Partners:
Units of $500. Authorized 40,000 Units,
5,674.50 Units outstanding at December 31,
1995 and 1994 (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......................... 722,864 623,661
Cumulative distributions...................... (2,179,347) (1,532,261)
----------- -----------
1,264,998 1,812,881
----------- -----------
Total Partners' capital....................... 1,270,563 1,818,446
----------- -----------
Total liabilities and Partners' capital........... $ 1,294,415 1,875,618
============ ============
See accompanying notes to financial statements.
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Income:
Interest on mortgage loans
receivable (Note 4)............. $152,051 179,416 203,421
Interest on investments........... 3,110 926 2,870
Other income...................... - - 10,447
-------- -------- --------
155,161 180,342 216,738
-------- -------- --------
Expenses:
Professional services to
Affiliates...................... 10,816 13,281 10,636
Professional services to
non-affiliates.................. 19,514 20,120 15,457
General and administrative
to Affiliates................... 15,622 14,530 13,920
General and administrative
to non-affiliates............... 4,707 3,866 3,916
Amortization of deferred
organization costs.............. - - 1,030
-------- -------- --------
50,659 51,797 44,959
-------- -------- --------
Net income.......................... $104,502 128,545 171,779
======== ======== ========
Net income allocated to (Note 3):
General Partner................... $ 5,299 6,259 1,718
Limited Partners.................. 99,203 122,286 170,061
-------- -------- --------
Net income.......................... $104,502 128,545 171,779
======== ======== ========
Net income allocated to the one
General Partner Unit.............. $ 5,299 6,259 1,718
======== ======== ========
Net income allocated to Limited
Partners per weighted average
Limited Partnership Units of
5,674.50.......................... $ 17.48 21.55 29.97
======== ======== ========
See accompanying notes to financial statements.
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INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 1995, 1994 and 1993
General Limited
Partner Partners Total
------- ---------- ----------
Balance at January 1, 1993............... $ 3,847 2,396,418 2,400,265
Supplemental Capital Contributions
made by the General Partner on
behalf of the Limited Partners......... - 39,222 39,222
Net Income............................... 1,718 170,061 171,779
Distributions to Partners
($134.87 per weighted average Limited
Partnership Units of 5,674.50)......... - (765,348) (765,348)
------- ---------- ----------
Balance at December 31, 1993............. 5,565 1,840,353 1,845,918
Supplemental Capital Contributions
made by the General Partner on
behalf of the Limited Partners......... - 2,358 2,358
Net Income............................... 6,259 122,286 128,545
Distributions to Partners
($26.81 per weighted average Limited
Partnership Units of 5,674.50)......... (6,259) (152,116) (158,375)
------- ---------- ----------
Balance at December 31, 1994............. 5,565 1,812,881 1,818,446
Net Income............................... 5,299 99,203 104,502
Distributions to Partners
($114.03 per weighted average Limited
Partnership Units of 5,674.50)......... (5,299) (647,086) (652,385)
------- ---------- ----------
Balance at December 31, 1995............. $ 5,565 1,264,998 1,270,563
======= ========== ==========
See accompanying notes to financial statements.
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income........................ $ 104,502 128,545 171,779
Adjustments to reconcile net income
to net cash provided by
operating activities:
Amortization of deferred
organization costs............ - - 1,030
Changes in assets and liabilities:
Accrued interest receivable... 4,451 208 4,530
Accounts payable.............. 441 (29) 694
Due to Affiliates............. 2,008 (300) (802)
--------- --------- ---------
Net cash provided by operating
activities........................ 111,402 128,424 177,231
--------- --------- ---------
Cash flows from investing activities:
Principal payments collected...... 546,449 28,728 500,816
--------- --------- ---------
Net cash provided by investing
activities........................ 546,449 28,728 500,816
--------- --------- ---------
Cash flows from financing activities:
Distributions paid................ (688,154) (148,966) (777,168)
Supplemental Capital Contributions - 13,575 32,425
--------- --------- ---------
Net cash used in financing
activities........................ (688,154) (135,391) (744,743)
--------- --------- ---------
Net increase (decrease) in cash
and cash equivalents.............. (30,303) 21,761 (66,696)
Cash and cash equivalents at
beginning of year................. 99,103 77,342 144,038
--------- --------- ---------
Cash and cash equivalents at end
of year........................... $ 68,800 99,103 77,342
========= ========= =========
Supplemental schedule of non-cash investing and financing activities:
Supplemental Capital Contribution
receivable from General Partner... $ - - 11,217
========= ========= =========
Accrued distributions payable....... $ 20,588 56,357 46,948
========= ========= =========
See accompanying notes to financial statements
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 1995, 1994 and 1993
(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 generally located in or near Chicago and other metropolitan
areas. 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 on January 9, 1991, with total sales of 5,675.50
Units resulting in gross offering proceeds of $2,837,749, which includes the
General Partner's $500 contribution. All of the holders of these Units were
admitted to the Partnership. The Limited Partners of the Partnership share in
the benefits of ownership in proportion to the number of Units held. 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.
Deferred organization costs were amortized over a 60-month period. 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.
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.
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
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 December 31, 1995
approximates their carrying value.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
The Partnership records are maintained on the accrual basis of accounting in
accordance with generally accepted accounting principles ("GAAP"). The Federal
income tax return has been prepared from such records after making appropriate
adjustments to reflect the Partnership's accounts as adjusted for Federal income
tax reporting purposes. Such adjustments are not recorded on the records of the
Partnership. The net effect of these items is summarized as follows:
1995 1994
----------------------- -----------------------
GAAP Tax GAAP Tax
Basis Basis Basis Basis
----------- ---------- --------- ----------
Total assets................ $ 1,294,415 1,294,415 1,875,618 1,875,618
Partners' capital:
General Partner........... 5,565 3,984 5,565 3,984
Limited Partners.......... 1,264,998 1,266,579 1,812,881 1,814,462
Net income (loss):
General Partner........... 5,299 5,299 6,259 2,321
Limited Partners.......... 99,203 99,203 122,286 126,224
Net income per weighted
average number of Limited
Partnership Units......... 17.48 17.48 21.55 22.24
The net income per Limited Partnership Unit is based upon the weighted average
number of Units outstanding of 5,674.50.
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(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
the professional services to Affiliates and general and administrative expenses
to Affiliates, of which $2,158 and $150 remained unpaid at December 31, 1995 and
1994, 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 distributions 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, a
subsidiary of the General Partner, to service the Partnership's mortgage loans
receivable. The services include processing mortgage loan 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 balance of the Partnership. Such fees of $3,830 in
1995, $4,515 in 1994 and $5,102 in 1993 have been incurred and paid to the
subsidiary and are included in the Partnership's general and administrative
expenses to Affiliates.
(3) Partnership Agreement
The Partnership Agreement defines the allocation of distributable cash flows and
profits and losses. Limited Partners are to receive 95% of Operating Cash Flow
then being distributed until the Limited Partners have received a Cumulative
Preferred Return of 8% per annum through January 9, 1994 and a 10% Preferential
Return for the period commencing January 10, 1994. Thereafter, Operating Cash
Flow is to be distributed to the General Partner to the extent of any
Supplemental Capital Contributions and then 90% to the Limited Partners and 10%
to the General Partner.
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
Distributions of Repayment Proceeds shall first be distributed to the Limited
Partners in proportion to their Participating Percentages as of the record dates
for such distributions until the Limited Partners shall have received
distributions from Repayment Proceeds equal to their Invested Capital plus the
amount of any deficiency in the Cumulative Preferred Return of 8% per annum
through January 9, 1994 plus any deficiency in the 10% Preferential Return for
the period commencing January 10, 1994.
Thereafter, any Repayment Proceeds available shall be distributed to the General
Partner in the amount of any Supplemental Capital Contributions made, and any
remaining balance shall then be distributed 90% to the Limited Partners and 10%
to the General Partner.
The General Partner is to be allocated net operating profits in an amount equal
to the greater of 1% of net operating profits or the amount of the General
Partner's distributive share of Operating Cash Flow, with the balance of such
net operating profits allocated to the Limited Partners. The General Partner is
to be allocated net operating profits from repayments in an amount equal to the
General Partner's distributive share of Repayment Proceeds, with the balance of
such net operating profits allocated to the Limited Partners. Net operating
losses are to be allocated 1% to the General Partner and 99% to the Limited
Partners.
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Mortgage Loans Receivable
Mortgage loans receivable are collateralized by first mortgages on improved,
income producing properties located in Chicago, Illinois or its surrounding
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.
Mortgage loans receivable consist of the following:
<TABLE>
<CAPTION>
Monthly Balance at
Interest Balloon P & I December 31,
Rate at Maturity at Payments -----------------------
Property Location 12/31/95 Date Maturity Prepayment (net) 1995 1994
- ------------------------- -------- -------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5540 W. 103rd St.
Oak Lawn, IL 10.875% October $356,868 No prepayment $3,649 $375,273 378,081
2000 before 10/97
5009 & 5013 Florence Ave.
Downers Grove, IL 9.750% April 375,502 60 days notice 3,577 403,833 406,974
2002 & 3% penalty
9716-18 & 9806-12 Mayline Ave.
Richmond, IL (A) - - - - - - 500,000
7432 Washington
Forest Park, IL (A) 10.000% July 436,143 At any time 3,635 436,143 476,643
2001 without penalty ---------- ----------
$1,215,249 1,761,698
========== ==========
</TABLE>
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<PAGE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(A) In June 1992, the Partnership purchased two $500,000 interests in first
mortgage loans funded by Inland Mortgage Investors Fund, L.P.-II, which is
another publicly registered partnership sponsored by the General Partner.
The $700,000 first mortgage loans were funded in June 1992 to refinance
existing mortgages owed to an Affiliate of the General Partner.
The loans have a fixed interest rate and require monthly payments of
interest only. The Partnership will receive its percentage share of all such
payments.
In November 1994, the borrower on the loan collateralized by the property
located at 7432 Washington made a partial paydown on the mortgage. The
Partnership received $23,357, its proportionate share of the total paydown.
In 1995, the borrower on the loan collateralized by the property located at
7432 Washington made additional partial paydowns on the mortgage. The
Partnership received $40,500, its proportionate share of the total paydowns.
In 1995, the loan collateralized by the property located at 9716-18 and
9806-12 Mayline was prepaid by the borrower. The Partnership received
$501,760, its proportionate share of the total prepayment.
(6) Subsequent Events
During January 1996, the Partnership paid a distribution of $20,588 to the
Partners, of which $954 was distributed to the General Partner and $19,634 was
distributed to the Limited Partners, including $1,506 of repayment proceeds and
$18,128 of net interest income.
-19-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements on accounting or financial disclosure during 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership, Inland Real Estate Investment
Corporation, was organized in 1984 for the purpose of acting as general partner
of limited partnerships formed to acquire, own and operate real property, and
make and acquire loans collateralized by mortgages on improved, income producing
multi-family residential properties. The General Partner is a wholly-owned
subsidiary of The Inland Group, Inc. In 1990, Inland Real Estate Investment
Corporation became the replacement General Partner for an additional 301
privately-offered real estate limited partnerships syndicated by Affiliates. The
General Partner has responsibility for all aspects of the Partnership's
operations. The relationship of the General Partner to its Affiliates is
described under the caption "Conflicts of Interest" at pages 10 and 11 of the
Prospectus, incorporated herein by reference.
Officers and Directors
The officers, directors and key employees of The Inland Group, Inc. and its
Affiliates ("Inland") that are likely to provide services to the Partnership are
as follows:
Functional Title
----------------
Daniel L. Goodwin.......... Chairman and Chief Executive Officer
Robert H. Baum............. Executive Vice President-General Counsel
G. Joseph Cosenza.......... Senior Vice President-Acquisitions
Robert D. Parks............ Senior Vice President-Investments
Catherine L. Lynch......... Treasurer
Roberta S. Matlin.......... Assistant Vice President-Investments
Mark Zalatoris............. Assistant Vice President-Due Diligence
Patricia A. Challenger..... Vice President-Asset Management
Frances C. Panico.......... Vice President-Mortgage Corporation
Raymond E. Petersen........ Vice President-Mortgage Corporation
Paul J. Wheeler............ Vice President-Personal Financial Services Group
Cynthia M. Hassett......... Assistant Vice President-Partnership Accounting
Venton J. Carlston......... Assistant Controller
-20-
<PAGE>
DANIEL L. GOODWIN (age 52) is Chairman of the Board of Directors of The
Inland Group, Inc., a billion-dollar real estate and financial organization
located in Oak Brook, Illinois. Among Inland's subsidiaries is the largest
property management firm in Illinois and one of the largest commercial real
estate and mortgage banking firms in the Midwest.
Mr. Goodwin has served as Director of the Avenue Bank of Oak Park and as a
Director of the Continental Bank of Oakbrook Terrace. He was also Chairman of
the Bank Holding Company of American National Bank of DuPage. Currently he is
the President of Inland Mortgage Investment Corporation.
Mr. Goodwin has been in the housing industry for more than 25 years, and has
demonstrated a lifelong interest in housing-related issues. He is a licensed
real estate broker and a member of the National Association of Realtors. He has
developed thousands of housing units in the Midwest, New England, Florida, and
the Southwest. He is also the author of a nationally recognized reference book
for the management of residential properties.
Mr. Goodwin serves on the Board of the Illinois State Affordable Housing Trust
Fund for the past 6 years. He is an advisor for the Office of Housing
Coordination Services of the State of Illinois, and a member of the Seniors
Housing Committee of the National Multi-Housing Council. Recently, Governor
Edgar appointed him Chairman of the Housing Production Committee for the
Illinois State Affordable Housing Conference. He also served as a member of the
Cook County Commissioner's Economic Housing Development Committee, and he was
the Chairman of the DuPage County Affordable Housing Task Force. The 1992
Catholic Charities Award was presented to Mr. Goodwin for his work in addressing
affordable housing needs. The City of Hope designated him as the 1980's Man of
the Year for the Illinois construction industry. In 1989, the Chicago
Metropolitan Coalition on Aging presented Mr. Goodwin with an award in
recognition of his efforts in making housing more affordable to Chicago's Senior
Citizens. On May 4, 1995, PADS, Inc. (Public Action to Deliver Shelter)
presented Mr. Goodwin with an award, recognizing The Inland Group as the leading
corporate provider of transitional housing for the homeless people of DuPage
County.
Mr. Goodwin is a product of Chicago-area schools, and obtained his Bachelor's
and Master's Degrees from Illinois Universities. Following graduation, he taught
for five years in Chicago Public Schools. His commitment to education has
continued through his work with the Better Boys Foundation's Pilot Elementary
School in Chicago, and the development of the Inland Vocational Training Center
for the Handicapped located at Little City in Palatine, Illinois. He personally
established an endowment which funds a perpetual scholarship program for inner-
city disadvantaged youth. In 1990 he received the Northeastern Illinois
University President's Meritorious Service Award. Mr. Goodwin holds a Master's
Degree in Education from Northern Illinois University, and in 1986, he was
awarded an Honorary Doctorate from Northeastern Illinois University College of
Education. He served as a member of the Board of Governors of Illinois State
Colleges and Universities, and he is currently a trustee of Illinois Benedictine
College. He was elected Chairman of Northeastern Illinois University Board of
Trustees in January 1996.
-21-
<PAGE>
Mr. Goodwin served as a member of Governor Jim Edgar's Transition Team. In 1988
he received the Outstanding Business Leader Award from the Oak Brook Jaycees. He
also serves as the Chairman of the Illinois Speaker of the House of
Representatives Club, and has been the General Chairman of the National Football
League Players Association Mackey Awards for the benefit of inner-city youth. In
March 1994, he won the Excellence in Business Award from the DuPage Area
Association of Business and Industry. Additionally, he was honored by Little
Friends on May 17, 1995 for rescuing their Parent-Handicapped Infant Program
when they lost their lease last year, and on June 9, he received the 1995 March
of Dimes Birth Defects Foundation Life Achievement Award.
ROBERT H. BAUM (age 52) has been with Inland since 1968 and is one of the
four original principals. Mr. Baum is Vice Chairman and Executive Vice
President-General Counsel of The Inland Group, Inc. In his capacity as General
Counsel, Mr. Baum is responsible for the supervision of the legal activities of
The Inland Group, Inc. and its affiliates. This responsibility includes the
supervision of The Inland Law Department and serving as liaison with all outside
counsel. Mr. Baum has served as a member of the North American Securities
Administrators Association Real Estate Advisory Committee and as a member of the
Securities Advisory Committee to the Secretary of State of Illinois. He is a
member of the American Corporation Counsel Association, as well as a member of
several bar associations. Mr. Baum has been admitted to practice before the
Supreme Courts of the United States and the State of Illinois, as well as the
bars of several federal courts of appeals and federal district courts. He
received his B.S. Degree from the University of Wisconsin and his J.D. Degree
from Northwestern University School of Law. Mr. Baum has served as a director of
American National Bank of DuPage and is a member of the Governing Council of
Wellness House, a charitable organization that provides emotional support for
cancer patients and their families.
G. JOSEPH COSENZA (age 52) joined Inland in 1968. Mr. Cosenza, is a
director, Vice Chairman and Chief Executive Officer of the Inland Group Inc.
Mr. Cosenza oversees, coordinates and directs Inland's many enterprises and, in
addition, immediately supervises a staff of five persons who engage in property
acquisition. Mr. Cosenza has been a consultant to other real estate entities and
lending institutions on property appraisal methods. Mr. Cosenza received his
B.A. degree from Northeastern Illinois University and his M.S. degree from
Northern Illinois University. From 1967 to 1968, Mr. Cosenza taught at the
LaGrange School District in Hodgkins, and from 1968 to 1972, he served as
Assistant Principal and teacher in the Wheeling School District. He has been a
licensed real estate broker since 1968 and an active member of various national
and local real estate associations, including the National Association of
Realtors and the Urban Land Institute. Mr. Cosenza has also been Chairman of the
Board of American National Bank of DuPage and part owner of American National
Bank of DuPage and Burbank State Bank, and has served on the Board of Directors
of Continental Bank of Oakbrook Terrace.
-22-
<PAGE>
ROBERT D. PARKS (age 52) joined Inland in 1968. He is Director of The Inland
Group, Inc. and is President, Chairman and Chief Executive Officer of Inland
Real Estate Investment Corporation and is Director of Inland Securities
Corporation. Mr. Parks is responsible for the ongoing administration of existing
partnerships, corporate budgeting and administration for Inland Real Estate
Investment Corporation. He oversees and coordinates the marketing of all limited
partnership interests nationwide and has overall responsibility for the
portfolio management of all partnership investments and investor relations. Mr.
Parks received his B.A. degree from Northeastern Illinois University and M.A.
degree from the University of Chicago. He is a registered Direct Participation
Program Principal with the National Association of Securities Dealers, Inc., and
a licensed real estate broker. He is a member of the Real Estate Investment
Association and a member of the board of NAREIT.
CATHERINE L. LYNCH (age 37) joined Inland in 1989 and is the Treasurer of
Inland Real Estate Investment Corporation. Ms. Lynch is responsible for managing
the Corporate Accounting Department. Prior to joining Inland, Ms. Lynch worked
in the field of public accounting for KPMG Peat Marwick since 1980. She received
her B.S. degree in Accounting from Illinois State University. Ms. Lynch is a
Certified Public Accountant and a member of the American Institute of Certified
Public Accountants. She is registered with the National Association of
Securities Dealers as a Financial Operations Principal.
ROBERTA S. MATLIN (age 51) joined Inland in 1984 as Director of Investor
Administration and currently serves as Senior Vice President-Investments. Prior
to that, Ms. Matlin spent 11 years with the Chicago Region of the Social
Security Administration of the United States Department of Health and Human
Services. As Senior Vice President-Investments, she directs the day-to-day
internal operations of the General Partner. Ms. Matlin received her B.A. degree
from the University of Illinois. She is registered with the National Association
of Securities Dealers, Inc. as a General Securities Principal.
MARK ZALATORIS (age 38) joined Inland in 1985 and currently serves as Vice
President of Inland Real Estate Investment Corporation. His responsibilities
include the coordination of due diligence activities by selling broker/dealers
and is also involved with limited partnership asset management including the
mortgage funds. Mr. Zalatoris is a graduate of the University of Illinois where
he received a Bachelors degree in Finance and a Masters degree in Accounting and
Taxation. He is a Certified Public Accountant and holds a General Securities
License with Inland Securities Corporation.
PATRICIA A. CHALLENGER (age 43) joined Inland in 1985. Ms. Challenger serves
as Senior Vice President of Inland Real Estate Investment Corporation in the
area of Asset Management. As head of the Asset Management Department, she
develops operating and disposition strategies for all investment-owned
properties. Ms. Challenger received her bachelor's degree from George Washington
University and her master's from Virginia Tech University. Ms. Challenger was
selected and served from 1980-1984 as Presidential Management Intern, where she
was part of a special government-wide task force to eliminate waste, fraud and
abuse in government contracting and also served as Senior Contract Specialist
responsible for capital improvements in 109 government properties. Ms.
Challenger is a licensed real estate salesperson, NASD registered securities
sales representative and is a member of the Urban Land Institute.
-23-
<PAGE>
FRANCES C. PANICO (age 46) joined Inland in 1972 and is currently President
of Inland Mortgage Servicing Corporation. Ms. Panico oversees the operation of
loan services, which has a loan portfolio in excess of $612 million. She
previously supervised the origination, processing and underwriting of single-
family mortgages, and she packaged and sold mortgages to secondary markets. Ms.
Panico's other primary duties at Inland have included coordinating collection
procedures and overseeing the default analysis and resolution process. Ms.
Panico received her B.A. in Business and Communication from Northern Illinois
University in 1972.
RAYMOND E. PETERSEN (age 56) joined Inland in 1981. Mr. Petersen is
responsible for the selection and approval of all corporate and limited
partnership financing, as well as for the daily supervision of the commercial
lending activity of Inland Mortgage Corporation, where he is President. For the
six years prior to joining Inland, Mr. Petersen was affiliated with the mortgage
banking firm of Downs, Mohl Mortgage Corporation, serving as President and Chief
Executive Officer. Previously he was also associated with the mortgage banking
houses of B.B. Cohen & Company and Percy Wilson Mortgage and Finance
Corporation. Mr. Petersen's professional credentials include a B.A. degree from
DePaul University, senior membership in the National Association of Review
Appraisers, state license as a real estate broker and licensed securities
representative. Mr. Petersen was also a Director and Chairman of the Asset and
Liability Committee of American National Bank of Downers Grove.
PAUL J. WHEELER (age 43) joined Inland in 1982 and is currently the
President of Inland Property Sales, Inc. and President of Inland Securities
Corporation, Inland's broker/dealer. Mr. Wheeler received his B.A. degree in
Economics from DePauw University and an M.B.A. in Finance/Accounting from
Northwestern University. Mr. Wheeler is a Certified Public Accountant, a
licensed real estate broker and is registered with the National Association of
Securities Dealers, Inc. as a General Securities Principal. For three years
prior to joining Inland, Mr. Wheeler was Vice President/Finance at the real
estate brokerage firm of Quinlan & Tyson, Inc.
CYNTHIA M. HASSETT (age 37) joined Inland in 1983 and is a Vice President of
Inland Real Estate Investment Corporation. Ms. Hassett is responsible for the
Investment Accounting Department which includes all public partnership
accounting functions along with quarterly and annual SEC filings. Prior to
joining Inland, Ms. Hassett was on the audit staff of Altschuler, Melvoin and
Glasser since 1980. She received her B.S. degree in Accounting from Illinois
State University. Ms. Hassett is a Certified Public Accountant and a member of
the American Institute of Certified Public Accountants.
VENTON J. CARLSTON (age 38) joined Inland in 1985 and is the Assistant
Controller of Inland Real Estate Investment Corporation where he supervises the
corporate bookkeeping staff and is responsible for financial statement
preparation and budgeting for Inland Real Estate Investment Corporation and its
subsidiaries. Prior to joining Inland, Mr. Carlston was a partnership accountant
with JMB Realty. He received his B.S. degree in Accounting from Southern
Illinois University. Mr. Carlston is a Certified Public Accountant and a member
of the American Institute of Certified Public Accountants and the Illinois CPA
Society. He is registered with the National Association of Securities Dealers,
Inc. as a Financial Operations Principal.
-24-
<PAGE>
Item 11. Executive Compensation
The General Partner is entitled to receive a share of cash distributions, when
and as cash distributions are made to the Limited Partners, and a share of
profits or losses as described under the caption "Cash Distributions" at pages
34 and 35, "Allocation of Profits or Losses" on page 34 of the Prospectus and at
pages A-6 through A-8 of the Partnership Agreement, included as an exhibit to
the Prospectus, incorporated herein by reference. Reference is also made to Note
(3) of the Notes to Financial Statements (Item 8 of this Annual Report) for a
description of such distributions and allocations.
The Partnership is permitted to engage in various transactions involving
Affiliates of the General Partner of the Partnership, as described under the
captions "Compensation and Fees" on pages 7 through 9, "Conflicts of Interest"
on pages 9 through 11 of the Prospectus and at pages A-10 through A-19 of the
Partnership Agreement, included as an exhibit to the Prospectus, which is hereby
incorporated herein by reference. The relationship of the General Partner (and
its directors and officers) to its Affiliates is set forth above in Item 10.
The General Partner may be reimbursed for salaries and direct expenses of
employees of the General Partner and its Affiliates for the administration of
the Partnership. In 1995, costs relating to such services were $22,608, of which
$2,158 is unpaid at December 31, 1995.
A subsidiary of the General Partner earned mortgage servicing fees of $3,830 in
1995, in connection with servicing the Partnership's mortgage loans receivable.
-25-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No person or group is known by the Partnership to own beneficially more
than 5% of the outstanding Units of the Partnership.
(b) The officers and directors of the General Partner of the Partnership own
as a group the following Units of the Partnership as of December 31, 1995:
Amount and Nature
of Beneficial Percentage
Title of Class Ownership of Class
-------------- ----------------- ----------
Limited Partnership One Unit directly Less than 1%
Units
No officer or director of the General Partner of the Partnership possesses
a right to acquire beneficial ownership of Units of the Partnership.
All of the outstanding shares of the General Partner of the Partnership
are owned by an Affiliate of its officers and directors as set forth in
Item 10.
(c) There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
There were no significant transactions or business relationships with the
General Partner, Affiliates or their management other than those described in
Items 10 and 11 above. Reference is made to Note (2) of the Notes to Financial
Statements (Item 8 of this Annual Report).
-26-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The Financial Statements listed in the index on page 8 of this Annual
Report are filed as part of this Annual Report.
(b) Exhibits. The following documents are filed as part of this Report:
3 Amended and Restated Agreement of Limited Partnership and
Certificate of Limited Partnership, included as Exhibit A and B to the
Prospectus dated January 9, 1989, as supplemented, are incorporated
herein by reference thereto.
4 Form of Certificate of Ownership representing interests in the
registrant filed as Exhibit 4 to Registration Statement on Form S-11,
File No. 33-24994, is incorporated herein by reference thereto.
28 Prospectus dated January 9, 1989, as supplemented, included in Post-
effective Amendment No. 1 to Form S-11 Registration Statement, File No.
33-24994, is incorporated herein by reference thereto.
(c) Financial Statement Schedules:
All schedules have been omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes.
(d) Reports on Form 8-K:
None
No Annual Report or proxy material for the year 1995 has been sent to the
Partners of the Partnership. An Annual Report will be sent to the Partners
subsequent to this filing and the Partnership will furnish copies of such report
to the Commission when it is sent to the Partners.
-27-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Inland Real Estate Investment Corporation
General Partner
By: Robert D. Parks
Chairman of the Board
and Chief Executive Officer
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
By: Inland Real Estate Investment Corporation
General Partner
By: Robert D. Parks
Chairman of the Board
and Chief Executive Officer
Date: March 28, 1996
By: Mark Zalatoris
Vice President
Date: March 28, 1996
By: Cynthia M. Hassett
Principal Financial Officer
and Principal Accounting Officer
Date: March 28, 1996
By: Daniel L. Goodwin
Director
Date: March 28, 1996
By: Robert H. Baum
Director
Date: March 28, 1996
-28-
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