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, 1996
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: 630-218-8000
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.
-1-
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
-2-
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, 1996, 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 located in
or 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 1996.
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 Partnership 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 1996.
-3-
PART II
Item 5. Market for the Partnership's Limited Partnership Units and Related
Security Holder Matters
As of December 31, 1996, there were 240 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. At this time, there are no Limited
Partners participating in the DRP.
-4-
Item 6. Selected Financial Data
<TABLE>
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
For the years ended December 31, 1996, 1995, 1994, and 1993 and 1992
(not covered by Report of Independent Accountants)
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets......... $1,288,230 1,294,415 1,875,618 1,894,010 2,460,285
========== ========== ========== ========== ==========
Total income......... $ 122,303 155,161 180,342 216,738 199,840
========== ========== ========== ========== ==========
Net income........... $ 72,325 104,502 128,545 171,779 152,192
========== ========== ========== ========== ==========
Net income
allocated to the one
General Partner Unit. $ 3,547 5,299 6,259 1,718 1,522
========== ========== ========== ========== ==========
Net income
allocated per Limited
Partner Unit (b)..... $ 12.12 17.48 21.55 29.97 26.55
========== ========== ========== ========== ==========
Distributions to Limited
Partners from:
Operations (c)..... 67,408 100,676 123,390 203,492 226,154
Repayment proceeds. 156,201 546,410 28,726 561,856 6,525
---------- ---------- ---------- ---------- ----------
$ 223,609 647,086 152,116 765,348 232,679
========== ========== ========== ========== ==========
Distributions per
Unit to Limited
Partners from (b):
Operations......... 11.88 17.74 21.74 35.86 39.85
Repayment proceeds. 27.53 96.29 5.07 99.01 1.15
---------- ---------- ---------- ---------- ----------
$ 39.41 114.03 26.81 134.87 41.00
========== ========== ========== ========== ==========
</TABLE>
(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 of 5,674.50.
(c) This amount represents distributions to the Limited Partners from
operations, a portion of which may have been funded by the General
Partner.
-5-
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this annual report on
Form 10-K constitute "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. These forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the Partnership's actual results, performance, or
achievements to be materially different from any future results, performance,
or achievements expressed or implied by these forward-looking statements.
These factors include, among other things, federal, state or local regulations;
adverse changes in general economic or local conditions; inability of borrower
to meet financial obligations; uninsured losses; and potential conflicts of
interest between the Partnership and its Affiliates, including the General
Partner.
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. The Partnership funded
seven loans between October 1990 and June 1992 utilizing $2,302,064 of capital
proceeds collected. As of December 31, 1996, cumulative distributions to the
Limited Partners totaled $2,402,956, of which $1,303,978 represents principal
amortization and repayments and $306,874 represents Supplemental Capital
Contributions from the General Partner.
As of December 31, 1996, the Partnership had cash and cash equivalents of
$219,645. 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 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.
-6-
The decrease in interest income on mortgage loans for the year ended December
31, 1996, as compared to the year ended December 31, 1995, is due to the
partial paydowns of the loan collateralized by the property located at 7432
Washington in the second, third and fourth quarters of 1996.
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.
Professional services to Affiliates decreased for the year ended December 31,
1996, as compared to the year ended December 31, 1995, due to a decrease in
accounting services required by the Partnership.
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.
-7-
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, 1996 and 1995............................. 10
Statements of Operations, for the years ended
December 31, 1996, 1995 and 1994..................................... 11
Statements of Partners' Capital, for the years ended
December 31, 1996, 1995 and 1994.................................... 12
Statements of Cash Flows, for the years ended
December 31, 1996, 1995 and 1994..................................... 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, 1996*
Notes to Statement of Operating Income and Expenses for the year ended
December 31, 1996*
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, 1996*
Notes to Statement of Operating Income and Expenses for the year ended
December 31, 1996*
* The Partnership will subsequently file these reports on or before May 15,
1997.
-8-
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, 1996 and 1995 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 17, 1997
-9-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Balance Sheets
December 31, 1996 and 1995
Assets
------
1996 1995
---- ----
Cash and cash equivalents (Note 1)................ $ 219,645 68,800
Accrued interest receivable....................... 9,499 10,366
Mortgage loans receivable (Note 4)................ 1,059,086 1,215,249
------------ ------------
Total assets...................................... $ 1,288,230 1,294,415
============ ============
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable................................ $ - 1,106
Distributions payable........................... 171,208 20,588
Due to Affiliates (Note 2)...................... 1,290 2,158
------------ ------------
Total liabilities............................. 172,498 23,852
------------ ------------
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......................... 20,170 16,623
Cumulative distributions...................... (15,105) (11,558)
------------ ------------
5,565 5,565
Limited Partners: ------------ ------------
Units of $500. Authorized 40,000 Units,
5,674.50 Units outstanding at December 31,
1996 and 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......................... 791,642 722,864
Cumulative distributions...................... (2,402,956) (2,179,347)
------------ ------------
1,110,167 1,264,998
------------ ------------
Total Partners' capital....................... 1,115,732 1,270,563
------------ ------------
Total liabilities and Partners' capital........... $ 1,288,230 1,294,415
============ ============
See accompanying notes to financial statements.
-10-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Income: ---- ---- ----
Interest on mortgage loans
receivable (Note 4)............. $ 116,400 152,051 179,416
Interest on investments........... 5,903 3,110 926
------------ ------------ ------------
122,203 155,161 180,342
Expenses: ------------ ------------ ------------
Professional services to
Affiliates...................... 6,899 10,816 13,281
Professional services to
non-affiliates.................. 21,640 19,514 20,120
General and administrative
to Affiliates................... 16,397 15,622 14,530
General and administrative
to non-affiliates............... 5,042 4,707 3,866
------------ ------------ ------------
49,978 50,659 51,797
------------ ------------ ------------
Net income.......................... $ 72,325 104,502 128,545
============ ============ ============
Net income allocated to (Note 3):
General Partner................... $ 3,547 5,299 6,259
Limited Partners.................. 68,778 99,203 122,286
------------ ------------ ------------
Net income.......................... $ 72,325 104,502 128,545
============ ============ ============
Net income allocated to the one
General Partner Unit.............. $ 3,547 5,299 6,259
============ ============ ============
Net income allocated to Limited
Partners per weighted average
Limited Partnership Units of
5,674.50.......................... $ 12.12 17.48 21.55
============ ============ ============
See accompanying notes to financial statements.
-11-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 1996, 1995 and 1994
General Limited
Partner Partners Total
----------- ----------- -----------
Balance at January 1, 1994............... $ 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
Net Income............................... 3,547 68,778 72,325
Distributions to Partners
($39.41 per weighted average Limited
Partnership Units of 5,674.50)......... (3,547) (223,609) (227,156)
----------- ----------- -----------
Balance at December 31, 1996............. $ 5,565 1,110,167 1,115,732
=========== =========== ===========
See accompanying notes to financial statements.
-12-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income........................ $ 72,325 104,502 128,545
Adjustments to reconcile net income
to net cash provided by
operating activities:
Changes in assets and liabilities:
Accrued interest receivable... 867 4,451 208
Accounts payable.............. (1,106) 441 (29)
Due to Affiliates............. (868) 2,008 (300)
Net cash provided by operating ------------ ------------ ------------
activities........................ 71,218 111,402 128,424
------------ ------------ ------------
Cash flows from investing activities:
Principal payments collected...... 156,163 546,449 28,728
Net cash provided by investing ------------ ------------ ------------
activities........................ 156,163 546,449 28,728
------------ ------------ ------------
Cash flows from financing activities:
Distributions paid................ (76,536) (688,154) (148,966)
Supplemental Capital Contributions - - 13,575
Net cash used in financing ------------ ------------ ------------
activities........................ (76,536) (688,154) (135,391)
Net increase (decrease) in cash ------------ ------------ ------------
and cash equivalents.............. 150,845 (30,303) 21,761
Cash and cash equivalents at
beginning of year................. 68,800 99,103 77,342
Cash and cash equivalents at end ------------ ------------ ------------
of year........................... $ 219,645 68,800 99,103
============ ============ ============
Supplemental schedule of non-cash investing and financing activities:
Accrued distributions payable....... $ 171,208 20,588 56,357
============ ============ ============
See accompanying notes to financial statements
-13-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 1996, 1995 and 1994
(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.
Offering costs have been offset against the Limited Partners' capital accounts.
The Partnership considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
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.
-14-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
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:
1996 1995
----------------------- ------------------------
GAAP Tax GAAP Tax
Basis Basis Basis Basis
----------- ----------- ----------- ------------
Total assets................ $ 1,288,230 1,288,230 1,294,415 1,294,415
Partners' capital:
General Partner........... 5,565 3,984 5,565 3,984
Limited Partners.......... 1,110,167 1,111,748 1,264,998 1,266,579
Net income:
General Partner........... 3,547 3,547 5,299 5,299
Limited Partners.......... 68,778 68,778 99,203 99,203
Net income per weighted
average number of Limited
Partnership Units......... 12.12 12.12 17.48 17.48
The net income per Limited Partnership Unit is based upon the weighted average
number of Units outstanding of 5,674.50.
-15-
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 $1,290 and $2,158 remained unpaid at December 31, 1996
and 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 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 $2,881 in 1996, $3,830 in 1995 and $4,515 in 1994 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.
-16-
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.
-17-
<TABLE>
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:
<CAPTION>
Monthly Balance at
Interest Balloon P & I December 31,
Rate at Maturity at Payments -----------------------
Property Location 12/31/96 Date Maturity Prepayment (net) 1996 1995
- ----------------------- --------- ---------- ----------- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
5540 W. 103rd St.
Oak Lawn, IL 10.875% October $356,453 No prepayment $ 3,649 $ 372,143 375,273
2000 before 10/97
5009 & 5013 Florence Ave.
Downers Grove, IL 9.750% April 374,996 60 days notice 3,557 400,372 403,833
2002 & 3% penalty
7432 Washington
Forest Park, IL (A) 10.000% July 286,571 At any time 2,388 286,571 436,143
2001 without penalty ----------- -----------
$1,059,086 1,215,249
=========== ===========
</TABLE>
-18-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(A) In June 1992, the Partnership purchased a $500,000 interest in a first
mortgage loan 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 loan was funded in June 1992 to refinance an
existing mortgage owed to an Affiliate of the General Partner.
The loan has a fixed interest rate and requires monthly payments of
interest only. The Partnership will receive its percentage share of all
such payments.
In 1996, the borrower on the loan collateralized by the property located at
7432 Washington made additional partial paydowns on the mortgage. The
Partnership received $149,571, its proportionate share of the total
paydowns.
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 November 1994, the borrower on the loan collateralized by the proeprty
located at 7432 Washington made a partial paydown on the mortgage. The
Partnership received $23,357, its proportionate share of the total paydown.
(6) Subsequent Events
During January 1997, the Partnership paid a distribution of $171,208 to the
Partners, of which $996 was distributed to the General Partner and $170,212 was
distributed to the Limited Partners, including $151,283 of repayment proceeds
and $18,929 of net interest income.
-19-
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements on accounting or financial disclosure during 1996.
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
Kelly Tucek................ Assistant Vice President-Partnership Accounting
Cynthia M. Hassett......... Assistant Vice President-Partnership Accounting
Venton J. Carlston......... Assistant Controller
-20-
DANIEL L. GOODWIN (age 53) 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 Chairman of the
Bank Holding Company of American National Bank of DuPage. Currently he is the
Chairman of the Board of Inland Mortgage Investment Corporation.
Mr. Goodwin has been in the housing industry for more than 28 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 real
estate reference book for the management of residential properties.
Mr. Goodwin has served 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. Also, Mr. Goodwin serves as Chairman of New Directions Housing
Corporation, a leading provider of affordable housing in northern Illinois.
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. More than 12 years ago, under Mr.
Goodwin's direction, Inland instituted a program to train disabled students in
the workplace. Most of these students are still employed at Inland today, and
Inland has become one of the largest employers of the disabled in DuPage
County. He has served as a member of the Board of Governors of Illinois State
Colleges and Universities, and he is currently a trustee of Benedictine
University. He was elected Chairman of Northeastern Illinois University Board
of Trustees in January 1996.
-21-
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 and has been the General Chairman of the National Football League
Players Association Mackey Awards for the benefit of inner-city youth. He
served as the recent Chairman of the Speakers Club of the Illinois House of
Representatives. 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. He was the recipient of the 1995
March of Dimes Life Achievement Award and was recently recognized as the 1997
Corporate Leader of the Year by the Oak Brook Area Association of Commerce and
Industry.
ROBERT H. BAUM (age 53) has been with The Inland Group, Inc. and its
affiliates 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 and has also been a guest lecturer for
the Illinois State Bar Association. Mr. Baum has been admitted to practice
before the Supreme Court of the United States, as well as the bars of several
federal courts of appeals and federal district courts and the State of
Illinois. 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. Currently, he serves as a
director of Westbank, 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 53) is a Director and Vice Chairman of The Inland
Group, Inc. Mr. Cosenza oversees, coordinates and directs Inland's many
enterprises and, in addition, immediately supervises a staff of eight 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, he
taught at the LaGrange School District in Hodgkins, Illinois and from 1968 to
1972, he served as Assistant Principal and taught in the Wheeling, Illinois
School District. Mr. Cosenza 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 has served on the Board of Directors of Continental Bank of
Oakbrook Terrace. He is presently Chairman of the Board of Westbank in
Westchester, Illinois.
-22-
ROBERT D. PARKS (age 53) is Director of The Inland Group, Inc., President,
Chairman and Chief Executive Officer of Inland Real Estate Investment
Corporation and President, Chief Executive Officer, Chief Operating Officer and
Affiliated Director of Inland Real Estate Corporation.
Mr. Parks is responsible for the ongoing administration of existing investment
programs, corporate budgeting and administration for Inland Real Estate
Investment Corporation. He oversees and coordinates the marketing of all
investments and investor relations.
Prior to joining Inland, Mr. Parks was a school teacher in Chicago's public
schools. He received his B.A. degree from Northeastern Illinois University and
his 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 he is a member of the Real Estate Investment Association and
a member of NAREIT.
CATHERINE L. LYNCH (age 38) 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 and the Illinois CPA
Society. She is registered with the National Association of Securities Dealers
as a Financial Operations Principal.
ROBERTA S. MATLIN (age 52) 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 39) 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 44) 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 broker, NASD registered
securities sales representative and is a member of the Urban Land Institute.
-23-
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 44) joined Inland in 1982 and is currently the
President of Inland Property Sales, Inc., the entity responsible for all
corporately owned real estate. 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 and
licensed real estate broker. For three years prior to joining Inland, Mr.
Wheeler was Vice President/Finance at the real estate brokerage firm of Quinlan
& Tyson, Inc.
KELLY TUCEK (age 34) joined Inland in 1989 and is an Assistant Vice
President of Inland Real Estate Investment Corporation. As of August 1996, Ms.
Tucek 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. Tucek was on the audit staff of Coopers
and Lybrand since 1984. She received her B.A. Degree in Accounting and
Computer Science from North Central College.
CYNTHIA M. HASSETT (age 37) joined Inland in 1983 and was a Vice President
of Inland Real Estate Investment Corporation. Through August 1996, Ms. Hassett
was 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.
-24-
VENTON J. CARLSTON (age 39) 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.
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 1996, costs relating to such services were $20,415, of
which $1,290 is unpaid at December 31, 1996.
A subsidiary of the General Partner earned mortgage servicing fees of $2,881 in
1996, in connection with servicing the Partnership's mortgage loans receivable.
-25-
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Liquidity Plan (page 18 of the Prospectus of the Partnerhsip dated
January 9, 1989, which is incorporated herein by reference) owns the
following Units of the Partnership as of December 31, 1996:
Amount and Nature
of Beneficial Percentage
Title of Class Ownership of Class
-------------------- ----------------------- ----------
Limited Partnership 379.97 Units, Directly 6.70%
Units
(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,
1996:
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-
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.
27 Financial Data Schedule
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 1996 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-
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 24, 1997
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 24, 1997
By: Mark Zalatoris
Vice President
Date: March 24, 1997
By: Kelly Tucek
Principal Financial Officer
and Principal Accounting Officer
Date: March 24, 1997
By: Daniel L. Goodwin
Director
Date: March 24, 1997
By: Robert H. Baum
Director
Date: March 24, 1997
-28-
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