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, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File #0-21606
InLand Capital Fund, L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3767977
(State of organization) (I.R.S. Employer Identification Number)
2901 Butterfield Road, Oak Brook, Illinois 60523
(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 December 13, 1991, 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 CAPITAL FUND, L.P.
(a limited partnership)
TABLE OF CONTENTS
Part I Page
------ ----
Item 1. Business...................................................... 3
Item 2. Properties.................................................... 5
Item 3. Legal Proceedings............................................. 5
Item 4. Submission of Matters to a Vote of Security Holders........... 5
Part II
-------
Item 5. Market for Partnership's Limited Partnership
Units and Related Security Holder Matters.................... 5
Item 6. Selected Financial Data....................................... 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 7
Item 8. Financial Statements and Supplementary Data................... 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 26
Part III
--------
Item 10. Directors and Executive Officers of the Registrant............ 26
Item 11. Executive Compensation........................................ 31
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 32
Item 13. Certain Relationships and Related Transactions................ 32
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.................................................. 33
SIGNATURES............................................................. 34
-2-
PART I
Item 1. Business
The Registrant, InLand Capital Fund, L.P. (the "Partnership"), is a limited
partnership formed on June 21, 1991 pursuant to the Delaware Revised Uniform
Limited Partnership Act, to invest in multiple parcels of land on an all-cash
basis. The Partnership intends to engage in a number of preliminary development
activities with the objective of maximizing the resale value of the land
parcels. On December 13, 1991, the Partnership commenced an Offering of 60,000
Limited Partnership Units ("Units") at $1,000 per Unit, pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933. The
Offering terminated on August 23, 1993, with total sales of 32,399.28 Units, at
$1,000 per Unit, resulting in $32,399,282 in gross offering proceeds, not
including the General Partner's capital contribution of $500. All of the
holders of these Units have been admitted to the Partnership. Inland Real
Estate Investment Corporation is the General Partner. The Limited Partners of
the Partnership will share in their portion of benefits of ownership of the
Partnership's real property investments according to the number of Units held.
As of December 31, 1997, the Partnership has repurchased a total of 47.17 Units
for $45,967 from various Limited Partners through the Unit Repurchase Program.
Under this program, Limited Partners may under certain circumstances have their
Units repurchased for an amount equal to their Invested Capital.
The Partnership is engaged in the business of real estate investment. A
presentation of information about industry segments would not be material to an
understanding of the Partnership's business taken as a whole.
The Partnership acquired fee ownership of the following real property
investments:
Gross Acres Purchase/Sales
Parcel & Location Purchased/Sold Date
- ----------------------------------- ------------------ ----------------
Parcel 1, Kendall County, Illinois 108.8960 07/22/92
Parcel 2, McHenry County, Illinois 201.0000 11/09/93
(17.7420 sold 08/02/95)
(8.6806 sold Var 1997)
Parcel 3, Will County, Illinois 34.0474 03/04/94
Parcel 4, Will County, Illinois 86.9195 03/30/94
(2.3050 sold Var 1997)
Parcel 5, LaSalle County, Illinois 190.9600 04/01/94
Parcel 6, DeKalb County, Illinois 59.0800 05/11/94
Parcel 7, Kendall County, Illinois 200.8210 07/28/94
Parcel 8, Kendall County, Illinois 133.0000 08/17/94
Parcel 9, LaSalle County, Illinois 335.9600 08/30/94
-3-
Gross Acres Purchase/Sales
Parcel & Location Purchased/Sold Date
- ----------------------------------- ------------------ ----------------
Parcel 10, Kendall County, Illinois 230.7860 09/16/94
(7.0390 sold 04/21/95)
Parcel 11, Kane County, Illinois 123.0000 09/26/94
Parcel 12, Kendall County, Illinois 110.2530 09/28/94
Parcel 13, LaSalle County, Illinois 352.7390 10/06/94
Parcel 14, Kendall County, Illinois 134.7760 10/26/94
Parcel 15, McHenry County, Illinois 169.5400 10/31/94
Parcel 16, McHenry County, Illinois 207.0754 11/30/94
Parcel 17, LaSalle County, Illinois 236.4400 12/07/94
Parcel 18, Kendall County, Illinois 386.9900 11/02/95
Reference is made to Note 4 of the Notes to Financial Statements (Item 8 of
this Annual Report) for additional descriptions of the Partnership's real
property investments.
The Partnership purchased, primarily on an all-cash basis, eighteen parcels of
undeveloped land and one building and is engaged in the rezoning and resale of
the parcels. All of the investments were made in the collar counties
surrounding the Chicago metropolitan area. The anticipated holding period of
the land is approximately two to seven years from the completion of the land
portfolio acquisitions. As of December 31, 1997, the Partnership has had
multiple sales transactions through which it has disposed of the building and
approximately thirty-six acres of the approximately 3,302 acres originally
owned.
The General Partner anticipates that land purchased by the Partnership will
produce sufficient income to pay property taxes, insurance and other
miscellaneous expenses, with surplus funds, if any, to be retained in the
working capital reserve for pre-development activities. Income is expected to
be derived from leases to farmers or from other activities compatible with the
the Partnership's business plan for land parcels. Although the General Partner
believes that leasing the Partnership's land will generate sufficient revenues
to pay these expenses, there can be no assurance that this will in fact occur.
However, the General Partner has agreed to make a Supplemental Capital
Contribution to the Partnership if and to the extent that real estate taxes and
insurance payable with respect to the Partnership's land during a given year
exceed the revenue earned by the Partnership from leasing its land during such
year. Any Supplemental Capital Contribution will be repaid only after Limited
Partners have received, over the life of the Partnership, a return of their
Original Capital plus the 15% Cumulative Return. All of the parcels purchased
by the Partnership consist of land which generates revenue from farming or
other leasing activities. It is not expected that the Partnership will generate
cash distributions to the partners from farm leases or other activities.
-4-
The Partnership had no employees during 1997.
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 3 of the
Notes to Financial Statements (Item 8 of this Annual Report) to which reference
is hereby made for a description of such terms and transactions.
The Partnership has reviewed its current computer systems and does not
anticipate any future problems relating to the year 2000.
Item 2. Properties
The Partnership owns directly the parcels of land referred to in Item 1 and in
Note 4 of the Notes to Financial Statements (Item 8 of this Annual Report) to
which reference is hereby made for a description of said parcels.
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 1997.
PART II
Item 5. Market for the Partnership's Limited Partnership Units and Related
Security Holder Matters
As of December 31, 1997, there were 2,671 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.
Although the Partnership has established a Unit Repurchase Program, funds for
repurchase of Units are limited. Reference is made to "Unit Repurchase Program"
on page 61 of the Prospectus of the Partnership dated December 13, 1991, as
amended, which is incorporated herein by reference. As of December 31, 1997,
the Partnership had approximately $153,000 available for the repurchase of
Units.
-5-
Item 6. Selected Financial Data
INLAND CAPITAL FUND, L.P.
(a limited partnership)
For the years ended December 31, 1997, 1996, 1995, 1994 and 1993
(not covered by the Report of Independent Accountants)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Total assets....... $28,953,356 29,381,700 28,884,088 29,636,310 28,516,330
=========== =========== =========== =========== ===========
Total income....... $ 1,717,766 410,743 1,102,930 744,291 563,836
=========== =========== =========== =========== ===========
Net income......... $ 1,066,944 94,338 368,124 501,310 470,710
=========== =========== =========== =========== ===========
Net income allocated
to the one General
Partner Unit..... $ 635 943 1,393 5,013 4,707
=========== =========== =========== =========== ===========
Net income allocated
per Limited
Partnership
Unit (b)......... $ 32.94 2.88 11.32 15.32 20.36
=========== =========== =========== =========== ===========
Distributions per
Limited Partnership
Unit from sales
(b)(c):.......... $ 30.89 - 19.90 - -
=========== =========== =========== =========== ===========
Weighted average
Limited Partnership
Units............ 32,368.73 32,388.75 32,397.11 32,397.46 22,891.86
=========== =========== =========== =========== ===========
(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, basic and diluted, and distributions per Unit are
based upon the weighted average number of Units outstanding.
(c) Distributions from sales represents a return of Invested Capital, as
defined in the Partnership Agreement.
(d) Reference is made to Note 4 of the Notes to Financial Statements (Item 8 of
this Annual Report) for a description of the Partnership's land
acquisitions and dispositions.
-6-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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; uninsured losses; and potential conflicts
of interest between the Partnership and its Affiliates, including the General
Partner.
Liquidity and Capital Resources
On December 13, 1991, the Partnership commenced an Offering of 60,000 Limited
Partnership Units ("Units") at $1,000 per Unit, pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Offering terminated
on August 23, 1993, with total sales of 32,399.28 Units, at $1,000 per Unit,
resulting in $32,399,282 in gross offering proceeds, not including the General
Partner's capital contribution of $500. All of the holders of these Units have
been admitted to the Partnership. The Limited Partners of the Partnership will
share in their portion of benefits of ownership of the Partnership's real
property investments according to the number of Units held.
The Partnership used $25,945,989 of gross offering proceeds to purchase, on an
all-cash basis, eighteen parcels of land and one building. These investments
include the payment of the purchase price, acquisition fees and acquisition
costs of such properties. One of the parcels was purchased during 1992, one
during 1993, fifteen during 1994 and one during 1995. As of December 31, 1997,
the Partnership has had multiple sales transactions through which it has
disposed of the building and approximately thirty-six acres of the 3,302 acres
originally owned. As of December 31, 1997, cumulative distributions to the
Limited Partners have totaled $1,646,334 (which represents a return of Invested
Capital, as defined in the Partnership Agreement). Through December 31, 1997,
the Partnership has used $3,100,951 of working capital reserve for rezoning and
other activities and such amount is included in investment properties.
The Partnership's capital needs and resources will vary depending upon a number
of factors, including the extent to which the Partnership conducts rezoning and
other activities relating to utility access, the installation of roads,
subdivision and/or annexation of land to a municipality, changes in real estate
taxes affecting the Partnership's land, and the amount of revenue received from
leasing. As of December 31, 1997, the Partnership owns, in whole or in part, all
eighteen of its original parcels, the majority of which are leased to local
farmers and are generating sufficient cash flow from farm leases to cover
property taxes and insurance.
-7-
At December 31, 1997, the Partnership had cash, cash equivalents and investments
in marketable securities of $479,252, of which approximately $153,000 is
reserved for the repurchase of Units through the Unit Repurchase Program. The
remaining $326,252 is available, upon maturity, to be used for Partnership
expenses and liabilities, cash distributions to partners, and other activities
with respect to some or all of its land parcels. The Partnership plans to
maximize its parcel sales effort in anticipation of rising land values.
The Partnership plans to enhance the value of its land through pre-development
activities such as rezoning, annexation and land planning. The Partnership has
already been successful in, or is in the process of pre-development activity on
a majority of the Partnership's land investments. Parcel 2, annexed to the
village of McHenry and zoned for a business park, has improvements underway and
sites are being marketed to potential buyers, of which nine of the 190 lots were
sold during 1997. Parcel 4, zoned for a variety of business uses, has
improvements underway and sites are being marketed to potential buyers, of which
one site consisting of .87 acres was sold to a hotel chain on June 6, 1997 and
another site consisting of 1.435 acres was sold to a combination gas
station/convenient store on August 12, 1997. (See Note 4 of the Notes to
Financial Statements.) Parcel 6, annexed to the village of DeKalb and zoned for
twenty-five large, residential lots, has completed the road into the subdivision
and the lots are being marketed to homebuilders and individuals. Parcels 15 and
16 have been annexed to the village of Huntley and zoned for residential and
commercial development.
Results of Operations
As of December 31, 1997, the Partnership owned eighteen parcels of land
consisting of approximately 3,266 acres. Of the 3,266 acres owned, approximately
2,834 acres are tillable and leased to local farmers and are generating
sufficient cash flow to cover property taxes, insurance and other miscellaneous
property expenses. The sale of investment property income and cost of investment
property sold for the year ended December 31, 1997 is the result of the sale of
.87 acres of Parcel 4 on June 6, 1997, the sale of 1.435 acres of Parcel 4 on
August 12, 1997, the sale of 1.929 acres of Parcel 2 on September 2, 1997 and
the sale of 6.7516 acres of Parcel 2 on November 7, 1997. The sale of
investment properties income and the cost of investment properties sold recorded
for the year ended December 31, 1995 is a result of the sale of the house and
outbuildings located on approximately seven acres of Parcel 10 and the sale of
17.742 acres of Parcel 2 on April 21, 1995 and August 2, 1995, respectively.
The increase in rental income for the years ended December 31, 1997 and 1996, as
compared to the year ended December 31, 1995, is due to the annual increase in
lease amounts from tenants. The increase in land operating expenses to non-
affiliates for the year ended December 31, 1997, as compared to the year ended
December 31, 1996, is due primarily to an increase in real estate taxes. The
decrease in depreciation expense for the years ended December 31, 1997 and 1996,
as compared to the year ended December 31, 1995, is due to the sale of the house
and outbuildings located on Parcel 10 during April 1995.
Interest income decreased for the years ended December 31, 1997 and 1996, as
compared to the year ended December 31, 1995, due primarily to the Partnership
utilizing its working capital reserve to fund pre-development activity on its
land parcels.
-8-
The increase in other income for year ended December 31, 1997, as compared to
the years ended December 31, 1997 and 1996, is due primarily to the Partnership
receiving a non-refundable deposit on a land sale which did not occur.
Professional services to non-affiliates increased for the years ended December
31, 1997 and 1996, as compared to the year ended December 31, 1995, due to an
increase in legal services relative to carrying out the Partnership's business
plan.
General and administrative expenses to Affiliates decreased for the year ended
December 31, 1997, as compared to the years ended December 31, 1996 and 1995,
due to decreases in data processing and investor services expenses.
Marketing expenses to Affiliates decreased for the years ended December 31, 1997
and 1996, as compared to the year ended December 31, 1995, and marketing
expenses to non-affiliates increased for the years ended December 31, 1997 and
1996, as compared to the year ended December 31, 1995, due to decreases in
expenses relating to marketing and advertising the Partnership's land
investments for sale paid to Affiliates and increases in advertising and travel
expenses relating to marketing the land portfolio to prospective purchasers paid
to non-affiliates.
Inflation
Inflation in future periods may cause capital appreciation of the Partnership's
investments in land. Rental income levels (from leases to new tenants or
renewals of existing tenants) are expected to rise and fall in accordance with
normal agricultural market conditions and may or may not be affected by
inflation. To date, the operations of the Partnership have not been
significantly affected by inflation.
-9-
Item 8. Financial Statements and Supplementary Data
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Index
-----
Page
----
Report of Independent Accountants........................................ 11
Financial Statements:
Balance Sheets, December 31, 1997 and 1996............................. 12
Statements of Operations, for the years ended December 31, 1997,
1996 and 1995........................................................ 14
Statements of Partners' Capital, for the years ended December
31, 1997, 1996 and 1995.............................................. 16
Statements of Cash Flows, for the years ended December 31, 1997,
1996 and 1995........................................................ 17
Notes to Financial Statements.......................................... 19
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.
-10-
REPORT OF INDEPENDENT ACCOUNTANTS
The Partners of InLand
Capital Fund, L.P.
We have audited the financial statements of InLand Capital Fund, L.P. listed in
the index on page 10 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 Capital Fund, L.P. as
of December 31, 1997 and 1996 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 5, 1998
-11-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
December 31, 1997 and 1996
Assets
------
1997 1996
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 304,452 581,693
Investments in marketable securities (Note 1)... 174,800 1,077,802
Accrued interest and other receivables.......... 1,018 4,903
Other current assets............................ 2,632 2,702
------------ ------------
Total current assets.............................. 482,902 1,667,100
------------ ------------
Other assets...................................... 169,139 -
Investment properties and improvements (including
acquisition fees paid to Affiliates of $1,409,967
and $1,418,902 at December 31, 1997 and 1996,
respectively) (Notes 3 and 4)................... 28,301,315 27,714,600
------------ ------------
Total assets...................................... $28,953,356 29,381,700
============ ============
See accompanying notes to financial statements.
-12-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
December 31, 1997 and 1996
Liabilities and Partners' Capital
---------------------------------
1997 1996
Current liabilities: ---- ----
Accounts payable................................ $ 8,590 474,058
Accrued real estate taxes....................... 73,097 73,031
Due to Affiliates (Note 3)...................... 10,343 6,451
Unearned income................................. 20,802 30,528
------------ ------------
Total current liabilities......................... 112,832 584,068
------------ ------------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 13,675 13,040
------------ ------------
14,175 13,540
Limited Partners: ------------ ------------
Units of $1,000. Authorized 60,000 Units,
32,352.11 and 32,377.11 outstanding at
December 31, 1997 and 1996, respectively
(net of offering costs of $4,466,765, of
which $3,488,574 was paid to Affiliates).... 27,886,551 27,910,743
Cumulative cash distributions................. (1,646,334) (646,474)
Cumulative net income......................... 2,586,132 1,519,823
------------ ------------
28,826,349 28,784,092
------------ ------------
Total Partners' capital........................... 28,840,524 28,797,632
------------ ------------
Total liabilities and Partners' capital........... $28,953,356 29,381,700
============ ============
See accompanying notes to financial statements.
-13-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
Income: ---- ---- ----
Sale of investment properties..... $ 1,328,482 - 646,334
Rental income..................... 298,616 288,338 244,637
Interest income................... 57,643 121,660 211,939
Other income...................... 33,025 745 20
------------ ------------ ------------
1,717,766 410,743 1,102,930
Expenses: ------------ ------------ ------------
Cost of investment properties sold 325,044 - 417,551
Professional services to
Affiliates...................... 36,820 35,354 36,707
Professional services to
non-affiliates.................. 45,112 27,016 21,836
General and administrative
expenses to Affiliates.......... 22,472 30,131 29,887
General and administrative
expenses to non-affiliates...... 12,558 11,895 13,875
Marketing expenses to Affiliates.. 10,812 26,628 43,619
Marketing expenses to
non-affiliates.................. 48,084 37,628 20,906
Land operating expenses to
Affiliates...................... 63,744 63,835 62,226
Land operating expenses to
non-affiliates.................. 86,176 81,566 83,630
Depreciation...................... - - 1,653
Amortization of deferred
organization costs.............. - 2,352 2,916
------------ ------------ ------------
650,822 316,405 734,806
------------ ------------ ------------
Net income.......................... $ 1,066,944 94,338 368,124
============ ============ ============
See accompanying notes to financial statements.
-14-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Net income allocated to (Note 2):
General Partner................... $ 635 943 1,393
Limited Partners.................. 1,066,309 93,395 366,731
------------ ------------ ------------
Net income.......................... $ 1,066,944 94,338 368,124
============ ============ ============
Net income per the one General
Partner Unit...................... $ 635 943 1,393
============ ============ ============
Net income per Unit, basic and
diluted, allocated to Limited
Partners per weighted average
Limited Partnership Units
(32,368.73, 32,388.75 and 32,397.11
for the years ended December 31,
1997, 1996 and 1995, respectively) $ 32.94 2.88 11.32
============ ============ ============
See accompanying notes to financial statements.
-15-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 1997, 1996 and 1995
General Limited
Partner Partners Total
------------ ------------ ------------
Balance January 1, 1995............. $ 11,204 28,988,364 28,999,568
Distributions to Partners ($19.90 per
weighted average Limited Partnership
Units of 32,397.11) (Note 2)...... - (644,658) (644,658)
Net income.......................... 1,393 366,731 368,124
------------ ------------ ------------
Balance December 31, 1995........... 12,597 28,710,437 28,723,034
Repurchase of Limited Partnership
Units............................. - (19,600) (19,600)
Foreign Partners' withholding (Note 1) - (140) (140)
Net income.......................... 943 93,395 94,338
------------ ------------ ------------
Balance December 31, 1996........... 13,540 28,784,092 28,797,632
Repurchase of Limited Partnership
Units............................. - (24,192) (24,192)
Distributions to Partners ($30.89 per
weighted average Limited Partnership
Units of 32,368.73) (Note 2)...... - (999,860) (999,860)
Net income.......................... 635 1,066,309 1,066,944
------------ ------------ ------------
Balance at December 31, 1997........ $ 14,175 28,826,349 28,840,524
============ ============ ============
See accompanying notes to financial statements.
-16-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
Cash flows from operating activities: ---- ---- ----
Net income........................ $ 1,066,944 94,338 368,124
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Amortization of deferred
organization costs............. - 2,352 2,916
Depreciation.................... - - 1,653
Gain on sale of investment
properties..................... (1,003,438) - (228,783)
Changes in assets and liabilities:
Accrued interest and other
receivables.................. 3,885 36,159 (21,571)
Other current assets.......... 70 (1,423) 18,374
Accounts payable.............. (465,468) 1,256 3,351
Accrued real estate taxes..... 66 (4,784) 13,581
Due to Affiliates............. 3,892 (20,080) 23,369
Unearned income............... (9,726) 3,097 14,154
Net cash provided by (used in) ------------ ------------ ------------
operating activities.............. (403,775) 110,915 195,168
------------ ------------ ------------
Cash flows from investing activities:
Purchase of and additions to
investment properties........... (911,759) (1,140,659) (1,429,731)
Sale (purchase) of marketable
securities, net................. 903,002 922,198 (250,000)
Other assets...................... (169,139) - -
Proceeds from sale of investment
properties...................... 1,328,482 - 646,334
Net cash provided by (used in) ------------ ------------ ------------
investing activities.............. 1,150,586 (218,461) (1,033,397)
------------ ------------ ------------
See accompanying notes to financial statements.
-17-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Cash flows from financing activities:
Repurchase of Limited Partnership
Units........................... $ (24,192) (19,600) -
Payment of note payable........... - - (530,143)
Distributions paid................ (999,860) (140) (644,658)
------------ ------------ ------------
Net cash used in financing activities (1,024,052) (19,740) (1,174,801)
Net decrease in cash and ------------ ------------ ------------
cash equivalents.................. (277,241) (127,286) (2,013,030)
Cash and cash equivalents at
beginning of year................. 581,693 708,979 2,722,009
Cash and cash equivalents at end of ------------ ------------ ------------
year.............................. $ 304,452 581,693 708,979
============ ============ ============
Supplemental schedule of noncash
investing and financing activities:
Prepaid acquisition fees capitalized
into investment properties........ $ - - 87,601
============ ============ ============
See accompanying notes to financial statements.
-18-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 1997, 1996 and 1995
(1) Organization and Basis of Accounting
InLand Capital Fund, L.P. (the "Partnership") was organized on June 21, 1991 by
the filing of a Certificate of Limited Partnership under the Revised Uniform
Limited Partnership Act of the State of Delaware. On December 13, 1991, the
Partnership commenced an Offering of 60,000 Limited Partnership Units pursuant
to a Registration under the Securities Act of 1933. The Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") provides for
Inland Real Estate Investment Corporation to be the General Partner. The
Offering terminated on August 23, 1993, with total sales of 32,399.28 Units, at
$1,000 per Unit, resulting in $32,399,282 in gross offering proceeds, not
including the General Partner's capital contribution of $500. All of the
holders of these Units have been admitted to the Partnership. The Limited
Partners of the Partnership will share in their portion of benefits of
ownership of the Partnership's real property investments according to the
number of Units held. As of December 31, 1997, the Partnership has repurchased
and canceled a total of 47.17 Units for $45,967 from various Limited Partners
through the Units Repurchase Program. Under this program, Limited Partners may
under certain circumstances have their Units repurchased for an amount equal to
their Invested Capital.
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 are 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 an
original maturity of three months or less to be cash equivalents. Such
investments consisted of commercial paper with interest rates ranging from
5.65% to 5.80% and aggregating $260,000 at December 31, 1997 issued by LaSalle
National Corporation with final maturities ranging from January 2, 1998 to
January 5, 1998. Such investments consisted of commercial paper with interest
rates ranging from 5.25% to 5.375% and aggregating $560,000 at December 31,
1996 issued by LaSalle National Corporation with final maturities ranging from
January 3, 1997 to January 21, 1997.
-19-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
Investments purchased with an original maturity of three months or more are
considered to be investments in marketable securities. Such investment of
$174,800 at December 31, 1997 consisted of commercial paper with an interest
rate of 5.46% issued by Manufacturers Bank with a final maturity of May 4,
1998. Such investments consisted of commercial paper with interest rates
ranging from 4.75% to 5.50% and aggregating $1,077,802 at December 31, 1996
issued by three banks with final maturities ranging from January 14, 1997 to
April 30, 1997.
For vacant land parcels and parcels with insignificant buildings and
improvements, the Partnership uses the area method of allocation, which
approximates the relative sales method of allocation, whereby a per acre price
is used as the standard allocation method for land purchases and sales. The
total cost of the parcel is divided by the total number of acres to arrive at a
per acre price. For parcels with significant buildings and improvements (Parcel
10, described in Note 4), the Partnership recorded the buildings and
improvements at a cost based upon the appraised value at the date of
acquisition. Buildings and improvements were depreciated using the straight-
line method of depreciation over a useful life of thirty years. Repair and
maintenance expenses are charged to operations as incurred. Significant
improvements are capitalized and depreciated over their estimated useful lives.
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121") requires the Partnership to record an impairment loss on its
property to be held for investment whenever its carrying value cannot be fully
recovered through estimated undiscounted future cash flows from their
operations and sale. The amount of the impairment loss to be recognized would
be the difference between the property's carrying value and the property's
estimated fair value. The adoption of SFAS 121 did not have any effect on the
Partnership's financial position, results of operations or liquidity. As of
December 31, 1997, the Partnership has not recognized any such impairment.
Statement of Financial Accounting Standards No. 128 "Earnings per Share" was
adopted by the Partnership for the year ended December 31, 1997 and has been
applied to all prior earnings periods presented in the financial statements.
The Partnership has no dilutive securities.
The Partnership is required to pay a withholding tax to the Internal Revenue
Service with respect to a Partner's allocable share of the Partnership's
taxable net income, if the Partner is a foreign person. The Partnership will
first pay the withholding tax from the distributions to any foreign person, and
to the extent that the tax exceeds the amount of distributions withheld, or if
there have been no distributions to withhold, the excess will be accounted for
as a distribution to the foreign person. Future withholding tax payments will
be made every April, June, September and December.
-20-
INLAND CAPITAL FUND, 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, if any, 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:
1997 1996
------------------------- ------------------------
GAAP Tax GAAP Tax
Basis Basis Basis Basis
----------- ------------- ----------- ------------
Total assets................ $28,953,356 28,953,426 $29,381,700 28,938,175
Partners' capital:
General Partner........... 14,175 14,175 13,540 13,540
Limited Partners.......... 28,826,349 28,826,421 28,784,092 28,784,092
Net income:
General Partner........... 635 635 943 943
Limited Partners.......... 1,066,309 1,066,309 93,395 93,395
Net income per Limited
Partnership Unit, basic
and diluted............... 32.94 32.94 2.88 2.88
The net income per Limited Partnership Unit is based upon the weighted average
number of Units of 32,368.73 and 32,388.75 during 1997 and 1996, respectively.
(2) Partnership Agreement
The Partnership Agreement defines the allocation of profits and losses, and
available cash. If and to the extent that real estate taxes and insurance
payable with respect to the Partnership's land during a given year exceed
revenues of the Partnership, the General Partner will make a Supplemental
Capital Contribution of such amount to the Partnership to ensure that it has
sufficient funds to make such payments.
Distributions of Net Sale Proceeds will be allocated between the General Partner
and the Limited Partners based upon both an aggregate overall return to the
Limited Partners and a separate return with respect to each parcel of land
purchased by the Partnership.
-21-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
Profits and losses from operations (other than capital transactions) will be
allocated 99% to the Limited Partners and 1% to the General Partner. The net
gain from a sale of Partnership properties is first allocated among the Partners
in proportion to the negative balances, if any, in their respective capital
accounts. Thereafter, except as provided below, net gain is allocated to the
General Partner in an amount equal to the proceeds distributable to the General
Partner from such sale and the balance of any net gain is allocated to the
Limited Partners. If the amount of net gain realized from a sale is less than
the amount of cash distributed to the General Partner from such sale, the
Partnership will allocate income or gain to the General Partner in an amount
equal to the excess of the cash distributed to the General Partner with respect
to such sale as quickly as permitted by law. Any net loss from a sale will be
allocated to the Limited Partners.
As a general rule, Net Sale Proceeds will be distributed 90% to the Limited
Partners and 10% to the General Partner until the Limited Partners have received
from Net Sale Proceeds (i) a return of their Original Capital plus (ii) a
noncompounded cumulative preferred return of 15% on their Invested Capital.
However, with respect to each parcel of land, the General Partner's 10% share
will be subordinated until the Limited Partners receive a return of the Original
Capital attributed to such parcel ("Parcel Capital") plus a 6% per annum
noncompounded cumulative preferred return thereon.
At the conclusion of Partnership operations, after all Parcels have been sold,
if Limited Partners have not received the return of their Original Capital, plus
a 6% annual, noncompounded return on their Invested Capital, the General Partner
has agreed to rebate to the Partnership, for distribution to the Limited
Partners, sales proceeds received by the General Partner in an amount equal to
the deficiency in the Limited Partners' return, plus 6% noncompounded annual
interest. The amount of this rebate by the General Partner, exclusive of the 6%
noncompounded annual interest to be paid on the rebate, will not exceed the
amount of sales proceeds received by the General Partner over the life of the
Partnership.
After the amounts described in items (i) and (ii) above and any previously
subordinated distributions to the General Partner have been paid, and the amount
of any Supplemental Capital Contributions have been repaid to the General
Partner, subsequent distributions shall be paid 75% to the Limited Partners and
25% to the General Partner without considering Parcel Capital. If, after all Net
Sale Proceeds have been distributed, the General Partner has received more than
25% of all Net Sale Proceeds (exclusive of distributions made to the Limited
Partners to return their Original Capital), the General Partner shall contribute
to the Partnership for distribution to the Limited Partners an amount equal to
such excess.
Any distributions from Net Sales Proceeds at a time when Invested Capital is
greater than zero shall be deemed applied first to reduction of such Invested
Capital before application to payment of any deficiency in the 15% Cumulative
Preferred Return.
-22-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Transactions with Affiliates
The General Partner and its Affiliates are entitled to reimbursement for
salaries and expenses of employees of the General Partner and its Affiliates
relating to the administration of the Partnership. Such costs are included in
professional services and general and administrative expenses to Affiliates,
of which $3,822 and $6,451 was unpaid as of December 31, 1997 and 1996,
respectively.
The General Partner is entitled to receive Asset Management Fees equal to one-
quarter of 1% of the original cost to the Partnership of undeveloped land
annually, limited to a cumulative total over the life of the Partnership of 2%
of the land's original cost to the Partnership. Such fees of $63,744, $63,835
and $62,039 have been incurred for the years ended December 31, 1997, 1996 and
1995, respectively, of which $15,738 was unpaid as of December 31, 1995. In
addition, an Affiliate of the General Partner performed property maintenance
on the Partnership's investment properties and was reimbursed (as set forth
in the Partnership Agreement) for direct costs. Such costs of $0, $0 and $187
have been incurred for the years ended December 31, 1997, 1996 and 1995,
respectively. Such fees and costs are included in land operating expenses to
Affiliates, of which $187 was unpaid as of December 31, 1995.
An Affiliate of the General Partner performed sales marketing and advertising
services for the Partnership and was reimbursed (as set forth under terms of the
Partnership Agreement) for direct costs. Such costs of $10,812, $26,628 and
$43,619 have been incurred and are included in marketing expenses to Affiliates
for the years ended December 31, 1997, 1996 and 1995, respectively, of which
$6,521 and $4,376 was unpaid as of December 31, 1997 and 1995, respectively.
An Affiliate of the General Partner performed property upgrades, rezoning,
annexation and other activities to prepare the Partnership's land investments
for sale and was reimbursed (as set forth under terms of the Partnership
Agreement) for salaries and direct costs. The Affiliate did not take a profit on
any project. Such costs of $102,300, $54,653 and $13,257 have been incurred for
the years ended December 31, 1997, 1996 and 1995, respectively, and are included
in investment properties, all of which has been paid.
-23-
<TABLE> INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investment Properties
<CAPTION>
All of the Partnership's investment properties are located in the collar counties surrounding the Chicago metropolitan area. The
following real property investments are owned by the Partnership as of December 31, 1997:
Total
Gross Initial Costs Costs Cumulative Remaining Current
Acres Purchase/ -------------------------------------- Capitalized Costs of Costs of Year Gain
Parcel Location: Purchased Sales Original Acquisition Total Subsequent to Property Parcels at On Sale
# County /(Sold) Date Costs Costs Costs Acquisition Sold 12/31/97 Recognized
- ------ --------- --------- ---------- ------------ ------------ ------------ -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Kendall 108.8960 07/22/92 $ 707,566 57,926 765,492 79,297 - 844,789 -
2 McHenry 201.0000 11/09/93 2,020,314 122,145 2,142,459 1,556,101 451,106 3,247,454 431,192
(17.7420) 08/02/95
(1.9290) 09/02/97
(6.7516) 11/07/97
3 Will 34.0474 03/04/94 1,235,830 88,092 1,323,922 28,273 - 1,352,195 -
4 Will 86.9195 03/30/94 1,778,820 143,817 1,922,637 286,545 70,411 2,138,771 572,246
(.8700) 06/07/97
(1.4350) 08/12/97
5 LaSalle 190.9600 04/01/94 532,000 18,145 550,145 65,883 - 616,028 -
6 DeKalb 59.0800 05/11/94 670,207 58,373 728,580 481,401 - 1,209,981 -
7 Kendall 200.8210 07/28/94 1,506,158 82,999 1,589,157 22,379 - 1,611,536 -
8 Kendall 133.0000 08/17/94 1,300,000 106,949 1,406,949 5,573 - 1,412,522 -
9 LaSalle 335.9600 08/30/94 993,441 79,329 1,072,770 110,717 - 1,183,487 -
10 Kendall 223.7470 09/16/94 2,693,025 205,660 2,898,685 23,716 - 2,922,401 -
10A(a) Kendall 7.0390 09/16/94 206,975 15,806 222,781 1,327 221,078 - -
(7.0390) 04/21/95
11 Kane 123.0000 09/26/94 1,353,000 75,551 1,428,551 5,949 - 1,434,500 -
12 Kendall 110.2530 09/28/94 600,001 51,220 651,221 41,042 - 692,263 -
13 LaSalle 352.7390 10/06/94 1,032,666 91,117 1,123,783 22,698 - 1,146,481 -
14 Kendall 134.7760 10/26/94 1,000,000 81,674 1,081,674 5,896 - 1,087,570 -
15 McHenry 169.5400 10/31/94 2,900,000 79,196 2,979,196 182,631 - 3,161,827 -
16 McHenry 207.0754 11/30/94 1,760,256 101,388 1,861,644 180,193 - 2,041,837 -
17 LaSalle 236.4400 12/07/94 1,060,286 74,735 1,135,021 854 - 1,135,875 -
18 Kendall 386.9900 11/02/95 934,993 126,329 1,061,322 476 - 1,061,798 -
------------ ------------ ------------ -------------- ------------ ------------ ------------
$24,285,539 1,660,450 25,945,989 3,100,951 742,595 28,301,315 1,003,438
============ ============ ============ ============== ============ ============ ============
</TABLE>
-24-
-24-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investment Properties (continued)
(a) Included in the purchase of Parcel 10 was a house and several outbuildings,
located on approximately seven acres, which was sold on April 21, 1995.
(b) The aggregate cost of real estate owned at December 31, 1997 for Federal
income tax purposes was approximately $28,301,300 (unaudited).
(c) Reconciliation of real estate owned:
1997 1996
---- ----
Balance at January 1,................... $27,714,600 26,130,416
Additions during year................... 911,759 1,584,184
------------ ------------
28,626,359 27,714,600
Sales during year....................... 325,044 -
------------ ------------
Balance at December 31,................. $28,301,315 27,714,600
============ ============
(5) Farm Rental Income
The Partnership has determined that all leases relating to the farm parcels are
operating leases. Accordingly, rental income is reported when earned.
As of December 31, 1997, the Partnership had farm leases of generally one year
in duration, for approximately 2,834 acres of the approximately 3,266 acres
owned.
(6) Note Payable
On January 5, 1995, the Partnership repaid the note, from offering proceeds (at
face value), related to the acquisition of Parcel 17 which was purchased by the
Partnership on December 7, 1994.
-25-
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements on accounting or financial disclosure during 1997.
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 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-owned 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 11 to 13 of the Prospectus, a copy of which description is
hereby 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
Norbert J. Treonis...... Senior Vice President-Property Management
Catherine L. Lynch...... Treasurer
Paul J. Wheeler......... Vice President-Personal Financial Services Group
Roberta S. Matlin....... Assistant Vice President-Investments
Mark Zalatoris.......... Assistant Vice President-Due Diligence
Patricia A. Challenger.. Vice President-Asset Management
Kelly Tucek............. Assistant Vice President-Partnership Accounting
Venton J. Carlston...... Assistant Controller
-26-
DANIEL L. GOODWIN (age 54) 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 7 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
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 also 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 the 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 educate disabled students
about the workplace. Most of these original students are still employed at
Inland today, and Inland continues as one of the largest employers of the
disabled in DuPage County. Mr. Goodwin 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.
-27-
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 54) 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 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 54) has been with The Inland Group, Inc. and its
affiliates since 1968 and is one of the four original principals. Mr. Cosenza
is a Director and Vice Chairman of The Inland Group, Inc. and oversees,
coordinates and directs Inland's many enterprises. 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 and Hillside, Illinois.
-28-
ROBERT D. PARKS (age 54) is a 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.
NORBERT J. TREONIS (age 47) joined The Inland Group, Inc. and its
affiliates in 1975 and he is currently Chairman and Chief Executive Officer of
The Inland Property Management Group, Inc. and a Director of The Inland Group,
Inc. He serves on the Board of Directors of all Inland subsidiaries involved
in the property management, acquisitions and maintenance of real estate,
including Mid-America Property Management Corporation, and Metropolitan
Construction Services, Inc. Mr. Treonis is charged with the responsibility of
the overall management and leasing of all apartment units, retail, industrial
and commercial properties nationwide.
Mr. Treonis is a licensed real estate broker. He is a past member of the Board
of Directors of American National Bank of DuPage, the Apartment Builders and
Managers Association of Illinois, the National Apartment Association and the
Chicagoland Apartment Association.
Mr. Treonis has been the Chairman of the Board of Directors of Inland
Commercial Property Management, Inc. since its formation in 1994.
CATHERINE L. LYNCH (age 39) 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.
PAUL J. WHEELER (age 45) 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.
-29-
ROBERTA S. MATLIN (age 53) 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 40) 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 45) 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.
KELLY TUCEK (age 35) 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.
VENTON J. CARLSTON (age 40) 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 Illinois CPA Society. He is registered with the National
Association of Securities Dealers, Inc. as a Financial Operations Principal.
-30-
Item 11. Executive Compensation
The General Partner is entitled to receive a share of cash distributions of Net
Sales Proceeds based upon both an aggregate overall return to the Limited
Partners and a separate return with respect to each parcel of land purchased by
the Partnership as described under the caption "Cash Distributions" and a share
of profits or losses as described under the caption "Allocation of Profits or
Losses" at pages 41-42 of the Prospectus, and at pages A-10 to A-11 of the
Partnership Agreement, included as an exhibit to the Prospectus, a copy of
which descriptions is incorporated herein by reference.
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" at pages 14-16 and "Conflicts of Interest" at
pages 16-18 of the Prospectus, and at pages A-13 to A-22 of the Partnership
Agreement, included as an exhibit to the Prospectus, a copy of which
descriptions is 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 and its Affiliates may be reimbursed for its expenses or
out-of-pocket costs relating to the administration of the Partnership. As of
December 31, 1997, such costs were $59,292, of which $3,822 was unpaid.
The General Partner is entitled to receive Asset Management Fees equal to one-
quarter of 1% of the original cost to the Partnership of undeveloped land
annually, limited to a cumulative total over the life of the Partnership of 2%
of the land's original cost to the Partnership. For the year ended December 31,
1997, the Partnership incurred and paid $63,744 in Asset Management Fees.
An Affiliate of the General Partner performed sales marketing and advertising
services for the Partnership and was reimbursed (as set forth under terms of
the Partnership Agreement) for direct costs. For the year ended December 31,
1997, such costs were $10,812, of which $6,521 was unpaid.
An Affiliate of the General Partner performed property upgrades, rezoning,
annexation and other activities to prepare the Partnership's land investments
for sale and was reimbursed (as set forth under terms of the Partnership
Agreement) for salaries and direct costs. For the year ended December 31, 1997,
the Partnership incurred and paid $102,300 of such costs and are included in
investment properties.
-31-
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, 1997:
Amount and Nature
of Beneficial Percent
Title of Class Ownership of Class
-------------- ------------------- ------------------
Limited Partnership 11.09 Units directly Less than 1/2%
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 or its officers and directors as set forth above 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 3 of the Notes to Financial
Statements (Item 8 of this Annual Report) for information regarding related
party transactions.
-32-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The financial statements listed in the index at page 10 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, included in Post-
Effective Amendment #3 dated February 16, 1993, and as Exhibit A of the
Prospectus dated December 13, 1991, as amended, is incorporated herein by
reference thereto.
28 Prospectus, to Form S-11 Registration Statement, File No. 33-42245, as
filed with Securities and Exchange Commission on December 13, 1991, as
supplemented to date, 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 1997 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.
-33-
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 CAPITAL FUND, L.P.
Inland Real Estate Investment Corporation
General Partner
/s/ Robert D. Parks
By: Robert D. Parks
Chairman of the Board
and Chief Executive Officer
Date: March 26, 1998
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
/s/ Robert D. Parks
By: Robert D. Parks
Chairman of the Board
and Chief Executive Officer
Date: March 26, 1998
/s/ Patricia A. Challenger
By: Patricia A. Challenger
Senior Vice President
Date: March 26, 1998
/s/ Kelly Tucek
By: Kelly Tucek
Principal Financial Officer
and Principal Accounting Officer
Date: March 26, 1998
/s/ Daniel L. Goodwin
By: Daniel L. Goodwin
Director
Date: March 26, 1998
/s/ Robert H. Baum
By: Robert H. Baum
Director
Date: March 26, 1998
-34-
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