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, 1998
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.................... 6
Item 6. Selected Financial Data....................................... 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 8
Item 8. Financial Statements and Supplementary Data................... 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 30
Part III
--------
Item 10. Directors and Executive Officers of the Registrant............ 30
Item 11. Executive Compensation........................................ 36
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 37
Item 13. Certain Relationships and Related Transactions................ 37
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.................................................. 38
SIGNATURES............................................................. 39
-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, 1998, 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)
(1.9290 sold Var 1998)
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)
(3.3600 sold Var 1998)
Parcel 5, LaSalle County, Illinois 190.9600 04/01/94
(2.0600 sold 04/08/98)
Parcel 6, DeKalb County, Illinois 59.0800 05/11/94
(4.9233 sold Apr 1998)
(54.1567 sold 07/23/98)
-3-
Gross Acres Purchase/Sales
Parcel & Location Purchased/Sold Date
- ----------------------------------- -------------------- ------------------
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
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
(10.0000 sold 07/27/98)
(342.7390 sold 08/31/98)
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
(386.9900 sold 08/31/98)
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, 1998, the Partnership has had
multiple sales transactions through which it has disposed of the building and
approximately 842 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.
-4-
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.
The Partnership had no employees during 1998.
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.
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 1998.
-5-
PART II
Item 5. Market for the Partnership's Limited Partnership Units and Related
Security Holder Matters
As of December 31, 1998, there were 2,666 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, 1998,
the Partnership had approximately $161,000 available for the repurchase of
Units.
-6-
Item 6. Selected Financial Data
INLAND CAPITAL FUND, L.P.
(a limited partnership)
For the years ended December 31, 1998, 1997, 1996, 1995 and 1994
(not covered by the Report of Independent Accountants)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Total assets....... $25,966,480 28,953,356 29,381,700 28,884,088 29,636,310
=========== =========== =========== =========== ===========
Total income....... $ 5,259,595 1,717,766 410,743 1,102,930 744,291
=========== =========== =========== =========== ===========
Net income......... $ 1,207,517 1,066,944 94,338 368,124 501,310
=========== =========== =========== =========== ===========
Net income allocated
to the one General
Partner Unit..... $ 44 635 943 1,393 5,013
=========== =========== =========== =========== ===========
Net income allocated
per Limited
Partnership
Unit (b)......... $ 37.32 32.94 2.88 11.32 15.32
=========== =========== =========== =========== ===========
Distributions per
Limited Partnership
Unit from sales
(b)(c):.......... $ 130.39 30.89 - 19.90 -
=========== =========== =========== =========== ===========
Weighted average
Limited Partnership
Units............ 32,352.11 32,368.73 32,388.75 32,397.11 32,397.46
=========== =========== =========== =========== ===========
(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.
-7-
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, 1998,
the Partnership has had multiple sales transactions through which it has
disposed of the building and approximately 842 acres of the 3,302 acres
originally owned. As of December 31, 1998, cumulative distributions to the
Limited Partners have totaled $5,864,621 (which represents a return of Invested
Capital, as defined in the Partnership Agreement). Through December 31, 1998,
the Partnership has used $3,355,914 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, 1998, the Partnership owns, in whole or in part,
fifteen 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.
-8-
At December 31, 1998, the Partnership had cash and cash equivalents of $569,663,
of which approximately $161,000 is reserved for the repurchase of Units through
the Unit Repurchase Program. The remaining $408,663 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 one phase of improvements
complete and sites are being marketed to potential buyers, of which eleven of
the 190 lots were sold as of December 31, 1998. (See Note 4 of the Notes to
Financial Statements.) 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,
another site consisting of 1.435 acres was sold to a combination gas
station/convenient store on August 12, 1997, a third site consisting of 1.5
acres was sold to a national fast-food chain on August 13, 1998, and a fourth
site consisting of 1.86 acres was sold to a different national fast-food chain
on October 16, 1998. (See Note 4 of the Notes to Financial Statements.) Parcels
15 and 16 have been annexed to the village of Huntley and zoned for residential
and commercial development. The Partnership sold Parcels 13 and 18 and the
remaining acres of Parcel 6 to unaffiliated third-parties. (See Note 4 of the
Notes to Financial Statements.)
Results of Operations
As of December 31, 1998, the Partnership owned fifteen parcels of land
consisting of approximately 2,460 acres. Of the 2,460 acres owned, approximately
2,084 acres are tillable and leased to local farmers and are generating
sufficient cash flow to cover property taxes, insurance and other miscellaneous
property expenses. Income from the sale of investment properties and the cost
of investment properties sold for the year ended December 31, 1998 is the result
of the sale of Parcels 6, 13 and 18, additional sales at Parcels 2 and 4 and an
easement sale on Parcel 5. Income from the sale of investment properties and
cost of investment properties 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.
(See Note 4 of the Notes to Financial Statements.)
Rental income decreased for the year ended December 31, 1998, as compared to the
year ended December 31, 1997, due to the decrease in tillable acres due to land
sales and pre-development activity on the Partnership's land investments. This
decrease was partially offset by the annual increase in lease amounts from
tenants. Rental income increased for the year ended December 31, 1997, as
compared to the year ended December 31, 1996, due to the annual increase in
lease amounts from tenants.
-9-
Interest income increased for the year ended December 31, 1998, as compared to
the year ended December 31, 1997, due primarily as a result of the interest
income earned on the mortgage loan receivable the Partnership received from the
sale of the remaining acreage of Parcel 6. See Note 6 of the Notes to Financial
Statements for further discussion of the terms of the mortgage loan receivable
received from this sale. Interest income decreased for the year ended December
31, 1997, as compared to the year ended December 31, 1996, due primarily to the
Partnership utilizing its working capital reserve to fund pre-development
activity on its land parcels.
The other income recorded for the year ended December 31, 1998 is the result of
the Partnership receiving non-refundable extension fees from the potential buyer
of Parcel 3. See Note 7 of the Notes to Financial Statements for further
discussion on the sale of Parcel 3. The other income recorded for the year
ended December 31, 1997 is the result of the Partnership receiving a non-
refundable deposit on a land sale which did not occur.
Professional services to non-affiliates decreased for the year ended December
31, 1998, as compared to the year ended December 31, 1997, due to a decrease in
legal services. This decrease was partially offset by an increase in accounting
fees. Professional services to non-affiliates increased for the year ended
December 31, 1997, as compared to the year ended December 31, 1996, due to an
increase in legal services.
General and administrative expenses to Affiliates decreased for the years ended
December 31, 1998 and 1997, as compared to the year ended December 31, 1996, due
to decreases in data processing and investor services expenses. The decrease
for the year ended December 31, 1998 was partially offset by an increase in
postage expenses. General and administrative expenses to non-affiliates
increased for the year ended December 31, 1998, as compared to the years ended
December 31, 1997 and 1996, due primarily to an increase in the Illinois
Replacement Tax.
Marketing expenses to Affiliates and non-affiliates increased for the year ended
December 31, 1998, as compared to the years ended December 31, 1997 and 1996,
due to increases in marketing, advertising and travel expenses relating to
marketing the land portfolio to prospective purchasers.
Land operating expenses to Affiliates decreased for the year ended December 31,
1998, as compared to the years ended December 31, 1997 and 1996, due to a
decrease in tillable acres due to land sales. Land operating expenses to non-
affiliates increased for the year ended December 31, 1998, as compared to the
years ended December 31, 1997 and 1996, due to an increase in real estate taxes
and maintenance expenses of the Partnership's land investments.
-10-
Year 2000 Issues
GENERAL
- -------
Many computer operating systems and software applications were designed such
that the year 1999 is the maximum date that can be processed accurately. In
conducting business, the Partnership relies on computers and operating systems
provided by equipment manufacturers, and also on application software developed
internally and, to a limited extent, by outside software vendors. The
Partnership has assessed its vulnerability to the so-called "Year-2000 Issue"
with respect to its equipment and computer systems.
STATE OF READINESS
- ------------------
The Partnership has identified the following two areas for "Year-2000"
compliance efforts:
Business Computer Systems: The majority of the Partnership's information
technology systems were developed internally and include accounting, lease
management, investment portfolio tracking, and tax return preparation. The
Partnership has rights to the source code for these applications and employs
programmers who are knowledgeable regarding these systems. The process of
testing these internal systems to determine year 2000 compliance is nearly
complete. The Partnership does not anticipate any material costs relating to
its business computer systems regarding year 2000 compliance since the
Partnership's critical hardware and software systems use four digits to
represent the applicable year. The Partnership does use various computers, so-
called "PC's", that may run software that may not use four digits to represent
the applicable year. The Partnership is in the process of testing the PC
hardware and software to determine year 2000 compliance, but it must be noted
that such PC's are incidental to the Partnership's critical systems. The
Partnership is considering independent testing of its critical systems.
Suppliers and other Parties: The Partnership is in the process of surveying
suppliers and other parties with whom the Partnership does a significant amount
of business to identify the Partnership's potential exposure in the event such
parties are not year 2000 compliant in a timely manner. At this time, the
Partnership is not aware of any party that is anticipating a material Year 2000
compliance issue. However, since this area involves some parties over which the
Partnership has no control, such as public utility companies, it is difficult,
at best, to judge the status of the outside companies' year 2000 compliance. The
Partnership is working closely with all suppliers of goods and services in an
effort to minimize the impact of the failure of any supplier to become year 2000
compliant by December 31, 1999. The Partnership's investigations and assessments
of possible year 2000 issues are in a preliminary stage, and currently the
Partnership is not aware of any material impact on its business, operations or
financial condition even if one or more parties is not Year 2000 compliant in a
timely manner, due to the number and nature of the Partnership's diverse
supplier base.
-11-
YEAR 2000 RISKS
- ---------------
The most reasonable likely worst case scenario for the Partnership with respect
to the year 2000 non-compliance of its business computer systems would be the
inability to access information which could result in the failure to issue
financial reports.
YEAR 2000 COSTS
- ---------------
The Partnership's General Partner and its Affiliates estimate that costs to
achieve year 2000 compliance will not exceed $100,000. However, only
approximately 1% of these costs will be directly allocated to and paid by the
Partnership. The balance of the year 2000 compliance costs, approximately 99%,
will be paid by the General Partner and its Affiliates. Total year 2000
compliance costs incurred through December 31, 1998 are estimated at
approximately $5,000.
CONTINGENCY PLAN
- ----------------
The Partnership is expects to be Year 2000 compliant in advance of the year
2000. The Partnership will continue to monitor its progress and state of
readiness, and is in the process of formulating a contingency plan which the
Partnership will be prepared to adopt with respect to areas in which evidence
arises that it may not become Year 2000 compliant in sufficient time. With
respect to its suppliers and other parties with whom the Partnership conducts
business, the Partnership does not yet have sufficient information to identify
the types of problems it may encounter in the event these third parties are not
Year 2000 compliant. As information is obtained that may indicate such parties
may not become Year 2000 compliant in sufficient time, the Partnership is
prepared to develop contingency plans, accordingly.
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.
Item 7(a). Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
-12-
Item 8. Financial Statements and Supplementary Data
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Index
-----
Page
----
Report of Independent Accountants........................................ 14
Financial Statements:
Balance Sheets, December 31, 1998 and 1997............................. 15
Statements of Operations, for the years ended December 31, 1998,
1997 and 1996........................................................ 17
Statements of Partners' Capital, for the years ended December
31, 1998, 1997 and 1996.............................................. 19
Statements of Cash Flows, for the years ended December 31, 1998,
1997 and 1996........................................................ 20
Notes to Financial Statements.......................................... 22
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.
-13-
REPORT OF INDEPENDENT ACCOUNTANTS
The Partners of InLand
Capital Fund, L.P.
In our opinion, the accompanying balance sheets and the related statements of
operations, partners' capital and cash flows present fairly, in all material
respects, the financial position of Inland Capital Fund, L.P. (the "Company")
at December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
March 15, 1999
-14-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
December 31, 1998 and 1997
Assets
------
1998 1997
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 569,663 304,452
Investments in marketable securities (Note 1)... - 174,800
Accrued interest and other receivables.......... 44,801 1,018
Other current assets............................ 2,406 2,632
------------ ------------
Total current assets.............................. 616,870 482,902
------------ ------------
Other assets...................................... 3,074 169,139
Mortgage loans receivable (Note 6)................ 400,000 -
Investment properties and improvements (including
acquisition fees paid to Affiliates of $1,187,120
and $1,409,967 at December 31, 1998 and 1997,
respectively) (Notes 3 and 4)................... 24,946,536 28,301,315
------------ ------------
Total assets...................................... $25,966,480 28,953,356
============ ============
See accompanying notes to financial statements.
-15-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
December 31, 1998 and 1997
Liabilities and Partners' Capital
---------------------------------
1998 1997
Current liabilities: ---- ----
Accounts payable................................ $ 18,124 8,590
Accrued real estate taxes....................... 80,989 73,097
Due to Affiliates (Note 3)...................... 19,796 10,343
Unearned income................................. 15,012 20,802
------------ ------------
Total current liabilities......................... 133,921 112,832
------------ ------------
Deferred gain on sale (Note 6).................... 2,805 -
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 13,719 13,675
------------ ------------
14,219 14,175
Limited Partners: ------------ ------------
Units of $1,000. Authorized 60,000 Units,
32,352.11 outstanding at December 31, 1998
and 1997 (net of offering costs of
$4,466,765, of which $3,488,574 was paid
to Affiliates).............................. 27,886,551 27,886,551
Cumulative cash distributions................. (5,864,621) (1,646,334)
Cumulative net income......................... 3,793,605 2,586,132
------------ ------------
25,815,535 28,826,349
------------ ------------
Total Partners' capital........................... 25,829,754 28,840,524
------------ ------------
Total liabilities and Partners' capital........... $25,966,480 28,953,356
============ ============
See accompanying notes to financial statements.
-16-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
Income: ---- ---- ----
Sale of investment properties..... $ 4,812,864 1,328,482 -
Rental income..................... 273,188 298,616 288,338
Interest income................... 133,043 57,643 121,660
Other income...................... 40,500 33,025 745
------------ ------------ ------------
5,259,595 1,717,766 410,743
Expenses: ------------ ------------ ------------
Cost of investment properties sold 3,609,742 325,044 -
Professional services to
Affiliates...................... 36,583 36,820 35,354
Professional services to
non-affiliates.................. 24,655 45,112 27,016
General and administrative
expenses to Affiliates.......... 23,174 22,472 30,131
General and administrative
expenses to non-affiliates...... 19,139 12,558 11,895
Marketing expenses to Affiliates.. 76,926 10,812 26,628
Marketing expenses to
non-affiliates.................. 60,702 48,084 37,628
Land operating expenses to
Affiliates...................... 61,445 63,744 63,835
Land operating expenses to
non-affiliates.................. 139,712 86,176 81,566
Amortization of deferred
organization costs.............. - - 2,352
------------ ------------ ------------
4,052,078 650,822 316,405
------------ ------------ ------------
Net income.......................... $ 1,207,517 1,066,944 94,338
============ ============ ============
See accompanying notes to financial statements.
-17-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Net income allocated to (Note 2):
General Partner................... $ 44 635 943
Limited Partners.................. 1,207,473 1,066,309 93,395
------------ ------------ ------------
Net income.......................... $ 1,207,517 1,066,944 94,338
============ ============ ============
Net income per the one General
Partner Unit...................... $ 44 635 943
============ ============ ============
Net income per Unit, basic and
diluted, allocated to Limited
Partners per weighted average
Limited Partnership Units
(32,352.11, 32,368.73 and 32,388.75
for the years ended December 31,
1998, 1997 and 1996, respectively) $ 37.32 32.94 2.88
============ ============ ============
See accompanying notes to financial statements.
-18-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 1998, 1997 and 1996
General Limited
Partner Partners Total
------------ ------------ ------------
Balance January 1, 1996............. $ 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
Distributions to Partners ($130.39 per
weighted average Limited Partnership
Units of 32,352.11) (Note 2)...... - (4,218,287) (4,218,287)
Net income.......................... 44 1,207,473 1,207,517
------------ ------------ ------------
Balance at December 31, 1998........ $ 14,219 25,815,535 25,829,754
============ ============ ============
See accompanying notes to financial statements.
-19-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
Cash flows from operating activities: ---- ---- ----
Net income........................ $ 1,207,517 1,066,944 94,338
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Amortization of deferred
organization costs............. - - 2,352
Gain on sale of investment
properties..................... (1,203,122) (1,003,438) -
Changes in assets and liabilities:
Accrued interest and other
receivables.................. (43,783) 3,885 36,159
Other current assets.......... 226 70 (1,423)
Accounts payable.............. 9,534 (465,468) 1,256
Accrued real estate taxes..... 7,892 66 (4,784)
Due to Affiliates............. 9,453 3,892 (20,080)
Unearned income............... (5,790) (9,726) 3,097
Deferred gain on sale......... (5,084) - -
Net cash provided by (used in) ------------ ------------ ------------
operating activities.............. (23,157) (403,775) 110,915
------------ ------------ ------------
Cash flows from investing activities:
Additions to investment properties (254,963) (911,759) (1,140,659)
Sale (purchase) of marketable
securities, net................. 174,800 903,002 922,198
Other assets...................... 166,065 (169,139) -
Principal payments collected on
mortgage loans receivable....... 725,000 - -
Proceeds from sale of investment
properties...................... 3,695,753 1,328,482 -
Net cash provided by (used in) ------------ ------------ ------------
investing activities.............. 4,506,655 1,150,586 (218,461)
------------ ------------ ------------
See accompanying notes to financial statements.
-20-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Cash flows from financing activities:
Repurchase of Limited Partnership
Units........................... $ - (24,192) (19,600)
Distributions paid................ (4,218,287) (999,860) (140)
------------ ------------ ------------
Net cash used in financing activities (4,218,287) (1,024,052) (19,740)
Net increase (decrease) in cash and ------------ ------------ ------------
cash equivalents.................. 265,211 (277,241) (127,286)
Cash and cash equivalents at
beginning of year................. 304,452 581,693 708,979
Cash and cash equivalents at end of ------------ ------------ ------------
year.............................. $ 569,663 304,452 581,693
============ ============ ============
Supplemental schedule of noncash investing activities:
Mortgage loans receivable........... $(1,125,000) - -
Reduction of investment properties.. 3,609,742 - -
Deferred gain on sale............... 7,889 - -
Gain on sale of land................ 1,203,122 - -
Proceeds from sale of investment ------------ ------------ ------------
properties........................ $ 3,695,753 - -
============ ============ ============
See accompanying notes to financial statements.
-21-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 1998, 1997 and 1996
(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, 1998, 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.
Investments purchased with an original maturity of three months or more are
considered to be investments in marketable securities.
-22-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
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. 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, 1998, 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, 1998 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.
-23-
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:
1998 1997
------------------------ ------------------------
GAAP Tax GAAP Tax
Basis Basis Basis Basis
----------- ------------ ----------- ------------
Total assets................ $25,966,480 25,966,480 $28,953,356 28,953,426
Partners' capital:
General Partner........... 14,219 14,219 14,175 14,175
Limited Partners.......... 25,815,535 25,815,604 28,826,349 28,826,421
Net income:
General Partner........... 44 44 635 635
Limited Partners.......... 1,207,473 1,207,473 1,066,309 1,066,309
Net income per Limited
Partnership Unit, basic
and diluted............... 37.32 37.32 32.94 32.94
The net income per Limited Partnership Unit is based upon the weighted average
number of Units of 32,352.11 and 32,368.73 during 1998 and 1997, 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.
-24-
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% noncompounded
Cumulative Preferred Return.
-25-
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 $2,772 and $3,822 was unpaid as of December 31, 1998 and 1997,
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 $61,445, $63,744
and $63,835 have been incurred for the years ended December 31, 1998, 1997 and
1996, respectively, of which $14,024 was unpaid as of December 31, 1998.
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 $76,926, $10,812 and
$26,628 have been incurred and are included in marketing expenses to Affiliates
for the years ended December 31, 1998, 1997 and 1996, respectively, of which
$3,000 and $6,521 was unpaid as of December 31, 1998 and 1997, 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 $48,939, $102,300 and $54,653 have been incurred
for the years ended December 31, 1998, 1997 and 1996, respectively, and are
included in investment properties, all of which has been paid.
-26-
<TABLE>
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investment Properties
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 12/31/98 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 81,360 - 846,852 -
2 McHenry 201.0000 11/09/93 2,020,314 122,145 2,142,459 1,626,154 509,825 3,258,788 77,589
(17.7420) 08/02/95
(8.6806) Var 1997
(1.9290) Var 1998
3 Will 34.0474 03/04/94 1,235,830 88,092 1,323,922 37,857 - 1,361,779 -
4 Will 86.9195 03/30/94 1,778,820 143,817 1,922,637 284,622 191,001 2,016,258 560,663
(2.3050) Var 1997
(3.3600) Var 1998
5 LaSalle 190.9600 04/01/94 532,000 18,145 550,145 63,732 6,655 607,222 56,765
(2.0600) 04/08/98
6 DeKalb 59.0800 05/11/94 670,207 58,373 728,580 486,869 1,215,449 - 15,720
(4.9233) Apr 1998
(54.1567) 07/23/98
7 Kendall 200.8210 07/28/94 1,506,158 82,999 1,589,157 24,738 - 1,613,895 -
8 Kendall 133.0000 08/17/94 1,300,000 106,949 1,406,949 6,996 - 1,413,945 -
9 LaSalle 335.9600 08/30/94 993,441 79,329 1,072,770 111,937 - 1,184,707 -
10 Kendall 223.7470 09/16/94 2,693,025 205,660 2,898,685 29,588 - 2,928,273 -
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 7,075 - 1,435,626 -
12 Kendall 110.2530 09/28/94 600,001 51,220 651,221 58,263 - 709,484 -
------------ ------------ ------------ -------------- ------------ ------------ ------------
Subtotal 15,597,338 1,106,011 16,703,349 2,820,518 2,144,008 17,376,829 710,737
-27-
-27-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investment Properties (continued)
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 12/31/98 Recognized
- ------ --------- --------- ---------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Subtotal 15,597,338 1,106,011 16,703,349 2,820,518 2,144,008 17,376,829 710,737
13 LaSalle 352.7390 10/06/94 1,032,666 91,117 1,123,783 22,723 1,146,506 - 143,987
(10.0000) 07/27/98
(342.7390) 08/31/98
14 Kendall 134.7760 10/26/94 1,000,000 81,674 1,081,674 6,711 - 1,088,385 -
15 McHenry 169.5400 10/31/94 2,900,000 79,196 2,979,196 252,993 - 3,232,189 -
16 McHenry 207.0754 11/30/94 1,760,256 101,388 1,861,644 245,860 - 2,107,504 -
17 LaSalle 236.4400 12/07/94 1,060,286 74,735 1,135,021 6,608 - 1,141,629 -
18 Kendall 386.9900 11/02/95 934,993 126,329 1,061,322 501 1,061,823 - 348,398
(386.9900) 08/31/98
------------ ------------ ------------ -------------- ------------ ------------ ------------
$24,285,539 1,660,450 25,945,989 3,355,914 4,352,337 24,946,536 1,203,122
============ ============ ============ ============== ============ ============ ============
</TABLE>
-28-
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, 1998 for Federal
income tax purposes was approximately $24,947,000 (unaudited).
(c) Reconciliation of real estate owned:
1998 1997
---- ----
Balance at January 1,................... $28,301,315 27,714,600
Additions during year................... 254,963 911,759
------------ ------------
28,556,278 28,626,359
Sales during year....................... 3,609,742 325,044
------------ ------------
Balance at December 31,................. $24,946,536 28,301,315
============ ============
(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, 1998, the Partnership had farm leases of generally one year
in duration, for approximately 2,084 acres of the approximately 2,460 acres
owned.
(6) Mortgage Loans Receivable
As a result of the sale of the remaining acres of Parcel 6 for a sales price of
$1,125,000 on July 7, 1998, the Partnership received a mortgage loan receivable
of $1,125,000 and recorded a deferred gain on sale of $7,889. The deferred
gain will be recognized over the life of the related mortgage loan receivable
as principal payments are received, of which $5,084 has been recognized as of
December 31, 1998. Of the $1,125,000 mortgage loan receivable received,
$725,000 accrued interest at 9% per annum and had a maturity date of November
30, 1998 (extended from September 30, 1998). The remaining $400,000 accrues
interest at 9% per annum and has a maturity date of July 7, 2001, at which time
all accrued interest, as well as principal, is due. As of December 31, 1998,
accrued interest totaled $44,919.
(7) Subsequent Events
On February 4, 1999, the Partnership sold Parcel 3 to an unaffiliated third
party for $2,600,000. The Partnership received net sales proceeds of
$2,594,180 and recorded a gain on sale of $1,232,401.
On February 12, 1999, the Partnership sold two additional lots of Parcel 2 to
an unaffiliated third party for $163,029. The Partnership received net sales
proceeds of $152,752 and recorded a gain on sale of $91,781.
-29-
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements on accounting or financial disclosure during 1998.
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
Brenda G. Gujral........ President and Chief Operating Officer-IREIC
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
-30-
DANIEL L. GOODWIN (age 55) 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. Mr.
Goodwin 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 six 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 Mr. Goodwin as 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 BBF Family Services' 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 the Northeastern
Illinois University Board of Trustees in January 1996.
-31-
In 1988 he received the Outstanding Business Leader Award from the Oak Brook
Jaycees and in March 1994, he won the Excellence in Business Award from the
DuPage Area Association of Business and Industry. Additionally, he was honored
with a dinner sponsored 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 1998 Corporate Leader of the Year by the Oak Brook Area
Association of Commerce and Industry. The Ray Graham Association for People
with Disabilities honored Mr. Goodwin as the 1999 Employer of the Year. For
many years, he has been Chairman of the National Football League Players
Association Mackey Awards for the benefit of inner-city youth and he served as
the recent Chairman of the Speakers Club of the Illinois House of
Representatives.
ROBERT H. BAUM (age 55) 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 and currently serves as a director of
Westbank. Mr. Baum also 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 55) 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, Mr. Cosenza
immediately supervises a staff of nine 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 a Director on the Board of Westbank in
Westchester and Hillside, Illinois.
-32-
ROBERT D. PARKS (age 55) 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 member of the Real
Estate Investment Association and a member of NAREIT.
NORBERT J. TREONIS (age 48) 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, Metropolitan
Construction Services, Inc. and Inland Commercial Property Management, 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 Building Owners
and Managers Association, the National Apartment Association and the
Chicagoland Apartment Association.
BRENDA G. GUJRAL (age 56) is President and Chief Operating Officer of
Inland Real Estate Investment Corporation (IREIC), the parent company of the
Advisor. She is also President and Chief Operating Officer of the Dealer-
Manager, Inland Securities Corporation (ISC), a member firm of the National
Association of Securities Dealers (NASD).
Mrs. Gujral has overall responsibility for the operations of IREIC, including
the distribution of checks to over 50,000 investors, review of periodic
communications to those investors, the filing of quarterly and annual reports
for Inland's publicly registered investment programs with the Securities and
Exchange Commission, compliance with other SEC and NASD securities regulations
both for IREIC and ISC, review of asset management activities, and marketing
and communications with the independent broker/dealer firms selling Inland's
current and prior programs. Mrs. Gujral works with internal and outside legal
counsel in structuring and registering the prospectuses for IREIC's investment
programs.
Mrs. Gujral has been with Inland for 18 years, becoming an officer in 1982.
Prior to joining Inland, she worked for the Land Use Planning Commission
establishing an office in Portland, Oregon, to implement land use legislation
for that state.
She is a graduate of California State University. She holds Series 7, 22, 39
and 63 licenses from the NASD and is a member of the National Association of
Real Estate Investment Trusts (NAREIT) and the National Association of Female
Executives.
-33-
CATHERINE L. LYNCH (age 40) 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 46) joined Inland in 1982 and is currently the
President of Inland Real Estate Equities, 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.
ROBERTA S. MATLIN (age 54) 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. She is a Director of Inland Real Estate Investment Corporation,
Inland Securities Corporation, and Inland Real Estate Advisory Services, Inc.
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 41) 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 46) 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.
-34-
KELLY TUCEK (age 36) 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 41) 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.
-35-
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, 1998, such costs were $59,757, of which $2,772 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,
1998, the Partnership incurred $61,445 in Asset Management Fees, of which
$14,024 was unpaid.
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,
1998, such costs were $76,926, of which $3,000 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, 1998,
the Partnership incurred and paid $48,939 of such costs and are included in
investment properties.
-36-
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, 1998:
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.
-37-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The financial statements listed in the index at page 13 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 1998 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.
-38-
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 22, 1999
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 22, 1999
/s/ Patricia A. Challenger
By: Patricia A. Challenger
Senior Vice President
Date: March 22, 1999
/s/ Kelly Tucek
By: Kelly Tucek
Principal Financial Officer
and Principal Accounting Officer
Date: March 22, 1999
/s/ Daniel L. Goodwin
By: Daniel L. Goodwin
Director
Date: March 22, 1999
/s/ Robert H. Baum
By: Robert H. Baum
Director
Date: March 22, 1999
-39-
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