INLAND REAL ESTATE CORP, 424B3, 1998-11-20

INLAND REAL ESTATE CORP
424B3, 1998-11-20
REAL ESTATE INVESTMENT TRUSTS

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Inland Real Estate Corporation
Sticker Supplement

This Supplement No. 16 to our Prospectus which is dated April 7, 1998 updates
information contained in the "Management", "Real Property Investments",
"Management Discussion and Analysis of the Financial Condition and Results of
Operations" and "Plan of Distribution" sections of the Prospectus. Any word
that is capitalized in this supplement but not defined has the same meaning as
in our Prospectus.

Management

7. Borrowing. On November 5, 1998, we borrowed through our newly formed
subsidiary, Inland Real Estate Column I, LLC ("Inland Column"), $25,000,000
from Column Financial ("Column"). The loan bears interest at a fixed rate of
7.0% and matures in ten (10) years. The loan requires monthly payments of
interest only with the principal due at maturity.

Inland Column is a single-member Illinois limited liability company; we are its
sole member. We conveyed title to five (5) of our properties to Inland Column.
The properties are: Rivertree Court, Winnetka Commons, Walgreens Store located
in Woodstock, Illinois, Woodland Heights and Berwyn Plaza. As collateral for
the loan, Column was given a first mortgage on each of the five (5) properties.
Our property manager remains responsible for the day-to-day management and
operation of each of the properties.

Costs incurred in connection with the financing were approximately $37,125.
These costs and expenses were paid out of the proceeds of the loan. The
remaining proceeds of the loan will be used to purchase or develop additional
properties.

Real Property Investments

Springboro Plaza, Springboro, Ohio

On November 12, 1998, the Company purchased Springboro Plaza from an
unaffiliated third party for approximately $9,295,000. The property is located
in Springboro, Ohio and contains approximately 154,000 square feet of leasable
space. Its anchor tenants are Kroger and Kmart.

Riverplace Centre, Noblesville, Indiana

On November 12, 1998, the Company purchased Riverplace Centre from an
unaffiliated third party for approximately $6,065,000. The property is located
in Noblesville, Indiana and contains approximately 74,414 square feet of
leasable space. Its anchor tenants are Kroger and Fashion Bug.

Elmwood Park Shopping Center (Phase I), Elmwood Park, Illinois

On November 16, 1998, the Company purchased Elmwood Park Shopping Center (Phase
I) from an unaffiliated third party for approximately $2,753,000. The property
is located in Elmwood Park, Illinois and contains approximately 18,264 square
feet of leasable space. Its sole tenant is Total Beverage.

Real Property Investments - Potential Property Acquisitions

Elmwood Park Shopping Center (Phase II). On November 16, 1998, we purchased
the entire fee simple interest in Elmwood Park Shopping Center (Phase I). We
now anticipate purchasing the entire fee simple interest in a property known as
"Elmwood Park Shopping Center (Phase II)." Elmwood Park Shopping Center (Phase
II) is a Neighborhood Retail Center located adjacent to Elmwood Park Shopping
Center (Phase I) on West North Avenue in Elmwood Park, Illinois. Phase II is
currently under construction and is scheduled to be completed in December,
1998. Phase II consists of a one-story, two-tenant retail building containing
approximately 5,940 leasable square feet. St. Louis Bread Company and Spring
Communications, Inc. have entered into leases to lease all of Phase II. We
anticipate purchasing Phase II for approximately $1,402,100.

Plan of Distribution

We commenced this Offering of 25,000,000 shares on April 7, 1998. As of
November 19, 1998, we had sold 13,016,821 shares resulting in net proceeds of
$139,831,253. Inland Securities Corporation, an Affiliate of our Advisor, is
dealer-manager of this Offering and is entitled to receive selling commissions
and certain other fees, as discussed further in our Prospectus. As of November
19, 1998, the commissions and fees incurred to Inland Securities Corporation
totaled $13,602,578. Our Advisor is entitled to receive an Advisor Asset
Management fee, as described more fully in our Prospectus. We also pay an
Affiliate of the Advisor fees to manage and lease our properties. This
arrangement is also described more fully in our Prospectus. We may pay
Acquisition Expenses up to .5% of the money that we raise in this Offering but
in no event will we pay Acquisition Expenses on an individual property that
exceeds 6% of the purchase price of any individual property.

SUPPLEMENT NO. 16
DATED NOVEMBER 20, 1998
TO OUR PROSPECTUS DATED APRIL 7, 1998
OF INLAND REAL ESTATE CORPORATION

We are providing this Supplement No. 16 to you in order to supplement our
Prospectus. We previously supplemented our Prospectus by providing you with
Supplement No. 15 dated November 4, 1998, Supplement No. 14 dated October 19,
1998, Supplement No. 13 dated October 15, 1998 and Supplement No. 12 dated
October 7, 1998. Supplement No. 12 combined all of the information contained
in Supplement Nos. 1 through 11. Therefore, you must read this Supplement No.
16, Supplement No. 15, Supplement No. 14, Supplement No. 13, Supplement No. 12
and the Prospectus for the most up to date information. This Supplement No. 16
updates information in the "Management," "Real Property Investments,"
"Management Discussion and Analysis of the Financial Condition and Results of
Operations" and "Plan of Distribution" sections of our Prospectus. Any word
that is capitalized in this Supplement but not defined has the same meaning as
in our Prospectus.

Management

-1-

Real Property Investments

Springboro Plaza, Springboro, Ohio

On November 12, 1998, we purchased the entire fee simple interest in a
Community Center located at Route 73 and Pioneer Boulevard in Springboro, Ohio
known as "Springboro Plaza." We purchased Springboro Plaza from Midwest Strip
Center Partners, an unaffiliated third party, for approximately $9,295,000. We
paid for Springboro Plaza using cash and cash equivalents. The purchase price
was approximately $60.34 per square foot, which we concluded was fair and
reasonable based on, among other things, an appraisal that we received and
presented to our board of directors.

Springboro Plaza, built in 1992, is a one-story, multi-tenant retail facility.
Springboro Plaza contains 154,034 leasable square feet. As of November 19,
1998, Springboro Plaza was 100% leased. When we evaluated Springboro Plaza as
a potential acquisition, we considered a variety of factors including location,
demographics, tenant mix, price per square foot, existing rental rates compared
to market rates, and occupancy. We believe that the center is located within a
vibrant economic area. The center is newly constructed and has a grocery
store, Kroger as its anchor. We did not consider any other factors when we
decided to acquire the property.

We do not anticipate making any significant repairs and improvements to
Springboro Plaza over the next few years. However, if we were to make any
repairs or improvements, a substantial portion of any monies spent on repairs
and improvements would be paid by the center's tenants, pursuant to the terms
of our leases with these tenants.

The table below sets forth the occupancy rate at Springboro Plaza expressed as
a percentage of total gross leasable area and the average annual base rent per
square foot:

Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------

1997 100 5.80
1996 100 6.04
1995 100 5.94
1994 100 5.96
1993 100 5.96

-2-

Tenants leasing more than 10% of the total gross leasable area of the property
are Kroger, a grocery store and Kmart, a discount store. These leases require
the tenants to pay base annual rent on a monthly basis as follows:

Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------

Kroger 56,634 37 6.56 Currently 04/30/17
Option 1 6.56 05/01/17 04/30/22
Option 2 6.56 05/01/22 04/30/27
Option 3 6.56 05/01/27 04/30/32
Option 4 6.56 05/01/32 04/30/37
Option 5 6.56 05/01/37 04/30/42

Kmart 91,266 59 5.25 Currently 06/30/17
Option 1 5.25 07/01/17 06/30/22
Option 2 5.25 07/01/22 06/30/27
Option 3 5.25 07/01/27 06/30/32
Option 4 5.25 07/01/32 06/30/37
Option 5 5.25 07/01/37 06/30/42

For federal income tax purposes, our depreciable basis in Springboro Plaza will
be approximately $7,000,000. When we calculate depreciation expense, for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 years.

Real estate taxes paid in 1998 for the tax year ended 1997 were $114,890. The
real estate taxes payable were calculated by multiplying the assessed value by
a tax rate of 3.3865%.

On November 19, 1998, a total of 154,034 square feet was leased to four tenants
at Springboro Plaza. The following tables set forth information with respect
to the amount of and expiration of the leases at this Community Center:

Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Kroger 56,634 04/17 5/5 yr. 371,519 6.56
Kmart 91,266 06/17 5/5 yr. 479,147 5.25
China Garden 4,000 02/03 1/5 yr. 48,000 12.00
Classic Cards 2,134 11/03 1/5 yr. 24,157 11.00

-3-

Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

1998 - - - 922,140 - - -

1999 - - - 923,207 - - -

2000 - - - 924,274 - - -

2001 - - - 925,341 - - -

2002 - - - 926,408 - - -

2003 2 6,134 75,742 926,408 12.35 3.98 8.18

2004 - - - 850,666 - - -

2005 - - - 850,666 - - -

2006 - - - 850,666 - - -

2007 - - - 850,666 - - -

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion
of our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Springboro Plaza property as
of October 16, 1998, of $9,500,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.

Riverplace Centre, Noblesville, Indiana

On November 12, 1998, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Logan Street and Nixon Street in
Noblesville, Indiana known as "Riverplace Centre". We purchased Riverplace
Centre from Midwest Strip Center Partners, an unaffiliated third party, for
approximately $6,065,000. We paid for Riverplace Centre using cash and cash
equivalents. The purchase price was approximately $81.51 per square foot,
which we concluded was fair and reasonable based on, among other things, an
appraisal that we received and presented to our board of directors.

-4-

Riverplace Centre, built in 1992 and added to in 1994, is a one-story, multi-
tenant retail facility. Riverplace Centre contains 74,414 leasable square
feet. As of November 19, 1998, Riverplace Centre was 100% leased. When we
evaluated Riverplace Centre as a potential acquisition, we considered a variety
of factors including location, demographics, tenant mix, price per square foot,
existing rental rates compared to market rates, and occupancy. We believe that
the center is located within a vibrant economic area. The center is newly
constructed and has a grocery store, Kroger as its anchor. We did not consider
any other factors when we decided to acquire the property.

We do not anticipate making any significant repairs and improvements to
Riverplace Centre over the next few years. However, if we were to make any
repairs or improvements, a substantial portion of any monies spent on repairs
and improvements would be paid by the center's tenants, pursuant to the terms
of our leases with these tenants.

The table below sets forth the occupancy rate at Riverplace Centre expressed as
a percentage of total gross leasable area and the average annual base rent per
square foot:

Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1997 100 8.10
1996 100 8.07
1995 100 8.00
1994* 100 5.42
1993* 100 7.25

* As of December 31, 1993, only the 50,000 square foot Kroger store existed.
During 1994, the additional 24,414 square feet was completed and leased in July
and August.

Tenants leasing more than 10% of the total gross leasable area of the property
are Kroger, a grocery store and Fashion Bug, a discount women's clothes store.
These leases require the tenants to pay base annual rent on a monthly basis as
follows:

Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Kroger 50,000 67 7.25 Currently 01/31/12
Option 1 7.25 02/01/12 01/31/17
Option 2 7.25 02/01/17 01/31/22
Option 3 7.25 02/01/22 01/31/27
Option 4 7.25 02/01/27 01/31/32
Option 5 7.25 02/01/32 01/31/37
Option 6 7.25 02/01/37 01/31/42

Fashion Bug 10,800 15 7.50 Currently 01/31/05
Option 1 8.00 02/01/05 01/31/10
Option 2 8.50 02/01/10 01/31/15
Option 3 9.00 02/01/15 01/31/20
Option 4 9.50 02/01/20 01/31/25

-5-

For federal income tax purposes, our depreciable basis in Riverplace Centre
will be approximately $4,500,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.

Real estate taxes paid in 1998 for the tax year ended 1997 were $99,564. The
real estate taxes payable were calculated by multiplying the taxable value by a
tax rate of 10.4118%.

On November 19, 1998, a total of 74,414 square feet was leased to eleven
tenants at Riverplace Centre. The following tables set forth information with
respect to the amount of and expiration of the leases at this Neighborhood
Retail Center:

Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Stewart Title 1,400 08/99 - 18,200 13.00
Fashion Bug 10,800 01/05 4/5 yr. 81,000 7.50
Great Clips 1,400 06/99 1/5 yr. 18,550 13.25
H & R Block 1,460 04/00 - 16,790 11.50
Shatar Rent to Own 3,154 07/99 1/3 yr. 30,752 9.75
Crystal Cleaners 1,400 07/99 - 18,200 13.00
Kroger 50,000 01/12 6/5 yr. 362,500 7.25
Papa John's Pizza 1,200 07/99 2/5 yr. 15,756 13.13
Mail Boxes Etc. 1,200 07/99 1/5 yr. 15,000 12.50
Personal Finance Co 1,200 06/01 - 15,000 12.50
Staffmark 1,200 04/02 - 14,700 12.25

-6-

1998 - - - 606,448 - - -

1999 6 9,754 116,458 606,448 11.94 13.11 19.20

2000 1 1,460 16,790 489,990 11.50 1.96 3.43

2001 1 1,200 15,000 473,200 12.50 1.61 3.17

2002 1 1,200 14,700 458,200 12.25 1.61 3.21

2003 - - - 443,500 - - -

2004 - - - 443,500 - - -

2005 1 10,800 81,000 443,500 7.50 14.51 18.26

2006 - - - 362,500 - - -

2007 - - - 362,500 - - -

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion
of our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Riverplace Centre property
as of October 15, 1998, of $6,200,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.

Elmwood Park Shopping Center (Phase I), Elmwood Park, Illinois

On November 16, 1998, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at 7330-7400 North Avenue in Elmwood Park,
Illinois known as "Elmwood Park Shopping Center (Phase I)". We purchased
Elmwood Park Shopping Center (Phase I) from Elmwood Park, LLC, an unaffiliated
third party, for approximately $2,753,000. We paid for Elmwood Park Shopping
Center (Phase I) using cash and cash equivalents. The purchase price was
approximately $113.74 per square foot, which we concluded was fair and
reasonable based on, among other things, an appraisal that we received and
presented to our board of directors.

-7-

Elmwood Park Shopping Center (Phase I), built in 1997, is a one-story, single-
tenant retail facility. Elmwood Park Shopping Center (Phase I) contains 18,264
leasable square feet. As of November 19, 1998, Elmwood Park Shopping Center
(Phase I) was 100% leased. When we evaluated Elmwood Park Shopping Center
(Phase I) as a potential acquisition, we considered a variety of factors
including location, demographics, price per square foot, existing rental rates
compared to market rates, and occupancy. We believe that the center is located
within a vibrant economic area. We did not consider any other factors when we
decided to acquire the property.

We do not anticipate making any significant repairs and improvements to Elmwood
Park Shopping Center (Phase I) over the next few years. However, if we were to
make any repairs or improvements, a substantial portion of any monies spent on
repairs and improvements would be paid by the center's tenants, pursuant to the
terms of our leases with these tenants.

The table below sets forth the occupancy rate at Elmwood Park Shopping Center
(Phase I) expressed as a percentage of total gross leasable area and the
average annual base rent per square foot:

Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------

1997 100 14.50

One tenant, Total Beverage, a discount liquor store, leases 100% of the total
gross leasable area of the property. This lease requires the tenant to pay
base annual rent on a monthly basis as follows:

Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------

Total Beverage 18,264 100 14.50 Currently 08/31/02
16.00 09/01/02 08/31/07
Option 1 17.75 09/01/07 08/31/12
Option 2 19.75 09/01/12 08/31/17
Option 3 21.75 09/01/17 08/31/22

For federal income tax purposes, our depreciable basis in Elmwood Park Shopping
Center (Phase I) will be approximately $2,000,000. When we calculate
depreciation expense, for tax purposes, we will use the straight-line method.
We depreciate buildings and improvements based upon estimated useful lives of
40 years.

-8-

Real estate taxes paid in 1998 for the tax year ended 1997 were $74,992. The
real estate taxes payable were calculated by multiplying the assessed value by
an equilizer of 2.1489% and a tax rate of 11.074%.

On November 19, 1998, a total of 18,264 square feet was leased to one tenant at
Elmwood Park Shopping Center (Phase I). The following tables set forth
information with respect to the amount of and expiration of the lease at this
Neighborhood Retail Center:

Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Total Beverage 18,264 08/07 3/5 yr. 264,828 14.50

1998 -
2002 - - - 264,828 - - -

2003 -
2006 - - - 292,224 - - -

2007 1 18,264 229,224 229,224 16.00 100 100

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of our
management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Elmwood Park Shopping Center
(Phase I) property, as of November 4, 1998, of $2,775,000. You should note
that appraisals are estimates of value and, therefore, you should not rely upon
them as a measure of true worth or realizable value.

-9-

Real Property Investments - Potential Property Acquisitions

Elmwood Park Shopping Center (Phase II).

On November 16, 1998, we purchased the entire fee simple interest in Elmwood
Park Shopping Center (Phase I). We now anticipate purchasing the entire fee
simple interest in a property known as "Elmwood Park Shopping Center (Phase
II)." Elmwood Park Shopping Center (Phase II) is a Neighborhood Retail Center
located adjacent to Elmwood Park Shopping Center (Phase I) on West North Avenue
in Elmwood Park, Illinois. Phase II is currently under construction and is
scheduled to be completed in December, 1998. Phase II consists of a one-story,
two-tenant retail building containing approximately 5,940 leasable square feet.
St. Louis Bread Company and Spring Communications, Inc. have entered into
leases to lease all of Phase II. We anticipate purchasing Phase II for
approximately $1,402,100.

-10-

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" 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 Company'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, limitations on the area
in which the Company may acquire properties; risks associated with borrowings
secured by the Company's properties; competition for tenants and customers;
federal, state or local regulations; adverse changes in general economic or
local conditions; competition for property acquisitions with third parties that
have greater financial resources than the Company; inability of lessees to meet
financial obligations; uninsured losses; risks of failing to qualify as a REIT;
and potential conflicts of interest between the Company and its Affiliates
including the Advisor.

Liquidity and Capital Resources

On April 7, 1998, the Company commenced an offering of an additional 27,000,000
Shares at $11.00 per Share, on a best efforts basis, ("the Fourth Offering").
As of September 30, 1998, the Company had received subscriptions for a total of
10,054,469 Shares from the Fourth Offering. In addition, as of September 30,
1998, the Company has distributed 1,737,836 Shares through the Company's
Distribution Reinvestment Program. As of September 30, 1998, the Company has
repurchased 86,119 Shares through the Company's Share Repurchase Program. As a
result, as of September 30, 1998, Gross Offering Proceeds total $477,717,785
net of Shares repurchased through the Share Repurchase Program.

On September 28, 1998, the Board of Directors authorized the Company to engage
Everen Securities, Inc. to advise the Company on strategic alternatives
designed to increase the value of an investment. These alternative include,
but are not limited to, evaluating whether: (1) the Company should become
internally advised and managed by acquiring the Advisor and the Property
Manager; (2) the Company should list our common stock on an exchange or other
trading system; and (3) the Company should seek to merge with a third party
that is already listed on an exchange or other trading system.

In order to maximize the Company's flexibility in evaluating strategic
alternatives, the Board of Directors has decided to terminate the Offering on
or prior to December 31, 1998. After the termination of the Offering, the
source of future cash for investing in properties will be from financing
obtained on currently unencumbered properties.

Cash and cash equivalents consists of cash and short-term investments. Cash
and cash equivalents at September 30, 1998 and December 31, 1997 were
$106,277,855 and $51,145,587 respectively. The increase in cash and cash
equivalents since December 31, 1997 resulted primarily from the sale of shares
and loan proceeds from financing secured by the Company's properties.
Partially offsetting the increase in cash and cash equivalents was the use of
cash resources to purchase additional properties since December 31, 1997 and
the payment of offering costs associated with sale of Shares. The Company
intends to use cash and cash equivalents to purchase additional properties, to
pay distributions and to pay Offering Costs.

-11-

As of September 30, 1998, the Company had acquired seventy-two properties. The
properties owned by the Company are currently generating sufficient cash flow
to cover operating expenses of the Company plus pay a monthly distribution on
weighted average shares. Beginning June 1, 1998, the Company increased the
monthly distribution paid to Stockholders of $.88 per annum on weighted average
shares. Distributions declared for the nine months ended September 30, 1998
were $24,550,083, a portion of which represents a return of capital for federal
income tax purposes. The return of capital portion of the distributions cannot
be determined at this time and will be calculated at year end.

Management of the Company monitors the various qualification tests the Company
must meet to maintain its status as a real estate investment trust. Large
ownership of the Company's stock is tested upon purchase to determine that no
more than 50% in value of the outstanding stock is owned directly, or
indirectly, by five or fewer persons or entities at any time. Management of
the Company also determines, on a quarterly basis, that the Gross Income, Asset
and Distribution Tests imposed by the REIT requirements are met. On an ongoing
basis, as due diligence is performed by the Advisor on potential real estate
purchases or temporary investment of uninvested capital, management determines
that the income from the new asset will qualify for REIT purposes. Beginning
with the tax year ended December 31, 1995, the Company has qualified as a REIT.

Cash Flows From Operating Activities

Net cash provided by operating activities increased from $9,809,108 for the
nine months ended September 30, 1997 to $25,761,090 for the nine months ended
September 30, 1998. This increase is due primarily to the purchase of
additional properties in 1998 and a full nine months of operations on
properties acquired during the nine months ended September 30, 1997. As of
September 30, 1998, the Company had acquired seventy-two properties, as
compared to thirty-six properties as of September 30, 1997.

Cash Flows From Investing Activities

Cash flows used in investing activities were utilized primarily for the
purchase of and additions to properties.

Cash Flows From Financing Activities

For the nine months ended September 30, 1998, the Company generated
$240,134,293 of cash flows from financing activities as compared to
$115,598,014 of cash flows generated from financing activities for the nine
months ended September 30, 1997. This increase is due primarily to the
increase in proceeds raised of $228,485,988 from the sale of Shares, net of
Shares repurchased, for the nine months ended September 30, 1998, as compared
to $110,092,663 raised from the sale of Shares, net of Shares repurchased, for
the nine months ended September 30, 1997. This increase is also due to the
Company obtaining $58,902,000 in financing secured by seventeen of the
Company's properties for the nine months ended September 30, 1998, as compared
to $32,848,380 in financing secured by ten of the Company's properties for the
nine months ended September 30, 1997. This increase is partially offset by an
increase in the cash used to pay costs associated with selling Shares for the
nine months ended September 30, 1998 as compared to the nine months ended
September 30, 1997. For the nine months ended September 30, 1998, the Company
paid offering costs totaling $22,692,010, as compared to $11,117,570 of
offering costs paid for the nine months ended September 30, 1997. The increase
is also partially offset by an increase in the amount of distributions paid for
the nine months ended September 30, 1998 of $22,981,479 as compared to the
distributions paid for the nine months ended September 30, 1997 of $7,518,259.

-12-

The Advisor has guaranteed payment of all public offering expenses (excluding
selling commissions, the marketing contribution and the due diligence expense
allowance fee) in excess of 5.5% of the Gross Offering Proceeds of the Offering
(the "Gross Offering Proceeds") or all organization and offering expenses
(including such selling expenses) which together exceed 15% of the Gross
Offering Proceeds. As of September 30, 1998, organizational and offering costs
totaling 50,897,764 did not exceed these limitations.

Results of Operations

At September 30, 1998, the Company owned fifty-two Neighborhood Retail Centers,
nine Community Centers and eleven single-user retail properties.

Total income for the nine months ended September 30, 1998 and 1997 was
$50,117,685 and $19,655,649 respectively. This increase was due to the purchase
of additional properties in 1998 and a full nine months of operations on
properties acquired during the nine months ended September 30, 1997. As of
September 30, 1998, the Company had acquired seventy-two properties, as compared
to thirty-six properties as of September 30, 1997. The purchase of additional
properties also resulted in increases in property operating expenses including
depreciation expense.

The decrease in mortgage interest to Affiliates for the nine months ended
September 30, 1998, as compared to the nine months ended September 30, 1997, is
due to the payoff of the acquisition financing totaling $8,000,000. The Company
continues to have a mortgage collateralized by the Walgreens, Decatur property
payable to an Affiliate.

The increase in mortgage interest to non-affiliates for the three and nine
months ended September 30, 1998, as compared to the three and nine months ended
September 30, 1997, is due the Company obtaining additional financing secured by
previously acquired centers as well as mortgages assumed as part of the
purchases of Aurora Commons, Rivertree Court, Fashion Square, Shoppes at Mill
Creek and Schaumburg Plaza. The mortgages payable totaled $178,106,593 as of
September 30, 1998 as compared to $88,774,835 as of September 30, 1997.

Interest income is the result of cash and cash equivalents being invested in
short-term investments until a property is purchased.

The increases in professional services to Affiliates and non-affiliates and
general and administrative expenses to Affiliates for the three and nine months
ended September 30, 1998, as compared to the three and nine months ended
September 30, 1997, is due to the management of an increased number of real
estate assets and an increased number of stockholders.

The Advisor may receive an annual Advisor Asset Management Fee of not more than
1% of the Average Invested Assets, paid quarterly. The Company paid an Advisor
Asset Management Fee of .40% and .75% for the nine months ended September 30,
1998 and 1997, respectively.

The increase in acquisition cost expenses is due to the increased number of
properties considered for acquisition by the Company and not purchased.

-13-

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 Company 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 Company
has assessed its vulnerability to the so-called "Year-2000 Issue" with respect
to its equipment and computer systems.

State of Readiness

The Company has identified the following three areas for "Year-2000" compliance
efforts:

Business Computer Systems: The majority of the Company's information technology
systems were developed internally and include accounting, lease management,
investment portfolio tracking, and tax return preparation. The Company 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 Company does
not anticipate any material costs relating to its business computer systems
regarding year 2000 compliance since the Company's critical hardware and
software systems use four digits to represent the applicable year. The Company
does use various computers, so-called "PC's", that may run software that may not
use four digits to represent the applicable year. The Company 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 Company's critical
systems. The Company is considering independent testing of its critical
systems.

Tenants and Suppliers: The Company is in the process of surveying tenants,
suppliers and other parties with whom the Company does a significant amount of
business to identify the Company's potential exposure in the event such parties
are not year 2000 compliant in a timely manner. Since this area involves some
parties over which the Company 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 Company 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 Company's investigations
and assessments of possible year 2000 issues are in a preliminary stage, and
currently the Company is not aware of any material impact on its business,
operations or financial condition due to year 2000 non-compliance by any of the
Company's tenants or suppliers.

Non-Information Technology Systems: In the operation of its properties, the
Company has acquired equipment with embedded technology such as
microcontrollers, which operate heating, ventilation, and air conditioning
systems, fire alarms, security systems, telephones and other equipment utilizing
time-sensitive technology. The Company is in the process of evaluating its
potential exposure and costs if such non-information technology systems are not
year 2000 compliant and expects to be able to complete its assessment during the
second quarter of 1999.

-14-

Year 2000 Costs

The Company's Advisor and its Affiliates estimate that costs to achieve year
2000 compliance will not exceed $50,000. However, only approximately 3% of these
costs will be directly allocated to and paid by the Company. The balance of the
year 2000 compliance costs, approximately 97%, will be paid by the Advisor and
its Affiliates. Total year 2000 compliance costs incurred through September 30,
1998 are estimated at approximately $5,000.

Year 2000 Risks

The most reasonable likely worst case scenario for the Company 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. The most reasonable likely worst case scenario for the
Company with respect to the year 2000 non-compliance of its tenants is failure
to receive rental income which could result in the Company being unable to meet
cash requirements for monthly expenses and distributions. The most reasonable
likely worst case scenario for the Company with respect to the year 2000 non-
compliance of its suppliers is the failure to supply necessary utilities;
including, but not limited to heating, as a result of a malfunctioning of non-
information technology systems in some of the Company's properties.

Contingency Plan

The Company is in the process of formulating a contingency plan which will be
developed by July of 1999.

-15-

Funds from Operations

One of the Company's objectives is to provide cash distributions to its
Stockholders from cash generated by the Company's operations. Cash generated
from operations is not equivalent to the Company's net operating income as
determined under GAAP. Due to certain unique operating characteristics of real
estate companies, the National Association of Real Estate Investment Trusts
("NAREIT"), an industry trade group, has promulgated a standard known as "Funds
from Operations" or "FFO" for short, which it believes more accurately reflects
the operating performance of a REIT such as the Company. As defined by NAREIT,
FFO means net income computed in accordance with GAAP, less extraordinary,
unusual and non-recurring items, excluding gains (or losses) from debt
restructuring and sales of property plus depreciation and amortization and after
adjustments for unconsolidated partnership and joint ventures in which the REIT
holds an interest. The Company has adopted the NAREIT definition for computing
FFO because management believes that, subject to the following limitations, FFO
provides a basis for comparing the performance and operations of the Company to
those of other REITs. The calculation of FFO may vary from entity to entity
since capitalization and expense policies tend to vary from entity to entity.
Items which are capitalized do not impact FFO, whereas items that are expensed
reduce FFO. Consequently, the presentation of FFO by the Company may not be
comparable to other similarly titled measures presented by other REITs. FFO is
not intended to be an alternative to "Net Income" as an indicator of the
Company's performance nor to "Cash Flows from Operating Activities" as
determined by GAAP as a measure of the Company's capacity to pay distributions.
FFO and funds available for distribution are calculated as follows:

September 30, September 30,
1998 1997
---- ----
Net income................................... $16,255,691 5,329,961
Depreciation................................. 8,087,624 3,007,678
------------- ------------
Funds from operations(1)................... 24,343,315 8,337,639

Normal amortizing principal payments of debt. (54,273) (48,652)
Deferred rent receivable (2)................. (1,435,055) (441,104)
Acquisition cost expenses (3)................ 212,129 105,142
Rental income received under
master lease agreements (4)................. 1,566,547 296,688
------------- ------------
Funds available for distribution............. $24,632,663 8,249,713
============ ============

(1) FFO does not represent cash generated from operating activities calculated
in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. FFO should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.

-16-

(2) Certain tenant leases contain provisions providing for stepped rent
increases. GAAP requires the Company to record rental income for the
period of occupancy using the effective monthly rent, which is the average
monthly rent for the entire period of occupancy during the term of the
lease.

(3) Acquisition costs expenses include costs and expenses relating to the
acquisition of properties. These costs are estimated to be up to .5% of
the Gross Offering Proceeds and are paid from the Proceeds of the
Offering.

(4) As part of several purchases, the Company will receive rent under master
lease agreements on some of the spaces currently vacant for periods
ranging from one to two years or until the spaces are leased. GAAP
requires that as these payments are received, they be recorded as a
reduction in the purchase price of the properties rather than as rental
income.

The following table lists the approximate physical occupancy levels for the
Company's properties as of the end of each quarter during 1998 and 1997. N/A
indicates the property was not owned by the Company at the end of the quarter.

1997 1998
------------------------ ------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Walgreens 100% 100% 100% 100% 100% 100% 100%
Decatur, Illinois
Eagle Crest 97% 97% 97% 97% 95% 95% 100%
Naperville, Illinois
Montgomery-Goodyear 77% 77% 77% 77% 77% 77% 77%
Montgomery, Illinois
Hartford/Naperville Plaza 100% 100% 94% 100% 100% 100% 100%
Naperville, Illinois
Nantucket Square 94% 94% 96% 96% 96% 98% 100%
Schaumburg, Illinois
Antioch Plaza 59% 59% 68% 68% 68% 68% 68%
Antioch, Illinois
Mundelein Plaza 100% 96% 97% 100% 95% 95% 92%
Mundelein, IL
Regency Point 100% 100% 97% 97% 97% 97% 97%
Lockport, IL
Prospect Heights 83% 83% 83% 83% 83% 92% 92%
Prospect Heights, IL
Montgomery-Sears 85% 85% 85% 95% 95% 95% 100%
Montgomery, IL
Zany Brainy 100% 100% 100% 100% 100% 100% 100%
Wheaton, IL
Salem Square 97% 97% 97% 97% 97% 97% 97%
Countryside, IL
Hawthorn Village 97% 98% 99% 99% 100% 100% 100%
Vernon Hills, IL

-17-

Six Corners 94% 94% 94% 90% 93% 90% 82%*
Chicago, IL
Spring Hill Fashion Ctr. 96% 96% 96% 100% 98% 100% 100%
West Dundee, IL
Crestwood Plaza 100% 100% 100% 100% 100% 100% 100%
Crestwood, IL
Park St. Claire 100% 100% 100% 100% 100% 100% 100%
Schaumburg, IL
Lansing Square 90% 90% 90% 90% 90% 90% 88%*
Lansing, IL
Summit of Park Ridge 82% 81% 84% 83% 83% 87% 91%
Park Ridge, IL
Grand and Hunt Club 100% 100% 100% 100% 100% 100% 100%
Gurnee, IL
Quarry Outlot 100% 100% 100% 100% 100% 100% 100%
Hodgkins, IL
Maple Park Place 99% 97% 98% 98% 98% 98% 94%
Bolingbrook, IL
Aurora Commons 99% 100% 100% 98% 98% 98% 95%
Aurora, IL
Lincoln Park Place 100% 100% 100% 60% 60% 60% 60%*
Chicago, IL
Ameritech N/A 100% 100% 100% 100% 100% 100%
Joliet, IL
Dominicks-Schaumburg N/A 100% 100% 100% 100% 100% 100%
Schaumburg, IL
Dominicks-Highland Park N/A 100% 100% 100% 100% 100% 100%
Highland Park, IL
Niles Shopping Center N/A 100% 87% 60% 60% 100% 100%
Niles, IL
Mallard Crossing N/A 95% 95% 95% 95% 95% 100%
Elk Grove Village, IL
Cobblers Crossing N/A 91% 89% 89% 89% 89% 92%*
Elgin, IL
Calumet Square N/A 100% 100% 100% 100% 100% 100%
Calumet City, IL
Sequoia Shopping Center N/A 96% 97% 93% 93% 96% 100%
Milwaukee, WI
Riversquare Shopping Ctr. N/A 100% 100% 95% 95% 100% 100%
Naperville, IL
Rivertree Court N/A N/A 97% 99% 99% 99% 99%*
Vernon Hills, IL
Shorecrest Plaza N/A N/A 96% 96% 96% 96% 96%*
Racine, WI
Dominicks-Glendale Heights N/A N/A 100% 100% 100% 100% 100%
Glendale Heights, IL
Party City Store N/A N/A N/A 100% 100% 100% 100%
Oak Brook Terrace, IL
Eagle Country Market N/A N/A N/A 100% 100% 100% 100%
Roselle, IL

-18-

Dominicks-Countryside N/A N/A N/A 100% 100% 100% 100%
Countryside, IL
Terramere Plaza N/A N/A N/A 80% 80% 86% 92%
Arlington Heights, IL
Wilson Plaza N/A N/A N/A 100% 100% 100% 100%
Batavia, IL
Iroquois Center N/A N/A N/A 81% 81% 81% 73%*
Naperville, IL
Fashion Square N/A N/A N/A 88% 80% 87% 97%
Skokie, IL
Naper West N/A N/A N/A 86% 88% 88% 90%*
Naperville, IL
Dominicks-West Chicago N/A N/A N/A N/A 100% 100% 100%
West Chicago, IL
Shops at Coopers Grove N/A N/A N/A N/A 96% 100% 100%
Country Club Hills, IL
Maple Plaza N/A N/A N/A N/A 100% 100% 100%
Downers Grove, IL
Orland Park Retail N/A N/A N/A N/A 84% 84% 100%
Orland Park, IL
Wisner/Milwaukee Plaza N/A N/A N/A N/A 100% 100% 100%
Chicago, IL
Homewood Plaza N/A N/A N/A N/A 100% 100% 100%
Homewood, IL
Elmhurst City Center N/A N/A N/A N/A 99% 99% 99%*
Elmhurst, IL
Shoppes of Mill Creek N/A N/A N/A N/A 97% 98% 98%*
Palos Park, IL
Oak Forest Commons N/A N/A N/A N/A 99% 95% 100%
Oak Forest, IL
Prairie Square N/A N/A N/A N/A 94% 90% 90%*
Sun Prairie, WI
Downers Grove Plaza N/A N/A N/A N/A 84% 100% 100%
Downers Grove, IL
St. James Crossing N/A N/A N/A N/A 88% 91% 91%*
Westmont, IL
Woodfield Plaza N/A N/A N/A N/A 97% 94% 94%*
Schaumburg, IL
Lake Park Plaza N/A N/A N/A N/A 95% 93% 76%*
Michigan City, IN
Chestnut Court N/A N/A N/A N/A 85% 86% 88%*
Darien, IL
Western & Howard N/A N/A N/A N/A N/A 100% 100%
Chicago, IL
High Point Center N/A N/A N/A N/A N/A 97% 97%*
Madison, WI
Wauconda Shopping Center N/A N/A N/A N/A N/A 100% 100%
Wauconda, IL
Berwyn Plaza N/A N/A N/A N/A N/A 100% 100%
Berwyn, IL

-19-

1997 1998
------------------------ ------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Woodland Heights N/A N/A N/A N/A N/A 86% 86%*
Streamwood, IL
Schaumburg Shopping Center N/A N/A N/A N/A N/A 93% 93%*
Schaumburg, IL
Bergen Plaza N/A N/A N/A N/A N/A 99% 98%*
Oakdale, MN
Walgreens-Woodstock N/A N/A N/A N/A N/A 100% 100%
Woodstock, IL
Winnetka Commons N/A N/A N/A N/A N/A N/A 100%
New Hope, MN
Eastgate Shopping Center N/A N/A N/A N/A N/A N/A 91%*
Lombard, IL
Fairview Heights Plaza N/A N/A N/A N/A N/A N/A 78%*
Fairview Heights, IL
Orland Greens N/A N/A N/A N/A N/A N/A 100%
Orland Park, IL
Bakers Shoes N/A N/A N/A N/A N/A N/A 100%
Chicago, IL

* As part of the purchase of these properties the Company receives rent under
master lease agreements on the vacant space, which results in 100% economic
occupancy at September 30, 1998 for each of these centers,except Six
Corners, Prairie Square and Lansing Square where the master lease agreement
results in economic occupancy of 86%, 97% and 97%, respectively.

The master lease agreements are for periods ranging from one to two years
from the purchase date or until the spaces are leased.

Subsequent Events

In October 1998, the Company paid a distribution of $3,345,717 to the
Stockholders.

On October 1, 1998, the Company purchased the Two Rivers Plaza from an
unaffiliated third party for approximately $6,770,000. The property is located
in Bolingbrook, Illinois and contains approximately 57,900 square feet of
leasable space. Its anchor tenants are Marshall's, Toy Works, Inc. and Sizes
Unlimited.

On October 1, 1998, the Company obtained additional financing totaling
$54,600,000 from an unaffiliated lender. To secure the first mortgage
financing, the Company formed a limited liability company known as "Inland Real
Estate LB I LLC" (the "LLC") to act as the borrower. The assets of the LLC
consist of Naperwest, Lake Park Plaza, Homewood Plaza, Wisner/Milwaukee,
Elmhurst City Center, Oak Forest Commons, St. James Crossing, Chestnut Court,
Bergen Plaza, Western & Howard, High Point Center and Wauconda Shopping Center
properties. Loan fees total $636,000 in connection with this loan. The
mortgage loan has a term of ten years and prior to maturity date, requires
monthly payments of interest only at the annual rate of 6.36%.

On October 8, 1998, the Company purchased the Woodfield Commons East and West
Shopping Center from an unaffiliated third party for approximately $27,000,000.
The property is located in Schaumburg, Illinois and contains approximately
207,106 square feet of leasable space. Its anchor tenants are Comp USA, Toys R
Us, Inc. and Tower Records.

-20-

On October 14, 1998, the Company purchased the Edinburgh Festival Shopping
Center from an unaffiliated third party for approximately $9,250,000. The
property is located in Brooklyn Park, Minnesota and contains approximately
91,613 square feet of leasable space. As part of the purchase of this property,
the Company agreed to assume the existing mortgage with Woodmen of the World for
$6,077,134. The mortgage loan will have a term of ten years and, prior to
maturity date, will require payments of interest only, fixed at 6.75%. The
Company will pay fees of approximately $48,000 in connection with the loan
assumption.

On October 30, 1998, the Company consummated a joint venture transaction with
B.I.J. Limited Partnership, an Illinois limited partnership ("BIJ"). To effect
the transaction, the Company formed a limited liability company known as "Inland
Joliet Commons L.L.C." (the "LLC") to own and operate Joliet Commons Shopping
Center ("Joliet Commons Shopping Center") located at U.S. 30 and Willow Road in
Joliet, Illinois. Pursuant to the LLC Operating Agreement (the "Agreement"),
the Company contributed approximately $52,000 in cash to obtain a one percent
(1%) equity interest in the LLC, which will be accounted for under the equity
method. BIJ contributed Joliet Commons Shopping Center to the LLC, which was
valued at approximately $5,100,000, ($19,800,000 less indebtedness of
$14,700,000) to obtain a ninety-nine percent (99%) equity interest in the LLC.
In accordance with the Agreement, BIJ may transfer its equity interest in the
LLC to certain persons as provided for in the Agreement. Each holder of an
equity interest in the LLC has the option to convert its equity interest into
shares of the Company's common stock (an "Exchange"). No holder of an equity
interest in the LLC, however, may Exchange its equity interest for a period of
one year from the effective date of the Agreement.

On October 23, 1998, the Company disbursed an additional $203,538 in connection
with the construction loan secured by the Staples Office Supply store to be
built in Freeport, Illinois.

On November 5, 1998, the Company obtained additional financing totaling
$25,000,000 from an unaffiliated lender. To secure the first mortgage
financing, the Company formed a limited liability company known as "Inland Real
Estate Column I LLC" (the "LLC") to act as the borrower. The assets of the LLC
consist of Rivertree Court, Winnetka Commons, Woodland Heights, Berwyn Plaza and
the Woodstock Walgreens properties. Loan fees total $37,125 in connection with
this loan. The mortgage loan has a term of ten years and prior to maturity
date, requires monthly payments of interest only at the annual rate of 7.0%.

On November 12, 1998, the Company purchased Riverplace Center from an
unaffiliated third party for approximately $6,065,000. The property is located
in Noblesville, Indiana and contains approximately 74,414 square feet of
leasable space. Its anchor tenants are Kroger and Fashion Bug.

On November 16, 1998, the Company purchased Elmwood Park Shopping Center from an
unaffiliated third party for approximately $2,753,000. The property is located
in Elmwood Park, Illinois and contains approximately 18,264 square feet of
leasable space. Its sole tenant is Total Beverage.

On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.

-21-

Plan of Distribution

We commenced this Offering of 25,000,000 Shares on April 7, 1998. As of
November 19, 1998, we had sold 13,016,821 shares resulting in net proceeds of
$139,831,253.

Inland Securities Corporation, an Affiliate of our Advisor, serves as dealer
manager of this Offering and is entitled to receive selling commissions and
certain other fees, as discussed further in our Prospectus. As of November 19,
1998, the commissions and fees incurred to Inland Securities Corporation
totaled $13,602,578. We also pay an Affiliate of our Advisor fees to manage
and lease our properties. We incurred Property Management Fees of
approximately $1,904,860 for the nine months ended September 30, 1998 and
$1,120,000 for the year ended December 31, 1997. Our Advisor may also receive
an annual Advisor Asset Management Fee of not more than 1% of the Average
Invested Assets, paid quarterly. For the nine months ended September 30, 1998,
we had incurred Advisor Asset Management Fees of $1,252,815. For the year
ended December 31, 1997, we had incurred Advisor Asset Management Fees of
$843,000. We may pay Acquisition Expenses up to .5% of the money that we raise
in this Offering but in no event will we pay Acquisition Expenses on any
individual property that exceeds 6% of the purchase price of any individual
property. As of September 30, 1998, we had paid Acquisition Expenses of
approximately $2,800,000.

-22-

Index to Financial Statements
Page

Balance Sheets at September 30, 1998 (unaudited)
and December 31, 1997............................................. F- 1

Statements of Operations for the three and nine months ended
September 30, 1998 and 1997 (unaudited)........................... F- 3

Statements of Stockholders' Equity at September 30, 1998 (unaudited)
and December 31, 1997............................................. F- 4

Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)........................... F- 5

Notes to Financial Statements....................................... F- 7

-23-

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets

September 30, 1998 and December 31, 1997
(unaudited)

Assets
------

1998 1997
---- ----
Investment properties (Notes 1, 4 and 5):
Land............................................ $137,749,833 75,801,319
Land under development.......................... 5,351,744 -
Building and improvements....................... 344,531,547 200,509,519
------------- -------------
487,633,124 276,310,838
Less accumulated depreciation................... 13,753,107 5,665,483
------------- -------------
Net investment properties....................... 473,880,017 270,645,355

Cash and cash equivalents including amounts
held by property manager (Note 1)............... 106,277,855 51,145,587
Restricted cash (Note 1).......................... 13,303,842 2,073,799
Accounts and rents receivable (Note 5)............ 10,935,833 4,926,643
Mortgage receivable (Note 6)...................... 1,986,952 -
Deposits and other assets......................... 6,417,561 3,924,431
Deferred organization costs (net of accumulated
amortization of $15,104 and $10,985 at September
30, 1998 and December 31, 1997, respectively)
(Note 1)........................................ 12,358 16,477
Loan fees (net of accumulated amortization of
$285,039 and $131,266 at September 30, 1998
and December 31, 1997, respectively) (Note 1)... 1,474,972 857,839
------------- -------------
Total assets.................................. $614,289,390 333,590,131
============= =============

See accompanying notes to financial statements.

F-1

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets
(continued)

September 30, 1998 and December 31, 1997
(unaudited)

Liabilities and Stockholders' Equity
------------------------------------
1998 1997
Liabilities: ---- ----
Accounts payable................................ $ 286,067 47,550
Accrued offering costs to Affiliates............ 406,765 544,288
Accrued offering costs to non-affiliates........ 10,670 36,574
Accrued interest payable to Affiliates.......... 4,579 4,641
Accrued interest payable to non-affiliates...... 1,025,788 560,821
Accrued real estate taxes....................... 12,859,623 7,031,732
Distributions payable (Note 8).................. 3,345,717 1,777,113
Security deposits............................... 1,282,675 754,359
Mortgages payable (Note 7)...................... 178,106,593 106,589,710
Unearned income................................. 1,263,271 495,535
Other liabilities............................... 2,297,130 493,116
Due to Affiliates (Note 2)...................... 820,632 337,825
------------- -------------
Total liabilities............................. 201,709,510 118,673,264
------------- -------------

Stockholders' Equity (Notes 1 and 2):
Preferred stock, $.01 par value, 6,000,000 Shares
authorized; none issued and outstanding at
September 30, 1998 and December 31, 1997....... - -
Common stock, $.01 par value, 100,000,000 Shares
authorized; 46,792,305 and 24,973,340 issued
and outstanding at September 30, 1998 and
December 31, 1997, respectively............... 467,923 249,733
Additional paid-in capital (net of offering
costs of $50,870,302 and 28,341,719 at
September 30, 1998 and December 31, 1997,
respectively, of which $45,071,495 and
$24,172,634 was paid to Affiliates,
respectively)................................. 426,379,560 220,640,345
Accumulated distributions in excess of
net income.................................... (14,267,603) (5,973,211)
------------- -------------
Total stockholders' equity.................... 412,579,880 214,916,867
------------- -------------
Commitments and contingencies
(Notes 1, 3, 5, 7 and 8)........................

Total liabilities and stockholders' equity........ $614,289,390 333,590,131
============= =============

See accompanying notes to financial statements.

F-2

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Operations

For the three and nine months ended September 30, 1998 and 1997
(unaudited)

Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
Income: ---- ---- ---- ----
Rental income (Notes 1 and 5)... $13,532,908 6,204,790 34,964,084 14,176,240
Additional rental income........ 4,582,313 1,159,442 11,767,354 4,569,303
Interest income................. 1,435,950 358,797 3,270,815 833,600
Other income.................... 53,118 15,286 115,432 76,506
----------- ---------- ---------- ----------
19,604,289 7,738,315 50,117,685 19,655,649
Expenses: ----------- ---------- ---------- ----------
Professional services to
Affiliates.................... 20,180 - 63,203 19,470
Professional services to
non-affiliates................ 26,585 8,228 142,283 72,153
General and administrative
expenses to Affiliates........ 125,799 26,284 273,225 64,339
General and administrative
expenses to non-affiliates.... 18,770 14,510 78,978 77,198
Advisor asset management fee.... 272,439 417,159 1,252,815 940,159
Property operating expenses
to Affiliates................. 755,741 349,929 1,904,860 766,259
Property operating expenses
to non-affiliates............. 4,789,547 1,341,468 13,118,138 5,384,314
Mortgage interest to Affiliates. 13,758 14,000 41,460 72,513
Mortgage interest to
non-affiliates................ 3,225,342 1,666,344 8,529,387 3,724,060
Depreciation.................... 3,068,690 1,368,159 8,087,624 3,007,678
Amortization.................... 60,344 32,144 157,892 92,403
Acquisition cost expenses to
Affiliates.................... 80,593 45,063 167,343 80,841
Acquisition cost expenses to
non-affiliates................ 22,635 7,230 44,786 24,301
----------- ---------- ---------- ----------
12,480,423 5,290,518 33,861,994 14,325,688
----------- ---------- ---------- ----------
Net income.................... $ 7,123,866 2,447,797 16,255,691 5,329,961
=========== ========== ========== ==========
Net income per weighted average
common stock shares outstanding
basic and diluted (44,370,036 and
16,779,827 for the three months
ended September 30, 1998 and 1997,
respectively and 36,811,187 and
12,854,708 for the nine months
ended September 30, 1998 and
1997, respectively)............. $ .16 .15 .44 .41
=========== ========== ========== ==========

See accompanying notes to financial statements.

F-3

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statement of Stockholders' Equity

September 30, 1998 and December 31, 1997
(unaudited)

Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
---------- ------------- ------------ -----------

Balance December 31, 1997... $ 249,733 220,640,345 (5,973,211) 214,916,867

Net income.................. - - 16,255,691 16,255,691

Distributions declared
($.67 for the nine months
ended September 30, 1998
per weighted average common
stock shares outstanding). - - (24,550,083) (24,550,083)

Proceeds from Offering (net
of Offering costs of
$22,528,583).............. 218,263 206,040,685 - 206,258,948

Repurchases of Shares....... (333) (301,210) - (301,543)
---------- ------------- ------------ ------------
Balance September 30, 1998.. $ 467,663 426,379,820 (14,267,603) 412,579,880
========== ============= ============ ============

See accompanying notes to financial statements.

F-4

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Cash Flows

For the nine months ended September 30, 1998 and 1997
(unaudited)
1998 1997
Cash flows from operating activities: ---- ----
Net income...................................... $ 16,255,691 5,329,961
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.................................. 8,087,624 3,007,678
Amortization.................................. 157,892 92,403
Rental income under master lease agreements... 1,566,547 296,688
Straight line rental income................... (1,435,055) (441,104)
Changes in assets and liabilities:
Accounts and rents receivable............... (4,574,135) (2,034,798)
Other assets................................ (4,411,660) 64,884
Accrued interest payable.................... 464,905 463,351
Accrued real estate taxes................... 5,827,891 1,507,144
Accounts payable............................ 238,517 (177,708)
Unearned income............................. 767,736 695,066
Other liabilities........................... 1,804,014 194,286
Due to Affiliates........................... 482,807 488,911
Security deposits........................... 528,316 322,346
------------- -------------
Net cash provided by operating activities......... 25,761,090 9,809,108
------------- -------------
Cash flows from investing activities:
Restricted cash................................. (11,230,043) (1,114,595)
Additions to investment properties.............. (1,805,430) (731,018)
Purchase of investment properties............... (197,659,220) (99,031,269)
Mortgage receivable............................. (1,986,952) -
Deposits on investment properties............... 1,918,530 (3,018,530)
------------- -------------
Net cash used in investing activities............. (210,763,115) (103,895,412)
------------- -------------
Cash flows from financing activities:
Proceeds from offering.......................... 228,787,531 110,332,398
Repurchases of shares........................... (301,543) (239,735)
Payments of offering costs...................... (22,692,010) (11,117,570)
Loan proceeds................................... 58,902,000 32,848,380
Loan fees....................................... (770,906) (531,537)
Distributions paid.............................. (22,981,479) (7,518,259)
Repayment of notes from Affiliates.............. - (8,000,000)
Principal payments of debt...................... (809,300) (175,663)
------------- -------------
Net cash provided by financing activities......... 240,134,293 115,598,014
------------- -------------
Net increase in cash and cash equivalents......... 55,132,268 21,511,710

Cash and cash equivalents at beginning of period.. 51,145,587 8,491,735
------------- -------------
Cash and cash equivalents at end of period........ $106,277,855 30,003,445
============= =============

See accompanying notes to financial statements.

F-5

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Cash Flows
(continued)

For the nine months ended September 30, 1998 and 1997
(unaudited)

Supplemental schedule of noncash investing and financing activities:

1998 1997
---- ----
Purchase of investment property................. $(211,083,403) (132,295,154)
Assumption of debt.............................. 13,424,183 25,263,885
Note payable.................................... - 8,000,000
------------- -------------
$(197,659,220) (99,031,269)
============== ==============

Distributions payable........................... $ 3,345,717 1,315,932
============== ==============

Cash paid for interest.......................... $ 8,105,942 3,333,222
============== ==============

See accompanying notes to financial statements.

F-6

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements

September 30, 1998
(unaudited)

The accompanying financial statements have been prepared in accordance with
Generally Accepted Accounting Principles ("GAAP") for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-
X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. Readers of this Quarterly
Report should refer to the Company's audited financial statements for the
fiscal year ended December 31, 1997, which are included in the Company's 1997
Annual Report, as certain footnote disclosures contained in such audited
financial statements have been omitted from this Report. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation have been included in this quarterly report.

(1) Organization and Basis of Accounting

Inland Real Estate Corporation (the "Company") was formed on May 12, 1994. The
Company may acquire existing Neighborhood Retail Centers and Community Centers
located primarily within an approximate 400-mile radius of its headquarters in
Oak Brook, Illinois. The Company may also acquire single-user retail
properties in locations throughout the United States, certain of which may be
sale and leaseback transactions, net leased to creditworthy tenants. The
Company is also permitted to construct or develop properties, or render
services in connection with such development or construction, subject to the
Company's compliance with the rules governing real estate investment trusts
under the Internal Revenue Code of 1986, ("Code"), as amended. Inland Real
Estate Advisory Services, Inc. (the "Advisor"), an Affiliate of the Company, is
the advisor to the Company.

On October 14, 1994, the Company commenced an initial public offering, on a
best efforts basis, ("Initial Offering") of 5,000,000 shares of common stock
("Shares") at $10 per Share. As of July 24, 1996, the Company had received
subscriptions for a total of 5,000,000 Shares, thereby completing the Initial
Offering. On July 24, 1996, the Company commenced an offering of an additional
10,000,000 Shares at $10.00 per Share, on a best efforts basis, (the "Second
Offering"). As of July 10, 1997, the Company had received subscriptions for a
total of 10,000,000 Shares, thereby completing the Second Offering. On July
14, 1997, the Company commenced an offering of an additional 20,000,000 Shares
at $10.00 per Share, on a best efforts basis, (the "Third Offering"). As of
March 19, 1998, the Company had received subscriptions for a total of
20,000,000 Shares, thereby completing the Third Offering. On April 7, 1998,
the Company commenced an offering of an additional 27,000,000 Shares at $11.00
per Share, on a best efforts basis, (the "Fourth Offering"). As of September
30, 1998, the Company had received subscriptions for a total of 10,054,469
Shares in the Fourth Offering. In addition, as of September 30, 1998, the
Company has distributed 1,737,836 Shares through the Company's Distribution
Reinvestment Program ("DRP"). As of September 30, 1998, the Company has
repurchased a total of 86,119 Shares through the Share Repurchase Program. As
a result, as of September 30, 1998, Gross Offering Proceeds total $477,717,785
net of Shares repurchased through the Share Repurchase Program.

F-7

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

The Company qualified as a real estate investment trust ("REIT") under the Code
for federal income tax purposes commencing with the tax year ending December
31, 1995. Since the Company qualified for taxation as a REIT, the Company
generally will not be subject to federal income tax to the extent it
distributes its REIT taxable income to its stockholders. If the Company fails
to qualify as a REIT in any taxable year, the Company will be subject to
federal income tax on its taxable income at regular corporate tax rates. Even
if the Company qualifies for taxation as a REIT, the Company may be subject to
certain state and local taxes on its income and property and federal income and
excise taxes on its undistributed income.

The preparation of financial statements in conformity with GAAP 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.

The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents and are carried at cost, which
approximates fair value.

Restricted cash at September 30, 1998 includes $719,322 held in escrow for the
principal payments on the Aurora Commons mortgage payable and $234,804 held in
escrow by the mortgagee for the payment of real estate taxes at Aurora Commons
and Shoppes at Mill Creek Shopping Center. Restricted cash at September 30,
1998 also includes amounts held as vacancy escrows on various other properties.
The monthly amounts drawn for rent under the master lease escrows decrease the
basis of the respective properties. Restricted cash at September 30, 1998 also
includes $572,408 held in escrow for the second phase of construction at Oak
Forest Commons and $95,985 held in escrow for possible vacancies upon
completion of the second phase at Oak Forest Commons. Restricted cash at
September 30, 1998 also includes $67,861 in escrows established by the Seller
of Bergen Plaza as a guarantee to cover possible unpaid expenses, an obligation
to complete a bike path for a new tenant and possible claims by tenants for
reimbursement of snowplowing expenses. Restricted cash at September 30, 1998
also includes $500,000 deposited with the City of Oakdale as security for any
shortfall of taxes due to the tax increment financing used to develop the
property. This requirement expires in the year 2004.

F-8

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

On August 6, 1998, the Company acquired title to approximately 27 acres of land
located at the northeast intersection of North Avenue and Kirk Road in St.
Charles, Illinois, to be developed into a 204,640 square foot shopping center
to be known as "Stuarts Crossing" from H.P. Kirk Partners, L.L.C., an
unaffiliated third party. The initial purchase price of $14,176,627, was
funded with cash and cash equivalents. Included in the purchase price paid by
the Company is $8,824,883 which has been placed in a development escrow for
infrastructure development and the construction of a Jewel/Osco Food Store and
adjacent stores. This development escrow is included in restricted cash. The
Company will receive interest at the rate of 9.0% per annum, paid monthly, on
funds escrowed to date.

Deposits and other assets represent deposits made to third parties for
financing in progress and potential acquisitions.

Statement of Financial Accounting Standards No. 121 requires the Company 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 operations and sale of properties. 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. As of September 30,
1998, the Company does not believe any such impairments of its properties
exists.

Depreciation expense is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 30 years for
the building and building improvements and 15 years for the site improvements.

Loan fees are amortized on a straight line basis over the life of the related
loans.

Deferred organization costs are amortized over a 60-month period.

Offering costs are offset against the Stockholders' equity accounts. Offering
costs consist principally of printing, selling and registration costs.

Rental income is recognized on a straight-line basis over the term of each
lease. The difference between rental income earned on a straight-line basis
and the cash rent due under the provisions of the lease agreements is recorded
as deferred rent receivable. The Company recognizes percentage rents as they
are received.

The Company believes that the interest rates associated with the mortgages
payable and notes payable to Affiliates approximate the market interest rates
for these types of debt instruments, and as such, the carrying amount of the
mortgages payable and notes payable to Affiliates approximate their fair value.

Certain reclassifications were made to the 1997 financial statements to conform
with the 1998 presentation.

F-9

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present
fairly the financial position and results of operations for the period
presented herein. Results of interim periods are not necessarily indicative of
results to be expected for the year.

(2) Transactions with Affiliates

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to each of the
Offerings. Such expenses include postage, data processing and marketing and
are reimbursed at cost. The collective costs to Affiliates incurred relating
to the Offerings were $1,251,429 and $1,047,694 as of September 30, 1998 and
December 31, 1997, respectively, of which $0 and $24,374 was unpaid as of
September 30, 1998 and December 31, 1997, respectively. In addition, an
Affiliate of the Advisor serves as Dealer Manager of each of the Offerings and
is entitled to receive selling commissions, a marketing contribution and a due
diligence expense allowance fee from the Company in connection with each of the
Offerings. Such amounts incurred were $43,820,066 and $23,124,938 as of
September 30, 1998 and December 31, 1997, respectively, of which $406,765 and
$519,914 was unpaid as of September 30, 1998 and December 31, 1997,
respectively. Approximately $37,323,000 and $19,581,000 of these commissions
had been passed through from the Affiliate to unaffiliated soliciting
broker/dealers as of September 30, 1998 and December 31, 1997, respectively.

As of September 30, 1998, the Company had incurred $50,897,764 of organization
and offering costs to Affiliates and non-affiliates. Pursuant to the terms of
the Offering, the Advisor is required to pay organizational and offering
expenses (excluding sales commissions, the marketing contribution and the due
diligence expense allowance fee) in excess of 5.5% of the gross proceeds of the
Offering (the "Gross Offering Proceeds") or all organization and offering
expenses (including selling commissions) which together exceed 15% of Gross
Offering Proceeds. As of September 30, 1998, organizational and offering
expenses did not exceed the 5.5% or 15% limitations. The Company anticipates
that these costs will not exceed these limitations upon completion of the
Fourth Offering, however, any excess amounts will be reimbursed by the Advisor.

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
administration of the Company. Such costs are included in professional
services to Affiliates, general and administrative expenses to Affiliates and
acquisition costs expensed.

On October 14, 1994, the Advisor contributed $200,000 to the capital of the
Company for which it received 20,000 Shares.

F-10

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

The Advisor may receive an annual Advisor Asset Management Fee of not more than
1% of the Average Invested Assets, paid quarterly. For any year in which the
Company qualifies as a REIT, the Advisor must reimburse the Company: (i) to
the extent that the Advisor Asset Management Fee plus Other Operating Expenses
paid during the previous calendar year exceed 2% of the Company's Average
Invested Assets for the calendar year or 25% of the Company's Net Income for
that calendar year; and (ii) to the extent that Stockholders have not received
an annual Distribution equal to or greater than the 8% Current Return. For the
nine months ended September 30, 1998, the Company has incurred $1,252,815 of
such fees, of which $820,632 remains unpaid at September 30, 1998.

An Affiliate of the Advisor is entitled to receive Property Management Fees for
management and leasing services. The Company incurred and paid Property
Management Fees of $1,904,860 and $766,259 for the nine months ended September
30, 1998 and 1997, respectively, all of which has been paid.

(3) Stock Option and Dealer Warrant Plan

The Company adopted an amended and restated Independent Director Stock Option
Plan which granted each Independent Director an option to acquire 3,000 Shares
as of the date they become a Director and an additional 500 Shares on the date
of each annual stockholders' meeting commencing with the annual meeting in 1995
if the Independent Director is a member of the Board on such date. The options
for the initial 3,000 Shares granted shall be exercisable as follows: 1,000
Shares on the date of grant and 1,000 Shares on each of the first and second
anniversaries of the date of grant. The succeeding options are exercisable on
the second anniversary of the date of grant. As of September 30, 1998, options
for 1,000 Shares have been exercised for $9.05 per Share.

In addition to sales commissions, Soliciting Dealers may also receive one
Soliciting Dealer Warrant for each 40 Shares sold by such Soliciting Dealer
during the offerings, subject to state and federal securities laws. The holder
of a Soliciting Dealer Warrant will be entitled to purchase one Share from the
Company at a price stated in the Offering during the period commencing with the
first date upon which the Soliciting Dealer Warrants are issued and ending upon
the exercise period. Notwithstanding the foregoing no Soliciting Dealer
Warrant will be exercisable until one year from the date of issuance. As of
September 30, 1998, 1,016,414 warrants had been issued. As of September 30,
1998, none of these warrants were exercised.

F-11

<TABLE> INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties Initial Cost (A) Gross amount at which carried
<CAPTION> --------------------------- at end of period
Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
Single-user Retail ------- ------------- ------------- ------------ ------------- ------------- -------------
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Walgreens/Decatur
Decatur, IL............. 01/95 $ 78,330 1,130,723 - 78,330 1,130,723 1,209,053

Zany Brainy
Wheaton, IL............. 07/96 838,000 1,626,033 664 838,000 1,626,697 2,464,697

Ameritech
Joliet, IL.............. 05/97 170,000 883,293 2,544 170,000 885,837 1,055,837

Dominicks-Schaumburg
Schaumburg, IL.......... 05/97 2,294,437 8,392,661 2,679 2,294,437 8,395,340 10,689,777

Dominicks-Highland Park
Highland Park, IL....... 06/97 3,200,000 9,597,963 2,200 3,200,000 9,600,163 12,800,163

Dominicks-Glendale Heights
Glendale Heights, IL.... 09/97 1,265,000 6,942,997 9,194 1,265,000 6,952,191 8,217,191

Party City
Oakbrook Terrace, IL.... 11/97 750,000 1,231,271 - 750,000 1,231,271 1,981,271

Eagle Country Market
Roselle, IL............. 11/97 966,667 1,940,898 - 966,667 1,940,898 2,907,565

Dominicks-West Chicago
West Chicago, IL........ 01/98 1,980,130 4,325,331 - 1,980,130 4,325,331 6,305,461

Walgreens-Woodstock
Woodstock, IL........... 06/98 395,080 772,345 - 395,080 772,345 1,167,425

Bakers Shoes
Chicago, IL............. 09/98 645,284 329,741 - 645,284 329,741 975,025

Neighborhood Retail Centers
- ---------------------------
Eagle Crest Shopping Center
Naperville, IL.......... 03/95 1,878,618 2,938,352 150,098 1,878,618 3,088,450 4,967,068

Montgomery-Goodyear
Montgomery, IL.......... 09/95 315,000 834,659 (11,158) 315,000 823,501 1,138,501

Hartford/Naperville Plaza
Naperville, IL.......... 09/95 990,000 3,427,961 13,002 990,000 3,440,963 4,430,963

Nantucket Square
Schaumburg, IL.......... 09/95 1,908,000 2,349,918 (69,881) 1,908,000 2,280,037 4,188,037

F-12

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties (continued) Initial Cost (A) Gross amount at which carried
--------------------------- at end of period
Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------- ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Antioch Plaza
Antioch, IL............. 12/95 268,000 1,360,445 (120,629) 268,000 1,239,816 1,507,816

Mundelein Plaza
Mundelein, IL........... 03/96 1,695,000 3,965,560 (53,429) 1,695,000 3,912,131 5,607,131

Regency Point
Lockport, IL............ 04/96 1,000,000 4,720,800 (19,377) 1,000,000 4,701,423 5,701,423

Prospect Heights
Prospect Heights, IL.... 06/96 494,300 1,683,755 32,061 494,300 1,715,816 2,210,116

Montgomery-Sears
Montgomery, IL.......... 06/96 768,000 2,655,181 (77,754) 768,000 2,577,427 3,345,427

Salem Square
Countryside, IL......... 08/96 1,735,000 4,449,217 (16,960) 1,735,000 4,432,257 6,167,257

Hawthorn Village
Vernon Hills, IL........ 08/96 2,619,500 5,887,640 46,891 2,619,500 5,934,531 8,554,031

Six Corners
Chicago, IL............. 10/96 1,440,000 4,538,152 3,638 1,440,000 4,541,790 5,981,790

Spring Hill Fashion Corner
West Dundee, IL......... 11/96 1,794,000 7,415,396 3,955 1,794,000 7,419,351 9,213,351

Crestwood Plaza
Crestwood, IL........... 12/96 325,577 1,483,183 4,750 325,577 1,487,933 1,813,510

Quarry Outlot
Hodgkins, IL............ 12/96 522,000 1,278,431 8,872 522,000 1,287,303 1,809,303

Grand and Hunt Club
Gurnee, IL.............. 12/96 969,840 2,622,575 (52,811) 969,840 2,569,764 3,539,604

Summit of Park Ridge
Park Ridge, IL.......... 12/96 672,000 2,497,950 5,886 672,000 2,503,836 3,175,836

Park St. Claire
Schaumburg, IL.......... 12/96 319,578 986,920 226,674 319,578 1,213,594 1,553,172

F-13

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties (continued) Initial Cost (A) Gross amount at which carried
--------------------------- at end of period
Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------- ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aurora Commons
Aurora, IL.............. 01/97 3,220,000 8,318,861 3,901 3,220,000 8,322,762 11,542,762

Lincoln Park Place
Chicago, IL............. 01/97 819,000 1,299,902 (83,015) 819,000 1,216,887 2,035,887

Niles Shopping Center
Niles, IL............... 04/97 850,000 2,466,389 (26,637) 850,000 2,439,752 3,289,752

Mallard Crossing
Elk Grove Village, IL... 05/97 1,778,667 6,331,943 (51,910) 1,778,667 6,280,033 8,058,700

Cobblers Crossing
Elgin, IL............... 05/97 3,200,000 7,763,940 (148,918) 3,200,000 7,615,022 10,815,022

Calumet Square
Calumet City, IL........ 06/97 527,000 1,540,046 63,664 527,000 1,603,710 2,130,710

Sequoia Shopping Center
Milwaukee, WI........... 06/97 1,216,914 1,806,734 (19,208) 1,216,914 1,787,526 3,004,440

Riversquare Shopping Center
Naperville, IL.......... 06/97 2,853,226 3,129,130 103,872 2,853,226 3,233,002 6,086,228

Shorecrest Plaza
Racine, WI.............. 07/97 1,150,000 4,775,119 (41,121) 1,150,000 4,733,998 5,883,998

Dominicks-Countryside
Countryside, IL......... 12/97 1,375,000 925,106 - 1,375,000 925,106 2,300,106

Terramere Plaza
Arlington Heights, IL... 12/97 1,435,000 2,981,314 177,899 1,435,000 3,159,213 4,594,213

Wilson Plaza
Batavia, IL............. 12/97 310,000 999,366 - 310,000 999,366 1,309,366

Iroquois Center
Naperville, IL.......... 12/97 3,668,347 8,276,041 43,902 3,668,347 8,319,943 11,988,290

F-14

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

Fashion Square
Skokie, IL.............. 12/97 2,393,534 6,901,769 109,153 2,393,534 7,010,922 9,404,456

Shops at Coopers Grove
Country Club Hills, IL.. 01/98 1,400,897 4,413,565 (29,421) 1,400,897 4,384,144 5,785,041

Maple Plaza
Downers Grove, IL....... 01/98 1,364,202 1,821,820 - 1,364,202 1,821,820 3,186,022

Orland Park Retail
Orland Park, IL......... 02/98 460,867 795,940 (20,291) 460,867 775,649 1,236,515

Wisner/Milwaukee Plaza
Chicago, IL............. 02/98 528,576 1,383,292 - 528,576 1,383,292 1,911,868

Homewood Plaza
Homewood, IL............ 02/98 534,599 1,398,042 - 534,599 1,398,042 1,932,641

Elmhurst City Center
Elmhurst, IL............ 02/98 2,050,217 2,839,047 (361,214) 2,050,217 2,477,833 4,528,050

Shoppes of Mill Creek
Palos Park, IL.......... 03/98 3,305,949 8,001,284 33,349 3,305,949 8,034,632 11,340,581

Prairie Square
Sun Prairie, WI......... 03/98 739,575 2,381,050 (15,902) 739,575 2,365,148 3,104,723

Oak Forest Commons
Oak Forest, IL.......... 03/98 2,795,519 9,030,068 (5,628) 2,795,519 9,024,440 11,819,959

Downers Grove Market
Downers Grove, IL....... 03/98 6,224,467 11,464,821 (29,297) 6,224,467 11,435,524 17,659,991

St. James Crossing
Westmont, IL............ 03/98 2,610,600 4,933,352 (37,062) 2,610,600 4,896,290 7,506,890

High Point Center
Madison, WI............. 04/98 1,449,560 8,808,272 (6,293) 1,449,560 8,801,979 10,251,540

Western & Howard
Chicago, IL............. 04/98 439,990 1,521,960 - 439,990 1,521,960 1,961,950

Wauconda Shopping Center
Wauconda, IL............ 05/98 454,500 2,065,324 - 454,500 2,065,324 2,519,824

F-15

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties (continued) Initial Cost (A) Gross amount at which carried
--------------------------- at end of period
Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------- ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Berwyn Plaza
Berwyn, IL.............. 05/98 769,073 1,072,777 - 769,073 1,072,777 1,841,850

Woodland Heights
Streamwood, IL.......... 06/98 2,976,000 6,878,840 (55,766) 2,976,000 6,823,074 9,799,074

Schaumburg Shopping Center
Schaumburg, IL.......... 06/98 2,445,555 4,560,943 (17,775) 2,445,555 4,543,168 6,988,723

Winnetka Shopping Center
New Hope, MN.......... 07/98 1,596,600 2,847,865 - 1,596,600 2,847,865 4,444,465

Eastgate Shopping Center
Lombard, IL............. 07/98 4,252,440 2,561,359 (23,478) 4,252,440 2,537,881 6,790,321

Orland Greens Shopping Center
Orland Park, IL......... 09/98 1,246,440 3,868,264 - 1,246,440 3,868,264 5,114,704

Community Centers
- -----------------
Lansing Square
Lansing, IL............. 12/96 4,075,000 12,179,383 28,587 4,075,000 12,207,970 16,282,970

Maple Park Place
Bolingbrook, IL......... 01/97 3,665,909 11,669,428 10,603 3,665,909 11,680,031 15,345,940

Rivertree Court
Vernon Hills, IL........ 07/97 8,651,875 22,910,165 (14,120) 8,651,875 22,896,045 31,547,920

Naper West
Naperville, IL.......... 12/97 5,335,000 9,608,534 (184,961) 5,335,000 9,423,573 14,758,573

Woodfield Plaza
Schaumburg, IL.......... 01/98 4,612,277 15,159,792 (82,168) 4,612,277 15,077,624 19,689,901

Lake Park Plaza
Michigan City, IN....... 02/98 3,252,861 9,208,072 782,115 3,252,861 9,990,188 13,243,049

Chestnut Court
Darien, IL.............. 03/98 5,719,982 10,481,184 54,365 5,719,982 10,535,549 16,255,531

Bergen Plaza
Oakdale, MN............. 04/98 5,346,781 11,693,055 34,410 5,346,781 11,727,465 17,074,246

Fairview Heights Plaza
Fairview Heights, IL.... 08/98 2,350,493 8,906,294 - 2,350,493 8,906,294 11,256,787

Stuarts Crossing
St. Charles, IL (C)..... 08/98 5,351,744 - - 5,351,744 - 5,351,744
------------- ------------- ----------- ------------ ------------ ------------
Total $143,101,577 344,248,803 282,744 143,101,577 344,531,547 487,633,124
============ ============= =========== ============ ============ ============
</TABLE>
F-16

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

(4) Investment Properties (continued)

(A) The initial cost to the Company, represents the original purchase price of
the property, including amounts incurred subsequent to acquisition, which
were contemplated at the time the property was acquired.

(B) Adjustments to basis includes additions to investment properties and
payments received under master lease agreements. As part of several
purchases, the Company will receive rent under master lease agreements on
the spaces currently vacant for periods ranging from one to two years or
until the spaces are leased. GAAP requires that as these payments are
received, they be recorded as a reduction in the purchase price of the
properties rather than as rental income. The cumulative amount of such
payments was $2,547,602 and $981,055 as of September 30, 1998 and December
31, 1997, respectively.

(C) On August 6, 1998, the Company acquired title to approximately 27 acres of
land located at the northeast intersection of North Avenue and Kirk Road in
St. Charles, Illinois, to be developed into a 204,640 square foot shopping
center to be known as "Stuarts Crossing" from H.P. Kirk Partners, L.L.C.,
an unaffiliated third party. This land is classified as land under
development for financial statement purposes. (Note 1)

(5) Operating Leases

As part of the purchases of several of the properties, the Company will receive
rent under master lease agreements on spaces currently vacant for periods
ranging from one to two years or until the spaces are leased and tenants begin
paying rent. GAAP requires the Company to reduce the purchase price of the
properties as these payments are received, rather than record the payments as
rental income.

Certain tenant leases contain provisions providing for stepped rent increases.
GAAP requires the Company to record rental income for the period of occupancy
using the effective monthly rent, which is the average monthly rent for the
entire period of occupancy during the term of the lease. The accompanying
financial statements include increases of $1,435,055 and $441,104 for the nine
months ended September 30, 1998 and 1997, of rental income for the period of
occupancy for which stepped rent increases apply and $2,221,671 and $786,616 in
related accounts receivable as of September 30, 1998 and December 31, 1997,
respectively. The Company anticipates collecting these amounts over the terms
of the related leases as scheduled rent payments are made.

F-17

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

(6) Mortgage Receivable

On April 22, 1998, the Company entered into a construction loan agreement with
an unaffiliated third party, the borrower, for an entire loan amount of
$2,562,519. Disbursements are to be made periodically as work progresses in
connection with the construction of a Staples Office Supply store to be built
in Freeport, Illinois. The construction loan had an original maturity date of
October 15, 1998 which was extended to March 5, 1999. Prior to maturity, the
loan requires the borrower to make payments of interest only, on amounts
disbursed at a rate of 9.5%. Contingent upon certain criteria stated in the
contract, the Company has agreed to purchase this property upon completion,
which should occur prior to year end 1998.

(7) Mortgages Payable

Mortgages payable consist of the following at September 30, 1998 and December
31, 1997:

Current Current Balance at
Property as Interest Maturity Monthly Sept. 30, Dec. 31,
Collateral Rate Date Payment(a) 1998 1997
- ----------- ---------- --------- ---------- ----------- -----------
Mortgage payable to Affiliate:
Walgreens 7.655% 05/2004 $ 5,689 $ 717,794 727,472

Mortgages payable to non-affiliates:
Regency Point 7.453% 08/2000 (b) 4,328,866 4,373,461
Eagle Crest 7.850% 10/2003 15,162 2,350,000 2,350,000
Nantucket Square 7.850% 10/2003 14,195 2,200,000 2,200,000
Antioch Plaza 7.850% 10/2003 5,646 875,000 875,000
Mundelein Plaza 7.850% 10/2003 18,130 2,810,000 2,810,000
Montgomery-Goodyear 7.850% 10/2003 4,065 630,000 630,000
Montgomery-Sears 7.850% 08/2003 10,614 1,645,000 1,645,000
Hartford/Naperville 7.850% 08/2003 14,904 2,310,000 2,310,000
Zany Brainy 7.590% 01/2004 7,767 1,245,000 1,245,000
Prospect Heights
Plaza 7.590% 01/2004 6,831 1,095,000 1,095,000

F-18

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

Current Current Balance at
Property as Interest Maturity Monthly Sept. 30, Dec. 31,
Collateral Rate Date Payment(a) 1998 1997
- ----------- ---------- --------- ---------- ----------- -----------

Hawthorn Village
Commons 7.590% 01/2004 26,700 4,280,000 4,280,000
Six Corners Plaza 7.590% 01/2004 19,339 3,100,000 3,100,000
Salem Square
Shopping Center 7.590% 01/2004 19,526 3,130,000 3,130,000
Lansing Square 7.800% 01/2004 52,249 8,150,000 8,150,000
Spring Hill Fashion
Mall 7.800% 01/2004 30,067 4,690,000 4,690,000
Aurora Commons (c) 9.000% 10/2001 85,423 9,253,677 9,392,602
Maple Park Place 7.650% 06/2004 48,101 7,650,000 7,650,000
Dominicks-Schaumburg 7.490% 06/2004 32,909 5,345,500 5,345,500
Summit Park Ridge 7.490% 06/2004 9,850 1,600,000 1,600,000
Lincoln Park Place 7.490% 06/2004 6,464 1,050,000 1,050,000
Crestwood Plaza 7.650% 06/2004 5,686 904,380 904,380
Park St. Claire 7.650% 06/2004 4,794 762,500 762,500
Quarry 7.650% 06/2004 5,659 900,000 900,000
Grand/Hunt Club 7.490% 06/2004 11,056 1,796,000 1,796,000
Rivertree Court (d) 10.030% 11/1998 131,226 15,700,000 15,700,000
Niles Shopping Center 7.230% 01/2005 9,612 1,617,500 1,617,500
Ameritech 7.230% 01/2005 3,104 522,375 522,375
Calumet Square 7.230% 01/2005 6,138 1,032,920 1,032,920
Sequoia Shopping
Center 7.230% 01/2005 8,943 1,505,000 1,505,000
Dominicks Highland
Park 7.210% 12/2004 38,453 6,400,000 6,400,000
Fashion Square (e) 4.375% 12/2014 19,740 6,200,000 6,800,000
Mallard Crossing 7.280% 03/2005 24,233 4,050,000 -
Prairie Square 7.000% 03/2005 8,918 1,550,000 -
Orland Park Retail 7.000% 03/2005 3,596 625,000 -
Maple Plaza 7.000% 03/2005 9,105 1,582,500 -
Iroquois Center 7.000% 03/2005 34,233 5,950,000 -
Dominicks-Countryside 6.990% 03/2003 6,607 1,150,000 -
Wilson Plaza 7.000% 03/2005 3,740 650,000 -
Eagle Country Market 7.000% 03/2005 8,342 1,450,000 -
Terramere Plaza 7.000% 03/2005 12,672 2,202,500 -
Shops at Coopers
Grove 7.000% 03/2005 16,685 2,900,000 -
Party City 7.000% 03/2005 5,682 987,500 -
Cobbler Crossing 7.000% 02/2005 31,946 5,476,500 -
Dominicks-Glendale
Heights 7.000% 01/2005 23,917 4,100,000 -
Riversquare Shopping
Center 7.150% 01/2005 18,173 3,050,000 -
Shorecrest Plaza 7.100% 03/2003 17,620 2,978,000 -

F-19

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

Current Current Balance at
Property as Interest Maturity Monthly Sept. 30, Dec. 31,
Collateral Rate Date Payment(a) 1998 1997
- ----------- ---------- --------- ---------- ----------- -----------

Shoppes of Mill
Creek 8.000% 09/1999 63,333 9,500,000 -
Woodfield Plaza 6.650% 05/2005 53,200 9,600,000 -
Schaumburg Plaza (f) 9.250% 12/2009 30,125 3,908,081 -
Downers Grove Market 6.820% 08/2005 60,243 10,600,000 -
------------ -----------
Mortgages Payable.................................... $178,106,593 106,589,710
============ ===========

(a) All payments are interest only, with the exception of the loans secured by
the Walgreens, Regency Point and Aurora Commons properties.

(b) Payments on this mortgage are based on a floating interest rate of 180
basis points over the 30-day LIBOR rate, which adjusts monthly, amortizing
over 25 years.

(c) The Company received a credit for interest expense on the debt at closing,
which is included in restricted cash along with an amount set aside by the
Company for principal payments on the debt. Interest income earned on the
restricted cash amounts, when netted with interest expense on the debt,
results in an adjusted interest rate on the debt of approximately 8.2%.

(d) The Company received a credit for interest expense on the debt at closing,
which is included in unearned income and amortized over the life of the
loan. This credit, when netted with interest expense on the debt, results
in an adjusted interest rate on the debt of approximately 8.7%.

(e) As part of the purchase of this property, the Company assumed the existing
mortgage-backed Economic Development Revenue Bonds, Series 1994 offered by
the Village of Skokie, Illinois. The interest rate floats and is reset
weekly by a re-marketing agent. The current rate is 4.375%. The bonds are
further secured by an Irrevocable Letter of Credit, issued by LaSalle Bank
at a fee of 1.25% of the bond outstanding. In addition, there is a .125%
re-marketing fee paid annually. On January 15, 1998,the Company made a
$600,000 paydown on the principal outstanding.

(f) The seller deposited money into an escrow account, which together with
interest earnings on the deposit, will provide a sum that will be drawn
down on a monthly basis by the Company to reduce the effective interest
rate paid on the loan to 7% per annum for a period of five years.

F-20

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

(8) Subsequent Events

In October 1998, the Company paid a distribution of $3,345,717 to the
Stockholders.

On October 14, 1998, the Company purchased the Edinburgh Festival Shopping
Center from an unaffiliated third party for approximately $9,250,000. The
property is located in Brooklyn Park, Minnesota and contains approximately
91,613 square feet of leasable space. As part of the purchase of this
property, the Company agreed to assume the existing mortgage with Woodmen of
the World for $6,077,134. The mortgage loan will have a term of ten years and,
prior to maturity date, will require payments of interest only, fixed at 6.75%.
The Company will pay fees of approximately $48,000 in connection with the loan
assumption.

F-21

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

September 30, 1998
(unaudited)

$14,700,000) to obtain a ninety-nine percent (99%) equity interest in the LLC.
In accordance with the Agreement, BIJ may transfer its equity interest in the
LLC to certain persons as provided for in the Agreement. Each holder of an
equity interest in the LLC has the option to convert its equity interest into
shares of the Company's common stock (an "Exchange"). No holder of an equity
interest in the LLC, however, may Exchange its equity interest for a period of
one year from the effective date of the Agreement.

On October 23, 1998, the Company disbursed an additional $203,538 in connection
with the construction loan secured by the Staples Office Supply store to be
built in Freeport, Illinois.

On November 5, 1998, the Company obtained additional financing totaling
$25,000,000 from an unaffiliated lender. To secure the first mortgage
financing, the Company formed a limited liability company known as "Inland Real
Estate Column I LLC" (the "LLC") to act as the borrower. The assets of the LLC
consist of Rivertree Court, Winnetka Commons, Woodland Heights, Berwyn Plaza
and the Woodstock Walgreens properties. Loan fees total $37,125 in connection
with this loan. The mortgage loan has a term of ten years and prior to
maturity date, requires monthly payments of interest only at the annual rate of
7.0%.

On November 16, 1998, the Company purchased Elmwood Park Shopping Center from
an unaffiliated third party for approximately $2,753,000. The property is
located in Elmwood Park, Illinois and contains approximately 24,204 square feet
of leasable space. Its sole tenant is Total Beverage.

On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.

F-22