Item 1. Business
The Registrant, Inland Real Estate Growth Fund II, L.P. (the "Partnership"), was formed in June 1987, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in improved residential, retail, industrial and other income producing properties. On September 21, 1987, the Partnership commenced an Offering of 25,000 Limited Partnership Units (the "Units") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. The Partnership terminated the Offering on September 21, 1989. A total of 4,038.25 Units were sold to the public at $1,000 per Unit, yielding gross offering proceeds of $4,038,250, not including the General Partner's contribution, of which $3,077,513 was invested in two properties. In addition, offering proceeds were used to repay advances from the General Partner, pay offering and organization costs and make distributions to the Limited Partners. All of the holders of these Units have been admitted to the Partnership. As of December 31, 1997, the Partnership has repurchased through the Unit Repurchase Program a total of 34 Units ($33,993) from various Limited Partners. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnership's real property investments according to the number of Units held. Inland Real Estate Investment Corporation is the General Partner.
The Partnership is engaged solely in the business of real estate investment. A presentation of information about industry segments is not applicable and would not be material to an understanding of the Partnership's business taken as a whole.
The Partnership has made real property investments as set forth in the following table:
Name of Number Purchase Type of property and location of Units Date Ownership(a) --------------------- -------- ---------- ------------- Wellington Place Fee ownership Apartments 108 04/19/88 of land and Carol Stream, Illinois (Sold 1991) improvements
Scandinavian Health Fee ownership Club N/A 04/21/89 of land and Columbus, Ohio improvements
(a) Reference is made to Notes (2) and (3) of the Notes to Financial Statements filed with this Annual Report for the current outstanding principal balance and a description of the mortgage indebtedness secured by the Partnership's real property investment.
As of December 31, 1991, the Partnership had sold all of the eighteen buildings comprising the Wellington Place apartment complex for a total gross sales price of approximately $4,472,000. Of the total gross sales proceeds, $80,000 remains to be received through installment contracts receivable with final balloon payment due June 30, 1998. Management believes these receivables will be collected. Reference is made to Note (2) of the Notes to Financial Statements filed with this Annual Report for a description of the remaining installment contracts receivable.
The Partnership's remaining real property investment is located in Columbus, Ohio and is subject to competition from similar types of properties in the vicinity in which it is located. This property is fully leased to Scandinavian Health Club. The Partnership has no real property investments located outside the United States. The Partnership does not segregate revenues or assets by geographic region, and as such a presentation is not applicable and would not be material to an understanding of the Partnership's business taken as a whole.
The Partnership had no employees during 1997.
The terms of transactions between the Partnership and Affiliates of the General Partner of the Partnership are set forth in Item 11 and Note (5) of the Notes to Financial Statements (Item 8 of this Annual Report) to which reference is hereby made.
The Partnership has reviewed its current computer systems and does not anticipate any future problems relating to the year 2000.
Item 2.
Item 2. Properties
The Partnership owns directly the properties referred to under Item 1 above to which reference is hereby made for a description of the properties.
Item 3.
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during 1997.
PART II
Item 5.
Item 5. Market for the Partnership's Limited Partnership Units and Related Security Holder Matters
As of December 31, 1997, there were 334 holders of Units of the Partnership. There is no public market for Units nor is it anticipated that any public market for Units will develop. Reference is made to Item 6
Item 6. Selected Financial Data
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
For the years ended December 31, 1997, 1996, 1995, 1994 and 1993
(not covered by Independent Auditors' Report)
1997 1996 1995 1994 1993 ---- ---- ---- ---- ----
Total assets........... $1,509,987 1,576,248 1,566,598 1,605,345 2,102,637 =========== ========== ========== ========== ==========
Long-term debt(a)...... $ 786,015 851,755 - 935,998 949,279 =========== ========== ========== ========== ==========
Total income........... $ 219,784 224,555 222,952 242,879 538,846 =========== ========== ========== ========== ==========
(a) Reference is made to Notes (2) and (3) of the Notes to Financial Statements filed with this Annual Report for further discussion of long- term debt.
1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Operating income....... $ 58,989 58,003 44,837 78,526 292,863 Gain on sale of investment property.. - - - 31,118 503,529 ----------- ---------- ---------- ---------- ---------- Net income............. $ 58,989 58,003 44,837 109,644 796,392 =========== ========== ========== ========== ==========
Net income allocated to the one General Partner Unit:
Operating income....... 590 580 448 785 2,929 Gain on sale of investment property.. - - - 311 5,035 ----------- ---------- ---------- ---------- ---------- $ 590 580 448 1,096 7,964 =========== ========== ========== ========== ==========
Net income allocated per Limited Partnership Unit (b):
Operating income....... 14.58 14.34 11.09 19.41 72.41 Gain on sale of investment property.. - - - 7.69 124.49 ----------- ---------- ---------- ---------- ---------- $ 14.58 14.34 11.09 27.10 196.90 =========== ========== ========== ========== ==========
Cash distributions to Limited Partners.. $ 64,671 16,850 69,690 553,096 2,453,208 =========== ========== ========== ========== ==========
Cash distributions to Limited Partners per Unit (b)......... $ 16.15 4.21 17.40 138.13 612.65 =========== ========== ========== ========== ==========
Weighted Average of Limited Partnership Units outstanding.... 4,004.25 4,004.25 4,004.25 4,004.25 4,004.25 =========== ========== ========== ========== ==========
(a) The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this Annual Report.
(b) The net income per Unit, basic and diluted, and cash distribution per Limited Partner Unit data are based upon the weighted average number of such Units.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this annual report on Form 10-K constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward- looking statements involve known and unknown risks, uncertainties and other factors which may cause the Partnership's actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. These factors include, among other things, competition for tenants; federal, state, or local regulations; adverse changes in general economic or local conditions; uninsured losses; and potential conflicts of interest between the Partnership and its Affiliates, including the General Partner.
Liquidity and Capital Resources
On September 21, 1987, the Partnership commenced an Offering of 25,000 Limited Partnership Units pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. The Offering terminated on September 21, 1989 with a total of 4,038.25 Units being sold to the public at $1,000 per Unit resulting in $4,038,250 in gross offering proceeds, not including the General Partner's contribution, of which $3,077,513 was invested in two properties (as described in Note (2) of the Notes to Financial Statements filed with this Annual Report). In addition, proceeds were used to repay advances from the General Partner, pay offering and organization costs and make distributions to the Limited Partners. As of December 31, 1997, the Partnership has repurchased 34 Units ($33,993) from various Limited Partners through the Unit Repurchase Program.
At December 31, 1997, the Partnership had cash and cash equivalents of $128,545 which includes approximately $14,000 restricted for the repurchase of Units through the Unit Repurchase Program. The Partnership intends to use available cash for working capital requirements and cash distributions.
As of December 31, 1991, the Partnership had sold all of the eighteen buildings comprising the Wellington Place apartment complex for a total gross sales price of approximately $4,472,000. Reference is made to Note (2) of the Notes to Financial Statements filed with this Annual Report for a description of the sale of buildings in this complex during 1991 and the prepayments of the related installment contracts receivable.
The Partnership is generating sufficient cash flow to cover operating expenses and debt service. To the extent that these sources are insufficient to meet the Partnership's needs, the Partnership may rely on advances from Affiliates of the General Partner, other short-term financing or may sell this property.
The General Partner has agreed to make, if necessary, a Supplemental Capital Contribution. The Supplemental Capital Contribution shall be in an amount which will enable the Partnership to pay a liquidating distribution to the Limited Partners equal to their Adjusted Invested Capital plus a noncompounded Minimum Return of 2% per annum on their Invested Capital. After consideration of the Supplemental Capital Contribution, the Partnership believes that it has sufficient funds to satisfy its obligations.
Results of Operations
As of December 31, 1991, the Partnership had sold all of the eighteen buildings comprising the Wellington Place apartment complex. The remaining property owned by the Partnership, a health club, is leased until October 2001 to Scandinavian Health Spa Inc., a wholly owned subsidiary of Bally's Health and Tennis Corporation on a "triple-net" basis, which means that in addition to paying base rent, the tenant is also responsible for the payment of insurance, taxes and maintenance. The General Partner does not anticipate an early termination of this lease.
The mortgage loan collateralized by the Scandinavian Health Club property ballooned in May 1996. A modification and extension agreement was entered into on January 30, 1997, effective May 1, 1996. The maturity date is extended to February 1, 1999. The payments of principal and interest for the period May 1, 1996 through January 1, 1997 remain consistent with the original terms of the note. Monthly principal and interest payments beginning February 1, 1997 will be calculated on the unpaid principal balance at January 1, 1997 with an interest rate of 8.25%, adjusted annually on May 1st of each subsequent year beginning May 1, 1997. The amortization period of this two year extension is ten years.
The gain on the sale of investment properties is the result of the installment sales of the eighteen buildings comprising the Wellington Place apartment complex. The total gain from these sales of $616,858 will be recognized as cash is received over the life of the related installment contracts. As of December 31, 1997, $9,950 of gain remains to be recognized.
The decrease in professional services to Affiliates for the year ended December 31, 1997, as compared to the years ended December 31, 1996 and 1995, is due to a decrease in accounting services required by the Partnership.
The increase in professional services to non-affiliates for the year ended December 31, 1996, as compared to the years ended December 31, 1997 and 1995, is due to an increase in accounting fees.
The decrease in general and administrative expenses to Affiliates for the year ended December 31, 1997, as compared to the year ended December 31, 1996, is due to a decrease in investor service charges offset by an increase in postage and data processing.
The decrease in general and administrative expenses to Affiliates for the year ended December 31, 1996, as compared to the year ended December 31, 1995, is due to a decrease in postage, investor service charges and mortgage servicing fees.
The decrease in general and administrative expenses to non-affiliates for the year ended December 31, 1997, as compared to the year ended December 31, 1996, is due to a decrease in bank charges offset by an increase in postage and printing.
The decrease in general and administrative expenses to non-affiliates for the year ended December 31, 1996, as compared to the year ended December 31, 1995 is due to a decrease in postage and printing.
The decrease in mortgage interest for the years ended December 31, 1997 and 1996, as compared to the year ended December 31, 1995, is due to a decrease in the adjustable rate mortgage on the health club property from 9.625% to 8.250% in May 1996.
Inflation
The health club's triple-net lease offsets any inflationary effect on the property operating expenses relating to that property.
Continued inflation may cause capital appreciation of the Partnership's investment property over a period of time as rental rates and replacement cost of this property continue to increase.
Item 8.
Item 8. Financial Statements and Supplementary Data
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Index Page ----- ----
Independent Auditors' Report............................................. 11
Financial Statements:
Balance Sheets, December 31, 1997 and 1996............................. 12
Statements of Operations, for the years ended December 31, 1997, 1996 and 1995..................................... 14
Statements of Partners' Capital, for the years ended December 31, 1997, 1996 and 1995..................................... 16
Statements of Cash Flows, for the years ended December 31, 1997, 1996 and 1995..................................... 17
Notes to Financial Statements.......................................... 18
Schedules not filed:
All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
Independent Auditors' Report
The Partners Inland Real Estate Growth Fund II, L.P.
We have audited the financial statements of Inland Real Estate Growth Fund II, L.P. (a limited partnership) as listed in the accompanying index. These financial statements are the responsibility of the General Partner of the Partnership. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inland Real Estate Growth Fund II, L.P. as of December 31, 1997 and 1996 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois January 30, 1998
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Balance Sheets
December 31, 1997 and 1996
Assets ------ 1997 1996 ---- ---- Current assets: Cash and cash equivalents including amounts held by property manager (Note 1)............. $ 128,545 152,259 Accrued interest receivable..................... 274 247 ------------ ------------ Total current assets.......................... 128,819 152,506 ------------ ------------ Investment property (including acquisition fees paid to Affiliates of $59,500 at December 31, 1997 and 1996 (Notes 1 and 2): Land............................................ 438,389 438,389 Building and improvements....................... 1,096,872 1,096,872 ------------ ------------ 1,535,261 1,535,261 Less accumulated depreciation................... 320,115 283,553 Total investment property, net of ------------ ------------ accumulated depreciation.................... 1,215,146 1,251,708 ------------ ------------ Installment contracts receivable (Note 2)......... 80,000 80,000 Accrued rents receivable (Notes l and 5).......... 63,724 79,374 Deferred loan costs (net of accumulated amortization of $10,165 at December 31, 1997) (Note 1)....... 12,303 - Deferred leasing fees to Affiliates (net of accumulated amortization of $15,991 and $13,326 at December 31, 1997 and 1996, respectively) (Note 1)........................................ 9,995 12,660 ------------ ------------ Total assets...................................... $ 1,509,987 1,576,248 ============ ============
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Balance Sheets (continued)
December 31, 1997 and 1996
Liabilities and Partners' Capital --------------------------------- 1997 1996 Current liabilities: ---- ---- Current portion of long-term debt............... $ 65,740 59,021 Accrued interest payable........................ 5,856 6,275 Due to Affiliates (Note 4)...................... 533 1,159 ------------ ------------ Total current liabilities..................... 72,129 66,455 ------------ ------------ Commission payable to Affiliates (Note 4)......... 135,000 135,000 Long-term debt, less current portion (Notes 2 and 3)................................. 786,015 851,755 ------------ ------------ Total liabilities............................. 993,144 1,053,210 ------------ ------------ Deferred gain on sale of investment property (Note 2)........................................ 9,950 9,950
Partners' capital (Notes 1, 3 and 4): General Partner: Capital contribution.......................... 500 500 Cumulative net income......................... 15,650 15,060 Cumulative cash distributions................. (9,374) (8,861) ------------ ------------ 6,776 6,699 Limited Partners: ------------ ------------ Units of $1,000. Authorized 25,000 Units, 4,004.25 Units outstanding at December 31, 1997 and 1996 (net of offering costs of $462,849, of which $59,476 was paid to Affiliates)................................. 3,541,408 3,541,408 Cumulative net income......................... 1,549,411 1,491,012 Cumulative cash distributions................. (4,590,702) (4,526,031) ------------ ------------ 500,117 506,389 ------------ ------------ Total Partners' capital..................... 506,893 513,088 ------------ ------------ Commitments and contingencies (Notes 2 and 5).....
Total liabilities and Partners' capital........... $ 1,509,987 1,576,248 ============ ============
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Statements of Operations
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995 ---- ---- ---- Income: Rental income (Note 5)............ $ 206,640 211,696 206,644 Interest income................... 13,144 12,859 11,677 Other income...................... - - 4,631 ------------ ------------ ------------ 219,784 224,555 222,952 ------------ ------------ ------------
Expenses: Professional services to Affiliates...................... 4,189 6,882 12,065 Professional services to non-affiliates.................. 17,575 18,955 15,885 General and administrative expenses to Affiliates.......... 13,002 13,445 15,337 General and administrative expenses to non-affiliates...... 1,862 3,442 4,311 Property operating expenses to Affiliates................... 2,223 2,071 2,020 Property operating expenses to non-affiliates............... - - 1,533 Mortgage interest................. 72,552 81,360 83,709 Depreciation...................... 36,562 36,563 36,562 Amortization...................... 12,830 3,834 6,693 ------------ ------------ ------------ 160,795 166,552 178,115 ------------ ------------ ------------ Net income.................... $ 58,989 58,003 44,837 ============ ============ ============
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Statements of Operations (continued)
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995 ---- ---- ---- Net income allocated to (Note 3): General Partner................... $ 590 580 448 Limited Partners.................. 58,399 57,423 44,389 ------------ ------------ ------------ Net income.................... $ 58,989 58,003 44,837 ============ ============ ============
Net income allocated to the one General Partner Unit.............. $ 590 580 448 ============ ============ ============
Net income per 4,004.25 weighted average Limited Partnership Units, basic and diluted.......... $ 14.58 14.34 11.09 ============ ============ ============
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 1997, 1996 and 1995
General Limited Partner Partners Total ----------- ----------- ------------
Balance January 1, 1995............. $ 12,401 491,117 503,518
Net income (Note 3)................. 448 44,389 44,837 Cash distributions ($17.40 per weighted average Limited Partnership Units of 4,004.25).... (6,580) (69,690) (76,270) ------------ ------------ ------------ Balance December 31, 1995........... 6,269 465,816 472,085
Net income (Note 3)................. 580 57,423 58,003 Cash distributions ($4.21 per weighted average Limited Partnership Units of 4,004.25).... (150) (16,850) (17,000) ------------ ------------ ------------ Balance December 31, 1996........... 6,699 506,389 513,088
Net income (Note 3)................. 590 58,399 58,989 Cash distributions ($16.15 per weighted average Limited Partnership Units of 4,004.25).... (513) (64,671) (65,184) ------------ ------------ ------------ Balance December 31, 1997........... $ 6,776 500,117 506,893 ============ ============ ============
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
1997 1996 1995 ---- ---- ---- Cash flows from operating activities: Net income........................ $ 58,989 58,003 44,837 Adjustments to reconcile net income to net cash provided by operating activities: Accrued rents receivable........ 15,650 (4,562) (4,562) Depreciation.................... 36,562 36,563 36,562 Amortization.................... 12,830 3,834 6,693 Accrued interest payable........ (419) (1,253) 1,687 Due to Affiliates............... (626) (1,447) 2,431 Changes in other assets and liabilities................... (27) (1,132) 516 Net cash provided by operating ------------ ------------ ------------ activities........................ 122,959 90,006 88,164 ------------ ------------ ------------
Cash flows from financing activities: Principal payments of long-term debt............................ (59,021) (27,727) (11,934) Deferred loan costs............... (22,468) - - Distributions..................... (65,184) (17,000) (76,270) Net cash used in financing ------------ ------------ ------------ activities........................ (146,673) (44,727) (88,204) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents.................. (23,714) 45,279 (40) Cash and cash equivalents at beginning of year................. 152,259 106,980 107,020 Cash and cash equivalents at ------------ ------------ ------------ end of year....................... $ 128,545 152,259 106,980 ============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest........................ $ 72,971 82,613 82,022 ============ ============ ============
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Notes to Financial Statements
For the years ended December 31, 1997, 1996 and 1995
(1) Organization and Basis of Accounting
Inland Real Estate Growth Fund II, L.P. (the "Partnership"), was formed in June 1987, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in improved residential, retail, industrial and other income producing properties. On September 21, 1987, the Partnership commenced an Offering of 25,000 Limited Partnership Units (the "Units") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. The Partnership terminated the Offering on September 21, 1989. A total of 4,038.25 Units were sold to the public at $1,000 per Unit, yielding gross offering proceeds of $4,038,250, not including the General Partner's contribution. All of the holders of these Units have been admitted to the Partnership. As of December 31, 1997, the Partnership has repurchased a total of 34 units ($33,993) from various Limited Partners. At December 31, 1997, included in cash and cash equivalents, is approximately $14,000 restricted for use by the Unit Repurchase Program. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnership's real property investment according to the number of Units held. Inland Real Estate Investment Corporation is the General Partner.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Offering costs have been offset against the Limited Partners' capital accounts.
Deferred loan costs are amortized on a straight-line basis over the life of the loan. Deferred leasing fees are amortized on a straight-line basis over the term of the related lease.
Installment contracts receivable origination fees received were deferred as unearned income and amortized as yield adjustments on a straight-line basis over the life of the related installment contracts receivable.
Statement of Financial Accounting Standards No. 121 requires the Partnership to record an impairment loss on its property to be held for investment whenever its carrying value cannot be fully recovered through estimated undiscounted future cash flows from their operations and sale. The amount of the impairment loss to be recognized would be the difference between the property's carrying value and the property's estimated fair value. As of December 31, 1997, the Partnership has not recognized any such impairment on its property.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Notes to Financial Statements (continued)
The Partnership uses the straight-line method of depreciation with a useful life of thirty years for buildings and improvements. Maintenance and repair expenses are charged to operations as incurred. Significant improvements are capitalized and depreciated over their estimated useful lives.
Rental income is recognized on a straight-line basis over the term of the lease. The excess of rental income earned over the cash rent due under the provisions of the lease agreement is recorded as accrued rent receivable.
The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
No provision for Federal income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership.
Statement of Financial Accounting Standards No. 128 "Earnings per share" was adopted by the Partnership for the year ended December 31, 1997 and has been applied to all prior earnings periods presented in the financial statements. the Partnership has no dilutive securities.
The Partnership's records are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles ("GAAP"). The Federal income tax return has been prepared from such records after making appropriate adjustments to reflect the Partnership's accounts as adjusted for Federal income tax reporting purposes. Such adjustments are not recorded on the records of the Partnership. The net effect of these items is summarized as follows:
1997 1996 ------------------------- ------------------------ Tax Tax GAAP Basis GAAP Basis Basis (unaudited) Basis (unaudited) ----------- ------------- ----------- ------------ Total assets.............. $1,509,987 1,934,297 1,576,248 1,983,963
Partner's capital: General Partner......... 6,776 6,389 6,699 6,146 Limited Partners........ 500,117 924,347 506,389 914,190
Net income: General Partner......... 590 756 580 544 Limited Partners........ 58,399 74,828 57,423 53,841
Net income per Limited Partnership Unit, basic and diluted............. 14.58 18.69 14.34 13.45
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Notes to Financial Statements (continued)
(2) Investment Properties
(a) Wellington Place, Carol Stream, Illinois
During 1991, the Partnership sold all of the eighteen buildings comprising the Wellington Place apartment complex to unaffiliated third parties. The Partnership had recorded wrap around installment contracts receivable of $3,988,999 as a result of these sales, with interest rates ranging from 10.5% to 10.9% due over seven to ten years. At the time of the sale, these receivables were subject to existing mortgage notes amounting to $1,505,558. The gain of $616,858 was to be recognized as cash was received over the life of the related installment contracts.
The Partnership has received complete prepayments on all of the eighteen installment contracts receivable amounting to $3,609,589, which included prepayment penalties of $10,830, less credit to the borrowers for prepaid interest. In conjunction with five of the prepayments, the Partnership provided a single borrower with five second mortgages, in the amount of $16,000 each, which require interest-only payments at the rate of 10% per annum with a final balloon payment due June 30, 1998, collateralized by five of the buildings previously sold.
(b) Scandinavian Health Club, Columbus, Ohio
On April 21, 1989, the Partnership purchased an existing 20,000 square-foot health and racquet club known as Scandinavian Health Club located in Columbus, Ohio. The property was purchased from an unaffiliated party. The total costs were $1,529,171, which included the purchase price of $1,442,000, acquisition costs of $87,171, including the acquisition fee paid to the General Partner of $59,500 and closing costs.
At closing, the Partnership obtained a $1,000,000 loan secured by the property from an unaffiliated lender. The loan has a current interest rate of 8.25% and requires monthly principal and interest payments. The interest rate adjusts annually to 3% over the one-year Treasury constant maturity average and payments are adjusted concurrently with the interest rates. The Partnership paid a $20,000 loan fee to the lender and incurred $8,188 of other costs associated with funding the loan. The mortgage loan ballooned in May 1996 and a modification and extension agreement was entered into on January 30, 1997. The Partnership paid a $18,149 loan fee to the lender and incurred $3,332 of legal fees in connection with this extension. The maturity date was extended to February 1, 1999. The payments of principal and interest for the period May 1, 1996 through January 1, 1997 remain consistent with the original terms of the note. Monthly principal and interest payments beginning February 1, 1997 will be calculated on the unpaid principal balance at January 1, 1997 with an interest rate of 8.25%, adjusted annually, based on a ten year amortization period. At December 31, 1997, the principal balance outstanding was $851,755.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Notes to Financial Statements (continued)
An Affiliate of the General Partner receives a management fee pursuant to a management agreement of a percentage of gross receipts.
As of December 31, 1997, the required future principal payments on the Partnership's long-term debt are as follows:
1998.......................................... $ 65,740 1999.......................................... 786,015
(3) Partnership Agreement
Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations are generally allocated 99% to the Limited Partners and 1% to the General Partner. Gains from the sale or other disposition of the Partnership's properties will generally be allocated to the General and Limited Partners in relation to the distributions of proceeds from such transactions.
Cash available for distribution from operations will be distributed 99% to the Limited Partners and 1% to the General Partner. Net sale or refinancing proceeds will generally be distributed first to the Limited Partners up to an amount equal to their Invested Capital plus any deficiency in a 10% cumulative annual return. Next, to the General Partner in an amount equal to any Supplemental Capital Contributions, as defined, made by it. Any remaining proceeds will be distributed 80% to the Limited Partners and 20% to the General Partner.
The General Partner has agreed to make, if necessary, a Supplemental Capital Contribution. The Supplemental Capital Contribution shall be in an amount which will enable the Partnership to pay a liquidating distribution to the Limited Partners equal to their Adjusted Invested Capital plus a noncompounded Minimum Return of 2% per annum on their Invested Capital. After consideration of the Supplemental Capital Contribution, the Partnership believes that it has sufficient funds to satisfy its obligations.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Notes to Financial Statements (continued)
(4) Transactions with Affiliates
The General Partner and its Affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its Affiliates relating to the administration of the Partnership, of which $533 and $1,159 remained unpaid at December 31, 1997 and 1996, respectively.
In connection with the sales at Wellington Place apartment complex, the Partnership has recorded $135,000 of sales commissions payable to Affiliates of the General Partner. Such commissions will be deferred until the Limited Partners have received their Original Capital plus a return as specified in the Partnership Agreement.
An Affiliate of the General Partner is entitled to receive Property Management Fees for management and leasing services. Management fees of $2,223, $2,071 and $2,020 for the years ended December 31, 1997, 1996 and 1995, respectively have been incurred and paid to an Affiliate and are included in the Partnership's property operating expenses to Affiliates.
(5) Leases
At December 31, 1997, the Partnership's principal asset consists of a health club which is occupied by one tenant, Scandinavian Health Spa Inc. which is a wholly owned subsidiary of Bally's Health and Tennis Corporation, under a triple net lease which requires that in addition to paying base rent, the tenant is also responsible for the payment of insurance, taxes and maintenance.
The property is subject to a lease which expires in October 2001 and required an initial base rent per annum of $183,710. The rent increased to $202,082 in October 1991 and $222,288 in October 1996. The General Partner does not anticipate an early termination of this lease.
The Partnership has determined that the lease relating to this property is properly classified as an operating lease; therefore, rental income is reported when earned and the cost of the property, excluding the cost of land, is depreciated over the estimated useful life.
INLAND REAL ESTATE GROWTH FUND II, L.P. (a limited partnership)
Notes to Financial Statements (continued)
Minimum lease payments to be received in the future for the health club lease are as follows:
1998............................................. $ 222,288 1999............................................. 222,288 2000............................................. 222,288 2001............................................. 166,716 ----------- Total............................................ $ 833,580 ===========
The lease contains provisions providing for stepped rent increases. Generally accepted accounting principles require that rental income be recorded 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 a decrease of $15,650 in 1997 and an increase of $4,562 in 1996 and 1995, respectively, of rental income for the period of occupancy for which stepped rent increases apply and $63,724 and $79,374 in related accrued rents receivable as of December 31, 1997 and 1996, respectively. Those amounts are expected to be collected over the terms of the related lease as scheduled rent payments are made.
(6) Subsequent Events
During January 1998, the Partnership paid a distribution of $25,559, of which $236 was distributed to the General Partner and $25,323 was distributed to the Limited Partners. The Limited Partners distribution included $2,000 of repayment proceeds which represents a return of capital and $23,323 of operating cash flow which represents a return on capital.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no disagreements on accounting or financial disclosure during 1997.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership, Inland Real Estate Investment Corporation, was organized in 1984 for the purpose of acting as general partner of limited partnerships formed to acquire, own and operate real properties. The General Partner is a wholly-owned subsidiary of The Inland Group, Inc. In 1990, Inland Real Estate Investment Corporation became the replacement General Partner for an additional 301 privately-owned real estate limited partnerships syndicated by Affiliates. The General Partner has responsibility for all aspects of the Partnership's operations. The relationship of the General Partner to its Affiliates is described under the caption "Conflicts of Interest" at pages 11 to 13 of the Prospectus, a copy of which description is hereby incorporated herein by reference.
Officers and Directors
The officers, directors, and key employees of The Inland Group, Inc. and its Affiliates ("Inland") that are likely to provide services to the Partnership are as follows:
Functional Title
Daniel L. Goodwin....... Chairman and Chief Executive Officer Robert H. Baum.......... Executive Vice President-General Counsel G. Joseph Cosenza....... Senior Vice President-Acquisitions Robert D. Parks......... Senior Vice President-Investments Norbert J. Treonis...... Senior Vice President-Property Management Catherine L. Lynch...... Treasurer Paul J. Wheeler......... Vice President-Personal Financial Services Group Roberta S. Matlin....... Assistant Vice President-Investments Mark Zalatoris.......... Assistant Vice President-Due Diligence Patricia A. Challenger.. Vice President-Asset Management Kelly Tucek............. Assistant Vice President-Partnership Accounting Venton J. Carlston...... Assistant Controller
DANIEL L. GOODWIN (age 54) is Chairman of the Board of Directors of The Inland Group, Inc., a billion-dollar real estate and financial organization located in Oak Brook, Illinois. Among Inland's subsidiaries is the largest property management firm in Illinois and one of the largest commercial real estate and mortgage banking firms in the Midwest.
Mr. Goodwin has served as Director of the Avenue Bank of Oak Park and as a Director of the Continental Bank of Oakbrook Terrace. He was Chairman of the Bank Holding Company of American National Bank of DuPage. Currently he is the Chairman of the Board of Inland Mortgage Investment Corporation.
Mr. Goodwin has been in the housing industry for more than 28 years, and has demonstrated a lifelong interest in housing-related issues. He is a licensed real estate broker and a member of the National Association of Realtors. He has developed thousands of housing units in the Midwest, New England, Florida, and the Southwest. He is also the author of a nationally recognized real estate reference book for the management of residential properties.
Mr. Goodwin has served on the Board of the Illinois State Affordable Housing Trust Fund for the past 7 years. He is an advisor for the Office of Housing Coordination Services of the State of Illinois, and a member of the Seniors Housing Committee of the National Multi-Housing Council. Recently, Governor Edgar appointed him Chairman of the Housing Production Committee for the Illinois State Affordable Housing Conference. He also served as a member of the Cook County Commissioner's Economic Housing Development Committee, and he was the Chairman of the DuPage County Affordable Housing Task Force. The 1992 Catholic Charities Award was presented to Mr. Goodwin for his work in addressing affordable housing needs. The City of Hope designated him as the Man of the Year for the Illinois construction industry. In 1989, the Chicago Metropolitan Coalition on Aging presented Mr. Goodwin with an award in recognition of his efforts in making housing more affordable to Chicago's Senior Citizens. On May 4, 1995, PADS, Inc. (Public Action to Deliver Shelter) presented Mr. Goodwin with an award, recognizing The Inland Group as the leading corporate provider of transitional housing for the homeless people of DuPage County. Mr. Goodwin also serves as Chairman of New Directions Housing Corporation, a leading provider of affordable housing in northern Illinois.
Mr. Goodwin is a product of Chicago-area schools, and obtained his Bachelor's and Master's Degrees from Illinois Universities. Following graduation, he taught for five years in the Chicago Public Schools. His commitment to education has continued through his work with the Better Boys Foundation's Pilot Elementary School in Chicago, and the development of the Inland Vocational Training Center for the Handicapped located at Little City in Palatine, Illinois. He personally established an endowment which funds a perpetual scholarship program for inner-city disadvantaged youth. In 1990 he received the Northeastern Illinois University President's Meritorious Service Award. Mr. Goodwin holds a Master's Degree in Education from Northern Illinois University, and in 1986, he was awarded an Honorary Doctorate from Northeastern Illinois University College of Education. More than 12 years ago, under Mr. Goodwin's direction, Inland instituted a program to educate disabled students about the workplace. Most of these original students are still employed at Inland today, and Inland continues as one of the largest employers of the disabled in DuPage County. Mr. Goodwin has served as a member of the Board of Governors of Illinois State Colleges and Universities, and he is currently a trustee of Benedictine University. He was elected Chairman of Northeastern Illinois University Board of Trustees in January 1996.
Mr. Goodwin served as a member of Governor Jim Edgar's Transition Team. In 1988 he received the Outstanding Business Leader Award from the Oak Brook Jaycees and has been the General Chairman of the National Football League Players Association Mackey Awards for the benefit of inner-city youth. He served as the recent Chairman of the Speakers Club of the Illinois House of Representatives. In March 1994, he won the Excellence in Business Award from the DuPage Area Association of Business and Industry. Additionally, he was honored by Little Friends on May 17, 1995 for rescuing their Parent-Handicapped Infant Program when they lost their lease. He was the recipient of the 1995 March of Dimes Life Achievement Award and was recently recognized as the 1997 Corporate Leader of the Year by the Oak Brook Area Association of Commerce and Industry.
ROBERT H. BAUM (age 54) has been with The Inland Group, Inc. and its affiliates since 1968 and is one of the four original principals. Mr. Baum is Vice Chairman and Executive Vice President-General Counsel of The Inland Group, Inc. In his capacity as General Counsel, Mr. Baum is responsible for the supervision of the legal activities of The Inland Group, Inc. and its affiliates. This responsibility includes the supervision of The Inland Law Department and serving as liaison with outside counsel. Mr. Baum has served as a member of the North American Securities Administrators Association Real Estate Advisory Committee and as a member of the Securities Advisory Committee to the Secretary of State of Illinois. He is a member of the American Corporation Counsel Association and has also been a guest lecturer for the Illinois State Bar Association. Mr. Baum has been admitted to practice before the Supreme Court of the United States, as well as the bars of several federal courts of appeals and federal district courts and the State of Illinois. He received his B.S. Degree from the University of Wisconsin and his J.D. Degree from Northwestern University School of Law. Mr. Baum has served as a director of American National Bank of DuPage. Currently, he serves as a director of Westbank, and is a member of the Governing Council of Wellness House, a charitable organization that provides emotional support for cancer patients and their families.
G. JOSEPH COSENZA (age 54) has been with The Inland Group, Inc. and its affiliates since 1968 and is one of the four original principals. Mr. Cosenza is a Director and Vice Chairman of The Inland Group, Inc. and oversees, coordinates and directs Inland's many enterprises. In addition, immediately supervises a staff of eight persons who engage in property acquisition. Mr. Cosenza has been a consultant to other real estate entities and lending institutions on property appraisal methods.
Mr. Cosenza received his B.A. Degree from Northeastern Illinois University and his M.S. Degree from Northern Illinois University. From 1967 to 1968, he taught at the LaGrange School District in Hodgkins, Illinois and from 1968 to 1972, he served as Assistant Principal and taught in the Wheeling, Illinois School District. Mr. Cosenza has been a licensed real estate broker since 1968 and an active member of various national and local real estate associations, including the National Association of Realtors and the Urban Land Institute.
Mr. Cosenza has also been Chairman of the Board of American National Bank of DuPage, and has served on the Board of Directors of Continental Bank of Oakbrook Terrace. He is presently Chairman of the Board of Westbank in Westchester and Hillside, Illinois.
ROBERT D. PARKS (age 54) is a Director of The Inland Group, Inc., President, Chairman and Chief Executive Officer of Inland Real Estate Investment Corporation and President, Chief Executive Officer, Chief Operating Officer and Affiliated Director of Inland Real Estate Corporation.
Mr. Parks is responsible for the ongoing administration of existing investment programs, corporate budgeting and administration for Inland Real Estate Investment Corporation. He oversees and coordinates the marketing of all investments and investor relations.
Prior to joining Inland, Mr. Parks was a school teacher in Chicago's public schools. He received his B.A. degree from Northeastern Illinois University and his M.A. degree from the University of Chicago. He is a registered Direct Participation Program Principal with the National Association of Securities Dealers, Inc., and he is a member of the Real Estate Investment Association and a member of NAREIT.
NORBERT J. TREONIS (age 47) joined The Inland Group, Inc. and its affiliates in 1975 and he is currently Chairman and Chief Executive Officer of The Inland Property Management Group, Inc. and a Director of The Inland Group, Inc. He serves on the Board of Directors of all Inland subsidiaries involved in the property management, acquisitions and maintenance of real estate, including Mid-America Property Management Corporation, and Metropolitan Construction Services, Inc. Mr. Treonis is charged with the responsibility of the overall management and leasing of all apartment units, retail, industrial and commercial properties nationwide.
Mr. Treonis is a licensed real estate broker. He is a past member of the Board of Directors of American National Bank of DuPage, the Apartment Builders and Managers Association of Illinois, the National Apartment Association and the Chicagoland Apartment Association.
Mr. Treonis has been the Chairman of the Board of Directors of Inland Commercial Property Management, Inc. since its formation in 1994.
CATHERINE L. LYNCH (age 39) joined Inland in 1989 and is the Treasurer of Inland Real Estate Investment Corporation. Ms. Lynch is responsible for managing the Corporate Accounting Department. Prior to joining Inland, Ms. Lynch worked in the field of public accounting for KPMG Peat Marwick since 1980. She received her B.S. degree in Accounting from Illinois State University. Ms. Lynch is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. She is registered with the National Association of Securities Dealers as a Financial Operations Principal.
PAUL J. WHEELER (age 45) joined Inland in 1982 and is currently the President of Inland Property Sales, Inc., the entity responsible for all corporately owned real estate. Mr. Wheeler received his B.A. degree in Economics from DePauw University and an M.B.A. in Finance/Accounting from Northwestern University. Mr. Wheeler is a Certified Public Accountant and licensed real estate broker. For three years prior to joining Inland, Mr. Wheeler was Vice President/Finance at the real estate brokerage firm of Quinlan & Tyson, Inc.
ROBERTA S. MATLIN (age 53) joined Inland in 1984 as Director of Investor Administration and currently serves as Senior Vice President-Investments. Prior to that, Ms. Matlin spent 11 years with the Chicago Region of the Social Security Administration of the United States Department of Health and Human Services. As Senior Vice President-Investments, she directs the day-to-day internal operations of the General Partner. Ms. Matlin received her B.A. degree from the University of Illinois. She is registered with the National Association of Securities Dealers, Inc. as a General Securities Principal.
MARK ZALATORIS (age 40) joined Inland in 1985 and currently serves as Vice President of Inland Real Estate Investment Corporation. His responsibilities include the coordination of due diligence activities by selling broker/dealers and is also involved with limited partnership asset management including the mortgage funds. Mr. Zalatoris is a graduate of the University of Illinois where he received a Bachelors degree in Finance and a Masters degree in Accounting and Taxation. He is a Certified Public Accountant and holds a General Securities License with Inland Securities Corporation.
PATRICIA A. CHALLENGER (age 45) joined Inland in 1985. Ms. Challenger serves as Senior Vice President of Inland Real Estate Investment Corporation in the area of Asset Management. As head of the Asset Management Department, she develops operating and disposition strategies for all investment-owned properties. Ms. Challenger received her Bachelor's degree from George Washington University and her Master's from Virginia Tech University. Ms. Challenger was selected and served from 1980-1984 as Presidential Management Intern, where she was part of a special government-wide task force to eliminate waste, fraud and abuse in government contracting and also served as Senior Contract Specialist responsible for capital improvements in 109 government properties. Ms. Challenger is a licensed real estate broker, NASD registered securities sales representative and is a member of the Urban Land Institute.
KELLY TUCEK (age 35) joined Inland in 1989 and is an Assistant Vice President of Inland Real Estate Investment Corporation. As of August 1996, Ms. Tucek is responsible for the Investment Accounting Department which includes all public partnership accounting functions along with quarterly and annual SEC filings. Prior to joining Inland, Ms. Tucek was on the audit staff of Coopers and Lybrand since 1984. She received her B.A. Degree in Accounting and Computer Science from North Central College.
VENTON J. CARLSTON (age 40) joined Inland in 1985 and is the Assistant Controller of Inland Real Estate Investment Corporation where he supervises the corporate bookkeeping staff and is responsible for financial statement preparation and budgeting for Inland Real Estate Investment Corporation and its subsidiaries. Prior to joining Inland, Mr. Carlston was a partnership accountant with JMB Realty. He received his B.S. degree in Accounting from Southern Illinois University. Mr. Carlston is a Certified Public Accountant and a member of the Illinois CPA Society. He is registered with the National Association of Securities Dealers, Inc. as a Financial Operations Principal.
Item 11.
Item 11. Executive Compensation
The General Partner is entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses as described under the caption "Cash Distributions" on page 44 and "Allocation of Profits or Losses" on page 43 of the Prospectus, and on pages A-7 to A-10 of the Partnership Agreement, included as an exhibit to the Prospectus. Reference is also made to Note (3) of the Notes to Financial Statements filed with this Annual Report for a description of such distributions and allocations. The General Partner received a share of Partnership income in 1997.
The Partnership is permitted to engage in various transactions involving Affiliates of the General Partner of the Partnership, as described under the captions "Compensation and Fees" on pages 8 to 10 and "Conflicts of Interest" on pages 10 to 13 of the Prospectus, and on pages A-12 through A-22 of the Partnership Agreement, included as an exhibit to the Prospectus. The relationship of the General Partner (and its directors and officers) to its Affiliates is set forth above in Item 10.
In connection with the sales at Wellington Place, the Partnership has recorded $135,000 of sales commissions payable to Affiliates of the General Partner. Such commissions will be deferred until the Limited Partners have received their Original Capital plus a return as specified in the Partnership Agreement.
The General Partner of the Partnership and its Affiliates may be reimbursed for their out-of-pocket expenses relating to the administration of the Partnership. In 1997, the General Partner of the Partnership was due reimbursement for such expenses in the amount of $17,191, of which $533 was unpaid at December 31, 1997.
An Affiliate of the General Partner earned management fees of $2,223 in 1997, in connection with managing the Partnership's investment property, all of which was paid at December 31, 1997.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding Units of the Partnership.
(b) The officers and directors of the General Partner of the Partnership own, as a group, the following Units of the Partnership:
Amount and Nature of Beneficial Percent Title of Class Ownership of Class ------------------- ----------------- ------------- Limited Partnership One Unit directly less than 1% Units
No officer or director of the General Partner of the Partnership possesses a right to acquire beneficial ownership of Units of the Partnership.
All of the outstanding shares of the General Partner of the Partnership are owned by an Affiliate of its officers and directors as set forth above in Item 10.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date result in a change in control of the Partnership.
Item 13.
Item 13. Certain Relationships and Related Transactions
There were no significant transactions or business relationships with the General Partner, Affiliates or their management other than those described in Items 10 and 11 above. Reference is made to Note (4) of the Notes to Financial Statements (Item 8 of this annual report) for information regarding related party transactions.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The financial statements listed in the index on page 10 of this Annual Report are filed as part of this Annual Report.
(b) Exhibits. The following documents are filed as part of this Report:
3 Amended and Restated Agreement of Limited Partnership and certificate of Limited Partnership included as Exhibits A and B to the Prospectus dated September 21, 1988, as supplemented, are incorporated herein by reference thereto.
4 Form of Certificate of Ownership representing interest in the registrant filed as Exhibit 4 to Registration Statement on S-11, File No. 33-15334, is incorporated herein by reference thereto.
28 Prospectus dated September 21, 1988, as supplemented, included in Post-Effective Amendment No. 4 to Form S-11 Registration Statement, File No. 33-15334, is incorporated herein by reference thereto.
(c) Financial Statement Schedules
All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
(d) Reports on Form 8-K:
None
No Annual Report or proxy material for the year 1997 has been sent to the Partners of the Partnership. An Annual Report will be sent to the Partners subsequent to this filing and the Partnership will furnish copies of such report to the Commission when it is sent to the Partners.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INLAND REAL ESTATE GROWTH FUND II, L.P. Inland Real Estate Investment Corporation General Partner
/s/ Robert D. Parks
By: Robert D. Parks Chairman of the Board and Chief Executive Officer Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
By: Inland Real Estate Investment Corporation General Partner
/s/ Robert D. Parks
By: Robert D. Parks Chairman of the Board and Chief Executive Officer Date: March 26, 1998
/s/ Patricia A. Challenger
By: Patricia A. Challenger Senior Vice President Date: March 26, 1998
/s/ Kelly Tucek
By: Kelly Tucek Asst. Vice President Date: March 26, 1998
/s/ Daniel L. Goodwin
By: Daniel L. Goodwin Director Date: March 26, 1998
/s/ Robert H. Baum
By: Robert H. Baum Director Date: March 26, 1998