INLAND LAND APPRECIATION FUND II LP - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2002

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ____________

Commission File #0-19220

Inland Land Appreciation Fund II, L.P.
(Exact name of registrant as specified in its charter)

Delaware	#36-3664407
(State or other jurisdiction	(I.R.S. Employer Identification Number)
of incorporation or organization)

2901 Butterfield Road, Oak Brook, Illinois	60523
(Address of principal executive office)	(Zip Code)

Registrant's telephone number, including area code: 630-218-8000

________________N/A___________________
(Former name, former address and former fiscal
year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

-1-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Balance Sheets

June 30, 2002 and December 31, 2001
(unaudited)

Assets

		2002	2001
Current assets:
Cash and cash equivalents	$	2,324,469	2,185,530
Accounts and accrued interest receivable (net of allowance for doubtful accounts of $336,712 at June 30, 2002) (Note 5)		1,114,220	971,627
Other current assets		1,442	12,005

Total current assets		3,440,131	3,169,162

Mortgage loans receivable (net of allowance for doubtful accounts of $1,000,000 at June 30, 2002) (Note 5)		16,409,878	17,409,878
Investment properties (including acquisition fees paid to Affiliates of $1,137,367 and $1,154,729 at June 30, 2002 and December 31, 2001, respectively) (Note 3):
Land and improvements		25,020,975	25,439,556

Total assets	$	44,870,984	46,018,596
		==========	=========

See accompanying notes to financial statements.

-2-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Balance Sheets
(continued)

June 30, 2001 and December 31, 2000
(unaudited)

Liabilities and Partners' Capital

		2002	2001
Current liabilities:
Accounts payable	$	47,420	365,653
Accrued real estate taxes		165,254	69,146
Due to Affiliates (Note 2)		9,750	8,075
Unearned income		85,230	96,688

Total current liabilities		307,654	539,562

Deferred gain on sale of investment properties (Note 5)		9,327,710	10,075,165

Partners' capital:
General Partner:
Capital contribution		500	500
Cumulative net income		2,153,911	2,157,496
Cumulative cash distributions		(1,789,294)	(1,789,294)

		365,117	368,702
Limited Partners:
Units of $1,000. Authorized 60,000 Units, 50,067 and 50,070 Units outstanding at June 30, 2002 and December 31, 2001, respectively (net of offering costs of $7,532,439, of which $2,535,445 was paid to Affiliates)		42,559,909	42,561,109
Cumulative net income		23,103,700	23,267,164
Cumulative cash distributions		(30,793,106)	(30,793,106)

		34,870,503	35,035,167

Total Partners' capital		35,235,620	35,403,869

Total liabilities and Partners' capital	$	44,870,984	46,018,596
		=========	=========

See accompanying notes to financial statements.

-3-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Statements of Operations

For the three and six months ended June 30, 2002 and 2001
(unaudited)

		Three months	Three months	Six months	Six months
		ended	ended	Ended	ended
		June 30, 2002	June 30, 2001	June 30, 2002	June 30, 2001
Income:
Sale of investment properties (Note 3)	$	679,976	3,419,387	1,405,634	14,943,445
Rental income (Note 4)		52,532	53,251	102,311	122,141
Interest income		252,632	280,693	501,920	351,949
Other income		-	-	865	30,150

		985,140	3,753,331	2,010,730	15,447,685

Expenses:
Cost of investment properties sold		570,910	1,804,213	1,214,209	4,489,988
Professional services to Affiliates		17,178	34,630	29,290	57,955
Professional services to non-affiliates		2,009	7,156	36,103	34,128
General and administrative expenses to Affiliates		3,357	3,072	9,413	7,993
General and administrative expenses to non-affiliates		18,008	16,901	106,737	17,628
Marketing expenses to Affiliates		3,970	5,714	9,950	11,370
Marketing expenses to non-affiliates		32,852	10,502	90,950	23,115
Land operating expenses to non-affiliates		32,974	50,371	91,870	98,675
Depreciation		-	-	-	776
Bad debt expense		-	-	589,257	-

		681,258	1,932,559	2,177,779	4,741,628

Net income (loss)	$	303,882	1,820,772	(167,049)	10,706,057
		=========	=========	=========	=========

See accompanying notes to financial statements.

-4-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Statements of Operations
(continued)

For the three and six months ended June 30, 2002 and 2001
(unaudited)

		Three months	Three months	Six months	Six months
		ended	ended	ended	ended
		June 30, 2002	June 30, 2001	June 30, 2002	June 30, 2001

Net income (loss) allocated to:
General Partner	$	1,948	796	(3,585)	545,326
Limited Partners		301,934	1,819,976	(163,464)	10,160,731

Net income	$	303,882	1,820,772	(167,049)	10,706,057
		=========	=========	=========	=========
Net income (loss) allocated to the one General Partner Unit	$	1,948	796	(3,585)	545,326
		=========	=========	=========	=========
Net income (loss) per Unit, basic and diluted, allocated to Limited Partners per weighted average Limited Partnership Units (50,067 and 50,073 for the three months ended June 30, 2002 and 2001, and 50,068 and 50,073 for the six months ended June 30, 2002 and 2001, respectively)	$	6.03	36.35	(3.26)	202.92
		=========	=========	=========	=========

See accompanying notes to financial statements.

-5-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Statements of Cash Flows

For the six months ended June 30, 2002 and 2001
(unaudited)

		2002	2001
Cash flows from operating activities:
Net income (loss)	$	(167,049)	10,706,057
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		-	776
Gain on sale of investment properties		(191,425)	(10,453,457)
Recognition of deferred gain on sale of investment properties		(747,455)	-
Bad debt expense		1,336,712	-
Changes in assets and liabilities:
Accounts and accrued interest receivable		(479,305)	(217,165)
Other current assets		10,563	(14,119)
Accounts payable		(318,233)	110,450
Accrued real estate taxes		96,108	(16,837)
Due to Affiliates		1,675	(19,910)
Unearned income		(11,458)	188,321

Net cash provided by (used in) operating activities		(469,867)	284,116

Cash flows from investing activities:
Additions to investment properties		(795,628)	(3,047,203)
Proceeds from sale of investment properties		1,405,634	14,943,445

Net cash provided by investing activities		610,006	11,896,242

Cash flows from financing activities:
Distributions		-	(10,542,800)
Repurchase of Limited Partnership Units		(1,200)	-

Net cash used in financing activities		(1,200)	(10,542,800)

Net increase in cash and cash equivalents		138,939	1,637,558
Cash and cash equivalents at beginning of period		2,185,530	1,762,071

Cash and cash equivalents at end of period	$	2,324,469	3,399,629
		=========	=========

See accompanying notes to financial statements.

-6-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Notes to Financial Statements

June 30, 2002
(unaudited)

Readers of this Quarterly Report should refer to the Partnership's audited financial statements for the fiscal year ended December 31, 2001, which are included in the Partnership's 2001 Annual Report, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this Report.

(1) Organization and Basis of Accounting

The Registrant, Inland Land Appreciation Fund II, L.P. (the "Partnership"), is a limited partnership formed on June 28, 1989, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 25, 1989, the Partnership commenced an Offering of 30,000 (subject to increase to 60,000) Limited Partnership Units pursuant to a Registration under the Securities Act of 1933. The Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") provides for Inland Real Estate Investment Corporation to be the General Partner. On October 24, 1991, the Partnership terminated its Offering of Units, with total sales of 50,476.17 Units, at $1,000 per Unit, resulting in $50,476,170 in gross offering proceeds, not including the General Partner's capital contribution of $500. All of the holders of these Units have been admitted to the Partnership. As of June 30, 2002, the Partner ship has repurchased a total of 408.65 Units for $383,822 from various Limited Partners through the Unit Repurchase Program. Under this program, Limited Partners may, under certain circumstances, have their Units repurchased for an amount equal to their Invested Capital.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

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.

- -7-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Notes to Financial Statements
(continued)

June 30, 2002
(unaudited)

(2) Transactions with Affiliates

The General Partner and its Affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its Affiliates relating to the administration of the Partnership. Such costs are included in professional services and general and administrative expenses to Affiliates, of which $9,750 and $8,075 was unpaid as of June 30, 2002 and December 31, 2001, respectively.

The General Partner is entitled to receive Asset Management Fees equal to one-quarter of 1% of the original cost to the Partnership of undeveloped land annually, limited to a cumulative total over the life of the Partnership of 2% of the land's original cost to the Partnership. As of September 30, 2000, the Partnership had met this limit.

An Affiliate of the General Partner performed sales marketing and advertising services for the Partnership and was reimbursed (as set forth under terms of the Partnership Agreement) for direct costs. Such costs of $9,950 and $11,370 have been incurred for the six months ended June 30, 2002 and 2001, respectively, and are included in marketing expenses to Affiliates. As of June 30, 2002 and December 31, 2001, all of such costs were paid.

An Affiliate of the General Partner performed property upgrades, rezoning, annexation and other activities to prepare the Partnership's land investments for sale and was reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs. The Affiliate did not recognize a profit on any project. Such costs are included in investment properties.

- -8-

INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)

Notes to Financial Statements
(continued)

(3) Investment Properties

		Gross Acres		Purchase/		Initial Costs				Costs Capitalized	Costs of	Total Remaining Costs of	Current Year Gain (Loss)
Parcel	Illinois		Purchased		Sales		Original	Acquisition	Total	Subsequent to	Property	Parcels at	on Sale
#	County		(Sold)	Date			Costs	Costs	Costs	Acquisition	Sold	06/30/02	Recognized
1	McHenry		372.759	04/25/90		$	2,114,295	114,070	2,228,365	596,016	-	2,824,381	-

2	Kendall		41.118	07/06/90			549,639	43,889	593,528	14,482	-	608,010	-

3	Kendall		120.817	11/06/90			1,606,794	101,863	1,708,657	103,556	-	1,812,213	-

4	Kendall		299.025	06/28/91			1,442,059	77,804	1,519,863	28,876	-	1,548,739	-

5	Kane		189.0468	02/28/91			1,954,629	94,569	2,049,198	349,845	2,399,043	-	-
			(189.0468)	05/16/01

6	Lake		57.3345	04/16/91			904,337	71,199	975,536	27,987	4,457	999,066	-
			(.258)	10/01/94

7	McHenry		56.7094	04/22/91			680,513	44,444	724,957	3,210,451	3,935,408	-	-
			(12.6506)	Var 1997
			(15.7041)	Var 1998
			(19.6296)	Var 1999
			(8.7251)	Var 2000

8	Kane		325.394	06/14/91			3,496,700	262,275	3,758,975	35,032	744,933	3,049,074	-
			(.870)	04/03/96
			(63.000)	01/23/01

9	Will		9.867	08/13/91			217,074	988	218,062	20,764	-	238,826	-

10	Will		150.66	08/20/91			1,866,716	89,333	1,956,049	15,812	-	1,971,861	-

11	Will		138.447	08/20/91			289,914	20,376	310,290	2,700	312,990	-	-
			(138.447)	05/03/93

12	Will		44.732	08/20/91			444,386	21,988	466,374	24,493	-	490,867	-

13	Will		6.342	09/23/91			139,524	172	139,696	-	139,696	-	-
			(6.342)	05/03/93

-9-

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

(3) Investment Properties (continued)

		Gross Acres		Purchase/	Initial Costs				Costs Capitalized	Costs of	Total Remaining Costs of	Current Year Gain (Loss)
Parcel	Illinois		Purchased	Sales		Original	Acquisition	Total	Subsequent to	Property	Parcels at	on Sale
#	County		(Sold)	Date		Costs	Costs	Costs	Acquisition	Sold	06/30/02	Recognized

14	Kendall		44.403	09/03/91		888,060	68,210	956,270	1,219,688	730,757	1,445,201	-
			(15.392)	04/16/01

15	Kendall		100.364	09/04/91		1,050,000	52,694	1,102,694	117,829	1,220,523	-	-
			(5.000)	09/01/93
			(11.000)	12/01/94
			(84.364)	08/14/98

16	McHenry		168.905	09/13/91		1,402,058	69,731	1,471,789	97,766	1,569,555	-	-
			(168.905)	08/03/01

17	Kendall		3.462	10/30/91		435,000	22,326	457,326	110,795	294,045	274,076	-
			(2.113)	03/06/01

18	McHenry		139.1697	11/07/91		1,160,301	58,190	1,218,491	298,482	-	1,516,973	-

19	Kane		436.236	12/13/91		4,362,360	321,250	4,683,610	187,211	4,870,821	-	-
			(436.236)	05/16/01

20	Kane &
	Kendall		400.129	01/31/92		1,692,623	101,318	1,793,941	1,367,239	1,250,469	1,910,711	-
			(21.138)	06/30/99

21	Kendall		15.013	05/26/92		250,000	23,844	273,844	13,238	18,798	268,284	-
			(1.000)	03/16/99

22	Kendall		391.959	10/30/92		3,870,000	283,186	4,153,186	1,755,861	2,246,278	3,662,769	-
			(10.000)	01/06/94
			(5.538)	01/05/96
			(2.400)	07/27/99
			(73.395)	Var 2001

-10-

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

(3) Investment Properties (continued)

		Gross Acres		Purchase/	Initial Costs				Costs Capitalized	Costs of	Total Remaining Costs of	Current Year Gain (Loss)
Parcel	Illinois		Purchased	Sales		Original	Acquisition	Total	Subsequent to	Property	Parcels at	on Sale
#	County		(Sold)	Date		Costs	Costs	Costs	Acquisition	Sold	06/30/02	Recognized

23 (c)	Kendall		133.2074	10/30/92		3,231,942	251,373	3,483,315	4,665,998	8,149,313	-	(14,082)
			(11.525)	07/16/93
			(44.070)	Var 1995
			(8.250)	Var 1996
			(2.610)	Var 1997
			(10.6624)	Var 1998
			(5.8752)	Var 1999
			(49.0120)	Var 2000
			(.2028)	Var 2001
			(1.0000)	02/22/02

23A(a)	Kendall		.2676	10/30/92		170,072	12,641	182,713	-	182,713	-	-
			(.2676)	03/16/93

24	Kendall		3.908	01/21/93		645,000	56,316	701,316	30,436	731,752	-	-
			(3.908)	04/16/01

24A(b)	Kendall		.406	01/21/93		155,000	13,533	168,533	-	168,533	-	-
			(.406)	04/16/01

25	Kendall		656.687	01/28/93		1,625,000	82,536	1,707,536	22,673	1,730,209	-	-
			(656.687)	10/31/95

26	Kane		89.511	03/10/93		1,181,555	89,312	1,270,867	3,741,716	3,701,376	1,311,207	205,507
			(2.108)	Var 1999
			(34.255)	Var 2000
			(7.800)	Var 2001
			(8.320)	Var 2002

27	Kendall		83.525	03/11/93		984,474	54,846	1,039,320	49,397	-	1,088,717	-