INLAND LAND APPRECIATION FUND II LP
Item 2. Properties We acquired fee ownership of the following real property investments:    Gross Acres Remaining Purchase/Sales  Parcel & Location Purchased/Sold Acres Date  Parcel 1, McHenry County, Illinois 372.7590 -     04/25/90   (372.7590  sold 02/23/04)       Parcel 2, Kendall County, Illinois 41.1180 -     07/06/90   (3.473  sold 08/29/03)   (37.645  sold 02/17/05)       Parcel 3, Kendall County, Illinois 120.8170 86.427  11/06/90   (3.3900  sold 05/17/05)   (31.0000  sold 07/14/05)          -5-           Gross Acres Remaining Purchase/Sales  Parcel & Location Purchased/Sold Acres Date       Parcel 4, Kendall County, Illinois 299.0250 299.0250 06/28/91       Parcel 5, Kane County, Illinois 189.0468 -     02/28/91   (189.0468  sold 05/16/01)       Parcel 6, Lake County, Illinois 57.3345 57.0765 04/16/91   (.2580  sold 10/01/94)       Parcel 7, McHenry County, Illinois 56.7094 -     04/22/91   (12.6506  sold various  1997)   (15.7041  sold various 1998)   (19.6296  sold various 1999)   (8.7251  sold various 2000)       Parcel 8, Kane County, Illinois 325.3940 181.5240 06/14/91   (.8700  sold 04/03/96)   (63.000  sold 01/23/01)   (80.000  sold 05/11/04)       Parcel 9, Will County, Illinois 9.8670 -     08/13/91   (9.8670  *09/16/02)       Parcel 10, Will County, Illinois 150.6600 -     08/20/91   (150.6600  sold 01/10/05)       Parcel 11, Will County, Illinois 138.4470 -     08/20/91   (138.4470  sold 05/03/93)       Parcel 12, Will County, Illinois 44.7320 -     08/20/91   (44.7320  *09/16/02)       Parcel 13, Will County, Illinois 6.3420 -     09/23/91   (6.3420  sold 05/03/93)       Parcel 14, Kendall County, Illinois 44.4030 -     09/03/91   (15.3920  sold 04/16/01)   (14.2110  sold various 2002)   (13.6000  sold 04/11/03)   (1.2000  sold 02/19/04)       Parcel 15, Kendall County, Illinois 100.3640 -     09/04/91   (5.0000  sold 09/01/93)   (11.0000  sold 12/01/94)   (84.3640  sold 08/14/98)       Parcel 16, McHenry County, Illinois 168.9050 -     09/13/91   (168.9050  sold 08/03/01)          -6-     Gross Acres Remaining Purchase/Sales  Parcel & Location Purchased/Sold Acres Date       Parcel 17, Kendall County, Illinois 3.4620 -     10/30/91   (2.1130  sold 03/06/01)   (1.3490  sold 08/23/02)       Parcel 18, McHenry County, Illinois 139.1697 96.6000 11/07/91   (9.2500  sold various 2004)   (33.3197  sold various 2005)       Parcel 19, Kane County, Illinois 436.2360 -     12/13/91   (436.2360  sold 05/16/01)       Parcel 20, Kane & Kendall Counties, Illinois 400.1290 378.9910 01/31/92   (21.1380  sold 06/30/99)       Parcel 21, Kendall County, Illinois 15.0130 14.0130 05/26/92   (1.0000  sold 03/16/99)       Parcel 22, Kendall County, Illinois 391.9590 28.9960 10/30/92   (10.0000  sold 01/06/94)   (5.5380  sold 01/05/96)   (2.4000  sold 07/27/99)   (73.3950  sold various 2001)   (136.0000  sold 08/14/02)   (34.1400  sold 05/27/03)   (101.4900  sold various 2004)       Parcel 23, Kendall County, Illinois 133.4750 -     10/30/92   (.2676  sold 03/16/93)   (11.5250  donated 07/16/93)   (44.0700  sold various 1995)   (8.2500  sold various 1996)   (2.6100  sold various 1997)   (10.6624  sold various 1998)   (5.8752  sold various 1999)   (49.0120  sold various 2000)   (.2028  sold various 2001)   (1.0000  sold various 2002)       Parcel 24, Kendall County, Illinois 4.3140 -     01/21/93   (4.3140  sold 04/16/01)       Parcel 25, Kendall County, Illinois 656.6870 -     01/28/93   (656.6870  sold 10/31/95)       Parcel 26, Kane County, Illinois 89.5110 -     03/10/93    (2.1080  sold 12/03/99)   (34.2550  sold various 2000)   (7.8000  sold various 2001)   (29.1200  sold various 2002)   (11.3100  sold various 2003)   (4.9180  sold 01/28/04)     -7-      Gross Acres Remaining Purchase/Sales  Parcel & Location Purchased/Sold Acres Date       Parcel 27, Kendall County, Illinois 83.5250 83.5250 03/11/93       Parcel 28, Kendall County, Illinois 50.0000 50.0000 *09/16/02    *  On September 16, 2002, we completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28).  Our general partner anticipates that the land we acquired will produce sufficient income to pay property taxes, insurance and other miscellaneous expenses. Income will be derived through leases to farmers or from other activities compatible with undeveloped land. Although the general partner believes that leasing our land will generate sufficient revenues to pay these expenses, there can be no assurance that this will in fact occur. Our general partner has agreed to make a supplemental capital contribution to us if and to the extent that real estate taxes and insurance payable with respect to our land during a given year exceed the revenue earned by us from leasing our land during such year. Any supplemental capital contribution will be repaid only after limited partners have received, over the life of our partnership, a return of their original capital plus the 15% cumulative return. A majority of the parcels purchased by us consist of land which gener ates revenue from farming or other leasing activities. It is not expected that we will generate cash distributions to limited partners from farm leases or other leasing activities. Through December 31, 2005, our land has generated sufficient revenues from leasing to cover real estate taxes and insurance expense.
We are not subject to any material pending legal proceedings.
Consistent with our limited partnership agreement, there were no matters submitted to a vote of our security holders during 2005.  Part II
As of March 15, 2006, there were 4,472 holders of our units. There is no public market for units nor is it anticipated that any public market for units will develop.  For the years ended December 31, 2005 and 2004, we paid the following distributions:        Distributions to:  2005 2004       General partners $ 900,000 4,111,902  Limited partners  9,500,000 17,088,098       Total $ 10,400,000 21,200,000      -8-
INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  For the years ended December 31, 2005, 2004, 2003, 2002 and 2001  (not covered by Report of Independent Registered Public Accounting Firm)      2005 2004 2003 2002 2001                  Total assets $ 40,369,857 37,219,501 39,274,559 41,787,000 46,018,596          Total income $ 20,171,792 25,705,324 5,713,191 12,208,392 20,993,953          Net income $ 14,722,791 18,657,525 2,504,880 6,333,833 13,666,351          Net income allocated to   the one general partner   unit $ 918,818 4,118,355 348,525 1,244,813 1,221,246          Net income allocated per   limited partnership unit  $ 275.70 290.39 43.07 101.64 248.54          Distributions per limited   partnership unit from   sales  $ 189.74 341.30 92.50 174.83 299.56          Weighted average limited   partnership units  50,068 50,068 50,068 50,068 50,073     The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this annual report.  The net income per unit and distributions per unit data is based upon the weighted average number of units outstanding.  All distributions from sales represent a return of original capital until such time as the limited partners have received distributions totaling their original capital.  As of March 2004, the limited partners had received distributions in excess of their original capital.     -9-
Not Applicable.    -16-
INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)   Index      Page     Report of Independent Registered Public Accounting Firm 18     Report of Independent Registered Public Accounting Firm 19     Financial Statements:        Balance Sheets, December 31, 2005 and 2004 20       Statements of Operations, for the years ended December 31, 2005, 2004 and 2003 22       Statements of Partners' Capital, for the years ended December 31, 2005, 2004 and 2003 23       Statements of Cash Flows, for the years ended December 31, 2005, 2004 and 2003 24       Notes to Financial Statements 25      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.                     -17-  Report of Independent Registered Public Accounting Firm   To the Partners of  Inland Land Appreciation Fund II, L.P.  We have audited the accompanying balance sheets of Inland Land Appreciation Fund II, L.P. (a limited partnership) (“the Partnership”) as of December 31, 2005 and 2004, and the related statements of operations, partners’ capital, and cash flows for the years then ended.  The financial statements are the responsibility of the Partnership’s management.  Our responsibility is to express an opinion on these financial statements based on our audits    We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and si gnificant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inland Land Appreciation Fund II, L.P. as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.   Grant Thornton LLP  Chicago, Illinois March 23, 2006       -18-        REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   To the Partners of  Inland Land Appreciation Fund II, L.P.   We have audited the accompanying statements of operations, partners' capital, and cash flows of Inland Land Appreciation Fund II, L.P. (a limited partnership) (the "Partnership") for the year ended December 31, 2003. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.   We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.  In our opinion, such financial statements present fairly, in all material respects, the results of operations and cash flows of Inland Land Appreciation Fund II, L.P. for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.   Deloitte & Touche LLP   March 26, 2004 Chicago, Illinois     -19-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Balance Sheets  December 31, 2005 and 2004    Assets      2005 2004  Current assets:       Cash and cash equivalents (Note 1) $ 6,129,127 4,338,694    Accounts and accrued interest receivable (net of allowance for       doubtful accounts of $336,712 at December 31, 2005 and      2004)  (Note 6)  268,897 78,414    Other current assets  278,182 302,507       Total current assets  6,676,206 4,719,615       Mortgage loans receivable (net of allowance for doubtful   accounts of $85,992 and $1,208,378 at December 31, 2005 and 2004, respectively) (Note 6)  11,705,015 12,677,979  Investment properties (including acquisition fees paid to   Affiliates of $585,834 and $690,325 at December 31, 2005   and 2004, respectively) (Notes 1, 3 and 4):       Land and improvements  21,988,636 19,821,907       Total assets $ 40,369,857 37,219,501                        See accompanying notes to financial statements.   -20-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Balance Sheets (continued)  December 31, 2005 and 2004    Liabilities and Partners' Capital      2005 2004       Current liabilities:       Accounts payable $ 2,377,965  1,696,084     Accrued real estate taxes  29,126  34,567     Due to Affiliates (Note 3)  71,227  34,042     Unearned income  -  1,316,422        Total current liabilities  2,478,318  3,081,115        Deferred gain on sale of investment properties (Note 6)  6,841,470  7,411,108        Total liabilities  9,319,788  10,492,223        Partners' capital:       General Partner:         Capital contribution  500  500       Cumulative net income  8,788,007  7,869,189       Cumulative cash distributions  (8,388,195) (7,488,195)          400,312  381,494     Limited Partners:         Units of $1,000. Authorized 60,000 Units, 50,068 Units outstanding     at December 31, 2005 and 2004, (net of offering costs of $7,532,439,     of which $2,535,445 was paid to Affiliates)  42,559,909  42,559,909       Cumulative net income  58,855,682  45,051,709       Cumulative cash distributions  (70,765,834) (61,265,834)          30,649,757  26,345,784        Total Partners' capital  31,050,069  26,727,278        Total liabilities and Partners' capital $ 40,369,857  37,219,501           See accompanying notes to financial statements.   -21-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Statements of Operations  For the years ended December 31, 2005, 2004 and 2003      2005 2004 2003  Income:        Sale of investment properties (Notes 1 and 3) $ 18,404,697  23,345,650  3,792,214     Recognition of deferred gain on sale of investment     properties (Note 6)  569,638  1,239,953  703,150     Rental income (Note 5)  79,969  127,291  190,115     Interest income  1,055,516  979,905  1,015,887     Other income  61,972  12,525  11,825            20,171,792  25,705,324  5,713,191         Expenses:        Cost of investment properties sold  6,133,357  6,573,355  2,258,971     Professional services to Affiliates  35,051  40,156  38,388     Professional services to non-affiliates  50,311  57,913  43,843     General and administrative expenses to Affiliates  28,276  24,632  33,076     General and administrative expenses to non-affiliates  50,172  53,113  29,206     Tax expense  121,561  144,677  56,451     Marketing expenses to Affiliates  35,818  28,048  26,008     Marketing expenses to non-affiliates  49,949  75,440  79,038     Land operating expenses to non-affiliates  66,892  50,465  81,971     Recovery of bad debt expense  (1,122,386) -  -     Impairment loss on land  -  -  561,359            5,449,001  7,047,799  3,208,311         Net income $ 14,722,791  18,657,525  2,504,880         Net income allocated to (Note 2):        General Partner $ 918,818  4,118,355  348,525     Limited Partners  13,803,973  14,539,170  2,156,355         Net income $ 14,722,791  18,657,525  2,504,880         Net income allocated to the one General Partner Unit $ 918,818  4,118,355  348,525         Net income per Unit allocated to Limited Partners per   weighted average Limited Partnership Units (50,068   for the years ended December 31, 2005, 2004 and   2003) $ 275.70  290.39  43.07         See accompanying notes to financial statements.   -22-   INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Statements of Partners' Capital  For the years ended December 31, 2005, 2004 and 2003       General Limited     Partner Partners Total        Balance January 1, 2003 $ 366,742  31,369,760  31,736,502         Distributions to Partners ($92.50 per weighted average   Limited Partnership Units of 50,068) (Note 2)  (340,226) (4,631,403) (4,971,629)  Net income (Note 2)  348,525  2,156,355  2,504,880         Balance December 31, 2003  375,041  28,894,712  29,269,753         Distributions to Partners ($341.30 per weighted average   Limited Partnership Units of 50,068) (Note 2)  (4,111,902) (17,088,098) (21,200,000)  Net income (Note 2)  4,118,355  14,539,170  18,657,525         Balance December 31, 2004  381,494  26,345,784  26,727,278         Distributions to Partners ($189.74 per weighted average   Limited Partnership Units of 50,068) (Note 2)  (900,000) (9,500,000) (10,400,000)  Net income (Note 2)  918,818  13,803,973  14,722,791         Balance December 31, 2005 $ 400,312  30,649,757  31,050,069                       See accompanying notes to financial statements.   -23-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Statements of Cash Flows  For the years ended December 31, 2005, 2004 and 2003     2005 2004 2003  Cash flows from operating activities:        Net income $ 14,722,791  18,657,525  2,504,880     Adjustments to reconcile net income to net cash       provided by operating activities:          Gain on sale of investment properties  (12,271,340) (16,772,295) (1,533,243)      Recognition of deferred gain on sale of investment       properties  (569,638) (1,239,953) (703,150)      Recovery of bad debt expense  (1,122,386) -  -       Impairment loss on land  -  -  561,359       Changes in assets and liabilities:            Restricted cash  -  182,879  (2,763)        Accounts and accrued interest receivable  (190,483) 24,848  845,838         Other current assets  24,325  (257) (7,029)        Accounts payable  681,881  1,647,095  (145,122)        Accrued real estate taxes  (5,441) (21,746) (99,636)        Due to Affiliates  37,185  (11,225) 15,898         Unearned income  (13,321) (181,975) 886,318         Net cash provided by operating activities  1,293,573  2,284,896  2,323,350         Cash flows from investing activities:        Principal payments collected on mortgage loans     receivable  2,095,350  2,117,893  1,204,128     Additions to investment properties  (8,300,086) (5,375,640) (1,249,231)    Proceeds from sale of investment properties  18,404,697  23,345,650  3,792,214     Deposits  (1,303,101) -  -         Net cash provided by investing activities  10,896,860  20,087,903  3,747,111         Cash flows from financing activities:        Distributions  (10,400,000) (21,200,000) (4,971,629)        Net cash used in financing activities  (10,400,000) (21,200,000) (4,971,629)        Net increase in cash and cash equivalents  1,790,433  1,172,799  1,098,832   Cash and cash equivalents at beginning of year  4,338,694  3,165,895  2,067,063         Cash and cash equivalents at end of year $ 6,129,127  4,338,694  3,165,895         Supplemental schedule of non-cash investing activities:        Reduction of investment properties $ 6,133,357  6,573,355  2,258,971     Gain on sale of investment properties  12,271,340  16,772,295  1,533,243           Proceeds from sale of investment properties $ 18,404,697  23,345,650  3,792,214     See accompanying notes to financial statements.   -24-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements  For the years ended December 31, 2005, 2004 and 2003   (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 December 31, 2005, the Partnership had repurchased a total of 408.65 Units for $383,822 from various Limited Partners through the Unit Repurchase Program. Under this program, Limited Partners could, 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 ("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 period. Actual results could differ from those estimates. Certain reclassifications were made to the 2004 financial statements to conform with the 2005 presentation.  Offering costs have been offset against the Limited Partners' capital accounts.  The Partnership 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 market.  The Partnership recognizes income from the sale of land parcels in accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate".  For vacant land parcels and parcels with insignificant buildings and improvements, the Partnership uses the area method of allocation, which approximates the relative sales method of allocation, whereby a per acre price is used as the standard allocation method for land purchases and sales. The total cost of the parcel is divided by the total number of acres to arrive at a per acre price. For parcels with significant buildings and improvements (Parcel 24, described in Note 4), the Partnership records the buildings and improvements at a cost based upon the appraised value at the date of acquisition. Buildings and improvements are depreciated using the straight-line method of depreciation over a useful life of thirty years.  Repair and maintenance expenses are charged to operations as incurred.       -25-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)   The Partnership is required to pay a withholding tax to the Internal Revenue Service with respect to a Partner's allocable share of the Partnership's taxable net income, if the Partner is a foreign person. The Partnership will first pay the withholding tax from the distributions to any foreign partner, and to the extent that the tax exceeds the amount of distributions withheld, or if there have been no distributions to withhold, the excess will be accounted for as a distribution to the foreign partner. Withholding tax payments are made every April, June, September and December.  No provision for Federal income taxes has been made, as the liability for such taxes is that of the Partners rather than the Partnership.  The Partnership records are maintained on the accrual basis of accounting in accordance with GAAP. The Federal income tax return has been prepared from such records after making appropriate adjustments, if any, to reflect the Partnership's accounts as adjusted for Federal income tax reporting purposes. Such adjustments are not recorded in the records of the Partnership.  The net effect of these items is summarized as follows:     2005 2004    GAAP Tax Basis GAAP Tax Basis    Basis (unaudited) Basis (unaudited)         Total assets $ 40,369,857 46,632,298 37,219,501 44,459,719         Partners' capital:         General Partner  400,312 219,416 381,494 200,597    Limited Partners  30,649,757 38,363,095 26,345,784 34,059,123         Net income:         General Partner  918,818 909,504 4,118,355 4,118,575    Limited Partners  13,803,973 12,865,209 14,539,170 13,618,583         Net income per Limited Partnership Unit  275.70 256.95 290.39 272.00    The net income per Unit is based upon the weighted average number of Units of 50,068 during 2005 and 2004.  New Accounting Pronouncements  In December 2004, the FASB issued SFAS No. 153: Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured on the fair value of assets exchanged. It eliminates the exceptions for nonmonetary exchanges of similar productive assets and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. The statement is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Partnership does not believe that the adoption of SFAS No. 153 will have a material impact on its financial statements.     -26-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)   Emerging Issues Task Force ("EITF") Issue No. 04-5: Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity when the Limited Partners Have Certain Rights, was ratified by the FASB in June 2005. At issue is what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate the limited partnership in accordance with U.S. generally accepted accounting principles. The assessment of limited partners' rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (a) there is a change to the terms or in the exercisability of the rights of the limited partners, (b) the sole general partner increases or decreases its ownership of limited partnership interests,  or (c) there is an increase or decrease in the number of outstanding limited partnership interests. This consensus applies to limited partnerships or similar entities, such as limited liability companies that have governing provisions that are the functional equivalent of a limited partnership. This Issue is effective no later than for fiscal years beginning after December 15, 2005 and as of June 29, 2005 for new or modified arrangements. The Partnership does not expect that this EITF Issue will have a material effect on its financial statements.  In June 2005, the FASB issued EITF Issue No. 04-10: Determining Whether to Aggregate Operating Segments that do not meet the Quantitative Thresholds.  The EITF provides clarification regarding SFAS No. 131: Disclosure about Segments of an Enterprise and Related Information.  The consensus states that operating segments that do not meet the quantitative thresholds can be aggregated only if aggregation is consistent with the objective and basic principles provided in SFAS No. 131, the segments have similar economic characteristics, and the segments share a majority of the aggregation criteria listed in SFAS No. 131.  This should be applied for fiscal years ending after September 15, 2005.  The corresponding information for earlier periods, including interim periods, should be restated unless it is impractical to do so.  Early application of the consensus is permitted.  The adoption of this consensu s did not have a significant impact on the Partnership’s segment disclosure.  In March 2005, the FASB issued FIN No. 47: Accounting for Conditional Asset Retirement Obligations.  This interpretation clarifies that the term conditional asset retirement obligation as used in SFAS No. 143: Accounting for Asset Retirement Obligation, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity.  Thus, the timing and (or) method of settlement may be conditional on a future event.  This interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation.  This interpretation is effective no later than the end of fiscal years ending after December 15, 2005.  The adoption of this interpretation did not have a significant impact on the Partnership’s finan cial statements.    -27-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)     (2) Partnership Agreement  The Partnership Agreement defines the allocation of profits and losses, and available cash. If and to the extent that real estate taxes and insurance payable with respect to the Partnership's land during a given year exceed revenues of the Partnership, the General Partner will make a Supplemental Capital Contribution of such amount to the Partnership to ensure that it has sufficient funds to make such payments.  Profits and losses from operations  (other than capital transactions) will be allocated 99% to the Limited Partners and 1% to the General Partner. The net gain from sales of Partnership properties is first allocated among the Partners in proportion to the negative balances, if any, in their respective capital accounts. Thereafter, except as provided below, net gain is allocated to the General Partner in an amount equal to the proceeds distributed to the General Partner from such sale and the balance of any net gain is allocated to the Limited Partners. If the amount of net gain realized from a sale is less than the amount of cash distributed to the General Partner from such sale, the Partnership will allocate income or gain to the General Partner in an amount equal to the excess of the cash distributed to the General Partner with respect to such sale as quickly as permitted by law.  Any net loss from a sale will be allocated to t he Limited Partners.  Distributions of Net Sale Proceeds will be allocated between the General Partner and the Limited Partners based upon both an aggregate overall return to the Limited Partners and a separate return with respect to each parcel of land purchased by the Partnership.  As a general rule, Net Sale Proceeds will be distributed 90% to the Limited Partners and 10% to the General Partner until the Limited Partners have received from Net Sale Proceeds  (i) a return of their Original Capital plus (ii) a noncompounded Cumulative Preferred Return of 15% of their Invested Capital. However, with respect to each parcel of land, the General Partner's 10% share will be subordinated until the Limited Partners receive a return of the Original Capital attributed to such parcel ("Parcel Capital") plus a 6% per annum noncompounded Cumulative Preferred Return thereon.  After the amounts described in items  (i) and  (ii) above and any previously subordinated distributions to the General Partner have been paid, and the amount of any Supplemental Capital Contributions have been repaid to the General Partner, subsequent distributions shall be paid 75% to the Limited Partners and 25% to the General Partner without considering Parcel Capital. If, after all Net Sale Proceeds have been distributed, the General Partner has received more than 25% of all Net Sale Proceeds (exclusive of distributions made to the Limited Partners to return their Original Capital), the General Partner shall contribute to the Partnership for distribution to the Limited Partners an amount equal to such excess.  Any distributions from Net Sales Proceeds at a time when Invested Capital is greater than zero shall be deemed applied first to reduction of such Invested Capital before application to payment of any deficiency in the 15% Cumulative Preferred Return.    -28-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)    (3) Transactions with Affiliates  The General Partner and its Affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its Affiliates relating to the administration of the Partnership. Such costs are included in professional services to Affiliates and general and administrative expenses to Affiliates, of which $8,511 and $12,267 was unpaid as of December 31, 2005 and 2004, respectively.  An Affiliate of the General Partner performed marketing and advertising services for the Partnership and was reimbursed (as set forth under term of the Partnership Agreement) for direct costs. Such costs of $35,818, $28,048 and $26,008 have been incurred and are included in marketing expenses to Affiliates for the years ended December 31, 2005, 2004 and 2003, respectively, all of which was paid as of December 31, 2005 and 2004.  An Affiliate of the General Partner performed property upgrades, rezoning, annexation and other activities to prepare the Partnership's land investments for sale and was reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs.  For the years ended December 31, 2005 and 2004, the Partnership incurred $236,691 and $256,488, respectively, of such costs.  The Affiliate did not recognize a profit on any project. Such costs are included in investment properties, of which $62,716 and $21,775 was unpaid as of December 31, 2005 and 2004, respectively.    -29-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued) (4) Investment Properties   Gross Acres Purchase/ Initial Costs Costs Capitalized Costs of Total Remaining Costs of Current Year Gain  Parcel Illinois Purchased Sales  Original Acquisition Total Subsequent to Property Parcels at on Sale  # County (Sold) Date  Costs Costs Costs Acquisition Sold 12/31/05 Recognized  1 McHenry 372.759  04/25/90 $ 2,114,295 114,070 2,228,365 630,703 2,859,068 -     -        (372.759) 02/23/04                       2 Kendall  41.118 07/06/90   549,639 43,889 593,528 75,199 668,727 -     1,587,700    (3.47) 08/29/03            (37.645) 02/17/05                       3 Kendall 120.817 11/06/90   1,606,794 101,863 1,708,657 2,344,554 567,827 3,485,384 4,593,679    (3.390) 05/17/05            (31.000) 07/14/05                       4 Kendall 299.025 06/28/91   1,442,059 77,804 1,519,863 464,714 -      1,984,577 -                    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 1,227,996 4,457 2,199,075 -           (.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 48,650 1,909,034 1,898,591 -         (.870) 04/03/96            (63.000) 01/23/01            (80.000) 05/11/04                       9 (c) Will 9.867 08/13/91   -      -      -      -      -      -      -         (9.867) 09/16/02                          -30-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued) (4) Investment Properties (continued)    Gross Acres Purchase/ Initial Costs Costs Capitalized Costs of Total Remaining Costs of Current Year Gain  Parcel Illinois Purchased Sales  Original Acquisition Total Subsequent to Property Parcels at on Sale  # County (Sold) Date  Costs Costs Costs Acquisition Sold 12/31/05 Recognized               10 Will 150.66 08/20/91 $ 1,866,716 89,333 1,956,049 23,897 1,979,946 -     5,886,788    (150.66) 01/10/05                       11 Will 138.447  08/20/91   289,914 20,376 310,290 2,700 312,990 -      -          (138.447) 05/03/93                       12 (c) Will 44.732 08/20/91  -      -      -      -      -      -      -         (44.732) 09/16/02                       13 Will 6.342 09/23/91  139,524 172 139,696 -      139,696 -      -         (6.342) 05/03/93                       14 Kendall  44.403 09/03/91   888,060 68,210 956,270 1,259,583 2,215,853 -      -        (15.392) 04/16/01            (14.2110) Var 2002            (13.6000) 04/11/03            (1.2000) 02/19/04                       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 22,326 457,326 113,135 570,461 -      -         (2.113) 03/06/01            (1.349) 08/23/02                       18 McHenry 139.1697 11/07/91   1,160,301 58,190 1,218,491 6,578,494 3,716,827 4,080,158 203,173    (9.2500) Var 2004            (33.3197) Var 2005             -31-       INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued) (4) Investment Properties (continued)    Gross Acres Purchase/ Initial Costs Costs Capitalized Costs of Total Remaining Costs of Current Year Gain  Parcel Illinois Purchased Sales  Original Acquisition Total Subsequent to Property Parcels at on Sale  # County (Sold) Date  Costs Costs Costs Acquisition Sold 12/31/05 Recognized               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 3,218,693 1,250,469 3,762,165 -          (21.138) 06/30/99                       21 Kendall 15.013 05/26/92  250,000 23,844 273,844 35,798 18,798 290,844 -          (1.000) 03/16/99                       22 Kendall 391.959 10/30/92  3,870,000 283,186 4,153,186 1,767,592 5,556,530 364,248 -          (10.000) 01/06/94             (5.538) 01/05/96             (2.400) 07/27/99            (73.395) Var 2001            (136.000) 08/14/02            (34.1400) 05/27/03            (101.4900) 01/09/04                       23  Kendall 133.2074 10/30/92   3,231,942 251,373 3,483,315 4,665,998 8,149,313 -      -          (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) Var 2002                       23A(a) Kendall .2676 10/30/92   170,072 12,641 182,713 -      182,713 -      -          (.2676) 03/16/93              -32-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued) (4) Investment Properties (continued)     Gross Acres Purchase/ Initial Costs Costs Capitalized Costs of Total Remaining Costs of Current Year Gain  Parcel Illinois Purchased Sales  Original Acquisition Total Subsequent to Property Parcels at on Sale  # County (Sold) Date  Costs Costs Costs Acquisition Sold 12/31/05 Recognized               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 (d) Kane 89.511 03/10/93  1,181,555 89,312 1,270,867 5,135,895 6,406,762 -      -         (2.108) Var 1999            (34.255) Var 2000            (7.800) Var 2001            (29.1200) Var 2002            (11.3100) Var 2003            (4.9180) 01/28/04                       27 Kendall 83.525 03/11/93   984,474 54,846 1,039,320 2,052,730 -      3,092,050 -                    28 (c) Kendall 50.0000 09/16/02  661,460 22,976 684,436 147,108 -      831,544 -                        $ 38,810,025 2,504,276 41,314,301 33,809,650 53,135,315 21,988,636 12,271,340      -33-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)  (4) Investment Properties (continued)  (a) Included in the purchase of Parcel 23 was a newly constructed 2,500 square foot house. The house was sold in March 1993.  (b) Included in the purchase of Parcel 24 was a 2,400 square foot office building. The building was sold in 2001.  (c) On September 16, 2002, the Partnership completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28).  (d) Reconciliation of investment properties owned:     2005 2004       Balance at January 1, $ 19,821,907  21,019,622   Additions during year  8,300,086  5,375,640   Sales during year  (6,133,357)  (6,573,355)       Balance at December 31, $ 21,988,636  19,821,907     (e) The aggregate cost of investment properties owned at December 31, 2005 for Federal income tax purposes was approximately $20,600,000 (unaudited).   (5) Rental Income  The Partnership has determined that all leases relating to the farm parcels are operating leases. Accordingly, rental income is reported when earned.  As of December 31, 2005, the Partnership had leases of generally one year in duration, for approximately 500 acres of the approximately 1,276 acres owned.   -34-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)   (6) Mortgage Loans Receivable  Mortgage loans receivable are the result of sales of Parcels, in whole or in part.  The Partnership has recorded a deferred gain on these sales.  The deferred gain will be recognized over the life of the related mortgage loan receivable as principal payments are received. The fair market value of the mortgage loans receivable was approximately $12,400,000 and $13,750,000, at December 31, 2005 and 2004, respectively.         Accrued       Principal Principal Interest Deferred      Balance Balance Receivable Gain  Parcel Maturity Interest Rate  12/31/05 12/31/04 12/31/05 12/31/05           5 & 19 07/01/11 6.00% $ 11,705,015 12,677,979 163,203 6,841,470           15 07/31/05 9.00%  85,992 1,208,378 336,712 -                   11,791,007 13,886,357 499,915 6,841,470           Less allowance for doubtful accounts  85,992 1,208,378 336,712 -                  $ 11,705,015 12,677,979 163,203 6,841,470     On May 16, 2001, the Partnership sold 189 acres of Parcel 5 and 436 acres of Parcel 19 for $17,500,000 and recorded deferred gain of $10,203,634.  The Partnership received a deferred down payment note in the amount of $1,500,000, due December 31, 2001.  The note had an interest rate of 6%, however the note provided for the interest to be waived if the principal was paid in full by December 1, 2001.  The Partnership received payment of the deferred down payment note on December 1, 2001 and recognized $875,923 of deferred gain.  The Partnership also received an installment note in the amount of $16,000,000 at the time of closing.  The installment note matures July 1, 2011 and has an interest rate of 6%.  The remaining deferred gain will be recognized as payments are received.  The General Partner determined that the maximum value of Parcel 15 could be realized if the parcel was developed and sold as individual lots. However, if we had followed that plan, there is a possibility that it could have increased income taxes. Therefore, the Partnership sold the parcel to a third party developer whereby 100% of the sales price was represented by a note receivable from the buyer. This transaction was deemed an installment sale. After the sale, the developer, through a limited liability company or LLC, secured third party financing to cover the deferred down payment owed to us as well as provide proceeds to begin the development of the project. This sale was structured so that the deferred down payment received at the time of the sale was sufficient to provide a distribution to our Limited Partners that equated to the parcel capital allocated to the parcel plus approximately a 6% return per annum on the capital invested i n the parcel (parcel capital) through the date of the distribution.   -35-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)   The velocity of the developer's individual home sales was slower than was originally projected and consequently, the developer's carrying costs were higher.  As a result of the slower lot sales, the net sale proceeds available to the Partnership were lower than anticipated. As of December 31, 2005, 2004 and 2003, the Partnership has recorded an allowance for doubtful accounts of $85,992, $1,208,378 and $1,208,378, respectively, relating to the mortgage receivable and $336,712, relating to the accrued interest relating to the sale of Parcel 15 and has written off the related deferred gain of $747,454.  During 2005, the Partnership received principal payments of $1,122,386 for a portion of the mortgage which was previously written off.  The Partnership recorded a provision for the reversal of loan losses and bad debt expense in the amount of $1,122,386.  The General Partner guaranteed the third party development loans owed by the limited liability company. In reviewing the development’s financial situation, our General Partner determined that it would be in its best interest to have an affiliate acquire the interest in the LLC. The General Partner and its affiliates concluded that they could better control the continuing costs to complete the development and would therefore have the best opportunity to limit their exposure under the guarantee agreements and possibly recover a portion of the amount owed to the Partnership. An affiliate of our General Partner acquired the interests in the LLC and paid off the debt under its guarantee of the LLC loans. The affiliate of the General Partner will complete the development and sale of this project.     (7) Subsequent Events  Since January 1, 2006, we have sold 15 additional lots of parcel 18 for approximately $910,000 and recorded a gain of approximately $70,000.    -36-
Not applicable.     -37-  PART III
Our general partner, 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.     The general partner has responsibility for all aspects of our operations.   During 2005, the board of directors of our general partner formalized the audit committee. The Audit Committee is not independent of our general partner and consists of Catherine L. Lynch, committee chair and financial expert, Brenda G. Gujral, Roberta S. Matlin and Gary Pechter. The audit committee is responsible for engaging our independent registered public accounting firm, reviewing the plans and results of the audit engagement with our independent registered public accounting firm and consulting with the independent registered public accounting firm regarding the adequacy of our internal accounting controls.  During 2005, our general partner adopted a Code of Ethics that applies to all of its employees.   Officers and Directors  The officers, directors, and key employees of IREIC and its affiliates that are likely to provide services to the Partnership are as follows.  Ages are listed as of January 1, 2006.   Functional Title   Daniel L. Goodwin Director  Robert H. Baum Director, General Counsel of IREIC  Robert D. Parks Chairman   Brenda G. Gujral Director, President and principal executive officer of the Partnership  Catherine L. Lynch Treasurer  Roberta S. Matlin Director, Senior Vice President-Investments  Guadalupe Griffin Vice President-Asset Management  Kelly Tucek Vice President-Partnership Accounting and principal financial officer of the Partnership  Gary E. Pechter Senior Vice President, The Inland Group,  Counsel to the Partnership         -38-  DANIEL L. GOODWIN (age 62) has been with Inland since 1968 and is a founding and controlling stockholder of, and the chairman of the board and chief executive officer of, The Inland Group. Mr. Goodwin also serves as a director or officer of entities wholly owned or controlled by The Inland Group. In addition, Mr. Goodwin is the chairman of the board of Inland Real Estate Corporation, chairman of the board and chief executive officer of Inland Mortgage Investment Corporation and chairman of the board and chief executive officer of Inland Bancorp Holding Company, a bank holding company. Mr. Goodwin also serves on the management committee of Inland Real Estate Corporation.  Mr. Goodwin is a member of the National Association of Realtors, the Illinois Association of Realtors and the Northern Illinois Commercial Association of Realtors.  He is also the author of a nationally recognized real estate reference book for the management of residential properties.  Mr. Goodwin serves on the Board of the Illinois State Affordable Housing Trust Fund. He has served as an advisor for the Office of Housing Coordination Services of the State of Illinois, and as a member of the Seniors Housing Committee of the National Multi-Housing Council. He has served as Chairman of the DuPage County Affordable Housing Task Force and presently serves as chairman of New Directions Affordable Housing Corporation.   Mr. Goodwin obtained his bachelor's and master's degrees from Illinois state universities. Following graduation, he taught for five years in the Chicago public schools system. More recently, Mr. Goodwin has served as a member of the board of governors of Illinois State Colleges and Universities.  He is vice chairman of the board of trustees of Benedictine University, vice chairman of the board of trustees of Springfield College and chairman of the board of Northeastern Illinois University.   ROBERT H. BAUM (age 62) has been with Inland since 1968 and is one of the founding stockholders. Mr. Baum is vice chairman and executive vice president and general counsel of The Inland Group. In his capacity as general counsel, Mr. Baum is responsible for the supervision of the legal activities of The Inland Group 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 appea ls and federal district courts and the State of Illinois. He is also a licensed real estate broker. He has served as a director of American National Bank of DuPage and currently serves as a director of Inland Bancorp Holding Company and of Westbank. Mr. Baum also is a member of the Governing Council of Wellness House, a charitable organization that exists to improve the quality of life for people whose lives have been affected by cancer and its treatment by providing psychosocial and educational support for cancer patients, their families and friends.   ROBERT D. PARKS  (age 62) has been with Inland since 1968 and is one of the founding stockholders. He also is chairman of Inland Real Estate Investment Corporation, director of Inland Securities Corporation and a director of Inland Investment Advisors, Inc.  Mr. Parks is president, chief executive officer, and a director of Inland Real Estate Corporation and serves on its management committee.  He is also chairman and an affiliated director of Inland Western Retail Real Estate Trust, Inc. He is chairman and an affiliated director of Inland American Real Estate Trust, Inc. 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 Limited Principal with the National Association of Securities Dealers, Inc. He is also a member of the Real Estate Investment Association, the Financial Planning    -39-  Association, the Foundation for Financial Planning, as well as a member of the National Association of Real Estate Investment Trusts.   BRENDA G. GUJRAL (age 63) is president, chief operating officer and a director of Inland Real Estate Investment Corporation (IREIC). She is also president, chief operating officer and a director of Inland Securities Corporation (ISC), a member firm of the National Association of Securities Dealers (NASD). Mrs. Gujral is also a director of Inland Investment Advisors, Inc., an investment advisor. She is also Chief Executive Officer and an affiliated director of Inland Western Retail Real Estate Trust, Inc., chairman of the board of Inland Real Estate Exchange Corporation and President and chief operating officer and an affiliated director of Inland American Retail Real Estate Trust, Inc.  Mrs. Gujral has overall responsibility for the operations of IREIC, including the distribution of checks to over 70,000 investors, review of periodic communications to those investors, the filing of quarterly and annual reports for Inland’s publicly registered investment programs with the Securities and Exchange Commission, compliance with other SEC and NASD securities regulations both for IREIC and ISC, review of asset management activities, and marketing and communications with the independent broker/dealer firms selling Inland’s current and prior programs.  Mrs. Gujral works with internal and outside legal counsel in structuring and registering the prospectuses for IREIC’s investment programs and in connection with the preparation of its offering documents and registering the related securities with the Securities and Exchange Commission and state securities commissions.  Mrs. Gujral has been with the Inland organization for more than 20 years, becoming an officer in 1982. Prior to joining Inland, she worked for the Land Use Planning Commission establishing an office in Portland, Oregon, to implement land use legislation for that state.  She is a graduate of California State University.  She holds Series 7, 22, 39 and 63 licenses withthe NASD.  Mrs. Gujral is a member of the National Association of Real Estate Investment Trusts (NAREIT) and the National Association for Female Executives.   CATHERINE L. LYNCH (age 47) 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 LLP 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.   ROBERTA S. MATLIN (age 61) joined Inland Real Estate Investment Corporation (IREIC) in 1984 as director of investor administration and currently serves as senior vice president of IREIC, directing the day-to-day internal operations.  Ms. Matlin is a director of IREIC and president of Inland Investment Advisors, Inc., and Intervest Southern Real Estate Corporation, and a director and vice president of Inland Securities Corporation. She is the president of Inland American Advisory Services, Inc. Since 2003, she has been vice president of administration of Inland Western Retail Real Estate Trust, Inc., and since 2004, vice president of administration of Inland American Real Estate Trust, Inc.  She was vice president of administration of Inland Real Corporation from 1995 until 2000 and of Inland Retail Real Estate Trust, Inc from 1998 until 2004. From June 2001 until April 2004, she was a trustee and executive vice president of I nland Mutual Fund Trust. Prior to joining Inland, she worked for the Chicago Region of the Social Security Administration of the Untied States Department of Health and Human Services.  Ms. Matlin is a graduate of the University of Illinois. She holds Series 7, 22, 24, 39, 63 and 65 licenses with the National Association of Securities Dealers.   -40-    GUADALUPE GRIFFIN (age 41) joined Inland in 1994. Ms. Griffin serves as vice president of Inland Real Estate Investment Corporation and assistant vice president of Inland Midwest Investment Corporation. Ms. Griffin is responsible for the asset management and day-to-day operations of the public and private partnerships which include the development of operating and disposition strategies for the partnerships and investor communications. Prior to joining Inland, Ms. Griffin was employed by the University of Illinois at Chicago Center for Urban Educational Research and Development as Assistant to the Director of the Nation of Tomorrow Program; a privately funded multi-million dollar program, which provided educational and empowerment services to youths and their families in four inner-city schools. Ms. Griffin holds an Illinois Real Estate Sales License.   KELLY TUCEK (age 43) joined Inland in 1989 and is a vice president of Inland Real Estate Investment Corporation and beginning in 2006, vice president, controller of Inland Western Retail Real Estate Advisory Services, Inc.  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.   GARY E. PECHTER (age 54) joined Inland in 1985 and is a Senior Vice President and Assistant General Counsel of The Inland Real Estate Group, Inc., and a member of the Audit Committee for all public partnerships sponsored by IREIC. In his capacity as their counsel, Mr. Pechter has been admitted to practice law in the State of Illinois and the federal district court.  He is also a licensed real estate broker. Mr. Pechter received his undergraduate degree from the University of Illinois and his law degree from John Marshall Law School.   Section 16(a) Beneficial Ownership Reporting Compliance  Section 16(a) of the Exchange Act requires directors, executive officers and beneficial owners of more than ten percent of our partnership units to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission and to provide us with copies of such reports. Based solely on a review of the copies provided to us and written representations from such reporting persons, we believe that all applicable Section 16(a) filing requirements have been met for such reporting persons.      -41-
Our general partner is entitled to receive a share of cash distributions of net sale proceeds based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.   Our partnership agreement defines the allocation of profits and losses, and available cash. If and to the extent that real estate taxes and insurance payable with respect to our land during a given year exceed our revenues, our general partner will make a supplemental capital contribution of such amount to us to ensure that we have sufficient funds to make such payments.  Profits and losses from operations (other than capital transactions) will be allocated 99% to the limited partners and 1% to the general partner. The net gain from sales of our properties is first allocated among the partners in proportion to the negative balances, if any, in their respective capital accounts. Thereafter, except as provided below, net gain is allocated to the general partner in an amount equal to the proceeds distributed to the general partner from such sale and the balance of any net gain is allocated to the limited partners. If the amount of net gain realized from a sale is less than the amount of cash distributed to the general partner from such sale, we will allocate income or gain to the general partner in an amount equal to the excess of the cash distributed to the general partner with respect to such sale as quickly as permitted by law.  Any net loss from a sale will be allocated to the limited partners.  Distributions of net sale proceeds will be allocated between the general partner and the limited partners based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.  As a general rule, net sale proceeds will be distributed 90% to the limited partners and 10% to the general partner until the limited partners have received from net sale proceeds (i) a return of their original capital plus (ii) a noncompounded cumulative preferred return of 15% of their invested capital. However, with respect to each parcel of land, the general partner's 10% share will be subordinated until the limited partners receive a return of the original capital attributed to such parcel ("parcel capital") plus a 6% per annum noncompounded cumulative preferred return thereon.  After the amounts described in items  (i) and  (ii) above and any previously subordinated distributions to the general partner have been paid, and the amount of any supplemental capital contributions have been repaid to the general partner, subsequent distributions shall be paid 75% to the limited partners and 25% to the general partner without considering parcel capital. If, after all net sale proceeds have been distributed, the general partner has received more than 25% of all net sale proceeds (exclusive of distributions made to the limited partners to return their original capital), the general partner shall contribute to us for distribution to the limited partners an amount equal to such excess.  Any distributions from net sales proceeds at a time when invested capital is greater than zero shall be deemed applied first to reduction of such invested capital before application to payment of any deficiency in the 15% cumulative preferred return.  We are permitted to engage in various transactions involving affiliates of our general, as described below.   Our general partner and its affiliates may be reimbursed for its expenses or out-of-pocket costs relating to our administration. For the year ended December 31, 2005, such costs, included in general and administrative expenses to affiliates and professional services to affiliates, were $63,327, of which $8,511 was unpaid as of December 31, 2005.    -42-  An affiliate of our general partner performed marketing and advertising services for us and was reimbursed  (as set forth under terms of the partnership agreement) for direct costs. For the year ended December 31, 2005, such costs were $35,818, all of which was paid at December 31, 2005.  An affiliate of our general partner performed property upgrades, rezoning, annexation and other activities to prepare our 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. For the year ended December 31, 2005, we incurred $236,691 of such costs, of which $62,716 was unpaid as of December 31, 2005, and which are included in investment properties.
(a) No person or group is known by us to own beneficially more than 5% of the outstanding units of our partnership.  (b) The officers and directors of our general partner own as a group the following units of our partnership:    Amount and Nature    of Beneficial Percent  Title of Class Ownership of Class      Limited partnership units 234 Units directly Less than 1/2%    No officer or director of our general partner possesses a right to acquire beneficial ownership of units of our partnership.  All of the outstanding shares of our general partner are owned by an affiliate or its officers and directors as set forth above in Item 10.  (c) There exists no arrangement, known us, the operation of which may, at a subsequent date, result in a change in our control.
There were no significant transactions or business relationships with the general partner, affiliates or their management other than those described in Items 10 and 11 above. Reference is made to Note 3 of the Notes to Financial Statements (Item 8 of this annual report) for information regarding related party transactions.    -43-
Fees.  Aggregate fees for professional services rendered by our independent registered public account firm were as follows:     Years ended December 31,    2005 2004       Audit fees for professional services rendered for the audit of our   annual financial statements and quarterly reviews of our   financial statements. $ 35,801 42,000  Tax fees for professional services rendered for tax return   preparation and review of our K-1s.  5,200 9,490       Total fees  $ 41,001 51,490         -44-  PART IV
(a) The financial statements listed in the index at page 17 of this annual report are filed as part of this annual report.  (b) Exhibits. The following exhibits are incorporated herein by reference:  3 Certificate of Limited Partnership and Amended and Restated Agreement of Limited Partnership, included as Exhibits A and B of the Prospectus dated October 25, 1989, as amended, are incorporated herein by reference thereto.  31.1 Rule 13a-14(a)/15d-14(a) Certification by principal executive officer 31.2 Rule 13a-14(a)/15d-14(a) Certification by principal financial officer   32.1 Section 1350 Certification by principal executive officer 32.2 Section 1350 Certification by principal financial officer   (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 2005 has been sent to our limited partners. An annual report will be sent to the limited partners subsequent to this filing and we will furnish copies of such report to the Commission when it is sent to the limited partners.      -45-  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 LAND APPRECIATION FUND II, L.P.    Inland Real Estate Investment Corporation    General Partner     /s/ Brenda G. Gujral     By: Brenda G. Gujral    President and Director  Date: March 23, 2005    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/ Brenda G. Gujral     By: Brenda G. Gujral    President and Director  Date: March 23, 2005     /s/ Guadalupe Griffin     By: Guadalupe Griffin    Vice President  Date: March 23, 2005     /s/ Kelly Tucek     By: Kelly Tucek    Vice President  Date: March 23, 2005     /s/ Robert D. Parks     By: Robert D. Parks    Chairman  Date: March 23, 2005     /s/ Daniel L. Goodwin     By: Daniel L. Goodwin    Director  Date: March 23, 2005         -46-       EX-31 2 land2311.htm     SECTION 302 CERTIFICATION     EXHIBIT 31.1 CERTIFICATION  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  I, Brenda G. Gujral, President, certify that: (1) I have reviewed this annual report on Form 10-K of Inland Land Appreciation Fund II, L.P.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.   By: Inland Real Estate Investment Corporation       General Partner         /S/ Brenda G. Gujral                                  Name: Brenda G. Gujral  Title:  President of the General Partner and             principal executive officer of Inland Land Appreciation Fund II, L.P.  Date: March 23, 2006           EX-31 3 land2312.htm     SECTION 302 CERTIFICATION     EXHIBIT 31.2 CERTIFICATION  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  I, Kelly Tucek, Vice President, certify that: (1) I have reviewed this annual report on Form 10-K of Inland Land Appreciation Fund II, L.P.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.   By: Inland Real Estate Investment Corporation       General Partner         /S/ Kelly Tucek                                  Name: Kelly Tucek  Title:  Vice President of the General Partner and             principal financial officer of Inland Land Appreciation Fund II, L.P.  Date: March 23, 2006           EX-32 4 land2321.htm     Exhibit [___]     Exhibit 32.1  Certification   Pursuant to Section 1350 of Title 18 of the United States Code, the undersigned hereby certifies that:  (1) I have reviewed the Annual Report on Form 10-K of Inland Land Appreciation Fund II, L.P. (the "Report") to which this statement is an Exhibit;  (2) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  (3) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Inland Land Appreciation Fund II, L.P.    By: Inland Real Estate Investment Corporation       General Partner         /S/ Brenda G. Gujral                                  Name: Brenda G. Gujral  Title:  President of the General Partner and             principal executive officer of Inland Land Appreciation Fund II, L.P.  Date: March 23, 2006           EX-32 5 land2322.htm     Exhibit 99       Exhibit 32.2  Certification  Pursuant to Section 1350 of Title 18 of the United States Code, the undersigned hereby certifies that:  (1) I have reviewed the Annual Report on Form 10-K of Inland Land Appreciation Fund II, L.P.  (the "Report") to which this statement is an Exhibit;  (2) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  (3) The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of Inland Land Appreciation Fund II, L.P.     By: Inland Real Estate Investment Corporation       General Partner      /S/ Kelly Tucek                                   Name: Kelly Tucek  Title: Vice President of the General Partner and   principal financial officer of Inland Land Appreciation Fund II, L.P.  Date: March 23, 2006             -----END PRIVACY-ENHANCED MESSAGE-----