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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

X	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, ~~2011~~2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 0-18431

Inland Land Appreciation Fund, L.P.

(Exact name of registrant as specified in its charter)


Delaware		36-3544798
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2901 Butterfield Road, Oak Brook, IL 60523

(Address of principal executive offices)(Zip Code)

630-218-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:		Name of each exchange on which registered:
None		None

Securities registered pursuant to Section 12(g) of the Act:

Limited Partnership Units

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. ~~Yes ¨ No X~~

Yes ¨ No X

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 at least the past 90 days.

Yes X No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the ~~definition~~definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No X

The registrant’s common equity is not publicly traded and therefore has no market value.

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

TABLE OF CONTENTS

		Page		~~Page~~
	Part I
Item 1.	Business		3		3
Item 1(A).	Risk Factors		4		4
Item 1(B).	Unresolved Staff Comments		5		5
Item 2.	Properties		6		6
Item 3.	Legal Proceedings		9		8
Item 4.	~~RESERVED~~Mine Safety Disclosures		9		8
	Part II
Item 5.	Market for Partnership’s Limited Partnership Units, Related Security Holder Matters and Partnership Purchases of Limited Partnership Units		9		8
Item 6.	Selected Financial Data		9		8
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10		9
Item 7(A).	Quantitative and Qualitative Disclosures About Market Risk		15		14
Item 8.	Financial Statements and Supplementary Data		16		15
Item 9.	Changes in and Disagreements with ~~Independent~~Accountants ~~Auditors~~ on Accounting and Financial Disclosure		27		29
Item 9(A).	Controls and Procedures		27		29
Item 9(B).	Other Information		27		29
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance		28		30
Item 11.	Executive Compensation		31		34
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		33		35
Item 13.	Certain Relationships and Related Transactions		33		35
Item 14.	Principal Accounting Fees and Services		33		36
	Part IV
Item 15.	Exhibits and Financial Statement Schedules		34		37
	SIGNATURES		35		38

-2-

PART I

Item 1.

Business

Inland Land Appreciation Fund, L.P. was formed in October 1987 to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 12, 1988, we commenced an offering of 10,000 (subject to an increase to 30,000) limited partnership units, or units, at $1,000 per unit, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. The offering terminated on October 6, 1989, after we sold 30,000 units, at $1,000 per unit, resulting in gross offering proceeds of $30,000,000, which does not include proceeds from our general partner or our initial limited partner. All of the holders of our units were admitted to our partnership. Inland Real Estate Investment Corporation is our general partner. We used $25,187,069 of gross offering proceeds to purchase on an all-cash basis twenty-five parcels of undeveloped land and an option to purchase undeveloped land. Our limited partners share in their portion of benefits of ownership of our real property investments according to the number of units held. Through December 31, ~~2011~~2012, we had repurchased a total of 407.75 Units for $359,484 from various limited partners through the unit repurchase program.

We purchased on an all-cash basis, twenty-five parcels of undeveloped land and are engaged in the rezoning and resale of the parcels. All of the investments were made in the Chicago metropolitan area. The anticipated holding period of the land was approximately two to seven years from the completion of the land portfolio acquisitions. As a result of the lengthy rezoning and entitlement processes and the no growth mentality of the municipalities where the land is located, as well as the depressed real estate market, our holding period has exceeded our original estimates. Through December 31, ~~2011~~2012, we have had multiple sales transactions, disposing of approximately 2,~~098~~611 acres of the approximately 3,102 acres originally owned. We continue to ~~market~~own the remaining acres until such time as we receive a favorable offer which the general partner deems to be reflective of the market for ~~sale~~the land within that area.

We are engaged in the business of real estate investment which management considers being a single operating segment. A presentation of information about operating segments would not be material to an understanding of our business taken as a whole.

We have been successful in pre-development activities such as rezoning, annexation and /or land planning of approximately 410 acres of Parcels 17, 18, 19 and 22 in McHenry, Illinois ~~and 224 acres of Parcel 25 in Kane County, Illinois~~. Further pre-development activities are on hold pending significant improvements in the real estate market as well as demand for improved land zoned for residential and commercial use.

WeInquiries ~~continue~~on tothe ~~closely~~Partnership’s ~~monitor~~land ~~the~~holdings ~~real~~have ~~estate~~increased, ~~market~~resulting ~~trends, especially~~in ~~within~~three ~~the~~separate ~~areas~~land ~~where~~sales ~~our~~for ~~remaining~~the ~~parcels~~year ~~are~~ended ~~located~~December 31, 2012. WeNet ~~have~~sales ~~seen~~proceeds ~~modest~~from ~~improvements~~the insale of investment properties of $5,462,228 and the ~~residential~~cost ~~resale~~of ~~real~~investment ~~estate~~properties ~~market,~~sold ~~however~~of $4,843,189 ~~new~~for ~~home~~the ~~starts~~year inended ~~these~~December 31, ~~middle~~2012 ~~class~~is ~~communities~~the ~~remain~~result ~~weak.~~of ~~That,~~the ~~coupled~~sale ~~with~~of ~~strict lender~~Parcel ~~requirements~~24, ~~adversely~~consisting ~~impact~~of ~~sales~~approximately ~~activity~~212 acres, ~~especially~~the ~~sales~~sale of ~~residential~~Parcel ~~lots~~25, consisting of 225 acres, and ~~sales~~the sale of ~~vacant~~Parcel ~~land~~14, ~~for~~consisting ~~retail~~of ~~purposes~~approximately 76 acres. ~~There~~The ~~have~~sales ~~been~~are ~~reports~~a result of ~~farm~~an ~~parcel~~increase ~~sales~~ in ~~surrounding~~sale ~~communities~~of ~~from~~vacant land to both speculators looking to hold land until the market rebounds asand ~~well as~~ farmers looking to increase their farming businesses. WeIn ~~realize~~June it2012, ~~could~~we ~~take~~made ~~some~~distributions ~~time~~totaling ~~for~~$2,194,618, ~~these~~which ~~current~~included ~~trends~~$1,804,618 paid to ~~improve~~the ~~which~~limited ~~could~~partners ~~result~~and in$390,000 anpaid ~~even~~to ~~longer~~the ~~holding~~general ~~period~~partner. ~~However,~~In weDecember ~~believe~~2012, we ~~have taken~~paid ~~the~~an ~~steps~~additional ~~necessary~~distribution tototaling ~~reduce~~$3,200,000, ~~costs~~which included ~~and~~$3,000,000 ~~maintain~~paid ~~sufficient~~to ~~reserves~~the oflimited ~~cash~~partners and ~~cash~~$200,000 ~~equivalents~~paid to ~~cover~~the ~~all~~general ~~our costs for an extended period of time~~partner. WeAs ~~have~~land ~~farm~~sales ~~leases~~occur, innet ~~place~~sales ~~which~~proceeds ~~generate~~will ~~sufficient~~be ~~income~~used to cover ~~the~~our ~~costs~~current ~~of insurance expense~~ and ~~real~~future ~~estate~~operations, ~~taxes.~~including ~~Our remaining~~ land isimprovements ~~not encumbered by debt~~ and island ~~located~~use inactivities. ~~areas~~We ~~that~~will evaluate weour ~~believe~~cash ~~are~~needs inthrough the ~~paths~~year ofto determine future ~~development~~distributions.

~~During~~We ~~the~~believe ~~year~~we ~~ended~~have ~~December 31,~~taken ~~2011,~~the ~~there~~steps ~~were~~necessary noto ~~land~~reduce ~~sales.~~costs ~~The~~and maintain ~~lack~~sufficient reserves of ~~sales~~cash ~~activity~~and iscash aequivalents ~~continued~~to ~~result~~cover all our costs for an extended period of time. We have farm leases in place which generate sufficient income to cover the ~~depressed~~costs of insurance expense and real estate ~~market~~taxes. Our remaining land is not encumbered by debt and ~~the~~is ~~slow~~located ~~down~~in areas that we believe are in the ~~sales~~paths of ~~vacant~~future ~~land~~development. ~~Previously~~ ~~undistributed~~As ~~net~~such, ~~sales~~the ~~proceeds~~Partnership ~~are~~has ~~being~~the ~~retained~~ability toand ~~fund~~management ~~our~~has ~~operations,~~the ~~including~~intent ~~land~~to ~~improvements.~~hold Weon ~~will~~to ~~evaluate~~the ~~our~~remaining ~~cash~~parcels ~~needs~~until ~~during~~such ~~the~~time ~~upcoming~~as reasonable ~~year~~and toacceptable ~~determine~~offers ~~future~~are ~~distributions~~received.

We had no employees during ~~2011~~2012. Accordingly, we hired no compensation consultants.

Our general partner and its affiliates provide services to us. Our general partner and its affiliates are reimbursed for salaries and expenses of employees of the general partner and its affiliates relating to the administration of the partnership. An affiliate of the general partner performs marketing and advertising services for us and is reimbursed for direct costs. An affiliate of the general partner performs land improvements, rezoning, annexation and other activities to prepare our parcels for sale and is reimbursed for salaries and direct costs.

-3-

Access to Our Information

We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (SEC). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800)-SEC-0330. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.

We make available, free of charge, by responding to requests addressed to our Investor Services department, the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. These reports are available as soon as reasonably practical after such material is electronically filed or furnished to the SEC.

Limited Partners wishing to communicate with our general partner can do so by writing to the attention of the general partner in care of our partnership at 2901 Butterfield Road, Oak Brook, IL 60523.

Item 1(A).

Risk Factors

Real Estate Market

~~Currently,~~The ~~the~~slowly ~~depressed~~improving real estate market, coupled with strict lender requirements, ~~continue~~continues to ~~adversely~~ impact sales activity, especially sales of vacant land,. asBuilders and developers ~~continue~~today toare ~~dispose~~less oflikely ~~excess~~to ~~inventories~~build speculatively and ~~have~~are ~~difficulty~~approaching innew ~~obtaining~~developments ~~financing~~with ~~for~~caution. ~~new~~Any ~~projects.~~negative ~~Therefore~~changes to the financial markets, itreal ~~could~~estate ~~take~~markets ~~some~~and ~~time~~employment ~~for~~numbers ~~these~~can ~~current~~have ~~trends~~an toimpact ~~improve~~on additional land sales which could result in an even longer holding period than previously estimated.

Pre-Development Stage Land

The net proceeds of the offering were invested in pre-development stage land. An investment in such land involves a number of potential risks, which include the following:

Dependence on Governmental Zoning and Fiscal Policies. We conduct rezoning and pre-development activities with respect to our land investments. Rezoning may only be effected by appropriate city, county and/or other local authorities. There can be no assurance that our efforts to cause these authorities to change the zoning classification(s) , which apply to a given parcel of land owned by the partnership, will be successful. Sometimes local residents oppose our efforts. Sometimes local authorities require us to spend funds to facilitate future development of the land as a condition of rezoning or to continue a special land use. There can be no assurance that we will have sufficient funds to accomplish the required changes or that they can be accomplished in a timely fashion.

Restricted or Limited Access to Utilities and Roadways. The value of our land will be affected by ease of access to utilities and transportation. If public utility providers are not located in sufficient proximity to a parcel owned by the partnership, the cost of arranging for such utility access may be prohibitive to the partnership or a potential purchaser of the parcel, thereby reducing the value of the parcel. Delays and/or postponements in the construction of roads in areas by our parcels likely would adversely affect the value of our parcels.

Environmental Risks. Federal and state environmental laws can impose substantial liability on owners of real estate without regard to fault, even when other parties are or were responsible for the environmental impairment. Environmental liabilities could cause us to incur significant expenses, including (but not limited to) the obligation to remedy or clean up hazardous substances (such as pesticides commonly used on farmland) or other pollutants, regardless of fault. Such liabilities could require us to dispose of a property at a loss, which could be substantial.

In addition, the value of our land is affected by the drainage pattern of such land and the surrounding area, the susceptibility of such land to flooding and the possibility that such land might be classified as “wetlands” by a government agency, thereby inhibiting or precluding development of the parcel.

-4-

Nature of Farm Leases and Limited Current Income. With the exception of limited amounts of cash which may be generated from leasing ~~the~~ land as farmland or for other revenue-producing activities, pre-development land does not generate current income. Nevertheless, we incur ongoing expenses in connection with the ownership of such land (for example, ~~real~~ real estate taxes and insurance). At the same time, our farm rental revenue is subject to a farm tenant’s ability to pay the contracted rent, which depends on circumstances such as fluctuations in commodity prices, bad weather, competition from ~~other~~ other producers, changes in government farm policy (including price supports), pests and crop diseases.

Lack of Geographic Diversification. All of our land investments are located in the Chicago metropolitan area. The success of the partnership will, therefore, depend to a great extent upon the rate and amount of economic growth in the Chicago metropolitan area.

Partnership-Related Risks

Risk of Installment Sale. We may sell some land parcels on an installment basis (which means that the sale price will be received in installments during the term of the agreement). In the event we find it necessary or desirable to provide such financing upon the resale of our parcels, a liquidation of the partnership may be delayed beyond the time of disposition of the parcels until any such loans are repaid or otherwise liquidated. In the event of a default on an installment sale, we may be forced to reacquire a property.

No Market for Units. Our units are subject to certain restrictions on transferability. As a result of these restrictions, no public trading market is likely to develop for these securities, nor is one intended to develop. Purchasers of units may not, therefore, be able to liquidate their investment, and units may not be readily acceptable as collateral for a loan.

Transfer Limit. In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund, L.P. Partnership Agreement and Treasury Regulation Section 1.7704-1(j), we did not reach the maximum threshold of limited partnership units that may be transferred/assigned directly between parties during ~~2011~~2012. For the benefit of interested limited partners, we have a relationship with a “qualified matching service” as defined under Treasury Regulation Section 1.7704-1(g). In accordance with this Treasury Regulation and the IRS private letter ruling obtained by the “qualified matching service,” we understand that ~~additional~~ limited partnership units may be transferred or assigned through the “qualified matching service” up to a separate maximum threshold each taxable year (in addition to the maximum threshold that may be transferred or assigned directly between parties ~~under~~discussed ~~our partnership agreement and Treasury Regulation Section 1.7704-1(j~~above)). However, there can be no assurance that the IRS private letter ruling will apply to transfers of our units, or that any particular transfer will not violate the transfer restrictions contained in the partnership agreement or the provisions of Treasury Regulation Section 1.7704-1(g). If you have any interest in participating in a transfer/assignment of limited partnership units through this “qualified matching service”, please contact American Partnership Board directly at 800-736-9797. You are strongly encouraged to consult your personal legal, financial and tax advisors in connection with any such transfer/assignment.

Conflicts of Interest. We may be subject to various conflicts of interest arising out of our relationship with our general partner and its affiliates. If the general partner or its affiliates breach their fiduciary obligations to us, or do not resolve these conflicts of interest to our benefit, we could suffer consequences which we might not otherwise be subject to if such conflicts of interest did not exist.

Federal Income Tax Aspects

Potential Receipt of UBTI. The incurrence of debt in connection with our pre-development and/or sales activities could cause the gain on the sale of parcels to constitute unrelated business taxable income (“UBTI”) and affect limited partners that are tax-exempt entities.

Tax liabilities may be greater than cash distributions. Each limited partner will be required to report the limited partner’s allocable share of our taxable net income on the limited partner’s personal tax return, regardless of whether the limited partner has received any cash distributions from us. Thus, limited partners may incur taxes associated with their proportional share of our net income even though we have not distributed cash to pay the taxes.

Item 1(B).

Unresolved Staff Comments

Not applicable

-5-

Item 2.

Properties

We acquired fee ownership of the following real property investments:. The table below summarizes the detail activity of all the land parcels owned by the Partnership from the purchase date through the year ending December 31, 2012.

Parcel & Location	Gross AcresPurchased/Sold	RemainingAcres		Purchase/Sales Date
Parcel 1, Kendall County, Illinois	84.7360		0	01/19/89
	(3.5200			sold 12/24/96)
	(.3520			sold 11/25/97)
	(80.8640			sold 12/29/97)
Parcel 2, McHenry County, Illinois	223.4121		0	01/19/89
	(183.3759			sold 12/27/90)
	(40.0362			sold 05/11/00)
Parcel 3, Kendall County, Illinois	20.0000		0	02/09/89
	(20.0000			sold 05/08/90)
Parcel 4, Kendall County, Illinois	69.2760		0	04/18/89
	(.4860			sold 02/28/91)
	(27.5850			sold 08/25/95)
	(4.4017			sold various 2001)
	(2.1400			sold various 2002)
	(23.0933			sold various 2003)
	(6.7800			sold various 2004)
	(4.7900			sold various 2005)
Parcel 5, Kendall County, Illinois	372.2230		0	05/03/89
	(Option			sold 04/06/90)
	(372.2230			sold 06/20/03)
Parcel 6, Kendall County, Illinois	78.3900		0	06/21/89
	(3.9500			sold 11/01/00)
	(30.0000			sold 07/12/05)
	(33.4270			sold 07/27/06)
	(11.0130			sold 08/22/07)
Parcel 7, Kendall County, Illinois	77.0490		0	06/21/89
	(71.2070			sold 08/22/07)
	(5.8420			sold 03/20/08)
Parcel 8, Kendall County, Illinois	5.0000		0	06/21/89
	(5.0000			sold 10/06/89)
Parcel 9, McHenry County, Illinois	51.0300		51.0300	08/07/89
Parcel 10, McHenry County, Illinois	123.9400		0	08/07/89
	(123.9400			sold 12/06/89)
Parcel 11, McHenry County, Illinois	30.5920		30.5920	08/07/89

Investment properties activity:

As part of the purchase agreement for parcel 5, we were required to buy an option to purchase an additional 243 acres immediately to the west of this parcel. The 1990 sale transaction relates to the sale of this option.


Parcel	Illinois County	Gross Acres Purchased (Sold)			Purchase/ Sales Date		Initial Costs						Costs Capitalized Subsequent to Acquisition		Costs of Property Sold		Total Remaining Costs of Parcels at 12/31/12		Current Year Gain(Loss) on Sale Recognized
Parcel	Illinois County	Gross Acres Purchased (Sold)			Purchase/ Sales Date		Original Costs		Acquisition Costs		Total Costs		Costs Capitalized Subsequent to Acquisition		Costs of Property Sold		Total Remaining Costs of Parcels at 12/31/12		Current Year Gain(Loss) on Sale Recognized
1	Kendall		84.7360			01/19/89	$	423,680		61,625		485,305		5,462,589		5,947,894		0		0
			(3.5200	)		12/24/96
			(.3520	)		11/25/97
			(80.8640	)		12/29/97
2	McHenry		223.4121			01/19/89		650,000		95,014		745,014		26,816		771,830		0		0
			(183.3759	)		12/27/90
			(40.0362	)		05/11/00
3	Kendall		20.0000			02/09/89		189,000		13,305		202,305		0		202,305		0		0
			(20.0000	)		05/08/90
4	Kendall		69.2760			04/18/89		508,196		38,126		546,322		1,223,376		1,769,698		0		0
			(.4860	)		02/28/91
			(27.5850	)		08/25/95
			(4.4017	)		Var 2001
			(2.1400	)		Var 2002
			(23.0933	)		Var 2003
			(6.7800	)		Var 2004
			(4.7900	)		Var 2005
5	Kendall (a)		372.2230			05/03/89		2,532,227		135,943		2,668,170		456,398		3,124,568		0		0
			(Option	)		04/06/90
			(372.2230	)		06/20/03
6	Kendall (b)		78.3900			06/21/89		416,783		31,691		448,474		1,461,256		1,909,730		0		0
			(3.9500	)		11/01/00
			(30.0000	)		07/12/05
			(33.4270	)		07/27/06
			(11.0130	)		08/22/07
7	Kendall (b)		77.0490			06/21/89		84,754		8,163		92,917		1,438,727		1,531,644		0		0
			(71.2070	)		08/22/07
			(5.8420	)		03/20/08

-6-

Parcel & Location	Gross AcresPurchased/Sold	RemainingAcres		Purchase/Sales Date
Parcel 12, Kendall County, Illinois	90.2710		0	10/31/89
	(.7090			sold 04/26/91)
	(89.5620			sold 03/10/04)
Parcel 13, McHenry County, Illinois	92.7800		0	11/07/89
	(2.0810			sold 09/18/97)
	(90.6990			sold 02/15/01)
Parcel 14, McHenry County, Illinois	76.2020		76.2020	11/07/89
Parcel 15, Lake County, Illinois	84.5564		0	01/03/90
	(10.5300			sold various 1996)
	(5.4680			sold various 1997)
	(68.5584			sold various 1998)
Parcel 16, Kane/Kendall Counties, Illinois	72.4187		0	01/29/90
	(30.9000			sold 07/10/98)
	(10.3910			sold 12/15/99)
	(3.1000			sold 12/12/00)
	(28.0277			sold 05/19/03)
Parcel 17, McHenry County, Illinois	99.9240		72.4140	01/29/90
	(27.5100			sold 01/29/99)
Parcel 18, McHenry County, Illinois	71.4870		69.9670	01/29/90
	(1.0000			sold various 1990)
	(.5200			sold 03/11/93)
Parcel 19, McHenry County, Illinois	63.6915		63.6915	02/23/90
Parcel 20, Kane County, Illinois	224.1480		0	02/28/90
	(.2790			sold 10/17/91)
	(223.8690			sold 02/20/04)
Parcel 21, Kendall County, Illinois	172.4950		0	03/08/90
	(172.4950			sold various 1998)
Parcel 22, McHenry County, Illinois	254.5250		203.5250	04/11/90
	(51.0000			conveyed 2008)
Parcel 23, Kendall County, Illinois	140.0210		0	05/08/90
	(4.4100			sold various 1993)
	(35.8800			sold various 1994)
	(3.4400			sold various 1995)
	(96.2910			sold 08/26/99)
Parcel 24, Kendall County, Illinois	298.4830		211.5770	05/23/90
	(12.4570			sold 05/25/90)
	(4.6290			sold 04/01/96)
	(69.8200			sold 11/26/02)
Parcel 25, Kane County, Illinois	225.0000		225.0000	06/01/90

INLAND LAND APPRECIATION FUND, L.P.

~~Our~~(a ~~general~~limited ~~partner~~partnership) anticipates that the land we acquired will produce sufficient income to pay real estate taxes and insurance expense. Income will be derived through leases to farmers or from other activities compatible with

Investment properties activity (continued)


Parcel	Illinois County	Gross Acres Purchased (Sold)			Purchase/ Sales Date		Initial Costs						Costs Capitalized Subsequent to Acquisition		Costs of Property Sold		Total Remaining Costs of Parcels at 12/31/12		Current Year Gain(Loss) on Sale Recognized
							Original		Acquisition		Total
							Costs		Costs		Costs
8	Kendall (b)		5.0000			06/21/89	$	60,000		5,113		65,113		0		65,113		0		0
			(5.0000	)		10/06/89
9	McHenry (b)		51.0300			08/07/89		586,845		22,482		609,327		94,659		0		703,986		0
10	McHenry (b)		123.9400			08/07/89		91,939		7,224		99,163		600		99,763		0		0
			(123.9400	)		12/06/89
11	McHenry (b)		30.5920			08/07/89		321,216		22,641		343,857		94,534		0		438,391		0
12	Kendall		90.2710			10/31/89		907,389		41,908		949,297		246,964		1,196,261		0		0
			(.7090	)		04/26/91
			(89.5620	)		03/10/04
13	McHenry		92.7800			11/07/89		251,306		19,188		270,494		18,745		289,239		0		0
			(2.0810	)		09/18/97
			(90.6990	)		02/15/01
14	McHenry		76.2020			11/07/89		419,111		23,402		442,513		206,810		649,323		0		151,761
			(76.2020	)		09/13/12
15	Lake		84.5564			01/03/90		1,056,955		85,283		1,142,238		1,661,344		2,803,582		0		0
			(10.5300	)		Var 1996
			(5.4680	)		Var 1997
			(68.5584	)		Var 1998
16	Kane/		72.4187			01/29/90		1,273,537		55,333		1,328,870		706,718		2,035,588		0		0
	Kendall		(30.9000	)		07/10/98
			(10.3910	)		12/15/99
			(3.1000	)		12/12/00
			(28.0277	)		05/19/03
17	McHenry		99.9240			01/29/90		739,635		61,038		800,673		1,254,202		320,961		1,733,914		0
			(27.5100	)		01/29/99

-7-

~~undeveloped~~INLAND ~~land.~~LAND ~~Although~~APPRECIATION ~~the general partner believes that leasing our land will generate sufficient revenues to pay these expenses~~FUND, ~~there can be no assurance that this will in fact occur~~L. 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 yearP. 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 a 15% cumulative return. A majority of the parcels purchased by us consist of land which generates 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, 2011, our land has generated sufficient revenues from leasing to cover real estate taxes and insurance expense.

(a limited partnership)

Investment properties activity (continued)


Parcel	Illinois County	Gross Acres Purchased (Sold)			Purchase/ Sales Date		Initial Costs						Costs Capitalized Subsequent to Acquisition		Costs of Property Sold		Total Remaining Costs of Parcels at 12/31/12		Current Year Gain(Loss) on Sale Recognized
							Original		Acquisition		Total
							Costs		Costs		Costs
18	McHenry		71.4870			01/29/90	$	496,116		26,259		522,375		517,216		11,109		1,028,482		0
			(1.0000	)		Var 1990
			(.5200	)		03/11/93
19	McHenry		63.6915			02/23/90		490,158		29,158		519,316		656,462		0		1,175,778		0
20	Kane		224.1480			02/28/90		2,749,800		183,092		2,932,892		1,938,930		4,871,822		0		0
			(.2790	)		10/17/91
			(223.8690	)		02/20/04
21	Kendall		172.4950			03/08/90		1,327,459		75,822		1,403,281		954,415		2,357,696		0		0
			(172.4950	)		Var 1998
22	McHenry		254.5250			04/11/90		2,608,881		136,559		2,745,440		577,489		0		3,322,929		0
			(51.000	)		10/02/08
23	Kendall		140.0210			05/08/90		1,480,000		116,240		1,596,240		909,395		2,505,635		0		0
			(4.4100	)		Var 1993
			(35.8800	)		Var 1994
			(3.4400	)		Var 1995
			(96.2910	)		08/26/99
24	Kendall		298.4830			05/23/90		1,359,774		98,921		1,458,695		101,991		1,560,686		0		1,088,536
			(12.4570	)		05/25/90
			(4.6290	)		04/01/96
			(69.8200	)		11/26/02
			(211.577	)		05/04/12
25	Kane		225.0000			06/01/90		2,600,000		168,778		2,768,778		301,040		3,069,818		0		(621,258	)
			(225.0000	)		09/07/12

	Totals						$	23,624,761		1,562,308		25,187,069		20,310,676		37,094,265		8,403,480		619,039

-8-

(a)	Included in the purchase agreement of Parcel 5 was a condition that required the Partnership to buy an option to purchase an additional 243 acres immediately to the west of this parcel. The 1990 sale transaction relates to the sale of this option.

(b)

The Partnership purchased from two third parties, two sets of three contiguous parcels of land (Parcels 6, 7 and 8; and Parcels 9, 10 and 11). The General Partner believes that the total value of this land will be maximized if it is treated and marketed to buyers as six separate parcels and closed the transactions as six separate purchases to facilitate this. Parcels 6, 7 and 8 were treated as one parcel and Parcels 9, 10 and 11 will continue to be treated as one parcel for purposes of computing Parcel Capital (as defined in the Partnership Agreement) and distributions to the partners.

Our general partner anticipates our land will produce sufficient income to pay real estate taxes and insurance expense. 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 a 15% cumulative return. A majority of the parcels purchased by us consist of land which generates 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, 2012, our land has generated sufficient revenues from leasing to cover real estate taxes and insurance expense.

Item 3.

Legal Proceedings

We are not subject to any material pending legal proceedings.

Item 4. ~~RESERVED~~Mine Safety Disclosures

Not applicable

PART II

Item 5.

Market for Partnership’s Limited Partnership Units, Related Security Holder Matters and Partnership Purchases of Limited Partnership Units

As of February 86, ~~2012~~2013, there were 2,~~639~~614 holders of our units. There is no public market for units nor is it anticipated that any public market for units will develop.

In June 2012, we made distributions totaling $2,194,618, which included $1,804,618 paid to the limited partners and $390,000 paid to the general partner. In December 2012, we paid an additional distribution totaling $3,200,000, which included $3,000,000 paid to the limited partners and $200,000 paid to the general partner. As land sales occur, net sales proceeds will be used to cover our current and future operations, including land improvements and land use activities. We will evaluate our cash needs through the year to determine future distributions.

Item 6.

Selected Financial Data

Not applicable

-89-

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this annual report on Form 10-K constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. These factors include, among other things, adverse changes in real estate, financing and general economic or local conditions; the ability to obtain annexation and zoning approvals required to develop our properties; the approval of local governing bodies to develop our properties; successful lobbying of local “no growth” or limited development homeowner groups; eminent domain proceedings; changes in the environmental conditions or changes in the environmental positions of governmental bodies; and potential conflicts of interest between us and our affiliates, including our general partner.

Critical Accounting Policies

The ~~Securities~~SEC ~~and Exchange Commission~~ previously issued Financial Reporting Release (FRR) or FRR No. 60 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies.” A critical accounting policy is one that would materially affect our operations or financial condition, and requires management to make estimates or judgments in certain circumstances. We believe that our most critical accounting policies relate to how we value ~~our investment properties~~, ~~the~~classify ~~allocation~~and of allocate costs of our investment properties and revenue recognition. These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain. The purpose of the FRR is to provide investors with an understanding of how management forms these policies. Critical accounting policies discussed in this section are not to be confused with accounting principles and methods disclosed in accordance with accounting principles generally accepted in the United States of America or GAAP. GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates. The following disclosure discusses judgments known to management pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions.

Valuation of Investment Properties—On a quarterly basis, we review impairment indicators and if necessary, conduct an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value. If an investment property is considered impaired, we would be required to record an impairment loss equal to the excess of carrying value over the estimated fair value.

In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures, ~~and~~ assessment of current economic conditions, and management’s intent to hold on to the remaining parcels until such time as reasonable and acceptable offers are received . These indicators are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain indicators, either individually or taken as a whole. Should the actual results differ from management’s judgment, the valuation could be negatively or positively affected.

The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management’s continuous process of analyzing each property. For the year ended December 31, ~~2011~~2012, we had recorded no such impairment.

Cost Allocation—We use the area method of cost 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.

Revenue Recognition—We recognize income from the sale of land parcels in accordance with the full accrual method of accounting.

Assets Held for Sale—In determining whether to classify an asset as held for sale, we consider whether: (i) management has committed to a plan to sell the asset; (ii) the asset is available for immediate sale, in its present condition; (iii) we have initiated a program to locate a buyer; (iv) we believe that the sale of the asset is probable; (v) we are actively marketing the asset for sale at a price that is reasonable in relation to its current value; and (vi) actions required for us to complete the plan indicate that it is unlikely that any significant changes will be made to the plan.

-910-

If all of the above criteria are met, we classify the asset as held for sale. The assets and liabilities associated with those assets that are held for sale are classified separately on the balance sheets for the most recent reporting period. Additionally, the operations for the periods presented are ~~classified~~included onin the statements of operations as discontinued operations for all periods presented. As of December 31, 2012, we have not classified any properties as held for sale.

From time to time, we may determine that a “held for sale property” no longer meets the criteria to continue to be classified as held for sale. If this occurs, we record the property at the lower of the carrying amount before the property was classified as held for sale or the fair value at the decision date not to sell. ~~As of December 31, 2011, we have not classified any properties as held for sale.~~

Liquidity and Capital Resources

Between October 12, 1988 and October 6, 1989, we sold 30,000 limited partnership units to the public at $1,000 per unit resulting in $30,000,000 in gross offering proceeds, which does not include proceeds from the initial limited partner and the general partner.

We used $25,187,069 of gross offering proceeds to purchase on an all-cash basis twenty-five parcels of undeveloped land and an option to purchase undeveloped land. These investments include the payment of the purchase price, acquisition fees and acquisition costs of such properties. Fourteen of the parcels were purchased during 1989 and eleven during 1990. Through December 31, ~~2011~~2012, we have had multiple sales transactions, disposing of approximately 2,~~098~~611 acres of the approximately 3,102 acres originally owned. As of December 31, ~~2011~~2012, cumulative distributions to the limited partners have totaled $3843,~~674~~479,~~493~~111 which is equivalent to ~~129~~145% of the original capital raised, which was $30,000,000, and cumulative distributions to the general partner have totaled $45,~~745~~335,451. Through December 31, ~~2011~~2012, we have used $20,~~302~~310,~~401~~676 of working capital for rezoning and other activities. Such amounts have been capitalized as costs capitalized subsequent to acquisition and are included in investment properties.

Our capital needs and resources will vary depending upon a number of factors, including the extent to which we conduct rezoning and other activities relating to utility access, the installation of roads, subdivision and/or annexation of land to a municipality, changes in real estate taxes affecting our land, and the amount of revenue received from farm rents. As of December 31, ~~2011~~2012, we own, in whole or in part, ~~nine~~six of our twenty-five original parcels, the majority of which are leased to local farmers and are generating sufficient cash flow from farm leases to cover real estate taxes and insurance expense.

At December 31, ~~2011~~2012, we had cash and cash equivalents of $12,~~983~~070,~~495~~810, which is available to be used for our costs and liabilities, cash distributions to partners and other activities with respect to some or all of our land parcels.

~~During~~We ~~the~~have ~~year~~been ~~ended~~successful ~~December 31,~~in pre-development ~~2011~~activities such as rezoning, ~~there~~annexation ~~were~~and no/or land ~~sales.~~planning Ifof ~~land~~approximately ~~sales~~410 ~~occur~~acres of Parcels 17, ~~net~~18, ~~sales proceeds~~19 ~~will~~and be22 ~~used~~in toMcHenry, ~~cover~~Illinois. ~~our~~Further ~~current~~pre-development ~~and~~activities ~~future~~are ~~operations,~~on ~~including~~hold ~~land~~pending significant improvements ~~and~~in ~~land~~the ~~use~~real estate ~~activities.~~market Weas ~~will~~well ~~evaluate~~as ~~our~~demand ~~cash~~for ~~needs~~improved ~~throughout~~land ~~the~~zoned ~~year~~for toresidential ~~determine~~and ~~future~~commercial ~~distributions~~use.

WeNet ~~continue~~sales toproceeds ~~closely~~from ~~monitor~~ the ~~real~~sale ~~estate~~of ~~market~~investment properties ~~trends~~of $5,462,228 ~~especially~~and ~~within~~ the ~~areas~~cost ~~where~~of ~~our~~investment ~~remaining~~properties ~~parcels~~sold ~~are~~of ~~located.~~$4,843,189 Wefor ~~have~~the ~~seen~~year ~~modest improvements~~ended inDecember 31, 2012 is the ~~residential~~result ~~resale~~of ~~real~~the ~~estate~~sale ~~market,~~of ~~however~~Parcel 24, ~~new~~consisting ~~home~~of ~~starts~~approximately in212 ~~these~~acres, ~~middle~~the ~~class~~sale ~~communities~~of ~~remain~~Parcel ~~weak. That~~25, ~~coupled~~consisting ~~with~~of ~~strict~~225 acres, ~~lender~~and ~~requirements,~~the ~~adversely~~sale ~~impact~~of ~~sales~~Parcel ~~activity~~14, ~~especially~~consisting ~~sales~~ of ~~residential~~approximately ~~lots and~~76 ~~sales~~acres. ofSales ~~vacant~~activity ~~land~~ for ~~retail~~the ~~purposes.~~year ~~There~~ended ~~have~~December 31, ~~been~~2012 ~~reports~~is the result of ~~farm~~an ~~parcel~~increase in sales inof ~~surrounding~~vacant ~~communities~~land ~~from~~to both speculators looking to hold land until the market rebounds and ~~as well as~~ farmers looking to increase their farming businesses. WeDuring ~~realize~~the ityear ~~could~~ended ~~take~~December 31, ~~some~~2011, ~~time~~there ~~for~~were ~~these~~no ~~current~~land ~~trends to improve which could result in an even longer holding period~~sales. ~~However,~~We we believe we have taken the steps necessary to reduce costs and maintain sufficient reserves of cash and cash equivalents to cover all our costs for an extended period of time. We have farm leases in place which generate sufficient income to cover the costs of insurance expense and real estate taxes. Our remaining land is not encumbered by debt and is is located in areas that we believe are in the paths of future development.

WeAs ~~have~~land ~~been~~sales ~~successful in pre-development activities such as rezoning~~occur, ~~annexation~~net ~~and~~sales ~~/or~~proceeds ~~land~~will ~~planning~~be ofused ~~approximately~~to ~~410~~cover ~~acres~~our current ofand ~~Parcels~~future 17operations, ~~18,~~including 19land ~~and~~improvements ~~22 in McHenry, Illinois~~ and ~~224~~land ~~acres~~use ~~of Parcel 25 in Kane County, Illinois~~activities. ~~Further~~We ~~pre-development~~will ~~activities~~evaluate ~~are~~our oncash ~~hold~~needs ~~pending~~throughout ~~significant improvements in~~ the ~~real~~year ~~estate~~to ~~market~~determine asfuture ~~well as demand for improved land zoned for residential and commercial use~~distributions.

-1011-

We continue to closely monitor the real estate market trends, especially within the areas where our remaining parcels are located. We have seen modest improvements in the residential resale real estate market, however, new home starts in these middle class communities remain weak. That, coupled with strict lender requirements, continues to impact sales activity, especially sales of residential lots and sales of vacant land for retail purposes. We are aware of farm parcel sales in surrounding communities from both speculators looking to hold land until the market rebounds as well as farmers looking to increase their farming businesses. Inquiries on the Partnership’s land holdings have also increased, resulting in three separate land sales for the year ended December 31, 2012.

Transactions with Related Parties

Our general partner and its affiliates are entitled to reimbursement for salaries and expenses of employees of the general partner and its affiliates relating to our administration. Such costs of $4160,~~562~~ 554 and $5341,~~522~~562 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively, of which $517,~~566~~079 and $5,~~618~~566 was unpaid as of December 31, ~~2011~~ 2012 and ~~2010~~2011, respectively.

An affiliate of our general partner performs marketing and advertising services for us and is reimbursed for direct costs. Such costs of $~~318~~502 and $~~3,798~~ 318 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively, all of which ~~$0 and $138~~ was ~~unpaid~~paid as of December 31, ~~2011~~2012 and ~~2010~~ 2011, respectively.

An affiliate of the general partner performs land improvements, rezoning, annexation and other activities to prepare our investment properties for sale and is reimbursed for salaries and direct costs. For the years ended December 31, ~~2011~~2012 and ~~2010~~2011, we incurred $0215 and $~~712~~0, respectively, of such costs. The affiliate does not recognize a profit on any project. Such costs are included in investment properties, all of which ~~all~~ was paid as of December 31, ~~2010~~2012.

As of December 31, ~~2011~~2012, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the general partner.

Results of Operations

As of December 31, ~~2011~~2012, we owned ~~nine~~six parcels of land consisting of approximately ~~1,004~~491 acres. Of the ~~1,004~~491 acres owned, approximately ~~921~~ 431 acres are tillable, leased to local farmers and generate sufficient cash flow to cover real estate taxes and insurance. Rental income was $~~215~~121,~~406~~455 and $~~207~~99,~~365~~835 for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively. Rental income increased due to an increase in the farm rental rates. The ~~2012~~2013 farm leases for our tillable land were negotiated and fully executed within the first quarter of ~~2012~~2013 at slightly increased rates.

~~There~~We ~~were~~have nobeen ~~sales~~successful in pre-development activities such as rezoning, annexation and/or land planning of approximately 410 acres of Parcels 17, 18, 19 and 22 in McHenry, Illinois. Parcels 17 and 18 are within the planning jurisdiction of the City of Woodstock. Parcel 22 was forcibly annexed into the corporate limits of the Village of Bull Valley and subject to that village’s restrictions. For land planning purposes, it was our intent to have most if not all three parcels ~~for~~annexed to the ~~years~~City ~~ended~~of ~~December 31~~Woodstock. In a prior year, ~~2011~~we entered into a Settlement and ~~2010~~Annexation Agreement with the Village of Bull Valley which moved the boundary line favorably for us allowing us to proceed with the land planning for these parcels with the City of Woodstock. The ~~lack~~settlement with Bull Valley provided the prospect of ~~sales~~allowing ~~activity~~us to develop the property with sewer and water facilities from the City of Woodstock and with a land use that could not have been developed in Bull Valley. In consideration for the ~~years~~release ~~ended~~of ~~December 31~~land, we simultaneously conveyed approximately 51 acres of Parcel 22 to the Village of Bull Valley. Also as part of the settlement, we received favorable zoning for the ~~2011~~remaining ~~and~~land ~~2010~~that islies awithin ~~continued~~the ~~result~~limits of the ~~depressed~~Village of Bull Valley. Due to the downturn in the real estate ~~market~~ and financial markets the ~~slow~~decision ~~down~~was inmade to discontinue the ~~sales~~land planning process of ~~vacant~~these ~~land~~parcels ~~for~~until ~~new~~such ~~developments~~time as the market rebounds and homebuilders and developers enter back into these markets.

WeParcel ~~have~~19 ~~been~~previously ~~successful~~received inapproval ~~pre-development~~required ~~activities~~from ~~such~~certain ~~as rezoning, annexation and/or land planning~~ Village of ~~approximately~~McHenry ~~410~~municipal ~~acres~~departments offor ~~Parcels~~a ~~17,~~preliminary ~~18,~~plan ~~19 and~~approving 22a in41 ~~McHenry,~~unit ~~Illinois~~well and ~~224~~septic ~~acres~~residential ofsubdivision ~~Parcel~~to 25be incalled ~~Kane~~Hunters ~~County, Illinois~~Woods. ~~Parcels~~Following ~~17 and 18 are within~~ the ~~planning~~downturn ~~jurisdiction~~in of the ~~City~~real ofestate ~~Woodstock.~~market, ~~Parcel~~we 22sought ~~was~~an ~~forcibly~~extension ~~annexed~~in ~~into~~ the ~~corporate~~time ~~limits~~limit offor recording the ~~Village~~final ofplat ~~Bull~~for ~~Valley and~~the ~~subject~~Hunters toWoods ~~that village’s restrictions~~Subdivision. ~~For~~The ~~land~~extension ~~planning~~expired ~~purposes~~on May 5, it2011. ~~was~~During ~~our intent to have most if not all three parcels annexed to~~ the ~~City~~first quarter of ~~Woodstock. In a prior year~~2011, we ~~entered~~submitted ~~into~~ a ~~Settlement~~formal ~~and~~request ~~Annexation Agreement with the Village of Bull Valley which moved the boundary line favorably~~ for usan ~~allowing~~additional usone toyear ~~proceed~~extension ~~with~~as ~~the~~allowed ~~land~~by ~~planning for these parcels with~~ the ~~City~~Village of ~~Woodstock~~McHenry. ~~The~~We ~~settlement~~received ~~with~~a response ~~Bull~~which ~~Valley~~required ~~provided~~addressing ~~the~~minor ~~prospect~~storm ofwater ~~allowing~~comments usraised toby ~~develop~~ the ~~property~~ ~~with~~McHenry ~~sewer~~County ~~and~~Department ~~water facilities from the City~~ of ~~Woodstock~~Planning and ~~with~~Development. aThese ~~land~~matters ~~use that could not~~ have been ~~developed~~addressed in ~~Bull~~a ~~Valley.~~formal ~~In consideration for the release of land, we simultaneously conveyed approximately 51 acres of Parcel 22 to the Village of Bull Valley~~response. ~~Also~~We asare ~~part~~awaiting offurther ~~the~~comments ~~settlement,~~and/or wea ~~received favorable zoning for the remaining land that lies within the limits of the Village of Bull Valley.~~ date

~~Parcel 19 previously received approval required from certain Village of McHenry municipal departments for a preliminary plan approving a 41 unit well and septic residential subdivision to be called~~-12- Hunters Woods. Following the downturn in the real estate market, we sought an extension in the time limit for recording the final plat for the Hunters Woods Subdivision. The extension expired on May 5, 2011. During the first quarter of 2011, we submitted a formal request for an additional one year extension as allowed by the Village of McHenry. We received a response which required addressing minor storm water comments raised by the McHenry County Department of Planning and Development. These matters have been addressed in a formal response. We are awaiting further comments and/or a date when our request will be submitted for approval of a plat extension. It is our intent to preserve the validity of our preliminary plan until such time as the market rebounds and homebuilders resume new home construction in this area.

Parcel 25 previously received approval from the subdivision and zoning department of Kane County for the preliminary plan for a residential development to be known as the Stonefield Subdivision located in Campton Township within the jurisdiction of Kane County. Similar to Parcel 19 above, following the downturn in the real estate market, we sought an

-11-

~~extension~~when inour ~~the~~request ~~time~~for ~~limit~~a ~~for~~plat ~~recording~~extension ~~the~~will ~~final~~be ~~plat~~submitted for ~~the~~approval. ~~Stonefield~~It ~~Subdivision.~~is Anour ~~extension~~intent ~~was~~to ~~granted~~preserve ~~and~~the ~~ran~~validity ~~through~~of ~~October 20,~~our ~~2011.~~preliminary Onplan ~~October 11,~~until ~~2011~~such wetime ~~submitted~~as athe market rebounds and homebuilders ~~formal~~resume ~~request~~new ~~for~~home anconstruction ~~additional~~in ~~extension~~this ~~which~~area. ~~has~~While ~~been~~new ~~granted~~home ~~until~~construction ~~November 15,~~has ~~2013~~not ~~allowing~~significantly usimproved toin ~~preserve~~these ~~the~~markets, ~~validity~~we ofhave ~~our~~seen ~~preliminary~~signs ~~plan~~of ~~until~~investors ~~such~~and ~~time~~farmers asre-entering ~~the~~these ~~market~~markets ~~rebounds~~to ~~and~~acquire ~~homebuilders~~land ~~resume~~either ~~new~~for ~~home~~future ~~construction~~development inor ~~this~~to expand ~~area~~farming operations.

AsProfessional ofservices to affiliates and non-affiliates were $132,277 and $114,388 for the ~~date~~years ofended ~~this~~December 31, 2012 ~~report~~and ~~there~~2011, ~~have~~respectively. ~~been~~Professional noservices ~~changes~~primarily ininclude ~~the~~accounting ~~status~~fees, oflegal ~~these~~fees ~~parcels~~and investor service fees. ~~Further~~The ~~pre~~increase in professional services to affiliates and non-~~development~~affiliates ~~activities~~is ~~are~~due onprimarily ~~hold pending~~to ~~significant~~an ~~improvement~~increase in ~~the~~affiliated accounting ~~real~~and ~~estate~~investor ~~market~~services ordue ~~until~~to ~~such~~the ~~time~~two asdistributions weto ~~become~~our ~~aware~~partners, ofas awell ~~demand~~as ~~for~~an ~~improved~~increase orin ~~entitled~~legal ~~land~~fees ~~zoned~~associated ~~for~~with ~~residential~~the ~~and/or~~three ~~commercial~~land ~~use~~sales.

~~Professional~~General ~~services~~and administrative expenses to affiliates and non-affiliates were $~~114~~41,~~388~~272 and $~~122~~35,~~809~~743 for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively. ~~Professional~~General ~~services~~and administrative expenses primarily include ~~accounting fees,~~data ~~legal~~processing ~~fees~~costs, postage and ~~investor~~printing ~~service fees~~costs. The ~~decrease~~increase ~~in professional services to affiliates and non-affiliates~~ is due ~~primarily~~ to apostage ~~decrease~~and inprinting ~~fees~~costs for ~~affiliated~~the ~~accounting~~two ~~services~~distributions.

~~General~~Marketing ~~and administrative~~ expenses to affiliates and non-affiliates were $351,~~743~~300 and $~~36,518~~318 for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively. ~~General~~Marketing ~~and~~expenses ~~administrative~~to ~~expenses~~affiliates are costs incurred for ~~primarily~~preparing ~~include~~and ~~data~~marketing ~~processing~~parcels ~~costs,~~for ~~postage~~sale and ~~printing~~monitoring ~~costs.~~activity ~~There~~at ~~were~~the noparcels. ~~significant~~The ~~changes~~increase in ~~these~~marketing ~~services~~expenses ~~for~~to ~~2011~~non-affiliates is due to signage costs.

~~Marketing~~ Land operating expenses to ~~affiliates and~~ non-affiliates were $~~318~~12,850 and $48,~~357~~070 for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively. ~~Marketing~~These ~~expenses~~costs toprimarily ~~affiliates~~include ~~and~~real ~~non-affiliates~~estate ~~are~~tax ~~costs~~expense ~~incurred for preparing~~ and ~~marketing parcels for sale.~~insurance ~~The~~expense, ~~decrease~~both isof ~~due~~which toincreased ~~less advertising costs and less marketing fees as a response to the continued slowdown~~ in ~~real estate sales~~2012.

~~Land operating~~Interest ~~expenses~~income towas ~~non-affiliates were~~ $1912,~~173~~926 and $7518,~~289~~161 for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively. ~~These~~Interest ~~costs~~income is primarily ~~include~~a ~~real~~result ~~estate~~of ~~tax expense, ground maintenance and insurance expense on~~ the ~~parcels~~cash weavailable ~~own, however, in 2010, we paid approximately $56,000~~ to ~~the~~invest ~~United~~on ~~City~~a ofshort ~~Yorkville~~term ~~for~~basis. ~~the~~The ~~required~~decrease ~~future~~in ~~water~~interest ~~main~~income ~~extension~~is ~~improvements~~due ~~relative~~ to ~~the Yorkville Business Center. This obligation was secured by~~ a ~~performance~~decrease ~~bond~~in ~~guaranteed~~interest ~~by the Partnership, which after receipt of payment was then fully released~~rates.

~~Interest~~Other income was $189,~~161~~050 and $217,~~662~~125 for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively. ~~Interest~~Other income is due primarily to transfer fees as a result of the ~~cash~~number ~~available~~of tocompleted ~~invest~~transfers onof limited apartnership ~~short term basis~~units. The ~~decrease~~increase ~~in interest income~~ is due to more transfer fee income as a ~~decrease~~result of an increase in ~~interest~~the ~~rates~~number of transfer requests.

~~Other~~Income ~~income~~from discontinued operations was $770,~~125~~145 and $9104,~~208~~468 for the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively. ~~Other~~Included in income isfrom discontinued ~~due~~operations ~~primarily~~are torental ~~transfer fee~~ income, asinsurance aand ~~result~~real ofestate taxes pertaining to the ~~number~~parcels ofsold ~~completed~~during ~~transfers~~the ofyear ~~limited~~ended ~~partnership~~December 31, ~~units~~2012. The decrease for 2012 is due to ~~less~~the ~~transfer~~three ~~fee~~land ~~income~~parcels assold aduring ~~result~~2012 ofand ~~the~~therefore, ~~decrease~~farm income infor the ~~number~~three ofsold ~~transfers~~parcels was for a partial year versus a full year in 2011.

The net gain on sale of investment properties of $619,039 for the year ended December 31, 2012 is the result of the sale of Parcel 24, consisting of approximately 212 acres, the sale of Parcel 25, consisting of 225 acres, and the sale of Parcel 14, consisting of approximately 76 acres. During the year ended December 31, 2011, there were no land sales. Sales activity for the year ended December 31, 2012 is the result of an increase in sales of vacant land to both speculators looking to hold land until the market rebounds and farmers looking to increase their farming businesses.

Our Partnership Agreement

Our partnership agreement prescribes the allocation of profits and losses, and the distribution priorities of 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 and receives a special allocation of expenses in a like amount.

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 on sales of investment 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 sales proceeds will be allocated between the general partner and the limited partners based upon both an~~-13- ~~aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.~~

-12-

Distributions of net sales 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 sales proceeds will be distributed 90% to the limited partners and 10% to the general partner until the limited partners have received from net sales 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 or 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 sales proceeds have been distributed, the general partner has received more than 25% of all net sales 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 as a reduction of such invested capital before application to payment of any deficiency in the 15% cumulative preferred return.

Subsequent Events

The Partnership evaluates subsequent events occurring between the most recent balance sheet date and the date that the financial statements are available to be issued in order to determine whether the subsequent events are to be recorded in and/or disclosed in the Partnership’s financial statements and footnotes. The financial statements are considered to be available to be issued at the time that they are filed with the Securities and Exchange Commission. There are no subsequent events to report that would have a material impact on the Partnership’s financial statements.

~~During early March 2012, the Partnership received what the general partner deems to be an acceptable offer from a third party purchaser for Parcel 24~~-14- located in Kendall County, Illinois. We are negotiating a purchase and sale agreement for this transaction. Provided the buyer performs, the sale is estimated to result in net sales proceeds of approximately $2,320,500 resulting in a potential gain on the sale of approximately $1,190,000.

For the year ended December 31, 2011, there are no other subsequent events to report that would have a material impact on the Partnership’s financial statements.

Other Items

In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund, L.P. Partnership Agreement and Treasury Regulation Section 1.7704-1(j), we did not reach the maximum threshold of limited partnership units that may be transferred/assigned directly between parties during 2011. For the benefit of interested limited partners, we have a relationship with a “qualified matching service” as defined under Treasury Regulation Section 1.7704-1(g). In accordance with this Treasury Regulation and the IRS private letter ruling obtained by the “qualified matching service”, we understand that limited partnership units may be transferred/assigned through the “qualified matching service” up to a separate maximum threshold each taxable year (in addition to the maximum threshold that may be transferred/assigned directly between parties discussed above). However, there can be no assurance that the IRS private letter ruling will apply to transfers of units, or that any particular transfer will not violate the transfer restrictions contained in our partnership agreement or the provisions of Treasury Regulation Section 1.7704-1(g). If you have any interest in participating in a transfer/assignment of limited partnership units through this “qualified matching service,” please contact American Partnership Board directly at 800-736-9797. You are strongly encouraged to consult your personal legal, financial and tax advisors in connection with any such transfer/assignment.

The Illinois Department of Revenue regulates Illinois income tax withholding requirements for nonresident partners. Payment of the required withholding amount will be made to the Illinois Department of Revenue prior to April 15, 2012. You are encouraged to consult with your tax advisor in connection with the Illinois withholding requirements for nonresident partners. We are also required to pay a withholding tax to the Internal Revenue Service with respect to a partner’s allocable share of our taxable net income, if the partner is a foreign person. We will first pay the withholding tax from the distributions to any nonresident and/or foreign partners, 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 such nonresident and/or foreign partners. Payment of the required withholding amount will be made to the Internal Revenue Service prior to April 15, 2012.

-13-

Other Items

In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund, L.P. Partnership Agreement and Treasury Regulation Section 1.7704-1(j), we did not reach the maximum threshold of limited partnership units that may be transferred/assigned directly between parties during 2012. For the benefit of interested limited partners, we have a relationship with a “qualified matching service” as defined under Treasury Regulation Section 1.7704-1(g). In accordance with this Treasury Regulation and the IRS private letter ruling obtained by the “qualified matching service”, we understand that limited partnership units may be transferred/assigned through the “qualified matching service” up to a separate maximum threshold each taxable year (in addition to the maximum threshold that may be transferred/assigned directly between parties discussed above). However, there can be no assurance that the IRS private letter ruling will apply to transfers of units, or that any particular transfer will not violate the transfer restrictions contained in our partnership agreement or the provisions of Treasury Regulation Section 1.7704-1(g). If you have any interest in participating in a transfer/assignment of limited partnership units through this “qualified matching service,” please contact American Partnership Board directly at 800-736-9797. You are strongly encouraged to consult your personal legal, financial and tax advisors in connection with any such transfer/assignment.

The Illinois Department of Revenue regulates Illinois income tax withholding requirements for nonresident partners. Payment of the required withholding amount will be made to the Illinois Department of Revenue prior to April 15, 2013. You are encouraged to consult with your tax advisor in connection with the Illinois withholding requirements for nonresident partners. We are also required to pay a withholding tax to the Internal Revenue Service with respect to a partner’s allocable share of our taxable net income, if the partner is a foreign person. We will first pay the withholding tax from the distributions to any nonresident and/or foreign partners, 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 such nonresident and/or foreign partners. Payment of the required withholding amount will be made to the Internal Revenue Service prior to April 15, 2013.

Off-Balance Sheet Arrangements, Contractual Obligations, Liabilities and Contracts and Commitments

None

Item 7(A).

Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

-1415-

Item 8.

Financial Statements and Supplementary Data

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Index

	Page
Report of Independent Registered Public Accounting Firm		1617
Financial Statements:
Balance Sheets, December 31, 2011 and 2010		17
Balance Sheets, December 31, 2012 and 2011		18
Statements of Operations, for the years ended December 31, 2011 and 2010		18
Statements of Operations, for the years ended December 31, 2012 and 2011		19
Statements of Partners’ Capital, for the years ended December 31, 2011 and 2010		19
Statements of Partners’ Capital, for the years ended December 31, 2012 and 2011		20
Statements of Cash Flows, for the years ended December 31, 2011 and 2010		20
Statements of Cash Flows, for the years ended December 31, 2012 and 2011		21
Notes to Financial Statements		2122

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.

-1516-

Report of Independent Registered Public Accounting Firm

To the Partners of

Inland Land Appreciation Fund, L.P.

We have audited the accompanying balance sheets of Inland Land Appreciation Fund, L.P. (a limited partnership) (“the Partnership”) as of December 31, ~~2011~~2012 and ~~2010~~2011, 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 audits 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 significant 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, L.P. as of December 31, ~~2011~~2012 and ~~2010~~2011, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

Chicago, Illinois

March 97, ~~2012~~2013

-1617-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Balance Sheets

December 31, ~~2011~~2012 and ~~2010~~2011

Assets

	2011		2010
	2012		2011
Current assets:
Cash and cash equivalents (Note 1)	$	12,~~983~~070,~~495~~810		1,~~912~~983,~~181~~495
Total current assets		1,983,495		1,912,181
Other assets		2,442		0
Investment properties, at cost (including acquisition fees paid to affiliates of $459,426 at December 31, 2011 and 2010) (Note 4):
Total current assets		2,073,252		1,983,495
Land and improvements		13,238,394		13,228,867
Investment properties, at cost (including acquisition fees paid to affiliates of $216,239 and $459,426 at December 31, 2012 and 2011, respectively) (Note 5):
Total assets	$	15,221,889		15,141,048
Land and improvements		8,403,480		13,238,394
Total assets	$	10,476,732		15,221,889

Liabilities and Partners’ Capital

Current liabilities:
Accounts payable	$	1618,~~865~~580		1016,~~000~~865
Accrued real estate taxes		157,~~966~~283		1215,~~870~~966
Due to affiliates (Note 3)		5,566		5,756
Due to affiliates (Note 4)		17,079		5,566
Total current liabilities		3842,~~397~~942		2838,~~626~~397
Partners’ capital:
General Partner:
Capital contribution		500		500
Cumulative net income		45,~~761~~351,~~402~~661		4,~~760~~761,~~691~~402
Cumulative cash distributions		(45,~~745~~335,451	)	(4,745,451	)
		16,451		15,740
		16,710		16,451
Limited Partners:
Units of $1,000. Authorized 30,001 Units, 29,593 Units outstanding at December 31, 2011 and 2010, (net of offering costs of $3,768,113, of which $1,069,764 was paid to affiliates)		25,873,403		25,873,403
Units of $1,000. Authorized 30,001 Units, 29,593 Units outstanding at December 31, 2012 and 2011, (net of offering costs of $3,768,113, of which $1,069,764 was paid to affiliates)		25,873,403		25,873,403
Cumulative net income		2728,~~968~~022,~~131~~788		27,~~897~~968,~~772~~131
Cumulative cash distributions		(3843,~~674~~479,~~493~~111	)	(38,674,493	)
		15,167,041		15,096,682
		10,417,080		15,167,041
Total Partners’ capital		1510,~~183~~433,~~492~~790		15,~~112~~183,~~422~~492
Total liabilities and Partners’ capital	$	1510,~~221~~476,~~889~~732		15,~~141~~221,~~048~~889

See accompanying notes to financial statements.

-1718-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Statements of Operations

For the years ended December 31, ~~2011~~2012 and ~~2010~~2011

	2011			2010
	2012			2011
Revenues:
Rental income (Note 5)	$	215,406			207,365
Rental income (Note 6)	$	121,455			99,835
Total revenues		~~215~~121,~~406~~455			~~207~~99,~~365~~835
Expenses:
Professional services to affiliates		3346,~~732~~097			4633,~~216~~732
Professional services to non-affiliates		8086,~~656~~180			7680,~~593~~656
General and administrative expenses to affiliates		714,~~830~~457			7,~~306~~830
General and administrative expenses to non-affiliates		2726,~~913~~815			2927,~~212~~913
Marketing expenses to affiliates		~~318~~502			~~3,798~~318
Marketing expenses to non-affiliates		0798			~~559~~0
Land operating expenses to non-affiliates		1912,~~173~~850			758,~~289~~070
Total expenses		~~169~~187,~~622~~699			~~238~~158,~~973~~519
Operating income (loss)		45,784			(31,608	)
Operating loss		(66,244	)		(58,684	)
Interest income		1812,~~161~~926			2118,~~662~~161
Other income		79,~~125~~050			97,~~208~~125
Net income (loss)	$	71,070			(738	)
Loss from continuing operations		(44,268	)		(33,398	)
Net income (loss) allocated to (Note 2):
Discontinued operations (Note 3)
General Partner	$	711			(7	)
Income from discontinued operations		70,145			104,468
Limited Partners		70,359			(731	)
Net gain on sale of investment properties		619,039			0
Net income (loss)	$	71,070			(738	)
Income from discontinued operations		689,184			104,468
Net income (loss) allocated to the one General Partner Unit	$	711			(7	)
Net income	$	644,916			71,070
Net income (loss) per Unit allocated to Limited Partners per weighted average Limited Partnership Units (29,593 for the years ended December 31, 2011 and 2010)	$	2.38			(.02	)
Net income allocated to (Note 2):
General Partner	$	590,259			711
Limited Partners		54,657			70,359
Net income	$	644,916			71,070
Net income allocated to the one General Partner Unit	$	590,259			711
Net income (loss) per Unit allocated to Limited Partners per weighted average Limited Partnership Units (29,593 for the years ended December 31, 2012 and 2011)
Continuing operations	$	(1.48	)		(1.12	)
Discontinued operations		3.33			3.50
		1.85			2.38

See accompanying notes to financial statements.

-1819-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Statements of Partners’ Capital

For the years ended December 31, ~~2011~~2012 and ~~2010~~2011

	General			Limited
	Partner			Partners			Total
Balance at January 1, 2010	$	15,747			15,097,413			15,113,160
Balance at January 1, 2011	$	15,740			15,096,682			15,112,422
Net loss (Note 2)		(7	)		(731	)		(738	)
Balance at December 31, 2010	$	15,740			15,096,682			15,112,422
Net income (Note 2)		711			70,359			71,070
Balance at December 31, 2011	$	16,451			15,167,041			15,183,492
Distributions to Partners (Note 2)		(590,000	)		(4,804,618	)		(5,394,618	)
Net income (Note 2)		590,259			54,657			644,916
Balance at December 31, 2012	$	16,710			10,417,080			10,433,790

See accompanying notes to financial statements.

-1920-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Statements of Cash Flows

For the years ended December 31, ~~2011~~2012 and ~~2010~~2011

	2011			2010
	2012			2011
Cash flows from operating activities:
Net income (loss)	$	71,070			(738	)
Net income	$	644,916			71,070
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities (including discontinued operations):
Net gain on sale of investment properties		(619,039	)		0
Changes in assets and liabilities:
Accounts payable		6,865			(7,807	)
Other current assets		(2,442	)		0
Accrued real estate taxes		3,096			1,465
Accounts payable		1,715			6,865
Due to affiliates		(190	)		(8,691	)
Accrued real estate taxes		(8,683	)		3,096
Unearned income		0			(534	)
Due to affiliates		11,513			(190	)
Net cash flow provided by (used in) operating activities		80,841			(16,305	)
Net cash flow provided by operating activities		27,980			80,841
Cash flows from investing activities:
Additions to investment properties		(98,~~527~~275	)		(29,~~792~~527	)
Net cash flow used in investing activities		(9,527	)		(2,792	)
Proceeds from sale of investment properties		5,462,228			0
Net increase (decrease) in cash and cash equivalents	$	71,314			(19,097	)
Net cash flow provided by (used in) investing activities		5,453,953			(9,527	)
Cash and cash equivalents at beginning of year		1,912,181			1,931,278
Cash flows from financing activities:
Cash and cash equivalents at end of year	$	1,983,495			1,912,181
Distributions		(5,394,618	)		0
Net cash used in financing activities		(5,394,618	)		0
Net increase in cash and cash equivalents	$	87,315			71,314
Cash and cash equivalents at beginning of year		1,983,495			1,912,181
Cash and cash equivalents at end of year	$	2,070,810			1,983,495

See accompanying notes to financial statements.

-2021-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

For the years ended December 31, ~~2011~~2012 and ~~2010~~2011

(1) Organization and Basis of Accounting

The Registrant, Inland Land Appreciation Fund, L.P. (the “Partnership”), was formed in October 1987, 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. Between October 12, 1988 and October 6, 1989, the Partnership sold 30,000 Limited Partnership Units (“Units”) at $1,000 per Unit, which does not include the General Partner or the Initial Limited Partner, resulting in gross offering proceeds of $30,000,000. Inland Real Estate Investment Corporation is the General Partner. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnership’s real property investments according to the number of Units held. Through December 31, ~~2011~~2012, the Partnership had repurchased a total of 407.75 Units for $359,484 from various Limited Partners through a ~~Unit~~unit ~~Repurchase~~repurchase ~~Program~~program.

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, as a result of discontinued operations, have been made to the 2011 financial statements to conform to the 2012 presentation. Unless otherwise noted, all disclosures in the financial statements relate to the continuing operations of the Partnership.

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 value. The Partnership maintains its cash and cash equivalents at a financial institution. The account ~~balance~~balances at the financial institution periodically ~~exceeds~~exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage of $250,000 on interest bearing and non-interest bearing accounts and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Partnership believes that the risk is not significant, and the Partnership does not anticipate the financial institution’s non-performance.

The Partnership recognizes income from the sale of land parcels in accordance with the full accrual method of accounting.

The Partnership’s escrow agent holds earnest money deposits from a prospective purchaser when an agreement for sale is executed. Generally, these funds are not the Partnership’s until the closing has occurred or the buyer under the sale agreement has committed a default which would entitle the Partnership to the earnest money.

Except as described in footnote (b) toof ~~Note~~Item 4(2) on ofpage ~~these notes~~9, the Partnership uses the area 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. Repairs and maintenance expenses are charged to operations as incurred.

A presentation of information about operating segments would not be material to an understanding of the Partnership’s business taken as a whole as the Partnership is engaged in the business of real estate investment which management considers to be a single operating segment.

~~On a quarterly basis, the Partnership reviews impairment~~-22- indicators and if necessary, conducts an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value. If an investment property is considered impaired, the Partnership would be required to record an impairment loss equal to the excess of carrying value over the estimated fair value.

-21-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

InThe ~~determining~~Partnership has taken the ~~value~~steps ofnecessary anto ~~investment~~reduce ~~property~~costs and ~~whether~~maintain ~~the~~sufficient ~~property~~reserves isof ~~impaired, management~~cash ~~considers~~and ~~several~~cash ~~factors~~equivalents ~~which~~to ~~require~~cover ~~difficult,~~all ~~complex~~our ~~and/or~~costs ~~subjective~~for ~~judgments,~~an ~~such~~extended asperiod ~~projected~~of ~~sales~~time. ~~prices,~~We ~~capital~~have ~~expenditures~~farm ~~and~~leases ~~assessment~~in place which generate sufficient income to cover the costs of ~~current~~insurance ~~economic~~expense ~~conditions~~and real estate taxes. ~~These~~Our ~~factors~~remaining ~~are~~land ~~considered~~is not encumbered by ~~management~~debt and is located in ~~determining~~areas that we believe are in the ~~value~~ paths of ~~any~~future ~~particular property~~development. ~~The~~As ~~value~~such, ofthe ~~any~~Partnership ~~particular~~has ~~property~~the isability ~~sensitive~~and management has the intent to hold on to the ~~actual~~remaining ~~results~~parcels ofuntil ~~any~~such oftime ~~these~~as ~~uncertain~~reasonable ~~factors,~~and ~~either~~acceptable ~~individually~~offers orare ~~taken~~received. In asaddition, on a ~~whole.~~quarterly ~~Should~~basis, the ~~actual~~Partnership ~~results~~reviews ~~differ~~impairment ~~from~~indicators ~~management’s~~and ~~judgment~~if necessary, conducts an impairment analysis to ensure that the ~~valuation~~carrying ~~could~~value beof ~~negatively~~each orinvestment ~~positively~~property ~~affected.~~does ~~The~~not ~~valuation~~exceed ~~and~~its ~~possible~~estimated ~~subsequent~~fair ~~impairment~~value. ofIf an investment ~~properties~~property is aconsidered ~~significant~~impaired, ~~estimate~~the ~~that~~Partnership ~~can~~would ~~and~~be ~~does~~required ~~change~~to ~~based~~record onan ~~management’s~~impairment ~~continuous~~loss ~~process~~equal to the excess of ~~analyzing~~carrying ~~each property~~value over the estimated fair value.

In determining the value of an investment property and whether the property is impaired, management considers several factors which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures, assessment of current economic conditions and management’s intent to hold on to the remaining parcels until reasonable and acceptable offers are received. These factors are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole. Should the actual results differ from management’s judgment, the valuation could be negatively or positively affected. The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management’s continuous process of analyzing each property.

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. Similarly, the Partnership is required to pay a withholding tax to the Illinois Department of Revenue for nonresident partners. The Partnership will first pay the withholding tax from the distributions to any nonresident and/or foreign partners, 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 such nonresident and/or foreign partners.

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’s 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:

2011

2010

2012

2011

GAAPBasis

Tax Basis(unaudited)

GAAPBasis

Tax Basis(unaudited)

GAAP Basis

Tax Basis(unaudited)

GAAP Basis

Tax Basis(unaudited)

Total assets

1510,~~221~~476,~~889~~732

1814,~~990~~244,~~003~~846

15,~~141~~221,~~048~~889

18,~~909~~990,~~162~~003

Partners’ capital:

General Partner

16,~~451~~710

58,~~734~~993

1516,~~740~~451

58,~~023~~734

Limited Partners

1510,~~167~~417,~~041~~080

1814,~~891~~141,~~335~~827

15,~~096~~167,~~682~~041

18,~~822~~891,~~514~~335

Net income (loss) allocated:

Net income allocated:

General Partner

~~711~~590,259

(7711

)

~~(16,582~~711

)

Limited Partners

7054,~~359~~657

~~(731~~70,359

)

(170,~~641,659~~359

)

Net income (loss) per Limited Partnership Unit

2.38

(.02

)

(55.47

)

Net income per Limited Partnership Unit

1.85

2.38

The net income ~~(loss)~~ per Unit is based upon the weighted average number of Units of 29,593 during ~~2011~~2012 and ~~2010~~2011.

-2223-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

(2) Partnership Agreement

The Partnership Agreement prescribes the allocation of profits and losses, and the distribution priorities of 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 and receives a special allocation of expenses in a like amount.

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 the Limited Partners.

Distributions of Net Sales 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 Sales Proceeds will be distributed 90% to the Limited Partners and 10% to the General Partner until the Limited Partners have received from Net Sales 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 Parcel 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 Sales Proceeds have been distributed, the General Partner has received more than 25% of all Net Sales 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 as a reduction of such Invested Capital before application to payment of any deficiency in the 15% Cumulative Preferred Return.

~~-23-~~ (3) Discontinued Operations and Investment Property Held for Sale

~~Table~~During the year ended December 31, 2012, the Partnership had multiple land sales, all of ~~Contents~~which are included in discontinued operations. Sales of investment properties of $5,462,228 and cost of land sold of $4,843,189, resulting in a net gain on sale of $619,039 is the result of the sale of Parcel 24, consisting of approximately 212 acres, the sale of Parcel 25, consisting of 225 acres, and the sale of Parcel 14, consisting of approximately 76 acres. The net gain on sale for all investment property sold and the operations for all investment property sold for all periods presented are included in discontinued operations on the accompanying statements of operations for the years ended December 31, 2012 and 2011.

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

(3) Transactions with Affiliates

The General Partner and its affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its affiliates relating to the administration of the Partnership. Such costs of $41,562 and $53,522 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2011 and 2010, respectively, of which $5,566 and $5,618 was unpaid as of December 31, 2011 and 2010, respectively.

An affiliate of the General Partner performs marketing and advertising services for the Partnership and is reimbursed (as set forth under terms of the Partnership Agreement) for direct costs. Such costs of $318 and $3,798 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2011 and 2010, respectively, of which $0 and $138 was unpaid as of December 31, 2011 and 2010, respectively.

An affiliate of the General Partner performs land improvements, rezoning, annexation and other activities to prepare the Partnership’s investment properties for sale and is reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs. For the years ended December 31, 2011 and 2010, the Partnership incurred $0 and $712, respectively, of such costs. The affiliate does recognize a profit on any project. Such costs are included in investment properties, of which all was paid as of December 31, 2010.

As of December 31, 2011 and 2010, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the General Partner.

-24-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

(4) ~~Investment~~Transactions ~~properties~~with Affiliates

Parcel		IllinoisCounty	Gross AcresPurchased(Sold)			Purchase/SalesDate		Initial Costs						CostsCapitalizedSubsequent toAcquisition		Costs ofPropertySold		TotalRemainingCosts ofParcels at12/31/11		CurrentYear Gainon SaleRecognized
								OriginalCosts		AcquisitionCosts		TotalCosts
	1	Kendall		84.7360			01/19/89	$	423,680		61,625		485,305		5,462,589		5,947,894		0		0
				(3.5200	)		12/24/96
				(.3520	)		11/25/97
				(80.8640	)		12/29/97
	2	McHenry		223.4121			01/19/89		650,000		95,014		745,014		26,816		771,830		0		0
				(183.3759	)		12/27/90
				(40.0362	)		05/11/00
	3	Kendall		20.0000			02/09/89		189,000		13,305		202,305		0		202,305		0		0
				(20.0000	)		05/08/90
	4	Kendall		69.2760			04/18/89		508,196		38,126		546,322		1,223,376		1,769,698		0		0
				(.4860	)		02/28/91
				(27.5850	)		08/25/95
				(4.4017	)		Var 2001
				(2.1400	)		Var 2002
				(23.0933	)		Var 2003
				(6.7800	)		Var 2004
				(4.7900	)		Var 2005
	5	Kendall (a)		372.2230			05/03/89		2,532,227		135,943		2,668,170		456,398		3,124,568		0		0
				(Option	)		04/06/90
				(372.2230	)		06/20/03
	6	Kendall (b)		78.3900			06/21/89		416,783		31,691		448,474		1,461,256		1,909,730		0		0
				(3.9500	)		11/01/00
				(30.0000	)		07/12/05
				(33.4270	)		07/27/06
				(11.0130	)		08/22/07
	7	Kendall (b)		77.0490			06/21/89		84,754		8,163		92,917		1,438,727		1,531,644		0		0
				(71.2070	)		08/22/07
				(5.8420	)		03/20/08

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 of $60,554 and $41,562 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2012 and 2011, respectively, of which $17,079 and $5,566 was unpaid as of December 31, 2012 and 2011, respectively.

An affiliate of the General Partner performs marketing and advertising services for the Partnership and is reimbursed (as set forth under terms of the Partnership Agreement) for direct costs. Such costs of $502 and $318 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2012 and 2011, respectively, all of which was paid as of December 31, 2012 and 2011, respectively.

An affiliate of the General Partner performs land improvements, rezoning, annexation and other activities to prepare the Partnership’s investment properties for sale and is reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs. For the years ended December 31, 2012 and 2011, the Partnership incurred $215 and $0, respectively, of such costs. The affiliate does not recognize a profit on any project. Such costs are included in investment properties, all of which was paid as of December 31, 2012.

As of December 31, 2012 and 2011, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the General Partner.

(5) Investment properties

As of December 31, 2012, the Partnership owned six parcels of land consisting of approximately 491 acres. There were three land sales during the year ended December 31, 2012. The Partnership sold the remaining balances of Parcel 24, consisting of approximately 212 acres, Parcel 25, consisting of 225 acres, and Parcel 14, consisting of approximately 76 acres.

(a)	Reconciliation of investment properties owned:


	2012			2011
Balance at January 1,	$	13,238,394			13,228,867
Additions during year		8,275			9,527
Sales during period		(4,843,189	)		0


Balance at December 31,	$	8,403,480			13,238,394

(b)	The aggregate cost of investment properties owned at December 31, 2012 for Federal income tax purposes was approximately $8,400,000 (unaudited).

(c)

The Partnership has taken the steps necessary to reduce costs and maintain sufficient reserves of cash and cash equivalents to cover all our costs for an extended period of time. We have farm leases in place which generate sufficient income to cover the costs of insurance expense and real estate taxes. Our remaining land is not encumbered by debt and is located in areas that we believe are in the paths of future development. As such, the Partnership has the ability and management has the intent to hold on to the remaining parcels until such time as reasonable and acceptable offers are received. In addition, on a quarterly basis, the Partnership reviews impairment indicators and if necessary, conducts an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value. If this were to occur, the Partnership would be required to record an impairment loss equal to the excess of the carrying value over the estimated fair value.

-25-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

~~(4)~~In ~~Investment~~determining ~~properties~~the ~~(continued)~~value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures, assessment of current economic conditions and management’s intent to hold on to the remaining parcels until such time as reasonable and acceptable offers are received. These indicators are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain indicators, either individually or taken as a whole. Should the actual results differ from management’s judgment, the valuation could be negatively or positively affected.

Parcel		IllinoisCounty	Gross AcresPurchased(Sold)			Purchase/SalesDate		Initial Costs						CostsCapitalizedSubsequent toAcquisition		Costs ofPropertySold		TotalRemainingCosts ofParcels at12/31/11		Current YearGainon SaleRecognized
								OriginalCosts		AcquisitionCosts		Total Costs
	8	Kendall (b)		5.0000			06/21/89	$	60,000		5,113		65,113		0		65,113		0		0
				(5.0000	)		10/06/89
	9	McHenry (b)		51.0300			08/07/89		586,845		22,482		609,327		94,659		0		703,986		0
	10	McHenry (b)		123.9400			08/07/89		91,939		7,224		99,163		600		99,763		0		0
				(123.9400	)		12/06/89
	11	McHenry (b)		30.5920			08/07/89		321,216		22,641		343,857		94,534		0		438,391		0
	12	Kendall		90.2710			10/31/89		907,389		41,908		949,297		246,964		1,196,261		0		0
				(.7090	)		04/26/91
				(89.5620	)		03/10/04
	13	McHenry		92.7800			11/07/89		251,306		19,188		270,494		18,745		289,239		0		0
				(2.0810	)		09/18/97
				(90.6990	)		02/15/01
	14	McHenry		76.2020			11/07/89		419,111		23,402		442,513		206,595		0		649,108		0
	15	Lake		84.5564			01/03/90		1,056,955		85,283		1,142,238		1,661,344		2,803,582		0		0
				(10.5300	)		Var 1996
				(5.4680	)		Var 1997
				(68.5584	)		Var 1998
	16	Kane/		72.4187			01/29/90		1,273,537		55,333		1,328,870		706,718		2,035,588		0		0
		Kendall		(30.9000	)		07/10/98
				(10.3910	)		12/15/99
				(3.1000	)		12/12/00
				(28.0277	)		05/19/03
	17	McHenry		99.9240			01/29/90		739,635		61,038		800,673		1,254,202		320,961		1,733,914		0
				(27.5100	)		01/29/99

The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management’s continuous process of analyzing each property. For the years ended December 31, 2012 and 2011, no impairment provisions were recorded by the Partnership.

(6) 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, 2012 the Partnership had farm leases of generally one year in duration, for approximately 431 acres of the approximately 491 acres owned.

(7) Subsequent Events

-26-

~~INLAND~~Item ~~LAND~~9. ~~APPRECIATION~~Changes ~~FUND,~~in ~~L.P.~~and Disagreements with Accountants on Accounting and Financial Disclosure

(aThere ~~limited~~were ~~partnership)~~no disagreements on accounting or financial disclosure matters during 2012.

Notes to Financial Statements

(continued)

(4) Investment properties (continued)

Parcel		IllinoisCounty	Gross AcresPurchased(Sold)			Purchase/SalesDate		Initial Costs						CostsCapitalizedSubsequent toAcquisition		Costs ofPropertySold		TotalRemainingCosts ofParcels at12/31/11		Current YearGainon SaleRecognized
								Original		Acquisition		Total
								Costs		Costs		Costs
	18	McHenry		71.4870			01/29/90	$	496,116		26,259		522,375		517,216		11,109		1,028,482		0
				(1.0000	)		Var 1990
				(.5200	)		03/11/93
	19	McHenry		63.6915			02/23/90		490,158		29,158		519,316		648,402		0		1,167,718		0
	20	Kane		224.1480			02/28/90		2,749,800		183,092		2,932,892		1,938,930		4,871,822		0		0
				(.2790	)		10/17/91
				(223.8690	)		02/20/04
	21	Kendall		172.4950			03/08/90		1,327,459		75,822		1,403,281		954,415		2,357,696		0		0
				(172.4950	)		Var 1998
	22	McHenry		254.5250			04/11/90		2,608,881		136,559		2,745,440		577,489		0		3,322,929		0
				(51.000	)		10/02/08
	23	Kendall		140.0210			05/08/90		1,480,000		116,240		1,596,240		909,395		2,505,635		0		0
				(4.4100	)		Var 1993
				(35.8800	)		Var 1994
				(3.4400	)		Var 1995
				(96.2910	)		08/26/99
	24	Kendall		298.4830			05/23/90		1,359,774		98,921		1,458,695		101,991		436,638		1,124,048		0
				(12.4570	)		05/25/90
				(4.6290	)		04/01/96
				(69.8200	)		11/26/02
	25	Kane		225.0000			06/01/90		2,600,000		168,778		2,768,778		301,040		0		3,069,818		0
		Totals						$	23,624,761		1,562,308		25,187,069		20,302,401		32,251,076		13,238,394		0

-27-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

(4) Investment properties (continued)

(a) Included in the purchase agreement of Parcel 5 was a condition that required the Partnership to buy an option to purchase an additional 243 acres immediately to the west of this parcel. The 1990 sale transaction relates to the sale of this option.

(b) The Partnership purchased from two third parties, two sets of three contiguous parcels of land (Parcels 6, 7 and 8; and Parcels 9, 10 and 11). The General Partner believes that the total value of this land will be maximized if it is treated and marketed to buyers as six separate parcels and closed the transactions as six separate purchases to facilitate this. Parcels 6, 7 and 8 will be treated as one parcel and Parcels 9, 10 and 11 will be treated as one parcel for purposes of computing Parcel Capital and distributions to the Partners.

	2011		2010
Balance at January 1,	$	13,228,867		13,226,075
Additions during year		9,527		2,792
Balance at December 31,	$	13,238,394		13,228,867

(d) The aggregate cost of investment properties owned at December 31, 2011 for Federal income tax purposes was approximately $13,200,000 (unaudited).

(e) On a quarterly basis, the Partnership reviews impairment indicators and if necessary, conducts an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value. If this were to occur, the Partnership would be required to record an impairment loss equal to the excess of the carrying value over the estimated fair value.

In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures and assessment of current economic conditions. These indicators are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain indicators, either individually or taken as a whole. Should the actual results differ from management’s judgment, the valuation could be negatively or positively affected.

(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, 2011 the Partnership had farm leases of generally one year in duration, for approximately 921 acres of the approximately 1,004 acres owned.

-28-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)

(6) Subsequent Events

During early March 2012, the Partnership received what the General Partner deems to be an acceptable offer from a third party purchaser for Parcel 24 located in Kendall County, Illinois. The Partnership is negotiating a purchase and sale agreement for this transaction. Provided the buyer performs, the sale is estimated to result in net sales proceeds of approximately $2,320,500 resulting in a potential gain on the sale of approximately $1,190,000.

For the year ended December 31, 2011, there are no other subsequent events to report that would have a material impact on the Partnership’s financial statements.

Item 9. Changes in and Disagreements with Independent Auditors on Accounting and Financial Disclosure

There were no disagreements on accounting or financial disclosure matters during 2011.

Item 9(A).

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us is made known to the members of senior management and the Audit Committee.

Based on management’s evaluation as of December 31, ~~2011~~ 2012, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, management concluded that our internal control over financial reporting was effective as of December 31, ~~2011~~2012. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

There were no changes to our internal controls over financial reporting during the fiscal quarter ended December 31, ~~2011~~2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9(B).

Other Information

Not applicable.

-2927-

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Our general partner, Inland Real Estate Investment Corporation (IREIC), was organized in 1984 for the purpose of acting as general partner of limited partnerships formed to acquire, own and operate real properties. Our general partner is a wholly owned subsidiary of The Inland Group, Inc. The general partner has responsibility for all aspects of our operations including risk oversight. The directors of the general partner have diverse and lengthy experience in the real estate industry and are well-qualified to guide the Partnership.

During 2004, the board of directors of our general partner formalized our audit committee. The audit committee is not independent from our general partner and consists of Catherine L. Lynch, committee chair and audit committee financial expert, Brenda G. Gujral, Roberta S. Matlin and Cathleen M. Hrtanek. 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.

Our general partner has a code of ethics that applies to all of its employees. We will provide the code of ethics free of charge upon written request to our Investor Services department in care of the general partner of our partnership at 2901 Butterfield Road, Oak Brook, IL 60523.

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, ~~2012~~2013.

Functional Title Daniel L. Goodwin Director of IREIC Robert H. Baum Director, General Counsel of IREIC Robert D. Parks Chairman of IREIC Brenda G. Gujral Director and ~~Chief~~President ~~Executive Officer~~ of IREIC and principal executive officer of the Partnership ~~Brian Conlon President of IREIC~~ Catherine L. Lynch Director, Chief Financial Officer of IREIC Roberta S. Matlin Director and Senior Vice President of IREIC Guadalupe Griffin Senior Vice President of IREIC-Asset Management Donna Urbain Principal Financial Officer with respect to Inland Land Appreciation Fund, L.P. and Vice President – Controller of IREIC Cathleen M. Hrtanek Assistant Counsel and Assistant Vice President, The Inland Real Estate Group, Inc., counsel to the Partnership

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DANIEL L. GOODWIN (age 6869) was the founder of the Inland real estate organization in May 1968 and is currently the controlling stockholder, chairman of the board and chief executive officer of The Inland Group, Inc., a holding company that was formed in July 1982. Mr. Goodwin also serves as a director or officer of entities wholly owned or controlled by The Inland Group. In addition, Mr. Goodwin has served as the chairman of the board and chief executive officer of Inland Mortgage Investment Corporation since March 1990 and chairman and chief executive officer of Inland Bancorp, Inc., a bank holding company, since January 2001. Mr. Goodwin also has served as a director of Inland Real Estate Corporation, a publicly traded real estate investment trust, since 2001, and served as its chairman of the board from 2004 to April 2008.

Housing. Mr. Goodwin is a member of the National Association of Realtors, the Illinois Association of Realtors, and was inducted into the Hall of Fame of the Chicago Association of Realtors in 2005. He is also the author of a nationally recognized real estate reference book for the management of residential properties. Mr. Goodwin served on the Board of the Illinois State Affordable Housing Trust Fund. He 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. Mr. Goodwin also founded New Directions Affordable Housing Corporation, a not for profit entity.

Education. Mr. Goodwin obtained his bachelor degree from Northeastern Illinois University and his master’s degree from Northern Illinois University. Following graduation, he taught for five years in the Chicago Public Schools. Over the past twenty years, Mr. Goodwin served as a member of the Board of Governors of Illinois State Colleges and Universities, 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 Trustees of Northeastern Illinois University.

ROBERT H. BAUM (age 6869) has been a principal of the Inland real estate organization since May 1968 and is currently the vice-chairman and executive vice-president and general counsel of The Inland Group, positions he has held since July 1982. In his capacity as general counsel, Mr. Baum is responsible for supervising the legal activities of The Inland Group and its affiliates. This includes supervising the Inland Law Department and serving as liaison with outside counsel.

Following his graduation from Northwestern University School of Law in 1967, Mr. Baum took a teaching position in the Chicago Public School System where he met the three other teaching associates who together with him became the founding principals of Inland. In 1968, he began his practice of law in Chicago with Shulman and Baum, a labor law firm. In January 1973, Mr. Baum joined Inland on a full-time basis as its General Counsel, a position he has held since that time.

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 The Private Company General Counsel Group. He has also been a guest lecturer for Northwestern University School of Law and the Illinois State Bar Association. Mr. Baum has been admitted to practice before the Supreme Court of the United States, as well as the bars of several federal courts of appeals and federal district courts and the State of Illinois. He is also an Illinois licensed real estate broker. He has served as a director of American National Bank of DuPage and Inland Bank & Trust and currently serves as a director of Inland Bancorp, Inc., a bank holding company.

Mr. Baum is a past member of the Men’s Council of the Museum of Contemporary Art in Chicago. He currently is a Governing Member of the Chicago Symphony Orchestra and is a Sponsor of the Civic Orchestra of Chicago. Mr. Baum also is a member of the Board of Directors of Wellness House, a charitable organization that helps cancer patients improve the quality of their lives by providing programs emphasizing emotional support and information as a vital complement to medical treatment, all for no charge. Mr. Baum received a bachelor degree from The University of Wisconsin and a juris doctor degree from The Northwestern University School of Law.

ROBERT D. PARKS (age 6869) has been a principal of the Inland real estate organization since May 1968 and is currently chairman of IREIC, a position he has held since November 1984. Mr. Parks has also served as a director of Inland Investment Advisors, Inc. since June 1995. Mr. Parks served as a director of Inland Securities Corporation from August 1984 until June 2009. He served as a director of Inland Real Estate Corporation from 1994 to June 2008, and served as chairman of the board from May 1994 to May 2004 and president and chief executive officer from 1994 to April

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2008. He also served as a director and chairman of the board of Inland Retail Real Estate Trust, Inc. from its inception in September 1998 to March 2006 and as chief executive officer until December 2004. Mr. Parks also has served as the chairman of the board and a director of Inland Diversified Real Estate Trust, Inc. since its inception in June 2008, chairman and director of Inland American Real Estate Trust, Inc. since its inception in October 2004 and as the chairman of the board and a director of Inland Western Retail Real Estate Trust, Inc. since its inception in March 2003. Mr. Parks is responsible for the ongoing administration of existing investment programs, corporate budgeting and administration for IREIC. He oversees and coordinates the marketing of all investments and investor relations.

He received his bachelor degree from Northeastern Illinois University, Chicago, Illinois, and his master’s degree from the University of Chicago and later taught in Chicago’s public schools. He is a member of the Real Estate Investment Association, the Financial Planning Association, the Foundation for Financial Planning and the National Association of Real Estate Investment Trusts, or “NAREIT.”

BRENDA G. GUJRAL (age 6970) serves as ~~chief executive officer and~~ a director of IREIC. ~~She~~and has served as its president ~~and~~since aFebruary ~~director~~2012 of(and ~~IREIC~~served ~~from~~in that capacity from July 1987 through June 1992. ~~She~~and ~~was~~ again ~~named~~from ~~president~~January ~~and~~1998 athrough ~~director~~January of2011). ~~IREIC~~Ms. Gujral ~~upon~~was ~~her~~appointed ~~return~~chief toexecutive officer of IREIC in January ~~1998,~~2008 ~~and served as president~~ until ~~January~~February ~~2011~~2012. She has been a director of Inland Securities Corporation since January 1997, and has served as its current president since January 2013 (and served as its president and chief operating officer from January 1997 to June 2009). ~~Additionally,~~ Ms. Gujral ~~has~~was ~~served as~~ a director of Inland ~~Investment~~Western ~~Advisors~~Retail Real Estate Trust, Inc. ~~since January 2001 and has been~~ (n/k/a Retail ~~director~~Properties of ~~Inland Western Retail Real Estate Trust~~America, Inc.) ~~since~~from its inception in March 2003, ~~serving~~until May 2012 and served as its chief executive officer from June 2005 until November 2007. Ms. Gujral ~~also~~serves ~~has~~as a director of Inland American Real Estate Trust, Inc. and served as its president since its inception in October of 2004 until December of 2011. She also serves as a director of Inland Diversified Real Estate Trust, Inc. since its inception in June 2008, and served as its president from June 2008 to May 2009. She has been the chairman of the board of Inland Private Capital Corporation (f/k/a Inland Real Estate Exchange Corporation) since May 2001 and has served as its President since May 2012. She has been a director of Inland Opportunity Business Manager & Advisor, Inc. since April 2009, and was a director of Inland Retail Real Estate Trust, Inc. from its inception in September 1998 until it was acquired in February 2007.

Ms. Gujral oversees and works closely with IREIC’s ~~president~~executive officers to administer to the daily operations of IREIC, including investor relations, regulatory compliance and filings, review of asset management activities and broker-dealer marketing and communication. Ms. Gujral works with internal and outside legal counsel in structuring IREIC’s investment programs and in connection with preparing offering documents and registering the related securities with the SEC and state securities commissions.

Ms. Gujral has been with the Inland organization for thirty ~~four~~ five years, becoming an officer in 1982. Prior to joining the Inland organization, she worked for the Land Use Planning Commission, establishing an office in Portland, Oregon, to implement land use legislation for that state. Ms. Gujral graduated from California State University. She holds Series 7, 22, 39 and 63 certifications from the Financial Industry Regulatory Authority (“FINRA”), and is a member of the National Association of Real Estate Investment Trusts (“NAREIT”), the Investment Program Association (“IPA”) and the Real Estate Investment Securities Association (“REISA”).

~~BRIAN~~CATHERINE ML. ~~CONLON~~LYNCH (age 5254) joined Inland in 1989 and has ~~served~~been asa ~~president~~director of ~~IREIC~~The Inland Group since June 2012. She serves as the treasurer and secretary (since January ~~2011~~1995), the chief financial officer (since January 2011) and asa director (since ~~February~~April 2011.) Inof ~~these~~IREIC ~~roles,~~and ~~Mr. Conlon~~as ~~oversees~~a ~~the~~director ~~company’s~~(since ~~day-to-day~~July ~~operations,~~2000) asand ~~well~~treasurer asand ~~strategic~~secretary ~~planning~~(since ~~for~~June ~~all~~1995) of Inland~~-sponsored~~ ~~investment~~Securities ~~products~~Corporation. HeMs. Lynch also ~~serves~~has served as ~~president~~a director and treasurer of Inland Investment Advisors, Inc. since June 1995, as a director and treasurer of Inland ~~Securities~~Institutional ~~Corporation~~Capital Partners, aInc. ~~wholly-owned~~since ~~subsidiary~~May 2006, and as a director of ~~IREIC.~~Inland InPrivate ~~that~~Capital ~~capacity,~~Corporation hesince ~~directs~~May ~~all~~2012. ~~capital-raising~~Ms. Lynch ~~activities~~worked ~~through~~for aKPMG ~~national~~Peat ~~team~~Marwick ofLLP ~~internal~~from ~~and~~1980 ~~external~~to ~~wholesalers~~1989. MrMs. ~~Conlon~~Lynch ~~began~~received ~~his~~her ~~career~~bachelor ~~with~~degree ~~Inland~~in accounting from Illinois State University in Normal. Ms. Lynch is a ~~September~~certified ~~1999~~public asaccountant ~~executive~~and ~~vice~~a ~~president~~member ~~for~~of ~~Inland~~the ~~Securities~~American ~~Corporation~~Institute of Certified Public Accountants and the Illinois CPA Society. Ms. Lynch also is registered with FINRA as a financial operations principal.

~~Prior~~ROBERTA toS. ~~joining~~MATLIN ~~Inland,~~(age ~~Mr. Conlon~~68) ~~served~~joined IREIC in 1984 as ~~executive vice~~director ~~president~~of ~~and~~investor ~~chief~~administration ~~operating~~and ~~officer~~currently ofserves ~~Wells~~as ~~Real~~a ~~Estate~~director ~~Funds.~~and Insenior ~~these~~vice president ~~roles~~of IREIC, hein ~~was~~the ~~responsible~~latter ~~for~~capacity ~~managing~~directing ~~the~~its day-to-day ~~operations~~internal ~~of the company’s real estate investments and capital-raising initiatives~~operations. MrMs. ~~Conlon~~Matlin ~~received~~ also has been a ~~bachelor’s~~director ~~degree~~of ~~(BBA)~~Inland ~~from~~Private ~~Georgia~~Capital ~~State~~Corporation ~~University~~since inMay ~~Atlanta~~2001, ~~Georgia,~~a ~~and~~vice apresident ~~master’s~~of ~~degree~~Inland inInstitutional ~~business~~Capital ~~administration~~Partners Corporation ~~(MBA)~~since ~~from~~May ~~the~~2006 ~~University~~and ofa ~~Dallas~~director insince ~~Dallas,~~August ~~Texas~~2012. ~~Mr. Conlon~~She also has ~~earned~~served ~~the~~as ~~Certified~~a ~~Financial~~director ~~Planner (CFP)~~ and ~~Certified~~president ~~Commercial~~of Inland Investment ~~Member~~Advisors, ~~(CCIM)~~Inc. ~~designations~~since ~~and~~June ~~holds~~1995 ~~Series 7, 24,~~ and 63Intervest ~~licenses~~Southern ~~with~~Real ~~FINRA.~~Estate Corporation

~~Mr. Conlon is a member of the Board of Directors of the IPA and currently serves on their Non~~-~~Listed REIT Committee. In addition, he serves on the Policy Subcommittee of the NAREIT Non~~30-~~Traded REIT Council and formerly served on the National Board of the Financial~~ ~~Planning Association (FPA).~~

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~~CATHERINE~~ since L.July ~~LYNCH~~1995, ~~(age~~and ~~53)~~a ~~joined~~director ~~the~~and vice president of Inland ~~organization~~Securities inCorporation ~~1989~~since ~~and~~July is1995. ~~currently~~Since ~~the chief~~December ~~financial~~2007 ~~officer~~Ms. Matlin ~~and~~has ~~secretary~~served ofas ~~IREIC~~a ~~and~~director ~~Inland~~of ~~Securities~~Pan ~~Corporation~~American Bank. Since 2008 Ms. ~~Lynch~~Matlin ~~had~~has served as ~~the~~vice ~~treasurer~~president ~~and~~of ~~secretary~~administration of ~~IREIC~~Inland ~~since~~Diversified ~~January~~Real ~~1995~~Estate Trust, Inc. and also has served as ~~treasurer~~the president of Inland Diversified Business Manager & Advisor, Inc. from June 2008 through May 2009 and ~~secretary~~is currently its vice president. She has served as president of Inland ~~Securities~~Opportunity ~~Corporation~~Business Manager & Advisor, Inc. since ~~June~~April ~~1995~~2009. She has served as vice president of administration of Inland American Real Estate Trust, Inc. since its Msinception in October 2004. ~~Lynch~~ ~~worked~~She ~~for~~served ~~KPMG~~as ~~LLP~~president of Inland American Business Manager & Advisor from ~~1980~~October to2004 ~~1989.~~until MsDecember 2011. ~~Lynch~~ ~~received~~She ~~her~~has ~~bachelor~~served ~~degree~~as invice ~~accounting~~president ~~from~~of ~~Illinois~~administration ~~State~~of ~~University~~Inland Real Estate Income Trust, ~~Normal~~Inc. and IREIT Business Manager & Advisor, ~~Illinois~~Inc. since August 2011. Ms. ~~Lynch~~Matlin isserved aas ~~certified~~vice ~~public~~president ~~accountant~~of ~~and~~administration of Inland Western Retail Real Estate Trust, Inc. (n/k/a ~~member~~Retail Properties of ~~the~~America, ~~American~~Inc.) ~~Institute~~from 2003 until 2007, vice president of ~~Certified~~administration ~~Public~~of ~~Accountants~~Inland ~~and~~Retail ~~the~~Real ~~Illinois~~Estate ~~CPA~~Trust, ~~Society~~Inc. ~~Ms. Lynch~~from ~~also~~1998 isuntil ~~registered~~2004, ~~with~~vice ~~FINRA~~president asof aadministration ~~financial~~of ~~operations~~Inland ~~principal~~Real Estate Corporation from 1995 until 2000 and trustee and executive vice president of Inland Mutual Fund Trust from 2001 until 2004.

~~ROBERTA~~Prior ~~S. MATLIN (age 67) joined IREIC in 1984 as director of investor administration and currently serves as a director and senior vice president of IREIC, in the latter capacity directing its day-~~to~~-day~~ ~~internal~~joining ~~operations. She also has served as a director and president of~~ Inland ~~Investment Advisors~~, Inc. since June 1995 and Intervest Southern Real Estate Corporation since July 1995. She served as president of Inland Securities Corporation from July 1995 to March 1997 and since July 1995 has served as a director of Inland Securities Corporation and since March 1997 has served as Inland Securities Corporation’s vice president. She has served as vice president – administration of Inland American Real Estate Trust, Inc. since its inception in October 2004. She served as president of Inland American Business Manager & Advisor, Inc. from October 2004 to January 2012. Ms. Matlin ~~served~~worked asfor ~~vice president~~the ofChicago ~~administration~~Region of ~~Inland~~the ~~Western~~Social ~~Retail~~Security ~~Real~~Administration ~~Estate Trust, Inc. from 2003 until 2007, vice president~~ of ~~administration~~the ofUnited ~~Inland~~States Department ~~Retail Real Estate Trust, Inc. from 1998 until 2004, vice president~~ of ~~administration~~Health ~~of Inland Real Estate Corporation from 1995 until 2000~~ and ~~trustee~~Human ~~and executive vice president of Inland Mutual Fund Trust from 2001 until 2004~~Services. Ms. Matlin ~~also~~is ~~has been~~ a ~~vice~~graduate ~~president~~ of ~~Inland~~the ~~Institutional~~University ~~Capital Partners Corporation since May 2006, and a director~~ of ~~Pan~~Illinois ~~American~~in ~~Bank since December 2007~~Champaign. ~~Ms. Matlin~~She isholds ~~the~~Series ~~vice~~7, ~~president~~22, of24, ~~administration of Inland Diversified Real Estate Trust~~39, ~~Inc.~~63 and ~~also~~65 ~~has~~certifications ~~served as the president of Inland Diversified Business Manager & Advisor, Inc.~~ from ~~June~~FINRA ~~2008 through May 2009~~ and is ~~currently its vice president. Since August 2011 she has been~~ a ~~vice~~member ~~president~~ of ~~Inland Monthly Income Trust, Inc~~REISA. ~~and Inland Monthly Income Business Manager & Advisor, Inc. Since April 2009 she has served as president of Inland Opportunity Business Manager & Advisor, Inc.~~

~~Prior~~GUADALUPE toGRIFFIN ~~joining~~(age ~~IREIC,~~48) ~~Ms. Matlin~~joined ~~worked~~Inland ~~for the~~in ~~Chicago~~1994. ~~Region~~Ms. Griffin ofserves ~~the~~as ~~Social~~senior ~~Security~~vice ~~Administration~~president of ~~the~~IREIC ~~United~~and ~~States~~assistant ~~Department~~vice president of ~~Health~~Inland ~~and~~Midwest ~~Human~~Investment ~~Services~~Corporation. Ms. ~~Matlin~~Griffin is aresponsible ~~graduate~~for of the ~~University~~asset ofmanagement ~~Illinois~~and inday-to-day ~~Champaign.~~operations ~~She~~of ~~holds~~the ~~Series~~public 7,and ~~22,~~private 24partnerships, 39and limited liability companies, 63which ~~and~~include 65the ~~licenses~~development ~~from~~of operating and ~~FINRA~~disposition strategies for the partnerships and isinvestor acommunications. ~~member~~Ms. Griffin also has served as vice president of ~~the~~Inland ~~Investment~~Opportunity ~~Program~~Business ~~Association~~Manager & ~~and~~Advisor, ~~the~~Inc. ~~Real~~since April 2009. Ms. Griffin holds an Illinois Real Estate ~~Securities~~Brokers ~~Association~~License.

~~GUADALUPE~~DONNA ~~GRIFFIN~~ URBAIN (age 4750) joined Inland in ~~1994.~~2002 ~~Ms. Griffin~~and ~~serves~~is asthe ~~vice~~principal ~~president~~financial ofofficer ~~IREIC~~with ~~and~~respect ~~assistant vice president of~~ to Inland ~~Midwest~~Land ~~Investment~~Appreciation ~~Corporation~~Fund, L.P. Ms. ~~Griffin~~Urbain is responsible for the ~~asset~~investment ~~management~~accounting ~~and~~department ~~day-to-day~~which ~~operations~~includes ofall ~~the~~ public ~~and~~partnership ~~private~~accounting ~~partnerships,~~functions ~~and~~along ~~limited~~with ~~liability~~quarterly ~~companies,~~and ~~which~~annual ~~include~~SEC ~~the~~filings. ~~development~~Ms. Urbain ofalso ~~operating~~serves ~~and~~as ~~disposition~~vice president ~~strategies~~– ~~for~~controller ~~the~~of ~~partnerships~~IREIC. ~~and~~Prior ~~investor~~to ~~communications.~~joining Inland, Ms. ~~Griffin~~Urbain ~~also~~worked ~~serves~~in asthe ~~vice~~field ~~president~~ of ~~Inland Opportunity~~public ~~Business~~accounting ~~Manager &~~for ~~Advisor,~~KPMG ~~Inc~~LLP. ~~since~~Ms. Urbain ~~April~~is ~~2009~~a Certified Public Accountant. MsShe received her B. ~~Griffin~~B.A. ~~holds~~in anAccounting ~~Illinois~~from ~~Real~~the ~~Estate~~University ~~Sales~~of Notre ~~License~~Dame in South Bend, Indiana.

~~DONNA~~CATHLEEN ~~URBAIN~~M. HRTANEK (age 4936) joined Inland in ~~2002~~2005 and is ~~the~~an ~~principal~~assistant ~~financial~~counsel ~~officer~~and assistant ~~with~~vice ~~respect~~president toof The Inland ~~Land~~Real ~~Appreciation~~Estate ~~Fund~~Group, LInc.P. In her capacity as assistant counsel, Ms. ~~Urbain~~Hrtanek isrepresents ~~responsible~~many ~~for~~of the ~~investment~~entities ~~accounting~~that comprise the Inland Real Estate Group of Companies on a variety of legal matters. She is also ~~department~~a ~~which~~member ~~includes~~of the audit committee for all public ~~partnership~~partnerships ~~accounting~~sponsored ~~functions~~by ~~along~~IREIC. ~~with~~Ms. Hrtanek ~~quarterly~~also ~~and~~has ~~annual~~served ~~SEC~~as ~~filings~~the secretary of Inland Diversified Real Estate Trust, Inc. Msand Inland Diversified Business Manager & Advisor, Inc. since September 2008, as the secretary of Inland Opportunity Business Manager ~~Urbain~~& ~~also~~Advisor, ~~serves~~Inc. since April 2009, as ~~vice~~the ~~president~~secretary –of ~~controller~~Inland Private Capital Corporation (f/k/a Inland Real Estate Exchange Corporation) since August 2009, and as the secretary of ~~IREIC~~Inland Monthly Income Trust, Inc. and Inland Monthly Income Business Manager & Advisor since August 2011. Prior to joining Inland, Ms. ~~Urbain~~Hrtanek ~~worked~~had inbeen ~~the~~employed ~~field of~~by ~~public~~Wildman ~~accounting~~Harrold ~~for~~Allen & ~~KPMG~~Dixon LLP in Chicago, Illinois since September 2001. Ms. ~~Urbain~~Hrtanek has been admitted to practice law in the State of Illinois and is a ~~Certified~~licensed ~~Public~~real ~~Accountant~~estate broker. ~~She~~Ms. Hrtanek received her ~~B.B.A.~~bachelor indegree ~~Accounting~~ from the University of Notre Dame in South Bend, Indiana and her law degree from Loyola University of Chicago School of Law.

CATHLEEN M. HRTANEK (age 35) joined Inland in 2005 and is an assistant counsel and assistant vice president of The Inland Real Estate Group, Inc. In her capacity as assistant counsel, Ms. Hrtanek represents many of the entities that comprise the Inland Real Estate Group of Companies on a variety of legal matters. She is also a member of the audit committee for all public partnerships sponsored by IREIC. Ms. Hrtanek also has served as the secretary of Inland Diversified Real Estate Trust, Inc. and Inland Diversified Business Manager & Advisor, Inc. since September 2008, as the secretary of Inland Opportunity Business Manager & Advisor, Inc. since April 2009, as the secretary of Inland Private Capital Corporation (f/k/a Inland Real Estate Exchange Corporation) since August 2009, and as the secretary of Inland Monthly Income Trust, Inc. and Inland Monthly Income Business Manager & Advisor, Inc. since August 2011. Prior to joining Inland, Ms. Hrtanek had been employed by Wildman Harrold Allen & Dixon LLP in Chicago, Illinois since September 2001. Ms. Hrtanek has been admitted to practice law in the State of Illinois and is a licensed real estate broker.

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Ms. Hrtanek received her bachelor degree from the University of Notre Dame in South Bend, Indiana and her law degree from Loyola University of Chicago School of Law.

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.

Item 11.

Executive Compensation

We do not have any employees, and none of our executive officers receives any compensation from us. Accordingly, we hired no compensation consultants.

~~Our~~-31- general partner is entitled to receive a share of cash distributions of net sales proceeds based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.

Our general partner is entitled to receive a share of cash distributions of net sales proceeds based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us. In 2012, our general partner received distributions of $590,000.

Our partnership agreement prescribes the allocation of profits and losses, and the distribution priorities of 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 and receive a special allocation of expenses in a like amount.

Profits and losses from operations (other than capital transactions) will be allocated 99% to the limited partners and 1% to the general partner. The net gain from a sale of 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.

We are permitted to engage in various transactions involving affiliates of our general partner, as described below.

Our general partner and its affiliates may be reimbursed for their expenses or out-34of-pocket costs relating to our administration (as set forth under terms of the partnership agreement). For the year ended December 31, 2012, such costs included in general and administrative expenses to affiliates and professional services to affiliates were $60,554 of which $17,079 was unpaid as of December 31, 2012.

An affiliate of the general partner performs marketing and advertising services for us and is reimbursed (as set forth under terms of the partnership agreement) for direct costs. For the year ended December 31, 2012, we incurred $502 of such costs, all of which was paid as of December 31, 2012.

An affiliate of the general partner performs land improvements, rezoning, annexation and other activities to prepare our investment properties for sale and is reimbursed for salaries and direct costs. For the year ended December 31, 2012, we incurred $215 of such costs. The affiliate does not recognize a profit on any project. Such costs are included in investment properties, all of which was paid as of December 31, 2012.

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~~Our~~As ~~general partner and its affiliates may be reimbursed for their expenses or out-~~of~~-pocket~~ ~~costs relating to our administration (as set forth under terms of the partnership agreement). For the year ended~~ December 31, ~~2011~~2012, ~~such~~the ~~costs~~Partnership ~~included~~held inall ~~general~~cash and ~~administrative~~cash ~~expenses~~equivalents towith ~~affiliates~~Inland Bank and ~~professional services to affiliates were $41~~Trust,~~562~~ ofan ~~which~~affiliate ~~$5,566 was unpaid as~~ of ~~December 31,~~the ~~2011~~general partner.

An affiliate of the general partner performs marketing and advertising services for us and is reimbursed (as set forth under terms of the partnership agreement) for direct costs. For the year ended December 31, 2011, we incurred $318 of such costs, all of which was paid as of December 31, 2011.

As of December 31, 2011, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the general partner.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We do not maintain any equity compensation plans.

(a) No person or group is known by us to ~~own~~ beneficially own 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:


Title of Class	Amount and Nature of Beneficial Ownership		Percent of Class

Limited partnership units		170 Units, directly		Less than 1	%

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 to us, the operation of which may at a subsequent date result in a change in our control.

Item 13.

Certain Relationships and Related Transactions

We do not currently have written, formal policies and procedures for the review, approval or ratification of transactions with related persons, as defined by Item 404 of the SEC Regulation S-K. Our policies, however, contain provisions setting forth an ability to engage in certain transactions. Our audit committee reviews all of these transactions as well as any related party transactions.

There were no significant transactions or business relationships with the general partner, its affiliates or their management other than those described in Item 7 (Transactions with Related Parties) above. Reference is made to Note 34 of the Notes to Financial Statements (Item 8 of this Annual Report) for information regarding related party transactions.

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Item 14.

Principal Accounting Fees and Services

Fees. Aggregate fees for professional services rendered by our principal accountant, Grant Thornton, LLP were as follows:

	Years ended December 31,
	2011		2010
	2012		2011
Audit fees for professional services rendered for the audit of our annual financial statements and quarterly reviews of our financial statements.	$	4546,~~690~~515		45,~~224~~690

Our audit committee has reviewed and approved all of the fees charged by Grant Thornton and actively monitors the relationship between audit and non-audit services provided by Grant Thornton. The audit committee concluded that all services rendered by Grant Thornton during the years ended December 31, ~~2011~~2012 and ~~2010~~2011, respectively, were consistent with maintaining Grant Thornton’s independence.

~~In addition, the audit committee must pre~~-~~approve all services provided by the company’s~~33- independent registered public accounting firm and the fees charged for these services including an annual review of audit fees, audit related fees, tax fees and other fees with specific dollar value limits for each category of service.

In addition, the audit committee must pre-approve all services provided by the company’s independent registered public accounting firm and the fees charged for these services including an annual review of audit fees, audit related fees, tax fees and other fees with specific dollar value limits for each category of service.

PART IV

Item 15.

Exhibits and Financial Statement Schedules

(a) The financial statements listed in the index at page 1516 of this annual report are filed as part of this annual report.

(b)	Exhibits. The following exhibits are incorporated herein by reference:

3		Restated Certificate of Limited Partnership and amended and restated Agreement of Limited Partnership, included as Exhibits A and B to the Registration Statement on Form S-11, filed with the SEC on October 12, 1988 as amended, are incorporated herein by reference thereto.
4		Form of Certificate of Ownership representing interests in the registrant filed as Exhibits 4(a) and 4(b) to Registration Statement on Form S-11, File No. 33-18607, is incorporated herein by reference thereto.
10.1		Vacant Land Purchase and Sale Contract (re: Inland Land Appreciation Fund, L.P. Parcel 25), by and between Inland Land Appreciation Fund, L.P. and Gerard F. Schiele Trust, dated August 9, 2012, included as Exhibit 10.1 to Form 10-Q filed on November 2, 2012, is 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
101		The following financial information from our Annual Report on Form 10-K for the year ended December 31, ~~2011~~2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Partners’ Capital, (iv) the Statements of Cash Flows and (v) related notes ~~(tagged as blocks of text)~~. This information is furnished but should not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

(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.

No annual report or proxy material for the year ~~2011~~2012 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.

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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, L.P.

By:		Inland Real Estate Investment Corporation
Its:		General Partner
/s/ BRENDA G. GUJRAL
By:		Brenda G. Gujral
Its:		Principal Executive Officer
Date:		March 97, ~~2012~~2013

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
Its:		General Partner
/s/ BRENDA G. GUJRAL
By:		Brenda G. Gujral
Its:		~~Chief~~President and Director and Principal Executive Officer ~~and~~with ~~Director~~respect to Inland Land Appreciation Fund, L.P.
Date:		March 97, ~~2012~~2013
/s/ GUADALUPE GRIFFIN
By:		Guadalupe Griffin
Its:		Senior Vice President
Date:		March 97, ~~2012~~2013
/s/ DONNA URBAIN
By:		Donna Urbain
Its:		Principal Financial Officer with respect to Inland Land Appreciation Fund, L.P.
Date:		March 97, ~~2012~~2013
/s/ ROBERT D. PARKS
By:		Robert D. Parks
Its:		Chairman
Date:		March 97, ~~2012~~2013
/s/ DANIEL L. GOODWIN
By:		Daniel L. Goodwin
Its:		Director
Date:		March 97, ~~2012~~2013

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