##### Table of Contents





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, 2010



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

COMMISSION FILE NUMBER: 0-19220





Inland Land
Appreciation Fund II, L.P.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 36-3664407                          
|(State or other jurisdiction 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

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   ̈    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.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

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.









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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

TABLE OF CONTENTS



|           |  |                                                                                                                                            |  |      |    |  |  | 
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- |  |  | 
|           |  |                                                                                                                                            |  | Page |   
|           |  | Part I                                                                                                                                     |  |      |    | 
|Item 1.    |  | Business                                                                                                                                   |  |      | 3  | 
|           |  |                                                                                                                                           
|Item 1(A). |  | Risk Factors                                                                                                                               |  |      | 4  | 
|           |  |                                                                                                                                           
|Item 1(B). |  | Unresolved Staff Comments                                                                                                                  |  |      | 6  | 
|           |  |                                                                                                                                           
|Item 2.    |  | Properties                                                                                                                                 |  |      | 7  | 
|           |  |                                                                                                                                           
|Item 3.    |  | Legal Proceedings                                                                                                                          |  |      | 9  | 
|           |  |                                                                                                                                           
|Item 4.    |  | RESERVED                                                                                                                                   |  |      | 10 | 
|           |  |                                                                                                                                           
|           |  | Part II                                                                                                                                    |  |      |    | 
|           |  |                                                                                                                                           
|Item 5.    |  | Market for Partnerships Limited Partnership Units, Related Security Holder Matters and Partnership
Purchases of Limited Partnership Units |  |      | 11 | 
|           |  |                                                                                                                                           
|Item 6.    |  | Selected Financial Data                                                                                                                    |  |      | 11 | 
|           |  |                                                                                                                                           
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                                                      |  |      | 12 | 
|           |  |                                                                                                                                           
|Item 7(A). |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                 |  |      | 18 | 
|           |  |                                                                                                                                           
|Item 8.    |  | Financial Statements and Supplementary Data                                                                                                |  |      | 19 | 
|           |  |                                                                                                                                           
|Item 9.    |  | Changes in and Disagreements with Independent Auditors on Accounting and Financial Disclosure                                              |  |      | 38 | 
|           |  |                                                                                                                                           
|Item 9(A). |  | Controls and Procedures                                                                                                                    |  |      | 38 | 
|           |  |                                                                                                                                           
|Item 9(B). |  | Other Information                                                                                                                          |  |      | 38 | 
|           |  |                                                                                                                                           
|           |  | Part III                                                                                                                                   |  |      |    | 
|           |  |                                                                                                                                           
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                                                     |  |      | 39 | 
|           |  |                                                                                                                                           
|Item 11.   |  | Executive Compensation                                                                                                                     |  |      | 43 | 
|           |  |                                                                                                                                           
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                                             |  |      | 44 | 
|           |  |                                                                                                                                           
|Item 13.   |  | Certain Relationships and Related Transactions                                                                                             |  |      | 44 | 
|           |  |                                                                                                                                           
|Item 14.   |  | Principal Accounting Fees and Services                                                                                                     |  |      | 45 | 
|           |  |                                                                                                                                           
|           |  | Part IV                                                                                                                                    |  |      |    | 
|           |  |                                                                                                                                           
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                                                 |  |      | 45 | 
|           |  |                                                                                                                                           
|           |  | SIGNATURES                                                                                                                                 |  |      | 46 | 



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PART I



|Item 1. | Business
|------- | --------

Inland Land Appreciation Fund
II, L.P. was formed on June 28, 1989, to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 25, 1989, we commenced an offering of 30,000 (subject to an increase to 60,000) 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. On October 24, 1991, we terminated our offering of units, after we sold 50,476.17 units, at $1,000 per unit,
resulting in $50,476,170 in gross offering proceeds, not including our general partners capital contribution of $500. All of the holders of our units were admitted to our partnership. Inland Real Estate Investment Corporation is our general
partner. 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, 2010, we had repurchased a total of 408.65 units for $383,822 from
various limited partners through the unit repurchase program.

We purchased on an all-cash basis, 27 parcels of undeveloped land and two
buildings and are engaged in the rezoning and resale of the parcels. On September 16, 2002, we completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28). 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, 2010, we have had multiple sales transactions, disposing of approximately
3,568 acres of the approximately 4,530 acres originally owned. We continue to market the remaining acres for sale.

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.

During the year ended December 31, 2010, we received net sales proceeds of $301,321 from the sale of nine improved residential lots which equates to
approximately 1.7 acres of Parcel 3/27. We have retained the net sales proceeds to support our continuing operations. Parcel 3/27 consists of two contiguous parcels which are being jointly developed as two residential subdivisions. Each subdivision
lies within the boundaries of both parcels. A third-party builder has entered into a contract for the residential portions of this parcel. While we anticipate additional sales of the remaining acreage of Parcel 3/27 through 2012, there can be no
assurance that any sales will be completed or that a distribution will be made to the limited partners. If sales occur net sales proceeds will be used to fund our current and future operations, including land improvements. We will evaluate our cash
needs throughout the year to determine any future distributions.

Parcel 18 has been zoned and planned for residential use. The townhome
portion was sold in a single transaction to a third party purchaser. The residential lots and duplex lots were under separate contract on a take-out basis with a single third-party builder. The builder has fulfilled its obligations for the duplex
lots pursuant to the terms of the contract.

Due to the severe slow down in new home starts and the abundance of competing inventory within
these communities, the builders who had contracts for the remaining residential lots of Parcels 3/27 and 18 did not fulfill their take-out obligation for the balance of the residential lots. Pursuant to the terms of the contracts, the builders were
given the required notice of default and an opportunity to cure such default within a specified period of time. The cure period expired January 11, 2009, the builders right to purchase lots under the contracts was terminated, and the
earnest money deposits held in escrow of $208,463 were remitted to us in 2009 and are included in other operating income in 2009.

We plan to
enhance the value of our remaining land through pre-development activities such as rezoning, annexation and land planning. We have already been successful in, or are in the process of, pre-development activity on several of our land investments.
Parcel 20 has been granted rezoning which will permit additional land to be used for development.

We continue to closely monitor the real
estate market trends, especially within the areas where our remaining parcels are located. Currently, the depressed real estate market, coupled with the troubled financial markets, continue to adversely impact sales activity, especially sales of
vacant land and residential lots. We realize it could take some time for these current trends to improve which could result in an even longer holding period. However, we believe we have taken the



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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 and real estate taxes. Our remaining land is not encumbered by mortgage debt and is located in areas that we believe are in the paths of future development.

We had no employees during 2010. 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.

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 customer relations 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 care of our
partnership at 2901 Butterfield Road, Oak Brook, IL 60523.



|Item 1(A). | Risk Factors
|---------- | ------------

Real Estate Market

Currently, the depressed real estate market, coupled with the troubled financial markets, continue to adversely impact sales activity,
especially sales of vacant land and residential lots, as developers continue to dispose of excess inventories and have difficulty in obtaining financing for new projects. Therefore, it could take some time for these current trends to improve 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 will 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. 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.



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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.

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 estate taxes). 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 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 II, 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 2010. 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 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 our partnership agreement and Treasury Regulation Section 1.7704-1(j)). 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
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.



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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.



|Item 1(B). | Unresolved Staff Comments
|---------- | -------------------------

Not
applicable.



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|Item 2. | Properties
|------- | ----------

We acquired fee ownership of
the following real property investments:



|                                      |  |                           |  |                |          |  |                     |                   
|------------------------------------- |  | ------------------------- |  | -------------- | -------- |  | ------------------- | ------------------
|Parcel & Location                     |  | Gross AcresPurchased/Sold |  | RemainingAcres |          |  | Purchase/Sales
Date
|Parcel 1, McHenry County, Illinois    |  | 372.7590                  |  |                |         |  |                     | 04/25/90          
|                                      |  | (372.7590                 |  |                |          |  |                     | sold 02/23/04)    
|                                      |  |                           | 
|Parcel 2, Kendall County, Illinois    |  | 41.1180                   |  |                |         |  |                     | 07/06/90          
|                                      |  | (3.473                    |  |                |          |  |                     | sold 08/29/03)    
|                                      |  | (37.645                   |  |                |          |  |                     | sold 02/17/05)    
|                                      |  |                           | 
|Parcel 3/27, Kendall County, Illinois |  | 120.8170                  |  |                | 10.8328  |  |                     | 11/06/90          
|                                      |  | 83.525                    |  |                |          |  |                     | 03/11/93          
|                                      |  | (3.3900                   |  |                |          |  |                     | sold 05/17/05)    
|                                      |  | (31.0000                  |  |                |          |  |                     | sold 07/14/05)    
|                                      |  | (74.7000                  |  |                |          |  |                     | sold various 2006)
|                                      |  | (36.85                    |  |                |          |  |                     | sold various 2007)
|                                      |  | (6.6000                   |  |                |          |  |                     | sold various 2008)
|                                      |  | (36.1262                  |  |                |          |  |                     | conveyed 2009)    
|                                      |  | (1.723                    |  |                |          |  |                     | sold 06/25/10)    
|                                      |  | (3.12                     |  |                |          |  |                     | conveyed 12/28/10)
|                                      |  |                           | 
|Parcel 4, Kendall County, Illinois    |  | 299.0250                  |  |                | 299.0250 |  |                     | 06/28/91          
|                                      |  |                           | 
|Parcel 5, Kane County, Illinois       |  | 189.0468                  |  |                |         |  |                     | 02/28/91          
|                                      |  | (189.0468                 |  |                |          |  |                     | sold 05/16/01)    
|                                      |  |                           | 
|Parcel 6, Lake County, Illinois       |  | 57.3345                   |  |                |         |  |                     | 04/16/91          
|                                      |  | (.2580                    |  |                |          |  |                     | sold 10/01/94)    
|                                      |  | (57.0765                  |  |                |          |  |                     | sold 03/22/07)    
|                                      |  |                           | 
|Parcel 7, McHenry County, Illinois    |  | 56.7094                   |  |                |         |  |                     | 04/22/91          
|                                      |  | (12.6506                  |  |                |          |  |                     | sold various 1997)
|                                      |  | (15.7041                  |  |                |          |  |                     | sold various 1998)
|                                      |  | (19.6296                  |  |                |          |  |                     | sold various 1999)
|                                      |  | (8.7251                   |  |                |          |  |                     | sold various 2000)
|                                      |  |                           | 
|Parcel 8, Kane County, Illinois       |  | 325.3940                  |  |                | 181.5240 |  |                     | 06/14/91          
|                                      |  | (.8700                    |  |                |          |  |                     | sold 04/03/96)    
|                                      |  | (63.0000                  |  |                |          |  |                     | sold 01/23/01)    
|                                      |  | (80.0000                  |  |                |          |  |                     | sold 05/11/04)    
|                                      |  |                           | 
|Parcel 9, Will County, Illinois       |  | 9.8670                    |  |                |         |  |                     | 08/13/91          
|                                      |  | (9.8670                   |  |                |          |  |                     | *09/16/02)        
|                                      |  |                           | 
|Parcel 10, Will County, Illinois      |  | 150.6600                  |  |                |         |  |                     | 08/20/91          
|                                      |  | (150.6600                 |  |                |          |  |                     | sold 01/10/05)    
|                                      |  |                           | 
|Parcel 11, Will County, Illinois      |  | 138.4470                  |  |                |         |  |                     | 08/20/91          
|                                      |  | (138.4470                 |  |                |          |  |                     | sold 05/03/93)    
|                                      |  |                           | 
|Parcel 12, Will County, Illinois      |  | 44.7320                   |  |                |         |  |                     | 08/20/91          
|                                      |  | (44.7320                  |  |                |          |  |                     | *09/16/02)        



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|                                             |  |                           |  |                |          |  |                     |                   
|-------------------------------------------- |  | ------------------------- |  | -------------- | -------- |  | ------------------- | ------------------
|Parcel & Location                            |  | Gross AcresPurchased/Sold |  | RemainingAcres |          |  | Purchase/Sales
Date
|Parcel 13, Will County, Illinois             |  | 6.3420                    |  |                |         |  |                     | 09/23/91          
|                                             |  | (6.3420                   |  |                |          |  |                     | sold 05/03/93)    
|                                             |  |                           | 
|Parcel 14, Kendall County, Illinois          |  | 44.4030                   |  |                |         |  |                     | 09/03/91          
|                                             |  | (15.3920                  |  |                |          |  |                     | sold 04/16/01)    
|                                             |  | (14.2110                  |  |                |          |  |                     | sold various 2002)
|                                             |  | (13.6000                  |  |                |          |  |                     | sold 04/11/03)    
|                                             |  | (1.2000                   |  |                |          |  |                     | sold 02/19/04)    
|                                             |  |                           | 
|Parcel 15, Kendall County, Illinois          |  | 100.3640                  |  |                |         |  |                     | 09/04/91          
|                                             |  | (5.0000                   |  |                |          |  |                     | sold 09/01/93)    
|                                             |  | (11.0000                  |  |                |          |  |                     | sold 12/01/94)    
|                                             |  | (84.3640                  |  |                |          |  |                     | sold 08/14/98)    
|                                             |  |                           | 
|Parcel 16, McHenry County, Illinois          |  | 168.9050                  |  |                |         |  |                     | 09/13/91          
|                                             |  | (168.9050                 |  |                |          |  |                     | sold 08/03/01)    
|                                             |  |                           | 
|Parcel 17, Kendall County, Illinois          |  | 3.4620                    |  |                |         |  |                     | 10/30/91          
|                                             |  | (2.1130                   |  |                |          |  |                     | sold 03/06/01)    
|                                             |  | (1.3490                   |  |                |          |  |                     | sold 08/23/02)    
|                                             |  |                           | 
|Parcel 18, McHenry County, Illinois          |  | 139.1697                  |  |                | 19.4600  |  |                     | 11/07/91          
|                                             |  | (9.2500                   |  |                |          |  |                     | sold various 2004)
|                                             |  | (33.3197                  |  |                |          |  |                     | sold various 2005)
|                                             |  | (62.0200                  |  |                |          |  |                     | sold various 2006)
|                                             |  | (12.8800                  |  |                |          |  |                     | sold various 2007)
|                                             |  | (2.2400                   |  |                |          |  |                     | sold various 2008)
|                                             |  |                           | 
|Parcel 19, Kane County, Illinois             |  | 436.2360                  |  |                |         |  |                     | 12/13/91          
|                                             |  | (436.2360                 |  |                |          |  |                     | sold 05/16/01)    
|                                             |  |                           | 
|Parcel 20, Kane & Kendall Counties, Illinois |  | 400.1290                  |  |                | 371.9910 |  |                     | 01/31/92          
|                                             |  | (21.1380                  |  |                |          |  |                     | sold 06/30/99)    
|                                             |  | (7.0000                   |  |                |          |  |                     | conveyed 2008)    
|                                             |  |                           | 
|Parcel 21, Kendall County, Illinois          |  | 15.0130                   |  |                |         |  |                     | 05/26/92          
|                                             |  | (1.0000                   |  |                |          |  |                     | sold 03/16/99)    
|                                             |  | (14.0130                  |  |                |          |  |                     | sold 09/06/06)    
|                                             |  |                           | 
|Parcel 22, Kendall County, Illinois          |  | 391.9590                  |  |                | 28.9960  |  |                     | 10/30/92          
|                                             |  | (10.0000                  |  |                |          |  |                     | sold 01/06/94)    
|                                             |  | (5.5380                   |  |                |          |  |                     | sold 01/05/96)    
|                                             |  | (2.4000                   |  |                |          |  |                     | sold 07/27/99)    
|                                             |  | (73.3950                  |  |                |          |  |                     | sold various 2001)
|                                             |  | (136.0000                 |  |                |          |  |                     | sold 08/14/02)    
|                                             |  | (34.1400                  |  |                |          |  |                     | sold 05/27/03)    
|                                             |  | (101.4900                 |  |                |          |  |                     | sold various 2004)
|                                             |  |                           | 
|Parcel 23, Kendall County, Illinois          |  | 133.4750                  |  |                |         |  |                     | 10/30/92          
|                                             |  | (.2676                    |  |                |          |  |                     | sold 03/16/93)    
|                                             |  | (11.5250                  |  |                |          |  |                     | donated 07/16/93) 
|                                             |  | (44.0700                  |  |                |          |  |                     | sold various 1995)
|                                             |  | (8.2500                   |  |                |          |  |                     | sold various 1996)
|                                             |  | (2.6100                   |  |                |          |  |                     | sold various 1997)



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|                                    |  |                           |  |                |         |  |                     |                   
|----------------------------------- |  | ------------------------- |  | -------------- | ------- |  | ------------------- | ------------------
|Parcel & Location                   |  | Gross AcresPurchased/Sold |  | RemainingAcres |         |  | Purchase/Sales
Date
|                                    |  | (10.6624                  |  |                |         |  |                     | sold various 1998)
|                                    |  | (5.8752                   |  |                |         |  |                     | sold various 1999)
|                                    |  | (49.0120                  |  |                |         |  |                     | sold various 2000)
|                                    |  | (.2028                    |  |                |         |  |                     | sold various 2001)
|                                    |  | (1.0000                   |  |                |         |  |                     | sold various 2002)
|                                    |  |                           | 
|Parcel 24, Kendall County, Illinois |  | 4.3140                    |  |                |        |  |                     | 01/21/93          
|                                    |  | (4.3140                   |  |                |         |  |                     | sold 04/16/01)    
|                                    |  |                           | 
|Parcel 25, Kendall County, Illinois |  | 656.6870                  |  |                |        |  |                     | 01/28/93          
|                                    |  | (656.6870                 |  |                |         |  |                     | sold 10/31/95)    
|                                    |  |                           | 
|Parcel 26, Kane County, Illinois    |  | 89.5110                   |  |                |        |  |                     | 03/10/93          
|                                    |  | (2.1080                   |  |                |         |  |                     | sold 12/03/99)    
|                                    |  | (34.2550                  |  |                |         |  |                     | sold various 2000)
|                                    |  | (7.8000                   |  |                |         |  |                     | sold various 2001)
|                                    |  | (29.1200                  |  |                |         |  |                     | sold various 2002)
|                                    |  | (11.3100                  |  |                |         |  |                     | sold various 2003)
|                                    |  | (4.9180                   |  |                |         |  |                     | sold 01/28/04)    
|                                    |  |                           | 
|Parcel 28, Kendall County, Illinois |  | 50.0000                   |  |                | 50.0000 |  |                     | *09/16/02         



|* | On September 16, 2002, we completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28).
|- | ---------------------------------------------------------------------------------------------------------------------------

Our general partner anticipates that the land we acquired will produce sufficient income to pay 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 the 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, 2010, our land has generated sufficient revenues from leasing to cover real estate taxes and insurance expense.



|Item 3. | Legal Proceedings
|------- | -----------------

During the first quarter of 2009, the General Partner received notice that William Ryan Homes, Inc. (Ryan), the
homebuilder for Parcel 18, filed suit against the City of Woodstock (Woodstock) and ILAFII#XVIII, LLC, our wholly-owned subsidiary that owns that property, in the Circuit Court for the 22ndJudicial District in McHenry County, Illinois. The complaint seeks
damages for alleged breach of a warranty which Ryan claims caused water seepage. The complaint claims that a total of seven lots have been the subject of water seepage complaints. Ryan also claims that the seepage issues have caused Woodstock to
issue a stop work order causing Ryan additional damage. Woodstock filed a Motion to Dismiss the complaint as it relates to Woodstock only and on October 13, 2009, Woodstocks motion was granted on the grounds that Ryan had failed to
properly exhaust its administrative remedies. The Partnerships subsidiary appeared and filed a Motion to Dismiss which was denied by the court on January 22, 2010. The Partnerships subsidiary filed its Answer and Affirmative
Defenses on February 17, 2010 denying liability for the alleged damages. The case has been continued to March 14, 2011 for status, however, on February 23, 2011, Ryan and the Partnerships subsidiary entered into a
Settlement Agreement regarding this matter. Pursuant to such Settlement Agreement, on March 2, 2011, the Partnership paid Ryan approximately $34,000 and in return received one lot (comprised of .219 acres) of Parcel 18.



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On or about April 8, 2010, we received notification from the attorneys for the Village of Elburn that
in effect demanded completion of certain land improvements. The Partnership is a co-indemnitor of the subdivision bonds that secure completion of the land improvements on Parcels 5 and 19 of the Blackberry Subdivision in Elburn, Il. On
April 22, 2010, the Partnership received notice from the bonding companies demanding completion and satisfaction of such obligations. Based on information provided by the bonding companies, the Partnership is estimating that the maximum balance
of the outstanding bonds and related fees is approximately $4.3 million; however, we believe the actual costs of the remaining improvements of the subdivision are far less than the outstanding bond amounts. We have met with a representative of the
bonding companies who has requested a complete list of remaining improvements being requested by the Village of Elburn. At this time, it is not possible to determine what, if any, liability will be asserted against the Partnership or the materiality
of any outcome.



|Item 4. | RESERVED
|------- | --------



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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 8, 2011, there were 4,183 holders of our units. There is no public market for units nor is it
anticipated that any public market for units will develop.

For the years ended December 31, 2010 and 2009, we paid the following
distribution to the Illinois Department of Revenue on behalf of the nonresident partners in order to comply with the Illinois income tax withholding requirements for nonresident partners:



|                 |  |      |   |  |      |  |       | 
|---------------- |  | ---- | - |  | ---- |  | ----- | 
|Distribution to: |  | 2010 |   |  | 2009 | 
|General partner  |  | $    |  |  |      |  |      | 
|Limited partners |  |      |  |  |      |  | 1,178 | 
|                 |  |      |   |  |      |  |       | 
|                 |  |     
|Total            |  | $    |  |  |      |  | 1,178 | 
|                 |  |      |   |  |      |  |       | 



|Item 6. | Selected Financial Data
|------- | -----------------------

Not applicable



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|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 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 and mortgage loans receivable 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. 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, 2010, we have not recorded any such
impairment. For the year ended December 31, 2009, we recorded an impairment loss of $1,397,000 in regards to Parcel 3/27 and Parcel 18. Subsequent costs incurred above the estimated fair value for Parcels 3/27 and 18 and for any other parcels
that may be deemed to be impaired will be expensed and included in land operating expenses.

Cost Allocation - We use the area method
of cost allocation, which approximates the relative sales 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.



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Valuation of Mortgage Loan Receivable - On a quarterly basis, we conduct an analysis to determine
whether the carrying value of each mortgage loan receivable is recoverable from the obligor. If we determine that all or a portion of the receivable is not collectible, we would be required to record an allowance for doubtful accounts equal to the
amount estimated to be uncollectible.

In determining the value of the mortgage loan receivable, management considers projected sales proceeds
available and expenses related to the property associated with the mortgage. Should the actual results differ from managements judgment, the valuation could be negatively or positively affected.

The valuation and possible subsequent allowance for doubtful accounts is a significant estimate that can and does change based on managements
continuous process of analyzing each mortgage loan receivable. During 2009, the partnership evaluated the mortgage loan receivable and determined that an allowance for doubtful accounts of $8,918,412 for the remaining principal was needed. As of
December 31, 2010, the mortgage loan receivable remains fully reserved.

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.

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
on the statements of operations as discontinued operations for all periods presented.

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, 2010, we have not classified any properties as held for sale.

Liquidity and Capital
Resources

On October 25, 1989, we commenced an offering of 30,000 (subject to increase to 60,000) limited partnership units or units
pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. On October 24, 1991, we terminated our offering of units, with total sales of 50,476.17 units, at $1,000 per unit, resulting in $50,476,170 in gross offering
proceeds, not including the general partners capital contribution of $500. All of the holders of these units were admitted to the partnership. Our limited partners share in their portion of benefits of ownership of our real property
investments according to the number of units held.

We used $41,314,301 of gross offering proceeds to purchase, on an all-cash basis, 27
parcels of undeveloped land and two buildings. These investments include the payment of the purchase price, acquisition fees and acquisition costs of such properties. Three of the parcels were purchased during 1990, sixteen during 1991, four during
1992, and four during 1993. On September 16, 2002, we completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28). Through December 31, 2010, we have had multiple sales, exchange transactions and
conveyances, disposing of the buildings and approximately 3,568 acres of the approximately 4,530 acres originally owned. Through December 31, 2010, cumulative distributions have totaled $90,332,012 to the limited partners which is equivalent to
179% of the original capital raised which was $50,476,170 and $13,313,195 to the general partner. Of the $90,332,012 distributed to the limited partners, $89,611,012 was net sales proceeds and $721,000 was from operations. Through December 31,
2010, we have used $47,329,256 of working capital for rezoning and other activities. Such amounts have been capitalized 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



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municipality, changes in real estate taxes affecting our land, and the amount of revenue received from leasing. As of December 31, 2010, we own, in whole or in part, seven 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. We continue to market the remaining acres for sale.

At December 31, 2010, we had cash and cash equivalents of $2,119,222 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 the year ended December 31, 2010, we received
net sales proceeds of $301,321 from the sale of nine improved residential lots which equates to approximately 1.7 acres of Parcel 3/27. During the fourth quarter of 2010, three acres of park land were conveyed to the Fox Valley Park district which
was required upon the acceptance of the improvements for Parcel 3/27. During the fourth quarter of 2009, required land conveyances were finalized for Parcel 3/27 to the Kendall County Forest Preserve. Other prior conveyances include the subdivision
roadways to the Village of Montgomery. Parcel 3/27 consists of two contiguous parcels which are being jointly developed as two residential subdivisions. Each subdivision lies within the boundaries of both parcels. Currently a third-party builder has
entered into a contract for the residential portions of this parcel. While we anticipate future additional sales of the remaining acreage of Parcel 3/27 through 2012, there can be no assurance that any sales will be completed or that a distribution
will be made to the limited partners. Undistributed net sales proceeds will be used to fund our operations, including land improvements. We will evaluate our cash needs throughout the year to determine any future distributions.

Parcel 18 has been zoned and planned for residential use. The townhome portion was sold in a single transaction to a third party purchaser. The
residential lots and duplex lots were under separate contract on a take-out basis with a single third-party builder. The builder has fulfilled its obligations for the duplex lots pursuant to the terms of the contract.

Due to the severe slow down in new home starts and the abundance of competing inventory within these communities, the builders who had contracts for the
remaining residential lots of Parcels 3/27 and 18 did not fulfill their take-out obligation for the balance of the residential lots. Pursuant to the terms of the contracts, the builders were given the required notice of default and an opportunity to
cure such default within a specified period of time. The cure period expired January 11, 2009, the builders right to purchase lots under the contracts was terminated, and the earnest money deposits held in escrow of $208,463 were remitted
to us in 2009 and are included in other operating income in 2009.

We plan to enhance the value of our remaining land through pre-development
activities such as rezoning, annexation and land planning. We have already been successful in, or are in the process of, pre-development activity on several of our land investments. Parcel 20 has been granted rezoning which will permit additional
land to be used for development.

We continue to closely monitor the real estate market trends, especially within the areas where our
remaining parcels are located. Currently, the depressed real estate market, coupled with the troubled financial markets, continue to adversely impact sales activity, especially sales of vacant land and residential lots. We realize it could take some
time for these current trends to improve which could result in an even longer holding period. However, 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 located in areas that we believe are in
the paths of future development.

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 $93,624
and $97,623 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2010 and 2009, respectively, of which $8,780 and $23,086 was unpaid as of December 31,
2010 and 2009, respectively.

An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for
direct costs. Such costs of $10,966 and $21,484 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2010 and 2009, respectively, of which $1,286 and $2,100 was unpaid as of December 31,
2010 and 2009, respectively.



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An affiliate of our general partner performed land improvements, rezoning, annexation and other activities
to prepare our investment properties for sale and was reimbursed for salaries and direct costs. For the years ended December 31, 2010 and 2009, we incurred $9,746 and $20,232, respectively, of such costs. Such costs are included in investment
properties, of which $2,241 and $3,000 was unpaid as of December 31, 2010 and 2009, respectively. In addition, the costs related to Parcels 3/27 and 18 totaled $27,004 and $43,982 for the years ended December 31, 2010 and 2009,
respectively, and is included in land operating expenses to affiliates, of which $7,333 and $8,000 was unpaid as of December 31, 2010 and 2009, respectively. The affiliate did not recognize a profit on any project.

As of December 31, 2010 and 2009, the Partnership had invested in a money market account with Inland Bank and Trust, an affiliate of the general
partner.

Results of Operations

During the year ended December 31, 2010, we received net sales proceeds of $301,321 from the sale of nine improved residential lots which equates to
approximately 1.7 acres of Parcel 3/27. During the fourth quarter of 2010, three acres of park land were conveyed to the Fox Valley Park district which was required upon the acceptance of the improvements for Parcel 3/27. During the fourth quarter
of 2009, required land conveyances were finalized for Parcel 3/27 to the Kendall County Forest Preserve. Other prior conveyances include the subdivision roadways to the Village of Montgomery. Parcel 3/27 consists of two contiguous parcels which are
being jointly developed as two residential subdivisions. Each subdivision lies within the boundaries of both parcels. Currently a third-party builder has entered into a contract for the residential portions of this parcel. While we anticipate future
additional sales of the remaining acreage of Parcel 3/27 through 2012, there can be no assurance that any sales will be completed or that a distribution will be made to the limited partners. Undistributed net sales proceeds will be used to fund our
operations, including land improvements. We will evaluate our cash needs throughout the year to determine any future distributions.

During
2001, we sold 189 acres of Parcel 5 and 436 acres of Parcel 19 for $17,500,000 and recorded deferred gain of $10,203,634. We received a deferred down payment note in the amount of $1,500,000, due December 31, 2001. The note had an interest rate
of 6%, however the note provided for the interest to be waived if the principal was paid in full by December 1, 2001. We received payment of the deferred down payment note on December 1, 2001 and recognized $875,923 of deferred gain. We
also received an installment note in the amount of $16,000,000 at the time of closing. The installment note matures July 1, 2011 and has an interest rate of 6%. During the first quarter of 2008, the homebuilder who is the borrower under the
mortgage loan notified us that it was experiencing a slowdown in sales contracts for new homes. As a result, we agreed to temporarily suspend the 6% interest due on the mortgage receivable and applied payments received during 2008 toward principal.
During the second quarter of 2008, based on the available information, we determined that the full collectability of the mortgage receivable was doubtful. As a result, we elected to reserve $3,923,062 of principal. In addition, $2,296,818 of the
deferred gain relating to the mortgage receivable was also reserved and recorded against bad debt expense during 2008. During the nine months ended September 30, 2009, we received principal payments totaling $2,400 and recognized deferred gain
of $1,405. During the third quarter of 2009, based on the available information, we determined that the collectability of the remaining mortgage receivable was doubtful. The mortgage receivable is subordinate to a first mortgage held by an
unaffiliated lender. The holder of the first mortgage filed a complaint of foreclosure during September 2009. We filed our answer and counterclaim to the complaint to preserve our interest in the foreclosure on March 18, 2010. The holder of the
first mortgage has filed for summary judgment and we filed a response to that motion on August 24, 2010. The case has been continued until March 16, 2011. Since it is unlikely that the remaining value of the property secured by the
mortgage receivable is in excess of the remaining balance due under the first mortgage, we elected to reserve the remaining $4,995,350 of principal as of September 30, 2009. In addition, the deferred gain of $2,913,192 relating to the mortgage
receivable was also reserved and recorded against bad debt expense resulting in bad debt expense of $2,082,158 for the nine months ended September 30, 2009. Effective January 1, 2009, accrual of the 6% interest due on the mortgage
receivable resumed, however, we determined that the collectability of the interest is doubtful. Since we have only received minimal payments from the borrower since January 2008, we are not accruing interest on the financial statements. We will
continue to monitor the activity associated with the mortgage receivable and the related interest.

As of December 31, 2010, we owned
seven parcels of land consisting of approximately 962 acres. Of the approximately 962 acres owned, 721 acres are tillable, leased to local farmers and generate sufficient cash flow to cover real estate taxes and insurance. Rental income was $159,455
and $116,785 for the years ended December 31, 2010 and 2009, respectively. The rental income for 2010 increased due to an increase in farm rental rates as a result of engaging the services of a



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company experienced in modern farm management and negotiating cash farm leases in an effort to achieve the maximum farm income possible. The 2011 farm leases for our tillable land were negotiated
and fully executed within the first quarter of 2011.

Other operating income was $71,000 and $220,113 for the years ended December 31,
2010 and 2009, respectively. During the year ended December 31, 2010, we received a $71,000 reimbursement from an unused development cost escrow related to a previously sold parcel. During the year ended December 31, 2009, we received
$208,463 in earnest money deposits held in escrow, as a result of the default on the three separate contracts with the builders for Parcels 3/27 and 18.

Professional services to affiliates and non-affiliates were $166,864 and $165,365 for the years ended December 31, 2010 and 2009, respectively. Professional services include primarily fees paid for
legal and accounting services. The legal fees for 2010 and 2009 include fees related to the on-going legal matters for the foreclosure proceedings related to the installment note discussed above, the Parcel 18 William Ryan homebuilder suit, and the
legal matter related to the subdivision bonds for Parcels 5 and 19.

General and administrative expenses to affiliates and non-affiliates were
$46,722 and $45,694 for the years ended December 31, 2010 and 2009, respectively. General and administrative expenses primarily include data processing costs, postage, and printing expenses. General and administrative expenses to affiliates and
non-affiliates increased due primarily to the first time fee incurred for a farm management company. The farm management company is experienced in modern farm management and in negotiating cash farm leases to achieve the maximum farm income
possible.

Marketing expenses to affiliates and non-affiliates were $10,966 and $26,997 for the years ended December 31, 2010 and 2009,
respectively. Marketing expenses to affiliates and non-affiliates are costs incurred for preparing and marketing parcels for sale. The decrease for 2010 is due to less advertising costs and less marketing fees as a response to the slowdown in real
estate sales.

Land operating expenses to affiliates and non-affiliates were $230,871 and $754,395 for the years ended December 31, 2010
and 2009, respectively. These costs primarily include real estate tax expense, ground maintenance expense, the Partnerships proportionate share of the homeowners association fees, and insurance expense on the parcels owned. The decrease in
2010 is due primarily to a decrease in grounds maintenance expenses for Parcels 3/27 and 18. During 2009 there were additional expenses necessary in order to remain in compliance with municipal codes regarding erosion control and landscaping
requirements on the remaining unsold residential lots of Parcels 3/27 and 18. In addition, the Village of Montgomery has accepted the public improvements for the residential subdivision associated with Parcel 3/27 and therefore has become
responsible for such costs, and consequently the homeowners association assessments have decreased significantly for 2010.

Interest income
was $27,972 and $9,273 for the years ended December 31, 2010 and 2009, respectively. Interest income is primarily a result of the cash available to invest on a short term basis during the year as a result of sales proceeds received. During the
first three quarters of 2009, cash was invested in commercial paper while during the year ended December 31, 2010, cash was invested in a money market account earning higher interest rates.

Other income was $16,293 and $18,450 for the years ended December 31, 2010 and 2009, respectively. The decrease in 2010 is due to less transfer fee
income as a result of a reduced number of completed transfers.

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 from sales of our properties is first allocated among the partners in proportion to the negative balances, if any, in their respective capital accounts.
Thereafter, except as provided below, net gain is allocated to the general partner in an amount equal to the proceeds distributed to the general partner from such sale and the balance of



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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
aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.

As a general
rule, net sale proceeds will be distributed 90% to the limited partners and 10% to the general partner until the limited partners have received from net sale proceeds (i) a return of their original capital plus (ii) a noncompounded
cumulative preferred return of 15% of their invested capital. However, with respect to each parcel of land, the general partners 10% share will be subordinated until the limited partners receive a return of the original capital attributed to
such parcel (parcel capital) plus a 6% per annum noncompounded cumulative preferred return thereon.

After the amounts
described in items (i) and (ii) above and any previously subordinated distributions to the general partner have been paid, and the amount of any supplemental capital contributions have been repaid to the general partner, subsequent
distributions shall be paid 75% to the limited partners and 25% to the general partner without considering parcel capital. If, after all net sale proceeds have been distributed, the general partner has received more than 25% of all net sale proceeds
(exclusive of distributions made to the limited partners to return their original capital), the general partner shall contribute to us for distribution to the limited partners an amount equal to such excess.

Any distributions from net sales proceeds at a time when invested capital is greater than zero shall be deemed applied first to reduction of such
invested capital before application to payment of any deficiency in the 15% cumulative preferred return.

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.

As discussed in the legal proceedings above, on February 23, 2011, the
parties involved in the William Ryan homebuilder suit involving Parcel 18 entered into a Settlement Agreement. Pursuant to such Settlement Agreement, on March 2, 2011 the Partnership paid the homebuilder approximately $34,000 and in return
received one lot (comprised of .219 acres) of Parcel 18.

For the year ended December 31, 2010, there are no other subsequent events.

Other Items

In accordance with
Article XVI Section 16.1 of the Inland Land Appreciation Fund II, 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 2010. 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 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.



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The Illinois Department of Revenue has finalized regulations regarding Illinois income tax withholding
requirements for nonresident partners. The withholding requirements were effective for the taxable years ending on or after December 31, 2008. For the taxable years ending December 31, 2010 and 2009, respectively, there were no
withholdings required. Payment of the required withholding amount of $1,167 for the taxable year ended December 31, 2008 was made to the Illinois Department of Revenue during March 2009. 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. During March 2009, we paid $11
to the Internal Revenue Service on behalf of foreign partners.

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

None

Litigation

During the
first quarter of 2009, the General Partner received notice that William Ryan Homes, Inc. (Ryan), the homebuilder for Parcel 18, filed suit against the City of Woodstock (Woodstock) and ILAFII#XVIII, LLC, our wholly-owned
subsidiary that owns that property, in the Circuit Court for the 22ndJudicial District in McHenry County, Illinois. The complaint seeks damages for alleged breach of a warranty which Ryan claims caused water seepage. The complaint claims that a total of seven lots have
been the subject of water seepage complaints. Ryan also claims that the seepage issues have caused Woodstock to issue a stop work order causing Ryan additional damage. Woodstock filed a Motion to Dismiss the complaint as it relates to Woodstock only
and on October 13, 2009, Woodstocks motion was granted on the grounds that Ryan had failed to properly exhaust its administrative remedies. The Partnerships subsidiary appeared and filed a Motion to Dismiss which was denied by
the court on January 22, 2010. The Partnerships subsidiary filed its Answer and Affirmative Defenses on February 17, 2010 denying liability for the alleged damages. The case has been continued to March 14, 2011 for status,
however, on February 23, 2011, Ryan and the Partnerships subsidiary entered into a Settlement Agreement regarding this matter. Pursuant to such Settlement Agreement, on March 2, 2011, the Partnership paid Ryan approximately
$34,000 and in return received one lot (comprised of .219 acres) of Parcel 18.

On or about April 8, 2010, we received notification from
the attorneys for the Village of Elburn that in effect demanded completion of certain land improvements. The Partnership is a co-indemnitor of the subdivision bonds that secure completion of the land improvements on Parcels 5 and 19 of the
Blackberry Subdivision in Elburn, Il. On April 22, 2010, the Partnership received notice from the bonding companies demanding completion and satisfaction of such obligations. Based on information provided by the bonding companies, we estimate
that the maximum balance of the outstanding bonds and related fees is approximately $4.3 million; however, we believe the actual costs of the remaining improvements of the subdivision are far less than the outstanding bond amounts. We have met with
a representative of the bonding companies who has requested a complete list of remaining improvements being requested by the Village of Elburn. At this time, it is not possible to determine what, if any, liability will be asserted against the
Partnership or the materiality of any outcome.



|Item 7(A). | Quantitative and Qualitative Disclosures About Market Risk
|---------- | ----------------------------------------------------------

Not Applicable



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Index



|                                                                                |  |      |    | 
|------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                |  | Page |   
|                                                                                | 
|Report of Independent Registered Public Accounting Firm                         |  |      | 20 | 
|                                                                                | 
|Financial Statements:                                                           |  |      |    | 
|                                                                                | 
|Balance Sheets, December 31, 2010 and 2009                                      |  |      | 21 | 
|                                                                                | 
|Statements of Operations, for the years ended December 31, 2010 and 2009        |  |      | 23 | 
|                                                                                | 
|Statements of Partners Capital, for the years ended December 31, 2010 and
2009 |  |      | 24 | 
|                                                                                | 
|Statements of Cash Flows, for the years ended December 31, 2010 and 2009        |  |      | 25 | 
|                                                                                | 
|Notes to Financial Statements                                                   |  |      | 26 | 

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.



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Partners of

Inland Land Appreciation
Fund II, L.P.

We have audited the accompanying balance sheets of Inland Land Appreciation Fund II, L.P. (a limited partnership) (the
Partnership) as of December 31, 2010 and 2009, and the related statements of operations, partners capital, and cash flows for the years then ended. The financial statements are the responsibility of the Partnerships
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and 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 II, L.P. as of December 31, 2010 and 2009, 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 9, 2011



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Balance Sheets

December 31, 2010 and 2009

Assets



|                                                                                                                                                     |  |      |            |  |      |  |            | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- |  | ---- |  | ---------- | 
|                                                                                                                                                     |  | 2010 |            |  | 2009 | 
|Current assets:                                                                                                                                      |  |      |            |  |      |  |            | 
|Cash and cash equivalents (Note 1)                                                                                                                   |  | $    | 2,119,222  |  |      |  | 2,336,902  | 
|                                                                                                                                                     |  |      |            |  |      |  |            | 
|                                                                                                                                                     |  |     
|Total current assets                                                                                                                                 |  |      | 2,119,222  |  |      |  | 2,336,902  | 
|                                                                                                                                                     |  |      |            |  |      |  |            | 
|                                                                                                                                                     |  |     
|Mortgage loan receivable (net of allowance for doubtful accounts of $8,918,412 at December 31, 2010 and 2009) (Note
6)                               |  |      |           |  |      |  |           | 
|Investment properties (including acquisition fees paid to affiliates of $366,275 and $369,560 at December 31, 2010 and 2009,
respectively) (Note 4): |  |      |            |  |      |  |            | 
|Land and improvements                                                                                                                                |  |      | 18,155,770 |  |      |  | 18,349,922 | 
|                                                                                                                                                     |  |      |            |  |      |  |            | 
|                                                                                                                                                     |  |     
|Total assets                                                                                                                                         |  | $    | 20,274,992 |  |      |  | 20,686,824 | 
|                                                                                                                                                     |  |      |            |  |      |  |            | 

See accompanying notes to financial statements.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Balance Sheets

(continued)



December 31, 2010 and 2009

Liabilities and Partners Capital



|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ----------- | -
|                                                                                                                                                                                    |  | 2010 |             |   | 2009 | 
|                                                                                                                                                                                    |  |     
|Current liabilities:                                                                                                                                                                |  |      |             |   |      |  |             |  
|Accounts payable                                                                                                                                                                    |  | $    | 27,368      |   |      |  | 232,423     |  
|Accrued real estate taxes                                                                                                                                                           |  |      | 35,615      |   |      |  | 40,464      |  
|Due to affiliates (Note 3)                                                                                                                                                          |  |      | 19,640      |   |      |  | 36,186      |  
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|                                                                                                                                                                                    |  |     
|Total current liabilities                                                                                                                                                           |  |      | 82,623      |   |      |  | 309,073     |  
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|                                                                                                                                                                                    |  |     
|Partners capital:                                                                                                                                                                  |  |      |             |   |      |  |             |  
|General Partner:                                                                                                                                                                    |  |      |             |   |      |  |             |  
|Capital contribution                                                                                                                                                                |  |      | 500         |   |      |  | 500         |  
|Cumulative net income                                                                                                                                                               |  |      | 13,689,294  |   |      |  | 13,691,101  |  
|Cumulative cash distributions                                                                                                                                                       |  |      | (13,313,195 | ) |      |  | (13,313,195 | )
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|                                                                                                                                                                                    |  |     
|                                                                                                                                                                                    |  |      | 376,599     |   |      |  | 378,406     |  
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|Limited Partners:                                                                                                                                                                   |  |      |             |   |      |  |             |  
|Units of $1,000. Authorized 60,000 Units, 50,068 Units outstanding at December 31, 2010 and 2009, (net of offering costs of
$7,532,439, of which $2,535,445 was paid to affiliates) |  |      | 42,559,909  |   |      |  | 42,559,909  |  
|Cumulative net income                                                                                                                                                               |  |      | 67,587,873  |   |      |  | 67,771,448  |  
|Cumulative cash distributions                                                                                                                                                       |  |      | (90,332,012 | ) |      |  | (90,332,012 | )
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|                                                                                                                                                                                    |  |     
|                                                                                                                                                                                    |  |      | 19,815,770  |   |      |  | 19,999,345  |  
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|                                                                                                                                                                                    |  |     
|Total Partners capital                                                                                                                                                             |  |      | 20,192,369  |   |      |  | 20,377,751  |  
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  
|                                                                                                                                                                                    |  |     
|Total liabilities and Partners capital                                                                                                                                             |  | $    | 20,274,992  |   |      |  | 20,686,824  |  
|                                                                                                                                                                                    |  |      |             |   |      |  |             |  

See accompanying notes to financial statements.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Statements of Operations

For the years ended December 31, 2010 and 2009



|                                                                                                                                                       |  |      |          |   |      |  |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -------- | - | ---- |  | ---------- | -
|                                                                                                                                                       |  | 2010 |          |   | 2009 | 
|Revenues:                                                                                                                                              |  |      |          |   |      |  |            |  
|Sale of investment properties (Notes 1 and 4)                                                                                                          |  | $    | 301,321  |   |      |  |           |  
|Deferred gain recognized (Note 6)                                                                                                                      |  |      |         |   |      |  | 1,405      |  
|Rental income (Note 5)                                                                                                                                 |  |      | 159,455  |   |      |  | 116,785    |  
|Other operating income                                                                                                                                 |  |      | 71,000   |   |      |  | 220,113    |  
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Total revenues                                                                                                                                         |  |      | 531,776  |   |      |  | 338,303    |  
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Expenses:                                                                                                                                              |  |      |          |   |      |  |            |  
|Cost of investment properties sold                                                                                                                     |  |      | 306,000  |   |      |  |           |  
|Professional services to affiliates                                                                                                                    |  |      | 80,412   |   |      |  | 84,117     |  
|Professional services to non-affiliates                                                                                                                |  |      | 86,452   |   |      |  | 81,248     |  
|General and administrative expenses to affiliates                                                                                                      |  |      | 13,212   |   |      |  | 13,506     |  
|General and administrative expenses to non-affiliates                                                                                                  |  |      | 33,510   |   |      |  | 32,188     |  
|Marketing expenses to affiliates                                                                                                                       |  |      | 10,966   |   |      |  | 21,484     |  
|Marketing expenses to non-affiliates                                                                                                                   |  |      |         |   |      |  | 5,513      |  
|Land operating expenses to affiliates                                                                                                                  |  |      | 27,004   |   |      |  | 43,982     |  
|Land operating expenses to non-affiliates                                                                                                              |  |      | 203,867  |   |      |  | 710,413    |  
|Bad debt expense                                                                                                                                       |  |      |         |   |      |  | 2,082,158  |  
|Impairment loss on land                                                                                                                                |  |      |         |   |      |  | 1,397,000  |  
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Total expenses                                                                                                                                         |  |      | 761,423  |   |      |  | 4,471,609  |  
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Operating loss                                                                                                                                         |  |      | (229,647 | ) |      |  | (4,133,306 | )
|                                                                                                                                                       |  |     
|Interest income                                                                                                                                        |  |      | 27,972   |   |      |  | 9,273      |  
|Other income                                                                                                                                           |  |      | 16,293   |   |      |  | 18,450     |  
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Net loss                                                                                                                                               |  | $    | (185,382 | ) |      |  | (4,105,583 | )
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Net loss allocated to (Note 2):                                                                                                                        |  |      |          |   |      |  |            |  
|General Partner                                                                                                                                        |  | $    | (1,807   | ) |      |  | (6,278     | )
|Limited Partners                                                                                                                                       |  |      | (183,575 | ) |      |  | (4,099,305 | )
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Net loss                                                                                                                                               |  | $    | (185,382 | ) |      |  | (4,105,583 | )
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Net loss allocated to the one General Partner Unit                                                                                                     |  | $    | (1,807   | ) |      |  | (6,278     | )
|                                                                                                                                                       |  |      |          |   |      |  |            |  
|                                                                                                                                                       |  |     
|Net loss per Unit allocated to Limited Partners per weighted average Limited Partnership Units (50,068 for the years ended
December 31, 2010 and 2009) |  | $    | (3.67    | ) |      |  | (81.87     | )
|                                                                                                                                                       |  |      |          |   |      |  |            |  

See accompanying notes to financial statements.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Statements of Partners Capital

For the years ended December 31, 2010
and 2009



|                                         |  |                |         |   |                 |  |            |       |  |  |            |  
|---------------------------------------- |  | -------------- | ------- | - | --------------- |  | ---------- | ----- |  |  | ---------- | -
|                                         |  | GeneralPartner |         |   | LimitedPartners |  |            | Total | 
|                                         |  |                |        
|Balance at January 1, 2009               |  | $              | 384,684 |   |                 |  | 24,099,828 |       |  |  | 24,484,512 |  
|                                         |  |                |        
|Distribution to Partners (Notes 1 and 2) |  |                |        |   |                 |  | (1,178     | )     |  |  | (1,178     | )
|Net loss (Note 2)                        |  |                | (6,278  | ) |                 |  | (4,099,305 | )     |  |  | (4,105,583 | )
|                                         |  |                |         |   |                 |  |            |       |  |  |            |  
|                                         |  |                |        
|Balance at December 31, 2009             |  | $              | 378,406 |   |                 |  | 19,999,345 |       |  |  | 20,377,751 |  
|                                         |  |                |         |   |                 |  |            |       |  |  |            |  
|                                         |  |                |        
|Net loss (Note 2)                        |  |                | (1,807  | ) |                 |  | (183,575   | )     |  |  | (185,382   | )
|                                         |  |                |         |   |                 |  |            |       |  |  |            |  
|                                         |  |                |        
|Balance at December 31, 2010             |  | $              | 376,599 |   |                 |  | 19,815,770 |       |  |  | 20,192,369 |  
|                                         |  |                |         |   |                 |  |            |       |  |  |            |  

See accompanying notes to financial statements.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Statements of Cash Flows

For the years ended December 31, 2010 and 2009



|                                                                            |  |      |           |   |      |  |            |  
|--------------------------------------------------------------------------- |  | ---- | --------- | - | ---- |  | ---------- | -
|                                                                            |  | 2010 |           |   | 2009 | 
|                                                                            |  |     
|Cash flows from operating activities:                                       |  |      |           |   |      |  |            |  
|Net loss                                                                    |  | $    | (185,382  | ) |      |  | (4,105,583 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |           |   |      |  |            |  
|Bad debt expense                                                            |  |      |          |   |      |  | 2,082,158  |  
|Loss on sale of investment properties                                       |  |      | 4,679     |   |      |  |           |  
|Deferred gain recognized                                                    |  |      |          |   |      |  | (1,405     | )
|Impairment loss on land                                                     |  |      |          |   |      |  | 1,397,000  |  
|Changes in assets and liabilities:                                          |  |      |           |   |      |  |            |  
|Accounts and accrued interest receivable                                    |  |      |          |   |      |  |           |  
|Other current assets                                                        |  |      |          |   |      |  | 3,342      |  
|Accounts payable                                                            |  |      | (205,055  | ) |      |  | (227,611   | )
|Accrued real estate taxes                                                   |  |      | (4,849    | ) |      |  | (8,409     | )
|Due to affiliates                                                           |  |      | (16,546   | ) |      |  | 12,069     |  
|                                                                            |  |      |           |   |      |  |            |  
|                                                                            |  |     
|Net cash flow used in operating activities                                  |  |      | (407,153  | ) |      |  | (848,439   | )
|                                                                            |  |      |           |   |      |  |            |  
|                                                                            |  |     
|Cash flows from investing activities:                                       |  |      |           |   |      |  |            |  
|Principal payments collected on mortgage loan receivable                    |  |      |          |   |      |  | 2,400      |  
|Additions to investment properties                                          |  |      | (111,848  | ) |      |  | (952,915   | )
|Proceeds from sale of investment properties                                 |  |      | 301,321   |   |      |  |           |  
|                                                                            |  |      |           |   |      |  |            |  
|                                                                            |  |     
|Net cash flow provided by (used in) investing activities                    |  |      | 189,473   |   |      |  | (950,515   | )
|                                                                            |  |      |           |   |      |  |            |  
|                                                                            |  |     
|Cash flows from financing activities:                                       |  |      |           |   |      |  |            |  
|Cash distribution                                                           |  |      |          |   |      |  | (1,178     | )
|                                                                            |  |      |           |   |      |  |            |  
|                                                                            |  |     
|Net cash flow used in financing activities                                  |  |      |          |   |      |  | (1,178     | )
|                                                                            |  |      |           |   |      |  |            |  
|                                                                            |  |     
|Net decrease in cash and cash equivalents                                   |  |      | (217,680  | ) |      |  | (1,800,132 | )
|Cash and cash equivalents at beginning of year                              |  |      | 2,336,902 |   |      |  | 4,137,034  |  
|                                                                            |  |      |           |   |      |  |            |  
|                                                                            |  |     
|Cash and cash equivalents at end of year                                    |  | $    | 2,119,222 |   |      |  | 2,336,902  |  
|                                                                            |  |      |           |   |      |  |            |  

See accompanying notes to financial statements.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

For the years ended December 31, 2010 and 2009

(1) Organization and Basis of Accounting

Inland Land Appreciation Fund II, L.P. (the Partnership) is a limited partnership formed on June 28, 1989, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in
undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 25, 1989, the Partnership commenced an Offering of 30,000 (subject to increase to 60,000) Limited Partnership Units (Units) pursuant
to a Registration Statement on Form S-11 under the Securities Act of 1933. The Amended and Restated Agreement of Limited Partnership (the Partnership Agreement) provides for Inland Real Estate Investment Corporation to be the General
Partner. On October 24, 1991, the Partnership terminated its Offering of Units, with total sales of 50,476.17 Units, at $1,000 per Unit, resulting in $50,476,170 in gross offering proceeds, not including the General Partners capital
contribution of $500. All of the holders of these Units have been admitted to the Partnership. Through December 31, 2010, the Partnership had repurchased a total of 408.65 Units for $383,822 from various Limited Partners through the Unit
Repurchase Program. Under this program, Limited Partners could, under certain circumstances, have their Units repurchased for an amount equal to their Invested Capital.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Offering costs have been offset against the Limited Partners capital accounts.

The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents and are carried at cost,
which approximates market. The Partnership maintains our cash and cash equivalents at financial institutions. The combined account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation
(FDIC) insurance coverage of $250,000 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 institutions 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 for the
purchase of parcels. 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.

For vacant land parcels and parcels with insignificant buildings and improvements, the Partnership uses the area method of allocation, which approximates
the relative sales method of allocation, whereby a per acre price is used as the standard allocation method for land purchases and sales. The total cost of the parcel is divided by the total number of acres to arrive at a per acre price. Repair 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.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



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 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.

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 and assessment of current economic conditions. 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 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:



|                                      |  |       |            |   |             |  |            |       |  |  |             |   |  |  |            |  
|------------------------------------- |  | ----- | ---------- | - | ----------- |  | ---------- | ----- |  |  | ----------- | - |  |  | ---------- | -
|                                      |  | 2010  |            |   | 2009        | 
|                                      |  | GAAP  |            |   | Tax Basis   |  |            | GAAP  |  |  | Tax Basis   |  
|                                      |  | Basis |            |   | (unaudited) |  |            | Basis |  |  | (unaudited) |  
|                                      |  |       |            |  
|Total assets                          |  | $     | 20,274,992 |   |             |  | 27,807,432 |       |  |  | 20,686,824  |   |  |  | 28,219,264 |  
|                                      |  |       |            |  
|Partners capital:                    |  |       |            |   |             |  |            |       |  |  |             |   |  |  |            |  
|General Partner                       |  |       | 376,599    |   |             |  | 195,191    |       |  |  | 378,406     |   |  |  | 196,996    |  
|Limited Partners                      |  |       | 19,815,770 |   |             |  | 27,529,621 |       |  |  | 19,999,345  |   |  |  | 27,713,197 |  
|                                      |  |       |            |  
|Net loss allocated:                   |  |       |            |   |             |  |            |       |  |  |             |   |  |  |            |  
|General Partner                       |  |       | (1,807     | ) |             |  | (1,660     | )     |  |  | (6,278      | ) |  |  | (5,689     | )
|Limited Partners                      |  |       | (183,575   | ) |             |  | (399,778   | )     |  |  | (4,099,305  | ) |  |  | (562,001   | )
|                                      |  |       |            |  
|Net loss per Limited Partnership Unit |  |       | (3.67      | ) |             |  | (7.98      | )     |  |  | (81.87      | ) |  |  | (11.22     | )

The net loss per Unit is based upon the
weighted average number of Units of 50,068 during 2010 and 2009.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, 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 Sale Proceeds will be allocated between the General Partner and the Limited Partners based upon both an aggregate overall return to the Limited Partners and a separate return with
respect to each parcel of land purchased by the Partnership.

As a general rule, Net Sale Proceeds will be distributed 90% to the Limited
Partners and 10% to the General Partner until the Limited Partners have received from Net Sale Proceeds (i) a return of their Original Capital plus (ii) a noncompounded Cumulative Preferred Return of 15% of their Invested Capital. However,
with respect to each parcel of land, the General Partners 10% share will be subordinated until the Limited Partners receive a return of the Original Capital attributed to such parcel (Parcel Capital) plus a 6% per annum
noncompounded Cumulative Preferred Return thereon.

After the amounts described in items (i) and (ii) above and any previously
subordinated distributions to the General Partner have been paid, and the amount of any Supplemental Capital Contributions have been repaid to the General Partner, subsequent distributions shall be paid 75% to the Limited Partners and 25% to the
General Partner without considering Parcel Capital. If, after all Net Sale Proceeds have been distributed, the General Partner has received more than 25% of all Net Sale Proceeds (exclusive of distributions made to the Limited Partners to return
their Original Capital), the General Partner shall contribute to the Partnership for distribution to the Limited Partners an amount equal to such excess.

Any distributions from Net Sales Proceeds at a time when Invested Capital is greater than zero shall be deemed applied first to the reduction of such Invested Capital before application to payment of any
deficiency in the 15% Cumulative Preferred Return.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



(3) Transactions with Affiliates

The General Partner and its affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its affiliates relating to the administration of the Partnership.
Such costs of $93,624 and $97,623 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2010 and 2009, respectively, of which $8,780 and $23,086 was unpaid as
of December 31, 2010 and 2009, respectively.

An affiliate of the General Partner performed marketing and advertising services for the
Partnership and was reimbursed (as set forth under terms of the Partnership Agreement) for direct costs. Such costs of $10,966 and $21,484 have been incurred and are included in marketing expenses to affiliates for the years ended December 31,
2010 and 2009, respectively, of which $1,286 and $2,100 was unpaid as of December 31, 2010 and 2009, respectively.

An affiliate of the
General Partner performed land improvements, rezoning, annexation and other activities to prepare the Partnerships investment properties for sale and was reimbursed (as set forth under terms of the Partnership Agreement) for salaries and
direct costs. For the years ended December 31, 2010 and 2009, the Partnership incurred $9,746 and $20,232, respectively, of such costs. Such costs are included in investment properties, of which $2,241 and $3,000 was unpaid as of
December 31, 2010 and 2009, respectively. In addition, the costs related to Parcels 3/27 and 18 totaled $27,004 and $43,982 for the years ended December 31, 2010 and 2009 and are included in land operating expenses to affiliates, of which
$7,333 and $8,000 was unpaid as of December 31, 2010 and 2009, respectively. The affiliate did not recognize a profit on any project.

As
of December 31, 2010 and 2009, the Partnership had invested in a money market account with Inland Bank and Trust, an affiliate of the General Partner.



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



(4) Investment properties



|         |  |                |  |                           |           |   |                    |  |          |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|-------- |  | -------------- |  | ------------------------- | --------- | - | ------------------ |  | -------- | ------------- |  | - | ----------------------------------------- |  |  | -------------------- | ------- |  | ---------------------------------------- |  | --------- | --------------------------------- |  |  | --------- |  |  |  | ---------- |  |  |  | --------- |  |  |  | ------ | -
|Parcel # |  | IllinoisCounty |  | GrossAcresPurchased(Sold) |           |   | Purchase/SalesDate |  |          | Initial Costs |  |   | CostsCapitalizedSubsequent 
toAcquisition |  |  | Costs ofPropertySold |         |  | TotalRemainingCosts ofParcels
at12/31/10 |  |           | CurrentYear Losson
SaleRecognized | 
|         |  |                |  | OriginalCosts             |           |   | AcquisitionCosts   |  |          | TotalCosts    |  |   |                                           |  | 
|1        |  | McHenry        |  |                           | 372.7590  |   |                    |  | 04/25/90 |               |  | $ | 2,114,295                                 |  |  |                      | 114,070 |  |                                          |  | 2,228,365 |                                   |  |  | 630,703   |  |  |  | 2,859,068  |  |  |  |          |  |  |  |       |  
|         |  |                |  |                           | (372.7590 | ) |                    |  | 02/23/04 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|2        |  | Kendall        |  |                           | 41.1180   |   |                    |  | 07/06/90 |               |  |   | 549,639                                   |  |  |                      | 43,889  |  |                                          |  | 593,528   |                                   |  |  | 75,199    |  |  |  | 668,727    |  |  |  |          |  |  |  |       |  
|         |  |                |  |                           | (3.4730   | ) |                    |  | 08/29/03 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (37.6450  | ) |                    |  | 02/17/05 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|3/27(d)  |  | Kendall        |  |                           | 120.8170  |   |                    |  | 11/06/90 |               |  |   | 2,591,268                                 |  |  |                      | 156,709 |  |                                          |  | 2,747,977 |                                   |  |  | 9,880,850 |  |  |  | 10,690,827 |  |  |  | 1,938,000 |  |  |  | (4,679 | )
|         |  |                |  |                           | 83.5250   |   |                    |  | 03/11/93 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (3.3900   | ) |                    |  | 05/17/05 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (31.0000  | ) |                    |  | 07/14/05 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (74.7000  | ) |                    |  | Var 2006 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (36.8500  | ) |                    |  | Var 2007 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (6.6000   | ) |                    |  | Var 2008 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (36.1262  | ) |                    |  | Var 2009 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (1.7230   | ) |                    |  | 06/25/10 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (3.12     | ) |                    |  | 12/28/10 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|4        |  | Kendall        |  |                           | 299.0250  |   |                    |  | 06/28/91 |               |  |   | 1,442,059                                 |  |  |                      | 77,804  |  |                                          |  | 1,519,863 |                                   |  |  | 532,601   |  |  |  |           |  |  |  | 2,052,464 |  |  |  |       |  
|         |  |                |  |                           |           |   |                    |  |          |              
|5        |  | Kane           |  |                           | 189.0468  |   |                    |  | 02/28/91 |               |  |   | 1,954,629                                 |  |  |                      | 94,569  |  |                                          |  | 2,049,198 |                                   |  |  | 349,845   |  |  |  | 2,399,043  |  |  |  |          |  |  |  |       |  
|         |  |                |  |                           | (189.0468 | ) |                    |  | 05/16/01 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|6        |  | Lake           |  |                           | 57.3345   |   |                    |  | 04/16/91 |               |  |   | 904,337                                   |  |  |                      | 71,199  |  |                                          |  | 975,536   |                                   |  |  | 55,628    |  |  |  | 1,031,164  |  |  |  |          |  |  |  |       |  
|         |  |                |  |                           | (.2580    | ) |                    |  | 10/01/94 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (57.0765  | ) |                    |  | 03/22/07 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|7        |  | McHenry        |  |                           | 56.7094   |   |                    |  | 04/22/91 |               |  |   | 680,513                                   |  |  |                      | 44,444  |  |                                          |  | 724,957   |                                   |  |  | 3,210,451 |  |  |  | 3,935,408  |  |  |  |          |  |  |  |       |  
|         |  |                |  |                           | (12.6506  | ) |                    |  | Var 1997 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (15.7041  | ) |                    |  | Var 1998 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (19.6296  | ) |                    |  | Var 1999 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (8.7251   | ) |                    |  | Var 2000 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|8        |  | Kane           |  |                           | 325.3940  |   |                    |  | 06/14/91 |               |  |   | 3,496,700                                 |  |  |                      | 262,275 |  |                                          |  | 3,758,975 |                                   |  |  | 74,924    |  |  |  | 1,909,034  |  |  |  | 1,924,865 |  |  |  |       |  
|         |  |                |  |                           | (.8700    | ) |                    |  | 04/03/96 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (63.0000  | ) |                    |  | 01/23/01 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  
|         |  |                |  |                           | (80.0000  | ) |                    |  | 05/11/04 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |            |  |  |  |           |  |  |  |        |  



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



(4) Investment properties (continued)



|         |  |                |  |                           |           |   |                    |  |          |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|-------- |  | -------------- |  | ------------------------- | --------- | - | ------------------ |  | -------- | ------------- |  | - | ----------------------------------------- |  |  | -------------------- | ------ |  | ---------------------------------------- |  | --------- | --------------------------------- |  |  | --------- |  |  |  | --------- |  |  |  | - |  |  |  | - | 
|Parcel # |  | IllinoisCounty |  | GrossAcresPurchased(Sold) |           |   | Purchase/SalesDate |  |          | Initial Costs |  |   | CostsCapitalizedSubsequent 
toAcquisition |  |  | Costs ofPropertySold |        |  | TotalRemainingCosts ofParcels
at12/31/10 |  |           | Current YearLosson
SaleRecognized | 
|         |  |                |  | OriginalCosts             |           |   | AcquisitionCosts   |  |          | TotalCosts    |  |   |                                           |  | 
|9 (c)    |  | Will           |  |                           | 9.8670    |   |                    |  | 08/13/91 |               |  | $ |                                          |  |  |                      |       |  |                                          |  |          |                                   |  |  |          |  |  |  |          |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (9.8670   | ) |                    |  | 09/16/02 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|10       |  | Will           |  |                           | 150.6600  |   |                    |  | 08/20/91 |               |  |   | 1,866,716                                 |  |  |                      | 89,333 |  |                                          |  | 1,956,049 |                                   |  |  | 23,897    |  |  |  | 1,979,946 |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (150.6600 | ) |                    |  | 01/10/05 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|11       |  | Will           |  |                           | 138.4470  |   |                    |  | 08/20/91 |               |  |   | 289,914                                   |  |  |                      | 20,376 |  |                                          |  | 310,290   |                                   |  |  | 2,700     |  |  |  | 312,990   |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (138.4470 | ) |                    |  | 05/03/93 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|12 (c)   |  | Will           |  |                           | 44.7320   |   |                    |  | 08/20/91 |               |  |   |                                          |  |  |                      |       |  |                                          |  |          |                                   |  |  |          |  |  |  |          |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (44.7320  | ) |                    |  | 09/16/02 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|13       |  | Will           |  |                           | 6.3420    |   |                    |  | 09/23/91 |               |  |   | 139,524                                   |  |  |                      | 172    |  |                                          |  | 139,696   |                                   |  |  |          |  |  |  | 139,696   |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (6.3420   | ) |                    |  | 05/03/93 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|14       |  | Kendall        |  |                           | 44.4030   |   |                    |  | 09/03/91 |               |  |   | 888,060                                   |  |  |                      | 68,210 |  |                                          |  | 956,270   |                                   |  |  | 1,259,583 |  |  |  | 2,215,853 |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (15.3920  | ) |                    |  | 04/16/01 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           | (14.2110  | ) |                    |  | Var 2002 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           | (13.6000  | ) |                    |  | 04/11/03 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           | (1.2000   | ) |                    |  | 02/19/04 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|15       |  | Kendall        |  |                           | 100.3640  |   |                    |  | 09/04/91 |               |  |   | 1,050,000                                 |  |  |                      | 52,694 |  |                                          |  | 1,102,694 |                                   |  |  | 117,829   |  |  |  | 1,220,523 |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (5.0000   | ) |                    |  | 09/01/93 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           | (11.0000  | ) |                    |  | 12/01/94 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           | (84.3640  | ) |                    |  | 08/14/98 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|16       |  | McHenry        |  |                           | 168.9050  |   |                    |  | 09/13/91 |               |  |   | 1,402,058                                 |  |  |                      | 69,731 |  |                                          |  | 1,471,789 |                                   |  |  | 97,766    |  |  |  | 1,569,555 |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (168.9050 | ) |                    |  | 08/03/01 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|17       |  | Kendall        |  |                           | 3.4620    |   |                    |  | 10/30/91 |               |  |   | 435,000                                   |  |  |                      | 22,326 |  |                                          |  | 457,326   |                                   |  |  | 113,135   |  |  |  | 570,461   |  |  |  |  |  |  |  |  | 
|         |  |                |  |                           | (2.1130   | ) |                    |  | 03/06/01 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 
|         |  |                |  |                           | (1.3490   | ) |                    |  | 08/23/02 |               |  |   |                                           |  |  |                      |        |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |   |  |  |  |   | 



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



(4) Investment properties (continued)



|         |  |                |  |                           |           |   |                    |  |          |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|-------- |  | -------------- |  | ------------------------- | --------- | - | ------------------ |  | -------- | ------------- |  | - | ----------------------------------------- |  |  | -------------------- | ------- |  | ---------------------------------------- |  | --------- | --------------------------------- |  |  | --------- |  |  |  | --------- |  |  |  | --------- |  |  |  | - | 
|Parcel # |  | IllinoisCounty |  | GrossAcresPurchased(Sold) |           |   | Purchase/SalesDate |  |          | Initial Costs |  |   | CostsCapitalizedSubsequent 
toAcquisition |  |  | Costs ofPropertySold |         |  | TotalRemainingCosts ofParcels
at12/31/10 |  |           | Current YearLosson
SaleRecognized | 
|         |  |                |  | OriginalCosts             |           |   | AcquisitionCosts   |  |          | TotalCosts    |  |   |                                           |  | 
|18 (d)   |  | McHenry        |  |                           | 139.1697  |   |                    |  | 11/07/91 |               |  | $ | 1,160,301                                 |  |  |                      | 58,190  |  |                                          |  | 1,218,491 |                                   |  |  | 9,456,992 |  |  |  | 9,621,483 |  |  |  | 1,054,000 |  |  |  |  | 
|         |  |                |  |                           | (9.2500   | ) |                    |  | Var 2004 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (33.3197  | ) |                    |  | Var 2005 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (62.0200  | ) |                    |  | Var 2006 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (12.8800  | ) |                    |  | Var 2007 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (2.2400   | ) |                    |  | Var 2008 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|19       |  | Kane           |  |                           | 436.2360  |   |                    |  | 12/13/91 |               |  |   | 4,362,360                                 |  |  |                      | 321,250 |  |                                          |  | 4,683,610 |                                   |  |  | 187,211   |  |  |  | 4,870,821 |  |  |  |          |  |  |  |  | 
|         |  |                |  |                           | (436.2360 | ) |                    |  | 05/16/01 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|20       |  | Kane & Kendall |  |                           | 400.1290  |   |                    |  | 01/31/92 |               |  |   | 1,692,623                                 |  |  |                      | 101,318 |  |                                          |  | 1,793,941 |                                   |  |  | 9,354,863 |  |  |  | 1,250,469 |  |  |  | 9,898,335 |  |  |  |  | 
|         |  |                |  |                           | (21.1380  | ) |                    |  | 06/30/99 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (7.0000   | ) |                    |  | 07/21/08 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|21       |  | Kendall        |  |                           | 15.0130   |   |                    |  | 05/26/92 |               |  |   | 250,000                                   |  |  |                      | 23,844  |  |                                          |  | 273,844   |                                   |  |  | 43,063    |  |  |  | 316,907   |  |  |  |          |  |  |  |  | 
|         |  |                |  |                           | (1.0000   | ) |                    |  | 03/16/99 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (14.0130  | ) |                    |  | 09/06/06 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           |           |   |                    |  |          |              
|22       |  | Kendall        |  |                           | 391.9590  |   |                    |  | 10/30/92 |               |  |   | 3,870,000                                 |  |  |                      | 283,186 |  |                                          |  | 4,153,186 |                                   |  |  | 1,768,844 |  |  |  | 5,556,530 |  |  |  | 365,500   |  |  |  |  | 
|         |  |                |  |                           | (10.0000  | ) |                    |  | 01/06/94 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (5.5380   | ) |                    |  | 01/05/96 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (2.4000   | ) |                    |  | 07/27/99 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (73.3950  | ) |                    |  | Var 2001 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (136.0000 | ) |                    |  | 08/14/02 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (34.1400  | ) |                    |  | 05/27/03 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 
|         |  |                |  |                           | (101.4900 | ) |                    |  | 01/09/04 |               |  |   |                                           |  |  |                      |         |  |                                          |  |           |                                   |  |  |           |  |  |  |           |  |  |  |           |  |  |  |   | 



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---

##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



(4) Investment properties (continued)



|         |  |                |  |                           |           |   |                    |  |          |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|-------- |  | -------------- |  | ------------------------- | --------- | - | ------------------ |  | -------- | ------------- |  | - | ----------------------------------------- |  |  | -------------------- | --------- |  | ---------------------------------------- |  | ---------- | --------------------------------- |  |  | ---------- |  |  |  | ---------- |  |  |  | ---------- |  |  |  | ------ | -
|Parcel # |  | IllinoisCounty |  | GrossAcresPurchased(Sold) |           |   | Purchase/SalesDate |  |          | Initial Costs |  |   | CostsCapitalizedSubsequent 
toAcquisition |  |  | Costs ofPropertySold |           |  | TotalRemainingCosts ofParcels
at12/31/10 |  |            | Current YearLosson
SaleRecognized | 
|         |  |                |  | OriginalCosts             |           |   | AcquisitionCosts   |  |          | TotalCosts    |  |   |                                           |  | 
|23       |  | Kendall        |  |                           | 133.2074  |   |                    |  | 10/30/92 |               |  | $ | 3,231,942                                 |  |  |                      | 251,373   |  |                                          |  | 3,483,315  |                                   |  |  | 4,665,998  |  |  |  | 8,149,313  |  |  |  |           |  |  |  |       |  
|         |  |                |  |                           | (11.5250  | ) |                    |  | 07/16/93 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (44.0700  | ) |                    |  | Var 1995 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (8.2500   | ) |                    |  | Var 1996 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (2.6100   | ) |                    |  | Var 1997 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (10.6624  | ) |                    |  | Var 1998 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (5.8752   | ) |                    |  | Var 1999 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (49.0120  | ) |                    |  | Var 2000 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (.2028    | ) |                    |  | Var 2001 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (1.0000   | ) |                    |  | Var 2002 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|23A (a)  |  | Kendall        |  |                           | .2676     |   |                    |  | 10/30/92 |               |  |   | 170,072                                   |  |  |                      | 12,641    |  |                                          |  | 182,713    |                                   |  |  |           |  |  |  | 182,713    |  |  |  |           |  |  |  |       |  
|         |  |                |  |                           | (.2676    | ) |                    |  | 03/16/93 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|24       |  | Kendall        |  |                           | 3.9080    |   |                    |  | 01/21/93 |               |  |   | 645,000                                   |  |  |                      | 56,316    |  |                                          |  | 701,316    |                                   |  |  | 30,436     |  |  |  | 731,752    |  |  |  |           |  |  |  |       |  
|         |  |                |  |                           | (3.9080   | ) |                    |  | 04/16/01 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|24A (b)  |  | Kendall        |  |                           | .4060     |   |                    |  | 01/21/93 |               |  |   | 155,000                                   |  |  |                      | 13,533    |  |                                          |  | 168,533    |                                   |  |  |           |  |  |  | 168,533    |  |  |  |           |  |  |  |       |  
|         |  |                |  |                           | (.4060    | ) |                    |  | 04/16/01 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|25       |  | Kendall        |  |                           | 656.6870  |   |                    |  | 01/28/93 |               |  |   | 1,625,000                                 |  |  |                      | 82,536    |  |                                          |  | 1,707,536  |                                   |  |  | 22,673     |  |  |  | 1,730,209  |  |  |  |           |  |  |  |       |  
|         |  |                |  |                           | (656.6870 | ) |                    |  | 10/31/95 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|26       |  | Kane           |  |                           | 89.5110   |   |                    |  | 03/10/93 |               |  |   | 1,181,555                                 |  |  |                      | 89,312    |  |                                          |  | 1,270,867  |                                   |  |  | 5,135,895  |  |  |  | 6,406,762  |  |  |  |           |  |  |  |       |  
|         |  |                |  |                           | (2.1080   | ) |                    |  | Var 1999 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (34.2550  | ) |                    |  | Var 2000 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (7.8000   | ) |                    |  | Var 2001 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (29.1200  | ) |                    |  | Var 2002 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (11.3100  | ) |                    |  | Var 2003 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           | (4.9180   | ) |                    |  | 01/28/04 |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|28 (c)   |  | Kendall        |  |                           | 50.0000   |   |                    |  | 09/16/02 |               |  |   | 661,460                                   |  |  |                      | 22,976    |  |                                          |  | 684,436    |                                   |  |  | 238,170    |  |  |  |           |  |  |  | 922,606    |  |  |  |       |  
|         |  |                |  |                           |           |   |                    |  |          |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  
|         |  |                |  |                           |           |   |                    |  |          |              
|         |  |                |  |                           |           |   |                    |  |          |               |  | $ | 38,810,025                                |  |  |                      | 2,504,276 |  |                                          |  | 41,314,301 |                                   |  |  | 47,329,256 |  |  |  | 70,487,787 |  |  |  | 18,155,770 |  |  |  | (4,679 | )
|         |  |                |  |                           |           |   |                    |  |          |               |  |   |                                           |  |  |                      |           |  |                                          |  |            |                                   |  |  |            |  |  |  |            |  |  |  |            |  |  |  |        |  



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



(4) Investment properties (continued)



|(a) | Included in the purchase of Parcel 23 was a newly constructed 2,500 square foot house. The house was sold in March 1993.
|--- | ------------------------------------------------------------------------------------------------------------------------



|(b) | Included in the purchase of Parcel 24 was a 2,400 square foot office building. The building was sold in 2001.
|--- | -------------------------------------------------------------------------------------------------------------



|(c) | On September 16, 2002, the Partnership completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(d) | 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.

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, 2010, the Partnership had recorded no such impairment. For the year ended December 31, 2009, the
Partnership recorded an impairment of $1,397,000, on land relating to Parcel 3/27 and Parcel 18. Due to the continuing troubled real estate market, the declining economy, the reduction in new construction home starts, the decrease in new home and
lot prices, and the homebuilder defaults in the fourth quarter of 2008 on the sales contracts, the remaining cost of Parcel 3/27 and Parcel 18 exceeded the estimated sales proceeds on the remaining lots and accordingly, the Partnership recorded the
impairment losses in 2009 to reduce the remaining cost of Parcel 3/27 and Parcel 18 to the projected sales proceeds. As of December 31, 2010 the total accumulated gain on sale recorded, net of the impairment losses, for Parcel 3/27 was
approximately $10,700,000 and for Parcel 18, the total accumulated gain recorded, net of the impairment losses, was approximately $2,200,000.



|(e) | Reconciliation of investment properties owned:
|--- | ----------------------------------------------



|                        |  |      |            |   |      |  |            |  
|----------------------- |  | ---- | ---------- | - | ---- |  | ---------- | -
|                        |  | 2010 |            |   | 2009 | 
|Balance at January 1,   |  | $    | 18,349,922 |   |      |  | 18,794,007 |  
|Additions during year   |  |      | 111,848    |   |      |  | 952,915    |  
|Impairment loss on land |  |      |           |   |      |  | (1,397,000 | )
|Sales during year       |  |      | (306,000   | ) |      |  |           |  
|                        |  |      |            |   |      |  |            |  
|                        |  |     
|Balance at December 31, |  | $    | 18,155,770 |   |      |  | 18,349,922 |  
|                        |  |      |            |   |      |  |            |  



|(f) | The aggregate cost of investment properties owned at December 31, 2010 for Federal income tax purposes was approximately $18,156,000 (unaudited).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



(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, 2010, the Partnership had farm leases of generally one year in duration, for approximately 721 acres of the approximately 962
acres owned.

(6) Mortgage Loan Receivable

The mortgage loan receivable is the result of sales of parcels, in whole or in part. The Partnership has recorded a deferred gain on these sales.



|                                     |  |          |          |  |               |  |      |                          |  |   |                          |  |  |                                   |           |  |                      |  |   |  |  |  |           | 
|------------------------------------ |  | -------- | -------- |  | ------------- |  | ---- | ------------------------ |  | - | ------------------------ |  |  | --------------------------------- | --------- |  | -------------------- |  | - |  |  |  | --------- | 
|Parcel                               |  | Maturity |          |  | Interest Rate |  |      | PrincipalBalance12/31/10 |  |   | PrincipalBalance12/31/09 |  |  | AccruedInterestReceivable12/31/10 |           |  | DeferredGain12/31/10 | 
|5 & 19                               |  |          | 07/01/11 |  |               |  | 6.00 | %                        |  | $ | 8,918,412                |  |  |                                   | 8,918,412 |  |                      |  |  |  |  |  | 5,210,010 | 
|                                     |  |          |          |  |               | 
|Less allowance for doubtful accounts |  |          |          |  |               |  |      |                          |  |   | 8,918,412                |  |  |                                   | 8,918,412 |  |                      |  |  |  |  |  | 5,210,010 | 
|                                     |  |          |          |  |               |  |      |                          |  |   |                          |  |  |                                   |           |  |                      |  |   |  |  |  |           | 
|                                     |  |          |          |  |               | 
|                                     |  |          |          |  |               |  |      |                          |  | $ |                         |  |  |                                   |          |  |                      |  |  |  |  |  |          | 
|                                     |  |          |          |  |               |  |      |                          |  |   |                          |  |  |                                   |           |  |                      |  |   |  |  |  |           | 

On May 16, 2001, the Partnership sold 189 acres of Parcel 5 and 436 acres of Parcel 19 for $17,500,000 and recorded
deferred gain of $10,203,634. The Partnership received a deferred down payment note in the amount of $1,500,000, due December 31, 2001. The note had an interest rate of 6%, however the note provided for the interest to be waived if the
principal was paid in full by December 1, 2001. The Partnership received payment of the deferred down payment note on December 1, 2001 and recognized $875,923 of deferred gain. The Partnership also received an installment note in the
amount of $16,000,000 at the time of closing. The installment note matures July 1, 2011 and has an interest rate of 6%. During 2009, the Partnership received $2,400 in principal payments, bringing the total amount of principal paid since loan
inception to $8,581,588 and interest paid since loan inception to $5,449,637. During the first quarter of 2008, the homebuilder who is the obligor under the mortgage loan receivable notified the Partnership that it was experiencing a slowdown in
sales contracts for new homes. The Partnership agreed to temporarily suspend the 6% interest due on the mortgage loan receivable and applied payments received during 2008 toward principal. During the second quarter of 2008, based on the available
information, the Partnership determined that the full collectability of the mortgage loan receivable was doubtful. As a result, management elected to reserve $3,923,062 of principal and $2,296,818 of the deferred gain relating to the mortgage loan
receivable which was recorded against bad debt expense during 2008.



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INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



During the third quarter of 2009, based on the available information, the Partnership determined that
the collectability of the remaining mortgage receivable was doubtful. The mortgage receivable is subordinate to a first mortgage held by an unaffiliated lender. The holder of the first mortgage filed a complaint of foreclosure during September 2009.
The Partnership filed an answer and counterclaim to the complaint to preserve its interest in the foreclosure on March 18, 2010. The holder of the first mortgage has filed for summary judgment and we filed a response to that motion on
August 24, 2010. The case has been continued until March 16, 2011. Since it is unlikely that the remaining value of the property secured by the mortgage loan receivable is in excess of the remaining balance due under the first mortgage,
management elected to reserve the remaining $4,995,350 of principal as of September 30, 2009. In addition, the remaining deferred gain of $2,913,192 relating to the mortgage receivable was also reserved and recorded against bad debt expense
resulting in bad debt expense of $2,082,158 for the nine months ended September 30, 2009. Effective January 1, 2009, accrual of the 6% interest due on the mortgage receivable resumed, however, the Partnership determined that the
collectability of the interest is also doubtful. Since the Partnership has only received minimal payments from the borrower since January 2008, the Partnership is not accruing interest on the financial statements. The Partnership will continue to
monitor the activity associated with the mortgage receivable and the related interest.

(7) Litigation

During the first quarter of 2009, the General Partner received notice that William Ryan Homes, Inc. (Ryan), the
homebuilder for Parcel 18, filed suit against the City of Woodstock (Woodstock) and ILAFII#XVIII, LLC, our wholly-owned subsidiary that owns that property, in the Circuit Court for the 22ndJudicial District in McHenry County, Illinois. The complaint seeks
damages for alleged breach of a warranty which Ryan claims caused water seepage. The complaint claims that a total of seven lots have been the subject of water seepage complaints. Ryan also claims that the seepage issues have caused Woodstock to
issue a stop work order causing Ryan additional damage. Woodstock filed a Motion to Dismiss the complaint as it relates to Woodstock only and on October 13, 2009, Woodstocks motion was granted on the grounds that Ryan had failed to
properly exhaust its administrative remedies. The Partnerships subsidiary appeared and filed a Motion to Dismiss which was denied by the court on January 22, 2010. The Partnerships subsidiary filed its Answer and Affirmative
Defenses on February 17, 2010 denying liability for the alleged damages. The case has been continued to March 14, 2011 for status, however, on February 23, 2011, Ryan and the Partnerships subsidiary entered into a Settlement
Agreement regarding this matter. Pursuant to such Settlement Agreement, on March 2, 2011, the Partnership paid Ryan approximately $34,000 and in return received one lot (comprised of .219 acres) of Parcel 18.

On or about April 8, 2010, the Partnership received notification from the attorneys for the Village of Elburn that in effect demanded completion of
certain land improvements. The Partnership is a co-indemnitor of the subdivision bonds that secure completion of the land improvements on Parcels 5 and 19 of the Blackberry Subdivision in Elburn, Il. On April 22, 2010, the Partnership received
notice from the bonding companies demanding completion and satisfaction of such obligations. Based on information provided by the bonding companies, the Partnership is estimating that the maximum balance of the outstanding bonds and related fees is
approximately $4.3 million, however, we believe the actual costs of the remaining improvements of the subdivision is far less than the outstanding bond amounts. The Partnership has met with a representative of the bonding companies who has requested
a complete list of the remaining improvements being requested by the Village of Elburn. At this time, it is not possible to determine what, if any, liability will be asserted against the Partnership or the materiality of any outcome.

(8) 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.



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INLAND LAND APPRECIATION FUND II, L.P.

(a limited partnership)

Notes to Financial Statements

(continued)



As discussed in the legal proceedings above, on February 23, 2011, the parties involved in the
William Ryan homebuilder suit involving Parcel 18 entered into a Settlement Agreement. Pursuant to such Settlement Agreement, on March 2, 2011 the Partnership paid the homebuilder approximately $34,000 and in return received one lot
(comprised of .219 acres) of Parcel 18.

For the year ended December 31, 2010, there are no other subsequent events.



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|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 2010.



|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,
2010, 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 Frameworkissued 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, 2010. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements
report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only managements report in this annual report.

There were no changes to our internal controls over financial reporting during the fiscal quarter ended December 31, 2010 that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



|Item 9(B). | Other Information
|---------- | -----------------

Not applicable.



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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. The 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 of 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 customer relations group 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, 2011.



|                    |  |                                                                                                 
|------------------- |  | ------------------------------------------------------------------------------------------------
|                    |  | 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 Executive Officer of IREIC and principal executive officer of the Partnership
|Brian Conlon        |  | President of IREIC                                                                              
|Catherine L. Lynch  |  | Chief Financial Officer of IREIC                                                                
|Roberta S. Matlin   |  | Director and Senior Vice President of IREIC                                                     
|Guadalupe Griffin   |  | Vice President of IREIC-Asset Management                                                        
|Donna Urbain        |  | Principal Financial Officer with respect to Inland Land Appreciation Fund, L.P.                 
|Cathleen M. Hrtanek |  | Assistant Counsel, The Inland Real Estate Group, Inc., counsel to the Partnership               



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DANIEL L. GOODWIN (age 67) 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 67) 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 67) 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



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served as chairman of the board from May 1994 to May 2004 and president and chief executive officer from 1994 to April 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 68) serves as chief executive officer and a director of
IREIC. She served as president and a director of IREIC from July 1987 through June 1992. She was again named president and a director of IREIC upon her return to IREIC in January 1998, and served as president until January 2011. She has been a
director of Inland Securities Corporation since January 1997, and served as its president and chief operating officer from January 1997 to June 2009. Additionally, Ms. Gujral has served as a director of Inland Investment Advisors, Inc. since
January 2001 and has been a director of Inland Western Retail Real Estate Trust, Inc. since its inception in March 2003, serving as its chief executive officer from June 2005 until November 2007. Ms. Gujral also has served 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 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 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 one 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 M. CONLON (age 51) has been president of Inland Real Estate Investment Corporation since January
2011, and also serves as director and president of Inland Securities Corporation. He has held these positions since July 2009 and June 2009, respectively. Mr. Conlon joined Inland Securities Corporation as executive vice president in September
1999 and served in that position until June 2009. Prior to joining Inland, Mr. Conlon was executive vice president and chief operating officer of Wells Real Estate Funds, where he was responsible for overseeing day-to-day operations of the
companys real estate investment and capital raising initiatives. Mr. Conlon served on the national board of directors for the Financial Planning Association in 2001 and 2002. Mr. Conlon received his bachelors degree (BBA) from
Georgia State University in Atlanta, Georgia and received a masters degree in business administration (MBA) from the University of Dallas, in Dallas, Texas. Mr. Conlon has earned the certified financial planner (CFP) and certified
commercial investment member (CCIM) designations and holds Series 7, 24 and 63 certifications with FINRA.

CATHERINE L. LYNCH
(age 52) joined the Inland organization in 1989 and is currently the chief financial officer and secretary of IREIC and Inland Securities Corporation. Ms. Lynch had served as the treasurer and secretary of IREIC since January 1995, and as
treasurer and secretary of Inland Securities Corporation since June 1995. Ms. Lynch worked for KPMG LLP from 1980 to 1989. Ms. Lynch received her bachelor degree in accounting from Illinois State University, Normal, Illinois.
Ms. Lynch is a certified public accountant and a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. Ms. Lynch also is registered with FINRA as a financial operations principal.



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ROBERTA S. MATLIN (age 66) 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 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 and a director and vice president of Inland Securities Corporation since July 1995. She has served as vice president  administration of Inland American Real Estate Trust, Inc. since its
inception in October 2004. She has been president of Inland American Business Manager & Advisor since October 2004. Ms. Matlin served as vice president of administration of Inland Western Retail Real Estate Trust, Inc. from 2003 until
2007, vice president of administration of Inland Retail Real Estate Trust, Inc. from 1998 until 2004, vice president of administration of Inland Real Estate Corporation from 1995 until 2000 and trustee and executive vice president of Inland Mutual
Fund Trust from 2001 until 2004. Ms. Matlin also has been a director of Inland Institutional Capital Partners Corporation since May 2006, and a director of Pan American Bank since December 2007. Ms. Matlin is the vice president of
administration of Inland Diversified Real Estate Trust, Inc. and also has served as the president of Inland Diversified Business Manager & Advisor, Inc. from June 2008 through May 2009 and is currently its vice president. Since April 2009,
she has served as president of Inland Opportunity Business Manager & Advisor, Inc.

Prior to joining IREIC, Ms. Matlin worked
for the Chicago Region of the Social Security Administration of the United States Department of Health and Human Services. Ms. Matlin is a graduate of the University of Illinois in Champaign. She holds Series 7, 22, 24, 39, 63 and 65 licenses
from FINRA.

GUADALUPE GRIFFIN (age 46) joined Inland in 1994. Ms. Griffin serves as vice president of IREIC and
assistant vice president of Inland Midwest Investment Corporation. Ms. Griffin is responsible for the asset management and day-to-day operations of the public and private partnerships which include the development of operating and disposition
strategies for the partnerships and investor communications. Ms. Griffin also serves as vice president of Inland Opportunity Business Manager & Advisor, Inc. since April 2009. Prior to joining Inland, Ms. Griffin was employed by
the University of Illinois at Chicago Center for Urban Educational Research and Development as Assistant to the Director of the Nation of Tomorrow Program; a privately funded multi-million dollar program, which provided educational and empowerment
services to youths and their families in four inner-city schools. Ms. Griffin holds an Illinois Real Estate Sales License.

DONNA URBAIN (age 48) joined Inland in 2002 and is the Principal Financial Officer with respect to Inland Land Appreciation Fund, L.P.
Ms. Urbain is responsible for the investment accounting department which includes all public partnership accounting functions along with quarterly and annual SEC filings. Prior to joining Inland, Ms. Urbain worked in the field of public
accounting for KPMG LLP. Ms. Urbain is a Certified Public Accountant. She received her B.B.A. in Accounting from the University of Notre Dame in South Bend, Indiana.

CATHLEEN M. HRTANEK (age 34) joined Inland in 2005 and is an assistant counsel 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
Opportunity Business Manager & Advisor, Inc. since April 2009, Inland Diversified Real Estate Trust, Inc. since June 2008 and Inland Real Estate Business Manager & Advisor, Inc. since June 2008. 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.
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.



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

Our partnership agreement 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 sales of our properties is first allocated among the partners in proportion to the negative balances, if any, in their respective capital accounts.
Thereafter, except as provided below, net gain is allocated to the general partner in an amount equal to the proceeds distributed to the general partner from such sale and the balance of any net gain is allocated to the limited partners. If the
amount of net gain realized from a sale is less than the amount of cash distributed to the general partner from such sale, we will allocate income or gain to the general partner in an amount equal to the excess of the cash distributed to the general
partner with respect to such sale as quickly as permitted by law. Any net loss from a sale will be allocated to the limited partners.

Distributions of net sale proceeds will be allocated between the general partner and the limited partners based upon both an aggregate overall return to
the limited partners and a separate return with respect to each parcel of land purchased by us.

As a general rule, net sale proceeds will be
distributed 90% to the limited partners and 10% to the general partner until the limited partners have received from net sale proceeds (i) a return of their original capital plus (ii) a noncompounded cumulative preferred return of 15% of
their invested capital. However, with respect to each parcel of land, the general partners 10% share will be subordinated until the limited partners receive a return of the original capital attributed to such parcel 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 sale proceeds have been distributed, the general partner has received more than 25% of all net sale proceeds (exclusive of distributions made to the limited partners to
return their original capital), the general partner shall contribute to us for distribution to the limited partners an amount equal to such excess.

Any distributions from net sales proceeds at a time when invested capital is greater than zero shall be deemed applied first to the reduction of such invested capital before application to payment of any
deficiency in the 15% cumulative preferred return.

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

Our general partner and its affiliates may be reimbursed (as set forth under terms of the partnership agreement)
for its expenses or out-of-pocket costs relating to our administration. For the year ended December 31, 2010, such costs, included in general and administrative expenses to affiliates and professional services to affiliates, were $93,624, of
which $8,780 was unpaid as of December 31, 2010.

An affiliate of our general partner performed marketing and advertising services for us
and was reimbursed (as set forth under terms of the partnership agreement) for direct costs. For the year ended December 31, 2010, such costs were $10,966, of which $1,286 was unpaid as of December 31, 2010.



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An affiliate of our general partner performed land improvements, rezoning, annexation and other activities
to prepare our investment properties for sale and was reimbursed (as set forth under terms of the partnership agreement) for salaries and direct costs. The affiliate did not recognize a profit on any project. For the year ended December 31,
2010, we incurred $9,746 of such costs, of which $2,241 was unpaid as of December 31, 2010, and which are included in investment properties. In addition, the costs related to Parcels 3/27 and 18 totaled $27,004 for the year ended
December 31, 2010 and is included in land operating expenses to affiliates, of which $7,333 was unpaid as of December 31, 2010.

As
of December 31, 2010 and 2009, the Partnership had invested in a money market account 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 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 Natureof BeneficialOwnership |                     |  | Percentof Class | 
|                          |  |                                        
|Limited partnership units |  |                                         | 184 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 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 3 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, |       
|                                                                                                                                                  |  | 2010                     |        |  | 2009 | 
|                                                                                                                                                  |  |                         
|Audit fees for professional services rendered for the audit of our annual financial statements and quarterly reviews of our
financial statements. |  | $                        | 50,759 |  |      |  | 55,235 | 

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, 2010 and 2009, respectively were consistent with maintaining Grant Thorntons independence.

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 19 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 of the Registration Statement on Form S-11, filed
with the SEC on October 25, 1989, as amended, are incorporated herein by reference thereto.
|     | 
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification by principal executive officer                                                                                                                                                                                                            
|     | 
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification by principal financial officer                                                                                                                                                                                                            
|     | 
|32.1 |  | Section 1350 Certification by principal executive officer                                                                                                                                                                                                                        
|     | 
|32.2 |  | Section 1350 Certification by principal financial officer                                                                                                                                                                                                                        



|(c) | Financial Statement Schedules:
|--- | ------------------------------

All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or
related notes.

No annual report or proxy material for the year 2010 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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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

INLAND LAND APPRECIATION FUND II, L.P.



|                     |  |                                          
|-------------------- |  | -----------------------------------------
|By:                  |  | Inland Real Estate Investment Corporation
|Its:                 |  | General Partner                          
|                    
|/s/ BRENDA G. GUJRAL
|                     | 
|By:                  |  | Brenda G. Gujral                         
|Its:                 |  | Principal Executive Officer              
|Date:                |  | March 9, 2011                            

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:                  |  | Principal Executive Officer                                                       
|Date:                 |  | March 9, 2011                                                                     
|                     
|/s/ GUADALUPE GRIFFIN
|                      | 
|By:                   |  | Guadalupe Griffin                                                                 
|Its:                  |  | Vice President                                                                    
|Date:                 |  | March 9, 2011                                                                     
|                     
|/s/ DONNA URBAIN     
|                      | 
|By:                   |  | Donna Urbain                                                                      
|Its:                  |  | Principal Financial Officer with respect to Inland Land Appreciation Fund II, L.P.
|Date:                 |  | March 9, 2011                                                                     
|                     
|/s/ ROBERT D. PARKS  
|                      | 
|By:                   |  | Robert D. Parks                                                                   
|Its:                  |  | Chairman                                                                          
|Date:                 |  | March 9, 2011                                                                     
|                     
|/s/ DANIEL L. GOODWIN
|                      | 
|By:                   |  | Daniel L. Goodwin                                                                 
|Its:                  |  | Director                                                                          
|Date:                 |  | March 9, 2011                                                                     



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