<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
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, 1998
--------------------------------------------------
OR
[ ] 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 0-16888
----------------------------------------------------------
First Capital Income and Growth Fund - Series XII
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Illinois 36-3498223
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite
1000, Chicago, Illinois 60606-2607
- ---------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (312) 207-0020
including area code ----------------------------------
Securities registered pursuant to
Section 12(b) of the Act: NONE
----------------------------------
Securities registered pursuant to
Section 12(g) of the Act: Limited Partnership Assignee Units
----------------------------------
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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]
Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated May 8, 1987, included
in the Registrant's Registration Statement on Form S-11 (Registration
No. 33-12269), is incorporated herein by reference in Part IV of this report.
Exhibit Index - Page A-1
- ------------------------
1
<PAGE>
PART I
ITEM 1. BUSINESS
- ------- --------
The registrant, First Capital Income and Growth Fund-Series XII (the
"Partnership") is a limited partnership organized in 1987 under the Revised
Uniform Limited Partnership Act of the State of Illinois. The Partnership sold
1,000,000 Limited Partnership Assignee Units (the "Units") to the public from
May 1987 to November 1988, pursuant to a Registration Statement on Form S-11
filed with the Securities and Exchange Commission (Registration No. 33-12269).
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement.
The business of the Partnership is to invest primarily in existing, income-
producing real estate, such as shopping centers, office buildings, apartments,
warehouses, or any one or more of these categories. From November 1987 to March
1991, the Partnership: 1) made three real property investments; 2) purchased 50%
interests in three joint ventures, a 75% interest in one joint venture and a 25%
interest in a separate joint venture which were each formed with Affiliated
partnerships for the purpose of acquiring a 100% interest in certain real
property and 3) purchased 50% interests in four separate joint ventures which
were each formed with Affiliated partnerships for the purpose of acquiring a
preferred majority interest in certain real property. All of these joint
ventures, prior to dissolution, are operated under the common control of First
Capital Financial Corporation (the "General Partner"). Through December 31, 1998
the Partnership, with its respective joint venture partners, has dissolved as a
result of the property sale and/or disposition: 1) the 75% interest, the 25%
interest and two of the 50% interests in joint ventures that had 100% interests
in real property; 2) all four 50% joint ventures that had preferred majority
interests in real property and 3) two real property investments.
Property management services for the Partnership's office building is provided
by an Affiliate of the General Partner and for its shopping center by a third-
party property management company for fees calculated as a percentage of gross
rents received from each of the Partnership's properties.
The real estate business is highly competitive. The results of operations of the
Partnership will depend upon the availability of suitable tenants, real estate
market conditions and general economic conditions which may impact the success
of these tenants. Properties owned by the Partnership frequently compete for
tenants with similar properties owned by others.
As of March 1, 1999, there was one employee at the Partnership's properties for
on-site property maintenance and administration.
ITEM 2. PROPERTIES (a)(b)
- ------- -----------------
As of December 31, 1998, the Partnership owned directly or through a joint
venture, the following two properties, which were owned in fee simple and, were
encumbered by mortgages. For details of the significant terms of the mortgages,
refer to Note 4 of Notes to Financial Statements.
<TABLE>
<CAPTION>
Net Leasable Number of
Property Name Location Sq. Footage Tenants (c)
- --------------------------------- ------------------------- ----------------- --------------
Shopping Center:
- ----------------
<S> <C> <C> <C>
Deerfield Mall Deerfield Beach, Florida 372,241 48 (2)
Office Building:
- ----------------
Prentice Plaza (50%) Englewood, Colorado 157,311 32 (1)
</TABLE>
(a) For a discussion of significant operating results and major capital
expenditures planned for the Partnership's properties refer to Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
2
<PAGE>
ITEM 2. PROPERTIES (a)(b) (Continued)
- ------- -----------------
(b) For federal income tax purposes, the Partnership depreciates the portion of
the acquisition costs of its properties allocable to real property
(exclusive of land), and all improvements thereafter, over useful lives of
40 years utilizing the straight-line method. The Partnership's portion of
real estate taxes for Deerfield Mall and Prentice Plaza was $743,800 and
$233,100, respectively, for the year ended December 31, 1998. In the
opinion of the General Partner, all of the Partnership's properties are
adequately insured and serviced by all necessary utilities.
(c) Represents the total number of tenants as well as the number of tenants, in
parenthesis, that individually occupy more than 10% of the net leasable
square footage of the property.
The following table presents each of the Partnership's properties' occupancy
rates as of December 31 for each of the last five years:
<TABLE>
<CAPTION>
Property Name 1998 1997 1996 1995 1994
- ---------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Deerfield Mall 91% 90% 92% 93% 92%
Prentice Plaza 100% 95% 98% 99% 97%
</TABLE>
The amounts in the following table represent each of the Partnership properties'
average annual rental rate per square foot for each of the last five years ended
December 31 and were computed by dividing each property's base rental revenues
by its average occupied square footage:
<TABLE>
<CAPTION>
Property Name 1998 1997 1996 1995 1994
- ---------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Deerfield Mall $ 9.84 $ 9.47 $ 9.57 $ 9.58 $ 9.25
Prentice Plaza $17.48 $15.68 $14.91 $14.31 $13.65
</TABLE>
The following table summarizes the principal provisions of the leases for each
of the tenants which occupy ten percent or more of the rentable square footage
at each of the Partnership's properties:
<TABLE>
<CAPTION>
Partnership's Share of per annum Percentage
Base Rents (a) for of Net Renewal
------------------------------------ Leasable Options
Final Twelve Expiration Square (Renewal)
Months of Date of Footage Options/
1999 Lease Lease Occupied Years
------------- ------------------ ----------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Deerfield Mall
- --------------
T. J. Maxx
(department store) $ 433,500 $ 433,500 11/30/2012 21% 5 / 5
Publix
(grocery store) $ 252,700 $ 252,700 5/4/2008 11% 4 / 5
Prentice Plaza (50%)
- --------------------
ANTEC
(design, engineering,
manufacturing and
distribution of cable
television products) $ 113,200 $ 150,900 9/30/1999 11% None
</TABLE>
3
<PAGE>
ITEM 2. PROPERTIES (Continued)
- ------ ----------
(a) The Partnership's share of per annum base rents for each of the tenants
listed above for each of the years between 1999 and the final twelve months
for each of the above leases is no lesser or greater than the amounts
listed in the above table.
The amounts in the following table represent the Partnership's portion of base
rental income from leases in the year of expiration (assuming no lease renewals)
through the year ending December 31, 2008:
<TABLE>
<CAPTION>
Base Rents in
Number Year of % of Total
Year of Tenants Square Feet Expiration (a) Base Rents
(b)
------------------ ------------------ ----------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
1999 21 62,382 $322,200 7.70%
2000 14 42,885 $282,100 7.54%
2001 14 31,586 $253,800 7.57%
2002 5 17,103 $120,100 3.99%
2003 13 52,892 $387,900 14.26%
2004 5 43,273 $166,000 8.38%
2005 0 None None 0.00%
2006 0 None None 0.00%
2007 2 10,037 $117,800 6.64%
2008 2 44,632 $148,000 10.08%
</TABLE>
(a) Represents the Partnership's portion of base rents to be collected each
calendar year on expiring leases.
(b) Represents the Partnership's portion of base rents to be collected each
year on expiring leases as a percentage of the Partnership's portion of the
total base rents to be collected on leases in effect as of December 31,
1998.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
(a & b) The Partnership and its properties were not a party to, nor the subject
of, any material pending legal proceedings, nor were any such proceedings
terminated during the quarter ended December 31, 1998. Ordinary routine legal
matters incidental to the business which were not deemed material were pursued
during the quarter ended December 31, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
(a, b, c & d) None.
4
<PAGE>
PART III
ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED SECURITY HOLDER MATTERS
- ------- ----------------------------------------------------------------------
There has not been, nor is there expected to be, a public market for Units.
As of March 1, 1999, there were 6,533 Holders of Units.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $17,253,700 $13,443,300 $17,899,200 $ 17,678,700 $ 16,698,200
Net income (loss) $ 9,599,400 $ 1,039,700 $ 2,155,600 $(13,386,400) $(14,742,000)
Net income (loss)
allocated to Limited
Partners $ 9,080,800 $ 1,029,300 $ 2,134,000 $(13,252,500) $(14,594,600)
Weighted average number
of Units outstanding 949,843 949,843 949,843 953,845 963,785
Net income (loss)
allocated to Limited
Partners per weighted
average Unit $ 9.56 $ 1.08 $ 2.25 $ (13.89) $ (15.14)
Total assets $42,979,200 $70,105,700 $74,772,700 $ 85,015,000 $100,121,600
Mortgage loans payable $21,387,900 $43,773,700 $48,858,400 $ 60,405,300 $ 61,195,100
Front-End Fees Loan
payable to Affiliate $13,434,400 $13,434,400 $13,434,400 $ 13,434,400 $ 13,434,400
Distributions to Limited
Partners per weighted
average Unit (a) $ 14.00 None None None None
Return of capital to
Limited Partners per
weighted average Unit
(b) $ 4.44 None None None None
OTHER DATA:
Investment in commercial
rental properties (net
of accumulated
depreciation and
amortization) $32,396,000 $59,890,500 $65,500,600 $ 78,329,900 $ 94,027,300
Number of real property
interests owned at
December 31 2 4 5 7 7
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Distributions to Limited Partners per Unit for the year ended December 31,
1998, are comprised of Sales Proceeds.
(b) For the purposes of this table, return of capital represents either: the
amount by which distributions, if any, exceed net income each respective
year or; total distributions, if any, in years when the Partnership incurs
a net loss. Pursuant to the Partnership Agreement, Capital Investment is
only reduced by distributions of Sale or Refinancing Proceeds. Accordingly,
return of capital as used in the above table does not impact Capital
Investment.
The following table includes a reconciliation of Cash Flow (as defined in the
Partnership Agreement) to cash flow provided by operating activities as
determined by generally accepted accounting principles ("GAAP"):
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Flow (as defined in
the Partnership
Agreement) (a) $ 1,604,100 $ 1,089,100 $ 2,710,800 $ 2,141,300 $ 2,259,300
Items of reconciliation:
Principal payments on
mortgage loans payable 606,800 1,265,000 1,085,200 1,240,500 449,200
Changes in current
assets and
liabilities:
Decrease (increase) in
current assets 171,800 217,200 374,200 (271,600) 495,000
(Decrease) increase in
current liabilities (964,700) (632,000) (751,300) 50,600 (156,100)
- --------------------------------------------------------------------------------------------
Net cash provided by
operating activities $ 1,418,000 $ 1,939,300 $ 3,418,900 $ 3,160,800 $ 3,047,400
- --------------------------------------------------------------------------------------------
Net cash provided by
(used for) investing
activities $ 39,170,800 $ 1,114,200 $ 10,173,400 $ (683,000) $ 2,141,100
- --------------------------------------------------------------------------------------------
Net cash (used for)
financing activities $(35,763,300) $(5,074,700) $(11,675,100) $(1,833,400) $(5,762,800)
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Cash Flow is defined in the Partnership Agreement as Partnership cash
revenues earned from operations (excluding tenant deposits and proceeds
from the sale, disposition or financing of any Partnership properties or
the refinancing of any Partnership indebtedness), minus all cash expenses
incurred (including Operating Expenses, payments of principal and interest
on any Partnership indebtedness, and any reserves of revenues from
operations deemed reasonably necessary by the General Partner), except
depreciation and amortization expenses and capital expenditures and lease
acquisition expenditures.
The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing on pages A-1 through A-8
in this report and the supplemental schedule on pages A-9 and A-10.
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The ordinary business of the Partnership is expected to pass through its life
cycle in three phases: (i) the Offering of Units and investment in Properties;
(ii) the operation of properties and (iii) the sale or other disposition of
properties.
Statements contained in the Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are not historical facts, may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only of the date hereof.
The Partnership commenced the Offering of Units on May 8, 1987 and began
operations on June 9, 1987 after reaching the required minimum subscription
level. On November 22, 1988, the Offering was Terminated upon the sale of
1,000,000 Units. From November 1987 to March 1991, the Partnership: 1) made
three real property investments; 2) purchased 50% interests in three joint
ventures, a 75% interest in one joint venture and a 25% interest in a separate
joint venture, each of which were formed with Affiliated partnerships for the
purpose of acquiring a 100% interest in certain real property and 3) purchased
50% interests in four separate joint ventures, each of which were formed with
Affiliated partnerships for the purpose of acquiring a preferred majority
interest in certain real property.
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price. In
1993 the Partnership, in addition to being in the operation of properties
phase, entered the disposition phase of its life cycle. During the disposition
phase of the Partnership's life cycle, comparisons of operating results are
complicated due to the timing and effect of property sales and dispositions.
Partnership operating results are generally expected to decline as real
property interests are sold or disposed of since the Partnership no longer
receives income generated from such real property interests. Through December
31, 1998 the Partnership, with its respective joint venture partners, has
dissolved as a result of the property sale and/or disposition: 1) the 75%
interest, the 25% interest and two of the 50% interests in joint ventures that
had 100% interests in real property; 2) all four 50% interests in joint
ventures with preferred majority interests in real property and 3) two real
property investments.
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's properties for the years ended December 31, 1998, 1997 and 1996.
The discussion following the table should be read in conjunction with the
Financial Statements and Notes thereto appearing in this report.
<TABLE>
<CAPTION>
Comparative Operating Results (a)
For the Years Ended December 31,
----------------------------------
1998 1997 1996
- ---------------------------------------------------------------
<S> <C> <C> <C>
DEERFIELD MALL
Rental revenues $4,174,300 $4,057,400 $ 4,275,400
- ---------------------------------------------------------------
Property net income $ 631,000 $ 605,800 $ 794,000
- ---------------------------------------------------------------
Average occupancy 90% 92% 94%
- ---------------------------------------------------------------
PRENTICE PLAZA (50%)
- ---------------------------------------------------------------
Rental revenues $1,468,600 $1,253,500 $ 1,270,700
- ---------------------------------------------------------------
Property net income (loss) $ 173,200 $ (114,800) $ (19,900)
- ---------------------------------------------------------------
Average occupancy 96% 95% 99%
- ---------------------------------------------------------------
SOLD PROPERTIES (B)
- ---------------------------------------------------------------
Rental revenues $2,185,800 $6,828,100 $11,055,900
- ---------------------------------------------------------------
Property net income $ 631,300 $ 476,600 $ 1,342,700
- ---------------------------------------------------------------
</TABLE>
(a) Excludes certain income and expense items which are either not directly
related to individual property operating results such as interest income,
interest expense on the Partnership's Front-End Fees loan and general and
administrative expenses or are related to properties disposed of by the
Partnership prior to the periods under comparison.
(b) Includes the results of properties sold in 1998, 1997 and 1996. Sold
Properties is comprised of the results, exclusive of the gains on sale, of
1800 Sherman Office Building ("1800 Sherman"), Meidinger Tower, Equitable
of Iowa Office Building ("Equitable"), Sentry Park West Office Campus
("Sentry West") and Regency Park Shopping Center ("Regency") (see Note 7 of
Notes to Financial Statements for additional information).
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED DECEMBER 31,
1997
Net income increased by $8,559,700 for the year ended December 31, 1998 when
compared to the year ended December 31, 1997. The increase was primarily due to
the 1998 gains recognized on the sales of Meidinger Tower and 1800 Sherman
exceeding the 1997 gain recognized on the sale of Regency. The increase was
also due to improved operating results at Prentice Plaza and an increase in
interest earned on the Partnership's short-term investments. The increase was
partially offset by the 1998 absence of the operating results from the Sold
Properties.
Net results, exclusive of the Sold Properties, changed from $(282,400) for the
year ended December 31, 1997 to $383,600 for the year ended December 31, 1998.
The change was primarily due to the increase in interest earned
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
on the Partnership's short-term investments and improved operating results at
Deerfield Mall and Prentice Plaza. The increase in interest income was
primarily the result of the availability of proceeds generated from the sales
of Meidinger Tower and 1800 Sherman prior to distribution to Limited Partners.
The following comparative discussion excludes the operating results of the Sold
Properties.
Rental revenues increased by $332,000 or 6.3% for the year ended December 31,
1998 when compared to the year ended December 31, 1997. The increase was
primarily due to an increase in base rental income at Prentice Plaza, which was
due to an increase in rates charged to new and renewing tenants. The increase
was also due to an increase in tenant expense reimbursements for real estate
taxes at Deerfield Mall and Prentice Plaza. The increase in tenant
reimbursements at Deerfield Mall was due to a 1998 adjustment of estimated 1997
billings to actual. The increase in tenant reimbursements at Prentice Plaza was
due to 1997 tenant expense reimbursement income being reduced due to credits
issued to tenants in 1997 for 1996 activity.
Interest expense on the Partnership's mortgage loans decreased by $47,000 for
the year ended December 31, 1998 when compared to the year ended December 31,
1997. The decrease was primarily due to the effects of principal payments made
during the past 24 months on the mortgage loan collateralized by Deerfield
Mall.
Repair and maintenance expenses decreased by $39,500 for the year ended
December 31, 1998 when compared to the year ended December 31, 1997. During
1998 the onsite janitor at Deerfield Mall was replaced by a contracted service
provider, which reduced expense. Also contributing to the decrease was a
reduction in ordinary repairs to the elevator and HVAC at Prentice Plaza.
Real estate taxes increased by $7,200 for the year ended December 31, 1998 when
compared to the year ended December 31, 1997. The increase was primarily the
result of an increase in real estate taxes at Deerfield, which was due to an
increased assessment from the taxing authority. The increase was partially
offset by a decrease in real estate taxes at Prentice Plaza, which was due to
an overestimate of 1997 taxes payable in 1998.
Property operating expenses increased by $125,000 for the year ended December
31, 1998 when compared to the year ended December 31, 1997. The increase was
primarily due to an increase in legal fees at Deerfield Mall, which was due to
an increase in tenant related issues. The increase was also due to a greater
portion of leasing related expenditures at Deerfield Mall being chargeable to
expense in 1998 than in 1997.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31,
1996
Net income decreased by $1,115,900 for the year ended December 31, 1997 when
compared to the year ended December 31, 1996. The decrease was primarily due to
the absence of operating results from Sentry West and Equitable due to their
1996 sales. Also contributing to the decrease was diminished operating results
at Deerfield Mall and Prentice Plaza and the smaller gain recorded on the 1997
property sale when compared to the 1996 property sales. Partially offsetting
the decrease was improved operating results at Meidinger Tower and 1800 Sherman
and an increase in interest income earned on the Partnership's short-term
investments due to the proceeds from Certain of the Sold Properties being
available for investment. The improved operating results at Meidinger Tower was
primarily the result of the classification of Meidinger Tower as "Held of
Disposition" as of October 1, 1997 which precluded the Partnership from
recording provisions for deprecation or amortization on the property.
Net income, exclusive of gains on the sales and the results of operations of
the Sold Properties, increased by $177,200 for the year ended December 31, 1997
when compared to the year ended December 31, 1996. The increase was primarily
due to the improved operating results at Meidinger Tower and 1800 Sherman and
the increase in interest income, as previously discussed. Also contributing to
the increase was a decrease in general and administrative expenses for
accounting services and salaries. The increase was partially offset by
diminished operating results at Deerfield Mall and Prentice Plaza.
The following comparative discussion includes only the results of the
Partnership's four remaining properties as of December 31, 1997.
Rental revenues decreased by $118,500 or 1% for the year ended December 31,
1997 when compared to the year ended December 31, 1996. The decrease was
primarily due to a decrease in base rental income at Deerfield Mall due to a
decline in the average occupancy. Also contributing to the decrease was a
decrease in tenant expense reimbursements at Prentice Plaza resulting from a
refund received in 1997 for 1996 real estate taxes reducing amounts due from
tenants. Partially offsetting the decrease was an increase in base rental
income at 1800 Sherman due to an increase in rates charged new and renewing
tenants and the 1997 receipt as consideration for the early termination of a
portion of a tenant's lease at Prentice Plaza.
Interest expense on the Partnership's mortgage loans increased by $69,600 for
the year ended December 31, 1997 when compared to the year ended December 31,
1996. The increase was primarily due to an increase in the average interest
rate charged on the mortgage loan collateralized by Meidinger Tower. Partially
offsetting the increase was the effects of principal payments made during the
past 24 months on the Partnership's mortgage loans.
Depreciation and amortization expense decreased by $322,400 for the year ended
December 31, 1997 when compared to the year ended December 31, 1996. The
decrease was primarily due to the effect of the classification of Meidinger
Tower as "Held for Disposition" as of October 1, 1997.
Real estate tax expense increased by $128,900 for the year ended December 31,
1997 when compared with the year ended December 31, 1996. The increase was
primarily due to a reassessment of property values at Prentice Plaza and 1800
Sherman by the taxing authorities.
Repair and maintenance expenses increased by $119,100 for the year ended
December 31, 1997 when compared to the year ended December 31, 1996. The
increase was primarily due to an increase in repairs to the HVAC system and the
elevators at Meidinger Tower.
Property operating expenses decreased by $91,200 for the year ended December
31, 1997 when compared to the year ended December 31, 1996. The decrease was
primarily due to decreases in utility costs at Meidinger Tower and Prentice
Plaza and a decrease in security costs at Deerfield Mall.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
To increase and/or maintain occupancy levels at the Partnership's properties,
the General Partner, through its asset and property management groups,
continues to take the following actions: 1) implementation of marketing
programs, including hiring of third-party leasing agents or providing on-site
leasing personnel, advertising, direct mail campaigns and development of
building brochures; 2) early renewal of existing tenant leases and addressing
any expansion needs these tenants may have; 3) promotion of local broker events
and networking with local brokers; 4) networking with national level retailers;
5) cold-calling other businesses and tenants in the market area; and 6)
providing rental concessions or competitively pricing rental rates depending on
market conditions.
The rate of inflation has remained relatively stable during the years under
comparison and has had a minimal impact on the operating results of the
Partnership. The nature of various tenant lease clauses protects the
Partnership, to some extent, from increases in the rate of inflation. Certain
of the lease clauses provide for the following: (1) annual rent increases based
on the Consumer Price Index or graduated rental increases; (2) percentage
rentals at shopping centers, for which the Partnership receives as additional
rent a percentage of a tenant's sales over predetermined amounts and (3) total
or partial tenant reimbursement of property operating expenses (e.g., common
area maintenance, real estate taxes, etc.).
LIQUIDITY AND CAPITAL RESOURCES
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its properties.
Cash Flow (as defined in the Partnership Agreement) is generally not equal to
net income or cash flows as determined by GAAP, since certain items are treated
differently under the Partnership Agreement than under GAAP. Management
believes that to facilitate a clear understanding of the Partnership's
operations, an analysis of Cash Flow (as defined in the Partnership Agreement)
should be examined in conjunction with an analysis of net income or cash flows
as determined by GAAP. The second table in Select Financial Data includes a
reconciliation of Cash Flow (as defined in the Partnership Agreement) to cash
flow provided by operating activities as determined by GAAP. Such amounts are
not indicative of actual distributions to Partners and should not be considered
as an alternative to the results disclosed in the Statements of Income and
Expenses and Statements of Cash Flows.
The increase in Cash Flow (as defined in the Partnership Agreement) of $515,000
for the year ended December 31, 1998 when compared to the year ended December
31, 1997 was primarily due to reduced scheduled principal payments on the
Partnership's mortgage loans, primarily resulting from the payoff of the
Meidinger Tower loan in April 1998. In addition, the increase was due to
increased interest income and improved operating results at the Partnership's
properties, exclusive of gains on sales, depreciation and amortization, as
previously discussed.
The net increase in the Partnership's cash position of $4,825,500 for the year
December 31, 1998 was primarily the result of the maturity of investments in
debt securities and net cash provided by operating activities exceeding
principal amortization payments and expenditures made for capital and tenant
improvements and leasing costs. The proceeds received from the sales of
Meidinger Tower and 1800 Sherman were used to repay mortgage debt with the
remainder distributed to Limited Partners. Liquid assets of the Partnership as
of December 31, 1998 were comprised of amounts held for working capital
purposes.
Net cash provided by operating activities decreased by $521,300 for the year
ended December 31, 1998 when compared to the year ended December 31, 1997. The
decrease was primarily the result of the satisfaction of all trade liabilities
in connection with the sale of 1800 Sherman. The decrease was partially offset
by the increase in net income, exclusive of gains on sales, depreciation and
amortization, as previously discussed.
Net cash provided by investing activities increased by $38,056,600 for the year
ended December 31, 1998 when compared to the year ended December 31, 1997. The
increase was primarily due to the cash generated from the 1998 sales of
Meidinger Tower and 1800 Sherman exceeding the cash generated by the 1997 sale
of Regency. Also contributing to the increase was the maturity of investments
in debt securities. Investments in debt securities are the result of the
extension of the maturities of certain of the Partnership's short-term
investments in an effort to maximize the return on these amounts while they are
held for working capital purposes and distribution to Partners. These
investments were of investment-grade and matured less than one year from their
date of purchase.
The Partnership maintains working capital reserves to pay for capital
expenditures such as building and tenant improvements and leasing costs. During
the year ended December 31, 1998, the Partnership spent $304,300 for these
items and has budgeted to spend approximately $550,000 during 1999. Included in
this budgeted amount are capital and tenant improvements and leasing costs of
approximately $375,000 for Deerfield Mall and $175,000 for Prentice Plaza. The
amounts budgeted to be spent at both properties relate mostly to tenant
allowances and improvements. Actual amounts expended may vary depending on a
number of factors including actual leasing activity, results of property
operations, liquidity considerations, the sale of any of the properties and
other market conditions throughout the year. The General Partner believes that
these improvements and leasing costs are necessary in order to increase and/or
maintain occupancy levels in very competitive markets, maximize rental rates
charged to new and renewing tenants and to prepare the remaining properties for
eventual disposition.
On April 1, 1998, the Partnership consummated the sale of Meidinger Tower. Net
proceeds from this transaction were $6,190,300, which was net of closing
expenses and the repayment of the mortgage loan collateralized by the property.
In connection with this transaction, the Partnership distributed $6,126,500 or
$6.45 per Unit on August 31,1998 to Limited Partners of record as of April 1,
1998.
On August 6, 1998, a joint venture in which the Partnership owns a 50% interest
consummated the sale of 1800 Sherman. The Partnership's share of net proceeds
from this transaction were $7,284,000, which was net of closing expenses. The
joint venture was required to place $500,000 of the proceeds from this
transaction into an interest bearing account for a nine-month period. The
escrowed funds are intended to cover potential claims asserted by the purchaser
arising from representations or warranties made by the joint venture. The
Partnership distributed $7,171,300 or $7.55 per
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
Unit on November 30, 1998 to Limited Partners of record as of August 6, 1998.
The increase in net cash used for financing activities of $30,688,600 for the
year ended December 31, 1998 when compared to the year ended December 31, 1997
was primarily the result of the repayment of the mortgage loan in conjunction
with the 1998 sale of Meidinger Tower exceeding the repayment of the mortgage
loan in conjunction with the 1997 sale of Regency. The increase was also due to
the distribution of proceeds to Limited Partners from the sales of Meidinger
Tower and 1800 Sherman.
Pursuant to a modification of the Partnership's Front-End Fees loan agreement,
the Partnership has the option to defer payment of interest on this loan for an
81-month period beginning April 1, 1993. In addition, any interest payments
made by the Partnership from April 1, 1993 through December 31, 1999 may be
borrowed from an Affiliate of the General Partner. All deferred and
subsequently borrowed amounts (including accrued interest thereon) shall be due
and payable on January 1, 2000, and shall not be subordinated to payment of
Original Capital Contributions to Limited Partners. As of December 31, 1998,
the Partnership had not exercised its option to defer the payment of interest
on this loan.
The Year 2000 problem is the result of the inability of existing computer
programs to distinguish between a year beginning with "20" rather than "19".
This is the result of computer programs using two rather than four digits to
define an applicable year. If not corrected, any program having time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a wide variety of problems including
miscalculations, loss of data and failure of entire systems. Critical areas
that could be effected are accounts receivable and rent collections, accounts
payable, general ledger, cash management, fixed assets, investor services,
computer hardware, telecommunications systems and health, security, fire and
life safety systems.
The Partnership has engaged Affiliated and unaffiliated entities to perform all
of its critical functions that utilize software that may have time-sensitive
applications. All of these providers are providing these services for their own
organizations as well as for their clients. The General Partner, on behalf of
the Partnership, has been in close communication with each of these service
providers regarding steps that they are taking to assure that there will be no
serious interruption of the operations of the Partnership resulting from Year
2000 problems. Based on the results of these inquiries, as well as a review of
the disclosures by these service providers, the General Partner believes that
the Partnership will be able to continue normal business operations and will
incur no material costs related to Year 2000 issues.
The Partnership has not formulated a contingency plan. However, the General
Partner believes that based on the size of the Partnership's portfolio and its
limited number of transactions, aside from catastrophic failures of banks,
government agencies, etc., it could carry out substantially all of its critical
operations on a manual basis or easily convert to systems that are Year 2000
compliant.
Since the beginning of 1996, the Partnership has sold five of its remaining
seven properties. As disclosed above, during 1998 the Partnership distributed a
total of $13,297,800 of Sales Proceeds to Limited Partners. With two properties
remaining in its portfolio, the Partnership believes that the cash generated by
the remaining properties, deducting amounts to be utilized for building and
tenant improvements and principal payments on the Partnership's loans, may not
be substantial enough to maintain distributions of Cash Flow (as defined in the
Partnership Agreement). In light of this, the General Partner believes that it
is in the Partnership's best interest to retain Cash Flow (as defined in the
Partnership Agreement). Accordingly, cash distributions, with the exception of
the distributions of Sales Proceeds, to Partners continue to be suspended. The
General Partner believes that Cash Flow (as defined in the Partnership
Agreement) is one of the best and least expensive sources of cash available to
the Partnership. For the year ended December 31, 1998, Cash Flow (as defined in
the Partnership Agreement) of $1,604,100 was retained to supplement working
capital reserves. The General Partner continues to review other sources of cash
available to the Partnership.
Based upon the current estimated value of its assets, net of its outstanding
liabilities, together with its expected operating results and capital
expenditure requirements, the General Partner believes that the Partnership's
cumulative distributions to its Limited Partners from inception through the
termination of the Partnership will be substantially less than such Limited
Partners' Original Capital Contribution.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
With the exception of variable rate mortgage debt, the Partnership has no
financial instruments for which there are significant risks. Based on variable
rate debt outstanding as of December 31, 1998, for every 1% change in interest
rates, the Partnership's annual interest expense would change by $47,500.
10
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The response to this item is submitted as a separate section of this report. See
page A-1 "Index of Financial Statements, Schedule and Exhibits."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
(a) & (e) DIRECTORS
---------
The Partnership has no directors. First Capital Financial Corporation ("FCFC")
is the General Partner. The directors of FCFC, as of March 31, 1999, are shown
in the table below. Directors serve for one year or until their successors are
elected. The next annual meeting of FCFC will be held in June 1999.
Name Office
---- ------
Douglas Crocker II................................... Director
Sheli Z. Rosenberg................................... Director
Douglas Crocker II, 58, has been President and Chief Executive Officer since
December 1992 and a Director since January 1993 of the General Partner. Mr.
Crocker has been President, Chief Executive Officer and trustee of Equity
Residential Properties Trust since March 31, 1993. Mr. Crocker is a member of
the Board of Directors of Wellsford Real Properties Inc. and Ventas Inc. and
was a member of the Board of Directors of Horizon Group, Inc. from July 1996
to June 1998. Mr. Crocker was an Executive Vice President of Equity Financial
and Management Company ("EFMC") from November 1992 until March 1997.
Sheli Z. Rosenberg, 57, was President and Chief Executive Officer of the
General Partner from December 1990 to December 1992 and has been a Director of
the General Partner since September 1983; was Executive Vice President and
General Counsel for EFMC from October 1980 to November 1994; has been
President and Chief Executive Officer of Equity Group Investments, LLC ("EGI")
since November 1994; has been a Director of Great American Management and
Investment Inc. ("Great American") since June 1984 and is a director of
various subsidiaries of Great American. She is also a director of Anixter
International Inc., Capital Trust Inc., CVS Corporation, Illinova
Corporation, Illinois Power Co., Jacor Communications, Inc. and Manufactured
Home Communities, Inc. She is also a trustee of Equity Residential Properties
Trust and Equity Office Properties Trust. Ms. Rosenberg was a Principal of
Rosenberg & Liebentritt, P.C., counsel to the Partnership, the General Partner
and certain of their Affiliates from 1980 until September 1997. She had been
Vice President of First Capital Benefit Administrators, Inc. ("Benefit
Administrators") since July 22, 1987 until its liquidation in November 1995.
Benefit Administrators filed for protection under the Federal Bankruptcy laws
on January 3, 1995.
11
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
- -------- --------------------------------------------------
(b) & (e) EXECUTIVE OFFICERS
------------------
The Partnership does not have any executive officers. The executive officers
of the General Partner as of March 31, 1999 are shown in the table. All
officers are elected to serve for one year or until their successors are
elected and qualified.
Name Office
---- ------
Douglas Crocker II......................President and Chief Executive Officer
Donald J. Liebentritt...................Vice President
Norman M. Field.........................Vice President - Finance and Treasurer
PRESIDENT AND CEO - See Table of Directors above.
Donald J. Liebentritt, 48, has been Vice President of the General Partner
since July 1997 and is Chief Operating Officer and General Counsel of EGI,
Vice President and Assistant Secretary of Great American and Principal and
Chairman of the Board of Rosenberg & Liebentritt, P.C.
Norman M. Field, 50, has been Vice President of Finance and Treasurer of the
General Partner since February 1984, and also served as Vice President of
Great American from July 1983 until March 1995 and from July 1997 to the
present. Mr. Field had been Treasurer of Benefit Administrators since July 22,
1987 until its liquidation in November 1995. He was Chief Financial Officer of
Equality Specialties, Inc. ("Equality"), a subsidiary of Great American, from
August 1994 to April 1995.
(d) FAMILY RELATIONSHIPS
--------------------
There are no family relationships among any of the foregoing directors and
officers.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
With the exception of the bankruptcy matter disclosed under Items 10 (a), (b)
and (e), there are no involvements in certain legal proceedings among any of
the foregoing directors and officers.
12
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
(a,b,c & d) As stated in Item 10, the Partnership has no officers or directors.
Neither the General Partner, nor any director or officer of the General Partner,
received any direct remuneration from the Partnership during the year ended
December 31, 1998. However, the General Partner and its Affiliates do
compensate its directors and officers.
For additional information see Item 13 Certain Relationships and Related
Transactions.
(e) None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
(a) As of March 1, 1999, no person of record owned or was known by the
Partnership to own beneficially more than 5% of the Partnership's 949,843
Units then outstanding.
(b) The Partnership has no directors or executive officers. As of March 1,
1999, the executive officers and directors of the General Partner, as a
group, did not own any Units.
(c) None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
(a) Affiliates of the General Partner provide leasing, supervisory and property
management services to the Partnership. Compensation for these property
management services may not exceed 6% of the gross receipts from the
property being managed where the General Partner or Affiliates provide
leasing, re-leasing and leasing-related services, or 3% of gross receipts
where the General Partner or Affiliates do not perform leasing, re-leasing
and leasing-related services for a particular property. For the year ended
December 31, 1998, these Affiliates were entitled to leasing, property
management and supervisory fees of $189,700, of which $9,200 was due from
Affiliates as of December 31, 1998. Other Affiliates of the General Partner
were also entitled to $92,700 for fees, compensation and reimbursements for
insurance and personnel service fees. Compensation for these services are
on terms which are fair, reasonable and no less favorable to the
Partnership than reasonably could be obtained from unaffiliated persons. Of
these amounts, $4,900 was due to Affiliates as of December 31, 1998.
In addition to the principal balance, the Partnership is also obligated to
an Affiliate for interest incurred on the Front-End Fees Loan. The
Affiliate was entitled to $1,037,700 in interest for the year ended
December 31, 1998. In accordance with the Partnership Agreement, neither
the General Partner nor its Affiliates shall lend money to the Partnership
with interest rates and other finance charges and fees in excess of the
lesser of the amounts that are charged by unrelated lending institutions
for comparable loans for the same purpose in the same locality or 2% above
the prime rate of interest charged by Chase Manhattan Bank.
Pursuant to a modification of the Partnership's Front-End Fees Loan, the
Partnership has the option to defer payment of interest on this loan for a
81-month period beginning April 1, 1993. All deferred amounts shall be due
and payable on January 1, 2000, and shall not be subordinated to repayment
to the Limited Partners of their Original Capital Contribution. As of
December 31, 1998, the Partnership had not exercised its option to defer
the payment of interest on this loan.
In accordance with the Partnership Agreement, as compensation for services
rendered in managing the affairs of the Partnership, the General Partner
shall be entitled to receive subsequent to November 22, 1988, the
Termination of the Offering, a Portfolio Management Fee, payable quarterly,
which shall be an amount equal to the lesser of (i) 0.5% of the gross
value of the Partnership's assets (not reduced by indebtedness
collateralized by such assets), all as estimated
13
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
- -------- ----------------------------------------------
by the General Partner in its reasonable discretion, plus, to the
extent the Portfolio Management Fee paid in any prior year was less than
0.5% of the gross value of the Partnership's assets in such prior year,
the amount of such deficit, or (ii) an amount equal to the remainder
obtained by subtracting the aggregate amount previously paid to the
General Partner as Portfolio Management Fees during such fiscal year, from
an amount equal to 10% of the Partnership's aggregate Cash Flow (as defined
in the Partnership Agreement) (computed prior to the deduction for
Portfolio Management Fees) for such fiscal year. For the year ended
December 31, 1998, in conjunction with the suspension of distributions of
Cash Flow (as defined in the Partnership Agreement) to Limited Partners,
the General Partner was not paid a Portfolio Management Fee.
In accordance with the Partnership Agreement, Net Profits and Net Losses
(exclusive of Net Profits and Net Losses from a Major Capital Event) are
allocated 1% to the General Partner and 99% to the Limited Partners as a
group. Net Losses from a Major Capital Event are allocated: first, prior
to giving effect to any distributions of Sale or Refinancing Proceeds
from the transaction, to the General Partner and Limited Partners with
positive balances in their Capital Accounts, in proportion to and to the
extent of such positive balances; and second, the balance, if any, 1% to
the General Partner and 99% to the Limited Partners as a group. Net
Profits from a Major Capital Event are allocated: first, prior to giving
effect to any distributions of Sale or Refinancing Proceeds from the
transaction, Net Profit in the amount of the Minimum Gain (as defined in
the Partnership Agreement) attributable to the property that is the
subject of such Major Capital Event is allocated to the General Partner
and Limited Partners with negative balances in their Capital Accounts,
pro rata in proportion to such respective negative balances; second, to
the General Partner and each Limited Partner in proportion to and to the
extent of such amounts, if any, equal to the amount of Sale or
Refinancing Proceeds to be distributed to each such General Partner or
Limited Partner with respect to such Major Capital Event; and third, the
balance, if any, 20% to the General Partner and 80% to the Limited
Partners as a group. Notwithstanding anything to the contrary, there
shall be allocated to the General Partner not less than 1% of all items
of Partnership income, gain, loss, deduction and credit during the
existence of the Partnership. For the year ended December 31, 1998, the
General Partner was allocated Net Profits of $518,600 which included
$508,500 of gain from the sales of Partnership properties.
ANTEC Corporation ("ANTEC"), which is in the business of designing,
engineering, manufacturing and distributing cable television products, and
approximately 18.5% owned by Anixter International Inc., an Affiliate of
the General Partner, is obligated to the Partnership under a lease of
office space at Prentice Plaza. During the year ended December 31, 1998,
the Partnership's 50% share of ANTEC's rent and related payments amounted
to $177,800. The per square foot rent paid by ANTEC is comparable to that
paid by other tenants at Prentice Plaza.
Manufactured Homes Communities, Inc. ("MHC"), a real estate investment trust
which is in the business of owning and operating mobile home communities, an
Affiliate of the General Partner, is obligated to the Partnership under a
lease of office space at Prentice Plaza. During the year ended December 31,
1998, the Partnership's 50% share of MHC's rent amounted to $39,000. The per
square foot rent paid by MHC is comparable to that paid by other tenants at
Prentice Plaza.
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), serves as legal counsel to the
Partnership, the General Partner and certain of their Affiliates. Donald J.
Liebentritt, Vice President, is a Principal and Chairman of the Board of
Rosenberg. For the year ended December 31, 1998, Rosenberg was entitled to
$139,100 for legal fees from the Partnership. Compensation for these
services are on terms which are fair, reasonable and no less favorable to
the Partnership than reasonably could be obtained from unaffiliated persons.
As of December 31, 1998 the Partnership owed $2,200 to Rosenberg.
(c) No management person is indebted to the Partnership.
(d) None.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
(a,c & d) See Index of Financial Statements, Schedule and Exhibits on page A-1
of Form 10-K.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended December 31,
1998.
15
<PAGE>
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.
FIRST CAPITAL INCOME AND GROWTH FUND - SERIES XII
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Dated: March 26, 1999 By: /s/ DOUGLAS CROCKER II
-------------- -----------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
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.
<TABLE>
<S> <C> <C>
/s/ DOUGLAS CROCKER II March 26, 1999 President, Chief Executive Officer and
- -------------------------- -------------- Director of the General Partner
DOUGLAS CROCKER II
/s/ SHELI Z. ROSENBERG March 26, 1999 Director of the General Partner
- -------------------------- --------------
SHELI Z. ROSENBERG
/s/ DONALD J. LIEBENTRITT March 26, 1999 Vice President
- -------------------------- --------------
DONALD J. LIEBENTRITT
/s/ NORMAN M. FIELD March 26, 1999 Vice President - Finance and Treasurer
- -------------------------- --------------
NORMAN M. FIELD
</TABLE>
16
<PAGE>5
INDEX OF FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
<TABLE>
<CAPTION>
Pages
-------
<S> <C> <C>
Report of Independent Auditors A-2
Balance Sheets as of December 31, 1998 and 1997 A-3
Statements of Partners' Capital for the Years Ended
December 31, 1998, 1997 and 1996 A-3
Statements of Income and Expenses for the Years Ended
December 31, 1998, 1997 and 1996 A-4
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 A-4
Notes to Financial Statements A-5 to A-8
SCHEDULE FILED AS PART OF THIS REPORT
III - Real Estate and Accumulated Depreciation as of December 31, 1998 A-9 and A-10
</TABLE>
All other schedules have been omitted as inapplicable, or for the reason that
the required information is shown in the financial statements or notes thereto.
EXHIBITS FILED AS PART OF THIS REPORT
EXHIBITS (3 & 4) First Amended and Restated Certificate and Agreement of Limited
Partnership as set forth on pages A-1 through A-37 of the Partnership's
definitive Prospectus dated May 8, 1987; Registration Statement No. 33-12269,
filed pursuant to Rule 424 (b), is incorporated herein by reference.
EXHIBIT (10) Material Contracts
- ------------
Real Estate Sale Agreement for the sale of the Partnership's investment in
Meidinger Tower filed as an exhibit to the Partnership's Report on Form 8-K
dated April 14, 1998 is incorporated herein by reference.
Real Estate Sale Agreement for the sale of the Partnership's investment in 1800
Sherman Office Building filed as an exhibit to the Partnership's Report on Form
8-K dated August 21, 1998 is incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
- ------------
The 1997 Annual Report to Limited Partners is being sent under separate cover,
not as a filed document and not via EDGAR, for the information of the
commission.
EXHIBIT (27) Financial Data Schedule
- ------------
A-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners
First Capital Income and Growth Fund - Series XII
Chicago, Illinois
We have audited the accompanying balance sheets of First Capital Income and
Growth Fund - Series XII, A Real Estate Limited Partnership, as of December 31,
1998 and 1997, and the related statements of income and expenses, partners'
capital and cash flows for each of the three years in the period ended December
31, 1998. Our audit also included the financial statement schedule listed in the
accompanying index. These financial statements and schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
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 First Capital Income and Growth
Fund - Series XII, A Real Estate Limited Partnership at December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Chicago, Illinois
February 26, 1999
2
<PAGE>
BALANCE SHEETS
December 31, 1998 and 1997
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 9,757,200 $ 12,034,200
Buildings and improvements 33,926,200 69,717,000
- ------------------------------------------------------------------------------
43,683,400 81,751,200
Accumulated depreciation and amortization (11,287,400) (21,860,700)
- ------------------------------------------------------------------------------
Total investment properties, net of
accumulated depreciation and amortization 32,396,000 59,890,500
Cash and cash equivalents 9,704,900 4,879,400
Investments in debt securities 3,948,400
Restricted cash 100,000
Rents receivable 351,100 379,000
Escrow deposits 379,000 552,400
Due from Affiliates 2,100
Other assets (net of accumulated amortization
on loan acquisition costs of $773,700 and
$919,100, respectively) 146,100 356,000
- ------------------------------------------------------------------------------
$ 42,979,200 $ 70,105,700
- ------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loans payable $ 21,387,900 $ 43,773,700
Front-End Fees Loan payable to Affiliate 13,434,400 13,434,400
Accounts payable and accrued expenses 459,800 1,435,200
Due to Affiliates 5,000
Security deposits 152,100 231,800
Other liabilities 216,800 199,000
- ------------------------------------------------------------------------------
35,651,000 59,079,100
- ------------------------------------------------------------------------------
Partners' capital:
General Partner (deficit) (1,146,000) (1,664,600)
Limited Partners (1,000,000 Units issued,
949,843 Units outstanding) 8,474,200 12,691,200
- ------------------------------------------------------------------------------
7,328,200 11,026,600
- ------------------------------------------------------------------------------
$ 42,979,200 $ 70,105,700
- ------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1998, 1997 and 1996
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital, January
1, 1996 $(1,696,600) $ 9,527,900 $ 7,831,300
Net income for the year ended
December 31, 1996 21,600 2,134,000 2,155,600
- -------------------------------------------------------------------------------
Partners' (deficit) capital, December
31, 1996 (1,675,000) 11,661,900 9,986,900
Net income for the year ended
December 31, 1997 10,400 1,029,300 1,039,700
- -------------------------------------------------------------------------------
Partners' (deficit) capital, December
31, 1997 (1,664,600) 12,691,200 11,026,600
Net income for the year ended
December 31, 1998 518,600 9,080,800 9,599,400
Distributions for the year ended
December 31, 1998 (13,297,800) (13,297,800)
- -------------------------------------------------------------------------------
Partners' (deficit) capital, December
31, 1998 $(1,146,000) $ 8,474,200 $ 7,328,200
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the years ended December 31, 1998, 1997 and 1996
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $ 7,895,700 $12,145,300 $16,602,000
Interest 773,500 452,500 320,900
Gain on sales of property 8,584,500 845,500 976,300
- -----------------------------------------------------------------------------
17,253,700 13,443,300 17,899,200
- -----------------------------------------------------------------------------
Expenses:
Interest:
Affiliates 1,037,700 1,040,900 1,016,600
Nonaffiliates 2,092,800 3,479,100 4,188,100
Depreciation and amortization 1,196,000 2,159,900 2,616,700
Property operating:
Affiliates 260,100 493,900 1,134,900
Nonaffiliates 892,200 1,500,600 2,047,500
Real estate taxes 1,213,400 1,832,300 2,078,000
Insurance--Affiliate 59,100 102,300 155,200
Repairs and maintenance 752,600 1,606,400 2,280,100
General and administrative:
Affiliates 37,600 36,600 54,700
Nonaffiliates 112,800 151,600 171,800
- -----------------------------------------------------------------------------
7,654,300 12,403,600 15,743,600
- -----------------------------------------------------------------------------
Net income $ 9,599,400 $ 1,039,700 $ 2,155,600
- -----------------------------------------------------------------------------
Net income allocated to General Partner $ 518,600 $ 10,400 $ 21,600
- -----------------------------------------------------------------------------
Net income allocated to Limited Partners $ 9,080,800 $ 1,029,300 $ 2,134,000
- -----------------------------------------------------------------------------
Net income allocated to Limited Partners
per Unit (949,843 Units Outstanding) $ 9.56 $ 1.08 $ 2.25
- -----------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,599,400 $ 1,039,700 $ 2,155,600
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,196,000 2,159,900 2,616,700
Gain on sales of property (8,584,500) (845,500) (976,300)
Changes in assets and liabilities:
Decrease in rents receivable 27,900 170,700 13,600
Decrease in other assets 143,900 46,500 360,600
(Decrease) in accounts payable and
accrued expenses (975,400) (504,600) (748,100)
(Decrease) increase in due to
Affiliates (7,100) (181,900) 7,500
Increase (decrease) in other
liabilities 17,800 54,500 (10,700)
- -------------------------------------------------------------------------------
Net cash provided by operating
activities 1,418,000 1,939,300 3,418,900
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for building and tenant
improvements (304,300) (362,600) (899,500)
Decrease (increase) in investments
in debt securities 3,948,400 (3,452,100) (496,300)
Proceeds from the sales of property 35,253,300 4,733,700 12,189,100
Decrease in restricted cash 100,000
Decrease (increase) in escrow
deposits 173,400 195,200 (619,900)
- -------------------------------------------------------------------------------
Net cash provided by investing
activities 39,170,800 1,114,200 10,173,400
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on mortgage loans
payable (606,800) (1,265,000) (1,085,200)
Repayment of mortgage loans payable (21,779,000) (3,819,700) (10,461,700)
Distributions to Partners (13,297,800)
Loan costs incurred (28,500)
(Decrease) increase in security
deposits (79,700) 10,000 (99,700)
- -------------------------------------------------------------------------------
Net cash (used for) financing
activities (35,763,300) (5,074,700) (11,675,100)
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 4,825,500 (2,021,200) 1,917,200
Cash and cash equivalents at the
beginning of the year 4,879,400 6,900,600 4,983,400
- -------------------------------------------------------------------------------
Cash and cash equivalents at the end
of the year $ 9,704,900 $ 4,879,400 $ 6,900,600
- -------------------------------------------------------------------------------
Supplemental information:
Interest paid during the year to
Affiliates $ 1,037,700 $ 1,128,400 $ 1,016,600
- -------------------------------------------------------------------------------
Interest paid during the year to
nonaffiliates $ 2,252,200 $ 3,584,600 $ 4,265,100
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement filed with the Securities and
Exchange Commission on Form S-11. Definitions of these terms are contained in
Article III of the First Amended and Restated Certificate and Agreement of
Limited Partnership, which is included in the Registration Statement and
incorporated herein by reference.
ORGANIZATION:
The Partnership was formed on February 24, 1987, by the filing of a Certificate
and Agreement of Limited Partnership with the Recorder of Deeds of Cook County,
Illinois, and commenced the Offering of Units on May 8, 1987. The Certificate
and Agreement, as amended and restated, authorized the sale to the public of
500,000 Units (with the General Partner's option to increase to 1,000,000
Units) and not less than 14,000 Units pursuant to the Prospectus. On June 9,
1987, the required minimum subscription level was reached and the Partnership's
operations commenced. The General Partner exercised its option to increase the
Offering to 1,000,000 Units, which amount was sold prior to the Termination of
the Offering in November 1988. The Partnership was formed to invest primarily
in existing, improved, income-producing real estate.
In 1998, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which was effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for the way that public business enterprises report information about
operating segments and major customers in their annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports in the second year of application. The
Partnership has one reportable segment as the Partnership is in the disposition
phase of its life cycle, wherein it is seeking to liquidate its remaining
operating assets. Management's main focus, therefore, is to prepare its assets
for sale and find purchasers for its remaining assets when market conditions
warrant such an action. The adoption of Statement 131 did not affect the
results of operations or financial position. The Partnership has one tenant who
occupies 15% of the Partnership's rentable space.
The Partnership Agreement provides that the Partnership will be dissolved on or
before December 31, 2017. The Limited Partners, by a majority vote, may
dissolve the Partnership at any time.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). The Partnership utilizes the accrual
method of accounting. Under this method, revenues are recorded when earned and
expenses are recorded when incurred. The Partnership recognizes rental income
that is contingent upon tenants' achieving specified targets only to the extent
that such targets are achieved.
Preparation of the Partnership's financial statements in conformity with 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.
The financial statements include the Partnership's 50% interest in three joint
ventures and its 25% interest in another joint venture with Affiliated
partnerships. Two of the 50% joint ventures and the 25% joint venture were
formed for the purpose of each acquiring a 100% interest in certain real
property and one of the 50% joint ventures was formed for the purpose of
acquiring a preferred majority interest in certain real property. These joint
ventures are operated under the common control of the General Partner.
Accordingly, the Partnership's pro rata share of the joint ventures' revenues,
expenses, assets, liabilities and Partners' capital is included in the
financial statements. With the exception of one 50% joint venture, the
properties in all joint ventures have been sold and the joint ventures
dissolved.
The Partnership is not liable for federal income taxes as the Partners
recognize their proportionate share of the Partnership income or loss in their
individual tax returns; therefore, no provision for federal income taxes is
made in the financial statements of the Partnership. In addition, it is not
practicable for the Partnership to determine the aggregate tax bases of the
individual Partners; therefore, the disclosure of the differences between the
tax bases and the reported assets and liabilities of the Partnership would not
be meaningful.
Commercial rental properties held for investment are recorded at cost, net of
any provisions for value impairment, and depreciated (exclusive of amounts
allocated to land) on the straight-line method over their estimated useful
lives. Upon classifying a commercial rental property as held for disposition,
no further depreciation or amortization of such property is provided for in the
financial statements. Lease acquisition fees are recorded at cost and amortized
over the life of each respective lease. Repair and maintenance costs are
expensed as incurred; expenditures for improvements are capitalized and
depreciated over the estimated life of such improvements.
The Partnership evaluates its commercial rental properties for impairment when
conditions exist which may indicate that it is probable that the sum of
expected future cash flows (undiscounted) from a property is less than its
carrying basis. Upon determination that an impairment has occurred, the
carrying basis in the rental property is reduced to its estimated fair value.
Management was not aware of any indicator that would result in a significant
impairment loss during the periods reported.
Loan acquisition costs are amortized over the term of the mortgage loan made in
connection with the acquisition of Partnership properties or refinancing of
Partnership loans. When a property is disposed of or a loan is refinanced, the
related loan acquisition costs and accumulated amortization are removed from
the respective accounts and any unamortized balance is charged to expense.
A-5
<PAGE>
Property sales are recorded when title transfers and sufficient consideration
has been received by the Partnership. Upon disposition, the related costs and
accumulated depreciation and amortization are removed from the respective
accounts. Any gain or loss on sale is recognized in accordance with GAAP.
Cash equivalents are considered all highly liquid investments with a maturity
of three months or less when purchased.
Investments in debt securities are comprised of corporate debt securities and
are classified as held-to-maturity. These investments are carried at their
amortized cost basis in the financial statements, which approximated fair
market value. These securities generally mature less than one year from their
date purchase.
The Partnership's financial statements include financial instruments, including
receivables, escrow deposits, restricted cash, trade liabilities and mortgage
debt. The Partnership considers the disclosure of the fair value of its
mortgage debt to be impracticable due to the general illiquid nature of the
real estate financing market and an inability to obtain comparable financing on
certain properties. The fair value of all other financial instruments,
including cash and cash equivalents, was not materially different from their
carrying value at December 31, 1998 and 1997.
2. RELATED PARTY TRANSACTIONS:
In accordance with the Partnership Agreement, as compensation for services
rendered in managing the affairs of the Partnership, the General Partner shall
be entitled to receive subsequent to November 22, 1988, the Termination of the
Offering, a Portfolio Management Fee, payable quarterly, which shall be an
amount equal to the lesser of (i) 0.5% of the gross value of the Partnership's
assets (not reduced by indebtedness collateralized by such assets), all as
estimated by the General Partner in its reasonable discretion, plus, to the
extent the Portfolio Management Fee paid in any prior year was less than 0.5%
of the gross value of the Partnership's assets in such prior year, the amount
of such deficit, or (ii) an amount equal to the remainder obtained by
subtracting the aggregate amount previously paid to the General Partner as
Portfolio Management Fees during such fiscal year, from an amount equal to 10%
of the Partnership's aggregate Cash Flow (as defined in the Partnership
Agreement) (computed prior to the deduction for Portfolio Management Fees) for
such fiscal year. For the years ended December 31, 1998, 1997 and 1996, in
conjunction with the suspension of distributions of Cash Flow (as defined in
the Partnership Agreement) to Limited Partners, the General Partner was not
paid a Portfolio Management Fee.
In accordance with the Partnership Agreement, Net Profits and Net Losses
(exclusive of Net Profits and Net Losses from a Major Capital Event) are
allocated 1% to the General Partner and 99% to the Limited Partners as a group.
Net Losses from a Major Capital Event are allocated: first, prior to giving
effect to any distributions of Sale or Refinancing Proceeds from the
transaction, to the General Partner and Limited Partners with positive balances
in their Capital Accounts, in proportion to and to the extent of such positive
balances; and second, the balance, if any, 1% to the General Partner and 99% to
the Limited Partners as a group. Net Profits from a Major Capital Event are
allocated: first, prior to giving effect to any distributions of Sale or
Refinancing Proceeds from the transaction, Net Profit in the amount of the
Minimum Gain attributable to the property that is the subject of such Major
Capital Event is allocated to the General Partner and Limited Partners with
negative balances in their Capital Accounts, pro rata in proportion to such
respective negative balances; second, to the General Partner and each Limited
Partner in proportion to and to the extent of such amounts, if any, equal to
the amount of Sale or Refinancing Proceeds to be distributed to each such
General Partner or Limited Partner with respect to such Major Capital Event;
and third, the balance, if any, 20% to the General Partner and 80% to the
Limited Partners as a group. Notwithstanding anything to the contrary, there
shall be allocated to the General Partner not less than 1% of all items of
Partnership income, gain, loss, deduction and credit during the existence of
the Partnership. For the year ended December 31, 1998, the General Partner was
allocated a Net Profit of $518,600 which included a net gain of $508,500 from
the sale of Partnership properties. For the year ended December 31, 1997, the
General Partner was allocated a Net Profit of $10,400, which included a net
gain of $8,500 from the sale of a Partnership property. For the year ended
December 31, 1996, the General Partner was allocated a Net Profit of $21,600,
which included a gain of $9,800 from the sale of two Partnership properties.
Fees and reimbursements paid and payable/(receivable) by the Partnership to
Affiliates were as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------------
1998 1997 1996
------------------ ------------------ -------------------
Paid Payable Paid Payable Paid Payable
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property management and
leasing fees $ 202,500 $(9,200) $ 511,300 $3,600 $1,006,800 $ 32,000
Interest expense on
Front-End Fees Loan
(Note 3) 1,037,700 None 1,128,400 None 1,021,300 87,500
Reimbursement of
property insurance
premiums 59,100 None 102,300 None 155,200 None
Legal 136,900 2,200 86,200 None 132,600 63,100
Reimbursement of
expenses, at cost:
--Accounting 19,400 3,100 24,100 1,100 47,000 3,700
--Investor
communication 10,700 1,800 9,800 300 15,500 600
--Other None None None None 300 None
- -----------------------------------------------------------------------------------
$1,466,300 $(2,100) $1,862,100 $5,000 $2,378,700 $186,900
- -----------------------------------------------------------------------------------
</TABLE>
ANTEC Corporation ("ANTEC"), which is in the business of designing,
engineering, manufacturing and distributing cable television products, and
approximately 18.5% owned by Anixter International Inc., an Affiliate of the
General Partner, is obligated to the Partnership under a lease of office space
at Prentice Plaza. During the years ended December 31, 1998, 1997 and 1996 the
Partnership's 50% share of ANTEC's rent and reimbursement of expenses amounted
to $177,800, $137,000 and $293,400, respectively. The per square foot rent paid
by ANTEC is comparable to that paid by other tenants at Prentice Plaza.
Manufactured Home Communities, Inc. ("MHC") a real estate investment trust,
which is in the business of owning and operating mobile home communities, an
Affiliate of the General Partner, is obligated to the Partnership under a lease
of office
A-6
<PAGE>
space at Prentice Plaza. During the years ended December 31, 1998, 1997 and
1996 the Partnership's 50% share of MHC's rent amounted to $39,000, $21,800 and
$29,800, respectively. The per square foot rent paid by MHC is comparable to
that paid by other tenants at Prentice Plaza.
On-site property management for the Partnership's properties is provided by an
Affiliate of the General Partner and a third-party property management group
for a fee equal to 3% of gross rents received by the properties. The Affiliate
and third-party property management groups are entitled to leasing fees equal
to 3% of gross rents received, reduced by leasing fees, if any, paid to third
parties.
3. FRONT-END FEES LOAN PAYABLE TO AFFILIATE:
The Partnership borrowed from an Affiliate of the General Partner an amount
needed for the payment of securities sales commissions, Offering and
Organizational Expenses and other Front-End Fees, other than Acquisition Fees.
Repayment of the principal amount of the Front-End Fees Loan is subordinated to
payment to the Limited Partners of 100% of their Original Capital Contribution
from Sale or Refinancing Proceeds. Interest on the outstanding balance of this
loan is due and payable monthly at a rate no greater than the cost of funds
obtained by the Affiliate from unaffiliated lenders.
As of December 31, 1998, the Partnership had drawn $13,434,400 under the Front-
End Fees Loan agreement, which is the full amount available pursuant to the
loan's terms. The interest rate paid on the Front-End Fees Loan is subject to
change in accordance with the loan agreement. The weighted average interest
rate for the year ended December 31, 1998 was 7.72%. As of December 31, 1998,
the interest rate was 7.63%.
Pursuant to a modification of this loan agreement, the Partnership has the
option to defer payment of interest on this loan for an 81-month period
beginning April 1, 1993. In addition, any interest payments made by the
Partnership from April 1, 1993 through December 31, 1999 may be borrowed from
the Affiliate. All deferred and subsequently borrowed amounts (including
accrued interest thereon) shall be due and payable on January 1, 2000, and
shall not be subordinated to payment of Original Capital Contributions to
Limited Partners. As of December 31, 1998, the Partnership had not exercised
its option to defer the payment of interest on this loan.
4. MORTGAGE LOANS PAYABLE:
Mortgage loans payable at December 31, 1998 and 1997, consisted of the
following loans which are non-recourse:
<TABLE>
<CAPTION>
Principal Balance at Average Estimated
Property Pledged as ----------------------- Interest Maturity Periodic Balloon
Collateral 12/31/98 12/31/97 Rate Date Payment (b) Payment (c)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deerfield Mall $16,633,500 $17,196,600 7.60% 3/1/01 $154,257 $15,256,700
Prentice Plaza (50%) 4,754,400 4,798,100 7.50%(a) 12/19/00 (d) $ 4,655,200
Meidinger Tower (e) 21,779,000
- -----------------------------------------------------------------------------------------
$21,387,900 $43,773,700
- -----------------------------------------------------------------------------------------
</TABLE>
(a) The average interest rate represents an average for the year ended December
31, 1998. Interest rates are subject to change in accordance with the
provisions of the loan agreement for Prentice Plaza. As of December 31,
1998, the interest rate on the loan collateralized by Prentice Plaza was
7.43%.
(b) Represents level monthly principal and interest payments.
(c) These repayments may require either sale or refinancing of the respective
property.
(d) In addition to monthly interest, monthly principal payments of $3,960 and
$4,305 are required beginning on January 1, 1999 and 2000, respectively.
(e) The Partnership, repaid the mortgage collateralized by Meidinger Tower with
a portion of the proceeds generated from its sale (see Note 7 for
additional information).
Principal amortization of mortgage loans payable for the duration of the loans
as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
1999 654,900
2000 5,362,200
2001 15,370,800
--------
$21,387,900
--------
</TABLE>
5. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rental income due on noncancelable
leases as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
1999 $ 4,184,900
2000 3,742,200
2001 3,351,900
2002 3,010,100
2003 2,720,500
Thereafter 14,000,600
--------------
$31,010,200
--------------
</TABLE>
A-7
<PAGE>
The Partnership is subject to the usual business risks associated with the
collection of the above-scheduled rentals. In addition to the amounts scheduled
above, the Partnership expects to receive rental revenue from operating expense
reimbursements and percentage rents. Percentage rents earned for the years
ended December 31, 1998, 1997 and 1996 were $33,200, $29,400 and $147,400,
respectively.
6. INCOME TAX:
The Partnership utilizes the accrual method of accounting for both income tax
reporting and financial statement purposes. Financial statement results will
differ from income tax results due to the use of differing depreciation lives
and methods, the recognition of rents received in advance as taxable income and
the Partnership's provisions for value impairment. For federal income tax
reporting purposes, the Partnership reported a (loss) of $(6,489,100) for the
year ended December 31, 1998. The aggregate cost of commercial rental
properties for federal income tax purposes at December 31, 1998 was
$52,483,400.
7. PROPERTY SALES:
On August 6, 1998, a joint venture in which the Partnership owned a 50%
interest, consummated the sale of 1800 Sherman Office Building for a sale price
of $15,050,000. The Partnership's share of net proceeds from this transaction
was $7,284,000, which was net of closing expenses. The Partnership recorded a
gain of $1,626,900 for the year ended December 31, 1998 and distributed
$7,171,300 or $7.55 per Unit on November 30, 1998 to Limited Partners of record
as of August 6, 1998. In accordance with the contract to sell the property, the
joint venture placed $500,000 of the proceeds from this sale in an interest
bearing escrow account for a nine-month period. The funds placed into escrow
are intended to cover potential claims asserted by the purchaser arising from
the representations and warranties made by the joint venture. For income tax
reporting purposes, the Partnership reported a gain of $216,700 for the year
ended December 31, 1998.
On April 1, 1998, the Partnership consummated the sale of Meidinger Tower for a
sale price of $28,450,000. Net proceeds from this transaction amounted to
$6,190,300, which was net of closing expenses and the repayment of the mortgage
loan encumbering the property. The Partnership recorded a gain of $6,957,600
for the year ended December 31, 1998 and distributed $6,126,500 or $6.45 per
Unit on August 31, 1998 to Limited Partners of record as of April 1, 1998. For
income tax reporting purposes the Partnership reported a (loss) of $(7,134,000)
for the year ended December 31, 1998.
On June 16, 1997, the joint venture in which the Partnership owned a 25%
interest, completed the sale of Regency, for a sale price of $19,325,000. The
Partnership's share of proceeds from this transaction was $867,900, which was
net of closing expenses and the repayment of the mortgage loan encumbering the
property. The Partnership recorded a gain of $799,400 in connection with this
sale. Net proceeds received from this transaction were retained to supplement
working capital reserves. For income tax reporting purposes the Partnership
reported a (loss) of $(2,308,900) for the year ended December 31, 1997.
On October 16, 1996, the Partnership consummated the sale of Equitable for a
price of $7,000,000. Proceeds from this transaction approximated $520,000,
which was net of selling expenses and the repayment of the mortgage loan
collateralized by Equitable. During 1996, the Partnership recorded a net gain
of $160,200 for financial statement purposes in connection with this sale. For
income tax reporting purposes, the Partnership reported a (loss) of
$(7,742,500) for the year ended December 31, 1996 in connection with this sale.
For the year ended December 31, 1997, the Partnership recorded a gain of
$46,100 for financial statement reporting purposes in connection with an
overaccrual of legal fees.
On August 28, 1996, the joint venture, which owned Sentry West, consummated the
sale of Sentry West for a sale price of $11,650,000. The Partnership's 50%
share of the proceeds from this transaction, which was net of selling expenses
and the repayment of the mortgage loan on Sentry West was approximately
$894,000 and was retained to supplement working capital. The net gain reported
by the Partnership for financial statement purposes was $816,100. For income
tax purposes, the Partnership reported a (loss) of $(4,762,500) for the year
ended December 31, 1996 in connection with this sale.
All of the above sales, with the exception of post sale matters, were all-cash
transactions, with no further involvement on the part of the Partnership.
A-8
<PAGE>
FIRST CAPITAL INCOME AND GROWTH FUND - SERIES XII
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Column A Column B Column C Column D
- --------------- ----------- ------------------------- -------------------------
Initial cost Costs capitalized
to Partnership subsequent to acquisition
------------------------- -------------------------
Buildings
and
Encum- Improve- Improve- Carrying
Description brances Land ments ments Costs (1)
- --------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Office Building:
- ---------------
Prentice Plaza
(Englewood, CO)
(50% Interest) 4,754,400 1,139,600 7,390,200 1,439,500 40,800
Shopping Center:
- ---------------
Deerfield Mall
(Deerfield
Beach, FL)
(100% interest) 16,633,500 9,607,900 30,996,300 1,676,200 192,900
----------- ----------- ----------- ---------- --------
$21,387,900 $10,747,500 $38,386,500 $3,115,700 $233,700
=========== =========== =========== ========== ========
Column E Column F Column G Column H Column I
--------------------------------------- ---------- --------- -------- ------------
Life on
Gross amount at which which
carried at close of period deprecia-
--------------------------------------- tion in lat-
Buildings Accumu- est income
and lated Date of statements
Improve- Deprecia- construc- Date is com-
Land ments Total (2)(3) tion (2) tion Acquired puted
----------- ----------- ------------ ---------- --------- -------- ------------
Office Building:
- ---------------
Prentice Plaza
(Englewood, CO) 35 (5)
(50% Interest) 1,139,600 8,870,500 10,010,100 3,730,200 1985 Mar. 1988 2-10 (6)
Shopping Center:
- ---------------
Deerfield Mall
(Deerfield
Beach, FL) 35 (5)
(100% interest) 8,617,500 25,055,800 33,673,300 (4) 7,557,200 1987 Jan. 1989 1-5 (6)
----------- ----------- ----------- -----------
$ 9,757,100 $33,926,300 $43,683,400 $11,287,400
=========== =========== =========== ===========
</TABLE>
See accompanying notes on the following page.
A-9
<PAGE>
FIRST CAPITAL INCOME AND GROWTH FUND - SERIES XII
NOTES TO SCHEDULE III
Note 1. Consists of legal fees, appraisal fees, title costs and other related
professional fees.
Note 2. The following is a reconciliation of activity in columns E and F.
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ---------------------------- ------------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance
at the
beginning
of the year $ 81,751,200 $ 21,860,700 $86,582,300 $21,081,700 $104,005,500 $25,675,600
Additions
during
the year:
Improvements 304,300 362,600 899,500
Provisions for
depreciation 1,140,700 2,097,000 2,616,700
Deductions
during the
year:
Cost of real
estate
disposed (38,372,100) (5,193,700) (18,322,700)
Accumulated
depreciation
on real
estate
disposed (11,714,000) (1,318,000) (7,210,600)
------------ ----------- ----------- ----------- ----------- -----------
Balance at
the end of
the year $ 43,683,400 $ 11,287,400 $81,751,200 $21,860,700 $86,582,300 $21,081,700
============ ============ =========== =========== =========== ===========
</TABLE>
Note 3. The aggregate cost for federal income tax purposes as of December 31,
1998 was $52,843,400
Note 4. Includes provisions for value impairment cumulatively totalling
$8,800,000 for Deerfield Mall.
Note 5. Estimated useful life for building in years.
Note 6. Estimated useful life for improvements in years.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,704,900
<SECURITIES> 0
<RECEIVABLES> 351,100
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,058,100
<PP&E> 43,683,400
<DEPRECIATION> 11,287,400
<TOTAL-ASSETS> 42,979,200
<CURRENT-LIABILITIES> 611,900
<BONDS> 34,822,300
0
0
<COMMON> 0
<OTHER-SE> 7,328,200
<TOTAL-LIABILITY-AND-EQUITY> 42,979,200
<SALES> 0
<TOTAL-REVENUES> 17,253,700
<CGS> 0
<TOTAL-COSTS> 3,177,400
<OTHER-EXPENSES> 150,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,130,500
<INCOME-PRETAX> 9,599,400
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,599,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,599,400
<EPS-PRIMARY> 9.56
<EPS-DILUTED> 9.56
</TABLE>
