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, 1996 the Partnership, with its respective joint venture partners, has dissolved as a result of the sale and/or disposition of: 1) one 50% and one 75% interest 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) one real property investment.
Property management services for the Partnership's real estate investments are provided by Affiliates of the General Partner 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, 1997, there were 16 employees at the Partnership's properties for on-site property maintenance and administration.
ITEM 2.

ITEM 2. PROPERTIES (a)(b)
As of December 31, 1996, the Partnership owned directly or through joint ventures, the following five properties, which were owned in fee simple and, except for 1800 Sherman Office Building ("1800 Sherman"), were encumbered by mortgages. For complete details of the material terms of the encumbrances, refer to Note 5 of the Notes to Financial Statements.
ITEM 2. PROPERTIES (a)(b) (Continued)
(a) For a discussion of significant operating results and major capital expenditures planned for the Partnership's properties refer to Item 7.
(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, 1800 Sherman, Meidinger Tower and Prentice Plaza the Partnership's most significant properties, was $664,100, $464,800, $400,800 and $143,000, respectively, for the year ended December 31, 1996. 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 most significant properties' occupancy rates as of December 31 for each of the last five years: (excludes properties that were sold during 1996)
ITEM 2. PROPERTIES (Continued) - ------ ----------
The amounts in the following table represent each of the Partnership's most significant 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: (excludes properties that were sold during 1996)
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 most significant properties:
ITEM 2. PROPERTIES (Continued)
television products)
(a) The Partnership's share of per annum base rents for each of the tenants listed above for each of the years between 1997 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 ended December 31, 2006 for the Partnership's most significant properties:
(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, 1996.
ITEM 3.

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, 1996. Ordinary routine litigation incidental to the business which is not deemed material was pursued during the quarter ended December 31, 1996.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a,b,c & d) None.
PART II
ITEM 5.

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, 1997, there were 7,391 Holders of Units.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
(a) Net (loss) allocated to Limited Partners for 1993 included an extraordinary gain on extinguishment of debt. (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"):
(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-9 in this report and the supplemental schedule on pages A-10 and A-11.
ITEM 6. SELECTED FINANCIAL DATA
(a) Net (loss) allocated to Limited Partners for 1993 included an extraordinary gain on extinguishment of debt. (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"):
(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-16 in this report and the supplemental schedule on pages A-17 and A-18.
ITEM 7.

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.
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 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.
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, 1996 the Partnership, with its respective joint venture partners, has dissolved as a result of the sale and/or disposition of: 1) one 50% and one 75% interest 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) one real property interest.
As disclosed in the Partnership's Annual Report for the year ended December 31, 1995, the Partnership was faced with significant financial obligations during 1996. In addition, operating results were affected by industry issues of its tenants, as well as unique matters related to its individual properties. During 1996, the General Partner was successful in selling two of the three properties whose mortgage debt was maturing during 1996 and was able to extend until December 31, 1997 the maturity date of the other maturing mortgage loan. The Partnership was also able to resolve some of the unique issues facing its properties through successful tenanting of those properties and the sale of two of the properties. During 1996 each of the Partnership's remaining properties experienced improved operating results as compared to the previous year. Notwithstanding this, the future operations of the Partnership's properties still face uncertainty based on regional market issues, individual property matters and industry issues and loan maturities.
OPERATIONS The table below is a recap of certain operating results of each of the Partnership's properties for the years ended December 31, 1996, 1995 and 1994. The discussion following the table should be read in conjunction with the Financial Statements and Notes thereto appearing in this report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
(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) Property net (loss) income excludes provisions for value impairment which were included in the Statements of Income and Expenses for the years ended December 31, 1995 and 1994 (see Note 12 of Notes to Financial Statements for additional information). (c) These properties were sold during 1996. The gains realized on the sales of these properties are excluded from the property net income reported above (see Note 11 of Notes to Financial Statements for additional information). (d) These properties were sold during 1994. The gains/losses realized on the sales of these properties are excluded from property net income / loss reported above (see Note 11 of Notes to Financial Statements for additional information).
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31, Net results for the Partnership changed from a (loss) of $(13,386,400) for the year ended December 31, 1995 to income of $2,155,600 for the year ended December 31, 1996. The change in results was primarily due to the provisions for value impairment which contributed $12,700,000 to the net (loss) in 1995. In addition, the change was due to the gain of $816,100 and $160,200 from the sales of Sentry West and Equitable, respectively, during 1996.
Net results, exclusive of provisions for value impairment, gain on sale of properties and the operating results of the sold properties, changed from a (loss) of $(863,900) for the year ended December 31, 1995 to income of $24,500 for the year ended December 31, 1996. The change in results was primarily due to: 1) improved operating results at all of the Partnership remaining properties, 2) decreased interest expense on the Partnership's Front-End Fees loan, due to a decrease in the variable interest rate, 3) increased interest income, primarily due to an increase in the funds available for short-term investments which was primarily the result of the receipt of sales proceeds during the second half of 1996 and 4) decreased general and administrative expenses, primarily due to lower data processing and printing and mailing costs.
The following comparative discussion includes the results from the Partnership's five remaining property investments.
Rental revenues increased by $384,200 or 3.2% for the year ended December 31, 1996 when compared to the year ended December 31, 1995. The primary factors which contributed to the increase were higher rental revenues at Meidinger Tower, which was primarily due an increase in tenant expense reimbursements and the receipt in 1996 of a one-time lease settlement fee and Prentice Plaza, primarily due to an increase in tenant expense reimbursements and base rents, which was due to the increase in average occupancy and average base rental rate charged to new and renewing tenants.
Interest expense on the Partnership's mortgage loans decreased by $280,300 for the year ended December 31, 1996 when compared to the year ended December 31, 1995. The decrease was primarily due to: 1) a lower average interest rate on Meidinger's variable rate mortgage loan; 2) a decrease in the interest rate on the fixed-rate mortgage loan collateralized by Regency, as further discussed below and 3) lower average outstanding balances resulting from principal payments on Deerfield Mall and Regency.
Depreciation and amortization expense decreased by $146,500 for the years under comparison. The decrease was primarily the result of the effects of provisions for value impairment recorded during the year ended December 31, 1995 which reduced the depreciable bases of Deerfield Mall, Meidinger Tower, 1800 Sherman and Regency.
Real estate tax expense decreased by $142,200 for the years under comparison. The decrease was primarily due to the successful appeal in 1996 for the reduction of the assessed value of 1800 Sherman for the 1995 tax year and the 1996 receipt of a refund following a successful appeal of the assessed value of Prentice Plaza for the 1989 to 1994 tax years.
Repairs and maintenance expense increased by $116,900 for the year ended December 31, 1996 when compared to the year ended December 31, 1995. The property contributing most significantly to the increase was Meidinger Tower, primarily due to a 7% increase in the janitorial service contract which was the result of an increase in the contractor's wages and the costs of supplies.
Property operating expenses increased by $107,700 for the years under comparison as a result of an increase at Meidinger Tower which was primarily due to higher utility, security and personnel costs as well as an increase in property management and leasing fees resulting from the increase in rental revenues. Also contributing to the increase was an increase in security costs at Prentice Plaza.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31, Net (loss) for the Partnership decreased by $1,355,600 for the year ended December 31, 1995 when compared to the year ended December 31, 1994. The effects of the sales of certain Partnership properties during 1994 and provisions for value impairment recognized in 1995 and 1994 had a significant impact on the comparison of net (loss) for the years ended December 31, 1995 and 1994. The Partnership recorded provisions for value impairment of $12,700,000 during 1995. During 1994, the Partnership recorded provisions for value impairment of $13,250,000 and sold the three remaining office buildings at Sentry East as well as Park Central. Properties sold during 1994 accounted for net income (including operating results and the net gain on sale of properties) of $160,800. For further information on the sales see Note 11 of Notes to Financial Statements.
Excluding the effects on net income of the properties sold and provisions for value impairment, net (loss) for the year ended December 31, 1995 decreased by $968,700 when compared to the net (loss) for the year ended December 31, 1994. The primary factor contributing to the decrease in net (loss) was improved operating results at all of the Partnership's remaining property interests except 1800 Sherman. In addition, interest income increased due to an increase in the rates and funds available for short-term investments. Partially offsetting the decrease in net (loss) was an increase in interest expense on the Partnership's Front-End Fees Loan due to an increase in the variable interest rate.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
For purposes of the following comparative discussion, the operating results of Park Central and Sentry East have been excluded.
Rental revenues increased by $1,610,900 or 10% for the year ended December 31, 1995 when compared to the year ended December 31, 1994. This increase was primarily the result of an increase in the average occupancy rates at all of the Partnership's properties. This factor, along with an increase in the average base rental rate charged to new and renewing tenants, contributed to a total increase for the Partnership of $974,300 in base rents. Another significant factor was a net increase in tenant expense reimbursements at the Partnership's properties, particularly at Meidinger Tower.
Depreciation and amortization expense decreased by $223,100 for the years under comparison. The decrease was primarily the result of the effects of provisions for value impairment recorded for several Partnership properties, which reduced depreciable bases.
Interest expense on the Partnership's mortgage loans increased by $568,000 for the year ended December 31, 1995 when compared to the year ended December 31, 1994. The increase was primarily due to increases in the variable interest rates on the mortgage loans collateralized by Meidinger Tower, Equitable and Sentry West together with a fixed interest rate on the new mortgage loan collateralized by Deerfield Mall which was higher than the 1994 variable interest rate on its prior mortgage loan.
Property operating expense increased by $191,600 for the years under comparison. Contributing factors were increases in property management and leasing fees at all of the Partnership's properties, except for Deerfield Mall as a result of the increase in rental revenues, and in fees for professional services at Sentry West, Equitable and Prentice Plaza. Partially offsetting the increase in property operating expense was decreased professional service fees at Deerfield Mall and 1800 Sherman.
To increase and/or maintain occupancy levels at the Partnership's properties, the General Partner, through its Affiliated 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 it properties. Cash Flow (as defined in the Partnership Agreement) is generally not equal to net income or cash flows as defined 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 Partnerships 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 defined 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 $569,500 for the year ended December 31, 1996 when compared to the year ended December 31, 1995, was primarily due to the change in net income (loss) previously discussed (exclusive of depreciation, amortization, provisions for value impairment and the gains on the sales of Sentry West and Equitable) and the absence of principal payments in 1996 on the mortgage loan collateralized by Meidinger Tower.
The net increase in the Partnership's cash position of $1,917,200 for the year December 31, 1996 was primarily the result of the net cash provided by operating activities and the net proceeds received from the sales of Sentry West and Equitable exceeding the increases in escrow deposits, investments in debt securities, regularly scheduled principal payments made on Partnership's mortgage loans payable and expenditures made for capital and tenant improvements and leasing costs. Liquid assets (including cash, cash equivalents and investments in debt securities) of the Partnership as of December 31, 1996 were comprised of amounts held for working capital purposes.
Net cash provided by operating activities continues to be a primary source of funds for the Partnership. Net cash provided by operating activities increased by $258,100 for the year ended December 31, 1996 when compared to the year ended December 31, 1995. This increase was primarily due to increases in the net cash provided by operating activities at Meidinger Tower, Prentice Plaza, Deerfield Mall and Regency as well as the increase in interest income and decrease in interest expense and general and administrative expenses, previously discussed. The increase was partially offset by decrease in the net cash provided by operating activities at Equitable and Sentry West which was the result of their sale during 1996.
Net cash (used for) provided by investing activities changed from $(683,000) for the year ended December 31, 1995 to $10,173,400 for the year ended December 31, 1996. The change was primarily due to the cash generated from the sales of Sentry West and Equitable, partially offset by an increase in cash paid into real estate tax escrows and an increase in investments in debt securities. The increase in investments in debt securities is a result of the extension of the maturities of certain of the Partnerships short-term
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
investments in an effort to maximize the return on these amounts while they are held for working capital purposes. These investments are of investment-grade and substantially all of them mature 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, 1996, the Partnership spent $899,500 for these items and has budgeted to spend approximately $1,000,000 during 1997. Included in this budgeted amount are capital and tenant improvements and leasing costs of approximately $500,000 for Meidinger Tower. Actual amounts expended may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions throughout the year. The General Partner believes 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 August 28, 1996, the joint venture which owned Sentry West, in which the Partnership had a 50% interest, sold Sentry West for $11,650,000. The Partnership's share of the proceeds from this transaction, net of closing prorations, selling expenses and the repayment of the mortgage loan collateralized by Sentry West was approximately $894,500 and was added to working capital. For additional information, see Note 11 of Notes to Financial Statements.
On October 16, 1996 the Partnership sold Equitable for $7,000,000. Proceeds from this transaction, net of closing prorations, estimated selling expenses and the repayment of the mortgage loan collateralized by Equitable, was approximately $520,000 and were added to working capital. For additional information, see Note 11 of Notes to Financial Statements.
The increase in net cash used for financing activities of $9,841,700 for year ended December 31, 1996 when compared to the year ended December 31, 1995 was primarily the result of the repayment of mortgage loans in conjunction with the sales of Sentry West and Equitable, partially offset by the effects of the expiration of the Repurchase Option Period in 1995 and the absence of principal payments in 1996 on the mortgage loan collateralized by Meidinger Tower. Also contributing to the increase were higher principal payments made in 1996 compared to 1995 on the mortgage loans collateralized by Regency and Deerfield Mall.
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 a 48-month period beginning April 1, 1993. In addition, any interest payments made by the Partnership from April 1, 1993 through March 31, 1997 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 April 1, 1997, and shall not be subordinated to payment of Original Capital Contributions to Limited Partners. As of December 31, 1996, the Partnership had not exercised its option to defer the payment of interest on this loan.
In August 1996, the joint venture which owns Regency, in which the Partnership has a 25% interest with Affiliated partnerships, executed an agreement (the "Extension") with the mortgage lender to modify the terms of the mortgage loan collateralized by Regency. Significant terms of the Extension, which are retroactive to January 1, 1996, include: 1) an extension of the maturity date to December 31, 1997; 2) monthly principal and interest payments based on a 23- year amortization schedule with a per annum interest rate of 7.5%; and 3) net property cash flow (as defined in the Extension), if any, after deducting scheduled principal and interest payments, approved capital and tenant improvements and leasing commissions, is required to be deposited into a non- interest bearing reserve account maintained by the lender to be used for capital and tenant improvements, leasing commissions and operating deficits of Regency.
As of December 31, 1996, 26 of the 33 tenants at Prentice Plaza and 35 of the 54 tenants at Deerfield Mall have leases, totaling 236,905 square feet, that expire during the next three years. The Partnership's share of total base rental revenues projected to be collected from these tenants for the year ending December 31, 1997 is $2,180,600. Notwithstanding the market rental rates that may be in effect at the time that these leases mature, the Partnership faces a significant amount of uncertainty with respect to the occupancy at its properties in 1998 and possibly beyond. The General Partner and its Affiliated management companies intend to address the possible renewal of these leases well in advance of their scheduled maturities in an attempt to maintain occupancy and rental revenues at its properties.
The Partnership has significant financial obligations during 1997 and beyond. In addition to required principal payments on certain of its mortgage loans, two of the Partnership's mortgage loans mature within the next two years. In addition, as a result of the potential tenant turnover discussed above, it is anticipated that the Partnership will incur a substantial amount of capital and tenant improvements and leasing costs during the next several years. In light of this, the General Partner believes that it is in the Partnership's best interest to retain all cash available. Accordingly, cash distributions 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. For the year ended December 31, 1996, Cash Flow (as defined in the Partnership Agreement) of $2,710,800 was retained to supplement working capital reserves. In addition, the General Partner continues to review other sources of cash available to the Partnership, which includes the possible financing, refinancing or sale of certain of the Partnership's properties. While there can be no assurance as to the timing or successful completion of any future transactions or as to the properties future operating results, the General Partner currently believes that the amount of the Partnerships existing cash reserves, future Cash Flow (as defined in the Partnership Agreement) to be earned as well as additional proceeds to be received from any sale, disposition, financing or refinancing of any properties or any mortgage loan modifications or extensions are sufficient to cover the planned expenditures for the ensuing twelve month period.
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 significantly less than such Limited Partners' original Capital Contribution.
ITEM 8.

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.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- --------------------------------------------------
(a) DIRECTORS ---------
The Partnership has no directors. First Capital Financial Corporation ("FCFC") is the General Partner. The Directors of FCFC, as of March 28, 1997, 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 1997.
Name Office ---- ------
Samuel Zell.......................................Chairman of the Board Douglas Crocker II................................Director Sheli Z. Rosenberg................................Director
Samuel Zell, 55, has been a Director of the General Partner since 1983 (Chairman of the Board since December 1985). Mr. Zell is also Chairman of the Board of Equity Financial and Management Company ("EFMC") and Equity Group Investments, Inc. ("EGI"), and is a trustee and beneficiary of a general partner of Equity Holdings Limited, an Illinois Limited Partnership, a privately owned investment partnership. He is also Chairman of the Board of Directors of Chart House Enterprises, Inc., Ramco Energy plc, TeleTech Holdings Inc., Anixter International Inc., American Classic Voyages Co. and Manufactured Home Communities, Inc. ("MHC"). He is Chairman of the Chart House Enterprises, Inc., Ramco Energy plc, Teletech Holdings Inc., Board of Trustees of Equity Residential Properties Trust. He is a Director of Quality Food Centers, Inc. ("QFC") and Sealy Corporation. He is Chairman of the Board of Directors and Chief Executive Officer of Capsure Holdings Corp. and Co-Chairman of the Board of Revco D.S., Inc.
Douglas Crocker II, 56, has been President and Chief Executive Officer since December 1992 and a Director since January 1993 of the General Partner. Mr. Crocker has been an Executive Vice President of EFMC since November 1992. Mr. Crocker has been President, Chief Executive Officer and trustee of Equity Residential Properties Trust since March 31, 1993. He was President of Republic Savings Bank, F.S.B. ("Republic") from 1989 to June 1992 at which time the Resolution Trust Company took control of Republic. Mr. Crocker is a member of the Board of Directors of Horizon Group, Inc.
Sheli Z. Rosenberg, 55, 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 EFMC and 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., Capsure Holdings Corp., American Classic Voyages Co., Jacor Communications, Inc., Revco D.S., Inc., Sealy Corporation, QFC and MHC. She is also a trustee of Equity Residential Properties Trust. Ms. Rosenberg is a Principal of Rosenberg & Liebentritt, P.C., counsel to the Partnership, the General Partner and certain of their Affiliates. 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.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(b,c & e) EXECUTIVE OFFICERS
The Partnership does not have any executive officers. The executive officers of the General Partner as of March 28, 1997 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 Gus J. Athas.............................Senior Vice President Norman M. Field..........................Vice President - Finance and Treasurer
PRESIDENT AND CEO - See Table of Directors above.
Gus J. Athas, 60, has been Senior Vice President of the General Partner since March 1995. Mr. Athas has served as Senior Vice Presient, General Counsel and Assistant Secretary of Great American since March 1995. Mr. Athas has served as Senior Vice President, General Counsel and Secretary of Falcon Building Products, Inc. since March 1994 and served as Vice President and Secretary from January 1994 to March 1994. Mr. Athas has served as Senior Vice President, General Counsel and Secretary of Eagle Industries, Inc. ("Eagle") since May 1993. From September 1992 to May 1993, Mr. Athas was Vice President, General Counsel and Secretary of Eagle. From November 1987 to September 1992, Mr. Athas served as Vice President, General Counsel and Assistant Secretary of Eagle.
Norman M. Field, 48, has been Vice President of Finance and Treasurer of the General Partner since February 1984, and also served as Vice President and Treasurer of Great American from July 1983 until March 1995. Mr. Field had been Treasurer of Benefit Administrators since July 22, 1987 until its liquidation in November 1995. Benefit Administrators filed for protectiion under the Federal bankruptcy laws on January 3, 1995. He was Chief Financial Officer of Equality Specialties, Inc. ("Equality"), a subsidiary of Great American, from August 1994 to April 1995. Equality was sold in 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), (c) and (e), there are no involvements in certain legal proceedings among any of the foregoing directors and officers.
ITEM 11.

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, 1996. However, the General Partner and its Affiliates do compensate its directors and officers. For additional information see Item 13 (a) Certain Relationships and Related Transactions.
(e) None.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) As of March 1, 1997, 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.
(a) The Partnership has no directors or executive officers. As of March 1, 1997, the executive officers and directors of the General Partner, as a group, did not own any Units.
(a) None.
ITEM 13.

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, 1996, these Affiliates were entitled to leasing, property management and supervisory fees of $968,000, of which $32,000 was due as of December 31, 1996. Other Affiliates of the General Partner were also entitled to receive $207,300 for fees, compensation and reimbursements for insurance and personnel services 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, $4,300 was due to Affiliates as of December 31, 1996.
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 $1,016,600 in interest for the year ended December 31, 1996. Of this amount $87,500 was due to the Affiliate as of December 31, 1996. 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 on 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 49-month period beginning March 1, 1993. All deferred amounts shall be due and payable on April 1, 1997, and shall not be subordinated to repayment to the Limited Partners. As of December 31, 1996, the Partnership had not exercised its option to defer the payment of interest on this loan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
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 year ended December 31, 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 (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, 1996, the General Partner was allocated a Net Profit of $21,600 which included $9,800 of gain from the sale of Partnership properties.
ANTEC Corporation ("ANTEC"), which is in the business of designing, engineering, manufacturing and distributing cable television products, and approximately 30% owned by Anixter International Inc. (formerly known as Itel Corporation), 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, 1996, the Partnership's 50% share of ANTEC's rent and related payments amounted to $293,400. 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 mobil 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, 1996, the Partnership's 50% share of MHC's rent amounted to $29,900. 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. Sheli Z. Rosenberg, President and Chief Executive Officer of the General Partner from December 1990 to December 1992 and a director of the General Partner since December 1983, is a Principal of Rosenberg. For the year ended December 31, 1996, Rosenberg was entitled to $194,300 for legal fees from the Partnership. As of December 31, 1996, $63,100 was due to Rosenberg. 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.
(c) No management person is indebted to the Partnership.
(d) None.
PART IV
ITEM 14.

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:
As disclosed in Item 6 of the Registrant's Form 10-Q, for the quarter ended September 30, 1996, a report on Form 8-K was filed on October 30, 1996, reporting the sale of the Equitable of Iowa Building.
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 28, 1997 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.
INDEX OF FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
SCHEDULE FILED AS PART OF THIS REPORT
III - Real Estate and Accumulated Depreciation as of A-10 and A-11 December 31, 1996
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 Equitable of Iowa Building filed as an exhibit to the Partnership's Report on Form 8-K dated October 30, 1996 is incorporated herein by reference.
Real Estate Sale Agreement for the sale of the Partnership's investment in Sentry Park West Office Campus filed as an exhibit to the Partnership's Report on Form 8-K dated September 12, 1996 is incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1995 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
REPORT OF INDEPENDENT AUDITORS
Partners First Capital Income and Growth Fund - Series XII, A Real Estate Limited Partnership 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, 1996 and 1995, 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, 1996, and 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, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, 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 March 14, 1997
A-2
BALANCE SHEETS December 31, 1996 and 1995 (All dollars rounded to nearest 00s)
STATEMENTS OF PARTNERS' CAPITAL For the Years ended December 31, 1996, 1995 and 1994 (All dollars rounded to nearest 00s)
The accompanying notes are an integral part of the financial statements. A-3
STATEMENTS OF INCOME AND EXPENSES For the years ended December 31, 1996, 1995 and 1994 (All dollars rounded to nearest 00s except Unit and per Unit amounts)
STATEMENTS OF CASH FLOWS For the years ended December 31, 1996, 1995 and 1994 (All dollars rounded to nearest 00s)
The accompanying notes are an integral part of the financial statements. A-4
NOTES TO FINANCIAL STATEMENTS
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.
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"). Under this method of accounting, revenues are recorded when earned and expenses are recorded when incurred.
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 (prior to its liquidation in 1996) 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.
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 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 the lease. Repair and maintenance costs are expensed as incurred; expenditures for improvements are capitalized and depreciated over the estimated life of such improvements.
During the first quarter of 1996, the Partnership adopted Financial Accounting Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (the "Standard"). The Standard established guidance for determining if the value of defined assets is impaired, and if so, how impairment losses should be measured and reported in the financial statements. Management is not aware of any indicator that would result in any significant impairment loss. Evaluation of the potential impairment of the value of the Partnership's assets is performed on an individual property basis.
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.
Property sales or dispositions 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 or disposition is recognized in accordance with generally accepted accounting principles.
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 obligations of the United States government totaling $496,300 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 at December 31, 1996. All of these securities had a maturity of less than one year when purchased.
A-5
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, 1996 and 1995.
Certain reclassifications have been made to the previously reported 1995 and 1994 statements in order to provide comparability with the 1996 statements. These reclassifications had no effect on net (loss) or Partners' capital (deficit).
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, 1996, 1995 and 1994 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, 1996, the General Partner was allocated a Net Profit of $21,600, which included a net gain of $9,800 from the sales of Partnership properties. For the year ended December 31, 1995, the General Partner was allocated a Net (Loss) of $(133,900), which included a (loss) from provisions for value impairment of $(127,000). For the year ended December 31, 1994, the General Partner was allocated a Net (Loss) of $(147,400), which included Net Profit of $1,900 from the sales of properties and a (loss) from provisions for value impairment of $(132,500).
Fees and reimbursements paid and payable by the Partnership to Affiliates were as follows:
ANTEC Corporation ("Antec"), which is in the business of designing, engineering, manufacturing and distributing cable television products, and approximately 30% owned by Anixter International Inc. (formerly known as Itel Corporation), 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, 1996, 1995 and 1994 the Partnership's 50% share of ANTEC's rent amounted to $293,400, $189,000 and $194,100, 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 space at Prentice Plaza. During the years ended December 31, 1996, 1995 and 1994 the Partnership's 50% share of MHC's rent amounted to $29,900, $22,100 and $9,900, respectively. The per square foot rent paid by MHC is comparable to that paid by other tenants at Prentice Plaza.
A-6
On-site property management for the Partnership's properties is provided by Affiliates of the General Partner for fees ranging from 3% to 6% of gross rents received by the properties based upon the terms of the individual management agreements.
3. FRONT-END FEES LOAN PAYABLE TO AFFILIATE:
The Partnership borrowed from 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 General Partner from unaffiliated lenders.
As of December 31, 1996, the Partnership had drawn $13,434,400 under the Front- End Fees Loan agreement. 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, 1996 was 7.43%. As of December 31, 1996, the interest rate was 7.56%.
Pursuant to a modification of this loan agreement, the Partnership has the option to defer payment of interest on this loan for a 49-month period beginning March 1, 1993. In addition, any interest payments made by the Partnership from April 1, 1993 through March 31, 1997 may be borrowed from the General Partner. All deferred and subsequently borrowed amounts (including accrued interest thereon) shall be due and payable on April 1, 1997, and shall not be subordinated to payment of Original Capital Contributions to Limited Partners. As of December 31, 1996, the Partnership had not exercised its option to defer the payment of interest on this loan. During the year ended December 31, 1996, the General Partner transferred this loan to an Affiliate.
4. RESTRICTED CASH:
Restricted certificate of deposit at December 31, 1996 represented a Eurodollar investment in the amount of $100,000 which has been pledged as collateral for a letter of credit issued to the Louisville Gas & Electric Company.
5. MORTGAGE LOANS PAYABLE:
Mortgage loans payable at December 31, 1996 and 1995, consisted of the following loans which are non-recourse:
(a) The average interest rate represents an average for the year ended December 31, 1996. Interest rates are subject to change in accordance with the provisions of the loan agreements for Meidinger Tower and Prentice Plaza. As of December 31, 1996, interest rates on the loans collateralized by Meidinger Tower and Prentice Plaza were 6.625% and 7.50%, respectively. (b) Represents level monthly principal and interest payments, paid in arrears. (c) This repayment may require either sale or refinancing of the respective property. (d) In August 1996, the joint venture which owns Regency, in which the Partnership has a 25% interest with Affiliated partnerships, executed an agreement (the "Extension") with the mortgage lender to modify the terms of this mortgage loan. Significant terms of the Extension, which were retroactive to January 1, 1996, include: 1) an extension of the maturity date to December 31, 1997; 2) monthly principal and interest payments based on a 23-year amortization schedule with a per annum interest rate of 7.5%; and 3) net property cash flow (as defined in the Extension), if any, after deducting scheduled principal and interest payments, approved capital and tenant improvements and leasing commissions, is required to be deposited into a non-interest bearing reserve account maintained by the lender to be used for capital and tenant improvements, leasing commissions and operating deficits of Regency. (e) In addition to monthly interest, monthly principal payments are $3,070 starting February 1, 1996 and increasing to $3,343, $3,638, $3,960 and $4,305 on January 1 of each subsequent year from 1997 through 2000, respectively. (f) For the year ended December 31, 1996, the Partnership made only monthly interest payments as the property did not generate excess cash flow (as defined in the restructured loan agreement). On March 3, 1997, the Partnership received an advance of $228,100 for capital and tenant improvements. (g) These properties were sold and the mortgage loans were fully repaid during 1996 (see Note 11 for additional information).
Principal amortization of mortgage loans payable for each of the next five years as of December 31, 1996 was as follows:
A-7
The amounts scheduled above do not consider principal payment requirements based on property cash flow, which must each be paid periodically, as well as amounts which are available but unfunded to the Partnership under certain mortgage loans.
6. REPURCHASE OPTION:
On January 1, 1991, the Repurchase Option period commenced for the repurchase of Limited Partnership Interests. This Repurchase Option, as defined in the Partnership Agreement, allowed Limited Partners to resell their Interests to the Partnership. During 1995, the fifth and final year of the Repurchase Option period, the partnership paid a price equal to 115% of the Limited Partners' Original Capital Contribution reduced by all prior distributions previously made to the Limited Partner. The maximum amount of Interests that the Partnership was obligated to purchase during the Repurchase Option period was 0.25% of the total Original Capital Contribution for each and every calendar quarter during the Repurchase Option period. As of December 31, 1996, the Partnership repurchased 50,157 Units which represented Original Capital Contributions of $5,015,700. The repurchase of these Units, reduced by all prior distributions previously made to the Limited Partners, resulted in a net reduction of Limited Partners' Capital and net payments by the Partnership of $4,581,400.
7. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rental income due on noncancelable leases as of December 31, 1966 was as follows:
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, 1996, 1995 and 1994 were $147,400, $164,600 and $167,600, respectively. Of these amounts, $121,700, $114,900 and $96,700, respectively, were realized from Equitable, which was sold during 1996.
8. INCOME TAX:
The Partnership utilizes the accrual basis 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. The net effect of these accounting differences for the year ended December 31, 1996 was that the results for Federal income tax reporting purposes was a (loss) of ($11,984,900) while for financial statement purposes net income was $2,155,600. The aggregate cost of commercial rental properties for federal income tax purposes at December 31, 1996 was $116,269,800.
9. ASSET HELD FOR DISPOSITION:
During 1996, the Partnership modified its mortgage obligation on the loan secured by Regency. Among other provisions, the modification provides for a maturity date of December 31, 1997.The Partnership is marketing Regency for sale and expects to complete a sale transaction prior to December 31, 1997. Accordingly, the Partnership began classifying Regency as "Held for Disposition" effective December 31, 1996. The Partnership's carrying basis, net of accumulated depreciation and amortization, of Regency on the Balance Sheet as of December 31, 1996 was $3,875,800 and does not exceed the estimated fair value, less costs to sell. The Partnership's share of net income/(loss) (exclusive of provisions for value impairments) of Regency, included in the Statements of Income and Expenses for the years ended December 31, 1996, 1995 and 1994 was $10,500, $(70,200) and $(163,100), respectively.
10. DISTRIBUTIONS:
Commencing with the quarter ended June 30, 1992, cash distributions to Partners were suspended and no further distributions will be made until such time as the Partnership's cash position is increased to a level that is expected to be sufficient to meet all of the anticipated capital expenditures, debt repayments and other working capital requirements during the next several years.
11. PROPERTY SALES AND DISPOSITIONS:
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 closing prorations, estimated selling expenses and the repayment of the mortgage loan collateralized by Equitable. The Partnership recorded a net gain of $160,200 for financial statement purposes in connection with this sale. Provisions for value impairment recorded during prior years reported cumulatively amounted to $6,500,000. For income tax reporting purposes, the Partnership recorded a net (loss) of $(7,742,500) for the year ended December 31, 1996, in connection with this sale.
On August 28, 1996, the joint venture which owned Sentry West consummated the sale of Sentry West for $11,650,000. The Partnership's 50% share of the proceeds from this transaction, which was net of closing prorations, selling expenses and the repayment of the mortgage loan for Sentry West was approximately $894,000. The net gain reported by the Partnership for
A-8
financial statement purposes was $816,100. The Partnership's share of provisions for value impairment recorded during prior years reported cumulatively amounted to $5,000,000. For income tax reporting purposes, the Partnership recorded a net (loss) of $(4,762,500) for the year ended December 31, 1996 in connection with this sale.
On April 22, 1994, the joint venture which owned Sentry East, located in Blue Bell, Pennsylvania, in which the Partnership had a 50% interest, sold one of the remaining three office buildings situated in this office campus for a sale price of $1,198,500. The joint venture incurred selling expenses of $95,600. The joint venture received net Sale Proceeds of $1,102,900, of which the Partnership's share was $551,500. The (loss) reported by the Partnership for financial statement purposes was $(280,700) and was previously recorded as part of the provisions for value impairment in 1992.
On June 29, 1994, the joint ventures which owned Park Central Office Park I, II and III ("Park Central"), located in Greenville, South Carolina, in which the Partnership had 50% interests, sold Park Central for a sale price of $7,250,000. The outstanding indebtedness on Park Central I and II of $7,000,000 was satisfied at closing. The joint ventures incurred selling expenses of $143,700. The joint ventures received net Sale Proceeds of $106,300, of which the Partnership's share was $53,200. The (loss) reported by the Partnership for financial statement purposes was $(4,654,000) of which a total of $(4,550,000) was previously recorded as part of the provisions for value impairment in 1992 and 1993.
On December 29, 1994, the joint venture which owned Sentry East sold the remaining two office buildings situated in this office campus for a sale price of $1,286,300. The joint venture incurred selling expenses of $99,900. The joint venture received net Sale Proceeds of $1,186,400, of which the Partnership's share was $593,200. The gain reported by the Partnership for financial statement purposes was $292,500 which represented a partial recovery of the (loss) from provisions for value impairment recorded in 1992.
All of the above sales and disposition were all-cash transactions, with no further involvement on the part of the Partnership.
12. PROVISIONS FOR VALUE IMPAIRMENT:
Due to the depressed economic environment in the retail industry, regional factors affecting the Partnership's retail and office properties and other matters relating specifically to certain of the Partnership's properties, there was uncertainty as to the Partnership's ability to recover the net carrying value of certain of its properties during the remaining estimated holding periods. Accordingly, it was deemed appropriate to reduce the bases of such properties in the Partnership's financial statements during the years ended December 31, 1995 and 1994. The provisions for value impairment were considered non-cash events for the purposes of the Statements of Cash Flows and were not utilized in the determination of Cash Flow (as defined in the Partnership Agreement). The following summary of the provisions for value impairment reported by the Partnership for the years ended December 31, 1995 and 1994.
A-9
FIRST CAPITAL INCOME AND GROWTH FUND - SERIES XII
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1996
See accompanying notes on the following page.
A-10
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.
Note 3. The aggregate cost for federal income tax purposes as of December 31, 1996 was $116,269,800.
Note 4. Included provisions for value impairment. See Note 12 of Notes to Financial Statements for additional information.
Note 5. Estimated useful life for building in years.
Note 6. Estimated useful life for improvements in years.
A-11


Item 1. Business.
	 Omitted pursuant to the no action letter to the registrant from 	 the Office of Chief Counsel of the Division of Corporation 	 Finance, Securities and Exchange Commission dated December 17, 	 1996 (the "No Action Letter") with respect to series of mortgage 	 pass-through certificates (collectively, the "Mortgage Pass- 	 Through Certificates"), each series being issued pursuant to a 	 Pooling and Servicing Agreement (collectively, the "Pooling and 	 Servicing Agreements") between the registrant, a servicer (the 	 "Servicer"),or master servicer(the Master "Servicer") and a 	 trustee (the "Trustee").
Item 2.

Item 2. Properties.
	 See Item 14(a), Exhibits 99.1, 99.2, and 99.3, for information 	 provided in lieu of information required by Item 102 of 	 Regulation S-K.
Item 3.

Item 3. Legal Proceedings.
	 The registrant knows of no material pending legal proceedings 	 involving the trusts created under the Pooling and Servicing 	 Agreement (the "Trusts"), the Trustee, the Servicer or the 	 registrant with respect to the Trusts other than routine 	 litigation incidental to the duties of the respective parties 	 under the Pooling and Servicing Agreements.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
	 None.
				 PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related 	 Stockholder Matters. (Subsection references herin refer to 	 Section 201 of Regulation S-K.)
	 (a) No established public trading market for the Certificates 	 exists.
	 (b) As of December 31, 1996, the number of holders of the 	 publicly offered Certificates was 26.
	 (c) Omitted pursuant to the No Action Letter.
Item 6.

Item 6. Selected Financial Data.
	 Omitted pursuant to the No Action Letter.
Item 7.

Item 7. Management's Discussion and Analysis of Financial 	 Condition and Results of Operations.
	 Omitted pursuant to the No Action Letter.
Item 8.

Item 8. Financial Statements and Supplementary Data.
	 See Item 14(a), Exhibits 99.1, 99.2, and 99.3, for information 	 provided in lieu of information required by Item 102 of 	 Regulation S-K.
Item 9.

Item 9. Changes in and Disagreements with Accountants on 	 Accounting and Financial Disclosure.
	 None.
				PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
	 Omitted pursuant to the No Action Letter.
Item 11.

Item 11. Executive Compensation.
	 Omitted pursuant to the No Action Letter.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
	 Omitted pursuant to the No Action Letter.
Item 13.

Item 13. Certain Relationships and Related Transactions.
	 Omitted pursuant to the No Action Letter.
				 PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Exhibits
	 99.1 Annual Independent Accountants' Servicing Reports 		 concerning servicing activities under the Pooling and 		 Servicing Agreements for the year ended December 31, 1996, 		 in accordance with the No Action Letter.
		 (a) Cimarron Mortgage Corp., as servicer 		 (b) Citicorp Mortgage, Inc., as servicer 		 (c) Countrywide Home Loans, as servicer 		 (d) First Union National Bank, as servicer 		 (e) Home Side Lending, as servicer 		 (f) Norwest Bank Minnesota, N.A., as Master Servicer 		 (g) Norwest Mortgage, as servicer 		 (h) SunTrust Mortgage, Inc. , as servicer
	 99.2 Report of Management as to Compliance with Minimum 		 Servicing Standards for the year ended December 31, 1996, 		 in accordance with the No Action Letter.
		 (a) Cimarron Mortgage Corp., as servicer 		 (b) Citicorp Mortgage, Inc., as servicer 		 (c) Countrywide Home Loans, as servicer 		 (d) First Union National Bank, as servicer 		 (e) Home Side Lending, as servicer 		 (f) Norwest Bank Minnesota, N.A., as Master Servicer 		 (g) Norwest Mortgage, as servicer 		 (h) SunTrust Mortgage, Inc. , as servicer
	 99.3 Annual Statements of Compliance under the Pooling and 		 Servicing Agreements for the year ended December 31, 1996, 		 in accordance with the No Action Letter.
		 (a) Cimarron Mortgage Corp., as servicer 		 (b) Citicorp Mortgage, Inc., as servicer 		 (c) Countrywide Home Loans, as servicer 		 (d) First Union National Bank, as servicer 		 (e) Home Side Lending, as servicer 		 (f) Norwest Bank Minnesota, N.A., as Master Servicer 		 (g) Norwest Mortgage, as servicer 		 (h) SunTrust Mortgage, Inc. , as servicer
	 99.4 Aggregate Statement of Principal and Interest 		 Distributions to Certificate Holders.
(b) On October 9, 1996, a report on Form 8-K was filed in 	 order to provide the Pooling and Servicing Agreement for 	 the Certificates.
	 On November 4, 1996, and December 3, 1996, reports on Form 8-K 	 were filed by the Company in order to provide the statements for 	 the monthly distributions to holders of the Certificates. No 	 other reports on Form 8-K have been filed during the last quarter 	 of the period covered by this report.
(c) Not applicable.
(d) Omitted pursuant to the No Action Letter.
Pursuant to the No Action Letter, such document (i) is not filed herewith since such document was not received by the Reporting Person at least three business days prior to the due date of this report; and (ii) will be included in an amendment to this report on Form 10-K/A to be filed wihtin 30 days of the Reporting Person's receipt of such document.
				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:
Norwest Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 1996-4 Trust
Signed Norwest Bank Minnesota, N.A. 	 as Master Servicer By: /s/Sherri J. Sharps Title: Vice president -- Securities Administration Services Dated: March 21, 1997
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
(a)(1) No annual report is provided to the Certificateholders other than with respect to aggregate principal and interest distributions.
(a)(2) No proxy statement, form of proxy or other proxy soliciting material has been sent to any Certificateholder with respect to any annual or other meeting of Certificateholders.