<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, 1996
                               ---------------------------------------

                                      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                      0-15632
                            --------------------------------------------

               First Capital Institutional Real Estate, Ltd. - 4
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                                          <C>

           Illinois                                                       36-3441345
-------------------------------                              ------------------------------------
(State or other jurisdiction of                                        (I.R.S. Employer
incorporation or organization)                                       Identification No.)

Two North Riverside Plaza, Suite 1100, Chicago, Illinois                  60606-2607
--------------------------------------------------------     ------------------------------------
        (Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code                      (312) 207-0020
                                                             ------------------------------------
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 November 5, 1986,
included in the Registrant's Registration Statement on Form S-11 (Registration
No. 33-06149), is incorporated herein by reference in Part IV of this report.

The Partnership's Report on Form 8-K dated February 5, 1997 reporting the sale
of Carrollton Crossroads Shopping Center, located in Carrollton, Georgia, is
incorporated herein by reference in Part IV of this report.

Exhibit Index - Page A-1
------------------------
<PAGE>

                                    PART I

ITEM 1.   BUSINESS
-------   --------

The registrant, First Capital Institutional Real Estate, Ltd.- 4 (the
"Partnership"), is a limited partnership organized in 1986 under the Uniform
Limited Partnership Act of the State of Illinois. The Partnership sold 593,025
Limited Partnership Assignee Units (the "Units") to the public from November
1986 to May 1988, pursuant to a Registration Statement on Form S-11 filed with
the Securities and Exchange Commission (Registration Statement No. 33-06149).
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 commercial
income-producing real estate, such as shopping centers, warehouses and office
buildings, and, to a lesser extent, in other types of commercial income-
producing real estate. From January 1987 to March 1989, the Partnership made one
real property investment and purchased 50% interests in three joint ventures and
a 75% interest in one joint venture each with Affiliated partnerships. Two of
the 50% joint ventures and the 75% joint venture were each formed for the
purpose of acquiring a 100% interest in certain real property and one 50% joint
venture was formed for the purpose of participating in a mortgage loan
investment, which was recognized as of July 1, 1990 as being foreclosed in-
substance and was recorded as two real property investments. All of the
Partnership's joint ventures, prior to disposition, 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
partner, dissolved the 50% joint venture which was originally formed for the
purpose of participating in a mortgage loan investment as a result of the sale
and/or disposition of the two real property investments.

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 the 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 seven employees at the Partnership's properties
for on-site property maintenance and administration.

ITEM 2.   PROPERTIES (a)(b)
-------   -----------------


As of December 31, 1996, the Partnership owned, directly or through joint
ventures, the following four property interests, all of which were owned in fee
simple.

<TABLE>
<CAPTION>
                                                               Net Leasable   Number of
             Property Name                     Location        Sq. Footage   Tenants (c)
--------------------------------------    -------------------  ------------  -----------
Shopping Center:
----------------
<S>                                       <C>                  <C>           <C>
Indian Ridge Plaza                        Mishawaka, Indiana     189,270       22 (2)

Carrollton Crossroads (50%) (d)           Carrollton, Georgia    303,806       27 (3)

Office Buildings:
-----------------
Park Plaza Professional Building (50%)    Houston, Texas         177,395       64 (1)

3120 Southwest Freeway (75%) (d)          Houston, Texas          89,346       39

</TABLE>

                                       2
<PAGE>

ITEM 2. PROPERTIES (a)(b) (Continued)

  (a) For a discussion of 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 a useful life
      of 40 years utilizing the straight-line method. The Partnership's portion
      of real estate taxes for Indian Ridge Plaza Shopping Center ("Indian
      Ridge"), Park Plaza Professional Building ("Park Plaza"), Carrollton
      Crossroads Shopping Center ("Carrollton") and 3120 Southwest Freeway was
      $315,900, $235,400, $96,500 and $56,000, respectively, for the year ended
      December 31, 1996. In the opinion of the General Partner, 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.

  (d) Property was sold subsequent to December 31, 1996.  For further
      information see Note 8 in Notes to the Financial Statements.


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               1996      1995     1994     1993     1992
-----------------------------      -------   ------   ------   ------   ------
<S>                                <C>       <C>      <C>      <C>      <C>
Indian Ridge                          92%       72%       98%      98%      97%

Park Plaza (50%)                      83%       86%       90%      91%      91%

Carrollton (50%)                      99%       99%       99%      99%      99%

3120 Southwest Freeway (75%)          90%       88%       96%      90%      80%
</TABLE>

The amounts in the following table represent each of the Partnership's
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               1996      1995     1994     1993     1992
-----------------------------      -------   ------   ------   ------   ------
<S>                                <C>       <C>      <C>      <C>      <C>
Indian Ridge                       $ 7.77    $ 8.72   $ 9.32   $ 9.18   $ 9.25

Park Plaza (50%)                   $17.16    $18.16   $18.44   $17.65   $16.99

Carrollton (50%)                   $ 6.45    $ 6.31   $ 6.30   $ 5.94   $ 5.73

3120 Southwest Freeway (75%)       $11.19    $10.99   $10.51   $10.23   $ 9.94

</TABLE>

                                       3
<PAGE>

ITEM 2.  PROPERTIES (Continued)
-------------------

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 except for Carrollton Crossroads and
3120 Southwest Freeway which were sold during the first quarter of 1997. See
Note 8 in Notes to Financial Statements for further information regarding the
sale of these 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/
                                1997                  Lease             Lease        Occupied        Years)
                             ----------          ----------------   -------------  -----------     ---------
<S>                          <C>                 <C>                <C>            <C>             <C>
Indian Ridge
------------

TJ Maxx
 (department store)            $237,000                  $243,700       1/31/2003        17%          2/5


Circuit City
 (audio visual store)          $288,800                  $288,800       1/31/2016        24%          1/5


Park Plaza
----------

AMI Park Plaza Hospital
 (health care services)        $118,600                  $118,600      11/30/2001        11%         None

</TABLE>
  (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 are no lesser or greater than the
      amounts listed in the above table.

The amounts in the following table represent the Partnership's portion of income
from leases in their respective year of expiration (assuming no lease renewals)
through the year ended December 31, 2006 (excluding Carrollton and Southwest
Freeway, which were sold in 1997):
<TABLE>
<CAPTION>

            Number                 Base Rents in Year   % of Total Base
Year      of Tenants  Square Feet   of Expiration (a)      Rents (b)
----    ------------  -----------  ------------------   ---------------
<S>     <C>           <C>          <C>                  <C>
1997         16            29,800            $234,400             8.88%
1998         23            66,800            $411,500            18.80%
1999         16            33,300            $131,400             8.11%
2000         10            20,800            $141,700             9.90%
2001         11            36,400            $207,400            16.96%
2002          4            19,600            $ 82,000             9.31%
2003          2            42,000            $ 85,300            15.59%
2004          0              None                None                0%
2005          2             9,700            $133,500            29.11%
2006          1             2,500            $  6,000             2.05%

</TABLE>
  (a) Represents the Partnership's portion of base rents to be collected each
      year on expiring leases.

                                       4
<PAGE>

ITEM 2.  PROPERTIES (Continued)
-------  ----------

  (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.  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.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------  ----------------------------------------------------

(a,b,c & d)  None.

                                       5
<PAGE>
                                   PART II

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 4,600 Holders of Units.


                                       6
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                       For the Years Ended December 31,
                          ------------------------------------------------------------
                             1996        1995         1994        1993        1992
---------------------------------------------------------------------------------------
<S>                       <C>         <C>          <C>         <C>         <C>
Total revenues            $ 5,467,800 $ 5,690,700  $ 6,156,100 $ 6,174,800 $ 6,296,800
Net income (loss)         $ 1,255,100 $  (784,500) $ 1,249,200 $ 1,623,300 $(2,034,200)
Net income (loss)
 allocated to Limited
 Partners(a)              $ 1,101,700 $  (921,700) $ 1,080,700 $ 1,107,600 $(2,013,900)
Net income (loss)
 allocated to Limited
 Partners per Unit
 (593,025 Units
 outstanding) (a)         $      1.86 $     (1.55) $      1.82 $      1.87 $     (3.40)
Total assets              $38,008,300 $39,228,800  $42,175,300 $44,887,600 $46,932,900
Loan payable to General
 Partner                  $ 4,246,800 $ 4,085,700  $ 3,911,700 $ 3,937,900 $ 3,937,900
Mortgage loan payable            None        None         None        None $ 2,419,000
Distributions to Limited
 Partners per Unit
 (593,025 Units
 outstanding) (b)         $      4.20 $      3.90  $      6.14 $      2.26        None
Return of capital to
 Limited Partners per
 Unit (593,025 Units
 outstanding) (c)         $      2.34 $      3.90  $      4.32 $      0.39        None
OTHER DATA:
Investment in commercial
 rental properties (net
 of accumulated
 depreciation and
 amortization)            $33,446,100 $34,232,400  $37,607,600 $41,405,300 $43,555,100
Number of real property
 interests owned at
 December 31                        4           4            4           5           5
---------------------------------------------------------------------------------------
</TABLE>
(a) Net income (loss) allocated to Limited Partners for 1993 and 1992 included
    an extraordinary gain on extinguishment of debt.
(b) Distributions to Limited Partners per Unit for the years ended December 31,
    1994 and 1993 included Sale Proceeds of $2.74 and $1.42, respectively.
(c) For the purposes of this table, return of capital represents either: the
    amount by which distributions, if any, exceed net income for 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. Accourdingly, 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,
                          ---------------------------------------------------------------
                             1996         1995         1994         1993         1992
------------------------------------------------------------------------------------------
<S>                       <C>          <C>          <C>          <C>          <C>
Cash Flow (as defined in
 the Partnership
 Agreement) (a)           $ 2,393,900  $ 2,842,900  $ 3,112,400  $ 2,448,300  $ 2,655,300
Item of reconciliation:
 General Partner
  Partnership Management
  Fee                         153,400      161,200      174,000      515,400
 Changes in current
  assets and
  liabilities:
  Decrease (increase) in
   current assets              56,000       83,600        1,900      254,500     (175,300)
  Increase (decrease) in
   current liabilities         12,500       40,700     (141,100)     132,900      222,600
------------------------------------------------------------------------------------------
Net cash provided by
 operating activities     $ 2,615,800  $ 3,128,400  $ 3,147,200  $ 3,351,100  $ 2,702,600
------------------------------------------------------------------------------------------
Net cash (used for)
 provided by investing
 activities               $(2,209,700) $  (412,600)  $1,761,300  $(1,773,300) $(1,027,200)
------------------------------------------------------------------------------------------
Net cash (used for)
 financing activities     $(2,488,800) $(2,202,700) $(3,820,400) $(1,218,100) $  (905,600)
------------------------------------------------------------------------------------------
</TABLE>
(a) Cash Flow is defined in the Partnership Agreement as Partnership 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 expenses incurred
    (including Operating Expenses, payments of principal (other than balloon
    payments of principal out of offering proceeds) and interest on any
    Partnership indebtedness and interest on advances by the General Partner
    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. Cash Flow (as
    defined in the Partnership Agreement) shall include amounts distributed to
    Limited Partners from funds advanced to the Partnership by the General
    Partner and the General Partner's Partnership Management Fee.

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-7
in this report and the supplemental schedule on pages A-8 and A-9.

                                                                               7
<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.

The Partnership commenced the Offering of Units on November 5, 1986 and began
operations on December 15, 1986, after achieving the required minimum
subscription level. On May 4, 1988, the Offering was Terminated upon the sale
of 593,025 Units. From January 1987 to March 1989, the Partnership made one
real property investment and purchased 50% interests in three joint ventures
and a 75% interest in one joint venture each with Affiliated partnerships. Two
of the 50% joint ventures and the 75% joint venture were each formed for the
purpose of acquiring a 100% interest in certain real property. The remaining
50% joint venture was formed for the purpose of participating in a mortgage
loan investment, which was recognized as of July 1, 1990 as being foreclosed
in-substance and was recorded as two real property investments; the Wellington
North Office Complex (comprised of three office buildings, "Wellington") and
the North Valley I Office Center (comprised of two office buildings
collectively known as "North Valley").

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
1992 the Partnership, in addition to being in the operation of properties
phase, entered the disposition phase of its life cycle with the disposal of
North Valley as a result of a conveyance of title to the mortgage holder in
lieu of foreclosure. 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.

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.

<TABLE>
<CAPTION>
                          Comparative Operating Results
                                       (a)
                         For the Years Ended December 31,
                         --------------------------------
                            1996       1995       1994
---------------------------------------------------------
<S>                      <C>        <C>        <C>
INDIAN RIDGE SHOPPING CENTER
Rental revenues          $1,707,100 $1,853,700 $2,147,400
---------------------------------------------------------
Property net income (b)  $  566,000 $  804,300 $1,100,500
---------------------------------------------------------
Average occupancy               82%        89%        98%
---------------------------------------------------------
PARK PLAZA PROFESSIONAL BUILDING (50%)
Rental revenues          $1,666,700 $1,699,200 $1,815,300
---------------------------------------------------------
Property net income (b)  $  327,400 $  395,700 $  483,100
---------------------------------------------------------
Average occupancy               84%        87%        89%
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------
<S>                      <C>        <C>        <C>
CARROLLTON CROSSROADS SHOPPING CENTER (50%)
Rental revenues          $1,194,200 $1,164,300 $1,094,800
---------------------------------------------------------
Property net income      $  656,100 $  627,200 $  549,000
---------------------------------------------------------
Average occupancy               98%        98%        99%
---------------------------------------------------------
3120 SOUTHWEST FREEWAY OFFICE BUILDING (75%)
Rental revenues          $  657,900 $  707,200 $  713,100
---------------------------------------------------------
Property net income (b)  $   23,800 $   45,100 $   46,900
---------------------------------------------------------
Average occupancy               85%        91%        91%
---------------------------------------------------------
WELLINGTON NORTH OFFICE COMPLEX (C)
Rental revenues                                $  215,400
---------------------------------------------------------
Property net income (b)                        $    5,300
---------------------------------------------------------
Average occupancy                                 (c)
---------------------------------------------------------
</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 loan from the General Partner and general and
    administrative expenses or are related to properties previously owned by
    the Partnership.
(b) Property net income excludes losses from provisions for value impairment
    which were included in the Statement of Income and Expenses for the years
    ended December 31, 1995 and 1994 (see Note 7 of Notes to Financial
    Statements for additional information).
(c) The joint venture which owned Wellington building C, in which the
    Partnership had a 50% interest, disposed of Wellington C on June 8, 1994.
    The property net income excludes the loss from the sale of this building,
    which was reported by the Partnership in the Statement of Income and
    Expenses (see Note 6 of Notes to Financial Statements for additional
    information).

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
Net results improved by $2,039,600 for the year ended December 31, 1996 when
compared to the year ended December 31, 1995. The improvement was primarily due
to provisions for value impairment recorded during 1995. Exclusive of the
provisions for value impairment, net income decreased by $360,400 for the years
under comparison. The decrease was primarily the result of diminished operating
results at Indian Ridge and to a lesser extent at Park Plaza and Southwest
Freeway. Also contributing to the decrease in net income was an increase in
interest expense on the loan payable to the General Partner as a result of a
greater average outstanding loan balance and a decrease in interest income
resulting from a reduction in the average amount of funds available for short-
term investments. Partially offsetting the decrease in net income was an
increase in operating results at Carrollton.

8
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)


Rental revenues for the year ended December 31, 1996 decreased by $192,500 or
3.6% when compared to the year ended December 31, 1995. The primary factor
which contributed to the decrease in rental revenues for the years under
comparison was lower average occupancy rates at all of the Partnership's
properties except Carrollton. Rental revenues at Indian Ridge decreased by
$146,600 for the year ended December 31, 1996, when compared to the year ended
December 31, 1995. This decrease was the result of a major tenant vacating
45,000 square feet of space in July 1995, subsequent to filing for bankruptcy.
This 45,000 square feet accounted for approximately 24% of the total leasable
square footage of Indian Ridge. In addition, in accordance with its lease,
starting in December 1995, the other major tenant at Indian Ridge began to pay
percentage rent, in lieu of the required base rent, because of the major tenant
vacancy. During October 1996, a new tenant, Circuit City, completed
construction and commenced operations in 45,000 square feet of this vacated
space. The Circuit City lease matures on September 30, 2016. Beginning October
1, 1996, the major tenant previously paying percentage rent resumed paying the
rental rates charged prior to the vacancy. In addition, rental revenues
decreased at Southwest Freeway due to a decrease in average occupancy and at
Park Plaza due to a decrease in base rental rates charged to new and renewing
tenants.

Real estate tax expense increased by $84,500 for the years under comparison.
The increase was primarily due to an increase in the 1995 tax liability (paid
in 1996) at Indian Ridge resulting from an increase in the assessed value for
real estate tax purposes.

Property operating expenses increased by $70,700 for the year ended December
31, 1996 when compared to the year ended December 31, 1995. The increase was
primarily due to higher professional service fees at Park Plaza and Indian
Ridge. Partially offsetting the increase was lower property management and
leasing fees at Indian Ridge as a result of the decrease in rental revenues.

Repairs and maintenance expenses increased by $56,000 for the year ended
December 31, 1996 when compared to the year ended December 31, 1995, primarily
due to increased: 1) expenditures relating to the parking facility at Park
Plaza; 2) snow removal and janitorial expenses at Indian Ridge and 3) expenses
related to the enhancement of the appearance of Carrollton. Partially
offsetting the increases were decreases at Southwest Freeway as a result of
expenditures made during 1995 in order to enhance the appearance and safety
features of the property.

Depreciation and amortization expense decreased by $96,400 for the years under
comparison, primarily due to the effects of the provisions for value impairment
recorded for several of the Partnership's properties during the year ended
December 31, 1995.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
Net results for the year ended December 31, 1995 diminished by $2,033,700 when
compared to the year ended December 31, 1994. The effects of losses from
provisions for value impairment in 1995 and 1994 and the net loss on the sale
of a Partnership property in 1994 had significant impact on the comparison of
net income (loss) for the years under comparison. As described above, the
Partnership recorded (losses) from provisions for value impairment of
$(2,400,000) during 1995. During 1994, the Partnership recorded a (loss) from a
provision for value impairment of $(500,000).

Excluding the effects on net results of the provisions for value impairment and
the (loss) from a property sale, net income for the year ended December 31,
1995 diminished by $182,600 when compared to the year ended December 31, 1994.
The decrease was primarily due to a decrease in operating results of $296,200
and $87,400 at Indian Ridge and Park Plaza, respectively. Partially offsetting
the decrease was: 1) an increase in interest income of $96,200 due to an
increase in rates available on the Partnership's short-term investments as well
as in the funds available for such investments; 2) an increase in operating
results of $78,200 at Carrollton and 3) a decrease in interest expense of
$11,900 as a result of a lower average amount outstanding on the loan payable
to the General Partner.

For purposes of the following comparative discussion, the operating results of
Wellington C have been excluded.

Rental revenues for the year ended December 31, 1995 decreased by $346,200 or
6% when compared to the year ended December 31, 1994. The primary factor which
contributed to the decrease in rental revenues was a lower average occupancy
rate at Indian Ridge which was the result of the loss of the major tenant, as
described above. In total, rental revenues at Indian Ridge decreased $293,700
during 1995 when compared to 1994. Another contributing factor was a decrease
in rental revenues of $116,100 at Park Plaza due to the uncertainties
surrounding the health care industry. A substantial amount of the leasable
square footage at Park Plaza is currently leased to tenants in the health care
industry. In order to maintain occupancy levels at Park Plaza, the Partnership
in 1994 began to offer to new and renewing tenants reduced lease rates and the
use of the current year as the base year for tenant expense reimbursements.
Accordingly, rental revenues at Park Plaza have decreased due to the lower
average effective rental rate charged to new and renewing tenants and lower
tenant expense reimbursements. Rental revenues also decreased at Park Plaza due
to a reduction in lease settlement fees received from tenants which in total
were $21,300 less in 1995 than in 1994. Partially offsetting the decrease in
rental revenues was an increase of $75,500 in percentage rental income at
Carrollton resulting from higher tenant sales which determine the amount of
percentage rents to be paid to the Partnership and an increase in the average
effective base rental rate charged to new and renewing tenants at 3120
Southwest Freeway.

Real estate tax expense increased by $33,900 for the years under comparison
primarily due to increases at Park Plaza and 3120 Southwest Freeway as a result
of projected increases in assessed property valuations and tax rates and at
Carrollton as a result of an underestimate of 1994 taxes which were paid in
1995. Partially offsetting the increase was lower real estate taxes at Indian
Ridge due to 1994 real estate taxes paid in 1995 being less than anticipated.

Property operating expenses decreased by $42,300 for the year ended December
31, 1995 when compared to the prior year primarily due to: 1) lower utility
costs totaling $45,100 at 3120 Southwest Freeway and Park Plaza; 2) lower
property management and leasing fees totaling $25,000 at Indian Ridge, Park
Plaza and 3120 Southwest Freeway as a result of lower rental revenues at these
properties which determines the amount of property management and leasing fees
and 3) lower advertising and promotional fees of

                                                                               9
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)

$16,900 at Indian Ridge. Partially offsetting the decrease in property
operating expenses was: 1) an increase of $26,700 in professional service fees
at Indian Ridge and 2) an increase totaling $12,500 in property office expenses
primarily as a result of the purchase of new personal computers, printers and
software at Park Plaza and 3120 Southwest Freeway.

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
property brochures; 2) early renewal of existing tenants' 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 based on 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.
Notwithstanding the Partnership's intention relative to property sales, another
primary objective of the Partnership is to provide cash distributions to
Partners from Partnership operations. To the extent cumulative cash
distributions exceed net income, such excess distributions will be treated as a
return of capital. Cash Flow (as defined in the Partnership Agreement) is
generally not equal to net income or cash flows as defined by generally
accepted accounting principles ("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 defined by GAAP. The second table in Selected Financial Data of this report
includes a reconciliation of Cash Flow (as defined in the Partnership
Agreement) to cash flows 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 Flow.

The decrease in Cash Flow (as defined in the Partnership Agreement) of $449,000
for the year ended December 31, 1996 when compared to year ended December 31,
1995 was primarily due to the decrease in operating results of Indian Ridge, as
previously discussed, exclusive of depreciation and amortization expense.

The decrease of $2,082,700 in the Partnership's cash position as of December
31, 1996 when compared to December 31, 1995 resulted primarily from the
increase in investments in debt securities, distributions paid to Limited
Partners and expenditures for capital and tenant improvements and leasing costs
exceeding the net cash provided by operating activities. 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 the primary source of
funds to the Partnership. Net cash provided by operating activities decreased
by $512,600 for the year ended December 31, 1996 when compared to the year
ended December 31, 1995. The decrease was primarily due to the decrease in net
income, as previously discussed. In addition, the decrease was also
attributable to the timing of the receipt of rental payments at Indian Ridge
and the payment of certain expenses at Southwest Freeway and Park Plaza.

The increase in net cash used for investing activities of $1,797,100 was
primarily due to an increase in investments in debt securities and in amounts
paid for capital expenditures, such as capital, tenant improvement and leasing
costs. The increase in investments in debt securities is a 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 as they are
held for working capital purposes. These investments are of investment grade
and mature less than one year from their date of purchase.

The Partnership maintains working capital reserves to pay for capital
expenditures and spent $505,200 for capital, tenant improvement and leasing
costs during the year ended December 31, 1996. Approximately $210,000 is
budgeted to be spent during 1997. This budgeted amount relates to anticipated
capital and tenant improvements and leasing costs of approximately $125,000 at
Park Plaza and $85,000 at Indian Ridge. Actual amounts expended may vary
depending on a number of factors including actual leasing activity 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 the occupancy levels in very competitive markets, maximize rental
rates charged to new and renewing tenants and prepare the remaining properties
for disposition.

The increase in net cash used for financing activities of $286,100 was
primarily due to an increase in the payment of cash distributions to Limited
Partners.

On January 17, 1997, Carrollton Crossroads Associates, a joint venture in which
the Partnership owns a 50% interest, completed the sale of Carrollton. The
Partnership's share of the net proceeds from this sale amounted to
approximately $8,853,200. In accordance with the Partnership Agreement, 75% of
the net proceeds will be distributed on May 31, 1997 to Limited Partners of
record as of January 17, 1997, with the remaining 25% distributed to the
General Partner to repay a portion of the loan payable to the General Partner.
For further information, see Note 8 in Notes to the Financial Statements.

10
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)


On February 18, 1997, the joint venture in which the Partnership owns a 75%
interest completed the sale of Southwest Freeway. The Partnership's share of
the net proceeds from this sale amounted to approximately $2,468,300. In
accordance with the Partnership Agreement, 75% of the net proceeds will be
distributed on May 31, 1997 to Limited Partners of record as of February 18,
1997, with the remaining 25% distributed to the General Partner to repay a
portion of the loan payable to the General Partner. For further information,
see Note 8 in Notes to the Financial Statements.

The General Partner continues to take a conservative approach to projections of
future rental income in its determination of adequate levels of cash reserves
due to the anticipated capital and tenant improvements and leasing costs
necessary to be made at the Partnership's properties during the next several
years. For the year ended December 31, 1996, the Partnership included $96,800
of previously undistributed Cash Flow (as defined in the Partnership Agreement)
in its distributions to Limited Partners.

Distributions to Limited Partners for the quarter ended December 31, 1996 were
declared in the amount of $622,600, or $1.05 per Unit. Cash distributions are
made 60 days after the last day of each fiscal quarter. The amount of future
distributions to Partners will ultimately be dependent upon the performance of
the Partnership's properties as well as the General Partner's determination of
the amount of cash necessary to supplement working capital reserves to meet
future liquidity requirements of the Partnership. Accordingly, with the
exception of the special distribution to Limited Partners on May 31, 1997 of
Sales Proceeds totaling $8,491,100 or $14.32 per Unit, there can be no
assurance as to the amounts of cash for future distributions to Partners.

                                                                              11
<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.

                                      12
<PAGE>

                                   PART III

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.
<TABLE>

         Name                                                Office
         ----                                                ------
<S>                                                    <C>
     Samuel Zell.......................................Chairman of the Board
     Douglas Crocker II................................Director
     Sheli Z. Rosenberg................................Director

</TABLE>
     Samuel Zell, 55, has been a Director of the General Partner since 1983
     (Chairman of the Board since December 1985) and is 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 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.

                                      13
<PAGE>

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.


<TABLE>
<CAPTION>
         Name                                            Office
         ----                                            ------
     <S>                                  <C>
     Douglas Crocker II...................President and Chief Executive Officer
     Gus J. Athas.........................Senior Vice President
     Norman M. Field......................Vice President - Finance and Treasurer
</TABLE>
     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 President, 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. He is a director of
     Signet Armorlite, Inc.

     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. Benefits Administrators for protection 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.

                                       14
<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, 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.  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 593,025
     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.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------  ----------------------------------------------


(a)  Certain 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, supervisory
     and property management fees of $324,300. In addition, other Affiliates of
     the General Partner were entitled to receive $101,700 for fees and
     reimbursements from the Partnership for insurance, personnel and other
     services. 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. A total of $48,200 of these amounts
     was due to Affiliates as of December 31, 1996.

     As of December 31, 1996, $40,200 was due to the General Partner for real
     estate commissions earned in connection with the disposition and sale of
     Partnership property. These commissions have been accrued but not paid.
     Under the terms of the Partnership Agreement, these commissions will not be
     paid until such time as the Limited Partners have received cumulative
     distributions of Sale or Financing Proceeds equal to 100% of their Original
     Capital Contribution, plus a cumulative return (including all Cash Flow
     which has been distributed to Limited Partners) of 6% simple interest per
     annum on their Capital Investment from the initial date of investment.

     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 May 4, 1988, the Termination of
     the Offering, a Partnership Management Fee payable annually within 60 days
     following the last day of each fiscal year, which shall be an amount equal
     to the lesser of (i) 0.5% of the net value of the Partnership's assets as
     of the end of such fiscal year reflected on the Certificate of Value
     furnished to the Limited Partners, plus, to the extent the Partnership
     Management Fee paid in any prior year was less than 0.5% of the net value
     of the Partnership's assets in such prior year, the amount of such deficit,
     or (ii) an amount equal to the

                                      15
<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
--------  ----------------------------------------------

     difference between 10% of the Partnership's aggregate Cash Flow (as defined
     in the Partnership Agreement) for the period from the Commencement of
     Operations to the end of the fiscal year for which such Partnership
     Management Fee is payable, and the aggregate amount previously paid to the
     General Partner as a Partnership Management Fee. In addition, Sale Proceeds
     are distributed: first, 75% to all Limited Partners and 25% to the General
     Partner until the earlier of (i) receipt by Limited Partners of cumulative
     distributions of Sale Proceeds in an amount equal to 100% of their Original
     Capital Contribution, or (ii) receipt by the General Partner of cumulative
     distributions of Sale Proceeds sufficient to repay all outstanding advances
     to the Partnership from the General Partner; thereafter, to the General
     Partner, until all outstanding advances, if any, to the Partnership from
     the General Partner have been repaid; thereafter, to the Limited Partners,
     until they have received cumulative distributions of Sale Proceeds in an
     amount equal to 100% of their Original Capital Contribution, plus an amount
     (including Cash Flow (as defined in the Partnership Agreement)) equal to a
     cumulative return of 6% per annum simple interest on their Capital
     Investment from their investment date in the Partnership; thereafter, 85%
     to all Limited Partners; and 15% to the General Partner, provided, however,
     that no distribution of the General Partner's 15% share of Sale Proceeds
     shall be made until Limited Partners have received the greater of (i) Sale
     Proceeds plus Cash Flow (as defined in the Partnership Agreement)
     previously received in excess of the Preferred Return equal to 125% of the
     Limited Partners' Original Capital Contribution, or (ii) Sale Proceeds plus
     all Cash Flow (as defined in the Partnership Agreement) previously received
     equal to their Original Capital Contribution plus a 10% per annum simple
     interest return on their Capital Investment from the date of investment.

     In accordance with the Partnership Agreement, Net Profits (exclusive of Net
     Profits from the sale or disposition of Partnership properties) shall be
     allocated to the General Partner in an amount equal to the greater of 1% of
     such Net Profits or the Partnership Management Fee paid by the Partnership
     to the General Partner during such year, and the balance, if any, to the
     Limited Partners. Net Losses (exclusive of Net Losses from the sale,
     disposition or provision for value impairment of Partnership properties)
     are allocated 1% to the General Partner and 99% to the Limited Partners.
     Net Profits from the sale or disposition of a Partnership property are
     allocated: first, prior to giving effect to any distributions of Sale
     Proceeds from the transaction, to the General Partner and Limited Partners
     with negative balances in their Capital Accounts, pro rata in proportion to
     such respective negative balances, to the extent of the total of such
     negative balances; second, to each Limited Partner in an amount, if any,
     necessary to make the positive balance in its Capital Account equal to the
     Sale Proceeds to be distributed to such Limited Partner with respect to the
     sale or disposition of such property; third, to the General Partner in an
     amount, if any, necessary to make the positive balance in its Capital
     Account equal to the Sale Proceeds to be distributed to the General Partner
     with respect to the sale or disposition of such property; and fourth, the
     balance, if any, 15% to the General Partner and 85% to the Limited
     Partners. Net Losses from the sale, disposition or provision for value
     impairment of Partnership properties are allocated: first, after giving
     effect to any distributions of Sale Proceeds from the transaction to the
     General Partner and Limited Partners with positive balances in their
     Capital Accounts, pro rata in proportion to such respective positive
     balances, to the extent of the total amount of such positive balances; and
     second, the balance, if any, 1% to the General Partner and 99% to the
     Limited Partners. 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 entitled to a Partnership Management Fee, and accordingly,
     allocated Net Profits, of $153,400.

     In accordance with the Partnership Agreement, the General Partner made
     advances to the Partnership in cumulative amounts equal to the Acquisition
     Fees and the Partnership Management Fees which were paid to the General
     Partner or its Affiliates for distribution to the Limited Partners

                                      16
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
-------- ----------------------------------------------

     on a pro rata basis to the extent that Cash Flow (as defined in the
     Partnership Agreement) was less than sufficient to distribute cash in
     amounts equal to the Limited Partners' Preferred Return (7.5% per annum
     noncompounding cumulative return on the Limited Partners' Capital
     Investment); provided, however, that the maximum amount which shall be
     advanced to the Partnership by the General Partner for distribution to the
     Limited Partners shall be the amount of Acquisition Fees and Partnership
     Management Fees actually paid to the General Partner or its Affiliates.
     Amounts advanced shall bear interest at the rate of 8.5% per annum simple
     interest, payable monthly. Repayment of amounts advanced shall be made only
     from Cash Flow (as defined in the Partnership Agreement) if and to the
     extent it is more than sufficient to distribute cash to the Limited
     Partners in amounts equal to the Limited Partners' Preferred Return and
     from Sale Proceeds to the extent permitted in the Partnership Agreement.
     During the quarter ended March 31, 1996, the General Partner advanced its
     Partnership Management Fee for the year ended December 31, 1995 of $161,200
     to the Partnership. As of December 31, 1996, the Partnership has drawn
     $4,246,800, which represents the total amount of the General Partner's
     current commitment. Accrued interest payable to the General Partner
     relating to the advanced amount totaled $31,100 as of December 31, 1996.

(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 $45,100 for legal fees from
     the Partnership. As of December 31, 1996, all fees due to Rosenberg have
     been paid. 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.

                                       17
<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:

      A report on Form 8-K was filed on February 3, 1997, reporting the sale of
Carrollton Crossroads Shopping Center, located in Carrollton, Georgia.

                                      18
<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 INSTITUTIONAL REAL ESTATE, LTD. - 4

                               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.


/s/  SAMUEL ZELL         March 28, 1997   Chairman of the Board and
-----------------------  --------------   Director of the General Partner
     SAMUEL ZELL

/s/  DOUGLAS CROCKER II  March 28, 1997   President, Chief Executive Officer and
-----------------------  --------------   Director of the General Partner
     DOUGLAS CROCKER II

/s/  SHELI Z. ROSENBERG  March 28, 1997   Director of the General Partner
-----------------------  --------------
     SHELI Z. ROSENBERG

/s/  GUS J. ATHAS        March 28, 1997   Senior Vice President
-----------------------  --------------
     GUS J. ATHAS

/s/  NORMAN M. FIELD     March 28, 1997   Vice President - Finance and Treasurer
-----------------------  --------------
     NORMAN M. FIELD


                                      19


<PAGE>


             INDEX OF FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS

               FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
<TABLE>
<CAPTION>

                                                     Pages
                                                -------------
<S>                                             <C>

Report of Independent Auditors                        A-2

Balance Sheets as of December
 31, 1996 and 1995                                    A-3

Statements of Partners' Capital
 for the Years Ended December
 31, 1996, 1995, and 1994                             A-3

Statements of Income and
 Expenses for the Years Ended
 December 31, 1996, 1995, and
 1994                                                 A-4

Statements of Cash Flows for the
 Years Ended December 31, 1996,
 1995, and 1994                                       A-4

Notes to Financial Statements                     A-5 to A-7

SCHEDULE FILED AS PART OF THIS REPORT

III - Real Estate and Accumulated
 Depreciation as of December 31, 1996             A-8 and A-9
</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-32 of the Partnership's
definitive Prospectus dated November 5, 1986 on Form S-11 Registration Statement
No. 33-06149, filed pursuant to Rule 424(b), is incorporated herein by
reference.

EXHIBIT (10)  Material Contracts

1996 lease agreement for a tenant at Indian Ridge, one the Partnership's most
significant properties, whose 1997 expected rental payments exceed 10% of Indian
Ridge's 1997 budgeted rental revenues, is attached as an exhibit.

Real Estate Agreement for the sale of Carrollton Crossroads Shopping Center
filed as an exhibit to the Partnership's Report on Form 8-K dated February 3,
1997, 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
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

Partners
First Capital Institutional Real Estate, Ltd. - 4
Chicago, Illinois


We have audited the accompanying balance sheets of First Capital Institutional
Real Estate, Ltd. - 4 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 Institutional
Real Estate, Ltd. - 4 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

<PAGE>

                FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--4

BALANCE SHEETS
December 31, 1996 and 1995
(All dollars rounded to nearest 00s)

<TABLE>
<CAPTION>
                                                     1996         1995
---------------------------------------------------------------------------
<S>                                              <C>           <C>
ASSETS
Investment in commercial rental properties:
 Land                                            $  5,050,400  $ 5,050,400
 Buildings and improvements                        38,778,200   38,273,000
---------------------------------------------------------------------------
                                                   43,828,600   43,323,400
 Accumulated depreciation and amortization        (10,382,500)  (9,091,000)
---------------------------------------------------------------------------
 Total investment properties, net of accumulated
  depreciation and amortization                    33,446,100   34,232,400
Cash and cash equivalents                           2,572,500    4,655,200
Restricted certificates of deposit                     50,000       62,500
Investments in debt securities                      1,717,000
Rents receivable                                      213,000      225,100
Other assets                                            9,700       53,600
---------------------------------------------------------------------------
                                                 $ 38,008,300  $39,228,800
---------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
 Loan payable to General Partner                 $  4,246,800  $ 4,085,700
 Accounts payable and accrued expenses                775,600      732,100
 Due to Affiliates                                    119,500      138,900
 Security deposits                                     94,600       92,600
 Distributions payable                                776,100      783,900
 Other liabilities                                     50,500       61,400
---------------------------------------------------------------------------
                                                    6,063,100    5,894,600
---------------------------------------------------------------------------
Partners' (deficit) capital:
 General Partner                                     (270,300)    (270,300)
 Limited Partners (593,025 Units issued and
  outstanding)                                     32,215,500   33,604,500
---------------------------------------------------------------------------
                                                   31,945,200   33,334,200
---------------------------------------------------------------------------
                                                 $ 38,008,300  $39,228,800
---------------------------------------------------------------------------
</TABLE>


STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1996, 1995 and 1994
(All dollars rounded to nearest 00s)

<TABLE>
<CAPTION>
                                            General     Limited
                                            Partner    Partners       Total
-------------------------------------------------------------------------------
<S>                                        <C>        <C>          <C>
Partners' (deficit) capital,
 January 1, 1994                           $(240,800) $39,399,500  $39,158,700
Net income for the year ended December
 31, 1994                                    168,500    1,080,700    1,249,200
Distributions for the year ended December
 31, 1994                                   (174,000)  (3,641,200)  (3,815,200)
-------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
 1994                                       (246,300)  36,839,000   36,592,700
Net income (loss) for the year ended
 December 31, 1995                           137,200     (921,700)    (784,500)
Distributions for the year ended December
 31, 1995                                   (161,200)  (2,312,800)  (2,474,000)
-------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
 1995                                       (270,300)  33,604,500   33,334,200
Net income for the year ended December
 31, 1996                                    153,400    1,101,700    1,255,100
Distributions for the year ended December
 31, 1996                                   (153,400)  (2,490,700)  (2,644,100)
-------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
 1996                                      $(270,300) $32,215,500  $31,945,200
-------------------------------------------------------------------------------
</TABLE>

    The accompanying notes are an integral part of the financial statements.
                                                                             A-3
<PAGE>

                FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--4

STATEMENTS OF INCOME AND EXPENSES
For the years ended December 31, 1996, 1995 and 1994
(All dollars rounded to nearest 00s except per Unit amounts)

<TABLE>
<CAPTION>
                                                1996       1995        1994
------------------------------------------------------------------------------
<S>                                          <C>        <C>         <C>
Income:
 Rental                                      $5,231,900 $5,424,400  $5,986,000
 Interest                                       235,900    266,300     170,100
------------------------------------------------------------------------------
                                              5,467,800  5,690,700   6,156,100
------------------------------------------------------------------------------
Expenses:
 Interest on loan payable to General Partner    364,800    349,800     361,700
 Depreciation and amortization                1,292,200  1,388,600   1,488,300
 Property operating:
  Affiliates                                    366,300    371,300     375,700
  Nonaffiliates                                 678,000    602,300     695,300
 Real estate taxes                              703,800    619,300     625,900
 Insurance--Affiliate                            65,000     58,300      70,300
 Repairs and maintenance                        568,500    512,500     564,300
 General and administrative:
  Affiliates                                     38,600     43,500      36,300
  Nonaffiliates                                 135,500    129,600     140,200
 Loss on sale of property                                               48,900
 Provisions for value impairment                         2,400,000     500,000
------------------------------------------------------------------------------
                                              4,212,700  6,475,200   4,906,900
------------------------------------------------------------------------------
Net income (loss)                            $1,255,100 $ (784,500) $1,249,200
------------------------------------------------------------------------------
Net income allocated to General Partner      $  153,400 $  137,200  $  168,500
------------------------------------------------------------------------------
Net income (loss) allocated to Limited
 Partners                                    $1,101,700 $ (921,700) $1,080,700
------------------------------------------------------------------------------
Net income (loss) allocated to Limited
 Partners per Unit (593,025 Units
 outstanding)                                $     1.86 $    (1.55) $     1.82
------------------------------------------------------------------------------
</TABLE>

STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
(All dollars rounded to nearest 00s)

<TABLE>
<CAPTION>
                                          1996         1995         1994
-----------------------------------------------------------------------------
<S>                                    <C>          <C>          <C>
Cash flows from operating activities:
 Net income (loss)                     $ 1,255,100  $  (784,500) $ 1,249,200
 Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:
  Depreciation and amortization          1,292,200    1,388,600    1,488,300
  Loss on sale of property                                            48,900
  Provisions for value impairment                0    2,400,000      500,000
  Changes in assets and liabilities:
   Decrease (increase) in rents
    receivable                              12,100       73,000       (1,600)
   Decrease in other assets                 43,200       10,600        3,500
   Increase (decrease) in accounts
    payable and accrued expenses            43,500       70,400     (176,900)
   (Decrease) increase in due to
    Affiliates                             (19,400)     (11,900)      25,500
   (Decrease) increase in other
    liabilities                            (10,900)     (17,800)      10,300
-----------------------------------------------------------------------------
    Net cash provided by operating
     activities                          2,615,800    3,128,400    3,147,200
-----------------------------------------------------------------------------
Cash flows from investing activities:
 Proceeds from the sale of property                                2,168,300
 (Increase) in investments in debt
  securities                            (1,717,000)
 Decrease in restricted certificate of
  deposit                                   12,500
 Payments for capital and tenant
  improvements                            (505,200)    (412,600)    (407,000)
-----------------------------------------------------------------------------
    Net cash (used for) provided by
     investing activities               (2,209,700)    (412,600)   1,761,300
-----------------------------------------------------------------------------
Cash flows from financing activities:
 Distributions paid to Partners         (2,651,900)  (2,368,200)  (3,777,000)
 Increase (decrease) in security
  deposits                                   2,000       (8,500)     (17,200)
 Proceeds from (net repayment of) loan
  payable to General Partner               161,100      174,000      (26,200)
-----------------------------------------------------------------------------
    Net cash (used for) financing
     activities                         (2,488,800)  (2,202,700)  (3,820,400)
-----------------------------------------------------------------------------
Net (decrease) increase in cash and
 cash equivalents                       (2,082,700)     513,100    1,088,100
Cash and cash equivalents at the
 beginning of the year                   4,655,200    4,142,100    3,054,000
-----------------------------------------------------------------------------
Cash and cash equivalents at the end
 of the year                           $ 2,572,500  $ 4,655,200  $ 4,142,100
-----------------------------------------------------------------------------
Supplemental information:
 Interest paid on loan payable to
  General Partner                      $   364,800  $   348,500  $   361,900
-----------------------------------------------------------------------------
</TABLE>

    The accompanying notes are an integral part of the financial statements.
A-4
<PAGE>

                FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--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 May 20, 1986, 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 November 5, 1986. On December
15, 1986, the required minimum subscription level was reached and Partnership
operations commenced. The Offering was Terminated on May 4, 1988 with 593,025
Units sold. The Partnership was formed to invest primarily in existing,
improved, income-producing commercial real estate.

The Partnership Agreement provides that the Partnership will be dissolved on or
before December 31, 2016. 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 two joint
ventures and a 75% interest in one joint venture with Affiliated partnerships.
Each of these ventures were formed for the purpose of each acquiring a 100%
interest in certain real property and are operated under the common control of
the General Partner. In addition, the 1994 financial statements included the
Partnership's 50% interest in a joint venture with an Affiliated Partnership.
This joint venture disposed of its assets and liquidated in 1994. Accordingly,
the Partnership's pro rata share of the ventures' revenues, expenses, assets,
liabilities and Partners' capital was 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 on 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 difference between the tax bases and
the reported assets and liabilities of the Partnership would not be meaningful.

Commercial rental properties 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. 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
are 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.

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 or disposition 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. As of December 31, 1996 these
securities had a fair market value of $1,714,400 and unrealized losses of
$(2,600). All of these securities had maturities of less than one year when
purchased.

The Partnership's financial statements include financial instruments, including
receivables, trade liabilities and the loan payable to the General Partner. The
fair value of financial instruments, including cash and cash equivalents, was
not materially different from their carrying value at December 31, 1996 and
1995.

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 May 4, 1988, the Termination of the
Offering, a Partnership Management Fee payable annually within 60 days
following the last day of each fiscal year, which shall be an amount equal to
the lesser of (i) 0.5% of the net value of the Partnership's assets as of the
end of such fiscal year reflected on the Certificate of Value furnished to the
Limited Partners, plus, to the extent the Partnership Management Fee paid in
any prior year was less than 0.5% of the net value of the Partnership's assets
in such prior year, the amount of such deficit, or (ii) an amount equal to the
difference between 10% of the Partnership's aggregate Cash Flow (as defined in
the Partnership Agreement) for the period from the Commencement of Operations
to the end of the fiscal year for which such Partnership Management Fee is
payable, and the aggregate amount previously paid to the General Partner as a
Partnership Management Fee. In addition, Sale Proceeds are distributed: first,
75% to all Limited Partners and 25% to the General Partner until the earlier of
(i) receipt by Limited Partners of cumulative distributions of Sale Proceeds in
an amount equal to 100% of their Original Capital Contribution, or (ii) receipt
by the General Partner of cumulative distributions of Sale Proceeds sufficient
to repay all outstanding advances to the Partnership from the General Partner;
thereafter, to the General Partner, until all outstanding advances, if any, to
the Partnership from the General Partner have been repaid; thereafter, to the
Limited Partners, until they have received cumulative distributions of Sale
Proceeds in an amount equal to 100% of their Original Capital Contribution,
plus an amount (including Cash Flow (as defined in the Partnership Agreement))
equal to a cumulative return of 6% per annum simple interest on their Capital
Investment from their investment date in the Partnership; thereafter, 85% to
all Limited Partners; and 15% to the General Partner, provided, however, that
no distribution of the General Partner's 15% share of Sale Proceeds shall be
made until Limited Partners have received the greater of (i) Sale Proceeds plus
Cash Flow (as defined in the Partnership Agreement) previously received in
excess of the Preferred Return equal to 125% of the Limited Partners' Original
Capital Contribution, or

                                                                             A-5
<PAGE>

                FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--4
(ii) Sale Proceeds plus all Cash Flow (as defined in the Partnership Agreement)
previously received equal to their Original Capital Contribution plus a 10% per
annum simple interest return on their Capital Investment from the date of
investment.

In accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties) shall be
allocated to the General Partner in an amount equal to the greater of 1% of
such Net Profits or the Partnership Management Fee paid by the Partnership to
the General Partner during such year, and the balance, if any, to the Limited
Partners. Net Losses (exclusive of Net Losses from the sale, disposition or
provision for value impairment of Partnership properties) are allocated 1% to
the General Partner and 99% to the Limited Partners. Net Profits from the sale
or disposition of a Partnership property are allocated: first, prior to giving
effect to any distributions of Sale Proceeds from the transaction, to the
General Partner and Limited Partners with negative balances in their Capital
Accounts, pro rata in proportion to such respective negative balances, to the
extent of the total of such negative balances; second, to each Limited Partner
in an amount, if any, necessary to make the positive balance in its Capital
Account equal to the Sale Proceeds to be distributed to such Limited Partner
with respect to the sale or disposition of such property; third, to the General
Partner in an amount, if any, necessary to make the positive balance in its
Capital Account equal to the Sale Proceeds to be distributed to the General
Partner with respect to the sale or disposition of such property; and fourth,
the balance, if any, 15% to the General Partner and 85% to the Limited
Partners. Net Losses from the sale, disposition or provision for value
impairment of Partnership properties are allocated: first, after giving effect
to any distributions of Sale Proceeds from the transaction to the General
Partner and Limited Partners with positive balances in their Capital Accounts,
pro rata in proportion to such respective positive balances, to the extent of
the total amount of such positive balances; and second, the balance, if any, 1%
to the General Partner and 99% to the Limited Partners. 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 entitled to a Partnership Management Fee, and
accordingly, allocated Net Profits, of $153,400. For the year ended December
31, 1995, the General Partner was entitled to a Partnership Management Fee of
$161,200 and allocated Net Profits of $137,200, which included a (loss) from
provisions for value impairment of $(24,000). For the year ended December 31,
1994, the General Partner was entitled to a Partnership Management Fee of
$174,000 and allocated Net Profits of $168,500, which included a (loss) from
the sale of a Partnership property of $(500) and a (loss) from a provision for
value impairment of $(5,000).

In accordance with the Partnership Agreement, the General Partner made advances
to the Partnership in cumulative amounts equal to the Acquisition Fees and the
Partnership Management Fees which were paid to the General Partner or its
Affiliates for distribution to the Limited Partners on a pro rata basis to the
extent that Cash Flow (as defined in the Partnership Agreement) was less than
sufficient to distribute cash in amounts equal to the Limited Partners'
Preferred Return (7.5% per annum noncompounding cumulative return on the
Limited Partners' Capital Investment); provided, however, that the maximum
amount which shall be advanced to the Partnership by the General Partner for
distribution to the Limited Partners shall be the amount of Acquisition Fees
and Partnership Management Fees actually paid to the General Partner or its
Affiliates. Amounts advanced shall bear interest at the rate of 8.5% per annum
simple interest, payable monthly. Repayment of amounts advanced shall be made
only from Cash Flow (as defined in the Partnership Agreement) if and to the
extent it is more than sufficient to distribute cash to the Limited Partners in
amounts equal to the Limited Partners' Preferred Return and from Sale Proceeds
to the extent permitted in the Partnership Agreement. As of December 31, 1996,
the Partnership has drawn $4,246,800, which represents the total amount of the
General Partner's current commitment. On May 31, 1997, $2,830,400 will be
repaid to the General Partner in conjunction with the distribution of sales
proceeds to Limited Partners from the sales of Carrollton and Southwest
Freeway. For further information, see Note 8.

Fees and reimbursements paid and payable by the Partnership to Affiliates were
as follows:

<TABLE>
<CAPTION>
                                   For the Years Ended December 31,
                         -----------------------------------------------------
                               1996              1995              1994
                         ----------------- ----------------- -----------------
                           Paid   Payable    Paid   Payable    Paid   Payable
------------------------------------------------------------------------------
<S>                      <C>      <C>      <C>      <C>      <C>      <C>
Property management and
 leasing fees            $339,600 $ 44,900 $343,100 $ 60,200 $310,800 $ 76,900
Real estate commissions
 (a)                         None   40,200     None   40,200     None   40,200
Interest expense on
 loan payable to
 General Partner          363,600   31,100  348,500   29,900  361,900   28,600
Reimbursement of
 property insurance
 premiums, at cost         65,000     None   58,300     None   67,600     None
Reimbursement of
 expenses, at cost:
 --Accounting              30,600    2,900   20,200    6,700   18,600    3,100
 --Investor
  communication            11,400      400   18,000    1,900   13,900    2,000
 --Legal                   45,100     None   47,300     None   48,500     None
 --Other                     None     None      900     None     None     None
------------------------------------------------------------------------------
                         $855,300 $119,500 $836,300 $138,900 $821,300 $150,800
------------------------------------------------------------------------------
</TABLE>
(a)As of December 31, 1996, the Partnership owed $40,200 to the General Partner
   for real estate commissions earned in connection with the sales of
   Partnership properties. These commissions have been accrued but not paid. In
   accordance with the Partnership Agreement, the Partnership will not pay the
   General Partner or any Affiliates a real estate commission from the sale of
   a Partnership property until Limited Partners have received cumulative
   distributions of Sale or Financing Proceeds equal to 100% of their Original
   Capital Contribution, plus a cumulative return (including all Cash Flow (as
   defined in the Partnership Agreement) which has been distributed to the
   Limited Partners from the initial investment date) of 6% simple interest per
   annum on their Capital Investment.

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 from the properties.

3. RESTRICTED CERTIFICATES OF DEPOSIT:

Restricted certificates of deposit include a negotiable certificate of deposit
of $50,000, which has been pledged as collateral for security deposits to the
Houston Lighting & Power Company.

A-6
<PAGE>

                FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--4
4. FUTURE MINIMUM RENT:

The Partnership's share of future minimum rental income due on noncancelable
leases as of December 31, 1996 was as follows (excludes Carrollton and
Southwest Freeway, which were sold during the first quarter of 1997):

<TABLE>
                    <S>                                            <C>
                    1997                                           $ 2,641,100
                    1998                                             2,188,900
                    1999                                             1,619,600
                    2000                                             1,431,000
                    2001                                             1,222,900
                    Thereafter                                       5,266,700
                             -----------------------------------
                                                                   $14,370,200
                             -----------------------------------
</TABLE>

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
and real estate tax expense reimbursements and percentage rents. Percentage
rents earned for the years ended December 31, 1996, 1995 and 1994 were
$196,900, $84,300 and $7,500, respectively, which included percentage rent from
Carrollton of $67,400, $75,300 and $107,900.

5. 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 income
for tax reporting purposes was greater than net income for financial statement
purposes by $291,400. The aggregate cost of commercial rental properties for
federal income tax purposes at December 31, 1996 was $46,720,800.

6. PROPERTY SALE:

On June 8, 1994, Farmington Hills Associates ("FHA"), the joint venture which
owned North Valley Office Center and Wellington North Office Complex
("Wellington A, B and C"), in which the Partnership owned a 50% interest, sold
Wellington C for the sale price of $4,500,000. The Partnership's share of
selling expenses was $81,700. The Partnership's share of the net proceeds from
this sale was $2,168,300. The Partnership recorded a total (loss) on the sale
of this property of $(2,048,900) for financial statement purposes, of which
$2,000,000 was recorded as of December 31, 1992 as a provision for value
impairment. This sale was an all-cash transaction with no further involvement
on the part of the Partnership.
7. 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
is 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 is a summary of the provisions for value impairment reported by
the Partnership for the years ended December 31, 1995 and 1994:

<TABLE>
<CAPTION>
                       Property                1995      1996
                  ---------------------------------------------
             <S>                            <C>        <C>
             Indian Ridge Plaza Shopping
              Center                        $  900,000
             Park Plaza Professional
              Building (50%)                   900,000 $500,000
             3120 Southwest Freeway Office
              Building (75%)                   600,000
                  ---------------------------------------------
                                            $2,400,000 $500,000
                  ---------------------------------------------
</TABLE>

8. SUBSEQUENT EVENTS:

On January 17, 1997, a joint venture in which the Partnership has a 50%
interest consummated the sale of Carrollton Crossroads Shopping Center, located
in Carrollton, Georgia, for a sale price of $18,100,000, of which the
Partnership's share was $9,050,000. Net proceeds from this transaction
approximated $8,853,200, which was net of certain closing expenses. The
Partnership will report a net gain of approximately $375,000 during 1997 in
connection with this sale and intends to distribute all of the net proceeds
from this transaction. On May 31, 1997, in accordance with the Partnership
Agreement, 75% of the net proceeds will be distributed to Limited Partners of
record as of January 17, 1997, with the remaining 25% distributed to the
General Partner to repay a portion of the loan payable to the General Partner.

On February 18, 1997, a joint venture in which the Partnership has a 75%
interest consummated the sale of 3120 Southwest Freeway Office Building,
located in Houston, Texas, for a sale price of $3,425,000, of which the
Partnership's share was $2,568,750. The Partnership's share net proceeds from
this transaction approximated $2,468,300, which was net of certain closing
expenses. The Partnership intends to report a net gain of approximately
$735,000 during 1997 in connection with this sale and will distribute all of
the net proceeds from this transaction. On May 31, 1997, in accordance with the
Partnership Agreement, 75% of the net proceeds will be distributed to Limited
Partners of record as of February 18, 1997, with the remaining 25% distributed
to the General Partner to repay a portion of the loan payable to the General
Partner.
                                                                             A-7
<PAGE>


               FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 4

            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1996


<TABLE>
<CAPTION>
     Column A              Column C                    Column D                           Column E
-----------------    -----------------------   -------------------------   --------------------------------------------
                         Initial cost              Costs capitalized                  Gross amount carried
                        to Partnership         subsequent to acquisition               at close of period
                     -----------------------   -------------------------   --------------------------------------------
                                   Buildings                                               Buildings
                                     and       Improve-    Carrying                            and
   Description       Land        Improvements   ments      Costs (1)         Land          Improvements    Total (2)(3)
-----------------    ----------  ------------  ---------   ----------      ---------       ------------    ------------
<S>                  <C>         <C>           <C>         <C>             <C>             <C>             <C>
Office Buildings:
-----------------

Park Plaza
  Professional
  Building
  (Houston, TX)
  (50% interest)     $  803,000  $10,772,500   $2,256,000  $ 82,400        $  803,000      $11,710,900(4)  $12,513,900

3120 Southwest
  Freeway
  (Houston, TX)
  (75% interest)        737,100    1,489,200    1,225,000    30,600           737,100        2,144,800(4)    2,881,900

Shopping Centers:
-----------------

Indian Ridge Plaza
  (Mishawaka, IN)     3,009,900   15,431,100      426,000    67,000         2,509,900(4)    15,524,100(4)   18,034,000

Carrollton
  Crossroads
  (Carrollton, GA)
  (50% interest)      1,000,400    7,703,400    1,635,100    59,900         1,000,400        9,398,400      10,398,800
                     ----------  -----------   ----------  --------        ----------      -----------     -----------

                     $5,550,400  $35,396,200   $5,542,100  $239,900        $5,050,400      $38,778,200     $43,828,600
                     =========   ==========    ==========  ========        ==========      ===========     ===========
</TABLE>
<TABLE>
<CAPTION>
     Column A                      Column F             Column G        Column H       Column I
-----------------               ----------------        ---------       --------       ------------
                                                                                         Life on
                                                                                          which
                                                                                       depreciation
                                                                                        in latest
                                                          Date                           income
                                  Accumulated            of con-          Date         statements
  Description                   Depreciation(2)         struction       Acquired       is computed
-----------------               ----------------        ---------       --------       ------------
<S>                             <C>                     <C>             <C>            <C>
Office Buildings:
-----------------

Park Plaza
  Professional
  Building
  (Houston, TX)                                                                                35(5)
  (50% interest)                $ 3,997,200                 1976           1/87              5-10(6)

3120 Southwest
  Freeway
  (Houston, TX)                                                                                35(5)
  (75% interest)                  1,147,100                 1964           3/89              5-10(6)

Shopping Centers:
-----------------

Indian Ridge Plaza                                                                             35(5)
  (Mishawaka, IN)                 3,313,400                 1986           1/89              5-10(6)

Carrollton
  Crossroads
  (Carrollton, GA)                                                                             35(5)
  (50% interest)                  1,924,800                 1988           8/88              5-10(6)
                                -----------
                                $10,382,500
                                ===========
</TABLE>

Column B - Not Applicable

See accompanying notes on the following page.

                                      A-8
<PAGE>


               FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 4

                             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>
                                     December 31, 1996              December 31, 1995             December 31, 1994
                                ---------------------------    --------------------------    ----------------------------
                                               Accumulated                   Accumulated                     Accumulated
                                   Cost        Depreciation       Cost       Depreciation       Cost         Depreciation
                                -----------    ------------    -----------   ------------    -----------     ------------
<S>                             <C>            <C>             <C>           <C>             <C>             <C>
Balance at beginning
  of the year                   $43,323,400    $  9,091,000    $45,310,800   $  7,703,200    $47,978,600     $  6,573,300

Additions during year:

Improvements                        505,200                        412,600                       407,000

Provision for depreciation                        1,291,500                     1,387,800                       1,487,600

Deductions
  during year:

Basis of real estate
  disposed (6)                                                                                (2,574,800)

Accumulated depreciation
  on real estate disposed                                                                                        (357,700)

Provisions for value
  impairment                                                    (2,400,000)                     (500,000)
                                -----------    ------------    -----------   ------------    -----------     ------------
Balance at end of
  the year                      $43,828,600    $ 10,382,500    $43,323,400   $  9,091,000    $45,310,800     $  7,703,200
                                ===========    ============    ===========   ============    ===========     ============
</TABLE>

Note 3.  The aggregate cost for federal income tax purposes as of December 31,
         1996 was $46,720,800.

Note 4.  Included provisions for value impairment. See Note 7 in Notes to
         Financial Statements for additional information.

Note 5.  Estimated useful life for building.

Note 6.  Estimated useful life for improvements.

                                      A-9