<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C. 20549-1004

                                   FORM 10-Q
                                        
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934

     For the period ended                     September 30, 1998
                           -----------------------------------------------------
 
                                      OR
 
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
 
     For the transition period from                     to
                                    -------------------    ---------------------

     Commission File Number                           0-12537
                            ----------------------------------------------------

              First Capital Income Properties, Ltd. - Series VIII
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)
 
           Florida                                                59-2192277
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization                               Identification No.)
 

Two North Riverside Plaza, Suite 1000, Chicago, Illinois         60606-2607
--------------------------------------------------------         ----------
       (Address of principal executive offices)                  (Zip Code)
 
                                (312) 207-0020
--------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)
 
                                Not applicable
--------------------------------------------------------------------------------
  (Former name, former address and former fiscal year, if changed since last
                                    report)
 
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
                                        ---      ---
Documents incorporated by reference:

The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the Partnership's Prospectus dated July 28, 1982, included
in the Partnership's Registration Statement on Form S-11, is incorporated herein
by reference in Part I of this report.

<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Reference is made to the Partnership's annual report for the year ended
December 31, 1997 for a discussion of the Partnership's business.
 
Statements contained in the Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are not historical facts, may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as to the date hereof.
 
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sale price. The
Partnership, in addition to being in the operation of properties phase, is in
the disposition of properties phase of its life cycle. During the disposition
phase of the Partnership's life cycle, comparisons of operating results are
complicated due to the timing and effect of property sales. Partnership
operating results are generally expected to decline as real property interests
are sold since the Partnership no longer receives the net income generated from
such properties. During 1998, the Partnership sold Old Mill Place Shopping
Center ("Old Mill").
 
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's properties for the quarters and nine months ended September 30,
1998 and 1997. 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 Quarters    For the Nine Months
                                  Ended                Ended
<S>                         <C>       <C>      <C>        <C>
                             9/30/98   9/30/97    9/30/98    9/30/97
--------------------------------------------------------------------
BROOKWOOD METROPLEX OFFICE BUILDING
Rental revenues             $607,500  $557,000 $1,902,500 $1,622,300
--------------------------------------------------------------------
Property net income         $168,900  $131,300 $  595,200 $  362,200
--------------------------------------------------------------------
Average occupancy                98%       94%        99%        97%
--------------------------------------------------------------------
WALKER SPRINGS PLAZA SHOPPING CENTER
Rental revenues             $219,400  $271,400 $  729,600 $  854,500
--------------------------------------------------------------------
Property net income         $ 77,300  $126,300 $  317,300 $  419,400
--------------------------------------------------------------------
Average occupancy                73%      100%        78%       100%
--------------------------------------------------------------------
OLD MILL PLACE SHOPPING CENTER (B)
Rental revenues             $  7,800  $263,200 $  500,800 $  806,600
--------------------------------------------------------------------
Property net (loss) income  $ (3,100) $155,100 $  326,200 $  468,500
--------------------------------------------------------------------
</TABLE>
(a) Excludes certain income and expense items which are either not directly
    related to individual property operating results such as interest income
    and general and administrative expenses or are related to properties
    previously disposed of by the Partnership.
(b) Old Mill was sold on June 17, 1998. Property net income excludes a loss on
    the sale of $339,300 recorded during the nine months ended September 30,
    1998.
 
Unless otherwise disclosed, discussions of fluctuations between 1998 and 1997
refer to both the quarters and nine months ended September 30, 1998 and 1997.
 
Net income decreased by $226,300 for the nine months ended September 30, 1998
when compared to the nine months ended September 30, 1997. The decrease was
primarily due to the loss of $339,300 recorded on the 1998 sale of Old Mill.
The decrease was also due to the partial absence of operating results in 1998
due to the sale of Old Mill and diminished operating results at Walker Springs
Plaza Shopping Center ("Walker Springs"). The decrease was partially offset by
improved operating results at Brookwood Metroplex Office Building ("Brookwood")
and an increase in interest earned on the Partnership's short-term investments,
resulting from the availability of additional proceeds from Old Mill being
invested prior to their distribution to Limited Partners.
 
Net income decreased by $89,900 for the quarter ended September 30, 1998 when
compared to the quarter ended September 30, 1997. The decrease was primarily
due to the absence of results in 1998 from Old Mill due to its sale. The
decrease was also due to the diminished operating results from Walker Springs.
The decrease was partially offset by the increase in interest earned on the
Partnership's short-term investments and the improved operating results at
Brookwood.
 
Net income, exclusive of Old Mill, increased by $69,300 and $255,200 for the
quarter and nine months ended September 30, 1998 when compared to the quarter
and nine months ended September 30, 1997. The increases were primarily due to
the increase in interest earned on the Partnership's short-term investments and
the improved operating results at Brookwood. The increases were partially
offset by the diminished operating results at Walker Springs.
 
The following comparative discussion excludes the results of Old Mill.
 
Rental revenues increased by $153,300 or 6.2% for the nine months ended
September 30, 1998 when compared to the nine months ended September 30, 1997.
The increase was primarily due to a 1997 adjustment of a 1996 overaccrual of
tenant expense reimbursements, causing reduced reported 1997 rental revenues,
at Brookwood. Also contributing to the increase was an increase in base rents
at Brookwood due to an increase in rates charged to new and renewing tenants.
The increase was partially offset by a decrease in base rental income at Walker
Springs due to a decline in average occupancy. Rental revenues remained
relatively unchanged for the quarterly periods under comparison. Increases in
1998 revenues at Brookwood were offset by reductions at Walker Springs.
 
Repair and maintenance expenses decreased by $11,500 and $12,600 for the
quarterly and nine-month periods under comparison, respectively. The decreases
were primarily due to decreases in ongoing repairs to the roof at Walker
Springs.
 
Real estate expense increased by $5,300 and $15,900 for the quarter and nine
months ended September 30, 1998 when compared to the quarter and nine months
ended September 30, 1997, respectively. The increases were primarily the result
of increases in the projected 1998 real estate taxes at Brookwood and Walker
Springs.
 
All other expenses remained relatively unchanged for the periods under
comparison.
 
To increase and/or maintain occupancy levels at the Partnership's properties,
the Managing General Partner, through its asset and property management groups,
continues to take the following actions: 1) implementation of marketing
programs, including hiring of third-party leasing agents or providing on-site
leasing personnel, advertising, direct mail campaigns and development of
building brochures; 2) early renewal of existing 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.
 
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 remaining
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 determined 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 determined by GAAP. 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 GAAP and are not indicative of actual
distributions to Partners and should not necessarily be considered as an
alternative to the results disclosed in the Statements of Income and Expenses
and Statements of Cash Flow.
 
                                                                               2
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
 
<TABLE>
<CAPTION>
                                                       Comparative Cash Flow
                                                          Results For the
                                                         Nine Months Ended
                                                        9/30/98      9/30/97
-------------------------------------------------------------------------------
<S>                                                   <C>          <C>
Cash Flow (as defined in the Partnership Agreement)   $ 2,003,300  $ 1,861,100
Items of reconciliation:
 Decrease in current assets                                69,100      198,600
 (Decrease) in current liabilities                       (237,200)    (145,400)
-------------------------------------------------------------------------------
Net cash provided by operating activities             $ 1,835,200  $ 1,914,300
-------------------------------------------------------------------------------
Net cash provided by (used for) investing activities  $ 3,184,300  $(2,725,500)
-------------------------------------------------------------------------------
Net cash (used for) financing activities              $(1,543,500) $(1,519,500)
-------------------------------------------------------------------------------
</TABLE>
 
The increase in Cash Flow (as defined in the Partnership Agreement) of
$142,200 for the nine months ended September 30, 1998 when compared to nine
months ended September 30, 1997 was due to improved results at Brookwood and
increased interest income. The increase was partially offset by diminished
results at Walker Springs and the absence of Old Mill subsequent to its sale.
 
The increase in the Partnership's cash position of $3,476,000 for the nine
months ended September 30, 1998 was primarily the result of receipt of the
proceeds from the sale June 17, 1998 sale of Old Mill. The increase was
partially offset by investments in debt securities, distributions paid to
Partners and expenditures made for capital and tenant improvements and leasing
costs, which exceeded net cash provided by operating activities. Liquid
assets, including cash, cash equivalents and investments in debt securities,
of the Partnership as of September 30, 1998 are comprised of amounts held for
working capital purposes and undistributed Sale Proceeds.
 
Net cash provided by operating activities decreased by $79,100 for the nine
months ended September 30, 1998 when compared to the nine months ended
September 30, 1997. The decrease was primarily due to the liquidation of Old
Mill's trade debt in connection with its sale, the timing of the payment of
certain expenses at Walker Springs and the timing of the receipt of rental
payments at Brookwood.
 
Net cash (used for) provided by investing activities changed from $(2,725,500)
for the nine months ended September 30, 1997 to $3,184,300 for the nine months
ended September 30, 1998. The change was primarily due to the 1998 receipt of
proceeds from the sale of Old Mill, partially offset by investments of a
portion of the proceeds in debt securities. The investments in debt securities
is a result of the continued 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 generally mature less than one year from their
date of purchase.
 
The Partnership maintains working capital reserves to pay for capital
expenditures such as building and tenant improvements and leasing costs.
During the nine months ended September 30, 1998, the Partnership spent $69,800
for capital and tenant improvements and leasing. Amounts to be spent in the
future depend to a large extent on the retenanting issues at Brookwood and
Walker Springs, as discussed below. The Managing General Partner believes that
ongoing improvements and leasing costs are necessary in order to increase
and/or maintain occupancy levels in very competitive markets, maximize rental
rates charged to new and renewing tenants and to prepare the remaining
properties for eventual disposition.
 
The Partnership has been notified that the tenant occupying approximately 67%
of the rentable square footage at Brookwood does not intend to exercise its
option ("Option") to renew its lease expiring on December 31, 1998. Market
rental rates currently being quoted by competing properties are greater than
the Option rate. Retenanting Brookwood could require a substantial amount of
capital and take an extended period of time. The Managing General Partner is
currently evaluating various options with respect to this property. These
include, but are not limited to: 1) immediately marketing the property for
sale; 2) begin securing new tenants for the property to replace the old tenant
upon their vacating the premises and then marketing the property for sale or
3) begin securing new tenants for the property, while marketing the property
for sale to a buyer that would be in position to complete the retenanting
process.
 
Walker Springs currently has approximately 44,000 square feet of vacant space.
The Partnership is currently in the process of locating one or two suitable
tenants to bring the occupancy at the center back up to 100%. There can be no
assurance that the Partnership will be successful in its efforts. Results at
Walker Springs can be expected to be adversely impacted during the remainder
of 1998 and most likely into 1999 until a new tenant(s) can be secured to
occupy the available space. The securing of a new tenant(s) could result in
substantial tenant improvement costs.
 
On June 17, 1998, the Partnership consummated the sale of Old Mill. Net
proceeds from this transaction amounted to $5,655,200, which was net of actual
and estimated closing expenses. The Partnership will distribute $5,635,000 or
$80.50 per Unit on November 30, 1998 to Limited Partners of record as of June
17, 1998.
 
The increase in net cash used for financing activities of $24,000 for the nine
months ended September 30, 1998 as compared to the nine months ended September
30, 1997 was primarily the result of crediting the purchaser of Old Mill with
the amount of its outstanding security deposits.
 
The Year 2000 problem is the result of the inability of existing computer
programs to distinguish between a year beginning with "20" rather than "19".
This is the result of computer programs using two rather than four digits to
define an applicable year. If not corrected, any program having time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a variety of problems including miscalculations,
loss of data and failure of entire systems. Critical areas that could be
effected are accounts receivable and rent collections, accounts payable,
general ledger, cash management, fixed assets, investor services, computer
hardware, telecommunications systems and health, security, fire and safety
systems.
 
The Partnership has engaged Affiliated and unaffiliated entities to perform
all of its critical functions that utilize software that may have time-
sensitive applications. All of these service providers are providing these
services for their own organizations as well as for other clients. The General
Partner, on behalf of the Partnership, has been in close communications with
each of these service providers regarding steps that are being taken to assure
that there will be no serious interruption of the operations of the
Partnership resulting from Year 2000 problems. Based on the results of the
queries, as well as a review of the disclosures by these service providers,
the General Partner believes that the Partnership will be able to continue
normal business operations and will incur no material costs related to Year
2000 issues.
 
The Partnership has not formulated a contingency plan. However, the General
Partner believes that based on the size of the Partnership's portfolio and its
limited number of transactions, aside from catastrophic failure of banks,
governmental agencies, etc., it could carry out substantially all of its
critical operations on a manual basis or easily convert to systems that are
Year 2000 compliant.
 
The Managing 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 Brookwood and Walker Springs during the
next several years. As a result of this, cash continues to be retained to
supplement working capital reserves. For the nine months ended September 30,
1998, Cash Flow (as defined in the Partnership Agreement) retained to
supplement working capital reserves amounted to $564,400.
 
Distributions of Cash Flow (as defined in the Partnership Agreement) to
Limited Partners for the quarter ended September 30, 1998 were declared in the
amount of $385,000, or $5.50 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 investments as well as the Managing General Partner's
determination of the amount of cash necessary to supplement working capital
reserves to meet future liquidity requirements of the Partnership.
Accordingly, there can be no
assurance as to the amounts of cash for future distributions to Partners.
 
3
<PAGE>
 
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
 
BALANCE SHEETS
(All dollars rounded to nearest 00s)
 
<TABLE>
<CAPTION>
                                                 September 30,
                                                     1998      December 31,
                                                  (Unaudited)      1997
---------------------------------------------------------------------------
<S>                                              <C>           <C>
ASSETS
Investment in commercial rental properties:
 Land                                             $ 3,985,900  $ 6,086,700
 Buildings and improvements                        20,021,500   27,622,800
---------------------------------------------------------------------------
                                                   24,007,400   33,709,500
Accumulated depreciation and amortization          (9,425,700) (12,642,700)
---------------------------------------------------------------------------
 Total investment properties, net of accumulated
  depreciation and amortization                    14,581,700   21,066,800
Cash and cash equivalents                           8,829,200    5,353,200
Investments in debt securities                      2,401,100
Rents receivable                                       64,400      123,400
Other assets                                            4,400       14,500
---------------------------------------------------------------------------
                                                  $25,880,800  $26,557,900
---------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
 Accounts payable and accrued expenses            $   404,500  $   620,100
 Due to Affiliates, net                                36,300       28,200
 Distributions payable                              6,062,800      505,600
 Security deposits                                     31,500       58,300
 Other liabilities                                      3,000       32,700
---------------------------------------------------------------------------
                                                    6,538,100    1,244,900
---------------------------------------------------------------------------
Partners' capital:
 General Partners (deficit)                           (30,400)     (27,000)
 Limited Partners (70,000 Units issued and
  outstanding                                      19,373,100   25,340,000
---------------------------------------------------------------------------
                                                   19,342,700   25,313,000
---------------------------------------------------------------------------
                                                  $25,880,800  $26,557,900
---------------------------------------------------------------------------
</TABLE>
 
STATEMENTS OF PARTNERS' CAPITAL
For the nine months ended September 30, 1998 (Unaudited) and the year ended
December 31, 1997
(All dollars rounded to nearest 00s)
 
<TABLE>
<CAPTION>
                                            General     Limited
                                           Partners    Partners       Total
-------------------------------------------------------------------------------
<S>                                        <C>        <C>          <C>
Partners' (deficit) capital,
 January 1, 1997                           $ (17,000) $26,443,000  $26,426,000
Net income for the year ended December
 31, 1997                                    192,200      717,000      909,200
Distributions for the year ended December
 31, 1997                                   (202,200)  (1,820,000)  (2,022,200)
-------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
 1997                                        (27,000)  25,340,000   25,313,000
Net income for the nine months ended
 September 30, 1998                          140,500      963,100    1,103,600
Distributions for the nine months ended
 September 30, 1998                         (143,900)  (6,930,000)  (7,073,900)
-------------------------------------------------------------------------------
Partners' (deficit) capital, September
 30, 1998                                  $ (30,400) $19,373,100  $19,342,700
-------------------------------------------------------------------------------
</TABLE>
    The accompanying notes are an integral part of the financial statements.
                                                                               4
<PAGE>
 
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended September 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
 
<TABLE>
<CAPTION>
                                                             1998      1997
------------------------------------------------------------------------------
<S>                                                        <C>      <C>
Income:
 Rental                                                    $834,600 $1,091,500
 Interest                                                   149,500     75,000
------------------------------------------------------------------------------
                                                            984,100  1,166,500
------------------------------------------------------------------------------
Expenses:
 Depreciation and amortization                              186,900    177,300
 Property operating:
  Affiliates                                                 43,600     37,300
  Nonaffiliates                                             150,900    188,600
 Real estate taxes                                           85,100    134,900
 Insurance--Affiliate                                        16,100     11,200
 Repairs and maintenance                                    108,700    129,600
 General and administrative:
  Affiliates                                                  5,600     13,000
  Nonaffiliates                                              20,700     19,300
 Additional expenses of sale of property                      1,100
------------------------------------------------------------------------------
                                                            618,700    711,200
------------------------------------------------------------------------------
Net income                                                 $365,400 $  455,300
------------------------------------------------------------------------------
Net income allocated to General Partners                   $ 42,800 $   50,600
------------------------------------------------------------------------------
Net income allocated to Limited Partners                   $322,600 $  404,700
------------------------------------------------------------------------------
Net income allocated to Limited Partners per Unit (70,000
 Units outstanding)                                        $   4.61 $     5.78
------------------------------------------------------------------------------
</TABLE>
 
STATEMENTS OF INCOME AND EXPENSES
For the nine months ended September 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
 
<TABLE>
<CAPTION>
                                                      1998       1997
------------------------------------------------------------------------
<S>                                                <C>        <C>
Income:
 Rental                                            $3,132,800 $3,283,300
 Interest                                             306,600    209,900
------------------------------------------------------------------------
                                                    3,439,400  3,493,200
------------------------------------------------------------------------
Expenses:
 Depreciation and amortization                        560,400    531,200
 Property operating:
  Affiliates                                          172,600    123,200
  Nonaffiliates                                       455,400    566,400
 Real estate taxes                                    342,300    404,900
 Insurance--Affiliate                                  28,900     33,600
 Repairs and maintenance                              334,400    374,000
 General and administrative:
  Affiliates                                           17,500     26,400
  Nonaffiliates                                        85,000    103,600
 Loss on sale of property                             339,300
------------------------------------------------------------------------
                                                    2,335,800  2,163,300
------------------------------------------------------------------------
Net income                                         $1,103,600 $1,329,900
------------------------------------------------------------------------
Net income allocated to General Partners           $  140,500 $  151,700
------------------------------------------------------------------------
Net income allocated to Limited Partners           $  963,100 $1,178,200
------------------------------------------------------------------------
Net income allocated to Limited Partners per Unit
 (70,000 Units outstanding)                        $    13.76 $    16.83
------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s)
 
<TABLE>
<CAPTION>
                                                            1998        1997
--------------------------------------------------------------------------------
<S>                                                      <C>         <C>
Cash flows from operating activities:
 Net income                                              $1,103,600  $1,329,900
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization                             560,400     531,200
  Loss on sale of property                                  339,300
  Changes in assets and liabilities:
  Decrease in rents receivable                               59,000     189,500
  Decrease in other assets                                   10,100       9,100
  (Decrease) in accounts payable and accrued expenses     (215,600)     (15,800)
  Increase (decrease) in due to Affiliates                    8,100     (66,400)
  (Decrease) in other liabilities                          (29,700)     (63,200)
--------------------------------------------------------------------------------
   Net cash provided by operating activities              1,835,200   1,914,300
--------------------------------------------------------------------------------
Cash flows from investing activities:
 (Increase) in investments in debt securities            (2,401,100) (2,523,000)
 Proceeds from sale of property                           5,655,200
 Payments for capital and tenant improvements               (69,800)   (202,500)
--------------------------------------------------------------------------------
   Net cash provided by (used for) investing activities   3,184,300  (2,725,500)
--------------------------------------------------------------------------------
Cash flows from financing activities:
 Distributions paid to Partners                          (1,516,700) (1,516,700)
 (Decrease) in security deposits                            (26,800)     (2,800)
--------------------------------------------------------------------------------
   Net cash (used for) financing activities              (1,543,500) (1,519,500)
--------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents      3,476,000  (2,330,700)
Cash and cash equivalents at the beginning of the
 period                                                   5,353,200   4,029,600
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period       $8,829,200  $1,698,900
--------------------------------------------------------------------------------
</TABLE>
    The accompanying notes are an integral part of the financial statements.
5
<PAGE>
 
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES VIII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 1998
 
1. 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.
 
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). The Partnership utilizes the accrual
method of accounting. Under this method, revenues are recorded when earned and
expenses are recorded when incurred. The Partnership recognizes rental income
that is contingent upon tenants' achieving specified targets, only to the
extent that such targets are attained.
 
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 information included in these financial statements is unaudited;
however, in management's opinion, all adjustments (consisting of only normal,
recurring accruals) necessary for a fair presentation of the results of
operations for the periods included have been made. Results of operations for
the quarter and nine months ended September 30, 1998 are not necessarily
indicative of the operating results for the year ending December 31, 1998.
 
Commercial rental properties held for investment are recorded at cost, net of
any provisions for value impairment, and depreciated (exclusive of amounts
allocated to land) on the straight-line method over their estimated useful
lives. Upon classifying a commercial rental property as held for disposition,
no depreciation or amortization of such property is provided for in the
financial statements. Lease acquisition fees are recorded at cost and amortized
over the life of the lease. Repair and maintenance costs are expensed as
incurred; expenditures for improvements are capitalized and depreciated over
the estimated life of such improvements.
 
The Partnership evaluates its rental properties for impairment when conditions
exist which may indicate that it is probable that the sum of expected cash
flows (undiscounted) from a property is less than its estimated carrying basis.
Upon determination that an impairment has occurred, the carrying basis in the
rental property is reduced to its estimated fair market value. Except as
disclosed in Note 3, management was not aware of any indicator that would
result in a significant impairment loss during the periods reported.
 
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. Gains or losses on sales are recognized in accordance with GAAP.
 
Cash equivalents are considered all highly liquid investments with maturity of
three months or less when purchased.
 
Investments in debt securities at September 30, 1998 are comprised of corporate
debt securities and are classified as held-to-maturity. These investments are
carried at their amortized cost basis in the financial statements, which
approximated fair market value. All of these securities had maturities of less
than one year when purchased.
 
Certain reclassifications have been made to the previously reported 1997
statements in order to provide comparability with the 1998 statements. These
reclassifications have no effect on net income or Partners' (deficit) capital.
 
Reference is made to the Partnership's annual report for the year ended
December 31, 1997 for a description of other accounting policies and additional
details of the Partnership's financial condition, results of operations,
changes in Partners' capital and changes in cash balances for the year then
ended. The details provided in the notes thereto have not changed except as a
result of normal transactions in the interim or as otherwise disclosed herein.
 
2. RELATED PARTY TRANSACTIONS:
 
In accordance with the Partnership Agreement, subsequent to December 23, 1982,
the Termination of the Offering, the General Partners are entitled to 10% of
Cash Flow (as defined in the Partnership Agreement), as a Partnership
Management Fee. Net Profits (exclusive of Net Profits from the sale or
disposition of Partnership properties) are allocated: first, to the General
Partners, in an amount equal to the greater of the General Partners'
Partnership Management Fee for such fiscal year, or 1% of such Net Profits; and
second, the balance, if any, to the Limited Partners. Net Profits from the sale
or disposition of a Partnership property are allocated: first, to the General
Partners and the 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 the General Partners,
in an amount necessary to make the aggregate amount of their capital accounts
equal to the greater of the Sale or Refinancing Proceeds to be distributed to
the General Partners with respect to the sale or disposition of such property
or 1% of such Net Profits; and third, 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 Partners and 99% to the Limited Partners. Net Losses from the sale,
disposition or provision for value impairment of Partnership properties are
allocated: first, to the extent that the balance in the General Partners'
capital accounts exceeds their Capital Investment or the balance in the capital
accounts of the Limited Partners exceeds the amount of their Capital Investment
(the "Excess Balances"), to the General Partners and the Limited Partners pro
rata in proportion to such Excess Balances until such Excess Balances are
reduced to zero; second, to the General Partners and the Limited Partners pro
rata in proportion to the balances in their respective capital accounts until
the
                                                                               6
<PAGE>
 
balances in their capital accounts shall be reduced to zero; and third, the
balance, if any, 99% to the Limited Partners and 1% to the General Partners.
In all events there shall be allocated to the General Partners not less than
1% of Net Profits and Net Losses from the sale, disposition or provision for
value impairment of a Partnership property. For the quarter and nine months
ended September 30, 1998, the General Partners were paid Cash Flow (as defined
in the Partnership Agreement), and allocated Net Profits, of $42,800 and
$143,900, respectively. In addition, the General Partners were allocated a
loss on the sale of property of $(3,400) for the nine months ended September
30, 1998.
 
Fees and reimbursements paid and (receivable)/payable by the Partnership to
Affiliates during the quarter and nine months ended September 30, 1998 were as
follows:
 
<TABLE>
<CAPTION>
                                                      Paid         (Receivable)
                                               Quarter Nine Months   Payable
-------------------------------------------------------------------------------
<S>                                            <C>     <C>         <C>
Property management and leasing fees           $48,400  $161,100     $(10,800)
Reimbursement of property insurance premiums,
 at cost                                        20,500    28,900         None
Real estate commission(a)                         None      None       37,700
Legal                                           12,200    33,400        6,500
Reimbursement of expenses, at cost:
 --Accounting                                    2,300    11,700        2,300
 --Investor communications                       1,500     3,400          600
-------------------------------------------------------------------------------
                                               $84,900  $238,500     $ 36,300
-------------------------------------------------------------------------------
</TABLE>
(a)As of September 30, 1998, the Partnership owed $37,700 to the Managing
 General Partner for real estate commissions earned in connection with the
 sale of a property. These commissions have been accrued but not paid. In
 accordance with the Partnership Agreement, the Partnership will not pay the
 General Partners or any Affiliates a real estate commission from the sale of
 a Partnership property until Limited Partners have received cumulative
 distributions of Sale or Refinancing 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 date of investment) of 6% simple interest
 per annum on their Capital Investment.
 
On-site property management for the Partnership's office property is provided
by an Affiliate of the Managing General Partner and for its retail shopping
centers by a third-party management group both for 3% of gross rents received
from the properties. The Affiliate and the third-party property management
groups are entitled to leasing fees equal to 3% of gross rents received from
the properties, reduced by leasing fees, if any, paid to third parties.
 
3. PROPERTY SALE:
 
On June 17, 1998, the Partnership consummated the sale of Old Mill for a
selling price of $5,900,000. Net Proceeds from this transaction amounted to
$5,655,200, which was net of actual and estimated closing expenses. The
Partnership recorded a loss of $339,300 for the nine months ended September
30, 1998. The Partnership will distribute $5,635,000 or $80.50 per Unit on
November 30, 1998 to Limited Partners of record as of June 17, 1998.
<PAGE>
 
                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES VIII

                             By:  FIRST CAPITAL FINANCIAL CORPORATION
                                  MANAGING GENERAL PARTNER

Date:  November 13, 1998     By:  /s/  DOUGLAS CROCKER II
       -----------------          ----------------------------------------------
                                       DOUGLAS CROCKER II
                                  President and Chief Executive Officer
                         
Date:  November 13, 1998     By:  /s/  NORMAN M. FIELD
       -----------------          ----------------------------------------------
                                       NORMAN M. FIELD
                                  Vice President - Finance and Treasurer

<PAGE>
 
                          PART II. OTHER INFORMATION

Item 6.        Exhibits and Reports on Form 8-K
-------        --------------------------------

          (a)  Exhibits: None      
                                    
          (b)  Reports on Form 8-K:   
                
               There were no reports filed on Form 8-K during the quarter ended
               September 30, 1998.