UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended June 30, 2004

¨	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 0-15538

First Capital Income Properties, Ltd.—Series XI

(Exact name of registrant as specified in its charter)

Illinois

(State or other jurisdiction of

incorporation or organization)

36-3364279

(I.R.S. Employer

Identification No.)

Two North Riverside Plaza,
Suite 700,
Chicago, Illinois

(Address of principal executive offices)

60606-2607

(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 ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

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 September 12, 1985, included in the Partnership’s Registration Statement on Form S-11, is incorporated herein by reference in Part I of this report.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BALANCE SHEETS

(All dollars rounded to nearest 00s)


	June 30, 2004 (Unaudited)		December 31, 2003


ASSETS
Real estate held for disposition	$	—	$	7,000,000
Cash and cash equivalents		11,028,200		5,725,200
Rents receivable		185,200		549,600
Other assets (net of accumulated amortization on leasing commissions of $13,400 in 2003)		30,200		90,300

	$	11,243,600	$	13,365,100


LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Front-End Fees loan payable to Affiliate	$	—	$	8,295,200
Accrued real estate taxes		—		845,800
Accounts payable and accrued expenses		512,400		489,500
Due to Affiliates		5,200		3,100
Security deposits		—		55,000
Distribution payable		230,500		230,500

		748,100		9,919,100

Partners’ Capital:
General Partner		—		1,389,700
Limited Partners (57,621 Units issued and outstanding)		10,495,500		2,056,300

		10,495,500		3,446,000

	$	11,243,600	$	13,365,100

STATEMENT OF PARTNERS’ CAPITAL

For the six months ended June 30, 2004 (Unaudited)

(All dollars rounded to nearest 00s)


	General Partner			Limited Partners			Total


Partners’ capital, January 1, 2004	$	1,389,700		$	2,056,300		$	3,446,000
Net (loss) for the six months ended June 30, 2004		(7,200	)		(777,500	)		(784,700	)
Capital adjustment, extinguishment of debt to affiliate of General Partner		—			8,295,200			8,295,200
Reallocation of Partners’ Capital		(1,382,500	)		1,382,500			—
Distributions for the six months ended June 30, 2004		—			(461,000	)		(461,000	)

Partners’ capital, June 30, 2004	$	—		$	10,495,500		$	10,495,500

STATEMENTS OF INCOME AND EXPENSES

For the quarters ended June 30, 2004 and 2003

(Unaudited)

(All dollars rounded to nearest 00s

except per Unit amounts)


		2004			2003

Income:
Interest	$	11,600		$	16,600

Expenses:
General and administrative:
Affiliates		7,200			7,200
Nonaffiliates		36,800			27,300

		44,000			34,500

Loss from continuing operations		(32,400	)		(17,900	)

Discontinued operations:
Income from discontinued operations		64,800			110,600
Loss on sale of property		(95,600	)		—

(Loss) income from discontinued operations		(30,800	)		110,600

Net (loss) income	$	(63,200	)	$	92,700

Net (loss) income allocated to General Partner	$	—		$	1,000

Net (loss) income allocated to Limited Partners	$	(63,200	)	$	91,700

Loss from continuing operations allocated to Limited Partners per Unit (57,621 Units outstanding)	$	(0.56	)	$	(0.31	)

Net (loss) income allocated to Limited Partners per Unit (57,621 Units outstanding)	$	(1.10	)	$	1.59

The accompanying notes are an integral part of the financial statements.

STATEMENTS OF INCOME AND EXPENSES

For the six months ended June 30, 2004 and 2003

(Unaudited)

(All dollars rounded to nearest 00s

except per Unit amounts)


		2004			2003

Income:
Interest	$	23,100		$	34,200

Expenses:
General and administrative:
Affiliates		14,500			14,500
Nonaffiliates		63,800			59,600

		78,300			74,100

Loss from continuing operations		(55,200	)		(39,900	)

Discontinued operations:
(Loss) income from discontinued operations (including impairment charge of $900,000 in 2004)		(633,900	)		407,400
Loss on sale of property		(95,600	)		—

(Loss) income from discontinued operations		(729,500	)		407,400

Net (loss) income	$	(784,700	)	$	367,500

Net (loss) income allocated to General Partner	$	(7,200	)	$	3,700

Net (loss) income allocated to Limited Partners	$	(777,500	)	$	363,800

Loss from continuing operations allocated to Limited Partners per Unit (57,621 Units outstanding)	$	(0.95	)	$	(0.69	)

Net (loss) income allocated to Limited Partners per Unit (57,621 Units outstanding)	$	(13.49	)	$	6.31

STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2004 and 2003

(Unaudited)

(All dollars rounded to nearest 00s)


		2004			2003

Cash flows from operating activities:
Net (loss) income	$	(784,700	)	$	367,500
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		17,500			4,100
Provision for value impairment		900,000			—
Loss on sale of property		95,600			—
Changes in assets and liabilities:
Decrease in rents receivable		171,800			86,000
Decrease in other assets		36,900			51,700
(Decrease) increase in accrued real estate taxes		(396,300	)		322,200
Increase (decrease) in accounts payable and accrued expenses		22,900			(120,900	)
Increase (decrease) in due to Affiliates		2,100			—
(Decrease) increase in security deposits		(55,000	)		2,500

Net cash provided by operating activities		10,800			713,100

Cash flows from investing activities:
Payments for building and tenant improvements		(95,100	)		(194,100	)
Proceeds from sale of property		5,877,700			—
Leasing commissions paid		(29,400	)		(22,700	)

Cash provided by (used in) investing activities		5,753,200			(216,800	)

Cash flows from financing activities:
Distributions to Limited Partners		(461,000	)		(461,000	)

Cash (used in) financing activities		(461,000	)		(461,000	)

Net increase (decrease) in cash and cash equivalents		5,303,000			35,300
Cash and cash equivalents at the beginning of the period		5,725,200			5,864,600

Cash and cash equivalents at the end of the period	$	11,028,200		$	5,899,900

The accompanying notes are an integral part of the financial statements.

FIRST CAPITAL INCOME PROPERTIES, LTD.—SERIES XI

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.

Accounting policies:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. Reference is made to the Partnership’s Annual Report for the year ended December 31, 2003, 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.

The Partnership utilizes the accrual method of accounting. Under this method, revenues are recorded when earned and expenses are recorded when incurred. Effective July 1, 1998, the Partnership recognizes rental income which 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 accounting principles generally accepted in the United States 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.

Commercial rental property held for investment is recorded at cost, net of any provisions for value impairment, and depreciated (exclusive of amounts allocated to land) on the straight-line method over their estimated useful lives. Upon classifying a commercial rental property as held for disposition, no further depreciation or amortization of such property is provided for in the financial statements. Lease acquisition fees are recorded at cost and amortized over the life of each respective lease. Repair and maintenance expenditures are expensed as incurred; expenditures for improvements are capitalized and depreciated over the estimated life of such improvements.

The Partnership evaluates its commercial rental property for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (undiscounted) from a property is less than its carrying basis. Upon determination that an impairment has occurred, the carrying basis in the rental property is reduced to its estimated fair value.

Since 1999, the Partnership has owned only one property, Marquette Mall and Office Building (“Marquette”), which has 382,052 net leasable square feet, is located in Michigan City, Indiana and was sold on June 11, 2004.

The FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets. Statement 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Standard was adopted in 2002, and management has committed to disposing of its remaining real estate asset. In April 2004, the Partnership entered into a Purchase and Sale Agreement for the sale of Marquette for approximately $6,100,000 and the property was sold on June 11, 2004. In the first quarter of 2004, the Partnership elected to write down the investment in Marquette to the approximate sales value resulting in an impairment charge of $900,000. Marquette’s operations have been disclosed as discontinued operations for each quarter presented as follows:


	For the quarter ended June 30,				For the six months ended June 30,
	2004		2003		2004			2003

Income	$	693,100	$	702,000	$	1,523,100		$	1,649,600
Expenses		628,300		591,400		1,257,000			1,242,200
Impairment Charge		—		—		900,000			—

Discontinued Operations	$	64,800	$	110,600	$	(633,900	)	$	407,400

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 on sale is recognized in accordance with accounting principles generally accepted in the United States.

The Partnership has disposed of its real estate properties and upon resolution of post-closing sale matters, the Partnership will make a liquidating distribution and dissolve.

Cash equivalents are considered all highly liquid investments with a maturity of three months or less when purchased.

Certain prior year amounts have been reclassified to conform to the current year presentation.

2. Related party transactions:

In accordance with the Partnership Agreement, Net Profits and Net Losses (exclusive of Net Profits and Net Losses from the sale, disposition or provision for value impairment of Partnership properties) shall be 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 or Refinancing 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 or Refinancing 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 or Refinancing Proceeds to be distributed to the General Partner with respect to the sale or disposition of such property; and fourth, the balance, if any, 25% to the General Partner and 75% 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 or Refinancing 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 quarter and six months ended June 30, 2004, the General Partner was allocated Net Profits (Losses) of $0 and $(7,200), respectively. For the quarter and six months ended June 30, 2003, the General Partner was allocated Net (Losses) Profits of $1,000 and $3,700, respectively.

Fees and reimbursements paid and payable by the Partnership to Affiliates during the quarter and six months ended June 30, 2004 were as follows:


	Paid
	Quarter		Six Months		Payable

Discontinued operations:
Asset management fees	$	None	$	2,600	$	5,200
Reimbursement of property insurance premiums		43,100		43,100		None
Real estate tax services		1,600		1,900		None
General and administrative:
Reimbursement of expenses, at cost:
—Accounting		14,500		14,500		None

	$	59,200	$	62,100	$	5,200

3. Front-End Fees loan payable to Affiliate:

The Partnership borrowed $8,295,200 from an Affiliate of the General Partner, the amount needed for the payment of securities sales commissions, Offering and Organizational Expenses and other Front-End Fees, other than Acquisition Fees. Repayment of the principal amount of the Front-End Fees loan is subordinated to payment to the Limited Partners of 100% of their Original Capital Contribution from Sale or Refinancing Proceeds (as defined in the Partnership Agreement). In the event that the Front-End Fees loan is not repaid, such amount will be reclassed to Partners’ Capital.

Pursuant to a modification of this loan agreement, beginning January 1, 1996, the Partnership elected to defer payment of interest on the Front-End Fees Loan. During the year ended December 31, 1999, the Affiliate of the General Partner elected to waive the Partnership’s obligation for all outstanding deferred interest on this loan and charge no interest in the future. During the year ended December 31, 1999, the Partnership reflected the waiver of deferred interest in the financial statements through an adjustment of $2,257,700 to Partners’ Capital.

4. Reallocation of Partners’ Capital:

As stated in Footnote 3, the General Partner believes that the Partnership’s cumulative distributions to its Limited Partners from inception through the termination of the Partnership will be less than such Limited Partners’ Original Capital Contribution therefore, under the terms of the Partnership Agreement, the General Partner will not be entitled to any distributions. During the quarter ended June 30, 2004, the General Partner has concluded that all remaining cash will be distributed to the Limited Partners and as a result, there has been a reallocation of equity from the General Partner to the Limited Partners.

Since the final distribution will be contingent upon estimated liquidation and dissolution costs that have not yet been accounted for in the financial statements, the amount and timing of the final distribution to the Limited Partners has not yet been determined and may not equal the $10,495,000 reflected on the Balance Sheet as Limited Partners’ Capital.

5. Property Sale:

On June 11, 2004, the Partnership completed the sale of Marquette Mall and Office Building for a sale price of $6,100,000. Net proceeds from this transaction amounted to $5,877,700 which was net of actual and estimated closing and post-closing sale expenses. The Partnership reported a (loss) on sale for financial reporting purposes of $(95,600) for the quarter and six-months ended June 30, 2004.

TRANSFER AGENT AND REGISTRAR

The Bank of New York

P.O. Box 7090

Troy, Michigan 48007-7090

(800) 447-7364

LOGO

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, 2003 for a discussion of the Partnership’s business.

Certain statements in the Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the SEC, all as may be amended from time to time. Such forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Partnership, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “project”, “may”, “will”, “would”, “could”, “should”, “seeks”, or “scheduled to”, or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. The Partnership cautions investors that any forward-looking statements made by the Partnership are not guarantees or indicative of future performance. Important assumptions and other important factors could cause actual results to differ materially from those forward-looking statements with respect to the Partnership. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Although the Partnership believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any of its forward-looking statements. The Partnership’s future financial condition and results of operations, as well as any forward-looking statements, are made only as of the date hereof and the partnership does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

On June 11, 2004 the Partnership completed the sale of Marquette. Please refer to the Form 8-K filed on June 25, 2004 for more information regarding the sale. The sale of Marquette constituted the sale of the remaining property held by the Partnership. The remaining assets of the partnership primarily consist of cash and cash equivalents held for distribution to Partners and amounts held to resolve post-closing sale matters which are reflected as receivables and payables on the Partnership’s balance sheet. Operating results for the quarter ended June 30, 2004 reflect Marquette’s operations through its sale on June 11, 2004. Other than post-closing sale matters, Marquette operations will have no material impact on future operating results of the Partnership.

Based upon the current estimated value of its assets, net of its outstanding liabilities, the General Partner believes that the Partnership’s cumulative distributions to its Limited Partners from inception through the termination of the Partnership will be less than such Limited Partners’ Original Capital Contribution therefore, under the terms of the Partnership Agreement, the General Partner will not be entitled to any distributions. During the quarter ended June 30, 2004, the General Partner has concluded that all remaining cash will be distributed to the Limited Partners and as a result, there has been a reallocation of equity from the General Partner to the Limited Partners. Since the final distribution will be contingent upon estimated liquidation and dissolution costs that have not yet been accounted for in the financial statements, the amount and timing of the final distribution to the Limited Partners has not yet been determined and may not equal the $10,495,000 reflected on the Balance Sheet as Limited Partners’ Capital.

The Partnership, following the sale of its operating assets, is in the disposition phase of its life cycle. During the disposition phase of the Partnership’s life cycle, comparisons of operating results are complicated due to the timing and effect of property sales and dispositions. Components of the Partnership’s operating results are generally expected to decline as real property interests are sold or disposed of since the Partnership no longer realizes income and incurs expenses from such real property interests. Accordingly, operating results are not comparable as a result of the sale and the disposition of the operating assets of the Partnership and may not provide any indication of the future operating results of the Partnership. The FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets. Statement 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The standard was adopted in 2002. In April 2004, the Partnership entered into a Purchase and Sale Agreement for the sale of Marquette for approximately $6,100,000 and the property was sold on June 11, 2004. During the first quarter of 2004, the Partnership wrote down the investment in Marquette to the approximate sales value resulting in an impairment charge of $900,000. The impairment charge is reflected in Discontinued Operations on the Statements of Income and Expenses. Marquette’s operations have been disclosed as discontinued operations for each period presented as follows


	For the quarter ended June 30,				For the six months ended June 30,
	2004		2003		2004			2003

Income	$	693,100	$	702,000	$	1,523,100		$	1,649,600
Expenses		628,300		591,400		1,257,000			1,242,200
Impairment Charge		—		—		900,000			—

Discontinued Operations	$	64,800	$	110,600	$	(633,900	)	$	407,400

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operations

The table below is a recap of certain operating results of Marquette for the quarters and six months ended June 30, 2004 and 2003, included in discontinued operations. The discussion following the table should be read in conjunction with the financial statements and notes thereto appearing in this report.


	Comparative Operating Results (a)
	For the Quarters Ended				For the Six Months Ended
	06/30/2004		06/30/2003		06/30/2004		06/30/2003

Marquette Mall and Office Building
Rental revenues	$	693,100	$	702,000	$	1,523,100	$	1,649,600

Property net income (b)	$	64,800	$	110,600	$	266,100	$	407,400

Average occupancy		75%		78%		76%		78%

Excludes certain income and expense items which are either not directly related to individual property operating results such as interest income, interest expense on the Partnership’s Front-End Fees loan, general and administrative and state income tax expenses and provision for value impairment or are related to properties disposed of by the Partnership prior to the periods under comparison.

b)	The property was sold on June 11, 2004. Property net income excludes the (loss) of $(95,600) recorded on the sale and the impairment loss of $900,000 reported in the first quarter of 2004.

Net income for the Partnership decreased by $155,900 and $1,152,200 for the quarter and six months ended June 30, 2004 when compared to the quarter and six months ended June 30, 2003. As previously discussed, the Partnership entered into a Purchase and Sale Agreement for the sale of Marquette for approximately $6,100,000. Accordingly, the Partnership wrote down the investment in Marquette to the approximate sales value resulting in an impairment charge of $900,000 during the first quarter of 2004. This write-down was the primary reason for the decrease in net income during the first six months of 2004 versus the same period in 2003. On June 11, 2004, the Partnership sold Marquette and recognized a (loss) for book purposes of $(95,600) during the quarter ended June 30, 2004. This was the primary reason for the decrease in net income during the quarter ended June 30, 2004 versus the quarter ended June 30, 2003.

Net income, exclusive of the impairment charge and the (loss) on the sale of Marquette decreased by $60,300 and $156,600 for the quarter and six months ended June 30, 2004 when compared to the quarter and six months ended June 30, 2003. Operations at Marquette were impacted by its sale on June 11, 2004. Revenues for both the quarter and six months ended June 30, 2004 were lower than the same periods in 2003 due to the sale. Expenses for both the quarter and six months ended June 30, 2004 were slightly higher than the same periods in 2003 due to the payment of fees related to the termination of certain service contracts at the time Marquette was sold.

Liquidity and Capital Resources

One of the primary objectives 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 the Partnership’s net income or cash flows (primarily from operating activities) as

determined by accounting principles generally accepted in the United States (“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. Management believes the primary users of the financial statements are limited partners who are most concerned with this performance measure. 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. Such amounts are not indicative of actual distributions to Partners and should not be considered as an alternative to the results disclosed in the Statements of Income and Expenses and Statements of Cash Flows.


	Comparative Cash Flow Results For the Six Months Ended June 30,
	2004			2003

Cash Flow (as defined in the Partnership Agreement)	$	228,400		$	371,600
Items of reconciliation:
Decrease in current assets		208,700			137,700
(Decrease) increase in current liabilities		(426,300	)		126,800

Net cash provided by operating activities (GAAP)	$	10,800		$	636,100

Net cash provided by (used in) investing activities (GAAP)	$	5,753,200		$	(216,800)

Net cash (used in) financing activities (GAAP)	$	(461,000	)	$	(461,000)

Cash Flow (as defined in the Partnership Agreement) decreased by $143,200 for the six months ended June 30, 2004 when compared to the six months ended June 30, 2003. The decrease was primarily due to reduced revenues due to the sale of Marquette on June 11, 2004 and the payment of fees related to the termination of certain service contracts at the time Marquette was sold.

The net increase in the Partnership’s cash position of $5,303,000 for the six months ended June 30, 2004 was primarily due to the receipt of proceeds from the sale of Marquette. Liquid assets of the Partnership as of June 30, 2004 were comprised of amounts held for distribution to Partners and amounts held to resolve potential post-closing sale matters.

Net cash provided by operating activities decreased by $625,300 for the six months ended June 30, 2004 when compared to the six months ended June 30, 2003. The decrease was primarily due to the payment of the 2002 real estate taxes and the decrease in net income as previously discussed.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net cash provided by investing activities increased by $5,970,000 for the six months ended June 30, 2004 when compared to the six months ended June 30, 2003. The increase was primarily due to the receipt of proceeds from the sale of Marquette.

The Partnership has no financial instruments for which there are significant risks.

At December 31, 2003, the Partnership owed an Affiliate of the General Partner for amounts borrowed for the payment of securities sales commissions, Offering and Organizational Expenses and other Front-End Fees, other than Acquisition Fees. Repayment of the Front-End Fees loan is subordinated to payment to the Limited Partners of 100% of their Original Capital Contribution from Sale or Refinancing Proceeds (as defined in the Partnership Agreement). Pursuant to a modification of the Partnership’s Front-End Fees loan agreement in 1996, the Affiliate of the General Partner elected to waive the Partnership’s obligation for all deferred interest on this loan and charge no interest in the future.

Under the terms of the Partnership Agreement, the General Partner will not be entitled to any distributions. Therefore, during the quarter ended June 30, 2004, the General Partner has concluded that all remaining cash will be distributed to the Limited Partners and as a result, there has been a reallocation of equity from the General Partner to the Limited Partners. Since the final distribution will be contingent upon estimated liquidation and dissolution costs that have not yet been accounted for in the financial statements, the amount and timing of the final distribution to the Limited Partners has not yet been determined and may not equal the $10,495,000 reflected on the Balance Sheet as Limited Partners’ Capital.

Distributions to Limited Partners for the three months ended June 30, 2004 were declared in the amount of $230,500 or $4.00 per Unit to Limited Partners of record as of June 30, 2004. Cash distributions are made 60 days after the last day of each fiscal quarter.

ITEM 4. CONTROLS AND PROCEDURES

The principal executive officer of the General Partner, Donald J. Liebentritt, and the principal financial officer of the General Partner, Philip Tinkler, have evaluated the effectiveness of the Partnership’s disclosure controls and procedures, as required by Rule 13a-15(e) and 15d – 15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon the results of that evaluation, these executive officers have concluded that as of the end of the period covered by this quarterly report, the Partnership’s disclosure controls and procedures were effective in all material respects to ensure that the information required to be disclosed by the Partnership in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

The Partnership also maintains a system of internal control over financial reporting (as defined in Rules 13A-15(f) and 15d-15(f)) designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. During the most recent fiscal quarter, there have been no changes in internal control over financial reporting that occurred that have materially affected or are reasonably likely to materially affect internal control over financial reporting.

The executive officers of the General Partner do not expect that the Partnership’s disclosure controls and procedures or internal controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Partnership have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

31.1: Certification of Principal Executive Officer required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2: Certification of Principal Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32: Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

(b) Reports on Form 8-K:

The Partnership filed Current Reports on Form 8-K as follows:


Date		Description


April 20, 2004		Purchase and Sale Agreement dated April 8, 2004 for the sale of Marquette Mall and Office Building.

June 25, 2004		Sale of Marquette Mall and Office Building on June 11, 2004.

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 XI

	By:	FIRST CAPITAL FINANCIAL, L.L.C. GENERAL PARTNER

Date: August 16, 2004	By:	/s/ DONALD J. LIEBENTRITT DONALD J. LIEBENTRITT President and Chief Executive Officer

Date: August 16, 2004	By:	/s/ PHILIP TINKLER PHILIP TINKLER Vice President—Finance and Treasurer

FIRST CAPITAL INCOME PROPERTIES LTD SERIES XI 10-Q