UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Period Ended: September 30, 1998
Commission File Number 0-16531
EQUITABLE CAPITAL PARTNERS, L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3486115
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1345 Avenue of the Americas
New York, New York 10105
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:(212) 969-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act
Units of Limited Partnership Interest
(Title of class)
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 .
Selected information from the Prospectus, dated July 15, 1988, and filed with
the Securities and Exchange Commission on July 19, 1988 (File No. 33-20093), is
incorporated by reference into Parts I, II and III of this Quarterly Report on
Form 10-Q.
<PAGE>
EQUITABLE CAPITAL PARTNERS, L.P.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Statements of Assets, Liabilities and Partners'
Capital as of September 30, 1998 and December 31, 1997 5
Statements of Operations
For the Three and Nine Months Ended
September 30, 1998 and 1997 6
Statements of Changes in Net Assets
For the Nine Months Ended September 30, 1998 and 1997 7
Statements of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997 8
Statement of Changes in Partners' Capital
For the Nine Months Ended September 30, 1998 9
Schedule of Portfolio Investments
For the Nine Months Ended September 30, 1998 10
Supplemental Schedule of Realized Gains and Losses
For the Nine Months Ended September 30, 1998 12
Notes to Financial Statements 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
PART II - OTHER INFORMATION
Item 6. Exhibits 22
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS,L.P.
STATEMENTS OF ASSETS
LIABILITIES AND PARTNERS' CAPITAL
(UNAUDITED)
<S> <C> <C> <C>
ASSETS: Notes September 30, 1998 December 31, 1997
(Unaudited)
Investments 2,10,12
Enhanced Yield Investments at Value-
Managed Companies
(amortized cost of $12,806,732 at
September 30, 1998 and $16,931,732
at December 31, 1997) $ - $ 7,589,732
Non-Managed Companies
(amortized cost of $3,584,607 at
September 30, 1998 and $13,766,546
at December 31, 1997) - 7,555,572
Temporary Investments
(at amortized cost ) 5,188,690 8,098,650
Cash 402,797 47,134
Interest Receivable 2,12 - 64,768
Receivable on Investments Sold 2,10 961,151 -
Note Receivable 3,4 1,455,454 1,484,748
TOTAL ASSETS $ 8,008,092 $ 24,840,604
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Professional Fees Payable 9 $ 41,076 $ 41,548
Independent General Partners' Fees Payable 8 11,118 12,396
Fund Administrative Expenses Payable 7 51,934 50,149
Other Accrued Liabilities 6,224 4,725
Total Liabilities 110,352 108,818
Partners' Capital
Managing General Partner 3,4 1,004,563 1,134,402
Limited Partners (284,611 Units) 4 6,893,177 23,597,384
Total Partners' Capital 7,897,740 24,731,786
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,008,092 $ 24,840,604
=========== ============
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<S> <C> <C> <C> <C>
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- ------------
INVESTMENT INCOME- Notes 2,12:
Interest and Discount Income $ 71,920 $ 350,243 $ 235,083 $ 2,187,617
Dividend Income -- -- -- 136,678
TOTAL INVESTMENT INCOME 71,920 350,243 235,083 2,324,295
EXPENSES:
Investment Advisory Fee- Note 6 281,413 281,413 844,239 932,442
Fund Administration Fees and Expenses- Note 7 126,933 173,086 459,603 553,687
Independent General Partners'
Fees and Expenses- Note 8 40,768 39,556 120,272 109,609
Professional Fees - Note 9 -- 31,000 12,988 62,050
Insurance Fees -- -- -- 6,017
Valuation Expenses -- 2,500 7,762 6,000
TOTAL EXPENSES 449,114 527,555 1,444,864 1,669,805
NET INVESTMENT (LOSS) INCOME (377,194) (177,312) (1,209,781) 654,490
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS- Note 12 8,420,399 8,888,987 (838,324) (20,943,490)
NET REALIZED (LOSS) GAIN ON INVESTMENTS- Note 10 (11,365,664) (10,727,598) (7,999,877) 16,546,648
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (3,322,459) $ (2,015,923) $(10,047,982) $ (3,742,352)
============ ============ ============ ============
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<S> <C> <C>
For the Nine Months Ended
September 30, 1998 September 30, 1997
------------------ ------------------
FROM OPERATIONS:
Net Decrease in Net Assets
Resulting from Operations $ (10,047,982) $ (3,742,352)
Cash Distributions to Partners (6,756,770) (76,692,223)
Reduction in Managing General Partners' Contribution (29,294) (341,148)
Total Decrease (16,834,046) (80,775,723)
NET ASSETS:
Beginning of Period 24,731,786 110,708,174
End of Period $ 7,897,740 $ 29,932,451
============ ============
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
For the Nine Months Ended
INCREASE (DECREASE) IN CASH September 30, 1998 September 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES: ------------------ ------------------
Interest and Discount Income $ 19,899 $ 1,822,856
Fund Administration Fees & Expenses (457,819) (538,697)
Investment Advisory Fee (844,239) (932,442)
Independent General Partners' Fees and Expenses (121,549) (121,665)
Valuation Expenses (6,262) (11,948)
Sale (Purchase) of Temporary Investments, Net 3,189,910 17,280,120
Proceeds from Sales and Principal Payments of
Enhanced Yield Investments 5,345,953 59,209,146
Professional Fees (13,460) (57,533)
Insurance Fees -- (3,742)
Net Cash Provided by Operating Activities 7,112,433 76,646,095
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to Partners (6,756,770) (76,692,223)
Net Cash Used in Financing Activities (6,756,770) (76,692,223)
Net Increase(Decrease) in Cash 355,663 (46,128)
Cash at the Beginning of the Period 47,134 91,206
Cash at the End of the Period $ 402,797 $ 45,078
================== ==================
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Decrease In Net Assets
Resulting From Operations $ (10,047,982) $ (3,742,352)
Adjustments to Reconcile Net Decrease in Net Assets
Resulting from Operations to Net Cash Provided by Operating
Activities:
Decrease in Investments 16,535,741 59,942,618
Increase in Accrued Interest and other Investment Income (215,184) (501,439)
Decrease in Prepaid Expenses -- 2,650
Net Change in Unrealized Depreciation on Investments 838,324 20,943,490
Increase in Fund Administration Expenses Payable 1,785 14,989
Increase (Decrease) in Other Accrued Liabilities 1,499 (5,948)
Decrease in Independent General Partners' Fees Payable (1,278) (12,056)
(Decrease) Increase in Professional Fees Payable (472) 4,143
Total Adjustments 17,160,415 80,388,447
Net Cash Provided by Operating Activities $ 7,112,433 $ 76,646,095
================== ==================
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(UNAUDITED)
<S> <C> <C> <C> <C>
Managing Limited
Notes General Partner Partners Total
------- --------------- ------------ ------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Partners' Capital at January 1, 1998 $ 1,134,402 $ 23,597,384 $ 24,731,786
Cash Distributions to Partners (105) (6,756,665) (6,756,770)
Reduction in Managing General Partners' Contribution 3 (29,294) - (29,294)
Allocation of Net Investment Loss 11 (12,098) (1,197,683) (1,209,781)
Allocation of Net Unrealized Depreciation
on Investments 12 (8,343) (829,981) (838,324)
Allocation of Net Realized Loss on Investments (79,999) (7,919,878) (7,999,877)
Partners' Capital at September 30, 1998 $ 1,004,563 $ 6,893,177 $ 7,897,740
=========== =========== ===========
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PRINCIPAL INVESTMENT INVESTMENT AMORTIZED VALUE % OF TOTAL
AMOUNT/SHARES INVESTMENT DATE COST COST (NOTE 2) INVESTMENTS
- --------------- -------------------------------------------- ----------- ---------- ---------- --------- -----------
ENHANCED YIELD INVESTMENTS
MANAGED COMPANIES
MISCELLANEOUS MANUFACTURING
QUANTEGY ACQUISITION CORP.
(FORMERLY AMPEX RECORDING MEDIA CORP.)
162 Shares Quantegy Acquisition Corp., Common Stock 11/13/95 $ 3,464,732 $3,464,732 $ 0
------------ ---------- -----------
3,464,732 3,464,732 0 0.00
------------ ---------- -----------------------
LEATHER AND LEATHER PRODUCTS
LEATHER U.S., INC. - NOTE 12
(FORMERLY UNITED STATES LEATHER HOLDINGS, INC.)
795.00 Shares Leather U.S., Inc., Common Stock 04/09/96 9,342,000 9,342,000 0
------------ ----------- -----------
9,342,000 9,342,000 0 0.00
------------ ----------- -----------------------
TOTAL INVESTMENT IN MANAGED COMPANIES $ 12,806,732 $ 12,806,732 $ 0 0.00%
--------------------------------------- ------------ ------------ -----------------------
NON-MANAGED COMPANIES
MISCELLANEOUS RETAIL
R&S/STRAUSS, INC.
(FORMERLY WSR ACQUISITION CORPORATION)
$ 1,274,607 R&S/Strauss, Inc.,
Sr. Sub. Nt. 15% due 05/31/00*(a) 06/13/90 1,274,607 1,274,607 0
$ 2,310,000 R&S/Strauss, Inc.,
Sr. Sub. Nt. 15% due 05/31/00*(a) 06/13/90 2,310,000 2,310,000 0
----------- ------------ -----------
3,584,607 3,584,607 0 0.00
----------- ------------ ----------------------
TOTAL INVESTMENT IN NON-MANAGED COMPANIES $ 3,584,607 $ 3,584,607 $ 0 0.00
------------------------------------------ ----------- ----------- ---------------------
TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS $16,391,339 $16,391,339 $ 0 0.00%
---------------------------------------------- ----------- ----------- ---------------------
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1998
(CONCLUDED)(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PRINCIPAL INVESTMENT INVESTMENT AMORTIZED VALUE % OF TOTAL
AMOUNT/SHARES INVESTMENT DATE COST COST (NOTE 2) INVESTMENTS
- -------------- -------------------------------------------------- ------------ --------------- ---------- ---------- --------------
TEMPORARY INVESTMENTS
COMMERCIAL PAPER
$ 5,200,000 Federal Home Loan Mortgage Disc Note,
5.22% due 10/16/98 9/29/98 $ 5,187,182 $ 5,188,690 $ 5,188,690
------------- ------------ ------------
TOTAL INVESTMENT IN COMMERCIAL PAPER $ 5,187,182 $ 5,188,690 $ 5,188,690 100.00%
------------- ------------ ---------------------
TOTAL TEMPORARY INVESTMENTS $ 5,187,182 $ 5,188,690 $ 5,188,690 100.00%
------------- ------------ ---------------------
TOTAL INVESTMENT PORTFOLIO $ 21,578,521 $ 21,580,029 $ 5,188,690 100.00%
============= ============ =====================
SUMMARY OF INVESTMENTS
Subordinated Notes $ 3,584,607 $ 3,584,607 $ 0 0.00%
Common Stock and Warrants 12,806,732 3,464,732 0 0.00
Temporary Investments 5,187,182 5,188,690 5,188,690 100.00
------------- ------------ ---------------------
$ 21,578,521 $ 21,580,029 $ 5,188,690 100.00%
============= ============ =====================
* Restricted Security
(a) Non-accrual investment status.
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
SUPPLEMENTAL SCHEDULE OF REALIZED GAINS AND LOSSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
PAR VALUE OR
DATE OF NUMBER OF AMORTIZED NET REALIZED
SECURITY TRANSACTION SHARES COST PROCEEDS GAIN (LOSS)
- ------------------------------------ ----------- ------------ ---------- ---------- -----------
Lexmark International Group, Inc.
Common Stock various 92,636 $ 617,576 $3,724,832 $ 3,107,256
MTI Holdings, Inc.
12% Sr. Sec. Note 3/12/98 220,102 220,102 220,102 --
Common Stock 15,772 236,580 236,580 --
Common Stock Purchase Warrants 4,397 -- -- --
Total Net Realized Gains for the
Three Months Ended March 31, 1998 $ 1,074,258 $4,181,514 $ 3,107,256
=========== ========== ============
MTI Holdings, Inc.
Common Stock 15,772 $ -- $ 617,497 $ 617,497 (A)
Common Stock Purchase Warrants 4,397 -- 107,072 107,072 (A)
Polaris Pool Systems, Inc.
Common Stock 4/23/98 -- -- 3,561 3,561 (B)
R&S/ Strauss, Inc.
15% Sr. Sub. Note 6/17/98 $ 540,393 $ 540,393 70,794 (469,599)
Total Net Realized Gain for the
Three Months Ended June 30, 1998 540,393 798,924 258,531
=========== ========== ============
Pergament Home Centers, Inc.
Floating Rate Demand Note 7/24/98 $3,236,800 $ 2,699,404 $ 571,200 $ (2,128,204)
Common Stock Class B 380.800 8,568,000 -- (8,568,000)
Common Stock Class C 135.912 -- -- --
Western Pioneer, Inc.
Common Stock 9/15/98 $9,460,000 1,219,460 550,000 (669,460)
Common Stock Purchase Warrants 162,161 -- -- --
Total Net Realized Loss for the
Three Months Ended September 30, 1998 $12,486,864 $1,121,200 $(11,365,664)
=========== ========== ============
Total Net Realized Loss for the
Nine Months Ended September 30, 1998 $14,101,515 $6,101,638 $ (7,999,877)
=========== ========== ============
(A) Proceeds represent our portion of an escrow account which is expected to be released in the next quarter.
(B) Procceds represent a distribution to the Fund from the escrow account.
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
EQUITABLE CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
1. Organization and Purpose
Equitable Capital Partners, L.P. (the "Fund") was formed along with
Equitable Capital Partners (Retirement Fund), L.P. (the "Retirement Fund," and
collectively with the Fund referred to as the "Funds") and the Certificates of
Limited Partnership were filed under the Delaware Revised Uniform Limited
Partnership Act on February 2, 1988. The Funds' operations commenced on October
13, 1988.
On July 22, 1993, Equitable Capital Management Corporation ("Equitable
Capital"), formerly the Managing General Partner and investment adviser of the
Funds, transferred substantially all of the assets comprising Equitable
Capital's business to Alliance Capital Management L.P. ("Alliance Capital") and
its wholly-owned subsidiary, Alliance Corporate Finance Group Incorporated
("Alliance Corporate"). In connection with such transaction, the limited
partners, (the "Limited Partners") of the Funds voted to approve a new
investment advisory agreement between the Funds and Alliance Corporate and also
voted to admit Alliance Corporate as Managing General Partner of the Funds to
succeed Equitable Capital. Accordingly, on July 22, 1993, the closing date of
the transaction described above, (i) Alliance Corporate was admitted as the
successor Managing General Partner of the Funds (ii) Equitable Capital withdrew
from the Funds as Managing General Partner and assigned all of its interest as
General Partner to Alliance Corporate and (iii) Alliance Corporate succeeded
Equitable Capital as the investment adviser to the Funds pursuant to a new
investment advisory agreement. Alliance Corporate (the "Investment Adviser") is
a registered investment adviser under the Investment Advisers Act of 1940.
Prior to July 22, 1993, Equitable Capital was responsible, subject to the
supervision of the independent general partners of the Funds (the "Independent
General Partners"), for the management of the Fund's investments. As of July 22,
1993, Alliance Corporate assumed such responsibilities in its capacity as
Managing General Partner and Investment Adviser of the Funds.
The Funds have elected to operate as business development companies under
the Investment Company Act of 1940, as amended. The Funds seek current income
and capital appreciation potential through investments in privately-structured,
friendly leveraged acquisitions and other leveraged transactions. The Funds have
pursued this objective by investing primarily in subordinated debt and related
equity securities ("Enhanced Yield Investments") issued in conjunction with the
"mezzanine financing" of friendly leveraged acquisitions and leveraged
recapitalizations.
As stated in the Partnership Agreement, the Fund reached the end of its 10
year term on October 13, 1998. The Fund is in the process of liquidating the
last remaining portfolio company and expects to make a final distribution in
December 1998.
2. Significant Accounting Policies
Basis of Accounting
For financial reporting purposes, the Fund's records are maintained using
the accrual method of accounting.
Valuation of Investments
Securities are valued at market or fair value. Market value is used for
securities for which market quotations are readily available. For securities
without a readily ascertainable market value, fair value is determined, on a
quarterly basis, in good faith by the General Partners of the Fund. In
connection with such determination, the Managing General Partner has established
a valuation committee comprised of senior executives to assess the Fund's
portfolio and make recommendations regarding the value of the Fund's portfolio
securities. This valuation committee uses available market information and
appropriate valuation methodologies. In addition, the Managing General Partner
has retained Arthur D. Little, Inc., a nationally recognized independent
valuation consultant, to review such valuations.
<PAGE>
For privately issued securities in which the Fund typically invested, the
fair value of an investment is its initial cost, adjusted for amortization of
discount or premium and as subsequently adjusted to reflect the occurrence of
significant developments. "Significant developments" are business, economic or
market events that may affect a company in which an investment has been made or
the securities comprising such investment. For example, significant developments
that could result in a writedown in value include, among other things, events of
default with respect to payment obligations or other developments indicating
that a portfolio company's performance may fall short of acceptable levels. A
writeup in value of an investment could take place when a significant favorable
development occurs, such as a transaction representing the partial sale of an
investment that would result in a capital gain, or company performance exceeding
expected levels on a sustained basis. Although the General Partners use their
best judgment in determining the fair value of these investments, there are
inherent limitations in any valuation technique involving securities of the type
in which the Fund invests. Therefore, the fair values presented herein are not
necessarily indicative of the amount which the Fund could realize in a current
transaction.
Temporary Investments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Temporary Investments which
mature in more than 60 days, for which market quotations are readily available,
are valued at the most recent bid price or the equivalent quoted yield obtained
from one or more of the market makers.
Interest Receivable on Investments
Investments will generally be placed on non-accrual status in the event of a
default (after applicable grace period expires) or if the Managing General
Partner determines that there is no reasonable expectation of collecting
interest.
Payment-In-Kind Securities
All payment-in-kind securities received in lieu of cash interest payments
from the Fund's portfolio companies are recorded at face value, unless the
Managing General Partner determines that there is no reasonable expectation of
collecting the full principal, amounts of such securities.
Income Taxes
As discusssed in Note 13, no provision for income taxes has been made since
all income and losses are allocated to the Fund's partners ("Partners") for
inclusion in their respective tax returns.
Investment Transactions
Enhanced Yield Investments - The Fund records transactions on the date on
which it obtains an enforceable right to demand the securities or payment
thereof.
Temporary Investments - The Fund records transactions on the trade date.
Realized gains and losses on investments are determined on the basis of
specific identification for accounting and tax purposes.
Sales, Marketing and Offering Expenses and Sales Commissions
Sales commissions and selling discounts have been allocated to the specific
Partners' accounts to which they are applicable. Sales, marketing and offering
expenses are allocated between the Funds in proportion to the number of units
issued by each Fund and to the Partners in proportion to their capital
contributions.
3. Note Receivable
On July 22, 1993, pursuant to the terms of the Fund's Amended and Restated
Agreement of Limited Partnership, Alliance Corporate, as the successor Managing
General Partner of the Fund, has contributed a non-interest bearing promissory
note (the "Note") to the Fund in an aggregate amount equal to 1.01% of the
aggregate Net Capital Contributions of all Limited Partners (less distributions
representing returns of capital). Net Capital Contributions are comprised of
gross offering proceeds, after giving effect to volume discounts (and after
netting of sales commissions, organization, offering and sales and marketing
expenses), less returns of capital distributed to Limited Partners. The
principal amount of the Note is reduced proportionally by the Managing General
Partners 1% allocation of return of capital. Such allocation for the nine months
ended September 30, 1998 resulted in a $29,294 reduction of the principal amount
of the Note.
<PAGE>
4. Capital Contributions
On October 13, 1988, the Fund closed the initial public offering of its
units of Limited Partner interests ("Units"). Equitable Capital, the Fund's
Managing General Partner at that time, accepted subscriptions for 284,611 Units
and admitted 18,288 Limited Partners.
The Limited Partners' total capital contributions were $283,873,400, after
giving effect to volume discounts allowed of $737,600. Equitable Capital's
aggregate capital contribution was in the form of a promissory note in the
principal amount of $2,641,469. On July 22, 1993, Equitable Capital's note was
cancelled and Alliance Corporate, as successor Managing General Partner, made a
capital contribution in the form of a promissory note on such date, as described
in Note 3. Sales, marketing and offering expenses and selling commissions have
been charged against proceeds resulting in net capital contributed by Limited
Partners of $261,531,542.
Allocation of income, loss and distributions of cash are made in accordance
with the Partnership Agreement as further discussed in Note 11.
5. Sales, Marketing and Offering Expenses and Sales Commissions
The Fund expended a total of $535,631 for the reimbursement of sales and
marketing expenses. Aggregate sales and marketing expenses of the Funds may not
exceed $2,528,415 or 0.5% of the aggregate capital contributions and were
allocated proportionately to the number of Units issued by each Fund. Aggregate
sales and marketing expenses for the Funds totalled $951,683.
The Fund also paid $2,098,311 for the reimbursement of offering expenses.
These expenses, along with the offering expenses of the Retirement Fund and the
organizational expenses of the Funds, may not exceed $6,000,000. Aggregate
offering and organizational expenses for the Funds totalled $4,711,806.
For their services as selling agent, the Fund paid sales commissions to
Merrill Lynch, Pierce, Fenner & Smith Incorporated in the amount of $19,185,170,
of which Equico Securities Corporation, an affiliate of Equitable Capital, a
related party, received $317,150 as a selected dealer.
6. Investment Advisory Fee
As of July 22, 1993, Alliance Corporate has been receiving a quarterly
Investment Advisory Fee, at the annual rate of 1.0% of the Fund's Available
Capital, with a minimum annual payment of $2,000,000 collectively for the Funds,
less 80% of commitment, transaction, investment banking and "break-up" or other
fees related to the Fund's investments ("Deductible Fees"). Available Capital is
defined as the sum of the aggregate Net Capital Contributions of the Partners
less the cumulative amount of returns of capital distributed to Partners and
realized losses from investments.
As stated in the Partnership Agreement, the Fund's allocable share of the
Minimum Amount is $1,125,650 or $281,413 per quarter.
The Investment Advisory Fee is calculated and paid quarterly in advance.
The Investment Advisory Fees paid by the Fund for the nine months ended
September 30, 1998 and 1997 were $844,239 and $932,442, respectively.
7. Fund Administration Fee and Expenses
The Fund Administration Fees paid by the Fund for the nine months ended
September 30, 1998 and 1997 were $225,000 and $225,000, respectively.
Beginning October 13, 1996, MLFAI is entitled to receive reimbursement for
all direct-out-of-pocket expenses incurred in connection with the administration
of the Fund, commencing October 13, 1992. For the nine months ended September
30, 1998 and 1997, the Fund incurred administrative expenses of $234,603 and
$328,687 respectively, which consisted primarily of printing, audit and tax
return preparation and custodian fees paid for by MLFAI on behalf of the Fund.
8. Independent General Partners' Fees and Expenses
As compensation for their services, each Independent General Partner is
entitled to a $30,000 annual fee (payable quarterly) from the Fund in addition
to $500 for each meeting attended and reimbursement for any out-of-pocket
expenses. In accordance with the Fund's Partnership Agreement, the amount of the
annual fee is reviewed annually by the Independent General Partners.
For the nine months ended September 30, 1998 and 1997, the Fund incurred
$120,272 and $109,609, respectively, of Independent General Partners' Fees and
Expenses.
<PAGE>
9. Related Party Transactions
For the nine months ended September 30, 1998 and 1997, the Fund paid
expenses of $6,549 and $15,384, respectively, as reimbursement for amounts paid
for legal services provided by Equitable Life in connection with the Fund's
Enhanced Yield Investments. The Fund is paying Alliance Corporate an Investment
Advisory Fee for its services as described in Note 6. Additionally, the Fund
paid sales commissions to Equico Securities, a related party, as described in
Note 5.
10. Investment Transactions
The Fund invested primarily in Enhanced Yield Investments, also known in
the securities industry as "high yield securities". The securities in which the
Fund has invested were issued in conjunction with the mezzanine financing of
privately structured, friendly leveraged acquisitions, recapitalizations and
other leveraged financings, and are generally linked with an equity
participation. Enhanced Yield Investments are debt and preferred equity
securities that are unrated or are rated by Standard & Poor's Corporation as BB
or lower and by Moody's Investor Services, Inc. as Ba or lower. Risk of loss
upon default by the issuer is significantly greater with Enhanced Yield
Investments than with investment grade securities because Enhanced Yield
Investments are generally unsecured and are often subordinated to other
creditors of the issuer. Also, these issuers usually have high levels of
indebtedness and are more sensitive to adverse economic conditions, such as a
recession or increasing interest rates, than investment grade issuers. Most of
these securities are subject to resale restrictions and generally there is no
quoted market for such securities.
Although the Fund cannot eliminate its risks associated with participation
in Enhanced Yield Investments, it has established risk management policies. The
Fund subjected each prospective investment to rigorous analysis, and made only
those investments that were recommended by the Managing General Partner and that
met the Fund's investment guidelines or that were otherwise approved by the
Independent General Partners. Fund investments are measured against specified
Fund investment and performance guidelines. To limit the exposure of the Fund's
capital in any single issuer, the Fund limited the amount of its investment in a
particular issuer. The Fund also continually monitors portfolio companies in
order to minimize the risks associated with participation in Enhanced Yield
Investments.
On January 2, 1998, April 1, 1998 and July 1, 1998, the Fund received
$68,353, $68,922 and $68,190 from Pergament Home Centers, Inc. as a principal
paydown of the Floating Demand Note held by the Fund. No gain, loss or income
has been recorded on this transaction.
On March 12, 1998, the Fund sold its MTI Holdings, Inc. 12% Senior Secured
Note, common stock and warrants for $456,682. No gain, loss or income was
recorded at the time of sale. During the three months ended June 30, 1998 the
Fund realized a gain of $724,569 on the sale.
During the first quarter ended March 31, 1998, the Fund sold the remaining
92,636 shares of Lexmark International Group, Inc. Class B Common Stock for
$3,724,832 resulting in a gain of $3,107,256 to the Fund.
On April 23, 1998 , the Fund received additional proceeds of $3,561 from
Polaris Pool Systems, Inc. The money represents proceeds from the sale of the
investments from prior years that have been held in escrow for future
adjustments and expenses not paid on the sale dates.
On June 17, 1998, the Fund sold $540,393 par value of R&S/Strauss, Inc. 15%
Senior Subordinated Note for $70,794 resulting in a loss of $469,599.
On July 24, 1998, the Fund sold its Pergament, Home Centers, Inc. Floating
Rate Demand Note , Class B common stock and Class C common stock for $571,200
resulting in a loss of $10,696,204 to the Fund.
On September 15, 1998, the Fund sold its Western Pioneer, Inc 10% Senior
Subordinated Note and common stock purchase warrants for $550,000 resulting in a
loss of $669,460 to the Fund.
All of the proceeds received during the third quarter of 1998 will be
distributed to Limited Partners of record as of September 30, 1998 on November
16, 1998.
As of September 30, 1998, the Fund had remaining investments in 2 Managed
Companies (a Managed Company is one to which the Fund, the Managing General
Partner or other persons in the Fund's investor group make significant
managerial assistance available) and 1 Non-Managed Companies (a Non-Managed
Company is one to which such assistance is not provided) totaling $16,391,339
consisting of $3,584,607 in senior notes and subordinated notes and $12,806,732
in common stock and purchase warrants.
<PAGE>
11. Allocation of Profits and Losses
Pursuant to the terms of the Partnership Agreement, net investment income
and gains and losses on investments are generally allocated between the Managing
General Partner and the Limited Partners based upon cash distributions as
follows:
first, 99% to the Limited Partners and 1% to the Managing General Partner
until the Limited Partners have received a cumulative priority return of 10%
non-compounded on an annual basis on their investments in Enhanced Yield
Investments;
second, 70% to the Limited Partners and 30% to the Managing General Partner
until the Managing General Partner has received 20% of all current and prior
distributions on such investments;
and thereafter, 80% to the Limited Partners and 20% to the Managing
General Partner.
For the nine months ended September 30, 1998, earnings were allocated 99%
to the Limited Partners, as a class, and 1% to the Managing General Partner.
12. Unrealized Appreciation/Depreciation and Non-Accrual of Investments
For the nine months ended September 30, 1998, the Fund recorded net
unrealized depreciation on Enhanced Yield Investments of $838,324 compared to
$20,943,490 for the nine months ended September 30, 1997. Such depreciation was
the result of adjustments in value made with respect to the following
investments during the nine months ended September 30, 1998:
The amount includes the reversal of $2,902,592 of unrealized appreciation
of Lexmark International Group, Inc. Class B common stock due to the sale of
92,636 shares.
On March 31, 1998, Quantegy Acquisition Corp., common stock was written
down from 100% to 15% of the cost resulting in unrealized depreciation of
$2,945,022 to the Fund.
On March 31, 1998, R&S/Strauss, Inc. 15% Senior Subordinated Note was
written down from 100% to 25% of par, resulting in unrealized depreciation of
$3,093,750 to the Fund.
On June 30, 1998, Quantegy Acquisition Corp., common stock was written down
from 15% of cost to 6.5% of the cost resulting in unrealized depreciation of
$292,501 to the Fund.
On June 30, 1998, R&S/Strauss, Inc. 15% Senior Subordinated Note was
written down form 25% to 13% of par, resulting in unrealized depreciation of
$430,153 to the Fund.
The reversal of $405,295 of unrealized depreciation due to the sale of
$540,393 par value of R&S/Strauss, Inc., 15% Senior Subordinated Note.
The reversal of $10,732,147 of unrealized depreciation due to the sale of
its Pergament, Home Centers, Inc. Floating Rate Demand Note , Class B common
stock and Class C common stock.
The reversal of $1,618,540 of unrealized appreciation due to the sale of
its Western Pioneer, Inc 10% Senior Subordinated Note and common stock purchase
warrants.
On September 30, 1998, Quantegy Acquisition Corp., common stock was written
down from 6.5% of cost to zero resulting in unrealized depreciation of $227,209
to the Fund.
On September 30, 1998, the remaining R&S/Strauss, Inc. 15% Senior
Suborinated Note was written down from 13% of par to zero resulting in
unrealized depreciation of $465,999 to the Fund.
The following investment has been on non-accrual status as of the following
date:
R&S/Strauss, Inc. 15% Senior Subordinated Note November 30, 1997
Alliance Corporate continues to monitor the Fund's portfolio closely. As a
matter of standard procedure, Alliance Corporate reviews each portfolio
company's financial statements at least quarterly, and often monthly. Investment
managers routinely review and discuss financial and operating results with the
companies' management and equity sponsors, and attend periodic board of
directors meetings, as appropriate. In some cases, Alliance Corporate officers,
acting on behalf of the Fund, serve as directors on the boards of portfolio
companies. When problems arise, communication with management and sponsors often
occurs on a daily basis.
<PAGE>
13. Income Taxes
No provision for income taxes has been made since all income and losses are
allocated to the Fund's partners for inclusion in their respective tax returns.
Pursuant to Statement of Financial Accounting Standards No. 109 - Accounting
for Income Taxes, the Fund is required to disclose any difference between the
tax bases of the Fund's assets and liabilities versus the amounts reported in
the Financial Statements. Generally, the tax bases of the Fund's assets
approximate the amortized cost amounts reported in the Financial Statements.
This amount is computed annually and as of December 31, 1997, the tax basis of
the Fund's assets was greater than the amounts reported in the Financial
Statements by $37,057,962. This difference is primarily attributable to
unrealized depreciation on investments which has not been recognized for tax
purposes. Additionally, certain realized gains and losses due to restructurings
were treated differently for tax purposes than for financial reporting purposes.
14. Subsequent Distributions
On October 28, 1998, the Independent General Partners approved an aggregate
cash distribution of $2,555,807 for the nine months ended September 30, 1998,
which will be paid on November 16, 1998 to the Limited Partners. The amount that
will be distributed to Limited Partners on record as of September 30, 1998
includes $2,555,807 of return of capital. On a per Unit basis, the distribution
of $8.98 represents return of capital. The Managing General Partner's one
percent allocation of $25,816 is being held as a Deferred Distribution Amount
resulting in no distribution to the Managing General Partner.
15. Subsequent Events
On October 7, 1998, the Fund sold its Leather U.S., Inc. Common Stock for
$159,000 and realized a loss of $9,183,000 to the Fund.
On November 5, 1998, the Fund sold its remaining portion of R&S/Strauss,
Inc. for $36,026 and realized a loss of $3,548,581 on the sale.
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
Net Proceeds of Offering
On October 13, 1988, the Fund completed the initial public offering of
Units, admitting 18,288 Limited Partners who purchased 284,611 Units. The net
proceeds available for investment by the Fund after such offering were
$261,499,657 after volume discounts, sales commissions and organizational,
offering, sales and marketing expenses.
Investments
As of September 30, 1998, the Fund had a total of 3 Enhanced Yield
Investments at a net cost of $16,391,339.
Proceeds from Investments
During the nine months ended September 30, 1998, the Fund received proceeds
from the following investments:
On January 2, 1998, April 1, 1998 and July 1, 1998, the Fund received
$68,353, $68,922 and $68,190 from Pergament Home Centers, Inc. as a principal
paydown of the Floating Demand Note held by the Fund. No gain, loss or income
has been recorded on this transaction.
During the first quarter ended March 31, 1998, the Fund sold the remaining
92,636 shares of Lexmark International Group, Inc. Class B Common Stock for
$3,724,832 resulting in a gain of $3,107,256 to the Fund.
On March 12, 1998, the Fund sold its MTI Holdings, Inc. 12% Senior Secured
Note, common stock and warrants for $456,682. No gain, loss or income was
recorded at the time of sale. During the three months ended June 30, 1998 the
Fund realized a gain of $724,569 on the sale.
On April 23, 1998, the Fund received additional proceeds of $3,561 from
Polaris Pool Systems, Inc. The money represents proceeds from the sale of the
investments from prior years that have been held in escrow for future
adjustments and expenses not paid on the sale dates.
On June 17, 1998, the Fund sold $540,393 par value of R&S/Strauss, Inc. 15%
Senior Subordinated Note for $70,794 resulting in a loss of $469,599.
On July 24, 1998, the Fund sold its Pergament, Home Centers, Inc. Floating
Rate Demand Note , Class B common stock and Class C common stock for $571,200
resulting in a loss of $10,696,204 to the Fund.
On September 15, 1998, the Fund sold its Western Pioneer, Inc 10% Senior
Subordinated Note and common stock purchase warrants for $550,000 resulting in a
loss of $669,460 to the Fund.
All of the proceeds received during the third quarter of 1998 are expected
to be distributed to Limited Partners on record as of September 30, 1998, on
November 16, 1998.
For additional information, refer to the Supplemental Schedule of Realized
Gains and Losses and Note 10 to the Financial Statements.
The Fund's Enhanced Yield Investments are typically issued in private
placement transactions and are subject to certain restrictions on transfer, and
are thus relatively illiquid. The balance of the Fund's assets at the end of the
period covered by this report was invested in Temporary Investments, comprised
of commercial paper with maturities of less than sixty days.
All cash dividends, interest and other income received by the Fund in excess
of expenses of operation and reserves for expenses and certain investments and
liabilities are distributed to the Limited Partners of the Fund and to Alliance
Corporate, as the Managing General Partner, within 45 days after the end of each
calendar quarter. Before each quarterly cash distribution, the Fund will analyze
the then current cash projections and determine the amount of any additional
reserves it deems necessary.
<PAGE>
Participation in Enhanced Yield Investments
The Fund is invested primarily in Enhanced Yield Investments, also known in
the securities industry as "high yield securities". The securities in which the
Fund has invested were issued in conjunction with the mezzanine financing of
privately structured, friendly leveraged acquisitions, recapitalizations and
other leveraged financings, and are generally linked with an equity
participation. Enhanced Yield Investments are debt and preferred equity
securities that are unrated or are rated by Standard & Poor's Corporation as BB
or lower and by Moody's Investor Services, Inc. as Ba or lower. Risk of loss
upon default by the issuer is significantly greater with Enhanced Yield
Investments than with investment grade securities because Enhanced Yield
Investments are generally unsecured and are often subordinated to other
creditors of the issuer. Also, these issuers usually have high levels of
indebtedness and are more sensitive to adverse economic conditions, such as a
recession or increasing interest rates, than investment grade issuers. Most of
these securities are subject to resale restrictions and generally there is no
quoted market for such securities.
Although the Fund cannot eliminate its risks associated with participation
in Enhanced Yield Investments, it has established risk management policies. The
Fund subjects each prospective investment to rigorous analysis, and makes only
those investments that have been recommended by the Managing General Partner and
that meet the Fund's investment guidelines or that have otherwise been approved
by the Independent General Partners.
Fund investments are measured against specified Fund investment and
performance guidelines. To limit the exposure of the Fund's capital in any
single issuer, the Fund limits the amount of its investment in a particular
issuer. The Fund also continually monitors portfolio companies in order to
minimize the risks associated with participation in Enhanced Yield Investments.
Results of Operations
For the three and nine months ended September 30, 1998, net investment
income decreased by $199,882 and $1,864,271 respectively, as compared to the
same periods in 1997. Net investment income is comprised of investment income
(primarily interest and dividend income) offset by expenses. The decrease in the
1998 net investment income versus the comparative period in 1997, reflects the
decrease in interest and dividend income partially offset by the decrease in
Fund Administration Fees and Expenses and Investment Advisory Fees.
For the three and nine months ended September 30, 1998, the Fund had
investment income of $71,920 and $235,083 respectively, as compared to $350,243
and $2,324,295 for the same periods in 1997. The decrease in 1998 investment
income of 90% was primarily due to an decrease in interest and dividend income.
The Fund incurred expenses of $449,114 and $1,444,864 for the three and
nine months ended September 30, 1998, as compared to $527,555 and $1,669,805 for
the same period in 1997. The decrease in the 1998 expenses of $224,941 was
primarily due to a decrease in Professional Fees, Fund Administration Fees and
Expenses and Independent General Partner's Fees and Expenses paid by the Fund.
The Fund's major expenses consist of the Investment Advisory Fee, the Fund
Administration Fees and Expenses and Independent General Partners' Fees and
Expenses.
The Fund experienced a decrease in net assets resulting from operations for
the nine months ended September 30, 1998 in the amount of $10,047,982 as
compared to an decrease of $3,742,352 for the comparative period in 1997. The
decrease in net assets for the nine months ended September 30, 1998 is comprised
of net investment loss of $1,209,791, net realized loss of $7,999,877 offset by
a net change in unrealized depreciation of $838,324. For the comparable period
in 1997, the decrease in net assets was comprised of net investment income of
$654,490, net realized gains of $16,546,648 offset by a net change in unrealized
depreciation of $20,943,490 (see Statements of Operations in the Financial
Statements).
For the three months ended September 30, 1998 and 1997, the Fund incurred
Investment Advisory Fees of $281,413 and $281,413, respectively. For the nine
months ended September 30, 1998 and 1997 the Fund incurred Investment Advisory
Fees of $884,239 and $932,442, respectively. (as described in Note 6 to the
Financial Statements).
<PAGE>
The Fund Administration Fees and Expenses (as described in Note 7 to the
Financial Statements) for the three months ended September 30, 1998 and 1997
were $126,933 and $173,086 respectively and for the nine months ended September
30, 1998 and 1997 were $459,603 and $553,687 respectively. The decrease from
1998 to 1997 of $94,084 is primarily due to the Fund Administration Fee changing
to an annual fee of $300,000 plus 100% of all direct out-of-pocket expenses
incurred by the Fund Administrator on behalf of the Fund.
Independent General Partners' Fees and Expenses incurred for the three and
nine months ended September 30, 1998 and 1997 were $40,768 and $39,556,
respectively and $120,272 and $109,609 respectively.
The Fund incurred no Professional Fees for the three months ended September
30, 1998. For the nine months ended September 30, 1998 the Fund incurred
Professional Fees of $12,988. Professional Fees incurred for the same periods in
1997 were $31,000 and $62,050, respectively. For the nine months ended September
30, 1998, the Fund incurred $6,549 of related party legal fees which included
reimbursed legal fees to Equitable Life for legal services. (See Note 9 to the
Financial Statements.)
Unrealized Appreciation/Depreciation and Non-Accrual of Investments
The General Partners of the Fund determine, on a quarterly basis, the fair
value of the Fund's portfolio securities that do not have a readily
ascertainable market value. They are assisted in connection with such
determination by the Managing General Partner, which has established a valuation
committee comprised of senior executives to assess the Fund's portfolio and make
recommendations regarding the value of its portfolio securities. This valuation
committee uses available market information and appropriate valuation
methodologies. In addition, the Managing General Partner has retained Arthur D.
Little, Inc., a nationally recognized independent valuation consultant, to
review such valuations.
For privately issued securities in which the Fund typically invests, the
fair value of an investment is its initial cost, adjusted for amortization of
discount or premium and as subsequently adjusted to reflect the occurrence of
significant developments. "Significant developments" are business, economic or
market events that may affect a company in which an investment has been made or
the securities comprising such investment. For example, significant developments
that could result in a writedown in value include, among other things, events of
default with respect to payment obligations or other developments indicating
that a portfolio company's performance may fall short of acceptable levels. A
writeup in value of an investment could take place when a significant favorable
development occurs, such as a transaction representing the partial sale of an
investment that would result in a capital gain or company performance exceeding
expected levels on a sustained basis.
Although the General Partners use their best judgment in determining the
fair value of these investments, there are inherent limitations in any valuation
technique involving securities of the type in which the Fund invests. Therefore,
the fair values presented herein are not necessarily indicative of the amount
which the Fund could realize in a current transaction.
For the nine months ended September 30, 1998, the Fund recorded net
unrealized depreciation on Enhanced Yield Investments of $145,116 as compared to
$20,943,490 for the nine months ended September 30, 1997. The change in
unrealized depreciation for the nine months ended September 30, 1998 was
primarily the result of unrealized depreciation in Quantegy Acquisition Corp.,
R&S/Strauss, Inc., and Pergament Home Centers, Inc. and the reversal of
unrealized appreciation in Lexmark International Group, Inc. and Western
Pioneer, Inc.
The following investment has been on non-accrual status as of the following
date:
R&S/Strauss, Inc.
15% Senior Subordinated Note November 30, 1997
Alliance Corporate continues to monitor the Fund's portfolio closely. As a
matter of standard procedure, Alliance Corporate reviews each portfolio
company's financial statements at least quarterly, and often monthly. Investment
managers routinely review and discuss financial and operating results with the
companies' management and equity sponsors, and attend periodic board of
directors meetings, as appropriate. In some cases, Alliance Corporate officers,
acting on behalf of the Funds, serve as directors on the boards of portfolio
companies. When problems arise, communication with management and sponsors often
occurs on a daily basis.
Realized Gains and Losses on Investments
During the three and nine months ended September 30, 1998, the Fund
recorded a net realized loss of $11,365,664 and $7,999,877 respectively, on
transactions involving seven Enhanced Yield Investment. For the nine months
ended September 30, 1997, the Fund recorded net realized gains on investments of
$16,546,648 on transactions involving two Enhanced Yield Investments (see Note
10 to the Financial Statements and the Supplemental Schedule of Realized Gains
and Losses).
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 4 are herewith omitted as the response to items is either
none or not applicable for the September 30, 1998, Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27 - Financial Data Schedule for the quarter ending
September 30, 1998.
3.1 Amended and Restated Certificate of Limited Partnership, dated as
of April 12, 1989*
4.1 Amended and Restated Agreement of Limited Partnership, dated as
of October 13, 1988**
10.1 Investment Advisory Agreement, dated July 22, 1993, between
Registrant and Alliance Corporate Finance Group Incorporated****
10.2 Administrative Services Agreement, dated October 13, 1988, among
the Registrant, Equitable Capital Management Corporation and ML
Fund Administrators, Inc.**
10.3 Credit Agreement dated as of June 27, 1989, between Equitable
Capital Partners, L.P. and Wells Fargo Bank, N.A.***
* Incorporated by reference to the Fund's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989, filed with the Securities and
Exchange Commission on March 29, 1990.
** Incorporated by reference to the Fund's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988, filed with the Securities and
Exchange Commission on March 29, 1989.
*** Incorporated by reference to the Fund's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989, filed with the Securities and
Exchange Commission on August 14, 1989.
**** Incorporated by reference to the Fund's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, filed with the Securities and
Exchange Commission on March 28, 1994.
(b) Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 13th day of
November, 1998.
EQUITABLE CAPITAL PARTNERS, L.P.
By: Alliance Corporate Finance Group Incorporated,
as Managing General Partner,
Dated: November 13, 1998 /s/ James R. Wilson
-----------------------------
James R. Wilson
Title: President
Dated: November 13, 1998 /s/ Andy Pitsillos
---------------------------
Andy Pitsillos
Title: Vice President and Chief
Accounting Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 13th day of
November, 1998.
EQUITABLE CAPITAL PARTNERS, L.P.
By: Alliance Corporate Finance Group Incorporated,
as Managing General Partner,
Dated: November 13, 1998
James R. Wilson
Title: President
Dated: November 13, 1998
Andy Pitsillos
Title: Vice President and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information extracted from the third quarter
of 1998 Form 10-Q Balance Sheets and Statements of Operations and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 16,391,339
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,416,605
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,008,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 110,352
<TOTAL-LIABILITIES> 110,352
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 284,611
<SHARES-COMMON-PRIOR> 284,611
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16,391,341)
<NET-ASSETS> 7,897,740
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 235,083
<OTHER-INCOME> 0
<EXPENSES-NET> 1,444,864
<NET-INVESTMENT-INCOME> (1,209,781)
<REALIZED-GAINS-CURRENT> (7,999,877)
<APPREC-INCREASE-CURRENT> (838,324)
<NET-CHANGE-FROM-OPS> (10,047,982)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 449,685
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (16,834,046)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 281,413
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 477,695
<AVERAGE-NET-ASSETS> 16,314,763
<PER-SHARE-NAV-BEGIN> 82.91
<PER-SHARE-NII> (4.21)
<PER-SHARE-GAIN-APPREC> (27.83)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.22
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
