SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended Commission File Number
December 31, 1998 1-16531
EQUITABLE CAPITAL PARTNERS, L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3486115
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1345 Avenue of the Americas
New York, New York 10105
(Address of principal executive offices) (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 ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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 Annual
Report on Form 10-K.
<PAGE>
Part I
Item 1. Business
Formation
Equitable Capital Partners, L.P. (the "Fund" or the "Registrant") was
formed along with Equitable Capital Partners (Retirement Fund), L.P. (the
"Retirement Fund," and collectively with the Fund referred to as the "Funds").
The Certificates of Limited Partnership were filed under the Delaware Revised
Uniform Limited Partnership Act on February 2, 1988 and the Funds' operations
commenced on October 13, 1988. Following liquidation and winding-up of the
Funds, Certificates of Cancellation of the Certificates of Limited Partnership
were filed by the Funds on January 27, 1999. The Fund's objective was to seek
current income and capital appreciation potential by investing in privately
structured, friendly leveraged acquisitions and leverage recapitalizations. The
Fund pursued this objective by investing primarily in subordinated debt and
related equity securities ("Mezzanine Investments") issued in conjunction with
the "mezzanine financing" of leveraged acquisitions and leveraged
recapitalizations. Mezzanine Investments, follow-on investments, bridge
investments and certain other investments which the Fund was permitted to invest
in are referred to herein as "Enhanced Yield Investments."
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 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 (the "Managing General
Partner") to succeed Equitable Capital. Accordingly, on July 22, 1993, the
closing date of the transaction described above, Alliance Corporate was admitted
as the successor Managing General Partner of the Funds. Equitable Capital
assigned all of its interest as General Partner to Alliance Corporate. Robert F.
Shapiro, Robert W. Lear, Alton G. Marshall and William G. Sharwell, who are not
affiliated with Alliance Corporate or "interested persons" of the Funds for
purposes of the Investment Company Act of 1940 as amended (the "Investment
Company Act"), served as the Funds' independent general partners (the
"Independent General Partners"). Messrs. Shapiro and Lear served from June 1988
until the Funds' dissolution, and Mr. Marshall and Dr. Sharwell served from 1989
until the Funds' dissolution. The Managing General Partner is an indirect
partially-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable Life") and is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. In addition, Alliance Corporate was
admitted as the successor investment adviser to the Funds (the "Investment
Adviser") pursuant to a new investment advisory agreement executed as of July
22, 1993 and since such date, was responsible, subject to the supervision of the
Independent General Partners, for the management of the Funds' investments.
The Fund elected to operate as a business development company under the
Investment Company Act of 1940, as amended. As such, it was subject to certain
provisions of the Investment Company Act. The Fund filed Form N-54C to withdraw
its election to be treated as a business development company on January 27,
1999. The description of the Fund's investment objective and policies, its
management arrangements and certain provisions of the Investment Company Act
that were applicable to the Fund during its term are set forth in the
information contained in the Prospectus of the Fund, dated July 15, 1988 (the
"Prospectus"), filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 424(b) under the Securities Act of 1933, as
amended (the "Securities Act"), on July 19, 1988 under the following captions:
"Investment Objective and Policies," "Management Arrangements" and "Regulation."
Such information is incorporated by reference into this Item 1.
The Funds jointly offered an aggregate of 1,000,000 units of limited
partnership interest ("Units") to investors in a public offering registered
under the Securities Act pursuant to a Registration Statement on Form N-2 (File
No. 33-20093), which was declared effective under the Securities Act by the
Commission on July 15, 1988. Merrill Lynch, Pierce, Fenner & Smith (the
"Agent"), an affiliate of ML Fund Administrators, Inc. (the "Fund
Administrator"), acted as selling agent for the Units offered by the Fund.
<PAGE>
On October 13, 1988, the Fund issued 284,611 Units to investors, and
Equitable Capital, as Managing General Partner, admitted 18,288 investors as
limited partners of the Fund (the "Limited Partners"). The net proceeds of the
offering of such Units to the Fund was $264,688,230 after giving effect to
volume discounts of $737,600 and the payment of $19,185,170 in sales commissions
to the Agent. Equitable Capital, in its capacity as Managing General Partner,
contributed a demand promissory note in the principal amount of $2,641,836 as
required by the Amended and Restated Agreement of Limited Partnership, dated as
of October 13, 1988 (the "Partnership Agreement"), pursuant to which the Fund
had been organized. Equitable Capital reduced this note by $367 resulting from
actual syndication expenses paid in excess of original estimates. The public
offering has been concluded.
In connection with its organization and offering, the Fund incurred
$554,631 in organizational expenses and $2,633,942 in offering, sales and
marketing expenses. The organizational expenses were amortized on a
straight-line basis over a sixty month period that commenced on October 13,
1988. Such expenses were fully amortized as of October 31, 1993. The offering,
sales and marketing expenses incurred by the Fund have been paid and accounted
for as a charge to the capital account of the Fund's partners. The net proceeds
available for investment by the Fund after such offering less the return of
capital distributed to the Limited Partners of $45,247,457 equaled $216,252,200.
Investments
As set forth in the Partnership Agreement, the Fund's investment period
ended on October 12, 1991, three years after the Fund's operations commenced.
Thereafter, the Fund was not permitted to acquire new Enhanced Yield
Investments, but was permitted to make follow-on investments in existing
portfolio companies. During the years ended December 31, 1998 and 1997, the Fund
made no follow-on investments.
During the year ended December 31, 1996, the Fund made a follow-on
investment in one Managed Company (as defined in the Prospectus) at a total cost
of $4,532.
The Fund was liquidated and dissolved as of December 31, 1998, and as of
that date the Fund had no Enhanced Yield Investments. During 1998, 1997 and 1996
the Fund received $7,042,600, $61,774,551 and $28,181,211, respectively, in
principal payments and prepayments relating to certain Enhanced Yield
Investments.
During its term, the Fund invested in certain temporary investments,
consisting principally of commercial paper with maturities of less than sixty
days. Proceeds that were not invested in Enhanced Yield Investments or returned
to Limited Partners were held in such temporary investments.
Competition
The Fund has completed its investment period and reinvestment period and
was liquidated and dissolved as of December 31, 1998. The Fund liquidated its
investments during fiscal year 1998 and, as of December 31, 1998, held no
portfolio investments.
Employees
The Fund has no employees. The Managing General Partner, subject to the
supervision of the Independent General Partners, managed and controlled the
Fund's investments. Certain officers of Alliance Corporate were designated as
agents of the Fund with titles corresponding to the titles of the offices held
by such persons with Alliance Corporate. The Fund Administrator performed
administrative services for the Fund on behalf of the Managing General Partner.
Item 2. Properties
The Fund does not own or lease any physical properties.
Item 3. Legal Proceedings
The Fund is not party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Fund filed Form 15 with the Commission on January 27, 1999 to terminate
the registration of the Units under the Securities Exchange Act of 1934.
The Units were illiquid securities and were subject to significant
restrictions on transfer. The information in the Prospectus under the caption
"Transferability of Units" is incorporated in this Item 5 by reference. There
was no established trading market for the Units. The Partnership Agreement
contained restrictions that were intended to prevent the development of a public
market.
The number of holders of Units as of December 31, 1998 was 16,712. The
Managing General Partner held a general partner interest in the Fund and did not
hold any Units. Pursuant to the terms of the Partnership Agreement, the Fund
generally made distributions within 45 days after the end of each calendar
quarter of cash income received from investments in excess of expenses of
operation, reserves for expenses and certain investments and liabilities. Net
cash receipts representing cumulative income and gains were distributed as soon
as practicable after the related disposition. Such distributions were allocated
among the Managing General Partner, and the Limited Partners, in general, first
99% to the Limited Partners and 1% to the Managing General Partner until the
Limited Partners received a cumulative priority return of 10% noncompounded 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. The Fund's distribution procedures are described in
detail in the Prospectus under the caption "Distributions and Allocations"; the
information under such caption is incorporated by reference in this Item 5.
<PAGE>
Item 6. Selection Financial Data
<TABLE>
For the Years Ended
<S> <C> <C> <C> <C> <C>
December 31, 1998 December 31, 1997 December 31, 1996 December 31, 1995 December 31, 1994
TOTAL FUND INFORMATION: ----------------- ----------------- ----------------- ----------------- -----------------
Cash Distributions $ 12,955,598(a) $ 81,951,834(c) $ 27,348,085(d) $ 41,174,256 $ 54,554,528
Net Assets 0 24,731,786 110,708,174 112,353,878 157,930,203
Total Assets 0 24,840,604 110,843,385 112,437,110 158,039,361
Net Investment (Loss) Income (2,188,734) 461,348 5,918,157 5,215,211 6,924,128
Net Change in Unrealized
Appreciation (Depreciation)
on Investments 15,553,015 (22,097,649) 31,877,152 2,627,096 (15,853,762)
Net Realized (Losses) Gains
on Investments (24,090,545) 17,973,591 (12,010,831) (11,988,596) 1,758,116
PER UNIT OF LIMITED
PARTNERSHIP INTEREST:
Cash Distributions $ 45.52(a) $ 287.88(c) $ 95.83(d) $ 144.38 191.33
Cumulative Cash Distributions 1,225.17(b) 1,179.65 891.77 795.94 651.56
Investment Income 1.00 9.13 28.80 27.77 36.53
Expenses (8.69) (7.52) (8.22) (9.63) (12.44)
Net Investment (Loss) Income (7.69) 1.60 20.59 18.14 24.09
Net Unrealized Appreciation
(Depreciation) on Investments 54.10 (76.87) 110.88 9.14 (55.15)
Net Realized (Losses) Gains
on Investments (83.80) 62.52 (41.78) (41.70) 6.12
Net Asset Value 0 82.91 383.53 390.82 548.47
</TABLE>
(a) Includes Return of Capital of $8,746,096 or $30.73 per LP Unit.
(b) Includes Return of Capital of $435.13 per LP Unit.
(c) Includes Return of Capital of $35,826,833 or $125.88 per LP Unit.
(d) Includes Return of Capital of $8,128,490 or $28.56 per LP Unit.
<PAGE>
Item 7. 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 December 31, 1998, the Fund had no Enhanced Yield Investments.
Proceeds from Investments
During the year ended December 31, 1998, the Fund received the following
proceeds:
During the year ended December 31, 1998, the Fund received a total of
$205,465 from Pergament Home Centers, Inc. as a principal paydown of the
Floating Rate Demand Note held by the Fund. No gain, loss or income was recorded
on this transaction.
During the year ended December 31, 1998, the Fund received additional
proceeds of $97,838 from Polaris Pool Systems, Inc. This represents proceeds
from the sale of the investments from prior years that were held in escrow for
future adjustments and expenses.
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.
During the year ended December 31, 1998, the Fund sold its MTI Holdings,
Inc. 12% Senior Secured Note, common stock and warrants for $1,181,251 and
realized a gain of $724,569 on the sale.
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 and Class C common stocks 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.
On October 7, 1998, the Fund sold its Leather U.S., Inc. common stock for
$159,000 resulting in a loss of $9,183,000 to the Fund.
On November 5, 1998, the Fund sold its remaining portion of R&S/Strauss,
Inc. 15% Senior Subordinated Note for $36,026 resulting in a loss of $3,548,581
to the Fund.
On December 22, 1998, the Fund sold its Quantegy Acquisition Corp. common
stock for $11,368 resulting in a loss of $3,453,364 to the Fund.
All proceeds not used to pay expenses during the year ended December 31,
1998 were distributed to Limited Partners. The final distribution was paid on
December 21, 1998. The Fund was liquidated and dissolved as of December 31,
1998, and a Certificate of Cancellation of Certificate of Limited Partnership
was filed on January 27, 1999.
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 were typically issued in private
placement transactions and were subject to certain restrictions on transfer, and
were thus relatively illiquid.
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 were 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 analyzed the then current cash projections and determined the amount of any
additional reserves it deemed necessary.
<PAGE>
Participation in Enhanced Yield Investments
The Fund was liquidated and dissolved as of December 31, 1998, and had no
assets as of that date. During its term, the Fund invested primarily in Enhanced
Yield Investments, also known in the securities industry as "high yield
securities". The securities in which the Fund invested were issued in
conjunction with the mezzanine financing of privately structured, friendly
leveraged acquisitions, recapitalizations and other leveraged financings, and
were generally linked with an equity participation. Enhanced Yield Investments
are debt and preferred equity securities that are below investment grade, i.e.,
unrated or rated by Standard & Poor's Corporation as BB or lower or 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 could not eliminate its risks associated with
participation in Enhanced Yield Investments, it 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 the Fund's investment guidelines or that were otherwise
approved by the Independent General Partners.
Fund investments were 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 monitored portfolio companies in order to
minimize the risks associated with participation in Enhanced Yield Investments.
Results of Operations
For the year ended December 31, 1998, the Fund had a net investment loss of
$2,188,734, a decrease of $2,650,082 from the net investment income of $461,348
for the year ended December 31, 1997. The Fund had net investment income of
$5,918,157 for the same period in 1996. 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 a decrease in interest and dividend income and the increase in
Fund Administration Fees and Expenses.
For the year ended December 31, 1998, the Fund had investment income of
$284,533, as compared to $2,623,310, for the same period in 1997 and $8,279,977
for the same period in 1996. The decrease in 1998 investment income of 89%
versus 1997 was primarily due to a decrease in the amount of accrual status
securities held by the Fund due to sales and repayments of Enhanced Yield
Investments during 1998. The decrease in the 1997 investment income of 68%
versus the comparative period in 1996 was primarily due to an decrease in
dividend income and debt securities held by the Fund due to the sales and
repayments of Enhanced Yield investments during 1997.
The Fund incurred expenses of $2,473,267, for the year ended December 31,
1998, as compared to $2,161,962 for the same period in 1997 and $2,361,820 for
the same period in 1996. The increase in the 1998 expenses versus 1997 expenses
of $311,305 was primarily due to the increase in the Fund Administration Fees
and Expenses due to a new Fund Administrative Services Agreement entered into as
of December 31, 1998 (as described in Note 7 to the Financial Statements) and
Independent General Partners' Fees and Expenses paid by the Fund offset by a
decrease in Professional Fees. The decrease in the 1997 expenses versus 1996
expenses of $199,858 was primarily due to the decrease in the Professional Fees
and Fund Administration Fees and Expenses and Independent General Partners' Fees
paid by the Fund.
The Fund experienced a decrease in net assets resulting from operations for
the year ended December 31, 1998 in the amount of $10,726,264 as compared to a
decrease of $3,662,710 for the same period in 1997. The decrease in net assets
resulting from operations in 1998 versus 1997 is attributable to a decrease in
net investment income of $2,650,082, an increase in unrealized appreciation of
$37,650,664 offset by an increase in net realized loss of $42,064,136 (see
Statement of Operations in the Financial Statements). The decrease in net assets
resulting from operations in 1997 of $3,662,710 as compared to an increase in
1996 of $25,784,478 was attributable to a decrease in net investment income of
$5,456,809, an increase in unrealized depreciation of $53,974,801 offset by an
increase in net realized gains of $29,984,422.
<PAGE>
For the years ended December 31, 1998, 1997 and 1996 the Fund incurred an
Investment Advisory Fee of $1,125,652, $1,213,855 and $1,037,447, respectively,
(as described in Note 6 to the Financial Statements).
The Fund Administration Fees and Expenses (as described in Note 7 to the
Financial Statements) for the years ended December 31, 1998, 1997 and 1996, were
$1,164,814, $701,134 and $916,209, respectively. The increase of $463,680 from
1997 to 1998 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. During the years ended December
31, 1998, 1997 and 1996, the Fund incurred a total of $639,814, $401,134 and
$192,068, respectively, of administrative expenses consisting primarily of
printing, audit and tax return preparation and custodian fees paid for by the
Fund Administrator.
Independent General Partners' Fees and Expenses incurred for the years
ended December 31, 1998, 1997 and 1996 were $152,303, $151,406 and $192,279,
respectively. The changes are attributable to fluctuations in legal fees
incurred by the Independent General Partners. (See Note 8 to the Financial
Statements.)
The Fund incurred Professional Fees of $27,334, $82,050 and $183,323 for
the years ended December 31, 1998, 1997 and 1996, respectively, which included
reimbursed legal fees to Debevoise & Plimpton and Equitable Life for legal
services. (See Note 9 to the Financial Statements.)
Unrealized Appreciation/Depreciation and Non-Accrual of Investments
During its term, the General Partners of the Fund determined, on a
quarterly basis, the fair value of the Fund's portfolio securities that did not
have a readily ascertainable market value. They were assisted in connection with
such determination by the Managing General Partner, which 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 used available market information and
appropriate valuation methodologies. In addition, the Managing General Partner
retained Arthur D. Little, Inc., a nationally recognized independent valuation
consultant, to review such valuations.
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 have resulted in a write-down 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 write-up in value of an investment could have taken place when a
significant favorable development occured, 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 used 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 invested.
Therefore, the fair values presented herein are not necessarily indicative of
the amount which the Fund could realize in a current transaction.
For the year ended December 31, 1998 the Fund recorded net unrealized
appreciation on Enhanced Yield Investments of $15,553,015 as compared to
$22,097,649 of unrealized depreciation at December 31, 1997. For the year ended
December 31, 1996, the Fund recorded net unrealized appreciation on Enhanced
Yield Investments of $31,877,152. The change of $37,650,664 from 1997 to 1998,
in unrealized depreciation was primarily the result of the reversal of
unrealized depreciation on Pergament Home Centers, Inc., Quantegy Acquisition
Corp., R&S/Strauss, Inc. and Leather U.S., Inc. and the reversal of unrealized
appreciation on Lexmark International Group, Inc. and Western Pioneer, Inc. (See
Note 12 to the Financial Statements.)
Realized Gains and Losses on Investments
For the year ended December 31, 1998, the Fund recorded a net realized loss
of $24,090,545 on transactions involving eight Enhanced Yield Investments. (See
Note 10 to the Financial Statements and the Supplemental Schedule of Realized
Gains and Losses.) For the year ended December 31, 1997, the Fund realized a net
realized gain of $17,973,591. For the year ended December 31, 1996, the Fund
realized a net realized loss of $12,010,831.
<PAGE>
Item 8. Financial Statements and Supplementary Data
EQUITABLE CAPITAL PARTNERS, L.P.
TABLE OF CONTENTS
Independent Auditors' Report
Statements of Assets, Liabilities and Partners' Capital as of
December 31, 1998 and 1997
Statements of Operations
For the Years Ended December 31, 1998, 1997 and 1996
Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996
Statements of Changes in Net Assets
For the Years Ended December 31, 1998, 1997 and 1996
Statements of Changes in Partners' Capital
For the Years Ended December 31, 1998, 1997 and 1996
Supplementary Schedule of Realized Gains and Losses
For the Year Ended December 31, 1998
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
Equitable Capital Partners, L.P.
We have audited the accompanying statements of assets, liabilities and
partners' capital of Equitable Capital Partners, L.P. (the "Fund") as of
December 31, 1998 and 1997 and the related statements of operations, cash flows,
changes in net assets and changes in partners' capital for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Fund's General Partners. Our responsibility is to express
an opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures include
confirmation of securities owned as of December 31, 1998, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Fund as of December 31, 1998 and 1997,
the results of operations, its cash flows and the changes in its net assets and
partners' capital for the respective stated periods, in conformity with
generally accepted accounting principles.
As explained in Note 2, the financial statements of the Fund include
securities valued at $11,625,136 as of December 31, 1997 and representing 46.8
percent of total assets, respectively, whose values have been estimated by the
General Partners of the Fund in the absence of readily ascertainable market
values. We have reviewed the procedures used by the General Partners in arriving
at their estimate of value of such securities and have inspected underlying
documentation, and, in the circumstances, we believe the procedures are
reasonable and the documentation appropriate. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the securities
existed, and the differences could be material.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedule of
realized gains and losses for the year ended December 31, 1998 is presented for
the purposes of additional analysis and is not a required part of the basic
financial statements. This schedule is the responsibility of the Fund's General
Partners. Such schedule has been subjected to the auditing procedures applied in
our audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
Deloitte & Touche LLP
New York, New York
February 22, 1998
<PAGE>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<S> <C> <C> <C>
ASSETS: Notes December 31, 1998 December 31, 1997
--------- ----------------- -----------------
Investments 2,10,12
Enhanced Yield Investments at Value-
Managed Companies
(amortized cost of $0 at
December 31, 1998 and $16,931,732
at December 31, 1997) $ - $ 7,589,732
Non-Managed Companies
(amortized cost of $0 at
December 31, 1998 and $13,766,546
at December 31, 1997) - 7,555,572
Temporary Investments
(at amortized cost ) - 8,098,650
Cash - 47,134
Interest Receivable 2,12 - 64,768
Note Receivable 3,4 - 1,484,748
TOTAL ASSETS $ - $ 24,840,604
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Professional Fees Payable 9 $ - $ 41,548
Independent General Partners' Fees Payable 8 - 12,396
Fund Administrative Expenses Payable 7 - 50,149
Other Accrued Liabilities - 4,725
Total Liabilities - 108,818
Partners' Capital
Managing General Partner 3,4 - 1,134,402
Limited Partners (284,611 Units) 4 - 23,597,384
Total Partners' Capital - 24,731,786
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ - $ 24,840,604
=========== ============
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C>
For the Years Ended
--------------------------------------------
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
INVESTMENT INCOME- NOTES 2,12:
Interest and Discount Income $ 284,533 $ 2,486,632 $ 4,478,309
Dividend Income -- 136,678 3,801,668
TOTAL INVESTMENT INCOME 284,533 2,623,310 8,279,977
EXPENSES:
Investment Advisory Fee- Note 6 1,125,652 1,213,855 1,037,447
Fund Administration Fees and Expenses- Note 7 1,164,814 701,134 916,209
Independent General Partners'
Fees and Expenses- Note 8 152,303 151,406 192,279
Professional Fees - Note 9 27,334 82,050 183,323
Insurance Fees -- 6,017 5,256
Valuation Expenses 3,164 7,500 27,306
TOTAL EXPENSES 2,473,267 2,161,962 2,361,820
NET INVESTMENT (LOSS) INCOME (2,188,734) 461,348 5,918,157
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS- NOTE 12 15,553,015 (22,097,649) 31,877,152
NET REALIZED (LOSS) GAIN ON INVESTMENTS- NOTE 10 (24,090,545) 17,973,591 (12,010,831)
NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(10,726,264) $ (3,662,710) $ 25,784,478
============ ============ ============
</TABLE>
See the Accompanying Notes to Financial Statements
<PAGE>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF CASH FLOW
<TABLE>
<S> <C> <C> <C>
For the Year Ended
-------------------------------------------
December 31, December 31, December 31,
1998 1997 1996
INCREASE (DECREASE) IN CASH ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and Discount Income $ 20,395 $ 2,132,489 $ 7,505,048
Fund Administration Fees and Expenses (1,214,963) (709,970) (893,841)
Investment Advisory Fee (1,125,652) (1,213,855) (1,037,447)
Independent General Partners' Fees and Expenses (164,699) (163,466) (183,096)
Valuation Expenses (7,888) (14,438) (21,501)
Sale (Purchase) of Temporary Investments, Net 8,427,553 20,186,427 (6,016,884)
Proceeds from Sales and Principal Payments of
Enhanced Yield Investments 7,042,600 61,774,551 28,181,211
Professional Fees (68,882) (80,234) (168,325)
Insurance Fees -- (3,742) (375)
Net Cash Provided by Operating Activities 12,908,464 81,907,762 27,364,790
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to Partners (12,955,598) (81,951,834) (27,348,085)
Net Cash Used in Financing Activities (12,955,598) (81,951,834) (27,348,085)
Net Increase(Decrease) in Cash (47,134) (44,072) 16,705
Cash at the Beginning of the Period 47,134 91,206 74,501
Cash at the End of the Period $ -- $ 47,134 $ 91,206
============ ============ ============
RECONCILIATION OF NET (DECREASE) INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net (Decrease) Increase In Net Assets
Resulting From Operations $(10,726,264) $ (3,662,710) $ 25,784,478
Adjustments to Reconcile Net (Decrease) Increase in Net Assets
Resulting from Operations to Net Cash Provided by Operating
Activities:
Decrease in Investments 39,560,699 63,987,387 34,175,157
Increase in Accrued Interest and Other Investment Income (264,138) (490,821) (774,928)
Decrease in Prepaid Expenses -- 2,650 5,256
Net Change in Unrealized (Appreciation) Depreciation on Investments (15,553,015) 22,097,649 (31,877,152)
(Decrease) Increase in Fund Administration Expenses Payable (50,149) (8,836) 22,368
(Decrease) Increase in Other Accrued Liabilities (4,725) (6,938) 5,805
(Decrease) Increase in Independent General Partners' Fees Payable (12,396) (12,060) 9,183
(Decrease) Increase in Professional Fees Payable (41,548) 1,441 14,623
Total Adjustments 23,634,728 85,570,472 1,580,312
Net Cash Provided by Operating Activities $ 12,908,464 $ 81,907,762 $ 27,364,790
============ ============ ============
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
<S> <C> <C> <C>
For the Years Ended
----------------------------------------------
December 31, December 31, December 31,
1998 1997 1996
------------- ------------ -------------
FROM OPERATIONS:
Net (Decrease) Increase in Net Assets
Resulting from Operations $ (10,726,264) $ (3,662,710) $ 25,784,478
Cash Distributions to Partners (12,955,598) (81,951,834) (27,348,085)
Reduction in Managing General Partners' Contribution (1,049,924) (361,844) (82,097)
Total Decrease (24,731,786) (85,976,388) (1,645,704)
NET ASSETS:
Beginning of Period 24,731,786 110,708,174 112,353,878
End of Period $ -- $ 24,731,786 $ 110,708,174
============= ============= =============
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<S> <C> <C> <C> <C>
Managing Limited
Notes General Partner Partners Total
-------- ---------------------------------------- -------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
Partners' Capital at January 1, 1996 $ 1,448,956 $110,904,922 $112,353,878
Cash Distributions to Partners (73,813) (27,274,272) (27,348,085)
Reduction in Managing General Partners' Contribution 3 (82,097) - (82,097)
Allocation of Net Investment Income 11 59,182 5,858,975 5,918,157
Allocation of Net Unrealized Appreciation
on Investments 12 318,772 31,558,380 31,877,152
Allocation of Net Realized Loss on Investments (120,108) (11,890,723) (12,010,831)
Partners' Capital at December 31, 1996 $ 1,550,892 $109,157,282 $110,708,174
=========== ============ ============
FOR THE YEAR ENDED DECEMBER 31, 1997
Partners' Capital at January 1, 1997 $ 1,550,892 $109,157,282 $110,708,174
Cash Distributions to Partners (18,019) (81,933,815) (81,951,834)
Reduction in Managing General Partners' Contribution 3 (361,844) - (361,844)
Allocation of Net Investment Income 11 4,613 456,735 461,348
Allocation of Net Unrealized Depreciation
on Investments 12 (220,976) (21,876,673) (22,097,649)
Allocation of Net Realized Gain on Investments 179,736 17,793,855 17,973,591
Partners' Capital at December 31, 1997 $ 1,134,402 $ 23,597,384 $ 24,731,786
=========== ============ ============
FOR THE YEAR ENDED DECEMBER 31, 1998
Partners' Capital at January 1, 1998 $ 1,134,402 $ 23,597,384 $ 24,731,786
Cash Distributions to Partners (105) (12,955,493) (12,955,598)
Reduction in Managing General Partners' Contribution 3 (1,049,924) - (1,049,924)
Allocation of Net Investment Income (Loss) 11 962 (2,189,696) (2,188,734)
Allocation of Net Unrealized Appreciation
on Investments 12 155,570 15,397,445 15,553,015
Allocation of Net Realized Loss on Investments (240,905) (23,849,640) (24,090,545)
Partners' Capital at December 31, 1998 $ - $ - $ -
========== =========== ============
</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 YEAR ENDED December 31, 1998
<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 Gain 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
Common Stock Purchase Warrants 4,397 - 107,072 107,072
Polaris Pool Systems, Inc.
Common Stock 4/23/98 - - 3,561 3,561 (A)
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.
10% Sr. Sub. Note 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)
=========== ========== ============
Leather U.S., Inc.
Common Stock 10/7/98 795 $ 9,342,000 $ 159,000 $ (9,183,000)
R&S/Strauss, Inc.
15% Sr. Sub. Note 11/5/98 $3,584,607 3,584,607 36,026 (3,548,581)
Quantegy Acquisition Corp.
Common Stock 12/22/98 162 3,464,732 11,368 (3,453,364)
Polaris Pool Systems, Inc.
Common Stock 12/31/98 - - 94,277 94,277 (A)
Total Net Realized Loss for the
Three Months Ended December 31, 1998 $ 16,391,339 $ 300,671 $ (16,090,668)
=========== ========== ============
Total Net Realized Loss for the
Year Ended December 31, 1998 $ 30,492,854 $ 6,402,309 $ (24,090,545)
=========== ========== ============
(A) Proceeds 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
December 31, 1998
1. Partnership Dissolution and Liquidation
Equitable Capital Partners, L. P. (the "Fund") sold its last Enhanced Yield
Investment on December 22, 1998 and, thereby, dissolved in accordance with
Article 4, Section 4.01 (iv) of its Amended and Restated Agreement of Limited
Partnership.
Final distributions were paid to the Limited Partners on December 21,1998.
Accordingly, the accompanying financial statements are the final financial
statements of the Partnership.
A Certificate of Cancellation of Certificate of Limited Partnership was
accepted for filing by the Secretary of State of the State Delaware on January
27, 1999.
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 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
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 made a final distribution on December
21, 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. The total
value of securities without a readily ascertainable market value is $0 and
$11,625,136 as of December 31, 1998 and 1997, respectively, representing 46.8%
of 1997 total assets. 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 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 write-down 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
write-up 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 were 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 discussed 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 as returns of capital are
received by the Fund. Such return of capital received for the year ended
December 31, 1998 resulted in a $1,049,924 reduction of the principal amount of
the Note. The remainder of the Note was paid by Alliance Capital at year ended
December 31, 1998.
<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
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
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 years ended December 31,
1998, 1997 and 1996 were $1,125,652, $1,213,855 and $1,037,447, respectively.
The decrease from 1997 to 1998 in the Investment Advisory Fee is due primarily
to 1997 reflecting an adjustment for the difference between the Minimum Amount
due to the Investment Advisor and what was paid for the quarters ending December
31, 1996 and March 31, 1997.
The Investment Advisory Agreement was terminated on December 31, 1998.
7. Fund Administration Fees and Expenses
In accordance with the Partnership Agreement, beginning October 13, 1996,
the Fund Administration Fee is 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.
As compensation for its services during the fourth through seventh year of
operation of the Funds, ML Fund Administrators, Inc. ("MLFAI"), as the Fund
administrator, received from the Funds an annual amount equal to the greater of
the (i) Minimum Fee and (ii) the Funds' prorated proportion (based on the number
of Units issued by the Funds) of 0.45% of the excess of the aggregate net
offering proceeds of the Units issued by the Funds over 50% of the aggregate
amount of capital reductions of the Funds (subject to an annual maximum of $3.2
million). The Minimum Fee is 1% of the gross offering price of Units in the
Funds, but not greater than $500,000. The Fund Administration Fee is calculated
and paid quarterly in advance. The Fund Administration Fees paid by the Fund for
the years ended December 31, 1998, 1997 and 1996, were $525,000, $300,000 and
$724,141, respectively.
In addition to the Fund Administration Fee, MLFAI is entitled to receive
reimbursement for a portion of direct out-of-pocket expenses incurred in
connection with the administration of the Fund, commencing on October 13, 1992.
For the years ended December 31, 1998 and 1997, the Fund incurred Administrative
Expenses of $639,814 and $401,134, respectively, which consisted primarily of
printing, audit and tax return preparation and custodian fees paid for by MLFAI
on behalf of the Fund.
<PAGE>
Upon termination of the Fund on December 31, 1998, the prior Fund
Administrative Services Agreement with MLFAI was terminated. A new agreement
commencing January 1, 1999, will provide certain post termination administrative
services.
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 plus reimbursement for any out-of-pocket
expenses. In accordance with the Fund's Partnership Agreement, the amount of
such fee is reviewed annually by the Independent General Partners.
For the years ended December 31, 1998, 1997 and 1996, the Fund incurred
$152,303, $151,406 and $192,279, respectively, of Independent General Partners'
Fees and Expenses.
9. Related Party Transactions
For the year ended December 31, 1998 the Fund paid no related party
expense. For the years ended December 31, 1997 and 1996 the Fund paid $32,246
and $76,426, 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.
During the year ended December 31, 1998, the Fund received a total of
$205,465 from Pergament Home Centers, Inc. as a principal paydown of the
Floating Rate Demand Note held by the Fund. No gain, loss or income was recorded
on this transaction.
During the year ended December 31, 1998, the Fund received additional
proceeds of $97,838 from Polaris Pool Systems, Inc. This represents proceeds
from the sale of the investments from prior years that were held in escrow for
future adjustments and expenses.
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.
During the year ended December 31, 1998, the Fund sold its MTI Holdings,
Inc. 12% Senior Secured Note, common stock and warrants for $1,181,251 and
realized a gain of $724,569 on the sale.
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 and C common stocks for $571,200 resulting in a loss
of $10,696,204 to the Fund.
<PAGE>
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.
On October 7, 1998, the Fund sold its Leather U.S., Inc. common stock for
$159,000 resulting in a loss of $9,183,000 to the Fund.
On November 5, 1998, the Fund sold its remaining portion of R&S/Strauss,
Inc. 15% Senior Subordinated Note for $36,026 resulting in a loss of $3,548,581
to the Fund.
On December 22, 1998, the Fund sold its Quantegy Acquisition Corp. common
stock for $11,368 resulting in a loss of $3,453,364 to the Fund.
All proceeds not used to pay expenses during the year ended December 31,
1998 were distributed to Limited Partners. The final distribution was paid on
December 21, 1998. The Fund was liquidated and dissolved as of December 31,
1998, and a Certificate of Cancellation of Certificates of Limited Partnership
was filed on January 27, 1999.
As of December 31, 1998 the Fund had no investments in Enhanced Yield
Securities.
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 year ended December 31, 1998, earnings were allocated 99% to the
Limited Partners, as a class, and 1% to the Managing General Partner, except for
certain adjustments which were necessary in allocating investment loss.
12. Unrealized Appreciation/Depreciation and Non-Accrual of Investments
For the year ended December 31, 1998, the Fund recorded net unrealized
appreciation on Enhanced Yield Investments of $15,553,015. Such appreciation was
the result of adjustments in value made with respect to the following
investments during the year ended December 31, 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 from 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 and C
common stocks.
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.
<PAGE>
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 reversal of $9,342,000 of unrealized depreciation due to the sale of
its Leather U.S., Inc. common stock.
The reversal of $3,464,732 of unrealized depreciation due to the sale of
its Quantegy Acquisition Corp. common stock.
The reversal of $3,584,607 of unrealized depreciation due to the sale of
its R&S/Strauss, Inc. 15% Senior Subordinated Note.
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 basis of the Fund's assets and liabilities versus the amounts reported in
the Financial Statements. Due to the termination, the partnership had no assets
or liabilities on December 31, 1998.
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Fund
The Fund's general partners (the "General Partners") were responsible for
the management and administration of the Fund. The General Partners consisted of
Alliance Corporate succeeding Equitable Capital, as the Managing General
Partner, and four individuals serving as Independent General Partners. Each
Independent General Partner was not an "interested person" of the Fund as such
term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act").
Independent General Partners
The Independent General Partners provided overall guidance and supervision
with respect to the operations of the Fund and perform the various duties
imposed on the directors of business development companies by the Investment
Company Act of 1940. The Independent General Partners supervised the Managing
General Partner and must, with respect to any Enhanced Yield Investment, either
certify that it meets the Fund's investment guidelines or specifically approve
it. The Independent General Partners were also responsible for approving certain
transactions pursuant to the conditions of an exemptive order issued by the
Securities and Exchange Commission (the "Commission") under which the Fund
operates. In addition, if a portfolio company is in material default with
respect to its payment obligations under any lending agreement to which it is a
party or has a ratio of earnings before interest, taxes and depreciation to cash
fixed charges of 1.1 to 1 or less for the latest fiscal year for which financial
statements are available, the Independent General Partners are required to
approve any changes in the terms of the Fund's investment in such portfolio
company.
Messrs. Robert W. Lear and Robert F. Shapiro served as Independent General
Partners of the Fund and the Retirement Fund since June 1988. On April 12, 1989,
Mr. Alton G. Marshall and Dr. William G. Sharwell were admitted to the Fund and
the Retirement Fund, increasing the total number of Independent General Partners
to four. Each Independent General Partner held office until the Fund was
liquidated and dissolved.
Mr. Lear, age 81, has been an Executive-in-Residence and Visiting Professor
at the Columbia University Graduate School of Business since 1977. He is also a
director of Cambrex Corp. and the Korea Fund (a closed-end investment fund). Mr.
Lear is a trustee of the Scudder Institutional Funds (mutual funds) and a member
of the advisory board of the Welsh, Carson, Anderson, Stowe Venture Capital
Funds.
Mr. Shapiro, age 64, is the President of RFS & Associates, Inc.
(consultants and investments). From 1986 to 1987 he was the Co-Chairman of
Wertheim Schroeder & Co. Inc. (investment bankers) and from 1974 to 1986 he was
the President of its predecessor, Wertheim & Co. Inc. Mr. Shapiro is a director
of TJX Companies, Inc. (specialty retailing), a director of American Building
Companies and the Burnham Fund Inc. (mutual fund). Mr. Shapiro was Chairman of
the Securities Industry Association in 1985.
Mr. Marshall, age 77, is Senior Fellow of the Nelson A. Rockefeller
Institute of Government. He is also President of Alton G. Marshall Associates,
Inc. (real estate consultants). He was Chairman and Chief Executive Officer of
Lincoln Savings Bank from 1984 to 1991. He is also a Director of New York State
Electric and Gas Corporation. He is a Trustee of EQK Realty Investors I and EQK
Green Acres (real estate investors), and a Trustee of The Hudson River Trust,
which is a mutual fund receiving investment advice from Alliance Capital.
Dr. Sharwell, age 78, served as the President of Pace University from 1984
to 1990, after retiring in 1984 as Senior Vice President of AT&T. He is also a
director of USLife Corporation, American Biogenetic Sciences, Inc. and United
States Life Insurance Company.
<PAGE>
Managing General Partner
The Managing General Partner was responsible for purchasing investments for
the Fund which the Independent General Partners reviewed for compliance with the
investment guidelines or otherwise approved, for providing administrative
services to the Fund and for the admission of assignee Limited Partners to the
Fund.
Management of Alliance Corporate and the Fund
The senior officers of Alliance Corporate responsible for overseeing the
management of the Fund are:
Position with Alliance Corporate Finance
Group Incorporated
----------------------------------------
James R. Wilson President
William Gobbo, Jr. Senior Vice President
Christopher Bricker Vice President and Chief Accounting Officer
James R. Wilson, age 52, is the President of Alliance Corporate and is in
charge of Alliance Corporate's Finance Department. He has specialized in private
placement investment management for over 20 years. He joined Equitable Life in
1970. From 1975 to 1978, he was in charge of the Private Placement Department's
Atlanta regional office, responsible for making direct placement loans to middle
market companies. He then returned to the home office to supervise the credit
review and approval procedures of all six regional offices. In 1980, Mr. Wilson
joined the Investment Recovery Division of Equitable Capital Management
Corporation and subsequently became its head. During his tenure in investment
recovery, he was instrumental in a number of major restructurings and
recapitalizations of troubled companies and served as chairman of several
creditors' committees. Mr. Wilson was elected senior vice president and deputy
head of Equitable Capital's Corporate Finance Department in 1985, and in 1991 he
became executive vice president and head of the Corporate Finance Department. He
was named President of Alliance Corporate Finance Group in 1993 in connection
with the Alliance Capital/Equitable Capital merger. Mr. Wilson has served on
several corporate Boards and presently is a director of US Leather, Inc. He is
active in private placement industry events, has been a speaker at many industry
conferences on leveraged buyouts and mezzanine finance and served as Chairman of
the annual Private Placement Conference in 1994. Mr. Wilson is a graduate of
Denison University and holds an MBA from the University of Pittsburgh.
Mr. William Gobbo, Jr., age 54, is a Senior Vice President of Alliance
Corporate. Mr. Gobbo joined Alliance Corporate through the combination with
Equitable Capital. Mr. Gobbo joined Equitable Life in 1967 as an economist in
the office of Equitable's Chief Economist. He joined the Private Placement
Department in 1976 and in 1984 became head of an investment group that was
responsible for the Department's lending activities involving financial
institutions and heavy industrial companies.
Christopher J. Bricker is a Vice President of Alliance Fund Services. He is
responsible for the Accounting operations for approximately 85 Offshore and
Partnership Investment Vehicles with approximately $20 billion in assets under
management. Mr. Bricker has been with Alliance for 7 years and prior to joining
Alliance, he worked at Dean Witter in their Intercapital Division for
approximately 2 years. Mr. Bricker has a BS in Accounting from Marist College
and a MBA in Finance from Long Island University.
<PAGE>
The Investment Adviser
As a result of the combination of the businesses of Equitable Capital and
Alliance Capital, Equitable Capital's investment advisory agreement with the
Fund terminated in accordance with its terms on July 22, 1993. On that date,
Alliance Corporate succeeded Equitable Capital as the Fund's investment adviser.
As investment adviser to the Fund, Alliance Corporate is responsible for the
identification, management and liquidation of all investments for the Fund.
The Administrator
The Administrator performs certain operating and administrative services
for the Fund on behalf of the Managing General Partner pursuant to an
administrative services agreement, dated October 13, 1988, among the Fund,
Equitable Capital and the Administrator. Under a new agreement that commenced on
January 1, 1999, the Administrator will provide certain post termination
administrative services.
The information contained in the Prospectus under the caption "Management
Arrangements" is incorporated by reference into this Item 10.
Item 11. Executive Compensation
The information with respect to compensation of the Independent General
Partners set forth under the caption "Management Arrangements -- The Independent
General Partners" in the Prospectus is incorporated by reference into this Item
11. The Fund paid Mr. Lear $34,500, Mr. Shapiro $34,500, Mr. Marshall $34,500
and Dr. Sharwell $34,500 in fees with respect to their services as Independent
General Partners in 1998.
The information with respect to the "Fund Administration Fee and Expenses"
payable to the Administrator set forth under the caption "Management
Arrangements -- the Administrator" in the Prospectus is incorporated by
reference into this Item 11. The Fund paid $1,214,963 to the Administrator in
1998.
The information with respect to the "Investment Advisory Fee" payable to
Alliance Corporate (and distributions from the Managing General Partner) set
forth under the caption "Management Arrangements -- Description of Investment
Advisory Agreements" in the Prospectus is incorporated by reference into this
Item 11. The Fund paid Alliance Corporate $1,125,652 with respect to the
Investment Advisory Fees for 1998.
Alliance Corporate, as Managing General Partner, received $105 representing
distributions of net investment income in 1998.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of the date of this report, no person or entity is known by the Fund
to be the beneficial owner of more than 5% of the total number of outstanding
Units.
The Independent General Partners and directors and officers of Alliance
Corporate own as a group 777 Units, or less than 1% of the total Units
outstanding.
Item 13. Certain Relationships and Related Transactions
The Fund co-invested in Enhanced Yield Investments with the Retirement Fund
and certain affiliates of Equitable Capital pursuant to the terms of an
exemptive order granted by the Commission on August 11, 1988 permitting
coinvestments on certain terms and conditions, Equitable Capital Partners, L.P.,
et al. (812-6983) IC-16522, August 11, 1988 (the "Order"). On December 31, 1990,
the Commission granted a request to amend such Order to: (I) permit any person
serving as an officer, director or employee of Equitable Life or any of its
subsidiaries to serve as a director of Equitable Capital; (ii) permit Equitable
Life and its subsidiaries (other than Equitable Capital) and certain other
affiliates of Equitable Capital to invest as limited partners in sponsor limited
partnerships which invest in transactions in which the Funds also invest; and
(iii) amend and restate all of the conditions and undertakings contained in the
August 11, 1988 Order to conform them to those contained in the application
filed with the Commission on behalf of Equitable Capital Partners II, L.P. and
Equitable Capital Partners (Retirement Fund) II, L.P. Equitable Capital
Partners, L.P., et al. (812-7328) IC - 17925, December 31, 1990.
Pursuant to such arrangements, the Fund co-invested in the Enhanced Yield
Investments listed above in Item 1 (with the exception of Color Your World,
Inc.) with the Retirement Fund and one or more of the following: Equitable Deal
Flow Fund, L.P., Equitable Capital Private Income and Equity Partnership II,
L.P., Equitable Life, Equitable Variable Life Insurance Company, Tandem
Insurance Group, Inc. and Royal Tandem Insurance Company.
In connection with the transaction that resulted in the succession of
Alliance Corporate as Managing General Partner of, and Investment Adviser to,
the Fund and Equitable Capital Partners (Retirement Fund), L.P. (the "Retirement
Fund"), Equitable Capital and Alliance Corporate received two exemptive orders
from the Securities and Exchange Commission permitting the Fund, the Retirement
Fund and Alliance to rely on the exemptive orders previously issued to Equitable
Capital and the Funds, subject to the same conditions and undertakings under
such orders as applied to Equitable Capital.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements, Financial Statement
Schedules and Exhibits
See Item 8. Financial Statements and Supplementary Data "Table of Contents."
Exhibits
<TABLE>
<S> <C>
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.***
13.1 (a) Forms 10-Q
Form 8-K *****
28.1 Portions of Prospectus of Registrant and Equitable Capital Partners,
L.P., dated July 15, 1988, incorporated by reference into this Annual
Report on Form 10-K
* 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 Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, filed with the
Securities and Exchange Commission on March 29, 1993.
**** 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.
***** Incorporated by reference to the Fund's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, filed with the
Securities and Exchange Commission on November 22, 1996.
</TABLE>
<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 30th day of March,
1999.
EQUITABLE CAPITAL PARTNERS, L.P.
By: Alliance Corporate Finance Group Incorporated,
as Managing General Partner,
Dated: March 30, 1999 -------------------------------
James R. Wilson
Title: President
Dated: March 30, 1999 --------------------------------
Christopher Bricker
Title: Vice President and Chief
Accounting Officer
<PAGE>
Pursuant to the Requirements of the Securities and Exchange Act of 1934
this report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the 30th day of March, 1999.
Signature Title
________________________ Independent General Partner of
Robert W. Lear Equitable Capital Partners, L.P.
________________________ Independent General Partner of
Robert F. Shapiro Equitable Capital Partners, L.P.
________________________ Independent General Partner of
Alton G. Marshall Equitable Capital Partners, L.P.
________________________ Independent General Partner of
William G. Sharwell Equitable Capital Partners, L.P.
________________________ President and Director of
James R. Wilson Alliance Corporate
________________________
Dave H. Williams Director of Alliance Corporate
________________________
Bruce W. Calvert Director of Alliance Corporate
________________________
John D. Carifa Director of Alliance Corporate
________________________
Frank Savage Director of Alliance Corporate
________________________ Co-Chairman, Co-Chief Executive Officer
Mark Arnold and Director of Alliance Corporate
________________________ Co-Chairman, Co-Chief Executive Officer
Alastair Tedford and Director of Alliance Corporate
<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 30th day of March,
1999.
EQUITABLE CAPITAL PARTNERS, L.P.
By: Alliance Corporate Finance Group Incorporated,
as Managing General Partner,
Dated: March 30, 1999 /s/ James R. Wilson
-----------------------------
James R. Wilson
Title: President
Dated: March 30, 1999 /s/ Christopher Bricker
----------------------------
Christopher Bricker
Title: Vice President and Chief
Accounting Officer
<PAGE>
Pursuant to the Requirements of the Securities and Exchange Act of 1934
this report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the 30th day of March, 1999.
Signature Title
/s/ Robert W. Lear Independent General Partner of
Robert W. Lear Equitable Capital Partners, L.P.
/s/ Robert F. Shapiro Independent General Partner of
Robert F. Shapiro Equitable Capital Partners, L.P.
/s/ Alton G. Marshall Independent General Partner of
Alton G. Marshall Equitable Capital Partners, L.P.
/s/ William G. Sharwell Independent General Partner of
William G. Sharwell Equitable Capital Partners, L.P.
/s/ James R. Wilson President and Director of
James R. Wilson Alliance Corporate
/s/ Dave H. Williams
Dave H. Williams Director of Alliance Corporate
/s/ Bruce W. Calvert
Bruce W. Calvert Director of Alliance Corporate
/s/ John D. Carifa
John D. Carifa Director of Alliance Corporate
/s/ Frank Savage
Frank Savage Director of Alliance Corporate
/s/ Mark Arnold Co-Chairman, Co-Chief Executive Officer
Mark Arnold and Director of Alliance Corporate
/s/ Alastair Tedford Co-Chairman, Co-Chief Executive Officer
Alastair Tedford and Director of Alliance Corporate
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information extracted from the fourth
quarter of 1998 Form 10-K Balance Sheets and Statements of Operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<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> 15,553,015
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 284,533
<OTHER-INCOME> 0
<EXPENSES-NET> 2,473,267
<NET-INVESTMENT-INCOME> (2,188,734)
<REALIZED-GAINS-CURRENT> (24,090,545)
<APPREC-INCREASE-CURRENT> 15,553,015
<NET-CHANGE-FROM-OPS> (10,726,264)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,209,502
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 8,746,096
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (24,731,786)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,125,652
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,473,267
<AVERAGE-NET-ASSETS> 12,365,893
<PER-SHARE-NAV-BEGIN> 82.91
<PER-SHARE-NII> (7.61)
<PER-SHARE-GAIN-APPREC> 54.10
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 45.52
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>