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 01-16532
December 31, 1996 Commission File Number
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3486106
(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 (Retirement Fund), L.P. (the "Retirement Fund"
or the "Registrant") was formed along with Equitable Capital Partners, L.P.
(collectively with the Retirement 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. The Retirement Fund seeks current income and
capital appreciation potential by investing in privately structured, friendly
leveraged acquisitions and leveraged recapitalizations. The Retirement Fund
pursues 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 Retirement Fund is 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"), serve as the Funds' independent general partners (the
"Independent General Partners"). Messrs. Shapiro and Lear have served since June
1988, and Mr. Marshall and Dr. Sharwell since 1989. 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, has been responsible, subject
to the supervision of the Independent General Partners, for the management of
the Funds' investments.
The Retirement Fund elected to operate as a business development company
under the Investment Company Act of 1940, as amended. As such, it is subject to
certain provisions of the Investment Company Act. The description of the
Retirement Fund's investment objective and policies, its management arrangements
and certain provisions of the Investment Company Act applicable to the
Retirement Fund are set forth in the information contained in the Prospectus of
the Retirement 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 Retirement
Fund.
<PAGE>
On October 13, 1988, the Retirement Fund issued 221,072 Units to
investors, and Equitable Capital, as Managing General Partner, admitted 26,304
investors as limited partners of the Retirement Fund (the "Limited Partners").
The net proceeds of the offering of such Units to the Retirement Fund was
$205,596,960 after giving effect to volume discounts of $223,270 and the payment
of $15,251,770 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 $2,052,050 as required by the Amended and Restated
Agreement of Limited Partnership, dated as of October 13, 1988 (the "Partnership
Agreement"), pursuant to which the Retirement Fund had been organized. Equitable
Capital reduced this note by $218,504 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 Retirement Fund
incurred $431,479 in organizational expenses and $2,043,437 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 Retirement Fund have been paid and
have been accounted for as a charge to the capital account of the Retirement
Fund's partners. The net proceeds available for investment by the Retirement
Fund after such offering less the return of capital to the Limited Partners of
$65,065,910 equaled $138,066,135.
Investments
As set forth in the Partnership Agreement, the Retirement Fund's
investment period ended on October 12, 1991, three years after the Retirement
Fund's operations commenced. Thereafter, the Retirement Fund is not permitted to
acquire new Enhanced Yield Investments, but can make follow-on investments in
existing portfolio companies. During the year ended December 31, 1996, the
Retirement Fund made a follow-on investment in one Managed Company (as defined
in the Prospectus) at a total cost of $2,232.
During the year ended December 31, 1995, the Retirement Fund made a
follow-on investment in one Managed Company at a total cost of $920 and paid
$359 in additional consideration to exercise warrants. During the year ended
December 31, 1994, the Retirement Fund made a follow-on investment in one
Managed Company at a total cost of $227.
As of December 31, 1996, the Retirement Fund had a total of 9 Enhanced
Yield Investments at a net cost of $59,323,162 (inclusive of the receipt of
securities having a capitalized cost of $422,439 received as payment-in-kind
interest on certain Enhanced Yield Investments). During 1996, 1995 and 1994, the
Retirement Fund received $20,659,748, $13,479,835 and $28,095,324, respectively,
in principal payments and prepayments relating to certain Enhanced Yield
Investments.
Pending investments in Enhanced Yield Investments, the net proceeds of the
public offering were invested in certain temporary investments, consisting
principally of commercial paper with maturities of less than sixty days.
Currently, proceeds that are not invested in Enhanced Yield Investments or
returned to Limited Partners are held in such temporary investments.
<PAGE>
New Investments in 1996
The Retirement Fund's investment period ended on October 12, 1991.
Accordingly, the Retirement Fund made no new investments in 1996.
Follow-on Investments in 1996
In 1996, the Retirement Fund made a single follow-on investment as
discussed below:
RI Holdings, Inc. ("Rowe")
Rowe is engaged in the design, engineering and manufacturing of jukeboxes,
bill acceptors and currency changers.
Under the terms of Rowe's senior subordinated notes, the Retirement Fund
receives common stock at a nominal cost of one cent per share for each interest
payment date on which Rowe delivers payment-in-kind securities in lieu of making
a cash payment. On May 1, 1996, the Retirement Fund acquired 223,212.92 shares
of Common Stock of RI Holdings, Inc., for a total cost of $2,232.
As of December 31, 1996, the Retirement Fund's investment in RI Holdings,
Inc. totaled $7,330,251, which includes the senior subordinated PIK note.
Competition
The Retirement Fund competes with other entities having a similar
investment objective. In addition, since Enhanced Yield Investments are selected
and managed exclusively by Alliance Corporate on behalf of the Retirement Fund,
other entities which compete with Alliance Corporate with respect to such
investments therefore compete with the Retirement Fund. Competitors include
other private and public mezzanine funds, other business development companies,
investment partnerships and corporations, small business investment companies
and large industrial and financial companies investing directly or through
affiliates and individuals.
Employees
The Retirement Fund has no employees. The Managing General Partner,
subject to the supervision of the Independent General Partners, manages and
controls the Retirement Fund's investments. Certain officers of Alliance
Corporate have been designated as agents of the Retirement Fund with titles
corresponding to the titles of the offices held by such persons with Alliance
Corporate. The Retirement Fund Administrator performs administrative services
for the Retirement Fund on behalf of the Managing General Partner.
Item 2. Properties
The Retirement Fund does not own or lease any physical properties.
Item 3. Legal Proceedings
The Retirement 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 Units are illiquid securities and are 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 is
no established trading market for the Units. The Partnership Agreement contains
restrictions that are intended to prevent the development of a public market.
The number of holders of Units as of December 31, 1996 was 25,224. The
Managing General Partner holds a general partner interest in the Retirement Fund
and does not hold any Units. Pursuant to the terms of the Partnership Agreement,
the Retirement Fund generally makes distributions of cash interest, dividends
and other income received from investments in excess of expenses of operation
and reserves for expenses and certain investments and liabilities within 45 days
after the end of each calendar quarter. Net cash receipts representing
cumulative income and gains are distributed as soon as practicable after the
related disposition. Such distributions are 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 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.
The Retirement 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.
On February 5, 1997, the Independent General Partners approved an aggregate
cash distribution of $16,012,999 for the three months ended December 31, 1996
which was paid on February 14, 1997. The amount distributed to Limited Partners
was $16,003,402 or $72.39 per Unit (of which $4,728,730 is capital returned from
investments during the fourth quarter of 1996), to Limited Partners of record at
December 31, 1996. On a per Unit basis, this distribution to Limited Partners
includes $46.70 of realized gains, $4.30 of income from operations and $21.39 of
return of capital. The Managing General Partner's one percent allocation of
$161,651 was reduced by its one percent allocation of realized gains and capital
returned from investments during the fourth quarter of 1996, of $152,054 (which
is being held as a Deferred Distribution Amount pursuant to the Partnership
Agreement), resulting in a net distribution of $9,597.
<PAGE>
Item 6. Selection Financial Data
<TABLE>
<CAPTION>
For the Years Ended
<S> <C> <C> <C> <C> <C>
December 31, 1996 December 31, 1995 December 31, 1994 December 31, 1993 December 31, 1992
TOTAL FUND INFORMATION: ----------------- ----------------- ----------------- ----------------- -----------------
Cash Distributions to Partners $19,384,272(a) $26,397,957(c) $ 30,860,830 $ 45,145,869 $ 39,262,688
Net Assets 85,429,641 88,842,112 115,578,330 145,821,277 174,588,494
Total Assets 85,552,314 88,926,178 115,662,552 145,923,297 174,662,492
Net Investment Income 4,579,169 4,999,345 5,797,964 10,909,633 16,145,611
Net Change in Unrealized
Appreciation (Depreciation)
on Investments 18,779,614 (6,915,689) (5,675,676) 4,082,028 12,769,101
Net Realized (Losses)
Gains on Investments (7,321,494) 1,744,317 642,557 1,633,125 (11,466,984)
PER UNIT OF LIMITED
PARTNERSHIP INTEREST:
Cash Distributions $ 87.44 (a) $ 119.13 (c) $ 139.31 $ 203.56 $ 176.91
Cumulative Cash
Distributions 962.43 (b) 874.99 755.86 615.55 412.99
Investment Income 29.00 32.00 38.24 61.20 86.84
Expenses 8.49 (9.62) (12.28) (12.34) (14.54)
Net Investment Income 20.51 22.38 24.09 52.93 75.10
Net Unrealized Appreciation
(Depreciation) on Investments 84.10 (30.97) (25.42) 18.28 57.18
Net Realized (Losses) Gains
on Investments (32.79) 7.81 2.88 7.45 (51.35)
Net Asset Value 381.46 397.85 516.98 652.87 781.84
</TABLE>
(a) Includes Return of Capital of $6,484,042 or $29.33 per LP Unit.
(b) Includes Return of Capital of $398.10 per LP Unit.
(c) Includes Return of Capital of $16,458,810 or $74.45 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 Retirement Fund completed the initial public
offering of Units, admitting 26,304 Limited Partners who purchased 221,072
Units. The net proceeds available for investment by the Retirement Fund after
such offering less return of capital to Limited Partners were $181,514,467 after
volume discounts, sales commissions and organizational, offering, sales and
marketing expenses.
Investments
During the year ended December 31, 1996, the Retirement Fund made a
follow-on investment in one Managed Company at a total cost of $2,232.
As of December 31, 1996, the Retirement Fund had a total of 9 Enhanced
Yield Investments at a net cost of $59,323,162 (inclusive of the receipt of
securities having a capitalized cost of $422,439 received as payment-in-kind
interest on certain Enhanced Yield Investments).
Proceeds from Investments
During the year ended December 31, 1996, the Retirement Fund received the
following proceeds:
During the year ended December 31, 1996, the Retirement Fund received a
total of $354,750 and $146,632 from Western Pioneer, Inc. and U.S. Leather
Holdings, Inc., respectively, as principal paydowns of the senior notes held by
the Retirement Fund. No gain or loss has been recorded on these transactions.
During the year ended December 31, 1996, the Retirement Fund received
additional proceeds of $131,366 from Polaris Pool Systems, Inc. The money
represents proceeds from the sale of the investment from prior years that have
been held in escrow for future adjustments and expenses not paid on the sale
dates. These proceeds were recorded and distributed as gains.
During March 1996, the Retirement Fund sold its remaining ASR Acquisition
Corp. common stock for $1,007,354 and recognized a gain of $990,330 on the sale.
On April 9, 1996, the Equitable investors foreclosed on the common stock of
United States Leather Holdings, Inc. All securities held by the Retirement Fund
have been surrendered and cancelled in exchange for 621.90 shares of common
stock in Leather U.S., Inc. The shares will have a cost basis of 50% of the
original par value of the 15% Senior Debentures surrendered.
On May 8, 1996, the Retirement Fund received dividend income of $1,852,198
from Bank United Corp.
On August 6, 1996, a comprehensive restructuring closed for MTI Holdings,
Inc. The Retirement Fund recognized a loss of $746,099 on this transaction.
On August 14, 1996, the Retirement Fund sold 102,197 shares of Bank United
Corp. (formerly USAT Holdings Inc.) common stock for $1,926,413 and recognized a
gain of $1,267,487.
On September 12, 1996, the Retirement Fund sold its Tulip Holding Corp.
14.5% Subordinated Notes for $2,929 and recognized a loss of $4,383,283 on the
sale. The 16.5% Subordinated Notes, Series A Exchangeable Preferred Stock and
Class A Common Stock were deemed worthless resulting in a total realized loss of
$2,742,846 to the Retirement Fund.
On September 30, 1996, the Retirement Fund sold 18,053 shares of Ampex
Recording Media Corp. Class A Common Stock for $143,746 which resulted in a loss
of $1,220 to the Retirement Fund. The Retirement Fund sold its remaining 17,829
shares of Ampex Recording Media Corp. Class A Common Stock on November 29, 1996,
for $143,752 and recognized a gain of $467 on the sale.
<PAGE>
During the fourth quarter of 1996, the Retirement Fund sold 585,520 shares
of Lexmark International Group, Inc. common stock for $13,627,380 resulting in a
gain of $9,723,894 to the Retirement Fund.
On November 6, 1996, the Apollo Radio Holding Co., Inc. common stock and
warrants held by the Retirement Fund were redeemed. The Retirement Fund received
proceeds of $817,614 which resulted in a realized gain of $702,864 to the
Retirement Fund.
On December 17, 1996, the Retirement Fund sold its American Paper Group
Ltd. 5% Subordinated Notes and common stock for $545,836 resulting in no gain or
loss to the Retirement Fund.
During the year ended December 31, 1996, the Retirement Fund received a
total of $103,367 from Pergament Home Centers, Inc., as principal paydowns of
the Floating Rate Demand Note held by the Retirement Fund. No gain or loss has
been recorded on these transactions.
For additional information, refer to the Supplemental Schedule of Realized
Gains and Losses and Note 10 to the Financial Statements.
The Retirement 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 Retirement 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.
The Retirement Fund, which is designed for tax-exempt investors, is not
permitted to borrow to finance investments. The Partnership Agreement imposes
certain limits on the use of proceeds from the disposition of investments for
reinvestments.
All cash dividends, interest and other income received by the Retirement
Fund in excess of expenses of operation and reserves for expenses and certain
investments and liabilities is distributed to the Limited Partners of the
Retirement Fund and to the Managing General Partner, within 45 days after the
end of each calendar quarter. Before each quarterly cash distribution, the
Retirement Fund will analyze the then current cash projections and determine the
amount of any additional reserves it deems necessary.
Participation in Enhanced Yield Investments
The Retirement Fund is invested primarily in Enhanced Yield Investments,
also known in the securities industry as "high yield securities". The securities
in which the Retirement 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 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 Retirement Fund cannot eliminate its risks associated with
participation in Enhanced Yield Investments, it has established risk management
policies. The Retirement 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 Retirement Fund's investment
guidelines or that have otherwise been approved by the Independent General
Partners.
Retirement Fund investments are measured against specified Retirement Fund
investment and performance guidelines. To limit the exposure of the Retirement
Fund's capital in any single issuer, the Retirement Fund limits the amount of
its investment in a particular issuer. The Retirement Fund also continually
monitors portfolio companies in order to minimize the risks associated with
participation in Enhanced Yield Investments.
<PAGE>
Results of Operations
For the year ended December 31, 1996, the Retirement Fund had net
investment income of $4,579,169, a decrease of $420,176 from the net investment
income of $4,999,345 for the year ended December 31, 1995. The Retirement Fund
had net investment income of $5,797,964 for the same period in 1994. Net
investment income is comprised of investment income (primarily interest and
dividend income) offset by expenses. The decrease in the 1996 net investment
income versus the comparative period in 1995 reflects the decrease in interest
and discount income partially offset by the decrease in Investment Advisory Fees
and Fund Administration Fees and Expenses.
For the year ended December 31, 1996, the Retirement Fund had investment
income of $6,475,628, as compared to $7,146,704 for the same period in 1995 and
$8,539,846 for the same period in 1994. The decrease in 1996 investment income
of 9.4% versus 1995 was primarily due to a decrease in the amount of accrual
status debt securities held by the Retirement Fund due to the sales and
repayments of Enhanced Yield Investments during 1996. (See Note 12 to the
Financial Statements). The decrease in the 1995 of investment income of 16%
versus the comparative period in 1994 was primarily due to a decrease in the
amount of accrual status debt securities held by the Retirement Fund due to the
sales and repayments of Enhanced Yield Investments during 1995.
The Retirement Fund incurred expenses of $1,896,459 for the year ended
December 31, 1996, as compared to $2,147,359 for the same period in 1995 and
$2,741,882 for the same period in 1994. The decrease in the 1996 expenses versus
the 1995 expenses of $250,900 was primarily due to a decrease in the Investment
Advisory Fee and the Fund Administration Fees and Expenses. The decrease in 1995
expenses versus 1994 expenses of $594,523 was primarily due to the decrease in
the Investment Advisory Fee and the Fund Administrative Fees and Expenses.
The Retirement Fund experienced an increase in net assets resulting from
operations for the year ended December 31, 1996 in the amount of $16,037,289, as
compared to a decrease of $172,027 for the same period in 1995. The increase in
net assets in 1996 versus 1995 is attributable to an increase in net unrealized
appreciation of $25,695,303 offset by a decrease in net investment income of
$420,176 and an increase in net realized losses of $9,065,811 (see Statements of
Operations in the Financial Statements). The decrease in net assets resulting
from operations in 1995 versus 1994 is attributable to a decrease in net
investment income of $798,619, an increase in net unrealized depreciation of
$1,240,013 offset by an increase in net realized gains of $1,101,760.
For the year ended December 31, 1996, the Retirement Fund incurred an
Investment Advisory Fee of $842,503 (as described in Note 6 to the Financial
Statements). For the years ended December 31, 1995 and 1994, the Retirement Fund
incurred Investment Advisory Fees of $1,037,207 and $1,278,599, respectively.
The decrease in Investment Advisory Fees is due to a decrease in the Retirement
Fund's Available Capital on which the Investment Advisory Fee is based,
resulting primarily from the redemption of debt obligations held by the
Retirement Fund (which is a component of Available Capital).
The Fund Administration Fees and Expenses (as described in Note 7 to the
Financial Statements) for the years ended December 31, 1996, 1995 and 1994, were
$680,441, $837,092, and $1,133,720, respectively. The decrease of $156,651 from
1995 to 1996 is due primarily to a decrease in the Retirement Fund's Available
Capital on which the Fund Administration Fee is based, resulting primarily from
redemptions of debt obligations held by the Retirement Fund (which is a
component of Available Capital). During the years ended December 31, 1996, 1995
and 1994, the Retirement Fund incurred a total of $146,468, $135,139 and
$367,552, respectively, of administrative expenses, consisting primarily of
printing, audit and tax return preparation and custodian fees paid for by the
Fund Administrator.
In accordance with the Partnership Agreement, beginning October 13, 1996,
the Retirement Fund Administration Fee was changed to an annual fee of $100,000
plus 100% of all direct out-of-pocket expenses incurred by the Fund
Administrator on behalf of the Retirement Fund.
Independent General Partners' Fees and Expenses incurred for the years
ended December 31, 1996, 1995 and 1994, were $183,611, $161,236, and $160,979,
respectively. The changes are attributable to fluctuations in legal fees
incurred by the Independent General Partners (See Note 9 to the Financial
Statements).
The Retirement Fund incurred professional fees of $171,200, $105,443, and
$146,956 for the years ended December 31, 1996, 1995 and 1994, respectively,
which were primarily comprised of legal fees reimbursed to Debevoise & Plimpton
and Equitable Life for legal services (see Note 9 to the Financial Statements).
<PAGE>
Unrealized Appreciation/Depreciation, and Non-Accrual of Investments
The General Partners of the Retirement Fund determine, on a quarterly
basis, the fair value of the Retirement 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 Retirement
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 Retirement 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 Retirement Fund invests.
Therefore, the fair values presented herein are not necessarily indicative of
the amount which the Retirement Fund could realize in a current transaction.
For the years ended December 31, 1996 and 1995, the Retirement Fund
recorded net unrealized appreciation on Enhanced Yield Investments of
$18,779,614 and net unrealized depreciation of $6,915,689, respectively. For the
year ended December 31, 1994, the Retirement Fund recorded net unrealized
depreciation on Enhanced Yield Investments of $5,675,676. The change of
$25,695,303 from 1995 to 1996, in unrealized appreciation was primarily the
result of unrealized appreciation in Bank United Corp., Lexmark International
Group, Inc. and Western Pioneer, Inc. and the reversal of unrealized
depreciation in Leather U.S., Inc., Tulip Holding Corp., MTI Holdings, Inc. and
WB Bottling Corporation, offset by writedowns in RI Holdings, Inc., Pergament
Home Centers, Inc., U.S. Leather Holdings, Inc. and Tulip Holding Corp. and the
reversal of unrealized appreciation in Lexmark International Group, Inc.,
American Safety Razor Company and Apollo Radio Holding Corp., Inc.(See Note 12
to the Financial Statements).
Alliance Corporate continues to monitor the Retirement 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.
The following investments have been on non-accrual status as of the
respective dates:
Pergament Home Centers, Inc.
Floating Rate Demand Note July 1, 1996
Western Pioneer, Inc. 10%
Senior Subordinated Note November 30, 1994
RI Holdings, Inc. 16%
Senior Subordinated Notes April 25, 1994
Realized Gains and Losses on Investments
For the year ended December 31, 1996, the Retirement Fund recorded net
realized losses of $7,321,494 on transactions involving 10 Enhanced Yield
Investments. (See Note 10 to the Financial Statements and the Supplemental
Schedule of Realized Gains and Losses). For the years ended December 31, 1995
and 1994, the Retirement Fund realized net gains on investments of $1,744,317
and $642,557, respectively.
<PAGE>
Item 8. Financial Statements and Supplementary Data
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
TABLE OF CONTENTS
Independent Auditors' Report
Statements of Assets, Liabilities and Partners' Capital
As of December 31, 1996 and 1995
Statements of Operations
For the Years Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
Statements of Changes in Net Assets
For the Years Ended December 31, 1996, 1995 and 1994
Statements of Changes in Partners' Capital
For the Years Ended December 31, 1996, 1995 and 1994
Schedule of Portfolio Investments - December 31, 1996
Supplemental Schedule of Realized Gains and Losses
For the Year Ended December 31, 1996
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
Equitable Capital Partners (Retirement Fund), L.P.
We have audited the accompanying statements of assets, liabilities and
partners' capital of Equitable Capital Partners (Retirement Fund), L.P. (the
"Retirement Fund") as of December 31, 1996 and 1995, including the schedule of
portfolio investments, as of December 31, 1996, 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, 1996. 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, 1996, 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 Retirement Fund as of December 31, 1996
and 1995, 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 Retirement Fund
include securities valued at $40,903,485 and $28,806,626, as of December 31,
1996 and 1995 respectively, representing 47.8 and 32.4 percent of total assets,
respectively, whose values have been estimated by the General Partners of the
Retirement 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, 1996 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 Retirement
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 21, 1997
<PAGE>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<S> <C> <C> <C>
For the Years Ended
ASSETS: Notes December 31, 1996 December 31, 1995
----------------- -----------------
Investments 2,10,12
Enhanced Yield Investments at Value-
Managed Companies
(amortized cost of $46,361,524 at
December 31, 1996 and $83,389,283
at December 31, 1995) $47,988,305 $67,489,913
Non-Managed Companies
(amortized cost of $12,961,638 at
December 31, 1996 and $2,121,174
at December 31, 1995) 14,814,796 2,720,868
Temporary Investments
(at amortized cost) 20,550,637 16,536,723
Cash 62,948 39,180
Interest Receivable 2,12 876,677 886,589
Note Receivable 3,4 1,178,728 1,245,982
Prepaid Expenses & Other Assets 80,223 6,923
TOTAL ASSETS $85,552,314 $88,926,178
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Professional Fees Payable 9 $ 52,641 $ 40,833
Independent General Partners' Fees Payable 8 20,846 10,547
Fund Administrative Expenses Payable 7 43,085 28,445
Other Accrued Liabilities 6,101 4,241
Total Liabilities 122,673 84,066
Partners' Capital
Managing General Partner 3,4 1,099,814 1,058,667
Limited Partners (221,072 Units) 4 84,329,827 87,783,445
Total Partners' Capital 85,429,641 88,842,112
TOTAL LIABILITIES AND PARTNERS' CAPITAL $85,552,314 $88,926,178
=========== ===========
</TABLE>
See the Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
For the Years Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
INVESTMENT INCOME- Notes 2,12:
Interest $ 4,603,229 $ 7,121,657 $ 7,622,188
Discount 20,204 25,047 917,658
Dividend 1,852,195 -- --
TOTAL INVESTMENT INCOME 6,475,628 7,146,704 8,539,846
EXPENSES:
Investment Advisory Fee- Note 6 842,503 1,037,207 1,278,599
Fund Administration Fees and Expenses- Note 7 680,441 837,092 1,133,720
Independent General Partners'
Fees and Expenses - Note 8 183,611 161,236 160,979
Professional Fees - Note 9 171,200 105,443 146,956
Insurance Fees 4,410 -- 2,755
Valuation Expenses 14,294 6,381 18,873
TOTAL EXPENSES 1,896,459 2,147,359 2,741,882
NET INVESTMENT INCOME 4,579,169 4,999,345 5,797,964
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS- Note 12 18,779,614 (6,915,689) (5,675,676)
NET REALIZED (LOSSES) GAINS ON INVESTMENTS- Note 10 (7,321,494) 1,744,317 642,557
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 16,037,289 $ (172,027) $ 764,845
============ ============ ============
</TABLE>
See the Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
For the Years Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and Discount Income $ 3,990,822 $ 7,249,650 $ 9,648,662
Fund Administration Fees & Expenses (665,800) (848,815) (1,093,552)
Investment Advisory Fee (842,503) (1,037,207) (1,278,599)
Independent General Partners' Fees and Expenses (172,309) (161,259) (160,413)
Valuation Expenses (12,435) (12,466) (23,346)
(Purchase) Sale of Temporary Investments, Net (3,390,853) 7,779,486 (4,156,369)
Purchase of Enhanced Yield Investments - (920) (227)
Proceeds from Sales and Principal Payments of
Enhanced Yield Investments 20,659,748 13,479,835 28,095,324
Professional Fees (158,255) (89,535) (149,295)
Insurance Fees (375) (6,923) (4,318)
Net Cash Provided by Operating Activities 19,408,040 26,351,846 30,877,867
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to Partners (19,384,272) (26,397,957) (30,860,830)
Net Cash Used in Financing Activities (19,384,272) (26,397,957) (30,860,830)
Net Increase (Decrease) in Cash 23,768 (46,111) 17,037
Cash at the Beginning of the Period 39,180 85,291 68,254
Cash at the End of the Period $ 62,948 $ 39,180 $ 85,291
=========== ============ ============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Increase (Decrease) In Net Assets
Resulting From Operations $ 16,037,289 $ (172,027) $ 764,845
Adjustments to Reconcile Net Increase (Decrease) in Net Assets
Resulting from Operations to Net Cash Provided by Operating
Activities:
Decrease in Investments 24,590,390 19,514,082 23,343,753
(Increase) Decrease in Accrued Interest (2,484,809) 101,181 1,108,636
Increase (Decrease) in Other Accrued Liabilities 1,859 (6,086) (56,193)
Increase (Decrease) in Fund Administration Expenses Payable 14,640 (11,723) 40,168
Decrease (Increase) in Prepaid Expenses 4,412 (6,923) 2,755
Net Change in Unrealized (Appreciation)
Depreciation on Investments (18,779,614) 6,915,689 5,675,676
Increase in Independent General
Partners' Fees Payable 11,303 981 566
Increase (Decrease) in Professional Fees Payable 12,570 16,672 (2,339)
Total Adjustments 3,370,751 26,523,873 30,113,022
Net Cash Provided by Operating Activities $ 19,408,040 $ 26,351,846 $ 30,877,867
============ ============ ============
</TABLE>
See the Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF CHANGES IN NET ASSETS
<S> <C> <C> <C>
For the Years Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
FROM OPERATIONS:
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 16,037,289 $ (172,027) $ 764,845
Cash Distributions to Partners (19,384,272) (26,397,957) (30,860,830)
Reduction in Managing General Partners'
Contribution (65,488) (166,234) (146,962)
Total Decrease (3,412,471) (26,736,218) (30,242,947)
NET ASSETS:
Beginning of Period 88,842,112 115,578,330 145,821,277
End of Period $ 85,429,641 $ 88,842,112 $ 115,578,330
============= ============= =============
</TABLE>
See the Accompanying Notes to Financial Statements
<PAGE>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<S> <C> <C> <C> <C>
Limited Managing
Notes General Partner Partners Total
--------------- ----------- --------------
FOR THE YEAR ENDED DECEMBER 31, 1994
Partners' Capital at January 1, 1994 $ 1,490,875 $144,330,402 $ 145,821,277
Cash Distributions to Partners (63,290) (30,797,540) (30,860,830)
Reduction in Managing General Partners' Contribution 3 (146,962) - (146,962)
Allocation of Net Investment Income 11 57,980 5,739,984 5,797,964
Allocation of Net Unrealized Depreciation
on Investments 12 (56,757) (5,618,919) (5,675,676)
Allocation of Net Realized Gains on Investments 6,426 636,131 642,557
Partners' Capital at December 31, 1994 $ 1,288,272 $114,290,058 $ 115,578,330
=========== ============ ==============
FOR THE YEAR ENDED DECEMBER 31, 1995
Partners' Capital at January 1, 1995 $ 1,288,272 $114,290,058 $ 115,578,330
Cash Distributions to Partners (61,650) (26,336,307) (26,397,957)
Reduction in Managing General Partners' Contribution 3 (166,234) - (166,234)
Allocation of Net Investment Income 11 49,993 4,949,352 4,999,345
Allocation of Net Unrealized Depreciation
on Investments 12 (69,157) (6,846,532) (6,915,689)
Allocation of Net Realized Gains on Investments 17,443 1,726,874 1,744,317
Partners' Capital at December 31, 1995 $ 1,058,667 $ 87,783,445 $ 88,842,112
=========== ============ ==============
FOR THE YEAR ENDED DECEMBER 31, 1996
Partners' Capital at January 1, 1996 $ 1,058,667 $ 87,783,445 $ 88,842,112
Cash Distributions to Partners (53,737) (19,330,535) (19,384,272)
Reduction in Managing General Partners' Contribution 3 (65,488) - (65,488)
Allocation of Net Investment Income 11 45,791 4,533,378 4,579,169
Allocation of Net Unrealized Appreciation
on Investments 12 187,796 18,591,818 18,779,614
Allocation of Net Realized Losses on Investments (73,215) (7,248,279) (7,321,494)
Partners' Capital at December 31, 1996 $ 1,099,814 $ 84,329,827 $ 85,429,641
=========== ============ ==============
</TABLE>
See the Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
<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
CONSUMER PRODUCTS MANUFACTURING
LEXMARK INTERNATIONAL GROUP, INC. - NOTE 12
$ 24,103,269 Lexmark International, Inc.,
Sr. Sub. Nts. 14.25% due 03/31/01* 03/27/91 $ 24,103,269 $ 24,103,269 $ 24,103,269
415,910 Shares Lexmark International Group, Inc.,
Class B Common Stock (c) 03/27/91 2,772,714 2,772,714 11,489,514
------------ ------------ ------------
26,875,983 26,875,983 35,592,783 42.70
------------ ------------ ------------------------
MISCELLANEOUS MANUFACTURING
QUANTEGY ACQUISITION CORP. - NOTES 10, 12
(FORMERLY AMPEX RECORDING MEDIA)
123.50 Shares Quantegy Acquisition Corp., Common Stock 11/13/95 2,722,290 2,722,290 2,722,290
------------ ----------- ------------
2,722,290 2,722,290 2,722,290 3.27
------------ ----------- -------------------------
RI HOLDINGS, INC. - NOTES 10, 12
$ 12,972,582 RI Holdings, Inc.,
Sr. Sub. Nts. 16% due 08/31/01*(a)(b) 04/25/94 5,823,918 5,823,918 240,232
150,191 Shares RI Holdings, Inc., Common Stock** 09/01/89 1,501,910 1,501,910 0
104,211.03 Shares RI Holdings, Inc., Common Stock** various 1,044 1,044 0
22,687.5 Shares RI Holdings, Inc., Common Stock** 04/25/94 227 227 0
92,045.09 Shares RI Holdings, Inc., Common Stock** 05/09/95 920 920 0
223,212.92 Shares RI Holdings, Inc., Common Stock** 05/01/96 2,232 2,232 0
----------- ------------ ----------
7,330,251 7,330,251 240,232 0.29
----------- ------------ -----------------------
LEATHER AND LEATHER PRODUCTS
LEATHER U.S., INC. - NOTE 12
(FORMERLY UNITED STATES LEATHER HOLDINGS, INC.)
621.90 Shares Leather U.S., Inc., Common Stock 04/09/96 7,308,000 7,308,000 7,308,000
----------- ------------ -----------
7,308,000 7,308,000 7,308,000 8.77
----------- ------------ ----------------------
MISCELLANEOUS RETAIL
R&S/STRAUSS, INC.
(FORMERLY WSR ACQUISITION CORP.)
$ 935,000 R&S/Strauss, Inc.,
Sr. Sub. Nt. 15% due 05/31/00* 06/13/90 935,000 935,000 935,000
$ 1,190,000 R&S/Strauss, Inc.,
Sr. Sub. Nt. 15% due 05/31/00* 06/13/90 1,190,000 1,190,000 1,190,000
----------- ----------- -----------
2,125,000 2,125,000 2,125,000 2.55
----------- ----------- ------------------------
TOTAL INVESTMENT IN MANAGED COMPANIES $46,361,524 $46,361,524 $47,988,305 57.58%
--------------------------------------- ----------- ----------- -------------------------
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(CONTINUED)
<S> <C> <C> <C> <C> <C> <C>
PRINCIPAL INVESTMENT INVESTMENT AMORTIZED VALUE % OF TOTAL
AMOUNT/SHARES INVESTMENT DATE COST COST (NOTE 2) INVESTMENTS
- ------------------- -------------------------------------------- ------------ ---------- ------------- ------------- -------------
NON-MANAGED COMPANIES
DISTRIBUTION SERVICES
WESTERN PIONEER, INC. - NOTES 10,12
$ 4,730,800 Western Pioneer, Inc.,
Sr. Sub. Nts. 10% due 11/30/07*(b) 11/30/94 $ 653,289 $ 653,289 $ 2,365,400
81,081 Warrants Western Pioneer, Inc.,
Common Stock Purchase Warrants ** 11/30/94 0 0 0
--------- ----------- -----------
653,289 653,289 2,365,400 2.84
--------- ----------- ----------------------
HEALTH SERVICES
MTI HOLDINGS, INC. - NOTES 10,12
$ 113,386 MTI Holdings, Inc.,
Sr. Sec. Nt. 12% due 07/01/03* 08/06/96 113,386 113,386 113,386
8,125 Shares MTI Holdings, Inc., Common Stock** 08/06/96 121,875 121,875 121,875
2,264 Warrants MTI Holdings, Inc., Common Stock
Purchase Warrants 08/06/96 0 0 0
---------- ---------- -----------
235,261 235,261 235,261 0.28
---------- ---------- -----------------------
MISCELLANEOUS RETAIL
PERGAMENT HOME CENTERS, INC.- NOTE 12
$ 2,543,200 Pergament Acq. Corp., Home Centers, Inc.
Floating Rate Demand Note due 07/31/00*(b) 10/18/91 2,439,833 2,439,833 1,804,033
299.2 Shares Pergament Holdings, Corp.,
Common Stock Class B ** 02/28/89 6,732,000 6,732,000 0
109.2571 Shares Pergament Holdings, Corp.,
Common Stock Class C ** 02/28/89 0 0 0
----------- ----------- -----------
9,171,833 9,171,833 1,804,033 2.16
----------- ----------- -----------------------
BANKING AND FINANCE
BANK UNITED CORP. - NOTES 10,12
(FORMERLY USAT HOLDINGS INC.)
432,403 Shares Bank United Corp., Class A Common Stock (c) 01/05/90 &
12/19/91 2,901,255 2,901,255 10,410,102
----------- ------------ ------------
2,901,255 2,901,255 10,410,102 12.49
----------- ------------ ------------------------
TOTAL INVESTMENT IN NON-MANAGED COMPANIES $12,961,638 $12,961,638 $14,814,796 17.77%
------------------------------------------ ---------- ----------- ------------------------
TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS $59,323,162 $59,323,162 $62,803,101 75.35%
---------------------------------------------- ----------- ----------- ------------------------
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(CONCLUDED)
<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
$ 2,000,000 ASCC Commercial Paper, 5.34% due 2/27/97 12/03/96 $ 1,974,487 $ 1,983,090 $ 1,983,090
$ 4,100,000 ASCC Commercial Paper, 5.33% due 3/18/97 12/11/96 4,041,118 4,053,866 4,053,866
$ 4,200,000 Old Line Funding, 5.50% due 2/27/97 12/18/96 4,154,442 4,163,425 4,163,425
$ 2,000,000 Barclays U.S. Funding, 5.52% due 1/21/97 12/19/96 1,989,880 1,993,867 1,993,867
$ 600,000 Barton Capital Corp., 5.52% due 2/14/97 12/19/96 594,756 595,952 595,952
$ 3,800,000 Receivable Capital Corp., 5.60% due 2/21/97 12/26/96 3,766,307 3,769,853 3,769,853
$ 4,000,000 Triple A Funding, 5.65% due 1/16/97 12/31/96 3,989,955 3,990,584 3,990,584
------------ -------------- ------------
TOTAL INVESTMENT IN COMMERCIAL PAPER $ 20,510,945 $ 20,550,637 $ 20,550,637 24.65
------------------------------------ ------------ -------------- --------------------
TOTAL TEMPORARY INVESTMENTS $ 20,510,945 $ 20,550,637 $ 20,550,637 24.65
--------------------------- ------------ -------------- --------------------
TOTAL INVESTMENT PORTFOLIO $ 79,834,107 $ 79,873,799 $ 83,353,738 100.00%
-------------------------- ============ ============== ====================
SUMMARY OF INVESTMENTS
Subordinated Notes $ 35,258,695 $ 35,258,695 $ 30,751,320 36.89
Common Stock and Warrants 24,064,467 24,064,467 32,051,781 38.46
Temporary Investments 20,510,945 20,550,637 20,550,637 24.65
------------ -------------- --------------------
TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS $ 79,834,107 $ 79,873,799 $ 83,353,738 100.00%
---------------------------------------------- ============ ============== ====================
* Restricted Security
** Restricted Non-income Producing Security
(a) Includes receipt of payment-in-kind securities.
(b) Non-accrual investment status.
(c) Pubicly traded class of securities.
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
SUPPLEMENTAL SCHEDULE OF REALIZED GAINS AND LOSSES
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C> <C> <C> <C> <C>
PAR VALUE OR
DATE OF NUMBER OF AMORTIZED NET REALIZED
SECURITY TRANSACTION SHARES COST PROCEEDS GAIN (LOSS)
----------- ---------- ------------ ----------- ------------
Polaris Pool Systems, Inc.
Common Stock 1/22/96 $ - $ - $ 87,270 (A) $ 87,270
ASR Acquisition Corp.
Common Stock various 108,241 17,024 1,007,354 990,330
Total Net Realized Gains for the
Three Months Ended March 31, 1996 $ 17,024 $ 1,094,624 $ 1,077,600
============ =========== ============
Polaris Pool Systems, Inc.
Common Stock 6/03/96 - - 41,949 (A) 41,949
U.S. Leather Holdings, Inc.
15% Sr. Sub. Deb. * 4/09/96 $14,616,000 17,112,740 7,308,000 (B) (9,804,740)
8% Sr. Pref. Stock 4/09/96 2,986.41 2,024,000 - (2,024,000)
Jr. Sub. Pref. Stock 4/09/96 150,231 - - -
Warrants 4/09/96 150,231 186,918 - (186,918)
Total Net Realized Losses for the
Three Months Ended June 30, 1996 $ 19,323,658 $ 7,349,949 $(11,973,709)
============ =========== ============
MTI Holdings, Inc.
5% Sr.Sec. Note 8/06/96 $ 471,360 471,360 113,386 (B) (357,974)
Common Stock 8/06/96 22,376 510,000 121,875 (B) (388,125)
Bank United Corp.
Common Stock 8/14/96 102,197 658,926 1,926,413 1,267,487
Tulip Holding Corp.
14.5% Sub. Note 9/12/96 $ 4,394,282 4,386,212 2,929 (4,383,283)
16.5% Sub. Note 9/12/96 $ 1,262,303 1,262,303 - (1,262,303)
15% Exch. Preferred Stock 9/12/96 1,464.763 1,464,763 - (1,464,763)
Common Stock 9/12/96 78,872 15,780 - (15,780)
Ampex Recording Media Corp.
Common Stock 9/30/96 18,053 144,966 143,746 (1,220)
Total Net Realized Losses for the
Three Months Ended September 30, 1996 $ 8,914,310 $ 2,308,349 $ (6,605,961)
============ =========== ============
Lexmark International Group, Inc.
Common Stock various 585,520 3,903,486 13,627,380 9,723,894
Polaris Pool Systems, Inc.
Common Stock 10/28/96 - - 2,147 (A) 2,147
Apollo Radio Holding Co., Inc.
Common Stock 11/06/96 55.25 114,750 817,614 702,864
Warrants 11/06/96 9.2083 - - -
Ampex Recording Media Corp.
Common Stock 11/29/96 17,829 143,285 143,752 467
American Paper Group, Ltd.
5% Sub. Note 12/17/96 $ 595,683 464,633 464,633 -
Common Stock 12/17/96 996 67,469 67,469 -
WB Bottling Corporation
Preferred Stock 12/31/96 1,615 161,500 - (161,500)
Common Stock 12/31/96 21,463 87,296 - (87,296)
Total Net Realized Gains for the
Three Months Ended December 31, 1996 $ 4,942,419 $15,122,995 $ 10,180,576
============ =========== ============
Total Net Realized Losses for the
Year Ended December 31, 1996 $ 33,197,411 $25,875,917 $ (7,321,494)
============ =========== ============
(A) Proceeds represent a distribution to the Retirement Fund from the escrow account.
(B) Proceeds represent fair value of exchange.
* Includes Payment in Kind Notes.
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 advisor 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 Funds' 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 Retirement Fund will terminate
on October 13, 1998, subject to the right of the Independent General Partners to
extend the term of the Retirement Fund for up to two additional one year
periods, after which the Retirement fund will liquidate any remaining
investments within five years.
<PAGE>
2. Significant Accounting Policies
Basis of Accounting
For financial reporting purposes, the Retirement 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 Retirement Fund.
The total value of securities without a readily ascertainable market value is
$40,903,485 and $28,806,626 as of December 31, 1996 and 1995, respectively,
representing 47.8% and 32.4% of total assets, respectively. In connection with
such determination, the Managing General Partner has established a valuation
committee comprised of senior executives to assess the Retirement Fund's
portfolio and make recommendations regarding the value of the Retirement 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.
For privately issued securities in which the Retirement 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 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 Retirement Fund invests. Therefore, the fair
values presented herein are not necessarily indicative of the amount which the
Retirement 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 Retirement 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.
<PAGE>
Income Taxes
As discussed in Note 13, no provision for income taxes has been made since
all income and losses are allocated to the Retirement Fund's partners
("Partners") for inclusion in their respective tax returns.
Investment Transactions
Enhanced Yield Investments - The Retirement Fund records transactions on
the date on which it obtains an enforceable right to demand the securities or
payment thereof.
Temporary Investments - The Retirement 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 are 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 Retirement Fund's Amended
and Restated Agreement of Limited Partnership, Alliance Corporate, as the
successor Managing General Partner of the Retirement Fund, has contributed a
non-interest bearing promissory note (the "Note") to the Retirement 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 such Limited Partners receive distributions
representing additional returns of capital. Such distributions received for the
year ended December 31, 1996, resulted in a $65,488 reduction of the principal
amount of the Note. The promissory note of Equitable Capital was canceled upon
the contribution of Alliance Corporate's Note.
4. Capital Contributions
On October 13, 1988, the Retirement Fund closed the initial public
offering of its units of Limited Partner interests ("Units"). Equitable Capital,
the Retirement Fund's Managing General Partner at that time, accepted
subscriptions for 221,072 Units and admitted 26,304 Limited Partners.
The Limited Partners' total capital contributions were $220,848,730, after
giving effect to volume discounts allowed of $223,270. Equitable Capital's
aggregate capital contribution was in the form of a promissory note in the
principal amount of $2,051,783. On July 22, 1993, Equitable Capital's note was
canceled and Alliance Corporate 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 $203,146,793.
Allocation of income, loss and distributions of cash are made in
accordance with the Partnership Agreement as further discussed in Note 11.
<PAGE>
5. Sales, Marketing and Offering Expenses and Sales Commissions
The Retirement Fund expended a total of $416,052 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 totaled $951,683.
The Retirement Fund also paid $1,627,385 for the reimbursement of offering
expenses. These expenses, along with the offering expenses of Equitable Capital
Partners and the organizational expenses of the Funds, may not exceed
$6,000,000. Aggregate offering and organizational expenses for the Funds totaled
$4,711,806.
For their services as selling agent, the Retirement Fund paid sales
commissions to Merrill Lynch, Pierce, Fenner & Smith Incorporated in the amount
of $15,251,770, of which Equico Securities Corporation, an affiliate of
Equitable Capital, a related party, received $168,150 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 Retirement 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 Retirement 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. Since
becoming the successor Managing General Partner of the Retirement Fund, Alliance
Corporate has not received any Deductible Fees. Alliance Corporate is a related
party of the Retirement Fund.
The Investment Advisory Fee is calculated and paid quarterly, in advance.
The Investment Advisory Fees paid by the Retirement Fund for the years ended
December 31, 1996, 1995 and 1994 were $842,503, $1,037,207 and $1,278,599,
respectively. The decrease in the Investment Advisory Fees, is due primarily to
the return of capital distributed to Limited Partners, which reduced the
Retirement Fund's Available Capital, on which the Investment Advisory Fee is
based.
7. Fund Administration Fee and Expenses
As compensation for its services during the fourth through seventh year of
operation of the Funds, ML Fund Administrators, Inc. ("MLFAI"), as the
Retirement Fund administrator, is entitled to receive 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 Retirement Fund
Administration Fee is calculated and paid quarterly, in advance. The Retirement
Fund Administration Fees paid by the Retirement Fund for the years ended
December 31, 1996, 1995 and 1994 were $553,973, $701,954 and $766,168,
respectively.
In addition to the Retirement 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 Retirement Fund, commencing on October
13, 1992. For the years ended December 31, 1996 and 1995, the Retirement Fund
incurred Administrative expenses of $146,468 and $135,139 respectively, which
consisted primarily of printing, audit and tax return preparation and custodian
fees paid for by MLFAI on behalf of the Retirement 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 Retirement Fund in
addition to $500 for each meeting attended plus reimbursement for any
out-of-pocket expenses. In accordance with the Retirement Fund's Partnership
Agreement, the amount of such fee is reviewed annually by the Independent
General Partners.
For the years ended December 31, 1996, 1995 and 1994, the Retirement Fund
incurred $183,611, $161,236 and $160,979, respectively, of Independent General
Partners' Fees and Expenses.
<PAGE>
9. Related Party Transactions
For the years ended December 31, 1996, 1995 and 1994, the Retirement Fund
paid expenses of $102,008, $26,408 and $36,782, respectively, as reimbursement
for amounts paid for legal services provided by Equitable Life in connection
with the Retirement Fund's Enhanced Yield Investments. The Retirement Fund is
paying Alliance Corporate an Investment Advisory Fee for its services as
described in Note 6. Additionally, the Retirement Fund paid sales commissions to
Equico Securities, a related party, as described in Note 5.
10. Investment Transactions
The Retirement Fund is invested primarily in Enhanced Yield Investments,
also known in the securities industry as "high yield securities". The securities
in which the Retirement 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 Retirement Fund cannot eliminate its risks associated with
participation in Enhanced Yield Investments, it has established risk management
policies. The Retirement Fund subjects each prospective investment to rigorous
analysis and will make only those investments that have been recommended by the
Managing General Partner and that meet the Retirement 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 Retirement Fund's capital
in any single issuer, the Retirement Fund limits the amount of its investment in
a particular issuer. The Retirement 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, 1996, the Retirement Fund received a
total of $354,750 and $146,632 from Western Pioneer, Inc. and U.S. Leather
Holdings, Inc., respectively, as principal paydowns of the senior notes held by
the Retirement Fund. No gain or loss has been recorded on these transactions.
During the year ended December 31, 1996, the Retirement Fund received
additional proceeds of $131,366 from Polaris Pool Systems, Inc. The money
represents proceeds from the sale of the investment from prior years that have
been held in escrow for future adjustments and expenses not paid on the sale
dates. These proceeds were recorded and distributed as gains.
During March 1996, the Retirement Fund sold its remaining ASR Acquisition
Corp. common stock for $1,007,354 and recognized a gain of $990,330 on the sale.
On April 9, 1996, the Equitable investors foreclosed on the common stock of
United States Leather Holdings, Inc. All securities held by the Retirement Fund
have been surrendered and cancelled in exchange for 621.90 shares of common
stock in Leather U.S., Inc. The shares will have a cost basis of 50% of the
original par value of the 15% Senior Debentures surrendered.
On May 8, 1996, the Retirement Fund received dividend income of $1,852,198
from Bank United Corp.
On August 6, 1996, a comprehensive restructuring closed for MTI Holdings,
Inc. The Retirement Fund recognized a loss of $746,099 on this transaction.
On August 14, 1996, the Retirement Fund sold 102,197 shares of Bank United
Corp. (formerly USAT Holdings Inc.) common stock for $1,926,413 and recognized a
gain of $1,267,487.
<PAGE>
On September 12, 1996, the Retirement Fund sold its Tulip Holding Corp.
14.5% Subordinated Notes for $2,929 and recognized a loss of $4,383,283 on the
sale. The 16.5% Subordinated Notes, Series A Exchangeable Preferred Stock and
Class A Common Stock were deemed worthless resulting in a total realized loss of
$2,742,846 to the Retirement Fund.
On September 30, 1996, the Retirement Fund sold 18,053 shares of Ampex
Recording Media Corp. Class A Common Stock for $143,746 which resulted in a loss
of $1,220 to the Retirement Fund. The Retirement Fund sold its remaining 17,829
shares of Ampex Recording Media Corp. Class A Common Stock on November 29, 1996,
for $143,752 and recognized a gain of $467 on the sale.
During the fourth quarter of 1996, the Retirement Fund sold 585,520 shares
of Lexmark International Group, Inc. common stock for $13,627,380 resulting in a
gain of $9,723,894 to the Retirement Fund.
On November 6, 1996, the Apollo Radio Holding Co., Inc. common stock and
warrants held by the Retirement Fund were redeemed. The Retirement Fund received
proceeds of $817,614 which resulted in a realized gain of $702,864 to the
Retirement Fund.
On December 17, 1996, the Retirement Fund sold its American Paper Group
Ltd. 5% Subordinated Notes and common stock for $545,836 resulting in no gain or
loss to the Retirement Fund.
During the year ended December 31, 1996, the Retirement Fund received a
total of $103,367 from Pergament Home Centers, Inc., as principal paydowns of
the Floating Rate Demand Note held by the Retirement Fund. No gain or loss has
been recorded on these transactions.
As of December 31, 1996, the Retirement Fund had investments in 5 Managed
Companies (a Managed Company is one to which the Retirement Fund, the Managing
General Partner or other persons in the Retirement Fund's investor group makes
significant managerial assistance available) and 4 Non-Managed Companies (a
Non-Managed Company is one to which such assistance is not provided) totaling
$59,323,162 (including $422,439 capitalized cost of payment-in-kind securities),
consisting of $35,258,695 in senior notes and subordinated notes and $24,064,467
in common stock and purchase warrants.
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, 1996, 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 year ended December 31, 1996, the Retirement Fund recorded net
unrealized appreciation on Enhanced Yield Investments of $18,779,614. Such
appreciation was the result of adjustments in value made with respect to the
following investments during 1996:
The amount includes the reversal of $9,878,056, $2,024,000 and $186,918 of
unrealized depreciation of U.S. Leather Holdings, Inc. senior subordinated
notes, senior subordinated preferred stock and non-voting common stock purchase
warrants, respectively, due to a restructuring on April 9, 1996. On March 31,
1996, U.S. Leather Holdings, Inc. 15% Senior Subordinated Notes were written
down from 60% to 50% of par, resulting in unrealized depreciation of $1,439,686
to the Retirement Fund.
<PAGE>
On March 31, 1996, Pergament Home Centers, Inc. Class B Common Stock was
written down from 25% of cost to zero, resulting in unrealized depreciation of
$1,683,000. On June 30, 1996, Pergament Home Centers, Inc. Floating Rate Demand
Note was written down from 100% to 75% of par, resulting in unrealized
depreciation of $635,800 to the Retirement Fund.
On March 31, 1996, RI Holdings, Inc. senior subordinated notes were written
down to 30% of par, resulting in unrealized depreciation of $1,056,772 to the
Retirement Fund. On May 1, 1996, the Retirement Fund received additional shares
of Class B Common Stock from RI Holdings. The Retirement Fund exchanged
outstanding debt for the new common stock issued, resulting in unrealized
depreciation of $670 to the Retirement Fund. On June 30, 1996, RI Holdings, Inc.
senior subordinated notes were written down from 30% to 15% of par, resulting in
unrealized depreciation of $1,801,739 to the Retirement Fund. On September 30,
1996, RI Holdings, Inc. senior subordinated notes were written down from 15% to
2% of par, resulting in unrealized depreciation of $1,561,507 to the Retirement
Fund.
Due to the sale of 585,520 shares of Lexmark International Group, Inc.
common stock during the fourth quarter of 1996, the Retirement Fund reversed
$5,011,136 of unrealized appreciation. Due to an increase in the quoted market
price of the Lexmark International Group, Inc. common stock, the Retirement Fund
recorded total unrealized appreciation of $1,940,270 at September 30, 1996. The
equity was valued at 100% of the closing market price at September 30, 1996, as
compared to 90% at March 31, 1996, resulting in unrealized appreciation of
$2,015,378 to the Retirement Fund.
On November 29, 1996, the Retirement Fund reversed a total of $30,962 of
unrealized depreciation due to the sale of the remaining 17,829 shares of Ampex
Recording Media Corp. Class A Common Stock. Due to a decrease in the quoted
market price of the Ampex Recording Media Corp. Class A Common Stock, the
Retirement Fund recorded total unrealized depreciation of $17,829 at September
30, 1996. Also, due to the sale of common stock on September 30, 1996, $13,178
of unrealized depreciation was reversed. Due to an increase in the quoted market
price of the Ampex Recording Media Corp. Class A Common Stock Warrants, the
Retirement Fund recorded total unrealized appreciation of $118,411 at June 30,
1996. The equity was valued at 80% of the closing market price at September 30,
1996, due to contractual restrictions on resale.
On November 6, 1996, the Retirement Fund reversed a total of $741,672 of
unrealized appreciation in Apollo Radio Holding Co., Inc. due to the redemption
of the common stock and warrants held by the Retirement Fund. On March 31, 1996,
Apollo Radio common stock was written up, pending a cash distribution expected
in the second half of 1996, resulting in unrealized appreciation of $231,672 to
the Retirement Fund.
Due to the sale of the Class B Common Stock investment in ASR Acquisition
Corp. in March 1996, the Retirement Fund reversed the unrealized appreciation
recorded of $835,374.
On August 6, 1996, the Retirement Fund reversed a total of $745,680 of
unrealized depreciation in MTI Holdings, Inc. due to a restructuring.
Due to the sale of the Tulip Holding Corporation 14.5% Subordinated Notes
on September 12, 1996, the Retirement Fund reversed the unrealized depreciation
recorded of $4,387,388. The Retirement Fund also reversed $2,742,846 of
unrealized depreciation for the 16.5% Subordinated Notes, 15% Exchangeable
Preferred Stock and Class A Common Stock which were deemed worthless as of
September 30, 1996. On June 30, 1996, Tulip Holding Corporation subordinated
notes were written down from 5% of par to zero, resulting in unrealized
depreciation of $219,714 to the Retirement Fund.
On September 30, 1996, the Western Pioneer, Inc. senior subordinated note
was written up to 50% of the original par value, resulting in unrealized
appreciation of $1,712,111 to the Retirement Fund.
Due to an increase in the quoted market price of Bank United Corp. common
stock, the Retirement Fund recorded total unrealized appreciation of $729,680 at
December 31, 1996. Due to an increase in the quoted market price of Bank United
Corp. common stock, the Retirement Fund recorded total unrealized appreciation
of $6,779,167 at September 30, 1996. The equity was valued at 90% of the closing
market price at December 31, 1996, due to contractual restrictions on resale.
On December 31, 1996, the Retirement Fund's preferred stock and common
stock investments in WB Bottling Corporation were rendered worthless. As a
result, the Retirement Fund reversed a total of $248,796 of unrealized
depreciation.
<PAGE>
For the years ended December 31, 1995 and 1994, the Retirement Fund
recorded net unrealized depreciation of $6,915,689 and $5,675,676, respectively.
The following investments have been on non-accrual status as of the
respective dates:
Pergament Home Centers, Inc.
Floating Rate Demand Note July 1, 1996
Western Pioneer, Inc. 10%
Senior Subordinated Note November 30, 1994
RI Holdings, Inc. 16%
Senior Subordinated Notes April 25, 1994
Alliance Corporate continues to monitor the Retirement 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.
13. Income Taxes
No provision for income taxes has been made since all income and losses
are allocated to the Retirement Fund's partners for inclusion in their
respective tax returns.
Pursuant to Statement of Financial Accounting Standards No. 109 Accounting
for Income Taxes, the Retirement Fund is required to disclose any difference
between the tax basis of the Retirement Fund's assets and liabilities versus the
amounts reported in the Financial Statements. Generally, the tax basis of the
Retirement Fund's assets approximate the amortized cost amounts reported in the
Financial Statements. This amount is computed annually and as of December 31,
1996, the tax basis of the Retirement Fund's assets was greater than the amounts
reported in the Financial Statements by $21,205,814. 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 restructuring were treated differently for tax purposes, but not
for financial reporting purposes.
14. Subsequent Distributions
On February 5, 1997, the Independent General Partners approved an aggregate
cash distribution of $16,012,999 for the three months ended December 31, 1996
which was paid on February 14, 1997. The amount distributed to Limited Partners
was $16,003,402 or $72.39 per Unit (of which $4,728,730 is capital returned from
investments during the fourth quarter of 1996), to Limited Partners of record at
December 31, 1996. On a per Unit basis, this distribution to Limited Partners
includes $46.70 of realized gains, $4.30 of income from operations and $21.39 of
return of capital. The Managing General Partner's one percent allocation of
$161,651 was reduced by its one percent allocation of realized gains and capital
returned from investments during the fourth quarter of 1996, of $152,054 (which
is being held as a Deferred Distribution Amount pursuant to the Partnership
Agreement), resulting in a net distribution of $9,597.
15. Subsequent Events
In January 1997, the Retirement Fund sold 22,641 shares of Lexmark
International Group, Inc. at an average price of $25.74 per share and generated
$582,684 of net proceeds, which includes realized gains of $431,743.
Certain shareholders of Bank United Corp. participated in a secondary
offering of approximately 4.1 million shares of its common stock (which includes
the underwriters' over-allotment option) in February 1997. The Retirement Fund
sold an aggregate of 383,872 shares at a net price of $27.98 per share. The
Retirement Fund received total net proceeds of $10,740,738.56 and realized gains
of $8,165,107.78. The Retirement Fund still holds 48,531 shares of Bank United
Corp., representing approximately 11% of its original shareholdings. The shares
of Bank United Corp. are traded on the NASDAQ under the ticker symbol "BNKU".
On February 21, 1997, the Retirement Fund received a prepayment notice from
Lexmark International Inc. stating that it will prepay its outstanding
$24,103,269 of Senior Subordinated Notes held by the Retirement Fund, together
with accrued interest and a contractual prepayment premium, on March 24, 1997.
The amount of the prepayment premium will be a function of interest rate levels
just prior to the time of prepayment.
Total proceeds received by the Retirement Fund from these transactions are
expected to be distributed to the Limited Partners as part of the regular
quarterly cash distribution to be made in May 1997.
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Retirement Fund
The Retirement Fund's general partners (the "General Partners") are
responsible for the management and administration of the Retirement Fund. The
General Partners consist of Alliance Corporate succeeding Equitable Capital, as
the Managing General Partner, and four individuals serving as Independent
General Partners. Each Independent General Partner is not an "interested person"
of the Retirement 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 provide overall guidance and supervision
with respect to the operations of the Retirement 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 supervise the
Managing General Partner and must, with respect to any Enhanced Yield
Investment, either certify that it meets the Retirement Fund's investment
guidelines or specifically approve it. The Independent General Partners are 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 Retirement 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 a portfolio company.
Messrs. Robert W. Lear and Robert F. Shapiro have served as Independent
General Partners of the Retirement Fund and the Enhanced Yield Fund since June
1988. On April 12, 1989, Mr. Alton G. Marshall and Dr. William G. Sharwell were
admitted to the Retirement Fund and the Enhanced Yield Fund, increasing the
total number of Independent General Partners to four. Each Independent General
Partner shall hold office until his removal or withdrawal pursuant to the
provisions of the Partnership Agreement.
Mr. Lear, age 79, 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 62, 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 75, 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 76, 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 is responsible for purchasing investments for
the Retirement Fund which the Independent General Partners have reviewed for
compliance with the investment guidelines or otherwise approved, for providing
administrative services to the Retirement Fund and for the admission of assignee
Limited Partners to the Retirement Fund.
Management of Alliance Corporate and the Retirement Fund
The senior officers of Alliance Corporate responsible for overseeing the
management of the Retirement Fund are:
Position with Alliance Corporate Finance
Group Incorporated
James R. Wilson President
William Gobbo, Jr. Senior Vice President
James D. Neidhart Senior Vice President
Laura Mah Vice President and Chief Accounting
Officer
James R. Wilson, age 50, 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 restructuring 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 52, 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.
<PAGE>
Mr. James D. Neidhart, age 52, is a Senior Vice President of Alliance
Corporate. He is head of the Investment Recovery Division of Alliance Corporate
responsible for the management of public and private investments in companies
that have encountered troubled financial situations. He has been actively
involved in over 20-25 restructuring, playing in most a leadership role
including chairmanship of committees critical to the restructuring process. Mr.
Neidhart, who joined Alliance Corporate through the combination with Equitable
Capital, had been employed by Equitable Capital in its workout group since 1986.
Prior to that, he had nine years of experience in private placement investments
and workout transactions with the Prudential Insurance Company of America, three
years of commercial lending experience with Harris Trust and Savings Bank and
served six years as an Officer in the U.S. Air Force.
Mrs. Laura Mah, age 41, is a Vice President of Alliance Capital and
co-manages the Insurance Services Group. She is responsible for accounting and
reporting for assets managed by Alliance Capital for insurance clients,
including mutual funds, partnerships, general, separate and advisory accounts.
Mrs. Mah joined Alliance Capital through the combination with Equitable Capital.
Prior to that, she was an Assistant Vice President with Shearson Lehman Hutton
for five years. She is a Certified Public Accountant.
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
Retirement Fund terminated in accordance with its terms on July 22, 1993. On
that date, Alliance Corporate succeeded Equitable Capital as the Retirement
Fund's investment advisor. As investment adviser to the Retirement Fund,
Alliance Corporate is responsible for the identification, management and
liquidation of all investments for the Retirement Fund.
The Administrator
The Administrator performs certain operating and administrative services
for the Retirement Fund on behalf of the Managing General Partner pursuant to an
administrative services agreement, dated October 13, 1988, among the Retirement
Fund, Equitable Capital and the Administrator.
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 Retirement Fund paid Mr. Lear $36,750, Mr. Shapiro $36,250, Mr. Marshall
$36,894 and Dr. Sharwell $35,500 in fees, with respect to their services as
Independent General Partners in 1996.
The information with respect to the "Fund Administration Fee and Expenses"
payable to the Managing General Partner and the Administrator set forth under
the caption "Management Arrangements -- The Managing General Partner" in the
Prospectus is incorporated by reference into this Item 11. The Retirement Fund
paid $665,800 to the Administrator, through the Managing General Partner, in
1996.
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 Retirement Fund paid Alliance Corporate $842,503 with respect to
the Investment Advisory Fee for 1996. The Managing General Partner's 1%
allocation of net investment income from Temporary Investments, which in 1996
amounted to $1,237, is credited against the Investment Advisory Fees as required
by the Partnership Agreement.
Alliance Corporate, as Managing General Partner, received $53,737,
representing distributions of net investment income in 1996.
<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
Retirement 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, 13 Units, or less than 1% of the total Units
outstanding.
Item 13. Certain Relationships and Related Transactions
The Retirement Fund co-invests in Enhanced Yield Investments with the
Equitable Capital Partners, L.P. and certain affiliates of Equitable Capital
pursuant to the terms of an exemptive order granted by the Commission on August
11, 1988 permitting co-investments 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: (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 Retirement 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 (Retirement Fund), L.P., et al. (812-7328) IC - 17925, December
31, 1990.
Pursuant to such arrangements, the Retirement Fund co-invested in the
Enhanced Yield Investments listed above in Item 1 with the Equitable Capital
Partners, L.P. 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
Funds, Equitable Capital and Alliance Corporate received two exemptive orders
from the Securities and Exchange Commission permitting the Funds and Alliance
Corporate 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
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.**
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 Retirement 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 Retirement 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 Retirement 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 Retirement Fund's Annual Report of
Form 10-K for the fiscal year ended December 31, 1995, filed with the
Securities and Exchange Commission on November 22, 1995.
<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 18th day of March,
1997.
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
By: Alliance Corporate Finance Group Incorporated,
as Managing General Partner,
Dated: March 18, 1997 _________________________________
James R. Wilson
Title: President
Dated: March 18, 1997 _________________________________
Laura Mah
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 18th day of March, 1997.
Signature Title
______________________ Independent General Partner of
Robert W. Lear Equitable Capital Partners (Retirement Fund), L.P.
______________________ Independent General Partner of
Robert F. Shapiro Equitable Capital Partners (Retirement Fund), L.P.
______________________ Independent General Partner of
Alton G. Marshall Equitable Capital Partners (Retirement Fund), L.P.
______________________ Independent General Partner of
William G. Sharwell Equitable Capital Partners (Retirement Fund), L.P.
______________________
James R. Wilson President and Director of 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 and
Mark Arnold Director of Alliance Corporate
________________________ Co-Chairman, Co-Chief Executive Officer and
Alastair Tedford 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 18th day of March,
1997.
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
By: Alliance Corporate Finance Group Incorporated,
as Managing General Partner,
Dated: March 18, 1997 /s/ James R. Wilson
James R. Wilson
Title: President
Dated: March 18, 1997 /s/ Laura Mah
Laura Mah
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 18th day of March, 1997.
Signature Title
/s/ Robert W. Lear Independent General Partner of
Robert W. Lear Equitable Capital Partners (Retirement Fund), L.P.
/s/ Robert F. Shapiro Independent General Partner of
Robert F. Shapiro Equitable Capital Partners (Retirement Fund), L.P.
/s/ Alton G. Marshall Independent General Partner of
Alton G. Marshall Equitable Capital Partners (Retirement Fund), L.P.
/s/ William G. Sharwell Independent General Partner of
William G. Sharwell Equitable Capital Partners (Retirement Fund), L.P.
/s/ James R. Wilson
James R. Wilson President and Director of 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 and
Mark Arnold Director of Alliance Corporate
/s/ Alastair Tedford Co-Chairman, Co-Chief Executive Officer and
Alastair Tedford Director of Alliance Corporate
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information extracted from the fourth quarter of
1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 59,323,162
<INVESTMENTS-AT-VALUE> 62,803,101
<RECEIVABLES> 2,055,405
<ASSETS-OTHER> 80,223
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,552,314
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 122,673
<TOTAL-LIABILITIES> 122,673
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 221,072
<SHARES-COMMON-PRIOR> 221,072
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,714,099
<NET-ASSETS> 85,429,641
<DIVIDEND-INCOME> 1,852,195
<INTEREST-INCOME> 4,603,229
<OTHER-INCOME> 20,204
<EXPENSES-NET> 1,896,459
<NET-INVESTMENT-INCOME> 4,579,169
<REALIZED-GAINS-CURRENT> (7,321,494)
<APPREC-INCREASE-CURRENT> 18,779,614
<NET-CHANGE-FROM-OPS> 16,037,289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,900,230
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 6,484,042
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (3,412,471)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 842,503
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,896,459
<AVERAGE-NET-ASSETS> 87,135,877
<PER-SHARE-NAV-BEGIN> 397.08
<PER-SHARE-NII> 20.51
<PER-SHARE-GAIN-APPREC> (32.79)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 87.44
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 381.46
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>