UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Period Ended: March 31, 1998
Commission File Number 01-16532
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3486106
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1345 Avenue of the Americas
New York, New York 10105
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:(212) 979-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act
Units of Limited Partnership Interest
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No.
Selected information from the Prospectus, dated July 15, 1988, and filed with
the Securities and Exchange Commission on July 19, 1988 (File No. 33-20093), is
incorporated by reference into Parts I, II and III of this Quarterly Report on
Form 10-Q.
<PAGE>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Statements of Assets, Liabilities and Partners'
Capital as of March 31, 1998 and December 31, 1997 5
Statements of Operations - For the Three Months
Ended March 31, 1998 and 1997 6
Statements of Changes in Net Assets - For the Three
Months Ended March 31, 1998 and 1997 7
Statements of Cash Flows - For the Three Months Ended
March 31, 1998 and 1997 8
Statement of Changes in Partners' Capital -
For the Three Months Ended March 31, 1998 9
Schedule of Portfolio Investments - March 31, 1998 10
Supplemental Schedule of Realized Gains and Losses
For the Three Months Ended March 31, 1998 13
Notes to Financial Statements 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
PART II - OTHER INFORMATION
Item 6. Exhibits 23
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
(UNAUDITED)
<S> <C> <C> <C>
ASSETS: Notes March 31, 1998 December 31, 1997
--------- -------------- -----------------
Investments 2,10,12
Enhanced Yield Investments at Value-
Managed Companies
(amortized cost of $12,155,290 at
March 31, 1998 and $12,155,290
at December 31, 1997) $ 939,594 $ 4,847,290
Non-Managed Companies
(amortized cost of $9,613,980 at
March 31, 1998 and $10,367,470
at December 31, 1997) 1,947,290 4,884,451
Temporary Investments
(at amortized cost) 7,700,000 6,898,850
Cash 49,742 24,028
Interest Receivable 2,12 2,683 19,322
Receivable on Investment Sold 2,10 235,261 -
Note Receivable 3,4 825,076 832,534
TOTAL ASSETS $ 11,699,646 $ 17,506,475
============== ================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Professional Fees Payable 9 $ 40,905 $ 52,721
Independent General Partners' Fees Payable 8 9,400 9,788
Fund Administrative Expenses Payable 7 42,611 38,958
Other Accrued Liabilities 2,406 2,847
Total Liabilities 95,322 104,314
Partners' Capital
Managing General Partner 3,4 669,342 717,018
Limited Partners (221,072 Units) 4 10,934,982 16,685,143
Total Partners' Capital 11,604,324 17,402,161
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 11,699,646 $ 17,506,475
============== ================
See the Accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<S> <C> <C>
For the Three Months Ended
--------------------------
March 31, 1998 March 31, 1997
-------------- --------------
INVESTMENT INCOME- Notes 2,12:
Interest $ 86,235 $ 1,172,266
Dividend - 60,536
TOTAL INVESTMENT INCOME 86,235 1,232,802
EXPENSES:
Investment Advisory Fee- Note 6 218,587 250,434
Fund Administration Fees and Expenses- Note 7 84,384 57,831
Independent General Partners'
Fees and Expenses - Note 8 37,700 35,000
Professional Fees - Note 9 12,125 88,618
Valuation Expenses 1,200 2,700
TOTAL EXPENSES 353,996 434,583
NET INVESTMENT (LOSS) INCOME (267,761) 798,219
NET CHANGE IN UNREALIZED DEPRECIATION
ON INVESTMENTS- Note 12 (6,091,334) (14,949,252)
NET REALIZED GAINS ON INVESTMENTS- Note 10 2,337,292 12,656,880
NET (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (4,021,803) $ (1,494,153)
============== =============
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<S> <C> <C>
For the Three Months Ended
--------------------------
March 31,1998 March 31,1997
------------- -------------
FROM OPERATIONS:
Net Decrease in Net Assets
Resulting from Operations $ (4,021,803) $ (1,494,153)
Cash Distributions to Partners (1,768,576) (16,012,999)
Reduction in Managing General Partners'
Contribution (7,458) (47,760)
Total Decrease (5,797,837) (17,554,912)
NET ASSETS:
Beginning of Period 17,402,161 85,429,641
End of Period $ 11,604,324 $ 67,874,729
============== =============
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
For the Three Months Ended
--------------------------
INCREASE (DECREASE) IN CASH March 31, 1998 March 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES: -------------- --------------
Interest and Discount Income $ 7,561 $ 5,778,306
Fund Administration Fees & Expenses (80,731) (68,085)
Investment Advisory Fee (218,587) (155,328)
Independent General Partners' Fees and Expenses (38,088) (42,638)
Valuation Expenses (1,641) (2,531)
Sale (Purchase) of Temporary Investments, Net (705,837) (24,905,926)
Proceeds from Sales and Principal Payments of
Enhanced Yield Investments 2,855,553 35,504,946
Professional Fees (23,940) (85,353)
Insurance Fees - (2,615)
Net Cash Provided by Operating Activities 1,794,290 16,020,776
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to Partners (1,768,576) (16,012,999)
Net Cash Used in Financing Activities (1,768,576) (16,012,999)
Net Increase (Decrease) in Cash 25,714 7,777
Cash at the Beginning of the Period 24,028 62,948
Cash at the End of the Period $ 49,742 $ 70,725
============== ==============
RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Decrease In Net Assets
Resulting From Operations $ (4,021,803) $ (1,494,153)
Adjustments to Reconcile Net Increase (Decrease) in Net Assets
Resulting from Operations to Net Cash Provided by Operating
Activities:
Decrease in Investments (187,574) (2,057,861)
(Increase) Decrease in Accrued Interest and Investment Income (78,675) 4,545,505
Decrease in Prepaid Expenses - 95,275
Decrease in Other Accrued Liabilities (441) (10,254)
Increase (Decrease) in Fund Administration Expenses Payable 3,653 (2,615)
Net Change in Unrealized Depreciation on Investments 6,091,334 14,949,252
Decrease in Independent General Partners' Fees Payable (388) (7,638)
(Decrease) Increase in Professional Fees Payable (11,816) 3,265
Total Adjustments 5,816,093 17,514,929
Net Cash Provided by Operating Activities $ 1,794,290 $ 16,020,776
============== ==============
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(UNAUDITED)
<S> <C> <C> <C> <C>
Managing Limited
Notes General Partner Partners Total
-------- --------------- ------------ ----------
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Partners' Capital at January 1, 1998 $ 717,018 $ 16,685,143 $ 17,402,161
Cash Distributions to Partners - (1,768,576) (1,768,576)
Reduction in Managing General Partners' Contribution 3 (7,458) - (7,458)
Allocation of Net Investment Income 11 (2,678) (265,083) (267,761)
Allocation of Net Unrealized Depreciation
on Investments 12 (60,913) (6,030,421) (6,091,334)
Allocation of Net Realized Gains on Investments 23,373 2,313,919 2,337,292
Partners' Capital at March 31, 1998 $ 669,342 $ 10,934,982 $ 11,604,324
=========== ============ ==============
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PRINCIPAL INVESTMENT INVESTMENT AMORTIZED VALUE % OF TOTAL
AMOUNT/SHARES INVESTMENT DATE COST COST (NOTE 2) INVESTMENTS
- ------------------ ---------------------------------------------- ---------- ------------ ------------ ------------- -----------
ENHANCED YIELD INVESTMENTS
MANAGED COMPANIES
MISCELLANEOUS MANUFACTURING
QUANTEGY ACQUISITION CORP.
(FORMERLY AMPEX RECORDING MEDIA)
123.50 Shares Quantegy Acquisition Corp., Common Stock 11/13/95 $ 2,722,290 $ 2,722,290 $ 408,344
------------ ----------- ------------
2,722,290 2,722,290 408,344 3.86
------------ ----------- -------------------------
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 0
----------- ------------ -----------
7,308,000 7,308,000 0 0.00
----------- ------------ ----------------------
MISCELLANEOUS RETAIL
R&S/STRAUSS, INC.
(FORMERLY WSR ACQUISITION CORP.)
$ 935,000 R&S/Strauss, Inc.,
Sr. Sub. Nt. 15% due 05/31/00* (a) 06/13/90 935,000 935,000 233,750
$ 1,190,000 R&S/Strauss, Inc.,
Sr. Sub. Nt. 15% due 05/31/00* (a) 06/13/90 1,190,000 1,190,000 297,500
----------- ----------- -----------
2,125,000 2,125,000 531,250 5.02
----------- ----------- ------------------------
TOTAL INVESTMENT IN MANAGED COMPANIES $12,155,290 $12,155,290 $ 939,594 8.88%
--------------------------------------- ----------- ----------- -------------------------
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
(CONTINUED) (UNAUDITED)
<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. - NOTE 12
$ 4,730,000 Western Pioneer, Inc.,
Sr. Sub. Nts. 10% due 11/30/07*(a) 11/30/94 $ 653,289 $ 653,289 $ 1,419,000
81,081 Warrants Western Pioneer, Inc.,
Common Stock Purchase Warrants ** 11/30/94 0 0 0
--------- ----------- -----------
653,289 653,289 1,419,000 13.40
--------- ----------- ----------------------
MISCELLANEOUS RETAIL
PERGAMENT HOME CENTERS, INC.- NOTES 10, 12
$ 2,543,200 Pergament Acq. Corp., Home Centers, Inc.
Floating Rate Demand Note due 07/31/00*(a) 10/18/91 2,228,691 2,228,691 528,290
299.2 Shares Pergament Holdings, Corp.,
Common Stock Class B ** 02/28/89 6,732,000 6,732,000 0
106.778 Shares Pergament Holdings, Corp.,
Common Stock Class C ** 02/28/89 0 0 0
----------- ----------- -----------
8,960,691 8,960,691 528,290 4.99
----------- ----------- -----------------------
TOTAL INVESTMENT IN NON-MANAGED COMPANIES $ 9,613,980 $ 9,613,980 $ 1,947,290 18.39%
------------------------------------------ ---------- ----------- ------------------------
TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS $21,769,270 $21,769,270 $ 2,886,884 27.27%
---------------------------------------------- ----------- ----------- ------------------------
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998
(CONCLUDED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PRINCIPAL INVESTMENT INVESTMENT AMORTIZED VALUE % OF TOTAL
AMOUNT/SHARES INVESTMENT DATE COST COST (NOTE 2) INVESTMENTS
- ------------------- ------------------------------------------ ------------ ----------- ------------ ---------- -------------
TEMPORARY INVESTMENTS
COMMERCIAL PAPER
$ 6,900,000 Federal Home Loan Mortgage Disc Note,
5.90% due 4/01/98 3/31/98 $ 7,698,738 $ 7,700,000 $ 7,700,000
------------ -------------- ------------
TOTAL INVESTMENT IN COMMERCIAL PAPER $ 7,698,738 $ 7,700,000 $ 7,700,000 72.73%
------------------------------------ ------------ -------------- --------------------
TOTAL TEMPORARY INVESTMENTS $ 7,698,738 $ 7,700,000 $ 7,700,000 72.73%
--------------------------- ------------ -------------- --------------------
TOTAL INVESTMENT PORTFOLIO $ 29,468,008 $ 29,469,270 $ 10,586,884 100.00%
-------------------------- ============ ============== ====================
SUMMARY OF INVESTMENTS
Subordinated Notes $ 5,006,980 $ 5,006,980 $ 2,478,540 23.41%
Common Stock and Warrants 16,762,290 16,762,290 408,344 3.86
Temporary Investments 7,698,738 7,700,000 7,700,000 72.73
------------ -------------- --------------------
TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS $ 29,468,008 $ 29,469,270 $ 10,586,884 100.00%
---------------------------------------------- ============ ============== ====================
* Restricted Security
** Restricted Non-income Producing Security
(a) Non-accrual investment status.
</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 THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
PAR VALUE OR
DATE OF NUMBER OF AMORTIZED NET REALIZED
SECURITY TRANSACTION SHARES COST PROCEEDS GAIN (LOSS)
Lexmark International Group, Inc.
Common Stock various 69,683 $ 464,555 $ 2,801,847 $ 2,337,292
MTI Holding Inc.
12% Sr. Sec. Note 3/12/98 $113,386 113,386 113,386 -
Common Stock 8,125 121,875 121,875 -
Common Stock Purchase Warrants 2,264 - - -
Total Net Realized Gains for the
Three Months Ended March 31, 1998 $ 699,816 $ 3,037,108 $ 2,337,292
=========== =========== ===========
See the Accompanying Notes to the Financial Statements.
</TABLE>
<PAGE>
EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. Organization and Purpose
Equitable Capital Partners, L.P. (the "Fund") was formed along with
Equitable Capital Partners (Retirement Fund), L.P. (the "Retirement Fund," and
collectively with the Fund referred to as the "Funds") and the Certificates of
Limited Partnership were filed under the Delaware Revised Uniform Limited
Partnership Act on February 2, 1988. The Funds' operations commenced on October
13, 1988.
On July 22, 1993, Equitable Capital Management Corporation ("Equitable
Capital"), formerly the Managing General Partner and investment adviser of the
Funds, transferred substantially all of the assets comprising Equitable
Capital's business to Alliance Capital Management L.P. ("Alliance Capital") and
its wholly-owned subsidiary, Alliance Corporate Finance Group Incorporated
("Alliance Corporate"). In connection with such transaction, the limited
partners (the "Limited Partners") of the Funds voted to approve a new investment
advisory agreement between the Funds and Alliance Corporate and also voted to
admit Alliance Corporate as Managing General Partner of the Funds to succeed
Equitable Capital. Accordingly, on July 22, 1993, the closing date of the
transaction described above, (i) Alliance Corporate was admitted as the
successor Managing General Partner of the Funds, (ii) Equitable Capital withdrew
from the Funds as Managing General Partner and assigned all of its interest as
General Partner to Alliance Corporate and (iii) Alliance Corporate succeeded
Equitable Capital as the investment 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 elected to operate as business development companies under the
Investment Company Act of 1940, as amended. The Funds seek current income and
capital appreciation potential through investments in privately-structured,
friendly leveraged acquisitions and other leveraged transactions. The Funds
pursued this objective by investing primarily in subordinated debt and related
equity securities ("Enhanced Yield Investments") issued in conjunction with the
"mezzanine financing" of friendly leveraged acquisitions and leveraged
recapitalizations.
As stated in the Partnership Agreement, the 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.
2. Significant Accounting Policies
Basis of Accounting
For financial reporting purposes, the Fund's records are maintained using
the accrual method of accounting.
Valuation of Investments
Securities are valued at market or fair value. Market value is used for
securities for which market quotations are readily available. For securities
without a readily ascertainable market value, fair value is determined, on a
quarterly basis, in good faith by the General Partners of the Retirement Fund.
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.
<PAGE>
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 writeup in value of an investment could take place when a
significant favorable development occurs, such as a transaction representing the
partial sale of an investment that would result in a capital gain, or company
performance exceeding expected levels on a sustained basis. Although the General
Partners use their best judgment in determining the fair values 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.
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 have been allocated to the specific
Partners' accounts to which they are applicable. Sales, marketing and offering
expenses are allocated between the Funds in proportion to the number of units
issued by each Fund and to the Partners in proportion to their capital
contributions.
<PAGE>
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 by the Managing General Pertners 1% allocation of return
of capital. Such allocation for the three months ended March 31, 1998, resulted
in a $7,458 reduction of the principal amount of the 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.
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.
As stated in the Partnership Agreement, the Retirement Fund's allocable
share of the Minimum Amount is $874,350, or $218,587 per quarter.
The Investment Advisory Fee is paid quarterly in advance. The Investment
Advisory Fees incurred by the Retirement Fund for the three months ended March
31, 1998 and 1997 were $218,587 and $250,434, respectively.
<PAGE>
7. Fund Administration Fee and Expenses
The Retirement Fund Administration Fees paid by the Fund for the three
months ended March 31, 1998 and 1997 were $25,000 and $25,000 respectively.
Beginning October 13, 1996, MLFAI is entitled to receive reimbursement for
all of direct out-of-pocket expenses incurred in connection with the
administration of the Retirement Fund, commencing on October 13, 1992. For the
three months ended March 31, 1998 and 1997, the Retirement Fund incurred
Administrative expenses of $59,384 and $32,831, 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 three months ended March 31, 1998 and 1997, the Retirement Fund
incurred $37,700 and $35,000, respectively, of Independent General Partners'
Fees and Expenses.
9. Related Party Transactions
For the three months ended March 31, 1998 and 1997, the Retirement Fund
paid expenses of $23,940 and $8,566, 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.
<PAGE>
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.
On January 2, 1998, the Retirement Fund received $53,706 from Pergament
Home Centers, Inc. as a principal paydown of the Floating Rate Demand Note held
by the Retirement Fund. No gain, loss or income has been recorded on this
transaction.
During the first quarter of 1998, the Retirement Fund sold the remaining
69,683 shares of Lexmark International Group, Inc. Class B Common Stock for
$2,801,847 resulting in a gain of $2,337,292 to the Retirement Fund.
On March 12, 1998, the Retirement Fund sold its MTI Holdings, Inc. 12%
Senior Secured Note, common stock and warrants for $235,261. No gain, loss or
income has been recorded on this transaction.
All of the proceeds received during the first quarter of 1998 will be
distributed to Limited Partners of record as of March 31, 1998 on May 15, 1998.
As of March 31, 1998, the Retirement Fund had investments in 3 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 2 Non-Managed Companies (a
Non-Managed Company is one to which such assistance is not provided) totaling
$21,769,270 (including $422,439 capitalized cost of payment-in-kind securities),
consisting of $5,006,980 in senior notes and subordinated notes and $16,762,290
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 three months ended March 31, 1998, earnings were allocated 99% to
the Limited Partners, as a class, and 1% to the Managing General Partner.
<PAGE>
12. Unrealized Appreciation/Depreciation and Non-Accrual of Investments
For the three months ended March 31, 1998, the Retirement Fund recorded net
unrealized depreciation on Enhanced Yield Investments of $6,091,334 as compared
to $14,949,252 for the three months ended March 31, 1997. Such depreciation was
the result of adjustments in value made with respect to the following
investments during the three months ended March 31, 1998:
The amount includes the reversal of $2,183,398 of unrealized appreciation
of Lexmark International Group, Inc. Class B Common Stock, due to the sale of
the remaining 69,683 shares.
On March 31, 1998, Quantegy Acquisition Corp., common stock was written
down from 100% to 15% of remaining cost, resulting in unrealized depreciation of
$2,313,946 to the Retirement Fund.
On March 31, 1998, the R&S Strauss Inc., 15% Senior Subordinated Note was
written down from 100% to 25% of par, resulting in unrealized depreciation of
$1,593,750 to the Retirement Fund.
On March 31, 1998, the Western Pioneer 10% Senior Subordinated Note par
value was reduced resulting in unrealized depreciation of $240.
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
R&S Strauss Inc.
15% Senior Subordinated Note November 30, 1997
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,
1997, the tax basis of the Retirement Fund's assets was greater than the amounts
reported in the Financial Statements by $24,826,666. 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 May 7, 1998, the Independent General Partners approved an aggregate cash
distribution of $2,929,204 for the three months ended March 31, 1998, which will
be paid on May 15, 1998 to the Limited Partners. The amount that will be
distributed to Limited Partners on record as of March 31, 1998 includes $873,234
of return of capital. On a per Unit basis, the distribution of $13.25 includes
$9.30 of net realized gains and $3.95 of return of capital. The Managing General
Partner's one percent allocation of $29,588 is being held as a Deferred
Distribution Amount resulting in no distribution to the Managing
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
Net Proceeds of Offering
On October 13, 1988, the 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
As of March 31, 1998, the Retirement Fund had a total of 6 Enhanced Yield
Investments at a net cost of $22,004,531.
Proceeds from Investments
During the three months ended March 31, 1998, the Retirement Fund received
proceeds from the following investments:
On January 2, 1998, the Retirement Fund received $53,706 from Pergament
Home Centers, Inc. as a principal paydown of the Floating Rate Demand Note held
by the Retirement Fund. No gain, loss or income has been recorded on this
transaction.
During the first quarter of 1998, the Retirement Fund sold the remaining
69,683 shares of Lexmark International Group, Inc. Class B Common Stock for
$2,801,847 resulting in a gain of $2,337,292 to the Retirement Fund.
On March 12, 1998, the Retirement Fund sold its MTI Holdings, Inc. 12%
Senior Secured Note, common stock and warrants for $235,261. No gain, loss or
income has been recorded on this transaction.
All of the proceeds received during the first quarter of 1998 will be
distributed to Limited Partners of record as of March 31, 1998 on May 15, 1998.
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 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.
<PAGE>
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.
Results of Operations
For the three months ended March 31, 1998, net investment income decreased
by $1,065,980 as compared to the same period in 1997. Net investment income is
comprised of investment income (primarily interest and dividend income) offset
by expenses. The decrease in the 1998 net investment income versus the
comparative period in 1997, reflects the decrease in interest and dividend
income partially offset by the decrease in Fund Administration Fees and
Expenses.
For the three months ended March 31, 1998, the Retirement Fund had
investment income of $86,235, as compared to $1,232,802 for the same period in
1997. The decrease in 1998 investment income of 93% was primarily due to a
decrease in interest and dividend income.
The Retirement Fund incurred expenses of $353,996 for the three months
ended March 31, 1998, as compared to $434,583 for the same period in 1997. The
decrease in the 1998 expenses of $80,587 was primarily due to a decrease in
Investment Advisory Fee and Professional Fees paid by the Retirement Fund. The
Retirement Fund's major expenses consist of the Investment Advisory Fee, the
Fund Administration Fees and Professional Fees.
The Retirement Fund experienced a decrease in net assets resulting from
operations for the three months ended March 31, 1998 in the amount of
$4,021,803, as compared to a decrease of $1,494,153 for the comparative period
in 1997. The decrease in net assets for the three months ended March 31, 1998 is
comprised of net investment loss of $267,761, net realized gains of $2,337,292
offset by a net change in unrealized depreciation of $6,091,334. For the
comparable period in 1997, the decrease in net assets was comprised of net
investment income of $798,219, net realized gains of $12,656,880 offset by a net
change in unrealized depreciation of $14,949,252. (see Statements of Operations
in the Financial Statements).
For the three months ended March 31, 1998 and 1997, the Retirement Fund
incurred Investment Advisory Fees of $218,587 and $250,434, respectively, (as
described in Note 6 to the Financial Statements).
The Retirement Fund Administration Fees and Expenses (as described in Note
7 to the Financial Statements) for the three months ended March 31, 1998 and
1997 were $84,384 and $57,831, respectively. The increase from 1997 to 1998 of
$26,554 is due primarily to the Fund Administration Fee changing to an annual
fee of $100,000 plus 100% of all direct out-of-pocket expenses incurred by the
Retirement Fund Administrator on behalf of the Retirement Fund.
Independent General Partners' Fees and Expenses incurred for the three
months ended March 31, 1998 and 1997, were $37,700 and $35,000, respectively.
The Retirement Fund incurred Professional Fees of $12,125 and $88,618 for
the three months ended March 31, 1998 and 1997, respectively. For the three
months ended March 31, 1998, the Retirement Fund incurred $23,940 of related
party legal fees which included reimbursed legal fees to Debevoise & Plimpton
and Equitable Life for legal services (See Note 9 to 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 three months ended March 31, 1998, the Retirement Fund recorded net
unrealized depreciation on Enhanced Yield Investments of $6,091,334 as compared
to $14,949,252 for the three months ended March 31, 1997. The change in
unrealized depreciation was primarily the result of unrealized depreciation in
Quantegy Acquisition Corp. and R&S Strauss Inc. and the reversal of unrealized
appreciation in Lexmark International Group, Inc.
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
R&S Strauss Inc.
15% Senior Subordinated Note November 30, 1997
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.
Realized Gains and Losses on Investments
For the three months ended March 31, 1998, the Retirement Fund recorded net
realized gains of $2,337,292 on transactions involving one Enhanced Yield
Investment. For the three months ended March 31, 1997, the Retirement Fund
recorded net realized gains of $12,656,880 on transactions involving three
Enhanced Yield Investments. (See Note 10 to the Financial Statements and the
Supplemental Schedule of Realized Gains and Losses).
<PAGE>
PART II - OTHER INFORMATION
Items 1 though 5 are herewith omitted as the response to all items is either
none or not applicable for the March 31, 1998, Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule for the quarter ending
March 31, 1998.
3.1 Amended and Restated Certificate of Limited Partnership, dated
as of April 12, 1989*
4.1 Amended and Restated Agreement of Limited Partnership, dated as
of October 13, 1988**
10.1 Investment Advisory Agreement, dated July 22, 1993, between
Registrant and Alliance Corporate Finance Group Incorporated***
10.2 Administrative Services Agreement, dated October 13, 1988, among
the Registrant, Equitable Capital Management Corporation and
ML Fund Administrators, Inc.**
* 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.
(b) Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 13th day of May,
1998.
EQUITABLE CAPITAL PARTNERS
(RETIREMENT FUND), L.P.
By: Alliance Corporate Finance Group
Incorporated, as Managing General Partner
Dated: May 13, 1998 /s/ James R. Wilson
-----------------------------
James R. Wilson
Title: President
Dated: May 13, 1998 /s/ Andy Pitsillos
------------------------------
Andy Pitsillos
Title: Vice President and Chief
Accounting Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 13th day of May, 1998.
EQUITABLE CAPITAL PARTNERS
(RETIREMENT FUND), L.P.
By: Alliance Corporate Finance Group
Incorporated, as Managing General Partner
Dated: May 13, 1998
James R. Wilson
Title: President
Dated: May 13, 1998
Andy Pitsillos
Title: Vice President and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information extracted from the first quarter
of 1998 Form 10-Q Balance Sheets and Statements of Operations and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 21,769,270
<INVESTMENTS-AT-VALUE> 2,886,884
<RECEIVABLES> 1,063,020
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,699,646
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 95,322
<TOTAL-LIABILITIES> 95,322
<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> (18,882,385)
<NET-ASSETS> 11,604,324
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 86,235
<OTHER-INCOME> 0
<EXPENSES-NET> 353,996
<NET-INVESTMENT-INCOME> (267,761)
<REALIZED-GAINS-CURRENT> 2,337,292
<APPREC-INCREASE-CURRENT> (6,091,334)
<NET-CHANGE-FROM-OPS> (4,021,803)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,030,196
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 738,380
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,797,837)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 218,587
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 353,996
<AVERAGE-NET-ASSETS> 14,503,243
<PER-SHARE-NAV-BEGIN> 75.47
<PER-SHARE-NII> (1.20)
<PER-SHARE-GAIN-APPREC> 10.47
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 8.00
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<PER-SHARE-NAV-END> 49.46
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
