SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-K



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

         For the year ended                   Commission File Number
          December 31, 1998                          1-16531


                        EQUITABLE CAPITAL PARTNERS, L.P.
      (Exact name of registrant as specified in its governing instruments)

              Delaware                               13-3486115
  (State or other jurisdiction of          (IRS Employer Identification No.)
   incorporation or organization)

                          1345 Avenue of the Americas
                            New York, New York 10105
              (Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code:  (212) 969-1000


           Securities registered pursuant to Section 12(b) of the Act:
     Title of each class            Name of each exchange on which registered
           None                                  Not Applicable


           Securities registered pursuant to Section 12(g) of the Act:
                      Units of Limited Partnership Interest
                                (Title of Class)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ___.

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     Selected  information  from the Prospectus,  dated July 15, 1988, and filed
with  the  Securities  and  Exchange  Commission  on July  19,  1988  (File  No.
33-20093),  is incorporated by reference into Parts I, II and III of this Annual
Report on Form 10-K.

<PAGE>
                                     Part I


Item 1.       Business

Formation

     Equitable  Capital  Partners,  L.P.  (the "Fund" or the  "Registrant")  was
formed along with  Equitable  Capital  Partners  (Retirement  Fund),  L.P.  (the
"Retirement  Fund," and collectively  with the Fund referred to as the "Funds").
The  Certificates of Limited  Partnership  were filed under the Delaware Revised
Uniform Limited  Partnership  Act on February 2, 1988 and the Funds'  operations
commenced on October 13,  1988.  Following  liquidation  and  winding-up  of the
Funds,  Certificates of Cancellation of the Certificates of Limited  Partnership
were filed by the Funds on January 27, 1999.  The Fund's  objective  was to seek
current  income and capital  appreciation  potential  by  investing in privately
structured, friendly leveraged acquisitions and leverage recapitalizations.  The
Fund pursued this  objective by  investing  primarily in  subordinated  debt and
related equity securities  ("Mezzanine  Investments") issued in conjunction with
the   "mezzanine   financing"   of   leveraged    acquisitions   and   leveraged
recapitalizations.   Mezzanine  Investments,   follow-on   investments,   bridge
investments and certain other investments which the Fund was permitted to invest
in are referred to herein as "Enhanced Yield Investments."

     On July 22, 1993,  Equitable  Capital  Management  Corporation  ("Equitable
Capital"),  formerly the Managing General Partner and investment  adviser of the
Funds,  transferred   substantially  all  of  the  assets  comprising  Equitable
Capital's business to Alliance Capital Management L.P. ("Alliance  Capital") and
its  wholly-owned  subsidiary,  Alliance  Corporate  Finance Group  Incorporated
("Alliance  Corporate").  In  connection  with  such  transaction,  the  limited
partners  of the Funds  voted to  approve a new  investment  advisory  agreement
between  the Funds  and  Alliance  Corporate  and also  voted to admit  Alliance
Corporate  as  Managing  General  Partner  of the Funds (the  "Managing  General
Partner") to succeed  Equitable  Capital.  Accordingly,  on July 22,  1993,  the
closing date of the transaction described above, Alliance Corporate was admitted
as the  successor  Managing  General  Partner  of the Funds.  Equitable  Capital
assigned all of its interest as General Partner to Alliance Corporate. Robert F.
Shapiro,  Robert W. Lear, Alton G. Marshall and William G. Sharwell, who are not
affiliated  with  Alliance  Corporate or  "interested  persons" of the Funds for
purposes  of the  Investment  Company  Act of 1940 as amended  (the  "Investment
Company  Act"),   served  as  the  Funds'  independent   general  partners  (the
"Independent General Partners").  Messrs. Shapiro and Lear served from June 1988
until the Funds' dissolution, and Mr. Marshall and Dr. Sharwell served from 1989
until the Funds'  dissolution.  The  Managing  General  Partner  is an  indirect
partially-owned subsidiary of The Equitable Life Assurance Society of the United
States  ("Equitable  Life") and is a  registered  investment  adviser  under the
Investment Advisers Act of 1940, as amended. In addition, Alliance Corporate was
admitted  as the  successor  investment  adviser to the Funds  (the  "Investment
Adviser")  pursuant to a new investment  advisory  agreement executed as of July
22, 1993 and since such date, was responsible, subject to the supervision of the
Independent General Partners, for the management of the Funds' investments.

     The Fund  elected to operate as a business  development  company  under the
Investment  Company Act of 1940, as amended.  As such, it was subject to certain
provisions of the Investment  Company Act. The Fund filed Form N-54C to withdraw
its  election  to be treated as a business  development  company on January  27,
1999.  The  description  of the Fund's  investment  objective and policies,  its
management  arrangements  and certain  provisions of the Investment  Company Act
that  were  applicable  to the  Fund  during  its  term  are  set  forth  in the
information  contained in the  Prospectus of the Fund,  dated July 15, 1988 (the
"Prospectus"),   filed  with  the  Securities  and  Exchange   Commission   (the
"Commission")  pursuant  to Rule 424(b)  under the  Securities  Act of 1933,  as
amended (the "Securities  Act"), on July 19, 1988 under the following  captions:
"Investment Objective and Policies," "Management Arrangements" and "Regulation."
Such information is incorporated by reference into this Item 1.

       The Funds  jointly  offered an aggregate  of  1,000,000  units of limited
partnership  interest  ("Units") to investors  in a public  offering  registered
under the Securities Act pursuant to a Registration  Statement on Form N-2 (File
No.  33-20093),  which was declared  effective  under the  Securities Act by the
Commission  on July  15,  1988.  Merrill  Lynch,  Pierce,  Fenner  & Smith  (the
"Agent"),   an   affiliate   of  ML  Fund   Administrators,   Inc.   (the  "Fund
Administrator"), acted as selling agent for the Units offered by the Fund.
<PAGE>
     On October  13,  1988,  the Fund issued  284,611  Units to  investors,  and
Equitable  Capital,  as Managing General  Partner,  admitted 18,288 investors as
limited partners of the Fund (the "Limited  Partners").  The net proceeds of the
offering  of such  Units to the Fund was  $264,688,230  after  giving  effect to
volume discounts of $737,600 and the payment of $19,185,170 in sales commissions
to the Agent.  Equitable  Capital,  in its capacity as Managing General Partner,
contributed a demand  promissory  note in the principal  amount of $2,641,836 as
required by the Amended and Restated Agreement of Limited Partnership,  dated as
of October 13, 1988 (the  "Partnership  Agreement"),  pursuant to which the Fund
had been organized.  Equitable  Capital reduced this note by $367 resulting from
actual  syndication  expenses paid in excess of original  estimates.  The public
offering has been concluded.

     In  connection  with its  organization  and  offering,  the  Fund  incurred
$554,631 in  organizational  expenses  and  $2,633,942  in  offering,  sales and
marketing   expenses.   The   organizational   expenses  were   amortized  on  a
straight-line  basis over a sixty  month  period that  commenced  on October 13,
1988.  Such expenses were fully  amortized as of October 31, 1993. The offering,
sales and marketing  expenses  incurred by the Fund have been paid and accounted
for as a charge to the capital account of the Fund's partners.  The net proceeds
available  for  investment  by the Fund after such  offering  less the return of
capital distributed to the Limited Partners of $45,247,457 equaled $216,252,200.

Investments

     As set forth in the Partnership  Agreement,  the Fund's  investment  period
ended on October 12, 1991,  three years after the Fund's  operations  commenced.
Thereafter,   the  Fund  was  not  permitted  to  acquire  new  Enhanced   Yield
Investments,  but  was  permitted  to make  follow-on  investments  in  existing
portfolio companies. During the years ended December 31, 1998 and 1997, the Fund
made no follow-on investments.

     During  the  year  ended  December  31,  1996,  the Fund  made a  follow-on
investment in one Managed Company (as defined in the Prospectus) at a total cost
of $4,532.

     The Fund was  liquidated  and dissolved as of December 31, 1998,  and as of
that date the Fund had no Enhanced Yield Investments. During 1998, 1997 and 1996
the Fund received  $7,042,600,  $61,774,551 and  $28,181,211,  respectively,  in
principal   payments  and  prepayments   relating  to  certain   Enhanced  Yield
Investments.

     During  its term,  the Fund  invested  in  certain  temporary  investments,
consisting  principally of commercial  paper with  maturities of less than sixty
days.  Proceeds that were not invested in Enhanced Yield Investments or returned
to Limited Partners were held in such temporary investments.
 
Competition

     The Fund has completed its investment  period and  reinvestment  period and
was liquidated  and dissolved as of December 31, 1998.  The Fund  liquidated its
investments  during  fiscal  year 1998 and,  as of December  31,  1998,  held no
portfolio investments.

Employees

     The Fund has no employees.  The Managing  General  Partner,  subject to the
supervision  of the  Independent  General  Partners,  managed and controlled the
Fund's  investments.  Certain officers of Alliance  Corporate were designated as
agents of the Fund with titles  corresponding  to the titles of the offices held
by such  persons  with  Alliance  Corporate.  The Fund  Administrator  performed
administrative services for the Fund on behalf of the Managing General Partner.

Item 2. Properties

       The Fund does not own or lease any physical properties.

Item 3. Legal Proceedings

        The Fund is not party to any material pending legal proceedings.

Item 4.       Submission of Matters to a Vote of Security Holders

       None.

<PAGE>
                                     Part II


Item 5.       Market for Registrant's Common Equity and Related
              Stockholder Matters


     The Fund filed Form 15 with the Commission on January 27, 1999 to terminate
the registration of the Units under the Securities Exchange Act of 1934.

     The  Units  were  illiquid  securities  and  were  subject  to  significant
restrictions on transfer.  The  information in the Prospectus  under the caption
"Transferability  of Units" is incorporated  in this Item 5 by reference.  There
was no  established  trading  market for the Units.  The  Partnership  Agreement
contained restrictions that were intended to prevent the development of a public
market.

     The number of holders of Units as of  December  31,  1998 was  16,712.  The
Managing General Partner held a general partner interest in the Fund and did not
hold any Units.  Pursuant to the terms of the  Partnership  Agreement,  the Fund
generally  made  distributions  within 45 days  after  the end of each  calendar
quarter of cash  income  received  from  investments  in excess of  expenses  of
operation,  reserves for expenses and certain  investments and liabilities.  Net
cash receipts representing  cumulative income and gains were distributed as soon
as practicable after the related disposition.  Such distributions were allocated
among the Managing General Partner, and the Limited Partners, in general,  first
99% to the Limited  Partners and 1% to the Managing  General  Partner  until the
Limited Partners  received a cumulative  priority return of 10% noncompounded on
an annual basis on their investments in Enhanced Yield Investments,  second, 70%
to the  Limited  Partners  and 30% to the  Managing  General  Partner  until the
Managing General Partner has received 20% of all current and prior distributions
on such investments and, thereafter,  80% to the Limited Partners and 20% to the
Managing General Partner.  The Fund's  distribution  procedures are described in
detail in the Prospectus under the caption "Distributions and Allocations";  the
information under such caption is incorporated by reference in this Item 5.


<PAGE>
Item 6. Selection Financial Data
<TABLE>

                                                                   For the Years Ended

<S>                          <C>                    <C>                   <C>                    <C>               <C>
                              December 31, 1998    December 31, 1997   December 31, 1996   December 31, 1995  December 31, 1994
TOTAL FUND INFORMATION:       -----------------    -----------------   -----------------   -----------------  -----------------
Cash Distributions                 $ 12,955,598(a)    $ 81,951,834(c)   $  27,348,085(d)    $   41,174,256        $ 54,554,528 
Net Assets                                    0         24,731,786        110,708,174          112,353,878         157,930,203
Total Assets                                  0         24,840,604        110,843,385          112,437,110         158,039,361 
Net Investment (Loss) Income         (2,188,734)           461,348          5,918,157            5,215,211           6,924,128
Net Change in Unrealized
  Appreciation (Depreciation)
  on Investments                     15,553,015        (22,097,649)        31,877,152            2,627,096         (15,853,762)
Net Realized (Losses) Gains
  on Investments                    (24,090,545)        17,973,591        (12,010,831)         (11,988,596)          1,758,116 

PER UNIT OF LIMITED
PARTNERSHIP INTEREST:

Cash Distributions                 $     45.52(a)     $    287.88(c)    $      95.83(d)     $       144.38              191.33


Cumulative Cash Distributions          1,225.17(b)        1,179.65             891.77               795.94              651.56 
Investment Income                          1.00               9.13              28.80                27.77               36.53 
Expenses                                  (8.69)             (7.52)             (8.22)               (9.63)             (12.44)
Net Investment (Loss) Income              (7.69)              1.60              20.59                18.14               24.09

Net Unrealized Appreciation
 (Depreciation) on Investments            54.10             (76.87)            110.88                 9.14              (55.15)


Net Realized (Losses) Gains
  on Investments                         (83.80)             62.52             (41.78)              (41.70)               6.12 
Net Asset Value                               0              82.91             383.53               390.82              548.47 

</TABLE>

(a) Includes Return of Capital of $8,746,096 or $30.73 per LP Unit.
(b) Includes Return of Capital of $435.13 per LP Unit.
(c) Includes Return of Capital of $35,826,833 or $125.88 per LP Unit.
(d) Includes Return of Capital of $8,128,490 or $28.56 per LP Unit.
<PAGE>
Item 7.       Management's Discussion and Analysis
              of Financial Condition and Results of Operations

Liquidity and Capital Resources

       Net Proceeds of Offering

       On October 13, 1988, the Fund  completed the initial  public  offering of
Units,  admitting 18,288 Limited  Partners who purchased  284,611 Units. The net
proceeds  available  for  investment  by  the  Fund  after  such  offering  were
$261,499,657  after volume  discounts,  sales  commissions  and  organizational,
offering, sales and marketing expenses.

     Investments

     As of December 31, 1998, the Fund had no Enhanced Yield Investments.

     Proceeds from Investments

     During the year ended  December 31, 1998,  the Fund  received the following
proceeds:

     During the year  ended  December  31,  1998,  the Fund  received a total of
$205,465  from  Pergament  Home  Centers,  Inc.  as a  principal  paydown of the
Floating Rate Demand Note held by the Fund. No gain, loss or income was recorded
on this transaction.

     During the year ended  December  31,  1998,  the Fund  received  additional
proceeds of $97,838 from Polaris Pool  Systems,  Inc. This  represents  proceeds
from the sale of the  investments  from prior years that were held in escrow for
future adjustments and expenses.

     During the first quarter ended March 31, 1998,  the Fund sold the remaining
92,636  shares of Lexmark  International  Group,  Inc.  Class B common stock for
$3,724,832 resulting in a gain of $3,107,256 to the Fund.

     During the year ended  December 31, 1998,  the Fund sold its MTI  Holdings,
Inc. 12% Senior  Secured  Note,  common stock and  warrants for  $1,181,251  and
realized a gain of $724,569 on the sale.

     On June 17, 1998, the Fund sold $540,393 par value of R&S/Strauss, Inc. 15%
Senior Subordinated Note for $70,794 resulting in a loss of $469,599.

     On July 24, 1998, the Fund sold its Pergament Home Centers,  Inc.  Floating
Rate Demand Note, Class B and Class C common stocks for $571,200  resulting in a
loss of $10,696,204 to the Fund.

     On September 15, 1998, the Fund sold its Western  Pioneer,  Inc. 10% Senior
Subordinated Note and common stock purchase warrants for $550,000 resulting in a
loss of $669,460 to the Fund.

     On October 7, 1998, the Fund sold its Leather U.S.,  Inc.  common stock for
$159,000 resulting in a loss of $9,183,000 to the Fund.

     On November 5, 1998,  the Fund sold its remaining  portion of  R&S/Strauss,
Inc. 15% Senior  Subordinated Note for $36,026 resulting in a loss of $3,548,581
to the Fund.

     On December 22, 1998, the Fund sold its Quantegy  Acquisition Corp. common
stock for $11,368 resulting in a loss of $3,453,364 to the Fund.

     All proceeds not used to pay  expenses  during the year ended  December 31,
1998 were distributed to Limited  Partners.  The final  distribution was paid on
December  21, 1998.  The Fund was  liquidated  and  dissolved as of December 31,
1998, and a Certificate of  Cancellation  of Certificate of Limited  Partnership
was filed on January 27, 1999.
 
       For  additional  information,  refer  to  the  Supplemental  Schedule  of
Realized Gains and Losses and Note 10 to the Financial Statements.

     The Fund's  Enhanced Yield  Investments  were  typically  issued in private
placement transactions and were subject to certain restrictions on transfer, and
were thus relatively illiquid.

     All cash  dividends,  interest  and other  income  received  by the Fund in
excess  of  expenses  of  operation   and  reserves  for  expenses  and  certain
investments and liabilities were distributed to the Limited Partners of the Fund
and to Alliance Corporate, as the Managing General Partner, within 45 days after
the end of each calendar quarter.  Before each quarterly cash distribution,  the
Fund analyzed the then current cash projections and determined the amount of any
additional reserves it deemed necessary.
<PAGE>
Participation in Enhanced Yield Investments

     The Fund was  liquidated  and dissolved as of December 31, 1998, and had no
assets as of that date. During its term, the Fund invested primarily in Enhanced
Yield  Investments,  also  known  in the  securities  industry  as  "high  yield
securities".   The  securities  in  which  the  Fund  invested  were  issued  in
conjunction  with the  mezzanine  financing  of privately  structured,  friendly
leveraged  acquisitions,  recapitalizations and other leveraged financings,  and
were generally linked with an equity  participation.  Enhanced Yield Investments
are debt and preferred equity securities that are below investment grade,  i.e.,
unrated or rated by Standard & Poor's  Corporation  as BB or lower or by Moody's
Investor Services,  Inc. as Ba or lower. Risk of loss upon default by the issuer
is  significantly  greater with Enhanced Yield  Investments than with investment
grade securities because Enhanced Yield Investments are generally  unsecured and
are often  subordinated  to other creditors of the issuer.  Also,  these issuers
usually  have high  levels of  indebtedness  and are more  sensitive  to adverse
economic  conditions,  such as a recession or increasing  interest  rates,  than
investment  grade  issuers.  Most of these  securities  are  subject  to  resale
restrictions and generally there is no quoted market for such securities.

     Although  the  Fund  could  not   eliminate  its  risks   associated   with
participation  in Enhanced Yield  Investments,  it established  risk  management
policies.  The Fund subjected each prospective  investment to rigorous analysis,
and made only those  investments  that were  recommended by the Managing General
Partner  and  that the  Fund's  investment  guidelines  or that  were  otherwise
approved by the Independent General Partners.

     Fund  investments  were measured  against  specified  Fund  investment  and
performance  guidelines.  To limit the  exposure  of the  Fund's  capital in any
single  issuer,  the Fund limited the amount of its  investment  in a particular
issuer.  The Fund also  continually  monitored  portfolio  companies in order to
minimize the risks associated with participation in Enhanced Yield Investments.

Results of Operations

     For the year ended December 31, 1998, the Fund had a net investment loss of
$2,188,734,  a decrease of $2,650,082 from the net investment income of $461,348
for the year ended  December 31,  1997.  The Fund had net  investment  income of
$5,918,157 for the same period in 1996.  Net  investment  income is comprised of
investment income  (primarily  interest and dividend income) offset by expenses.
The decrease in the 1998 net investment income versus the comparative  period in
1997  reflects a decrease in interest  and  dividend  income and the increase in
Fund Administration Fees and Expenses.

     For the year ended  December 31, 1998,  the Fund had  investment  income of
$284,533, as compared to $2,623,310,  for the same period in 1997 and $8,279,977
for the same  period in 1996.  The  decrease  in 1998  investment  income of 89%
versus  1997 was  primarily  due to a decrease  in the amount of accrual  status
securities  held by the Fund due to  sales  and  repayments  of  Enhanced  Yield
Investments  during  1998.  The  decrease in the 1997  investment  income of 68%
versus  the  comparative  period in 1996 was  primarily  due to an  decrease  in
dividend  income  and debt  securities  held by the Fund  due to the  sales  and
repayments of Enhanced Yield investments during 1997.

     The Fund incurred  expenses of $2,473,267,  for the year ended December 31,
1998, as compared to $2,161,962  for the same period in 1997 and  $2,361,820 for
the same period in 1996. The increase in the 1998 expenses  versus 1997 expenses
of $311,305 was  primarily due to the increase in the Fund  Administration  Fees
and Expenses due to a new Fund Administrative Services Agreement entered into as
of December 31, 1998 (as  described in Note 7 to the Financial  Statements)  and
Independent  General  Partners'  Fees and Expenses  paid by the Fund offset by a
decrease in  Professional  Fees.  The decrease in the 1997 expenses  versus 1996
expenses of $199,858 was primarily due to the decrease in the Professional  Fees
and Fund Administration Fees and Expenses and Independent General Partners' Fees
paid by the Fund.

     The Fund experienced a decrease in net assets resulting from operations for
the year ended  December 31, 1998 in the amount of  $10,726,264 as compared to a
decrease of $3,662,710  for the same period in 1997.  The decrease in net assets
resulting from  operations in 1998 versus 1997 is  attributable to a decrease in
net investment income of $2,650,082,  an increase in unrealized  appreciation of
$37,650,664  offset by an  increase in net  realized  loss of  $42,064,136  (see
Statement of Operations in the Financial Statements). The decrease in net assets
resulting  from  operations  in 1997 of $3,662,710 as compared to an increase in
1996 of $25,784,478 was  attributable to a decrease in net investment  income of
$5,456,809,  an increase in unrealized  depreciation of $53,974,801 offset by an
increase in net realized gains of $29,984,422.
<PAGE>
     For the years ended  December 31, 1998,  1997 and 1996 the Fund incurred an
Investment Advisory Fee of $1,125,652, $1,213,855 and $1,037,447,  respectively,
(as described in Note 6 to the Financial Statements).

     The Fund  Administration  Fees and Expenses (as  described in Note 7 to the
Financial Statements) for the years ended December 31, 1998, 1997 and 1996, were
$1,164,814,  $701,134 and $916,209,  respectively. The increase of $463,680 from
1997 to 1998 is  primarily  due to the Fund  Administration  Fee  changing to an
annual fee of $300,000 plus 100% of all direct  out-of-pocket  expenses incurred
by the Fund Administrator on behalf of the Fund. During the years ended December
31, 1998,  1997 and 1996,  the Fund  incurred a total of $639,814,  $401,134 and
$192,068,  respectively,  of  administrative  expenses  consisting  primarily of
printing,  audit and tax return  preparation  and custodian fees paid for by the
Fund Administrator.

     Independent  General  Partners'  Fees and  Expenses  incurred for the years
ended  December 31, 1998,  1997 and 1996 were  $152,303,  $151,406 and $192,279,
respectively.  The  changes  are  attributable  to  fluctuations  in legal  fees
incurred  by the  Independent  General  Partners.  (See Note 8 to the  Financial
Statements.)

     The Fund incurred  Professional  Fees of $27,334,  $82,050 and $183,323 for
the years ended December 31, 1998, 1997 and 1996,  respectively,  which included
reimbursed  legal fees to  Debevoise  & Plimpton  and  Equitable  Life for legal
services. (See Note 9 to the Financial Statements.)

Unrealized Appreciation/Depreciation and Non-Accrual of Investments

     During  its  term,  the  General  Partners  of the  Fund  determined,  on a
quarterly basis, the fair value of the Fund's portfolio  securities that did not
have a readily ascertainable market value. They were assisted in connection with
such  determination  by  the  Managing  General  Partner,  which  established  a
valuation  committee  comprised  of  senior  executives  to  assess  the  Fund's
portfolio  and  make  recommendations  regarding  the  value  of  its  portfolio
securities.  This  valuation  committee used available  market  information  and
appropriate valuation  methodologies.  In addition, the Managing General Partner
retained Arthur D. Little, Inc., a nationally  recognized  independent valuation
consultant, to review such valuations.

     For privately issued securities in which the Fund typically  invested,  the
fair value of an investment is its initial cost,  adjusted for  amortization  of
discount or premium and as  subsequently  adjusted to reflect the  occurrence of
significant developments.  "Significant developments" are business,  economic or
market events that may affect a company in which an investment  has been made or
the securities comprising such investment. For example, significant developments
that could have resulted in a write-down in value  include,  among other things,
events of default  with  respect to payment  obligations  or other  developments
indicating that a portfolio  company's  performance may fall short of acceptable
levels.  A write-up  in value of an  investment  could  have taken  place when a
significant favorable  development occured,  such as a transaction  representing
the partial sale of an investment that would result in a capital gain or company
performance exceeding expected levels on a sustained basis.

     Although the General  Partners used their best judgment in determining  the
fair value of these investments, there are inherent limitations in any valuation
technique  involving  securities  of  the  type  in  which  the  Fund  invested.
Therefore,  the fair values presented  herein are not necessarily  indicative of
the amount which the Fund could realize in a current transaction.

     For the year ended  December  31,  1998 the Fund  recorded  net  unrealized
appreciation  on  Enhanced  Yield  Investments  of  $15,553,015  as  compared to
$22,097,649 of unrealized  depreciation at December 31, 1997. For the year ended
December 31, 1996,  the Fund recorded net  unrealized  appreciation  on Enhanced
Yield  Investments of $31,877,152.  The change of $37,650,664 from 1997 to 1998,
in  unrealized  depreciation  was  primarily  the  result  of  the  reversal  of
unrealized  depreciation on Pergament Home Centers,  Inc., Quantegy  Acquisition
Corp.,  R&S/Strauss,  Inc. and Leather U.S., Inc. and the reversal of unrealized
appreciation on Lexmark International Group, Inc. and Western Pioneer, Inc. (See
Note 12 to the Financial Statements.)
    
Realized Gains and Losses on Investments

     For the year ended December 31, 1998, the Fund recorded a net realized loss
of $24,090,545 on transactions involving eight Enhanced Yield Investments.  (See
Note 10 to the Financial  Statements and the  Supplemental  Schedule of Realized
Gains and Losses.) For the year ended December 31, 1997, the Fund realized a net
realized gain of  $17,973,591.  For the year ended  December 31, 1996,  the Fund
realized a net realized loss of $12,010,831.
<PAGE>
Item 8.  Financial Statements and Supplementary Data

                        EQUITABLE CAPITAL PARTNERS, L.P.


                                TABLE OF CONTENTS


Independent Auditors' Report

Statements of Assets, Liabilities and Partners' Capital as of
     December 31, 1998 and 1997

Statements of Operations
     For the Years Ended December 31, 1998, 1997 and 1996

Statements of Cash Flows
     For the Years Ended December 31, 1998, 1997 and 1996

Statements of Changes in Net Assets
     For the Years Ended December 31, 1998, 1997 and 1996

Statements of Changes in  Partners'  Capital 
     For the Years Ended December 31, 1998, 1997 and 1996

Supplementary Schedule of Realized Gains and Losses
     For the Year Ended December 31, 1998

Notes to Financial Statements


<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Equitable Capital Partners, L.P.

     We have audited the  accompanying  statements  of assets,  liabilities  and
partners'  capital  of  Equitable  Capital  Partners,  L.P.  (the  "Fund") as of
December 31, 1998 and 1997 and the related statements of operations, cash flows,
changes in net assets and  changes in  partners'  capital  for each of the three
years in the period ended December 31, 1998. These financial  statements are the
responsibility of the Fund's General Partners.  Our responsibility is to express
an opinion on these financial statements based upon our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  Our procedures include
confirmation of securities owned as of December 31, 1998, by correspondence with
the custodian.  An audit also includes assessing the accounting  principles used
and significant estimates made by management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  such financial  statements present fairly, in all material
respects,  the financial  position of the Fund as of December 31, 1998 and 1997,
the results of operations,  its cash flows and the changes in its net assets and
partners'  capital  for  the  respective  stated  periods,  in  conformity  with
generally accepted accounting principles.

     As  explained  in Note 2, the  financial  statements  of the  Fund  include
securities  valued at $11,625,136 as of December 31, 1997 and representing  46.8
percent of total assets,  respectively,  whose values have been estimated by the
General  Partners  of the Fund in the  absence of readily  ascertainable  market
values. We have reviewed the procedures used by the General Partners in arriving
at their  estimate of value of such  securities  and have  inspected  underlying
documentation,  and,  in  the  circumstances,  we  believe  the  procedures  are
reasonable and the documentation  appropriate.  However, because of the inherent
uncertainty of valuation,  those estimated values may differ  significantly from
the  values  that would  have been used had a ready  market  for the  securities
existed, and the differences could be material.

     Our  audits  were  conducted  for the  purpose of forming an opinion on the
basic  financial  statements  taken as a whole.  The  supplemental  schedule  of
realized  gains and losses for the year ended December 31, 1998 is presented for
the  purposes of  additional  analysis  and is not a required  part of the basic
financial statements.  This schedule is the responsibility of the Fund's General
Partners. Such schedule has been subjected to the auditing procedures applied in
our audit of the basic  financial  statements  and,  in our  opinion,  is fairly
stated  in all  material  respects  when  considered  in  relation  to the basic
financial statements taken as a whole.


Deloitte & Touche LLP
New York, New York
February 22, 1998
<PAGE>



                        EQUITABLE CAPITAL PARTNERS, L.P.
             STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL

<TABLE>
<S>                                                               <C>             <C>                          <C>
                                                                                                           
ASSETS:                                                                Notes       December 31, 1998        December 31, 1997
                                                                     ---------     -----------------        ----------------- 
     Investments                                                      2,10,12
         Enhanced Yield Investments at Value-
              Managed Companies
              (amortized cost of $0 at
              December 31, 1998 and $16,931,732
              at December 31, 1997)                                                      $         -             $  7,589,732
              Non-Managed Companies
              (amortized cost of $0 at
              December 31, 1998 and $13,766,546
              at December 31, 1997)                                                                -                7,555,572
         Temporary Investments
              (at amortized cost )                                                                 -                8,098,650

     Cash                                                                                          -                   47,134
     Interest Receivable                                               2,12                        -                   64,768
     Note Receivable                                                    3,4                        -                1,484,748

TOTAL ASSETS                                                                             $         -             $ 24,840,604
                                                                                         ===========             ============


LIABILITIES AND PARTNERS' CAPITAL

     Liabilities                                                                                           
         Professional Fees Payable                                       9               $         -             $     41,548
         Independent General Partners' Fees Payable                      8                         -                   12,396
         Fund Administrative Expenses Payable                            7                         -                   50,149
         Other Accrued Liabilities                                                                 -                    4,725
              Total Liabilities                                                                    -                  108,818

     Partners' Capital
         Managing General Partner                                       3,4                        -                1,134,402
         Limited Partners (284,611 Units)                                4                         -               23,597,384
              Total Partners' Capital                                                              -               24,731,786

TOTAL LIABILITIES AND PARTNERS' CAPITAL                                                  $         -             $ 24,840,604
                                                                                         ===========             ============

</TABLE>

               See the Accompanying Notes to Financial Statements.

<PAGE>

                        EQUITABLE CAPITAL PARTNERS, L.P.
                            STATEMENTS OF OPERATIONS

<TABLE>
<S>                                                                    <C>                <C>            <C>
                                                                                     For the Years Ended
                                                                         --------------------------------------------
                                                                         December 31,    December 31,    December 31, 
                                                                             1998           1997             1996
                                                                         ------------    ------------    ------------
INVESTMENT INCOME- NOTES 2,12:
     Interest and Discount Income                                        $    284,533    $  2,486,632    $  4,478,309
     Dividend Income                                                             --           136,678       3,801,668
          TOTAL INVESTMENT INCOME                                             284,533       2,623,310       8,279,977

EXPENSES:
     Investment Advisory Fee- Note 6                                        1,125,652       1,213,855       1,037,447
     Fund Administration Fees and Expenses- Note 7                          1,164,814         701,134         916,209
     Independent General Partners'
      Fees and Expenses- Note 8                                               152,303         151,406         192,279
     Professional Fees - Note 9                                                27,334          82,050         183,323
     Insurance Fees                                                              --             6,017           5,256
     Valuation Expenses                                                         3,164           7,500          27,306
          TOTAL EXPENSES                                                    2,473,267       2,161,962       2,361,820

NET INVESTMENT (LOSS) INCOME                                               (2,188,734)        461,348       5,918,157

NET CHANGE IN UNREALIZED APPRECIATION
     (DEPRECIATION) ON INVESTMENTS- NOTE 12                                15,553,015     (22,097,649)     31,877,152

NET REALIZED (LOSS) GAIN ON INVESTMENTS- NOTE 10                          (24,090,545)     17,973,591     (12,010,831)

NET (DECREASE) INCREASE IN NET ASSETS
     RESULTING FROM OPERATIONS                                           $(10,726,264)   $ (3,662,710)   $ 25,784,478
                                                                         ============    ============    ============

</TABLE>

               See the Accompanying Notes to Financial Statements



<PAGE>
                                            EQUITABLE CAPITAL PARTNERS, L.P.
                                                STATEMENTS OF CASH FLOW
               
<TABLE>
<S>                                                                      <C>                 <C>                   <C>
                                                                                      For the Year Ended
                                                                         -------------------------------------------
                                                                         December 31,    December 31,    December 31,          
                                                                              1998           1997             1996
INCREASE (DECREASE) IN CASH                                              ------------    ------------    ------------     
CASH FLOWS FROM OPERATING ACTIVITIES:                                   
       Interest and Discount Income                                     $     20,395    $  2,132,489    $  7,505,048
       Fund Administration Fees and Expenses                              (1,214,963)       (709,970)       (893,841)
       Investment Advisory Fee                                            (1,125,652)     (1,213,855)     (1,037,447)
       Independent General Partners' Fees and Expenses                      (164,699)       (163,466)       (183,096)
       Valuation Expenses                                                     (7,888)        (14,438)        (21,501)
       Sale (Purchase) of Temporary Investments, Net                       8,427,553      20,186,427      (6,016,884)
       Proceeds from Sales and Principal Payments of
          Enhanced Yield Investments                                       7,042,600      61,774,551      28,181,211
       Professional Fees                                                     (68,882)        (80,234)       (168,325)
       Insurance Fees                                                           --            (3,742)           (375)
Net Cash Provided by Operating Activities                                 12,908,464      81,907,762      27,364,790
CASH FLOWS FROM FINANCING ACTIVITIES:
       Cash Distributions to Partners                                    (12,955,598)    (81,951,834)    (27,348,085)
Net Cash Used in Financing Activities                                    (12,955,598)    (81,951,834)    (27,348,085)
Net Increase(Decrease) in Cash                                               (47,134)        (44,072)         16,705
Cash at the Beginning of the Period                                           47,134          91,206          74,501
Cash at the End of the Period                                            $       --     $     47,134    $     91,206
                                                                         ============   ============    ============


                                 RECONCILIATION OF NET (DECREASE) INCREASE IN NET ASSETS RESULTING
                                   FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Net (Decrease) Increase In Net Assets
     Resulting From Operations                                           $(10,726,264)   $ (3,662,710)   $ 25,784,478

Adjustments to Reconcile Net (Decrease) Increase in Net Assets
        Resulting from Operations to Net Cash Provided by Operating
        Activities:
Decrease in Investments                                                    39,560,699      63,987,387      34,175,157
Increase in Accrued Interest and Other Investment Income                     (264,138)       (490,821)       (774,928)
Decrease in Prepaid Expenses                                                     --             2,650           5,256
Net Change in Unrealized (Appreciation) Depreciation on Investments       (15,553,015)     22,097,649     (31,877,152)
(Decrease) Increase in Fund Administration Expenses Payable                   (50,149)         (8,836)         22,368
(Decrease) Increase in Other Accrued Liabilities                               (4,725)         (6,938)          5,805
(Decrease) Increase in Independent General Partners' Fees Payable             (12,396)        (12,060)          9,183
(Decrease) Increase in Professional Fees Payable                              (41,548)          1,441          14,623
Total Adjustments                                                          23,634,728      85,570,472       1,580,312
Net Cash Provided by Operating Activities                                $ 12,908,464    $ 81,907,762    $ 27,364,790
                                                                         ============    ============    ============
</TABLE>
                          See the Accompanying Notes to Financial Statements.


<PAGE>
<TABLE>
<CAPTION>
                                              EQUITABLE CAPITAL PARTNERS, L.P.
                                            STATEMENTS OF CHANGES IN NET ASSETS

<S>                                                                    <C>                <C>             <C>
                                                                                     For the Years Ended
                                                                         ----------------------------------------------  
                                                                          December 31,     December 31,    December 31, 
                                                                             1998              1997             1996
                                                                         -------------     ------------    -------------
FROM OPERATIONS:

   Net (Decrease) Increase in Net Assets
      Resulting from Operations                                          $ (10,726,264)   $  (3,662,710)   $  25,784,478

   Cash Distributions to Partners                                          (12,955,598)     (81,951,834)     (27,348,085)

   Reduction in Managing General Partners' Contribution                     (1,049,924)        (361,844)         (82,097)

   Total Decrease                                                          (24,731,786)     (85,976,388)      (1,645,704)

NET ASSETS:

   Beginning of Period                                                      24,731,786      110,708,174      112,353,878

   End of Period                                                         $        --      $  24,731,786    $ 110,708,174
                                                                         =============    =============    =============



</TABLE>
                           See the Accompanying Notes to Financial Statements.


<PAGE>
<TABLE>
<CAPTION>
                        EQUITABLE CAPITAL PARTNERS, L.P.
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

<S>                                                                   <C>       <C>              <C>             <C>
                                                                            Managing             Limited
                                                              Notes      General Partner         Partners             Total
                                                             --------  ---------------------------------------- -------------------

FOR THE YEAR ENDED DECEMBER 31, 1996

Partners' Capital at January 1, 1996                                          $ 1,448,956         $110,904,922        $112,353,878
Cash Distributions to Partners                                                    (73,813)         (27,274,272)        (27,348,085)
Reduction in Managing General Partners' Contribution            3                 (82,097)                   -             (82,097)
Allocation of Net Investment Income                            11                  59,182            5,858,975           5,918,157
Allocation of Net Unrealized Appreciation
   on Investments                                              12                 318,772           31,558,380          31,877,152
Allocation of Net Realized Loss on Investments                                   (120,108)         (11,890,723)        (12,010,831)
Partners' Capital at December 31, 1996                                        $ 1,550,892         $109,157,282        $110,708,174
                                                                              ===========         ============        ============

FOR THE YEAR ENDED DECEMBER 31, 1997

Partners' Capital at January 1, 1997                                          $ 1,550,892         $109,157,282        $110,708,174
Cash Distributions to Partners                                                    (18,019)         (81,933,815)        (81,951,834)
Reduction in Managing General Partners' Contribution            3                (361,844)                   -            (361,844)
Allocation of Net Investment Income                            11                   4,613              456,735             461,348
Allocation of Net Unrealized Depreciation
   on Investments                                              12                (220,976)         (21,876,673)        (22,097,649)
Allocation of Net Realized Gain on Investments                                    179,736           17,793,855          17,973,591
Partners' Capital at December 31, 1997                                        $ 1,134,402         $ 23,597,384        $ 24,731,786
                                                                              ===========         ============        ============


FOR THE YEAR ENDED DECEMBER 31, 1998

Partners' Capital at January 1, 1998                                          $ 1,134,402         $ 23,597,384        $ 24,731,786
Cash Distributions to Partners                                                       (105)         (12,955,493)        (12,955,598)
Reduction in Managing General Partners' Contribution            3              (1,049,924)                   -          (1,049,924)
Allocation of Net Investment Income (Loss)                     11                     962           (2,189,696)         (2,188,734)
Allocation of Net Unrealized Appreciation
   on Investments                                              12                 155,570           15,397,445          15,553,015
Allocation of Net Realized Loss on Investments                                   (240,905)         (23,849,640)        (24,090,545)
Partners' Capital at December 31, 1998                                         $        -          $         -        $          -
                                                                               ==========          ===========        ============

</TABLE>
                           See the Accompanying Notes to Financial Statements.



<PAGE>
<TABLE>
<CAPTION>
                              EQUITABLE CAPITAL PARTNERS, L.P.
                      SUPPLEMENTAL SCHEDULE OF REALIZED GAINS AND LOSSES
                            FOR THE YEAR ENDED December 31, 1998

<S>                                             <C>                 <C>        <C>            <C>             <C>

                                                              PAR VALUE OR
                                                DATE OF         NUMBER OF       AMORTIZED         NET           REALIZED
SECURITY                                      TRANSACTION        SHARES          COST           PROCEEDS       GAIN (LOSS)
----------------------------------           -----------     --------------   ------------    ------------    ------------         

Lexmark International Group, Inc. 
   Common Stock                                 various            92,636      $   617,576     $3,724,832     $  3,107,256

MTI Holdings, Inc. 
   12% Sr. Sec. Note                            3/12/98        $  220,102          220,102        220,102                -
   Common Stock                                                    15,772          236,580        236,580                -
   Common Stock Purchase Warrants                                   4,397               -               -                -


Total Net Realized Gain for the
 Three Months Ended March 31, 1998                                             $ 1,074,258     $4,181,514     $  3,107,256
                                                                               ===========     ==========     ============

MTI Holdings, Inc. 
   Common Stock                                                    15,772      $         -     $  617,497     $    617,497 
   Common Stock Purchase Warrants                                   4,397                -        107,072          107,072 

Polaris Pool Systems, Inc. 
  Common Stock                                  4/23/98                 -                -          3,561            3,561 (A)

R&S/Strauss, Inc. 
   15% Sr. Sub. Note                            6/17/98        $  540,393          540,393         70,794         (469,599)

Total Net Realized Gain for the
  Three Months Ended June 30, 1998                                             $   540,393     $  798,924     $    258,531
                                                                               ===========     ==========     ============
Pergament Home Centers, Inc.
  Floating Rate Demand Note                     7/24/98        $3,236,800      $ 2,699,404     $  571,200     $ (2,128,204) 
  Common Stock Class B                                            380.800        8,568,000              -       (8,568,000)
  Common Stock Class C                                            135.912                -              -                -

Western Pioneer, Inc.                                
   10% Sr. Sub. Note                            9/15/98        $9,460,000        1,219,460        550,000         (669,460)
   Common Stock Purchase Warrants                                 162,161                -              -                -


Total Net Realized Loss for the
  Three Months Ended September 30, 1998                                       $ 12,486,864    $1,121,200     $(11,365,664)
                                                                               ===========     ==========     ============  
Leather U.S., Inc.
  Common Stock                                  10/7/98               795     $  9,342,000    $  159,000     $ (9,183,000)       

R&S/Strauss, Inc.
  15% Sr. Sub. Note                             11/5/98        $3,584,607        3,584,607         36,026       (3,548,581)

Quantegy Acquisition Corp.                      
  Common Stock                                  12/22/98              162        3,464,732         11,368       (3,453,364)  

Polaris Pool Systems, Inc.
  Common Stock                                  12/31/98                -                -         94,277           94,277 (A)
 

Total Net Realized Loss for the
  Three Months Ended December 31, 1998                                        $ 16,391,339    $   300,671    $ (16,090,668)
                                                                               ===========     ==========     ============


Total Net Realized Loss for the
  Year Ended December 31, 1998                                                $ 30,492,854    $ 6,402,309    $ (24,090,545)
                                                                               ===========     ==========     ============


(A)  Proceeds represent a distribution to the Fund from the escrow account.
</TABLE>

                             See the Accompanying Notes to Financial Statements.


<PAGE>
                        EQUITABLE CAPITAL PARTNERS, L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1998

1.  Partnership Dissolution and Liquidation

     Equitable Capital Partners, L. P. (the "Fund") sold its last Enhanced Yield
Investment  on December  22, 1998 and,  thereby,  dissolved in  accordance  with
Article 4, Section  4.01 (iv) of its Amended and  Restated  Agreement of Limited
Partnership.

     Final  distributions were paid to the Limited Partners on December 21,1998.
Accordingly,  the  accompanying  financial  statements  are the final  financial
statements of the Partnership.

     A Certificate of  Cancellation  of Certificate of Limited  Partnership  was
accepted for filing by the  Secretary of State of the State  Delaware on January
27, 1999.

     Organization and Purpose

     Equitable  Capital  Partners,  L.P.  (the  "Fund")  was  formed  along with
Equitable Capital Partners  (Retirement  Fund), L.P. (the "Retirement Fund," and
collectively  with the Fund referred to as the "Funds") and the  Certificates of
Limited  Partnership  were filed  under the  Delaware  Revised  Uniform  Limited
Partnership Act on February 2, 1988. The Funds' operations  commenced on October
13, 1988.

     On July 22, 1993,  Equitable  Capital  Management  Corporation  ("Equitable
Capital"),  formerly the Managing General Partner and investment  adviser of the
Funds,  transferred   substantially  all  of  the  assets  comprising  Equitable
Capital's business to Alliance Capital Management L.P. ("Alliance  Capital") and
its  wholly-owned  subsidiary,  Alliance  Corporate  Finance Group  Incorporated
("Alliance  Corporate").  In  connection  with  such  transaction,  the  limited
partners,  (the  "Limited  Partners")  of  the  Funds  voted  to  approve  a new
investment  advisory agreement between the Funds and Alliance Corporate and also
voted to admit Alliance  Corporate as Managing  General  Partner of the Funds to
succeed Equitable  Capital.  Accordingly,  on July 22, 1993, the closing date of
the  transaction  described  above,  (i) Alliance  Corporate was admitted as the
successor  Managing General Partner of the Funds (ii) Equitable Capital withdrew
from the Funds as Managing  General  Partner and assigned all of its interest as
General  Partner to Alliance  Corporate and (iii) Alliance  Corporate  succeeded
Equitable  Capital  as the  investment  adviser to the Funds  pursuant  to a new
investment advisory agreement.  Alliance Corporate (the "Investment Adviser") is
a registered investment adviser under the Investment Advisers Act of 1940.

    Prior to July 22, 1993,  Equitable  Capital was responsible,  subject to the
supervision of the independent  general partners of the Funds (the  "Independent
General Partners"), for the management of the Fund's investments. As of July 22,
1993,  Alliance  Corporate  assumed  such  responsibilities  in its  capacity as
Managing General Partner and Investment Adviser of the Funds.

     The Funds elected to operate as business  development  companies  under the
Investment  Company Act of 1940, as amended.  The Funds seek current  income and
capital  appreciation  potential  through  investments in  privately-structured,
friendly  leveraged  acquisitions  and other leveraged  transactions.  The Funds
pursued this objective by investing  primarily in subordinated  debt and related
equity securities  ("Enhanced Yield Investments") issued in conjunction with the
"mezzanine   financing"  of  friendly   leveraged   acquisitions  and  leveraged
recapitalizations.

     As stated in the  Partnership  Agreement,  the Fund  reached the end of its
10-year term on October 13, 1998. The Fund made a final distribution on December
21, 1998.

2.     Significant Accounting Policies

       Basis of Accounting

       For financial reporting purposes, the Fund's records are maintained using
the accrual method of accounting.

       Valuation of Investments

     Securities  are valued at market or fair  value.  Market  value is used for
securities  for which market  quotations are readily  available.  For securities
without a readily  ascertainable  market value,  fair value is determined,  on a
quarterly  basis,  in good faith by the General  Partners of the Fund. The total
value of  securities  without a  readily  ascertainable  market  value is $0 and
$11,625,136 as of December 31, 1998 and 1997,  respectively,  representing 46.8%
of 1997 total  assets.  In  connection  with such  determination,  the  Managing
General  Partner has  established  a  valuation  committee  comprised  of senior
executives to assess the Fund's portfolio and make recommendations regarding the
value  of  the  Fund's  portfolio  securities.  This  valuation  committee  uses
available  market  information  and  appropriate  valuation  methodologies.   In
addition,  the Managing  General Partner has retained Arthur D. Little,  Inc., a
nationally  recognized   independent   valuation  consultant,   to  review  such
valuations.
<PAGE>
       For privately issued securities in which the Fund typically invests,  the
fair value of an investment is its initial cost,  adjusted for  amortization  of
discount or premium and as  subsequently  adjusted to reflect the  occurrence of
significant developments.  "Significant developments" are business,  economic or
market events that may affect a company in which an investment  has been made or
the securities comprising such investment. For example, significant developments
that could result in a write-down in value include,  among other things,  events
of default with respect to payment obligations or other developments  indicating
that a portfolio  company's  performance may fall short of acceptable  levels. A
write-up in value of an investment could take place when a significant favorable
development  occurs,  such as a transaction  representing the partial sale of an
investment that would result in a capital gain, or company performance exceeding
expected levels on a sustained  basis.  Although the General  Partners use their
best  judgment in  determining  the fair value of these  investments,  there are
inherent limitations in any valuation technique involving securities of the type
in which the Fund invests.  Therefore,  the fair values presented herein are not
necessarily  indicative  of the amount which the Fund could realize in a current
transaction.

       Temporary  Investments  with  maturities of 60 days or less are valued at
amortized cost, which  approximates  market value.  Temporary  Investments which
mature in more than 60 days, for which market quotations are readily  available,
are valued at the most recent bid price or the equivalent  quoted yield obtained
from one or more of the market makers.

    Interest Receivable on Investments

    Investments will generally be placed on non-accrual status in the event of a
default  (after  applicable  grace period  expires) or if the  Managing  General
Partner  determines  that  there  is no  reasonable  expectation  of  collecting
interest.

    Payment-In-Kind Securities

     All  payment-in-kind  securities received in lieu of cash interest payments
from the Fund's  portfolio  companies  were  recorded at face value,  unless the
Managing General Partner  determines that there is no reasonable  expectation of
collecting the full principal amounts of such securities.

    Income Taxes

     As discussed in Note 13, no provision  for income taxes has been made since
all income and losses are  allocated  to the Fund's  partners  ("Partners")  for
inclusion in their respective tax returns.

    Investment Transactions

    Enhanced Yield  Investments - The Fund records  transactions  on the date on
which it  obtains  an  enforceable  right to demand  the  securities  or payment
thereof.

    Temporary Investments - The Fund records transactions on the trade date.

    Realized  gains and losses on  investments  are  determined  on the basis of
specific identification for accounting and tax purposes.

    Sales, Marketing and Offering Expenses and Sales Commissions

    Sales  commissions and selling discounts have been allocated to the specific
Partners' accounts to which they are applicable.  Sales,  marketing and offering
expenses are  allocated  between the Funds in  proportion to the number of units
issued  by  each  Fund  and to the  Partners  in  proportion  to  their  capital
contributions.

3.     Note Receivable

     On July 22, 1993,  pursuant to the terms of the Fund's Amended and Restated
Agreement of Limited Partnership,  Alliance Corporate, as the successor Managing
General Partner of the Fund, has contributed a non-interest  bearing  promissory
note  (the  "Note")  to the Fund in an  aggregate  amount  equal to 1.01% of the
aggregate Net Capital  Contributions of all Limited Partners (less distributions
representing  returns of capital).  Net Capital  Contributions  are comprised of
gross  offering  proceeds,  after giving effect to volume  discounts  (and after
netting of sales  commissions,  organization,  offering and sales and  marketing
expenses),  less  returns  of  capital  distributed  to  Limited  Partners.  The
principal amount of the Note is reduced proportionally as returns of capital are
received  by the  Fund.  Such  return of  capital  received  for the year  ended
December 31, 1998 resulted in a $1,049,924  reduction of the principal amount of
the Note.  The remainder of the Note was paid by Alliance  Capital at year ended
December 31, 1998.
<PAGE>
4.     Capital Contributions

    On October 13,  1988,  the Fund closed the  initial  public  offering of its
units of Limited Partner  interests  ("Units").  Equitable  Capital,  the Fund's
Managing General Partner at that time, accepted  subscriptions for 284,611 Units
and admitted 18,288 Limited Partners.

    The Limited Partners' total capital  contributions were $283,873,400,  after
giving  effect to volume  discounts  allowed of  $737,600.  Equitable  Capital's
aggregate  capital  contribution  was in the  form of a  promissory  note in the
principal amount of $2,641,469.  On July 22, 1993,  Equitable Capital's note was
cancelled and Alliance Corporate,  as successor Managing General Partner, made a
capital contribution in the form of a promissory note on such date, as described
in Note 3. Sales,  marketing and offering expenses and selling  commissions have
been charged against  proceeds  resulting in net capital  contributed by Limited
Partners of $261,531,542.

    Allocation of income,  loss and distributions of cash are made in accordance
with the Partnership Agreement as further discussed in Note 11.

5.     Sales, Marketing and Offering Expenses and Sales Commissions

    The Fund  expended a total of $535,631  for the  reimbursement  of sales and
marketing expenses.  Aggregate sales and marketing expenses of the Funds may not
exceed  $2,528,415  or 0.5% of the  aggregate  capital  contributions  and  were
allocated  proportionately to the number of Units issued by each Fund. Aggregate
sales and marketing expenses for the Funds totalled $951,683.

    The Fund also paid $2,098,311 for the  reimbursement  of offering  expenses.
These expenses,  along with the offering expenses of the Retirement Fund and the
organizational  expenses  of the  Funds,  may not exceed  $6,000,000.  Aggregate
offering and organizational expenses for the Funds totalled $4,711,806.

     For their  services as selling  agent,  the Fund paid sales  commissions to
Merrill Lynch, Pierce, Fenner & Smith Incorporated in the amount of $19,185,170,
of which Equico Securities  Corporation,  an affiliate of Equitable  Capital,  a
related party, received $317,150 as a selected dealer.

6.   Investment Advisory Fee

     Alliance Corporate has been receiving a quarterly  Investment Advisory Fee,
at the  annual  rate of 1.0% of the  Fund's  Available  Capital,  with a minimum
annual payment of $2,000,000 collectively for the Funds, less 80% of commitment,
transaction,  investment  banking and  "break-up"  or other fees  related to the
Fund's investments  ("Deductible Fees"). Available Capital is defined as the sum
of the aggregate Net Capital  Contributions  of the Partners less the cumulative
amount of returns of Capital  distributed  to Partners and realized  losses from
investments.

     As stated in the  Partnership  Agreement,  the  Fund's  allocable  share of
Minimum  Amount is $1,125,650 or $281,413 per quarter.  

     The  Investment  Advisory Fee is calculated  and paid quarterly in advance.
The  Investment  Advisory Fees paid by the Fund for the years ended December 31,
1998, 1997 and 1996 were  $1,125,652,  $1,213,855 and $1,037,447,  respectively.
The decrease from 1997 to 1998 in the  Investment  Advisory Fee is due primarily
to 1997  reflecting an adjustment for the difference  between the Minimum Amount
due to the Investment Advisor and what was paid for the quarters ending December
31, 1996 and March 31, 1997.

     The Investment Advisory Agreement was terminated on December 31, 1998.

7.     Fund Administration Fees and Expenses

     In accordance with the Partnership  Agreement,  beginning October 13, 1996,
the Fund Administration Fee is an annual fee of $300,000 plus 100% of all direct
out-of-pocket expenses incurred by the Fund Administrator on behalf of the Fund.

     As compensation  for its services during the fourth through seventh year of
operation of the Funds,  ML Fund  Administrators,  Inc.  ("MLFAI"),  as the Fund
administrator,  received from the Funds an annual amount equal to the greater of
the (i) Minimum Fee and (ii) the Funds' prorated proportion (based on the number
of Units  issued by the  Funds)  of 0.45% of the  excess  of the  aggregate  net
offering  proceeds  of the Units  issued by the Funds over 50% of the  aggregate
amount of capital  reductions of the Funds (subject to an annual maximum of $3.2
million).  The  Minimum  Fee is 1% of the gross  offering  price of Units in the
Funds, but not greater than $500,000.  The Fund Administration Fee is calculated
and paid quarterly in advance. The Fund Administration Fees paid by the Fund for
the years ended December 31, 1998,  1997 and 1996,  were $525,000,  $300,000 and
$724,141, respectively.

     In addition to the Fund  Administration  Fee,  MLFAI is entitled to receive
reimbursement  for a  portion  of  direct  out-of-pocket  expenses  incurred  in
connection with the administration of the Fund,  commencing on October 13, 1992.
For the years ended December 31, 1998 and 1997, the Fund incurred Administrative
Expenses of $639,814 and $401,134,  respectively,  which consisted primarily of
printing,  audit and tax return preparation and custodian fees paid for by MLFAI
on behalf of the Fund.
<PAGE>
     Upon  termination  of the  Fund  on  December  31,  1998,  the  prior  Fund
Administrative  Services  Agreement with MLFAI was  terminated.  A new agreement
commencing January 1, 1999, will provide certain post termination administrative
services.

8.     Independent General Partners' Fees and Expenses

       As compensation for their services,  each Independent  General Partner is
entitled to a $30,000 annual fee (payable  quarterly)  from the Fund in addition
to $500 for each  meeting  attended  plus  reimbursement  for any  out-of-pocket
expenses.  In accordance with the Fund's  Partnership  Agreement,  the amount of
such fee is reviewed annually by the Independent General Partners.

     For the years ended  December 31, 1998,  1997 and 1996,  the Fund  incurred
$152,303, $151,406 and $192,279,  respectively, of Independent General Partners'
Fees and Expenses.

9.   Related Party Transactions

     For the  year  ended  December  31,  1998 the Fund  paid no  related  party
expense.  For the years ended  December  31, 1997 and 1996 the Fund paid $32,246
and $76,426,  respectively, as reimbursement for amounts paid for legal services
provided  by  Equitable  Life in  connection  with  the  Fund's  Enhanced  Yield
Investments.  The Fund is paying Alliance  Corporate an Investment  Advisory Fee
for its  services  as  described  in Note 6.  Additionally,  the Fund paid sales
commissions to Equico Securities, a related party, as described in Note 5.

10. Investment Transactions

     The Fund invested  primarily in Enhanced Yield  Investments,  also known in
the securities industry as "high yield securities".  The securities in which the
Fund has invested were issued in  conjunction  with the  mezzanine  financing of
privately  structured,  friendly leveraged  acquisitions,  recapitalizations and
other   leveraged   financings,   and  are  generally   linked  with  an  equity
participation.   Enhanced  Yield  Investments  are  debt  and  preferred  equity
securities that are unrated or are rated by Standard & Poor's  Corporation as BB
or lower and by Moody's  Investor  Services,  Inc. as Ba or lower.  Risk of loss
upon  default  by the  issuer  is  significantly  greater  with  Enhanced  Yield
Investments  than  with  investment  grade  securities  because  Enhanced  Yield
Investments  are  generally  unsecured  and  are  often  subordinated  to  other
creditors  of the  issuer.  Also,  these  issuers  usually  have high  levels of
indebtedness  and are more sensitive to adverse economic  conditions,  such as a
recession or increasing  interest rates, than investment grade issuers.  Most of
these  securities are subject to resale  restrictions  and generally there is no
quoted market for such securities.

     Although the Fund cannot eliminate its risks associated with  participation
in Enhanced Yield Investments,  it has established risk management policies. The
Fund subjected each prospective  investment to rigorous analysis,  and made only
those investments that were recommended by the Managing General Partner and that
met the Fund's  investment  guidelines  or that were  otherwise  approved by the
Independent  General  Partners.  Fund investments are measured against specified
Fund investment and performance guidelines.  To limit the exposure of the Fund's
capital in any single issuer, the Fund limited the amount of its investment in a
particular  issuer. The Fund also continually  monitors  portfolio  companies in
order to minimize the risks  associated  with  participation  in Enhanced  Yield
Investments.

     During the year  ended  December  31,  1998,  the Fund  received a total of
$205,465  from  Pergament  Home  Centers,  Inc.  as a  principal  paydown of the
Floating Rate Demand Note held by the Fund. No gain, loss or income was recorded
on this transaction.

     During the year ended  December  31,  1998,  the Fund  received  additional
proceeds of $97,838 from Polaris Pool  Systems,  Inc. This  represents  proceeds
from the sale of the  investments  from prior years that were held in escrow for
future adjustments and expenses.

     During the first quarter ended March 31, 1998,  the Fund sold the remaining
92,636  shares of Lexmark  International  Group,  Inc.  Class B common stock for
$3,724,832 resulting in a gain of $3,107,256 to the Fund.

     During the year ended  December 31, 1998,  the Fund sold its MTI  Holdings,
Inc. 12% Senior  Secured  Note,  common stock and  warrants for  $1,181,251  and
realized a gain of $724,569 on the sale.

     On June 17, 1998, the Fund sold $540,393 par value of R&S/Strauss, Inc. 15%
Senior Subordinated Note for $70,794 resulting in a loss of $469,599.

     On July 24, 1998, the Fund sold its Pergament Home Centers,  Inc.  Floating
Rate Demand Note,  Class B and C common stocks for $571,200  resulting in a loss
of $10,696,204 to the Fund.
<PAGE>

     On September 15, 1998,  the Fund sold its Western  Pioneer,  Inc 10% Senior
Subordinated Note and common stock purchase warrants for $550,000 resulting in a
loss of $669,460 to the Fund.

     On October 7, 1998, the Fund sold its Leather U.S., Inc. common stock for
$159,000 resulting in a loss of $9,183,000 to the Fund.

     On November 5, 1998,  the Fund sold its remaining  portion of  R&S/Strauss,
Inc. 15% Senior  Subordinated Note for $36,026 resulting in a loss of $3,548,581
to the Fund.

     On December 22, 1998, the Fund sold its Quantegy  Acquisition  Corp. common
stock for $11,368 resulting in a loss of $3,453,364 to the Fund.

     All proceeds not used to pay  expenses  during the year ended  December 31,
1998 were distributed to Limited  Partners.  The final  distribution was paid on
December  21, 1998.  The Fund was  liquidated  and  dissolved as of December 31,
1998, and a Certificate of Cancellation  of Certificates of Limited  Partnership
was filed on January 27, 1999.

     As of December  31,  1998 the Fund had no  investments  in  Enhanced  Yield
Securities.

11.    Allocation of Profits and Losses

    Pursuant to the terms of the Partnership  Agreement,  net investment  income
and gains and losses on investments are generally allocated between the Managing
General  Partner  and the  Limited  Partners  based upon cash  distributions  as
follows:

    first,  99% to the Limited  Partners and 1% to the Managing  General Partner
    until the Limited Partners have received a cumulative priority return of 10%
    non-compounded  on an annual basis on their  investments  in Enhanced  Yield
    Investments;

    second,  70% to the Limited Partners and 30% to the Managing General Partner
    until the Managing General Partner has received 20% of all current and prior
    distributions on such investments;

    and thereafter, 80% to the Limited Partners and 20% to the Managing
    General Partner.

     For the year ended  December 31, 1998,  earnings were  allocated 99% to the
Limited Partners, as a class, and 1% to the Managing General Partner, except for
certain adjustments which were necessary in allocating investment loss.

12.    Unrealized Appreciation/Depreciation and Non-Accrual of Investments

     For the year ended  December 31,  1998,  the Fund  recorded net  unrealized
appreciation on Enhanced Yield Investments of $15,553,015. Such appreciation was
the  result  of  adjustments  in  value  made  with  respect  to  the  following
investments during the year ended December 31, 1998:

     The amount  includes the reversal of $2,902,592 of unrealized  appreciation
of Lexmark  International  Group,  Inc.  Class B common stock due to the sale of
92,636 shares.

     On March 31, 1998, Quantegy Acquisition Corp. common stock was written down
from 100% to 15% of the cost resulting in unrealized  depreciation of $2,945,022
to the Fund.
    
     On March 31,  1998,  R&S/Strauss, Inc.  15%  Senior  Subordinated  Note was
written down from 100% to 25% of par,  resulting in unrealized  depreciation  of
$3,093,750 to the Fund.

     On June 30, 1998, Quantegy  Acquisition Corp. common stock was written down
from 15% of cost to 6.5% of the cost  resulting in  unrealized  depreciation  of
$292,501 to the Fund.

     On June 30,  1998,  R&S/Strauss,  Inc.  15%  Senior  Subordinated  Note was
written down from 25% to 13% of par,  resulting in  unrealized  depreciation  of
$430,153 to the Fund.

     The  reversal  of $405,295 of  unrealized  depreciation  due to the sale of
$540,393 par value of R&S/Strauss, Inc. 15% Senior Subordinated Note.

     The reversal of $10,732,147 of unrealized  depreciation  due to the sale of
its  Pergament,  Home Centers,  Inc.  Floating  Rate Demand Note,  Class B and C
common stocks.

     The reversal of $1,618,540 of  unrealized  appreciation  due to the sale of
its  Western  Pioneer,  Inc.  10% Senior  Subordinated  Note and  common  stock
purchase warrants.
<PAGE>

     On September 30, 1998, Quantegy  Acquisition Corp. common stock was written
down from 6.5% of cost to zero resulting in unrealized  depreciation of $227,209
to the Fund.

     On  September  30,  1998,  the  remaining  R&S/Strauss,   Inc.  15%  Senior
Suborinated  Note  was  written  down  from  13%  of par to  zero  resulting  in
unrealized depreciation of $465,999 to the Fund.
    
     The reversal of $9,342,000 of  unrealized  depreciation  due to the sale of
its Leather U.S., Inc. common stock.

     The reversal of $3,464,732 of  unrealized  depreciation  due to the sale of
its Quantegy Acquisition Corp. common stock.

     The reversal of $3,584,607 of  unrealized  depreciation  due to the sale of
its R&S/Strauss, Inc. 15% Senior Subordinated Note.
     
13. Income Taxes

       No  provision  for income taxes has been made since all income and losses
are  allocated to the Fund's  partners for  inclusion  in their  respective  tax
returns.

     Pursuant to Statement of Financial  Accounting Standards No. 109 Accounting
for Income Taxes,  the Fund is required to disclose any  difference  between the
tax basis of the Fund's assets and  liabilities  versus the amounts  reported in
the Financial Statements. Due to the termination,  the partnership had no assets
or liabilities on December 31, 1998.


<PAGE>
Item 9.       Disagreements on Accounting and Financial Disclosure

       None.

                                    Part III

Item 10.      Directors and Executive Officers of the Registrant

The Fund

     The Fund's general  partners (the "General  Partners") were responsible for
the management and administration of the Fund. The General Partners consisted of
Alliance  Corporate  succeeding  Equitable  Capital,  as  the  Managing  General
Partner,  and four individuals  serving as Independent  General  Partners.  Each
Independent  General Partner was not an "interested  person" of the Fund as such
term  is  defined  in the  Investment  Company  Act of  1940,  as  amended  (the
"Investment Company Act").

Independent General Partners

     The Independent  General Partners provided overall guidance and supervision
with  respect to the  operations  of the Fund and  perform  the  various  duties
imposed on the  directors of business  development  companies by the  Investment
Company Act of 1940. The Independent  General  Partners  supervised the Managing
General Partner and must, with respect to any Enhanced Yield Investment,  either
certify that it meets the Fund's investment  guidelines or specifically  approve
it. The Independent General Partners were also responsible for approving certain
transactions  pursuant to the  conditions  of an  exemptive  order issued by the
Securities  and  Exchange  Commission  (the  "Commission")  under which the Fund
operates.  In  addition,  if a  portfolio  company is in material  default  with
respect to its payment  obligations under any lending agreement to which it is a
party or has a ratio of earnings before interest, taxes and depreciation to cash
fixed charges of 1.1 to 1 or less for the latest fiscal year for which financial
statements  are  available,  the  Independent  General  Partners are required to
approve  any  changes in the terms of the Fund's  investment  in such  portfolio
company.

     Messrs.  Robert W. Lear and Robert F. Shapiro served as Independent General
Partners of the Fund and the Retirement Fund since June 1988. On April 12, 1989,
Mr. Alton G. Marshall and Dr.  William G. Sharwell were admitted to the Fund and
the Retirement Fund, increasing the total number of Independent General Partners
to four.  Each  Independent  General  Partner  held  office  until  the Fund was
liquidated and dissolved. 

     Mr. Lear, age 81, has been an Executive-in-Residence and Visiting Professor
at the Columbia  University Graduate School of Business since 1977. He is also a
director of Cambrex Corp. and the Korea Fund (a closed-end investment fund). Mr.
Lear is a trustee of the Scudder Institutional Funds (mutual funds) and a member
of the advisory  board of the Welsh,  Carson,  Anderson,  Stowe Venture  Capital
Funds.

     Mr.  Shapiro,  age  64,  is  the  President  of  RFS  &  Associates,   Inc.
(consultants  and  investments).  From  1986 to 1987 he was the  Co-Chairman  of
Wertheim Schroeder & Co. Inc.  (investment bankers) and from 1974 to 1986 he was
the President of its predecessor,  Wertheim & Co. Inc. Mr. Shapiro is a director
of TJX Companies,  Inc. (specialty  retailing),  a director of American Building
Companies and the Burnham Fund Inc.  (mutual fund).  Mr. Shapiro was Chairman of
the Securities Industry Association in 1985.

     Mr.  Marshall,  age 77, is  Senior  Fellow  of the  Nelson  A.  Rockefeller
Institute of Government.  He is also President of Alton G. Marshall  Associates,
Inc. (real estate  consultants).  He was Chairman and Chief Executive Officer of
Lincoln  Savings Bank from 1984 to 1991. He is also a Director of New York State
Electric and Gas Corporation.  He is a Trustee of EQK Realty Investors I and EQK
Green Acres (real  estate  investors),  and a Trustee of The Hudson River Trust,
which is a mutual fund receiving investment advice from Alliance Capital.

     Dr. Sharwell,  age 78, served as the President of Pace University from 1984
to 1990,  after  retiring in 1984 as Senior Vice President of AT&T. He is also a
director of USLife Corporation,  American Biogenetic  Sciences,  Inc. and United
States Life Insurance Company.
<PAGE>
Managing General Partner

     The Managing General Partner was responsible for purchasing investments for
the Fund which the Independent General Partners reviewed for compliance with the
investment  guidelines  or  otherwise  approved,  for  providing  administrative
services to the Fund and for the admission of assignee  Limited  Partners to the
Fund.

Management of Alliance Corporate and the Fund

       The senior officers of Alliance Corporate  responsible for overseeing the
management of the Fund are:

                             Position with Alliance Corporate Finance
                             Group Incorporated
                             ----------------------------------------

James R. Wilson              President

William Gobbo, Jr.           Senior Vice President

Christopher Bricker          Vice President and Chief Accounting Officer


       James R. Wilson, age 52, is the President of Alliance Corporate and is in
charge of Alliance Corporate's Finance Department. He has specialized in private
placement  investment  management for over 20 years. He joined Equitable Life in
1970. From 1975 to 1978, he was in charge of the Private Placement  Department's
Atlanta regional office, responsible for making direct placement loans to middle
market  companies.  He then  returned to the home office to supervise the credit
review and approval  procedures of all six regional offices. In 1980, Mr. Wilson
joined  the  Investment   Recovery  Division  of  Equitable  Capital  Management
Corporation and  subsequently  became its head.  During his tenure in investment
recovery,   he  was  instrumental  in  a  number  of  major  restructurings  and
recapitalizations  of  troubled  companies  and  served as  chairman  of several
creditors'  committees.  Mr. Wilson was elected senior vice president and deputy
head of Equitable Capital's Corporate Finance Department in 1985, and in 1991 he
became executive vice president and head of the Corporate Finance Department. He
was named  President of Alliance  Corporate  Finance Group in 1993 in connection
with the Alliance  Capital/Equitable  Capital  merger.  Mr. Wilson has served on
several  corporate Boards and presently is a director of US Leather,  Inc. He is
active in private placement industry events, has been a speaker at many industry
conferences on leveraged buyouts and mezzanine finance and served as Chairman of
the annual  Private  Placement  Conference in 1994.  Mr. Wilson is a graduate of
Denison University and holds an MBA from the University of Pittsburgh.

     Mr.  William  Gobbo,  Jr.,  age 54, is a Senior Vice  President of Alliance
Corporate.  Mr. Gobbo joined Alliance  Corporate  through the  combination  with
Equitable  Capital.  Mr. Gobbo joined  Equitable Life in 1967 as an economist in
the office of  Equitable's  Chief  Economist.  He joined the  Private  Placement
Department  in 1976 and in 1984  became  head of an  investment  group  that was
responsible  for  the  Department's   lending  activities   involving  financial
institutions and heavy industrial companies.

     Christopher J. Bricker is a Vice President of Alliance Fund Services. He is
responsible  for the  Accounting  operations for  approximately  85 Offshore and
Partnership  Investment  Vehicles with approximately $20 billion in assets under
management.  Mr. Bricker has been with Alliance for 7 years and prior to joining
Alliance,   he  worked  at  Dean  Witter  in  their  Intercapital  Division  for
approximately  2 years.  Mr. Bricker has a BS in Accounting  from Marist College
and a MBA in Finance from Long Island University.


<PAGE>
 
The Investment Adviser

       As a result of the combination of the businesses of Equitable Capital and
Alliance Capital,  Equitable  Capital's  investment  advisory agreement with the
Fund  terminated  in  accordance  with its terms on July 22, 1993. On that date,
Alliance Corporate succeeded Equitable Capital as the Fund's investment adviser.
As investment  adviser to the Fund,  Alliance  Corporate is responsible  for the
identification, management and liquidation of all investments for the Fund.

The Administrator

     The Administrator  performs certain operating and  administrative  services
for  the  Fund  on  behalf  of  the  Managing  General  Partner  pursuant  to an
administrative  services  agreement,  dated  October 13,  1988,  among the Fund,
Equitable Capital and the Administrator. Under a new agreement that commenced on
January 1,  1999,  the  Administrator  will  provide  certain  post  termination
administrative services.

       The information contained in the Prospectus under the caption "Management
Arrangements" is incorporated by reference into this Item 10.

Item 11.      Executive Compensation

     The information  with respect to  compensation  of the Independent  General
Partners set forth under the caption "Management Arrangements -- The Independent
General  Partners" in the Prospectus is incorporated by reference into this Item
11. The Fund paid Mr. Lear $34,500,  Mr. Shapiro  $34,500,  Mr. Marshall $34,500
and Dr.  Sharwell  $34,500 in fees with respect to their services as Independent
General Partners in 1998.

     The information with respect to the "Fund  Administration Fee and Expenses"
payable  to  the   Administrator   set  forth  under  the  caption   "Management
Arrangements  --  the  Administrator"  in  the  Prospectus  is  incorporated  by
reference into this Item 11. The Fund paid  $1,214,963 to the  Administrator  in
1998.

     The information  with respect to the  "Investment  Advisory Fee" payable to
Alliance  Corporate (and  distributions  from the Managing  General Partner) set
forth under the caption  "Management  Arrangements  -- Description of Investment
Advisory  Agreements" in the Prospectus is  incorporated  by reference into this
Item 11.  The Fund  paid  Alliance  Corporate  $1,125,652  with  respect  to the
Investment Advisory Fees for 1998.

     Alliance Corporate, as Managing General Partner, received $105 representing
distributions of net investment income in 1998.
<PAGE>
Item 12.      Security Ownership of Certain Beneficial Owners and Management

       As of the date of this  report,  no person or entity is known by the Fund
to be the  beneficial  owner of more than 5% of the total number of  outstanding
Units.

       The Independent  General  Partners and directors and officers of Alliance
Corporate  own as a  group  777  Units,  or  less  than  1% of the  total  Units
outstanding.

Item 13.      Certain Relationships and Related Transactions

     The Fund co-invested in Enhanced Yield Investments with the Retirement Fund
and  certain  affiliates  of  Equitable  Capital  pursuant  to the  terms  of an
exemptive  order  granted  by the  Commission  on  August  11,  1988  permitting
coinvestments on certain terms and conditions, Equitable Capital Partners, L.P.,
et al. (812-6983) IC-16522, August 11, 1988 (the "Order"). On December 31, 1990,
the  Commission  granted a request to amend such Order to: (I) permit any person
serving as an officer,  director or  employee  of  Equitable  Life or any of its
subsidiaries to serve as a director of Equitable Capital;  (ii) permit Equitable
Life and its  subsidiaries  (other than  Equitable  Capital)  and certain  other
affiliates of Equitable Capital to invest as limited partners in sponsor limited
partnerships  which invest in transactions  in which the Funds also invest;  and
(iii) amend and restate all of the conditions and undertakings  contained in the
August 11,  1988 Order to conform  them to those  contained  in the  application
filed with the Commission on behalf of Equitable  Capital  Partners II, L.P. and
Equitable  Capital  Partners   (Retirement  Fund)  II,  L.P.  Equitable  Capital
Partners, L.P., et al. (812-7328) IC - 17925, December 31, 1990.

       Pursuant to such arrangements, the Fund co-invested in the Enhanced Yield
Investments  listed  above in Item 1 (with the  exception  of Color Your  World,
Inc.) with the Retirement Fund and one or more of the following:  Equitable Deal
Flow Fund,  L.P.,  Equitable  Capital Private Income and Equity  Partnership II,
L.P.,  Equitable  Life,  Equitable  Variable  Life  Insurance  Company,   Tandem
Insurance Group, Inc. and Royal Tandem Insurance Company.

        In connection  with the  transaction  that resulted in the succession of
Alliance  Corporate as Managing  General Partner of, and Investment  Adviser to,
the Fund and Equitable Capital Partners (Retirement Fund), L.P. (the "Retirement
Fund"),  Equitable Capital and Alliance  Corporate received two exemptive orders
from the Securities and Exchange Commission  permitting the Fund, the Retirement
Fund and Alliance to rely on the exemptive orders previously issued to Equitable
Capital and the Funds,  subject to the same  conditions and  undertakings  under
such orders as applied to Equitable Capital.
<PAGE>
                                    Part IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

       (a)    Financial Statements, Financial Statement
              Schedules and Exhibits

See Item 8.  Financial Statements and Supplementary Data "Table of Contents."

Exhibits
<TABLE>
<S>        <C>
3.1        Amended and Restated Certificate of Limited Partnership, dated as of April 12,
           1989*

4.1        Amended and Restated Agreement of Limited Partnership, dated as of October 13,
           1988**

10.1       Investment Advisory Agreement, dated July 22, 1993, between Registrant and
           Alliance Corporate Finance Group Incorporated****

10.2       Administrative Services Agreement, dated October 13, 1988, among the Registrant,
           Equitable Capital Management Corporation and ML Fund Administrators, Inc.**

10.3       Credit Agreement dated as of June 27, 1989, between Equitable Capital Partners,
           L.P. and Wells Fargo Bank, N.A.***

13.1       (a)  Forms 10-Q
                Form  8-K *****

28.1       Portions of Prospectus of Registrant and Equitable  Capital Partners,
           L.P., dated July 15, 1988, incorporated by reference into this Annual
           Report on Form 10-K

*          Incorporated  by reference to the Fund's  Annual  Report on Form 10-K
           for  the  fiscal  year  ended  December  31,  1989,  filed  with  the
           Securities and Exchange Commission on March 29, 1990.

**         Incorporated  by reference to the Fund's  Annual  Report on Form 10-K
           for  the  fiscal  year  ended  December  31,  1988,  filed  with  the
           Securities and Exchange Commission on March 29, 1989.

***        Incorporated  by reference to the Fund's  Annual  Report on Form 10-K
           for  the  fiscal  year  ended  December  31,  1992,  filed  with  the
           Securities and Exchange Commission on March 29, 1993.

****       Incorporated  by reference to the Fund's  Annual  Report on Form 10-K
           for  the  fiscal  year  ended  December  31,  1993,  filed  with  the
           Securities and Exchange Commission on March 28, 1994.

*****      Incorporated  by reference to the Fund's  Annual  Report on Form 10-K
           for  the  fiscal  year  ended  December  31,  1996,  filed  with  the
           Securities and Exchange Commission on November 22, 1996.

</TABLE>
<PAGE>


                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the  undersigned,  thereunto duly authorized on the 30th day of March,
1999.

                                  EQUITABLE CAPITAL PARTNERS, L.P.

                             By:  Alliance Corporate Finance Group Incorporated,
                                  as Managing General Partner,

Dated: March 30, 1999             -------------------------------
                                  James R. Wilson
                                  Title:  President


Dated: March 30, 1999             --------------------------------
                                  Christopher Bricker
                                  Title:  Vice President and Chief
                                          Accounting Officer

<PAGE>
       Pursuant to the  Requirements  of the Securities and Exchange Act of 1934
this  report has been  signed  below by the  following  persons on behalf of the
Registrant in the capacities indicated on the 30th day of March, 1999.

         Signature                               Title


________________________            Independent General Partner of
Robert W. Lear                      Equitable Capital Partners, L.P.

________________________            Independent General Partner of
Robert F. Shapiro                   Equitable Capital Partners, L.P.

________________________            Independent General Partner of
Alton G. Marshall                   Equitable Capital Partners, L.P.

________________________            Independent General Partner of
William G. Sharwell                 Equitable Capital Partners, L.P.

________________________            President and Director of
James R. Wilson                     Alliance Corporate

________________________
Dave H. Williams                    Director of Alliance Corporate

________________________
Bruce W. Calvert                    Director of Alliance Corporate

________________________
John D. Carifa                      Director of Alliance Corporate

________________________
Frank Savage                        Director of Alliance Corporate

________________________            Co-Chairman, Co-Chief Executive Officer
Mark Arnold                         and Director of Alliance Corporate

________________________            Co-Chairman, Co-Chief Executive Officer
Alastair Tedford                    and Director of Alliance Corporate

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the  undersigned,  thereunto duly authorized on the 30th day of March,
1999.

                              EQUITABLE CAPITAL PARTNERS, L.P.

                              By: Alliance Corporate Finance Group Incorporated,
                                  as Managing General Partner,

Dated: March 30, 1999                /s/  James R. Wilson
                                     -----------------------------
                                     James R. Wilson
                                     Title:  President

Dated: March 30, 1999                /s/  Christopher Bricker
                                     ----------------------------
                                     Christopher Bricker
                                     Title:  Vice President and Chief
                                             Accounting Officer



<PAGE>



       Pursuant to the  Requirements  of the Securities and Exchange Act of 1934
this  report has been  signed  below by the  following  persons on behalf of the
Registrant in the capacities indicated on the 30th day of March, 1999.

       Signature                              Title


/s/  Robert W. Lear                  Independent General Partner of
Robert W. Lear                       Equitable Capital Partners, L.P.

/s/  Robert F. Shapiro               Independent General Partner of
Robert F. Shapiro                    Equitable Capital Partners, L.P.

/s/  Alton G. Marshall               Independent General Partner of
Alton G. Marshall                    Equitable Capital Partners, L.P.

/s/  William G. Sharwell             Independent General Partner of
William G. Sharwell                  Equitable Capital Partners, L.P.

/s/  James R. Wilson                 President and Director of
James R. Wilson                      Alliance Corporate

/s/  Dave H. Williams
Dave H. Williams                     Director of Alliance Corporate

/s/  Bruce W. Calvert
Bruce W. Calvert                     Director of Alliance Corporate

/s/  John D. Carifa
John D. Carifa                       Director of Alliance Corporate

/s/  Frank Savage
Frank Savage                         Director of Alliance Corporate

/s/  Mark Arnold                     Co-Chairman, Co-Chief Executive Officer
Mark Arnold                          and Director of Alliance Corporate

/s/  Alastair Tedford                Co-Chairman, Co-Chief Executive Officer
Alastair Tedford                     and Director of Alliance Corporate