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, 1996                          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.  The Fund  seeks  current  income and  capital
appreciation potential by investing in privately structured,  friendly leveraged
acquisitions and leverage recapitalizations.  The Fund pursues this objective by
investing   primarily  in  subordinated   debt  and  related  equity  securities
("Mezzanine  Investments") issued in conjunction with the "mezzanine  financing"
of   leveraged   acquisitions   and   leveraged   recapitalizations.   Mezzanine
Investments,   follow-on  investments,  bridge  investments  and  certain  other
investments  which the Fund is  permitted to invest in are referred to herein as
"Enhanced Yield Investments."

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

       The Fund elected to operate as a business  development  company under the
Investment  Company Act of 1940,  as amended.  As such, it is subject to certain
provisions  of the  Investment  Company  Act.  The  description  of  the  Fund's
investment  objective  and policies,  its  management  arrangements  and certain
provisions of the Investment Company Act applicable to the Fund 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 is not permitted to acquire new Enhanced Yield Investments,
but can make follow-on  investments in existing portfolio companies.  During the
year ended  December  31,  1996,  the Fund made a  follow-on  investment  in one
Managed  Company  (as defined in the  Prospectus)  at a total cost of $4,532.

     During  the  year  ended  December  31,  1995,  the Fund  made a  follow-on
investment  in one  Managed  Company  at a total cost of $1,869 and paid $457 in
additional  consideration to exercise  warrants.  During the year ended December
31, 1994, the Fund made a follow-on investment in one Managed Company at a total
cost of $461.

     As of  December  31,  1996,  the  Fund  had a  total  of 9  Enhanced  Yield
Investments at a net cost of $74,398,957 (inclusive of the receipt of securities
having a capitalized cost of $854,000  received as  payment-in-kind  interest on
certain  Enhanced  Yield  Investments).  During  1996,  1995 and 1994,  the Fund
received $28,181,211,  $21,907,154, and $54,858,990,  respectively, in principal
payments and prepayments relating to certain Enhanced Yield Investments.

       Pending  investments in Enhanced Yield  Investments,  the net proceeds of
the public offering were invested in certain temporary  investments,  consisting
principally  of  commercial  paper  with  maturities  of less than  sixty  days.
Currently,  proceeds  that are not  invested in Enhanced  Yield  Investments  or
returned to Limited Partners are held in such temporary investments.
<PAGE>

       New Investments in 1996

       The Fund's investment period ended on October 12, 1991. Accordingly,  the
Fund made no new investments in 1996.

       Follow-on Investments in 1996

       In 1996, the Fund made a single follow-on investment as described below:

       RI Holdings, Inc. ("Rowe")

       Rowe  is  engaged  in  the  design,   engineering  and  manufacturing  of
jukeboxes, bill acceptors and currency changers.

       Under the terms of Rowe's senior  subordinated  notes,  the Fund receives
common stock at a nominal cost of one cent per share for each  interest  payment
date on which Rowe delivers payment-in-kind  securities in lieu of making a cash
payment.  On May 1, 1996, the Fund acquired 453,189.90 shares of Common Stock of
RI Holdings, Inc. for a total cost of $4,532.

       As  of  December  31,  1996,  the  Fund's   investment  in  Rowe  totaled
$14,882,644 which includes senior subordinated PIK notes.

Competition

       The  Fund  competes  with  other  entities  having a  similar  investment
objective.  In  addition,  since  Enhanced  Yield  Investments  are selected and
managed  exclusively by Alliance Corporate on behalf of the Fund, other entities
which compete with Alliance Corporate with respect to such investments therefore
compete with the Fund.  Competitors  include other private and public  mezzanine
funds,  other  business  development  companies,   investment  partnerships  and
corporations,  small  business  investment  companies and large  industrial  and
financial companies investing directly or through affiliates and individuals.

Employees

       The Fund has no employees.  The Managing General Partner,  subject to the
supervision of the Independent General Partners, manages and controls the Fund's
investments.  Certain  officers of Alliance  Corporate  have been  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  performs
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  Units  are  illiquid  securities  and  are  subject  to  significant
restrictions on transfer.  The  information in the Prospectus  under the caption
"Transferability of Units" is incorporated in this Item 5 by reference. There is
no established trading market for the Units. The Partnership  Agreement contains
restrictions that are intended to prevent the development of a public market.

     The number of holders of Units as of  December  31,  1996 was  17,505.  The
Managing  General Partner holds a general partner  interest in the Fund and does
not hold any Units. Pursuant to the terms of the Partnership Agreement, the Fund
generally  makes  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 are distributed as soon
as practicable after the related  disposition.  Such distributions are allocated
among the Managing General Partner, and the Limited Partners, in general,  first
99% to the Limited  Partners and 1% to the Managing  General  Partner  until the
Limited Partners have received a cumulative priority return of 10% 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.

     On February 5, 1997, the Independent General Partners approved an aggregate
cash  distribution  of $21,719,699 for the three months ended December 31, 1996,
which was paid on February 14, 1997. The amount  distributed to Limited Partners
was  $21,710,127,  or $76.28 per Unit (of which  $6,651,359 is capital  returned
from  investments  during the fourth  quarter of 1996),  to Limited  Partners of
record at December 31, 1996. On a per Unit basis,  this  distribution to Limited
Partners includes $49.58 of realized gains,  $3.33 of income from operations and
$23.37 of  return  of  capital.  The  Managing  General  Partner's  one  percent
allocation  of $219,294  was reduced by its one percent  allocation  of realized
gains and capital returned from  investments  during the fourth quarter of 1996,
of $209,722 (which is being held as a Deferred  Distribution  Amount pursuant to
the Partnership Agreement), resulting in a net distribution of $9,572.

<PAGE>
Item 6. Selection Financial Data


                               For the Years Ended
<TABLE>
<S>                          <C>                    <C>                   <C>                    <C>               <C>
                             December 31, 1996      December 31, 1995      December 31, 1994  December 31, 1993    December 31, 1992
TOTAL FUND INFORMATION:      -----------------      -----------------      -----------------  -----------------    -----------------
Cash Distributions               $  27,348,085  (a)    $   41,174,256  (c)    $   54,554,528     $   45,172,973      $   22,883,377
Net Assets                         110,839,732            112,353,878            157,930,203        219,924,070         245,894,872
Total Assets                       110,974,943            112,437,110            158,039,361        220,036,182         268,779,984
Outstanding Loan Payable                     -                      -                      -                  -          22,702,377
Net Investment Income                5,918,157              5,215,211              6,924,128         15,218,052          21,588,983
Net Change in Unrealized
  Appreciation (Depreciation)
  on Investments                    31,877,152               2,627,096            (15,853,762)         1,053,093         32,754,922
Net Realized (Losses) Gains 
  on Investments                   (12,010,831)            (11,988,596)             1,758,116          3,120,202        (31,104,609)

PER UNIT OF LIMITED
PARTNERSHIP INTEREST:

Cash Distributions               $       95.83  (a)    $       144.38   (c)     $     191.33       $      157.98       $      79.76


Cumulative Cash Distributions           891.77  (b)            795.94                 651.56              460.23             302.25
Investment Income                        28.80                  27.77                  36.53               70.47             103.31
Expenses                                 (8.22)                 (9.63)                (12.44)             (17.54)            (28.21)
Net Investment Income                    20.59                  18.14                  24.09               52.93              75.10

Net Unrealized Appreciation
 (Depreciation) on Investments          110.88                   9.14                 (55.15)               3.66             113.94


Net Realized (Losses) Gains 
  on Investments                        (41.78)                (41.70)                  6.12               10.85            (108.20)
Net Asset Value                         383.53                 390.82                 548.47              764.75             855.28

</TABLE>

(a) Includes Return of Capital of $8,128,490 or $28.56 per LP Unit.
(b) Includes Return of Capital of $276.52 per LP Unit.
(c) Includes Return of Capital of $25,324,686 or $88.98 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

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

     As of  December  31,  1996,  the  Fund  had a  total  of 9  Enhanced  Yield
Investments at a net cost of $74,398,957 (inclusive of the receipt of securities
having a capitalized cost of $854,000  received as  payment-in-kind  interest on
certain Enhanced Yield Investments).

       Proceeds from Investments

       During the year ended  December 31, 1996, the Fund received the following
proceeds:

     During the year  ended  December  31,  1996,  the Fund  received a total of
$709,500 and $187,444  from Western  Pioneer,  Inc. and U.S.  Leather  Holdings,
Inc., respectively,  as principal paydowns of the senior notes held by the Fund.
No gain or loss has been recorded on the transactions.

     During the year ended  December  31,  1996,  the Fund  received  additional
proceeds of $266,713  from  Polaris  Pool  Systems,  Inc.  The money  represents
proceeds from the sale of the investment from prior years that have been held in
escrow for future  adjustments  and expenses  not paid on the sale dates.  These
proceeds were recorded and distributed as gains.

     During March 1996, the Fund sold its remaining ASR Acquisition Corp. common
stock for $2,045,112 and recognized a gain of $2,010,551 on the sale.

     On April 9, 1996, the Equitable investors foreclosed on the common stock of
United States Leather  Holdings,  Inc. All securities held by the Fund have been
surrendered  and cancelled in exchange for 795 shares of common stock in Leather
U.S., Inc. The shares will have a cost basis of 50% of the original par value of
the 15% Senior Debentures surrendered.

     On May 8, 1996, the Fund received  dividend  income of $3,760,524 from Bank
United Corp.

     On August 6, 1996, a comprehensive  restructuring  closed for MTI Holdings,
Inc. The Fund recognized a loss of $1,449,097 on this transaction.

     On August 14,  1996,  the Fund sold  207,492  shares of Bank  United  Corp.
(formerly  USAT Holdings Inc.) common stock for $3,911,224 and recognized a gain
of $2,572,585.

     On  September  12,  1996,  the Fund  sold its  Tulip  Holding  Corp.  14.5%
Subordinated  Notes for $5,687 and  recognized a loss of $8,508,727 on the sale.
The 16.5% Subordinated Notes, Series A Exchangeable  Preferred Stock and Class A
Common  Stock  were  deemed  worthless  resulting  in a total  realized  loss of
$5,320,733 to the Fund.

     On September 30, 1996, the Fund sold 22,977 shares of Ampex Recording Media
Corp.  Class A Common Stock for $182,953  which  resulted in a loss of $1,552 to
the Fund.  The Fund sold its remaining  22,690 shares of Ampex  Recording  Media
Corp.  Class A Common Stock on November 29,  1996,for  $182,946 and recognized a
gain of $586 on the sale.
<PAGE>
     During the fourth  quarter of 1996, the Fund sold 775,858 shares of Lexmark
International  Group,  Inc. common stock for $18,057,338  resulting in a gain of
$12,884,925 to the Fund.

     On November 6, 1996,  the Apollo Radio Holding Co.,  Inc.  common stock and
warrants  held  by the  Fund  were  redeemed.  The  Fund  received  proceeds  of
$1,587,133 which resulted in a realized gain of $1,364,383 to the Fund.

     On December 17,  1996,  the Fund sold its  American  Paper  Group,  Ltd. 5%
Subordinated Notes and common stock for $1,108,132  resulting in no gain or loss
to the Fund.

     During the year  ended  December  31,  1996,  the Fund  received a total of
$131,558  from  Pergament  Home  Centers,  Inc.,  as  principal  paydowns of the
Floating Rate Demand Note held by the Fund. No gain or loss has been recorded on
the transactions.
     
       For  additional  information,  refer  to  the  Supplemental  Schedule  of
Realized Gains and Losses and Note 10 to the Financial Statements.

       The Fund's  Enhanced Yield  Investments  are typically  issued in private
placement  transactions and are subject to certain restrictions on transfer, and
are thus relatively illiquid. The balance of the Fund's assets at the end of the
period covered by this report was invested in Temporary  Investments,  comprised
of commercial paper with maturities of less than sixty days.

       All cash  dividends,  interest and other  income  received by the Fund in
excess  of  expenses  of  operation   and  reserves  for  expenses  and  certain
investments and liabilities are distributed to the Limited  Partners of the Fund
and to Alliance Corporate, as the Managing General Partner, within 45 days after
the end of each calendar quarter.  Before each quarterly cash distribution,  the
Fund will analyze the then current cash  projections and determine the amount of
any additional reserves it deems necessary.

Participation in Enhanced Yield Investments

       The Fund is invested primarily in Enhanced Yield Investments,  also known
in the securities  industry as "high yield securities".  The securities in which
the Fund has invested were issued in conjunction with the mezzanine financing of
privately  structured,  friendly leveraged  acquisitions,  recapitalizations and
other   leveraged   financings,   and  are  generally   linked  with  an  equity
participation.   Enhanced  Yield  Investments  are  debt  and  preferred  equity
securities that are 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 cannot eliminate its risks associated with  participation
in Enhanced Yield Investments,  it has established risk management policies. The
Fund subjects each prospective  investment to rigorous analysis,  and makes only
those investments that have been recommended by the Managing General Partner and
that meet the Fund's investment  guidelines or that have otherwise been approved
by the Independent General Partners.

       Fund  investments  are measured  against  specified  Fund  investment and
performance  guidelines.  To limit the  exposure  of the  Fund's  capital in any
single  issuer,  the Fund limits the amount of its  investment  in a  particular
issuer.  The Fund also  continually  monitors  portfolio  companies  in order to
minimize the risks associated with participation in Enhanced Yield Investments.
<PAGE>
Results of Operations

     For the year ended December 31, 1996, the Fund had net investment income of
$5,918,157, an increase of $702,946 from the net investment income of $5,215,211
for the year ended  December 31,  1995.  The Fund had net  investment  income of
$6,924,128 for the same period in 1994.  Net  investment  income is comprised of
investment income  (primarily  interest and dividend income) offset by expenses.
The increase in the 1996 net investment income versus the comparative  period in
1995 reflects the increase in dividend income  partially  offset by the decrease
in Investment Advisory Fees and Fund Administration Fees and Expenses.

     For the year ended  December 31, 1996,  the Fund had  investment  income of
$8,279,977,  as  compared  to  $7,984,889  for  the  same  period  in  1995  and
$10,501,426 for the same period in 1994. The increase in 1996 investment  income
of 3.7%  versus  1995  was  primarily  due to an  increase  in  dividend  income
partially  offset by a decrease in the amount of accrual status debt  securities
held by the Fund due to the sales and repayments of Enhanced  Yield  Investments
during 1996. (See Note 12 to the Financial Statements). The decrease in the 1995
investment income of 24% versus the comparative period in 1994 was primarily due
to a decrease in the amount of accrual status debt  securities  held by the Fund
due to the sales and repayments of Enhanced Yield investments during 1995.

     The Fund incurred  expenses of $2,361,820  for the year ended  December 31,
1996, as compared to $2,769,678  for the same period in 1995 and  $3,577,298 for
the same period in 1994. The decrease in the 1996 expenses  versus 1995 expenses
of $407,858 was primarily due to the decrease in the Investment Advisory Fee and
Fund Administration Fees and Expenses.  The decrease in the 1995 expenses versus
1994 expenses of $807,620 was  primarily  due to the decrease in the  Investment
Advisory Fee and Fund Administration Fees and Expenses.

     The Fund  experienced an increase in net assets  resulting from  operations
for the year ended December 31, 1996 in the amount of $25,784,478 as compared to
a decrease of $4,146,289 for the same period in 1995. The increase in net assets
resulting from  operations in 1996 versus 1995 is attributable to an increase in
net investment  income of $702,946,  an increase in unrealized  appreciation  of
$29,250,056  offset  by an  increase  in net  realized  losses of  $22,235  (see
Statement of Operations in the Financial Statements). The decrease in net assets
resulting  from  operations  in 1995 of  $4,146,289 as compared to a decrease in
1994 of $7,171,518 was  attributable  to a decrease in net investment  income of
$1,708,917,  a decrease in net realized gains of $13,746,712  offset by a change
in unrealized appreciation of $18,480,858.

     For the year ended  December  31,  1996,  the Fund  incurred an  Investment
Advisory Fee of $1,037,447 (as described in Note 6 to the Financial Statements).
For the years ended  December 31, 1995 and 1994,  the Fund  incurred  Investment
Advisory  Fees of  $1,442,458  and  $1,855,152,  respectively.  The  decrease in
Investment Advisory Fees is due to a decrease in the Fund's Available Capital on
which the Investment Advisory Fee is based, resulting primarily from redemptions
of  debt  obligations  held by the  Fund  (which  is a  component  of  Available
Capital).

     The Fund  Administration  Fees and Expenses (as  described in Note 7 to the
Financial Statements) for the years ended December 31, 1996, 1995 and 1994, were
$916,209,  $1,077,666,  and $1,459,516,  respectively.  The decrease of $161,457
from 1995 to 1996 is due primarily to a decrease in the Fund's Available Capital
on  which  the  Fund  Administration  Fee is  based,  resulting  primarily  from
redemptions  of debt  obligations  held by the Fund  (which  is a  component  of
Available Capital). During the years ended December 31, 1996, 1995 and 1994, the
Fund  incurred a total of $192,068,  $173,962  and  $473,142,  respectively,  of
administrative  expenses consisting primarily of printing,  audit and tax return
preparation and custodian fees paid for by the Fund Administrator.

     In accordance with the Partnership  Agreement,  beginning October 13, 1996,
the Fund  Administration  Fee was changed 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.

     For the years ended  December  31,  1996,  1995 and 1994,  the Fund did not
incur any interest or loan fees.

     Independent  General  Partners'  Fees and  Expenses  incurred for the years
ended December 31, 1996,  1995 and 1994 were $192,279,  $167,152,  and $164,518,
respectively.  The  changes  are  attributable  to  fluctuations  in legal  fees
incurred  by the  Independent  General  Partners.  (See Note 9 to the  Financial
Statements).

     The Fund incurred  professional  fees of $183,323,  $69,167 and $62,601 for
the years ended  December  31,  1996,  1995 and 1994,  respectively,  which were
primarily  comprised  of legal fees  reimbursed  to  Debevoise  &  Plimpton  and
Equitable Life for legal services (See Note 9 to the Financial Statements).
<PAGE>
Unrealized Appreciation/Depreciation and Non-Accrual of Investments

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

       For privately issued securities in which the Fund typically invests,  the
fair value of an investment is its initial cost,  adjusted for  amortization  of
discount or premium and as  subsequently  adjusted to reflect the  occurrence of
significant developments.  "Significant developments" are business,  economic or
market events that may affect a company in which an investment  has been made or
the securities comprising such investment. For example, significant developments
that could result in a writedown in value include, among other things, events of
default with respect to payment  obligations  or other  developments  indicating
that a portfolio  company's  performance may fall short of acceptable  levels. A
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.

     For the years ended  December  31,  1996 and 1995,  the Fund  recorded  net
unrealized  appreciation  on  Enhanced  Yield  Investments  of  $31,877,152  and
$2,627,096,  respectively.  For the  year  ended  December  31,  1994,  the Fund
recorded  net  unrealized   depreciation   on  Enhanced  Yield   Investments  of
$15,853,762.  The  change  of  $29,381,614  from  1995 to  1996,  in  unrealized
appreciation was primarily the result of unrealized  appreciation in Bank United
Corp.,  Lexmark  International  Group,  Inc. and Western  Pioneer,  Inc. and the
reversal of unrealized  depreciation in Leather U.S., Inc., Tulip Holding Corp.,
MTI  Holdings,  Inc. and WB Bottling  Corporation,  offset by  writedowns  in RI
Holdings,  Inc., Pergament Home Centers,  Inc., U.S. Leather Holdings,  Inc. and
Tulip  Holding  Corp.  and the reversal of  unrealized  appreciation  in Lexmark
International  Group,  Inc.,  American  Safety  Razor  Company and Apollo  Radio
Holding Co., Inc. (See Note 12 to the Financial Statements).

         Alliance  Corporate  continues to monitor the Fund's portfolio closely.
As a matter of standard  procedure,  Alliance  Corporate  reviews each portfolio
company's financial statements at least quarterly, and often monthly. Investment
managers  routinely review and discuss  financial and operating results with the
companies'  management  and  equity  sponsors,  and  attend  periodic  board  of
directors meetings, as appropriate.  In some cases, Alliance Corporate officers,
acting on behalf of the Funds,  serve as  directors  on the boards of  portfolio
companies. When problems arise, communication with management and sponsors often
occurs on a daily basis.

         The following  investments  have been on  non-accrual  status as of the
respective dates:

         Pergament Home Centers, Inc.
           Floating Rate Demand note                 July 1, 1996
         Western Pioneer, Inc. 10%
           Senior Subordinated Note                  November 30, 1994
         RI Holdings, Inc. 16%
           Senior Subordinated Notes                 April 25, 1994

Realized Gains and Losses on Investments

     For the year ended December 31, 1996, the Fund recorded net realized losses
of $12,010,831 on  transactions  involving 10 Enhanced Yield  Investments.  (See
Note 10 to the Financial  Statements and the  Supplemental  Schedule of Realized
Gains and  Losses).  For the years ended  December  31, 1995 and 1994,  the Fund
realized a net loss on investments of $11,988,596  and a net gain of $1,758,116,
respectively.



<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, 1996 and 1995

Statements of Operations
     For the Years Ended December 31, 1996, 1995 and 1994

Statements of Cash Flows
     For the Years Ended December 31, 1996, 1995 and 1994

Statements of Changes in Net Assets
     For the Years Ended December 31, 1996, 1995 and 1994

Statements of Changes in  Partners'  Capital
     For the Years Ended  December  31, 1996, 1995 and 1994

Schedule of Portfolio Investments - December 31, 1996

Supplemental Schedule of Realized Gains and Losses
     For the Year Ended December 31, 1996

Notes to Financial Statements


<PAGE>



                          INDEPENDENT AUDITORS' REPORT

Equitable Capital Partners, 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, 1996 and 1995, including the schedule of portfolio investments,  as
of December 31, 1996,  and the related  statements  of  operations,  cash flows,
changes in net assets and  changes in  partners'  capital  for each of the three
years in the period ended December 31, 1996. These financial  statements are the
responsibility of the Fund's General Partners.  Our responsibility is to express
an opinion on these financial statements based upon our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  Our procedures include
confirmation of securities owned as of December 31, 1996, by correspondence with
the custodian.  An audit also includes assessing the accounting  principles used
and significant estimates made by management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  such financial  statements present fairly, in all material
respects,  the financial  position of the Fund as of December 31, 1996 and 1995,
the results of operations,  its cash flows and the changes in its net assets and
partners'  capital  for  the  respective  stated  periods,  in  conformity  with
generally accepted accounting principles.

     As  explained  in Note 2, the  financial  statements  of the  Fund  include
securities  valued at $44,569,548 and  $46,116,681,  as of December 31, 1996 and
1995  respectively,   representing  40.2  and  41.0  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, 1996 is presented for
the  purposes of  additional  analysis  and is not a required  part of the basic
financial statements.  This schedule is the responsibility of the Fund's General
Partners. Such schedule has been subjected to the auditing procedures applied in
our audit of the basic  financial  statements  and,  in our  opinion,  is fairly
stated  in all  material  respects  when  considered  in  relation  to the basic
financial statements taken as a whole.


Deloitte & Touche LLP
New York, New York
February 21, 1997
<PAGE>



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

<TABLE>
<S>                                                     <C>          <C>                     <C>
                                                                                For the Years Ended
ASSETS:                                                 Notes         December 31, 1996       December 31, 1995
                                                                      -----------------       -----------------
     Investments                                      2,10,12
        Enhanced Yield Investments at Value-
             Managed Companies
             (amortized cost of $55,159,154 at
             December 31, 1996 and $110,558,741
             at December 31, 1995)                                         $ 52,325,273         $ 83,988,222
             Non-Managed Companies
             (amortized cost of $19,239,803 at
             December 31, 1996 and $4,092,050
             at December 31, 1995)                                           28,618,359            5,330,092
        Temporary Investments
             (at amortized cost )                                            27,105,414           20,356,353

     Cash                                                                        91,206               74,501
     Interest Receivable                                 2,12                   753,608              751,346
     Note Receivable                                      3,4                 1,846,593            1,928,690
     Prepaid Expenses & Other Assets                                            102,932                7,906

TOTAL ASSETS                                                               $110,843,385         $112,437,110
                                                                           ============         ============


LIABILITIES AND PARTNERS' CAPITAL

     Liabilities
        Professional Fees Payable                           9              $     40,107         $     25,484
        Independent General Partners' Fees Payable          8                    24,456               15,273
        Fund Administrative Expenses Payable                7                    58,985               36,617
        Other Accrued Liabilities                                                11,663                5,858
             Total Liabilities                                                  135,211               83,232

     Partners' Capital
        Managing General Partner                          3,4                 1,550,892            1,448,956
        Limited Partners (284,611 Units)                    4               109,157,282          110,904,922
             Total Partners' Capital                                        110,708,174          112,353,878

TOTAL LIABILITIES AND PARTNERS' CAPITAL                                    $110,843,385         $112,437,110
                                                                           ============         ============

</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, 1996        December 31, 1995        December 31, 1994
INVESTMENT INCOME- Notes 2,12:                              -----------------        -----------------        -----------------
     Interest                                                $       4,478,309        $       7,936,925       $       9,384,869
     Discount                                                           41,144                   47,964               1,116,557
     Dividend                                                        3,760,524                        -                       -
         TOTAL INVESTMENT INCOME                                     8,279,977                7,984,889              10,501,426

EXPENSES:
     Investment Advisory Fee- Note 6                                 1,037,447                1,442,458               1,855,152
     Fund Administration Fees and Expenses- Note 7                     916,209                1,077,666               1,459,516
     Independent General Partners'
       Fees and Expenses- Note 8                                       192,279                  167,152                 164,518
     Professional Fees - Note 9                                        183,323                   69,167                  62,601
     Insurance Fees                                                      5,256                        -                   2,755
     Valuation Expenses                                                 27,306                   13,235                  32,756
         TOTAL EXPENSES                                              2,361,820                2,769,678               3,577,298

NET INVESTMENT INCOME                                                5,918,157                5,215,211               6,924,128

NET CHANGE IN UNREALIZED APPRECIATION
     (DEPRECIATION) ON INVESTMENTS- Note 12                         31,877,152                2,627,096             (15,853,762)

NET REALIZED (LOSSES) GAINS ON INVESTMENTS- Note 10                (12,010,831)             (11,988,596)              1,758,116

NET INCREASE (DECREASE) IN NET ASSETS
     RESULTING FROM OPERATIONS                               $      25,784,478        $      (4,146,289)      $      (7,171,518)
                                                             =================        =================       =================

   </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 Years Ended
   INCREASE (DECREASE) IN CASH                                December 31, 1996        December 31, 1995         December 31, 1994
   CASH FLOWS FROM OPERATING ACTIVITIES:                      -----------------        -----------------         -----------------
         Interest and Discount Income                         $       7,505,048         $       9,797,734        $     13,169,441
         Fund Administration Fees & Expenses                           (893,841)               (1,092,756)             (1,407,807)
         Investment Advisory Fee                                     (1,037,447)               (1,442,458)             (1,855,152)
         Independent General Partners' Fees and Expenses               (183,096)                 (164,204)               (166,193)
         Valuation Expenses                                             (21,501)                  (25,370)                (47,262)
        (Purchase) Sale of Temporary Investments, Net                (6,016,884)               12,191,972              (9,775,337)
         Purchase of Enhanced Yield Investments                               -                    (1,869)                   (461)
         Proceeds from Sales and Principal Payments of
             Enhanced Yield Investments                              28,181,211                21,907,154              54,858,990
         Professional Fees                                             (168,325)                  (70,815)                (88,469)
         Insurance Fees                                                    (375)                   (7,906)                 (4,343)
             Net Cash Provided by Operating Activities               27,364,790                41,091,482              54,683,407
   CASH FLOWS FROM FINANCING ACTIVITIES:
         Cash Distributions to Partners                             (27,348,085)              (41,174,256)            (54,554,528)
             Net Cash Used in Financing Activities                  (27,348,085)              (41,174,256)            (54,554,528)
   Net Increase (Decrease) in Cash                                       16,705                   (82,774)                128,879
   Cash at the Beginning of the Period                                   74,501                   157,275                  28,396
   Cash at the End of the Period                              $          91,206         $          74,501        $        157,275
                                                              =================         =================        ================

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

   Net Increase (Decrease) In Net Assets
         Resulting From Operations                            $      25,784,478         $      (4,146,289)       $     (7,171,518)

   Adjustments to Reconcile Net Increase (Decrease) in 
         Net Assets Resulting from Operations to Net Cash
         Provided by Operating Activities:
   Decrease in Investments                                           34,175,157                46,085,852              43,333,548
   (Decrease) Increase  in Accrued Interest                            (774,928)                1,812,846               2,667,814
   Increase (Decrease) in Other Accrued Liabilities                       5,805                   (10,370)                (27,118)
   Increase (Decrease) in Fund Administration Expenses Payable           22,368                   (15,090)                 51,707
   Decrease (Increase) in Prepaid Expenses                                5,256                    (7,906)                  2,755
   Net Change in Unrealized (Appreciation)
     Depreciation on Investments                                    (31,877,152)               (2,627,096)             15,853,762
   Increase (Decrease) in Independent General
      Partners' Fees Payable                                              9,183                     1,945                  (1,675)
   Increase (Decrease) in Professional Fees Payable                      14,623                    (2,410)                (25,868)
         Total Adjustments                                            1,580,312                45,237,771              61,854,925
   Net Cash Provided by Operating Activities                   $     27,364,790         $      41,091,482        $     54,683,407
                                                               ================         =================        ================


</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, 1996       December 31, 1995        December 31, 1994
FROM OPERATIONS:                                                -----------------       -----------------        -----------------  

   Net Increase (Decrease) in Net Assets
        Resulting from Operations                               $      25,784,478       $      (4,146,289)       $     (7,171,518)

   Cash Distributions to Partners                                     (27,348,085)            (41,174,256)            (54,554,528)

   Reduction in Managing General Partners' Contribution                   (82,097)               (255,780)               (267,821)

   Total Decrease                                                      (1,645,704)            (45,576,325)            (61,993,867)

NET ASSETS:

   Beginning of Period                                                112,353,878             157,930,203             219,924,070

   End of Period                                                $     110,708,174       $     112,353,878        $    157,930,203
                                                                =================       =================        ================


</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, 1994

Partners' Capital at January 1, 1994                                        $ 2,267,762        $217,656,308         $219,924,070
Cash Distributions to Partners                                                  (99,905)        (54,454,623)         (54,554,528)
Reduction in Managing General Partners' Contribution               3           (267,821)                  -             (267,821)
Allocation of Net Investment Income                               11             69,241           6,854,887            6,924,128
Allocation of Net Unrealized Depreciation
   on Investments                                                 12           (158,538)        (15,695,224)         (15,853,762)
Allocation of Net Realized Gains on Investments                                  17,581           1,740,535            1,758,116
Partners' Capital at December 31, 1994                                      $ 1,828,320        $156,101,883         $157,930,203
                                                                            ===========        ============         ============

FOR THE YEAR ENDED DECEMBER 31, 1995

Partners' Capital at January 1, 1995                                        $ 1,828,320        $156,101,883         $157,930,203
Cash Distributions to Partners                                                  (82,120)        (41,092,136)         (41,174,256)
Reduction in Managing General Partners' Contribution               3           (255,780)                  -             (255,780)
Allocation of Net Investment Income                               11             52,152           5,163,059            5,215,211
Allocation of Net Unrealized Appreciation
   on Investments                                                 12             26,271           2,600,825            2,627,096
Allocation of Net Realized Losses on Investments                               (119,887)        (11,868,709)         (11,988,596)
Partners' Capital at December 31, 1995                                      $ 1,448,956        $110,904,922         $112,353,878
                                                                            ===========        ============         ============

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 Losses 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
                                                                            ===========        ============         ============

</TABLE>



                           See the Accompanying Notes to Financial Statements.




<PAGE>
<TABLE>
<CAPTION>
                        EQUITABLE CAPITAL PARTNERS, L.P.
                        SCHEDULE OF PORTFOLIO INVESTMENTS
                                DECEMBER 31, 1996
<S>                <C>                                        <C>           <C>            <C>           <C>           <C>


   PRINCIPAL                                                    INVESTMENT   INVESTMENT     AMORTIZED     VALUE         % OF TOTAL
 AMOUNT/SHARES                  INVESTMENT                         DATE         COST          COST       (NOTE 2)       INVESTMENTS
---------------  --------------------------------------------   -----------  ----------    ----------    ---------     -------------

                    ENHANCED YIELD INVESTMENTS
                    MANAGED COMPANIES

                    CONSUMER PRODUCTS MANUFACTURING

                    LEXMARK INTERNATIONAL GROUP, INC. - NOTE 10
  $     19,667,348  Lexmark International, Inc.,
                     Sr. Sub. Nts. 14.25% due 03/31/01*              03/27/91    $19,667,348   $ 19,667,348  $  19,667,348
     551,618 Shares Lexmark International Group, Inc.,
                     Class B Common Stock (c)                        03/27/91      3,677,430      3,677,430     15,238,449
                                                                                 -----------   ------------  -------------
                                                                                  23,344,778     23,344,778     34,905,797    32.30
                                                                                 -----------   ------------  -----------------------
                    MISCELLANEOUS MANUFACTURING

                    QUANTEGY ACQUISITION CORP. - NOTES 10, 12
                    (FORMERLY AMPEX RECORDING MEDIA CORP.)
        162 Shares  Quantegy Acquisition Corp., Common Stock          11/13/95     3,464,732     3,464,732     3,464,732
                                                                                ------------    ----------   -----------
                                                                                   3,464,732     3,464,732     3,464,732       3.21
                                                                                ------------    ----------   -----------------------

                    RI HOLDINGS, INC. - NOTE 12
  $     26,338,272  RI Holdings, Inc.,
                     Sr. Sub. Nts. 16% due 08/31/01*(a)(b)            04/25/94    11,824,318    11,824,318       487,744
     304,934 Shares RI Holdings, Inc., Common Stock**                 09/01/89     3,049,340     3,049,340             0
  212,407.91 Shares RI Holdings, Inc., Common Stock**                  various         2,124         2,124             0
    46,062.5 Shares RI Holdings, Inc., Common Stock**                 04/25/94           461           461             0
  186,879.68 Shares RI Holdings, Inc., Common Stock**                 05/09/95         1,869         1,869             0
  453,189.90 Shares RI Holdings, Inc., Common Stock**                 05/01/96         4,532         4,532             0
                                                                                ------------   -----------   -----------
                                                                                  14,882,644    14,882,644       487,744       0.45
                                                                                ------------   -----------   -----------------------

                    LEATHER AND LEATHER PRODUCTS

                    LEATHER U.S., INC. - NOTE 12
                    (FORMERLY UNITED STATES LEATHER HOLDINGS, INC.)
      795.00 Shares Leather U.S., Inc., Common Stock                  04/09/96     9,342,000     9,342,000     9,342,000
                                                                                ------------   -----------   -----------
                                                                                   9,342,000     9,342,000     9,342,000       8.65
                                                                                ------------   -----------   -----------------------

                    MISCELLANEOUS RETAIL

                    R&S/STRAUSS, INC.
                    (FORMERLY WSR ACQUISITION CORPORATION)
  $      1,815,000  R&S/Strauss, Inc., Sr. Sub. Nt. 15% due 05/31/00* 06/13/90     1,815,000     1,815,000     1,815,000
  $      2,310,000  R&S/Strauss, Inc., Sr. Sub. Nt. 15% due 05/31/00* 06/13/90     2,310,000     2,310,000     2,310,000
                                                                                 -----------  ------------   -----------
                                                                                   4,125,000     4,125,000     4,125,000       3.82
                                                                                 -----------  ------------   -----------------------




                    TOTAL INVESTMENT IN  MANAGED  COMPANIES                     $ 55,159,154  $ 55,159,154   $52,325,273      48.43%
                    ---------------------------------------                     ------------  ------------   -----------------------

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


<PAGE>
<TABLE>
<CAPTION>
                                               EQUITABLE CAPITAL PARTNERS, L.P.
                                             SCHEDULE OF PORTFOLIO INVESTMENTS
                                                      DECEMBER 31, 1996
                                                         (CONTINUED)
<S>               <C>                                                  <C>            <C>            <C>         <C>           <C>

  PRINCIPAL                                                           INVESTMENT    INVESTMENT    AMORTIZED    VALUE   % OF TOTAL
 AMOUNT/SHARES                       INVESTMENT                         DATE           COST         COST      (NOTE 2) INVESTMENTS
---------------  ---------------------------------------------------- ------------ --------------- ----------- --------- -----------

                    NON-MANAGED COMPANIES

                    DISTRIBUTION SERVICES

                    WESTERN PIONEER, INC.-NOTES 10, 12
  $      9,460,000  Western Pioneer, Inc.,
                      Sr. Sub. Nts. 10% due 11/30/07*(b)              11/30/94   $ 1,219,460  $  1,219,460   $  4,730,000
   162,161 Warrants Western Pioneer, Inc.,
                     Common Stock Purchase Warrants **                11/30/94             0             0              0
                                                                                 -----------  ------------   ------------
                                                                                   1,219,460     1,219,460      4,730,000      4.38
                                                                                 -----------  ------------   ----------------------

                   HEALTH SERVICES

                    MTI HOLDINGS, INC. - NOTES 10,12
  $        220,102  MTI Holdings, Inc.,
                     Sr. Sec. Nt. 12% due 07/01/03*                   08/06/96       220,102       220,102        220,102
   15,772 Shares    MTI Holdings, Inc., Common Stock**                08/06/96       236,580       236,580        236,580
    4,397 Warrants  MTI Holdings, Inc., Common Stock
                     Purchase Warrants                                08/06/96             0             0              0 
                                                                                   ---------    ----------     ----------
                                                                                     456,682       456,682        456,682      0.42
                                                                                   ---------    ----------     --------------------

                    MISCELLANEOUS RETAIL

                    PERGAMENT HOME CENTERS, INC.- NOTE 12
  $      3,236,800  Pergament Acq. Corp., Home Centers, Inc.
                     Floating Rate Demand Note due 07/31/00* (b)      10/18/91     3,105,242     3,105,242      2,296,042
     380.80 Shares  Pergament Holding, Corp., Common Stock Class B ** 02/28/89     8,568,000     8,568,000              0
    139.0545 Shares Pergament Holding, Corp., Common Stock Class C ** 02/28/89             0             0              0
                                                                                 -----------   -----------    -----------
                                                                                  11,673,242    11,673,242      2,296,042      2.12
                                                                                 -----------   -----------    ---------------------

                    BANKING AND FINANCE

                    BANK UNITED CORP. - NOTES 10,12
                    (FORMERLY USAT HOLDINGS INC.)
     877,908 Shares  Bank United Corp., Class A Common Stock (c)     01/05/90 &
                                                                     12/19/91      5,890,419     5,890,419     21,135,635
                                                                                 -----------   -----------    -----------
                                                                                   5,890,419     5,890,419     21,135,635     19.56
                                                                                 -----------   -----------    ---------------------


                    TOTAL INVESTMENT IN NON-MANAGED  COMPANIES                   $19,239,803   $19,239,803    $28,618,359     26.48%
                    ------------------------------------------                   -----------   -----------    ---------------------


                    TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS               $74,398,957   $74,398,957    $80,943,632     74.91%
                    ----------------------------------------------               -----------   -----------    ---------------------


</TABLE>

                             See the Accompanying Notes to Financial Statements.


<PAGE>
<TABLE>
<CAPTION>
                                               EQUITABLE CAPITAL PARTNERS, L.P.
                                              SCHEDULE OF PORTFOLIO INVESTMENTS
                                                      DECEMBER 31, 1996
                                                         (CONCLUDED)
<S>             <C>                                                 <C>           <C>          <C>         <C>            <C>
   PRINCIPAL                                                        INVESTMENT    INVESTMENT    AMORTIZED     VALUE     % OF TOTAL
 AMOUNT/SHARES                        INVESTMENT                       DATE          COST          COST      (NOTE 2)   INVESTMENTS
--------------  -------------------------------------------------- ------------ --------------- ---------- ---------- --------------

                   TEMPORARY INVESTMENTS

                   COMMERCIAL PAPER

$      2,000,000   ASCC Commercial Paper, 5.34% due 2/27/97          12/03/96   $   1,974,487  $  1,983,090   $  1,983,090
$      4,600,000   ASCC Commercial Paper, 5.33% due 3/18/97          12/11/96       4,533,938     4,548,240      4,548,240
$      5,600,000   Old Line Funding, 5.50% due 2/27/97               12/18/96       5,539,255     5,551,233      5,551,233
$      3,400,000   Barton Capital Corp., 5.20% due 2/14/97           12/19/96       3,370,284     3,377,061      3,377,061
$      3,300,000   Receivable Capital Corp., 5.60% due 2/21/97       12/26/96       3,270,740     3,273,820      3,273,820
$        900,000   Jefferson Smurfit, 5.46% due 3/18/97              12/30/96         889,353       889,626        889,626
$      7,500,000   Triple A Funding, 5.65% due 1/16/97               12/31/96       7,481,167     7,482,344      7,482,344
                                                                                -------------  ------------   ------------
                   TOTAL INVESTMENT IN COMMERCIAL PAPER                         $  27,059,224  $ 27,105,414   $ 27,105,414    25.09
                                                                                -------------  ------------   ---------------------


                   TOTAL TEMPORARY INVESTMENTS                                  $  27,059,224  $ 27,105,414   $ 27,105,414    25.09
                                                                                -------------  ------------   ---------------------

                   TOTAL INVESTMENT PORTFOLIO                                   $ 101,458,181  $101,504,371   $108,049,046   100.00%
                                                                                =============  ============   =====================
 

                   SUMMARY OF INVESTMENTS
                   Subordinated Notes                                           $  40,161,470  $ 40,161,470   $ 31,526,236    29.18
                   Common Stock and Warrants                                       34,237,487    34,237,487     49,417,396    45.73
                   Temporary Investments                                           27,059,224    27,105,414     27,105,414    25.09
                                                                                -------------  ------------   ---------------------
                                                                                $ 101,458,181  $101,504,371   $108,049,046   100.00%
                                                                                =============  ============   =====================

                   *  Restricted Security
                  **  Restricted Non-income Producing Security
                  (a) Includes receipt of payment-in-kind securities.
                  (b) Non-accrual investment status.
                  (c) Publicly traded class of securities.

</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, 1996

<S>                                             <C>                 <C>                  <C>        <C>             <C>
                                                                       PAR VALUE OR
                                                      DATE OF            NUMBER OF     AMORTIZED       NET              REALIZED
SECURITY                                            TRANSACTION           SHARES         COST        PROCEEDS          GAIN (LOSS)
                                                    -----------        ------------    ---------   -----------        ------------
Polaris Pool Systems, Inc.
   Common Stock                                       1/22/96                  -     $         -   $   177,185  (A)   $    177,185

ASR Acquisition Corp.
   Common Stock                                       various            219,745          34,561     2,045,112           2,010,551
Total Net Realized Gains for the
 Three Months Ended March 31, 1996                                                   $    34,561   $ 2,222,297        $  2,187,736
                                                                                     ===========   ===========        ============

Polaris Pool Systems, Inc.
   Common Stock                                       6/03/96                  -               -        85,169  (A)         85,169

U.S. Leather Holdings, Inc.
   15% Sr. Sub. Deb. *                                4/09/96        $18,684,000      21,875,262     9,342,000  (B)    (12,533,262)
   8% Sr. Sub. Pref. Stock                            4/09/96           3,800.89       2,576,000             -          (2,576,000)
   Jr. Sub. Pref. Stock                               4/09/96            191,504               -             -                   -
   Warrants                                           4/09/96            191,504         238,247             -            (238,247)
Total Net Realized Losses for the
  Three Months Ended June 30, 1996                                                   $24,689,509   $ 9,427,169        $(15,262,340)
                                                                                     ===========   ===========        ============

MTI Holdings, Inc.
   5% Sr. Sec. Note                                   8/06/96        $   915,779         915,779       220,102  (B)       (695,677)
   Common Stock                                       8/06/96             43,436         990,000       236,580  (B)       (753,420)

Bank United Corp.
   Common Stock                                       8/14/96            207,492       1,338,639     3,911,224           2,572,585

Tulip Holding Corp.
   14.5% Sub. Note                                    9/12/96        $ 8,530,073       8,514,414         5,687          (8,508,727)
   16.5% Sub. Note                                    9/12/96        $ 2,446,735       2,446,735             -          (2,446,735)
   15% Exch. Preferred Stock                          9/12/96          2,843.362       2,843,362             -          (2,843,362)
   Common Stock                                       9/12/96            153,104          30,636             -             (30,636)

Ampex Recording Media Corp.
   Common Stock                                       9/30/96             22,977         184,505       182,953              (1,552)
Total Net Realized Losses for the
  Three Months Ended September 30, 1996                                              $17,264,070   $ 4,556,546        $(12,707,524)
                                                                                     ===========   ===========        ============

Lexmark International Group, Inc.
   Common Stock                                       various            775,858       5,172,413    18,057,338          12,884,925

Polaris Pool Systems, Inc.
   Common Stock                                      10/28/96                  -               -         4,359 (A)           4,359

Apollo Radio Holding Co., Inc.
   Common Stock                                      11/06/96             107.25         222,750     1,587,133           1,364,383
   Warrants                                          11/06/96            17.8749               -             -                   -

Ampex Recording Media Corp. 
   Common Stock                                      11/29/96             22,690         182,360       182,946                 586

American Paper Group, Ltd.
   5% Sub. Note                                      12/17/96        $ 1,209,417         943,345       943,345                   -
   Common Stock                                      12/17/96              2,021         136,903       136,903                   -

WB Bottling Corporation
   Preferred Stock                                   12/31/96              3,135         313,500             -            (313,500)
   Common Stock                                      12/31/96             41,663         169,456             -            (169,456)
      
Total Net Realized Gains for the
  Three Months Ended December 31, 1996                                               $ 7,140,727   $20,912,024        $ 13,771,297
                                                                                     ===========   ===========        ============

Total Net Realized Losses for the
   Year Ended December 31, 1996                                                      $49,128,867   $37,118,036        $(12,010,831)
                                                                                     ===========   ===========        ============



(A) Proceeds represent a distribution to the Fund from the escrow account.
(B) Proceeds represent fair value of exchange.
 *  Includes Payment In Kind Notes. 

</TABLE>

                             See the Accompanying Notes to Financial Statements.


<PAGE>
                        EQUITABLE CAPITAL PARTNERS, L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996



1.     Organization and Purpose

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

       On July 22, 1993,  Equitable Capital Management  Corporation  ("Equitable
Capital"),  formerly the Managing General Partner and investment  adviser of the
Fund, 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 Fund  pursuant  to a new
investment advisory agreement.  Alliance Corporate (the "Investment Adviser") is
a registered investment adviser under the Investment Advisers Act of 1940.

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

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

       As stated  in the  Partnership  Agreement,  the Fund  will  terminate  on
October 13, 1998,  subject to the right of the Independent  General  Partners to
extend the term of the Fund for up to two  additional  one year  periods,  after
which the Fund will liquidate any remaining investments within five years.

2.     Significant Accounting Policies

       Basis of Accounting

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

       Valuation of Investments

     Securities  are valued at market or fair  value.  Market  value is used for
securities  for which market  quotations are readily  available.  For securities
without a readily  ascertainable  market value,  fair value is determined,  on a
quarterly  basis,  in good faith by the General  Partners of the Fund. The total
value of securities without a readily  ascertainable market value is $44,569,548
and $46,116,681,  as of December 31, 1996 and 1995,  respectively,  representing
40.2%  and  41.0%  of  total  assets,  respectively.  In  connection  with  such
determination,   the  Managing  General  Partner  has  established  a  valuation
committee comprised of senior executives to assess the 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  are  recorded at face  value,  unless the
Managing General Partner  determines that there is no reasonable  expectation of
collecting the full principal amounts of such securities.

       Income Taxes

       As  discussed  in Note 13, no  provision  for income  taxes has been made
since all income and losses are  allocated to the 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  are allocated to the specific
Partners' accounts to which they are applicable.  Sales,  marketing and offering
expenses are  allocated  between the Funds in  proportion to the number of units
issued  by  each  Fund  and to the  Partners  in  proportion  to  their  capital
contributions.
<PAGE>
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 such Limited Partners
receive   distributions   representing   additional  returns  of  capital.  Such
distributions  received  for the year ended  December  31,  1996  resulted  in a
$82,097 reduction of the principal amount of the Note. The promissory note of
Equitable  Capital was canceled upon the  contribution  of Alliance  Corporate's
Note.

4.     Capital Contributions

       On October 13, 1988, the 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
canceled and Alliance  Corporate  made a capital  contribution  in the form of a
promissory  note on such date,  as  described  in Note 3. Sales,  marketing  and
offering  expenses and selling  commissions  have been charged against  proceeds
resulting in net capital contributed by Limited Partners of $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 totaled $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 totaled $4,711,806. 

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

6.     Investment Advisory Fee

     As of July 22,  1993,  Alliance  Corporate  has been  receiving a quarterly
Investment  Advisory  Fee,  at the annual  rate of 1.0% of the Fund's  Available
Capital, with a minimum annual payment of $2,000,000 collectively for the Funds,
less 80% of commitment,  transaction, investment banking and "break-up" or other
fees related to the Fund's investments ("Deductible Fees"). Available Capital is
defined as the sum of the  aggregate Net Capital  Contributions  of the Partners
less the  cumulative  amount of returns of Capital  distributed  to Partners and
realized losses from investments.  Since becoming the successor Managing General
Partner of the Fund, Alliance Corporate has not received any Deductible Fees.
Alliance Corporate is a related party of the Fund.

     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,
1996, 1995 and 1994 were $1,037,447,  $1,442,458, and $1,855,152,  respectively.
The decrease from 1995 to 1996 in the  Investment  Advisory Fee is due primarily
to the return of capital  distributed  to Limited  Partners,  which  reduced the
Fund's Available Capital, on which the Investment Advisory Fee is based.
<PAGE>
7.     Fund Administration Fees and Expenses

     As compensation  for its services during the fourth through seventh year of
operation of the Funds,  ML Fund  Administrators,  Inc.  ("MLFAI"),  as the Fund
administrator,  is entitled to receive from the Funds an annual  amount equal to
the  greater  of the (i)  Minimum  Fee and (ii) the Funds'  prorated  proportion
(based on the number of Units issued by the Funds) of 0.45% of the excess of the
aggregate net offering proceeds of the Units issued by the Funds over 50% of the
aggregate  amount  of  capital  reductions  of the Funds  (subject  to an annual
maximum of $3.2  million).  The Minimum Fee is 1% of the gross offering price of
Units in the Funds, but not greater than $500,000.  The Fund  Administration Fee
is calculated and paid quarterly in advance.  The Fund  Administration Fees paid
by the  Fund for the  years  ended  December  31,  1996,  1995  and  1994,  were
$724,141, $903,704, and $986,374, 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 Retirement Fund, commencing on October
13,  1992.  For the years ended  December 31, 1996 and 1995,  the Fund  incurred
Administrative  Expenses of $192,068 and $173,962 respectively,  which consisted
primarily of printing,  audit and tax return preparation and custodian fees paid
for by MLFAI on behalf of the Retirement Fund.

8.     Independent General Partners' Fees and Expenses

       As compensation for their services,  each Independent  General Partner is
entitled to a $30,000 annual fee (payable  quarterly)  from the 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, 1996,  1995 and 1994,  the Fund  incurred
$192,279, $167,152, and $164,518, respectively, of Independent General Partners'
Fees and Expenses.

9.   Related Party Transactions

     For the  years  ended  December  31,  1996,  1995 and  1994,  the Fund paid
expenses of $76,426,  $44,530, and $87,221,  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.
<PAGE>
10.    Investment Transactions

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

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

     During the year  ended  December  31,  1996,  the Fund  received a total of
$709,500 and $187,444  from Western  Pioneer,  Inc. and U.S.  Leather  Holdings,
Inc., respectively, as principal pay downs of the senior notes held by the Fund.
No gain or loss has been recorded on the transactions.

     During the year ended  December  31,  1996,  the Fund  received  additional
proceeds of $266,713  from  Polaris  Pool  Systems,  Inc.  The money  represents
proceeds from the sale of the investment from prior years that have been held in
escrow for future  adjustments  and expenses  not paid on the sale dates.  These
proceeds were recorded and distributed as gains.

     During March 1996, the Fund sold its remaining ASR Acquisition Corp. common
stock for $2,045,112 and recognized a gain of $2,010,551 on the sale.

     On April 9, 1996, the Equitable investors foreclosed on the common stock of
United States Leather  Holdings,  Inc. All securities held by the Fund have been
surrendered  and cancelled in exchange for 795 shares of common stock in Leather
U.S., Inc. The shares will have a cost basis of 50% of the original par value of
the 15% Senior Debentures surrendered.

     On May 8, 1996, the Fund received  dividend  income of $3,760,524 from Bank
United Corp.

     On August 6, 1996, a comprehensive  restructuring  closed for MTI Holdings,
Inc. The Fund recognized a loss of $1,449,097 on this transaction.

     On August 14,  1996,  the Fund sold  207,492  shares of Bank  United  Corp.
(formerly  USAT Holdings Inc.) common stock for $3,911,224 and recognized a gain
of $2,572,585.

     On  September  12,  1996,  the Fund  sold its  Tulip  Holding  Corp.  14.5%
Subordinated  Notes for $5,687 and  recognized a loss of $8,508,727 on the sale.
The 16.5% Subordinated Notes, Series A Exchangeable  Preferred Stock and Class A
Common  Stock  were  deemed  worthless  resulting  in a total  realized  loss of
$5,320,733 to the Fund.

     On September 30, 1996, the Fund sold 22,977 shares of Ampex Recording Media
Corp.  Class A Common Stock for $182,953  which  resulted in a loss of $1,552 to
the Fund.  The Fund sold its remaining  22,690 shares of Ampex  Recording  Media
Corp.  Class A Common Stock on November 29, 1996,  for $182,946 and recognized a
gain of $586 on the sale.
<PAGE>
     During the fourth  quarter of 1996, the Fund sold 775,858 shares of Lexmark
International  Group,  Inc. common stock for $18,057,338  resulting in a gain of
$12,884,925 to the Fund.

     On November 6, 1996,  the Apollo Radio Holding Co.,  Inc.  common stock and
warrants  held  by the  Fund  were  redeemed.  The  Fund  received  proceeds  of
$1,587,133 which resulted in a realized gain of $1,364,383 to the Fund.

     On December 17,  1996,  the Fund sold its  American  Paper  Group,  Ltd. 5%
Subordinated Notes and common stock for $1,108,132  resulting in no gain or loss
to the Fund.

     During the year  ended  December  31,  1996,  the Fund  received a total of
$131,558  from  Pergament  Home  Centers,  Inc.,  as principal  pay downs of the
Floating Rate Demand Note held by the Fund. No gain or loss has been recorded on
the transactions.

     As of December 31, 1996, the Fund had investments in 5 Managed Companies (a
Managed Company is one to which the Fund, the Managing  General Partner or other
persons in the Fund's  investor group makes  significant  managerial  assistance
available) and 4 Non-Managed  Companies (a  Non-Managed  Company is one to which
such  assistance  is not  provided)  totaling  $74,398,957  (including  $854,000
capitalized cost of  payment-in-kind  securities),  consisting of $40,161,470 in
senior notes and subordinated notes and $34,237,487 in common stock and purchase
warrants.

11.    Allocation of Profits and Losses

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

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

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

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

       For the year ended December 31, 1996,  earnings were allocated 99% to the
Limited Partners, as a class, and 1% to the Managing General Partner.

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

     For the year ended  December 31,  1996,  the Fund  recorded net  unrealized
appreciation on Enhanced Yield Investments of $31,877,152. Such appreciation was
the  result  of  adjustments  in  value  made  with  respect  to  the  following
investments during 1996:

     The amount includes the reversal of $12,626,984, $2,576,000 and $238,247 of
unrealized  depreciation of U.S.  Leather  Holdings,  Inc.  senior  subordinated
notes, senior subordinated  preferred stock and non-voting common stock purchase
warrants,  respectively,  due to a restructuring  on April 9, 1996. On March 31,
1996, U.S. Leather  Holdings,  Inc. 15% Senior  Subordinated  Notes were written
down from 60% to 50% of par, resulting in unrealized  depreciation of $1,840,387
to the Fund.

     On March 31, 1996,  Pergament  Home Centers,  Inc. Class B Common Stock was
written down from 25% of cost to zero,  resulting in unrealized  depreciation of
$2,142,000.  On June 30, 1996, Pergament Home Centers, Inc. Floating Rate Demand
Note  was  written  down  from  100%  to 75% of  par,  resulting  in  unrealized
depreciation of $809,200 to the Fund.

     On March 31, 1996, RI Holdings, Inc. senior subordinated notes were written
down to 30% of par,  resulting in unrealized  depreciation  of $2,145,567 to the
Fund.  On May 1, 1996,  the Fund  received  additional  shares of Class B Common
Stock from RI Holdings.  The Fund exchanged  outstanding debt for the new common
stock  issued,  resulting in unrealized  depreciation  of $1,360 to the Fund. On
June 30, 1996, RI Holdings,  Inc.  senior  subordinated  notes were written down
from 30% to 15% of par,  resulting in unrealized  depreciation  of $3,658,076 to
the Fund. On September 30, 1996, RI Holdings,  Inc.  senior  subordinated  notes
were written down from 15% to 2% or par, resulting in unrealized depreciation of
$3,170,333 to the Fund.
<PAGE>
     Due to the sale of 775,858  shares of  Lexmark  International  Group,  Inc.
common stock during the fourth  quarter 1996,  the Fund  reversed  $6,636,463 of
unrealized  appreciation.  Due to an  increase  in the  quoted  market  price of
Lexmark  International  Group,  Inc.  common  stock,  the  Fund  recorded  total
unrealized  appreciation  of $2,571,985  at September  30, 1996.  The equity was
valued at 100% of the closing  market price at September 30, 1996 as compared to
90% at March 31, 1996, resulting in unrealized appreciation of $2,671,546 to the
Fund.

     On November 29, 1996,  the Fund  reversed a total of $39,413 of  unrealized
depreciation  due to the sale of the remaining  22,690 shares of Ampex Recording
Media Corp.  Class A Common Stock.  Due to a decrease in the quoted market price
of the Ampex Recording Media Corp. Class A Common Stock, the Fund recorded total
unrealized  depreciation of $22,690 at September 30, 1996. Also, due to the sale
of common stock on September 30, 1996,  $16,773 of unrealized  depreciation  was
reversed.  Due to an increase in the quoted market price of the Ampex  Recording
Media Corp.  Class A Common Stock Warrants,  the Fund recorded total  unrealized
appreciation  of $150,701 at June 30, 1996.  The equity was valued at 80% of the
closing market price at September 30, 1996, due to contractual  restrictions  on
resale.

     On November 6, 1996,  the Fund reversed a total of $1,439,717 of unrealized
appreciation  in Apollo Radio  Holding Co.,  Inc. due to the  redemption  of the
common stock and  warrants  held by the Fund.  On March 31,  1996,  Apollo Radio
common stock was written up, pending a cash distribution  expected in the second
half of 1996, resulting in unrealized appreciation of $449,717 to the Fund.

     Due to the sale of the Class B Common Stock  investment in ASR  Acquisition
Corp. in March 1996, the Fund reversed the unrealized  appreciation  recorded of
$1,695,930.

     On August 6, 1996,  the Fund  reversed a total of  $1,447,889 of unrealized
depreciation in MTI Holdings, Inc. due to a restructuring.

     Due to the sale of the Tulip Holding  Corporation 14.5%  Subordinated Notes
on September 12, 1996, the Fund reversed the unrealized depreciation recorded of
$8,516,679. The Fund also reversed $5,320,733 of unrealized depreciation for the
16.5%  Subordinated  Notes, 15% Exchangeable  Preferred Stock and Class A Common
Stock which were deemed  worthless as of September  30, 1996.  On June 30, 1996,
Tulip Holding Corporation subordinated notes were written down from 5% of par to
zero, resulting in unrealized depreciation of $426,504 to the Fund.

     On September 30, 1996, the Western Pioneer,  Inc. senior  subordinated note
was  written  up to 50% of the  original  par  value,  resulting  in  unrealized
appreciation of $3,510,540 to the Fund.

     Due to an increase in the quoted  market price of Bank United Corp.  common
stock, the Fund recorded total unrealized appreciation of $1,481,470 at December
31,  1996.  Due to an increase in the quoted  market  price of Bank United Corp.
common stock, the Fund recorded total unrealized  appreciation of $13,763,746 at
September 30, 1996.  The equity was valued at 90% of the closing market price at
December 31, 1996, due to contractual restrictions on resale.

     On  December  31,  1996,  the  Fund's  preferred  stock  and  common  stock
investments in WB Bottling Corporation were rendered worthless. As a result, the
Fund reversed a total of $482,956 of unrealized depreciation.

     For the years ended  December  31,  1995 and 1994,  the Fund  recorded  net
unrealized  appreciation  of  $2,627,096  and  net  unrealized  depreciation  of
$15,853,762, respectively.

         The following  investments  have been on  non-accrual  status as of the
respective dates:

         Pergament Home Centers, Inc.
           Floating Rate Demand Note                 July 1, 1996
         Western Pioneer, Inc. 10%
           Senior Subordinated Note                  November 30, 1994
         RI Holdings, Inc. 16%
           Senior Subordinated Notes                 April 25, 1994

     Alliance Corporate  continues to monitor the Fund's portfolio closely. As a
matter  of  standard  procedure,   Alliance  Corporate  reviews  each  portfolio
company's financial statements at least quarterly, and often monthly. Investment
managers  routinely review and discuss  financial and operating results with the
companies'  management  and  equity  sponsors,  and  attend  periodic  board  of
directors meetings, as appropriate.  In some cases, Alliance Corporate officers,
acting on behalf of the Funds,  serve as  directors  on the boards of  portfolio
companies. When problems arise, communication with management and sponsors often
occurs on a daily basis.
<PAGE>
13.    Income Taxes

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

     Pursuant to Statement of Financial  Accounting Standards No. 109 Accounting
for Income Taxes,  the Fund is required to disclose any  difference  between the
tax basis of the Fund's assets and  liabilities  versus the amounts  reported in
the  Financial  Statements.  Generally,  the  tax  basis  of the  Fund's  assets
approximate  the amortized  cost amounts  reported in the Financial  Statements.
This amount is computed  annually and as of December 31, 1996,  the tax basis of
the  Fund's  assets was  greater  than the  amounts  reported  in the  Financial
Statements  by  $30,331,565.   This  difference  is  primarily  attributable  to
unrealized  depreciation  on investments  which has not been  recognized for tax
purposes.  Additionally,  certain realized gains and losses due to restructuring
were treated  differently  for tax  purposes,  but not for  financial  reporting
purposes.

14.  Subsequent Distributions

     On February 5, 1997, the Independent General Partners approved an aggregate
cash  distribution  of $21,719,699 for the three months ended December 31, 1996,
which was paid on February 14, 1997. The amount  distributed to Limited Partners
was  $21,710,127,  or $76.28 per Unit (of which  $6,651,359 is capital  returned
from  investments  during the fourth  quarter of 1996),  to Limited  Partners of
record at December 31, 1996. On a per Unit basis,  this  distribution to Limited
Partners includes $49.58 of realized gains,  $3.33 of income from operations and
$23.37 of  return  of  capital.  The  Managing  General  Partner's  one  percent
allocation  of $219,294  was reduced by its one percent  allocation  of realized
gains and capital returned from  investments  during the fourth quarter of 1996,
of $209,722 (which is being held as a Deferred  Distribution  Amount pursuant to
the Partnership Agreement), resulting in a net distribution of $9,572.

15.  Subsequent Events

     In January  1997,  the Fund sold  30,002  shares of  Lexmark  International
Group,  Inc. at an average price of $25.74 per share and  generated  $772,125 of
net proceeds, which includes realized gains of $572,111.

     Certain  shareholders  of Bank  United  Corp.  participated  in a secondary
offering of approximately 4.1 million shares of its common stock (which includes
the  underwriters'  over-allotment  option) in February  1997.  The Fund sold an
aggregate  of  779,543  shares  at a net  price of $27.98  per  share.  The Fund
received   total  net  proceeds  of   $21,811,613.14   and  realized   gains  of
$16,581,184.92.  The Fund  still  holds  98,365  shares  of Bank  United  Corp.,
representing approximately 11% of its original shareholdings. The shares of Bank
United Corp. are traded on the NASDAQ under the ticker symbol "BNKU".

     On February 21, 1997,  the Fund  received a prepayment  notice from Lexmark
International  Inc.  stating that it will prepay its outstanding  $19,667,348 of
Senior Subordinated Notes held by the Fund, together with accrued interest and a
contractual  prepayment premium, on March 24, 1997. The amount of the prepayment
premium  will be a function  of  interest  rate levels just prior to the time of
prepayment.

     Total proceeds received by the Fund from these transactions are expected to
be  distributed  to the Limited  Partners as part of the regular  quarterly cash
distribution to be made in May 1997.
<PAGE>
Item 9.       Disagreements on Accounting and Financial Disclosure

       None.

                                    Part III

Item 10.      Directors and Executive Officers of the Registrant

The Fund

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

Independent General Partners

       The Independent General Partners provide overall guidance and supervision
with  respect to the  operations  of the Fund and  perform  the  various  duties
imposed on the  directors of business  development  companies by the  Investment
Company Act of 1940. The  Independent  General  Partners  supervise the Managing
General Partner and must, with respect to any Enhanced Yield Investment,  either
certify that it meets the Fund's investment  guidelines or specifically  approve
it. The Independent  General Partners are also responsible for approving certain
transactions  pursuant to the  conditions  of an  exemptive  order issued by the
Securities  and  Exchange  Commission  (the  "Commission")  under which the 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  have 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 shall hold office until his
removal or withdrawal pursuant to the provisions of the Partnership Agreement.

     Mr. Lear, age 79, has been an Executive-in-Residence and Visiting Professor
at the Columbia  University Graduate School of Business since 1977. He is also a
director of Cambrex Corp. and the Korea Fund (a closed-end investment fund). Mr.
Lear is a trustee of the Scudder Institutional Funds (mutual funds) and a member
of the advisory  board of the Welsh,  Carson,  Anderson,  Stowe Venture  Capital
Funds.

     Mr.  Shapiro,  age  62,  is  the  President  of  RFS  &  Associates,   Inc.
(consultants  and  investments).  From  1986 to 1987 he was the  Co-Chairman  of
Wertheim Schroeder & Co. Inc.  (investment bankers) and from 1974 to 1986 he was
the President of its predecessor,  Wertheim & Co. Inc. Mr. Shapiro is a director
of TJX Companies,  Inc. (specialty  retailing),  a director of American Building
Companies and the Burnham Fund Inc.  (mutual fund).  Mr. Shapiro was Chairman of
the Securities Industry Association in 1985.

     Mr.  Marshall,  age 75, is  Senior  Fellow  of the  Nelson  A.  Rockefeller
Institute of Government.  He is also President of Alton G. Marshall  Associates,
Inc. (real estate  consultants).  He was Chairman and Chief Executive Officer of
Lincoln  Savings Bank from 1984 to 1991. He is also a Director of New York State
Electric and Gas Corporation.  He is a Trustee of EQK Realty Investors I and EQK
Green Acres (real  estate  investors),  and a Trustee of The Hudson River Trust,
which is a mutual fund receiving investment advice from Alliance Capital.

     Dr. Sharwell,  age 76, served as the President of Pace University from 1984
to 1990,  after  retiring in 1984 as Senior Vice President of AT&T. He is also a
director of USLife Corporation,  American Biogenetic  Sciences,  Inc. and United
States Life Insurance Company.
<PAGE>
Managing General Partner

       The Managing  General Partner is responsible  for purchasing  investments
for the Fund which the Independent General Partners have 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

James D. Neidhart            Senior Vice President

Laura Mah                    Vice President and Chief Accounting Officer


       James R. Wilson, age 50, is the President of Alliance Corporate and is in
charge of Alliance Corporate's Finance Department. He has specialized in private
placement  investment  management for over 20 years. He joined Equitable Life in
1970. From 1975 to 1978, he was in charge of the Private Placement  Department's
Atlanta regional office, responsible for making direct placement loans to middle
market  companies.  He then  returned to the home office to supervise the credit
review and approval  procedures of all six regional offices. In 1980, Mr. Wilson
joined  the  Investment   Recovery  Division  of  Equitable  Capital  Management
Corporation and  subsequently  became its head.  During his tenure in investment
recovery,   he  was  instrumental  in  a  number  of  major  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 52, is a Senior Vice  President of Alliance
Corporate.  Mr. Gobbo joined Alliance  Corporate  through the  combination  with
Equitable  Capital.  Mr. Gobbo joined  Equitable Life in 1967 as an economist in
the office of  Equitable's  Chief  Economist.  He joined the  Private  Placement
Department  in 1976 and in 1984  became  head of an  investment  group  that was
responsible  for  the  Department's   lending  activities   involving  financial
institutions and heavy industrial companies.
<PAGE>
       Mr.  James D.  Neidhart,  age 52, is a Senior Vice  President of Alliance
Corporate.  He is head of the Investment Recovery Division of Alliance Corporate
responsible  for the  management of public and private  investments in companies
that  have  encountered  troubled  financial  situations.  He has been  actively
involved  in  over  20-25  restructurings,  playing  in most a  leadership  role
including  chairmanship of committees critical to the restructuring process. Mr.
Neidhart,  who joined Alliance  Corporate through the combination with Equitable
Capital, had been employed by Equitable Capital in its workout group since 1986.
Prior to that, he had nine years of experience in private placement  investments
and workout transactions with the Prudential Insurance Company of America, three
years of commercial  lending  experience  with Harris Trust and Savings Bank and
served six years as an Officer in the U.S. Air Force.

     Mrs.  Laura  Mah,  age 41, is a Vice  President  of  Alliance  Capital  and
co-manages the Insurance  Services Group.  She is responsible for accounting and
reporting  for  assets  managed  by  Alliance  Capital  for  insurance  clients,
including mutual funds,  partnerships,  general, separate and advisory accounts.
Mrs. Mah joined Alliance Capital through the combination with Equitable Capital.
Prior to that, she was an Assistant  Vice President with Shearson  Lehman Hutton
for five years. She is a Certified Public Accountant.

The Investment Adviser

       As a result of the combination of the businesses of Equitable Capital and
Alliance Capital,  Equitable  Capital's  investment  advisory agreement with the
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.

       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 $36,890,  Mr. Shapiro  $36,250,  Mr. Marshall $36,935
and Dr.  Sharwell  $35,500 in fees with respect to their services as Independent
General Partners in 1996.

     The information with respect to the "Fund  Administration Fee and Expenses"
payable to the Managing  General Partner and the  Administrator  set forth under
the caption  "Management  Arrangements -- The Managing  General  Partner" in the
Prospectus  is  incorporated  by  reference  into  this  Item 11.  The Fund paid
$893,841 to the Administrator, through the Managing General Partner in 1996.

     The information  with respect to the  "Investment  Advisory Fee" payable to
Alliance  Corporate (and  distributions  from the Managing  General Partner) set
forth under the caption  "Management  Arrangements  -- Description of Investment
Advisory  Agreements" in the Prospectus is  incorporated  by reference into this
Item 11.  The Fund  paid  Alliance  Corporate  $1,037,447  with  respect  to the
Investment  Advisory Fees for 1996. The Managing General Partner's 1% allocation
of net investment income from Temporary  Investments,  which in 1996 amounted to
$280,  is credited  against the  Investment  Advisory  Fees,  as required by the
Partnership Agreement.

     Alliance   Corporate,   as  Managing  General  Partner,   received  $73,812
representing distributions of net investment income in 1996.
<PAGE>
Item 12.      Security Ownership of Certain Beneficial Owners and Management

       As of the date of this  report,  no person or entity is known by the 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-invests 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,  1995,  filed  with  the
           Securities and Exchange Commission on November 22, 1995.

</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 18th day of March,
1997.

                                  EQUITABLE CAPITAL PARTNERS, L.P.

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

Dated: March 18, 1997             -------------------------------
                                  James R. Wilson
                                  Title:  President


Dated: March 18, 1997             --------------------------------
                                  Laura Mah
                                  Title:  Vice President and Chief
                                          Accounting Officer

<PAGE>
       Pursuant to the  Requirements  of the Securities and Exchange Act of 1934
this  report has been  signed  below by the  following  persons on behalf of the
Registrant in the capacities indicated on the 18th day of March, 1997.

         Signature                               Title


________________________            Independent General Partner of
Robert W. Lear                      Equitable Capital Partners, 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 18th day of March,
1997.

                              EQUITABLE CAPITAL PARTNERS, L.P.

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

Dated: March 18, 1997                /s/  James R. Wilson
                                     -----------------------------
                                     James R. Wilson
                                     Title:  President

Dated: March 18, 1997                /s/  Laura Mah
                                     ----------------------------
                                     Laura Mah
                                     Title:  Vice President and Chief
                                             Accounting Officer



<PAGE>



       Pursuant to the  Requirements  of the Securities and Exchange Act of 1934
this  report has been  signed  below by the  following  persons on behalf of the
Registrant in the capacities indicated on the 18th day of March, 1997.

       Signature                              Title


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