SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-K



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

           For the year ended                         01-16532
           December 31, 1997                  Commission File Number

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


            Delaware                                 13-3486106
  (State or other jurisdiction of         (IRS Employer Identification No.)
  incorporation or organization)

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


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


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


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


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

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

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


<PAGE>
                                     Part I


Item 1.    Business

Formation

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

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

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

      The Funds  jointly  offered an  aggregate  of  1,000,000  units of limited
partnership  interest  ("Units") to investors  in a public  offering  registered
under the Securities Act pursuant to a Registration  Statement on Form N-2 (File
No.  33-20093),  which was declared  effective  under the  Securities Act by the
Commission  on July  15,  1988.  Merrill  Lynch,  Pierce,  Fenner  & Smith  (the
"Agent"),   an   affiliate   of  ML  Fund   Administrators   Inc.,   (the  "Fund
Administrator")  acted as selling agent for the Units offered by the  Retirement
Fund.
 <PAGE>
      On  October  13,  1988,  the  Retirement  Fund  issued  221,072  Units  to
investors,  and Equitable Capital, as Managing General Partner,  admitted 26,304
investors as limited  partners of the Retirement Fund (the "Limited  Partners").
The net  proceeds  of the  offering  of such  Units to the  Retirement  Fund was
$205,596,960 after giving effect to volume discounts of $223,270 and the payment
of $15,251,770  in sales  commissions to the Agent.  Equitable  Capital,  in its
capacity as Managing  General Partner,  contributed a demand  promissory note in
the  principal  amount of  $2,052,050  as required  by the Amended and  Restated
Agreement of Limited Partnership, dated as of October 13, 1988 (the "Partnership
Agreement"), pursuant to which the Retirement Fund had been organized. Equitable
Capital reduced this note by $218,504 resulting from actual syndication expenses
paid in excess of original estimates. The public offering has been concluded.

      In connection  with its  organization  and offering,  the Retirement  Fund
incurred $431,479 in organizational  expenses and $2,043,437 in offering,  sales
and  marketing  expenses.  The  organizational  expenses  were  amortized  on  a
straight-line  basis over a sixty  month  period that  commenced  on October 13,
1988.  Such expenses were fully  amortized as of October 31, 1993. The offering,
sales and marketing  expenses incurred by the Retirement Fund have been paid and
have been  accounted  for as a charge to the capital  account of the  Retirement
Fund's  partners.  The net proceeds  available for  investment by the Retirement
Fund after such offering  less the return of capital to the Limited  Partners of
$65,065,910 equaled $138,066,135.

Investments

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

     During  the year  ended  December  31,  1996,  the  Retirement  Fund made a
follow-on  investment in one Managed  Company at a total cost of $2,232.  During
the  year  ended  December  31,  1995,  the  Retirement  Fund  made a  follow-on
investment  in one  Managed  Company  at a total  cost of $920 and paid  $359 in
additional consideration to exercise warrants.

     As of December  31,  1997,  the  Retirement  Fund had a total of 7 Enhanced
Yield Investments at a cost of $22,522,760.  During 1997, 1996 and 1995 the Fund
receive  $50,807,443,  $20,659,748 and $13,479,835,  respectively,  in principal
payments and prepayment relating to certain Enhanced Yield Investments.

     The Fund invests 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>

Competition

     The Retirement  Fund has completed its investment  period and  reinvestment
period and no longer has to compete for investments.

Employees

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

Item 2.    Properties

      The Retirement Fund does not own or lease any physical properties.

Item 3.    Legal Proceedings

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

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

      None.
<PAGE>
                                     Part II


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

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

     The number of holders of Units as of  December  31,  1997 was  24,934.  The
Managing General Partner holds a general partner interest in the Retirement Fund
and does not hold any Units. Pursuant to the terms of the Partnership Agreement,
the Retirement Fund generally makes  distributions  of cash interest,  dividends
and other income  received from  investments  in excess of expenses of operation
and reserves for expenses and certain investments and liabilities within 45 days
after  the  end  of  each  calendar  quarter.  Net  cash  receipts  representing
cumulative  income and gains are  distributed as soon as  practicable  after the
related disposition. Such distributions are allocated among the Managing General
Partner, and the Limited Partners, in general, first 99% to the Limited Partners
and 1% to the Managing  General Partner until the Limited Partners have received
a cumulative  priority return of 10%  non-compounded on an annual basis on their
investments in Enhanced Yield  Investments,  second, 70% to the Limited Partners
and 30% to the Managing  General Partner until the Managing  General Partner has
received 20% of all current and prior  distributions  on such  investments  and,
thereafter, 80% to the Limited Partners and 20% to the Managing General Partner.
The  Retirement  Fund's  distribution  procedures are described in detail in the
Prospectus under the caption  "Distributions  and Allocations";  the information
under such caption is incorporated by reference in this Item 5.

     On February 5, 1998, the Independent General Partners approved an aggregate
cash  distribution  of $1,768,576,  for the three months ended December 31, 1997
which was paid on February 13, 1998 to the Limited Partners. The amount that was
distributed  to Limited  Partners  on record as of December  31,  1997  includes
$738,380 of return of capital.  On a per Unit basis,  the  distribution of $8.00
includes  $4.66 of net  realized  gains  and $3.34 of  return  of  capital.  The
Managing General Partner's one percent allocation of which $17,864 is being held
as a Deferred  Distribution  Amount resulting in no distribution to the Managing
General Partner.

<PAGE>
<TABLE>
<CAPTION>

Item 6. Selected Financial Data
                                                       For the Years Ended

<S>                              <C>                  <C>                 <C>                  <C>                <C>
                                   December 31, 1997   December 31, 1996   December 31, 1995   December 31, 1994  December 31, 1993
TOTAL FUND INFORMATION:            -----------------   -----------------   -----------------   -----------------  -----------------
Cash Distributions to Partners         $  65,855,797(a)     $19,384,272(c)      $26,397,957(d)     $ 30,860,830        $ 45,145,869
Net Assets                                17,402,161         85,429,641          88,842,112         115,578,330         145,821,277
Total Assets                              17,506,475         85,552,314          88,926,178         115,662,552         145,923,297
Net Investment Income                        516,140          4,579,169           4,999,345           5,797,964          10,909,633
Net Change in Unrealized
 Appreciation (Depreciation)
 on Investments                          (16,270,956)        18,779,614          (6,915,689)         (5,675,676)          4,082,028
Net Realized (Losses)
 Gains on Investments                     13,929,328         (7,321,494)          1,744,317             642,557           1,633,125


PER UNIT OF LIMITED
PARTNERSHIP INTEREST:

Cash Distributions                     $      297.81(a)     $     87.44(c)       $   119.13 (d)      $    139.31         $   203.56


Cumulative Cash
 Distributions                              1,260.24(b)          962.43              874.99              755.86             615.55
Investment Income                               9.50              29.00               32.00               38.24              61.20
Expenses                                        7.19               8.49               (9.62)             (12.28)            (12.34)
Net Investment Income                           2.31              20.51               22.38               24.09              52.93
Net Unrealized Appreciation
  (Depreciation) on Investments               (72.86)             84.10              (30.97)             (25.42)             18.28
Net Realized (Losses) Gains
 on Investments                                62.38             (32.79)               7.81                2.88               7.45
Net Asset Value                                75.47             381.46              397.85              516.98             652.87

</TABLE>

(a) Includes Return of Capital of $34,277,214 or $155.05 per LP Unit.
(b) Includes Return of Capital of $553.15 per LP Unit.
(c) Includes Return of Capital of $6,484,042 or $29.33 per LP Unit.
(d) Includes Return of Capital of $16,458,810 or $74.45 per LP Unit.


<PAGE>
Item 7.    Management's Discussion and Analysis
           of Financial Condition and Results of Operations

Liquidity and Capital Resources

      Net Proceeds of Offering

      On October 13, 1988,  the  Retirement  Fund  completed the initial  public
offering of Units,  admitting  26,304  Limited  Partners who  purchased  221,072
Units.  The net proceeds  available for investment by the Retirement  Fund after
such offering less return of capital to Limited Partners were $181,514,467 after
volume discounts,  sales  commissions and  organizational,  offering,  sales and
marketing expenses.

      Investments

     As of December  31,  1997,  the  Retirement  Fund had a total of 7 Enhanced
Yield  Investments  at a net cost of  $22,522,760.

      Proceeds from Investments

      During the year ended December 31, 1997, the Retirement  Fund received the
following proceeds:

     During the year ended  December 31, 1997,  the  Retirement  Fund received a
total of $157,436 from  Pergament Home Centers,  Inc. as a principal  paydown of
the Floating  Rate Demand Note held by the  Retirement  Fund.  No gain,  loss or
income was recorded on this transaction.

     During the year ended  December  31, 1997,  the  Retirement  Fund  received
additional  proceeds of $1,338 from Polaris Pool Systems,  Inc. This  represents
proceeds  from the sale of the  investments  from prior  years that were held in
escrow for future adjustments and expenses.

     On March 24, 1997,  the  Retirement  Fund  received a prepayment of Lexmark
International,  Inc.'s  14.25% Senior  Subordinated  Notes  outstanding,  in the
principal amount of $24,103,269 together with a prepayment penalty of $4,059,488
and  $791,892  of  accrued  interest.  The  transaction  resulted  in a gain  of
$4,059,488 to the Retirement Fund.

     On April 8, 1997,  the  Retirement  Fund received a dividend of $6,794 from
Bank United Corp.

     On July 2, 1997, the Retirement  Fund sold its RI Holdings Inc., 16% Senior
Subordinated  Notes for $202,165 and realized a loss of  $5,261,753 on the sale.
Additionally,  the  write-off  of the common  stock  resulted  in an  additional
realized loss of $1,506,333.

     On September 19, 1997, the Retirement Fund received  additional proceeds of
$4,546 from Haddon  Craftsman.  This  represents  proceeds  from the sale of the
investment from prior years that have been held in escrow.

     During the year ended December 31, 1997,  the Retirement  Fund sold 432,403
shares of Bank United Corp.  Class A Common Stock for $12,264,518 and realized a
gain of $9,363,263.

     For the year ended  December 31,  1997,  the  Retirement  Fund sold 346,227
shares of Lexmark  International Group, Inc. Class B Common Stock for $9,936,971
resulting in a gain $7,628,779.

     All proceeds  received during the fourth quarter of 1997 are expected to be
distributed  to Limited  Partners on record as of December  31, 1997 on February
13, 1998.

     For additional information,  refer to the Supplemental Schedule of Realized
Gains and Losses and Note 10 to the Financial Statements.
<PAGE>

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

      The Retirement  Fund, which is designed for tax-exempt  investors,  is not
permitted to borrow to finance  investments.  The Partnership  Agreement imposes
certain limits on the use of proceeds from the  disposition  of investments  for
reinvestments.

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

Participation in Enhanced Yield Investments

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

      Although the Retirement  Fund cannot  eliminate its risks  associated with
participation in Enhanced Yield Investments,  it has established risk management
policies.  The Retirement Fund subjects each prospective  investment to rigorous
analysis,  and makes only those  investments  that have been  recommended by the
Managing  General  Partner  and  that  meet  the  Retirement  Fund's  investment
guidelines  or that have  otherwise  been  approved by the  Independent  General
Partners.

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

     For  the  year  ended  December  31,  1997,  the  Retirement  Fund  had net
investment income of $516,140,  a decrease of $4,063,029 from the net investment
income of $4,579,169 for the year ended  December 31, 1996. The Retirement  Fund
had net  investment  income  of  $4,999,345  for the same  period  in 1995.  Net
investment  income is comprised of  investment  income  (primarily  interest and
dividend  income)  offset by expenses.  The decrease in the 1997 net  investment
income versus the  comparative  period in 1996 reflects the decrease in interest
and dividend income partially offset by the decrease in Fund Administration Fees
and Expenses.

     For the year ended December 31, 1997,  the  Retirement  Fund had investment
income of $2,120,811,  as compared to $6,475,628 for the same period in 1996 and
$7,146,704 for the same period in 1995. The decrease in 1997  investment  income
of 67% versus  1996 was  primarily  due to a  decrease  in the amount of accural
status debt  securities held by the Fund due to sales and repayments of Enhanced
Yield Investments  during 1997. The decrease in the 1996 of investment income of
9.4% versus the  comparative  period in 1995 was  primarily due to a decrease in
the amount of accrual status debt  securities held by the Retirement Fund due to
the sales and repayments of Enhanced Yield Investments during 1996.

     The  Retirement  Fund incurred  expenses of  $1,604,671  for the year ended
December 31,  1997,  as compared to  $1,896,459  for the same period in 1996 and
$2,147,359 for the same period in 1995. The decrease in the 1997 expenses versus
the 1996 expenses of $291,788 was  primarily  due to a decrease in  Professional
Fees and Fund  Administration  Fees and Expenses.  The decrease in 1996 expenses
versus 1995  expenses  of  $250,900  was  primarily  due to the  decrease in the
Investment Advisory Fee and the Fund Administrative Fees and Expenses.

     The  Retirement  Fund  experienced a decrease in net assets  resulting from
operations for the year ended December 31, 1997 in the amount of $1,825,488,  as
compared to an increase of $16,037,289 for the same period in 1996. The decrease
in net assets in net in 1997 versus 1996 is  attributable  to an increase in net
unrealized  depreciation of $35,050,570,  a decrease in net investment income of
$4,063,029 and an increase in net realized gain of $21,250,822.  (see Statements
of Operations in the Financial  Statements).The increase in net assets resulting
from operations in 1996 versus 1995 is attributable to an increase in unrealized
appreciation  of $25,695,303  offset by a decrease in net  investment  income of
$420,176 and an increase in net realized loss of $9,065,811.

     For the year ended  December  31, 1997,  the  Retirement  Fund  incurred an
Investment Advisory Fee of $906,195.  Investment Advisory Fee for the year ended
December 31, 1997, reflects an adjustment for the difference between the Minimum
Amount due to the Investment  Advisor and what was paid for the quarters  ending
December 31, 1996 and March 31, 1997.  (as  described in Note 6 to the Financial
Statements). For the years ended December 31, 1996 and 1995, the Retirement Fund
incurred Investment Advisory Fees of $842,503 and $1,037,207,  respectively, (as
described in Note 6 to the Financial Statements).

     The Fund  Administration  Fees and Expenses (as  described in Note 7 to the
Financial Statements) for the years ended December 31, 1997, 1996 and 1995, were
$414,349,  $680,441 and  $837,092,  respectively.  The decrease of $266,092 from
1996 to 1997 is primarily the result of the Fund  Administration Fee changing to
an  annual  fee of  $100,000  plus  100% of all  direct  out-of-pocket  expenses
incurred by the Retirement Fund  Administrator on behalf of the Fund. During the
years ended December 31, 1997,  1996 and 1995,  the  Retirement  Fund incurred a
total of  $314,349,  $146,468  and  $135,139,  respectively,  of  administrative
expenses, consisting primarily of printing, audit and tax return preparation and
custodian fees paid for by the Fund Administrator.

     Independent General Partners' Fees and Expense incurred for the years ended
December  31,  1997,  1996 and  1995,  were  $147,671,  $183,611  and  $161,236,
respectively.  The  changes  are  attributable  to  fluctuations  in legal  fees
incurred  by the  Independent  General  Partners  (See  Note 8 to the  Financial
Statements).

     The Retirement Fund incurred  professional  fees of $125,730,  $171,200 and
$105,443 for the years ended  December 31,  1997,  1996 and 1995,  respectively,
which included  reimbursed legal fees to Debevoise & Plimpton and Equitable Life
for legal services (See Note 9 to Financial Statements).
<PAGE>
Unrealized Appreciation/Depreciation, and Non-Accrual of Investments

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

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

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

     For the years ended December  31,1997 and 1996 the Retirement Fund recorded
net unrealized depreciation on Enhanced Yield Investments of $16,270,956 and net
unrealized  appreciation  of $  18,779,614,  respectively.  For the  year  ended
December 31, 1995, the Retirement  Fund recorded net unrealized  depreciation on
Enhanced Yield Investments of $6,915,689. The change of $35,050,570 from 1996 to
1997,  in  unrealized  depreciation  was  primarily  the result of writedowns in
Leather U.S.,  Inc.,  Pergament  Home Centers,  Inc., and Western  Pioneer,  the
reversal of unrealized  depreciation  in R I. Holdings offset by the reversal of
unrealized  appreciation on Bank United Corp. and Lexmark  International  Group.
(See Note 12 to the Financial Statements).

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

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

        Pergament Home Centers, Inc.
          Floating Rate Demand Note                July 1, 1996
        Western Pioneer, Inc. 10%
          Senior Subordinated Note                 November 30, 1994

Realized Gains and Losses on Investments

     For the year ended  December 31, 1997,  the  Retirement  Fund  recorded net
realized  gains of  $13,929,328  on  transactions  involving five Enhanced Yield
Investments.  (See  Note 10 to the  Financial  Statements  and the  Supplemental
Schedule of Realized Gains and Losses). For the year ended December 31, 1996 the
Retirement  Fund  realized  net  losses on  investments  of  $7,321,494  and net
realized gains on investment of $1,744,317 at December 31, 1995.
<PAGE>
Item 8. Financial Statements and Supplementary Data


               EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.


                                TABLE OF CONTENTS


Independent Auditors' Report

Statements of Assets, Liabilities and Partners' Capital
  As of December 31, 1997 and 1996

Statements of Operations
  For the Years Ended December 31, 1997, 1996 and 1995

Statements of Cash Flows
  For the Years Ended December 31, 1997, 1996 and 1995

Statements of Changes in Net Assets 
  For the Years Ended December 31, 1997, 1996 and 1995

Statements of Changes in  Partners'  Capital 
  For the Years Ended December 31, 1997, 1996 and 1995

Schedule of Portfolio Investments - December 31, 1997

Supplementary Schedule of Realized Gains and Losses
  For the Year Ended December 31, 1997

Notes to Financial Statements



<PAGE>


                          INDEPENDENT AUDITORS' REPORT

Equitable Capital Partners (Retirement Fund), L.P.

     We have audited the  accompanying  statements  of assets,  liabilities  and
partners'  capital of Equitable  Capital Partners  (Retirement  Fund), L.P. (the
"Retirement  Fund") as of December 31, 1997 and 1996,  including the schedule of
portfolio  investments,  as of December 31, 1997, and the related  statements of
operations,  cash flows,  changes in net assets and changes in partners' capital
for each of the  three  years in the  period  ended  December  31,  1997.  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, 1997, by correspondence with
the custodian.  An audit also includes assessing the accounting  principles used
and significant estimates made by management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  such financial  statements present fairly, in all material
respects,  the financial position of the Retirement Fund as of December 31, 1997
and 1996, the results of  operations,  its cash flows and the changes in its net
assets and partners'  capital for the respective  stated periods,  in conformity
with generally accepted accounting principles.

     As explained in Note 2, the  financial  statements of the  Retirement  Fund
include securities valued at $7,083,787 and $40,903,485, as of December 31, 1997
and 1995  respectively,  representing  40.5 and 47.8  percent  of total  assets,
respectively,  whose values have been  estimated by the General  Partners of the
Retirement Fund in the absence of readily  ascertainable  market values. We have
reviewed  the  procedures  used by the  General  Partners  in  arriving at their
estimate   of  value  of  such   securities   and  have   inspected   underlying
documentation,  and,  in  the  circumstances,  we  believe  the  procedures  are
reasonable and the documentation  appropriate.  However, because of the inherent
uncertainty of valuation,  those estimated values may differ  significantly from
the  values  that would  have been used had a ready  market  for the  securities
existed, and the differences could be material.

     Our  audits  were  conducted  for the  purpose of forming an opinion on the
basic  financial  statements  taken as a whole.  The  supplemental  schedule  of
realized  gains and losses for the year ended December 31, 1997 is presented for
the  purposes of  additional  analysis  and is not a required  part of the basic
financial  statements.  This schedule is the  responsibility  of the  Retirement
Fund's  General  Partners.  Such  schedule  has been  subjected  to the auditing
procedures  applied in our audit of the basic  financial  statements and, in our
opinion,  is fairly stated in all material  respects when considered in relation
to the basic financial statements taken as a whole.


Deloitte & Touche LLP
New York, New York
February 20, 1998
<PAGE>


               EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
             STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL

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

ASSETS:                                                            Notes             December 31, 1997         December 31, 1996
                                                                                     -----------------         -----------------
    Investments                                                   2,10,12
        Enhanced Yield Investments at Value-
            Managed Companies
               (amortized cost of $12,155,290 at
               December 31, 1997 and $46,361,524
               at December 31, 1996)                                                  $      4,847,290         $     47,988,305
            Non-Managed Companies
               (amortized cost of $10,367,470 at
               December 31, 1997 and $12,961,638
               at December 31, 1996)                                                         4,884,451               14,814,796
        Temporary Investments
               (at amortized cost)                                                           6,898,850               20,550,637

    Cash                                                                                        24,028                   62,948
    Interest Receivable                                            2,12                         19,322                  876,677
    Note Receivable                                                 3,4                        832,534                1,178,728
    Receivable  for Investment Sold                                                                  -                   77,712
    Prepaid Expenses                                                                                 -                    2,511

TOTAL ASSETS                                                                          $     17,506,475         $     85,552,314
                                                                                      ================         ================


LIABILITIES AND PARTNERS' CAPITAL

    Liabilities
        Professional Fees Payable                                    9                $         52,721         $         52,641
        Independent General Partners' Fees Payable                   8                           9,788                   20,846
        Fund Administrative Expenses Payable                         7                          38,958                   43,085
        Other Accrued Liabilities                                                                2,847                    6,101
            Total Liabilities                                                                  104,314                  122,673

    Partners' Capital
        Managing General Partner                                    3,4                        717,018                1,099,814
        Limited Partners (221,072 Units)                             4                      16,685,143               84,329,827
            Total Partners' Capital                                                         17,402,161               85,429,641

TOTAL LIABILITIES AND PARTNERS' CAPITAL                                               $     17,506,475         $     85,552,314
                                                                                      ================         ================


</TABLE>


                             See the Accompanying Notes to Financial Statements


<PAGE>
<TABLE>
<CAPTION>
                              EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                             STATEMENTS OF OPERATIONS

<S>                                                          <C>                  <C>               <C>
                                                                             For the Years Ended
                                                          -----------------------------------------------------------       
                                                          December 31, 1997    December 31, 1996    December 31, 1995
                                                          -----------------    -----------------    -----------------       
INVESTMENT INCOME- Notes 2,12:
      Interest                                            $       2,053,480    $       4,603,229    $       7,121,657
      Dividend and Discount                                          67,331            1,872,399               25,047
                    TOTAL INVESTMENT INCOME                       2,120,811            6,475,628            7,146,704

EXPENSES:
      Investment Advisory Fee- Note 6                               906,195              842,503            1,037,207
      Fund Administration Fees and Expenses- Note 7                 414,349              680,441              837,092
      Independent General Partners'
       Fees and Expenses - Note 8                                   147,671              183,611              161,236
      Professional Fees - Note 9                                    125,730              171,200              105,443
      Insurance Fees                                                  5,126                4,410                 --
      Valuation Expenses                                              5,600               14,294                6,381
                    TOTAL EXPENSES                                1,604,671            1,896,459            2,147,359

NET INVESTMENT INCOME                                               516,140            4,579,169            4,999,345

NET CHANGE IN UNREALIZED (DEPRECIATION)
      APPRECIATION ON INVESTMENTS- Note 12                      (16,270,956)          18,779,614           (6,915,689)

NET REALIZED GAINS (LOSSES)ON INVESTMENTS- Note 10               13,929,328           (7,321,494)           1,744,317

NET INCREASE (DECREASE) IN NET ASSETS
      RESULTING FROM OPERATIONS                           $      (1,825,488)   $      16,037,289    $        (172,027)
                                                          =================    =================    =================

</TABLE>


                             See the Accompanying Notes to Financial Statements


<PAGE>
<TABLE>
<CAPTION>
                              EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                           STATEMENTS OF CASH FLOWS



<S>                                                            <C>               <C>               <C>
                                                                                           For the Years Ended
                                                                         -------------------------------------------------------
INCREASE (DECREASE) IN CASH                                              December 31, 1997  December 31, 1996  December 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES:                                    -----------------  -----------------  -----------------  
       Interest and Discount Income                                        $     2,054,172    $     3,990,822    $     7,249,650
       Fund Administration Fees & Expenses                                        (418,476)          (665,800)          (848,815)
       Investment Advisory Fee                                                    (906,195)          (842,503)        (1,037,207)
       Independent General Partners' Fees and Expenses                            (158,730)          (172,309)          (161,259)
       Valuation Expenses                                                           (8,854)           (12,435)           (12,466)
       Sale (Purchase) of Temporary Investments, Net                            14,575,782         (3,390,853)         7,779,486
       Purchase of Enchanced Yield Investments                                        --                   --               (920)
       Proceeds from Sales and Principal Payments of
            Enhanced Yield Investments                                          50,807,443         20,659,748         13,479,835
       Professional Fees                                                          (125,275)          (158,255)           (89,535)
       Insurance Fees                                                               (2,990)              (375)            (6,923)
Net Cash Provided by Operating Activities                                       65,816,877         19,408,040         26,351,846
CASH FLOWS FROM FINANCING ACTIVITIES:
       Cash Distributions to Partners                                          (65,855,797)       (19,384,272)       (26,397,957)
Net Cash Used in Financing Activities                                          (65,855,797)       (19,384,272)       (26,397,957)
Net Increase (Decrease) in Cash                                                    (38,920)            23,768            (46,111)
Cash at the Beginning of the Period                                                 62,948             39,180             85,291
Cash at the End of the Period                                              $        24,028    $        62,948    $        39,180
                                                                           ===============    ===============    ===============


                     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                                             $    (1,825,488)   $    16,037,289    $      (172,027)

Adjustments to Reconcile Net Increase (Decrease) in Net Assets
       Resulting from Operations to Net Cash Provided by Operating
       Activities:
Decrease in Investments                                                         51,453,897         24,590,390         19,514,082
Decrease (Increase) in Accrued Interest and Investment Income                      (66,640)        (2,484,809)           101,181
Decrease (Increase)in Prepaid Expenses                                               2,511              4,412             (6,923)
(Decrease) Increase in Other Accrued Liabilities                                    (3,254)             1,859             (6,086)
Increase (Decrease) in Fund Administration Expenses Payable                         (4,127)            14,640            (11,723)
Net Change in Unrealized (Appreciation)
   Depreciation on Investments                                                  16,270,956        (18,779,614)         6,915,689
(Decrease) Increase in Independent General
    Partners' Fees Payable                                                         (11,058)            11,303                981
Increase in Professional Fees Payable                                                   80             12,570             16,672
Total Adjustments                                                               67,642,365          3,370,751         26,523,873
Net Cash Provided by Operating Activities                                  $    65,816,877    $    19,408,040    $    26,351,846
                                                                           ===============    ===============    ===============

</TABLE>

                              See the Accompanying Notes to Financial Statements


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

<S>                                                                <C>                 <C>             <C>
                                                                      For the Years Ended
                                                     -----------------------------------------------------------
                                                     December 31, 1997    December 31, 1996    December 31, 1995
                                                     -----------------    -----------------    -----------------  
FROM OPERATIONS:

     Net Increase (Decrease) in Net Assets
       Resulting from Operations                     $      (1,825,488)   $      16,037,289    $        (172,027)

     Cash Distributions to Partners                        (65,855,797)         (19,384,272)         (26,397,957)

     Reduction in Managing General Partners'
       Contribution                                           (346,195)             (65,488)            (166,234)

     Total Decrease                                        (68,027,480)          (3,412,471)         (26,736,218)

NET ASSETS:

     Beginning of Period                                    85,429,641           88,842,112          115,578,330

     End of Period                                   $      17,402,161    $      85,429,641    $      88,842,112
                                                     =================    =================    =================


</TABLE>
                             See the Accompanying Notes to Financial Statements



<PAGE>


                              EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                  STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<S>                                                           <C>        <C>                 <C>                 <C>
                                                                              Managing          Limited
                                                                   Notes  General Partner       Partners         Total
                                                                   -----  ---------------   -------------    -------------   


FOR THE YEAR ENDED DECEMBER 31, 1995

Partners' Capital at January 1, 1995                                       $   1,288,272    $ 114,290,058    $ 115,578,330
Cash Distributions to Partners                                                   (61,650)     (26,336,307)     (26,397,957)
Reduction in Managing General Partners' Contribution                  3         (166,234)            --           (166,234)
Allocation of Net Investment Income                                  11           49,993        4,949,352        4,999,345
Allocation of Net Unrealized Depreciation
  on Investments                                                     12          (69,157)      (6,846,532)      (6,915,689)
Allocation of Net Realized Gains on Investments                                   17,443        1,726,874        1,744,317
Partners' Capital at December 31, 1997                                     $   1,058,667    $  87,783,445    $  88,842,112
                                                                           =============    =============    =============


FOR THE YEAR ENDED DECEMBER 31, 1996

Partners' Capital at January 1, 1996                                       $   1,058,667    $  87,783,445    $  88,842,112
Cash Distributions to Partners                                                   (53,737)     (19,330,535)     (19,384,272)
Reduction in Managing General Partners' Contribution                  3          (65,488)            --            (65,488)
Allocation of Net Investment Income                                  11           45,791        4,533,378        4,579,169
Allocation of Net Unrealized Appreciation
  on Investments                                                     12          187,796       18,591,818       18,779,614
Allocation of Net Realized Losses on Investments                                 (73,215)      (7,248,279)      (7,321,494)
Partners' Capital at December 31, 1997                                     $   1,099,814    $  84,329,827    $  85,429,641
                                                                           =============    =============    =============


FOR THE THREE MONTHS ENDED DECEMBER 31, 1997

Partners' Capital at January 1, 1997                                       $   1,099,814    $  84,329,827    $  85,429,641
Cash Distributions to Partners                                                   (18,345)     (65,837,452)     (65,855,797)
Reduction in Managing General Partners' Contribution                  3         (346,195)            --           (346,195)
Allocation of Net Investment Income                                  11            5,161          510,979          516,140
Allocation of Net Unrealized Depreciation
  on Investments                                                     12         (162,710)     (16,108,246)     (16,270,956)
Allocation of Net Realized Gains on Investments                                  139,293       13,790,035       13,929,328
Partners' Capital at December 31, 1997                                     $     717,018    $  16,685,143    $  17,402,161
                                                                           =============    =============    =============



</TABLE>

                            See the Accompanying Notes to Financial Statements


<PAGE>
<TABLE>
<CAPTION>
                                                EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                                       SCHEDULE OF PORTFOLIO INVESTMENTS
                                                                DECEMBER 31, 1997

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

                   ENHANCED YIELD INVESTMENTS
                   MANAGED COMPANIES


                   MISCELLANEOUS MANUFACTURING

                   QUANTEGY ACQUISITION CORP. 
                    (FORMERLY AMPEX RECORDING MEDIA)
    123.50 Shares  Quantegy Acquisition Corp., Common Stock        11/13/95    $  2,722,290   $ 2,722,290  $  2,722,290
                                                                               ------------   -----------  ------------
                                                                                  2,722,290     2,722,290     2,722,290       16.37%
                                                                               ------------   -----------  -------------------------
                   LEATHER AND LEATHER PRODUCTS

                   LEATHER U.S., INC. - NOTE 12
                     (FORMERLY UNITED STATES LEATHER HOLDINGS, INC.)
     621.90 Shares Leather U.S., Inc., Common Stock                 04/09/96     7,308,000      7,308,000              0
                                                                               -----------   ------------    -----------
                                                                                 7,308,000      7,308,000              0       0.00
                                                                               -----------   ------------    ----------------------
                    MISCELLANEOUS RETAIL

                     R&S/STRAUSS, INC.
                     (FORMERLY WSR ACQUISITION CORP.)
   $       935,000   R&S/Strauss, Inc.,
                      Sr. Sub. Nt. 15% due 05/31/00*                06/13/90       935,000       935,000       935,000
   $     1,190,000   R&S/Strauss, Inc.,
                      Sr. Sub. Nt. 15% due 05/31/00*                06/13/90     1,190,000     1,190,000     1,190,000
                                                                               -----------   -----------   -----------
                                                                                 2,125,000     2,125,000     2,125,000        12.78
                                                                               -----------   -----------   ------------------------



                     TOTAL INVESTMENT IN  MANAGED  COMPANIES                   $12,155,290   $12,155,290   $ 4,847,290        29.15%
                     ---------------------------------------                   -----------   -----------   -------------------------


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


<PAGE>
<TABLE>
<CAPTION>
                              EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                        SCHEDULE OF PORTFOLIO INVESTMENTS
                                                DECEMBER 31, 1997
                                                  (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

                     CONSUMER PRODUCTS MANUFACTURING

                     LEXMARK INTERNATIONAL GROUP, INC.
                       - NOTES 10, 12
          69,683     Lexmark International Group, Inc.,
                       Class B Common Stock (b)                     03/27/91     $ 464,523    $   464,523    $ 2,647,954
                                                                                 ---------    -----------    -----------
                                                                                   464,523        464,523      2,647,954      15.92%
                                                                                 ---------    -----------    ----------------------
                     DISTRIBUTION SERVICES

                     WESTERN PIONEER, INC. - NOTE 12
   $     4,730,800   Western Pioneer, Inc.,
                       Sr. Sub. Nts. 10% due 11/30/07*(a)           11/30/94       653,289        653,289      1,419,240
     81,081 Warrants Western Pioneer, Inc.,
                       Common Stock Purchase Warrants **            11/30/94             0              0              0
                                                                                 ---------    -----------    -----------
                                                                                   653,289        653,289      1,419,240       8.53
                                                                                 ---------    -----------    ----------------------

                     HEALTH SERVICES

                     MTI HOLDINGS, INC.
   $       113,386   MTI Holdings, Inc.,
                      Sr. Sec. Nt. 12% due 07/01/03*                08/06/96       113,386        113,386       113,386
      8,125 Shares   MTI Holdings, Inc., Common Stock**             08/06/96       121,875        121,875       121,875
     2,264 Warrants  MTI Holdings, Inc., Common Stock
                      Purchase Warrants                             08/06/96             0              0             0
                                                                                ----------     ----------   -----------
                                                                                   235,261        235,261       235,261        1.41
                                                                                ----------     ----------   -----------------------

                     MISCELLANEOUS RETAIL

                     PERGAMENT HOME CENTERS, INC.- NOTES 10, 12
   $     2,543,200   Pergament Acq. Corp., Home Centers, Inc.
                      Floating Rate Demand Note due 07/31/00*(a)     10/18/91    2,282,397      2,282,397       581,996
      299.2 Shares   Pergament Holdings, Corp.,
                      Common Stock Class B **                        02/28/89    6,732,000      6,732,000             0
     109.2571 Shares Pergament Holdings, Corp.,
                      Common Stock Class C **                        02/28/89            0              0             0
                                                                               -----------    -----------   -----------
                                                                                 9,014,397      9,014,397       581,996        3.50
                                                                               -----------    -----------   -----------------------


                     TOTAL INVESTMENT IN NON-MANAGED  COMPANIES                $10,367,470    $10,367,470   $ 4,884,451       29.36%
                     ------------------------------------------                 ----------    -----------   ------------------------


                     TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS            $22,522,760    $22,522,760   $ 9,731,741       58.51%
                     ----------------------------------------------            -----------    -----------   ------------------------
</TABLE>


                             See the Accompanying Notes to Financial Statements.

<PAGE>
<TABLE>
<CAPTION>
                              EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                        SCHEDULE OF PORTFOLIO INVESTMENTS
                                                 DECEMBER 31, 1997
                                                    (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

   $     6,900,000   Federal Home Loan Mortgage Disc Note,
                       6.00% due 01/02/98                           12/31/97   $  6,897,700   $    6,898,850   $  6,898,850
                                                                               ------------   --------------   ------------
                     TOTAL INVESTMENT IN COMMERCIAL PAPER                      $  6,897,700   $    6,898,850   $  6,898,850   41.49%
                     ------------------------------------                      ------------   --------------   --------------------


                     TOTAL TEMPORARY INVESTMENTS                               $  6,897,700   $    6,898,850   $  6,898,850   41.49%
                     ---------------------------                               ------------   --------------   --------------------

                     TOTAL INVESTMENT PORTFOLIO                                $ 29,420,460   $   29,421,610   $ 16,630,591  100.00%
                     --------------------------                                ============   ==============   ====================




                     SUMMARY OF  INVESTMENTS
                     Subordinated Notes                                        $  5,174,072   $    5,174,072   $  4,239,622   25.49
                     Common Stock and Warrants                                   17,348,688       17,348,688      5,492,119   33.02
                     Temporary Investments                                        6,897,700        6,898,850      6,898,850   41.49
                                                                               ------------   --------------   --------------------

                     TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS            $ 29,420,460   $   29,421,610   $ 16,630,591  100.00%
                     ----------------------------------------------            ============   ==============   ====================


                       * Restricted Security
                      ** Restricted Non-income Producing Security
                     (a) Non-accrual investment status.
                     (b) Pubicly traded class of securities.

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

<PAGE>
<TABLE>
<CAPTION>
               EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
               SUPPLEMENTAL SCHEDULE OF REALIZED GAINS AND LOSSES
                      FOR THE YEAR ENDED DECEMBER 31, 1997



<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                       1/15/97        $       --     $       --      $        542(A)   $        542

Lexmark International Group, Inc. 
   Common Stock                       various              22,641        150,941         582,684           431,743

Bank United Corp. 
   Common Stock                       various             383,872      2,575,631      10,740,739         8,165,108
 
Lexmark International Inc. 
   14.25% Sr. Sub. Note               3/24/97        $ 24,103,269     24,103,269      28,162,757         4,059,488

Total Net Realized Gains for the
  Three Months Ended March 31, 1997                                 $ 26,829,841    $ 39,486,722      $ 12,656,881
                                                                    ============    ============      ============


Polaris Pool Systems, Inc. 
   Common Stock                       5/15/97        $       --     $       --      $        796(A)   $        796

Lexmark International Group, Inc. 
   Common Stock                       various             171,037      1,140,252       4,443,681         3,303,429

Bank United Corp. 
   Common Stock                       various              48,531        325,624       1,523,779         1,198,155


Total Net Realized Gains for the
  Three Months Ended June 30, 1997                                  $  1,465,876    $  5,968,256      $  4,502,380
                                                                    ============    ============      ============


RI Holdings, Inc. 
   16% Sr. Sub Nts.                   7/02/97        $ 12,972,582   $  5,823,918    $    202,165      $ (5,621,753)
   Common Stock                                           592,348      1,506,333             --         (1,506,333)

Lexmark International Group, Inc. 
   Common Stock                       various             106,349        708,997       3,529,226         2,820,229

Haddon Craftsman
   Common Stock                       9/19/97                                 --           4,546(A)          4,546    


Total Net Realized Loss for the
  Three Months Ended September 30, 1997                             $  8,039,248    $  3,735,937      $ (4,303,311)
                                                                    ============    ============      ============


Lexmark International Group, Inc. 
   Common Stock                       various              46,200   $    308,002    $  1,381,380      $  1,073,378


Total Net Realized Gains for the
  Three Months Ended December 31, 1997                              $    308,002    $  1,381,380      $  1,073,378
                                                                    ============    ============      ============


Total Net Realized Gains for the
  Year Ended December 31, 1997                                      $ 36,642,967    $ 50,572,295      $ 13,929,328
                                                                    ============    ============      ============



(A) Proceeds  represent a distribution  to the  Retirement  Fund from the escrow
account.

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


<PAGE>
                   EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                            NOTES TO FINANCIAL STATEMENTS
                                  December 31, 1997



1.    Organization and Purpose

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

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

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

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

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

      Basis of Accounting

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

      Valuation of Investments

     Securities  are valued at market or fair  value.  Market  value is used for
securities  for which market  quotations are readily  available.  For securities
without a readily  ascertainable  market value,  fair value is determined,  on a
quarterly  basis, in good faith by the General  Partners of the Retirement Fund.
The total value of securities  without a readily  ascertainable  market value is
$7,083,787  and  $40,903,485  as of December  31,  1997 and 1996,  respectively,
representing 40.5% and 47.8% of total assets,  respectively.  In connection with
such  determination,  the Managing  General  Partner has established a valuation
committee  comprised  of senior  executives  to  assess  the  Retirement  Fund's
portfolio and make recommendations  regarding the value of the Retirement Fund's
portfolio securities. This valuation committee uses available market information
and  appropriate  valuation  methodologies.  In addition,  the Managing  General
Partner has retained Arthur D. Little, Inc., a nationally recognized independent
valuation consultant, to review such valuations.

     For privately  issued  securities in which the  Retirement  Fund  typically
invests,  the fair value of an  investment  is its initial  cost,  adjusted  for
amortization of discount or premium and as subsequently  adjusted to reflect the
occurrence of significant developments. "Significant developments" are business,
economic or market events that may affect a company in which an  investment  has
been made or the securities comprising such investment. For example, significant
developments  that could  result in a writedown  in value  include,  among other
things,  events  of  default  with  respect  to  payment  obligations  or  other
developments indicating that a portfolio company's performance may fall short of
acceptable  levels. A write-up in value of an investment could take place when a
significant favorable development occurs, such as a transaction representing the
partial sale of an  investment  that would result in a capital  gain, or company
performance exceeding expected levels on a sustained basis. Although the General
Partners  use  their  best  judgment  in  determining  the  fair  value of these
investments, there are inherent limitations in any valuation technique involving
securities of the type in which the Retirement Fund invests. Therefore, the fair
values presented  herein are not necessarily  indicative of the amount which the
Retirement Fund could realize in a current transaction.

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

      Interest Receivable on Investments

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

      Payment-In-Kind Securities

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

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

      Investment Transactions

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

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

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

      Sales, Marketing and Offering Expenses and Sales Commissions

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

3.    Note Receivable

     On July 22, 1993,  pursuant to the terms of the  Retirement  Fund's Amended
and  Restated  Agreement  of Limited  Partnership,  Alliance  Corporate,  as the
successor  Managing  General  Partner of the Retirement  Fund, has contributed a
non-interest  bearing  promissory note (the "Note") to the Retirement Fund in an
aggregate  amount equal to 1.01% of the aggregate Net Capital  Contributions  of
all Limited Partners (less distributions  representing returns of capital).  Net
Capital  Contributions  are comprised of gross offering  proceeds,  after giving
effect  to  volume   discounts   (and  after   netting  of  sales   commissions,
organization,  offering  and sales and  marketing  expenses),  less  returns  of
capital  distributed to Limited  Partners.  The principal  amount of the Note is
reduced  proportionally  as returns of capital are  received  by the Fund.  Such
return of capital  received for the year ended December 31, 1997,  resulted in a
$346,195  reduction of the principal  amount of the Note. The promissory note of
Equitable  Capital was canceled upon the  contribution  of Alliance  Corporate's
Note.

4.    Capital Contributions

      On October  13,  1988,  the  Retirement  Fund  closed the  initial  public
offering of its units of Limited Partner interests ("Units"). Equitable Capital,
the  Retirement   Fund's  Managing  General  Partner  at  that  time,   accepted
subscriptions for 221,072 Units and admitted 26,304 Limited Partners.

      The Limited Partners' total capital contributions were $220,848,730, after
giving  effect to volume  discounts  allowed of  $223,270.  Equitable  Capital's
aggregate  capital  contribution  was in the  form of a  promissory  note in the
principal amount of $2,052,059.  On July 22, 1993,  Equitable Capital's note was
canceled and Alliance  Corporate  made a capital  contribution  in the form of a
promissory  note on such date,  as  described  in Note 3. Sales,  marketing  and
offering  expenses and selling  commissions  have been charged against  proceeds
resulting in net capital contributed by Limited Partners of $203,146,793.

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

5.    Sales, Marketing and Offering Expenses and Sales Commissions

     The Retirement Fund expended a total of $416,052 for the  reimbursement  of
sales and marketing  expenses.  Aggregate  sales and  marketing  expenses of the
Funds may not exceed $2,528,415 or 0.5% of the aggregate  capital  contributions
and were allocated  proportionately  to the number of Units issued by each Fund.
Aggregate sales and marketing expenses for the Funds totaled $951,683.

     The Retirement Fund also paid $1,627,385 for the  reimbursement of offering
expenses.  These expenses, along with the offering expenses of Equitable Capital
Partners  and  the  organizational   expenses  of  the  Funds,  may  not  exceed
$6,000,000. Aggregate offering and organizational expenses for the Funds totaled
$4,711,806.

     For their  services  as  selling  agent,  the  Retirement  Fund paid  sales
commissions to Merrill Lynch, Pierce,  Fenner & Smith Incorporated in the amount
of  $15,251,770,  of  which  Equico  Securities  Corporation,  an  affiliate  of
Equitable Capital, a related party, received $168,150 as a selected dealer.
<PAGE>
6.    Investment Advisory Fee

      As of July 22, 1993,  Alliance  Corporate  has been  receiving a quarterly
Investment  Advisory  Fee, at the annual rate of 1.0% of the  Retirement  Fund's
Available Capital, with a minimum annual payment of $2,000,000  collectively for
the  Funds,  less  80%  of  commitment,   transaction,  investment  banking  and
"break-up"  or  other  fees  related  to  the  Retirement   Fund's   investments
("Deductible  Fees").  Available  Capital is defined as the sum of the aggregate
Net Capital  Contributions of the Partners less the cumulative amount of returns
of Capital distributed to Partners and realized losses from investments.

     As stated in the Partnership  Agreement,  the Retirement  Fund's  allocable
share of the Minimum  Amount is $874,350 or  $218,588  per  quarter.  Investment
Advisory Fee for the year ended  December 31, 1997,  reflects an adjustment  for
the difference between the Minimum Amount due to the Investment Advisor and what
was paid for the quarters ending December 31, 1996 and March 31, 1997.

     The Investment  Advisory Fee is calculated and paid quarterly,  in advance.
The  Investment  Advisory Fees paid by the  Retirement  Fund for the years ended
December  31,  1997,  1996 and 1995  were  $906,195,  $842,503  and  $1,037,207,
respectively.  The decrease from 1995 to 1996 in the Investment  Advisory Fee is
due  primarily  to the return of capital  distributed  to the Limited  Partners,
which reduced the Fund's Availavle Capital, on which the Investment Advisory Fee
is based.

7.    Fund Administration Fee and Expenses

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

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

     The Retirement Fund Administration Fees paid by the Retirement Fund for the
years  ended  December  31,  1997,  1996 and 1995 were  $100,000,  $553,973  and
$701,954, respectively.

     Beginning October 13, 1996, MLFAI is entitled to receive  reimbursement for
all  of  direct   out-of-pocket   expenses   incurred  in  connection  with  the
administration  of the Retirement Fund,  commencing on October 13, 1992. For the
years  ended  December  31,  1997  and  1996,   the  Retirement   Fund  incurred
Administrative expenses of $314,349 and $146,468,  respectively, which consisted
primarily of printing,  audit and tax return preparation and custodian fees paid
for by MLFAI on behalf of the Retirement Fund.

8.    Independent General Partners' Fees and Expenses

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

     For the years ended December 31, 1997,  1996 and 1995, the Retirement  Fund
incurred $147,671, $183,611 and $161,236,  respectively,  of Independent General
Partners' Fees and Expenses.

9.    Related Party Transactions

     For the years ended December 31, 1997,  1996 and 1995, the Retirement  Fund
paid expenses of $21,995, $102,008 and $26,408,  respectively,  as reimbursement
for amounts paid for legal  services  provided by Equitable  Life in  connection
with the Retirement  Fund's Enhanced Yield  Investments.  The Retirement Fund is
paying  Alliance  Corporate  an  Investment  Advisory  Fee for its  services  as
described in Note 6. Additionally, the Retirement Fund paid sales commissions to
Equico Securities, a related party, as described in Note 5.
<PAGE>
10.   Investment Transactions

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

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

     During the year ended  December 31, 1997,  the  Retirement  Fund received a
total of $157,436 from  Pergament Home Centers,  Inc. as a principal  paydown of
the Floating  Rate Demand Note held by the  Retirement  Fund.  No gain,  loss or
income has been recorded on this transaction.

     During the year ended  December  31, 1997,  the  Retirement  Fund  received
additional  proceeds  of  $1,338  from  Polaris  Pool  Systems,  Inc.  The money
represents  proceeds from the sale of the investments from prior years that have
been held in escrow for future  adjustments  and  expenses  not paid on the sale
dates.

     On March 24, 1997,  the  Retirement  Fund  received a prepayment of Lexmark
International,  Inc.'s  14.25% Senior  Subordinated  Notes  outstanding,  in the
principal amount of $24,103,269 together with a prepayment penalty of $4,059,488
and  $791,892  of  accrued  interest.  The  transaction  resulted  in a gain  of
$4,059,488 to the Retirement Fund.

     On April 8, 1997,  the  Retirement  Fund received a dividend of $6,794 from
Bank United Corp.

    On July 2, 1997, the Retirement  Fund sold its RI Holdings Inc., 16% Senior
Subordinated  Notes for $202,165 and realized a loss of  $5,261,753 on the sale.
Additionally,  the  write-off  of the common  stock  resulted  in an  additional
realized loss of $1,506,333.

     On September 19, 1997, the Retirement Fund received  additional proceeds of
$4,546 from Haddon  Craftsman.  This  represents  proceeds  from the sale of the
investment from prior years that have been held in escrow.

     During the year ended December 31, 1997,  the Retirement  Fund sold 432,403
shares of Bank United Corp.  Class A Common Stock for $12,264,518 and realized a
gain of $9,363,263.

     For the year ended  December 31,  1997,  the  Retirement  Fund sold 346,227
shares of Lexmark  International Group, Inc. Class B Common Stock for $9,936,971
resulting in a gain $7,628,779.

     All proceeds  received during the fourth quarter of 1997 are expected to be
distributed  to Limited  Partners on record as of December  31, 1997 on February
13, 1998.

     As of December 31, 1997, the Retirement  Fund had  investments in 3 Managed
Companies (a Managed  Company is one to which the Retirement  Fund, the Managing
General  Partner or other persons in the Retirement  Fund's investor group makes
significant  managerial  assistance  available)  and 4 Non-Managed  Companies (a
Non-Managed  Company is one to which such  assistance is not provided)  totaling
$22,522,760 (including $422,439 capitalized cost of payment-in-kind securities),
consisting of $5,174,072 in senior notes and subordinated  notes and $17,348,688
in common stock and purchase warrants.
<PAGE>

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, 1997,  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, 1997,  the  Retirement  Fund  recorded net
unrealized  depreciation  on Enhanced  Yield  Investments of  $16,270,956.  Such
depreciation  was the result of  adjustments  in value made with  respect to the
following investments during 1997:

     The amount includes the reversal of $6,545,973 and $1,106,041 of unrealized
appreciation  of Bank  United  Corp.  Class A  Common  Stock  due to the sale of
383,872  shares in February and the remaining  48,531 shares in May of 1997. Due
to an increase in the quoted  market price of Bank United  Corp.  Class A Common
Stock  and the  equity  being  valued  at 100% of the  closing  market  price as
compared to 90% at December 31, 1996,  the Retirement  Fund recorded  unrealized
appreciation of $143,167 at March 31, 1997. 

     On March 31, 1997,  Pergament Home Centers,  Inc. Floating Rate Demand Note
was written down from 75% to 50% of par, resulting in unrealized depreciation of
$532,433.  On June 30, 1997,  Pergament Home Centers,  Inc. Floating Rate Demand
Note  was  written  down  from  50% to  25%  of  par,  resulting  in  unrealized
depreciation of $532,167.

     Due to the sale of  346,227  shares of  Lexmark  International  Group  Inc.
common  stock  during the year  ended  December  31,  1997 the  Retirement  Fund
reversed $1,801,801, $1,646,224, $2,217,161 and $868,183 respectively.

     During the first quarter,  Leather U.S., Inc. common stock was written down
from 100% to 15% of par. In the second quarter the common stock was written down
from 15% to 0% of par. The  writedowns  resulted in unrealized  depreciation  of
$7,308,000 to the Retirement Fund.

     Due to the sale of the 16% Senior  Subordinated  Notes and the write-off of
the common stocks of RI Holdings, Inc. in July 1997 the Retirement Fund reversed
depreciation of $5,583,688 and $1,506,333 respectively.

     On September 30, 1997, the Western  Pioneer,  Inc. 10% Senior  Subordinated
Notes  were  written  down  from  50%  of par to  30%  resulting  in  unrealized
depreciation of $946,160.

     For the year ended  December 31, 1996,  the  Retirement  Fund  recorded net
unrealized appreciation of $18,779,614 and unrealized depreciation of $6,915,689
in 1995.
<PAGE>

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

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

13.   Income Taxes

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

      Pursuant to Statement of Financial Accounting Standards No. 109 Accounting
for Income Taxes,  the  Retirement  Fund is required to disclose any  difference
between the tax basis of the Retirement Fund's assets and liabilities versus the
amounts reported in the Financial  Statements.  Generally,  the tax basis of the
Retirement Fund's assets  approximate the amortized cost amounts reported in the
Financial  Statements.  This amount is computed  annually and as of December 31,
1997, the tax basis of the Retirement Fund's assets was greater than the amounts
reported  in  the  Financial  Statements  by  $24,826,666.  This  difference  is
primarily  attributable to unrealized  depreciation on investments which has not
been  recognized  for tax purposes.  Additionally,  certain  realized  gains and
losses due to restructuring were treated  differently for tax purposes,  but not
for financial reporting purposes.

14.  Subsequent Distributions

     On February 5, 1998, the Independent General Partners approved an aggregate
cash  distribution  of $1,768,576,  for the three months ended December 31, 1997
which was paid on February 13, 1998 to the Limited Partners. The amount that was
distributed  to Limited  Partners  on record as of December  31,  1997  includes
$738,380 of return of capital.  On a per Unit basis,  the  distribution of $8.00
includes  $4.66 of net  realized  gains  and $3.34 of  return  of  capital.  The
Managing General Partner's one percent  allocation of $17,864 is being held as a
Deferred  Distribution  Amount  resulting  in no  distribution  to the  Managing
General Partner.

15.  Subsequent Events

     In January 1998 through  February 1998 the Fund sold its  remaining  69,683
shares of Lexmark  International  Group,  Inc.  common stock.  The Fund received
$2,801,847 of net proceeds and realized a gain of $2,337,292.
<PAGE>
Item 9.    Disagreements on Accounting and Financial Disclosure

      None.

                                  Part III

Item 10.   Directors and Executive Officers of the Registrant

The Retirement Fund

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

Independent General Partners

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

     Messrs.  Robert W. Lear and Robert F.  Shapiro  have served as  Independent
General  Partners of the Retirement  Fund and the Enhanced Yield Fund since June
1988. On April 12, 1989,  Mr. Alton G. Marshall and Dr. William G. Sharwell were
admitted to the  Retirement  Fund and the Enhanced  Yield Fund,  increasing  the
total number of Independent  General Partners to four. Each Independent  General
Partner  shall hold  office  until his  removal or  withdrawal  pursuant  to the
provisions of the Partnership Agreement.

     Mr. Lear, age 80, 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  63,  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 76, 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 77, served as the President of Pace University from 1984
to 1990,  after  retiring in 1984 as Senior Vice President of AT&T. He is also a
director of USLife Corporation,  American Biogenetic  Sciences,  Inc. and United
States Life Insurance Company.
<PAGE>

Managing General Partner

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

Management of Alliance Corporate and the Retirement Fund

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

                         Position with Alliance Corporate Finance
                         Group Incorporated
                         ----------------------------------------
   
James R. Wilson          President

William Gobbo, Jr.       Senior Vice President

Andy Pitsillos           Vice President and Chief Accounting Officer


      James R. Wilson,  age 51, is the President of Alliance Corporate and is in
charge of Alliance Corporate's Finance Department. He has specialized in private
placement  investment  management for over 20 years. He joined Equitable Life in
1970. From 1975 to 1978, he was in charge of the Private Placement  Department's
Atlanta regional office, responsible for making direct placement loans to middle
market  companies.  He then  returned to the home office to supervise the credit
review and approval  procedures of all six regional offices. In 1980, Mr. Wilson
joined  the  Investment   Recovery  Division  of  Equitable  Capital  Management
Corporation and  subsequently  became its head.  During his tenure in investment
recovery,   he  was  instrumental  in  a  number  of  major   restructuring  and
recapitalizations  of  troubled  companies  and  served as  chairman  of several
creditors'  committees.  Mr. Wilson was elected senior vice president and deputy
head of Equitable Capital's Corporate Finance Department in 1985, and in 1991 he
became executive vice president and head of the Corporate Finance Department. He
was named  President of Alliance  Corporate  Finance Group in 1993 in connection
with the Alliance  Capital/Equitable  Capital  merger.  Mr. Wilson has served on
several  corporate Boards and presently is a director of US Leather,  Inc. He is
active in private placement industry events, has been a speaker at many industry
conferences on leveraged buyouts and mezzanine finance and served as Chairman of
the annual  Private  Placement  Conference in 1994.  Mr. Wilson is a graduate of
Denison University and holds an MBA from the University of Pittsburgh.

     Mr.  William  Gobbo,  Jr.,  age 53, 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.

     Mr. Andy Pitsillos, age 39, is Vice President and Chief Accounting Officer,
managing the  Partnership  Accounting  and  Advisory  Accounting  Groups.  He is
responsible  for the accounting  and financial  reporting for  partnerships  and
similarly structured entities managed by the firm and for Equitable  investments
in special purpose subsidiaries and externally managed limited partnerships.  He
has over 11 years experience in the insurance financial industry. Since 1984, he
has had  various  responsibilities  as Vice  President  of  Equitable  Capital's
Investment Reporting and analysis group, ensuring that proper statutory and GAAP
accounting/reporting  procedures  are  followed  for the  general  and  advisory
account assets managed by Alliance  Capital.  He  participated in the successful
demutualization of Equitable  companies.  Mr. Pitsillos holds a magna cum laude,
B.B.S.  and  M.B.A.  degrees in finance  from the City  University  of New York,
Bernard M. Baruch College.
<PAGE>

The Investment Adviser

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

The Administrator

      The Administrator  performs certain operating and administrative  services
for the Retirement Fund on behalf of the Managing General Partner pursuant to an
administrative services agreement,  dated October 13, 1988, among the Retirement
Fund, Equitable Capital and the Administrator.

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

Item 11.   Executive Compensation

     The information  with respect to  compensation  of the Independent  General
Partners set forth under the caption "Management Arrangements -- The Independent
General  Partners" in the Prospectus is incorporated by reference into this Item
11. The Retirement Fund paid Mr. Lear $35,750, Mr. Shapiro $35,250, Mr. Marshall
$35,750 and Dr.  Sharwell  $35,250 in fees,  with  respect to their  services as
Independent General Partners in 1997.

     The information with respect to the "Fund  Administration Fee and Expenses"
payable  to  the   Administrator   set  forth  under  the  caption   "Management
Arrangements -- The Administator" in the Prospectus is incorporated by reference
into this Item 11. The  Retirement  Fund paid $418,476 to the  Administrator  in
1997.

     The information  with respect to the  "Investment  Advisory Fee" payable to
Alliance  Corporate (and  distributions  from the Managing  General Partner) set
forth under the caption  "Management  Arrangements  -- Description of Investment
Advisory  Agreements" in the Prospectus is  incorporated  by reference into this
Item 11. The Retirement  Fund paid Alliance  Corporate  $906,195 with respect to
the Investment Advisory Fee for 1997.

     Alliance  Corporate,   as  Managing  General  Partner,   received  $18,345,
representing distributions of net investment income in 1997.
<PAGE>
Item 12.   Security Ownership of Certain Beneficial Owners and Management

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

      The  Independent  General  Partners and directors and officers of Alliance
Corporate  own as a  group,  13  Units,  or  less  than  1% of the  total  Units
outstanding.

Item 13.   Certain Relationships and Related Transactions

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

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

      In connection  with the  transaction  that  resulted in the  succession of
Alliance  Corporate as Managing General Partner of and Investment Adviser to the
Funds,  Equitable Capital and Alliance  Corporate  received two exemptive orders
from the  Securities and Exchange  Commission  permitting the Funds and Alliance
Corporate to rely on the exemptive orders previously issued to Equitable Capital
and the Funds, subject to the same conditions and undertakings under such orders
as applied to Equitable Capital.



<PAGE>


                                    Part IV


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

      (a)  Financial Statements, Financial Statement
           Schedules and Exhibits

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


Exhibits

3.1        Amended and Restated Certificate of Limited Partnership,
           dated as of April 12, 1989*

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

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

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

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

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

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

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

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

****       Incorporated  by reference to the Retirement  Fund's Annual Report of
           Form 10-K for the fiscal year ended December 31, 1995, filed with the
           Securities and Exchange Commission on November 22, 1995.


<PAGE>


                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the  undersigned,  thereunto duly authorized on the 27th day of March,
1998.

                             EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.

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

Dated: March 27, 1998             /s/  James R. Wilson
                                  -----------------------------
                                  James R. Wilson
                                  Title:  President



Dated: March 27, 1998            /s/ Andy Pitsillos
                                 ------------------------------
                                 Andy Pitsillos
                                 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 27th day of March, 1998.

      Signature                              Title

________________________   Independent General Partner of
Robert W. Lear             Equitable Capital Partners (Retirement Fund), L.P.

________________________   Independent General Partner of
Robert F. Shapiro          Equitable Capital Partners (Retirement Fund), L.P.

________________________   Independent General Partner of
Alton G. Marshall          Equitable Capital Partners (Retirement Fund), L.P.

________________________   Independent General Partner of
William G. Sharwell        Equitable Capital Partners (Retirement Fund), L.P.

________________________
James R. Wilson            President and Director of Alliance Corporate

________________________
Dave H. Williams           Director of Alliance Corporate

________________________
Bruce W. Calvert           Director of Alliance Corporate

________________________
John D. Carifa             Director of Alliance Corporate

________________________
Frank Savage               Director of Alliance Corporate


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


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




<PAGE>


                                   SIGNATURES


      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the  undersigned,  thereunto duly authorized on the 27th day of March,
1998.

                          EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.

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

Dated: March 27, 1998          /s/  James R. Wilson
                               ------------------------
                               James R. Wilson
                               Title:  President


Dated: March 27, 1998          /s/  Andy Pitsillos
                               ------------------------
                               Andy Pitsillos
                               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 27th day of March, 1998.

     Signature                                 Title


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

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

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

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

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

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

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

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

/s/  Frank Savage
Frank Savage                Director of Alliance Corporate

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

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