SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


[X]      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

For the Quarterly Period Ended June 30, 1999

Or

[  ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

For the transition period from                        to
                             Commission file number 0-29120

                           MICROCAP LIQUIDATING TRUST
                     (Successor to The MicroCap Fund, Inc.)
-------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


New York                                                             13-7110611
-------------------------------------------------------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)


c/o Raymond S. Troubh
Ten Rockefeller Plaza, Suite 712
New York, New York                                                     10020
-------------------------------------------------------------------------------
(Address of Principal Executive Offices)                           (Zip Code)


Registrant's Telephone Number, Including Area Code:  (800) 888-6534


Not applicable
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report


     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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest  practicable date. As of August 2, 1999 there were
2,427,281 units of beneficial interest outstanding.


<PAGE>


                           MICROCAP LIQUIDATING TRUST
                     (SUCCESSOR TO THE MICROCAP FUND, INC.)
                                      INDEX


PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements.

Statements of Net Assets in Liquidation as of June 30, 1999 (Unaudited) and
December 31, 1998

Schedule of Portfolio Investments as of June 30, 1999 (Unaudited)

Statements of Operations for the three months ended June 30, 1999 and 1998
(Unaudited)

Statements of Operations for the six months ended June 30, 1999 and 1998
(Unaudited)

Statements of Changes in Net Assets for the six months ended June 30, 1999
and 1998 (Unaudited)

Statements of Cash Flows for the six months ended June 30, 1999 and 1998
(Unaudited)

Notes to Financial Statements (Unaudited)

Item 2.       Management's Discussion and Analysis of Financial Condition and
Results of Operations.


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings.

Item 2.       Changes in Securities.

Item 3.       Defaults upon Senior Securities.

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

Item 5.       Other Information.

Item 6.       Exhibits and Reports on Form 8-K.



<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF NET ASSETS IN LIQUIDATION
<TABLE>

                                                                                            June 30, 1999      December 31,
                                                                                             (Unaudited)             1998
Assets

<S>                                       <C>
Portfolio investments at fair value (cost $1,937,500 as of
   June 30, 1999 and December 31, 1998)                                                     $       484,375    $        484,375
Cash and cash equivalents - unrestricted                                                          1,041,599             813,832
Cash and cash equivalents - restricted                                                              370,000           2,790,218
Accrued interest receivable                                                                           5,498              14,826
Other receivables                                                                                         -              50,000
                                                                                            ---------------    ----------------
   Total assets                                                                                   1,901,472           4,153,251
                                                                                            ---------------    ----------------

Liabilities

Accounts payable and accrued expenses                                                                16,324              81,513
Litigation settlement reserve                                                                             -             278,200
                                                                                            ---------------    ----------------
   Total liabilities                                                                                 16,324             359,713
                                                                                            ---------------    ----------------

Net Assets in Liquidation                                                                   $     1,885,148    $      3,793,538
                                                                                            ===============    ================


Net assets in liquidation per Unit of beneficial interest                                          $   0.78              $ 1.56
                                                                                                   ========              ======

Number of Units of beneficial interest outstanding                                                2,427,281           2,427,281

                                                                                               ============           =========


</TABLE>














See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited)
As of June 30, 1999
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                                                        Fair Value
                                                                                                                         as a % of
Issuer / Position                                                                   Cost              Fair Value       Net Assets(1)

Publicly-Held Securities:

Unigene Laboratories, Inc.
Warrant to purchase 475,000 shares of Common Stock
   at $1.375, expiring 7/7/00                                                   $           0       $            0       0.00%
                                                                                -------------       --------------     -------

Privately-Held Securities:

First Colony Acquisition Corp.
106,562 shares of Series A1 Preferred Stock                                           594,174              148,544
240,179 shares of Series B1 Preferred Stock                                         1,343,326              335,831
Warrant to purchase 7,560 shares of Common Stock
   at $5.00, expiring 1/24/00                                                               0                    0
                                                                                -------------       --------------
                                                                                    1,937,500              484,375      25.69%
                                                                                -------------       --------------    --------

Total Portfolio Investments (A)                                                 $   1,937,500       $      484,375      25.69%

                                                                             =============       ==============    ========

</TABLE>

(1) Represents fair value as a percentage of the Trust's total net assets.

(A)  All portfolio securities held as of June 30, 1999 are non-income producing.
     As of June 30, 1999, all of the Trust's portfolio companies were located in
     the  eastern  United  States.  The  investments,  using  fair  value  as  a
     percentage  of net  assets,  represented  biotechnology,  25.69%,  consumer
     products, 0%, preferred stock, 25.69%, and common stock, 0%.







     See notes to financial statements.



<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended June 30,
<TABLE>





                                                                                           1999                       1998
                                                                                     ---------------           -----------------

INVESTMENT INCOME AND EXPENSES

Income:
<S>                                                                                  <C>                       <C>
   Interest from U.S. Treasury Bills and repurchase agreements                       $        17,024           $         70,257
   Other income                                                                                    -                    186,298
                                                                                     ---------------           ----------------
   Total investment income                                                                    17,024                    256,555
                                                                                     ---------------           ----------------

Expenses:
   Trustee fees                                                                               25,500                     25,500
   Administrative fees                                                                        20,010                     18,779
   Legal fees                                                                                     55                    (16,729)
   Accounting fees                                                                             4,500                     12,639
   Transfer agent and custodian fees                                                           5,168                      4,986
   Mailing and printing expenses                                                                  39                       (438)
   Other operating expenses                                                                      105                        102
                                                                                     ---------------           ----------------
   Total expenses                                                                             55,377                     44,839
                                                                                     ---------------           ----------------

NET INVESTMENT (LOSS) INCOME                                                                 (38,353)                   211,716

   Change in net unrealized depreciation of investments                                            -                   (282,032)
                                                                                     ---------------           ----------------

NET DECREASE IN NET ASSETS IN LIQUIDATION                                            $       (38,353)          $        (70,316)
                                                                                     ===============           ================

</TABLE>

See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF OPERATIONS (Unaudited)
For the six months ended June 30,

<TABLE>



                                                                                           1999                    1998
                                                                                     ---------------        -----------------

INVESTMENT INCOME AND EXPENSES

Income:
<S>                                                                                  <C>                    <C>
   Interest from U.S. Treasury Bills and repurchase agreements                       $        57,958        $       144,013
   Other income                                                                                    -                186,298
   Miscellaneous                                                                                   -                 11,815
                                                                                     ---------------        ---------------
   Total investment income                                                                    57,958                342,126
                                                                                     ---------------        ---------------

Expenses:
   Trustee fees                                                                               69,205                 51,000
   Administrative fees                                                                        39,639                 36,837
   Legal fees                                                                                  7,314                 56,982
   Accounting fees                                                                            15,500                 23,889
   Transfer agent and custodian fees                                                          10,584                 10,414
   Litigation expense                                                                          3,225                      -
   Mailing and printing expenses                                                                  39                   (438)
   Other operating expenses                                                                      381                    758
                                                                                     ---------------        ---------------
   Total expenses                                                                            145,887                179,442
                                                                                     ---------------        ---------------

NET INVESTMENT (LOSS) INCOME                                                                 (87,929)               162,684

   Change in net unrealized depreciation of investments                                            -               (311,719)
                                                                                     ---------------        ---------------

NET DECREASE IN NET ASSETS IN LIQUIDATION                                            $       (87,929)       $      (149,035)
                                                                                     ===============        ===============

</TABLE>

See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
For the six months ended June 30,
<TABLE>




                                                                                             1999                   1998
                                                                                      -----------------       ----------------


Changes in net assets resulting from operations:

<S>                                                                                   <C>                    <C>
Net investment (loss) income                                                          $       (87,929)       $        162,684
Change in net unrealized depreciation of investments                                                -                (311,719)
                                                                                      ---------------        ----------------
Net decrease in net assets resulting from operations                                          (87,929)               (149,035)
                                                                                      ---------------        ----------------

Cash distributions paid                                                                    (1,820,461)                      -
                                                                                      ---------------        ----------------

Decrease in net assets in liquidation                                                      (1,908,390)               (149,035)

Net assets in liquidation at beginning of period                                            3,793,538               6,931,370
                                                                                      ---------------        ----------------

Net Assets in Liquidation at End of Period                                            $     1,885,148        $      6,782,335
                                                                                      ===============        ================

Net assets per unit of beneficial interest                                               $      0.78           $       2.79
                                                                                         ===========           ============

Number of units of beneficial interest                                                      2,427,281               2,427,281
                                                                                        =============          ==============


</TABLE>

See notes to financial statements.



<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF CASH FLOWS (Unaudited)
For the six months ended June 30,

<TABLE>



                                                                                          1999                     1998
                                                                                    ---------------         ---------------

CASH FLOWS (USED FOR) PROVIDED FROM
   OPERATING ACTIVITIES

<S>                                                                                 <C>                     <C>
Net investment (loss) income                                                        $       (87,929)        $       162,684
Adjustments to reconcile net investment (loss) income to cash
   (used for) provided from operating activities:
Decrease in liabilities                                                                    (343,389)                (87,340)
Decrease (increase) in other assets                                                          59,328                 (46,488)
                                                                                    ---------------         ---------------
Cash flows (used for) provided from operating activities                                   (371,990)                 28,856
                                                                                    ---------------         ---------------

CASH FLOWS USED FOR FINANCING ACTIVITIES

Cash distributions paid                                                                  (1,820,461)                      -
                                                                                    ---------------         ---------------
Cash flows used for financing activities                                                 (1,820,461)                      -
                                                                                    ---------------         ---------------

(Decrease) increase in cash and cash equivalents                                         (2,192,451)                 28,856

Cash and cash equivalents at beginning of period                                          3,604,050               5,442,020
                                                                                    ---------------         ---------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $     1,411,599         $     5,470,876
                                                                                    ===============         ===============

</TABLE>

See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
NOTES TO FINANCIAL STATEMENTS (Unaudited)

1.     Organization and Purpose

The MicroCap  Liquidating  Trust (the "Trust"),  a liquidating trust established
under the laws of the State of New York, is the successor entity to The MicroCap
Fund, Inc., formerly Commonwealth Associates Growth Fund, Inc. (the "Fund"). The
Fund,  which was a  Maryland  corporation  formed on  January  26,  1993,  was a
non-diversified,  closed-end  management  investment  company and  operated as a
business  development  company  under the  Investment  Company Act of 1940.  The
Fund's investment  objective was to achieve  long-term  capital  appreciation of
assets,  rather than current income,  by investing in debt and equity securities
of  emerging  and  established   companies  that  management   believed  offered
significant growth potential.

Pursuant to its Plan of Liquidation,  which was approved at a special meeting of
shareholders on July 23, 1996, the Fund  transferred all of its remaining assets
and its remaining fixed and contingent liabilities to the Trust, effective as of
the close of business on February 24, 1997, the Fund's termination date.

Also  effective as of the close of business on February 24, 1997,  the 2,188,085
common  shares and 191,357  preferred  shares of the Fund,  outstanding  on such
date,  were  automatically  deemed to represent  2,427,281  units of  beneficial
interest  in the Trust  ("Units").  As a result,  on  February  24,  1997,  each
shareholder  of the Fund  received  one Unit of the Trust for each  share of the
Fund's common stock held on such date and 1.25 Units of the Trust for each share
of the Fund's preferred stock held on such date.

2.       Significant Accounting Policies

Valuation of  Investments - Portfolio  investments  are carried at fair value as
determined  quarterly  by the  Trustee.  The fair  value  of each  publicly-held
portfolio  security is adjusted to the closing  public  market price on the last
day of the  calendar  quarter  discounted  by a  factor  of 0% to 20% for  sales
restrictions,  if any. Factors considered in the determination of an appropriate
discount include:  underwriter lock-up,  affiliate status by owning greater than
10% of the  outstanding  shares of a  portfolio  security,  and other  liquidity
factors such as the size of the Trust's  position in a given  portfolio  company
compared to the trading history of the public security. Privately-held portfolio
securities  are carried at cost until  significant  developments  affecting  the
portfolio company provide a basis for change in valuation, including adjustments
to reflect meaningful third-party transactions in the private market.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Investment  Transactions  - Realized  gains and losses on  investments  sold are
computed on a specific  identification basis. The Trust records its transactions
on the accrual method.

Income Taxes - The Trust is a complete  pass-through  entity for federal  income
tax  purposes  and,  accordingly,  is not subject to income tax.  Instead,  each
beneficiary  of the Trust is required to take into account,  in accordance  with
such  beneficiary's  method of accounting,  such beneficiary's pro rata share of
the Trust's income, gain, loss,  deduction or expense,  regardless of the amount
or timing of distributions to beneficiaries.



<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
NOTES TO FINANCIAL STATEMENTS - continued (Unaudited)

Cash and  Cash  Equivalents  - The  Trust  invests  its  available  cash in U.S.
Treasury Bills and overnight repurchase agreements  collateralized by securities
issued by the U.S.  Government or its agencies.  Such investments are considered
to be cash  equivalents  for the  statement  of cash  flows.  The  cash and cash
equivalents  of the Trust  include  restricted  cash of  $370,000,  comprised of
$250,000  relating to certain  indemnification  agreements  with Mr.  Raymond S.
Troubh, the Trustee of the Trust, and certain of the Fund's former directors and
officers and $120,000  relating to the potential  reimbursement of out-of-pocket
expenses of a shareholder  group that had solicited proxies in opposition to the
Fund's Plan of Liquidation. See Notes 4 and 5 below.

3.     Related Party Transactions

In July 1996, the Fund entered into an agreement with Raymond S. Troubh, whereby
Mr. Troubh provided  management services to the Fund in connection with its Plan
of  Liquidation  and has  continued to provide such services to the Trust during
its liquidation.  For services rendered under the agreement, Mr. Troubh receives
$8,500 per month,  plus 1% of the amount of each  distribution  (other  than the
initial  distribution paid by the Fund on August 30, 1996), plus a percentage of
any  proceeds  of sale or other  revenues  received  by the Fund or the Trust in
excess of the investment in the particular asset. Mr. Troubh was paid 5% of such
excess for amounts received in 1996 and 1997, 4% in 1998, and will be paid 2% in
1999 and 0% thereafter.

4.     Litigation

Regency  Holdings   (Cayman)  Inc.   ("Holdings")  and  Regency  Maritime  Corp.
("Maritime")  (collectively  "Regency")  along with other  related  entities are
debtors in a bankruptcy case pending in the United States  Bankruptcy  Court for
the Southern  District of New York, 95 B 45197 (TLB). In that  bankruptcy  case,
Regency  initiated an adversary  proceeding  against the Fund and certain  other
persons and entities to recover monies that it paid them on the ground that such
payments constituted  voidable  preferences or fraudulent  conveyances under the
Bankruptcy Code.  Holdings maintained that a payment made to the Fund between 90
days and one year prior to the filing of  Regency's  bankruptcy  petition in the
amount of  $1,940,000  to satisfy a bridge loan the Fund made to Regency,  was a
voidable preference because Kamal Mustafa, the former president of the Fund, was
a director of Regency (and  therefore an insider) for a portion of the time that
such amounts were due and owing. Holdings also maintained that such relationship
had an  impact on the  decision  to pay these  amounts.  Additionally,  Holdings
maintained  that a  payment  of  $145,728  made to the  Fund to  redeem  certain
warrants issued with respect to the loan  transaction was made within 90 days of
the filing of the  bankruptcy  petition and was therefore a voidable  preference
without  regard to  whether  Mustafa  was an  insider.  Alternatively,  Maritime
asserted  that  the  foregoing  payments  were  made  from  its  funds,  without
reasonably equivalent consideration,  and were therefore avoidable as fraudulent
conveyances.  The Fund served an answer  denying the  allegations of the amended
complaint and contested  Regency's  claims.  Pursuant to an order filed with the
Bankruptcy  Court,  the Trust had set aside  approximately  $2.4  million  in an
interest-bearing  cash account pending resolution by the Bankruptcy Court of the
adversary proceeding. Substantial discovery had been undertaken. A limited trial
based upon written  submissions to address the validity of Regency's  preference
claims was held in  December  1997 and  resulted  in a judgment  in favor of the
Trust, dismissing the preference claims with prejudice. A mediator was appointed
to attempt to  facilitate  a mutually  beneficial  settlement  of the  remaining
fraudulent  conveyance  claims,  and a mediation  session occurred on October 5,
1998. During that session, the parties reached a tentative consensual resolution
of the fraudulent  conveyance  claim.  The proposed  settlement was finalized in
March 1999 and the  defendants  agreed to pay a total of $535,000,  of which the
Trust's share was $281,425, exclusive of legal and other fees and expenses.

MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
NOTES TO FINANCIAL STATEMENTS - continued (Unaudited)

5.     Other Information

On July 15, 1996,  the Fund entered into a settlement  agreement with a group of
shareholders of the Fund's common stock that had solicited proxies in opposition
to the  Fund's  Plan of  Liquidation  (the "13D  Group").  Under the  settlement
agreement,  the Fund and the 13D Group agreed that,  (i) certain  members of the
13D Group and affiliated  persons would cease to have business  dealings with or
receive compensation from the Fund, (ii) a 13D Group member would have the right
to receive  notice of and attend all meetings of the Board of Directors  and any
committee  meeting thereof,  and (iii) subject to the approval of the Securities
and Exchange Commission (the "SEC"), the Trust would reimburse the 13D Group for
its reasonable out of pocket  expenses up to $120,000 in connection with the 13D
Group's efforts.  An application  relating to such reimbursement by the Trust to
the 13D Group was filed with the SEC on September 27, 1996.

Effective on August 1, 1996,  the Fund entered into  indemnification  agreements
with Mr. Raymond Troubh and certain of the Fund's former directors and officers.
Pursuant  to such  agreements,  the Fund  established  an  escrow  account  that
contains  approximately  $250,000  in cash or cash  equivalents  to provide  for
potential  legal fees and settlement  payments  relating to certain actions that
may arise against such individuals relating to activity involving the Fund.

6.       Cash Distribution

On  March  2,  1999,  the  Trust   announced  that  an  additional   liquidation
distribution  would be paid to unit  holders of record on March 16,  1999.  This
distribution  totaled  $1,820,461  or $.75 per  Unit,  and was paid on March 31,
1999.



<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
 of Operations.

Liquidity and Capital Resources

As of June  30,  1999,  the  Trust  held  cash  and  cash  equivalents  totaling
$1,411,599,  of which $370,000 was restricted due to certain  contingencies,  as
discussed below.  The Trust's cash balances are invested in U.S.  Treasury Bills
or overnight  repurchase  agreements  collateralized by securities issued by the
U.S.  Government or its agencies.  Interest earned from such investments for the
three  and six  months  ended  June  30,  1999,  totaled  $17,024  and  $57,958,
respectively.  Interest  earned  from such cash  balances  in future  periods is
subject  to  fluctuations  in  short-term  interest  rates and  changes  in cash
equivalent balances held by the Trust.

The restricted cash and cash  equivalents  balance of $370,000,  is comprised of
$250,000  relating to certain  indemnification  agreements  with Mr.  Raymond S.
Troubh,  the  Trustee of the Trust,  and  certain  of the former  directors  and
officers of The MicroCap  Fund,  Inc. (the "Fund") and $120,000  relating to the
potential  reimbursement of out-of-pocket  expenses of a shareholder  group that
had solicited proxies in opposition to the Fund's Plan of Liquidation.  See Note
5 of the Notes to Financial Statements.

Results of Operations

The Trust is  pursuing  the  orderly  liquidation  of its assets and  subsequent
distribution  to unit holders of the proceeds from such  liquidation,  including
the Trust's  remaining  cash  balances,  after payment of, or provision for, all
current, future and contingent liabilities.  Prior to the creation of the Trust,
the Fund had begun to pursue  this  objective  upon the  approval of its Plan of
Liquidation in July 1996.

Realized and Unrealized Gains and Losses from Portfolio Investments
For the three and six months ended June 30,  1999,  the Trust had no realized or
unrealized gains or losses from portfolio investments.

The Trust had no realized gains or losses from portfolio  investments during the
three and six months  ended June 30,  1998.  For the three and six months  ended
June 30, 1998, the Trust had unrealized losses from its portfolio investments of
$282,032 and $311,719, respectively.

The $311,719  unrealized  loss for the six months ended June 30, 1998,  resulted
from  the  net  downward  revaluation  of  the  Trust's  investment  in  Unigene
Laboratories,  Inc., due to the decreased  public market price of Unigene common
stock at the end of the period.

Investment Income and Expenses
For the  three  months  ended  June  30,  1999 and  1998,  the  Trust  had a net
investment  loss (interest and other income less operating  expenses) of $38,353
and net investment  income of $211,716,  respectively.  For the six months ended
June 30, 1999 and 1998, the Trust had a net  investment  loss of $87,929 and net
investment income of $162,684, respectively.

The net  investment  loss of $38,353 for the three months ended June 30, 1999 as
compared to the net  investment  income of $211,716 for the same period in 1998,
resulted from a $239,531 decrease in investment income and a $10,538 increase in
operating  expenses for the 1999 period.  The decrease in investment  income for
the 1999 period  compared to the same period in 1998 included a one time payment
of $186,298  received by the Trust  during the 1998  period,  as a result of the
settlement  of certain  legal claims made by the Trust.  The reduced  investment
income  also  included a $53,233  decrease in  interest  income from  short-term
investments,  which  primarily  was due to a reduction  of funds  available  for
investment  in such  securities  during the three  months  ended  June 30,  1999
compared to the same period in 1998.

The Trust had a slight increase in operating expenses for the three months ended
June 30, 1999, as compared to the same period in 1998.  This increase  primarily
was due to the reversal of $16,674 of accrued  legal  expenses  during the three
months ended June 30, 1998.

The net  investment  loss of $87,929  for the six months  ended June 30, 1999 as
compared to the net  investment  income of $162,684 for the same period in 1998,
resulted from a $284,168  decrease in investment  income  partially  offset by a
$33,555  decrease in operating  expenses  for the 1999  period.  The decrease in
investment  income  primarily  was  due  to the  $186,298  one  time  litigation
settlement payment received by the Trust during 1998, as discussed above, and an
$86,055  decrease in interest  income from  short-term  investments for the 1999
period as compared to the same period in 1998.  The decrease in interest  income
from short-term  investments primarily was due to a reduction of funds available
for  investment  in such  securities  during the six months  ended June 30, 1999
compared to the same period in 1998. The Trust also had $11,815 of non-recurring
income for the six months ended June 30, 1998.

The  decrease in operating  expenses for the six months ended June 30, 1999,  as
compared to the same period in 1998,  primarily was due to a $49,668  decline in
legal fees,  reflecting the Trust's  declining  litigation  activity,  partially
offset by a $16,113  increase in other expenses.  The increase in other expenses
primarily was due to an $18,205  increase in Trustee fees, due to the additional
fee paid in connection with the cash distribution paid to beneficial  holders on
March 31, 1999. See Notes 3 and 6 of Notes to Financial Statements.


Net Assets in Liquidation
As of June 30, 1999, net assets in liquidation totaled $1,885,148, a decrease of
$1,908,390 from net assets in liquidation of $3,793,538 as of December 31, 1998.
This decrease is the result of the $1,820,461  cash  distribution  paid in March
1999 and the $87,929 net investment loss for the six months ended June 30, 1999.
As of June 30,  1999,  the net asset value per Unit of  beneficial  interest was
$0.78, compared to $1.56 as of December 31, 1998.

Year 2000 Issue - The Year 2000 ("Y2K")  concern  arose  because  many  existing
computer  programs  use only the last two digits to refer to a year.  Therefore,
these computer  programs do not properly  recognize a year that begins with "20"
instead of "19".  If not  corrected,  many computer  applications  could fail or
create erroneous results. The impact of the Y2K concern on the operations of the
Trust is currently being assessed.

Palmeri  Fund  Administrators,   Inc.  (the  "Administrator")  provides  certain
administrative and accounting services for the Trust,  including  maintenance of
the books and  records of the  Trust,  preparation  and  issuance  of  financial
reports and tax information to beneficial  holders of the Trust and other day to
day administrative and accounting functions.

The  Administrator  has  assessed its  computer  hardware and software  systems,
specifically  as they  relate to the  operations  of the  Trust.  As part of its
investigation  of possible Y2K concerns,  the  Administrator  contracted with an
outside computer service provider to examine all of the Administrator's computer
hardware and software  applications,  to identify any Y2K concerns.  This review
and evaluation has been completed and certain Y2K concerns were identified.  The
Administrator  has  completed  the purchase and  installation  of the  necessary
software  upgrades  and  patches  and new  computer  hardware  required  for its
computer systems to be Y2K compliant.

Additionally, the Administrator has contacted all outside service providers used
to assist the Administrator with the administration of the Trust's operations to
ascertain  whether these  entities are addressing the Y2K issue within their own
operation.  There can be no guarantee that the  Administrator's  systems or that
systems of other companies  providing services to the Trust will be corrected in
a timely manner.

Costs to be incurred by the Trust relating to the investigation or correction of
potential Y2K problems affecting the Trust are expected to be immaterial.

The Y2K  issue is a  global  concern  that may  affect  all  business  entities,
including the Trust's remaining portfolio  companies.  The Trustee is continuing
to assess  the  impact of Y2K  concerns  affecting  these  portfolio  companies.
However,  the  extent to which any  potential  Y2K  concerns  could  affect  the
valuations  of these  companies  is  presently  unknown.  At the  time  such Y2K
concerns  are  identified,  if any,  the  Trustee  will  take such  issues  into
consideration  in adjusting  the fair value of the Trust's  remaining  portfolio
investments.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The Trust is subject to market  risk  arising  from  changes in the value of its
portfolio  investments,  investments in U.S. Treasury Bills and interest-bearing
cash  equivalents,  which may result from  fluctuations  in  interest  rates and
equity prices.  The Trust has calculated its market risk related to its holdings
of these  investments  based on changes  in  interest  rates and  equity  prices
utilizing  a  sensitivity  analysis.  The  sensitivity  analysis  estimates  the
hypothetical  change in fair values, cash flows and earnings based on an assumed
10% change  (increase  or  decrease)  in interest  rates and equity  prices.  To
perform the  sensitivity  analysis,  the assumed 10% change is applied to market
rates  and  prices  on  investments  held  by the  Trust  as of  the  end of the
accounting period.

The Trust's portfolio  investments had an aggregate fair value of $484,375 as of
June 30,  1999.  An assumed 10% decline  from this fair value would  result in a
reduction  to the  fair  value of such  investments  and an  unrealized  loss of
$48,438.

Market  risk  relating  to  the  Trust's   interest-bearing   cash  equivalents,
investments  in  U.S.  Treasury  Bills  and  overnight   repurchase   agreements
collateralized by securities issued by the U.S.  Government or its agencies held
as of June 30, 1999 is considered to be immaterial.


<PAGE>


                           PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.

Regency  Holdings   (Cayman)  Inc.   ("Holdings")  and  Regency  Maritime  Corp.
("Maritime")  (collectively  "Regency")  along with other  related  entities are
debtors in a bankruptcy case pending in the United States  Bankruptcy  Court for
the Southern  District of New York, 95 B 45197 (TLB). In that  bankruptcy  case,
Regency  initiated an adversary  proceeding  against the Fund and certain  other
persons and entities to recover monies that it paid them on the ground that such
payments constituted  voidable  preferences or fraudulent  conveyances under the
Bankruptcy Code.  Holdings maintained that a payment made to the Fund between 90
days and one year prior to the filing of  Regency's  bankruptcy  petition in the
amount of  $1,940,000  to satisfy a bridge loan the Fund made to Regency,  was a
voidable preference because Kamal Mustafa, the former president of the Fund, was
a director of Regency (and  therefore an insider) for a portion of the time that
such amounts were due and owing. Holdings also maintained that such relationship
had an  impact on the  decision  to pay these  amounts.  Additionally,  Holdings
maintained  that a  payment  of  $145,728  made to the  Fund to  redeem  certain
warrants issued with respect to the loan  transaction was made within 90 days of
the filing of the  bankruptcy  petition and was therefore a voidable  preference
without  regard to  whether  Mustafa  was an  insider.  Alternatively,  Maritime
asserted  that  the  foregoing  payments  were  made  from  its  funds,  without
reasonably equivalent consideration,  and were therefore avoidable as fraudulent
conveyances.  The Fund served an answer  denying the  allegations of the amended
complaint and contested  Regency's  claims.  Pursuant to an order filed with the
Bankruptcy  Court,  the Trust had set aside  approximately  $2.4  million  in an
interest-bearing  cash account pending resolution by the Bankruptcy Court of the
adversary proceeding. Substantial discovery had been undertaken. A limited trial
based upon written  submissions to address the validity of Regency's  preference
claims was held in  December  1997 and  resulted  in a judgment  in favor of the
Trust, dismissing the preference claims with prejudice. A mediator was appointed
to attempt to  facilitate  a mutually  beneficial  settlement  of the  remaining
fraudulent  conveyance  claims,  and a mediation  session occurred on October 5,
1998. During that session, the parties reached a tentative consensual resolution
of the fraudulent  conveyance  claim.  The proposed  settlement was finalized in
March 1999 and the  defendants  agreed to pay a total of $535,000,  of which the
Trust's share was $281,425, exclusive of legal and other fees and expenses.

Item 2.       Changes in Securities.

Not applicable.

Item 3.       Defaults Upon Senior Securities.

Not applicable.

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

No matter was brought to a vote of security holders during the period covered by
this report.

Item 5.       Other Information.

Not applicable.

Item 6.       Exhibits and Reports on Form 8-K.

              (a)  Exhibits

                    (27)   Financial Data Schedule

              (b)  Reports on Form 8-K

                   None.


<PAGE>


                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



              MICROCAP LIQUIDATING TRUST


              s/s     Raymond S. Troubh
              Raymond S. Troubh
              Trustee



Date:         August 13, 1999