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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)

[X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 (FEE REQUIRED)

For the fiscal period ended December 31, 2002

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

Commission File Number 0-17526

                          EQUUS CAPITAL PARTNERS, L.P.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Delaware                                 76-0264305
 ------------------------------------       ------------------------------------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)

 2929 Allen Parkway, Suite 2500
        Houston, Texas                                   77019-2120
 ------------------------------------       ------------------------------------
     (Address of principal                               (Zip Code)
      executive offices)

Registrant's telephone number, including area code:          (713) 529-0900

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                      Units of Limited Partners' Interests
                      ------------------------------------
                                (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 the definitive proxy or information statement
incorporated by reference in Part III of this 10-K. [X]

As of December 31, 2002, 12,187 units ("Units") of limited partners' interests
in the Partnership were held by non-affiliates of the registrant. The net asset
value of a Unit at December 31, 2002 was $56.82. There is no established market
for such Units.

                   Documents incorporated by reference: None.

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                                TABLE OF CONTENTS

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                                                                                           PAGE
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<S>      <C>           <C>                                                                 <C>
PART I

         Item  1.      Business............................................................   1
         Item  2.      Properties..........................................................   9
         Item  3.      Legal Proceedings...................................................   9
         Item  4.      Submission of Matters to a Vote of Security
                          Holders..........................................................   9

PART II

         Item  5.      Market for the Registrant's Units
                          and Related Unitholder Matters...................................   9
         Item  6.      Selected Financial Data.............................................  10
         Item  7.      Management's Discussion and Analysis of
                          Financial Condition and Results of
                          Operations.......................................................  11
         Item 7A.      Quantitative and Qualitative Disclosure About Market Risk...........  14
         Item  8.      Financial Statements and Supplementary
                          Data.............................................................  16
         Item  9.      Changes in and Disagreements with Accountants on
                          Accounting and Financial Disclosure..............................  32

PART III

         Item 10.      Directors and Executive Officers of
                          the Registrant...................................................  32
         Item 11.      Executive Compensation..............................................  35
         Item 12.      Security Ownership of Certain
                          Beneficial Owners and Management.................................  38
         Item 13.      Certain Relationships and Related
                          Transactions.....................................................  38

PART IV

         Item 14.      Controls and Procedures.............................................  38

         Item 15.      Exhibits, Financial Statement Schedules
                          and Reports on Form 8-K..........................................  39
</TABLE>

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ITEM 1.         BUSINESS.

        Equus Capital Partners, L.P. (the "Partnership") is a limited
partnership organized under Delaware law on December 1, 1988, and has elected to
be a business development company under the Investment Company Act of 1940 (the
"Investment Company Act"). The Partnership's total contributed capital was
$12,435,691, consisting of $12,307,375 for 12,310 Units from 1,428 limited
partners, $125,316 from the Managing Partner and $3,000 from the Independent
General Partners. The investment objective of the Partnership is to achieve
current income and capital appreciation principally by making investments in
"mezzanine" securities, consisting primarily of subordinated debt or preferred
stock combined with equity participations in common stock or rights to acquire
common stock, and subsequently disposing of such investments. The Partnership
Agreement provided for termination of the Partnership on December 31, 1999,
subject to the right of the Independent General Partners to extend the term for
up to four additional years if they determine it is in the best interest of the
Partnership. In 2001, 2000 and 1999, the agreement was extended through December
31, 2002, 2001 and 2000, respectively. At a meeting in November 2002, the
Independent General Partners extended the termination date for an additional
year to December 31, 2003. The Partnership has only two remaining investments,
and is planning to dispose of such investments and distribute the proceeds from
such dispositions before the end of 2003. The Partnership will be dissolved
after the disposition of the two remaining investments. The Managing Partner is
wholly owned by Equus Capital Management Corporation.

        Equus Capital Corporation, a Delaware corporation (the "Managing
Partner"), is the managing general partner of the Partnership and is responsible
for approving the Partnership's investments, arranging additional financing for
companies in which the Partnership invests ("Portfolio Companies") and providing
management assistance to Portfolio Companies.

        Two independent individuals (the "Independent General Partners") also
serve as general partners of the Partnership. The Independent General Partners
are responsible for providing overall guidance and supervision of the
Partnership, approving the Partnership's investments and performing various
duties imposed on disinterested directors of a business development company by
the Investment Company Act. Among other things, the Independent General Partners
supervise the management arrangements for the Partnership, the custody
arrangements with respect to portfolio securities, the selection of independent
accountants, fidelity bonding and any transactions with affiliates.

        The Partnership has engaged Equus Capital Management Corporation, a
Delaware corporation (the "Management Company"), to provide certain management
and administrative services to the Partnership. Subject to the supervision of
the Independent General Partners, the Management Company performs, or arranges
for third parties to perform, the management, certain investment advisory and
other services necessary for the operation of the Partnership. The Management
Company identifies, evaluates, structures, monitors and arranges for the
disposition of the Partnership's investments, and provides managerial assistance
to the Portfolio Companies. The Management Company manages the Partnership's
cash and short-term, interest-bearing investments. The Management Company also
provides the Partnership, at the Management Company's expense, with the office
space, facilities, equipment and personnel (whose salaries and benefits are paid
by the Management Company) necessary to enable the Partnership to conduct its
business. The management fees paid by Equus II Incorporated represent the
Management Company's primary source of revenue and support.

        The Managing Partner and the Management Company are sometimes referred
to herein collectively as "Management."

        The Partnership's office is located at 2929 Allen Parkway, Suite 2500,
Houston, Texas 77019-2120, and its telephone number is (713) 529-0900.

        The Partnership has no employees.

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GENERAL

        The investment objective of the Partnership is to achieve current income
and capital appreciation principally by making investments in "mezzanine"
securities, consisting primarily of subordinated debt or preferred stock
combined with equity participations in common stock or rights to acquire common
stock, and subsequently disposing of such investments. Such investments are
collectively referred to herein as "Enhanced Yield Investments." The Partnership
completed its initial investment program in 1993, and has made and may only make
follow-on investments in existing portfolio companies after such date.

COINVESTMENTS

        The Partnership coinvested in certain Enhanced Yield Investments with
Equus II Incorporated, a Delaware corporation ("EQS"). The Partnership and
Management obtained an order from the Securities and Exchange Commission (the
"SEC") exempting the Partnership from certain prohibitions contained in the
Investment Company Act relating to coinvestments by the Partnership and EQS.
Under the terms of the order, Enhanced Yield Investments purchased by the
Partnership and EQS were required to meet certain guidelines or be approved in
advance by the Managing Partner and the Independent General Partners and were
required to satisfy certain conditions established by the SEC.

TEMPORARY INVESTMENTS

        Pending investment in Enhanced Yield Investments or distribution to
partners, the Partnership invests its available funds in interest-bearing bank
accounts, money market mutual funds, U.S. Treasury securities and/or
certificates of deposit with maturities of less than one year (collectively,
"Temporary Investments"). Temporary Investments also include commercial paper
(rated or unrated) and other short-term securities. Temporary Investments
constituting cash, cash items, securities issued or guaranteed by the U.S.
Treasury or U.S. Government agencies and high quality debt securities
(commercial paper rated in the two highest rating categories by Moody's Investor
Services, Inc. or Standard & Poor's Corporation, or if not rated, issued by a
company having an outstanding debt issue so rated) with maturities of less than
one year at the time of investment will qualify for determining whether the
Partnership has 70% of its total assets invested in Managed Companies (as
hereafter defined) or in qualified Temporary Investments for purposes of the
business development company provisions of the Investment Company Act. See
"Regulation" below.

        The Partnership's Enhanced Yield Investments generally are unrated
securities. Such securities would, however, if rated, typically be classified as
speculative securities that generally would be of the type rated BB/Ba to
CCC/Caa.

CURRENT PORTFOLIO COMPANIES

        The following is a description of the Partnership's investments as of
December 31, 2002:

        Artegraft, Inc.

        Artegraft, Inc. ("Artegraft"), Morristown, New Jersey, manufactures and
distributes a specialty surgical product line consisting of bovine vascular
prostheses used in hemodialysis and other healthcare procedures. Since 1996,
Artegraft has been in dispute with Johnson & Johnson, the former owner of the
business, over issues stemming from its acquisition by Artegraft. In January
2002, the arbitrators ruled in favor of Johnson & Johnson on most of the issues.
Accordingly, Artegraft is considering its options, which will most likely result
in a restructuring of its outstanding indebtedness. As such, the Partnership has
reduced the value of this investment effective as of December 31, 2001. At
December 31, 2002, the Partnership's investment in Artegraft, valued at $0, with
a cost of $954,597, consisted of $702,500 in a 7% demand promissory note,
$252,047 in a 9% demand promissory note, and warrants to buy up to 1,000 and
4,000 shares of common stock for $0.01 and $17.50 per share, respectively. The
Partnership's investment represents a 24% fully-diluted equity interest in
Artegraft. Tracy H. Cohen, a Vice President of the

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Managing Partner, serves as a director of Artegraft.

        MaxTech Holdings, Inc.

        MaxTech Holdings, Inc. ("MaxTech"), Dallas, Texas, provided
environmental and engineering consulting services throughout the United States.
During 2001, MaxTech sold its services business, but continues to own several
tracts of real estate, which it intends to sell. At December 31, 2002, the
Partnership's investment in MaxTech, valued at $550,000 with a cost of $15,781,
consisted of 18,417.49 shares of common stock. The Partnership previously owned
2,200,000 shares of preferred stock and 59,875 shares of common stock. During
2001 and 2002, the Partnership received proceeds from the redemption of the
preferred stock, liquidating distributions and dividends in arrears from MaxTech
totaling $4,933,131 and $705,671, respectively. On January 10, 2003, the
Partnership received $550,000 in cash for its remaining investment in MaxTech.
Gary L. Forbes, a Vice President of the Managing Partner and Management Company,
served on the Board of Directors of MaxTech.

PREVIOUSLY OWNED PORTFOLIO COMPANIES

        AutoCorp, Inc. ("AutoCorp")

        In 1991, the Partnership advanced $1,650,000 to AutoCorp in exchange for
$1,050,000 in subordinated 12.5% term notes and a $600,000, 12.5% subordinated
convertible promissory note. AutoCorp, doing business as Pettigrew-Smith Auto
Supply, was a retail distributor of auto parts and supplies in Houston, Texas.
During 1992, the Partnership was repaid its principal and interest on its
investment in AutoCorp.

        CMC Holdings, Inc. ("CMC")

        In November 1992, the Partnership made its initial investment in CMC
Holdings, Inc. which was formed to acquire Cliff's Restaurants, a chain of
upscale hamburger restaurants in Houston, Texas. Through December 31, 1995, the
Partnership had invested $2,488,000 in CMC. On December 22, 1995, the
Partnership contributed $1,174,500 of its notes receivable from CMC to E-B
Holdings, Inc. The balance of its investment was written off in December 1995,
resulting in a realized capital loss of $1,313,500.

        Drypers Corporation

        Drypers Corporation ("Drypers"), Houston, Texas, manufactured and
marketed disposable baby diapers and other consumer products under the trade
name Drypers(R) and under various store label brands. Drypers had manufacturing
facilities in Marion, Ohio; Vancouver, Washington; Buenos Aires, Argentina;
Guadalajara, Mexico; Sao Paulo, Brazil; Puerto Rico and Malaysia. During 2000,
the Partnership sold 104,900 shares of commons stock for $6,862, resulting in a
realized capital loss of $820,295. At December 31, 2000, due to Drypers
declaring bankruptcy, the remaining 121,690 shares of Drypers were deemed
worthless and abandoned, resulting in a realized capital loss of $487,257.

        E-B Holdings, Inc.

        E-B Holdings, Inc. ("E-B"), Houston, Texas, owned interests in two
restaurants in the Houston area. The Partnership's investment in E-B, with a
cost of $580,293, consisted of 12% promissory notes valued at $290,000. In
December 1999, the Partnership sold its investment for $290,000, net of
expenses, realizing a capital loss of $290,293.

        Garden Ridge Corporation (NASDAQ: GRDG)

        Garden Ridge Corporation ("GRDG"), Houston, Texas, is a specialty
retailer of crafts and home decorative items. GRDG operates 33 megastores in 12
states and is continuing its expansion into other areas of the United States.
The Partnership's investment in GRDG with an original cost of $770,228,

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consisted of 106,841 shares of common stock, 14,802 shares of preferred stock,
and $529,913 in subordinated promissory notes. From 1995 to 1999, the
Partnership sold its investment in GRDG, resulting in capital gains of
$2,421,648.

        Independent Gas Company Holdings, Inc.

        Independent Gas Company Holdings, Inc. ("IGC"), Canute, Oklahoma,
acquires and manages established propane gas distributors, primarily serving
rural Texas and Oklahoma markets. The Partnership's investment in IGC, with an
original cost of $1,519,977, consisted of 16,267 shares of common stock, 1,281
shares of 9% Series A preferred stock and 215 shares of Series C preferred
stock. On September 14, 1998, the Partnership sold its investment in IGC for
$4,051,340, realizing a capital gain of $2,531,363.

        Industrial Equipment Rentals, Inc.

        Industrial Equipment Rentals, Inc. ("IER"), Houma, Louisiana, rents
industrial equipment from locations in Texas, Louisiana, Alabama and
Mississippi, primarily to refineries, petrochemical plants and oil and gas
operations along the Gulf Coast corridor. The Partnership's investment in IER,
with a cost of $808,300, consisted of 91,115 shares of common stock, 2,685
shares of 6% cumulative junior preferred stock and $538,889 in a 12%
subordinated debenture. On August 1, 1997, the Partnership sold its investment
in IER for $2,493,791 realizing a capital gain of $1,685,491. In addition,
during 1998, the Partnership received an additional $210,049 in proceeds from
the sale, which had been previously deposited into an escrow account, and
recognized the amount as a realized capital gain.

        Medifit of America, Inc.

        Medifit of America, Inc. ("Medifit"), Teaneck, New Jersey, provided
comprehensive outpatient rehabilitation services from over 15 facilities in six
states. Medifit sold the majority of its assets. The Partnership's investment in
Medifit had a cost of $1,000,163, and consisted of 190,476 shares of Series D
preferred stock and warrants to buy 9,054 and 76,379 shares of common stock for
$3.75 and $0.01 per share, respectively. On December 21, 1997, the Partnership
sold its investment in Medifit for $10, realizing a capital loss of $1,000,153.

        Paracelsus Healthcare Corporation (OTCBB: PLHC)

        Paracelsus Healthcare Corporation ("PLHC"), Houston, Texas, owned or
operated, directly or through hospital partnerships, ten acute-care hospitals in
six states. PLHC declared bankruptcy in September 2000, and is in the process of
liquidating its assets. The Partnership wrote off its entire investment in March
2001, realizing a capital loss of $1,181,124.

        Tennis Cards, Inc. ("TCI")

        During August 1992, the Partnership advanced $150,000 to TCI in exchange
for a 10% subordinated promissory note. In addition, the Partnership received
warrants to buy up to 63 shares of common stock of TCI for $1,000 per share
through August 24, 1997. Tennis Cards, Inc. had an exclusive license to print
and market trading cards featuring selected professional tennis players. On
December 29, 1993, the Partnership foreclosed on certain assets of TCI and
realized a net capital loss of $150,000. In February 2001, the Partnership sold
the entire inventory of tennis trading cards, realizing a capital gain of
$49,500.

ONGOING MANAGEMENT SUPPORT

        Successful Enhanced Yield Investments typically require active
monitoring of, and significant participation in, major business decisions of
Portfolio Companies. In many cases, representatives of Management serve as
members of the board of directors of Portfolio Companies. Such management
assistance is required of a business development company and is intended to
enable the Partnership to

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provide guidance and management assistance with respect to such matters as
capital structure, budgets, profit goals, diversification strategy, financing
requirements, management additions or replacements and development of a public
market for the securities of the Portfolio Company. In connection with their
service as directors of Portfolio Companies, officers and directors of
Management may receive and retain directors' fees or reimbursement for expenses
incurred. When necessary, Management, on behalf of the Partnership may also
assign staff professionals with financial or management expertise to assist
Portfolio Company management on specific problems.

FOLLOW-ON INVESTMENTS

        Following its initial investment in a Portfolio Company, the Partnership
may be requested to make additional or follow-on investments ("Follow-on
Investments") in the Portfolio Company. Follow-on Investments may be made to
take advantage of warrants or other preferential rights granted to the
Partnership or otherwise to increase the Partnership's position in a successful
or promising Portfolio Company. The Partnership may also be called upon to
provide additional equity or mezzanine financing needed by a Portfolio Company
to fully implement its business plans, to develop a new line of business or to
recover from unexpected business problems. The Partnership may borrow an amount
up to 20% of its partners' capital to make Follow-on Investments in Portfolio
Companies. In addition, the Partnership may reinvest cash receipts and proceeds
from the disposition of Enhanced Yield Investments in Follow-on Investments.

DISPOSITION OF INVESTMENTS

        The Managing Partner is responsible (subject to the supervision of the
Independent General Partners) for the decision and, together with the Management
Company, the actions to dispose of an Enhanced Yield Investment. In structuring
investments, the Partnership endeavors to reach appropriate agreements or
understandings with a prospective Portfolio Company with respect to the method
and timing of the disposition of the Partnership's investment and, if
appropriate, will seek to obtain registration rights at the expense of the
Portfolio Company. The Partnership bears the costs of disposing of an investment
to the extent not paid by the Portfolio Company.

VALUATION

        On a quarterly basis, the Managing Partner performs a valuation of the
investments held by the Partnership, subject to the approval of the Independent
General Partners. Valuations of enhanced yield investments are performed in
accordance with generally accepted accounting principles and the financial
reporting policies of the Securities and Exchange Commission ("SEC"). The
applicable methods prescribed by such principles and policies are described
below.

        The fair value of investments for which no market exists is determined
on the basis of procedures established in good faith by the Managing Partner and
approved quarterly by the Independent General Partners. As a general principle,
the current "fair value" of an investment would be the amount the Partnership
might reasonably expect to receive for it upon its current sale. There is a
range of values that are reasonable for such investments at any particular time.
Generally, cost is the primary factor used to determine fair value until
significant developments affecting the Portfolio Company (such as results of
operations or changes in general market conditions) provide a basis for use of
an appraisal valuation.

        Appraisal valuations are based upon such factors as a Portfolio
Company's earnings, cash flow and net worth, the market prices for similar
securities of comparable companies, an assessment of the company's current and
future financial prospects and various other factors and assumptions. In the
case of unsuccessful operations, the appraisal may be based upon liquidation
value. Appraisal valuations are necessarily subjective and the Managing
Partner's estimate of values may differ materially from amounts actually
received upon the disposition of portfolio securities. Also, failure by a
Portfolio Company to

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achieve its business plan or obtain and maintain its financing arrangements
could result in a significant and rapid change in its value.

        The Partnership may also use, when available, third-party transactions
in a Portfolio Company's securities as the basis of valuation (the "private
market method"). The private market method will be used only with respect to
completed transactions or firm offers made by sophisticated, independent
investors.

        The Partnership investments for which market quotations are readily
available and which are freely transferable are valued at the closing price on
the date of valuation. For securities which are in a class of public securities
but are restricted from free trading (such as Rule 144 stock), valuation is set
by discounting the closing price to reflect the estimated effects of the
illiquidity caused by such restrictions. The fair values of debt securities,
which are generally held to maturity, are determined on the basis of the terms
of the debt securities and the financial condition of the issuer. Certificates
of deposit purchased by the Partnership generally will be valued at their face
value, plus interest accrued to the date of valuation.

        The Independent General Partners review the valuation policies on a
quarterly basis to determine their appropriateness and may also hire independent
firms to review the Managing Partner's methodology of valuation or to conduct an
independent valuation.

OPERATING EXPENSES

        The Management Company, at its expense, provides the Partnership with
office space, facilities, equipment and personnel (whose salaries and benefits
are paid by the Management Company) necessary for the conduct of the
Partnership's business and pays all costs related to proposed acquisitions of
portfolio securities that are not completed, unless such proposed acquisitions
have been previously approved by the Independent General Partners.

        The Partnership pays certain expenses relating to its operations,
including: the Management Fee; the Management Company Incentive Fee; and the
Fund Administration Fee (all as defined under "Management Agreement"); fees and
expenses of the Independent General Partners; finder's fees; direct costs of
proposed investments in Portfolio Companies, whether or not completed, if such
proposed investments have been approved for acquisition by the Independent
General Partners; fees of unaffiliated transfer agents, registrars and
disbursing agents; portfolio transaction expenses; interest, legal and
accounting expenses; costs of printing and mailing proxy materials and reports
to limited partners; custodian fees; taxes; litigation costs; costs of disposing
of investments including brokerage fees and commissions; and other extraordinary
or nonrecurring expenses properly payable by the Partnership.

CUSTODIAN

        The Partnership acts as the custodian of its securities to the extent
permitted under the Investment Company Act and is subject to the restrictions
imposed on self-custodians by the Investment Company Act and the rules and
regulations thereunder. The Partnership has entered into an agreement with
National Fiduciary Services, NA, (formerly Southwest Guaranty Trust Company),
Houston, Texas, with respect to the safekeeping of such securities. The
principal business office of such trust company is 2121 Sage Road, Suite 150,
Houston, Texas 77056.

TRANSFER AND DISBURSING AGENT

        The Management Company acts as the transfer agent and disbursing agent
for the Partnership. The Management Company is paid for such services on terms
approved by the Independent General Partners as being no less favorable to the
Partnership than those obtainable from unaffiliated parties. Risk Factors

        An investment in Units of limited partnership interest in the
Partnership involves a number of risks due to the nature of the Partnership's
investment portfolio. Investments in mezzanine securities involve a

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high degree of business and financial risk and can result in substantial losses.
In the event that a Portfolio Company cannot generate adequate cash flow to meet
its debt service, the Partnership's investment could be reduced or eliminated
through foreclosure on the Portfolio Company's assets or the Portfolio Company's
reorganization or bankruptcy. The Enhanced Yield Investments acquired by the
Partnership may require four to seven years to reach maturity and generally are
illiquid. This lack of liquidity may preclude or delay any disposition of such
investments, or reduce proceeds that might otherwise be realized from any such
dispositions. After its initial investment in a Portfolio Company, the
Partnership may be called upon from time to time to provide additional funds to
such company. There can be no assurance that the Partnership will have
sufficient funds, or be willing, to make such investments. The Partnership's
inability or unwillingness to make a Follow-on Investment could adversely affect
an investment in a Portfolio Company. The Partnership is a "non-diversified"
company as defined in the Investment Company Act. The Partnership is not limited
in the proportion of its assets that may be invested in securities of a single
issuer, and, accordingly, an investment in the Partnership may, under certain
circumstances, present greater risk to an investor than an investment in a
diversified company. Also see "Partnership Borrowings."

        Valuation of Investments - Enhanced Yield Investments are carried at
fair value with the net change in unrealized appreciation or depreciation
included in the determination of partners' capital. Investments in companies
whose securities are publicly-traded are valued at their quoted market price,
less a discount to reflect the estimated effects of restrictions on the sale of
such securities, if applicable. Cost is used to approximate fair value until
significant developments affecting an Enhanced Yield Investment provide a basis
for use of an appraisal valuation. Thereafter, Enhanced Yield Investments are
carried at appraised values as determined quarterly by the Managing Partner,
subject to the approval of the Independent General Partners. The fair values of
debt securities, which are generally held to maturity, are determined on the
basis of the terms of the debt securities and the financial condition of the
issuer. Because of the inherent uncertainty of the valuation of Enhanced Yield
Investments which do not have readily ascertainable market values, the Managing
Partner's estimate of fair value may significantly differ from the fair value
that would have been used had a ready market existed for such investments. See
"Valuation".

REGULATION

        The Partnership has elected to be treated as a business development
company under the Investment Company Act in order to provide for incentive
compensation to the Management Company and the Managing Partner based on the
capital appreciation of the Partnership's investments. The Partnership may not
withdraw its election to be treated as a business development company without
first obtaining the approval of a majority in interest of its limited partners.

        The following brief description of the Investment Company Act is
qualified in its entirety by reference to the full text of the Investment
Company Act and the rules thereunder.

        A business development company must be operated for the purpose of
investing in the securities of certain present and former "eligible portfolio
companies" or certain bankrupt or insolvent companies and must make available
significant managerial assistance to portfolio companies. An eligible portfolio
company generally is a company that (i) is organized under the laws of, and has
its principal place of business in, any state or states, (ii) is not an
investment company and (iii)(a) does not have a class of securities registered
on an exchange or included in the Federal Reserve Board's over-the-counter
margin list, (b) is actively controlled by the business development company
acting either alone or as part of a group acting together and an affiliate of
the business development company is a member of the portfolio company's board of
directors or (c) meets such other criteria as may be established by the SEC.
Control is presumed to exist where the business development company owns more
than 25% of the outstanding voting securities of a portfolio company.

        "Making available significant managerial assistance" is defined under
the Investment Company Act to mean (i) any arrangement whereby a business
development company, through its directors, officers,

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employees or general partners, offers to provide and, if accepted, does provide
significant guidance and counsel concerning the management, operations or
business objectives or policies of a portfolio company or (ii) the exercise of a
controlling influence over the management or policies of a portfolio company by
the business development company acting individually or as part of a group of
which the business development company is a member acting together which
controls such company. A business development company may satisfy the
requirements of clause (i) with respect to a portfolio company by purchasing
securities of such a company as part of a group of investors acting together if
one person in such group provides the type of assistance described in such
clause. However, the business development company will not satisfy the general
requirement of making available significant managerial assistance if it only
provides such assistance indirectly through an investor group. A business
development company need only extend significant managerial assistance with
respect to portfolio companies which are treated as Qualifying Assets (as
defined below) for the purpose of satisfying the 70% test discussed below.

        The Investment Company Act prohibits or restricts the Partnership from
investing in certain types of companies, such as brokerage firms, insurance
companies, investment banking firms and investment companies. Moreover, the
Investment Company Act limits the type of assets that the Partnership may
acquire to "Qualifying Assets" and certain assets necessary for its operations
(such as office furniture, equipment and facilities) if, at the time of the
acquisition, less than 70% of the value of the Partnership's total assets
consists of qualifying assets. Qualifying Assets include (i) securities of
companies that were eligible portfolio companies at the time that the
Partnership acquired their securities; (ii) securities of companies that are
actively controlled by the Partnership; (iii) securities of bankrupt or
insolvent companies that are not otherwise eligible portfolio companies; (iv)
securities acquired as Follow-on Investments in companies that were eligible
portfolio companies at the time of the Partnership's initial acquisition of
their securities but are no longer eligible portfolio companies, provided that
the Partnership has maintained a substantial portion of its initial investment
in such companies; (v) securities received in exchange for or distributed on or
with respect to any of the foregoing; and (vi) cash items, government securities
and high-quality, short-term debt. The Investment Company Act also places
restrictions on the nature of the transactions in which, and the persons from
whom, securities can be purchased in order for such securities to be considered
Qualifying Assets. As a general matter, Qualifying Assets may only be purchased
from the issuer or an affiliate in a transaction not constituting a public
offering. The Partnership may not purchase any security on margin, except such
short-term credits as are necessary for the clearance of portfolio transactions,
or engage in short sales of securities.

        The Partnership is permitted by the Investment Company Act, under
specified conditions, to issue multiple classes of senior debt and a single
class of limited partners' interests senior to the Units if its asset coverage,
as defined in the Investment Company Act, is at least 200% after the issuance of
the debt or the senior limited partners' interests. In addition, provision must
be made to prohibit any distribution to limited partners for the repurchase of
any Unit unless the asset coverage ratio is at least 200% at the time of the
distribution or repurchase.

        Many of the transactions involving the Partnership and its affiliates
(as well as affiliates of such affiliates) require the prior approval of a
majority of the Independent General Partners and a majority of the Independent
General Partners having no financial interest in the transactions. However,
certain transactions involving closely affiliated persons of the Partnership,
including its General Partners and the Management Company, require the prior
approval of the SEC. In general (a) any person who owns, controls or holds with
power to vote more than 5% of the outstanding Units, (b) any director, executive
officer or general partner of such person and (c) any person who directly or
indirectly controls, is controlled by or is under common control with such
person, must obtain the prior approval of a majority of the Independent General
Partners and, in some situations, the prior approval of the SEC, before engaging
in certain transactions involving the Partnership or any company controlled by
the Partnership. In accordance with the Investment Company Act, a majority of
the General Partners must be persons who are not "interested persons" as defined
in such act. Except for certain transactions which must be approved by the
Independent General Partners, the Investment Company Act generally does not
restrict transactions

                                        8

<PAGE>

between the Partnership and its portfolio companies.

ITEM 2.         PROPERTIES.

        The Partnership does not have an interest in any physical properties.

ITEM 3.         LEGAL PROCEEDINGS.

        The Partnership is not involved in any legal proceedings.

ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        No matters were submitted to a vote of security holders during the
fourth quarter of 2002.

ITEM 5.         MARKET FOR THE REGISTRANT'S UNITS AND RELATED UNITHOLDER
                MATTERS.

        There is no established public trading market for the Partnership's
Units. The Partnership had 1,338 limited partners at December 31, 2002. The
Partnership declared cash distributions of $861,700, $4,616,250 and $615,500 or
$70, $375 and $50 per Unit to limited partners during 2002, 2001 and 2000,
respectively. The distribution declared in 2002 was paid in January 2003.

                                        9

<PAGE>

ITEM 6.         SELECTED FINANCIAL DATA.

        Following is a summary of selected financial data of the Partnership for
the five years ended December 31, 2002.

<TABLE>
<CAPTION>
                                              2002          2001           2000          1999          1998
                                          -----------   -----------    -----------   -----------   -----------

<S>                                       <C>           <C>            <C>           <C>           <C>
Investment income                         $   (44,529)  $ 1,559,409    $    84,962   $   120,554   $    62,301

Net investment income (loss)              $  (127,402)  $ 1,448,567    $   (92,680)  $   (88,420)  $  (191,167)

Realized gain (loss) on sales
 of enhanced yield investments, net       $   705,671   $   833,595    $(1,307,552)  $   363,179   $ 2,741,412

Increase (decrease) in
 unrealized appreciation
 of enhanced yield investments, net       $  (550,000)  $(1,380,238)   $ 1,562,997   $   (76,503)  $(2,457,625)

Net increase  in partners'
 capital from operations                  $    28,269   $   901,924    $   162,765   $   198,256   $    92,620

Distributions to partners                 $   870,650   $ 4,664,198    $   621,892   $         -   $ 3,731,359

Total assets                              $ 1,748,991   $ 1,614,831    $ 5,377,105   $ 5,850,232   $ 5,645,576

Partners' capital, end of year            $   729,650   $ 1,572,031    $ 5,334,305   $ 5,793,432   $ 5,595,176

Cost of enhanced yield
 investments made during year             $         -   $    77,325    $   187,222   $   702,500   $         -

Net cash provided (used) by
 operating activities                     $   (77,943)  $ 1,395,351    $  (152,431)  $  (141,049)  $  (128,119)

PER UNIT OF LIMITED PARTNERS'
INTEREST:

Net investment income (loss)              $    (10.25)  $    116.46    $     (7.45)  $     (7.11)  $    (15.37)

Realized gain (loss) on
 sales of enhanced
 yield investments, net                   $     56.74   $     67.02    $   (105.13)  $     29.20   $    220.41

Increase (decrease) in
 unrealized appreciation
 of enhanced yield
 investments, net                         $    (44.22)  $   (110.97)   $    125.66   $     (6.15)  $   (197.59)

Distributions to partners                 $     70.00   $    375.00    $     50.00   $         -   $    300.00

Partners' capital, end of year            $     56.82   $    124.55    $    427.03   $    463.95   $    448.01
</TABLE>

        The financial statements for 1998 through 2001 were audited by Arthur
Andersen LLP, which has ceased operations. A copy of the auditor's report
previously issued by Arthur Andersen LLP on our financial statements as of
December 31, 2001 and 2000 and for each of the three years in the period ended
December 31, 2001 is included elsewhere in the Form 10-K. Arthur Andersen LLP
did not reissue its report.

                                       10

<PAGE>

ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATIONS.

CRITICAL ACCOUNTING POLICIES

        Valuation of Investments - Enhanced yield investments are carried at
fair value with the net change in unrealized appreciation or depreciation
included in the determination of partner's capital. Valuations of enhanced yield
investments are performed in accordance with generally accepted accounting
principles and the financial reporting policies of the Securities and Exchange
Commission ("SEC"). The applicable methods prescribed by such principles and
policies are described below:

        Publicly-traded Enhanced Yield Investments - Investments in companies
whose securities are publicly traded are valued at their quoted market price at
the close of business on the valuation date, less a discount to reflect the
estimated effects of restrictions on the sale of such securities ("Valuation
Discount"), if applicable.

        Privately-held Enhanced Yield Investments - The fair value of
investments for which no market exists is determined by the Managing Partner on
the basis of procedures established in good faith by the Managing Partner and
approved by the Independent General Partners of the Partnership. As a general
principle, the current "fair value" of an investment would be the amount the
Partnership might reasonably expect to receive for it upon its current sale.
Appraisal valuations are necessarily subjective and the Managing Partner's
estimate of values may differ materially from amounts actually received upon the
disposition of enhanced yield investments.

        Generally, cost is the primary factor used to determine fair value until
significant developments affecting the Portfolio Company (such as results of
operations or changes in general market conditions) provide a basis for use of
an appraisal valuation. Thereafter, Enhanced Yield Investments are carried at
appraised values as determined quarterly by the Managing Partner, subject to the
approval of the Independent General Partners. Appraisal valuations are based
upon such factors as a Portfolio Company's earnings, cash flow and net worth,
the market prices for similar securities of comparable companies, an assessment
of the company's current and future financial prospects and various other
factors and assumptions. In the case of unsuccessful operations, the appraisal
may be based upon liquidation value.

        Most of the Partnership's common equity investments may be appraised at
a multiple of free cash flow generated by the Portfolio Company in its most
recent fiscal year, less outstanding funded indebtedness and other senior
securities such as preferred stock. Projections of current year free cash flow
may be utilized and adjustments for non-recurring items are considered.
Multiples utilized are estimated based on the Management Company's experience in
the private company marketplace, and are necessarily subjective in nature. Most
of the Portfolio Companies utilize a high degree of leverage. From time to time,
Portfolio Companies are in default of certain covenants in their loan
agreements. In the event a Portfolio Company cannot generate adequate cash flow
to meet the principal and interest payments on such indebtness or is not
successful in refinancing the debt upon its maturity, the value of the
Partnership's investment could be reduced or eliminated through foreclosure on
the Portfolio Company's assets or the Portfolio Company's reorganization or
bankruptcy. When the Managing Partner has a reasonable belief that the Portfolio
Company will be able to restructure the loan agreements to adjust for any
defaults, the Portfolio Company's securities continue to be valued assuming that
the company is a going concern. The Partnership may also use, when available,
third-party transactions in a Portfolio Company's securities as the basis of
valuation (the "private market method"). The private market method will be used
only with respect to completed transactions or firm offers made by
sophisticated, independent investors.

        The fair values of debt securities, which are generally held to
maturity, are determined on the basis of the terms of the debt securities and
the financial conditions of the issuer. Certificates of deposit

                                       11

<PAGE>

purchased by the Fund generally will be valued at their face value, plus
interest accrued to the date of valuation.

LIQUIDITY AND CAPITAL RESOURCES

        The Partnership's total contributed capital was $12,435,691, consisting
of $12,307,375 (net of $2,625 in selling commission discounts on sales to
affiliates) for 12,310 units of limited partners' interests ("Units") from 1,428
limited partners, $125,316 from the Managing Partner and $3,000 from the
Independent General Partners. Net proceeds to the Partnership, after payment of
selling commissions and wholesale marketing assistance fees of $1,228,375 and
payment of $615,500 as reimbursement of offering costs, were $10,591,816.

        At December 31, 2002, the Partnership had $970,378 (at cost) invested in
Enhanced Yield Investments of two companies, which have an estimated fair value
of $550,000 at such date.

        At December 31, 2002, the Partnership had $1,198,991 in cash and
temporary cash investments. However, $861,700 of such amount was distributed to
the limited partners in January 2003 and another $119,000 reflects prior
distributions declared but unclaimed by the Partners entitled thereto. In order
to allow Follow-on Investments in Enhanced Yield Investments when such
opportunities arise, the Partnership may utilize proceeds from existing Enhanced
Yield Investments. Management believes that temporary cash investments and
proceeds from existing Enhanced Yield Investments provide the Partnership with
the liquidity necessary to pay operating expenses of the Partnership. Since the
Partnership term will expire during the year ended December 31, 2003, no
Follow-on Investments are expected to be made. The Partnership has only two
remaining investments, and in 2003 plans to dispose of such investments and
distribute the proceeds, and thereafter dissolve the Partnership.

        Net investment income and the proceeds from the sale of Enhanced Yield
Investments are distributed to the extent such amounts are not reserved for
payment of expenses and contingencies.

RESULTS OF OPERATIONS

INVESTMENT LOSS AND EXPENSES

        Net investment income (loss) after all expenses amounted to $(127,402),
$1,448,567 and $(92,680) for the years ended December 31, 2002, 2001 and 2000,
respectively. Interest income from temporary cash investments was $9,119,
$38,281 and $23,355 for the years ended December 31, 2002, 2001 and 2000,
respectively. The higher amounts in 2001 and 2000 as compared to 2002 were due
to the higher average balance of temporary cash investments resulting from
proceeds received by the Partnership in 2001 and 2000 from the sale of Enhanced
Yield Investments. For the year ended December 31, 2002, the Partnership wrote
off the accrued interest receivable related to Artegraft, Inc. in the amount of
$53,648 which resulted in a loss from Enhanced Yield Investments. For the years
ended December 31, 2001 and 2000, the Partnership earned $1,521,128 and $61,607
in income from Enhanced Yield Investments, respectively. The increase in income
from Enhanced Yield Investments in 2001 was due to the Partnership receiving
dividends in arrears of $1,467,912 in 2001 from MaxTech Holdings, Inc.

        Independent general partner fees were $6,000, $37,500 and $39,012 for
the years ended December 31, 2002, 2001 and 2000, respectively. The decrease is
due to the discontinuation of the annual fee paid to the Independent General
Partners ("IGP") of $13,500 each for the year ended December 31, 2002. In
addition, the meeting fees for 2002 were reduced from $1,500 per meeting to $750
per meeting. Professional fees were $52,145, $44,453 and $34,931 for the years
ended December 31, 2002, 2001 and 2000, respectively. The increase in 2002 is
due to an increase in accounting fees over 2001 and 2000.

        The Management Company receives a management fee equal to 2.5% of the
Available Capital. "Available Capital" is the amount of net offering proceeds
from the sale of Units reduced by capital distributed to the holders of the
Units and realized losses from the Partnership's investments. Such fee

                                       12

<PAGE>

amounted to $1,586 and $76,438 for the years ended December 31, 2001 and 2000,
respectively. The decrease in management fees is due to the decrease in
Available Capital for each respective year. Due to the depletion of Available
Capital in the third quarter of 2001, no management fee was received for the
year ended December 31, 2002. Based on the level of Available Capital at
December 31, 2002, the Management Company will receive no additional management
fees from the Partnership. The Management Company was also to be allocated an
incentive fee equal to 10% of the Partnership's cumulative distributions from
Enhanced Yield Investments (excluding returns of capital) over the life of the
Partnership, subject to payment of a priority return to the limited partners.
The Management Company will not receive any incentive fee upon the sale of the
Partnership's investments.

REALIZED GAIN OR LOSS ON ENHANCED YIELD INVESTMENTS

        During 2002, the Partnership realized a capital gain of $705,671. On
August 30, 2002, the Partnership received a liquidating distribution of $705,671
in cash related to its common stock investment in MaxTech Holdings, Inc.
("MaxTech") pursuant to a plan of liquidation previously filed by MaxTech. In
January 2003, the Partnership sold its remaining interest in MaxTech for
$550,000 in cash.

        During 2001, the Partnership realized a net capital gain of $833,595. In
1993, the Partnership wrote off its investment in Tennis Cards, Inc. and
foreclosed on its collateral which consisted of an inventory of tennis trading
cards. On February 22, 2001, the Partnership sold the entire inventory of tennis
trading cards for net proceeds of $49,500. In addition, the Partnership wrote
off its entire investment in Paracelsus Healthcare Corporation, which went
through bankruptcy, realizing a capital loss of $1,181,124. Also, the
Partnership received proceeds from the redemption of its preferred stock and
received a partial payment pursuant to a plan of liquidation on its common stock
of MaxTech, realizing a capital gain of $1,965,219. MaxTech sold all of its
business operations and is attempting to sell its remaining assets, which
primarily consists of real estate.

        During 2000, the Partnership realized a capital loss of $1,307,552. In
October 2000, the Partnership sold 104,900 shares of common stock of Drypers
Corporation ("Drypers") for $6,862, realizing a capital loss of $820,295.
Effective December 31, 2000, due to Drypers declaring bankruptcy, the remaining
121,690 shares of Drypers common stock were deemed worthless and were abandoned,
realizing a capital loss of $487,257.

UNREALIZED GAINS ON ENHANCED YIELD INVESTMENTS

        Unrealized appreciation of Enhanced Yield Investment decreased by
$550,000 during the year ended December 31, 2002. Such decrease resulted from
the receipt of a liquidating distribution of $705,671 from MaxTech Holdings,
Inc., offset by an increase of $155,671 in the remaining value of MaxTech.

        Unrealized appreciation of Enhanced Yield Investments decreased by
$1,380,238 during the year ended December 31, 2001. Such decrease resulted from
the net decrease in the estimated fair value of Enhanced Yield Investments in
two companies in the amount of $974,547 and the transfer of net unrealized
appreciation to net realized gains from the write-off and partial sale of two
Enhanced Yield Investments in the amount of $405,691.

        Unrealized appreciation of Enhanced Yield Investments increased by
$1,562,997 during the year ended December 31, 2000. Such increase resulted from
the increase of $1,000,000 in the estimated fair value of Enhance Yield
Investments of one company, the decrease in the estimated fair value of Enhanced
Yield Investments of one company of $222,552 and the transfer of $785,549 from
net unrealized depreciation to net realized loss from the sale and abandonment
of one Enhanced Yield Investment.

DISTRIBUTIONS

        The Partnership declared distributions of $861,700 or $70 per unit,
$4,616,250 or $375 per Unit

                                       13

<PAGE>

and $621,892 or $50 per Unit to the Limited Partners for the years ended 2002,
2001 and 2000, respectively. The distribution for 2002 was paid in January 2003.
Cumulative cash distributions to limited partners from inception to December 31,
2002 were $13,492,497, or $1,095.53 per weighted average number of Units
outstanding.

ENHANCED YIELD INVESTMENTS

        The Partnership made no new investments in 2002, 2001 or 2000.

        During 2002, the Partnership received management fees from Artegraft,
Inc. ("Artegraft") for the fourth quarter of 2001 and the year ended December
31, 2002 in the amount of $75,000 in the form of a 9% demand note. Given the
financial condition of Artegraft, such fees have not been recognized in the
accompanying financial statements as management believes there is a high
likelihood they will not be realized.

        During 2001, the Partnership received management fees in the amount of
$37,500 and note payments in the amount of $26,800, including interest of $525,
from Artegraft, both in the form of a 9% demand note.

        During 2000, the Partnership received management fees in the amount of
$54,167 and note payments in the amount of $133,055, including interest in the
amount of $12,156, from Artegraft, in the form of a 9% demand note.

        In September and October 2000, respectively, Paracelsus Healthcare
Corporation ("PLHC") and Drypers Corporation ("Drypers") filed for protection
under Chapter 11 of the Federal Bankruptcy Code. PLHC negotiated a plan of
reorganization with its primary creditors and emerged from bankruptcy in March
2001, at which time the Partnership's investment became worthless. The assets
and businesses of Drypers were sold at auction through the bankruptcy process,
with no proceeds available for common shareholders. Effective December 31, 2000,
the remaining shares of Drypers were deemed worthless and abandoned.

        Both of the companies in which the Partnership held investments at
December 31, 2002 are privately held. They each have a small number of
shareholders and do not generally make financial information available to the
public. However, each company's operations and financial information are
reviewed by the General Partners to determine the proper valuation of the
Partnership's investment.

SUBSEQUENT EVENTS

        On January 5, 2003, distributions of $861,700 were paid to the Limited
Partners.

        On January 10, 2003, the Partnership received $550,000 in cash for its
investment in MaxTech Holdings, Inc., realizing a capital gain of $534,219.

ITEM 7A.        QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        The Partnership is subject to financial market risks, including changes
in interest rates with respect to its investments in debt securities, as well as
changes in marketable equity security prices. The Partnership does not use
derivative financial instruments to mitigate any of these risks. The return on
the Partnership's investments is generally not affected by foreign currency
fluctuations.

        The Partnership's investment in portfolio securities consists of some
fixed rate debt securities. Since the debt securities are generally priced at a
fixed rate, changes in interest rates do not directly impact

                                       14

<PAGE>

interest income. In addition, changes in market interest rates are not typically
a significant factor in the Partnership's determination of fair values of these
debt securities. The Partnership's debt securities are generally held to
maturity and their fair values are determined on the basis of the terms of the
debt security and the financial condition of the issuer. In addition, there were
no significant changes to the factors that affect market risk from 2001 to 2002.

        The Partnership's investment portfolio consists of debt and equity
investments in private companies. The Partnership would anticipate no impact on
these investments from modest changes in public market equity prices. However,
should significant changes in market equity prices occur, there could be a
longer-term effect on valuations of private companies, which could affect the
carrying value and the amount and timing of gains realized on these investments.

                                       15

<PAGE>

ITEM 8.         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                        Report of Independent Accountants

To the Independent General Partners of
   Equus Capital Partners, L.P.:

In our opinion, the accompanying statements of assets, liabilities and partners'
capital, including the schedule of enhanced yield investments, and the related
statements of operations, changes in partners' capital and cash flows and the
selected per unit data and ratios present fairly, in all material respects, the
financial position of Equus Capital Partners, L.P. (a Delaware limited
partnership) at December 31, 2002, and the results of its operations, changes in
partners' capital and its cash flows for the year ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and selected per unit data and ratios are
the responsibility of Equus Capital Corporation (the "Managing Partner"). Our
responsibility is to express an opinion on these financial statements and
selected per unit data and ratios based on our audit. We conducted our audit of
these statements and selected per unit data and ratios in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and selected per unit data and ratios are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our procedures included
physical inspection or confirmation of securities owned as of December 31, 2002.
We believe that our audit provides a reasonable basis for our opinion. The
financial statements of Equus Capital Partners, L.P. as of December 31, 2001 and
for each of the two years in the period then ended as well as the selected per
unit data and ratios for each of the four years in the period then ended were
audited by other independent public accountants who have ceased operations.
Those independent public accountants expressed an unqualified opinion on those
financial statements and selected per unit data and ratios in their report dated
March 11, 2002, which included an explanatory paragraph that described the
Managing Partner's valuation of enhanced yield investments in the absence of
readily ascertainable market values.

As discussed in Note 3, the financial statements include enhanced yield
investments valued at $550,000 (75% of partners' capital) as of December 31,
2002 whose values have been estimated by the Managing Partner and approved by
the Independent General Partners in the absence of readily ascertainable market
values. These estimated values may differ materially from the values that
would have been used had a ready market for the investments existed.

As discussed in Note 1, the Partnership has only two remaining investments and
in 2003 plans to dispose of such investments and distribute the proceeds, and
thereafter dissolve the Partnership.

/s/ PricewaterhouseCoopers LLP
-------------------------------------
PricewaterhouseCoopers LLP

Houston, Texas
March 14, 2003

                                       16

<PAGE>

The following report is a copy of a report previously issued by Arthur Andersen
LLP and has not been reissued by Arthur Andersen LLP. Equus Capital Partners,
L.P.'s statement of assets, liabilities and partners' capital as of December 31,
2000 and the statements of operations, changes in partners' capital and cash
flows for the year ended December 31, 1999 and the selected per Unit data and
ratios for the year ended December 31, 1997 are not required to be presented and
are not included in this Form 10-K.

                REPORT OF PREVIOUS INDEPENDENT PUBLIC ACCOUNTANTS

To the Independent General Partners of
   Equus Capital Partners, L.P.:

We have audited the accompanying statements of assets, liabilities and partners'
capital of Equus Capital Partners, L.P. (a Delaware limited partnership),
including the schedules of enhanced yield investments, as of December 31, 2001
and 2000, and the related statements of operations, changes in partners' capital
and cash flows for each of the three years in the period ended December 31,
2001, and the selected per unit data and ratios for each of the five years in
the period ended December 31, 2001. These financial statements and selected per
unit data and ratios are the responsibility of Equus Capital Corporation (the
"Managing Partner"). Our responsibility is to express an opinion on these
financial statements, schedules of enhanced yield investments and selected per
unit data and ratios based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
selected per unit data and ratios are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and selected per unit data and ratios.
Our procedures included physical inspection or confirmation of securities owned
as of December 31, 2001 and 2000. 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.

As discussed in Note 3, the financial statements include enhanced yield
investments valued at $1,100,000 (70% of partners' capital) and $5,123,337 (96%
of partners' capital) as of December 31, 2001 and 2000, respectively, whose
values have been estimated by the Managing Partner and approved by the
Independent General Partners in the absence of readily ascertainable market
values. We have reviewed the procedures used by the Managing Partner in arriving
at its estimate of value of such investments and have inspected the underlying
documentation, and, in the circumstances, we believe the procedures are
reasonable and the documentation is appropriate. However, because of the
inherent uncertainty of valuation, the Managing Partner's estimate of values may
differ significantly from the values that would have been used had a ready
market existed for the investments and the differences could be material.

In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of Equus Capital Partners, L.P. as of December 31, 2001 and 2000, and
the results of its operations, changes in its partners' capital and its cash
flows for each of the three years in the period ended December 31, 2001, and the
selected per unit data and ratios for each of the five years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in United States.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Houston, Texas
March 11, 2002

                                       17

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
             STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
                           DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                 2002         2001
                                                              ----------   ----------

<S>                                                           <C>          <C>
Assets

Enhanced yield investments, at fair value
 (cost of $970,378)                                           $  550,000   $1,100,000
Temporary cash investments, at cost which
 approximates fair value                                       1,197,687      459,877
Cash                                                               1,304        1,306
Accrued interest receivable                                            -       53,648
                                                              ----------   ----------

          Total assets                                        $1,748,991   $1,614,831
                                                              ==========   ==========

Liabilities and Partners' Capital
Liabilities:

     Accounts payable                                         $   38,611   $   42,800
     Distributions payable to limited partners                   980,730            -
                                                              ----------   ----------

          Total liabilities                                    1,019,341       42,800
                                                              ----------   ----------

Commitments and contingencies

Partners' capital:
     Managing partner                                             29,846       38,270
     Independent general partners                                    365          601
     Limited partners (12,310 Units issued and outstanding)      699,439    1,533,160
                                                              ----------   ----------

          Total partners' capital                                729,650    1,572,031
                                                              ----------   ----------

          Total liabilities and partners' capital             $1,748,991   $1,614,831
                                                              ==========   ==========
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       18

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                         2002           2001           2000
                                                     -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>
Investment income (loss):

     Income (loss) from enhanced yield investments   $   (53,648)   $ 1,521,128    $    61,607
     Interest from temporary cash investments              9,119         38,281         23,355
                                                     -----------    -----------    -----------

         Total investment income (loss)                  (44,529)     1,559,409         84,962
                                                     -----------    -----------    -----------

Expenses:

     Management fee                                            -          1,586         76,438
     Independent general partners' fees                    6,000         37,500         39,012
     Professional fees                                    52,146         44,453         34,931
     Mailing and printing expenses                         4,612          7,368          7,191
     Administrative fees                                  20,115         19,935         20,070
                                                     -----------    -----------    -----------

          Total expenses                                  82,873        110,842        177,642
                                                     -----------    -----------    -----------

Net investment income (loss)                            (127,402)     1,448,567        (92,680)
                                                     -----------    -----------    -----------

Realized gain (loss) on sales of enhanced
 yield investments, net:                                 705,671        833,595     (1,307,552)
                                                     -----------    -----------    -----------

Unrealized appreciation (depreciation) of enhanced
 yield investments, net:
   End of year                                          (420,378)       129,622      1,509,860
   Beginning of year                                     129,622      1,509,860        (53,137)
                                                     -----------    -----------    -----------

   Increase (decrease) in unrealized
    appreciation, net                                   (550,000)    (1,380,238)     1,562,997
                                                     -----------    -----------    -----------

   Net increase in partners' capital
    from operations                                  $    28,269    $   901,924    $   162,765
                                                     ===========    ===========    ===========
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       19

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                         Independent
                                                           Managing        General        Limited
                                              Total         Partner        Partners      Partners
                                           -----------    -----------    -----------    -----------
<S>                                        <C>            <C>            <C>            <C>
Partners' capital,
      December 31, 1999                    $ 5,793,432    $    80,484    $     1,778    $ 5,711,170
                                           -----------    -----------    -----------    -----------

 Investment activities:
      Investment income                         84,962            850             24         84,088
      Expenses                                 177,642          1,777             50        175,815
                                           -----------    -----------    -----------    -----------

         Net investment loss                   (92,680)          (927)           (26)       (91,727)

 Realized loss on sales of enhanced
  yield investments, net                    (1,307,552)       (13,076)          (371)    (1,294,105)

 Increase in unrealized appreciation
  of enhanced yield investments, net         1,562,997         15,630            443      1,546,924

 Distribution to partners                     (621,892)        (6,219)          (173)      (615,500)
                                           -----------    -----------    -----------    -----------

 Net decrease in partners' capital            (459,127)        (4,592)          (127)      (454,408)
                                           -----------    -----------    -----------    -----------

 Partners' capital,
       December 31, 2000                   $ 5,334,305    $    75,892    $     1,651    $ 5,256,762
                                           ===========    ===========    ===========    ===========
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       20

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                                   (Continued)

<TABLE>
<CAPTION>
                                                                         Independent
                                                           Managing        General        Limited
                                              Total         Partner        Partners      Partners
                                           -----------    -----------    -----------    -----------
<S>                                        <C>            <C>            <C>            <C>
Partners' capital,
      December 31, 2000                    $ 5,334,305    $    75,892    $     1,651    $ 5,256,762
                                           -----------    -----------    -----------    -----------

Investment activities:
      Investment income                      1,559,409         15,594            442      1,543,373
      Expenses                                 110,842          1,108             31        109,703
                                           -----------    -----------    -----------    -----------

         Net investment income               1,448,567         14,486            411      1,433,670

Realized gain on sales of enhanced
 yield investments, net                        833,595          8,336            237        825,022

Decrease in unrealized appreciation
 of enhanced yield investments, net         (1,380,238)       (13,802)          (392)    (1,366,044)

Distributions to partners                   (4,664,198)       (46,642)        (1,306)    (4,616,250)
                                           -----------    -----------    -----------    -----------

Net decrease in partners' capital           (3,762,274)       (37,622)        (1,050)    (3,723,602)
                                           -----------    -----------    -----------    -----------

Partners' capital,
       December 31, 2001                   $ 1,572,031    $    38,270    $       601    $ 1,533,160
                                           ===========    ===========    ===========    ===========
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       21

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                                   (Continued)
<TABLE>
<CAPTION>

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

Partners' capital,
     December 31, 2001                     $ 1,572,031    $    38,270    $       601    $ 1,533,160
                                           -----------    -----------    -----------    -----------
Investment activities:
     Investment loss                           (44,529)          (446)           (12)       (44,071)
     Expenses                                   82,873            829             24         82,020
                                           -----------    -----------    -----------    -----------

        Net investment loss                   (127,402)        (1,275)           (36)      (126,091)

Realized gain on sales of enhanced
 yield investments, net                        705,671          7,057            200        698,414

Decrease in unrealized appreciation
 of enhanced yield investments, net           (550,000)        (5,500)          (156)      (544,344)

Distributions to partners                     (870,650)        (8,706)          (244)      (861,700)
                                           -----------    -----------    -----------    -----------

Net decrease in partners' capital             (842,381)        (8,424)          (236)      (833,721)
                                           -----------    -----------    -----------    -----------
Partners' capital,
      December 31, 2002                    $   729,650    $    29,846    $       365    $   699,439
                                           ===========    ===========    ===========    ===========
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       22

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>

                                                    2002           2001           2000
                                                -----------    -----------    -----------

<S>                                             <C>            <C>            <C>
Cash flows from operating activities:

     Interest and dividends received            $     9,119    $ 1,506,193    $    29,211
     Cash paid to management company,
      general partners, bank and suppliers          (87,062)      (110,842)      (181,642)
                                                -----------    -----------    -----------

        Net cash provided (used) by operating       (77,943)     1,395,351       (152,431)
         activities                             -----------    -----------    -----------

Cash flows from investing activities:

     Sale of enhanced yield investments             705,671      3,514,719        296,862
     Repayment of enhanced yield investments              -              -          9,300
                                                -----------    -----------    -----------

        Net cash provided by investing
           activities                               705,671      3,514,719        306,162
                                                -----------    -----------    -----------

Cash flows from financing activities:
     Unclaimed distributions to partners            119,030              -              -
     Distributions to partners                       (8,950)    (4,664,198)      (621,892)
                                                -----------    -----------    -----------
        Net cash provided (used) by financing
         activities                                 110,080     (4,664,198)      (621,892)
                                                -----------    -----------    -----------

Net increase (decrease) in cash and
 cash equivalents                                   737,808        245,872       (468,161)

Cash and cash equivalents at
 beginning of year                                  461,183        215,311        683,472
                                                -----------    -----------    -----------

Cash and cash equivalents at end
 of year                                        $ 1,198,991    $   461,183    $   215,311
                                                ===========    ===========    ===========
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       23

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
                                   (Continued)

<TABLE>
<CAPTION>
                                                                2002           2001          2000
                                                             -----------   ----------     ------------
<S>                                                          <C>           <C>            <C>
Reconciliation of net increase in partners'
     capital from operations to net cash
     used by operating activities:
Net increase in partners' capital
     from operations                                         $   28,269    $   901,924    $    162,765
Adjustments to reconcile net increase in partners'
     capital from operations to
     net cash used by operating activities:
     Realized (gain) loss on sales of enhanced
        yield investments, net                                 (705,671)      (833,595)      1,307,552
     (Increase) decrease in unrealized
        appreciation of enhanced yield
        investments, net                                        550,000      1,380,238      (1,562,997)
     Income received in the form of
        enhanced yield investments                                    -        (38,025)        (66,323)
     Decrease in accounts receivable                                  -              -           5,736
     Decrease (increase) in accrued
        interest receivable                                      53,648        (15,191)          4,836

     Decrease in accounts payable                                (4,189)             -          (4,000)
                                                             ----------    -----------    ------------
Net cash provided (used) by operating activities             $  (77,943)   $ 1,395,351    $   (152,431)
                                                             ==========    ===========    ============
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       24

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                        SELECTED PER UNIT DATA AND RATIOS
                   FOR THE FIVE YEARS ENDED DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                             2002         2001        2000          1999        1998
                                          --------     ---------   --------      --------   ---------
<S>                                       <C>          <C>         <C>           <C>        <C>
Selected per unit data:
Investment income                         $  (3.59)    $  125.38   $   6.83      $   9.69   $    5.01
Expenses                                      6.66          8.91      14.28         16.80       20.38
                                          --------     ---------   --------      --------   ---------
Net investment income (loss)                (10.25)       116.47      (7.45)        (7.11)     (15.37)

Realized gain (loss) on sales of
     enhanced yield investments, net         56.74         67.02    (105.13)        29.20      220.41
Increase (decrease) in unrealized
     appreciation of enhanced
     yield investments, net                 (44.22)      (110.97)    125.66         (6.15)    (197.59)
                                          --------     ---------   --------      --------   ---------
Net increase in partners'
     capital from operations                  2.27         72.52      13.08         15.94        7.45
Distributions to partners                   (70.00)      (375.00)    (50.00)          -       (300.00)
                                          --------     ---------   --------      --------   ---------
Net increase (decrease) in
     partners' capital                      (67.73)      (302.48)    (36.92)        15.94     (292.55)
Partners' capital, beginning of year        124.55        427.03     463.95        448.01      740.56
                                          --------     ---------   --------      --------   ---------
Partners' capital, end of year            $  56.82     $  124.55   $ 427.03      $ 463.95   $  448.01
                                          ========     =========   ========      ========   =========
Selected ratios:
Ratio of expenses to average
     partners' capital                        7.35%         3.23%      3.21%         3.68%       3.43%
Ratio of net investment income (loss) to
     average partners' capital              (11.30)%       42.23%     (1.67)%       (1.56)%     (2.59)%
Ratio of total increase
     in partners' capital from
     operations to average
     partners' capital                        2.51%        26.29%      2.94%         3.50%       1.25%

Total return on partners' capital             1.82%        16.98%      2.89%         3.56%       1.01%
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       25

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                     SCHEDULE OF ENHANCED YIELD INVESTMENTS
                                DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                          Date Of
Portfolio Company                                   Initial Investment        Cost           Fair Value
-----------------                                   ------------------   --------------    ---------------
<S>                                                   <C>                <C>               <C>
Artegraft, Inc.                                       January 1993
  -  9% demand promissory note                                           $      252,047    $             -
  -  7% demand promissory note                                                  702,500                  -
  -  Warrant to buy up to 1,000 shares of
     common stock at $.01 per share
     through December 31, 2002                                                       10                  -
  -  Warrant to buy up to 4,000 shares
     of common stock at $17.50 per share
     through December 31, 2002                                                       40                  -
MaxTech Holdings, Inc.                                 March 1991
  -  18,417.49 shares of common stock                                            15,781            550,000
                                                                         --------------    ---------------
      Total                                                              $      970,378    $       550,000
                                                                         ==============    ===============
</TABLE>

        All of the Partnership's Enhanced Yield Investments are restricted from
public sale without prior registration under the Securities Act of 1933. The
Partnership negotiates certain aspects of the method and timing of the
disposition of the Partnership's Enhanced Yield Investments in each Portfolio
Company, including registration rights and related costs. The Partnership does
not expect to incur significant costs, including costs of any such registration,
in connection with the future disposition of its portfolio securities.

        As defined in the Investment Company Act of 1940, all of the
Partnership's investments are in eligible Enhanced Yield Investments. The
Partnership provides significant managerial assistance to all of the Portfolio
Companies in which it has invested.

                          The accompanying notes are an
                  integral part of these financial statements.

                                       26

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                     SCHEDULE OF ENHANCED YIELD INVESTMENTS
                                DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                          Date Of
Portfolio Company                                   Initial Investment        Cost           Fair Value
-----------------                                   ------------------    -------------    ---------------
<S>                                                   <C>                <C>               <C>
Artegraft, Inc.                                       January 1993
  -  9% demand promissory note                                           $      252,047    $             -
  -  7% demand promissory note                                                  702,500                  -
  -  Warrant to buy up to 1,000 shares of
     common stock at $.01 per share
     through December 31, 2002                                                       10                  -
  -  Warrant to buy up to 4,000 shares
     of common stock at $17.50 per share
     through December 31, 2002                                                       40                  -
MaxTech Holdings, Inc.                                 March 1991
  -  59,875 shares of common stock                                               15,781          1,100,000
                                                                         --------------    ---------------
      Total                                                              $      970,378    $     1,100,000
                                                                         ===============   ===============
</TABLE>

                          The accompanying notes are an
                  integral part of these financial statements.

                                       27

<PAGE>

                          EQUUS CAPITAL PARTNERS, L.P.
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2002, 2001, AND 2000

(1)     Organization and Business Purpose

        Equus Capital Partners, L.P. (the "Partnership"), a Delaware limited
partnership, completed the sale of 12,310 units of limited partners' interest
("Units") to 1,428 limited partners as of December 31, 1990. Each Unit required
a capital contribution to the Partnership of $1,000 less applicable selling
commission discounts and may not be sold, transferred or assigned without the
consent of Equus Capital Corporation, a Delaware corporation (the "Managing
Partner"), which consent may not be unreasonably withheld.

        The Partnership seeks to achieve current income and capital appreciation
principally by making investments in "mezzanine" securities, consisting
primarily of subordinated debt or preferred stock combined with equity
participations in common stock or rights to acquire common stock, and
subsequently disposing of such investments ("Enhanced Yield Investments"). The
Partnership has elected to be treated as a business development company under
the Investment Company Act of 1940, as amended. The Partnership was scheduled to
terminate by December 31, 1999, subject to the right of the Independent General
Partners (as defined below) to extend the term for up to four additional years
if they determine that such extension is in the best interest of the
Partnership. The agreement has been extended through December 31, 2003. The
Partnership has only two remaining investments, and in 2003 plans to dispose of
such investments and distribute the proceeds, and thereafter dissolve the
Partnership. The Managing Partner is wholly owned by Equus Capital Management
Corporation.

(2)     Management

        The Partnership currently has three general partners, consisting of the
Managing Partner and two independent, individual general partners (the
"Independent General Partners"). As compensation for services rendered to the
Partnership through December 31, 2002, each Independent General Partner receives
a fee of $750 for each meeting of the Independent General Partners attended and
reimbursement of all out-of-pocket expenses relating to attendance at such
meetings. The meeting fees were reduced in 2002 from $1,500 to $750. Until 2002,
the Independent General Partners also received an annual fee of $13,500,
however, the annual fee was discontinued in 2002. Pursuant to the Partnership
agreement, the Managing Partner has made a general partner's capital
contribution to the Partnership of $125,316, or approximately one percent of the
Partnership's contributed capital.

        The Partnership has entered into a management agreement with Equus
Capital Management Corporation, a Delaware corporation (the "Management
Company"). Pursuant to such agreement, the Management Company performs certain
management and administrative services necessary for the operation of the
Partnership. The Management Company receives a management fee at an annual rate
equal to 2.5% of the available capital and is payable quarterly in arrears.
Since Available Capital, as calculated, was depleted in the third quarter of
2001, no additional management fees are payable. In addition, the Management
Company was entitled to receive an incentive fee equal to 10% of the
Partnership's cumulative distributions from Enhanced Yield Investments
(excluding returns of capital) over the life of the Partnership, subject to
payment of a priority return to the limited partners. No incentive fees will be
paid. The Management Company also receives compensation for providing certain
administrative services to the Partnership on terms determined by the
Independent General Partners as being no less favorable to the Partnership than
those obtainable from competent unaffiliated parties. The Management Company
also has management agreements with the Managing Partner and Equus II
Incorporated

                                       28

<PAGE>

("EQS"), a Delaware corporation, and with Equus Equity Appreciation Fund L.P.
("EEAF"), a Delaware limited partnership. The management fees paid by EQS
represent the Management Company's primary source of revenue and support.

        The Managing Partner is a wholly-owned subsidiary of the Management
Company, which in turn is controlled by a privately owned corporation. The
Managing Partner is also the managing general partner of EEAF.

(3)     Significant Accounting Policies

        Valuation of Investments - Enhanced yield investments are carried at
fair value with the net change in unrealized appreciation or depreciation
included in the determination of partner's capital. Valuations of enhanced yield
investments are performed in accordance with generally accepted accounting
principles and the financial reporting policies of the Securities and Exchange
Commission ("SEC"). The applicable methods prescribed by such principles and
policies are described below:

        Publicly-traded Enhanced Yield Investments - Investments in companies
whose securities are publicly traded are valued at their quoted market price at
the close of business on the valuation date, less a discount to reflect the
estimated effects of restrictions on the sale of such securities ("Valuation
Discount"), if applicable.

        Privately-held Enhanced Yield Investments - The fair value of
investments for which no market exists is determined on the basis of procedures
established in good faith by the Managing Partner and approved by the
Independent General Partners of the Partnership. As a general principle, the
current "fair value" of an investment would be the amount the Partnership might
reasonably expect to receive for it upon its current sale. Appraisal valuations
are necessarily subjective and the Managing Partner's estimate of values may
differ materially from amounts actually received upon the disposition of
enhanced yield investments.

        Generally, cost is the primary factor used to determine fair value until
significant developments affecting the Portfolio Company (such as results of
operations or changes in general market conditions) provide a basis for use of
an appraisal valuation. Thereafter, Enhanced Yield Investments are carried at
appraised values as determined quarterly by the Managing Partner, subject to the
approval of the Independent General Partners. Appraisal valuations are based
upon such factors as a Portfolio Company's earnings, cash flow and net worth,
the market prices for similar securities of comparable companies, an assessment
of the company's current and future financial prospects and various other
factors and assumptions. In the case of unsuccessful operations, the appraisal
may be based upon liquidation value.

        Most of the Partnership's common equity investments may be appraised at
a multiple of free cash flow generated by the Portfolio Company in its most
recent fiscal year, less outstanding funded indebtedness and other senior
securities such as preferred stock. Projections of current year free cash flow
may be utilized and adjustments for non-recurring items are considered.
Multiples utilized are estimated based on the Management Company's experience in
the private company marketplace, and are necessarily subjective in nature. Most
of the Portfolio Companies utilize a high degree of leverage. From time to time,
Portfolio Companies are in default of certain covenants in their loan
agreements. In the event a Portfolio Company cannot generate adequate cash flow
to meet the principal and interest payments on such indebtness or is not
successful in refinancing the debt upon its maturity, the value of the
Partnership's investment could be reduced or eliminated through foreclosure on
the Portfolio Company's assets or the Portfolio Company's reorganization or
bankruptcy. When the Managing Partner has a reasonable belief that the Portfolio
Company will be able to restructure the loan agreements to adjust for any
defaults, the Portfolio Company's securities continue to be valued assuming that
the company is a going concern. The Partnership may also use, when available,
third-party transactions in a Portfolio Company's securities as

                                       29

<PAGE>

the basis of valuation (the "private market method"). The private market method
will be used only with respect to completed transactions or firm offers made by
sophisticated, independent investors.

        The fair values of debt securities, which are generally held to
maturity, are determined on the basis of the terms of the debt securities and
the financial conditions of the issuer. Certificates of deposit purchased by the
Partnership generally will be valued at their face value, plus interest accrued
to the date of valuation.

        Because of the inherent uncertainty of the valuation of portfolio
securities which do not have readily ascertainable market values, amounting to
$550,000 and $1,100,000 at December 31, 2002 and 2001, respectively, the
Partnership's estimate of fair value may differ materially from the value that
would have been used had a ready market existed for the securities. Appraised
values do not reflect brokers' fees or other normal selling costs which might
become payable on disposition of such investments.

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

        Income Taxes - No provision for income taxes has been made since all
income and losses are allocable to the partners for inclusion in their
respective tax returns. Profits and Losses for tax purposes are determined and
allocated as of the end of each calendar quarter. Profits and Losses are
allocated first to reflect such cash distributions made or scheduled to be made
(other than as to distributions of capital), and thereafter in a manner designed
to reflect cash distributions projected to be made.

        Cash Flows - For purposes of the Statements of Cash Flows, the
Partnership considers all highly liquid temporary cash investments purchased
with an original maturity of three months or less to be cash equivalents.

        Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires the use of certain
estimates and assumptions by management in determining the reported amounts of
assets and liabilities, disclosure of contingent liabilities as of the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Because uncertainties with respect to such
estimates and assumptions are inherent in the preparation of financial
statements, actual results could differ from these estimates.

(4)     Allocations and Distributions

        The Partnership's cumulative net distributions from Enhanced Yield
Investments in excess of returns of capital will be shared in proportion to the
partners' capital contributions until the limited partners have received a
priority return, and thereafter are designed so that such distributions
generally will ultimately be shared 80% by the general and limited partners in
proportion to their capital contributions, 10% by the Managing Partner as an
incentive distribution and 10% by the Management Company as an incentive fee.
The priority return of $3,329,084 and $3,210,033 at December 31, 2002 and 2001,
respectively, is equal to the cumulative, non-compounded return on the average
daily amount of the gross capital contributions represented by Enhanced Yield
Investments ranging from 10 to 12% per annum, depending on the date of the
original contribution, less amounts previously distributed related to such
return. For financial reporting purposes, net unrealized appreciation or
depreciation is allocated to the partners' capital accounts as if it were
realized. Based on current valuations of Enhanced Yield Investments, the
Management Company will not receive any incentive fee upon the sale of the
Partnership's investments.

        Income from any source other than Enhanced Yield Investments is
generally allocated to the partners in proportion to the partners' capital
contributions. Indirect expenses of the Partnership are allocated between
Enhanced Yield Investments and Temporary Cash Investments on a pro-rata basis
based on the average assets from each type of investment.

        Subject to certain provisions in the Partnership agreement, net
investment income and gains and losses on investments are generally allocated
between the general partners and the limited partners on the same basis as cash
distributions.

                                       30

<PAGE>

(5)     Temporary Cash Investments

        Temporary cash investments, which represent the short-term utilization
of cash prior to investment in Enhanced Yield Investments, distributions to the
partners or payment of expenses, consisted of money market accounts earning
interest ranging from 0.55% to 1.00% and 0.75% to 2.00% at December 31, 2002 and
2001, respectively.

(6)     Enhanced Yield Investments

        The Partnership made no new investments during the year ended
December 31, 2002. During the year ended December 31, 2002, the Partnership
received a liquidating distribution of $705,671 from MaxTech Holdings, Inc.
("MaxTech"). Also, the Partnership wrote off the accrued interest related to
Artegraft, Inc. ("Artegraft") in the amount of $53,648 which resulted in a loss
from Enhanced Yield Investments. In addition, the Partnership received
management fees from Artegraft for the fourth quarter 2001 and the year ended
December 31, 2002 in the amount of $75,000 in the form of a 9% demand note.
Given the financial condition of Artegraft, such fees have not been recognized
in the accompanying financial statements as management believes there is a high
likelihood they will not be realized.

        The Partnership made no new investments during the year ended December
31, 2001. During the year ended December 31, 2001, the Partnership received
management fees in the amount of $37,500 and note payments in the amount of
$26,800, including interest of $525, from Artegraft, both in the form of a 9%
demand note.

        During the year ended December 31, 2001, the Partnership realized a net
capital gain of $833,595. In 1993, the Partnership wrote off its investment in
Tennis Cards, Inc. and foreclosed on its collateral which consisted of an
inventory of tennis trading cards. On February 22, 2001, the Partnership sold
the entire inventory of tennis trading cards for net proceeds of $49,500. In
addition, the Partnership wrote off its entire investment in Paracelsus
Healthcare Corporation, which went through bankruptcy, realizing a capital loss
of $1,181,124. Also, the Partnership received proceeds from the redemption of
its preferred stock and received a partial payment pursuant to a plan of
liquidation on its common stock of MaxTech, realizing a capital gain of
$1,965,219. MaxTech sold all of its business operations and is attempting to
sell its remaining assets, which primarily consist of real estate.

(7)     Unrealized Appreciation on Enhanced Yield Investments

        Unrealized appreciation of Enhanced Yield Investment decreased by
$550,000 during the year ended December 31, 2002. Such decrease resulted from
the receipt of a liquidating distribution of $705,671 from MaxTech Holdings,
Inc., offset by an increase of $155,671 in the remaining value of the investment
in MaxTech.

        Unrealized appreciation of Enhanced Yield Investments decreased by
$1,380,238 during the year ended December 31, 2001. Such decrease resulted from
the net decrease in the estimated fair value of two Enhanced Yield Investments
in two companies in the amount of $974,547 and the transfer of net unrealized
appreciation to net realized gains from the write-off and partial sale of two
Enhanced Yield Investments in the amount of $405,691.

(8)     Subsequent Events

        On January 5, 2003, distributions of $861,700 were paid to the Limited
Partners.

        On January 10, 2003, the Partnership received $550,000 in cash for its
investment in MaxTech Holdings, Inc., realizing a capital gain of $534,219.

                                       31

<PAGE>

ITEM 9.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE.

        None.

ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        The Partnership has no directors or officers. On December 31, 2002, the
Partnership was managed by the Managing Partner and two Independent General
Partners.

        Certain information regarding the Independent General Partners is set
forth below:

        John M. Ivancevich, age 62, has been an Independent General Partner of
the Partnership since 1989. He has been Executive Vice President for Academic
Affairs and Provost at the University of Houston since July 1995 and was Dean of
the College of Business Administration at the University of Houston from 1988 to
July 1995. Dean Ivancevich has held the Hugh Roy and Lillie Cranz Cullen
Distinguished Professorship of Management since 1979. Between 1974 and 1988,
Dean Ivancevich held various positions in the College of Business
Administration, including Chairman of the Department of Organizational Behavior
and Management and Associate Dean for Research.

        John W. Storms, 58, became an Independent General Partner of the
Partnership effective December 31, 2001. He has been the Managing General
Partner of Storms & Critz, Certified Public Accountants since May 1988. He has
also served as a director of Equus II Incorporated since October 1991 and was an
Independent General Partner of Equus II's predecessor from its inception in
1987.

        The Independent General Partners make up the audit committee and do not
have separate nominating or compensation committees, but act on such matters as
a committee of the whole. The business address of Messrs. Ivancevich and Storms
is 2929 Allen Parkway, Suite 2500, Houston, Texas 77019.

FILING OF REPORTS OF UNIT OWNERSHIP

        Under the federal securities laws, the Partnership's general partners
and any persons holding more than ten percent of the Partnership's Units are
required to report their ownership of the Partnership's Units and any changes in
that ownership to the Partnership and the SEC. Specific due dates for these
reports have been established by regulation and the Partnership is required to
report any failure to file by these due dates. All of these filings were
satisfied by the Partnership's general partners and ten percent holders,
pursuant to Section 16(2) of the Securities Exchange Act of 1934.

        As of March 31, 2003, the Partnership believes that all of the
Partnership's general partners and ten percent holders are current in their
filings. In making these statements, the Partnership has relied on the transfer
records of the Partnership and copies of reports that they have filed with the
SEC.

Managing Partner

        The Managing Partner is a corporation organized under the laws of the
State of Delaware in September 1983. The Managing Partner was organized to serve
as managing general partner of Equus Investments I, L.P., Equus Investments II,
L.P., the Partnership and similar partnerships which may be formed. The Managing
Partner, subject to the supervision of the Independent General Partners, has
exclusive power and authority to manage and control the Partnership. The
Managing Partner is a registered investment adviser under the Investment
Advisers Act of 1940 ("the Investment Advisers Act").

                                       32

<PAGE>

        The following is a list of the directors and officers of the Managing
Partner at December 31, 2002:

<TABLE>
<CAPTION>
        Name                           Age                     Position
        ------------------------  ----------                  -------------------------
        <S>                            <C>                    <C>
        Sam P. Douglass                70                     Chairman of the Board and
                                                               Chief Executive Officer
        Nolan Lehmann                  58                     President and Director
        Randall B. Hale                40                     Vice President and Director
        Paula T. Douglass              51                     Director
        S. Preston Douglass, Jr.       44                     Director
        Tracy H. Cohen                 36                     Vice President and Secretary
        Gary L. Forbes                 59                     Vice President
</TABLE>

        Sam P. Douglass has been Chairman of the Board of the Managing Partner
since its formation in September 1983 and became Chief Executive Officer in
December 1989. Mr. Douglass is also Chairman of the Board and Chief Executive
Officer of the Management Company and Equus II Incorporated. Since December
1978, he has served as Chairman and Chief Executive Officer of Equus Corporation
International, a privately-owned corporation engaged in a variety of investment
activities.

        Nolan Lehmann has been the President of the Managing Partner since May
1990 and a director since December 1989. From its formation in September 1983 to
May 1990 he was Executive Vice President. Mr. Lehmann is also President and a
director of the Management Company and Equus II Incorporated. He is a director
of Allied Waste Industries, Inc. Mr. Lehmann is a certified public accountant.

        Randall B. Hale was a Vice President of the Managing Partner, Equus II
Incorporated and the Management Company since November 1992 until February 2003.
He was elected a director of the Managing Partner and Management Company in
February 1996. As of February 15, 2003, Mr. Hale resigned his positions with the
Managing Partner, Equus II Incorporated and the Management Company. From June
1985 to October 1992, he was employed by Arthur Andersen LLP. He is a director
of ENGlobal Corporation. Mr. Hale is a certified public accountant.

        Paula T. Douglass has been a director of the Management Company since
July 1993. She was elected director of the Managing Partner in February 1996.
From September 1989 to September 1990, she was employed as an attorney by
Fulbright & Jaworski. Since December 1978, she has been a director of Equus
Corporation International. She is a licensed attorney. From February 1998
through November 2000, Ms. Douglass was Chairman and Chief Executive Officer of
Cinema Film Systems Texas, Inc.

        S. Preston Douglass, Jr. has been a director of the Management Company
since July 1993. He was elected director of the Managing Partner in February
1996. He has been President and Chief Executive Officer of Corpus Christi Harley
Davidson, Inc. since March 2000. He was a partner at Wallace, Machann, Jackson,
Williams and Douglass where he was employed from January 1989 to March 2000. He
was a prosecutor in the 216th Judicial District in Kerrville, Texas from
December 1987 to December 1988. He is a licensed attorney.

        Tracy H. Cohen was elected a Vice President of the Managing Partner in
April 1995 and is the Manager of the Investor Relations Department for the
Management Company, where she has been employed since April 1995. She has been a
Vice President of Equus II Incorporated since May 1995. From September 1990 to
April 1995, she was employed by Arthur Andersen LLP. Ms. Cohen is a certified
public accountant.

        Gary L. Forbes was a director of the Managing Partner from January 1992
to November 1995 and has been a Vice President of the Managing Partner and the
Management Company since November 1991.

                                       33

<PAGE>

He was a director of the Management Company from July 1993 to November 1995. He
has been a Vice President of Equus II Incorporated since December 1991. He is
also a director of Consolidated Graphics, Inc. and NCI Building Systems, Inc.
Mr. Forbes is a certified public accountant.

        There is no family relationship between any Independent General Partner
and any director or officer of the Managing Partner. Paula T. Douglass is the
wife of Sam P. Douglass, and S. Preston Douglass, Jr. is the son of Sam P.
Douglass. The business address of Messrs. Douglass, Lehmann, Hale, Forbes and
Ms. Douglass and Cohen is 2929 Allen Parkway, Suite 2500, Houston, Texas 77019.
The business address of Mr. S. Preston Douglass, Jr. is 2626 S. Padre Island
Dr., Corpus Christi, Texas 78415.

        The Managing Partner contributed $125,316 to the Partnership,
representing approximately 1% of total capital contributions to the Partnership.

        The Managing Partner is a wholly-owned subsidiary of the Management
Company. As a result of its stock ownership in the Management Company, Equus
Corporation International has 80% voting control of the Management Company.
Equus Corporation International has its principal offices at 2929 Allen Parkway,
Suite 2500, Houston, Texas 77019.

MANAGEMENT COMPANY

        The Management Company was organized as a Delaware corporation in 1983
and maintains its offices at 2929 Allen Parkway, Suite 2500, Houston, Texas
77019. The Management Company's sole activity is to provide management,
administrative and investment advisory services for the Partnership, Equus II
Incorporated and Equus Equity Appreciation Fund, L.P. The Management Company is
a registered investment adviser under the Investment Advisers Act.

        At December 31, 2002, the directors and officers of the Management
Company are Sam P. Douglass, Chairman of the Board and Chief Executive Officer,
Nolan Lehmann, President and a director, Randall B. Hale, Vice President,
Secretary and director, Paula T. Douglass, director, S. Preston Douglass, Jr.,
director and Gary L. Forbes, Vice President. See "Managing Partner" above for
information concerning Messrs. Sam P. Douglass, Lehmann, Hale, S. Preston
Douglass, Jr., Forbes and Ms. Douglass.

        As a result of its stock ownership in the Management Company, Equus
Corporation International has 80% voting control of the Management Company.
Equus Corporation International is a privately owned corporation engaged in a
variety of investment activities. The business address of Equus Corporation
International is 2929 Allen Parkway, Suite 2500, Houston, Texas 77019.

THE MANAGEMENT AGREEMENT

        The Management Agreement provides that the Management Company receive as
compensation for its services a management fee (the "Management Fee") at an
annual rate of 2.5% of Available Capital of the Partnership, paid quarterly in
arrears. Based on the level of Available Capital, no management fees were paid
in 2002. Management fees of $1,586 and $76,438 were paid during the years ended
December 31, 2001 and 2000, respectively.

        The Management Agreement also provides that the Management Company will
be paid as the Management Company Incentive Fee an amount equal to 10% of the
excess of distributions from Enhanced Yield Investments over distributions from
Enhanced Yield Investments representing returns of capital over the life of the
Partnership, subject to payment of the priority return to the Limited Partners.
At December 31, 2002, payment of incentive fees is subject to the payment of
$3,299,077 in cumulative accrued priority returns owed to limited partners. No
incentive fees will be paid to the Management

                                       34

<PAGE>

Company.

        The Management Agreement provides for indemnification by the Partnership
of the Management Company and its officers and directors, to the fullest extent
allowed by law, against any threatened, pending or completed action to the
extent that the activities giving rise to such action were performed in good
faith either on behalf of the Partnership or in furtherance of the interests of
the Partnership and in a manner reasonably believed by the indemnified person to
be within the scope of the authority conferred by the Management Agreement or by
law, so long as such person was not guilty of bad faith, negligence, misconduct
or any breach of fiduciary duty owed to the Partnership. Indemnification is
limited by Section 17(d) of the Investment Company Act.

        The Management Agreement was approved by the Independent General
Partners and was submitted to the first annual meeting of Limited Partners for
their approval. Unless earlier terminated, the Management Agreement will remain
in effect from year to year if approved by (i) a majority of the General
Partners or a majority in interest of Limited Partners and (ii) a majority of
the Independent General Partners. The Management Agreement is not assignable and
may be terminated without penalty on 60 days' written notice at the option of
either party or by a vote of a majority in interest of Limited Partners.

        As compensation for the specified administrative services to be rendered
by the Management Company, the Management Company is paid a fee (the "Fund
Administration Fee") of $15 per Limited Partner account per year and is
reimbursed for certain out-of-pocket expenses relating to such services. Such
terms and conditions must be approved by the Independent General Partners,
however, as being not less favorable to the Partnership than those obtainable
from competent unaffiliated third parties. The amount of compensation payable to
the Management Company is reviewed annually by the Independent General Partners
and, subject to the limitation contained in the previous sentence, may be
increased or decreased by the Independent General Partners to provide for such
compensation as the Independent General Partners may in good faith deem
reasonable. Administration fees were $20,115, $19,935 and $20,070 for the years
ended December 31, 2002, 2001 and 2000, respectively.

        The Management Company is a registered investment adviser under the
Investment Advisers Act.

ITEM 11.        EXECUTIVE COMPENSATION.

        The following table sets forth all cash compensation paid to the
Independent General Partners during or with respect to 2002 for services
rendered in all capacities to the Partnership.

        Number of              Capacities in          Cash
        persons in group        which served       compensation
        ----------------    -------------------    ------------
              2             Independent General    $      6,000
                             Partners

        Each Independent General Partner received from the Partnership a fee of
$750 for each meeting of the Independent General Partners attended and
reimbursement for all out-of-pocket expenses relating to attendance at such
meetings. Independent General Partners do not receive any additional
compensation from the Partnership or its Portfolio Companies for any additional
services rendered.

        The Partnership has no directors, executive officers or employees and
therefore paid no other compensation during 2002.

                                       35

<PAGE>

DISTRIBUTIONS AND ALLOCATIONS OF PROFITS AND LOSSES

DISTRIBUTIONS

        Subject to the Priority Return, the Partnership's cumulative net
distributions from Enhanced Yield Investments in excess of returns of capital
generally are to be shared 80% by the Limited Partners and the General Partners
in proportion to their Capital Contributions, 10% by the Managing Partner as an
incentive distribution and 10% by the Management Company as an incentive fee.

        Current Returns. All cash dividends, interest and other income received
by the Partnership in excess of expenses of operation and reserves for expenses
and Follow-on Investments are to be distributed to the Partners at least
annually as follows:

        (a)     From Enhanced Yield Investments,

        first, 99% to the Limited Partners and the Independent General Partners,
        as a class, and 1% to the Managing Partner, until the Limited Partners,
        as a class, have received from cumulative distributions from Enhanced
        Yield Investments made by the Partnership (other than as a return of
        capital), an amount equal to the sum of (i) an aggregate return
        (cumulative but not compounded) ranging from 12% to 10% per annum
        (depending on when the Limited Partner made his Capital Contribution) on
        the average daily amount of Gross Capital Contributions represented by
        Enhanced Yield Investments (the "Priority Return"), and (ii) any
        outstanding Compensatory Payment (as defined below),

        second, 79% to the Limited Partners and the Independent General
        Partners, as a class, and 21% to the Managing Partner until the Managing
        Partner has received from all distributions with respect to Enhanced
        Yield Investments made by the Partnership (other than as a return of
        capital), an amount equal to 11% of all such distributions (10
        percentage points being an incentive distribution, the "MGP Incentive
        Distribution"), except that if there are any outstanding Deferred
        Distribution Amounts (defined below), such distribution will, to the
        extent permitted by the Partnership Agreement, first be made solely to
        the Managing Partner until such amount is distributed to it, and

        third, thereafter, 89% to the Limited Partners and the Independent
        General Partners, as a class, and 11% to the Managing Partner (10
        percentage points being an MGP Incentive Distribution).

        (b)     From Temporary Investments, 99% to the Limited Partners and the
                Independent General Partners, as a class, and 1% to the Managing
                Partner.

        The Priority Return is 12% for Capital Contributions made prior to June
30, 1989, 11% for Capital Contributions made between July 1 and September 30,
1989 and 10% for Capital Contributions made thereafter.

        Capital Transactions. All proceeds from the disposition of Enhanced
Yield Investments and Temporary Investments, including distributions of returns
of capital from investments ("Capital Transactions"), that are not utilized or
reserved for Follow-on Investments or used to pay, or reserved for the payment
of, outstanding obligations or expenses of the Partnership will be distributed
as soon as practicable after such Capital Transactions as follows:

        (a)     From Enhanced Yield Investments,

        first, 99% to the Limited Partners and the Independent General Partners,
        as a class, and 1% to

                                       36

<PAGE>

        the Managing Partner, until the Limited Partners, as a class, have
        received from cumulative distributions from Enhanced Yield Investments,
        an amount equal to the sum of (i) the Priority Return and (ii) any
        outstanding Compensatory Payment,

        second, to the Managing Partner, the Independent General Partners and
        the Limited Partners, as a class, in proportion to their respective "Net
        Capital Contributions" (Capital Contributions net of selling commissions
        and organizational, offering and marketing expenses) until the Limited
        Partners, as a class, have received from cumulative distributions from
        Enhanced Yield Investments (a) the portion of their Net Capital
        Contributions represented by Enhanced Yield Investments then or
        theretofore liquidated and not reinvested plus (b) an amount equal to
        the sum of (i) the Priority Return and (ii) any outstanding Compensatory
        Payment, except that if there are any outstanding Deferred Distribution
        Amounts, such distribution will, to the extent permitted by the
        Partnership Agreement, first be made solely to the Managing Partner
        until such amount is distributed to it,

        third, 79% to the Limited Partners and the Independent General Partners,
        as a class, and 21% to the Managing Partner, until the Managing Partner
        has received from all distributions made with respect to Enhanced Yield
        Investments, 11% of all such distributions (10 percentage points being
        an MGP Incentive Distribution), other than as a return of capital, and

        fourth, thereafter 89% to the Limited Partners and the Independent
        General Partners, as a class, and 11% to the Managing Partner (10
        percentage points being an MGP Incentive Distribution).

        (b)     From Temporary Investments,

        first, to the Managing Partner, the Independent General Partners and the
        Limited Partners, as a class, in proportion to their respective Net
        Capital Contributions until the Limited Partners, as a class, have
        received from cumulative distributions other than distributions from
        Enhanced Yield Investments the portion of their Net Capital
        Contributions represented by Temporary Investments then or theretofore
        liquidated and not reinvested, and

        second, 99% to the Limited Partners and the Independent General
        Partners, as a class, and 1% to the Managing Partner.

        For purposes of the distribution described above, "Gross Capital
Contributions represented by Enhanced Yield Investments" is the total cost of
Enhanced Yield Investments grossed up for the related selling commissions,
marketing and sales expenses and organization and offering expenses, without
regard to selling discounts or waivers of selling commissions or wholesale
marketing assistance fees.

        Distributions to Limited Partners are allocated among such Limited
Partners in proportion to the respective number of Units held by such Limited
Partners and based on the Priority Return they are entitled to receive.

        As soon as possible after the Partnership's termination, the Managing
Partner, or a liquidating trustee, will liquidate the Partnership and the
Partners will receive a liquidating distribution of the remaining assets based
upon their allocable share thereof.

ALLOCATIONS

        Profits and Losses for tax purposes are determined and allocated as of
the end of each calendar quarter. Profits and Losses are allocated first to
reflect such cash distributions made or scheduled to be

                                       37

<PAGE>

made (other than as to distributions of capital), and thereafter in a manner
designed to reflect cash distributions projected to be made.

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        To the best knowledge of the Partnership, no person beneficially owns
more than five percent of the Units of limited partners' interests in the
Partnership. The Partnership has no other class of security currently
outstanding. No Independent General Partner of the Partnership owns any Units of
limited partners' interests in the Partnership.

        Set forth below is information as of December 31, 2002, with respect to
the ownership of Units by the directors and officers of the Managing Partner.

                                           Units
Name                                 Beneficially Owned     Percentage
------------------------------       ------------------     ----------
Tracy H. Cohen
(Vice President and Secretary)                38 (1)               .31%

Sam P. Douglass
(Chairman and Director)                        5                   .04%

Gary L. Forbes
(Vice President)                              58 (1)               .47%

Randall B. Hale
(Vice President and Director)                 43 (1)               .35%

Nolan Lehmann
(President and Director)                      69 (1)               .56%

All directors and officers
of the Managing Partner
as a group (eight persons)                    99                   .80%

       (1)  includes 38 units owned by GRN Partners of which Ms. Cohen and
            Messrs. Forbes, Hale, and Lehmann are general partners.

        There exists no arrangement known to the Partnership, the operation of
which may at a subsequent date result in a change of control of the Partnership.

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        Reference is made in Items 10 and 11 to the information set forth under
the captions "The Management Agreement" and "The Management Company" and to the
information set forth under the captions "Managing Partner" and "Distributions
and Allocation of Profits and Losses" for information concerning certain
relationships and transactions between the Managing Partner and the Management
Company.

ITEM 14.        CONTROLS AND PROCEDURES

        The Partnership maintains disclosure controls and other procedures that
are designed to ensure that information required to be disclosed by the
Partnership in the reports that it files or submits under the

                                       38

<PAGE>

Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Managing Partner's management, including its
Chairman and Chief Executive Officer and President and Principal Financial and
Accounting Officer, as appropriate, to allow timely decisions regarding required
disclosure.

        The Managing Partner's Chairman and Chief Executive Officer and
President and Principal Financial and Accounting Officer have reviewed and
evaluated the effectiveness of the Fund's disclosure controls and procedures
within 90 days prior to the date of this report. Based on their review and
evaluation, the Managing Partner's Chairman and Chief Executive Officer and
President and Principal Financial and Accounting Officer concluded that the
Partnership's disclosure controls and procedures were effective in ensuring that
information relating to the Partnership was made known to them by others within
the Partnership in a timely manner, particularly during the period in which this
Annual Report on Form 10-K was being prepared, and that no changes are required
at this time.

        There have been no significant changes in the Partnership's internal
controls or in other factors that could significantly affect the Partnership's
internal controls subsequent to the date the Partnership completed its
evaluation.

ITEM 15.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1)          Financial Statements                                  Page
        -----------------------------------------------------         ----

        Report of Independent Public Accountants                       16

        Statements of Assets, Liabilities and Partners'                18
        Capital at December 31, 2002 and 2001

        Statements of Operations for the years ended                   19
        December 31, 2002, 2001 and 2000

        Statements of Changes in Partners' Capital                     20
        for the years ended December 31, 2002, 2001 and 2000

        Statements of Cash Flows for the years ended                   23
        December 31, 2002, 2001 and 2000

        Selected Per Unit Data and Ratios for the                      25
        five years ended December 31, 2002

        Schedules of Enhanced Yield Investments                        26
        at December 31, 2002 and 2001

        Notes to Financial Statements                                  28

        All other information required in the financial statement schedules has
been incorporated in the financial statements or notes thereto or has been
omitted since the information is not applicable, not present or not present in
amounts sufficient to require submission of the schedule.

(a)(3)  Exhibits

3.      Articles of Incorporation and By-laws.

                                       39

<PAGE>

        (a)     Certificate of Limited Partnership of the Partnership dated
                November 30, 1988. [Incorporated by reference to Form N-3
                Exhibit 1.1 to Registration Statement, File No. 33-25985].

        (b)     Amended and Restated Agreement of Limited Partnership of the
                Partnership dated as of October 6, 1989. [Incorporated by
                reference to Exhibit 3(e) to the Partnership's Annual Report on
                Form 10-K, filed March 30, 1990.]

4.      Instruments defining the rights of security holders, including
        debentures

        (a)     Amended and Restated Agreement of Limited Partnership of the
                Partnership dated as of October 6, 1989. [Incorporated by
                reference to Exhibit 3(e) to the Partnership's Annual Report on
                Form 10-K, filed March 30, 1990]

        (b)     Form of Subscription Agreement [Incorporated by reference to
                Form N-2, Exhibit B to Prospectus, File No 33-25958].

10.     Material Contracts

        (a)     Management Agreement between the Partnership and Equus Capital
                Management Corporation dated October 6, 1989. [Incorporated by
                reference to Exhibit 10(a) to the Partnership's Annual Report on
                Form 10-K filed March 30, 1990.]

        (b)     Service Agreement between the Partnership and Equus Capital
                Management Corporation dated October 6, 1989. [Incorporated by
                reference to Exhibit 10(b) to the Partnership's Annual Report on
                Form 10-K filed March 30, 1990.]

        (c)     Safekeeping Agreement between the Partnership and Southwest
                Guaranty Trust Company dated January 2, 1991. [Incorporated by
                reference to Exhibit 10(d) to the Partnership's Annual Report on
                Form 10-K filed March 21, 1991.]

        (d)     Reports on Form 8-K
                November 11, 2002             Our current report on Form 8-K
                                              terminating Arthur Andersen LLP as
                                              accountants for the fiscal year
                                              2002 and appointing
                                              PricewaterhouseCoopers LLP as
                                              accountants for the fiscal year
                                              2002.

99.     Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

        (1) Certification by Chief Executive Officer

        (2) Certification by the President and Principal Financial and
            Accounting Officer


        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed by the
undersigned, thereunto duly authorized.

                                              EQUUS CAPITAL PARTNERS, L.P.

                                              By:  Equus Capital Corporation,
                                                   Managing Partner


                                              By:  /s/ Nolan Lehmann
                                                   -----------------------------
                                                   Nolan Lehmann, President

Date:   March 31, 2003

                                       40

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
        Signature                             Title                             Date
------------------------------------  -----------------------             ---------------

<S>                                   <C>                                 <C>
EQUUS CAPITAL CORPORATION
Managing General Partner

By: /s/ Nolan Lehmann
    -------------------------------
         Nolan Lehmann                President                           March 31, 2003

     /s/ John M. Ivancevich
-----------------------------------
         John M. Ivancevich           Independent                         March 31, 2003
                                      General Partner
     /s/ John W. Storms
-----------------------------------
         John W. Storms               Independent                         March 31, 2003
                                      General Partner
     /s/ Nolan Lehmann
-----------------------------------
         Nolan Lehmann                President and Director of the       March 31, 2003
                                      Managing Partner  (principal
                                      Financial and Accounting Officer
                                      of the Managing Partner)
     /s/ Sam P. Douglass
-----------------------------------
         Sam P. Douglass              Chairman of the Board and Chief     March 31, 2003
                                      Executive Officer of the Managing
                                      Partner
     /s/ Paula T. Douglass
-----------------------------------
         Paula T. Douglass            Director of the Managing            March 31, 2003
                                      Partner
   /s/ S. Preston Douglass, Jr.
-----------------------------------
       S. Preston Douglass, Jr.       Director of the Managing            March 31, 2003
                                      Partner
</TABLE>

                                       41

<PAGE>

                                    EXHIBIT A

                      FORM OF ANNUAL CERTIFICATION REQUIRED
      BY RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Sam P. Douglass, certify that:

        1.      I have reviewed this annual report on Form 10-K of Equus Capital
                Partners, L.P.;

        2.      Based on my knowledge, this annual report does not contain any
                untrue statement of a material fact or omit to state a material
                fact necessary to make the statements made, in light of the
                circumstances under which such statements were made, not
                misleading with respect to the period covered by this annual
                report;

        3.      Based on my knowledge, the financial statements, and other
                financial information included in this annual report, fairly
                present in all material respects the financial condition,
                results of operations and cash flows of the registrant as of,
                and for, the periods presented in this annual report;

        4.      The registrant's other certifying officer and I are responsible
                for establishing and maintaining disclosure controls and
                procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
                for the registrant and we have:

                a.  designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this annual report is being prepared;

                b.  evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

                c.  presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

        5.      The registrant's other certifying officer and I have disclosed,
                based on our most recent evaluation, to the registrant's
                auditors and the audit committee of registrant's board of
                directors (or persons performing the equivalent function):

                a.  all significant deficiencies in the design or operation of
                    internal controls, which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

                b.  any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

                                       42

<PAGE>

        6.      The registrant's other certifying officer and I have indicated
                in this annual report whether or not there were significant
                changes in internal controls or in other factors that could
                significantly affect internal controls subsequent to the date of
                our most recent evaluation, including any corrective actions
                with regard to significant deficiencies and material weaknesses.

        Date: March 31, 2003

                                               /s/ Sam P. Douglass
                                              ----------------------------------
                                              Sam P. Douglass
                                              Chairman
                                              Chief Executive Officer
                                              of Equus Capital Corporation
                                              Managing General Partner

                                       43

<PAGE>

                                    EXHIBIT A

                      FORM OF ANNUAL CERTIFICATION REQUIRED
      BY RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Nolan Lehmann, certify that:

        1.      I have reviewed this annual report on Form 10-K of Equus Capital
                Partners, L.P.;

        2.      Based on my knowledge, this annual report does not contain any
                untrue statement of a material fact or omit to state a material
                fact necessary to make the statements made, in light of the
                circumstances under which such statements were made, not
                misleading with respect to the period covered by this annual
                report;

        3.      Based on my knowledge, the financial statements, and other
                financial information included in this annual report, fairly
                present in all material respects the financial condition,
                results of operations and cash flows of the registrant as of,
                and for, the periods presented in this annual report;

        4.      The registrant's other certifying officer and I are responsible
                for establishing and maintaining disclosure controls and
                procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
                for the registrant and we have:

                a.  designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this annual report is being prepared;

                b.  evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

                c.  presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

        5.      The registrant's other certifying officer and I have disclosed,
                based on our most recent evaluation, to the registrant's
                auditors and the audit committee of registrant's board of
                directors (or persons performing the equivalent function):

                a.  all significant deficiencies in the design or operation of
                    internal controls, which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

                b.  any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

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<PAGE>

        6.      The registrant's other certifying officer and I have indicated
                in this annual report whether or not there were significant
                changes in internal controls or in other factors that could
                significantly affect internal controls subsequent to the date of
                our most recent evaluation, including any corrective actions
                with regard to significant deficiencies and material weaknesses.

        Date: March 31, 2003

                                              /s/ Nolan Lehmann
                                              ----------------------------------
                                              Nolan Lehmann
                                              President
                                              Principal Financial & Accounting
                                              Officer of Equus Capital
                                              Corporation Managing General
                                              Partner

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