UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                      For the Period Ended: September 30, 1997

                         Commission File Number 0-16531

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

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

                           1345 Avenue of the Americas
                            New York, New York 10105
              (Address of principal executive offices and zip code)

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

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

     Title of each class             Name of each exchange on which registered
           None                                  Not Applicable

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

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

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



<PAGE>
                        EQUITABLE CAPITAL PARTNERS, L.P.

                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

                                                           Page
Item 1.  Financial Statements

Statements of Assets, Liabilities and Partners'
  Capital as of September 30, 1997 and December 31, 1996        5

Statements of Operations - For the Three and Nine
  Months Ended September 30, 1997 and 1996                      6

Statements of Changes in Net Assets - For the Nine
  Months Ended September 30, 1997 and 1996                      7

Statements of Cash Flows - For the Nine Months Ended
  September 30, 1997 and 1996                                   8

Statement of Changes in Partners' Capital -
  For the Nine Months Ended September 30, 1997                  9

Schedule of Portfolio Investments - September 30, 1997         10

Supplemental Schedule of Realized Gains and Losses
  For the Nine Months Ended September 30, 1997                 13

Notes to Financial Statements                                  14


Item 2.  Management's Discussion and Analysis of
  Financial Condition and Results of Operations                21


                PART II - OTHER INFORMATION

Item 6.  Exhibits                                              25




<PAGE>
<TABLE>
<CAPTION>
                         EQUITABLE CAPITAL PARTNERS,L.P.
                              STATEMENTS OF ASSETS
                        LIABILITIES AND PARTNERS' CAPITAL


<S>                                                              <C>            <C>                <C>
                                                                                September 30, 1997
ASSETS:                                                            Notes          (Unaudited)         December 31, 1996

     Investments
         Enhanced Yield Investments at Value- Managed Companies
             (amortized cost of $16,931,732 at
              September 30, 1997 and $55,159,154
              at December 31, 1996)                              2,10,12        $       7,589,732      $     52,325,273
              Non-Managed Companies
              (amortized cost of $14,244,478 at
              September 30, 1997 and $19,239,803
              at December 31, 1996)                                                     9,187,664            28,618,359
         Temporary Investments
              (at amortized cost )                                                     10,867,490            27,105,414

     Cash                                                                                  45,078                91,206
     Interest Receivable                                            2,12                  212,851               753,608
     Note Receivable                                                 3,4                1,505,445             1,846,593
     Receivable for Investment Sold                                                       660,530               100,282
     Prepaid Expenses                                                                          --                 2,650
                                                                                -----------------      ----------------
TOTAL ASSETS                                                                    $      30,068,790      $    110,843,385
                                                                                =================      ================


LIABILITIES AND PARTNERS' CAPITAL

     Liabilities
         Professional Fees Payable                                     9        $          44,250      $         40,107
         Independent General Partners' Fees Payable                    8                   12,400                24,456
         Fund Administrative Expenses Payable                          7                   73,974                58,985
         Other Accrued Liabilities                                                          5,715                11,663 
                                                                                -----------------      ----------------
              Total Liabilities                                                           136,339               135,211

     Partners' Capital
         Managing General Partner                                    3,4                1,154,302             1,550,892
         Limited Partners (284,611 Units)                              4               28,778,149           109,157,282
                                                                                -----------------      ----------------
              Total Partners' Capital                                                  29,932,451           110,708,174


TOTAL LIABILITIES AND PARTNERS' CAPITAL                                         $      30,068,790      $    110,843,385
                                                                                =================      ================



               See the Accompanying Notes to Financial Statements.

</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                        EQUITABLE CAPITAL PARTNERS, L.P.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<S>                                                  <C>              <C>              <C>               <C>
                                                           For the Three Months Ended       For the Nine Months Ended
                                                      ---------------------------------------------------------------
                                                      September 30,    September 30,     September 30,   September 30,
                                                           1997             1996              1997             1996
                                                      ------------     ------------     ------------     ------------
INVESTMENT INCOME- Notes 2,12:
    Interest                                          $    350,243     $  1,141,590     $  2,187,617     $  3,411,384
    Discount                                                    --           10,172               --           33,645
    Dividend                                                    --               --          136,678        3,760,524
                                                      ------------     ------------     ------------     ------------
        TOTAL INVESTMENT INCOME                            350,243        1,151,762        2,324,295        7,205,553

EXPENSES:
    Investment Advisory Fee- Note 6                        281,413          249,764          932,442          824,674
    Fund Administration Fees and Expenses- Note 7          173,086          229,860          553,687          767,058
    Independent General Partners'
     Fees and Expenses- Note 8                              39,556           49,636          109,609          147,971
    Professional Fees - Note 9                              31,000          123,906           62,050          141,179
    Insurance Fees                                              --               --            6,017            5,256
    Valuation Expenses                                       2,500               --            6,000           19,021
                                                      ------------     ------------     ------------     ------------
        TOTAL EXPENSES                                     527,555          653,166        1,669,805        1,905,159
                                                      ------------     ------------     ------------     ------------

NET INVESTMENT INCOME                                     (177,312)         498,596          654,490        5,300,394

NET CHANGE IN UNREALIZED DEPRECIATION
    ON INVESTMENTS- Note 12                              8,888,987       29,715,206      (20,943,490)      37,949,493

NET REALIZED GAINS (LOSSES)ON INVESTMENTS- Note 10     (10,727,598)     (12,705,316)      16,546,648      (25,779,920)
                                                      ------------     ------------     ------------     ------------

NET DECREASE IN NET ASSETS
    RESULTING FROM OPERATIONS                         $ (2,015,923)    $ 17,508,486     $ (3,742,352)    $ 17,469,967
                                                      ============     ============     ============     ============




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

<PAGE>
<TABLE>
<CAPTION>

                        EQUITABLE CAPITAL PARTNERS, L.P.
                       STATEMENTS OF CHANGES IN NET ASSETS
                                   (UNAUDITED)


<S>                                                                             <C>                    <C>
                                                                                     For the Nine Months Ended
                                                                           --------------------------------------------
                                                                           September 30, 1997        September 30, 1996
                                                                           ------------------        ------------------
FROM OPERATIONS:

    Net (Decrease) Increase in Net Assets
       Resulting from Operations                                                $  (3,742,352)            $  17,469,967

    Cash Distributions to Partners                                                (76,692,223)              (22,326,249)

    Reduction in Managing General Partners' Contribution                             (341,148)                  (61,285)
                                                                                -------------             -------------

    Total Decrease                                                                (80,775,723)               (4,917,567)

NET ASSETS:

    Beginning of Period                                                           110,708,174               112,353,878

    End of Period                                                               $  29,932,451             $ 107,436,311
                                                                                =============             =============




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


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

<S>                                                                   <C>                 <C>
                                                                            For the Nine Months Ended
                                                                        --------------------------------
                                                                        September 30,      September 30,
                                                                            1997                1996
                                                                      --------------      --------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
        Interest and Discount Income                                  $    1,822,856      $    6,398,571
        Fund Administration Fees & Expenses                                 (538,697)           (779,746)
        Investment Advisory Fee                                             (932,442)           (824,674)
        Independent General Partners' Fees and Expenses                     (121,665)           (140,449)
        Valuation Expenses                                                   (11,948)            (13,216)
        Sale (Purchase)of Temporary Investments, Net                      17,280,120          10,823,692
        Proceeds from Sales and Principal Payments of
            Enhanced Yield Investments                                    59,209,146           7,121,320
        Professional Fees                                                    (57,533)            (80,625)
        Insurance Fees                                                        (3,742)               (375)
                                                                      --------------      --------------
Net Cash Provided by Operating Activities                                 76,646,095          22,504,498
CASH FLOWS FROM FINANCING ACTIVITIES:
        Cash Distributions to Partners                                   (76,692,223)        (22,326,249)
Net Cash Used in Financing Activities                                    (76,692,223)        (22,326,249)
                                                                      --------------      --------------
Net (Decrease) Increase in Cash                                              (46,128)            178,249
                                                                      --------------      --------------
Cash at the Beginning of the Period                                           91,206              74,501
Cash at the End of the Period                                         $       45,078      $      252,750
                                                                      ==============      ==============


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

Net (Decrease) Increase In Net Assets
     Resulting From Operations                                        $   (3,742,352)     $   17,469,967

Adjustments to Reconcile Net (Decrease) Increase in Net Assets
     Resulting from Operations to Net Cash Provided by Operating
     Activities:
Decrease in Investments                                                   59,942,618          43,724,932
Decrease (Increase) in Accrued Interest and Investment Income               (501,439)           (806,981)
Decrease in Prepaid Expenses                                                   2,650               5,256
Net Change in Unrealized Depreciation (Appreciation) on Investments       20,943,490         (37,949,493)
Increase (Decrease) in Fund Administration Expenses Payable                   14,989             (12,688)
(Decrease) Increase in Other Accrued Liabilities                              (5,948)              5,805
(Decrease) Increase in Independent General
   Partners' Fees Payable                                                    (12,056)              7,522
Increase in Professional Fees Payable                                          4,143              60,178
                                                                      --------------      --------------
        Total Adjustments                                                 80,388,447           5,034,531
                                                                      --------------      --------------
Net Cash Provided by Operating Activities                             $   76,646,095      $   22,504,498
                                                                      ==============      ==============



               See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                        EQUITABLE CAPITAL PARTNERS, L.P.
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                                   (UNAUDITED)

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


                                                                       Managing          Limited
                                                           Notes    General Partner     Partners           Total
                                                          -------  ----------------- --------------- -----------------

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

Partners' Capital at January 1, 1997                                  $ 1,550,892    $  109,157,282    $  110,708,174
Cash Distributions to Partners                                            (18,019)      (76,674,204)      (76,692,223)
Reduction in Managing General Partners' Contribution        3            (341,148)                -          (341,148)
Allocation of Net Investment Income                         11              6,545           647,945           654,490
Allocation of Net Unrealized Depreciation
   on Investments                                           12           (209,435)      (20,734,056)      (20,943,491)
Allocation of Net Realized Gains on Investments                           165,467        16,381,182        16,546,649
                                                                      -----------    --------------    --------------
Partners' Capital at September 30, 1997                               $ 1,154,302    $   28,778,149    $   29,932,451
                                                                      ===========    ==============    ==============



               See the Accompanying Notes to Financial Statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                        EQUITABLE CAPITAL PARTNERS, L.P.
                        SCHEDULE OF PORTFOLIO INVESTMENTS
                                SEPTEMBER 30, 1997
                                  (UNAUDITED)
<S>                <C>                                        <C>           <C>            <C>           <C>           <C>


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

                    ENHANCED YIELD INVESTMENTS
                    MANAGED COMPANIES

                    MISCELLANEOUS MANUFACTURING

                    QUANTEGY ACQUISITION CORP.
                    (FORMERLY AMPEX RECORDING MEDIA CORP.)
        162 Shares  Quantegy Acquisition Corp., Common Stock          11/13/95  $  3,464,732    $3,464,732   $ 3,464,732
                                                                                ------------    ----------   -----------
                                                                                   3,464,732     3,464,732     3,464,732      12.53%
                                                                                ------------    ----------   -----------------------

                    LEATHER AND LEATHER PRODUCTS

                    LEATHER U.S., INC. - NOTE 12
                    (FORMERLY UNITED STATES LEATHER HOLDINGS, INC.)
      795.00 Shares Leather U.S., Inc., Common Stock                  04/09/96     9,342,000     9,342,000             0
                                                                                ------------   -----------   -----------
                                                                                   9,342,000     9,342,000             0       0.00
                                                                                ------------   -----------   -----------------------

                    MISCELLANEOUS RETAIL

                    R&S/STRAUSS, INC.
                    (FORMERLY WSR ACQUISITION CORPORATION)
  $      1,815,000  R&S/Strauss, Inc., Sr. Sub. Nt. 15% due 05/31/00* 06/13/90     1,815,000     1,815,000     1,815,000
  $      2,310,000  R&S/Strauss, Inc., Sr. Sub. Nt. 15% due 05/31/00* 06/13/90     2,310,000     2,310,000     2,310,000
                                                                                 -----------  ------------   -----------
                                                                                   4,125,000     4,125,000     4,125,000      14.92
                                                                                 -----------  ------------   -----------------------




                    TOTAL INVESTMENT IN  MANAGED  COMPANIES                     $ 16,931,732  $ 16,931,732   $ 7,589,732      27.45%
                    ---------------------------------------                     ------------  ------------   -----------------------

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


<PAGE>
<TABLE>
<CAPTION>
                                              EQUITABLE CAPITAL PARTNERS, L.P.
                                             SCHEDULE OF PORTFOLIO INVESTMENTS
                                                      SEPTEMBER 30, 1997
                                                 (CONTINUED)(UNAUDITED)
<S>               <C>                                                  <C>            <C>            <C>         <C>           <C>

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

                    NON-MANAGED COMPANIES

                    CONSUMER PRODUCTS MANUFACTURING

                    LEXMARK INTERNATIONAL GROUP, INC. - NOTES 10,12
     154,054 Shares Lexmark International Group, Inc.,
                     Class B Common Stock (c)                         03/27/91   $ 1,026,990   $  1,026,990  $   5,083,782
                                                                                 -----------   ------------  -------------
                                                                                   1,026,990      1,026,990      5,083,782    18.39%
                                                                                 -----------   ------------  -----------------------

                    DISTRIBUTION SERVICES

                    WESTERN PIONEER, INC. - NOTE 12
  $      9,460,000  Western Pioneer, Inc.,
                      Sr. Sub. Nts. 10% due 11/30/07*(b)              11/30/94     1,219,460     1,219,460      2,838,000
   162,161 Warrants Western Pioneer, Inc.,
                     Common Stock Purchase Warrants **                11/30/94             0             0              0
                                                                                 -----------  ------------   ------------
                                                                                   1,219,460     1,219,460      2,838,000     10.27
                                                                                 -----------  ------------   ----------------------

                    HEALTH SERVICES

                    MTI HOLDINGS, INC.
  $        220,102  MTI Holdings, Inc.,
                     Sr. Sec. Nt. 12% due 07/01/03*                   08/06/96       220,102       220,102        220,102
   15,772 Shares    MTI Holdings, Inc., Common Stock**                08/06/96       236,580       236,580        236,580
    4,397 Warrants  MTI Holdings, Inc., Common Stock
                     Purchase Warrants                                08/06/96             0             0              0
                                                                                   ---------    ----------     ----------
                                                                                     456,682       456,682        456,682      1.65
                                                                                   ---------    ----------     --------------------

                    MISCELLANEOUS RETAIL

                    PERGAMENT HOME CENTERS, INC.- NOTES 10, 12
  $      3,236,800  Pergament Acq. Corp., Home Centers, Inc.
                     Floating Rate Demand Note due 07/31/00* (b)      10/18/91     2,973,346     2,973,346        809,200
     380.80 Shares  Pergament Holding, Corp., Common Stock Class B ** 02/28/89     8,568,000     8,568,000              0
    139.0545 Shares Pergament Holding, Corp., Common Stock Class C ** 02/28/89             0             0              0
                                                                                 -----------   -----------    -----------
                                                                                  11,541,346    11,541,346        809,200      2.93
                                                                                 -----------   -----------    ---------------------


                    TOTAL INVESTMENT IN NON-MANAGED  COMPANIES                   $14,244,478   $14,244,478    $ 9,187,664     33.24%
                    ------------------------------------------                   -----------   -----------    ---------------------

                    TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS               $31,176,210   $31,176,210    $16,777,396     60.69%
                    ----------------------------------------------               -----------   -----------    ---------------------


</TABLE>

                             See the Accompanying Notes to Financial Statements.


<PAGE>
<TABLE>
<CAPTION>
                                               EQUITABLE CAPITAL PARTNERS, L.P.
                                              SCHEDULE OF PORTFOLIO INVESTMENTS
                                                      SEPTEMBER 30, 1997
                                                   (CONCLUDED)(UNAUDITED)
<S>             <C>                                                 <C>           <C>          <C>         <C>            <C>
   PRINCIPAL                                                        INVESTMENT    INVESTMENT    AMORTIZED     VALUE     % OF TOTAL
 AMOUNT/SHARES                        INVESTMENT                       DATE          COST          COST      (NOTE 2)   INVESTMENTS
--------------  -------------------------------------------------- ------------ --------------- ---------- ---------- --------------

                   TEMPORARY INVESTMENTS

                   COMMERCIAL PAPER

$      3,500,000   UNIFUNDING, 5.51% due 10/10/97                    07/15/97   $   3,453,395  $  3,495,178   $  3,495,178
$      2,900,000   AAFC, 5.53% due 11/19/97                          07/15/97       2,843,425     2,878,172      2,878,172
$      1,700,000   ALAMO FUNDING 5.54% due 10/15/97                  09/05/97       1,689,536     1,696,337      1,696,337
$      2,800,000   WINDMILL FUNDING CORP 5.65% due 10/06/97          09/30/97       2,797,263     2,797,803      2,797,803
                                                                                -------------  ------------   ------------
                   TOTAL INVESTMENT IN COMMERCIAL PAPER                         $  10,783,619  $ 10,867,490   $ 10,867,490    39.31%
                                                                                -------------  ------------   ---------------------


                   TOTAL TEMPORARY INVESTMENTS                                  $  10,783,619  $ 10,867,490   $ 10,867,490    39.31%
                                                                                -------------  ------------   ---------------------

                   TOTAL INVESTMENT PORTFOLIO                                   $  41,959,829  $ 42,043,700   $ 27,644,886   100.00%
                                                                                =============  ============   =====================


                   SUMMARY OF INVESTMENTS
                   Subordinated Notes                                           $   8,537,908  $  8,537,908   $  7,992,302    28.91%
                   Common Stock and Warrants                                       22,638,302    22,638,302      8,785,094    31.78
                   Temporary Investments                                           10,783,619    10,867,490     10,867,490    39.31
                                                                                -------------  ------------   ---------------------
                                                                                $  41,959,829  $ 42,043,700   $ 27,644,886   100.00%
                                                                                =============  ============   =====================

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

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

<PAGE>
<TABLE>
<CAPTION>
                                        EQUITABLE CAPITAL PARTNERS, L.P.
                              SUPPLEMENTAL SCHEDULE OF REALIZED GAINS AND LOSSES
                                    FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                                                   (UNAUDITED)

<S>                                                        <C>              <C>          <C>            <C>            <C>
                                                                    PAR VALUE OR
                                                     DATE OF          NUMBER OF      AMORTIZED         NET         REALIZED
SECURITY                                           TRANSACTION         SHARES          COST          PROCEEDS     GAIN (LOSS)

Polaris Pool Systems, Inc. 
   Common Stock                                      1/15/97               --     $       --      $      1,100(A)  $     1,100

Lexmark International Group, Inc. 
   Common Stock                                      various             30,002        200,014         772,125         572,111

Bank United Corp. 
   Common Stock                                      various            779,543      5,230,428      21,811,613      16,581,185

Lexmark International, Inc. 
   14.25% Sr. Sub. Note                              3/24/97       $ 19,667,348     19,667,348      22,979,735       3,312,387

                                                                                                
Total Net Realized Gains for the                                                  ------------    ------------    ------------     
  Three Months Ended March 31, 1997                                               $ 25,097,790    $ 45,564,573    $ 20,466,783
                                                                                  ============    ============    ============

Polaris Pool Systems, Inc.                           5/15/97               --     $       --      $      1,616(A) $      1,616
                                                                                                                              
Lexmark International Group, Inc. 
   Common Stock                                      various            226,641      1,510,948       5,888,318       4,377,370

Bank United Corp. 
   Common Stock                                      various             98,365        659,990       3,088,467       2,428,477

                                                                                                  
Total Net Realized Gains for the                                                  ------------    ------------    ------------  
  Three Months Ended June 30, 1997                                                $  2,170,938    $  8,978,401    $  6,807,463
                                                                                  ============    ============    ============

RI Holdings, Inc. 
   16% Sr. Sub. Nts.                                 7/02/97       $ 26,338,272   $ 11,824,318    $    409,189    $(11,415,129)

RI Holdings, Inc. 
   Common Stock                                      7/02/97          1,203,474      3,058,326               -      (3,058,326)

Lexmark International Group, Inc. 
   Common Stock                                      various            140,921        939,478       4,676,509       3,737,031

Haddon Craftsman                                     
   Common Stock                                      9/19/97                 --             --           8,826(A)        8,826  

                                                                                                  
Total Net Realized Loss for the                                                   ------------    ------------     -----------
  Three Months Ended September 30, 1997                                           $ 15,822,122    $  5,094,524    $(10,727,598)
                                                                                  ============    ============    ============

Total Net Realized Gains for the
  Nine Months Ended September 30, 1997                                            $ 43,090,850    $ 59,637,498    $ 16,546,648
                                                                                  ============    ============    ============

(A) Proceeds represent a distribution to the Fund from the escrow account.
</TABLE>
               See the Accompanying Notes to Financial Statements.

<PAGE>

                        EQUITABLE CAPITAL PARTNERS, L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                 SEPTEMBER 30, 1997
                                   (UNAUDITED)

1.  Organization and Purpose

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

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

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

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

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

2.  Significant Accounting Policies

    Basis of Accounting

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

    Valuation of Investments

     Securities  are valued at market or fair  value.  Market  value is used for
securities  for which market  quotations are readily  available.  For securities
without a readily  ascertainable  market value,  fair value is determined,  on a
quarterly  basis,  in good faith by the General  Partners of the Fund. The total
value of securities without a readily  ascertainable market value is $11,693,614
and  $44,569,548  as of September 30, 1997 and December 31, 1996,  respectively,
representing 38.9% and 40.2% of total assets,  respectively.  In connection with
such  determination,  the Managing  General  Partner has established a valuation
committee comprised of senior executives to assess the Fund's portfolio and make
recommendations  regarding the value of the Fund's  portfolio  securities.  This
valuation committee uses available market information and appropriate  valuation
methodologies.  In addition, the Managing General Partner has retained Arthur D.
Little,  Inc., a nationally  recognized  independent  valuation  consultant,  to
review such valuations.

<PAGE>

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

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

    Interest Receivable on Investments

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

    Payment-In-Kind Securities

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

    Income Taxes

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

    Investment Transactions

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

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

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

    Sales, Marketing and Offering Expenses and Sales Commissions

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

<PAGE>

3.  Note Receivable

     On July 22, 1993,  pursuant to the terms of the Fund's Amended and Restated
Agreement of Limited Partnership,  Alliance Corporate, as the successor Managing
General Partner of the Fund, has contributed a non-interest  bearing  promissory
note  (the  "Note")  to the Fund in an  aggregate  amount  equal to 1.01% of the
aggregate Net Capital  Contributions of all Limited Partners (less distributions
representing  returns of capital).  Net Capital  Contributions  are comprised of
gross  offering  proceeds,  after giving effect to volume  discounts  (and after
netting of sales  commissions,  organization,  offering and sales and  marketing
expenses),  less  returns  of  capital  distributed  to  Limited  Partners.  The
principal amount of the Note is reduced  proportionally as such Limited Partners
receive   distributions   representing   additional  returns  of  capital.  Such
distributions  received for the nine months ended September 30, 1997 resulted in
a $341,148 reduction of the principal amount of the Note. The promissory note of
Equitable  Capital was cancelled upon the  contribution of Alliance  Corporate's
note.

4.  Capital Contributions

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

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

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

5.  Sales, Marketing and Offering Expenses and Sales Commissions

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

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

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

<PAGE>

6.  Investment Advisory Fee

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

     As stated in the Partnership  Agreement,  the Fund's allocable share of the
Minimum Amount is $1,125,650 or $281,413 per quarter.  Investment  Advisory Fees
for the nine months ended  September 30, 1997,  reflect and  adjustment  for the
difference between the Minimum Amount due to the Investment Advisor and what was
paid for the quarters ending December 31, 1996 and March 31, 1997.

     The  Investment  Advisory Fee is calculated  and paid quarterly in advance.
The  Investment  Advisory  Fees  paid by the  Fund  for the  nine  months  ended
September 30, 1997 and 1996 were $932,442 and $824,674, respectively.

7.  Fund Administration Fee and Expenses

     As compensation  for its services during the fourth through seventh year of
operation of the Funds,  ML Fund  Administrators,  Inc.  ("MLFAI"),  as the Fund
administrator,  is entitled to receive from the Funds an annual  amount equal to
the  greater  of the (i)  Minimum  Fee and (ii) the Funds'  prorated  proportion
(based on the number of Units issued by the Funds) of 0.45% of the excess of the
aggregate net offering proceeds of the Units issued by the Funds over 50% of the
aggregate  amount  of  capital  reductions  of the Funds  (subject  to an annual
maximum of $3.2 million). The Minimum Fee is 1.0% of the gross offering price of
Units in the Funds, but not greater than $500,000.  The Fund  Administration Fee
is calculated and paid quarterly in advance.

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

     The Fund  Administration  Fees paid by the Fund for the nine  months  ended
September 30, 1997 and 1996 were $225,000 and $630,453, respectively.

     Beginning October 13, 1996, MLFAI is entitled to receive  reimbursement for
all direct-out-of-pocket expenses incurred in connection with the administration
of the Fund,  commencing  October 13, 1992. For the nine months ended  September
30, 1997 and 1996,  the Fund  incurred  administrative  expenses of $328,687 and
$136,605,  respectively,  which consisted  primarily of printing,  audit and tax
return preparation and custodian fees paid for by MLFAI on behalf of the Fund.

8.  Independent General Partners' Fees and Expenses

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

     For the nine months ended  September  30, 1997 and 1996,  the Fund incurred
$109,609 and $147,971,  respectively,  of Independent General Partners' Fees and
Expenses.

9. Related Party Transactions

     For the nine  months  ended  September  30,  1997 and  1996,  the Fund paid
expenses of $15,384 and $73,550 respectively,  as reimbursement for amounts paid
for legal  services  provided by Equitable  Life in  connection  with the Fund's
Enhanced Yield Investments.  The Fund is paying Alliance Corporate an Investment
Advisory Fee for its services as  described  in Note 6.  Additionally,  the Fund
paid sales  commissions to Equico  Securities,  a related party, as described in
Note 5.

<PAGE>

10.  Investment  Transactions

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

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

     On January 2, April 2, and July 1, 1997, the Fund received $65,194, $64,754
and $67,143,  respectively,  from  Pergament  Home Centers,  Inc. as a principal
paydown of the  Floating  Rate  Demand Note held by the Fund.  No gain,  loss or
income has been recorded on this transaction.

     On January 15 and May 15, 1997,  the Fund received  additional  proceeds of
$1,100 and $1,616,  respectively,  from  Polaris  Pool  Systems,  Inc. The money
represents  proceeds from the sale of the investments from prior years that have
been held in escrow for future  adjustments  and  expenses  not paid on the sale
dates.

     On March 24, 1997, the Fund received a prepayment of Lexmark International,
Inc.'s 14.25% Senior Subordinated Notes outstanding,  in the principal amount of
$19,667,348  together with a prepayment  penalty of  $3,312,387  and $646,154 of
accrued interest. The transaction resulted in a gain of $3,312,387 to the Fund.

     On April 8, 1997,  the Fund received a dividend of $13,771 from Bank United
Corp.

     On  July  2,  1997,  the  Fund  sold  its  RI  Holdings  Inc.,  16%  Senior
Subordinated  Notes for $409,189 and realized a loss of $11,415,129 on the sale.
The write-off of the common stocks resulted in a realized loss of $3,058,326.

     On September 19, 1997, the Fund received  additional procees of $8,826 from
Haddon Craftsman.  This represents proceeds from the sale of the investment from
prior  years  that  have been  held in  escrow. 

     During  the nine  months  ended  September  30,  1997,  the  Fund  sold the
remaining  877,908  shares  of Bank  United  Corp.  Class  A  Common  Stock  for
$24,900,079 and realized a gain of $19,009,662.

     During the nine months  ended  September  30,  1997,  the Fund sold 397,564
shares of Lexmark International Group, Inc. Class B Common Stock for $11,336,952
resulting in a gain of $8,686,512.

     All of the proceeds  received during the third quarter of 1997 are expected
to be  distributed  to Limited  Partners on record as of September  30, 1997, on
November 14, 1997.

     As of September 30, 1997,  the Fund had remaining  investments in 3 Managed
Companies  (a Managed  Company is one to which the Fund,  the  Managing  General
Partner  or  other  persons  in  the  Fund's  investor  group  make  significant
managerial  assistance  available)  and 4 Non-Managed  Companies (a  Non-Managed
Company is one to which such  assistance is not provided)  totaling  $31,176,210
(including $854,000 capitalized cost of payment-in-kind securities),  consisting
of $8,537,908 in senior notes and  subordinated  notes and $22,638,302 in common
stock and purchase warrants.
<PAGE>
11. Allocation of Profits and Losses

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

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

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

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

     For the nine months ended  September 30, 1997,  earnings were allocated 99%
to the Limited Partners, as a class, and 1% to the Managing General Partner.

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

     For the nine  months  ended  September  30,  1997,  the Fund  recorded  net
unrealized depreciation on Enhanced Yield Investments of $20,943,490 compared to
$37,949,493 of unrealized  appreciation  for the nine months ended September 30,
1996. Such depreciation was the result of adjustments in value made with respect
to the following investments during the nine months ended September 30, 1997:

     The  amount  includes  the  reversal  of  $13,293,616,  and  $2,241,777  of
unrealized  appreciation  of Bank United  Corp.  Class A Common Stock due to the
sale of 779,543  shares in February 1997 and the remaining  98,365 shares in May
1997. Due to an increase in the quoted market price of Bank United Corp. Class A
Common Stock and the equity being valued at 100% of the closing  market price as
compared to 90% at December 31, 1996, the Fund recorded unrealized  appreciation
of $290,177 at March 31, 1997.

     Due to the sale of 30,002 shares of Lexmark International Group, Inc. Class
B Common Stock in January,  226,641 shares in May and June and 140,921 shares in
July  through  September  1997  the Fund  reversed  $2,389,245,  $2,178,374  and
$2,936,608 of unrealized appreciation, respectively.

     During the first quarter  Leather U.S.,  Inc. common stock was written down
from 100% to 15% of the par. In the second  quarter  ended June 30, 1997 Leather
U.S.,  Inc.  common  stock  was  written  down  from 15% to 0% of the  par.  The
writedowns resulted in unrealized depreciation of $9,342,000 to the Fund.

     On March 31, 1997,  Pergament Home Center,  Inc.  Floating Rate Demand Note
was written down from 75% to 50% of par, resulting in unrealized depreciation of
$677,642 to the Fund. In the third quarter ended  September 30, 1997,  Pergament
Home Centers,  Inc.,  Floating Rate Demand Note was written down from 50% of par
to 25% of par. This writedown resulted in unrealized depreciation of $677,305.

     Due to the sale of the 16% Senior  Subordinated  Notes and the write-off of
the  common  stocks  of RI  Holdings  Inc.,  in  July  1997  the  Fund  reversed
depreciation of $11,336,574 and $3,058,326, respectively.

     During the three months ended September 30, 1997,  Western  Pioneer,  Inc.,
10% Senior  Subordinated  Notes were  written down from 50% of par to 30% of par
This writedown resulted in unrealized depreciation of $1,892,000.
     
<PAGE>

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

    Pergament Home Centers, Inc.
      Floating Rate Demand Note              July 1, 1996
    MTI Holdings, Inc. 12%
      Senior Secured Note                    October 1, 1995
    Western Pioneer, Inc. 10%
      Senior Subordinated Note               November 30, 1994

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

13. Income Taxes

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

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

14. Subsequent Events

     On November 6, 1997, the Independent General Partners approved an aggregate
cash  distribution  of $5,259,611 for the three months ended September 30, 1997,
which will be paid on November 14, 1997 to the Limited Partners. The amount that
will be  distributed  to Limited  Partners  on record as of  September  30, 1997
includes  $2,049,199 of return of capital. On a per Unit basis, the distribution
of $18.48  includes $11.28 of net realized gains and $7.20 of return of capital.
The Managing General  Partner's one percent  allocation of $53,127 is being held
as a Deferred  Distribution  Amount resulting in no distribution to the Managing
General Partner.

     In November  1997,  pursuant  to a Secondary  Offering of shares of Lexmark
International  Group,  Inc common  stock the Fund sold  54,486  shares of common
stock at a net price of $29.90 per share.  The Fund  received  $1,629,131 of net
proceeds and realized a gain of  $1,265,890.  The Fund  continues to hold 99,568
shares of Lexmark common stock.
<PAGE>


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

Liquidity and Capital Resources

Net Proceeds of Offering

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

Investments

     As of  September  30,  1997,  the  Fund  had a total  of 7  Enhanced  Yield
Investments at a net cost of $31,176,210 (inclusive of the receipt of securities
having a capitalized cost of $854,000  received as  payment-in-kind  interest on
certain Enhanced Yield Investments).

Proceeds from Investments

     During the nine months ended September 30, 1997, the Fund received proceeds
from the following investments:

     On January 2, April 2, and July 1, 1997, the Fund received $65,194, $64,754
and $67,143,  respectively,  from  Pergament  Home Centers,  Inc. as a principal
paydown of the  Floating  Rate  Demand Note held by the Fund.  No gain,  loss or
income has been recorded on this transaction.

     On January 15 and May 15, 1997,  the Fund received  additional  proceeds of
$1,100 and $1,616,  respectively,  from  Polaris  Pool  Systems,  Inc. The money
represents  proceeds from the sale of the investments from prior years that have
been held in escrow for future  adjustments  and  expenses  not paid on the sale
dates.

     On March 24, 1997, the Fund received a prepayment of Lexmark International,
Inc.'s 14.25% Senior Subordinated Notes outstanding,  in the principal amount of
$19,667,348  together with a prepayment  penalty of  $3,312,387  and $646,154 of
accrued interest. The transaction resulted in a gain of $3,312,387 to the Fund.

     On April 8, 1997,  the Fund received a dividend of $13,771 from Bank United
Corp.

     On  July  2,  1997,  the  Fund  sold  its  RI  Holdings  Inc.,  16%  Senior
Subordinated  Notes for $409,189 and realized a loss of $11,415,129 on the sale.
The write-off of the common stocks resulted in a realized loss of $3,058,326.

     During  the nine  months  ended  September  30,  1997,  the  Fund  sold the
remaining  877,908  shares  of Bank  United  Corp.  Class  A  Common  Stock  for
$24,900,079 and realized a gain of $19,009,662.

     On September 19, 1997, the Fund received additional proceeds of $8,826 from
Haddon Craftsman.  This represents proceeds from the sale of the investment from
prior years that have been held in escrow.

     During the nine months  ended  September  30,  1997,  the Fund sold 397,564
shares of Lexmark International Group, Inc. Class B Common Stock for $11,336,952
resulting in a gain of $8,686,512.

     All of the proceeds  received during the third quarter of 1997 are expected
to be  distributed  to Limited  Partners on record as of September  30, 1997, on
November 14, 1997.

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

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

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

<PAGE>

Participation in Enhanced Yield Investments

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

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

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

Results of Operations

     For the three and nine months  ended  September  30, 1997,  net  investment
income  decreased by $675,908 and  $4,645,904  respectively,  as compared to the
same period in 1996.  Net  investment  income is comprised of investment  income
(primarily interest and dividend income) offset by expenses. The decrease in the
1997 net investment income versus the comparative  period in 1996,  reflects the
decrease in interest and  dividend  income  partially  offset by the decrease in
Fund Administration Fees and Expenses.

     For the  three and nine  months  ended  September  30,  1997,  the Fund had
investment  income of  $350,243  and  $2,324,295,  respectively,  as compared to
$1,151,762  and  $7,205,553 ,  respectively,  for the same periods in 1996.  The
decrease in 1997  investment  income of 68% was  primarily due to an decrease in
interest and dividend income.

     The Fund  incurred  expenses of $527,555 and  $1,669,805  for the three and
nine months ended September 30, 1997, as compared to $653,166 and $1,905,159 for
the same  periods in 1996.  The  decrease in the 1997  expenses of $235,354  was
primarily due to a decrease in Professional Fees, Fund  Administration  Fees and
Expenses and Independent  General  Partner's Fees and Expenses paid by the Fund.
The Fund's  major  expenses  consist of the  Investment  Advisory  Fee, the Fund
Administration  Fees and Expenses and  Independent  General  Partners'  Fees and
Expenses.

     The Fund  experienced an decrease in net assets  resulting from  operations
for the nine months  ended  September  30, 1997 in the amount of  $3,742,352  as
compared to an increase of $17,469,967 for the  comparative  period in 1996. The
decrease in net assets for the nine months ended September 30, 1997 is comprised
of net investment income of $654,490,  net realized gains of $16,546,648  offset
by a net change in unrealized  depreciation of  $20,943,490.  For the comparable
period in 1996,  the  increase  in net assets was  comprised  of net  investment
income of $5,300,394,  net realized losses of $25,779,920 offset by a net change
in unrealized  appreciation of $37,949,493  (see Statements of Operations in the
Financial Statements).

     For the three months ended  September 30, 1997 and 1996,  the Fund incurred
Investment  Advisory Fees of $281,413 and $249,764,  respectively.  For the nine
months ended September 30, 1997 and 1996, the Fund incurred  Investment Advisory
Fees of $932,442  and  $824,674,  respectively  (as  described  in Note 6 to the
Financial Statements).
 <PAGE>

     The Fund  Administration  Fees and Expenses (as  described in Note 7 to the
Financial  Statements)  for the three months ended  September  30, 1997 and 1996
were $173,086 and $229,860 respectively, and for the nine months ended September
30, 1997 and 1996 were  $553,687 and $767,058,  respectively.  The decrease from
1996 to  1997 of  $213,371  is  primarily  due to the  Fund  Administration  Fee
changing  to an annual fee of  $300,000  plus 100% of all  direct  out-of-pocket
expenses incurred by the Fund Administrator on behalf of the Fund.

     Independent  General Partners' Fees and Expenses incurred for the three and
nine  months  ended  September  30,  1997 and 1996  were  $39,556  and  $49,636,
respectively and $109,609 and $147,971, respectively.

     The Fund  incurred  Professional  Fees of $31,000 and $62,050 for the three
and nine months  ended  September  30,  1997,  respectively.  Professional  Fees
incurred for the same periods in 1996 were $123,906 and $141,179,  respectively.
(See Note 9 to the Financial Statements.)

Unrealized  Appreciation/Depreciation and Non-Accrual of Investments

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

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

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

     For the nine  months  ended  September  30,  1997,  the Fund  recorded  net
unrealized depreciation on Enhanced Yield Investments of $20,943,490 as compared
to $37,949,493 of unrealized  appreciation  for the nine months ended  September
30, 1996.  The change in  unrealized  depreciation  was  primarily the result of
unrealized  depreciation  in Leather  U.S.,  Pergament  Home  Centers,  Inc. and
Western Pioneer, Inc., the reversal of depreciation on RI Holdings, Inc. and the
reversal  of  unrealized   appreciation   in  Bank  United  Corp.   and  Lexmark
International  Group,  Inc.
 <PAGE>

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

    Pergament Home Centers, Inc.
      Floating Rate Demand Note              July 1, 1996
    MTI Holdings, Inc. 12%
      Senior Secured Note                    October 1, 1995
    Western Pioneer, Inc. 10%
      Senior Subordinated Note               November 30, 1994

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

Realized Gains and Losses on Investments

     During the three months ended  September 30, 1997,  the Fund recorded a net
realized loss of  $10,727,598  and for the nine months ended  September 30, 1997
the Fund recorded net realized gains of $16,546,648  on  transactions  involving
five Enhanced Yield  Investments.  For the three and nine months ended September
30, 1996,  the Fund recorded net realized  losses on  investments of $12,705,316
and  $25,779,920,  respectively,  on transactions  involving four Enhanced Yield
Investments  (see  Note 10 to the  Financial  Statements  and  the  Supplemental
Schedule of Realized Gains and Losses).

<PAGE>


                           PART II - OTHER INFORMATION

    Items 1 through 4 are  herewith  omitted as the  response to items is either
none or not applicable for the September 30, 1997, Form 10-Q.

Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits:  Exhibit 27 - Financial  Data Schedule for the quarter ending
September 30, 1997.

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

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

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

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

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

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

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

***      Incorporated by reference to the Fund's  Quarterly  Report on Form 10-Q
         for the quarter  ended June 30,  1989,  filed with the  Securities  and
         Exchange Commission on August 14, 1989.

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

(b)  Reports on Form 8-K - None.


<PAGE>


                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized  on the  14th  day of
November, 1997.

                              EQUITABLE CAPITAL PARTNERS, L.P.

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


Dated:  November 14, 1997     /s/  James R. Wilson
                              -----------------------------
                              James R. Wilson
                              Title:  President


Dated:  November 14, 1997     /s/  Andy Pitsillos
                              ---------------------------
                              Andy Pitsillos
                              Title:  Vice President and Chief
                                      Accounting Officer


<PAGE>


                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized  on the  14th  day of
November, 1997.

                              EQUITABLE CAPITAL PARTNERS, L.P.

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


Dated:  November 14, 1997
                              James R. Wilson
                              Title:  President


Dated:  November 14, 1997
                              Andy Pitsillos
                              Title:  Vice President and Chief
                                      Accounting Officer