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, 1998

                         Commission File Number 01-16532

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

              Delaware                            13-3486106
      (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) 979-1000

           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 (RETIREMENT FUND), 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, 1998 and December 31, 1997         5

Statements of Operations - For the Three and Nine Months
  Ended September 30, 1998 and 1997                              6

Statements of Changes in Net Assets - For the Nine
  Months Ended September 30, 1998 and 1997                       7

Statements of Cash Flows - For the Nine Months Ended
  September 30, 1998 and 1997                                    8

Statement of Changes in Partners' Capital -
  For the Nine Months Ended September 30, 1998                   9

Schedule of Portfolio Investments - September 30, 1998          10

Supplemental Schedule of Realized Gains and Losses
  For the Nine Months Ended September 30, 1998                  12

Notes to Financial Statements                                   13


Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations          20


                           PART II - OTHER INFORMATION

Item 6.  Exhibits                                               23



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


<S>                                                             <C>            <C>                       <C>
                                                                                                        
ASSETS:                                                           Notes            September 30, 1998        December 31, 1997
                                                                                       (Unaudited)
    Investments                                                  2,10,12
        Enhanced Yield Investments at Value-
            Managed Companies
               (amortized cost of $10,030,290 at
               September 30, 1998 and $12,155,290
               at December 31, 1997)                                                        $      --              $ 4,847,290
            Non-Managed Companies
               (amortized cost of $1,846,616 at
               September 30, 1998 and $10,367,470
               at December 31, 1997)                                                               --                4,884,451
        Temporary Investments
               (at amortized cost)                                                          4,490,213                6,898,850

    Cash                                                                                      354,921                   24,028
    Interest Receivable                                            2,12                             -                   19,322
    Receivable on Investment Sold                                  2,10                       495,110                        -
    Note Receivable                                                3,4                        810,340                  832,534

TOTAL ASSETS                                                                              $ 6,150,584             $ 17,506,475
                                                                                          ===========             ============


LIABILITIES AND PARTNERS' CAPITAL

    Liabilities                                                                                         
        Professional Fees Payable                                   9                        $ 37,248                 $ 52,721
        Independent General Partners' Fees Payable                  8                           9,553                    9,788
        Fund Administrative Expenses Payable                        7                          70,750                   38,958
        Other Accrued Liabilities                                                               4,039                    2,847
            Total Liabilities                                                                 121,590                  104,314

    Partners' Capital
        Managing General Partner                                   3,4                        631,609                  717,018
        Limited Partners (221,072 Units)                            4                       5,397,385               16,685,143
            Total Partners' Capital                                                         6,028,994               17,402,161

TOTAL LIABILITIES AND PARTNERS' CAPITAL                                                   $ 6,150,584             $ 17,506,475
                                                                                          ===========             ============

             See the Accompanying Notes to Financial Statements.

</TABLE>



<PAGE>
<TABLE>
<CAPTION>
               EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), 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, 
                                                                    1998               1997             1998               1997
                                                                -------------     -------------     -------------     -------------
INVESTMENT INCOME- Notes 2,12:
      Interest                                                  $      64,533     $     231,192     $     233,951     $   1,856,007
      Dividend                                                           --                --                --              67,331
                     TOTAL INVESTMENT INCOME                           64,533           231,192           233,951         1,923,338

EXPENSES:
      Investment Advisory Fee- Note 6                                 218,587           218,587           655,761           687,608
      Fund Administration Fees and Expenses- Note 7                    95,750           101,196           357,391           330,334
      Independent General Partners'
       Fees and Expenses - Note 8                                      39,253            36,844           117,396           106,885
      Professional Fees - Note 9                                         --               6,212            21,830           110,730
      Insurance Fees                                                     --                --                  --             5,126
      Valuation Expenses                                                 --               1,700             5,221             4,400
                     TOTAL EXPENSES                                   353,590           364,539         1,157,599         1,245,083

NET INVESTMENT (LOSS) INCOME                                         (289,057)         (133,347)         (923,648)          678,255

NET CHANGE IN UNREALIZED APPRECIATION
      (DEPRECIATION) ON INVESTMENTS- Note 12                        7,252,717         3,394,533           914,146       (15,402,772)

NET REALIZED (LOSS) GAIN ON INVESTMENTS- Note 10                   (8,782,449)       (4,303,311)       (6,312,083)       12,855,950

NET DECREASE IN NET ASSETS
      RESULTING FROM OPERATIONS                                 $  (1,818,789)    $  (1,042,125)    $  (6,321,585)    $  (1,868,567)
                                                                =============     =============     =============     =============

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



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

<S>                                                            <C>               <C>
                                                                  For the Nine Months Ended
                                                                September 30,     September 30,
                                                                     1998             1997
FROM OPERATIONS:                                                -------------     ------------- 

     Net Decrease in Net Assets
       Resulting from Operations                                $  (6,321,585)    $  (1,868,567)

     Cash Distributions to Partners                                (5,029,388)      (62,002,512)

     Reduction in Managing General Partners'
       Contribution                                                   (22,194)         (331,838)

     Total Decrease                                               (11,373,167)      (64,202,917)

NET ASSETS:

     Beginning of Period                                           17,402,161        85,429,641

     End of Period                                              $   6,028,994     $  21,226,724
                                                                =============     =============



               See the Accompanying Notes to Financial Statements.


</TABLE>



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

<S>                                                                            <C>               <C>
                                                                                  For the Nine Months Ended     
                                                                               September 30,     September 30, 
                                                                                    1998              1997
INCREASE (DECREASE) IN CASH                                                    -------------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES:                                      
       Interest and Discount Income                                            $      10,718     $   1,894,684
       Fund Administration Fees & Expenses                                          (325,598)         (318,690)
       Investment Advisory Fee                                                      (655,761)         (687,608)
       Independent General Partners' Fees and Expenses                              (117,632)         (118,614)
       Valuation Expenses                                                             (4,029)           (7,251)
       Sale (Purchase) of Temporary Investments, Net                               2,651,192        12,488,055
       Proceeds from Sales and Principal Payments of
            Enhanced Yield Investments                                             3,838,694        48,873,786
       Professional Fees                                                             (37,303)         (102,090)
       Insurance Fees                                                                   --              (2,991)
Net Cash Provided by Operating Activities                                          5,360,281        62,019,281
CASH FLOWS FROM FINANCING ACTIVITIES:
       Cash Distributions to Partners                                             (5,029,388)      (62,002,512)
Net Cash Used in Financing Activities                                             (5,029,388)      (62,002,512)
Net Increase in Cash                                                                 330,893            16,769
Cash at the Beginning of the Period                                                   24,028            62,948
Cash at the End of the Period                                                  $     354,921     $      79,717
                                                                               =============     =============


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

Net Decrease In Net Assets
     Resulting From Operations                                                 $  (6,321,585)    $  (1,868,567)

Adjustments to Reconcile Net Decrease in Net Assets
       Resulting from Operations to Net Cash Provided by Operating
       Activities:
Decrease in Investments                                                           12,801,969        48,505,893
(Increase) Decrease in Accrued Interest and other Investment
   Income                                                                           (223,233)          (28,655)
Decrease in Prepaid Expenses                                                            --               2,511
Increase in Other Accrued Liabilities                                                  1,192            (2,852)
Increase in Fund Administration Expenses Payable                                      31,792            11,644
Net Change in Unrealized  Depreciation on Investments                               (914,146)       15,402,772
Decrease in Independent General Partners' Fees Payable                                  (235)          (11,729)
(Decrease) Increase in Professional Fees Payable                                     (15,473)            8,264
Total Adjustments                                                                 11,681,866        63,887,848
Net Cash Provided by Operating Activities                                      $   5,360,281     $  62,019,281
                                                                               =============     =============



               See the Accompanying Notes to Financial Statements.

</TABLE>



<PAGE>
<TABLE>
<CAPTION>
               EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                    STATEMENT 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, 1998

Partners' Capital at January 1, 1998                                               $   717,018      $ 16,685,143    $ 17,402,161
Cash Distributions to Partners                                                              --        (5,029,388)     (5,029,388)
Reduction in Managing General Partners' Contribution                    3              (22,194)             --           (22,194)
Allocation of Net Investment Income                                    11               (9,236)         (914,412)       (923,648)
Allocation of Net Unrealized Depreciation
  on Investments                                                       12                9,141           905,005         914,146
Allocation of Net Realized Gains on Investments                                        (63,120)       (6,248,963)     (6,312,083)
Partners' Capital at September 30, 1998                                            $   631,609      $  5,397,385     $ 6,028,994
                                                                                   ===========      ============     ===========




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

<PAGE>
<TABLE>
<CAPTION>
                                                EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                                       SCHEDULE OF PORTFOLIO INVESTMENTS
                                                                SEPTEMBER 30, 1998
                                                                  (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)
    123.50 Shares  Quantegy Acquisition Corp., Common Stock         11/13/95   $  2,722,290   $ 2,722,290  $          0
                                                                               ------------   -----------  ------------
                                                                                  2,722,290     2,722,290             0        0.00
                                                                               ------------   -----------  -------------------------
                   LEATHER AND LEATHER PRODUCTS

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

                     TOTAL INVESTMENT IN  MANAGED  COMPANIES                   $10,030,290   $ 10,030,290    $         0       0.00%
                     ---------------------------------------                   -----------   ------------    ----------------------


                     NON-MANAGED  COMPANIES

                     MISCELLANEOUS RETAIL

                     R&S/STRAUSS, INC.
                     (FORMERLY WSR ACQUISITION CORP.)
   $       656,616   R&S/Strauss, Inc.,
                      Sr. Sub. Nt. 15% due 05/31/00* (a)             06/13/90      656,616        656,616             0
   $     1,190,000   R&S/Strauss, Inc.,
                      Sr. Sub. Nt. 15% due 05/31/00* (a)             06/13/90    1,190,000      1,190,000             0
                                                                               -----------    -----------   -----------
                                                                                 1,846,616      1,846,616             0        0.00
                                                                               -----------    -----------   -----------------------


                     TOTAL INVESTMENT IN NON-MANAGED  COMPANIES                  1,846,616      1,846,616             0        0.00
                     ------------------------------------------                 ----------    -----------   -----------------------


                     TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS            $11,876,906    $11,876,906   $         0        0.00%
                     ----------------------------------------------            -----------    -----------   -----------------------
</TABLE>


                             See the Accompanying Notes to Financial Statements.

<PAGE>
<TABLE>
<CAPTION>
                                 EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                                        SCHEDULE OF PORTFOLIO INVESTMENTS
                                                 SEPTEMBER 30, 1998
                                               (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

   $     4,500,000   Federal Home Loan Mortgage Disc Note,
                       5.22% due 10/16/98                           6/18/98    $  4,488,908   $    4,490,213   $  4,490,213
                                                                               ------------   --------------   ------------
                     TOTAL INVESTMENT IN COMMERCIAL PAPER                      $  4,488,908   $    4,490,213   $  4,490,213  100.00%
                     ------------------------------------                      ------------   --------------   --------------------


                     TOTAL TEMPORARY INVESTMENTS                               $  4,488,908   $    4,490,213   $  4,490,213  100.00
                     ---------------------------                               ------------   --------------   --------------------

                     TOTAL INVESTMENT PORTFOLIO                                $ 16,365,814   $   16,367,119   $  4,490,213  100.00%
                     --------------------------                                ============   ==============   ====================




                     SUMMARY OF  INVESTMENTS
                     Subordinated Notes                                        $  1,846,616   $    1,846,616   $          0    0.00%
                     Common Stock and Warrants                                   10,030,290       10,030,290              0    0.00
                     Temporary Investments                                        4,488,908        4,490,213      4,490,213  100.00
                                                                               ------------   --------------   --------------------

                     TOTAL INVESTMENT IN ENHANCED YIELD INVESTMENTS            $ 16,365,814   $   16,367,119   $  4,490,213  100.00%
                     ----------------------------------------------            ============   ==============   ====================


                       *  Restricted Security
                      (a) Non-accrual investment status.


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

<PAGE>
<TABLE>
<CAPTION>
                               EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                               SUPPLEMENTAL SCHEDULE OF REALIZED GAINS AND LOSSES
                                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                                    (UNAUDITED)

<S>                                              <C>              <C>           <C>            <C>              <C>
                                                                    PAR VALUE OR
                                                     DATE OF         NUMBER OF      AMORTIZED          NET            REALIZED
SECURITY                                           TRANSACTION         SHARES          COST          PROCEEDS        GAIN (LOSS)
------------------------------------              -------------     ------------   -----------     -------------   --------------
Lexmark International Group, Inc. 
   Common Stock                                      various             69,683    $   464,555      $   2,801,847   $  2,337,292

MTI Holdings, Inc. 
   12% Sr. Sec. Note                                 3/12/98         $  113,386        113,386            113,386             --
   Common Stock                                                           8,125        121,875            121,875             --
   Common Stock Purchase Warrants                                         2,264             --                 --             --


Total Net Realized Gains for the
  Three Months Ended March 31, 1998                                                $   699,816      $   3,037,108   $  2,337,292
                                                                                   ===========      =============   ============


MTI Holdings, Inc. 
   Common Stock                                                           8,125    $        --      $     318,105   $    318,105(A)
   Common Stock Purchase Warrants                                         2,264             --             55,129         55,129(A)

Polaris Pool Systems, Inc. 
  Common Stock                                       4/23/98                 --             --              1,754          1,754(B)

R&S/ Strauss, Inc. 
   15% Sr. Sub. Note                                 6/17/98         $  278,384        278,384             36,470       (241,914)
 
Total Net Realized Gain for the
  Three Months Ended June 30, 1998                                                 $   278,384      $     411,458   $    133,074
                                                                                   ===========      =============   ============
Pergament Home Centers, Inc.
    Floating Rate Demand Note                        7/24/98         $2,543,200    $ 2,120,960      $     448,800   $ (1,672,160)
    Common Stock Class B                                                299.200      6,732,000                 --     (6,732,000) 
    Common Stock Class C                                                106.778             --                 --             --

Western Pioneer, Inc.
    Common Stock                                     9/15/98         $4,730,000        653,289            275,000       (378,289)
    Common Stock Purchase Warrants                                       81,081             --                 --             --   

Total Net Realized Loss for the
  Three Months Ended September 30, 1998                                            $ 9,506,249      $     723,800   $ (8,782,449)
                                                                                   ===========      =============   ============
Total Net Realized Loss for the
  Nine Months Ended September 30, 1998                                             $10,484,449      $   4,172,366   $ (6,312,083)
                                                                                   ===========      =============   ============


(A)  Proceeds represent our portion of an escrow account which is expected to be released in the next quarter.

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




               See the Accompanying Notes to the Financial Statements.

</TABLE>
<PAGE>
               EQUITABLE CAPITAL PARTNERS (RETIREMENT FUND), L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                 September 30, 1998
                                   (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  advisor to the Funds  pursuant  to a new
investment advisory agreement.  Alliance Corporate (the "Investment Adviser") is
a registered investment adviser under the Investment Advisers Act of 1940.

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

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

     As stated in the Partnership Agreement, the Retirement Fund reached the end
of its 10 year term on October 13, 1998. The  Retirement  Fund is in the process
of liquidating the last remaining  portfolio company and expects to make a final
distribution in December 1998.

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 Retirement Fund.
In  connection  with  such  determination,  the  Managing  General  Partner  has
established a valuation  committee  comprised of senior executives to assess the
Retirement Fund's portfolio and make recommendations  regarding the value of the
Retirement Fund's portfolio securities.  This valuation committee uses available
market information and appropriate  valuation  methodologies.  In addition,  the
Managing  General  Partner has  retained  Arthur D.  Little,  Inc., a nationally
recognized independent valuation consultant, to review such valuations.
<PAGE>
    For privately  issued  securities  in which the  Retirement  Fund  typically
invests,  the fair value of an  investment  is its initial  cost,  adjusted  for
amortization of discount or premium and as subsequently  adjusted to reflect the
occurrence of significant developments. "Significant developments" are business,
economic or market events that may affect a company in which an  investment  has
been made or the securities comprising such investment. For example, significant
developments  that could  result in a writedown  in value  include,  among other
things,  events  of  default  with  respect  to  payment  obligations  or  other
developments indicating that a portfolio company's performance may fall short of
acceptable  levels.  A 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  values of these
investments, there are inherent limitations in any valuation technique involving
securities of the type in which the Retirement Fund invests. Therefore, the fair
values presented  herein are not necessarily  indicative of the amount which the
Retirement Fund could realize in a current transaction.

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

    Interest Receivable on Investments

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

    Payment-In-Kind Securities

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

    Income Taxes

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

    Investment Transactions

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

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

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

    Sales, Marketing and Offering Expenses and Sales Commissions

    Sales  commissions and selling discounts 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  Retirement  Fund's Amended
and  Restated  Agreement  of Limited  Partnership,  Alliance  Corporate,  as the
successor  Managing  General  Partner of the Retirement  Fund, has contributed a
non-interest  bearing  promissory note (the "Note") to the Retirement Fund in an
aggregate  amount equal to 1.01% of the aggregate Net Capital  Contributions  of
all Limited Partners (less distributions  representing returns of capital).  Net
Capital  Contributions  are comprised of gross offering  proceeds,  after giving
effect  to  volume   discounts   (and  after   netting  of  sales   commissions,
organization,  offering  and sales and  marketing  expenses),  less  returns  of
capital  distributed to Limited  Partners.  The principal  amount of the Note is
reduced  proportionally by the Managing General Pertners 1% allocation of return
of capital.  Such  allocation  for the nine months  ended  September  30,  1998,
resulted in a $22,194 reduction of the principal amount of the Note.

4.  Capital Contributions

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

      The Limited Partners' total capital contributions were $220,848,730, after
giving  effect to volume  discounts  allowed of  $223,270.  Equitable  Capital's
aggregate  capital  contribution  was in the  form of a  promissory  note in the
principal amount of $2,051,783.  On July 22, 1993,  Equitable Capital's note was
canceled and Alliance  Corporate  made a capital  contribution  in the form of a
promissory  note on such date,  as  described  in Note 3. Sales,  marketing  and
offering  expenses and selling  commissions  have been charged against  proceeds
resulting in net capital contributed by Limited Partners of $203,146,793.

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

5.  Sales, Marketing and Offering Expenses and Sales Commissions

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

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

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

6.  Investment Advisory Fee

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

     As stated in the Partnership  Agreement,  the Retirement  Fund's  allocable
share of the Minimum  Amount is $874,350,  or $218,587  per quarter.  

     The Investment  Advisory Fee is paid  quarterly in advance.  The Investment
Advisory  Fees  incurred  by the  Retirement  Fund  for the  nine  months  ended
September 30, 1998 and 1997 were $655,761 and $687,608, respectively.
<PAGE>

7. Fund Administration Fee and Expenses

     The  Retirement  Fund  Administration  Fees  paid by the  Fund for the nine
months ended September 30, 1998 and 1997 were $75,000 and $75,000 respectively.

     Beginning October 13, 1996, MLFAI is entitled to receive  reimbursement for
all  of  direct   out-of-pocket   expenses   incurred  in  connection  with  the
administration  of the Retirement Fund,  commencing on October 13, 1992. For the
nine months ended  Septmeber  30, 1998 and 1997,  the  Retirement  Fund incurred
Administrative expenses of $282,391 and $255,334,  respectively, which consisted
primarily of printing,  audit and tax return preparation and custodian fees paid
for by MLFAI on behalf of the Retirement Fund.

8.  Independent General Partners' Fees and Expenses

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

     For the nine months ended  September 30, 1998 and 1997, the Retirement Fund
incurred $117,396 and $106,885,  respectively,  of Independent General Partners'
Fees and Expenses.

9.  Related Party Transactions

     For the nine months ended  September 30, 1998 and 1997, the Retirement Fund
paid expenses of $5,068 and $9,108,  respectively,  as reimbursement for amounts
paid for legal  services  provided  by  Equitable  Life in  connection  with the
Retirement  Fund's  Enhanced Yield  Investments.  The Retirement  Fund is paying
Alliance  Corporate an Investment  Advisory Fee for its services as described in
Note 6.  Additionally,  the  Retirement  Fund paid sales  commissions  to Equico
Securities, a related party, as described in Note 5.

10. Investment Transactions

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

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

     On January 2, 1998,  April 1, 1998 and July 1, 1998,  the  Retirement  Fund
received  $53,706,  $54,153 and $53,577 from Pergament  Home Centers,  Inc. as a
principal  paydown of the Floating Rate Demand Note held by the Retirement Fund.
No gain, loss or income has been recorded on this transaction.

     During the first quarter ended March 31, 1998, the Retirement Fund sold the
remaining  69,683 shares of Lexmark  International  Group,  Inc.  Class B Common
Stock for $2,801,847 resulting in a gain of $2,337,292 to the Retirement Fund.

     On March 12, 1998,  the  Retirement  Fund sold its MTI  Holdings,  Inc. 12%
Senior Secured Note,  common stock and warrants for $235,261.  No gain,  loss or
income was  recorded on this  transaction.  During the six months ended June 30,
1998, the Fund realized a gain of $373,234 of the sale.

     On April 23, 1998,  the  Retirement  Fund received  additional  proceeds of
$1,754 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 June 17, 1998, the Fund sold $278,384 par value of R&S/Strauss, Inc. 15%
Senior Subordinated Note for $36,470 resulting in a loss of $241,914.

     On July 24, 1998,  the Fund sold its Pergament  Acq.  Corp.,  Home Centers,
Inc.  Floating  Rate Demand Note , Class B common stock and Class C common stock
for $448,800 resulting in a loss of $8,404,160 to the Fund.

     On September 15, 1998,  the Fund sold its Western  Pioneer,  Inc 10% Senior
Subordinated Note and common stock purchase warrants for $275,000 resulting in a
loss of $378,289 to the Fund.

     All of the  proceeds  received  during  the third  quarter  of 1998 will be
distributed  to Limited  Partners of record as of September 30, 1998 on November
16, 1998.

     As of September 30, 1998, the Retirement  Fund had investments in 2 Managed
Companies (a Managed  Company is one to which the Retirement  Fund, the Managing
General  Partner or other persons in the Retirement  Fund's investor group makes
significant  managerial  assistance  available)  and 1 Non-Managed  Companies (a
Non-Managed  Company is one to which such  assistance is not provided)  totaling
$11,876,906  consisting of $1,846,616 in senior notes and subordinated notes and
$10,030,290 in common stock and purchase warrants.

11. Allocation of Profits and Losses

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

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

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

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

     For the nine months ended  September 30, 1998,  earnings were allocated 99%
to the Limited Partners, as a class, and 1% to the Managing General Partner.
<PAGE>
12. Unrealized Appreciation/Depreciation and Non-Accrual of Investments

     For the nine months ended  September 30, 1998, the Retirement Fund recorded
net  unrealized  appreciation  on  Enhanced  Yield  Investments  of  $914,146 as
compared to  $15,402,772  of unrealized  depreciation  for the nine months ended
September 30, 1997.  Such  depreciation  was the result of  adjustments in value
made with  respect to the  following  investments  during the nine months  ended
September 30, 1998:
     
     The amount  includes the reversal of $2,183,398 of unrealized  appreciation
of Lexmark  International  Group,  Inc. Class B Common Stock, due to the sale of
the remaining 69,683 shares.

     On March 31, 1998,  Quantegy  Acquisition  Corp.,  common stock was written
down from 100% to 15% of remaining cost, resulting in unrealized depreciation of
$2,313,946 to the Retirement Fund.

     On March 31, 1998, the R&S/Strauss,  Inc., 15% Senior Subordinated Note was
written down from 100% to 25% of par,  resulting in unrealized  depreciation  of
$1,593,750 to the Retirement Fund.

     On March 31, 1998,  the Western  Pioneer 10% Senior  Subordinated  Note par
value was reduced resulting in unrealized depreciation of $240.

     On June 30, 1998, Quantegy Acquisition Corp., common stock was written down
from 15% to 6.4% of remaining  cost,  resulting in  unrealized  depreciation  of
$234,431 to the Retirement Fund.

     On June 30,  1998,  R&S/Strauss,  Inc.  15%  Senior  Subordinated  Note was
written down from 25% to 13% of par,  resulting in  unrealized  depreciation  of
$221,594 to the Retirement Fund.

     The  reversal  of $208,788 of  unrealized  depreciation  due to the sale of
$278,384 par value of R&S/Strauss, Inc. 15% Senior Subordinated Note.

     The reversal of $8,432,401 of  unrealized  depreciation  due to the sale of
its Pergament Acq. Corp., Home Centers, Inc. Floating Rate Demand Note , Class B
common stock and Class C common stock.

     The reversal of $765,711 of unrealized  appreciation due to the sale of its
Western  Pioneer,  Inc 10% Senior  Subordinated  Note and common stock  purchase
warrants.

     On September 30, 1998, Quantegy Acquisition Corp., common stock was written
down from 6.4% of cost to zero resulting in unrealized  depreciation of $173,913
to the Fund.

     On  September  30,  1998,  the  remaining  R&S/Strauss,   Inc.  15%  Senior
Suborinated  Note  was  written  down  from  13%  of par to  zero  resulting  in
unrealized depreciation of $240,060 to the Fund.

     The following investment has been on non-accrual status as of the following
date:

    R&S/Strauss  Inc. 
      15% Senior Subordinated Note         November 30, 1997

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

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

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

14. Subsequent Distributions

     On October 28, 1998, the Independent General Partners approved an aggregate
cash  distribution  of $2,248,302 for the nine months ended  September 30, 1998,
which will be paid on November 16, 1998 to the Limited Partners. The amount that
will be  distributed  to Limited  Partners  on record as of  September  30, 1998
includes  $2,248,302 of return of capital. On a per Unit basis, the distribution
of $10.17  represents  return of capital.  The Managing  General  Partner's  one
percent  allocation of $22,710 is being held as a Deferred  Distribution  Amount
resulting in no distribution to the Managing General Partner.

15.  Subsequent Events 

     On October 7, 1998,  the Fund sold its Leather U.S.  Inc.  Common Stock for
$124,380 and realized a loss of $7,183,620 on the sale.

     On November 5, 1998,  the Fund sold its remaining  portion of  R&S/Strauss,
Inc. for $18,559 and realized a loss of $1,828,057 on the sale.

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

     Investments

     As of September  30, 1998,  the  Retirement  Fund had a total of 3 Enhanced
Yield Investments at a net cost of $11,876,906.

     Proceeds from Investments

     During the nine months  ended  September  30,  1998,  the  Retirement  Fund
received proceeds from the following investments:

     On January 2, 1998,  April 1, 1998 and July 1, 1998,  the  Retirement  Fund
received  $53,706,  $54,153 and $53,577 from Pergament  Home Centers,  Inc. as a
principal  paydown of the Floating Rate Demand Note held by the Retirement Fund.
No gain, loss or income has been recorded on this transaction.

     During the first quarter ended March 31, 1998, the Retirement Fund sold the
remaining  69,683 shares of Lexmark  International  Group,  Inc.  Class B Common
Stock for $2,801,847 resulting in a gain of $2,337,292 to the Retirement Fund.

     On March 12, 1998,  the  Retirement  Fund sold its MTI  Holdings,  Inc. 12%
Senior Secured Note,  common stock and warrants for $235,261.  No gain,  loss or
income was  recorded on this  transaction.  During the six months ended June 30,
1998, the Fund realized a gain of $373,234 of the sale.

    On April 23, 1998,  the  Retirement  Fund received  additional  proceeds of
$1,754 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 June 17, 1998, the Fund sold $278,384 par value of R&S/Strauss, Inc. 15%
Senior Subordinated Note for $36,470 resulting in a loss of $241,914.

     On July 24, 1998, the Fund sold its Pergament Home Centers,  Inc.  Floating
Rate Demand Note , Class B common  stock and Class C common  stock for  $448,800
resulting in a loss of $8,404,160 to the Fund.

     On September 15, 1998,  the Fund sold its Western  Pioneer,  Inc 10% Senior
Subordinated Note and common stock purchase warrants for $275,000 resulting in a
loss of $378,289 to the Fund.

     All of the  proceeds  received  during the  third  quarter of 1998 will be
distributed  to Limited  Partners of record as of September 30, 1998 on November
16, 1998.

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

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

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

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

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

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

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

Results of Operations

     For the three and nine months  ended  September  30, 1998,  net  investment
income  decreased by $155,710 and  $1,601,903  respectively,  as compared to the
same periods in 1997.  Net investment  income is comprised of investment  income
(primarily interest and dividend income) offset by expenses. The decrease in the
1998 net investment income versus the comparative  period in 1997,  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, 1998, the Retirement Fund
had  investment  income of $64,533  and  $233,951  respectively,  as compared to
$231,192  and  $1,923,338,  respectively,  for the same  periods  in  1997.  The
decrease in 1998  investment  income of 88% was  primarily  due to a decrease in
interest and dividend income.

     The  Retirement  Fund incurred  expenses of $353,590 and $1,157,599 for the
three and nine months  ended  September  30,  1998,  as compared to $364,539 and
$1,245,083, respectively, for the same periods in 1997. The decrease in the 1998
expenses of $87,484 was primarily  due to a decrease in Investment  Advisory Fee
and Professional  Fees paid by the Retirement Fund. The Retirement  Fund's major
expenses consist of the Investment  Advisory Fee, the Fund  Administration  Fees
and Professional Fees.

     The  Retirement  Fund  experienced a decrease in net assets  resulting from
operations  for the nine  months  ended  September  30,  1998 in the  amount  of
$6,321,585,  as compared to a decrease of $1,868,567 for the comparative  period
in 1997. The decrease in net assets for the nine months ended September 30, 1998
is comprised of net investment loss of $923,648, net realized loss of $6,312,083
offset  by a  net  change  in  unrealized  appreciation  of  $914,146.  For  the
comparable  period in 1997,  the  decrease  in net assets was  comprised  of net
investment income of $678,255, net realized gains of $12,855,950 offset by a net
change in unrealized depreciation of $15,402,772.  (see Statements of Operations
in the Financial Statements).

     For the three months ended September 30, 1998 and 1997, the Retirement Fund
incurred  Investment Advisory Fees of $218,587 and $218,587,  respectively.  For
the nine months ended  September 30, 1998 and 1997, the Retirement Fund incurred
Investment Advisory Fees of $655,761 and $687,608,  respectively.  (as described
in Note 6 to the Financial Statements).

     The Retirement Fund  Administration Fees and Expenses (as described in Note
7 to the Financial Statements) for the three months ended September 30, 1998 and
1997 were  $95,750 and  $101,196,  respectively  and for the nine  months  ended
September  30,  1998 and 1997 were  $357,391  and  $330,334,  respectively.  The
increase   from  1997  to  1998  of  $27,057  is  due   primarily  to  the  Fund
Administration Fee changing to an annual fee of $100,000 plus 100% of all direct
out-of-pocket  expenses incurred by the Retirement Fund  Administrator on behalf
of the Retirement Fund.
<PAGE>

     Independent  General Partners' Fees and Expenses incurred for the three and
nine months  ended  September  30,  1998 and 1997,  were  $39,253 and  $117,396,
respectively, and $36,844 and $106,885 respectively.

     The  Retirement  Fund  incurred no  Professional  Fees for the three months
ended September 30, 1998. For the nine months ended September 30, 1998, the Fund
incurred  Professional Fees of $21,830. For the three and months ended September
30,  1997  the  Fund  incurred   Professional   Fees  of  $6,212  and  $110,730,
respectively.  For the nine months ended September 30, 1998, the Retirement Fund
incurred  $36,638 of related party legal fees which  included  reimbursed  legal
fees to Debevoise & Plimpton and Equitable  Life for legal  services (See Note 9
to Financial Statements).

     Unrealized Appreciation/Depreciation and Non-Accrual of Investments

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

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

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

     For the nine months ended  September 30, 1998, the Retirement Fund recorded
net  unrealized  appreciation  on  Enhanced  Yield  Investments  of  $914,146 as
compared to  $15,402,772  of unrealized  depreciation  for the nine months ended
September  30, 1997.  The change in  unrealized  depreciation  was primarily the
result of unrealized  depreciation in Quantegy  Acquisition Corp.,  R&S/Strauss,
Inc.  and Western  Pioneer,  Inc.  the reversal of  unrealized  appreciation  in
Lexmark  International Group, Inc. and Western Pioneer, Inc. and the reversal of
unrealized  depreciation due to the sale of Pergament Home Centers, Inc. and the
partial sale of R&S/Strauss.

     The following investment has been on non-accrual status as of the following
date:

        R&S/Strauss,  Inc. 
        15% Senior Subordinated Note               November 30, 1997

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

Realized Gains and Losses on Investments

     For the three and nine months ended September 30, 1998, the Retirement Fund
recorded  net realized  loss of  $8,782,449  and  $6,312,083,  respectively.  on
transactions involving six Enhanced Yield Investment. For the three months ended
September 30, 1997, the Fund recorded net realized losses of $4,303,311. For the
nine months ended  September 30, 1997, the Retirement Fund recorded net realized
gains of $12,855,950 on transactions  involving five 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 though 5 are  herewith  omitted as the  response  to all items is either
none or not applicable for the September 30, 1998, 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, 1998.

 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.**

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

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

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

(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, 1998.

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

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

Dated: November 14, 1998    /s/  James R. Wilson
                            -----------------------------
                            James R. Wilson
                            Title:  President



Dated: November 14, 1998   /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, 1998.



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

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




Dated: November 14, 1998 
                              James R. Wilson
                              Title:  President



Dated: November 14, 1998 
                              Andy Pitsillos
                              Title:  Vice President and Chief
                              Accounting Officer