UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
Belair Capital Fund LLC (the "Fund")
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3404037
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(State of organization) (I.R.S. Employer Identification No.)
The Eaton Vance Building
255 State Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 617-482-8260
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Limited Liability Company Interests in the Fund ("Shares")
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(Title of class)
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Belair Capital Fund LLC
Index to Form 10Q
PART I - FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements 2
Consolidated Statements of Assets and
Liabilities as of September 30, 1999
(unaudited) and December 31, 1998 2
Consolidated Statements of Operations
For the Three Months Ended September 30,
1999 and 1998 (unaudited) and for the Nine
Months Ended September 30, 1999 and the
period ended September 30, 1998 (unaudited) 3
Consolidated Statements of Changes in Net
Assets For the Nine Months Ended September 30,
1999 and 1998 (unaudited) 4
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1999
and 1998 (unaudited) 5
Notes to Financial Statements as of September
30, 1999 (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------
BELAIR CAPITAL FUND LLC
Consolidated Statements of Assets and Liabilities
<TABLE>
September 30,
1999 December 31,
(Unaudited) 1998
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<S> <C> <C>
Assets:
Total investments, at value (identified cost, $2,272,437,422 at $2,479,188,542 $2,535,739,282
September 30, 1999 and $2,304,223,436 at December 31,
1998)
Cash 25,914,060 2,711,580
Receivable for open swap contracts 8,623,471 -
Dividends receivable 6,103,940 1,008,985
Deferred organization expenses 366,343 508,884
Other receivable 12,139 -
--------------- --------------
Total Assets $2,520,208,495 $2,539,968,731
--------------- --------------
Liabilities:
Loan payable $ 645,000,000 $ 583,000,000
Payable for open swap contracts - 18,155,651
Minority interest 208,000 -
Interest payable 5,682,113 4,926,762
Other accrued expenses 131,835 1,037,946
--------------- --------------
Total Liabilities $ 651,021,948 $ 607,120,359
--------------- --------------
Net assets $1,869,186,547 $1,932,848,372
=============== ==============
Sources of Net Assets:
Paid-in capital $1,716,881,706 $1,779,879,517
Accumulated net realized loss on investments (computed
on the basis of identified cost) (63,089,652) (55,088,152)
Accumulated (distributions in excess of) net investment
income 19,902 (5,303,188)
Net unrealized appreciation of investments (computed
on the basis of identified cost) 215,374,591 213,360,195
--------------- --------------
Total $1,869,186,547 $1,932,848,372
=============== ==============
Shares outstanding 16,053,481 16,568,833
Net Asset Value and Redemption
Price Per Share $ 116.43 $ 116.66
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2
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BELAIR CAPITAL FUND LLC
Consolidated Statements of Operations
(Unaudited) Three months Three months Nine months Period
ended ended ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998*
----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends allocated from Belvedere Capital $4,661,462 $5,137,565 $14,020,021 $9,749,344
(net of foreign taxes of $148, $14,761,
$141,505 and $100,089, respectively)
Interest allocated from Belvedere Capital 1,481,654 201,333 3,901,182 978,169
Expenses allocated from Belvedere Capital (3,153,084) (2,924,437) (9,516,927) (5,622,969)
----------------- ------------------ ------------------ -----------------
Net investment income allocated from
Belvedere Capital 2,990,032 2,414,461 8,404,276 5,104,544
Dividends from partnership preference units 10,757,794 11,145,598 34,413,868 16,873,351
Interest 109,384 4,559 274,954 4,559
----------------- ------------------ ------------------ -----------------
Total investment income $13,857,210 $13,564,618 $43,093,098 $21,982,454
----------------- ------------------ ------------------ -----------------
Expenses:
Investment advisor fees $1,672,556 $1,380,120 $4,847,333 $2,547,357
Service fees 222,936 188,953 692,017 372,716
Interest expense 9,296,362 8,924,734 26,227,265 16,238,592
Interest expense on swap contracts 1,840,990 323,962 5,313,558 1,264,505
Custodian and transfer agent fees 17,886 9,680 49,837 28,266
Legal and accounting services 128,007 187,981 554,423 484,219
Printing and postage 419 3,277 5,279 9,005
Amortization of organization expenses 27,666 40,894 66,436 80,619
Miscellaneous 11,562 21,170 13,860 133,428
----------------- ------------------ ------------------ -----------------
Total expenses $13,218,384 $11,080,771 $37,770,008 $21,158,707
----------------- ------------------ ------------------ -----------------
Net investment income $638,826 $2,483,847 $5,323,090 $823,747
----------------- ------------------ ------------------ -----------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) -
Investment transactions from Belvedere $2,783,853 $(11,044,935) $9,177,648 $(5,764,365)
Capital
Investment transactions in partnership (8,937,720) - (17,179,148) -
preference units
Investment transactions in copper and - - - (1,315,184)
aluminum
----------------- ------------------ ------------------ -----------------
Net realized gain (loss) $(6,153,867) $(11,044,935) $(8,001,500) $(7,079,549)
----------------- ------------------ ------------------ -----------------
Change in unrealized appreciation
(depreciation) -
Investment in Belvedere Capital $(169,040,091) $(204,833,907) $ (8,061,449) $(130,809,379)
Investments in partnership preference units (2,940,299) (3,876,285) (16,703,277) (26,252,395)
Interest rate swap contracts (1,316,821) (23,715,420) 26,779,122 (27,598,757)
----------------- ------------------ ------------------ -----------------
Net change in unrealized
appreciation/(depreciation) $(173,297,211) $(232,425,612) $2,014,396 $(18,660,531)
----------------- ------------------ ------------------ -----------------
Net realized and unrealized gain (loss) $(179,451,078) $(243,470,547) $(5,987,104) $(191,740,080)
----------------- ------------------ ------------------ -----------------
Net decrease in net assets from operations $(178,812,252) $(240,986,700) % (664,014) $(190,916,333)
================= ================== ================== =================
*For the period from the start of business, February 6, 1998 to September 30,1998.
</TABLE>
3
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<TABLE>
BELAIR CAPITAL FUND LLC
Consolidated Statements of Changes in Net Assets (Unaudited)
Nine months Period
ended Ended
September 30, September 30,
1999 1998*
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<S> <C> <C>
Increase (Decrease) in Net Assets:
Net investment income (loss) $ 5,323,090 $ 823,747
Net realized gain (loss) from investment transactions (8,001,500) (7,079,549)
Net change in unrealized appreciation (depreciation) of 2,014,396 (184,660,531)
investments
------------------ -----------------
Net decrease in net assets from operations (664,014) $(190,916,333)
------------------ -----------------
Transactions in Fund shares -
Investment securities and cash contributed $ - $1,848,834,256
Less - selling commissions - (8,445,747)
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Net contributions - 1,840,388,509
Net asset value of shares redeemed (62,997,811) (56,260,295)
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Net increase in net assets from Fund share transactions $ (62,997,811) $1,784,128,214
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Net decrease in net assets $ (63,661,825) $1,593,211,881
Net assets:
Beginning of period 1,932,848,372 10,100
------------------ -----------------
End of period $1,869,186,547 $1,593,221,981
================== =================
Accumulated net investment
income included in net assets at end of period $ 19,902 $ 823,747
*For the period from the start of business, February 6, 1998 to September 30, 1998.
</TABLE>
4
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<TABLE>
BELAIR CAPITAL FUND LLC
Consolidated Statements of Cash Flows (Unaudited)
Nine months Period
ended ended
September 30, September 30,
1999 1998*
----------------- ------------------
<S> <C> <C>
Cash flows from (for) Operating Activities -
Net investment income (loss) $ 5,323,090 $ 823,747
Adjustments to reconcile net investment income to net
Cash flows from (used for) operations -
Amortization of organization expense 66,436 80,619
Net investment income allocated from Belvedere Capital (8,404,276) (5,104,544)
Increase in dividends receivable (5,094,955) (5,787,657)
Increase in other receivable (12,139) -
Payment of organization expenses (443,560) (90,000)
Increase (decrease) in interest payable/receivable for open swap 475,260 354,513
contracts
Increase (decrease) in accrued interest and operating expenses 101,646 4,496,827
Purchases of partnership preference units, copper and aluminum (409,000,000) (603,535,863)
Sales of partnership preference units, copper and aluminum 358,486,052 47,220,679
Net (increase) decrease in investment in Belvedere Capital 43,557,536 7,185,736
----------------- ------------------
Net cash flows used for operating activities $ (14,944,910) $ (554,355,943)
Cash Flows From Financing Activities -
Proceeds from loan $ 62,000,000 $ 568,000,000
Contribution from Manager - 100,000
Payments on behalf of shareholders (selling commissions) - (8,445,747)
Payments for Fund shares redeemed (23,852,610) (5,308,410)
----------------- ------------------
Net cash flows from financing activities $ 38,147,390 $ 554,345,843
Net increase (decrease) in cash 23,202,480 (10,100)
Cash beginning of period 2,711,580 10,100
----------------- ------------------
Cash end of period $ 25,914,060 $ -
================= ==================
Supplemental Disclosure and Non-cash Investing and
Financing Activities
Securities contributed by shareholders, invested in Belvedere $ - $ 1,848,734,256
Capital
Unrealized appreciation (depreciation) of investments and open 215,374,591 (184,660,531)
swap contracts
Interest paid for loan 25,947,174 11,790,694
Interest paid for swap contracts 4,838,298 909,992
Market value of securities distributed in payment of redemptions 39,145,201 50,758,986
*For the period from the start of business, February 6, 1998 to September 30, 1998.
</TABLE>
5
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BELAIR CAPITAL FUND LLC As Of September 30, 1999
NOTE TO CONSOLIDATED FINANICIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
Belair Capital Fund LLC (Belair Capital) has been organized as a Massachusetts
limited liability company to offer diversification and tax-sensitive investment
management to persons holding large and concentrated positions in equity
securities of selected publicly-traded companies. The investment objective of
Belair Capital is to achieve long-term, after-tax returns for Shareholders.
Belair Capital pursues this objective primarily by investing indirectly in
Tax-Managed Growth Portfolio (the Portfolio), a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Portfolio is organized as a trust under the laws of the state of
New York. Belair Capital maintains its investment in the Portfolio by investing
in Belvedere Capital Fund Company LLC (Belvedere Capital), a separate
Massachusetts limited liability company that invests exclusively in the
Portfolio. The performance of Belair Capital and Belvedere Capital are directly
and substantially affected by the performance of the Portfolio. Separate from
its investment in the Portfolio through Belvedere Capital, the Fund invests
indirectly in income-producing, preferred equity interests in real estate
operating partnerships (partnership preference units) affiliated with
publicly-traded real estate investment trusts (REITs). Belair Capital's
investment in partnership preference units is achieved through its investment in
Belair Real Estate Corporation (BREC). BREC is a Delaware corporation that has
been organized and intends to operate in such a manner as to qualify for
taxation as a REIT under the Internal Revenue Code. At September 30, 1999,
Belair Capital owned 100% of the common stock issued by BREC and intends to hold
all of BREC's common stock at all times.
On November 24, 1998, (the date BREC commenced operations), Belair Capital
acquired 2,100 shares of Class A preferred stock (the "preferred stock") issued
by BREC. For BREC to qualify as a REIT, it must be beneficially owned in the
aggregate by 100 or more persons. BREC has satisfied this requirement as a
result of Belair Capital donating 20 shares of BREC preferred stock to each of
approximately 105 (currently 104) charitable organizations. The charitable
organizations' interest in the preferred stock has been recorded as a minority
interest on the Statement of Assets and Liabilities.
The preferred stock has a par value of $.01 per share and is redeemable by BREC
at a redemption price of $100 after the occurrence of certain tax events or
after December 31, 2004. Dividends on the preferred stock will be cumulative and
will be payable annually in arrears on December 30 of each year (or the
immediately preceding business day) equal to $8 per share per annum
(representing an annual dividend yield of 8%).
The accompanying consolidated financial statements include the accounts of
Belair Capital and BREC (collectively, the Fund) for periods ending after
November 24, 1998. All material intercompany accounts and transactions have been
eliminated. For informational purposes, a summary of the Portfolio's operations
is included with these consolidated financial statements (see Note 8).
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its consolidated financial
statements. The policies are in conformity with generally accepted accounting
principles.
A Investment Security Costs -- The Fund's investment assets were principally
acquired on February 6, 1998, April 20, 1998 and June 25, 1998 through
contributions of common stock by shareholders in exchange for Shares of the Fund
and in purchases of partnership preference units, copper and aluminum (held as
temporary assets until replaced by additional purchases of partnership
preference units). The Fund immediately exchanged the contributed securities
into Belvedere Capital for shares thereof, and Belvedere Capital, in turn,
immediately thereafter exchanged the contributed securities into the Portfolio
for an interest in the Portfolio. The cost at which the Fund's investments are
6
<PAGE>
carried on the books and in the financial statements is the value of the
contributed securities as of the close of business on the day prior to their
contribution to the Fund and, in the case of purchased securities, the
acquisition price thereof. The initial tax basis of the Fund's investment in the
Portfolio through Belvedere Capital is the same as the contributing
shareholders' basis in securities and cash contributed to the Fund. The initial
tax basis of securities purchased by the Fund is the purchase cost.
B Investment Valuations --The Fund's investments consist of partnership
preference units and shares of Belvedere Capital. Belvedere Capital's exclusive
investment is an interest in the Portfolio, the value of which is derived from a
proportional interest therein. Additionally, the Fund has entered into interest
rate swap contracts (see Note 7). The valuation policy that follows is
applicable to the assets of the Fund, Belvedere Capital and the Portfolio.
Marketable securities, including options, that are listed on foreign or U.S.
securities exchanges or in the NASDAQ National Market System are valued at
closing sale prices, on the exchange where such securities are principally
traded. Futures positions on securities or currencies are generally valued at
closing settlement prices. Unlisted or listed securities for which closing sale
prices are not available are valued at the mean between the latest bid and asked
prices. Short-term debt securities with a remaining maturity of 60 days or less
are valued at amortized cost, which approximates value. Other fixed income and
debt securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments held by the Portfolio for which
valuations or market quotations are unavailable are valued at fair value using
methods determined in good faith by or at the direction of the Trustees.
Investments held by the Fund for which valuations or market quotations are
unavailable are valued at fair value using methods determined in good faith by
the Investment Adviser. Interest rate swap contracts are valued by obtaining
dealer or counterparty quotes.
C Income -- Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Belvedere Capital's net investment
income or loss consists of Belvedere Capital's pro-rata share of the net
investment income of the Portfolio, less all actual or accrued expenses of
Belvedere Capital, determined in accordance with generally accepted accounting
principles. The Fund's net investment income or loss consists of the Fund's
pro-rata share of the net investment income of Belvedere Capital, plus all
income earned on the Fund's direct investments, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.
D Income Taxes -- Belair Capital, Belvedere Capital and the Portfolio are
treated as partnerships for federal income tax purposes. As a result, Belair
Capital, Belvedere Capital and the Portfolio do not incur federal income tax
liability, and the shareholders and partners thereof are individually
responsible for taxes on items of partnership income, gain, loss, and deduction.
BREC's policy is to comply with the Internal Revenue Code applicable to REITs.
BREC will generally not be subject to federal income tax to the extent that it
distributes its earnings to its shareholders and maintains its qualification as
a REIT.
E Deferred Organization Expenses -- Costs incurred by Belair Capital in
connection with its organization are being amortized on a straight-line basis
over five years. Costs incurred in connection with the organization of BREC are
expensed as incurred.
F Interest Rate Swaps -- The Fund has entered into interest rate swap agreements
with respect to its borrowings and investments in fixed-rate partnership
preference units. Pursuant to these agreements, the Fund makes quarterly
payments to the counterparty at predetermined fixed rates, in exchange for
floating-rate payments from the counterparty at a predetermined spread to the
three-month LIBOR, based on notional values approximately equal to the Fund's
acquisition cost for the fixed-rate partnership preference units. During the
terms of the outstanding swap agreements, changes in the underlying values of
the swaps are recorded as unrealized gains or losses. The Fund is exposed to
credit loss in the event of non-performance by the swap counterparty. However,
the Fund does not anticipate non-performance by the counterparty.
7
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G Written Options -- The Portfolio and the Fund may write listed and
over-the-counter call options on individual securities, on baskets of securities
and on stock market indices. Upon the writing of a call option, an amount equal
to the premium received by the Portfolio or Fund is included in the Statement of
Assets and Liabilities as a liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the option written
in accordance with the investment valuation policies discussed above. Premiums
received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or are closed are
added to or offset against the proceeds or amount paid on the transaction to
determine the realized gain or loss. The Portfolio or Fund as a writer of an
option may have no control over whether the underlying securities may be sold
and as a result bears the market risk of an unfavorable change in the price of
the securities underlying the written option.
H Purchased Options -- Upon the purchase of a put option, the premium paid by
the Portfolio or Fund is included in the Statement of Assets and Liabilities as
an investment. The amount of the investment is subsequently marked-to-market to
reflect the current market value of the option purchased, in accordance with the
investment valuation policies discussed above. If an option which the Portfolio
or Fund has purchased expires on the stipulated expiration date, the Portfolio
or Fund will realize a loss in the amount of the cost of the option. If the
Portfolio or Fund enters into a closing sale transaction, the Portfolio or Fund
will realize a gain or loss, depending on whether the sales proceeds from the
closing sale transaction are greater or less than the cost of the option. If the
Portfolio or Fund exercises a put option, it will realize a gain or loss from
the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid.
I Other -- Investment transactions are accounted for on a trade date basis.
J Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expense during the reporting period. Actual results could differ from those
estimates.
K Interim Financial Statements -- The interim financial statements relating to
September 30, 1999 and September 30, 1998 and for the periods then ended have
not been audited by independent certified public accountants, but in the opinion
of the Fund's management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the presentation of the financial
statements.
2 Distributions to Shareholders
The Fund intends to distribute at the end of each year all of its net investment
income for the year, if any, and approximately 22% of its net realized capital
gains for such year, if any, other than precontribution gains allocated to a
shareholder in connection with a tender offer or other extraordinary corporate
event with respect to a security contributed by such shareholder, for which no
capital gain distribution will be made. In addition, whenever a distribution in
respect of a precontribution gain is made, the Fund makes a supplemental
distribution to compensate shareholders receiving such distributions for taxes
that may be due in connection with the precontribution gain and supplemental
distributions.
8
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3 Shareholder Transactions
The Fund may issue an unlimited number of full and fractional shares.
Transactions in Fund shares, including contributions of securities and cash in
exchange for shares of the Fund were as follows:
Nine Months
Ended Period Ended
September 30, September 30,
1999 1998*
---------------- -----------------
Issued at fund closings - 17,179,183
Redemptions (515,352) (559,560)
---------------- -----------------
Net increase (decrease) (515,352) 16,619,623
---------------- -----------------
* For the period from the start of business, February 6, 1998, to September
30, 1998.
Redemptions of shares held less than three years are generally subject to a
redemption fee of 1% of the net asset value of shares redeemed. The redemption
fee is paid to the Investment Adviser by the Fund on behalf of the redeeming
shareholder. No charge is levied on redemptions of shares acquired through the
reinvestment of distributions, shares redeemed in connection with a Tender
Security or shares redeemed following the death of all of the initial holders of
the shares redeemed. In addition, no fee applies to redemptions by a
shareholder, who, during any 12-month period, redeem less than 8% of the total
number of shares held by the shareholder as of the beginning of the 12-month
period. For the nine months ended September 30, 1999 and the period ended
September 30, 1998, the Investment Adviser received $360,657 and $531,083,
respectively, in redemption fees.
4 Investment Transactions
Increases and decreases of the Fund's investment in Belvedere Capital for the
nine months ended September 30, 1999 aggregated $21,680,018 and $104,382,755,
respectively, and for the period ended September 30, 1998 aggregated
$1,872,948,483 and $63,312,960, respectively. Purchases and sales of other
investments aggregated $409,000,000 and $358,486,052, respectively, for the nine
months ended September 30, 1999, and $603,535,863 and $47,220,679, respectively,
for the period ended September 30, 1998. In addition, investments were
distributed in payment of Fund shares redeemed resulting in realized capital
losses of $1,100,391 and $3,927,219 for book purposes, for the nine months ended
September 30, 1999 and for the period ended September 30, 1998, respectively.
5 Management Fee and Other Transactions With Affiliates
The Fund and the Portfolio have engaged Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM) as investment adviser.
Under the terms of the advisory agreement with the Portfolio, BMR receives a
monthly fee of 5/96 of 1% (0.625% annually) of the average daily net assets of
the Portfolio up to $500,000,000 and at reduced rates as daily net assets exceed
that level. For the nine months ended September 30, 1999 and the period ended
September 30, 1998 the advisory fee applicable to the Portfolio was 0.45%
(annualized) and 0.47% (annualized), respectively, of average net assets for
such periods. Belvedere Capital's allocated portion of the advisory fee totaled
$6,318,309, of which $2,284,355 was allocated to the Fund, for the three months
ended September 30, 1999, and $3,384,008, of which $2,111,021 was allocated to
the Fund, for the three months ended September 30, 1998. Belvedere Capital's
allocated portion of the advisory fee totaled $16,474,285, of which $6,903,616
was allocated to the Fund, for the nine months ended September 30, 1999, and
$7,401,332, of which $3,951,228 was allocated to the Fund, for the period ended
September 30, 1998. In addition, Belair Capital pays BMR a monthly advisory and
administrative fee of 1/20 of 1% (0.60% annually) of the average daily gross
investment assets of Belair Capital (including the value of all assets
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of Belair Capital other than Belair Capital's investment in BREC, minus the sum
of Belair Capital's liabilities other than the principal amount of money
borrowed) and BREC pays BMR a monthly management fee at a rate of 1/20th of 1%
(equivalent to 0.60% annually) of its average gross investment assets (including
the value of all assets of BREC, minus the sum of BREC's liabilities other than
any liability with respect to Belair Capital's Credit Facility). The advisory
fee payable by the Portfolio in respect of Belair Capital's indirect investment
in the Portfolio is credited toward Belair Capital's advisory and administrative
fee payment. For the three month periods ended September 30, 1999 and 1998 the
advisory and administrative fee payable to BMR by the Fund, less the Fund's
allocated share of the Portfolio's advisory fee, totaled $1,672,556 and
$1,380,120, respectively. For the nine months ended September 30, 1999 and the
period ended September 30, 1998 the advisory and administrative fee payable to
BMR by the Fund, less the Fund's allocated share of the Portfolio's advisory
fee, totaled $4,847,333 and $2,547,357, respectively.
Eaton Vance Management (EVM) serves as manager of Belair Capital and receives no
separate compensation for services provided in such capacity.
Pursuant to a servicing agreement between Belvedere Capital and Eaton Vance
Distributors, Inc. (EVD), Belvedere Capital pays a servicing fee to EVD for
providing certain services and information to shareholders. The servicing fee is
paid on a quarterly basis at an annual rate of 0.15% of Belvedere Capital's
average daily net assets and totaled $2,133,661 and $1,102,276 for the three
month periods ended September 30, 1999 and 1998, respectively, of which $774,738
and $685,363 was allocated to Belair Capital for the respective periods. The
servicing fee totaled $5,476,924 and $2,357,549 for the nine months ended
September 30, 1999 and the period ended September 30, 1998, respectively, of
which $2,296,651 and $1,273,253 was allocated to Belair Capital for the
respective periods. Pursuant to a servicing agreement between Belair Capital and
EVD, Belair Capital pays a servicing fee to EVD on a quarterly basis at an
annual rate of 0.20% of Belair Capital's average daily net assets, less Belair
Capital's allocated share of the servicing fee payable by Belvedere Capital. For
the three month periods ended September 30, 1999 and 1998, the servicing fee
paid directly by Belair Capital totaled $222,936 and $188,953, respectively. For
the nine months ended September 30, 1999 and the period ended September 30, 1998
the servicing fee paid directly by Belair Capital totaled $692,017 and $372,716,
respectively. Of the amounts allocated to and incurred by the Fund, $997,674 and
$1,835,305 was paid to subagents for the three months ended and the nine months
ended September 30, 1999, respectively. No service fees were paid to subagents
for the period ended September 30, 1998.
6 Credit Facility
The Fund has obtained a $655,000,000 Credit Facility with a term of seven years
from Merrill Lynch International Bank Limited. The Fund's obligations under the
Credit Facility are secured by a pledge of its assets. Interest on borrowed
funds is based on the prevailing LIBOR rate for the respective interest period
plus a spread of 0.45% per annum. The Fund may borrow for interest periods of
one month to five years. In addition, the Fund pays a commitment fee at a rate
of 0.10% per annum on the unused amount of the loan commitment. Borrowings have
been used to purchase qualifying assets (partnership preference units, copper
and aluminum) to pay selling commissions and organizational expenses, and to
provide for the short-term liquidity needs of the Fund. Additional borrowings
under the Credit Facility may be made in the future for these purposes. At
September 30, 1999 and December 31, 1998, amounts outstanding under the Credit
Facility totaled $645,000,000 and $583,000,000, respectively.
10
<PAGE>
7 Interest Rate Swap Agreements
The Fund has entered into interest rate swap agreements with Merrill Lynch
Capital Services, Inc., with respect to each of its holdings of partnership
preference units and the associated borrowings. Under such agreements, the Fund
has agreed to make periodic payments at fixed rates in exchange for payments at
floating rates. The notional or contractual amounts of these instruments may not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these investments is meaningful only when
considered in conjunction with all related assets, liabilities and agreements.
The Fund has the right to terminate the interest rate swap agreements beginning
in the first half of 2003, at dates corresponding approximately to the initial
call dates of the partnership preference units held by the Fund.
<TABLE>
Unrealized Unrealized
Notional Initial Appreciation/ Appreciation/
Amount Optional (Depreciation) (Depreciation)
Effective (000's Fixed Floating Termination Maturity At September 30, At December 31, 1998
Date omitted) Rate Rate Date Date 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2/98 $60,000 6.72% Libor+.45% 2/03 2/05 $ 1,271,867 $(1,845,506)
2/98 120,000 6.715% Libor+.45% 2/03 2/05 2,568,733 (3,665,804)
4/98 50,000 6.84% Libor+.45% 2/03 2/05 822,389 (1,788,985)
4/98 150,000 6.835% Libor+.45% 4/03 4/05 3,109,687 (5,584,296)
6/98 20,000 6.67% Libor+.45% 6/03 2/05 434,539 (620,177)
6/98 75,000 6.68% Libor+.45% 6/03 2/05 1,600,583 (2,358,284)
6/98 80,000 6.595% Libor+.45% 6/03 2/05 1,982,655 (2,219,084)
11/98 14,709 6.13% Libor+.45% 11/03 2/05 632,382 (73,515)
2/99 34,951 6.34% Libor+.45% 2/04 2/05 1,168,058 -
4/99 5,191 6.49% Libor+.45% 2/04 2/05 140,488 -
7/99 24,902 7.077% Libor+.45% 7/04 2/05 (11,643,560) -
9/99 4,902 7.27% Libor+.45% 9/04 2/05 6,559,000 -
9/99 10,470 7.37% Libor+.45% 9/04 2/05 (23,350) -
</TABLE>
8 Indirect Investment in Portfolio
Belvedere Capital's interest in the Portfolio at September 30, 1999, was
$6,567,348,215, representing 51.5% of the Portfolio's net assets, and at
September 30, 1998 was $2,701,775,938, representing 41.6% of the Portfolio's
assets. The Fund's investment in Belvedere Capital at September 30, 1999 was
$1,931,317,944, representing 29.4% of Belvedere Capital's net assets, and at
September 30, 1998 was $1,678,166,323, representing 62.1% of Belvedere Capital's
net assets. Investment income allocated to Belvedere Capital from the Portfolio
for the nine months ended September 30, 1999 totaled $43,288,145, of which
$17,921,203 was allocated to the Fund. Investment income allocated to Belvedere
Capital from the Portfolio for the period ended September 30, 1998 totaled
$20,374,240 of which $10,727,513 was allocated to the Fund. Expenses allocated
to Belvedere Capital from the Portfolio for the nine months ended September 30,
1999 totaled $16,940,614, of which $7,116,523 was allocated to the Fund.
Expenses allocated to Belvedere Capital from the Portfolio for the period ended
September 30, 1998 totaled $8,058,862, of which $4,288,692 was allocated to the
Fund. Belvedere Capital allocated additional expenses to the Fund of $2,400,404
for the nine months ended September 30, 1999, representing $103,753 of operating
expenses and $2,296,651 of service fees. Belvedere Capital allocated additional
expenses to the Fund of $1,334,277 for the period ended September 30, 1998,
representing $61,024 of operating expenses and $1,273,253 of service fees (see
Note 5).
11
<PAGE>
A summary of the Portfolio's Statement of Assets and Liabilities, at September
30, 1999, December 31, 1998 and September 30, 1998 and its operations for the
nine months ended September 30, 1999, the year ended December 31, 1998 and the
period ended September 30, 1998 follows:
<TABLE>
September 30, December 31, 1998 September 30,
1999 1998*
-------------------- -------------------- -------------------
<S> <C> <C> <C>
Investments, at value $12,750,511,786 $ 8,713,317,160 $6,465,198,643
Other Assets 11,587,842 7,040,200 27,369,561
----------------------------------- -------------------- -------------------- -------------------
Total Assets $12,762,099,628 $ 8,720,357,360 $6,492,568,204
Total Liabilities 174,903 15,498,025 168,659
----------------------------------- -------------------- -------------------- -------------------
Net Assets $12,761,924,725 $ 8,704,859,335 $6,492,399,545
=================================== ==================== ==================== ===================
Dividends and interest $ 94,362,172 $ 70,963,640 $ 48,677,218
Investment adviser fee 36,125,499 26,313,762 17,776,926
Other expenses 1,022,728 1,306,076 1,242,548
----------------------------------- -------------------- -------------------- -------------------
Total expenses $ 37,148,227 $ 27,619,838 $ 19,019,474
----------------------------------- -------------------- -------------------- -------------------
Net investment income $ 57,213,945 $ 43,343,802 $ 29,657,744
Net realized gains (losses) 46,838,127 (69,097,723) (19,318,669)
Net unrealized gains (losses) (205,241,641) 1,226,948,293 (254,912,952)
----------------------------------- -------------------- -------------------- -------------------
Net increase (decrease) in net
assets from operations $ (101,189,569) $ 1,201,194,372 $ (244,573,877)
----------------------------------- -------------------- -------------------- -------------------
* For the period from the start of business, February 6, 1998 to September 30, 1998.
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Increases and decreases in the Fund's net asset value per Share are derived
from net investment income, and realized and unrealized gains and losses on
investments, including securities investments held through the Fund's indirect
interest (through the Company) in the Portfolio, real estate investments held
through BREC and any direct investments of the Fund. Expenses of the Fund
include its pro-rata share of the expenses of the Company, and indirectly the
Portfolio, as well as the actual and accrued expenses of the Fund and BREC. The
Fund's most significant expense is interest incurred on borrowings under the
Credit Facility and, to a lesser degree, interest rate swap agreements. Fund
borrowings are used primarily to finance the purchase of Partnership Preference
Units through BREC. The interest paid on Fund borrowings is offset by the
dividends earned from the Fund's indirect investment in Partnership Preference
Units. The Fund's realized and unrealized gains and losses on investments are
based on its allocated share of the realized and unrealized gains and losses of
the Company, and indirectly the Portfolio, as well as realized and unrealized
gains and losses on investments in Partnership Preference Units through BREC.
The realized and unrealized gains and losses on investments have the most
significant impact on the Fund's net asset value per share and result from sales
of such investments and changes in their underlying value. The investments of
the Portfolio consist primarily of common stocks of domestic and foreign growth
companies that are considered to be high in quality and attractive in their
long-term investment prospects. Because the securities holdings of the Portfolio
are broadly diversified, the performance of the Portfolio cannot be attributed
to one particular stock or one particular industry or market sector. The
performance of the Portfolio and the Fund are substantially influenced by the
overall performance of the United States stock market, as well as by the
relative performance versus the overall market of specific stocks and classes of
stocks in which the Portfolio maintains large positions. Through the impact of
interest rates on the valuation of the Fund's investments in Partnership
Preference Units through BREC and its positions in interest rate swap
agreements, the performance of the Fund is also affected by movements in
interest rates and, particularly, changes in credit spread relationships. On a
combined basis, the Fund's Partnership Preference Units and interest rate swaps
generally decline in value when credit spreads widen (as fixed income markets
grow more risk-averse) and generally increase in value when credit spreads
tighten.
Results of Operations For the Quarter ended September 30, 1999 and the Nine
Months Ended September 30, 1999
The Fund achieved total return performance of -8.7% for the quarter ended
September 30, 1999. This return reflects a decrease in the Fund's net asset
value per share from $127.49 to $116.43. For comparison, the S&P 500, an
unmanaged index of large capitalization stocks commonly used as a benchmark for
the U.S. equity market, had a total return of -6.2% over the same period.
During the third quarter of 1999, U.S. equity market leadership was
concentrated in the technology sector, continuing the trend of the past two
years. With only a few exceptions (cellular telephone, biotechnology, gold
mining), industry groups outside the technology sector were uniformly weak,
generating negative returns for the quarter. Among the weakest groups was the
large financial sector, hurt by a deteriorating outlook for interest rates and
earnings disappointments. The performance of the Fund versus the S&P 500 during
the quarter was adversely affected by the Fund's overweighting in financial
stocks.
In the fixed income markets, the third quarter saw a slight increase in
interest rates on benchmark government bonds and a widening of credit spreads
for corporate issues. The performance of the Fund during the quarter was
adversely affected by the widening of credit spreads, which resulted in
markdowns in value of the Fund's holdings of partnership preference units.
13
<PAGE>
The Fund achieved total return performance of -0.2% for the nine months
ended September 30, 1999. This return reflects a decrease in the Fund's net
asset value per share from $116.66 to $116.43. For comparison, the S&P 500, an
unmanaged index of large capitalization stocks commonly used as a benchmark for
U.S. stocks, had a total return of 5.4% over the same period.
During the nine months ended September 30, 1999, a general deterioration in
the U.S. market was masked by the continued strength of a narrow group of
technology-oriented, mega-cap stocks that included Microsoft, Intel, Cisco
Systems, IBM and America Online. Outside of the favored technology sector,
negative returns for the year to date were widespread. Among the declining
groups were financial stocks and healthcare stocks, both areas of significant
investment by the Fund.
In the fixed income markets, the first three quarters of 1999 saw a
pronounced increase in interest rates on benchmark government bonds, reversing
the trend of 1998. Fixed income markets were hurt by robust economic conditions
in the U.S. and fears of a rise in inflationary pressures in the domestic
economy. The Federal Reserve responded to the perceived threat to monetary
stability by instituting a 0.25% increase in the Federal Funds rate late in the
second quarter and a second 0.25% increase in the middle of the third quarter.
The Fund's performance during the nine months was negatively impacted by its
holdings of partnership preference units and the associated interest rate swap
agreements, hurt by the widening of credit spreads that occurred during the
third quarter.
Liquidity and Capital Resources
As of September 30, 1999, the Fund had outstanding borrowings of $645
million under the Credit Facility established with Merrill Lynch International
Bank Limited, the term of which extends until February 6, 2005. The Credit
Facility is being used primarily to finance the Fund's investments in
Partnership Preference Units and will continue to be used for such purposes in
the future, as well as to provide for any short-term liquidity needs of the
Fund. In the future, the Fund may increase the size of the Credit Facility
(subject to lender consent) and the amount of outstanding borrowings thereunder
for these purposes.
The Fund may redeem shares of the Company at any time. Both the Company and
the Portfolio follow the practice of normally meeting redemptions by
distributing securities, consisting, in the case of the Company, of securities
drawn from the Portfolio. The Company and the Portfolio may also meet
redemptions by distributing cash. As of September 30, 1999, the Portfolio had
cash and short-term investments totaling $648.7 million. The Portfolio
participates in a $130 million multi-fund unsecured line of credit agreement
with a group of banks. The Portfolio may temporarily borrow from the line of
credit to satisfy redemption requests in cash or to settle investment
transactions. The Portfolio had no outstanding borrowings under the $130 million
line of credit at September 30, 1999, and, as of that date, the net assets of
the Portfolio totaled $12,761.9 million. To ensure liquidity for investors in
the Portfolio, the Portfolio may not invest more than 15% of its net assets in
illiquid assets. As of September 30, 1999, restricted securities, which are
considered illiquid, constituted 5.1% of the net assets of the Portfolio.
The Partnership Preference Units held by BREC are not registered under the
Securities Act and are subject to substantial restrictions on transfer. As such,
they are considered illiquid.
Redemptions of Fund Shares are met primarily by distributing securities
drawn from the Portfolio, although cash may also be distributed. Shareholders
generally do not have the right to receive the proceeds of Fund redemptions in
cash.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The value of Fund Shares may not increase or may decline. The performance
of the Fund fluctuates. There can be no assurance that the performance of the
Fund will match that of the United States stock market or that of other equity
funds. In managing the Portfolio for long-term, after-tax returns, the
Portfolio's investment adviser generally seeks to avoid or minimize sales of
securities with large accumulated capital gains, including contributed
securities. Such securities constitute a substantial portion of the assets of
the Portfolio. Although the Portfolio may utilize certain management strategies
in lieu of selling appreciated securities, the Portfolio's, and hence the
Fund's, exposure to losses during stock market declines may nonetheless be
higher than that of funds that do not follow a general policy of avoiding sales
of highly-appreciated securities.
The Portfolio invests in securities issued by foreign companies and the
Fund may acquire foreign investments. Foreign investments involve considerations
and possible risks not typically associated with investing in the United States.
The value of foreign investments to U.S. investors may be adversely affected by
changes in currency rates. Foreign brokerage commissions, custody fees and other
costs of investing are generally higher than in the United States, and foreign
investments may be less liquid, more volatile and more subject to government
regulation than in the United States. Foreign investments could be adversely
affected by other factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting and auditing
standards, armed conflict, and potential difficulty in enforcing contractual
obligations.
In managing the Portfolio, the investment adviser may purchase or sell
derivative instruments (which derive their value by reference to other
securities, indices, instruments, or currencies) to hedge against securities
price declines and currency movements and to enhance returns. Such transactions
may include, without limitation, the purchase and sale of stock index futures
contracts and options on stock index futures; the purchase of put options and
the sale of call options on securities held; equity swaps; and the purchase and
sale of forward currency exchange contracts and currency futures. The Portfolio
may make short sales of securities provided that an equal amount is held of the
security sold short (a covered short sale) and may also lend portfolio
securities. The Fund utilizes interest rate swap agreements to fix the cost of
its borrowings over the term of the Credit Facility. In the future, the Fund may
use other interest rate hedging arrangements (such as caps, floors and collars)
to fix or limit borrowing costs. The use of these investment techniques is a
specialized activity that may be considered speculative and which can expose the
Fund and the Portfolio to significant risk of loss. Successful use of these
investment techniques is subject to the ability and performance of the
investment adviser. The Fund's and the Portfolio's ability to meet their
investment objectives may be adversely affected by the use of these techniques.
The writer of an option or a party to an equity swap may incur losses that
substantially exceed the payments, if any, received from a counterparty. Swaps,
caps, floors, collars and over-the-counter options are private contracts in
which there is also a risk of loss in the event of a default on an obligation to
pay by the counterparty. Such instruments may be difficult to value, may be
illiquid and may be subject to wide swings in valuation caused by changes in the
price of the underlying security, index, instrument or currency. In addition, if
the Fund or the Portfolio has insufficient cash to meet margin, collateral or
settlement requirements, it may have to sell assets to meet such requirements.
Alternatively, should the Fund or the Portfolio fail to meet these requirements,
the counterparty or broker may liquidate positions of the Fund or the Portfolio.
The Portfolio may also have to sell or deliver securities holdings in the event
that it is not able to purchase securities on the open market to cover its short
positions or to close out or satisfy an exercise notice with respect to options
positions it has sold. In any of these cases, such sales may be made at prices
or in circumstances that the investment adviser considers unfavorable.
The Portfolio's ability to utilize covered short sales, certain equity
swaps and certain equity collar strategies (combining the purchase of a put
option and the sale of a call option) as a tax-efficient management technique
with respect to holdings of appreciated securities is limited to circumstances
in which the hedging transaction is closed out within thirty days of the end of
15
<PAGE>
the Portfolio's taxable year and the underlying appreciated securities position
is held unhedged for at least the next Ninety days after such hedging
transaction is closed. There can be no assurance that counterparties will at all
times be willing to enter into covered short sales, interest rate hedges, equity
swaps and other derivative instrument transactions on terms satisfactory to the
Fund or the Portfolio. The Fund's and the Portfolio's ability to enter into such
transactions may also be limited by covenants under the Credit Facility, the
federal margin regulations and other laws and regulations. The Portfolio's use
of certain investment techniques may be constrained because the Portfolio is a
diversified, open-end management investment company registered under the 1940
Act and because other investors in the Portfolio are regulated investment
companies under Subchapter M of the Code. Moreover, the Fund and the Portfolio
are subject to restrictions under the federal securities laws on their ability
to enter into transactions in respect of securities that are subject to
restrictions on transfer pursuant to the Securities Act.
Although intended to add to returns, the borrowing of funds to purchase
Partnership Preference Units through BREC exposes the Fund to the risk that the
returns achieved on the Partnership Preference Units will be lower than the cost
of borrowing to purchase such assets and that the leveraging of the Fund to buy
such assets will therefore diminish the returns to be achieved by the Fund as a
whole. In addition, there is a risk that the availability of financing will be
interrupted at some future time, requiring the Fund to sell assets to repay
outstanding borrowings or a portion thereof. It may be necessary to make such
sales at unfavorable prices. The Fund's obligations under the Credit Facility
are secured by a pledge of its assets. In the event of default, the lender could
elect to sell assets of the Fund without regard to consequences of such action
for Shareholders. The rights of the lender to receive payments of interest on
and repayments of principal of borrowings is senior to the rights of the
Shareholders. Under the terms of the Credit Facility, the Fund is not permitted
to make distributions of cash or securities while there is outstanding an event
of default under the Credit Facility. During such periods, the Fund would not be
able to honor redemption requests or make cash distributions.
The Partnership Preference Units held by the Fund through its investment in
BREC are subject to restrictions on transfer, including, among other
restrictions, limitations on the manner of resale and the requirement that the
general partner of the issuer consent to transfers. In addition, there is no
active secondary market for any Partnership Preference Units that BREC holds.
Accordingly, BREC's investments in Partnership Preference Units are illiquid.
The success of BREC's investments in Partnership Preference Units depends in
part on many factors related to the real estate market and to the issuing
partnerships that may affect such partnerships' profitability and their ability
to make distributions to holders of Partnership Preference Units. These factors
include, without limitation, general economic conditions, the supply and demand
for different types of real properties, the financial health of tenants, the
timing of lease expirations and terminations, fluctuations in rental rates and
operating costs, exposure to adverse environmental conditions and losses from
casualty or condemnation, interest rates, availability of financing, managerial
performance, government rules and regulations, and acts of God. Although BREC's
investments in Partnership Preference Units are, to some degree, insulated from
risk by virtue of their senior position relative to other equity interests in
the issuing partnerships and by their diversification across a range of property
types and geographic regions, the above-referenced factors can substantially
affect the value and marketability of such investments over time. There can be
no assurance that the investments in Partnership Preference Units will be an
economic success.
The valuations of Partnership Preference Units held by the Fund through its
investment in BREC fluctuate over time to reflect, among other factors, changes
in interest rates, changes in the perceived riskiness of such units (including
call risk), changes in the perceived riskiness of comparable or similar
securities trading in the public market and the relationship between supply and
demand for comparable or similar securities trading in the public market.
Increases in interest rates and increases in the perceived riskiness of such
units or comparable or similar securities will adversely affect the valuation of
the Partnership Preference Units. Fluctuations in the value of Partnership
Preference Units derived from changes in general interest rates can be expected
to be offset in part (but not entirely) by changes in the value of interest rate
swap agreements or other interest rate hedges entered into by the Fund with
16
<PAGE>
respect to its borrowings under the Credit Facility. Fluctuations in the value
of Partnership Preference Units derived from other factors besides general
interest rate movements (including issuer-specific and sector-specific credit
concerns and changes in interest rate spread relationships) will not be offset
by changes in the value of interest rate swap agreements or other interest rate
hedges entered into by the Fund. Changes in the valuation of the Partnership
Preference Units not offset by changes in the valuation of interest rate swap
agreements or other interest rate hedges entered into by the Fund will cause the
performance of the Fund to deviate from the performance of the Portfolio. Over
time, the performance of the Fund can be expected to be more volatile than the
performance of the Portfolio.
17
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Fund is not aware of any pending legal proceedings to which the Fund is a
party or to which of their assets are subject.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
27 Financial Data Schedules
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELAIR CAPITAL FUND LLC
By: /s/ James L. O'Connor
------------------------------
James L. O'Connor
Vice President and Treasurer
19
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> BELAIR CAPITAL FUND
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 2,272,347,422
<INVESTMENTS-AT-VALUE> 2,479,188,542
<RECEIVABLES> 14,739,550
<ASSETS-OTHER> 366,343
<OTHER-ITEMS-ASSETS> 25,914,000
<TOTAL-ASSETS> 2,520,208,495
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 645,000,000
<OTHER-ITEMS-LIABILITIES> 6,021,948
<TOTAL-LIABILITIES> 651,021,948
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,716,881,706
<SHARES-COMMON-STOCK> 16,053,481
<SHARES-COMMON-PRIOR> 16,568,833
<ACCUMULATED-NII-CURRENT> 19,902
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (63,089,652)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 215,374,591
<NET-ASSETS> 1,869,186,547
<DIVIDEND-INCOME> 48,433,889
<INTEREST-INCOME> 4,176,136
<OTHER-INCOME> 0
<EXPENSES-NET> 47,286,935
<NET-INVESTMENT-INCOME> 5,323,090
<REALIZED-GAINS-CURRENT> (8,001,500)
<APPREC-INCREASE-CURRENT> 2,014,396
<NET-CHANGE-FROM-OPS> (664,014)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (515,352)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (63,661,825)
<ACCUMULATED-NII-PRIOR> (5,303,188)
<ACCUMULATED-GAINS-PRIOR> (55,088,152)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,847,333
<INTEREST-EXPENSE> 31,540,823
<GROSS-EXPENSE> 47,286,935
<AVERAGE-NET-ASSETS> 1,997,919,000
<PER-SHARE-NAV-BEGIN> 116.66
<PER-SHARE-NII> 0.334
<PER-SHARE-GAIN-APPREC> (0.564)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 116.43
<EXPENSE-RATIO> 3.16
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> BELAIR CAPITAL FUND
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,363,909,281
<INVESTMENTS-AT-VALUE> 2,205,213,053
<RECEIVABLES> 5,787,657
<ASSETS-OTHER> 540,179
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,211,540,889
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 568,000,000
<OTHER-ITEMS-LIABILITIES> 50,318,908
<TOTAL-LIABILITIES> 618,318,908
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,784,138,314
<SHARES-COMMON-STOCK> 16,619,724
<SHARES-COMMON-PRIOR> 101
<ACCUMULATED-NII-CURRENT> 823,747
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,079,549)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (184,660,531)
<NET-ASSETS> 1,593,221,981
<DIVIDEND-INCOME> 26,622,695
<INTEREST-INCOME> 982,728
<OTHER-INCOME> 0
<EXPENSES-NET> 26,781,676
<NET-INVESTMENT-INCOME> 823,747
<REALIZED-GAINS-CURRENT> (7,079,549)
<APPREC-INCREASE-CURRENT> (184,660,531)
<NET-CHANGE-FROM-OPS> (190,916,333)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,199,183
<NUMBER-OF-SHARES-REDEEMED> (559,560)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,593,211,881
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,547,357
<INTEREST-EXPENSE> 17,503,097
<GROSS-EXPENSE> 26,781,676
<AVERAGE-NET-ASSETS> 1,267,464,810
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 0.068
<PER-SHARE-GAIN-APPREC> (4.208)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 95.86
<EXPENSE-RATIO> 3.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
