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 March 31, 1999
BELAIR CAPITAL FUND LLC (THE "FUND")
------------------------------------
(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
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 617-482-8260
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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)
<PAGE>
Belair Capital Fund LLC
Index to Form 10Q
PART I - FINANCIAL INFORMATION Page
Item 1. Unaudited Consolidated Financial Statements 2
Consolidated Statements of Assets and Liabilities
as of March 31, 1999 (unaudited) and December 31, 1998 2
Consolidated Statements of Operations For the Three
Months Ended March 31, 1999 and 1998 (unaudited) 3
Consolidated Statements of Changes in Net Assets For
the Three Months Ended March 31, 1999 and 1998 (unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 (unaudited) 5
Notes to Financial Statements as of March 31, 1999 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 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
BELAIR CAPITAL FUND LLC
Consolidated Statements of Assets and Liabilities
<TABLE>
March 31,
1999 December 31,
(Unaudited) 1998
------------------- -------------------
<S> <C> <C>
Assets:
Total investments, at value (identified cost, $2,319,697,929 $ 2,608,076,250 $ 2,535,739,282
at
March 31, 1999 and $2,304,223,436 at December 31, 1998)
Cash
7,890,941 2,711,580
Dividends and interest receivable
2,593,584 1,008,985
Other assets
478,270 508,884
------------------- -------------------
------------------- -------------------
Total Assets $ 2,619,039,045 $ 2,539,968,731
------------------- -------------------
Liabilities:
Loan payable $ 618,000,000 $ 583,000,000
Payable for open swap contracts
6,775,157 18,155,651
Payable for fund shares redeemed
1,080,920 -
Minority interest
208,000 -
Interest payable
5,184,658 4,926,762
Other accrued expenses
774,367 1,037,946
------------------- -------------------
------------------- -------------------
Total $ 632,023,102 $ 607,120,359
Liabilities
------------------- -------------------
=================== ===================
Net assets $ 1,987,015,943 $ 1,932,848,372
=================== ===================
Sources of Net Assets:
Paid-in capital $ 1,763,258,613 $ 1,779,879,517
Accumulated net realized loss on investments (computed
on the basis of identified
cost) (55,182,551) (55,088,152)
Accumulated distributions in excess of net investment income
(2,663,287) (5,303,188)
Net unrealized appreciation of investments (computed
on the basis of identified
cost) 281,603,168 213,360,195
=================== ===================
Total $ 1,987,015,943 $ 1,932,848,372
=================== ===================
Shares outstanding
16,429,460 16,568,833
Net Asset Value and Redemption
Price Per Share $ 120.94 $ 116.66
</TABLE>
2
<PAGE>
BELAIR CAPITAL FUND LLC
<TABLE>
Consolidated Statements of Operations (Unaudited) Three months Three months
ended Ended
March 31, 1999 March 31, 1998
------------------- -------------------
<S> <C> <C>
Investment Income:
Dividends allocated from Belvedere Capital (net of foreign $ 4,618,526 $ 1,777,687
taxes, $46,659 and $0 for March 31, 1999 and 1998,
respectively)
Interest allocated from Belvedere
Capital 1,253,833 -
Expenses allocated from Belvedere Capital
(3,146,321) (677,373)
------------------- -------------------
Net investment income allocated from Belvedere Capital
2,726,038 1,100,314
Dividends from partnership preference units
11,722,048 -
Interest
40,434 -
=================== ===================
Total investment income $ 14,488,520 $ 1,100,314
=================== ===================
Expenses:
Investment advisor fees $ 1,521,637 $ 266,941
Service fees
230,289 52,392
Interest expense
8,344,620 1,858,935
Interest expense on swap contracts
1,663,492 159,470
Custodian and transfer agent fees
17,469 5,681
Legal and accounting services
32,363 16,570
Printing and postage
1,229 1,923
Amortization of organization expenses
30,614 1,421
Miscellaneous
6,906 128,278
------------------- -------------------
Total expenses $ 11,848,619 $ 2,491,611
------------------- -------------------
------------------- -------------------
Net investment income (loss) $ 2,639,901 $ (1,391,297)
------------------- -------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
- -
Investment transactions from Belvedere Capital $ 5,206,357 $ (382,464)
Investment transactions in partnership preference units
(5,300,756) -
Investment transactions in copper and aluminum
- (1,315,184)
------------------- -------------------
Net realized gain (loss) $ ( 94,399) $ (1,697,648)
------------------- -------------------
Change in unrealized appreciation (depreciation) -
Investment in Belvedere Capital $ 51,330,957 $ 61,139,352
Investments in partnership preference units
5,531,522
Interest rate swap contracts
11,380,494 (1,706,668)
------------------- -------------------
Net change in unrealized appreciation $ 68,242,973 $ 59,432,684
------------------- -------------------
Net realized and unrealized $ 68,148,574 $ 57,735,036
gain
=================== ===================
Net increase in net assets from operations $ 70,788,475 $ 56,343,739
=================== ===================
</TABLE>
3
<PAGE>
BELAIR CAPITAL FUND LLC
<TABLE>
Consolidated Statements of Changes in Net Assets (Unaudited)
Three months Three months
ended ended
March 31, 1999 March 31, 1998
------------------- -------------------
<S> <C> <C>
Increase(Decrease) in Net Assets:
Net investment income (loss) $ 2,639,901 $ (1,391,297)
Net realized gain (loss) from investment transactions
(94,399) (1,697,648)
Net change in unrealized appreciation (depreciation) of
investments 68,242,973 59,432,684
------------------- -------------------
Net increase in net assets from operations $ 70,788,475 $ 56,343,739
------------------- -------------------
Transactions in fund shares -
Investment securities and cash contributed $ - $ 600,662,711
Less - selling commissions
- (2,393,365)
------------------- -------------------
Net contributions
- 598,269,346
Net asset value of shares redeemed
(16,620,904) (979,585)
------------------- -------------------
Net increase in net assets from Fund share transactions $ (16,620,904) $ 597,289,761
------------------- -------------------
Net increase in net assets $ 54,167,571 $ 653,633,500
Net assets:
Beginning of period
1,932,848,372 10,100
=================== ===================
End of $ 1,987,015,943 $ 653,643,600
period
=================== ===================
Accumulated distributions in excess of net investment
income/(net investment loss) included in net assets at end of
period
$ 2,663,287 $ (1,391,297)
</TABLE>
4
<PAGE>
BELAIR CAPITAL FUND LLC
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
Three months Three months
ended ended
March 31, 1999 March 31, 1998
------------------- --------------------
<S> <C> <C>
Cash flows from Operating Activities -
Net investment income $ 2,639,901 $ (1,391,297)
Adjustments to reconcile net investment income to net
Cash flows from operations -
Amortization of organization expense
30,614 1,421
Net investment income allocated from Belvedere Capital
(2,726,038) (1,100,314)
Increase in dividends receivable
(1,584,599) -
Increase in interest payable for open swap contracts
520,185 159,470
Increase (decrease) in accrued interest and operating expenses
(525,868) 2,404,753
Increase in minority interest
208,000 -
Purchases of partnership preference units, copper and aluminum
(139,000,000) (228,535,863)
Sales of partnership preference units, copper and aluminum
104,049,244 47,220,678
Net (increase) decrease in investment in Belvedere Capital
8,168,879 (6,200,859)
------------------- --------------------
Net cash flows used for operating activities $ (28,219,682) $ (187,442,011)
Cash Flows From Financing Activities -
Proceeds from loan $ 35,000,000 $ 190,000,000
Payments on behalf of shareholders (selling commissions)
- (2,393,365)
Payments for Fund shares redeemed
(1,600,957) (174,724)
------------------- --------------------
Net cash flows from financing activities $ 33,399,043 $ 187,431,911
Net increase in cash
5,179,361 (10.100)
Cash beginning of period
2,711,580 10.100
=================== ====================
Cash end of period $ 7,890,941 $ -
=================== ====================
Supplemental Disclosure and Non-cash Investing and
Financing Activities
Securities contributed by shareholders, invested in Belvedere $ - $ 600,552,612
Capital
Unrealized appreciation of investments and open swap contracts
281,603,168 59,432,684
Interest paid for loan
8,606,909 32,181
Interest paid for swap contracts
1,143,307 -
Market value of securities distributed in payment of redemptions
13,939,027 804,861
</TABLE>
5
<PAGE>
BELAIR CAPITAL FUND LLC As Of March 31, 1999
NOTES TO CONSOLIDATED FINANICIAL (UNAUDITED)
1. Belair Capital Fund LLC (Belair Capital) is 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 March 31, 1999, Belair
Capital owned all of the outstanding voting stock of BREC. BREC began
operations on November 24, 1998. Prior to November 24, 1998, Belair Capital
invested directly in partnership preference units.
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.
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 private purchases of partnership preference units, copper and aluminum.
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 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
6
<PAGE>
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 expects to qualify as a REIT under the Internal Revenue Code of 1986, as
amended. 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
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
<PAGE>P
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
March 31, 1999 and March 31, 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 make annual income distributions approximately equal to the
amount of its net investment income, if any, and annual capital gains
distributions equal to approximately 22% of the amount of its net realized
capital gains, 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 intends to make a
supplemental distribution to compensate shareholders receiving such
distributions for taxes that may be due in connection with the precontribution
gain and supplemental distributions.
3 Shareholder Transactions
The Fund may issue an unlimited number of full and fractional shares.
Transactions in Fund shares during the three months ended March 31, 1999 and the
8
<PAGE>
period ended March 31, 1998, including contributions of securities and cash in
exchange for shares of the Fund were as follows:
Three Months Ended Period Ended
March 31, 1999 March 31, 1998*
-------------------- ----------------
Issued at fund closing - 5,982,694
Redemptions (139,373) (9,345)
-------------------- ----------------
Net increase (decrease) (139,373) 5,973,449
-------------------- ----------------
* For the period from the start of business, February 6, 1998, to March 31,
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 three months ended March 31, 1999 and the period ended March 31,
1998, the Investment Adviser received $137,968 and $8,049, respectively, in
redemption fees.
4 Investment Transactions
Increases and decreases of the Fund's investment in Belvedere Capital for the
three months ended March 31, 1999 aggregated $4,443,702 and $26,551,608,
respectively, and for the period ended March 31, 1998 aggregated $604,562,198
and $6,392,850, respectively. Purchases and sales of other investments
(partnership preference units, copper and aluminum) aggregated $139,000,000 and
$104,049,244, respectively, for the three months ended March 31, 1999, and
$228,535,862 and $47,220,679, respectively, for the period ended March 31, 1998.
Sales of other investments during the three months ended March 31, 1999
represent the sale of partnership preference units to Belcrest Capital Fund LLC,
a fund similar to the Fund that is sponsored by Eaton Vance Management. There
were no such sales during the period ended March 31, 1998. In addition,
investments were distributed in payment of Fund shares redeemed resulting in
realized capital losses of $763,990 and $27,551 for book purposes, for the three
month period ended March 31, 1999 and the period ended March 31, 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
9
<PAGE>
the Portfolio up to $500,000,000 and at reduced rates as daily net assets exceed
that level. For the three months ended March 31, 1999 and the period ended March
31, 1998 the advisory fee applicable to the Portfolio was 0.46% and 0.48%,
respectively, of average net assets for such periods. Belvedere Capital's
allocated portion of the advisory fee amounted to $4,640,720 of which $2,296,510
was allocated to the Fund, for the three months ended March 31, 1999, and
$1,739,063, of which $460,110 was allocated to the Fund, for the period ended
March 31, 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 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 the Fund's indirect investment in the Portfolio is
credited toward the Fund's advisory and administrative fee payment. For the
three months ended March 31, 1999 and the period ended March 31, 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 $1,521,637 and
$266,941, respectively.
Eaton Vance Management (EVM) serves as manager of the Fund 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 $1,506,207 and $525,837 for the three
months ended March 31, 1999 and the period ended March 31, 1998, respectively,
of which $744,573 and $140,563 was allocated to the Belair Capital for the
respective periods. Pursuant to a servicing agreement between the 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 Capitals average daily net assets, less the
Belair Capitals allocated share of the servicing fee payable by Belvedere
Capital. For the three months ended March 31, 1999 and the period ended March
31, 1998 the servicing fee paid directly by Belair Capital totaled $230,289 and
$52,392, respectively. For shares sold through a subagent, EVD intends to assign
servicing responsibilities and fees to the applicable subagent beginning twelve
months after the issuance of Fund shares to such persons. For the three months
ended March 31, 1999, EVD paid $191,209 in service fees to subagents. No service
fees were paid to subagents for the period ended March 31, 1998.
6 Credit Facility
The Fund has obtained a $625,000,000 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. Initial
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
10
<PAGE>
these purposes. At March 31, 1999 and December 31, 1998, amounts outstanding
under the Credit Facility totaled $618,000,000 and $583,000,000, respectively.
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 pay a fixed rate of interest in exchange for a floating rate of
interest. 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 March 31, At December 31,
Date omitted) Rate Rate Date Date 1999 1998
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2/98 $60,000 6.72% Libor+.45% 2/03 2/05 $(667,666) $(1,845,506)
2/98 120,000 6.715% Libor+.45% 2/03 2/05 (1,328,667) (3,665,804)
4/98 50,000 6.84% Libor+.45% 2/03 2/05 (803,222) (1,788,985)
4/98 150,000 6.835% Libor+.45% 4/03 4/05 (2,427,826) (5,584,296)
6/98 20,000 6.67% Libor+.45% 6/03 2/05 (142,111) (620,177)
6/98 75,000 6.68% Libor+.45% 6/03 2/05 (830,500) (2,358,284)
6/98 80,000 6.595% Libor+.45% 6/03 2/05 (611,778) (2,219,084)
11/98 14,709 6.13% Libor+.45% 11/03 2/05 (9,881) (73,515)
2/99 34,951 6.34% Libor+.45% 2/04 2/05 46,494 -
</TABLE>
8 Indirect Investment in Portfolio
Belvedere Capital's interest in the Portfolio at March 31, 1999, was
$4,529,834,947, representing 44.9% of the Portfolio's net assets, and at March
31, 1998 was $1,817,330,753, representing 37.6% of the Portfolio's assets.
Belair Capital's investment in Belvedere Capital at March 31, 1999 was
$2,041,655,652, representing 45.1% of Belvedere Capital's net assets, and at
March 31, 1998 was $667,439,285, representing 36.7% of Belvedere Capital's net
assets. Investment income allocated to Belvedere Capital from the Portfolio for
the three months ended March 31, 1999 totaled $12,010,208, of which $5,872,359
was allocated to the Fund. Investment income allocated to Belvedere Capital from
the Portfolio for the period ended March 31, 1998 totaled $5,931,190, of which
$1,777,687 was allocated to the Fund. Expenses allocated to Belvedere Capital
from the Portfolio for the three months ended March 31, 1999 totaled $4,771,888,
of which $2,361,466 was allocated to the Fund. Expenses allocated to Belvedere
Capital from the Portfolio for the period ended March 31, 1998 totaled
$1,895,572, of which $511,865 was allocated to the Fund. Belvedere Capital
allocated additional expenses to the Fund of $784,855 for the three months ended
March 31, 1999, representing $40,282 of operating expenses and $744,573 of
service fees. Belvedere Capital allocated additional expenses to the Fund of
$165,508 for the period ended March 31, 1998, representing $24,946 of operating
expenses and $140,562 of service fees (see Note 5).
11
<PAGE>
A summary of the Portfolio's Statement of Assets and Liabilities, at March 31,
1999, December 31, 1998 and March 31, 1998 and its operations for the three
months ended March 31, 1999, the year ended December 31, 1998 and the period
ended March 31, 1998 follows:
<TABLE>
March 31, December 31, 1998 March 31,
1999 1998
------------------ -------------------- --------------------
<S> <C> <C> <C>
Investments, at value $10,118,166,710 $8,713,317,160 $4,828,513,953
Other Assets 11,801,799 7,040,200 6,108,537
Total Assets $10,129,968,509 $ 8,720,357,360 $ 4,834,622,490
Total Liabilities 44,583,965 15,498,025 1,640,860
Net Assets $10,085,384,545 $ 8,704,859,335 $ 4,832,981,629
====================================== ================== ==================== ====================
Dividends and interest $ 27,230,271 $ 70,963,640 $ 15,697,528
Investment adviser fee 10,581,529 26,313,762 4,773,371
Other expenses 297,623 1,306,076 244,816
Total expenses $ 10,879,152 $ 27,619,838 $5,018,187
Net investment income $ 16,351,119 $ 43,343,802 $10,679,341
Net realized gains (losses) 18,042,697 (69,097,723) 3,388,200
Net unrealized gains 265,622,128 1,226,948,293 524,618,241
Net increase in net assets from $ 300,015,944 $ 1,201,194,372 $ 538,685,782
operations
====================================== ================== ==================== ====================
</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 BREC, the Company, and indirectly
the Portfolio, as well as the actual and accrued expenses of the Fund. 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 MARCH 31, 1999
- ----------------------------------------------------------
The Fund achieved a total return of 3.6% during the quarter ended March 31,
1999. This return reflects an increase in the Fund's net asset value per share
from $116.66 to $120.94. For comparison, the S&P 500, an unmanaged index
commonly used to measure the performance of U.S. stocks, had a total return of
5.0% over the same period.
During the first quarter of 1999, performance in the U.S. equity market was
led by the large capitalization growth stocks that dominate the S&P 500 and, to
a lesser extent, the holdings of the Portfolio. Investors placed increasingly
high valuations on well-known, industry-leading companies with above-market
growth potentials. This continues the trend established during 1998.
In the fixed income markets, the first quarter was characterized by rising
interest rates on benchmark government bonds and a narrowing of credit spreads
for corporate issues. The Fund's performance during the quarter was positively
impacted by its holdings of Partnership Preference Units and the associated
interest rate swap agreements, benefiting from the narrowing of credit spreads.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of March 31, 1999, the Fund had outstanding borrowings of $618 million
and unused loan commitments of $7 million under the Credit Facility established
with Merrill Lynch International Bank Limited, the term of which extends until
13
<PAGE>
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 March 31, 1999, the Portfolio had cash
and short-term investments totaling $460.2 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 March 31,
1999, and, as of that date, the net assets of the Portfolio totaled $10,085.4
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 March 31,
1999, restricted securities, which are considered illiquid, constituted 4.5% 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.
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
14
<PAGE>
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
the Portfolio's taxable year and the underlying appreciated securities position
is held unhedged for at least the next sixty 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.
15
<PAGE>
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
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.
16
<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
17
<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
18
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 784,583,265
<INVESTMENTS-AT-VALUE> 845,722,617
<RECEIVABLES> 0
<ASSETS-OTHER> 485,206
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 847,924,491
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 194,280,891
<TOTAL-LIABILITIES> 194,280,891
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 597,299,861
<SHARES-COMMON-STOCK> 653,643,600
<SHARES-COMMON-PRIOR> 101
<ACCUMULATED-NII-CURRENT> (1,391,297)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,697,648)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59,432,684
<NET-ASSETS> 653,643,600
<DIVIDEND-INCOME> 1,777,687
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,168,984
<NET-INVESTMENT-INCOME> (1,391,297)
<REALIZED-GAINS-CURRENT> (1,697,648)
<APPREC-INCREASE-CURRENT> 59,432,684
<NET-CHANGE-FROM-OPS> 56,343,739
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 9,345
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 653,633,500
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 266,941
<INTEREST-EXPENSE> 1,858,935
<GROSS-EXPENSE> 3,168,984
<AVERAGE-NET-ASSETS> 652,116,435
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> (0.233)
<PER-SHARE-GAIN-APPREC> 9.653
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 109.42
<EXPENSE-RATIO> 3.28
[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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 2,319,697,929
<INVESTMENTS-AT-VALUE> 2,608,076,250
<RECEIVABLES> 2,593,584
<ASSETS-OTHER> 478,270
<OTHER-ITEMS-ASSETS> 7,890,941
<TOTAL-ASSETS> 2,619,039,045
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 632,023,102
<TOTAL-LIABILITIES> 632,023,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,763,258,613
<SHARES-COMMON-STOCK> 16,429,460
<SHARES-COMMON-PRIOR> 16,568,833
<ACCUMULATED-NII-CURRENT> (2,663,287)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (55,182,551)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 281,603,168
<NET-ASSETS> 1,987,015,943
<DIVIDEND-INCOME> 16,340,574
<INTEREST-INCOME> 1,294,267
<OTHER-INCOME> 0
<EXPENSES-NET> 14,994,940
<NET-INVESTMENT-INCOME> 2,639,901
<REALIZED-GAINS-CURRENT> (94,399)
<APPREC-INCREASE-CURRENT> 68,242,973
<NET-CHANGE-FROM-OPS> 70,788,475
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 139,373
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 54,167,571
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (55,088,152)
<OVERDISTRIB-NII-PRIOR> (5,303,188)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,521,637
<INTEREST-EXPENSE> 8,344,620
<GROSS-EXPENSE> 14,994,940
<AVERAGE-NET-ASSETS> 1,976,803,500
<PER-SHARE-NAV-BEGIN> 116.66
<PER-SHARE-NII> 0.160
<PER-SHARE-GAIN-APPREC> 4.12
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 120.94
<EXPENSE-RATIO> 3.08
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
