SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Belcrest Capital Fund LLC (the "Fund")
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3453080
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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
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Securities to be registered pursuant to Section 12(b) of the Act: None
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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)
The Exhibit Index is located on page 70.
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
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ITEM 1. BUSINESS
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Belcrest Capital Fund LLC (the "Fund") is a Massachusetts limited liability
company organized in 1998 to provide diversification and tax-sensitive
investment management to investors who are "qualified purchasers" as defined in
Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended (the "1940
Act"), and the rules thereunder. The Fund commenced its investment operations on
November 24, 1998. The Fund conducted no operations prior to that date.
The Fund seeks to achieve long-term, after-tax returns for qualified
purchasers who have invested in the Fund ("Shareholders") by acquiring limited
liability company interests ("Shares") in the Fund. The Fund pursues its
investment objective primarily by investing indirectly in Tax-Managed Growth
Portfolio (the "Portfolio"), a diversified, open-end management investment
company registered under the 1940 Act, with net assets of approximately $15.1
billion as of December 31, 1999. The Portfolio was organized in 1995 as
successor to the investment operations of Capital Exchange Fund, a mutual fund
established in 1966 and managed from inception for long-term, after-tax returns.
The Fund maintains its indirect investment in the Portfolio by investing in
Belvedere Capital Fund Company LLC (the "Company"), a separate Massachusetts
limited liability company that invests exclusively in the Portfolio. As of
December 31, 1999, the investment assets of the Company consisted exclusively of
an interest in the Portfolio with a value of $7.70 billion. As of such date,
assets of the Fund invested in the Company totaled $4.08 billion.
The investment objective of the Portfolio is to achieve long-term,
after-tax returns for its investors by investing in a diversified portfolio of
equity securities. The Portfolio emphasizes investments in common stocks of
domestic and foreign growth companies that are considered to be high in quality
and attractive in their long-term investment prospects. Under normal market
conditions, the Portfolio will invest at least 65% of its assets in common
stocks. Although the Portfolio may also invest in investment-grade preferred
stocks and debt securities, purchases of such securities are normally limited to
securities convertible into common stocks and temporary investments in
short-term notes and government obligations. During periods in which the
investment adviser to the Portfolio believes that returns on common stock
investments may be unfavorable, the Portfolio may invest a portion of its assets
in U.S. government obligations and high quality short-term notes. The
Portfolio's holdings represent a number of different industries. Not more than
25% of the Portfolio's assets may be invested in the securities of issuers
having their principal business activity in the same industry, determined as of
the time of acquisition of any such securities.
In its operations, the Portfolio seeks to achieve long-term, after-tax
returns in part by minimizing the taxes incurred by investors in the Portfolio
in connection with the Portfolio's investment income and realized capital gains.
Taxes on investment income are minimized by investing primarily in
lower-yielding securities. Taxes on realized capital gains are minimized by
avoiding or minimizing the sale of securities holdings with large accumulated
capital gains. The Portfolio seeks to invest in a broadly diversified portfolio
of stocks and to invest primarily in established companies with characteristics
of above-average growth, predictability and stability that are acquired with the
expectation of being held for a period of years. The Portfolio generally seeks
to avoid realizing short-term capital gains. When a decision is made to sell a
particular appreciated security, the Portfolio will select for sale the share
lots resulting in the most favorable tax treatment, generally those with holding
periods sufficient to qualify for long-term capital gains treatment that have
the highest cost basis. The Portfolio may, when deemed prudent by its investment
adviser, sell securities to realize capital losses that can be used to offset
realized gains.
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To protect against price declines in securities holdings with large
accumulated capital gains, the Portfolio may use various investment techniques,
including, but not limited to, the purchase of put options on securities held,
equity collars (combining the purchase of a put option and the sale of a call
option), equity swaps, covered short sales, and the sale of stock index futures
contracts. By using these techniques rather than selling such securities, the
Portfolio can reduce its exposure to price declines in the securities without
realizing substantial capital gains under current tax law. The Portfolio's
ability to utilize covered short sales, certain equity swaps and certain equity
collar strategies 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 after 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. The use of these investment techniques may require the Portfolio to
commit or make available cash and, therefore, may not be available at such times
as the Portfolio has limited holdings of cash.
Separate from its investment in the Portfolio through the Company, the Fund
invests through its subsidiary, Belcrest Realty Corporation ("BRC"), in a
portfolio of income-producing preferred equity interests in real estate
operating partnerships ("Partnership Preference Units") affiliated with real
estate investment trusts ("REITs") that are publicly traded. Each issue of
Partnership Preference Units held by BRC pays, or is expected to pay, regular
quarterly dividends at fixed rates. None of the issues of Partnership Preference
Units is or will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and each issue is thus subject to restrictions on transfer.
BRC invests in Partnership Preference Units of issuers whose preferred equity or
senior debt securities are deemed by its investment adviser to be of
investment-grade quality. BRC may make other types of real estate investments,
such as interests in real properties subject to triple net leases and equity
interests in other types of entities (such as partnerships and REITs) holding
income-producing real properties. BRC may purchase Partnership Preference Units
from, and sell them to, other investment funds sponsored by the Eaton Vance
organization and REIT subsidiaries thereof.
BRC is a Delaware corporation that intends to operate in such a manner as
to qualify for taxation as a REIT under the Internal Revenue Code (the "Code").
As a REIT, BRC will not be subject to federal income tax to the extent that it
distributes all of its earnings to its stockholders each year. As at December
31, 1999, assets of the Fund invested in BRC totaled $949.8 million.
Subsequent to December 31, 1999, the Fund indirectly acquired real property
through a newly created wholly-owned subsidiary of BRC, Bel Santa Ana LLC. The
property, two suburban office buildings in Santa Ana, California, is leased to a
single investment-grade rated tenant under a triple net lease. The property
carries secured, non-recourse, fixed-rate financing from GMAC Commercial
Mortgage Corporation. Additionally, BRC formed a REIT with a major private
multifamily property company in which BRC is a majority shareholder and the
multifamily company is a minority shareholder. The initial assets of the new
REIT are multi-family housing units formerly owned by the minority shareholder
and financed through secured, non-recourse, fixed-rate debt.
The Fund's investments in real estate through BRC are financed using
borrowings under a seven-year revolving credit facility (the "Credit Facility")
established with Merrill Lynch International Bank Limited. The Fund's
obligations under the Credit Facility are secured by a pledge of its assets,
including BRC common stock and shares of the Company. Borrowings under the
Credit Facility are at an annual rate of LIBOR plus 0.45%, based on interest
periods of one month to five years as selected by the Fund. Interest on
outstanding borrowings is payable at the end of each interest period, but not
less frequently than semi-annually. The Fund also pays a commitment fee of 0.10%
on the unused loan commitment amount. As of December 31, 1999, outstanding
borrowings under the Credit Facility totaled $1.13 billion, and the unused loan
commitment amount was $20.0 million.
2
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The Fund has entered into cancelable interest rate swap agreements (the
"swap agreements") with Merrill Lynch Capital Services, Inc. ("MLCS"), to lock
in a positive spread between the distributions payable on BRC's current holdings
of Partnership Preference Units and the interest cost of the associated Fund
borrowings under the Credit Facility. The swap agreements are valued on an
ongoing basis by the Fund's investment adviser. The Fund has the right to
terminate the swap agreements beginning in 2003, at dates corresponding
approximately to the initial call dates of the Partnership Preference Units held
by BRC. MLCS is a secured party under the Credit Facility. The obligations of
MLCS under the arrangements are supported by the guarantee of Merrill Lynch &
Co., Inc.
The Fund issued Shares to Shareholders at closings taking place on November
24, 1998, February 23, 1999, April 29, 1999, July 28, 1999, September 7, 1999,
September 29, 1999 and October 22, 1999. At the seven closings, an aggregate of
33,519,481 Shares were issued in exchange for Shareholder contributions totaling
$3,646.0 million. All Shareholder contributions (other than contributions by the
Fund's Manager) were made in the form of securities. At each closing, all of the
securities contributed by Shareholders were exchanged by the Fund into the
Company for shares of the Company. Immediately thereafter, all of such
securities were exchanged by the Company into the Portfolio for an interest in
the Portfolio.
Shares of the Fund were privately offered and sold only to "accredited
investors" as defined in Rule 501(a) under the Securities Act who were
"qualified purchasers" (as defined in Section 2(a)(51)(A) of the 1940 Act). The
offering was conducted by Eaton Vance Distributors, Inc. ("EVD") as placement
agent and by certain subagents appointed by EVD in reliance upon the exemption
from registration provided by Rule 506 under the Securities Act.
The Fund discontinued its private offering on October 22, 1999.
The Fund has no officers or employees, inasmuch as its business affairs are
conducted by its Manager, Eaton Vance Management ("EVM"), a Massachusetts
business trust with offices at The Eaton Vance Building, 255 State Street,
Boston, Massachusetts 02109, and its investment operations are conducted by its
investment adviser, Boston Management and Research, a wholly-owned subsidiary of
EVM.
ITEM 2. FINANCIAL INFORMATION.
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Table of Selected Financial Data
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Note: The Fund commenced its investment operations on November 24, 1998
(start of business), and the consolidated data referred to below
reflects the period commencing on that date through December 31, 1998
(the end of the Fund's first fiscal year) and the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Period Ended Fiscal Year
December 31, 1998 December 31, 1999
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Total investment income $1,303,798 $69,398,141
Interest expense $1,006,805 $39,181,865
Net expenses (including interest expense) $1,918,650 $53,487,074
Net investment income (loss) $(614,852) $15,911,067
3
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Net realized loss $(233,937) $(20,032,514)
Net change in unrealized appreciation $30,412,330 $351,001,290
Net increase in net assets from operations $29,563,541 $346,879,843
Total assets $711,459,486 $5,066,809,383
Loan payable $165,000,000 $1,130,000,000
Net assets $544,202,835 $3,920,612,531
Shares outstanding 5,148,858 33,007,386
Net Asset Value and Redemption Price per Share $105.69 $118.78
Distribution paid per Share $0.05 $0.91
</TABLE>
Management's Discussion and Analysis of
Financial Condition and Result of Operations
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Results of Operations
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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 BRC and any direct investments of the Fund. Expenses of the Fund include
its pro-rata share of the expenses of BRC, 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. Fund borrowings are used primarily to finance the purchase of
Partnership Preference Units through BRC. 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 BRC. 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 BRC and its positions in
interest rate swap agreements, the performance of the Fund is also affected by
movements in interest rates and, particularly, by 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.
4
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RESULTS OF OPERATIONS FOR THE PERIOD FROM THE START OF BUSINESS TO DECEMBER 31,
1999
The Fund achieved a total return of 5.7% for the period from its inception
on November 24, 1998 until December 31, 1998. This return reflects an increase
in the Fund's net asset value per Share from $100.00 to $105.69, and the payment
of an income distribution of $0.05 per share at the conclusion of the year. For
comparison, the Standard & Poor's 500 Index (the "S&P 500"), an unmanaged index
commonly used to measure the performance of U.S. stocks, had a total return of
3.8% over the same period.
For the fiscal year ended December 31, 1999, the Fund achieved a total
return of 13.30%. This return reflects an increase in the Fund's net asset value
per Share from $105.69 to $118.78, and the payment of an income distribution of
$0.91 per share at the conclusion of the year. For comparison, the S&P 500 had a
total return of 21.03% over the same period.
The stock market's 1999 performance was similar to its performance for
1998. 1999 marked an unprecedented fifth consecutive year of 20%-plus returns
for the S&P 500. Similar to 1998, though, the Index's returns came from a very
narrow group of stocks, with only 31 stocks accounting for all the appreciation
in the S&P 500. The other 469 stocks included in the Index were, on balance,
flat. Of the 31 top-contributing stocks in the Index, over two-thirds were drawn
from the technology, media, and communications industries.
The fixed income markets experienced a very volatile 1999, as the Federal
Reserve Board's actions and economic strength kept the bond markets on the
defensive for much of the year. Rates on the benchmark 30-year Treasury bond
rose nearly 1.90% in 1999, one of the biggest annual increases in recent
history.
The Fund participates in fixed income markets through its portfolio of
Partnership Preference Units, issued by operating partnerships affiliated with
publicly-traded REITs. The Fund's performance during the year was negatively
affected by markdowns in the value of its holdings of Partnership Preference
Units, particularly in the last few weeks of 1999. At year-end, the REIT
preferred stock universe that the Fund uses as a primary valuation benchmark was
quite weak, largely as a result of tax-loss selling pressures and other
short-term technical factors. The U.S. real estate market remains fundamentally
strong. All of the Fund's holdings of Partnership Preference Units are current
in their distribution payments and none of their issuers have experienced credit
rating downgrades.
Liquidity and Capital Resources
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As of December 31, 1999, the Fund had outstanding borrowings of $1.13
billion and unused loan commitments of $20.0 million under the Credit Facility
established with Merrill Lynch International Bank Limited, the term of which
extends until November 24, 2005. As of December 31, 1998, the Fund had
outstanding borrowings of $165 million and unused loan commitments of $135
million under the Credit Facility. 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.
5
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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 December 31, 1999, the Portfolio had
cash and short-term investments totaling $642.7 million, compared to $432.4
million as of December 31, 1998. The Portfolio participates in a $150 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 at December 31, 1998 or December 31, 1999. As of December
31,1999, the net assets of the Portfolio totaled $15.1 billion, compared to $8.7
billion as of December 31, 1998. 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 December 31, 1999, restricted securities, which are
considered illiquid, constituted 5.0% of the net assets of the Portfolio,
compared to 6.5% as of December 31, 1998.
The Partnership Preference Units held by BRC 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.
Market Risks
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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 cancelable interest rate swap agreements to fix
the cost of its borrowings over the term of the Credit Facility. In the future,
the
6
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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 BRC 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.
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The Partnership Preference Units held by the Fund through its investment in
BRC 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 BRC holds.
Accordingly, BRC's investments in Partnership Preference Units are illiquid. The
success of BRC'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 BRC'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 BRC 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 cancelable
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.
ITEM 3. PROPERTIES.
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At December 31, 1999, the Fund did not own any physical properties, other
than indirectly as a result of BRC's investments in Partnership Preference
Units.
Subsequent to December 31, 1999, the Fund indirectly acquired real property
through a newly created wholly-owned subsidiary of BRC, Bel Santa Ana LLC. The
property, two suburban office buildings in Santa Ana, California, is leased to a
single investment-grade rated tenant under a triple net lease. Additionally, BRC
formed a REIT with a major private multifamily property company in which BRC is
the majority shareholder and the multifamily company is a minority shareholder.
The initial assets of the new REIT are multifamily housing units formerly owned
by minority shareholder.
8
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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(a) Security Ownership of Certain Beneficial Owners.
To the knowledge of the Fund, no person beneficially owns more than
five percent of the Shares of the Fund.
(b) Security Ownership of Management.
EVM, the Manager of the Fund, beneficially owned 100.862 Shares of the
Fund as of March 31, 2000. None of the other entities or individuals named in
response to Item 5 below beneficially owned Shares of the Fund as of March 31,
2000.
(c) Changes in Control.
Not applicable.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
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The Fund has no individual directors or executive officers. The Fund is
managed by EVM. Each of the Fund, BRC and the Portfolio engage Boston Management
and Research ("BMR"), a wholly-owned subsidiary of EVM, as investment adviser.
EVM, its affiliates and predecessor companies have been investment advisers to
individuals and institutions since 1924 and have been advising investment
companies since 1931. BMR and EVM currently have assets under investment
management of approximately $45 billion. EVM is a wholly-owned subsidiary of
Eaton Vance Corp. ("EVC"), a publicly-held holding company which, through its
subsidiaries and affiliates, engages primarily in investment management,
administration and marketing activities. The non-voting common stock of EVC is
listed and traded on the New York Stock Exchange. All shares of the voting
common stock of EVC are held in a voting trust, the voting trustees of which are
senior officers of the Eaton Vance organization. Eaton Vance, Inc. ("EV"), a
wholly-owned subsidiary of EVC, is the sole trustee of EVM and of BMR, each of
which is a Massachusetts business trust. The names of the executive officers and
the directors of EV and their ages and principal occupations are set forth
below:
DIRECTORS AND EXECUTIVE OFFICERS OF EATON VANCE, INC.
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James B. Hawkes, (58), is Chairman, President and Chief Executive Officer
of EVM, BMR, EVC and EV and a Director of EVC and EV. He is also Director or
Trustee and an officer of various investment companies managed by EVM or BMR and
has been employed by the Eaton Vance organization for 29 years.
Alan R. Dynner, (59), is a Vice President and Chief Legal Officer of EVM,
BMR, EVC and EV and an officer of various investment companies managed by EVM or
BMR. He joined Eaton Vance on November 1, 1996. Prior to joining Eaton Vance,
Mr. Dynner was a partner in the New York and Washington offices of the law firm
of Kirkpatrick & Lockhart LLP. Mr. Dynner was Executive Vice President of
Neuberger & Berman Management, Inc. from 1994 to 1995.
William M. Steul, (57), is a Vice President and Chief Financial Officer of
EVM, BMR, EVC and EV. He joined Eaton Vance in December 1994.
Eric G. Woodbury (42), is a Vice President of EVM, BMR and EVC and
Assistant Secretary of EV. He joined Eaton Vance in February 1993.
9
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
- --------------------------------
Under the terms of the Fund's investment advisory and administrative
agreement with BMR, BMR receives a monthly advisory and administrative fee at
the rate of 1/20th of 1% (equivalent to 0.60% annually) of the average daily
gross investment assets of the Fund reduced by that portion of the monthly
advisory fee for such month payable by the Portfolio which is attributable to
the value of the Fund's investment in the Company. The term gross investment
assets of the Fund is defined in the agreement to include the value of all
assets of the Fund other than the Fund's investments in BRC, minus the sum of
the Fund's liabilities other than the principal amount of money borrowed. The
advisory fee payable for such month to BMR 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 period commencing with the
start of the Fund's business, November 24, 1998, through December 31, 1998 and
for the fiscal year ended December 31, 1999 the advisory and administrative fees
paid by the Fund to BMR, less the Fund's allocated share of the Portfolio's
advisory fee, totaled $179,998 and $6,963,463, respectively.
Under the terms of BRC's management agreement with BMR, BMR receives a
monthly management fee at the rate of 1/20th of 1% (equivalent to 0.60%
annually) of the average daily gross investment assets of BRC. The term gross
investment assets of BRC is defined in the agreement to include the value of all
assets of BRC, minus the sum of BRC's liabilities other than the principal
amount of money borrowed. For the period commencing with the start of BRC's
business, November 24, 1998, through December 31, 1998 and for the fiscal year
ended December 31, 1999, BRC paid BMR management fees of $97,730 and $3,646,587,
respectively.
Under the terms of the Portfolio's investment advisory agreement with BMR,
BMR receives a monthly advisory fee at a base rate of 5/96 of 1% (equivalent to
0.625% annually) of the average daily net assets of the Portfolio up to $500
million. On net assets of $500 million or more the monthly fee is reduced and is
computed as follows: 9/192 of 1% (equivalent to 0.5625% annually) of the average
daily net assets of the Portfolio of $500 million but less than $1 billion; 1/24
of 1% (equivalent to 0.50% annually) of the average daily net assets of the
Portfolio of $1 billion but less than 1.5 billion; 7/192 of 1% (equivalent to
0.4375% annually) of the average daily net assets of the Portfolio of $1.5
billion; but less than $7 billion; 17/480 of 1% (equivalent to 0.425% annually)
of the average daily net assets of the Portfolio of $7 billion but less than $10
billion; and 11/320 of 1% (equivalent to 0.4125% annually) of the average daily
net assets of the Portfolio of $10 billion and above. As of December 31, 1998
and December 31, 1999, net assets of the Portfolio totaled $8,704.9 million and
$15,114.6 million, respectively. Effective February 23, 2000, the monthly
advisory fee on average daily net assets of the Portfolio of $15 billion and
above is computed at the rate of 1/30 of 1% (equivalent to 0.40% annually). As
indicated above, the Fund's allocated share of the monthly advisory fee paid by
the Portfolio to BMR is credited toward the Fund's advisory and administrative
fee payments. For the period commencing with the start of the Fund's business,
November 24, 1998, through December 31, 1998 and for the fiscal year ended
December 31, 1999, the advisory fee applicable to the Portfolio was 0.46% and
0.45%, respectively, of average daily net assets for such periods, and the
Fund's allocated portion of the fee amounted to $179,998 and $9,380,632,
respectively.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
See the information set forth under Item 6 above.
Shares of the Fund were privately placed with qualified purchasers pursuant
to a placement agency agreement entered into between the Fund and EVD as
exclusive placement agent. EVD is a wholly-owned subsidiary of EVM. EVD
appointed certain securities dealers as subagents to participate in the private
offering. No selling commissions were paid by the Fund on behalf of Shareholders
making investment commitments of $5 million or more. The Fund paid a 1.5%
selling commission to EVD on
10
<PAGE>
behalf of each Shareholder making an investment commitment of less than $2
million and a 1.0% selling commission to EVD on behalf of each shareholder
making an investment commitment of at least $2 million but less than $5 million.
The selling commission paid by the Fund on behalf of a Shareholder was deducted
from the contribution to the Fund by such Shareholder, thereby reducing the
number of Shares of the Fund issued to the Shareholder. During the period from
November 24, 1998 to December 31, 1998 and for the fiscal year ended December
31, 1999, the Fund paid selling commissions aggregating $2,577,428 and
$11,854,961, respectively, pursuant to the placement agency agreement, and such
selling commissions were paid by EVD to those subagents through which
Shareholders invested in the Fund.
Pursuant to a servicing agreement between the Company and EVD, the Company
pays a servicing fee to EVD for providing certain services and information to
direct and indirect investors in the Company. The servicing fee is paid on a
quarterly basis, at an annual rate of 0.15% of the Company's average daily net
assets. With respect to investors in the Company and Shareholders of the Fund
who subscribed through a subagent, EVD will assign servicing responsibilities
and fees to the applicable subagent, beginning twelve months after the issuance
of shares of the Company or Shares of the Fund to such persons. The Fund will
assume its allocated share of the Company's servicing fee. The servicing fee
payable in respect of the Fund's investment in the Company is credited toward
the Fund servicing fee described below. During the period from November 24, 1998
to December 31, 1998 and for the fiscal year ended December 31, 1999, the
Company paid servicing fees aggregating $81,611 and $3,186,480, respectively,
which were attributable to the Fund's investments in the Company.
Pursuant to a servicing agreement between the Fund and EVD, the Fund pays a
servicing fee to EVD for providing certain services and information to the
Shareholders of the Fund. The servicing fee is paid on a quarterly basis, at an
annual rate of 0.20% of the Fund's average daily net assets. With respect to
Shareholders who subscribed through a subagent, EVD will assign servicing
responsibilities and fees to the applicable subagent, beginning twelve months
after the issuance of Shares of the Fund to such persons. The Fund's allocated
share of the servicing fee paid by the Company is credited toward the Fund's
servicing fee payment, thereby reducing the amount of the servicing fee paid by
the Fund. During the period from November 24, 1998 to December 31, 1998 and for
the fiscal year ended December 31, 1999, the Fund paid servicing fees
aggregating $25,024 and $967,055, respectively.
Of the foregoing service fee amounts allocated to and incurred by the Fund,
$149,554 was paid to sub-agents based on the value of Shares sold by them. The
balance of such amounts was retained by EVD.
Under the terms of the Fund's distribution agreement with EVD, EVD receives
a monthly distribution fee at an annual rate of 0.10% of the average daily net
assets of the Fund as compensation for its services as placement agent. The
distribution fee accrued from the Fund's initial closing and will continue for a
period of ten years (subject to the annual approval of Eaton Vance, Inc.). For
the period commencing with the start of the Fund's business, November 24, 1998,
through December 31, 1998 and for the fiscal year ended December 31, 1999, the
distribution fees paid or accrued to EVD totaled $52,501 and $2,075,525,
respectively. BMR has agreed to waive a portion of the monthly advisory and
administrative fee payable by the Fund to the extent that such fee, together
with the BRC management fee and the monthly distribution fee to EVD, exceeds an
annual rate of 0.60% of the average daily gross investment assets of the Fund
(as defined in Item 6 above), reduced by the portion of the monthly advisory fee
for such month payable by the Portfolio which is attributable to the value of
the Fund's investment in the Portfolio. For the period commencing with the start
of the Fund's business, November 24, 1998, through December 31, 1998 and for the
fiscal year ended December 31, 1999, BMR has waived $52,501 and $2,075,525,
respectively, of the advisory and administrative fee payable by the Fund.
11
<PAGE>
Shares of the Fund redeemed within three years of issuance are generally
subject to a redemption fee equal to 1% of the net asset value of the Shares
redeemed. The redemption fee is payable to BMR in cash by the Fund on behalf of
the redeeming Shareholder. No redemption fee is imposed on Shares of the Fund
held for at least three years, Shares acquired through the reinvestment of Fund
distributions, Shares redeemed in connection with a tender offer or other
extraordinary corporate event involving securities contributed by the redeeming
Shareholder, or Shares redeemed following the death of all of the initial owners
of the Shares redeemed. No redemption fee applies to redemptions by a
Shareholder who, during any 12 month period, redeems less than 8% of the total
number of Shares held by the Shareholder as of the beginning of such period.
During the period from November 24, 1998 to December 31, 1998 and for the fiscal
year ended December 31, 1999, BMR received redemption fees of $2,783 and
$287,414, respectively, from the Fund on behalf of redeeming Shareholders.
ITEM 8. LEGAL PROCEEDINGS.
- ---------------------------
There are no material pending legal proceedings to which the Fund or BRC is
a party or of which any of their property is the subject.
ITEM 9. NET ASSET VALUE OF AND DISTRIBUTIONS ON THE FUND'S SHARES AND RELATED
SHAREHOLDER MATTERS.
(a) Market Information, Restrictions on Transfer of Shares and Redemption
of Shares.
There is no established public trading market for the Shares of the Fund,
and the transfer of Shares is severely restricted by the Operating Agreement of
the Fund.
Other than transfer to the Fund in a redemption, transfers of Shares are
expressly prohibited without the consent of EVM, which consent may be withheld
in its sole discretion for any reason or for no reason. The Shares have not been
and will not be registered under the Securities Act, and may not be resold
unless an exemption from such registration is available. Shareholders have no
right to require registration of the Shares and the Fund does not intend to
register the Shares under the Securities Act or take any action to cause an
exemption (whether pursuant to Rule 144 of the Securities Act or otherwise) to
be available. The Fund is not and will not be registered under the 1940 Act, and
no transfer of Shares may be made that would, in the opinion of counsel to the
Fund, result in the Fund being required to be registered under the 1940 Act. In
addition, no transfer of Shares may be made unless, in the opinion of counsel
for the Fund, such transfer would not result in termination of the Fund for
purposes of Section 708 of the Code or result in the classification of the Fund
as an association or a publicly traded partnership taxable as a corporation
under the Code. In no event shall all or any part of a Shareholder's Shares be
assigned to a minor or an incompetent, unless in trust for the benefit of such
person. Shares may be sold, transferred, assigned or otherwise disposed of by a
Shareholder only if, in the opinion of counsel, such transfer, assignment or
disposition would not violate federal securities or state securities or "blue
sky" laws (including investor qualification standards).
Shares of the Fund may be redeemed on any business day. Redemptions of
Shares held for at least three years will be met at net asset value. Shares
redeemed within these years of issuance are generally subject to a redemption
fee equal to 1% of the net asset value of the Shares redeemed. See Item 7 above.
The Fund plans to meet redemption requests principally by distributing
securities drawn from the Portfolio, but may also distribute cash. If requested
by a redeeming Shareholder, the Fund will meet a redemption request by
distributing securities that were contributed by the redeeming Shareholder,
provided that such securities are held in the Portfolio at the time of
redemption. The securities contributed by a Shareholder will not be distributed
to any other Shareholder in the Fund (or to any other investor in the Company or
the Portfolio) during the first seven years following their contribution. A
shareholder redemption request within seven years of a contribution of
securities by such Shareholder
12
<PAGE>
will ordinarily be met by distributing securities that were contributed by such
Shareholder, prior to distributing to such Shareholder any other securities held
in the Portfolio. Securities contributed by a Shareholder may be distributed to
other Shareholders in the Fund (or to other investors in the Company or the
Portfolio) after a holding period of at least seven years and, if so
distributed, would not be available to meet subsequent redemption requests made
by the contributing Shareholder. If requested by a redeeming Shareholder making
a redemption of at least $1 million occurring more than seven years after such
Shareholder's admission to the Fund, the Fund will generally distribute to the
redeeming Shareholder a diversified basket of securities representing a range of
industry groups that is drawn from the Portfolio, but the selection of
individual securities would be made by BMR in its sole discretion. No
Partnership Preference Units or real estate investments held by BRC will be
distributed to meet a redemption request, and "restricted securities" will be
distributed only to the Shareholder who contributed such securities or such
Shareholder's successor in interest. Other than as set forth above, the
allocation of each redemption between securities and cash and the selection of
securities to be distributed will be at the sole discretion of BMR. Distributed
securities may include securities contributed by Shareholders as well as other
readily marketable securities held in the Portfolio. The value of securities and
cash distributed to meet a redemption will equal the net asset value of the
number of Shares being redeemed less the applicable redemption fee, if any. The
Fund's Credit Facility prohibits the Fund from honoring redemption requests
while there is outstanding an event of default under the Credit Facility.
The Fund may compulsorily redeem all or a portion of the Shares of a
Shareholder if the Fund has determined that such redemption is necessary or
appropriate to avoid registration of the Fund or the Company under the 1940 Act,
to avoid adverse tax or other consequences to the Portfolio, the Company, the
Fund or the Shareholders, or to discharge such Shareholder's obligation to
reimburse the Fund for state taxes paid by the Fund on behalf of the Shareholder
and accrued interest thereon. No redemption fee is payable in the event of a
compulsory redemption.
The high and low net asset values per Share of the Fund during each full
quarterly period from the Fund's inception, November 24, 1998, through the
fiscal year ended December 31, 1999 are as follows:
Quarter Ended High Low
------------- ---- ---
3/31/99 $111.50 $103.03
6/30/99 $115.22 $108.40
9/30/99 $118.09 $104.83
12/31/99 $118.78 $100.44
There are no outstanding options or warrants to purchase, or securities
convertible into, Shares of the Fund. Shares of the Fund cannot be sold pursuant
to Rule 144 under the Securities Act, and the Fund does not propose to publicly
offer any of its Shares at any time.
(b) Record Holders of Shares of the Fund.
As of March 31, 2000, there were 1,200 record holders of Shares of the
Fund.
(c) Distributions.
On December 30, 1998 the Fund made an income distribution of $0.05 per
Share from its net investment income to Shareholders of record on December 29,
1998. On December 20, 1999, the Fund made an income distribution of $0.91 per
Share from its net investment income to Shareholders of record on December 20,
1999.
13
<PAGE>
Except as provided in the next paragraph, 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 gain allocated to a Shareholder in connection with a tender
offer or other extraordinary corporate event involving a security contributed by
such Shareholder. In addition, whenever a distribution in respect of a
precontribution gain is made, the Fund intends to make a supplemental
distribution generally equal to approximately 6% of the allocated
precontribution gain or such other percentage as deemed appropriate to
compensate Shareholders receiving such distributions for taxes that may be due
in connection with the precontribution gain and supplemental distributions. The
Fund's distribution rates with respect to realized gains may be adjusted at a
future time to reflect changes in the effective maximum marginal individual
federal tax rate applicable to long-term capital gains. Shareholder
distributions with respect to net investment income and realized
post-contribution gains will be made pro rata in proportion to the number of
Shares held as of the record date of the distribution. Distributions that are
made in respect of realized precontribution gains and the associated
supplemental distributions will be made solely to the Shareholders to whom such
gain is allocated. The Fund's net investment income and net realized gains
include the Fund's allocated share of the net investment income and net realized
gains of BRC, the Company and, indirectly, the Portfolio. The Fund's Credit
Facility prohibits the Fund from making any distribution to Shareholders while
there is outstanding an event of default under the Credit Facility.
The Fund may make state tax payments on behalf of eligible Shareholders
through a composite or similar filing. Distributions to a Shareholder on whose
behalf the Fund has made state tax payments will be reduced by the outstanding
balance of unreimbursed state tax payments and accrued interest thereon until
repaid in full.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
- --------------------------------------------------
The Fund held its initial closing of November 24, 1998, at which time
qualified purchasers contributed cash of $10,000* and equity securities with an
aggregate exchange value of $517,599,933 in exchange for an aggregate of
5,150,225.046 Shares of the Fund. Shares of the Fund were privately offered and
sold only to "accredited investors" as defined in Rule 501 (a) under the
Securities Act who were "qualified purchasers" (as defined in Section
2(a)(51)(A) of the 1940 Act) in certain states through EVD, the placement agent,
and certain subagents appointed by EVD in reliance upon the exemption from
registration provided by Rule 506 under the Securities Act.
The Fund held a second closing on February 23, 1999, at which time
qualified purchasers contributed equity securities with an aggregate exchange
value of $668,374,856 in exchange for an aggregate of 6,122,657.185 Shares of
the Fund. The Fund held a third closing on April 29, 1999, at which time
qualified purchasers contributed equity securities with an aggregate exchange
value of $435,673,373 in exchange for an aggregate of 3,823,915.545 Shares of
the Fund. The Fund held a fourth closing on July 28, 1999, at which time
qualified purchasers contributed equity securities with an aggregate exchange
value of $804,331,565 in exchange for an aggregate of 7,051,661.181 Shares of
the Fund. The Fund held a fifth closing on September 7, 1999, at which time
qualified purchasers contributed equity securities with an aggregate exchange
value of $358,807,908 in exchange for an aggregate of 3,185,637.791 Shares of
the Fund. The Fund held a sixth closing on September 29, 1999, at which time
qualified purchasers contributed equity securities with an aggregate exchange
value of
____________________
*Contributed by EVM in exchange for 100 Shares of the Fund. No selling
commission applied to such 100 Shares.
14
<PAGE>
$743,904,897 in exchange for an aggregate of 7,058,869.442 Shares of the Fund.
The Fund held a seventh and final closing on October 22, 1999, at which time
qualified purchasers contributed equity securities with an aggregate exchange
value of $117,303,803 in exchange for an aggregate of 1,126,515.900 Shares of
the Fund. In connection with each of the foregoing closings, Shares of the Fund
were privately offered and sold only to accredited investors who were qualified
purchasers in the manner described above.
ITEM 11. DESCRIPTION OF THE FUND'S SECURITIES TO BE REGISTERED.
- ----------------------------------------------------------------
The Fund is registering only Shares representing limited liability company
interests in the Fund pursuant to Section 12(g) of the Securities Exchange Act
of 1934.
The distribution practices of the Fund are described in Item 9(c) above.
The Shares have no conversion or preemption rights, and there are no sinking
fund provisions applicable to the Shares. The redemption rights of Shareholders
are described in Item 9(a) above. Restrictions on transfer of the Shares are
described in Item 9(a) above. Upon liquidation of the Fund, all assets remaining
after payment of all liabilities and obligations of the Fund and after provision
for liquidation expenses will be distributed in cash or in kind to Shareholders
in proportion to the positive balances in their capital accounts. The Shares are
not subject to any assessment by the Fund, and the Fund's Operating Agreement
provides that no Shareholder shall be liable for any obligations or liabilities
of the Fund.
Shareholders have no control of the Fund's business or activities.
Shareholders do not have the right to replace EVM as Manager of the Fund, but
may do so only upon the bankruptcy of EVM. Except as specifically required by
the Operating Agreement, no Shareholder shall have any right to vote on, consent
to or approve any action or matter under any circumstances whatsoever.
Shareholders have a very limited right to consent, pursuant to and in accordance
with the Operating Agreement, only (i) to change in or elimination of the Fund's
investment objective and fundamental investment restrictions set forth in the
Operating Agreement, (ii) to the designation by EVM of another Manager which is
not an entity directly or indirectly owned by EVC, (iii) to the designation of a
substitute Manager upon the bankruptcy of EVM, (iv) to authorize the bringing of
a suit, action or proceeding by a Shareholder in the right of or on behalf of or
in the name of the Fund, (v) to an election to dissolve the Fund upon the
occurrence of certain events or (vi) to the appointment of a liquidator to wind
up the Fund's affairs upon its dissolution in the event there is no Manager to
serve as liquidator.
The Fund's Operating Agreement provides that no action, suit or other
proceeding may be brought by a Shareholder in the right of or on behalf of or in
the name of the Fund unless such Shareholder has first obtained the written
consents of those Shareholders holding at least a majority of the outstanding
Shares, which consents specifically authorize the bringing of such suit, action
or other proceeding.
The Fund's Operating Agreement may be amended or restated only by action of
the Manager by an instrument in writing signed by or on behalf of the Manager.
No such amendment or restatement shall in any material respect increase, add to
or alter any financial obligation of any Shareholder. No consent or approval of
the Shareholders is required to affect any such amendment or restatement, except
that the Fund's investment objective and fundamental investment restrictions set
forth in the Operating Agreement may be changed or eliminated only with the
Consent of the Shareholders (defined as the consent or approval of Shareholders
holding the lesser of (i) 50% of the outstanding Shares, (ii) 67% of those
Shares acting on the matter if Shareholders holding more than 50% of the
outstanding Shares have responded to the consent solicitation or (iii) 67% of
those Shares present or represented by proxy at a meeting if Shareholders
holding more than 50% of the outstanding Shares are present or represented by
proxy at the meeting).
15
<PAGE>
ITEM 12. INDEMNIFICATION OF THE MANAGER AND ITS AFFILIATES.
- ------------------------------------------------------------
EVM and BMR, their trustee, and their officers, employees and affiliates
are entitled to indemnification from the Fund against all liabilities and
expenses incurred or paid by them in connection with any claim, suit, action or
proceeding in which they become involved as a party or otherwise. No
indemnification shall be provided to any such person with respect to any matter
as to which it shall be ultimately determined by final judicial decision that
such person did not act in good faith in the reasonable belief that such
person's action was in the best interest of the Fund and therefore is not
entitled to indemnification by the Fund. Expenses incurred in defending any
claim, suit, action or proceeding may be paid by the Fund as they are incurred
upon receipt in each case of an undertaking by or on behalf of the relevant
party to repay such amounts if it is ultimately determined that such party is
not entitled to be indemnified by the Fund in accordance with the Operating
Agreement. The indemnification is not to be deemed exclusive of any other rights
to which the indemnified parties may be entitled under any statute, contract or
otherwise.
The Operating Agreement provides that EVM and BMR, their trustee, and their
officers, employees and affiliates shall not be liable to the Fund or to any
Shareholder by reason of (i) any tax liabilities incurred by the Shareholders,
including, without limitation, as a result of their contribution of securities
to the Fund or upon the exchange of such securities from the Fund to the Company
or from the Company to the Portfolio, or as a result of any sale or distribution
of any such securities; (ii) any failure to withhold income tax under federal or
state tax laws with respect to income or gains allocated to the Shareholders;
(iii) any change in the federal or state tax laws or regulations or in the
interpretations thereof as they apply to the Portfolio, the Company, BRC, the
Fund or the Shareholders, whether such change or interpretation occurs through
legislative, judicial or administrative action; or (iv) any failure of BRC to
qualify as a REIT under the Code. The Operating Agreement also provides that
such persons, when acting in their respective capacities in connection with the
Fund's business or affairs, shall not be liable to the Fund or to any
Shareholder for any act, omission or breach of duty of any such person or of any
other such persons, provided that no such person shall be exonerated from such
liability who has been finally adjudicated by a court or other body before which
a proceeding was brought not to have acted in good faith in the reasonable
belief that such action was in the best interest of the Fund and to be liable to
the Fund or to such Shareholder by reason thereof.
Reference is made to Sections 3.2 and 13.1 of the Operating Agreement
(Exhibit 3.1 hereto), which provisions are incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------------------------------------------------------
The Fund's financial statements, together with the auditors' report
thereon, appearing on pages 21 through 68 hereof, are incorporated herein by
reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
There have been no changes in, or disagreements with, accountants on
accounting and financial disclosures.
16
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
- --------------------------------------------
(a) The following is a list of all financial statements filed as a part of
this registration statement:
(i) Portfolio of Investments as of December 31, 1998
Consolidated Statement of Assets and Liabilities as of December
31, 1998
Consolidated Statement of Operations for the period from the
start of business, November 24, 1998, to December 31, 1998
Consolidated Statement of Changes in Net Assets for the period
from the start of business, November 24, 1998, to December 31,
1998
Consolidated Statement of Cash Flows for the period from the
start of business, November 24, 1998, to December 31, 1998
Notes to Consolidated Financial Statements
Portfolio of Investments of Tax-Managed Growth Portfolio as of
December 31, 1998
Independent Auditors' Report dated February 12, 1999
(ii) Portfolio of Investments as of December 31, 1999
Consolidated Statement of Assets and Liabilities as of December
31, 1999
Consolidated Statement of Operations for the fiscal year ended
December 31, 1999
Consolidated Statement of Changes in Net Assets for the fiscal
year ended December 31, 1999
Consolidated Statement of Cash Flows for the fiscal year ended
December 31, 1999
Notes to Consolidated Financial Statements
Independent Auditors' Report dated February 11, 2000
Portfolio of Investments of Tax-Managed Growth Portfolio as of
December 31, 1999
Statement of Assets and Liabilities of Tax-Managed Growth
Portfolio as of December 31, 1999
Statement of Operations of Tax-Managed Growth Portfolio for the
fiscal year ended December 31, 1999
17
<PAGE>
Statement of Changed in Net Assets of Tax-Managed Growth
Portfolio for the fiscal year ended December 31, 1999
Supplementary Data of Tax-Managed Growth Portfolio for the fiscal
periods ended December 31, 1999, December 31, 1998, October 31,
1998, October 31, 1997 and October 31, 1996
Notes to Financial Statements
Independent Auditors' Report dated February 11, 2000
(b) The following is a list of all exhibits filed as a part of this
registration statement:
3 Copy of Amended and Restated
Operating Agreement of the Fund
dated November 24, 1998. (Note:
the Operating Agreement also
defines the rights of the
holders of Shares of the Fund)
4 Copy of Loan and Security
Agreement dated as of November
24, 1998, First Amendment
thereto dated as of February 23,
1999; Second Amendment thereto
dated as of April 28, 1999;
Third Amendment thereto dated as
of July 28, 1999, and Fourth
Amendment thereto dated as of
September 1, 1999, Fifth
Amendment thereto dated as of
September 29, 1999; and Sixth
Amendment thereto dated as of
March 8, 2000.
9 Not applicable and not filed.
10(1) Copy of Investment Advisory and
Administration Agreement between
the Fund and Boston Management
and Research dated November 24,
1998.
10(2) Copy of anagement Agreement
between Belcrest Realty
Corporation and Boston
Management and Research dated
November 24, 1998.
10(3) Copy of Investor Servicing
Agreement between the Fund and
Eaton Vance Distributors, Inc.
dated August 14, 1998.
10(4) Copy of Custody and Transfer
Agency Agreement between the
Fund and Investors Bank & Trust
Company dated August 14, 1998.
11 Not applicable and not filed.
12 Not applicable and not filed.
21 List of Subsidiaries of the Fund.
24 Not applicable and not filed.
27(1) Financial Data Schedule for
12/31/98
27(2) Financial Data Schedule for
12/31/99
18
<PAGE>
99 Form N-SAR of Eaton Vance
Tax-Managed Growth Portfolio
(File No. 811-7409) for its
fiscal year ended December 31,
1999 filed electronically with
the Securities and Exchange
Commission under the Investment
Company Act of 1940 on February
17, 2000 (Accession No.
0000940394-00-000073)
(incorporated herein by
reference pursuant to Rule
12b-32).
19
<PAGE>
<TABLE>
Belcrest Capital Fund LLC and Subsidiary as of December 31, 1998
- --------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------------------------------
Investment in Belvedere Capital Fund
Company LLC -- 77.6%
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment in Belvedere Capital Fund Company LLC (Belvedere Capital) 3,718,814 $551,199,008
- --------------------------------------------------------------------------------------------------------
Total Investment in Belvedere Capital
(identified cost $524,102,381) $551,199,008
- --------------------------------------------------------------------------------------------------------
Partnership Preference Units -- 22.4%
Security Units Value
- --------------------------------------------------------------------------------------------------------
AMB Property II, L.P. (Delaware Limited Partnership affiliate
of AMB Property Corporation), 8.75% Series C Cumulative
Redeemable Preferred Units, Callable from 11/24/03+ 480,000 $ 24,768,000
CP Liimited Partnership (Maryland Limited Partnership affiliate
of Chateau Communities, Inc.), 8.125% Series A Cumulative
Redeemable Preferred Units, Callable from 4/20/03+ 440,000 21,252,880
Essex Portfolio L.P. (California Limited Partnership affiliate
of Essex Property Trust, Inc.), 9.125% Series C Cumulative
Redeemable Preferred Units, Callable from 11/24/03+ 420,000 21,781,200
Kilroy Realty, L.P. (Delaware Limited Partnership affiliate of
Kilroy Realty Corporation), 9.375% Series C Cumulative
Redeemable Preferred Units, Callable from 2/6/03+ 475,000 24,624,000
National Golf Operating Partnership, L.P. (Delaware Limited
Partnership affiliate of National Golf Properties, Inc.), 8%
Series A Cumulative Redeemable Preferred Units, Callable from
3/4/03+ 470,000 21,123,680
Prentiss Properties Acquisition Partners, L.P. (Delaware
Limited Partnership affiliate of Prentiss Properties Trust),
8.30% Series B Cumulative Redeemable Perpetual Preferred Units,
Callable from 6/25/03+ 525,000 25,068,750
Spieker Properties, L.P. (California Limited Partnership
affiliate of Spieker Properties, Inc.), 7.6875% Series D
Cumulative Redeemable Preferred Units, Callable from 4/20/03+ 450,000 20,653,200
- --------------------------------------------------------------------------------------------------------
Total Partnership Preference Units
(identified cost $155,290,940) $159,271,710
- --------------------------------------------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost $679,393,321) $710,470,718
- --------------------------------------------------------------------------------------------------------
+ Security Exempt from registration under the Securities Act of 1933. At December 31, 1998, the value
of these securities totaled $159,271,710, or 22.4% of investments.
See notes to consolidated financial statements
20
</TABLE>
<PAGE>
Belcrest Capital Fund LLC and Subsidiary as of December 31, 1998
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Consolidated Statement of
Assets and Liabilities
As of December 31, 1998
Assets
- -------------------------------------------------------------------------------
Investments, at value (identified cost, $679,393,321) $710,470,718
Cash 377,275
Dividends receivable 432,422
Deferred offering expenses 179,071
- -------------------------------------------------------------------------------
Total assets $711,459,486
- -------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------
Notes payable $165,000,000
Payable for swap contracts 665,067
Payable to affiliate for distribution fees 52,501
Payable to affiliate for investment advisory fees 20,360
Accrued expenses:
Interest expense 1,133,330
Organization, offering and other expenses 385,393
- -------------------------------------------------------------------------------
Total liabilities $167,256,651
- -------------------------------------------------------------------------------
Net Assets for 5,148,858 shares outstanding $544,202,835
- -------------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------------
Paid-in capital $514,896,671
Accumulated undistributed net realized loss on investments
(computed on the basis of identified cost) (233,937)
Accumulated distributions in excess of net investment income (872,229)
Unrealized appreciation of investments (computed on the basis
of identified cost) 30,412,330
- -------------------------------------------------------------------------------
Total $544,202,835
- -------------------------------------------------------------------------------
Net Asset Value and Redemption
Price Per Share
- -------------------------------------------------------------------------------
($544,202,835 / 5,148,858 shares outstanding) $ 105.69
- -------------------------------------------------------------------------------
<PAGE>
Consolidated Statement of Operations
For the Period Ended
December 31, 1998*
Investment Income
- -------------------------------------------------------------------------------
Dividends allocated from Belvedere Capital (net of foreign
taxes, $2,751) $ 549,615
Interest allocated from Belvedere Capital 132,508
Expenses allocated from Belvedere Capital (355,435)
- -------------------------------------------------------------------------------
Net investment income allocated from Belvedere Capital $ 326,688
Dividends from partnership preference units 977,110
- -------------------------------------------------------------------------------
Total investment income $ 1,303,798
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Investment advisory and administrative fee $ 179,998
Distribution and servicing fee 77,525
Interest expense 1,006,805
Organization expense 378,475
Interest expense on swap contracts 140,580
Legal and accounting services 139,836
Amortization of offering expenses 35,929
Printing and postage 5,443
Custodian and transfer agent fees 5,206
Miscellaneous 1,354
- -------------------------------------------------------------------------------
Total expenses $ 1,971,151
Reduction of investment adviser fee (52,501)
- -------------------------------------------------------------------------------
Net expenses $ 1,918,650
- -------------------------------------------------------------------------------
Net investment loss $ (614,852)
- -------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- -------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions from Belvedere Capital
(identified cost basis) $ (233,937)
- -------------------------------------------------------------------------------
Net realized loss $ (233,937)
- -------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment in Belvedere Capital (identified cost basis) $ 27,096,627
Investments in partnership preference units
(identified cost basis) 3,980,770
Interest rate swap contracts (665,067)
- -------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 30,412,330
- -------------------------------------------------------------------------------
Net realized and unrealized gain $ 30,178,393
- -------------------------------------------------------------------------------
Net increase in net assets from operations $ 29,563,541
- -------------------------------------------------------------------------------
* For the period from the start of business, November 24, 1998, to December
31, 1998.
See notes to consolidated financial statements
21
<PAGE>
Belcrest Capital Fund LLC and Subsidiary as of December 31, 1998
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- --------------------------------------------------------------------------------
Consolidated Statement of
Changes in Net Assets
Increase (Decrease) Period Ended
in Net Assets December 31, 1998*
- -------------------------------------------------------------------------------
Net investment loss $ (614,852)
Net realized loss on investment transactions (233,937)
Net change in unrealized appreciation of investments 30,412,330
- -------------------------------------------------------------------------------
Net increase in net assets from operations $ 29,563,541
- -------------------------------------------------------------------------------
Transactions in Fund shares --
Investment securities contributed $517,599,932
Less -- Selling commissions (2,577,428)
- -------------------------------------------------------------------------------
Net contributions $515,022,504
Net asset value of shares issued to shareholders in payment
of distributions declared 142,355
Net asset value of shares redeemed (278,288)
- -------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions $514,886,571
- -------------------------------------------------------------------------------
Distributions to shareholders --
In excess of net investment income $ (257,377)
- -------------------------------------------------------------------------------
Total distributions to shareholders $ (257,377)
- -------------------------------------------------------------------------------
Net increase in net assets $544,192,735
- -------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------
At beginning of period $ 10,100
- -------------------------------------------------------------------------------
At end of period $544,202,835
- -------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income included in net assets
- -------------------------------------------------------------------------------
At end of period $ (872,229)
- -------------------------------------------------------------------------------
* For the period from the start of business, November 24, 1998, to December
31, 1998.
<PAGE>
Consolidated Statement of Cash Flows
Increase (Decrease)
in Cash
For the Period Ended
December 31, 1998*
- -------------------------------------------------------------------------------
Cash Flows From (For) Operating Activities --
Net investment loss $ (614,852)
Adjustment to reconcile net investment loss to
net cash flows from (for) operations --
Amortization of offering expenses 35,929
Net investment income allocated from Belvedere Capital (326,688)
Payment of organization and offering expenses (215,000)
Increase in dividend receivable (432,422)
Increase in accrued interest and accrued operating expenses 1,591,584
Purchases of partnership preference units (155,290,940)
Net increase in investment in Belvedere Capital (6,687,986)
- -------------------------------------------------------------------------------
Net cash flows used for operating activities $(161,940,375)
- -------------------------------------------------------------------------------
Cash Flows From (For) Financing Activities --
Proceeds of loan $165,000,000
Payments on behalf of investors (selling commissions) (2,577,428)
Distributions paid (115,022)
- -------------------------------------------------------------------------------
Net cash flows from financing activities $162,307,550
- -------------------------------------------------------------------------------
Net increase in cash $ 367,175
- -------------------------------------------------------------------------------
Cash at Beginning of Period $ 10,100
- -------------------------------------------------------------------------------
Cash at End of Period $ 377,275
- -------------------------------------------------------------------------------
Supplemental Disclosure and Non-cash
Investing and Financing Activities
- -------------------------------------------------------------------------------
Securities contributed by Shareholders, invested in Belvedere
Capital $517,599,932
Unrealized appreciation of investments and open swap
contracts $ 30,412,330
Interest paid on loan $ 14,055
Market value of securities distributed in payment of
redemptions $ 278,288
- -------------------------------------------------------------------------------
* For the period from the state of business, November 24, 1998, to December
31, 1998.
See notes to consolidated financial statements
22
<PAGE>
Belcrest Capital Fund LLC and Subsidiary as of December 31, 1998
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 Significant Accounting Policies
- --------------------------------------------------------------------------------
Belcrest Capital Fund LLC (Belcrest 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 Belcrest Capital is to achieve long-term, after-tax returns for
Shareholders. Belcrest 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. Belcrest 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 Belcrest 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). Belcrest Capital's investment in partnership
preference units is achieved through its investment in Belcrest Realty
Corporation (BRC). BRC 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 December 31, 1998, BRC was a wholly-
owned subsidiary of the Fund.
The accompanying consolidated financial statements include the accounts of
Belcrest Capital and BRC (collectively, the Fund). All material intercompany
accounts and transactions have been eliminated. For informational purposes,
the Portfolio's audited schedule of investments as well as an unaudited
summary of its operations is included with these financial statements (see
Note 8). The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
A Investment Security Costs -- The Fund's investment assets were
principally acquired on November 24, 1998 through contributions of common
stock by Shareholders in exchange for Shares of the Fund and in private
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 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. As of December 31, 1998 the aggregate tax
basis of the Fund's investments was $189,481,416.
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
23
<PAGE>
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 -- Belcrest Capital, Belvedere Capital and the Portfolio are
treated as partnerships for federal income tax purposes. As a result,
Belcrest 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. Belcrest Realty expects to qualify as a REIT under the
Internal Revenue Code of 1986, as amended. Belcrest Realty will generally
not be subject to federal income tax to the extent that it distributes its
earnings to its stockholders and maintains its qualification as a REIT.
E Organization Costs and Deferred Offering Expenses -- Costs incurred by
the Fund in connection with its organization are being expensed as incurred.
Costs incurred by the Fund in connection with its offering are being
amortized over the Fund's offering period.
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 will
make 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.
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 that expire are
treated as realized gains. Premiums received from writing options that 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.
2 Distributions to Shareholders
- --------------------------------------------------------------------------------
Belcrest Capital 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
24
<PAGE>
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 period from the start of business,
November 24, 1998, to December 31, 1998, including contributions of
securities and cash in exchange for shares of the Fund were as follows:
Period Ended
December 31, 1998
--------------------------------------------------------------------------
Issued at Fund closing 5,150,225
Issued to shareholders electing to receive payment of
distributions in Fund shares 1,360
Redemptions (2,828)
--------------------------------------------------------------------------
Net increase 5,148,757
--------------------------------------------------------------------------
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 period from the start of
business, November 24, 1998, to December 31, 1998, the Investment Adviser
received $2,783 in redemption fees.
In connection with the offering of shares, Eaton Vance Distributors, Inc.
(EVD), the Placement Agent, received $2,577,428 in selling commissions paid
by the Fund on behalf of shareholders. EVD, in turn, paid this amount to the
applicable subagent on behalf of shareholders investing in the Fund through
such subagent. In addition, EVD made payments to subagents from its own
resources totaling $5,175,999, equal to 1.0% of the value of investments in
the Fund made through subagents.
4 Investment Transactions
- --------------------------------------------------------------------------------
Increases and decreases of the Fund's investment in Belvedere Capital for
the period from the start of business, November 24, 1998, to December 31,
1998 aggregated $525,037,381 and $3,605,179, respectively. Purchases of
partnership preference units aggregated $155,290,940 during the period,
including the purchase of partnership preference units with a value on the
date purchased of $86,540,940 from Belair Capital Fund LLC (Belair Capital),
a fund similar to the Fund that is sponsored by Eaton Vance Management
(EVM). There were no sales of partnership preference units during the
period. In addition, investments were distributed in payment of Fund shares
redeemed resulting in realized capital losses of $22,367 for book purposes.
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 period from the
Fund's start of business, November 24, 1998, to December 31, 1998 the
advisory fee applicable to the Portfolio was 0.46% of average net assets for
such period. Belvedere Capital's allocated portion of the advisory fee
amounted to $1,665,880, of which $242,154 was allocated to the Fund for the
period from the start of business, November 24, 1998, to December 31, 1998.
In addition, Belcrest 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 Belcrest Capital (including the value of all assets of the
Belcrest Capital other than Belcrest Capital's investment in BRC, minus the
sum of Belcrest Capital's liabilities other than the principal amount of
money borrowed) and BRC pays BMR a monthly management fee at a rate of 1/
20th of 1% (equivalent to 0.60% annually of the average daily gross
investment assets of BRC (including the value of all assets of BRC, minus
the sum of BRC's liabilities other than any BRC liability with respect to
Belcrest 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
period from the start of business, November 24, 1998, to December 31, 1998
the advisory and administrative fee payable to BMR by the Fund, less
25
<PAGE>
the Fund's allocated share of the Portfolio's advisory fee, totaled $179,998.
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 $561,466 for the period from
the Fund's start of business, November 24, 1998, to December 31, 1998, of
which $81,611 was allocated to Belcrest Capital. Pursuant to a servicing
agreement between Belcrest Capital and EVD, Belcrest Capital pays a
servicing fee to EVD on a quarterly basis at an annual rate of 0.20% of
Belcrest Capital's average daily net assets, less Belcrest Capital's
allocated share of the servicing fee payable by Belvedere Capital. For the
period from the start of business, November 24, 1998, to December 31, 1998,
the servicing fee paid directly by Belcrest Capital totaled $25,024. 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.
As compensation for its services as placement agent, Belcrest Capital pays
EVD a monthly distribution fee at an annual rate of 0.10% of the average
daily net assets of Belcrest Capital. For the period from the start of
Belcrest Capital's business on November 24, 1998 to December 31, 1998,
distribution fees paid or accrued to EVD totaled $52,501.
BMR has agreed to waive a portion of the monthly advisory and administrative
fee payable by Belcrest Capital to the extent that such fee, together with
the monthly distribution fee to EVD, exceeds an annual rate of 0.60% of the
average daily gross investment assets of Belcrest Capital, reduced by that
portion of the monthly advisory fee for such month payable by the Portfolio
which is attributable to the value of Belcrest Capital's investment in
Belvedere Capital. For the period from the start of business, November 24,
1998, to December 31, 1998, BMR has waived $52,501 of the advisory and
administrative fee of Belcrest Capital.
6 Credit Facility
- --------------------------------------------------------------------------------
The Fund has obtained a $300,000,000 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), 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 December 31, 1998, amounts outstanding under the
Credit Facility totaled $165,000,000.
7 Interest Rate Swap Agreements
- --------------------------------------------------------------------------------
The Fund may enter into interest rate swap agreements, in connection with
its investments in partnership preference units and associated borrowings.
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. As of
December 31, 1998, the Fund has entered into interest rate swap agreements
with Merrill Lynch Capital Services, Inc. (MLCS) with respect to each of its
holdings of partnership preference units and the associated borrowings. 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.
Initial
Optional Final
Effective Notional Fixed Floating Termination Termination Unrealized
Date Amount Rate Rate Date Date Depreciation
- --------------------------------------------------------------------------------
11/24/98 $20,644,750 6.33% Libor+.45% 2/24/03 11/24/05 $167,420
11/24/98 68,750,000 6.225% Libor+.45% 11/24/03 11/24/05 88,335
11/24/98 24,528,000 6.295% Libor+.45% 5/24/03 11/24/05 106,755
11/24/98 41,368,190 6.31% Libor+.45% 2/24/03 11/24/05 302,557
26
<PAGE>
8 Indirect Investment in Portfolio
- --------------------------------------------------------------------------------
Belvedere Capital's interest in the Portfolio at December 31, 1998, was
$3,771,343,746, representing 43.3% of the Portfolio's net assets. The Fund's
investment in Belvedere Capital at December 31, 1998 was $551,199,008,
representing 14.6% of Belvedere Capital's net assets.
Investment income allocated to Belvedere Capital from the Portfolio for the
period from the Fund's start of business, November 24, 1998, to December 31,
1998 totaled $4,704,826, of which $682,123 was allocated to the Fund.
Expenses allocated to Belvedere Capital from the Portfolio for the period
from the Fund's start of business, November 24, 1998, to December 31, 1998
totaled $1,792,438, of which $259,544 was allocated to the Fund. Belvedere
Capital allocated additional expenses to the Fund of $95,891 for the period
from the Fund's start of business, November 24, 1998, to December 31, 1998,
representing $14,280 of operating expenses and $81,611 of service fees (see
Note 5).
A summary of the Portfolio's Statement of Assets and Liabilities, at
December 31, 1998, and its operations for the period from the Fund's start
of business, November 24, 1998 to December 31, 1998 follows:
Investments, at value $8,713,317,160
Other Assets 7,040,200
-----------------------------------------------------------------------
Total Assets $8,720,357,360
Total Liabilities 15,498,025
-----------------------------------------------------------------------
Net Assets $8,704,859,335
-----------------------------------------------------------------------
Dividends and interest $ 10,687,029
-----------------------------------------------------------------------
Investment adviser fee (Note 5) $ 3,881,728
Other expenses 188,122
-----------------------------------------------------------------------
Total expenses $ 4,069,850
-----------------------------------------------------------------------
Net investment income $ 6,617,179
Net realized gains 12,024,862
Net unrealized gains 412,336,223
-----------------------------------------------------------------------
Net increase in net assets from operations $ 430,978,264
-----------------------------------------------------------------------
27
<PAGE>
<TABLE>
Tax-Managed Growth Portfolio as of December 31, 1998
- ----------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
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Common Stocks -- 94.7%
<CAPTION>
Security Shares Value
- ----------------------------------------------------------------------------------------------
Advertising and Marketing Services -- 2.6%
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ACNielsen Corp.(1) 45,668 $ 1,290,121
Advo, Inc.(1) 170,000 4,483,750
Harte-Hanks Communications, Inc. 144,604 4,121,214
Interpublic Group of Companies, Inc. 582,138 46,425,506
Omnicom Group, Inc. 2,298,418 133,308,243
R.H. Donelley Corp. 8,153 118,728
Snyder Communications, Inc.(1)(2) 442,500 14,929,397
Snyder Communications, Inc.(1)(2) 40,000 1,348,875
TMP Worldwide, Inc.(1) 43,000 1,806,000
True North Communications, Inc. 93,000 2,499,375
True North Communications, Inc.(2) 200,000 5,358,248
WPP Group PLC 488,000 2,969,626
Young and Rubicam, Inc.(1) 186,000 6,021,750
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$ 224,680,833
- ----------------------------------------------------------------------------------------------
Aerospace and Defense -- 0.2%
- ----------------------------------------------------------------------------------------------
Allied Signal, Inc. 25,000 $ 1,107,813
Boeing Company (The) 228,127 7,442,643
Raytheon Co., Class B 213,564 11,372,283
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$ 19,922,739
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Apparel & Textiles -- 0.0%
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Unifi, Inc. 50,000 $ 978,125
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$ 978,125
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Auto and Parts -- 0.9%
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Aftermarket Technology Corp.(1)(2) 46,000 $ 361,767
Borg-Warner Automotive, Inc. 225,000 12,557,813
DaimlerChrysler(1) 19,952 1,916,639
Ford Motor Co. 32,000 1,878,000
General Motors Corp. 3,969 284,032
Genuine Parts Co. 147,059 4,917,285
Harley-Davidson, Inc. 1,000 47,375
Magna International, Inc., Class A 875,000 54,250,000
Meritor Automotive, Inc. 61,133 1,295,255
SPX Corp.(1) 47,862 3,206,754
TRW, Inc. 2,000 112,375
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$ 80,827,295
- ----------------------------------------------------------------------------------------------
Banks - Money Center -- 0.1%
- ----------------------------------------------------------------------------------------------
Bank of Montreal 36,650 $ 1,470,581
Chase Manhattan Corp. 78,566 5,347,398
Morgan (J.P.) & Co., Inc. 1,000 105,063
National Westminster Bank PLC 8,753 1,037,231
- ----------------------------------------------------------------------------------------------
$ 7,960,273
- ----------------------------------------------------------------------------------------------
Banks - Regional -- 5.4%
- ----------------------------------------------------------------------------------------------
AmSouth Bancorporation 27,492 $ 1,254,323
Bank of Granite Corp. 22,500 621,563
Bank of New York Co., Inc. (The) 245,144 9,867,046
Bank One Corp. 839,254 42,854,407
Bank United Corp. 65,000 2,551,250
BankAmerica Corp. 611,569 36,770,586
BankBoston Corp. 1,502,000 58,484,125
BB&T Corp. 66,470 2,679,572
City National Corp. 100,000 4,162,500
Colonial Bancgroup, Inc. (The) 310,822 3,729,864
Comerica, Inc. 100,779 6,871,868
Community First Bancshares, Inc. 296,000 6,234,500
Community First Bancshares, Inc.(2) 72,000 1,514,604
Compass Bancshares, Inc. 171,112 6,512,951
Crestar Financial Corp. 83,348 6,001,056
Fifth Third Bancorp 126,710 9,036,007
First Citizens BancShares, Inc. 47,900 4,311,000
First Tennessee National Corp. 33,488 1,274,637
First Union Corp. 1,054,655 64,136,206
Fleet Financial Group, Inc. 114,972 5,137,811
Golden West Financial Corp. 7,000 641,813
Keycorp 422,594 13,523,008
Marshall and Ilsley Corp. 20,000 1,168,750
Mellon Bank Corp. 16,000 1,100,000
Mercantile Bancorporation, Inc. 168,462 7,770,310
National City Corp. 90,150 6,535,875
National Commerce Bancorporation(2) 159,632 3,002,076
Northern Trust Corp. 181,898 15,881,969
Old Kent Financial Corp. 33,000 1,534,500
PNC Bank Corp. 62,502 3,382,921
Regions Financial Corp. 49,300 1,987,406
Southwest Bancorporation of Texas, Inc.(1) 7,688 137,423
Sovereign Bancorp., Inc. 366,000 5,215,500
Summit Bancorp. 21,000 917,438
SunTrust Banks, Inc. 480 36,720
See notes to financial statements
28
<PAGE>
Security Shares Value
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Banks - Regional (continued)
- ----------------------------------------------------------------------------------------------
Synovus Financial 41,776 1,018,290
U.S. Bancorp. 155,474 5,519,327
Union Planters Corp. 56,875 2,577,148
Valley National Bancorp. 230,863 6,507,451
Wachovia Corp. 37,199 3,252,588
Washington Mutual, Inc. 143,506 5,480,135
Wells Fargo & Co. 2,714,048 108,392,291
Westamerica Bancorporation 82,596 3,035,403
Zions Bancorporation 20,000 1,247,500
- ----------------------------------------------------------------------------------------------
$ 473,871,718
- ----------------------------------------------------------------------------------------------
Beverages -- 1.5%
- ----------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 546,465 $ 35,861,766
Coca-Cola Company (The) 612,666 40,972,039
PepsiCo, Inc. 1,343,931 55,017,175
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$ 131,850,980
- ----------------------------------------------------------------------------------------------
Broadcasting and Cable -- 1.5%
- ----------------------------------------------------------------------------------------------
Clear Channel Communications, Inc.(1) 108,600 $ 5,918,700
Comcast Corp., Class A 62,500 3,667,969
Cox Communications, Inc., Class A(1) 193,319 13,363,176
Infinity Broadcasting Corp.(1) 34,500 944,438
Liberty Media Group, Class A(1) 91,828 4,229,827
MediaOne Group, Inc.(1) 1,259,024 59,174,128
Tele-Communications, Inc., Series A(1) 546,073 30,204,663
Univision Communications, Inc.(1) 200,649 7,260,986
Univision Communications, Inc.(1)(2) 183,556 6,634,130
- ----------------------------------------------------------------------------------------------
$ 131,398,017
- ----------------------------------------------------------------------------------------------
Building Materials and Tools -- 0.5%
- ----------------------------------------------------------------------------------------------
American Standard Companies, Inc.(1) 172,899 $ 6,224,364
CRH PLC 258,294 4,443,380
Interface, Inc. 484,412 4,495,973
Masco Corp. 228,662 6,574,033
Sherwin-Williams Co. (The) 44,670 1,312,181
Snap-On, Inc. 44,444 1,547,207
Valspar Corp. 620,000 23,133,750
Walter Industries, Inc.(1) 1,000 15,313
- ----------------------------------------------------------------------------------------------
$ 47,746,201
- ----------------------------------------------------------------------------------------------
Business Services - Miscellaneous -- 1.0%
- ----------------------------------------------------------------------------------------------
Cintas Corp. 131,244 $ 9,244,499
Corrections Corporation of America(1) 97,310 1,715,089
Fair, Issac and Co., Inc. 88,828 4,102,743
Fair, Issac and Co., Inc.(2) 150,000 6,922,352
Half (Robert) International, Inc.(1) 1,800 80,438
Manpower, Inc. 110,000 2,770,625
Metzler Group, Inc. (The)(1) 314,880 15,330,720
Metzler Group, Inc. (The)(1)(2) 273,312 13,291,353
Navigant International, Inc.(1) 59,631 458,413
Romac International, Inc.(1)(2) 45,546 1,013,061
ServiceMaster Co. 515,201 11,366,622
Staff Leasing, Inc.(1) 78,125 908,203
Staff Leasing, Inc.(1)(2) 78,125 906,992
Sylvan Learning Systems, Inc.(1) 509,469 15,538,805
Viad Corp. 40,314 1,224,538
- ----------------------------------------------------------------------------------------------
$ 84,874,453
- ----------------------------------------------------------------------------------------------
Chemicals -- 0.8%
- ----------------------------------------------------------------------------------------------
Bayer AG ADR 40,000 $ 1,670,348
Dow Chemical Co. (The) 21,318 1,938,606
DuPont (E.I.) de Nemours & Co. 223,800 11,875,388
Eastman Chemical Co. 123 5,504
Monsanto Co. 1,142,240 54,256,400
Octel Corp.(1) 8,322 115,468
Solutia, Inc. 200,336 4,482,518
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$ 74,344,232
- ----------------------------------------------------------------------------------------------
Communications Equipment -- 2.0%
- ----------------------------------------------------------------------------------------------
3Com Corp.(1) 902,883 $ 40,460,444
Ascend Communications, Inc.(1) 11,000 723,250
Comverse Technology, Inc.(1) 100,000 7,100,000
Dialogic Corp.(1) 80,000 1,572,504
General Cable Corp. 3,000 61,500
General Motors Corp., Class H(1) 300,000 11,906,250
L.M. Ericsson Telephone Co., ADR 452,000 10,819,750
Lucent Technologies, Inc. 19,369 2,130,590
Nokia Corp., Class A ADR 644,720 77,648,464
Northern Telecom Ltd. ADR 138,263 6,930,433
PairGain Technologies, Inc.(1) 350,581 2,695,091
Salient 3 Communications, Inc., Class A 78,125 712,891
Tellabs, Inc.(1) 151,623 10,395,652
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$ 173,156,819
- ----------------------------------------------------------------------------------------------
See notes to financial statements
29
<PAGE>
Communications Services -- 1.9%
- ----------------------------------------------------------------------------------------------
Airtouch Communications, Inc.(1) 1,420 $ 102,418
Aliant Communications, Inc. 86,322 3,528,412
Alltel Corp. 54,746 3,274,520
American Tower Corp., Class A(1) 149,451 4,418,145
Ameritech Corp. 28,968 1,835,847
AT&T Corp. 71,617 5,389,179
Bell Atlantic Corp. 8,448 447,744
BellSouth Corp. 43,912 2,190,111
Citizens Utilities Corp., Class B(1) 45,311 368,154
Frontier Corp. 32,129 1,092,386
GTE Corp. 12,176 791,440
GTE Corp.(2) 17,500 1,128,021
Intermedia Communications, Inc.(1) 113,637 1,960,238
ITC Deltacom, Inc.(1)(2) 628,773 9,536,050
IXC Communications, Inc.(1) 135,000 4,539,375
MCI Worldcom, Inc.(1) 1,422,741 102,081,666
McLeodUSA, Inc.(1) 57,143 1,785,719
McLeodUSA, Inc.(1)(2) 36,000 1,124,625
Nextel Communications, Inc., Class A(1) 75,830 1,791,484
Premiere Technologies, Inc.(1) 28,000 206,500
SBC Communications, Inc. 10,437 559,684
Sprint Corp. 1,885 158,576
Sprint Corp. (PCS Group)(1) 942 21,784
Tel-Save Holdings, Inc.(1) 247,376 4,143,548
Telecom Corp. of New Zealand Ltd. ADR 8,000 285,500
Teleglobe, Inc. 88,500 3,186,000
Telephone & Data Systems, Inc. 131,756 5,920,785
US West, Inc. 26,551 1,715,858
Winstar Communications, Inc.(1) 11,424 445,536
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$ 164,029,305
- ----------------------------------------------------------------------------------------------
Computer Software -- 2.9%
- ----------------------------------------------------------------------------------------------
Aspect Development, Inc.(1)(2) 100,000 $ 4,417,439
Baan Co., NV ADR(1) 223,926 2,351,223
BMC Software, Inc.(1) 8,000 356,500
Boole and Babbage, Inc.(1) 40,000 1,177,500
Cadence Design Systems, Inc.(1) 506,000 15,053,500
Computer Associates International, Inc. 854,500 36,423,063
Compuware Corp.(1) 1,400 109,375
CSG Systems International, Inc.(1) 20,558 1,624,082
HNC Software, Inc.(1) 329,814 13,336,854
HNC Software, Inc.(1)(2) 147,980 5,981,448
Intuit, Inc.(1) 285,917 20,728,983
Microsoft Corp.(1) 281,755 39,075,897
Oracle Corp.(1) 1,262,500 54,445,313
Parametric Technology Corp.(1) 94,600 1,537,250
PeopleSoft, Inc.(1) 354,174 6,707,170
Platinum Technology, Inc.(1) 155,000 2,964,375
Sapient Corp.(1) 323,876 18,137,056
Security Dynamics Technologies, Inc.(1) 40,000 920,000
Siebel Systems, Inc.(1) 118,000 4,004,625
Siebel Systems, Inc.(1)(2) 300,000 10,149,518
Sterling Commerce, Inc.(1) 2,388 107,460
Structural Dynamics Research Corp.(1) 675,000 13,415,625
Wind River Systems, Inc.(1) 21,622 1,016,234
Wind River Systems, Inc.(1)(2) 13,000 610,796
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$ 254,651,286
- ----------------------------------------------------------------------------------------------
Computers and Business Equipment -- 7.6%
- ----------------------------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 33,715 $ 282,363
Cisco Systems, Inc.(1) 1,026,251 95,248,920
Compaq Computer Corp. 38,490 1,614,174
Dell Computer Corp.(1) 3,800 278,113
Dell Computer Corp.(1)(2) 1,500,000 109,744,655
Dell Computer Corp.(1)(2) 150,512 10,999,533
EMC Corp.(1) 22,162 1,883,770
Fore Systems, Inc.(1) 222,250 4,069,953
Fore Systems, Inc.(1)(2) 38,466 703,528
Gateway 2000, Inc.(1)(2) 200,000 10,224,703
Gateway 2000, Inc.(1)(2) 200,000 10,190,578
Hewlett-Packard Co. 588,680 40,214,203
International Business Machines Corp. 154,198 28,488,081
Lexmark International Group, Inc.(1) 1,841,746 185,095,472
Seagate Technology, Inc.(1) 40,000 1,210,000
Sun Microsystems, Inc.(1) 3,500 299,688
Xerox Corp. 1,334,000 157,411,999
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$ 657,959,733
- ----------------------------------------------------------------------------------------------
Conglomerates -- 1.4%
- ----------------------------------------------------------------------------------------------
General Electric Co. 1,066,342 $ 108,833,529
General Electric Co.(2) 21,155 2,157,675
United Technologies Corp. 86,242 9,378,818
- ----------------------------------------------------------------------------------------------
$ 120,370,022
- ----------------------------------------------------------------------------------------------
See notes to financial statements
30
<PAGE>
Consumer Services -- 0.3%
- ----------------------------------------------------------------------------------------------
Block (H&R), Inc. 366,177 $ 16,477,965
Cendant Corp.(1) 187,999 3,583,731
Service Corp. International 130,389 4,962,931
Stewart Enterprises, Inc. 153,992 3,426,322
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$ 28,450,949
- ----------------------------------------------------------------------------------------------
Containers and Packaging -- 0.2%
- ----------------------------------------------------------------------------------------------
Sealed Air Corp.(1) 325,000 $ 16,595,313
Sonoco Products Co. 78,571 2,327,666
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$ 18,922,979
- ----------------------------------------------------------------------------------------------
Distribution Services -- 1.6%
- ----------------------------------------------------------------------------------------------
Airgas, Inc.(1) 536,219 $ 4,792,457
Cardinal Health, Inc. 747,356 56,705,637
School Specialty, Inc.(1) 66,257 1,416,234
Sysco Corp. 1,766,922 48,479,922
U.S. Foodservice, Inc.(1) 505,489 24,768,961
U.S. Foodservice, Inc.(1)(2) 66,438 3,252,749
US Office Products Co.(1) 149,077 577,674
Wilmar Industries, Inc.(1) 50,000 1,015,625
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$ 141,009,259
- ----------------------------------------------------------------------------------------------
Drugs -- 9.3%
- ----------------------------------------------------------------------------------------------
Abbott Laboratories 1,208,935 $ 59,237,814
Agouron Pharmaceuticals, Inc.(1) 355,077 20,860,774
Allergan, Inc. 50,000 3,237,500
American Home Products Corp. 4,600 259,038
Amgen, Inc.(1) 405,532 42,403,440
Astra AB, Class A 1,074,400 21,937,207
Astra AB, Class B ADR 160,000 3,310,000
Bristol-Myers Squibb Co. 383,255 51,284,310
Covance, Inc.(1) 81,250 2,366,406
Elan Corp., PLC ADR(1) 339,630 23,625,512
Genentech, Inc.(1) 80,000 6,375,000
Genzyme Corp., Class A(1) 970,000 48,257,500
Incyte Pharmaceuticals, Inc.(1)(2) 577,571 21,582,639
Incyte Pharmaceuticals, Inc.(1) 150,856 5,638,243
Incyte Pharmaceuticals, Inc.(1)(2) 328,053 12,257,303
Lilly (Eli) & Co. 825,448 73,361,690
Merck & Co., Inc. 597,415 88,230,727
Parexel International Corp.(1) 35,000 875,000
Pfizer, Inc. 881,021 110,513,071
Quintiles Transnational Corp.(1) 195,420 10,430,543
Schering-Plough Corp. 643,784 35,569,066
Sepracor, Inc.(1) 440,000 38,775,000
SmithKline Beecham PLC ADR 301,940 20,984,830
Teva Pharmaceutical Industries Ltd. ADR(2) 100,000 4,065,834
Vertex Pharmaceuticals, Inc.(1) 35,000 1,041,250
Warner-Lambert Co. 716,032 53,836,656
Watson Pharmaceuticals, Inc.(1) 599,550 37,696,706
Watson Pharmaceuticals, Inc.(1)(2) 122,888 7,720,144
- ----------------------------------------------------------------------------------------------
$ 805,733,203
- ----------------------------------------------------------------------------------------------
Electric Utilities -- 0.2%
- ----------------------------------------------------------------------------------------------
Central and South West Corp. 1,600 $ 43,900
Dominion Resources, Inc. 28,938 1,352,852
Duke Energy Corp. 1,800 115,313
New England Electric System 2,700 129,938
Teco Energy, Inc. 40,000 1,127,500
Texas Utilities Co. 250,196 11,681,026
- ----------------------------------------------------------------------------------------------
$ 14,450,529
- ----------------------------------------------------------------------------------------------
Electrical Equipment -- 0.5%
- ----------------------------------------------------------------------------------------------
American Power Conversion Corp.(1) 200,000 $ 9,687,500
AMP, Inc. 112,340 5,848,701
Emerson Electric Co. 159,148 9,628,454
Molex, Inc., Class A 90,066 2,870,854
Rockwell International Corp. 183,400 8,906,363
Sanmina Corp.(1)(2) 150,000 9,363,281
Thomas and Betts Corp. 22,963 994,585
- ----------------------------------------------------------------------------------------------
$ 47,299,738
- ----------------------------------------------------------------------------------------------
Electronics - Instruments -- 0.2%
- ----------------------------------------------------------------------------------------------
Dionex Corp.(1) 362,140 $ 13,263,378
Dionex Corp.(1)(2) 40,000 1,460,434
Waters Corp.(1) 29,580 2,580,855
X-Rite, Inc. 310,000 2,402,500
X-Rite, Inc.(2) 118,000 914,195
- ----------------------------------------------------------------------------------------------
$ 20,621,362
- ----------------------------------------------------------------------------------------------
See notes to financial statements
31
<PAGE>
Electronics - Semiconductors -- 2.6%
- ----------------------------------------------------------------------------------------------
Altera Corp.(1) 3,600 $ 219,150
Analog Devices, Inc.(1) 1,630,000 51,141,250
Burr-Brown Corp.(1) 600,000 14,062,500
Intel Corp. 857,173 101,628,573
KLA-Tencor Corp.(1) 36,000 1,561,500
Lam Research Corp.(1) 106,000 1,888,125
Level One Communications, Inc.(1) 31,129 1,105,080
Linear Technologies Corp. 66,000 5,911,125
Maxim Integrated Products Co.(1)(2) 20,664 895,311
Maxim Intergrated Products Co.(1) 40,000 1,747,500
Motorola, Inc. 137,188 8,377,042
National Semiconductor Corp.(1) 79,368 1,071,468
Smart Modular Technologies, Inc.(1) 60,000 1,665,000
Speedfam International, Inc.(1) 221,000 3,784,625
Texas Instruments, Inc. 337,948 28,915,676
Ultratech Stepper, Inc.(1) 245,129 3,922,064
Uniphase Corp.(1)(2) 25,932 1,798,433
- ----------------------------------------------------------------------------------------------
$ 229,694,422
- ----------------------------------------------------------------------------------------------
Engineering and Construction -- 0.1%
- ----------------------------------------------------------------------------------------------
Jacobs Engineering Group, Inc.(1) 162,455 $ 6,620,041
- ----------------------------------------------------------------------------------------------
$ 6,620,041
- ----------------------------------------------------------------------------------------------
Entertainment -- 0.6%
- ----------------------------------------------------------------------------------------------
Callaway Golf Co.(2) 35,715 $ 365,932
Disney (Walt) Co. 79,800 2,394,000
Fox Entertainment Group, Inc.(1) 275,500 6,939,156
Mattel, Inc. 20,995 478,948
Time Warner Inc.(2) 62,418 3,866,069
Time Warner Inc. 501,368 31,116,152
Viacom, Inc., Class A(1) 10,727 789,105
Viacom, Inc., Class B(1) 80,105 5,927,770
Westwood One(1)(2) 61,200 1,860,782
- ----------------------------------------------------------------------------------------------
$ 53,737,914
- ----------------------------------------------------------------------------------------------
Environmental Services -- 0.7%
- ----------------------------------------------------------------------------------------------
Allied Waste Industries, Inc.(1) 375,000 $ 8,859,375
Browning-Ferris Industries, Inc. 423,906 12,054,827
Eastern Environmental Services(1) 83,552 2,475,228
U.S. Filter Corp.(1) 160,412 3,669,425
Waste Management, Inc. 741,981 34,594,864
- ----------------------------------------------------------------------------------------------
$ 61,653,719
- ----------------------------------------------------------------------------------------------
Financial Services - Miscellaneous -- 3.4%
- ----------------------------------------------------------------------------------------------
American Express Co. 616,648 $ 63,052,257
Associates First Capital Corp. 600,000 25,425,000
Capital One Financial Corp. 73,411 8,442,265
Citigroup 1,395,960 69,100,019
Fannie Mae 940,805 69,619,569
FirstPlus Financial Group, Inc.(1) 120,000 330,000
Freddie Mac 352,900 22,739,994
Household International, Inc. 339,293 13,444,485
Providian Financial Corp. 266,261 19,969,538
- ----------------------------------------------------------------------------------------------
$ 292,123,127
- ----------------------------------------------------------------------------------------------
Foods -- 3.4%
- ----------------------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 143,775 $ 2,471,133
Bestfoods 22,400 1,192,800
Conagra, Inc. 326,199 10,275,269
Dean Foods Co. 150,944 6,160,402
Flowers Industries, Inc. 435,781 10,431,508
General Mills, Inc. 24,850 1,932,088
Keebler Food Products Co.(1) 40,000 1,505,000
Keebler Food Products Co.(1)(2) 31,480 1,180,744
Kellogg Co. 69,714 2,378,990
McCormick & Co., Inc. 623,058 21,067,149
Nabisco Holdings Corp., Class A 100,000 4,150,000
Pioneer Hi-Bred International, Inc. 952,171 25,708,617
Quaker Oats Co. (The) 39,942 2,376,549
Ralston Purina Group 74,659 2,417,085
Riviana Foods, Inc. 150,000 3,703,125
Riviana Foods, Inc.(2) 100,000 2,465,664
Sara Lee Corp. 1,155,944 32,583,172
Tyson Food, Inc. 870,276 18,493,365
Unilever ADR 1,652,000 137,012,749
Wrigley (Wm.) Jr. Co. 113,180 10,136,684
- ----------------------------------------------------------------------------------------------
$ 297,642,093
- ----------------------------------------------------------------------------------------------
Furniture and Appliances -- 0.5%
- ----------------------------------------------------------------------------------------------
HON Industries, Inc. 1,135,488 $ 27,180,744
HON Industries, Inc.(2) 134,930 3,228,810
Leggett & Platt, Inc. 298,328 6,563,216
Miller (Herman), Inc. 120,000 3,225,000
- ----------------------------------------------------------------------------------------------
$ 40,197,770
- ----------------------------------------------------------------------------------------------
See notes to financial statements
32
<PAGE>
Health Services -- 0.7%
- ----------------------------------------------------------------------------------------------
Aetna, Inc. 59,821 $ 4,703,426
Beverly Enterprises, Inc.(1) 357,143 2,410,715
Concentra Managed Care, Inc.(1) 410,257 4,384,622
FPA Medical Management, Inc.(1)(3) 315,000 3,150
Genesis Health Ventures, Inc.(1) 4,000 35,000
Health Management Associates, Inc., Class A(1) 361,170 7,810,301
HealthSouth Corp.(1) 146,000 2,253,875
Integrated Health Services, Inc. 50,000 706,250
Magellan Health Services, Inc.(1) 50,000 418,750
MedPartners, Inc.(1) 17,696 92,904
Omnicare, Inc. 25,650 891,338
Orthodontic Centers of America, Inc.(1) 100,000 1,943,750
Pacificare Health Systems, Inc., Class B(1) 19,500 1,550,250
PhyCor, Inc.(1) 312,500 2,128,906
Quest Diagnostics, Inc.(1) 15,625 278,320
Quorum Health Group, Inc.(1) 55,733 721,046
Renal Care Group, Inc.(1) 175,282 5,050,313
Renal Care Group, Inc.(1)(2) 196,225 5,646,195
Response Oncology, Inc.(1) 44,761 181,842
Sunrise Assisted Living, Inc.(1) 210,000 10,893,750
Sunrise Assisted Living, Inc.(1)(2) 140,000 7,259,232
United HealthCare Corp. 20,000 861,250
Vencor, Inc.(1) 25,600 115,200
- ----------------------------------------------------------------------------------------------
$ 60,340,385
- ----------------------------------------------------------------------------------------------
Household Products -- 2.7%
- ----------------------------------------------------------------------------------------------
Avon Products, Inc. 8,700 $ 384,975
Blyth Industries, Inc.(1) 522,000 16,312,500
Blyth Industries, Inc.(1)(2) 40,000 1,249,583
Blyth Industries, Inc.(1)(2) 20,000 624,167
Colgate-Palmolive Co. 54,337 5,046,549
Fortune Brands, Inc. 67,500 2,134,688
Gillette Co. 2,632,556 127,185,361
Helen of Troy Ltd.(1) 65,000 954,688
Kimberly-Clark Corp. 551,168 30,038,656
Procter & Gamble Co. 410,462 37,480,311
Rubbermaid, Inc. 463,920 14,584,485
- ----------------------------------------------------------------------------------------------
$ 235,995,963
- ----------------------------------------------------------------------------------------------
Industrial Equipment -- 0.7%
- ----------------------------------------------------------------------------------------------
Dover Corp. 355,445 $ 13,018,173
DT Industries, Inc. 37,728 594,216
Federal Signal Corp. 283,471 7,760,019
Illinois Tool Works, Inc. 169,010 9,802,580
Parker-Hannifin Corp. 150,898 4,941,910
Regal Beloit Corp. 265,000 6,095,000
Tecumseh Products Co., Class A 156,420 7,293,083
Tyco International Ltd. 98,730 7,447,944
- ----------------------------------------------------------------------------------------------
$ 56,952,925
- ----------------------------------------------------------------------------------------------
Information Services -- 4.7%
- ----------------------------------------------------------------------------------------------
Acxiom Corp.(1) 407,088 $ 12,619,728
America Online, Inc.(1) 21,600 3,456,000
At Home Corp., Series A(1)(2) 20,291 1,478,584
At Home Corp., Series A(1)(2) 100,000 7,373,953
Automatic Data Processing, Inc. 1,856,243 148,847,485
Aztec Technology Partners(1) 119,262 432,324
Bell and Howell Co.(1) 115,000 4,348,438
BISYS Group, Inc. (The)(1) 53,873 2,781,194
Ceridian Corp.(1) 90,500 6,318,031
Computer Sciences Corp. 650,202 41,897,391
DST Systems, Inc.(1)(2) 93,000 5,302,390
Dun and Bradstreet Corp. (The) 40,768 1,286,740
Electronic Data Systems Corp. 155,000 7,788,750
Equifax, Inc. 40,000 1,367,500
First Data Corp. 282,761 8,959,989
HBO and Co. 27,599 791,746
IDX Systems Corp.(1)(2) 35,000 1,538,717
IDX Systems Corp.(1)(2) 25,000 1,096,572
IMS Health, Inc. 249,006 18,784,390
Lason, Inc.(1)(2) 165,000 9,597,737
Lason, Inc.(1)(2) 190,000 11,040,884
National Data Corp. 81,333 3,959,900
Nielsen Media Research 83,002 1,494,036
Nova Corp.(1) 75,758 2,627,856
Paychex, Inc. 87,976 4,525,266
Reuters Holdings PLC ADR 273,945 17,361,264
Reynolds & Reynolds, Inc., Class A 235,989 5,412,998
Saville Systems PLC ADR(1) 320,000 6,080,000
Saville Systems PLC ADR(1)(2) 99,197 1,882,387
Saville Systems PLC ADR(1)(2) 297 5,635
SunGard Data Systems, Inc.(1) 1,732,319 68,751,409
- ----------------------------------------------------------------------------------------------
$ 409,209,294
- ----------------------------------------------------------------------------------------------
See notes to financial statements
33
<PAGE>
Insurance -- 6.6%
- ----------------------------------------------------------------------------------------------
20th Century Industries 70,700 $ 1,639,356
Aegon, N.V. ADR 96,504 11,797,614
Allmerica Financial Corp. 1,500 86,813
Allstate Corp. (The) 170,416 6,582,318
American General Corp. 91,153 7,109,934
American International Group, Inc. 427,911 41,346,901
AON Corp. 78,949 4,371,801
Berkshire Hathaway, Inc., Class A(1) 80 5,600,000
Berkshire Hathaway, Inc., Class B(1) 38,078 89,482,900
Chubb Corp. 101,050 6,555,619
Conseco, Inc.(2) 100,000 3,052,175
Delphi Financial Group, Inc.(1) 40,800 2,139,450
Gallagher (A.J.) and Co. 35,000 1,544,375
HSB Group, Inc. 75,000 3,079,688
Jefferson-Pilot Corp. 38,267 2,870,025
Kansas City Life Insurance Co. 35,400 2,893,950
Lab Holdings, Inc. 35,960 629,300
Marsh & McLennan Cos., Inc. 2,138,866 124,989,981
Mercury General Corp. 2,000 87,625
Mutual Risk Management Ltd. 1,043,500 40,826,938
Progressive Corp. 190,000 32,181,250
Protective Life Corp. 64,346 2,561,775
Safeco Corp. 12,122 520,488
St. Paul Cos., Inc. (The) 275,532 9,574,737
SunAmerica, Inc. 1,810,644 146,888,494
Torchmark Corp. 222,850 7,869,391
Transamerica Corp. 52,304 6,041,112
UICI(1) 57,257 1,402,797
UICI(1) 180,000 4,410,000
UNUM Corp. 152,200 8,884,675
- ----------------------------------------------------------------------------------------------
$ 577,021,482
- ----------------------------------------------------------------------------------------------
Investment Services -- 0.7%
- ----------------------------------------------------------------------------------------------
E*Trade Group, Inc.(1)(2) 100,000 $ 4,634,268
Merrill Lynch & Co., Inc. 349,756 23,346,213
Morgan Stanley Dean Witter & Co. 300,431 21,330,601
Morgan Stanley Dean Witter & Co.(2) 52,000 3,687,385
Price (T. Rowe) Associates, Inc. 86,716 2,970,023
Schwab (Charles) and Co., Inc. 66,750 3,750,516
Waddell & Reed Financial, Inc., Class A 12,680 300,358
Waddell & Reed Financial, Inc., Class B 54,575 1,268,869
- ----------------------------------------------------------------------------------------------
$ 61,288,233
- ----------------------------------------------------------------------------------------------
Lodging and Gaming -- 0.2%
- ----------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.(2) 500,000 $ 18,433,400
Sunterra Corp.(1)(2) 50,000 749,188
- ----------------------------------------------------------------------------------------------
$ 19,182,588
- ----------------------------------------------------------------------------------------------
Medical Products -- 5.8%
- ----------------------------------------------------------------------------------------------
Allegiance Corp. 45,322 $ 2,113,138
Ballard Medical Products 519,966 12,641,673
Bausch & Lomb, Inc. 115,804 6,948,240
Baxter International, Inc. 1,266,028 81,421,425
Becton, Dickinson and Co. 7,265 310,125
Becton, Dickinson and Co.(2) 28,980 1,236,589
Boston Scientific Corp.(1) 1,979,700 53,080,706
Dentsply International, Inc. 42,000 1,081,500
ESC Medical Systems Ltd.(1) 30,000 315,000
ESC Medical Systems Ltd.(1)(2) 150,000 1,571,063
Guidant Corp. 100,000 11,025,000
Heartport, Inc.(1) 41,026 241,028
Hillenbrand Industries, Inc. 647,898 36,849,199
Johnson & Johnson Co. 1,575,542 132,148,584
Medtronics, Inc. 1,086,048 80,639,063
Schein (Henry) Corp.(1)(2) 271,494 12,100,759
Schein (Henry), Corp.(1) 555,700 24,867,575
Schein (Henry), Corp.(1)(2) 17,000 759,799
Schein (Henry), Corp.(1)(2) 281,000 12,557,984
Sofamor Danek Group, Inc.(1) 223,000 27,150,250
St. Jude Medical, Inc.(1) 42,144 1,166,862
Steris Corp.(1) 78,394 2,229,329
- ----------------------------------------------------------------------------------------------
$ 502,454,891
- ----------------------------------------------------------------------------------------------
Metals - Gold -- 0.0%
- ----------------------------------------------------------------------------------------------
Freeport-McMoran Copper & Gold, Inc. 6,000 $ 62,625
- ----------------------------------------------------------------------------------------------
$ 62,625
- ----------------------------------------------------------------------------------------------
Metals - Industrial -- 0.0%
- ----------------------------------------------------------------------------------------------
Cyprus Amax Minerals Co. 20,950 $ 209,500
Nucor Corp.(2) 22,648 979,199
- ----------------------------------------------------------------------------------------------
$ 1,188,699
- ----------------------------------------------------------------------------------------------
Minerals and Fertilizer -- 0.0%
- ----------------------------------------------------------------------------------------------
Mississippi Chemical Corp. 272,180 $ 3,810,520
- ----------------------------------------------------------------------------------------------
$ 3,810,520
- ----------------------------------------------------------------------------------------------
See notes to financial statements
34
<PAGE>
Natural Gas Distribution -- 0.1%
- ----------------------------------------------------------------------------------------------
Columbia Energy Group 1 $ 29
Dynegy, Inc. 290,000 3,171,875
KN Energy, Inc. 20,000 727,500
National Fuel Gas Co. 2,000 90,375
Sonat, Inc. 107,200 2,901,100
- ----------------------------------------------------------------------------------------------
$ 6,890,879
- ----------------------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 1.1%
- ----------------------------------------------------------------------------------------------
Baker Hughes, Inc. 739,234 $ 13,075,201
Core Laboratories(1)(2) 560,000 10,668,767
Halliburton Co. 1,501,550 44,483,419
National-Oilwell, Inc.(1) 50,000 559,375
National-Oilwell, Inc.(1)(2) 416,400 4,652,264
Newpark Resources, Inc.(1) 110,000 749,375
Noble Drilling, Inc.(1) 170,000 2,199,375
Patterson Energy, Inc.(1) 200,000 812,500
Schlumberger Ltd. 367,470 16,949,554
Syntroleum Corp.(1) 2,735 16,923
Weatherford International(1) 56,750 1,099,531
- ----------------------------------------------------------------------------------------------
$ 95,266,284
- ----------------------------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 1.0%
- ----------------------------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,204,000 $ 68,048,499
Apache Corp. 127,003 3,214,763
Burlington Resources, Inc. 119,335 4,273,685
El Paso Energy Corp. 45,000 1,566,563
Oryx Energy Co.(1) 369,103 4,959,822
Triton Energy, Ltd.(1) 700 5,556
Union Pacific Resources Group, Inc. 79,795 723,142
USX-Marathon Group 50,005 1,506,401
- ----------------------------------------------------------------------------------------------
$ 84,298,431
- ----------------------------------------------------------------------------------------------
Oil and Gas - Integrated -- 1.2%
- ----------------------------------------------------------------------------------------------
Amoco Corp. 299,345 $ 17,661,355
Atlantic Richfield Co. 41,766 2,725,232
British Petroleum Co. PLC ADR 512 48,640
Chevron Corp. 55,600 4,611,325
Exxon Corp. 222,963 16,304,169
Mobil Corp. 450,645 39,262,446
Murphy Oil Corp. 29,700 1,225,125
Pennzoil-Quaker State Co. 74,458 1,102,907
Royal Dutch Petroleum Co. 33,417 1,599,839
Texaco, Inc. 700 37,013
Tosco Corp.(2) 314,619 8,138,053
Tosco Corp.(2) 300,000 7,738,307
- ----------------------------------------------------------------------------------------------
$ 100,454,411
- ----------------------------------------------------------------------------------------------
Paper and Forest Products -- 0.6%
- ----------------------------------------------------------------------------------------------
Caraustar Industries, Inc. 224,961 $ 6,425,449
Champion International Corp. 20,203 818,222
Fort James Corp. 56,401 2,256,040
Georgia-Pacific Corp. - G-P Group 305,098 17,867,302
Georgia-Pacific Corp. - G-P Group(2) 14,133 826,974
Georgia-Pacific Corp. - Timber Group 305,098 7,265,146
Louisiana Pacific Corp. 55,364 1,013,853
Mead Corporation (The) 38,768 1,136,387
Union Camp Corp. 80,309 5,420,858
Weyerhaeuser Co. 101,205 5,142,479
Willamette Industries, Inc. 53,000 1,775,500
- ----------------------------------------------------------------------------------------------
$ 49,948,210
- ----------------------------------------------------------------------------------------------
Photography -- 0.1%
- ----------------------------------------------------------------------------------------------
Eastman Kodak Co. 64,225 $ 4,624,200
- ----------------------------------------------------------------------------------------------
$ 4,624,200
- ----------------------------------------------------------------------------------------------
Printing and Business Products -- 0.7%
- ----------------------------------------------------------------------------------------------
American Business Products, Inc. 261,355 $ 6,141,843
Avery Dennison Corp. 803,004 36,185,368
Bowne & Co., Inc. 172,640 3,085,940
Consolidated Graphics, Inc.(1) 35,064 2,369,012
Consolidated Graphics, Inc.(1)(2) 35,151 2,367,488
Consolidated Graphics, Inc.(1)(2) 35,977 2,424,571
Corporate Express, Inc.(1) 92,486 479,771
Danka Business Systems, PLC ADR 1,000 4,188
Deluxe Corp. 80,675 2,949,680
Donnelley (R.R.) & Sons Co. 32,896 1,441,256
Harland (John H.) Co. 51,540 814,976
Ikon Office Solutions, Inc. 115,500 988,969
Workflow Management, Inc.(1) 79,508 526,740
- ----------------------------------------------------------------------------------------------
$ 59,779,802
- ----------------------------------------------------------------------------------------------
See notes to financial statements
35
<PAGE>
Publishing -- 1.2%
- ----------------------------------------------------------------------------------------------
Belo (A.H.) Corp. 110,220 $ 2,197,511
Dow Jones & Co., Inc. 376,300 18,109,438
Gannett Co., Inc. 280,900 18,118,050
Houghton Mifflin Co. 97,400 4,602,150
McGraw-Hill Companies, Inc. (The) 455,608 46,415,065
Meredith Corp. 190,000 7,196,250
The MacClatchy Co., Class A 48,066 1,700,335
Times Mirror Co., Class A 151,670 8,493,520
- ----------------------------------------------------------------------------------------------
$ 106,832,319
- ----------------------------------------------------------------------------------------------
Real Estate -- 0.5%
- ----------------------------------------------------------------------------------------------
Avalonbay Communities, Inc. 55,000 $ 1,883,750
Catellus Development Corp.(1) 290,000 4,150,625
Equity Office Properties Trust 2,812 67,488
Grubb and Ellis Co.(1)(2) 100,000 805,242
LaSalle Partners, Inc.(1)(2) 213,193 6,273,777
Patriot America Hospitality, Inc. 132,212 793,272
Redwood Trust, Inc. 71,710 1,003,940
Rouse Co. (The) 127,700 3,511,750
Trammell Crow Co.(1)(2) 876,098 24,500,081
Ventas, Inc.(1) 25,600 312,000
- ----------------------------------------------------------------------------------------------
$ 43,301,925
- ----------------------------------------------------------------------------------------------
Restaurants -- 1.1%
- ----------------------------------------------------------------------------------------------
Bob Evans Farms, Inc. 48,193 $ 1,256,030
Boston Chicken, Inc.(1)(3) 38,500 385
Brinker International, Inc.(1) 435,034 12,561,607
CKE Restaurants, Inc.(2) 110,000 3,237,046
CKE Restaurants, Inc.(2) 11,000 323,381
Lone Star Steakhouse and Saloon, Inc.(1) 145,981 1,341,200
Lone Star Steakhouse and Saloon, Inc.(1)(2) 200,000 1,835,203
McDonald's Corp. 270,607 20,735,261
Outback Steakhouse, Inc.(1) 77,101 3,074,402
Outback Steakhouse, Inc.(1)(2) 130,181 5,184,479
Outback Steakhouse, Inc.(1)(2) 250,000 9,955,458
Papa John's International, Inc.(1) 25,807 1,138,734
Papa John's International, Inc.(1)(2) 51,744 2,280,350
Sonic Corp.(1)(2) 47,338 1,176,061
Starbucks Corp.(1) 342,000 19,194,750
Tricon Global Restaurants, Inc.(1) 175,767 8,810,321
- ----------------------------------------------------------------------------------------------
$ 92,104,668
- ----------------------------------------------------------------------------------------------
Retail - Food and Drug -- 4.6%
- ----------------------------------------------------------------------------------------------
Albertson's, Inc. 2,340,219 $ 149,042,697
Albertson's, Inc.(2) 10,000 634,890
CVS Corp. 2,176,571 119,711,404
General Nutrition Companies, Inc.(1) 44,460 722,475
Hannaford Brothers Co. 30,849 1,634,997
Kroger Co. (The)(1) 22,800 1,379,400
Rite Aid Corp. 6,000 297,375
Safeway, Inc.(1) 1,777,501 108,316,466
Walgreen Co. 13,750 805,234
Whole Foods Market, Inc.(1) 90,000 4,353,750
Winn-Dixie Stores, Inc. 320,221 14,369,917
- ----------------------------------------------------------------------------------------------
$ 401,268,605
- ----------------------------------------------------------------------------------------------
Retail - General -- 1.8%
- ----------------------------------------------------------------------------------------------
99 Cents Only Stores(1)(2) 428,337 $ 21,033,989
Casey's General Stores, Inc.(2) 75,000 976,529
Department 56, Inc.(1) 190,000 7,136,875
Department 56, Inc.(1)(2) 29,404 1,101,045
Dollar General Corp. 25,625 605,391
Dollar Tree Stores, Inc.(1) 292,500 12,778,594
Dollar Tree Stores, Inc.(1)(2) 247,792 10,821,805
Harcourt General, Inc. 216,416 11,510,626
May Department Stores Co. (The) 104,258 6,294,577
Nordstrom, Inc. 27,610 957,722
Penney (J.C.) Company, Inc. 1,117,673 52,390,922
Wal-Mart Stores, Inc. 428,060 34,860,136
- ----------------------------------------------------------------------------------------------
$ 160,468,211
- ----------------------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 2.8%
- ----------------------------------------------------------------------------------------------
Abercrombie and Fitch Co., Class A(1) 2,802 $ 198,242
Burlington Coat Factory Warehouse Corp. 543,600 8,867,475
Home Depot, Inc. (The) 2,517,746 154,054,582
Limited, Inc. (The) 205,000 5,970,625
Lowe's Companies 60,000 3,071,250
Office Depot, Inc.(1) 140,000 5,171,250
OfficeMax, Inc.(1) 672,867 8,242,621
Pep Boys - Manny, Moe & Jack (The) 35,476 556,530
Pep Boys - Manny, Moe & Jack (The)(2) 62,500 980,142
Pier 1 Imports, Inc.(2) 150,000 1,451,914
Pier 1 Imports, Inc.(2) 75,000 725,654
Pier 1 Imports, Inc.(2) 125,000 1,207,163
Republic Industries, Inc.(1) 2,719,023 40,105,589
Staples, Inc.(1) 150,000 6,553,125
Tandy Corp. 60,000 2,471,250
Tiffany and Co. 22,000 1,141,250
TJX Companies, Inc. (The) 50,000 1,450,000
Toys "R" Us, Inc.(1) 73,255 1,236,178
- ----------------------------------------------------------------------------------------------
$ 243,454,840
- ----------------------------------------------------------------------------------------------
See notes to financial statements
36
<PAGE>
Specialty Chemicals and Materials -- 1.3%
- ----------------------------------------------------------------------------------------------
Corning, Inc. 130,000 $ 5,850,000
Dexter Corp. (The) 36,139 1,136,120
Ecolab, Inc. 2,063,536 74,674,208
International Flavors & Fragrances, Inc. 148,101 6,544,213
International Specialty Products, Inc.(1) 59,000 800,188
MacDermid, Inc. 30,000 1,173,750
Millipore Corp. 101,440 2,884,700
Minnesota Mining & Manufacturing Co. 42,731 3,039,242
Morton International, Inc. 34,000 833,000
Nalco Chemical Co. 224,852 6,970,412
Pall Corp. 216,000 5,467,500
RPM, Inc. 70,138 1,122,208
- ----------------------------------------------------------------------------------------------
$ 110,495,541
- ----------------------------------------------------------------------------------------------
Tobacco -- 0.2%
- ----------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 249,706 $ 13,359,271
- ----------------------------------------------------------------------------------------------
$ 13,359,271
- ----------------------------------------------------------------------------------------------
Transportation -- 0.4%
- ----------------------------------------------------------------------------------------------
Arnold Industries, Inc. 148,543 $ 2,395,256
Burlington Northern Santa Fe Corp. 188,799 6,371,966
Coach USA, Inc.(1) 168,889 5,858,337
Coach USA, Inc.(1)(2) 185,676 6,438,704
FDX Corp.(1) 93,723 8,341,347
Heartland Express, Inc.(1) 250,000 4,375,000
Union Pacific Corp. 92,081 4,149,400
- ----------------------------------------------------------------------------------------------
$ 37,930,010
- ----------------------------------------------------------------------------------------------
Trucks and Parts -- 0.0%
- ----------------------------------------------------------------------------------------------
Paccar, Inc. 46,602 $ 1,916,507
- ----------------------------------------------------------------------------------------------
$ 1,916,507
- ----------------------------------------------------------------------------------------------
Total Common Stocks
(identified cost $5,715,068,624) $8,246,680,855
- ----------------------------------------------------------------------------------------------
Put Options Purchased -- 0.0%
Security Shares Value
- ----------------------------------------------------------------------------------------------
Computers and Business Equipment -- 0.0%
- ----------------------------------------------------------------------------------------------
Dell Computer, Expires 1/16/99, Strike Price 45 250,000 $ 31,250
Dell Computer, Expires 1/16/99, Strike Price 50 250,000 15,625
Dell Computer, Expires 2/20/99, Strike Price 50 250,000 195,313
Dell Computer, Expires 2/20/99, Strike Price 55 500,000 562,500
- ----------------------------------------------------------------------------------------------
$ 804,688
- ----------------------------------------------------------------------------------------------
Total Put Options Purchased
(identified cost $5,771,939) $ 804,688
- ----------------------------------------------------------------------------------------------
Rights -- 0.0%
Oil and Gas - Exploration and Production -- 0.0%
- ----------------------------------------------------------------------------------------------
Triton Energy, Ltd.(1) 51 $ 0
- ----------------------------------------------------------------------------------------------
$ 0
- ----------------------------------------------------------------------------------------------
Total Rights
(identified cost $0) $ 0
- ----------------------------------------------------------------------------------------------
Convertible Preferred Stocks -- 0.4%
Entertainment -- 0.4%
- ----------------------------------------------------------------------------------------------
Time Warner Inc., Series J(3) 100,187 $ 26,526,391
Time Warner Inc., Series J(2)(3) 21,410 5,657,362
- ----------------------------------------------------------------------------------------------
$ 32,183,753
- ----------------------------------------------------------------------------------------------
Financial - Miscellaneous -- 0.0%
- ----------------------------------------------------------------------------------------------
American General Corp., Series D 21,474 $ 1,406,547
- ----------------------------------------------------------------------------------------------
$ 1,406,547
- ----------------------------------------------------------------------------------------------
Insurance -- 0.0%
- ----------------------------------------------------------------------------------------------
Aetna, Inc., Series C 449 $ 34,152
- ----------------------------------------------------------------------------------------------
$ 34,152
- ----------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $14,428,021) $ 33,624,452
- ----------------------------------------------------------------------------------------------
See notes to financial statements
37
<PAGE>
Commercial Paper -- 4.3%
Face Amount
Name of Company (000's omitted) Value
- ----------------------------------------------------------------------------------------------
American Express Credit Corp.,
6.00%, 1/8/99 $76,827 $ 76,737,368
Associates Corp. of North America,
5.25%, 1/4/99 37,141 37,124,751
Corporate Receivables Corp.,
5.50%, 1/8/99 30,000 29,967,917
Ford Motor Credit Co.,
5.53%, 1/8/99 77,696 77,612,455
General Electric Capital Co.,
5.50%, 1/4/99 56,607 56,581,055
Prudential Funding Corp.,
5.80%, 1/8/99 95,000 94,892,861
- ----------------------------------------------------------------------------------------------
Total Commercial Paper
(identified cost $372,916,407) $ 372,916,407
- ----------------------------------------------------------------------------------------------
Short-Term Investments -- 0.7%
- ----------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
4.50%, 1/4/99 $59,313 $ 59,290,758
- ----------------------------------------------------------------------------------------------
Total Short-Term Investments
(identified cost $59,290,758) $ 59,290,758
- ----------------------------------------------------------------------------------------------
Total Investments -- 100.1%
(identified cost $6,167,475,749) $8,713,317,160
- ----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities -- (0.1)% $ (8,457,825)
- ----------------------------------------------------------------------------------------------
Net Assets -- 100.0%
$8,704,859,335
- ----------------------------------------------------------------------------------------------
ADR -- American Depositary Receipt.
(1) Non-income producing security.
(2) Security restricted from resale for a period not exceeding one year. At December 31, 1998,
the value of these securities totaled $565,804,292 or 6.5% of net assets.
(3) Security valued at fair value using methods determined in good faith by or at the direction
of the Trustees.
See notes to financial statements
38
</TABLE>
<PAGE>
Belcrest Capital Fund LLC and Subsidiary as of December 31, 1998
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
To the Shareholders of
Belcrest Capital Fund LLC
- -------------------------------------------------------------------------------
We have audited the accompanying consolidated statement of assets and
liabilities, including the portfolio of investments, of Belcrest Capital Fund
LLC and Belcrest Realty Corporation (collectively, the "Fund"), as of December
31, 1998, and the related consolidated statements of operations, changes in
net assets and cash flows for the period from the start of business, November
24, 1998, to December 31, 1998. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on the financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation
of securities owned at December 31, 1998, by correspondence with the
custodian; for certain securities that were out for registration, we confirmed
such securities with the agent processing the registration. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of the Fund at December 31,
1998, the results of its consolidated operations, the consolidated changes in
its net assets and its consolidated cash flows for the period from the start
of business, November 24, 1998, to December 31, 1998 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 12, 1999
39
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS
INVESTMENT IN BELVEDERE CAPITAL FUND
COMPANY LLC -- 81.1%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Investment in Belvedere
Capital Fund Company LLC
(Belvedere Capital) 23,617,752 $4,080,817,015
- ----------------------------------------------------------------
Total Investment in
Belvedere Capital
(identified cost
$3,563,746,498) $4,080,817,015
- ----------------------------------------------------------------
</TABLE>
PARTNERSHIP PREFERENCE UNITS -- 18.9%
<TABLE>
<CAPTION>
SECURITY UNITS VALUE
<S> <C> <C>
- ----------------------------------------------------------------
AMB Property II, L.P.
(Delaware Limited
Partnership affiliate of AMB
Property Corporation), 8.75%
Series C Cumulative
Redeemable Preferred Units,
Callable from 11/24/03+ 1,400,000 $ 62,076,000
Bradley Operating Limited
Partnership (Delaware
Limited Partnership
affiliate of Bradley Real
Estate, Inc.), 8.875%
Series B Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 2/23/04+ 1,726,608 35,827,116
Cabot Industrial Properties,
L.P. (Delaware Limited
Partnership affiliate of
Cabot Industrial Trust),
8.625% Series B Cumulative
Redeemable Preferred Units,
Callable from 4/29/04+ 740,000 31,073,340
Camden Operating, L.P.
(Delaware Limited
Partnership affiliate of
Camden Property Trust),
8.50% Series B Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 2/23/04+ 2,855,000 59,815,105
CP Limited Partnership
(Maryland Limited
Partnership affiliate of
Chateau Communities, Inc.),
8.125% Series A Cumulative
Redeemable Preferred Units,
Callable from 4/20/03+ 930,000 36,517,380
Colonial Realty Limited
Partnership (Delaware
Limited Partnership
affiliate of Colonial
Properties Trust), 8.875%
Series B Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 2/23/04+ 1,430,000 59,343,570
Essex Portfolio, L.P.
(California Limited
Partnership affiliate of
Essex Property
Trust, Inc.), 7.875%
Series B Cumulative
Redeemable Preferred Units,
Callable from 2/6/03+ 623,000 22,966,895
Essex Portfolio, L.P.
(California Limited
Partnership affiliate of
Essex Property
Trust, Inc.),9.125%
Series C Cumulative
Redeemable Preferred Units,
Callable from 11/24/03+ 420,000 17,909,640
<CAPTION>
SECURITY UNITS VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Essex Portfolio,
L.P.(California Limited
Partnership affiliate of
Essex Property Trust, Inc.),
9.30% Series D Cumulative
Redeemable Preferred Units,
Callable from 7/28/04+ 1,692,000 $ 36,870,372
Kilroy Realty, L.P.
(Delaware Limited
Partnership affiliate of
Kilroy Realty Corporation),
8.075% Series A Cumulative
Redeemable Preferred Units,
Callable from 2/6/03+ 624,000 23,407,488
Kilroy Realty, L.P.
(Delaware Limited
Partnership affiliate of
Kilroy Realty Corporation),
9.375% Series C Cumulative
Redeemable Preferred Units,
Callable from 11/24/03+ 700,000 30,431,800
Liberty Property L.P.
(Pennsylvania Limited
Partnership affiliate of
Liberty Property Trust),
9.25% Series B Cumulative
Redeemable Preferred Units,
Callable from 7/28/04+ 2,565,000 56,314,575
MHC Operating Limited
Partnership (Illinois
Limited Partnership
affiliate of Manufactured
Home Communities, Inc.), 9%
Series D Cumulative
Redeemable Perpetual
Preference Units, Callable
from 9/29/04+ 3,000,000 62,790,000
National Golf Operating
Partnership, L.P. (Delaware
Limited Partnership
affiliate of National Golf
Properties, Inc.), 8%
Series A Cumulative
Redeemable Preferred Units,
Callable from 3/4/03+ 760,000 28,138,240
National Golf Operating
Partnership, L.P. (Delaware
Limited Partnership
affiliate of National Golf
Properties, Inc.), 9.30%
Series B Cumulative
Redeemable Preferred Units,
Callable from 7/28/04+ 1,200,000 25,849,200
Prentiss Properties
Acquisition Partners, L.P.
(Delaware Limited
Partnership affiliate of
Prentiss Properties Trust),
8.30% Series B Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 6/25/03+ 1,215,000 46,047,285
Prentiss Properties
Acquisition Partners, L.P.
(Delaware Limited
Partnership affiliate of
Prentiss Properties Trust),
9.45% Series C Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 9/17/04+ 1,400,000 30,553,600
Price Development Company,
L.P. (Maryland Limited
Partnership affiliate of
J.P. Realty, Inc.), 8.95%
Series B Cumulative
Redeemable Preferred
Partnership Interests,
Callable from 7/28/04+ 2,575,000 55,975,350
Regency Centers,
L.P.(Delaware Limited
Partnership affiliate of
Regency Realty Corporation),
8.125% Series A Cumulative
Redeemable Preferred Units,
Callable from 6/25/03+ 447,000 17,234,979
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY UNITS VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Regency Centers,
L.P.(Delaware Limited
Partnership affiliate of
Regency Realty Corporation),
9.125% Series D Cumulative
Redeemable Preferred Units,
Callable from 9/29/04+ 500,000 $ 43,382,000
Spieker Properties, L.P.
(California Limited
Partnership affiliate of
Spieker Properties, Inc.),
7.6875% Series D Cumulative
Redeemable Preferred Units,
Callable from 4/20/03+ 990,000 37,806,120
Summit Properties
Partnership, L.P. (Delaware
Limited Partnership
affiliate of Summit
Properties, Inc.), 8.95%
Series B Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 4/29/04+ 2,215,000 46,351,090
Sun Communities Operating
L. P. (Michigan Limited
Partnership affiliate of Sun
Communities, Inc.), 9.125%
Series A Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 9/29/04+ 1,400,000 30,601,200
Urban Shopping Centers, L.P.
(Illinois Limited
Partnership affiliate of
Urban Shopping
Centers, Inc.), 9.45%
Series D Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 10/1/04+ 2,400,000 50,652,000
- ----------------------------------------------------------------
Total Partnership Preference Units
(identified cost $1,114,776,992) $ 947,934,345
- ----------------------------------------------------------------
Total Investments -- 100.0%
(identified cost $4,678,523,490) $5,028,751,360
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(+) Security exempt from registration under the Securities
Act of 1933. At December 31, 1999, the value of these
securities totaled $947,934,345, or 24.1% of net
assets.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- ----------------------------------------------------------
Investments, at value
(identified cost $4,678,523,490) $5,028,751,360
Cash 5,028,304
Receivable for open swap contracts 31,185,750
Swap interest receivable 327,250
Dividends receivable 1,516,719
- ----------------------------------------------------------
TOTAL ASSETS $5,066,809,383
- ----------------------------------------------------------
Liabilities
- ----------------------------------------------------------
Loan payable $1,130,000,000
Payable for Fund shares redeemed 2,479,636
Payable to affiliate for distribution fees 312,417
Accrued expenses:
Interest expense 13,009,314
Other accrued expenses 187,485
Minority interest 208,000
- ----------------------------------------------------------
TOTAL LIABILITIES $1,146,196,852
- ----------------------------------------------------------
NET ASSETS FOR 33,007,386 SHARES
OUTSTANDING $3,920,612,531
- ----------------------------------------------------------
Shareholders' Capital
- ----------------------------------------------------------
SHAREHOLDERS' CAPITAL $3,920,612,531
- ----------------------------------------------------------
Net Asset Value and Redemption Price Per Share
- ----------------------------------------------------------
($3,920,612,531 DIVIDED BY 33,007,386
SHARES OUTSTANDING) $ 118.78
- ----------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
<S> <C>
Investment Income
- -----------------------------------------------------------
Dividends allocated from Belvedere
Capital
(net of foreign taxes, $134,087) $ 19,664,989
Interest allocated from Belvedere
Capital 5,917,082
Expenses allocated from Belvedere
Capital (13,038,482)
- -----------------------------------------------------------
Net investment income allocated from
Belvedere Capital $ 12,543,589
Dividends from partnership preference
units 56,625,243
Interest 229,309
- -----------------------------------------------------------
TOTAL INVESTMENT INCOME $ 69,398,141
- -----------------------------------------------------------
Expenses
- -----------------------------------------------------------
Investment advisory and administrative
fee $ 6,963,463
Distribution and servicing fee 3,042,580
Interest expense 39,181,865
Interest expense on swap contracts 4,302,849
Legal and accounting services 1,507,681
Amortization of offering expenses 352,266
Printing and postage 82,972
Custodian and transfer agent fees 68,677
Miscellaneous 60,246
- -----------------------------------------------------------
TOTAL EXPENSES $ 55,562,599
- -----------------------------------------------------------
Reduction of investment adviser and
administrative fee $ (2,075,525)
- -----------------------------------------------------------
NET EXPENSES $ 53,487,074
- -----------------------------------------------------------
NET INVESTMENT INCOME $ 15,911,067
- -----------------------------------------------------------
Realized and Unrealized Gain (Loss)
- -----------------------------------------------------------
Net realized gain (loss) --
Investment transactions from
Belvedere Capital
(identified cost basis) $ (20,032,514)
- -----------------------------------------------------------
NET REALIZED LOSS $ (20,032,514)
- -----------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investment in Belvedere Capital
(identified cost basis) $ 489,973,890
Investments in partnership
preference units
(identified cost basis) (170,823,417)
Interest rate swap contracts 31,850,817
- -----------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 351,001,290
- -----------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 330,968,776
- -----------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 346,879,843
- -----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
CONSOLIDATED FINANCIAL STATEMENTS CONT'D
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCREASE (DECREASE) YEAR ENDED PERIOD ENDED
IN NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998*
<S> <C> <C>
- -------------------------------------------------------------------
Net investment income (loss) $ 15,911,067 $ (614,852)
Net realized loss on
investment transactions (20,032,514) (233,937)
Net change in unrealized
appreciation
of investments 351,001,290 30,412,330
- -------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 346,879,843 $ 29,563,541
- -------------------------------------------------------------------
Transactions in Fund shares
--
Investment securities
contributed $3,128,396,402 $ 517,599,932
Less -- Selling
commissions (11,854,961) (2,577,428)
- -------------------------------------------------------------------
Net contributions $3,116,541,441 $ 515,022,504
Net asset value of shares
issued
to Shareholders in
payment of
distributions declared 14,142,044 142,355
Net asset value of shares
redeemed (71,057,947) (278,288)
- -------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM FUND
SHARE TRANSACTIONS $3,059,625,538 $ 514,886,571
- -------------------------------------------------------------------
Distributions to
Shareholders
Belcrest Capital Fund $ (30,079,045) $ (257,377)
Preferred Shareholders of
BRC (16,640) --
- -------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (30,095,685) $ (257,377)
- -------------------------------------------------------------------
NET INCREASE IN NET ASSETS $3,376,409,696 $ 544,192,735
- -------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------
At beginning of year $ 544,202,835 $ 10,100
- -------------------------------------------------------------------
AT END OF YEAR $3,920,612,531 $ 544,202,835
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period from the start of business, November 24,
1998, to December 31, 1998.
</TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
INCREASE (DECREASE) IN CASH DECEMBER 31, 1999
<S> <C>
- ------------------------------------------------------------
Cash Flows From (For) Operating
Activities --
Net investment income $ 15,911,067
Adjustment to reconcile net investment
income to net cash flows used for
operating activity --
Amortization of offering expenses 352,266
Net investment income allocated from
Belvedere Capital (12,543,589)
Payment of organization and offering
expenses (326,898)
Increase in dividends receivable (1,084,297)
Increase in accrued interest and
accrued operating expenses 12,419,915
Decrease in interest payable for open
swap contracts (467,830)
Purchase of partner preference units (959,486,052)
Net decrease in investment in
Belvedere Capital 39,182,353
- ------------------------------------------------------------
NET CASH FLOWS USED FOR OPERATING
ACTIVITIES $(906,043,065)
- ------------------------------------------------------------
Cash Flows From (For) Financing
Activities --
Proceeds of loan $ 965,000,000
Payments on behalf of investors
(selling commissions) (11,854,961)
Payments for Fund shares redeemed (26,497,304)
Distributions paid (15,953,641)
- ------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES $ 910,694,094
- ------------------------------------------------------------
NET INCREASE IN CASH $ 4,651,029
- ------------------------------------------------------------
CASH AT BEGINNING OF YEAR $ 377,275
- ------------------------------------------------------------
CASH AT END OF YEAR $ 5,028,304
- ------------------------------------------------------------
Supplemental Disclosure and Non-cash
Investing and Financing Activities
- ------------------------------------------------------------
Securities contributed by Shareholders,
invested in Belvedere Capital $3,128,396,402
Unrealized appreciation of investments
and open swap contracts $ 381,413,620
Interest paid for loan $ 27,165,301
Interest paid for swap contracts $ 4,770,679
Market value of securities distributed in
payment of redemptions $ 42,081,007
- ------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Belcrest Capital Fund LLC (Belcrest Capital) is a Massachusetts limited
liability company established 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 Belcrest Capital is to achieve long-term, after-tax returns for
shareholders. Belcrest 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. Belcrest 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 Belcrest 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, Belcrest Capital 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). Belcrest Capital's investment in partnership preference units
is achieved through its investment in Belcrest Realty Corporation (BRC). BRC
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 December 31, 1999, Belcrest Capital owned 100% of the common stock
issued by BRC and intends to hold all of BRC's common stock at all times.
On the initial closing date of Belcrest Capital, Belcrest Capital acquired
2,100 shares of Class A preferred stock (the "preferred stock") issued by
BRC. For BRC to qualify as a REIT, it must be beneficially owned in the
aggregate by 100 or more persons. BRC has satisfied this requirement as a
result of Belcrest Capital donating 20 shares of BRC 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
BRC 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
Belcrest Capital and BRC (collectively, the Fund). All material intercompany
accounts and transactions have been eliminated.
Financial statements of the Portfolio, including the portfolio of
investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Security Costs -- The Fund's investment assets were principally
acquired during 1998 and 1999 through contributions of common stock by
shareholders in exchange for Shares of the Fund and in private 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 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. As of December 31, 1999, the aggregate tax basis of the Fund's
investments was $1,453,297,592.
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
44
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
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 -- Belcrest Capital, Belvedere Capital and the Portfolio are
treated as partnerships for federal income tax purposes. As a result,
Belcrest 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. BRC's policy is to comply with the Internal Revenue Code
applicable to REITs. Belcrest Realty will generally not be subject to federal
income tax to the extent that it distributes its earnings to its stockholders
and maintains its qualification as a REIT.
E Organization Costs and Deferred Offering Expenses -- Costs incurred by the
Fund in connection with its organization have been expensed as incurred. Costs
incurred by the Fund in connection with its offering were amortized over the
Fund's offering period.
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 will
make 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.
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 that expire are
treated as realized gains. Premiums received from writing options that 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.
45
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
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.
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 is 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.
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:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998*
<S> <C> <C>
------------------------------------------------------------------
Issued at Fund
closings 28,369,256 5,150,225
Issued to
shareholders
electing to receive
payment of
distributions in
Fund Shares 127,006 1,360
Redemptions (637,734) (2,828)
------------------------------------------------------------------
NET INCREASE 27,858,528 5,148,757
------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* For the period from the start of business,
November 24, 1998, to December 31, 1998.
</TABLE>
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, redeems less
than 8% of the total number of shares held by the shareholder as of the
beginning of the 12-month period. For the year ended December 31, 1999, the
Investment Adviser received $287,414 in redemption fees.
In connection with the offering of shares, Eaton Vance Distributors, Inc.
(EVD), the Placement Agent, received $14,432,389 in selling commissions paid
by the Fund on behalf of shareholders, since inception of the Fund. EVD, in
turn, paid this amount to the applicable subagent on behalf of shareholders
investing in the Fund through such subagent. In addition, EVD made payments
to subagents from its own resources totaling $36,433,844 equal to 1.0% of the
value of investments in the Fund made through subagents since inception of
the Fund.
4 Investment Transactions
- -------------------------------------------
Increases and decreases of the Fund's investment in Belvedere Capital for the
year ended December 31, 1999 aggregated $3,193,177,310 and $146,044,268,
respectively. Purchases of other investments (partnership preference units)
aggregated $959,486,052. There were no sales of partnership preference units
during the year.
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 year ended December 31, 1999, the
advisory fee applicable to the Portfolio was 0.45% of average net assets.
Belvedere Capital's allocated portion of the advisory fee totaled $24,247,975
of which $9,380,632 was allocated to the Fund for the year ended
December 31, 1999. In addition, Belcrest 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 Belcrest Capital (including the value of all
assets of Belcrest Capital other than Belcrest Capital's investment in BRC,
minus the sum of Belcrest Capital's liabilities other than the principal
46
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
amount of money borrowed) and BRC pays BMR a monthly management fee at a rate
of 1/20th of 1% (equivalent to 0.60% annually) of the average daily gross
investment assets of BRC (including the value of all assets of BRC, minus the
sum of BRC's liabilities other than any BRC liability with respect to
Belcrest Capital's Credit Facility). The advisory fee payable by the
Portfolio in respect of Belcrest Capital's indirect investment in the
Portfolio is credited toward Belcrest Capital's advisory and administrative
fee payment. For the year ended December 31, 1999, the advisory and
administrative fee payable to BMR by the Fund, less the Fund's allocated
share of the Portfolio's advisory fee, totaled $6,963,463.
Eaton Vance Management (EVM) serves as manager of Belcrest 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 $8,158,220 for the year ended
December 31, 1999, of which $3,186,480 was allocated to Belcrest Capital.
Pursuant to a servicing agreement between Belcrest Capital and EVD, Belcrest
Capital pays a servicing fee to EVD on a quarterly basis at an annual rate of
0.20% of Belcrest Capital's average daily net assets, less Belcrest Capital's
allocated share of the servicing fee payable by Belvedere Capital. For the
year ended December 31, 1999, the servicing fee paid directly by Belcrest
Capital totaled $967,055. Of the amounts allocated to and incurred by the
Fund, $149,554 was paid to subagents.
As compensation for its services as placement agent, Belcrest Capital pays
EVD a monthly distribution fee at an annual rate of 0.10% of the average
daily net assets of Belcrest Capital. For the year ended December 31, 1999,
Belcrest Capital's distribution fees paid or accrued to EVD totaled
$2,075,525. BMR has agreed to waive a portion of the monthly advisory and
administrative fee payable by Belcrest Capital to the extent that such fee,
together with the monthly distribution fee to EVD, exceeds an annual rate of
0.60% of the average daily gross investment assets of Belcrest Capital,
reduced by that portion of the monthly advisory fee for such month payable by
the Portfolio which is attributable to the value of Belcrest Capital's
investment in Belvedere Capital. For the year ended December 31, 1999, BMR
has waived $2,075,525 of the advisory and administrative fee of Belcrest
Capital.
6 Credit Facility
- -------------------------------------------
The Fund has obtained a $1,150,000,000 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), 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 December 31, 1999, amounts outstanding under the Credit
Facility totaled $1,130,000,000.
7 Cancelable Interest Rate Swap Agreements
- -------------------------------------------
The Fund may enter into cancelable interest rate swap agreements, in
connection with its investments in partnership preference units and
associated borrowings. 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. As of December 31, 1999, the Fund has entered
into cancelable interest rate swap agreements with Merrill Lynch Capital
Services, Inc. (MLCS) with respect to each of its holdings of partnership
preference units and the associated borrowings. 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.
47
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
INITIAL
OPTIONAL FINAL UNREALIZED
EFFECTIVE NOTIONAL FIXED FLOATING TERMINATION TERMINATION APPRECIATION
DATE AMOUNT RATE RATE DATE DATE (DEPRECIATION)
<C> <C> <C> <S> <C> <C> <C>
---------------------------------------------------------------------------------------
11/24/98 $ 20,644,750 6.330% Libor + .45% 02/24/03 11/24/05 $ 1,265,451
11/24/98 68,750,000 6.225% Libor + .45% 11/24/03 11/24/05 4,445,740
11/24/98 24,528,000 6.295% Libor + .45% 05/24/03 11/24/05 1,526,923
11/24/98 41,368,190 6.310% Libor + .45% 02/24/03 11/24/05 2,562,785
02/23/99 40,035,410 6.545% Libor + .45% 02/06/03 11/24/05 2,079,543
02/23/99 9,029,600 6.505% Libor + .45% 03/04/03 11/24/05 483,072
02/23/99 21,995,694 6.497% Libor + .45% 04/20/03 11/24/05 1,174,226
02/23/99 12,970,800 6.495% Libor + .45% 06/25/03 11/24/05 688,760
02/23/99 20,017,740 6.439% Libor + .45% 11/24/03 11/24/05 1,094,309
02/23/99 111,000,000 6.407% Libor + .45% 02/23/04 11/24/05 6,182,680
04/29/99 80,000,000 6.555% Libor + .45% 04/28/04 11/24/05 3,868,250
04/29/99 16,467,960 6.720% Libor + .45% 02/06/03 11/24/05 731,149
04/29/99 4,018,230 6.716% Libor + .45% 03/04/03 11/24/05 178,049
04/29/99 7,844,872 6.700% Libor + .45% 04/20/03 11/24/05 350,225
04/29/99 8,701,753 6.692% Libor + .45% 06/25/03 11/24/05 387,326
04/29/99 12,671,063 6.618% Libor + .45% 11/24/03 11/24/05 590,442
04/29/99 15,105,450 6.590% Libor + .45% 02/23/04 11/24/05 713,143
07/28/99 26,516,250 7.308% Libor + .45% 11/24/03 11/24/05 420,202
07/28/99 40,193,165 7.301% Libor + .45% 02/23/04 11/24/05 602,342
07/28/99 10,108,570 7.237% Libor + .45% 04/29/04 11/24/05 171,715
07/28/99 155,000,000 7.231% Libor + .45% 07/28/04 11/24/05 2,501,920
07/28/99 13,199,520 7.442% Libor + .45% 04/20/03 11/24/05 174,318
07/28/99 5,080,903 7.349% Libor + .45% 06/25/03 11/24/05 81,759
09/07/99 17,673,796 7.700% Libor + .45% 02/23/04 11/24/05 (45,650)
09/07/99 9,833,200 7.635% Libor + .45% 07/28/04 11/24/05 (23,163)
09/07/99 5,062,185 7.840% Libor + .45% 06/25/03 11/24/05 (20,784)
09/17/99 43,000,000 7.6525% Libor + .45% 09/17/04 11/24/05 (169,629)
09/28/99 35,023,620 7.644% Libor + .45% 07/28/04 11/24/05 (96,962)
09/28/99 20,009,642 7.885% Libor + .45% 06/25/03 11/24/05 (118,788)
09/28/99 5,019,578 7.915% Libor + .45% 04/20/03 11/24/05 (29,122)
09/28/99 212,000,000 7.6224% Libor + .45% 09/28/04 11/24/05 (587,812)
09/29/99 1,907,052 7.580% Libor + .45% 04/29/04 11/24/05 3,331
---------------------------------------------------------------------------------------
TOTAL $31,185,750
---------------------------------------------------------------------------------------
</TABLE>
8 Indirect Investment in Portfolio
- -------------------------------------------
Belvedere Capital's interest in the Portfolio at December 31, 1999, was
$7,695,912,318, representing 50.9% of the Portfolio's net assets. The Fund's
investment in Belvedere Capital at December 31, 1999, was $4,080,817,015,
representing 53.0% of Belvedere Capital's net assets.
Investment income allocated to Belvedere Capital from the Portfolio for the
year ended December 31, 1999, totaled $64,529,911, of which $25,582,071 was
allocated to the Fund. Expenses allocated to Belvedere Capital from the
Portfolio for the year ended December 31, 1999, totaled $25,044,679, of which
$9,735,929 was allocated to the Fund. Belvedere Capital allocated additional
expenses to the Fund of $3,302,553 for the year ended December 31, 1999,
representing $116,073 of operating expenses and $3,186,480 of service fees
(see Note 5).
9 Subsequent Event
- -------------------------------------------
The Fund has indirectly acquired real property through a newly created
wholly-owned subsidiary of BRC, Bel Santa Ana LLC. The property, two suburban
office buildings in Santa Ana, California, is leased to a single investment-
grade rated tenant under a triple net lease. The property carries secured,
non-recourse fixed-rate financing from GMAC Commercial Mortgage Corporation.
48
<PAGE>
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 1999
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS
OF BELCREST CAPITAL FUND LLC
- ---------------------------------------------
We have audited the accompanying consolidated statement of assets and
liabilities, including the portfolio of investments, of Belcrest Capital Fund
LLC and Belcrest Realty Corporation, (collectively, the Fund) as of
December 31, 1999, and the related consolidated statement of operations and cash
flows for the year then ended and the consolidated statement of changes in net
assets for the year then ended and for the period from the start of business,
November 24, 1998, to December 31, 1998. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999 by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Fund as of
December 31, 1999, the results of its consolidated operations and its
consolidated cash flows for the year then ended, and the consolidated changes in
its net assets for year then ended and the period from the start of business,
November 24, 1998, to December 31, 1998, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
49
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS
COMMON STOCKS -- 95.4%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Advertising and Marketing Services -- 4.0%
- ----------------------------------------------------------------
ACNielsen Corp.(1) 45,668 $ 1,124,573
Advo, Inc.(1) 170,000 4,037,500
Catalina Marketing Corp.(1) 20,000 2,315,000
Harte-Hanks Communications,
Inc. 135,487 2,946,842
IMS Health, Inc. 498,012 13,539,701
Interpublic Group of
Companies, Inc. 2,397,899 138,328,799
Lamar Advertising Co.(1) 100,000 6,056,250
Lamar Advertising
Co.(1)(2)(3) 400,000 24,216,521
Lamar Advertising
Co.(1)(2)(3) 250,000 15,126,998
Navigant Consulting,
Inc.(1) 496,795 5,402,646
Navigant International,
Inc.(1) 59,630 696,926
Omnicom Group, Inc. 2,899,018 289,901,800
R.H. Donelley Corp.(1) 8,153 153,888
Snyder Communications,
Inc.(1) 482,500 9,288,125
TMP Worldwide, Inc.(1) 59,790 8,490,180
True North Communications,
Inc. 513,715 22,956,639
Valassis Communications,
Inc.(1) 975,000 41,193,750
Ventiv Health, Inc.(1) 160,833 1,477,653
WPP Group PLC 488,000 7,715,670
Young and Rubicam, Inc. 186,000 13,159,500
- ----------------------------------------------------------------
$ 608,128,961
- ----------------------------------------------------------------
Aerospace and Defense -- 0.2%
- ----------------------------------------------------------------
Boeing Company (The) 284,081 $ 11,807,117
Honeywell International,
Inc. 119,536 6,895,733
Raytheon Co., Class B 213,564 5,672,794
Teledyne Technologies,
Inc.(1) 16,830 158,833
- ----------------------------------------------------------------
$ 24,534,477
- ----------------------------------------------------------------
Apparel and Textiles -- 0.0%
- ----------------------------------------------------------------
Shaw Industries, Inc.(2)(3) 325,000 $ 5,014,261
Unifi, Inc.(1) 50,000 615,625
- ----------------------------------------------------------------
$ 5,629,886
- ----------------------------------------------------------------
Auto and Parts -- 0.4%
- ----------------------------------------------------------------
Aftermarket Technology
Corp.(1) 46,000 $ 549,125
Borg-Warner Automotive,
Inc. 230,270 9,325,935
DaimlerChrysler 19,952 1,561,244
Dana Corp. 46,137 1,381,226
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Auto and Parts (continued)
- ----------------------------------------------------------------
Delphi Automotive Systems 5,290 $ 83,318
Ford Motor Co. 152,609 8,155,043
General Motors Corp. 10,996 799,272
Genuine Parts Co. 147,059 3,648,901
Harley-Davidson, Inc. 21,000 1,345,312
Honda Motor Co. Ltd. ADR 5,000 382,500
Magna International, Inc.,
Class A 815,000 34,535,625
Meritor Automotive, Inc. 71,799 1,391,106
SPX Corp.(1) 47,862 3,867,848
TRW, Inc. 2,000 103,875
- ----------------------------------------------------------------
$ 67,130,330
- ----------------------------------------------------------------
Banks - Money Center -- 0.1%
- ----------------------------------------------------------------
Bank of Montreal 73,412 $ 2,496,008
Chase Manhattan Corp. 123,458 9,591,143
Morgan (J.P.) & Co., Inc. 18,780 2,378,018
National Westminster Bank
PLC 8,753 1,131,325
- ----------------------------------------------------------------
$ 15,596,494
- ----------------------------------------------------------------
Banks - Regional -- 5.5%
- ----------------------------------------------------------------
AmSouth Bancorporation 609,824 $ 11,777,226
Associated Banc-Corp. 568,111 19,457,802
Bank of America Corp. 1,157,235 58,078,732
Bank of Granite Corp. 22,500 483,750
Bank of New York Co., Inc.
(The) 313,144 12,525,760
Bank One Corp. 1,146,258 36,751,897
Bank One Corp.(2)(3) 51,299 1,643,815
Bank United Corp. 102,072 2,781,462
BB&T Corp. 362,198 9,915,170
City National Corp. 100,000 3,293,750
Colonial Bancgroup, Inc.
(The) 449,424 4,662,774
Comerica, Inc. 155,041 7,238,477
Commerce Bancshares, Inc. 70,356 2,383,309
Community First Bancshares,
Inc. 418,000 6,583,500
Compass Bancshares, Inc. 306,668 6,842,530
Fifth Third Bancorp 244,512 17,941,068
First Citizens BancShares,
Inc. 65,900 4,596,525
First Financial Bancorp. 54,529 1,165,557
First Midwest Bancorp, Inc. 225,353 5,971,841
First Security Corp. 39,200 1,000,827
First Tennessee National
Corp. 33,488 954,408
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Banks - Regional (continued)
- ----------------------------------------------------------------
First Union Corp. 1,216,405 $ 39,913,289
Firstar Corp. 1,550,874 32,762,213
FleetBoston Financial Corp. 3,395,973 118,222,310
Golden West Financial Corp. 55,467 1,858,144
Keycorp 500,764 11,079,404
M&T Bank Corp. 2,000 828,500
Marshall and Ilsley Corp. 70,410 4,422,628
Mellon Financial Corp. 206,912 7,047,940
National City Corp. 444,035 10,518,079
National Commerce
Bancorporation 252,894 5,737,533
National Commerce
Bancorporation(2)(3) 670,000 15,191,758
National Commerce
Bancorporation(2)(3) 150,000 3,397,808
Northern Trust Corp. 1,363,796 72,281,188
Old Kent Financial Corp. 103,786 3,671,430
Peoples Heritage Financial
Group, Inc. 55,720 839,282
PNC Bank Corp. 141,615 6,301,867
Popular, Inc. 716 20,003
Regions Financial Corp. 1,276,273 32,066,359
S&T Bancorp, Inc. 100,000 2,318,750
SouthTrust Corp. 476,101 18,002,569
Southwest Bancorporation of
Texas, Inc.(1) 7,688 152,318
Sovereign Bancorporation,
Inc. 442,584 3,298,623
State Street Corp. 64,000 4,676,000
Summit Bancorp. 177,812 5,445,492
SunTrust Banks, Inc. 178,600 12,289,913
Synovus Financial 634,329 12,607,289
U.S. Bancorp. 411,190 9,791,462
Union Planters Corp. 87,070 3,433,823
Valley National Bancorp. 290,706 8,139,768
Wachovia Corp. 118,714 8,072,552
Washington Mutual, Inc. 163,506 4,251,156
Wells Fargo & Co. 3,349,981 135,464,857
Westamerica Bancorporation 266,506 7,445,511
Whitney Holding Corp. 145,180 5,380,734
Whitney Holding Corp.(2)(3) 89,741 3,324,862
Whitney Holding Corp.(2)(3) 30,011 1,110,948
Zions Bancorporation 20,000 1,183,750
- ----------------------------------------------------------------
$ 828,600,292
- ----------------------------------------------------------------
Beverages -- 2.1%
- ----------------------------------------------------------------
Anheuser-Busch Cos., Inc. 1,364,418 $ 96,703,126
Coca-Cola Company (The) 2,126,331 123,858,781
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Beverages (continued)
- ----------------------------------------------------------------
Coca-Cola Company
(The)(2)(3) 264,724 $ 5,327,198
Panamerican Beverages,
Inc., Class A 80,000 1,645,000
PepsiCo, Inc. 2,476,847 87,308,857
- ----------------------------------------------------------------
$ 314,842,962
- ----------------------------------------------------------------
Broadcasting and Cable -- 2.1%
- ----------------------------------------------------------------
AMFM, Inc.(1) 200,000 $ 15,650,000
AT&T Corp. - Liberty Media
Group(1) 484,974 27,522,274
AT&T Corp. - Liberty Media
Group, Class B(1) 16,438 1,130,112
CBS Corp.(1) 117,340 7,502,426
Clear Channel
Communications, Inc.(1) 10,000 891,429
Clear Channel
Communications,
Inc.(1)(2)(3) 340,609 30,399,353
Comcast Corp., Class A 175,000 8,848,437
Cox Communications, Inc.,
Class A(1) 508,036 26,163,854
Gaylord Entertainment Co. 315,332 9,440,252
General Motors Corp., Class
H(1) 391,754 37,608,384
Infinity Broadcasting
Corp.(1) 34,500 1,248,469
MediaOne Group, Inc.(1) 1,461,694 112,276,370
Univision Communications,
Inc.(1) 384,205 39,260,948
Westwood One, Inc.(1) 61,200 4,651,200
- ----------------------------------------------------------------
$ 322,593,508
- ----------------------------------------------------------------
Building Materials and Tools -- 0.4%
- ----------------------------------------------------------------
American Standard
Companies, Inc.(1) 172,899 $ 7,931,742
CRH PLC 261,114 5,574,523
Interface, Inc. 434,412 2,497,869
Masco Corp. 253,662 6,436,673
Sherwin-Williams Co. (The) 80,069 1,681,449
Snap-On, Inc. 71,795 1,907,055
Valspar Corp. 620,000 25,962,500
Vulcan Materials Co. 26,500 1,058,344
- ----------------------------------------------------------------
$ 53,050,155
- ----------------------------------------------------------------
Business Services - Miscellaneous -- 0.6%
- ----------------------------------------------------------------
Century Business Services,
Inc.(1) 400,000 $ 3,375,000
Cintas Corp. 665,716 35,366,163
Concord EFS, Inc.(1) 113,905 2,933,041
Fair, Issac and Co., Inc. 238,828 12,657,884
Gartner Group, Inc.(1) 31,000 472,750
Gartner Group, Inc., Class
B(1) 64,841 895,616
Half (Robert)
International, Inc.(1) 1,800 51,412
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Business Services - Miscellaneous (continued)
- ----------------------------------------------------------------
Interim Services, Inc.(1) 90,000 $ 2,227,500
Manpower, Inc. 110,000 4,138,750
National Data Corp. 81,333 2,760,239
NFO Worldwide, Inc.(1) 18,000 402,750
ServiceMaster Co. 695,430 8,562,482
Staff Leasing, Inc.(1) 156,250 1,484,375
Sylvan Learning Systems,
Inc.(1) 815,396 10,600,148
United Rentals, Inc.(1) 453,283 7,762,471
Viad Corp. 40,314 1,123,753
- ----------------------------------------------------------------
$ 94,814,334
- ----------------------------------------------------------------
Chemicals -- 1.1%
- ----------------------------------------------------------------
Ashland, Inc. 46,784 $ 1,540,948
Ashland, Inc.(2)(3) 59,890 1,971,894
Bayer AG ADR 40,000 1,884,332
Dow Chemical Co. (The) 27,517 3,676,959
DuPont (E.I.) de Nemours &
Co. 1,119,502 73,747,194
Eastman Chemical Co. 148 7,058
Monsanto Co. 2,331,780 83,069,662
Octel Corp.(1) 3,322 34,466
Rohm and Haas Co. 9,083 369,565
Solutia, Inc. 220,629 3,405,960
- ----------------------------------------------------------------
$ 169,708,038
- ----------------------------------------------------------------
Communications Equipment -- 4.4%
- ----------------------------------------------------------------
3Com Corp.(1) 870,186 $ 40,898,742
ADC Telecommunications,
Inc.(1) 150,178 10,897,291
CIENA Corp.(1) 351,013 20,183,247
Comverse Technology,
Inc.(1) 150,000 21,712,500
JDS Uniphase Corp.(1) 133,040 21,461,015
L.M. Ericsson Telephone
Co., ADR 454,000 29,822,125
Lucent Technologies, Inc. 685,475 51,282,098
Motorola, Inc. 559,130 82,331,892
Nokia Corp., Class A, ADR 1,273,935 242,047,650
Nortel Networks Corp. 523,526 52,876,126
Nortel Networks Corp.(2)(3) 10,000 1,009,499
PairGain Technologies,
Inc.(1) 241,198 3,421,997
Qualcomm, Inc.(1) 182,112 32,074,476
Qualcomm, Inc.(1)(2)(3) 162,000 28,515,606
Salient 3 Communications,
Inc., Class A(1) 78,125 546,875
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Communications Equipment (continued)
- ----------------------------------------------------------------
Tellabs, Inc.(1) 314,454 $ 20,184,016
- ----------------------------------------------------------------
$ 659,265,155
- ----------------------------------------------------------------
Communications Services -- 5.6%
- ----------------------------------------------------------------
Alltel Corp. 885,395 $ 73,211,099
Alltel Corp.(2)(3) 164,000 13,559,801
Alltel Corp.(2)(3) 96,978 8,006,840
American Tower Corp., Class
A(1) 149,451 4,567,596
AT&T Corp. 1,346,252 68,322,289
Bell Atlantic Corp. 269,848 16,612,518
BellSouth Corp. 216,429 10,131,583
Broadwing, Inc. 326,991 12,057,781
CapRock Communications
Corp.(1)(2)(3) 207,590 6,725,620
Citizens Utilities Corp.,
Class B(1) 45,311 642,850
Global Crossing Ltd.(1) 124,289 6,214,450
GTE Corp. 1,683,801 118,813,208
Intermedia Communications,
Inc.(1) 153,275 5,948,986
ITC Deltacom, Inc.(1) 628,773 17,369,854
ITC Deltacom, Inc.(1)(2)(3) 50,416 1,391,535
ITC Deltacom, Inc.(1)(2)(3) 438,852 12,116,215
MCI Worldcom, Inc.(1) 2,930,489 155,499,046
McLeodUSA, Inc.(1) 383,918 22,603,172
McLeodUSA, Inc.(1)(2)(3) 60,000 3,530,439
Nextel Communications,
Inc., Class A(1) 110,891 11,435,634
NTL, Inc.(1)(2)(3) 156,250 19,428,229
NTL, Inc.(1)(2)(3) 164,063 20,397,350
Premiere Technologies,
Inc.(1) 28,000 196,000
RSL Communications Ltd.,
Class A(1)(2)(3) 247,161 4,230,163
RSL Communications Ltd.,
Class A(1)(2)(3) 500,000 8,549,121
SBC Communications, Inc. 2,121,704 103,433,070
Sprint Corp. 1,253,920 84,404,490
Sprint Corp. (PCS Group)(1) 7,877 807,392
Talk.com, Inc.(1) 247,376 4,390,924
Telecom Corp. of New
Zealand Ltd. ADR 8,000 308,000
Teleglobe, Inc. 88,500 2,007,844
Telephone & Data Systems,
Inc. 131,756 16,601,256
US West, Inc. 33,935 2,443,320
Vodafone AirTouch PLC ADR 58,345 2,888,077
Winstar Communications,
Inc.(1) 11,424 859,656
- ----------------------------------------------------------------
$ 839,705,408
- ----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Computer Software -- 5.3%
- ----------------------------------------------------------------
Adobe Systems, Inc. 114,368 $ 7,691,248
Aspect Development, Inc.(1) 100,000 6,850,000
Baan Co., NV ADR(1) 223,926 3,162,955
BMC Software, Inc.(1) 35,000 2,797,812
Cadence Design Systems,
Inc.(1) 956,000 22,944,000
Cognos, Inc.(1) 38,500 1,775,812
Computer Associates
International, Inc. 522,500 36,542,344
Compuware Corp.(1) 2,800 104,300
CSG Systems International,
Inc.(1) 41,116 1,639,500
HNC Software, Inc.(1) 477,794 50,526,715
I2 Technologies, Inc.(1) 35,795 6,980,025
Intuit, Inc.(1) 857,751 51,411,451
J.D. Edwards & Co.(1) 592,758 17,708,645
J.D. Edwards & Co.(1)(2)(3) 299,086 8,924,472
Microsoft Corp.(1) 921,005 107,527,334
Oracle Corp.(1) 1,985,822 222,536,178
Parametric Technology
Corp.(1) 94,600 2,560,112
PeopleSoft, Inc.(1) 448,770 9,564,411
Sapient Corp.(1) 991,752 139,775,047
Sapient Corp.(1)(2)(3) 33,162 4,619,242
Siebel Systems, Inc.(1) 1,146,640 96,317,760
Siebel Systems,
Inc.(1)(2)(3) 30,000 2,516,976
Sterling Commerce, Inc.(1) 2,388 81,341
Structural Dynamics
Research Corp.(1) 55,882 712,495
Wind River Systems, Inc.(1) 51,933 1,902,046
- ----------------------------------------------------------------
$ 807,172,221
- ----------------------------------------------------------------
Computers and Business Equipment -- 7.6%
- ----------------------------------------------------------------
Cabletron Systems, Inc.(1) 89,660 $ 2,331,160
Cisco Systems, Inc.(1) 2,357,101 252,504,445
Compaq Computer Corp. 74,841 2,025,385
Dell Computer Corp.(1) 3,308,624 168,739,824
Dell Computer
Corp.(1)(2)(3) 202,519 10,319,173
EMC Corp.(1) 187,265 20,458,701
Gateway, Inc.(1) 800,000 57,650,000
Gateway, Inc.(1)(2)(3) 250,000 18,009,320
Hewlett-Packard Co. 558,461 63,629,650
IDX Systems Corp.(1) 60,000 1,875,000
International Business
Machines Corp. 839,117 90,624,636
Jabil Circuit,
Inc.(1)(2)(3) 22,979 1,676,488
Lexmark International
Group, Inc.(1) 3,760,641 340,338,010
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Computers and Business Equipment (continued)
- ----------------------------------------------------------------
Network Appliance, Inc.(1) 244,000 $ 20,267,250
Pitney Bowes, Inc. 19,486 941,417
Seagate Technology, Inc.(1) 168,215 7,832,511
Solectron Corp.(1) 75,950 7,224,744
Sun Microsystems, Inc.(1) 119,000 9,215,062
Xerox Corp. 3,080,142 69,880,722
Zebra Technologies Corp.(1) 6,000 351,000
- ----------------------------------------------------------------
$ 1,145,894,498
- ----------------------------------------------------------------
Conglomerates -- 1.9%
- ----------------------------------------------------------------
General Electric Co. 1,527,079 $ 236,315,475
Tyco International Ltd. 1,166,995 45,366,931
United Technologies Corp. 191,354 12,438,010
- ----------------------------------------------------------------
$ 294,120,416
- ----------------------------------------------------------------
Consumer Services -- 0.1%
- ----------------------------------------------------------------
Block (H&R), Inc. 366,177 $ 16,020,244
Cendant Corp.(1) 187,999 4,993,723
Service Corp. International 145,389 1,008,636
Stewart Enterprises, Inc. 153,992 731,462
- ----------------------------------------------------------------
$ 22,754,065
- ----------------------------------------------------------------
Containers and Packaging -- 0.2%
- ----------------------------------------------------------------
Sealed Air Corp.(1) 440,750 $ 22,836,359
Sonoco Products Co. 122,135 2,778,571
- ----------------------------------------------------------------
$ 25,614,930
- ----------------------------------------------------------------
Distribution Services -- 1.0%
- ----------------------------------------------------------------
Airgas, Inc.(1) 536,219 $ 5,094,080
Arrow Electronics, Inc.(1) 8,750 222,031
Cardinal Health, Inc. 550,151 26,338,479
McKesson HBOC, Inc. 105,734 2,385,623
MSC Industrial Direct
Co.(1) 5,000 66,250
School Specialty, Inc.(1) 66,255 1,002,107
Sysco Corp. 2,236,922 88,498,227
U.S. Foodservice, Inc.(1) 1,143,854 19,159,554
US Office Products Co.(1) 149,077 465,866
Wilmar Industries, Inc.(1) 50,000 868,750
- ----------------------------------------------------------------
$ 144,100,967
- ----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Drugs -- 6.5%
- ----------------------------------------------------------------
Abbott Laboratories 2,920,381 $ 106,046,335
Allergan, Inc. 840 41,790
American Home Products
Corp. 498,733 19,668,783
Amgen, Inc.(1) 1,723,928 103,543,426
AstraZeneca PLC 542,035 22,841,138
AstraZeneca PLC ADR 80,720 3,370,060
Bristol-Myers Squibb Co. 1,151,622 73,919,737
Covance, Inc.(1) 81,250 878,516
Elan Corp., PLC ADR(1) 539,036 15,901,562
Genzyme Corp., Class A(1) 800,000 36,000,000
Gilead Sciences, Inc.(1) 34,043 1,842,577
Incyte Pharmaceuticals,
Inc.(1) 1,012,257 60,735,420
Incyte Pharmaceuticals,
Inc.(1)(2)(3) 365,570 21,926,523
Lilly (Eli) & Co. 1,009,301 67,118,516
Merck & Co., Inc. 1,331,598 89,300,291
Novo Nordisk ADR 116,911 7,555,373
Parexel International
Corp.(1) 35,000 413,437
Pfizer, Inc. 3,205,678 103,984,180
Pharmacia & Upjohn, Inc. 22,617 1,017,765
Quintiles Transnational
Corp.(1) 517,372 9,668,389
Quintiles Transnational
Corp.(1)(2)(3) 23,400 437,134
Schering-Plough Corp. 867,580 36,601,031
Schering-Plough Corp.(2)(3) 126,720 5,342,881
Sepracor, Inc.(1) 442,000 43,840,875
SmithKline Beecham PLC ADR 520,254 33,523,867
Teva Pharmaceutical
Industries Ltd. ADR 100,000 7,168,750
Teva Pharmaceutical
Industries Ltd. ADR(2)(3) 50,000 3,581,567
Vertex Pharmaceuticals,
Inc.(1) 35,000 1,225,000
Warner-Lambert Co. 906,711 74,293,633
Watson Pharmaceuticals,
Inc.(1) 981,781 35,160,032
- ----------------------------------------------------------------
$ 986,948,588
- ----------------------------------------------------------------
Electric Power -- 0.1%
- ----------------------------------------------------------------
AES Corp.(1) 11,542 $ 862,764
Ameren Corp. 5,000 163,750
Central and South West
Corp. 1,600 32,000
Dominion Resources, Inc. 28,938 1,135,816
Duke Energy Corp. 1,800 90,225
P G & E Corp. 47,705 977,952
Teco Energy, Inc. 40,000 742,500
Texas Utilities Co. 250,196 8,897,595
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Electric Power (continued)
- ----------------------------------------------------------------
Wisconsin Energy Corp. 9,576 $ 184,338
- ----------------------------------------------------------------
$ 13,086,940
- ----------------------------------------------------------------
Electrical Equipment -- 0.6%
- ----------------------------------------------------------------
American Power Conversion
Corp.(1) 400,000 $ 10,550,000
Baldor Electric Co. 149,060 2,701,713
Emerson Electric Co. 337,467 19,362,169
Molex, Inc., Class A 90,066 4,075,486
Rockwell International
Corp. 203,032 9,720,157
Sanmina Corp.(1) 222,860 22,258,142
Sanmina Corp.(1)(2)(3) 130,609 13,028,920
Thomas and Betts Corp. 110,263 3,514,633
- ----------------------------------------------------------------
$ 85,211,220
- ----------------------------------------------------------------
Electronics - Instruments -- 0.3%
- ----------------------------------------------------------------
Dionex Corp.(1) 402,140 $ 16,563,141
National Instruments
Corp.(1)(2)(3) 466,603 17,837,154
PerkinElmer, Inc. 100,000 4,168,750
Waters Corp.(1) 99,160 5,255,480
X-Rite, Inc. 428,000 2,675,000
- ----------------------------------------------------------------
$ 46,499,525
- ----------------------------------------------------------------
Electronics - Semiconductors and Related -- 4.2%
- ----------------------------------------------------------------
Altera Corp.(1) 40,258 $ 1,995,287
Analog Devices, Inc.(1) 2,034,150 189,175,950
Applied Materials, Inc.(1) 1,000 126,687
Applied Materials,
Inc.(1)(2)(3) 28,106 3,556,406
Broadcom Corp., Class
A(1)(2)(3) 117,000 31,839,194
Burr-Brown Corp.(1) 900,000 32,512,500
Conexant Systems(1) 317,574 21,078,974
Intel Corp. 2,386,485 196,437,547
Intel Corp.(2)(3) 430,000 35,366,649
KLA-Tencor Corp.(1) 50,749 5,652,170
Lam Research Corp.(1) 106,000 11,825,625
Linear Technologies Corp. 132,000 9,446,250
Maxim Integrated Products
Co.(1) 161,328 7,612,665
Maxim Integrated Products
Co.(1)(2)(3) 80,000 3,772,169
National Semiconductor
Corp.(1) 79,368 3,397,942
SpeedFam-IPEC, Inc.(1) 221,000 2,859,187
Teradyne, Inc.(1) 25,400 1,676,400
Texas Instruments, Inc. 706,204 68,413,512
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Electronics - Semiconductors and Related (continued)
- ----------------------------------------------------------------
Ultratech Stepper, Inc.(1) 245,129 $ 3,952,705
Xilinx, Inc.(1) 48,856 2,221,424
- ----------------------------------------------------------------
$ 632,919,243
- ----------------------------------------------------------------
Engineering and Construction -- 0.0%
- ----------------------------------------------------------------
Dycom Industries(1) 50,000 $ 2,203,125
Jacobs Engineering Group,
Inc.(1) 162,455 5,279,787
- ----------------------------------------------------------------
$ 7,482,912
- ----------------------------------------------------------------
Entertainment -- 0.6%
- ----------------------------------------------------------------
Callaway Golf Co. 35,715 $ 631,709
Disney (Walt) Co. 419,395 12,267,304
Fox Entertainment Group,
Inc.(1) 275,500 6,870,281
Mattel, Inc. 22,091 289,944
Time Warner Inc. 873,162 63,249,672
Viacom, Inc., Class A(1) 21,774 1,315,966
Viacom, Inc., Class B(1) 162,724 9,834,632
- ----------------------------------------------------------------
$ 94,459,508
- ----------------------------------------------------------------
Environmental Services -- 0.2%
- ----------------------------------------------------------------
Allied Waste Industries,
Inc.(1) 1,075,000 $ 9,473,437
Waste Management, Inc. 1,342,447 23,073,308
- ----------------------------------------------------------------
$ 32,546,745
- ----------------------------------------------------------------
Financial Services - Miscellaneous -- 3.2%
- ----------------------------------------------------------------
American Express Co. 641,762 $ 106,692,932
Associates First Capital
Corp. 2,093,830 57,449,461
Capital One Financial Corp. 364,830 17,580,246
Citigroup 2,409,208 133,861,620
Fannie Mae 944,640 58,980,960
Finova Group, Inc. 175,587 6,233,338
FirstPlus Financial Group,
Inc.(1) 120,000 9,000
Freddie Mac 364,900 17,173,106
GreenPoint Financial Corp. 100,000 2,381,250
Household International,
Inc. 1,147,679 42,751,043
ING Groep NV ADR 102,622 6,259,942
MGIC Investment Corp. 80,000 4,815,000
Providian Financial Corp. 370,378 33,727,547
- ----------------------------------------------------------------
$ 487,915,445
- ----------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Foods -- 1.8%
- ----------------------------------------------------------------
Archer-Daniels-Midland Co. 385,946 $ 4,703,717
Bestfoods 19,370 1,018,136
Campbell Soup Co. 336 12,999
Conagra, Inc. 748,125 16,879,570
Dean Foods Co. 150,944 6,000,024
Flowers Industries, Inc. 708,601 11,293,328
General Mills, Inc. 125,784 4,496,778
H J Heinz Co. 80,713 3,213,386
Hershey Foods Corp. 1,615,406 76,731,785
Keebler Food Products
Co.(1) 121,798 3,425,569
Kellogg Co. 97,974 3,018,824
McCormick & Co., Inc. 458,058 13,627,225
Nabisco Holdings Corp.,
Class A 100,000 3,162,500
Quaker Oats Co. (The) 113,114 7,423,106
Ralston Purina Group 277,878 7,745,849
Riviana Foods, Inc. 250,000 4,437,500
Sara Lee Corp. 1,571,388 34,668,748
Smithfield Foods,
Inc.(1)(2)(3) 490,191 11,758,702
Tyson Food, Inc. 1,127,235 18,317,569
Unilever ADR 400,000 21,775,000
Wrigley (Wm.) Jr. Co. 171,469 14,221,210
- ----------------------------------------------------------------
$ 267,931,525
- ----------------------------------------------------------------
Furniture and Appliances -- 0.3%
- ----------------------------------------------------------------
HON Industries, Inc. 1,270,418 $ 27,869,795
Leggett & Platt, Inc. 593,654 12,726,458
Miller (Herman), Inc. 420,000 9,660,000
Steelcase, Inc., Class A 123,000 1,476,000
- ----------------------------------------------------------------
$ 51,732,253
- ----------------------------------------------------------------
Health Services -- 0.2%
- ----------------------------------------------------------------
Aetna, Inc. 60,189 $ 3,359,299
Beverly Enterprises,
Inc.(1) 357,143 1,562,501
Caremark Rx, Inc.(1) 17,696 89,586
FPA Medical Management,
Inc.(1)(3) 315,000 3,150
Health Management
Associates, Inc.,
Class A(1) 161,170 2,155,649
HealthSouth Corp.(1) 122,699 659,507
Integrated Health Services,
Inc.(1)(3) 50,000 500
LabOne, Inc. 53,940 370,837
Magellan Health Services,
Inc.(1) 50,000 315,625
Orthodontic Centers of
America, Inc.(1) 100,000 1,193,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Health Services (continued)
- ----------------------------------------------------------------
Pacificare Health Systems,
Inc., Class A(1) 19,500 $ 1,033,500
PhyCor, Inc.(1) 312,500 585,937
Quest Diagnostics, Inc.(1) 15,625 477,539
Quorum Health Group,
Inc.(1) 6,893 64,191
Renal Care Group, Inc.(1) 371,507 8,683,976
Response Oncology, Inc.(1) 44,761 50,356
Sunrise Assisted Living,
Inc.(1) 354,000 4,867,500
United HealthCare Corp. 52,286 2,777,694
- ----------------------------------------------------------------
$ 28,251,097
- ----------------------------------------------------------------
Household Products -- 2.7%
- ----------------------------------------------------------------
Avon Products, Inc. 34,700 $ 1,145,100
Blyth Industries, Inc.(1) 824,000 20,239,500
Blyth Industries,
Inc.(1)(2)(3) 50,000 1,227,695
Blyth Industries,
Inc.(1)(2)(3) 35,068 860,324
Clorox Co. 1,021,344 51,450,204
Colgate-Palmolive Co. 348,851 22,675,315
Estee Lauder Co.(2)(3) 1,563,248 78,806,898
Estee Lauder Co.(2)(3) 529,064 26,661,539
Fortune Brands, Inc. 69,838 2,309,019
Gillette Co. 1,450,706 59,750,953
Helen of Troy Ltd.(1) 20,000 145,000
Kimberly-Clark Corp. 975,191 63,631,213
Newell Rubbermaid, Inc. 367,678 10,662,662
Procter & Gamble Co. 635,352 69,610,754
Water Pik Technologies,
Inc.(1) 5,890 56,323
- ----------------------------------------------------------------
$ 409,232,499
- ----------------------------------------------------------------
Industrial Equipment -- 0.5%
- ----------------------------------------------------------------
Dover Corp. 385,445 $ 17,489,567
DT Industries, Inc. 37,728 297,108
Federal Signal Corp. 283,471 4,553,253
Illinois Tool Works, Inc. 353,210 23,863,751
Johnson Controls 13,571 771,851
Nordson Corp. 50,000 2,412,500
Parker-Hannifin Corp. 150,898 7,742,954
PPG Industries, Inc. 21,680 1,356,355
Regal Beloit Corp. 265,000 5,465,625
Tecumseh Products Co.,
Class A 156,420 7,381,069
Westinghouse Air Brake Co. 250,000 4,437,500
- ----------------------------------------------------------------
$ 75,771,533
- ----------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Information Services -- 3.9%
- ----------------------------------------------------------------
Acxiom Corp.(1) 829,019 $ 19,896,456
America Online, Inc.(1) 196,852 14,850,023
At Home Corp., Series A(1) 248,582 10,657,953
Automatic Data Processing,
Inc. 4,497,232 242,288,374
Aztec Technology
Partners(1) 119,261 544,128
Bell and Howell Co.(1) 115,000 3,658,438
BISYS Group, Inc. (The)(1) 53,873 3,515,213
CareInsite, Inc.(1) 50,000 4,025,000
Ceridian Corp.(1) 181,000 3,902,813
Check Point Software
Technology(1) 26,000 5,167,500
Circle.com(1) 120,625 1,485,195
Computer Sciences Corp.(1) 1,400,202 132,494,114
DST Systems, Inc.(1) 93,000 7,097,063
DST Systems, Inc.(1)(2)(3) 91,517 6,981,447
Dun and Bradstreet Corp.
(The) 15,503 457,339
Electronic Data Systems
Corp. 157,612 10,550,153
Equifax, Inc. 80,000 1,885,000
First Data Corp. 780,662 38,496,395
Keane, Inc.(1) 200,000 6,350,000
Lason, Inc.(1) 355,000 3,905,000
Momentum Business
Applications(1) 7,083 55,779
NOVA Corp.(1) 104,965 3,312,958
Paychex, Inc. 131,964 5,278,560
Perot Systems Corp., Class
A(1) 275,000 5,225,000
Reuters Holdings PLC ADR 275,331 22,250,186
Reynolds & Reynolds, Inc.,
Class A 451,043 10,148,468
RSA Security, Inc.(1) 40,000 3,100,000
SunGard Data Systems,
Inc.(1) 1,058,119 25,130,326
- ----------------------------------------------------------------
$ 592,708,881
- ----------------------------------------------------------------
Insurance -- 6.0%
- ----------------------------------------------------------------
20th Century Industries 70,700 $ 1,365,394
Aegon, NV ADR 1,315,749 125,654,030
Aflac Corp. 117,990 5,567,653
Allmerica Financial Corp. 1,500 83,438
Allstate Corp. (The) 40,426 970,224
American General Corp. 96,733 7,339,616
American International
Group, Inc. 3,258,756 352,352,993
AON Corp. 644,100 25,764,000
Berkshire Hathaway, Inc.(1) 127 7,124,700
Berkshire Hathaway, Inc.,
Class B(1) 39,077 71,510,910
Chubb Corp. 101,050 5,690,378
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Insurance (continued)
- ----------------------------------------------------------------
Commerce Group, Inc. 120,000 $ 3,135,000
Conseco, Inc. 100,000 1,787,500
Delphi Financial Group,
Inc.(1) 6,448 193,450
Enhance Finance Service
Group, Inc.(2)(3) 70,000 1,137,045
Gallagher (A.J.) and Co. 115,000 7,446,250
Hartford Financial Services
Group 304 14,402
HSB Group, Inc. 75,000 2,535,938
Jefferson-Pilot Corp. 80,726 5,509,550
Kansas City Life Insurance
Co. 70,800 2,389,500
Marsh & McLennan Cos., Inc. 2,439,897 233,467,644
Mercury General Corp. 2,000 44,500
Mutual Risk Management Ltd. 406,500 6,834,281
Progressive Corp. 181,111 13,243,742
Protective Life Corp. 43,381 1,380,058
Reliastar Financial Corp. 87,000 3,409,313
Safeco Corp. 28,255 702,843
St. Paul Cos., Inc. (The) 305,212 10,281,829
Torchmark Corp. 222,850 6,476,578
UICI(1) 280,854 2,966,520
UnumProvident Corp. 2,200 70,538
- ----------------------------------------------------------------
$ 906,449,817
- ----------------------------------------------------------------
Investment Services -- 2.5%
- ----------------------------------------------------------------
E*Trade Group, Inc.(1) 688,290 $ 17,981,576
E*Trade Group,
Inc.(1)(2)(3) 82,958 2,164,713
Federated Investors, Inc. 318,085 6,381,580
Federated Investors, Inc.,
Class B(2)(3) 267,880 5,369,506
Franklin Resources, Inc. 755,539 24,224,469
John Nuveen Co., Class A
(The) 50,000 1,803,125
Merrill Lynch & Co., Inc. 1,167,161 97,457,944
Morgan Stanley Dean Witter
& Co. 764,905 109,190,189
Morgan Stanley Dean Witter
& Co.(2)(3) 75,000 10,702,503
Morgan Stanley Dean Witter
& Co.(2)(3) 28,750 4,102,421
Morgan Stanley Dean Witter
& Co.(2)(3) 519,327 74,090,684
Morgan Stanley Dean Witter
& Co.(2)(3) 21,000 2,994,153
Price (T. Rowe) Associates,
Inc. 86,716 3,203,072
Schwab (Charles) and Co.,
Inc. 387,500 14,870,313
Waddell & Reed Financial,
Inc., Class A 12,680 343,945
Waddell & Reed Financial,
Inc., Class B 54,575 1,371,197
- ----------------------------------------------------------------
$ 376,251,390
- ----------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Lodging and Gaming -- 0.2%
- ----------------------------------------------------------------
Interstate Hotels Corp.(1) 4,407 $ 14,323
Marriott International,
Inc., Class A 29,245 923,045
Marriott International,
Inc., Class A(2)(3) 26,685 842,034
Marriott International,
Inc., Class A(2)(3) 31,276 986,754
Royal Caribbean Cruises
Ltd. 500,000 24,656,250
Sunterra Corp.(1) 50,000 575,000
Wyndham International,
Class A(1) 132,212 388,373
- ----------------------------------------------------------------
$ 28,385,779
- ----------------------------------------------------------------
Medical Products -- 3.3%
- ----------------------------------------------------------------
Bausch & Lomb, Inc. 145,054 $ 9,927,133
Baxter International, Inc. 1,328,572 83,450,929
Becton, Dickinson and Co. 36,245 969,554
Boston Scientific Corp.(1) 1,080,300 23,631,563
Boston Scientific
Corp.(1)(2)(3) 137,500 3,006,058
Boston Scientific
Corp.(1)(2)(3) 59,844 1,307,517
Dentsply International,
Inc. 42,000 992,250
ESC Medical Systems Ltd.(1) 180,000 1,721,250
Genzyme Surgical
Products(1) 143,208 832,397
Guidant Corp.(1) 202,000 9,494,000
Guidant Corp.(1)(2)(3) 23,816 1,118,904
Heartport, Inc.(1) 41,026 194,874
Hillenbrand Industries,
Inc. 647,898 20,530,268
Johnson & Johnson Co. 2,032,744 189,299,285
Medtronic, Inc. 3,185,670 116,077,851
MiniMed, Inc.(1)(2)(3) 202,600 14,822,641
Schein (Henry), Corp.(1) 1,125,194 14,979,145
St. Jude Medical, Inc.(1) 42,144 1,293,294
Steris Corp.(1) 78,394 808,438
VISX, Inc.(1) 50,000 2,587,500
- ----------------------------------------------------------------
$ 497,044,851
- ----------------------------------------------------------------
Metals - Industrial -- 0.1%
- ----------------------------------------------------------------
Allegheny Technologies,
Inc. 58,908 $ 1,321,748
Nucor Corp. 221,462 12,138,886
Phelps Dodge Corp. 7,332 492,161
Steel Dynamics, Inc.(1) 291,800 4,650,563
Steel Dynamics,
Inc.(1)(2)(3) 20,000 318,463
Worthington Industries 147,466 2,442,406
- ----------------------------------------------------------------
$ 21,364,227
- ----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Minerals and Fertilizer -- 0.0%
- ----------------------------------------------------------------
Mississippi Chemical Corp. 217,070 $ 1,343,121
- ----------------------------------------------------------------
$ 1,343,121
- ----------------------------------------------------------------
Natural Gas Distribution -- 0.2%
- ----------------------------------------------------------------
Dynegy, Inc. 290,000 $ 7,050,625
Kinder Morgan, Inc. 1,230,000 24,830,625
National Fuel Gas Co. 2,000 93,000
- ----------------------------------------------------------------
$ 31,974,250
- ----------------------------------------------------------------
Oil and Gas - Equipment and Services -- 1.7%
- ----------------------------------------------------------------
Baker Hughes, Inc. 746,804 $ 15,729,559
Core Laboratories NV(1) 1,049,214 21,049,856
Halliburton Co. 2,662,050 107,147,513
Nabors Industries,
Inc.(1)(2)(3) 400,000 12,360,150
National-Oilwell, Inc.(1) 398,417 6,250,167
National-Oilwell,
Inc.(1)(2)(3) 115,645 1,812,911
National-Oilwell,
Inc.(1)(2)(3) 127,137 1,992,721
Newpark Resources, Inc.(1) 110,000 673,750
Noble Drilling, Inc.(1) 170,000 5,567,500
Patterson Energy, Inc.(1) 200,000 2,600,000
Schlumberger Ltd. 1,226,532 68,992,425
Syntroleum Corp.(1) 2,735 22,222
Transocean Sedco Forex,
Inc. 237,457 7,999,319
Valero Energy Corp. 51,510 1,023,761
Weatherford International 49,861 1,991,324
Weatherford
International(2)(3) 65,679 2,619,827
- ----------------------------------------------------------------
$ 257,833,005
- ----------------------------------------------------------------
Oil and Gas - Exploration and Production -- 0.8%
- ----------------------------------------------------------------
Anadarko Petroleum Corp. 2,554,000 $ 87,155,250
Apache Corp. 200,003 7,387,611
Burlington Resources, Inc. 428,629 14,171,546
El Paso Energy Corp. 173,830 6,746,777
Kerr - McGee Corp. 136,199 8,444,338
Newfield Exploration
Co.(1)(2)(3) 60,000 1,602,492
Union Pacific Resources
Group, Inc. 79,795 1,017,386
USX-Marathon Group 50,000 1,234,375
- ----------------------------------------------------------------
$ 127,759,775
- ----------------------------------------------------------------
Oil and Gas - Integrated -- 1.1%
- ----------------------------------------------------------------
Atlantic Richfield Co. 55,366 $ 4,789,159
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Oil and Gas - Integrated (continued)
- ----------------------------------------------------------------
BP Amoco PLC ADR 954,222 $ 56,597,292
Chevron Corp. 94,909 8,221,492
Exxon Mobil Corp. 965,231 77,761,461
Murphy Oil Corp. 29,700 1,704,038
Pennzoil-Quaker State Co. 74,457 758,531
Phillips Petroleum Co. 18,407 865,129
Royal Dutch Petroleum Co. 48,037 2,903,236
Texaco, Inc. 2,500 135,781
Tosco Corp. 614,619 16,709,954
- ----------------------------------------------------------------
$ 170,446,073
- ----------------------------------------------------------------
Paper and Forest Products -- 0.5%
- ----------------------------------------------------------------
Caraustar Industries, Inc. 264,862 $ 6,356,688
Champion International
Corp. 21,089 1,306,200
Fort James Corp. 56,401 1,543,977
Georgia-Pacific Corp. - G-P
Group 647,827 32,877,220
Georgia-Pacific Corp. -
Timber Group 305,098 7,513,038
International Paper Co. 144,526 8,156,686
Louisiana Pacific Corp. 70,750 1,008,188
Mead Corporation (The) 38,768 1,683,985
Temple Inland, Inc. 12,632 832,923
Weyerhaeuser Co. 119,608 8,589,350
Willamette Industries, Inc. 151,412 7,031,195
- ----------------------------------------------------------------
$ 76,899,450
- ----------------------------------------------------------------
Photography -- 0.1%
- ----------------------------------------------------------------
Eastman Kodak Co. 122,529 $ 8,117,546
- ----------------------------------------------------------------
$ 8,117,546
- ----------------------------------------------------------------
Printing and Business Products -- 0.8%
- ----------------------------------------------------------------
American Business Products,
Inc. 261,355 $ 3,054,587
Avery Dennison Corp. 1,361,504 99,219,604
Avery Dennison Corp.(2)(3) 40,000 2,913,980
Banta Corp. 42,341 955,319
Bowne & Co., Inc. 172,640 2,330,640
Consolidated Graphics,
Inc.(1) 70,215 1,048,837
Day Runner, Inc.(1) 8,000 31,250
Deluxe Corp. 80,675 2,213,520
Donnelley (R.R.) & Sons Co. 32,896 816,232
Harland (John H.) Co. 51,540 943,826
Ikon Office Solutions, Inc. 166,094 1,131,515
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Printing and Business Products (continued)
- ----------------------------------------------------------------
Workflow Management,
Inc.(1) 79,507 $ 2,275,888
- ----------------------------------------------------------------
$ 116,935,198
- ----------------------------------------------------------------
Publishing -- 1.3%
- ----------------------------------------------------------------
Belo (A.H.) Corp. 542,924 $ 10,349,489
Dow Jones & Co., Inc. 376,300 25,588,400
Gannett Co., Inc. 297,800 24,289,313
Houghton Mifflin Co. 97,400 4,109,063
McGraw-Hill Companies, Inc.
(The) 1,311,216 80,803,686
McGraw-Hill Companies, Inc.
(The)(2)(3) 178,948 11,023,811
Meredith Corp. 190,000 7,920,625
New York Times Co., Class A
(The) 278,000 13,656,750
The MacClatchy Co., Class A 48,066 2,078,855
Times Mirror Co., Class A 151,670 10,161,890
Tribune Co. 26,200 1,442,638
Washington Post Co., Class
B (The) 3,600 2,001,150
- ----------------------------------------------------------------
$ 193,425,670
- ----------------------------------------------------------------
Real Estate -- 0.2%
- ----------------------------------------------------------------
Avalonbay Communities, Inc. 55,000 $ 1,887,188
Catellus Development
Corp.(1) 415,722 5,326,438
Equity Office Properties
Trust 2,812 69,246
Jones Lang Lasalle, Inc.(1) 213,193 2,531,667
Prison Realty Corp. 85,146 431,052
Redwood Trust, Inc. 71,710 896,375
Rouse Co. (The) 127,700 2,713,625
Trammell Crow Co.(1) 876,098 10,184,639
Ventas, Inc.(1) 25,600 107,200
- ----------------------------------------------------------------
$ 24,147,430
- ----------------------------------------------------------------
Restaurants -- 1.1%
- ----------------------------------------------------------------
Bob Evans Farms, Inc. 48,193 $ 743,979
Boston Chicken, Inc.(1)(3) 38,500 385
Brinker International,
Inc.(1) 435,034 10,440,816
CBRL Group, Inc. 62,047 602,048
CKE Restaurants, Inc. 126,522 743,317
Jack in the Box, Inc.(1) 500,000 10,343,750
Lone Star Steakhouse and
Saloon, Inc.(1) 345,981 3,086,808
McDonald's Corp. 2,152,592 86,776,365
Outback Steakhouse, Inc.(1) 685,923 17,791,128
Papa John's International,
Inc.(1) 77,551 2,021,173
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Restaurants (continued)
- ----------------------------------------------------------------
Papa John's International,
Inc.(1)(2)(3) 47,649 $ 1,241,417
Papa John's International,
Inc.(1)(2)(3) 23,000 599,088
Papa John's International,
Inc.(1)(2)(3) 49,046 1,276,727
Sonic Corp.(1) 47,338 1,349,133
Starbucks Corp.(1) 684,000 16,587,000
Tricon Global Restaurants,
Inc.(1) 219,121 8,463,549
- ----------------------------------------------------------------
$ 162,066,683
- ----------------------------------------------------------------
Retail - Food and Drug -- 2.0%
- ----------------------------------------------------------------
Albertson's, Inc. 2,192,341 $ 70,702,997
CVS Corp. 1,831,571 73,148,367
Hannaford Brothers Co. 96,349 6,678,190
Kroger Co. (The)(1) 52,440 989,805
Rite Aid Corp. 6,000 67,125
Safeway, Inc.(1) 3,355,233 119,320,474
Walgreen Co. 127,500 3,729,375
Whole Foods Market, Inc.(1) 90,000 4,173,750
Winn-Dixie Stores, Inc. 729,899 17,471,957
- ----------------------------------------------------------------
$ 296,282,040
- ----------------------------------------------------------------
Retail - General -- 1.5%
- ----------------------------------------------------------------
99 Cents Only Stores(1) 428,337 $ 16,383,890
Casey's General Stores,
Inc. 75,000 782,813
Department 56, Inc.(1) 219,404 4,964,016
Department 56,
Inc.(1)(2)(3) 35,758 808,701
Dollar General Corp. 199,987 4,549,704
Dollar Tree Stores, Inc.(1) 770,178 37,305,497
Dollar Tree Stores,
Inc.(1)(2)(3) 154,032 7,457,941
Dollar Tree Stores,
Inc.(1)(2)(3) 87,961 4,256,776
Family Dollar Stores 757,718 12,360,275
Family Dollar Stores(2)(3) 345,987 5,641,655
Family Dollar Stores(2)(3) 1,259,373 20,528,114
May Department Stores Co.
(The) 562,886 18,153,074
Nordstrom, Inc. 27,610 723,037
Penney (J.C.) Company, Inc. 1,068,960 21,312,390
Sears Roebuck & Co. 15,750 479,391
Wal-Mart Stores, Inc. 1,003,281 69,351,799
- ----------------------------------------------------------------
$ 225,059,073
- ----------------------------------------------------------------
Retail - Specialty and Apparel -- 2.7%
- ----------------------------------------------------------------
Abercrombie and Fitch Co.,
Class A(1) 5,604 $ 149,557
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Retail - Specialty and Apparel (continued)
- ----------------------------------------------------------------
Autonation, Inc.(1) 5,695,785 $ 52,686,011
Burlington Coat Factory
Warehouse Corp. 628,228 8,716,664
Circuit City Stores-Circuit
City Group 16,000 721,000
Circuit City Stores-Circut
City Group(2)(3) 200,000 9,001,685
Gap, Inc. (The) 41,776 1,921,696
Harcourt General, Inc. 216,416 8,710,744
Home Depot, Inc. (The) 3,714,168 254,652,644
Intimate Brands,
Inc.(1)(2)(3) 26,500 1,141,441
Limited, Inc. (The) 302,250 13,091,203
Lowe's Companies 60,000 3,585,000
Neiman Marcus Group, Inc.,
Class B (The)(1) 65,206 1,756,487
Office Depot, Inc.(1) 303,219 3,316,458
OfficeMax, Inc.(1) 912,117 5,016,644
Payless Shoesource, Inc.(1) 7,700 361,900
Pep Boys - Manny, Moe &
Jack (The) 97,976 894,031
Pier 1 Imports, Inc. 350,000 2,231,250
Tandy Corp. 443,401 21,809,787
Tiffany and Co. 44,000 3,927,000
TJX Companies, Inc. (The) 500,000 10,218,750
Too, Inc.(1) 39,087 674,251
Toys 'R' Us, Inc.(1) 56,355 806,581
- ----------------------------------------------------------------
$ 405,390,784
- ----------------------------------------------------------------
Specialty Chemicals and Materials -- 1.1%
- ----------------------------------------------------------------
Arch Chemicals, Inc. 4,950 $ 103,641
Corning, Inc. 336,282 43,359,360
Dexter Corp. (The) 36,139 1,436,525
Ecolab, Inc. 2,043,736 79,961,171
International Flavors &
Fragrances, Inc. 148,101 5,590,813
International Specialty
Products, Inc.(1) 59,000 542,063
MacDermid, Inc. 61,937 2,543,288
Millipore Corp. 101,440 3,918,120
Minnesota Mining &
Manufacturing Co. 114,851 11,241,042
Olin Corp. 9,900 196,144
Pall Corp. 216,000 4,657,500
RPM, Inc. 470,138 4,789,531
Sigma Aldrich Corp. 195,000 5,862,188
- ----------------------------------------------------------------
$ 164,201,386
- ----------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Tobacco -- 0.1%
- ----------------------------------------------------------------
Philip Morris Co., Inc. 481,024 $ 11,153,744
- ----------------------------------------------------------------
$ 11,153,744
- ----------------------------------------------------------------
Transportation -- 0.4%
- ----------------------------------------------------------------
Arnold Industries, Inc. 148,543 $ 2,088,886
Burlington Northern Santa
Fe Corp. 212,295 5,148,154
C.H. Robinson Worldwide,
Inc. 87,672 3,484,962
C.H. Robinson Worldwide,
Inc.(2)(3) 121,000 4,803,978
CSX Corp. 36,496 1,145,062
FDX Corp.(1) 695,106 28,455,902
Florida East Coast
Industries, Inc. 122,888 5,130,574
Heartland Express, Inc.(1) 250,000 3,937,500
Kansas City Southern
Industries, Inc. 16,800 1,253,700
Norfolk Southern Corp. 390 7,995
Union Pacific Corp. 92,081 4,017,034
United Parcel Service,
Inc., Class B 25,700 1,773,300
- ----------------------------------------------------------------
$ 61,247,047
- ----------------------------------------------------------------
Trucks and Parts -- 0.0%
- ----------------------------------------------------------------
Paccar, Inc. 12,894 $ 571,365
- ----------------------------------------------------------------
$ 571,365
- ----------------------------------------------------------------
Total Common Stocks
(identified cost $9,942,958,016) $14,420,304,715
- ----------------------------------------------------------------
</TABLE>
CONVERTIBLE PREFERRED STOCKS -- 0.2%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Entertainment -- 0.2%
- ----------------------------------------------------------------
Time Warner Inc., Series
J(3) 121,597 $ 36,851,256
- ----------------------------------------------------------------
$ 36,851,256
- ----------------------------------------------------------------
Financial - Miscellaneous -- 0.0%
- ----------------------------------------------------------------
American General Corp.,
Series D 5,673 $ 354,562
- ----------------------------------------------------------------
$ 354,562
- ----------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $13,737,810) $ 37,205,818
- ----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
RIGHTS -- 0.0%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------
Communications Services -- 0.0%
- ----------------------------------------------------------------
Talk.com, Inc.(1) 12,369 $ 9,277
- ----------------------------------------------------------------
$ 9,277
- ----------------------------------------------------------------
Total Rights
(identified cost $0) $ 9,277
- ----------------------------------------------------------------
</TABLE>
COMMERCIAL PAPER -- 3.7%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000'S
SECURITY OMITTED) VALUE
<S> <C> <C>
- ----------------------------------------------------------------
American General Corp.,
4.50%, 1/3/00 $ 28,300 $ 28,292,925
Ciesco LP, 6.00%, 1/20/00 100,000 99,683,333
CIT Group, Inc., 5.99%,
1/27/00 100,000 99,567,389
Corporate Receivables Corp.
(144A), 6.05%, 1/19/00 35,471 35,363,700
General Electric Capital
Corp., 6.01%, 1/28/00 80,402 80,039,588
Panasonic Finance,
5.45%, 1/5/00 40,000 39,975,778
Prudential Funding Corp.,
5.99%, 2/7/00 150,000 149,076,542
SBC Communications, Inc.,
4.45%, 1/3/00 20,000 19,995,056
- ----------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $551,994,311) $ 551,994,311
- ----------------------------------------------------------------
Total Investments -- 99.3%
(identified cost $10,508,690,137) $15,009,514,121
- ----------------------------------------------------------------
Other Assets, Less Liabilities -- 0.7% $ 105,134,838
- ----------------------------------------------------------------
Net Assets -- 100.0% $15,114,648,959
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
ADR-American Depositary Receipt
(1) Non-income producing security.
(2) Security restricted from resale for a period not
exceeding one year. At December 31, 1999, the value
of these securities totaled $757,283,521 or 5.0% of
net assets.
(3) Security valued at fair value using methods
determined in good faith by or at the direction of
the Trustees.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- ------------------------------------------------------------
Investments, at value
(identified cost, $10,508,690,137) $15,009,514,121
Cash 90,699,036
Receivable for investments sold 2,374,878
Interest and dividends receivable 11,946,129
Other assets 353,771
Tax reclaim receivable 28,687
Deferred organization expenses 1,989
- ------------------------------------------------------------
TOTAL ASSETS $15,114,918,611
- ------------------------------------------------------------
Liabilities
- ------------------------------------------------------------
Payable to affiliate for Trustees' fees $ 8,443
Accrued expenses 261,209
- ------------------------------------------------------------
TOTAL LIABILITIES $ 269,652
- ------------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $15,114,648,959
- ------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $10,613,825,235
Net unrealized appreciation (computed on
the basis of identified cost) 4,500,823,724
- ------------------------------------------------------------
TOTAL $15,114,648,959
- ------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
<S> <C>
Investment Income
- ------------------------------------------------------------
Dividends (net of foreign taxes,
$824,260) $ 104,816,227
Interest 30,978,859
- ------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 135,795,086
- ------------------------------------------------------------
Expenses
- ------------------------------------------------------------
Investment adviser fee $ 51,368,943
Trustees fees and expenses 40,972
Custodian fee 1,332,208
Legal and accounting services 118,905
Amortization of organization expenses 2,176
Miscellaneous 105,614
- ------------------------------------------------------------
TOTAL EXPENSES $ 52,968,818
- ------------------------------------------------------------
NET INVESTMENT INCOME $ 82,826,268
- ------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 19,286,893
Foreign currency transactions (5,306)
- ------------------------------------------------------------
NET REALIZED GAIN $ 19,281,587
- ------------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 1,954,982,573
Foreign currency (260)
- ------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 1,954,982,313
- ------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 1,974,263,900
- ------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 2,057,090,168
- ------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCREASE (DECREASE) YEAR ENDED PERIOD ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998(1) OCTOBER 31, 1998
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
From operations --
Net investment income $ 82,826,268 $ 9,404,648 $ 40,322,702
Net realized gain (loss) 19,281,587 21,475,026 (88,268,073)
Net change in unrealized appreciation
(depreciation) 1,954,982,313 950,828,792 540,179,532
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,057,090,168 $ 981,708,466 $ 492,234,161
- ---------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 5,393,615,110 $ 858,758,546 $4,084,235,841
Withdrawals (1,040,915,654) (121,286,161) (462,237,336)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 4,352,699,456 $ 737,472,385 $3,621,998,505
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 6,409,789,624 $1,719,180,851 $4,114,232,666
- ---------------------------------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------------------------------
At beginning of year $ 8,704,859,335 $6,985,678,484 $2,871,445,818
- ---------------------------------------------------------------------------------------------------------------
AT END OF YEAR $15,114,648,959 $8,704,859,335 $6,985,678,484
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(1) For the two-month period ended December 31, 1998.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
YEAR ENDED PERIOD ENDED -----------------------------------
DECEMBER 31, 1999 DECEMBER 31, 1998(1) 1998 1997 1996(2)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------
Expenses 0.46% 0.48%(3) 0.50% 0.56% 0.66%(3)
Net investment income 0.72% 0.72%(3) 0.78% 0.81% 0.91%(3)
Portfolio Turnover 11% 3% 12% 14% 6%
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S
OMITTED) $15,114,649 $8,704,859 $6,985,678 $2,871,446 $936,800
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(1) For the two-month period ended December 31, 1998.
(2) For the period form the start of business, December 1, 1995,
to October 31, 1996.
(3) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Tax-Managed Growth Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Portfolio, which was organized as a trust
under the laws of the State of New York on December 1, 1995, seeks to provide
long-term after-tax returns by investing in a diversified portfolio of equity
securities. The Declaration of Trust permits the Trustees to issue interests
in the Portfolio. The following is a summary of significant accounting
policies consistently followed by the Portfolio in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A Investment Valuations -- 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
generally 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. Over-the counter options are normally valued
at the mean between the latest bid and asked price. Investments 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.
B Income Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes on its share of such
taxable income. Since some of the Portfolio's investors are regulated
investment companies that invest all or substantially all of their assets in
the Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements (under the Internal Revenue Code) in
order for its investors to satisfy them. The Portfolio will allocate, at
least annually among its investors, each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit.
C Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
D Futures Contracts -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit either in cash or securities an amount
(initial margin) equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio (margin maintenance) each day, dependent on daily
fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed to hedge against
anticipated future changes in price of current or anticipated portfolio
positions. Should prices move unexpectedly, the Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
E Put Options -- Upon the purchase of a put option by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio 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. When the
Portfolio exercises a put option, settlement is made in cash. The risk
associated with purchasing options is limited to the premium originally paid.
F Securities Sold Short -- The Portfolio may sell securities it does not own in
anticipation of a decline in the market price of the securities or in order
to hedge portfolio positions. The Portfolio will generally borrow the
security sold in order to make delivery to the buyer. Upon executing the
transaction, the Portfolio records the proceeds as deposits with brokers in
the Statement of Assets and Liabilities and establishes an offsetting payable
for securities sold short for the securities due on settlement. The proceeds
are retained by the broker as collateral for the short position. The
liability is marked to market and the Portfolio is required to pay the
lending broker any dividend or interest income earned while the short
position is open. A gain or loss is recorded when the security is delivered
to the broker. The Portfolio may
65
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
recognize a loss on the transaction if the market value of the securities
sold increases before the securities are delivered.
G Other -- Investment transactions are accounted for on the date the securities
are purchased or sold. Dividend income is recorded on the ex-dividend date.
However, if the ex-dividend date has passed, certain dividends from foreign
securities are recorded as the Portfolio is informed of the ex-dividend date.
Interest income is recorded on the accrual basis.
H Use of Estimates -- The preparation of the 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.
2 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
Under the advisory agreement, BMR receives a monthly advisory 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 year ended December 31, 1999, the adviser fee was 0.45% of the
Portfolio's average net assets. Except for Trustees of the Portfolio who are
not members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment
adviser fee. Trustees of the Portfolio that are not affiliated with the
Investment Adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the year ended December 31, 1999, no significant
amounts have been deferred.
Certain officers and Trustees of the Portfolio are officers of the above
organizations.
3 Investment Transactions
- -------------------------------------------
For the year ended December 31, 1999, purchases and sales of investments,
other than short-term obligations, aggregated $2,189,568,246 and
$1,178,444,732, respectively. In addition, investments having an aggregate
market value of $323,735,434 at dates of withdrawal were distributed in
payment for capital withdrawals. During the year ended December 31, 1999,
investors contributed securities with a value of $3,191,016,822.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1999 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $ 4,733,822,312
---------------------------------------------------------
Gross unrealized appreciation $10,362,747,476
Gross unrealized depreciation (87,055,667)
---------------------------------------------------------
NET UNREALIZED APPRECIATION $10,275,691,809
---------------------------------------------------------
</TABLE>
5 Financial Instruments
- -------------------------------------------
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
The Portfolio did not have any open obligations under these financial
instruments at December 31, 1999.
6 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 million unsecured line of credit agreement
with a group of banks. The Portfolio may temporarily borrow from the line of
credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at an
amount above the Eurodollar rate or federal funds rate. In addition, a fee
computed at an annual rate of 0.10% on the daily unused portion of the line
of credit is allocated among the participating portfolios
66
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
and funds at the end of each quarter. The Portfolio did not have any
significant borrowings or allocated fees during the year ended December 31,
1999.
7 Fiscal Year End Change
- -------------------------------------------
Effective November 1, 1998, the Portfolio changed its fiscal year-end to
December 31.
67
<PAGE>
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 1999
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS
OF TAX-MANAGED GROWTH PORTFOLIO:
- ---------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Managed Growth Portfolio (the Portfolio) as
of December 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for the year ended December 31,
1999, the two-month period ended December 31, 1998 and for the year ended
October 31, 1998, and the supplementary data for the year ended December 31,
1999, the two-month period ended December 31, 1998 and for each of the years in
the two-year period ended October 31, 1998 and for the period from the start of
business, December 1, 1995 to October 31, 1996. These financial statements and
supplementary data are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of the
Portfolio as of December 31, 1999, and the results of its operations, the
changes in its net assets and its supplementary data for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned officer of its Manager, Eaton Vance Management,
thereunto duly authorized.
BELCREST CAPITAL FUND LLC
(Registrant)
By: EATON VANCE MANAGEMENT, its Manager
By: /s/ Alan R. Dynner
-----------------------
Alan R. Dynner
Vice President and Chief Legal Officer
Date: April 27, 2000
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3 Copy of Amended and Restated Operating Agreement of the Fund
dated November 24, 1998 and First Amendment thereto dated
September 1, 1999. (Note: the Operating Agreement also
defines the rights of the holders of Shares of the Fund)
4 Copy of Loan and Security Agreement dated as of November 24,
1998, First Amendment thereto dated as of February 23, 1999;
Second Amendment thereto dated as of April 28, 1999; Third
Amendment thereto dated as of July 28, 1999, and Fourth
Amendment thereto dated as of September 1, 1999, Fifth
Amendment thereto dated as of September 29, 1999; Sixth
Amendment thereto dated as of March 8, 2000.
9 Not applicable and not filed.
10(1) Copy of Investment Advisory and Administration Agreement
between the Fund and Boston Management and Research dated
November 24, 1998.
10(2) Copy of Management Agreement between Belcrest Realty
Corporation and Boston Management and Research dated
November 24, 1998.
10(3) Copy of Investor Servicing Agreement between the Fund and
Eaton Vance Distributors, Inc. dated August 14, 1998.
10(4) Copy of Custody and Transfer Agency Agreement between the
Fund and Investors Bank & Trust Company dated August 14,
1998.
11 Not applicable and not filed.
12 Not applicable and not filed.
21 List of Subsidiaries of the Fund.
24 Not applicable and not filed.
27(1) Financial Data Schedule for 12/31/98
27(2) Financial Data Schedule for 12/31/99
99 Form N-SAR of Eaton Vance Tax-Managed Growth Portfolio (File
No. 811-7409) for its fiscal year ended December 31, 1999
filed electronically with the Securities and Exchange
Commission under the Investment Company Act of 1940 on
February 17, 2000 (Accession No. 0000940394-00-000073)
(incorporated herein by reference pursuant to Rule 12b-32).
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EXHIBIT No. 3
APPENDIX IV
BELCREST CAPITAL FUND LLC
(a Massachusetts limited liability company)
AMENDED AND RESTATED OPERATING AGREEMENT
To be retained by the Shareholder.
<PAGE>
BELCREST CAPITAL FUND LLC
AMENDED AND RESTATED OPERATING AGREEMENT
This AMENDED AND RESTATED OPERATING AGREEMENT of Belcrest Capital Fund LLC
(the "Fund") is dated as of this 24th day of November, 1998, by and among Eaton
Vance Management, a Massachusetts business trust ("Eaton Vance"), as manager of
the Fund and as a member and shareholder thereof, Boston Management and
Research, a Massachusetts business trust ("BMR" and sometimes herein called the
"Withdrawing Shareholder"), as resigning organizational member and shareholder,
and the Shareholders (as defined below).
The Fund was formed as a limited liability company by filing in the office
of the Secretary of the Commonwealth of Massachusetts a Certificate of
Organization of the Fund on August 13, 1998, pursuant to an Operating Agreement
dated as of August 13, 1998 (the "Original Agreement").
The Shareholders desire to be admitted to the Fund as members and
Shareholders.
The Manager (as defined below), Eaton Vance (as a Shareholder), the
Withdrawing Shareholder and the Shareholders desire to amend the Original
Agreement as hereinafter provided and in consideration of the premises and the
agreements herein contained and intending to be legally bound hereby agree as
follows:
A. The Withdrawing Shareholder shall hereby withdraw from the Fund as a
member and Shareholder, its contribution to the Fund as organizational member
and Shareholder shall be returned in full satisfaction of its interest in the
Fund, and the Withdrawing Shareholder shall have no further claims against the
Fund with respect to such interest.
B. Effective upon the date hereof, the Shareholders shall hereby be
admitted to the Fund as members and Shareholders, and the Original Agreement
shall be amended and restated to read as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree to carry on a limited liability
company in accordance with the Act (as defined below) and the provisions of this
Agreement and subject to the terms and conditions of this Agreement.
ARTICLE 1
DEFINITIONS
The defined terms used in this Agreement shall have the meanings specified
below:
"ACCEPTABLE SECURITIES" means the equity securities determined by the
Investment Adviser in its sole discretion to be acceptable for contribution, and
which are in fact contributed, to the Fund by the Shareholders as their Capital
Contributions.
"ACCOUNTANT" means such firm of independent certified public accountants as
may be engaged from time to time by the Fund.
"ACT" means the Massachusetts Limited Liability Company Act (chapter 156C
of the Massachusetts General Laws), as amended from time to time, and any
successor to such Act.
"AGREEMENT" means this Amended and Restated Operating Agreement of Limited
Liability Company, as it may be amended or restated from time to time.
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"BANKRUPTCY OF THE MANAGER" means the occurrence of any of the following:
(i) the Manager is adjudged a bankrupt or insolvent, or has entered against it
an order for relief in any bankruptcy or insolvency proceeding; (ii) 120 days
after the commencement of any proceeding against the Manager seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, if the proceeding has
not been dismissed, or if within 90 days after the appointment without the
Manager's consent or acquiescence of a trustee, receiver or liquidator of the
Manager or of all or any substantial part of its properties, the appointment is
not vacated or stayed, or within 90 days after the expiration of any such stay,
the appointment is not vacated; or (iii) the Manager makes an assignment for the
benefit of creditors, files a voluntary petition in bankruptcy, files a petition
or answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation, files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against it in any proceeding of
this nature or seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of the Manager or of all or any substantial part of its
properties.
"BMR" means Boston Management and Research, a Massachusetts business trust,
or any successor corporation or other entity which is wholly-owned by Eaton
Vance or Eaton Vance's parent, Eaton Vance Corp. BMR acts as investment adviser
of the Portfolio and will act as the initial investment adviser of the Fund.
"BOOK GAIN" or "BOOK LOSS" means the gain or loss recognized by the Fund
for book purposes in any Fiscal Year by reason of a sale or other disposition of
any asset. Such Book Gain or Book Loss shall be computed by reference to the
Book Value of such asset as of the date of such sale or other disposition,
rather than by reference to the tax basis of such asset as of such date, and
each and every reference herein to "gain" or "loss" shall be deemed to refer to
Book Gain or Book Loss, rather than to tax gain or tax loss, unless the context
manifestly otherwise requires.
"BOOK VALUE" of an asset means, as of any particular date, the value at
which the asset is reflected on the books of the Fund as of such date. The Book
Value of all Fund assets shall be adjusted to equal their respective values used
to determine Net Asset Value per Share, as determined by the Fund in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(f), as of the following
times: (i) the acquisition of additional Shares by any new or existing
Shareholder in exchange for more than a de minimis Capital Contribution; (ii)
the distribution by the Fund to a Shareholder of more than a de minimis amount
of property or money in exchange for all or part of the Shares owned by such
Shareholder; and (iii) the termination of the Fund for federal income tax
purposes pursuant to Code Section 708(b)(1)(B); provided, however, that
adjustments pursuant to clauses (i) and (ii) above shall be made only if the
Fund determines that such adjustments are necessary or appropriate to accurately
reflect the economic interests of the Shareholders in the Fund or are otherwise
required by Treasury Regulations Section 1.704-1(b)(2)(iv).
"BRC" means Belcrest Realty Corporation, a Delaware corporation, 100% of
the common stock of which will be owned by the Fund so long as BRC holds the
Real Estate Assets.
"BUSINESS DAY" means any day on which the New York Stock Exchange is open
for trading.
"BY-LAWS" means the By-Laws of the Fund adopted by the Manager, as amended
from time to time.
"CAPITAL ACCOUNT" has the meaning set forth in Section 6.1 hereof.
"CAPITAL CONTRIBUTION" means, with respect to any Shareholder except the
Manager, the Exchange Value of Acceptable Securities contributed to the Fund by
such Shareholder, net of the selling commission paid by the Fund on behalf of
such Shareholder, if any.
2
<PAGE>
"CERTIFICATE" means the Certificate of Organization of the Fund as provided
for pursuant to the Act, as filed in the office of the State Secretary of the
Commonwealth of Massachusetts on August 13, 1998, as it may be amended or
restated from time to time.
"CLOSING" means the Initial Closing or any Subsequent Closing.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent federal law of similar import.
"COMPANY" means Belvedere Capital Fund Company LLC, a Massachusetts limited
liability company.
"COMPANY SERVICING AGREEMENT" means any agreement between the Company and
Eaton Vance Distributors, Inc., or between the Company and any sub-agent
pursuant to which investor services will be rendered to one or more direct or
indirect investors in the Company. The Company Servicing Agreement with any
sub-agent may be contained in a sub-agency agreement between Eaton Vance
Distributors, Inc. and such sub-agent.
"CONSENT OF THE SHAREHOLDERS" means the consent or approval of Shareholders
holding the lesser of (i) 50% of the outstanding Shares, (ii) 67% of those
Shares acting on the matter if Shareholders holding more than 50% of the
outstanding Shares have responded to the consent solicitation or (iii) 67% of
those Shares present or represented by proxy at a meeting if Shareholders
holding more than 50% of the outstanding Shares are present or represented by
proxy at the meeting. The Manager shall determine the manner of making and
obtaining any such Consent, may establish record dates for this purpose, and
shall have complete authority to decide all matters in connection therewith.
"COVERED PERSON" has the meaning set forth in Section 3.2 hereof.
"DEPRECIATION" means, for each Fiscal Year or other period, an amount equal
to the depreciation, amortization or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year or other period for federal income
tax purposes, except that if the Book Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such Fiscal
Year or other period, then Depreciation shall be that amount which bears the
same relationship to the Book Value of such asset as the depreciation,
amortization or other cost recovery deduction allowable for federal income tax
purposes bears to its adjusted tax basis.
"DIVERSIFIED BASKET OF SECURITIES" means a group of securities that is
diversified among at least 10 different issuers such that not more than 25% of
the value of the securities are investments in the securities of any one issuer
and not more than 50% of the value of the securities are investments in the
securities of five or fewer issuers.
"EFFECTIVE DATE" means the date of this Agreement.
"EATON VANCE" means Eaton Vance Management, a Massachusetts business trust,
or any successor corporation or other entity which is wholly-owned by Eaton
Vance's parent, Eaton Vance Corp. Eaton Vance acts as Manager of the Fund and
currently owns all outstanding shares of BMR.
"EXCHANGE VALUE" means the value of an Acceptable Security contributed at
any Closing as of the close of business on the business day immediately
preceding such Closing, determined with respect to (i) any security which is
freely tradable as the market value of said Security and (ii) any Restricted
Security as at a discount to the market value of freely tradable securities of
the same class in the principal market for said Restricted Security.
"FISCAL YEAR" means the taxable year of the Fund selected by the Manager,
which is expected to be the calendar year, except that the initial Fiscal Year
shall commence on the Effective Date and the final Fiscal Year shall end on the
date on which the Fund is terminated under Article 9 hereof. The Manager, in its
discretion, may
3
<PAGE>
change the Fiscal Year subject to and upon compliance with applicable
restrictions and conditions imposed by the Code or the Service.
"FUND" means the Massachusetts limited liability company formed under the
Act and governed by and subject to the provisions of this Agreement.
"FUND MINIMUM GAIN" has the same meaning as partnership minimum gain set
forth in Treasury Regulations Section 1.704-2(d) and, as provided therein, shall
generally be determined by computing, for each Nonrecourse Debt of the Fund, any
gain the Fund would realize if it disposed of the property subject to that
liability for no consideration other than full satisfaction of the liability,
and then aggregating the separate amounts of gain so computed.
"FUND SERVICING AGREEMENT" means any agreement between the Fund and Eaton
Vance Distributors, Inc., or between the Fund and any sub-agent pursuant to
which investor services will be rendered to one or more Shareholders. The Fund
Servicing Agreement with any sub-agent may be contained in a sub-agency
agreement between Eaton Vance Distributors, Inc. and such sub-agent.
"IMMEDIATE FAMILY" means, with respect to any person, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, and sister-in-law of
such person, and shall include adoptive relationships.
"INITIAL CLOSING" means the closing on the Effective Date at which the
initial Shareholders (other than Eaton Vance which is an organizational
Shareholder) are admitted to the Fund in exchange for the contribution of
Acceptable Securities.
"INVESTMENT ADVISER" means BMR or any replacement or successor investment
adviser of the Fund, in such capacity.
"INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENT" means the investment
advisory and administrative agreement entered into by the Fund and BMR, dated
the date hereof, as it may be amended from time to time, and any replacement
investment advisory agreement between the Fund and BMR or any replacement or
successor investment adviser of the Fund.
"INVESTMENT PROPERTY" has the meaning set forth in Section 2.4(b) hereof.
"ISSUE PRICE PER SHARE" means the price per share at which the Fund will
issue Shares at each Closing, which price will equal the sum of (i) the Fund's
Net Asset Value Per Share as of the close of business on the business day
preceding the Closing, (ii) the cumulative amount of organizational and start-up
costs per Share incurred by the Fund and BRC prior to such Closing, and (iii)
the cost to the Fund of the preferred stock of BRC acquired by the Fund and
donated to charitable organizations prior to such Closing. At the Initial
Closing the Issue Price Per Share shall be $100.
"LIBOR THREE MONTHS RATE" means in relation to any particular calendar
quarterly period the rate per annum equal to the London Inter Bank Offered Rate
for three months, as published in the Wall Street Journal on the first business
day of such quarter. Such rate shall be effective during the entire calendar
quarter for all loans made pursuant to Section 8.5 during such quarter or which
are outstanding during such quarter. It is understood and agreed that a written
statement by the Fund of the LIBOR Three Months Rate for any particular
quarterly period shall be conclusive evidence of such rate for all purposes of
this Agreement.
"MANAGER" means Eaton Vance in its capacity as the manager of the Fund and
any other Person who or that becomes a substituted or successor Manager as
provided herein.
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<PAGE>
"MARKETABLE EQUITY SECURITY" means an equity security for which market
quotations are readily available.
"MEMORANDUM" means the Confidential Private Placement Memorandum of the
Fund dated August 14, 1998, prepared in connection with the offering and sale of
the Shares, as it may be amended and supplemented from time to time.
"MINIMUM GAIN" means, as of any particular date, an amount determined with
respect to the Fund as of such date in accordance with Treasury Regulations
Section 1.704-2(d).
"NET ASSET VALUE PER SHARE" means the total value of the Fund's total
assets, less the Fund's accrued and allocated liabilities, divided by the number
of Shares outstanding. The assets and liabilities of the Fund shall be
calculated in the manner authorized by the Investment Adviser.
"NET CURRENT INCOME" has the meaning set forth in Section 8.1 hereof.
"1940 ACT" means the Investment Company Act of 1940, as amended.
"NONRECOURSE DEBT" means any Fund liability to the extent that no
Shareholder (or related person within the meaning of Treasury Regulations
Section 1.752-4(b)) bears the economic risk of loss for such liability under
Treasury Regulations Section 1.752-2.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury Regulations
Section 1.704-2(c).
"PERSON" means any individual, corporation, association, business trust,
limited liability company, partnership, joint venture, trust or other entity,
and the heirs, executors, administrators, legal representatives, successors and
assigns of such Person where the context so admits.
"PLACEMENT AGENCY AGREEMENT" means the placement agency agreement dated as
of August 14, 1998 between the Fund and Eaton Vance Distributors, Inc., as it
may be amended from time to time.
"PORTFOLIO" means Tax-Managed Growth Portfolio, a New York common law trust
registered under the 1940 Act as a diversified open-end management investment
company.
"PRECONTRIBUTION GAIN" means with respect to any Acceptable Security which
a Shareholder contributes to the Fund, (i) the excess of the Exchange Value of
such Acceptable Security over its tax basis in the hands of the Fund immediately
after such contribution on the date of contribution or, if less, (ii) the excess
of the amount realized on a sale or other taxable disposition of such Acceptable
Security by the Fund, the Company or the Portfolio over its tax basis.
"PRECONTRIBUTION LOSS" means with respect to any Acceptable Security which
a Shareholder contributes to the Fund, the excess of the tax basis of the
Acceptable Security in the hands of the Fund immediately after such contribution
over the Exchange Value of such Acceptable Security.
"PROFIT" or "LOSS" means, for each Fiscal Year, an amount equal to the
Fund's taxable income or loss (as the case may be) for such year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Fund that is exempt from federal income tax and not
otherwise taken into account in computing Profit or Loss shall be added to
such taxable income or loss;
5
<PAGE>
(b) Any expenditures of the Fund described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury
Regulations Sections 1.704-1(b)(2)(iv)(i) shall be subtracted from such
taxable income or loss;
(c) In lieu of the depreciation, amortization or other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year;
(d) Book Gain or Book Loss shall be taken into account in lieu of any tax
gain or tax loss recognized by the Fund; and
(e) Items of income, gain, loss, or deduction specially allocated pursuant
to Section 6.5 or 6.6 hereof shall not be taken into account.
"QUALIFIED PURCHASER" has the meaning set forth in Section 2(a)(51) of the
1940 Act.
"QUALIFYING ASSETS" means assets that are acquired by the Fund or by BRC in
order for the exchange of contributed securities for Shares of the Fund to be
non-taxable, and which are not assets described or referred to in Section
351(e)(1)(B) of the Code.
"REAL ESTATE ASSETS" shall mean those Qualifying Assets constituting real
property or interests in real property, including the Partnership Preference
Units referred to in the Memorandum, equity interests in private partnerships
holding real properties subject to long-term leases and equity interests in
other types of private operating partnerships holding income producing real
properties.
"REGULATORY ALLOCATIONS" has the meaning given such term in Section 6.6
hereof.
"RESTRICTED SECURITIES" means, as of any time, Acceptable Securities which
are restricted as to disposition at such time by the Fund or Portfolio pursuant
to contract or the Securities Act, but shall not include any security if the
Fund or Portfolio can then sell its holdings of such security pursuant to the
provisions of Rule 144 under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERVICE" means the Internal Revenue Service.
"SHARE OF MINIMUM GAIN" means, at a particular time with respect to a
Shareholder, the amount of partnership minimum gain determined with respect to
such Shareholder as of such time in accordance with Treasury Regulations Section
1.704-2(g)(1).
"SHAREHOLDER" or "SHAREHOLDERS" means any and all of those Persons
(including the Person designated as Manager) designated as Shareholders on the
books and records of the Fund, as they may be amended from time to time,
together with any Person who becomes a substituted or additional Shareholder as
provided herein, in such Person's capacity as a Shareholder of the Fund. Each
Shareholder designated as such on the books and records of the Fund is admitted
as a member of the Fund within the meaning of the Act, and is a holder of record
of Shares of the Fund. Only those Persons so designated are deemed to be
Shareholders for all purposes of this Agreement and the Act.
"SHAREHOLDER NONRECOURSE DEBT MINIMUM GAIN" shall be determined in the same
manner as partner nonrecourse minimum gain in Treasury Regulations Section
1.704-2(i)(3) and, as provided therein, shall generally be the amount, with
respect to each Shareholder Nonrecourse Debt, equal to the Fund Minimum Gain
that would result if such Shareholder Nonrecourse Debt were treated as a
Nonrecourse Debt.
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"SHAREHOLDER NONRECOURSE DEBT" means any Fund liability to the extent such
liability is nonrecourse for purposes of Treasury Regulations Section 1.1001-2
and a Shareholder (or related person within the meaning of Treasury Regulation
Section 1.752-4(b)) bears the economic risk of loss with respect to such
liability under Treasury Regulations Section 1.752-2.
"SHAREHOLDER NONRECOURSE DEDUCTIONS" shall be determined in the manner set
forth with respect to partnership nonrecourse deductions in Treasury Regulations
Section 1.704-2(i)(2).
"SHARES" means the limited liability company interests in the Fund in the
form of shares issued by the Fund from time to time, and includes a fraction of
a Share as well as a whole Share.
"SPECIAL PRECONTRIBUTION GAIN DISTRIBUTION" has the meaning set forth in
Section 8.1(b) hereof.
"SUB-AGENT" means any sub-agent appointed by Eaton Vance Distributors, Inc.
with respect to the private offering and sale of the Shares.
"SUBSEQUENT CLOSING" means any Closing which may be held in the discretion
of the Manager to admit additional Shareholders and/or to receive additional
Capital Contributions by any Shareholder after the Initial Closing.
"TAX MATTERS PARTNER" means the Person designated as the Tax Matters
Partner in accordance with Section 6.9 of this Agreement.
"TENDER SECURITY" has the meaning set forth in Section 10.3 hereof.
"TREASURY REGULATIONS" means the Federal income tax regulations promulgated
under the Code, as such Treasury Regulations may be amended from time to time
(it being understood that all references herein to sections of the Treasury
Regulations shall be deemed also to refer to any corresponding provisions of
succeeding Treasury Regulations).
ARTICLE 2
THE FUND
2.1 THE FUND. The Manager and Shareholders agree to carry on the business
of the Fund pursuant to the Act, this Agreement and the By-Laws. The rights,
powers and duties of the Manager and Shareholders shall be governed by the
provisions of this Agreement and the By-Laws.
2.2 FUND NAME, OFFICE AND RESIDENT AGENT FOR SERVICE OF PROCESS. The Fund
shall be known as "Belcrest Capital Fund LLC." The Massachusetts office required
by the Act and principal place of business of the Fund shall be located at 24
Federal Street, Boston, Massachusetts 02110, or at such other location in the
Commonwealth of Massachusetts as may hereafter be determined by the Manager. The
Manager shall appoint, in accordance with the Act, a resident agent for service
of process on the Fund and reflect such agent in the Certificate.
2.3 INVESTMENT OBJECTIVE AND FUNDAMENTAL INVESTMENT RESTRICTIONS. The
Fund's investment objective is to achieve long-term after-tax returns for
Shareholders. The Fund has adopted the following fundamental investment
restrictions:
(a) The Fund will not engage in the underwriting of securities.
(b) With respect to 75% of its total assets, the Fund will not, whether by
reason of its direct investments or by reason of its indirect interest in the
securities which are directly held by the Portfolio or by
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BRC, invest more than 5% of its total assets (taken at current value) in the
securities or investments of any one issuer (except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and except
securities of other investment companies), but this restriction shall not apply
to the Fund's direct investment in shares of the Company, the Fund's indirect
investment in the Portfolio held through the Company or the Fund's investment in
securities issued by BRC.
(c) The Fund will not, whether by reason of its direct investments or by
reason of its indirect interest in the securities which are directly held by the
Portfolio or by BRC, invest more than 25% of its total assets (taken at current
value) in any one industry (or, with respect to real estate, in any one sector
of the real estate market), but this restriction shall not apply to the Fund's
direct investment in shares of the Company or the Fund's indirect investment in
the Portfolio held through the Company or the Fund's investment in securities
issued by BRC.
This Section 2.3 and the foregoing investment objective and fundamental
investment restrictions may not be changed or eliminated without the Consent of
the Shareholders.
2.4 PURPOSES, POWERS AND PRIVILEGES. In furtherance of its investment
objective, the Fund shall have the following purposes, powers and privileges and
is specifically authorized:
(a) to acquire shares of the Company (which invests exclusively in the
Portfolio), to acquire securities issued by BRC, to acquire Qualifying Assets,
to engage in the other investment activities referred to in the Memorandum, and
to conduct, operate and carry on the business of a private limited liability
investment company;
(b) to hold cash and cash equivalents; to subscribe for, invest in,
reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign,
transfer, lend, write options on, exchange, distribute or otherwise dispose of
and deal in and with securities (including restricted or illiquid securities and
shares or other interests in the Company), real estate and all types of
interests therein, personal property and all types of interests therein,
commodities and other assets, including, without limitation, all types of
stocks, shares (including shares issued by the Company), futures contracts,
bonds, debentures, notes, bills and other negotiable or non-negotiable
instruments, obligations, evidences of interest, certificates of interest,
certificates of participation, certificates, interests, participations,
evidences of ownership, guarantees, rights, warrants, options or evidences of
indebtedness issued or created by or guaranteed by any state or local government
or any agency or instrumentality thereof, by the United States Government or any
agency, instrumentality, territory, district or possession thereof, by any
foreign government or any agency, instrumentality, territory, district of
possession thereof, or by any corporation, association, business trust, limited
liability company, joint venture, partnership, trust or other entity (whether
public or private) organized or existing under the laws of any state, the United
States or any territory or possession thereof or under the laws of any foreign
country or other jurisdiction, bank certificates of deposit, bank time deposits,
bankers' acceptances and commercial paper; to use various investment techniques,
including, but not limited to, the purchase and sale of derivative instruments,
the purchase and sale of stock index futures contracts and options on stock
index futures, the purchase and sale of options on securities, the purchase and
sale of forward currency exchange contracts and currency futures, equity swaps,
short sales and interest rate hedges; to hold or dispose of such other
investment property (or interest therein) of any kind or nature, real or
personal, tangible or intangible as may be received by the Fund as distributions
on, or with respect to, securities held directly or indirectly by the Fund (all
such investment property or interests which are not securities being herein
sometimes referred to as "Investment Property"), provided, however, that the
Fund shall not have the power to derive items of income to the extent that such
income would cause the Fund to fail to qualify under the 90% test in Section
7704(c)(2) of the Code; and to pay for the same in cash or by the issue of
Shares, bonds, notes or other securities of the Fund or otherwise; and to
exercise any and all rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers and privileges in respect of any such investments;
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(c) to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security all or any part of the
assets of the Fund;
(d) to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in, Shares, including Shares in
fractional denominations, and to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds, securities or other
assets of the Fund, whether capital or surplus or otherwise, to the full extent
now or hereafter permitted by the laws of the Commonwealth of Massachusetts;
(e) to conduct its business, promote its purposes, and carry on its
activities and operations in any and all of its branches and maintain offices
both within and without the Commonwealth of Massachusetts, in any and all States
of the United States of America, including the District of Columbia; and
(f) to do all and everything necessary, suitable, convenient, or proper for
the conduct, promotion, or attainment of any of the businesses, activities and
purposes herein specified or which at any time may be incidental thereto or may
appear conducive to or expedient for the accomplishment of any of such
businesses, activities and purposes and which might be engaged in or carried on
by a limited liability company formed under the Act; to enter into, make and
perform all contracts and other undertakings and engage in all activities as the
Manager may deem necessary or advisable to carry out the investment objective or
any purpose of the Fund; to indemnify and guarantee the obligations of other
Persons; to organize or form other limited liability companies and other
entities and to act as manager of the same; and to exercise any and all powers
and privileges that a natural person could exercise and to have and exercise all
of the powers and privileges conferred by the laws of the Commonwealth of
Massachusetts upon a Massachusetts limited liability company.
The foregoing provisions of this Section 2.4 shall be construed together as
purposes, powers and privileges and each as an independent purpose, power and
privilege.
ARTICLE 3
MANAGEMENT OF THE FUND
3.1 THE MANAGER.
(a) The Shareholders designate Eaton Vance as the initial Manager of the
Fund. The complete and entire management, control and operation of the Fund is
vested exclusively in the Manager, which is hereby empowered to exercise all the
powers and privileges of the Fund. No Shareholder other than the Manager shall
have any right, power or authority to manage, control or operate the Fund.
(b) The Manager shall have all rights, powers and authority necessary,
convenient or desirable to carry out or implement the investment objective and
purposes of the Fund, including, without limitation, the powers and privileges
referred to in Article 2. Without limiting the generality of the foregoing, the
Manager shall have full right, power and authority in the name and on behalf of
the Fund:
(i) To vote or give assent, or exercise any rights of ownership, with
respect to securities or other property; and to execute and deliver proxies
or powers of attorney to such Person or Persons as the Manager shall deem
proper, granting to such Person or Persons such power and discretion with
relation to securities or property as the Manager shall deem proper;
(ii) To hold any security, property or Qualifying Assets in bearer,
unregistered or other negotiable form or in the name of the Fund or a
custodian, subcustodian or other depository or a nominee or nominees or
otherwise;
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(iii) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or other entity, any security of
which is held in the Fund; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or other entity, and to
pay calls or subscriptions with respect to any security held in the Fund;
(iv) To join with other security holders in acting through a
committee, depository, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depository or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Manager shall deem appropriate, and to agree to pay,
and to pay, such portion of the expenses and compensation of such
committee, depository or trustee as the Manager shall deem appropriate;
(v) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Fund or any matter in controversy;
(vi) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(vii) To purchase and pay for entirely out of Fund property such
insurance as the Manager may deem necessary or appropriate for the conduct
of the business of the Fund, including, without limitation, insurance
policies insuring the assets of the Fund and payment of distributions and
principal on its portfolio investments, and insurance policies insuring the
Shareholders, Manager, Investment Adviser, officers, employees, agents
(including placement agents) or independent contractors of the Fund
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such
person as Shareholder, Manager, Investment Adviser, officer, employee,
agent (including placement agent) or independent contractor, including any
action taken or omitted that may be determined to constitute negligence,
breach of duty or other wrongdoing, whether or not the Fund would have the
power to indemnify such Person against such liability;
(viii) To change the resident agent for service of process on the
Fund;
(ix) Subject to Section 12.3 hereof, to reorganize the Fund;
(x) To sell or otherwise dispose of all or substantially all of the
assets of the Fund;
(xi) To appoint officers of the Fund and to determine their duties,
powers and authority;
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(xii) To adopt By-Laws which may contain provisions relating to the
business and activities of the Fund, the conduct of its affairs and its
rights, powers and privileges, or the rights, powers, duties or authority
of the Manager, Investment Adviser, Shareholders, officers, employees or
agents of the Fund, and to amend, supplement or repeal the same (and such
By-Laws are hereby deemed to be incorporated and included in this
Agreement), and to adopt rules, regulations and additional provisions
relating to any matter referred to in this Agreement or the By-Laws or
concerning the business, affairs, activities, investments or operations of
the Fund;
(xiii) To establish the methods and procedures for obtaining any
consent or approval of the Shareholders required by this Agreement
(including, without limitation, the calling and holding of Shareholder
meetings, the solicitation of proxies or consents, and the establishment of
record dates in connection therewith), and the Manager shall have complete
authority to decide all matters in connection therewith, which decisions
shall be conclusive and binding on all Persons interested;
(xiv) To establish record dates with respect to any allocation or
distribution which may be made by or on behalf of the Fund;
(xv) To employ one or more custodians, subcustodians, depositors,
administrators, transfer agents, shareholder servicing agents, agents for
the private offering and sale of Shares, consultants, attorneys,
accountants, appraisers, experts and such other agents and Persons as the
Manager may deem appropriate;
(xvi) To delegate to any officer, employee, agent or other Person such
of its rights, powers, duties or authority as the Manager may consider
necessary, convenient or desirable, including, without limitation, the
keeping of books and records and the making of allocations described in
this Agreement, the determination of items of the Fund's income, gain,
loss, deduction, basis, amount realized and credit (and the character and
source of such items), the determination of the Fund's net income, total
assets, liabilities and Net Asset Value per Share, and the valuation of any
security or asset held by the Fund;
(xvii) To execute, acknowledge and deliver such deeds, agreements,
instruments, certificates and other documents as it may deem necessary,
appropriate or desirable from time to time; and
(xviii) To have and exercise all of the rights, powers, privileges and
authority of the Manager of a Massachusetts limited liability company
provided under the Act or as otherwise permitted by law, custom or business
practice.
Further, without limiting the generality of the foregoing, the Manager
shall have full power and authority to incur and pay out of the principal or
income of the Fund such expenses and liabilities as may be deemed by the Manager
to be necessary, proper or desirable for the business, activities or purposes of
the Fund.
Any determination made in good faith and, so far as accounting matters are
involved, in accordance with generally accepted accounting principles, whether
by or pursuant to the authority granted by the Manager, as to: the amount of the
assets, debts, obligations or liabilities of the Fund or its Shareholders; the
amount of any reserves or charges set up and the propriety thereof; the time of
or purpose for creating such reserves or charges; the use, alteration or
cancellation of any reserves or charges (whether or not any debt, obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged); the cost of any investment or other asset owned or held by the
Fund; the value of any investment or other asset of the Fund; the number of
Shares outstanding; the estimated expense to the Fund in connection with the
issue and sale of its Shares; the ability to liquidate investments in an orderly
fashion; the extent to which it is practicable to deliver a selection of
securities to satisfy a redemption of Shares; and as to any and all other
matters relating to the issue, sale, redemption, transfer and/or other
acquisition or disposition of investments or Shares of the Fund, shall in each
and all cases be final and conclusive, and shall be
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binding upon the Fund and its Shareholders, past, present and future, and Shares
are issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
The Manager or any organization with which the Manager may be affiliated or
associated also may act as broker for the Fund in making purchases and sales of
investments for or to the Fund for its portfolio, and may charge and receive
from the Fund the usual and customary commission for such service. Any
organization with which the Manager may be affiliated or associated in acting as
broker for the Fund shall be responsible only for the proper execution of
transactions in accordance with the instructions of the Fund and shall be
subject to no further liability of any sort whatsoever.
(c) The Manager, in the name and on behalf of the Fund, is specifically
authorized to enter into the Investment Advisory and Administrative Agreement
for the management of the assets of the Fund and the provision of certain
administrative services. Said agreement may contain such provisions and provide
for such compensation to the Investment Adviser as the Manager in its sole
discretion may determine, and may authorize the Investment Adviser to make all
decisions regarding the Fund's assets and, among other things, to find,
evaluate, structure, monitor and liquidate, upon dissolution or otherwise, such
assets and in connection therewith to enter into, execute, amend, supplement,
acknowledge and deliver any and all contracts, agreements or other instruments,
including, but not limited to, contracts with one or more banks, trust
companies, broker-dealers, investment firms, consultants or other investment
advisers, including affiliates or associates of the Investment Adviser, for the
performance of such duties, functions or activities as the Investment Adviser
may determine, including the investment and reinvestment of the Fund's
Qualifying Assets and the execution of securities and other transactions. Each
Shareholder, by becoming such, acknowledges and agrees that the Investment
Adviser shall be entitled to compensation as investment adviser to the Fund to
the extent provided for in the Investment Advisory and Administrative Agreement.
Each Shareholder, by becoming such, acknowledges and agrees that the Investment
Adviser may also act as manager of BRC pursuant to an agreement with BRC and
shall be entitled to receive the compensation and fees set forth in such
agreement.
(d) Any affiliate or associate of the Manager may act as a placement agent
(with authority to appoint sub-agents) with respect to the private offering and
sale of Shares, and the Manager is authorized, in the name and on behalf of the
Fund, to execute and deliver the Placement Agency Agreement. Any such affiliate
or associate may also provide services to the Shareholders and assist the
sub-agents in providing services to investors in the Fund and receive
compensation therefor from the Company and from the Fund, and may also assign
its servicing responsibilities and compensation therefor to one or more
sub-agents. Sub-agents which provide such services may also receive compensation
therefor from the Company and from the Fund. Each Shareholder, by becoming such,
acknowledges and agrees that Eaton Vance Distributors, Inc. shall be entitled to
the compensation and fees to the extent provided in its Company Servicing
Agreement and its Fund Servicing Agreement, and that each sub-agent may receive
the compensation provided in its Company Servicing Agreement and its Fund
Servicing Agreement.
(e) The Manager shall devote such time and effort to the affairs and
business of the Fund as is sufficient to allow the Fund to pursue its investment
objective. The Manager may, directly and indirectly, devote substantial time and
effort to other business endeavors, activities and ventures, including, without
limitation, acting as investment adviser of investment companies and rendering
investment advice and other services to investment trusts, limited liability
companies, partnerships and other entities with an investment objective similar
to the Fund, and neither the Fund nor any Shareholder as such shall have any
interest therein. Each Shareholder, by acquiring Shares, acknowledges and agrees
that the Manager, the affiliates, associates, officers, employees and trustee of
the Manager and any officers and employees of the Fund may (i) engage in, pursue
or have an interest in, directly or indirectly, other business endeavors,
activities and ventures of any kind, nature or description, independently or
with other Persons, and whether or not such endeavors, activities or ventures
are competitive with the activities or operations of the Fund, and (ii) contract
or enter into any financial, advisory or other transaction with any Shareholder
or any corporation or other entity whose securities or other assets are held by
the Fund or the Portfolio or may be interested in any such contract or
transaction; and that none of the foregoing
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Persons shall be liable to account to the Fund or the Shareholders for any
profit or benefit made or derived thereby or in connection therewith.
(f) Third parties and other Persons dealing with the Fund are entitled to
rely conclusively on the authority of the Manager to bind and act for the Fund,
and to assume without inquiry that any necessary consents (if any should ever be
required) of Shareholders have been obtained.
(g) The Fund may have dealings and enter into transactions with the Person
designated as the Manager and affiliates and associates of the Manager. The Fund
may engage the Person designated as the Manager and/or affiliates and associates
of the Manager to provide various services to the Fund or its Shareholders and
in return for such services may pay compensation and other fees to the Person
designated as the Manager and/or affiliates and associates of the Manager, in
such amounts and on such terms as the Manager in its sole discretion shall
determine, provided that such terms shall be at least as favorable to the Fund
as may reasonably be expected to be obtained from unrelated third parties. Each
Shareholder, by acquiring Shares, acknowledges and agrees, without limiting the
generality of the foregoing, that BMR and Eaton Vance Distributors, Inc. shall
be entitled to receive the compensation, fees and commissions described in the
Memorandum.
(h) Anything in this Agreement to the contrary notwithstanding, the Manager
may at any time resign if (i) the Manager has designated and admitted to the
Fund as a successor Manager any corporation, trust, business trust, limited
liability company, partnership or other entity that is wholly-owned, directly or
indirectly by Eaton Vance's parent, Eaton Vance Corp. (provided that such
corporation, trust, business trust, limited liability company, partnership or
other entity has, or its personnel have, similar management experience to Eaton
Vance and that its financial position is at least comparable to that of Eaton
Vance) and each of the Shareholders, by acquiring Shares of the Fund, hereby
consents to the admission of such successor Manager; or (ii) the Manager, with
the consent of those Shareholders holding at least a majority of the outstanding
Shares, has designated and admitted a substitute Manager; provided that any such
succession or substitution shall be effective upon such resignation and shall
not in the opinion of tax counsel to the Fund adversely affect the
classification of the Fund as a partnership for Federal income tax purposes. In
the case of the Bankruptcy of the Manager (herein in such event called a
"Bankrupt Manager") those Shareholders holding a majority of the outstanding
Shares shall have the right to designate and admit to the Fund a substitute
Manager by filing written consents to such action with the records of the Fund.
The Bankrupt Manager or its legal representative shall give the Shareholders
prior notice if practicable or prompt notice of any Bankruptcy of the Manager.
From and after the date of the designation and admission of the substitute
Manager by the Shareholders, the Bankrupt Manager's Shares shall be assigned to
the successor Manager, such Bankrupt Manager shall have no further interest in
the Fund and, except as hereinafter otherwise provided in this Section 3.1(h),
shall not be entitled to any payment or other compensation for its previously
held Shares, and neither the Fund nor the Shareholders shall be liable in any
manner to the Bankrupt Manager as a result thereof. The Bankrupt Manager shall
be forthwith entitled to receive from the successor Manager an amount, in cash,
equal to the Net Asset Value Per Share multiplied by the number of Shares so
assigned to the successor Manager. If the Shareholders fail to designate and
admit a successor Manager, the Bankrupt Manager shall continue as the Manager of
the Fund. Neither the Bankruptcy of the Manager nor any other action taken
pursuant to and in accordance with this Section 3.1(h) shall cause a dissolution
or termination of the Fund.
(i) There shall be no more than one Manager of the Fund at any one time.
The Manager shall be required to be a Shareholder of the Fund. Unless and until
a successor or substitute Manager has been designated and admitted in accordance
with Section 3.1(h), the Manager shall not voluntarily resign or sell, transfer,
pledge or otherwise dispose of (except by way of redemption of part of its
Shares pursuant to Article 10) all or any part of its Shares.
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3.2 LIMITATION OF LIABILITY. Each Person who is or was (i) a Manager or an
Investment Adviser, or (ii) an affiliate, associate, officer, employee or
trustee of a Manager or of an Investment Adviser, (iii) an officer or employee
of the Fund or (iv) a manager, director, officer or employee of BRC (each, a
"Covered Person", and collectively, the "Covered Persons"), when acting in their
respective capacities in connection with the Fund's or BRC's business or
affairs, shall not be liable to any Person (including, without limitation, the
Fund or a Shareholder) for any act, omission or obligation of the Fund, BRC,
Manager, Investment Adviser or Covered Person or for breach of any duty to the
Fund or BRC. Notwithstanding anything in this Agreement to the contrary, the
Manager and the Investment Adviser shall not be responsible or liable to the
Fund or a Shareholder in any event for any mistake, error, neglect, wrongdoing
or breach of duty of any Covered Person or for losses attributable thereto, nor
shall any Manager, Investment Adviser or Covered Person be liable or responsible
to the Fund or a Shareholder for the act, omission, obligation or breach of duty
of any other Manager, Investment Adviser or Covered Person; provided that
nothing in this paragraph shall be deemed to exonerate a Manager, Investment
Adviser or Covered Person from liability to the Fund or any Shareholder who has
been finally adjudicated by a court or other body before which a proceeding was
brought not to have acted in good faith in the reasonable belief that his action
was in the best interest of the Fund and to be liable to the Fund or to such
Shareholder by reason thereof.
Each Covered Person shall, in the performance of such Covered Person's
duties (whether or not the Fund would have the power to indemnify such Covered
Person against liability), be fully and completely justified and protected with
regard to any act or failure to act resulting in or from reliance in good faith
upon (i) the provisions of this Agreement or of the By-Laws, (ii) the books of
account or other records of the Fund or BRC, (iii) advice of counsel, or (iv)
information, opinions, statements or reports made, presented or given to the
Fund or BRC, the Manager or the Investment Adviser by any of their respective
officers or employees or by any attorney, accountant, appraiser, expert,
consultant or other Person selected with reasonable care by or on behalf of the
Manager or the Investment Adviser.
The Manager, the Investment Adviser and all other Covered Persons shall not
be personally liable for the payment or repayment of any amounts standing in the
account of a Shareholder including, but not limited to, the Capital
Contributions of such Shareholder. Any such payment or repayment, if required to
be made, shall be made solely from the assets of the Fund.
In addition, the Manager, the Investment Adviser and all other Covered
Persons shall not be liable to the Fund or any Shareholder by reason of (i) any
tax liabilities incurred by the Shareholders (including, without limitation, as
a result of their contribution of securities to the Fund in exchange for Shares
or upon the exchange of such securities from the Fund into the Company or from
the Company into the Portfolio or as a result of any sale or distribution of any
such securities); (ii) any failure to withhold income tax under federal or state
tax laws with respect to income or gains allocated to the Shareholders; (iii)
any change in the federal or state tax laws or regulations or in the
interpretations thereof as they may apply to the Fund, BRC, the Company, the
Portfolio or the Shareholders, whether such change or interpretation occurs
through legislative, judicial or administrative action; or (iv) any failure of
BRC to qualify as a real estate investment trust under the Code.
Every note, bond, agreement, instrument, certificate, Share, undertaking or
other document and every other act or thing whatsoever executed or done by the
Manager, the Investment Adviser or a Covered Person or any of them on behalf of
the Fund, in connection with the Fund's business, shall be deemed conclusively
to have been executed or done only in such Person's capacity as Manager,
Investment Adviser or Covered Person, and such Manager, Investment Adviser or
Covered Person shall not be personally liable thereon to any Person.
To the extent that, at law or in equity, the Manager, the Investment
Adviser or a Covered Person has duties (including fiduciary duties) and
liabilities relating thereto, whether to the Fund or to BRC or to the
Shareholders, the Manager, Investment Adviser or Covered Person acting in
connection with the Fund's or BRC's business or affairs shall not be liable to
the Fund or to any Shareholder for such Manager's, Investment Adviser's or
Covered Person's good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict, limit or
eliminate the duties and liabilities of the Manager, the Investment Adviser
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or a Covered Person otherwise existing at law or in equity, are agreed by the
Shareholders to replace such other duties and liabilities of the Manager,
Investment Adviser or Covered Person.
3.3 OWNERSHIP OF ASSETS OF THE FUND. Title to all of the assets of the Fund
shall at all times be vested in the Fund as a separate legal entity under the
Act. Securities owned by the Fund may be registered in or made payable to, and
title to Qualifying Assets which are not securities or any item of Investment
Property may be held by, the Fund in its name or the name of a nominee or agent
or in a "street" name. Any issuer of securities, transfer agent or other person
called upon to transfer any security, Qualifying Asset or item of Investment
Property to or from the name of the Fund shall be entitled to rely on
instructions or assignments signed or purporting to be signed by the Manager
without inquiry as to the authority of the Person so acting or as to the
validity of any transfer to or from the name of the Fund. At any time of
transfer, unless notified in writing to the contrary, such issuer, transfer
agent or other Person may act on the basis that the Fund is still in existence
and this Agreement is in full force and effect.
ARTICLE 4
INTERESTS IN THE FUND AND CAPITAL CONTRIBUTIONS
4.1 SHARES OF INTEREST. The limited liability company interests in the Fund
shall at all times be divided into Shares, without par value, which may be
issued from time to time in such amounts as the Fund (without any prior
authorization of the Shareholders) and for such consideration as the Fund may
deem appropriate. Except as otherwise provided in this Agreement, each Share
shall represent an equal proportionate interest in the Fund with each other
Share. The number of Shares authorized to be issued shall be unlimited, and the
Shares so authorized may be represented in part by fractional Shares. From time
to time the Fund may divide or combine the Shares into a greater or lesser
number without thereby changing the proportionate interests in the Fund.
4.2 ISSUANCE OF SHARES. The Fund is authorized to issue or authorize the
issuance of full and fractional Shares and to fix the price or the consideration
(whether in cash and/or such other property, real or personal, tangible or
intangible, including without limitation the securities of other entities) or
the minimum consideration for such Shares, all in such manner as the Fund shall
from time to time determine. Shares may be issued in fractional denominations to
the same extent as whole Shares. Shares in fractional denominations shall be
Shares having proportionately to the respective fractions represented thereby
all the rights of whole Shares, except as otherwise provided in this Agreement.
Shares shall be issued in book entry form, and no certificates shall be issued
for Shares except as the Fund shall otherwise determine from time to time.
4.3 CAPITAL CONTRIBUTIONS BY THE MANAGER. Eaton Vance as an organizational
member purchased 100 Shares and the Withdrawing Shareholder as an organizational
member purchased one Share at the purchase price of $100 per Share paid in cash
and each was admitted as an organizational Shareholder of the Fund. At its
discretion, the Manager may purchase additional Shares at the Initial Closing
and from time to time. Additional Shares acquired by the Manager at the Initial
Closing will be purchased at a price of $100 per Share, and any additional
Shares purchased by the Manager at any subsequent time will be acquired at the
Issue Price Per Share as of such date. Capital Contributions of the Manager are
not subject to selling commissions. The Share owned by the Withdrawing
Shareholder will be redeemed by the Fund (without payment of a redemption fee)
on the effective date of this Agreement.
4.4 CAPITAL CONTRIBUTIONS BY INITIAL SHAREHOLDERS. At the Initial Closing,
the initial Shareholders shall purchase full and fractional Shares (rounded to
the nearest 1/1000) at a purchase price of $100 per Share, and shall contribute
to the capital of the Fund their Capital Contributions in the form of Acceptable
Securities. The Capital Contributions of each initial Shareholder will be net of
the selling commissions paid by the Fund on behalf of such Shareholder, if any.
On the Effective Date, the Initial Closing of the sale of Shares will be
consummated in the manner described in the Memorandum.
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4.5 CAPITAL CONTRIBUTIONS OF ADDITIONAL SHAREHOLDERS. Upon the admission of
additional Shareholders or upon an additional Capital Contribution by an
existing Shareholder as provided in Section 5.1 at any Subsequent Closing, each
such Shareholder shall purchase full and fractional Shares (rounded to the
nearest 1/1,000) at a purchase price equal to the Issue Price Per Share prior to
giving effect to such purchase as of the date of such Subsequent Closing, and
shall contribute to the capital of the Fund a Capital Contribution in the form
of Acceptable Securities. At any Subsequent Closing, the Capital Contribution of
each such Shareholder will be net of the selling commissions paid by the Fund on
behalf of such Shareholder at such Closing, if any.
4.6 WITHDRAWAL OF CAPITAL. Except as specifically provided in Article 10
and elsewhere in this Agreement, no Shareholder shall have the right (a) to
withdraw from the Fund all or any part of such Shareholder's Capital
Contribution or (b) to demand and receive property or cash of the Fund in return
for such Shareholder's Capital Contribution.
4.7 NONTRANSFERABILITY OF SHARES. In no event shall a Shareholder or the
legal representative of such Shareholder's estate transfer, sell, alienate,
pledge, encumber, assign or otherwise dispose of all or any part of such
Shareholder's Shares or any interest therein whether voluntarily, involuntarily,
by operation of law, at judicial sale or otherwise, without the prior written
consent of the Manager, which consent may be withheld in its sole discretion for
any reason or for no reason; provided, however, that upon the death of a
Shareholder the interest in such Shareholder's Shares may be transferred by
operation of law to his estate, and provided further that, in the absence of the
foregoing written consent of the Manager, such estate will be entitled only to
the deceased Shareholder's economic interest in the profits, losses and capital
of the Fund but will not be entitled to the prior right of the deceased
Shareholder to give consents when required by this Agreement or by the
Memorandum (or otherwise participate in decisions made on behalf of the Fund) or
to be admitted to the Fund as a substituted Shareholder. In no event shall a
Shareholder transfer, sell, alienate, pledge or otherwise encumber, assign or
dispose of all or any part of his Shares unless counsel for the Fund shall have
rendered an opinion (unless the delivery of an opinion shall have been waived by
the Manager) (i) that such transaction would not violate the Securities Act or
applicable state securities or blue sky laws (including investor qualification
standards); and (ii) that the Fund will not as a result thereof (A) be
considered to be terminated pursuant to Section 708 of the Code, (B) be
classified as an association or a publicly traded partnership taxable as a
corporation, or (C) be required to register under the 1940 Act, as then in
effect. No Shareholder shall be permitted to sell, assign, transfer, alienate or
dispose of such Shareholder's Shares to a minor or incompetent Person, unless in
trust for the benefit of such Person. Any Person desiring to consummate a
transfer or other disposition of Shares shall execute and deliver to the Fund
such instruments, agreements and other documents as the Manager may require. Any
Person desiring to become a substituted Shareholder shall execute and deliver to
the Fund such representations, instruments, agreements, powers of attorney and
other documents, including an agreement to be bound by this Agreement, as the
Manager may deem necessary or desirable to effect such substitution. Provided
the written consent of the Manager has been obtained, any transferee Shareholder
shall be substituted as a Shareholder and shall succeed to all of the rights,
privileges, restrictions, obligations and liabilities of the transferor
Shareholder. Each Shareholder, by acquiring Shares of the Fund, consents to the
admission of any substituted Shareholder pursuant to the terms of this Section
4.7. If any transfer of Shares pursuant to this Section 4.7 (other than a
transfer to other Shareholders) shall result in multiple ownership of any
Shareholder's interest in the Fund, the Manager may require that one or more
trustees or nominees be designated as representing a portion of or the entire
interest transferred for the purpose of receiving all notices which may be given
and all payments which may be made under this Agreement and for the purpose of
exercising all rights and privileges which the transferor as a Shareholder had
pursuant to the provisions of this Agreement. Every transfer or other
disposition of Shares shall be subject to all terms, conditions, restrictions
and obligations of this Agreement. Each of the Shareholders agrees not to make
any transfer or other disposition of Shares except as permitted by the
provisions of this Section 4.7, and any act by any Shareholder in violation of
this Section 4.7 shall be null and void ab initio. The transferee of Shares
shall bear all of the Fund's expenses incurred in connection with any transfer,
including, without limitation, reasonable attorneys fees. The Manager may impose
additional restrictions on transfers or redemptions of Shares in order to ensure
that the Fund (i) will be an exempted issuer described in Section 3(c)(1) or
3(c)(7)(A) of the 1940 Act, (ii) will not be classified as or an association or
a publicly traded partnership subject to tax as a corporation or (iii) will not
be required to register under the 1940 Act.
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4.8 OWNERSHIP OF SHARES. It is intended that Shares may be purchased and
owned only by Persons who are, or who are deemed to be, Qualified Purchasers.
Shares that are owned by Persons who received the same from a Qualified
Purchaser as a gift or bequest, or in a case in which the transfer was caused by
legal separation, divorce, death or other involuntary event, shall be deemed to
be owned by a Qualified Purchaser, subject to such rules, regulations and orders
as the Securities and Exchange Commission may from time to time prescribe or
adopt. The Manager may impose additional restrictions on the ownership of Shares
to ensure that the Fund (i) will be an exempted issuer described in Section
3(c)(1) or 3(c)(7)(A) of the 1940 Act, (ii) will not be classified as an
association or a publicly traded partnership subject to tax as a corporation or
(iii) will not be required to register under the 1940 Act. The ownership of
Shares will be recorded in the books of the Fund or a transfer agent. The record
books of the Fund or any transfer agent, as the case may be, shall be conclusive
as to who are the holders of Shares and as to the number of Shares held from
time to time by each holder. No Shares shall be recorded as being owned by a
Shareholder except in accordance with the procedures set forth in Section 5.1 of
this Agreement. No certificates certifying the ownership of Shares shall be
issued except as the Manager may otherwise determine from time to time.
4.9 NO PREEMPTIVE RIGHTS; DERIVATIVE SUITS. Shareholders shall have no
preemptive or other right to subscribe for any additional Shares or other
securities issued by the Fund. No suit, action or other proceeding may be
brought by a Shareholder in the right of or on behalf of or in the name of the
Fund unless such Shareholder has first obtained the written consents of those
Shareholders holding at least a majority of the outstanding Shares, which
consents specifically authorize the bringing of such suit, action or other
proceeding.
4.10 STATUS OF SHARES. Shares shall be deemed to be personal property
giving only the rights and privileges provided in this Agreement. Every
Shareholder by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms of this Agreement and to have become
a party hereto. The death of a Shareholder during the continuance of the Fund
shall not operate to terminate the same nor entitle the representative of any
deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Fund or the Manager; and the deceased Shareholder's estate
shall only be entitled to the rights of said decedent under this Agreement.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the assets of the Fund or rights to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders to be deemed partners, irrespective of the fact that
the Fund is intended to be classified as a partnership for federal income tax
purposes. Neither the Fund nor the Manager shall have any power to call upon any
Shareholder for the payment of any debt or obligation of the Fund or of any sum
of money or assessment whatsoever other than such as the Shareholder at any time
personally may agree to pay by way of subscription for any Shares or otherwise.
ARTICLE 5
RIGHTS AND OBLIGATIONS OF SHAREHOLDERS
5.1 SHAREHOLDERS. Only those Persons admitted by the Fund as a record owner
of Shares shall be considered Shareholders of the Fund. The Fund shall change or
adjust, or cause to be changed or adjusted, the Shareholder records from time to
time to reflect the resignation, withdrawal, addition and substitution of
Shareholders and the change in the number of Shares owned by the Shareholders.
Shareholders may be substituted in accordance with Section 4.7 of this
Agreement, and additional Shareholders may be admitted to the Fund and/or
existing Shareholders may make additional Capital Contributions, at any
Subsequent Closing or Subsequent Closings, in the sole discretion of the Manager
on the terms and conditions determined by the Manager.
5.2 NO LIABILITY FOR FUND OR BRC OBLIGATIONS. No Shareholder shall be
liable for any debts, obligations or liabilities of the Fund or of BRC; whether
arising in contract, tort or otherwise; provided, however, that contributions of
a Shareholder and his share of any undistributed assets of the Fund shall be
subject to the risks of the operations of the Fund.
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5.3 NO RIGHT OF MANAGEMENT OR AUTHORITY TO ACT. No Shareholder in its
capacity as a Shareholder shall take any part in the direction, management or
control of the business or activities of the Fund or BRC, transact any business
for or on behalf of the Fund or BRC or have any right, power or authority to
bind the Fund or BRC. Except as specifically otherwise required by this
Agreement, no Shareholder shall have any right, power or privilege to vote on,
consent to or approve any action or matter under any circumstances whatsoever.
The Shareholders shall have the limited right to consent only as and when
required by Section 2.3, 3.1(h), 4.9, 9.1 or 9.3 of this Agreement.
ARTICLE 6
CAPITAL ACCOUNTS AND TAX ALLOCATIONS
6.1 CAPITAL ACCOUNTS. There shall be established on the books of the Fund a
capital account for each Shareholder which shall reflect the value of such
Shareholder's interest in the Fund (hereinafter a "Capital Account"), which
Capital Account shall initially be equal to such Shareholder's Capital
Contribution (as it may be adjusted pursuant to Article 4) and shall thereafter
be adjusted in accordance with the following provisions:
(a) To each Shareholder's Capital Account there shall be credited such
Shareholder's allocable share of Profit and the amount of any Fund liabilities
(as determined under Code Section 752) that are expressly assumed in writing by
such Shareholder (other than liabilities secured by property distributed to the
Shareholder).
(b) To each Shareholder's Capital Account there shall be debited the amount
of cash and the value (as used for purposes of determining Net Asset Value per
Share) of any Fund asset distributed to such Shareholder pursuant to any
provision of this Agreement (net of any liabilities that are assumed by such
Shareholder or to which such asset is taken subject), such Shareholder's
allocable share of Loss, and the amount of any liabilities of such Shareholder
that are assumed by the Fund.
(c) In the event that the Book Value of the Fund assets is adjusted
pursuant to the definition of Book Value in Article 1 hereof, the Capital
Accounts of all Shareholders shall be adjusted simultaneously to reflect the
aggregate net adjustments as if the Fund recognized Profit or Loss equal to the
respective amounts of such aggregate net adjustments immediately before the
event causing such adjustment to Book Value.
(d) A Shareholder shall not be entitled to withdraw any part of such
Shareholder's Capital Account or to receive any distributions from the Fund,
except as provided in Articles 8, 9, and 10; nor shall a Shareholder be entitled
to make any Capital Contribution to the Fund other than as expressly provided
herein. No Shareholder shall receive interest on such Shareholder's Capital
Account.
(e) The provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) as
in effect on the date hereof, and shall be interpreted and applied in a manner
consistent with such Treasury Regulations. In the event the Manager shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto, are computed in order to comply with such
Regulations and any amended or successor Regulations, the Manager may make such
modification, provided that it shall not have a material adverse effect on the
amounts distributable to any Shareholder pursuant to Article 8 or upon the
dissolution of the Fund.
6.2 ALLOCATIONS GENERALLY. Except as otherwise provided in this Article 6,
Profit or Loss of the Fund shall be allocated pro rata to and among the
Shareholders in proportion to the number of Shares owned by each Shareholder.
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6.3 TAX ALLOCATIONS.
(a) Except as otherwise provided in this Agreement, for federal income tax
purposes, all items of Fund income, gain, loss, deduction, basis, amount
realized, and credit (and the character and source of such items) shall be
allocated among the Shareholders in the same manner as the corresponding items
of income, gain, loss, deduction or credit are allocated to Capital Accounts
pursuant to Section 6.1 and 6.2, and the Fund shall maintain such books, records
and accounts as are necessary to make such allocations.
(b) The Manager is authorized to make, for tax purposes, allocations of
income, gain, loss or deduction or adopt conventions as are necessary or
appropriate to comply with Section 704(c) of the Code and the relevant Treasury
Regulations or Internal Revenue Service pronouncements thereunder, in
particular, in respect of Precontribution Gain or Loss and adjustments to the
Book Value of Fund assets in accordance with the definition thereof.
(i) The Manager intends to make such allocations with respect to any
gain realized from the sale of Acceptable Securities (whether by the Fund,
the Company or the Portfolio) to and among the Shareholders pursuant to the
traditional method under Section 704(c) of the Code and Section 1.704-3(b)
of the Treasury Regulations, with such simplifying conventions as the
Manager may determine are appropriate, so as to take into account, to the
full extent permitted by applicable law and regulations, any
Precontribution Gain or Precontribution Loss.
(ii) Allocations with respect to any property held by the Portfolio
that has a value (as determined for purposes of determining Net Asset Value
per Share) different from its adjusted tax basis on the date on which the
Fund issues any Shares (or fractions thereof) pursuant to Section 4.5 or
8.1(c) will be made to and among the Shareholders in accordance with the
traditional method under Section 704(c) of the Code and Section 1.704-3(b)
of the Treasury Regulations, with such simplifying conventions as the
Manager may determine are appropriate, and in conformity with Section
1.704-1(b)(2)(iv)(f) and 1.704-1(b)(4)(i) of the Treasury Regulations.
(iii) The Manager intends to account for any shifts in Precontribution
Gain or Precontribution Loss caused by the distribution of securities
(other than securities contributed by the receiving Shareholder) in a
manner designed to preserve with respect to each Shareholder the amount of
the Shareholder's Precontribution Gain or Loss. Thus, the Manager currently
intends that if a security with Precontribution Gain as to one Shareholder
is distributed to another Shareholder or another investor in the Portfolio
or Company, the amount of the first Shareholder's Precontribution Gain
attributable to the distributed security would be reallocated among the
remaining securities contributed to and then held in the Portfolio in
proportion to the respective amounts by which their market values exceed
the sum of their tax bases and other precontribution gain in respect of
such contributed securities. Upon the Portfolio's later disposition at a
gain of any security to which such Precontribution Gain has been so
reallocated, gain on such disposition generally would be allocated as
follows: (1) gain to the extent of the original precontribution gain in
respect of such security would be allocated to the investor in the
Portfolio (and the investor in the Company and the Shareholder, as
applicable) which contributed such security, (2) Precontribution Gain
reallocated to the security would be allocated through the Company and the
Fund to the Shareholder which contributed the security the previous
distribution of which gave rise to such reallocation and (3) any remaining
gain would generally (after taking into account any allocations required
under Section 6.3(b)(ii) hereof) be allocated to and among all investors in
the Portfolio (and all investors in the Company and all Shareholders) in
proportion to their respective shares of the post-contribution
appreciation. The Manager also currently intends that, in general, if
securities are distributed in redemption of Shares to a Shareholder who has
Precontribution Gain with respect to other securities contributed to the
Fund and then held by the Portfolio, the Precontribution Gain of such
distributee Shareholder with respect to such other securities contributed
to the Fund and then held by the Portfolio would be reduced by an amount
equal to the excess of the fair market value of the distributed securities
at the time of the redemption over the tax basis of the distributed
securities in the hands of the distributee Shareholder, which reduction
would be allocated pro rata to such Precontribution Gain (subject to
possible simplifying conventions). The Manager currently intends to account
for shifts for built-in gain
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and built-in loss items described in Section 6.3(b)(ii) in a manner similar
to that described in this subparagraph (iii) for Precontribution Gain and
Precontribution Loss.
(c) If a Shareholder sells or redeems any or all of such Shareholder's
Shares or purchases additional Shares, or if the number of Shares held by a
Shareholder is otherwise reduced or increased during a taxable year of the Fund
for any reason, the Shareholders' respective distributive shares of items for
such year shall be determined on a daily pro rata basis.
(d) The allocations provided in this Section 6.3 are for tax purposes only
and shall in no way affect the allocations provided for in Section 6.2, the
distributions provided for in Article 8 (except for Special Precontribution Gain
Distributions), the withdrawals provided for in Article 10, or the distribution
of proceeds upon termination of the Fund as provided in Article 9. The
allocations provided in this Section 6.3 are intended to comply with Treasury
Regulations Section 1.704-1(b) and 1.704-3(b). The Manager may amend the
provisions of this Section 6.3 to conform with any amendments to such
Regulations or with any additional Regulations promulgated under Code Section
704.
6.4 TRANSFER OF CAPITAL ACCOUNTS. The original Capital Account established
for each substituted Shareholder shall be in the same amount as the Capital
Account of the Shareholder to which such substituted Shareholder succeeds, as of
the date that such substituted Shareholder is admitted to the Fund. The Capital
Account of any Shareholder whose interest in the Fund is increased by means of
the transfer to such Shareholder of all or part of the Shares of another
Shareholder shall be appropriately adjusted to reflect such transfer. Any
reference in this Agreement to a Capital Contribution of or distribution or
allocation to a then Shareholder shall include a Capital Contribution or
distribution or allocation previously made by or to any prior Shareholder on
account of the Shares of such then Shareholder.
6.5 REGULATORY ALLOCATIONS.
(a) QUALIFIED INCOME OFFSET. If any Shareholder unexpectedly receives an
adjustment, allocation or distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) in any Fiscal Year, and as a result would,
but for this Section 6.5(a), have a deficit balance in his Capital Account as of
the last day of such Fiscal Year (taking into account the amount of such
Shareholder's share of Fund Minimum Gain (including for this purpose such
Shareholder's share of Shareholder Nonrecourse Debt Minimum Gain) as of such
last day) which is in excess of the amount (if any) such Shareholder is
unconditionally obligated to pay or contribute to the Fund as described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(c), then items of income and gain
of the Fund (consisting of a pro rata portion of each item of Fund income,
including gross income and gain) for such Fiscal Year (and, if necessary, for
subsequent Fiscal Years) shall be specially allocated to such Shareholder in the
amount and in the proportions required to eliminate such excess as quickly as
possible. For purposes of this Section 6.5(a), a Shareholder's Capital Account
shall be computed as of the last day of a Fiscal Year in the manner provided in
Section 6.1 hereof, but shall be increased by any allocation of income to such
Shareholder for such Fiscal Year under Sections 6.5(b), 6.5(c) and 6.5(d)
hereof.
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(b) GROSS INCOME ALLOCATION. If any Shareholder would otherwise have a
deficit balance in his Capital Account as of the last day of any Fiscal Year
(taking into account the amount of such Shareholder's share of Fund Minimum Gain
(including for this purpose such Shareholder's share of Fund Nonrecourse Debt
Minimum Gain) as of such last day) which is in excess of the amount (if any)
such Shareholder is unconditionally obligated to pay or contribute to the Fund
as described in Treasury Regulations Section 1.704-(b)(2)(ii)(c), then items of
income and gain of the Fund shall be specially allocated to such Shareholder (in
the manner specified in Section 6.5(a) hereof) so as to eliminate such excess as
quickly as possible. For purposes of this Section 6.5(b), a Shareholder's
Capital Account shall be computed as of the last day of a Fiscal Year in the
manner provided in Section 6.1 hereof, but shall be increased by any allocation
of income to such Shareholder for such Fiscal Year under Sections 6.5(c) and
6.5(d) hereof.
(c) FUND MINIMUM GAIN CHARGEBACK. If there is a net decrease in Fund
Minimum Gain during any Fiscal Year, each Shareholder shall be allocated items
of Fund income and gain for such Fiscal Year (and, if necessary, for subsequent
Fiscal Years) in proportion to, and to the extent of, an amount equal to such
Shareholder's share of the net decrease in Fund Minimum Gain during such Fiscal
Year, determined in accordance with Treasury Regulations Section 1.704-2(g). The
requirement set forth in the preceding sentence shall be subject to the
exceptions and limitations referred to in Treasury Regulations Section
1.704-2(f). This Section 6.5(c) is intended to constitute a "minimum gain
chargeback" provision as described in Treasury Regulations Section 1.704-2(f)
and shall be construed so as to meet the requirements of such Treasury
Regulation.
(d) SHAREHOLDER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. If there is a net
decrease in Shareholder Nonrecourse Debt Minimum Gain during any Fiscal Year,
each Shareholder shall be allocated items of Fund income and gain for such
Fiscal Year or other period (and, if necessary, for subsequent Fiscal Years) in
proportion to, and to the extent of, an amount equal to such Shareholder's share
of the net decrease in Shareholder Nonrecourse Debt Minimum Gain during such
Fiscal Year, determined in a manner consistent with the provisions of Treasury
Regulations Section 1.704-2(g)(2). The requirement set forth in the preceding
sentence shall be subject to the exceptions and limitations referred to in
Treasury Regulations Section 1.704-2(i)(4). This Section 6.5(d) is intended to
comply with the minimum gain chargeback requirement contained in Treasury
Regulations Section 1.704-2(i)(4), and shall be construed so as to meet the
requirements of said Treasury Regulation.
(e) SHAREHOLDER NONRECOURSE DEDUCTIONS. If one or more Shareholders bear
the economic risk of loss (within the meaning of Section 1.752-2 of the Treasury
Regulations) with respect to any Shareholder Nonrecourse Debt, Shareholder
Nonrecourse Deductions attributable thereto shall be allocated among such
Shareholders in accordance with the ratios in which such Shareholders share the
economic risk of loss for such Shareholder Nonrecourse Debt.
(f) LIMITATION ON LOSS ALLOCATIONS. With respect to any Shareholder,
notwithstanding the provisions of Section 6.2, the amount of Loss for any Fiscal
Year that would otherwise be allocated to a Shareholder under Section 6.2 shall
not be so allocated if to do so would cause or increase a deficit balance in
such Shareholder's Capital Account in excess of such Shareholder's share of Fund
Minimum Gain (including such Shareholder's share of Shareholder Nonrecourse Debt
Minimum Gain) plus his exposure with respect to debt or other obligations or
liabilities of the Fund as of the last day of such Fiscal Year. Any Loss in
excess of the limitation set forth in the preceding sentence shall be allocated
among the Shareholders, pro rata, to the extent each, respectively, is liable or
exposed with respect to any debt or other obligations or liabilities of the
Fund. For purposes of this Section 6.5(f), a Shareholder's Capital Account shall
be computed as of the last day of such Fiscal Year in the manner provided in
Section 6.1, but shall be reduced for the items described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
6.6 CURATIVE ALLOCATIONS. The allocations set forth in Section 6.5 (the
"Regulatory Allocations") are intended to comply with certain requirements of
Treasury Regulations Sections 1.704-1(b) and 1.704-2. The Regulatory Allocations
may not be consistent with the manner in which the Shareholders intend to
allocate Profit and Loss or make Fund distributions. Accordingly,
notwithstanding the other provisions of this Article 6, but subject to the
Regulatory Allocations, the Manager is hereby directed to reallocate items of
income, gain,
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deduction and loss among the Shareholders so as to eliminate the effect of the
Regulatory Allocations and thereby to cause the respective Capital Accounts of
the Shareholders to be in the amounts (or as close thereto as possible) they
would have been if Profit and Loss (and such other items of income, gain,
deduction and loss) had been allocated without reference to the Regulatory
Allocations. In general, the Manager anticipates that this will be accomplished
by specially allocating other Profit and Loss (and such other items of income,
gain, deduction and loss) among the Shareholders so that the net amount of the
Regulatory Allocations and such special allocations to each such Shareholder is
zero. The Manager shall have discretion to accomplish this result in any
reasonable manner. In addition, if in any Fiscal Year there is a decrease in
Fund Minimum Gain, or in Shareholder Nonrecourse Debt Minimum Gain, and
application of the minimum gain chargeback requirements contained in Section
6.5(c) or Section 6.5(d) would cause a distortion in the economic arrangement
among the Shareholders, the Manager may, if the Manager does not expect that the
Fund will have sufficient other income to correct such distortion, request the
Internal Revenue Service to waive either or both of such minimum gain chargeback
requirements. If such request is granted, this Agreement shall be applied in
such instance as if it did not contain such minimum gain chargeback
requirements.
6.7 SPECIAL ALLOCATION OF PROFIT. In the event that there is distributed to
a Shareholder a Special Precontribution Gain Distribution pursuant to Section
8.1(c), there shall be specially allocated to such Shareholder prior to any
other allocations hereunder other than those pursuant to Section 6.5 and 6.6 an
amount of Profit equal to the amount described in clause (i) of Section 8.1(c)
divided by one minus the effective percentage used to calculate that portion of
the Special Precontribution Gain Distribution referred to in clause (ii) of
Section 8.1(c).
6.8 PARTNERSHIP CLASSIFICATION; FEDERAL TAX ELECTIONS.
(a) PARTNERSHIP CLASSIFICATION. It is intended that the Fund will be
treated as a partnership for federal income tax purposes and for purposes of the
tax laws of the Commonwealth of Massachusetts and other jurisdictions. Each
Shareholder agrees to take any action requested by the Manager that may be
desirable to ensure that the Fund is so treated. Neither the Fund nor any
Shareholder shall not take any action that is inconsistent with such treatment.
The Manager shall cause the preparation and timely filing of all Fund tax
returns and shall file all other writings required by any tax authority having
jurisdiction to require such filings.
(b) FEDERAL TAX ELECTIONS. The Fund, in the sole discretion of the Manager,
may make or revoke elections for federal tax purposes as follows:
(i) In the case of a distribution of property within the meaning of
Section 734 of the Code, the Fund, in the absolute discretion of the
Manager, may elect pursuant to Section 754 of the Code (or corresponding
provisions of future law) and pursuant to similar provisions of applicable
state or local income tax laws, to adjust the basis of the remaining assets
of the Fund; and
(ii) All other elections required or permitted to be made by the Fund
under the Code shall be made by the Manager in such manner as will, in the
opinion of the Manager, be in the best interest of the Fund and
advantageous to individual Shareholders who are (1) married and filing
joint federal income tax returns and (2) in the maximum marginal federal
income tax bracket. (In reaching such opinion the Manager shall not be
required to poll or survey the Shareholders.) The Fund shall, to the extent
permitted by applicable law and regulations, elect to treat as an expense
for federal income tax purposes all amounts incurred by it for state and
local taxes, interest and other charges that may, in accordance with
applicable law and regulations, be considered as expenses.
(c) OTHER TAX ELECTIONS. The Fund, in the sole discretion of the Manager,
may make, alter, amend - or revoke all elections required or permitted to be
made by the Fund under any applicable state or local tax law or regulation.
6.9 TAX MATTERS PARTNER.
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(a) The Manager shall be the Tax Matters Partner pursuant to Section 6231
of the Code. The Tax Matters Partner shall have the following duties:
(i) to the extent and in the manner required by applicable law and
regulations, to furnish the name, address, profits interest and taxpayer
identification number of each Shareholder, and such other information as
may be required by such law or regulations, to the Secretary of the
Treasury or his delegate (the "Secretary"); and
(ii) to the extent and in the manner required by applicable law and
regulations, to keep each Shareholder informed of administrative and
judicial proceedings for the adjustment at the Fund level of any item
required to be taken into account by a Shareholder for federal income tax
purposes (such administrative and judicial proceedings referred to
hereinafter as "judicial review").
(b) The Fund shall indemnify and reimburse the Tax Matters Partner (solely
out of Fund assets) for any and all expenses, including, without limitation,
legal and accounting fees, claims, liabilities, losses and damages incurred in
connection with any judicial or administrative review with respect to the tax
liability of the Shareholders. The payment of all such expenses shall be made
before any distributions are made. No Manager (nor any affiliate or associate
thereof) shall have any obligation to provide funds for such purpose. The taking
of any action and the incurring of any expense by the Tax Matters Partner in
connection with any such proceeding, except to the extent required by law, is a
matter in the sole discretion of the Tax Matters Partner.
(c) The Tax Matters Partner is hereby authorized, but not required:
(i) to enter into any settlement agreement with the Service with
respect to any tax audit or judicial review, in which agreement the Tax
Matters Partner may expressly state that such agreement shall bind the Fund
and the Shareholders, except that such settlement agreement shall not bind
any person or entity who is entitled to file and who (within the time
prescribed pursuant to the Code and regulations thereunder) files a
statement with the Service stating that the Tax Matters Partner shall not
have the authority to enter into a settlement agreement on behalf of such
person or entity;
(ii) in the event that a notice of a final administrative adjustment
at the Fund level of any item required to be taken into account by a
Shareholder for tax purposes (a "final adjustment") is mailed to the Tax
Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court, the
District Court of the United States for the district in which the Fund's
principal place of business is located or the United States Claims Court;
(iii) to intervene in any action brought by or on behalf of the Fund
or a Shareholder for judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the
Service at any time and, if any part of such request is not allowed by the
Service, to file a petition for judicial review with respect to such
request;
(v) to enter into an agreement with the Service to extend the period
for assessing any tax which is attributable to any Fund item required to be
taken into account by a Shareholder for tax purposes, or an item affected
by any such item; and
(vi) to take any other action on behalf of the Fund or a Shareholder
in connection with any administrative or judicial tax proceeding to the
extent permitted by applicable law or regulations.
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ARTICLE 7
VALUATION OF FUND ASSETS
Whenever valuation of the Fund's net worth or of any particular asset of
the Fund is required, unless otherwise expressly provided in this Agreement, the
Manager shall authorize and empower the Investment Adviser to make a good faith
determination of the value of all non-cash assets of the Fund (if net worth is
to be evaluated) or of such particular asset.
(a) The value of the Fund's shares of the Company shall reflect the value
of the Company's proportionate interest in the Portfolio.
(b) The Qualifying Assets will be valued as determined in good faith by the
Investment Adviser, after consideration of all relevant factors, data and
information. Holdings of traded physical commodities will be valued at their
current values based on closing sale prices (or the mean between the closing bid
and asked prices on days when no sales occur) in the principal market on which
such commodities are normally traded.
(c) Over-the-counter options, interest rate and equity swaps, and other
derivatives for which prices are not readily available will be valued as
determined in good faith by the Investment Adviser. In determining such value,
the Investment Adviser may consider, among other things, dealer and counterparty
quotes and pricing models.
(d) Investment Property will be valued as determined in good faith by the
Investment Adviser.
Subject to the foregoing provisions of this Article 7, any determination of
the Fund's net worth or the value of a particular asset shall be made in
accordance with generally accepted accounting principles as applicable to the
Fund; provided, however, that no value shall be assigned to the Fund name and
goodwill or to the office records, files, statistical data or any similar
intangible assets of the Fund not normally reflected in the Fund's accounting
records; and provided, further, that liabilities of the Fund shall be taken at
the amounts at which they are carried on the books of the Fund, reasonable
provision to be made, however, for contingent or other liabilities not reflected
on such books and, in the case of the liquidation of the Fund, for the expenses
(to be borne by the Fund) of the liquidation and winding up of the Fund's
affairs. Promptly after completing any such determination of value with respect
to the Fund's portfolio in connection with a distribution of assets in kind on
the termination of the Fund, the Manager shall give written notice of such
determination to all Shareholders.
(e) The value of the Fund's investments in BRC shall reflect the Fund's
proportionate interest in the value of BRC's assets.
ARTICLE 8
DISTRIBUTIONS
8.1 DISTRIBUTIONS OF CURRENT INCOME; DISTRIBUTIONS OF CAPITAL GAIN;
REINVESTMENT.
(a) On the last business day of each Fiscal Year or shortly thereafter, the
Fund shall distribute an amount approximately equal to the Net Current Income of
the Fund for the Fiscal Year, if any, to the Shareholders. Such distributions
shall be made to the Shareholders in proportion to the number of Shares owned by
each. The term "Net Current Income" shall mean the net income accrued by or
allocated to the Fund (other than net income attributable to gains described in
Section 8.1(b) and Section 8.1(c) of this Agreement) for the Fiscal Year ended,
determined in accordance with generally accepted accounting principles.
(b) On the last business day of each Fiscal Year or shortly thereafter, the
Fund shall distribute an amount approximately equal to 22% (which percentage may
be adjusted to reflect changes in the effective maximum marginal individual
federal tax rate for long-term capital gains) of net realized capital gains that
are long-term gains, if any, other than net realized long-term capital gains
that are Precontribution Gains.
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Distributions with respect to net realized gains other than Precontribution
Gains shall be made to the Shareholders in proportion to the number of Shares
held by each.
(c) On the last business day of each year or shortly thereafter, the Fund
shall distribute (i) an amount approximately equal to 22% (which percentage may
be adjusted to reflect changes in the effective maximum marginal individual
federal tax rate for long-term capital gains) of the realized Precontribution
Gains allocated to any Shareholder that are long-term gains other than realized
long-term Precontribution Gains allocated to a Shareholder with respect to a
Tender Security contributed by such Shareholder, plus (ii) an amount
approximately equal to 22% (which percentage may be adjusted to reflect any
material ordinary income component or changes in the effective maximum marginal
individual federal tax rate for long-term capital gains) of the amount of Profit
specially allocated to the Shareholder pursuant to the provisions of Section 6.7
(any such distribution under (i) and (ii) is referred to herein as a "Special
Precontribution Gain Distribution"). Any Special Precontribution Gain
Distributions shall be made solely to the Shareholders to which such realized
Precontribution Gains have been allocated and, among such Shareholders, will be
made in proportion to the allocation of such realized Precontribution Gains. No
distribution shall be made to a Shareholder with respect to Precontribution Gain
realized on a Tender Security contributed by such Shareholder.
(d) If a Shareholder has elected in the subscription documents heretofore
executed by each Shareholder to have such Shareholder's portion of any
distributions from the Fund reinvested in the Fund instead of being distributed
to such Shareholder in cash, the reinvested amount of such distributions shall
be applied to the purchase of Shares (including fractional Shares) at the Net
Asset Value Per Share as of the date of distribution. The number of Shares owned
by a Shareholder after a distribution under this Section 8.1 shall equal the
number of Shares owned by such Shareholder immediately prior to such
distribution plus the number of Shares purchased as provided above. Unless and
until the Shareholder having made such election notifies the Manager of said
Shareholder's decision to terminate such election (which notice must be received
at least five days prior to the date of a distribution to be effective with
respect to such distribution), such election shall be deemed to be a continuing
election to have future distributions reinvested. Any such termination notice
which is received within 5 days prior to the end of a Fiscal Year shall
initially apply to the next Fiscal Year unless the Manager in its sole
discretion determines otherwise. All notices given pursuant to this Section 8.1
shall be in such form or forms as the Manager may from time to time specify.
Anything herein to the contrary notwithstanding, the Manager may in its sole
discretion reduce or suspend distributions under Section 8.1 (a) or (b), or
both, or limit or suspend the right of any or all Shareholders to reinvest
distributions, in each case if the Manager determines that such action is in the
best interest of the Fund.
8.2 OTHER DISTRIBUTIONS. The Fund may, from time to time, in the Manager's
sole discretion, make distributions (whether from income, gains, capital or any
other source whatsoever) of Fund assets to the Shareholders in whole or in part
in marketable equity securities or cash; provided that the Manager shall not
distribute any marketable equity securities to a Shareholder unless such
distribution will not give rise to the recognition of capital gain by any
Shareholder. Such distributions shall be made pro rata to the Shareholders in
proportion to the number of Shares owned by each. Any marketable equity
securities so distributed shall be subject to the requirements of state and
federal securities laws. In the event of a distribution of marketable equity
securities, the value of such distribution (other than for Capital Account
purposes) shall be the value of such marketable equity securities as of the date
of such distribution, determined pursuant to the provisions of Article 7. For
purposes of such distribution, each class of marketable equity securities of any
issuer shall be considered a different asset, with each portion of such class
having a different adjusted tax basis for federal income tax purposes being
considered a different asset.
8.3 NO LIABILITY FOR DISTRIBUTIONS. No Shareholder or Manager shall be
liable to the Fund for any distribution made pursuant to this Article 8, and all
such distributions shall be deemed to have been made in full compliance with
this Agreement for purposes of Section 35 of the Act.
8.4 TREATMENT OF TAXES WITHHELD OR PAID ON BEHALF OF SHAREHOLDERS. All
amounts withheld or paid pursuant to the Code or any provisions of any state,
local or foreign tax law or regulation and Section 8.5 hereof
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with respect to any allocation, payment or distribution to any Shareholder may
be paid, solely out of assets of the Fund, by the Fund or the Manager to the
appropriate taxing authority. Each tax payment (including any estimated tax
payment) so made by the Fund on behalf of a Shareholder shall be treated by the
Fund as a loan by the Fund to such Shareholder bearing interest as provided in
Section 8.5, which loan and all interest accrued thereon shall (until repaid in
full) be satisfied from and hence reduce amounts otherwise distributable or
payable to such Shareholder pursuant to this Agreement. Whenever amounts are
applied to reduce or repay the loan (and accrued interest thereon) made by the
Fund to such Shareholder (whether by way of withholding from a distribution or
redemption proceeds or a compulsory redemption of Shares), such amounts shall be
treated as a cash distribution or cash payment to such Shareholder and the
Capital Account of such Shareholder shall be reduced.
8.5 TAX WITHHOLDINGS AND PAYMENTS. Each Shareholder hereby authorizes the
Fund to withhold from or pay on behalf of or with respect to such Shareholder
any amount of federal, state, local, or foreign taxes that the Manager
determines that the Fund is required or permitted to withhold or pay with
respect to any amount distributable or allocable to such Shareholder pursuant to
this Agreement or with respect to the exercise by such Shareholder of the
redemption right set forth in Article 10, including, without limitation, any
taxes required or permitted to be withheld or paid by the Fund pursuant to the
Code or any state, local or foreign tax law or regulation. Each amount paid on
behalf of or with respect to a Shareholder shall constitute a loan by the Fund
to such Shareholder, which loan shall bear interest at the LIBOR Three Months
Rate plus two percentage points (but not higher than the maximum lawful rate)
beginning on the day following the day each such tax payment is made by the Fund
until, and including, the day the loan and all interest accrued thereon is paid
in full and received by the Fund. All interest shall accrue from day to day and
shall be calculated on the basis of a 360 day year and the number of days
elapsed. The calculation of interest by the Fund shall be binding on the
Shareholder. The Fund will withhold sufficient amounts from each distribution
which would otherwise be made to a Shareholder and apply such amounts to
discharge all such loans made to such Shareholder and interest accrued thereon;
if a deficiency exists after such application, the Fund shall be entitled to
redeem such portion of the Shareholder's Shares as may be necessary to discharge
the unpaid amount of such loans and interest accrued thereon. The Fund shall
also be entitled to withhold sufficient amounts from any redemption proceeds
which would otherwise be paid to a redeeming Shareholder in order to discharge
the unpaid amount of such loans and interest accrued thereon. Each Shareholder
hereby unconditionally and irrevocably grants to the Fund a first priority
security interest in and lien upon such Shareholder's Shares to secure such
Shareholder's unconditional obligation to pay to the Fund the unpaid amount of
such loans and interest accrued thereon (together with attorney's fees and other
costs in enforcing the Fund's rights against the collateral), and agrees that
the Fund may compulsorily redeem such portion of the Shareholder's Shares as may
be necessary to discharge such obligation. Each Shareholder and each redeeming
Shareholder shall take such actions and execute and deliver such instruments and
documents as the Fund or the Manager shall request in order to effect the
compulsory redemption of the Shareholder's Shares to satisfy the Shareholder's
obligations hereunder or to perfect or enforce the security interest and lien
created pursuant to this Section 8.5.
ARTICLE 9
DISSOLUTION AND TERMINATION OF FUND
9.1 DISSOLUTION.
(a) Except as otherwise provided in Section 9.1(b) the Fund shall be
dissolved upon the first to occur of the following events:
(i) the election to dissolve the Fund by the Manager with the Consent
of the Shareholders;
(ii) the election of the Manager to dissolve the Fund at such time as
the net asset value of the Fund is less than $25,000,000;
(iii) the Fund disposes of all or substantially all of its assets;
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(iv) the filing with the records of the Fund of written consents to
such dissolution executed by all of the Shareholders;
(v) whenever there exists less than two Shareholders of the Fund; and
(vi) any other act or event that causes a dissolution of the Fund
under the Act.
(b) Upon the occurrence of any other act or event as provided in Section
9.1(a)(vi), the Fund shall dissolve unless those Shareholders holding at least a
majority of the outstanding Shares consent to the designation and admission of a
successor Manager (if necessary) and the election to continue the Fund as a
limited liability company (or, if necessary, as a successor limited liability
company), upon substantially the same terms and conditions as are set forth in
this Agreement or as otherwise agreed in writing. The election to continue the
Fund as a limited liability company (or, if necessary, as a successor limited
liability company) shall be exercisable only within 120 days after the
occurrence of the act or event referred to in Section 9.1(a)(vi).
9.2 DEATH OR TERMINATION OF A SHAREHOLDER. The death, insanity,
incompetence, withdrawal, retirement, resignation, expulsion, bankruptcy,
insolvency, dissolution or termination of a Shareholder, or the occurrence of
any other event which terminates the membership of a member in the Fund within
the meaning of the Act shall not result in the termination or dissolution of the
Fund.
9.3 LIQUIDATION OF FUND ASSETS UPON DISSOLUTION.
(a) Upon dissolution, the Fund business shall be liquidated in an orderly
manner in accordance with the provisions of this Section 9.3. The Manager shall
be the liquidator to wind up the affairs of the Fund pursuant to this Agreement;
provided, however, that if there shall be no Manager, the Shareholders (acting
by Consent of the Shareholders) may appoint one or more liquidators to act as
the liquidator(s) in effecting such liquidation. The liquidator(s) are
authorized to sell, exchange or otherwise dispose of the assets of the Fund, or
to distribute Fund assets in kind, as the liquidator(s) shall determine to be in
the best interest of the Shareholders. The liquidator(s) are also authorized to
hold any funds required to be held in escrow pursuant to the provisions of any
agreement for the sale of investments which require such an escrow. Such
escrowed funds shall be deposited in an interest bearing account. The reasonable
out-of-pocket expenses incurred by the liquidator(s) in connection with winding
up the Fund, all other liabilities or losses of the Fund or the liquidator(s)
incurred in accordance with the terms of this Agreement and reasonable
compensation for the services of the liquidator(s) shall be borne by the Fund;
provided, however, that if the amount reserved to cover contingent liabilities
and the expenses of liquidation and winding up the affairs of the Fund
(including compensation for the services of the liquidator(s)) shall be in
excess of the amount required, or shall be insufficient to fund all such
liabilities and expenses, then the excess or deficiency, as the case may be,
shall be allocated among the Capital Accounts of the Shareholders in accordance
with paragraph (iii) of Section 9.3(b) below. Subject to the provisions of the
preceding sentence, the liquidator(s) shall not be liable to any Shareholder or
the Fund for any loss attributable to any act or omission of the liquidator(s)
taken in good faith in connection with the winding up of the Fund and the
distribution of Fund assets, provided that nothing in this Section 9.3(a) shall
be deemed to protect or exonerate from liability to any Shareholder or to the
Fund any liquidator(s) who shall have been finally adjudicated by a court or
other body before which the proceeding was brought not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
Fund and to be liable to the Shareholder or the Fund by reason thereof. The
liquidator(s) may consult with counsel and accountants with respect to winding
up the Fund and distributing its assets and shall be justified and protected in
acting or omitting to act in accordance with the advice or opinion of such
counsel or accountants, provided that the liquidator(s) shall have used
reasonable care in selecting such counsel or accountants. Except as otherwise
set forth in this Agreement, the Manager or liquidator(s) shall not be liable
for the return or repayment of the Capital Contributions of any Shareholders.
(b) Upon termination of the Fund, its liabilities and obligations to
creditors (including creditors who are Shareholders) shall be paid from cash on
hand or from the liquidation of Fund properties, and, after payment
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or provision for payment of all debts of the Fund, the following provisions
shall govern with respect to the distribution of the remaining assets to the
Shareholders:
(i) The liquidator(s) shall determine which of the assets of the Fund
shall be liquidated and which shall be distributed to the Shareholders in
kind.
(ii) After the liquidation of all Fund assets other than assets which
the liquidator(s) shall have determined to distribute in kind, the Fund net
worth shall be determined. For purposes of determination of net worth all
values shall be established in accordance with the provisions of Article 7
as of the valuation date.
(iii) All Fund assets remaining after provision for liquidation
expenses (including the excess or deficiency, referred to in Section
9.3(a), of the amount reserved to cover contingent liabilities and the
expenses of liquidation and winding up) shall then be distributed to the
Shareholders in cash or in kind in proportion to the positive balances in
their respective Capital Accounts. All Shareholders shall be furnished a
written report accounting for the manner of all such distributions, and all
distributions in cash or in kind shall be made pro-rata with each class of
securities of any issuer being considered a different asset.
ARTICLE 10
REDEMPTION OF SHARES
10.1 REDEMPTION BY SHAREHOLDERS AND THE FUND.
(a) Each Shareholder may withdraw capital from the Fund by redeeming all or
any portion of such Shareholder's Shares on any business day. The redemption
price will be based on the Net Asset Value per Share next determined after
receipt by the Fund of a written redemption request executed by the Shareholder
or his legal representative, together with any documentation the Fund may
require to effect the redemption. Shares redeemed within three years of issuance
will be subject to a redemption fee payable to BMR and equal to 1% of the
aggregate net asset value of the Shares redeemed, except that no redemption fee
will be imposed on (i) Shares acquired through the reinvestment of distributions
made by the Fund, (ii) Shares redeemed in connection with a tender offer or
other extraordinary corporate event involving securities contributed by the
redeeming Shareholder, (iii) Shares redeemed following the death of all of the
initial owners of the Shares redeemed, (iv) Shares redeemed during any 12-month
period by a Shareholder who, during such period, redeems not more than 8% of the
total number of Shares held by such Shareholder at the beginning of such period,
or (v) Shares redeemed by the Manager. The redemption fee, if applicable, will
be deducted from the redemption proceeds and paid to BMR in cash by the Fund on
behalf of the redeeming Shareholder. The Fund may redeem shares of the Company
for cash to provide for such payment.
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(b) The Fund intends to satisfy redemption requests principally by
distributing securities drawn by the Company from the Portfolio, but may also
distribute cash. If specified by the redeeming Shareholder, the Fund will
satisfy a redemption request by distributing securities held in the Portfolio at
the time of the redemption that were contributed to the Fund by such
Shareholder. In meeting a shareholder redemption occurring within seven years of
a contribution of securities by the redeeming Shareholder, the Fund will not,
unless requested in writing by the redeeming Shareholder, distribute any
securities other than securities contributed by such Shareholder while retaining
in the Fund, the Company or the Portfolio any securities that were contributed
by such Shareholder during the preceding seven years if the value of the
distributed securities exceeds the redeeming Shareholder's adjusted basis in the
Fund. If requested by a redeeming Shareholder making a redemption of at least $1
million occurring more than seven years after such Shareholder's admission to
the Fund, the Fund will generally provide the redeeming Shareholder with a
Diversified Basket of Securities representing a range of industry groups that is
drawn from the Portfolio and selected by the Investment Adviser in its sole
discretion. The Fund will not provide a redeeming Shareholder with a Diversified
Basket of Securities if such a distribution is expected to cause any other
Shareholder, any investor in the Company or any investor in the Portfolio to
realize taxable gain. No Qualifying Asset will be distributed to satisfy a
redemption request, and any Restricted Security will be distributed only to the
Shareholder which contributed it to the Fund or to such Shareholder's successor
in interest. Except as otherwise provided above in this paragraph (b), the
allocation of the redemption between securities and cash and the selection of
securities to be distributed will be at the sole discretion of the Investment
Adviser. Distributed securities may include securities contributed by the
redeeming Shareholder as well as other readily marketable securities held in the
Portfolio.
(c) Notwithstanding anything in this Agreement to the contrary, the Fund
may delay or suspend redemption of Shares if such delay or suspension is
required under a loan agreement or other contract of the Fund. The right of a
Shareholder to redeem can be suspended and the payment of the redemption price
deferred when the New York Stock Exchange is closed, during periods when trading
on said Exchange is restricted or during any emergency as determined by the
Securities and Exchange Commission, during any emergency which makes it
impracticable for the Fund, Company or Portfolio to dispose of or value its
assets, or during any other period permitted by order of the Securities and
Exchange Commission for the protection of investors. Redemption requests that
are timely made but not yet honored due to delay or suspension in accordance
with this Section 10.1(c) will be honored in the order in which they are
submitted (on a pro-rata basis with respect to requests made as of the same date
in proportion to the Shareholders' respective withdrawal requests). Once the
Fund has received a written request for redemption of Shares, such request
cannot be revoked without the consent of the Manager.
(d) The Fund may compulsorily redeem all or any portion of the Shares of a
Shareholder if the Manager has determined that such redemption is necessary or
appropriate to avoid registration of the Fund under the 1940 Act or the
Securities Exchange Act of 1934, as amended, or to avoid adverse tax or other
consequences to the Fund or the Shareholders, or to discharge the Shareholder's
obligations pursuant to Section 8.5. Each Shareholder, by acquiring Shares of
the Fund, agrees that he will execute and deliver such instruments and documents
as the Manager may require to effect such compulsory redemption. No redemption
fee will be payable in the event of a compulsory redemption.
(e) Each Shareholder, by acquiring Shares of the Fund, acknowledges and
agrees that the Investment Adviser has the sole and exclusive right and power
(subject to the Shareholder's right described in Section 10.1(b) to specify that
the Fund service such Shareholder's redemption request by distributing
securities held in the Portfolio at the time of the redemption that were
contributed to the Fund by such Shareholder) to select the securities
distributed to service the redemption of Shares, and that such Shareholder upon
redemption of such Shareholder's Shares may be compelled to accept a
distribution of an asset in kind from the Fund notwithstanding the fact that the
percentage of the asset distributed to such Shareholder exceeds a percentage of
the asset which is equal to the percentage in which such Shareholder would share
in distributions from the Fund pursuant to Article 8 hereof.
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10.2 EFFECTING REDEMPTIONS; TIME AND METHOD OF DISTRIBUTION.
(a) Any Shareholder or his legal representative who shall be entitled
pursuant to Section 10.1(a) or 10.3 hereof, or be required pursuant to Section
10.1(d) hereof, to withdraw capital from the Fund shall be entitled to receive
the proceeds of his redeemed Shares (whether in securities or cash or both), net
of any applicable redemption fee, ordinarily not more than five business day
after
(i) the Manager receives the redemption request made pursuant to
Section 10.1(a) or election made pursuant to Section 10.3, or
(ii) a compulsory redemption is effected pursuant to Section 10.1(d),
or as soon as practicable after all necessary registration and transfer
documentation has been executed if payment is to be made in securities. No
interest shall accrue or be paid with respect to amounts of withdrawn
capital due to Shareholders.
(b) The withdrawal of capital by a Shareholder pursuant to Section 10.1(a)
shall be accomplished by redeeming Shares of such Shareholder in accordance with
Section 10.1 on the business day on which the Manager receives the written
withdrawal request, which may be provided by facsimile transmission. On any
redemption of Shares under this Article 10, the securities to be delivered in
distribution to the withdrawing Shareholder or such Shareholder's representative
shall be designated by notice to such Shareholder or such representative within
five business days from the date of the determination of the value of the
redeemed Shares. The value of securities being distributed will be determined in
accordance with the provisions of Article 7. Such Shareholder or such
representative shall be entitled to such increases and shall bear such decreases
in value of the designated securities as may occur after the date of
designation. Any distribution of securities shall in any event be subject to
compliance with federal and state securities laws.
(c) The number of Shares owned by a Shareholder after a withdrawal of
capital by such Shareholder shall equal the number of Shares owned by such
Shareholder immediately prior to such withdrawal minus the number of Shares (or
fractions thereof) redeemed as provided herein. In the event of the redemption
of all of the Shares of any Shareholder, such Shareholder shall, immediately and
without further action by such Shareholder or the Fund, be deemed to have
resigned from the Fund within the meaning of the Act and shall thereupon cease
to be a member and Shareholder of the Fund. Except as otherwise provided in this
Article 10, a Shareholder shall not have any right to resign as a member and
Shareholder of the Fund.
10.3 TENDER OFFERS. In the event of a tender offer or other extraordinary
corporate event with respect to a security held by the Portfolio which was
contributed by a Shareholder to the Fund (a "Tender Security"), the Manager or
Investment Adviser will, to the extent practicable, notify the Shareholder who
contributed the security of the pending tender offer prior to the sale or tender
of the security by the Portfolio. Upon such notice, the Shareholder can elect to
redeem some or all of such Shareholder's Shares. If the Shareholder elects to
redeem, such Shareholder's Shares will be redeemed to the extent requested by
distributing to such Shareholder shares of the Tender Security (up to the number
of shares thereof contributed by the redeeming Shareholder), plus other
securities and/or cash as required to complete the redemption. No redemption fee
will be payable in connection with any such redemption.
10.4 REDEMPTION PRACTICES MAY BE CHANGED. The redemption practices of the
Fund referred to in this Agreement may be altered or changed to reflect,
accommodate or conform to changes in the Code, Treasury Regulations and
administrative interpretations relating to the federal income tax law.
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ARTICLE 11
RECORDS AND REPORTS
11.1 BOOKS AND RECORDS. The Manager shall maintain or cause to be
maintained books of account, kept on the accrual method of accounting, in which
shall be entered fully and accurately the transactions of the Fund. The Manager
may reflect any action taken by it on behalf of the Fund in any book, record or
other document as the Manager may deem appropriate. The documents referred to in
Section 9 of the Act shall be kept at the principal office of the Fund in
Boston, Massachusetts, and such documents shall be subject to inspection and
copying at the reasonable request and at the expense of any Shareholder during
ordinary business hours. Subject to such reasonable standards as may be
determined by the Manager from time to time, including without limitation
standards governing what information and documents are to be furnished at what
time and location and at whose expense, a Shareholder may obtain from the Fund
upon reasonable demand in writing (but only for a purpose stated in such demand
which purpose must be reasonably related to such Shareholder's interest in the
Fund) the information and documents referred to in Section 10 of the Act.
11.2 FINANCIAL REPORTS. Semi-annual unaudited financial statements
reporting on the financial condition of the Fund's business and the results of
its operations shall be furnished to each of the Shareholders. An annual audit
of the Fund's financial statements shall be made by the Accountant and a copy of
the report of such audit, together with the financial statements (consisting of
a balance sheet, a statement of operations, a statement of cash flows, a list of
the Fund's investments and related notes) shall be furnished to all Shareholders
within a reasonable period after the close of each Fiscal Year. On or about
March 15 of each year, a report shall also be furnished to each Shareholder
indicating such Shareholder's share of the income or loss of the Fund for the
preceding Fiscal Year for federal income tax purposes. The Manager shall cause
to be delivered to each Shareholder a Schedule K-1 with respect to each Fiscal
Year. The Manager shall also cause to be delivered to each Shareholder upon
request such other information as shall be reasonably requested by such
Shareholder for purposes of filing any tax returns, and the Manager shall from
time to time furnish such other information as any Shareholder shall reasonably
request for the purpose of enabling such Shareholder to comply with any
reporting or filing requirements imposed by any statute, rule, regulation or
otherwise by any governmental agency or authority.
ARTICLE 12
AMENDMENTS
12.1 AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended or
restated only by the Manager. Any such amendment or restatement shall be made by
an instrument in writing signed by or on behalf of the Manager. No such
amendment or restatement shall in any material respect increase, add to or alter
any financial obligation of any Shareholder. Except as otherwise specifically
required by Section 2.3, no consent or approval of the Shareholders is required
to effect any such amendment or restatement.
12.2 AMENDMENT OF CERTIFICATE. The Certificate may be amended or restated
only by the Manager. The Manager shall prepare and file, in accordance with the
Act, any certificate of amendment, certificate of cancellation or certificate of
consolidation or merger, and each of such certificates may be signed solely by
the Manager.
12.3 REORGANIZATION. Notwithstanding anything else herein, the Manager, in
order to change the form of organization of the Fund, may, without Shareholder
approval or consent, cause the Fund to consolidate or merge with or into one or
more trusts, partnerships, limited liability companies, associations or other
entities so long as the surviving or resulting entity is an entity intended to
be classified as a partnership for federal income tax purposes.
Pursuant to and in accordance with the provisions of Section 61(d) of the
Act, and notwithstanding anything else herein, an agreement of consolidation or
merger approved by the Manager in accordance with this
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Section 12.3 may effect any amendment to this Agreement or effect the adoption
of a new operating agreement of the Fund if the Fund is the surviving or
resulting entity in the consolidation or merger.
ARTICLE 13
INDEMNIFICATION
13.1 INDEMNIFICATION OF COVERED PERSONS.
(a) Each Person who was or is made a party to or is threatened to be made a
party to or is otherwise involved in any action, suit, arbitration or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such Person is or was a
Covered Person or is or was serving at the request of the Fund as a manager,
director, trustee, officer, employee or agent of another Person in which the
Fund has or had any interest as a shareholder, creditor or otherwise
(hereinafter an "indemnitee"), whether the basis for such proceeding is alleged
action in an official capacity as a Covered Person or as a manager, director,
trustee, officer, employee or agent of another Person or in any other capacity
while serving as such, shall be indemnified and held harmless by the Fund from
and against any and all demands, claims, expenses, liabilities and losses
whatsoever (including, without limitation, attorneys' fees, judgments, fines,
penalties and amounts paid in settlement) incurred or suffered by such
indemnitee in connection therewith; provided that no indemnification shall be
provided under this Section 13.1(a) for any indemnitee with respect to any
matter as to which it shall ultimately be determined by final judicial decision
from which there is no further right of appeal (hereinafter a "final
adjudication") that such indemnitee did not act in good faith in the reasonable
belief that his action was in the best interest of the Fund and therefore is not
entitled to indemnification hereunder. It is understood and agreed that officers
and employees of the Manager or the Investment adviser who serve as officers,
directors or trustees of BRC or any other subsidiary of the Fund are serving in
such capacity at the request of the Fund, and that BMR is serving as manager of
BRC at the request of the Fund. To the extent that the Act is hereafter amended
to permit broader or more complete indemnification rights to any such
indemnitee, then this Section 13.1(a) shall be deemed and construed to permit
such broader or more complete indemnification rights.
(b) The indemnification rights conferred in Section 13.1(a) shall include
the right to be paid by the Fund all expenses (including, without limitation,
attorneys' fees) incurred in defending any such proceeding in advance of its
final disposition upon receipt of an undertaking by such indemnitee to repay all
amounts so advanced if a final adjudication shall have determined that such
indemnitee is not entitled to indemnification hereunder. The Fund shall be
entitled to accept such undertaking without reference to the financial ability
of such indemnitee to make repayment. The rights to indemnification and to the
advancement of expenses conferred in Section 13.1(a) and 13.1(b) shall be
contract rights and such rights shall continue as to any indemnitee who has
ceased to be a Covered Person (or who has ceased to serve at the request of the
Fund as a director, trustee, officer, employee or agent of another Person) and
shall inure to the benefit of the indemnitee's heirs, executors, administrators,
successors and assigns.
(c) In any action brought by an indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the
Fund to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Section 13.1 or
otherwise shall be on the Fund.
(d) The rights to indemnification and to the advancement of expenses
conferred in this Section 13.1 shall not be exclusive of any other right which
any Person may have or hereafter acquire under any statute, amendment or
restatement of this Agreement, the By-Laws, contract or otherwise.
(e) The Fund may maintain insurance, at its expense, to protect itself, the
Manager, the Investment Adviser, any indemnitee, the Shareholders or any other
Person against any claim, expense, liability or loss,
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whether or not the Fund would have the power to indemnify any such Person
against such claim, expense, liability or loss under applicable law.
13.2 MERGED PERSONS. For the purposes of this Article 13 references to "the
Fund" include any constituent Person (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power to indemnify an indemnitee as well
as the resulting or surviving Person; so that any Person who is or was a Covered
Person of such a constituent Person or is or was serving at the request of such
a constituent Person as a trustee, director, officer, employee or agent of
another Person shall stand in the same position under the provisions of this
Article 13 with respect to the resulting or surviving Person as he would have
with respect to such a constituent Person if its separate existence had
continued.
13.3 SHAREHOLDERS. Notwithstanding the limitation on a Shareholder's
liability set forth in Section 5.2 of this Agreement, in case any Shareholder or
former Shareholder shall be held to be liable by reason of his or her being or
having been a Shareholder and not because of his or her acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Fund to be indemnified against all losses and
expenses arising from such liability, provided that no indemnification shall be
granted by the Fund in violation of applicable law. Upon request, the Fund shall
cause its counsel to assume the defense of any claim which, if successful, would
result in an obligation of the Fund to indemnify the Shareholder as aforesaid.
ARTICLE 14
POWER OF ATTORNEY
14.1 APPOINTMENT; POWER. Each of the Shareholders hereby constitutes and
appoints the Manager and each officer and the trustee of the Manager, and each
of them, as such Shareholder's true and lawful agent and attorney-in-fact with
full power of substitution, and with power to act in such Shareholder's name and
on such Shareholder's behalf, to make, execute and deliver, swear to,
acknowledge, file, and record (i) this Agreement, and amendments hereto or
restatements hereof adopted pursuant to the provisions hereof (including but not
limited to any such amendment required upon the admission of a successor or
substitute Manager or a substitute or additional Shareholder, or the making of
withdrawals of capital, the continuation of this Fund, the formation of a
successor limited liability company or other successor entity or the doing of
any act requiring the amendment of this Agreement under the laws of the
Commonwealth of Massachusetts and any such amendment relating to a successor
limited liability company or other successor entity) and, upon termination of
the Fund (or its successor), a certificate of cancellation, as and if the same
may be required by the laws of the Commonwealth of Massachusetts, (ii) any
certificate of organization or certificate of amendment thereto, or any
certificate of consolidation or merger, required or permitted to be filed on
behalf of the Fund, and any and all certificates as necessary to qualify or
continue the Fund as a limited liability company wherein the shareholders or
members thereof have limited liability in the states where the Fund may be
conducting activities, and all instruments which effect a change or modification
of the Fund in accordance with this Agreement, (iii) any certificate of
fictitious name, if required by law, (iv) any documents containing any
investment representations and/or representations relating to the citizenship,
residence and tax status required by any state or federal law or regulation, and
(v) such other certificates or instruments as may be required under the laws of
the Commonwealth of Massachusetts or any other jurisdiction, or by any
regulatory agency, as the Manager may deem necessary or advisable, in each case
having the power to execute such instruments on the Shareholder's behalf,
whether or not such Shareholder consented to or approved such action; provided,
however, that none of the foregoing acts shall increase the liability of any
Shareholder beyond that expressly set forth in this Agreement.
33
<PAGE>
14.2 NATURE OF POWER.
(a) The power of attorney granted in this Article 14 is a special power of
attorney coupled with an interest and is irrevocable, shall survive the death or
incompetency of a Shareholder, may be exercised by the attorney-in-fact by
signature on behalf of any or all Shareholders and shall survive the delivery of
an assignment by a Shareholder of the whole or any portion of such Shareholder's
economic interest in the Fund, except that where the assignee, donee or other
transferee of any such interest has been approved for admission to the Fund as a
substituted Shareholder pursuant to the provisions of Section 4.7, the power of
attorney shall survive the delivery of such assignment solely for the purpose of
enabling the attorney-in-fact to execute, acknowledge, and file any instrument
necessary to effect such substitution.
(b) Each Shareholder hereby gives and grants to such Shareholder's said
attorney under this Power of Attorney full power and authority to do and perform
each and every act and thing whatsoever requisite, necessary or appropriate to
be done in or in connection with this Power of Attorney as fully to all intents
and purposes as such Shareholder might or could do if personally present, hereby
ratifying all that such Shareholder's said attorney shall lawfully do or cause
to be done by virtue of this Power of Attorney.
(c) The existence of this Power of Attorney shall not preclude execution of
any such instrument by such Shareholder individually on any such matter. A
Person dealing with the Fund may conclusively presume and rely on the fact that
any such instrument executed by such agent and attorney-in-fact is authorized,
regular and binding without further inquiry.
ARTICLE 15
GENERAL PROVISIONS
15.1 NOTICES. Except as specifically provided elsewhere in this Agreement
or in the By-Laws, all notices, requests and statements shall be deemed to have
been properly given if mailed by overnight or first class mail, postage prepaid,
or if sent by prepaid telegram, addressed, if to the Fund or Manager to 24
Federal Street, Boston, Massachusetts 02110, or to any Shareholder to the
address set forth in the shareholder record of the Fund, or, in any case, to
such other address or addresses as may be specified by written notice.
15.2 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts. The Fund is a
limited liability company formed under, and subject to the provisions of, the
Act. In the event of any conflict or inconsistency between any provisions of
this Agreement and any non-mandatory or default provision of the Act, the
provisions of this Agreement shall control and take precedence.
15.3 BINDING EFFECT. Each Shareholder of the Fund, by complying with the
conditions for becoming a beneficial owner and acquiring Shares, is bound by all
of the terms and provisions of the Agreement and of the By-Laws. The exercise by
the Manager of its rights, powers, privileges, authority and discretion under
this Agreement and the By-Laws under the circumstances then prevailing, shall be
binding upon each Shareholder and every other Person interested. This Agreement
and all of the terms and provisions hereof shall be binding upon, and shall
inure to the benefit of the Manager and the Shareholders, and their legal
representatives, heirs, successors and permitted assigns, except as expressly
noted otherwise herein and except that no Shareholder may assign or transfer
such Shareholder's rights or obligations under this Agreement in any manner
other than as provided herein.
15.4 INTEREST ON CAPITAL ACCOUNTS; LOANs. No interest shall accrue on the
Capital Accounts of the Shareholders. Any Shareholder may make loans to the Fund
on such terms as the lender and the Manager may agree.
15.5 NOT A PUBLIC OFFERING. Each of the Shareholders understand that the
sale to such Shareholder of Shares has not been registered under the Securities
Act and that the offering and sale of the Shares was made in reliance upon an
exemption from registration provided under the Securities Act. Each Shareholder
represents and
34
<PAGE>
warrants that (a) such Shareholder is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act, (b)
such Shareholder has such knowledge and experience in financial and business
matters that such Shareholder is capable of evaluating the merits and risks of
an investment in the Shares, and (c) such Shareholder, at each time such
Shareholder acquires Shares, is a Qualified Purchaser.
15.6 INVESTMENT REPRESENTATIONS. Each Shareholder by acquiring Shares
acknowledges that such Shareholder is acquiring such Shares for such
Shareholder's own account for investment purposes and not with a view to the
resale or distribution thereof, or of any part of such Shares, within the
meaning of the Securities Act, and agrees that such Shareholder will not sell or
otherwise dispose of such Shares or any part thereof without registration under
the Securities Act or unless, in the opinion of counsel to the Fund, an
exemption therefrom is available.
15.7 GENDER AND NUMBER. The masculine gender shall be deemed to denote the
feminine or neuter genders, the singular to denote the plural, and the plural to
denote the singular, where the context so permits.
15.8 PARTITION. Each Shareholder waives any right to partition or the right
to take any other action which might otherwise be available to such Shareholder
outside of the provisions of this Agreement for the purpose of severing such
Shareholder's relationship with the Fund or such Shareholder's interest in the
property held by the Fund from the interests of the other Shareholders until the
end of the term of both this Fund and any successor entity formed pursuant to
the terms hereof.
15.9 SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflicting of any provision with
any constitution or statute or rule of public policy or for any other reason,
such circumstance shall not have the effect of rendering the provision or
provisions in question invalid, inoperative or unenforceable in any other
jurisdiction or in any other case or circumstance or of rendering any other
provision or provisions herein contained invalid, inoperative or unenforceable
to the extent that such other provision or provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
15.10 AGREEMENT, REFERENCES, HEADINGS. A copy of this Agreement and of each
amendment hereto and of the By-Laws shall be kept at the principal office of the
Fund in Massachusetts where they may be inspected by any Shareholder during
ordinary business hours. Anyone dealing with the Fund may rely on a certificate
by an officer of the Fund as to whether or not any such amendments have been
made and as to other matters in connection with the Fund hereunder; and, with
the same effect as if it were the original, may rely on a copy certified by an
officer of the Fund or by an officer of the Manager to be a copy of this
Agreement or of any such amendment thereto. In this Agreement or in any such
amendment references to this Agreement, and all expressions like "herein,"
"hereof," and "hereunder," shall be deemed to refer to this Agreement as amended
or affected by any such amendment. Headings are placed herein for convenience of
reference only and in case of any conflict, the text of this Agreement, rather
than the headings, shall control. This Agreement and each amendment or
restatement thereof may be executed in any number of counterparts each of which
shall be deemed an original but all of which taken together shall constitute one
Agreement.
35
<PAGE>
15.11 AUTHORITY OF SHAREHOLDER ENTITIES. Any corporation, partnership,
trust or other entity which is a Shareholder represents and warrants that the
execution, delivery and performance of private placement documents referred to
in the Memorandum by such entity has been duly authorized by all necessary
action and is valid and binding upon such entity. When such documents are
executed by the trustee of any trust, such execution is by the trustee, not
individually, but solely as trustee in the exercise of and under the power and
authority conferred upon and invested in such trustee.
15.12 STATUS OF SUCCESSOR TRUSTEES AS SHAREHOLDERS. Any successor trustee
or trustees of any trust which is a Shareholder of the Fund shall be entitled to
exercise the same rights and privileges and be subject to the same duties and
obligations as his predecessor trustee. As used in this Agreement, the term
"trustee" shall include any and all such successor trustees.
15.13 NO PERSONAL LIABILITY TO OTHERS. All Persons extending credit to,
contracting with or having any claim against the Fund shall look only to the
assets of the Fund for payment under or satisfaction or such credit, contract or
claim; and no Shareholder, Manager or officer or employee of the Fund or
trustee, officer or employee of the Manager, whether past, present or future,
shall be personally liable therefor.
15.14 INDULGENCES. Neither the failure nor any delay on the part of any
party hereto to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
36
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
MANAGER
EATON VANCE MANAGEMENT
By /s/ Thomas Otis
------------------
Vice President
ORGANIZATIONAL SHAREHOLDER
EATON VANCE MANAGEMENT
By /s/ Thomas Otis
------------------
Vice President
WITHDRAWING ORGANIZATIONAL SHAREHOLDER
BOSTON MANAGEMENT AND RESEARCH
By /s/ Alan R. Dynner
---------------------
Vice President
SHAREHOLDERS:
THE PERSONS LISTED ON THE RECORDS OF THE FUND
AS SHAREHOLDERS
By EATON VANCE MANAGEMENT, AS MANAGER
AND ATTORNEY-IN-FACT
By /s/ Thomas Otis
------------------
Vice President
37
<PAGE>
FIRST AMENDMENT TO
AMENDED AND RESTATED OPERATING AGREEMENT
OF BELCREST CAPITAL FUND LLC
This First Amendment to the Amended and Restated Operating Agreement (the
"Agreement") of Belcrest Capital Fund LLC (the "Fund") dated as of November 24,
1998 is made and effective this first day of September, 1999.
A. THE FOLLOWING DEFINITION OF BIC IS HEREBY ADDED TO ARTICLE 1 OF THE
AGREEMENT AND THE DEFINITION OF QUALIFYING ASSETS THEREIN IS HEREBY CHANGED
TO READ AS FOLLOWS:
"BIC" means Belcrest Investment Corporation, a Delaware corporation, 100%
of the capital stock of which will be owned by the Fund.
"QUALIFYING ASSETS" means assets that are acquired by the Fund or by BRC or
BIC in order for the exchange of contributed securities for Shares of the
Fund to be non-taxable, and which are not assets described or referred to
in Section 351(e)(1)(B) of the Code.
B. PARAGRAPHS (B) AND (C) OF SECTION 2.3 OF THE AGREEMENT ARE HEREBY CHANGED
TO READ AS FOLLOWS:
(b) With respect to 75% of its total assets, the Fund will not, whether by
reason of its direct investments or by reason of its indirect interest in
the securities which are directly held by the Portfolio or by BRC or by
BIC, invest more than 5% of its total assets (taken at current value) in
the securities or investments of any one issuer (except obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
except securities of other investment companies), but this restriction
shall not apply to the Fund's direct investment in shares of the Company,
the Fund's indirect investment in the Portfolio held through the Company or
the Fund's investment in securities issued by BRC or BIC.
(c) The Fund will not, whether by reason of its direct investments or by
reason of its indirect interest in the securities which are directly held
by the Portfolio or by BRC or by BIC, invest more than 25% of its total
assets (taken at current value) in any one industry (or, with respect to
real estate, in any one sector of the real estate market), but this
restriction shall not apply to the Fund's direct investment in shares of
the Company or the Fund's indirect investment in the Portfolio held through
the Company or the Fund's investment in securities issued by BRC or BIC.
C. PARAGRAPH (A) OF SECTION 2.4 OF THE AGREEMENT IS HEREBY CHANGED TO READ AS
FOLLOWS:
(a) to acquire shares of the Company (which invests exclusively in the
Portfolio), to acquire securities issued by BRC and BIC, to acquire
Qualifying Assets, to engage in the other investment activities referred to
in the Memorandum, and to conduct, operate and carry on the business of a
private limited liability investment company;
D. SECTION 3.2 OF THE AGREEMENT IS HEREBY CHANGED TO READ AS FOLLOWS:
3.2 LIMITATION OF LIABILITY. Each Person who is or was (i) a Manager or an
Investment Adviser, or (ii) an affiliate, associate, officer, employee or
trustee of a Manager or of an Investment Adviser, (iii) an officer or
employee of the Fund or (iv) a manager, director, officer or employee of
BRC or BIC (each, a "Covered Person", and collectively, the "Covered
Persons"), when acting in their respective capacities in connection with
the Fund's or BRC's or BIC's business or affairs, shall not be liable to
any Person (including, without limitation, the Fund or a Shareholder) for
any act, omission or obligation of the Fund, BRC, BIC, Manager, Investment
Adviser or Covered Person or for breach of any duty to the Fund, BRC or
BIC. Notwithstanding anything in this Agreement to the contrary, the
<PAGE>
Manager and the Investment Adviser shall not be responsible or liable to
the Fund or a Shareholder in any event for any mistake, error, neglect,
wrongdoing or breach of duty of any Covered Person or for losses
attributable thereto, nor shall any Manager, Investment Adviser or Covered
Person be liable or responsible to the Fund or a Shareholder for the act,
omission, obligation or breach of duty of any other Manager, Investment
Adviser or Covered Person; provided that nothing in this paragraph shall be
deemed to exonerate a Manager, Investment Adviser or Covered Person from
liability to the Fund or any Shareholder who has been finally adjudicated
by a court or other body before which a proceeding was brought not to have
acted in good faith in the reasonable belief that his action was in the
best interest of the Fund and to be liable to the Fund or to such
Shareholder by reason thereof.
Each Covered Person shall, in the performance of such Covered Person's
duties (whether or not the Fund would have the power to indemnify such
Covered Person against liability), be fully and completely justified and
protected with regard to any act or failure to act resulting in or from
reliance in good faith upon (i) the provisions of this Agreement or of the
By-Laws, (ii) the books of account or other records of the Fund, BRC or
BIC, (iii) advice of counsel, or (iv) information, opinions, statements or
reports made, presented or given to the Fund, BRC or BIC, the Manager or
the Investment Adviser by any of their respective officers or employees or
by any attorney, accountant, appraiser, expert, consultant or other Person
selected with reasonable care by or on behalf of the Manager or the
Investment Adviser.
The Manager, the Investment Adviser and all other Covered Persons shall not
be personally liable for the payment or repayment of any amounts standing
in the account of a Shareholder including, but not limited to, the Capital
Contributions of such Shareholder. Any such payment or repayment, if
required to be made, shall be made solely from the assets of the Fund.
In addition, the Manager, the Investment Adviser and all other Covered
Persons shall not be liable to the Fund or any Shareholder by reason of (i)
any tax liabilities incurred by the Shareholders (including, without
limitation, as a result of their contribution of securities to the Fund in
exchange for Shares or upon the exchange of such securities from the Fund
into the Company or from the Company into the Portfolio or as a result of
any sale or distribution of any such securities); (ii) any failure to
withhold income tax under federal or state tax laws with respect to income
or gains allocated to the Shareholders; (iii) any change in the federal or
state tax laws or regulations or in the interpretations thereof as they may
apply to the Fund, BRC, BIC, the Company, the Portfolio or the
Shareholders, whether such change or interpretation occurs through
legislative, judicial or administrative action; or (iv) any failure of BRC
to qualify as a real estate investment trust under the Code.
Every note, bond, agreement, instrument, certificate, Share, undertaking or
other document and every other act or thing whatsoever executed or done by
the Manager, the Investment Adviser or a Covered Person or any of them on
behalf of the Fund, in connection with the Fund's business, shall be deemed
conclusively to have been executed or done only in such Person's capacity
as Manager, Investment Adviser or Covered Person, and such Manager,
Investment Adviser or Covered Person shall not be personally liable thereon
to any Person.
To the extent that, at law or in equity, the Manager, the Investment
Adviser or a Covered Person has duties (including fiduciary duties) and
liabilities relating thereto, whether to the Fund or to BRC or to BIC or to
the Shareholders, the Manager, Investment Adviser or Covered Person acting
in connection with the Fund's or BRC's or BIC's business or affairs shall
not be liable to the Fund or to any Shareholder for such Manager's,
Investment Adviser's or Covered Person's good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict, limit or eliminate the duties and liabilities of
the Manager, the Investment Adviser or a Covered Person otherwise existing
at law or in equity, are agreed by the Shareholders to replace such other
duties and liabilities of the Manager, Investment Adviser or Covered
Person.
2
<PAGE>
E. SECTION 5.2 OF THE AGREEMENT IS HEREBY CHANGED TO READ AS FOLLOWS:
5.2 NO LIABILITY FOR FUND OR BRC OR BIC OBLIGATIONS. No Shareholder shall
be liable for any debts, obligations or liabilities of the Fund or of BRC
or of BIC; whether arising in contract, tort or otherwise; provided,
however, that contributions of a Shareholder and his share of any
undistributed assets of the Fund shall be subject to the risks of the
operations of the Fund.
F. SECTION 5.3 OF THE AGREEMENT IS HEREBY CHANGED TO READ AS FOLLOWS:
5.3 NO RIGHT OF MANAGEMENT OR AUTHORITY TO ACT. No Shareholder in its
capacity as a Shareholder shall take any part in the direction, management
or control of the business or activities of the Fund or BRC or BIC,
transact any business for or on behalf of the Fund or BRC or BIC or have
any right, power or authority to bind the Fund or BRC or BIC. Except as
specifically otherwise required by this Agreement, no Shareholder shall
have any right, power or privilege to vote on, consent to or approve any
action or matter under any circumstances whatsoever. The Shareholders shall
have the limited right to consent only as and when required by Section 2.3,
3.1(h), 4.9, 9.1 or 9.3 of this Agreement.
G. PARAGRAPH (E) OF ARTICLE 7 OF THE AGREEMENT IS HEREBY CHANGED TO READ AS
FOLLOWS:
(e) The value of the Fund's investments in BRC and BIC shall reflect the
Fund's proportionate interest in the value of BRC's assets and BIC's
assets, respectively.
H. PARAGRAPH (A) OF SECTION 13.1 OF THE AGREEMENT IS HEREBY CHANGED TO READ AS
FOLLOWS:
(a) Each Person who was or is made a party to or is threatened to be made a
party to or is otherwise involved in any action, suit, arbitration or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such Person is or
was a Covered Person or is or was serving at the request of the Fund as a
manager, director, trustee, officer, employee or agent of another Person in
which the Fund has or had any interest as a shareholder, creditor or
otherwise (hereinafter an "indemnitee"), whether the basis for such
proceeding is alleged action in an official capacity as a Covered Person or
as a manager, director, trustee, officer, employee or agent of another
Person or in any other capacity while serving as such, shall be indemnified
and held harmless by the Fund from and against any and all demands, claims,
expenses, liabilities and losses whatsoever (including, without limitation,
attorneys' fees, judgments, fines, penalties and amounts paid in
settlement) incurred or suffered by such indemnitee in connection
therewith; provided that no indemnification shall be provided under this
Section 13.1(a) for any indemnitee with respect to any matter as to which
it shall ultimately be determined by final judicial decision from which
there is no further right of appeal (hereinafter a "final adjudication")
that such indemnitee did not act in good faith in the reasonable belief
that his action was in the best interest of the Fund and therefore is not
entitled to indemnification hereunder. It is understood and agreed that
officers and employees of the Manager or the Investment adviser who serve
as officers, directors or trustees of BRC or BIC or any other subsidiary of
the Fund are serving in such capacity at the request of the Fund, and that
BMR is serving as manager of BRC at the request of the Fund. To the extent
that the Act is hereafter amended to permit broader or more complete
indemnification rights to any such indemnitee, then this Section 13.1(a)
shall be deemed and construed to permit such broader or more complete
indemnification rights.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned Manager of the Fund, acting pursuant to
Section 12.1 of the Agreement, has executed this First Amendment to the
Agreement as of the day and year set forth above.
MANAGER
EATON VANCE MANAGEMENT
By: /s/ Thomas E. Faust, Jr.
------------------------
Thomas E. Faust, Jr.
Vice President
4
EXHIBIT NO. 4
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT dated as of November 24, 1998 (as the same may
be amended, supplemented or otherwise modified from time to time, the
"Agreement"), by and among Merrill Lynch International Bank Limited, a bank
organized under the laws of England (the "Lender"), Belcrest Capital Fund LLC, a
Massachusetts limited liability company (the "Borrower") and Merrill Lynch
Capital Services, Inc. ("MLCS"). This Agreement establishes the terms and
conditions that will govern the revolving credit loan from the Lender to the
Borrower.
RECITALS
All terms not otherwise defined above or in this Introductory Statement are
as defined in Article 1 hereof, or as defined elsewhere herein.
The Borrower has requested the Lender to make Loans to the Borrower in the
aggregate amount of $300,000,000 or such lesser amount as indicated herein. The
Borrower wishes to pledge the Collateral to the Lender as security for the Loans
and to MLCS as security for Borrower's obligations under the MLCS Swap
Agreement.
The Loans are to be secured by a pledge by the Borrower of the Collateral
(as hereinafter defined), including 100% of the common stock of Belcrest Realty
Corporation and the shares of Belvedere Capital Fund Company LLC, owned by the
Borrower and held in a special securities account established and maintained
with Investors Bank & Trust Company.
Subject to the terms and conditions set forth herein, the Lender is willing
to make the Loans to the Borrower.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS.
For the purposes hereof unless the context otherwise requires, the
following terms shall have the meanings indicated. Unless the context otherwise
requires, any of the following terms may be used in the singular or the plural,
depending on the reference:
"ACT" shall have the meaning given to such term in Section 6.13.
"AFFILIATE" shall mean with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person. A Person shall be deemed to control a Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through ownership of
voting securities, by contract or otherwise.
<PAGE>
"BASE RATE" shall mean the floating annual rate of interest determined by
the Lender and equal to a weighted average of rates on the second Business Day
before the first Business Day of each week the Lender offers deposits in Dollars
to leading banks in the London Inter Bank Market, for terms of one night, one
week and one month, or if any such deposits are not offered by the Lender at the
relevant time, the rate equal to its cost of such a deposit at the relevant time
(such floating annual rate to change when and as such base rate changes).
"BELVEDERE" shall mean Belvedere Capital Fund Company LLC.
"BORROWING DATE" shall have the meaning given to such term in Section 2.2.
"BORROWING NOTICE" shall have the meaning given to such term
in Section 2.2.
"BRC" shall mean Belcrest Realty Corporation, a Delaware corporation.
"BUSINESS DAY" shall mean a day (other than a Saturday or Sunday) on which
deposits in Dollars and any other relevant currency may be dealt in on the
London Inter Bank Market and banks are open in London and New York City.
"COLLATERAL" shall mean all personal property of the Borrower, tangible and
intangible, wherever located or situated and whether now owned or hereafter
acquired or created, including without limitation, all goods, accounts,
documents, instruments, chattel paper, cash, bank accounts, inventory, contract
rights, general intangibles, equipment, securities entitlements and securities
(including, but not limited to the Pledged Securities) and any proceeds thereof
or income therefrom, specifically including, but not limited to:
(a) all stocks, bonds, or other securities or property now or hereafter in
the Securities Account;
(b) all credit balances, accounts, contract rights, general intangibles,
instruments, documents, money, certificates of deposit and all other property of
whatever kind or description now or hereafter in the Securities Account;
(c) any securities described in confirmations and other reports delivered
by Custodian to the Borrower or either Secured Party in connection with the
Securities Account, which securities are deemed to be in the Securities Account
for purposes of this Agreement;
(d) all dividends, interest and proceeds of any of the property described
in clauses (a), (b) or (c) above, including without limitation, proceeds of
proceeds;
(e) all its right, title and interest in and to all monies, debts, claims,
securities and other property deposited with or owed or owing to either of the
Secured Parties; and
-2-
<PAGE>
(f) all its right, title and interest in and to bullion, precious metals or
other trades made on behalf of the Borrower (directly or indirectly) by Merrill
Lynch Pierce Fenner & Smith (Brokers & Dealers) Limited;
PROVIDED, HOWEVER, that assets encumbered by a lien to a person other than the
Secured Parties not otherwise prohibited by Section 8.2 of this Agreement shall
be excluded from this definition of Collateral for such period as the underlying
obligation which is secured by such lien exists; and provided further that the
term Collateral as used herein shall not include any preferred stock of BRC
issued from time to time which are temporarily held by the Borrower pending
donation to one or more charitable organizations as contemplated under the
Private Placement Memorandum.
"COMMITMENT" shall mean three hundred million dollars ($300,000,000), or
such lesser amount if reduced pursuant to Section 2.10.
"COMMITMENT TERMINATION DATE" shall mean November 24, 2005 or such earlier
date on which (i) the Loans shall become due in accordance with Section 10.2 or
(ii) the Borrower terminates the Commitment pursuant to Section 2.10.
"COMPLIANCE CERTIFICATE" shall have the meaning given to that term in
Section 2.2.
"CUSTODIAN" shall mean Investors Bank & Trust Company.
"DEFAULT" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"DOLLARS" OR "$" shall mean the lawful currency of the United States of
America.
"EVENT OF DEFAULT" shall have the meaning given to that term in Section
10.1.
"GAAP" shall mean generally accepted accounting principles consistently
applied (except for accounting changes in response to FASB releases or other
authoritative pronouncements).
"INDEBTEDNESS" of any Person means (a) liability of such Person (i) for
borrowed money, or under any reimbursement obligation related to a letter of
credit or bond or performance bond facility, or (ii) evidenced by a bond, note,
debenture or other evidence of indebtedness (including a purchase money
obligation) representing extensions of credit or given in connection with the
acquisition of any business, property, service or asset of any kind (iii) under
swap, cap or other interest rate or foreign currency hedging agreements and
options, financial future contracts and options on financial futures contracts
or (iv) under margin accounts or other securities transactions conducted by the
Borrower on margin or obligations with respect to a capital lease; (b) any
liability of others either for any lease, dividend or letter of credit or for
any obligation described in the preceding clause (a) that (i) the Person has
guaranteed or that is otherwise its legal liability (whether contingent or
otherwise or direct or indirect, but excluding endorsements of negotiable
instruments for deposit or collection in the ordinary course of business) or
(ii) is secured by any Lien, charge,
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easement, mortgage, pledge, security interest or other encumbrance or any
restriction or limitation of any kind on any property or asset owned or held by
that Person, regardless of whether the obligation secured thereby shall have
been assumed by or is a personal liability of that Person and (c) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) and (b) above.
"INTEREST PERIOD" shall mean a period of one month to five years as
selected by the Borrower in a written notice received by the Lender no later
than 12:00 noon (London time) on the third Business Day before the first day of
the Interest Period, provided, however, that no interest period will be selected
which will end later than the Maturity Date. In the case of each Loan, the first
Interest Period shall begin on the proposed date of such Loan and each
subsequent Interest Period shall begin on the last date of the previous Interest
Period. If any Interest Period would end on a day which is not a Business Day,
the last day of such Interest Period shall be extended to occur on the next
succeeding Business Day, PROVIDED, HOWEVER, if such extension would cause such
interest period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day. If the
Borrower fails to timely specify an Interest Period, then the Interest Period
for such Loan shall be the same as the Interest Period in effect as of the date
notice should have been received.
"INTEREST RATE" shall mean a rate per annum during each Interest Period,
LIBOR plus 0.45%. In the event that for any reason the Lender is unable to
define LIBOR, the Interest Rate shall mean the Base Rate plus 0.45%.
"LIBOR" shall mean in relation to a particular Interest Period, the rate
per annum equal to the rate (as determined by the Lender) (rounded to the next
higher 1/16 of 1%) at which, at or about 11:00 a.m. (London time), the Lender
offers deposits to leading banks in the London Inter Bank Market in an amount
comparable to the relevant Loan for the applicable Interest Period, it being
understood and agreed that a written statement by the Lender of the LIBOR rate
hereunder shall be conclusive evidence of such rate.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance (excluding restrictions on the transfer of securities
arising under Federal or state securities laws or by reason of contract and any
right of first refusal or a right to purchase a Partnership Preference Unit (as
defined in the Private Placement Memorandum)), lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the Uniform Commercial Code or any other similar recording or notice statute,
and any lease having substantially the same effect as any of the foregoing).
"LOAN" shall mean a loan made by the Lender to the Borrower under this
Agreement.
"MLCS" shall mean Merrill Lynch Capital Services, Inc.
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"MLCS SWAP AGREEMENT" shall mean the Swap Agreement entitled "ISDA Master
Agreement", and all exhibits thereto, dated as of November 24, 1998, between
MLCS and the Borrower, and all "Transactions" and "Confirmations" thereunder.
"MANAGER" shall mean Eaton Vance Management.
"MATURITY DATE" shall mean November 24, 2005 or such earlier date on which
the Loans shall become due in accordance with Section 10.2.
"NET ASSET VALUE" shall be as defined in the Private Placement Memorandum.
"NOTE" shall have the meaning given to such term in Section 2.1.
"OBLIGATIONS" shall mean the due and punctual payment of (i) principal of
and interest on the Loans, all fees and other monetary obligations of the
Borrower to the Lender under this Agreement or the Note and (ii) all payments,
fees and other monetary obligations of the Borrower to MLCS under this Agreement
or the MLCS Swap Agreement.
"OPERATING AGREEMENT" shall mean the Amended and Restated Operating
Agreement of the Borrower dated November 24, 1998.
"PERSON" shall include any individual, company, corporation, firm,
partnership, joint venture, association, organization, trust, state or agency of
a state (in each case, whether or not having separate legal personality).
"PLEDGED SECURITIES" shall mean the Qualifying Assets and the other
securities held in the Securities Account, including, but not limited to, shares
of Belvedere Capital Fund Company LLC and shares of common stock of BRC.
"PORTFOLIO" shall have the meaning given to such term in Section 7.15(c).
"PRIVATE PLACEMENT MEMORANDUM" shall mean the Confidential Private
Placement Memorandum of the Borrower dated August 14, 1998 and Supplement Number
1, dated November 12, 1998.
"QUALIFYING ASSET" shall have the meaning given such term in the Private
Placement Memorandum.
"REPORT" shall have the meaning given to such term in Section 7.11.
"REQUIRED AMOUNT" shall mean the amount of the "Net Market Quotation" (as
hereinafter defined), if such amount is positive; PROVIDED, HOWEVER, that (A)
for so long as the principal amount of the Loan outstanding shall be less than
the greater of (i) $50,000,000 and (ii) 15% of the notional amount of the
Transactions under the MLCS Swap Agreement or (B) if the Commitment shall be
terminated, the Required Amount shall mean an amount equal to the sum of
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(x) 3.7% of the notional amount of the Transactions under the MLCS Swap
Agreement and (y) if positive, the amount of the Net Market Quotation. The "Net
Market Quotation" is the sum of all Market Quotations (both positive and
negative); PROVIDED, that MLCS need not obtain quotations from Reference
Market-makers, but shall determine the Market Quotation on the basis of its
customary method of valuation using mid-market swap rates and a zero coupon
yield curve for the purpose of discounting to the present value. A positive
Market Quotation shall mean that MLCS is exposed to the Borrower, a negative
Market Quotation shall mean the Borrower is exposed to MLCS. Terms used in this
definition and not otherwise defined in this Agreement shall have the meaning
ascribed to them in the MLCS Swap Agreement.
"SECURED PARTIES" shall mean the Lender and MLCS.
"SECURITIES ACCOUNT" shall mean the securities account of the Borrower
established with Custodian subject to the terms and provisions of the Securities
Agreement.
"SECURITIES AGREEMENT" shall mean the Securities Account Agreement among
the Borrower, the Lender, MLCS and the Custodian, in form and substance
satisfactory to the Lender and MLCS.
"SECURITY INTEREST" shall have the meaning given to such term in Section
4.1.
"SHAREHOLDER" shall have the meaning given to such term in the Private
Placement Memorandum.
2. THE LOAN.
2.1. LOANS. The Lender agrees, on the terms and conditions set forth
herein, from and including the date hereof through and including the Commitment
Termination Date to make Loans to the Borrower from time to time in an amount
not to exceed the Commitment less the principal amount of any outstanding Loans;
provided, however, that the minimum amount of any Loan shall be $500,000 (or
such lesser amount as shall equal the available but unused portion of the
Commitment) or such greater amount which is a multiple of $100,000. Subject to
the terms of this Agreement, the Borrower may borrow, repay and reborrow Loans
at any time prior to the Commitment Termination Date. The Loans shall be
evidenced by a promissory note substantially in the form of Exhibit A hereto
(the "Note").
2.2. BORROWING NOTICE. The Borrower shall give the Lender irrevocable
notice (substantially in the form of Exhibit D hereto (a "Notice of Borrowing"))
not later than 10:00 a.m. (New York City time) at least two Business Days before
the proposed borrowing date (the "Borrowing Date") of any Loan specifying (i)
the Borrowing Date of such Loan which shall be a Business Day, (ii) the
principal amount of such Loan and (iii) the initial Interest Period applicable
to such Loan and certifying the matters contained in Section 9.2 hereof. In
addition to such notice, the Borrower shall deliver a Compliance Certificate
substantially in the form of Exhibit E hereto (a "Compliance Certificate") to
the Lender.
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2.3. METHOD OF FUNDING LOANS. The Borrower has provided the Lender with an
instruction letter as to the proceeds of the Loan made on the date hereof. As to
all future Loans, the Lender shall make available to the Borrower on each
Borrowing Date, the Loans specified in the applicable Notice of Borrowing to the
Borrower's account (Account No. 5821-5013, Control Wire, Re: Belcrest Capital
Fund LLC-4931) at Custodian (or to such other account as to which the Borrower
shall instruct the Lender) via Federal Funds wire transfer.
2.4. INTEREST. Interest shall accrue on the unpaid principal amount of each
Loan at the Interest Rate from and including the date of the Loan but excluding
the date of any principal payment whether upon acceleration or otherwise.
Interest accrued on each Loan shall be payable on (i) the last day of the
Interest Period applicable thereto, (ii) in the case of Loans with Interest
Periods in excess of six months, on the date during such Interest Period that
would be the last day of an Interest Period commencing on the same day as the
first day of such Interest Period but having a duration of six months and on any
day on which Loans are repaid whether due to acceleration or otherwise.
Notwithstanding anything in this Agreement to the contrary, the interest rate on
the Loans shall in no event be in excess of the maximum interest rate permitted
by applicable law. All interest shall accrue from day to day and shall be
calculated on the basis of a 360 (three hundred and sixty) day year and the
number of days elapsed.
2.5. DEFAULT INTEREST. So long as an Event of Default shall have occurred
and be continuing (after as well as before judgment), the Borrower shall pay
interest on the unpaid principal amount of all Loans and on any interest, fees
and other amounts payable hereunder, at the times specified in Section 2.4
hereof and on demand at a rate per annum equal (i) in the case of the principal
amount of Loans, the Interest Rate then applicable to such Loans plus 2% per
annum and (ii) in the case of such other amounts, an amount equal to the Base
Rate plus 2% per annum.
2.6. REPAYMENT AND TERMINATION. The Borrower shall repay the outstanding
principal amount of all Loans on the Maturity Date.
2.7. OPTIONAL PREPAYMENTS. The Borrower may from time to time on the last
day of any Interest Period, upon five Business Days prior written notice to the
Lender, which notice shall be irrevocable once given, pay the outstanding
principal amount of the Loans, in whole or in part, without prepayment penalty,
together with accrued interest to the date of such prepayment on the principal
amount prepaid, provided that each partial principal repayment is in a minimum
aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess
thereof.
2.8. MANNER OF PAYMENTS. All payments by the Borrower hereunder and under
the Note shall be made by the Borrower on the date when due without offset or
counterclaim in Dollars in federal or other immediately available funds to
Northern Trust International, New York, New York, A.B.A. No. 026001122, For the
account of the Lender, Account No. 10022220230, or in accordance with the wire
transfer instructions provided by the Lender to the Borrower from time to time.
Any such payment received after 11:00 a.m. New York City time on the date when
due shall be deemed received on the following Business Day.
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2.9. COMMITMENT FEE. The Borrower agrees to pay in arrears to the Lender on
the last Business Day of each March, June, September and December in each year
(commencing on the last Business Day of December 1998) prior to the Commitment
Termination Date and on the Commitment Termination Date, a fee (the "Commitment
Fee") of 1/10 of 1% per annum, computed on the basis of the actual number of
days elapsed over a year of 360 days, on the average daily amount by which the
Commitment exceeds the sum of the principal balance of Loans outstanding during
the preceding period or quarter. Such Commitment Fee shall commence to accrue on
the date on which this Agreement is fully executed and shall cease to accrue on
the Commitment Termination Date.
2.10. REDUCTION OR TERMINATION OF COMMITMENT. The Borrower shall have the
right, upon at least five (5) Business Days' prior written notice to the Lender,
to reduce permanently the Commitment in whole at any time, or in part from time
to time, to an amount not less than the aggregate principal balance of the Loans
then outstanding (after giving effect to any contemporaneous prepayment thereof
in accordance with Section 2.7), without premium or penalty, provided that each
partial reduction of the Commitment shall be in an amount equal to $1,000,000 or
such greater amount which is an integral multiple thereof.
2.11. CHANGE IN CIRCUMSTANCES. (a) In the event that after the date hereof
any change in applicable law or in the official interpretation or administration
thereof (including, without limitation, any request, guideline or policy not
having the force of law) by any authority charged with the administration or
interpretation thereof or, with respect to clause (ii), (iii) or (iv) below any
change in conditions, shall occur which shall:
(i) subject the Lender to, or increase the net amount of, any tax, levy,
impost, duty, charge, fee, deduction or withholding with respect to any Loan for
which the Interest Rate is based upon LIBOR (other than withholding tax imposed
by the United States of America or any political subdivision or taxing authority
thereof or any other tax, levy, impost, duty, charge, fee, deduction or
withholding (x) that is measured with respect to the overall net income of the
Lender, and that is imposed by the United States of America, or by the
jurisdiction in which the Lender is incorporated, or in which the Lender has its
principal office (or any political subdivision or taxing authority thereof or
therein), or (y) that is imposed solely by reason of the Lender failing to make
a declaration of, or otherwise to establish, non-residence, or to make any other
claim for exemption, or otherwise to comply with any certification,
identification, information, documentation or reporting requirements prescribed
under the laws of the relevant jurisdiction, in those cases where a Lender may
properly make such declaration or claim or so establish non-residence or
otherwise comply); or
(ii) change the basis of taxation of any payment to the Lender of principal
or any interest on any Loan for which the Interest Rate is based upon LIBOR
(except as limited in clause (i) above); or
(iii) impose, modify or deem applicable any reserve, deposit or similar
requirement against any assets held by, deposits with or for the account of or
loans or commitments by an office of the Lender with respect to any Loan for
which the interest rate is based upon LIBOR; or
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(iv) impose upon the Lender or the London Interbank Market any other
condition with respect to any Loans for which the interest rate is based upon
LIBOR or this Agreement;
and the result of any of the foregoing shall be to increase the actual cost to
the Lender of making or maintaining any Loan hereunder or to reduce the amount
of any payment (whether of principal, interest or otherwise) received or
receivable by the Lender in connection with any Loan hereunder, or to require
the Lender to make any payment in connection with any Loan hereunder, in each
case by or in an amount which the Lender in its sole judgment shall deem
material, then and in each case the Borrower shall pay to the Lender, as
provided in paragraph (b) below, such amounts as shall be necessary to
compensate the Lender for such cost, reduction or payment.
(b) The Lender shall deliver to the Borrower from time to time, one or more
certificates setting forth the amounts due to the Lender under paragraph (a)
above, the changes as a result of which such amounts are due, the manner of
computing such amounts and the manner of computing the amounts allocable to
Loans hereunder pursuant to paragraph (a) above. Each such certificate shall be
conclusive in the absence of manifest error. The Borrower shall pay to the
Lender the amounts shown as due on any such certificate within ten Business Days
after its receipt of the same. No failure on the part of the Lender to demand
compensation under paragraph (a) above on any one occasion shall constitute a
waiver of its rights to demand compensation on any other occasion. The
protection of this Section shall be available to the Lender regardless of any
possible contention of the invalidity or inapplicability of any law, regulation
or other condition which shall give rise to any demand by the Lender for
compensation thereunder.
3. ESTABLISHMENT OF SECURITIES ACCOUNT; PLEDGE OF COLLATERAL
3.1. ESTABLISHMENT OF THE SECURITIES ACCOUNT. The Borrower shall establish
with Custodian the Securities Account, which shall be known as the "Belcrest
Capital Fund LLC Collateral Account for Merrill Lynch International Bank Limited
and Merrill Lynch Capital Services, Inc.", or such other title acceptable to the
Secured Parties to reflect their interest therein. The Borrower agrees, as a
condition to the Lender's obligation to extend the Loan and MLCS' obligations
under the MLCS Swap Agreement, to place the Pledged Securities in the Securities
Account. The Borrower agrees at all times to maintain the Pledged Securities in
the Securities Account, until the Borrower has satisfied all of the Obligations
in full. The Borrower acknowledges that in establishing and maintaining the
Securities Account, the Custodian is acting as the Secured Parties' agent for
purposes of perfecting the Secured Parties' Security Interest.
3.2. OTHER ACCOUNT PROVISIONS. The Borrower further acknowledges that the
Securities Account shall be subject to the terms and conditions of the
Securities Agreement.
4. PLEDGE AND SECURITY AGREEMENT.
4.1. GRANT OF SECURITY INTEREST. As security for the Obligations, the
Borrower hereby assigns, pledges, grants and conveys to the Secured Parties a
continuing first priority lien and security interest (the "Security Interest")
in the Collateral.
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The Borrower will take all action which either Secured Party requests and
which is reasonably necessary to assure that each of the Secured Parties has a
continuing perfected first priority Security Interest in the Collateral while
this Agreement is in effect. Upon the request of either Secured Party, the
Borrower will promptly execute and deliver to such Secured Party financing
statements conforming to the Uniform Commercial Code in effect in the
Commonwealth of Massachusetts and any other state or jurisdiction deemed
appropriate by such Secured Party, and such other documents as may be required
in order to perfect the Security Interest, all in a form such Secured Party
deems to be acceptable. Upon the request of such Secured Party, the Borrower
also agrees to promptly execute and deliver continuation statements conforming
to the Uniform Commercial Code in effect in the Commonwealth of Massachusetts
and any other state or jurisdiction deemed appropriate by such Secured Party and
in a form such Secured Party deems to be acceptable. If the Borrower fails to
promptly deliver to either Secured Party financing statements or continuation
statements required by such Secured Party, such Secured Party may, to the extent
permitted by law and without limiting its other rights under this Agreement and
the Note, execute and file in the Borrower's name, as the Borrower's
attorney-in-fact, such documents.
If the location of the Borrower's principal executive office changes, the
Borrower will immediately notify both Secured Parties in writing to that effect
and will execute and deliver to the Secured Parties any additional financing
statements or similar documentation the Secured Parties may reasonably request
to assure the continued effectiveness of the Security Interest. Once both
Secured Parties agree that the Borrower has fully and indefeasibly performed the
Obligations, the Security Interest in any Collateral will be terminated, any
such Collateral will be returned to the Borrower and the Secured Parties will,
at the Borrower's expense, execute and deliver to the Borrower such documents as
the Borrower may reasonably request to evidence such termination.
5. SPECIAL AGREEMENTS WITH RESPECT TO PLEDGED SECURITIES.
On a continuing basis, the Borrower covenants with the Secured Parties
that:
5.1. LIQUIDATION OF PLEDGED SECURITIES. (a) If an Event of Default has
occurred and is continuing, either of the Secured Parties shall be entitled to
take market action against any securities held in the Securities Account in
accordance with this Agreement, and where appropriate, the Secured Parties may
execute and file the requisite number of S.E.C. Forms 144 on behalf of the
Borrower.
(b) In the event that upon the occurrence and continuation of an Event of
Default, a Secured Party sells, assigns and delivers or otherwise transfers any
of the Pledged Securities under this Agreement (a "Liquidation"), the Borrower
will cooperate with such Secured Party in taking any and all action that such
Secured Party deems necessary or appropriate to effect or facilitate such
Liquidation. The Borrower agrees that upon the occurrence and continuation of an
Event of Default, a Secured Party may, in its sole and absolute discretion,
sell, or instruct Custodian to sell, all or any part of the Pledged Securities
at private sale in such manner and under such circumstances as such Secured
Party may deem necessary or advisable in order that the sale may be lawfully
conducted. The Borrower acknowledges that the purchaser at such sale may be an
Affiliate of a Secured Party.
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Without limiting the foregoing, a Secured Party may (i) approach and negotiate
with only one or a limited number of potential purchasers, and (ii) restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Pledged Securities for their own account for investment
and not with a view to distribution or resale thereof. In the event that any of
the Pledged Securities are sold at private sale, the Borrower agrees that if the
Pledged Securities are sold for a price which such Secured Party in good faith
believed to be reasonable, then (a) the sale will be deemed to be commercially
reasonable in all respects, (b) the Borrower will not be entitled to credit
against its Obligations in an amount in excess of the purchase price, and (c)
the Secured Parties will not incur any liability or responsibility to the
Borrower in connection therewith, notwithstanding the possibility that a
substantially higher price might have been realized at a public sale.
(c) The Borrower understands and acknowledges that it may incur monetary
liability to the issuer of the Pledged Securities under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in connection with
a sale of the Pledged Securities, whether initiated by it or by a Secured Party
under this Agreement. The Borrower acknowledges that any such liability is
strictly personal to it, and agrees to indemnify and hold the Secured Parties
harmless from and against any and all losses, costs, liabilities or expenses
arising out of or relating to a purchase or sale of any of the Pledged
Securities under Section 16(b) of the 1934 Act at any time whatsoever.
6. REPRESENTATIONS AND WARRANTIES.
On a continuing basis, the Borrower represents and warrants to the Lender
(and to MLCS with respect to Section 6.1, 6.8-6.11, 6.14 and 6.15) that:
6.1. COLLATERAL. (a) Except for the Secured Parties' rights established
under this Agreement, the MLCS Swap Agreement and the Securities Agreement, the
Borrower owns the Collateral (including without limitation the shares of common
stock of BRC) free of any interest or Lien in favor of any third party or any
restriction on transfer other than pursuant to the Operating Agreement or, as to
restricted securities and Qualifying Assets, restrictions on transfer arising
under Federal or state securities laws or by reason of contract. It is
understood that the transfer of Partnership Preference Units (as defined in the
Private Placement Memorandum) will be subject to various restrictions and
limitations set forth in the applicable partnership agreements, and that such
partnership agreements may subject the Units to a right of first refusal or a
right to purchase such Units which may be exercised by the general partners (or
their affiliates) of such partnerships.
(b) The Security Interest is and shall remain a perfected and valid first
priority Lien and security interest upon the Collateral.
6.2. DUE ORGANIZATION. The Borrower is a limited liability company and BRC
is a corporation, and each of them is duly organized and validly existing under
the jurisdiction of its organization and has the power and authority to own its
assets and to conduct the business which it
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conducts. Each of the Borrower and BRC is in good standing under the laws of the
jurisdiction of its organization or formation and is duly qualified to do
business in all jurisdictions in which the nature of its activities requires
such qualification or has made (or will make promptly following the date hereof)
all filings necessary to so qualify.
6.3. POWER AND AUTHORITY; BINDING AGREEMENTS. The Borrower has the full
right, power and authority to make, execute, deliver and perform its obligations
under this Agreement and the execution, delivery and performance of the
documents contemplated by this Agreement and consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary action
on the part of the Borrower. The Agreement and the Notes constitute the legal,
valid and binding obligation of the Borrower, enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
6.4. NO VIOLATION. Neither the execution, delivery or performance by the
Borrower of this Agreement and the related documents, the consummation of the
transaction contemplated by this Agreement, nor compliance by the Borrower with
the provisions of this Agreement will (i) violate any law, regulation, order,
judgment or decree binding it, (ii) violate or conflict with, as applicable, its
certificate of organization, Operating Agreement or other organizational or
governing documents, (iii) conflict with, cause a breach of, constitute a
default under, be cause for the acceleration of the maturity of, or create or
result in the creation or imposition of any Lien, charge or encumbrance (other
than in favor of the Lender) on any of its property under, any agreement,
notice, indenture, instrument or other undertaking to which it is a party.
6.5. NO CONSENTS. No order, consent, license, authorization, recording or
registration is required to authorize or is required in connection with the
execution, delivery and performance by the Borrower or the legality, validity,
binding effect or enforceability of this Agreement upon or against the Borrower,
any documents executed by the Borrower in connection with this Agreement or any
transactions contemplated by this Agreement other than the filing of UCC-1
financing statements, the registration of the shares of Belvedere and the shares
of common stock of BRC in the name of the Custodian or the Custodian's nominee
and the written consent of the Manager of Belvedere to the Borrower's pledge of
the shares of Belvedere.
6.6. NO LITIGATION. There are no actions, suits, litigation or
investigations, pending or threatened, against the Borrower that could (i) have
a material adverse effect on the business, condition (financial or otherwise),
obligations, operations, performance, properties or prospects of the Borrower or
(ii) affect the Borrower's ability to enter into and perform its obligations
under this Agreement or any of the transactions contemplated by this Agreement.
6.7. COMPLIANCE WITH LAWS. The operations of the Borrower are and have been
in compliance in all material respects with all federal, state, local and
foreign laws and regulations applicable to it, including, without limitation,
tax, environmental and health and safety laws and regulations.
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6.8. NO MATERIAL ADVERSE CHANGE. Since the date of the Private Placement
Memorandum, there has been no material adverse change in the business,
condition (financial or otherwise), obligations, operations, performance,
properties or prospects of the Borrower.
6.9. SOLVENCY. After giving effect to the Loans, the MLCS Swap Agreement
and the Borrower's obligations (i) the present fair value of the Borrower's
assets exceeds the total amount of the Borrower's liabilities (including,
without limitation, contingent liabilities), (ii) the Borrower has capital and
assets sufficient to carry on its businesses, (iii) the Borrower is not engaged
and is not about to engage in a business or a transaction for which its
remaining assets are unreasonably small in relation to such business or
transaction and (iv) the Borrower does not intend to incur or believe that it
will incur debts beyond its ability to pay as they become due. The Borrower will
not be rendered insolvent by the execution, delivery and performance of
documents relating to this Agreement or by the consummation of the transactions
contemplated under this Agreement.
6.10. PLACE OF BUSINESS. The address of the principal executive office of
the Borrower as indicated on the signature page hereto is correct.
6.11. FULL DISCLOSURE. Neither this Agreement nor the Private Placement
Memorandum nor any agreement, document, certificate or statement furnished to
either Secured Party by the Borrower in connection with the transactions
contemplated hereby, at the time it was furnished or delivered, contained any
untrue statement of a material fact or omitted to state a material fact, under
the circumstances under which it was made, necessary in order to make the
statements contained herein or therein not misleading.
6.12. SOLE BUSINESS. Neither the Borrower nor BRC is engaged in any
business other than as described in the Private Placement Memorandum.
6.13. INVESTMENT COMPANY ACT. The Borrower is not an investment company
required to be registered under the Investment Company Act of 1940 (the "Act"),
as amended.
6.14. PRIVATE PLACEMENT MEMORANDUM. All transactions contemplated by this
Agreement are consistent in all material respects with the descriptions thereof,
if any, contained in the Private Placement Memorandum and neither the Borrower
nor BRC has entered into any agreements which would otherwise prohibit, restrict
or limit the transactions contemplated by this Agreement or the Private
Placement Memorandum other than agreements as a holder of shares of Belvedere to
be bound by the operating agreement of Belvedere, agreements as a holder of
common stock of BRC to be bound by the Certificate of Incorporation of BRC,
agreements entered into or made in connection with the acquisition of Qualifying
Assets which restrict the transfer of such Qualifying Assets, and agreements
entered into or made in connection with Partnership Preference Units as referred
to in Section 6.1.
6.15. PLEDGED SECURITIES. Any outstanding certificates representing the
Pledged Securities will be physically held in the United States by Custodian or
an authorized subcustodian or agent of the Custodian.
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6.16. BELCREST REALTY CORPORATION. The authorized capitalization of BRC
consists of (i) 7000 shares of common stock $0.01 par value of which 1,550.809
shares are outstanding and owned by the Borrower on the date hereof and (ii)
3000 shares of preferred stock $0.01 par value, of which 2100 shares have been
designated as class A preferred stock with a liquidation preference of $100 per
share all of which are now or promptly after the date hereof to be issued to the
Borrower and donated by the Borrower to charitable organizations as contemplated
by the Private Placement Memorandum. All outstanding shares of common stock of
BRC are owned by the Borrower. BRC intends to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, as amended.
7. AFFIRMATIVE COVENANTS.
Until this Agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will and will cause its subsidiary BRC
to:
7.1. MAINTENANCE OF EXISTENCE. Preserve and maintain its existence and
material rights and franchises.
7.2. COMPLIANCE WITH LAWS. Comply in all material respects, with all
applicable laws, statutes, codes, ordinances, regulations, rules, orders,
awards, judgments, decrees, injunctions, approvals and permits applicable to it.
7.3. PAYMENT OF TAXES. Pay all taxes, assessments and governmental charges
imposed upon it or upon its property and all claims (including, without
limitation, claims for labor, materials, supplies or services) which might, if
unpaid, become a lien upon its property, unless, in each case, the validity or
amount thereof is being contested in good faith by appropriate proceedings and
it has maintained adequate reserves with respect thereto.
7.4. BOOKS AND RECORDS. Maintain or cause to be maintained at all times in
accordance with GAAP (other than as to the valuation of the Pledged Securities
which shall be in accordance with the valuation procedures described in the
Private Placement Memorandum) true and complete books and records of its
financial and business operations.
7.5. AUDIT RIGHTS. Permit any representative of the Secured Parties to
examine the Borrower's, and its consolidated subsidiary's, books and records and
to make copies and take extracts therefrom, and to discuss the Borrower's
affairs, finances and accounts with the Manager of the Borrower and with the
Borrower's independent accountants, all at such reasonable times and as often as
either Secured Party may reasonably request.
7.6. MAINTENANCE OF COLLATERAL. Maintain the Pledged Securities and other
Collateral in the Securities Account; PROVIDED, HOWEVER, that withdrawals,
releases, distributions and transfers of Pledged Securities and other Collateral
may be made in accordance with the terms of the Securities Agreement.
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7.7. NOTICES. Furnish to the Secured Parties: (i) within ten (10) days of
becoming aware of the occurrence of any Default or Event of Default, notice of
the occurrence and nature of such Default and of the steps that are being taken
to cure such Default or Event of Default; and (ii) promptly after (a) the
occurrence thereof, notice of the institution of or any material adverse
development in any action, suit or proceeding or any governmental investigation
or any arbitration, before any court or arbitrator or any governmental authority
(involving in excess of $500,000, or otherwise material) against the Borrower or
any material property of the Borrower, or (b) actual knowledge thereof, notice
of the threat of any such action, suit, proceeding, investigation or
arbitration.
7.8. BANKRUPTCY. Notify the Secured Parties in writing before filing any
petition seeking the protection of any bankruptcy, insolvency or any similar
statutes, and neither the Borrower nor BRC will take any action (or fail to take
any necessary action) which may cause a petition in bankruptcy, insolvency or
any similar law or procedure to be filed against it or Belvedere.
7.9. FINANCIAL AND CREDIT INFORMATION. (a) Notify the Secured Parties
immediately, in writing, of any material change in the Borrower's or BRC's
financial condition which would adversely affect the Borrower's ability to repay
any obligation(s) to either Secured Party according to the terms of this
Agreement, the Note or the MLCS Swap Agreement.
(b) Supply to the Secured Parties such current financial information or
other information as either Secured Party may reasonably request from time to
time.
(c) Permit the Secured Parties to share with any of their Affiliates, or
any Person authorized by the Borrower, for legitimate business purposes, any
information about the Borrower which it may currently possess or obtain in the
future.
(d) Permit each Secured Party to answer any questions about its credit
experience with the Borrower.
(e) Comply with any reasonable requests from either Secured Party for
additional documentation required to be filed or executed by the Borrower from
time to time by applicable law or the policies and procedures of such Secured
Party.
7.10. FINANCIAL STATEMENTS. Furnish the Secured Parties (i) within 60 days
after the end of the first six-month fiscal period of the Borrower and its
consolidated subsidiary, semi-annual unaudited financial statements consisting
of a balance sheet of the Borrower, or its consolidated subsidiary and
statements of operations and cash flows of the Borrower, and its consolidated
subsidiary, for such period, all in reasonable detail and certified by the
Manager of the Borrower, that such statements are correct and fairly present the
financial condition of the Borrower and its consolidated subsidiary, as at the
end of such fiscal period (subject to normal year-end audit adjustments); (ii)
within 90 days after the end of each fiscal year of the Borrower, and its
consolidated subsidiary, annual audited financial statements of the Borrower,
and its consolidated subsidiary, consisting of a balance sheet as of the close
of such fiscal year and related statements of operations and cash flows for such
year, attached to which shall be a report of Deloitte & Touche,
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L.L.P. or such other independent certified public accountants of recognized
standing acceptable to the Secured Parties and which statement shall have been
prepared in accordance with GAAP; (iii) upon receipt by the Borrower, copies of
all financial reports distributed by or on behalf of Belvedere and (iv)
concurrently with such distribution, copies of all financial reports distributed
by or on behalf of the Borrower, and its consolidated subsidiary, to all
Shareholders.
7.11. MONTHLY REPORT. Provide the Secured Parties, within ten Business Days
after the end of each calendar month, a Statement in the form of Exhibit B
hereto (the "Report"). The Secured Parties reserve the right to request such
additional information in connection with the Report and any Pledged Security as
they deem appropriate.
7.12. LIENS. Defend the Collateral (including the Pledged Securities)
against any and all Liens, claims and other impediments howsoever arising, other
than (i) the Lien to the Secured Parties created hereunder and (ii) Liens not
otherwise prohibited under Section 8.2.
7.13. GOVERNMENT APPROVAL. If any further authorizations, approvals,
registrations or filings with any governmental or public regulatory body or
authority of the United States, any state thereof or any other jurisdiction
required for the performance by the Borrower of this Agreement should hereafter
become necessary, obtain or make, or cause to be obtained or made, all such
authorizations, approvals, registrations or filings.
7.14. USE OF PROCEEDS. The Borrower shall use the proceeds of the Loans to
acquire common stock and preferred stock of BRC, to finance the purchase of
Qualifying Assets by BRC and by the Borrower, to finance the cost of qualifying
BRC as a Real Estate Investment Trust, to pay placement fees, selling
commissions and offering, organizational and loan facility expenses of the
Borrower, for short-term liquidity needs and for other general working capital
purposes, including payment of interest and fees hereunder.
7.15. VALUATION COVENANTS. Maintain:
(a) the market value of the total assets of the Borrower, and its
consolidated subsidiary (less the market value of its assets pledged to another
party), at an amount equal to or in excess of 250% of the sum of the Required
Amount plus the outstanding principal balance of the Loans plus accrued and
unpaid interest on the Loans;
(b) the market value of the Borrower's, and its consolidated subsidiary's,
Qualifying Assets at an amount not in excess of 40% of the market value of the
Collateral. (In the event that the market value of the Qualifying Assets
represents more than 40% of the market value of the Collateral, value for that
portion exceeding 40% shall not be given in determining the market value of the
Borrower's total assets for purposes of clause (a) above); and
(c) by reason of its indirect interest in the securities which are directly
held by the Tax-Managed Growth Portfolio (the "Portfolio"), not more than (i) 5%
of the Borrower's, and its consolidated subsidiary's, total assets (taken at
current value) as investments (directly or indirectly) in the securities of any
one issuer (except obligations issued or guaranteed by the U.S. Government,
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its agencies or instrumentalities and except securities of other investment
companies) or (ii) 25% of the Borrower's, and its consolidated subsidiary's,
total assets (taken at current value) as investments (directly or indirectly) in
any one industry (or, with respect to real estate, in any one sector of the real
estate market), but the restrictions contained in this clause (c) shall not
apply to the Borrower's direct investments in (1) Qualifying Assets or (2)
shares of Belvedere or (3) securities issued by BRC or to the Borrower's
indirect investment in shares of the Portfolio (as distinguished from the
underlying securities held by the Portfolio) held through its direct investment
in shares of Belvedere or to BRC's investments in Qualifying Assets. (In the
event that either of the foregoing restrictions contained in this clause (c) are
exceeded, value for that portion of the excess shall not be given in determining
the market value of the Borrower's, and its consolidated subsidiary's, total
assets for purposes of clause (a) above.)
8. NEGATIVE COVENANTS OF THE BORROWER
Until this Agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will not, and it will not allow its
subsidiary BRC to:
8.1. NO INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness, except for (i) Indebtedness of the Borrower under this Agreement
and the Note and the MLCS Swap Agreement, (ii) Indebtedness of the Borrower in
respect of (x) swap, cap or other interest rate or foreign currency hedging
arrangements (in each case, where used for hedging purposes), and (y) options,
financial futures contracts and options on financial futures contracts (in each
case, where used for hedging purposes), (iii) Indebtedness in respect of
purchases of securities on short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities as described in the
Private Placement Memorandum and (iv) overdrafts extended by the Custodian under
the Securities Agreement. Nothing contained in this Section 8.1 shall prohibit
the incurrence of the Required Amount.
8.2. NO LIENS. Create, incur, assume or suffer to exist any Lien on any of
its properties or assets except (i) Liens on assets of the Borrower (but not
BRC) in respect of Indebtedness permitted under Section 8.1, (ii) Liens for
taxes, assessments or similar charges incurred in the ordinary course of
business which are not delinquent or which are being contested in good faith and
by appropriate proceedings diligently conducted, and for which adequate reserves
have been set aside in accordance with GAAP, provided that enforcement of such
Liens is stayed pending such contest, (iii) statutory Liens arising by operation
of law such as mechanics, materials, carriers', warehouse liens, (A) which occur
in the ordinary course of business (B) which secure normal trade debt which is
not yet due and payable, (C) which do not secure Indebtedness for borrowed
money, (D) which are being contested in good faith and by appropriate
proceedings diligently conducted, and (E) for which adequate reserves have been
set aside in accordance with GAAP, provided that enforcement of such Liens is
stayed pending such contest, (iv) Liens arising out of judgments or decrees
which are being contested in good faith and by appropriate proceedings
diligently conducted, and for which adequate reserves have been set aside in
accordance with GAAP, provided that enforcement thereof is stayed pending such
contest, (v) Liens of the Custodian under the Securities Agreement and (vi)
Liens created pursuant to this Agreement, the MLCS Swap Agreement and the
Securities Agreement.
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8.3. NO MERGERS, ETC. Enter into any transaction of merger or consolidation
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution).
8.4. NO NEW BUSINESS. Engage in any business other than as described in the
Private Placement Memorandum.
8.5. TRADING. Conduct any sale of any Qualifying Assets (other than (i) in
connection with a distribution or redemption not otherwise prohibited under this
Agreement or (ii) when the proceeds of such sale will be utilized to purchase
other Qualifying Assets which are comparable to investment grade Qualifying
Assets) without providing three Business Days' prior notice to the Lender.
8.6. DISTRIBUTIONS. Make any distributions or honor any requests for
redemptions if such distributions or withdrawals, if made, would result in the
occurrence of a Default or an Event of Default of the type specified in Sections
10.1(a)(i), 10.1(b), 10.1(i) or 10.1(j).
8.7. AMENDMENTS. Amend or modify, or permit to be amended or modified the
Private Placement Memorandum or Operating Agreement of the Borrower, or the
Certificate of Incorporation or By-Laws of BRC, without the prior written
consent of the Secured Parties, which consent shall not be unreasonably
withheld, except that the Borrower or BRC may make ministerial or other
non-material changes, changes required to comply with statutory or regulatory
requirements or revisions or changes reflecting matters, events or circumstances
which should be described in the Private Placement Memorandum, provided,
however, that the Borrower or BRC shall promptly notify the Secured Parties of
such changes.
8.8. CUSTODIAN. Terminate the services, or accept the resignation of the
Manager of the Borrower or the Custodian without the prior written consent of
the Secured Parties.
8.9 LIMITATION ON RESTRICTION ON SUBSIDIARY DIVIDENDS AND OTHER
DISTRIBUTIONS, ETC. Create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of BRC to (a)
pay dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower other than such
restrictions as are set forth in BRC's Certificate of Incorporation and
Certificate of Designation of class A preferred stock, or pay any indebtedness
owed to the Borrower, (b) make loans or advances to the Borrower, or (c)
transfer any of its properties or assets to the Borrower.
9. CONDITIONS PRECEDENT TO CLOSING
9.1. CONDITIONS PRECEDENT TO INITIAL LOAN. It shall be a condition
precedent to the effectiveness of this Agreement and the making of the initial
Loan hereunder that the Lender shall have received the following, in form and
substance satisfactory to the Lender in its sole discretion:
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(a) Evidence satisfactory to the Lender that the Borrower is duly
authorized to enter into this Agreement and all transactions contemplated hereby
and to execute and deliver this Agreement, the Notes and all documents to be
executed in connection therewith;
(b) A certificate of the Manager of the Borrower attesting, among other
things, (i) that true, correct and complete copies of the Borrower's certificate
of organization and Operating Agreement, together with all amendments thereto,
have been delivered to the Lender, (ii) that provisions of the Operating
Agreement authorize the Manager to authorize the execution, delivery and
performance in accordance with their terms of the Agreement, the Notes and the
other documents and transactions contemplated thereby and the borrowings
hereunder and the Manager has so authorized and such authorization is in full
force and effect, (iii) that all representations and warranties made in
connection with this Agreement are true, accurate and correct in all respects,
(iv) to the incumbency of the Manager, or any other Person executing this
Agreement, the Notes and any related documents on behalf of the Borrower, and
(v) attached thereto is a (i) a true, correct and complete copy of certificate
of organization filed in the Borrower's jurisdiction of organization and (ii) a
true, correct and complete copy of the certificate of incorporation, certificate
of designation of class A preferred stock, and by-laws of BRC.
(c) A certificate of good standing from the Borrower's and BRC's
jurisdiction of organization;
(d) The Securities Agreement duly executed on behalf of the Borrower and
the Custodian;
(e) Written evidence that the Securities Account has been established and
that the Manager of Belvedere has consented to the pledge of the shares
Belvedere;
(f) Evidence that the aggregate market value of the Collateral (as of the
date of the initial Loan and as calculated in accordance with the determination
of Net Asset Value) is equal to or exceeds 250% of the sum of the Required
Amount plus the principal amount of the initial Loan;
(g) the UCC-1 Financing Statements duly signed on behalf of the Borrower;
(h) Instructions from the Borrower in connection with the payment from the
proceeds of the initial Loan of all placement fees, selling commissions and cost
and fees (including legal fees incurred by the Lender as to which a statement
has been delivered to the Borrower) which are due and payable as of the date
hereof;
(i) The favorable opinion of Counsel to the Borrower covering matters of
Massachusetts and United States law, in the form of Exhibit C hereto;
(j) the Note, dated as of the date hereof, duly executed on behalf of the
Borrower;
(k) the Closing (as defined in the Private Placement Memorandum) shall
occur contemporaneously with the making of the initial Loan hereunder;
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(l) (i) the MLCS Swap Agreement and all Exhibits thereto, duly executed on
behalf of the Borrower and (ii) evidence that the Borrower has executed the
"Confirmations" relating to the MLCS Swap Agreement; and
(m) the Lender shall have received such other documents as the Lender may
reasonably require.
9.2. CONDITIONS PRECEDENT TO ALL LOANS. It shall be a condition precedent
to all Loans (including the initial Loan hereunder) that on the date of such
Loan the following statements shall be true (and each request for a Loan shall
constitute a representation and warranty by the Borrower that on the date of
such Loan that such statements are true):
(a) After giving effect to such Loan, the total of all Loans outstanding
will not exceed the Commitment;
(b) The representations and warranties contained in Article 6 are true and
correct on and as of the date of such Loan, except to the extent such
representations and warranties specifically relate to an earlier date.
(c) No event has occurred or is continuing or would result from the making
of such Loan which would constitute a Default or an Event of Default; and
(d) The Borrower has delivered to the Lender the Notice of Borrowing and
Compliance Certificate required pursuant to Section 2.2 hereof.
In addition, it shall be a condition precedent to all Loans (including the
initial Loan) that after giving effect to such Loan, the aggregate market value
of the Collateral shall be equal to or exceed 250% of the sum of the Required
Amount plus the principal amount of the Loans outstanding together with accrued
and unpaid interest thereon plus any other amounts due and owing under this
Agreement (in each case, as determined on the most recent date for which the
Borrower calculates its aggregate Net Asset Value (but in no event earlier than
ten (10) Business Days prior to the making of such Loan) and as calculated in
accordance with the determination of such Net Asset Value).
10. DEFAULTS; REMEDIES
10.1. EVENTS OF DEFAULT. An event of default ("Event of Default") will
occur under this Agreement and the Note if:
(a) the Borrower fails (i) to make any payment when it is due as required
by this Agreement and such default continues unremedied, in the case of payments
of any amounts other than principal, for five days after such amount becomes due
or (ii) to observe or perform any
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covenant or agreement contained in Article 8 of this Agreement or Article 4 of
the Securities Agreement or (iii) to observe or perform any other covenant or
agreement contained in this Agreement and such default continues unremedied for
30 days;
(b) the aggregate market value of the Collateral (as calculated in
accordance with the determination of aggregate Net Asset Value) shall be less
than 250% of the sum of the Required Amount plus the principal amount of the
Loans outstanding together with accrued and unpaid interest thereon plus any
other amounts due and owing under this Agreement;
(c) the Borrower makes, or the Lender discovers that the Borrower has made,
a material misrepresentation in connection with this Agreement, the Notes or the
Loans;
(d) default shall be made (and not cured within any applicable grace
period) with respect to the payment of any Indebtedness or other obligation of
the Borrower, the outstanding amount of which exceeds $1,000,000 or a default
shall have occurred under the MLCS Swap Agreement;
(e) (i) an attachment is levied against all or any portion of the
Securities Account or (ii) Custodian shall have breached any provision of the
Securities Agreement;
(f) either Secured Party reasonably determines that the Security Interest
(in whole or in part) hereby created is not in full force and effect or does not
have the priority stated herein;
(g) either Secured Party reasonably determines that it is or will become
unlawful or contrary to any directive, regulation or the like (whether or not
having the force of law) of any governmental or other regulatory body or
authority for the Borrower or the Lender to carry out all or any of its
obligations hereunder;
(h) final judgment for the payment of money in excess of $1,000,000 shall
be rendered against the Borrower or BRC and within thirty (30) days from the
entry of judgment shall not have been discharged or stayed pending appeal or
shall not have been discharged within thirty (30) days from the entry of a final
order of affirmance or appeal;
(i) any step is taken or legal proceeding started by any Person in the
bankruptcy of the Borrower or BRC or for the appointment of a receiver,
administrator, trustee or similar officer of the Borrower or BRC or of any or
all of the revenues and assets of the Borrower or BRC or the winding-up,
administration, dissolution or reorganization of the Borrower or BRC;
(j) the Borrower or BRC is insolvent, is unable to pay its debts as they
fall due, stops, suspends or threatens to stop or suspend payment of all or a
material part of its debts, begins negotiations or takes any proceeding or other
step with a view to readjustment, rescheduling or deferral of all of its
indebtedness or any part of its indebtedness which it would or might otherwise
be unable to pay when due or proposes or makes a general assignment or an
arrangement or composition with or for the benefit of the creditors;
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(k) the Borrower is subject to dissolution or termination as the result of
(i) a vote to dissolve by the Shareholders, (ii) the election by Manager to
terminate the operations of the Borrower or (iii) the expulsion, bankruptcy or
dissolution of a Shareholder, unless within 90 days thereafter, the Shareholders
holding at least a majority of the interests in the Borrower vote to continue
the operations of the Borrower; or
(l) the ratio of Belvedere's total assets to total liabilities (excluding
the amount of any Shares submitted for redemption but not yet redeemed in the
ordinary course of business) shall at any time be less than 10:1.
10.2. REMEDIES. (a) Upon the occurrence and during the continuation of an
Event of Default, the Lender may, without prejudice to any other right or remedy
of the Lender, at law, by contract or otherwise, by notice to the Borrower
declare all Loans, accrued interest thereon and any other sum then payable
hereunder to be immediately due and payable by the Borrower to the Lender
whereupon they shall become so due and payable, and/or declare the Commitment to
be terminated, whereupon it shall so terminate. If an Event of Default specified
in clause (i) above shall have occurred, the Commitment shall automatically
terminate and the Note shall automatically become due and payable, both as to
interest and principal, without presentment, demand, protest or other notice of
any kind. Upon the occurrence and continuation of an Event of Default, the
Lender may to the extent permitted by applicable law, also set-off, against any
amount owing to it under this Agreement and the Note, any securities, cash or
other property of the Borrower in the Lender's possession.
(b) Upon the occurrence and continuation of an Event of Default, either
Secured Party may, at its option, instruct Custodian to cancel any open orders
and close any and all outstanding financial contracts referred to in
subparagraph (a)(iii) of the definition of Indebtedness, transfer any or all of
the Pledged Securities to such Secured Party or its designee, transfer the whole
or any part of the Collateral into its name or the name of its nominee or to
notify the obligors on any Collateral to make payment to the Secured Parties or
their nominee of any amounts due thereon and to take control or grant its
nominee the right to take control of any proceeds of the Collateral, liquidate
the Pledged Securities or other Collateral, withdraw and/or sell any such
Pledged Securities or other Collateral and apply any such Collateral as well as
the proceeds of any such Pledged Securities or other Collateral to all unpaid
Obligations in such order as the Lender defines in its sole discretion. The
Borrower will be responsible for any decrease in the value of the Collateral
occurring prior to liquidation. Upon the occurrence and continuation of an Event
of Default, the Secured Party may also set-off, against any amount owing to it
under this Agreement, the Note or the MLCS Swap Agreement, any securities, cash
or other property of the Borrower in such Secured Party's possession, directly
or through Custodian as agent for such Secured Party.
(c) Either Secured Party may exercise any or all of the rights contained in
this Section without further demand for additional Collateral, or notice of sale
or purchase, or other notice or advertisement. Any sales or purchases made
pursuant to this Section may be made at such Secured Party's discretion on any
exchange or other market where such business is usually transacted, or at public
auction or private sale, and such Secured Party or its agent or any Affiliate of
either Secured Party or its agent may be the purchaser for such Secured Party or
its agent or such
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Affiliate's or its agent's own account. It is understood that the giving of any
prior demand or call or prior notice of the time and place of such sale or
purchase by such Secured Party or its agent will not be considered a waiver of
such Secured Party's right to sell or buy without any such demand, call or
notice as provided in this Agreement.
(d) In addition to the Secured Parties' rights and remedies described in
this Agreement, the Secured Parties have the right to exercise any one or more
of the rights and remedies of a secured creditor under the Uniform Commercial
Code in effect in the State of New York. All the rights and remedies which are
available to the Secured Parties under this Agreement are cumulative and are in
addition to any and all other rights and remedies which are otherwise available
to the Secured Parties either at law, equity or otherwise. The Secured Parties
may exercise any one or more of such rights and remedies simultaneously or
successively.
11. MISCELLANEOUS
11.1. EXPENSES. Whether or not the transactions hereby contemplated shall
be consummated, the Borrower agrees to pay all reasonable expenses incurred by
the Lender in connection with, or growing out of, the negotiation, preparation,
execution, delivery, waiver, modification or enforcement and administration of
this Agreement (including any amendment hereto) and any other documentation
contemplated hereby, the Notes and the Collateral (including the Pledged
Securities), including, but not limited to, the reasonable fees and
disbursements of any counsel for the Lender.
11.2. COST OF COLLECTION. If the Borrower fails to make any payment under
this Agreement as and when required, the Borrower must pay, to the extent
permitted by applicable law, Secured Parties' court and collection costs,
including legal fees, any costs incurred in the disposition of the Collateral,
and, if the Loan is referred for collection to any attorney not employed by the
Lender or one of its affiliates, the Lender's reasonable attorney fees.
11.3. INDEMNITIES. The Borrower shall on demand indemnify such of the
Secured Parties to the extent such Secured Party has sustained or suffered:
(i) Any increased cost in maintaining the Commitment, all or any part of
any Loan or any other amount outstanding under this Agreement or any reduction
in the effective return to the Lender under this Agreement or in the rate of
overall return on its capital below that which it would have been able to
achieve but for its entering into or giving effect to the Agreement, in each
case, which is sustained or incurred directly or indirectly as a consequence of,
or of compliance with, any change after the date hereof in any law, regulation,
guideline, order or any directive or the like (whether or not having the force
of law) of any governmental or other regulatory body or authority including any
law, regulation, directive or the like affecting the manner in which the Lender
allocates capital resources to its obligations under this Agreement or any
interpretation by any such governmental or regulatory body or authority;
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<PAGE>
(ii) Any funding and any other cost, expense or liability (including loss
of profit, legal fees and taxes) sustained or incurred by either Secured Party
(1) to render this Agreement (including the Security Interest created by this
Agreement) enforceable, (2) in connection with protecting or enforcing the
Secured Parties' rights under this Agreement and/or any amendment thereto, (3)
as a result of the occurrence or continuance of any Default, or (4) as a result
of the receipt or recovery by the Lender of all or any part of a Loan (other
than a Loan interest on which is calculated by reference to Base Rate) or an
overdue sum otherwise than on the last day of an Interest Period applicable to
that Loan;
(iii) Any stamp, documentary, registration or similar tax payable in
connection with the entry into, registration, performance, enforcement or
admissibility in evidence of the Agreement and/or any such amendment, supplement
or waiver, promptly and in any event before any interest or penalty becomes
payable, together with any liability with respect to or resulting from any delay
in paying or omission to pay any such tax;
(iv) Any claims, demands, losses, judgments, damages and liabilities
(including liabilities for penalties) incurred by such Secured Party and/or its
directors, officers, employees and agents (each an "Indemnified Party") as a
result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not such Secured Party
is a party thereto) related to the entering into and/or the performance of this
Agreement, or the use of the proceeds of any Loan hereunder or the consummation
of any other transaction contemplated by this Agreement, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses of an
Indemnified Party to the extent incurred (i) by reason of the gross negligence
or willful misconduct of such Indemnified Party or (ii) as a result of any
dispute between Indemnified Parties or any conflicting instructions given to the
Borrower by Indemnified Parties); and
(v) Any claims, demands, losses, judgments, damages and liabilities
(including liabilities for penalties) incurred by an Indemnified Party as a
result of, or arising out of, or in any way related to, or by reason of, any
loss incurred by any Shareholder whether as a result of an adverse tax situation
or otherwise, arising from or in any way related to any act or failure to act by
either Secured Party in connection with the Collateral or this Agreement.
11.4. DELAY IN ENFORCEMENT; NO WAIVER. The Secured Parties or either of
them can choose to delay or not to enforce any of their rights under this
Agreement without losing such rights or in any way affecting the ability of the
other Secured Party to exercise such rights. If either of the Secured Parties
chooses not to exercise or enforce (or is prevented from exercising or
enforcing) any of such rights, the Borrower agrees that such Secured Party is
not waiving the right to enforce such rights at a later time or any of its other
rights, and that the other Secured Party may, nevertheless, proceed to
independently exercise or enforce any or all of such rights as it may deem
appropriate. Any waiver of the Secured Parties' rights under this Agreement must
be in writing.
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<PAGE>
11.5. STATEMENTS AND NOTICES. Statements and notices will be sent to the
address for the Borrower indicated on the signature page hereto, unless the
Borrower notifies the Lender in writing of a change in address. The Borrower
agrees to provide the Lender with 30 Business Days' prior written notice of any
change of address or name. The Borrower agrees to send correspondence to (i) the
Lender at the address for the Lender indicated on the signature page or as
otherwise provided by the Lender from time to time with a copy to the Lender's
Representative Office located at 65 East 55th Street, 29th Floor, New York, New
York 10022, Attention: G. Frederick Reinhardt, telephone no.: 212- 610-2041,
telecopier no.: 212-610-2080 and (ii) as set forth in the MLCS Swap Agreement.
11.6. WAIVERS. To the extent permitted by applicable law, the Borrower
waives the Borrower's rights to require the Lender, (a) to demand payments of
amounts due (known as "presentment"); (b) to give notice that amounts due have
not been paid (known as "notice of dishonor"); and (c) to obtain an official
certification of non-payment (known as "protest").
11.7. NON-RECOURSE. Each Secured Party hereby agrees for the benefit of
each and every Shareholder of the Borrower, the Manager of the Borrower, each
employee, officer and trustee of the Manager and of the Borrower, and any
successor, assignee, heir, estate, administrator or personal representative of
any such person (a "Non-Recourse Person") that: (a) no Non-Recourse Person shall
have any personal liability for any obligation of the Borrower under this
Agreement or the Note or the Securities Agreement, the MLCS Swap Agreement or
any other instrument or document delivered pursuant hereto or thereto; (b) no
claim against any Non-Recourse Person may be made for any obligation of the
Borrower under this Agreement or the Note or the Securities Agreement or any
other instrument or document delivered pursuant hereto or thereto, whether for
payment of principal of, or interest on, the Loans or for any fees, costs,
expenses or other amounts payable by the Borrower hereunder or thereunder, or
otherwise; and (c) the obligations of the Borrower under this Agreement, the
Note, the Securities Agreement or the MLCS Swap Agreement or other document or
instrument delivered pursuant hereto or thereto are enforceable solely against
the Borrower and the Borrower's properties and assets. Nothing contained in this
Section shall be construed as limiting the Secured Parties' rights against the
Custodian in its capacity as custodian and account carrier under the Securities
Agreement.
11.8. FURTHER ASSURANCES. The Borrower agrees that upon the request of
either Secured Party, it shall execute and/or deliver any additional agreements,
documents and instruments as may be reasonably requested by such Secured Party
from time to time, including, without limitation, opinions of counsel with
respect to the continuing authority of the Borrower to perform its obligations
under this Agreement (which counsel shall be satisfactory to the Secured Parties
in their sole discretion), which agreements, documents or instruments shall be
satisfactory to the Secured Parties in their sole discretion.
11.9. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of all the parties
to this Agreement. Either Secured Party may assign at its sole option all or
part of its rights, obligations and remedies under this Agreement. Any such
assignee of such rights and obligations shall be entitled to the full benefit of
this Agreement to the same extent as if it were an original party in respect of
the rights or
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<PAGE>
obligations assigned or transferred to it. Either Secured Party may disclose to
a potential assignee (or any other Person who has entered or proposes to enter
into contractual arrangements with the Lender in relation to or concerning this
Agreement) such information about the Borrower, and this Agreement as it may
deem appropriate. The Borrower may not assign its rights or obligations under
this Agreement.
(b) The Lender may grant participations in all or any part of its Loans and
its Commitment to one or more commercial banks, provided that (i) the Lender's
obligations under this Agreement shall remain unchanged, (ii) the Lender shall
remain solely responsible to the Borrower for the performance of such
obligations, (iii) the Borrower shall continue to deal solely and directly with
the Lender in connection with the Lender's rights and obligations under this
Agreement, (iv) no sub-participations shall be permitted and (v) the voting
rights of any holder of any participation shall be limited to decisions that
only do any of the following: (A) subject the participant to any additional
obligation, (B) reduce the principal of, or interest on the Loans or any fees or
other amounts payable hereunder, (C) postpone the Commitment Termination Date,
or the date fixed for payment of interest on the loans or the Commitment Fee
payable hereunder.
(c) If any participation made pursuant to subsection (b) shall be made to
any Person that is not a United States Person as defined in Section 7701(a)(30)
of the Internal Revenue Code of 1986, such Person shall furnish to the Lender
such forms as may be specified by the Internal Revenue Service to evidence such
Person's complete exemption from (or entitlement to a reduced rate for) U.S.
withholding taxes with respect to all payments with respect to such
participation.
11.10. GOVERNING LAW AND JURISDICTION. (A) THIS AGREEMENT AND THE NOTES
HAVE BEEN EXECUTED AND DELIVERED BY THE BORROWER IN THE STATE OF NEW YORK AND IN
ALL RESPECTS SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH
STATE.
(B) THE BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF
THE STATE COURTS OF THE STATE OF NEW YORK AND TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF
ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT
OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS OR ASSIGNS.
THE BORROWER, TO THE EXTENT PERMITTED BY APPLICABLE LAW, (A) HEREBY WAIVES AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE
JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE
FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THIS AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED
IN OR BY SUCH
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<PAGE>
COURT, AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY OFFSET OR COUNTERCLAIM, EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY.
THE BORROWER HEREBY CONSENTS TO THE SERVICE OF PROCESS BY MAIL AT ITS NOTICE
ADDRESS SET FORTH IN SECTION 11.5. THE BORROWER AGREES THAT ITS SUBMISSION TO
JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF THE SECURED PARTIES. FINAL JUDGMENT AGAINST THE BORROWER IN ANY SUCH
SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR
TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF
THE INDEBTEDNESS OR LIABILITY OF THE BORROWER OR (Y) IN ANY OTHER MANNER
PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED,
HOWEVER, THAT EACH SECURED PARTY MAY AT ITS OPTION BRING SUIT OR INSTITUTE OTHER
JUDICIAL PROCEEDINGS AGAINST THE BORROWER OR ANY OF ITS ASSETS IN ANY STATE OR
FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE THE BORROWER
OR SUCH ASSETS MAY BE FOUND.
11.11. EFFECTIVENESS. The Borrower hereby acknowledges that (i) this
Agreement shall become effective with respect to Lender only at such time as the
Lender has accepted this Agreement in London and the Lender shall have no
liability or obligation hereunder until such time, (ii) the Lender may execute
this Agreement by telecopy and provide executed originals to the Borrower, and
(iii) the Loans will be made in England.
11.12. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE NOTES OR THE SUBJECT MATTER HEREOF OR THEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
TORT OR OTHERWISE. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE
SECURED PARTIES THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH THE SECURED PARTIES HAVE RELIED, ARE RELYING AND WILL RELY
IN ENTERING INTO THIS AGREEMENT, THE NOTES, THE MLCS SWAP AGREEMENT AND ANY
OTHER DOCUMENT RELATED THERETO. EACH SECURED PARTY MAY FILE AN ORIGINAL
COUNTERPART OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE BORROWER TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
11.13. AMENDMENTS. Any amendment or other modification of this Agreement
shall not be effective unless and until signed by each of the parties hereto so
long as the Obligations of the Borrower to the Lender remain outstanding.
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<PAGE>
11.14. HEADINGS. The heading of each provision of this Agreement is for
descriptive purposes only and shall not be deemed to modify or qualify any of
the rights or obligations described in each such provision.
11.15. SEVERABILITY. If any provision of this Agreement is held to be
invalid, illegal, void or unenforceable, by reason of any law, rule,
administrative order or judicial or arbitral decision, such decision shall not
affect the validity of the remaining provisions of this Agreement.
11.16. ENTIRE AGREEMENT. This Agreement and the Securities Agreement
constitute the entire agreement between Borrower and the Lender and supersede
any and all prior agreements (whether written or oral).
11.17. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute one and the same instrument.
11.18. CONFIDENTIALITY. The Lender agrees to keep confidential any written
or oral information (a) provided to it by or on behalf of the Borrower pursuant
to or in connection with this Agreement or (b) obtained by the Lender based on a
review of the books and records of the Borrower; PROVIDED that nothing herein
shall prevent the Lender from disclosing any such information (i) to any
assignee, transferee, prospective assignee or prospective transferee which
agrees to comply with the provisions of this Section, (ii) to its affiliates,
employees, directors, agents, attorneys, accountants and other professional
advisors, (iii) upon the request or demand of any governmental or other
regulatory body or authority, (iv) in response to any order of any court or
other governmental or other regulatory body or authority or as may otherwise be
required pursuant to any present or future law or regulation or any directive or
the like (whether or not having the force of law) of any governmental or other
regulatory body or authority, (v) which has been publicly disclosed other than
in breach of this Section, or (vi) in connection with the exercise of any remedy
hereunder.
11.19. Survival. The Borrower hereby acknowledges that the
Security Interest created hereby is for the benefit of the Secured Parties. To
the extent that the Loans have been indefeasibly paid, the Commitment
terminated, and all other Obligations of the Borrower to the Lender have been
satisfied (as determined by the Lender in its sole discretion) while the MLCS
Swap Agreement remains effective, then MLCS or its designee shall have or
continue to have all rights hereunder as a Secured Party and all provisions of
this Agreement relating in any manner to such rights shall survive the
satisfaction of the Borrower's Obligations to the Lender. At such time, MLCS
shall be entitled to exercise or refrain from exercising any such rights,
without regard to the satisfaction of the Borrower's Obligations to the Lender.
To the extent that all Obligations of the
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Borrower to MLCS have been satisfied (as determined by MLCS in its sole
discretion) while the Borrower's Obligations to the Lender remain outstanding,
the Lender shall have or continue to have all rights hereunder as a Secured
Party and all provisions of this Agreement relating in any manner to such rights
shall survive the satisfaction of the Borrower's Obligations to MLCS. At such
time, the Lender shall be entitled to exercise or refrain from exercising any
such rights, without regard to the satisfaction of the Borrower's Obligation to
MLCS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by its authorized officer as of the day and year first written
above.
BELCREST CAPITAL FUND LLC
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
---------------------------
Name: Thomas E. Faust, Jr.
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: (617) 482-8260
Telecopier No.: (617) 338-8054
The Lender is a member of The Securities and Futures Authority Limited and
operates a Client Complaints Procedure. If for any reason the Borrower should
have cause for concern or complaint, the Borrower should contact the Manager,
PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL BANK LIMITED
BY: /s/ Jennifer Bereska
-----------------------
Name: Jennifer Bereska
Title: Associate Director
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.:
Telecopier No.:
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<PAGE>
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ Roger A. Baum
--------------------
Name: Roger A. Baum
Title: Authorized Signatory
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower
22nd Floor
250 Vessey Street
New York, New York
10281-1322
Telephone No.:
Telecopier No.:
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<PAGE>
AMENDMENT NO. 1 dated as of February 23, 1999 to the
Loan and Security Agreement dated as of November 24, 1998
(as heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELCREST
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
----------------------
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase
in the Commitment to $400,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) The definition of Commitment appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"`COMMITMENT' shall mean four hundred million dollars ($400,000,000)
or such lesser amount if reduced pursuant to Section 2.10."
SECTION 2. Conditions to Effectiveness. This Amendment is subject to
the satisfaction in full of the following conditions (the first date on which
all such conditions have been satisfied being herein called the "Effective
Date"):
(A) the Lender shall have received counterparts of this Amendment
which, when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and
substance satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Account Agreement remains in full force and
effect;
<PAGE>
(C) the Lender shall have received a promissory note in the form of
Exhibit A to the Loan Agreement in the amount of $400,000,000 (a "New Note")
which New Note shall replace the Note currently held by the Lender and shall be
deemed the Note for purposes of the Loan Agreement and the Lender shall return
the existing Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of
Counsel to the Borrower, dated the Effective Date, addressed to the Lender, to
the effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of
the Borrower, dated the Effective Date and certifying that (1) the provisions of
the Operating Agreement authorize the Manager to authorize the execution,
delivery and performance in accordance with their terms of this Amendment, the
New Note and the other documents and transactions contemplated by this Amendment
and the borrowings under the Note and that the Manager has so authorized and
such authorization is in full force and effect and (2) neither the certificate
of organization nor the Operating Agreement of the Borrower have been amended
since November 24, 1998 and (ii) such other documents as the Lender or Morgan,
Lewis & Bockius LLP, counsel for the Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants that:
(A) the representations and warranties contained in the Loan Agreement
are true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions
set forth in the Loan Agreement and, after giving effect hereto, no Default or
Event of Default has occurred and is continuing.
SECTION 4. Full Force and Effect. Except as expressly amended hereby,
the Loan Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Loan Agreement, the
terms "Agreement", "this Agreement"
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<PAGE>
"herein", "hereafter", "hereto", "hereof", and words of similar import, shall,
unless the context otherwise requires, mean the Loan Agreement as amended by
this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed as of the date first written above.
BELCREST CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
-------------------------
Name: Thomas E. Faust
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.: 617-482-3836
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<PAGE>
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
--------------------
Name: John Mulholland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.: 212-449-1788
The Lender is a member of The Securities and Futures Authority Limited
and operates a Client Complaints Procedure. If for any reason the Borrower
should have cause for concern or complaint, the Borrower should contact the
Manager, PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Alan Stern
---------------
Executed in London, Name: Alan Stern
England on ________, 1999 Title: Chief Credit Officer
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.:
Telecopier No.:
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G. F. Reinhardt
--------------------
Name: G. F. Reinhardt
Title: Vice President
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<PAGE>
AMENDMENT NO. 2 dated as of April 28, 1999 to the Loan
and Security Agreement dated as of November 24, 1998 (as
heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELCREST
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
----------------------
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase
in the Commitment to $600,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) The definition of Commitment appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"`COMMITMENT' shall mean six hundred million dollars ($600,000,000) or
such lesser amount if reduced pursuant to Section 2.10."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to
the satisfaction in full of the following conditions (the first date on which
all such conditions have been satisfied being herein called the "Effective
Date"):
(A) the Lender shall have received counterparts of this Amendment
which, when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and
substance satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Account Agreement remains in full force and
effect;
<PAGE>
(C) the Lender shall have received a promissory note in the form of
Exhibit A to the Loan Agreement in the amount of $600,000,000 (a "New Note")
which New Note shall replace the Note currently held by the Lender and shall be
deemed the Note for purposes of the Loan Agreement and the Lender shall return
the existing Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of
Counsel to the Borrower, dated the Effective Date, addressed to the Lender, to
the effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of
the Borrower, dated the Effective Date and certifying that (1) the provisions of
the Operating Agreement authorize the Manager to authorize the execution,
delivery and performance in accordance with their terms of this Amendment, the
New Note and the other documents and transactions contemplated by this Amendment
and the borrowings under the Note and that the Manager has so authorized and
such authorization is in full force and effect and (2) neither the certificate
of organization nor the Operating Agreement of the Borrower have been amended
since November 24, 1998 and (ii) such other documents as the Lender or Morgan,
Lewis & Bockius LLP, counsel for the Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. Representations and Warranties. The Borrower hereby
represents and warrants that:
(A) the representations and warranties contained in the Loan Agreement
are true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions
set forth in the Loan Agreement and, after giving effect hereto, no Default or
Event of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby,
the Loan Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Loan Agreement, the
terms "Agreement", "this Agreement"
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<PAGE>
"herein", "hereafter", "hereto", "hereof", and words of similar import, shall,
unless the context otherwise requires, mean the Loan Agreement as amended by
this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 2
to be duly executed as of the date first written above.
BELCREST CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
-------------------------
Name: Thomas E. Faust
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.: 617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
--------------------
Name: John Mulholland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.: 212-449-1788
-4-
<PAGE>
The Lender is a member of The Securities and Futures Authority Limited
and operates a Client Complaints Procedure. If for any reason the Borrower
should have cause for concern or complaint, the Borrower should contact the
Manager, PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Jennifer A. Bereska
-------------------------
Executed in London, Name: Jennifer A. Bereska
England on ________, 1999 Title: Associate Director
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.: 011-44-171-808-5289
Telecopier No.:011-44-171-808-5312
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G. F. Reinhardt
--------------------
Name: G. F. Reinhardt
Title: Vice President
Address: 65 East 55th Street
29th Floor
New York, New York 10022
Telephone No.: 212-610-2041
Telecopier No.: 212-610-2080
-5-
<PAGE>
AMENDMENT NO. 3 dated as of July 28, 1999 to the Loan
and Security Agreement dated as of November 24, 1998 (as
heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELCREST
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
----------------------
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase
in the Commitment to $800,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) The definition of Commitment appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"`COMMITMENT' shall mean six hundred million dollars ($800,000,000) or
such lesser amount if reduced pursuant to Section 2.10."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to
the satisfaction in full of the following conditions (the first date on which
all such conditions have been satisfied being herein called the "Effective
Date"):
(A) the Lender shall have received counterparts of this Amendment
which, when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and
substance satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Account Agreement remains in full force and
effect;
<PAGE>
(C) the Lender shall have received a promissory note in the form of
Exhibit A to the Loan Agreement in the amount of $600,000,000 (a "New Note")
which New Note shall replace the Note currently held by the Lender and shall be
deemed the Note for purposes of the Loan Agreement and the Lender shall return
the existing Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of
Counsel to the Borrower, dated the Effective Date, addressed to the Lender, to
the effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of
the Borrower, dated the Effective Date and certifying that (1) the provisions of
the Operating Agreement authorize the Manager to authorize the execution,
delivery and performance in accordance with their terms of this Amendment, the
New Note and the other documents and transactions contemplated by this Amendment
and the borrowings under the Note and that the Manager has so authorized and
such authorization is in full force and effect and (2) neither the certificate
of organization nor the Operating Agreement of the Borrower have been amended
since November 24, 1998 and (ii) such other documents as the Lender or Morgan,
Lewis & Bockius LLP, counsel for the Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. Representations and Warranties. The Borrower hereby
represents and warrants that:
(A) the representations and warranties contained in the Loan Agreement
are true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions
set forth in the Loan Agreement and, after giving effect hereto, no Default or
Event of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby,
the Loan Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Loan Agreement, the
terms "Agreement", "this Agreement"
-2-
<PAGE>
"herein", "hereafter", "hereto", "hereof", and words of similar import, shall,
unless the context otherwise requires, mean the Loan Agreement as amended by
this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 3
to be duly executed as of the date first written above.
BELCREST CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
-------------------------
Name: Thomas E. Faust
Title: Vice President
Address: Eaton Vance
The Eaton Vance Building
255 State Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.: 617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ Roger A. Baum
--------------------
Name: Roger A. Baum
Title: Authorized Signatory
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.: 212-449-1788
-4-
<PAGE>
The Lender is a member of The Securities and Futures Authority Limited
and operates a Client Complaints Procedure. If for any reason the Borrower
should have cause for concern or complaint, the Borrower should contact the
Manager, PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Jennifer A. Bereska
-------------------------
Executed in London, Name: Jennifer A. Bereska
England on ________, 1999 Title: Associate Director
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.: 011-44-171-808-5289
Telecopier No.:011-44-171-808-5312
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G. F. Reinhardt
--------------------
Name: G. F. Reinhardt
Title: Vice President
Address: 65 East 55th Street
29th Floor
New York, New York 10022
Telephone No.: 212-610-2041
Telecopier No.: 212-610-2080
-5-
<PAGE>
AMENDMENT NO. 4 dated as of September 1, 1999 to the
Loan and Security Agreement dated as of November 24, 1998
(as heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELCREST
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
----------------------
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase
in the Commitment to $1,000,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) The definition of Commitment appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"`COMMITMENT' shall mean six hundred million dollars ($1,000,000,000)
or such lesser amount if reduced pursuant to Section 2.10."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to
the satisfaction in full of the following conditions (the first date on which
all such conditions have been satisfied being herein called the "Effective
Date"):
(A) the Lender shall have received counterparts of this Amendment
which, when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and
substance satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Account Agreement remains in full force and
effect;
<PAGE>
(C) the Lender shall have received a promissory note in the form of
Exhibit A to the Loan Agreement in the amount of $600,000,000 (a "New Note")
which New Note shall replace the Note currently held by the Lender and shall be
deemed the Note for purposes of the Loan Agreement and the Lender shall return
the existing Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of
Counsel to the Borrower, dated the Effective Date, addressed to the Lender, to
the effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of
the Borrower, dated the Effective Date and certifying that (1) the provisions of
the Operating Agreement authorize the Manager to authorize the execution,
delivery and performance in accordance with their terms of this Amendment, the
New Note and the other documents and transactions contemplated by this Amendment
and the borrowings under the Note and that the Manager has so authorized and
such authorization is in full force and effect and (2) neither the certificate
of organization nor the Operating Agreement of the Borrower have been amended
since November 24, 1998 and (ii) such other documents as the Lender or Morgan,
Lewis & Bockius LLP, counsel for the Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. Representations and Warranties. The Borrower hereby
represents and warrants that:
(A) the representations and warranties contained in the Loan Agreement
are true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions
set forth in the Loan Agreement and, after giving effect hereto, no Default or
Event of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby,
the Loan Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Loan Agreement, the
terms "Agreement", "this Agreement"
-2-
<PAGE>
"herein", "hereafter", "hereto", "hereof", and words of similar import, shall,
unless the context otherwise requires, mean the Loan Agreement as amended by
this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 4
to be duly executed as of the date first written above.
BELCREST CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
-------------------------
Name: Thomas E. Faust
Title: Vice President
Address: Eaton Vance
The Eaton Vance Building
255 State Street
Boston, MA 02109
Telephone No.: 617-482-8260
Telecopier No.: 617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
--------------------
Name: John Mulholland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.: 212-449-1788
-4-
<PAGE>
The Lender is a member of The Securities and Futures Authority Limited
and operates a Client Complaints Procedure. If for any reason the Borrower
should have cause for concern or complaint, the Borrower should contact the
Manager, PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Alan Stern
-------------------------
Executed in London, Name: Alan Stern
England on ________, 1999 Title: Chief Credit Officer
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.: 011-44-171-808-5289
Telecopier No.:011-44-171-808-5312
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G. F. Reinhardt
--------------------
Name: G. F. Reinhardt
Title: Vice President
Address: 65 East 55th Street
29th Floor
New York, New York 10022
Telephone No.: 212-610-2041
Telecopier No.: 212-610-2080
-5-
<PAGE>
AMENDMENT NO. 5 dated as of September 29, 1999 to the
Loan and Security Agreement dated as of November 24, 1998
(as heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELCREST
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
----------------------
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase
in the Commitment to $1,150,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) The definition of Commitment appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
"`COMMITMENT' shall mean six hundred million dollars ($1,150,000,000)
or such lesser amount if reduced pursuant to Section 2.10."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to
the satisfaction in full of the following conditions (the first date on which
all such conditions have been satisfied being herein called the "Effective
Date"):
(A) the Lender shall have received counterparts of this Amendment
which, when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and
substance satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Account Agreement remains in full force and
effect;
<PAGE>
(C) the Lender shall have received a promissory note in the form of
Exhibit A to the Loan Agreement in the amount of $600,000,000 (a "New Note")
which New Note shall replace the Note currently held by the Lender and shall be
deemed the Note for purposes of the Loan Agreement and the Lender shall return
the existing Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of
Counsel to the Borrower, dated the Effective Date, addressed to the Lender, to
the effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of
the Borrower, dated the Effective Date and certifying that (1) the provisions of
the Operating Agreement authorize the Manager to authorize the execution,
delivery and performance in accordance with their terms of this Amendment, the
New Note and the other documents and transactions contemplated by this Amendment
and the borrowings under the Note and that the Manager has so authorized and
such authorization is in full force and effect and (2) neither the certificate
of organization nor the Operating Agreement of the Borrower have been amended
since November 24, 1998 and (ii) such other documents as the Lender or Morgan,
Lewis & Bockius LLP, counsel for the Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. Representations and Warranties. The Borrower hereby
represents and warrants that:
(A) the representations and warranties contained in the Loan Agreement
are true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions
set forth in the Loan Agreement and, after giving effect hereto, no Default or
Event of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby,
the Loan Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Loan Agreement, the
terms "Agreement", "this Agreement"
-2-
<PAGE>
"herein", "hereafter", "hereto", "hereof", and words of similar import, shall,
unless the context otherwise requires, mean the Loan Agreement as amended by
this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 5
to be duly executed as of the date first written above.
BELCREST CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
-------------------------
Name: Thomas E. Faust
Title: Vice President
Address: Eaton Vance
The Eaton Vance Building
255 State Street
Boston, MA 02109
Telephone No.: 617-482-8260
Telecopier No.: 617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ Roger A. Baum
--------------------
Name: Roger A. Baum
Title: Authorized Signatory
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.: 212-449-1788
-4-
<PAGE>
The Lender is a member of The Securities and Futures Authority Limited
and operates a Client Complaints Procedure. If for any reason the Borrower
should have cause for concern or complaint, the Borrower should contact the
Manager, PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Jennifer A. Bereska
-------------------------
Executed in London, Name: Jennifer A. Bereska
England on ________, 1999 Title: Associate Director
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.: 011-44-171-808-5289
Telecopier No.:011-44-171-808-5312
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G. F. Reinhardt
--------------------
Name: G. F. Reinhardt
Title: Vice President
Address: 65 East 55th Street
29th Floor
New York, New York 10022
Telephone No.: 212-610-2041
Telecopier No.: 212-610-2080
-5-
<PAGE>
AMENDMENT NO. 6 dated as of March 8, 2000 to the Loan
and Security Agreement dated as of November 24, 1998 (as
heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELCREST
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
----------------------
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested and the Lender hereby consents to and
acknowledges (i) the formation of Bel Santa Ana LLC ("BSA"), a subsidiary of
BRC, for the purpose of acquiring direct ownership of certain real property;
(ii) the formation of Bel Santa Ana Management LLC, a subsidiary of BRC, to
serve as the manager of BSA; (iii) the assignment of the Lease to BSA; (iv) the
assumption of the GMAC Promissory Note and the Deed of Trust by BSA; and (v) the
execution of the GMAC Guaranty.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) Article 1 of the Loan Agreement is hereby amended to insert the
following definitions in their proper alphabetical location:
"`BSA' shall mean Bel Santa Ana LLC."
"`BSA Management LLC' shall mean Bel Santa Ana Management LLC.
"`CONTRACT OF SALE' shall mean the sale agreement by and between
Andrew Place One, LLC and Bel Santa Ana LLC for the purchase and sale of the
property commonly known as 1600 and 1610 East St. Andrew Place, Santa Ana,
California (the "Property").
<PAGE>
"`DEED OF TRUST' shall mean the Deed of Trust and Security Agreement
by Andrew Place One LLC to First American Title Company for the benefit of GMAC
Commercial Mortgage Corporation, dated as of December 30, 1998."
"`GMAC GUARANTY' shall mean the Guaranty of Certain Recourse
Obligations of the Borrower between GMAC Commercial Mortgage Corporation and the
Borrower, to be dated as of the date the date title to the Property closes
pursuant to the Contract of Sale, which date the Borrower anticipates to be
March 9, 2000, substantially in the form of the draft delivered to the Secured
Parties on February 16, 2000."
"`GMAC PROMISSORY NOTE' shall mean the Promissory Note originally made
by Andrew Place One LLC, dated as of December 30, 1998 in the amount of
$50,890,000 in favor of GMAC Commercial Mortgage Corporation.
"`LEASE' shall mean the Indenture of Lease by and between Andrew Place
One, LLC and Ingram Micro, Inc. dated as of December 1, 1998.
(B) Section 7.5 of the Loan Agreement is hereby amended to replace the
words "and its consolidated subsidiary's" with "and its consolidated
subsidiaries'."
(C) Section 7.8 of the Loan Agreement is hereby amended to replace the
words "neither the Borrower nor BRC" with "neither the Borrower nor any of its
subsidiaries."
(D) Section 7.9 of the Loan Agreement is hereby amended to replace the
words "the Borrower's or BRC's financial condition" with "the Borrower's or any
of its subsidiaries' financial condition."
(E) Section 7.10 f the Loan Agreement is hereby amended to replace the
words "the Borrower and its consolidated subsidiary" with "the Borrower and its
consolidated subsidiaries."
(F) Section 7.15 of the Loan Agreement is hereby amended to replace
the words "consolidated subsidiary" with "consolidated subsidiaries" and the
words "consolidated subsidiary's" with "consolidated subsidiaries'" in each
place they appear.
(G) Section 7.15(a) of the Loan Agreement is hereby amended in its
entirety to read as follows:
(a) The market value of the total assets of the Borrower, and its
consolidated subsidiaries (less the market value of its assets pledged to
another party), at an amount equal to or in excess of 250% of the sum of the
Required Amount plus the outstanding principal balance of the Loans plus accrued
and unpaid interest on the Loans; PROVIDED, HOWEVER,
-2-
<PAGE>
that for purposes of computing such market value, neither the membership
interests in BSA which are owned by BRC, nor the assets which are owned by BSA
or BSA Management LLC, nor the assets or stock or other membership interest in
any other direct or indirect subsidiary of the Borrower which is hereafter
formed or acquired shall be included.
(H) The following Affirmative Covenant is hereby added to the Loan
Agreement as Section 7.16:
7.16 FORMATION OF ADDITIONAL SUBSIDIARIES. Promptly following the
creation or acquisition thereof, notify the Secured Parties of any additional
subsidiary and the purpose for which it is being created.
(I) Section 8.l of the Loan Agreement is hereby amended to (i) delete
the word "and" after Private Placement Memorandum and insert a semi-colon and
(ii) insert the following at the end of the first sentence:
";(v) Indebtedness of the Borrower under the GMAC Guaranty."
(J) Section 8.2(i) of the Loan Agreement is hereby amended in its
entirety to read as follows:
"(i) Liens on assets of the Borrower (but not BRC) in respect of
Indebtedness permitted under Section 8.1 (i)- (iv)."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to
the satisfaction in full of the following conditions (the first date on which
all such conditions have been satisfied being herein called the "Effective
Date"):
(A) the Lender shall have received counterparts of this Amendment
which, when taken together, bear the signatures of all parties hereto;
(B) all of the conditions precedent set forth in the Contract of Sale
between Andrew Place One LLC and Bel Santa Ana pertaining to the purchase of the
Lease shall have been satisfied, unless otherwise waived with the consent of the
Secured Parties, and the purchase transaction shall have closed; and
(C) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants that:
-3-
<PAGE>
(A) the representations and warranties contained in the Loan Agreement
are true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions
set forth in the Loan Agreement and, after giving effect hereto, no Default or
Event of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby,
the Loan Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Loan Agreement, the
terms "Agreement", "this Agreement" "herein", "hereafter", "hereto", "hereof",
and words of similar import, shall, unless the context otherwise requires, mean
the Loan Agreement as amended by this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of or be taken
into consideration in interpreting this Amendment.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment
No. 6 to be duly executed as of the date first written above.
BELCREST CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
-------------------------
Name: Thomas E. Faust
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.: 617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ Roger A. Baum
--------------------
Name: Roger A. Baum
Title: Authorized Signatory
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.: 212-449-1788
-5-
<PAGE>
The Lender is a member of The Securities and Futures Authority Limited
and operates a Client Complaints Procedure. If for any reason the Borrower
should have cause for concern or complaint, the Borrower should contact the
Manager, PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Jennifer A. Bereska
-----------------------
Executed in London, Name: Jennifer A. Bereska
England on ________, 1999 Title: Associate Director
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.:011-44-171-808-5289
Telecopier No.:011-44-171-808-5312
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G. Frederick Reinhardt
--------------------------
Name: G. Frederick Reinhardt
Title:Vice President
Address: 65 East 55th Street
29th Floor
New York, New York 10022
Telephone No.: 212-610-2041
Telecopier No.: 212-610-2080
-6-
EXHIBIT 10(1)
BELCREST CAPITAL FUND LLC
INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENT
AGREEMENT, dated as of November 18, 1998, between Belcrest Capital Fund
LLC, a Massachusetts limited liability company (the "Fund"), and Boston
Management and Research, a Massachusetts business Trust (the "Adviser"). Unless
otherwise defined, capitalized terms shall have the meanings ascribed to them in
the Fund's private placement memorandum, as amended or supplemented.
1. DUTIES OF THE ADVISER. The Fund, pursuant to 3.1(c) of the Amended and
Restated Operating Agreement of the Fund (the "Operating Agreement"), hereby
employs the Adviser to act as investment adviser for and to manage the
investment and reinvestment of the assets of the Fund and to administer its
affairs for the period and on the terms set forth in this Agreement.
The Adviser hereby accepts such employment, and undertakes to afford to the
Fund the advice and assistance of the Adviser's organization in the choice of
investments and in the purchase and sale of securities for the Fund and to
furnish for the use of the Fund office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Fund
and for administering its affairs and to pay the salaries of officers of the
Fund who are members of the Adviser's organization. The Adviser shall for all
purposes herein be deemed to be an independent contractor and shall, except as
otherwise herein expressly provided or authorized, have no authority to act for
or represent the Fund in any way or otherwise be deemed an agent of the Fund.
The Adviser shall evaluate and select those equity securities which it
considers appropriate for contribution to the Fund in accordance with the Fund's
private placement memorandum. The Adviser shall provide the Fund with such
investment management and supervision as the Fund may from time to time consider
necessary for the proper supervision of the Fund. As investment adviser to the
Fund, the Adviser shall furnish continuously an investment program and shall
determine from time to time what securities and other investments shall be
acquired, disposed of or exchanged and what portion of the Fund's assets shall
be held uninvested, subject always to the applicable restrictions of the
Operating Agreement of the Fund, as from time to time amended. The Adviser shall
take, on behalf of the Fund, all actions which it deems necessary or desirable
to implement the investment policies of the Fund.
The Adviser shall find, evaluate, structure and monitor the Qualifying
Assets (other than Real Estate Assets) defined in the Operating Agreement, and
shall make arrangements for the borrowings to enable the Fund and its subsidiary
Belcrest Realty Corp. ("BRC") to acquire the Qualifying Assets. The Adviser
shall make all decisions regarding the Fund's investments, hedging transactions
and other investment strategies, subject always to the applicable restrictions
of the Operating Agreement, as from time to time amended. The Adviser shall
value all non-cash assets of the Fund in accordance with Article 7 of the
Operating Agreement. The value of the Fund's Qualifying Assets (other than Real
Estate Assets) will be determined in good faith by the Adviser, after
consideration of all relevant factors, data and information. The Adviser shall
arrange and supervise the Fund's credit facility and its borrowings thereunder.
The Adviser shall manage, supervise and monitor the redemption practices and
policies of the Fund as set forth in the Operating Agreement and the Fund's
private placement memorandum. The Adviser shall also provide such other
administrative services as the Fund may
<PAGE>
request from time to time, including without limitation the computation of
distributions, the preparation of performance data and financial information,
the preparation of reports and other communications to Shareholders, and the
monitoring of compliance by the Fund with tax and regulatory requirements and
its credit facility, investment objective and investment restrictions.
The Adviser shall place all orders for the purchase or sale of portfolio
securities for the account of the Fund either directly with the issuer or with
brokers or dealers selected by the Adviser, and to that end the Adviser is
authorized as the agent of the Fund to give instructions to the custodian of the
Fund as to deliveries of securities and payments of cash for the account of the
Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, the Adviser shall use its best efforts to seek to
execute security transactions at prices which are advantageous to the Fund and
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Adviser and the Adviser is expressly
authorized to pay any broker or dealer who provides such brokerage and research
services a commission for executing a security transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities which the Adviser
and its affiliates have with respect to accounts over which they exercise
investment discretion. Subject to the requirement set forth in the second
sentence of this paragraph, the Adviser is authorized to consider, as a factor
in the selection of any broker or dealer with whom purchase or sale orders may
be placed, the fact that such broker or dealer has sold Shares of the Fund or
has sold or is selling shares of various investment companies sponsored by the
Adviser or its affiliates.
2. COMPENSATION OF THE ADVISER. For the services, payments and facilities
to be furnished hereunder by the Adviser, the Adviser shall be entitled to
receive from the Fund in respect of each month a monthly investment advisory and
administrative fee at the rate of 1/20th of 1% of the average daily gross
investment assets of the Fund, reduced by that portion of the monthly advisory
fee for such month payable by Tax-Managed Growth Portfolio which is attributable
to the value of the Fund's investment in Belvedere Capital Fund Company LLC (the
"Company"). The gross investment assets on any day means the value of all assets
of the Fund other than the Fund's investments in BRC minus the sum of the Fund's
liabilities other than the principal amount of money borrowed on such day. Such
compensation shall be paid monthly in arrears on the last business day of each
month. The value of the Fund's assets shall be computed daily in accordance with
the Operating Agreement. In case of initiation or termination of this Agreement
during any month with respect to the Fund, the fee for that month shall be based
on the number of calendar days during which it is in effect.
3. ALLOCATION OF CHARGES AND EXPENSES. It is understood that the Fund will
pay all expenses other than those expressly stated to be payable by the Adviser
hereunder, which expenses payable by the Fund shall include, without implied
limitation, (i) expenses of maintaining the Fund and continuing its existence,
(ii) commissions, fees and other expenses connected with the acquisition,
holding and disposition of securities and other investments, (iii) auditing,
accounting and legal expenses, (iv) taxes, interest and borrowing costs, (v)
governmental fees, (vi) expenses of offering, issue, sale, and redemption of
Fund Shares, (vii) expenses under federal and state securities laws and of
preparing and printing private placement memoranda and subscription documents
for such purposes and for distributing the same to investors, (viii) expenses of
reports, notices and other communications to investors, (ix) insurance expenses,
(x) fees, expenses and disbursements of custodians and subcustodians for all
services to the Fund (including without limitation safekeeping of funds,
securities and other investments, keeping of
2
<PAGE>
books, accounts and records, and calculation of asset values, book capital
account balances and tax capital account balances), (xi) fees, expenses and
disbursements of transfer agents, distribution disbursing agents, investor
servicing agents and registrars for all services to the Fund, (xii) expenses for
servicing the accounts of Shareholders, (xiii) compensation of the Adviser,
(xiv) expenses of soliciting Shareholder consents and holding meetings of
Shareholders, (xv) the commissions, fees, costs and expenses stated to be paid
or reimbursed by the Fund in the Fund's private placement memorandum as
supplemented from time to time, and (xvi) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Fund to indemnify persons pursuant to the
Operating Agreement or other contractual arrangements.
4. WAIVER OF PORTION OF FEE. The Adviser agrees to waive that portion of
the monthly investment advisory and administrative fee payable each month by the
Fund to the extent that such fee, together with the monthly distribution fee for
such month payable by the Fund to Eaton Vance Distributors, Inc. exceeds 1/20th
of 1% of the average daily gross investment assets of the Fund (as defined
herein) reduced by that portion of the monthly advisory fee for such month
payable by Tax-Managed Growth Portfolio which is attributable to the Fund's
investment in the Company.
5. LIMITATION OF LIABILITY OF THE ADVISER. The services of the Adviser to
the Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others and engage in other business activities. The Fund
acknowledges that the Adviser and its officers, employees, trustee, associates
and affiliates are entitled to the limitation of liability to the Fund and the
Shareholders and the indemnification from the Fund conferred upon them by the
Operating Agreement of the Fund. The Adviser shall not be liable for losses
sustained in the acquisition, holding or disposition of any security or other
investment.
6. DURATION AND AMENDMENT. This Agreement shall continue indefinitely
unless terminated or amended by the Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
BELCREST CAPITAL FUND LLC
By: EATON VANCE MANAGEMENT - its Manager
By: /s/ Thomas Otis
- --------------------
BOSTON MANAGEMENT AND RESEARCH
By: /s/ Alan R. Dynner
- ----------------------
3
EXHIBIT 10(2)
BELCREST REALTY CORPORATION
MANAGEMENT AGREEMENT
AGREEMENT, dated as of November 23, 1998, between Belcrest Realty
Corporation, a Delaware corporation ("BRC"), and Boston Management and Research,
a Massachusetts business Trust (the "Manager"). Unless otherwise defined,
capitalized terms shall have the meanings ascribed to them in the private
placement memorandum of Belcrest Capital Fund LLC (the "Fund"), as amended or
supplemented.
1. DUTIES OF THE MANAGER. BRC, pursuant to its Certificate of Incorporation
(the "Charter"), hereby employs the Manager to manage the investment and
reinvestment of the assets of BRC and to administer its affairs for the period
and on the terms set forth in this Agreement.
The Manager hereby accepts such employment, and undertakes to afford to BRC
the advice and assistance of the Adviser's organization in the choice of
investments and in the acquisition and disposition of Real Estate Assets (as
such term is defined in the Operating Agreement of the Fund) for BRC and to
furnish for the use of BRC office space and all necessary office facilities,
equipment and personnel for servicing the investments of BRC and for
administering its affairs and to pay the salaries and compensation of the
directors, officers and employees of BRC who are members of the Eaton Vance
organization. The Manager shall for all purposes herein be deemed to be an
independent contractor and shall, except as otherwise herein expressly provided
or authorized, have no authority to act for or represent BRC in any way or
otherwise be deemed an agent of BRC.
The Manager shall evaluate and select those Real Estate Assets which it
considers appropriate for investment by BRC in accordance with the Fund's
private placement memorandum. The Manager shall provide BRC with such management
and supervision as BRC may from time to time consider necessary for the proper
supervision of BRC. As manager of BRC, the Manager shall furnish continuously an
investment program and shall determine from time to time what Real Estate Assets
and other investments shall be acquired, disposed of or exchanged and what
portion of BRC's assets shall be held uninvested, subject always to the
applicable restrictions of the Charter of BRC, as from time to time amended. The
Manager shall take, on behalf of BRC, all actions which it deems necessary or
desirable to implement the investment policies of BRC and those investment
policies of the Fund relating to Qualifying Assets.
The Manager shall find, evaluate, structure and monitor the Real Estate
Assets defined in the Fund's Operating Agreement. The Manager shall make all
decisions regarding BRC's Real Estate Assets and other investments subject
always to the applicable restrictions of the Charter of BRC, as from time to
time amended. The Manager shall value all non-cash assets of BRC in accordance
with the by-laws of BRC, as from time to time amended, and any resolutions of
the directors of BRC. The value of BRC's Real Estate Assets will be determined
in good faith by the Manager, after consideration of all relevant factors, data
and information, including, with respect to the Real Estate Assets that are
preferred equity interests in operating partnerships affiliated with
publicly-traded real estate investment trusts, information from dealers and
similar firms with knowledge of such issues, and the prices of comparable
preferred equity securities and other fixed or adjustable rate instruments
having similar investment characteristics. The Manager shall also provide such
other administrative services as BRC may request from time to time, including
without limitation the computation of distributions, the
<PAGE>
preparation of performance data and financial information, the preparation of
reports and other communications to Shareholders of the Fund and stockholders of
BRC, the monitoring of compliance by BRC with tax and regulatory requirements,
and the monitoring of compliance by the Fund with its credit facility,
investment objective and investment restrictions.
2. COMPENSATION OF THE MANAGER. For the services, payments and facilities
to be furnished hereunder by the Manager, the Manager shall be entitled to
receive from BRC in respect of each month a monthly management fee at the rate
of 1/20th of 1% of the average daily gross investment assets of BRC. The gross
investment assets on any day means the value of all assets of BRC minus the sum
of BRC's liabilities other than any BRC liability with respect to the Fund's
Credit Facility. Such compensation shall be paid monthly in arrears on the last
business day of each month. The value of BRC's assets shall be computed daily in
accordance with the by-laws of BRC and any resolutions of the directors of BRC.
In case of initiation or termination of this Agreement during any month with
respect to BRC, the fee for that month shall be based on the number of calendar
days during which it is in effect.
3. ALLOCATION OF CHARGES AND EXPENSES. It is understood that BRC will pay
all expenses other than those expressly stated to be payable by the Manager
hereunder, which expenses payable by BRC shall include, without implied
limitation, (i) expenses of maintaining BRC and continuing its existence, (ii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of Real Estate Assets and other investments, (iii) auditing,
accounting and legal expenses, (iv) taxes, interest and borrowing costs, (v)
governmental fees, (vi) expenses of offering, issue, sale, and redemption of BRC
securities, (vii) expenses under federal and state securities laws and of
preparing and printing private placement (or informational) memoranda and
subscription documents for such purposes and for distributing the same to
investors and donees, (viii) expenses of reports, notices and other
communications to stockholders of BRC, (ix) insurance expenses, (x) fees,
expenses and disbursements of custodians and subcustodians for all services to
BRC (including without limitation safekeeping of funds, Real Estate Assets and
other investments, keeping of books, accounts and records, and calculation of
the value of BRC's assets), (xi) fees, expenses and disbursements of transfer
agents, distribution disbursing agents, investor servicing agents and registrars
for all services to BRC, (xii) expenses for servicing the accounts of
stockholders of BRC, (xiii) compensation of the Manager, (xiv) expenses of
soliciting stockholder consents and holding meetings of stockholders, (xv) the
commissions, fees, costs and expenses stated to be paid or reimbursed by BRC in
BRC's private placement (or informational) memorandum as supplemented from time
to time, and (xvi) such non-recurring items as may arise, including expenses
incurred in connection with litigation, proceedings and claims and the
obligation of BRC to indemnify persons pursuant to the Charter or by-laws of BRC
or other contractual arrangements.
4. LIMITATION OF LIABILITY OF THE MANAGER. The services of the Manager to
BRC are not to be deemed to be exclusive, the Manager being free to render
services to others and engage in other business activities. BRC acknowledges
that the Manager and its officers, employees, trustee, associates and affiliates
are entitled to the limitation of liability to the Fund and the Shareholders of
the Fund and the indemnification from the Fund conferred upon them by the
Operating Agreement of the Fund. BRC further acknowledges that the Manager and
its officers, employees, trustee, associates and affiliates are entitled to the
limitation of liability to BRC and the stockholders of BRC and the
indemnification of BRC conferred upon them by the Charter and by-laws of BRC.
The Manager shall not be liable for losses sustained in the acquisition, holding
or disposition of any Real Estate Asset or other investment.
2
<PAGE>
5. DURATION AND AMENDMENT. This Agreement shall continue indefinitely
unless terminated or amended by BRC.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
BELCREST REALTY CORPORATION
By: /s/ Thomas E. Faust, Jr.
- --- ------------------------
its Executive Vice President
BOSTON MANAGEMENT AND RESEARCH
By: /s/ Alan R. Dynner
- ----------------------
its Vice President
3
EXHIBIT NO. 10(3)
BELCREST CAPITAL FUND LLC
INVESTOR SERVICING AGREEMENT
WHEREAS, Belvedere Capital Fund Company LLC (the "Company") and Belcrest
Capital Fund LLC (the "Fund") are Massachusetts limited liability companies
which are conducting separate private offerings of their respective Shares to
qualified purchasers pursuant to their respective Private Placement Memoranda;
WHEREAS, Eaton Vance Distributors, Inc. ("EVD"), a Massachusetts
corporation, is acting as exclusive placement agent for the Company and the Fund
in connection with the separate private placements of their respective Shares;
WHEREAS, the Company and EVD have entered into a separate Investor
Servicing Agreement dated March 4, 1997 and amended on October 28, 1997 and on
August 14, 1998 (the "Company Servicing Agreement") pursuant to which EVD will
provide certain investor services to the Shareholders of the Fund, Belair
Capital Fund LLC, Belvedere Equity Fund LLC and the Company for a fee to be paid
by the Company to EVD;
WHEREAS, the Fund desires to enter into a similar servicing agreement with
EVD in order to provide additional compensation to EVD for the services provided
to Shareholders of the Fund;
WHEREAS, EVD is willing to perform such services (or arrange for the
performance of such services by sub-agents appointed by EVD in connection with
the private placement of Shares of the Fund) on an ongoing basis in return for
the compensation provided in the Company Servicing Agreement and the additional
compensation provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. The Fund hereby engages EVD to provide the investor services specified
herein for the benefit of the Fund and its Shareholders. EVD shall be available
to respond to investor inquiries regarding the Company and the Fund and the
performance of the Company and the Fund throughout the term of this Agreement.
EVD shall respond to inquiries from Shareholders regarding their investments in
Shares of the Fund, including those relating to performance, yield, total
return, distributions and redemptions, additional investments, and reports to
Shareholders. EVD will assist the Shareholders in connection with their
redemptions and transfers of Shares, and explain to them, upon request, features
offered to Shareholders, including any distribution options. EVD accepts such
engagement and agrees to provide, or to cause any one or more of its associated
companies or persons to provide, such services to the Fund and its respective
Shareholders.
2. EVD, as placement agent for the Fund, has entered into and may enter
into sub-agency agreements with sub-agents to facilitate the private placement
of Shares of the Fund. Said sub-agency agreements may provide for EVD to assign
to a sub-agent all or a portion of EVD's responsibilities hereunder and under
the Company Servicing Agreement to provide services to those Shareholders of the
Fund who are clients or customers of said sub-agents and who acquired Shares as
a result of the efforts of the sub-agent, and to assign the fees for such
services (based upon the interest represented by such Shares) to said
sub-agents.
<PAGE>
3. For the services to be rendered pursuant to paragraph 1 hereof, the Fund
will pay to EVD a quarterly fee at the annual rate of 0.20% of the Fund's
average daily net assets throughout each calendar quarter, reduced by the amount
of the Fund's allocated share of the fee for such quarter payable by the Company
pursuant to the Company Servicing Agreement. Such fee shall be paid quarterly in
arrears within seven business days after the close of each quarter, with
appropriate proration for any portion thereof. Such fee shall commence on the
date of this Agreement. In the event EVD shall have assigned any portion of its
fee to any sub-agent, the Fund shall pay such assigned portion directly to such
sub-agent.
4. This Agreement shall become effective on the date hereof and shall
continue in effect until the date on which the Fund is terminated. This
Agreement may not be terminated or assigned by the Fund without the written
consent of EVD, but this Agreement may be assigned by EVD as contemplated in
paragraph 2. No waiver, amendment or other modification of this Agreement shall
be effective unless in writing and signed by each party to be bound thereby.
This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns.
5. This Agreement shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts. Terms used but not defined herein
shall have the meanings assigned to them in the Private Placement Memoranda
referred to above. This Agreement is executed on behalf of the Fund by Eaton
Vance Management in its capacity as Manager of the Fund, and not in its
individual capacity. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of this 14th day of August, 1998.
BELCREST CAPITAL FUND LLC
By: EATON VANCE MANAGEMENT
as its Manager
By:/s/ William M. Steul
-----------------------
Vice President
EATON VANCE DISTRIBUTORS, INC.
By:/s/ Alan R. Dynner
---------------------
Vice President
-2-
EXHIBIT NO. 10(4)
CUSTODY AND TRANSFER AGENCY AGREEMENT
between
BELCREST CAPITAL FUND LLC
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Definitions..............................................................1
2. Employment of Custodian and Property to be Held by It....................3
3. Duties of the Custodian with Respect to Property of the Fund.............3
4. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value.................................................16
5. Records and Miscellaneous Duties........................................16
6. Opinion of Fund's Independent Public Accountants........................17
7. Persons Having Access to Assets of the Fund.............................17
8. Terms of Appointment and Duties of the Bank as Transfer Agent...........18
9. Sale of Fund Shares.....................................................19
10. Redemption Procedures..................................................20
11. Distributions..........................................................20
12. Taxes..................................................................21
13. Books and Records......................................................21
14. Fees and Expenses......................................................22
15. Representations and Warranties of the Bank.............................22
16. Representations and Warranties of the Fund.............................22
17. Indemnification........................................................23
18. Covenants of the Fund..................................................23
19. Termination of Agreement...............................................25
20. Assignment.............................................................26
21. Amendment..............................................................26
22. Merger of Agreement and Severability...................................26
23. Limitation of Liability of the Manager and Shareholders................26
24. Interpretive and Additional Provisions.................................26
25. Notices................................................................27
26. Massachusetts Law to Apply.............................................27
<PAGE>
CUSTODY AND TRANSFER AGENCY AGREEMENT
This Agreement dated as of August 14, 1998 is made between Belcrest Capital
Fund LLC, a Massachusetts limited liability company (hereinafter called "Fund")
, and Investors Bank & Trust Company (hereinafter called "Bank", "Custodian" and
"Agent"), a trust company established under the laws of Massachusetts with a
principal place of business in Boston, Massachusetts.
Whereas, the Fund has appointed the Bank to act as Custodian of its
property and as its transfer agent and to perform certain duties as its Agent,
as more fully hereinafter set forth; and
Whereas, the Bank is willing and able to act as the Fund's Custodian,
Transfer Agent and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, the Fund and the Bank agree as
follows:)
1. Definitions
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Manager" shall mean Eaton Vance Management, or any successor Manager
of the Fund.
(b) "The Depository Trust Company" is a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Manager.
(c) "Participants Trust Company" is a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Manager.
(d) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository but
only if the Custodian has received written instructions from the Manager
approving such clearing agency as a securities depository for the Fund.
<PAGE>
-2-
(e) "Federal Book-Entry System" shall mean the book-entry system referred
to in Rule 17f-4(b) under the Investment Company Act of 1940 for United States
and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry
regulations of federal agencies substantially in the form of Subpart O).
(f) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities BUT ONLY if the Custodian
has received written instructions from the Manager approving such depository or
clearing agency as a foreign securities depository for the Fund.
(g) "Approved Book-Entry System for Commercial Paper" shall mean a system
maintained by the Custodian or by a subcustodian employed pursuant to Section 2
hereof for the holding of commercial paper in book-entry form BUT ONLY if the
Custodian has received written instructions from the Manager approving the
participation by the Fund in such system.
(h) The Custodian shall be deemed to have received "proper instructions" in
respect of any of the matters referred to in this Agreement upon receipt of
written or facsimile instructions signed by the Manager or such one or more
person or persons as the Manager shall have from time to time authorized to give
the particular class of instructions in question. Electronic instructions for
the purchase and sale of securities which are transmitted by the Manager to the
Custodian through the Eaton Vance equity trading system and the Eaton Vance
fixed income trading system shall be deemed to be proper instructions; the Fund
shall cause all such instructions to be confirmed in writing. Different persons
may be authorized to give instructions for different purposes. Written
instructions of the Manager may be received and accepted by the Custodian as
conclusive evidence of the authority of any such person to act and may be
considered as in full force and effect until receipt of written notice to the
contrary. Such instructions may be general or specific in terms and, where
appropriate, may be standing instructions. Unless the instructions delegating
authority to any person or persons to give a particular class of instructions
specifically requires that the approval of any person, persons or committee
shall first have been obtained before the Custodian may act on instructions of
that class, the Custodian shall be under no obligation to question the right of
the person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably believes them
to have been given by a person authorized to give instructions with respect to
the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. The Fund authorizes the Custodian to tape record any and
all telephonic or other oral instructions given to the Custodian. Upon receipt
of written instructions from the Manager as to the authorization by the Fund
accompanied by a detailed description of the communication procedures approved
by the Fund, "proper instructions" may also include communications effected
directly between electromechanical or electronic devices provided that the Fund
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets. In performing its duties generally, and more particularly
in connection with the purchase, sale and exchange of securities made by or for
the Fund, the Custodian may take cognizance of the provisions of the governing
documents and the Private Placement Memorandum of the Fund as the same may from
time to time be in effect (and votes, resolutions,
<PAGE>
-3-
authorizations or proceedings of the Fund or the Manager), but, nevertheless,
except as otherwise expressly provided herein, the Custodian may assume unless
and until notified in writing to the contrary that so-called proper instructions
received by it are not in conflict with or in any way contrary to any provisions
of such governing documents and Private Placement Memorandum, or votes,
resolutions, authorizations or proceedings of the Fund or the Manager.
(i) "Private Placement Memorandum" shall mean the Private Placement
Memorandum of the Fund dated as of August 14, 1998, as amended from time to
time.
2. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby appoints and employs the Bank as its Custodian and Agent in
accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the securities
or other consideration received by it for such new limited liability company
interests ("Shares") of the Fund as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund held by the Fund
and not delivered by the Fund to the Custodian. The Fund will also deliver to
the Bank from time to time copies of its currently effective operating agreement
and, if any, by-laws, together with such authorizations and other proceedings of
the Fund as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Manager. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, money and other property of the Fund held by such subcustodian. For
the purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
------------------------------------------------------------
A. SAFEKEEPING AND HOLDING OF PROPERTY The Custodian shall keep safely all
property of the Fund and on behalf of the Fund shall from time to time receive
delivery of Fund property for safekeeping. The Custodian shall hold, earmark and
segregate on its books and records for the account of the Fund all property of
the Fund, including all securities, participation interests and other assets of
the Fund (1) physically held by the Custodian, (2) held by any subcustodian
referred to in Section 2 hereof or by any agent referred to in Paragraph K
hereof, (3) held by or maintained in The Depository Trust Company or in
Participants Trust Company or in an Approved Clearing Agency or in the Federal
Book-Entry System or in an Approved Foreign Securities Depository, each of which
from time to time is referred to herein as a "Securities System," and (4) held
by the Custodian or by any subcustodian referred to in Section 2 hereof and
maintained in any Approved Book-Entry System for Commercial Paper.
<PAGE>
-4-
B. DELIVERY OF SECURITIES The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or deemed to be
held) by the Custodian or maintained in a Securities System account or in an
Approved Book-Entry System for Commercial Paper account only upon receipt of
proper instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1. Upon sale of such securities or participation interests for the
account of the Fund, BUT ONLY against receipt of payment therefor; if delivery
is made in Boston or New York City, payment therefor shall be made in accordance
with generally accepted clearing house procedures or by use of Federal Reserve
Wire System procedures; if delivery is made elsewhere payment therefor shall be
in accordance with then current "street delivery" custom or in accordance with
such procedures agreed to in writing from time to time by the parties hereto; if
the sale is effected through a Securities System, delivery and payment therefor
shall be made in accordance with the provisions of Paragraph L hereof; if the
sale of commercial paper is to be effected through an Approved Book-Entry System
for Commercial Paper, delivery and payment therefor shall be made in accordance
with the provisions of Paragraph M hereof; if the securities are to be sold
outside the United States, delivery may be made in accordance with procedures
agreed to in writing from time to time by the parties hereto; for the purposes
of this subparagraph, the term "sale" shall include the disposition of a
portfolio security (i) upon the exercise of an option written by the Fund and
(ii) upon the failure by the Fund to make a successful bid with respect to a
portfolio security, the continued holding of which is contingent upon the making
of such a bid;
2. Upon the receipt of payment in connection with any repurchase
agreement or reverse repurchase agreement relating to such securities and
entered into by the Fund;
3. To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;
4. To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or otherwise become
payable; PROVIDED that, in any such case, the cash or other consideration is to
be delivered to the Custodian or any subcustodian employed pursuant to Section 2
hereof;
5. To the issuer thereof, or its agent, for transfer into the name of
the Fund or into the name of any nominee of the Custodian or into the name or
nominee name of any agent appointed pursuant to Paragraph K hereof or into the
name or nominee name of any subcustodian employed pursuant to Section 2 hereof;
or for exchange for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units; PROVIDED that,
in any such case, the new securities or participation interests are to be
delivered to the Custodian or any subcustodian employed pursuant to Section 2
hereof;
6. To the broker selling the same for examination in accordance with
the "street delivery" custom; PROVIDED that the Custodian shall adopt such
procedures as the Fund from time to time shall approve to ensure their prompt
return to the Custodian by the broker in the event the broker elects not to
accept them;
<PAGE>
-5-
7. For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion of such securities, or pursuant to any deposit agreement; PROVIDED
that, in any such case, the new securities and cash, if any, are to be delivered
to the Custodian or any subcustodian employed pursuant to Section 2 hereof;
8. In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such warrants, rights or
similar securities, or the surrender of interim receipts or temporary securities
for definitive securities; PROVIDED that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
9. For delivery in connection with any loans of securities made by the
Fund, BUT ONLY against receipt of adequate collateral as agreed upon from time
to time by the Custodian and the Fund, which may be in the form of cash or
obligations issued by the United States government, its agencies or
instrumentalities; except that in connection with any securities loans for which
collateral is to be credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of Treasury, the Custodian will not be held
liable or responsible for the delivery of securities loaned by the Fund prior to
the receipt of such collateral;
10. For delivery as security in connection with any borrowings by the
Fund requiring a pledge or hypothecation of assets by the Fund, provided, that
the securities shall be released only upon payment to the Custodian of the
monies borrowed, except that in cases where additional collateral is required to
secure a borrowing already made, further securities may be released for that
purpose; upon receipt of proper instructions, the Custodian may pay any such
loan upon redelivery to it of the securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing the loan. In connection with
its organization, the Fund expects to obtain non-recourse loans from Merrill
Lynch International Bank Limited or another lender (the "Lead Lender") or group
of lenders pursuant to a Credit Agreement, and it will be a condition to the
obligation of such lenders to make their respective loans that the Fund shall
have executed and delivered the Loan Documents as defined in said Credit
Agreement and granted to the Lead Lender for the ratable benefit of the lenders
a security interest in the Collateral described in said Loan Documents. It is
understood that the Custodian shall, under the direction of and as agent for the
Lead Lender under said Loan Documents, have dominion and control over said
Collateral, and that the Lead Lender will authorize and direct the Custodian, at
all times prior to delivery by the Lead Lender to the Custodian of a notice of
an Event of Default as described in the Loan Documents, to deal with said
Collateral as directed by the Fund and as provided in this Agreement;
11. When required for delivery in connection with any redemption of
Shares of the Fund in accordance with the provisions of Paragraph J hereof;
12. For delivery in accordance with the provisions of any agreement
between the Custodian (or a subcustodian employed pursuant to Section 2 hereof)
and a broker-dealer registered under the Securities Exchange Act of 1934 and, if
necessary, the Fund, relating to compliance with the rules of The Options
Clearing Corporation or of any registered national
<PAGE>
-6-
securities exchange, or of any similar organization or organizations, regarding
deposit or escrow or other arrangements in connection with options transactions
by the Fund;
13. For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian (or a subcustodian employed pursuant to Section 2
hereof), and a futures commissions merchant, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or of any contract market
or commodities exchange or similar organization, regarding futures margin
account deposits or payments in connection with futures transactions by the
Fund; and
14. For any other proper purpose, BUT ONLY upon receipt of proper
instructions specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom delivery of such
securities shall be made.
C. REGISTRATION OF SECURITIES Securities held by the Custodian (other than
bearer securities) for the account of the Fund shall be registered in the name
of the Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian, or in the name or nominee name of any agent appointed pursuant to
Paragraph K hereof, or in the name or nominee name of any subcustodian employed
pursuant to Section 2 hereof, or in the name or nominee name of The Depository
Trust Company or Participants Trust Company or Approved Clearing Agency or
Federal Book-Entry System or Approved Book-Entry System for Commercial Paper;
provided, that securities are held in an account of the Custodian or of such
agent or of such subcustodian containing only assets of the Fund or only assets
held by the Custodian or such agent or such subcustodian as a custodian or
subcustodian or in a fiduciary capacity for customers. All certificates for
securities accepted by the Custodian or any such agent or subcustodian on behalf
of the Fund shall be in "street" or other good delivery form or shall be
returned to the selling broker or dealer who shall be advised of the reason
thereof.
D. BANK ACCOUNTS The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund. Funds held by the Custodian for the Fund
may be deposited by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as the Custodian may in
its discretion deem necessary or desirable; PROVIDED, however, that every such
bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and
<PAGE>
-7-
that each such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved in writing by the Manager. Such
funds shall be deposited by the Custodian in its capacity as Custodian and shall
be subject to withdrawal only by the Custodian in that capacity.
E. PAYMENT FOR SHARES OF THE FUND The Custodian shall make appropriate
arrangements with the Fund and/or the placement agent for the Fund to enable the
Custodian to make certain it promptly receives the securities or other
consideration due to the Fund for such new Shares as may be issued or sold from
time to time by the Fund, in accordance with the governing documents of the
Fund, the Private Placement Memorandum and any procedures adopted by the Fund or
the Manager. The Custodian will provide prompt notification to the Fund of any
receipt by it of payments for Shares of the Fund and shall take prompt action to
register securities received as payment in accordance with Paragraph 3.C hereof.
F. INVESTMENT OF FEDERAL FUNDS Upon agreement between the Fund and the
Custodian, the Custodian shall, upon the receipt of proper instructions, which
may be continuing instructions when deemed appropriate by the parties invest in
such securities and instruments as may be set forth in such instructions on the
same day as received all federal funds received after a time agreed upon between
the Custodian and the Fund.
G. COLLECTIONS The Custodian shall promptly collect all income and other
payments with respect to registered securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall promptly collect all income and other payments with respect
to bearer securities if, on the date of payment by the issuer, such securities
are held by the Custodian or agent thereof and shall credit such income, as
collected, to the Fund's custodian account. The Custodian shall do all things
necessary and proper in connection with such prompt collections and, without
limiting the generality of the foregoing, the Custodian shall:
1. Present for payment all coupons and other income items requiring
presentations;
2. Present for payment all securities which may mature or be called,
redeemed, retired or otherwise become payable;
3. Endorse and deposit for collection, in the name of the Fund,
checks, drafts or other negotiable instruments;
4. Credit income from securities maintained in a Securities System or
in an Approved Book-Entry System for Commercial Paper at the time funds become
available to the Custodian; in the case of securities maintained in The
Depository Trust Company funds shall be deemed available to the Fund not later
than the opening of business on the first business day after receipt of such
funds by the Custodian.
<PAGE>
-8-
The Custodian shall notify the Fund as soon as reasonably practicable
whenever income due on any security is not promptly collected. In any case in
which the Custodian does not receive any due and unpaid income after it has made
demand for the same, it shall immediately so notify the Fund in writing,
enclosing copies of any demand letter, any written response thereto, and
memoranda of all oral responses thereto and to telephonic demands, and await
instructions from the Fund; the Custodian shall in no case have any liability
for any nonpayment of such income provided the Custodian meets the standard of
care set forth in Section 17 hereof. The Custodian shall not be obligated to
take legal action for collection unless and until reasonably indemnified to its
satisfaction.
The Custodian shall also receive and collect all stock dividends, rights
and other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. PAYMENT OF FUND MONEYS Upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out moneys of the Fund in the following cases only:
1. Upon the purchase of securities, participation interests, options,
futures contracts, forward contracts and options on futures contracts purchased
for the account of the Fund but only (a) against the receipt of:
(i) such securities registered as provided in Paragraph C hereof
or in proper form for transfer; or
(ii) detailed instructions signed by the Manager regarding the
participation interests to be purchased; or
(iii) written confirmation of the purchase by the Fund of the
options, futures contracts, forward contracts or options on
futures contracts by the Custodian (or by a subcustodian employed
pursuant to Section 2 hereof or by a clearing corporation of a
national securities exchange of which the Custodian is a member
or by any bank, banking institution or trust company doing
business in the United States or abroad which is qualified under
the Investment Company Act of 1940 to act as a custodian and
which has been designated by the Custodian as its agent for this
purpose or by the agent specifically designated in such
instructions as representing the purchasers of a new issue of
privately placed securities);
(b) in the case of a purchase effected through a Securities System, upon receipt
of the securities by the Securities System in accordance with the conditions set
forth in Paragraph L hereof; (c) in the case of a purchase of commercial paper
effected through an Approved Book-Entry System for Commercial Paper, upon
receipt of the paper by the Custodian or subcustodian in accordance with the
conditions set forth in Paragraph M hereof; (d) in the case of repurchase
agreements entered into between the Fund and another bank or a broker-dealer,
against receipt by the Custodian of the securities underlying the repurchase
agreement either in certificate form or through an entry crediting the
Custodian's segregated, non-proprietary account at the Federal
<PAGE>
-9-
Reserve Bank of Boston with such securities along with written evidence of the
agreement by the bank or broker-dealer to repurchase such securities from the
Fund; or (e) with respect to securities purchased outside of the United States,
in accordance with written procedures agreed to from time to time in writing by
the parties hereto;
2. when required in connection with the conversion, exchange or
surrender of securities owned by the Fund as set forth in Paragraph B hereof;
3. When required for the redemption of Shares of the Fund in
accordance with the provisions of Paragraph J hereof;
4. For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for the account of the
Fund: advisory fees, service fees, interest, taxes, management compensation and
expenses, accounting, transfer agent and legal fees, and other operating
expenses of the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5. For the payment of any distributions to Shareholders of the
Fund declared or authorized by the Fund; and
6. For any other proper purpose, BUT ONLY upon receipt of proper
instructions specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to be made.
I. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED In
any and every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions signed by the Manager
to so pay in advance, the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities had been received by the
Custodian; EXCEPT that in the case of a repurchase agreement entered into by the
Fund with a bank which is a member of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of (i) the
securities in certificate form subject to such repurchase agreement or (ii)
written evidence that the securities subject to such repurchase agreement have
been transferred by book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston or (iii) the
safekeeping receipt, provided that such securities have in fact been so
transferred by book-entry and the written repurchase agreement is received by
the Custodian in due course; and except that if the securities are to be
purchased outside the United States, payment may be made in accordance with
procedures agreed to in writing from time to time by the parties hereto.
J. PAYMENTS FOR REDEMPTIONS OF SHARES OF THE FUND From such funds and/or
portfolio securities as may be available for the purpose, but subject to any
applicable instructions of the Manager and the current redemption procedures of
the Fund, the Custodian shall, upon receipt of written instructions from the
Manager make funds and/or portfolio securities available for payment to holders
of Shares who have caused their Shares to be redeemed by the Fund.
<PAGE>
-10-
K. APPOINTMENT OF AGENTS BY THE CUSTODIAN The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company (PROVIDED such bank or trust company is itself qualified under the
Investment Company Act of 1940 to act as a custodian or is itself an eligible
foreign custodian within the meaning of Rule 17f-5 under said Act) as the agent
of the Custodian to carry out such of the duties and functions of the Custodian
described in this Section 3 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any such agent shall not relieve the
Custodian of any of its responsibilities or liabilities hereunder, and as
between the Fund and the Custodian the Custodian shall be fully responsible for
the acts and omissions of any such agent. For the purposes of this Agreement,
any property of the Fund held by any such agent shall be deemed to be held by
the Custodian hereunder.
L. DEPOSIT OF FUND PORTFOLIO SECURITIES IN SECURITIES Systems The Custodian
may deposit and/or maintain securities owned by the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, and at all times
subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities of the Fund in a
Securities System provided that such securities are maintained in a
non-proprietary account ("Account") of the Custodian or such subcustodian in the
Securities System which shall not include any assets of the Custodian or such
subcustodian or any other person other than assets held by the Custodian or such
subcustodian as a fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by book-entry
those securities belonging to the Fund, and the Custodian shall be fully and
completely responsible for maintaining a recordkeeping system capable of
accurately and currently stating the Fund's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of notice or advice from
the Securities System that such securities have been transferred to the
<PAGE>
-11-
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The Custodian
shall transfer securities sold for the account of the Fund only upon (i) receipt
of notice or advice from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all notices or advices from the Securities System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be promptly provided to the Fund at
its request. The Custodian shall promptly send to the Fund confirmation of each
transfer to or from the account of the Fund in the form of a written advice or
notice of each such transaction, and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day.
(d) The Custodian shall promptly send to the Fund any report or other
communication received or obtained by the Custodian relating to the Securities
System's accounting system, system of internal accounting controls or procedures
for safeguarding securities deposited in the Securities System; the Custodian
shall promptly send to the Fund any report or other communication relating to
the Custodian's internal accounting controls and procedures for safeguarding
securities deposited in any Securities System; and the Custodian shall ensure
that any agent appointed pursuant to Paragraph K hereof or any subcustodian
employed pursuant to Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such agent's or
subcustodian's internal accounting controls and procedures for safeguarding
securities deposited in any Securities System. The Custodian's books and records
relating to the Fund's participation in each Securities System will at all times
during regular business hours be open to the inspection of the Fund's authorized
officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the absence
of receipt of proper instructions indicating that the Manager has approved the
use of a particular Securities System; the Custodian shall also obtain
appropriate assurance from the Manager that it has annually reviewed the
continued use by the Fund of each Securities System, and the Fund shall promptly
notify the Custodian if the use of a Securities System is to be discontinued; at
the request of the Fund, the Custodian will terminate the use of any such
Securities System as promptly as practicable.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the Fund
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or subcustodians
or of any of its or their employees or from any failure of the Custodian or any
such agent or subcustodian to enforce effectively such rights as it may have
against the Securities System or any other person; at the election of the Fund,
it shall be entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or damage.
<PAGE>
-12-
M. DEPOSIT OF FUND COMMERCIAL PAPER IN AN APPROVED BOOK-ENTRY SYSTEM FOR
COMMERCIAL PAPER Upon receipt of proper instructions with respect to each issue
of direct issue commercial paper purchased by the Fund, the Custodian may
deposit and/or maintain direct issue commercial paper owned by the Fund in any
Approved Book-Entry System for Commercial Paper, in each case only in accordance
with applicable Securities and Exchange Commission rules, regulations, and
no-action correspondence, and at all times subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep commercial paper of the Fund
in an Approved Book-Entry System for Commercial Paper ("System"), provided that
such paper is issued in book-entry form by the Custodian or subcustodian on
behalf of an issuer with which the Custodian or subcustodian has entered into a
book-entry agreement and provided further that such paper is maintained in a
non-proprietary account ("Account") of the Custodian or such subcustodian in a
System which shall not include any assets of the Custodian or such subcustodian
or any other person other than assets held by the Custodian or such subcustodian
as a fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial paper of
the Fund which is maintained in a System shall identify by book-entry each
specific issue of commercial paper purchased by the Fund which is included in
the System and shall at all times during regular business hours be open for
inspection by the Manager or authorized officers, employees or agents of the
Fund. The Custodian shall be fully and completely responsible for maintaining a
recordkeeping system capable of accurately and currently stating the Fund's
holdings of commercial paper maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased in
book-entry form for the account of the Fund only upon contemporaneous (i)
receipt of notice or advice from the issuer that such paper has been issued,
sold and transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such purchase, payment and transfer for the
account of the Fund. The Custodian shall transfer such commercial paper which is
sold or cancel such commercial paper which is redeemed for the account of the
Fund only upon contemporaneous (i) receipt of notice or advice that payment for
such paper has been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer or redemption and
payment for the account of the Fund. Copies of all notices, advices and
confirmations of transfers of commercial paper for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian and be promptly
provided to the Fund at its request. The Custodian shall promptly send to the
Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice of each such transaction, and shall furnish
to the Fund copies of daily transaction sheets reflecting each day's
transactions in the System for the account of the Fund on the next business day.
<PAGE>
-13-
(d) The Custodian shall promptly send to the Fund any report or other
communication received or obtained by the Custodian relating to each System's
accounting system, system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System; the Custodian shall
promptly send to the Fund any report or other communication relating to the
Custodian's internal accounting controls and procedures for safeguarding
commercial paper deposited in any System; and the Custodian shall ensure that
any agent appointed pursuant to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such agent's or
subcustodian's internal accounting controls and procedures for safeguarding
securities deposited in any System.
(e) The Custodian shall not act under this Paragraph M in the absence
of receipt of proper instructions indicating that the Manager has approved the
use of a particular System; the Custodian shall also obtain appropriate
assurance from the Manager that it has annually reviewed the continued use by
the Fund of each System, and the Fund shall promptly notify the Custodian if the
use of a System is to be discontinued; at the request of the Fund, the Custodian
will terminate the use of any such System as promptly as practicable.
(f) The Custodian (or subcustodian, if the System is maintained by the
subcustodian) shall issue physical commercial paper or promissory notes whenever
requested to do so by the Fund or in the event of an electronic system failure
which impedes issuance, transfer or custody of direct issue commercial paper by
book-entry.
(g) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the Fund
resulting from use of any System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or subcustodians or of any of
its or their employees or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have against the
System, the issuer of the commercial paper or any other person; at the election
of the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the System, the issuer of the
commercial paper or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
N. SEGREGATED ACCOUNT The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Paragraph L hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and any registered broker-dealer
(or any futures commission merchant), relating to compliance with the rules of
the Options Clearing Corporation and of any registered national securities
exchange (or of the Commodity Futures Trading Commission or of any contract
market or commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other arrangements in connection
with transactions by the Fund, (ii) for purposes of segregating cash or U.S.
Government securities in connection with options purchased, sold or written by
the Fund or futures contracts or options thereon purchased or sold by the Fund,
and (iii) for other proper purposes, BUT ONLY, in
<PAGE>
-14-
the case of clause (iii), upon receipt of proper instructions setting forth the
purpose of such segregated account and declaring such purpose to be a proper
purpose.
O. OWNERSHIP CERTIFICATES FOR TAX PURPOSES The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
P. PROXIES The Custodian shall, with respect to the securities held by it
hereunder, cause to be promptly delivered to the Fund all forms of proxies and
all notices of meetings and any other notices or announcements or other written
information affecting or relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its nominee to execute and
deliver such proxies or other authorizations as may be required. Neither the
Custodian nor its nominee shall vote upon any of the securities or execute any
proxy to vote thereon or give any consent or take any other action with respect
thereto (except as otherwise herein provided) unless ordered to do so by proper
instructions.
Q. COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES The Custodian shall
deliver promptly to the Fund all written information (including, without
limitation, pendency of call and maturities of securities and participation
interests and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the Custodian from issuers
and other persons relating to the securities and participation interests being
held for the Fund. With respect to tender or exchange offers, the Custodian
shall deliver promptly to the Fund all written information received by the
Custodian from issuers and other persons relating to the securities and
participation interests whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer.
R. EXERCISE OF RIGHTS: TENDER OFFERS In the case of tender offers, similar
offers to purchase or exercise rights (including, without limitation, pendency
of calls and maturities of securities and participation interests and
expirations of rights in connection therewith and notices of exercise of call
and put options and the maturity of future contracts) affecting or relating to
securities and participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for promptly notifying the
Fund of all such offers in accordance with the standard of reasonable care set
forth in Section 8 hereof. For all such offers for which the Custodian is
responsible as provided in this Paragraph R, the Fund shall have responsibility
for providing the Custodian with all necessary instructions in a timely fashion.
Upon receipt of proper instructions, the Custodian shall timely deliver to the
issuer or trustee thereof, or to the agent of either, warrants, puts, calls,
rights or similar securities for the purpose of being exercised or sold upon
proper receipt therefor and upon receipt of assurances satisfactory to the
Custodian that the new securities and cash, if any, acquired by such action are
to be delivered to the Custodian or any subcustodian employed pursuant to
Section 2 hereof. Upon receipt of proper instructions, the Custodian shall
timely deposit securities upon invitations for tenders of securities upon proper
receipt therefor and upon receipt of assurances satisfactory to the Custodian
that the consideration to be paid or delivered or the tendered securities are to
be returned to the Custodian or subcustodian employed pursuant to Section 2
hereof.
<PAGE>
-15-
Notwithstanding any provision of this Agreement to the contrary, the Custodian
shall take all necessary action, unless otherwise directed to the contrary by
proper instructions, to comply with the terms of all mandatory or compulsory
exchanges, calls, tenders, redemptions, or similar rights of security ownership,
and shall thereafter promptly notify the Fund in writing of such action.
S. DEPOSITORY RECEIPTS The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign securities to the
depository used by an issuer of American Depository Receipts or International
Depository Receipts (hereinafter collectively referred to as "ADRs") for such
securities, against a written receipt therefor adequately describing such
securities and written evidence satisfactory to the Custodian that the
depository has acknowledged receipt of instructions to issue with respect to
such securities ADRs in the name of a nominee of the Custodian or in the name or
nominee name of any subcustodian employed pursuant to Section 2 hereof, for
delivery to the Custodian or such subcustodian at such place as the Custodian or
such subcustodian may from time to time designate. The Custodian shall, upon
receipt of proper instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs surrendered and written
evidence satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian or to a subcustodian employed
pursuant to Section 2 hereof.
T. INTEREST BEARING CALL OR TIME DEPOSITS The Custodian shall, upon receipt
of proper instructions, place interest bearing fixed term and call deposits with
the banking department of such banking institution (other than the Custodian)
and in such amounts as the Fund may designate. Deposits may be denominated in
U.S. Dollars or other currencies. The Custodian shall include in its records
with respect to the assets of the Fund appropriate notation as to the amount and
currency of each such deposit, the accepting banking institution and other
appropriate details and shall retain such forms of advice or receipt evidencing
the deposit, if any, as may be forwarded to the Custodian by the banking
institution. Such deposits shall be deemed portfolio securities of the Fund for
the purposes of this Agreement, and the Custodian shall be responsible for the
collection of income from such accounts and the transmission of cash to and from
such accounts.
U. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its
discretion, without express authority from the Fund:
1. make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Agreement,
PROVIDED, that all such payments shall be accounted for by the Custodian to the
Fund;
2. surrender securities in temporary form for securities in definitive
form;
3. endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
<PAGE>
-16-
4. in general, attend to all nondiscretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise directed by the
Fund.
4. Duties of Bank with Respect to Books of Account and Calculations of Net Asset
Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such
books of account (including records showing the adjusted tax costs of the Fund's
portfolio securities) and render as at the close of business on each day a
detailed statement of the amounts received or paid out and of securities
received or delivered for the account of the Fund during said day and such other
statements, including a daily trial balance and inventory of the Fund's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Manager of the Fund; and shall
compute and determine, as of the close of business of the New York Stock
Exchange, or at such other time or times as the Manager may determine, the net
asset value of a Share of the Fund, such computation and determination to be
made in accordance with the governing documents of the Fund and the
authorizations and instructions of the Manager at the time in force and
applicable, and promptly notify the Fund and its investment adviser and such
other persons as the Fund may request of the result of such computation and
determination. In computing the net asset value the Custodian may rely upon
security quotations received by telephone or otherwise from sources or pricing
services designated by the Fund by proper instructions, and may further rely
upon information furnished to it by any authorized officer of the Manager of the
Fund relative (a) to liabilities of the Fund not appearing on its books of
account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Manager regarding the
valuation of portfolio securities, and (d) to the value to be assigned to any
bond, note, debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interests or other asset or property for which market
quotations are not readily available.
5. Records and Miscellaneous Duties
--------------------------------
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, as if such act
were applicable, with particular attention to Section 31 thereof and Rules 3la-1
and 3la-2 thereunder, applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Fund. All
books of account and records maintained by the Bank in connection with the
performance of its duties under this Agreement shall be the property of the
Fund, shall at all times during the regular business hours of the Bank be open
for inspection by authorized officers, employees or agents of the Manager of the
Fund, and in the event of termination of this Agreement shall be delivered to
the Fund or to such other person or persons as shall be designated by the Fund.
Disposition of any account or record after any required period of preservation
shall be only in accordance with specific instructions received from the Fund.
The Bank shall assist generally in the preparation of reports to shareholders,
to federal and state securities regulators (if any such reports are required to
be filed therewith) and to others, audits of accounts, and other ministerial
matters of like nature; and, upon request, shall furnish the Fund's auditors
with an attested inventory of securities held with appropriate information as to
securities in transit or in the process of
<PAGE>
-17-
purchase or sale and with such other information as said auditors may from time
to time request. The Custodian shall also maintain records of all receipts,
deliveries and locations of such securities, together with a current inventory
thereof, and shall conduct periodic verifications (including sampling counts at
the Custodian) of certificates representing bonds and other securities for which
it is responsible under this Agreement in such manner as the Custodian shall
determine from time to time to be advisable in order to verify the accuracy of
such inventory. The Bank shall not disclose or use any books or records it has
prepared or maintained by reason of this Agreement in any manner except as
expressly authorized herein or directed by the Fund, and the Bank shall keep
confidential any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
------------------------------------------------
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to enable the Fund to obtain from year to year favorable
opinions from the Fund's independent public accountants with respect to its
activities hereunder.
7. Persons Having Access to Assets of the Fund
-------------------------------------------
(i) No trustee, director, manager, officer, employee, member or agent of
the Fund or the Manager shall have physical access to the assets of the Fund
held by the Custodian or be authorized or permitted to withdraw any investments
of the Fund, nor shall the Custodian deliver any assets of the Fund to any such
person. No officer, director, employee or agent of the Custodian who holds any
similar position with the Fund or the investment adviser of the Fund shall have
access to the assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only be available to
duly authorized officers, employees, representatives or agents of the Custodian
or other persons or entities for whose actions the Custodian shall be
responsible to the extent permitted hereunder, or to the Fund's independent
public accountants in connection with their auditing duties performed on behalf
of the Fund.
(iii) Nothing in this Section 7 shall prohibit any officer, employee or
agent of the Manager of the Fund or of the investment adviser of the Fund from
giving instructions to the Custodian or executing a certificate so long as it
does not result in delivery of or access to assets of the Fund prohibited by
paragraph (i) of this Section 7.
<PAGE>
-18-
8. Terms of Appointment and Duties of the Bank as Transfer Agent
-------------------------------------------------------------
A. Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Bank to act as, and the Bank agrees to act
as, transfer agent for the Fund's authorized and issued Shares, dividend
disbursing agent and agent in connection with the purchase and redemption plans
provided to the Shareholders and set out in the Private Placement Memorandum.
B. The Bank agrees that it will perform the following services:
(a) In connection with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
Custodian;
(ii) Pursuant to purchase orders, issue the appropriate amount of
Shares and hold such Shares in the appropriate Shareholder accounts;
(iii) Receive for acceptance, redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies or
portfolio securities paid or delivered to it by the Custodian with respect to
any redemption, pay over or deliver or cause to be paid over in the appropriate
manner such monies or portfolio securities as instructed by the redeeming
Shareholders;
(v) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vi) Create and maintain all necessary records, and make available
during regular business hours all records for inspection, as set forth in
Section 13; and
(vii) Record the issuance of Shares of the Fund and maintain a record
of the total amount of Shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The Bank shall also
provide the Fund on a regular basis with the total amount of Shares which are
authorized and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such Shares or to
take cognizance of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund. In connection with the
closings of the Fund, the Bank will notify the Fund and each Shareholder of the
Fund participating in a closing, promptly of the number of full and fractional
Shares held by such Shareholder.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a) or in any schedule hereto the Bank shall:
<PAGE>
-19-
(i) perform all of the customary services of a transfer agent,
distribution disbursing agent and, as relevant, agent in connection with
purchase and redemption plans; including but not limited to: maintaining all
Shareholder accounts (including capital accounts, tax basis accounts and any
other account required in order to comply with Section 704(c) of the Internal
Revenue Code), mailing proxy materials, receiving and tabulating proxies,
mailing Shareholder reports to current Shareholders, withholding taxes on all
Shareholder accounts, including non-resident alien accounts, and preparing and
mailing confirmation forms and statements of account to Shareholders for all
purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts; and
(ii) perform such other duties and functions as may from time to time
be agreed in writing.
9. Sale of Fund Shares
-------------------
A. Whenever the Fund shall sell or cause to be sold any Shares, the Fund
shall deliver or cause to be delivered to the Bank a document duly specifying:
(i) the amount of Shares sold, trade date, and price; and (iii) the amount of
money or portfolio securities to be delivered to the Custodian for the sale of
such Shares.
B. The Bank will, upon receipt by it of payment identified by it as an
investment in Shares and drawn or endorsed to the Bank as agent for, or
identified as being for the account of, the Fund, promptly deposit such payment
to the appropriate account postings necessary to reflect the investment. The
Bank will notify the Fund, or its designee, and the Custodian of all purchases
and related account adjustments.
C. Under procedures as established by mutual agreement between the Fund and
the Bank, the Bank shall issue to the purchaser or its authorized agent such
Shares as it is entitled to receive, based on the appropriate net asset value of
the Fund's Shares, determined in accordance with applicable procedures of the
Fund and, if any, applicable Federal law or regulation. In issuing Shares to a
purchaser or its authorized agent, the Bank shall be entitled to rely upon the
latest directions, if any, previously received by the Bank from the purchaser or
its authorized agent concerning the delivery of such Shares.
D. The Bank shall not be required to issue any Shares of the Fund where it
has received a written instruction from the Fund or the Fund's placement agent
or written notification from any appropriate Federal or state authority that the
sale of the Shares of the Fund has been suspended or discontinued, and the Bank
shall be entitled to rely upon such written instructions or written
notification.
E. Upon the issuance of any Shares in accordance with the foregoing
provisions of this Section 9, the Bank shall not be responsible for the payment
of any original issue or other taxes required to be paid by the Fund in
connection with such issuance.
<PAGE>
-20-
F. The Bank may establish such additional rules and regulations governing
the transfer or registration of Shares as it may deem advisable and consistent
with such rules and regulations generally adopted by transfer agents.
10. Redemption Procedures
---------------------
Shares of the Fund may be redeemed in accordance with the procedures set
forth in the Private Placement Memorandum or otherwise adopted by the Fund, and
the Bank will duly process all redemption requests. The Bank reserves the right
to refuse to redeem Shares until it is satisfied that the requested redemption
is legally authorized, and it shall incur no liability for the refusal, in good
faith, to make redemptions which the Bank, in its judgment, deems improper or
unauthorized, or until it is satisfied that there is no basis for any claims
adverse to such transfer or redemption consistent with applicable law, including
the provisions of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended from time
to time.
11. Distributions
-------------
A. The Fund will promptly notify the Bank of the making of any
distribution. The Fund shall furnish to the Bank proper instructions: (i)
authorizing the making of a distribution on a specified periodic basis and
authorizing the Bank to rely on oral instructions or proper instructions
specifying the date of the making of such distribution, the date of payment
thereof, the record date as of which the Shareholders entitled to payment shall
be determined and the amount payable per Share to the Shareholders of record as
of that date and the total amount payable to the Bank on the payment date, or
(ii) setting forth the date of the making of any distribution by the Fund, the
date of payment thereof, the record date as of which Shareholders entitled to
payment shall be determined, and the amount payable per Share to the
Shareholders of record as of that date and the total amount payable to the Bank
on the payment date.
B. The Bank, on behalf of the Fund, shall instruct the Custodian to place
in a disbursing account funds equal to the cash amount of any distribution to be
paid out. The Bank will calculate, prepare and credit such distribution to the
account of, Fund Shareholders, and maintain and safeguard all underlying
records.
C. The Bank will maintain all records necessary to reflect the crediting of
distributions which are reinvested in Shares of the Fund.
D. If the Bank shall not receive from the Custodian sufficient cash to make
payment to all Shareholders of the Fund as of the record date, the Bank shall,
upon notifying the Fund, withhold payment to all Shareholders of record as of
the record date until such sufficient cash is provided to the Bank.
<PAGE>
-21-
12. Taxes
-----
It is understood that the Bank shall file such appropriate information
returns concerning tax withholding with the proper Federal, State and local
authorities as are required by law to be filed by the Fund and shall withhold
such sums as are required to be withheld by applicable law.
13. Books and Records
-----------------
A. The Bank shall keep records relating to the services it performs as
Custodian and Transfer Agent hereunder, in the form and manner as it may deem
advisable. The Bank shall maintain records showing for each Shareholder's
account the following: (i) names, addresses and tax identification numbers, if
any; (ii) amount of Shares held; (iii) historical information regarding the
account of each Shareholder, including all transactions properly reflected in a
Shareholder's account; (iv) any stop or restraining order placed against a
Shareholder's account; (v) information with respect to withholdings; (vi) any
distribution reinvestment order, distribution address and correspondence
relating to the current maintenance of a Shareholder's account; (vii) any
information required in order for the Bank to perform the calculations
contemplated or required by this Agreement; and (viii) such other information
and data as may be required by applicable law. The Bank shall maintain a
duplicate copy of such records at the offices of the Fund.
B. The Bank shall make available during regular business hours all records
and other data created and maintained pursuant to this Agreement for reasonable
audit and inspection by the Fund or any person retained by the Fund. Such
records may be copied by the Fund or such person retained by the Fund consistent
with the confidentiality provisions of Section 13C hereof. Upon reasonable
notice by the Fund, the Bank shall make available during regular business hours
its facilities and premises employed in connection with its performance of this
Agreement for reasonable visitation by the Fund, or any person retained by the
Fund.
C. The Bank and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law or by the Fund's Amended and Restated Operating
Agreement.
D. The Bank agrees to maintain or provide for redundant facilities or a
compatible configuration and to maintain or provide for backup of the Fund's
master and input files and to store such files in a secure off-premises location
so that in the event of a power failure or other interruption of whatever cause
at the location of such files the Fund's records are maintained intact and
transactions can be processed at another location.
E. Procedures applicable to the services to be performed hereunder may be
established from time to time by agreement between the Fund and the Bank. The
Bank shall have the right to utilize any Shareholder accounting and
recordkeeping systems which, in its opinion, qualifies to perform any services
to be performed hereunder.
<PAGE>
-22-
14. Fees and Expenses
-----------------
A. For the performance by the Bank of all services pursuant to this
Agreement, the Fund agrees to pay the Bank the fees as mutually agreed upon in
writing.. In case of initiation or termination of the Agreement during any month
with respect to the Fund, the fee for that month shall be based on the number of
calendar days during which it is in effect. In addition, the Fund agrees to
reimburse the Bank for out-of-pocket expenses or advances incurred by the Bank
for the items set out in a writing agreed to by the parties hereto. Such fees
and out-of-pocket expenses may be changed from time to time subject to mutual
written agreement between the Fund and the Bank.
B. The Fund agrees to pay all fees and reimbursable expenses within five
days following the mailing of the respective billing notice. Postage for mailing
of dividends, proxies, Fund reports and other mailings to all Shareholder
accounts shall be advanced to the Bank by the Fund at least seven (7) days prior
to the mailing date of such materials.
15. Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Fund that:
A. It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
B. It is empowered under applicable laws and by its charter and By-laws to
enter into and perform this Agreement.
C. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
D. It has and will continue to have or its agents or subcontractors have
and will continue to have access to the necessary facilities, equipment and
personnel to perform its duties and obligations under this Agreement.
E. The various procedures and systems which it has implemented with regard
to the safeguarding from loss or damage attributable to fire, theft or any other
cause of the Fund's records and other data and the Bank's records, data,
equipment, facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder.
16. Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Bank that:
A. It is a limited liability company duly organized and existing under the
laws of the Commonwealth of Massachusetts.
<PAGE>
-23-
B. It is empowered under applicable laws and by its Operating Agreement to
enter into and perform this Agreement.
C. All proceedings required by said Operating Agreement have been taken to
authorize it to enter into and perform this Agreement.
17. Indemnification
---------------
A. The Bank shall not be responsible for, and the Fund shall indemnify and
hold the Bank harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions taken or omitted to be taken by the Bank or its agents
or subcontractors in good faith in reliance on or use by the Bank or its agents
or subcontractors of information, records and documents which (i) are received
by the Bank or its agents or subcontractors and furnished to it by or on behalf
of the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) So long as and to the extent that it is in the exercise of
reasonable care, the Bank's reliance on any notice, request, consent,
certificate or other instrument reasonably believed by it to be genuine and to
be signed by the proper party or parties.
(d) The offer or sale of Shares in violation of any requirement under
the Federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any Federal agency or any state
with respect to the offer or sale of such Shares in such state.
(e) Indemnification under this Agreement shall not apply to actions or
omissions of the Bank or its directors, officers, employees, agents or
subcontractors in cases of its own negligence, willful misconduct, bad faith, or
reckless disregard of its duties or their own duties hereunder or which arise
out of the breach of any representation or warranty of the Bank hereunder.
B. The Bank shall indemnify and hold the Fund harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of any action or failure or omission to act by the Bank as
a result of the Bank's negligence, willful misconduct, bad faith or reckless
disregard of its duties or which arise out of the breach of any representation
or warranty of the Bank hereunder.
<PAGE>
-24-
C. At any time the Bank may apply to the Fund for instructions, and may
consult with legal counsel (which may be legal counsel for the Fund) with
respect to any matter arising in connection with the services to be performed by
the Bank under this Agreement, and the Bank and its agents or subcontractors
shall not be liable for any action taken or omitted by it in good faith reliance
upon such written instructions or upon the written opinion of such counsel. The
Bank, its agents and subcontractors shall not be liable for acting upon any
paper or document furnished to the Bank, reasonably believed to be genuine and
to have been signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided by the Bank or its agents or
subcontractors by machine readable input, telex, CRT data entry or other similar
means authorized by the Fund, and shall not be held to have notice of any change
of authority of any person, until receipt of written notice thereof from the
Fund.
D. In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable to the other for
any damages resulting from such failure to perform or otherwise from such
causes.
E. In order that the indemnification provisions contained in this Section
17 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
18. Covenants of the Fund
---------------------
The Fund shall promptly furnish to the Bank the following if requested by
the Bank:
(a) A certificate of the Manager stating that the Fund has authorized
the appointment of the Bank and the execution and delivery of this Agreement.
(b) A copy of the Operating Agreement and all amendments thereto.
(c) Copies of instructions of the Manager designating authorized
persons to give instructions to the Bank.
(d) Certificates as to any change in the Manager or in any authorized
persons of the Manager.
<PAGE>
-25-
(e) A list of Shareholders of the Fund with the name, address and tax
identification number of each Shareholder, and the amount of Shares of the Fund
held by each, certificate numbers and denominations (if any certificates have
been issued), lists of any accounts against which stops have been placed,
together with the reasons for said stops, and the amount of Shares redeemed by
the Fund.
(f) An opinion of counsel for the Fund with respect to the validity of
the Shares and the status of such Shares under the Securities Act of 1933.
(g) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for the Bank in the proper performance of its
duties.
19. Termination of Agreement
------------------------
A. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT; SUCCESSOR CUSTODIAN
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual written agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided, that
the Fund may at any time by action of its Manager, (i) substitute another bank
or trust company for the Custodian and/or Transfer Agent by giving notice as
described above to the Bank, or (ii) immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Bank by the
Federal Deposit Insurance Corporation or by the Banking Commissioner of the
Commonwealth of Massachusetts or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction. Upon termination of this Agreement, the Fund shall pay to the Bank
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Bank for its costs, expenses and disbursements.
The Manager shall, forthwith, upon giving or receiving notice of
termination of this Agreement or the termination of the Custodian as Custodian
Recorder, appoint as successor custodian, a bank or trust company having such
qualifications as the Manager deems necessary or appropriate. The Bank, as
Custodian, Agent or otherwise, shall, upon termination of this Agreement,
deliver to such successor custodian, all securities then held hereunder and all
funds or other properties of the Fund deposited with or held by the Bank
hereunder and all books of account and records kept by the Bank pursuant to this
Agreement, and all documents held by the Bank relative thereto. In the event
that no written order designating a successor custodian shall have been
delivered to the Bank on or before the date when such termination shall become
effective, then the Bank shall not deliver the securities, funds and other
properties of the Fund to the Fund but shall have the right to deliver to a bank
or trust company doing business in Boston, Massachusetts of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than $2,000,000, all funds, securities and
properties
<PAGE>
-26-
of the Fund held by or deposited with the Bank, and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. Thereafter such bank or trust company shall be the
successor of the Custodian under this Agreement.
20. Assignment
----------
A. Except as provided in Section 20C below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
B. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
C. The Bank may, without further consent on the part of the Fund,
subcontract for the performance and of any of the services to be provided
hereunder including, but not limited to, proxy solicitation and tabulation, bulk
mailings and insertions, and microfiche copying, provided that the Bank shall
remain liable hereunder.
21. Amendment
---------
This Agreement may be amended or modified by a written agreement duly
authorized and executed by both parties.
22. Merger of Agreement and Severability
------------------------------------
A. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written.
B. In the event any provision of this Agreement shall be held unenforceable
or invalid for any reason, the remainder of this Agreement shall remain in full
force and effect.
23. Limitation of Liability of the Manager and Shareholders
-------------------------------------------------------
It is understood and expressly stipulated that neither the Shareholders nor
the Manager or its Trustee or officers shall be personally liable hereunder.
This Agreement is executed on behalf of the Fund by Eaton Vance Management in
its capacity as Manager, and not in its individual capacity.
24. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Agreement, the Bank and the Fund
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Agreement as they in their joint opinion deem consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in writing signed by both
<PAGE>
-27-
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the governing instruments of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
25. Notices
-------
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to 24 Federal Street, Boston, Massachusetts 02110, or to such other
address as the Fund may have designated to the Bank, in writing, or to Investors
Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts 02116, shall
be deemed to have been properly delivered or given hereunder to the respective
addressees.
26. Massachusetts Law to Apply
--------------------------
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
on its behalf as of the day and year first above written.
BELCREST CAPITAL FUND LLC
By: EATON VANCE MANAGEMENT,
Manager
By:/s/ Eric G. Woodbury
-----------------------
Name: Eric G. Woodbury
Title: Vice President
INVESTORS BANK AND TRUST COMPANY
By: /s/ Robert D. Mancuso
-------------------------
Name: Robert D. Mancuso
Title: Managing Director
BELCREST CAPITAL FUND LLC
List of Subsidiaries
at December 31, 1999
Belcrest Realty Corporation
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> BELCREST CAPITAL FUND LLC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 679,393,321
<INVESTMENTS-AT-VALUE> 710,470,718
<RECEIVABLES> 432,422
<ASSETS-OTHER> 179,071
<OTHER-ITEMS-ASSETS> 377,275
<TOTAL-ASSETS> 711,459,486
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 165,000,000
<OTHER-ITEMS-LIABILITIES> 2,256,651
<TOTAL-LIABILITIES> 167,256,651
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 513,790,505
<SHARES-COMMON-STOCK> 5,148,858
<SHARES-COMMON-PRIOR> 101
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30,412,330
<NET-ASSETS> 544,202,835
<DIVIDEND-INCOME> 1,526,725
<INTEREST-INCOME> 132,508
<OTHER-INCOME> 0
<EXPENSES-NET> 2,274,085
<NET-INVESTMENT-INCOME> (614,852)
<REALIZED-GAINS-CURRENT> (233,937)
<APPREC-INCREASE-CURRENT> 30,412,330
<NET-CHANGE-FROM-OPS> 29,563,541
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 257,377
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (2,828)
<SHARES-REINVESTED> 1,360
<NET-CHANGE-IN-ASSETS> 544,192,735
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 369,651
<INTEREST-EXPENSE> 1,006,805
<GROSS-EXPENSE> 2,326,586
<AVERAGE-NET-ASSETS> 512,128,618
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> (0.120)
<PER-SHARE-GAIN-APPREC> 5.860
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 105.69
<EXPENSE-RATIO> 4.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> BELCREST CAPITAL FUND LLC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 4,678,523,490
<INVESTMENTS-AT-VALUE> 5,028,751,360
<RECEIVABLES> 33,029,719
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 5,028,304
<TOTAL-ASSETS> 5,066,809,383
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 1,130,000,000
<OTHER-ITEMS-LIABILITIES> 16,196,852
<TOTAL-LIABILITIES> 1,146,196,852
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,539,198,911
<SHARES-COMMON-STOCK> 33,007,386
<SHARES-COMMON-PRIOR> 5,148,858
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 381,413,620
<NET-ASSETS> 3,920,612,531
<DIVIDEND-INCOME> 76,290,232
<INTEREST-INCOME> 6,146,391
<OTHER-INCOME> 0
<EXPENSES-NET> 66,525,556
<NET-INVESTMENT-INCOME> 15,911,067
<REALIZED-GAINS-CURRENT> (20,032,514)
<APPREC-INCREASE-CURRENT> 351,001,290
<NET-CHANGE-FROM-OPS> 346,879,843
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 30,095,685
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (637,734)
<SHARES-REINVESTED> 127,006
<NET-CHANGE-IN-ASSETS> 3,376,409,696
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,268,570
<INTEREST-EXPENSE> 39,181,865
<GROSS-EXPENSE> 68,601,801
<AVERAGE-NET-ASSETS> 2,093,454,841
<PER-SHARE-NAV-BEGIN> 105.69
<PER-SHARE-NII> 0.844
<PER-SHARE-GAIN-APPREC> 13.156
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.910)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 118.78
<EXPENSE-RATIO> 3.18
</TABLE>
