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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 2000
Commission File No. 000-30509
Belcrest Capital Fund LLC
(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 registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Liability Company Interests in the Fund ("Shares")
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of the Shares held by non-affiliates of Registrant,
based on the closing net asset value on February 28, 2001 was $3,598,253,047.
Calculation of holdings by non-affiliates is based upon the assumption, for
these purposes only, that the Registrant's manager, its executive officers and
directors and persons holding 5% or more of the Registrant's Shares are
affiliates.
Incorporation by Reference:
--------------------------
The financial statements contained in Registrant's Form 10 filed with the
Securities and Exchange Commission on April 28, 2000 (Accession No.
0000940394-00-000198) have been incorporated into the following Parts of this
report: Part II and Part III.
The Exhibit Index is located on page 51.
PART I
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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 $18.4
billion as of December 31, 2000. The Portfolio was organized in 1995 as
successor to the investment operations of Eaton Vance Tax-Managed Growth Fund
1.0 (formerly 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, 2000, the
investment assets of the Company consisted exclusively of an interest in the
Portfolio with a value of $9.94 billion. As of such date, assets of the Fund
invested in the Company totaled $3.96 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 invests 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.
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 generally affiliated with real estate investment trusts
("REITs") that are publicly traded ("Partnership Preference Units"), interests
in real estate joint ventures ("Real Estate Joint Ventures") and interests in
properties subject to long term, triple net leases ("Net Lease Properties")
(collectively, "real estate investments"). BRC may purchase real estate
investments from, and sell them to, other investment funds sponsored by the
Eaton Vance organization and REIT subsidiaries thereof.
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 have been deemed by BRC's
investment adviser to be of investment-grade quality at the time of purchase.
Each Real Estate Joint Venture in which BRC invests will be majority owned by
BRC. The principal minority investor in each Real Estate Joint Venture (the
"Operating Partner") will own a substantial interest therein and will provide
the day-to-day operating management of the Real Estate Joint Venture, subject to
the oversight of a board of directors controlled by BRC. Operating Partners may
include publicly-traded REITs or their affiliates, as well as private real
estate operating companies. It is expected that each Real Estate Joint Venture
entered by BRC will be structured as described below. The property owned by each
Real Estate Joint Venture is expected to be primarily multi-family residential
properties, but may include other types of properties.
At December 31, 2000, BRC owned a controlling interest in three Real Estate
Joint Ventures. The assets of each Real Estate Joint Venture consist primarily
of multi-family residential properties acquired from or in conjunction with the
Operating Partner. Real Estate Joint Venture distributable cash flows are
allocated such that BRC: 1) holds a priority position versus the Operating
Partner with respect to a fixed annual preferred return; and 2) participates on
a pro rata or reduced basis in distributable cash flows in excess of the annual
preferred return of BRC and a subordinated preferred return of the Operating
Partner. Each Real Estate Joint Venture includes a buy/sell provision that can
be activated by either BRC or the Operating Partner after a fixed period of
years. Financing for the Real Estate Joint Ventures consists primarily of
fixed-rate secured mortgage debt obligations of the Real Estate Joint Ventures
that generally is without recourse to BRC and the Fund. Equity capital also was
invested in the Real Estate Joint Ventures by BRC and the Operating Partners
thereof. BRC's equity in the Real Estate Joint Ventures was acquired using the
proceeds of Fund borrowings. At December 31, 2000, BRC also owned Net Lease
Properties consisting of two suburban office buildings leased to a single
investment grade tenant (as rated by Standard & Poor's Rating Group and
Fitch/IBCA). These properties carry secured, non-recourse, fixed-rate financing.
For a description of BRC's properties, see Item 2 below.
BRC is a Delaware corporation that operates in such a manner as to qualify
for taxation as a REIT under the Internal Revenue Code (the "Code"). As a REIT,
BRC is not subject to federal income tax on that portion of its ordinary income
or taxable gain that it distributes to its stockholders each year. The Fund owns
100% of the common stock issued by BRC, and intends to hold all of BRC's common
2
stock at all times. Additionally, at December 31, 2000, 2,100 Class A shares of
Class A preferred stock were outstanding. The preferred stock is owned by 105
charitable organizations. As at December 31, 2000, assets of the Fund invested
in BRC totaled $882.8 million.
The Fund's equity in its real estate investments held 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, 2000, outstanding
borrowings under the Credit Facility totaled $1.01 billion, and the unused loan
commitment amount was $143.8 million.
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 expected from BRC's equity in its
real estate investments 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. Fluctuations in the value of the real estate
investments derived from other factors besides general interest rate movements
(including issuer-specific and sector-specific credit concerns,
property-specific concerns and changes in interest rate spread relationships)
are not offset by changes in the value of the swap agreements. The Fund has the
right to terminate the swap agreements beginning in 2003, generally 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.
In addition to its investment in the Portfolio through the Company and its
investment in BRC, the Fund may invest directly in traded physical commodities
(other than precious metals) and certain other types of assets that are not
securities.
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.
3
ITEM 2. PROPERTIES.
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The Fund does not own any physical properties, other than indirectly as a
result of BRC's investments in Partnership Preference Units and BRC's controlled
subsidiaries. At December 31, 2000, in addition to investments in Partnership
Preference Units, BRC owned interests in the following four controlled
subsidiaries:
Bel Santa Ana LLC is a wholly owned subsidiary of BRC that owns two
suburban office buildings in Santa Ana, California, which are leased to a single
investment-grade rated tenant under a triple net lease.
Bel Alliance Properties LLC is a majority owned subsidiary of BRC that owns
41 multi-family residential properties located in seven states (Texas, Virginia,
Maryland, Georgia, Alabama, North Carolina and Florida).
Bel Apartment Properties Trust is a majority owned subsidiary of BRC that
owns 10 multi-family residential properties located in seven states (Texas,
Arizona, Georgia, North Carolina, Washington, Tennessee and Florida).
Bel Communities Properties Trust is a majority owned subsidiary of BRC that
owns 12 multi-family residential properties located in 11 states (Texas,
Arizona, Georgia, North Carolina, Washington, Tennessee, Minnesota, Maryland,
Oregon, Okalahoma and Florida).
ITEM 3. LEGAL PROCEEDINGS.
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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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
No items were submitted to a vote of security holders during the fiscal
year ended December 31, 2000.
PART II
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ITEM 5. MARKET FOR 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
4
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 meets 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 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 other 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 for the Fund's fiscal years ended December 31, 1999 and 2000
are as follows:
Quarter Ended High Low
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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
3/31/00 $129.17 $112.90
6/30/00 $127.33 $112.78
9/30/00 $131.74 $121.36
12/31/00 $127.33 $115.39
5
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 February 28, 2001, there were 1,192 record holders of Shares of the
Fund.
(c) Distributions.
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, the Company and, indirectly, the Portfolio plus all income earned in the
Fund's direct and indirect investments, less all actual and accrued expense of
the Fund and BRC. 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.
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. On December 29, 2000, the Fund made an income distribution of $1.21 per
Share from its net investment income and a long-term gain distribution of $0.03
to Shareholders of record on December 28, 2000.
(d) 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
- --------
* Contributed by EVM in exchange for 100 Shares of the Fund. No selling
commission applied to such 100 Shares.
6
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 $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 6. FINANCIAL INFORMATION.
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The Fund commenced its investment operations on November 24, 1998, 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 years ended December 31, 1999 and 2000.
Period Ended Fiscal Year Ended Fiscal Year Ended
Table of Selected Financial Data December 31, 1998 December 31, 1999 December 31, 2000
- -------------------------------- ----------------- ----------------- -----------------
Total investment income $1,303,798 $69,398,141 $184,443,819
Interest expense $1,006,805 $39,181,865 $106,481,607
Net expenses (including interest $1,918,650 $53,487,074 $163,858,005
expense)
Net investment income (loss) $(614,852) $15,911,067 $16,188,469
Minority Interest in Net Income ------ ------ $4,397,345
Net realized gain (loss) $(233,937) $(20,032,514) $59,911,984
Net change in unrealized appreciation $30,412,330 $351,001,290 $23,202,514
Net increase in net assets from $29,563,541 $346,879,843 $99,302,967
operations
Total assets $711,459,486 $5,066,809,383 $5,597,503,897
Loan payable $165,000,000 $1,130,000,000 $1,006,250,000
Net assets $544,202,835 $3,920,612,531 $3,807,101,131
Shares outstanding 5,148,858 33,007,386 31,646,617
Net Asset Value and Redemption Price $105.69 $118.78 $120.30
per Share
Distribution paid per Share $0.05 $0.91 $1.24
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS.
- -------------------------------------------------------------------------------
Results of Operations
- ---------------------
Increases and decreases in the Fund's net asset value per Share are derived
from net investment income, and realized and unrealized gains and losses on
investments, including securities investments held through the Fund's indirect
interest (through the Company) in the Portfolio, real estate investments held
through 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 real
estate investments through BRC. 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 real estate investments held
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
real estate investments held through BRC and its positions in 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 real estate investments 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.
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 a 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 a 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 Fund achieved a total return of 2.3% for the fiscal year ended December
31, 2000. This return reflects an increase in the Fund's net asset value per
Share from $118.78 to $120.30, and the payment of a distribution of $1.24 per
share at the conclusion of the year. For comparison, the S&P 500 Index had a
total return of -9.10% over the same period.
In 2000, the U.S. equity markets were characterized by extreme volatility
and dramatic declines in the more aggressive sectors. After a prolonged period
in which risk-taking in stocks was amply rewarded, the markets became more
conservative during 2000. Many technology, media and telecom stocks that were
big winners in 1998 and 1999 experienced massive price declines in 2000 -
victims of diminished growth expectations, earnings shortfalls and a collapse in
valuations from inflated levels. The tech-heavy NASDAQ Composite plunged over
39%, giving back nearly all the gains made in 1999. Other market sectors
8
performed much better in 2000, benefiting from a shift in investor focus away
from the technology/media/telecom area. Market-leading sectors included
utilities, energy and healthcare stocks.
The Fund's real estate investments exerted a modest drag on performance in
2000, primarily in the second half of the year. This can be attributed to
weakness in the market for preferred equity securities due to rising credit
concerns in a slowing economy. Reflecting the fundamental strength of the U.S.
real estate sector, real estate preferreds generally outperformed other types of
preferred equity securities in 2000.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 2000, the Fund had outstanding borrowings of $1.01
billion and unused loan commitments of $143.8 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, 1999, the Fund had
outstanding borrowings of $1.13 billion and unused loan commitments of $20.0
million under the Credit Facility. The Credit Facility is being used primarily
to finance the Fund's equity in its real estate investments and will continue to
be used for such purposes in the future, as well as to provide for any
short-term liquidity needs of the Fund. In the future, the Fund may increase the
size of the Credit Facility (subject to lender consent) and the amount of
outstanding borrowings thereunder for these purposes.
The Fund may redeem shares of the Company at any time. Both the Company and
the Portfolio follow the practice of normally meeting redemptions by
distributing securities, consisting, in the case of the Company, of securities
drawn from the Portfolio. The Company and the Portfolio may also meet
redemptions by distributing cash. As of December 31, 2000, the Portfolio had
cash and short-term investments totaling $314.2 million, compared to $642.7
million as of December 31, 1999. 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, 1999 or December 31, 2000. As of December
31, 2000, the net assets of the Portfolio totaled $18.4 billion, compared to
$15.1 billion as of December 31, 1999. 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, 2000, restricted securities, which are
considered illiquid, constituted 2.7% of the net assets of the Portfolio,
compared to 5.0% as of December 31, 1999.
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. The liquidity of BRC's other real estate
investments also is extremely limited. The lease and mortgage structures of the
Net Lease Properties limit the pool of potential acquirors of these assets, and
it is not anticipated that these properties will be widely marketable until the
expiration of both the current lease and that lease's renewal options (which
expire in 2027). BRC's investment in Real Estate Joint Ventures are similarly
illiquid, and have been structured as an investment of at least ten years (until
2010), at which time a buy/sell mechanism offers liquidity to both BRC and the
respective Operating Partners. Transfers of BRC's interest in a Real Estate
Joint Venture to parties other than the Operating Partners thereof are
constrained by the terms of the operating management agreement, buy/sell
arrangements with the Operating Partner, and lender consent requirements.
Redemptions of Fund Shares are met primarily by distributing securities
drawn from the Portfolio, although cash may also be distributed. Shareholders
generally do not have the right to receive the proceeds of Fund redemptions in
cash.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
- --------------------------------------------------------------------
(a) Quantitative Disclosure about Market Risk.
9
As noted above, the Fund may enter into cancelable interest rate swap
agreements in connection with its real estate investments and the associated
borrowings. Under such agreements, the Fund has agreed to make periodic payments
at fixed rates in exchange for payments at floating rates. The notional or
contractual amounts of these instruments may not necessarily represent the
amounts potentially subject to risk. The measurement of the risks associated
with these investments is meaningful only when considered in conjunction with
all related assets, liabilities and agreements. As of December 31, 2000, the
Fund has entered into cancelable interest rate swap agreements with Merrill
Lynch Capital Services, Inc. (MLCS). The Fund has the right to terminate the
interest rate swap agreements beginning in 2003, generally at dates
corresponding approximately to the initial call dates of the Partnership
Preference Units held by the Fund.
Unrealized Unrealized
Notional Initial Appreciation Appreciation
Amount Optional Final (Depreciation) (Depreciation)
Effective (000's Fixed Floating Termination Termination At December 31, At December 31,
Date omitted) Rate Rate Date Date 2000 1999
- ------------------------------------------------------------------------------------------------------------------------
11/98 $20,644,750 6.330% Libor+.45% 02/03 11/05 --- * $1,265,451
11/98 68,750 6.225% Libor+.45% 11/03 11/05 $1,196,307 4,445,740
11/98 24,528 6.295% Libor+.45% 5/03 11/05 411,928 1,526,923
11/98 41,368 6.310% Libor+.45% 2/03 11/05 706,962 2,562,785
02/99 40,035,410 6.545% Libor+.45% 02/03 11/05 --- * 2,079,543
02/99 9,030 6.505% Libor+.45% 3/03 11/05 102,930 483,072
02/99 21,996 6.497% Libor+.45% 4/03 11/05 244,166 1,174,226
02/99 12,970,800 6.495% Libor+.45% 06/03 11/05 --- * 688,760
02/99 20,018 6.439% Libor+.45% 11/03 11/05 199,789 1,094,309
02/99 111,000 6.407% Libor+.45% 2/04 11/05 1,082,897 6,182,680
04/99 80,000 6.555% Libor+.45% 4/04 11/05 273,503 3,868,250
04/99 16,468 6.720% Libor+.45% 2/03 11/05 88,815 731,149
04/99 4,018,230 6.716% Libor+.45% 03/03 11/05 --- * 178,049
04/99 7,844,872 6.700% Libor+.45% 04/03 11/05 --- * 350,225
04/99 8,701,753 6.692% Libor+.45% 06/03 11/05 --- * 387,326
04/99 12,671 6.618% Libor+.45% 11/03 11/05 49,102 590,442
04/99 15,105 6.590% Libor+.45% 2/04 11/05 49,789 713,143
07/99 26,516 7.308% Libor+.45% 11/03 11/05 (496,405) 420,202
07/99 40,193 7.301% Libor+.45% 2/04 11/05 (840,927) 602,342
07/99 10,109 7.237% Libor+.45% 4/04 11/05 (207,635) 171,715
07/99 155,000 7.231% Libor+.45% 7/04 11/05 (3,515,996) 2,501,920
07/99 13,199,520 7.442% Libor+.45% 04/03 11/05 --- * 174,318
07/99 5,080,903 7.349% Libor+.45% 06/03 11/05 --- * 81,759
09/99 17,674 7.700% Libor+.45% 2/04 11/05 (600,675) (45,650)
09/99 9,833 7.635% Libor+.45% 7/04 11/05 (363,677) (23,163)
09/99 5,062,185 7.840% Libor+.45% 06/03 11/05 --- * (20,784)
09/99 43,000 7.6525% Libor+.45% 9/04 11/05 (1,686,087) (169,629)
09/99 35,024 7.644% Libor+.45% 7/04 11/05 (1,306,409) (96,962)
09/99 20,009,642 7.855% Libor+.45% 06/03 11/05 --- * (118,788)
09/99 5,019,578 7.915% Libor+.45% 04/03 11/05 --- * (29,122)
09/99 212,000 7.6224% Libor+.45% 9/04 11/05 (8,156,580) (587,812)
09/99 1,907 7.580% Libor+.45% 4/04 11/05 (61,654) 3,331
------------------------------------
Total $ (12,829,857) $ 31,185,750
* Terminated during year ended December 31, 2000.
(b) Qualitative Information about Market Risk.
10
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 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
11
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
real estate investments exposes the Fund to the risk that the returns achieved
on its real estate investments will be lower than the cost of borrowing to
purchase such assets and that the leveraging of the Fund to buy such assets will
therefore diminish the returns to be achieved by the Fund as a whole. In
addition, there is a risk that the availability of financing will be interrupted
at some future time, requiring the Fund to sell assets to repay outstanding
borrowings or a portion thereof. It may be necessary to make such sales at
unfavorable prices. The Fund's obligations under the Credit Facility are secured
by a pledge of its assets. In the event of default, the lender could elect to
sell assets of the Fund without regard to consequences of such action for
Shareholders. The rights of the lender to receive payments of interest on and
repayments of principal of borrowings is senior to the rights of the
Shareholders. Under the terms of the Credit Facility, the Fund is not permitted
to make distributions of cash or securities while there is outstanding an event
of default under the Credit Facility. During such periods, the Fund would not be
able to honor redemption requests or make cash distributions.
The success of BRC's real estate investments depends in part on many
factors related to the real estate market. 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 (whether or not insured
against). Partnership Preference Units also depend upon factors relating to the
issuing partnerships that may affect such partnerships' profitability and their
ability to make distributions to holders of Partnership Preference Units. BRC's
investment in a Real Estate Joint Venture may be influenced by decisions which
the Operating Partner of such Venture may make on behalf of the property owned
thereby and potential changes in the specific real estate sub-markets in which
the properties are located. The debt of each Real Estate Joint Venture is
fixed-rate, secured by the underlying properties and with limited recourse to
BRC. However, changes in interest rates, the availability of financing and other
financial conditions can have a material impact on property values and therefore
on the value of BRC's equity interest. There can be no assurance that BRC's
ownership of real estate investments will be an economic success. Moreover, the
success of any Real Estate Joint Venture investment depends in large part upon
the performance of the Operating Partner. Operating Partners will be subject to
substantial conflicts of interest in structuring, operating and winding up the
Real Estate Joint Ventures. Operating Partners will have an economic incentive
to maximize the prices at which they sell properties to Real Estate Joint
Ventures and to minimize the prices at which they acquire properties from Real
Estate Joint Ventures. Operating Partners may devote greater attention or more
resources to managing their wholly-owned properties than properties held by Real
Estate Joint Ventures. Future investment opportunities identified by Operating
Partners will more likely be pursued independently, rather than through, the
Real Estate Joint Ventures. Financial difficulties encountered by Operating
Partners in their other businesses may interfere with the operations of Real
Estate Joint Ventures.
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
12
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. The ongoing value of BRC's investments in Real
Estate Joint Ventures, Net Lease Properties and other real property subsidiaries
will be substantially uncertain. BRC's investments in Real Estate Joint
Ventures, Net Lease Properties and other real property subsidiaries generally
will be stated at estimated market value based on independent valuations,
assuming an orderly disposition of assets. Detailed investment evaluations will
be performed annually and reviewed periodically. Interim valuations will reflect
results of operations and distributions, and may be adjusted to reflect
significant changes in economic circumstances since the most recent independent
evaluation. Fluctuations in the value of real estate investments derived from
changes in general interest rates can be expected to be offset in part (but not
entirely) by changes in the value of interest rate swap agreements or other
interest rate hedges entered into by the Fund with respect to its borrowings
under the Credit Facility. Fluctuations in the value of real estate investments
derived from other factors besides general interest rate movements (including
issuer-specific and sector-specific credit concerns, property-specific 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 real estate investments
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
The Fund's financial statements, together with the auditors' report
thereon, appearing on pages 21 through 68 of the Fund's Form 10 filed with the
Securities and Exchange Commission on April 28, 2000, are incorporated herein by
reference. The Fund's financial statements for the fiscal year ended December
31, 2000, together with the auditors' reports thereon, appearing on pages 21
through 49 hereof, are incorporated herein by reference.
ITEM 9. 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.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
- ------------------------------------------
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 more than $45 billion. EVM is a wholly-owned subsidiary of Eaton
Vance Business Trust, which is wholly-owned by 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 Eaton Vance Business Trust, EVM and 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:
13
DIRECTORS AND EXECUTIVE OFFICERS OF EATON VANCE, INC.
James B. Hawkes, (59), is Chairman, President and Chief Executive Officer
of EVM, BMR, EVC and EV and a Director of EVC and EV. He is also a Trustee and
an officer of various investment companies managed by EVM or BMR and has been
employed by the Eaton Vance organization for 30 years.
Thomas E. Faust Jr., (42), is Executive Vice President of Eaton Vance, BMR,
EVC and EV, and Chief Equity Investment Officer of Eaton Vance and BMR. He is
also an officer of various investment companies managed by Eaton Vance or BMR
and has been employed by the Eaton Vance organization for 15 years.
Alan R. Dynner, (60), is Vice President and Chief Legal Officer of EVM, BMR
and EVC, and Secretary and Clerk of EV. He is also 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.
William M. Steul, (58), is Vice President and Chief Financial Officer of
EVM, BMR, EVC and EV. He joined Eaton Vance in December 1994.
ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------
Under the terms of the Fund's investment advisory and administrative
agreement with BMR, BMR is entitled to receive 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 fiscal years ended
December 31, 1999 and 2000, the advisory and administrative fees paid by the
Fund to BMR, less the Fund's allocated share of the Portfolio's advisory fee,
totaled $6,963,463 and $6,886,754, 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 monthly distribution fee payable to
EVD, exceeds an annual rate of 0.60% of the average daily gross investment
assets of the Fund (as defined 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 fiscal years ended
December 31, 1999 and December 31, 2000, BMR waived $2,075,525 and $3,927,324,
respectively, of the advisory and administrative fee payable by the Fund.
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 this purpose, the assets and liabilities of BRC's
controlled subsidiaries are reduced by the proportionate interests therein of
investors other than BRC.) For the fiscal years ended December 31, 1999 and
2000, BRC paid BMR management fees of $3,646,587 and $6,809,483, 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)
14
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 but less than $15 billion; and 1/30
of 1% (equivalent to 0.40% annually) of the average daily net assets of the
Portfolio of $15 billion and above. As of December 31, 2000, net assets of the
Portfolio totaled $18.4 billion 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 fiscal years ended
December 31, 1999 and 2000, the advisory fee applicable to the Portfolio was
0.45% and 0.43%, respectively, of average daily net assets for such periods, and
the Fund's allocated portion of the fee amounted to $9,380,632 and $17,867,409,
respectively.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
(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 101.892 Shares of the Fund
as of March 21, 2001. None of the other entities or individuals named in
response to Item 10 above beneficially owned Shares of the Fund as of such date.
(c) Changes in Control.
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
See the information set forth under Item 11 above.
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 has assigned 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 fiscal year ended December
31, 2000, the Company paid servicing fees aggregating $6,156,044 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 has assigned 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 fiscal year ended December 31, 2000, the Fund paid
servicing fees aggregating $1,764,568.
Of the foregoing service fee amounts allocated to and incurred by the Fund,
$3,890,707 was paid to sub-agents based on the value of Shares sold by them. The
balance of such amounts was retained by EVD.
15
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 fiscal year ended December 31, 2000, the distribution fees paid or accrued
to EVD totaled $3,927,324.
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 fiscal year ended December 31, 2000, BMR received redemption fees of
$1,388,829 from the Fund on behalf of redeeming Shareholders.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
- ----------------------------------------------------------------
(a) Financial Statements.
(1) (i) The following is a list of all financial statements incorporated
by reference from the Fund's Form 10 dated April 28, 2000 into this
report:
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 Statements of Changes in Net Assets for the fiscal year
ended December 31, 1999 and for the period from the start of business,
November 24, 1998, to December 31, 1998
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
Statements of Changes in Net Assets of Tax-Managed Growth Portfolio
for the fiscal years ended December 31, 1999 and December 31, 1998
16
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
(ii) The following is a list of all financial statements filed as a
part of this report:
Portfolio of Investments as of December 31, 2000
Consolidated Statement of Assets and Liabilities as of December 31,
2000
Consolidated Statement of Operations for the fiscal year ended
December 31, 2000
Consolidated Statements of Changes in Net Assets for the fiscal years
ended December 31, 2000 and December 31, 1999
Consolidated Statement of Cash Flows for the fiscal year ended
December 31, 2000
Notes to Consolidated Financial Statements
Independent Auditors' Report dated March 9, 2001
Portfolio of Investments of Tax-Managed Growth Portfolio as of
December 31, 2000
Statement of Assets and Liabilities of Tax-Managed Growth Portfolio as
of December 31, 2000
Statement of Operations of Tax-Managed Growth Portfolio for the fiscal
year ended December 31, 2000
Statements of Changes in Net Assets of Tax-Managed Growth Portfolio
for the fiscal years ended December 31, 2000 and December 31, 1999
Supplementary Data of Tax-Managed Growth Portfolio for the fiscal
periods ended December 31, 2000, December 31, 1999, December 31, 1998
and October 31, 1998, October 31, 1997
Notes to Financial Statements
Independent Auditors' Report dated February 16, 2001
(b) Reports on Form 8-K.
None.
17
(c) 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 filed as Exhibit 3 to the Fund's Initial
Registration Statement on Form 10 and incorporated herein by
reference. (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 filed as Exhibit 4 to the Fund's Initial
Registration Statement on Form 10 and incorporated herein by
reference.
4(2) Copy of Seventh Amendment to Loan and Security Agreement dated as
of June 29, 2000 and copy of Eighth Amendment thereto dated as of
November 27, 2000 filed herewith.
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 filed as Exhibit 10(1) to the Fund's Initial Registration
Statement on Form 10 and incorporated herein by reference.
10(2) Copy of Management Agreement between Belcrest Realty Corporation
and Boston Management and Research dated November 24, 1998 filed
as Exhibit 10(2) to the Fund's Initial Registration Statement on
Form 10 and incorporated herein by reference.
10(2)(a) Copy of Amendment No. 1 to Management Agreement between Belcrest
Realty Corporation and Boston Management and Research dated as of
December 28, 1999 filed herewith.
10(3) Copy of Investor Servicing Agreement between the Fund and Eaton
Vance Distributors, Inc. dated August 14, 1998 filed as Exhibit
10(3) to the Fund's Initial Registration Statement on Form 10 and
incorporated herein by reference.
10(4) Copy of Custody and Transfer Agency Agreement between the Fund
and Investors Bank & Trust Company dated August 14, 1998 filed as
Exhibit 10(4) to the Fund's Initial Registration Statement on
Form 10 and incorporated herein by reference.
11 Not applicable and not filed.
18
12 Not applicable and not filed.
21 List of Subsidiaries of the Fund filed herewith.
24 Not applicable and not filed.
99 Form N-SAR of Eaton Vance Tax-Managed Growth Portfolio (File No.
811-7409) for its fiscal year ended December 31, 2000 filed
electronically with the Securities and Exchange Commission under
the Investment Company Act of 1940 on March 1, 2001 (Accession
No. 0000940394-01-000043) (incorporated herein by reference
pursuant to Rule 12b-32).
19
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
CONSOLIDATED PORTFOLIO OF INVESTMENTS
INVESTMENT IN BELVEDERE CAPITAL FUND
COMPANY LLC -- 71.2%
SECURITY SHARES VALUE
- ---------------------------------------------------------------
Investment in Belvedere
Capital Fund Company LLC
(Belvedere Capital) 22,331,415 $3,955,678,939
- ---------------------------------------------------------------
Total Investment in Belvedere Capital
(identified cost, $3,455,301,863) $3,955,678,939
- ---------------------------------------------------------------
PARTNERSHIP PREFERENCE UNITS -- 12.4%
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+ 1,150,000 $ 54,155,800
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+ 976,608 19,121,399
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+ 170,000 3,756,201
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+ 1,030,000 43,541,911
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 23,396,765
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 18,228,840
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 56,507,976
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 64,304,100
SECURITY UNITS VALUE
- ---------------------------------------------------------------
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 $ 26,805,960
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 24,602,400
PSA Institutional
Partners, L.P. (California
Limited Partnership
affiliate of Public
Storage, Inc.), 9.50%
Series N Cumulative
Redeemable Perpetual
Preferred Units,
Callable from 3/17/05+ 3,515,000 91,562,938
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 31,788,680
Price Development Company,
L.P. (Maryland Limited
Partnership affiliate of
J.P. Realty, Inc.), 8.95%
Series B Cumulative
Redeemable Preferred
Partnership Units,
Callable from 7/28/04+ 2,575,000 54,888,185
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+ 350,000 32,511,255
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 40,599,900
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 47,214,497
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 55,639,200
- ---------------------------------------------------------------
Total Partnership Preference Units
(identified cost, $771,557,092) $ 688,626,007
- ---------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
CONSOLIDATED PORTFOLIO OF INVESTMENTS CONT'D
OTHER REAL ESTATE INVESTMENTS -- 15.9%
DESCRIPTION VALUE
- ---------------------------------------------------------------
Rental Property(1)(2) $ 879,987,063
- ---------------------------------------------------------------
Total Rental Property
(identified cost, $879,987,063) $ 879,987,063
- ---------------------------------------------------------------
COMMERCIAL PAPER -- 0.5%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- -------------------------------------------------------------------
American Express Credit
Corp., 6.48%, 01/02/01 $ 14,405 $ 14,402,407
Corporate Asset Funding
Corp., 6.00%, 01/02/01 13,490 13,487,752
- -------------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $27,890,159) $ 27,890,159
- -------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost, $5,134,736,177) $5,552,182,168
- -------------------------------------------------------------------
+ Security exempt from registration under the Securities
Act of 1933. At December 31, 2000, the value of these
securities totaled $688,626,007, or 18.1% of net
assets.
(1) Investment valued at fair value using methods
determined in good faith by or at the direction of the
manager of Belcrest Realty Corporation.
(2) Rental property represents 63 multi-family residential
properties located in thirteen states and two suburban
office buildings located in California. None of the
individual properties represent more than 5% of net
assets.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2000
Assets
- --------------------------------------------------------
Investments, at value
(identified cost, $5,134,736,177) $5,552,182,168
Cash 10,419,784
Cash - security deposits 970,626
Dividends receivable 12,288,687
Escrow deposits - restricted 12,078,851
Prepaid and deferred expenses 6,210,987
Accounts receivable and other assets 2,982,937
Swap interest receivable 369,857
- --------------------------------------------------------
TOTAL ASSETS $5,597,503,897
- --------------------------------------------------------
Liabilities
- --------------------------------------------------------
Loan payable $1,006,250,000
Mortgage payable, net of unamortized
debt issuance costs 648,625,391
Open interest rate swap contracts, at
value 12,829,857
Security deposits 2,698,676
Accrued expenses:
Interest expense 14,713,521
Accrued property taxes 8,062,588
Other accrued expenses 4,349,200
Other liabilities 2,823,496
Minority interests in controlled
subsidiaries 90,050,037
- --------------------------------------------------------
TOTAL LIABILITIES $1,790,402,766
- --------------------------------------------------------
NET ASSETS FOR 31,646,617 SHARES
OUTSTANDING $3,807,101,131
- --------------------------------------------------------
Shareholders' Capital
- --------------------------------------------------------
SHAREHOLDERS' CAPITAL $3,807,101,131
- --------------------------------------------------------
Net Asset Value and Redemption
Price Per Share
- --------------------------------------------------------
($3,807,101,131 DIVIDED BY 31,646,617
SHARES OUTSTANDING) $ 120.30
- --------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 2000
Investment Income
- ------------------------------------------------------
Dividends allocated from Belvedere
Capital
(net of foreign taxes, $237,335) $ 35,439,620
Interest allocated from Belvedere
Capital 10,593,510
Expenses allocated from Belvedere
Capital (24,784,211)
- ------------------------------------------------------
Net investment income allocated from
Belvedere Capital $ 21,248,919
Dividends from partnership preference
units 78,704,548
Rental income 83,323,856
Interest 1,166,496
- ------------------------------------------------------
TOTAL INVESTMENT INCOME $184,443,819
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Investment advisory and administrative
fees $ 13,696,237
Distribution and servicing fees 5,691,892
Property management fees 3,167,938
Interest expense on credit facility 73,798,691
Interest expense on mortgages 32,451,872
Property and maintenance expenses 26,445,927
Property taxes and insurance 8,827,769
Legal and accounting services 1,577,327
Amortization of deferred expenses 723,873
Interest expense on swap contracts 231,044
Organizational expense 150,496
Custodian and transfer agent fees 84,195
Printing and postage 9,865
Miscellaneous 928,203
- ------------------------------------------------------
TOTAL EXPENSES $167,785,329
- ------------------------------------------------------
Deduct --
Reduction of investment adviser and
administrative fees $ 3,927,324
- ------------------------------------------------------
NET EXPENSES $163,858,005
- ------------------------------------------------------
Net investment income before minority
interests in share of net income of
controlled subsidiaries $ 20,585,814
Minority interests in net income of
controlled subsidiaries (4,397,345)
- ------------------------------------------------------
NET INVESTMENT INCOME $ 16,188,469
- ------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions from
Belvedere Capital
(identified cost basis) $117,483,431
Investment transactions in
partnership preference units
(identified cost basis) (63,944,347)
Termination of interest rate swap
contracts 6,372,900
- ------------------------------------------------------
NET REALIZED GAIN $ 59,911,984
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investment in Belvedere Capital
(identified cost basis) $(16,693,441)
Investments in partnership preference
units
(identified cost basis) 83,911,562
Interest rate swap contracts (44,015,607)
- ------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 23,202,514
- ------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 83,114,498
- ------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 99,302,967
- ------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22
BELCREST CAPITAL FUND LLC AS DECEMBER 31, 2000
CONSOLIDATED FINANCIAL STATEMENTS CONT'D
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 2000 DECEMBER 31, 1999
- ------------------------------------------------------------------------------------
Net investment income $ 16,188,469 $ 15,911,067
Net realized gain (loss) on
investment transactions 59,911,984 (20,032,514)
Net change in unrealized appreciation
(depreciation) of investments 23,202,514 351,001,290
- ------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 99,302,967 $ 346,879,843
- ------------------------------------------------------------------------------------
Transactions in Fund Shares --
Investment securities contributed $ -- $ 3,128,396,402
Less -- Selling commissions -- (11,854,961)
- ------------------------------------------------------------------------------------
Net contributions $ -- $ 3,116,541,441
Net asset value of Shares issued to
Shareholders in payment of
distributions declared 17,804,221 14,142,044
Net asset value of Shares redeemed (186,699,799) (71,057,947)
- ------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS $ (168,895,578) $ 3,059,625,538
- ------------------------------------------------------------------------------------
Distribution to Shareholders
Belcrest Capital Fund $ (39,059,995) $ (30,079,045)
Special distributions to Shareholders (4,590,391) --
Preferred Shareholders of BRC (16,800) (16,640)
Minority Shareholders of
controlled subsidiaries (251,603) --
- ------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (43,918,789) $ (30,095,685)
- ------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (113,511,400) $ 3,376,409,696
- ------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------
At beginning of year $ 3,920,612,531 $ 544,202,835
- ------------------------------------------------------------------------------------
AT END OF YEAR $ 3,807,101,131 $ 3,920,612,531
- ------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED
INCREASE (DECREASE) IN CASH DECEMBER 31, 2000
- --------------------------------------------------------------
Cash Flows From (For) Operating
Activities --
Net investment income $ 16,188,469
Adjustment to reconcile net
investment income to net cash
flows from operating
activities --
Amortization of deferred costs 723,873
Net investment income allocated
from Belvedere Capital (21,248,919)
Increase in dividends receivable (10,771,968)
Increase in deferred costs (4,766,502)
Decrease in prepaid expenses 88,039
Increase in interest receivable
for open swap contracts (42,607)
Increase in escrow deposits (3,159,846)
Increase in other assets (2,590,437)
Increase in accrued property taxes 6,414,269
Increase in accrued interest and
accrued operating expenses 1,809,339
Improvements to property (3,614,716)
Purchases of partnership
preference units (113,469,200)
Payments for investments in other
real property (147,285,488)
Cash assumed in connection with
acquisition of real estate
investments 1,605,788
Sales of partnership preference
units 392,744,753
Proceeds from terminated interest
rate swap contracts 6,372,900
Net decrease in investment in
Belvedere Capital 88,483,631
Increase in minority interest 2,000
Increase in short-term investments (27,890,159)
Minority interests in share of net
income of
controlled subsidiaries 4,397,345
- --------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 183,990,564
- --------------------------------------------------------------
Cash Flows From (For) Financing
Activities --
Repayment of Credit Facility $ (123,750,000)
Payment on mortgage (2,558,004)
Payment of distributions (24,073,636)
Payments for Fund Shares redeemed (30,486,081)
Capital contribution to controlled
subsidiaries 2,268,637
- --------------------------------------------------------------
NET CASH FLOWS USED FOR FINANCING
ACTIVITIES $ (178,599,084)
- --------------------------------------------------------------
NET INCREASE IN CASH $ 5,391,480
- --------------------------------------------------------------
CASH AT BEGINNING OF YEAR $ 5,028,304
- --------------------------------------------------------------
CASH AT END OF YEAR $ 10,419,784
- --------------------------------------------------------------
Supplemental Disclosure and Non-cash
Investing and Financing Activities
- --------------------------------------------------------------
Change in unrealized appreciation of
investments and open swap contracts $ 23,202,514
Interest paid for loan $ 76,346,426
Interest paid for mortgages $ 28,199,930
Interest paid for swap contracts $ 273,651
Market value of securities distributed
in payment of redemptions $ 158,693,354
Market value of real property and other
assets, net of current liabilities,
contributed to Fund $ 889,105,508
Mortgages assumed in conjunction with
acquisitions of real property $ 658,744,135
- --------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Organization
- -------------------------------------------
A Investment Objective -- 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
is directly and substantially affected by the performance of the Portfolio.
Separate from its investment in the Portfolio through Belvedere Capital,
Belcrest Capital invests in real estate assets including income-producing
preferred equity interests in real estate operating partnerships
(partnership preference units) affiliated with publicly-traded real estate
investment trusts (REITs) and interests in controlled real property
subsidiaries.
B Subsidiaries -- Belcrest Capital invests in real estate through its
subsidiary Belcrest Realty Corporation (BRC). BRC invests directly in
partnership preference units and indirectly in real property through its
controlled subsidiaries Bel Santa Ana LLC (BSA), Bel Alliance Properties
LLC (Bel Alliance), Bel Apartment Properties Trust (Bel Apartment) and Bel
Communities Properties Trust (Bel Communities).
BRC -- BRC invests directly in partnership preference units and also holds
a 100% interest in BSA and majority interests in Bel Alliance, Bel
Apartment and Bel Communities. At December 31, 2000, Belcrest Capital owned
100% of the common stock issued by BRC and intends to hold all of BRC's
common stock at all times. Additionally, 2,100 shares of preferred stock of
BRC are outstanding at December 31, 2000. The preferred stock has a par
value of $0.01 per share and is redeemable by BRC at a redemption price of
$100 per share after the occurrence of certain tax events or after December
31, 2004. Dividends on the preferred stock are cumulative and payable
annually equal to $8 per share. The interest in preferred stock is recorded
as a minority interest on the Consolidated Statement of Assets and
Liabilities.
BSA -- BSA, a wholly-owned subsidiary of BRC, owns two suburban office
buildings located in California. The property is leased to a single
investment-grade tenant (as rated by Standard & Poor's and Fitch IBCA)
under a triple net lease.
BEL ALLIANCE -- Bel Alliance, a majority-owned subsidiary of BRC, owns
forty-one multi-family residential properties (collectively, the Bel
Alliance Properties) located in seven states (Texas, Virginia, Maryland,
Georgia, Alabama, North Carolina, and Florida). BRC owns 100% of the Class
A units of Bel Alliance, representing 55% of the equity interests in Bel
Alliance, and a minority shareholder (the Bel Alliance Minority
Shareholder) owns 100% of the Class B units, representing 45% of the equity
interests in Bel Alliance. The Class B equity interest is recorded as a
minority interest on the Consolidated Statement of Assets and Liabilities.
The primary distinction between the two classes of shares is the
distribution priority and voting rights. BRC has priority in distributions
and has greater voting rights than the holders of the Class B units.
BEL APARTMENT -- Bel Apartment, a majority-owned subsidiary of BRC, owns
ten multi-family residential properties (collectively, the Bel Apartment
Properties) located in seven states (Texas, Arizona, Georgia, North
Carolina, Washington, Tennessee and Florida). BRC owns Class A units of Bel
Apartment, representing a 75% equity interest in Bel Apartment, and a
minority shareholder (the Bel Apartment Minority Shareholder) owns Class B
units, representing a 25% equity interest in Bel Apartment. The equity
interest of the Bel Apartment minority shareholder is recorded as a
minority interest on the Consolidated Statement of Assets and Liabilities.
The primary distinction between the two classes of shares is the
distribution priority and voting rights. BRC has priority in distributions
and has greater voting rights than the holder of Class B units.
BEL COMMUNITIES -- Bel Communities, a majority-owned subsidiary of BRC,
owns twelve multi-family residential properties (collectively, the Bel
Communities Properties) located in eleven states (Texas, Arizona, Georgia,
North Carolina, Washington, Tennessee, Minnesota, Maryland, Oregon,
Oklahoma and Florida). BRC owns Class A units of Bel Communities,
representing a 75% equity interest in Bel Communities, and a minority
shareholder (the Bel Communities Minority Shareholder) owns Class B units,
representing a 25% equity interest in Bel Communities. The equity interest
of the Bel Communities minority shareholder is recorded as a minority
interest on the Consolidated Statement of Assets and Liabilities. The
primary distinction between the two classes of shares is the distribution
priority and voting rights. BRC has priority in distributions and has
greater voting rights than the holder of Class B units.
24
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
The accompanying consolidated financial statements include the accounts of
Belcrest Capital, BRC, BSA, Bel Alliance, Bel Apartment and Bel Communities
(collectively, the Fund). All material intercompany accounts and
transactions have been eliminated.
The audited 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.
2 Significant Accounting Policies
- -------------------------------------------
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 Costs -- The Fund's investment assets were acquired through
contributions of common stock by Shareholders in exchange for Shares of
Belcrest Capital, in private purchases of partnership preference units and
real estate investments and through contributions of real estate
investments in exchange for minority interests in controlled subsidiaries.
Upon receipt of common stock from Shareholders, Belcrest Capital
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 securities are carried in the
financial statements is the value of the contributed common stock as of the
close of business on the day prior to their contribution to the Fund. 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 and financial
reporting basis of the Fund's investments in securities and real estate
purchased by the Fund is the purchase cost. The initial financial reporting
basis of the Fund's investments in real estate contributed to the Fund is
the market value on contribution date. The initial tax basis of real estate
investments contributed to the Fund is the market value on the date of
contribution, the contributor's tax basis at the time of contribution or a
combination thereof depending on the taxability of the contribution.
B Investment Valuations -- The Fund's investments consist of partnership
preference units, other real property investments, shares of Belvedere
Capital and short-term debt securities. Belvedere Capital's only 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 (Note 8). The valuation policy followed by the
Fund, Belvedere Capital and the Portfolio is as follows:
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 fair value. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, are normally 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 Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM), as investment
adviser. Interest rate swap contracts for which prices are unavailable are
valued as determined in good faith by BMR.
The value of the Fund's real estate investments is determined in good faith
by BMR, as manager of BRC, taking into account all relevant factors, data
and information, including, with respect to investments in partnership
preference units, 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. Real estate investments other than partnership preference
units are generally stated at estimated market values based upon
independent valuations assuming orderly disposition of assets. Detailed
investment valuations are performed annually and reviewed periodically and
adjusted if there has been a significant change in economic circumstances
since the previous valuation.
C Interest Rate Swaps -- The Fund has entered into interest rate swap
agreements with respect to its borrowings and real estate investments.
Pursuant to these agreements, the Fund makes quarterly payments to the
counterparty at predetermined fixed rates, in exchange for floating-rate
payments from the counterparty at a predetermined spread to three-month
LIBOR. During the terms of the outstanding swap agreements, changes in the
25
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
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.
D 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 of the respective
entity 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.
E 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 of the respective entity 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.
F Rental Operations -- The apartment units held by Bel Alliance are leased to
residents generally for terms of one year or less, with monthly payments
due in advance. The apartment units held by Bel Apartment and Bel
Communities are leased to residents generally for a term of one year
renewable upon consent of both parties on a year-to-year or month-to-month
basis. The office property held by BSA is leased for a remaining term of
approximately 15 years with options to extend such lease for two additional
six-year periods.
The escrow accounts related to Bel Alliance, Bel Apartment and Bel
Communities consist of deposits for real estate taxes, insurance,
environmental, renovation, reserve for replacements and capital repairs
required under mortgage agreements, debt service and security deposit
accounts. Bel Alliance, Bel Apartment and Bel Communities have no access to
these funds once deposited into the escrow accounts. Amounts are held by
the respective financial institutions and controlled by the lender (Note
9).
Costs incurred in connection with acquisitions of properties have been
capitalized. Significant betterments and improvements are capitalized as
part of the building and improvements.
G Income -- Dividend income is recorded on the ex-dividend date and interest
and rental 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 and indirect investments (including partnership preference
units and other real property), less all actual and accrued expenses of the
Fund determined in accordance with generally accepted accounting
principles.
H Deferred Costs -- 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. Deferred mortgage origination expenses incurred in connection with
the financing of Bel Alliance, Bel Apartment and Bel Communities are
amortized over the terms of the respective loans.
I 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. The policy of BRC, Bel Alliance, Bel Apartment and Bel
Communities is to comply with the Internal Revenue Code applicable to
REITs. BRC, Bel Alliance, Bel Apartment and Bel Communities will generally
not be subject to federal income tax to the extent that they distribute
their earnings to their stockholders each year and maintain their
qualification as a REIT. BSA is a single member limited liability company
treated as a pass-through entity for federal tax purposes.
26
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
J Other -- Investment transactions are accounted for on a trade date basis.
K 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.
3 Distributions to Shareholders
- ------------------------------------
The Fund intends to distribute 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
special distribution to compensate Shareholders receiving such
distributions for taxes that may be due in connection with the
precontribution gain and supplemental distributions. Special distributions
paid during the year ended December 31, 2000 totaled $4,590,391.
In addition, BRC, Bel Alliance, Bel Apartment and Bel Communities intend to
distribute substantially all of their taxable income earned by the
respective entities during the year.
4 Shareholder Transactions
- -------------------------------------------
The Fund may issue an unlimited number of full and fractional Fund Shares.
Transactions in Fund Shares, including contributions of securities and cash
in exchange for Shares of the Fund, were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------------------------------------------------------------------
Issued at Fund closings -- 28,369,256
Issued to Shareholders electing to
receive payment of distributions in
Fund Shares 146,075 127,006
Redemptions (1,506,844) (637,734)
----------------------------------------------------------------------------
NET INCREASE (DECREASE) (1,360,769) 27,858,528
----------------------------------------------------------------------------
Redemptions of Fund 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 Eaton Vance Distributors, Inc.(EVD) 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 offer or other extraordinary corporate
event 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, 2000 EVD received
$1,388,829 in redemption fees.
In connection with the offering of Shares, 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.
5 Investment Transactions
- -------------------------------------------
Increases and decreases of the Fund's investment in Belvedere Capital for
the year ended December 31, 2000 aggregated $142,279,521 and $389,456,506,
respectively. Purchases and sales of partnership preference units
aggregated $113,469,200 and $392,744,753, respectively, for the year ended
December 31, 2000. Acquisitions of other real property, through purchases
and contributions, totaled $147,285,488 for the year ended December 31,
2000.
Sales of partnership preference units for the year ended December 31, 2000
include amounts sold to other funds sponsored by EVM.
6 Indirect Investment in Portfolio
- -------------------------------------------
Belvedere Capital's interest in the Portfolio at December 31, 2000, was
$9,944,343,179, representing 54.1% of the Portfolio's net assets. The
Fund's investment in Belvedere Capital at December 31, 2000 was
$3,955,678,939, representing 39.8% of Belvedere Capital's net assets.
Investment income allocated to Belvedere Capital from the Portfolio for the
year ended December 31, 2000 totaled $100,027,958, of which $46,033,130 was
allocated to the Fund. Expenses allocated to Belvedere Capital from the
Portfolio for the year ended December 31, 2000 totaled $39,931,120, of
which $18,450,386 was allocated to the Fund. Belvedere Capital allocated
additional expenses to the Fund of $6,333,825 for the year
27
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
ended December 31, 2000, representing $177,781 of operating expenses and
$6,156,044 of service fees (Note 10).
7 Rental Property
- -------------------------------------------
The average occupancy rate for real property held by Bel Alliance,
consisting of 13,833 residential units, was approximately 93% at December
31, 2000. The average occupancy rate for real property held by Bel
Apartment, consisting of 2,530 residential units, was approximately 95% at
December 31, 2000. The average occupancy rate for real property held by Bel
Communities, consisting of 2,624 residential units, was approximately 96%
at December 31, 2000. The real property held by BSA, consisting of two
suburban office buildings, was 100% occupied at December 31, 2000. The
value of real property owned by the Fund through BSA, Bel Alliance, Bel
Apartment and Bel Communities at December 31, 2000, is as follows:
Land $160,169,027
Buildings, improvements and
other assets 719,818,036
------------------------------------------------------
VALUE $879,987,063
------------------------------------------------------
8 Cancelable Interest Rate Swap Agreements
- -------------------------------------------
The Fund has entered into cancelable interest rate swap agreements in
connection with its real estate investments and the associated borrowings.
Under such agreements, the Fund has agreed to make periodic payments at
fixed rates in exchange for payments at floating rates. The notional or
contractual amounts of these instruments may not necessarily represent the
amounts potentially subject to risk. The measurement of the risks
associated with these investments is meaningful only when considered in
conjunction with all related assets, liabilities and agreements. As of
December 31, 2000, the Fund has entered into cancelable interest rate swap
agreements with Merrill Lynch Capital Services, Inc.
NOTIONAL INITIAL UNREALIZED
AMOUNT OPTIONAL FINAL APPRECIATION
EFFECTIVE (000'S FIXED FLOATING TERMINATION TERMINATION (DEPRECIATION)
DATE OMITTED) RATE RATE DATE DATE AT DECEMBER 31, 2000
------------------------------------------------------------------------------------------------
11/98 68,750 6.225% Libor + .45% 11/24/03 11/24/05 $ 1,196,307
11/98 24,528 6.295% Libor + .45% 05/24/03 11/24/05 411,928
11/98 41,368 6.310% Libor + .45% 02/24/03 11/24/05 706,962
02/99 9,030 6.505% Libor + .45% 03/04/03 11/24/05 102,930
02/99 21,996 6.497% Libor + .45% 04/20/03 11/24/05 244,166
02/99 20,018 6.439% Libor + .45% 11/24/03 11/24/05 199,789
02/99 111,000 6.407% Libor + .45% 02/23/04 11/24/05 1,082,897
04/99 80,000 6.555% Libor + .45% 04/28/04 11/24/05 273,503
04/99 16,468 6.720% Libor + .45% 02/06/03 11/24/05 88,815
04/99 12,671 6.618% Libor + .45% 11/24/03 11/24/05 49,102
04/99 15,105 6.590% Libor + .45% 02/23/04 11/24/05 49,789
07/99 26,516 7.308% Libor + .45% 11/24/03 11/24/05 (496,405)
07/99 40,193 7.301% Libor + .45% 02/23/04 11/24/05 (840,927)
07/99 10,109 7.237% Libor + .45% 04/29/04 11/24/05 (207,635)
07/99 155,000 7.231% Libor + .45% 07/28/04 11/24/05 (3,515,996)
09/99 17,674 7.700% Libor + .45% 02/23/04 11/24/05 (600,675)
09/99 9,833 7.635% Libor + .45% 07/28/04 11/24/05 (363,677)
09/99 43,000 7.6525% Libor + .45% 09/17/04 11/24/05 (1,686,087)
09/99 35,024 7.644% Libor + .45% 07/28/04 11/24/05 (1,306,409)
09/99 212,000 7.6224% Libor + .45% 09/28/04 11/24/05 (8,156,580)
09/99 1,907 7.580% Libor + .45% 04/29/04 11/24/05 (61,654)
------------------------------------------------------------------------------------------------
TOTAL $ (12,829,857)
------------------------------------------------------------------------------------------------
28
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
9 Debt
- -------------------------------------------
A Mortgages -- Rental property held by the Fund is financed through various
mortgages issued to the real estate subsidiaries. Mortgages payable are
reported on the Consolidated Statement of Assets and Liabilities net of
unamortized debt issuance costs. A description of the mortgages issued to
each of the real estate subsidiaries, excluding unamortized debt issuance
costs, is as follows:
Real property held by Bel Alliance is financed through loans collateralized
by its real estate assets, mortgage loan deposit accounts, including all
sub-accounts thereunder, and an assignment of certain leases and rents.
Balances at December 31, 2000 are as follows:
MONTHLY
ANNUAL PRINCIPAL AND
INTEREST INTEREST BALANCE AT
MATURITY DATE RATE PAYMENT DECEMBER 31, 2000
----------------------------------------------------------------------------
April 1, 2010 8.560% $ 213,139 $ 27,458,402
January 1, 2028 7.143% 418,459 60,083,860
July 1, 2009 7.740% 235,286 32,524,700
April 1, 2010 8.640% 308,577 39,466,760
April 1, 2010 8.640% 236,624 30,264,010
April 1, 2010 8.560% 224,163 28,878,713
April 1, 2010 8.560% 173,885 22,401,406
May 1, 2009 7.250% 36,155 5,228,274
February 1, 2009 7.220% 313,618 45,348,838
February 1, 2009 7.220% 332,517 48,081,581
July 1, 2009 7.830% 277,228 38,001,415
----------------------------------------------------------------------------
$2,769,651 $377,737,959
----------------------------------------------------------------------------
Real property held by Bel Apartment is financed through a loan secured by
cross-collateralized first mortgage liens on such real property. The
balance at December 31, 2000 is as follows:
ANNUAL MONTHLY
INTEREST INTEREST BALANCE AT
MATURITY DATE RATE PAYMENT* DECEMBER 31, 2000
----------------------------------------------------------------------------
May 1, 2010 8.330% $745,323 $107,369,483
* Mortgage provides for monthly payments of interest only through May 1,
2010, with the entire principal balance due on May 1, 2010.
Real property held by Bel Communities is financed through a loan secured by
cross-collateralized first mortgage liens on such real property. The
balance at December 31, 2000 is as follows:
ANNUAL MONTHLY
INTEREST INTEREST BALANCE AT
MATURITY DATE RATE PAYMENT* DECEMBER 31, 2000
----------------------------------------------------------------------------
December 1, 2010 7.540% $760,283 $121,000,000
* Mortgage provides for monthly payments of interest only through December 1,
2010, with the entire principal balance due on December 1, 2010.
Real property held by BSA is financed through a loan collateralized by its
real property. The balance at December 31, 2000 is as follows:
MONTHLY
ANNUAL PRINCIPAL AND
INTEREST INTEREST BALANCE AT
MATURITY DATE RATE PAYMENT** DECEMBER 31, 2000
----------------------------------------------------------------------------
July 10, 2015 7.180% $337,500 $50,078,689
** Amount indicates current monthly loan payment. Amount increases as rental
payments under lease agreement with property tenant increases.
Scheduled repayments of mortgages, excluding unamortized debt issuance
costs, for the years subsequent to December 31, 2000, are as follows:
YEARS ENDING DECEMBER 31, AMOUNT
------------------------------------------------------
2001 $ 3,797,253
2002 4,100,974
2003 4,429,166
2004 5,611,627
2005 6,077,951
Thereafter 632,169,160
------------------------------------------------------
$656,186,131
------------------------------------------------------
B Credit Facility -- Belcrest Capital has obtained a $1,150,000,000 Credit
Facility with a term of seven years from Merrill Lynch International Bank
Limited. Belcrest Capital's obligations under the Credit Facility are
secured by a pledge of its assets, excluding the assets of BSA, Bel
Alliance, Bel Apartment and Bel Communities. Interest on borrowed funds is
based on the prevailing LIBOR rate for the respective interest period plus
a spread of 0.45% per annum. Belcrest Capital may borrow for interest
periods of one month to five years. In addition, Belcrest Capital pays a
commitment fee at a rate of 0.10% per annum on the unused amount of the
loan commitment. Borrowings under the Credit Facility have been used to
purchase qualifying assets, pay selling commissions and organizational
expenses, and to provide for the short-term liquidity needs of Belcrest
Capital. Additional borrowings under the Credit Facility may be made in the
future for these purposes. At December 31, 2000, amounts outstanding under
the Credit Facility totaled $1,006,250,000.
29
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
10 Management Fees and Other Transactions with Affiliates
- -------------------------------------------
The Fund and the Portfolio have engaged BMR 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, 2000, the
advisory fee applicable to the Portfolio was 0.43% of average daily net
assets. Belvedere Capital's allocated portion of the advisory fee was
$38,608,769 of which $17,867,409 was allocated to the Fund for the year
ended December 31, 2000. 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 amount of money borrowed). BRC pays BMR a monthly
management fee at a rate of 1/20 of 1% (equivalent to 0.60% annually) of
the average daily gross investment assets of BRC (which consist of all
assets of BRC minus the sum of BRC's liabilities other than the principal
amount of money borrowed. For this purpose, the assets and liabilities of
BRC's controlled subsidiaries are reduced by the proportionate interests
therein of investors other than BRC). The advisory fee payable by the
Portfolio in respect of Belcrest Capital's indirect investment in the
Portfolio is credited toward the Fund's advisory and administrative fee
payment. For the year ended December 31, 2000, the advisory and
administrative fee payable to BMR by the Fund, less the Fund's allocated
share of the Portfolio's advisory fee, totaled $13,696,237.
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 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 $13,327,074 for the year ended December 31,
2000, of which $6,156,044 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, 2000, the servicing fee paid directly by Belcrest
Capital totaled $1,764,568. Of the amounts allocated to and incurred by the
Fund, for the year ended December 31, 2000, $3,890,707 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, 2000,
Belcrest Capital's distribution fees paid or accrued to EVD totaled
$3,927,324. 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
(other than Belcrest Capital's investment in BRC), 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, 2000, BMR has waived $3,927,324 of
the advisory and administrative fee of Belcrest Capital.
Bel Alliance indirectly holds real property through eleven operating
partnerships. Each operating partnership has entered into or assumed a
management agreement with an affiliate of the Bel Alliance Minority
Shareholder (Note 1B). The management agreements provide for a management
fee and allows for reimbursement to the manager for all direct expenses
incurred by the manager for managing the Bel Alliance Properties. For the
period from inception, March 17, 2000 to December 31, 2000, Bel Alliance
paid or accrued property management fees amounting to $2,660,398.
An affiliate of the Bel Apartment Minority Shareholder (Note 1B) provides
day-to-day management of Bel Apartment pursuant to a management agreement.
The management agreement provides for a management fee and allows for
reimbursement of payroll expenses incurred by the manager in conjunction
with managing Bel Apartment Properties. For the period from inception, June
30, 2000 to December 31, 2000, Bel Apartment paid or accrued property
management fees amounting to $429,647.
An affiliate of the Bel Communities Minority Shareholder (Note 1B) provides
day-to-day management of Bel Communities pursuant to a management
agreement. The management agreement provides for a management fee and
allows for reimbursement of payroll expenses incurred by the manager in
conjunction with managing Bel Communities Properties. For the period from
inception, November 28, 2000 to December 31, 2000, Bel Communities paid or
accrued property management fees amounting to $77,893.
30
BELCREST CAPITAL FUND LLC AS OF DECEMBER 31, 2000
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS
OF BELCREST CAPITAL FUND LLC AND SUBSIDIARIES
- ---------------------------------------------
We have audited the accompanying consolidated statement of assets and
liabilities, including the consolidated portfolio of investments, of Belcrest
Capital Fund LLC and Subsidiaries, (collectively, the Fund) as of December 31,
2000, and the related consolidated statements of operations and cash flows for
the year then ended and the consolidated statement of changes in net assets for
the two years then ended. 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 auditing standards generally accepted
in the United States of America. 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, 2000 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, 2000, 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 the two years then ended in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 9, 2001
31
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS
COMMON STOCKS -- 98.1%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Advertising and Marketing Services -- 3.4%
- --------------------------------------------------------------------------
ACNielsen Corp.(1) 66,001 $ 2,392,536
Advo, Inc.(1) 670,000 29,731,250
Catalina Marketing Corp.(1) 76,714 2,987,051
Harte-Hanks Communications, Inc. 135,487 3,209,348
Havas Advertising ADR(1) 2,431,419 34,343,793
IMS Health, Inc. 498,012 13,446,324
Interpublic Group Cos., Inc. 3,641,817 155,004,836
Lamar Advertising Co.(1) 857,818 33,106,456
Omnicom Group, Inc. 3,174,478 263,084,864
TMP Worldwide, Inc.(1) 119,580 6,576,900
TMP Worldwide, Inc.(1)(2)(3) 34,846 1,916,128
True North Communications, Inc. 499,879 21,244,857
Valassis Communications, Inc.(1) 975,000 30,773,438
Ventiv Health, Inc.(1) 160,833 2,020,465
WPP Group PLC 488,000 6,356,639
WPP Group PLC ADR 155,310 9,755,409
- --------------------------------------------------------------------------
$ 615,950,294
- --------------------------------------------------------------------------
Aerospace and Defense -- 0.8%
- --------------------------------------------------------------------------
Boeing Company (The) 1,634,544 $ 107,879,904
Boeing Company (The)(2)(3) 250,000 16,478,344
Honeywell International, Inc. 284,652 13,467,598
Northrop Grumman Corp. 67,538 5,605,654
Raytheon Co., Class B 213,564 6,633,832
Teledyne Technologies, Inc.(1) 6,117 144,514
- --------------------------------------------------------------------------
$ 150,209,846
- --------------------------------------------------------------------------
Apparel and Textiles -- 0.0%
- --------------------------------------------------------------------------
Shaw Industries, Inc. 325,000 $ 6,154,687
Unifi, Inc.(1) 51,208 457,671
- --------------------------------------------------------------------------
$ 6,612,358
- --------------------------------------------------------------------------
Auto and Parts -- 0.2%
- --------------------------------------------------------------------------
Aftermarket Technology Corp.(1) 46,000 $ 100,625
Borg-Warner Automotive, Inc. 230,270 9,210,800
DaimlerChrysler 19,952 822,022
Dana Corp. 46,137 706,473
Delphi Automotive Systems 6,128 68,940
Ford Motor Co. 240,055 5,626,289
General Motors Corp. 13,596 692,546
Genuine Parts Co. 147,059 3,851,108
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Auto and Parts (continued)
- --------------------------------------------------------------------------
Harley-Davidson, Inc. 49,700 $ 1,975,575
Honda Motor Co. Ltd. ADR 5,000 369,375
SPX Corp.(1) 47,862 5,178,070
TRW, Inc. 2,000 77,500
Visteon Corp. 15,135 174,053
- --------------------------------------------------------------------------
$ 28,853,376
- --------------------------------------------------------------------------
Banks - Money Center -- 0.4%
- --------------------------------------------------------------------------
Bank of Montreal 136,928 $ 7,214,394
Chase Manhattan Corp.(1) 459,027 20,857,039
Morgan (J.P.) & Co., Inc. 218,780 36,208,090
Royal Bank of Scotland Group PLC 51,201 1,209,977
Royal Bank of Scotland
Group PLC (A.V.S.)(1) 50,837 63,033
- --------------------------------------------------------------------------
$ 65,552,533
- --------------------------------------------------------------------------
Banks - Regional -- 5.9%
- --------------------------------------------------------------------------
AmSouth Bancorporation 692,177 $ 10,555,699
Associated Banc-Corp. 624,922 18,982,006
Bank of America Corp. 1,327,437 60,896,173
Bank of Granite Corp. 22,500 523,125
Bank of New York Co., Inc. (The) 359,398 19,834,277
Bank One Corp. 1,238,985 45,377,826
Bank United Corp. 102,072 6,960,035
Banknorth Group, Inc. 65,720 1,310,292
BB&T Corp. 695,376 25,946,217
City National Corp. 130,000 5,045,625
Colonial Bancgroup, Inc. (The) 396,090 4,257,967
Comerica, Inc. 155,041 9,205,559
Commerce Bancshares, Inc. 142,938 6,074,846
Community First Bancshares, Inc. 418,000 7,889,750
Compass Bancshares, Inc. 306,668 7,321,698
Fifth Third Bancorp 447,549 26,741,053
First Citizens BancShares, Inc. 65,900 5,321,425
First Financial Bancorp. 51,393 873,681
First Midwest Bancorp, Inc. 458,929 13,194,209
First Tennessee National Corp. 33,488 969,059
First Union Corp. 1,237,805 34,426,452
Firstar Corp. 2,808,435 65,296,114
FleetBoston Financial Corp. 2,808,399 105,490,487
Hibernia Corp., Class A 63,017 803,467
Huntington Bancshares, Inc. 400,000 6,475,000
Keycorp 500,764 14,021,392
SEE NOTES TO FINANCIAL STATEMENTS
32
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Banks - Regional (continued)
- --------------------------------------------------------------------------
M&T Bank Corp. 20,000 $ 1,360,000
Marshall and Ilsley Corp. 50,410 2,562,340
Mellon Financial Corp. 206,912 10,177,484
National City Corp. 442,706 12,727,797
National Commerce Bancorporation 1,072,894 26,554,126
Northern Trust Corp. 1,363,796 111,234,611
Old Kent Financial Corp. 79,943 3,497,506
PNC Bank Corp. 145,615 10,638,996
Popular, Inc. 716 18,840
Regions Financial Corp. 1,284,408 35,080,394
S&T Bancorp, Inc. 100,000 2,162,500
SouthTrust Corp. 76,101 3,096,359
Southwest Bancorporation of
Texas, Inc.(1) 215,601 9,257,368
Sovereign Bancorporation, Inc. 442,584 3,595,995
State Street Corp. 64,000 7,949,440
Summit Bancorp. 176,081 6,724,093
SunTrust Banks, Inc. 201,151 12,672,513
Synovus Financial 945,437 25,467,709
U.S. Bancorp. 457,914 13,365,365
Union Planters Corp. 87,070 3,112,752
Valley National Bancorp. 305,241 10,168,341
Wachovia Corp. 132,559 7,704,992
Washington Mutual, Inc. 138,506 7,349,475
Wells Fargo & Co. 4,057,454 225,949,470
Westamerica Bancorporation 266,506 11,459,758
Whitney Holding Corp. 253,297 9,197,847
Zions Bancorporation 137,571 8,589,589
- --------------------------------------------------------------------------
$ 1,085,469,094
- --------------------------------------------------------------------------
Beverages -- 2.6%
- --------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 2,128,699 $ 96,855,804
Coca-Cola Company (The) 2,078,457 126,655,974
Coca-Cola Enterprises, Inc. 264,724 5,029,756
Panamerican Beverages, Inc., Class A 80,000 1,135,000
PepsiCo, Inc. 5,023,110 248,957,889
- --------------------------------------------------------------------------
$ 478,634,423
- --------------------------------------------------------------------------
Broadcasting and Cable -- 1.2%
- --------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group(1) 1,385,714 $ 18,793,746
AT&T Corp. - Liberty Media Group,
Class B(1) 32,876 616,425
Cablevision Systems Corp. (1)(2)(3) 130,000 11,032,213
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Broadcasting and Cable (continued)
- --------------------------------------------------------------------------
Clear Channel Communications, Inc.(1) 467,378 $ 22,638,622
Comcast Corp., Class A(1) 1,736,177 72,485,390
Cox Communications, Inc., Class A(1) 608,036 28,311,676
Gaylord Entertainment Co.(1) 428,482 8,944,562
General Motors Corp., Class H(1) 1,175,262 27,031,026
Infinity Broadcasting Corp.(1) 34,500 963,844
Univision Communications, Inc.(1) 663,184 27,149,095
Westwood One, Inc.(1) 122,400 2,363,850
- --------------------------------------------------------------------------
$ 220,330,449
- --------------------------------------------------------------------------
Building Materials and Tools -- 0.6%
- --------------------------------------------------------------------------
American Standard Companies, Inc.(1) 172,899 $ 8,526,082
CRH PLC 262,701 4,888,340
Interface, Inc. 422,412 3,669,704
Masco Corp. 2,278,653 58,532,899
Sherwin-Williams Co. (The) 80,069 2,106,816
Snap-On, Inc. 71,795 2,001,286
Valspar Corp. 620,000 19,951,600
Vulcan Materials Co. 49,689 2,378,861
- --------------------------------------------------------------------------
$ 102,055,588
- --------------------------------------------------------------------------
Business Services - Miscellaneous -- 0.6%
- --------------------------------------------------------------------------
ANC Rental Corp.(1) 689,786 $ 2,414,251
Century Business Services, Inc.(1) 400,000 450,000
Cintas Corp. 1,103,661 58,700,969
Concord EFS, Inc.(1) 213,905 9,398,451
Fair, Isaac and Co., Inc. 238,828 12,180,228
Gartner Group, Inc.(1) 3,000 20,700
Gartner Group, Inc., Class B(1) 92,416 585,917
Half (Robert) International, Inc.(1) 3,600 95,400
Manpower, Inc. 110,000 4,180,000
Navigant Consulting, Inc.(1) 496,795 1,894,031
Navigant International, Inc.(1) 59,630 484,494
ServiceMaster Co. 695,430 7,997,445
Spherion Corp.(1) 90,000 1,018,125
Staff Leasing, Inc.(1) 156,250 468,750
Sylvan Learning Systems, Inc.(1) 815,396 12,078,053
United Rentals, Inc.(1) 342,099 4,596,955
Viad Corp. 40,314 927,222
- --------------------------------------------------------------------------
$ 117,490,991
- --------------------------------------------------------------------------
Chemicals -- 0.6%
- --------------------------------------------------------------------------
Ashland, Inc. 106,674 $ 3,828,530
SEE NOTES TO FINANCIAL STATEMENTS
33
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Chemicals (continued)
- --------------------------------------------------------------------------
Bayer AG ADR 40,000 $ 2,106,764
Dow Chemical Co. (The) 150,501 5,512,099
DuPont (E.I.) de Nemours & Co. 1,054,446 50,942,922
Eastman Chemical Co. 148 7,215
Monsanto Co.(1) 1,810,000 48,983,125
Solutia, Inc. 99,629 1,195,548
Syngenta AG ADR (1) 10,030 109,703
- --------------------------------------------------------------------------
$ 112,685,906
- --------------------------------------------------------------------------
Communications Equipment -- 2.9%
- --------------------------------------------------------------------------
3Com Corp.(1) 873,949 $ 7,428,566
ADC Telecommunications, Inc.(1) 937,781 16,997,280
Advanced Fibre Communication, Inc.(1) 15,000 270,937
Alcatel S.A. ADR 43,728 2,446,035
Avaya, Inc.(1) 48,028 495,289
Avaya, Inc.(1)(2)(3) 25,000 257,774
CIENA Corp.(1) 702,026 57,039,612
Comverse Technology, Inc.(1) 386,378 41,970,310
Corning, Inc. 930,112 49,121,540
JDS Uniphase Corp.(1) 266,080 11,092,210
Lucent Technologies, Inc. 496,773 6,706,435
Lucent Technologies, Inc.(2)(3) 300,000 4,049,613
Marconi PLC 674,246 7,248,958
Motorola, Inc. 1,286,001 26,041,520
Nokia Corp., Class A, ADR 3,891,143 169,264,720
Nortel Networks Corp. 2,152,570 69,016,776
Qualcomm, Inc.(1) 344,112 28,281,705
Salient 3 Communications, Inc., Class A 78,125 185,547
Telefonaktiebolaget LM Ericsson,
Class B ADR 1,816,000 20,316,500
Tellabs, Inc.(1) 353,998 20,000,887
- --------------------------------------------------------------------------
$ 538,232,214
- --------------------------------------------------------------------------
Communications Services -- 2.4%
- --------------------------------------------------------------------------
Alltel Corp. 1,315,181 $ 82,116,614
Alltel Corp.(2)(3) 30,000 1,872,732
American Tower Corp., Class A(1) 145,509 5,511,153
AT&T Corp. 1,564,226 27,080,663
BCE, Inc. 80,269 2,322,784
BellSouth Corp. 699,286 28,627,021
Broadwing, Inc.(1) 764,587 17,442,141
Citizens Communications Co.(1) 59,563 781,764
Global Crossing Ltd.(1) 124,289 1,778,886
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Communications Services (continued)
- --------------------------------------------------------------------------
Intermedia Communications, Inc.(1) 403,275 $ 2,898,539
ITC Deltacom, Inc.(1) 1,118,041 6,026,912
McLeodUSA, Inc.(1) 1,523,959 21,525,919
McLeodUSA, Inc.(1)(2)(3) 150,000 2,116,102
McLeodUSA, Inc.(1)(2)(3) 231,562 3,267,951
Nextel Communications, Inc., Class A(1) 221,782 5,489,104
NTL, Inc.(1) 400,391 9,584,351
PTEK Holdings, Inc.(1) 28,000 40,250
Qwest Communications International(1) 81,903 3,358,023
RSL Communications Ltd.(1) 747,161 127,017
SBC Communications, Inc. 1,587,062 75,782,210
Sprint Corp. 1,315,630 26,723,734
Sprint Corp., PCS Group(1) 815,754 16,671,972
Talk.com, Inc.(1) 247,376 355,603
Telecom Corp. of New Zealand Ltd. ADR 8,000 133,500
Telephone & Data Systems, Inc. 131,756 11,858,040
Verizon Communications, Inc. 180,425 9,043,803
Vodafone Group PLC ADR 40,745 1,459,180
Voicestream Wireless
Corporation(1)(2)(3) 395,175 39,590,515
Winstar Communications, Inc.(1) 17,136 200,277
WorldCom, Inc.(1) 2,372,008 33,356,363
- --------------------------------------------------------------------------
$ 437,143,123
- --------------------------------------------------------------------------
Computer Software -- 3.4%
- --------------------------------------------------------------------------
Adobe Systems, Inc. 231,936 $ 13,495,776
BMC Software, Inc.(1) 35,000 490,000
Cadence Design Systems, Inc.(1) 956,000 26,290,000
Cognos, Inc.(1) 77,000 1,448,562
Computer Associates International, Inc. 32,395 631,702
Compuware Corp.(1) 2,800 17,500
CSG Systems International, Inc.(1) 41,116 1,929,882
Edwards (J.D.) & Co.(1) 891,844 15,885,971
HNC Software, Inc.(1) 477,794 14,184,509
I2 Technologies, Inc.(1) 363,180 19,747,912
Intuit, Inc.(1) 1,157,751 45,658,805
Microsoft Corp.(1) 4,197,398 182,062,138
Oracle Corp.(1) 3,674,035 106,776,642
Parametric Technology Corp.(1) 94,600 1,271,187
PeopleSoft, Inc.(1) 475,770 17,692,697
Retek, Inc.(1) 593,916 14,476,703
Safeguard Scientific, Inc.(1) 26,579 176,086
Sapient Corp.(1) 2,049,828 24,469,822
Siebel Systems, Inc.(1) 1,728,628 116,898,468
SEE NOTES TO FINANCIAL STATEMENTS
34
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Computer Software (continued)
- --------------------------------------------------------------------------
Synavant, Inc.(1) 24,900 $ 116,719
Veritas Software Corp.(1) 88,142 7,712,440
Wind River Systems, Inc.(1) 220,537 7,525,825
- --------------------------------------------------------------------------
$ 618,959,346
- --------------------------------------------------------------------------
Computers and Business Equipment -- 4.7%
- --------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 89,660 $ 1,350,504
Cisco Systems, Inc.(1) 5,542,579 212,003,647
Compaq Computer Corp. 74,641 1,123,347
Dell Computer Corp.(1) 3,518,058 61,346,136
EMC Corp.(1) 644,183 42,838,169
Gateway, Inc.(1) 1,111,743 20,000,257
Hewlett-Packard Co. 1,153,153 36,396,392
IDX Systems Corp.(1) 60,000 1,500,000
International Business Machines Corp. 667,872 56,769,120
Jabil Circuit, Inc.(1) 45,958 1,166,184
Jabil Circuit, Inc.(1)(2)(3) 2,082,013 52,806,866
Lexmark International, Inc.(1) 5,036,940 223,199,404
Network Appliance, Inc.(1) 488,000 31,323,500
Palm, Inc.(1) 1,298,491 36,763,526
Pitney Bowes, Inc. 67,682 2,241,966
Solectron Corp.(1) 1,068,848 36,233,947
Solectron Corp.(1)(2)(3) 500,000 16,942,231
Solectron Corp.(1)(2)(3) 250,000 8,467,584
Sun Microsystems, Inc.(1) 503,430 14,033,111
Sun Microsystems, Inc.(1)(2)(3) 47,490 1,323,253
Xerox Corp. 40,742 188,432
Zebra Technologies Corp.(1) 6,000 244,781
- --------------------------------------------------------------------------
$ 858,262,357
- --------------------------------------------------------------------------
Conglomerates -- 2.3%
- --------------------------------------------------------------------------
General Electric Co. 5,253,671 $ 251,847,854
Tyco International Ltd. 1,186,995 65,878,222
United Technologies Corp. 1,391,354 109,395,208
Vivendi Universal ADR 8,000 522,500
- --------------------------------------------------------------------------
$ 427,643,784
- --------------------------------------------------------------------------
Consumer Services -- 0.1%
- --------------------------------------------------------------------------
Block (H&R), Inc. 366,177 $ 15,150,573
Cendant Corp.(1) 187,999 1,809,490
Service Corp. International(1) 145,389 254,431
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Consumer Services (continued)
- --------------------------------------------------------------------------
Stewart Enterprises, Inc. 114,000 $ 217,318
- --------------------------------------------------------------------------
$ 17,431,812
- --------------------------------------------------------------------------
Containers and Packaging -- 0.1%
- --------------------------------------------------------------------------
Bemis Co., Inc. 91,000 $ 3,054,187
Sealed Air Corp.(1) 474,914 14,484,877
Sonoco Products Co. 122,135 2,641,169
- --------------------------------------------------------------------------
$ 20,180,233
- --------------------------------------------------------------------------
Distribution Services -- 1.4%
- --------------------------------------------------------------------------
Airgas, Inc.(1) 536,219 $ 3,652,992
Arrow Electronics, Inc.(1) 8,750 250,469
Cardinal Health, Inc. 967,387 96,375,930
Cardinal Health, Inc.(2)(3) 24,100 2,397,811
McKesson HBOC, Inc. 166,692 5,982,576
MSC Industrial Direct Co.(1) 5,000 90,312
School Specialty, Inc.(1) 66,255 1,329,241
Sysco Corp. 4,743,436 142,303,080
Sysco Corp.(2)(3) 99,028 2,969,478
Sysco Corp.(2)(3) 44,744 1,340,558
- --------------------------------------------------------------------------
$ 256,692,447
- --------------------------------------------------------------------------
Drugs and Drug Development -- 10.1%
- --------------------------------------------------------------------------
Abbott Laboratories 3,463,086 $ 167,743,228
Allergan, Inc. 34,340 3,324,541
Alza Corp.(1) 49,044 2,084,370
American Home Products Corp. 963,139 61,207,483
Amgen, Inc.(1) 2,351,938 150,377,036
Andrx Group(1) 93,750 5,425,781
Andrx Group(1)(2)(3) 300,000 17,337,541
AstraZeneca PLC ADR 80,720 4,157,080
Bristol-Myers Squibb Co. 2,289,343 169,268,298
Covance, Inc.(1) 81,250 873,437
Elan Corp., PLC ADR(1) 539,036 25,233,623
Forest Laboratories, Inc.(1) 10,000 1,328,750
Genzyme Corp.(1) 800,000 71,950,000
Gilead Sciences, Inc.(1) 9,532 790,560
GlaxoSmithKline PLC ADR(1) 648,382 36,309,393
Incyte Genomics, Inc.(1) 1,151,474 28,642,916
King Pharmaceuticals, Inc.(1)(2)(3) 1,563,838 80,714,682
Lilly (Eli) & Co. 1,237,852 115,197,602
Lilly (Eli) & Co.(2)(3) 38,250 3,554,524
Merck & Co., Inc. 1,557,519 145,822,716
SEE NOTES TO FINANCIAL STATEMENTS
35
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Drugs and Drug Development (continued)
- --------------------------------------------------------------------------
Mylan Laboratories 450,000 $ 11,334,375
Novo Nordisk ADR 116,911 10,346,623
Parexel International Corp.(1) 35,000 378,437
Pfizer, Inc. 6,788,726 312,281,396
Pharmacia Corp. 2,510,843 153,161,423
Quintiles Transnational Corp.(1) 417,372 8,738,726
Schering-Plough Corp. 1,368,641 77,670,377
Sepracor, Inc.(1) 884,000 70,830,500
Teva Pharmaceutical Industries Ltd. 300,000 21,975,000
Vertex Pharmaceuticals, Inc.(1) 83,000 5,934,500
Watson Pharmaceuticals, Inc.(1) 1,781,781 91,204,915
- --------------------------------------------------------------------------
$ 1,855,199,833
- --------------------------------------------------------------------------
Electric Power -- 0.8%
- --------------------------------------------------------------------------
AES Corp.(1) 1,378,084 $ 76,311,401
Ameren Corp. 5,000 231,562
American Electric Power, Inc. 960 44,640
Dominion Resources, Inc. 28,938 1,938,846
Duke Energy Corp. 4,117 350,974
Exelon Corp. 787,500 55,290,375
P G & E Corp. 47,705 954,100
Southern Energy, Inc.(1) 14,500 410,531
Teco Energy, Inc. 40,000 1,295,000
TXU Corp. 250,196 11,086,810
Wisconsin Energy Corp. 9,576 216,059
- --------------------------------------------------------------------------
$ 148,130,298
- --------------------------------------------------------------------------
Electrical Equipment -- 0.3%
- --------------------------------------------------------------------------
American Power Conversion Corp.(1) 436,671 $ 5,403,804
Baldor Electric Co. 149,060 3,148,893
Emerson Electric Co. 400,903 31,596,168
Molex, Inc., Class A 112,582 2,863,805
Rockwell International Corp. 203,032 9,669,399
Thomas and Betts Corp. 132,863 2,150,720
- --------------------------------------------------------------------------
$ 54,832,789
- --------------------------------------------------------------------------
Electronics - Instruments -- 0.5%
- --------------------------------------------------------------------------
Agilent Technologies, Inc.(1) 216,897 $ 11,875,111
Applera Corporation - Applied
Biosystems Group(1) 47,100 1,692,656
Dionex Corp.(1) 362,140 12,493,830
Invitrogen Corp.(1) 37,645 3,251,587
National Instruments Corp.(1) 466,603 22,659,408
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Electronics - Instruments (continued)
- --------------------------------------------------------------------------
PerkinElmer, Inc. 110,263 $ 11,577,615
Waters Corp.(1) 198,320 16,559,720
X-Rite, Inc. 428,000 3,343,750
- --------------------------------------------------------------------------
$ 83,453,677
- --------------------------------------------------------------------------
Electronics - Semiconductors and Related -- 3.7%
- --------------------------------------------------------------------------
Altera Corp.(1) 80,516 $ 2,118,577
Analog Devices, Inc.(1) 3,043,828 155,805,946
Applied Materials, Inc.(1) 80,212 3,063,096
Broadcom Corp., Class A(1) 234,000 19,656,000
Conexant Systems(1) 317,574 4,882,700
Cypress Semiconductor Corporation(1) 187,500 3,691,406
Cypress
Semiconductor Corporation(1)(2)(3) 19,307 379,774
Flextronics International Ltd.(1) 108,564 3,094,074
Intel Corp. 5,698,406 171,308,330
Intel Corp.(2)(3) 119,093 3,575,119
Intel Corp.(2)(3) 350,000 10,506,750
KLA-Tencor Corp.(1) 101,498 3,419,214
Lam Research Corp.(1) 293,051 4,249,240
Linear Technologies Corp. 267,760 12,383,900
Maxim Integrated Products Co.(1) 274,351 13,117,407
National Semiconductor Corp.(1) 79,368 1,597,281
Plexus Corp.(1) 132,189 4,017,303
Sanmina Corp.(1) 727,021 55,707,984
SpeedFam-IPEC, Inc.(1) 221,000 1,339,813
Teradyne, Inc.(1) 325,400 12,121,150
Texas Instruments, Inc. 4,051,267 191,928,774
Ultratech Stepper, Inc.(1) 245,129 6,342,713
Xilinx, Inc.(1) 68,518 3,160,393
- --------------------------------------------------------------------------
$ 687,466,944
- --------------------------------------------------------------------------
Engineering and Construction -- 0.1%
- --------------------------------------------------------------------------
Dycom Industries(1) 170,511 $ 6,127,739
Jacobs Engineering Group, Inc.(1) 168,555 7,785,134
- --------------------------------------------------------------------------
$ 13,912,873
- --------------------------------------------------------------------------
Entertainment -- 1.2%
- --------------------------------------------------------------------------
Callaway Golf Co. 35,715 $ 665,192
Disney (Walt) Co. 1,031,468 29,848,105
Mattel, Inc. 22,091 318,994
MGM Grand, Inc. 269,445 7,594,981
Time Warner, Inc. 1,410,539 73,686,557
SEE NOTES TO FINANCIAL STATEMENTS
36
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Entertainment (continued)
- --------------------------------------------------------------------------
Viacom, Inc., Class A(1) 21,774 $ 1,023,378
Viacom, Inc., Class B(1) 2,241,664 104,797,792
- --------------------------------------------------------------------------
$ 217,934,999
- --------------------------------------------------------------------------
Environmental Services -- 0.3%
- --------------------------------------------------------------------------
Allied Waste Industries, Inc.(1) 1,075,000 $ 15,654,687
Waste Management, Inc. 1,402,239 38,912,132
- --------------------------------------------------------------------------
$ 54,566,819
- --------------------------------------------------------------------------
Financial Services - Miscellaneous -- 4.4%
- --------------------------------------------------------------------------
American Express Co. 1,991,447 $ 109,405,120
Capital One Financial Corp. 560,175 36,866,517
Citigroup 4,050,760 206,841,933
Enhance Financial Service Group, Inc. 70,000 1,080,625
Fannie Mae 1,862,776 161,595,818
Finova Group, Inc. 175,587 164,613
FirstPlus Financial Group, Inc.(1) 120,000 10,800
Freddie Mac 1,368,400 94,248,550
GreenPoint Financial Corp. 100,000 4,093,750
GreenPoint Financial Corp.(2)(3) 300,000 12,263,596
Household International, Inc. 1,441,724 79,294,820
ING Groep NV ADR 105,285 8,435,961
MGIC Investment Corp. 80,000 5,395,000
Providian Financial Corp. 806,498 46,373,635
USA Education, Inc. 600,000 40,800,000
- --------------------------------------------------------------------------
$ 806,870,738
- --------------------------------------------------------------------------
Foods -- 1.5%
- --------------------------------------------------------------------------
Archer-Daniels-Midland Co. 405,243 $ 6,078,645
Campbell Soup Co. 12,242 423,879
Conagra, Inc. 707,429 18,393,154
Dean Foods Co. 150,944 4,632,094
Flowers Industries, Inc. 965,916 15,213,177
General Mills, Inc. 123,254 5,492,506
Heinz (H.J.) Co. 181,374 8,603,929
Hershey Foods Corp. 714,492 45,995,423
Keebler Food Products Co. 121,798 5,047,005
Keebler Food Products Co.(2)(3) 28,300 1,172,144
Kellogg Co. 102,235 2,683,669
McCormick & Co., Inc. 458,058 16,518,717
Quaker Oats Co. (The) 110,087 10,719,722
Ralston Purina Group 277,878 7,259,563
Riviana Foods, Inc. 250,000 4,906,250
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Foods (continued)
- --------------------------------------------------------------------------
Sara Lee Corp. 837,776 $ 20,577,873
Smithfield Foods, Inc.(1) 1,025,907 31,187,573
Smithfield Foods, Inc.(1)(2)(3) 892,858 27,137,067
Suiza Foods Corp.(1) 40,152 1,927,296
Tyson Food, Inc. 163,901 2,089,738
Unilever ADR 400,000 25,175,000
Wrigley (Wm.) Jr. Co. 171,469 16,428,874
- --------------------------------------------------------------------------
$ 277,663,298
- --------------------------------------------------------------------------
Furniture and Appliances -- 0.3%
- --------------------------------------------------------------------------
HON Industries, Inc. 1,270,418 $ 32,395,659
Leggett & Platt, Inc. 713,393 13,509,880
Maytag Corp. 27,073 874,796
Miller (Herman), Inc. 540,103 15,527,961
Steelcase, Inc., Class A 123,000 1,706,625
- --------------------------------------------------------------------------
$ 64,014,921
- --------------------------------------------------------------------------
Health Services -- 0.3%
- --------------------------------------------------------------------------
Beverly Enterprises, Inc.(1) 357,143 $ 2,924,108
Caremark Rx, Inc.(1) 17,696 240,002
Cybear Group(1) 13,959 5,235
FPA Medical Management, Inc.(1)(2) 315,000 3,150
HCA - The Healthcare Company 53,310 2,346,173
Health Management Associates, Inc.,
Class A(1) 1,311,170 27,206,778
HealthSouth Corp.(1) 122,699 2,001,527
LabOne, Inc.(1) 53,940 310,155
Orthodontic Centers of America, Inc.(1) 100,000 3,125,000
Pacificare Health Systems, Inc.,
Class A(1) 19,500 292,500
PhyCor, Inc.(1) 312,500 10,000
Quest Diagnostics, Inc.(1) 15,625 2,218,750
Quorum Health Group, Inc.(1) 6,893 108,565
Renal Care Group, Inc.(1) 371,007 10,173,717
Response Oncology, Inc.(1) 44,761 11,190
Sunrise Assisted Living, Inc.(1) 354,000 8,850,000
UnitedHealth Group, Inc. 52,106 3,198,006
- --------------------------------------------------------------------------
$ 63,024,856
- --------------------------------------------------------------------------
Household Products -- 2.7%
- --------------------------------------------------------------------------
Avon Products, Inc. 134,700 $ 6,448,763
Blyth Industries, Inc.(1) 1,085,671 26,191,813
Blyth Industries, Inc.(1)(2)(3) 167,616 4,040,198
SEE NOTES TO FINANCIAL STATEMENTS
37
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Household Products (continued)
- --------------------------------------------------------------------------
Clorox Co. 421,344 $ 14,957,712
Colgate-Palmolive Co. 546,478 35,275,155
Energizer Holdings, Inc.(1) 92,626 1,979,881
Fortune Brands, Inc. 69,838 2,095,140
Gillette Co. 4,208,557 152,034,122
Helen of Troy Ltd.(1) 20,000 97,500
Kimberly-Clark Corp. 1,549,593 109,540,729
Lauder (Estee) Companies, Inc. 2,092,312 91,669,420
Newell Rubbermaid, Inc. 423,137 9,626,367
Procter & Gamble Co. 578,277 45,358,602
Water Pik Technologies, Inc.(1) 2,141 14,987
- --------------------------------------------------------------------------
$ 499,330,389
- --------------------------------------------------------------------------
Industrial Equipment -- 0.4%
- --------------------------------------------------------------------------
Dover Corp. 419,712 $ 17,024,568
Federal Signal Corp. 283,471 5,563,118
Illinois Tool Works, Inc. 386,412 23,015,665
Johnson Controls 46,758 2,431,416
Nordson Corp. 163,978 4,181,439
Parker-Hannifin Corp. 157,066 6,930,537
PPG Industries, Inc. 13,680 633,555
Regal-Beloit Corp. 265,000 4,520,900
Tecumseh Products Co., Class A 156,420 6,559,864
Teleflex, Inc. 47,559 2,101,513
Wabtec 250,000 2,937,500
- --------------------------------------------------------------------------
$ 75,900,075
- --------------------------------------------------------------------------
Information Services -- 4.9%
- --------------------------------------------------------------------------
Acxiom Corp.(1) 929,019 $ 36,173,677
Affiliated Computer Services, Inc.(1) 20,000 1,213,750
Affiliated Computer Services,
Inc.(1)(2)(3) 80,327 4,867,837
America Online, Inc.(1) 166,177 5,782,960
At Home Corp., Series A(1) 240,582 1,330,731
At Home Corp., Series A(1)(2)(3) 171,895 950,572
Automatic Data Processing, Inc. 5,597,020 354,361,329
Bell and Howell Co.(1) 115,000 1,897,500
BISYS Group, Inc. (The)(1) 107,746 5,616,260
Ceridian Corp.(1) 181,000 3,608,688
Check Point Software Technology Ltd.(1) 104,000 13,890,500
Circle.com(1) 120,625 67,852
Computer Sciences Corp.(1) 2,955,400 177,693,425
DST Systems, Inc.(1) 389,034 26,065,278
Electronic Data Systems Corp. 157,612 9,102,093
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Information Services (continued)
- --------------------------------------------------------------------------
Equifax, Inc. 80,000 $ 2,295,000
First Data Corp. 2,827,384 148,967,795
Investors Financial Services Corp. 51,000 4,386,000
Keane, Inc.(1) 200,000 1,950,000
Lason, Inc.(1) 355,000 95,850
NOVA Corp.(1) 104,965 2,092,740
Paychex, Inc. 365,232 17,759,406
Perot Systems Corp., Class A(1) 245,326 2,253,933
Reuters Holdings PLC ADR 270,131 26,607,904
Reynolds & Reynolds, Inc., Class A 451,043 9,133,621
RSA Security, Inc.(1) 40,000 2,115,000
SunGard Data Systems, Inc.(1) 988,797 46,597,059
- --------------------------------------------------------------------------
$ 906,876,760
- --------------------------------------------------------------------------
Insurance -- 7.0%
- --------------------------------------------------------------------------
21st Century Insurance Group 70,700 $ 1,007,475
Aegon, NV ADR 2,680,037 111,054,033
Aetna, Inc.(1) 368 15,111
Aflac Corp. 135,749 9,799,381
Allmerica Financial Corp. 1,500 108,750
Allstate Corp. (The) 40,426 1,761,058
American General Corp. 101,421 8,265,811
American International Group, Inc. 5,194,621 511,994,832
American International Group, Inc.(2)(3) 375,000 36,948,001
AON Corp. 607,321 20,800,744
Berkshire Hathaway, Inc.(1) 448 31,808,000
Berkshire Hathaway, Inc., Class B(1) 39,077 91,987,258
Chubb Corp. 104,451 9,035,012
Commerce Group, Inc. 120,000 3,261,600
Delphi Financial Group, Inc.(1) 6,448 248,248
Gallagher (A.J.) and Co. 261,250 16,622,031
Hartford Financial Services Group 3,512 248,035
Jefferson-Pilot Corp. 80,726 6,034,269
Kansas City Life Insurance Co. 70,800 2,504,550
Lincoln National Corp. 26,903 1,272,848
Marsh & McLennan Cos., Inc. 2,682,868 313,895,556
Mercury General Corp. 2,000 87,750
MetLife, Inc. 1,885,000 65,975,000
Mutual Risk Management Ltd. 240,000 3,645,000
Progressive Corp. 186,136 19,288,343
Protective Life Corp. 43,381 1,399,037
Safeco Corp. 23,248 764,278
St. Paul Cos., Inc. (The) 305,436 16,588,993
SEE NOTES TO FINANCIAL STATEMENTS
38
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Insurance (continued)
- --------------------------------------------------------------------------
Torchmark Corp. 222,850 $ 8,565,797
UICI(1) 160,854 955,071
- --------------------------------------------------------------------------
$ 1,295,941,872
- --------------------------------------------------------------------------
Investment Services -- 3.4%
- --------------------------------------------------------------------------
Dain Rauscher Corporation 13,749 $ 1,301,858
E*Trade Group, Inc.(1) 771,248 5,687,954
Federated Investors, Inc. 878,947 25,599,331
Federated Investors, Inc.,
Class B(2)(3) 378,000 11,005,397
Federated Investors, Inc.,
Class B(2)(3) 378,000 11,004,204
Franklin Resources, Inc. 1,746,081 66,525,686
Goldman Sachs Group, Inc. 9,627 1,029,487
Knight Trading Group, Inc.(1) 475,000 6,620,313
Legg Mason, Inc. 17,641 961,435
Merrill Lynch & Co., Inc.(2)(3) 150,000 10,213,422
Merrill Lynch & Co., Inc. 2,822,531 192,461,333
Morgan Stanley Dean Witter & Co. 3,038,338 240,788,287
Nuveen (John) Co., Class A (The) 50,000 2,875,000
Price (T. Rowe) Associates, Inc. 139,176 5,882,357
Schwab (Charles) Corp. 1,105,111 31,357,525
Stilwell Financial, Inc. 95,458 3,764,625
Waddell & Reed Financial, Inc., Class A 19,020 715,628
Waddell & Reed Financial, Inc., Class B 81,862 3,069,825
- --------------------------------------------------------------------------
$ 620,863,667
- --------------------------------------------------------------------------
Lodging and Gaming -- 0.1%
- --------------------------------------------------------------------------
Marriott International, Inc., Class A 157,628 $ 6,659,783
Royal Caribbean Cruises Ltd. 500,000 13,225,000
Wyndham International, Class A(1) 132,212 231,371
- --------------------------------------------------------------------------
$ 20,116,154
- --------------------------------------------------------------------------
Medical Products -- 4.1%
- --------------------------------------------------------------------------
Bausch & Lomb, Inc. 145,054 $ 5,865,621
Baxter International, Inc. 1,508,565 133,225,147
Becton, Dickinson and Co. 36,245 1,254,983
Biomet, Inc. 129,346 5,133,419
Biomet, Inc.(2)(3) 87,596 3,473,405
Boston Scientific Corp.(1) 541,644 7,413,752
Dentsply International, Inc. 47,401 1,854,564
Edwards Lifesciences Corp.(1) 295,714 5,248,924
ESC Medical Systems Ltd.(1) 170,000 2,050,625
Genzyme Corporation - Genzyme Biosurgery
Division (1) 86,784 753,936
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Medical Products (continued)
- --------------------------------------------------------------------------
Guidant Corp.(1) 453,816 $ 24,477,701
Heartport, Inc.(1) 41,026 64,103
Hillenbrand Industries, Inc. 647,898 33,366,747
Johnson & Johnson Co. 2,478,558 260,403,500
Medtronic, Inc. 3,548,358 214,232,114
MiniMed, Inc.(1) 407,100 17,110,942
Schein (Henry), Corp.(1) 1,125,194 38,959,842
Steris Corp.(1) 78,394 1,264,103
VISX, Inc.(1) 50,000 521,875
- --------------------------------------------------------------------------
$ 756,675,303
- --------------------------------------------------------------------------
Metals - Industrial -- 0.4%
- --------------------------------------------------------------------------
Alcoa, Inc. 1,896,000 $ 63,516,000
Allegheny Technologies, Inc. 21,408 339,852
Nucor Corp. 221,462 8,789,273
Phelps Dodge Corp. 7,332 409,217
Steel Dynamics, Inc.(1) 311,800 3,429,800
Worthington Industries 147,466 1,188,945
- --------------------------------------------------------------------------
$ 77,673,087
- --------------------------------------------------------------------------
Natural Gas Distribution -- 0.8%
- --------------------------------------------------------------------------
Coastal Corp. (The) 200,000 $ 17,662,500
Dynegy, Inc. 430,200 24,118,088
Dynegy, Inc.(2)(3) 63,525 3,556,271
Kinder Morgan, Inc.(2)(3) 500,000 26,059,502
Kinder Morgan, Inc. 1,275,912 66,586,658
National Fuel Gas Co. 2,000 125,875
Williams Cos., Inc. (The) 100,000 3,993,750
- --------------------------------------------------------------------------
$ 142,102,644
- --------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 2.2%
- --------------------------------------------------------------------------
Baker Hughes, Inc. 746,804 $ 31,039,041
Core Laboratories NV(1) 205,000 5,599,063
Grant Prideco, Inc.(1) 163,681 3,590,752
Halliburton Co. 3,257,050 118,068,063
Nabors Industries, Inc.(1) 400,000 23,660,000
Nabors Industries, Inc.(1)(2)(3) 150,000 8,869,395
National-Oilwell, Inc.(1) 641,199 24,806,386
National-Oilwell, Inc.(1)(2)(3) 45,730 1,766,857
Newpark Resources, Inc.(1) 110,000 1,051,875
Noble Drilling, Inc.(1) 170,000 7,384,375
Patterson Energy, Inc.(1) 200,000 7,450,000
Schlumberger Ltd. 1,703,413 136,166,577
SEE NOTES TO FINANCIAL STATEMENTS
39
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Oil and Gas - Equipment and Services (continued)
- --------------------------------------------------------------------------
Smith International, Inc.(1) 70,000 $ 5,219,375
Syntroleum Corp.(1) 2,735 46,495
Transocean Sedco Forex, Inc. 237,966 10,946,436
Valero Energy Corp. 51,510 1,915,528
Weatherford International(1) 163,681 7,733,927
- --------------------------------------------------------------------------
$ 395,314,145
- --------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 1.5%
- --------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,591,906 $ 184,232,678
Apache Corp. 204,874 14,353,985
Burlington Resources, Inc. 428,629 21,645,765
Devon Energy Corp. 224,853 13,709,287
El Paso Energy Corp. 478,836 34,296,629
Kerr - McGee Corp. 136,199 9,116,821
Newfield Exploration Co.(1) 60,000 2,846,250
USX-Marathon Group 50,000 1,387,500
- --------------------------------------------------------------------------
$ 281,588,915
- --------------------------------------------------------------------------
Oil and Gas - Integrated -- 1.2%
- --------------------------------------------------------------------------
BP Amoco PLC ADR 1,214,307 $ 58,134,948
Chevron Corp. 93,585 7,902,083
Exxon Mobil Corp. 1,379,486 119,929,064
Murphy Oil Corp. 29,700 1,794,994
Pennzoil-Quaker State Co. 74,457 958,634
Phillips Petroleum Co. 18,407 1,046,898
Royal Dutch Petroleum Co. 56,537 3,424,022
Texaco, Inc. 2,500 155,313
Tosco Corp. 614,619 20,858,632
- --------------------------------------------------------------------------
$ 214,204,588
- --------------------------------------------------------------------------
Paper and Forest Products -- 0.3%
- --------------------------------------------------------------------------
Caraustar Industries, Inc. 264,862 $ 2,483,081
Georgia-Pacific Corp. - G-P Group 655,759 20,410,499
Georgia-Pacific Corp. - Timber Group 305,098 9,133,871
International Paper Co. 161,321 6,583,913
Louisiana Pacific Corp. 70,750 716,344
Mead Corporation (The) 38,768 1,216,346
Temple Inland, Inc. 12,632 677,391
Westvaco Corp. 47,000 1,371,813
Weyerhaeuser Co. 119,608 6,070,106
Willamette Industries, Inc. 156,412 7,341,588
- --------------------------------------------------------------------------
$ 56,004,952
- --------------------------------------------------------------------------
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Photography -- 0.0%
- --------------------------------------------------------------------------
Eastman Kodak Co. 143,906 $ 5,666,299
- --------------------------------------------------------------------------
$ 5,666,299
- --------------------------------------------------------------------------
Printing and Business Products -- 0.5%
- --------------------------------------------------------------------------
Avery Dennison Corp. 1,501,504 $ 82,395,032
Banta Corp. 42,341 1,076,308
Bowne & Co., Inc. 172,640 1,823,510
Consolidated Graphics, Inc.(1) 70,215 838,192
Day Runner, Inc.(1) 1,600 500
Deluxe Corp. 80,675 2,038,657
Donnelley (R.R.) & Sons Co. 85,277 2,302,479
Harland (John H.) Co. 51,540 728,003
Ikon Office Solutions, Inc. 122,526 306,315
Workflow Management, Inc.(1) 79,507 546,611
- --------------------------------------------------------------------------
$ 92,055,607
- --------------------------------------------------------------------------
Publishing -- 1.6%
- --------------------------------------------------------------------------
Belo (A.H.) Corp. 542,924 $ 8,686,784
Dow Jones & Co., Inc. 376,300 21,307,988
Gannett Co., Inc. 600,300 37,856,419
Houghton Mifflin Co. 97,400 4,516,925
MacClatchy Co. (The), Class A 48,066 2,048,813
McGraw-Hill Companies, Inc. (The) 3,155,455 184,988,549
Meredith Corp. 190,000 6,115,625
New York Times Co. (The), Class A 315,755 12,649,935
Tribune Co. 226,200 9,556,950
Washington Post Co. (The), Class B 3,600 2,220,750
- --------------------------------------------------------------------------
$ 289,948,738
- --------------------------------------------------------------------------
Real Estate -- 0.2%
- --------------------------------------------------------------------------
Avalonbay Communities, Inc. 55,000 $ 2,756,875
Catellus Development Corp.(1) 415,722 7,275,135
Equity Office Properties Trust 2,812 91,742
Jones Lang Lasalle, Inc.(1) 213,193 2,958,053
Rouse Co. (The) 127,700 3,256,350
Trammell Crow Co.(1) 876,098 11,827,323
Ventas, Inc. 25,600 144,000
- --------------------------------------------------------------------------
$ 28,309,478
- --------------------------------------------------------------------------
Restaurants -- 1.1%
- --------------------------------------------------------------------------
Boston Chicken, Inc.(1)(2) 38,500 $ 385
Brinker International, Inc.(1) 388,158 16,399,676
SEE NOTES TO FINANCIAL STATEMENTS
40
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Restaurants (continued)
- --------------------------------------------------------------------------
CBRL Group, Inc. 62,047 $ 1,128,480
CKE Restaurants, Inc. 5,522 15,186
Evans (Bob) Farms, Inc. 48,193 1,027,113
Jack in the Box, Inc.(1) 500,000 14,718,750
Lone Star Steakhouse and Saloon, Inc. 345,981 3,330,067
McDonald's Corp. 2,075,892 70,580,328
Outback Steakhouse, Inc.(1) 685,923 17,748,258
Outback Steakhouse, Inc.(1)(2)(3) 600,000 15,517,884
Outback Steakhouse, Inc.(1)(2)(3) 500,000 12,918,902
Papa John's International, Inc.(1) 197,246 4,388,724
Sonic Corp.(1) 71,007 1,655,351
Starbucks Corp.(1) 684,000 30,267,000
Tricon Global Restaurants, Inc.(1) 219,321 7,237,593
- --------------------------------------------------------------------------
$ 196,933,697
- --------------------------------------------------------------------------
Retail - Food and Drug -- 2.1%
- --------------------------------------------------------------------------
Albertson's, Inc. 868,341 $ 23,011,036
CVS Corp. 1,958,878 117,410,250
Delhaize America, Inc. 33,442 591,505
Kroger Co. (The)(1) 60,140 1,627,539
Safeway, Inc.(1) 3,479,293 217,455,813
Walgreen Co. 518,466 21,678,360
Winn-Dixie Stores, Inc. 519,957 10,074,167
- --------------------------------------------------------------------------
$ 391,848,670
- --------------------------------------------------------------------------
Retail - General -- 1.5%
- --------------------------------------------------------------------------
99 Cents Only Stores(1) 571,116 $ 15,634,300
Casey's General Stores, Inc. 91,201 1,362,315
Costco Wholesale Corporation(1) 20,435 816,123
Costco Wholesale Corporation(1)(2)(3) 56,823 2,266,106
Department 56, Inc.(1) 255,162 2,934,363
Dollar General Corp. 249,983 4,718,429
Dollar Tree Stores, Inc.(1) 1,518,256 37,197,272
Family Dollar Stores 2,618,411 56,132,186
May Department Stores Co. (The) 436,040 14,280,310
Nordstrom, Inc. 65,692 1,194,773
Penney (J.C.) Company, Inc. 907,984 9,874,326
Sears Roebuck & Co. 15,750 547,313
Target Corporation 2,200,000 70,950,000
Wal-Mart Stores, Inc. 1,175,988 62,474,363
- --------------------------------------------------------------------------
$ 280,382,179
- --------------------------------------------------------------------------
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Retail - Specialty and Apparel -- 2.5%
- --------------------------------------------------------------------------
Abercrombie & Fitch Co., Class A(1) 5,604 $ 112,080
AutoNation, Inc.(1) 5,359,593 32,157,558
Burlington Coat Factory Warehouse Corp. 628,228 11,897,068
Circuit City Stores-Circuit City Group 216,000 2,484,000
Gap, Inc. (The) 521,688 13,303,044
Harcourt General, Inc. 216,416 12,378,995
Home Depot, Inc. (The) 4,294,789 196,218,172
Intimate Brands, Inc. 53,000 795,000
Limited, Inc. (The) 675,566 11,526,845
Limited, Inc. (The)(2)(3) 45,139 769,173
Lowe's Companies 2,313,241 102,939,225
Neiman Marcus Group, Inc. (The),
Class B(1) 65,206 2,159,949
Office Depot, Inc.(1) 303,219 2,160,435
OfficeMax, Inc.(1) 912,117 2,622,336
Payless Shoesource, Inc.(1) 7,700 544,775
Pep Boys - Manny, Moe & Jack (The) 97,976 355,163
Pier 1 Imports, Inc. 350,000 3,609,375
RadioShack Corporation 609,588 26,097,986
Tiffany and Co. 88,000 2,783,000
TJX Companies, Inc. (The) 1,000,000 27,750,000
Too, Inc.(1) 39,087 488,588
- --------------------------------------------------------------------------
$ 453,152,767
- --------------------------------------------------------------------------
Specialty Chemicals and Materials -- 0.7%
- --------------------------------------------------------------------------
Arch Chemicals, Inc. 4,950 $ 87,863
Ecolab, Inc. 2,023,831 87,404,201
International Flavors & Fragrances, Inc. 148,101 3,008,302
MacDermid, Inc. 61,937 1,176,803
Millipore Corp. 101,440 6,390,720
Minnesota Mining & Manufacturing Co. 122,203 14,725,462
Olin Corp. 9,900 219,038
Pall Corp. 216,000 4,603,500
RPM, Inc. 470,138 4,025,557
Sigma Aldrich Corp. 395,000 15,528,438
- --------------------------------------------------------------------------
$ 137,169,884
- --------------------------------------------------------------------------
Tobacco -- 0.1%
- --------------------------------------------------------------------------
Philip Morris Co., Inc. 481,024 $ 21,165,056
- --------------------------------------------------------------------------
$ 21,165,056
- --------------------------------------------------------------------------
Transportation -- 1.7%
- --------------------------------------------------------------------------
Arnold Industries, Inc. 148,543 $ 2,673,774
SEE NOTES TO FINANCIAL STATEMENTS
41
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Transportation (continued)
- --------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 214,916 $ 6,084,809
CSX Corp. 36,496 946,615
FedEx Corp.(1) 2,945,106 117,686,436
Florida East Coast Industries, Inc. 122,888 4,408,607
Heartland Express, Inc.(1) 250,000 5,703,125
Kansas City Southern Industrials, Inc. 15,215 154,052
Norfolk Southern Corp. 390 5,192
Robinson (C.H.) Worldwide, Inc. 821,308 25,819,870
Robinson (C.H.) Worldwide, Inc.(2)(3) 320,000 10,055,389
Union Pacific Corp. 92,081 4,673,111
United Parcel Service, Inc., Class B 2,234,027 131,388,713
- --------------------------------------------------------------------------
$ 309,599,693
- --------------------------------------------------------------------------
Trucks and Parts -- 0.0%
- --------------------------------------------------------------------------
Arvinmeritor, Inc. 53,849 $ 612,532
Paccar, Inc. 12,894 635,030
- --------------------------------------------------------------------------
$ 1,247,562
- --------------------------------------------------------------------------
Water Utilities -- 0.0%
- --------------------------------------------------------------------------
American Water Works Co. 79,211 $ 2,326,823
- --------------------------------------------------------------------------
$ 2,326,823
- --------------------------------------------------------------------------
Total Common Stocks
(identified cost $13,439,891,552) $18,037,861,223
- --------------------------------------------------------------------------
RIGHTS -- 0.0%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Computer Software -- 0.0%
- --------------------------------------------------------------------------
Veritas Software Corp.
(Tax Refund Rights)(1) 197,392 $ 15,791
- --------------------------------------------------------------------------
$ 15,791
- --------------------------------------------------------------------------
Total Rights
(identified cost $15,791) $ 15,791
- --------------------------------------------------------------------------
COMMERCIAL PAPER -- 1.5%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------
Barton Capital Corp., 6.62%, 1/11/01 $ 30,151 $ 30,095,556
Barton Capital Corp., 6.65%, 1/5/01 78,988 78,929,637
Barton Capital Corp., 6.65%, 1/5/01 65,000 64,951,972
Corporate Receivables Corp.,
6.53%, 1/2/01 21,450 21,446,109
Ford Motor Credit Co., 6.51%, 1/10/01 84,943 84,804,755
- --------------------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $280,228,029) $ 280,228,029
- --------------------------------------------------------------------------
Total Investments -- 99.6%
(identified cost $13,720,135,372) $18,318,105,043
- --------------------------------------------------------------------------
SECURITIES SOLD SHORT -- -1.0%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
American International Group, Inc. 1,000,000 $ (98,562,500)
Oracle Corp. 2,000,000 (58,125,000)
Siebel Systems, Inc. 400,000 (27,050,000)
- --------------------------------------------------------------------------
Total Securities Sold Short
(proceeds $227,951,317) $ (183,737,500)
- --------------------------------------------------------------------------
Other Assets, Less Liabilities
excluding securities sold short -- 1.4% $ 250,701,342
- --------------------------------------------------------------------------
Net Assets -- 100.0% $18,385,068,885
- --------------------------------------------------------------------------
ADR - American Depositary Receipt
(1) Non-income producing security.
(2) Security valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
(3) Security restricted from resale for a period not exceeding two years. At
December 31, 2000, the value of these securities totaled $487,752,865 or
2.7% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
42
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2000
Assets
- ---------------------------------------------------------
Investments, at value (identified cost,
$13,720,135,372) $18,318,105,043
Cash 33,931,620
Deposits with brokers for securities
sold short 187,909,032
Dividends and interest receivable 22,219,113
Receivable for investments sold 6,947,733
Tax reclaim receivable 22,242
Other assets 294,764
- ---------------------------------------------------------
TOTAL ASSETS $18,569,429,547
- ---------------------------------------------------------
Liabilities
- ---------------------------------------------------------
Securities sold short, at value
(proceeds received of $227,951,317) $ 183,737,500
Miscellaneous liabilities 32,000
Payable to affiliate for Trustees' fees 16,977
Accrued expenses 574,185
- ---------------------------------------------------------
TOTAL LIABILITIES $ 184,360,662
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $18,385,068,885
- ---------------------------------------------------------
Sources of Net Assets
- ---------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $13,742,884,218
Net unrealized appreciation (computed on
the basis of identified cost) 4,642,184,667
- ---------------------------------------------------------
TOTAL $18,385,068,885
- ---------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 2000
Investment Income
- ------------------------------------------------------
Dividends (net of foreign taxes,
$953,924) $145,545,700
Interest 44,194,837
- ------------------------------------------------------
TOTAL INVESTMENT INCOME $189,740,537
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Investment adviser fee $ 73,317,616
Trustees fees and expenses 41,436
Custodian fee 1,951,652
Legal and accounting services 123,245
Amortization of organization expenses 1,989
Miscellaneous 381,771
- ------------------------------------------------------
TOTAL EXPENSES $ 75,817,709
- ------------------------------------------------------
NET INVESTMENT INCOME $113,922,828
- ------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $118,155,592
Securities sold short 78,957,715
Foreign currency transactions (150,768)
- ------------------------------------------------------
NET REALIZED GAIN $196,962,539
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 97,145,947
Securities sold short 44,213,817
Foreign currency 1,179
- ------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $141,360,943
- ------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $338,323,482
- ------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $452,246,310
- ------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
43
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 2000 DECEMBER 31, 1999
- ------------------------------------------------------------------------------
From operations --
Net investment income $ 113,922,828 $ 82,826,268
Net realized gain 196,962,539 19,281,587
Net change in unrealized appreciation
(depreciation) 141,360,943 1,954,982,313
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 452,246,310 $ 2,057,090,168
- ------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,816,070,598 $ 5,393,615,110
Withdrawals (1,997,896,982) (1,040,915,654)
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 2,818,173,616 $ 4,352,699,456
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 3,270,419,926 $ 6,409,789,624
- ------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------
At beginning of year $ 15,114,648,959 $ 8,704,859,335
- ------------------------------------------------------------------------------
AT END OF YEAR $ 18,385,068,885 $ 15,114,648,959
- ------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
44
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
YEAR ENDED DECEMBER 31, YEAR ENDED OCTOBER 31,
---------------------------- PERIOD ENDED ---------------------------------------
2000 1999 DECEMBER 31, 1998(1) 1998 1997 1996(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of average daily
net assets):
Expenses 0.45% 0.46% 0.48%(3) 0.50% 0.56% 0.66%(3)
Net investment income 0.67% 0.72% 0.72%(3) 0.78% 0.81% 0.91%(3)
Portfolio Turnover 13% 11% 3% 12% 14% 6%
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $18,385,069 $15,114,649 $8,704,859 $6,985,678 $2,871,446 $936,800
- ---------------------------------------------------------------------------------------------------------------------------------
(1) For the two-month period ended December 31, 1998.
(2) For the period from the start of business, December 1, 1995, to
October 31, 1996.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
45
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
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 fair 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 recognize a loss on the transaction if the
market value of the securities sold increases before the securities are
delivered.
46
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
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, 2000, the
adviser fee was 0.43% 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 who 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, 2000, 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, 2000, purchases and sales of investments,
other than short-term obligations, aggregated $3,441,068,199 and
$2,085,534,854, respectively. In addition, investments having an aggregate
market value of $457,566,723 at dates of withdrawal were distributed in
payment for capital withdrawals. During the year ended December 31, 2000,
investors contributed securities with a value of $2,622,113,147.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 2000, as computed on a federal income tax
basis, were as follows:
AGGREGATE COST $ 5,919,433,713
---------------------------------------------------------
Gross unrealized appreciation $12,444,556,001
Gross unrealized depreciation (45,884,671)
---------------------------------------------------------
NET UNREALIZED APPRECIATION $12,398,671,330
---------------------------------------------------------
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, 2000.
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. Borrowings will be made by the Portfolio
solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each participating
portfolio or fund based on its borrowings at an amount above either 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 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, 2000.
47
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
7 Restricted Securities
- -------------------------------------------
At December 31, 2000, the Portfolio owned the following securities
(representing 2.7% of net assets) which were restricted as to public resale
and not registered under the Securities Act of 1933. The securities are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
DATE OF
DESCRIPTION ACQUISITION SHARES/FACE COST FAIR VALUE
----------------------------------------------------------------------------------------------
COMMON STOCKS
----------------------------------------------------------------------------------------------
Affiliated Computer Services, Inc. 11/29/00 80,327 $ 4,516,629 $ 4,867,837
Alltel Corp. 5/16/00 30,000 1,896,544 1,872,732
American International Group, Inc. 3/17/00 375,000 24,949,397 36,948,001
Andrx Group 11/29/00 300,000 19,676,691 17,337,541
At Home Corp., Series A 3/17/00 171,895 5,000,018 950,572
Avaya, Inc. 9/29/00 25,000 963,897 257,774
Biomet, Inc. 7/19/00 87,596 2,500,016 3,473,405
Blyth Industries, Inc. 7/19/00 167,616 5,000,017 4,040,198
Boeing Company (The) 9/27/00 250,000 16,506,453 16,478,344
Cablevision Systems Corp. 7/19/00 130,000 8,826,740 11,032,213
Cardinal Health, Inc. 9/27/00 24,100 2,287,570 2,397,811
Costco Wholesale Corporation 11/29/00 56,823 2,000,006 2,266,106
Cypress Semiconductor Corporation 7/19/00 19,307 1,000,048 379,774
Dynegy, Inc. 11/29/00 63,525 3,108,056 3,556,271
Federated Investors, Inc., Class B 3/17/00 378,000 6,243,996 11,005,397
Federated Investors, Inc., Class B 5/16/00 378,000 7,221,298 11,004,204
GreenPoint Financial Corp. 11/29/00 300,000 8,780,559 12,263,596
Intel Corp. 11/29/00 350,000 14,688,889 10,506,750
Intel Corp. 11/29/00 119,093 5,000,002 3,575,119
Jabil Circuit, Inc. 5/16/00 2,082,013 75,000,003 52,806,866
Keebler Food Products Co. 5/16/00 28,300 1,000,011 1,172,144
Kinder Morgan, Inc. 9/27/00 500,000 19,657,969 26,059,502
DATE OF
DESCRIPTION ACQUISITION SHARES/FACE COST FAIR VALUE
----------------------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 11/29/00 1,563,838 $ 77,586,646 $ 80,714,682
Lilly (Eli) & Co. 11/29/00 38,250 3,504,173 3,554,524
Limited, Inc. (The) 9/27/00 45,139 1,000,019 769,173
Lucent Technologies, Inc. 5/16/00 300,000 16,638,317 4,049,613
McLeodUSA, Inc. 3/17/00 150,000 4,182,109 2,116,102
McLeodUSA, Inc. 7/19/00 231,562 5,000,017 3,267,951
Merrill Lynch & Co., Inc. 11/29/00 150,000 9,192,441 10,213,422
Nabors Industries, Inc. 3/17/00 150,000 5,738,829 8,869,395
National-Oilwell, Inc. 9/27/00 45,730 1,347,011 1,766,857
Outback Steakhouse, Inc. 5/16/00 600,000 19,815,679 15,517,884
Outback Steakhouse, Inc. 11/29/00 500,000 13,011,703 12,918,902
Robinson (C.H.) Worldwide, Inc. 5/16/00 320,000 8,260,903 10,055,389
Smithfield Foods, Inc. 7/19/00 892,858 24,981,274 27,137,067
Solectron Corp. 5/16/00 500,000 17,137,378 16,942,231
Solectron Corp. 7/19/00 250,000 11,747,977 8,467,584
Sun Microsystems, Inc. 5/16/00 47,490 2,000,072 1,323,253
Sysco Corp. 5/16/00 99,028 2,000,020 2,969,478
Sysco Corp. 9/27/00 44,744 1,015,003 1,340,558
TMP Worldwide, Inc. 5/16/00 34,846 2,048,347 1,916,128
Voicestream Wireless Corporation 3/17/00 395,175 46,008,743 39,590,515
----------------------------------------------------------------------------------------------
$508,041,470 $487,752,865
----------------------------------------------------------------------------------------------
48
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2000
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, 2000, and the related statement of operations for the year then
ended, the statements of changes in net assets for the two years then ended and
the supplementary data for the two years ended December 31, 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000 by correspondence with the custodian
and brokers; where replies were not received, we performed other procedures. 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, 2000, and the results of its operations, the
changes in its net assets and its supplementary data for the respective stated
periods in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 16, 2001
49
SIGNATURE
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 29th day of March, 2001.
BELCREST CAPITAL FUND LLC
(Registrant)
By: EATON VANCE MANAGEMENT,
Its Manager
By: /s/ William M. Steul
---------------------------------------
William M. Steul
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ James B. Hawkes Principal Executive Officer of Eaton Vance March 29, 2001
- ------------------------------------ Management; Sole Director of Eaton Vance, Inc.
James B. Hawkes sole trustee of Eaton Vance Management
/s/ William M. Steul
- ------------------------------------ Chief Financial Officer of Eaton Vance Management March 29, 2001
William M. Steul
50
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 filed as Exhibit 3 to the Fund's Initial
Registration Statement on Form 10 and incorporated herein by
reference. (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 filed as Exhibit
4 to the Fund's Initial Registration Statement on Form 10
and incorporated herein by reference.
4(2) Copy of Seventh Amendment to Loan and Security Agreement
dated as of June 29, 2000 and coy of Eighth Amendment
thereto dated as of November 27, 2000 filed herewith.
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 filed as Exhibit 10(1) to the Fund's
Initial Registration Statement on Form 10 and incorporated
herein by reference.
10(2) Copy of Management Agreement between Belcrest Realty
Corporation and Boston Management and Research dated
November 24, 1998 filed as Exhibit 10(2) to the Fund's
Initial Registration Statement on Form 10 and incorporated
herein by reference.
10(2)(a) Copy of Amendment No. 1 to Management Agreement between
Belcrest Realty Corporation and Boston Management and
Research dated as of December 28, 2000 filed herewith.
10(3) Copy of Investor Servicing Agreement between the Fund and
Eaton Vance Distributors, Inc. dated August 14, 1998 filed
as Exhibit 10(3) to the Fund's Initial Registration
Statement on Form 10 and incorporated herein by reference.
10(4) Copy of Custody and Transfer Agency Agreement between the
Fund and Investors Bank & Trust Company dated August 14,
1998 filed as Exhibit 10(4) to the Fund's Initial
Registration Statement on Form 10 and incorporated herein by
reference.
11 Not applicable and not filed.
12 Not applicable and not filed.
21 List of Subsidiaries of the Fund filed herewith.
24 Not applicable and not filed.
99 Form N-SAR of Eaton Vance Tax-Managed Growth Portfolio (File
No. 811-7409) for its fiscal year ended December 31, 2000
filed electronically with the Securities and Exchange
Commission under the Investment Company Act of 1940 on March
1, 2001 (Accession No. 0000940394-01-000043) (incorporated
herein by reference pursuant to Rule 12b-32).
51