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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003
Commission File No. 000-30509
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Belcrest Capital Fund LLC
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3453080
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(State of organization) (I.R.S. Employer Identification No.)
The Eaton Vance Building
255 State Street, Boston, Massachusetts 02109
--------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 617-482-8260
----------------
None
----
(Former Name, Former Address and Former Fiscal Year,
if changed since last report)
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 and 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ]
Belcrest Capital Fund LLC
Index to Form 10-Q
PART I - FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Statements of Assets and Liabilities
as of March 31, 2003 (Unaudited) and December 31, 2002 3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months Ended March 31, 2003 and 2002 4
Condensed Consolidated Statements of Changes in Net Assets
(Unaudited) for the Three Months Ended March 31, 2003 and 2002 6
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2003 and 2002 7
Financial Highlights (Unaudited) for the Three Months Ended
March 31, 2003 9
Notes to Condensed Consolidated Financial Statements as of
March 31, 2003 (Unaudited) 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002 24
EXHIBIT INDEX 26
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
- --------------------------------------------------------------------------------
BELCREST CAPITAL FUND LLC
Condensed Consolidated Statements of Assets and Liabilities
March 31,
2003 December 31,
(Unaudited) 2002
-------------- --------------
Assets:
Investment in Belvedere Capital Fund Company LLC
(Belvedere Capital) $2,294,359,439 $2,423,063,983
Investment in Partnership Preference Units 574,851,847 547,878,187
Investment in other real estate 630,305,530 651,756,818
Short-term investments 5,135,000 2,564,911
-------------- --------------
Total investments $3,504,651,816 $3,625,263,899
Cash 6,106,383 12,216,034
Receivable for investments sold - 73,554,369
Escrow deposits - restricted 10,125,650 13,475,591
Dividends and interest receivable 6,577,362 7,835,775
Other assets 6,001,598 6,867,545
-------------- --------------
Total assets $3,533,462,809 $3,739,213,213
-------------- --------------
Liabilities:
Loan payable on Credit Facility $737,150,000 $779,350,000
Mortgages payable 539,815,708 541,017,537
Payable for Fund Shares redeemed 1,693,035 3,952,191
Special Distributions payable 3,438 -
Open interest rate swap contracts, at value 52,781,474 61,716,527
Security deposits 2,247,682 2,231,784
Swap interest payable 5,143,948 5,089,784
Accrued expenses:
Interest expense 4,657,591 4,815,222
Property taxes 2,965,673 9,169,540
Other expenses and liabilities 6,838,838 6,282,930
Minority interests in controlled subsidiaries 22,885,260 26,096,166
-------------- --------------
Total liabilities $1,376,182,647 $1,439,721,681
-------------- --------------
Net assets $2,157,280,162 $2,299,491,532
Shareholders' Capital
-------------- --------------
Shareholders' capital $2,157,280,162 $2,299,491,532
-------------- --------------
Shares Outstanding 27,303,313 27,724,437
-------------- --------------
Net Asset Value and Redemption Price Per Share $ 79.01 $ 82.94
-------------- --------------
See notes to condensed consolidated financial statements
3
BELCREST CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2003 2002
------------- -------------
Investment Income:
Dividends allocated from Belvedere Capital
(net of foreign taxes of $106,401 and
$46,801, respectively) $ 8,736,786 $ 8,683,321
Interest allocated from Belvedere Capital 174,381 290,069
Expenses allocated from Belvedere Capital (3,564,995) (5,021,278)
------------- -------------
Net investment income allocated from
Belvedere Capital $ 5,346,172 $ 3,952,112
Dividends from Partnership Preference Units 13,821,632 13,110,509
Rental income 28,255,238 37,699,404
Interest 130,477 58,277
------------- -------------
Total investment income $ 47,553,519 $ 54,820,302
------------- -------------
Expenses:
Investment advisory and administrative fees $ 2,532,153 $ 3,254,020
Property management fees 1,082,976 1,474,910
Distribution and servicing fees 788,949 1,139,421
Interest expense on mortgages 10,348,506 14,267,601
Interest expense on Credit Facility 3,622,027 5,389,421
Interest expense on swap contracts 12,122,103 10,827,575
Property and maintenance expenses 8,989,832 10,802,690
Property taxes and insurance 3,854,036 4,765,280
Miscellaneous 287,060 525,481
------------- -------------
Total expenses $ 43,627,642 $ 52,446,399
Deduct:
Reduction of investment advisory
and administrative fees 546,845 786,794
------------- -------------
Net expenses $ 43,080,797 $ 51,659,605
------------- -------------
Net investment income before minority
interests in net income of controlled
subsidiaries $ 4,472,722 $ 3,160,697
Minority interests in net income
of controlled subsidiaries (957,405) (1,485,387)
------------- -------------
Net investment income $ 3,515,317 $ 1,675,310
------------- -------------
See notes to condensed consolidated financial statements
4
BELCREST CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited) (Continued)
Three Months Three Months
Ended Ended
March 31, March 31,
2003 2002
-------------- -------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) -
Investment transactions from Belvedere
Capital (identified cost basis) $ (10,452,878) $(20,116,001)
Investment transactions in Partnership
Preference Units (identified cost basis) 624,980 374,360
Investment transactions in other real estate
investments - (1,532,128)
Termination of interest rate swap contracts (168,392) -
-------------- -------------
Net realized loss $ (9,996,290) $(21,273,769)
-------------- -------------
Change in unrealized appreciation(depreciation)-
Investment in Belvedere Capital
(identified cost basis) $(107,493,190) $ 40,208,914
Investments in Partnership Preference Units
(identified cost basis) 32,788,723 (2,094,618)
Investment in other real estate investments
(net of minority interests in unrealized
loss of controlled subsidiaries of
$4,167,143 and $28,914,600, respectively) (24,604,397) (26,182,578)
Interest rate swap contracts 8,935,053 11,316,556
-------------- -------------
Net change in unrealized appreciation
(depreciation) $ (90,373,811) $ 23,248,274
-------------- -------------
Net realized and unrealized gain (loss) $(100,370,101) $ 1,974,505
-------------- -------------
Net (decrease) increase in net assets from
operations $ (96,854,784) $ 3,649,815
============== =============
See notes to condensed consolidated financial statements
5
BELCREST CAPITAL FUND LLC
Condensed Consolidated Statements of Changes in Net Assets (Unaudited)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- ----------------
Increase (Decrease) in Net Assets:
Net investment income $ 3,515,317 $ 1,675,310
Net realized loss on investment transactions (9,996,290) (21,273,769)
Net change in unrealized appreciation
(depreciation) of investments (90,373,811) 23,248,274
-------------- ----------------
Net increase (decrease) in net assets from
operations $ (96,854,784) $ 3,649,815
-------------- ----------------
Transactions in Fund Shares -
Net asset value of Fund Shares issued to
Shareholders in payment of distributions
declared $ 4,796,611 $ -
Net asset value of Fund Shares redeemed (38,256,077) (45,940,156)
--------------- ---------------
Net decrease in net assets from Fund Share
transactions $ (33,459,466) $ (45,940,156)
--------------- ---------------
Distributions -
Distributions to Shareholders $ (11,893,682) $ -
Special Distributions to Shareholders (3,438) -
--------------- ---------------
Total distributions $ (11,897,120) $ -
--------------- ---------------
Net decrease in net assets $ (142,211,370) $ (42,290,341)
Net assets:
At beginning of period $2,299,491,532 $3,253,990,369
--------------- ---------------
At end of period $2,157,280,162 $3,211,700,028
=============== ===============
See notes to condensed consolidated financial statements
6
BELCREST CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2003 2002
------------- -------------
Cash Flows From (For) Operating Activities -
Net (decrease) increase in net assets from operations $(96,854,784) $ 3,649,815
Adjustments to reconcile net (decrease) increase in net assets from
operations to net cash flows from operating activities -
Amortization of debt issuance costs 136,912 212,017
Net investment income allocated from Belvedere Capital (5,346,172) (3,952,112)
(Increase) decrease in dividends and interest receivable 1,258,413 (6,014,953)
Decrease in escrow deposits 3,349,941 5,408,937
Decrease in receivable for investments sold 73,554,369 -
Increase in interest receivable from other real estate investment (39,237) -
Decrease in other assets 729,035 1,281,871
Increase in interest payable for open swap contracts 54,164 379,531
Decrease in accrued property taxes (6,203,867) (6,237,161)
Increase (decrease) in security deposits, accrued interest and accrued other
expenses and liabilities 414,175 (1,708,179)
Improvements to rental property (840,675) (1,671,560)
Proceeds from sale of investment in other real estate - 31,588,186
Decrease in cash due to sale of majority interest in controlled subsidiary - (1,195,835)
Proceeds from sale of Partnership Preference Units - 35,374,360
Net increase in investment in Belvedere Capital (23,700,000) (6,774,312)
Payment for terminated interest rate swap contacts (168,392) -
Decrease (increase) in short-term investments (2,570,089) 5,140,717
Minority interests in net income of controlled subsidiaries 957,405 1,485,387
Net realized loss on investment transactions 9,996,290 21,273,769
Net change in unrealized (appreciation) depreciation of investments 90,373,811 (23,248,274)
-------------- -------------
Net cash flows from operating activities $ 45,101,299 $ 54,992,204
-------------- -------------
Cash Flows From (For) Financing Activities -
Repayment of Credit Facility $ (42,200,000) $(53,000,000)
Payments on mortgages (1,201,829) (1,120,192)
Payments for Fund Shares redeemed (710,585) (1,963,904)
Distributions paid to Shareholders (7,097,071) -
Distributions paid to minority shareholders (1,465) (1,259,036)
-------------- -------------
Net cash flows for financing activities $ (51,210,950) $(57,343,132)
-------------- -------------
Net decrease in cash $ (6,109,651) $ (2,350,928)
Cash at beginning of period $ 12,216,034 $ 12,170,155
-------------- -------------
Cash at end of period $ 6,106,383 $ 9,819,227
============== =============
See notes to condensed consolidated financial statements
7
BELCREST CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
Supplemental Disclosure and Non-cash Investing and
Financing Activities-
Interest paid for loan-Credit Facility $ 3,685,091 $ 6,021,038
Interest paid for mortgages $ 10,212,387 $ 14,810,841
Interest paid for swap contracts $ 12,067,939 $ 10,448,044
Market value of securities distributed in payment of redemptions $ 39,804,648 $ 42,765,142
Market value of real property and other assets, net of current
liabilities, disposed of in conjunction with sale of real estate investment $ - $147,208,137
Mortgage disposed of in conjunction with sale of real estate investment $ - $106,380,298
Partnership Preference Units exchanged for a real estate
equity investment and an investment in note receivable $ (6,440,043) $ -
Market value of real estate equity investment $ 3,087,607 $ -
Investment in note receivable $ 3,352,436 $ -
See notes to condensed consolidated financial statements
8
BELCREST CAPITAL FUND LLC as of March 31, 2003
Condensed Consolidated Financial Statements (Continued)
FINANCIAL HIGHLIGHTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2003
- --------------------------------------------------------------------------------
Net asset value - Beginning of period $ 82.940
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
- --------------------------------------------------------------------------------
Net investment income (6) $ 0.128
Net realized and unrealized loss (3.628)
- --------------------------------------------------------------------------------
TOTAL LOSS FROM OPERATIONS $ (3.500)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions to Shareholders $ (0.430)
Special distributions to Shareholders (9) (0.000)
- --------------------------------------------------------------------------------
Total distributions $ (0.430)
- --------------------------------------------------------------------------------
Net asset value - End of period $ 79.010
- --------------------------------------------------------------------------------
Total Return(1) (4.26)%
- --------------------------------------------------------------------------------
As a Percentage As a Percentage
of Average Net of Average Gross
Ratios Assets(5) Assets(4)(5)
- --------------------------------------------------------------------------------
Expenses of Consolidated Real Property
Subsidiaries
Interest and other borrowing costs(3) 1.45%(8) 0.94%(8)
Operating expenses(3) 1.90%(8) 1.24%(8)
Belcrest Capital Fund LLC Expenses
Interest and other borrowing costs(2) 2.88%(8) 1.87%(8)
Investment advisory and administrative
fees, servicing fees and other Fund
operating expenses(2)(7) 1.19%(8) 0.78%(8)
-----------------------------------
Total expenses 7.42%(8) 4.83%(8)
Net investment income 0.64% (8) 0.42%(8)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $2,157,280
Portfolio Turnover of Tax-Managed Growth Portfolio
(the Portfolio) 4%
- --------------------------------------------------------------------------------
(1) Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. Total return is not computed on an
annualized basis.
(2) Includes the expenses of Belcrest Capital Fund LLC (Belcrest Capital) and
Belcrest Realty Corporation (Belcrest Realty). Does not include expenses of
the real estate subsidiaries majority-owned by Belcrest Realty.
(3) Includes Belcrest Realty's proportional share of expenses incurred by its
majority-owned subsidiaries.
(4) Average Gross Assets is defined as the average daily amount of all assets
of Belcrest Capital (not including its investment in Belcrest Realty) plus
all assets of Belcrest Realty minus the sum of each entity's liabilities
other than the principal amount of money borrowed. For this purpose, the
assets and liabilities of Belcrest Realty's controlled subsidiaries are
reduced by the proportionate interests therein of investors other than
Belcrest Realty.
(5) For the purpose of calculating ratios, the income and expenses of Belcrest
Realty's controlled subsidiaries are reduced by the proportionate interests
therein of investors other than Belcrest Realty.
(6) Calculated using average shares outstanding.
(7) Includes Belcrest Capital's share of Belvedere Capital Fund Company LLC's
allocated expenses, including those expenses allocated from the Portfolio.
(8) Annualized.
(9) Special distributions amount to less than $0.001 per share.
See notes to condensed consolidated financial statements
9
BELCREST CAPITAL FUND LLC as of March 31, 2003
Notes to Condensed Consolidated Financial Statements (Unaudited)
1 Basis of Presentation
The condensed consolidated interim financial statements of Belcrest Capital Fund
LLC (Belcrest Capital) and its subsidiaries (collectively, the Fund) have been
prepared by the Fund, without audit, in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted as permitted by such rules and regulations. All adjustments, consisting
of normal recurring adjustments, have been included. Management believes that
the disclosures are adequate to present fairly the financial position, results
of operations, cash flows and financial highlights at the dates and for the
periods presented. It is suggested that these interim financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Fund's latest annual report on Form 10-K. Results for interim periods are
not necessarily indicative of those to be expected for the full fiscal year.
The balance sheet at December 31, 2002 has been derived from the December 31,
2002 audited financial statements but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements as permitted by the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Certain amounts in the prior period's condensed consolidated financial
statements have been reclassified to conform with the current period
presentation.
2 Investment Transactions
Increases and decreases of the Fund's investment in Belvedere Capital Fund
Company LLC (Belvedere Capital) for the three months ended March 31, 2003
aggregated $23,700,000 and $39,804,648 respectively, and for the three months
ended March 31, 2002 aggregated $80,040,392 and $117,409,106, respectively. For
the three months ended March 31, 2002, sales of Partnership Preference Units
aggregated $35,374,360. For the three months ended March 31, 2003 and for the
three months ended March 31, 2002 there were no purchases of Partnership
Preference Units. For the three months ended March 31, 2003, there were no
acquisitions or sales of other real estate investments. For the three months
ended March 31, 2002, sales of other real estate investments aggregated
$31,588,186. During the three months ended March 31, 2003, the Fund exchanged
Partnership Preference Units in the amount of $6,440,043 for an equity
investment in two private real estate companies affiliated with the issuer of
such formerly held Partnership Preference Units and a note receivable in the
amounts of $3,087,607 and $3,391,673, respectively. The secured note receivable
earns interest of 8% per annum and matures in February 2013 or on demand.
During the three months ended March 31, 2002, Belcrest Realty Corporation
(Belcrest Realty) sold its majority interest in Bel Apartment Properties Trust
(Bel Apartment) to another fund sponsored by Eaton Vance Management, for which a
loss of $1,532,128 was recognized.
10
3 Indirect Investment in Portfolio
Belvedere Capital's interest in Tax-Managed Growth Portfolio (the Portfolio) at
March 31, 2003 was $8,400,349,853 representing 61.1% of the Portfolio's net
assets and at March 31, 2002 was $10,618,305,771 representing 56.5% of the
Portfolio's net assets. The Fund's investment in Belvedere Capital at March 31,
2003 was $2,294,359,439, representing 27.3% of Belvedere Capital's net assets
and at March 31, 2002 was $3,404,421,331, representing 32.1% of Belvedere
Capital's net assets. Investment income allocated to Belvedere Capital from the
Portfolio for the three months ended March 31, 2003 totaled $32,398,573, of
which $8,911,167 was allocated to the Fund. Investment income allocated to
Belvedere Capital from the Portfolio for the three months ended March 31, 2002
totaled $27,289,011, of which $8,973,390 was allocated to the Fund. Expenses
allocated to Belvedere Capital from the Portfolio for the three months ended
March 31, 2003 totaled $9,667,954, of which $2,661,373 was allocated to the
Fund. Expenses allocated to Belvedere Capital from the Portfolio for the three
months ended March 31, 2002 totaled $11,408,561, of which $3,747,521 was
allocated to the Fund. Belvedere Capital allocated additional expenses to the
Fund of $903,622 for the three months ended March 31, 2003, representing $37,787
of operating expenses and $865,835 of service fees. Belvedere Capital allocated
additional expenses to the Fund of $1,273,757 for the three months ended March
31, 2002, representing $32,198 of operating expenses and $1,241,559 of service
fees.
A summary of the Portfolio's Statement of Assets and Liabilities, at March 31,
2003, December 31, 2002 and March 31, 2002 and its operations for the three
months ended March 31, 2003, the year ended December 31, 2002 and the three
months ended March 31, 2002 follows:
March 31, December 31, March 31,
2003 2002 2002
---------------------------------------------------
Investments, at value $13,797,517,752 $14,544,149,182 $18,699,529,315
Other assets 24,535,362 70,073,039 137,094,099
- --------------------------------------------------------------------------------
Total assets $13,822,053,114 $14,614,222,221 $18,836,623,414
Total liabilities 73,659,303 42,700,633 54,877,430
- --------------------------------------------------------------------------------
Net Assets $13,748,393,811 $14,571,521,588 $18,781,745,984
================================================================================
Dividends and interest $ 53,431,732 $ 213,292,082 $ 48,561,319
- --------------------------------------------------------------------------------
Investment adviser fee $ 15,490,999 $ 71,564,552 $ 19,634,596
Other expenses 477,083 2,577,489 654,041
- --------------------------------------------------------------------------------
Total expenses $ 15,968,082 $ 74,142,041 $ 20,288,637
- --------------------------------------------------------------------------------
Net investment income $ 37,463,650 $ 139,150,041 $ 28,272,682
Net realized losses (62,969,970) (459,996,840) (111,417,095)
Net change in unrealized
appreciation (depreciation) (649,928,537) (3,312,547,564) 229,264,275
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations $ (675,434,857) $(3,633,394,363) $ 146,119,862
- --------------------------------------------------------------------------------
4 Cancelable Interest Rate Swap Agreements
Belcrest Capital has entered into cancelable interest rate swap agreements in
connection with its real estate investments and the associated borrowings. Under
such agreements, Belcrest Capital has agreed to make periodic payments at fixed
rates in exchange for payments at floating rates.
11
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 March 31,
2003 and December 31, 2002, Belcrest Capital has entered into cancelable
interest rate swap agreements with Merrill Lynch Capital Services, Inc., as
listed below.
Notional Initial Unrealized Unrealized
Amount Optional Final Depreciation Depreciation
(000's Fixed Floating Termination Termination at March 31, at December 31,
omitted) Rate Rate Date Date 2003 2002
- -------- ----- -------- ----------- ----------- ------------ ---------------
$68,750 6.225% LIBOR + 0.45% 11/03 11/05 $1,999,998 $ 2,631,954
24,528 6.295% LIBOR + 0.45% 05/03 11/05 257,303 524,357
41,368 6.310% LIBOR + 0.45% 02/03 11/05 95,560 552,915
9,030 6.505% LIBOR + 0.45% 03/03 11/05 - * 72,358
21,996 6.497% LIBOR + 0.45% 04/03 11/05 52,976 306,283
20,018 6.439% LIBOR + 0.45% 11/03 11/05 610,317 806,266
111,000 6.4068% LIBOR + 0.45% 02/04 11/05 4,586,641 5,541,030
80,000 6.555% LIBOR + 0.45% 04/04 11/05 4,054,111 4,704,347
16,468 6.7195% LIBOR + 0.45% 02/03 11/05 - * 73,907
12,671 6.6176% LIBOR + 0.45% 11/03 11/05 401,040 531,221
15,105 6.5903% LIBOR + 0.45% 02/04 11/05 649,465 786,970
26,516 7.308% LIBOR + 0.45% 11/03 11/05 957,628 1,277,816
40,193 7.301% LIBOR + 0.45% 02/04 11/05 1,985,692 2,427,007
10,109 7.237% LIBOR + 0.45% 04/04 11/05 588,859 689,195
155,000 7.231% LIBOR + 0.45% 07/04 11/05 10,863,753 12,202,144
17,674 7.700% LIBOR + 0.45% 02/04 11/05 936,211 1,148,226
9,833 7.635% LIBOR + 0.45% 07/04 11/05 742,175 837,224
43,000 7.6525% LIBOR + 0.45% 09/04 11/05 3,545,354 3,931,451
35,024 7.644% LIBOR + 0.45% 07/04 11/05 2,647,657 2,986,988
212,000 7.6224% LIBOR + 0.45% 09/04 11/05 17,688,560 19,546,084
1,907 7.58% LIBOR + 0.45% 04/04 11/05 118,174 138,784
- -----------------------------------------------------------------------------------------------------------
$52,781,474 $61,716,527
- -----------------------------------------------------------------------------------------------------------
* Agreement was terminated on the Initial Optional Termination Date.
5 Debt-Credit Facility
Effective March 31, 2003, Belcrest Capital reduced its loan commitment to
$950,000,000 from $1,150,000,000 at December 31, 2002. There were no other
changes to the terms of the Credit Facility during the quarter ended March 31,
2003.
6 Segment Information
Belcrest Capital pursues its investment objective primarily by investing
indirectly in the Portfolio through Belvedere Capital. The Portfolio is a
diversified investment company of equity securities that 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.
Separate from its investment in Belvedere Capital, Belcrest Capital invests in
real estate assets through its subsidiary Belcrest Realty. Belcrest Realty
invests directly in Partnership Preference Units and debt and equity investments
in private real estate companies and indirectly in investments in real property
through controlled subsidiaries, Bel Santa Ana LLC, Bel Alliance Properties, LLC
and Casco Property Trust, LLC. At March 31, 2002, Belcrest Realty's controlled
subsidiaries also included Bel Communities Property Trust and Bel Apartment (for
the period from January 1, 2002 through March 19, 2002).
12
Belcrest Capital evaluates performance of the reportable segments based on the
net increase (decrease) in net assets from operations of the respective segment,
which includes net investment income or loss, net realized gain (loss), and
unrealized gain (loss). The accounting policies of the reportable segments are
the same as those for Belcrest Capital on a consolidated basis. No reportable
segments have been aggregated. Reportable information by segment is as follows:
Tax Managed
FOR THE THREE MONTHS ENDED Growth Real
MARCH 31, 2003 Portfolio* Estate Total
- ------------------------------------------------------------------------------------------
Revenue $ 5,346,172 $ 42,090,566 $ 47,436,738
Interest expense on mortgages - (10,348,506) (10,348,506)
Interest expense on Credit Facility - (3,549,586) (3,549,586)
Interest expense on swap contracts - (12,122,103) (12,122,103)
Operating expenses (349,789) (15,795,837) (16,145,626)
Minority interest in net income of
controlled subsidiaries - (957,405) (957,405)
- ------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ 4,996,383 $ (682,871) $ 4,313,512
Net realized gain (loss) (10,452,878) 456,588 (9,996,290)
Change in unrealized gain (loss) (107,493,190) 17,119,379 (90,373,811)
- ------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS OF REPORTABLE
SEGMENTS $ (112,949,685) $ 16,893,096 $ (96,056,589)
- ------------------------------------------------------------------------------------------
Segment assets $2,294,359,439 $1,231,696,411 $3,526,055,850
Segment liabilities 1,696,473 1,359,608,270 1,361,304,743
- ------------------------------------------------------------------------------------------
NET ASSETS OF REPORTABLE SEGMENTS $2,292,662,966 $ (127,911,859) $2,164,751,107
- ------------------------------------------------------------------------------------------
Tax Managed
FOR THE THREE MONTHS ENDED Growth Real
MARCH 31, 2002 Portfolio* Estate Total
- -------------------------------------------------------------------------------------------
Revenue $ 3,952,112 $ 50,858,327 $ 54,810,439
Interest expense on mortgages - (14,267,601) (14,267,601)
Interest expense on Credit Facility - (5,173,845) (5,173,845)
Interest expense on swap contracts - (10,827,575) (10,827,575)
Operating expenses (524,572) (19,435,457) (19,960,029)
Minority interest in net income of
controlled subsidiaries - (1,485,387) (1,485,387)
- -------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ 3,427,540 $ (331,538) $ 3,096,002
Net realized loss (20,116,001) (1,157,768) (21,273,769)
Change in unrealized gain (loss) 40,208,914 (16,960,640) 23,248,274
- -------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS OF REPORTABLE
SEGMENTS $ 23,520,453 $ (18,449,946) $ 5,070,507
- -------------------------------------------------------------------------------------------
Segment assets $3,404,421,331 $1,403,610,105 $4,808,031,436
Segment liabilities 1,227,020 1,563,180,083 1,564,407,103
- -------------------------------------------------------------------------------------------
NET ASSETS OF REPORTABLE SEGMENTS $3,403,194,311 $ (159,569,978) $3,243,624,333
- -------------------------------------------------------------------------------------------
* Belcrest Capital invests indirectly in Tax-Managed Growth Portfolio through
Belvedere Capital.
13
The following tables reconcile the reported segment information to the condensed
consolidated financial statements for the three months ended March 31, 2003 and
2002:
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
------------------ ------------------
Revenue:
Revenue from reportable segments $ 47,436,738 $ 54,810,439
Unallocated revenue 116,781 9,863
------------------ ------------------
TOTAL REVENUE $ 47,553,519 $ 54,820,302
------------------ ------------------
Net increase (decrease) in net assets
from operations:
Net increase (decrease) in net assets
from operations of reportable segments $ (96,056,589) $ 5,070,507
Unallocated revenue 116,781 9,863
Unallocated expenses ** (914,976) (1,430,555)
------------------ ------------------
TOTAL NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (96,854,784) $ 3,649,815
------------------ ------------------
** Unallocated expenses include costs of Belcrest Capital to operate the Fund
such as servicing and distribution expenses, as well as other miscellaneous
administrative costs of Belcrest Capital.
Net assets:
Net assets of reportable segments $ 2,164,751,107 $ 3,243,624,333
Unallocated cash 2,271,959 982,803
Short-term investments 5,135,000 579,000
Loan payable-Credit Facility (14,743,000) (33,254,000)
Other liabilities (134,904) (232,108)
------------------ ------------------
Total net assets $ 2,157,280,162 $ 3,211,700,028
------------------ ------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information in this report contains forward-looking statements within the
meaning of the federal securities laws. Forward-looking statements typically are
identified by use of terms such as "may," "will," "should," "might," "expect,"
"anticipate," "estimate," and similar words, although some forward-looking
statements are expressed differently. The actual results of Belcrest Capital
Fund LLC (the Fund) could differ materially from those contained in the
forward-looking statements due to a number of factors. The Fund undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise, except as required by
applicable law. Factors that could affect the Fund's performance include a
decline in the U.S. stock markets or in general economic conditions, adverse
developments affecting the real estate industry, or fluctuations in interest
rates.
The following discussion should be read in conjunction with the Fund's unaudited
condensed consolidated financial statements and related notes in Item 1 above.
14
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2003, COMPARED TO THE
QUARTER ENDED MARCH 31, 2002
PERFORMANCE OF THE FUND.(1) The Fund's total return was -4.26% for the quarter
ended March 31, 2003. This return reflects a decrease in the Fund's net asset
value per share from $82.94 to $79.01 and a distribution of $0.43 per share
during the quarter. For comparison, the Standard & Poor's 500 Index (the S&P
500), an unmanaged index of large capitalization stocks commonly used as a
benchmark for the U.S. equity market, had a total return of -3.15% over the same
period.(2) The Fund outperformed Tax-Managed Growth Portfolio (the Portfolio) by
approximately 0.45% during the period. Last year, the Fund had a total return
performance of 0.13% for the quarter ended March 31, 2002. This return reflected
an increase in the Fund's net asset value per share from $106.98 to $107.12. For
comparison, the S&P 500 had a total return of 0.28% over the same period.(2) The
performance of the Fund trailed that of the Portfolio by approximately 0.70%
during the period.
PERFORMANCE OF THE PORTFOLIO. War angst coupled with rising oil prices, domestic
terrorist fears, and negative investor sentiment contributed to continued market
volatility in the first quarter of 2003. The quarter was marked by a few
leadership reversals from the same period last year. Particularly of note was
the dominance of large capitalization and growth related stocks, and the
divergence in performance of growth oriented sectors and sub-industries during
the quarter. Most major domestic benchmarks experienced negative returns and
only two of the S&P 500 sectors had gains during the period.
The best performing sector of the S&P 500 during the first quarter of 2003 was
health care, while the telecommunications services sector continued to trail the
performance of the S&P 500. Market leading industries in the first quarter
included computer software, biotechnology, and managed health care. Defensive
groups such as food distributors, material manufacturing, and drug retailing
realized weaker quarterly returns during the period.
In this challenging environment, the performance of the Portfolio trailed that
of the overall market mostly due to lower exposure to more aggressive sectors
and industries. During the quarter, Boston Management and Research (Boston
Management), the Portfolio's investment adviser, emphasized industrials and
consumer staples sectors, a continuing theme from last year. While this emphasis
has been productive in prior periods, it hurt Portfolio returns during the first
quarter of 2003. Relatively stronger stock selection within the airfreight and
logistics, personal products and beverages sub-industries partially offset the
negative performance of these sectors during the quarter.
Boston Management gradually increased the Portfolio's exposure to the energy
sector (particularly the oil and gas industries) during the quarter to a
relatively higher allocation from its neutral standing versus the S&P 500 last
year. Boston Management slightly trimmed the Portfolio's positions in the
healthcare and financial sectors from last year's levels, primarily due to
fundamental and political headwinds. Lack of earnings visibility in the
information technology sector prompted a continued underweight allocation versus
the S&P 500. The Portfolio also underweighted the telecommunications services
sector during the quarter, which was the S&P 500's worst performing sector
during the period. Boston Management believes that these sector shifts are
appropriate for the longer-term positioning of the Portfolio.
- --------------------
(1) Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that Shares, when redeemed, may be worth
more or less than their original cost.
(2) It is not possible to invest directly in an index.
15
PERFORMANCE OF REAL ESTATE INVESTMENTS. For the quarter ended March 31, 2003,
the Fund's real estate operations (conducted principally through Real Estate
Joint Ventures) reflected weakening multifamily market fundamentals and the
uncertain outlook for the U.S. economy as a whole. Rental income decreased to
$28.3 million for the quarter ended March 31, 2003 from $37.7 million for the
quarter ended March 31, 2002, a decrease of $9.4 million or 25%. Property
operating expenses (before debt service and excluding certain operating expenses
of Belcrest Realty Corporation (Belcrest Realty) of approximately $1.9 million)
also decreased to $13.9 million for the quarter ended March 31, 2003 a decrease
of $3.1 million or 18%. The declines in rental income and property operating
expenses were principally a result of the Fund's sale of its investment in Bel
Apartment Properties Trust and Bel Communities Property Trust (Bel Communities)
during March and October 2002, respectively. However, during the quarter ended
March 31, 2003, Real Estate Joint Venture operations were affected by
deteriorating multifamily market fundamentals in most regions with falling
occupancy levels and rising rent concessions. Given the continued uncertain
outlook for the U.S. economy as a whole, expectations are that real estate
operating results in 2003 will be modestly below the levels of 2002.
Due primarily to the sale of the Fund's investment in Bel Communities during
2002, the estimated fair value of the real properties held through Belcrest
Realty was lower at the end of the first quarter of 2003 compared to the first
quarter of 2002. At March 31, 2003, the estimated fair value of the real
properties held through Belcrest Realty was $623.8 million compared to $839.3
million at March 31, 2002, a decrease of $215.5 million or 26%. The decrease in
estimated fair value of the real properties was also due, in part, to modest
decreases in property values resulting from declines in near-term earnings
expectations and the economic downturn. The Fund recognized unrealized
depreciation of the estimated fair value of its other real estate investments of
approximately $24.6 million for the quarter ended March 31, 2003. Despite weaker
market conditions, declines in asset values for multifamily properties have
generally been modest as decreases in capitalization rates have largely offset
declining income levels.
For the quarter ended March 31, 2003, the Fund's investments in Partnership
Preference Units generally benefited from declining interest rates and
tightening spreads in income-oriented securities, particularly in real
estate-related securities. As a result, the Fund recognized $32.8 million of
unrealized appreciation in the estimated value of the Partnership Preference
Units during the quarter ended March 31, 2003. At March 31, 2003, the estimated
fair value of the Fund's Partnership Preference Units totaled $574.9 million
compared to $533.6 million at March 31, 2002, an increase of $41.3 million or 8%
primarily due to appreciation recognized as a result of market conditions
similar to the first quarter 2003 market conditions described above. Dividends
received from the Partnership Preference Units for the quarter ended March 31,
2003 totaled $13.8 million compared to $13.1 million for the quarter ended March
31, 2002, an increase of $0.7 million or 5%. During March 2003, Belcrest Realty
exchanged Partnership Preference Units of one issuer for an equity interest in,
and notes receivable of, private real estate companies formerly affiliated with
such issuer. The estimated value of these investments at March 31, 2003 was
approximately $6.5 million.
PERFORMANCE OF INTEREST RATE SWAPS. For the quarter ended March 31, 2003,
interest rate swap valuations appreciated modestly by approximately $8.9
million, as initial optional termination dates moved closer. Approximately 42%
of existing notional contract amounts will reach optional termination over the
next four quarters. Offsetting the appreciation were minimal interest rate
decreases during the first quarter of 2003, which were in contrast to interest
rate increases during the first quarter of 2002. Valuations appreciated by
approximately $11.3 million for the quarter ended March 31, 2002, due to
increases in swap rates during the period.
16
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2003 the loan commitment under the Fund's revolving credit
facility (the Credit Facility) was reduced to $950,000,000. The Fund had
outstanding borrowings of $737,150,000 and unused loan commitments of
$212,850,000 at March 31, 2003. There are no amounts outstanding under letters
of credit at March 31, 2003. 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 purpose in the future. The Credit Facility will also 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 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 underlying values of the swaps are recorded as
unrealized gains or losses.
As of March 31, 2003 and 2002, the unrealized depreciation related to the
interest rate swap agreements was $52,781,474 and $38,513,800, respectively.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Fund's discussion and analysis of its financial condition and results of
operations are based upon the Fund's unaudited condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires the Fund to make estimates, judgments and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. The Fund bases these estimates, judgments and assumptions on
historical experience and on other various factors that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.
The Fund's critical accounting policies affect the Fund's more significant
estimates and assumptions used in valuing the Fund's real estate investments and
interest rate swap agreements. Prices are not readily available for these types
of investments and therefore are valued on an ongoing basis by Boston
Management, in its capacity as manager of Belcrest Realty, in the case of the
real estate investments, and in its capacity as the Fund's investment adviser,
in the case of the interest rate swap contracts.
In estimating the value of the Fund's investments in real estate, Boston
Management takes into account 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 fair
values based upon independent valuations assuming an orderly disposition of
assets. Detailed investment valuations are performed at least annually and
reviewed periodically. Interim valuations for the Real Estate Joint Ventures,
reflect results of operations and distributions, and may be adjusted if there
has been a significant change in economic circumstances since the most recent
independent valuation. Given that such valuations include many assumptions,
including but not limited to an orderly disposition of assets, values may differ
17
from amounts ultimately realized. Boston Management, as the Fund's investment
adviser, determines the value of interest rate swaps, and, in doing so, may
consider among other things, dealer and counter-party quotes and pricing models.
The policies for valuing real estate investments involve significant judgments
that are based upon, 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 and government rules and regulations. The
valuations of Partnership Preference Units held by the Fund through its
investment in Belcrest Realty fluctuate over time to reflect, among other
factors, changes in interest rates, changes in perceived riskiness of such units
(including call risk), changes in the perceived riskiness of comparable or
similar securities trading in the public market and the relationship between
supply and demand for comparable or similar securities trading in the public
market.
The value of interest rate swaps may be subject to wide swings in valuation
caused principally by changes in interest rates. Interest rate swaps may be
difficult to value since such instruments may be considered illiquid.
Fluctuations in the value of Partnership Preference Units derived from changes
in general interest rates can be expected to be offset in part (but not
entirely) by changes in the value of interest rate swap agreements or other
interest rate hedges entered into by the Fund with respect to its borrowings.
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 Partnership Preference Units not offset by
changes in the valuation of interest rate swap agreements or other interest rate
hedges entered into by the Fund and changes in the value of other real estate
investments will cause the performance of the Fund to deviate from the
performance of the Portfolio.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Fund's primary exposure to interest rate risk arises from its real estate
investments that are financed by the Fund with floating rate bank borrowings
under the Credit Facility and by fixed-rate secured mortgage debt obligations of
the Real Estate Joint Ventures and Net Leased Properties. The interest rate on
borrowings under the Fund's Credit Facility is reset at regular intervals based
on a fixed and predetermined premium to LIBOR for short-term extensions of
credit. The Fund utilizes cancelable interest rate swap agreements to fix the
cost of its borrowings under the Credit Facility and to mitigate the impact of
interest rate changes on the Fund's net asset value. Under the terms of the
interest rate swap agreements, the Fund makes cash payments at fixed rates in
exchange for floating rate payments that fluctuate with three-month LIBOR. 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 interest
rate hedging arrangements is a specialized activity that can expose the Fund to
significant loss.
The value of Partnership Preference Units and, to a lesser degree, other real
estate investments is sensitive to interest rate risk. Increases in interest
rates generally will have an adverse affect on the value of Partnership
Preference Units and other real estate investments.
18
The following table summarizes the contractual maturities and weighted-average
interest rates associated with the Fund's significant non-trading financial
instruments. The Fund has no market risk sensitive instruments held for trading
purposes. This information should be read in conjunction with Note 4 to the
unaudited condensed consolidated financial statements.
Interest Rate Sensitivity
Cost, Principal (Notional) Amount by Contractual Maturity
For the Twelve Months Ended March 31,
Estimated
2004-2005 2006 2007-2008 Thereafter Total Fair Value
------------- ------------- ------------- -------------- --------------- --------------
Rate sensitive
liabilities:
- ---------------------------------------
Long-term debt:
- ---------------------------------------
Fixed-rate mortgages $11,570,127 $528,245,581 $539,815,708 $596,000,000
Average interest rate 6.90% 7.57% 7.55%
- ---------------------------------------
Variable-rate Credit Facility $737,150,000 $737,150,000 $737,150,000
Average interest rate 1.73% 1.73%
- -----------------------------------------------------------------------------------------------------------------------------------
Rate sensitive derivative financial
instruments:
- ---------------------------------------
Pay fixed/
Receive variable interest rate swap
contracts $946,691,942 $946,691,942 $(52,781,474)
Average pay rate 7.03% 7.03%
Average receive rate 1.73% 1.73%
- -----------------------------------------------------------------------------------------------------------------------------------
Rate sensitive investments:
- ---------------------------------------
Fixed-rate Partnership Preference
Units:
- ---------------------------------------
Bradley Operating Limited
Partnership, 8.875% Series B
Cumulative Redeemable Perpetual
Preferred Units, Callable 2/23/04,
Current Yield: 9.09% $ 23,799,036 $ 23,799,036 $ 23,829,235
- ---------------------------------------
Camden Operating, L.P., 8.50% Series
B Cumulative Redeemable Perpetual
Preferred Units, Callable 2/23/04,
Current Yield: 8.32% $ 4,076,090 $ 4,076,090 $ 4,343,500
- ---------------------------------------
Colonial Realty Limited Partnership,
8.875% Series B Cumulative Redeemable
Perpetual Preferred Units, Callable
2/23/04, Current Yield: 8.87% $ 50,744,840 $ 50,744,840 $ 51,530,900
- ---------------------------------------
Essex Portfolio, L.P., 9.125% Series
C Cumulative Redeemable Preferred
Units, Callable 11/24/03, Current
Yield: 9.01% $ 21,000,000 $ 21,000,000 $ 21,278,838
- ---------------------------------------
Liberty Property L.P., 9.25%, Series
B Cumulative Redeemable Preferred
Units, Callable 7/28/04, Current
Yield: 8.91% $ 64,025,574 $ 64,025,574 $ 66,561,750
- ---------------------------------------
MHC Operating Limited Partnership, 9%
Series D Cumulative Redeemable
Perpetual Preference Units, Callable
9/29/04, Current Yield: 9.00% $ 75,000,000 $ 75,000,000 $ 74,340,000
19
- ---------------------------------------
National Golf Operating Partnership
L.P., 9.3% Series A Cumulative
Redeemable Preferred Units, Callable
3/4/03, Current Yield: 9.37% $ 27,877,518 $ 27,877,518 $ 31,320,144
- ---------------------------------------
National Golf Operating Partnership
L.P., 9.3% Series B Cumulative
Redeemable Preferred Units, Callable
7/28/04, Current Yield: 9.31% $ 29,833,200 $ 29,833,200 $ 29,976,000
- ---------------------------------------
PSA Institutional Partners, L.P.,
9.50% Series N Cumulative Redeemable
Perpetual Preferred Units, Callable
3/17/05, Current Yield: 9.07% $ 55,375,000 $ 55,375,000 $ 58,010,850
- ---------------------------------------
Price Development Company, L.P.,
8.95% Series B Cumulative Redeemable
Preferred Partnership Units, Callable
7/28/04, Current Yield: 9.61% $ 64,089,925 $ 64,089,925 $ 59,971,750
- ---------------------------------------
Regency Centers, L.P., 9.125% Series
D Cumulative Redeemable Preferred
Units, Callable 9/29/04, Current
Yield: 8.69% $ 35,000,000 $ 35,000,000 $ 36,732,500
- ---------------------------------------
Summit Properties Partnership, L.P.,
8.95% Series B Cumulative Redeemable
Perpetual Preferred Units, Callable
4/29/04, Current Yield: 9.07% $ 55,108,570 $ 55,108,570 $ 54,621,900
- ---------------------------------------
Urban Shopping Centers, L.P., 9.45%
Series D Cumulative Redeemable
Perpetual Preferred Units, Callable
10/1/04, Current Yield: 9.10% $ 60,000,000 $ 60,000,000 $ 62,334,480
- ---------------------------------------
Fixed-rate investment in note receivable:
- ---------------------------------------
Fixed rate note receivable, 8% $ 3,391,673 $ 3,391,673 $ 3,391,673
- -----------------------------------------------------------------------------------------------------------------------------------
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, Eaton Vance
Management (Eaton Vance) , as the Fund's manager, and the Fund's Chief Executive
Officer and Chief Financial Officer have conducted an evaluation of the
effectiveness of disclosure controls and procedures pursuant to Rule 13a-14
under the Securities Exchange Act of 1934, as amended. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures are, to the best of their knowledge,
effective in ensuring that all material information required to be filed in this
quarterly report has been made known to them in a timely fashion. There have
been no significant changes in internal controls, or in factors that could
significantly affect internal controls, subsequent to the date the Chief
Executive Officer and Chief Financial Officer completed their evaluation.
20
As the Fund's manager, the complete and entire management, control and operation
of the Fund are vested in Eaton Vance. The Fund's organizational structure does
not provide for a board of directors or a board audit committee. As such, the
Fund's Chief Executive Officer and Chief Financial Officer intend to report any
significant deficiency in the design or operation of internal controls which
could adversely affect the Fund's ability to record, process, summarize and
report financial data, and any fraud, whether or not material, that involves
management or other employees who have a significant role in the Fund's internal
controls to Eaton Vance.
21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Although in the ordinary course of business, the Fund, Belcrest Realty
and Belcrest Realty's controlled subsidiaries may become involved in
legal proceedings, the Fund is not aware of any material pending legal
proceedings to which any of them is subject.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
three months ended March 31, 2003.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports of Form 8-K:
(a) The following is a list of all exhibits files as part of this Form
10-Q:
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
None.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officer on May 15, 2003.
BELCREST CAPITAL FUND LLC
(Registrant)
By: /s/ Michelle A. Alexander
---------------------------
Michelle A. Alexander
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
23
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Thomas E. Faust Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Belcrest Capital Fund
LLC;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Thomas E. Faust Jr.
-------------------------
Thomas E. Faust Jr.
Chief Executive Officer
24
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Michelle A. Alexander, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Belcrest Capital Fund
LLC;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Michelle A. Alexander
----------------------------
Michelle A. Alexander
Chief Financial Officer
25
EXHIBIT INDEX
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
26