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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. 000-49775
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Belport Capital Fund LLC
------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3551830
----------------------- ------------------------------------
(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 [ ]
Belport 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 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 21
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
- --------------------------------------------------------------------------------
BELPORT 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) $1,286,768,268 $1,322,126,211
Investment in Partnership Preference Units 100,799,113 96,503,025
Investment in other real estate investments 542,376,746 493,950,506
Short-term investments 3,076,000 622,978
-------------- --------------
Total investments $1,933,020,127 $1,913,202,720
Cash 6,562,289 7,452,296
Escrow deposits - restricted 3,645,237 2,272,211
Receivable for investments sold - 50,221,589
Dividends and interest receivable 570,759 570,704
Other assets 2,698,771 2,680,422
-------------- --------------
Total assets $1,946,497,183 $1,976,399,942
-------------- --------------
Liabilities:
Loan payable on Credit Facility $ 231,000,000 $ 226,000,000
Mortgages payable 420,709,325 361,107,500
Open interest rate swap contracts, at value 26,638,837 26,385,515
Payable for Fund Shares redeemed 740,597 -
Security deposits 871,046 798,511
Swap interest payable 188,403 189,454
Accrued expenses:
Interest expense 2,617,628 2,484,938
Property taxes 3,030,936 2,051,403
Other expenses and liabilities 3,226,681 2,799,285
Minority interests in controlled subsidiaries 22,824,325 29,941,272
-------------- --------------
Total liabilities $ 711,847,778 $ 651,757,878
-------------- --------------
Net assets $1,234,649,405 $1,324,642,064
Shareholders' Capital
-------------- --------------
Shareholders' capital $1,234,649,405 $1,324,642,064
-------------- --------------
Shares Outstanding 17,114,730 17,258,094
-------------- --------------
Net Asset Value and Redemption Price Per Share $ 72.14 $ 76.75
-------------- --------------
See notes to condensed consolidated financial statements
3
BELPORT 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 $59,569 and $24,276,
respectively) $ 4,857,387 $ 4,497,093
Interest allocated from Belvedere Capital 90,563 149,847
Expenses allocated from Belvedere Capital (1,968,349) (2,599,446)
------------ ------------
Net investment income allocated from
Belvedere Capital $ 2,979,601 $ 2,047,494
Rental income 16,638,248 17,228,311
Dividends from Partnership Preference
Units 2,203,828 2,203,828
Interest 67,253 42,124
----------- ------------
Total investment income $21,888,930 $21,521,757
------------ ------------
Expenses:
Investment advisory and administrative
fees $ 1,305,729 $ 1,488,441
Property management fees 659,528 690,709
Distribution and servicing fees 627,665 855,385
Interest expense on mortgages 6,329,727 6,185,329
Interest expense on Credit Facility 1,026,582 1,311,904
Interest expense on swap contracts 2,166,915 2,036,074
Property and maintenance expense 4,213,973 3,682,656
Property taxes and insurance 1,993,052 1,968,146
Miscellaneous 227,965 384,780
------------ ------------
Total expenses $18,551,136 $18,603,424
Deduct-
Reduction of investment advisory
and administrative fees 313,437 423,820
------------ ------------
Net expenses $18,237,699 $18,179,604
------------ ------------
Net investment income before minority
interests in net income of controlled
subsidiaries $ 3,651,231 $ 3,342,153
Minority interests in net income
of controlled subsidiaries (658,259) (1,068,174)
------------ ------------
Net investment income $ 2,992,972 $ 2,273,979
------------ ------------
See notes to condensed consolidated financial statements
4
BELPORT 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 loss -
Investment transactions from Belvedere
Capital (identified cost basis) $ (5,647,765) $(10,094,276)
------------- -------------
Net realized loss $ (5,647,765) $(10,094,276)
------------- -------------
Change in unrealized appreciation (depreciation)-
Investment in Belvedere Capital
(identified cost basis) $(58,653,661) $ 21,581,004
Investments in Partnership Preference Units
(identified cost basis) 4,296,088 990,238
Investments in other real estate investments
(net of minority interests in unrealized
loss of controlled subsidiaries of
$6,931,836 and $6,554,953, respectively) (10,053,812) (16,860,461)
Interest rate swap contracts (253,322) 3,439,380
------------- -------------
Net change in unrealized appreciation
(depreciation) $(64,664,707) $ 9,150,161
------------- ------------
Net realized and unrealized loss $(70,312,472) $ (944,115)
------------- ------------
Net increase (decrease) in net assets
from operations $(67,319,500) $ 1,329,864
============= =============
See notes to condensed consolidated financial statements
5
BELPORT 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 $ 2,992,972 $ 2,273,979
Net realized loss on investment transactions (5,647,765) (10,094,276)
Net change in unrealized appreciation
(depreciation) of investments (64,664,707) 9,150,161
--------------- ---------------
Net increase (decrease) in net assets from
operations $ (67,319,500) $ 1,329,864
--------------- ---------------
Transactions in Fund Shares -
Net asset value of Fund Shares issued to
Shareholders in payment of distributions
declared $ 6,479,733 $ -
Net asset value of Fund Shares redeemed (16,785,312) (8,918,380)
--------------- ---------------
Net decrease in net assets from Fund Share
transactions $ (10,305,579) $ (8,918,380)
--------------- ---------------
Distributions -
Distributions to Shareholders $ (12,367,580) $ -
--------------- ---------------
Total distributions $ (12,367,580) $ -
--------------- ---------------
Net decrease in net assets $ (89,992,659) $ (7,588,516)
Net assets:
At beginning of period $1,324,642,064 $1,749,157,864
--------------- ---------------
At end of period $1,234,649,405 $1,741,569,348
=============== ===============
See notes to condensed consolidated financial statements
6
BELPORT 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 increase (decrease) in net assets from operations $(67,319,500) $ 1,329,864
Adjustments to reconcile net increase (decrease) in net assets from operations
to net cash flows from operating activities -
Amortization of debt issuance costs 67,408 30,058
Net investment income allocated from Belvedere Capital (2,979,601) (2,047,494)
Increase in escrow deposits (1,373,026) (1,024,570)
Decrease in receivable for investments sold 50,221,589 -
(Increase) decrease in other assets (85,757) 503,062
Increase in dividends and interest receivable (55) (771,875)
Increase (decrease) in interest payable for open swap contracts (1,051) 165,633
Increase in security deposits, accrued interest and accrued other expenses
and liabilities 632,621 388,222
Increase in accrued property taxes 979,533 1,274,030
Payments for investment in other real estate (5,026,960) -
Improvements to rental property (783,102) (458,814)
Net (increase) decrease in investment in Belvedere Capital (41,000,002) 906,535
(Increase) decrease in short-term investments (2,453,022) 1,334,860
Minority interests in net income of controlled subsidiaries 658,259 1,068,174
Net realized loss on investment transactions 5,647,765 10,094,276
Net change in unrealized (appreciation) depreciation of investments 64,664,707 (9,150,161)
------------------- -------------------
Net cash flows from operating activities $ 1,849,806 $ 3,641,800
Cash Flows From (For) Financing Activities -
Proceeds from Credit Facility $ 5,000,000 $ -
Distributions paid to Shareholders (5,887,847) -
Payments for Fund Shares redeemed (1,008,595) (1,381,814)
Distributions paid to minority shareholders (843,371) (1,321,350)
------------------- -------------------
Net cash flows for financing activities $ (2,739,813) $ (2,703,164)
Net increase (decrease) in cash $ (890,007) $ 938,636
Cash at beginning of period $ 7,452,296 $ 10,001,955
------------------- ------------------
Cash at end of period $ 6,562,289 $ 10,940,591
=================== ==================
See notes to condensed consolidated financial statements
7
BELPORT CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months Three Months
Ended Ended
March 31, March 31,
2003 2002
------------------ -------------------
Supplemental Disclosure and Non-cash Investing and
Financing Activities-
Interest paid for loan-Credit Facility $ 795,195 $ 1,089,589
Interest paid for swap contracts $ 2,167,966 $ 1,870,441
Interest paid for mortgages $ 6,118,316 $ 6,111,830
Market value of securities distributed in payment of redemptions $ 15,036,120 $ 7,536,566
Market value of real property and other assets, net of current liabilities,
assumed in conjunction with acquisition of real estate investments $ 64,628,785 $ -
Mortgage assumed in connection with acquisition of real estate investments $ 59,601,825 $ -
See notes to condensed consolidated financial statements
8
BELPORT 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 $ 76.750
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
- --------------------------------------------------------------------------------
Net investment income(5) $ 0.174
Net realized and unrealized loss (4.064)
- --------------------------------------------------------------------------------
TOTAL LOSS FROM OPERATIONS $ (3.890)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions to Shareholders $ (0.720)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.720)
- --------------------------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD $ 72.140
- --------------------------------------------------------------------------------
TOTAL RETURN(1) (5.14)%
- -------------------------------------------------------------------------------
As a Percentage As a Percentage
of Average Net of Average Gross
RATIOS Assets(4) Assets(2)(4)
- --------------------------------------------------------------------------------
Expenses of Consolidated Real Property
Subsidiaries
Interest and other borrowing costs(3) 1.65% (8) 1.15% (8)
Operating expenses(3) 1.80% (8) 1.25% (8)
Belport Capital Fund LLC Expenses
Interest and other borrowing costs(6) 1.02% (8) 0.71% (8)
Investment advisory and administrative
fees, servicing fees and other Fund
operating expenses(6)(7) 1.20% (8) 0.84% (8)
----------------------------------
Total expenses(7) 5.67% (8) 3.95% (8)
Net investment income 0.96% (8) 0.67% (8)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $1,234,649
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) Average Gross Assets is defined as the average daily amount of all assets
of Belport Capital Fund LLC (Belport Capital) (including Belport Capital's
interest in Belvedere Capital Fund Company LLC (Belvedere Capital) and
Belport Capital's ratable share of the assets of its directly and
indirectly controlled subsidiaries), without reduction by any liabilities.
For this purpose, the assets of Belport Realty Corporation's (Belport
Realty) controlled subsidiaries are reduced by the proportionate interests
therein of investors other than Belport Realty.
(3) Includes Belport Realty's proportional share of expenses incurred by its
majority-owned subsidiaries.
(4) For the purpose of calculating ratios, the income and expenses of Belport
Realty's controlled subsidiaries are reduced by the proportionate interest
therein of investors other than Belport Realty.
(5) Calculated using average shares outstanding.
(6) Includes the expenses of Belport Capital and Belport Realty. Does not
include expenses of the real estate subsidiaries majority-owned by Belport
Realty.
(7) Includes Belport Capital's share of Belvedere Capital's allocated expenses,
including those expenses allocated from the Portfolio.
(8) Annualized.
See notes to condensed consolidated financial statements
9
BELPORT 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 Belport Capital Fund
LLC (Belport 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 Estate Freeze
Shareholders in Belport Capital are entitled to restructure their Fund Share
interests under what is termed an Estate Freeze Election. Under this election,
Fund Shares are divided into Preferred Shares and Common Shares. Preferred
Shares have a preferential right over the corresponding Common Shares equal to
(i) 95% of the original capital contribution made in respect of the undivided
Shares from which the Preferred Shares and Common Shares were derived, plus (ii)
an annuity priority return equal to 8.5% of the Preferred Shares' preferential
interest in the original capital contribution of the undivided Fund Shares. The
associated Common Shares are entitled to the remaining 5% of the original
capital contribution in respect of the undivided Shares, plus any returns
thereon in excess of the fixed annual priority of the Preferred Shares. At March
31, 2003 and December 31, 2002, the Preferred Shares were valued at $72.14 and
$76.75, respectively, and the Common Shares had no value. The existence of
restructured Fund Shares does not adversely affect Shareholders who do not
participate in the election nor do the restructured Fund Shares have
preferential rights to Fund Shares that have not been restructured. Shareholders
who subdivide Fund Shares under this election sacrifice certain rights and
privileges that they would otherwise have with respect to the Fund Shares so
divided, including redemption rights and voting and consent rights. Upon the
twentieth anniversary of the issuance of the associated undivided Fund Shares to
the original holders thereof, Preferred and Common Shares will automatically
convert into full and fractional undivided Fund Shares.
10
3 Investment Transactions
Increases and decreases of Belport Capital's investment in Belvedere Capital for
the three months ended March 31, 2003 aggregated $45,919,932 and $19,956,050,
respectively, and for the three months ended March 31, 2002, aggregated
$5,191,349 and $13,634,454, respectively. For the three months ended March 31,
2003 and for the three months ended March 31, 2002, there were no purchases or
sales of Partnership Preference Units. For the three months ended March 31,
2003, acquisitions and sales of other real estate investments aggregated
$5,026,960 and $0, respectively. For the three months ended March 31, 2002,
there were no acquisitions or sales of other real estate investments.
During the three months ended March 31, 2003, Bel Oakbrook LLC (Bel Oakbrook), a
wholly-owned subsidiary of Belport Realty Corporation (Belport Realty), acquired
a 100% ownership interest in CRIC Oakbrook 2, LLC (CRIC Oakbrook), another real
estate investment. CRIC Oakbrook owns a suburban office building located in
Illinois. The property is leased to a single tenant on a triple net lease basis
pursuant to a non-cancelable, fixed-term operating lease expiring in June 2017
with options to extend the lease or to purchase the property. Rental income is
variable through June 2007 and based on a calculation as defined in the lease
agreement using current interest rates. For the period June 2007 through June
2017 rental income to be received is approximately $48,679,000. The property is
100% occupied at March 31, 2003.
In May 2003, Belport Realty sold its interest in Bel Oakbrook to another Fund
sponsored by Eaton Vance Management. A gain of approximately $300,000 was
recognized on the transaction.
4 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 $1,286,768,268 representing 15.32% of Belvedere Capital's net assets
and at March 31, 2002 was $1,767,713,414, representing 16.7% 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 $4,947,950 was allocated to Belport Capital. Investment income allocated
to Belvedere Capital from the Portfolio for the three months ended March 31,
2002 totaled $27,289,011, of which $4,646,940 was allocated to Belport Capital.
Expenses allocated to Belvedere Capital from the Portfolio for the three months
ended March 31, 2003 totaled $9,667,954, of which $1,474,128 was allocated to
Belport Capital. Expenses allocated to Belvedere Capital from the Portfolio for
the three months ended March 31, 2002 totaled $11,408,561, of which $1,940,638
was allocated to Belport Capital. Belvedere Capital allocated additional
expenses to Belport Capital of $494,221 for the three months ended March 31,
2003, representing $14,665 of operating expenses and $479,556 of service fees.
Belvedere Capital allocated additional expenses to Belport Capital of $658,808
for the three months ended March 31, 2002, representing $16,775 of operating
expenses and $642,033 of service fees.
A summary of the Portfolio's Statement of Assets and Liabilities, at March 31,
2003, December 31, 2002 and at March 31, 2002 and its operations for the three
months ended March 31, 2003, the year ended December 31, 2002 and for the three
months ended March 31, 2002 follows:
11
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
- -------------------------------------------------------------------------------
5 Interest Rate Swap Agreements
Belport Capital has entered into current and forward interest rate swap
agreements in connection with its real estate investments and the associated
borrowings. Under such agreements, Belport Capital 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 March 31, 2003 and
December 31, 2002, Belport Capital has entered into interest rate swap
agreements with Citibank, N.A. and Merrill Lynch Capital Services, Inc., as
listed below.
Notional Unrealized Unrealized
Amount Depreciation Depreciation
Effective (000's Fixed Floating Termination at March 31, at December 31,
Date omitted) Rate Rate Date 2003 2002
- -------------- ----------- ----------- ------------------- -------------- -------------------- -------------------
03/01 $49,080 5.8075% LIBOR + 0.40% 3/08 $ 5,365,921 $ 529,706
05/01 73,980 5.79% LIBOR + 0.40% 3/08 8,092,641 8,088,686
07/01 34,905 5.995% LIBOR + 0.40% 3/08 4,156,686 4,169,274
12/01 57,509 5.841% LIBOR + 0.40% 3/08 6,455,491 6,440,259
03/08 49,080 6.45% LIBOR + 0.40% 2/10 662,343 5,416,263
03/08 73,980 6.92% LIBOR + 0.40% 9/10 1,905,755 1,741,327
- -------------- ----------- ----------- ------------------- -------------- -------------------- -------------------
Total $26,638,837 $26,385,515
- -------------- ----------- ----------- ------------------- -------------- -------------------- -------------------
12
6 Debt
Mortgages - Rental property held by Belport Realty's controlled subsidiaries,
Monadnock Property Trust, LLC (Monadnock), Bel Multifamily Property Trust (Bel
Multifamily) and CRIC Oakbrook, is financed through mortgages issued to the
controlled subsidiaries. The mortgages are secured by the rental property and
are generally without recourse to the other assets of Belport Capital and
Belport Realty. The estimated fair value of the rental property securing the
loans was $542,376,746 at March 31, 2003. Amounts outstanding at March 31, 2003
are as follows:
Annual
Interest Monthly Loan Balance at
Property Maturity Date Rate Payment March 31, 2003
- --------------------------------------------------------------------------------
Monadnock April 1, 2009 7.89% $ 100,647 (A) $ 15,307,500
Monadnock April 1, 2011 6.57% 1,112,094 (A) 202,000,000
Bel Multifamily March 1, 2011 6.95% 832,842 (A) 143,800,000
CRIC Oakbrook June 15, 2017 6.69% 338,691 (B) 59,601,825
- --------------------------------------------------------------------------------
$420,709,325
- --------------------------------------------------------------------------------
(A) Mortgages provide for monthly payments of interest only through the
respective maturity date, with the entire principal balance due on the
respective maturity date.
(B) Monthly payments are $338,691 through June 14, 2007 and then $405,656
through the maturity date.
The estimated market value of the mortgage notes payable is approximately
$462,000,000 at March 31, 2003. The mortgage notes payable cannot be prepaid or
otherwise disposed of without incurring a substantial prepayment penalty or
without the sale of the rental property financed by the mortgage notes payable.
Management has no current plans to prepay or otherwise dispose of the mortgage
notes payable or sell the related rental property prior to the maturity date.
The market value of the mortgages is based on estimates using discounted cash
flow analysis and currently prevailing rates. Considerable judgment is necessary
in interpreting market data to develop estimates at market value. The use of
different assumptions or estimation methodologies may have a material effect on
the estimated market value.
7 Segment Information
Belport 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, Belport Capital invests in
real estate assets through its subsidiary, Belport Realty. Belport Realty
invests directly in Partnership Preference Units and indirectly in real property
through controlled subsidiaries, Bel Multifamily , Monadnock and Bel Oakbrook.
Belport Realty acquired its investment in Bel Oakbrook during the quarter ended
March 31, 2003.
Belport 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 (loss), realized gain (loss), and
unrealized gain (loss). The accounting policies of the reportable segments are
the same as those for Belport Capital on a consolidated basis. No reportable
segments have been aggregated. Reportable information by segment is as follows:
13
TAX-MANAGED
FOR THE THREE MONTHS ENDED GROWTH REAL
MARCH 31, 2003 PORTFOLIO* ESTATE TOTAL
- -------------------------------------------------------------------------------------------------------------------
Revenue $ 2,979,601 $ 18,870,046 $ 21,849,647
Interest expense on mortgages - (6,329,727) (6,329,727)
Interest expense on Credit Facility - (975,253) (975,253)
Interest expense on swap contracts - (2,166,915) (2,166,915)
Operating expenses (238,215) (7,782,704) (8,020,919)
Minority interest in net income of controlled
subsidiaries - (658,259) (658,259)
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 2,741,386 $ 957,188 $ 3,698,574
Net realized loss (5,647,765) - (5,647,765)
Change in unrealized gain (loss) (58,653,661) (6,011,046) (64,664,707)
- -------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS OF
REPORTABLE SEGMENTS $ (61,560,040) $ (5,053,858) $ (66,613,898)
- -------------------------------------------------------------------------------------------------------------------
Segment assets $1,286,768,268 $655,094,504 $1,941,862,772
Segment liabilities 740,597 699,458,966 700,199,563
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS OF REPORTABLE SEGMENTS $1,286,027,671 $(44,364,462) $1,241,663,209
- -------------------------------------------------------------------------------------------------------------------
TAX-MANAGED
FOR THE THREE MONTHS ENDED GROWTH REAL
MARCH 31, 2002 PORTFOLIO* ESTATE TOTAL
- -------------------------------------------------------------------------------------------------------------------
Revenue $ 2,047,494 $ 19,466,690 $ 21,514,184
Interest expense on mortgages - (6,185,329) (6,185,329)
Interest expense on Credit Facility - (1,220,071) (1,220,071)
Interest expense on swap contracts - (2,036,074) (2,036,074)
Operating expenses (313,464) (7,350,117) (7,663,581)
Minority interest in net income of controlled
subsidiaries - (1,068,174) (1,068,174)
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 1,734,030 $ 1,606,925 $ 3,340,955
Net realized loss (10,094,276) - (10,094,276)
Change in unrealized gain (loss) 21,581,004 (12,430,843) 9,150,161
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS OF REPORTABLE SEGMENTS $ 13,220,758 $(10,823,918) $ 2,396,840
- -------------------------------------------------------------------------------------------------------------------
Segment assets $1,767,713,414 $606,552,307 $2,374,265,721
Segment liabilities - 618,703,704 618,703,704
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS OF REPORTABLE SEGMENTS $1,767,713,414 $(12,151,397) $1,755,562,017
- -------------------------------------------------------------------------------------------------------------------
* Belport Capital invests indirectly in Tax-Managed Growth Portfolio through
Belvedere Capital.
14
The following tables reconcile the reported segment information to the condensed
consolidated financial statements for the three months ended March 31, 2003 and
March 31, 2002:
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2003 MARCH 31, 2002
--------------- --------------
Revenue:
Revenue from reportable segments $ 21,849,647 $ 21,514,184
Unallocated revenue 39,283 7,573
--------------- ---------------
TOTAL REVENUE $ 21,888,930 $ 21,521,757
--------------- ---------------
Net increase (decrease) in net assets
from operations:
Net increase (decrease) in net assets
from operations of reportable segments $ (66,613,898) $ 2,396,840
Unallocated revenue 39,283 7,573
Unallocated expenses ** (744,885) (1,074,549)
-------------- ---------------
TOTAL NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (67,319,500) $ 1,329,864
-------------- ---------------
** Unallocated expenses include costs of Belport Capital to operate the Fund
such as servicing and distribution expense, as well as other administrative
costs of Belport Capital.
Net assets:
Net assets of reportable segments $1,241,663,209 $1,755,562,017
Unallocated cash 1,558,411 1,925,317
Short-term investments 3,076,000 371,055
Loan payable- Credit Facility (11,550,000) (16,170,000)
Other liabilities (98,215) (119,041)
--------------- ---------------
Total net assets $1,234,649,405 $1,741,569,348
--------------- ---------------
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 Belport 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.
15
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 -5.14% for the quarter
ended March 31, 2003. This return reflects a decrease in the Fund's net asset
value per share from $76.75 to $72.14 and a distribution of $0.72 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 performance of the Fund trailed that of Tax-Managed Growth
Portfolio (the Portfolio) by approximately -0.43% during the period. Last year,
the Fund had a total return performance of 0.09% for the quarter ended March 31,
2002. This return reflected an increase in the Fund's net asset value per share
from $98.37 to $98.46. 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 0.74% 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
- -----------------------
(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.
16
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.
PERFORMANCE OF REAL ESTATE INVESTMENTS. For the quarter ended March 31, 2003,
the Fund's real estate operations (conducted primarily 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 $16.6
million for the quarter ended March 31, 2003 from $17.2 million for the quarter
ended March 31, 2002, a decrease of $0.6 million or 3%, while property operating
expenses (before debt service and excluding certain operating expenses of
Belport Realty Corporation (Belport Realty) of approximately $0.9 million)
increased to $6.9 million for the quarter ended March 31, 2003 from $6.3 million
for the quarter ended March 31, 2002, an increase of $0.6 million or 10%. The
increase in property operating expenses was principally due to increases in
property and maintenance expenses with smaller increases in property tax and
insurance expenses. 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.
At March 31, 2003, the estimated fair value of the real properties held through
Belport Realty was $542.4 million compared to $495.7 million at March 31, 2002,
an increase of $46.7 million or 9%. The increase in real property values at
March 31, 2003 resulted from the acquisition during the quarter ended March 31,
2003, of the Fund's investment in CRIC Oakbrook 2 LLC (CRIC Oakbrook), which
owns an office property subject to a triple net lease. The increase was offset
in part by lower property values due to 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 $10.1 million during 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 level expectations.
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 approximately $4.3
million of unrealized appreciation in the estimated fair 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 $100.8 million compared to $93.5 million at March 31, 2002, an increase
of $7.3 million or 8% primarily due to appreciation recognized as a result of
the market conditions similar to the first quarter 2003 market conditions
described above. Dividends received from the Partnership Preference Units
totaled $2.2 million for each of the quarters ended March 31, 2003 and 2002.
PERFORMANCE OF INTEREST RATE SWAPS. For the quarter ended March 31, 2003,
interest rate swap valuations depreciated by approximately $0.3 million. This
decrease in value was the result of minimal interest rate decreases during the
first quarter of 2003, which was in contrast to interest rate increases for the
first quarter of 2002. Valuations appreciated by approximately $3.4 million for
the quarter ended March 31, 2002, due to increases in swap rates during the
period.
17
LIQUIDITY AND CAPITAL RESOURCES
CRIC Oakbrook had outstanding borrowings consisting of fixed-rate secured
mortgage debt obligations of $59.6 million as of March 31, 2003. The outstanding
borrowings were assumed in connection with the purchase of the real estate
investment during March 2003.
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 periodic payments to the counterparty at predetermined fixed rates, in
exchange for floating-rate payments from the counterparty that fluctuate with
one-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 appreciation (depreciation)
related to the interest rate swap agreements was $(26,638,837) and $1,095,372,
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 Belport 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 agreements.
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
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.
18
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 Belport 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 borrowings under a
revolving securitization facility with two affiliated special purpose commercial
paper issuers (the CP Issuers) which is supported by a liquidity facility
(collectively, the Credit Facility) and by fixed-rate secured mortgage debt
obligations of the Real Estate Joint Ventures and the Net Leased Property. The
interest rate on borrowings under the Fund's Credit Facility is reset at regular
intervals based on the CP Issuers' cost of financing plus a margin of one-month
LIBOR plus a premium. 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 one-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.
19
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 5 to the
Fund's unaudited condensed consolidated financial statements in Item 1.
INTEREST RATE SENSITIVITY
COST, PRINCIPAL (NOTIONAL) AMOUNT BY CONTRACTUAL MATURITY
FOR THE TWELVE MONTHS ENDED MARCH 31,
Estimated
2004-2007 2008 Thereafter Total Fair Value
------------------------------------------------------------------------------------------
Rate sensitive
Liabilities:
- --------------------------
Long-term debt:
- --------------------------
Fixed-rate mortgages $420,709,325 $420,709,325 $462,000,000
Average interest rate 6.76% 6.76%
- --------------------------
Variable-rate Credit
Facility $231,000,00 $231,000,000 $231,000,000
Average interest rate 1.25% 1.25%
- ---------------------------------------------------------------------------------------------------------------------
Rate sensitive
derivative financial
instruments:
- --------------------------
Pay fixed/
Receive variable
interest rate swap
contracts $338,534,000 $338,534,000 $(26,638,837)
Average pay rate 6.16% 6.16%
Average receive rate 1.25% 1.25%
- ---------------------------------------------------------------------------------------------------------------------
Rate sensitive
investments:
- --------------------------
Fixed-rate Partnership
Preference Units:
- --------------------------
Essex Portfolio, L.P.,
7.875% Series B
Cumulative Redeemable
Preferred Units,
Callable 2/6/03, Current
Yield: 8.38% $ 34,821,762 $ 34,821,762 $ 41,122,113
- --------------------------
PSA Institutional
Partners, L.P., 9.50%
Series N Cumulative
Redeemable Perpetual
Preferred Units,
Callable 3/17/05,
Current Yield: 9.07% $ 34,905,000 $ 34,905,000 $ 34,047,000
- --------------------------
20
Prentiss Properties
Acquisition Partners,
L.P., 8.30% Series B
Cumulative Redeemable
Perpetual Preferred
Units, Callable 6/25/03,
Current Yield: 8.91% $ 22,687,060 $ 22,687,060 $ 25,630,000
- --------------------------
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.
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, Belport Realty
and Belport 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 ON FORM 8-K:
- -------------------------------------------
(a) The following is a list of all exhibits filed as part of this Form
10-Q:
4.1 Copy of First and Second Amendments to Revolving Credit and
Security Agreement dated March 12, 2003 and April 11, 2003,
respectively, filed herewith
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 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.
BELPORT 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 Belport 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 Belport 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
4.1 Copy of First and Second Amendments to Revolving Credit Security
Agreement dated March 12, 2003 and April 11, 2003, respectively, filed
herewith.
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