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. 000-50258
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Belrose Capital Fund LLC
------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3613468
-------- ------------------------------------
(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 [ ] NO [X]
Belrose 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 for the Period Ended March 31, 2002 4
Condensed Consolidated Statements of Changes in Net
Assets (Unaudited) for the Three Months Ended March 31,
2003 and for the Period Ended March 31, 2002 6
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended March 31, 2003
and for the Period Ended March 31, 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 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002 23
EXHIBIT INDEX 25
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
- --------------------------------------------------------------------------------
BELROSE 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) $1,284,892,115 $1,264,314,536
Investment in Partnership Preference Units 54,843,503 41,849,305
Investment in other real estate investments 467,377,242 470,597,295
-------------- ---------------
Total investments $1,807,112,860 $1,776,761,136
Cash 7,412,390 7,214,141
Escrow deposits - restricted 2,654,484 3,239,060
Dividends and interest receivable 401,094 440,053
Other assets 3,390,396 3,553,337
-------------- ---------------
Total assets $1,820,971,224 $1,791,207,727
-------------- ------- -------
Liabilities:
Loan payable - Credit Facility $ 164,300,000 $ 155,300,000
Mortgages payable 344,219,483 344,219,483
Open interest rate swap contracts, at value 12,194,333 11,552,842
Security deposits 1,050,619 1,012,016
Swap interest payable 139,146 129,883
Accrued expenses:
Interest expense 2,448,030 2,438,911
Property taxes 1,877,121 2,575,189
Other expenses and liabilities 2,688,187 2,546,403
Minority interests in controlled subsidiaries 25,334,414 29,431,345
--------------- ---------------
Total liabilities $ 554,251,333 $ 549,206,072
-------------- ---------------
Net assets $1,266,719,891 $1,242,001,655
Shareholders' Capital
-------------- --------------
Shareholders' capital $1,266,719,891 $1,242,001,655
-------------- --------------
Shares Outstanding 17,252,760 16,160,271
-------------- ---------------
Net Asset Value and Redemption Price Per Share $ 73.42 $ 76.86
-------------- ---------------
See notes to condensed consolidated financial statements
3
BELROSE CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Period
Ended Ended
March 31, March 31,
2003 2002*
------------- ------------
Investment Income:
Dividends allocated from Belvedere Capital
(net of foreign taxes of $59,363 and
$1,439, respectively) $ 4,743,401 $ 69,982
Interest allocated from Belvedere Capital 88,575 1,776
Expenses allocated from Belvedere Capital (1,916,046) (60,509)
------------- ------------
Net investment income allocated from
Belvedere Capital $ 2,915,930 $ 11,240
Rental income 16,333,785 1,804,713
Dividends from Partnership Preference Units 996,581 37,831
Interest 19,785 8,110
------------- ------------
Total investment income $ 20,266,081 $ 1,861,903
------------- ------------
Expenses:
Investment advisory and administrative fees $ 1,134,716 $ 41,013
Property management fees 652,486 72,188
Distribution and servicing fees 612,071 18,728
Interest expense on mortgages 6,579,439 755,215
Interest expense on Credit Facility 732,292 41,020
Interest expense on swap contracts 1,051,283 39,587
Property and maintenance expenses 4,256,698 426,429
Property taxes and insurance 2,189,342 208,381
Organizational expenses - 681,830
Miscellaneous 271,835 90,571
------------- ------------
Total expenses $ 17,480,162 $ 2,374,962
Deduct-
Reduction of investment advisory
and administrative fees 305,442 9,308
------------- -------------
Net expenses $ 17,174,720 $ 2,365,654
------------- -------------
Net investment income (loss) before minority
interests in net income of controlled
subsidiaries $ 3,091,361 $ (503,751)
Minority interests in net income
of controlled subsidiaries (514,701) (69,656)
------------ ------------
Net investment income (loss) $ 2,576,660 $ (573,407)
------------ ------------
* For the period from start of business, March 19, 2002, to March 31, 2002.
See notes to condensed consolidated financial statements
4
BELROSE CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited) (Continued)
Three Months Period
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) $ (5,345,920) $ 24,980
------------- ------------
Net realized gain (loss) $ (5,345,920) $ 24,980
------------- ------------
Change in unrealized appreciation (depreciation)-
Investment in Belvedere Capital
(identified cost basis) $(57,789,631) $(2,968,113)
Investments in Partnership Preference Units
(identified cost basis) 4,960,598 (38,311)
Investments in other real estate investments
(net of minority interests in unrealized
gain (loss) of controlled subsidiaries of
$(4,734,953) and $483,454, respectively) 809,787 (1,654,885)
Interest rate swap contracts (641,491) (71,648)
------------- ------------
Net change in unrealized appreciation
(depreciation) $(52,660,737) $(4,732,957)
------------- ------------
Net realized and unrealized loss $(58,006,657) $(4,707,977)
------------- ------------
Net decrease in net assets from operations $(55,429,997) $(5,281,384)
============= ===========
* For the period from start of business, March 19, 2002, to March 31, 2002.
See notes to condensed consolidated financial statements
5
BELROSE CAPITAL FUND LLC
Condensed Consolidated Statements of Changes in Net Assets (Unaudited)
Three Months Period
Ended Ended
March 31, 2003 March 31, 2002*
--------------- ---------------
Increase (Decrease) in Net Assets:
Net investment income (loss) $ 2,576,660 $ (573,407)
Net realized gain (loss) on investment
transactions (5,345,920) 24,980
Net change in unrealized appreciation
(depreciation) of investments (52,660,737) (4,732,957)
--------------- ---------------
Net decrease in net assets from operations $ (55,429,997) $ (5,281,384)
--------------- ---------------
Transactions in Fund Shares -
Investment securities contributed $ 95,047,136 $ 289,269,379
Less - Selling commissions (325,083) (1,580,621)
-------------- ---------------
Net contributions $ 94,722,053 $ 287,688,758
Net asset value of Fund Shares issued to
Shareholders in payment of distributions
declared 348,050 -
Net asset value of Fund Shares redeemed (14,113,856) -
--------------- ---------------
Net increase in net assets from Fund Share
transactions $ 80,956,247 $ 287,688,758
--------------- ---------------
Distributions -
Distributions to Shareholders $ (808,014) $ -
----------------- ---------------
Total distributions $ (808,014) $ -
----------------- ---------------
Net increase in net assets $ 24,718,236 $ 282,407,374
Net assets:
At beginning of period $ 1,242,001,655 $ -
--------------- ---------------
At end of period $ 1,266,719,891 $ 282,407,374
=============== ===============
* For the period from start of business, March 19, 2002, to March 31, 2002.
See notes to condensed consolidated financial statements
6
BELROSE CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Period
Ended Ended
March 31, March 31,
2003 2002*
------------------ -------------------
Cash Flows From (For) Operating Activities -
Net decrease in net assets from operations $ (55,429,997) $ (5,281,384)
Adjustment to reconcile net decrease in net assets from operations to net
cash flows used for operating activities -
Net investment income allocated from Belvedere Capital (2,915,930) (11,249)
Amortization of debt issuance costs 103,309 9,892
Decrease (increase) in escrow deposits 584,576 (5,433)
Decrease in other assets 59,632 40,352
Decrease (increase) in dividends and interest receivable 38,959 (76,858)
Increase in interest payable for open swap contracts 9,263 39,587
Increase in security deposits, accrued interest and accrued other expenses
and liabilities 189,506 818,199
(Decrease) increase in accrued property taxes (698,068) 177,816
Purchases of Partnership Preference Units (8,033,600) (3,547,905)
Payments for investments in other real estate - (31,588,186)
Cash assumed in connection with acquisition of other
real estate investments - 1,195,835
Improvements to rental property (705,109) (60,804)
Net decrease (increase) in investment in Belvedere Capital 1,404,502 (1,145,852)
Increase in minority interest - 210,000
Minority interests in net income of controlled subsidiaries 514,701 69,656
Net realized loss (gain) on investment transactions 5,345,920 (24,980)
Net change in unrealized (appreciation) depreciation of investments 52,660,737 4,732,957
------------------ -------------------
Net cash flows for operating activities $ (6,871,599) $(34,448,357)
Cash Flows From (For) Financing Activities -
Proceeds from Credit Facility $ 9,000,000 $ 38,000,000
Payments on behalf of investors (selling commissions) (325,083) (1,580,621)
Payments for Fund Shares redeemed (1,268,422) -
Distributions paid to Shareholders (459,964) -
Capital contributed to controlled subsidiaries 123,317 -
------------------ -----------------
Net cash flows from financing activities $ 7,069,848 $ 36,419,379
Net increase in cash $ 198,249 $ 1,971,022
Cash at beginning of period $ 7,214,141 $ -
------------------ ------------------
Cash at end of period $ 7,412,390 $ 1,971,022
================== ==================
* For the period from start of business, March 19, 2002, to March 31, 2002.
See notes to condensed consolidated financial statements
7
BELROSE CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months Period
Ended Ended
March 31, March 31,
2003 2002*
------------------ -------------------
Supplemental Disclosure and Non-cash Investing and
Financing Activities -
Securities contributed by Shareholders, invested in Belvedere Capital $95,047,136 $289,269,379
Interest paid for loan - Credit Facility $ 682,966 $ -
Interest paid for mortgages $ 6,476,131 $ -
Interest paid for swap contracts $ 1,042,020 $ -
Market value of securities distributed in payment of redemptions $12,845,434 $ -
Market value of real property and other assets, net of current
liabilities, assumed in conjunction with acquisition of other real
estate investments $ - $148,197,322
Mortgage assumed in conjunction with acquisition of other real
estate investments $ - $107,369,483
* For the period from start of business, March 19, 2002, to March 31, 2002.
See notes to condensed consolidated financial statements
8
BELROSE 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 $ 76.860
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
- --------------------------------------------------------------------------------
Net investment income (6) $ 0.155
Net realized and unrealized loss (3.545)
- --------------------------------------------------------------------------------
Total loss from operations $ (3.390)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions to Shareholders $ (0.050)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.050)
- --------------------------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD $ 73.420
- --------------------------------------------------------------------------------
TOTAL RETURN (1) (4.42)%
- --------------------------------------------------------------------------------
AS A PERCENTAGE AS A PERCENTAGE
OF AVERAGE NET OF AVERAGE GROSS
RATIOS ASSETS(5) ASSETS(2)(5)
- --------------------------------------------------------------------------------
Expenses of Consolidated Real Property
Subsidiaries
Interest and other borrowing costs(4) 1.74% (3) 1.28% (3)
Operating expenses(4) 1.90% (3) 1.40% (3)
Belrose Capital Fund LLC Expenses
Interest and other borrowing costs(7) 0.58% (3) 0.43% (3)
Investment advisory and administrative fees,
servicing fees and other Fund operating
expenses(7)(8) 1.16% (3) 0.85% (3)
---------------------------------
Total expenses(8) 5.38% (3) 3.96% (3)
Net investment income 0.84% (3) 0.62% (3)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $1,266,720
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 Belrose Capital Fund LLC (Belrose Capital) (including Belrose Capital's
interest in Belvedere Capital Fund Company LLC (Belvedere Capital) and
Belrose 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 Belrose Realty Corporation's (Belrose
Realty) controlled subsidiaries are reduced by the proportionate interests
therein of investors other than Belrose Realty.
(3) Annualized.
(4) Includes Belrose Realty's proportional share of expenses incurred by its
majority-owned subsidiaries.
(5) For the purpose of calculating ratios, the income and expenses of Belrose
Realty's controlled subsidiaries are reduced by the proportionate interest
therein of investors other than Belrose Realty.
(6) Calculated using average shares outstanding.
(7) Includes the expenses of Belrose Capital and Belrose Realty. Does not
include expenses of the real estate subsidiaries majority-owned by Belrose
Realty.
(8) Includes Belrose Capital's share of Belvedere Capital's allocated expenses,
including those expenses allocated from the Portfolio.
See notes to condensed consolidated financial statements
9
BELROSE 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 Belrose Capital Fund
LLC (Belrose 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. 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 Belrose Capital's investment in Belvedere Capital for
the three months ended March 31, 2003 aggregated $95,047,136 and $14,249,936,
respectively, and for the period from the start of business, March 19, 2002, to
March 31, 2002 aggregated $292,022,776 and $1,607,545, respectively. For the
three months ended March 31, 2003, purchases and sales of Partnership Preference
Units aggregated $8,033,600 and $0, respectively. For the period from the start
of business, March 19, 2002, to March 31, 2002, purchases and sales of
Partnership Preference Units aggregated $3,547,905 and $0, respectively. For the
three months ended March 31, 2003, there were no acquisitions or sales of other
real estate investments. For the period from the start of business, March 19,
2002, to March 31, 2002, acquisitions and sales of other real estate investments
aggregated $31,588,186 and $0, respectively.
Purchases of Partnership Preference Units during the three months ended March
31, 2003 and the period from the start of business, March 19, 2002, to March 31,
2002, represent amounts purchased from other funds sponsored by Eaton Vance
Management (Eaton Vance). Acquisitions of other real estate investments
represent amounts purchased from other funds sponsored by Eaton Vance for the
period from the start of business, March 19, 2002, to March 31, 2002.
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 $1,284,892,115 representing 15.3% of Belvedere Capital's net assets and
at March 31, 2002 was $287,483,347, representing 2.7% 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 $4,831,976
was allocated to Belrose Capital. Investment income allocated to Belvedere
Capital from the Portfolio for the period from the start of business, March 19,
2002, to March 31, 2002 totaled $2,654,905, of which $71,758 was allocated to
Belrose Capital. Expenses allocated to Belvedere Capital from the Portfolio for
the three months ended March 31, 2003 totaled $9,667,954, of which $1,434,886
was allocated to Belrose Capital. Expenses allocated to Belvedere Capital from
the Portfolio for the period from the start of business, March 19, 2002, to
March 31, 2002 totaled $1,661,238, of which $44,803 was allocated to Belrose
Capital. Belvedere Capital allocated additional expenses to Belrose Capital of
$481,160 for the three months ended March 31, 2003, representing $14,255 of
operating expenses and $466,905 of service fees. Belvedere Capital allocated
additional expenses to Belrose Capital of $15,706, for the period from the start
of business, March 19, 2002, to March 31, 2002, representing $364 of operating
expenses and $15,342 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 period from the start of business, March 19,
2002, to December 31, 2002 and the period from the start of business, March 19,
2002, to 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 $ 169,418,860 $ 4,688,097
- --------------------------------------------------------------------------------
Investment adviser fee $ 15,490,999 $ 54,761,871 $ 2,831,915
Other expenses 477,083 2,016,295 92,847
- --------------------------------------------------------------------------------
Total expenses $ 15,968,082 $ 56,778,166 $ 2,924,762
- --------------------------------------------------------------------------------
Net investment income $ 37,463,650 $ 112,640,694 $ 1,763,335
Net realized gains (losses) (62,969,970) (344,617,301) 3,962,444
Net change in unrealized
appreciation (depreciation) (649,928,537) (3,469,590,930) 72,220,909
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations $ (675,434,857) $(3,701,567,537) $ 77,946,688
- --------------------------------------------------------------------------------
11
4 Interest Rate Swap Agreements
Belrose 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, Belrose 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, Belrose Capital has entered into interest rate swap
agreements with 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
- -----------------------------------------------------------------------------------------------------------------------
03/02 $ 35,136 5.660% LIBOR + 0.38% 03/07 $ 3,496,247 $ 3,478,871
03/07 31,588 7.140% LIBOR + 0.38% 07/09 1,166,937 1,134,349
05/02 32,966 5.159% LIBOR + 0.38% 03/07 2,643,313 2,591,755
03/07 32,966 6.874% LIBOR + 0.38% 11/10 1,380,074 1,309,376
07/02 29,588 4.540% LIBOR + 0.38% 03/07 1,666,104 1,580,735
03/07 29,588 6.500% LIBOR + 0.38% 07/09 709,113 683,659
10/02 36,631 3.550% LIBOR + 0.38% 03/07 664,088 480,992
03/07 36,631 5.480% LIBOR + 0.38% 11/09 100,725 67,648
12/02 7,865 3.685% LIBOR + 0.38% 03/07 183,529 146,897
03/07 7,865 5.727% LIBOR + 0.38% 07/09 84,045 78,560
02/03 8,034 3.320% LIBOR + 0.38% 03/07 73,751 -
03/07 8,034 5.480% LIBOR + 0.38% 07/09 26,407 -
- ----------------------------------------------------------------------------------------------------------------------
Total $ 12,194,333 $ 11,552,842
- ----------------------------------------------------------------------------------------------------------------------
5 Debt- Credit Facility
Effective March 31, 2003, Belrose Capital reduced its loan commitment to
$225,000,000 from $300,000,000 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
Belrose 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, Belrose Capital invests in
real estate assets through its subsidiary Belrose Realty Corporation (Belrose
Realty). Belrose Realty invests directly in Partnership Preference Units and
indirectly in real property through controlled subsidiaries, Bel Apartment
Properties Trust, Katahdin Property Trust, LLC (Katahdin) and Bel Communities
Property Trust (Bel Communities). Belrose Realty did not hold an investment in
controlled subsidiaries Katahdin or Bel Communities for the period from the
start of business, March 19, 2002, to March 31, 2002.
12
Belrose 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), net realized gain (loss) and
unrealized gain (loss). The accounting policies of the reportable segments are
the same as those for Belrose 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 $ 2,915,930 $ 17,346,911 $ 20,262,841
Interest expense on mortgages - (6,579,439) (6,579,439)
Interest expense on Credit Facility - (695,677) (695,677)
Interest expense on swap contracts - (1,051,283) (1,051,283)
Operating expenses (195,414) (7,893,295) (8,088,709)
Minority interest in net income of controlled
subsidiaries - (514,701) (514,701)
- --------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 2,720,516 $ 612,516 $ 3,333,032
Net realized loss (5,345,920) - (5,345,920)
Change in unrealized gain (loss) (57,789,631) 5,128,894 (52,660,737)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
OF REPORTABLE SEGMENTS $ (60,415,035) $ 5,741,410 $ (54,673,625)
- --------------------------------------------------------------------------------------------------------------------
Segment assets $1,284,892,115 $534,894,052 $1,819,786,167
Segment liabilities - 545,954,694 545,954,694
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS OF REPORTABLE SEGMENTS $1,284,892,115 $(11,060,642) $1,273,831,473
- --------------------------------------------------------------------------------------------------------------------
TAX-MANAGED
FOR THE PERIOD ENDED GROWTH REAL
MARCH 31, 2002 (1) PORTFOLIO* ESTATE TOTAL
- -------------------------------------------------------------------------------------------------------------------
Revenue $ 11,249 $ 1,850,654 $ 1,861,903
Interest expense on mortgages - (755,215) (755,215)
Interest expense on Credit Facility - (38,559) (38,559)
Interest expense on swap contracts - (39,587) (39,587)
Operating expenses (7,575) (821,421) (828,996)
Minority interest in net income of controlled
subsidiaries - (69,656) (69,656)
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 3,674 $ 126,216 $ 129,890
Net realized gain 24,980 - 24,980
Change in unrealized gain (loss) (2,968,113) (1,764,844) (4,732,957)
- -------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS OF
REPORTABLE SEGMENTS $ (2,939,459) $ (1,638,628) $ (4,578,087)
- -------------------------------------------------------------------------------------------------------------------
Segment assets $ 287,483,347 $154,085,413 $ 441,568,760
Segment liabilities - 156,487,407 156,487,407
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS OF REPORTABLE SEGMENTS $ 287,483,347 $ (2,401,994) $ 285,081,353
- -------------------------------------------------------------------------------------------------------------------
* Belrose Capital invests indirectly in Tax-Managed Growth Portfolio through
Belvedere Capital.
(1) For the period from the start of business, March 19, 2002, to March 31,
2002.
13
The following tables reconcile the reported segment information to the condensed
consolidated financial statements for the three months ended March 31, 2003 and
for the period from the start of business, March 19, 2002, to March 31, 2002:
THREE MONTHS ENDED PERIOD ENDED
MARCH 31, 2003 MARCH 31, 2002(1)
------------- -------------
Revenue:
Revenue from reportable segments $ 20,262,841 $ 1,861,903
Unallocated revenue 3,240 -
------------- -------------
TOTAL REVENUE $ 20,266,081 $ 1,861,903
------------- -------------
Net increase (decrease) in net assets
from operations:
Net decrease in net assets from operations
of reportable segments $(54,673,625) $ (4,578,087)
Unallocated revenue 3,240 -
Unallocated expenses** (759,612) (703,297)
------------- -------------
TOTAL NET DECREASE IN NET ASSETS FROM
OPERATIONS $(55,429,997) $ (5,281,384)
------------- -------------
** Unallocated expenses include costs of Belrose Capital to operate the Fund
such as servicing and distribution expense, as well as other administrative
costs of Belrose Capital.
(1) For the period from the start of business, March 19, 2002, to March 31,
2002.
Net assets:
Net assets of reportable segments $ 1,273,831,473 $ 285,081,353
Unallocated cash 1,185,057 301,106
Loan payable - Credit Facility (8,215,000) (2,280,000)
Other liabilities (81,639) (695,085)
---------------- --------------
TOTAL NET ASSETS $ 1,266,719,891 $ 282,407,374
---------------- --------------
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 Belrose 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
PERIOD FROM THE START OF BUSINESS, MARCH 19, 2002, TO MARCH 31, 2002.
PERFORMANCE OF THE FUND.(1) The Fund's total return was -4.42% for the quarter
ended March 31, 2003. This return reflects a decrease in the Fund's net asset
value per share from $76.86 to $73.42 and a distribution of $0.05 per share
during the quarter. 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 0.29%
during the period. For comparison, at the end of the period from the start of
business, March 19, 2002, to March 31, 2002, the Fund's net asset value per
share decreased from $100.00 to $98.16, representing a -1.84% return versus the
S&P 500's total return of -1.48%.(2) The performance of the Fund trailed that of
the Portfolio by approximately 0.43% during the period from the start of
business, March 19, 2002, to March 31, 2002.
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.
15
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 through Real Estate Joint Ventures)
achieved operating results that were slightly below budget. Rental income of
$16.3 million was below budget and property operating expenses (before debt
service and excluding certain operating expenses of Belrose Realty Corporation
(Belrose Realty) of approximately $0.8 million) of $7.1 million were generally
in line with budget. 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
Real Estate Joint Ventures was $467.4 million compared to $146.3 million at
March 31, 2002. The change in estimated fair value of the real properties held
through Real Estate Joint Ventures was primarily due to the acquisitions of the
Fund's investments in Katahdin Property Trust, LLC and Bel Communities Property
Trust during 2002. The Fund recognized unrealized appreciation of the estimated
fair value of its other real estate investments of approximately $0.8 million
during the quarter ended March 31, 2003. Despite weaker market conditions,
changes 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 $5.0
million of unrealized appreciation in the estimated fair value of the
Partnership Preference Units during the quarter ended March 31, 2003. The
estimated fair value of the Fund's Partnership Preference Units totaled $54.8
million at March 31, 2003 compared to $3.5 million at March 31, 2002. The
increase in value was due to approximately $45.5 million in purchases of
Partnership Preference Units, as well as appreciation recognized primarily 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 and for the period from the start of business,
March 19, 2002, to March 31, 2002 totaled $1.0 million and $0.04 million,
respectively.
PERFORMANCE OF INTEREST RATE SWAPS. For the quarter ended March 31, 2003,
interest rate swap values decreased by approximately $0.6 million. This decrease
in value was the result of minimal interest rate decreases during the first
quarter of 2003. Values decreased by approximately $0.07 million for the period
from the start of business, March 19, 2002, to March 31, 2002.
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 $225,000,000. The Fund had
outstanding borrowings of $164,300,000, two letters of credit totaling
$2,667,011 and unused loan commitments of $58,032,989 at March 31, 2003. The
Credit Facility is being used primarily to finance the Fund's equity in its real
16
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 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 depreciation related to the
interest rate swap agreements was $12,194,333 and $71,648, 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 Belrose 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 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.
17
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 Belrose 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
the Credit Facility and by fixed-rate secured mortgage debt obligations of the
Real Estate Joint Ventures. 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 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 values of the Partnership Preference Units and, to a lesser degree, the Real
Estate Joint Ventures are sensitive to interest rate risk. Increases in interest
rates generally will have an adverse affect on the value of Partnership
Preference Units and Real Estate Joint Ventures.
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
condensed consolidated financial statements in Item 1 of this report.
Interest Rate Sensitivity
Principal (Notional) Amount by Contractual Maturity
For the Twelve Months Ended March 31,
Estimated
2004-2006 2007 2008 Thereafter Total Fair Value
------------------------------------------------------------------------------------------------------
Rate sensitive
liabilities:
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt:
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed-rate mortgages $344,219,483 $344,219,483 $393,000,000
Average interest rate 7.53% 7.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Variable-rate Credit
Facility $164,300,000 $164,300,000 $164,300,000
Average interest rate 1.68% 1.68%
Rate sensitive derivative
financial instruments:
- -----------------------------
Pay fixed/
Receive variable interest
rate swap contracts $296,892,000 $296,892,000 $(12,194,333)
Average pay rate 5.47% 5.47%
Average receive rate 1.68% 1.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive investments:
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed-rate Partnership
Preference Units:
- ------------------------------------------------------------------------------------------------------------------------------------
Essex Portfolio, L.P.,
7.875% Series B Cumulative
Redeemable Preferred Units,
Callable from 2/6/03,
Current Yield: 8.38% $16,616,170 $ 16,616,170 $ 18,798,680
- -----------------------------
Kilroy Realty, L.P., 8.075%
Series A Cumulative
Redemable Preferred Units,
Callable from 2/6/03,
Current Yield: 8.95% $15,898,220 $ 15,898,220 $ 18,035,600
- -----------------------------
Prentiss Properties
Acquisition Partners, L.P.,
8.30% Series B Cumulative
Redeemable Perpetual
Preferred Units, Callable
from 6/25/03, Current
Yield: 8.91% $16,519,510 $ 16,519,510 $ 18,009,223
- -----------------------------
19
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, Eaton Vance
Management (Eaton Vance), 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.
20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- ----------------------------
Although in the ordinary course of business, the Fund, Belrose Realty
and the Real Estate Joint Ventures 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
10Q:
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.
21
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.
BELROSE CAPITAL FUND LLC
(Registrant)
By: /s/ Michelle A. Alexander
------------------------------------
Michelle A. Alexander
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
22
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 Belrose 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
23
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 Belrose 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
24
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
25