UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2005
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _____________
Commission File No. 000-32633
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Belmar Capital Fund LLC
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3508106
-------- ----------
(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 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 Securities Exchange Act of 1934).
YES X NO
--- ---
BELMAR CAPITAL FUND LLC
Index to Form 10-Q
Page
PART I FINANCIAL INFORMATION............................................ 1
Item 1. Financial Statements............................................. 1
Condensed Consolidated Statements of Assets and Liabilities
as of March 31, 2005 (Unaudited) and December 31, 2004........... 3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months Ended March 31, 2005 and 2004............... 4
Condensed Consolidated Statements of Changes in Net Assets
for the Three Months Ended March 31, 2005 (Unaudited) and
the Year Ended December 31, 2004................................. 6
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2005 and 2004............... 7
Financial Highlights (Unaudited) for the Three Months Ended
March 31, 2005................................................... 9
Notes to Condensed Consolidated Financial Statements as of
March 31, 2005 (Unaudited).......................................10
Item 2. Management's Discussion and Analysis of Financial Condition
(MD&A) and Results of Operations.................................15
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......18
Item 4. Controls and Procedures..........................................19
PART II OTHER INFORMATION................................................20
Item 1. Legal Proceedings................................................20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......20
Item 3. Defaults Upon Senior Securities..................................20
Item 4. Submission of Matters to a Vote of Security Holders..............20
Item 5. Other Information................................................20
Item 6. Exhibits.........................................................21
SIGNATURES...................................................................22
EXHIBIT INDEX................................................................23
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
BELMAR CAPITAL FUND LLC
Condensed Consolidated Statements of Assets and Liabilities
March 31, 2005 December 31,
(Unaudited) 2004
----------------------- -----------------------
Assets:
Investment in Belvedere Capital Fund Company LLC
(Belvedere Company) $ 1,951,102,511 $ 2,015,871,844
Investment in Partnership Preference Units 33,829,050 63,687,600
Investment in other real estate 582,365,032 579,496,359
Short-term investments 35,100,000 1,700,000
----------------------- -----------------------
Total investments $ 2,602,396,593 $ 2,660,755,803
Cash 3,518,877 6,789,395
Open interest rate swap agreements, at value 8,366,254 2,701,342
Distributions and interest receivable 6,590 6,511
Other assets 7,202,175 6,789,882
----------------------- -----------------------
Total assets $ 2,621,490,489 $ 2,677,042,933
----------------------- -----------------------
Liabilities:
Loan payable - Credit Facility $ 309,000,000 $ 290,000,000
Mortgages payable 453,908,265 455,098,913
Swap interest payable 63,080 144,508
Security deposits 607,262 502,487
Accrued expenses:
Interest expense 1,922,681 1,903,452
Property taxes 491,245 30,839
Other expenses and liabilities 3,705,689 2,879,715
Minority interests in controlled subsidiaries 13,546,772 15,995,521
----------------------- -----------------------
Total liabilities $ 783,244,994 $ 766,555,435
----------------------- -----------------------
Net assets $ 1,838,245,495 $ 1,910,487,498
----------------------- -----------------------
Shareholders' Capital $ 1,838,245,495 $ 1,910,487,498
----------------------- -----------------------
Shares outstanding 20,720,707 20,880,411
----------------------- -----------------------
Net asset value and redemption price per Share $ 88.72 $ 91.50
----------------------- -----------------------
See notes to unaudited condensed consolidated financial statements
3
BELMAR CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004
------------------------ ------------------------
Investment Income:
Dividends allocated from Belvedere Company
(net of foreign taxes of $77,852 and
$81,514, respectively) $ 8,091,353 $ 6,838,925
Interest allocated from Belvedere Company 59,397 33,780
Expenses allocated from Belvedere Company (2,944,049) (2,968,076)
------------------------ ------------------------
Net investment income allocated from
Belvedere Company $ 5,206,701 $ 3,904,629
Rental income 11,123,758 12,178,674
Distributions from Partnership Preference Units 667,833 6,401,602
Interest 102,480 191,318
------------------------ ------------------------
Total investment income $ 17,100,772 $ 22,676,223
------------------------ ------------------------
Expenses:
Investment advisory and administrative fees $ 1,741,707 $ 1,961,109
Property management fees 158,133 329,154
Distribution and servicing fees 879,236 939,591
Interest expense on mortgages 6,481,670 6,554,619
Interest expense on Credit Facility 2,131,608 1,670,807
Property and maintenance expenses 680,489 2,915,734
Property taxes and insurance 944,358 1,169,214
Miscellaneous 768,733 511,679
------------------------ ------------------------
Total expenses $ 13,785,934 $ 16,051,907
Deduct-
Reduction of investment advisory
and administrative fees 462,142 477,795
------------------------ ------------------------
Net expenses $ 13,323,792 $ 15,574,112
------------------------ ------------------------
Net investment income before
minority interests in net income of
controlled subsidiaries $ 3,776,980 $ 7,102,111
Minority interests in net income
of controlled subsidiaries (236,262) (48,115)
------------------------ ------------------------
Net investment income $ 3,540,718 $ 7,053,996
------------------------ ------------------------
See notes to unaudited condensed consolidated financial statements
4
BELMAR CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited) (Continued)
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004
------------------------- ------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) -
Investment transactions, securities sold short
and foreign currency transactions allocated from
Belvedere Company (identified cost basis) $ (1,174,904) $ 7,200,329
Investment transactions in Partnership
Preference Units (identified cost basis) 4,349,676 30,460,629
Interest rate swap agreements (1) (1,660,980) (3,033,976)
------------------------- ------------------------
Net realized gain $ 1,513,792 $ 34,626,982
------------------------- ------------------------
Change in unrealized appreciation
(depreciation) -
Investments, securities sold short and foreign
currency allocated from Belvedere Company
(identified cost basis) $ (45,565,227) $ 29,534,797
Investment in Partnership Preference Units
(identified cost basis) (3,631,351) (27,504,776)
Investment in other real estate
(net of minority interest in unrealized (depreciation)
appreciation of controlled subsidiaries of $(1,859,191)
and $1,076,976, respectively) 4,130,077 (3,426,498)
Interest rate swap agreements 5,664,912 (5,768,889)
------------------------- ------------------------
Net change in unrealized appreciation (depreciation) $ (39,401,589) $ (7,165,366)
------------------------- ------------------------
Net realized and unrealized (loss) gain $ (37,887,797) $ 27,461,616
------------------------- ------------------------
Net (decrease) increase in net assets
from operations $ (34,347,079) $ 34,515,612
========================= ========================
(1) Amounts represent periodic payments made in connection with interest rate
swap agreements (Note 5).
See notes to unaudited condensed consolidated financial statements
5
BELMAR CAPITAL FUND LLC
Condensed Consolidated Statements of Changes in Net Assets
Three Months
Ended Year Ended
March 31, 2005 December 31,
(Unaudited) 2004
------------------------ ----------------------
Increase (Decrease) in Net Assets:
Net investment income $ 3,540,718 $ 25,224,494
Net realized gain from investment transactions, securities sold short,
foreign currency transactions and interest rate swap agreements 1,513,792 57,671,882
Net change in unrealized appreciation (depreciation) of investments,
securities sold short, foreign currency and interest rate swap
agreements (39,401,589) 52,072,410
------------------------ ----------------------
Net (decrease) increase in net assets from operations $ (34,347,079) $ 134,968,786
------------------------ ----------------------
Transactions in Fund Shares -
Net asset value of Fund Shares issued to Shareholders in
payment of distributions declared $ 9,834,087 $ 10,101,552
Net asset value of Fund Shares redeemed (24,359,710) (129,608,009)
------------------------ ----------------------
Net decrease in net assets from Fund Share transactions $ (14,525,623) $ (119,506,457)
------------------------ ----------------------
Distributions -
Distributions to Shareholders $ (23,369,301) $ (25,586,688)
------------------------ ----------------------
Total distributions $ (23,369,301) $ (25,586,688)
------------------------ ----------------------
Net decrease in net assets $ (72,242,003) $ (10,124,359)
Net assets:
At beginning of period $ 1,910,487,498 $ 1,920,611,857
------------------------ ----------------------
At end of period $ 1,838,245,495 $ 1,910,487,498
======================== ======================
See notes to unaudited condensed consolidated financial statements
6
BELMAR CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004
----------------------- ---------------------
Cash Flows From (For) Operating Activities -
Net (decrease) increase in net assets from operations $ (34,347,079) $ 34,515,612
Adjustments to reconcile net (decrease) increase in net assets from operations
to net cash flows (for) from operating activities -
Net investment income allocated from Belvedere Company (5,206,701) (3,904,629)
Decrease in escrow deposits - 811,800
Increase in other assets (412,293) (504,258)
(Increase) decrease in distributions and interest receivable (79) 1,108,013
(Decrease) increase in interest payable for open swap agreements (81,428) 2,739
Increase in security deposits, accrued interest and
accrued other expenses and liabilities 949,978 1,282,177
Increase (decrease) in accrued property taxes 460,406 (1,231,565)
Proceeds from sales of Partnership Preference Units 30,576,875 213,665,294
Payments for investments in other real estate - (16,058,060)
Increase in minority interest 240,000 -
Increase in short-term investments (33,400,000) (56,468,524)
Improvements to rental property (597,790) (267,893)
Interest incurred on interest rate swap agreements (1,660,980) (3,033,976)
Minority interests in net income of controlled subsidiaries 236,262 48,115
Net realized gain from investment transactions,
foreign currency transactions and interest rate swap agreements (1,513,792) (34,626,982)
Net change in unrealized (appreciation) depreciation of investments,
foreign currency and interest rate swap agreements 39,401,589 7,165,366
----------------------- ---------------------
Net cash flows (for) from operating activities $ (5,355,032) $ 142,503,229
----------------------- ---------------------
Cash Flows From (For) Financing Activities -
Proceeds from Credit Facility $ 19,000,000 $ 15,000,000
Repayment of Credit Facility - (143,000,000)
Repayments of mortgages (1,190,648) (1,083,927)
Payments for Fund Shares redeemed (1,123,807) (767,886)
Distributions paid to Shareholders (13,535,214) (15,485,136)
Distributions paid to minority shareholders (1,065,817) (16,800)
----------------------- ---------------------
Net cash flows from (for) financing activities $ 2,084,514 $ (145,353,749)
----------------------- ---------------------
Net decrease in cash $ (3,270,518) $ (2,850,520)
Cash at beginning of period $ 6,789,395 $ 6,605,096
----------------------- ---------------------
Cash at end of period $ 3,518,877 $ 3,754,576
======================= =====================
See notes to unaudited condensed consolidated financial statements
7
BELMAR CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004
----------------------- -------------------------
Supplemental Disclosure and Non-cash Investing and
Financing Activities -
Interest paid on loan - Credit Facility $ 2,090,452 $ 1,660,547
Interest paid on mortgages $ 6,433,894 $ 5,637,684
Interest paid on swap agreements $ 1,742,408 $ 3,031,237
Market value of securities distributed in payment of
redemptions $ 23,235,903 $ 38,996,734
Market value of real property and other assets, net of
current liabilities, assumed in conjunction with
acquisition of other real estate $ - $ 245,732,974
Mortgages assumed in conjunction with acquisition
of other real estate $ - $ 229,674,914
See notes to unaudited condensed consolidated financial statements
8
BELMAR CAPITAL FUND LLC as of March 31, 2005
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Financial Highlights (Unaudited)
For the Three Months Ended March 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value - Beginning of period $ 91.500
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (1) $ 0.170
Net realized and unrealized loss (1.830)
- ------------------------------------------------------------------------------------------------------------------------------------
Total loss from operations $ (1.660)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders $ (1.120)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (1.120)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value - End of period $ 88.720
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (2) (1.80)%
- ------------------------------------------------------------------------------------------------------------------------------------
As a Percentage As a Percentage
of Average Net of Average Gross
Ratios Assets (3) Assets (3)(8)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses of Consolidated Real Property Subsidiaries
Interest and other borrowing costs (4) 1.29% (9) 0.94% (9)
Operating expenses (4) 0.38% (9) 0.28% (9)
Belmar Capital Fund LLC Expenses
Interest and other borrowing costs (5)(6) 0.46% (9) 0.33% (9)
Investment advisory and administrative fees, distribution and
servicing fees and other Fund operating expenses (5)(7) 1.20% (9) 0.87% (9)
--------------------------------------------------
Total expenses 3.33% (9) 2.42% (9)
Net investment income 0.77% (9) 0.56% (9)
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 1,838,246
Portfolio turnover of Tax-Managed Growth Portfolio (the Portfolio) 0.12%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Calculated using average shares outstanding.
(2) 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.
(3) For the purpose of calculating ratios, the income and expenses of Belmar
Realty Corporation's (Belmar Realty) controlled subsidiaries are reduced by
the proportionate interests therein of investors other than Belmar Realty.
(4) Includes Belmar Realty's proportional share of expenses incurred by its
controlled subsidiaries.
(5) Includes the expenses of Belmar Capital Fund LLC (Belmar Capital) and
Belmar Realty. Does not include expenses of Belmar Realty's controlled
subsidiaries.
(6) Ratios do not include interest incurred in connection with interest rate
swap agreements. Had such amounts been included, ratios would be higher.
(7) Includes Belmar Capital's share of Belvedere Capital Fund Company LLC's
(Belvedere Company) allocated expenses, including those expenses allocated
from the Portfolio.
(8) Average Gross Assets is defined as the average daily amount of all assets
of Belmar Capital (including Belmar Capital's interest in Belvedere Company
and Belmar 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 Belmar Realty's controlled subsidiaries are
reduced by the proportionate interests therein of investors other than
Belmar Realty.
(9) Annualized.
See notes to unaudited condensed consolidated financial statements
9
BELMAR CAPITAL FUND LLC as of March 31, 2005
Notes To Condensed Consolidated Financial Statements (Unaudited)
1 Basis of Presentation
The condensed consolidated interim financial statements of Belmar Capital Fund
LLC (Belmar Capital) and its subsidiaries (collectively, the Fund) have been
prepared, 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 as of 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, 2004 and the statement of changes in net
assets for the year then ended have been derived from the December 31, 2004
audited financial statements but do 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 periods' condensed consolidated financial
statements have been reclassified to conform with the current period
presentation.
2 Estate Freeze
Shareholders in Belmar 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, 2005 and December 31, 2004, the Preferred Shares were valued at $88.72 and
$91.50, respectively, and the Common Shares had no value. The existence of
restructured Fund Shares does not adversely affect Shareholders who do not make
an 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
The following table summarizes the Fund's investment transactions, other than
short-term obligations, for the three months ended March 31, 2005 and March 31,
2004:
Three Months Ended Three Months Ended
Investment Transaction March 31, 2005 March 31, 2004
- ----------------------------------------------------------------------------------------------------------------------
Decreases in investment in Belvedere Capital Fund
Company LLC (Belvedere Company) $ 23,235,903 $ 38,996,734
Acquisition of other real property (1) $ - $ 16,058,060
Sales of Partnership Preference Units (2) $ 30,576,875 $213,665,294
- ----------------------------------------------------------------------------------------------------------------------
(1) In January 2004, Belmar Realty purchased an indirect investment in real
property through its wholly-owned subsidiary, Bel Stamford Investors, LLC
(Bel Stamford) for a net investment of $16,058,060.
(2) Sales of Partnership Preference Units for the three months ended March 31,
2004 include Partnership Preference Units sold to other investment funds
advised by Boston Management and Research (Boston Management) for which a
gain of $22,355,905 was recognized. There were no sales of Partnership
Preference Units to other investment funds advised by Boston Management for
the three months ended March 31, 2005.
4 Indirect Investment in the Portfolio
The following table summarizes the Fund's investment in Tax-Managed Growth
Portfolio (the Portfolio) through Belvedere Company for the three months ended
March 31, 2005 and March 31, 2004, including allocations of income, expenses and
net realized and unrealized gains (losses) for the respective periods then
ended:
Three Months Ended Three Months Ended
March 31, 2005 March 31, 2004
- ----------------------------------------------------------------------------------------------------------------------------
Belvedere Company's interest in the Portfolio (1) $ 12,584,989,585 $ 11,520,846,141
The Fund's investment in Belvedere Company (2) $ 1,951,102,511 $ 1,968,554,205
Income allocated to Belvedere Company from the Portfolio $ 52,138,985 $ 39,365,471
Income allocated to the Fund from Belvedere Company $ 8,150,750 $ 6,872,705
Expenses allocated to Belvedere Company from the Portfolio $ 14,031,081 $ 12,634,511
Expenses allocated to the Fund from Belvedere Company $ 2,944,049 $ 2,968,076
Net realized (loss) gain from investment transactions, securities sold short
and foreign currency transactions allocated to Belvedere Company
from the Portfolio $ (7,321,051) $ 41,048,575
Net realized (loss) gain from investment transactions, securities sold
short and foreign currency transactions allocated to the Fund from
Belvedere Company $ (1,174,904) $ 7,200,329
Net change in unrealized appreciation (depreciation) of investments,
securities sold short and foreign currency allocated to Belvedere
Company from the Portfolio $ (280,637,975) $ 163,577,445
Net change in unrealized appreciation (depreciation) of investments,
securities sold short and foreign currency allocated to the Fund from
Belvedere Company $ (45,565,227) $ 29,534,797
- ---------------------------------------------------------------------------------------------------------------------------
(1) As of March 31, 2005 and 2004, the value of Belvedere Company's interest in
the Portfolio represents 67.7% and 63.9% of the Portfolio's net assets,
respectively.
(2) As of March 31, 2005 and 2004, the Fund's investment in Belvedere Company
represents 15.5% and 17.1% of Belvedere Company's net assets, respectively.
A summary of the Portfolio's Statement of Assets and Liabilities at March 31,
2005, December 31, 2004 and March 31, 2004 and its operations for the three
months ended March 31, 2005, for the year ended December 31, 2004 and for the
three months ended March 31, 2004 follows:
11
March 31, 2005 December 31, 2004 March 31, 2004
-------------------- ------------------------ ---------------------
Investments, at value $18,468,165,880 $19,139,242,713 $18,003,359,532
Other assets 119,669,991 199,253,595 25,944,066
- --------------------------------------------------------------------------------------------------------------
Total assets $18,587,835,871 $19,338,496,308 $18,029,303,598
- --------------------------------------------------------------------------------------------------------------
Loan payable - Line of Credit $ 4,200,000 $ - $ -
Securities sold short, at value - 197,010,000 -
Other liabilities 125,209 343,906 254,697
- --------------------------------------------------------------------------------------------------------------
Total liabilities $ 4,325,209 $ 197,353,906 $ 254,697
- --------------------------------------------------------------------------------------------------------------
Net assets $18,583,510,662 $19,141,142,402 $18,029,048,901
==============================================================================================================
Dividends and interest $ 77,449,217 $ 292,265,206 $ 62,101,320
- --------------------------------------------------------------------------------------------------------------
Investment adviser fee $ 20,297,088 $ 77,609,178 $ 19,348,796
Other expenses 611,649 2,649,363 598,921
Total expense reductions (59,259) (26,706) -
- --------------------------------------------------------------------------------------------------------------
Net expenses $ 20,849,478 $ 80,231,835 $ 19,947,717
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 56,599,739 $ 212,033,371 $ 42,153,603
Net realized (loss) gain from
investment transactions,
securities sold short and
foreign currency transactions (11,056,277) 152,422,840 64,894,806
Net change in unrealized
appreciation (depreciation) of
investments, securities sold
short and foreign currency (422,252,722) 1,317,878,707 261,922,214
- --------------------------------------------------------------------------------------------------------------
Net (decrease) increase in net
assets from operations $ (376,709,260) $ 1,682,334,918 $ 368,970,623
- --------------------------------------------------------------------------------------------------------------
5 Interest Rate Swap Agreements
Belmar Capital has entered into interest rate swap agreements with Merrill Lynch
Capital Services, Inc. in connection with its real estate investments and the
associated borrowings. Under such agreements, Belmar 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. Interest rate
swap agreements open at March 31, 2005 and December 31, 2004 are listed below.
Notional Initial
Amount Optional Final Unrealized Unrealized
Effective (000's Fixed Floating Termination Termination Appreciation at Appreciation at
Date omitted) Rate Rate Date Date March 31, 2005 December 31, 2004
- ----------- ----------- ------------ --------------- -------------- --------------- ---------------------- --------------------
02/04 $58,363 4.90% LIBOR + 0.20% 8/04 6/10 $ 668,409 $ 129,965
10/03 55,831 4.875% LIBOR + 0.20% 4/04 6/10 676,463 136,605
10/03 43,010 4.755% LIBOR + 0.20% 7/04 6/10 666,966 203,743
10/03 56,978 4.695% LIBOR + 0.20% 9/04 6/10 985,326 341,914
10/03 64,418 4.565% LIBOR + 0.20% 3/05 6/10 1,375,851 581,263
10/03 110,068 3.9725% LIBOR + 0.20% - 6/10 3,993,239 1,307,852
- ----------- ----------- ------------ --------------- -------------- --------------- ---------------------- --------------------
Total $388,668 $ 8,366,254 $ 2,701,342
- ----------- ----------- ------------ --------------- -------------- --------------- ---------------------- --------------------
6 Segment Information
Belmar Capital pursues its investment objective primarily by investing
indirectly in the Portfolio through Belvedere Company. The Portfolio is a
diversified investment company that emphasizes investments in common stocks of
domestic and foreign growth companies that are considered by its investment
adviser to be high in quality and attractive in their long-term investment
prospects. Separate from its investment in Belvedere Company, Belmar Capital
invests in real estate assets through its subsidiary Belmar Realty. Belmar
12
Realty invests directly and indirectly in Partnership Preference Units and in
real property through controlled subsidiaries, Bel Alliance Apartments, LLC (Bel
Apartments), Bel Stamford and Brazos Property Trust (Brazos) (for the period
during which Belmar Realty maintained an interest in each of the controlled
subsidiaries).
Belmar 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 appreciation (depreciation). The accounting policies of the
reportable segments are the same as those for Belmar Capital on a consolidated
basis. No reportable segments have been aggregated. Reportable information by
segment is as follows:
For the Three Months Ended Tax-Managed Real
March 31, 2005 Growth Portfolio* Estate Total
- ------------------------------------------------------- ----------------------- ------------------ -------------------
Revenue $ 5,206,701 $ 11,826,062 $ 17,032,763
Interest expense on mortgages - (6,481,670) (6,481,670)
Interest expense on Credit Facility (596,850) (852,643) (1,449,493)
Operating expenses (396,813) (3,314,757) (3,711,570)
Minority interest in net income of controlled
subsidiaries - (236,262) (236,262)
- ------------------------------------------------------- ----------------------- ------------------ -------------------
Net investment income $ 4,213,038 $ 940,730 $ 5,153,768
Net realized (loss) gain (1,174,904) 2,688,696 1,513,792
Net change in unrealized appreciation (depreciation) (45,565,227) 6,163,638 (39,401,589)
- ------------------------------------------------------- ----------------------- ------------------ -------------------
Net (decrease) increase in net assets from operations
of reportable segments $ (42,527,093) $ 9,793,064 $(32,734,029)
- ------------------------------------------------------- ----------------------- ------------------ -------------------
For the Three Months Ended Tax-Managed Real
March 31, 2004 Growth Portfolio* Estate Total
- ------------------------------------------------------- ----------------------- ------------------ -------------------
Revenue $ 3,904,629 $ 18,581,141 $ 22,485,770
Interest expense on mortgages - (6,554,619) (6,554,619)
Interest expense on Credit Facility (300,745) (935,652) (1,236,397)
Operating expenses (460,439) (5,873,117) (6,333,556)
Minority interest in net income of controlled
subsidiary - (48,115) (48,115)
- ------------------------------------------------------- ----------------------- ------------------ -------------------
Net investment income $ 3,143,445 $ 5,169,638 $ 8,313,083
Net realized gain 7,200,329 27,426,653 34,626,982
Net change in unrealized appreciation (depreciation) 29,534,797 (36,700,163) (7,165,366)
- ------------------------------------------------------- ----------------------- ------------------ -------------------
Net increase (decrease) in net assets from operations
of reportable segments $ 39,878,571 $ (4,103,872) $ 35,774,699
- ------------------------------------------------------- ----------------------- ------------------ -------------------
Tax-Managed Real
At March 31, 2005 Growth Portfolio* Estate Total
- ---------------------------------------------------- ------------------------- ------------------ -------------------
Segment assets $ 1,951,102,511 $ 634,887,590 $ 2,585,990,101
Segment liabilities 86,026,339 572,615,194 658,641,533
- ---------------------------------------------------- ------------------------- ------------------ -------------------
Net assets of reportable segments $ 1,865,076,172 $ 62,272,396 $ 1,927,348,568
- ---------------------------------------------------- ------------------------- ------------------ -------------------
At December 31, 2004
- ---------------------------------------------------- ------------------------- ------------------ -------------------
Segment assets $ 2,015,871,844 $ 658,486,334 $ 2,674,358,178
Segment liabilities 86,014,813 605,497,871 691,512,684
- ---------------------------------------------------- ------------------------- ------------------ -------------------
Net assets of reportable segments $ 1,929,857,031 $ 52,988,463 $ 1,982,845,494
- ---------------------------------------------------- ------------------------- ------------------ -------------------
* Belmar Capital invests indirectly in Tax-Managed Growth Portfolio through
Belvedere Company.
The following tables reconcile the reported segment information to the condensed
consolidated financial statements for the periods indicated:
13
Three Months Ended Three Months Ended
March 31, 2005 March 31, 2004
----------------------- -----------------------
Revenue:
Revenue from reportable segments $ 17,032,763 $ 22,485,770
Unallocated amounts:
Interest earned on cash not invested in
the Portfolio or in subsidiaries 68,009 190,453
----------------------- -----------------------
Total revenue $ 17,100,772 $ 22,676,223
----------------------- -----------------------
Net increase (decrease) in net assets from operations:
Net (decrease) increase in net assets from
operations of reportable segments $ (32,734,029) $ 35,774,699
Unallocated investment income:
Interest earned on cash not invested
in the Portfolio or in subsidiaries 68,009 190,453
Unallocated expenses (1):
Distribution and servicing fees (879,236) (939,591)
Interest expense on Credit Facility (682,115) (434,410)
Audit, tax, and legal fees (99,196) (54,799)
Other operating expenses (20,512) (20,740)
----------------------- -----------------------
Total net (decrease) increase in net assets
from operations $ (34,347,079) $ 34,515,612
----------------------- -----------------------
(1) Unallocated expenses represent costs incurred that pertain to the overall
operation of Belmar Capital, and do not pertain to either operating
segment.
March 31, 2005 December 31, 2004
----------------------- -----------------------
Net assets:
Net assets of reportable segments $1,927,348,568 $1,982,845,494
Unallocated amounts:
Cash (1) 400,388 984,755
Short-term investments (1) 35,100,000 1,700,000
Loan payable - Credit Facility (2) (124,373,684) (74,796,809)
Other liabilities (229,777) (245,942)
----------------------- -----------------------
Total net assets $1,838,245,495 $1,910,487,498
----------------------- -----------------------
(1) Unallocated cash and short-term investments represent cash and cash
equivalents not invested in the Portfolio or real estate assets.
(2) Unallocated amount of loan payable - Credit Facility represents borrowings
not specifically used to fund real estate investments. Such borrowings are
generally used to pay selling commissions, organization expenses and other
liquidity needs of the Fund.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (MD&A) 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 Belmar 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.
(a) RESULTS OF OPERATIONS.
Increases and decreases in the Fund's net asset value per share are based on net
investment income (or loss) and realized and unrealized gains and losses on
investments. The Fund's net investment income (or loss) is determined by
subtracting the Fund's total expenses from its investment income and then
deducting the net investment income (or loss) attributable to the minority
interest in controlled subsidiaries of Belmar Realty Corporation (Belmar
Realty). The Fund's investment income includes the net investment income
allocated to the Fund from Belvedere Capital Fund Company LLC (Belvedere
Company), rental income from the properties owned by Belmar Realty's controlled
subsidiaries, partnership income allocated to the income-producing preferred
equity interests in real estate operating partnerships (Partnership Preference
Units) owned directly or indirectly by Belmar Realty and interest earned on the
Fund's short-term investments (if any). The net investment income of Belvedere
Company allocated to the Fund includes dividends and interest allocated to
Belvedere Company by Tax-Managed Growth Portfolio (the Portfolio) less the
expenses of Belvedere Company allocated to the Fund. The Fund's total expenses
include the Fund's investment advisory and administrative fees, distribution and
servicing fees, interest expense from mortgages on properties owned by Belmar
Realty's controlled subsidiaries, interest expense on the Fund's Credit Facility
(described in Item 2(b) below), property management fees, property taxes,
insurance, maintenance and other expenses relating to the properties owned by
Belmar Realty's controlled subsidiaries, and other miscellaneous expenses. The
Fund's realized and unrealized gains and losses are the result of transactions
in, or changes in value of, security investments held through the Fund's
indirect interest (through Belvedere Company) in the Portfolio, real estate
investments held through Belmar Realty, the Fund's interest rate swap agreements
and any other direct investments of the Fund, as well as periodic payments made
by the Fund pursuant to interest rate swap agreements.
Realized and unrealized gains and losses on investments have the most
significant impact on the Fund's net asset value per share and result primarily
from sales of such investments and changes in their underlying value. The
investments of the Portfolio consist primarily of common stocks of domestic and
foreign growth companies that are considered by its investment adviser to be
high in quality and attractive in their long-term investment prospects. Because
the securities holdings of the Portfolio are broadly diversified, the
performance of the Portfolio cannot be attributed to one particular stock or one
particular industry or market sector. The performance of the Portfolio and the
Fund are substantially influenced by the overall performance of the U.S. stock
market, as well as by the relative performance versus the overall market of
specific stocks and classes of stocks in which the Portfolio maintains large
positions.
MD&A AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2005 COMPARED TO
THE QUARTER ENDED MARCH 31, 2004
PERFORMANCE OF THE FUND.(1) The Fund's investment objective is to achieve
long-term, after-tax returns for Shareholders. Eaton Vance Management (Eaton
Vance), as the Fund's manager, measures the Fund's success in achieving its
objective based on the investment returns of the Fund, using the S&P 500 Index
as the Fund's primary performance benchmark. The S&P 500 Index is a broad-based
unmanaged index of common stocks widely used as a measure of U.S. stock market
performance. Eaton Vance's primary focus in pursuing total return is on the
Fund's common stock portfolio, which consists of its indirect interest in the
(1) Total returns are historical and are calculated by determining the
percentage change in net asset value with all distributions reinvested.
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. The Portfolio's total return for the
period reflects the total return of another fund that invests in the
Portfolio, adjusted for non-Portfolio expenses of that fund. Performance is
for the stated time period only and is not annualized; due to market
volatility, the Fund's current performance may be lower or higher. The
performance of the Fund and the Portfolio is compared to that of their
benchmark, the S&P 500 Index. It is not possible to invest directly in an
Index. 15
Portfolio. In measuring the performance of the Fund's real estate investments,
Eaton Vance considers whether, through current returns and changes in valuation,
the real estate investments achieve returns that over the long-term exceed the
cost of the borrowings incurred to acquire such investments and thereby add to
Fund returns. The Fund has entered into interest rate swap agreements to fix a
substantial portion of the borrowing costs under the Credit Facility used to
acquire equity in its real estate investments and to mitigate in part the impact
of interest rate changes on the Fund's net asset value.
The Fund's total return was -1.80% for the quarter ended March 31, 2005. This
return reflects a decrease in the Fund's net asset value per share from $91.50
to $88.72 and a distribution of $1.12 per share during the period. The total
return of the S&P 500 Index was -2.15% over the same period. The performance of
the Fund exceeded that of the Portfolio by approximately 0.18% during the
period. Last year, the Fund had a total return performance of 1.80% for the
quarter ended March 31, 2004. This return reflected an increase in the Fund's
net asset value per share from $86.28 to $86.67 and a distribution of $1.15 per
share during the period. The S&P 500 Index had a total return of 1.69% over the
same period. The performance of the Fund trailed that of the Portfolio by
approximately 0.32% during th at period.
PERFORMANCE OF THE PORTFOLIO. For the quarter ended March 31, 2005, the
Portfolio had a total return of -1.98%, compared to a total return of 2.12%
during the quarter ended March 31, 2004. The total return of the Portfolio
exceeded the total return of the S&P 500 Index by 0.17% in the first quarter of
2005 and 0.43% in the first quarter of 2004. Although most U.S. public companies
have continued to demonstrate solid profitability and earnings growth, market
performance in the first quarter was hampered by rising interest rates and
growing inflation fears amid resurging oil prices. As expected, the Federal
Reserve raised the federal funds target rate to 2.75%, the seventh increase in
this short-term interest rate benchmark since June of last year. During the
quarter, investors favored defensive, higher-yielding stocks over cyclicals,
technology stocks and other high volatility stocks. The tech-heavy NASDAQ
Composite Index lost over 8% during the quarter.
Utilities and energy were the best performing sectors of the S&P 500 Index,
while telecommunications and technology were the poorest performing sectors.
Market leading industries in the first quarter included: oil and gas, health
care providers and personal products. In contrast, information technology
consulting, auto manufacturers and multi-line insurers were among the worst
performing industry groups.
The Portfolio's relative performance versus the S&P 500 Index was driven
primarily by industry and sector exposure and stock selection. The Portfolio
benefited from the continued overweighting of the energy sector, as oil and gas
related investments advanced during the quarter on rising commodity prices. The
Portfolio's relative performance also benefited from underweight positions in
the lagging information technology and telecommunication sectors. Relative
performance was adversely affected by an overweighting of the lagging industrial
sector and an underweighting of the utilities sector, which was among the
strongest performers in a defensive market. Favorable stock selection within the
thrift bank, media and catalog retailer industries was also beneficial to the
overall results.
PERFORMANCE OF REAL ESTATE INVESTMENTS. The Fund's real estate investments are
held through Belmar Realty. As of March 31, 2005, real estate investments
included an interest in a real estate joint venture (the Real Estate Joint
Venture), Brazos Property Trust (Brazos), a Net Leased Property, Bel Stamford
Investors LLC (Bel Stamford), and a portfolio of Partnership Preference Units.
Brazos owns industrial distribution properties and Bel Stamford owns an interest
in leasehold improvements of an office building and attached facilities subject
to a triple net lease. As of March 31, 2005, the estimated fair value of the
Fund's real estate investments represented 23.5% of the Fund's total assets on a
consolidated basis. After adjusting for the minority interest in the Real Estate
Joint Venture, the Fund's real estate investments represented 30.8% of the
Fund's net assets as of March 31, 2005.
During the quarter ended March 31, 2005, rental income from real estate
operations was approximately $11.1 million compared to approximately $12.2
million for the quarter ended March 31, 2004, a decrease of $1.1 million or 9%.
This decrease in rental income was due to the fact that rental revenues of the
properties owned by Brazos during the quarter ended March 31, 2005 were less
than the rental revenues of the multifamily properties owned by Bel Alliance
Apartments LLC (Bel Apartments) during the quarter ended March 31, 2004. Belmar
Realty sold its interest in the Bel Apartments properties in October 2004.
During the quarter ended March 31, 2004, rental income increased primarily due
to the acquisition of Bel Stamford. The increase was partially offset by a
decrease in rental revenue for the multifamily properties of Bel Apartments.
During the quarter ended March 31, 2004, Bel Apartments' rental revenue was
affected by reduced apartment rental rates, increased rent concessions, and
lower occupancy levels.
During the quarter ended March 31, 2005, property operating expenses were
approximately $1.8 million compared to approximately $4.4 million for the
quarter ended March 31, 2004, a decrease of $2.6 million or 60% (property
operating expenses are before certain operating expenses of Belmar Realty of
16
approximately $1.5 million for the quarter ended March 31, 2005 and $1.5 million
for the quarter ended March 31, 2004). The decrease in property operating
expenses was principally due to the fact that property operating expenses of
properties owned by Brazos during the quarter ended March 31, 2005 were less
than property operating expenses of Bel Apartments during the quarter ended
March 31, 2004. Property operating expenses for the quarter ended March 31, 2004
were not materially different from operating expenses for the quarter ended
March 31, 2003. Belmar Realty does not record property operting expenses for Bel
Stamford because expenses are assumed by the tenant under the terms of the lease
agreement.
For many industrial distribution properties, reduced rent levels are likely to
continue over the near term as above-market leases mature and space is re-leased
at current market rates. Boston Management and Research (Boston Management),
Belmar Realty's manager, expects that improvements in industrial distribution
property operating performance will occur over the longer term.
At March 31, 2005, the estimated fair value of the real properties indirectly
held through Belmar Realty was approximately $579.4 million compared to
approximately $428.8 million at March 31, 2004, a net increase of $150.6 million
or 35%. The net increase in estimated real property values at March 31, 2005 as
compared to March 31, 2004 resulted from Belmar Realty's acquisition of an
interest in Brazos in the third quarter of 2004, offset in part by its sale of
an interest in Bel Apartments in 2004. The increase in estimated real property
value at March 31, 2004 was principally due to the acquisition of Bel Stamford.
The increase was offset in part by lower values for the properties held by Bel
Apartments.
Despite weak real estate operating conditions over the past several years,
property values in the U.S. have remained stable or increased modestly as lower
near-term property earning expectations have generally been offset by lower
capitalization and discount rates applied in valuing the properties.
Capitalization rates and discount rates, terms commonly used in the real estate
industry, are rate of return percentages applied to actual or projected income
levels to estimate the value of real estate investments.
During the quarter ended March 31, 2005, the Fund saw unrealized appreciation of
the estimated fair value of its other real estate investments (which includes
Brazos) of approximately $4.1 million compared to unrealized depreciation of
approximately $3.4 million during the quarter ended March 31, 2004. Net
unrealized appreciation of approximately $4.1 million during the quarter ended
March 31, 2005 consisted of unrealized appreciation in the estimated fair value
of the properties of Brazos.
During the quarter ended March 31, 2005, Belmar Realty experienced scheduled
redemptions of certain of its Partnership Preference Units totaling
approximately $30.6 million, recognizing a gain of approximately $4.3 million on
the transactions. At March 31, 2005, the estimated fair value of Belmar Realty's
Partnership Preference Units totaled approximately $33.8 million compared to
approximately $214.1 million at March 31, 2004, a net decrease of $180.3 million
or 84%. The net decrease in value was principally due to fewer Partnership
Preference Units held at March 31, 2005 compared to March 31, 2004. Partnership
Preference Unit values at March 31, 2004 decreased compared to March 31, 2003
due to fewer Partnership Preference Units held and lower average per unit values
of the Partnership Preference Units held at March 31, 2004 due to their lower
average coupon rates. In the current low interest rate environment, many issuers
have been redeeming Partnership Preference Units as Belmar Realty's call
protections expire or restructuring the terms of outstanding Partnership
Preference Units in advance of their call dates. As a result, many of the
higher-yielding Partnership Preference Units held by Belmar Realty during the
quarter ended March 31, 2004 were no longer held at March 31, 2005.
During the quarter ended March 31, 2005, the Fund saw net unrealized
depreciation of the estimated fair value of its Partnership Preference Units of
approximately $3.6 million compared to net unrealized depreciation of
approximately $27.5 million during the quarter ended March 31, 2004. The net
unrealized depreciation of approximately $3.6 million during the quarter ended
March 31, 2005 consisted of approximately $0.5 million of unrealized
appreciation as a result of increases in the per unit values of Partnership
Preference Units held by Belmar Realty at March 31, 2005, and approximately $4.1
million of unrealized depreciation resulting from the reclassification of
previously recorded unrealized appreciation as realized gains due to the sales
of Partnership Preference Units during the quarter ended March 31, 2005. The net
unrealized depreciation in the first quarter of 2004 consisted of approximately
$1.5 million of unrealized depreciation resulting from decreases in per unit
values of the Partnership Preference Units held by Belmar Realty at March 31,
2004, and approximately $26.0 million of unrealized depreciation resulting from
the reclassification of previously recorded unrealized appreciation as realized
gains due to sales of Partnership Preference Units during the quarter ended
March 31, 2004.
17
Distributions from Partnership Preference Units for the quarter ended March 31,
2005 totaled approximately $0.7 million compared to approximately $6.4 million
for the quarter ended March 31, 2004, a decrease of $5.7 million or 90%. The
decrease was principally due to fewer Partnership Preference Units held on
average during the quarter as well as to lower average distribution rates.
Distributions from Partnership Preference Units for the quarter ended March 31,
2004 compared to March 31, 2003 decreased due to fewer Partnership Preference
Units held on average, as well as lower average distribution rates on
Partnership Preference Units held during the quarter ended March 31, 2004.
PERFORMANCE OF INTEREST RATE SWAP AGREEMENTS. For the quarter ended March 31,
2005, net realized and unrealized gains on the Fund's interest rate swap
agreements totaled approximately $4.0 million, compared to approximately $8.8
million of net realized and unrealized losses for the quarter ended March 31,
2004. Net realized and unrealized gains on swap agreements for the quarter ended
March 31, 2005 consisted of $5.7 million of net unrealized gains due to changes
in swap agreement valuations, offset by $1.7 million of periodic payments made
pursuant to outstanding swap agreements (and classified as net realized losses
on interest rate swap agreements). For the quarter ended March 31, 2004, the
Fund had net unrealized losses of $5.8 million due to swap agreement valuation
changes and $3.0 million of swap agreement periodic payments. The positive
impact on Fund performance for the quarter ended March 31, 2005 from changes in
swap agreement valuations was attributable to an increase in swap rates during
the period. The negative impact on Fund performance from changes in swap
valuations for the quarter ended March 31, 2004 was due to a decline in swap
rates during the period.
(b) LIQUIDITY AND CAPITAL RESOURCES.
OUTSTANDING BORROWINGS. The Fund has entered into credit arrangements with DrKW
Holdings, Inc. and Merrill Lynch Mortgage Capital, Inc. (collectively, the
Credit Facility) primarily to finance the Fund's real estate investments and
will continue to use the Credit Facility for such purpose in the future. The
Credit Facility may also be used for other purposes, including any 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. As of March 31, 2005, the Fund had outstanding borrowings of $309.0
million and $99.5 million of unused loan commitments under the Credit Facility.
The Fund has entered into interest rate swap agreements with respect to a
substantial portion of its real estate investments and associated borrowings.
Pursuant to these agreements, the Fund makes periodic payments to the
counterparty at predetermined fixed rates in exchange for floating-rate payments
that fluctuate with one-month LIBOR. During the terms of the outstanding
interest rate swap agreements, changes in the underlying values of the
agreements are recorded as unrealized appreciation or depreciation. As of March
31, 2005, the unrealized appreciation related to the interest rate swap
agreements was approximately $8.4 million. As of March 31, 2004, the unrealized
depreciation related to the interest rate swap agreements was approximately $3.7
million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE 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 and Net Leased Property.
Partnership Preference Units are fixed rate instruments whose values will
generally decrease when interest rates rise and increase when interest rates
fall. The interest rates on borrowings under the Credit Facility are reset at
regular intervals based on one-month LIBOR. The Fund has entered into interest
rate swap agreements to fix the cost of a substantial portion of its borrowings
under the Credit Facility used to acquire equity in real estate investments and
to mitigate in part 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. The Fund's interest rate swap agreements will generally
increase in value when interest rates rise and decrease in value when interest
rates fall. 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 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 above.
18
Interest Rate Sensitivity
Cost, Principal (Notional) Amount
by Contractual Maturity and Callable Date
for the Twelve Months Ended March 31,*
Estimated Fair
Value as of
2006 2007-2008 2009 2010 Thereafter Total March 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive
liabilities:
- ------------------------
Long-term debt:
- ------------------------
Fixed-rate mortgages $453,908,265 $453,908,265 $452,000,000
Average interest rate 5.72% 5.72%
- ------------------------
Variable-rate Credit
Facility $309,000,000 $309,000,000 $309,000,000
Average interest rate 3.08% 3.08%
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive derivative
financial instruments:
- ------------------------
Pay fixed/receive
variable interest rate
swap agreements $388,668,000 $388,668,000 $ 8,366,254
Average pay rate 4.53% 4.53%
Average receive rate 3.07% 3.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive
investments:
- ------------------------
Fixed-rate Partnership
Preference Units:
- ------------------------
MHC Operating Limited
Partnership, 8.0625% Series
D Cumulative Redeemable
Perpetual Preference Units,
Callable 3/24/10, Current
Yield: 7.89% $20,544,240 $ 20,544,240 $ 20,448,000
PSA Institutional Partners,
L.P., 6.40% Series NN
Cumulative Redeemable Perpetual
Preferred Units, Callable
3/17/10, Current Yield: 6.64% $13,387,321 $ 13,387,321 $ 13,381,050
* The amounts listed reflect the Fund's positions as of March 31, 2005. The
Fund's current positions may differ.
ITEM 4. CONTROLS AND PROCEDURES.
Eaton Vance, as the Fund's manager, evaluated the effectiveness of the Fund's
disclosure controls and procedures (as defined by Rule 13a-15(e) of the 1934
Act) as of the end of the period covered by this report, with the participation
of the Fund's Chief Executive Officer and Chief Financial Officer. The Fund's
disclosure controls and procedures are the controls and other procedures that
the Fund designed to ensure that it records, processes, summarizes and reports
in a timely manner the information that the Fund must disclose in reports that
it files or submits to the Securities and Exchange Commission. Based on that
evaluation, the Fund's Chief Executive Officer and Chief Financial Officer
concluded that, as of March 31, 2005, the Fund's disclosure controls and
procedures were effective. During the quarter, the Fund adopted additional
internal controls relating to its real estate investments, including the
establishment of a valuation committee to oversee the implementation of the
valuation policies relating to the Fund's real estate and other investments.
There were no other changes in the Fund's internal control over financial
reporting that occurred during the quarter ended March 31, 2005 that have
materially affected or are reasonably likely to materially affect, the Fund's
internal control over financial reporting.
19
As the Fund's manager, the complete and entire management, control and operation
of the Fund are vested in Eaton Vance. The Fund's Chief Executive Officer and
Chief Financial Officer intend to report to the Board of Directors of Eaton
Vance, Inc. (the sole trustee of Eaton Vance) any significant deficiency in the
design or operation of internal control over financial reporting 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 control
over financial reporting.
Effective April 15, 2005, Eaton Vance appointed James L. O'Connor interim Chief
Financial Officer to serve during Michelle A. Green's maternity leave, which is
expected to continue for three to four months.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Although in the ordinary course of business, the Fund and its directly and
indirectly 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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
As described in the Fund's Annual Report on Form 10-K for the year ended
December 31, 2004, shares of the Fund may be redeemed by Fund shareholders on
any business day. Redemptions are met at the net asset value per share of the
Fund. The right to redeem is available to all shareholders and all outstanding
Fund shares are eligible (except for Shares subject to an estate freeze election
as described in Item 5 of the Fund's Annual Report on Form 10-K for the fiscal
year ending December 31, 2004). During each month in the quarter ended March 31,
2005, the total number of shares redeemed and the average price paid per share
were as follows:
Total No. of Shares Average Price Paid
Month Ended Redeemed(1) Per Share
- -------------------------------------------------------------------------
January 31, 2005 29,040.982 $88.21
- -------------------------------------------------------------------------
February 28, 2005 148,562.899 $89.77
- -------------------------------------------------------------------------
March 31, 2005 94,400.082 $89.97
- -------------------------------------------------------------------------
Total 272,003.963 $89.79
- -------------------------------------------------------------------------
(1) All shares redeemed during the periods were redeemed at the option of
shareholders pursuant to the Fund's redemption policy. The Fund has not
announced any plans or programs to repurchase shares other than at the
option of shareholders.
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, 2005.
ITEM 5. OTHER INFORMATION.
None.
20
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:
31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 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 10, 2005.
BELMAR CAPITAL FUND LLC
/s/ James L. O'Connor
---------------------
James L. O'Connor
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
22
EXHIBIT INDEX
-------------
31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
23