SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Belport Capital Fund LLC (the "Fund")
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(Exact name of registrant as specified in its charter)
Delaware 04-3551830
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(State of organization) (I.R.S. Employer Identification No.)
The Eaton Vance Building
255 State Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 617-482-8260
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Securities to be registered pursuant to Section 12(b) of the Act: None
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Securities to be registered pursuant to Section 12(g) of the Act:
Limited Liability Company Interests in the Fund ("Shares")
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(Title of class)
The Exhibit Index is located on page 52.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
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Item 1. Business
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Belport Capital Fund LLC (the "Fund") is a Delaware limited liability
company organized in 2000 to provide diversification and tax-sensitive
investment management to investors who are "qualified purchasers" as defined in
Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended (the "1940
Act"), and the rules thereunder. The Fund commenced its investment operations on
March 14, 2001. The Fund conducted no operations prior to that date.
The Fund seeks to achieve long-term, after-tax returns for qualified
purchasers who have invested in the Fund ("Shareholders") by acquiring limited
liability company interests ("Shares") in the Fund. The Fund pursues its
investment objective primarily by investing indirectly in Tax-Managed Growth
Portfolio (the "Portfolio"), a diversified, open-end management investment
company registered under the 1940 Act, with net assets of approximately $18.3
billion as of December 31, 2001. The Portfolio was organized in 1995 as
successor to the investment operations of Eaton Vance Tax-Managed Growth Fund
1.0 (formerly Capital Exchange Fund), a mutual fund established in 1966 and
managed from inception for long-term, after-tax returns. The Fund maintains its
indirect investment in the Portfolio by investing in Belvedere Capital Fund
Company LLC (the "Company"), a Massachusetts limited liability company that
invests exclusively in the Portfolio. As of December 31, 2001, the investment
assets of the Company consisted exclusively of an interest in the Portfolio with
a value of $10.33 billion. As of such date, assets of the Fund invested in the
Company totaled $1.76 billion.
The investment objective of the Portfolio is to achieve long-term,
after-tax returns for its investors by investing in a diversified portfolio of
equity securities. The Portfolio emphasizes investments in common stocks of
domestic and foreign growth companies that are considered to be high in quality
and attractive in their long-term investment prospects. Under normal market
conditions, the Portfolio will invest primarily in common stocks. Although the
Portfolio may also invest in investment-grade preferred stocks and debt
securities, purchases of such securities are normally limited to securities
convertible into common stocks and temporary investments in short-term notes and
government obligations. During periods in which the investment adviser to the
Portfolio believes that returns on common stock investments may be unfavorable,
the Portfolio may invest a portion of its assets in U.S. government obligations
and high quality short-term notes. The Portfolio's holdings represent a number
of different industries. Not more than 25% of the Portfolio's assets may be
invested in the securities of issuers having their principal business activity
in the same industry, determined as of the time of acquisition of any such
securities.
In its operations, the Portfolio seeks to achieve long-term, after-tax
returns in part by minimizing the taxes incurred by investors in the Portfolio
in connection with the Portfolio's investment income and realized capital gains.
Taxes on investment income are minimized by investing primarily in
lower-yielding securities. Taxes on realized capital gains are minimized by
avoiding or minimizing the sale of securities holdings with large accumulated
capital gains. The Portfolio seeks to invest in a broadly diversified portfolio
of stocks and to invest primarily in established companies with characteristics
of above-average growth, predictability and stability that are acquired with the
expectation of being held for a period of years. The Portfolio generally seeks
to avoid realizing short-term capital gains. When a decision is made to sell a
particular appreciated security, the Portfolio will select for sale the share
lots resulting in the most favorable tax treatment, generally those with holding
periods sufficient to qualify for long-term capital gains treatment that have
the highest cost basis. The Portfolio may, when deemed prudent by its investment
adviser, sell securities to realize capital losses that can be used to offset
realized gains.
To protect against price declines in securities holdings with large
accumulated capital gains, the Portfolio may use various investment techniques,
including, but not limited to, the purchase of put options on securities held,
equity collars (combining the purchase of a put option and the sale of a call
option), equity swaps, covered short sales, and the sale of stock index futures
contracts. By using these techniques rather than selling such securities, the
Portfolio can reduce its exposure to price declines in the securities without
realizing substantial capital gains under current tax law. The Portfolio's
ability to utilize covered short sales, certain equity swaps and certain equity
collar strategies as a tax-efficient management technique with respect to
holdings of appreciated securities is limited to circumstances in which the
hedging transaction is closed out within thirty days after the end of the
taxable year of the Portfolio in which the hedging transaction was initiated and
the underlying appreciated securities position is held unhedged for at least the
next sixty days after such hedging transaction is closed. The use of these
investment techniques may require the Portfolio to commit or make available cash
and, therefore, may not be available at such times as the Portfolio has limited
holdings of cash.
Separate from its investment in the Portfolio through the Company, the Fund
invests through its subsidiary, Belport Realty Corporation ("BRC"), in interests
in real estate joint ventures ("Real Estate Joint Ventures") and a portfolio of
income-producing preferred equity interests in real estate operating
partnerships that generally are affiliated with real estate investment trusts
("REITs") that are publicly traded ("Partnership Preference Units")
(collectively, "real estate investments"). BRC may make other types of real
estate investments, such as interests in real properties subject to long-term
leases. BRC may purchase real estate investments from, and sell them to, other
investment funds sponsored by the Eaton Vance organization and REIT subsidiaries
thereof.
At December 31, 2001, BRC owned a controlling interest in two Real Estate
Joint Ventures. Each Real Estate Joint Venture in which BRC invests is majority
owned by BRC. The principal minority investor in each Real Estate Joint Venture
(the "Operating Partner") owns a substantial interest therein and provides the
day-to-day operating management of the Real Estate Joint Venture, subject to the
oversight of a board of directors controlled by BRC. Both Operating Partners are
publicly-traded REITs. The assets of the Real Estate Joint Ventures consist
primarily of multi-family residential properties acquired from or in conjunction
with the Operating Partner thereof. Real Estate Joint Venture distributable cash
flows are allocated such that BRC: 1) holds a priority position versus the
Operating Partner with respect to a fixed annual preferred return; and 2)
participates on a pro rata or reduced basis in distributable cash flows in
excess of the annual preferred return of BRC and a subordinated preferred return
of the Operating Partner. The Real Estate Joint Ventures include a buy/sell
provision that can be activated by either BRC or the Operating Partner after a
fixed period of years. Financing for the Real Estate Joint Ventures consists
primarily of fixed-rate secured mortgage debt obligations of the Real Estate
Joint Venture that generally are without recourse to BRC and the Fund. Equity
was invested in the Real Estate Joint Ventures by both BRC and the Operating
Partner. BRC's equity in the Real Estate Joint Ventures was acquired using the
proceeds of Fund borrowings. For a description of the Real Estate Joint
Ventures, see Item 3 below.
Each issue of Partnership Preference Units held by BRC pays regular
quarterly distributions at fixed rates. None of the issues of Partnership
Preference Units is or will be registered under the Securities Act of 1933, as
amended (the "Securities Act"), and each issue is thus subject to restrictions
on transfer. Partnership Preference Units that might be acquired by BRC will not
be rated by a nationally recognized rating agency, and such interests may not be
as high in quality as issues that are rated investment grade.
BRC is a Delaware corporation that operates in such a manner as to qualify
for taxation as a REIT under the Internal Revenue Code (the "Code"). As a REIT,
BRC generally is not subject to federal income tax on that portion of its
ordinary income or taxable gain that it distributes to its stockholders each
year. The Fund owns 100% of the common stock issued by BRC, and intends to hold
2
all of BRC's common stock at all times. Additionally, at December 31, 2001,
2,100 shares of Class A preferred stock of BRC were outstanding. The preferred
stock is owned by approximately 105 charitable organizations. As of December 31,
2001, net assets of the Fund invested in BRC totaled $220.67 million.
The Fund's investments in real estate through BRC are financed using
borrowings under a revolving securitization facility (the "Commercial Paper
Facility") of up to $250 million with two affiliated special purpose commercial
paper issuers (the "CP Issuers") and Citicorp North America, Inc. ("Citicorp")
as agent for the CP Issuers. The Commercial Paper Facility is supported by a
committed liquidity facility (the "Liquidity Facility") provided by Citibank,
N.A. ("Citibank"), under which borrowings may be made for a maximum term of
seven years from the date the Fund commenced operations. On borrowings under the
Commercial Paper Facility, the Fund pays a rate of interest equal to the CP
Issuers' cost of commercial paper funding plus a margin and certain fees and
expenses. Based upon the CP Issuers' historical cost of funding, it is expected
that borrowings under the Commercial Paper Facility will be at an annual rate of
approximately one-month LIBOR plus 0.40%. The Fund also pays a commitment fee of
approximately 0.18% per year on the unused portion of the Commercial Paper
Facility. In the event that the CP Issuers are unable or unwilling to maintain
advances to the Fund, they may assign advances to the providers of the Liquidity
Facility. Borrowings under the Liquidity Facility will be at an annual rate of
one-month LIBOR plus 0.75%. The Fund's obligations under the Commercial Paper
Facility and the Liquidity Facility (collectively, the "Credit Facility") are
secured by a pledge of its assets. Obligations under the Credit Facility are
without recourse to Fund shareholders. As of December 31, 2001, outstanding
borrowings under the Credit Facility totaled $231.0 million, and the unused loan
commitment amount was $19.0 million.
The Fund has entered into current and forward interest rate swap agreements
with Citibank, to fix the cost of borrowings under the Credit Facility used to
acquire BRC's equity in a Real Estate Joint Venture. The combined term of the
swap agreements extends until February 22, 2010. Pursuant to the swap
agreements, the Fund makes cash payments to Citibank at fixed rates averaging
6.0% per annum in exchange for floating rate payments from Citibank that
fluctuate with one-month LIBOR. The Fund also has entered into current and
forward interest rate swap agreements with Merrill Lynch Capital Services. Inc.
("MLCS") to fix the cost of borrowings under the Credit Facility used to acquire
BRC's equity in the other Real Estate Joint Venture and BRC's investment in
Partnership Preference Units. Pursuant to the swap agreements, the Fund makes
cash payments to MLCS at fixed rates in exchange for floating rate payments from
MLCS that fluctuate with one-month LIBOR. The swap agreements entered into with
respect to BRC's equity in the Real Estate Joint Venture extend until September
13, 2010 and provide for the Fund to make payments to MLCS at fixed rates
averaging 6.1%. The swap agreement entered into with respect to BRC's investment
in Partnership Preference Units extends until March 14, 2008 and provides for
the Fund to make payments to MLCS at fixed rates of approximately 6.0%.
The Fund issued Shares to Shareholders at closings taking place on March
14, 2001, May 23, 2001, July 26, 2001, October 4, 2001, and December 18, 2001.
At the five closings, an aggregate of 17,842,860 Shares were issued in exchange
for Shareholder contributions totaling $1.78 billion. All Shareholder
contributions (other than contributions by the Fund's Manager) were made in the
form of securities. At each closing, all of the securities contributed by
Shareholders were exchanged by the Fund into the Company for shares of the
Company. Immediately thereafter, all of such securities were exchanged by the
Company into the Portfolio for an interest in the Portfolio.
Shares of the Fund were privately offered and sold only to "accredited
investors" as defined in Rule 501(a) under the Securities Act who were
"qualified purchasers" (as defined in Section 2(a)(51)(A) of the 1940 Act). The
offering was conducted by Eaton Vance Distributors, Inc. ("EVD") as placement
agent and by certain subagents appointed by EVD in reliance upon the exemption
from registration provided by Rule 506 under the Securities Act.
3
The Fund discontinued its private offering on December 18, 2001.
The Fund has no officers or employees, inasmuch as its business affairs are
conducted by its Manager, Eaton Vance Management ("EVM"), a Massachusetts
business trust with offices at The Eaton Vance Building, 255 State Street,
Boston, Massachusetts 02109, and its investment operations are conducted by its
investment adviser, Boston Management and Research, a wholly-owned subsidiary of
EVM.
ITEM 2. FINANCIAL INFORMATION.
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Table of Selected Financial Data
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The Fund commenced its investment operations on March 14, 2001 and the
consolidated data referred to below reflects the period commencing on that date
through December 31, 2001.
Period Ended
December 31, 2001
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Total investment income $48,271,188
Interest expense $21,115,627
Net expenses (including interest expense) $42,094,986
Net investment income $3,576,308
Minority interests in net income of controlled subsidiaries $2,599,894
Net realized loss $(368,915)
Net change in unrealized depreciation $(17,999,161)
Net decrease in net assets from operations $(14,791,768)
Total assets $2,389,035,478
Loan payable $231,000,000
Mortgages payable, net $358,668,115
Net assets $1,749,157,864
Shares outstanding 17,782,241
Net Asset Value and Redemption Price per Share $98.37
Distribution paid per Share $0.00
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
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Results of Operations
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Increases and decreases in the Fund's net asset value per Share are derived
from net investment income or loss, and realized and unrealized gains and losses
on investments, including security investments held through the Fund's indirect
interest (through the Company) in the Portfolio, real estate investments held
through BRC and any direct investments of the Fund. Expenses of the Fund include
its pro-rata share of the expenses of BRC, the Real Estate Joint Ventures, the
Company, and, indirectly, the Portfolio, as well as the actual and accrued
expenses of the Fund. The Fund's most significant expense is interest incurred
on Real Estate Joint Venture mortgage debt and borrowings under the Credit
Facility. Fund borrowings are used primarily to finance the purchase of real
estate investments through BRC. The Fund's realized and unrealized gains and
losses on investments are based on its allocated share of the realized and
unrealized gains and losses of the Company, and indirectly the Portfolio, as
well as realized and unrealized gains and losses on real estate investments held
through BRC. The realized and unrealized gains and losses on investments have
the most significant impact on the Fund's net asset value per Share and result
from sales of such investments and changes in their underlying value. The
investments of the Portfolio consist primarily of common stocks of domestic and
foreign growth companies that are considered to be high in quality and
attractive in their long-term investment prospects. Because the securities
holdings of the Portfolio are broadly diversified, the performance of the
Portfolio cannot be attributed to one particular stock or one particular
industry or market sector. The performance of the Portfolio and the Fund are
substantially influenced by the overall performance of the United States stock
market, as well as by the relative performance versus the overall market of
specific stocks and classes of stocks in which the Portfolio maintains large
positions. Through the impact of interest rates on the valuation of the Fund's
real estate investments held through BRC and its positions in swap agreements,
the performance of the Fund is also affected by movements in interest rates and,
particularly, changes in credit spread relationships. On a combined basis, the
Fund's real estate investments and interest rate swaps generally decline in
value when credit spreads widen (as fixed-income markets grow more risk-averse)
and generally increase in value when credit spreads tighten.
The Fund's total return for the period from its inception on March 14, 2001
through December 31, 2001 was -1.63%. This return reflects a decrease in the
Fund's net asset value per Share from $100.00 to $98.37. For comparison, the
Standard & Poor's 500 Index (the "S&P 500"), an unmanaged index commonly used to
measure the performance of U.S. stocks, had a total return of -3.05% over the
same period.
The year 2001 witnessed a significant slowing of the U.S. and global
economies, characterized by deteriorating corporate profits, job layoffs and
sharply lower capital spending. Against this discouraging backdrop, the equity
markets moved dramatically lower through much of the year. The tragic events of
September 11th served to accelerate the downward trend. In their wake, consumer
spending declined sharply and the U.S. economy slid into recession in the third
quarter as the nation's Gross Domestic Product contracted 1.3%, the first such
quarterly decline since 1991. The initial estimates from the Commerce Department
for the fourth quarter indicated that GDP grew by a modest 0.2%. In an effort to
stimulate economic activity, the Federal Reserve has continued the accommodative
monetary policy it began in January 2001. By year-end, the Fed had lowered its
benchmark Federal Funds rate - a key short-term interest rate barometer - on 11
occasions by a total of 475 basis points (4.75%).
5
Even as the economy continued to struggle in the fourth quarter, the U.S.
equity markets started to gain some traction in October. The fourth quarter saw
a sharp rebound from the September lows, led by technology stocks and other
aggressive sectors of the market. But the late gains were not sufficient for the
broad market to avoid its second consecutive year of negative returns.
The Fund's performance to date has been minimally affected by investments
and activities outside of the Portfolio. Since the Fund's inception, its
performance has trailed that of the Portfolio by 0.49%. The Fund's investments
in Real Estate Joint Ventures generally performed well. Asset values were well
maintained and operating results, although weaker toward year-end, were in line
with expectations. Investments in Partnership Preference Units benefited from
favorable issuer performance and a tightening in interest rate spreads. The
value of the Fund's interest rate swap agreements declined as interest rates
fell, more than offsetting the favorable impact on Fund performance of its real
estate investments.
Liquidity and Capital Resources
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As of December 31, 2001, the Fund had outstanding borrowings of $231.0
million and unused loan commitments of $19.0 million under the Credit Facility.
Additionally, the lender has provided up to $10 million for use of letters of
credit. As of December 31, 2001, a letter of credit in the amount of
approximately $1.9 million was outstanding and was issued as a substitute for
funding mortgage escrow accounts required by the lender of one of the Real
Estate Joint Ventures. The Credit Facility is being used primarily to finance
the Fund's equity in its real estate investments and will continue to be used
for such purposes in the future, as well as to provide for any short-term
liquidity needs of the Fund. In the future, the Fund may increase the size of
the Credit Facility (subject to lender consent) and the amount of outstanding
borrowings thereunder for these purposes.
The Fund may redeem shares of the Company at any time. Both the Company and
the Portfolio follow the practice of normally meeting redemptions by
distributing securities drawn from the Portfolio. The Company and the Portfolio
may also meet redemptions by distributing cash. As of December 31, 2001, the
Portfolio had cash and short-term investments totaling $421.0 million, compared
to $314.2 million and $642.7 million as of December 31, 2000 and December 31,
1999, respectively. The Portfolio participates in a $150 million multi-fund
unsecured line of credit agreement with a group of banks. The Portfolio may
temporarily borrow from the line of credit to satisfy redemption requests in
cash or to settle investment transactions. The Portfolio had no outstanding
borrowings at December 31, 2001, December 31, 2000 or December 31, 1999. As of
December 31, 2001, the net assets of the Portfolio totaled $18.3 billion,
compared to $18.4 billion as of December 31, 2000. To ensure liquidity for
investors in the Portfolio, the Portfolio may not invest more than 15% of its
net assets in illiquid assets. As of December 31, 2001, restricted securities
not available for current public sale (which are considered illiquid)
constituted 2.0% of the net assets of the Portfolio, compared to 2.7% as of
December 31, 2000.
The liquidity of BRC's Real Estate Joint Venture investments is extremely
limited, and relies principally upon a buy/sell arrangement with the Operating
Partners that is invokable after a specified period (up to ten years) after the
formation of the Real Estate Joint Venture. Transfers of BRC's interest in the
Real Estate Joint Ventures to parties other than the Operating Partner thereof
are constrained by terms of the operating management agreements, buy/sell
arrangements with the Operating Partner, and lender consent requirements. The
Partnership Preference Units held by BRC are not registered under the Securities
Act and are subject to substantial restrictions on transfer. As such, they are
considered illiquid.
Redemptions of Fund Shares are met primarily by distributing securities
drawn from the Portfolio, although cash may also be distributed. Shareholders
generally do not have the right to receive the proceeds of Fund redemptions in
cash.
6
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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(a) Quantitative Information About Market Risk
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Interest Rate Risk
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The Fund's primary exposure to interest rate risk arises from investments
in real estate that are financed with floating rate bank borrowings. The
interest rate on borrowings under the Fund's Credit Facility is reset at regular
intervals based on the CP cost of financing plus a margin of one-month LIBOR
plus a premium. The Fund utilizes cancelable interest rate swap agreements to
fix the cost of its borrowings under the Credit Facility and to mitigate the
impact of interest rate changes on the Fund's net asset value. Under the terms
of the interest rate swap agreements, the Fund makes cash payments at fixed
rates in exchange for floating rate payments that fluctuate with one-month
LIBOR. In the future, the Fund may use other interest rate hedging arrangements
(such as caps, floors and collars) to fix or limit borrowing costs. The use of
interest rate hedging arrangements is a specialized activity that may be
considered speculative and which 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 Notes 7 and 8 to the consolidated financial statements.
Interest Rate Sensitivity
Principal (Notional) Amount by Contractual Maturity
For the Twelve Months Ended December 31,
2002-2006 Thereafter Total Fair Value
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Rate sensitive liabilities:
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Long term debt - variable
rate Credit Facility $231,000,000 $231,000,000 $231,000,000
Average
interest rate 2.62% 2.62%
Rate sensitive derivative
financial instruments:
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Pay fixed/
Receive variable interest
rate swap contracts $338,534,000 $338,534,000 $(2,344,008)
Averagete 6.16% 6.16%
Average receive rate 2.62% 2.62%
(b) Qualitative Information About Market Risk
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The value of Fund shares may not increase or may decline. The performance
of the Fund fluctuates. There can be no assurance that the performance of the
Fund will match that of the United States stock market or that of other equity
funds. In managing the Portfolio for long-term, after-tax returns, the
Portfolio's investment adviser generally seeks to avoid or minimize sales of
securities with large accumulated capital gains, including contributed
securities. Such securities constitute a substantial portion of the assets of
the Portfolio. Although the Portfolio may utilize certain management strategies
in lieu of selling appreciated securities, the Portfolio's, and hence the
Fund's, exposure to losses during stock market declines may nonetheless be
higher than funds that do not follow a general policy of avoiding sales of
highly-appreciated securities.
The Portfolio invests in securities issued by foreign companies and the
Fund may acquire foreign investments. Foreign investments involve considerations
and possible risks not typically associated with investing in the United States.
The value of foreign investments to U.S. investors may be adversely affected by
changes in currency rates. Foreign brokerage commissions, custody fees and other
7
costs of investing are generally higher than in the United States, and foreign
investments may be less liquid, more volatile and subject to more government
regulation than in the United States. Foreign investments could be adversely
affected by other factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting and auditing
standards, armed conflict, and potential difficulty in enforcing contractual
obligations.
Risks of Certain Investment Techniques
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In managing the Portfolio, the investment adviser may purchase or sell
derivative instruments (which derive their value by reference to other
securities, indices, instruments, or currencies) to hedge against securities
price declines and currency movements and to enhance returns. Such transactions
may include, without limitation, the purchase and sale of stock index futures
contracts and options on stock index futures; the purchase of put options and
the sale of call options on securities held; equity swaps; and the purchase and
sale of forward currency exchange contracts and currency futures. The Portfolio
may make short sales of securities provided that an equal amount is held of the
security sold short (a covered short sale) and may also lend portfolio
securities. The use of these investment techniques is a specialized activity
that may be considered speculative and which can expose the Fund and the
Portfolio to significant risk of loss. Successful use of these investment
techniques is subject to the ability and performance of the investment adviser.
The Fund's and the Portfolio's ability to meet their investment objectives may
be adversely affected by the use of these techniques. The writer of an option or
a party to an equity swap may incur losses that substantially exceed the
payments, if any, received from a counterparty. Swaps, caps, floors, collars and
over-the-counter options are private contracts in which there is also a risk of
loss in the event of a default on an obligation to pay by the counterparty. Such
instruments may be difficult to value, may be illiquid and may be subject to
wide swings in valuation caused by changes in the price of the underlying
security, index, instrument or currency. In addition, if the Fund or the
Portfolio has insufficient cash to meet margin, collateral or settlement
requirements, it may have to sell assets to meet such requirements.
Alternatively, should the Fund or the Portfolio fail to meet these requirements,
the counterparty or broker may liquidate positions of the Fund or the Portfolio.
The Portfolio may also have to sell or deliver securities holdings in the event
that it is not able to purchase securities on the open market to cover its short
positions or to close out or satisfy an exercise notice with respect to options
positions it has sold. In any of these cases, such sales may be made at prices
or in circumstances that the investment adviser considers unfavorable.
The Portfolio's ability to utilize covered short sales, certain equity
swaps and certain equity collar strategies (combining the purchase of a put
option and the sale of a call option) as a tax-efficient management technique
with respect to holdings of appreciated securities is limited to circumstances
in which the hedging transaction is closed out within thirty days of the end of
the taxable year of the Portfolio in which the hedging transaction was initiated
and the underlying appreciated securities position is held unhedged for at least
the next sixty days after such hedging transaction is closed. There can be no
assurance that counterparties will at all times be willing to enter into covered
short sales, interest rate hedges, equity swaps and other derivative instrument
transactions on terms satisfactory to the Fund or the Portfolio. The Fund's and
the Portfolio's ability to enter into such transactions may also be limited by
covenants under the Fund's revolving securitization facility, the federal margin
regulations and other laws and regulations. The Portfolio's use of certain
investment techniques may be constrained because the Portfolio is a diversified,
open-end management investment company registered under the Investment Company
Act of 1940 and because other investors in the Portfolio are regulated
investment companies under Subchapter M of the Internal Revenue Code. Moreover,
the Fund and the Portfolio are subject to restrictions under the federal
securities laws on their ability to enter into transactions in respect of
securities that are subject to restrictions on transfer pursuant to the
Securities Act.
8
Risks of Real Estate Investments and Leverage
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The success of BRC's real estate investments, which consist of Real Estate
Joint Ventures and Partnership Preference Units, depends in part on many factors
related to the real estate market. These factors include, without limitation,
general economic conditions, the supply and demand for different types of real
properties, the financial health of tenants, the timing of lease expirations and
terminations, fluctuations in rental rates and operating costs, exposure to
adverse environmental conditions and losses from casualty or condemnation,
interest rates, availability of financing, managerial performance, government
rules and regulations, and acts of God (whether or not insured against).
Partnership Preference Units also depend upon factors relating to the issuing
partnerships that may affect such partnerships' profitability and their ability
to make distributions to holders of Partnership Preference Units. The
performance of Real Estate Joint Ventures is substantially influenced by the
property management capabilities of the Operating Partner and conditions in the
specific real estate sub-markets in which the properties are located. The debt
of the Real Estate Joint Ventures is fixed-rate, secured by the underlying
properties and with limited recourse to BRC. However, changes in interest rates,
the availability of financing and other financial conditions can have a material
impact on property values and therefore on the value of BRC's equity interest.
The Operating Partners will be subject to substantial conflicts of interest in
structuring, operating and winding up the Real Estate Joint Ventures. The
Operating Partners will have an economic incentive to maximize the prices at
which they sell properties to Real Estate Joint Ventures and to minimize the
prices at which they acquire properties from Real Estate Joint Ventures. The
Operating Partners may devote greater attention or more resources to managing
their wholly-owned properties than properties held by Real Estate Joint
Ventures. Future investment opportunities identified by the Operating Partners
will more likely be pursued independently, rather than through, the Real Estate
Joint Ventures. Financial difficulties encountered by the Operating Partners in
their other businesses may interfere with the operations of the Real Estate
Joint Ventures. There can be no assurance that BRC's ownership of real estate
investments will be an economic success.
Although intended to add to returns, the borrowing of funds to purchase
real estate investments exposes the Fund to the risk that the returns achieved
on the real estate investments will be lower than the cost of borrowing to
purchase such assets and that the leveraging of the Fund to buy such assets will
therefore diminish the returns to be achieved by the Fund as a whole. In
addition, there is a risk that the availability of financing will be interrupted
at some future time, requiring the Fund to sell assets to repay outstanding
borrowings or a portion thereof. It may be necessary to make such sales at
unfavorable prices. The Fund's obligations under the Credit Facility are secured
by a pledge of its assets. In the event of default, the lender could elect to
sell assets of the Fund without regard to consequences of such action for
Shareholders. The rights of the lender to receive payments of interest on and
repayments of principal of borrowings is senior to the rights of the
Shareholders. Under the terms of the Credit Facility, the Fund is not permitted
to make distributions of cash or securities while there is outstanding an event
of default under the Credit Facility. During such periods, the Fund would not be
able to honor redemption requests or make cash distributions.
The valuations of Partnership Preference Units held by the Fund through its
investment in BRC fluctuate over time to reflect, among other factors, changes
in interest rates, changes in the perceived riskiness of such units (including
call risk), changes in the perceived riskiness of comparable or similar
securities trading in the public market and the relationship between supply and
demand for comparable or similar securities trading in the public market.
Increases in interest rates and increases in the perceived riskiness of such
units or comparable or similar securities will adversely affect the valuation of
the Partnership Preference Units. The ongoing value of BRC's investments in Real
Estate Joint Ventures will be substantially uncertain. BRC's investments in Real
Estate Joint Ventures generally will be stated at estimated market value based
on independent valuations, assuming an orderly disposition of assets. Detailed
investment evaluations will be performed at least annually and reviewed
periodically. Interim valuations will reflect results of operations and
distributions, and may be adjusted to reflect significant changes in economic
circumstances since the most recent independent evaluation. Given that such
9
valuations include many assumptions, including but not limited to, an orderly
disposition of assets, values may differ from amounts ultimately realized.
Fluctuations in the value of real estate investments derived from changes in
general interest rates can be expected to be offset in part (but not entirely)
by changes in the value of interest rate swap agreements or other interest rate
hedges entered into by the Fund with respect to its borrowings under the Credit
Facility.
Fluctuations in the value of real estate investments derived from other
factors besides general interest rate movements (including issuer-specific and
sector-specific credit concerns, property-specific concerns and changes in
interest rate spread relationships) will not be offset by changes in the value
of interest rate swap agreements or other interest rate hedges entered into by
the Fund. Changes in the valuation of real estate investments not offset by
changes in the valuation of interest rate swap agreements or other interest rate
hedges entered into by the Fund will cause the performance of the Fund to
deviate from the performance of the Portfolio. Over time, the performance of the
Fund can be expected to be more volatile than the performance of the Portfolio.
ITEM 3. PROPERTIES.
- -------------------
The Fund does not own any physical properties, other than indirectly as a
result of BRC's investments in Partnership Preference Units and BRC's controlled
subsidiaries. At December 31, 2001, in addition to investments in Partnership
Preference Units, BRC owned a majority interest in the following two controlled
subsidiaries:
Bel Multifamily Property Trust, which owns eleven multi-family residential
properties located in seven states (Washington, Missouri, North Carolina,
Arizona, Florida, Georgia and Texas).
Monadnock Property Trust, LLC, which owns twelve multi-family residential
properties, located in eight states (Texas, Arizona, Georgia, North Carolina,
Oregon, Utah, Tennessee and Florida).
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners.
To the knowledge of the Fund, no person beneficially owns more than five
percent of the Shares of the Fund.
(b) Security Ownership of Management.
As of April 15, 2002, EVM, the Manager of the Fund, beneficially owned 100
Shares of the Fund and James B. Hawkes, Chairman, President and Chief Executive
Officer of EVM, owned 77,410.094 Shares of the Fund individually and 23,909.564
Shares of the Fund jointly with his spouse. The Shares owned by Mr. Hawkes and
EVM represent less than 1% of the outstanding Shares of the Fund as of April 15,
2002. None of the other entities or individuals named in response to Item 5
below beneficially owned Shares of the Fund as of such date.
(c) Changes in Control.
Not applicable.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
- ------------------------------------------
The Fund has no individual directors or executive officers. The Fund is
managed by EVM. Each of the Fund, BRC and the Portfolio engage Boston Management
and Research ("BMR"), a wholly-owned subsidiary of EVM, as investment adviser.
10
EVM, its affiliates and predecessor companies have been investment advisers to
individuals and institutions since 1924 and have been advising investment
companies since 1931. BMR and EVM currently have assets under investment
management of approximately $60 billion. EVM is an indirect wholly-owned
subsidiary of Eaton Vance Corp. ("EVC"), a publicly-held holding company which,
through its subsidiaries and affiliates, engages primarily in investment
management, administration and marketing activities. The non-voting common stock
of EVC is listed and traded on the New York Stock Exchange. All shares of the
voting common stock of EVC are held in a voting trust, the voting trustees of
which are senior officers of the Eaton Vance organization. Eaton Vance, Inc.
("EV"), a wholly-owned subsidiary of EVC, is the sole trustee of EVM and of BMR,
each of which is a Massachusetts business trust. The names of the executive
officers and the directors of EV and their ages and principal occupations are
set forth below:
DIRECTORS AND EXECUTIVE OFFICERS OF EATON VANCE, INC.
James B. Hawkes, (60), is Chairman, President and Chief Executive Officer
of EVM, BMR, EVC and EV and a Director of EVC and EV. He is also a Trustee and
an officer of various investment companies managed by EVM or BMR and has been
employed by the Eaton Vance organization for 31 years.
Thomas E. Faust Jr., (43), is Executive Vice President and Chief Investment
Officer of Eaton Vance, BMR, EVC and EV. He is also an officer of various
investment companies managed by Eaton Vance or BMR and has been employed by the
Eaton Vance organization for 16 years.
Alan R. Dynner, (61), is Vice President and Chief Legal Officer of EVM, BMR
and EVC, and Secretary and Clerk of EV. He is also an officer of various
investment companies managed by EVM or BMR. He joined Eaton Vance in November
1996.
William M. Steul, (59), is Vice President and Chief Financial Officer of
EVM, BMR, EVC and EV. He joined Eaton Vance in December 1994.
ITEM 6. EXECUTIVE COMPENSATION.
- --------------------------------
Under the terms of the Fund's investment advisory and administrative
agreement with BMR, BMR receives a monthly advisory and administrative fee at
the rate of 1/20th of 1% (equivalent to 0.60% annually) of the average daily
gross assets of the Fund, reduced by the amount of distribution fees payable by
the Fund (see Item 7 below) and the Fund's attributable share of the monthly
investment advisory and management fees for such month payable by the Portfolio
and BRC, respectively. The term "gross assets of the Fund" means the value of
all Fund assets (including the Fund's interest in the Company and the Fund's
ratable share of the assets of its directly and indirectly controlled
subsidiaries), without reduction by any liabilities. For the period commencing
with the start of the Fund's business, March 14, 2001, through December 31,
2001, the advisory and administrative fees paid by the Fund to BMR (after
reductions) totaled $1,356,557.
Under the terms of BRC's management agreement with BMR, BMR receives a
monthly management fee at the rate of 1/20th of 1% (equivalent to 0.60%
annually) of the average daily gross assets of BRC. The term "gross assets of
BRC" means the current value of all assets of BRC, including BRC's ratable share
of the assets of its controlled subsidiaries, without reduction by any
liabilities. For the period commencing with the start of BRC's business, March
14, 2001, through December 31, 2001, BRC paid BMR management fees of $1,527,066.
Under the terms of the Portfolio's investment advisory agreement with BMR,
BMR receives a monthly advisory fee at a base rate of 5/96 of 1% (equivalent to
11
0.625% annually) of the average daily net assets of the Portfolio up to $500
million. On net assets of $500 million or more the monthly fee is reduced and is
computed as follows: 9/192 of 1% (equivalent to 0.5625% annually) of the average
daily net assets of the Portfolio of $500 million but less than $1 billion; 1/24
of 1% (equivalent to 0.50% annually) of the average daily net assets of the
Portfolio of $1 billion but less than $1.5 billion; 7/192 of 1% (equivalent to
0.4375% annually) of the average daily net assets of the Portfolio of $1.5
billion but less than $7 billion; 17/480 of 1% (equivalent to 0.425% annually)
of the average daily net assets of the Portfolio of $7 billion but less than $10
billion; 11/320 of 1% (equivalent to 0.4125% annually) of the average daily net
assets of the Portfolio of $10 billion but less than $15 billion; and 1/30 of 1%
(equivalent to 0.40% annually) of the average daily net assets of the Portfolio
of $15 billion and above. For the fiscal year ended December 31, 2001, the
advisory fee applicable to the Portfolio was 0.43% of average daily net assets
for such period, and the Fund's allocated portion of the fee totaled $3,487,825
for the period commencing with the start of BRC's business, March 14, 2001,
through December 31, 2001.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
See the information set forth under Item 6 above.
Shares of the Fund were privately placed with qualified purchasers pursuant
to a placement agency agreement entered into between the Fund and EVD as
exclusive placement agent. EVD is a wholly-owned subsidiary of EVM. EVD
appointed certain securities dealers as subagents to participate in the private
offering. No selling commissions were paid by the Fund on behalf of Shareholders
making investment commitments of $5 million or more. The Fund paid a 1.5%
selling commission to EVD on behalf of each Shareholder making an investment
commitment of less than $2 million and a 1.0% selling commission to EVD on
behalf of each shareholder making an investment commitment of at least $2
million but less than $5 million. The selling commission paid by the Fund on
behalf of a Shareholder was deducted from the contribution to the Fund by such
Shareholder, thereby reducing the number of Shares of the Fund issued to the
Shareholder. During the period commencing with the start of the Fund's business,
March 14, 2001, to December 31, 2001, the Fund paid selling commissions
aggregating $7,971,497 pursuant to the placement agency agreement, and such
selling commissions were paid by EVD to those subagents through which
Shareholders invested in the Fund.
Pursuant to a servicing agreement between the Company and EVD, the Company
pays a servicing fee to EVD for providing certain services and information to
direct and indirect investors in the Company. The servicing fee is paid on a
quarterly basis, at an annual rate of 0.15% of the Company's average daily net
assets. With respect to investors in the Company and Shareholders of the Fund
who subscribed through a subagent, EVD will assign servicing responsibilities
and fees to the applicable subagent, beginning twelve months after the issuance
of shares of the Company or Shares of the Fund to such persons. The Fund will
assume its allocated share of the Company's servicing fee. The servicing fee
payable in respect of the Fund's investment in the Company is credited toward
the Fund servicing fee described below. During the period commencing with the
start of the Fund's business, March 14, 2001, to December 31, 2001, the Company
paid servicing fees aggregating $1,217,658 that were attributable to the Fund's
investments in the Company.
Pursuant to a servicing agreement between the Fund and EVD, the Fund pays a
servicing fee to EVD for providing certain services and information to the
Shareholders of the Fund. The servicing fee is paid on a quarterly basis at an
annual rate of 0.25% of the Fund's average daily net assets. With respect to
Shareholders who subscribed through a subagent, EVD will assign servicing
responsibilities and fees to the applicable subagent, beginning twelve months
after the issuance of Shares of the Fund to such persons. The Fund's allocated
share of the servicing fee paid by the Company is credited toward the Fund's
servicing fee payment, thereby reducing the amount of the servicing fee paid by
12
the Fund. During the period commencing with the start of the Fund's business,
March 14, 2001, to December 31, 2001, the Fund paid servicing fees aggregating
$766,867.
Under the terms of the Fund's distribution agreement with EVD, EVD receives
a monthly distribution fee at an annual rate of 0.10% of the average daily net
assets of the Fund as compensation for its services as placement agent. The
distribution fee accrued from the Fund's initial closing and will continue for a
period of ten years (subject to the annual approval of Eaton Vance, Inc.). For
the period commencing with the start of the Fund's business, March 14, 2001, to
December 31, 2001, the distribution fees payable or accrued to EVD totaled
$799,935.
Shares of the Fund redeemed within three years of issuance are generally
subject to a redemption fee equal to 1% of the net asset value of the Shares
redeemed. The redemption fee is payable to EVD in cash by the Fund on behalf of
the redeeming Shareholder. No redemption fee is imposed on Shares of the Fund
held for at least three years, Shares acquired through the reinvestment of Fund
distributions, Shares redeemed in connection with a tender offer or other
extraordinary corporate event involving securities contributed by the redeeming
Shareholder, or Shares redeemed following the death of all of the initial owners
of the Shares redeemed. In addition, no fee applies to redemptions made pursuant
to a systematic redemption plan established by a Shareholder with the Fund.
During the period commencing with the start of the Fund's business, March 14,
2001, to December 31, 2001, EVD received redemption fees of $28,772 from the
Fund on behalf of redeeming Shareholders.
ITEM 8. LEGAL PROCEEDINGS.
- ---------------------------
Although in the ordinary course of business, the Fund, BRC or the real
estate investments in which BRC has equity interests may become involved in
legal proceedings, the Fund is not aware of any material pending legal
proceedings to which the Fund or BRC is a party or of which any of BRC's real
estate investments is the subject.
ITEM 9. NET ASSET VALUE OF AND DISTRIBUTIONS ON THE FUND'S SHARES AND RELATED
SHAREHOLDER MATTERS.
- --------------------------------------------------------------------------------
(a) Market Information, Restrictions on Transfer of Shares and Redemption
of Shares.
There is no established public trading market for the Shares of the Fund,
and the transfer of Shares is severely restricted by the Limited Liability
Company Agreement ("LLC Agreement") of the Fund.
Other than transfer to the Fund in a redemption, transfers of Shares are
expressly prohibited without the consent of EVM, which consent may be withheld
in its sole discretion for any reason or for no reason. The Shares have not been
and will not be registered under the Securities Act, and may not be resold
unless an exemption from such registration is available. Shareholders have no
right to require registration of the Shares and the Fund does not intend to
register the Shares under the Securities Act or take any action to cause an
exemption (whether pursuant to Rule 144 of the Securities Act or otherwise) to
be available. The Fund is not and will not be registered under the 1940 Act, and
no transfer of Shares may be made if, as determined by EVM or counsel to the
Fund, such transfer would result in the Fund being required to be registered
under the 1940 Act. In addition, no transfer of Shares may be made unless, in
the opinion of counsel for the Fund, such transfer would not result in
termination of the Fund for purposes of Section 708 of the Code or result in the
classification of the Fund as an association or a publicly traded partnership
taxable as a corporation under the Code. In no event shall all or any part of a
Shareholder's Shares be assigned to a minor or an incompetent, unless in trust
for the benefit of such person. Shares may be sold, transferred, assigned or
otherwise disposed of by a Shareholder only if it is determined by EVM or
13
counsel to the Fund that such transfer, assignment or disposition would not
violate federal securities or state securities or "blue sky" laws (including
investor qualification standards).
Shares of the Fund may be redeemed on any business day. Redemptions of
Shares held for at least three years will be met at net asset value. Shares
redeemed within three years of issuance are generally subject to a redemption
fee equal to 1% of the net asset value of the Shares redeemed. See Item 7 above.
The Fund plans to meet redemption requests principally by distributing
securities drawn from the Portfolio, but may also distribute cash. If requested
by a redeeming Shareholder, the Fund will meet a redemption request by
distributing securities that were contributed by the redeeming Shareholder,
provided that such securities are held in the Portfolio at the time of
redemption. The securities contributed by a Shareholder will not be distributed
to any other Shareholder in the Fund (or to any other investor in the Company or
the Portfolio) during the first seven years following their contribution. A
shareholder redemption request within seven years of a contribution of
securities by such Shareholder will ordinarily be met by distributing securities
that were contributed by such Shareholder, prior to distributing to such
Shareholder any other securities held in the Portfolio. Securities contributed
by a Shareholder may be distributed to other Shareholders in the Fund (or to
other investors in the Company or the Portfolio) after a holding period of at
least seven years and, if so distributed, would not be available to meet
subsequent redemption requests made by the contributing Shareholder. If
requested by a redeeming Shareholder making a redemption of at least $1 million
occurring more than seven years after such Shareholder's admission to the Fund,
the Fund will generally distribute to the redeeming Shareholder a diversified
basket of securities representing a range of industry groups that is drawn from
the Portfolio, but the selection of individual securities would be made by BMR
in its sole discretion. No interests in Real Estate Joint Ventures, Partnership
Preference Units or other real estate investments held by BRC will be
distributed to meet a redemption request, and "restricted securities" will be
distributed only to the Shareholder who contributed such securities or such
Shareholder's successor in interest. Other than as set forth above, the
allocation of each redemption between securities and cash and the selection of
securities to be distributed will be at the sole discretion of BMR. Distributed
securities may include securities contributed by Shareholders as well as other
readily marketable securities held in the Portfolio. The value of securities and
cash distributed to meet a redemption will equal the net asset value of the
number of Shares being redeemed less the applicable redemption fee, if any. The
Fund's Credit Facility prohibits the Fund from honoring redemption requests
while there is outstanding an event of default under the Credit Facility.
The Fund may compulsorily redeem all or a portion of the Shares of a
Shareholder if the Fund has determined that such redemption is necessary or
appropriate to avoid registration of the Fund or the Company under the 1940 Act,
or to avoid adverse tax or other consequences to the Portfolio, the Company, the
Fund or the Shareholders. No redemption fee is payable in the event of a
compulsory redemption.
The investment adviser is responsible for determining the value of the
Fund's assets. The Fund's custodian, Investors Bank & Trust Company, calculates
the value of the assets of the Fund, the Company and the Portfolio each day that
the New York Stock Exchange ("NYSE") is open for trading, as of the close of
regular trading on the NYSE. The Fund's net asset value per Share is calculated
by dividing the value of the Fund's total assets, less its accrued and allocated
liabilities, by the number of Shares outstanding. The Fund's net assets are
valued in accordance with the Fund's valuation procedures and reflect the value
of its directly-held assets and liabilities, as well as the net asset value of
the Fund's investments in controlled subsidiaries and the Fund's investment in
the Portfolio held through the Company. The high and low net asset values per
Share of the Fund during each full quarterly period from the Fund's inception,
March 14, 2001, through the fiscal year ended December 31, 2001 are as follows:
14
Quarter Ended High Low
------------- ---- ---
12/31/01 $ 99.33 $87.05
9/30/01 $103.34 $81.20
6/30/01 $108.90 $92.25
There are no outstanding options or warrants to purchase, or securities
convertible into, Shares of the Fund. Shares of the Fund cannot be sold pursuant
to Rule 144 under the Securities Act, and the Fund does not propose to publicly
offer any of its Shares at any time.
(b) Record Holders of Shares of the Fund.
As of March 31, 2002, there were 675 record holders of Shares of the Fund.
(c) Distributions.
The Fund intends to make annual income distributions approximately equal to
the amount of its net investment income, if any, and annual capital gains
distributions equal to approximately 22% of the amount of its net realized
capital gains, if any, other than precontribution gain allocated to a
Shareholder in connection with a tender offer or other extraordinary corporate
event involving a security contributed by such Shareholder. In addition,
whenever a distribution in respect of a precontribution gain is made, the Fund
intends to make a supplemental distribution generally equal to approximately 6%
of the allocated precontribution gain or such other percentage as deemed
appropriate to compensate Shareholders receiving such distributions for taxes
that may be due in connection with the precontribution gain and supplemental
distributions. The Fund's distribution rates with respect to realized gains may
be adjusted at a future time to reflect changes in the effective maximum
marginal individual federal tax rate applicable to long-term capital gains.
Shareholder distributions with respect to net investment income and realized
post-contribution gains will be made pro rata in proportion to the number of
Shares held as of the record date of the distribution. Distributions that are
made in respect of realized precontribution gains and the associated
supplemental distributions will be made solely to the Shareholders to whom such
gain is allocated. The Fund's net investment income and net realized gains
include the Fund's allocated share of the net investment income and net realized
gains of BRC, the Company and, indirectly, the Portfolio. The Fund's Credit
Facility prohibits the Fund from making any distribution to Shareholders while
there is outstanding an event of default under the Credit Facility. The Fund
made no distributions during the period commencing with the start of the Fund's
business, March 14, 2001, to December 31, 2001.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
- --------------------------------------------------
The Fund held its initial closing on March 14, 2001, at which time
qualified purchasers contributed $10,000* in cash and equity securities with an
aggregate exchange value of $483.7 million in exchange for an aggregate of
4,820,606 Shares of the Fund. Shares of the Fund were privately offered and sold
only to "accredited investors" as defined in Rule 501(a) under the Securities
Act who were "qualified purchasers" (as defined in Section 2(a)(51)(A) of the
1940 Act) in certain states through EVD, the placement agent, and certain
subagents appointed by EVD in reliance upon the exemption from registration
provided by Rule 506 under the Securities Act.
- ------------------------
* Contributed by EVM in exchange for 100 Shares of the Fund. No selling
commission applied to such Shares.
15
The Fund held a second closing on May 23, 2001, at which time qualified
purchasers contributed equity securities with an aggregate exchange value of
$369.4 million in exchange for an aggregate of 3,378,091 Shares of the Fund. The
Fund held a third closing on July 26, 2001, at which time qualified purchasers
contributed equity securities with an aggregate exchange value of $352.7 million
in exchange for an aggregate of 3,522,710 Shares of the Fund. The Fund held a
fourth closing on October 4, 2001, at which time qualified purchasers
contributed equity securities with an aggregate exchange value of $298.8 million
in exchange for an aggregate of 3,308,909 Shares of the Fund. The Fund held a
fifth and final closing on December 18, 2001, at which time qualified purchasers
contributed equity securities with an aggregate exchange value of $273.5 million
in exchange for an aggregate of 2,812,544 Shares of the Fund. In connection with
each of the foregoing closings, Shares of the Fund were privately offered and
sold only to accredited investors who were qualified purchasers in the manner
described above.
ITEM 11. DESCRIPTION OF THE FUND'S SECURITIES TO BE REGISTERED.
- ---------------------------------------------------------------
The Fund is registering only Shares representing limited liability company
interests in the Fund pursuant to Section 12(g) of the Securities Exchange Act
of 1934.
The distribution practices of the Fund are described in Item 9(c) above.
The Shares have no conversion or preemption rights, and there are no sinking
fund provisions applicable to the Shares. The redemption rights of Shareholders
are described in Item 9(a) above. Restrictions on transfer of the Shares are
described in Item 9(a) above. Upon liquidation of the Fund, all assets remaining
after payment of all liabilities and obligations of the Fund and after provision
for liquidation expenses will be distributed in cash or in kind to Shareholders
in proportion to the positive balances in their capital accounts. The Shares are
not subject to any assessment by the Fund, and the Fund's LLC Agreement provides
that no Shareholder shall be liable for any obligations or liabilities of the
Fund.
Subject to the consent of the Manager, a Shareholder may make an estate
freeze election pursuant to which all or a portion of such Shareholder's Shares
will be divided into Preferred Shares and Common Shares ("Estate Freeze
Shares"). Such division will be made in accordance with the terms of the LLC
Agreement. Estate Freeze Shares are not transferable without the consent of the
Fund's Manager and have no daily redemption rights or voting or consent rights.
Shareholders have no control of the Fund's business or activities.
Shareholders generally do not have the right to replace EVM as Manager of the
Fund, but may do so upon the bankruptcy of EVM. Except as specifically required
by the LLC Agreement, no Shareholder shall have any right to vote on, consent to
or approve any action or matter under any circumstances whatsoever. Shareholders
have a very limited right to consent, pursuant to and in accordance with the LLC
Agreement, only (i) to change in or elimination of the Fund's investment
objective and fundamental investment restrictions set forth in the LLC
Agreement, (ii) to the designation by EVM of another Manager which is not an
entity directly or indirectly owned by EVC, (iii) to the designation of a
substitute Manager upon the bankruptcy of EVM, (iv) to an election to dissolve
the Fund upon the occurrence of certain events or (v) to the appointment of a
liquidator to wind up the Fund's affairs upon its dissolution in the event there
is no Manager to serve as liquidator.
The Fund's LLC Agreement may be amended or restated only by action of the
Manager by an instrument in writing signed by or on behalf of the Manager. No
such amendment or restatement shall in any material respect increase, add to or
alter any financial obligation of any Shareholder. No consent or approval of the
Shareholders is required to affect any such amendment or restatement, except
that the Fund's investment objective and fundamental investment restrictions set
forth in the LLC Agreement may be changed or eliminated only with the Consent of
the Shareholders (defined as the consent or approval of Shareholders holding the
lesser of (i) 50% of the outstanding Shares, (ii) 67% of those Shares acting on
the matter if Shareholders holding more than 50% of the outstanding Shares have
16
responded to the consent solicitation or (iii) 67% of those Shares present or
represented by proxy at a meeting if Shareholders holding more than 50% of the
outstanding Shares are present or represented by proxy at the meeting).
ITEM 12. INDEMNIFICATION OF THE MANAGER AND ITS AFFILIATES.
- -----------------------------------------------------------
EVM and BMR, their trustee, and their officers, employees and affiliates
are entitled to indemnification from the Fund against all liabilities and
expenses incurred or paid by them in connection with any claim, suit, action or
proceeding in which they become involved as a party or otherwise. No
indemnification shall be provided to any such person with respect to any matter
as to which it shall be ultimately determined by final judicial decision that
such person did not act in good faith in the reasonable belief that such
person's action was in the best interest of the Fund and therefore is not
entitled to indemnification by the Fund. Expenses incurred in defending any
claim, suit, action or proceeding may be paid by the Fund as they are incurred
upon receipt in each case of an undertaking by or on behalf of the relevant
party to repay such amounts if it is ultimately determined that such party is
not entitled to be indemnified by the Fund in accordance with the LLC Agreement.
The indemnification is not to be deemed exclusive of any other rights to which
the indemnified parties may be entitled under any statute, contract or
otherwise.
The LLC Agreement provides that EVM and BMR, their trustee, and their
officers, employees and affiliates shall not be liable to the Fund or to any
Shareholder by reason of (i) any tax liabilities incurred by the Shareholders,
including, without limitation, as a result of their contribution of securities
to the Fund or upon the exchange of such securities from the Fund to the Company
or from the Company to the Portfolio, or as a result of any sale or distribution
of any such securities; (ii) any failure to withhold income tax under federal or
state tax laws with respect to income or gains allocated to the Shareholders;
(iii) any change in the federal or state tax laws or regulations or in the
interpretations thereof as they apply to the Portfolio, the Company, BRC, the
Fund or the Shareholders, whether such change or interpretation occurs through
legislative, judicial or administrative action; or (iv) any failure of BRC to
qualify as a REIT under the Code. The LLC Agreement also provides that such
persons, when acting in their respective capacities in connection with the
Fund's business or affairs, shall not be liable to the Fund or to any
Shareholder for any act, omission or breach of duty of any such person or of any
other such persons, provided that no such person shall be exonerated from such
liability who has been finally adjudicated by a court or other body before which
a proceeding was brought not to have acted in good faith in the reasonable
belief that such action was in the best interest of the Fund and to be liable to
the Fund or to such Shareholder by reason thereof.
Reference is made to Sections 3.2 and 13.1 of the LLC Agreement (Exhibit
3.1 hereto), which provisions are incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------------------------------------------------------
The Fund's financial statements for the period ended December 31, 2001,
together with the auditors' report thereon, appearing on pages 20 through 50
hereof, are incorporated here by reference.
17
The following is a summary of unaudited quarterly results of operations of the
Fund for 2001.
2001
------------------------------------------------------------
First Second Third Fourth
Quarter(1) Quarter Quarter Quarter
-------------------------------------------------------------
Investment income $2,774,542 $9,989,731 $13,956,796 $21,550,119
Minority interest in net income of controlled subsidiaries ($223,157) ($561,019) ($768,931) ($1,046,787)
Net investment income (loss) $518,943 $135,581 ($149,458) $3,071,242
Per share data(2):
Investment income $0.58 $1.60 $1.30 $1.41
Net investment income (loss) $0.11 $0.02 ($0.01) $0.20
(1) For the period from the start of business, March 14, 2001, to March 31, 2001.
(2) Based on average shares outstanding.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
- --------------------------------------------------------------------------------
There have been no changes in, or disagreements with, accountants on
accounting and financial disclosures.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
- -------------------------------------------
(a) The following is a list of all financial statements filed as a part of
this registration statement:
(i) Consolidated Portfolio of Investments as of December 31, 2001
Consolidated Statement of Assets and Liabilities as of December
31, 2001
Consolidated Statement of Operations for the period from the
start of business, March 14, 2001, to December 31, 2001
Consolidated Statement of Changes in Net Assets for the period
from the start of business, March 14, 2001, to December 31, 2001
Consolidated Statement of Cash Flows for the period from the
start of business, March 14, 2001, to December 31, 2001
Financial Highlights for the period ended December 31, 2001
Notes to Consolidated Financial Statements
Independent Auditors' Report dated March 1, 2002
Portfolio of Investments of Tax-Managed Growth Portfolio as of
December 31, 2001
Statement of Assets and Liabilities of Tax-Managed Growth
Portfolio as of December 31, 2001
18
Statement of Operations of Tax-Managed Growth Portfolio for the
fiscal year ended December 31, 2001
Statements of Changes in Net Assets of Tax-Managed Growth
Portfolio for the fiscal years ended December 31, 2001 and
December 31, 2000
Supplementary Data of Tax-Managed Growth Portfolio for the years
ended December 31, 2001, December 31, 2000, December 31, 1999,
the two month period ended December 31, 1998, the fiscal year
ended October 31, 1998 and October 31, 1997
Notes to Financial Statements
Independent Auditors' Report dated February 15, 2002
(b) A list of the exhibits filed as a part of this registration statement
is included in the Exhibit Index appearing on page 52 hereof.
19
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
CONSOLIDATED PORTFOLIO OF INVESTMENTS
================================================================================
INVESTMENT IN BELVEDERE CAPITAL
FUND COMPANY LLC -- 74.2%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Investment in Belvedere Capital Fund
Company LLC (Belvedere Capital) 11,088,800 $1,762,622,297
- --------------------------------------------------------------------------------
Total Investment in Belvedere Capital
(identified cost, $1,776,648,002) $1,762,622,297
- --------------------------------------------------------------------------------
PARTNERSHIP PREFERENCE UNITS -- 3.9%
SECURITY UNITS VALUE
- --------------------------------------------------------------------------------
Essex Portfolio, L.P. (California
Limited Partnership affiliate of Essex
Property Trust, Inc.), 7.875% Series B
Cumulative Redeemable Preferred Units,
Callable from 2/6/03+ 875,000 $ 35,162,050
PSA Institutional Partners, L.P.
(California Limited Partnership
affiliate of Public Storage, Inc.),
9.50% Series N Cumulative Redeemable
Perpetual Preferred Units, Callable from
3/17/05+ 1,300,000 35,005,100
Prentiss Properties Acquisition
Partners, L.P. (Delaware Limited
Partnership affiliate of Prentiss
Properties Trust), 8.30% Series B
Cumulative Redeemable Perpetual
Preferred Units, Callable from 6/25/03+ 550,000 22,333,850
- --------------------------------------------------------------------------------
Total Partnership Preference Units
(identified cost $92,413,822) $ 92,501,000
- --------------------------------------------------------------------------------
OTHER REAL ESTATE INVESTMENTS -- 21.8%
DESCRIPTION VALUE
- --------------------------------------------------------------------------------
Rental Property(1)(2) $ 518,617,126
- --------------------------------------------------------------------------------
Total Other Real Estate Investments
(identified cost, $520,333,752) $ 518,617,126
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.1%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
General Electric Capital Corp., 1.78%,
01/02/02 $ 1,706 $ 1,705,915
- --------------------------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $1,705,915) $ 1,705,915
- --------------------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost, $2,391,101,491) $2,375,446,338
- --------------------------------------------------------------------------------
(+) Security exempt from registration under the Securities Act of 1933. At
December 31, 2001, the value of these securities totaled $92,501,000, or
5.3% of net assets.
(1) Investment valued at fair value using methods determined in good faith by
or at the direction of the Manager of Belport Realty Corporation.
(2) Rental property represents twenty-three multi-family residential properties
located in ten states. None of the individual properties represent more
than 5% of net assets.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2001
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost,
$2,391,101,491) $2,375,446,338
Cash 10,001,955
Escrow deposits-restricted 2,081,850
Dividends receivable 570,625
Other assets 934,710
- --------------------------------------------------------------------------------
TOTAL ASSETS $2,389,035,478
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Mortgages payable, net of unamortized
debt issuance
costs of $2,439,385 $ 358,668,115
Loan payable 231,000,000
Open interest rate swap contracts, at
value 2,344,008
Security deposits 948,853
Swap interest payable 170,110
Accrued expenses:
Interest expense 2,556,850
Property taxes 1,698,822
Other expenses and liabilities 3,059,258
Minority interest in controlled
subsidiaries 39,431,598
- --------------------------------------------------------------------------------
TOTAL LIABILITIES $ 639,877,614
- --------------------------------------------------------------------------------
NET ASSETS FOR 17,782,241 FUND SHARES
OUTSTANDING $1,749,157,864
- --------------------------------------------------------------------------------
Shareholders' Capital
- --------------------------------------------------------------------------------
SHAREHOLDERS' CAPITAL $1,749,157,864
- --------------------------------------------------------------------------------
Net Asset Value and Redemption Price
Per Share (Note 4)
- --------------------------------------------------------------------------------
($1,749,157,864 DIVIDED BY 17,782,241
FUND SHARES OUTSTANDING) $ 98.37
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2001*
Investment Income
- --------------------------------------------------------------------------------
Dividends allocated from Belvedere Capital
(net of foreign taxes, $47,213) $ 8,345,141
Interest allocated from Belvedere Capital 541,100
Expenses allocated from Belvedere Capital (4,851,729)
- --------------------------------------------------------------------------------
Net investment income allocated from Belvedere Capital $ 4,034,512
Rental income 41,868,817
Dividends from Partnership Preference Units 2,114,375
Interest 253,484
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 48,271,188
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment advisory and administrative fee $ 2,883,623
Property management fees 1,684,578
Distribution and servicing fee 1,566,802
Interest expense on mortgages 15,287,500
Interest expense on Credit Facility 3,772,792
Interest expense on swap contracts 2,055,335
Property and maintenance expenses 9,403,144
Property taxes and insurance 4,456,562
Miscellaneous 1,784,585
- --------------------------------------------------------------------------------
TOTAL EXPENSES $ 42,894,921
- --------------------------------------------------------------------------------
Deduct --
Reduction of investment adviser and administrative fee $ 799,935
- --------------------------------------------------------------------------------
NET EXPENSES $ 42,094,986
- --------------------------------------------------------------------------------
Net investment income before minority interests in
net income of controlled subsidiaries $ 6,176,202
Minority interests in net income of controlled subsidiaries (2,599,894)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 3,576,308
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions from Belvedere Capital
(identified cost basis) $ (807,510)
Investment transactions in real estate investments,
excluding Partnership Preference Units 438,595
- --------------------------------------------------------------------------------
NET REALIZED LOSS $ (368,915)
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment in Belvedere Capital (identified cost basis) $(14,025,705)
Investments in Partnership Preference
Units (identified cost basis) 87,178
Investments in other real estate investments
(net of minority interests in unrealized gain
(loss) of controlled subsidiaries) (1,716,626)
Interest rate swap contracts (2,344,008)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ (17,999,161)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (18,368,076)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (14,791,768)
- --------------------------------------------------------------------------------
* For the period from the start of business, March 14, 2001, to
December 31, 2001.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
CONSOLIDATED STATEMENT OF CHANGES IN
NET ASSETS
INCREASE (DECREASE) PERIOD ENDED
IN NET ASSETS DECEMBER 31, 2001*
- --------------------------------------------------------------------------------
Net investment income $ 3,576,308
Net realized loss on investment
transactions (368,915)
Net change in unrealized appreciation
(depreciation) of investments (17,999,161)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (14,791,768)
- --------------------------------------------------------------------------------
Transactions in Fund Shares --
Investment securities contributed $1,778,032,763
Less -- Selling commissions (7,971,497)
- --------------------------------------------------------------------------------
Net contributions $1,770,061,266
Net asset value of Fund Shares redeemed (5,842,111)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS $1,764,219,155
- --------------------------------------------------------------------------------
Distributions --
Special Distributions to Belport
Capital Fund LLC Shareholders $ (269,523)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (269,523)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $1,749,157,864
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ --
- --------------------------------------------------------------------------------
AT END OF PERIOD $1,749,157,864
- --------------------------------------------------------------------------------
* For the period from the start of business, March 14, 2001, to
December 31, 2001.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) PERIOD ENDED
IN CASH DECEMBER 31, 2001*
- --------------------------------------------------------------------------------
Cash Flows From (For) Operating Activities --
Net investment income $ 3,576,308
Adjustments to reconcile net investment
income to net cash flows used for
operating activities --
Net investment income allocated from Belvedere Capital (4,034,512)
Amortization of debt issuance costs 160,905
Decrease in escrow deposits 3,717,624
Increase in other assets (208,301)
Increase in dividends receivable (570,625)
Increase in minority interest 646,000
Decrease in security deposits (61,343)
Increase in interest payable for open swap contracts 170,110
Increase in accrued interest and
accrued expenses and liabilities 2,400,263
Decrease in accrued property taxes (308,857)
Purchases of Partnership Preference Units (101,800,438)
Sales of investments in other real estate 43,415,885
Payments for investments in other real estate (167,665,973)
Cash assumed in connection with
acquisition of other real estate investments 3,398,477
Sales of Partnership Preference Units 9,386,616
Improvements to rental property (2,685,717)
Net decrease in investment in Belvedere Capital 1,589,562
Increase in short-term investments (1,705,915)
Minority interests in net income of
controlled subsidiaries 2,599,894
- --------------------------------------------------------------------------------
NET CASH FLOWS USED FOR OPERATING
ACTIVITIES $ (207,980,037)
- --------------------------------------------------------------------------------
Cash Flows From (For) Financing
Activities --
Proceeds from Credit Facility $ 231,000,000
Payments on behalf of investors
(selling commissions) (7,971,497)
Payments for Fund Shares redeemed (2,819,910)
Payment of Special Distributions (269,523)
Payment of distributions to minority shareholders (1,907,924)
Payments on mortgages (49,154)
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES $ 217,981,992
- --------------------------------------------------------------------------------
NET INCREASE IN CASH $ 10,001,955
- --------------------------------------------------------------------------------
CASH AT BEGINNING OF PERIOD $ --
- --------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 10,001,955
- --------------------------------------------------------------------------------
Supplemental Disclosure and Non-cash Investing and Financing
Activities
- --------------------------------------------------------------------------------
Change in unrealized appreciation
(depreciation) of investments and open swap contracts $ (17,999,161)
Interest paid for loan $ 2,912,221
Interest paid for mortgages $ 13,050,291
Interest paid for swap contracts $ 1,885,225
Market value of securities distributed
in payment of redemptions $ 3,022,201
Market value of real property and other assets,
net of current liabilities, assumed in conjunction
with acquisition of other real estate investments $ 523,011,166
Mortgages assumed in conjunction with acquisition
of other real estate investments $ 361,107,500
- --------------------------------------------------------------------------------
* For the period from the start of business, March 14, 2001, to
December 31, 2001.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED DECEMBER 31, 2001(1)
- --------------------------------------------------------------------------------
Net asset value -- Beginning of period $ 100.00
- --------------------------------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------------------------------
Net investment income(7) $ 0.341
Net realized and unrealized loss (1.945)
- --------------------------------------------------------------------------------
TOTAL LOSS FROM OPERATIONS $ (1.604)
- --------------------------------------------------------------------------------
Distributions
- --------------------------------------------------------------------------------
Special Distributions to Belport Capital
Fund LLC Shareholders(7) $ (0.026)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.026)
- --------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 98.370
- --------------------------------------------------------------------------------
TOTAL RETURN(2) (1.63)%
- --------------------------------------------------------------------------------
AS A PERCENTAGE AS A PERCENTAGE
OF AVERAGE NET OF AVERAGE GROSS
RATIOS ASSETS(6) ASSETS(3)(6)
- --------------------------------------------------------------------------------
Expenses of Consolidated Real Property
Subsidiaries
Interests and other borrowing costs(4)(5) 1.45% 1.10%
Operating expenses(4)(5) 1.49% 1.13%
Belport Capital Fund LLC Expenses
Interest and other borrowing costs(4)(8) 0.72% 0.55%
Investment advisory and administrative
fees, servicing fees and other Fund
operating expenses(4)(8)(9) 1.23% 0.94%
--------------------------
Total expenses(4)(9)(10) 4.89% 3.72%
Net investment income(4)(10) 0.44% 0.34%
- --------------------------------------------------------------------------------
Supplemental Data
- --------------------------------------------------------------------------------
Net asset, end of year (000's omitted) $1,749,158
Portfolio turnover of Tax-Managed Growth
Portfolio 18%
- --------------------------------------------------------------------------------
(1) For the period from the start of business, March 14, 2001, to December 31,
2001.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of the
period. Distributions, if any, are assumed reinvested at the net asset
value on the reinvestment date. Total return is not calculated on an
annualized basis.
(3) Average Gross Assets is defined as the average daily amount of all assets
of Belport Capital Fund LLC (not including its investment in Belport Realty
Corporation (BRC)) plus all assets of BRC, without reduction by any
liabilities. For this purpose, the assets of BRC's controlled subsidiaries
are reduced by the proportionate interest therein of investors other than
BRC.
(4) Annualized.
(5) Ratio includes BRC's proportional share of expenses incurred by its
majority-owned subsidiaries (see Note 1).
(6) For the purpose of calculating ratios, the income and expenses of BRC's
controlled subsidiaries are reduced by the proportionate interest therein
of investors other than BRC.
(7) Calculated using average shares outstanding.
(8) Ratio includes the expenses of Belport Capital Fund LLC and BRC for which
Belport Capital Fund LLC owns 100% of the outstanding common stock. The
ratio does not include expenses of other real estate subsidiaries.
(9) Ratio includes Belport Capital Fund LLC's share of Belvedere Capital's
allocated expenses, including those expenses allocated from the Portfolio.
(10) The expenses reflect a reduction of the investment advisory and
administrative fees. Had such action not been taken, the ratios of total
expenses to average net assets and average gross assets would have been
4.99% and 3.79%, respectively, and the ratios of net investment income to
average net assets and average gross assets would have been 0.34% and
0.27%, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1 Organization
- --------------------------------------------------------------------------------
A Investment Objective -- Belport Capital Fund LLC (Belport Capital) is a
Delaware limited liability company established to offer diversification and
tax-sensitive investment management to persons holding large and
concentrated positions in equity securities of selected publicly-traded
companies. The investment objective of Belport Capital is to achieve
long-term, after-tax returns for Belport Capital shareholders
(Shareholders). Belport Capital pursues this objective primarily by
investing indirectly in Tax-Managed Growth Portfolio (the Portfolio), a
diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Portfolio is organized as a
trust under the laws of the State of New York. Belport Capital maintains
its investment in the Portfolio by investing in Belvedere Capital Fund
Company LLC (Belvedere Capital), a separate Massachusetts limited liability
company that invests exclusively in the Portfolio. The performance of
Belport Capital and Belvedere Capital is directly and substantially
affected by the performance of the Portfolio. Separate from its investment
in the Portfolio through Belvedere Capital, Belport Capital invests in real
estate assets including income-producing preferred equity interests in real
estate operating partnerships (Partnership Preference Units) affiliated
with publicly-traded real estate investment trusts (REITs) and interests in
controlled real property subsidiaries.
B Subsidiaries -- Belport Capital invests in real estate through its
subsidiary Belport Realty Corporation (BRC). At December 31, 2001 BRC
invested directly in Partnership Preference Units and indirectly in real
property through controlled subsidiaries, Bel Multifamily Property Trust
(Bel Multifamily) and Monadnock Property Trust, LLC (Monadnock).
BRC -- BRC invests directly in Partnership Preference Units and also holds
majority interests in Bel Multifamily and Monadnock. At December 31, 2001,
Belport Capital owned 100% of the common stock issued by BRC and intends to
hold all of BRC's common stock at all times. Additionally, 2,100 shares of
preferred stock of BRC are outstanding at December 31, 2001. The preferred
stock has a par value of $0.01 per share and is redeemable by BRC at a
redemption price of $100 per share after the occurrence of certain tax
events or after December 31, 2005. Dividends on the preferred stock are
cumulative and payable annually equal to $8 per share. The interest in
preferred stock is recorded as a minority interest on the Consolidated
Statement of Assets and Liabilities.
Bel Multifamily -- Bel Multifamily, a majority-owned subsidiary of BRC,
owns eleven multi-family residential properties consisting of 3,011 units
(collectively, the Bel Multifamily Properties) located in seven states
(Washington, Missouri, North Carolina, Arizona, Florida, Georgia and
Texas). The average occupancy rate was approximately 95% at December 31,
2001. BRC owns 100% of the Class A units of Bel Multifamily, representing
75% of the voting interests in Bel Multifamily, and a minority shareholder
(the Bel Multifamily Minority Shareholder) owns 100% of the Class B units,
representing 25% of the voting interests in Bel Multifamily. The Class B
equity interest is recorded as a minority interest on the Consolidated
Statement of Assets and Liabilities. The primary distinction between the
two classes of shares is the distribution priority and voting rights. BRC
has priority in distributions and has greater voting rights than the
holders of the Class B units. Pursuant to a buy/sell agreement entered into
at the time Bel Multifamily was established, either BRC or the Bel
Multifamily Minority Shareholder can give notice after February 22, 2010
either to buy the other's equity interest in Bel Multifamily or to sell its
own equity interest in Bel Multifamily.
Monadnock -- Monadnock, a majority-owned subsidiary of BRC, owns twelve
multi-family residential properties consisting of 4,614 units
(collectively, the Monadnock Properties) located in eight states (Texas,
Arizona, Georgia, North Carolina, Oregon, Utah, Tennessee and Florida). The
average occupancy rate was approximately 95% at December 31, 2001. BRC owns
Class A units of Monadnock, representing 60% of the voting interests in
Monadnock, and a minority shareholder (the Monadnock Minority Shareholder)
owns Class B units, representing 40% of the voting interests in Monadnock.
The Class B equity interest is recorded as a minority interest on the
Consolidated Statement of Assets and Liabilities. The primary distinction
between the two classes of shares is the distribution priority and voting
rights. BRC has priority in distributions and has greater voting rights
than the holder of Class B units. Pursuant to a buy/sell agreement entered
into at the time Monadnock was established, either BRC or the Monadnock
Minority Shareholder can give notice after September 13, 2010 either to buy
the other's equity interest in Monadnock or to sell its own equity interest
in Monadnock.
Casco -- Casco, which was a majority-owned subsidiary of BRC during the
period ended December 31, 2001, owns eight multi-family residential
properties (collectively, the Casco Properties) located in five states
(North Carolina, Tennessee, Florida, Georgia and Texas). BRC owned 100% of
the Class A units of Casco, representing 60% of the voting interests in
24
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
Casco, and a minority shareholder (the Casco Minority Shareholder) owned
100% of the Class B units, representing 40% of the voting interests in
Casco. The primary distinction between the two classes of shares is the
distribution priority and voting rights. BRC had priority in distributions
and had greater voting rights than the holders of the Class B units. BRC
does not own an interest in Casco at December 31, 2001.
The accompanying consolidated financial statements include the accounts of
Belport Capital, BRC, Bel Multifamily, Monadnock and Casco (for the period
during which BRC maintained a majority interest in Casco) (collectively,
the Fund). All material intercompany accounts and transactions have been
eliminated.
The audited financial statements of the Portfolio, including the Portfolio
of Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
2 Significant Accounting Policies
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its consolidated financial
statements. The policies are in conformity with accounting principles
generally accepted in the United States of America.
A Investment Costs -- The Fund's investment assets were principally acquired
through contributions of common stock by Shareholders in exchange for
Shares of the Fund, in purchases of Partnership Preference Units and
through contributions of real estate investments in exchange for cash and a
minority interest in controlled subsidiaries. Upon receipt of common stock
from Shareholders, Belport Capital immediately exchanged the contributed
securities into Belvedere Capital for shares thereof, and Belvedere
Capital, in turn, immediately thereafter exchanged the contributed
securities into the Portfolio for an interest in the Portfolio. The cost at
which the Fund's investments of contributed securities is carried in the
consolidated financial statements is the value of the contributed
securities as of the close of business on the day prior to their
contribution to the Fund. The initial tax basis of the Fund's investment in
the Portfolio through Belvedere Capital is the same as the contributing
Shareholders' basis in securities contributed to the Fund. The initial tax
and financial reporting basis of the Fund's investment in Partnership
Preference Units and other real estate purchased by the Fund is the
purchase cost. The initial cost at which the Fund's investments in real
estate contributed to the Fund is carried in the consolidated financial
statements is the market value on contribution date. The initial tax basis
of real estate investments contributed to the Fund is the contributor's tax
basis at the time of contribution or value at the time of contribution,
depending on the taxability of the contribution.
B Investment Valuations -- The Fund's investments consist of Partnership
Preference Units, other real property investments, shares of Belvedere
Capital and short-term debt securities. Belvedere Capital's only investment
is an interest in the Portfolio, the value of which is derived from a
proportional interest therein. Additionally, the Fund has entered into
interest rate swap contracts (Note 7). The valuation policy followed by the
Fund, Belvedere Capital and the Portfolio is as follows:
Marketable securities, including options, that are listed on foreign or
U.S. securities exchanges or in the NASDAQ National Market System are
valued at closing sale prices on the exchange where such securities are
principally traded. Futures positions on securities or currencies are
generally valued at closing settlement prices. Unlisted or listed
securities for which closing sale prices are not available are valued at
the mean between the latest bid and asked prices. Short-term debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates fair value. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, are normally valued on the basis of valuations
furnished by a pricing service. Investments held by the Portfolio for which
valuations or market quotations are unavailable are valued at fair value
using methods determined in good faith by or at the direction of the
Trustees. Investments held by the Fund for which valuations or market
quotations are unavailable are valued at fair value using methods
determined in good faith by Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM), as Investment
Adviser of Belport Capital and Manager of BRC. Interest rate swap contracts
for which prices are unavailable are valued as determined in good faith by
BMR.
The value of the Fund's real estate investments is determined in good faith
by BMR as Manager of BRC, taking into account all relevant factors, data
and information including with respect to investments in Partnership
Preference Units, information from dealers and similar firms with knowledge
of such issues and the prices of comparable preferred equity securities and
other fixed or adjustable rate instruments having similar investment
characteristics. Real estate investments other than Partnership Preference
Units are generally stated at estimated market values based upon
25
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
independent valuations assuming an orderly disposition of assets. Detailed
valuations are performed annually and reviewed periodically and adjusted if
there has been a significant change in economic circumstances since the
previous 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.
C Interest Rate Swaps -- Belport Capital has entered into current and forward
interest rate swap agreements with respect to its borrowings and real
estate investments. Pursuant to these agreements, Belport Capital 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. Belport Capital is exposed to credit loss in the event of
non-performance by the swap counterparty.
D Written Options -- The Portfolio and the Fund may write listed and
over-the-counter call options on individual securities, on baskets of
securities and on stock market indices. Upon the writing of a call option,
an amount equal to the premium received by the Portfolio or Fund is
included in the Consolidated Statement of Assets and Liabilities of the
respective entity as a liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the option
written in accordance with the investment valuation policies discussed
above. Premiums received from writing options that expire are treated as
realized gains. Premiums received from writing options that are exercised
or are closed are added to or offset against the proceeds or amount paid on
the transaction to determine the realized gain or loss. The Portfolio or
Fund as a writer of an option may have no control over whether the
underlying securities may be sold and as a result bears the market risk of
an unfavorable change in the price of the securities underlying the written
option.
E Purchased Options -- Upon the purchase of a put option, the premium paid by
the Portfolio or Fund is included in the Consolidated Statement of Assets
and Liabilities of the respective entity as an investment. The amount of
the investment is subsequently marked-to-market to reflect the current
market value of the option purchased, in accordance with the investment
valuation policies discussed above. If an option which the Portfolio or
Fund has purchased expires on the stipulated expiration date, the Portfolio
or Fund will realize a loss in the amount of the cost of the option. If the
Portfolio or Fund enters into a closing sale transaction, the Portfolio or
Fund will realize a gain or loss, depending on whether the sales proceeds
from the closing sale transaction are greater or less than the cost of the
option. If the Portfolio or Fund exercises a put option, it will realize a
gain or loss from the sale of the underlying security and the proceeds from
such sale will be decreased by the premium originally paid.
F Rental Operations -- The apartment units held by Bel Multifamily and
Monadnock are leased to residents generally for a term of one year
renewable upon consent of both parties on a year-to-year or month-to-month
basis. The apartment units held by Casco were leased to residents generally
for a term of one year or less.
The escrow accounts related to Monadnock consist of tenant security
deposits, deposits for real estate taxes, insurance, reserve for
replacements and capital repairs as required under the mortgage agreements.
The mortgage escrow accounts are held by the respective financial
institutions and controlled by lenders (Note 8).
Costs incurred in connection with acquisitions of properties have been
capitalized. Significant betterments and improvements are capitalized as
part of real property.
G Income -- Dividend income is recorded on the ex-dividend date and interest
and rental income are recorded on the accrual basis.
Belvedere Capital's net investment income or loss consists of Belvedere
Capital's pro-rata share of the net investment income of the Portfolio,
less all actual or accrued expenses of Belvedere Capital, determined in
accordance with accounting principles generally accepted in the United
States of America. The Fund's net investment income or loss consists of the
Fund's pro-rata share of the net investment income of Belvedere Capital,
plus all income earned on the Fund's direct investments, less all actual
and accrued expenses of the Fund determined in accordance with accounting
principles generally accepted in the United States of America.
H Deferred Costs -- Mortgage origination expenses incurred in connection with
the financing of Bel Multifamily and Monadnock are capitalized and
amortized over the terms of the respective loans.
I Income Taxes -- Belport Capital, Belvedere Capital and the Portfolio are
treated as partnerships for federal income tax purposes. As a result,
26
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
Belport Capital, Belvedere Capital and the Portfolio do not incur federal
income tax liability, and the shareholders and partners thereof are
individually responsible for taxes on items of partnership income, gain,
loss and deduction. The policy of BRC, Bel Multifamily, Monadnock and Casco
is to comply with the Internal Revenue Code applicable to REITs. BRC, Bel
Multifamily, Monadnock and Casco will generally not be subject to federal
income tax to the extent that they distribute their earnings to their
stockholders each year and maintain their qualifications as REITs.
J Other -- Investment transactions are accounted for on a trade date basis.
K Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expense during the
reporting period. Actual results could differ from those estimates.
3 Distributions to Shareholders
- --------------------------------------------------------------------------------
Each year Belport Capital intends to distribute all of its net investment
income for the year, if any, and approximately 22% of its net realized
capital gains for such year, if any, other than precontribution gains
allocated to a Shareholder in connection with a tender offer or other
extraordinary corporate event with respect to a security contributed by
such Shareholder, for which no capital gain distribution is made. In
addition, whenever a distribution with respect to a precontribution gain is
made, Belport Capital makes a supplemental distribution to compensate
Shareholders receiving such distributions for taxes that may be due in
connection with the precontribution gain and supplemental distributions
(Special Distribution). Special Distributions accrued for or paid during
the period from the start of business, March 14, 2001, to December 31,
2001, totaled $269,523.
In addition, BRC, Bel Multifamily, Monadnock, and Casco intend to
distribute substantially all of their taxable income earned by the
respective entities during the year.
4 Shareholder Transactions
- --------------------------------------------------------------------------------
Belport Capital may issue an unlimited number of full and fractional Fund
Shares. Transactions in Fund Shares, including contributions of securities
in exchange for Shares of Belport Capital, were as follows:
PERIOD ENDED
DECEMBER 31, 2001*
- --------------------------------------------------------------------------------
Issued at Belport Capital closings 17,842,860
Redemptions (60,619)
- --------------------------------------------------------------------------------
NET INCREASE 17,782,241
- --------------------------------------------------------------------------------
* For the period from the start of business, March 14, 2001, to December 31,
2001.
Redemptions of Fund Shares held less than three years are generally subject
to a redemption fee of 1% of the net asset value of Fund Shares redeemed.
The redemption fee is paid to Eaton Vance Distributors, Inc. (EVD) by
Belport Capital on behalf of the redeeming Shareholder. No charge is levied
on redemptions of Fund Shares acquired through the reinvestment of
distributions, Fund Shares redeemed in connection with a tender offer or
other extraordinary corporate event or Fund Shares redeemed following the
death of all of the initial holders of the Fund Shares redeemed. In
addition, no fee applies to redemptions made pursuant to a Systematic
Redemption Plan, whereby, a Shareholder can redeem up to 2% of Fund Shares
held on a quarterly basis. For the period from the start of business, March
14, 2001, to December 31, 2001 EVD received $28,772 in redemption fees.
In connection with the offering of Fund Shares, EVD, the Placement Agent,
received $7,971,497 in selling commissions paid by Belport Capital on
behalf of Shareholders. EVD, in turn, paid this amount to the applicable
subagent on behalf of Shareholders investing in Belport Capital through
such subagent. In addition, EVD made payments to subagents from its own
resources totaling $17,564,770, approximately equal to 1.0% of the value of
investments in Belport Capital made through subagents.
Shareholders in Belport Capital are entitled to restructure their Fund
Share interests under what is termed an Estate Freeze Election. Under this
election, Fund Shares are divided into Preferred Shares and Common Shares.
Preferred Shares have a preferential right over the corresponding Common
Shares equal to (i) 95% of the original capital contribution made in
respect of the undivided Shares from which the Preferred Shares and Common
Shares were derived, plus (ii) an annuity priority return equal to 8.5% of
27
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
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 Fund Shares, plus any returns thereon in excess of
the fixed annual priority of the Preferred Shares. The existence of
restructured Fund Shares does not adversely affect Shareholders who do not
participate in the election nor do the restructured Fund Shares have
preferential rights to Fund Shares that have not been restructured.
Shareholders who subdivide Fund Shares under this election sacrifice
certain rights and privileges that they would otherwise have with respect
to the Fund Shares so divided, including redemption rights and voting and
consent rights. Upon the twentieth anniversary of the issuance of the
associated undivided Fund Shares to the original holders thereof, Preferred
and Common Shares will automatically convert into full and fractional
undivided Fund Shares.
The allocation of Belport Capital's net asset value per Share of $98.37
between Preferred and Common Shares that have been restructured is as
follows:
PER SHARE VALUE AT
DECEMBER 31, 2001
-------------------
PREFERRED COMMON
DATE OF CONTRIBUTION SHARES SHARES
----------------------------------------------------------------------------
July 26, 2001 $ 94.71 $ 3.66
5 Investment Transactions
- --------------------------------------------------------------------------------
For the period from the start of business, March 14, 2001, to December 31,
2001, increases and decreases of Belport Capital's investment in Belvedere
Capital aggregated $1,836,633,984 and $63,212,984, respectively, and
purchases and sales of Partnership Preference Units aggregated $101,800,438
and $9,386,616, respectively. Acquisitions and sales of other real estate
investments totaled $167,665,973 and $43,415,885, respectively, during the
period from March 14, 2001, to December 31, 2001.
Purchases and sales of Partnership Preference Units and purchases of other
real estate investments during the period from the start of business, March
14, 2001, to December 31, 2001, include amounts purchased from and sold to
other funds sponsored by EVM. Sales of other real estate investments were
made to other funds sponsored by EVM.
6 Indirect Investment in Portfolio
- --------------------------------------------------------------------------------
Belvedere Capital's interest in the Portfolio at December 31, 2001, was
$10,334,131,781, representing 56.4% of the Portfolio's net assets. The
Fund's investment in Belvedere Capital at December 31, 2001 was
$1,762,622,297, representing 17.1% of Belvedere Capital's net assets.
Investment income allocated to Belvedere Capital from the Portfolio for the
period from the Fund's start of business March 14, 2001, to December 31,
2001 totaled $83,457,515, of which $8,886,241 was allocated to the Fund.
Expenses allocated to Belvedere Capital from the Portfolio for the period
from the Fund's start of business March 14, 2001, to December 31, 2001,
totaled $34,645,717, of which $3,601,116 was allocated to the Fund.
Belvedere Capital allocated additional expenses to the Fund of $1,250,613
for the period from the Fund's start of business March 14, 2001, to
December 31, 2001, representing $32,955 of operating expenses and
$1,217,658 of service fees (Note 9).
7 Interest Rate Swap Agreements
- --------------------------------------------------------------------------------
Belport Capital has entered into current and forward interest rate swap
agreements in connection with its real estate investments and associated
borrowings. Under such agreements, Belport Capital has agreed to make
periodic payments at fixed rates in exchange for payments at floating
rates. The notional or contractual amounts of these instruments may not
necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these investments is meaningful
only when considered in conjunction with all related assets, liabilities
and agreements. As of December 31, 2001, Belport Capital has entered into
interest rate swap agreements with Citibank, N.A. and Merrill Lynch Capital
Services, Inc.
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
EFFECTIVE (000'S FIXED FLOATING TERMINATION AT DECEMBER 31,
DATE OMITTED) RATE RATE DATE 2001
- --------------------------------------------------------------------------------
3/01 $49,080 5.8075% Libor + 0.40% 3/08 $ 452,595
5/01 73,980 5.79% Libor + 0.40% 3/08 (797,634)
7/01 34,905 5.995% Libor + 0.40% 3/08 (767,018)
12/01 57,509 5.841% Libor + 0.40% 3/08 (786,962)
3/08 49,080 6.45% Libor + 0.40% 2/10 (538,733)
3/08 73,980 6.92% Libor + 0.40% 9/10 93,744
- --------------------------------------------------------------------------------
TOTAL $ (2,344,008)
- --------------------------------------------------------------------------------
28
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
8 Debt
- --------------------------------------------------------------------------------
A Mortgages -- Rental property held by BRC's controlled subsidiaries is
financed through mortgages issued to the controlled subsidiaries. The
mortgages are secured by the rental property and are generally without
recourse to the other assets of Belport Capital's Shareholders. The value
of the rental property securing the loans was $518,617,126 at December 31,
2001. Amounts outstanding at December 31, 2001, excluding unamortized debt
issuance costs, are as follows:
ANNUAL MONTHLY BALANCE AT
MATURITY INTEREST INTEREST DECEMBER 31,
DATE RATE PAYMENT* 2001
----------------------------------------------------------------------------
April 1, 2009 7.89% $ 100,647 $ 15,307,500
March 1, 2011 6.95% 832,842 143,800,000
April 1, 2011 6.57% 1,105,952 202,000,000
- --------------------------------------------------------------------------------
$ 2,039,441 $ 361,107,500
- --------------------------------------------------------------------------------
* Mortgages provide for monthly payments of interest only through the
respective maturity date, with the entire principal balance due on the
respective maturity date.
B Credit Facility -- Belport Capital has entered into a revolving
securitization facility (the Commercial Paper Facility) of up to
$250,000,000 with a special purpose commercial paper issuer (the CP Issuer)
and Citicorp North America, Inc. as agent for the CP Issuer. The Commercial
Paper Facility is supported by a committed liquidity facility (the
Liquidity Facility)(collectively, the Credit Facility) provided by
Citibank, N.A., under which borrowings may be made for a maximum term of
seven years from Belport Capital's initial closing. On borrowings under the
Commercial Paper Facility, Belport Capital pays a rate of interest equal to
the CP Issuer's cost of commercial paper funding plus a margin and certain
fees and expenses. Interest expense includes a commitment fee of
approximately 0.18% per year on the unused portion of the Commercial Paper
Facility. In the event that the CP issuer is unable or unwilling to
maintain advances to the Fund, it may assign its advances to the providers
of the Liquidity Facility. Borrowings under the Liquidity Facility will be
at an annual rate of one-month Libor plus 0.75%. Belport Capital's
obligation under the Credit Facility is secured by a pledge of
substantially all of its assets, including BRC common stock and shares of
Belvedere Capital held by the Fund.
Initial borrowings under the Credit Facility have been used to purchase
qualifying assets, to pay organizational costs and selling expenses of the
Fund, and to provide for short-term liquidity needs of the Fund. Additional
borrowings under the Credit Facility may be made in the future for these
purposes. At December 31, 2001, amounts outstanding under the Credit
Facility totaled $231,000,000.
Additionally, Citibank, N.A. has provided up to $10,000,000 for use of
letters of credit. As of December 31, 2001 a letter of credit in the amount
of $1,908,885 is outstanding and was issued as a substitute for funding
mortgage escrow accounts required by the lender of Bel Multifamily. The
letter of credit expires on November 5, 2002 and automatically extends for
successive one-year periods not to extend beyond March 1, 2008.
9 Management Fee and Other Transactions with Affiliates
- --------------------------------------------------------------------------------
Belport Capital and the Portfolio have engaged BMR as investment adviser.
Under the terms of the advisory agreement with the Portfolio, BMR receives
a monthly advisory fee of 5/96 of 1% (0.625% annually) of the average daily
net assets of the Portfolio up to $500,000,000 and at reduced rates as
daily net assets exceed that level. For the period from Belport Capital's
start of business, March 14, 2001, to December 31, 2001, the advisory fee
applicable to the Portfolio was 0.43% (annualized) of average daily net
assets. Belvedere Capital's allocated portion of the advisory fee totaled
$33,753,655 of which $3,487,825 was allocated to Belport Capital for the
period from Belport Capital's start of business, March 14, 2001, to
December 31, 2001.
In addition, Belport Capital pays BMR, but for the fee cap described below,
a monthly advisory and administrative fee of 1/20 of 1% (0.60% annually) of
the average daily gross assets of Belport Capital reduced by the portion of
the monthly advisory and management fees payable for such month by the
Portfolio and BRC that is attributable to the value of Belport Capital's
direct or indirect investment therein (but no such reduction is made to the
extent that any such fee or portion thereof has been waived by BMR). The
term "gross assets" with respect to Belport Capital is defined to include
the current value of all of Belport Capital's assets (including Belport
Capital's interest in Belvedere Capital and Belport Capital's ratable share
of the assets of its controlled subsidiaries), without reduction by any
liabilities. BRC pays BMR a monthly management fee at a rate of 1/20 of 1%
(equivalent to 0.60% annually) of the average daily gross assets of BRC.
The term "gross assets" with respect to BRC is defined to include the
current value of all assets of BRC, including BRC's ratable share of the
assets of its controlled subsidiaries, without reduction by any
liabilities. For this purpose, the assets of BRC's controlled subsidiaries
29
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
are reduced by the proportionate interest therein of investors other than
BRC. For the period from the start of business, March 14, 2001, to December
31, 2001, the advisory and administrative fee payable to BMR by Belport
Capital, plus the management fee payable to BMR by BRC totaled $2,883,623.
EVM and BMR do not receive separate compensation for serving as Manager of
Belport Capital and Manager of Belvedere Capital, respectively.
As compensation for its services as placement agent, Belport Capital pays
EVD a monthly distribution fee at a rate of 1/120 of 1% (equivalent to
0.10% annually) of Belport Capital's average daily net assets. For the
period from Belport Capital's start of business March 14, 2001, to December
31, 2001, Belport Capital's distribution fees paid or accrued to EVD
totaled $799,935.
BMR has agreed to waive a portion of the monthly advisory and
administrative fee otherwise payable by Belport Capital to the extent that
such a fee (prior to any reduction of such fees payable by the Portfolio
that are attributable to the value of Belport Capital's direct or indirect
investment therein), together with the monthly distribution fee payable to
EVD and the management fee payable to BMR, exceeds 1/20th of 1% (equivalent
to 0.60% annually) of Belport Capital's average daily gross assets (as
defined above). For the period from the start of business March 14, 2001,
to December 31, 2001, BMR has waived $799,935 of the advisory and
administrative fee of Belport Capital.
Pursuant to a servicing agreement between Belvedere Capital and EVD,
Belvedere Capital pays a servicing fee to EVD for providing certain
services and information to Shareholders. The servicing fee is paid on a
quarterly basis at an annual rate of 0.15% of Belvedere Capital's average
daily net assets and totaled $11,748,856 for the period from the start of
business March 14, 2001, to December 31, 2001, of which $1,217,658 was
allocated to Belport Capital. Pursuant to a servicing agreement between
Belport Capital and EVD, Belport Capital pays a servicing fee to EVD on a
quarterly basis at an annual rate of 0.25% of Belport Capital's average
daily net assets, less Belport Capital's allocated share of the servicing
fee payable by Belvedere Capital. For the period from the start of
business, March 14, 2001, to December 31, 2001, the servicing fee paid
directly by Belport Capital totaled $766,867. Of the amounts allocated to
and incurred by Belport Capital, for the period from the start of business
on March 14, 2001, to December 31, 2001, no amounts were paid to subagents.
Management services for the real property held by Bel Multifamily,
Monadnock and Casco are provided by an affiliate of each respective
entity's Minority Shareholder (see Note 1B). Each management agreement
provides for a management fee and allows for reimbursement of payroll
expenses incurred by the managers in conjunction with managing each
respective entity's properties (see Note 1B). For the period from the start
of business on March 14, 2001, to December 31, 2001, BRC's controlled
subsidiaries paid or accrued property management fees of $1,684,578.
30
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
INDEPENDENT AUDITORS' REPORT
================================================================================
TO THE SHAREHOLDERS OF BELPORT CAPITAL FUND LLC
AND SUBSIDIARIES:
- --------------------------------------------------------------------------------
We have audited the accompanying consolidated statement of assets and
liabilities, including the consolidated portfolio of investments, of Belport
Capital Fund LLC and Subsidiaries, (collectively, the Fund) as of December 31,
2001, the related consolidated statements of operations, consolidated cash
flows, the consolidated statement of changes in net assets and financial
highlights for the period from the start of business, March 14, 2001, to
December 31, 2001. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2001 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of December 31, 2001, the results of its operations, its
cash flows, the changes in its net assets and financial highlights for the
period from the start of business, March 14, 2001, to December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 1, 2002
31
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS
================================================================================
COMMON STOCKS -- 97.6%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Aerospace and Defense -- 1.5%
- --------------------------------------------------------------------------------
Boeing Company (The) 361,794 $ 14,030,371
Boeing Company (The)(1)(2) 250,000 9,689,547
Boeing Company (The)(1)(2) 200,000 7,752,122
General Dynamics Corp. 1,505,000 119,858,200
Honeywell International, Inc. 292,998 9,909,192
Northrop Grumman Corp. 833,164 83,991,263
Raytheon Co., Class B 313,564 10,181,423
Rockwell Collins, Inc. 203,032 3,959,124
United Technologies Corp. 291,354 18,830,209
- --------------------------------------------------------------------------------
$ 278,201,451
- --------------------------------------------------------------------------------
Air Freight and Couriers -- 1.5%
- --------------------------------------------------------------------------------
FedEx Corp.(3) 1,631,578 $ 84,646,267
Fedex Corp.(1)(2)(3) 75,000 3,887,141
United Parcel Service, Inc., Class B 3,295,388 179,598,646
- --------------------------------------------------------------------------------
$ 268,132,054
- --------------------------------------------------------------------------------
Airlines -- 0.0%
- --------------------------------------------------------------------------------
Southwest Airlines Co. 52,000 $ 960,960
- --------------------------------------------------------------------------------
$ 960,960
- --------------------------------------------------------------------------------
Auto Components -- 0.2%
- --------------------------------------------------------------------------------
Aftermarket Technology Corp.(3) 46,000 $ 745,200
Arvinmeritor, Inc. 53,849 1,057,594
Borg-Warner Automotive, Inc. 230,270 12,031,607
Dana Corp. 46,137 640,382
Delphi Automotive Systems 6,128 83,708
Federal Signal Corp. 283,471 6,312,899
Johnson Controls 240,591 19,427,723
TRW, Inc. 2,000 74,080
Visteon Corp. 15,135 227,630
- --------------------------------------------------------------------------------
$ 40,600,823
- --------------------------------------------------------------------------------
Automobiles -- 0.1%
- --------------------------------------------------------------------------------
DaimlerChrysler 19,952 $ 831,400
Ford Motor Co. 179,556 2,822,620
General Motors Corp. 13,596 660,766
Harley-Davidson, Inc. 114,700 6,229,357
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Automobiles (continued)
- --------------------------------------------------------------------------------
Honda Motor Co. Ltd. ADR 5,000 $ 407,550
- --------------------------------------------------------------------------------
$ 10,951,693
- --------------------------------------------------------------------------------
Banks -- 7.0%
- --------------------------------------------------------------------------------
AmSouth Bancorporation 1,251,949 $ 23,661,836
Associated Banc-Corp. 624,922 22,053,497
Bank of America Corp. 1,717,799 108,135,447
Bank of Granite Corp. 22,500 444,825
Bank of Montreal 273,104 6,207,654
Bank of New York Co., Inc. (The) 477,978 19,501,502
Bank One Corp. 1,251,649 48,876,893
Banknorth Group, Inc. 65,720 1,480,014
BB&T Corp. 1,016,764 36,715,348
Charter One Financial, Inc. 544,901 14,794,062
City National Corp. 130,000 6,090,500
Colonial Bancgroup, Inc. (The) 396,090 5,580,908
Comerica, Inc. 222,464 12,747,187
Commerce Bancshares, Inc. 206,545 8,053,190
Community First Bancshares, Inc. 418,000 10,738,420
Compass Bancshares, Inc. 306,668 8,678,704
Credit Suisse Group 55,136 2,352,292
Fifth Third Bancorp 772,018 47,347,864
Fifth Third Bancorp(1)(2) 81,626 5,001,158
First Citizens BancShares, Inc. 65,900 6,441,725
First Financial Bancorp. 51,122 902,303
First Midwest Bancorp, Inc. 573,661 16,745,165
First Midwest Bancorp, Inc.(1)(2) 65,612 1,914,017
First Midwest Bancorp, Inc.(1)(2) 176,056 5,133,978
First Tennessee National Corp. 30,912 1,120,869
FleetBoston Financial Corp. 631,350 23,044,275
Golden West Financial Corp. 121,800 7,167,930
GreenPoint Financial Corp. 120,983 4,325,142
Greenpoint Financial Corp.(1)(2) 200,000 7,145,531
GreenPoint Financial Corp.(1)(2) 300,000 10,717,627
Hibernia Corp., Class A 165,893 2,951,236
Huntington Bancshares, Inc. 518,842 8,918,894
Investors Financial Services Corp. 205,701 13,619,463
Investors Financial Services Corp.(1)(2) 32,000 2,117,396
Keycorp 552,835 13,456,004
M&T Bank Corp. 33,977 2,475,224
Marshall and Ilsley Corp. 92,887 5,877,889
Mellon Financial Corp. 206,912 7,784,029
SEE NOTES TO FINANCIAL STATEMENTS
32
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Banks (continued)
- --------------------------------------------------------------------------------
Mellon Financial Corp.(1)(2) 15,000 $ 564,018
National City Corp. 567,618 16,597,150
National Commerce Financial Corp. 1,113,055 28,160,291
Northern Trust Corp. 1,451,188 87,390,541
Pacific Century Financial Corp. 49,425 1,279,613
PNC Financial Services Group, Inc. 171,634 9,645,831
Popular, Inc. 716 20,821
Regions Financial Corp. 1,375,042 41,168,757
Royal Bank of Canada 368,444 12,000,221
Royal Bank of Scotland Group PLC 52,322 1,271,994
Royal Bank of Scotland Group PLC
(A.V.S.)(3) 50,837 58,210
S&T Bancorp, Inc. 100,000 2,428,000
Societe Generale, Class A 809,647 45,298,997
SouthTrust Corp. 332,978 8,214,567
Southwest Bancorporation of Texas,
Inc.(3) 215,601 6,526,242
Southwest Bancorporation of Texas,
Inc.(1)(2)(3) 600,000 18,150,649
Sovereign Bancorporation, Inc. 442,584 5,417,228
SunTrust Banks, Inc. 311,574 19,535,690
Synovus Financial 1,002,233 25,105,937
TCF Financial Corp. 512,000 24,565,760
U.S. Bancorp 4,083,706 85,471,967
Union Planters Corp. 408,979 18,457,222
Valley National Bancorp. 323,780 10,668,551
Wachovia Corp. 1,497,451 46,960,063
Washington Mutual, Inc. 2,327,799 76,119,027
Wells Fargo & Co. 2,972,457 129,153,257
Westamerica Bancorporation 266,506 10,545,642
Whitney Holding Corp. 245,252 10,754,300
Zions Bancorporation 227,671 11,970,941
- --------------------------------------------------------------------------------
$1,283,821,485
- --------------------------------------------------------------------------------
Beverages -- 3.0%
- --------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 2,291,559 $ 103,601,382
Coca-Cola Company (The) 3,068,681 144,688,309
Coca-Cola Enterprises, Inc. 384,724 7,286,673
Panamerican Beverages, Inc., Class A 80,000 1,188,800
PepsiCo, Inc. 6,033,757 293,783,628
- --------------------------------------------------------------------------------
$ 550,548,792
- --------------------------------------------------------------------------------
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Biotechnology -- 2.1%
- --------------------------------------------------------------------------------
Amgen, Inc.(3) 3,822,612 $ 215,748,221
Celera Genomics Group - Applera Corp.(3) 47,100 1,257,099
Genzyme Corp.(3) 1,616,207 96,746,151
Genzyme Corp.(1)(2)(3) 9,605 574,385
Genzyme Corporation - Genzyme Biosurgery
Division(3) 86,784 460,823
Gilead Sciences, Inc.(3) 38,745 2,546,321
Incyte Genomics, Inc.(3) 1,145,302 22,264,671
Invitrogen Corp.(3) 37,645 2,331,355
Sepracor, Inc.(3) 884,000 50,441,040
Vertex Pharmaceuticals, Inc.(3) 83,000 2,040,970
- --------------------------------------------------------------------------------
$ 394,411,036
- --------------------------------------------------------------------------------
Building Products -- 0.6%
- --------------------------------------------------------------------------------
American Standard Companies, Inc.(3) 258,251 $ 17,620,466
American Standard Companies,
Inc.(1)(2)(3) 63,436 4,327,833
Masco Corp. 3,506,516 85,909,642
- --------------------------------------------------------------------------------
$ 107,857,941
- --------------------------------------------------------------------------------
Chemicals -- 1.7%
- --------------------------------------------------------------------------------
Airgas, Inc.(3) 536,219 $ 8,107,631
Arch Chemicals, Inc. 4,950 114,840
Bayer AG ADR 40,000 1,271,448
Dow Chemical Co. (The) 183,245 6,190,016
DuPont (E.I.) de Nemours & Co. 1,173,241 49,874,475
Eastman Chemical Co. 148 5,775
Ecolab, Inc. 2,064,867 83,110,897
International Flavors & Fragrances, Inc. 148,101 4,400,081
MacDermid, Inc. 61,937 1,049,832
Monsanto Co. 2,990,100 101,065,380
Olin Corp. 9,900 159,786
PPG Industries, Inc. 23,542 1,217,592
RPM, Inc. 470,138 6,798,195
Sigma Aldrich Corp. 615,000 24,237,150
Solutia, Inc. 99,629 1,396,799
Syngenta AG ADR(3) 10,030 106,318
Valspar Corp. 768,316 30,425,314
- --------------------------------------------------------------------------------
$ 319,531,529
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
33
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Commercial Services and Supplies -- 5.1%
- --------------------------------------------------------------------------------
Allied Waste Industries, Inc.(3) 1,675,000 $ 23,550,500
Apollo Group, Inc.(3) 5,066 228,021
Arbitron, Inc.(3) 36,200 1,236,230
Automatic Data Processing, Inc. 3,247,523 191,279,105
Avery Dennison Corp. 1,432,004 80,951,186
Banta Corp. 42,341 1,249,906
BISYS Group, Inc. (The)(3) 107,746 6,894,667
BISYS Group, Inc. (The)(1)(2)(3) 12,500 799,472
BISYS Group, Inc. (The)(1)(2)(3) 20,000 1,279,032
Block (H&R), Inc. 732,354 32,736,224
Bowne & Co., Inc. 172,640 2,209,792
Cendant Corp.(3) 192,150 3,768,061
Century Business Services, Inc.(3) 400,000 920,000
Ceridian Corp.(3) 181,858 3,409,837
Certegy Inc.(3) 42,862 1,466,738
Cintas Corp. 1,410,561 67,706,928
Concord EFS, Inc.(3) 551,454 18,076,662
Consolidated Graphics, Inc.(3) 70,215 1,351,639
CSG Systems International, Inc.(3) 41,116 1,663,142
Deluxe Corp. 80,675 3,354,466
Donnelley (R.R.) & Sons Co. 200,521 5,953,468
DST Systems, Inc.(3) 2,017,634 100,579,055
eFunds Corp.(3) 44,484 611,655
Equifax, Inc. 85,724 2,070,235
First Data Corp. 2,227,384 174,738,275
Harland (John H.) Co. 51,540 1,139,034
HON Industries, Inc. 1,270,418 35,127,058
Imagistics International Inc.(3) 6,222 76,842
IMS Health, Inc. 498,012 9,716,214
Manpower, Inc. 112,000 3,775,520
Miller (Herman), Inc. 577,903 13,673,185
Navigant Consulting, Inc.(3) 496,795 2,732,372
Navigant International, Inc.(3) 59,630 682,763
Newpark Resources, Inc.(3) 96,537 762,642
Paychex, Inc. 929,490 32,392,727
Pitney Bowes, Inc. 77,782 2,925,381
ProQuest Company(3) 115,000 3,899,650
ServiceMaster Co. 704,262 9,718,816
Spherion Corp.(3) 90,000 878,400
Staff Leasing, Inc. 78,125 198,437
Steelcase, Inc., Class A 123,000 1,810,560
Sylvan Learning Systems, Inc.(3) 815,396 17,995,790
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Commercial Services and Supplies (continued)
- --------------------------------------------------------------------------------
Valassis Communications, Inc.(3) 775,000 $ 27,605,500
Viad Corp. 40,314 954,636
Waste Management, Inc. 1,399,736 44,665,576
Workflow Management, Inc.(3) 79,507 379,248
- --------------------------------------------------------------------------------
$ 939,194,647
- --------------------------------------------------------------------------------
Communications Equipment -- 1.5%
- --------------------------------------------------------------------------------
3Com Corp.(3) 873,949 $ 5,575,795
ADC Telecommunications, Inc.(3) 937,781 4,313,793
Advanced Fibre Communication, Inc.(3) 15,000 265,050
Alcatel S.A. ADR 43,728 723,698
Avaya, Inc.(3) 68,903 837,171
CIENA Corp.(3) 702,026 10,045,992
Cisco Systems, Inc.(3) 5,430,799 98,351,770
Comverse Technology, Inc.(3) 386,378 8,643,276
Corning, Inc. 705,943 6,297,012
Enterasys Networks, Inc.(3) 989,660 8,758,491
JDS Uniphase Corp.(3) 266,080 2,309,574
Lucent Technologies, Inc. 954,951 6,006,642
Marconi PLC 23,088 14,015
McData Corp., Class A(3) 23,016 563,892
Motorola, Inc. 551,445 8,282,704
Nokia Corp., Class A, ADR 2,881,697 70,688,027
Nortel Networks Corp. 2,131,110 15,983,325
Qualcomm, Inc.(3) 344,112 17,377,656
Riverstone Networks, Inc.(3) 46,005 763,683
Telefonaktiebolaget LM Ericsson, Class B
ADR 1,816,000 9,479,520
Tellabs, Inc.(3) 338,790 5,068,298
- --------------------------------------------------------------------------------
$ 280,349,384
- --------------------------------------------------------------------------------
Computers and Peripherals -- 3.2%
- --------------------------------------------------------------------------------
Compaq Computer Corp. 82,245 $ 802,711
Dell Computer Corp.(3) 3,630,589 98,679,409
EMC Corp.(3) 1,075,543 14,455,298
Gateway, Inc.(3) 1,149,407 9,241,232
Hewlett-Packard Co. 1,991,489 40,905,184
International Business Machines Corp. 1,039,334 125,717,841
Lexmark International, Inc.(3) 4,536,940 267,679,460
Network Appliance, Inc.(3) 488,000 10,672,560
Palm, Inc.(3) 1,304,605 5,061,867
SEE NOTES TO FINANCIAL STATEMENTS
34
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Computers and Peripherals (continued)
- --------------------------------------------------------------------------------
Sun Microsystems, Inc.(3) 537,670 $ 6,613,341
- --------------------------------------------------------------------------------
$ 579,828,903
- --------------------------------------------------------------------------------
Construction and Engineering -- 0.1%
- --------------------------------------------------------------------------------
Dycom Industries(3) 160,464 $ 2,681,353
Jacobs Engineering Group, Inc.(3) 176,233 11,631,378
Salient 3 Communications, Inc., Class A 78,125 76,953
- --------------------------------------------------------------------------------
$ 14,389,684
- --------------------------------------------------------------------------------
Construction Materials -- 0.1%
- --------------------------------------------------------------------------------
CRH PLC 329,450 $ 5,806,873
Vulcan Materials Co. 136,109 6,525,065
- --------------------------------------------------------------------------------
$ 12,331,938
- --------------------------------------------------------------------------------
Containers and Packaging -- 0.1%
- --------------------------------------------------------------------------------
Bemis Co., Inc. 141,000 $ 6,934,380
Caraustar Industries, Inc. 264,862 1,835,494
Sealed Air Corp.(3) 174,914 7,139,989
Sonoco Products Co. 160,690 4,271,140
Temple Inland, Inc. 12,632 716,613
- --------------------------------------------------------------------------------
$ 20,897,616
- --------------------------------------------------------------------------------
Distributors -- 0.0%
- --------------------------------------------------------------------------------
MSC Industrial Direct Co.(3) 5,000 $ 98,750
- --------------------------------------------------------------------------------
$ 98,750
- --------------------------------------------------------------------------------
Diversified Financials -- 5.7%
- --------------------------------------------------------------------------------
Affiliated Managers Group, Inc.(3) 13,680 $ 964,166
American Express Co. 969,588 34,604,596
ANC Rental Corp.(1)(3) 689,786 6,898
Capital One Financial Corp. 836,371 45,122,215
Citigroup 3,970,061 200,408,679
E*Trade Group, Inc.(3) 288,290 2,954,972
Fannie Mae 1,006,357 80,005,381
Federated Investors, Inc. 1,634,947 52,122,110
Finova Group, Inc.(3) 175,587 107,108
FirstPlus Financial Group, Inc.(3) 120,000 9,600
Franklin Resources, Inc. 1,896,536 66,890,825
Freddie Mac 498,106 32,576,132
Freddie Mac(1)(2) 20,000 1,307,346
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Diversified Financials (continued)
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. 9,627 $ 892,904
Household International, Inc. 1,603,743 92,920,869
ING Groep NV ADR 210,570 5,359,007
J.P. Morgan Chase & Co. 421,490 15,321,162
Knight Trading Group, Inc.(3) 1,750,000 19,285,000
Legg Mason, Inc. 217,641 10,877,697
MBNA Corp. 131,157 4,616,726
MBNA Corp.(1)(2) 113,797 3,998,444
Merrill Lynch & Co., Inc.(1)(2) 150,000 7,812,625
Merrill Lynch & Co., Inc. 1,676,195 87,363,283
Morgan Stanley Dean Witter & Co. 3,015,769 168,702,118
Nuveen (John) Co. (The), Class A 75,000 4,011,000
Providian Financial Corp. 893,096 3,170,491
Raymond James Financial, Inc.(1)(2) 70,000 2,481,924
Schwab (Charles) Corp. 699,540 10,821,884
Schwab (Charles) Corp.(1)(2) 133,650 2,063,844
State Street Corp. 328,000 17,138,000
Stilwell Financial, Inc. 95,458 2,598,367
T. Rowe Price Group, Inc. 137,827 4,786,732
Ubs AG-Registered Foreign(3) 9,183 459,150
USA Education, Inc. 601,539 50,541,307
Waddell & Reed Financial, Inc., Class A 150,751 4,854,182
- --------------------------------------------------------------------------------
$1,037,156,744
- --------------------------------------------------------------------------------
Diversified Telecommunication -- 2.6%
- --------------------------------------------------------------------------------
Alltel Corp. 1,375,801 $ 84,928,196
American Tower Corp., Class A(3) 93,218 882,774
AT&T Corp. 1,181,497 21,432,356
BellSouth Corp. 1,439,465 54,915,590
Broadwing, Inc.(3) 764,587 7,263,577
Citizens Communications Co.(3) 59,563 634,942
Deutsche Telekom AG ADR(3) 1,616,197 27,313,734
Global Crossing Ltd.(3) 124,289 104,403
ITC Deltacom, Inc.(3) 1,118,041 972,696
McLeodUSA, Inc.(3) 1,608,292 595,068
NTL, Inc.(3) 400,390 376,367
PTEK Holdings, Inc.(3) 28,000 95,200
Qwest Communications International(3) 81,903 1,157,289
RSL Communications Ltd.(3) 747,161 5,230
SBC Communications, Inc. 4,236,990 165,962,898
Sprint Corp. 2,656,796 53,348,464
Talk America Holdings, Inc.(3) 247,376 101,424
SEE NOTES TO FINANCIAL STATEMENTS
35
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Diversified Telecommunication (continued)
- --------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd. ADR 8,000 $ 134,000
Verizon Communications, Inc. 197,052 9,352,088
Williams Communications Group, Inc.(3) 4,086 9,602
Winstar Communications, Inc.(3) 17,136 296
Worldcom, Inc. - MCI Group(3) 105,035 1,333,945
WorldCom, Inc. - Worldcom Group(3) 2,799,665 39,419,283
- --------------------------------------------------------------------------------
$ 470,339,422
- --------------------------------------------------------------------------------
Electric Utilities -- 0.3%
- --------------------------------------------------------------------------------
AES Corp.(3) 69,254 $ 1,132,303
Ameren Corp. 5,000 211,500
American Electric Power, Inc. 960 41,789
Dominion Resources, Inc. 210,464 12,648,886
Duke Energy Corp. 9,234 362,527
Exelon Corp. 500,000 23,940,000
P G & E Corp.(3) 47,705 917,844
Teco Energy, Inc. 40,000 1,049,600
TXU Corp. 250,196 11,796,741
Wisconsin Energy Corp. 9,576 216,035
- --------------------------------------------------------------------------------
$ 52,317,225
- --------------------------------------------------------------------------------
Electrical Equipment -- 0.3%
- --------------------------------------------------------------------------------
American Power Conversion Corp.(3) 436,671 $ 6,314,263
Baldor Electric Co. 149,060 3,115,354
Emerson Electric Co. 522,858 29,855,192
Energizer Holdings, Inc.(3) 92,626 1,764,525
Molex, Inc., Class A 112,582 3,045,343
Rockwell International Corp. 203,032 3,626,152
Tecumseh Products Co., Class A 156,420 7,919,545
Thomas and Betts Corp. 132,863 2,810,052
- --------------------------------------------------------------------------------
$ 58,450,426
- --------------------------------------------------------------------------------
Electronic Equipment - Instruments -- 0.8%
- --------------------------------------------------------------------------------
Agilent Technologies, Inc.(3) 517,438 $ 14,752,157
Arrow Electronics, Inc.(3) 8,750 261,625
Flextronics International Ltd.(3) 204,816 4,913,536
Jabil Circuit, Inc.(3) 2,127,971 48,347,501
Millipore Corp. 101,440 6,157,408
PerkinElmer, Inc. 300,081 10,508,837
Plexus Corp.(3) 132,189 3,510,940
Plexus Corp.(1)(2)(3) 77,757 2,063,935
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Electronic Equipment - Instruments (continued)
- --------------------------------------------------------------------------------
Sanmina-SCI Corp.(3) 1,186,972 $ 23,620,743
Solectron Corp.(3) 1,818,848 20,516,605
Teledyne Technologies, Inc.(3) 6,117 99,646
Waters Corp.(3) 198,320 7,684,900
X-Rite, Inc. 428,000 3,642,280
- --------------------------------------------------------------------------------
$ 146,080,113
- --------------------------------------------------------------------------------
Energy Equipment and Services -- 1.1%
- --------------------------------------------------------------------------------
Baker Hughes, Inc. 977,604 $ 35,653,218
Core Laboratories NV(3) 205,000 2,874,100
Grant Prideco, Inc.(3) 163,681 1,882,332
Halliburton Co. 504,383 6,607,417
Nabors Industries, Inc.(3) 572,000 19,636,760
National-Oilwell, Inc.(3) 641,199 13,215,111
National-Oilwell, Inc.(1)(2)(3) 45,730 941,965
Noble Drilling, Inc.(3) 170,000 5,786,800
Patterson-UTI Energy, Inc.(3) 200,000 4,662,000
Schlumberger Ltd. 1,455,913 80,002,419
Smith International, Inc.(3) 70,000 3,753,400
Transocean Sedco Forex, Inc. 73,657 2,491,080
Weatherford International(3) 663,681 24,728,754
- --------------------------------------------------------------------------------
$ 202,235,356
- --------------------------------------------------------------------------------
Food and Drug Retailing -- 1.9%
- --------------------------------------------------------------------------------
Albertson's, Inc. 1,049,367 $ 33,044,567
Casey's General Stores, Inc. 91,201 1,358,895
CVS Corp. 961,153 28,450,129
Kroger Co. (The)(3) 1,066,630 22,260,568
Safeway, Inc.(3) 1,992,734 83,196,645
Sysco Corp. 5,842,567 153,192,107
Sysco Corp.(1)(2) 44,744 1,172,528
Walgreen Co. 643,194 21,649,910
Winn-Dixie Stores, Inc. 506,616 7,219,278
- --------------------------------------------------------------------------------
$ 351,544,627
- --------------------------------------------------------------------------------
Food Products -- 2.3%
- --------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 234,652 $ 3,367,256
Campbell Soup Co. 1,243,047 37,129,814
Conagra Foods, Inc. 1,544,015 36,701,237
Dean Foods Co.(3) 128,072 8,734,510
Flowers Foods, Inc.(3) 98,255 3,922,340
SEE NOTES TO FINANCIAL STATEMENTS
36
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Food Products (continued)
- --------------------------------------------------------------------------------
General Mills, Inc. 254,545 $ 13,238,885
Heinz (H.J.) Co. 191,876 7,889,941
Hershey Foods Corp. 744,421 50,397,302
Kellogg Co. 101,647 3,059,575
Kraft Foods, Inc.(3) 387,000 13,169,610
McCormick & Co., Inc. 458,870 19,258,774
Riviana Foods, Inc. 250,000 4,437,500
Sara Lee Corp. 3,092,508 68,746,453
Smithfield Foods, Inc.(3) 4,207,530 92,733,961
Tyson Foods, Inc. 405,548 4,684,079
Unilever ADR 400,000 23,044,000
Wrigley (Wm.) Jr. Co. 441,026 22,655,506
- --------------------------------------------------------------------------------
$ 413,170,743
- --------------------------------------------------------------------------------
Gas Utilities -- 0.6%
- --------------------------------------------------------------------------------
El Paso Corporation 175,909 $ 7,847,300
Enron Corp. 17,000 10,200
Kinder Morgan, Inc.(1)(2) 500,000 27,829,337
Kinder Morgan, Inc. 1,288,072 71,732,730
National Fuel Gas Co. 4,000 98,800
- --------------------------------------------------------------------------------
$ 107,518,367
- --------------------------------------------------------------------------------
Health Care Equipment and Supplies -- 2.5%
- --------------------------------------------------------------------------------
Applied Biosystems Group - Applera Corp. 444,800 $ 17,467,296
Bausch & Lomb, Inc. 145,054 5,462,734
Baxter International, Inc. 3,262,710 174,979,137
Becton, Dickinson and Co. 255,921 8,483,781
Biomet, Inc. 334,411 10,333,300
Biomet, Inc.(1)(2) 76,929 2,374,749
Boston Scientific Corp.(3) 544,685 13,137,802
Dentsply International, Inc. 49,550 2,487,410
Edwards Lifesciences Corp.(3) 295,714 8,170,578
Guidant Corp.(3) 54,616 2,719,877
Hillenbrand Industries, Inc. 647,898 35,809,322
Lumenis Ltd.(3) 112,000 2,206,400
Medtronic, Inc. 3,100,748 158,789,305
St. Jude Medical, Inc.(3) 5,007 388,794
Steris Corp.(3) 56,377 1,030,008
VISX, Inc.(3) 50,000 662,500
Zimmer Holdings, Inc.(3) 244,725 7,473,902
- --------------------------------------------------------------------------------
$ 451,976,895
- --------------------------------------------------------------------------------
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Health Care Providers and Services -- 1.9%
- --------------------------------------------------------------------------------
Andrx Group(3) 93,750 $ 6,600,938
Andrx Group(1)(2)(3) 300,000 21,108,478
Beverly Enterprises, Inc.(3) 357,143 3,071,430
Cardinal Health, Inc. 1,727,365 111,691,421
Cardinal Health, Inc.(1)(2) 36,150 2,336,144
Caremark Rx, Inc.(3) 17,696 288,622
CIGNA Corp. 11,236 1,041,015
Covance, Inc.(3) 58,750 1,333,625
Cybear Group(3) 2,326 768
FPA Medical Management, Inc.(1)(3) 315,000 3,150
HCA - The Healthcare Company 53,310 2,054,567
Health Management Associates, Inc.,
Class A(3) 1,936,833 35,637,727
HealthSouth Corp.(3) 314,854 4,666,136
IDX Systems Corp.(3) 60,000 780,600
LabOne, Inc.(3) 53,940 830,676
McKesson HBOC, Inc. 49,513 1,851,786
Orthodontic Centers of America, Inc.(3) 100,000 3,050,000
Pacificare Health Systems, Inc.,
Class A(3) 19,500 312,000
Parexel International Corp.(3) 35,000 502,250
PhyCor, Inc.(3) 312,500 10,938
Quest Diagnostics, Inc.(3) 481,250 34,510,438
Quintiles Transnational Corp.(3) 417,372 6,698,821
Renal Care Group, Inc.(3) 371,007 11,909,325
Response Oncology, Inc.(3) 44,761 2,462
Schein (Henry), Corp.(3) 1,125,194 41,665,934
Schein (Henry), Corp.(1)(2)(3) 147,354 5,453,790
Service Corp. International(3) 145,389 725,491
Stewart Enterprises, Inc.(3) 114,000 682,860
Sunrise Assisted Living, Inc.(3) 354,000 10,304,940
Synavant, Inc.(3) 24,900 99,600
Tenet Healthcare Corp.(3) 302,641 17,771,080
UnitedHealth Group, Inc. 68,371 4,838,616
Ventiv Health, Inc.(3) 160,833 588,649
Wellpoint Health Networks, Inc.(3) 200,000 23,370,000
- --------------------------------------------------------------------------------
$ 355,794,277
- --------------------------------------------------------------------------------
Hotels, Restaurants and Leisure -- 1.2%
- --------------------------------------------------------------------------------
Brinker International, Inc.(3) 582,237 $ 17,327,373
Carnival Corp. 54,748 1,537,324
Carnival Corp.(1)(2) 500,000 14,032,980
SEE NOTES TO FINANCIAL STATEMENTS
37
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Hotels, Restaurants and Leisure (continued)
- --------------------------------------------------------------------------------
CBRL Group, Inc. 62,047 $ 1,826,664
Evans (Bob) Farms, Inc. 51,662 1,269,335
International Game Technology(1)(2)(3) 100,000 6,826,585
International Speedway Corp., Class A 118,344 4,627,250
Jack in the Box, Inc.(3) 500,000 13,770,000
Lone Star Steakhouse and Saloon, Inc. 145,981 2,164,898
Marriott International, Inc., Class A 282,392 11,479,235
McDonald's Corp. 1,434,823 37,979,765
MGM Mirage, Inc.(3) 269,445 7,778,877
Outback Steakhouse, Inc.(3) 1,285,923 44,042,863
Outback Steakhouse, Inc.(1)(2)(3) 325,000 11,123,597
Papa John's International, Inc.(3) 199,997 5,495,918
Royal Caribbean Cruises Ltd. 500,000 8,100,000
Sonic Corp.(3) 71,007 2,556,252
Starbucks Corp.(3) 1,368,000 26,060,400
Tricon Global Restaurants, Inc.(3) 219,875 10,817,850
- --------------------------------------------------------------------------------
$ 228,817,166
- --------------------------------------------------------------------------------
Household Durables -- 0.4%
- --------------------------------------------------------------------------------
Blyth Industries, Inc. 1,258,693 $ 29,264,612
Department 56, Inc.(3) 255,162 2,194,393
Fortune Brands, Inc. 69,838 2,764,886
Helen of Troy Ltd.(3) 20,000 248,200
Interface, Inc. 207,000 1,161,270
Interface, Inc.(1) 54,608 306,351
Leggett & Platt, Inc. 878,704 20,210,192
Maytag Corp. 27,073 840,075
Newell Rubbermaid, Inc. 426,562 11,760,314
Snap-On, Inc. 51,429 1,731,100
Water Pik Technologies, Inc.(3) 2,141 18,605
- --------------------------------------------------------------------------------
$ 70,499,998
- --------------------------------------------------------------------------------
Household Products -- 1.1%
- --------------------------------------------------------------------------------
Clorox Co. 53,688 $ 2,123,360
Colgate-Palmolive Co. 608,213 35,124,301
Kimberly-Clark Corp. 1,784,920 106,738,216
Procter & Gamble Co. 718,761 56,875,558
- --------------------------------------------------------------------------------
$ 200,861,435
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Industrial Conglomerates -- 1.9%
- --------------------------------------------------------------------------------
General Electric Co. 5,842,676 $ 234,174,454
Minnesota Mining & Manufacturing Co. 196,745 23,257,226
Teleflex, Inc. 47,559 2,250,016
Tyco International Ltd. 1,540,147 90,714,658
- --------------------------------------------------------------------------------
$ 350,396,354
- --------------------------------------------------------------------------------
Insurance -- 6.5%
- --------------------------------------------------------------------------------
21st Century Insurance Group 70,700 $ 1,375,115
Aegon, NV ADR 2,909,484 77,886,887
Aflac Corp. 1,004,964 24,681,916
Allmerica Financial Corp. 1,500 66,825
Allstate Corp. (The) 79,921 2,693,338
American International Group, Inc. 5,687,070 451,553,358
AON Corp. 725,165 25,757,861
Axa ADR 200,000 4,204,000
Berkshire Hathaway, Inc.(3) 511 38,631,600
Berkshire Hathaway, Inc., Class B(3) 39,512 99,767,800
Chubb Corp. 104,451 7,207,119
Commerce Group, Inc. 120,000 4,522,800
Delphi Financial Group, Inc. 6,448 214,718
Gallagher (A.J.) and Co. 993,779 34,275,438
Hartford Financial Services Group 130,205 8,180,780
Jefferson-Pilot Corp. 121,089 5,602,788
Kansas City Life Insurance Co. 70,800 2,626,680
Lincoln National Corp. 26,903 1,306,679
Marsh & McLennan Cos., Inc. 2,230,877 239,707,734
Mercury General Corp. 2,000 87,320
MetLife, Inc. 1,985,000 62,884,800
MGIC Investment Corp. 765,000 47,215,800
Old Republic International Corp. 38,403 1,075,668
Progressive Corp. 197,650 29,509,145
Protective Life Corp. 37,271 1,078,250
Radian Group, Inc. 30,800 1,322,860
Safeco Corp. 19,809 617,050
St. Paul Cos., Inc. (The) 323,841 14,239,289
Torchmark Corp. 282,104 11,095,150
UICI(3) 100,854 1,361,529
- --------------------------------------------------------------------------------
$1,200,750,297
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
38
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Internet and Catalog Retail -- 0.0%
- --------------------------------------------------------------------------------
Land's End Inc.(3) 130,000 $ 6,520,800
School Specialty, Inc.(3) 66,255 1,515,914
- --------------------------------------------------------------------------------
$ 8,036,714
- --------------------------------------------------------------------------------
Internet Software and Services -- 0.2%
- --------------------------------------------------------------------------------
At Home Corp., Series A(3) 371,895 $ 2,157
Check Point Software Technologies
Ltd.(3) 343,568 13,704,928
Retek, Inc.(3) 554,364 16,558,853
- --------------------------------------------------------------------------------
$ 30,265,938
- --------------------------------------------------------------------------------
IT Consulting and Services -- 1.6%
- --------------------------------------------------------------------------------
Accenture Ltd., Class A(3) 1,038,000 $ 27,942,960
Acxiom Corp.(3) 579,019 10,115,462
Affiliated Computer Services, Inc.(3) 20,000 2,122,600
Affiliated Computer Services,
Inc.(1)(2)(3) 80,327 8,519,244
Computer Sciences Corp.(3) 1,890,302 92,586,992
Edwards (J.D.) & Co.(3) 891,844 14,670,834
Electronic Data Systems Corp. 157,612 10,804,303
Gartner Group, Inc.(3) 4,811 56,241
Gartner Group, Inc., Class B(3) 92,416 1,035,059
Keane, Inc.(3) 173,924 3,135,850
Perot Systems Corp., Class A(1)(2)(3) 400,000 8,162,895
Perot Systems Corp.(3) 347,730 7,100,647
Safeguard Scientifics, Inc.(3) 26,579 93,027
Sapient Corp.(3) 2,049,828 15,824,672
SunGard Data Systems, Inc.(3) 3,430,781 99,252,494
- --------------------------------------------------------------------------------
$ 301,423,280
- --------------------------------------------------------------------------------
Leisure Euipment and Products -- 0.0%
- --------------------------------------------------------------------------------
Callaway Golf Co. 35,715 $ 683,942
Eastman Kodak Co. 157,202 4,626,455
Mattel, Inc. 22,091 379,965
- --------------------------------------------------------------------------------
$ 5,690,362
- --------------------------------------------------------------------------------
Machinery -- 0.9%
- --------------------------------------------------------------------------------
Deere & Co. 1,650,000 $ 72,039,000
Dionex Corp.(3) 362,140 9,238,191
Donaldson Co., Inc. 40,220 1,562,145
Dover Corp. 586,188 21,729,989
Illinois Tool Works, Inc. 544,318 36,861,215
Nordson Corp. 163,978 4,330,659
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Machinery (continued)
- --------------------------------------------------------------------------------
Paccar, Inc. 12,894 $ 846,104
Pall Corp. 216,000 5,196,960
Parker-Hannifin Corp. 159,137 7,305,980
Regal-Beloit Corp. 265,000 5,777,000
SPX Corp.(3) 47,862 6,552,308
Wabtec 232,061 2,854,350
- --------------------------------------------------------------------------------
$ 174,293,901
- --------------------------------------------------------------------------------
Media -- 6.4%
- --------------------------------------------------------------------------------
Advo, Inc.(3) 670,000 $ 28,810,000
AOL Time Warner, Inc.(3) 2,133,278 68,478,224
Belo (A.H.) Corp. 542,924 10,179,825
Cablevision Systems New York Group(3) 130,000 6,168,500
Cablevision Systems-Rainbow Media
Group(3) 65,000 1,605,500
Catalina Marketing Corp.(3) 86,297 2,994,506
Clear Channel Communications, Inc.(3) 340,290 17,324,164
Comcast Corp., Class A(3) 4,199,177 151,170,372
Cox Communications, Inc., Class A(3) 1,508,036 63,201,789
Disney (Walt) Co. 4,461,891 92,450,382
Dow Jones & Co., Inc. 376,300 20,594,899
E.W. Scripps Co., Class A 25,533 1,685,178
Gannett Co., Inc. 708,627 47,640,993
Gaylord Entertainment Co.(3) 428,482 10,540,657
General Motors Corp., Class H(3) 1,175,262 18,157,798
Harte-Hanks, Inc. 128,869 3,630,240
Havas Advertising ADR(3) 3,142,938 22,786,301
Interpublic Group Cos., Inc. 1,571,697 46,427,929
Interpublic Group Cos., Inc.(1)(2) 26,126 771,280
Lamar Advertising Co.(3) 857,818 36,320,014
Liberty Media Corp., Class A(3) 1,478,536 20,699,504
Liberty Media Corp., Class B(3) 32,876 499,715
MacClatchy Co. (The), Class A 48,066 2,259,102
McGraw-Hill Companies, Inc. (The) 1,428,164 87,089,441
Meredith Corp. 190,000 6,773,500
New York Times Co. (The), Class A 317,259 13,721,452
Omnicom Group, Inc. 2,324,141 207,661,998
Publicis Groupe SA 293,650 7,776,865
Reuters Holdings PLC ADR 270,131 16,205,159
Shaw Communications Inc., Class B 20,000 424,000
TMP Worldwide, Inc.(3) 1,404,426 60,249,875
Tribune Co. 62,327 2,332,900
SEE NOTES TO FINANCIAL STATEMENTS
39
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Media (continued)
- --------------------------------------------------------------------------------
Univision Communications, Inc.(3) 663,184 $ 26,832,425
Viacom, Inc., Class A(3) 21,774 963,500
Viacom, Inc., Class B(3) 640,391 28,273,263
Vivendi Universal ADR 490,725 26,396,098
Washington Post Co. (The), Class B 3,600 1,908,000
Westwood One, Inc.(3) 122,400 3,678,120
WPP Group PLC 488,000 5,392,595
WPP Group PLC ADR 155,310 8,371,209
- --------------------------------------------------------------------------------
$1,178,447,272
- --------------------------------------------------------------------------------
Metals and Mining -- 0.5%
- --------------------------------------------------------------------------------
Alcoa, Inc. 1,931,687 $ 68,671,473
Allegheny Technologies, Inc. 21,408 358,584
Nucor Corp. 239,966 12,708,599
Phelps Dodge Corp. 22,194 719,086
Steel Dynamics, Inc.(3) 311,800 3,619,998
Worthington Industries 147,466 2,094,017
- --------------------------------------------------------------------------------
$ 88,171,757
- --------------------------------------------------------------------------------
Multi - Utilities -- 0.1%
- --------------------------------------------------------------------------------
Dynegy, Inc. 451,500 $ 11,513,250
Dynegy, Inc.(1)(2) 63,525 1,618,893
Williams Cos., Inc. (The) 222,833 5,686,698
- --------------------------------------------------------------------------------
$ 18,818,841
- --------------------------------------------------------------------------------
Multiline Retail -- 2.7%
- --------------------------------------------------------------------------------
99 Cents Only Stores(3) 856,674 $ 32,639,279
Costco Wholesale Corporation(3) 20,435 906,905
Costco Wholesale Corporation(1)(2)(3) 56,823 2,520,071
Dollar General Corp. 249,983 3,724,747
Dollar Tree Stores, Inc.(3) 1,217,053 37,619,108
Family Dollar Stores 2,618,411 78,499,962
Kohl's Corp.(3) 49,500 3,486,780
May Department Stores Co. (The) 569,660 21,066,027
Neiman Marcus Group, Inc. (The),
Class B(3) 65,206 1,936,618
Nordstrom, Inc. 65,692 1,328,949
Penney (J.C.) Company, Inc. 837,309 22,523,612
Sears Roebuck & Co. 15,750 750,330
Target Corporation 2,753,362 113,025,510
Wal-Mart Stores, Inc. 2,874,863 165,448,366
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Multiline Retail (continued)
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc.(1)(2) 40,000 $ 2,297,856
- --------------------------------------------------------------------------------
$ 487,774,120
- --------------------------------------------------------------------------------
Office - Electronics -- 0.0%
- --------------------------------------------------------------------------------
Ikon Office Solutions, Inc. 99,415 $ 1,162,161
Xerox Corp. 20,000 208,400
Zebra Technologies Corp.(3) 6,000 333,060
- --------------------------------------------------------------------------------
$ 1,703,621
- --------------------------------------------------------------------------------
Oil and Gas -- 3.6%
- --------------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,961,941 $ 168,386,346
Apache Corp. 886,372 44,212,250
Ashland, Inc. 106,674 4,915,538
BP Amoco PLC ADR 1,328,827 61,803,744
Burlington Resources, Inc. 928,629 34,860,733
ChevronTexaco Corp. 999,818 89,593,691
Devon Energy Corp. 724,853 28,015,568
Exxon Mobil Corp. 3,612,103 141,955,648
Kerr - McGee Corp. 267,327 14,649,520
Murphy Oil Corp. 29,700 2,495,988
Newfield Exploration Co.(3) 60,000 2,130,600
Ocean Energy Inc. 900,000 17,280,000
Pennzoil-Quaker State Co. 74,457 1,075,904
Phillips Petroleum Co. 510,102 30,738,747
Royal Dutch Petroleum Co. 56,824 2,785,512
Syntroleum Corp.(3) 2,735 19,419
USX-Marathon Group 350,000 10,500,000
Valero Energy Corp. 51,510 1,963,561
- --------------------------------------------------------------------------------
$ 657,382,769
- --------------------------------------------------------------------------------
Paper and Forest Products -- 0.3%
- --------------------------------------------------------------------------------
Georgia-Pacific Corp. - G-P Group 647,827 $ 17,886,503
International Paper Co. 219,061 8,839,111
Louisiana Pacific Corp. 70,750 597,130
Mead Corporation (The) 38,768 1,197,544
Plum Creek Timber Co., Inc. 417,984 11,849,846
Westvaco Corp. 47,000 1,337,150
Weyerhaeuser Co. 119,608 6,468,401
Willamette Industries, Inc. 156,412 8,152,193
- --------------------------------------------------------------------------------
$ 56,327,878
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
40
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Personal Products -- 0.6%
- --------------------------------------------------------------------------------
Avon Products, Inc. 134,700 $ 6,263,550
Gillette Co. 1,088,640 36,360,576
Lauder (Estee) Companies, Inc. 2,092,312 67,079,523
- --------------------------------------------------------------------------------
$ 109,703,649
- --------------------------------------------------------------------------------
Pharmaceutical -- 9.4%
- --------------------------------------------------------------------------------
Abbott Laboratories 4,303,053 $ 239,895,205
Allergan, Inc. 34,340 2,577,217
American Home Products Corp. 1,955,001 119,958,861
AstraZeneca PLC ADR 80,720 3,761,552
Bristol-Myers Squibb Co. 2,675,910 136,471,410
Elan Corp., PLC ADR(3) 1,758,536 79,239,632
Forest Laboratories, Inc.(3) 28,400 2,327,380
GlaxoSmithKline PLC ADR(3) 630,613 31,417,140
Johnson & Johnson Co. 5,079,253 300,183,852
King Pharmaceuticals, Inc.(3) 200,000 8,426,000
King Pharmaceuticals, Inc.(1)(2)(3) 2,085,117 87,785,585
Lilly (Eli) & Co. 1,216,752 95,563,702
Lilly (Eli) & Co.(1)(2) 38,250 3,002,090
Merck & Co., Inc. 1,743,377 102,510,568
Mylan Laboratories 653,037 24,488,888
Novo Nordisk ADR 292,277 11,720,308
Pfizer, Inc. 5,482,579 218,480,773
Pharmacia Corp. 3,310,843 141,207,454
Schering-Plough Corp. 1,395,760 49,982,166
Teva Pharmaceutical Industries Ltd. 300,000 18,489,000
Watson Pharmaceuticals, Inc.(3) 1,241,828 38,980,981
- --------------------------------------------------------------------------------
$1,716,469,764
- --------------------------------------------------------------------------------
Real Estate -- 0.2%
- --------------------------------------------------------------------------------
Avalonbay Communities, Inc. 55,000 $ 2,602,050
Catellus Development Corp.(3) 415,722 7,649,285
Equity Office Properties Trust 2,812 84,585
Jones Lang Lasalle, Inc.(3) 213,193 3,848,134
Rouse Co. (The) 127,700 3,740,333
Trammell Crow Co.(3) 876,098 10,250,347
Ventas, Inc. 25,600 294,400
- --------------------------------------------------------------------------------
$ 28,469,134
- --------------------------------------------------------------------------------
Road and Rail -- 0.3%
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 217,094 $ 6,193,692
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Road and Rail (continued)
- --------------------------------------------------------------------------------
CSX Corp. 36,496 $ 1,279,185
Florida East Coast Industries, Inc. 122,888 2,844,857
Heartland Express, Inc.(3) 312,500 8,678,125
Kansas City Southern Industrials,
Inc.(3) 15,215 214,988
Norfolk Southern Corp. 390 7,149
Robinson (C.H.) Worldwide, Inc. 1,231,376 35,605,237
Union Pacific Corp. 92,156 5,252,892
- --------------------------------------------------------------------------------
$ 60,076,125
- --------------------------------------------------------------------------------
Semiconductor Equipment and Products -- 3.1%
- --------------------------------------------------------------------------------
Alpha Industries, Inc.(3) 60,075 $ 1,309,635
Altera Corp.(3) 80,516 1,708,550
Analog Devices, Inc.(3) 3,063,534 135,990,274
Applied Materials, Inc.(3) 80,212 3,216,501
Broadcom Corp., Class A(3) 234,000 9,563,580
Conexant Systems(3) 317,574 4,560,363
Cypress Semiconductor Corporation(3) 227,742 4,538,898
Intel Corp.(1)(2) 119,093 3,743,335
Intel Corp. 5,791,331 182,137,360
Intel Corp.(1)(2) 350,000 10,999,932
Intel Corp.(1)(2) 800,000 25,147,420
Intel Corp.(1)(2) 500,000 15,705,344
KLA-Tencor Corp.(3) 101,498 5,030,241
Lam Research Corp.(3) 151,152 3,509,749
Linear Technologies Corp. 267,760 10,453,350
LSI Logic Corp.(3) 132,810 2,095,742
Maxim Integrated Products Co.(3) 274,351 14,406,171
National Semiconductor Corp.(3) 79,368 2,443,741
SpeedFam-IPEC, Inc.(3) 221,000 658,580
Teradyne, Inc.(3) 27,996 843,799
Texas Instruments, Inc. 4,185,654 117,198,312
Ultratech Stepper, Inc.(3) 245,129 4,049,531
Xilinx, Inc.(3) 68,518 2,675,628
- --------------------------------------------------------------------------------
$ 561,986,036
- --------------------------------------------------------------------------------
Software -- 3.2%
- --------------------------------------------------------------------------------
Adobe Systems, Inc. 231,936 $ 7,201,613
Ascential Software Corp.(3) 6,127 24,814
BMC Software, Inc.(3) 35,000 572,950
Cadence Design Systems, Inc.(3) 956,000 20,955,520
Cognos, Inc.(3) 77,000 1,925,000
SEE NOTES TO FINANCIAL STATEMENTS
41
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Software (continued)
- --------------------------------------------------------------------------------
Computer Associates International, Inc. 632,395 $ 21,811,304
Compuware Corp.(3) 153,744 1,812,642
Fair, Isaac and Co., Inc. 358,242 22,576,411
Henry (Jack) & Associates 201,006 4,389,971
HNC Software, Inc.(3) 427,794 8,812,556
I2 Technologies, Inc.(3) 233,752 1,846,641
Intuit, Inc.(3) 1,557,278 66,620,353
Microsoft Corp.(3) 4,581,426 303,519,473
National Instruments Corp.(3) 466,603 17,478,948
Oracle Corp.(3) 2,178,195 30,080,873
Parametric Technology Corp.(3) 94,600 738,826
PeopleSoft, Inc.(3) 478,732 19,245,026
Reynolds & Reynolds, Inc., Class A 451,043 10,937,793
RSA Security, Inc.(3) 60,000 1,047,600
Siebel Systems, Inc.(3) 1,396,472 39,073,287
Veritas Software Corp.(3) 88,142 3,951,406
Wind River Systems, Inc.(3) 111,410 1,995,353
- --------------------------------------------------------------------------------
$ 586,618,360
- --------------------------------------------------------------------------------
Specialty Retail -- 4.3%
- --------------------------------------------------------------------------------
Abercrombie & Fitch Co., Class A(3) 10,900 $ 289,177
AutoNation, Inc.(3) 4,598,727 56,702,304
Best Buy Co., Inc.(3) 122,407 9,116,873
Burlington Coat Factory Warehouse Corp. 628,228 10,554,230
Circuit City Stores-Circuit City Group 216,000 5,605,200
Gap, Inc. (The) 21,812 304,059
Home Depot, Inc. (The) 5,566,099 283,926,710
Intimate Brands, Inc. 53,000 787,580
Limited, Inc. (The) 699,309 10,293,828
Limited, Inc. (The)(1)(2) 45,139 664,072
Limited, Inc. (The)(1)(2) 200,000 2,942,160
Lowe's Companies 5,775,619 268,046,478
Office Depot, Inc.(3) 283,487 5,255,849
OfficeMax, Inc.(3) 912,117 4,104,527
Payless Shoesource, Inc.(3) 7,700 432,355
Pep Boys - Manny, Moe & Jack (The) 97,976 1,680,288
Pier 1 Imports, Inc. 300,000 5,202,000
RadioShack Corporation 643,906 19,381,571
Sherwin-Williams Co. (The) 80,069 2,201,898
Staples, Inc.(3) 2,192,500 40,999,750
Tiffany and Co. 88,000 2,769,360
TJX Companies, Inc. (The) 1,000,000 39,860,000
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Specialty Retail (continued)
- --------------------------------------------------------------------------------
Too, Inc.(3) 39,087 $ 1,074,893
United Rentals, Inc.(3) 483,278 10,970,411
- --------------------------------------------------------------------------------
$ 783,165,573
- --------------------------------------------------------------------------------
Textiles and Apparel -- 0.0%
- --------------------------------------------------------------------------------
Coach, Inc.(3) 91,430 $ 3,563,941
Unifi, Inc.(3) 51,208 371,258
- --------------------------------------------------------------------------------
$ 3,935,199
- --------------------------------------------------------------------------------
Tobacco -- 0.1%
- --------------------------------------------------------------------------------
Philip Morris Co., Inc. 482,161 $ 22,107,082
UST, Inc. 439 15,365
- --------------------------------------------------------------------------------
$ 22,122,447
- --------------------------------------------------------------------------------
Trading Companies and Distributors -- 0.1%
- --------------------------------------------------------------------------------
Genuine Parts Co. 326,715 $ 11,990,441
- --------------------------------------------------------------------------------
$ 11,990,441
- --------------------------------------------------------------------------------
Water Utilities -- 0.0%
- --------------------------------------------------------------------------------
American Water Works Co. 77,310 $ 3,227,693
- --------------------------------------------------------------------------------
$ 3,227,693
- --------------------------------------------------------------------------------
Wireless Telecommunication Services -- 1.1%
- --------------------------------------------------------------------------------
AT&T Wireless Services, Inc.(3) 7,303,000 $ 104,944,110
Nextel Communications, Inc., Class A(3) 224,782 2,463,611
Sprint Corp., PCS Group(3) 3,119,754 76,153,195
Telephone & Data Systems, Inc. 132,964 11,933,519
Vodafone Group PLC ADR 40,745 1,046,333
- --------------------------------------------------------------------------------
$ 196,540,768
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $14,839,179,959) $17,892,659,773
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.0%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Gas Utilities -- 0.0%
- --------------------------------------------------------------------------------
Enron Corp.(1)(2) 3,663 $ 59,949
Enron Corp.(1)(2) 5,555 90,959
SEE NOTES TO FINANCIAL STATEMENTS
42
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
PORTFOLIO OF INVESTMENTS CONT'D
================================================================================
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Gas Utilities (continued)
- --------------------------------------------------------------------------------
Enron Corp.(1)(2) 1,832 $ 29,994
- --------------------------------------------------------------------------------
$ 180,902
- --------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $16,637,836) $ 180,902
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.0%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Banks -- 0.0%
- --------------------------------------------------------------------------------
Wachovia Corp.(1)(3) 166,518 $ 29,973
- --------------------------------------------------------------------------------
$ 29,973
- --------------------------------------------------------------------------------
Total Preferred Stocks
(identified cost $39,407) $ 29,973
- --------------------------------------------------------------------------------
RIGHTS -- 0.0%
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
Banks -- 0.0%
- --------------------------------------------------------------------------------
Bank United Litigation Contingent
Payment Rights, Expire 2/14/05(3) 102,072 $ 10,207
- --------------------------------------------------------------------------------
$ 10,207
- --------------------------------------------------------------------------------
Computers and Business Equipment -- 0.0%
- --------------------------------------------------------------------------------
Seagate Technology, Inc. (Tax Refund
Rights)(3) 197,392 $ 0
- --------------------------------------------------------------------------------
$ 0
- --------------------------------------------------------------------------------
Total Rights
(identified cost $50,596) $ 10,207
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.3%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
American General Corp., 1.93%, 1/7/02 $ 100,000 $ 99,967,833
Barton Capital Corp., 1.79%, 1/9/02 85,000 84,966,189
Delaware Corp., 1.89%, 1/22/02 49,884 49,829,003
General Electric Capital Corp., 1.78%,
1/2/02 14,913 14,912,263
General Electric Capital Corp., 1.87%,
1/9/02 50,000 49,979,222
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
General Electric Capital Corp., 1.92%,
1/7/02 $ 46,368 $ 46,353,162
Household Finance Corp., 1.85%, 1/22/02 28,895 28,863,818
Panasonic Finance America, Inc.,
2.05%, 1/2/02 45,243 45,240,423
- --------------------------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $420,111,913) $ 420,111,913
- --------------------------------------------------------------------------------
Total Investments -- 99.9%
(identified cost $15,276,019,711) $18,312,992,768
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.1% $ 22,872,212
- --------------------------------------------------------------------------------
Net Assets -- 100.0% $18,335,864,980
- --------------------------------------------------------------------------------
ADR - American Depositary Receipt
(1) Security valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
(2) Security restricted from resale for a period not exceeding two years. At
December 31, 2001, the value of these securities totaled $366,043,256 or
2.0% of net assets.
(3) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
43
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
FINANCIAL STATEMENTS
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2001
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost,
$15,276,019,711) $18,312,992,768
Cash 926,215
Receivable for investments sold 6,078,282
Dividends receivable 15,975,413
Tax reclaim receivable 80,636
Other Assets 168,677
- --------------------------------------------------------------------------------
TOTAL ASSETS $18,336,221,991
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable to affiliate for Trustees' fees $ 7,680
Accrued expenses 349,331
- --------------------------------------------------------------------------------
TOTAL LIABILITIES $ 357,011
- --------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $18,335,864,980
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $15,298,891,403
Net unrealized appreciation (computed on
the basis of identified cost) 3,036,973,577
- --------------------------------------------------------------------------------
TOTAL $18,335,864,980
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 2001
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes,
$1,078,556) $ 176,692,519
Interest 15,674,562
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 192,367,081
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 76,812,367
Trustees' fees and expenses 16,773
Custodian fee 1,818,767
Legal and accounting services 95,442
Miscellaneous 230,033
- --------------------------------------------------------------------------------
TOTAL EXPENSES $ 78,973,382
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 113,393,699
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (407,571,786)
Securities sold short 47,451,257
Foreign currency transactions 229
- --------------------------------------------------------------------------------
NET REALIZED LOSS $ (360,120,300)
- --------------------------------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(1,560,996,614)
Securities sold short (44,213,817)
Foreign currency (659)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(1,605,211,090)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(1,965,331,390)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $(1,851,937,691)
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
44
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
FINANCIAL STATEMENTS CONT'D
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 2001 DECEMBER 31, 2000
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 113,393,699 $ 113,922,828
Net realized gain (loss) (360,120,300) 196,962,539
Net change in unrealized appreciation
(depreciation) (1,605,211,090) 141,360,943
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $(1,851,937,691) $ 452,246,310
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 3,921,075,957 $4,816,070,598
Withdrawals (2,118,342,171) (1,997,896,982)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 1,802,733,786 $2,818,173,616
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (49,203,905) $3,270,419,926
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $18,385,068,885 $15,114,648,959
- --------------------------------------------------------------------------------
AT END OF YEAR $18,335,864,980 $18,385,068,885
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
45
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
FINANCIAL STATEMENTS CONT'D
================================================================================
SUPPLEMENTARY DATA
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
PERIOD ENDED 2001 2000 1999 DECEMBER 31, 1998(1)
- -------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.45% 0.45% 0.46% 0.48%(2)
Net investment income 0.64% 0.67% 0.72% 0.72%(2)
Portfolio Turnover 18% 13% 11% 3%
Total Return(3) (9.67)% -- -- --
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $18,335,865 $18,385,069 $15,114,649 $8,704,859
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------
1998 1997
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.50% 0.56%
Net investment income 0.78% 0.81%
Portfolio Turnover 12% 14%
Total Return(3) -- --
- --------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $6,985,678 $2,871,446
- --------------------------------------------------------------------------------
(1) For the two-month period ended December 31, 1998.
(2) Annualized.
(3) Total return is required to be disclosed for fiscal years beginning
after December 15, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
46
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- --------------------------------------------------------------------------------
Tax-Managed Growth Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Portfolio, which was organized as a
trust under the laws of the State of New York on December 1, 1995, seeks to
provide long-term after-tax returns by investing in a diversified portfolio
of equity securities. The Declaration of Trust permits the Trustees to
issue interests in the Portfolio. The following is a summary of significant
accounting policies consistently followed by the Portfolio in the
preparation of its financial statements. The policies are in conformity
with accounting principles generally accepted in the United States of
America.
A Investment Valuations -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices on the exchange where such
securities are principally traded. Futures positions on securities or
currencies are generally valued at closing settlement prices. Unlisted or
listed securities for which closing sale prices are not available are
generally valued at the mean between the latest bid and asked prices.
Short-term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost, which approximates fair value. Other fixed income
and debt securities, including listed securities and securities for which
price quotations are available, will normally be valued on the basis of
valuations furnished by a pricing service. Over-the-counter options are
normally valued at the mean between the latest bid and asked price.
Investments for which valuations or market quotations are unavailable are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
B Income Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes
on any taxable income of the Portfolio because each investor in the
Portfolio is ultimately responsible for the payment of any taxes on its
share of such taxable income. Since some of the Portfolio's investors are
regulated investment companies that invest all or substantially all of
their assets in the Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements (under the
Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio will allocate, at least annually among its investors, each
investor's distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss,
deduction or credit.
C Futures Contracts -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit either in cash or securities an amount
(initial margin) equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made
or received by the Portfolio (margin maintenance) each day, dependent on
daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
The Portfolio's investment in financial futures contracts is designed to
hedge against anticipated future changes in the price of current or
anticipated portfolio positions. Should prices move unexpectedly, the
Portfolio may not achieve the anticipated benefits of the financial futures
contracts and may realize a loss.
D Put Options -- Upon the purchase of a put option by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio will realize a gain
or loss depending on whether the sales proceeds from the closing sale
transaction are greater or less than the cost of the option. When the
Portfolio exercises a put option, settlement is made in cash. The risk
associated with purchasing options is limited to the premium originally
paid.
E Securities Sold Short -- The Portfolio may sell securities it does not own
in anticipation of a decline in the market price of the securities or in
order to hedge portfolio positions. The Portfolio will generally borrow the
security sold in order to make delivery to the buyer. Upon executing the
transaction, the Portfolio records the proceeds as deposits with brokers in
the Statement of Assets and Liabilities and establishes an offsetting
payable for securities sold short for the securities due on settlement. The
proceeds are retained by the broker as collateral for the short position.
The liability is marked-to-market and the Portfolio is required to pay the
lending broker any dividend or interest income earned while the short
position is open. A gain or loss is recorded when the security is delivered
to the broker. The Portfolio may recognize a loss on the transaction if the
market value of the securities sold increases before the securities are
delivered.
47
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
NOTES TO FINANCIAL STATEMENTS CONT'D
================================================================================
F Other -- Investment transactions are accounted for on the date the
securities are purchased or sold. Dividend income is recorded on the
ex-dividend date. However, if the ex-dividend date has passed, certain
dividends from foreign securities are recorded as the Portfolio is informed
of the ex-dividend date. Interest income is recorded on the accrual basis.
G Use of Estimates -- The preparation of the financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of income and expense
during the reporting period. Actual results could differ from those
estimates.
2 Investment Adviser Fee and Other Transactions with Affiliates
- --------------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered to
the Portfolio. Under the advisory agreement, BMR receives a monthly
advisory fee of 5/96 of 1% (0.625% annually) of the average daily net
assets of the Portfolio up to $500,000,000, and at reduced rates as daily
net assets exceed that level. For the year ended December 31, 2001, the
adviser fee was 0.43% of the Portfolio's average net assets. Except for
Trustees of the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services
to the Portfolio out of such investment adviser fee. Trustees of the
Portfolio who are not affiliated with the Investment Adviser may elect to
defer receipt of all or a percentage of their annual fees in accordance
with the terms of the Trustees' Deferred Compensation Plan. For the year
ended December 31, 2001, no significant amounts have been deferred.
Certain officers and Trustees of the Portfolio are officers of the above
organizations.
3 Investment Transactions
- --------------------------------------------------------------------------------
For the year ended December 31, 2001, purchases and sales of investments,
other than short-term obligations, aggregated $3,145,062,958 and
$3,120,025,819, respectively. In addition, investments having an aggregate
market value of $359,656,314 at dates of withdrawal were distributed in
payment for capital withdrawals. During the year ended December 31, 2001,
investors contributed securities with a value of $1,798,445,978.
4 Federal Income Tax Basis of Investments
- --------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 2001 as computed on a federal income tax
basis, were as follows:
AGGREGATE COST $ 6,190,955,787
--------------------------------------------------------------
Gross unrealized appreciation $12,129,439,542
Gross unrealized depreciation (7,402,561)
--------------------------------------------------------------
NET UNREALIZED APPRECIATION $12,122,036,981
--------------------------------------------------------------
5 Financial Instruments
- --------------------------------------------------------------------------------
The Portfolio may trade in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include
written options, forward foreign currency exchange contracts and financial
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are
considered. The Portfolio did not have any open obligations under these
financial instruments at December 31, 2001.
6 Line of Credit
- --------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $150 million unsecured line of credit
agreement with a group of banks. Borrowings will be made by the Portfolio
solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each participating
portfolio or fund based on its borrowings at an amount above either the
Eurodollar rate or Federal Funds rate. In addition, a fee computed at an
annual rate of 0.10% on the daily unused portion of the line of credit is
allocated among the participating portfolios and funds at the end of each
48
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
NOTES TO FINANCIAL STATEMENTS CONT'D
================================================================================
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the year ended December 31, 2001.
7 Restricted Securities
- --------------------------------------------------------------------------------
At December 31, 2001, the Portfolio owned the following securities
(representing 2.0% of net assets) which were restricted as to public resale
and not registered under the Securities Act of 1933. The securities are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
DATE OF
DESCRIPTION ACQUISITION SHARES COST FAIR VALUE
---------------------------------------------------------------------------------------------------
COMMON STOCKS
---------------------------------------------------------------------------------------------------
Affiliated Computer Services, Inc. 11/29/00 80,327 $ 4,523,414 $ 8,519,244
American Standard Companies, Inc. 10/4/01 63,436 3,702,125 4,327,833
Andrx Group 11/29/00 300,000 19,706,250 21,108,478
Biomet, Inc. 7/26/01 76,929 2,504,295 2,374,749
BISYS Group, Inc. (The) 7/26/01 12,500 670,125 799,472
BISYS Group, Inc. (The) 12/18/01 20,000 1,190,400 1,279,032
Boeing Company (The) 9/27/00 250,000 16,531,250 9,689,547
Boeing Company (The) 3/14/01 200,000 12,114,000 7,752,122
Cardinal Health, Inc. 9/27/00 36,150 2,291,006 2,336,144
Carnival Corp. 3/14/01 500,000 14,160,000 14,032,980
Costco Wholesale Corporation 11/29/00 56,823 2,003,011 2,520,071
Dynegy, Inc. 11/29/00 63,525 3,112,725 1,618,893
Fedex Corp. 7/26/01 75,000 3,046,500 3,887,141
Fifth Third Bancorp 7/26/01 81,626 5,008,571 5,001,158
First Midwest Bancorp, Inc. 5/23/01 65,612 1,502,264 1,914,017
First Midwest Bancorp, Inc. 7/26/01 176,056 4,436,617 5,133,978
Freddie Mac 3/14/01 20,000 1,252,000 1,307,346
Genzyme Corp. 7/26/01 9,605 500,901 574,385
GreenPoint Financial Corp. 11/29/00 300,000 8,793,750 10,717,627
Greenpoint Financial Corp. 5/23/01 200,000 7,712,000 7,145,531
Intel Corp. 11/29/00 350,000 14,710,955 10,999,932
Intel Corp. 11/29/00 119,093 5,005,634 3,743,335
Intel Corp. 3/14/01 800,000 23,500,000 25,147,420
Intel Corp. 10/4/01 500,000 10,615,000 15,705,344
DATE OF
DESCRIPTION ACQUISITION SHARES COST FAIR VALUE
----------------------------------------------------------------------------------------------------
International Game Technology 3/14/01 100,000 $ 5,227,000 $ 6,826,585
Interpublic Group Cos., Inc. 6/25/01 26,126 1,001,516 771,280
Investors Financial Services Corp. 5/23/01 32,000 2,301,120 2,117,396
Kinder Morgan, Inc. 9/27/00 500,000 19,687,500 27,829,337
King Pharmaceuticals, Inc. 11/29/00 2,085,117 77,703,201 87,785,585
Lilly (Eli) & Co. 11/29/00 38,250 3,509,437 3,002,090
Limited, Inc. (The) 9/27/00 45,139 1,001,522 664,072
Limited, Inc. (The) 5/23/01 200,000 3,382,000 2,942,160
MBNA Corp. 12/18/01 113,797 3,768,957 3,998,444
Mellon Financial Corp. 3/14/01 15,000 635,250 564,018
Merrill Lynch & Co., Inc. 11/29/00 150,000 9,206,250 7,812,625
National-Oilwell, Inc. 9/27/00 45,730 1,349,035 941,965
Outback Steakhouse, Inc. 11/29/00 325,000 13,031,250 11,123,597
Perot Systems Corp., Class A 5/23/01 400,000 6,172,000 8,162,895
Plexus Corp. 5/23/01 77,757 3,004,530 2,063,935
Raymond James Financial, Inc. 12/18/01 70,000 2,326,800 2,481,924
Schein (Henry), Corp. 3/14/01 147,354 5,010,036 5,453,790
Schwab (Charles) Corp. 12/18/01 133,650 2,031,480 2,063,844
Southwest Bancorporation of Texas, Inc. 5/23/01 600,000 19,296,000 18,150,649
Sysco Corp. 9/27/00 44,744 1,016,528 1,172,528
Wal-Mart Stores, Inc. 12/18/01 40,000 2,234,000 2,297,856
----------------------------------------------------------------------------------------------------
$351,488,205 $365,862,354
----------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS
----------------------------------------------------------------------------------------------------
3/14/01-
7/25/01 11,050 $ 16,637,836 $ 180,902
Enron Corp.
----------------------------------------------------------------------------------------------------
$ 16,637,836 $ 180,902
----------------------------------------------------------------------------------------------------
49
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
INDEPENDENT AUDITORS' REPORT
================================================================================
TO THE TRUSTEES AND INVESTORS
OF TAX-MANAGED GROWTH PORTFOLIO:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Managed Growth Portfolio (the Portfolio) as
of December 31, 2001, and the related statement of operations for the year then
ended, the statements of changes in net assets for the two years then ended and
the supplementary data for the three years ended December 31, 2001, the
two-month period ended December 31, 1998 and for each of the years in the
two-year period ended October 31, 1998. These financial statements and
supplementary data are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
supplementary data based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and supplementary data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2001 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of the
Portfolio as of December 31, 2001, and the results of its operations, the
changes in its net assets and its supplementary data for the respective stated
periods in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 15, 2002
50
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned officer of its Manager, Eaton Vance Management,
thereunto duly authorized.
BELPORT CAPITAL FUND LLC
(Registrant)
By: EATON VANCE MANAGEMENT, its Manager
By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner
Vice President and Chief Legal Officer
Date: April 29, 2002
51
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
3 Copy of Limited Liability Company Agreement of the Fund
dated December 5, 2001. (Note: the LLC Agreement also
defines the rights of the holders of Shares of the Fund)
4 Copy of Revolving Credit and Security Agreement dated as of
March 14, 2001; Agreement of Amendment thereto dated as of
September 28, 2001; Agreement of Amendment thereto dated as
of March 13, 2002.
9 Not applicable and not filed.
10(1) Copy of Investment Advisory and Administration Agreement
between the Fund and Boston Management and Research dated
March 7, 2001.
10(2) Copy of Management Agreement between Belport Realty
Corporation and Boston Management and Research dated March
14, 2001.
10(3) Copy of Investor Servicing Agreement between the Fund and
Eaton Vance Distributors, Inc. dated December 5, 2000.
10(4) Copy of Custody and Transfer Agency Agreement between the
Fund and Investors Bank & Trust Company dated December 5,
2000.
11 Not applicable and not filed.
12 Not applicable and not filed.
21 List of Subsidiaries of the Fund.
24 Not applicable and not filed.
99 Form N-SAR of Eaton Vance Tax-Managed Growth Portfolio (File
No. 811-7409) for its fiscal year ended December 31, 2001
filed electronically with the Securities and Exchange
Commission under the Investment Company Act of 1940 on
February 27, 2002 (Accession No. 0000940394-02-000091)
(incorporated herein by reference pursuant to Rule 12b-32).
52