UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2002
Commission File No. 000-1108991
Belmar Capital Fund LLC
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3508106
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(State of organization) (I.R.S. Employer Identification No.)
The Eaton Vance Building
255 State Street, Boston, Massachusetts 02109
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 617-482-8260
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None
----
Former Name, Former Address and Former Fiscal Year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Belmar Capital Fund LLC
Index to Form 10Q
PART I - FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements 3
Consolidated Statements of Assets
and Liabilities as of March 31, 2002
(unaudited) and December 31, 2001 3
Consolidated Statements of Operations
(unaudited) for the Three Months Ended
March 31, 2002 and 2001 4
Consolidated Statements of Changes in
Net Assets (unaudited) for the Three Months
Ended March 31, 2002 and 2001 6
Consolidated Statements of Cash Flows
(unaudited) for the Three Months Ended
March 31, 2002 and 2001 7
Financial Highlights (unaudited) for the
Three Months Ended March 31, 2002 9
Notes to Consolidated Financial Statements
as of March 31, 2002 (unaudited) 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risks 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports 16
SIGNATURES 17
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
BELMAR CAPITAL FUND LLC
Consolidated Statements of Assets and Liabilities
March 31,
2002 December 31,
(Unaudited) 2001
-------------------- ------------------
Assets:
Investment in Belvedere Capital Fund Company LLC $2,132,045,602 $2,129,845,069
Investment in Partnership Preference Units 587,482,247 587,551,880
Investment in other real estate 229,656,405 229,061,223
Short-term investments 584,083 3,919,805
-------------------- ------------------
Total investments $2,949,768,337 $2,950,377,977
-------------------- ------------------
Cash 1,310,882 1,658,511
Escrow deposits - restricted 3,118,972 6,140,804
Dividends receivable 8,919,478 4,935,259
Other assets 861,031 1,116,314
-------------------- ------------------
Total assets $2,963,978,700 $2,964,228,865
Liabilities:
Loan payable $ 613,500,000 $ 613,500,000
Mortgage payable, net of unamortized debt issuance
costs ($3,112,164 and $3,201,792, respectively) 172,002,242 172,269,051
Open interest rate swap contracts, at value 36,111,680 44,239,310
Swap interest payable 1,426,132 1,447,644
Note payable to minority shareholder 565,972 700,000
Security deposits 699,773 679,655
Accrued expenses:
Interest expense 2,778,544 2,782,673
Property taxes 862,632 3,121,214
Other expenses and liabilities 2,785,168 3,894,230
Minority interests in controlled subsidiaries 12,264,911 12,910,955
-------------------- ------------------
Total liabilities $ 842,997,054 $ 855,544,732
-------------------- ------------------
Net assets $2,120,981,646 $2,108,684,133
-------------------- ------------------
Shareholders' Capital
Shareholders' capital $2,120,981,646 $2,108,684,133
-------------------- ------------------
Shares Outstanding 24,009,180 24,134,504
-------------------- ------------------
Net Asset Value and Redemption Price Per Share $ 88.34 $ 87.37
-------------------- ------------------
See notes to consolidated financial statements
3
BELMAR CAPITAL FUND LLC
Consolidated Statements of Operations (Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2002 2001
---------------------- ------------------
Investment Income:
Dividends allocated from Belvedere Capital
(net of foreign taxes of $29,355
and $34,559, respectively) $ 5,445,139 $ 5,431,721
Interest allocated from Belvedere Capital 181,358 976,548
Expenses allocated from Belvedere Capital (3,146,053) (3,518,459)
---------------------- ------------------
Net investment income allocated from
Belvedere Capital $ 2,480,444 $ 2,889,810
Dividends from Partnership Preference Units 13,912,529 14,357,713
Rental income 8,742,889 8,740,392
Interest 11,895 261,213
---------------------- ------------------
Total investment income $25,147,757 $26,249,128
---------------------- ------------------
Expenses:
Investment advisory and administrative fees $ 2,104,754 $ 1,931,895
Property management fees 347,649 351,208
Distribution and servicing fees 1,043,486 1,190,864
Interest expense on Credit Facility 3,677,584 10,791,565
Interest expense on swap contracts 10,197,831 4,134,679
Interest expense on mortgages 3,821,757 3,832,550
Property and maintenance expenses 2,706,386 2,973,932
Property taxes and insurance 1,230,307 976,010
Miscellaneous 282,989 697,293
---------------------- ------------------
Total expenses $25,412,743 $26,879,996
Deduct -
Reduction of investment adviser and
administrative fee $ 515,469 $ 590,917
---------------------- ------------------
Net expenses $24,897,274 $26,289,079
---------------------- ------------------
Net investment income (loss) before minority
interest in net income of controlled
subsidiary $ 250,483 $ (39,951)
Minority interest in net income of
controlled subsidiary (114,392) (243,400)
---------------------- ------------------
Net investment income (loss) $ 136,091 $ (283,351)
---------------------- ------------------
See notes to consolidated financial statements
4
BELMAR CAPITAL FUND LLC
Consolidated Statements of Operations (Unaudited) (Continued)
Three Months Three Months
Ended Ended
March 31, March 31,
2002 2001
---------------------- ------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) -
Investment transactions from Belvedere
Capital (identified cost basis) $(12,537,225) $ 6,985,081
Investment transactions in other real estate
investments - 428,905
---------------------- ------------------
Net realized gain (loss) $(12,537,225) $ 7,413,986
---------------------- ------------------
Change in unrealized appreciation
(depreciation) -
Investment in Belvedere Capital (identified
cost basis) $ 26,921,774 $(290,429,569)
Investments in Partnership Preference Units
(identified cost basis) (69,633) 28,407,540
Investment transactions in other real estate
investments (net of minority interest in
unrealized gain (loss) of controlled subsidiary) 760,447 -
Interest rate swap contracts 8,127,630 (11,952,947)
---------------------- ------------------
Net change in unrealized appreciation (depreciation) $ 35,740,218 $(273,974,976)
---------------------- ------------------
Net realized and unrealized gain (loss) $ 23,202,993 $(266,560,990)
---------------------- ------------------
Net increase (decrease) in net assets from
operations $ 23,339,084 $(266,844,341)
====================== ==================
See notes to consolidated financial statements
5
BELMAR CAPITAL FUND LLC
Consolidated Statements of Changes in Net Assets (Unaudited)
Three Months Three Months
Ended Ended
March 31, 2002 March 31, 2001
------------------- ------------------
Increase (Decrease) in Net Assets:
Net investment income (loss) $ 136,091 $ (283,351)
Net realized gain (loss) on investment transactions (12,537,225) 7,413,986
Net change in unrealized appreciation (depreciation) of
investments 35,740,218 (273,974,976)
------------------- ------------------
Net increase (decrease) in net assets from operations $ 23,339,084 $ (266,844,341)
Transactions in Fund Shares -
Net asset value of Fund Shares redeemed $ (11,041,571) $ (26,480,525)
------------------- ------------------
Net decrease in net assets from Fund Share
transactions $ (11,041,571) $ (26,480,525)
------------------- ------------------
Net increase (decrease) in net assets $ 12,297,513 $ (293,324,866)
------------------- ------------------
Net assets
At beginning of period $2,108,684,133 $2,457,715,428
------------------- ------------------
At end of period $2,120,981,646 $2,164,390,562
=================== ==================
See notes to consolidated financial statements
6
BELMAR CAPITAL FUND LLC
Consolidated Statements of Cash Flows (Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2002 2001
------------------- ------------------
Cash Flows From (For) Operating Activities -
Net investment income (loss) $ 136,091 $ (283,351)
Adjustments to reconcile net investment income (loss) to
net cash flows from operating activities -
Amortization of debt issuance costs 89,628 82,071
Amortization of deferred expenses - 6,679
Net investment income allocated from Belvedere Capital (2,480,444) (2,889,810)
Increase in dividends receivable (3,984,219) (2,510,938)
Increase (decrease) in interest payable for open swap contracts (21,512) 384,185
Decrease in escrow deposits 3,021,832 3,160,564
Decrease in other assets 255,283 19,719
Decrease in accrued property taxes (2,258,582) (1,737,933)
Decrease in security deposits, accrued expenses and other
liabilities (1,093,073) (251,566)
Increase in minority interest - 210,000
Payments for investments in other real estate - (48,651,593)
Proceeds from sales of investments in other real estate - 49,080,499
Improvements to rental property (595,182) (2,491,053)
Net decrease in investment in Belvedere Capital 4,538,926 3,040,410
Decrease in short-term investments 3,335,722 4,057,378
Minority interest in net income of controlled subsidiary 114,392 243,400
------------------- ------------------
Net cash flows from operating activities $ 1,058,862 $ 1,468,661
Cash Flows For Financing Activities -
Payments on mortgages $ (356,437) $ (333,132)
Payment on note payable to minority shareholder (134,028) -
Payments for Fund Shares redeemed (916,026) (1,425,891)
------------------- ------------------
Net cash flows used for financing activities $(1,406,491) $(1,759,023)
Net decrease in cash $ (347,629) $ (290,362)
Cash at beginning of period $ 1,658,511 $ 2,256,168
------------------- ------------------
Cash at end of period $ 1,310,882 $ 1,965,806
=================== ==================
See notes to consolidated financial statements
7
BELMAR CAPITAL FUND LLC
Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months Three Months
Supplemental Disclosure and Non-cash Investing and Ended Ended
Financing Activities- March 31, 2002 March 31, 2001
Change in unrealized appreciation (depreciation) of investments and
open swap contracts $35,740,218 $(273,974,976)
Interest paid for loan $ 3,707,607 $ 9,778,069
Interest paid for mortgages $ 3,706,234 $ 3,752,905
Interest paid for swap contracts $10,219,343 $ 3,750,494
Market value of securities distributed in payment of redemptions $10,125,545 $ 25,494,215
See notes to consolidated financial statements
8
BELMAR CAPITAL FUND LLC as of March 31, 2002
Consolidated Financial Statements (Continued)
FINANCIAL HIGHLIGHTS (UNAUDITED)
For the Three Months Ended March 31, 2002
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Net asset value - Beginning of period $87.370
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- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS
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Net investment income(6) $ 0.006
Net realized and unrealized gain 0.964
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TOTAL INCOME FROM OPERATIONS $ 0.970
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- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value - End of Period $88.340
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TOTAL RETURN(1) 1.11%
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AS A PERCENTAGE AS A PERCENTAGE
OF AVERAGE NET OF AVERAGE GROSS
RATIOS ASSETS (5)(9) ASSETS (4)(5)(9)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses of Consolidated Real Property Subsidiaries
Interest expense and other borrowing costs (7) 0.58% 0.42%
Operating expenses(7) 0.68% 0.48%
Belmar Capital Fund LLC Expenses
Interest and other borrowing costs(8) 2.69% 1.94%
Investment advisory and administrative fees,
servicing fees and other Fund operating
expenses(2)(8) 1.16% 0.84%
-----------------------------------------------------
Total expenses(3) 5.11% 3.68%
Net investment income(3) 0.03% 0.02%
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SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (000's omitted) $2,120,982
Portfolio Turnover of Tax-Managed Growth Portfolio 5%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) 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.
(2) Ratio includes Belmar Capital Fund LLC's share of Belvedere Capital's
allocated expenses, including those expenses allocated from the Portfolio.
(3) 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
5.21% and 3.75%, respectively, and the ratios of net investment loss to
average net assets and average gross assets would have been (0.07)% and
(0.05)%, respectively.
(4) Average Gross Assets is defined as the average daily amount of all assets
of Belmar Capital Fund LLC (not including its investment in Belmar 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 interests therein of investors other than
BRC.
(5) For the purpose of calculating ratios, the income and expenses of BRC's
controlled subsidiaries are reduced by the proportionate interests therein
of investors other than BRC.
(6) Calculated using average shares outstanding.
(7) Ratio includes BRC's proportional share of expenses incurred by its
majority-owned subsidiary.
(8) Ratio includes the expenses of Belmar Capital Fund LLC and BRC, for which
Belmar Capital Fund LLC owns 100% of the outstanding common stock. The
ratio does not include expenses of other real estate subsidiaries.
(9) Annualized.
See notes to consolidated financial statements
9
BELMAR CAPITAL FUND LLC as of March 31, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1 Basis of Presentation
The condensed consolidated interim financial statements of Belmar Capital Fund
LLC (Belmar Capital) and its subsidiaries (collectively, the "Fund") have been
prepared by the Fund, without audit, in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted as permitted by such rules and regulations. All adjustments, consisting
of normal recurring adjustments, have been included. Management believes that
the disclosures are adequate to present fairly the financial position, results
of operations, cash flows and financial highlights at the dates and for the
periods presented. It is suggested that these interim financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Fund's latest annual report on Form 10-K. Results for interim periods are
not necessarily indicative of those to be expected for the full fiscal year.
The balance sheet at December 31, 2001, has been derived from the December 31,
2001 audited financial statements but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements as permitted by the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Certain amounts in the prior period's consolidated financial statements have
been reclassified to conform with the current year presentation.
2 Estate Freeze
Shareholders in Belmar Capital are entitled to restructure their Fund Share
interests under what is termed an Estate Freeze Election. Under this election,
Fund Shares are divided into Preferred Shares and Common Shares. Preferred
Shares have a preferential right over the corresponding Common Shares equal to
(i) 95% of the original capital contribution made in respect of the undivided
Shares from which the Preferred Shares and Common Shares were derived, plus (ii)
an annuity priority return equal to 8.5% of the Preferred Shares' preferential
interest in the original capital contribution of the undivided Fund Shares. The
associated Common Shares are entitled to the remaining 5% of the original
capital contribution in respect of the undivided Shares, plus any returns
thereon in excess of the fixed annual priority of the Preferred Shares. At March
31, 2002 and December 31, 2001, the Preferred Shares were valued at $88.34 and
$87.37, respectively, and the Common Shares had no value. The existence of
restructured Fund Shares does not adversely affect Shareholders who do not
participate in the election nor do the restructured Fund Shares have
preferential rights to Fund Shares that have not been restructured. Shareholders
who subdivide Fund Shares under this election sacrifice certain rights and
privileges that they would otherwise have with respect to the Fund Shares so
10
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.
3 Investment Transactions
Increases and decreases of the Fund's investment in Belvedere Capital Fund
Company LLC (Belvedere Capital) for the three months ended March 31, 2002
aggregated $12,045,414 and $26,709,874, respectively, and for the three months
ended March 31, 2001 aggregated $15,060,009 and $43,594,634, respectively. There
were no purchases and sales of Partnership Preference Units for the three months
ended March 31, 2002 and March 31, 2001, respectively. For the three months
ended March 31, 2002, there were no acquisitions and sales of other real
property and for the three months ended March 31, 2001, acquisitions and sales
of other real property aggregated $48,651,593 and $49,080,499, respectively.
Sales of other real estate property during the three months ended March 31, 2001
were made to other funds sponsored by Eaton Vance Management.
4 Indirect Investment in Portfolio
Belvedere Capital's interest in Tax-Managed Growth Portfolio (the Portfolio) at
March 31, 2002, was $10,618,305,771 representing 56.5% of the Portfolio's net
assets and at March 31, 2001 was $9,248,868,309 representing 54.7% of the
Portfolio's net assets. The Fund's investment in Belvedere Capital at March 31,
2002 was $2,132,045,602, representing 20.1% of Belvedere Capital's net assets
and at March 31, 2001 was $2,176,644,308, representing 23.5% of Belvedere
Capital's net assets. Investment income allocated to Belvedere Capital from the
Portfolio for the three months ended March 31, 2002 totaled $27,289,011, of
which $5,626,497 was allocated to the Fund. Investment income allocated to
Belvedere Capital from the Portfolio for the three months ended March 31, 2001
totaled $25,944,565, of which $6,408,269 was allocated to the Fund. Expenses
allocated to Belvedere Capital from the Portfolio for the three months ended
March 31, 2002 totaled $11,408,561, of which $2,347,879 was allocated to the
Fund. Expenses allocated to Belvedere Capital from the Portfolio for the three
months ended March 31, 2001 totaled $10,657,687, of which $2,627,082 was
allocated to the Fund. Belvedere Capital allocated additional expenses to the
Fund of $798,174 for the three months ended March 31, 2002, representing $20,422
of operating expenses and $777,752 of service fees. Belvedere Capital allocated
additional expenses to the Fund of $891,377 for the three months ended March 31,
2001, representing $22,794 of operating expenses and $868,583 of service fees.
A summary of the Portfolio's Statement of Assets and Liabilities, at March 31,
2002, December 31, 2001 and March 31, 2001 and its operations for the three
months ended March 31, 2002, the year ended December 31, 2001 and for the three
months ended to March 31, 2001 follows:
March 31, December 31, March 31,
2002 2001 2001
---------------------- ---------------------- ---------------------
Investments, at value $18,699,529,315 $18,312,992,768 $16,937,423,532
Other Assets 137,094,099 23,229,223 32,010,878
- ----------------------------------- ---------------------- ---------------------- ---------------------
Total Assets $18,836,623,414 $18,336,221,991 $16,969,434,410
Total Liabilities 54,877,430 357,011 59,756,296
- ----------------------------------- ---------------------- ---------------------- ---------------------
Net Assets $18,781,745,984 $18,335,864,980 $16,909,678,114
=================================== ====================== ====================== =====================
Dividends and interest $ 48,561,319 $ 192,367,081 $ 48,190,173
11
- ----------------------------------- ---------------------- ---------------------- ---------------------
Investment adviser fee $ 19,634,596 $ 76,812,367 $ 19,128,089
Other expenses 654,041 2,161,015 640,516
- ----------------------------------- ---------------------- ---------------------- ---------------------
Total expenses $ 20,288,637 $ 78,973,382 $ 19,768,605
- ----------------------------------- ---------------------- ---------------------- ---------------------
Net investment income $ 28,272,682 $ 113,393,699 $ 28,421,568
Net realized gains (losses) (111,417,095) (360,120,300) 52,532,750
Net change in unrealized gains
(losses) 229,264,275 (1,605,211,090) (2,205,600,689)
- ----------------------------------- ---------------------- ---------------------- ---------------------
Net increase (decrease) in net
assets from operations $ 146,119,862 $(1,851,937,691) $(2,124,646,371)
- ----------------------------------- ---------------------- ---------------------- ---------------------
5 Cancelable Interest Rate Swap Agreements
Belmar Capital has entered into cancelable interest rate swap agreements in
connection with its real estate investments and the associated borrowings. Under
such agreements Belmar Capital has agreed to make periodic payments at fixed
rates in exchange for payments at floating rates. The notional or contractual
amounts of these instruments may not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with these
investments is meaningful only when considered in conjunction with all related
assets, liabilities and agreements. As of March 31, 2002 and December 31, 2001,
Belmar Capital has entered into cancelable interest rate swap agreements with
Merrill Lynch Capital Services, Inc.
Notional Initial Unrealized Unrealized
Amount Optional Final Depreciation Depreciation
Effective (000's Fixed Floating Termination Termination At March 31, At December 31,
Date omitted) Rate Rate Date Date 2002 2001
- --------------- ------------ ---------- ------------------ --------------- ---------------- ----------------- ---------------------
3/00 $27,500 8.96% Libor + 0.40% 3/05 3/30 $(2,096,914) $(2,436,531)
3/00 19,146 9.09% Libor + 0.40% 4/04 3/30 (1,280,183) (1,532,942)
3/00 43,181 9.20% Libor + 0.40% 6/03 3/30 (2,252,240) (2,837,702)
3/00 21,766 9.24% Libor + 0.40% 4/03 3/30 (1,048,760) (1,342,028)
3/00 38,102 9.11% Libor + 0.40% 2/04 3/30 (2,438,722) (2,949,577)
3/00 20,659 9.13% Libor + 0.40% 11/03 3/30 (1,232,690) (1,511,706)
3/00 23,027 9.05% Libor + 0.40% 7/04 3/30 (1,608,596) (1,907,179)
5/00 10,773 9.54% Libor + 0.40% 4/03 3/30 (589,798) (751,770)
5/00 12,984 9.50% Libor + 0.40% 6/03 3/30 (775,158) (970,355)
5/00 9,608 9.46% Libor + 0.40% 11/03 3/30 (673,322) (816,822)
5/00 13,274 9.42% Libor + 0.40% 2/04 3/30 (993,158) (1,187,688)
5/00 12,063 9.38% Libor + 0.40% 4/04 3/30 (937,460) (1,110,698)
5/00 10,799 9.35% Libor + 0.40% 7/04 3/30 (885,537) (1,037,073)
5/00 41,185 9.31% Libor + 0.40% 9/04 3/30 (3,452,089) (4,018,391)
5/00 7,255 9.26% Libor + 0.40% 3/05 3/30 (656,660) (752,849)
7/00 22,982 9.17% Libor + 0.40% 2/03 3/30 (926,170) (1,221,975)
7/00 28,305 9.15% Libor + 0.40% 4/03 3/30 (1,302,669) (1,671,727)
7/00 32,404 9.13% Libor + 0.40% 6/03 3/30 (1,627,710) (2,056,481)
7/00 3,383 9.08% Libor + 0.40% 11/03 3/30 (196,141) (241,109)
7/00 12,062 9.00% Libor + 0.40% 2/04 3/30 (722,095) (878,731)
7/00 24,622 8.985% Libor + 0.40% 4/04 3/30 (1,543,348) (1,859,986)
7/00 9,184 8.97% Libor + 0.40% 7/04 3/30 (610,064) (726,630)
7/00 13,454 8.93% Libor + 0.40% 9/04 3/30 (907,118) (1,075,119)
7/00 17,888 8.87% Libor + 0.40% 3/05 3/30 (1,283,465) (1,500,071)
12
9/00 39,407 7.46% Libor + 0.40% - 9/10 (3,103,730) (3,940,610)
11/00 11,776 8.34% Libor + 0.40% 3/05 3/30 (507,349) (635,430)
11/00 2,338 8.41% Libor + 0.40% 9/04 3/30 (97,802) (123,704)
11/00 23,636 8.48% Libor + 0.40% 2/04 3/30 (895,319) (1,161,401)
11/00 20,265 8.60% Libor + 0.40% 6/03 3/30 (671,596) (894,183)
11/00 28,629 8.66% Libor + 0.40% 2/03 3/30 (795,817) (1,088,842)
- --------------- ------------ ---------- ------------------ --------------- ---------------- ----------------- ---------------------
Total $(36,111,680) $(44,239,310)
- --------------- ------------ ---------- ------------------ --------------- ---------------- ----------------- ---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2002, COMPARED TO THE
QUARTER ENDED MARCH 31, 2001
Belmar Capital Fund LLC and its subsidiaries (collectively, the Fund) achieved
total return performance of 1.11% for the quarter ended March 31, 2002. This
return reflects an increase in the Fund's net asset value per share from $87.37
to $88.34. For comparison, the Standard & Poors 500 Index (S&P 500), an
unmanaged index of large capitalization stocks commonly used as a benchmark for
the U.S. equity market, had a total return of 0.28% over the same period. For
comparison, at the end of the first quarter of 2001, the Fund's net asset value
per share decreased from $97.83 to $87.12, representing a -11.0% return versus
S&P 500's total return of -11.9%.
During the first quarter of 2002, the U.S. equity market's return was hampered
by continued volatility and economic uncertainty. In this difficult environment,
the performance of Tax-Managed Growth Portfolio (the Portfolio) exceeded that of
the overall market. The Portfolio correctly de-emphasized the two worst
performing sectors of the S&P 500: Information Technology and Telecom, which
lost -7.5% and -15.9% respectively. The Portfolio held the same cautious stance
on the aforementioned sectors in the first quarter of 2001. Value stocks in all
capitalization ranges outperformed their growth counterparts for the quarter
ending March 31, 2002. The Portfolio made a gradual shift to overweight in
Capital Goods, and increased its exposure to the Consumer Discretionary area
during the last year, which helped its performance. An increase in the exposure
to defense and aerospace names continued to be productive for the Portfolio.
In the fixed income markets, the first quarter benefited from a stable interest
rate environment and narrowing credit spreads. The Federal Reserve Board left
interest rates unchanged for the quarter ending March 31, 2002; the first
non-action since early 2000. Changes in valuation of the Fund's holdings of
Partnership Preference Units and other real estate investments had a modest
positive impact on the Fund's performance during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Fund has entered into interest rate swap agreements with respect to its
borrowings and real estate investments. Pursuant to these agreements, the Fund
makes periodic payments to the counterparty at predetermined fixed rates, in
exchange for floating-rate payments from the counterparty that fluctuate with
one-month LIBOR. During the terms of the outstanding swap agreements, changes in
the underlying values of the swaps are recorded as unrealized gains or losses.
13
As of March 31, 2002 and 2001, the unrealized depreciation related to the
interest rate swap agreements was $(36,111,680) and $(47,392,105), respectively.
CRITICAL ACCOUNTING POLICIES
The Fund's discussion and analysis of its financial condition and results of
operations are based upon the Fund's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Fund to make estimates, judgments and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. The Fund bases
these estimates, judgments and assumptions on historical experience and on other
various factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates under different assumptions or
conditions.
The Fund believes its more significant estimates and assumptions used in
preparation of its consolidated financial statements are affected by its
critical accounting policies for the Fund's investments in real estate and
interest rate swap contracts. Prices are not readily available for these types
of investments and therefore they are valued as determined in good faith by the
Investment Adviser on an ongoing basis.
In estimating the value of the Fund's investments in real estate, the Investment
Adviser takes 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 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. The Investment Adviser, in determining the
value of interest rate swaps, may consider among other things, dealer and
counter-party quotes and pricing models.
These policies involve significant judgments made, based upon without
limitation, general economic conditions, the supply and demand for different
types of real properties, the financial health of tenants, the timing of lease
expirations and terminations, fluctuations in rental rates and operating costs,
exposure to adverse environmental conditions and losses from casualty or
condemnation, interest rates, availability of financing, managerial performance
and government rules and regulations. The valuations of Partnership Preference
Units held by the Fund through its investment in Belmar Realty Corporation (BRC)
fluctuate over time to reflect, among other factors, changes in interest rates,
changes in perceived riskiness of such units (including call risk), changes in
the perceived riskiness of comparable or similar securities trading in the
public market and the relationship between supply and demand for comparable or
similar securities trading in the public market. 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. Fluctuations in the value of real estate
14
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Fund's primary exposure to interest rate risk arises from investments in
real estate that are financed using floating rate bank borrowings under a
revolving credit facility (the Credit Facility). The interest rate on borrowings
under the Fund's Credit Facility is reset at regular intervals based on the
Issuer's cost of financing plus a margin or 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. The interest rate swap
agreements are valued on an ongoing basis by the Investment Adviser. 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 Note 5 to the
consolidated financial statements.
Interest Rate Sensitivity
Principal (Notional) Amount by Contractual Maturity
For the Twelve Months Ended March 31,
2003-2006 2007 Thereafter Total Fair Value
-------- ------------ ----------------- ---------------- ----------------- ----------------
Rate sensitive
liabilities:
- -------------------
Long term debt
- - variable rate
Credit Facility $613,500,000 $613,500,000 $613,500,000
Average
interest rate 1.81% 1.81%
Rate sensitive
derivative
financial
instruments:
- -------------------
Pay fixed/
Receive
variable
interest rate
swap contracts $601,656,000 $601,656,000 $(36,111,680)
Average
pay rate 8.96% 8.96%
Average receive
rate 1.81% 1.81%
15
PART II. OTHER INFORMATION
ITEM 1. 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. THE FOLLOWING IS A LIST OF ALL EXHIBITS FILED AS PART OF THIS FORM 10Q:
(a) Exhibits
4 Copy of Revolving Credit and Security Agreement of Amendment thereto
dated as of March 15, 2002.
21 List of subsidiaries
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned officer of its Manager, Eaton Vance Management thereunto duly
authorized on May 15, 2002.
BELMAR CAPITAL FUND LLC
(Registrant)
By: EATON VANCE MANAGEMENT,
its Manager
By: /s/ James L. O'Connor
---------------------------------
James L. O'Connor
Vice President
By: /s/ William M. Steul
---------------------------------
William M. Steul
Chief Financial Officer
17
EXHIBIT INDEX
4 Copy of Revolving Credit and Security Agreement of Amendment thereto dated
as of March 15, 2002.
21 List of subsidiaries
18