SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10/A
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 86.
BELPORT CAPITAL FUND
Index to Form 10
ITEM PAGE
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1 Business.............................................................. 1
Fund Overview....................................................... 1
Structure of the Fund............................................. 1
Fund Management................................................... 1
The Fund's Offering............................................... 1
The Fund's Investment in Belvedere Capital Fund
Company LLC and Tax-Managed Growth Portfolio........................ 2
The Company....................................................... 2
The Portfolio..................................................... 2
The Portfolio's Investment Objective and Policies................. 2
The Portfolio's Tax Management Strategies......................... 2
The Fund's Real Estate Investments through
Belport Realty Corporation.......................................... 3
Real Estate Joint Venture Investments............................. 4
Partnership Preference Units...................................... 5
Organization of Belport Realty and the Real Estate
Joint Ventures.................................................... 5
Fund Borrowings..................................................... 6
Interest Rate Swap Agreements..................................... 6
The Eaton Vance Organization........................................ 6
2 Financial Information............................................... 8
Table of Selected Financial Data.................................. 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 9
Results of Operations............................................ 9
Fund Performance............................................... 10
Performance of the Portfolio................................... 10
Performance of Real Estate Investments......................... 10
Performance of Interest Rate Swaps............................. 11
Liquidity and Capital Resources.................................. 11
Outstanding Borrowings......................................... 11
Liquidity...................................................... 11
Quantitative and Qualitative Disclosures About
Market Risk........................................................ 11
Quantitative Information About Market Risk..................... 11
Interest Rate Risk........................................... 11
Qualitative Information About Market Risk...................... 13
Risks Associated with Equity Investing....................... 13
Risks of Investing in Foreign Securities..................... 14
Risks of Certain Investment Techniques....................... 14
Risks of Real Estate Investments............................. 15
Risks of Leverage............................................ 16
3 Properties......................................................... 16
4 Security Ownership of Certain Beneficial Owners and Management..... 16
Security Ownership of Certain Beneficial Owners................ 16
Security Ownership of Management............................... 17
Changes in Control............................................. 17
5 Directors and Executive Officers................................... 17
Directors and Executive Officers of Eaton Vance, Inc........... 17
6 Executive Compensation............................................. 18
The Fund's Investment Advisory and Administrative Fee.......... 18
Belport Realty's Management Fee................................ 18
The Portfolio's Investment Advisory Fee........................ 19
7 Certain Relationships and Related Transactions..................... 19
Selling Commissions............................................ 19
Servicing Fees Paid by the Company............................. 19
Servicing Fees Paid by the Fund................................ 19
Distribution Fee Paid to EV Distributors....................... 20
Redemption Fee................................................. 20
8 Legal Proceedings.................................................. 20
9 Net Asset Value of and Distributions on Fund Shares
and Related Shareholder Matters.................................... 20
Market Information, Restrictions on Transfers and
Redemption of Shares............................................ 20
Transfers of Fund Shares...................................... 20
Redemption of Fund Shares..................................... 21
Determining Net Asset Value................................... 22
Historic Net Asset Values..................................... 23
Record Holders of Shares of the Fund............................ 23
Distributions .................................................. 23
Income and Capital Gains Distributions........................ 23
Special Distributions......................................... 23
10 Recent Sales of Unregistered Securities............................ 24
11 Description of the Fund's Securities to be Registered.............. 24
General Description of Fund Shares............................. 24
Voting Rights ................................................. 25
Amending the LLC Agreement..................................... 25
12 Indemnification of the Manager and its Affiliates.................. 25
13 Financial Statements and Supplementary Data........................ 26
14 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures............................ 27
15 Financial Statements and Exhibits.................................. 27
FINANCIAL STATEMENTS........................................................ 28
SIGNATURES.................................................................. 85
EXHIBIT INDEX................................................................86
INFORMATION REQUIRED IN REGISTRATION STATEMENT
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ITEM 1. BUSINESS
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FUND OVERVIEW. Belport Capital Fund LLC (the "Fund") is a private investment
company organized to provide diversification and tax-sensitive investment
management to investors holding large and concentrated positions in equity
securities of selected public companies. The Fund's investment objective is to
achieve long-term, after-tax returns for persons who have invested in the Fund
("Shareholders"). The Fund, a Delaware limited liability company, commenced its
investment operations on March 14, 2001. Limited liability company interests of
the Fund ("Shares") were issued to Shareholders at five closings during 2001. At
each Fund closing, the Fund accepted contributions of stock from investors in
exchange for Shares of the Fund (the "exchange transaction"). The Fund
discontinued offering Shares on December 18, 2001 and no future offering is
anticipated.
STRUCTURE OF THE FUND. The Fund is structured to provide tax-free
diversification and tax-sensitive investment management to Shareholders. To meet
the objective of tax-free diversification, the Fund must satisfy specific
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). In
order for the contributions of appreciated stock to the Fund by Shareholders to
be nontaxable, not more than 80% of the Fund's assets (calculated in the manner
prescribed) may consist of "stocks and securities" as defined in the Code. To
meet this requirement, the Fund invests at least 20% of its assets as so
determined in certain real estate investments (see "The Fund's Real Estate
Investments through Belport Realty Corporation" below). The Fund invests up to
80% of its assets in a diversified portfolio of common stocks (see "The Fund's
Investment in Belvedere Capital Fund Company LLC & Tax-Managed Growth Portfolio"
below). The Fund acquires its real estate investments with borrowed funds, as
described below under "Fund Borrowings."
There is no trading market for the Fund's Shares. As described further under
"Redemption of Fund Shares" in Item 9(a), Fund Shares may be redeemed on any
business day. The Fund plans to satisfy redemption requests principally by
distributing securities, but may also distribute cash. The value of securities
and cash distributed to satisfy a redemption will equal the net asset value of
the number of Shares being redeemed (less any applicable redemption fees).
FUND MANAGEMENT. The manager of the Fund is Eaton Vance Management ("Eaton
Vance"), a Massachusetts business trust registered as an investment adviser.
Eaton Vance and its wholly-owned subsidiary, Boston Management and Research
("Boston Management"), provide management and advisory services to the Fund, its
real estate subsidiary and the investment portfolios in which the Fund invests.
Eaton Vance and Boston Management provide advisory, administration and/or
management services to over 170 investment companies, as well as individual and
institutional investors. As of December 31, 2001, Eaton Vance and its affiliates
managed approximately $55 billion on behalf of clients.
THE FUND'S OFFERING. Shares of the Fund were privately offered and sold only to
"accredited investors" as defined in Rule 501(a) under the Securities Act of
1933, as amended, (the "Securities Act") who were "qualified purchasers" (as
defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended
(the "1940 Act")). The offering was conducted by Eaton Vance Distributors, Inc.,
a wholly-owned subsidiary of Eaton Vance, ("EV Distributors") as placement agent
and by certain subagents appointed by EV Distributors. The Shares were offered
and sold in reliance upon an exemption from registration provided by Rule 506
under the Securities Act. 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.
THE FUND'S INVESTMENT IN BELVEDERE CAPITAL FUND COMPANY LLC AND TAX-MANAGED
GROWTH PORTFOLIO. At each Fund closing, all of the securities accepted for
contribution to the Fund were contributed by the Fund to Belvedere Capital Fund
Company LLC (the "Company"), a Massachusetts limited liability company, in
exchange for shares of the Company. The Company then contributed the securities
received from the Fund to Tax-Managed Growth Portfolio (the "Portfolio") in
exchange for an interest in the Portfolio. The Portfolio is 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. As of December
31, 2001, the Fund's investment in the Portfolio through the Company had a value
of $1.76 billion (equal to approximately 73.8% of the Fund's total assets on a
consolidated basis).
THE COMPANY. 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, the Fund owned approximately 17% of the Company's
outstanding shares. The other investors in the Company include four other
investment funds sponsored by the Eaton Vance organization, as well as qualified
individual investors who acquired shares of the Company in exchange for
portfolios of acceptable securities. Under the 1940 Act, the Fund is permitted
to invest through the Company in the Portfolio, but it does not satisfy the
conditions of the 1940 Act for investing directly in the Portfolio.
THE PORTFOLIO. The Portfolio was organized in 1995 as the 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. As of December 31, 2001, investors
in the Portfolio included seven investors in addition to the Company, four of
which acquire interests in the Portfolio with cash on a continuous basis. All
investors in the Portfolio are sponsored by or affiliated with Eaton Vance. As
of December 21, 2001, the Company owned approximately 56% of the Portfolio. The
Fund invests in the Portfolio because it is a well-established investment
portfolio that has an investment objective and policies that are compatible to
those of the Fund. Investing in the Portfolio enables the Fund to participate in
a substantially larger and more diversified investment portfolio than it could
achieve by managing the contributed securities directly.
THE PORTFOLIO'S INVESTMENT OBJECTIVE AND POLICIES. 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. 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. Under normal
market conditions, the Portfolio will invest primarily in common stocks. The
Portfolio acquires securities through contributions from the Company and by
purchasing securities with cash invested in the Portfolio by other investors.
Although the Portfolio may, in addition to investing in common stocks, 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.
THE PORTFOLIO'S TAX MANAGEMENT STRATEGIES. 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
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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 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. While the
Portfolio generally retains the securities contributed to the Portfolio by the
Company, the Portfolio has the flexibility to sell contributed securities.
Securities acquired by the Portfolio with cash may be sold in accordance with
the tax-management strategy described above. In lieu of selling a security, the
Portfolio may hedge its exposure to that security by using the techniques
described below. The Portfolio also disposes of contributed securities through
its practice of settling redemptions by a distribution of securities as
described in Item 9(a) under "Redemption of Fund Shares". As described in Item
9(a), settling redemptions with securities may result in certain tax benefits to
the Portfolio, the Company, the Fund and the redeeming Shareholder.
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, within certain limits, 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. During January 2001, the Portfolio held short positions on
three portfolio securities. The short positions were entered into during 2000
and at December 31, 2000 had a combined value equal to approximately 1% of the
Portfolio's net assets. The gain realized when the short positions were sold in
January, 2001 constituted less than 0.3% of the Portfolio's net assets as of
December 31, 2001. The Portfolio paid commissions totaling approximately
$113,000 in connection with the short sales. The Portfolio did not otherwise
employ any of the techniques described above during the year ended December 31,
2001.
THE FUND'S REAL ESTATE INVESTMENTS THROUGH BELPORT REALTY CORPORATION. Separate
from its investment in the Portfolio through the Company, the Fund invests in
certain real estate investments through its subsidiary, Belport Realty
Corporation ("Belport Realty"). As referred to above under "Fund Overview -
Structure of the Fund", the Fund invests in real estate investments to satisfy
certain requirements of the Code for contributions of appreciated stocks to the
Fund by Shareholders to be nontaxable. As of December 31, 2001, the consolidated
real estate assets of Belport Realty totaled $611.12 million. The Fund's
consolidated real estate assets represented 25.6% of the Fund's assets on a
consolidated basis at December 31, 2001. The Fund acquires its real estate
investments with borrowed funds, as described below under "Fund Borrowings". The
Fund seeks a return on its real estate investments over the long-term that
exceeds the cost of the borrowings incurred to acquire such investments.
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At December 31, 2001, Belport Realty invested primarily in real estate joint
ventures ("Real Estate Joint Ventures") that are controlled by Belport Realty
and in a portfolio of income-producing preferred equity interests in real estate
operating partnerships that generally are affiliated with and controlled by real
estate investment trusts ("REITs") that are publicly traded ("Partnership
Preference Units"). As of December 31, 2001, approximately 85% of the
consolidated assets of Belport Realty were assets of Real Estate Joint Ventures
and approximately 15% were investments in Partnership Preference Units.
In the future, Belport Realty may invest in other types of real estate
investments, such as interests in real properties subject to long-term leases.
Belport Realty may purchase real estate investments from, and sell them to,
other investment funds sponsored by the Eaton Vance organization and REIT
subsidiaries of such investment funds that are similar to Belport Realty. Boston
Management serves as manager of Belport Realty. The two Real Estate Joint
Ventures and the Partnership Preference Units owned by Belport Realty at
December 31, 2001 were acquired from such REIT subsidiaries. Boston Management
serves as Manager of Belport Realty. In that capacity, Boston Management manages
the investment and reinvestment of Belport Realty's assets and administers its
affairs.
REAL ESTATE JOINT VENTURE INVESTMENTS. At December 31, 2001, Belport Realty
owned a controlling interest in two Real Estate Joint Ventures, Bel Multifamily
Property Trust ("Bel Multifamily") and Monadnock Property Trust LLC
("Monadnock"). During 2001, Belport Realty owned a controlling interest in a
third Real Estate Joint Venture that was sold during the year to a REIT
subsidiary of another investment fund sponsored by the Eaton Vance organization
for a gain of $438,595.
The day-to-day operating management of each Real Estate Joint Venture is
provided by the real estate operating company (the "Operating Partner") that is
the principal minority investor in the Real Estate Joint Venture. A board of
directors or trustees controlled by Belport Realty oversees the performance of
the Operating Partner and controls the major decisions of the Real Estate Joint
Venture.
The assets of the Real Estate Joint Ventures consist of multi-family residential
properties acquired from or in conjunction with the Operating Partner of the
Real Estate Joint Venture. Distributable cash flows from each Real Estate Joint
Venture are allocated in a manner that provides Belport Realty: 1) a priority
position versus the Operating Partner with respect to a fixed annual preferred
return; and 2) participation on a pro rata or reduced basis in distributable
cash flows in excess of the annual preferred return of Belport Realty and a
subordinated preferred return of the Operating Partner. Financing for the Real
Estate Joint Ventures consists primarily of fixed-rate secured mortgage debt
obligations of the Real Estate Joint Ventures that generally are without
recourse to Belport Realty and the Fund. Both Belport Realty and the Operating
Partner invested equity in the Real Estate Joint Ventures. Belport Realty's
equity in the Real Estate Joint Ventures was acquired using the proceeds of Fund
borrowings.
The Operating Partner of Bel Multifamily is ERP Operating Limited Partnership
("ERP"), an affiliate of Equity Residential. Equity Residential is a publicly
owned, self-administered and self-managed REIT. As of December 31, 2001, Equity
Residential owned or had interests in a portfolio of 1,076 multi-family
properties containing 224,801 apartment units. Equity Residential's corporate
headquarters are located in Chicago, Illinois. Equity Residential's common
shares are traded on the New York Stock Exchange under the symbol "EQR". ERP
owns 25% of the issued and outstanding shares of Bel Multifamily that are
entitled to vote for election of trustees of Bel Multifamily.
The Operating Partner of Monadnock is Archstone-Smith Operating Trust.
Archstone-Smith Trust ("Archstone"), the sole trustee of Archstone-Smith
Operating Trust, is a publicly owned REIT focused on the operation, development,
redevelopment, acquisition and long-term ownership of garden apartment
communities and high-rise apartment properties in the United States. As of
December 31, 2001, Archstone's properties consisted of 176 garden properties and
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49 high-rise properties, representing a total of 79,982 units, including 2,812
units in development. Archstone's corporate headquarters are located in
Englewood, Colorado. Archstone is traded on the New York Stock Exchange under
the symbol "ASN". Archstone owns 25% of the issued and outstanding shares of
Monadnock that are entitled to Board representation.
The Real Estate Joint Ventures include a buy/sell provision that can be
activated by either Belport Realty or the Operating Partner after a fixed period
of years. Pursuant to the buy/sell provision entered into at the time Bel
MultiFamily was established, either Belport Realty or the Bel MultiFamily
Operating Partner 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 has a similar buy-sell provision, between Belport
Realty and the Monadnock Operating Partner. The Monadnock buy/sell provision can
be invoked after September 13, 2010.
A purchase or sale pursuant to a buy/sell provision would be made at a
negotiated price. The agreement containing the buy/sell provision applicable to
a Real Estate Joint Venture continues indefinitely, but could be terminated upon
the receipt of the requisite approval of the owners of the voting interests in
the Real Estate Joint Venture. The sale to Belport Realty by the Operating
Partner of the Operating Partner's interest in Bel Multifamily or Monadnock
would not affect the REIT qualification of Bel Multifamily or Monadnock,
respectively. If Belport Realty were to dispose of its interest in a Real Estate
Joint Venture pursuant to a buy/sell provision, it may acquire a different real
estate investment to replace the investment sold.
PARTNERSHIP PREFERENCE UNITS. Each issue of Partnership Preference Units held by
Belport Realty pays regular quarterly distributions at fixed rates. None of the
issues of Partnership Preference Units is or will be registered under the
Securities Act and each issue is thus subject to restrictions on transfer.
Partnership Preference Units that might be acquired by Belport Realty 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. The Partnership
Preference Units owned by Belport Realty as of December 31, 2001 are described
in the Consolidated Portfolio of Investments included in the Fund's Financial
Statements, which are incorporated by reference into Item 13.
Belport Realty will acquire Partnership Preference Units issued by partnerships
that are not publicly-traded partnerships within the meaning of Code Section
7704(b). When acquired, Partnership Preference Units will have a remaining life
of at least five years (subject to earlier call provisions) and will not, by
their terms, be readily convertible or exchangeable into cash or securities of
the affiliated public company. It is anticipated that substantially all of the
assets of the issuing partnerships will consist of direct or indirect ownership
interests in real properties, and that holders of Partnership Preference Units
will receive regular distributions from the net profits of such partnerships and
will have a preferred interest therein.
ORGANIZATION OF BELPORT REALTY AND THE REAL ESTATE JOINT VENTURES. Belport
Realty and each Real Estate Joint Venture operate in such a manner as to qualify
for taxation as a REIT under the Code. As REITs, Belport Realty and each Real
Estate Joint Venture generally are not subject to federal income tax on that
portion of their ordinary income or taxable gain that is distributed to
stockholders each year. The Fund owns 100% of the common stock issued by Belport
Realty, and intends to hold all of Belport Realty's common stock at all times.
Belport Realty and the respective Operating Partner own all of the common shares
or similar interests of each Real Estate Joint Venture.
Belport Realty and each Real Estate Joint Venture also have issued preferred
shares to satisfy certain requirements of the Code relating to qualification as
a REIT. The preferred shares of each such entity are owned by approximately 105
charitable organizations. As of December 31, 2001, the total value of the
preferred shares of each of Belport Realty, Bel Multifamily and Monadnock was
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$210,000, $220,000 and $216,000, respectively. The dividend rate for issued and
outstanding preferred shares is 8% per year. The dividends paid on preferred
shares have priority over payments on common shares. For the period from March
14, 2001 to December 31,2001, Belport Realty, Bel Multifamily and Monadnock paid
distributions to preferred shareholders of $15,792, $8,968 and $8,805,
respectively.
FUND BORROWINGS. The Fund's investments in Partnership Preference Units and its
equity in Real Estate Joint Ventures held through Belport Realty are financed
using borrowings under a revolving securitization facility (the "Commercial
Paper Facility") of up to $250 million with two special purpose commercial paper
issuers affiliated with Citicorp North America, Inc. ("Citicorp") (the "CP
Issuers") and 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
substantially all 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. As described above, financing for the Real
Estate Joint Ventures consists primarily of fixed-rate secured mortgage debt
obligations of the Real Estate Joint Ventures that generally are without
recourse to Belport Realty and the Fund.
INTEREST RATE SWAP AGREEMENTS. 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 Belport Realty's equity in Bel Multifamily.
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 approximately 6.0% per annum in exchange for floating rate
payments from Citibank that equal one-month LIBOR plus approximately 0.40%.
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 Belport Realty's equity in Monadnock
and Belport Realty'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 equal one-month LIBOR plus 0.40%. The
swap agreements entered into with respect to Belport Realty's equity in
Monadnock 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 Belport Realty's investments 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 EATON VANCE ORGANIZATION. The Eaton Vance organization sponsors the Fund.
Eaton Vance serves as the Fund's manager. Boston Management serves as the Fund's
investment adviser and as manager of Belport Realty. EV Distributors served as
the Fund's placement agent. The Fund's business affairs are conducted by Eaton
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Vance (as its manager) and its investment operations are conducted by Boston
Management (as its adviser). The Fund's officers are employees of Eaton Vance.
Eaton Vance, Boston Management and EV Distributors are indirect wholly-owned
subsidiaries of Eaton Vance Corp. ("EVC"), a publicly-held holding company,
which through its affiliates and subsidiaries engages primarily in investment
management, administration and marketing activities.
As noted above, the Fund pursues its objective primarily by investing in the
Company. The Company invests exclusively in the Portfolio. Boston Management
acts as investment adviser of the Portfolio and manager of the Company. EV
Distributors acts as placement agent for the Company and the Portfolio. As of
December 31, 2001, the assets of the Fund represented approximately 4% of assets
under management by Eaton Vance and its affiliates. The offices of the Fund,
Eaton Vance, Boston Management and EV Distributors are located at 255 State
Street, Boston, Massachusetts 02109.
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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. The consolidated
data referred to below reflects the Fund's results for the period from March 14,
2001 through December 31, 2001. The other consolidated data referred to below is
as of December 31, 2001.
Period Ended/As of
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
Net decrease in net assets from operations per Share ($1.604)
Distribution paid per Share $0.00*
* Special Distributions of $0.062 per Share were paid. Special Distributions
are not made on a pro rata basis. See Item 9(c).
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS.
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SOME OF THE INFORMATION IN THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. FORWARD-LOOKING
STATEMENTS TYPICALLY ARE IDENTIFIED BY USE OF TERMS SUCH AS "MAY", "WILL",
"SHOULD", "MIGHT", "EXPECT", "ANTICIPATE", "ESTIMATE" AND SIMILAR WORDS,
ALTHOUGH SOME FORWARD-LOOKING STATEMENTS ARE EXPRESSED DIFFERENTLY. THE FUND'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE CONTAINED IN THE
FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF FACTORS. THE FUND UNDERTAKES NO
OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY
APPLICABLE LAW. FACTORS THAT COULD AFFECT THE FUND'S PERFORMANCE INCLUDE A
DECLINE IN THE U.S. STOCK MARKETS OR IN GENERAL ECONOMIC CONDITIONS, ADVERSE
DEVELOPMENTS EFFECTING THE REAL ESTATE INDUSTRY OR AN INCREASE IN INTEREST
RATES. SEE "QUALITATIVE INFORMATION ABOUT MARKET RISK" BELOW.
The following discussion should be read in conjunction with the Fund's
consolidated financial statements and related notes located elsewhere in this
filing.
RESULTS OF OPERATIONS. 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 Belport Realty and any direct investments
of the Fund. Expenses of the Fund include the expenses of Belport Realty and the
Real Estate Joint Ventures, the Fund's proportionate share of the expenses of
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 Fund borrowings. Fund borrowings are used primarily to finance the purchase
of real estate investments through Belport Realty.
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 Belport Realty and the Fund's
interest rate swap agreements. 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 value of Partnership Preference
Units and, to a lesser degree, the Real Estate Joint Ventures held through
Belport Realty and the Fund's positions in interest rate swap agreements,
movements in interest rates also affect the performance of the Fund. Because
Partnership Preference Units are fixed rate instruments, an increase in interest
rates generally will cause a decline in their value and a decrease in interest
rates generally will cause an increase in their value. The Fund's interest rate
swaps generally will increase in value when interest rates rise and decrease in
value when rates fall.
9
FUND PERFORMANCE(1). 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
- -3.06% over the same period(2). The combined impact on performance of the Fund's
investments and activities outside of the Portfolio was modestly negative for
the period ended December 31, 2001. The performance of the Fund trailed that of
the Portfolio by approximately 0.49%.
PERFORMANCE OF THE PORTFOLIO. 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 U.S. equity markets moved dramatically lower through much of the
year. The tragic events of September 11, 2001 served to accelerate the downward
trend. 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%).
In this difficult environment, the Portfolio's performance exceeded that of the
overall market. The Portfolio's sector allocation and stock selection
contributed to the Portfolio's relative out-performance. In the absence of clear
sector leadership, management chose to overweight defensive sectors such as the
consumer staples and consumer discretionary sectors. Lack of earnings visibility
and continued volatility in the market steered the Portfolio to de-emphasize
technology and telecommunication related holdings. An emphasis on industrial
company investments, especially within aerospace and defense, aided the
Portfolio's performance.
PERFORMANCE OF REAL ESTATE INVESTMENTS. For the period ended December 31, 2001,
the Fund's real estate operations (conducted through Real Estate Joint Ventures)
achieved operating results that were consistent with expectations. Rental income
of $41.87 million and operating expenses (before debt service) of $15.77 million
were both generally in line with plan. Toward the end of the year, Real Estate
Joint Venture operations were affected by deteriorating multifamily market
fundamentals in a number of different regions. By year-end, overall Real Estate
Joint Venture occupancy levels were falling and rent concessions were on the
rise. Given the weakening market conditions at year-end and the uncertain
outlook for the U.S. economy as a whole, expectations are for operating results
in 2002 to be modestly below the levels of 2001.
As of December 31, 2001, the fair value of the Fund's interest in real
properties held through Real Estate Joint Ventures was $518.62 million. Despite
weaker market conditions, asset values for multifamily properties have generally
been maintained as decreases in capitalization rates have offset declining
income levels.
For the period ended December 31, 2001, the values of the Fund's investments in
Partnership Preference Units generally benefited from declining interest rates
and tightening spreads in income-oriented securities, particularly in real
estate-related securities. The fair value of the Fund's Partnership Preference
Units was $92,501,000 at December 31, 2001. Dividends earned from the
Partnership Preference Units equaled approximately $2,114,000 for the period
ended December 31, 2001. As of such date, dividend payments on Partnership
Preference Units were current and there were no accumulated and unpaid
distributions.
(1) Past Performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original value.
(2) Investors cannot invest directly in an Index.
10
PERFORMANCE OF INTEREST RATE SWAPS. For the period ended December 31, 2001, the
fair value of the Fund's interest rate swap agreements declined by approximately
$2,344,000. This decline in value was the result of a decline in interest rates
during the period.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
OUTSTANDING BORROWINGS. 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 purpose in the future. The Credit Facility will also provide for
any short-term liquidity needs of the Fund. In the future, the Fund may increase
the size of the Credit Facility (subject to lender consent) and the amount of
outstanding borrowings thereunder for these purposes.
As of December 31, 2001, Monadnock had outstanding borrowings consisting of
fixed-rate secured mortgage debt obligations of $217.3 million. As of such date,
Bel Multifamily had outstanding borrowings consisting of fixed-rate secured
mortgage debt obligations of $143.8 million.
LIQUIDITY. The Fund may redeem shares of the Company at any time. Both the
Company and the Portfolio normally follow the practice of satisfying redemptions
by distributing securities drawn from the Portfolio. The Company and the
Portfolio may also satisfy 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, illiquid assets
(consisting of restricted securities not available for current public sale)
constituted 2.0% of the net assets of the Portfolio, compared to 2.7% as of
December 31, 2000.
The liquidity of Belport Realty's Real Estate Joint Venture investments is
extremely limited, and relies principally upon buy/sell arrangements with the
Operating Partners that may be exercised after a specified period (up to ten
years) after the formation of the Real Estate Joint Ventures. Transfers of
Belport Realty's interest in the Real Estate Joint Ventures to parties other
than the relevant Operating Partner are restricted by terms of the operating
management agreements, buy/sell arrangements with the Operating Partners, and
lender consent requirements. The Partnership Preference Units held by Belport
Realty are not registered under the Securities Act and are subject to
substantial restrictions on transfer. As such, they are illiquid.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
QUANTITATIVE INFORMATION ABOUT MARKET RISK
- ------------------------------------------
INTEREST RATE RISK. The Fund's primary exposure to interest rate risk arises
from its real estate investments that are financed by the Fund with floating
rate borrowings under the Credit Facility and by fixed-rate secured mortgage
debt obligations of the Real Estate Joint Ventures. The interest rate on
borrowings under the Fund's Credit Facility is reset at regular intervals based
11
on the CP Issuers' cost of financing plus a margin of one-month LIBOR plus a
premium. The Fund utilizes cancelable interest rate swap agreements to fix the
cost of its borrowings under the Credit Facility and to mitigate the impact of
interest rate changes on the Fund's net asset value. Under the terms of the
interest rate swap agreements, the Fund makes cash payments at fixed rates in
exchange for floating rate payments that fluctuate with one-month LIBOR. In the
future, the Fund may use other interest rate hedging arrangements (such as caps,
floors and collars) to fix or limit borrowing costs. The use of interest rate
hedging arrangements is a specialized activity that may be considered
speculative and which can expose the Fund to significant loss.
The value of Partnership Preference Units and, to a lesser degree, Real Estate
Joint Ventures is sensitive to interest rate risk. Increases in interest rates
generally will have an adverse affect on the value of Partnership Preference
Units and Real Estate Joint Ventures.
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.
12
Interest Rate Sensitivity
Cost, Principal (Notional) Amount by Contractual Maturity
For the Twelve Months Ended December 31,
2002-2006 Thereafter Total Fair Value
-----------------------------------------------------
Rate sensitive
Liabilities:
- --------------------------
Long-term debt:
- --------------------------
Fixed-rate mortgages $361,107,500 $361,107,500 $361,107,500
Average interest rate 6.78% 6.78%
- --------------------------
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:
- --------------------------
Pay fixed/
Receive variable interest
rate swap contracts $338,534,000 $338,534,000 $(2,344,008)
Average pay rate 6.16% 6.16%
Average receive rate 2.62% 2.62%
- --------------------------------------------------------------------------------
Rate sensitive
investments:
- --------------------------
Fixed-rate Partnership
Preference Units:
- --------------------------
Essex Portfolio, L.P.
7.875%, Series B
Cumulative Redeemable $34,821,763 $34,821,763 $35,162,050
Preferred Units,
Callable 2/6/03, Current
Yield: 9.80%
PSA Institutional
Partners, L.P. 9.50%,
Series N Cumulative $34,905,000 $34,905,000 $35,050,100
Redeemable Perpetual
Preferred Units, Callable
3/17/05, Current Yield:
8.82%
Prentiss Properties
Acquisition Partners, L.P. $22,687,060 $22,687,060 $22,333,850
8.30%, Series B
Cumulative Redeemable
Perpetual Preferred Units,
Callable 6/25/03, Current
Yield: 10.22%
- --------------------------------------------------------------------------------
QUALITATIVE INFORMATION ABOUT MARKET RISK
- -----------------------------------------
RISKS ASSOCIATED WITH EQUITY INVESTING. The value of Fund Shares may not
increase and 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
13
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.
RISK OF INVESTING IN FOREIGN 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 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. 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 achieve 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 Credit 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 1940 Act and because other investors in
14
the Portfolio are regulated investment companies under Subchapter M of the 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.
RISKS OF REAL ESTATE INVESTMENTS. The success of Belport Realty's real estate
investments 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, fluctuations in interest rates,
availability of financing, managerial performance, government rules and
regulations, and acts of God (whether or not insured against).
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 owned by the Real
Estate Joint Ventures are located. 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.
The debt of the Real Estate Joint Ventures is fixed-rate, secured by the
underlying properties and with limited recourse to Belport Realty. 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 Real Estate Joint Venture assets. There can be no assurance that
Belport Realty's ownership of real estate investments will be an economic
success.
The success of investments in Partnership Preference Units depends 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. Belport Realty's interests in Real Estate Joint Ventures and
Partnership Preference Units are not registered under the federal securities
laws and are subject to restrictions on transfer. Due to their illiquidity, they
may be difficult to value and the ongoing value of the investments is uncertain.
Because the Partnership Preference Units are not rated by a
nationally-recognized rating agency, they may be subject to more credit risk
than securities that are rated investment grade.
The ongoing value of Belport Realty's investments in Real Estate Joint Ventures
will be substantially uncertain. Belport Realty'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
valuations include many assumptions, including, but not limited to, an orderly
disposition of assets, values may differ from amounts ultimately realized.
Investments in Partnership Preference Units will be valued primarily by
referencing market trading prices for comparable preferred equity securities or
other fixed-rate instruments having similar investment characteristics. The
valuations of Partnership Preference Units fluctuate over time to reflect, among
15
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. Fluctuations
in the value of Partnership Preference Units derived from changes in general
interest rates can be expected to be offset in part (but not entirely) by
changes in the value of interest rate swap agreements or other interest rate
hedges entered into by the Fund with respect to its borrowings under the Credit
Facility.
Fluctuations in the value of Partnership Preference Units and Real Estate Joint
Venture equity that are 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 value 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.
RISKS OF LEVERAGE. 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 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 under the Credit Facility are 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. In addition, the
rights of lenders under the mortgages used to finance Real Estate Joint Venture
properties are senior to Belport Realty's right to receive distributions from
Real Estate Joint Ventures.
ITEM 3. PROPERTIES.
- --------------------
The Fund does not own any physical properties, other than indirectly through
Belport Realty's investments in Partnership Preference Units and Real Estate
Joint Ventures. At December 31, 2001, Belport Realty owned a majority interest
in two Real Estate Joint Ventures, Bel Multifamily and Monadnock, whose assets
are reflected in the consolidated financial statements of the Fund. Bel
Multifamily owns eleven multi-family residential properties located in seven
states (Washington, Missouri, North Carolina, Arizona, Florida, Georgia and
Texas). Monadnock owns twelve multi-family residential properties, located in
eight states (Texas, Arizona, Georgia, North Carolina, Oregon, Utah, Tennessee
and Florida). As of December 31, 2001, Belport Realty held investments in
Partnership Preference Units of three issuers.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
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.
16
SECURITY OWNERSHIP OF MANAGEMENT. As of February 14, 2003, Eaton Vance, the
manager of the Fund, beneficially owned 100 Shares of the Fund and James B.
Hawkes, Chairman, President and Chief Executive Officer of Eaton Vance, owned
78,124.100 Shares of the Fund individually and 24,130.098 Shares of the Fund
jointly with his spouse. The Shares owned by Mr. Hawkes and Eaton Vance
represent less than 1% of the outstanding Shares of the Fund as of February 14,
2003. None of the other entities or individuals named in response to Item 5
below beneficially owned Shares of the Fund as of such date.
CHANGES IN CONTROL. Not applicable.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
- ------------------------------------------
The Fund is managed by Eaton Vance. Boston Management is investment adviser to
the Fund and the Portfolio and manager of Belport Realty. The portfolio manager
of the Fund and the Portfolio is Duncan W. Richardson, Senior Vice President and
Chief Equity Investment Officer of Eaton Vance and Boston Management. Mr.
Richardson has been employed by the Eaton Vance organization since 1987 and has
served as portfolio manager of the Fund since its inception and of the Portfolio
and its predecessor since 1990. Boston Management has an experienced team of
analysts that provides Mr. Richardson with research and recommendations on
investments, including William R. Cross who is primarily responsible for
providing research and analysis relating to the Fund's real estate investments
held through Belport Realty. A majority of Mr. Richardson's time is spent
managing the Portfolio and related entities.
As of December 31, 2001, the Fund had no officers. On October 16, 2002, Eaton
Vance, in its capacity as the Fund's manager, elected Thomas E. Faust Jr. and
Michelle A. Alexander as the Fund's Chief Executive Officer and Chief Financial
Officer, respectively. Information about Mr. Faust appears below. Ms. Alexander
(33) is a Vice President of Eaton Vance and Boston Management. She also serves
as an officer of various investment companies managed or advised by Eaton Vance
or Boston Management. As members of the Eaton Vance organization, Mr. Faust and
Ms. Alexander receive no compensation from the Fund for serving as Fund
officers.
As disclosed under "The Eaton Vance Organization" in Item 1, Eaton Vance and
Boston Management are indirect wholly-owned subsidiaries of Eaton Vance Corp.
("EVC"). 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 Eaton Vance and of Boston Management, 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, (61), is Chairman, President and Chief Executive Officer of
Eaton Vance, Boston Management, EVC and EV and a Director of EVC and EV. He is
also Vice President and Director of EV Distributors. He is also a Trustee and an
officer of various investment companies managed by Eaton Vance or Boston
Management and has been employed by the Eaton Vance since 1970.
Thomas E. Faust Jr., (44), is Executive Vice President and Chief Investment
Officer of Eaton Vance, Boston Management, EVC and EV, and a Director of EVC. He
is also Chief Executive Officer of Belair Capital Fund LLC, Belcrest Capital
Fund LLC, Belmar Capital Fund LLC and the Fund. He is also an officer of various
investment companies managed by Eaton Vance or Boston Management and has been
employed by the Eaton Vance since 1985.
17
Alan R. Dynner, (62), is Vice President, Chief Legal Officer and Secretary of
Eaton Vance, Boston Management, EVC, EV Distributors and EV. He is also an
officer of various investment companies managed by Eaton Vance or Boston
Management. He joined Eaton Vance in November 1996.
William M. Steul, (60), is Vice President and Chief Financial Officer of Eaton
Vance, Boston Management, EVC and EV. He is also Vice President of EV
Distributors. He joined Eaton Vance in December 1994.
ITEM 6. EXECUTIVE COMPENSATION.
- --------------------------------
As noted in Item 5, the officers of the Fund receive no compensation from the
Fund. The Fund's Manager, Eaton Vance, and its affiliates receive compensation
from the Fund for services provided to the Fund. Set forth below are the
investment advisory and administrative fees, servicing fees and distribution fee
paid or payable by, or allocable to, the Fund and the management fee paid or
payable by Belport Realty for the period from the start of business, March 14,
2001, to December 31, 2001. Information about advisory and management fees is
provided below. Information about distribution and servicing fees appears in
Item 7.
------------------------------------------------------------- -----------
Advisory and Administrative Fees Paid or Payable by the Fund* $ 556,622
------------------------------------------------------------- -----------
Management Fee Paid or Payable by Belport Realty* $ 1,527,066
------------------------------------------------------------- -----------
Fund's Allocable Portion of the Portfolio's Advisory Fee** $ 3,487,825
------------------------------------------------------------- -----------
Servicing Fees Paid or Payable by the Fund $ 766,867
------------------------------------------------------------- -----------
Fund's Allocable Portion of the Company's Servicing Fees $ 1,217,658
------------------------------------------------------------- -----------
Distribution Fee Paid or Payable by the Fund* $ 799,935
------------------------------------------------------------- -----------
* Boston Management has agreed to waive the portion of the investment
advisory and administrative fee payable by the Fund to the extent that such
fee, together with the distribution fee payable by the Fund and the Fund's
attributable share of the investment advisory and management fees payable
by the Portfolio and Belport Realty, respectively, exceeds 0.60% of the
average daily gross assets of the Fund. The amount shown reflects this
waiver by Boston Management.
** For its fiscal year ended December 31, 2001, advisory fees paid or payable
by the Portfolio totaled $76,812,367. The Company's allocable portion of
that fee was $33,753,655, of which $3,487,825 was allocable to the Fund.
THE FUND'S INVESTMENT ADVISORY AND ADMINISTRATIVE FEE. Under the terms of the
Fund's investment advisory and administrative agreement, Boston Management is
entitled to receive, subject to the fee waiver described in the next sentence, 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. Boston
Management has agreed to waive that portion of the monthly investment advisory
and administrative fee payable by the Fund to the extent that such fee, together
with the 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 Belport Realty, respectively, exceeds
1/20th of 1% of the average daily gross assets of the Fund. 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.
BELPORT REALTY'S MANAGEMENT FEE. Under the terms of Belport Realty's management
agreement with Boston Management, Boston Management 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 Belport Realty. The term "gross assets of Belport
Realty" means the current value of all assets of Belport Realty, including
Belport Realty's ratable share of the assets of its controlled subsidiaries,
without reduction by any liabilities.
18
THE PORTFOLIO'S INVESTMENT ADVISORY FEE. Under the terms of the Portfolio's
investment advisory agreement with Boston Management, Boston Management receives
a monthly advisory fee as follows:
Annual Fee Rate
Average Daily Net Assets for the Month (for each level)
- -------------------------------------------------------------------
Up to $500 million 0.6250%
$500 million but less than $1 billion 0.5625%
$1 billion but less than $1.5 billion 0.5000%
$1.5 billion but less than $7 billion 0.4375%
$7 billion but less than $10 billion 0.4250%
$10 billion but less than $15 billion 0.4125%
$15 billion and over 0.4000%
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
See the information set forth under Item 6 above.
SELLING COMMISSIONS. Shares of the Fund were privately placed with qualified
purchasers pursuant to a placement agency agreement entered into between the
Fund and EV Distributors as exclusive placement agent. EV Distributors is a
wholly-owned subsidiary of Eaton Vance. EV Distributors 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 generally paid a 1.5%
selling commission to EV Distributors on behalf of each Shareholder making an
investment commitment of less than $2 million and a 1.0% selling commission to
EV Distributors 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 EV Distributors to those subagents
through which Shareholders invested in the Fund.
SERVICING FEES PAID BY THE COMPANY. Pursuant to a servicing agreement between
the Company and EV Distributors, the Company pays a servicing fee to EV
Distributors 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, EV Distributors 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. See the table
in Item 6 for the servicing fees attributable to the Fund during the period
ended December 31, 2001.
SERVICING FEES PAID BY THE FUND. Pursuant to a servicing agreement between the
Fund and EV Distributors, the Fund pays a servicing fee to EV Distributors 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, EV Distributors 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 payable by the Fund. See the
table in Item 6 for the servicing fees paid or payable by the Fund during the
period ended December 31, 2001.
19
DISTRIBUTION FEE PAID TO EV DISTRIBUTORS. Under the terms of the Fund's
placement agreement with EV Distributors, EV Distributors 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 EV). See the table in Item 6 for
the distribution fees paid or payable by the Fund during the period ended
December 31, 2001.
REDEMPTION FEE. 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 EV Distributors 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, EV Distributors 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, Belport Realty and the
Real Estate Joint Ventures may become involved in legal proceedings, the Fund is
not aware of any material pending legal proceedings to which any of them is
subject.
ITEM 9. NET ASSET VALUE OF AND DISTRIBUTIONS ON FUND SHARES AND RELATED
SHAREHOLDER MATTERS.
- --------------------------------------------------------------------------------
This Item and other Items in this registration statement contain summaries of
certain provisions contained in the Limited Liability Company Agreement of the
Fund (the "LLC Agreement"), which is filed as an exhibit to this Registration
Statement. All such summaries are qualified in their entirety by the actual
provisions of the LLC Agreement, which are incorporated by reference herein.
(A) MARKET INFORMATION, RESTRICTIONS ON TRANSFERS AND REDEMPTION OF SHARES.
TRANSFERS OF FUND SHARES. There is no established public trading market for the
Shares of the Fund. Other than transfers to the Fund in a redemption, transfers
of Shares are expressly prohibited by the LLC Agreement of the Fund without the
consent of Eaton Vance. Eaton Vance's consent to a transfer 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 Eaton Vance 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 to 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.
20
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 Eaton Vance or 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).
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.
REDEMPTION OF FUND SHARES. Shares of the Fund may be redeemed on any business
day. The redemption price of Shares that are redeemed is based on the net asset
value next computed after receipt of the redemption request. 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 satisfy redemption requests principally by distributing
securities drawn from the Portfolio, but may also distribute cash. If requested
by a redeeming Shareholder, the Fund will satisfy 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 unless
the contributing Shareholder has withdrawn from the Fund.
Under most circumstances, a redemption from the Fund that is settled with
securities as described herein will not result in the recognition of capital
gains by the Fund or by the redeeming Shareholder. The redeeming Shareholder
would generally recognize capital gains upon the sale of the securities received
upon the redemption. If a redeeming Shareholder receives cash in addition to
securities to settle a redemption, the amount of cash received will be taxable
to the Shareholder to the extent it exceeds such Shareholder's tax basis in Fund
Shares. Shareholders should consult their tax advisors about the tax
consequences of redeeming Fund Shares.
A shareholder redemption request within seven years of a contribution of
securities by such Shareholder will ordinarily be satisfied 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 Boston Management in its sole discretion. No interests in Real Estate
Joint Ventures, Partnership Preference Units or other real estate investments
held by Belport Realty 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 Boston Management. 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
21
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.
DETERMINING NET ASSET VALUE. Boston Management, as 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 investment in the Portfolio held
through the Company and in real estate investments held through Belport Realty.
The Trustees of the Portfolio have established the following procedures for the
fair valuation of the Portfolio's assets under normal market conditions.
Marketable securities listed on foreign or U.S. securities exchanges or on the
NASDAQ National Market System generally are valued at closing sale prices or, if
there were no sales, at the mean between the closing bid and asked prices
therefor on the exchange where such securities are principally traded or on such
National Market System (such prices may not be used, however, where an active
over-the-counter market in an exchange listed security better reflects current
market value).
Unlisted or listed securities for which closing sale prices are not available
are valued at the mean between the latest bid and asked prices. An option is
valued at the last sale price as quoted on the principal exchange or board of
trade on which such option or contract is traded, or in the absence of a sale,
at the mean between the last bid and asked prices. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short-term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. 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. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
NYSE. The values of these securities used in determining the net asset value of
the Portfolio generally are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and the
close of the NYSE, which will not be reflected in the computation of the
Portfolio's net asset value (unless the Portfolio deems that such events would
materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the
Portfolio will be valued in U.S. dollars; such values will be computed by the
Portfolio's custodian based on foreign currency exchange rate quotations
supplied by an independent quotation service. The Fund's real estate investments
will be valued each day as determined in good faith by Boston Management, as
investment adviser to Belport Realty, after consideration of relevant factors,
data and information. The procedures for valuing Belport Realty's assets are
described in Item 2 under "Risks of Real Estate Investments."
22
HISTORIC NET ASSET VALUES. Set forth below are the high and low net asset values
("NAVs") 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, the
closing NAV on the last business day of each full quarter, and the percentage
change in NAV during each such quarter.
Quarterly
NAV at % Change in
Quarter Ended High NAV Low NAV Quarter End NAV (1)
------------- -------- ------- ----------- -----------
12/31/01 $ 99.33 $87.05 $ 98.37 +12.23%
9/30/01 $103.34 $81.20 $ 87.65 -14.64%
6/30/01 $108.90 $92.25 $102.68 + 6.19%
(1) Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, if redeemed, may be worth
more or less than their original cost. Changes in NAV are historical and
are calculated by determining the percentage change in NAV with any
distributions reinvested. For more information about the performance of the
Fund, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 2.
(B) RECORD HOLDERS OF SHARES OF THE FUND.
As of February 14, 2003, there were 663 record holders of Shares of the Fund.
(C) DISTRIBUTIONS.
INCOME AND CAPITAL GAIN DISTRIBUTIONS. The Fund intends to distribute each year
the amount of its net investment income for such year, if any. The Fund also
intends to distribute annual capital gains distributions equal to approximately
22% of the amount of its net realized capital gains, if any, other than
precontribution gain. 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 Belport Realty, the Company and, indirectly, the Portfolio. Because the
Portfolio invests primarily in lower yielding securities, seeks to avoid
short-term capital gains and bears certain ongoing expenses, it is not expected
that income distributions will be significant. The Fund intends to pay
distributions (if any) on the last business day of each fiscal year of the Fund
(which concludes on December 31) or shortly thereafter.
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. All distributions
(including Special Distributions described below) are paid by the Fund in cash.
Distributions are generally not taxable to the recipient Shareholder unless the
distributions exceed the recipient Shareholder's tax basis in Fund Shares. 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'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. The Fund made no income
or capital gain distributions during the period commencing with the start of the
Fund's business, March 14, 2001, to December 31, 2001 because there was no net
investment income or net realized capital gains during the period (as computed
on a tax basis).
SPECIAL DISTRIBUTIONS. In addition to the capital gain distribution described
above, the Fund also makes distributions whenever a Shareholder recognizes a
precontribution gain (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) (a "Special
Distribution"). Special Distributions generally equal approximately 22% of the
amount of realized precontribution gains plus approximately 6% of the allocated
precontribution gain or such other percentage as deemed appropriate to
23
compensate Shareholders receiving such distributions for taxes that may be due
in connection with the precontribution gain and Special Distributions. Special
Distributions will be made solely to the Shareholders to whom the
precontribution gain is allocated. The Fund does not intend to make Special
Distributions to a Shareholder in respect of realized precontribution gain
allocated to a Shareholder in connection with a tender offer or other
extraordinary corporate event involving a security contributed by such
Shareholder. For the period from the start of business, March 14, 2001, to
December 31, 2001, the Fund made Special Distributions of $269,523.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Fund held its initial closing on March 14, 2001, at which time qualified
purchasers contributed 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 issued in the initial closing at $100 per Share (less
any applicable selling commission).
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 closings, Shares of the Fund were privately
offered and sold only to accredited investors who were qualified purchasers in
the manner described in Item 1. Shares were issued at each of the foregoing
closings after the initial closing at a price per share based on the Fund's net
asset value per share determined as of the close of the NYSE on the business day
immediately preceding the closing.
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.
GENERAL DESCRIPTION OF FUND SHARES. 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. The distribution
practices of the Fund are described in Item 9(c) above. Upon liquidation of the
Fund, all assets remaining after payment of all liabilities and obligations and
provision for liquidation expenses of the Fund 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.
A capital account for each Shareholder is maintained on the books of the Fund.
The account reflects the value of such Shareholder's interest in the Fund, which
is adjusted for profits, liabilities and distributions allocable to such account
- ---------------------
* Prior to the initial closing, Eaton Vance purchased 100 Shares of the Fund
for $10,000. No selling commission applied to such Shares.
24
in accordance with Article 6 of the Fund's LLC Agreement. Subject to the consent
of the manager of the Fund, 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 redemption rights or voting or consent rights.
VOTING RIGHTS. Shareholders have no control of the Fund's business or
activities. Shareholders generally do not have the right to replace Eaton Vance
as manager of the Fund, but may do so upon the bankruptcy of Eaton Vance. 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. Pursuant to and in accordance with the LLC Agreement,
Shareholders have a very limited right to consent, only:
* to a change in or elimination of the Fund's investment objective and
fundamental investment restrictions set forth in the LLC Agreement;
* to the designation by Eaton Vance of another manager which is not an
entity directly or indirectly owned by EVC;
* to the designation of a substitute manager upon the bankruptcy of
Eaton Vance;
* to an election to dissolve the Fund made by the manager; or
* 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 may also be dissolved upon the filing with the records of the Fund of
written consents to such dissolution by all Shareholders owning voting shares.
AMENDING THE LLC AGREEMENT. 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 (a) 50% of the outstanding
Shares, (b) 67% of those Shares acting on the matter if Shareholders holding
more than 50% of the outstanding Shares have responded to the consent
solicitation or (c) 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.
Eaton Vance and Boston Management, 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
by reason of the fact that Eaton Vance or Boston Management was or is serving as
the manager or investment adviser to the Fund or a subsidiary thereof. Fund
officers are also entitled to indemnification. 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
25
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 Eaton Vance and Boston Management, their
trustee, and their officers, employees and affiliates shall not be liable to the
Fund or to any Shareholder by reason of
* 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;
* any failure to withhold income tax under federal or state tax laws
with respect to income or gains allocated to the Shareholders;
* any change in the federal or state tax laws or regulations or in the
interpretations thereof as they apply to the Portfolio, the Company,
Belport Realty, the Fund or the Shareholders, whether such change or
interpretation occurs through legislative, judicial or administrative
action; or
* any failure of Belport Realty or any Real Estate Joint Venture 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, 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 28 through 84 hereof, are
incorporated herein by reference.
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 $2,775,030 $9,989,243 $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) $506,393 $148,131 ($149,458) $3,071,242
Net increase (decrease)
in net assets from
operations ($14,793,941) $6,683,107 $165,282,786) $158,601,852
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
Net increase (decrease) in
net assets from operations ($3.07) $1.07 ($15.39) $10.37
(1) For the period from the start of business, March 14, 2001, to March 31,
2001.
(2) Based on average Shares outstanding.
26
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
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 86 hereof.
27
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
- --------------------------------------------------------------------------------
28
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
29
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 3,374,095
- --------------------------------------------------------------------------------
TOTAL ASSETS $2,391,474,863
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Mortgages payable $ 361,107,500
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 $ 642,316,999
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
30
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 of $(2,083,851)) (1,716,626)
Interest rate swap contracts (2,344,008)
31
- --------------------------------------------------------------------------------
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
32
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.
33
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) PERIOD ENDED
IN CASH DECEMBER 31, 2001*
- --------------------------------------------------------------------------------
Cash Flows From (For) Operating Activities --
Net decrease in net assets from operations $ (14,791,768)
Adjustments to reconcile net decrease in net assets
from operations 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 realized loss on investment transactions 368,915
Net change in unrealized (appreciation) depreciation
Of investments 17,999,161
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
34
Supplemental Disclosure and Non-cash Investing and Financing
Activities
- --------------------------------------------------------------------------------
Securities contributed by Shareholders invested in
Belvedere Capital $1,778,032,763
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
35
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 (Belport Realty)) plus all assets of Belport Realty, without
reduction by any liabilities. For this purpose, the assets of Belport
36
Realty's controlled subsidiaries are reduced by the proportionate interest
therein of investors other than Belport Realty.
(4) Annualized.
(5) Ratio includes Belport Realty'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 Belport
Realty's controlled subsidiaries are reduced by the proportionate interest
therein of investors other than Belport Realty.
(7) Calculated using average shares outstanding.
(8) Ratio includes the expenses of Belport Capital Fund LLC and Belport Realty
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
37
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 (Belport Realty). At December 31,
2001 Belport Realty 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).
Belport Realty -- Belport Realty 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 Belport Realty and intends to hold all of Belport Realty's common stock
at all times. Additionally, 2,100 shares of preferred stock of Belport
Realty are outstanding at December 31, 2001. The preferred stock has a par
value of $0.01 per share and is redeemable by Belport Realty 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 Belport
Realty, 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. Belport Realty 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. Belport Realty has priority in distributions and has greater voting
rights than the holders of the Class B units. Pursuant to a buy/sell
38
agreement entered into at the time Bel Multifamily was established, either
Belport Realty 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 Belport Realty, 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. Belport
Realty 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. Belport Realty 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 Belport Realty 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 Belport Realty
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). Belport
Realty owned 100% of the Class A units of Casco, representing 60% of the
39
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
voting interests in 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. Belport Realty
had priority in distributions and had greater voting rights than the
holders of the Class B units. Belport Realty does not own an interest in
Casco at December 31, 2001.
The accompanying consolidated financial statements include the accounts of
Belport Capital, Belport Realty, Bel Multifamily, Monadnock and Casco (for
the period during which Belport Realty 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:
40
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 (Boston
Management), a wholly-owned subsidiary of Eaton Vance Management (Eaton
Vance), as Investment Adviser of Belport Capital and Manager of Belport
Realty. Interest rate swap contracts for which prices are unavailable are
valued as determined in good faith by Boston Management.
The value of the Fund's real estate investments is determined in good faith
by Boston Management as Manager of Belport Realty, 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 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.
41
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
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 income is recorded on the accrual basis. Rental income is recorded on
the accrual basis based upon the terms of the lease agreements.
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,
Belport Capital, Belvedere Capital and the Portfolio do not incur federal
income tax liability, and the shareholders and partners thereof are
42
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
individually responsible for taxes on items of partnership income, gain,
loss and deduction. The policy of Belport Realty, Bel Multifamily,
Monadnock and Casco is to comply with the Internal Revenue Code applicable
to REITs. Belport Realty, 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 in
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, Belport Realty, 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.
43
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. (EV
Distributors) 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 EV Distributors received
$28,772 in redemption fees.
In connection with the offering of Fund Shares, EV Distributors, the
Placement Agent, received $7,971,497 in selling commissions paid by Belport
Capital on behalf of Shareholders. EV Distributors, in turn, paid this
amount to the applicable subagent on behalf of Shareholders investing in
Belport Capital through such subagent. In addition, EV Distributors 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
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
44
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
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, represent amounts purchased from and sold
to other funds sponsored by Eaton Vance. During 2001, Belport Realty sold
its majority interest in Casco to another fund sponsored by Eaton Vance and
recognized a gain of $438,595.
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.
45
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
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)
- --------------------------------------------------------------------------------
8 Debt
- --------------------------------------------------------------------------------
A Mortgages -- Rental property held by Belport Realty'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
46
substantially all of its assets, including Belport Realty 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 Boston Management as
investment adviser. Under the terms of the advisory agreement with the
Portfolio, Boston Management 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 Boston Management, 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 Belport Realty 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 Boston Management). 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. Belport
Realty pays Boston Management a monthly management fee at a rate of 1/20 of
1% (equivalent to 0.60% annually) of the average daily gross assets of
Belport Realty. The term "gross assets" with respect to Belport Realty is
defined to include the current value of all assets of Belport Realty,
including Belport Realty's ratable share of the assets of its controlled
subsidiaries, without reduction by any liabilities. For this purpose, the
assets of Belport Realty's controlled subsidiaries are reduced by the
proportionate interest therein of investors other than Belport Realty. For
the period from the start of business, March 14, 2001, to December 31,
2001, the advisory and administrative fee payable to Boston Management by
Belport Capital, plus the management fee payable to Boston Management by
Belport Realty totaled $2,883,623.
Eaton Vance and Boston Management do not receive separate compensation for
serving as Manager of Belport Capital and Manager of Belvedere Capital,
respectively.
47
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2001
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
================================================================================
As compensation for its services as placement agent, Belport Capital pays
EV Distributors 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 EV Distributors totaled $799,935.
Boston Management 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
EV Distributors and the management fee payable to Boston Management,
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, Boston Management
has waived $799,935 of the advisory and administrative fee of Belport
Capital
Pursuant to a servicing agreement between Belvedere Capital and EV
Distributors, Belvedere Capital pays a servicing fee to EV Distributors 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 EV Distributors, Belport Capital pays
a servicing fee to EV Distributors 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, Belport Realty's
controlled subsidiaries paid or accrued property management fees of
$1,684,578.
10 Segment Information
- --------------------------------------------------------------------------------
Belport Capital pursues its investment objective primarily by investing
indirectly in the Portfolio through Belvedere Capital. The Portfolio is a
diversified investment company of equity securities that emphasizes
investments in common stocks of domestic and foreign growth companies that
are considered to be high in quality and attractive in their long-term
investment prospects. Separate from its investment in Belvedere Capital,
Belport Capital invests in real estate assets through its subsidiary,
Belport Realty. Belport Realty invests directly in Partnership Preference
Units and indirectly in real property through controlled subsidiaries, Bel
Multifamily and Monadnock (Note 1).
48
Belport Capital evaluates performance of the reportable segments based on
the net increase (decrease) in net assets from operations of the respective
segment, which includes net investment income or loss, realized gain (loss)
and unrealized gain (loss). The accounting policies of the reportable
segments are the same as those for Belport Capital on a consolidated basis
(Note 2). No reportable segments have been aggregated. Reportable
information by segment is as follows:
Tax-Managed
For the year ended Growth Real
December 31, 2001 Portfolio* Portfolio* Estate Total
- --------------------------------------------------------------------------------
Revenues $ 4,034,512 $ 44,207,788 $ 48,242,300
Interest expense on mortgages - (15,287,500) (15,287,500)
Interest expense on Credit
Facility - (3,508,697) (3,508,697)
Interest expense on swap
contracts - (2,055,335) (2,055,335)
Operating expenses (556,622) (17,774,116) (18,330,738)
Minority interest in net
income of controlled
subsidiaries - 2,599,894) (2,599,894)
--------------- ------------- ---------------
Net investment income 3,477,890 2,982,246 6,460,136
Net realized gain (loss) (807,510) 438,595 (368,915)
Change in unrealized gain
(loss) (14,025,705) (3,973,456) (17,999,161)
--------------- ------------- ---------------
Net increase (decrease) in
net assets from operations
of reportable segments $ (11,355,325) $ (552,615) $ (11,907,940)
--------------- ------------- ---------------
Segment assets $1,762,622,657 $625,575,651 $2,388,198,308
Segment liabilities 0 625,998,357 625,998,357
--------------- ------------- ---------------
Net assets of reportable
segments $1,762,622,657 1,762,622,657 $ (422,706) $1,762,199,951
--------------- ------------- ---------------
* Belport Capital invests in Tax-Managed Growth Portfolio indirectly through
Belvedere Capital.
The following tables reconcile the reported segment information to the
consolidated financial statements for the year ended December 31, 2001:
Revenues from reportable segments $ 48,242,300
Unallocated revenue 28,888
---------------
Total revenue $ 48,271,188
---------------
Net increase (decrease) in net assets from operations:
Net increase (decrease) in net assets from operations
for reportable segments $ (11,907,940)
Other revenues 28,888
Unallocated expenses (2,912,716)
---------------
Total net increase (decrease) in net assets from
operations $ (14,791,768)
---------------
Net assets:
Net assets of reportable segments $1,762,199,951
Unallocated cash 1,570,640
Short-term investments 1,705,915
Loan payable on Credit Facility (16,170,000)
Other liabilities (148,642)
---------------
Total net assets $1,749,157,864
---------------
49
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
50
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
51
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
52
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
- ------------------------------------------------------------------------------
53
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
54
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
55
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
56
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
57
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
58
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
59
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
60
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
- ------------------------------------------------------------------------------
61
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
62
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
63
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
64
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 Equipment 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
65
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
66
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
67
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
68
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
69
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
70
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
71
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
72
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%
73
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
74
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
- ------------------------------------------------------------------------------
75
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
76
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
77
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
==============================================================================
FINANCIAL STATEMENTS CONT'D
==============================================================================
SUPPLEMENTARY DATA
YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------
2001 2000 1999
- ------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.45% 0.45% 0.46%
Net investment income 0.64% 0.67% 0.72%
Portfolio Turnover 18% 13% 11%
Total Return(3) (9.67)% -- --
- ------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $18,335,865 $18,385,069 $15,114,649
- ------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED OCTOBER 31,
------------ ----------------------
DECEMBER 31, 1998(1) 1998 1997
- ------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------
Ratios (As a percentage of average daily net assets):
Expenses 0.48%(2) 0.50% 0.56%
Net investment income 0.72%(2) 0.78% 0.81%
Portfolio Turnover 3% 12% 14%
Total Return(3) -- -- --
- ------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $8,704,859 $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
78
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.
79
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.
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.
80
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
NOTES TO FINANCIAL STATEMENTS CONT'D
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
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the year ended December 31, 2001.
81
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2001
================================================================================
NOTES TO FINANCIAL STATEMENTS CONT'D
================================================================================
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, 11/29/00 80,327 $ 4,523,414 $ 8,519.244
Inc.
American Standard Companies, 10/04/01 63,436 3,702,125 4,327,833
Inc.
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
82
DATE OF
DESCRIPTION ACQUISITION SHARES COST FAIR VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS
- ------------------------------------------------------------------------------
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 5/23/01 32,000 2,301,120 2,117,396
Corp.
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 5/23/01 600,000 19,296,000 18,150,649
Texas, Inc.
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-
Enron Corp. 7/25/01 11,050 $ 16,637,836 $ 180,902
- ------------------------------------------------------------------------------
$ 16,637,836 $ 180,902
- ------------------------------------------------------------------------------
83
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
84
SIGNATURE
---------
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this amendment to its registration
statement to be signed on its behalf by the undersigned duly authorized officer
on February 24, 2003.
BELPORT CAPITAL FUND LLC
(Registrant)
By: /s/ Michelle A. Alexander
-------------------------
Michelle A. Alexander
Duly Authorized Officer and
Principal Accounting Officer
85
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3 Copy of Limited Liability Company Agreement of the Fund dated
December 5, 2001 filed as Exhibit 3 to the Fund's Initial
Registration Statement on Form 10 and incorporated herein by
reference. (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 filed as Exhibit 4 to the Fund's Initial Registration
Statement on Form 10 and incorporated herein by reference.
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
filed as Exhibit 10(1) to the Fund's Initial Registration
Statement on Form 10 and incorporated herein by reference.
10(2) Copy of Management Agreement between Belport Realty Corporation
and Boston Management and Research dated March 14, 2001 filed as
Exhibit 10(2) to the Fund's Initial Registration Statement on
Form 10 and incorporated herein by reference.
10(3) Copy of Investor Servicing Agreement between the Fund and Eaton
Vance Distributors, Inc. dated December 5, 2000 filed as Exhibit
10(3) the Fund's Initial Registration Statement on Form 10 and
incorporated herein by reference.
10(4) Copy of Custody and Transfer Agency Agreement between the Fund
and Investors Bank & Trust Company dated December 5, 2000 filed
as Exhibit 10(4) the Fund's Initial Registration Statement on
Form 10 and incorporated herein by reference.
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).
86