ITEM 1. BUSINESS. - ------------------
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 and 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 5(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).
The Fund intends to distribute each year the amount of its net investment income for such year, if any. The Fund also intends to make annual capital gain distributions equal to approximately 22% of the amount of its net realized capital gains, if any, other than precontribution gain. The Fund's income distributions are not expected to 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. See "Distributions" in Item 5(c).
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, 2002, 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 $1.8 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 $14.6 billion as of December 31, 2002. As of December 31, 2002, the Fund's investment in the Portfolio through the Company had a value of approximately $1.3 billion (equal to approximately 66.9% of the Fund's total assets on a consolidated basis).
THE COMPANY. As of December 31, 2002, the investment assets of the Company consisted exclusively of an interest in the Portfolio with a value of approximately $8.8 billion. As of such date, the Fund owned approximately 15.1% of the Company's outstanding shares. The other investors in the Company include five 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, 2002, 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 31, 2002, the Company owned approximately 60.1% 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 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 gain 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 strategies 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 5(a) under "Redemption of Fund Shares". As described in Item 5(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, forward sales of stocks held, and the purchase and sale of futures contracts on stocks and stock indexes and options thereon. 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, forward sales, futures 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. At December 31, 2002, the Portfolio held three short positions on a security with a combined value equal to approximately 0.3% of the Portfolio's net assets. The Portfolio paid commissions totaling approximately $30,000 in connection with these short sales. The Portfolio did not otherwise employ any of the techniques described above during the year ended December 31, 2002.
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, 2002, the consolidated real estate assets of Belport Realty totaled $590.5 million. The Fund's consolidated real estate investments represented 29.9% of the Fund's assets on a
consolidated basis at December 31, 2002. The Fund acquired 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.
At December 31, 2002, 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, 2002, approximately 83.7% of the consolidated real estate investments of Belport Realty were Real Estate Joint Venture assets and approximately 16.3% 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. The two Real Estate Joint Ventures and the Partnership Preference Units owned by Belport Realty at December 31, 2002 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, 2002, Belport Realty owned a controlling interest in two Real Estate Joint Ventures, Bel Multifamily Property Trust ("Bel Multifamily") and Monadnock Property Trust LLC ("Monadnock").
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 managers 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 a total of 23 multifamily residential properties acquired from or in conjunction with the Operating Partner of the Real Estate Joint Venture. See Item 2.
ITEM 2. 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, 2002, Belport Realty owned majority interests 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 multifamily residential properties located in seven states (Washington, Missouri, North Carolina, Arizona, Florida, Georgia and Texas). Monadnock owns twelve multifamily residential properties, located in eight states (Texas, Arizona, Georgia, North Carolina, Oregon, Utah, Tennessee and Florida). As of December 31, 2002, Belport Realty held investments in Partnership Preference Units of three issuers.
ITEM 3.
ITEM 3. 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 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - -------------------------------------------------------------
No items were submitted to a vote of security holders during the fiscal year ended December 31, 2002.
PART II
ITEM 5.
ITEM 5. DETERMINING NET ASSET VALUE, MARKET FOR FUND SHARES AND RELATED SHAREHOLDER MATTERS. - --------------------------------------------------------------------------------
This Item and other Items in this report contain summaries of certain provisions contained in the Limited Liability Company Agreement of the Fund (the "LLC Agreement"), which was filed as an exhibit to the Fund's Registration Statement on Form 10. 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.
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 13 below.
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 Facility prohibits the Fund from honoring redemption requests while there is an event of default outstanding 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 Fund Shareholders. No redemption fee is payable in the event of a compulsory redemption.
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 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.
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 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 Portfolio's 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; the Portfolio's custodian will compute such values 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 7A(b) under "Risks of Real Estate Investments". Boston Management values the Fund's interest rate swap agreements based upon dealer and counterparty quotes and pricing models.
HISTORIC NET ASSET VALUES. Set forth below are the high and low net asset values ("NAVs") per Share of the Fund during each full quarter from the Fund's inception, March 14, 2001, through the fiscal year ended December 31, 2002, 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) - ------------- -------- ------- ----------- ------------ 12/31/02 $ 81.14 $68.38 $ 76.75 + 6.35% 9/30/02 $ 85.53 $69.36 $ 72.17 - 16.33% 6/30/02 $ 98.35 $84.77 $ 86.26 - 12.39% 3/31/02 $100.13 $92.71 $ 98.46 + 0.09% 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 + 5.93%
(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. For more information about the performance of the Fund, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7.
(b) RECORD HOLDERS OF SHARES OF THE FUND. - ----------------------------------------------
As of March 14, 2003, there were 671 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 make annual capital gain 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 an event of default outstanding 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). The Fund made no distributions in 2002. On January 17, 2003, the Fund made a distribution of $0.72 per share to Shareholders of record on January 16, 2003.
SPECIAL DISTRIBUTIONS. In addition to the capital gain distributions 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 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. There were no Special Distributions for the year ended December 31, 2002.
(d) 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.
* Prior to the initial closing, Eaton Vance purchased 100 Shares of the Fund for $10,000. No selling commission applied to such purchase.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. - ---------------------------------
TABLE OF SELECTED FINANCIAL DATA. The Fund commenced its investment operations on March 14, 2001. The consolidated data referred to below reflects the Fund's results for the fiscal year ended December 31, 2002 and the period from March 14, 2001 through December 31, 2001. The other consolidated data referred to below is as of each period end.
(1) Certain amounts have been reclassified to conform with the current year presentation. (2) Special Distributions of $0.026 per Share were paid during the period ended December 31, 2001. Special Distributions are not made on a pro rata basis. See Item 5(c). (3) On January 17, 2003, the Fund made a distribution of $0.72 per Share to Shareholders of record on January 16, 2003.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. - -------------------------------------------------------------------------------- The information in this report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements typically are identified by use of terms such as "may", "will," "should," "might," "expect," "anticipate," "estimate" and similar words, although some forward-looking statements are expressed differently. The 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 affecting the real estate industry or fluctuations in interest rates. See "Qualitative Information About Market Risk" in Item 7A
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. - ---------------------------------------------------------------------
(a) 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 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 Fund's Consolidated Financial Statements incorporated by reference into Item 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - -----------------------------------------------------
The Fund's financial statements for the year ended December 31, 2002, together with the auditors' report thereon, appearing on pages 31 through 90 hereof, are incorporated herein by reference. The Fund's financial statements and auditors; report thereon for the period ended December 31, 2001, appearing on pages 28 through 84 of the Fund's Form 10/A filed with the Securities and Exchange Commission on February 24, 2003, are also incorporated herein by reference.
The following is a summary of unaudited quarterly results of operations of the Fund for 2002 and 2001.
(1) Based on average Shares outstanding. (2) For the period from the start of business, March 14, 2001, to March 31, 2001. (3) Certain amounts have been reclassified to conform with the current year presentation.
ITEM 9.
ITEM 9. 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.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS. - -------------------------------------------
The Fund is managed by Eaton Vance. Thomas E. Faust Jr. and Michelle A. Alexander serve as the Fund's Chief Executive Officer and Chief Financial Officer, respectively. Information about Mr. Faust appears below under "Directors and Officers of Eaton Vance, Inc." Ms. Alexander (33) is a Vice President of Eaton Vance and Boston Management. She also serves as an officer of various investment companies managed by Eaton Vance or Boston Management and has been an employee of Eaton Vance since 1997. As members of the Eaton Vance organization, Mr. Faust and Ms. Alexander receive no compensation from the Fund for serving as Fund officers.
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 disclosed under "The Eaton Vance Organization" in Item 1, Eaton Vance and Boston Management are indirect wholly-owned subsidiaries of EVC. The non-voting common stock of EVC is listed and traded on the NYSE. 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 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 an officer of various investment companies managed by Eaton Vance or Boston Management and has been employed by Eaton Vance since 1985.
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 and has been employed by Eaton Vance since 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 has been employed by Eaton Vance since 1994.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION. - ---------------------------------
As noted in Item 10, 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 fees paid or payable by, or allocable to, the Fund and the management fees paid or payable by Belport Realty for the fiscal year ended December 31, 2002 and 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 13.
- -------------------------------------------------------------------------------- Year ended Period Ended December 31, December 31, 2002 2001 - -------------------------------------------------------------------------------- Advisory and Administrative Fees Paid or Payable by the Fund* $ 1,032,117 $ 556,622 - -------------------------------------------------------------------------------- Management Fees Paid or Payable by Belport Realty* $ 2,965,540 $ 1,527,066 - -------------------------------------------------------------------------------- Fund's Allocable Portion of the Portfolio's Advisory Fees** $ 6,746,346 $ 3,487,825 - -------------------------------------------------------------------------------- Servicing Fees Paid or Payable by the Fund $ 1,463,390 $ 766,867 - -------------------------------------------------------------------------------- Fund's Allocable Portion of the Company's Servicing Fees $ 2,319,921 $ 1,217,658 - -------------------------------------------------------------------------------- Distribution Fees Paid or Payable by the Fund* $ 1,512,281 $ 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 years ended December 31, 2002 and 2001, advisory fees paid or payable by the Portfolio totaled $71,564,552 and $76,812,367, respectively. For 2002, the Company's allocable portion of that fee was $41,180,780, of which $6,746,346 was allocable to the Fund. For 2001, 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 13 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.
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:
Average Daily Net Assets for the Month Annual Fee Rate (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 12.
ITEM 12. 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.
SECURITY OWNERSHIP OF MANAGEMENT. As of March 14, 2003, Eaton Vance, the manager of the Fund, beneficially owned 100.922 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 March 14, 2003. None of the other entities or individuals named in response to Item 10 above beneficially owned Shares of the Fund as of such date.
CHANGES IN CONTROL. Not applicable.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - ---------------------------------------------------------
See the information set forth under Item 11 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 has assigned 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 11 for the servicing fees attributable to the Fund during the fiscal year ended December 31, 2002 and 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 has assigned 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 11 for the servicing fees paid or payable by the Fund during the fiscal year ended December 31, 2002 and the period ended December 31, 2001.
DISTRIBUTION FEES 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 11 for the distribution fees paid or payable by the Fund during the fiscal year ended December 31, 2002 and the period ended December 31, 2001.
REDEMPTION FEES. 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 Fund 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 fiscal year ended December 31, 2002, EV Distributors received redemption fees of $183,987 from the Fund on behalf of redeeming Shareholders.
ITEM 14.
ITEM 14. CONTROLS AND PROCEDURES. - ----------------------------------
Within the 90-day period prior to the filing of this report, Eaton Vance and the Fund's Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are, to the best of their knowledge, effective in ensuring that all material information required to be filed in this annual report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.
The complete and entire management, control and operation of the Fund are vested in the Fund's manager, Eaton Vance. The Fund's organizational structure does not provide for a board of directors or a board audit committee. As such, the Fund's Chief Executive Officer and Chief Financial Officer intend to report any significant deficiency in the design or operation of internal controls which could adversely affect the Fund's ability to record, process, summarize and report financial data, and any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal controls, to Eaton Vance.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K. - -----------------------------------------------------------------
(a) The following is a list of all financial statements incorporated by reference into this report from the Fund's Form 10/A filed February 24, 2003:
(1) (i) Consolidated Portfolio of Investments as of December 31, 2001
Consolidated Statement of Assets and Liabilities as of December 31,
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 from the start of business, March 14, 2001, to 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 fiscal years ended December 31, 2001, December 31, 2000, December 31, 1999, the two month period ended December 31, 1998, the fiscal years ended October 31, 1998 and October 31, 1997
Notes to Financial Statements
Independent Auditors' Report dated February 15, 2002
(ii) The following is a list of all financial statements filed as a part of this report:
Consolidated Portfolio of Investments as of December 31, 2002
Consolidated Statement of Assets and Liabilities as of December 31,
Consolidated Statement of Operations for the fiscal year ended December 31, 2002
Consolidated Statements of Changes in Net Assets for the fiscal year ended December 31, 2002 and for the period from the start of business, March 14, 2001, to December 31, 2001
Consolidated Statement of Cash Flows for the fiscal year ended December 31, 2002
Financial Highlights for the fiscal year ended December 31, 2002
Notes to Consolidated Financial Statements
Independent Auditors' Report dated February 28, 2003
Portfolio of Investments of Tax-Managed Growth Portfolio as of December 31, 2002
Statement of Assets and Liabilities of Tax-Managed Growth Portfolio as of December 31, 2002
Statement of Operations of Tax-Managed Growth Portfolio for the fiscal year ended December 31, 2002
Statements of Changes in Net Assets of Tax-Managed Growth Portfolio for the fiscal years ended December 31, 2002 and December 31, 2001
Supplementary Data of Tax-Managed Growth Portfolio for the fiscal years ended December 31, 2002, December 31, 2001, December 31, 2000, December 31, 1999, the two month period ended December 31, 1998, and the fiscal year ended October 31, 1998
Notes to Financial Statements
Independent Auditors' Report dated February 14, 2003
(b) Reports on Form 8-K:
None.
(c) A list of the exhibits filed as a part of this Form 10-K is included in the Exhibit Index appearing on page 94 hereof.
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
CONSOLIDATED PORTFOLIO OF INVESTMENTS
INVESTMENT IN BELVEDERE CAPITAL FUND COMPANY LLC -- 69.1%
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Investment in Belvedere Capital Fund Company LLC (Belvedere Capital) 10,350,420 $1,322,126,211 - -------------------------------------------------------------------------- Total Investment in Belvedere Capital (identified cost, $1,676,818,857) $1,322,126,211 - --------------------------------------------------------------------------
PARTNERSHIP PREFERENCE UNITS -- 5.1%
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+(1) 875,000 $ 37,556,925 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) 1,300,000 35,366,500 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+(1) 550,000 23,579,600 - -------------------------------------------------------------------------- Total Partnership Preference Units (identified cost, $92,413,822) $ 96,503,025 - --------------------------------------------------------------------------
OTHER REAL ESTATE INVESTMENTS -- 25.8%
DESCRIPTION VALUE
- -------------------------------------------------------------------------- Rental Property(1)(2) $ 493,950,506 - -------------------------------------------------------------------------- Total Other Real Estate Investments (identified cost, $526,010,503) $ 493,950,506 - --------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.0%
PRINCIPAL AMOUNT SECURITY (000'S OMITTED) VALUE
- -------------------------------------------------------------------------- General Electric Capital Corp., 1.25%, 1/2/03 $ 623 $ 622,978 - -------------------------------------------------------------------------- Total Commercial Paper (at amortized cost, $622,978) $ 622,978 - -------------------------------------------------------------------------- Total Investments -- 100.0% (identified cost, $2,295,866,160) $1,913,202,720 - --------------------------------------------------------------------------
+ Security exempt from registration under the Securities Act of 1933. At December 31, 2002, the value of these securities totaled $96,503,025, or 7.3% of net assets. (1) Investment valued at estimated 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
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2002
Assets - -------------------------------------------------------- Investments, at value (identified cost, $2,295,866,160) $1,913,202,720 Cash 7,452,296 Escrow deposits -- restricted 2,272,211 Receivable for investments sold 50,221,589 Dividends and interest receivable 570,704 Other assets 2,680,422 - -------------------------------------------------------- TOTAL ASSETS $1,976,399,942 - -------------------------------------------------------- Liabilities - -------------------------------------------------------- Loan payable on Credit Facility $ 226,000,000 Mortgages payable 361,107,500 Open interest rate swap contracts, at value 26,385,515 Security deposits 798,511 Swap interest payable 189,454 Accrued expenses: Interest expense 2,484,938 Property taxes 2,051,403 Other expenses and liabilities 2,799,285 Minority interests in controlled subsidiaries 29,941,272 - -------------------------------------------------------- TOTAL LIABILITIES $ 651,757,878 - -------------------------------------------------------- NET ASSETS FOR 17,258,094 FUND SHARES OUTSTANDING $1,324,642,064 - -------------------------------------------------------- Shareholders' Capital - -------------------------------------------------------- SHAREHOLDERS' CAPITAL $1,324,642,064 - -------------------------------------------------------- Net Asset Value and Redemption Price Per Share (Note 4) - -------------------------------------------------------- ($1,324,642,064 DIVIDED BY 17,258,094 FUND SHARES OUTSTANDING) $ 76.75 - --------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
Investment Income - ------------------------------------------------------- Dividends allocated from Belvedere Capital (net of foreign taxes, $190,889) $ 19,519,140 Interest allocated from Belvedere Capital 565,728 Expenses allocated from Belvedere Capital (9,368,372) - ------------------------------------------------------- Net investment income allocated from Belvedere Capital $ 10,716,496 Rental income 67,475,332 Dividends from Partnership Preference Units 8,815,313 Interest 151,237 - ------------------------------------------------------- TOTAL INVESTMENT INCOME $ 87,158,378 - ------------------------------------------------------- Expenses - ------------------------------------------------------- Investment advisory and administrative fees $ 5,509,938 Property management fees 2,712,324 Distribution and servicing fees 2,975,671 Interest expense on mortgages 24,926,829 Interest expense on Credit Facility 5,165,792 Interest expense on swap contracts 7,966,617 Property and maintenance expenses 16,390,005 Property taxes and insurance 7,736,844 Miscellaneous 917,714 - ------------------------------------------------------- TOTAL EXPENSES $ 74,301,734 - ------------------------------------------------------- Deduct -- Reduction of investment advisory and administrative fees $ 1,512,281 - ------------------------------------------------------- NET EXPENSES $ 72,789,453 - ------------------------------------------------------- Net investment income before minority interests in net income of controlled subsidiaries $ 14,368,925 Minority interests in net income of controlled subsidiaries (3,427,044) - -------------------------------------------------------
NET INVESTMENT INCOME $ 10,941,881 - ------------------------------------------------------- Realized and Unrealized Gain (Loss) - ------------------------------------------------------- Net realized gain (loss) -- Investment transactions from Belvedere Capital (identified cost basis) $ (9,996,126) Investment transactions (identified cost basis) (59,596) - ------------------------------------------------------- NET REALIZED LOSS $ (10,055,722) - ------------------------------------------------------- Change in unrealized appreciation (depreciation) -- Investment in Belvedere Capital (identified cost basis) $(340,666,941) Investments in Partnership Preference Units (identified cost basis) 4,002,025 Investments in other real estate investments (net of minority interests in unrealized loss of controlled subsidiaries of $9,074,327) (19,185,193) Interest rate swap contracts (24,041,507) - ------------------------------------------------------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $(379,891,616) - -------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(389,947,338) - -------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(379,005,457) - -------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
CONSOLIDATED FINANCIAL STATEMENTS CONT'D
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED INCREASE (DECREASE) DECEMBER 31, DECEMBER 31, IN NET ASSETS 2002 2001*
- ------------------------------------------------------------------------ Net investment income $ 10,941,881 $ 3,576,308 Net realized loss on investment transactions (10,055,722) (368,915) Net change in unrealized appreciation (depreciation) of investments (379,891,616) (17,999,161) - ------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM OPERATIONS $ (379,005,457) $ (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 (45,510,343) (5,842,111) - ------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS $ (45,510,343) $1,764,219,155 - ------------------------------------------------------------------------ Distributions -- Special Distributions to Shareholders $ -- $ (269,523) - ------------------------------------------------------------------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ -- $ (269,523) - ------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS $ (424,515,800) $1,749,157,864 - ------------------------------------------------------------------------ Net Assets - ------------------------------------------------------------------------ At beginning of year $1,749,157,864 $ -- - ------------------------------------------------------------------------ AT END OF YEAR $1,324,642,064 $1,749,157,864 - ------------------------------------------------------------------------
* For the period from the start of business, March 14, 2001, to December 31, 2001.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED INCREASE (DECREASE) IN CASH DECEMBER 31, 2002
- ----------------------------------------------------------- Cash Flows From (For) Operating Activities -- Net decrease in net assets from operations $ (379,005,457) Adjustments to reconcile net decrease in net assets from operations to net cash flows from operating activities -- Net investment income allocated from Belvedere Capital (10,716,496) Amortization of debt issuance costs 232,283 Increase in escrow deposits (190,361) Decrease in other assets 461,390 Increase in dividends and interest receivable (79) Increase in interest payable for open swap contracts 19,344 Decrease in security deposits, accrued interest and accrued other expenses and liabilities (482,227) Increase in accrued property taxes 352,581 Improvements to rental property (3,592,900) Net decrease in investment in Belvedere Capital 10,432,410 Decrease in short-term investments 1,082,937 Minority interests in net income of controlled subsidiaries 3,427,044 Net realized loss on investment transactions 10,055,722 Net change in unrealized (appreciation) depreciation of investments 379,891,616 - ----------------------------------------------------------- NET CASH FLOWS FROM OPERATING ACTIVITIES $ 11,967,807 - ----------------------------------------------------------- Cash Flows For Financing Activities -- Repayment of Credit Facility $ (5,000,000) Payments for Fund Shares redeemed (5,674,423) Payments of distributions to minority shareholders (3,843,043) - ----------------------------------------------------------- NET CASH FLOWS FOR FINANCING ACTIVITIES $ (14,517,466) - -----------------------------------------------------------
NET DECREASE IN CASH $ (2,549,659) - -----------------------------------------------------------
CASH AT BEGINNING OF YEAR $ 10,001,955 - -----------------------------------------------------------
CASH AT END OF YEAR $ 7,452,296 - ----------------------------------------------------------- Supplemental Disclosure and Non-cash Investing and Financing Activities - ----------------------------------------------------------- Interest paid for loan -- Credit Facility $ 4,262,611 Interest paid for mortgages $ 24,694,546 Interest paid for swap contracts $ 7,947,273 Market value of securities distributed in payment of redemptions $ 39,835,920 - -----------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
CONSOLIDATED FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2002
- ------------------------------------------------------------------------------ Net asset value -- Beginning of year $ 98.370 - ------------------------------------------------------------------------------
Income (loss) from operations - ------------------------------------------------------------------------------ Net investment income(5) $ 0.625 Net realized and unrealized loss (22.245) - ------------------------------------------------------------------------------ TOTAL LOSS FROM OPERATIONS $ (21.620) - ------------------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 76.750 - ------------------------------------------------------------------------------
TOTAL RETURN(1) (21.98)% - ------------------------------------------------------------------------------
AS A PERCENTAGE AS A PERCENTAGE OF AVERAGE OF AVERAGE RATIOS NET ASSETS(4) GROSS ASSETS(2)(4) - ------------------------------------------------------------------------------
Expenses of Consolidated Real Property Subsidiaries Interest and other borrowing costs(3) 1.30% 0.96% Operating expenses(3) 1.40% 1.04% Belport Capital Fund LLC Expenses Interest and other borrowing costs(6) 0.87% 0.64% Investment advisory and administrative fees, servicing fees and other Fund operating expenses(6)(7) 1.13% 0.84% Total expenses(7) 4.70% 3.48% Net investment income 0.72% 0.53% - ------------------------------------------------------------------------------
Supplemental Data - ------------------------------------------------------------------------------ Net assets, end of year (000's omitted) $ 1,324,642 Portfolio turnover of Tax-Managed Growth Portfolio 23% - ------------------------------------------------------------------------------
(1) Returns are calculated by determining the percentage change in net asset value with all distributions reinvested. (2) Average Gross Assets is defined as the average daily amount of all assets of Belport Capital Fund LLC (Belport Capital) (including Belport Capital's interest in Belvedere Capital Fund Company LLC (Belvedere Capital) and Belport Capital's ratable share of the assets of its directly and indirectly controlled subsidiaries), without reduction by any liabilities (Note 1B). For this purpose, the assets of Belport Realty Corporation's (Belport Realty) controlled subsidiaries are reduced by the proportionate interests therein of investors other than Belport Realty. (3) Includes Belport Realty's proportional share of expenses incurred by its majority-owned subsidiaries. (4) 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. (5) Calculated using average shares outstanding. (6) Includes the expenses of Belport Capital and Belport Realty. Does not include expenses of the real estate subsidiaries majority-owned by Belport Realty. (7) Includes Belport Capital's share of Belvedere Capital's allocated expenses, including those expenses allocated from the Portfolio.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
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 real properties held through joint ventures that are controlled subsidiaries of Belport Realty Corporation (Belport Realty).
B Subsidiaries -- Belport Capital invests in real estate through its subsidiary Belport Realty. At December 31, 2002, 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, 2002, 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, 2002. 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 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 91% at December 31, 2002. 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 minority interest on the Consolidated Statement of Assets and Liabilities. The primary distinctions between the two classes of shares are 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
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 94% at December 31, 2002. Belport Realty owns 100% of the Class A units of Monadnock and a minority shareholder (the Monadnock Minority Shareholder) owns 100% of the Class B units. The units of Monadnock entitled to board of managers representation are currently owned 75% by Belport Realty and 25% by the Monadnock Minority Shareholder. The Class B equity interest is recorded as minority interest on the Consolidated Statement of Assets and Liabilities. The primary distinctions between the two classes of shares are the distribution priority and voting rights. Belport Realty has priority in distributions and has greater voting rights than the holder of the 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.
The accompanying consolidated financial statements include the accounts of Belport Capital, Belport Realty, Bel Multifamily and Monadnock (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.
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
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, through purchases of Partnership Preference Units and other real estate investments, 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 may 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 agreements (Note 7). The valuation policy followed by the Fund, Belvedere Capital and the Portfolio is as follows:
Marketable securities, including options, that are listed on foreign or U.S. securities exchanges or in the NASDAQ National Market System are valued at closing sale prices on the exchange where such securities are principally traded. Futures positions on securities or currencies are generally valued at closing settlement prices. Unlisted or listed securities for which closing sale prices are not available are valued at the mean between the latest bid and asked prices. Short-term debt securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates fair value. Other fixed income and debt securities, including listed securities and securities for which price quotations are available, are normally valued on the basis of valuations furnished by a pricing service. Investments held by the Portfolio for which valuations or market quotations are unavailable are valued at fair value using methods determined in good faith by or at the direction of the Trustees. Investments held by the Fund for which valuations or market quotations are unavailable are valued at fair value using methods determined in good faith by Boston Management and Research (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 fair values based upon independent valuations assuming an orderly disposition of assets. Detailed investment valuations are performed at least annually and reviewed periodically. Interim valuations reflect results of operations and distributions, and may be adjusted if there has been a significant change in economic circumstances since the most recent independent valuation. Given that such valuations include many assumptions, including, but not limited to, an orderly disposition of assets, values may differ from amounts ultimately realized.
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. Risks may arise from the unanticipated movements in the value of interest rates.
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 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
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
determine the realized gain or loss. The Portfolio or Fund as a writer of an option may have no control over whether the underlying securities may be sold and as a result bears the market risk of an unfavorable change in the price of the securities underlying the written option.
E Purchased Options -- Upon the purchase of a put option, the premium paid by the Portfolio or Fund is included in the 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 mortgage escrow accounts consist of 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 income is recorded on the accrual basis. Rental income is recorded on the accrual basis based upon the term 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 and indirect investments (including Partnership Preference Units and other real property), 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. Deferred loan costs are included in other assets in the accompanying consolidated financial statements.
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
individually responsible for taxes on items of partnership income, gain, loss and deduction. The policy of Belport Realty, Bel Multifamily and Monadnock is to comply with the Internal Revenue Code of 1986, as amended applicable to REITs. Belport Realty, Bel Multifamily and Monadnock 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 - ------------------------------- Belport Capital intends to distribute each year the amount of its net investment income for the year, if any, and 22% of the amount 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 event with respect to a security contributed by that Shareholder or such Shareholder's predecessor in interest. In addition, whenever a distribution in respect of a precontribution gain is made, Belport Capital intends to make a supplemental distribution to compensate Shareholders receiving such distributions for taxes that may be due on income specially allocated in connection with the precontribution gain and supplemental distributions. Capital gain distributions that are made with respect to realized precontribution gains and the associated supplemental distributions (collectively, Special Distributions) will be made solely to the Shareholders to whom such realized precontribution gain is allocated. No Special Distributions were paid or accrued during the year ended December 31, 2002.
In addition, Belport Realty, Bel Multifamily and Monadnock intend to distribute substantially all of their taxable income earned by the respective entities during the year.
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
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:
YEAR ENDED PERIOD ENDED DECEMBER 31, 2002 DECEMBER 31, 2001*
- ------------------------------------------------------------------------------ Issued at Belport Capital closings -- 17,842,860 Redemptions (524,147) (60,619) - ------------------------------------------------------------------------------ NET INCREASE (DECREASE) (524,147) 17,782,241 - ------------------------------------------------------------------------------
* For the period from the start of business, March 14, 2001, to December 31, 2001.
Redemptions of Fund Shares held less than three years are generally subject to a redemption fee of 1% of the net asset value of Fund Shares redeemed. The redemption fee is paid to Eaton Vance Distributors, Inc. (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 year ended December 31, 2002, EV Distributors received $183,987 in redemption fees.
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 $76.75 and $98.37 as of December 31, 2002 and December 31, 2001, respectively, between Preferred and Common Shares that have been restructured is as follows:
PER SHARE VALUE AT ------------------------------------- DECEMBER 31, 2001 ------------------------------------- PREFERRED COMMON PREFERRED COMMON DATE OF CONTRIBUTION SHARES SHARES SHARES SHARES
- ------------------------------------------------------------------------------ May 23, 2001 $76.75 $ -- N/A* N/A* July 26, 2001 $76.75 $ -- $94.71 $3.66 December 18, 2001 $76.75 $ -- N/A* N/A*
* There were no Estate Freeze participants from the May 23, 2001 and December 18, 2001 closings as of December 31, 2001.
5 Investment Transactions - -------------------------- For the year ended December 31, 2002, increases and decreases of Belport Capital's investment in Belvedere Capital aggregated $19,122,117 and $119,671,632, respectively. Included in the decrease in the investment in Belvedere Capital is the receipt of common stock through a redemption in-kind that was subsequently sold for $50,221,589. There were no purchases and sales of Partnership Preference Units or other real estate investments during the year ended December 31, 2002.
6 Indirect Investment in Portfolio - ----------------------------------- Belvedere Capital's interest in the Portfolio at December 31, 2002, was $8,753,268,522, representing 60.1% of the Portfolio's net assets. The Fund's investment in Belvedere Capital at December 31, 2002 was $1,322,126,211, representing 15.1% of Belvedere Capital's net assets. Investment income allocated to Belvedere Capital from the Portfolio for the year ended December 31, 2002 totaled $123,096,851, of which $20,084,868 was allocated to the Fund. Expenses allocated to Belvedere Capital from the Portfolio for the year ended December 31, 2002, totaled $42,648,896, of which $6,989,394 was allocated to the Fund. Belvedere Capital allocated additional expenses to the Fund of $2,378,978 for the year ended December 31, 2002, representing $59,057 of operating expenses and $2,319,921 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
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
and agreements. As of December 31, 2002, Belport Capital has entered into interest rate swap agreements with Citibank, N.A. and Merrill Lynch Capital Services, Inc.
NOTIONAL INITIAL UNREALIZED AMOUNT OPTIONAL DEPRECIATION AT EFFECTIVE (000'S FIXED FLOATING TERMINATION MATURITY DECEMBER 31, DATE OMITTED) RATE RATE DATE DATE 2001 - ----------------------------------------------------------------------------- 3/01 $49,080 5.8075% LIBOR + 0.40% 3/08 $ 529,706 5/01 73,980 5.79% LIBOR + 0.40% 3/08 8,088,686 7/01 34,905 5.995% LIBOR + 0.40% 3/08 4,169,274 12/01 57,509 5.841% LIBOR + 0.40% 3/08 6,440,259 3/08 49,080 6.45% LIBOR + 0.40% 2/10 5,416,263 3/08 73,980 6.92% LIBOR + 0.40% 9/10 1,741,327 - ------------------------------------------------------------------------------ TOTAL $26,385,515 - ------------------------------------------------------------------------------
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 and Belport Realty. The estimated fair value of the rental property securing the loans was $493,950,506 at December 31, 2002. Amounts outstanding at December 31, 2002, are as follows:
ANNUAL MONTHLY BALANCE AT INTEREST INTEREST DECEMBER 31, MATURITY DATE RATE PAYMENT* 2002
------------------------------------------------------------ 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.
The estimated market value of the mortgage notes payable is approximately $399,000,000 at December 31, 2002. The mortgage notes payable cannot be prepaid or otherwise disposed of without incurring a substantial prepayment penalty or without the sale of the rental property financed by the mortgage notes payable. Management has no current plans to prepay or otherwise dispose of the mortgage notes payable or sell the related rental property prior to the maturity date. The market value of the mortgages is based on estimates using discounted cash flow analysis and currently prevailing rates. Considerable judgment is necessary in interpreting market data to develop estimates at market value. The use of different assumptions or
estimation methodologies may have a material effect on the estimated market value.
B Credit Facility -- Belport Capital has entered into a revolving securitization facility (the Commercial Paper Facility) of up to $250 million with two affiliated special purpose commercial paper issuers (the CP Issuers) and Citicorp North America, Inc. 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., under which borrowings may be made for a maximum term of seven years from Belport Capital's initial closing.
The CP Issuers fund advances under the Commercial Paper Facility by issuing highly rated commercial paper notes. On borrowings under the Commercial Paper Facility, Belport Capital pays a rate of interest equal to the CP Issuers' cost of funding plus a margin and certain administrative and other fees. Such fees amount to approximately 0.31% of the borrowings under the Commercial Paper Facility. Initial borrowings under the Commercial Paper 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 Commercial Paper Facility may be made in the future for these purposes. At December 31, 2002, amounts outstanding under the Commercial Paper Facility totaled $226,000,000. In the event that the CP Issuers are unable or unwilling to maintain advances to Belport Capital, 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%. There were no borrowings under the Liquidity Facility during the year ended December 31, 2002.
Interest expense also includes a commitment fee of 0.15% of the unused portion of the Liquidity Facility and a loan structure fee of less than 0.02% (annualized) of the total amount available under the Commercial Paper Facility.
Belport Capital's obligations under the Commercial Paper Facility and Liquidity Facility are secured by a pledge of substantially all of its assets, including Belport Realty common stock and shares of Belvedere Capital held by the Fund.
Additionally, Citibank, N.A. has provided up to $10,000,000 for use of letters of credit. Fees on the letters of credit are charged at a rate of 0.62% per annum. As of December 31, 2002, a letter of credit in the amount of $1,299,000 was outstanding, used as a substitute for funding mortgage escrow accounts required by the lender of Bel Multifamily. The letter of credit expires on September 27, 2003 and automatically extends for successive one-year periods not to extend beyond March 14, 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
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
$500,000,000 and at reduced rates as daily net assets exceed that level. For the year ended December 31, 2002, the advisory fee applicable to the Portfolio was 0.44% of average daily net assets. Belvedere Capital's allocated portion of the advisory fee totaled $41,180,780 of which $6,746,346 was allocated to Belport Capital for the year ended December 31, 2002.
In addition, Boston Management is, subject to the fee cap described below, entitled to receive a monthly advisory and administrative fee of 1/20 of 1% (0.60% annually) of the average daily gross assets of Belport Capital. 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 directly and indirectly 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 year ended December 31, 2002, the advisory and administrative fee paid or accrued to Boston Management by Belport Capital, plus the management fee paid or accrued to Boston Management by Belport Realty totaled $5,509,938.
Eaton Vance and Boston Management do not receive separate compensation for serving as Manager of Belport Capital and Manager of Belvedere Capital, respectively.
As compensation for its services as placement agent, Belport Capital pays 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 year ended December 31, 2002, Belport Capital's distribution fees paid or accrued to EV Distributors totaled $1,512,281.
Payments to the Eaton Vance organization for investment advisory, management, administration and distribution services made by or in respect of Belport Capital on a direct or indirect basis are subject to a monthly fee cap at a rate of 1/20th of 1% (equivalent to 0.60% annually) of the average daily gross assets of Belport Capital (as defined above). Payments subject to the monthly fee cap are the distribution fee paid to EV Distributors, Belport Capital's attributable share of the advisory and management fees paid by the Portfolio and Belport Realty, and Belport Capital's advisory and administrative fee. Boston Management has agreed to waive a portion of the monthly advisory and administrative fee otherwise payable by Belport Capital as necessary to comply with the monthly fee cap. For the year ended December 31, 2002, Boston Management has waived $1,512,281 of the advisory and administrative fees 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 $14,167,556 for the year ended December 31, 2002, of which $2,319,921 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 year ended December 31, 2002, the servicing fee paid directly by Belport Capital totaled $1,463,390. Of the servicing fee amounts allocated to and incurred by Belport Capital, $1,637,934 was paid or accrued to subagents for the year ended December 31, 2002.
Management services for the real property held by Bel Multifamily and Monadnock are provided by an affiliate of each respective entity's Minority Shareholder (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 (Note 1B). For the year ended December 31, 2002, Belport Realty's controlled subsidiaries paid or accrued property management fees of $2,712,324.
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).
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 (loss), net realized gain (loss), and unrealized gain (loss). The accounting policies of the reportable segments are the same as those for Belport Capital on a
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
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, 2002 PORTFOLIO* ESTATE TOTAL
- ------------------------------------------------------------------------------ Revenue $ 10,716,496 $ 76,407,590 $ 87,124,086 Interest expense on mortgages -- (24,926,829) (24,926,829) Interest expense on Credit Facility -- (4,907,502) (4,907,502) Interest expense on swap contracts -- (7,966,617) (7,966,617) Operating expenses (1,032,117) (30,273,533) (31,305,650) Minority interest in net income of controlled subsidiaries -- (3,427,044) (3,427,044) - ------------------------------------------------------------------------------ NET INVESTMENT INCOME $ 9,684,379 $ 4,906,065 $ 14,590,444 Net realized loss (10,055,722) -- (10,055,722) Change in unrealized gain (loss) (340,666,941) (39,224,675) (379,891,616) - ------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM OPERATIONS OF REPORTABLE SEGMENTS $ (341,038,284) $(34,318,610) $ (375,356,894) - ------------------------------------------------------------------------------ Segment assets(1) $1,372,347,800 $601,083,507 $1,973,431,307 Segment liabilities -- 640,369,917 640,369,917 - ------------------------------------------------------------------------------ NET ASSETS OF REPORTABLE SEGMENTS $1,372,347,800 $(39,286,410) $1,333,061,390 - -----------------------------------------------------------------------------
* Belport Capital invests indirectly in Tax-Managed Growth Portfolio through Belvedere Capital. (1) Includes $50,221,589 of accounts receivable for investments sold.
The following tables reconcile the reported segment information to the consolidated financial statements for the year ended December 31, 2002:
-------------------------------------------------------- Revenue: Revenue from reportable segments $ 87,124,086 Unallocated revenue 34,292 -------------------------------------------------------- TOTAL REVENUE $ 87,158,378 -------------------------------------------------------- Net increase (decrease) in net assets from operations: Net decrease in net assets from operations of reportable segments $ (375,356,894) Unallocated revenue 34,292 Unallocated expenses (3,682,855) --------------------------------------------------------
TOTAL NET DECREASE IN NET ASSETS FROM OPERATIONS $ (379,005,457) -------------------------------------------------------- Net assets: Net assets of reportable segments $1,333,061,390 Unallocated cash 2,345,657 Short-term investments 622,978 Loan payable -- Credit Facility (11,300,000) Other liabilities (87,961) -------------------------------------------------------- TOTAL NET ASSETS $1,324,642,064 --------------------------------------------------------
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
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, 2002, the related consolidated statements of operations and consolidated cash flows for the year then ended, the consolidated statements of changes in net assets for the year ended December 31, 2002 and the period from the start of business, March 14, 2001, to December 31, 2001, and financial highlights for the year ended December 31, 2002. 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 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 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, 2002 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Fund as of December 31, 2002, the results of its operations, its cash flows, the changes in its net assets, and financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP Boston, Massachusetts February 28, 2003
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS
COMMON STOCKS -- 98.9%
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Aerospace and Defense -- 3.0% - -------------------------------------------------------------------------- Boeing Company (The) 785,510 $ 25,913,975 General Dynamics 2,655,000 210,727,350 Honeywell International, Inc. 292,998 7,031,952 Northrop Grumman Corp. 1,084,235 105,170,795 Raytheon Company 313,599 9,643,169 Rockwell Collins, Inc. 203,032 4,722,524 United Technologies Corp. 1,205,679 74,679,757 - -------------------------------------------------------------------------- $ 437,889,522 - -------------------------------------------------------------------------- Air Freight and Logistics -- 2.7% - -------------------------------------------------------------------------- FedEx Corporation 2,306,578 $ 125,062,659 Robinson (C.H.) Worldwide, Inc. 1,203,674 37,554,629 United Parcel Service, Inc. Class B 3,640,273 229,628,421 - -------------------------------------------------------------------------- $ 392,245,709 - -------------------------------------------------------------------------- Airlines -- 0.0% - -------------------------------------------------------------------------- Southwest Airlines, Inc. 17,221 $ 239,372 - -------------------------------------------------------------------------- $ 239,372 - -------------------------------------------------------------------------- Auto Components -- 0.2% - -------------------------------------------------------------------------- ArvinMeritor, Inc. 33,635 $ 560,695 Borg-Warner Automotive, Inc. 203,981 10,284,722 Dana Corp. 46,137 542,571 Delphi Automotive Systems Corp. 6,338 51,021 Federal Signal Corp. 283,471 5,505,007 Johnson Controls, Inc. 128,040 10,264,967 Visteon Corp. 15,135 105,340 - -------------------------------------------------------------------------- $ 27,314,323 - -------------------------------------------------------------------------- Automobiles -- 0.3% - -------------------------------------------------------------------------- DaimlerChrysler AG 7,000 $ 214,550 Ford Motor Co. 146,202 1,359,679 General Motors Corp. 13,896 512,207 Harley-Davidson, Inc. 714,700 33,019,140 Honda Motor Co. Ltd. ADR 20,000 361,200 - -------------------------------------------------------------------------- $ 35,466,776 - -------------------------------------------------------------------------- Banks -- 8.8% - -------------------------------------------------------------------------- AmSouth Bancorporation 832,318 $ 15,980,506
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Banks (continued) - -------------------------------------------------------------------------- Associated Banc-Corp. 749,148 $ 25,426,083 Bank of America Corporation 1,996,299 138,882,521 Bank of Hawaii Corp. 49,425 1,502,026 Bank of Montreal 271,403 7,197,608 Bank of New York Co., Inc. (The) 454,051 10,879,062 Bank One Corp. 1,526,487 55,793,100 Banknorth Group, Inc. 65,720 1,485,272 BB&T Corp. 1,169,217 43,249,337 Charter One Financial, Inc. 251,896 7,236,972 City National Corp. 273,260 12,020,707 Colonial Bancgroup, Inc. (The) 396,090 4,725,354 Comerica, Inc. 222,464 9,619,343 Commerce Bancshares, Inc. 179,374 7,047,604 Community First Bancshares, Inc. 360,184 9,530,469 Compass Bancshares, Inc. 359,763 11,249,789 Credit Suisse Group(1) 155,136 3,364,598 Fifth Third Bancorp 1,047,527 61,332,706 First Citizens BancShares, Inc. 48,696 4,704,034 First Financial Bancorp. 48,948 802,307 First Midwest Bancorp, Inc. 815,329 21,777,438 First Tennessee National Corporation 70,143 2,520,939 FleetBoston Financial Corporation 708,165 17,208,409 Golden West Financial Corporation 121,800 8,746,458 GreenPoint Financial Corp. 620,983 28,056,012 GreenPoint Financial Corp.(2)(3) 100,000 4,516,306 Hibernia Corp. Class A 187,345 3,608,265 Huntington Bancshares, Inc. 578,423 10,822,294 Investors Financial Services Corp. 475,402 13,021,261 Keycorp 651,954 16,390,124 M&T Bank Corp. 39,116 3,103,855 Marshall & Ilsley Corp. 683,798 18,722,389 Mellon Financial Corporation 221,912 5,794,122 National City Corp. 1,288,252 35,195,045 National Commerce Financial Corp. 1,113,055 26,546,362 North Fork Bancorporation, Inc. 53,534 1,806,237 Northern Trust Corp. 221,188 7,752,639 PNC Bank Corp. 150,003 6,285,126 Popular, Inc. 716 24,201 Regions Financial Corp. 1,624,786 54,202,861 Royal Bank of Canada 438,749 16,119,638 Royal Bank of Scotland Group PLC 52,322 1,253,156
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Banks (continued) - -------------------------------------------------------------------------- Royal Bank of Scotland Group PLC (A.V.S.) 50,837 $ 44,800 S&T Bancorp, Inc. 100,000 2,505,100 Societe Generale 809,647 47,117,023 SouthTrust Corp. 331,989 8,249,927 Southwest Bancorporation of Texas, Inc.(1) 815,601 23,497,465 Sovereign Bancorporation, Inc. 26,692 375,023 SunTrust Banks, Inc. 404,246 23,009,682 Synovus Financial Corp. 1,303,564 25,289,142 TCF Financial Corporation 28,000 1,223,320 U.S. Bancorp 4,363,624 92,596,101 UBS AG(1) 32,525 1,565,103 Union Planters Corp. 725,968 20,428,740 Valley National Bancorp 382,725 10,092,458 Wachovia Corp. 1,704,138 62,098,789 Washington Mutual, Inc. 2,083,493 71,943,013 Wells Fargo & Company 2,670,930 125,186,489 Westamerica Bancorporation 266,506 10,708,211 Whitney Holding Corp. 359,920 11,996,134 Zions Bancorporation 227,671 8,958,626 - -------------------------------------------------------------------------- $ 1,282,387,681 - -------------------------------------------------------------------------- Beverages -- 4.3% - -------------------------------------------------------------------------- Anheuser-Busch Companies, Inc. 3,192,296 $ 154,507,126 Coca-Cola Company (The) 3,873,680 169,744,658 Coca-Cola Enterprises, Inc. 1,729,424 37,563,089 Panamerican Beverages, Inc. 80,000 1,662,400 PepsiCo., Inc. 6,158,804 260,024,705 - -------------------------------------------------------------------------- $ 623,501,978 - -------------------------------------------------------------------------- Biotechnology -- 1.5% - -------------------------------------------------------------------------- Amgen, Inc.(1) 3,354,935 $ 162,177,558 Applera Corp. - Celera Genomics Group(1) 26,000 248,300 Genzyme Corp. - General Division(1) 1,325,812 39,204,261 Gilead Sciences, Inc.(1) 77,490 2,634,660 Incyte Pharmaceuticals, Inc.(1) 1,118,525 5,100,474 Invitrogen Corp.(1) 179,449 5,614,959 Vertex Pharmaceuticals, Inc.(1) 13,000 206,050 - -------------------------------------------------------------------------- $ 215,186,262 - --------------------------------------------------------------------------
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Building Products -- 0.7% - -------------------------------------------------------------------------- American Standard Companies, Inc.(1) 331,609 $ 23,590,664 Masco Corporation 3,895,436 81,998,928 - -------------------------------------------------------------------------- $ 105,589,592 - -------------------------------------------------------------------------- Chemicals -- 1.1% - -------------------------------------------------------------------------- Airgas, Inc.(1) 469,801 $ 8,104,067 Arch Chemicals, Inc. 4,950 90,337 Bayer AG ADR 40,000 866,000 Dow Chemical Co. (The) 251,078 7,457,017 DuPont (E.I.) de Nemours & Co. 1,252,589 53,109,774 Eastman Chemical Co. 148 5,442 Ecolab, Inc. 300,326 14,866,137 International Flavors & Fragrances, Inc. 50,247 1,763,670 MacDermid, Inc. 61,937 1,415,260 Monsanto Company 94,435 1,817,874 Olin Corp. 9,900 153,945 PPG Industries, Inc. 23,742 1,190,661 Rohm and Haas, Co. 2,380 77,302 RPM, Inc. 470,138 7,183,709 Sigma-Aldrich Corp. 630,897 30,724,684 Solutia Inc. 99,629 361,653 Syngenta AG(1) 10,030 115,546 Valspar Corp. 818,316 36,153,201 - -------------------------------------------------------------------------- $ 165,456,279 - -------------------------------------------------------------------------- Commercial Services and Supplies -- 5.0% - -------------------------------------------------------------------------- Allied Waste Industries, Inc.(1) 1,675,000 $ 16,750,000 Apollo Group, Inc. Class A(1) 7,599 334,356 Arbitron, Inc.(1) 30,885 1,034,647 Automatic Data Processing, Inc. 4,747,523 186,340,278 Avery Dennison Corp. 1,332,004 81,358,804 Banta Corp. 42,341 1,324,003 BISYS Group, Inc. (The)(1) 280,492 4,459,823 Block (H&R), Inc. 732,354 29,440,631 Bowne & Company 172,640 2,063,048 Cendant Corp.(1) 549,359 5,757,282 Century Business Services, Inc.(1) 400,000 1,060,000 Ceridian Corp.(1) 166,750 2,404,535 Certegy, Inc.(1) 42,862 1,052,262 Cintas Corp. 1,020,305 46,678,954 Concord EFS, Inc.(1) 531,454 8,365,086
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Commercial Services and Supplies (continued) - -------------------------------------------------------------------------- Consolidated Graphics, Inc.(1) 70,215 $ 1,562,284 CSG Systems International, Inc.(1) 41,116 561,233 Deluxe Corporation 80,675 3,396,417 Donnelley (R.R.) & Sons Co. 200,521 4,365,342 DST Systems, Inc.(1) 391,034 13,901,259 eFunds Corp.(1) 44,484 405,249 Equifax, Inc. 85,724 1,983,653 First Data Corp. 4,150,162 146,957,236 Gevity HR, Inc. 78,125 316,406 Harland (John H.) Co. 51,540 1,140,580 HON Industries, Inc. 1,561,853 44,169,203 Imagistics International Inc.(1) 2,482 49,640 Manpower, Inc. 112,000 3,572,800 Miller (Herman) Inc. 577,903 10,633,415 Navigant Consulting, Inc.(1) 496,795 2,931,090 Navigant International, Inc.(1) 44,278 545,948 Paychex, Inc. 1,548,895 43,214,170 Pitney Bowes, Inc. 89,799 2,932,835 Proquest Company(1) 115,000 2,254,000 ServiceMaster Co. 938,668 10,419,215 Spherion Corp.(1) 90,000 603,000 Steelcase Inc. 123,000 1,348,080 Sylvan Learning Systems, Inc.(1) 815,396 13,372,494 Waste Management, Inc. 1,310,285 30,031,732 - -------------------------------------------------------------------------- $ 729,090,990 - -------------------------------------------------------------------------- Communications Equipment -- 1.2% - -------------------------------------------------------------------------- 3Com Corp.(1) 873,949 $ 4,046,384 ADC Telecommunications, Inc.(1) 370,286 773,899 Advanced Fibre Communication, Inc.(1) 15,000 250,200 Alcatel S.A. ADR 43,728 194,152 Avaya, Inc.(1) 65,196 159,730 Ciena Corp.(1) 380,378 1,955,143 Cisco Systems, Inc.(1) 3,718,338 48,710,228 Comverse Technology, Inc.(1) 386,378 3,871,508 Corning, Inc.(1) 705,943 2,336,671 Enterasys Networks, Inc.(1) 61,088 95,297 JDS Uniphase Corp.(1) 266,080 657,218 Lucent Technologies, Inc.(1) 654,299 824,417 McData Corp., Class A(1) 22,604 160,488 Motorola, Inc. 604,394 5,228,008 Nokia Corp., Class A, ADR 6,050,307 93,779,758
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Communications Equipment (continued) - -------------------------------------------------------------------------- Nortel Networks Corp.(1) 1,663,151 $ 2,677,673 Qualcomm, Inc.(1) 344,112 12,522,236 Riverstone Networks, Inc.(1) 31,344 66,449 Tellabs, Inc.(1) 118,404 860,797 - -------------------------------------------------------------------------- $ 179,170,256 - -------------------------------------------------------------------------- Computers and Peripherals -- 3.2% - -------------------------------------------------------------------------- Dell Computer Corp.(1) 3,963,089 $ 105,973,000 EMC Corp.(1) 1,014,343 6,228,066 Gateway, Inc.(1) 99,407 312,138 Hewlett-Packard Co. 2,235,064 38,800,711 International Business Machines Corp. 1,442,028 111,757,170 Lexmark International Group, Inc.(1) 3,269,528 197,806,444 Network Appliance, Inc.(1) 488,000 4,880,000 Palm, Inc.(1) 65,230 1,024,111 Sun Microsystems, Inc.(1) 537,670 1,672,154 - -------------------------------------------------------------------------- $ 468,453,794 - -------------------------------------------------------------------------- Construction and Engineering -- 0.1% - -------------------------------------------------------------------------- Dycom Industries, Inc.(1) 160,464 $ 2,126,148 Jacobs Engineering Group, Inc.(1) 325,090 11,573,204 Salient 3 Communications, Inc., Class A 78,125 54,687 - -------------------------------------------------------------------------- $ 13,754,039 - -------------------------------------------------------------------------- Construction Materials -- 0.1% - -------------------------------------------------------------------------- CRH plc 329,450 $ 4,076,249 Vulcan Materials Company 184,512 6,919,200 - -------------------------------------------------------------------------- $ 10,995,449 - -------------------------------------------------------------------------- Containers and Packaging -- 0.1% - -------------------------------------------------------------------------- Bemis Co. 141,000 $ 6,997,830 Caraustar Industries, Inc.(1) 264,862 2,510,892 Sealed Air Corp.(1) 174,914 6,524,292 Sonoco Products Co. 160,690 3,684,622 Temple-Inland, Inc. 12,632 566,040 - -------------------------------------------------------------------------- $ 20,283,676 - -------------------------------------------------------------------------- Distillers and Vintners -- 0.0% - -------------------------------------------------------------------------- Brown-Forman Corp. Class A 15,296 $ 1,024,832 - -------------------------------------------------------------------------- $ 1,024,832 - --------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Distributors -- 0.0% - -------------------------------------------------------------------------- Genuine Parts Company 188,609 $ 5,809,157 - -------------------------------------------------------------------------- $ 5,809,157 - -------------------------------------------------------------------------- Diversified Financials -- 5.8% - -------------------------------------------------------------------------- Affiliated Managers Group(1) 13,680 $ 688,104 American Express Co. 925,031 32,699,846 Bear Stearns Companies, Inc. 16,237 964,478 Capital One Financial Corp. 1,270,025 37,745,143 Citigroup Inc. 4,258,531 149,857,706 E*Trade Group, Inc.(1) 288,290 1,401,089 Fannie Mae 1,187,100 76,366,143 Federated Investors, Inc. 1,634,947 41,478,605 Finova Group, Inc.(1) 175,587 28,094 Franklin Resources, Inc. 1,903,317 64,865,043 Freddie Mac 180,047 10,631,775 Goldman Sachs Group, Inc. 9,627 655,599 Household International, Inc. 1,102,873 30,670,898 ING groep, N.V. ADR 210,570 3,545,999 Knight Trading Group, Inc.(1) 1,750,000 8,382,500 Legg Mason, Inc. 17,641 856,294 Lehman Brothers Holdings, Inc. 55,756 2,971,237 MBNA Corporation 391,431 7,445,018 Merrill Lynch & Co., Inc. 1,869,290 70,939,555 Moody's Corp. 20,004 825,965 Morgan (J.P.) Chase & Co. 432,106 10,370,544 Morgan Stanley Dean Witter & Co. 4,625,985 184,669,321 Morgan Stanley Dean Witter & Co.(2)(3) 150,000 5,982,760 Nuveen (John) Co. 150,000 3,802,500 Price (T. Rowe) Group, Inc. 171,926 4,690,141 Providian Financial Corp.(1) 597,678 3,878,930 Raymond James Financial, Inc. 98,225 2,905,495 Schwab (Charles) & Co. 998,190 10,830,361 SLM Corp. 601,833 62,506,375 State Street Corp. 328,000 12,792,000 Stilwell Financial, Inc.(1) 95,458 1,247,636 Waddell & Reed Financial, Inc., Class A 150,751 2,965,272 - -------------------------------------------------------------------------- $ 849,660,426 - -------------------------------------------------------------------------- Diversified Telecommunication Services -- 2.5% - -------------------------------------------------------------------------- Alltel Corp. 1,663,732 $ 84,850,332 At Home Corporation Series A(1)(2) 371,895 744
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Diversified Telecommunication Services (continued) - -------------------------------------------------------------------------- AT&T Corp. 473,339 $ 12,358,881 BCE, Inc. 4,000,000 72,040,000 BellSouth Corp. 1,460,642 37,786,809 Broadwing, Inc.(1) 324,311 1,141,575 Citizens Communications Co.(1) 59,563 628,390 Deutsche Telekom AG 1,684,272 21,390,254 ITC DeltaCom, Inc.(1) 6,373 14,849 McLeodUSA(1) 35,538 29,852 NTL, Inc.(1) 400,390 6,406 PTEK Holdings, Inc.(1) 28,000 123,200 Qwest Communications International, Inc.(1) 59,924 299,620 RSL Communications Ltd.(1) 747,161 97 SBC Communications, Inc. 2,622,841 71,105,219 Sprint Corp. - FON Group 150,796 2,183,526 Talk America Holdings, Inc.(1) 82,458 461,765 Verizon Communications 1,345,782 52,149,053 WorldCom, Inc.(1) 232,818 32,129 WorldCom, Inc. - MCI Group 46,372 8,347 - -------------------------------------------------------------------------- $ 356,611,048 - -------------------------------------------------------------------------- Electric Utilities -- 0.2% - -------------------------------------------------------------------------- Ameren Corp. 5,000 $ 207,850 American Electric Power, Inc. 960 26,237 Dominion Resources, Inc. 10,464 574,474 Exelon Corp. 500,000 26,385,000 PG&E Corp.(1) 47,705 663,100 TECO Energy, Inc. 40,000 618,800 TXU Corp. 250,196 4,673,661 Wisconsin Energy Corp. 9,576 241,315 - -------------------------------------------------------------------------- $ 33,390,437 - -------------------------------------------------------------------------- Electrical Equipment -- 0.5% - -------------------------------------------------------------------------- American Power Conversion Corp.(1) 36,671 $ 555,566 Baldor Electric Co. 149,060 2,943,935 Emerson Electric Co. 1,048,511 53,316,784 Energizer Holdings(1) 141,981 3,961,270 Rockwell International Corp. 179,520 3,717,859 Thomas & Betts Corp.(1) 114,600 1,936,740 - -------------------------------------------------------------------------- $ 66,432,154 - --------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Electronic Equipment and Instruments -- 0.5% - -------------------------------------------------------------------------- Agilent Technologies, Inc.(1) 218,644 $ 3,926,846 Arrow Electronics, Inc.(1) 8,750 111,913 Flextronics International Ltd.(1) 182,816 1,497,263 Jabil Circuit, Inc.(1) 2,127,971 38,133,240 Millipore Corporation(1) 101,440 3,448,960 Molex, Inc., Class A 112,582 2,239,256 PerkinElmer, Inc. 300,081 2,475,668 Plexus Corp.(1) 209,946 1,843,326 Roper Industries, Inc. 23,122 846,265 Sanmina Corp.(1) 1,186,972 5,329,504 Solectron Corporation(1) 1,818,848 6,456,910 Teledyne Technologies Incorporated(1) 6,117 95,915 Waters Corp.(1) 198,320 4,319,410 X-Rite Incorporated 361,707 2,528,332 - -------------------------------------------------------------------------- $ 73,252,808 - -------------------------------------------------------------------------- Energy Equipment and Services -- 1.2% - -------------------------------------------------------------------------- Baker Hughes, Inc. 520,182 $ 16,744,659 Core Laboratories N.V.(1) 205,000 2,326,750 Grant Prideco, Inc.(1) 160,681 1,870,327 Halliburton Company 502,602 9,403,683 Nabors Industries, Ltd.(1) 223,291 7,875,474 National-Oilwell, Inc.(1) 686,929 15,002,529 Schlumberger Ltd. 2,370,713 99,783,310 Smith International, Inc.(1) 140,000 4,566,800 Transocean Sedco Forex, Inc. 71,442 1,657,454 Weatherford International Ltd.(1) 188,681 7,534,032 - -------------------------------------------------------------------------- $ 166,765,018 - -------------------------------------------------------------------------- Food and Drug Retailing -- 2.0% - -------------------------------------------------------------------------- Albertson's, Inc. 820,296 $ 18,259,789 Casey's General Stores, Inc. 91,201 1,113,564 CVS Corp. 193,763 4,838,262 Kroger Co. (The)(1) 1,113,221 17,199,264 Safeway, Inc.(1) 1,210,097 28,267,866 Sysco Corp. 6,819,724 203,159,578 Walgreen Co. 631,784 18,441,775 Winn-Dixie Stores, Inc. 271,444 4,147,664 - -------------------------------------------------------------------------- $ 295,427,762 - --------------------------------------------------------------------------
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Food Products -- 3.5% - -------------------------------------------------------------------------- Archer-Daniels-Midland Co. 316,652 $ 3,926,485 Campbell Soup Co. 1,243,047 29,174,313 Conagra Inc. 1,654,583 41,381,121 Dean Foods Co.(1) 336,144 12,470,942 Del Monte Foods, Co.(1) 103,109 793,939 General Mills, Inc. 253,123 11,884,125 Heinz (H.J.) Co. 230,876 7,588,894 Hershey Foods Corp. 243,006 16,388,325 JM Smucker Co. 19,342 770,005 Kellogg Co. 80,407 2,755,548 Kraft Foods, Inc. 387,000 15,065,910 McCormick & Co., Inc. 482,002 11,182,446 Nestle SA 200,000 42,363,998 Riviana Foods, Inc. 250,000 6,755,250 Sara Lee Corp. 5,587,965 125,785,092 Smithfield Foods, Inc.(1) 4,207,530 83,477,395 Tyson Foods, Inc. 405,548 4,550,249 Unilever ADR 1,100,000 67,881,000 Wrigley (Wm.) Jr. Company Class A 444,868 24,414,356 - -------------------------------------------------------------------------- $ 508,609,393 - -------------------------------------------------------------------------- Gas Utilities -- 0.5% - -------------------------------------------------------------------------- Kinder Morgan, Inc. 1,788,072 $ 75,581,803 - -------------------------------------------------------------------------- $ 75,581,803 - -------------------------------------------------------------------------- Health Care Equipment and Supplies -- 1.7% - -------------------------------------------------------------------------- Advanced Medical Optics 7,631 $ 91,343 Bausch & Lomb, Inc. 145,054 5,221,944 Baxter International, Inc. 3,059,912 85,677,536 Becton & Dickinson and Co. 89,913 2,759,430 Biomet, Inc. 411,340 11,789,004 Boston Scientific Corporation(1) 540,985 23,002,682 Dentsply International, Inc. 11,325 421,290 Edwards Lifesciences Corp.(1) 29,878 760,993 Guidant Corp.(1) 54,616 1,684,904 Hillenbrand Industries, Inc. 647,179 31,265,217 Lumenis Ltd.(1) 112,000 224,000 Medtronic, Inc. 1,692,376 77,172,346 St. Jude Medical, Inc.(1) 10,014 397,756 Steris Corp.(1) 36,246 878,966 VISX, Inc.(1) 50,000 479,000
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Health Care Equipment and Supplies (continued) - -------------------------------------------------------------------------- Zimmer Holdings, Inc.(1) 244,725 $ 10,160,982 - -------------------------------------------------------------------------- $ 251,987,393 - -------------------------------------------------------------------------- Health Care Providers and Services -- 2.2% - -------------------------------------------------------------------------- AmerisourceBergen Corp. 30,800 $ 1,672,748 Andrx Group(1) 393,772 5,776,635 Beverly Enterprises, Inc.(1) 357,143 1,017,858 Cardinal Health, Inc. 1,883,537 111,486,555 Caremark Rx, Inc.(1) 17,696 287,560 Cigna Corp. 11,836 486,696 HCA Inc. 253,484 10,519,586 Health Management Associates, Inc., Class A 1,536,833 27,509,311 HealthSouth Corp.(1) 319,506 1,341,925 IDX Systems Corp.(1) 60,000 1,021,800 IMS Health, Inc. 498,012 7,968,192 McKesson HBOC, Inc. 49,513 1,338,336 Parexel International Corp.(1) 35,000 384,650 Quest Diagnostics, Inc.(1) 231,250 13,158,125 Quintiles Transnational Corp.(1) 343,408 4,155,237 Renal Care Group, Inc.(1) 371,007 11,738,661 Schein (Henry), Corp.(1) 1,272,548 57,264,660 Service Corp. International(1) 145,389 482,691 Stewart Enterprises, Inc.(1) 114,000 635,094 Sunrise Assisted Living, Inc.(1) 144,000 3,584,160 Tenet Healthcare Corp.(1) 3,961 64,960 UnitedHealth Group, Inc. 305,124 25,477,854 Ventiv Health, Inc.(1) 160,833 326,652 Wellpoint Health Networks(1) 504,000 35,864,640 - -------------------------------------------------------------------------- $ 323,564,586 - -------------------------------------------------------------------------- Hotels, Restaurants and Leisure -- 1.5% - -------------------------------------------------------------------------- Brinker International, Inc.(1) 582,237 $ 18,777,143 Carnival Corporation 554,748 13,840,963 CBRL Group, Inc. 62,047 1,869,476 Evans (Bob) Farms, Inc. 51,662 1,206,308 Gaylord Entertainment Co.(1) 428,482 8,826,729 International Game Technology(1) 100,000 7,592,000 International Speedway Corporation 118,344 4,413,048 Jack in the Box, Inc.(1) 500,000 8,645,000 Lone Star Steakhouse & Saloon, Inc. 145,981 2,823,273
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Hotels, Restaurants and Leisure (continued) - -------------------------------------------------------------------------- Marriott International, Inc. 332,517 $ 10,929,834 McDonald's Corp. 1,373,682 22,088,807 MGM Grand, Inc.(1) 94,445 3,113,852 Outback Steakhouse, Inc. 1,610,923 55,480,188 Outback Steakhouse, Inc.(2)(3) 31,784 1,093,683 Papa John's International, Inc.(1) 199,760 5,569,309 Royal Caribbean Cruises Ltd. 500,000 8,350,000 Sonic Corp.(1) 106,510 2,182,390 Starbucks Corp.(1) 1,330,334 27,112,207 Yum! Brands, Inc.(1) 436,380 10,569,124 - -------------------------------------------------------------------------- $ 214,483,334 - -------------------------------------------------------------------------- Household Durables -- 0.6% - -------------------------------------------------------------------------- Blyth Industries, Inc. 1,042,766 $ 27,904,418 Department 56, Inc.(1) 255,162 3,291,590 Fortune Brands Inc. 142,143 6,611,071 Helen of Troy Ltd.(1) 20,000 232,800 Interface, Inc. Class B(2) 171,613 526,852 Interface, Inc. Class A 19,538 59,982 Leggett & Platt, Inc. 1,432,606 32,147,679 Maytag Corp. 27,073 771,581 Newell Rubbermaid, Inc. 402,694 12,213,709 Snap-On, Inc. 51,429 1,445,669 - -------------------------------------------------------------------------- $ 85,205,351 - -------------------------------------------------------------------------- Household Products -- 1.8% - -------------------------------------------------------------------------- Clorox Co. (The) 53,688 $ 2,214,630 Colgate-Palmolive Co. 563,176 29,527,318 Kimberly-Clark Corp. 1,920,274 91,155,407 Procter & Gamble Co. 1,680,808 144,448,640 - -------------------------------------------------------------------------- $ 267,345,995 - -------------------------------------------------------------------------- Industrial Conglomerates -- 1.5% - -------------------------------------------------------------------------- 3M Co. 223,875 $ 27,603,788 General Electric Co. 6,597,241 160,642,818 Teleflex, Inc. 47,559 2,039,806 Tyco International Ltd. 1,191,481 20,350,495 - -------------------------------------------------------------------------- $ 210,636,907 - -------------------------------------------------------------------------- Insurance -- 6.9% - -------------------------------------------------------------------------- 21st Century Insurance Group 70,700 $ 885,164
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Insurance (continued) - -------------------------------------------------------------------------- Aegon N.V. ADR 5,048,336 $ 64,770,151 AFLAC Corp. 1,292,702 38,936,184 Allmerica Financial Corp.(1) 1,500 15,150 Allstate Corp. (The) 79,875 2,954,576 American International Group, Inc. 5,394,313 312,061,007 AON Corp. 908,574 17,162,963 Berkshire Hathaway, Inc., Class A(1) 386 28,081,500 Berkshire Hathaway, Inc., Class B(1) 39,680 96,144,640 Chubb Corporation 104,951 5,478,442 Commerce Group, Inc. 120,000 4,498,800 Delphi Financial Group Inc. 6,448 244,766 Gallagher (Arthur J.) and Co. 1,028,843 30,227,407 Hartford Financial Services Group, Inc. 36,048 1,637,661 Jefferson-Pilot Corp. 190,173 7,247,493 Kansas City Life Insurance Co. 70,800 2,683,320 Lincoln National Corp. 52,903 1,670,677 Manulife Financial Corp.(1) 74,958 1,627,338 Marsh & McLennan Cos., Inc. 4,128,592 190,782,236 Mercury General Corp. 2,000 75,160 MetLife, Inc. 1,969,700 53,260,688 MGIC Investment Corp. 85,000 3,510,500 Old Republic International Corp. 72,603 2,032,884 Progressive Corp. 1,905,100 94,550,113 Radian Group, Inc. 30,800 1,144,220 Safeco Corp. 17,439 604,610 St. Paul Companies, Inc. (The) 323,841 11,026,786 Torchmark Corp. 289,585 10,578,540 Travelers Property Casualty - Class A(1) 173,919 2,547,913 Travelers Property Casualty - Class B(1) 357,326 5,234,826 UICI(1) 75,030 1,166,717 UnumProvident Corp. 52,000 912,080 XL Capital Ltd., Class A 79,232 6,120,672 - -------------------------------------------------------------------------- $ 999,875,184 - -------------------------------------------------------------------------- Internet and Catalog Retail -- 0.0% - -------------------------------------------------------------------------- eBay, Inc.(1) 34,268 $ 2,324,056 School Specialty Corp.(1) 49,197 982,956 - -------------------------------------------------------------------------- $ 3,307,012 - --------------------------------------------------------------------------
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Internet Software and Services -- 0.0% - -------------------------------------------------------------------------- Retek, Inc.(1) 465,615 $ 1,266,473 - -------------------------------------------------------------------------- $ 1,266,473 - -------------------------------------------------------------------------- IT Consulting and Services -- 0.9% - -------------------------------------------------------------------------- Accenture Ltd.(1) 3,638,000 $ 65,447,620 Acxiom Corp.(1) 579,019 8,905,312 Acxiom Corp.(1)(2)(3) 68,785 1,056,326 Affiliated Computer Services(1) 200,654 10,564,433 Computer Sciences Corp.(1) 390,302 13,445,904 Electronic Data Systems Corp. 157,712 2,906,632 Gartner Group, Inc., Class A(1) 4,811 44,261 Gartner Group, Inc., Class B(1) 92,416 873,331 Keane, Inc.(1) 119,224 1,071,824 Perot Systems Corp.(1) 747,730 8,015,666 Safeguard Scientifics, Inc.(1) 26,579 36,147 SunGard Data Systems, Inc.(1) 867,786 20,445,038 Synavant, Inc.(1) 13,700 12,741 - -------------------------------------------------------------------------- $ 132,825,235 - -------------------------------------------------------------------------- Leisure Equipment and Products -- 0.1% - -------------------------------------------------------------------------- Eastman Kodak Co. 156,267 $ 5,475,596 Mattel, Inc. 19,627 375,857 - -------------------------------------------------------------------------- $ 5,851,453 - -------------------------------------------------------------------------- Machinery -- 2.9% - -------------------------------------------------------------------------- Caterpillar, Inc. 23,255 $ 1,063,219 Danaher Corporation 1,915,985 125,880,215 Deere & Co. 3,450,000 158,182,500 Dionex Corp.(1) 501,890 14,891,076 Donaldson Company, Inc. 40,220 1,447,920 Dover Corp. 610,289 17,796,027 Illinois Tool Works, Inc. 1,138,513 73,843,953 ITT Industries, Inc. 4,214 255,748 Nordson Corporation 163,978 4,071,574 Parker-Hannifin Corporation 125,359 5,782,811 SPX Corp.(1) 95,724 3,584,864 Tecumseh Products Co., Class A 156,420 6,902,815 Wabtec 232,061 3,258,136 - -------------------------------------------------------------------------- $ 416,960,858 - --------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Media -- 6.9% - -------------------------------------------------------------------------- ADVO, Inc.(1) 580,339 $ 19,052,529 AOL Time Warner, Inc.(1) 1,400,796 18,350,428 Belo (A.H.) Corp. 542,924 11,575,140 Cablevision Systems Corp.(1) 207,410 3,472,043 Catalina Marketing Corp.(1) 89,203 1,650,256 Clear Channel Communications, Inc.(1) 448,274 16,716,137 Comcast Corp. Class A(1) 1,965,628 46,329,852 Comcast Corp. Class A Special(1) 1,042,262 23,544,699 Cox Communications, Inc., Class A(1) 352,265 10,004,326 Disney (Walt) Company 5,039,433 82,193,152 EchoStar Communications, Class A(1) 35,150 782,439 Entercom Communications Corp.(1) 20,000 938,400 Entercom Communications Corp.(1)(2)(3) 200,000 9,378,526 Gannett Co., Inc. 1,208,627 86,779,419 General Motors Corp., H Class(1) 275,262 2,945,303 Havas Advertising, S.A. ADR 3,142,938 12,477,464 Interpublic Group of Companies., Inc. 2,495,261 35,133,275 Interpublic Group of Companies., Inc.(2)(3) 100,000 1,405,888 KnightRidder, Inc. 18,123 1,146,280 Lamar Advertising Co.(1) 845,318 28,444,951 Liberty Media Corp. Class A(1) 1,225,175 10,953,065 Liberty Media Corp. Class B(1) 32,876 302,459 MacClatchy Co. (The) 48,066 2,726,784 McGraw-Hill Companies, Inc. (The) 2,028,164 122,582,232 Meredith Corp. 190,000 7,810,900 New York Times Co. (The), Class A 317,259 14,508,254 News Corporation Ltd. 93,965 2,128,307 Omnicom Group, Inc. 3,546,255 229,088,073 Publicis Groupe SA 368,212 7,798,992 Reuters Holdings plc ADR 270,131 4,646,253 Scripps (The E.W) Company 25,533 1,964,764 TMP Worldwide, Inc.(1) 154,426 1,746,558 Tribune Co. 654,327 29,745,705 Univision Communications, Inc.(1) 963,184 23,598,008 Viacom, Inc., Class A(1) 29,774 1,215,077 Viacom, Inc., Class B(1) 2,637,818 107,517,462 Vivendi Universal S.A. ADR 490,725 7,885,951 Washington Post Co. (The) 11,352 8,377,776 Westwood One, Inc.(1) 122,400 4,572,864 WPP Group plc 139,450 1,065,057
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Media (continued) - -------------------------------------------------------------------------- WPP Group plc ADR 188,507 $ 7,140,645 - -------------------------------------------------------------------------- $ 1,009,695,693 - -------------------------------------------------------------------------- Metals and Mining -- 0.3% - -------------------------------------------------------------------------- Alcoa, Inc. 1,406,287 $ 32,035,218 Allegheny Technologies, Inc. 21,408 133,372 Nucor Corp. 239,966 9,910,596 Phelps Dodge Corp.(1) 18,854 596,729 Steel Dynamics, Inc.(1) 311,800 3,750,954 Worthington Industries, Inc. 147,466 2,247,382 - -------------------------------------------------------------------------- $ 48,674,251 - -------------------------------------------------------------------------- Multiline Retail -- 3.0% - -------------------------------------------------------------------------- 99 Cents Only Stores(1) 1,142,232 $ 30,680,352 Costco Wholesale Corp.(1) 77,258 2,167,859 Dollar General Corp. 249,983 2,987,297 Dollar Tree Stores, Inc.(1) 1,024,932 25,182,579 Dollar Tree Stores, Inc.(1)(2)(3) 30,000 736,824 Dollar Tree Stores, Inc.(1)(2)(3) 5,000 122,778 Family Dollar Stores, Inc. 2,618,411 81,720,607 Kohls Corp.(1) 49,500 2,769,525 May Department Stores Co. (The) 596,760 13,713,545 Neiman Marcus Group, Inc. (The)(1) 27,117 741,108 Nordstrom, Inc. 65,692 1,246,177 Penney (J.C.) Company, Inc. 539,766 12,420,016 Sears, Roebuck & Co. 15,750 377,213 Target Corp. 2,824,259 84,727,770 Wal-Mart Stores, Inc. 3,579,444 180,797,716 - -------------------------------------------------------------------------- $ 440,391,366 - -------------------------------------------------------------------------- Multi-Utilities and Unregulated Power -- 0.0% - -------------------------------------------------------------------------- AES Corporation(1) 49,542 $ 149,617 Duke Energy Corp. 45,234 883,872 Dynegy, Inc. 63,525 74,960 El Paso Corp. 175,909 1,224,327 Enron Corp.(1)(2) 17,000 1,054 National Fuel Gas Co. 4,000 82,920 Williams Companies. Inc. (The) 222,833 601,649 - -------------------------------------------------------------------------- $ 3,018,399 - --------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Office Electronics -- 0.0% - -------------------------------------------------------------------------- Ikon Office Solutions, Inc. 99,415 $ 710,817 Xerox Corp.(1) 20,000 161,000 Zebra Technologies Corp., Class A(1) 6,000 343,800 - -------------------------------------------------------------------------- $ 1,215,617 - -------------------------------------------------------------------------- Oil and Gas -- 4.4% - -------------------------------------------------------------------------- Anadarko Petroleum Corp. 2,591,941 $ 124,153,974 Apache Corporation 986,372 56,213,340 Ashland, Inc. 115,544 3,296,470 BP plc ADR 3,190,393 129,689,475 Burlington Resources, Inc. 930,802 39,698,705 ChevronTexaco Corporation 805,697 53,562,737 ConocoPhillips 386,960 18,724,994 Devon Energy Corp. 724,853 33,270,753 Exxon Mobil Corp. 4,388,503 153,334,295 Kerr - McGee Corp. 267,327 11,842,586 Marathon Oil Corp. 350,450 7,461,081 Murphy Oil Corporation 59,400 2,545,290 Newfield Exploration Company(1) 60,000 2,163,000 Ocean Energy Inc. 200,000 3,994,000 Royal Dutch Petroleum Co. 84,624 3,725,148 Syntroleum Corp.(1) 2,735 4,732 Valero Energy Corp. 51,510 1,902,779 - -------------------------------------------------------------------------- $ 645,583,359 - -------------------------------------------------------------------------- Paper and Forest Products -- 0.2% - -------------------------------------------------------------------------- Georgia-Pacific Corp. 647,827 $ 10,468,884 International Paper Co. 219,061 7,660,563 Louisiana-Pacific Corp.(1) 70,750 570,245 MeadWestvaco Corp. 84,358 2,084,486 Weyerhaeuser Co. 119,608 5,885,910 - -------------------------------------------------------------------------- $ 26,670,088 - -------------------------------------------------------------------------- Personal Products -- 1.1% - -------------------------------------------------------------------------- Avon Products, Inc. 134,700 $ 7,256,289 Gillette Company 2,998,197 91,025,261 Lauder (Estee) Companies, Inc. 2,092,312 55,237,037 Water Pik Technologies(1) 2,141 15,736 - -------------------------------------------------------------------------- $ 153,534,323 - --------------------------------------------------------------------------
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Pharmaceuticals -- 6.6% - -------------------------------------------------------------------------- Abbott Laboratories 2,268,381 $ 90,735,240 Allergan, Inc. 52,340 3,015,831 Bristol-Myers Squibb Company 2,879,723 66,665,587 Elan Corp., PLC ADR(1) 31,838 78,321 Forest Laboratories, Inc.(1) 328,400 32,255,448 GlaxoSmithKline plc 503,923 18,876,956 Johnson & Johnson 2,920,807 156,876,544 King Pharmaceuticals, Inc.(1) 2,085,117 35,843,161 Lilly (Eli) & Co. 2,130,682 135,298,307 Merck & Co., Inc. 1,585,166 89,736,247 Mylan Laboratories, Inc. 3,037 105,991 Novo Nordisk ADR 292,277 8,446,805 Pfizer, Inc. 5,629,045 172,079,906 Pharmacia Corp. 540,149 22,578,228 Schering AG ADR 25,000 1,072,500 Schering-Plough Corp. 1,855,738 41,197,384 Sepracor, Inc.(1) 4,000 38,680 Teva Pharmaceutical Industries Ltd. ADR 600,000 23,166,000 Watson Pharmaceuticals, Inc.(1) 1,190,893 33,666,545 Wyeth Corp. 718,378 26,867,337 - -------------------------------------------------------------------------- $ 958,601,018 - -------------------------------------------------------------------------- Real Estate -- 0.2% - -------------------------------------------------------------------------- AvalonBay Communities, Inc. 55,000 $ 2,152,700 Catellus Development Corp.(1) 415,722 8,252,082 Equity Office Properties Trust 2,812 70,244 Jones Lang Lasalle, Inc.(1) 154,567 2,377,240 Plum Creek Timber Co., Inc. 415,793 9,812,715 Trammell Crow Co.(1) 861,878 7,756,902 - -------------------------------------------------------------------------- $ 30,421,883 - -------------------------------------------------------------------------- Road and Rail -- 0.2% - -------------------------------------------------------------------------- ANC Rental Corporation(1) 497,025 $ 24,851 Burlington Northern Santa Fe Corp. 214,841 5,588,014 CSX Corporation 46,652 1,320,718 Florida East Coast Industries, Inc. 122,888 2,851,002 Heartland Express, Inc.(1) 283,930 6,505,120 Heartland Express, Inc.(1)(2)(3) 435,436 9,961,310 Kansas City Southern Industries, Inc.(1) 15,215 182,580 Norfolk Southern Corp. 3,090 61,769
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Road and Rail (continued) - -------------------------------------------------------------------------- Union Pacific Corp. 92,156 $ 5,517,380 - -------------------------------------------------------------------------- $ 32,012,744 - -------------------------------------------------------------------------- Semiconductor Equipment and Products -- 1.4% - -------------------------------------------------------------------------- Agere Systems, Inc.(1) 7,560 $ 10,886 Agere Systems, Inc., Class B(1) 188,938 264,513 Altera Corp.(1) 80,516 992,762 Analog Devices, Inc.(1) 740,630 17,678,838 Applied Materials, Inc.(1) 196,824 2,564,617 Applied Materials, Inc.(1)(2)(3) 215,968 2,809,842 Broadcom Corp.(1) 234,000 3,524,040 Conexant Systems, Inc.(1) 134,174 216,020 Cypress Semiconductor Corporation(1) 152,742 873,684 Intel Corp. 5,993,950 93,325,802 Intel Corp.(2)(3) 250,000 3,891,040 Intel Corp.(2)(3) 250,000 3,889,094 Intel Corp.(2)(3) 500,000 7,775,269 Intel Corp.(2)(3) 375,000 5,829,992 KLA-Tencor Corp.(1) 94,066 3,327,114 KLA-Tencor Corp.(1)(2)(3) 35,000 1,237,228 Lam Research Corp.(1) 44,051 475,751 Linear Technologies Corp. 87,760 2,257,187 LSI Logic Corporation(1) 132,810 766,314 Maxim Integrated Products Co. 274,351 9,064,557 Mykrolis Corp.(1) 68,655 501,182 Skyworks Solutions, Inc.(1) 98,686 850,673 Teradyne, Inc.(1) 27,996 364,228 Texas Instruments, Inc. 2,589,577 38,869,551 Xilinx, Inc.(1) 68,518 1,411,471 - -------------------------------------------------------------------------- $ 202,771,655 - -------------------------------------------------------------------------- Software -- 2.4% - -------------------------------------------------------------------------- Adobe Systems, Inc. 231,936 $ 5,752,245 Ascential Software Corp.(1) 6,127 14,705 BMC Software, Inc.(1) 27,000 461,970 Cadence Design Systems, Inc.(1) 900,000 10,611,000 Check Point Software Technologies Ltd.(1) 143,568 1,862,077 Cognos, Inc.(1) 77,000 1,805,650 Computer Associates International, Inc. 32,395 437,333 Compuware Corp.(1) 153,744 737,971 Edwards (J.D.) & Co.(1) 891,844 10,060,000
SECURITY SHARES VALUE
- --------------------------------------------------------------------------
Software (continued) - -------------------------------------------------------------------------- Fair, Isaac and Co., Inc. 744,545 $ 31,792,072 Henry (Jack) & Associates 201,006 2,420,112 I2 Technologies, Inc.(1) 233,752 268,815 Intuit, Inc.(1) 956,635 44,885,314 Microsoft Corp.(1) 3,703,047 191,447,530 National Instruments Corp.(1) 466,603 15,159,931 Oracle Corp.(1) 737,178 7,961,522 Parametric Technology Corp.(1) 94,600 238,392 PeopleSoft, Inc.(1) 384,478 7,035,947 Reynolds & Reynolds, Co. 451,043 11,488,065 Siebel Systems, Inc.(1) 1,216,472 9,001,893 VERITAS Software Corp.(1) 43,942 686,374 Wind River Systems, Inc.(1) 111,410 456,781 - -------------------------------------------------------------------------- $ 354,585,699 - -------------------------------------------------------------------------- Specialty Retail -- 2.8% - -------------------------------------------------------------------------- Abercrombie & Fitch Co.(1) 10,900 $ 223,014 AutoNation, Inc.(1) 3,829,750 48,101,660 Best Buy Co., Inc.(1) 113,610 2,743,682 Burlington Coat Factory Warehouse Corp. 628,228 11,276,693 Carmax, Inc.(1) 67,797 1,212,210 Circuit City Stores, Inc. 216,000 1,602,720 Gap, Inc. (The) 21,812 338,522 Home Depot, Inc. (The) 6,702,847 160,600,214 Limited Brands, Inc. 847,878 11,810,941 Lowe's Companies 2,379,050 89,214,375 Office Depot, Inc.(1) 245,021 3,616,510 OfficeMax, Inc.(1) 912,117 4,560,585 Payless Shoesource, Inc.(1) 7,700 396,319 Pep Boys - Manny, Moe & Jack (The) 83,415 967,614 Pier 1 Imports, Inc. 300,000 5,679,000 RadioShack Corp. 677,904 12,703,921 Sherwin-Williams Co. (The) 80,069 2,261,949 Staples, Inc.(1) 92,500 1,692,750 Tiffany & Co. 88,000 2,104,080 TJX Companies, Inc. (The) 2,000,000 39,040,000 Too, Inc.(1) 38,284 900,440 United Rentals, Inc.(1) 401,179 4,316,686 - -------------------------------------------------------------------------- $ 405,363,885 - --------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Textiles, Apparel and Luxury Goods -- 0.1% - -------------------------------------------------------------------------- Coach, Inc.(1) 182,860 $ 6,019,751 Nike Inc., Class B 78,316 3,482,713 Unifi, Inc.(1) 42,921 225,335 - -------------------------------------------------------------------------- $ 9,727,799 - -------------------------------------------------------------------------- Tobacco -- 0.1% - -------------------------------------------------------------------------- Philip Morris Companies, Inc. 495,730 $ 20,091,937 UST, Inc. 439 14,676 - -------------------------------------------------------------------------- $ 20,106,613 - -------------------------------------------------------------------------- Trading Companies and Distributors -- 0.0% - -------------------------------------------------------------------------- MSC Industrial Direct Co.(1) 5,000 $ 88,750 - -------------------------------------------------------------------------- $ 88,750 - -------------------------------------------------------------------------- Water Utilities -- 0.0% - -------------------------------------------------------------------------- American Waterworks Co. 76,039 $ 3,458,254 - -------------------------------------------------------------------------- $ 3,458,254 - -------------------------------------------------------------------------- Wireless Telecommunication Services -- 0.1% - -------------------------------------------------------------------------- AT&T Wireless Services, Inc.(1) 1,502,536 $ 8,489,328 Nextel Communications, Inc., Class A(1) 73,122 844,559 Sprint Corp. - PCS Group(1) 19,754 86,523 Telephone and Data Systems, Inc. 46,394 2,181,446 Vodafone Group plc ADR 50,617 917,180 - -------------------------------------------------------------------------- $ 12,519,036 - -------------------------------------------------------------------------- Total Common Stocks (identified cost $14,682,605,092) $14,411,340,749 - --------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.0%
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Multi-Utilities and Unregulated Power -- 0.0% - -------------------------------------------------------------------------- Enron Corp.(1)(2) 11,050 $ 18,706 - -------------------------------------------------------------------------- $ 18,706 - -------------------------------------------------------------------------- Total Convertible Preferred Stocks (identified cost $4,500,777) $ 18,706 - --------------------------------------------------------------------------
PREFERRED STOCKS -- 0.0%
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Banks -- 0.0% - -------------------------------------------------------------------------- Wachovia Corp. (Dividend Equalization Preferred Shares)(1)(2) 166,518 $ 20,815 - -------------------------------------------------------------------------- $ 20,815 - -------------------------------------------------------------------------- Total Preferred Stocks (identified cost $39,407) $ 20,815 - --------------------------------------------------------------------------
RIGHTS -- 0.0%
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Banks -- 0.0% - -------------------------------------------------------------------------- Bank United Corp. (Litigation Contingent Payment Rights)(1) 102,072 $ 10,207 - -------------------------------------------------------------------------- $ 10,207 - -------------------------------------------------------------------------- Computers and Business Equipment -- 0.0% - -------------------------------------------------------------------------- Seagate Technology, Inc. (Tax Refund Rights)(1)(2) 197,392 $ 0 - -------------------------------------------------------------------------- $ 0 - -------------------------------------------------------------------------- Diversified Telecommunication Services -- 0.0% - -------------------------------------------------------------------------- McLeodUSA (Escrow Rights)(1)(2) 1,592,200 $ 0 - -------------------------------------------------------------------------- $ 0 - -------------------------------------------------------------------------- Total Rights (identified cost $50,596) $ 10,207 - --------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.9%
PRINCIPAL AMOUNT SECURITY (000'S OMITTED) VALUE
- -------------------------------------------------------------------------- American Express Credit Corp., 1.28%, 1/6/03 $ 20,000 $ 19,996,444 Cortez Capital Corp., 1.36%, 1/15/03 29,000 28,984,662 G. E. Capital Corp., 1.25%, 1/2/03 12,276 12,275,574 Old Line Funding Corp., 1.36%, 1/17/03 27,603 27,586,316 Transamerica Finance Corp., 1.35%, 1/8/03 25,000 24,993,438
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
PORTFOLIO OF INVESTMENTS CONT'D
PRINCIPAL AMOUNT SECURITY (000'S OMITTED) VALUE
- -------------------------------------------------------------------------- Trident Cptl Fnce Inc., 1.36%, 1/16/03 18,933 $ 18,922,271 - -------------------------------------------------------------------------- Total Commercial Paper (at amortized cost, $132,758,705) $ 132,758,705 - -------------------------------------------------------------------------- Total Investments -- 99.8% (identified cost $14,819,954,577) $14,544,149,182 - --------------------------------------------------------------------------
SECURITIES SOLD SHORT -- -0.3%
SECURITY SHARES VALUE
- -------------------------------------------------------------------------- Kinder Morgan, Inc. 1,000,000 $ (42,270,000) - -------------------------------------------------------------------------- Total Securities Sold Short (proceeds $42,473,701) $ (42,270,000) - -------------------------------------------------------------------------- Other Assets, Less Liabilities excluding securities sold short -- 0.5% $ 69,642,406 - -------------------------------------------------------------------------- Net Assets -- 100.0% $14,571,521,588 - --------------------------------------------------------------------------
ADR - American Depositary Receipt
(1) Non-income producing security. (2) Security valued at fair value using methods determined in good faith by or at the direction of the Trustees. (3) Security restricted from resale for a period not exceeding two years. At December 31, 2002, the value of these securities totaled $59,686,866 or 0.4% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2002
Assets - --------------------------------------------------------- Investments, at value (identified cost, $14,819,954,577) $14,544,149,182 Cash 93,887 Deposits with brokers for securities sold short 42,473,701 Receivable for investments sold 4,812,234 Dividends and interest receivable 22,219,628 Tax reclaim receivable 426,060 Other assets 47,529 - --------------------------------------------------------- TOTAL ASSETS $14,614,222,221 - ---------------------------------------------------------
Liabilities - --------------------------------------------------------- Securities sold short, at value (proceeds received $42,473,701) $ 42,270,000 Payable for dividends on securities sold short 250,000 Payable to affiliate for Trustees' fees 7,500 Accrued expenses 173,133 - --------------------------------------------------------- TOTAL LIABILITIES $ 42,700,633 - --------------------------------------------------------- NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $14,571,521,588 - ---------------------------------------------------------
Sources of Net Assets - --------------------------------------------------------- Net proceeds from capital contributions and withdrawals $14,847,095,575 Net unrealized depreciation (computed on the basis of identified cost) (275,573,987) - --------------------------------------------------------- TOTAL $14,571,521,588 - ---------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
Investment Income - --------------------------------------------------------- Dividends (net of foreign taxes, $2,032,262) $ 207,295,027 Interest 5,997,055 - --------------------------------------------------------- TOTAL INVESTMENT INCOME $ 213,292,082 - ---------------------------------------------------------
Expenses - --------------------------------------------------------- Investment adviser fee $ 71,564,552 Trustees' fees and expenses 29,796 Custodian fee 1,992,078 Dividends on securities sold short 250,000 Legal and accounting services 95,485 Miscellaneous 210,130 - --------------------------------------------------------- TOTAL EXPENSES $ 74,142,041 - ---------------------------------------------------------
NET INVESTMENT INCOME $ 139,150,041 - ---------------------------------------------------------
Realized and Unrealized Gain (Loss) - --------------------------------------------------------- Net realized gain (loss) -- Investment transactions (identified cost basis) $ (459,951,418) Foreign currency transactions (45,422) - --------------------------------------------------------- NET REALIZED LOSS $ (459,996,840) - --------------------------------------------------------- Change in unrealized appreciation (depreciation) -- Investments (identified cost basis) $(3,312,778,452) Securities sold short 203,701 Foreign currency 27,187 - --------------------------------------------------------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $(3,312,547,564) - ---------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(3,772,544,404) - ---------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(3,633,394,363) - ---------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE (DECREASE) YEAR ENDED YEAR ENDED IN NET ASSETS DECEMBER 31, 2002 DECEMBER 31, 2001
- ------------------------------------------------------------------------------ From operations -- Net investment income $ 139,150,041 $ 113,393,699 Net realized loss (459,996,840) (360,120,300) Net change in unrealized appreciation (depreciation) (3,312,547,564) (1,605,211,090) - ------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS FROM OPERATIONS $ (3,633,394,363) $ (1,851,937,691) - ------------------------------------------------------------------------------ Capital transactions -- Contributions $ 2,786,165,872 $ 3,921,075,957 Withdrawals (2,917,114,901) (2,118,342,171) - ------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (130,949,029) $ 1,802,733,786 - ------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS $ (3,764,343,392) $ (49,203,905) - ------------------------------------------------------------------------------
Net Assets - ------------------------------------------------------------------------------ At beginning of year $ 18,335,864,980 $ 18,385,068,885 - ------------------------------------------------------------------------------ AT END OF YEAR $ 14,571,521,588 $ 18,335,864,980 - ------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
YEAR ENDED DECEMBER 31, 2002 2001 2000 1999 - ------------------------------------------------------------------------------ Ratios/Supplemental Data
------------------------------------------------------------------------------ Ratios (As a percentage of average daily net assets): Expenses 0.45% 0.45% 0.45% 0.46% Net investment income 0.85% 0.64% 0.67% 0.72% Portfolio Turnover 23% 18% 13% 11% - ------------------------------------------------------------------------------ TOTAL RETURN(3) (19.52)% (9.67)% -- -- - ------------------------------------------------------------------------------ NET ASSETS, END OF YEAR (000'S OMITTED) $14,571,522 $18,335,865 $18,385,069 $15,114,649 - ------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31, YEAR ENDED OCTOBER 31, 1998(1) 1998 - ------------------------------------------------------------------------------ Ratios/Supplemental Data
------------------------------------------------------------------------------ Ratios (As a percentage of average daily net assets): Expenses 0.48%(2) 0.50% Net investment income 0.72%(2) 0.78% Portfolio Turnover 3% 12% - -------------------------------------------------------------------------------- TOTAL RETURN(3) -- -- - ------------------------------------------------------------------------------ NET ASSETS, END OF YEAR (000'S OMITTED $8,704,859 $6,985,678 - ------------------------------------------------------------------------------
(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
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
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 or losses, and any other items of income, gain, loss, deduction or credit.
C Futures Contracts -- Upon the entering of a financial futures contract, the Portfolio is required to deposit either in cash or securities an amount (initial margin) equal to a certain percentage of the purchase price indicated in the financial futures contract. Subsequent payments are made or received by the Portfolio (margin maintenance) each day, dependent on daily fluctuations in the value of the underlying security, and are recorded for book purposes as unrealized gains or losses by the Portfolio. The Portfolio's investment in financial futures contracts is designed to hedge against anticipated future changes in the price of current or anticipated portfolio positions. Should prices move unexpectedly, the Portfolio may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.
D Put Options -- Upon the purchase of a put option by the Portfolio, the premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Portfolio will realize a loss in the amount of the cost of the option. When the Portfolio enters into a closing sale transaction, the Portfolio will realize a gain or loss depending on whether the sales proceeds from the closing sale transaction are greater or less than the cost of the option. When the Portfolio exercises a put option, settlement is made in cash. The risk associated with purchasing options is limited to the premium originally paid.
E Securities Sold Short -- The Portfolio may sell a security short if it owns at least an equal amount of the security sold short or another security exchangeable for an equal amount of the security sold short 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.
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS CONT'D
F Foreign Currency Translation -- Investment valuations, other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
G Other -- Investment transactions are accounted for on a trade-date basis. 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.
H 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 (Boston Management), a wholly-owned subsidiary of Eaton Vance Management (Eaton Vance), as compensation for management and investment advisory services rendered to the Portfolio. Under the advisory agreement, 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 year ended December 31, 2002, the adviser fee was 0.44% of the Portfolio's average daily net assets. Except for Trustees of the Portfolio who are not members of Eaton Vance's or Boston Management'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, 2002, no significant amounts have been deferred.
Certain officers and Trustees of the Portfolio are officers of the above organizations.
3 Investment Transactions - ------------------------- For the year ended December 31, 2002, purchases and sales of investments, other than short-term obligations, aggregated $3,708,519,991 and $3,826,197,983, respectively. In addition, investments having an aggregate market value of $969,441,055 at dates of withdrawal were distributed in payment for capital withdrawals. During the year ended December 31, 2002, investors contributed securities with a value of $1,378,394,239.
4 Federal Income Tax Basis of Unrealized Appreciation (Depreciation) - ------------------------------------------- The cost and unrealized appreciation (depreciation) in value of the investments owned at December 31, 2002 as computed on a federal income tax basis, were as follows:
AGGREGATE COST $5,279,824,520 -------------------------------------------------------- Gross unrealized appreciation $9,292,814,140 Gross unrealized depreciation (28,489,478) -------------------------------------------------------- NET UNREALIZED APPRECIATION $9,264,324,662 --------------------------------------------------------
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, 2002.
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS CONT'D
6 Line of Credit - ---------------- The Portfolio participates with other portfolios and funds managed by Boston Management and Eaton Vance 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, 2002.
7 Restricted Securities - ----------------------- At December 31, 2002, the Portfolio owned the following securities (representing 0.4% 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
- ------------------------------------------------------------------------------ Acxiom Corp. 12/18/02 68,785 $ 1,000,007 $ 1,056,326 Applied Materials, Inc. 12/18/02 215,968 2,988,826 2,809,842 Dollar Tree Stores, Inc. 3/19/02 30,000 1,001,995 736,824 Dollar Tree Stores, Inc. 5/22/02 5,000 192,081 122,778 Entercom Communications Corp. 5/22/02 200,000 10,415,398 9,378,526 GreenPoint Financial Corp. 3/19/02 100,000 4,536,185 4,516,306 Heartland Express, Inc. 12/18/02 435,436 10,000,005 9,961,310 Intel Corp. 12/18/02 375,000 6,698,687 5,829,992 Intel Corp. 10/9/02 500,000 6,600,085 7,775,269 Intel Corp. 3/19/02 250,000 7,893,143 3,891,040 Intel Corp. 7/30/02 250,000 4,715,416 3,889,094 Interpublic Group of Companies., Inc. 12/18/02 100,000 1,354,965 1,405,888 KLA-Tencor Corp. 5/22/02 35,000 2,046,381 1,237,228 Morgan Stanley Dean Witter & Co. 7/30/02 150,000 5,926,597 5,982,760 Outback Steakhouse, Inc. 7/30/02 31,784 1,000,011 1,093,683 - ------------------------------------------------------------------------------ $66,369,782 $59,686,866 - ------------------------------------------------------------------------------
TAX-MANAGED GROWTH PORTFOLIO AS OF DECEMBER 31, 2002
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, 2002, 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 four years ended December 31, 2002, the two-month period ended December 31, 1998 and for the year 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, 2002 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, 2002, 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 14, 2003
BELPORT CAPITAL FUND LLC AS OF DECEMBER 31, 2002
Investment Adviser of Tax-Managed Growth Portfolio and Belport Capital Fund LLC
Boston Management and Research The Eaton Vance Building 255 State Street Boston, MA 02109
Manager of Belport Realty Corporation
Boston Management and Research The Eaton Vance Building 255 State Street Boston, MA 02109
Manager of Belport Capital Fund LLC
Eaton Vance Management The Eaton Vance Building 255 State Street Boston, MA 02109
Custodian and Transfer Agent
Investors Bank & Trust Company 200 Clarendon Street Boston, MA 02116
Independent Auditors
Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 26th day of March, 2003.
BELPORT CAPITAL FUND LLC (Registrant)
By: /s/ Michelle A. Alexander -------------------------- Michelle A. Alexander Duly Authorized Officer and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Thomas E. Faust Jr. -------------------------- Thomas E. Faust Jr. Chief Executive Officer
Date: March 26, 2003
By: /s/ Michelle A. Alexander -------------------------- Michelle A. Alexander Chief Financial Officer
Date: March 26, 2003
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas E. Faust Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Belport Capital Fund LLC;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 /s/ Thomas E. Faust Jr. ------------------------------- Thomas E. Faust Jr. Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michelle A. Alexander, certify that:
1. I have reviewed this annual report on Form 10-K of Belport Capital Fund LLC;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 26, 2003 /s/ Michelle A. Alexander ------------------------------- Michelle A. Alexander Chief Financial Officer
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.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.3 Form N-SAR of Eaton Vance Tax-Managed Growth Portfolio (File No. 811-7409) for its fiscal year ended December 31, 2002 filed electronically with the Securities and Exchange Commission under the Investment Company Act of 1940 on March 3, 2003 (Accession No. 0000940394-03-000125) (incorporated herein by reference pursuant to Rule 12b-32).