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WHITEROCK PORTFOLIO INVESTORS, L.L.C.
700 N.E. Multnomah, Suite 1600
Portland, Oregon 97232-4116
Annual Report
For The Year Ended December 31, 1995
August 29, 1996
To the Members:
The enclosed information concerning the performance results of WhiteRock
Portfolio Investors, L.L.C. for the year ended December 31, 1995, and the
financial position of the Company as of this date, is being furnished to you for
your information and in accordance with applicable law. Please retain this
information for future reference and call the undersigned at (214) 831-2000 with
any questions you may have.
Sincerely,
/s/ Sharlene D. Snyder
Sharlene D. Snyder
Assistant Secretary
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WHITEROCK PORTFOLIO INVESTORS, L.L.C.
-----------------------------------
ANNUAL REPORT
AND
FINANCIAL STATEMENTS
For the Year Ended
December 31, 1995
-----------------------------------
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MANAGEMENT
J.T. Crandall
Vice President and Chief Financial Officer
Keystone, Inc.
Robert F. Lanz
Chief Investment Officer, PacifiCorp Master
Retirement Trust
Vice President, PacifiCorp
Nori Gerardo
Investment Consultant
Pension Consulting Alliance
William E. Peressini
Treasurer, PacifiCorp
Chief Financial Officer, PacifiCorp Financial
Services, Inc.
Brian M. Wirkkala
Vice President and Treasurer
Pacific Telecom, Inc.
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WHITEROCK PORTFOLIO INVESTORS, L.L.C.
WhiteRock Portfolio Investors, L.L.C. ("WhiteRock" or "Company") is a
limited liability company registered as a closed-end investment company with the
Securities and Exchange Commission ("SEC") and is designed to invest in real
estate, broadly defined.
The Company's investment objective is to seek high total returns by
buying, selling, exchanging or otherwise acquiring, holding, trading, investing
in, managing, and dealing with investments, direct or indirect (whether
characterized as debt, equity or otherwise), in real property (principally in
the U.S. and Canada), mortgage loans, and real-estate related securities. The
company is focussed primarily on acquiring, directly or indirectly, managing and
disposing of, distressed mortgage loan and REO portfolios, and high-yield
commercial mortgage-backed securities ("CMBS"), including but not limited to
investing in entities organized or to be organized by Brazos Principal GenPar,
L.P. and its affiliates.
The Company is organized as a Delaware limited liability company that
is managed by a five member Board of Managers having powers similar to a board
of directors. The Company does not have a separate investment advisor, but is
self-managed. The Board approves any investment course of action involving over
$10,000. Pursuant to the Company's limited liability company agreement
("Operating Agreement"), the Board has delegated many of its day-to-day duties
to various named officers. In addition, the Board has authorized the Company to
hire Brazos GenPar, Inc. to administer its affairs and ensure compliance with
various legal requirements.
Units in the Company were placed pursuant to a private placement.
These units, therefore, are not registered under the Securities Act of 1933.
1995 PERFORMANCE
On September 29, 1995, the Company committed $15 million of its
available capital to an investment in the Brazos Fund, L.P., which is exempt
from registration under the Investment Company Act of 1940 in reliance on
Section 3(c)(1) of that Act. At December 31, 1995, the Company had funded
approximately two-thirds of the commitment, and had invested substantially all
of its assets in Brazos Fund, L.P. or in cash. For the period ended
December 31, 1995,
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the Company had not realized any income on its investment in Brazos Fund, L.P.,
but had an equity in loss on its investment in this entity of $59,116. During
this same period, the Company did not incur any operating expenses. In
accordance with the terms of the Operating Agreement, all expenses of the
Company were borne by Brazos GenPar, Inc. or Brazos GenPar Principal, L.P.
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[LOGO OF THE GLOBAL LEADER APPEARS HERE]
WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Financial Statements
December 31, 1995
(With Independent Auditors' Report Thereon)
KPMG Peat Marwick LLP
===============================
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[LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Members
WhiteRock Portfolio Investors, L.L.C.:
We have audited the accompanying balance sheet of WhiteRock Portfolio Investors,
L.L.C. (a limited liability company) as of December 31, 1995, and the related
statements of operations, members' capital and cash flows for the period from
September 29, 1995 (inception) through December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WhiteRock Portfolio Investors,
L.L.C. as of December 31, 1995, and the results of its operations and its cash
flows for the period from September 29, 1995 (inception) through December 31,
1995, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
June 6, 1996
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WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Balance Sheet
December 31, 1995
Assets
------
<TABLE>
<S> <C>
Cash $ 1,834,136
Investment in Brazos Fund, L.P. (note 2) 10,216,165
Accounts receivable 7,729
----------
Total assets $ 12,058,030
==========
Liabilities and Members' Capital
--------------------------------
Liabilities - accounts payable $ 29,356
Members' capital 12,028,674
----------
Total liabilities and members' capital $ 12,058,030
==========
</TABLE>
See accompanying notes to financial statements.
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WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Statement of Operations
For the period from September 29, 1995 (inception)
through December 31, 1995
<TABLE>
<S> <C>
Loss - equity in loss on investment in Brazos Fund, L.P. $(59,116)
------
Net loss $(59,116)
======
</TABLE>
See accompanying notes to financial statements.
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WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Statement of Members' Capital
For the period from September 29, 1995 (inception)
through December 31, 1995
<TABLE>
<CAPTION>
PacifiCorp Brazos
Master Principal
Retirement J.T. GenPar, R. N.
Trust Crandall Inc. Lanz Gerardo Total
----- -------- ---- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Capital contributions $ 11,959,537 120,803 7,306 72 72 12,087,790
Net loss (58,460) (590) (66) - - (59,116)
---------- ------- ------ --- --- -----------
Balances, December 31,
1995 $ 11,901,077 120,213 7,240 72 72 12,028,674
========== ======= ====== === === ===========
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Statement of Cash Flows
For the period from September 29, 1995 (inception)
through December 31, 1995
<S> <C>
Cash flows from operating activities:
Net loss $ (59,116)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Equity in loss on investment in Brazos Fund, L.P. 59,116
Changes in operating assets and liabilities:
Increase in accounts receivable (7,729)
Increase in accounts payable 29,356
-------------
Net cash provided by operating activities 21,627
-------------
Cash flows used in investing activities:
Contributions made to Brazos Fund, L.P. (15,776,387)
Contributions returned from Brazos Fund, L.P. 5,501,106
-------------
Net cash used in investing activities (10,275,281)
-------------
Cash flows from financing activities - capital contributions 12,087,790
-------------
Net increase in cash and cash equivalents 1,834,136
Cash and cash equivalents, beginning of period --
-------------
Cash and cash equivalents, end of period $ 1,834,136
=============
</TABLE>
See accompanying notes to financial statements.
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WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Notes to Financial Statements
December 31, 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Description of Business
-----------------------
WhiteRock Portfolio, L.L.C. (WhiteRock) was formed on September 29,
1995 and is registered as a nondiversified, closed-end investment
company under the Investment Company Act of 1940. The investment
objective of WhiteRock is to seek high total returns by buying,
selling, exchanging or otherwise acquiring, holding, trading,
investing in, managing, and dealing with qualified investments,
whether such assets are acquired directly, or indirectly through
partnerships, joint ventures, or otherwise. In pursuing its
objectives, WhiteRock shall focus primarily on acquiring, directly or
indirectly, managing and disposing of distressed mortgage loan and
owned real estate ("REO") portfolios, and high yield commercial
mortgage-backed securities, including but not limited to investing in
entities organized or to be organized by Brazos Fund, L.P. (Brazos)
and its affiliates. As of December 31, 1995 WhiteRock's only
investment is an approximate 6% interest in Brazos (see note 2).
The operations of WhiteRock are governed by a limited liability
company agreement dated September 29, 1995. The term of WhiteRock is
six years and eleven months from the date of inception.
Net income and losses of WhiteRock are allocated among the members
based on their respective ownership percentages in accordance with the
limited liability company agreement.
(b) Income Taxes
------------
As a limited liability company, WhiteRock is not subject to federal
income taxes; therefore, no provision has been made for such taxes in
the accompanying financial statements. Income taxes are the
responsibility of WhiteRock's members.
(c) Investment in Partnership
-------------------------
Investment in Brazos is recorded for financial statement purposes on
the equity basis which approximates the estimated fair value of
WhiteRock's investment in Brazos as of December 31, 1995.
(d) Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
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2
WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Notes to Financial Statements
(2) Investment in Limited Partnership
---------------------------------
The primary focus of Brazos, WhiteRock's only investment at December 31,
1995, is the acquisition, management and disposition of distressed
mortgage loan and real estate portfolios. Brazos may also invest in
other real estate related assets. The objective of Brazos is to achieve
significant yields and capital gains for its partners. The projected
holding period for each of Brazos' investments is three to five years.
Brazos' general partner is responsible for the evaluation, execution and
management of the investments and investment opportunities of Brazos.
Brazos will invest only where it believes that it has a competitive
advantage arising from its expertise in origination, evaluation,
management and disposition of its assets. As of December 31, 1995,
Brazos has invested in thirteen portfolios.
The operations of Brazos are governed by a limited partnership agreement
(Agreement) dated March 30, 1995. The term of Brazos is ten years and
three months from the date of inception.
At December 31, 1995, total commitments from the partners to provide
capital contributions is approximately $246,389,000 which includes
Brazos Principal GenPar, L.P.'s (General Partner) commitment of 1% of
total commitments. The partners' commitments will expire on the earlier
of thirty months after March 30, 1995 or on the date a new fund, if any,
is formed; however, at least 85% of the total commitments must be
invested or committed for investment before the General Partner can
organize a new fund. At December 31, 1995, 67.8% of total commitments
have been invested. Should a new fund be formed, limited partners with
unfunded commitments in excess of $2,000,000 will have the opportunity
to transfer those commitments to the new fund. Capital returned to any
partner during the first year will be added to such partner's unfunded
commitments and thus will be available to be redrawn by Brazos during
the commitment period.
According to the Agreement, the General Partner cannot act on behalf of
the Partnership without prior written approval of the limited partners
on the following major decisions: (1) making an investment in a single
asset in excess of 15% of the total commitments or making an acquisition
of a portfolio of assets acquired in a single transaction in excess of
33% of total commitments; (2) removing the General Partner; (3)
termination of the commitment period; and (4) requiring the dissolution
of Brazos. To approve a major decision, the requesting partner must
propose the major decision to the other partners by written notice.
Within ten days after the receipt of that notice, each partner shall
indicate in writing to the requesting partner and the General Partner
their approval or disapproval. In the event any partner does not respond
within the time period, such partner shall be deemed to have disapproved
the major decision. If any limited partner or limited partners of Brazos
holding at least 66-2/3% of the overall percentages in Brazos approve
or consent to the major decision, the decision would be considered
approved and would require no further action of any other partner.
(Continued)
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3
WHITEROCK PORTFOLIO INVESTORS, L.L.C.
(a limited liability company)
Notes to Financial Statements
The General Partner, at its sole discretion, will determine the amount and
frequency of distributions. All profits, losses and cash distributions are
allocated and governed in accordance with the Agreement.
Summary condensed financial information of Brazos as of December 31, 1995
and for the period from March 30, 1995 (inception) to December 31, 1995 is
as follows:
<TABLE>
<S> <C>
Assets $ 614,063,610
=============
Liabilities $ 382,905,571
Minority interest 65,198,070
Partners' capital 165,959,969
-------------
$ 614,063,610
=============
WhiteRock's investments in Brazos $ 10,216,165
=============
Revenues and net gain on disposition of assets $ 28,932,467
Expenses and minority interest charge 29,903,502
-------------
Net loss $ (971,035)
=============
WhiteRock's equity in loss on investment in Brazos $ (59,116)
=============
(3) Related Party Transactions
--------------------------
All WhiteRock expenses, including organizational expenses, are the
responsibility of Brazos Principal GenPar, L.P. or its general partner,
Brazos GenPar, Inc. Brazos GenPar, Inc. also functions as WhiteRock's
administrator.
</TABLE>
