10-K 1 bclp-10k.txt FORM 10-K FOR JUNE 30, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended June 30, 2002 -------------------- Commission Registrant; State of Organization; IRS Employer File No. Address and Telephone Number Identification No. ---------- ---------------------------------- ------------------ 1-14507 Boston Celtics Limited Partnership 04-3416346 (a Delaware limited partnership) 151 Merrimac Street, Boston, Massachusetts 02114 (617) 523-6050 1-9324 Boston Celtics Limited Partnership II 04-2936516 (a Delaware limited partnership) 151 Merrimac Street, Boston, Massachusetts 02114 (617) 523-6050 Securities registered pursuant to Section 12(b) of the Act: ----------------------------------------------------------- Name of Exchange Registrant Title of Each Class On Which Registered ---------- ------------------- ------------------- Boston Celtics Units Representing Limited New York Stock Exchange Limited Partnership Partnership Interests Boston Stock Exchange Boston Celtics 6% Subordinated Debentures Limited Partnership II due 2038 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: ----------------------------------------------------------- None. Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K . ----- The aggregate market value of the 2,025,864 Units held by non-affiliates of Boston Celtics Limited Partnership as of September 16, 2002 was approximately $20,542,000, based on the closing price of the Units on the New York Stock Exchange on that date of $10.14 per Unit, and the aggregate market value of the 2,703,364 Subordinated Debentures held by non- affiliates of Boston Celtics Limited Partnership II as of September 16, 2002 was approximately $35,144,000, based on the closing price of the Subordinated Debentures on the New York Stock Exchange on that date of $13.00 per Debenture. As of September 16, 2002, there were 2,703,664 Units outstanding of Boston Celtics Limited Partnership, and 2,703,664 units representing limited partnership interests outstanding of Boston Celtics Limited Partnership II. BOSTON CELTICS LIMITED PARTNERSHIP 2002 FORM 10-K ANNUAL REPORT INDEX

This document contains the Annual Reports on Form 10-K for the fiscal year ended June 30, 2002 for each of Boston Celtics Limited Partnership and Boston Celtics Limited Partnership II. Information contained herein relating to an individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, Boston Celtics Limited Partnership II makes no representation as to information relating to Boston Celtics Limited Partnership or to any other entities affiliated with Boston Celtics Limited Partnership. Unless otherwise indicated, the information presented in this Form 10-K does not reflect the proposed sale of the assets of Celtics Basketball, L.P. as described below in "Recent Developments". PART I ------ Items 1 and 2. Business and Properties -------------- ----------------------- General Boston Celtics Limited Partnership ("BCLP" or the "Partnership") is a Delaware limited partnership that was formed in 1998 in connection with a reorganization of Boston Celtics Limited Partnership II ("BCLP II"), also a Delaware limited partnership. The reorganization of BCLP II (the "Reorganization") was completed on June 30, 1998. For a description of the Reorganization, see Note A of the Notes to Consolidated Financial Statements of Boston Celtics Limited Partnership and the Partnership's Form 10-K for the year ended June 30, 2000. BCLP, through its subsidiaries, owns an indirect investment in Celtics Basketball, L.P. ("Celtics Basketball"), which owns and operates the Boston Celtics professional basketball team (the "Boston Celtics") of the National Basketball Association (the "NBA"). BCLP does not directly own or control the Boston Celtics and therefore an investment in BCLP is not a direct investment in the Boston Celtics. However, a significant portion of BCLP's earnings and cash flows are derived from its indirect investment in the Boston Celtics. Therefore, most of the disclosures in this document regarding operating activities principally relate to the operations of the Boston Celtics. Subsequent to the Reorganization, BCLP owns a 99% limited partnership interest in BCLP II. In addition, BCLP wholly owns BCCLP Holding Corporation ("Holdings"), which in turn wholly owns Celtics Capital Corporation ("CCC"), which holds investments. BCLP II owns a 99% limited partnership interest in Celtics Limited Partnership ("CLP"), and wholly owns Celtics Investments, Inc. ("CII"). Together, CCC and CLP wholly own Celtics Pride GP. Celtics Pride GP owns a 48.3123% limited partnership interest in Celtics Basketball Holdings, L.P. ("Celtics Basketball Holdings"), which owns a 99.999% limited partnership interest in Celtics Basketball, which in turn owns and operates the Boston Celtics. The remaining 51.6867% limited partnership interest in Celtics Basketball Holdings is held by Castle Creek Partners, L.P. ("Castle Creek"). See "Item 12 - Security Ownership of Certain Beneficial Owners and Management" regarding ownership and control of Castle Creek. As a result of its indirect 48.3123% limited partnership interest in Celtics Basketball Holdings, BCLP accounts for its investment in the accounts of the Boston Celtics using the equity method subsequent to the Reorganization. References in this Form 10-K to "Units" with respect to Pre- Reorganization time periods means units representing limited partnership interests in BCLP II and, with respect to post-Reorganization time periods, means units representing limited partnership interests in BCLP. Recent Developments On September 27, 2002, Celtics Basketball entered into an Asset Purchase and Sale Agreement with Lake Carnegie, LLC (the "Asset Purchase Agreement"), pursuant to which Lake Carnegie, LLC ("Lake Carnegie") will pay to Celtics Basketball (the Partnership's 48.3% owned, indirect subsidiary) an aggregate amount of $360 million in cash consideration for all assets relating to the Boston Celtics (of which $50 million will be used to repay outstanding bank borrowings) and will assume the liabilities relating to the Boston Celtics. The transaction is subject to National Basketball Association approval and customary closing conditions. Lake Carnegie's damages in the event that the transaction is not consummated are limited to $5 million. The transaction has been unanimously approved by the general partner and the limited partners of Celtics Basketball, and does not require the approval of the holders of BCLP Units. The transaction is expected to close before December 31, 2002. BCLP and its subsidiaries will cease using the Boston Celtics name after the transaction is consummated. Upon receipt of its 48.3% proportionate share of the net proceeds, the Partnership and its subsidiaries anticipate pursuing a course of action that would result in a cash benefit to BCLP unit holders, after payment of taxes (including federal and state income taxes) and expenses, provision for other liabilities (including a reserve for contingent liabilities), and provision for approximately $54 million in outstanding aggregate principal amount of subordinated debentures due 2038 of Boston Celtics Limited Partnership II, a 99% owned subsidiary of BCLP. The timing and amount of any such cash benefit to public unit holders has not yet been determined. Basketball Operations BCLP's most significant operating asset is its indirect investment in Celtics Basketball, which owns and operates the Boston Celtics. The following table summarizes the performance of the Boston Celtics during the past 15 basketball seasons:

Effective July 1, 1998, the NBA commenced a lockout of NBA players in support of its attempt to reach a new collective bargaining agreement. On January 20, 1999, the NBA and the NBA Players Association (the "NBPA") entered into a new collective bargaining agreement (the "Collective Bargaining Agreement"), thereby ending the lockout. The Collective Bargaining Agreement is to be in effect through June 30, 2004, and the NBA has an option to extend it for one year thereafter. As a result of the lockout, the 1998-99 NBA regular season consisted of 50 games per team. The impact of the lockout and the shortened NBA season had a materially adverse effect on BCLP's financial condition and results of operations. See "Collective Bargaining Agreement." Sources of Revenues. The Boston Celtics derive their revenues principally from the sale of tickets to home games, the licensing of television, cable network and radio rights, and promotional and novelty revenues. The following table shows the contribution to revenues of the basketball operations from these sources and from miscellaneous other sources for each of the last three fiscal years:

The operations and financial results of the Boston Celtics are seasonal. See "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations-General." 2 Ticket Sales. The Boston Celtics play an equal number of home games and away games during the 82-game NBA regular season. In addition, the Boston Celtics ordinarily play eight exhibition games prior to the commencement of the regular season. Under the NBA Constitution and By- laws, the Boston Celtics receive all revenues from the sale of tickets to regular season home games (subject to the NBA gate assessment of 6%) and no revenues from the sale of tickets to regular season away games. Although the Boston Celtics receive all revenues from the sale of tickets to home playoff games, the NBA gate assessment is increased to 45%. Further, in the event of a playoff series that concludes in an odd number of games, the visiting team receives 25% of the ticket sales for the final game and the NBA gate assessment is reduced to 30%. Generally, the Boston Celtics retain all revenues from the sale of tickets to home exhibition games played in Boston as well as certain ticket revenues from home exhibition games played outside of Boston. Under certain circumstances, the Boston Celtics pay appearance fees to the visiting team for exhibition games, and likewise the team may receive appearance fees for exhibition games played elsewhere. Effective with the 1995-96 season, all Boston Celtics regular season home games are played in the FleetCenter, an arena located in downtown Boston, with a seating capacity of approximately 19,300. The policy of the Boston Celtics during the last several years has been to limit the number of season tickets so that some tickets are available on a per game basis. During both the 2001-02 season and the 2000-01 season, approximately 11,000 season tickets were sold, as compared to 12,000 in the 1999-2000 season. Television, Cable and Radio Broadcasting. The Boston Celtics and the NBA license the television and radio broadcast rights to Boston Celtics basketball games. The NBA, as agent for its members, licenses the national and international broadcast of NBA games. Previously, the NBA had agreements with NBC Sports, a division of the National Broadcasting Company (the "NBC Agreement"), and Turner Network Television, Inc., an affiliate of Turner Broadcasting (the "TNT Agreement"). Each of the NBA member teams share equally in these license fees. The NBC and TNT agreements expired after the 2001-02 season. In addition, the Boston Celtics license the right to air all Boston Celtics home and away games to Sportschannel New England Limited Partnership ("SNE") (doing business as Fox Sports Net New England) (the "SNE Agreement"), and license the rights to broadcast all games on radio under an agreement with Vulcan Print Media, Inc. (doing business as The Sporting News) (the "Sporting News Agreement"). The SNE Agreement originally extended through the 2002-03 season, with a right to an additional extension by SNE through the 2005-06 season. The Sporting News Agreement extends through the 2005-06 season. In January 2002, the NBA Board of Governors approved a six-year agreement to license the national broadcast of NBA games, beginning in the 2002-03 season, under agreements with ABC (the "ABC/ESPN Agreement") and AOL Time Warner (the "New TNT Agreement"). Each of the NBA member teams will share equally in these license fees. Under the terms of the ABC/ESPN Agreement and the New TNT Agreement, management anticipates that the Boston Celtics' national television and cable revenues will decrease by approximately $4,975,000 in the 2002-03 season. Based on BCLP's 48.3% indirect interest in the operations of the Boston Celtics, BCLP's equity in the net income of the Boston Celtics is expected to decrease by approximately $2,400,000 as a result of these agreements. In July 2002, Celtics Basketball and SNE entered into an agreement to extend the SNE Agreement through the 2016-17 season (the "New SNE Agreement"). Under the New SNE Agreement, SNE paid an initial fee of $30,000,000 (the "Initial Fee") in August 2002, which is refundable on a pro rata basis if SNE terminates the agreement upon a material breach by Celtics Basketball of certain terms of the agreement. The Initial Fee will be recorded as revenue ratably in proportion to the annual rights fees over the term of the New SNE Agreement. Celtics Basketball does not have the right to terminate the New SNE Agreement except upon a material breach by SNE of the agreement. Under the terms of the New SNE Agreement, management anticipates that the Boston Celtics' local cable revenues will increase by approximately $2,828,000 in the 2002-03 season. Based on BCLP's 48.3% indirect interest in the operations of the Boston Celtics, BCLP's equity in the net income of the Boston Celtics is expected to increase by approximately $1,366,000 as a result of this agreement. Generally, these license agreements provide for the broadcast of a specified number of games (exhibition, regular season and playoff games) at specified rights fees per game, which in some cases increase over the term of the contract, in some cases provide for revenue sharing, and in some cases provide for upward or downward adjustment based on ratings. The national agreements provide that the licensee identify the games which it wishes to broadcast and the local rights agreements provide for the preemption of games broadcast under the national license agreements. 3 The NBC Agreement accounted for approximately 20% ($19,567,000), 20% ($16,297,000) and 16% ($13,381,000) of Celtics Basketball's total revenues for the years ended June 30, 2002, 2001 and 2000, respectively; the SNE Agreement accounted for approximately 12% ($11,996,000), 13% ($10,631,000) and 14% ($11,125,000) of Celtics Basketball's total revenues for the years ended June 30, 2002, 2001 and 2000, respectively; and the TNT Agreement accounted for approximately 10% ($10,293,000) and 10% ($8,578,000) of Celtics Basketball's total revenues for the years ended June 30, 2002 and 2001, respectively. No other agreement accounted for as much as 10% of BCLP's, BCLP II's or Celtics Basketball's total revenues during any of the years ended June 30, 2002, 2001 and 2000. There can be no assurance that Celtics Basketball or the NBA as agent for its members, upon expiration of the aforementioned agreements, will be able to enter into new agreements on terms as favorable as those in the current agreements. Other Sources. Other sources of revenues for the basketball operations include promotional and novelty revenues, including royalties from NBA Properties, Inc. ("NBA Properties"). NBA Properties is a corporation organized in 1967 to which each NBA member has assigned the exclusive rights to the merchandising of its team name, insignia and other similar properties to the extent such rights were not previously assigned to others prior to the formation of NBA Properties. NBA Properties pays royalties to each NBA team in consideration of the receipt of such rights. This assignment is subject to the right of each team, including the Boston Celtics, to use its insignia and symbols in connection with the promotion of the team in its home territory and retail sales in its home arena. NBA Properties licenses other companies to manufacture and sell official NBA items such as sneakers, basketballs, warm-up jackets and sweatshirts, as well as certain non-sports items. Basketball Team Players. In general, the rules of the NBA permit each team to maintain an active roster of 12 basketball players during each regular season and up to 20 players in the off-season. The By-laws of the NBA require each member team to enter into a uniform player contract with each of its players. The following table sets forth certain information concerning the players under contract with the Boston Celtics as of September 16, 2002:

Compensation expense related to player salaries amounted to approximately $42,602,000 during the 2001-02 season. During the 2002-03 season, the Boston Celtics are contractually required to make salary payments to its players totaling approximately $52,570,000. Coaches, General Manager and other Team Personnel. The Head Coach of the Boston Celtics, James O'Brien, was appointed Head Coach in January 2001 after having served as the Associate Coach of the Boston Celtics since May 1997. Mr. O'Brien was previously an assistant coach at the University of Kentucky (1994-1997), the Head Coach at the University of Dayton (1989- 1994), and an assistant coach of the New York Knickerbockers of the NBA (1987-1989), prior to which he held a variety of coaching positions since 1974. Mr. O'Brien is under contract through the end of the 2003-04 season. 4 The assistant coaches of the Boston Celtics are Dick Harter, Lester Conner, John Carroll, Frank Vogel and Joe Gallagher. The Strength and Conditioning Coach is Shaun Brown, the General Manager is Chris Wallace, and the Head Athletic Trainer and Physical Therapist is Ed Lacerte. Compensation expense for coaches, general manager and other Boston Celtics team personnel, including compensation payments to team personnel not under contract, was approximately $3,793,000 during the 2001-02 season. During the 2002-03 season, the Boston Celtics are contractually required to make salary payments to its coaches, general manager and other team personnel totaling $3,995,000. Collective Bargaining Agreement. -------------------------------- NBA players, including those that play for the Boston Celtics, are covered by a collective bargaining agreement between the NBA and the NBPA dated January 20, 1999 (the "Collective Bargaining Agreement"). The Collective Bargaining Agreement is in effect through June 30, 2004, and the NBA has an option to extend it for one year thereafter. The Collective Bargaining Agreement provides for maximum and minimum player salaries and total team salaries. Maximum and minimum player salaries are based on years of service in the NBA. Maximum and minimum team salaries are determined based on estimates of league revenues prior to the start of each season. The maximum team salary (the "Salary Cap") for each team for a particular season, subject to certain exceptions, is 48.04% of the projected Basketball-Related Income (as defined in the Collective Bargaining Agreement) ("BRI") of all NBA teams, less league-wide benefits, divided by the number of NBA teams. Additionally, under the terms of the Collective Bargaining Agreement, the 2001-02 NBA season was the first in which a luxury tax and escrow system with respect to player salaries was in effect. The escrow system resulted in a reduction of players' contracted salaries of approximately $3,042,000 in the 2001-02 season. The luxury tax system had no impact on the operating results of the Boston Celtics in the 2001-02 season. Based on current information available, management of the Partnership does not believe that the luxury tax and escrow system will have a material adverse effect on its financial position or results of its operations in the 2002- 03 season. The Collective Bargaining Agreement was preceded by a collective bargaining agreement that was to expire on June 30, 2001 (the "1995 Collective Bargaining Agreement"). The NBA, however, had the right to terminate the 1995 Collective Bargaining Agreement after the 1997-98 season if it was determined that the aggregate salaries and benefits paid by all NBA teams for the 1997-98 season exceeded 51.8% of projected BRI. On March 23, 1998, the Board of Governors of the NBA voted to exercise that right and reopen the 1995 Collective Bargaining Agreement effective as of June 30, 1998, as it had been determined that the aggregate salaries and benefits paid by the NBA teams for the 1997-98 season would exceed 51.8% of projected BRI. Effective July 1, 1998, the NBA commenced a lockout of NBA players in support of its attempt to reach a new collective bargaining agreement, and the 1998-99 NBA season did not begin until the Collective Bargaining Agreement was reached. As a result of the lockout, the 1998-99 NBA regular season consisted of 50 games per team (25 of which were home games), beginning in early February 1999. Ordinarily, the NBA regular season consists of 82 games per team (41 of which are home games), and generally begins in late October or early November. Given the fixed nature of many of its expenses, and given that the Boston Celtics' operating income is almost entirely dependent on revenues generated during the NBA season, the cancellation of 32 regular season games (of which 16 were home games) as a result of the lockout had a material adverse effect on the Partnership's financial condition and its results of operations for the fiscal year ended June 30, 1999. For a more detailed discussion of the impact of the lockout, see "Items 1 and 2: Collective Bargaining Agreement" in the Partnership's Form 10-K for the year ended June 30, 2001. There can be no assurance that the NBA and NBPA will not experience labor relations difficulties in the future or that Celtics Basketball will not, notwithstanding the Collective Bargaining Agreement, experience significantly increased player salaries, including the potential impact of the luxury tax and escrow system, which could have a material adverse effect on the Partnership's financial condition or results of operations. Basketball Facilities The Boston Celtics play all home games at the FleetCenter located in Boston, Massachusetts. On April 4, 1990, the Boston Celtics entered into a License/Lease Agreement and an Office Lease Agreement (collectively, the "Lease Agreement") with New Boston Garden Corporation ("NBGC"), which was amended in certain respects and was assigned to 5 Celtics Basketball in connection with the Reorganization. NBGC, which is not affiliated with the Boston Celtics, developed the FleetCenter, which opened in 1995 and has a seating capacity of approximately 19,300 spectators. Under the terms of the Lease Agreement, NBGC has granted to Celtics Basketball a license to use the basketball facilities at the FleetCenter and provides approximately 10,000 square feet of office space. NBGC is responsible for maintaining the FleetCenter and providing administrative personnel such as ushers, ticket takers, police and security personnel, announcers, scorers and statisticians. At Celtics Basketball's request, NBGC is responsible for making all box office ticket sales and remitting the proceeds to Celtics Basketball. Celtics Basketball does not pay rent to NBGC, and NBGC generally receives only premium fee revenues generated from preferred seating and executive boxes in the FleetCenter. Under the terms of the Lease Agreement, Celtics Basketball does not share in revenue from food and beverage concessions at the FleetCenter but may sell programs at each game subject to the payment of a commission to NBGC's concessionaires. NBGC is also licensed to sell merchandise bearing the Boston Celtics' name, trademark and/or logo, subject to prior approval by, and payment of a commission to, Celtics Basketball. The initial term of the Lease Agreement extended through May 31, 2006. In May 2001, NBGC exercised its option to extend the term of the Lease Agreement for five additional basketball seasons, or through the 2010-11 season (the "Extended Term"). NBGC will be required to make payments to Celtics Basketball, based on NBGC's revenues, during the Extended Term. Celtics Basketball also leases approximately 16,000 square feet of space at 151 Merrimac Street, Boston, Massachusetts. This facility houses the Boston Celtics administrative offices. The term of this lease extends through December 2005, with an option to extend for one five-year renewal period. Under the provisions of the Lease Agreement with NBGC, Celtics Basketball is reimbursed for the cost of 10,000 square feet of office space through the Extended Term of the Lease Agreement with NBGC. On March 31, 1998, CLP entered into a lease agreement for the use of a 22,000 square foot practice facility and wellness center in Waltham, Massachusetts. The facility also includes certain office space for Boston Celtics basketball operations personnel. Celtics Basketball does not pay rent under this lease agreement. The term of the lease extends through June 30, 2010, with three three-year options to extend. The lease agreement was assigned to Celtics Basketball in connection with the Reorganization. Neither the Partnership, nor Celtics Basketball, owns any real property. The NBA The NBA is a joint venture, consisting of member teams, each of which operates a professional basketball team in a major city of the United States or Canada. NBA members operate under the rules and regulations established by the NBA Constitution and By-laws. The NBA Constitution prohibits any NBA "owner" (as defined in the NBA Constitution) or person with management authority over an NBA member from (i) directly or indirectly exercising control over any other NBA member, or (ii) holding a direct or indirect financial interest in another NBA member, unless the financial interest does not exceed one percent of any outstanding publicly traded class of securities or 75% of the Board of Governors of the NBA approves the interest. The NBA Constitution also imposes restrictions upon the transfer of interests in NBA members. The acquisition of a 10% or greater interest in a member team must be approved by the Board of Governors. The acquisition of an interest of less than 10% but more than 5% must be approved by a committee appointed by the NBA Commissioner. In general, the acquisition of a 5% or less interest must be approved by the NBA Commissioner. However, the acquisition of less than a 5% interest in a team that is owned by more than 500 persons is not restricted unless (i) the effect of such acquisition is to change ownership of effective control of the NBA member, (ii) the acquisition would result in any person or entity that has not been approved by an NBA committee or the members holding directly or indirectly more than a 5% interest or (iii) the acquisition would result in any person or entity that has not been approved by the NBA members holding directly or indirectly more than a 10% interest. Pursuant to applicable NBA rules, referees and other employees of the NBA are not eligible to purchase or hold BCLP Units. Accordingly, a record owner of BCLP Units may not transfer ownership of his or her BCLP Units to any person who is not an "eligible holder" under NBA rules or who does not properly execute and deliver a transfer application certifying that he or she (or that, to the best of his or her knowledge, the person for whom he or she is acting as nominee) is an "eligible holder." Competition 6 The Boston Celtics are the only professional basketball team in the Boston area. However, the Boston Celtics compete for spectator interest with all forms of professional and amateur sports conducted in and near Boston. During parts of the basketball season the Boston Celtics experience competition from professional hockey (the Boston Bruins), professional football (the New England Patriots), and professional baseball (the Boston Red Sox). In addition, the colleges and universities in the Boston area, as well as public and private schools, offer a full schedule of athletic events throughout the year. The Boston Celtics also compete for attendance with the wide range of other entertainment and recreational activities available in New England. The Boston Celtics also compete with other United States and foreign basketball teams, professional and otherwise, for available players, coaches and other team personnel. Insurance The Boston Celtics maintain accidental death and dismemberment, disability and life insurance policies on most key players and certain coaches. These disability policies cover injuries which result in permanent and total disability, as well as temporary disability for injuries which cause less severe damage, but loss of player services for more than half a playing season. These policies would generally reimburse Celtics Basketball for a substantial percentage of the payments which it would be required to make to such player under his contract. The waiting period for reimbursement under most temporary disability policies is 41 games. This Key Man Disability Insurance Plan is maintained by the NBA through a Master Policy Program, and underwritten by a leading national insurance company. The Boston Celtics participate in a workers' compensation policy and a high limit comprehensive general liability and umbrella policy maintained by the NBA. Included under that plan is protection for team sports participant's liability covering claims which may result from, among other things, certain injuries which may be incurred during player contests or exhibitions sponsored by the Boston Celtics. The NBA has established a Disaster Plan which permits a team suffering an air or similar disaster to draft players from the other NBA teams subject to specified procedures. The NBA maintains an insurance policy that provides compensation to the team suffering the disaster, as well as those teams whose players are selected in such special draft. In addition to basketball-related insurance, the Partnership maintains various types of business insurance, including general liability insurance and umbrella insurance. Employees In addition to the players and coaches, see "Basketball Operations - Basketball Team," as of September 16, 2002, the Boston Celtics have 44 full-time employees engaged in operating, marketing, advertising and administrative activities. In addition, the Partnership has 10 full-time employees engaged in operating and administrative activities. None of the Partnership's or its subsidiaries' employees, other than its players, are covered by collective bargaining agreements. The Partnership considers its relations with its employees to be good. Item 3. Legal Proceedings ------- ----------------- As a member of the NBA, Celtics Basketball is a defendant along with the other NBA members in various lawsuits incidental to the NBA's basketball operations. Celtics Basketball will generally be liable, jointly and severally, with all other members of the NBA for the costs of defending such lawsuits and any liabilities of the NBA which might result from such lawsuits. From time to time, the Partnership may become a party to legal proceedings arising in the ordinary course of business. In July and August 1998, four separate class action complaints (the "Complaints") were filed by Unitholders in the Court of Chancery of the State of Delaware in and for New Castle County against BCLP II, Celtics, Inc., Paul E. Gaston, Don F. Gaston, Paula B. Gaston, John H.M. Leithead and John B. Marsh III, each a director or former director of Celtics, Inc. The named plaintiffs, who each purported to bring their individual actions on behalf of themselves and others similarly situated, are Kenneth L. Rilander, Harbor Finance Partners, Maryann Kelly and Kathleen Kruse Perry. Each of the Complaints alleges, among other things, that the Reorganization was unfair to former BCLP II Unitholders, and seeks to recover an unspecified amount of damages, including attorneys' and experts' fees and expenses. The Partnership filed a Motion to Dismiss the Complaint filed by Mr. Rilander on July 29, 1998, and discovery in that case has been stayed by agreement of the parties. The Complaints have been consolidated. On August 6, 1999, the Court of Chancery issued an 7 opinion granting in part, and denying in part, the Partnership's Motion to Dismiss, and on September 3, 1999, the plaintiffs filed an amended consolidated Complaint. On October 1, 1999, the Partnership filed an answer to the Complaint. Although the ultimate outcome of the Complaint cannot be determined at this time, management of the Partnership does not believe that the outcome of these proceedings will have a material adverse effect on the Partnership's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders ------- --------------------------------------------------- None. 8 PART II ------- Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ------- --------------------------------------------------------------------- BCLP's Units are listed on the New York Stock Exchange and the Boston Stock Exchange and are traded under the symbol "BOS". BCLP II's Subordinated Debentures trade on the New York Stock Exchange and provide for annual interest payments. The following table sets forth, for the periods indicated, the high and low sales prices per BCLP Unit on the New York Stock Exchange for the years ended June 30, 2002 and 2001.

-------------------- As of September 16, 2002, the approximate number of registered holders of BCLP's Units was 58,567. No cash distributions to Unitholders of BCLP were declared or paid during the years ended June 30, 2002 or 2001. Distributions may be declared from time to time in the sole discretion of BCLP GP, Inc. as General Partner of the Partnership. See "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." 9 Item 6. Selected Consolidated Financial Data ------- ------------------------------------ The selected consolidated financial information set forth below represents the consolidated operating results and balance sheet data of BCLP and BCLP II as described in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Basis of Presentation." Amounts in thousands, except per unit amounts.

11 Item 7. Management's Discussion and Analysis of ------- --------------------------------------- Financial Condition and Results of Operations -------------------------------------------- Forward Looking Statements Certain statements and information included herein are "forward-looking statements" within the meaning of the federal Private Securities Litigation Reform Act of 1995, including statements relating to BCLP's and BCLP II's financial condition, results of operations, liquidity and capital resources, and statements relating to the transaction with Lake Carnegie, LLC, consummation of the transaction and the availability of net proceeds to BCLP and prospective cash benefits to BCLP unitholders. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of BCLP or BCLP II to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause BCLP's or BCLP II's financial condition, results of operations, liquidity and capital resources to differ materially include the competitive success of the Boston Celtics, uncertainties as to increases in players' salaries and team expenses, including the potential impact of the luxury tax and escrow system under the Collective Bargaining Agreement, the Boston Celtics' ability to attract and retain talented players and coaches, the risk of injuries to key players, uncertainties regarding media contracts, the performance of certain investments by subsidiaries of the Partnership and the extent to which the Partnership's subsidiaries generate, and are able to distribute, operating cash flow. Factors that could impact the timing and amount of net proceeds available to BCLP as a result of the transaction with Lake Carnegie LLC include the satisfaction of conditions to the transaction, including National Basketball Association approval, payment of fees and expenses, payment of taxes and provision for other liabilities (including bank borrowings and the subordinated debentures), actual earnings and expenses of BCLP and its subsidiaries, and expectations, intentions and strategies regarding the future. Basis of Presentation As more fully described in "Items 1 and 2 - Business and Properties - General," BCLP II completed a Reorganization on June 30, 1998 pursuant to which BCLP was formed as a holding entity for BCLP II. From its date of formation until the completion of the Reorganization, BCLP had no material assets and was not engaged in any business operations. Prior to the Reorganization, BCLP II, through its subsidiaries, owned and operated the Boston Celtics. Accordingly, the operating results of the Boston Celtics are consolidated in BCLP II's financial statements for periods prior to the Reorganization. Upon completion of the Reorganization, effective June 30, 1998, BCLP's and BCLP II's interest in the accounts and operations of the Boston Celtics is reflected in their indirect 48.3% investment in Celtics Basketball Holdings, which is accounted for using the equity method. Celtics Basketball Holdings has a 99.999% limited partnership interest in Celtics Basketball, which owns and operates the Boston Celtics effective July 1, 1998. Because BCLP had not engaged in any business operations prior to June 30, 1998, the Selected Consolidated Statement of Operations Data presented in "Item 6" above compare the operating results of BCLP and its subsidiaries for the years ended June 30, 2002, 2001, 2000 and 1999 with those of BCLP II and its subsidiaries for the year ended June 30, 1998. Due to the July 1, 1998 change in BCLP's and BCLP II's method of accounting for their investment in the accounts and operations of the Boston Celtics from consolidation to the equity method, BCLP's and BCLP II's results of operations in the fiscal years ended June 30, 2002, 2001, 2000 and 1999 are materially different than those in the fiscal year ended June 30, 1998. Collective Bargaining Agreement As more fully described in "Items 1 and 2" above, due to a lockout of NBA players, the 1998-99 NBA regular season consisted of 50 games per team. Ordinarily, the NBA regular season consists of 82 games per team. The impact of the lockout and the shortened NBA season had a materially adverse effect on BCLP's financial position and results of operations in the fiscal year ended June 30, 1999. Under the terms of the Collective Bargaining Agreement, the 2001-02 NBA season was the first in which a luxury tax and escrow system with respect to player salaries was in effect. The escrow system resulted in a reduction of players' contracted salaries of approximately $3,042,000 in the 2001-02 season. The luxury tax system had no impact on the operating results of the Boston Celtics in the 2001-02 season. Based on current information available, management of the Partnership does not believe that the luxury tax and escrow system will have a material adverse effect on its financial position or results of its operations in the 2002-03 season. General The Boston Celtics derive revenues principally from the sale of tickets to home games and the licensing of television, cable network and radio rights. The most significant expenses of the Boston Celtics are player and coaching 12 salaries. A large portion of the Boston Celtics' annual revenues and operating expense is determinable at the commencement of each basketball season based on season ticket sales and the Boston Celtics' multi-year contracts with its players, coaches and broadcast organizations. The operations and financial results of the Boston Celtics are seasonal. On a cash flow basis, the Boston Celtics receive a substantial portion of their receipts from the advance sale of season tickets during the months of June through October, prior to the commencement of the NBA regular season. Cash receipts from playoff ticket sales are received beginning in March of any year for which the team qualifies for league playoffs. Most of the Boston Celtics' operating expenses are incurred and paid during the regular season, which extends from late October or early November through late April. Certain playoff expenses are paid during the playoffs and in the month after their completion. For financial reporting purposes the Boston Celtics recognize revenues and expenses on a game-by-game basis. Because the NBA regular season ordinarily begins in late October or early November, the first fiscal quarter, which ends on September 30, will generally include limited or no revenue and will reflect a net loss attributable to general and administrative expenses incurred in the quarter. Based on the present NBA game schedule, the Boston Celtics generally recognize approximately one- third of its annual regular season revenue in the second fiscal quarter, approximately one-half of such revenue in the third fiscal quarter and the remainder in the fourth fiscal quarter, and it recognizes its playoff revenue, if any, in the fourth fiscal quarter. Due to the lockout in the 1998-99 season, however, the operating results of the Boston Celtics for the year ended June 30, 1999 did not reflect historical seasonal trends. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations is based upon the consolidated financial statements presented herein, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates and judgments that affect the reported assets and liabilities, revenues and expenses, and other financial information. Actual results may differ significantly from these estimates under different assumptions and conditions. The Partnership's significant accounting policies are described in Note B to the consolidated financial statements. Not all of these significant accounting policies, however, require management to make difficult, complex or subjective judgments or estimates. Management believes that the Partnership's accounting policy related to its interest in Celtics Basketball Holdings as described below meets the definition of "critical accounting policies." The Partnership accounts for its 48.3% interest in Celtics Basketball Holdings using the equity method. Accordingly, the investment is carried at cost, increased by equity in earnings of Celtics Basketball Holdings and reduced by distributions received. The Partnership uses the equity method of accounting because it holds less than a controlling financial interest (50%) in Celtics Basketball Holdings, but its interest of 48.3% presumes the ability to exercise significant influence over operating and financial policies of Celtics Basketball Holdings. The Partnership's equity in earnings of Celtics Basketball Holdings is classified within the operating section of the Partnership's consolidated statements of operations due to the fact that a significant portion of the Partnership's earnings and cash flows are derived from its indirect investment in the Boston Celtics. Results of Operations Consolidated net income for the year ended June 30, 2002 was $4,587,000 or $1.62 per unit, compared with a consolidated net loss of $4,098,000 or $1.27 per unit for the year ended June 30, 2001 and a consolidated net loss of $3,329,000 or $1.23 per unit for the year ended June 30, 2000. Equity in net income (loss) of Celtics Basketball Holdings, L.P. ("Celtics Basketball Holdings") represents BCLP's 48.3% interest in the income (loss) of the entity that indirectly owns and operates the Boston Celtics basketball team subsequent to the Reorganization. BCLP's equity interest in Celtics Basketball Holdings resulted in income of $11,089,000 in the year ended June 30, 2002, compared with $4,191,000 in the year ended June 30, 2001 and $4,353,000 in the year ended June 30, 2000. The increase in fiscal 2002 is primarily a result of an increase in television broadcast rights fees ($2,387,000), the Boston Celtics' appearance in the playoffs in the 2001-02 season ($2,120,000), and decreased team expenses, including the impact of proceeds from the escrow system as provided for in the Collective Bargaining Agreement between the NBA and the NBPA ($1,920,000). The decrease in fiscal 2001 is a result of a decrease in ticket revenues, due to a decrease in attendance, partially offset by an increase in television broadcast rights fees. 13 BCLP's general and administrative expenses of $2,941,000 in fiscal 2002 decreased by $2,729,000 compared to $5,670,000 in fiscal 2001. The decrease was primarily attributable to the provision for certain non- recurring expenses in fiscal 2001, including professional expenses ($1,333,000) associated with, among other things, a transaction in October 2000 whereby BCLP II distributed its investment in BCCLP Holdings and $50,000,000 of borrowings under its revolving credit agreement (see "Liquidity and Capital Resources" below), the write-off of certain intangibles related to the liquidation of one of BCLP's subsidiary partnerships in June 2001 ($607,000), and the payment of a non-recurring sales tax at one of BCLP's subsidiary partnerships in December 2000 ($325,000). The decrease is also attributable to a decrease in personnel and professional expenses. General and administrative expenses of $5,670,000 in fiscal 2001 increased by $1,727,000 compared to $3,943,000 in fiscal 2000 as a result of the provision for non-recurring expenses in fiscal 2001 as described above, partially offset by a decrease in professional expenses. BCLP II's general and administrative expenses of $233,000 in fiscal 2002 decreased by $3,100,000 compared to $3,333,000 in fiscal 2001. BCLP II's general and administrative expenses in fiscal 2001 included $2,058,000 related to BCCLP Holdings and CCC. As more fully described in "Liquidity and Capital Resources" below, effective October 31, 2000, BCLP II distributed to BCLP all of the outstanding capital stock of BCCLP Holdings, and, as a result, the results of operations of BCCLP Holdings and CCC are currently not consolidated with those of BCLP II. In addition, the decrease in BCLP II's general and administrative expenses was attributable to the provision for the non-recurring sales tax and the write-off of certain intangibles in fiscal 2001 as described in the preceding paragraph. Depreciation and amortization expense of $82,000 in fiscal 2002 increased by $8,000 compared to $74,000 in fiscal 2001, due to an increase in deferred financing costs in fiscal 2001. Amortization expense was $57,000 in fiscal 2000. Interest expense of $4,377,000 in fiscal 2002 decreased by $1,766,000 compared to $6,143,000 in fiscal 2001, and interest expense of $6,143,000 decreased by $1,009,000 compared to $7,152,000 in fiscal 2000. The decreases are due to a reduction in average borrowings outstanding under BCLP's revolving credit agreement with its commercial bank. As more fully described in "Liquidity and Capital Resources" below, $50,000,000 of borrowings under BCLP's revolving credit agreement was repaid in December 2000. BCLP's interest income from short-term investments of $898,000 in fiscal 2002 decreased by $3,000,000 compared to $3,898,000 in fiscal 2001, and interest income from short-term investments of $3,898,000 in fiscal 2001 decreased by $1,372,000 compared to $5,270,000 in fiscal 2000. The decreases are primarily attributable to a decrease in invested balances combined with a decrease in interest rates earned on invested balances. As more fully described in "Liquidity and Capital Resources" below, $50,000,000 of short-term investments was liquidated in December 2000 to repay borrowings under BCLP's revolving credit agreement. BCLP's interest income in fiscal 2002 included $840,000 related to BCCLP Holdings and CCC, which, effective October 31, 2000, are not consolidated with BCLP II. BCLP's interest income in fiscal 2001 included $1,843,000 related to BCCLP Holdings and CCC for the periods subsequent to October 31, 2000. BCLP's provision for income taxes relates to BCLP's subsidiary corporations. The provision of $300,000 in fiscal 2001 decreased by $1,500,000 compared to $1,800,000 in fiscal 2000. Effective November 1, 2000, certain of BCLP's subsidiary corporations began filing tax returns consolidated with those of BCLP. As a result, income earned by BCLP's subsidiary corporations subsequent to October 31, 2000 is offset by losses of BCLP. BCLP II recorded an extraordinary charge in the three months ended September 30, 1998 related to the early retirement of notes payable to a former principal unitholder relating to redeemed BCLP II units. The notes payable to the former principal unitholder had an aggregate initial face amount of $14,365,096. The notes, which were due and payable on July 1, 2000, also provided that the amounts to be paid to such unitholder were to be increased by specified amounts on each July 1 during their term. If the principal unitholder held the notes until July 1, 2000, he would have been entitled to receive aggregate payments (excluding interest) in the amount of $20,044,320. Each of the notes bore interest payable quarterly at the rate of 7.76% per annum. At September 30, 1998, BCLP II repaid the notes payable, which had an aggregate balance, including scheduled increases in the note balances, of $17,538,780. The notes payable were repaid in the amount of $19,794,320, resulting in an extraordinary charge of $2,255,540 related to early retirement of notes payable. 14 Liquidity and Capital Resources BCLP used approximately $5,963,000, $6,829,000 and $6,792,000 in cash flows from operating activities in fiscal 2002, 2001 and 2000, respectively. At June 30, 2002, the Partnership had approximately $3,499,000 of cash and cash equivalents and $28,400,000 of short-term investments. In addition to these amounts, sources of funds available to the Partnership include funds generated by operations and distributions from Celtics Basketball Holdings, which through a subsidiary owns and operates the Boston Celtics. These resources will be used to repay commercial bank borrowings and for general partnership purposes, working capital needs or possible investments and/or acquisitions. On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit agreement with its commercial bank, $20,000,000 of which was reserved for the repayment of notes payable related to redeemed BCLP II Units. Interest on advances under the revolving credit agreement accrues at BCLP II's option of either LIBOR plus 0.70% or the greater of the bank's Base Rate or the Federal Funds Effective Rate plus 0.50%. The revolving credit agreement expires on June 30, 2003 and is secured by a pledge of certain short-term investments of CCC. On May 26, 1998, $30,000,000 was advanced under the revolving credit agreement in connection with the Reorganization, and on September 30, 1998, BCLP II borrowed the $20,000,000 reserved for the repayment of notes payable related to redeemed BCLP II Units and repaid the notes with the proceeds. On June 30, 1999, BCLP II borrowed $2,500,000 against the revolving line of credit for general working capital purposes, and during fiscal 2000, BCLP II borrowed the remaining $7,500,000 available under the revolving credit agreement. On October 31, 2000, in order to achieve certain efficiencies, BCLP II distributed to BCLP all of the outstanding capital stock of BCCLP Holdings, and BCLP assumed all of BCLP II's liability for borrowings under its revolving credit agreement aggregating $50,000,000. In December 2000, BCCLP Holdings, through CCC, liquidated $50,000,000 of short-term investments and distributed the proceeds to BCLP. BCLP used those proceeds to repay the $50,000,000 of borrowings under the revolving credit agreement that were assumed from BCLP II. In connection with this distribution, BCLP II issued a note payable to BCLP II GP, Inc., its general partner, in the amount of $361,882, representing its 1% share of the fair value of the distribution. The note accrued interest at 7% annually, and was paid in full on June 26, 2001. On May 10, 2001, the revolving credit agreement was amended to reduce the amount of borrowings available under the agreement to $10,000,000, all of which was outstanding on June 30, 2002. The agreement matures on June 30, 2003. As described below, BCLP II repaid all amounts advanced under the revolving credit agreement in September 2002. In connection with the Reorganization, BCLP II distributed 6% subordinated debentures to certain former holders of BCLP II units. One $20 face value subordinated debenture was distributed for each of the 2,703,664 BCLP II units with respect to which a BCLP II Unitholder elected to receive subordinated debentures, cash and BCLP units. The subordinated debentures were recorded at $12.20 per debenture, the fair market value at date of issue, or $32,984,700. The original issue discount of $21,088,580 is being amortized over the 40-year life of the debentures using the interest method and, accordingly, the subordinated debentures are carried on the balance sheet at $34,636,000 at June 30, 2002. The subordinated debentures bear interest at the rate of 6% per annum, payable annually commencing June 30, 1999, and mature on June 30, 2038. There is no mandatory redemption or sinking fund requirement relating to the subordinated debentures. No cash distributions to unitholders of BCLP were declared or paid during the years ended June 30, 2002, 2001 or 2000. Future distributions will be determined by BCLP GP in its sole discretion based, among other things, on available resources and the needs of the Partnership, the ability of BCLP's subsidiaries to generate sufficient operating cash flow, and the funds available after debt service payments related to the notes payable to commercial bank and the subordinated debentures. In the year ended June 30, 2002, BCLP and its subsidiaries received discretionary distributions from Celtics Basketball Holdings aggregating $4,831,000. On September 6, 2002, BCLP and its subsidiaries received a discretionary distribution from Celtics Basketball Holdings amounting to approximately $19,324,000, representing BCLP's proportionate share of a discretionary distribution of available funds by Celtics Basketball, primarily the $30,000,000 Initial Fee under the New SNE Agreement described in "Items 1 and 2: Television, Cable and Radio Broadcasting" above. In September 2002, BCLP II used $10,000,000 of this distribution to repay all outstanding amounts under its revolving credit agreement with its commercial bank. Future distributions from Celtics Basketball Holdings will be determined by Boston Celtics Corporation, the general partner of Celtics Basketball Holdings, in its sole discretion subject to applicable credit agreements and based, among other things, on available resources and the needs of Celtics Basketball Holdings and Celtics Basketball, the ability of Celtics Basketball Holdings and Celtics Basketball to generate 15 sufficient operating cash flow, and the funds available after debt service payments related to Celtics Basketball's revolving credit agreement with its commercial bank. Management believes that BCLP's cash, cash equivalents and short-term investments together with cash from operating activities will provide adequate cash for the Partnership and its subsidiaries to meet their cash requirements through June 30, 2003. Item 7A. Quantitative and Qualitative Disclosures About Market Risk -------- ----------------------------------------------------------- At June 30, 2002, BCLP had invested approximately $28,400,000 in loan participations issued by a commercial bank with maturities of less than ninety days. Due to their short maturities and applicable transfer restrictions, management believes that the loan participations are not exposed to market risk. Management further believes that the Partnership has no other assets that are subject to market risk. As of June 30, 2002, BCLP II's debt portfolio included a note payable to a bank in the amount of $10,000,000, which bore interest at BCLP II's option of either LIBOR plus 0.70% or the greater of the Bank's Base Rate or the Federal Funds Effective Rate plus 0.50% (2.80% at June 30, 2002). A hypothetical increase of one percentage point in the interest rate on the debt would increase annual interest expense by $100,000. As of June 30, 2002, BCLP II's debt portfolio also included 6% Subordinated Debentures with a carrying value of $34,636,000. The Subordinated Debentures bear interest at a fixed rate of 6% per annum and, as a result, fluctuations in market interest rates will have no effect on interest expense, or on the earnings or cash flows of BCLP II. A hypothetical 10% increase in market interest rates would not have a material effect on the fair value of the Subordinated Debentures. As of June 30, 2002, Celtics Basketball Holdings, through its subsidiary, had outstanding a note payable to a bank in the amount of $50,000,000. The note payable bears interest at a fixed annual rate of 6.29% and, as a result, fluctuations in market interest rates will have no effect on interest expense, or on the earnings or cash flows of Celtics Basketball Holdings. A hypothetical 10% increase in market interest rates would not have a material effect on the fair value of the note payable. Neither BCLP nor its subsidiaries are exposed to foreign currency risk. Currently, BCLP does not use interest rate derivative instruments to manage its exposure to interest rate changes, and management does not intend to utilize derivative instruments in the future. Item 8. Financial Statements and Supplementary Data ------- ------------------------------------------- See Item 14. Item 9. Changes in and Disagreements with Accountants on ------- ------------------------------------------------ Accounting and Financial Disclosure ----------------------------------- None. 16 PART III -------- Item 10. Directors and Executive Officers of the Registrant -------- -------------------------------------------------- General Partner The General Partner of BCLP is BCLP GP, Inc., a Delaware corporation organized in 1998 ("BCLP GP"), and the General Partner of BCLP II is BCLP II GP, Inc., a Delaware corporation organized in 1998 ("BCLP II GP"). BCLP GP is wholly owned by Paul Gaston, and BCLP II GP is wholly owned by Celtics, Inc., which is wholly owned by Walcott Partners, L.P., a Gaston family partnership. BCLP's activities are managed and controlled by BCLP GP. The General Partner of each of CLP, Celtics Basketball Holdings and Celtics Basketball is Boston Celtics Corporation ("BCC"). Paul E. Gaston and Don F. Gaston (Paul Gaston's father) are the sole stockholders of BCC. The activities of CLP, Celtics Basketball Holdings and Celtics Basketball are managed and controlled by BCC. The General Partners of Celtics Pride GP are CLP and CCC, which is wholly owned by BCCLP Holdings, which in turn is wholly owned by BCLP. BCC receives a base management fee of $750,000 per annum, subject to increases based on annual cash flows from basketball operations. Management fees of $933,000, $750,000 and $935,000 were charged to Celtics Basketball's operations during the years ended June 30, 2002, 2001 and 2000, respectively. In accordance with the partnerships' respective partnership agreements, each item of income, gain, loss and deduction is allocated and distributions are made to partners in accordance with their respective percentage interests (excluding earnings of BCLP and subsidiary corporate entities, which are taxed directly). Directors and Executive Officers The following table sets forth, for each of the directors and executive officers of BCLP GP, his or her principal occupation, age and business experience during the past five years. All of the directors and officers are U.S. citizens and the business address of each is c/o Boston Celtics Limited Partnership, 151 Merrimac Street, Boston, Massachusetts 02114.

Paul E. Gaston became Chairman of the Board of BCLP GP in April 1998 and has been Chairman of the Board of Celtics, Inc. since December 1992 and Director since September 1992. Mr. Gaston has been Chairman of the Board of BCC since September 1993. Upon its formation in November 1992, he became Managing Director of Walcott Partners L.P., a Gaston family partnership whose investments include limited partnership interests in the Partnership and ownership of Celtics, Inc. Mr. Gaston is the son of Don F. and Paula B. Gaston. Richard G. Pond was named Vice President, Controller and Secretary of Celtics, Inc. in December 1992. He has been employed by BCLP II since July 1992. From July 1981 to June 1992, he was with the international accounting firm of Ernst & Young LLP, most recently as a senior audit manager. Effective July 1, 1996, Mr. Pond assumed his responsibilities as Executive Vice President, Chief Financial Officer and Treasurer, and effective July 1, 1997, Mr. Pond assumed his responsibilities as Chief Operating Officer. Upon consummation of the Reorganization, Mr. Pond assumed similar responsibilities with BCLP GP. 17 Don F. Gaston has served as a Director of the General Partners of BCLP II and CLP since his resignation as Chairman of the Board of BCLP II in December 1992 and CLP in September 1993. He was succeeded in each of these positions by his son, Paul E. Gaston. He became Chairman of the Board of Directors of Boston Celtics Incorporated in September 1983 when he, together with Alan C. Cohen and Paul R. Dupee, Jr., acquired the Boston Celtics franchise. Mr. Gaston was Chairman of the Board of Providence Capitol, Ltd. from July 1982 until its liquidation in December 1986. From 1962 to June 1982, he was associated with Gulf & Western Industries, Inc. in various capacities, including Executive Vice President, director and member of the Executive Committee. Mr. Gaston is the husband and father respectively, of Paula B. Gaston and Paul E. Gaston. Paula B. Gaston became a Director of Celtics, Inc. in September 1992 and a Director of the General Partner of CLP in October 1992. She is a private investor and is the wife of Mr. Don F. Gaston and the mother of Paul E. Gaston. John B. Marsh III became a director of Celtics, Inc. in September 1992. Mr. Marsh is currently the managing partner of Corvus Capital, LLC, a strategic investment partnership where he is an investment banker. From April 2002 to August 2002, he was a senior portfolio manager at Rayner and Stonington, a strategic investment partnership. From 1998 to 2002, Mr. Marsh was the managing partner of Corvus Capital, LLC. From 1995 to 1998, he was Director of Trading and Sales with ABSA Securities, Inc., an investment banking firm. From 1991 to 1995, he was Chief Executive Officer and President of Saicor Ltd., an investment banking firm specializing in emerging markets. From 1988 to 1991 he was a Vice President at Deutsche Bank Capital Corporation where he headed an international arbitrage securities trading group. From 1985 to 1988 Mr. Marsh was a Vice President in the international arbitrage department of Merrill Lynch Pierce Fenner and Smith. Tedmund W. Pryor became a Director of BCLP GP in September 2001. Mr. Pryor is currently Senior Vice President, Equity Group, at GE Capital Corporation, a financial services company. From 1998 to 2002, Mr. Pryor was Executive Director of BHC Interim Funding, L.P., a mezzanine financing fund and Brooks Houghton & Company, Inc., an investment banking firm, since 1998. From 1997 to 1998, he was Regional Manager of Sirrom Capital Corporation, a mezzanine financing company, from 1990 to 1997, he was Regional Manager of Structured Finance for the Rail Group and the Aviation Services Group of GE Capital Corporation, from 1986 to 1990, he was Vice President, Investment Banking at Prudential Securities, Inc., a financial services company, and from 1982 to 1986, he was Vice President of Investment Banking at Bank of America NT & SA, a major commercial bank. David A. Splaine became a director of BCLP GP in January 2000. Mr. Splaine has been the Managing Director of Baldwin & Clarke Corporate Finance, Inc., an investment banking firm, since 1997. From 1986 to 1997, he was employed by Fleet Bank (and its predecessor, Shawmut Bank), most recently holding the position of Senior Vice President. Mr. Splaine is also a director of Juki Automation Systems Holding, Inc., a privately held distributor of automated assembly equipment, Vested Development, Inc., a privately held software services provider, and Meta Controls, Inc., a privately held manufacturer of industrial cameras and automation equipment. BCLP GP has an Audit Committee composed of Messrs. Marsh, Pryor and Splaine, each non-management directors. Non-management directors other than Don F. Gaston and Paula B. Gaston are reimbursed for their expenses, and receive directors' fees equal to $2,000 per month and $2,500 per meeting attended with respect to their services as directors of BCLP GP. Each of Mr. Marsh and Mr. Splaine received $26,500 in such directors' fees in fiscal 2002, respectively, and Mr. Pryor received $22,500 in such directors' fees in fiscal 2002. Directors are named by the stockholders of BCLP GP and serve until their successors are named. Thus, holders of limited partnership units have no vote in the selection of directors of BCLP GP. BCLP GP's officers are appointed by, and serve at the discretion of, the Board of Directors. Audit and Other Fees -------------------- During the fiscal year ended June 30, 2002, the aggregate fees billed by Ernst & Young LLP for the audit of the Partnership's financial statements for such fiscal year and for the reviews of the Partnership's interim financial statements amounted to $75,000. There were no fees billed by Ernst & Young LLP for information systems design and implementation, or for any other professional services rendered on behalf of the Partnership. 18 Section 16(a) Beneficial Ownership Reporting Compliance ------------------------------------------------------- Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, require executive officers and directors of BCLP GP, the general partner of BCLP, to file reports pertaining to their beneficial ownership of the Units of BCLP with the Securities and Exchange Commission and the New York Stock Exchange when they are first elected, and to report (with certain exceptions) subsequent changes in their beneficial ownership of Units. Executive officers, directors and 10% beneficial owners are required to furnish the Partnership with copies of all forms they file pursuant to Section 16(a). The Partnership believes that all filing requirements were complied with in a timely fashion during the year ended June 30, 2002. Report of the Audit Committee ----------------------------- The Audit Committee oversees the Partnership's financial reporting process on behalf of the board of directors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control. In fulfilling its oversight responsibilities, the Committee reviewed the audited financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements. The Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the committee under generally accepted auditing standards (including Statement on Auditing Standards No. 61). In addition, the Committee has discussed with the independent auditors the auditors' independence from management and the Partnership, including the matters in the written disclosures required by the Independence Standards Board (including Independence Standards Board Standard No. 1), and considered the compatibility of nonaudit services with the auditors' independence. The Committee discussed with the Partnership's independent auditors the overall scope and plans for their respective audits. The Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Partnership's internal control, and the overall quality of the Partnership's financial reporting. The committee held one meeting during fiscal year 2002. In reliance on the reviews and discussions referred to above, the Committee recommended to the board of directors (and the board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended June 30, 2002 for filing with the Securities and Exchange Commission. AUDIT COMMITTEE John B. Marsh, III, Chair Tedmund W. Pryor David A. Splaine September 27, 2002 The above report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Partnership specifically incorporates this information by reference, and shall not be deemed filed with the Securities and Exchange Commission under such Acts. 19 Item 11. Executive Compensation -------- ---------------------- The following Summary Compensation Table sets forth the compensation of each of the Chief Executive Officer and the most highly compensated executive officers of BCLP GP whose annual salary and bonus, if any, exceeded $100,000 for services in all capacities to BCLP (including predecessor entities) and its subsidiaries during the last three fiscal years. Only two of the Partnership's executive officers had an annual salary and bonus exceeding $100,000 for services to BCLP and its subsidiaries during the year ended June 30, 2002.

Neither BCLP nor BCLP II granted any options or appreciation rights during the year ended June 30, 2002. No options were exercised during the year ended June 30, 2002, and there are no options outstanding at June 30, 2002. Employment and Consulting Agreements The Partnership In August 1993, the Board of Directors of Celtics, Inc. approved compensation arrangements and an incentive plan for Paul E. Gaston, Chairman of the Board of Celtics, Inc., under which Mr. Gaston was to be employed on an at will basis, with compensation at the rate of $400,000 per annum. In June 1997, the Board of Directors of the General Partner of BCLP II approved an increase in Mr. Gaston's compensation to $1,000,000 per annum. The incentive plan, which is subject to annual review, provides that Mr. Gaston shall receive annual incentive payments, commencing with the fiscal year ending June 30, 1994, of 5% of the amount by which Consolidated Net Income before taxes on income of BCLP II for the related fiscal year exceeds $8,000,000, payable not later than 10 days after the issuance of audited financial statements of BCLP. Mr. Gaston voluntarily elected to receive reduced compensation of $500,000 from BCLP during each of the years ended June 30, 2002, 2001 and 2000. During the years ended June 30, 2002, 2001 and 2000, no annual incentive compensation payments were made to Mr. Gaston. Compensation Committee Interlocks and Insider Participation Mr. Marsh, a non-management director and member of the Audit Committee of the Board, performed the functions of a compensation committee during the year ended June 30, 2002. Mr. Marsh was not, during the year ended June 30, 2002 or previously, an officer or employee of the Partnership or any of its subsidiaries, and he did not have any affiliated relationship requiring disclosure. 20 Item 12. Security Ownership of Certain Beneficial Owners and Management -------- -------------------------------------------------------------- The following table sets forth certain information regarding the Partnership's Units beneficially owned on September 16, 2002 by (i) each person who is known by the Partnership to beneficially own more than five percent (5%) of the outstanding Units, (ii) each director of BCLP GP, (iii) each executive named in the Summary Compensation Table and (iv) all directors and executive officers of BCLP GP as a group. All information with respect to beneficial ownership is based solely on information furnished by the respective Unitholders to the Partnership.

Unless otherwise indicated, all parties have both exclusive voting and investing power. Item 13. Certain Relationships and Related Transactions -------- ---------------------------------------------- In 2002, BCLP reimbursed Conanicut Aviation LLC ("Conanicut") approximately $26,000 for the business use in the fiscal year ended June 30, 2002 of an aircraft based on standard charter rates for comparable aircraft. In addition, in 2002, Celtics Basketball reimbursed Conanicut approximately $29,000 for the business use in the fiscal year ended June 30, 2002 of the aircraft based on standard charter rates for comparable aircraft. Conanicut is wholly owned by Walcott Partners, L.P. The General Partners of Walcott Partners, L.P. are Paul E. Gaston and Draycott, Inc., of which Paul E. Gaston is the only stockholder, officer and director. The reimbursements were reviewed and approved by the Audit Committee of the Board of Directors of BCLP GP. BCC receives a base management fee of $750,000 per annum, subject to increases based on annual cash flows from basketball operations. Management fees of $933,000, $750,000 and $935,000 were charged to Celtics Basketball's operations during the years ended June 30, 2002, 2001 and 2000, respectively. On June 30, 1998, BCLP entered into a management services agreement by and between BCLP II, CLP, Celtics Pride G.P., CCC, BCCLP Holdings, Castle Creek, Celtics Basketball Holdings and Celtics Basketball. The agreement provides that these entities will provide certain management and corporate services on behalf of the other entities, and will charge a fee for these services based on the cost of the actual services. BCLP received reimbursements from Celtics Basketball and Castle Creek in the amounts of $142,000 and $155,000, respectively, in the fiscal year ended June 30, 2002 and $71,000 and $69,000, respectively, in the fiscal year ended June 30, 2001. Celtics Basketball received reimbursements from Castle Creek in the amounts of $10,000 and $2,000 in the fiscal years ended June 30, 2002 and 2001, respectively. BCLP II received reimbursements from Celtics Basketball and Castle Creek in the amounts of $449,000 and $82,000, respectively, in the fiscal year ended June 30, 2001, and $687,000 and $903,000, respectively, in the fiscal year ended June 30, 2000 for services provided under this agreement. See "Item 12 - Security Ownership of Certain Beneficial Owners and Management" regarding ownership and control of Castle Creek. 22 PART IV ------- Item 14. Exhibits, and Reports on Form 8-K -------- --------------------------------- (a) The following documents are filed as part of this report: 1. Financial Statements: The financial statements listed in the accompanying List of Financial Statements and Financial Statement Schedules are filed as part of this report. 2. Exhibits: The Exhibits listed below are filed as part of this report. (3) (a) -- Certificate of Limited Partnership of Boston Celtics Limited Partnership II, as amended.(1) (b) -- Agreement of Limited Partnership of Boston Celtics Limited Partnership II.(1) (c) -- Certificate of Limited Partnership of Boston Celtics Limited Partnership.(10) (d) -- Agreement of Limited Partnership of Boston Celtics Limited Partnership.(9) (e) -- First Amendment to Amended and Restated Agreement of Limited Partnership of Boston Celtics Limited Partnership II.(2) (f) -- Certificate of Amendment of Certificate of Limited Partnership of Boston Celtics Limited Partnership, changing the name of Boston Celtics Limited Partnership II from its former name of "Boston Celtics Limited Partnership."(10) (g) -- Certificate of Amendment of Certificate of Limited Partnership of Boston Celtics Limited Partnership II, changing the name of Boston Celtics Limited Partnership from its former name of "Boston Celtics Limited Partnership II."(10) (h) -- Certificate of Incorporation of BCLP GP, Inc., dated April 13, 1998.(8) (i) -- By-Laws of BCLP GP, Inc.(8) (j) -- Certificate of Amendment, dated June 29, 1998, changing the name of BCLP GP, Inc. from its former name of "BCLP II GP, Inc."(10) (k) -- Certificate of Incorporation of BCLP II GP, Inc., dated April 13, 1998.(8) (l) -- By-Laws of BCLP II GP, Inc.(8) (m) -- Certificate of Amendment, dated June 29, 1998, changing the name of BCLP II GP, Inc. from its former name of "BCLP GP, Inc."(10) 23 (4) (a) -- Form of Unit Certificate Representing Limited Partnership Interest of BCLP.(1) (b) -- Form of Indenture between Boston Celtics Limited Partnership and Chase Manhattan Bank, as Trustee, dated as of June 30, 1998.(8) (10) (a) -- Joint Venture Agreement by and among NBA member organizations.(1) (b) -- Constitution and By-laws of the National Basketball Association.(1) (c) -- License/Lease Agreement dated April 4, 1990 between Boston Celtics Limited Partnership and New Boston Garden Corporation (confidential treatment previously granted).(2) (d) -- Office Lease Agreement dated April 4, 1990 between Boston Celtics Limited Partnership and New Boston Garden Corporation (confidential treatment previously granted).(2) (e) -- Letter Agreement dated April 4, 1990 between the Boston Celtics Limited Partnership and New Boston Garden Corporation (confidential treatment granted).(2) (f) -- Unit Option Agreement dated December 31, 1993 by and between Boston Celtics Limited Partnership and Paul E. Gaston.(3) (g) -- Restricted Unit Agreement dated June 28, 1996 between Boston Celtics Limited Partnership and Paul E. Gaston.(4) (h) -- Letter from Paul Gaston electing to accept all incentive compensation for 1996 in restricted units.(4) (i) -- Letter Agreement dated June 30, 1997 between Boston Celtics Limited Partnership and Paul E. Gaston pertaining to the election to exchange options to purchase Limited Partnership Units for Restricted Units.(5) (j) -- Credit Agreement dated as of December 15, 1997 by and between Celtics Limited Partnership as the Borrower, Boston Celtics Limited Partnership and Citizens Bank of Massachusetts as the Lender.(6) (k) -- Credit Agreement between Boston Celtics Limited Partnership and Citizens Bank of Massachusetts, dated as of May 20, 1998.(7) (l) -- Second Amendment to Credit Agreement dated as of July 30, 1999 among Celtics Limited Partnership, Boston Celtics Limited Partnership II, Boston Celtics Limited Partnership, Celtics Basketball, L.P., Celtics Basketball Holdings, L.P., Celtics Pride, G.P. and Citizens Bank of Massachusetts.(11) (m) -- Second Amendment to Credit Agreement dated as of July 30, 1999 among Boston Celtics Limited Partnership II, the Borrower, and The Royal Bank of Scotland plc, the Lender, and Citizens Bank of Massachusetts, the Agent.(11) (n) -- Amended and Restated Credit Agreement dated as of October 31, 2000 among Boston Celtics Limited Partnership and Boston 24 Celtics Limited Partnership II as Borrowers, and The Royal Bank of Scotland, plc, as the Existing Lender, and The Other Lender Parties Hereto, and Citizens Bank of Massachusetts, as Agent for the Lenders.(12) (o) -- First Amendment to the Amended and Restated Credit Agreement and Second Amendment to the Credit Support Agreements, Dated as of May 10, 2001, among Boston Celtics Limited Partnership, as Borrower and a Credit Support Affiliate, Boston Celtics Limited Partnership II, as Borrower, BCCLP Holding Corporation, as a Credit Support Affiliate, Celtics Limited Partnership, as a Credit Support Affiliate, Celtics Basketball Holdings, L.P., as a Credit Support Affiliate, and Celtics Pride G.P., as a Credit Support Affiliate, and The Royal Bank of Scotland, plc, as the Existing Lender, and The Other Lender Parties Thereto, and Citizens Bank of Massachusetts, as Agent for the Lenders.(13) (p) -- Amendment, Dated as of May 10, 2001, to Amended and Restated Pledge and Security Agreement between Celtics Capital Corporation and Citizens Bank of Massachusetts, as Agent for the Lenders.(13) (q) -- Third Amendment, Dated as of May 10, 2001, to Credit Agreement among Celtics Basketball, L.P., as Borrower, Boston Celtics Limited Partnership, Boston Celtics Limited Partnership II, Celtics Limited Partnership, Celtics Basketball Holdings, L.P., Celtics Pride, G.P., as Borrower Affiliates, and Citizens Bank of Massachusetts, as Lender.(13) (r) -- Fourth Amendment to the Amended and Restated Credit Agreement, Dated as of October 16, 2001, to Credit Agreement among Celtics Basketball, L.P., as Borrower, Boston Celtics Limited Partnership, Boston Celtics Limited Partnership II, Celtics Limited Partnership, Celtics Basketball Holdings, L.P., Celtics Pride, G.P., as Borrower Affiliates, and Citizens Bank of Massachusetts, as Lender.(14) 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 -- Audit Committee Charter. -------------------- Incorporated by reference from the exhibits filed with the Partnership's registration statement on Form S-1 filed under the Securities Act of 1933 (File No. 33-9796). Incorporated by reference from the exhibits filed with the Report on Form 10-K of the Registrant filed with the Securities and Exchange Commission for the year ended June 30, 1990. Incorporated by reference to the exhibits filed with the report on Form 10-Q filed with the Securities and Exchange Commission on February 14, 1994 (File No. 0-19324). Incorporated by reference to the exhibits filed with the report on Form 10-K filed with the Securities and Exchange Commission on September 27, 1996 (File No. 0-19324). Incorporated by reference to the exhibits filed with the report on Form 10-K filed with the Securities and Exchange Commission on September 26, 1997 (File No. 0-19324). 25 Incorporated by reference to the exhibits filed with the report on Form 10-Q filed with the Securities and Exchange Commission on February 6, 1998 (File No. 0-19324). Incorporated by reference from the exhibits filed with the Schedule 13E-3 filed by Boston Celtics Limited Partnership (File No. 5-37799). Incorporated by reference from the exhibits filed with the report on Form S-4 filed with the Securities and Exchange Commission on April 17, 1998, as amended (File No. 333-50367). Incorporated by reference to the exhibits filed with the report on Form 8-K filed with the Securities and Exchange Commission on June 30, 1998 (File No. 0-19324). Incorporated by reference to the exhibits filed with the report on Form 10-K filed with the Securities and Exchange Commission on September 25, 1998 (File No. 0-19324). Incorporated by reference to the exhibits filed with the report on Form 10-K filed with the Securities and Exchange Commission on September 17, 1999 (File No. 0-19324). Incorporated by reference to the exhibits filed with the report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2000 (File No. 0-19324). Incorporated by reference to the exhibits filed with the report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-19324). Incorporated by reference to the exhibits filed with the report on Form 10-Q filed with the Securities and Exchange Commission on October 26, 2001 (File No. 0-19324). (b) Reports on Form 8-K filed in the fourth quarter of 2002 - None. (c) Exhibits - The response to this portion of Item 14 is filed as a part of this report. (d) Financial Statement Schedules - The response to this portion of Item 14 is filed as part of this report. 26 ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14(a)(1) and (2)(c) and (d) LIST OF FINANCIAL STATEMENTS FINANCIAL STATEMENTS CERTAIN EXHIBITS YEAR ENDED JUNE 30, 2002 BOSTON CELTICS LIMITED PARTNERSHIP BOSTON, MASSACHUSETTS 27 FORM 10-K -- ITEM 14(a)(1) and (2) BOSTON CELTICS LIMITED PARTNERSHIP LIST OF CONSOLIDATED FINANCIAL STATEMENTS The following consolidated financial statements are included in Item 8: Boston Celtics Limited Partnership and Subsidiaries Consolidated Balance Sheets at June 30, 2002 and 2001. Consolidated Statements of Operations for each of the three years in the period ended June 30, 2002. Consolidated Statements of Partners' Capital (Deficit) for each of the three years in the period ended June 30, 2002. Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 2002. Notes to Consolidated Financial Statements. Boston Celtics Limited Partnership II and Subsidiaries Consolidated Balance Sheets at June 30, 2002 and 2001. Consolidated Statements of Operations for each of the three years in the period ended June 30, 2002. Consolidated Statements of Partners' Capital (Deficit) for each of the three years in the period ended June 30, 2002. Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 2002. Notes to Consolidated Financial Statements. Celtics Basketball Holdings, L.P. and Subsidiary Consolidated Balance Sheets at June 30, 2002 and 2001. Consolidated Income Statements for each of the three years in the period ended June 30, 2002. Consolidated Statements of Partners' Capital (Deficit) for each of the three years in the period ended June 30, 2002. Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 2002. Notes to Consolidated Financial Statements. All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. 28 Report of Independent Auditors To the General Partner Boston Celtics Limited Partnership We have audited the accompanying consolidated balance sheets of Boston Celtics Limited Partnership and Subsidiaries as of June 30, 2002 and 2001, and the related consolidated statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended June 30, 2002. These financial statements are the responsibility of the Partnership'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. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Boston Celtics Limited Partnership and Subsidiaries at June 30, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP --------------------- Boston, Massachusetts August 23, 2002, except for Note N, as to which the date is September 27, 2002 29 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Consolidated Balance Sheets

See notes to consolidated financial statements. 30 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Consolidated Statements of Operations

See notes to consolidated financial statements. 31 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Consolidated Statements of Partners' Capital (Deficit)

See notes to consolidated financial statements. 32 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Consolidated Statements of Partners' Capital (Deficit) (continued)

33 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Consolidated Statements of Cash Flows

See notes to consolidated financial statements. 34 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Consolidated Financial Statements Note A - Basis of Presentation Principles of Consolidation: The consolidated financial statements include the accounts of Boston Celtics Limited Partnership ("BCLP," the "Partnership") and its majority-owned and controlled subsidiaries and partnerships: Boston Celtics Limited Partnership II ("BCLP II"), Celtics Limited Partnership ("CLP"), BCCLP Holding Corporation ("BCCLP Holdings"), Celtics Capital Corporation ("CCC"), Celtics Pride GP ("Celtics Pride") and Celtics Investments, Inc. ("CII"). All intercompany transactions are eliminated in consolidation. BCLP (formerly "Boston Celtics Limited Partnership II") is a Delaware limited partnership that was formed on April 13, 1998 in connection with a reorganization of Boston Celtics Limited Partnership II (formerly "Boston Celtics Limited Partnership"). Pursuant to the reorganization of BCLP II (the "Reorganization"), which was completed on June 30, 1998, BCLP owns a 99% limited partnership interest in BCLP II. The 1% general partner of BCLP is BCLP GP, Inc., and the 99% limited partnership interest in BCLP is comprised of 2,703,664 publicly held units. BCLP, through its subsidiaries, holds certain investments, including a 48.3123% limited partnership investment in Celtics Basketball Holdings, L.P., ("Celtics Basketball Holdings") which, through a 99.999% subsidiary partnership, owns and operates the Boston Celtics professional basketball team of the National Basketball Association ("NBA"). BCLP's investment in Celtics Basketball Holdings is accounted for using the equity method and, accordingly, the investment is carried at cost, increased by equity in earnings of Celtics Basketball Holdings and reduced by distributions received. Note B - Significant Accounting Policies Cash Equivalents: Cash equivalents represent investments with maturities at the date of purchase of three months or less. Estimates and Assumptions: 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 reported period. Actual results could differ from those estimates. Concentration of Credit Risk: Financial instruments which potentially subject the Partnership to credit risk consist principally of cash equivalents and short-term investments. The Partnership's cash equivalents and short-term investments represent investments with relatively short maturities in the securities of highly rated financial institutions and United States government entities and private placement notes with a commercial bank. Short-Term Investments: The Partnership accounts for short-term investments in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" which established the accounting and reporting requirements for investments in equity securities that have readily determinable fair values and for all investments in debt securities. All affected investment securities are classified as securities to be held to maturity, for trading, or available- for-sale. Financial Instruments: In the fiscal year ended June 30, 2001, the Partnership adopted Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement 133"). The Statement requires that all derivatives are recognized on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value of the hedged assets, liabilities or firm commitments will either be immediately recognized in earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Because of the Partnership's minimal use of derivatives, the adoption of the new Statement did not have a significant effect on earnings or the financial position of the Partnership. In November 2000, in order to fix the interest rate on the debt described in Note E, BCLP II entered into an interest rate 35 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Consolidated Financial Statements Note B - Significant Accounting Policies (continued) cap agreement with a notional amount of $10,000,000, which expired in May 2002. The interest rate cap agreement provided for the payment of interest at a fixed interest rate of 6.65%. The interest rate differential was recognized as an adjustment to interest expense. The carrying value of financial instruments such as cash equivalents, short-term investments and accounts payable approximate their fair values based on the short-term maturities of these instruments. The carrying value of the note payable to bank approximates its fair value because the interest rate fluctuates with market rates. The carrying value of the subordinated debentures approximates its fair value based on the trading price of the subordinated debentures at June 30, 2002. Property and Equipment: Property and equipment is stated at cost and is being depreciated over estimated useful lives of three to five years using the straight-line method of depreciation. Income Taxes: BCLP is a partnership that is taxed as a corporation. BCLP and its subsidiary corporations report their income tax provision, including the income (losses) of subsidiary partnerships, using the liability method in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using tax rates and laws that will be in effect when the differences are expected to reverse. Comprehensive Income: The Partnership adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" in the fiscal year ended June 30, 1999. The Partnership's comprehensive income (loss) is comprised of net income (loss) and unrealized gains and losses on interest rate cap agreements. Note C - Investment in Capital Deficiency of Celtics Basketball Holdings, L.P. BCLP, through its subsidiary partnerships and corporations, owns a 48.3123% limited partnership interest in Celtics Basketball Holdings. Celtics Basketball Holdings, through Celtics Basketball, L.P. ("Celtics Basketball"), its 99.999% subsidiary partnership, owns and operates the Boston Celtics professional basketball team of the National Basketball Association. BCLP's investment in Celtics Basketball Holdings is accounted for on the equity method, and, accordingly, the investment is carried at cost, increased by equity in earnings of Celtics Basketball Holdings and reduced by distributions received. Summary balance sheet and income statement data for Celtics Basketball Holdings is as follows (amounts in thousands):

36 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Consolidated Financial Statements Note D - Short-Term Investments Short-term investments, which consist primarily of private placement notes with a commercial bank with a maturity of under one year, are classified as held-to-maturity and are carried at amortized cost, which approximates market value. There were no realized or unrealized gains or losses on short-term investments in the fiscal years ended June 30, 2002, 2001 or 2000. Note E - Notes Payable On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit agreement with its commercial bank. Interest on advances under the revolving credit agreement accrues at BCLP II's option of either LIBOR plus 0.70% or the greater of the bank's Base Rate or the Federal Funds Effective Rate plus 0.50% (2.80% at June 30, 2002). BCLP II borrowed $30,000,000 under the revolving credit agreement in fiscal 1998, borrowed an additional $22,500,000 in fiscal 1999, and borrowed the remaining $7,500,000 available under the revolving credit agreement in fiscal 2000. On October 31, 2000, in order to achieve certain efficiencies, BCLP II distributed to BCLP all of the outstanding capital stock of BCCLP Holdings, and BCLP assumed all of BCLP II's liability for borrowings under its revolving credit agreement aggregating $50,000,000. In December 2000, BCLP repaid the $50,000,000 of borrowings under the revolving credit agreement that were assumed from BCLP II. In connection with this distribution, BCLP II issued a note payable to BCLP II GP, Inc., its general partner, in the amount of $361,882, representing its 1% share of the fair value of the distribution. The note accrued interest at 7% annually, and was paid in full on June 26, 2001. On May 10, 2001, the revolving credit agreement was amended to reduce the amount of borrowings available under the agreement to $10,000,000, all of which was outstanding on June 30, 2002. The agreement expires on June 30, 2003. The revolving credit agreement is secured by a pledge of certain short-term investments of CCC, an indirect subsidiary of BCLP, and contains certain restrictions and various provisions and covenants customary in lending arrangements of this type. BCLP was in compliance with these restrictions, provisions and covenants at June 30, 2002. Interest charged to operations in connection with borrowings under the revolving credit agreement and the note payable to BCLP II GP, Inc. amounted to $707,000, $2,479,000 and $3,503,000 in the fiscal years ended June 30, 2002, 2001 and 2000, respectively. Note F - Subordinated Debentures In connection with the Reorganization, BCLP II distributed 6% Subordinated Debentures to certain former holders of BCLP II units. One $20 face value Subordinated Debenture was distributed for each BCLP II unit with respect to which a BCLP II Unitholder elected to receive Subordinated Debentures. In the Reorganization, BCLP II Unitholders elected to receive Subordinated Debentures with respect to 2,703,664 former BCLP II units for an aggregate principal obligation of $54,073,280. The Subordinated Debentures were recorded at $12.20 per debenture, the fair market value at date of issue, or $32,984,700. The original issue discount of $21,088,580 is being amortized over the 40-year life of the Subordinated Debentures using the interest method and, accordingly, the Subordinated Debentures are valued at $34,636,305 at June 30, 2002. The Subordinated Debentures bear interest at the rate of 6% per annum, payable annually commencing June 30, 1999, and mature on June 30, 2038. There is no mandatory redemption or sinking fund requirement relating to the Subordinated Debentures. Interest charged to operations in connection with the Subordinated Debentures, including amortization of the original issue discount, amounted to $3,670,000, $3,664,000 and $3,649,000 in the fiscal years ended June 30, 2002, 2001 and 2000, respectively. 37 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Consolidated Financial Statements Note G - Related Party Transactions Boston Celtics Corporation, the general partner of Celtics Basketball, receives a base management fee of $750,000 per annum, subject to increases based on annual cash flows from basketball operations. Management fees of $933,000, $750,000 and $935,000 were charged to Celtics Basketball's operations in the years ended June 30, 2002, 2001 and 2000, respectively. On June 30, 1998, BCLP entered into a management services agreement by and between, among others, BCLP II, Castle Creek and Celtics Basketball. The agreement provides that these entities will provide certain management and corporate services on behalf of the other entities, and will charge a fee for these services based on the cost of the actual services. BCLP received reimbursements from Celtics Basketball and Castle Creek in the amounts of $142,000 and $155,000, respectively, in the fiscal year ended June 30, 2002 and $71,000 and $69,000, respectively, in the fiscal year ended June 30, 2001. Celtics Basketball received reimbursements from Castle Creek in the amounts of $10,000 and $2,000 in the fiscal years ended June 30, 2002 and 2001, respectively. BCLP II received reimbursements from Celtics Basketball and Castle Creek in the amounts of $449,000 and $82,000, respectively, in the fiscal year ended June 30, 2001, and $687,000 and $903,000, respectively, in the fiscal year ended June 30, 2000 for services provided under this agreement. Note H - Commitments and Contingencies In July and August 1998, four separate class action complaints (the "Complaints") were filed by Unitholders in the Court of Chancery of the State of Delaware in and for New Castle County against BCLP II, its former general partner (Celtics, Inc.), and certain directors or former directors of Celtics, Inc. Each of the Complaints alleges, among other things, that the Reorganization was unfair to former BCLP II Unitholders, and seeks to recover an unspecified amount of damages, including attorneys' and experts' fees and expenses. The Partnership filed a Motion to Dismiss one of the complaints on July 29, 1998, and discovery in that case has been stayed by agreement of the parties. The Complaints have been consolidated. On August 6, 1999, the Court of Chancery issued an opinion granting in part, and denying in part, the Partnership's Motion to Dismiss, and on September 3, 1999, the plaintiffs filed an amended Complaint. On October 1, 1999, the Partnership filed an answer to the Complaint. Although the ultimate outcome of the Complaint cannot be determined at this time, management of the Partnership does not believe that the outcome of these proceedings will have a material adverse effect on the Partnership's financial position or results of operations. Under the terms of the Collective Bargaining Agreement between the NBA and the NBA Players Association, the 2001-02 NBA season was the first in which a luxury tax and escrow system with respect to player salaries was in effect. As of June 30, 2002, the luxury tax and escrow system did not, and based on currently available information, is not expected to have a material adverse effect on the Partnership's financial position or results of operations. Celtics Basketball is committed under noncancelable, long-term operating leases for certain of its facilities and equipment. Celtics Basketball does not pay rent under its lease agreements related to the FleetCenter (where the Boston Celtics play all of their home games), which expires after the 2010-11 NBA season, or the practice facility and wellness center, which also includes certain office space, and which expires in 2010. Under the terms of its lease agreement related to the FleetCenter, Celtics Basketball does not share in revenue from food and beverage concessions. Note I - Benefit Plans Certain of the Partnership's subsidiaries have defined contribution plans covering substantially all employees who meet certain eligibility requirements. Participants may make contributions to the plans up to 15% of their compensation (as defined). Contributions to these plans are matched by the Partnership and its subsidiaries 100% on the first 7% of compensation contributed by each participant. Contributions are fully vested after three years of service. Costs of the plans charged to operations amounted to $43,000, $41,000 and $44,000 in the fiscal years ended June 30, 2002, 2001 and 2000, respectively. 38 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Consolidated Financial Statements Note J - Cash Flows Reconciliations of net income (loss) to net cash flows used in operating activities are as follows (in thousands):

Note K - Quarterly Results (Unaudited) A summary of operating results, net income (loss) per unit based on the average units outstanding throughout each year calculated for financial statement purposes only, and cash distributions for the quarterly periods in the two years ended June 30, 2002 and 2001 is set forth below (in thousands, except for per unit amounts):

Note L - Income Taxes BCLP is a partnership that is taxed as a corporation. The consolidated financial statements include the accounts and operating results of certain wholly owned subsidiary corporations that file tax returns separate from those of BCLP. As a result, income of those subsidiary corporations cannot be offset by losses of BCLP. Effective November 1, 2000, certain of BCLP's subsidiary corporations began filing tax returns consolidated with those of BCLP. As a result, income earned by those certain subsidiary corporations subsequent to October 31, 2000 is offset by losses of BCLP. Aggregate pre- tax income (loss) of BCLP's wholly owned taxable subsidiary corporations that file tax returns separate from those of BCLP amounted to $15,000, $(355,000) and $4,027,000 in the years ended June 30, 2002, 2001 and 2000, respectively. 39 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Consolidated Financial Statements Note L - Income Taxes (continued) Components of deferred tax assets and liabilities and assets at June 30, 2002 and 2001 are as follows (in thousands):

At June 30, 2002, the Partnership has net operating loss carryforwards of $29,011,000 for income tax purposes that expire beginning in fiscal 2014, and capital loss carryforwards of $8,026,000 that expire in 2006. Net operating loss carryforwards of $349,000 were used during the year ended June 30, 2002. The net deferred tax liabilities represent the tax-effected difference between the tax and financial statement bases of the net assets of BCCLP Holdings and CII, and relate to BCCLP Holdings or former subsidiary partnerships Boston Celtics Communications Limited Partnership ("BCCLP") and Boston Celtics Broadcasting Limited Partnership ("BCBLP"). The net deferred tax assets are attributable to different entities in the consolidated group. As a result, the deferred tax assets and liabilities do not necessarily offset and are evaluated separately. Because of the uncertainty regarding the Partnership's ability to realize the deferred tax assets, a full valuation allowance has been established for the deferred tax assets. The provision for income taxes included in the consolidated statement of operations consists of the following (in thousands):

40 BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Consolidated Financial Statements Note L - Income Taxes (continued) The following table reconciles taxes at the statutory federal income tax rate to the tax provision (in thousands):

The capital loss carryforward represents a capital loss realized by a subsidiary corporation that files a tax return separate from that of BCLP. Note M - Net Income Per Unit The following table sets forth the computation of basic and diluted earnings per unit for each of the periods indicated (in thousands, except per unit amounts):

Note N -- Subsequent Events On September 13, 2002, BCLP II repaid all amounts advanced under the revolving credit agreement with its commercial bank. On September 27, 2002, Celtics Basketball, the Partnership's 48.3% owned, indirect subsidiary, entered into an Asset Purchase and Sale Agreement with Lake Carnegie, LLC (the "Asset Purchase Agreement"), pursuant to which Lake Carnegie, LLC ("Lake Carnegie") will pay to Celtics Basketball an aggregate amount of $360 million in cash consideration for all assets relating to the Boston Celtics (of which $50 million will be used to repay outstanding bank borrowings) and will assume the liabilities relating to the Boston Celtics. The transaction is subject to National Basketball Association approval and customary closing conditions. The transaction is expected to close before December 31, 2002. 41 Report of Independent Auditors To the General Partner Boston Celtics Limited Partnership II We have audited the accompanying consolidated balance sheets of Boston Celtics Limited Partnership II and Subsidiaries as of June 30, 2002 and 2001, and the related consolidated statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended June 30, 2002. These financial statements are the responsibility of the Partnership'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. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Boston Celtics Limited Partnership II and Subsidiaries at June 30, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP --------------------- Boston, Massachusetts August 23, 2002, except for Note L, as to which the date is September 27, 2002 42 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Consolidated Balance Sheets

See notes to consolidated financial statements. 43 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Consolidated Statements of Operations For the Year Ended --------------------------------------------- June 30, June 30, June 30, 2002 2001 2000 -------- -------- -------- Equity in net income of Celtics Basketball Holdings, L.P. $11,088,839 $ 4,190,982 $ 4,353,162 Costs and expenses: General and administrative 232,717 3,332,904 1,645,329 Amortization 68,104 61,841 47,114 --------------------------------------------- 300,821 3,394,745 1,692,443 --------------------------------------------- 10,788,018 796,237 2,660,719 Interest expense (4,639,799) (5,673,699) (7,151,884) Interest income 58,845 2,055,088 5,270,020 --------------------------------------------- Income (loss) before income taxes 6,207,064 (2,822,374) 778,855 Provision for income taxes 300,000 1,800,000 --------------------------------------------- Net income (loss) 6,207,064 (3,122,374) (1,021,145) Net income (loss) applicable to interests of General Partners 171,927 (619,359) 34,088 --------------------------------------------- Net income (loss) applicable to interest of Limited Partner $ 6,035,137 $(2,503,015) $(1,055,233) =============================================

See notes to consolidated financial statements. 44 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Consolidated Statements of Partners' Capital (Deficit)

See notes to consolidated financial statements. 45 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Consolidated Statements of Partners' Capital (Deficit) (continued)

46 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Consolidated Statements of Cash Flows

See notes to consolidated financial statements. 47 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Notes to Consolidated Financial Statements Note A - Basis of Presentation Principles of Consolidation: The consolidated financial statements include the accounts of Boston Celtics Limited Partnership II ("BCLP II," the "Partnership") and its majority-owned and controlled subsidiaries and partnerships: Celtics Limited Partnership ("CLP"), Celtics Pride GP ("Celtics Pride") and Celtics Investments, Inc. ("CII"). All intercompany transactions are eliminated in consolidation. BCLP II is a Delaware limited partnership formed in 1986 as Boston Celtics Limited Partnership. Its general partner was Celtics, Inc. Pursuant to a reorganization of its partnership structure that was completed on June 30, 1998 (the "Reorganization"), the Partnership's name was changed to Boston Celtics Limited Partnership II, and its general partner became BCLP II GP, Inc. ("BCLP II GP"), a wholly owned subsidiary of Celtics, Inc. As a result of the Reorganization, the Partnership's 99% limited partnership interest is owned by Boston Celtics Limited Partnership (a Delaware limited partnership formed in April 1998). Prior to the Reorganization, BCLP II, through its subsidiaries, owned and operated the Boston Celtics professional basketball team of the National Basketball Association (the "Boston Celtics") and held investments. The Boston Celtics were owned by CLP, in which BCLP II has a 99% limited partnership interest. Upon completion of the Reorganization, the Boston Celtics are owned and operated by Celtics Basketball, L.P. ("Celtics Basketball"), a subsidiary of Celtics Basketball Holdings, L.P. ("Celtics Basketball Holdings"). BCLP II, through its subsidiaries, holds certain investments, including a 48.3123% limited partnership investment in Celtics Basketball Holdings. Accordingly, effective June 30, 1998, BCLP II's interest in the accounts and operations of the Boston Celtics is reflected in its investment in Celtics Basketball Holdings which, under the equity method, is carried at cost, increased by equity in the earnings of Celtics Basketball Holdings and reduced by distributions received. Note B - Significant Accounting Policies Cash Equivalents: Cash equivalents represent investments with maturities at date of purchase of three months or less. Estimates and Assumptions: 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 reported period. Actual results could differ from those estimates. Concentration of Credit Risk: Financial instruments which potentially subject the Partnership to credit risk consist principally of cash equivalents. The Partnership's cash equivalents represent investments with relatively short maturities in the securities of highly rated financial institutions and United States government entities. Property and Equipment: Property and equipment is stated at cost and is being depreciated over estimated useful lives from three to five years using straight line or accelerated methods of depreciation as appropriate. Financial Instruments: In the fiscal year ended June 30, 2001, the Partnership adopted Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement 133"). The Statement requires that all derivatives are recognized on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value of the hedged assets, liabilities or firm commitments will either be immediately recognized in earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Because of the Partnership's minimal use of derivatives, the adoption of the new Statement did not have a significant effect on earnings or the financial position of the Partnership. In November 2000, in order to fix the interest rate on the debt described in Note E, BCLP II entered into an interest rate cap agreement with a notional amount of $10,000,000, which expired in May 2002. The fixed interest rate on this contract was 6.65%. The interest rate differential was recognized as an adjustment to interest expense. 48 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Notes to Consolidated Financial Statements Note B - Significant Accounting Policies (continued) The carrying value of financial instruments such as cash equivalents and accounts payable approximate their fair values based on the short-term maturities of these instruments. The carrying value of the note payable to bank approximates its fair value because the interest rate fluctuates with market rates. The carrying value of the subordinated debentures approximates its fair value based on the trading price of the subordinated debentures at June 30, 2002. Income Taxes: No provision for income taxes is required by the Partnership as its income and expenses are taxable to or deductible by its partners. CII, a wholly owned subsidiary corporation of the Partnership, and Celtics Capital Corporation ("CCC") and BCCLP Holding Corporation ("BCCLP Holdings"), wholly owned subsidiary corporations of the Partnership prior to their distribution to Boston Celtics Limited Partnership on October 31, 2000 (see Note C - Investment in BCCLP Holding Corporation), are subject to income taxes and report their income tax provision, including the income (losses) of Boston Celtics Communications Limited Partnership ("BCCLP"), a former subsidiary partnership, using the liability method in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using tax rates and laws that will be in effect when the differences are expected to reverse. Comprehensive Income: The Partnership adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" in the fiscal year ended June 30, 1999. The Partnership's comprehensive income (loss) is comprised of net income (loss) and unrealized gains and losses on interest rate cap agreements. Note C - Investment in BCCLP Holding Corporation On October 31, 2000, in order to achieve certain efficiencies, BCLP II distributed to BCLP all of the outstanding capital stock of BCCLP Holdings, and BCLP assumed all of BCLP II's liability for borrowings under its revolving credit agreement aggregating $50,000,000. The net assets of BCCLP Holdings at the date of distribution amounted to $87,629,000 and included, among other things, cash of $3,551,000, short-term investments of $82,000,000, an amount receivable from Celtics Investments, Inc., a wholly owned subsidiary of BCLP II, of $4,800,000, and deferred tax liabilities of $2,899,000. In connection with this distribution, BCLP II issued a note payable to BCLP II GP, Inc., its general partner, in the amount of $361,882, representing its 1% share of the fair value of the distribution. The note accrued interest at 7% annually, and was paid in full on June 26, 2001. Note D - Investment in Capital Deficiency of Celtics Basketball Holdings, L.P. BCLP II, through its subsidiary partnerships and corporations, owns a 48.3123% limited partnership interest in Celtics Basketball Holdings. Celtics Basketball Holdings, through Celtics Basketball, its 99.999% subsidiary partnership, owns and operates the Boston Celtics professional basketball team of the National Basketball Association. BCLP II's investment in Celtics Basketball Holdings is accounted for on the equity method and, accordingly, the investment is carried at cost, increased by equity in the earnings of Celtics Basketball Holdings and reduced by distributions received. 49 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Notes to Consolidated Financial Statements Note D - Investment in Capital Deficiency of Celtics Basketball Holdings, L.P. (continued) Summary balance sheet and income statement data for Celtics Basketball Holdings is as follows (amounts in thousands):

Note E - Notes Payable On May 20, 1998, the Partnership entered into a $60,000,000 revolving credit agreement with its commercial bank. Interest on advances under the revolving credit agreement accrues at the Partnership's option of either LIBOR plus 0.70% or the greater of the bank's Base Rate or the Federal Funds Effective Rate plus 0.50% (2.8% at June 30, 2002). The Partnership borrowed $30,000,000 under the revolving credit agreement in fiscal 1998, borrowed an additional $22,500,000 in fiscal 1999, and borrowed the remaining $7,500,000 available under the revolving line of credit in fiscal 2000. On October 31, 2000, as more fully described in Note C - Investment in BCCLP Holdings, BCLP assumed all of the Partnership's liability for borrowings under its revolving credit agreement aggregating $50,000,000, and the Partnership issued a note payable to BCLP II GP, Inc., its general partner, in the amount of $361,882. The note accrued interest at 7% annually, and was paid in full on June 26, 2001. As a result, subsequent to BCLP's assumption of $50,000,000 of borrowings, $10,000,000 was outstanding under the revolving credit agreement. On May 10, 2001, the revolving credit agreement was amended to reduce the amount of borrowings available under the agreement to $10,000,000. The agreement matures on June 30, 2003. The revolving credit agreement is secured by a pledge of certain short-term investments of CCC, an indirect subsidiary of BCLP. The revolving credit agreement contains certain restrictions and various provisions and covenants customary in lending arrangements of this type. BCLP II was in compliance with these restrictions, provisions and covenants at June 30, 2002. In June 2001, the Partnership borrowed $3,000,000 from CCC. Interest under this note accrues at 8.75%, and the note is payable on September 30, 2003. The note is subordinate to the note payable to bank and the subordinated debentures. Interest charged to operations in connection with borrowings under the revolving credit agreement and the notes payable to CCC and BCLP II GP, Inc. amounted to $970,000, $2,009,000 and $3,503,000 in the years ended June 30, 2002, 2001 and 2000, respectively. 50 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Notes to Consolidated Financial Statements Note F - Subordinated Debentures In connection with the Reorganization, BCLP II distributed 6% Subordinated Debentures to certain former holders of BCLP II units. One $20 face value Subordinated Debenture was distributed for each BCLP II unit with respect to which a BCLP II Unitholder elected to receive Subordinated Debentures. In the Reorganization, BCLP II Unitholders elected to receive Subordinated Debentures with respect to 2,703,664 former BCLP II units, for an aggregate principal obligation of $54,073,280. The Subordinated Debentures were recorded at $12.20 per debenture, the fair market value at date of issue, or $32,984,700. The original issue discount of $21,088,580 is being amortized over the 40-year life of the Subordinated Debentures using the interest method and, accordingly, the Subordinated Debentures are valued at $34,636,305 at June 30, 2002. The Subordinated Debentures bear interest at the rate of 6% per annum, payable annually commencing June 30, 1999, and mature on June 30, 2038. There is no mandatory redemption or sinking fund requirement relating to the Subordinated Debentures. Interest charged to operations in connection with the Subordinated Debentures, including amortization of the original issue discount, amounted to $3,670,000, $3,664,000 and $3,649,000 in the fiscal years ended June 30, 2002, 2001 and 2000, respectively. Note G - Related Party Transactions Boston Celtics Corporation, the general partner of Celtics Basketball, receives a base management fee of $750,000 per annum, subject to increases based on annual cash flows from basketball operations. Management fees of $933,000, $750,000 and $935,000 were charged to Celtics Basketball's operations in the years ended June 30, 2002, 2001 and 2000, respectively. On June 30, 1998, BCLP II entered into a management services agreement by and between, among others, BCLP, Castle Creek and Celtics Basketball. The agreement provides that these entities will provide certain management and corporate services on behalf of the other entities, and will charge a fee for these services based on the cost of the actual services. BCLP received reimbursements from Celtics Basketball and Castle Creek in the amounts of $142,000 and $155,000, respectively, in the fiscal year ended June 30, 2002 and $71,000 and $69,000, respectively, in the fiscal year ended June 30, 2001. Celtics Basketball received reimbursements from Castle Creek in the amounts of $10,000 and $2,000 in the fiscal years ended June 30, 2002 and 2001, respectively. BCLP II received reimbursements from Celtics Basketball and Castle Creek in the amounts of $449,000 and $82,000, respectively, in the fiscal year ended June 30, 2001, and $687,000 and $903,000, respectively, in the fiscal year ended June 30, 2000 for services provided under this agreement. Note H - Commitments and Contingencies In July and August 1998, four separate class action complaints (the "Complaints") were filed by Unitholders in the Court of Chancery of the State of Delaware in and for New Castle County against BCLP II, its former general partner (Celtics, Inc.), and certain directors or former directors of Celtics, Inc. Each of the Complaints alleges, among other things, that the Reorganization was unfair to former BCLP II Unitholders, and seeks to recover an unspecified amount of damages, including attorneys' and experts' fees and expenses. The Partnership filed a Motion to Dismiss one of the complaints on July 29, 1998, and discovery in that case has been stayed by agreement of the parties. The Complaints have been consolidated. On August 6, 1999, the Court of Chancery issued an opinion granting in part, and denying in part, the Partnership's Motion to Dismiss, and on September 3, 1999, the plaintiffs filed an amended Complaint. On October 1, 1999, the Partnership filed an answer to the Complaint. Although the ultimate outcome of the Complaint cannot be determined at this time, management of the Partnership does not believe that the outcome of these proceedings will have a material adverse effect on the Partnership's financial position or results of operations. 51 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Notes to Consolidated Financial Statements Note H - Commitments and Contingencies (continued) Under the terms of the Collective Bargaining Agreement between the NBA and the NBA Players Association, the 2001-02 NBA season was the first in which a luxury tax and escrow system with respect to player salaries was in effect. As of June 30, 2002, the luxury tax and escrow system did not, and based on currently available information, is not expected to have a material adverse effect on the Partnership's financial position or results of operations. Celtics Basketball is committed under noncancelable, long-term operating leases for certain of its facilities and equipment. Celtics Basketball does not pay rent under its lease agreements related to the FleetCenter (where the Boston Celtics play all of their home games), which expires after the 2010-11 NBA season, or the practice facility and wellness center, which also includes certain office space, and which expires in 2010. Under the terms of its lease agreement related to the FleetCenter, Celtics Basketball does not share in revenue from food and beverage concessions. Note I - Cash Flows Reconciliations of net income (loss) to net cash flows used in operating activities are as follows (in thousands):

Note J - Quarterly Results (Unaudited) A summary of operating results for the quarterly periods in the fiscal years ended June 30, 2002 and 2001 is set forth below (in thousands):

52 BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Notes to Consolidated Financial Statements Note K - Income Taxes Components of deferred tax liabilities and assets at June 30 are as follows (in thousands):

The deferred tax liabilities at June 30, 2002, 2001 and 2000 represent the tax-effected difference between the tax and financial statement bases of the net assets of BCCLP Holdings and CII, and relate to BCCLP Holdings or subsidiary partnerships BCCLP and Boston Celtics Broadcasting Limited Partnership ("BCBLP"). At June 30, 2002, the tax bases of the assets and liabilities of BCLP II and its subsidiaries exceeded their financial statement bases by approximately $80,269,000, consisting primarily of a step-up in basis in connection with Unit redemptions $(54,099,000), difference between tax and financial statement basis of the investment in Celtics Basketball Holdings $(23,759,000), original issue discount on the Subordinated Debentures $(1,421,000) and intangible assets $(990,000). No deferred tax asset has been provided for these differences because BCLP II and its subsidiary partnerships are not subject to income taxes. The provision for income taxes included in the consolidated statements of operations consists of the following (in thousands):

A reconciliation of taxes at the statutory federal income tax rate applied to reported pre-tax income (loss) of BCLP II's wholly owned taxable subsidiary corporations that file tax returns separate from those of BCLP II, which amounted to $15,000 in 2002, $(355,000) in 2001 and $4,027,000 in 2000, to the tax provision is (in thousands):

Note L -- Subsequent Events On September 13, 2002, BCLP II repaid all amounts advanced under the revolving credit agreement with its commercial bank. On September 27, 2002, Celtics Basketball, the Partnership's 48.3% owned, indirect subsidiary, entered into an Asset Purchase and Sale Agreement with Lake Carnegie, LLC (the "Asset Purchase Agreement"), pursuant to which Lake Carnegie, LLC ("Lake Carnegie") will pay to Celtics Basketball an aggregate amount of $360 million in cash consideration for all assets relating to the Boston Celtics (of which $50 million will be used to repay outstanding bank borrowings) and will assume the liabilities relating to the Boston Celtics. The transaction is subject to National Basketball Association approval and customary closing conditions. The transaction is expected to close before December 31, 2002. 53 Report of Independent Auditors To the General Partner Celtics Basketball Holdings, L.P. We have audited the accompanying consolidated balance sheets of Celtics Basketball Holdings, L.P. and Subsidiary as of June 30, 2002 and 2001, and the related consolidated income statements, statements of partners' capital (deficit) and cash flows for each of the three years in the period ended June 30, 2002. These financial statements are the responsibility of the Partnership'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. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Celtics Basketball Holdings, L.P. and Subsidiary at June 30, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP --------------------- Boston, Massachusetts August 23, 2002, except for Note L, as to which the date is September 27, 2002 54 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Consolidated Balance Sheets

See notes to consolidated financial statements. 55 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Consolidated Income Statements For the Year Ended --------------------------------------------- June 30, June 30, June 30, 2002 2001 2000 -------- -------- -------- Revenues: Basketball regular season - Ticket sales $36,507,205 $35,830,050 $39,393,990 Television and radio broadcast rights fees 42,635,323 37,694,822 33,115,930 Other, principally promotional advertising 10,405,647 8,913,235 7,625,721 Basketball playoffs - Ticket sales 8,956,600 Television and radio broadcast rights fees 970,811 --------------------------------------------- 99,475,586 82,438,107 80,135,641 Costs and expenses: Basketball regular season - Team 55,201,790 59,176,534 56,664,039 Game 2,585,373 2,454,128 2,673,269 Basketball playoffs 5,538,582 General and administrative 5,084,357 4,520,516 5,119,684 Selling and promotional 4,907,810 4,935,160 4,427,810 Depreciation 426,349 350,275 347,471 Amortization of NBA franchise and other intangible assets 3,858 157,819 157,727 --------------------------------------------- 73,748,119 71,594,432 69,390,000 --------------------------------------------- 25,727,467 10,843,675 10,745,641 Equity in net income of NBA-related entities 321,694 704,329 1,113,363 Interest expense (3,258,215) (3,299,931) (3,393,910) Interest income 161,685 426,781 545,456 --------------------------------------------- Net income 22,952,631 8,674,854 9,010,550 Net income applicable to interests of General Partners 460 174 180 --------------------------------------------- Net income applicable to interests of Limited Partners $22,952,171 $8,674,680 $9,010,370 =============================================

See notes to consolidated financial statements. 56 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Consolidated Statements of Partners' Capital (Deficit)

See notes to consolidated financial statements. 57 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Consolidated Statements of Partners' Capital (Deficit) (continued)

58 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Consolidated Statements of Cash Flows

See notes to consolidated financial statements. 59 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Notes to Consolidated Financial Statements Note A - Basis of Presentation Principles of Consolidation: Celtics Basketball Holdings, L.P. ("Celtics Basketball Holdings," or the "Partnership"), a Delaware limited partnership, through Celtics Basketball, L.P. ("Celtics Basketball"), its 99.999% owned subsidiary, owns and operates the Boston Celtics professional basketball team of the National Basketball Association (the "Boston Celtics"). The consolidated financial statements include the accounts of Celtics Basketball Holdings and Celtics Basketball. All intercompany transactions are eliminated in consolidation. Celtics Basketball Holdings and Celtics Basketball held no material assets and were not engaged in operations from April 13, 1998, their date of formation, until June 30, 1998. On June 30, 1998, Celtics Limited Partnership ("CLP"), which formerly owned and operated the Boston Celtics, contributed the assets and liabilities of the Boston Celtics to Celtics Basketball in exchange for a 99.999% limited partnership interest in Celtics Basketball. Subsequently on June 30, 1998, CLP contributed its 99.999% limited partnership interest in Celtics Basketball to Celtics Basketball Holdings in exchange for a 99.999% limited partnership interest in Celtics Basketball Holdings. The general partner of both Celtics Basketball Holdings and Celtics Basketball is Boston Celtics Corporation. Note B - Significant Accounting Policies Cash Equivalents: Cash equivalents represent short-term investments with maturities at the date of purchase of three months or less. Estimates and Assumptions: 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 reported period. Actual results could differ from those estimates. Concentration of Credit Risk: Financial instruments which potentially subject the Partnership to credit risk consist principally of cash equivalents and accounts receivable. The Partnership's cash equivalents represent investments with relatively short maturities in the securities of highly rated financial institutions and United States government entities. The Partnership performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Credit losses have been consistently within management's expectations. The Boston Celtics and the NBA have entered into long-term agreements with various broadcast partners to license the national and local broadcast of NBA games. These agreements provide for future cash obligations on the part of the broadcast partners that represent a significant portion of the Partnership's current and future revenues. The ability of the Partnership's broadcast partners to fulfill these cash obligations will have a material impact on its future cash flows and results of operations. Financial Instruments: The carrying value of financial instruments such as cash equivalents, accounts receivable and accounts payable approximate their fair values based on the short-term maturities of these instruments. The carrying value of long-term debt approximates its fair value based on references to similar instruments. Property and Equipment: Property and equipment is stated at cost and is being depreciated over estimated useful lives of from three to ten years using straight line or accelerated methods of depreciation as appropriate. Leasehold improvements are depreciated over the lesser of the remaining lives of the leases or the assets. Basketball Operations: Revenues, principally ticket sales and television and radio broadcasting fees, generally are recorded as revenues at the time the game to which such proceeds relate is played. Team expenses, principally player and coaches salaries, related fringe benefits and insurance, and game and playoff expenses, principally National Basketball Association attendance assessments and travel, are recorded as expense on the same basis. Accordingly, advance ticket sales and payments on television and radio broadcasting contracts and payments for team and game 60 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Notes to Consolidated Financial Statements Note B - Significant Accounting Policies (continued) expenses not earned or incurred are recorded as deferred revenues and deferred expenses, respectively, and amortized ratably as regular season games are played. General and administrative and selling and promotional expenses are charged to operations as incurred. Income Taxes: No provision for income taxes is required by Celtics Basketball Holdings as its income and expenses are taxable to or deductible by its partners. Accounting for Derivatives and Hedging Activities: The Partnership adopted Financial Accounting Standards Board Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, in the year ended June 30, 2001. Because of the Partnership's minimal use of derivatives, the adoption of the new Statement did not have a significant effect on the results of operations or the financial position of the Partnership. Franchise and Other Intangible Assets: In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets, including the NBA franchise, deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The Partnership adopted the new rules on accounting for goodwill and other intangible assets in the first quarter of fiscal 2002. Application of the nonamortization provisions of the Statement resulted in an increase in net income of $154,000 in fiscal 2002. No impairment was indicated in connection with the Partnership's annual impairment tests of the NBA franchise as of June 30, 2002. Reclassifications: Certain prior year amounts have been reclassified to conform to the fiscal 2002 presentation. Note C - Property and Equipment Property and equipment are summarized as follows:

Note D - Investments in NBA-Related Entities Celtics Basketball owns a 3.45% interest in each of NBA Media Ventures, LLC ("NBA Media Ventures"), NBA Development, LLC ("NBA Development") and NBDL Holdings LLC ("NBDL Holdings"), each of which is owned equally by the 29 NBA men's member clubs (the "members"). NBA Media Ventures pools all of the fees that its members are entitled to receive under their respective market extension agreements. In addition, NBA Media Ventures is engaged in the sale of nationally syndicated radio broadcast rights of NBA games, licenses direct broadcast satellite services and operates the NBA's retail store. NBA Development operates a league of women's professional basketball teams. NBDL Holdings operates a league of men's professional minor league basketball teams. Celtics Basketball's investments in NBA Media Ventures, NBA Development and NBDL Holdings are accounted for on the equity method. 61 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Notes to Consolidated Financial Statements Note E - Deferred Compensation Certain player contracts provide for guaranteed compensation payments which are deferred until a future date. Operations are charged amounts equal to the present value of future guaranteed payments in the period in which the compensation is earned. The present value of payments due under these agreements is as follows: Years ending June 30, 2003 $1,236,000 2004 1,209,000 2005 981,000 2006 966,000 2007 370,000 2008 and thereafter 455,000 ---------- $5,217,000 ==========

Note F - Notes Payable Notes payable to bank represents outstanding borrowings under a $60,000,000 credit facility dated December 15, 1997 between Celtics Basketball and its commercial bank. The credit agreement, which was originally entered into by CLP and contributed to Celtics Basketball on June 30, 1998, consists of a $50,000,000 term loan and a $10,000,000 revolving line of credit. As of June 30, 2002, no borrowings were outstanding against the $10,000,000 revolving line of credit. Under the terms of the $50,000,000 term loan agreement, interest is payable quarterly in arrears at a fixed annual rate of 6.29% from December 15, 1997 through September 30, 2006. The principal amount of the loan is payable in full on September 30, 2006, the maturity date of the loan. The $10,000,000 revolving line of credit agreement expires on December 15, 2002, with two automatic one-year extensions cancelable at the option of the commercial bank. Interest on any borrowings under the revolving line of credit accrues at the Partnership's option of either LIBOR plus 0.70% or the greater of the bank's Base Rate or the Federal Funds Effective Rate plus 0.50% (2.54% at June 30, 2002). Interest charged to operations in connection with the term loan and revolving line of credit amounted to $3,189,000, $3,189,000 and $3,294,000 in the years ended June 30, 2002, 2001 and 2000, respectively. Borrowings under the term loan and revolving line of credit are secured by all of the assets of and are the liability of Celtics Basketball. The loan agreement contains certain restrictions and various provisions and covenants customary in lending arrangements of this type. Celtics Basketball was in compliance with these restrictions, provisions and covenants at June 30, 2002. Note G - Related Party Transactions Boston Celtics Corporation, the general partner of CLP, Celtics Basketball Holdings and Celtics Basketball, receives a base management fee of $750,000 per annum, subject to increases based on annual cash flows from basketball operations. Management fees of $933,000, $750,000 and $935,000 were charged to Celtics Basketball's operations in the years ended June 30, 2002, 2001 and 2000, respectively. On June 30, 1998, Celtics Basketball entered into a management services agreement by and between, among others, BCLP, BCLP II and Castle Creek. The agreement provides that these entities will provide certain management and corporate services on behalf of the other entities, and will charge a fee for these services based on the cost of the actual services. BCLP received reimbursements from Celtics Basketball in the amount of $142,000 and $71,000 in the fiscal years ended June 30, 2002 and 2001, respectively. Celtics Basketball received reimbursements from Castle Creek in the amounts of $10,000 and $2,000 in the fiscal years ended June 30, 2002 and 2001, respectively. BCLP II received reimbursements from Celtics Basketball in the amount of $449,000 and $687,000 in the fiscal years ended June 30, 2001 and 2000, respectively, for services provided under this agreement. 62 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Notes to Consolidated Financial Statements Note H - Commitments and Contingencies Celtics Basketball has employment agreements with officers, coaches and players of the Boston Celtics basketball team. Certain of the contracts provide for guaranteed payments which must be paid even if the employee is injured or terminated. Amounts required to be paid under such contracts in effect as of September 16, 2002, including option years but excluding payments due on deferred compensation arrangements as disclosed in Note E - Deferred Compensation, are as follows: Years ending June 30, 2003 $56,565,000 2004 56,834,000 2005 52,467,000 2006 38,568,000 2007 15,102,000 Thereafter 16,360,000

Celtics Basketball maintains disability and life insurance policies on most of its key players. The level of insurance coverage maintained is based on management's determination of the insurance proceeds which would be required to meet its guaranteed obligations in the event of permanent or total disability of its key players. Under the terms of the Collective Bargaining Agreement, the 2001-02 NBA season was the first in which a luxury tax and escrow system with respect to player salaries was in effect. As of June 30, 2002, the luxury tax and escrow system did not, and based on currently available information, is not expected to have a material adverse effect on the Partnership's financial position or results of operations. Celtics Basketball is committed under noncancelable, long-term operating leases for certain of its facilities and equipment. Rent expense charged to operations amounted to $276,000, $239,000 and $293,000 in the years ended June 30, 2002, 2001 and 2000, respectively. Celtics Basketball does not pay rent under its lease agreements related to the FleetCenter (where the Boston Celtics play all of their home games), which expires after the 2010-11 NBA season, or the practice facility and wellness center, which also includes certain office space, and which expires in 2010. Under the terms of its lease agreement related to the FleetCenter, Celtics Basketball does not share in revenue from food and beverage concessions. Minimum annual payments required under operating leases are as follows: Years ending June 30, 2003 $423,000 2004 444,000 2005 465,000 2006 238,000

Note I - Benefit Plans Celtics Basketball has a defined contribution plan covering substantially all employees who meet certain eligibility requirements. Participants may make contributions to the plans up to 15% of their compensation (as defined). Contributions to these plans are matched by the Partnership and its subsidiaries 100% on the first 7% of compensation contributed by each participant. Contributions are fully vested after three years of service. Costs of these plans charged to operations amounted to $233,000, $199,000 and $144,000 in the years ended June 30, 2002, 2001 and 2000, respectively. Players, coaches, trainers and the general manager of the basketball operation are covered by multiemployer defined benefit pension plans administered by the National Basketball Association. Costs of these plans charged to operations amounted to $1,352,000, $893,000 and $859,000 in the years ended June 30, 2002, 2001 and 2000, respectively. Note J - Accounts Payable and Accrued Expenses Accounts payable and accrued expenses include accrued compensation to players and coaches of $17,052,000 and $19,110,000 at June 30, 2002 and 2001, respectively. 63 CELTICS BASKETBALL HOLDINGS, L.P. and Subsidiary Notes to Consolidated Financial Statements Note K - Cash Flows Reconciliations of net income to net cash flows from operating activities are as follows:

Note L - Subsequent Events Celtics Basketball licenses the right to air all Boston Celtics home and away games to Sportschannel New England Limited Partnership ("SNE") (doing business as Fox Sports Net New England) under an agreement that extends through the 2002-03 NBA season, with a right to an additional extension by SNE through the 2005-06 NBA season (the "SNE Agreement"). In July 2002, Celtics Basketball and SNE entered into an agreement to extend the SNE Agreement through the 2016-17 NBA season (the "New SNE Agreement"). The New SNE Agreement provides for annual rights fees that increase ratably over the term of the agreement. Under the New SNE Agreement, SNE paid an initial fee of $30,000,000 (the "Initial Fee") in August 2002, which is refundable on a pro rata basis if SNE terminates the agreement upon a breach by Celtics Basketball of certain terms of the agreement. The Initial Fee will be recorded as revenue ratably in proportion to the annual rights fees over the term of the New SNE Agreement. On September 27, 2002, the Partnership entered into an Asset Purchase and Sale Agreement with Lake Carnegie, LLC (the "Asset Purchase Agreement"), pursuant to which Lake Carnegie, LLC ("Lake Carnegie") will pay to the Partnership an aggregate amount of $360 million in cash consideration for all assets relating to the Boston Celtics (of which $50 million will be used to repay outstanding bank borrowings) and will assume the liabilities relating to the Boston Celtics. The transaction is subject to National Basketball Association approval and customary closing conditions. The transaction is expected to close before December 31, 2002. 64 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BOSTON CELTICS LIMITED PARTNERSHIP By: BCLP GP, Inc., General Partner ------------------------------------ Date: September 27, 2002 By: /s/ Paul E. Gaston ------------------------------------ Paul E. Gaston Chairman of the Board and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title* Date --------- ------ ---- /s/ Don F. Gaston Director September 27, 2002 ---------------------- Don F. Gaston /s/ Paula B. Gaston Director September 27, 2002 ---------------------- Paula B. Gaston /s/ John B. Marsh, III Director September 27, 2002 ---------------------- John B. Marsh, III /s/ Tedmund W. Pryor Director September 27, 2002 ---------------------- Ted Prior /s/ David A. Splaine Director September 27, 2002 ---------------------- David A. Splaine /s/ Richard G. Pond Executive Vice President, September 27, 2002 ---------------------- Chief Financial Officer and Richard G. Pond Chief Accounting Officer * Title indicates position with General Partner. 65 CERTIFICATION Each of the undersigned, in his capacity as the Chief Executive Officer and Chief Financial Officer, respectively, of the general partners of Boston Celtics Limited Partnership and Boston Celtics Limited Partnership II, provides the following certifications required by 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, and 17 C.F.R. [Section] 240.13a-14. Certification of Chief Executive Officer I, Paul E. Gaston, certify that: * I have reviewed this annual report on Form 10-K of Boston Celtics Limited Partnership and Boston Celtics Limited Partnership II; * 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; and * 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. Dated: September 27, 2002 /s/ Paul E. Gaston ---------------------------------- Paul E. Gaston Chief Executive Officer Certification of Chief Financial Officer I, Richard G. Pond, certify that: * I have reviewed this annual report on Form 10-K of Boston Celtics Limited Partnership and Boston Celtics Limited Partnership II; * 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; and * 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. Dated: September 27, 2002 /s/ Richard G. Pond ---------------------------------- Richard G. Pond Chief Financial Officer 66

BOSTON CELTICS LIMITED PARTNERSHIP /DE/ 10-K