-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AS1kIZipee7DeyxzchY3iq7l6i/wWNxaKHD6/9HVVexO6xO39MudWdPH4cuSpfTl CLVGji57ywvFK8iQn++POw== 0000940394-04-000716.txt : 20040809 0000940394-04-000716.hdr.sgml : 20040809 20040809142830 ACCESSION NUMBER: 0000940394-04-000716 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELPORT CAPITAL FUND LLC CENTRAL INDEX KEY: 0001138602 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-49775 FILM NUMBER: 04960726 BUSINESS ADDRESS: STREET 1: 255 STATE STREET CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174828260 10-Q 1 belport10q.txt BELPORT CAPITAL FUND LLC FORM 10Q 6-30-04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2004 ------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File No. 000-49775 --------- Belport Capital Fund LLC ------------------------ (Exact name of registrant as specified in its charter) Delaware 04-3551830 -------- ---------- (State of organization) ( I.R.S. Employer Identification No.) The Eaton Vance Building 255 State Street Boston, Massachusetts 02109 --------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number: 617-482-8260 ------------ None ---- (Former Name, Former Address and Former Fiscal Year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). YES [X] NO [ ] BELPORT CAPITAL FUND LLC Index to Form 10-Q PART I FINANCIAL INFORMATION Page Item 1. Condensed Consolidated Financial Statements 3 Condensed Consolidated Statements of Assets and Liabilities as of June 30, 2004 (Unaudited) and December 31, 2003 3 Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended June 30, 2004 and 2003 and for the Six Months Ended June 30, 2004 and 2003 4 Condensed Consolidated Statements of Changes in Net Assets for the Six Months Ended June 30, 2004 (Unaudited) and the Year Ended December 31, 2003 6 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2004 and 2003 7 Financial Highlights (Unaudited) for the Six Months Ended June 30, 2004 9 Notes to Condensed Consolidated Financial Statements as of June 30, 2004 (Unaudited) 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 Item 4. Controls and Procedures 22 PART II OTHER INFORMATION Item 1. Legal Proceedings 23 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 23 Item 3. Defaults Upon Senior Securities 23 Item 4. Submission of Matters to a Vote of Security Holders 23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 23 SIGNATURES 25 EXHIBIT INDEX 26 2 PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements - -------------------------------------------------------------------------------- BELPORT CAPITAL FUND LLC Condensed Consolidated Statements of Assets and Liabilities June 30, 2004 December 31, (Unaudited) 2003 -------------- ----------------- Assets: Investment in Belvedere Capital Fund Company LLC (Belvedere Company) $1,638,833,340 $1,611,769,203 Investment in Partnership Preference Units 64,802,430 93,277,111 Investment in other real estate 480,737,049 484,704,890 Short-term investments 10,112,000 4,821,135 -------------- ----------------- Total investments $2,194,484,819 $2,194,572,339 Cash 10,418,622 6,522,994 Escrow deposits - restricted 4,270,757 2,764,808 Open interest swap agreements, at value 6,002,326 1,763,670 Distributions and interest receivable 408 404,628 Other assets 2,350,588 2,358,005 -------------- ----------------- Total assets $2,217,527,520 $2,208,386,444 -------------- ----------------- Liabilities: Loan payable - Credit Facility $ 218,500,000 $ 230,500,000 Mortgages payable 361,107,500 361,107,500 Open interest rate swap agreements, at value - - Payable for Fund Shares redeemed 3,007,789 - Distributions payable to minority shareholders - 16,800 Special Distributions payable - 17 Security deposits 896,951 863,503 Swap interest payable 95,025 118,147 Accrued expenses: Interest expense 2,150,340 2,141,722 Property taxes 3,980,613 2,212,615 Other expenses and liabilities 1,968,632 2,224,975 Minority interests in controlled subsidiaries 23,912,383 24,347,753 -------------- ----------------- Total liabilities $ 615,619,233 $ 623,533,032 -------------- ----------------- Net assets $1,601,908,287 $1,584,853,412 -------------- ----------------- Shareholders' Capital $1,601,908,287 $1,584,853,412 -------------- ----------------- Shares outstanding 16,431,015 16,697,292 -------------- ----------------- Net asset value and redemption price per Share $ 97.49 $ 94.92 -------------- ----------------- See notes to unaudited condensed consolidated financial statements 3 BELPORT CAPITAL FUND LLC Condensed Consolidated Statements of Operations (Unaudited)
Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003 ------------- ------------- ------------- ------------- Investment Income: Dividends allocated from Belvedere Company (net of foreign taxes of $135,599, $92,080, $203,232 and $151,649, respectively) $ 6,224,854 $ 5,064,663 $ 11,880,465 $ 9,922,050 Interest allocated from Belvedere Company 18,762 158,459 46,206 249,022 Expenses allocated from Belvedere Company (2,418,878) (2,129,108) (4,870,949) (4,097,457) ------------- ------------- ------------- ------------- Net investment income allocated from Belvedere Company $ 3,824,738 $ 3,094,014 $ 7,055,722 $ 6,073,615 Rental income 15,145,342 16,555,469 30,450,343 33,193,717 Distributions from Partnership Preference Units 962,968 2,203,828 3,449,826 4,407,656 Interest 102,667 34,814 210,214 102,067 ------------- ------------- ------------- ------------- Total investment income $ 20,035,715 $ 21,888,125 $ 41,166,105 $ 43,777,055 ------------- ------------- ------------- ------------- Expenses: Investment advisory and administrative fees $ 1,410,801 $ 1,373,131 $ 2,842,727 $ 2,678,860 Property management fees 610,545 655,091 1,222,966 1,314,619 Distribution and servicing fees 769,300 655,212 1,559,180 1,282,877 Interest expense on mortgages 6,327,499 6,544,104 12,550,534 12,873,831 Interest expense on Credit Facility 740,419 926,512 1,516,855 1,953,094 Property and maintenance expenses 4,069,423 4,277,044 8,250,233 8,491,017 Property taxes and insurance 2,034,818 2,272,938 4,033,728 4,265,990 Miscellaneous 154,722 610,312 291,051 838,277 ------------- ------------- ------------- ------------- Total expenses $ 16,117,527 $ 17,314,344 $ 32,267,274 $ 33,698,565 Deduct- Reduction of investment advisory and administrative fees $ 394,659 $ 336,633 $ 793,098 $ 650,070 ------------- ------------- ------------- ------------- Net expenses $ 15,722,868 $ 16,977,711 $ 31,474,176 $ 33,048,495 ------------- ------------- ------------- ------------- Net investment income before minority interests in net income of controlled subsidiaries $ 4,312,847 $ 4,910,414 $ 9,691,929 $ 10,728,560 Minority interests in net income of controlled subsidiaries (416,038) (544,906) (829,995) (1,203,165) ------------- ------------- ------------- ------------- Net investment income $ 3,896,809 $ 4,365,508 $ 8,861,934 $ 9,525,395 ------------- ------------- ------------- -------------
See notes to unaudited condensed consolidated financial statements 4 BELPORT CAPITAL FUND LLC Condensed Consolidated Statements of Operations (Unaudited) (Continued)
Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003 ------------- ------------- ------------- ------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) - Investment transactions and foreign currency transactions allocated from Belvedere Company (identified cost basis) $ 2,721,888 $ 2,441,173 $ 8,671,372 $ (3,206,592) Investment transactions in Partnership Preference Units (identified cost basis) (87,065) - 3,574,654 - Investment transactions in other real estate - 323,384 4,280,114 323,384 Interest rate swap agreements(1) (1,334,342) (2,305,806) (2,615,000) (4,472,721) ------------- ------------- ------------- ------------- Net realized gain (loss) $ 1,300,481 $ 458,751 $ 13,911,140 $ (7,355,929) ------------- ------------- ------------- ------------- Change in unrealized appreciation (depreciation) - Investments and foreign currency allocated from Belvedere Company (identified cost basis) $ 14,221,133 $166,898,579 $ 38,673,851 $108,244,918 Investments in Partnership Preference Units (identified cost basis) (1,680,221) 3,578,312 (6,659,971) 7,874,400 Investments in other real estate (net of minority interests in unrealized gain (loss) of controlled subsidiaries of $1,543,751, $(1,134,599), $(2,681,059) and $(8,066,435), respectively) 2,488,357 (2,204,133) (3,455,411) (12,257,945) Interest rate swap agreements 9,191,139 (5,286,834) 4,238,656 (5,540,156) ------------- ------------- ------------- ------------- Net change in unrealized appreciation (depreciation) $ 24,220,408 $162,985,924 $ 32,797,125 $ 98,321,217 ------------- ------------- ------------- ------------- Net realized and unrealized gain $ 25,520,889 $163,444,675 $ 46,708,265 $ 90,965,288 ------------- ------------- ------------- ------------- Net increase in net assets from operations $ 29,417,698 $167,810,183 $ 55,570,199 $100,490,683 ============= ============= ============= =============
(1) Amounts represent periodic payments made in connection with interest rate swap agreements. (Note 5) See notes to unaudited condensed consolidated financial statements 5 BELPORT CAPITAL FUND LLC Condensed Consolidated Statements of Changes in Net Assets Six Months Ended Year Ended June 30, 2004 December 31, (Unaudited) 2003 ---------------- ------------ Increase (Decrease) in Net Assets: Net investment income $ 8,861,934 $ 19,648,844 Net realized gain (loss) from investment transactions, foreign currency transactions and interest rate swap agreements 13,911,140 (10,022,550) Net change in unrealized appreciation (depreciation) of investments, foreign currency and interest rate swap agreements 32,797,125 309,086,814 --------------- --------------- Net increase in net assets from operations $ 55,570,199 $ 318,713,108 --------------- --------------- Transactions in Fund Shares - Net asset value of Fund Shares issued to Shareholders in payment of distributions declared $ 6,341,090 $ 6,479,733 Net asset value of Fund Shares redeemed (32,166,623) (52,613,896) --------------- --------------- Net decrease in net assets from Fund Share transactions $ (25,825,533) $ (46,134,163) --------------- --------------- Distributions - Distributions to Shareholders $ (12,689,791) $ (12,367,580) Special Distributions to Shareholders - (17) --------------- --------------- Total distributions $ (12,689,791) $ (12,367,597) --------------- --------------- Net increase in net assets $ 17,054,875 $ 260,211,348 Net assets: At beginning of period $1,584,853,412 $1,324,642,064 --------------- --------------- At end of period $1,601,908,287 $1,584,853,412 =============== =============== See notes to unaudited condensed consolidated financial statements 6 BELPORT CAPITAL FUND LLC Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Six Months Ended Ended June 30, 2004 June 30, 2003 ------------- ------------- Cash Flows From (For) Operating Activities - Net increase in net assets from operations $ 55,570,199 $100,490,683 Adjustments to reconcile net increase in net assets from operations to net cash flows from operating activities - Net investment income allocated from Belvedere Company (7,055,722) (6,073,615) Increase in escrow deposits (1,505,949) (2,445,484) Decrease in receivable for investments sold - 50,221,589 Decrease in other assets 7,417 122,256 Decrease in distributions and interest receivable 404,220 36 (Decrease) increase in interest payable for open swap agreements (23,122) 15,435 (Decrease) increase in security deposits, accrued interest and accrued other expenses and liabilities (214,277) 17,017 Increase in accrued property taxes 1,767,998 2,290,702 Proceeds from sales of Partnership Preference Units 25,389,364 - Proceeds from sale of investment in other real estate 41,336,126 5,356,755 Payments for investments in other real estate (36,157,244) (5,026,960) Improvements to rental property (1,651,703) (1,903,172) Net increase in investment in Belvedere Company - (41,000,000) Net interest incurred on interest rate swap agreements (2,615,000) (4,472,721) (Increase) decrease in short-term investments (5,290,865) 622,978 Minority interests in net income of controlled subsidiaries 829,995 1,203,165 Net realized (gain) loss from investment transactions (13,911,140) 7,355,929 Net change in unrealized (appreciation) depreciation of investments (32,797,125) (98,321,217) ------------- ------------- Net cash flows from operating activities $ 24,083,172 $ 8,453,376 ------------- ------------- Cash Flows For Financing Activities - Repayment of mortgage $ - $ (6,410) Repayment of Credit Facility (12,000,000) - Distributions paid to Shareholders (6,348,718) (5,887,847) Payments for Fund Shares redeemed (1,822,026) (2,118,686) Distributions paid to minority shareholders (16,800) (557,312) ------------- ------------- Net cash flows for financing activities $(20,187,544) $ (8,570,255) ------------- ------------- Net increase (decrease) in cash $ 3,895,628 $ (116,879) Cash at beginning of period $ 6,522,994 $ 7,452,296 ------------- ------------- Cash at end of period $ 10,418,622 $ 7,335,417 ============= =============
See notes to unaudited condensed consolidated financial statements 7 BELPORT CAPITAL FUND LLC Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Six Months Ended Ended June 30, 2004 June 30, 2003 ------------- ------------- Supplemental Disclosure and Non-cash Investing and Financing Activities - Interest paid on loan - Credit Facility $ 1,480,832 $ 1,781,333 Interest paid on mortgages $ 12,398,354 $ 12,775,879 Interest paid on swap agreements $ 2,638,122 $ 4,457,286 Market value of securities distributed in payment of redemptions $ 27,336,808 $ 20,250,630 Market value of real property and other assets, net of current liabilities, assumed in conjunction with acquisition of other real estate $ - $ 64,628,785 Mortgage assumed in conjunction with acquisition of other real estate $ - $ 59,601,825 Market value of real property and other assets, net of current liabilities, disposed of in conjunction with sale of other real estate $ - $ 64,713,609 Mortgage disposed of in conjunction with sale of other real estate $ - $ 59,595,415
See notes to unaudited condensed consolidated financial statements 8 BELPORT CAPITAL FUND LLC as of June 30, 2004 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FINANCIAL HIGHLIGHTS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2004 - -------------------------------------------------------------------------------- Net asset value - Beginning of period $ 94.920 - -------------------------------------------------------------------------------- INCOME (LOSS) FROM OPERATIONS - -------------------------------------------------------------------------------- Net investment income(6) $ 0.533 Net realized and unrealized gain 2.797 - -------------------------------------------------------------------------------- TOTAL INCOME FROM OPERATIONS $ 3.330 - -------------------------------------------------------------------------------- DISTRIBUTIONS - -------------------------------------------------------------------------------- Distributions to Shareholders $ (0.760) - -------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS $ (0.760) - -------------------------------------------------------------------------------- NET ASSET VALUE - END OF PERIOD $ 97.490 - -------------------------------------------------------------------------------- TOTAL RETURN(1) 3.53% - -------------------------------------------------------------------------------- As a Percentage As a Percentage of Average Net of Average Gross RATIOS Assets(5) Assets (2)(5) - -------------------------------------------------------------------------------- Expenses of Consolidated Real Property Subsidiaries Interest and other borrowing costs(7) 1.30%(9) 0.97%(9) Operating expenses(7) 1.40%(9) 1.05%(9) Belport Capital Fund LLC Expenses Interest and other borrowing costs(4)(8) 0.19%(9) 0.14%(9) Investment advisory and administrative fees, servicing fees and other Fund operating expenses(3)(4) 1.10%(9) 0.83%(9) ---------------------------------- Total expenses 3.99%(9) 2.99%(9) Net investment income 1.12%(9) 0.84%(9) - -------------------------------------------------------------------------------- SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Net assets, end of period (000's omitted) $1,601,908 Portfolio turnover of Tax-Managed Growth Portfolio (the Portfolio) 1.73% - -------------------------------------------------------------------------------- (1) Returns are calculated by determining the percentage change in net asset value with all distributions reinvested. Total return is not computed on an annualized basis. (2) Average Gross Assets is defined as the average daily amount of all assets of Belport Capital Fund LLC (Belport Capital) (including Belport Capital's interest in Belvedere Capital Fund Company LLC (Belvedere Company) and Belport Capital's ratable share of the assets of its directly and indirectly controlled subsidiaries), without reduction by any liabilities. For this purpose, the assets of Belport Realty Corporation's (Belport Realty) controlled subsidiaries are reduced by the proportionate interests therein of investors other than Belport Realty. (3) Includes Belport Capital's share of Belvedere Company's allocated expenses, including those expenses allocated from the Portfolio. (4) Includes the expenses of Belport Capital and Belport Realty. Does not include expenses of the real estate subsidiaries majority-owned by Belport Realty. (5) For the purpose of calculating ratios, the income and expenses of Belport Realty's controlled subsidiaries are reduced by the proportionate interest therein of investors other than Belport Realty. (6) Calculated using average shares outstanding. (7) Includes Belport Realty's proportional share of expenses incurred by its majority-owned subsidiaries. (8) Ratios do not include interest incurred in connection with the interest rate swap agreements. Had such amounts been included, ratios would be higher. (9) Annualized. See notes to unaudited condensed consolidated financial statements 9 BELPORT CAPITAL FUND LLC as of June 30, 2004 Notes to Condensed Consolidated Financial Statements (Unaudited) 1 Basis of Presentation The condensed consolidated interim financial statements of Belport Capital Fund LLC (Belport Capital) and its subsidiaries (collectively, the Fund) have been prepared, without audit, in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, cash flows and financial highlights as of the dates and for the periods presented. It is suggested that these interim financial statements be read in conjunction with the financial statements and the notes thereto included in the Fund's latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the full fiscal year. The balance sheet at December 31, 2003 and the statement of changes in net assets for the year then ended have been derived from the December 31, 2003 audited financial statements but do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements as permitted by the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain amounts in the prior periods' condensed consolidated financial statements have been reclassified to conform with the current period presentation. 2 Estate Freeze Shareholders in Belport Capital are entitled to restructure their Fund Share interests under what is termed an Estate Freeze Election. Under this election, Fund Shares are divided into Preferred Shares and Common Shares. Preferred Shares have a preferential right over the corresponding Common Shares equal to (i) 95% of the original capital contribution made in respect of the undivided Shares from which the Preferred Shares and Common Shares were derived, plus (ii) an annuity priority return equal to 8.5% of the Preferred Shares' preferential interest in the original capital contribution of the undivided Fund Shares. The associated Common Shares are entitled to the remaining 5% of the original capital contribution in respect of the undivided Shares, plus any returns thereon in excess of the fixed annual priority of the Preferred Shares. The existence of restructured Fund Shares does not adversely affect Shareholders who do not make an election nor do the restructured Fund Shares have preferential rights to Fund Shares that have not been restructured. Shareholders who subdivide Fund Shares under this election sacrifice certain rights and privileges that they would otherwise have with respect to the Fund Shares so divided, including redemption rights and voting and consent rights. Upon the twentieth anniversary of the issuance of the associated undivided Fund Shares to the original holders thereof, Preferred and Common Shares will automatically convert into full and fractional undivided Fund Shares. The allocation of Belport Capital's net asset value per Share at June 30, 2004 and December 31, 2003, between Preferred and Common Shares that have been restructured is as follows: 10
Per Share Value At Per Share Value At June 30, 2004 December 31, 2003 ------------------------------------------------------------------- Date of Contribution Preferred Shares Common Shares Preferred Shares Common Shares - ------------------------------------------------------------------------------------------ May 23, 2001 $97.49 $ - $94.92 $ - July 26, 2001 $94.71 $2.78 $94.71 $0.21 December 18, 2001 $92.66 $4.83 $91.87 $3.05
3 Investment Transactions The following table summarizes the Fund's investment transactions for the six months ended June 30, 2004 and June 30, 2003: Six Months Ended Six Months Ended Investment Transaction June 30, 2004 June 30, 2003 - -------------------------------------------------------------------------------- Increases in investment in Belvedere Company $ - $ 41,000,000 Decreases in investment in Belvedere Company $ 27,336,808 $ 20,250,630 Sales of other real estate(1)(3) $ 41,336,126 $ 5,356,755 Acquisitions of other real estate(1)(3) $ 36,157,244 $ 5,026,960 Sales of Partnership Preference Units(2) $ 25,389,364 $ - - -------------------------------------------------------------------------------- (1) In March 2003, Bel Oakbrook LLC (Bel Oakbrook), a wholly-owned subsidiary of Belport Realty Corporation (Belport Realty), acquired a 100% ownership interest in an office building. In May 2003, Belport Realty sold its interest in Bel Oakbrook to another investment fund advised by Boston Management and Research (Boston Management). A gain of $323,384 was recognized on the transaction. (2) Sales of Partnership Preference Units for the six months ended June 30, 2004 included Partnership Preference Units sold to other investment funds advised by Boston Management for which a loss of $85,428 was recognized. (3) In January 2004, a multifamily residential property owned by Monadnock Property Trust, LLC (Monadnock) was sold to a third party. Belport Realty recognized a gain of $4,280,114 on the transaction. In June 2004, Monadnock then acquired a replacement multifamily residential property with the proceeds from that sale. 4 Indirect Investment in the Portfolio The following table summarizes the Fund's investment in Tax-Managed Growth Portfolio (the Portfolio) through Belvedere Capital Fund Company LLC (Belvedere Company), for the six months ended June 30, 2004 and June 30, 2003, including allocations of income, expenses and net realized and unrealized gains (losses) for the respective periods then ended:
Six Months Six Months Ended Ended June 30, 2004 June 30, 2003 - ------------------------------------------------------------------------------------------------------- Belvedere Company's interest in the Portfolio(1) $ 11,762,239,521 $ 9,599,217,401 The Fund's investment in Belvedere Company(2) $ 1,638,833,340 $ 1,453,987,522 Income allocated to Belvedere Company from the Portfolio $ 83,686,364 $ 66,798,353 Income allocated to the Fund from Belvedere Company $ 11,926,671 $ 10,171,072 Expenses allocated to Belvedere Company from the Portfolio $ 25,387,360 $ 20,113,419 Expenses allocated to the Fund from Belvedere Company $ 4,870,949 $ 4,097,457 Net realized gain (loss) from investment transactions and foreign currency transactions allocated to Belvedere Company from the Portfolio $ 72,573,659 $ (17,889,099) Net realized gain (loss) from investment transactions and foreign currency transactions allocated to the Fund from Belvedere Company $ 8,671,372 $ (3,206,592) Net change in unrealized appreciation (depreciation) of investments and foreign currency allocated to Belvedere Company from the Portfolio $ 255,505,090 $ 698,962,649 Net change in unrealized appreciation (depreciation) of investments and foreign currency allocated to the Fund from Belvedere Company $ 38,673,851 $ 108,244,918 - -------------------------------------------------------------------------------------------------------
11 (1) As of June 30, 2004 and 2003, the value of Belvedere Company's interest in the Portfolio represents 64.7% and 61.7% of the Portfolio's net assets, respectively. (2) As of June 30, 2004 and 2003, the Fund's investment in Belvedere Company represents 13.9% and 15.1% of Belvedere Company's net assets, respectively. A summary of the Portfolio's Statement of Assets and Liabilities, at June 30, 2004, December 31, 2003 and June 30, 2003 and its operations for the six months ended June 30, 2004, for the year ended December 31, 2003 and for the six months ended June 30, 2003 follows:
June 30, December 31, June 30, 2004 2003 2003 ------------------------------------------------------ Investments, at value $ 18,156,546,589 $ 17,584,390,762 $ 15,616,951,272 Other assets 30,174,170 25,462,745 26,660,614 - -------------------------------------------------------------------------------------------- Total assets $ 18,186,720,759 $ 17,609,853,507 $ 15,643,611,886 Total liabilities 138,607 264,502 93,843,137 - -------------------------------------------------------------------------------------------- Net assets $ 18,186,582,152 $ 17,609,589,005 $ 15,549,768,749 ============================================================================================ Dividends and interest $ 131,109,908 $ 232,925,912 $ 109,393,140 - -------------------------------------------------------------------------------------------- Investment adviser fee $ 38,780,667 $ 67,584,543 $ 31,979,032 Other expenses 1,025,267 2,295,653 985,298 - -------------------------------------------------------------------------------------------- Total expenses $ 39,805,934 $ 69,880,196 $ 32,964,330 - -------------------------------------------------------------------------------------------- Net investment income $ 91,303,974 $ 163,045,716 $ 76,428,810 Net realized gain (loss) from investment transactions and foreign currency transactions 118,166,339 70,909,770 (29,306,399) Net change in unrealized appreciation (depreciation) of investments and foreign currency 397,547,485 3,174,709,110 1,126,151,279 - -------------------------------------------------------------------------------------------- Net increase in net assets from operations $ 607,017,798 $ 3,408,664,596 $ 1,173,273,690 - --------------------------------------------------------------------------------------------
5 Interest Rate Swap Agreements Belport Capital has entered into interest rate swap agreements with Merrill Lynch Capital Services, Inc. in connection with its real estate investments and the associated borrowings. Under such agreements, Belport Capital has agreed to make periodic payments at fixed rates in exchange for payments at floating rates. The notional or contractual amounts of these instruments may not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these investments is meaningful only when considered in conjunction with all related assets, liabilities and agreements. Interest rate swap agreements open at June 30, 2004 and December 31, 2003 are listed below.
Notional Initial Unrealized Unrealized Amount Optional Final Appreciation Appreciation (000's Fixed Floating Termination Termination at June 30, at December 31, omitted) Rate Rate Date Date 2004 2003 - ---------------------------------------------------------------------------------------------------- $ 34,905 4.565% LIBOR + 0.20% 3/05 6/10 $ 625,591 $ 170,784 46,160 4.045% LIBOR + 0.20% 2/10 6/10 1,444,992 326,668 109,822 3.945% LIBOR + 0.20% - 6/10 3,931,743 1,266,218 - ---------------------------------------------------------------------------------------------------- Total $6,002,326 $ 1,763,670 - ----------------------------------------------------------------------------------------------------
12 6 Segment Information Belport Capital pursues its investment objective primarily by investing indirectly in the Portfolio through Belvedere Company. The Portfolio is a diversified investment company that emphasizes investments in common stocks of domestic and foreign growth companies that are considered to be high in quality and attractive in their long-term investment prospects. Separate from its investment in Belvedere Company, Belport Capital invests in real estate assets through its subsidiary, Belport Realty. Belport Realty invests directly and indirectly in Partnership Preference Units and indirectly in real property through controlled subsidiaries, Bel Multifamily Property Trust, Monadnock and Bel Oakbrook (for the period from March 19, 2003, to May 13, 2003). Belport Capital evaluates performance of the reportable segments based on the net increase (decrease) in net assets from operations of the respective segment, which includes net investment income (loss), net realized gain (loss) and unrealized appreciation (depreciation). The accounting policies of the reportable segments are the same as those for the Fund on a consolidated basis. No reportable segments have been aggregated. Reportable information by segment is as follows:
Tax-Managed For the Three Months Ended Growth Real June 30, 2004 Portfolio* Estate Total - ----------------------------------------------------------------------------------------------- Revenue $ 3,824,738 $ 16,194,129 $ 20,018,867 Interest expense on mortgages - (6,327,499) (6,327,499) Interest expense on Credit Facility (51,829) (621,592) (673,421) Operating expenses (301,534) (7,513,249) (7,814,783) Minority interest in net income of controlled subsidiaries - (416,038) (416,038) - ----------------------------------------------------------------------------------------------- Net investment income $ 3,471,375 $ 1,315,751 $ 4,787,126 Net realized gain (loss) 2,721,888 (1,421,407) 1,300,481 Net change in unrealized appreciation (depreciation) 14,221,133 9,999,274 24,220,407 - ----------------------------------------------------------------------------------------------- Net increase in net assets from operations of reportable segments $ 20,414,396 $ 9,893,618 $ 30,308,014 - ----------------------------------------------------------------------------------------------- Tax-Managed For the Three Months Ended Growth Real June 30, 2003 Portfolio* Estate Total - ----------------------------------------------------------------------------------------------- Revenue $ 3,094,014 $ 18,776,535 $ 21,870,549 Interest expense on mortgages - (6,544,104) (6,544,104) Interest expense on Credit Facility (56,592) (832,861) (889,453) Operating expenses (237,868) (8,495,397) (8,733,265) Minority interest in net income of controlled subsidiaries - (544,906) (544,906) - ----------------------------------------------------------------------------------------------- Net investment income $ 2,799,554 $ 2,359,267 $ 5,158,821 Net realized gain (loss) 2,441,173 (1,982,422) 458,751 Net change in unrealized appreciation (depreciation) 166,898,579 (3,912,655) 162,985,924 - ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations of reportable segments $172,139,306 $ (3,535,810) $168,603,496 - ----------------------------------------------------------------------------------------------- 13 Tax-Managed For the Six Months Ended Growth Real June 30, 2004 Portfolio* Estate Total - ----------------------------------------------------------------------------------------------- Revenue $ 7,055,722 $ 34,072,888 $ 41,128,610 Interest expense on mortgages - (12,550,534) (12,550,534) Interest expense on Credit Facility (106,180) (1,289,327) (1,395,507) Operating expenses (601,308) (15,105,452) (15,706,760) Minority interest in net income of controlled subsidiaries - (829,995) (829,995) - ----------------------------------------------------------------------------------------------- Net investment income $ 6,348,234 $ 4,297,580 $ 10,645,814 Net realized gain 8,671,372 5,239,768 13,911,140 Net change in unrealized appreciation (depreciation) 38,673,851 (5,876,727) 32,797,124 - ----------------------------------------------------------------------------------------------- Net increase in net assets from operations of reportable segments $ 53,693,457 $ 3,660,621 $ 57,354,078 - ----------------------------------------------------------------------------------------------- Tax-Managed For the Six Months Ended Growth Real June 30, 2003 Portfolio* Estate Total - ----------------------------------------------------------------------------------------------- Revenue $ 6,073,615 $ 37,646,581 $ 43,720,196 Interest expense on mortgages - (12,873,831) (12,873,831) Interest expense on Credit Facility (97,655) (1,777,316) (1,874,971) Operating expenses (476,083) (16,278,101) (16,754,184) Minority interest in net income of controlled subsidiaries - (1,203,165) (1,203,165) - ----------------------------------------------------------------------------------------------- Net investment income $ 5,499,877 $ 5,514,168 $ 11,014,045 Net realized loss (3,206,592) (4,149,337) (7,355,929) Net change in unrealized appreciation (depreciation) 108,244,918 (9,923,701) 98,321,217 - ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations of reportable segments $110,538,203 $ (8,558,870) $101,979,333 - ----------------------------------------------------------------------------------------------- Tax-Managed Growth Real At June 30, 2004 Portfolio* Estate Total - ---------------------------------------------------------------------------------------------------------- Segment assets $1,638,833,340 $568,566,827 $2,207,400,167 Segment liabilities 19,609,592 574,551,145 594,160,737 - ---------------------------------------------------------------------------------------------------------- Net assets (liabilities) of reportable segments $1,619,223,748 $ (5,984,318) $1,613,239,430 - ---------------------------------------------------------------------------------------------------------- At December 31, 2003 - ---------------------------------------------------------------------------------------------------------- Segment assets $1,611,769,203 $589,657,910 $2,201,427,113 Segment liabilities 16,596,400 598,192,300 614,788,700 - ---------------------------------------------------------------------------------------------------------- Net assets (liabilities) of reportable segments $1,595,172,803 $ (8,534,390) $1,586,638,413 - ----------------------------------------------------------------------------------------------------------
* Belport Capital invests indirectly in Tax-Managed Growth Portfolio through Belvedere Company. 14 The following tables reconcile the reported segment information to the condensed consolidated financial statements for the periods indicated:
Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003 ------------------------------------------------------------- Revenue: Revenue from reportable segments $ 20,018,867 $ 21,870,549 $ 41,128,610 $ 43,720,196 Unallocated amounts: Interest earned on cash not invested in the Portfolio or in subsidiaries 16,848 17,576 37,495 56,859 ------------------------------------------------------------- TOTAL REVENUE $ 20,035,715 $ 21,888,125 $ 41,166,105 $ 43,777,055 ------------------------------------------------------------- Net increase (decrease) in net assets from operations: Net increase in net assets from operations of reportable segments $ 30,308,014 $168,603,496 $ 57,354,078 $101,979,333 Unallocated amounts: Interest earned on cash not invested in the Portfolio or in subsidiaries 16,848 17,576 37,495 56,859 Unallocated amounts(1): Distribution and servicing fees (769,300) (655,212) (1,559,180) (1,282,877) Interest expense on Credit Facility (74,602) (37,059) (121,348) (78,123) Audit, tax and legal fees (27,670) (72,912) (82,020) (115,462) Other operating expenses (35,592) (45,706) (58,826) (69,047) ------------------------------------------------------------- TOTAL NET INCREASE IN NET ASSETS FROM OPERATIONS $ 29,417,698 $167,810,183 $ 55,570,199 $100,490,683 -------------------------------------------------------------
June 30, 2004 December 31, 2003 Net assets: ----------------- --------------------- Net assets of reportable segments $1,613,239,430 $1,586,638,413 Unallocated cash(2) 15,353 2,138,196 Short-term investments(2) 10,112,000 4,821,135 Loan payable-Credit Facility(3) (21,315,492) (8,568,222) Other liabilities (143,004) (176,110) ----------------- --------------------- TOTAL NET ASSETS $1,601,908,287 $1,584,853,412 ----------------- --------------------- (1) Unallocated amounts represent expenses incurred that pertain to the overall operation of Belport Capital, and do not pertain to either operating segment. (2) Unallocated cash and short-term investments represent cash and cash equivalents not invested in the Portfolio or real estate assets. (3) Unallocated amount of loan payable - Credit Facility represents borrowings not specifically used to fund real estate investments. Such borrowings are generally used to pay selling commissions, organization expenses and other liquidity needs of the Fund. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. - -------------------------------------------------------------------------------- THE INFORMATION IN THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS TYPICALLY ARE IDENTIFIED BY USE OF TERMS SUCH AS "MAY," "WILL," "SHOULD," "MIGHT," "EXPECT," "ANTICIPATE," "ESTIMATE," AND SIMILAR WORDS, ALTHOUGH SOME FORWARD-LOOKING STATEMENTS ARE EXPRESSED DIFFERENTLY. THE ACTUAL RESULTS OF BELPORT CAPITAL FUND LLC (THE FUND) COULD DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF FACTORS. THE FUND UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE, EXCEPT AS REQUIRED BY APPLICABLE LAW. FACTORS THAT COULD AFFECT THE FUND'S PERFORMANCE INCLUDE A DECLINE IN THE U.S. STOCK MARKETS OR IN GENERAL ECONOMIC CONDITIONS, ADVERSE DEVELOPMENTS AFFECTING THE REAL ESTATE INDUSTRY, OR FLUCTUATIONS IN INTEREST RATES. The following discussion should be read in conjunction with the Fund's unaudited condensed consolidated financial statements and related notes in Item 1 above. RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2004 COMPARED TO THE QUARTER ENDED JUNE 30, 2003 - -------------------------------------------------------------------------------- (a) RESULTS OF OPERATIONS. - -------------------------- Increases and decreases from operations in the Fund's net asset value per share are derived from net investment income (or loss) and realized and unrealized gains and losses on investments. The Fund's net investment income (or loss) is determined by subtracting the Fund's total expenses from its investment income and then deducting the minority interest in net income (or loss) of the controlled subsidiaries of Belport Realty Corporation (Belport Realty). The Fund's investment income includes the net investment income allocated to the Fund from Belvedere Capital Fund Company LLC (Belvedere Company), rental income from the properties owned by Belport Realty's controlled subsidiaries, partnership income allocated to the income-producing preferred equity interests in real estate operating partnerships (Partnership Preference Units) owned by Belport Realty and interest earned on the Fund's short-term investments (if any). The net investment income of Belvedere Company allocated to the Fund includes dividends, interest and expenses allocated to Belvedere Company by Tax-Managed Growth Portfolio (the Portfolio) less the expenses of Belvedere Company allocated to the Fund. The Fund's total expenses include the Fund's investment advisory and administrative fees, distribution and servicing fees, interest expense from mortgages on properties owned by Belport Realty's controlled subsidiaries, interest expense on the Fund's Credit Facility (described in Item 2(b) below), property management fees, property taxes, insurance, maintenance and other expenses relating to the properties owned by Belport Realty's controlled subsidiaries, and other miscellaneous expenses. The Fund's realized and unrealized gains and losses are the result of transactions in, or changes in value of, security investments held through the Fund's indirect interest (through Belvedere Company) in the Portfolio, real estate investments held through Belport Realty, the Fund's interest rate swap agreements and any other direct investments of the Fund, as well as periodic payments made by the Fund pursuant to interest rate swap agreements. Realized and unrealized gains and losses on investments have the most significant impact on the Fund's net asset value per share and result primarily from sales of such investments and changes in their underlying value. The investments of the Portfolio consist primarily of common stocks of domestic and foreign growth companies that are considered to be high in quality and attractive in their long-term investment prospects. Because the securities holdings of the Portfolio are broadly diversified, the performance of the Portfolio cannot be attributed to one particular stock or one particular industry or market sector. The performance of the Portfolio and the Fund are substantially influenced by the overall performance of the U.S. stock market, as well as by the relative performance versus the overall market of specific stocks and classes of stocks in which the Portfolio maintains large positions. PERFORMANCE OF THE FUND.(1) The Fund's investment objective is to achieve long-term, after-tax returns for Shareholders. Eaton Vance Management (Eaton Vance), as the Fund's manager, measures the Fund's success in achieving its objective based on the investment returns of the Fund, using the Standard & Poor's 500 Composite Index (the S&P 500) as the Fund's primary performance benchmark. The S&P 500 is a broad-based unmanaged index of common stocks widely used as a measure of U.S. stock market performance. Eaton Vance's primary focus in pursuing total return is on the Fund's common stock portfolio, which consists of its indirect interest in the Portfolio. In measuring the performance of the - --------------------- 1 Total returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Portfolio's total return for the period reflects the total return of another fund that invests in the Portfolio, adjusted for certain fund expenses. Performance is for the stated time period only and is not annualized; due to market volatility, the Fund's current performance may be lower or higher. The performance of the Fund and the Portfolio is compared to that of their benchmark, the S&P 500. It is not possible to invest directly in an Index. 16 Fund's real estate investments held through Belport Realty, Eaton Vance considers whether, through current returns and changes in valuation, the real estate investments achieve returns that over the long-term exceed the cost of the borrowing incurred to acquire such investments and thereby add to Fund returns. The Fund has entered into interest rate swap agreements to fix the cost of borrowings under the Credit Facility used to acquire Belport Realty's equity in its real estate investments and to mitigate in part the impact of interest rate changes on the Fund's net asset value. PERFORMANCE OF THE FUND. The Fund's total return was 1.86% for the quarter ended June 30, 2004. This return reflects an increase in the Fund's net asset value per share from $95.71 to $97.49 during the period. For comparison, the S&P 500 had a total return of 1.72% over the same period. The performance of the Fund exceeded that of the Portfolio by approximately 0.55% during the period. Last year, the Fund had a total return performance of 13.58% for the quarter ended June 30, 2003. This return reflected an increase in the Fund's net asset value per share from $72.14 to $81.94 during the period. For comparison, the S&P 500 had a total return of 15.39% over the same period. The performance of the Fund exceeded that of the Portfolio by approximately 0.04% during that period. PERFORMANCE OF THE PORTFOLIO. For the quarter ended June 30, 2004, the Portfolio's total return was 1.31%. This compares to a total return of 1.72% for the S&P 500. In the second quarter, U.S. equity returns were supported by strengthening employment trends, robust manufacturing activity and rising corporate profits. At the same time, uncertainty over the situation in Iraq and the prospect of rising interest rates and inflation weighed on investors and held back returns. During the quarter, growth stocks outperformed value stocks, and small-caps performed better than large-caps and mid-caps. The Portfolio's modest underperformance during the quarter was attributable in part to a relative overweighting of certain weaker performing industry groups, specifically specialty retail and media. In addition, the Portfolio was underweight internet software and communications equipment stocks, which rallied during the period. Concerns about future trends in consumer spending caused the Portfolio to trim its relative overweighting of the discretionary and staples sectors during the quarter. The Portfolio also reduced healthcare and technology investments during the quarter, mainly in the lagging biotech and semi-conductor groups. During the quarter, the Portfolio continued to overweight airfreight and machinery holdings, which contributed positively to the Portfolio's performance. The Portfolio benefited from the strong performance of stocks in the food, staples retailing and commercial bank industries during the quarter, as well as from increased exposure to energy stocks. Material stocks were also solid performers during the quarter and, despite the Portfolio's underweight of the sector versus the S&P 500, the performance of the Portfolio's holdings in the metals and mining group was noteworthy. Valuation and regulatory concern prompted a continued de-emphasis of multi-line utilities and diversified telecom companies. For the quarter ended June 30, 2003, the Portfolio's total return was 13.54% compared to the 15.39% total return for the S&P 500. During the quarter, the S&P 500 posted its best quarterly return in five years, with favorable fiscal and monetary policy developments, progress in Iraq and signs of an improving economy contributing to a stronger market. The Portfolio's relative underperformance was attributable primarily to its lower exposure to higher-volatility, lower-quality stocks that were the strongest performers in the sharp market rally. PERFORMANCE OF REAL ESTATE INVESTMENTS. The Fund's real estate investments are held through Belport Realty. As of June 30, 2004, real estate investments included two real estate joint ventures that operate multifamily properties (the Real Estate Joint Ventures) and a portfolio of Partnership Preference Units issued by partnerships affiliated with publicly traded real estate investment trusts (REITs). As of June 30, 2004, the estimated fair value of the Fund's real estate investments represented 24.6% of the Fund's total assets on a consolidated basis. After adjusting for minority interests in the Real Estate Joint Ventures, the Fund's real estate investments represented 28.6% of the Fund's net assets as of June 30, 2004. In January 2004, one of Belport Realty's Real Estate Joint Ventures sold a property for approximately $41.3 million, for which Belport Realty recognized a gain of $4.3 million. Pursuant to the Real Estate Joint Venture's loan agreement with its lender, the proceeds from the sale must be reinvested in replacement assets in order to maintain certain collateral levels. Accordingly, during the quarter ended June 30, 2004, the Real Estate Joint Venture acquired a replacement property for approximately $36.2 million. The remaining portion of the sale proceeds is expected to be invested in another replacement property by the end of 2004. Rental income from real estate operations of Belport Realty's Real Estate Joint Ventures decreased to $15.1 million for the quarter ended June 30, 2004 from $16.6 million for the quarter ended June 30, 2003, a decline of $1.5 million or 9%. This decrease in rental income resulted principally from fewer properties held for the full period by the Real Estate Joint Ventures as a result of the property sale discussed above and lower revenues from the remaining properties held by the Real Estate Joint Ventures. Rental revenues were adversely affected by lower rent rates, increased rent concessions and lower occupancy levels. 17 Property operating expenses for Belport's Real Estate Joint Ventures decreased to approximately $6.7 million for the quarter ended June 30, 2004 from approximately $7.2 million for the quarter ended June 30, 2003, a decrease of $0.5 million or 7% (property operating expenses are before certain operating expenses of Belport Realty of approximately $0.8 million for the quarter ended June 30, 2004 and approximately $1.3 million for the quarter ended June 30, 2003). The near-term outlook for multifamily property operations continues to be weak. While the recent pick-up in economic and employment growth is expected to lead to improved supply-demand balance in the apartment industry, oversupply conditions continue to exist in most major markets. As a result, Boston Management expects that multifamily real estate operating results in 2004 will continue to be similar to 2003. At June 30, 2004, the estimated fair value of the real properties indirectly held through Belport Realty was $480.7 million compared to $475.5 million at June 30, 2003, a net increase of $5.2 million or 1%. The modest net increase was due to declines in capitalization rates, offset in part by lower near-term property earnings expectations. The capitalization rate, a term commonly used in the real estate industry, is the rate of return percentage applied to actual or projected income levels to estimate the value of real estate investments. The Fund saw unrealized appreciation in the estimated fair value of its other real estate investments (which includes Belport Realty's interests in Real Estate Joint Ventures) of approximately $2.5 million during the quarter ended June 30, 2004 compared to unrealized depreciation of approximately $2.2 million for the quarter ended June 30, 2003. During the quarter ended June 30, 2004, property values appreciated modestly due to declines in capitalization rates, offset in part by lower near-term property earnings expectations. During the quarter ended June 30, 2003, estimated property values declined due to declines in near-term earnings expectations and the economic downturn. However, declines in estimated asset values for multifamily properties generally were modest during the quarter ended June 30, 2003 as decreases in capitalization rates largely offset declining income level expectations. During the quarter ended June 30, 2004, Belport Realty sold (or experienced scheduled redemptions of) certain of its Partnership Preference Units for approximately $5.3 million (including sales to other investment funds advised by Boston Management), recognizing a loss of $0.1 million. At June 30, 2004, the estimated fair value of Belport Realty's Partnership Preference Units totaled approximately $64.8 million compared to approximately $104.4 million at June 30, 2003, a decrease of $39.6 million or 38%. While the decrease in value was principally due to fewer Partnership Preference Units held at June 30, 2004, the decrease also reflects lower per unit values of the Partnership Preference Units held at June 30, 2004 due to their lower average coupon rates. In the current low interest rate environment, many issuers have been redeeming Partnership Preference Units as call protections expire or restructuring the terms of outstanding Partnership Preference Units in advance of their call dates. As a result, many of the higher-yielding Partnership Preference Units held by Belport Realty during the quarter ended June 30, 2003 were no longer held at June 30, 2004. Boston Management expects this trend to continue through 2004. The Fund saw unrealized depreciation of the estimated fair value in its Partnership Preference Units of approximately $1.7 million during the quarter ended June 30, 2004 compared to unrealized appreciation of approximately $3.6 million for the quarter ended June 30, 2003. For the quarter ended June 30, 2004, net unrealized depreciation of $1.7 million consisted of approximately $1.6 million of unrealized depreciation as a result of decreases in per unit values of the Partnership Preference Units held by Belport Realty at June 30, 2004, and approximately $0.1 million of unrealized depreciation resulting from the recharacterization of previously recorded unrealized appreciation to realized gains due to sales of Partnership Preference Units during the quarter ended June 30, 2004. During the quarter ended June 30, 2004, Partnership Preference Unit values were negatively affected by the rising trend in U.S. interest rates, partly offset by tighter spreads for credit-sensitive income securities, including real estate-related securities. In a rising interest rate environment, values of outstanding Partnership Preference Units generally can be expected to decline. During the quarter ended June 30, 2003, Belport Realty's investments in Partnership Preference Units generally benefited from declining interest rates and tightening spreads in credit-sensitive income securities, particularly in real estate-related securities. Distributions from Partnership Preference Units for the quarter ended June 30, 2004 totaled $1.0 million compared to $2.2 million for the quarter ended June 30, 2003, a decrease of $1.2 million or 55%. The decrease was principally due to fewer Partnership Preference Units held on average, as well as lower average distribution rates for the Partnership Preference Units held during the quarter ended June 30, 2004. PERFORMANCE OF INTEREST RATE SWAP AGREEMENTS. For the quarter ended June 30, 2004, net realized and unrealized gains on the Fund's interest rate swap agreements totaled approximately $7.9 million, compared to net realized and unrealized losses of approximately $7.6 million for the quarter ended June 30, 2003. Net realized and unrealized gains on swap agreements for the quarter ended June 30, 2004 consisted of $9.2 million of unrealized appreciation due to 18 changes in swap agreement valuations offset in part by $1.3 million of periodic payments made pursuant to outstanding swap agreements (and classified as net realized losses on interest rate swap agreements). For the quarter ended June 30, 2003, net realized and unrealized losses on swap agreements consisted of unrealized depreciation of $5.3 million on swap agreement valuation changes and $2.3 million of swap agreement periodic payments. The positive contribution to Fund performance for the quarter ended June 30, 2004 from changes in swap agreement valuations was attributable to an increase in swap rates during the quarter. The negative impact on Fund performance for the quarter ended June 30, 2003 was attributable to a decline in swap rates during the quarter. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2003 - -------------------------------------------------------------------------------- PERFORMANCE OF THE FUND. The Fund's total return was 3.53% for the six months ended June 30, 2004. This return reflects an increase in the Fund's net asset value per share from $94.92 to $97.49 and a distribution of $0.76 per share during the period. For comparison, the S&P 500 had a total return of 3.44% over the same period. The performance of the Fund exceeded that of the Portfolio by approximately 0.08% during the period. Last year, the Fund had a total return performance of 7.74% for the six months ended June 30, 2003. This return reflected an increase in the Fund's net asset value per share from $76.75 to $81.94 and a distribution of $0.72 per share. For comparison, the S&P 500 had a total return of 11.75% over the same period. The performance of the Fund trailed that of the Portfolio by 0.45% during that period. PERFORMANCE OF THE PORTFOLIO. For the six months ended June 30, 2004, the Portfolio's total return was 3.45%, in line with the 3.44% total return of the S&P 500. In the period, U.S. equity returns were supported by a strengthening economy and rising corporate profits. Geopolitical concerns, higher interest rates and rising inflation were negative factors that held back returns. In the period, small-cap stocks sharply outperformed large-caps and mid-caps, and value stocks performed modestly better than growth stocks. The Portfolio's performance during the first six months of 2004 was driven primarily by its diversified industry exposure and positive stock selection. Concerns about future trends in consumer spending caused the Portfolio to trim its relative overweighting of the discretionary and staples sectors during the period. The Portfolio also decreased positions in healthcare and technology stocks during the period. The underweighting of semiconductor equipment and software industries added to performance. The Portfolio maintained an overweighting of industrials stocks, and benefited from advances in airfreight, machinery and building stocks. While the consumer staples and financials sectors generally did not perform well during the period, the Portfolio's holdings in those sectors were positive contributors to performance. Another positive contributor was the Portfolio's growing exposure to the energy sector. The Portfolio's oil exploration and gas investments benefited from the current supply-demand imbalances and associated energy price increases. The strong performance of the Portfolio's holdings in the cyclical metals and mining industries during the period was also noteworthy. The Portfolio continued to underweight the utilities and telecom sectors. For the six months ended June 30, 2003, the Portfolio's total return was 8.19% compared to the 11.75% total return for the S&P 500. Market performance during the first six months of 2003 was volatile, with war angst, a questionable economic recovery and the SARS outbreak among the concerns weighing on investors toward the beginning of the year. From mid-March through the end of the period, the U.S. market rallied sharply, with favorable fiscal and monetary policy developments, progress in Iraq and signs of an improving economy contributing to the strength. The Portfolio's relative underperformance during the period was attributable primarily to its lower exposure to higher-volatility, lower-quality stocks that were the strongest performers in the market rally. PERFORMANCE OF REAL ESTATE INVESTMENTS. During the six months ended June 30, 2004, one of Belport Realty's Real Estate Joint Ventures sold a property for approximately $41.3 million and recognizing a gain of $4.3 million on the transaction. Pursuant to the Real Estate Joint Venture's loan agreement with its lender, the proceeds from the sale must be reinvested in replacement assets in order to maintain certain collateral levels. Accordingly, the Real Estate Joint Venture acquired a replacement property for approximately $36.2 million. The remaining portion of the sale proceeds is expected to be invested in another replacement property by the end of 2004. Rental income from real estate operations for Belport Realty's Real Estate Joint Ventures decreased to $30.5 million for the six months ended June 30, 2004 from $33.2 million for the six months ended June 30, 2003, a decline of $2.7 million or 8%. This decrease in rental income resulted principally from fewer properties held by the Real Estate Joint Ventures for the full period as a result of the property sale discussed above and lower revenues from the other properties held by Belport Realty's Real Estate Joint Ventures. Rental revenues were adversely affected by lower rent rates, increased rent concessions and lower occupancy levels during the period. Property operating expenses for Belport's Real Estate Joint Ventures decreased to approximately $13.5 million for the six months ended June 30, 2004 from approximately $14.1 million for the six months ended June 30, 2003, a decrease of $0.6 million or 4% (property operating expenses are before 19 certain operating expenses of Belport Realty of approximately $1.6 million for the six months ended June 30, 2004 and approximately $2.2 million for the six months ended June 30, 2003). The near-term outlook for multifamily property operations continues to be weak. While the recent pick-up in economic and employment growth is expected to lead to improved supply-demand balance in the apartment industry, oversupply conditions continue to exist in most major markets. As a result, Boston Management expects that multifamily real estate operating results in 2004 will continue to be similar to 2003. At June 30, 2004, the estimated fair value of the real properties indirectly held through Belport Realty was $480.7 million compared to $475.5 million at June 30, 2003, a net increase of $5.2 million or 1%. The modest net increase was due to declines in capitalization rates, offset in part by lower near-term property earnings expectations. The Fund saw unrealized depreciation in the estimated fair value of its other real estate investments (which includes Belport Realty's interests in Real Estate Joint Ventures) of approximately $3.5 million during the six months ended June 30, 2004 compared to approximately $12.3 million in unrealized depreciation for the six months ended June 30, 2003. During the six months ended June 30, 2004, unrealized depreciation was principally due to the recharacterization of previously recorded unrealized appreciation to realized gains due to the January 2004 sale of a property owned by one of Belport Realty's Real Estate Joint Ventures, offset in part by modest increases in estimated property values. During the six months ended June 30, 2003, estimated property values declined due to declines in near-term earnings expectations and the economic downturn. However, declines in estimated asset values for multifamily properties generally were modest during the six months ended June 30, 2003 as decreases in capitalization rates largely offset declining earnings expectations. During the six months ended June 30, 2004, Belport Realty sold (or experienced scheduled redemptions of) certain of its Partnership Preference Units for approximately $25.4 million (including sales to other investment funds advised by Boston Management), recognizing gains of $3.6 million on the transactions. At June 30, 2004, the estimated fair value of Belport Realty's Partnership Preference Units totaled approximately $64.8 million compared to approximately $104.4 million at June 30, 2003, a decrease of $39.6 million or 38%. While the decrease in value was principally due to fewer Partnership Preference Units held at June 30, 2004, the decrease also reflects lower per unit values of the Partnership Preference Units held at June 30, 2004 due to their lower average coupon rates. In the current low interest rate environment, many issuers have been redeeming Partnership Preference Units as call protections expire or restructuring the terms of outstanding Partnership Preference Units in advance of their call dates. As a result, many of the higher-yielding Partnership Preference Units held by Belport Realty during the six months ended June 30, 2003 were no longer held at June 30, 2004. As noted above, Partnership Preference Unit values can generally be expected to decline in a rising interest rate environment. The Fund saw unrealized depreciation of the estimated fair value in its Partnership Preference Units of approximately $6.7 million during the six months ended June 30, 2004 compared to unrealized appreciation of approximately $7.9 million for the six months ended June 30, 2003. For the six months ended June 30, 2004, net unrealized depreciation of $6.7 million consisted of approximately $3.5 million of unrealized depreciation as a result of decreases in per unit values of the Partnership Preference Units held by Belport Realty at June 30, 2004 (as described above), and approximately $3.2 million of unrealized depreciation resulting from the recharacterization of previously recorded unrealized appreciation to realized gains due to sales of Partnership Preference Units during the six months ended June 30, 2004. During the six months ended June 30, 2004, Partnership Preference Unit values were negatively affected by the rising trend in U.S. interest rates, partly offset by tighter spreads for credit-sensitive income securities, including real estate-related securities. In a rising interest rate environment, values of outstanding Partnership Preference Units generally can be expected to decline. During the six months ended June 30, 2003, Belport Realty's investments in Partnership Preference Units generally benefited from declining interest rates and tightening spreads in credit-sensitive income securities, particularly in real estate-related securities. Distributions from Partnership Preference Units for the six months ended June 30, 2004 totaled $3.5 million compared to $4.4 million for the six months ended June 30, 2003, a decrease of $0.9 million or 21%. The decrease was principally due to fewer Partnership Preference Units held on average during the six months ended June 30, 2004 and to lower average distribution rates on the Partnership Preference Units, partially offset by a one-time special distribution from one issuer made in connection with a restructuring of its Partnership Preference Units. PERFORMANCE OF INTEREST RATE SWAP AGREEMENTS. For the six months ended June 30, 2004, net realized and unrealized gains on the Fund's interest rate swap agreements totaled approximately $1.6 million, compared to net realized and unrealized losses of approximately $10.0 million for the six months ended June 20 30, 2003. Net realized and unrealized gains on swap agreements for the six months ended June 30, 2004 consisted of $4.2 million of unrealized appreciation due to changes in swap agreement valuations offset in part by $2.6 million of periodic payments made pursuant to outstanding swap agreements (and classified as net realized losses on interest rate swap agreements). For the six months ended June 30, 2003, net realized and unrealized losses on swap agreements consisted of unrealized depreciation of $5.5 million on swap agreement valuation changes and $4.5 million of swap agreement periodic payments. The positive contribution to Fund performance for the six months ended June 30, 2004 from changes in swap agreement valuations was attributable to an increase in swap rates during the quarter. The negative impact on Fund performance for the six months ended June 30, 2003 from changes in swap valuations was attributable to a decline in swap rates during the period. (b) LIQUIDITY AND CAPITAL RESOURCES. - ------------------------------------ OUTSTANDING BORROWINGS. The Fund has entered into credit arrangements with DrKW Holdings, Inc. and Merrill Lynch Mortgage Capital, Inc. (collectively, the Credit Facility) primarily to finance the Fund's equity in its real estate investments and will continue to use the Credit Facility for such purpose in the future. The Credit Facility may also be used for other purposes, including any short-term liquidity needs of the Fund. In the future, the Fund may increase the size of the Credit Facility (subject to lender consent) and the amount of outstanding borrowings thereunder. As of June 30, 2004, the Fund had outstanding borrowings of $218.5 million and unused loan commitments of $52.4 million under the Credit Facility. The Fund has entered into interest rate swap agreements with respect to its real estate investments and associated borrowings. Pursuant to these agreements, the Fund makes periodic payments to the counterparty at predetermined fixed rates, in exchange for floating-rate payments at a predetermined spread plus one-month LIBOR. During the terms of the outstanding interest rate swap agreements, changes in the underlying values of the agreements are recorded as unrealized appreciation or depreciation. As of June 30, 2004, the unrealized appreciation related to the interest rate swap agreements was approximately $6.0 million. As of June 30, 2003, the unrealized depreciation related to the interest rate swap agreements was approximately $31.9 million. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. - ------------------------------------------------------------------- INTEREST RATE RISK. The Fund's primary exposure to interest rate risk arises from its real estate investments that are financed by the Fund with floating rate borrowings under the Fund's Credit Facility and by fixed-rate secured mortgage debt obligations of the Real Estate Joint Ventures. Partnership Preference Units are fixed rate instruments whose values will generally decrease when interest rates rise and increase when interest rates fall. The interest rates on borrowings under the Fund's Credit Facility are reset at regular intervals based on one-month LIBOR. The Fund has entered into interest rate swap agreements to fix the cost of its borrowings under the Credit Facility used to acquire Belport Realty's equity in its real estate investments and to mitigate in part the impact of interest rate changes on the Fund's net asset value. Under the terms of the interest rate swap agreements, the Fund makes cash payments at fixed rates in exchange for floating rate payments that fluctuate with one-month LIBOR. The Fund's interest rate swap agreements will generally increase in value when interest rates rise and decrease in value when interest rates fall. In the future, the Fund may use other interest rate hedging arrangements (such as caps, floors and collars) to fix or limit borrowing costs. The use of interest rate hedging arrangements is a specialized activity that can expose the Fund to significant loss. The following table summarizes the contractual maturities and weighted-average interest rates associated with the Fund's significant non-trading financial instruments. The Fund has no market risk sensitive instruments held for trading purposes. This information should be read in conjunction with Note 5 to the Fund's unaudited condensed consolidated financial statements in Item 1 above. 21 Interest Rate Sensitivity Cost, Principal (Notional) Amount by Contractual Maturity and Callable Date for the Twelve Months Ended June 30,*
Estimated Fair Value as of June 30, 2005-2008 2009 Thereafter Total 2004 - ------------------------------------------------------------------------------------------------------------------------------------ Rate sensitive liabilities: - ------------------------------------------ Long-term debt: - ------------------------------------------ Fixed-rate mortgages $15,307,500 $345,800,000 $361,107,500 $389,700,000 Average interest rate 6.78% 6.78% - ------------------------------------------ Variable-rate Credit Facility $218,500,000 $218,500,000 $218,500,000 Average interest rate 1.57% 1.57% - ----------------------------------------------------------------------------------------------------------------------------------- Rate sensitive derivative financial instruments: - ------------------------------------------ Pay fixed/receive variable interest rate swap agreements $190,887,000 $190,887,000 $ 6,002,326 Average pay rate 4.08% 4.08% Average receive rate 1.57% 1.57% - ----------------------------------------------------------------------------------------------------------------------------------- Rate sensitive investments: - ------------------------------------------ Fixed-rate Partnership Preference Units: - ------------------------------------------ Essex Portfolio, L.P., 7.875% Series B Cumulative Redeemable Preferred Units, Callable 12/31/09, Current Yield: 7.82% $ 17,908,335 $ 17,908,335 $ 22,649,490 PSA Institutional Partners, L.P., 6.4% Series NN Cumulative Redeemable Perpetual Preferred Units, Callable 3/17/10, Current Yield: 7.04% $ 34,905,000 $ 34,905,000 $ 29,536,000 Vornado Realty, L.P., 7% Series D-10 Cumulative Redeemable Preferred Units, Callable 11/17/08, Current Yield: 7.34%(1) $ 12,705,370 $ 12,705,370 $ 12,616,940
* The amounts listed reflect the Fund's positions as of June 30, 2004. The Fund's current positions may differ. (1) Belport Realty's interest in these Partnership Preference Units is held through Bel Holdings LLC. ITEM 4. CONTROLS AND PROCEDURES. - -------------------------------- Eaton Vance, as the Fund's manager, conducted an evaluation of the effectiveness of the Fund's disclosure controls and procedures (as defined by Rule 13a-15(e) of the 1934 Act) as of the end of the period covered by this report, with the participation of the Fund's Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Fund's disclosure controls and procedures were effective. There were no changes in the Fund's internal control over financial reporting that occurred during the quarter ended June 30, 2004 that have materially affected, or are reasonably likely to materially affect, the Fund's internal control over financial reporting. 22 As the Fund's manager, the complete and entire management, control and operation of the Fund are vested in Eaton Vance. The Fund's Chief Executive Officer and Chief Financial Officer intend to report to the Board of Directors of Eaton Vance, Inc. (the sole trustee of Eaton Vance) any significant deficiency in the design or operation of internal control over financial reporting which could adversely affect the Fund's ability to record, process, summarize and report financial data, and any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. - -------------------------- Although in the ordinary course of business, the Fund, Belport Realty and Belport Realty's controlled subsidiaries may become involved in legal proceedings, the Fund is not aware of any material pending legal proceedings to which any of them is subject. ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES. - -------------------------------------------------------------------------------- As described in the Fund's Annual Report on Form 10-K for the year ended December 31, 2003, shares of the Fund may be redeemed by Fund shareholders on any business day. Redemptions are met at the net asset value per share of the Fund (less any applicable redemption fee). The right to redeem is available to all shareholders and all outstanding Fund shares are eligible (except for shares subject to an estate freeze election as described in Item 5 of the Fund's Report on Form 10-K for the fiscal year ending December 31, 2003). During each month in the quarter ended June 30, 2004, the total number of shares redeemed and the average price paid per share were as follows: - -------------------------------------------------------------------------------- Total No. of Shares Average Price Paid Month Ended Redeemed(1) Per Share - -------------------------------------------------------------------------------- April 30, 2004 124,007.65 $96.73 - -------------------------------------------------------------------------------- May 31, 2004 37,995.92 $93.85 - -------------------------------------------------------------------------------- June 30, 2004 87,693.85 $96.29 - -------------------------------------------------------------------------------- Total 249,697.42 $96.15 - -------------------------------------------------------------------------------- (1) All shares redeemed during the periods were redeemed at the option of shareholders pursuant to the Fund's redemption policy. The Fund has not announced any plans or programs to repurchase shares other than at the option of shareholders. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. - ---------------------------------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------ No matters were submitted to a vote of security holders during the three months ended June 30, 2004. ITEM 5. OTHER INFORMATION. - -------------------------- None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: - ----------------------------------------- (a) The following is a list of all exhibits filed as part of this Form 10-Q: 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 23 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K: None. 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized officer on August 9, 2004. BELPORT CAPITAL FUND LLC /s/ Michelle A. Alexander ------------------------- Michelle A. Alexander Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 25 EXHIBIT INDEX ------------- 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 26 EX-31 2 belportex311.txt BELPORT CAPITAL FUND LLC 302 CERTIFICATION FOR CEO EXHIBIT 31.1 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION - ------------- I, Thomas E. Faust Jr., certify that: 1. I have reviewed this Form 10-Q of Belport Capital Fund LLC; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 9, 2004 /s/ Thomas E. Faust Jr. ----------------------- Thomas E. Faust Jr. Chief Executive Officer EX-31 3 belportex312.txt BELPORT CAPITAL FUND LLC 302 CERTIFICATION FOR CFO EXHIBIT 31.2 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION - ------------- I, Michelle A. Alexander, certify that: 1. I have reviewed this Form 10-Q of Belport Capital Fund LLC; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 9, 2004 /s/ Michelle A. Alexander ------------------------- Michelle A. Alexander Chief Financial Officer EX-32 4 belportex321.txt BELPORT CAPITAL FUND LLC 906 CERTIFICATION FOR CEO EXHIBIT 32.1 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certifies in his capacity as Chief Executive Officer of Belport Capital Fund LLC (the Fund), that based on his knowledge: (a) the Quarterly Report of the Fund on Form 10-Q for the quarter ended June 30, 2004 (the Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Fund for such period. Date: August 9, 2004 /s/ Thomas E. Faust Jr. ----------------------- Thomas E. Faust Jr. Chief Executive Officer EX-32 5 belportex322.txt BELPORT CAPITAL FUND LLC 906 CERTIFICATION FOR CFO EXHIBIT 32.2 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certifies in her capacity as Chief Financial Officer of Belport Capital Fund LLC (the Fund), that based on her knowledge: (a) the Quarterly Report of the Fund on Form 10-Q for the quarter ended June 30, 2004 (the Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Fund for such period. Date: August 9, 2004 /s/ Michelle A. Alexander ------------------------- Michelle A. Alexander Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----