BELMAR CAPITAL FUND LLC - 10-Q Quarterly Report

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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. 000-32633
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Belmar Capital Fund LLC
-----------------------
(Exact name of registrant as specified in its charter)

Delaware 04-3508106
-------- ----------
(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
--- ---

BELMAR 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 18

Item 3. Quantitative and Qualitative Disclosures About Market Risk 24

Item 4. Controls and Procedures 26

PART II OTHER INFORMATION

Item 1. Legal Proceedings 26

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases 26
of Equity Securities

Item 3. Defaults Upon Senior Securities 27

Item 4. Submission of Matters to a Vote of Security Holders 27

Item 5. Other Information 27

Item 6. Exhibits and Reports on Form 8-K 27

SIGNATURES 28

EXHIBIT INDEX 29

2

PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
- --------------------------------------------------------------------------------

BELMAR 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) $1,962,258,647 $1,966,911,184
Investment in Partnership Preference Units 169,775,665 424,780,443
Investment in other real estate 471,434,428 185,138,810
Short-term investments 35,867,000 16,973,476
-------------- --------------
Total investments $2,639,335,740 $2,593,803,913
Cash 3,009,748 6,605,096
Escrow deposits - restricted 2,801,196 3,817,390
Open interest rate swap agreements, at value 7,338,032 2,090,845
Distributions and interest receivable 760,900 1,960,318
Other assets 4,278,381 3,661,857
-------------- --------------
Total assets $2,657,523,997 $2,611,939,419
-------------- --------------

Liabilities:
Loan payable - Credit Facility $ 335,000,000 $ 513,000,000
Mortgages payable 402,843,443 161,157,192
Payable for Fund Shares redeemed - 1,361,403
Distributions payable to minority
shareholders - 16,800
Swap interest payable 271,143 242,283
Security deposits 882,048 744,420
Notes payable to minority shareholder 565,972 565,972
Accrued expenses:
Interest expense 2,369,999 1,423,780
Property taxes 1,869,112 3,281,589
Other expenses and liabilities 3,160,674 1,586,790
Minority interests in controlled
subsidiaries 6,471,523 7,947,333
-------------- --------------
Total liabilities $ 753,433,914 $ 691,327,562
-------------- --------------

Net assets $1,904,090,083 $1,920,611,857

-------------- --------------
Shareholders' Capital $1,904,090,083 $1,920,611,857
-------------- --------------

Shares outstanding 21,571,157 22,261,334
-------------- --------------

Net asset value and redemption price
per Share $ 88.27 $ 86.28
-------------- --------------

See notes to unaudited condensed consolidated financial statements

3

BELMAR 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 $163,289, $112,152,
$244,803, and $184,755, respectively) $ 7,488,854 $ 6,156,100 $14,327,779 $ 12,106,567
Interest allocated from Belvedere Company 21,995 184,836 55,775 303,678
Expenses allocated from Belvedere Company (2,909,452) (2,580,274) (5,877,528) (5,008,200)
----------- ------------ ----------- ------------
Net investment income allocated from
Belvedere Company $ 4,601,397 $ 3,760,662 $ 8,506,026 $ 7,402,045
Distributions from Partnership Preference Units 3,807,547 12,150,878 10,209,149 24,635,410
Rental income 12,952,949 8,657,559 25,131,623 17,245,049
Interest 194,129 33,976 385,447 58,103
----------- ------------ ----------- ------------
Total investment income $21,556,022 $ 24,603,075 $44,232,245 $ 49,340,607
----------- ------------ ----------- ------------

Expenses:
Investment advisory and administrative fees $ 1,807,437 $ 1,801,410 $ 3,768,546 $ 3,537,849
Property management fees 334,444 334,588 663,598 673,575
Distribution and servicing fees 913,203 826,426 1,852,794 1,586,055
Interest expense on mortgages 7,044,944 3,612,337 13,599,563 7,160,183
Interest expense on Credit Facility 1,277,912 2,162,197 2,948,719 4,907,997
Property and maintenance expenses 2,908,907 3,109,717 5,824,641 5,888,310
Property taxes and insurance 1,173,127 1,196,216 2,342,341 2,373,519
Miscellaneous 173,941 447,974 685,620 644,784
----------- ------------ ----------- ------------
Total expenses $15,633,915 $ 13,490,865 $31,685,822 $ 26,772,272
Deduct-
Reduction of investment advisory
and administrative fees 471,078 417,691 948,873 799,699
----------- ------------ ----------- ------------
Net expenses $15,162,837 $ 13,073,174 $30,736,949 $ 25,972,573
----------- ------------ ----------- ------------
Net investment income before
minority interest in net income of
controlled subsidiaries $ 6,393,185 $ 11,529,901 $13,495,296 $ 23,368,034
Minority interest in net income (loss)
of controlled subsidiaries 46,387 (94,806) (1,728) (232,351)
----------- ------------ ----------- ------------
Net investment income $ 6,439,572 $ 11,435,095 $13,493,568 $ 23,135,683
----------- ------------ ----------- ------------

See notes to unaudited condensed consolidated financial statements

4

BELMAR 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) $ 4,218,875 $ 2,922,615 $11,419,204 $ (4,318,937)
Investment transactions in Partnership
Preference Units (identified cost basis) 6,066,076 1,172,600 36,526,705 1,811,300
Interest rate swap agreements (1) (3,239,926) (9,551,052) (6,273,902) (19,242,769)
----------- ------------ ----------- ------------
Net realized gain (loss) $ 7,045,025 $ (5,455,837) $41,672,007 $(21,750,406)
----------- ------------ ----------- ------------

Change in unrealized appreciation
(depreciation) -
Investments and foreign currency
allocated from Belvedere Company
(identified cost basis) $15,961,313 $202,414,631 $45,496,110 $129,298,443
Investment in Partnership Preference Units
(identified cost basis) (10,842,713) 11,475,814 (38,347,489) 26,287,255
Investment in other real estate (net of
minority interest in unrealized loss
of controlled subsidiaries of $(7,484,947),
$(1,734,236), $(6,407,971) and $(1,722,246),
respectively) 5,080,042 (10,917,092) 1,653,544 (12,300,380)
Interest rate swap agreements 11,016,076 5,372,060 5,247,187 13,212,148
----------- ------------ ----------- ------------

Net change in unrealized appreciation
(depreciation) $21,214,718 $208,345,413 $14,049,352 $156,497,466
----------- ------------ ----------- ------------

Net realized and unrealized gain $28,259,743 $202,889,576 $55,721,359 $134,747,060
----------- ------------ ----------- ------------

Net increase in net assets from operations $34,699,315 $214,324,671 $69,214,927 $157,882,743
=========== ============ =========== ============

(1) Amounts represent periodic payments made in connection with interest rate
swap agreements. (Note 5)

See notes to unaudited condensed consolidated financial statements

5

BELMAR 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 $ 13,493,568 $ 43,724,019
Net realized gain from investment
transactions, foreign currency transactions
and interest rate swap agreements 41,672,007 5,911,089
Net change in unrealized appreciation
(depreciation) of investments, foreign
currency and interest rate swap agreements 14,049,352 362,154,142
-------------- --------------
Net increase in net assets from operations $ 69,214,927 $ 411,789,250
-------------- --------------

Transactions in Fund Shares -
Net asset value of Fund Shares issued to
Shareholders in payment of distributions
declared $ 10,101,552 $ 18,603,373
Net asset value of Fund Shares redeemed (70,251,565) (90,690,145)
-------------- --------------
Net decrease in net assets from Fund Share
transactions $ (60,150,013) $ (72,086,772)
-------------- --------------

Distributions -
Distributions to Shareholders $ (25,586,688) $ (39,320,426)
-------------- --------------
Total distributions $ (25,586,688) $ (39,320,426)
-------------- --------------

Net (decrease) increase in net assets $ (16,521,774) $ 300,382,052

Net assets:
At beginning of period $1,920,611,857 $1,620,229,805
-------------- --------------
At end of period $1,904,090,083 $1,920,611,857
============== ==============

See notes to unaudited condensed consolidated financial statements

6

BELMAR 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 $ 69,214,927 $ 157,882,743
Adjustments to reconcile net increase in net assets from operations
to net cash flows from operating activities -
Net investment income allocated from Belvedere Company (8,506,026) (7,402,045)
Decrease in escrow deposits 1,016,194 769,546
Decrease in receivable for securities sold - 29,285,540
(Increase) decrease in other assets (169,262) 349,694
Decrease (increase) in distributions and interest receivable 1,199,418 (1,401,584)
Increase (decrease) in interest payable for open swap agreements 28,860 (551,575)
Increase (decrease) in security deposits, accrued interest and
accrued other expenses and liabilities 1,386,495 (567,932)
Decrease in accrued property taxes (1,635,628) (1,531,565)
Proceeds from sales of Partnership Preference Units 253,183,994 13,994,100
Increase in short-term investments (18,893,524) (3,499,133)
Payments for investments in other real estate (40,257,119) -
Cash assumed in connection with aquisition
of other real estate investments 15,051 -
Improvements to rental property (700,923) (701,489)
Net increase in investment in Belvedere Company - (10,866,251)
Interest incurred on interest rate swap agreements (6,273,902) (19,242,769)
Minority interests in net income of controlled subsidiaries 1,728 232,351
Net realized (gain) loss from investment transactions (41,672,007) 21,750,406
Net change in unrealized (appreciation) depreciation of investments (14,049,352) (156,497,466)
------------- -------------
Net cash flows from operating activities $ 193,888,924 $ 22,002,571
------------- -------------

Cash Flows From (For) Financing Activities -
Repayment of Credit Facility $(178,000,000) $ -
Payments on mortgages (2,443,245) (656,516)
Payments for Fund Shares redeemed (1,539,091) (1,417,252)
Distributions paid to Shareholders (15,485,136) (20,717,051)
Distributions paid to minority shareholders (16,800) -
------------- -------------
Net cash flows for financing activities $(197,484,272) $ (22,790,819)
------------- -------------

Net decrease in cash $ (3,595,348) $ (788,248)

Cash at beginning of period $ 6,605,096 $ 6,149,096
------------- -------------
Cash at end of period $ 3,009,748 $ 5,360,848
============= =============

See notes to unaudited condensed consolidated financial statements

7

BELMAR CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)

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 $ 2,921,736 $ 4,637,461
Interest paid on mortgages $ 12,628,186 $ 6,962,700
Interest paid on swap agreements $ 6,245,042 $ 19,794,344
Market value of securities distributed in payment of redemptions $ 70,073,877 $ 28,840,993
Market value of real property and other assets, net of current
liabilities, assumed in conjunction with aquisitions of other
real estate $ 290,421,359 $ -
Mortgages assumed in conjunction with aquisitions of other
real estate $ 244,129,496 $ -

See notes to unaudited condensed consolidated financial statements

8

BELMAR 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 $86.280
- --------------------------------------------------------------------------------

INCOME (LOSS) FROM OPERATIONS
- --------------------------------------------------------------------------------
Net investment income(6) $ 0.614
- --------------------------------------------------------------------------------
Net realized and unrealized gain 2.526
- --------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 3.140
- --------------------------------------------------------------------------------

DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions to Shareholders $(1.150)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(1.150)
- --------------------------------------------------------------------------------

NET ASSET VALUE - END OF PERIOD $88.270
- --------------------------------------------------------------------------------

TOTAL RETURN(1) 3.68%
- --------------------------------------------------------------------------------

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) 1.43%(9) 1.02%(9)
Operating expenses(7) 0.94%(9) 0.67%(9)
Belmar Capital Fund LLC Expenses
Interest and other borrowing costs(4)(8) 0.31%(9) 0.22%(9)
Investment advisory and administrative fees,
servicing fees and other Fund operating
expenses(3)(4) 1.17%(9) 0.83%(9)
---------------------------------
Total expenses 3.85%(9) 2.74%(9)

Net investment income 1.42%(9) 1.01%(9)
- --------------------------------------------------------------------------------

SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $1,904,090
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 Belmar Capital Fund LLC (Belmar Capital) (including Belmar Capital's
interest in Belvedere Capital Fund Company LLC (Belvedere Company) and
Belmar 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 Belmar Realty Corporation's (Belmar Realty)
controlled subsidiaries are reduced by the proportionate interests therein
of investors other than Belmar Realty.
(3) Includes Belmar Capital's share of Belvedere Company's allocated expenses,
including those expenses allocated from the Portfolio.
(4) Includes the expenses of Belmar Capital and Belmar Realty. Does not include
expenses of the real estate subsidiaries majority-owned by Belmar Realty.
(5) For the purpose of calculating ratios, the income and expenses of Belmar
Realty's controlled subsidiaries are reduced by the proportionate interests
therein of investors other than Belmar Realty.
(6) Calculated using average shares outstanding.
(7) Includes Belmar 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

BELMAR CAPITAL FUND LLC as of June 30, 2004
Notes To Condensed Consolidated Financial Statements (Unaudited)

1 Organization and Basis of Presentation

The condensed consolidated interim financial statements of Belmar Capital Fund
LLC (Belmar 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.

During the quarter ended June 30, 2004, Belmar Realty Corporation (Belmar
Realty) made indirect investments in real property through two newly established
controlled subsidiaries, Brazos Property Trust (Brazos) and Cimmaron Property
Trust (Cimmaron), as described below. The consolidated financial statements
include the accounts of Brazos and Cimmaron and all material intercompany
accounts and transactions have been eliminated.

Subsidiaries-

Brazos- On May 3, 2004, Belmar Realty entered into an agreement to establish and
acquire a majority interest in a controlled subsidiary, Brazos. On June 30,
2004, Brazos acquired a majority interest in four industrial properties located
in two states (Tennessee and North Carolina). On August 4, 2004, Brazos acquired
an additional nineteen industrial properties located in six states (Florida,
Indiana, New Jersey, Ohio, Pennsylvania and South Carolina). Belmar Realty owns
100% of the Class A Units of Brazos, representing 60% of the voting interests in
Brazos and a minority shareholder (the Brazos Minority Shareholder) owns 100% of
the Class B units, representing 40% of the voting interests in Brazos. The Class
B equity interest is recorded as a minority interest on the Consolidated
Statements of Assets and Liabilities. The primary distinctions between the two
classes of shares are the distribution priority and voting rights. Belmar Realty
has priority in distributions and has greater voting rights than the holder of
the Class B units. From and after August 4, 2014, either Belmar Realty or the
Brazos Minority Shareholder may cause a liquidation of Brazos and, if Belmar
Realty makes that election, the Brazos Minority Shareholder has the right either
to purchase the shares of Brazos owned by Belmar Realty or to acquire the assets
of Brazos, in either case at a price determined through an appraisal of the
assets of Brazos.

10

Cimmaron- On May 3, 2004, Belmar Realty entered into an agreement to establish
and acquire a majority interest in a controlled subsidiary, Cimmaron. On June
30, 2004, Cimmaron acquired a majority interest in four industrial properties
located in four states (Tennessee, Georgia, Texas and Ohio). On August 4, 2004,
Cimmaron acquired an additional twenty industrial properties located in five
states (Florida, New Jersey, Ohio, Pennsylvania and South Carolina). Belmar
Realty owns 100% of the Class A Units of Cimmaron, representing 60% of the
voting interests in Cimmaron and a minority shareholder (the Cimmaron Minority
Shareholder) owns 100% of the Class B units, representing 40% of the voting
interests in Cimmaron. The Class B equity interest is recorded as a minority
interest on the Consolidated Statements of Assets and Liabilities. The primary
distinctions between the two classes of shares are the distribution priority and
voting rights. Belmar Realty has priority in distributions and has greater
voting rights than the holder of the Class B units. From and after August 4,
2014, either Belmar Realty or the Cimmaron Minority Shareholder may cause a
liquidation of Cimmaron and, if Belmar Realty makes that election, the Cimmaron
Minority Shareholder has the right either to purchase the shares of Cimmaron
owned by Belmar Realty or to acquire the assets of Cimmaron, in either case at a
price determined through an appraisal of the assets of Cimmaron.

2 Estate Freeze

Shareholders in Belmar 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. At June
30, 2004 and December 31, 2003, the Preferred Shares were valued at $88.27 and
$86.28, respectively, and the Common Shares had no value. 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.

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 $ - $ 10,000,000
Decreases in investment in Belvedere Company $ 70,073,877 $ 27,974,742
Acquisition of other real property(1) $ 40,257,119 $ -
Sales of Partnership Preference Units(2) $ 253,183,994 $ 13,994,100
- --------------------------------------------------------------------------------

(1) In January 2004, Belmar Realty purchased an indirect investment in real
property through a controlled subsidiary, Bel Stamford Investors, LLC (Bel
Stamford). At the date of the transaction, the value of the real property
was $242,750,000. The real property is financed through a mortgage loan
assumed at acquisition. The mortgage loan balance assumed at the date of
the transaction was $229,674,914 and accrues interest at a fixed rate of 6%
through the stated maturity date, October 11, 2016.

On June 30, 2004, Belmar Realty purchased an indirect investment in real
property through two controlled subsidiaries, Brazos and Cimmaron as
described below. At the date of the transaction, the value of Belmar
Realty's interest in its real property investments in Brazos and Cimmaron
was $7,793,938 and $16,412,031, respectively.

11

(2) Sales of Partnership Preference Units for the six months ended June 30,
2004 and 2003 include Partnership Preference Units sold to other investment
funds advised by Boston Management and Research for which a gain of
$28,421,981 and $638,700 was recognized, respectively.

On May 3, 2004, Belmar Realty entered into an agreement to establish and acquire
a majority interest in two controlled subsidiaries, Brazos and Cimmaron. On June
30, 2004, Brazos and Cimmaron each acquired a majority interest in four separate
industrial properties. The seller retained a minority interest in the properties
and an affiliate thereof manages the properties. When Brazos and Cimmaron
acquired the real estate investments, a portion of the real estate's purchase
price was allocated to the estimated fair value of in-place leases in accordance
with Statement of Financial Accounting Standards 141. At June 30, 2004, $128,797
and $647,636, respectively, of the real estate investment balance represents the
estimated fair value of favorable in-place leases at acquisition. The properties
are leased under fixed-term operating leases on a long-term basis. At June 30,
2004, the minimum lease payments expected to be received by Brazos and Cimmaron
on leases with lease periods greater than one year are as follows:

Twelve Months Ending June 30, Amount
- -----------------------------------------
2005 $ 3,853,140
2006 3,268,512
2007 2,415,316
2008 1,925,975
2009 1,807,375
Thereafter 3,086,058
------------
$16,356,376
============

On August 4, 2004, the Fund made additional investments in Brazos and Cimmaron
of $297,615,308 and $141,086,904, respectively. Brazos and Cimmaron concurrently
acquired a majority interest in an additional nineteen and twenty industrial
properties, respectively. An affiliate of the Brazos Minority Shareholder and
Cimmaron Minority Shareholder manages the properties. All of the Brazos and
Cimmaron properties are leased under fixed-term operating leases on a long-term
basis.

In May 2004, Bel Alliance Apartments, LLC (Bel Apartments), a controlled
subsidiary of Belmar Realty, agreed to sell all of its multifamily residential
properties to an affiliate of the Bel Apartments minority shareholder
(Affiliate). According to the agreement, Bel Apartments is expected to receive
net proceeds of $23,541,068 as consideration for all of its interest in the
multifamily properties and expects not to retain any contingent liabilities
associated with the mortgage debt secured by the properties or other
liabilities. Concurrent with this sale, Belmar Realty has agreed to buy the
outstanding minority interest in Bel Apartments for a nominal amount. Although
there is no assurance that the transaction will be consummated, the transaction
is expected to close by the end of September 2004. The Fund had an increase in
net unrealized appreciation of $5,298,371 for the quarter ended June 30, 2004 as
a result of the terms of the agreement.

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:

12

Six Months Ended Six Months 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) $ 1,962,258,647 $ 1,759,668,762
Income allocated to Belvedere Company from the Portfolio $ 83,686,364 $ 66,798,353
Income allocated to the Fund from Belvedere Company $ 14,383,554 $ 12,410,245
Expenses allocated to Belvedere Company from the Portfolio $ 25,387,360 $ 20,113,419
Expenses allocated to the Fund from Belvedere Company $ 5,877,528 $ 5,008,200
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 $ 11,419,204 $ (4,318,937)
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 $ 45,496,110 $ 129,298,443
- -----------------------------------------------------------------------------------------------------------------------

(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 16.7% and 18.3% 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, 2004 December 31, 2003 June 30, 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 $ 39,805,394 $ 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

Belmar 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, Belmar 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.

13

Notional Initial
Amount Optional Final Unrealized Unrealized
Effective (000's Fixed Floating Termination Termination Appreciation at Appreciation at
Date omitted) Rate Rate Date Date June 30, 2004 December 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------

06/04 $279,760 4.875% LIBOR + 0.00% - 6/12 $ 73,463* $ -
02/04 58,363 4.90% LIBOR + 0.20% 8/04 6/10 486,255 -
10/03 58,363 4.95% LIBOR + 0.20% 2/04 6/10 -** 133,207
10/03 55,831 4.875% LIBOR + 0.20% 4/04 6/10 497,942 154,214
10/03 43,010 4.755% LIBOR + 0.20% 7/04 6/10 534,215 163,545
10/03 56,978 4.695% LIBOR + 0.20% 9/04 6/10 813,440 232,978
10/03 64,418 4.565% LIBOR + 0.20% 3/05 6/10 1,155,847 316,702
10/03 110,068 3.9725% LIBOR + 0.20% - 6/10 3,776,870 1,090,199
- -----------------------------------------------------------------------------------------------------------------------------
$ 7,338,032 $ 2,090,845
- -----------------------------------------------------------------------------------------------------------------------------

* On May 3, 2004, Belmar Capital entered into a forward interest rate swap
agreement with Merrill Lynch Capital Services, Inc. in anticipation of its
future investment in controlled subsidiaries Brazos and Cimmaron for the
purpose of hedging the interest rate of substantially all of the expected
fixed-rate mortgage financing of the real property over the expected 8-year
term. Such agreement was terminated in July 2004 and the fund realized a
loss of $2,437,256 upon termination.
** Agreement was terminated on the Initial Optional Termination Date.

6 Debt

Mortgages- In connection with the acquisition of real properties on June 30,
2004, Brazos assumed an existing mortgage note with a principal balance of
$14,454,582. The mortgage note, which bears interest at a fixed rate of 6.29%
per annum, is secured by the properties and is generally without recourse to the
other assets of Belmar Capital and Belmar Realty. The value of the rental
property securing the mortgage is $24,106,308. Principal and interest payments
are due monthly with a balloon payment of $12,421,558 due on January 1, 2013.
Principal payments due under the mortgage note for the years subsequent to June
30, 2004 are as follows:

2005 $ 187,828
2006 199,989
2007 212,937
2008 226,724
2009 241,403
Thereafter 13,385,701
-----------
$14,454,582
===========

The estimated market value of the mortgage note payable is approximately
$14,900,000 at June 30, 2004. The mortgage note payable cannot be prepaid or
otherwise disposed of without incurring a substantial prepayment penalty or
without the sale of the rental properties financed by the mortgage note payable.
Management generally has no current plans to prepay or otherwise dispose of the
mortgage note payable or sell the related rental property prior to the maturity
date. The market value of the mortgage is based on estimates using discounted
cash flow analysis and currently prevailing rates. Considerable judgment is
necessary in interpreting market data to develop estimates of market value. The
use of different assumptions or estimation methodologies may have a material
effect on the estimated market value.

Rental property held by Belmar Realty's controlled subsidiaries, Bel Apartments
and Bel Stamford, is financed through mortgages issued to the controlled
subsidiaries. The mortgages are secured by a rental property or properties. The
mortgages are generally without recourse to Belmar Capital and Belmar Realty.
The mortgage debt obligation of Bel Stamford is generally without recourse to
Belmar Capital, Belmar Realty and Shareholders.

The mortgage agreements relating to the rental properties held by Bel Apartments
require certain covenants be met, including a covenant that trade payables and
accrued expenses incurred in the ordinary course of business in the aggregate
will not exceed 1% of the outstanding principal balance of the loan. At June 30,
2004, this covenant was not met for certain mortgage agreements, of which the
aggregate principal balance at June 30, 2004 totals $20,867,0238 or 5% of the
total mortgages outstanding. The mortgage agreements provide for a cure period
of 30 days after written notification from the lenders, with a further extension
of up to 60 additional days. As of June 30, 2004 the lenders had not provided
such notice. It is uncertain as to whether the lenders will seek to enforce the
provisions of the mortgage agreements. Bel Apartments may choose not to commit
additional equity to cure certain of these technical defaults. If the lenders
pursue enforcement and a mutually acceptable arrangement with the lenders cannot
be reached, the result could be a foreclosure on some or all of those investment
properties that secure such mortgages. However, the Fund's current net
investment in Bel Apartments would not be negatively impacted if a foreclosure
on some or all of those investment properties that secure such mortgages were to
occur, based on the current valuations of the affected properties and the
related mortgages. The eventual outcome of this matter cannot be determined at
this time. The mortgages are generally without recourse to the other assets of
Bel Apartments, Belmar Capital and Belmar Realty. The technical default of
certain mortgage agreements does not affect Belmar Capital's liquidity.

Credit Facility- In August 2004 additional borrowings under the Credit Facility
in the amount of $118,500,000 were used to purchase additional interests in the
real estate investments Brazos and Cimmaron, real estate subsidiaries of Belmar
Realty. This borrowing accrues interest at a rate of one-month LIBOR plus 0.38%
per annum.

On August 4, 2004, Brazos and Cimmaron acquired a majority interest in nineteen
and twenty industrial properties, respectively (See Note 3). To finance the
Fund's investments in the properties acquired by Brazos and Cimmaron, Belmar

14

Capital increased the amount available under its credit arrangement with Merrill
Lynch Mortgage Capital, Inc. (Merrill Lynch) by $213,500,000 under a temporary
arrangement (the Temporary Arrangement) and borrowed that amount. The borrowing
under the Temporary Arrangement accrues interest at a rate of one-month LIBOR
plus 0.90% and is for a term of sixty days, subject to a thirty-day extension.
Any unused amount of the increase pertaining to the Temporary Arrangement is
subject to a commitment fee of 0.10% per annum. The assets of Belmar Capital,
excluding the assets of Bel Apartments, Bel Stamford, Brazos and Cimmaron,
secure all borrowings under the credit arrangement with Merrill Lynch.

Brazos and Cimmaron expect to obtain first mortgage financing for their
investments in real properties in the third and fourth quarters of 2004. The
proceeds from such first mortgage financing will be used to repay Belmar
Capital, and accordingly, Belmar Capital will repay its borrowings under the
Temporary Arrangement and a portion of other borrowings under the Credit
Facility.

7 Segment Information

Belmar 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, Belmar Capital invests in real estate assets
through its subsidiary, Belmar Realty. Belmar Realty invests directly and
indirectly in Partnership Preference Units and indirectly in real property
through controlled subsidiaries Bel Apartments, Bel Stamford (for the period
January 14, 2004 to June 30, 2004), Brazos and Cimmaron (See Note 1).

Management services for the real property held by Bel Apartments are provided by
an affiliate of its minority shareholder. The management agreement provides for
a management fee and allows for reimbursement of payroll and other direct
expenses incurred by the manager in conjunction with managing properties. Belmar
Realty is currently disputing certain expenditures, allocations and
reimbursements by the property manager under the management agreement.

Belmar 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:

For the Three Months Ended Tax-Managed Real
June 30, 2004 Growth Portfolio* Estate Total
- -----------------------------------------------------------------------------------------------------------------

Revenue $ 4,601,397 $ 16,762,915 $ 21,364,312
Interest expense on mortgages - (7,044,944) (7,044,944)
Interest expense on Credit Facility (288,999) (597,682) (886,681)
Operating expenses (470,215) (5,367,314) (5,837,529)
Minority interest in net loss of controlled subsidiary - 46,387 46,387
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 3,842,183 $ 3,799,362 $ 7,641,545
Net realized gain 4,218,875 2,826,150 7,045,025
Net change in unrealized appreciation (depreciation) 15,961,313 5,253,405 21,214,718
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations of
reportable segments $ 24,022,371 $ 11,878,917 $ 35,901,288
- -----------------------------------------------------------------------------------------------------------------

15

For the Three Months Ended Tax-Managed Real
June 30, 2003 Growth Portfolio* Estate Total
- -----------------------------------------------------------------------------------------------------------------
Revenue $ 3,760,662 $ 20,809,126 $ 24,569,788
Interest expense on mortgages - (3,612,337) (3,612,337)
Interest expense on Credit Facility (216,220) (1,853,653) (2,069,873)
Operating expenses (285,940) (6,036,774) (6,322,714)
Minority interest in net income of controlled
subsidiary - (94,806) (94,806)
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 3,258,502 $ 9,211,556 $ 12,470,058
Net realized gain (loss) 2,922,615 (8,378,452) (5,455,837)
Net change in unrealized appreciation (depreciation) 202,414,631 5,930,782 208,345,413
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations of
reportable segments $ 208,595,748 $ 6,763,886 $ 215,359,634
- -----------------------------------------------------------------------------------------------------------------

For the Six Months Ended Tax-Managed Real
June 30, 2004 Growth Portfolio* Estate Total
- -----------------------------------------------------------------------------------------------------------------
Revenue $ 8,506,026 $ 35,344,056 $ 43,850,082
Interest expense on mortgages - (13,599,563) (13,599,563)
Interest expense on Credit Facility (589,744) (1,533,334) (2,123,078)
Operating expenses (930,654) (11,240,431) (12,171,085)
Minority interest in net income of controlled subsidiary - (1,728) (1,728)
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 6,985,628 $ 8,969,000 $ 15,954,628
Net realized gain 11,419,204 30,252,803 41,672,007
Net change in unrealized appreciation (depreciation) 45,496,110 (31,446,758) 14,049,352
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations of
reportable segments $ 3,900,942 $ 7,775,045 $ 71,675,987
- -----------------------------------------------------------------------------------------------------------------

For the Six Months Ended Tax-Managed Real
June 30, 2003 Growth Portfolio* Estate Total
- -----------------------------------------------------------------------------------------------------------------
Revenue $ 7,402,045 $ 41,881,844 $ 49,283,889
Interest expense on mortgages - (7,160,183) (7,160,183)
Interest expense on Credit Facility (490,800) (4,269,957) (4,760,757)
Operating expenses (556,588) (11,551,328) (12,107,916)
Minority interest in net income of controlled subsidiary - (232,351) (232,351)
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 6,354,657 $ 18,668,025 $ 25,022,682
Net realized loss (4,318,937) (17,431,469) (21,750,406)
Net change in unrealized appreciation (depreciation) 129,298,443 27,199,023 156,497,466
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations of
reportable segments $ 131,334,163 $ 28,435,579 $ 159,769,742
- -----------------------------------------------------------------------------------------------------------------

Tax-Managed Real
At June 30, 2004 Growth Portfolio* Estate Total
- ----------------------------------------------------------------------------------------------------------------
Segment assets $ 1,962,258,647 $ 657,830,895 $ 2,620,089,542
Segment liabilities 86,022,534 578,334,567 664,357,101
- -----------------------------------------------------------------------------------------------------------------
Net assets of reportable segments $ 1,876,236,113 $ 79,496,328 $ 1,955,732,441
- -----------------------------------------------------------------------------------------------------------------

At December 31, 2003
- -----------------------------------------------------------------------------------------------------------------
Segment assets $ 1,966,911,184 $ 623,035,741 $ 2,589,946,925
Segment liabilities 87,378,722 549,380,252 636,758,974
- -----------------------------------------------------------------------------------------------------------------
Net assets of reportable segments $ 1,879,532,462 $ 73,655,489 $ 1,953,187,951
- -----------------------------------------------------------------------------------------------------------------

* Belmar Capital invests indirectly in Tax-Managed Growth Portfolio through
Belvedere Company.

16

The following tables reconcile the reported segment information to the condensed
consolidated financial statements for the periods indicated:

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
----------------------------------------------------------------------------------

Revenue:
Revenue from reportable segments $ 21,364,312 $ 24,569,788 $ 43,850,082 $ 49,283,889
Unallocated amounts:
Interest earned on cash not invested in
the Portfolio or in subsidiaries 191,710 33,287 382,163 56,718
----------------------------------------------------------------------------------
Total revenue $ 21,556,022 $ 24,603,075 $ 44,232,245 $ 49,340,607
----------------------------------------------------------------------------------

Net increase (decrease) in net assets from operations:
Net increase in net assets from operations of
reportable segments $ 35,901,288 $ 215,359,634 $ 71,675,987 $ 159,769,742
Unallocated amounts:
Interest earned on cash not invested
in the Portfolio or in subsidiaries 191,710 33,287 382,163 56,718

Unallocated amounts(1):
Distribution and servicing fees (913,203) (826,426) (1,852,794) (1,586,055)
Interest expense on Credit Facility (391,231) (92,324) (825,641) (147,240)
Audit, tax, and legal fees (58,051) (109,624) (112,850) (149,288)
Other operating expenses (31,198) (39,876) (51,938) (61,134)
----------------------------------------------------------------------------------
Total net increase in net assets from operations $ 34,699,315 $ 214,324,671 $ 69,214,927 $ 157,882,743
----------------------------------------------------------------------------------

June 30, 2004 December 31, 2003
-----------------------------------------
Net assets:
Net assets of reportable segments $ 1,955,732,441 $ 1,953,187,951
Unallocated cash(2) 1,567,455 5,019,018
Short-term investments(2) 35,867,000 16,973,476
Loan payable - Credit Facility(3) (88,878,476) (54,357,683)
Other liabilities (198,337) (210,905)
-----------------------------------------
Total net assets $ 1,904,090,083 $ 1,920,611,857
-----------------------------------------

(1) Unallocated amounts represent expenses incurred that pertain to the overall
operation of Belmar Capital, and do not pertain to either operating
segment.
(2) Unallocated cash and short-term investments represent cash and cash
equivalents not currently invested in the Portfolio or real estate assets.
(3) Unallocated amount of loan payable - Credit Facility primarily represents
borrowings on hand to be used for acquiring investments. However, such
borrowings have also been used to pay selling commissions, organization
expenses and other liquidity needs of the Fund.

17

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 Belmar 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 Belmar Realty Corporation (Belmar 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 Belmar Realty's controlled subsidiaries, partnership income
allocated to the income-producing preferred equity interests in real estate
operating partnerships (Partnership Preference Units) owned by Belmar 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 Belmar 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 Belmar 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 Belmar 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.

18

Fund's real estate investments held through Belmar 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 Belmar Realty's equity
equity in its real estate investments and to mitigate in part the impact of
interest rate changes on the Fund's net asset value.

The Fund's total return was 1.85% for the quarter ended June 30, 2004. This
return reflects an increase in the Fund's net asset value per share from $86.67
to $88.27 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 0.54% during the period. Last year, the Fund had a
total return performance of 14.08% for the quarter ended June 30, 2003. This
return reflected an increase in the Fund's net asset value per share from $65.78
to $75.04 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 0.54% 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 Belmar Realty. As of June 30, 2004, real estate investments
consisted primarily of a portfolio of Partnership Preference Units issued by
partnerships affiliated with publicly traded real estate investment trusts
(REITs), and four subsidiary companies: Bel Alliance Apartments, LLC (Bel
Apartments), Bel Stamford Investors, LLC (Bel Stamford), Brazos Property Trust
(Brazos) and Cimmaron Property Trust (Cimmaron). Bel Apartments, Brazos and
Cimmaron are real estate joint ventures that operate multifamily (in the case of
Bel Apartments) and industrial (in the case of Brazos and Cimmaron) properties
(Real Estate Joint Ventures). Bel Stamford owns a property subject to a
long-term triple net lease (Net Leased Property). As of June 30, 2004, the
estimated fair value of the Fund's real estate investments represented 24.1% of
the Fund's total assets on a consolidated basis. Adjusting for the minority
interests in Bel Apartments, Brazos and Cimmaron, the Fund's real estate
investments represented 33.1% of the Fund's net assets as of June 30, 2004.

During the quarter ended June 30, 2004, Belmar Realty sold Partnership
Preference Units totaling approximately $39.5 million (including sales to other
investment funds advised by Boston Management), recognizing gains of
approximately $6.1 million on the transactions. At June 30, 2004, the estimated
fair value of Belmar Realty's Partnership Preference Units totaled $169.8
million compared to $564.5 million at June 30, 2003, a net decrease of $394.7
million or 70%. While the net decrease in value was principally due to fewer
Partnership Preference Units held at June 30, 2004, the net decrease also
reflects lower per unit values of the Partnership Preference Units held at June
30, 2004 due principally 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 Belmar

19

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 $10.8 million during the quarter
ended June 30, 2004 compared to approximately $11.5 million of unrealized
appreciation during the quarter ended June 30, 2003. The net unrealized
depreciation of $10.8 million in the second quarter of 2004 consisted of
approximately $3.3 million of unrealized depreciation resulting from decreases
in per unit values of the Partnership Preference Units held by Belmar Realty at
June 30, 2004 and approximately $7.5 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 Partnership Preference Units generally can
be expected to decline. During the quarter ended June 30, 2003, 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 $3.8 million compared to $12.2 million for the quarter ended June
30, 2003, a decrease of $8.4 million or 69%. The decrease was principally due to
fewer Partnership Preference Units held on average, as well as to lower average
distribution rates on Partnership Preference Units held during the quarter ended
June 30, 2004.

On June 30, 2004, Belmar Realty's newly formed subsidiaries Brazos and Cimmaron
acquired, as their initial investments, majority interests in certain industrial
properties from ProLogis, a publicly-traded REIT, for approximately $7.8 million
and $16.4 million, respectively. ProLogis retained minority interests in the
properties. In May 2004, Belmar Realty entered into agreements with ProLogis to
form ProLogis Six Rivers Limited Partnership (Six Rivers) (in association with
subsidiaries of other investment funds advised by Boston Management) and to
merge Six Rivers with Keystone Property Trust, a publicly-traded REIT
(Keystone). The transactions contemplated by these agreements were consummated
on August 4, 2004. As a result of the transactions, Brazos and Cimmaron acquired
partnership interests in Six Rivers. In addition, ProLogis acquired minority
interests in Brazos and Cimmaron. Through their interests in Six Rivers, Brazos
and Cimmaron own a majority of the economic interests in certain industrial
properties acquired through the merger of Six Rivers and Keystone for
approximately $372.0 million and $176.4 million, respectively. As part of the
transaction on June 30, 2004, Brazos assumed first mortgage debt of
approximately $14.5 million secured by certain properties. It is anticipated
that in the third and fourth quarter of 2004 each of Brazos and Cimmaron will
obtain first mortgage financing secured by their respective properties equal to
approximately 60-65% of the property value. The Fund has provided interim
financing for Brazos and Cimmaron, as described below in "Liquidity and Capital
Resources."

Rental income from real estate operations increased to approximately $13.0
million for the quarter ended June 30, 2004 from approximately $8.7 million for
the quarter ended June 30, 2003, a net increase of $4.3 million or 49%. This net
increase was due to the acquisition of Bel Stamford in January 2004. The net
increase was partially offset by lower rental revenue for Bel Apartments. Bel
Apartment's rental income declined to approximately $8.4 million for the quarter
ended June 30, 2004 from approximately $8.7 million for the quarter ended June
30, 2003, a decrease of $0.3 million or 3%. The decline was principally due to
increased rental concessions and lower occupancy levels at the properties held
by Bel Apartments.

Belmar Realty does not record property operating expenses for Bel Stamford, as
such expenses are assumed by the tenant under the terms of the lease agreement.
Property operating expenses for Bel Apartments were approximately $4.4 million
for the quarter ended June 30, 2004 compared to approximately $4.6 million for
the quarter ended June 30, 2003, a net decrease of $0.2 million or 4% (property
operating expenses are before certain operating expenses of Belmar Realty of
approximately $1.0 million for the quarter ended June 30, 2004 and approximately
$1.4 million for the quarter ended June 30, 2003). The decline in property
operating expenses was due to a decline in property and maintenance expenses
while property tax and insurance expenses remained unchanged. 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.

Because Brazos and Cimmaron held no investments in property until June 30, 2004,
they had no significant impact on real estate operations during the quarter then
ended. As of August 4, 2004, Brazos and Cimmaron own interests in 23 and 24

20

industrial properties, respectively, which each consist of industrial
distribution properties located in eight states. ProLogis, currently the largest
REIT specializing in industrial distribution properties, provides day-to-day
operating management of these properties. The terms of the Brazos and Cimmaron
joint ventures are similar to those of the Bel Apartments joint venture. Belmar
Realty's investments in Brazos and Cimmaron will be valued in substantially the
same manner as its investment in Bel Apartments and they are subject to similar
risks, as well as risks specifically associated with industrial distribution
properties (such as changing transportation and logistics patterns and tenant
credit). The mortgage financing to be obtained by Brazos and Cimmaron will be
secured by the properties owned by each and are expected to be without recourse
to Belmar Realty, the Fund or its Shareholders. Pursuant to an agreement between
Belmar Realty and ProLogis, Belmar Realty is obligated to make capital
contributions to Brazos and Cimmaron if required to fund certain items, such as
debt service, insurance or property taxes. In 2004, industrial properties in the
United States have experienced increased demand for space after three years of
occupancy and rental rate declines in most markets. However, reduced rent levels
may continue over the near term as above-market leases mature and space is
released at current market rates. As a result, Boston Management expects that
improvements in industrial property operating performance will occur over the
longer term.

At June 30, 2004, the estimated fair value of the real properties indirectly
held through Belmar Realty was approximately $471.4 million compared to
approximately $190.6 million at June 30, 2003, a net increase of $280.8 million
or 147%. The net increase in estimated real property value was principally due
to the January 2004 acquisition of Bel Stamford, the properties acquired by
Brazos and Cimmaron on June 30, 2004 and the agreement to sell certain
properties as described below. The Fund saw unrealized appreciation in the
estimated fair value of its other real estate investments (which includes Bel
Apartments, Brazos, Cimmaron and Bel Stamford) of approximately $5.1 million
during the quarter ended June 30, 2004 compared to unrealized depreciation of
approximately $10.9 million during the quarter ended June 30, 2003.

In May 2004, Bel Apartments agreed to sell all of its multifamily residential
properties to an affiliate of the Bel Apartments' minority interest owner. Upon
consummation of the transaction, Belmar Realty is expected to receive net
proceeds of approximately $23.5 million as consideration for all of its interest
in the multifamily residential properties and expects not to retain any
contingent liabilities associated with the mortgage debt secured by the
properties or other liabilities. Concurrent with this sale, Belmar Realty has
agreed to buy the outstanding minority interest in Bel Apartments for a nominal
amount. Although there can be no assurance that the transaction will be
consummated, it is expected to close by the end of September 2004. Reflecting
the anticipated sale, an increase of approximately $5.3 million of unrealized
appreciation is reported on the Fund's unaudited financial statements for the
quarter ended June 30, 2004 included in Item 1 above.

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 $7.8 million, compared to net realized and
unrealized losses of approximately $4.2 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 $11.0 million of unrealized appreciation due to
changes in swap agreement valuations offset by $3.2 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,
unrealized appreciation of $5.4 million on swap agreement valuation changes was
offset by $9.6 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 positive contribution for the quarter ended June
30, 2003 from changes in swap valuations was due primarily to the exercise of
early termination options on a number of swap agreements and the remaining swaps
approaching their initial optional termination dates. The appreciation was
offset in part by a slight decline in swap rates.

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 3.68% for the six months
ended June 30, 2004. This return reflects an increase in the Fund's net asset
value per share from $86.28 to $88.27 and a distribution of $1.15 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 0.23% during the period. Last year, the Fund had a total return
performance of 10.00% for the six months ended June 30, 2003. This return
reflected an increase in the Fund's net asset value per share from $69.87 to
$75.04 and a distribution of $1.70 per share. For comparison, the S&P 500 had a
total return of 11.75% over the same period. The performance of the Fund
exceeded that of the Portfolio by 1.81% 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

21

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 an 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. markets 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, Belmar Realty purchased and sold certain real estate investments. As
described below, in January 2004 Belmar Realty acquired Bel Stamford. Belmar
Realty's newly formed subsidiaries, Brazos and Cimmaron, each acquired certain
industrial properties on June 30, 2004 and on August 4, 2004. In May 2004, Bel
Apartments agreed to sell all its real estate assets to an affiliate of the
minority interest holder therein. During the six months ended June 30, 2004,
Belmar Realty sold (or experienced scheduled redemptions of) Partnership
Preference Units totaling approximately $253.2 million (including sales to other
investment funds advised by Boston Management), recognizing gains of
approximately $36.5 million on the transactions.

At June 30, 2004, the estimated fair value of Belmar Realty's Partnership
Preference Units totaled $169.8 million compared to $564.5 million at June 30,
2003, a net decrease of $394.7 million or 70%. While the net decrease in value
was principally due to fewer Partnership Preference Units held at June 30, 2004,
the net decrease also reflects lower per unit values of the Partnership
Preference Units held at June 30, 2004 due principally 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 Belmar Realty during the six months 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 $38.3 million during the six
months ended June 30, 2004 compared to approximately $26.3 million of unrealized
appreciation during the six months ended June 30, 2003. The net unrealized
depreciation of $38.3 million in the first six months of 2004 consisted of
approximately $5.5 million of unrealized depreciation resulting from decreases
in per unit values of the Partnership Preference Units held by Belmar Realty at
June 30, 2004 and approximately $32.8 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 Units 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 Partnership Preference Units
generally can be expected to decline. During the six months ended June 30, 2003,
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 $10.2 million compared to $24.6 million for the six months
ended June 30, 2003, a decrease of $14.4 million or 59%. The decrease was
principally due to fewer Partnership Preference Units held on average and to
lower average distribution rates on Partnership Preference Units held during the
six months ended June 30, 2004, partially offset by a one-time special
distribution from one issuer made in connection with a restructuring of its
Partnership Preference Units.

22

In January 2004, Belmar Realty acquired Bel Stamford at a cost of $16.1 million.
Bel Stamford holds, subject to certain debt, a commercial office building and
attached facilities in Stamford, Connecticut with 682,000 square feet of
rentable space that is leased to a single investment grade-quality tenant on a
triple net basis pursuant to a non-cancelable, fixed term operating lease
expiring in December 2017, subject to renewal options extending thereafter. At
the date of the transaction, the value of the real property was $242.8 million.
The real property is financed through a mortgage loan assumed at aquistion. The
mortgage loan balance assumed at the date of the transaction was $229.7 million.
The estimated fair value of the property held through Bel Stamford on June 30,
2004 was $242.8 million.

Rental income from real estate operations increased to approximately $25.1
million for the six months ended June 30, 2004 from approximately $17.2 million
for the six months ended June 30, 2003, a net increase of $7.9 million or 46%.
This net increase was primarily due to the acquisition of Bel Stamford in
January 2004. The net increase was partially offset by lower rental revenue for
Bel Apartments. Bel Apartment's rental income declined to approximately $16.6
million for the six months ended June 30, 2004 from approximately $17.2 million
for the six month ended June 30, 2003, a decrease of $0.6 million or 4%. The
decline was principally due to increased rental concessions and lower occupancy
levels at the properties held by Bel Apartments. As noted above, Brazos and
Cimmaron acquired their initial property investments on June 30, 2004, and thus
had no significant impact on real estate operating results for the period.

Belmar Realty does not record property operating expenses for Bel Stamford, as
such expenses are assumed by the tenant under the terms of the lease agreement.
Property operating expenses for Bel Apartments were approximately $8.8 million
for the six months ended June 30, 2004 compared to approximately $8.9 million
for the six months ended June 30, 2003, a net decrease of $0.1 million or 1%
(property operating expenses are before certain operating expenses of Belmar
Realty of approximately $2.4 million for the six months ended June 30, 2004 and
approximately $2.6 million for the six months ended June 30, 2003). The decline
in property operating expenses was due to a decline in property and maintenance
expenses while property tax and insurance expenses remained unchanged. 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 Belmar Realty was approximately $471.4 million compared to
approximately $190.6 million at June 30, 2003, a net increase of $280.8 million
or 147%. The net increase in estimated real property value is principally due to
the January 2004 acquisition of Bel Stamford, the properties acquired by Brazos
and Cimmaron on June 30, 2004 and the agreement to sell Bel Apartments' assets.
The Fund saw unrealized appreciation in the estimated fair value of its other
real estate investments (which includes Bel Apartments, Brazos, Cimmaron and Bel
Stamford) of approximately $1.7 million during the six months ended June 30,
2004 compared to unrealized depreciation of approximately $12.3 million during
the six months ended June 30, 2003. Net unrealized appreciation of $1.7 million
for the six months ended June 30, 2004 is principally due to appreciation in the
value of Bel Apartments as a result of the agreement to sell its real estate
assets as discussed above.

PERFORMANCE OF INTEREST RATE SWAP AGREEMENTS. For the six months ended June 30,
2004, net realized and unrealized losses on the Fund's interest rate swap
agreements totaled approximately $1.0 million, compared to net realized and
unrealized losses of approximately $6.0 million for the six months ended June
30, 2003. Net realized and unrealized losses on swap agreements for the six
months ended June 30, 2004 consisted of $5.3 million of unrealized appreciation
due to changes in swap agreement valuations offset by $6.3 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, unrealized appreciation of $13.2 million on swap agreement valuation
changes was offset by $19.2 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 period. The positive contribution to Fund performance for
the six months ended June 30, 2003 from changes in swap valuations was primarily
due to the exercise of early termination options on a number of swap agreements
and the remaining swaps approaching their initial optional termination dates.
Swap rates declined during the six months ended June 30, 2003, offsetting some
of the appreciation from approaching early termination dates.

(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

23

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 $335.0 million and unused loan commitments of $118.5 million under
the Credit Facility.

In August 2004, the Fund made borrowings under its credit arrangement with
Merrill Lynch Mortgage Capital, Inc. (MLMC) in the amount of $118.5 million. At
that time, the Fund also temporarily increased the amount available under its
credit arrangement with MLMC by $213.5 million and borrowed that amount. The
Fund used the total proceeds from these borrowings to finance the acquisitions
by Brazos and Cimmaron of interests in certain industrial properties. The
additional $213.5 million of borrowings is at a rate of LIBOR plus 0.90% and is
for a period of up to sixty-days (subject to a 30-day extension, if needed).
Brazos and Cimmaron expect to obtain first mortgage financing for its properties
in the third and fourth quarters of 2004, the proceeds from which will be used
to repay borrowings obtained by the Fund in August 2004 to facilitate the Brazos
and Cimmaron acquisitions.

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 $7.3 million. As
of June 30, 2003, the unrealized depreciation related to the interest rate swap
agreements was approximately $33.8 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 and Net Leased
Property. 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 Belmar 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 and three 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 and Note 6
to the Fund's unaudited condensed consolidated financial statements in Item 1
above.

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 2006-2008 2009 Thereafter Total 2004
- ------------------------------------------------------------------------------------------------------------------------------------

Rate sensitive liabilities:
- ----------------------------------
Long-term debt:
- ----------------------------------
Fixed-rate mortgages $402,843,443 $402,843,443 $420,700,000

24

Estimated
Fair Value as of
June 30,
2005 2006-2008 2009 Thereafter Total 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Average interest rate 7.01% 7.01%
- ----------------------------------
Variable-rate Credit Facility $335,000,000 $335,000,000 $335,000,000

Average interest rate 1.57% 1.57%
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive derivative financial
instruments:
- ----------------------------------
Pay fixed/receive variable interest
rate swap agreements(**) $668,428,000 $668,428,000 $ 7,338,032

Average pay rate(**) 4.68% 4.68%

Average receive rate(**) 1.59% 1.59%
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive investments:
- ----------------------------------
Fixed-rate Partnership Preference Units:
- ----------------------------------
Cabot Industrial Properties, L.P.,
8.625% Series B Cumulative Redeemable
Preferred Units, Callable 4/29/04,
Current Yield: 8.55% $20,147,160 $ 20,147,160 $ 24,206,400

Camden Operating, L.P., 7% Series B
Cumulative Redeemable Perpetual
Preferred Units, Callable 12/2/08,
Current Yield: 7.29% $ 4,243,400 $ 4,243,400 $ 4,804,000

Essex Portfolio, L.P., 7.875% Series B
Cumulative Redeemable Preferred Units,
Callable 12/31/09, Current Yield: 7.82% $ 11,997,050 $ 11,997,050 $ 16,357,965

Essex Portfolio, L.P., 9.30% Series D
Cumulative Redeemable Preferred Units,
Callable 7/28/10, Current Yield: 9.16%(1) $ 6,562,950 $ 6,562,950 $ 7,614,180

MHC Operating Limited Partnership,
9% Series D Cumulative Redeemable
Perpetual Preference Units, Callable
9/29/04, Current Yield: 8.96% $20,544,240 $ 20,544,240 $ 20,088,000

PSA Institutional Partners, L.P., 6.40%
Series NN Cumulative Redeemable Perpetual
Preferred Units, Callable 3/17/10, Current
Yield: 7.04% $ 38,687,415 $ 38,687,415 $ 35,329,600

Price Development Company, L.P., 8.95%
Series B Cumulative Redeemable Preferred
Partnership Units, Callable 7/28/04,
Current Yield: 8.94% $20,085,760 $ 20,085,760 $ 20,032,000

Sun Communities Operating L.P., 8.875%
Series A Cumulative Redeemable Perpetual
Preferred Units, Callable 9/29/04,
Current Yield: 8.82% $26,227,200 $ 26,227,200 $ 30,180,000

25

Estimated
Fair Value as of
June 30,
2005 2006-2008 2009 Thereafter Total 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Vornado Realty, L.P., 7% Series D-10
Cumulative Redeemable Preferred Units,
Callable 11/17/08, Current Yield: 7.34%(2) $11,241,763 $ 11,241,763 $ 11,163,520

* The amounts listed reflect the Fund's positions as of June 30, 2004. The
Fund's current positions may differ.

** The terms disclosed are those of the interest rate swap agreements that are
in effect as of June 30, 2004. As discussed in Note 5 to the Fund's
unaudited condensed consolidated financial statements in Item 1 above,
during July 2004 certain interest rate swap agreements were terminated,
resulting in a change of the average pay rate and average receive rate to
4.53% and 1.57%, respectively.

1 On July 28, 2004, the coupon rate reset to 7.875%.

2 Belmar 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.

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, Belmar Realty and Belmar
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. 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,

26

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 101,591.51 $86.74
- ----------------------------------------------------------------
May 31, 2004 199,822.67 $85.78
- ----------------------------------------------------------------
June 30, 2004 64,908.41 $88.24
- ----------------------------------------------------------------
Total 366,322.59 $87.74
- ----------------------------------------------------------------

(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:

4.2(a) Form of Amendment No. 1 dated August 3, 2004 to Loan and Security
Agreement among the Fund, Merrill Lynch Mortgage Capital, Inc., as
Agent, the Lenders referred to therein and Merrill Lynch Capital
Services, Inc.

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

(b) Reports on Form 8-K:

None.

27

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.

BELMAR CAPITAL FUND LLC

/s/ Michelle A. Alexander
-------------------------
Michelle A. Alexander
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)

28

EXHIBIT INDEX
-------------

4.2(a) Form of Amendment No. 1 dated August 3, 2004 to Loan and Security
Agreement among the Fund, Merrill Lynch Mortgage Capital, Inc., as
Agent, the Lenders referred to therein and Merrill Lynch Capital
Services, Inc.

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

29