UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Q[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Act)For the quarterly period ended June 30, 2010[ ] Transition Report Pursuant to Section 13 or 15(d) of the ActFor the transition period from __________ to ____________Commission File Number000-30509Belcrest Capital Fund LLC(Exact Name of Registrant as Specified in Its Charter) Massachusetts
     04-3453080(State of Organization)
     (I.R.S. Employer Identification No.)Two International PlaceBoston, Massachusetts
     02110(Address of Principal Executive Offices)
     (Zip Code)Registrants Telephone Number, Including Area Code:
     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 Act during the preceding 12months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days
     
     Yes X  No __Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (¶232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the Registrant was required to submit and post such files). Yes __ No __Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reportingcompany. (See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Act).Large Accelerated FilerX
     AcceleratedFiler__
     Non-Accelerated Filer __
     Smaller Reporting Company __(Do not check if a smaller reporting company)
  Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes __ NoX




Belcrest Capital Fund LLCIndex to Form 10-QPART I. FINANCIAL INFORMATION
     PageItem 1.
     Financial Statements (Unaudited).
     3Condensed Consolidated Statements of Assets and Liabilities as of
     3June 30, 2010 and December 31, 2009Condensed Consolidated Statements of Operations for the Three Months
     4Ended June 30, 2010 and 2009 and for the Six Months Ended June 30, 2010and 2009Condensed Consolidated Statements of Changes in Net Assets for the Six Months
     6Ended June 30, 2010 and the Year Ended December 31, 2009Condensed Consolidated Statements of Cash Flows for the Six Months
     7Ended June 30, 2010 and 2009Financial Highlights for the Six Months Ended June 30, 2010 and the
     9Year Ended December 31, 2009Notes to Condensed Consolidated Financial Statements as of June 30, 2010
     10Item 2.
     Managements Discussion and Analysis of Financial Condition
     22and Results of Operations (MD&A).Item 3.
     Quantitative and Qualitative Disclosures About Market Risk.
     26Item 4.
     Controls and Procedures.
     27PART II.
     OTHER INFORMATION
     28Item 1.
     Legal Proceedings.
     28Item 1A.
     Risk Factors.
     28Item 2.
     Unregistered Sales of Equity Securities and Use of Proceeds.
     28Item 3.
     Defaults Upon Senior Securities.
     28Item 4.
     (Reserved).
     28Item 5.
     Other Information.
     28Item 6.
     Exhibits.
     29SIGNATURES
     30EXHIBIT INDEX
     31
  2




PART I. FINANCIAL INFORMATIONItem 1. Financial Statements.BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Assets and Liabilities (Unaudited)June 30, 2010
     
     December 31, 2009Assets:Investment in Belvedere Capital Fund Company LLC(Belvedere Company)
     $
     584,245,612
     $
     705,444,925Investment in Partnership Preference Units
     
     69,931,461
     
     69,274,637Investment in Real Estate Joint Ventures
     
     78,786,057
     
     72,575,344Investment in Co-owned Property
     
     1,929,337
     
     2,335,863Affiliated investment
     
     1,909,071
     
     1,338,012Total investments, at value
     $
     736,801,538
     $
     850,968,781Cash
     
     20,787
     
     1,212,932Interest receivable from affiliated investment
     
     240
     
     -Other assets
     
     417,389
     
     567,345Total assets
     $
     737,239,954
     $
     852,749,058Liabilities:Loan payable  Credit Facility
     $
     190,500,000
     $
     194,500,000Payable for Fund shares redeemed
     
     896,752
     
     568,252Interest payable for open interest rate swap agreements
     
     3,640
     
     61,852Open interest rate swap agreements, at value
     
     765,154
     
     3,241,582Payable to affiliate for investment advisory and administrative fees
     
     358,058
     
     367,161Payable to affiliate for servicing fee
     
     56,190
     
     56,209Other accrued expenses:Interest expense
     
     134,286
     
     70,764Other expenses and liabilities
     
     590,018
     
     1,206,007Total liabilities
     $
     193,304,098
     $
     200,071,827Net assets
     $
     543,935,856
     $
     652,677,231Shareholders capital
     $
     543,935,856
     $
     652,677,231Shares outstanding (unlimited number of shares authorized)
     
     7,283,721
     
     8,125,199Net asset value and redemption price per share
     $
     74.68
     $
     80.33
  See notes to unaudited condensed consolidated financial statements 3




BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Operations (Unaudited)Three Months Ended
     
     
     Six Months EndedJune 30, 2010
     
     
     June 30, 2009
     
     
     June 30, 2010
     
     
     June 30, 2009Investment Income:Dividends allocated from Belvedere Company(net of foreign taxes, $112,055, $150,393, $142,739and $165,392, respectively)
     $
     3,370,892
     
     $
     4,440,633
     
     $
     6,538,880
     
     $
     9,455,739Interest allocated from Belvedere Company
     
     2,366
     
     
     17,052
     
     
     4,448
     
     
     41,239Expenses allocated from Belvedere Company
     
     (1,052,364)
     
     
     (1,078,131)
     
     
     (2,141,511)
     
     
     (2,243,663)Net investment income allocated from Belvedere Company
     $
     2,320,894
     
     $
     3,379,554
     
     $
     4,401,817
     
     $
     7,253,315Net investment income allocated from Real Estate Joint Ventures
     
     4,528,404
     
     
     4,277,945
     
     
     8,732,589
     
     
     8,729,577Distributions from Partnership Preference Units
     
     1,515,390
     
     
     1,901,230
     
     
     3,030,781
     
     
     3,416,621Net investment income allocated from Co-owned Property
     
     145,486
     
     
     136,541
     
     
     293,474
     
     
     275,269Interest
     
     -
     
     
     10
     
     
     240
     
     
     253Interest allocated from affiliated investments
     
     1,320
     
     
     4,972
     
     
     2,526
     
     
     9,556Expenses allocated from affiliated investments
     
     (126)
     
     
     (4,411)
     
     
     (616)
     
     
     (7,710)Total investment income
     $
     8,511,368
     
     $
     9,695,841
     
     $
     16,460,811
     
     $
     19,676,881Expenses:Investment advisory and administrative fees
     $
     1,088,369
     
     $
     1,159,933
     
     $
     2,198,851
     
     $
     2,422,593Servicing fee
     
     56,189
     
     
     61,499
     
     
     115,597
     
     
     130,890Interest expense on Credit Facility
     
     1,146,818
     
     
     420,332
     
     
     1,686,390
     
     
     958,466Custodian and transfer agent fee
     
     15,617
     
     
     12,805
     
     
     29,564
     
     
     26,977Miscellaneous
     
     97,424
     
     
     148,343
     
     
     246,726
     
     
     245,224Total expenses
     $
     2,404,417
     
     $
     1,802,912
     
     $
     4,277,128
     
     $
     3,784,150Deduct Reduction of custodian and transfer agent fee
     $
     17
     
     $
     -
     
     $
     17
     
     $
     -Net expenses
     $
     2,404,400
     
     $
     1,802,912
     
     $
     4,277,111
     
     $
     3,784,150Net investment income
     $
     6,106,968
     
     $
     7,892,929
     
     $
     12,183,700
     
     $
     15,892,731
  See notes to unaudited condensed consolidated financial statements 4




BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Operations (Unaudited) (Continued)Three Months Ended
     
     
     Six Months EndedJune 30, 2010
     
     
     June 30, 2009
     
     
     June 30, 2010
     
     
     June 30, 2009Realized and Unrealized Gain (Loss)Net realized gain (loss) Investments and foreign currency transactions allocatedfrom Belvedere Company (identified cost basis)(1)
     $
     (933,500
     )
     $
     (11,978,797)
     
     $
     540,189
     
     $
     (61,957,933)Investment transactions in Partnership Preference Units(identified cost basis)
     
     19,543
     
     
     (418,032)
     
     
     39,427
     
     
     (12,749,038)Investment transactions allocated from affiliated investments
     
     24
     
     
     -
     
     
     274
     
     
     -Interest rate swap agreements(2)
     
     (1,048,186)
     
     
     (1,780,322)
     
     
     (2,781,940)
     
     
     (5,894,892)Net realized loss
     $
     (1,962,119)
     
     $
     (14,177,151)
     
     $
     (2,202,050)
     
     $
     (80,601,863)Change in unrealized appreciation (depreciation) Investments and foreign currency allocatedfrom Belvedere Company (identified cost basis)
     $
     (90,936,938)
     
     $
     98,338,504
     
     $
     (55,029,003
     )
     $
     40,097,559Investment in Partnership Preference Units(identified cost basis)
     
     592,013
     
     
     8,376,177
     
     
     1,020,552
     
     
     17,756,661Investment in Real Estate Joint Ventures
     
     17,555,400
     
     
     (62,802,441
     )
     
     4,859,814
     
     
     (102,004,076)Investment in Co-owned Property
     
     (325,000)
     
     
     (830,000
     )
     
     (700,000
     )
     
     (2,000,000)Interest rate swap agreements
     
     856,369
     
     
     1,195,417
     
     
     2,476,428
     
     
     3,380,834Net change in unrealized appreciation (depreciation)
     $
     (72,258,156)
     
     $
     44,277,657
     
     $
     (47,372,209
     )
     $
     (42,769,022)Net realized and unrealized gain (loss)
     $
     (74,220,275)
     
     $
     30,100,506
     
     $
     (49,574,259
     )
     $
     (123,370,885)Net increase (decrease) in net assets from operations
     $
     (68,113,307)
     
     $
     37,993,435
     
     $
     (37,390,559)
     
     $
     (107,478,154)
  (1)
     Amounts include net realized gain (loss) from redemptions in-kind of $(519,917), $(9,338,197), $564,841 and $(16,300,875), respectively.(2)
     Amounts include net interest incurred in connection with periodic settlement of interest rate swap agreements of $1,048,186, $1,780,322, $2,781,940 and $4,198,593, respectively (Note 8). See notes to unaudited condensed consolidated financial statements 5




BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Changes in Net Assets (Unaudited)Six Months Ended
     
     
     Year EndedJune 30, 2010
     
     
     December 31, 2009Increase (Decrease) in Net Assets:From operations Net investment income
     $
     12,183,700
     
     $
     29,876,124Net realized loss from investment transactions, foreigncurrency transactions and interest rate swap agreements
     
     (2,202,050)
     
     
     (83,700,939)Net change in unrealized appreciation (depreciation) of investments,foreign currency and interest rate swap agreements
     
     (47,372,209)
     
     
     97,581,241Net increase (decrease) in net assets from operations
     $
     (37,390,559)
     
     $
     43,756,426Transactions in Fund shares Net asset value of Fund shares issued to Shareholdersin payment of distributions declared
     $
     600,452
     
     $
     4,083,889Net asset value of Fund shares redeemed
     
     (69,944,179)
     
     
     (190,776,429)Net decrease in net assets from Fund share transactions
     $
     (69,343,727)
     
     $
     (186,692,540)Distributions Distributions to Shareholders
     $
     (2,007,089)
     
     $
     (13,268,132)Total distributions
     $
     (2,007,089)
     
     $
     (13,268,132)Net decrease in net assets
     $
     (108,741,375)
     
     $
     (156,204,246)Net assets:At beginning of period
     $
     652,677,231
     
     $
     808,881,477At end of period
     $
     543,935,856
     
     $
     652,677,231
  See notes to unaudited condensed consolidated financial statements 6




BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Cash Flows (Unaudited)Six Months EndedIncrease (Decrease) in Cash:
     
     June 30, 2010
     
     
     June 30, 2009Cash Flows From Operating Activities Net decrease in net assets from operations
     $
     (37,390,559
     )
     $
     (107,478,154
     )Adjustments to reconcile net decrease in net assets fromoperations to net cash flows provided by operating activities Net investment income allocated from Belvedere Company
     
     (4,401,817
     )
     
     (7,253,315
     )Net investment income allocated from Real Estate Joint Ventures
     
     (8,732,589
     )
     
     (8,729,577
     )Payments from Real Estate Joint Ventures
     
     7,381,690
     
     
     7,327,673Net investment income allocated from Co-owned Property
     
     (293,474
     )
     
     (275,269
     )Amortization of deferred loan costs - Credit Facility
     
     153,956
     
     
     -Increase in other assets
     
     (4,000
     )
     
     -Increase in affiliated investment and interest receivable from affiliated investment
     
     (571,025
     )
     
     (1,984,990
     )Increase (decrease) in interest payable for open interest rate swap agreements
     
     (58,212
     )
     
     37,033Decrease in payable to affiliate for investment advisory and administrative fees
     
     (9,103
     )
     
     (67,253
     )Decrease in payable to affiliate for servicing fee
     
     (19
     )
     
     (12,216
     )Increase (decrease) in accrued interest and other accrued expenses and liabilities
     
     22,533
     
     
     (33,400
     )Increases in Partnership Preference Units
     
     (933
     )
     
     (1,776
     )Proceeds from sales of Partnership Preference Units
     
     404,088
     
     
     22,803,603Decreases in investment in Belvedere Company
     
     1,500,000
     
     
     82,100,000Payment for termination of interest rate swap agreement
     
     -
     
     
     (1,696,299
     )Net interest incurred on interest rate swap agreements
     
     (2,781,940
     )
     
     (4,198,593
     )Net realized loss from investment transactions, foreign currencytransactions and interest rate swap agreements
     
     2,202,050
     
     
     80,601,863Net change in unrealized (appreciation) depreciation of investments,foreign currency and interest rate swap agreements
     
     47,372,209
     
     
     42,769,022Net cash flows provided by operating activities
     $
     4,792,855
     
     $
     103,908,352Cash Flows From Financing Activities Proceeds from Credit Facility (Note 9)
     $
     193,000,000
     
     $
     -Repayments of Credit Facility (Note 9)
     
     (197,000,000
     )
     
     (93,800,000
     )Payment for deferred loan costs - Credit Facility
     
     (575,000
     )
     
     -Payments for Fund shares redeemed
     
     (3,363
     )
     
     (385,355
     )Distributions paid to Shareholders
     
     (1,406,637
     )
     
     (9,205,776
     )Payment of Special Distributions
     
     -
     
     
     (1,044,908
     )Net cash flows used in financing activities
     $
     (5,985,000
     )
     $
     (104,436,039
     )Net decrease in cash
     $
     (1,192,145
     )
     $
     (527,687
     )Cash at beginning of period
     $
     1,212,932
     
     $
     1,761,897Cash at end of period
     $
     20,787
     
     $
     1,234,210
  See notes to unaudited condensed consolidated financial statements 7




BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Cash Flows (Unaudited) (Continued)Six Months EndedJune 30, 2010
     
     June 30, 2009Supplemental Disclosure and Non-cash Operating andFinancing Activities Interest paid on loan  Credit Facility
     $
     1,468,912
     $
     963,674Interest paid on interest rate swap agreements, net
     $
     2,840,152
     $
     4,161,560Reinvestment of distributions paid to Shareholders
     $
     600,452
     $
     4,083,889Market value of securities distributed in payment of redemptions
     $
     69,612,316
     $
     88,342,974
  See notes to unaudited condensed consolidated financial statements 8




BELCREST CAPITAL FUND LLCFinancial Highlights (Unaudited)Six Months Ended
     
     
     Year EndedJune 30, 2010
     
     
     December 31, 2009Net asset value  Beginning of period
     $
     80.330
     
     $
     74.710Income (loss) from operationsNet investment income(1)
     $
     1.580
     
     $
     3.134Net realized and unrealized gain (loss)
     
     (6.980)
     
     
     3.716Total income (loss) from operations
     $
     (5.400)
     
     $
     6.850DistributionsDistributions to Shareholders
     $
     (0.250)
     
     $
     (1.230
     )Total distributions
     $
     (0.250)
     
     $
     (1.230
     )Net asset value  End of period
     $
     74.680
     
     $
     80.330Total Return(2)
     
     **(6.77)%**(3)
     
     
     9.51
     %Ratios as a percentage of average net assetsInvestment advisory and administrative fees, servicing feeand other operating expenses(4)(5)
     
     1.53% (8)
     
     
     1.52
     %Interest and other borrowing costs(4)(6)
     
     0.55% (8)
     
     
     0.25
     %Total expenses
     
     2.08% (8)
     
     
     1.77
     %Net investment income(6)
     
     3.94% (8)
     
     
     4.53
     %Ratios as a percentage of average gross assets(7)Investment advisory and administrative fees, servicing feeand other operating expenses(4)(5)
     
     0.77% (8)
     
     
     0.77
     %Interest and other borrowing costs(4)(6)
     
     0.27% (8)
     
     
     0.12
     %Total expenses
     
     1.04% (8)
     
     
     0.89
     %Net investment income(6)
     
     1.97% (8)
     
     
     2.26
     %Supplemental DataNet assets, end of period (000s omitted)
     $
     543,936
     
     $
     652,677Portfolio turnover of Tax-Managed Growth Portfolio(9)
     
     0%(3)(10)
     
     
     2
     %
  (1)
     Calculated using average shares outstanding.(2)
     Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested.(3)
     Not annualized.(4)
     Includes the expenses of Belcrest Capital Fund LLC (Belcrest Capital) and Belcrest Realty Corporation (Belcrest Realty).(5)
     Includes Belcrest Capital's share of Belvedere Capital Fund Company LLC's allocated expenses, including those expenses allocated from Tax-Managed Growth Portfolio (the Portfolio).(6)
     Ratios do not include net interest earned or incurred in connection with interest rate swap agreements. Had such amounts been included, ratios would be lower or higher.(7)
     Average gross assets means the average daily amount of the value of all assets of Belcrest Capital (not including its investment in Belcrest Realty) plus all assets of Belcrest Realty minus the sum of their liabilities other than the principal amount of money borrowed. For this purpose, the assets and liabilities of Belcrest Realty include its ratable share of the assets and liabilities of its direct and indirect subsidiaries, real estate joint ventures and co- owned real property investments.(8)
     Annualized.(9)
     Excludes the value of portfolio securities contributed or distributed as a result of in-kind shareholder transactions. The portfolio turnover rate of the Portfolio including in-kind contributions and distributions was 1% and 3% for the six months ended June 30, 2010 and the year ended December 31, 2009, respectively.(10)
     Amounts to less than 1%. See notes to unaudited condensed consolidated financial statements 9




BELCREST CAPITAL FUND LLCas of June 30, 2010 Notes to Condensed Consolidated Financial Statements (Unaudited) 1 Basis of Presentation The condensed consolidated interim financial statements of Belcrest Capital Fund LLC (Belcrest 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 (GAAP) 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 GAAP 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 annual consolidated financial statements and notes for the year ended December 31, 2009 included in the Funds Annual Report on Form 10-K dated March 1, 2010. Results for interim periods are not necessarily indicative of those to be expected for the full fiscal year. The condensed consolidated statement of assets and liabilities at December 31, 2009 and the condensed consolidated statement of changes in net assets and the financial highlights for the year then ended have been derived from the December 31, 2009 audited financial statements but do not include all of the information and footnotes required by GAAP for complete financial statements as permitted by the instructions to Form 10-Q and Article 10 of Regulation S-X. 2 Recently Issued Accounting Pronouncement In January 2010, the Financial Accounting Standards Board issued authoritative guidance on improving disclosures about fair value measurements that is effective for annual or interim reporting periods beginning after December 15, 2009. Under the new guidance, significant transfers in and/or out of Level 1 and Level 2 of the fair value hierarchy, and the reasons for the transfers should be disclosed. The guidance has an additional requirement that is effective for reporting periods beginning after December 15, 2010. This requirement states that information about certain purchases, sales, issuances, and settlements should be disclosed on a gross basis rather than on a net basis. The adoption of the new guidance requires new disclosure to the Funds financial statements, as applicable, but will not have an impact on the Funds net asset value, financial condition or results of operations. 3 Investment and Other Valuations The Fund invests in shares of Belvedere Capital Fund Company LLC (Belvedere Company). Belvedere Companys only investment is an interest in Tax-Managed Growth Portfolio (the Portfolio), a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act), the value of which is derived from a proportional interest therein. Valuation of the Portfolios securities is discussed in Note 1A of the Portfolios Notes to Financial Statements, which are included in the Funds Annual Report on Form 10-K dated March 1, 2010.The Fund also invests in real estate investments through a controlled subsidiary, Belcrest Realty Corporation (Belcrest Realty). Such investments include preferred equity interests in real estate operating partnerships (Partnership Preference Units) affiliated with publicly traded real estate investment trusts (REITs), investments in real estate joint ventures (Real Estate Joint Ventures) and a tenancy-in-common interest in real property (Co-owned Property). The Real Estate Joint Ventures and Co-owned Property are referred to herein collectively as Subsidiary Real Estate Investments. The Fund may also invest cash on a temporary basis 10




in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund). Prior to February 2010, the Fund invested cash in Cash Management Portfolio (Cash Management). Cash Reserves Fund and Cash Management are affiliated investment companies managed by Eaton Vance Management (Eaton Vance) and Boston Management and Research (Boston Management), respectively. Boston Management is an indirect subsidiary of Eaton Vance Corp., a Maryland corporation and publicly-held holding company. Additionally, Belcrest Capital has interest rate swap agreements (Note 8). Boston Management makes valuation determinations in accordance with the Funds policies. The valuation policies followed by the Fund are as follows: Market prices for the Funds investments in Partnership Preference Units and Subsidiary Real Estate Investments are not readily available. Such investments are stated in the Funds condensed consolidated financial statements at fair value which represents the amount at which Boston Management, as manager of Belcrest Realty, believes would be received to sell an asset in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants under current market conditions. In valuing these investments, Boston Management considers relevant factors, data and information. Valuations of the Funds Partnership Preference Units and Subsidiary Real Estate Investments are inherently uncertain because they involve the use of assumptions and estimates. If the assumptions and estimates used in the valuations were to change, it could materially impact the fair value of the Funds holdings of Partnership Preference Units and Subsidiary Real Estate Investments. The fair value of property held by the Funds Subsidiary Real Estate Investments is based on appraisals provided by independent, licensed appraisers (Appraisers) and valuations, if applicable, prepared by Boston Management. The appraisals of properties are conducted by Appraisers on at least an annual basis. Appraisals of properties may be conducted more frequently than once a year if Boston Management determines that significant changes in economic circumstances, that may materially impact fair values, have occurred since the most recent appraisal. Each appraisal is conducted in accordance with the Uniform Standards of Professional Appraisal Practices (as well as other relevant standards). Boston Management reviews the appraisal of each property and generally relies on the assumptions and estimates made by the Appraiser when determining fair value. In deriving the fair value of a property, an Appraiser considers numerous factors, including the expected future cash flows from the property, recent sale prices for similar properties and, if applicable, the replacement cost of the property, in order to derive an indication of the amount that a prudent, informed purchaser-investor would pay for the property. For those properties not appraised by Appraisers in a given quarter,Boston Management will review the fair values of such properties and, if Boston Management believes it is warranted based on the appraisals of appraised properties or for other reasons, Boston Management may prepare a valuation of such properties considering results of operations, market conditions, significant changes in economic circumstances, recent independent appraisals of similar properties and/or other relevant facts or circumstances. In determining valuations, Boston Management follows a process consistent with industry practice and the practice of Appraisers, as described above. Valuations may occur more frequently than quarterly if it is determined by Boston Management that the current property valuation has changed materially since the most recent appraisal or valuation. 11




Boston Management determines the fair value of the Funds equity interest in a Real Estate Joint Venture based on an estimate of the allocation of equity interests between Belcrest Realty and the unaffiliated minority investor of the Real Estate Joint Venture (the Operating Partner). This allocation is generally calculated by a third party specialist, using current valuations of the properties owned by the Real Estate Joint Venture. The specialist uses a financial model that considers (i) the terms of the joint venture agreement relating to allocation of distributable cash flow, (ii) the expected duration of the joint venture, and (iii) the projected property values and cash flows from the properties based on estimates used in the property valuations. The estimated allocation of equity interests between Belcrest Realty and the Operating Partner of a Real Estate Joint Venture is prepared quarterly and reviewed by Boston Management. Interim allocations of equity interests may be conducted more frequently than quarterly if Boston Management determines that significant changes in economic circumstances that may materially impact the allocation of equity interests have occurred since the most recent allocation. Boston Management determines the fair value of the Funds interest in Co-owned Property by applying the Funds ownership interest to the net asset value of the Co-owned Property. The fair value of the Partnership Preference Units is based on analysis and calculations performed on at least a monthly basis by a third party service provider. The service provider calculates an estimated price and yield (before accrued distributions) for each issue of Partnership Preference Units based on descriptions of such issue provided by Boston Management and certain publicly available information including, but not limited to, the trading prices of publicly issued debt and/or preferred stock instruments of the same or similar issuers, which may be adjusted to reflect the illiquidity and other structural characteristics of the Partnership Preference Units (such as call provisions). Daily valuations of Partnership Preference Units are determined by adjusting prices from the service provider to account for accrued distributions under the terms of the Partnership Preference Units. If changes in relevant markets, events that materially affect an issuer or other events that have a significant effect on the price or yield of Partnership Preference Units occur, relevant prices or yields may be adjusted to take such occurrences into account. Boston Management reviews the analysis and calculations performed by the service provider. Boston Management generally relies on the assumptions and estimates made by the service provider when determining the fair value of the Partnership Preference Units. Cash Reserves Fund and Cash Management generally value their investment securities utilizing the amortized cost valuation technique in accordance with Rule 2a-7 under the 1940 Act, pursuant to which Cash Reserves Fund and Cash Management must comply with certain conditions. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund and Cash Management may value their investment securities based on available market quotations provided by a third party pricing service. Interest rate swap agreements are normally valued on the basis of valuations furnished daily by a third party pricing service. The valuations are based on the present value of fixed and projected floating rate cash flows over the term of the agreement. Future cash flows are discounted to their present value using swap quotations provided by electronic data services or by broker-dealers. Changes in the fair value of the Funds investments are recorded as unrealized appreciation (depreciation) in the condensed consolidated statements of operations. 12




4 Fair Value Measurements GAAP establishes a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three levels of the fair value hierarchy are described below. Level 1  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;Level 2  Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;Level 3  Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. In determining the fair value of its investments, the Fund uses appropriate valuation techniques based on available inputs. The Fund maximizes its use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. If market data is not readily available, fair value is based upon other significant unobservable inputs such as inputs that reflect the Funds own assumptions about the inputs market participants would use in valuing the investment. Investments valued using unobservable inputs are classified to the lowest level of any input that is most significant to the valuation. Thus, a valuation may be classified as Level 3 even though the valuation may include significant inputs that are readily observable. The Funds assets classified as Level 3 as of June 30, 2010 and December 31, 2009 represent 20.4% and 16.9%, respectively, of the Funds total assets. The following tables present for each of the hierarchy levels, the Funds assets and liabilities that are measured at fair value as of June 30, 2010 and December 31, 2009. Fair Value Measurements at June 30, 2010Description
     
     Total
     
     Level 1
     
     Level 2
     
     Level 3AssetsInvestment in Belvedere Company(1)
     $
     584,245,612
     $
     -
     $
     584,245,612
     $
     -Partnership Preference Units
     
     69,931,461
     
     -
     
     -
     
     69,931,461Real Estate Joint Ventures
     
     78,786,057
     
     -
     
     -
     
     78,786,057Co-owned Property
     
     1,929,337
     
     -
     
     -
     
     1,929,337Affiliated Investment
     
     1,909,071
     
     -
     
     1,909,071
     
     -Total
     $
     736,801,538
     $
     -
     $
     586,154,683
     $
     150,646,855LiabilitiesInterest Rate Swap Agreements
     $
     765,154
     $
     -
     $
     765,154
     $
     -
  (1)
     Belvedere Companys only investment is an interest in the Portfolio, a management investment company registered under the 1940 Act that invests primarily in a diversified portfolio of equity securities. Belvedere Companys investment in the Portfolio is classified as Level 1. However, because the Fund invests in the Portfolio through Belvedere Company, which is not registered under the 1940 Act, the Funds investment in Belvedere Company is classified as Level 2. The Funds investment in Belvedere Company is redeemable on a daily basis at its net asset value subject to certain restrictions of the Belvedere Company operating agreement. The fair value of the Funds investment in Belvedere Company is the Funds pro rata share of the net asset value of Belvedere Company. The transfer of the Funds investment in Belvedere Company from Level 1 to Level 2 for the six monthsended June 30, 2010 takes into consideration these items along with accounting guidance regarding fair value measurements. 13




Fair Value Measurements at December 31, 2009Description
     
     Total
     
     Level 1
     
     Level 2
     
     Level 3AssetsInvestment in Belvedere Company
     $
     705,444,925
     $
     705,444,925
     $
     -
     $
     -Partnership Preference Units
     
     69,274,637
     
     -
     
     -
     
     69,274,637Real Estate Joint Ventures
     
     72,575,344
     
     -
     
     -
     
     72,575,344Co-owned Property
     
     2,335,863
     
     -
     
     -
     
     2,335,863Affiliated Investment
     
     1,338,012
     
     1,338,012
     
     -
     
     -Total
     $
     850,968,781
     $
     706,782,937
     $
     -
     $
     144,185,844LiabilitiesInterest Rate Swap Agreements
     $
     3,241,582
     $
     -
     $
     3,241,582
     $
     -
  The following tables present the changes in the Level 3 fair value category for the three months and six months ended June 30, 2010 and 2009. Level 3 Fair Value Measurements for theThree Months Ended June 30, 2010PartnershipPreference
     
     
     Real Estate
     
     
     Co-ownedUnits
     
     Joint Ventures
     
     
     Property
     
     
     TotalBeginning balance as ofMarch 31, 2010
     $
     69,529,804
     
     $
     60,447,346
     
     $
     2,108,851
     
     $
     132,086,001Net realized gain
     
     19,543
     
     
     -
     
     
     -
     
     
     19,543Net change in unrealizedappreciation (depreciation)
     
     592,013
     
     
     17,555,400
     
     
     (325,000
     )
     
     17,822,413Net sales
     
     (209,899
     )
     
     -
     
     
     -
     
     
     (209,899
     )Net investment income(1)
     
     -
     
     
     4,528,404
     
     
     145,486
     
     
     4,673,890Other(2)
     
     -
     
     
     (3,745,093
     )
     
     -
     
     
     (3,745,093
     )Net transfers in and/or out of Level 3
     
     -
     
     
     -
     
     
     -
     
     
     -Ending balance as of June 30, 2010
     $
     69,931,461
     
     $
     78,786,057
     
     $
     1,929,337
     
     $
     150,646,855Net change in unrealizedappreciation (depreciation) frominvestments still held atJune 30, 2010
     $
     605,805
     
     $
     17,555,400
     
     $
     (325,000
     )
     $
     17,836,205
  14




Level 3 Fair Value Measurements for theThree Months Ended June 30, 2009PartnershipPreference
     
     
     Real Estate
     
     
     Co-ownedUnits
     
     Joint Ventures
     
     
     Property
     
     
     TotalBeginning balance as ofMarch 31, 2009
     $
     48,572,364
     
     $
     144,440,854
     
     $
     3,550,262
     
     $
     196,563,480Net realized loss
     
     (418,032
     )
     
     -
     
     
     -
     
     
     (418,032
     )Net change in unrealizedappreciation (depreciation)
     
     8,376,177
     
     
     (62,802,441
     )
     
     (830,000
     )
     
     (55,256,264
     )Net purchases
     
     177,672
     
     
     -
     
     
     -
     
     
     177,672Net investment income(1)
     
     -
     
     
     4,277,945
     
     
     136,541
     
     
     4,414,486Other(2)
     
     -
     
     
     (3,272,361
     )
     
     -
     
     
     (3,272,361
     )Net transfers in and/or out of Level 3
     
     -
     
     
     -
     
     
     -
     
     
     -Ending balance as of June 30, 2009
     $
     56,708,181
     
     $
     82,643,997
     
     $
     2,856,803
     
     $
     142,208,981Net change in unrealizedappreciation (depreciation) frominvestments still held atJune 30, 2009
     $
     8,309,952
     
     $
     (62,802,441
     )
     $
     (830,000
     )
     $
     (55,322,489
     )
  Level 3 Fair Value Measurements for theSix Months Ended June 30, 2010PartnershipPreference
     
     
     Real Estate
     
     
     Co-ownedUnits
     
     Joint Ventures
     
     
     Property
     
     
     TotalBeginning balance as ofDecember 31, 2009
     $
     69,274,637
     
     $
     72,575,344
     
     $
     2,335,863
     
     $
     144,185,844Net realized gain
     
     39,427
     
     
     -
     
     
     -
     
     
     39,427Net change in unrealizedappreciation (depreciation)
     
     1,020,552
     
     
     4,859,814
     
     
     (700,000
     )
     
     5,180,366Net sales
     
     (403,155
     )
     
     -
     
     
     -
     
     
     (403,155
     )Net investment income(1)
     
     -
     
     
     8,732,589
     
     
     293,474
     
     
     9,026,063Other(2)
     
     -
     
     
     (7,381,690
     )
     
     -
     
     
     (7,381,690
     )Net transfers in and/or out of Level 3
     
     -
     
     
     -
     
     
     -
     
     
     -Ending balance as of June 30, 2010
     $
     69,931,461
     
     $
     78,786,057
     
     $
     1,929,337
     
     $
     150,646,855Net change in unrealizedappreciation (depreciation) frominvestments still held atJune 30, 2010
     $
     1,046,926
     
     $
     4,859,814
     
     $
     (700,000
     )
     $
     5,206,740
  15




Level 3 Fair Value Measurements for theSix Months Ended June 30, 2009PartnershipPreference
     
     
     
     Real Estate
     
     
     Co-ownedUnits
     
     
     Joint Ventures
     
     
     Property
     
     
     TotalBeginning balance as ofDecember 31, 2008
     $
     74,502,385
     
     
     $
     183,246,169
     
     $
     4,581,534
     
     $
     262,330,088Net realized loss
     
     (12,749,038
     )
     
     
     -
     
     
     -
     
     
     (12,749,038
     )Net change in unrealizedappreciation (depreciation)
     
     17,756,661
     
     
     
     (102,004,076
     )
     
     (2,000,000
     )
     
     (86,247,415
     )Net sales
     
     (22,801,827
     )
     
     
     -
     
     
     -
     
     
     (22,801,827
     )Net investment income(1)
     
     -
     
     
     
     8,729,577
     
     
     275,269
     
     
     9,004,846Other(2)
     
     -
     
     
     
     (7,327,673
     )
     
     -
     
     
     (7,327,673
     )Net transfers in and/or out of Level 3
     
     -
     
     
     
     -
     
     
     -
     
     
     -Ending balance as of June 30, 2009
     $
     56,708,181
     
     
     $
     82,643,997
     
     $
     2,856,803
     
     $
     142,208,981Net change in unrealizedappreciation (depreciation) frominvestments still held atJune 30, 2009
     $
     4,459,512
     
     
     $       (102,004,076
     )
     $
     (2,000,000
     )
     $
     (99,544,564
     )
  (1)
     Represents net investment income recorded using the equity method of accounting.(2)
     Represents capital distributions recorded using the equity method of accounting. 5 Investment Transactions The following table summarizes the Funds investment transactions, other than short-term investments, for the six months ended June 30, 2010 and 2009. Six Months EndedInvestment Transactions
     
     June 30, 2010
     
     
     June 30, 2009Decreases in investment in Belvedere Company
     $
     71,112,316
     
     $
     170,442,974Increases in Partnership Preference Units
     $
     933
     
     $
     1,776Decreases in Partnership Preference Units
     $
     404,088
     
     $
     22,803,603Decreases in investment in Real Estate Joint Ventures
     $
     7,381,690
     
     $
     7,327,673
  16




6 Indirect Investment in the Portfolio The following table summarizes the Funds investment in the Portfolio through Belvedere Company for the six months ended June 30, 2010 and 2009, including allocations of income, expenses and net realized and unrealized gains (losses). Six Months EndedJune 30, 2010
     
     
     June 30, 2009Belvedere Companys interest in the Portfolio(1)
     $
     5,629,028,525
     
     $
     6,326,489,008The Funds investment in Belvedere Company(2)
     $
     584,245,612
     
     $
     687,366,177Income allocated to Belvedere Company from the Portfolio
     $
     62,569,237
     
     $
     86,032,598Income allocated to the Fund from Belvedere Company
     $
     6,543,328
     
     $
     9,496,978Expenses allocated to Belvedere Company from the Portfolio
     $
     15,470,225
     
     $
     15,361,088Expenses allocated to the Fund from Belvedere Company(3)
     $
     2,141,511
     
     $
     2,243,663Net realized gain (loss) from investment transactions and foreign currencytransactions allocated to Belvedere Company from the Portfolio
     $
     5,439,034
     
     $
     (566,277,763
     )Net realized gain (loss) from investment transactions and foreign currencytransactions allocated to the Fund from Belvedere Company
     $
     540,189
     
     $
     (61,957,933
     )Net change in unrealized appreciation (depreciation) of investments andforeign currency allocated to Belvedere Company from the Portfolio
     $
     (538,118,805
     )
     $
     391,848,248Net change in unrealized appreciation (depreciation) of investments andforeign currency allocated to the Fund from Belvedere Company
     $
     (55,029,003
     )
     $
     40,097,559
  (1)
     As of June 30, 2010 and 2009, the value of Belvedere Companys interest in the Portfolio represents 70.6% and 71.6% of the Portfolios net assets, respectively.(2)
     As of June 30, 2010 and 2009, the Funds investment in Belvedere Company represents 10.4% and 10.9% of Belvedere Companys net assets, respectively.(3)
     Expenses allocated to the Fund from Belvedere Company represent: Six Months EndedJune 30, 2010
     
     June 30, 2009Expenses allocated from the Portfolio
     $
     1,620,642
     $
     1,695,026Servicing fee
     $
     506,715
     $
     528,970Operating expenses
     $
     14,154
     $
     19,667
  A summary of the Portfolios Statement of Assets and Liabilities at June 30, 2010, December 31, 2009 and June 30, 2009 and its operations for the six months ended June 30, 2010, for the year ended December 31, 2009 and for the six months ended June 30, 2009 follows: June 30, 2010
     
     December 31, 2009
     
     June 30, 2009Investments, at value
     $
     7,959,822,749
     $
     9,444,013,841
     $
     8,798,281,112Other assets
     
     17,631,540
     
     39,398,248
     
     46,177,099Total assets
     $
     7,977,454,289
     $
     9,483,412,089
     $
     8,844,458,211Investment adviser fee payable
     $
     3,220,115
     $
     3,590,334
     $
     3,367,917Other liabilities
     
     657,348
     
     342,491
     
     418,975Total liabilities
     $
     3,877,463
     $
     3,932,825
     $
     3,786,892Net assets
     $
     7,973,576,826
     $
     9,479,479,264
     $
     8,840,671,319
  17




June 30, 2010
     
     
     December 31, 2009
     
     
     June 30, 2009Total investment income
     $
     88,490,921
     
     $
     214,172,161
     
     $
     118,415,469Investment adviser fee
     $
     20,916,721
     
     $
     41,375,335
     
     $
     19,920,922Other expenses
     
     953,918
     
     
     1,745,255
     
     
     907,932Total expenses
     $
     21,870,639
     
     $
     43,120,590
     
     $
     20,828,854Net investment income
     $
     66,620,282
     
     $
     171,051,571
     
     $
     97,586,615Net realized gain (loss) from investmenttransactions and foreign currencytransactions(1)
     
     86,327,876
     
     
     (446,364,875
     )
     
     (581,145,577
     )Net change in unrealized appreciation(depreciation) of investments andforeign currency
     
     (842,681,069
     )
     
     2,039,540,383
     
     
     385,653,299Net increase (decrease) in net assetsfrom operations
     $
     (689,732,911
     )
     $
     1,764,227,079
     
     $
     (97,905,663
     )
  (1)
     Amounts include net realized gain (loss) from redemptions in-kind of $86,419,296, $(67,236,452) and $(94,639,592), respectively. 7 Investment in Real Estate Joint Ventures At June 30, 2010 and December 31, 2009, Belcrest Realty held investments in two Real Estate Joint Ventures, Lafayette Real Estate LLC (Lafayette) and Allagash Property Trust (Allagash). Belcrest Realty held a majority economic interest of 67.6% and 68.9% in Lafayette and 88.7% and 87.1% in Allagash as of June 30, 2010 and December 31, 2009, respectively. Lafayette owns office properties and Allagash owns industrial distribution properties. Combined and condensed financial data of the Real Estate Joint Ventures is presented below. June 30, 2010
     
     December 31, 2009Investment in real estate
     $
     656,475,000
     $
     645,699,200Other assets
     
     13,840,803
     
     14,638,408Total assets
     $
     670,315,803
     $
     660,337,608Mortgage notes payable, at face(1)
     $
     554,341,651
     $
     552,859,762Other liabilities
     
     8,804,019
     
     9,991,469Total liabilities
     $
     563,145,670
     $
     562,851,231Shareholders equity
     $
     107,170,133
     $
     97,486,377Total liabilities and shareholders equity
     $
     670,315,803
     $
     660,337,608
  (1)
     The mortgage notes payable generally cannot be prepaid or otherwise disposed of without incurring a substantial prepayment penalty. The Real Estate Joint Ventures generally have no current plans to prepay or otherwise dispose of the mortgage notes payable without the sale of the related real property.  18


Three Months Ended
     
     
     Six Months EndedJune 30, 2010
     
     June 30, 2009
     
     
     June 30, 2010
     
     June 30, 2009Revenues
     $
     19,924,064
     $
     20,004,199
     
     $
     40,397,577
     $
     40,412,844Expenses
     
     14,086,882
     
     14,404,211
     
     
     29,082,423
     
     29,058,378Net investment income beforeunrealized appreciation (depreciation)
     $
     5,837,182
     $
     5,599,988
     
     $
     11,315,154
     $
     11,354,466Change in net unrealized appreciation(depreciation)
     
     22,737,266
     
     (76,499,420)
     
     
     6,887,653
     
     (134,243,423)Net increase (decrease) in net assetsresulting from operations
     $
     28,574,448
     $
     (70,899,432)
     
     $
     18,202,807
     $
     (122,888,957)
  On July 1, 2010, Belcrest Realty entered into an agreement to sell its interest in Allagash to a third party.  The agreement is subject to several conditions and there can be no assurance that the transaction will be consummated. 8 Interest Rate Swap Agreements Belcrest Capital has entered into interest rate swap agreements with Merrill Lynch Capital Services, Inc. to fix the cost of a portion of its borrowings under the Credit Facility (Note 9). Pursuant to the agreements, Belcrest Capital makes periodic payments to the counterparty at predetermined fixed rates in exchange for floating rate payments that fluctuate with the one-month London Interbank Offered Rate (LIBOR). 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. The risks of interest rate swap agreements include changes in market conditions that will affect the value of the agreement or the cash flows and the possible inability of the counterparty to fulfill its obligations under the agreement. Belcrest Capitals maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the agreements remaining life, to the extent that the amount is positive. See Note 3 for additional information. The following table summarizes Belcrest Capitals interest rate swap agreements. Liability Derivatives atDerivatives Not Designated as Hedging Instruments
     
     June 30, 2010
     
     December 31, 2009Notional amount(1)
     $
     3,870,000
     
     $
     214,835,000Average notional amount during the respective period
     $
     149,998,000
     
     $
     234,970,000Weighted average fixed interest rate
     
     6.29%
     
     
     4.09%Floating rate
     
     LIBOR + 0.30%
     
     
     LIBOR + 0.30%Initial optional termination date
     
     
     
     
     3/2010Final termination dates
     
     7/2015
     
     
     6/2010  7/2015Fair value
     $
     (765,154)
     
     $
     (3,241,582)
  9 Debt Credit Facility  On March 24, 2010, Belcrest Capital terminated and repaid its credit arrangements with Dresdner Kleinwort Holdings I, Inc. and Merrill Lynch Mortgage Capital, Inc. using proceeds from its credit arrangement with Bank of America (the Credit Facility). The Credit Facility has a minimum initial term of 540 days but may be terminated by the lender any time thereafter upon 180 days notice. Belcrest Capital may terminate the Credit Facility upon 30 days notice subject to an early termination fee. 19




The aggregate amount available for borrowing under the Credit Facility is $230,000,000. At June 30, 2010, Belcrest Capital had outstanding borrowings under the Credit Facility of $190,500,000. The fair value of the Credit Facility approximates its carrying value. Belcrest Capital pays a rate of interest equal to three-month LIBOR plus 1.75% per annum on outstanding borrowings under the Credit Facility. A loan structure fee equal to 0.25% of the total amount available under the Credit Facility was paid at closing and is amortized over the term of the Credit Facility. A commitment fee is paid on the unused commitment amount equal to 0.25% per annum from January 1, 2010 through March 24, 2010 and 0.40% per annum thereafter. Belcrest Capital will incur an additional fee if outstanding borrowings fall below certain levels. Obligations under the Credit Facility are without recourse to shareholders. Belcrest Capital is required under the Credit Facility to maintain at all times a specified asset coverage ratio. The rights of the lender to receive payments of interest on and repayments of principal of borrowings are senior to the rights of shareholders. Under the terms of the Credit Facility, Belcrest Capital is not permitted to make distributions of cash or securities while there is outstanding any event of default under the Credit Facility. During such periods, Belcrest Capital would not be able to honor redemption requests or make cash distributions. The Credit Facility is secured by a pledge of Belcrest Capitals assets, excluding the Funds real estate investments. Borrowings under the Credit Facility have been used to purchase the Funds interests in real estate investments, to pay selling commissions and organizational expenses and to provide for the liquidity needs of the Fund. Additional borrowings under the Credit Facility may be made in the future for these purposes. Average Borrowings and Average Interest Rate  During the six months ended June 30, 2010, the average balance of borrowings under the Credit Facility was approximately $192,700,000 with a weighted average interest rate of 1.75%. The weighted average interest rate includes all costs of borrowings under the Credit Facility. 10 Segment Information Belcrest 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 by its investment adviser to be high in quality and attractive in their long-term investment prospects. The Funds investment income includes the Funds pro rata share of Belvedere Companys net investment income. Separate from its investment in Belvedere Company, Belcrest Capital invests in real estate investments through Belcrest Realty. The Funds investment income from real estate investments primarily consists of distribution income from Partnership Preference Units, and net investment income from Real Estate Joint Ventures and Co-owned Property. Belcrest 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 the net change in unrealized appreciation (depreciation). 20




The Funds Credit Facility borrowings and related interest expense are centrally managed by the Fund. A portion of the Credit Facility borrowings and related interest expense have been approximated and allocated to the real estate segment for presentation purposes herein. Credit Facility borrowings allocated to the real estate segment primarily represent estimated net amounts borrowed to purchase the Funds interest in real estate investments. The Funds interest rate swap agreement balances are presented as part of the real estate segment for presentation purposes herein. The accounting policies of the reportable segments are the same as those for Belcrest Capital on a consolidated basis. No reportable segments have been aggregated. Reportable information by segment is as follows: Three Months Ended
     
     
     Six Months EndedJune 30, 2010
     
     
     June 30, 2009
     
     
     June 30, 2010
     
     
     June 30, 2009Investment incomeThe Portfolio*
     $
     2,320,894
     
     $
     3,379,554
     
     $
     4,401,817
     
     $
     7,253,315Real Estate
     
     6,189,280
     
     
     6,315,716
     
     
     12,056,844
     
     
     12,421,467Unallocated
     
     1,194
     
     
     571
     
     
     2,150
     
     
     2,099Total investment income
     $
     8,511,368
     
     $
     9,695,841
     
     $
     16,460,811
     
     $
     19,676,881Net increase (decrease) in netassets from operationsThe Portfolio*
     $
     (89,788,777)
     
     $
     89,505,411
     
     $
     (50,578,492)
     
     $
     (15,089,410)Real Estate
     
     21,899,149
     
     
     (51,340,029)
     
     
     13,594,274
     
     
     (92,029,628)Unallocated
     
     (223,679)
     
     
     (171,947)
     
     
     (406,341)
     
     
     (359,116)Net increase (decrease) in netassets from operations
     $
     (68,113,307)
     
     $
     37,993,435
     
     $
     (37,390,559)
     
     $
     (107,478,154)June 30, 2010
     
     December 31, 2009Net assetsThe Portfolio*
     $
     583,275,646
     
     $
     704,791,545Real Estate
     
     (26,041,388)
     
     
     (39,343,736)Unallocated(1)
     
     (13,298,402)
     
     
     (12,770,578)Net assets
     $
     543,935,856
     
     $
     652,677,231
  *
     Belcrest Capital invests indirectly in the Portfolio through Belvedere Company.(1)
     Amounts include unallocated liabilities, net of unallocated assets. Unallocated liabilities primarily consist of outstanding Credit Facility borrowings that are used to finance ongoing operations of the Fund and are not allocable to reportable segments. As of June 30, 2010 and December 31, 2009, such borrowings totaled approximately $14,989,000.Unallocated assets primarily consist of direct cash held by the Fund and the Funds investment in Cash Reserves Fund and Cash Management. As of June 30, 2010 and December 31, 2009, such amounts totaled approximately $1,930,000 and $2,596,000, respectively. 21




Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A). The information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the Act). 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 Belcrest 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. MD&A for the Quarter Ended June 30, 2010 Compared to the Quarter Ended June 30, 2009.(1) Performance of the Fund.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 S&P 500 Index (the Index) as the Funds primary performance benchmark. The Index is a broad-based, unmanaged index of common stocks commonly 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 Tax-Managed Growth Portfolio (the Portfolio). The Fund invests in the Portfolio through its interest in Belvedere Capital Fund Company LLC (Belvedere Company). The Funds performance will differ from that of the Portfolio primarily due to its investments outside the Portfolio. In measuring the performance of the Funds real estate investments, 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 borrowings 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 a portion of its borrowings under the Credit Facility (described under "Liquidity and Capital Resources" below). The Funds total return was -11.87% for the quarter ending June 30, 2010. This return reflects a decrease in the Funds net asset value per share from $84.74 to $74.68. The total return of the Index was -11.43% over the same period. Last year, the Fund had a total return of 6.09% for the quarter ending June 30, 2009. This return reflected an increase in the Funds net asset value per share from $59.93 to $63.58. The Index had a total return of 15.91% over the same period. Performance of the Portfolio.The Portfolio invests on a long-term basis in a broadly diversified portfolio consisting primarily of common stocks of established growth companies. For the quarter ending June 30, 2010, the Portfolio had a total return of -13.17% underperforming the Index, its benchmark, which had a total return of -11.43%. For comparison, the total return of the Portfolio in the second quarter of 2009 was 14.26% compared to the 15.91% return of the Index during the period. In a stark reversal from the first quarter, all ten of the economic sectors represented in the S&P 500 Index registered declines. Defensive areas generally held up better than those with cyclical exposure. The utilities, telecommunication services and consumer staples groups were the only sectors that declined less than 10% in the quarter. During the quarter, weakness in select pockets of the Portfolio hurt return comparisons in the form of security selection. Areas of relative strength in the Portfolio included not only the more defensive consumer staples group, in which the Portfolio held a modest overweight, but also the consumer discretionary and materials sectors. Relative gains were greatest in the two consumer sectors where positions in a number of large leading consumer-brand companies added value. In materials, avoidance of an agricultural biotechnology company lifted relative results. Weakness among Portfolio holdings in the energy and financials sectors dragged on return comparisons during the quarter. Global growth concerns and the oil spill in the Gulf of Mexico broadly impacted the energy sector and the Portfolio was not left unscathed as positions in the exploration and production, oil services, and integrated oil industries underperformed. In financials, a European bank holding and two capital markets related positions were laggards. 1 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. Total returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested except for special distributions. Performance is for the stated time period only and is not annualized; due to market volatility, current performance of the Fund and of the Portfolio may be lower or higher than the quoted return. The performance of the Fund and the Portfolio is compared to that of their benchmark, the Index. It is not possible to invest directly in an index. 22




The Portfolio remains broadly diversified across economic sectors, industries and individual stock selections. At June 30, 2010, the Portfolios most substantive overweights were in the industrials, health care, and information technology sectors. The most meaningful underweights were held in financials, utilities, and telecommunication services. Performance of Real Estate Investments.The Funds real estate investments are held through Belcrest Realty Corporation (Belcrest Realty). As of June 30, 2010, real estate investments included: two real estate joint ventures (Real Estate Joint Ventures), Allagash Property Trust (Allagash) and Lafayette Real Estate LLC (Lafayette); a tenancy-in-common interest in real property (Co-owned Property), Bel Stamford I LLC (Bel Stamford I); and a portfolio of preferred equity interests in real estate operating partnerships (Partnership Preference Units) affiliated with publicly traded real estate investment trusts. Allagash owns industrial distribution properties, Lafayette owns office properties and Bel Stamford I owns an interest in an office property leased to a single tenant.  On July 1, 2010, Belcrest Realty entered into an agreement to sell its interest in Allagash to a third party.  The agreement is subject to several conditions and there can be no assurance that the transaction will be consummated. The Funds real estate investments produced positive returns for the quarter ending June 30, 2010, due primarily to increases in the fair value of Lafayette and tothe net investment income generated during the quarter. The first half of the year saw a return of investor interest to commercial real estate investments, helping to ease value declines in the asset class. However, transaction activity has remained at historically low levels and limited generally to high quality properties concentrated in certain core markets. While attractive debt financing is now becoming more available for certain property types (especially among multifamily properties), commercial real estate values remain heavily dependent on the willingness of lenders to restructure existing loans and to make new loans on attractive terms. Significant uncertainty remains on commercial real estate investment values and the asset class may continue to face pressure from declining rental rates, thechallenge of maintaining occupancy levels, availability of debt financing and apotential increase in distressed property transactions. The fair value of Partnership Preference Units were generally flat from March 31, 2010. During the quarter ending June 30, 2010, the Funds net investment income from real estate investments was approximately $6.2 million compared to approximately $6.3 million for the quarter ending June 30, 2009, a decrease of $0.1 million, or 2%. During the quarter ending June 30, 2009, the Funds net investment income from real estate investments decreased due to lower distributions from investments in Partnership Preference Units due principally to fewer average holdings of Partnership Preference Units held during the quarter, partially offset by the acquisition of Bel Stamford I in June 2008. Performance of Interest Rate Swap Agreements.For the quarter ending June 30, 2010, net realized and unrealized losses on the Funds interest rate swap agreements totaled approximately $0.2 million, compared to approximately $0.6 million of net realized and unrealized losses for the quarter ending June 30, 2009. Net realized and unrealized losses on swap agreements for the quarter ending June 30, 2010 consisted of $1.1 million of periodic net payments made pursuant to outstanding swap agreements (and classified as net realized losses on interest rate swap agreements in the Funds unaudited condensed consolidated financial statements), partially offset by $0.9 million of net unrealized gains due to changes in swap agreement valuations. For the quarter ending June 30, 2009, net realized and unrealized losses on swap agreements consisted of $1.8 million of periodic net payments made pursuant to outstanding swap agreements, partially offset by $1.2 million of net unrealized gains due to changes in swap agreement valuations. The positive contribution to Fund performance from changes in swap agreement valuations for the quarter ending June 30, 2010 was attributable to a decrease in the remaining term of the agreements and a decrease in the outstanding notional balance. The positive contribution to Fund performance from changes in swap agreement valuations for the quarter ending June 30, 2009 was attributable to an increase in swap rates during the period and a decrease in the remaining term of the agreements. MD&A for the Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009.(1) Performance of the Fund.The Funds total return was -6.77% for the six months ending June 30, 2010. This return reflects a decrease in the Funds net asset value per share from $80.33 to $74.68 and a distribution of $0.25 per share during the period. The total return of the Index was -6.65% over the same period. Last year, the Fund had a total return of -13.36% for the six months ending June 30, 2009. This return reflected a decrease in the Funds net asset value per share from $74.71 to $63.58 and a distribution of $1.23 per share during the period. The Index had a total return of 3.19% over the same period. Performance of the Portfolio.Extreme volatility defined the domestic equity markets during the six months ending June 30, 2010, amid a flurry of unsettling developments around the globe. Concerns about sovereign debt in the euro zone, credit 23




tightening in China and a disastrous oil spill in the Gulf of Mexico, among other events, sent many investors back to the sidelines, reducing their exposure to risk-sensitive assets, especially those tied to the global growth theme. These disruptions contributed to a sharp sell-off in the equity markets in May, and while domestic equities regained some of this lost ground in early June, the Index ended the six-month period lower than where it began. Value stocks outperformed growth stocks across all market capitalization. Mid- and small-cap stocks outperformed large-caps, although returns were in negative territory across all categories. For the six months ending June 30, 2010, the Portfolio had a total return of -8.08% underperforming the Index, its benchmark, which had a total return of -6.65%. For comparison, the total return of the Portfolio for the six months ending June 30, 2009 was 1.25% compared to the 3.19% return of the Index during the period. Each of the ten economic sectors represented in the Index posted negative returns for the period, with most of the losses coming in the second quarter of 2010. Consumer discretionary, consumer staples, industrials and financials registered the smallest decreases, at less than 5% each. Energy, materials and information technology were hit the hardest. The Portfolios underperformance of the Index was a function of security selection, most notably in the oil and gas industry, where its holdings were impacted by the oil spill in the Gulf of Mexico. Among the financials sector, the Portfolios investments within the commercial banks and diversified financial services industries lagged those represented by the Index. Making a positive contribution to the Portfolios relative performance were proper emphasis of the consumer staples sector, particularly within less-cyclical food products and beverages industries and selectiveness within specialty retail and textile apparel industries of the consumer discretionary sector. Additionally, the Portfolio benefited from an underweight of the lagging materials, telecommunications and utilities sectors. Performance of Real Estate Investments.The Funds real estate investments produced positive returns during the period due primarily to increases in the fair value of Lafayette and tothe net investment income generated during the period. The first half of the year saw a return of investor interest to commercial real estate investments, helping to ease value declines in the asset class. However, transaction activity has remained at historically low levels and limited generally to high quality properties concentrated in certain core markets. While attractive debt financing is now becoming more available for certain property types (especially among multifamily properties), commercial real estate values remain heavily dependent on the willingness of lenders to restructure existing loans and to make new loans on attractive terms. Significant uncertainty remains on commercial real estate investment values and the asset class may continue to face pressure from declining rental rates, thechallenge of maintaining occupancy levels, availability of debt financing and apotential increase in distressed property transactions. The fair value of Partnership Preference Units were generally flat during the period. During the six months ending June 30, 2010, Belcrest Realty did not acquire or dispose of any real estate investments. During the six months ending June 30, 2009, Belcrest Realty sold certain of its Partnership Preference Units for approximately $22.8 million (representing a sale to the issuer of such Partnership Preference Units), recognizing a loss of approximately $12.7 million on the sale transaction. During the six months ending June 30, 2010, the Funds net investment income from real estate investments was approximately $12.1 million compared to approximately $12.4 million for the six months ending June 30, 2009, a decrease of $0.3 million, or 2%. The decrease was due principally to lower distributions from investments in Partnership Preference Units due to fewer average holdings of Partnership Preference Units during the period. During the six months ending June 30, 2009, the Funds net investment income from real estate investments decreased due to fewer average holdings of Partnership Preference Units during the period, partially offset by the acquisition of Bel Stamford I in June 2008. The fair value of the Funds real estate investments was approximately $150.6 million at June 30, 2010 compared to approximately $144.2 million at December 31, 2009, a net increase of $6.4 million, or 4%. This net increase was due principally to an increase in the fair value of Belcrest Realtys investment in Lafayette. Performance of Interest Rate Swap Agreements.For the six months ending June 30, 2010, net realized and unrealized losses on the Funds interest rate swap agreements totaled approximately $0.3 million, compared to net realized and unrealized losses of approximately $2.5 million for the six months ending June 30, 2009. Net realized and unrealized losses on swap agreements for the six months ending June 30, 2010 consisted of $2.8 million of periodic net payments made pursuant to outstanding swap agreements (and classified as net realized losses on interest rate swap agreements in the Funds unaudited 24




condensed consolidated financial statements), partially offset by $2.5 million of net unrealized gains due to changes in swap agreement valuations. For the six months ending June 30, 2009, net realized and unrealized losses on swap agreements consisted of $4.2 million of periodic net payments made pursuant to outstanding swap agreements and $1.7 million of net realized losses due to the early termination of a certain swap agreement, partially offset by $3.4 million of net unrealized gains consisting of approximately $1.7 million of net unrealized gains resulting from the recharacterization of previously recorded unrealized depreciation as realized losses due to the early termination of a certain swap agreement referenced above and approximately $1.7 million due to changes in swap agreement valuations. The positive contribution to Fund performance from changes in swap agreement valuations for the six months ending June 30, 2010 was attributable to a decrease in the remaining term of the agreements and a decrease in the outstanding notional balance. The positive contribution to Fund performance from changes in swap agreement valuations for the six months ending June 30, 2009 was attributable to an increase in swap rates during the period and a decrease in the remaining term of the agreements. Liquidity and Capital Resources. Outstanding Borrowings.On March 24, 2010 (the Refinancing Date), the Fund terminated and repaid its credit arrangements with Dresdner Kleinwort Holdings I, Inc. and Merrill Lynch Mortgage Capital, Inc. using the proceeds from its credit arrangement with Bank of America (the Credit Facility). The Credit Facility has a minimum initial term of 540 days but may be terminated by the lender any time thereafter upon 180 days notice. The Fund may terminate the Credit Facility upon 30 days notice subject to an early termination fee. The Fund may borrow up to $230.0 million under the Credit Facility (the Facility Limit) to finance its real estate investments, pay ordinary course Fund expenses and provide for ongoing liquidity needs of the Fund. Any increase in the Facility Limit will be subject to lender consent and may result in a change to the terms of the Credit Facility including to the interest rates and fees paid thereunder. As of June 30, 2010, the Fund had outstanding borrowings under the Credit Facility of $190.5 million and the unused portion of the Facility Limit equaled $39.5 million. The Fund pays a rate of interest equal to the three-month London Interbank Offered Rate (LIBOR) plus 1.75% per annum on outstanding borrowings under the Credit Facility. A loan structure fee equal to 0.25% of the total amount available under the Credit Facility was paid at closing. A commitment fee is paid on the amount of the undrawn portion of the Facility Limit equal to 0.25% per annum from January 1, 2010 through the Refinancing Date and 0.40% per annum thereafter. The Fund will incur an additional fee if outstanding borrowings fall below certain levels. Obligations under the Credit Facility are without recourse to shareholders. The Fund is required under the Credit Facility to maintain at all times a specified asset coverage ratio. To comply with the terms of the Credit Facility, the Fund may be required to dispose of assets on unfavorable terms if market fluctuations or other factors reduce the required asset coverage to less than the prescribed amount. The rights of the lenders under the Credit Facility to receive payments of interest on and repayments of principal of borrowings are senior to the rights of the shareholders. Under the terms of the Credit Facility, the Fund is not permitted to make distributions of cash or securities while there is outstanding any event of default under the Credit Facility. During such periods, the Fund would not be able to honor redemption requests or make cash distributions. The Credit Facility is secured by a pledge of the Funds assets, excluding the Funds real estate investments. Following an event of default under the Credit Facility, the lender could elect to sell pledged assets of the Fund without regard to the tax or other consequences of such action for the shareholders. The Fund has entered into interest rate swap agreements with Merrill Lynch Capital Services, Inc. to fix the cost of a portion of its borrowings under the Credit Facility. Pursuant to the agreements, the Fund makes periodic payments to the counterparty at predetermined fixed rates in exchange for floating rate payments that fluctuate with one-month LIBOR. Changes in the underlying values of the outstanding interest rate swap agreements are recorded as unrealized appreciation or depreciation in the unaudited condensed consolidated statements of operations. As of June 30, 2010, the accumulated unrealized depreciation related to the interest rate swap agreements was approximately $0.8 million. As of December 31, 2009, the accumulated unrealized depreciation related to the interest rate swap agreements was approximately $3.2 million. 25




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 Credit Facility and by fixed-rate mortgage notes secured by the real property of the Real Estate Joint Ventures and Co-owned 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 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 a portion of its borrowings under the Credit Facility. Pursuant to the agreements, the Fund makes periodic payments to the counterparty at predetermined fixed rates in exchange for floating rate payments that fluctuate with one-month LIBOR. The Funds interest rate swap agreements will generally increase in value when interest rates rise and decrease in value when interest rates fall. In the future, the Fund may use other interest rate hedging arrangements (such as caps, floors and collars) to fix or limit borrowing costs. The use of interest rate hedging arrangements is a specialized activity that can expose the Fund to significant loss. The following table summarizes the contractual maturities and weighted-average interest rates associated with the Funds significant non-trading financial instruments. The Fund has no market risk sensitive instruments held for trading purposes. This information should be read in conjunction with Notes 8 and 9 to the Funds unaudited condensed consolidated financial statements in Item 1. Interest Rate SensitivityCost, Principal (Notional) Amountby Contractual Maturity and Callable Datefor the Twelve Months Ended June 30 ,* Fair Value asof June 30,20102011
     
     2012
     
     2013
     2014
     2015
     
     Thereafter
     
     
     TotalRate sensitive liabilities:Long-term debt:Variable-rate Credit Facility
     
     
     $190,500,000
     
     
     
     
     
     
     $190,500,000
     $190,500,000Average interest rate
     
     
     
     2.28%
     
     
     
     
     
     
     
     2.28%Rate sensitive derivativefinancial instruments:Pay fixed/receivevariable interest rateswap agreements(1)
     
     
     
     
     
     
     
     
     $3,870,000
     $3,870,000
     $(765,154)Average pay rate
     
     
     
     
     
     
     
     
     
     6.29%
     
     6.29%Average receive rate
     
     
     
     
     
     
     
     
     
     0.65%
     
     0.65%Rate sensitiveInvestments:Fixed-rate PartnershipPreference Units:Essex Portfolio, L.P.,7.875% Series BCumulative RedeemablePreferred Units,Callable 12/31/09,Current Yield: 9.19%
     $15,209,090
     
     
     
     
     
     
     
     
     $15,209,090
     $12,849,660
  26




Fair Value asof June 30,2011
     2012
     2013
     2014
     2015
     Thereafter
     
     Total
     
     2010Liberty PropertyLimited Partnership,7.45% Series BCumulative RedeemablePreferred Units,Callable 8/31/09,Current Yield 9.20%
     $6,250,000
     
     
     
     
     
     $6,250,000
     $5,060,000MHC Operating LimitedPartnership, 8.0625%Series D CumulativeRedeemable PerpetualPreference Units,Callable 3/24/10,Current Yield: 10.30%
     $37,500,000
     
     
     
     
     
     $37,500,000
     $29,355,000MHC Operating LimitedPartnership, 7.95%Series F CumulativeRedeemable PerpetualPreference Units,Callable 6/30/10,Current Yield: 10.30%
     $17,500,000
     
     
     
     
     
     $17,500,000
     $13,510,000Vornado Realty L.P., 7%Series D-10 CumulativeRedeemable Preferred Units,Callable 11/17/08,Current Yield 9.17%(1)
     $8,271,142
     
     
     
     
     
     $8,271,142
     $9,156,801
  *
     The amounts listed reflect the Funds positions as of June 30, 2010. The Funds current positions may differ.
(1) Belcrest Realtys interest in these Partnership Preference Units is held through Bel Holdings LLC. Risks of Interest Rate Swap Agreements.The risks of interest rate swap agreements include changes in market conditions that will affect the value of the agreement or the cash flows and the possible inability of the counterparty to fulfill its obligations under the agreement. Interest rate swap agreements may be difficult to value and may be illiquid. The Funds maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the agreements remaining life, to the extent that amount is positive. Item 4. Controls and Procedures. Fund Governance.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 Audit Committee of 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. Disclosure Controls and Procedures.Eaton Vance, as the Funds manager, evaluated the effectiveness of the Funds disclosure controls and procedures (as defined by Rule 13a-15(e) of the 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. The Funds disclosure controls and procedures are the controls and other procedures that the Fund designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Based on that evaluation, the Funds Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2010, the Funds disclosure controls and procedures were effective. 27




Internal Control Over Financial Reporting.There were no changes in the Funds internal control over financial reporting that occurred during the quarter ending June 30, 2010 that have materially affected or are reasonably likely to materially affect 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 and its subsidiaries may become involved in legal proceedings, the Fund is not aware of any material pending legal proceedings to which they are subject. Item 1A. Risk Factors. There have been no material changes from risk factors as previously disclosed in the Funds Form 10-K for the year ending December 31, 2009 in response to Item 1A to Part I of Form 10-K. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. As described in the Funds Annual Report on Form 10-K for the year ending December 31, 2009, shares of the Fund generally may be redeemed on any business day. The redemption price will be based on the net asset value next computed after receipt by the Fund of a written redemption request from a shareholder, including a proper form of signature guarantee and such other documentation the Fund and the transfer agent may then require. The Fund may, at its discretion, accept redemption requests submitted by facsimile transmission, although an original letter of instruction and supporting documents must be delivered before proceeds are delivered. Once accepted, a redemption request may not be revoked without the consent of the Fund. Settlement of redemptions will ordinarily occur within five business days of receipt by the Funds transfer agent of the original redemption request in good order, and (if applicable) promptly following registration and processing of stock certificates by the transfer agent of the issuer of the distributed securities. The right to redeem is available to all shareholders and all outstanding Fund shares generally are eligible for redemption. During each month in the quarter ending June 30, 2010, the total number of shares redeemed and the average price paid per share were as follows: Total No. of Shares
     
     Average Price PaidMonth Ending
     Redeemed(1)
     
     Per ShareApril 30, 2010
     313,581.095
     
     $86.57May 31, 2010
     88,572.704
     
     $79.82June 30, 2010
     89,550.268
     
     $77.44Total
     491,704.067
     
     $80.62
  (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. (Reserved).Item 5. Other Information.None. 28




Item 6. Exhibits. (a)
     The following is a list of all exhibits filed as part of this Form 10-Q:31.1
     Certification Pursuant to 18 U.S .C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
     Certification Pursuant to 18 U.S .C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
     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.
  29




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 thereunto duly authorized officer on August 9, 2010. BELCREST CAPITAL FUND LLC/s/ Andrew C. FrenetteAndrew C. FrenetteChief Financial Officer(Duly Authorized Officer andPrincipal Financial Officer)
  30




EXHIBIT INDEX 31.1
     Certification Pursuant to 18 U.S .C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
     Certification Pursuant to 18 U.S .C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  31