|UNITED STATESSECURITIES AND EXCHANGE
      COMMISSIONWashington, D.C. 20549
|---------------------------------------------------------------------------

FORM 10-Q



|[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934
                                      
      For the quarterly period ended June 30,
2006
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|[   ] Transition Report Pursuant to Section 13 or
      15(d) of the Securities Exchange Act of
      1934                            
      For the transition period from _________ to
_____________
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commission File No. 000-30509



|BelcrestCapital Fund LLC(Exact
      name of Registrant as specified in its
charter)
|------------------------------------------------------------------------------------

Massachusetts
    
    04-3453080(State of
      organization)
    
    (I.R.S.
      Employer Identification No.)The Eaton Vance Building255
      State StreetBoston,
      Massachusetts
    
    02109(Address of
      principal executive offices)
    
    (Zip
      Code)Registrants telephone number:
    
    617-482-8260




|None(Former name, former address and
      former fiscal year, if changed since last
report)
|--------------------------------------------------------------------------------------------



| | Indicate by check mark whether the Registrant (1) has filed all
      reports required to be filed by Section 13 or 15(d) of the Securities
      Exchange Act of 1934 (the Act) during the preceding 12 months (or for
      such shorter period that the Registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the
      past 90 days.      
      Yes   X   
      No __
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Indicate by check mark whether the Registrant is a large
      accelerated filer, an accelerated filer or a non-accelerated filer (as
      defined in Rule 12b-2 of the
      Act).           
      Large Accelerated Filer 
      X               
      Accelerated
      Filer __          
      Non-Accelerated Filer __
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Act).   Yes __   
No  X

BelcrestCapital Fund LLC

Index to Form 10-Q

PART I.       
FINANCIAL
INFORMATION                                                               
Page

Item
1.          Financial
Statements

|         |  |                   |  | Condensed Consolidated Statements of Assets and Liabilities as
      of   |  |   
|-------- |  | ----------------- |  | ------------------------------------------------------------------------- |  | --
|         |  |                   |  | June 30, 2006(Unaudited) andDecember 31, 2005                             |  | 3 
|         |  |                   |  |                                                                           |  |   
|         |  |                   |  | Condensed Consolidated Statements of Operations (Unaudited) for
      the |  |   
|         |  |                   |  | Three MonthsEndedJune
      30, 2006and2005and for the                    |  |   
|         |  |                   |  | Six MonthsEndedJune
      30, 2006and2005                                 |  | 4 
|         |  |                   |  |                                                                           |  |   
|         |  |                   |  | Condensed Consolidated Statements of Changes in Net Assets for
      the  |  |   
|         |  |                   |  | SixMonths EndedJune
      30, 2006(Unaudited) and the                     |  |   
|         |  |                   |  | Year Ended December 31, 2005                                              |  | 6 
|         |  |                   |  |                                                                           |  |   
|         |  |                   |  | Condensed Consolidated Statements of Cash Flows (Unaudited) for
      the |  |   
|         |  |                   |  | SixMonths EndedJune
      30, 2006and2005                                 |  | 7 
|         |  |                   |  |                                                                           |  |   
|         |  |                   |  | Financial Highlights for theSixMonths EndedJune 30, 2006(Unaudited)       |  |   
|         |  |                   |  | and the Year Ended December 31, 2005                                      |  | 9 
|         |  |                   |  |                                                                           |  |   
|         |  |                   |  | Notes to Condensed Consolidated Financial Statements                      |  |   
|         |  |                   |  | as ofJune 30, 2006(Unaudited)                                             |  | 10
|         |  |                   |  |                                                                           |  |   
|Item     |  | 2.                |  | Managements Discussion and Analysis of Financial Condition
      (MD&A)  |  |   
|         |  |                   |  | and Results of Operations                                                 |  | 15
|         |  |                   |  |                                                                           |  |   
|Item     |  | 3.                |  | Quantitative and Qualitative Disclosures About Market
      Risk          |  | 19
|         |  |                   |  |                                                                           |  |   
|Item     |  | 4.                |  | Controls and Procedures                                                   |  | 22
|         |  |                   |  |                                                                          
|PART II. |  | OTHER INFORMATION |  |                                                                          
|         |  |                   |  |                                                                           |  |   
|Item     |  | 1.                |  | Legal Proceedings                                                         |  | 24
|         |  |                   |  |                                                                           |  |   
|Item     |  | 1A.               |  | Risk Factors                                                              |  | 24
|         |  |                   |  |                                                                           |  |   
|Item     |  | 2.                |  | Unregistered Sales of Equity Securities and Use of
      Proceeds         |  | 24
|         |  |                   |  |                                                                           |  |   
|Item     |  | 3.                |  | Defaults Upon Senior Securities                                           |  | 24
|         |  |                   |  |                                                                           |  |   
|Item     |  | 4.                |  | Submission of Matters to a Vote of Security Holders                       |  | 24
|         |  |                   |  |                                                                           |  |   
|Item     |  | 5.                |  | Other Information                                                         |  | 24

|Item 6.       |  | Exhibits |  | 25
|------------- |  | -------- |  | --
|              |  |         
|SIGNATURES    |  | 26      
|              |  |         
|EXHIBIT INDEX |  | 27      



|PART I. FINANCIAL INFORMATIONItem 1. Financial
      Statements.
|----------------------------------------------------------------

|BELCREST
      CAPITAL FUND LLC                                          |  |               |  |                   |  |   |  |              
|------------------------------------------------------------------------ |  | ------------- |  | ----------------- |  | - |  | -------------
|Condensed
      Consolidated Statements of Assets and Liabilities        |  |               |  |                   |  |   |  |              
|                                                                        
|                                                                         |  | June 30, 2006 |  |                   |  |  
|                                                                         |  | (Unaudited)   |  | December 31, 2005
|                                                                         |  |               |  |                  
|Assets:                                                                  |  |               |  |                   |  |   |  |              
|Investment in Belvedere Capital Fund Company LLC                         |  |               |  |                   |  |   |  |              
|(Belvedere Company)                                                      |  | $             |  | 2,450,588,399     |  | $ |  | 2,641,477,550
|Investment in Partnership Preference Units                               |  |               |  | 337,479,123       |  |   |  | 319,101,220  
|Investment in other real estate                                          |  |               |  | 459,400,959       |  |   |  | 507,075,670  
|Short-term investments                                                   |  |               |  | 5,432,991         |  |   |  | 4,838,338    
|                                                                         |  |               |  |                  
|Total
      investments                                                  |  | $             |  | 3,252,901,472     |  | $ |  | 3,472,492,778
|Cash                                                                     |  |               |  | 21,179,491        |  |   |  | 58,371,682   
|Distributions and interest receivable                                    |  |               |  | 2,223,278         |  |   |  | 2,272,762    
|Swap interest receivable                                                 |  |               |  | 98,848            |  |   |  | 721          
|Open interest rate swap agreements, at value                             |  |               |  | 26,747,725        |  |   |  | 15,814,056   
|Other assets                                                             |  |               |  | 6,543,146         |  |   |  | 10,444,764   
|                                                                         |  |               |  |                  
|Total
    assets                                                         |  | $             |  | 3,309,693,960     |  | $ |  | 3,559,396,763
|                                                                         |  |               |  |                  
|                                                                        
|Liabilities:                                                             |  |               |  |                   |  |   |  |              
|Loan payable  Credit Facility                                           |  | $             |  | 669,000,000       |  | $ |  | 660,000,000  
|Mortgages payable                                                        |  |               |  | 307,000,000       |  |   |  | 353,111,019  
|Payable for Fund Shares redeemed                                         |  |               |  | 5,150,927         |  |   |  | 4,218,855    
|Payable to affiliate for investment advisory and administrative
    fees |  |               |  | 527,948           |  |   |  | 575,889      
|Payable to affiliate for distribution and servicing fees                 |  |               |  | 427,907           |  |   |  | 479,553      
|Security deposits                                                        |  |               |  | 640,469           |  |   |  | 555,489      
|Accrued expenses:                                                        |  |               |  |                   |  |   |  |              
|Interest expense                                                         |  |               |  | 1,933,030         |  |   |  | 1,947,234    
|Property taxes                                                           |  |               |  | 1,038,632         |  |   |  | 534,135      
|Other expenses and liabilities                                           |  |               |  | 2,139,285         |  |   |  | 3,570,422    
|Minority interests in controlled subsidiaries                            |  |               |  | 29,604,092        |  |   |  | 27,346,442   
|                                                                         |  |               |  |                  
|Total
      liabilities                                                  |  | $             |  | 1,017,462,290     |  | $ |  | 1,052,339,038
|                                                                         |  |               |  |                  
|                                                                        
|Net
    assets                                                           |  | $             |  | 2,292,231,670     |  | $ |  | 2,507,057,725
|                                                                         |  |               |  |                  
|                                                                        
|Shareholders
      Capital                                              |  | $             |  | 2,292,231,670     |  | $ |  | 2,507,057,725
|                                                                         |  |               |  |                  
|                                                                        
|Shares
      outstanding                                                 |  |               |  | 19,209,642        |  |   |  | 21,336,023   
|                                                                         |  |               |  |                  
|                                                                        
|Net asset value
      and redemption price per Share                     |  | $             |  | 119.33            |  | $ |  | 117.50       
|                                                                         |  |               |  |                  

See notes to unaudited condensed consolidated financial
statements

3



|BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Operations
      (Unaudited)
|------------------------------------------------------------------------------------------

|                                                      |  | Three Months
      Ended |  | Six Months Ended
|----------------------------------------------------- |  | ------------------------ |  | ----------------
|                                                      |  |                          |  |                 
|                                                      |  | June 30, 2006            |  | June 30, 2005   
|                                                      |  |                          |  |                 
|Investment Income:                                    |  |                          |  |                 
|Dividends allocated from Belvedere
      Company      |  |                          |  |                 
|(net of foreign taxes, $445,434,
      $382,917,      |  |                          |  |                 
|$513,398 and $490,214,
      respectively)            |  | $                        |  | 12,342,325      
|Interest allocated from Belvedere Company             |  |                          |  | 277,680         
|Expenses allocated from Belvedere Company             |  |                          |  | (3,815,708)     
|                                                      |  |                          |  |                 
|Net investment income allocated from                  |  |                          |  |                 
|Belvedere Company                                     |  | $                        |  | 8,804,297       
|Rental income                                         |  |                          |  | 10,047,074      
|Distributions from Partnership Preference
      Units |  |                          |  | 6,206,010       
|Interest                                              |  |                          |  | 407,063         
|Other income                                          |  |                          |  | -               
|                                                      |  |                          |  |                 
|Total investment income                               |  | $                        |  | 25,464,444      
|                                                      |  |                          |  |                 
|                                                     
|Expenses:                                             |  |                          |  |                 
|Investment advisory and administrative
      fees     |  | $                        |  | 2,214,117       
|Property management and administrative
      fees     |  |                          |  | 553,401         
|Distribution and servicing fees                       |  |                          |  | 835,971         
|Interest expense on mortgages                         |  |                          |  | 4,215,773       
|Interest expense on Credit Facility                   |  |                          |  | 8,958,667       
|Property and maintenance expenses                     |  |                          |  | 520,374         
|Property taxes and insurance                          |  |                          |  | 1,252,792       
|Miscellaneous                                         |  |                          |  | 558,532         
|                                                      |  |                          |  |                 
|Total expenses                                        |  | $                        |  | 19,109,627      
|Deduct                                               |  |                          |  |                 
|Reduction of investment advisory and                  |  |                          |  |                 
|administrative fees                                   |  |                          |  | 597,136         
|                                                      |  |                          |  |                 
|Net expenses                                          |  | $                        |  | 18,512,491      
|                                                      |  |                          |  |                 
|Net investment income before minority interest        |  |                          |  |                 
|in net income of controlled subsidiary                |  | $                        |  | 6,951,953       
|Minority interest in net income of                    |  |                          |  |                 
|controlled subsidiary                                 |  |                          |  | (708,237)       
|                                                      |  |                          |  |                 
|Net investment income                                 |  | $                        |  | 6,243,716       
|                                                      |  |                          |  |                 

See notes to unaudited condensed consolidated
financial statements

4



|BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Operations (Unaudited)
      (Continued)
|------------------------------------------------------------------------------------------------------

|                                                           |  | Three Months Ended |  | Six Months Ended
|---------------------------------------------------------- |  | ------------------ |  | ----------------
|                                                           |  |                    |  |                 
|                                                           |  | June 30, 2006      |  | June 30, 2005   
|                                                           |  |                    |  |                 
|Realized and Unrealized Gain (Loss)                        |  |                    |  |                 
|Net realized gain (loss)                                  |  |                    |  |                 
|Investment transactions, securities sold short             |  |                    |  |                 
|and foreign currency transactions
      allocated          |  |                    |  |                 
|from Belvedere Company (identified cost
      basis)       |  | $  39,013,539      |  | $               
|Investment transactions in Partnership                     |  |                    |  |                 
|Preference Units (identified cost basis)                   |  | 117,563            |  |                 
|Investment transactions in other real estate               |  | 112,903            |  |                 
|Interest rate swap agreements (1)                          |  | 886,918            |  |                 
|                                                           |  |                    |  |                 
|Net realized gain (loss)                                   |  | $  40,130,923      |  | $               
|                                                           |  |                    |  |                 
|                                                          
|Change in unrealized appreciation (depreciation)          |  |                    |  |                 
|Investments, securities sold short and foreign             |  |                    |  |                 
|currency allocated from Belvedere Company                  |  |                    |  |                 
|(identified cost basis)                                    |  | $ (81,183,954)     |  | $               
|Investments in Partnership Preference                      |  |                    |  |                 
|Units (identified cost basis)                              |  | (10,961,604)       |  |                 
|Investments in other real estate (net of minority          |  |                    |  |                 
|interest in unrealized appreciation
      (depreciation)   |  |                    |  |                 
|of controlled subsidiary of $1,931,860,
      $580,137,    |  |                    |  |                 
|$3,948,466 and
      $(1,538,404), respectively)           |  | 3,174,493          |  |                 
|Interest rate swap
      agreements                        |  | 4,888,269          |  |                 
|                                                           |  |                    |  |                 
|Net change in unrealized appreciation
      (depreciation) |  | $ (84,082,796)     |  | $               
|                                                           |  |                    |  |                 
|                                                          
|Net realized and unrealized gain
      (loss)              |  | $ (43,951,873)     |  | $               
|                                                           |  |                    |  |                 
|                                                          
|Net increase (decrease) in net assets from operations      |  | $(37,708,157)      |  | $32,275,458     
|                                                           |  |                    |  |                 

(1)Amounts
represent net interest earned (incurred) in connection with interest rate swap
agreements (Note 4).

See notes to unaudited condensed consolidated
financial statements

5



|BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Changes in Net
      Assets
|-----------------------------------------------------------------------------------------

|                                                                             |  | Six Months    |  |                   |  |  
|---------------------------------------------------------------------------- |  | ------------- |  | ----------------- |  | -
|                                                                             |  | Ended         |  |                   |  |  
|                                                                             |  | June 30, 2006 |  | Year Ended       
|                                                                             |  | (Unaudited)   |  | December 31, 2005
|                                                                             |  |               |  |                  
|Increase (Decrease) in Net Assets:                                           |  |               |  |                   |  |  
|From operations                                                             |  |               |  |                   |  |  
|Net investment income                                                        |  | $             |  | 12,315,924        |  | $
|Net realized gain from investment transactions,
      securities sold short, |  |               |  |                   |  |  
|foreign currency transactions and interest rate
      swap agreements        |  |               |  | 80,089,702        |  |  
|Net change in unrealized appreciation (depreciation)
      of                |  |               |  |                   |  |  
|investments, securities sold short, foreign
      currency and               |  |               |  |                   |  |  
|interest rate swap agreements                                                |  |               |  | (9,334,927)       |  |  
|                                                                             |  |               |  |                  
|Net increase in net assets from operations                                   |  | $             |  | 83,070,699        |  | $
|                                                                             |  |               |  |                  
|                                                                            
|Transactions in Fund Shares                                                 |  |               |  |                   |  |  
|Net asset value of Fund Shares issued to Shareholders
      in               |  |               |  |                   |  |  
|payment of distributions declared                                            |  | $             |  | 15,634,647        |  | $
|Net asset value of Fund Shares redeemed                                      |  |               |  | (272,587,628)     |  |  
|                                                                             |  |               |  |                  
|Net decrease in net assets from Fund Share
      transactions                |  | $             |  | (256,952,981)     |  | $
|                                                                             |  |               |  |                  
|                                                                            
|Distributions                                                               |  |               |  |                   |  |  
|Distributions to Shareholders                                                |  | $             |  | (40,943,773)      |  | $
|                                                                             |  |               |  |                  
|Total distributions                                                          |  | $             |  | (40,943,773)      |  | $
|                                                                             |  |               |  |                  
|                                                                            
|Net decrease in net assets                                                   |  | $             |  | (214,826,055)     |  | $
|                                                                            
|Net assets:                                                                  |  |               |  |                   |  |  
|At beginning of period                                                       |  | $             |  | 2,507,057,725     |  | $
|                                                                             |  |               |  |                  
|At end of period                                                             |  | $             |  | 2,292,231,670     |  | $
|                                                                             |  |               |  |                  

See notes to unaudited condensed consolidated
financial statements

6



|BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Cash Flows
      (Unaudited)
|------------------------------------------------------------------------------------------

|                                                                                    |  | Six Months Ended
|----------------------------------------------------------------------------------- |  | ----------------
|                                                                                    |  |                 
|                                                                                    |  | June 30, 2006   
|                                                                                    |  |                 
|Cash Flows From (For) Operating Activities                                         |  |                 
|Net increase (decrease) in net assets from operations                               |  | $               
|Adjustments to reconcile net increase (decrease) in net assets
      from           |  |                 
|operations to net cash flows from (for) operating
      activities                 |  |                 
|Net investment income allocated from Belvedere
      Company                        |  |                 
|Increase in note receivable from other real
      estate investments                |  |                 
|(Increase) decrease in distributions and
      interest receivable                  |  |                 
|Increase in interest receivable for open swap
      agreements                      |  |                 
|Decrease in other assets                                                            |  |                 
|Decrease in payable to affiliate for investment
      advisory and                  |  |                 
|administrative
      fees                                                           |  |                 
|Decrease in payable to affiliate for
      distribution and servicing fees          |  |                 
|Decrease in interest payable for open swap
      agreements                         |  |                 
|Increase (decrease) in security deposits,
      accrued interest and accrued        |  |                 
|other expenses and
      liabilities                                                |  |                 
|Increase in accrued property taxes                                                  |  |                 
|Purchases of Partnership Preference
      Units                                     |  |                 
|Proceeds from sales of Partnership Preference
      Units                           |  |                 
|Proceeds from sale of investment in other real
      estate                         |  |                 
|Improvements to rental property                                                     |  |                 
|Decrease in cash due to sale of controlled
      subsidiary                         |  |                 
|Net interest earned (incurred) on interest rate
      swap agreements               |  |                 
|(Increase) decrease in short-term
      investments                                 |  |                 
|Minority interest in net income of controlled
      subsidiary                      |  |                 
|Net realized (gain) loss from investment
      transactions, securities sold short, |  |                 
|foreign currency
      transactions and interest rate swap agreements               |  |                 
|Net change in unrealized (appreciation)
      depreciation of investments,          |  |                 
|securities sold short,
      foreign currency and interest rate swap agreements     |  |                 
|                                                                                    |  |                 
|Net cash flows from (for) operating activities                                      |  | $               
|                                                                                    |  |                 
|                                                                                   
|Cash Flows From (For) Financing Activities                                         |  |                 
|Proceeds from Credit Facility                                                       |  | $               
|Repayments of Credit Facility                                                       |  |                 
|Repayments on mortgages                                                             |  |                 
|Issuance of real estate joint venture preferred
      shares                        |  |                 
|Payments for Fund Shares redeemed                                                   |  |                 
|Distributions paid to Shareholders                                                  |  |                 
|Distributions paid to minority
      shareholders                                   |  |                 
|                                                                                    |  |                 
|Net cash flows from (for) financing activities                                      |  | $               
|                                                                                    |  |                 
|                                                                                   
|Net increase (decrease) in cash                                                     |  | $               
|                                                                                   
|Cash at beginning of period                                                         |  | $               
|                                                                                    |  |                 
|Cash at end of period                                                               |  | $               
|                                                                                    |  |                 

See notes to unaudited condensed consolidated
financial statements

7



|BELCREST CAPITAL FUND LLCCondensed Consolidated Statements of Cash Flows (Unaudited)
      (Continued)
|------------------------------------------------------------------------------------------------------

|                                                                       |  | Six Months Ended
|---------------------------------------------------------------------- |  | ----------------
|                                                                       |  |                 
|                                                                       |  | June 30, 2006   
|                                                                       |  |                 
|Supplemental Disclosure and
      Non-cash Investing and               |  |                 
|Financing Activities                                                  |  |                 
|Interest paid on loan  Credit Facility                                |  | $               
|Interest paid on mortgages                                             |  | $               
|Interest paid (received) on swap agreements                            |  | $               
|Market value of securities distributed in payment of
      redemptions |  | $ 269,469,382   
|Market value of real property and other assets, net                    |  |                 
|of current liabilities, disposed
      of in conjunction with the      |  |                 
|sale of other real estate                                              |  | $               
|Mortgage disposed of in conjunction with the sale
      of             |  |                 
|other real estate                                                      |  | $               

See notes to unaudited condensed consolidated
financial statements

8



|BELCREST CAPITAL FUND LLCCondensed Consolidated
      Financial Statements (Continued) Financial Highlights
|-----------------------------------------------------------------------------------------------------------

|                                                                             |  | Six Months Ended |  |            |  |                   |  |      
|---------------------------------------------------------------------------- |  | ---------------- |  | ---------- |  | ----------------- |  | -----
|                                                                             |  | June 30, 2006    |  |            |  | Year Ended       
|                                                                             |  | (Unaudited)      |  |            |  | December 31, 2005
|                                                                            
|Net asset value
       Beginning of period                                  |  | $                |  | 117.500    |  |                   |  | $    
|                                                                            
|                                                                            
|Income
      (loss) from operations                                          |  |                  |  |            |  |                   |  |      
|                                                                            
|Net investment
      income (1)                                              |  | $                |  | 0.602      |  |                   |  | $    
|Net realized
      and unrealized gain                                       |  |                  |  | 3.168      |  |                   |  |      
|                                                                            
|Total income
      from operations                                           |  | $                |  | 3.770      |  |                   |  | $    
|                                                                            
|                                                                            
|Distributions                                                                |  |                  |  |            |  |                   |  |      
|                                                                            
|Distributions
      to Shareholders                                          |  | $                |  | (1.940)    |  |                   |  | $    
|                                                                            
|Total
      distributions                                                    |  | $                |  | (1.940)    |  |                   |  | $    
|                                                                            
|                                                                            
|Net asset
      value  End of period                                        |  | $                |  | 119.330    |  |                   |  | $    
|                                                                            
|                                                                            
|Total
      Return(2)                                                        |  |                  |  | 3.25%      |  |                   |  |      
|                                                                            
|                                                                            
|Ratios as a percentage of average net assets
      (3) :                     |  |                  |  |            |  |                   |  |      
|                                                                            
|Expenses of Consolidated Real Property
Subsidiaries                          |  |                  |  |            |  |                   |  |      
|Interest and other borrowing
      costs(4)                                  |  |                  |  | 0.58%      |  | (9)               |  |      
|Operating expenses(4)                                                        |  |                  |  | 0.32%  (9) |  |                   |  | 0.26%
|Belcrest Capital Fund LLC Expenses                                           |  |                  |  |            |  |                   |  |      
|Interest and other borrowing
      costs(5)(6)                               |  |                  |  | 1.40%      |  | (9)               |  |      
|Investment advisory and administrative fees,
      distribution and          |  |                  |  |            |  |                   |  |      
|servicing fees and other
      operating expenses(5)(7)                      |  |                  |  | 1.11%      |  | (9)               |  |      
|                                                                             |  |                 
|Total expenses                                                               |  |                  |  | 3.41%  (9) |  |                   |  | 3.07%
|                                                                            
|Net
      investment income(6)                                               |  |                  |  | 1.01%  (9) |  |                   |  | 1.60%
|                                                                            
|                                                                            
|Ratios as a percentage of average gross assets
      (3)(8) :                |  |                  |  |            |  |                   |  |      
|                                                                            
|Expenses of
      Consolidated Real Property Subsidiaries                    |  |                  |  |            |  |                   |  |      
|Interest and other borrowing costs(4)                                        |  |                  |  | 0.42%      |  | (9)               |  |      
|Operating expenses(4)                                                        |  |                  |  | 0.23%  (9) |  |                   |  | 0.18%
|Belcrest
      Capital Fund LLC Expenses                                     |  |                  |  |            |  |                   |  |      
|Interest and other borrowing costs(5)(6)                                     |  |                  |  | 1.02%      |  | (9)               |  |      
|Investment advisory and administrative fees, distribution
    and            |  |                  |  |            |  |                   |  |      
|servicing fees and other operating
    expenses(5)(7)                        |  |                  |  | 0.81%      |  | (9)               |  |      
|                                                                             |  |                 
|Total
    expenses                                                           |  |                  |  | 2.48%  (9) |  |                   |  | 2.21%
|                                                                            
|Net investment
      income(6)                                               |  |                  |  | 0.74%  (9) |  |                   |  | 1.15%
|                                                                            
|Supplemental
      Data                                                      |  |                  |  |            |  |                   |  |      
|                                                                            
|Net assets, end
      of period (000s omitted)                              |  | $                |  | 2,292,232  |  |                   |  | $    
|Portfolio turnover of Tax-Managed Growth Portfolio (the
      Portfolio)(10) |  |                  |  | 1%         |  |                   |  |      
|                                                                            

|(1)  | Calculated using average shares outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  | Returns are calculated by determining the percentage
      change in net asset value with all distributions reinvested. Total return
      is not computed on an annualized basis.                                                                                                                                                                                                                                                                                                                        
|    
|(3)  | For the purpose of calculating ratios, the income and
      expenses of Belcrest Realty Corporation's (Belcrest Realty) controlled
      subsidiaries are reduced by the proportionate interests therein of
      investors other than Belcrest Realty.                                                                                                                                                                                                                                                   
|    
|(4)  | Includes Belcrest Realty's proportional shares of
      expenses incurred by its controlled subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(5)  | Includes the expenses of Belcrest Capital Fund LLC
      (Belcrest Capital) and Belcrest Realty. Does not include expenses of
      Belcrest Realty's controlled subsidiaries.                                                                                                                                                                                                                                                                                                                            
|    
|(6)  | Ratios do not include interest incurred or earned in
      connection with interest rate swap agreements. Had such amounts been
      included, ratios would be higher.                                                                                                                                                                                                                                                                                                                                   
|    
|(7)  | Includes Belcrest Capital's share of Belvedere Capital
      Fund Company LLC's (Belvedere Company) allocated expenses, including those
      expenses allocated from the Portfolio.                                                                                                                                                                                                                                                                                                                      
|    
|(8)  | Average gross assets is defined as the average daily
      amount of all assets of Belcrest Capital (not including its investment in
      Belcrest Realty) plus all assets of Belcrest Realty minus the sum of each
      entity's liabilities other than the principal amount of money borrowed.
      For this purpose, the assets and liabilities of Belcrest Realty's
      controlled subsidiaries are reduced by the proportionate interests therein
      of investors other than Belcrest Realty.
|    
|(9)  | Annualized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(10) | Excludes the value of portfolio securities contributed or
      distributed as a result of in-kind transactions. The total turnover rate
      of the Portfolio including contributions and distributions in-kind was 3%
      and 6% for the six months ended June 30, 2006 and the year ended December
      31, 2005, respectively.                                                                                                                                                                    
|    
|(11) | Amounts to less than 1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    



|See notes to unaudited condensed consolidated
      financial statements9
|-------------------------------------------------------------------------



|BELCREST CAPITAL FUND LLCas of June 30, 2006Notes 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 financial statements and the notes thereto included in the Funds latest
annual report on Form 10-K. Results for interim periods are not necessarily
indicative of those to be expected for the full fiscal year.

The balance sheet at December 31, 2005 and the
statement of changes in net assets and the financial highlights for the year
then ended have been derived from the December 31, 2005 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.

Certain amounts in the prior periods condensed
consolidated financial statements have been reclassified to conform to the
current period presentation.



|2 Investment
Transactions
|-------------------------

The following table summarizes the Funds investment
transactions, other than short-term obligations, for the six months ended June
30, 2006 and 2005:

|                                                                    |  | Six Months Ended
|------------------------------------------------------------------- |  | ----------------
|                                                                    |  |                 
|Investment Transactions                                             |  | June 30, 2006   
|                                                                   
|Decreases in investment in Belvedere Capital Fund Company
      LLC |  | $               
|Sale of other real estate(1)                                        |  | $               
|Purchases of Partnership Preference Units(2)                        |  | $               
|Sales of Partnership Preference Units(3)                            |  | $               
|                                                                   

|(1) | In January 2006, Belcrest Realty
      Corporation (Belcrest Realty) sold its interest in Bel Santa Ana LLC (Bel
      Santa Ana) to the real estate investment affiliate of another investment
      fund advised by Boston Management and Research (Boston Management) for
      which a gain of $15,631,391 was recognized.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Purchases of Partnership Preference Units
      for the six months ended June 30, 2006 represent Partnership Preference
      Units purchased from real estate investment affiliates of other investment
      funds advised by Boston Management.                                                                            
|   
|(3) | Sales of Partnership Preference Units for
      the six months ended June 30, 2006 represent Partnership Preference Units
      sold to real estate affiliate of another investment funds advised by
      Boston Management for which gains of $985,408 was recognized.                                                      
|   

10



|3 Indirect Investment in the
    Portfolio
|------------------------------------------

The following table summarizes the Funds investment
in Tax-Managed Growth Portfolio (the Portfolio) through Belvedere Capital Fund
Company LLC (Belvedere Company) for the six months ended June 30, 2006 and 2005,
including allocations of income, expenses and net realized and unrealized gains
(losses) for the respective periods then ended:

|                                                                            |  | Six Months Ended
|--------------------------------------------------------------------------- |  | ----------------
|                                                                            |  |                 
|                                                                            |  | June 30, 2006   
|                                                                           
|Belvedere Companys interest in the Portfolio (1)                           |  | $               
|The Funds investment in Belvedere Company (2)                              |  | $               
|Income allocated to Belvedere Company from the
      Portfolio              |  | $               
|Income allocated to the Fund from Belvedere Company                         |  | $               
|Expenses allocated to Belvedere Company from the
      Portfolio            |  | $               
|Expenses allocated to the Fund from Belvedere Company                       |  | $               
|Net realized gain from investment transactions, securities
      sold       |  |                 
|short and foreign currency transactions allocated to
      Belvedere        |  |                 
|Company from the Portfolio                                                  |  | $               
|Net realized gain from investment transactions, securities
      sold       |  |                 
|short and foreign currency transactions allocated to
      the Fund from    |  |                 
|Belvedere Company                                                           |  | $               
|Net change in unrealized appreciation (depreciation) of
      investments,  |  |                 
|securities sold short and foreign currency allocated
      to Belvedere     |  |                 
|Company from the Portfolio                                                  |  | $               
|Net change in unrealized appreciation (depreciation) of
      investments,  |  |                 
|securities sold short and foreign currency allocated
      to the Fund from |  |                 
|Belvedere Company                                                           |  | $               
|                                                                           

|(1) | As of June 30, 2006 and 2005, the value of
      Belvedere Companys interest in the Portfolio represents 72.1% and 68.4%
      of the Portfolios net assets, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | As of June 30, 2006 and 2005, the Funds
      investment in Belvedere Company represents 18.0% and 20.7% of Belvedere
      Companys net assets, respectively.            
|   

A summary of the Portfolios Statement of Assets and
Liabilities at June 30, 2006, December 31, 2005 and June 30, 2005 and its
operations for the six months ended June 30, 2006, for the year ended December
31, 2005 and for the six months ended June 30, 2005 follows:

|                                 |  | June 30, 2006 |  | December 31, 2005 |  |   |  | June 30, 2005 
|-------------------------------- |  | ------------- |  | ----------------- |  | - |  | --------------
|                                 |  |              
|Investments, at value            |  | $             |  | 18,934,068,161    |  | $ |  | 18,969,693,193
|Other assets                     |  |               |  | 34,515,320        |  |   |  | 78,497,584    
|                                
|Total assets                     |  | $             |  | 18,968,583,481    |  | $ |  | 19,048,190,777
|                                
|Collateral for securities loaned |  | $             |  | 72,500,000        |  | $ |  | -             
|Demand note payable              |  |               |  | -                 |  |   |  | 8,000,000     
|Management fee payable           |  |               |  | 6,735,653         |  |   |  | 6,896,006     
|Other liabilities                |  |               |  | 754,547           |  |   |  | 687,918       
|                                
|Total liabilities                |  | $             |  | 79,990,200        |  | $ |  | 15,583,924    
|                                
|Net assets                       |  | $             |  | 18,888,593,281    |  | $ |  | 19,032,606,853
|                                

11

|                               |  | June 30, 2006 |  | December 31, 2005 |  |   |  | June 30, 2005
|------------------------------ |  | ------------- |  | ----------------- |  | - |  | -------------
|                               |  |              
|Dividends and interest         |  | $             |  | 175,092,342       |  | $ |  | 316,363,717  
|                              
|Investment adviser fee         |  | $             |  | 41,339,905        |  | $ |  | 80,617,092   
|Other expenses                 |  |               |  | 1,142,069         |  |   |  | 2,931,135    
|Total expense reductions       |  |               |  | (99)              |  |   |  | (89,156)     
|                              
|Net expenses                   |  | $             |  | 42,481,875        |  | $ |  | 83,459,071   
|                              
|Net investment income          |  | $             |  | 132,610,467       |  | $ |  | 232,904,646  
|Net realized gain from         |  |               |  |                   |  |   |  |              
|investment transactions,       |  |               |  |                   |  |   |  |              
|securities sold short and      |  |               |  |                   |  |   |  |              
|foreign currency transactions  |  |               |  | 453,652,551       |  |   |  | 70,889,149   
|Net change in unrealized       |  |               |  |                   |  |   |  |              
|appreciation (depreciation) of |  |               |  |                   |  |   |  |              
|investments, securities sold   |  |               |  |                   |  |   |  |              
|short and foreign currency     |  |               |  | (29,804,533)      |  |   |  | 551,019,603  
|                              
|Net increase (decrease) in net |  |               |  |                   |  |   |  |              
|assets from operations         |  | $             |  | 556,458,485       |  | $ |  | 854,813,398  
|                              

4 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
substantial portion of its borrowings under the Credit Facility and to
mitigate in part the impact of interest rate changes on Belcrest Capital's net
asset value. Under such agreements, Belcrest Capital has
agreed to make periodic payments at fixed rates in exchange for payments at
floating rates. The notional or contractual amounts of these instruments may not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these investments is meaningful only when
considered in conjunction with all related assets, liabilities and agreements.
Interest rate swap agreements in place at June 30, 2006 and December 31, 2005
are listed below.

|          |  | Notional  |  |        |  |               |  | Initial     |  |             |  | Unrealized
      Appreciation
|--------- |  | --------- |  | ------ |  | ------------- |  | ----------- |  | ----------- |  | -----------------------------
|          |  | Amount    |  |        |  |               |  | Optional    |  | Final       |  | (Depreciation)
      at      
|Effective |  | (000s    |  | Fixed  |  | Floating      |  | Termination |  | Termination |  |                              
|          |  |          
|Date      |  | omitted)  |  | Rate   |  | Rate          |  | Date        |  | Date        |  | June 30, 2006                
|         
|10/03     |  | $ 128,116 |  | 4.865% |  | LIBOR + 0.30% |  | 07/04       |  | 06/10       |  | $                            
|10/03     |  | 170,000   |  | 4.795% |  | LIBOR + 0.30% |  | 09/04       |  | 06/10       |  |                              
|10/03     |  | 63,526    |  | 4.69%  |  | LIBOR + 0.30% |  | 02/05       |  | 06/10       |  |                              
|10/03     |  | 55,375    |  | 4.665% |  | LIBOR + 0.30% |  | 03/05       |  | 06/10       |  |                              
|10/03     |  | 80,965    |  | 4.145% |  | LIBOR + 0.30% |  | 03/10       |  | 06/10       |  |                              
|10/03     |  | 47,253    |  | 4.045% |  | LIBOR + 0.30% |  | -           |  | 06/10       |  |                              
|02/04     |  | 78,620    |  | 5.00%  |  | LIBOR + 0.30% |  | 08/04       |  | 06/10       |  |                              
|06/10     |  | 3,870     |  | 6.29%  |  | LIBOR + 0.30% |  | -           |  | 07/15       |  |                              
|         
|          |  |           |  |        |  |               |  |             |  |             |  | $  26,747,725                
|         

12



|5 Debt
|------

A Credit Facility - On June 30, 2006, Belcrest
Capital amended its credit arrangement with Merrill Lynch Mortgage Capital, Inc.
to decrease the amount of the revolving loan facility by $60,000,000 to an
aggregate principal amount of $78,000,000. Borrowings under this credit
arrangement accrue interest at a rate of one-month LIBOR plus 0.38% per annum. A
commitment fee of 0.10% per annum is paid on the unused commitment amount. As of
June 30, 2006, outstanding borrowings under this credit arrangement totaled
$34,000,000.

There were no changes to the terms of Belcrest
Capitals credit arrangement with DrKW Holdings, Inc. during the six months
ended June 30, 2006. As of June 30, 2006, outstanding borrowings under this
credit arrangement totaled $635,000,000.

B Mortgage - In January 2006, Belcrest Realty sold
its interest in Bel Santa Ana (Note 2). At the time of the transaction, the loan
balance was $45,974,673.



|6 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 revenue includes the Funds pro rata share of
the Portfolios revenue. Separate from its investment in Belvedere Company,
Belcrest Capital invests in real estate assets through its subsidiary, Belcrest
Realty. Belcrest Realty invests directly and indirectly in Partnership
Preference Units, debt and common equity investments in private real estate
companies and indirectly in real property through its controlled subsidiary,
Allagash Property Trust (Allagash) and formerly invested in Bel Santa Ana (for
the period during which Belcrest Realty maintained an interest in Bel Santa
Ana). The Funds revenues from the real estate assets primarily consist of
consolidated rental income from Allagash and Bel Santa Ana and distribution
income from Partnership Preference Units.

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). The Funds Credit Facility borrowings and related interest
expense are centrally managed. A portion of the Credit Facility borrowings and
related interest expense have been allocated to the real estate segment for
presentation purposes herein. Credit Facility borrowings allocated to the real
estate segment primarily consist of net amounts borrowed to purchase the Funds
interest in real estate investments. The Funds interest rate swap agreement
balances are disclosed as part of the real estate segment. 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:

13

|                                 |  | Three Months Ended |  | Six Months Ended 
|-------------------------------- |  | ------------------ |  | -----------------
|                                 |  |                    |  |                  
|                                 |  | June 30, 2006      |  | June 30, 2005    
|                                 |  |                    |  |                  
|Revenues                         |  |                    |  |                  
|The Portfolio*                   |  | $                  |  | 8,804,297        
|Real Estate                      |  |                    |  | 16,578,820       
|Unallocated                      |  |                    |  | 81,327           
|                                 |  |                    |  |                  
|Total
      revenues             |  | $                  |  | 25,464,444       
|                                 |  |                    |  |                  
|                                
|Net increase
      (decrease) in |  |                    |  |                  
|net
      assets from operations |  |                    |  |                  
|The Portfolio*                   |  | $                  |  | (33,885,107)     
|Real Estate                      |  |                    |  | (2,780,398)      
|Unallocated(1)                   |  |                    |  | (1,042,652)      
|                                 |  |                    |  |                  
|Net
      increase (decrease) in |  |                    |  |                  
|net assets from operations       |  | $                  |  | (37,708,157)     
|                                 |  |                    |  |                  
|                                
|                                 |  | June 30, 2006      |  | December 31, 2005
|                                 |  |                    |  |                  
|Net
    assets                   |  |                    |  |                  
|The Portfolio*                   |  | $                  |  | 2,445,272,096    
|Real Estate                      |  |                    |  | (143,185,266)    
|Unallocated(2)                   |  |                    |  | (9,855,160)      
|                                 |  |                    |  |                  
|Net
      Assets                 |  | $                  |  | 2,292,231,670    
|                                 |  |                    |  |                  

* Belcrest Capital invests indirectly in the Portfolio through
Belvedere Company.

|(1) | Unallocated amounts pertain to the overall operation of
      Belcrest Capital and do not pertain to either segment. Included in this
      amount are distribution and servicing fees of $835,971, $850,643,
      $1,718,849 and $1,744,939 for the three and six months ended June 30, 2006
      and 2005, respectively.                                                                                                                                                                                                                                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Amount includes unallocated liabilities, net of
      unallocated assets. Unallocated liabilities primarily consist of
      outstanding unallocated Credit Facility borrowings. Such borrowings are
      used to finance ongoing operations of the Fund and are not allocable to
      reportable segments. As of June 30, 2006 and December 31, 2005, such
      borrowings totaled $14,989,059. Unallocated assets represent cash and
      short-term investments not invested in the Portfolio or real estate
      assets. As of June 30, 2006 and December 31, 2005, such amounts totaled
      $5,914,385 and $5,279,690, respectively.
|   

14

Item 2. Managements Discussion and Analysis
of Financial Condition (MD&A) and Results of Operations.

The information in this report contains
forward-looking statements within the meaning of the federal securities laws.
Forward-looking statements typically are identified by use of terms such as
may, will, should, might, expect, anticipate, estimate, and
similar words, although some forward-looking statements are expressed
differently. The actual results ofBelcrest 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 interestrates.

The following discussion should be read in
conjunction with the Fundsunaudited condensed
consolidated financial statementsand related notesin Item 1 above.

MD&A and Results of Operations for the
Quarter EndedJune 30,
2006Compared to the Quarter EndedJune 30, 2005.

Performance of the
Fund.(1)The Funds
investment objective is to achieve long-term, after-tax returns for
shareholders.Eaton Vance Management (Eaton
Vance), as the Funds manager, measures the Funds success
in achieving its objective based on the investment returns of the Fund, using
the S&P 500 Index as the Funds primary performance benchmark. The S&P
500 Index is a broad-based, unmanaged market 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 borrowing incurred to acquire such investments and thereby add to Fund
returns. The Fund has entered into interest rate swap agreements to fix the cost
of a substantial portion of its borrowings under the Credit Facility (described
under "Liquidity and Capital Resources" below) and to mitigate in part the
impact of interest rate changes on the Funds net asset value.

The Funds total return was-1.60% for the quarter endedJune 30, 2006. This return reflectsa decreasein the Funds net asset value per share
from $121.27to $119.33during the period. The total return of the
S&P 500 Index was-1.44% over the
same period. Last year, the Fund had a total return of1.34%for the quarter ended
June 30, 2005. This return reflectedan increasein the Funds net asset value per share
from $108.51to $109.96during the period. The S&P 500 Index had
a total return of1.37% over the same
period.

Performance of the Portfolio.For the quarter ended June 30, 2006, the Portfolio
had a total return of -1.30%, which compares to the -1.44% total return of its
benchmark, the S&P 500 Index, during the same period. Domestic and
international equity markets faced a challenging second quarter, particularly
during a month-long correction that commenced in mid-May. The riskiest asset
classes suffered the most, as investors traded in high beta, growth exposure for
higher quality, dividend-rich stocks. The tech-heavy NASDAQ Composite declined
more than 7% during the quarter. Positive earnings, record-level profitability
and other favorable corporate developments were overshadowed by rising economic
and geopolitical concerns. Interest rate increases also continued as the Federal
Reserve raised the Federal Funds Rate to 5.25% . Utilities, energy and consumer
staples were the top performing S&P 500 Index sectors, while the information
technology and health care sectors were the worst. Market leading industries in
the second quarter included independent power producers, cable, oil and gas. In
contrast, homebuilders, consumer electronics and specialized finance stocks were
among the weakest performers.

During the quarter, the Portfolio remained broadly
diversified and its strategy of investing in large-capitalization,
valuation-sensitive stocks helped performance in an environment of increased
market volatility and shift in market leadership to high quality. Compared to
the S&P 500 Index, the Portfolio benefited from an overweighting of the



|(1 )Past
      performance is no guarantee of future results. Investment return and
      principal value will fluctuate so that shares, when redeemed, may beworth more or less
      than their original cost. Total returns are historical and are calculated
      by determining the percentage change in net asset valuewith all distributions reinvested.
      The Portfolios total return for the period reflects the total return of
      another fund that invests in the Portfolioadjusted for non-Portfolio expenses
      of that fund. Performance is for the stated time period only and is not
      annualized; due to market volatility, theFunds current performance may be
      lower or higher. The performance of the Fund and the Portfolio is compared
      to that of their benchmark, theS&P 500 Index. It is not
      possible to invest directly in an
Index.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

industrials, energy and consumer staples sectors and
an underweighting of the information technology and health care sectors. The
Portfolios relatively stronger investments among communications equipment,
computers, and wireless telecommunications industries were also positive
contributors to returns. The Portfolios relative performance was adversely
affected by an overweighting of the consumer discretionary sector and an
underweighting of the leading utilities sector. The Portfolios stock selection
in the insurance, retail and leisure industries also detracted from
returns.

Performance of Real Estate Investments.The Funds real estate investments are held through
Belcrest RealtyCorporation (Belcrest Realty). As of June
30, 2006, real estate investments included a majority interest in a real estate
joint venture (Real Estate Joint Venture), Allagash Property Trust (Allagash), a
portfolio of income producing preferred equity interests in real estate
operating partnerships that are generally affiliated with and controlled by real
estate investment trusts (REITs) that are publicly traded (Partnership
Preference Units) (a portion of which is held through a wholly-owned subsidiary
of Belcrest Realty) and certain debt and common equity investments in two
private real estate companies. Allagash owns industrial distribution properties.
As of June 30, 2006, the estimated fair value of the Funds real estate
investments represented 24.1% of the Funds total assets on a consolidated
basis. After adjusting for the minority interest in Allagash, the Funds real
estate investments represented 31.0% of the Funds net assets as of June 30,
2006.

On January 20, 2006, Belcrest Realty sold a property
subject to a long-term triple net lease (Net Leased Property), Bel Santa Ana LLC
(Bel Santa Ana), to the real estate investment affiliate of another investment
fund advised by Boston Management and Research (Boston Management), realizing a
gain of approximately $15.6 million on the transaction.

During the quarter ended June 30, 2006, rental
income from real estate operations was approximately $10.0 million compared to
approximately $10.5 million for the quarter ended June 30, 2005, a decrease of
$0.5 million or 5%. This decrease in rental income from real estate operations
was principally due to the sale of Bel Santa Ana referenced above, offset in
part by increases in the rental income of Allagash. During the quarter ended
June 30, 2005, rental income decreased due to Belcrest Realtys October 2004
sale of all of the properties held by a Real Estate Joint Venture, Bel Alliance
Properties LLC (Bel Alliance), offset in part by the rental income of Allagash,
which was acquired in June 2004.

During the quarter ended June 30, 2006, property
operating expenses were approximately $2.3 million compared to approximately
$2.4 million for the quarter ended June 30, 2005, a decrease of $0.1 million or
4%. The decrease in property operating expenses was due to lower property taxes
and insurance expenses at Allagash. Property operating expenses for the quarter
ended June 30, 2005 decreased principally due to the sale of the properties held
by Bel Alliance referenced above.

For most industrial distribution properties, rent
levels are expected to see modest growth over the near term. Boston Management
and Research (Boston Management), the Funds investment adviser, expects that
improvements in industrial distribution property operating performance will
occur over the long term.

During the quarter ended June 30, 2006, the Fund saw
net unrealized appreciation of the estimated fair value of its other real estate
investments (which include Allagash and certain debt and common equity
investments) of approximately $3.2 million compared to net unrealized
appreciation of approximately $12.3 million during the quarter ended June 30,
2005. Net unrealized appreciation of approximately $3.2 million during the
quarter ended June 30, 2006 consisted of approximately $7.6 million of net
unrealized appreciation in the industrial distribution properties held by
Allagash, offset by $4.4 million of unrealized depreciation of certain common
equity investments. Net unrealized appreciation of approximately $12.3
million during the quarter ended June 30, 2005 consisted of approximately $13.0
million of unrealized appreciation in the value of the property of Bel Santa
Ana, $0.7 million of unrealized appreciation in the value of the industrial
distribution properties held by Allagash and $1.4 million of net unrealized
depreciation of certain common equity investments.

During the quarter ended June 30, 2006, Belcrest
Realty sold certain of its Partnership Preference Units for approximately $8.4
million (representing sales to real estate investment affiliates of other
investment funds advised by Boston Management), recognizing a net gain of
approximately $0.1 million on the transactions.

During the quarter ended June 30, 2006, the Fund saw
net unrealized depreciation of the estimated fair value of its Partnership
Preference Units of approximately $11.0 million compared to net unrealized
appreciation of approximately $8.1 million during the quarter ended June 30,
2005. The net unrealized depreciation of approximately $11.0 million during the
quarter ended June 30, 2006 consisted of approximately $10.6 million of
unrealized depreciation as a result of decreases in the per unit values of
Partnership Preference Units during the quarter, and approximately $0.4 million
of

16

unrealized depreciation resulting from the
recharacterization of previously recorded unrealized appreciation as realized
gains due to the sales of Partnership Preference Units. The net unrealized
appreciation of approximately $8.1 million during the quarter ended June 30,
2005 resulted from increases in the per unit values of Partnership Preference
Units held.

Distributions from Partnership Preference Units for
the quarter ended June 30, 2006 were approximately $6.2 million compared to
approximately $6.9 million for the quarter ended June 30, 2005, a decrease of
$0.7 million or 10%. The decrease was principally due to fewer Partnership
Preference Units held on average during the quarter, partially offset by higher
average distribution rates for the Partnership Preference Units held. For the
quarter ended June 30, 2005, the decrease was due to fewer Partnership
Preference Units held on average, as well as lower average distribution rates on
Partnership Preference Units held during the quarter.

Performance of Interest Rate Swap Agreements.For the quarter ended June 30, 2006, net realized
and unrealized gains on the Funds interest rate swap agreements were
approximately $5.8 million, compared to net realized and unrealized losses of
approximately $10.1 million for the quarter ended June 30, 2005. Net realized
and unrealized gains on swap agreements for the quarter ended June 30, 2006
consisted of $4.9 million of unrealized appreciation due to changes in swap
agreement valuations and $0.9 million of periodic payments received pursuant to
outstanding swap agreements (and classified as net realized gains on interest
rate swap agreements in the Funds consolidated financial statements). For the
quarter ended June 30, 2005, net realized and unrealized losses consisted of
unrealized depreciation of $7.9 million on swap agreement valuation changes and
$2.2 million of swap agreement periodic payments. The positive contribution for
the quarter ended June 30, 2006 from changes in swap valuations was attributable
to an increase in swap rates during the period. The negative impact on Fund
performance for the quarter ended June 30, 2005 from changes in swap agreement
valuations was attributable to a decrease in swap rates during the
period.

MD&A and Results of Operations for theSix MonthsEndedJune 30, 2006Compared to theSix
MonthsEndedJune 30, 2005

Performance of the Fund.The Funds total return was3.25% for thesix monthsendedJune 30, 2006. This return reflectsan increasein the Funds net asset
value per share from $117.50to
$119.33 and a distribution of $1.94 per shareduring the period. The S&P 500 Index had a total return of2.70% over the same period. Last year,
the Fund had a total return of-0.19%for the six months ended June 30, 2005. This return reflecteda decreasein the Funds net asset value per share from $111.88to $109.96 and a
distribution of $1.66 per share during the period. The
S&P 500 Index had a total return of-0.81% over the same period.

Performance of the Portfolio.For the six months ended June 30, 2006, the
Portfolio had a total return of 2.97%, which compares to the 2.70% total return
of the S&P 500 Index for the same period. The broad equity market posted
mixed returns for the six months ended June 30, 2006. Small-cap stocks
outperformed large-cap stocks, while value stocks continued to outperform growth
stocks. Geopolitical fears and economic uncertainty led to a month-long sell-off
toward the end of the period, reversing much of the first quarter gains.
Increased market volatility caused investors to move from risky, speculative
investments to more stable, value-oriented, and dividend-producing stocks. On
balance, corporate trends remained positive, as companies reported solid
earnings gains, record profitability levels, and healthy balance sheets.
However, as the period progressed, strength in corporate profits became
increasingly overshadowed by anxiety surrounding world events and concern over
the direction of the economy and interest rates. Monetary policy remained in a
tightening mode as the Federal Reserve raised its Fed Funds target rate four
times, to 5.25%, over the period. Energy, telecommunications and industrials
were the strongest-performing S&P 500 Index sectors, while information
technology and health care stocks realized weaker semi-annual returns. Record
crude oil prices helped energy-related stocks advance higher. Market-leading
industries in the first half of the year included energy equipment and services,
construction, metal and mining, and diversified telecom. In contrast, internet
software, catalog retail, health care equipment and household durables stocks
were among the weakest performers.

The Portfolio remained broadly diversified,
continuing to emphasize investments in large-cap, high-quality stocks. Compared
to the S&P 500 Index, the Portfolio benefited from an overweighting of the
industrials, energy and consumer staples sectors and an underweighting of the
information technology and health care sectors. The Portfolios stock selection
among metals and mining, health care providers and air freight logistics
industries was also beneficial to performance. Conversely, an underweight of the
telecommunications and utilities sectors, as well as stock selection in retail,
insurance and biotechnology holdings, hurt relative performance.

17

Performance of Real Estate Investments.During the six months ended June 30, 2006, rental income from real estate operations was approximately $21.1 million compared to approximately $20.6 million for the six
months ended June 30, 2005, an increase of $0.5 million or 2%. This increase in rental income from real estate operations was principally due to increases in the rental income of Allagash, offset in part by the sale of Bel Santa Ana in January
2006. For the six months ended June 30, 2005, rental income from real estate operations decreased principally due to Belcrest Realtys sale of Casco Property Trust, LLC (Casco) in February 2004 and its sale of all of the properties held by Bel
Alliance in October 2004, offset in part by the rental income of Allagash, which was acquired in June 2004.

During the six months ended June 30, 2006, property operating expenses were approximately $5.0 million compared to approximately $4.5 million for the six months ended June 30, 2005, an increase of $0.5 million or 11%. This increase
in property operating expenses was principally due to an increase in the property and maintenance expenses of Allagash. During the six months ended June 30, 2005, property operating expenses decreased principally due to Belcrest Realtys sales
of Casco and the properties held by Bel Alliance.

The estimated fair values of the real properties indirectly held through Belcrest Realty was approximately $452.5 million at June 30, 2006 compared to approximately $501.6 million at December 31, 2005, a net decrease of $49.1
million or 10%. This net decrease in the estimated fair values of the real properties for the six months ended June 30, 2006 was principally due to Belcrest Realtys sale of Bel Santa Ana in January 2006, offset by modest net increases in the
estimated values of the industrial distribution properties held by Allagash. Property values have increased due both to modest growth expected in near-term property earnings and to lower capitalization and discount rates applied in valuing the
properties.

During the six months ended June 30, 2006, the Fund saw net unrealized depreciation in the estimated fair value of its other real estate investments (which includes Allagash, Bel Santa Ana and certain debt and common equity investments) of
approximately $0.6 million compared to approximately $19.4 million of net unrealized appreciation for the six months ended June 30, 2005, a decrease of $20.0 million. Net unrealized depreciation of approximately $0.6 million during
the six months ended June 30, 2006 consisted of approximately $13.6 million of net unrealized appreciation in the industrial distribution properties held by Allagash, $1.3 million of unrealized appreciation of certain common equity
investments and the recharacterization of previously recorded unrealized appreciation as realized gains in the amount of $15.5 million in connection with the sale of Bel Santa Ana. Net unrealized appreciation of $19.4 million during the six
months ended June 30, 2005 was due to increases in the estimated fair values of properties held by Allagash and Bel Santa Ana offset by slight depreciation in the value of certain common equity investments.

During the six months ended June 30, 2006, Belcrest Realty acquired interests in additinal Partnership Preference Units (representing acquisitions from real estate investment affiliates of other investment funds advised by Boston Management)
for approximately $70.6 million. During the six months ended June 30, 2006, Belcrest Realty also sold certain of its Partnership Preference Units for approximately $33.1 million (representing sales to real estate investment affiliates of
other investment funds advised by Boston Management), recognizing a net gain of approximately $1.0 million on the transactions.

At June 30, 2006, the estimated fair value of Belcrest Realtys Partnership Preference Units was approximately $337.5 million compared to approximately $319.1 million at December 31, 2005, an increase of $18.4 million or 6%.
The net increase in the estimated fair values was principally due to more Partnership Preference Units held at June 30, 2006, partially offset by decreases in the per unit values of the Partnership Preference Units held. Estimated fair values for
Partnership Preference Units have been negatively impacted by rising interest rates, offset slightly by tighter credit spreads for credit-sensitive income securities, including real estate-related securities.

The Fund saw unrealized depreciation in the estimated fair value of its Partnership Preference Units of approximately $20.1 million during the six months ended June 30, 2006 compared to unrealized appreciation of approximately $12.1
million for the six months ended June 30, 2005. The unrealized depreciation of approximately $20.1 million during the six months ended June 30, 2006 consisted of approximately $18.9 million of unrealized depreciation as a result of decreases
in the per unit values of Partnership Preference Units during the period, and approximately $1.2 million of unrealized depreciation resulting from the recharacterization of previously recorded unrealized appreciation as realized gains due to the
sales of Partnership Preference Units. The net unrealized appreciation of approximately $12.1 million during the first six months of 2005 consisted of approximately $11.4 million of unrealized appreciation as a result of increases in the per
unit values of Partnership Preference Units during the period, offset by approximately $0.7 million of unrealized appreciation resulting from the recharacterization of previously recorded unrealized depreciation as realized losses due to the
sales of Partnership Preference Units.

18

Distributions from Partnership Preference Units for
the six months ended June 30, 2006 totaled approximately $12.4 million compared
to approximately $14.0 million for the six months ended June 30, 2005, a
decrease of $1.6 million or 11%. The decrease was principally due to fewer
Partnership Preference Units held on average during the six months ended June
30, 2006. Distributions from Partnership Preference Units decreased during the
first six months of 2005 due to fewer Partnership Preference Units held on
average during the six months ended June 30, 2005 and lower average distribution
rates.

Performance of Interest Rate Swap Agreements.For the six months ended June 30, 2006 net realized
and unrealized gains on the Funds interest rate swap agreements totaled
approximately $12.1 million, compared to net realized and unrealized losses of
approximately $4.2 million for the six months ended June 30, 2005. Net realized
and unrealized gains on swap agreements for the six months ended June 30, 2006
consisted of $10.9 million of unrealized appreciation due to changes in swap
agreement valuations and $1.2 million of periodic payments received pursuant to
outstanding swap agreements (and classified as net realized gains on interest
rate swap agreements in the Funds consolidated financial statements). For the
six months ended June 30, 2005, unrealized appreciation of $0.6 million on swap
agreement valuation changes was offset by $4.9 million of swap agreement
periodic payments. The positive contribution to Fund performance for the six
months ended June 30, 2006 and 2005 from changes in swap agreement valuations
was attributable to an increase in swap rates during the periods for swaps with
maturities comparable to those of the Funds swaps.



|Liquidity and Capital
      Resources.
|--------------------------------------

Outstanding Borrowings.The Fund has entered into credit arrangements with DrKW Holdings, Inc.
and Merrill Lynch Mortgage Capital, Inc. (collectively, the Credit Facility)
primarily to finance the Funds real estate investments, and will continue to
use the Credit Facility for such purpose in the future. The Credit Facility may
also be used for other purposes, including any liquidity needs of the Fund. On
June 30, 2006, the Fund amended its revolving credit facility with Merrill Lynch
Mortgage Capital, Inc. todecreasethe
amount available by $60.0 millionto
an aggregate amount available for borrowing of $78.0million. In the future, the Fund may increase
the size of the Credit Facility (subject to lender consent) and the amount of
outstanding borrowings thereunder. As ofJune 30,
2006, the Fund had outstanding borrowings of $669.0 millionand unused loan commitments of
$44.0 millionunder the CreditFacility.

The Fund has entered into interest rate swap
agreements with respect to a substantial portion of its borrowings under the
Credit Facility. Pursuant to these agreements, the Fund makes periodic payments
to the counterparty at predetermined fixed rates in exchange for floating-rate
payments that fluctuate withone-month LIBOR. During the terms of the outstanding interest rate swap agreements,
changes in the underlying values of the agreements are recorded as unrealized
appreciation or depreciation. As ofJune 30,
2006, the accumulated unrealizedappreciationrelated to the interest rate swap
agreements was approximately$26.7 million. As ofDecember 31, 2005, the
accumulated unrealizedappreciationrelated to the interest rate swap agreements was approximately$15.8 million.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk.

Interest Rate Risk.The Funds primary exposure to interest rate risk arises from its real
estate investments that are financed by the Fund with floating rate borrowings
under the Credit Facility and by fixed-rate secured mortgage debt obligations ofAllagash. 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 onone-month LIBOR. The Fund has entered
intointerestrate swap agreements to
fix the cost of a substantial portion of its borrowings under the Credit
Facility and to mitigate in part the impact of interest rate changes on the
Funds net asset value. Under the terms of the interest rate swap agreements,
the Fund makes cash payments at fixed rates in exchange for floating rate
payments that fluctuate withone-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 withNote 4 and Note 5to the Fundsunaudited condensed consolidated financial
statementsin Item 1 above.

19



|Interest Rate
      SensitivityCost, Principal (Notional)
      Amountby Contractual Maturity and Callable
      Datefor theTwelve Months
      Ended June 30,*
|---------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  | Estimated    
|--------------------------- |  | ---- |  | ---- |  | ----------- |  | ------------ |  | ---- |  | ------------ |  | ------------ |  | -------------
|                            |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  | Fair Value as
|                            |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  | ofJune 30,   
|                            |  | 2007 |  | 2008 |  | 2009        |  | 2010         |  | 2011 |  | Thereafter   |  | Total        |  | 2006         
|                           
|                           
|Rate sensitive liabilities: |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|                            |  |     
|                           
|Long-term debt:             |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|                            |  |     
|                           
|Fixed-rate mortgages        |  |      |  |      |  |             |  |              |  |      |  | $307,000,000 |  | $307,000,000 |  | $298,300,000 
|                           
|Average interest rate       |  |      |  |      |  |             |  |              |  |      |  | 5.44%        |  | 5.44%        |  |              
|                            |  |     
|                           
|Variable-rate Credit        |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Facility                    |  |      |  |      |  |             |  | $669,000,000 |  |      |  |              |  | $669,000,000 |  | $669,000,000 
|                           
|Average interest rate       |  |      |  |      |  |             |  | 5.64%        |  |      |  |              |  | 5.64%        |  |              
|                           
|                           
|Rate sensitive derivative   |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|financial instruments:      |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|                            |  |     
|                           
|Pay fixed/receive           |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|variable interest rate      |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|swap agreements(1)          |  |      |  |      |  |             |  | $623,855,000 |  |      |  | $3,870,000   |  | $627,725,000 |  | $26,747,725  
|                           
|Average pay rate            |  |      |  |      |  |             |  | 4.67%        |  |      |  | 6.29%        |  | 4.68%        |  |              
|                           
|Average receive rate        |  |      |  |      |  |             |  | 5.63%        |  |      |  | 5.63%        |  | 5.63%        |  |              
|                           
|                           
|Rate sensitive              |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|investments:                |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|                            |  |     
|                           
|Fixed-rate Partnership      |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Preference Units:           |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|                            |  |     
|                           
|Camden Operating,           |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|L.P., 7% Series B           |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Cumulative                  |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Redeemable Perpetual        |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Preferred Units,            |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Callable 12/2/08,           |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Current Yield: 7.66%        |  |      |  |      |  | $28,197,003 |  |              |  |      |  |              |  | $28,197,003  |  | $25,809,200  
|                           
|Colonial Realty Limited     |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Partnership, 7.25%          |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Series B Cumulative         |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Redeemable Perpetual        |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Preferred Units,            |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Callable 8/24/09,           |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Current Yield: 7.83%        |  |      |  |      |  |             |  | $20,430,833  |  |      |  |              |  | $20,430,833  |  | $18,991,200  
|                           
|Essex Portfolio, L.P.,      |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|7.875% Series B             |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Cumulative                  |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Redeemable Preferred        |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Units,                      |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Callable 12/31/09,          |  |      |  |      |  |             |  |              |  |      |  |              |  |              |  |              
|Current Yield: 8.05%        |  |      |  |      |  |             |  | $29,226,328  |  |      |  |              |  | $29,226,328  |  | $28,118,765  

20

|                        |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  | Estimated    
|----------------------- |  | ----------- |  | ---- |  | ---- |  | ----------- |  | ----------- |  | ---------- |  | ----------- |  | -------------
|                        |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  | Fair Value as
|                        |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  | ofJune 30,   
|                        |  | 2007        |  | 2008 |  | 2009 |  | 2010        |  | 2011        |  | Thereafter |  | Total       |  | 2006         
|                       
|                       
|Essex Portfolio, L.P.,  |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|7.875% Series D         |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Cumulative              |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Redeemable Preferred    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Units,                  |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Callable 7/28/10,       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Current Yield: 7.99%    |  |             |  |      |  |      |  |             |  | $12,913,850 |  |            |  | $12,913,850 |  | $12,313,050  
|                       
|Liberty Property        |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Limited Partnership,    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|7.45% Series B          |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Cumulative              |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Redeemable Preferred    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Units,                  |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Callable 8/31/09,       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Current Yield: 7.60%    |  |             |  |      |  |      |  | $32,250,000 |  |             |  |            |  | $32,250,000 |  | $31,617,900  
|                       
|MHC Operating           |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Limited Partnership,    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|8.0625% Series D        |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Cumulative              |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Redeemable Perpetual    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Preference Units,       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Callable 3/24/10,       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Current Yield: 8.32%    |  |             |  |      |  |      |  | $55,000,000 |  |             |  |            |  | $55,000,000 |  | $53,328,000  
|                       
|MHC Operating           |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Limited Partnership,    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|7.95% Series F          |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Cumulative              |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Redeemable Perpetual    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Preference Units,       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Callable 6/30/10,       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Current Yield: 8.26%    |  |             |  |      |  |      |  | $17,500,000 |  |             |  |            |  | $17,500,000 |  | $16,842,000  
|                       
|National Golf Operating |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Partnership, L.P., 11%  |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Series A Cumulative     |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Redeemable Preferred    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Units, Callable 2/6/03, |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Current Yield: 10.82%   |  | $27,877,518 |  |      |  |      |  |             |  |             |  |            |  | $27,877,518 |  | $32,083,896  
|                       
|National Golf Operating |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Partnership, L.P., 11%  |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Series B Cumulative     |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Redeemable Preferred    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Units, Callable 2/6/03, |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Current Yield: 10.82%   |  | $29,833,200 |  |      |  |      |  |             |  |             |  |            |  | $29,833,200 |  | $30,492,000  
|                       
|PSA Institutional       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Partners, L.P., 6.4%    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Series NN Cumulative    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Redeemable Perpetual    |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Preferred Units,        |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Callable 3/17/10,       |  |             |  |      |  |      |  |             |  |             |  |            |  |             |  |              
|Current Yield: 7.10%    |  |             |  |      |  |      |  | $48,488,320 |  |             |  |            |  | $48,488,320 |  | $43,840,300  
|                       
|                       
|                       
|                        |  |             |  |      |  |      |  | 21          |  |             |  |            |  |             |  |              

|                        |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  | Estimated    
|----------------------- |  | ---- |  | ---- |  | ----------- |  | ---- |  | ----------- |  | ---------- |  | ----------- |  | -------------
|                        |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  | Fair Value as
|                        |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  | ofJune 30,   
|                        |  | 2007 |  | 2008 |  | 2009        |  | 2010 |  | 2011        |  | Thereafter |  | Total       |  | 2006         
|                       
|Vornado Realty, L.P.,   |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|7% Series D-10          |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Cumulative              |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Redeemable Preferred    |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Units,                  |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Callable 11/17/08,      |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Current Yield: 7.50%(2) |  |      |  |      |  | $11,754,742 |  |      |  |             |  |            |  | $11,754,742 |  | $11,197,513  
|                       
|Vornado Realty, L.P.,   |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|6.75% Series D-14       |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Cumulative              |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Redeemable Preferred    |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Units,                  |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Callable 9/9/10,        |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|Current Yield: 7.19%(3) |  |      |  |      |  |             |  |      |  | $33,919,726 |  |            |  | $33,919,726 |  | $32,845,299  
|                        |  |     
|                       
|Note Receivable:        |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|                        |  |     
|                       
|Fixed-rate note         |  |      |  |      |  |             |  |      |  |             |  |            |  |             |  |              
|receivable, 8%          |  |      |  |      |  |             |  |      |  |             |  | $3,352,436 |  | $3,352,436  |  | $4,355,817   

|*   |  | The amounts listed reflect the Funds positions as ofJune 30, 2006. The Funds current positions
      may differ. 
|--- |  | -------------------------------------------------------------------------------------------------------------------
|(1) |  | The interest rate swap agreement with a notional amount of
      $3,870,000 has an effective date of June 25, 2010.
|(2) |  | Belcrest Realtys interest in these
      Partnership Preference Units is held through Bel Holdings
      LLC.     
|(3) |  | Belcrest Realtys interest in these
      Partnership Preference Units is held through Belvorn Holdings
      LLC. 



| | Item4. 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 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.

22

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 1934 Act) as of the
end of the period covered by this report, with the participation of the Funds Chief Executive Officer and Chief Financial Officer. The Funds disclosure controls and procedures are the controls and other procedures that the Fund designed
to ensure that it records, processes, summarizes and reports in a timely manner the information that the Fund must disclose in reports that it files or submits to the Securities and Exchange Commission. Based on that evaluation, the Funds
Chief Executive Officer and Chief Financial Officer concluded that, as ofJune 30, 2006, the Funds disclosure controls and procedures were effective.

Internal Control Over Financial Reporting.There were no changes in the Funds internal control over financial reporting that occurred during the quarter endedJune 30, 2006that have
materially affected or are reasonably likely to materially affect the Funds internal control over financial reporting.

23



|PART II. OTHER INFORMATION
      Item1. Legal
      Proceedings.
|----------------------------------------------------------------

Although in the ordinary course of business, the
Fund and its directly and indirectly controlled 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 ended
December 31, 2005 in response to Item 1A to Part 1 of Form 10-K.

Item2. Unregistered Sales of Equity
Securities and Use of Proceeds.

As described in the Funds Annual Report on Form
10-K for the year ended December 31, 2005, shares of the Fund may be redeemed by
Fund shareholders on any business day. Redemptions are met at the net asset
value per share of theFund. The right
to redeem is available to all shareholders and all outstanding Fund shares areeligible for redemption. During each
month in the quarter endedJune 30, 2006, the total number of shares redeemed and the average price paid per
share were as follows:

Total No. of Shares
    
    Average Price PaidMonth Ended
    
    Redeemed(1)
    
    Per ShareApril 30, 2006
    
    172,032.762
    
    $121.88May 31, 2006
    
    1,084,713.600
    
    $121.99June 30, 2006
    
    250,828.588
    
    $117.23Total
    
    1,507,574.950
    
    $119.56


|(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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   

Item3. Defaults Upon Senior
Securities.

None.

Item4. Submission of Matters to a Vote of
Security Holders.

No matters were submitted to a vote of security
holders during thequarterendedJune 30, 2006.

Item5. Other
Information.

None.

24

Item6. Exhibits.

(a)        
The following is a list of all exhibits filed as part of this Form10-Q:

|4.2(d) |  | Amendment No.4dated June 30, 2006 to the Loan and
      Security Agreement among the Fund, Merrill  Lynch Mortgage Capital, Inc., as Agent, the Lenders referred to
      therein and Merrill Lynch Capital  Services,
      Inc.
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|       | 
|       |  |                                                                                                                                                                                                                                  
|31.1   |  | Certification Pursuant
      to  18  U.S.C.
      Section  1350,  as
      Adopted Pursuant to Section  302 
      of the Sarbanes-  Oxley Act
      of  2002                                                                    
|       | 
|       |  |                                                                                                                                                                                                                                  
|31.2   |  | Certification Pursuant
      to  18  U.S.C.
      Section  1350,  as
      Adopted Pursuant to Section  302 
      of the Sarbanes-  Oxley Act
      of  2002                                                                    
|       | 
|       |  |                                                                                                                                                                                                                                  
|32.1   |  | Certification Pursuant
      to  18  U.S.C.
      Section  1350,  as
      Adopted Pursuant to Section  906 
      of the Sarbanes-  Oxley Act
      of  2002                                                                    
|       | 
|       |  |                                                                                                                                                                                                                                  
|32.2   |  | Certification Pursuant
      to  18  U.S.C.
      Section  1350,  as
      Adopted Pursuant to Section  906 
      of the Sarbanes-  Oxley Act
      of  2002                                                                    
|       | 

(b)        
Reports on Form 8-K:

None.

25



|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 onAugust 9, 2006.

BELCRESTCAPITAL FUND LLC/s/Michelle A.
      GreenMichelle A. GreenChief Financial Officer(Duly Authorized Officer andPrincipal Financial Officer)


26

EXHIBIT INDEX

4.2(d)
    
    Amendment No.4dated June 30, 2006 to the Loan and
      Security Agreement among the Fund, Merrill  Lynch Mortgage Capital, Inc., as Agent, the Lenders referred to
      therein and Merrill Lynch Capital  Services,
      Inc.31.1
    
    Certification Pursuant
      to  18  U.S.C.
      Section  1350,  as
      Adopted Pursuant to Section  302 
      of the Sarbanes-  Oxley Act
      of  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


27