UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934
                  For the quarterly period ended June 30, 2004
                                                 -------------

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

                          Commission File No. 000-25767
                                              ---------

                             Belair Capital Fund LLC
                             -----------------------
             (Exact name of registrant as specified in its charter)

             Massachusetts                             04-3404037
             -------------                             ----------
        (State of organization)           (I.R.S. Employer Identification No.)

       The Eaton Vance Building
           255 State Street
        Boston, Massachusetts                            02109
        ---------------------                            -----
(Address of principal executive offices)               (Zip Code)

     Registrant's telephone number:                   617-482-8260
                                                      ------------

                                      None
                                      ----

     (Former Name, Former Address and Former Fiscal Year, if changed since
                                  last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                   YES  X      NO
                                       ---        ---

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).

                                   YES  X      NO
                                       ---        ---
<PAGE>
                             BELAIR CAPITAL FUND LLC
                               Index to Form 10-Q

PART I    FINANCIAL INFORMATION                                           Page

Item 1.   Condensed Consolidated Financial Statements                       3

          Condensed Consolidated Statements of Assets and Liabilities
          as of June 30, 2004 (Unaudited) and December 31, 2003             3

          Condensed Consolidated Statements of Operations (Unaudited)
          for the Three Months Ended June 30, 2004 and 2003 and for the
          Six Months Ended June 30, 2004 and 2003                           4

          Condensed Consolidated Statements of Changes in Net Assets
          for the Six Months Ended June 30, 2004 (Unaudited) and the
          Year Ended December 31, 2003                                      6

          Condensed Consolidated Statements of Cash Flows (Unaudited)
          for the Six Months Ended June 30, 2004 and 2003                   7

          Financial Highlights (Unaudited) for the Six Months Ended
          June 30, 2004                                                     9

          Notes to Condensed Consolidated Financial Statements as of
          June 30, 2004 (Unaudited)                                        10

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                        17

Item 3.   Quantitative and Qualitative Disclosures About Market Risk       22

Item 4.   Controls and Procedures                                          25

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                                25

Item 2.   Changes in Securities, Use of Proceeds and Issuer Purchases
          of Equity Securities                                             25

Item 3.   Defaults Upon Senior Securities                                  25

Item 4.   Submission of Matters to a Vote of Security Holders              25

Item 5.   Other Information                                                26

Item 6.   Exhibits and Reports on Form 8-K                                 26

SIGNATURES                                                                 27

EXHIBIT INDEX                                                              28

                                        2

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

BELAIR CAPITAL FUND LLC
Condensed Consolidated Statements of Assets and Liabilities

                                                June 30, 2004       December 31,
                                                 (Unaudited)           2003
                                                --------------    --------------
Assets:
 Investment in Belvedere Capital Fund
  Company LLC (Belvedere Company)               $1,608,405,284    $1,588,195,284
 Investment in Partnership Preference Units        305,783,310       318,042,995
 Investment in other real estate                   185,246,356       162,585,380
 Short-term investments                             16,000,000        11,765,330
                                                --------------    --------------
Total investments                               $2,115,434,950    $2,080,588,989
 Cash                                                2,564,853         8,687,577
 Escrow deposits - restricted                           80,839            80,839
 Open interest rate swap agreements, at value        6,529,868         1,644,344
 Distributions and interest receivable                 127,031           694,054
 Other assets                                        2,997,165         1,144,720
                                                --------------    --------------
Total assets                                    $2,127,734,706    $2,092,840,523
                                                --------------    --------------

Liabilities:
 Loan payable - Credit Facility                 $  468,000,000    $  447,000,000
 Mortgage payable                                  112,630,517       112,630,517
 Payable for Fund Shares redeemed                      200,000         1,180,000
 Distributions payable to minority shareholders              -            16,800
 Swap interest payable                                 210,383           243,920
 Security deposits                                     443,809           372,900
 Accrued expenses:
  Interest expense                                     942,695           920,797
  Property taxes                                       866,975           576,590
  Other expenses and liabilities                       421,592           669,458
 Minority interests in controlled subsidiaries      13,637,454         6,947,692
                                                --------------    --------------
Total liabilities                               $  597,353,425    $  570,558,674
                                                --------------    --------------

Net assets                                      $1,530,381,281    $1,522,281,849

                                                --------------    --------------
Shareholders' Capital                           $1,530,381,281    $1,522,281,849
                                                --------------    --------------

Shares outstanding                                  12,523,816        12,728,157
                                                --------------    --------------

Net asset value and redemption price per Share  $       122.20    $       119.60
                                                --------------    --------------

       See notes to unaudited condensed consolidated financial statements

                                        3
<PAGE>
BELAIR CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
                                                    Three Months   Three Months    Six Months    Six Months
                                                       Ended          Ended          Ended         Ended
                                                   June 30, 2004  June 30, 2003  June 30, 2004  June 30, 2003
                                                   -------------  -------------  -------------  -------------
<S>                                                <C>            <C>            <C>            <C>
Investment Income:
 Dividends allocated from Belvedere Company
  (net of foreign taxes of $133,243, $92,086,
  $199,652 and $152,043, respectively)              $ 6,114,372    $ 5,051,085    $11,671,799    $ 9,972,661
 Interest allocated from Belvedere Company               18,865        158,005         45,403        249,852
 Expenses allocated from Belvedere Company           (2,376,174)    (2,122,158)    (4,786,308)    (4,124,509)
                                                    -----------    -----------    -----------    -----------
 Net investment income allocated from
  Belvedere Company                                 $ 3,757,063    $ 3,086,932    $ 6,930,894    $ 6,098,004
 Distributions from Partnership Preference Units      7,022,667      9,656,110     15,493,544     19,308,901
 Rental income                                        5,602,237      5,483,433     11,113,455     11,067,605
 Interest                                               137,621         63,229        242,769        109,448
                                                    -----------    -----------    -----------    -----------
Total investment income                             $16,519,588    $18,289,704    $33,780,662    $36,583,958
                                                    -----------    -----------    -----------    -----------
Expenses:
 Investment advisory and administrative fees        $ 1,390,558    $ 1,352,111    $ 2,791,673    $ 2,637,073
 Property management fees                               223,344        222,039        441,881        444,666
 Servicing fees                                         154,895        131,906        322,438        247,720
 Interest expense on mortgages                        2,386,111      2,386,111      4,772,222      4,772,222
 Interest expense on Credit Facility                  1,696,182      2,422,481      3,367,062      4,971,353
 Property and maintenance expenses                    1,680,746      1,567,507      3,257,272      3,117,760
 Property taxes and insurance                           693,586        751,907      1,394,367      1,506,554
 Amortization of deferred expenses                            -              -              -          9,099
 Miscellaneous                                          191,034        183,543        327,420        310,141
                                                    -----------    -----------    -----------    -----------
Total expenses                                      $ 8,416,456    $ 9,017,605    $16,674,335    $18,016,588
                                                    -----------    -----------    -----------    -----------
Net investment income before
 minority interest in net income of
 controlled subsidiaries                            $ 8,103,132    $ 9,272,099    $17,106,327    $18,567,370
Minority interest in net income
 of controlled subsidiaries                            (115,744)      (149,592)      (225,980)      (321,751)
                                                    -----------    -----------    -----------    -----------
Net investment income                               $ 7,987,388    $ 9,122,507    $16,880,347    $18,245,619
                                                    -----------    -----------    -----------    -----------
</TABLE>
       See notes to unaudited condensed consolidated financial statements

                                        4
<PAGE>
BELAIR CAPITAL FUND LLC
Condensed Consolidated Statements of Operations (Unaudited) (Continued)
<TABLE>
<CAPTION>
                                                    Three Months   Three Months    Six Months     Six Months
                                                        Ended          Ended          Ended          Ended
                                                    June 30, 2004  June 30, 2003  June 30, 2004  June 30, 2003
                                                    -------------  -------------  -------------  -------------
<S>                                                 <C>            <C>            <C>            <C>
Realized and Unrealized Gain (Loss)
Net realized gain (loss) -
 Investment transactions and foreign
  currency transactions allocated from
  Belvedere Company (identified cost basis)         $ 5,985,586    $  3,705,353    $11,836,499   $ (2,191,186)
 Investment transactions in Partnership
  Preference Units (identified cost basis)                    -               -      2,399,543             92
 Interest rate swap agreements (1)                   (3,193,756)     (4,875,697)    (6,245,551)   (11,984,376)
                                                    -----------    ------------    -----------   ------------
Net realized gain (loss)                            $ 2,791,830    $ (1,170,344)   $ 7,990,491   $(14,175,470)
                                                    -----------    ------------    -----------   ------------
Change in unrealized appreciation
 (depreciation)
 Investments and foreign currency
  allocated from Belvedere Company
  (identifed cost basis)                            $10,427,667    $165,762,777    $34,441,442   $104,742,932
 Investment in Partnership Preference Units
  (identified cost basis)                            (5,653,884)      3,001,536    (12,611,935)    27,138,712
 Investment in other real estate (net of
  minority interests in unrealized gain
  of controlled subsidiaries of $151,672,
  $519,169, $2,059,804 and $170,020, respectively)     (486,900)        670,139     (2,445,242)       236,994
 Interest rate swap agreements                        9,759,378       4,213,887      4,885,524     10,456,140
                                                    -----------    ------------    -----------   ------------
Net change in unrealized appreciation
 (depreciation)                                     $14,046,261    $173,648,339    $24,269,789   $142,574,778
                                                    -----------    ------------    -----------   ------------

Net realized and unrealized gain                    $16,838,091    $172,477,995    $32,260,280   $128,399,308
                                                    -----------    ------------    -----------   ------------

Net increase in net assets from operations          $24,825,479    $181,600,502    $49,140,627   $146,644,927
                                                    ===========    ============    ===========   ============
</TABLE>

(1)  Amounts  represent  periodic payments made in connection with interest rate
     swap agreements. (Note 4)

       See notes to unaudited condensed consolidated financial statements

                                        5
<PAGE>
BELAIR CAPITAL FUND LLC
Condensed Consolidated Statements of Changes in Net Assets

                                                   Six Months
                                                     Ended          Year Ended
                                                 June 30, 2004     December 31,
                                                  (Unaudited)         2003
                                                ---------------  ---------------
Increase (Decrease) in Net Assets:
 Net investment income                          $   16,880,347   $   34,029,533
 Net realized gain (loss) from investment
  transactions, foreign currency transactions
  and interest rate swap agreements                  7,990,491       (6,702,427)
 Net change in unrealized appreciation
  (depreciation) of investments, foreign
  currency and interest rate swap agreements        24,269,789      335,001,122
                                                --------------   --------------
Net increase in net assets from operations      $   49,140,627   $  362,328,228
                                                --------------   --------------
Transactions in Fund Shares -
 Net asset value of Fund Shares issued to
  Shareholders in payment of distributions
  declared                                      $    7,259,756   $    2,956,829
 Net asset value of Fund Shares redeemed           (32,021,472)     (82,202,891)
                                                --------------   --------------
Net decrease in net assets from Fund Share
 transactions                                   $  (24,761,716)  $  (79,246,062)
                                                --------------   --------------
Distributions -
 Distributions to Shareholders                  $  (16,279,479)  $   (6,607,973)
                                                --------------   --------------
Total distributions                             $  (16,279,479)  $   (6,607,973)
                                                --------------   --------------

Net increase in net assets                      $    8,099,432   $  276,474,193

Net assets:
 At beginning of period                         $1,522,281,849   $1,245,807,656
                                                --------------   --------------
 At end of period                               $1,530,381,281   $1,522,281,849
                                                ==============   ==============

       See notes to unaudited condensed consolidated financial statements

                                        6
<PAGE>
BELAIR CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
                                                                          Six Months        Six Months
                                                                            Ended             Ended
                                                                         June 30, 2004    June 30, 2003
                                                                         -------------    -------------
<S>                                                                      <C>              <C>
Cash Flows From (For) Operating Activities -
Net increase in net assets from operations                               $ 49,140,627     $ 146,644,927
Adjustments to reconcile net increase in net assets from
 operations to net cash flows (for) from operating activities -
  Net investment income allocated from Belvedere Company                   (6,930,894)       (6,098,004)
  Decrease in escrow deposits                                                       -           993,440
  Decrease in receivable for investments sold                                       -         4,952,435
  Increase in interest receivable from other real estate investments          (87,281)          (65,074)
  (Increase) decrease in other assets                                      (1,715,188)           94,223
  Decrease in distributions and interest receivable                           567,023           740,741
  Decrease in interest payable for open swap agreements                       (33,537)       (3,653,354)
  Decrease in security deposits, accrued interest and accrued
   other expenses and liabilities                                            (200,959)         (411,383)
  Increase in accrued property taxes                                          199,029           108,974
  Purchases of Partnership Preference Units                               (48,668,050)                -
  Proceeds from sales of Partnership Preference Units                      50,715,343                 -
  Payment for investments in other real estate                            (17,686,317)                -
  Improvements to rental property                                            (851,239)         (821,949)
  Net increase in investment in Belvedere Company                                   -        (3,500,000)
  Interest incurred on interest rate swap agreements                       (6,245,551)      (11,984,376)
  (Increase) decrease in short-term investments                            (4,234,670)        3,426,881
  Minority interest in net income of controlled subsidiaries                  225,980           321,751
  Net realized (gain) loss from investment transactions                    (7,990,491)       14,175,470
  Net change in unrealized (appreciation) depreciation of investments     (24,269,789)     (142,574,778)
                                                                         ------------     -------------
Net cash flows (for) from operating activities                           $(18,065,964)    $   2,349,924
                                                                         ------------     -------------
Cash Flows From (For) Financing Activities -
 Proceeds from (repayment of) Credit Facility                            $ 21,000,000     $  (8,000,000)
 Payments for Fund Shares redeemed                                             (2,637)           (1,646)
 Distributions paid to Shareholders                                        (9,019,723)       (3,651,144)
 Distributions paid to minority shareholders                                  (34,400)          (17,600)
                                                                         ------------     -------------
Net cash flows from (for) financing activities                           $ 11,943,240     $ (11,670,390)
                                                                         ------------     -------------

Net decrease in cash                                                     $ (6,122,724)    $  (9,320,466)

Cash at beginning of period                                              $  8,687,577     $  16,067,430
                                                                         ------------     -------------
Cash at end of period                                                    $  2,564,853     $   6,746,964
                                                                         ============     =============
</TABLE>

       See notes to unaudited condensed consolidated financial statements

                                        7
<PAGE>
BELAIR CAPITAL FUND LLC
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
<TABLE>
                                                                          Six Months        Six Months
                                                                            Ended             Ended
                                                                         June 30, 2004    June 30, 2003
                                                                         -------------    -------------
<S>                                                                      <C>              <C>
Supplemental Disclosure and Non-cash Investing and
 Financing Activities -
  Interest paid on loan - Credit Facility                                $  3,297,247     $   4,933,537
  Interest paid on swap agreements                                       $  6,279,088     $  15,637,730
  Interest paid on mortgage                                              $  4,691,061     $   4,691,061
  Market value of securities distributed in payment of redemptions       $ 32,998,835     $  36,865,637
  Market value of real property and other assets, net of current
   liabilities, assumed in conjunction with the acquisition of
   other real estate                                                     $ 22,107,896     $           -
  Partnership Preference Units exchanged for an equity investment
   in real estate companies and an investment in note receivable         $          -     $  (3,977,592)
  Market value of an equity investment in real estate companies          $          -     $   1,907,012
  Investment in note receivable                                          $          -     $   2,070,580
</TABLE>

       See notes to unaudited condensed consolidated financial statements

                                        8
<PAGE>
BELAIR CAPITAL FUND LLC as of June 30, 2004
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FINANCIAL HIGHLIGHTS

FOR THE SIX MONTHS ENDED JUNE 30, 2004
--------------------------------------------------------------------------------
Net asset value - Beginning of period                                  $119.600
--------------------------------------------------------------------------------

INCOME (LOSS) FROM OPERATIONS
--------------------------------------------------------------------------------
Net investment income (6)                                              $  1.333
Net realized and unrealized gain                                          2.547
--------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS                                           $  3.880
--------------------------------------------------------------------------------

DISTRIBUTIONS
--------------------------------------------------------------------------------
Distributions to Shareholders                                          $ (1.280)
--------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS                                                    $ (1.280)
--------------------------------------------------------------------------------

NET ASSET VALUE - END OF PERIOD                                        $122.200
--------------------------------------------------------------------------------

TOTAL RETURN(1)                                                            3.28%
--------------------------------------------------------------------------------




                                              As a Percentage   As a Percentage
                                              of Average Net   of Average Gross
RATIOS                                           Assets(5)        Assets(2)(5)
--------------------------------------------------------------------------------
Expenses of Consolidated Real Property
Subsidiaries
 Interest and other borrowing costs(7)           0.52%(9)           0.38%(9)
 Operating expenses(7)                           0.55%(9)           0.40%(9)
Belair Capital Fund LLC Expenses
 Interest and other borrowing costs(4)(8)        0.44%(9)           0.32%(9)
 Investment advisory and administrative fees,
  servicing fees and other Fund operating
  expenses(3)(4)                                 1.08%(9)           0.79%(9)
                                              ----------------------------------
Total expenses                                   2.59%(9)           1.89%(9)

Net investment income                            2.22%(9)           1.63%(9)
--------------------------------------------------------------------------------

SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
Net assets, end of period (000's omitted)                            $1,530,381
Portfolio turnover of Tax-Managed Growth Portfolio (the Portfolio)         1.73%
--------------------------------------------------------------------------------

(1)  Returns are  calculated by determining  the percentage  change in net asset
     value with all distributions reinvested. Total return is not computed on an
     annualized basis.
(2)  Average  Gross Assets is defined as the average  daily amount of all assets
     of Belair  Capital Fund LLC (Belair  Capital) (not including its investment
     in Belair Real Estate Corporation  (Belair Real Estate)) plus all assets of
     Belair  Real  Estate  minus  the sum of their  liabilities  other  than the
     principal amount of money borrowed.  For this purpose, the assets of Belair
     Real  Estate's  controlled  subsidiaries  are reduced by the  proportionate
     interests therein of investors other than Belair Real Estate.
(3)  Includes  Belair  Capital's  share of Belvedere  Capital Fund Company LLC's
     allocated expenses, including those expenses allocated from the Portfolio.
(4)  Includes  the expenses of Belair  Capital and Belair Real Estate.  Does not
     include expenses of the real estate  subsidiaries  majority-owned by Belair
     Real Estate.
(5)  For the purpose of  calculating  ratios,  the income and expenses of Belair
     Real  Estate's  controlled  subsidiaries  are reduced by the  proportionate
     interests therein of investors other than Belair Real Estate.
(6)  Calculated using average shares outstanding.
(7)  Includes Belair Real Estate's  proportional  share of expenses  incurred by
     its majority-owned subsidiaries.
(8)  Ratios do not include  interest  incurred in  connection  with the interest
     rate swap  agreements.  Had such  amounts  been  included,  ratios would be
     higher.
(9)  Annualized.

       See notes to unaudited condensed consolidated financial statements

                                        9
<PAGE>
BELAIR CAPITAL FUND LLC as of June 30, 2004
Notes To Condensed Consolidated Financial Statements (Unaudited)

1    Organization and Basis of Presentation

The condensed  consolidated  interim financial statements of Belair Capital Fund
LLC (Belair  Capital) and its  subsidiaries  (collectively,  the Fund) have been
prepared by the Fund,  without audit, in accordance  with accounting  principles
generally  accepted  in the  United  States of  America  for  interim  financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with accounting principles
generally  accepted  in the United  States of  America  have been  condensed  or
omitted as permitted by such rules and regulations. All adjustments,  consisting
of normal recurring  adjustments,  have been included.  Management believes that
the disclosures are adequate to present fairly the financial  position,  results
of  operations,  cash flows and  financial  highlights  at the dates and for the
periods  presented.  It is suggested that these interim financial  statements be
read in conjunction with the financial statements and the notes thereto included
in the Fund's latest annual report on Form 10-K. Results for interim periods are
not necessarily indicative of those to be expected for the full fiscal year.

The balance  sheet at  December  31,  2003 and the  statement  of changes in net
assets for the year then ended have been  derived  from the  December  31,  2003
audited  financial  statements  but do not  include all of the  information  and
footnotes  required by accounting  principles  generally  accepted in the United
States  of  America  for  complete  financial  statements  as  permitted  by the
instructions to Form 10-Q and Article 10 of Regulation S-X.

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

During the quarter ended June 30, 2004, Belair Real Estate  Corporation  (Belair
Real  Estate)  made an  indirect  investment  in real  property  through a newly
established  controlled  subsidiary,   Elkhorn  Property  Trust  (Elkhorn),   as
described below. The consolidated  financial  statements include the accounts of
Elkhorn  and all  material  intercompany  accounts  and  transactions  have been
eliminated.

Subsidiary-

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

                                       10
<PAGE>
2    Investment Transactions

The following table  summarizes the Fund's  investment  transactions for the six
months ended June 30, 2004 and June 30, 2003:

                                              Six Months Ended  Six Months Ended
          Investment Transaction               June 30, 2004      June 30, 2003
--------------------------------------------------------------------------------
Increases in investment in Belvedere Company   $          -        $  4,000,000
Decreases in investment in Belvedere Company   $ 32,998,835        $ 37,365,637
Acquisition of other real property(1)          $ 17,686,317        $          -
Purchases of Partnership Preference Units(2)   $ 48,668,050        $          -
Sales of Partnership Preference Units(3)       $ 50,715,343        $          -
--------------------------------------------------------------------------------

(1)  On June 30, 2004,  Belair Real Estate  purchased an indirect  investment in
     real property through a controlled subsidiary, Elkhorn, as described below.
     At the date of the transaction,  the value of Belair Real Estate's interest
     in its real property investment in Elkhorn was $17,690,553.
(2)  Purchases of Partnership  Preference Units during the six months ended June
     30, 2004  include  Partnership  Preference  Units  purchased  from  another
     investment  fund  advised  by  Boston   Management  and  Research   (Boston
     Management).
(3)  Sales of  Partnership  Preference  Units for the six months  ended June 30,
     2004 include  Partnership Preference Units  sold to another investment fund
     advised by Boston Management for which a loss of $997,698 was recognized.

On May 3, 2004,  Belair Real Estate  entered into an agreement to establish  and
acquire a majority  interest in a controlled  subsidiary,  Elkhorn.  On June 30,
2004,  Elkhorn  acquired  a  majority  interest  in  five  separate   industrial
properties.  The seller  retained a minority  interest in the  properties and an
affiliate  of the Elkhorn  Minority  Shareholder  manages the  properties.  When
Elkhorn  acquired the real estate  investment,  a portion of the  real  estate's
purchase price was allocated to the estimated  fair value of in-place  leases in
accordance  with  Statement of Financial  Accounting  Standards 141. At June 30,
2004, the real estate  investment  balance  includes the estimated fair value of
net unfavorable in-place leases totaling $231,735 at acquisition. The properties
are leased under  fixed-term  operating leases on a long-term basis. At June 30,
2004,  the minimum lease  payments  expected to be received by Elkhorn on leases
with lease periods greater than one year are as follows:

Twelve Months Ending June 30,   Amount
-----------------------------------------
2005                         $ 1,962,494
2006                           1,857,478
2007                           1,515,106
2008                           1,028,257
2009                             737,755
Thereafter                       157,655
                             -----------
                             $ 7,258,745
                             ===========

On  August 4,  2004,  the Fund  made an  additional  investment  in  Elkhorn  of
$161,644,755. Elkhorn concurrently acquired a majority interest in an additional
seventeen   industrial   properties.   An  affiliate  of  the  Elkhorn  Minority
Shareholder  manages the  properties.  All of the Elkhorn  properties are leased
under fixed-term operating leases on a long-term basis.

During  the six months  ended  June 30,  2003,  the Fund  exchanged  Partnership
Preference  Units in the amount of  $3,977,592  for an equity  investment in two
private real estate  companies  affiliated with the issuer of such formerly held
Partnership  Preference Units and a note receivable in the amounts of $1,907,012
and $2,070,580,  respectively. The secured note receivable (valued at $2,306,993
as of June 30, 2004 and $2,135,654 as of June 30, 2003) earns interest of 8% per
annum and matures in February 2013 or on demand.

                                       11
<PAGE>
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, 2004 and June 30,  2003,  including
allocations of income,  expenses and net realized and unrealized  gains (losses)
for the respective periods then ended:

<TABLE>
<CAPTION>
                                                                                Six Months Ended     Six Months Ended
                                                                                  June 30, 2004       June 30, 2003
------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                  <C>
Belvedere Company's interest in the Portfolio(1)                                $ 11,762,239,521     $  9,599,217,401
The Fund's investment in Belvedere Company(2)                                   $  1,608,405,284     $  1,436,699,926
Income allocated to Belvedere Company from the Portfolio                        $     83,686,364     $     66,798,353
Income allocated to the Fund from Belvedere Company                             $     11,717,202     $     10,222,513
Expenses allocated to Belvedere Company from the Portfolio                      $     25,387,359     $     20,113,419
Expenses allocated to the Fund from Belvedere Company                           $      4,786,308     $      4,124,509
Net realized gain (loss) from investment transactions and foreign currency
  transactions allocated to Belvedere Company from the Portfolio                $     72,573,660     $    (17,889,099)
Net realized gain (loss) from investment transactions and foreign currency
  transactions allocated to the Fund from Belvedere Company                     $     11,836,499     $     (2,191,186)
Net change in unrealized appreciation (depreciation) of investments and
  foreign currency allocated to Belvedere Company from the Portfolio            $    255,505,090     $   (698,962,649)
Net change in unrealized appreciation (depreciation) of investments and
  foreign currency allocated to the Fund from Belvedere Company                 $     34,441,442     $    104,742,932
----------------------------------------------------------------------------- ------------------------------------------
</TABLE>

(1)  As of June 30, 2004 and 2003, the value of Belvedere  Company's interest in
     the Portfolio  represents  64.7% and 61.7% of the  Portfolio's  net assets,
     respectively.
(2)  As of June 30, 2004 and 2003,  the Fund's  investment in Belvedere  Company
     represents 13.7% and 15.0% of Belvedere Company's net assets, respectively.

A summary of the  Portfolio's  Statement of Assets and  Liabilities  at June 30,
2004,  December 31, 2003 and June 30, 2003 and its operations for the six months
ended June 30, 2004, for the year ended December 31, 2003 and for the six months
ended June 30, 2003 follows:

<TABLE>
<CAPTION>
                                                     June 30, 2004      December 31, 2003       June 30, 2003
                                                 -------------------------------------------------------------
<S>                                                <C>                   <C>                  <C>
Investments, at value                              $ 18,156,546,589      $ 17,584,390,762     $ 15,616,951,272
Other assets                                             30,174,170            25,462,745           26,660,614
--------------------------------------------------------------------------------------------------------------
Total assets                                       $ 18,186,720,759      $ 17,609,853,507     $ 15,643,611,886
Total liabilities                                           138,607               264,502           93,843,137
--------------------------------------------------------------------------------------------------------------
Net assets                                         $ 18,186,582,152      $ 17,609,589,005     $ 15,549,768,749
==============================================================================================================
Dividends and interest                             $    131,109,908      $    232,925,912     $    109,393,140
--------------------------------------------------------------------------------------------------------------
Investment adviser fee                             $     38,780,667      $     67,584,543     $     31,979,032
Other expenses                                            1,025,267             2,295,653              985,298
--------------------------------------------------------------------------------------------------------------
Total expenses                                     $     39,805,934      $     69,880,196     $     32,964,330
--------------------------------------------------------------------------------------------------------------
Net investment income                              $     91,303,974      $    163,045,716     $     76,428,810
Net realized gain (loss) from investment
 transactions and foreign currency transactions         118,166,339            70,909,770         (29,306,399)
Net change in unrealized appreciation
 (depreciation) of investments and foreign
 currency                                               397,547,485         3,174,709,110        1,126,151,279
--------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations         $    607,017,798      $  3,408,664,596     $  1,173,273,690
--------------------------------------------------------------------------------------------------------------
</TABLE>

4    Interest Rate Swap Agreements

Belair Capital has entered into interest rate swap agreements with Merrill Lynch
Capital  Services,  Inc. in connection with its real estate  investments and the
associated borrowings. Under such agreements,  Belair Capital has agreed to make
periodic payments at fixed rates in exchange for payments at floating rates. The

                                       12
<PAGE>
notional  or  contractual  amounts  of  these  instruments  may not  necessarily
represent the amounts  potentially subject to risk. The measurement of the risks
associated  with  these  investments  is  meaningful  only  when  considered  in
conjunction with all related assets,  liabilities and agreements.  Interest rate
swap agreements open at June 30, 2004 and December 31, 2003, are listed below.

<TABLE>
<CAPTION>

           Notional                             Initial
            Amount                             Optional       Final       Unrealized           Unrealized
Effective   (000's     Fixed    Floating      Termination  Termination  Appreciation at      Appreciation at
   Date    omitted)    Rate       Rate           Date         Date       June 30, 2004     December 31, 2003
---------------------------------------------------------------------------------------------------------------
<S>        <S>        <C>      <C>               <C>          <C>        <C>                <C>
  10/03    $20,000    4.045%   LIBOR + 0.30%       -          6/10       $    716,021       $    230,597
  02/04     95,952     5.00%   LIBOR + 0.30%     08/04        6/10            799,431                  -
  10/03     95,952     5.05%   LIBOR + 0.30%     02/04        6/10                  - *          218,976
  10/03     61,500    4.865%   LIBOR + 0.30%     07/04        6/10            740,135            212,857
  10/03     75,000    4.795%   LIBOR + 0.30%     09/04        6/10          1,067,095            304,067
  10/03     42,000     4.69%   LIBOR + 0.30%     02/05        6/10            725,432            201,570
  10/03     49,000    4.665%   LIBOR + 0.30%     03/05        6/10            879,202            240,892
  10/03     35,330     4.18%   LIBOR + 0.30%     07/09        6/10          1,066,054            235,385
  06/04    104,176    4.875%   LIBOR + 0.00%       -          6/12            536,498**                -
---------------------------------------------------------------------------------------------------------------
                                                                         $  6,529,868       $  1,644,344
---------------------------------------------------------------------------------------------------------------
</TABLE>

*    Agreement was terminated on the Initial Optional Termination Date.
**   On May 3, 2004,  Belair Capital  entered into a forward  interest rate swap
     agreement with Merrill Lynch Capital Services,  Inc. in anticipation of its
     future investment in a controlled  subsidiary,  Elkhorn, for the purpose of
     hedging the interest rate of substantially  all of the expected  fixed-rate
     mortgage financing of the real property over the expected 8-year term. Such
     agreement  was  terminated  in July  2004 and the Fund  realized  a gain of
     $536,498 upon termination.

5    Debt

Credit Facility- In August 2004, additional borrowings under the Credit Facility
in the amount of  $100,000,000  were used to purchase an additional  interest in
the real estate  investment  Elkhorn,  a real estate  subsidiary  of Belair Real
Estate.  This borrowing accrues interest at a rate of one-month LIBOR plus 0.38%
per annum.

On August 4, 2004, Elkhorn acquired a majority interest in seventeen  industrial
properties  (See Note 2). To finance  the Fund's  investment  in the  properties
acquired by Elkhorn,  Belair Capital  increased the amount  available  under its
credit arrangement with Merrill Lynch Mortgage Capital,  Inc. (Merrill Lynch) by
$13,000,000  under a  temporary  arrangement  (the  Temporary  Arrangement)  and
borrowed that amount.  The borrowing  under the  Temporary  Arrangement  accrues
interest  at a rate of  one-month  LIBOR  plus  0.90% and is for a term of sixty
days,  subject to a  thirty-day  extension.  Any unused  amount of the  increase
pertaining to the Temporary  Arrangement is subject to a commitment fee of 0.10%
per annum. The assets of Belair Capital, excluding the assets of Bel Residential
Properties Trust (Bel Residential) and Elkhorn,  secure all borrowings under the
credit arrangement with Merrill Lynch.

Elkhorn  expects to obtain first  mortgage  financing for its  investment in the
third and  fourth  quarters  of 2004.  The  proceeds  from such  first  mortgage
financing will be used to repay Belair Capital, and accordingly,  Belair Capital
will repay its borrowings under the Temporary Arrangement and a portion of other
borrowings under the Credit Facility.

6    Segment Information

Belair  Capital  pursues  its  investment   objective   primarily  by  investing
indirectly  in the  Portfolio  through  Belvedere  Company.  The  Portfolio is a
diversified  investment company that emphasizes  investments in common stocks of
domestic and foreign growth  companies that are considered to be high in quality
and  attractive  in their  long-term  investment  prospects.  Separate  from its
investment in Belvedere  Company,  Belair Capital  invests in real estate assets
through its subsidiary  Belair Real Estate.  Belair Real Estate invests directly
and indirectly in Partnership  Preference Units, debt and equity  investments in
private  real  estate  companies  and  in  real  property   through   controlled
subsidiaries Bel Residential and Elkhorn (See Note 1).

                                       13
<PAGE>
Belair Capital evaluates performance of the reportable segments based on the net
increase  (decrease) in net assets from  operations of the  respective  segment,
which  includes net  investment  income  (loss),  net  realized  gain (loss) and
unrealized   appreciation   (depreciation).   The  accounting  policies  of  the
reportable  segments are the same as those for Belair  Capital on a consolidated
basis. No reportable  segments have been aggregated.  Reportable  information by
segment is as follows:
<TABLE>
<CAPTION>
                                                           Tax-Managed
For the Three Months Ended                                    Growth              Real
June 30, 2004                                               Portfolio*           Estate               Total
------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                 <C>                  <C>
Revenue                                                  $   3,757,063       $  12,677,866        $   16,434,929
Interest expense on mortgages                                        -          (2,386,111)           (2,386,111)
Interest expense on credit facilities                                -          (1,527,070)           (1,527,070)
Operating expenses                                            (723,818)         (3,370,438)           (4,094,256)
Minority interest in net income of controlled
 subsidiaries                                                        -            (115,744)             (115,744)
------------------------------------------------------------------------------------------------------------------
Net investment income                                    $   3,033,245       $   5,278,503        $    8,311,748
Net realized gain (loss)                                     5,985,586          (3,193,756)            2,791,830
Net change in unrealized appreciation (depreciation)        10,427,667           3,618,594            14,046,261
------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations of
 reportable segments                                     $  19,446,498       $   5,703,341        $   25,149,839
------------------------------------------------------------------------------------------------------------------

                                                           Tax-Managed
For the Three Months Ended                                    Growth              Real
June 30, 2003                                               Portfolio*           Estate               Total
------------------------------------------------------------------------------------------------------------------
Revenue                                                  $   3,086,932       $  15,191,521        $   18,278,453
Interest expense on mortgages                                        -          (2,386,111)           (2,386,111)
Interest expense on Credit Facility                                  -          (2,349,806)           (2,349,806)
Operating expenses                                            (543,486)         (3,455,002)           (3,998,488)
Minority interest in net income of controlled
 subsidiary                                                          -            (149,592)             (149,592)
------------------------------------------------------------------------------------------------------------------
Net investment income                                    $   2,543,446        $  6,851,010        $    9,394,456
Net realized gain (loss)                                     3,705,353          (4,875,697)           (1,170,344)
Net change in unrealized appreciation (depreciation)       165,762,777           7,885,562           173,648,339
------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations of
 reportable segments                                     $ 172,011,576        $  9,860,875        $  181,872,451
------------------------------------------------------------------------------------------------------------------

                                                           Tax-Managed
For the Six Months Ended                                      Growth              Real
June 30, 2004                                               Portfolio*           Estate               Total
------------------------------------------------------------------------------------------------------------------
Revenue                                                  $   6,930,894       $  26,712,415        $   33,643,309
Interest expense on mortgages                                        -          (4,772,222)           (4,772,222)
Interest expense on Credit Facility                                  -          (3,097,697)           (3,097,697)
Operating expenses                                          (1,423,482)         (6,646,271)           (8,069,753)
Minority interest in net income of controlled
 subsidiary                                                          -            (225,980)             (225,980)
------------------------------------------------------------------------------------------------------------------
Net investment income                                    $   5,507,412       $  11,970,245        $   17,477,657
Net realized gain (loss)                                    11,836,499          (3,846,008)            7,990,491
Net change in unrealized appreciation (depreciation)        34,441,442         (10,171,653)           24,269,789
------------------------------------------------------------------------------------------------------------------
Net increase (decrease)  in net assets from operations
 of reportable segments                                  $  51,785,353       $  (2,047,416)       $   49,737,937
------------------------------------------------------------------------------------------------------------------

                                       14
<PAGE>
                                                           Tax-Managed
For the Six Months Ended                                      Growth              Real
June 30, 2003                                               Portfolio*           Estate               Total
------------------------------------------------------------------------------------------------------------------
Revenue                                                  $   6,098,004       $  30,456,141        $   36,554,145
Interest expense on mortgages                                        -          (4,772,222)           (4,772,222)
Interest expense on Credit Facility                                  -          (4,822,212)           (4,822,212)
Operating expenses                                          (1,047,225)         (6,825,261)           (7,872,486)
Minority interest in net income of controlled
 subsidiary                                                          -            (321,751)             (321,751)
------------------------------------------------------------------------------------------------------------------
Net investment income                                    $   5,050,779       $  13,714,695        $   18,765,474
Net realized loss                                           (2,191,186)        (11,984,284)          (14,175,470)
Net change in unrealized appreciation (depreciation)       104,742,932          37,831,846           142,574,778
------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations of
 reportable segments                                     $ 107,602,525       $  39,562,257        $  147,164,782
------------------------------------------------------------------------------------------------------------------


                                                            Tax-Managed           Real
At June 30, 2004                                         Growth Portfolio*       Estate               Total
------------------------------------------------------------------------------------------------------------------
Segment assets                                           $  1,608,405,284    $ 503,583,475        $ 2,111,988,759
Segment liabilities                                               200,000      567,314,243            567,514,243
------------------------------------------------------------------------------------------------------------------
Net assets (liabilities) of reportable segments          $  1,608,205,284    $ (63,730,768)       $ 1,544,474,516
------------------------------------------------------------------------------------------------------------------

At December 31, 2003
------------------------------------------------------------------------------------------------------------------
Segment assets                                           $  1,588,195,284    $ 487,471,604        $ 2,075,666,888
Segment liabilities                                             1,180,000      544,629,124            545,809,124
------------------------------------------------------------------------------------------------------------------
Net assets (liabilities) of reportable segments          $  1,587,015,284     $(57,157,520)       $ 1,529,857,764
------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                       Three Months     Three Months       Six Months       Six Months
                                                          Ended             Ended            Ended             Ended
                                                      June 30, 2004     June 30, 2003    June 30, 2004     June 30, 2003
                                                     --------------------------------------------------------------------
<S>                                                  <C>               <C>                <C>              <C>
Revenue:
 Revenue from reportable segments                     $ 16,434,929     $  18,278,453      $ 33,643,309     $  36,554,145
  Unallocated amounts:
   Interest earned on cash not invested in
    the Portfolio or in subsidiaries                        84,659            11,251           137,353           29,813
                                                     --------------------------------------------------------------------
Total revenue                                         $ 16,519,588     $  18,289,704      $ 33,780,662     $  36,583,958
                                                     --------------------------------------------------------------------

Net increase (decrease) in net assets from operations:
 Net increase in net assets from operations of
  reportable segments                                 $ 25,149,839     $ 181,872,451      $ 49,737,937     $ 147,164,782
 Unallocated amounts:
  Interest earned on cash not invested in
   the Portfolio or in subsidiaries                         84,659            11,251           137,353            29,813
  Unallocated amounts(1):
    Servicing fees                                        (154,895)         (131,906)         (322,438)         (247,720)
    Interest expense on Credit Facility                   (169,112)          (72,675)         (269,365)         (149,141)
    Audit, tax and legal fees                              (53,924)          (42,358)          (99,025)          (90,289)
    Other operating expenses                               (31,088)          (36,261)          (43,835)          (62,518)
                                                     --------------------------------------------------------------------
Total net increase in net assets from operations      $ 24,825,479     $ 181,600,502      $ 49,140,627     $ 146,644,927
                                                     --------------------------------------------------------------------
</TABLE>

                                       15
<PAGE>
                                         June 30, 2004       December 31, 2003
                                       -----------------------------------------
Net assets:
 Net assets of reportable segments      $ 1,544,474,516       $ 1,529,857,764
 Unallocated cash                                 5,074             5,408,305
 Short-term investments(2)                   16,000,000            11,765,330
 Loan payable - Credit Facility(3)          (29,940,457)          (24,579,481)
 Other liabilities                             (157,852)             (170,069)
                                       -----------------------------------------
Total net assets                        $ 1,530,381,281       $ 1,522,281,849
                                       -----------------------------------------

(1)  Unallocated amounts represent expenses incurred that pertain to the overall
     operation  of  Belair  Capital,  and do not  pertain  to  either  operating
     segment.
(2)  Short-term  investments  represent  temporary  investments  of  cash.  Such
     amounts  may  be  used  to  finance  the  Fund's   equity  in  real  estate
     investments,  to reduce outstanding borrowings under the Credit Facility or
     for the short-term liquidity needs of the Fund.
(3)  Unallocated amount of loan payable - Credit Facility represents  borrowings
     not specifically used to fund real estate investments.  Such borrowings are
     generally used to pay selling commissions,  organization expenses and other
     liquidity needs of the Fund.

                                       16
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

THE INFORMATION IN THIS REPORT CONTAINS  FORWARD-LOOKING  STATEMENTS  WITHIN THE
MEANING OF THE FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS TYPICALLY ARE
IDENTIFIED BY USE OF TERMS SUCH AS "MAY," "WILL," "SHOULD,"  "MIGHT,"  "EXPECT,"
"ANTICIPATE,"  "ESTIMATE,"  AND SIMILAR  WORDS,  ALTHOUGH  SOME  FORWARD-LOOKING
STATEMENTS ARE EXPRESSED DIFFERENTLY.  THE ACTUAL RESULTS OF BELAIR CAPITAL FUND
LLC  (THE  FUND)  COULD   DIFFER   MATERIALLY   FROM  THOSE   CONTAINED  IN  THE
FORWARD-LOOKING  STATEMENTS DUE TO A NUMBER OF FACTORS.  THE FUND  UNDERTAKES NO
OBLIGATION  TO UPDATE  PUBLICLY  ANY  FORWARD-LOOKING  STATEMENTS,  WHETHER AS A
RESULT OF NEW INFORMATION,  FUTURE EVENTS,  OR OTHERWISE,  EXCEPT AS REQUIRED BY
APPLICABLE  LAW.  FACTORS  THAT COULD  AFFECT THE FUND'S  PERFORMANCE  INCLUDE A
DECLINE IN THE U.S.  STOCK MARKETS OR IN GENERAL  ECONOMIC  CONDITIONS,  ADVERSE
DEVELOPMENTS  AFFECTING THE REAL ESTATE  INDUSTRY,  OR  FLUCTUATIONS IN INTEREST
RATES.

The following discussion should be read in conjunction with the Fund's unaudited
condensed consolidated financial statements and related notes in Item 1 above.

RESULTS OF  OPERATIONS  FOR THE  QUARTER  ENDED JUNE 30,  2004  COMPARED  TO THE
QUARTER ENDED JUNE 30, 2003

(a) RESULTS OF OPERATIONS.

Increases and decreases from  operations in the Fund's net asset value per share
are derived from net  investment  income (or loss) and  realized and  unrealized
gains and losses on investments.  The Fund's net investment  income (or loss) is
determined by subtracting  the Fund's total expenses from its investment  income
and  then  deducting  the  minority  interest  in net  income  (or  loss) of the
controlled  subsidiaries of Belair Real Estate Corporation (Belair Real Estate).
The Fund's investment income includes the net investment income allocated to the
Fund from Belvedere Capital Fund Company LLC (Belvedere Company),  rental income
from the  properties  owned by Belair  Real  Estate's  controlled  subsidiaries,
partnership income allocated to the income-producing  preferred equity interests
in real estate operating  partnerships  (Partnership  Preference Units) owned by
Belair Real Estate and interest earned on the Fund's short-term  investments (if
any).  The net  investment  income of  Belvedere  Company  allocated to the Fund
includes  dividends,  interest  and expenses  allocated to Belvedere  Company by
Tax-Managed  Growth  Portfolio  (the  Portfolio)  less the expenses of Belvedere
Company  allocated  to the Fund.  The Fund's total  expenses  include the Fund's
investment  advisory and administrative  fees,  servicing fees, interest expense
from  mortgages  on  properties   owned  by  Belair  Real  Estate's   controlled
subsidiaries,  interest expense on the Fund's Credit Facility (described in Item
2(b) below),  property management fees, property taxes,  insurance,  maintenance
and other  expenses  relating to the  properties  owned by Belair Real  Estate's
controlled  subsidiaries,  and other miscellaneous expenses. The Fund's realized
and unrealized gains and losses are the result of transactions in, or changes in
value of,  security  investments  held  through  the  Fund's  indirect  interest
(through  Belvedere  Company) in the  Portfolio,  real estate  investments  held
through  Belair Real Estate,  the Fund's  interest rate swap  agreements and any
other direct  investments of the Fund, as well as periodic  payments made by the
Fund pursuant to interest rate swap agreements.

Realized  and  unrealized   gains  and  losses  on  investments  have  the  most
significant  impact on the Fund's net asset value per share and result primarily
from sales of such  investments  and  changes  in their  underlying  value.  The
investments of the Portfolio  consist primarily of common stocks of domestic and
foreign  growth  companies  that  are  considered  to be  high  in  quality  and
attractive  in their  long-term  investment  prospects.  Because the  securities
holdings  of the  Portfolio  are broadly  diversified,  the  performance  of the
Portfolio  cannot  be  attributed  to one  particular  stock  or one  particular
industry or market  sector.  The  performance  of the Portfolio and the Fund are
substantially influenced by the overall performance of the U.S. stock market, as
well as by the relative performance versus the overall market of specific stocks
and classes of stocks in which the Portfolio maintains large positions.

PERFORMANCE  OF THE  FUND.(1)  The  Fund's  investment  objective  is to achieve
long-term,  after-tax  returns for  Shareholders.  Eaton Vance Management (Eaton
Vance),  as the Fund's  manager,  measures the Fund's  success in achieving  its
objective  based on the  investment  returns of the Fund,  using the  Standard &
Poor's  500  Composite  Index (the S&P 500) as the  Fund's  primary  performance
benchmark.  The S&P 500 is a broad-based unmanaged index of common stocks widely
used as a measure of U.S. stock market performance.  Eaton Vance's primary focus
in pursuing total return is on the Fund's common stock portfolio, which consists

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

                                       17
<PAGE>
of its indirect  interest in the Portfolio.  In measuring the performance of the
Fund's real estate  investments  held through  Belair Real  Estate,  Eaton Vance
considers  whether,  through current returns and changes in valuation,  the real
estate  investments  achieve returns that over the long-term  exceed the cost of
the  borrowing  incurred  to acquire  such  investments  and thereby add to Fund
returns. The Fund has entered into interest rate swap agreements to fix the cost
of borrowings  under the Credit  Facility  used to acquire  Belair Real Estate's
equity in its real  estate  investments  and to  mitigate  in part the impact of
interest rate changes on the Fund's net asset value.

The Fund's  total  return was 1.65% for the quarter  ended June 30,  2004.  This
return reflects an increase in the Fund's net asset value per share from $120.22
to $122.20 during the period. For comparison,  the S&P 500 had a total return of
1.72% over the same period.  The  performance  of the Fund  exceeded that of the
Portfolio by  approximately  0.34% during the period.  Last year, the Fund had a
total return  performance  of 15.23% for the quarter  ended June 30, 2003.  This
return reflected an increase in the Fund's net asset value per share from $89.32
to $102.92 during the period. For comparison,  the S&P 500 had a total return of
15.39% over the same period.  The  performance  of the Fund exceeded that of the
Portfolio by approximately 1.69% during that period.

PERFORMANCE  OF THE  PORTFOLIO.  For  the  quarter  ended  June  30,  2004,  the
Portfolio's total return was 1.31%. This compares to a total return of 1.72% for
the S&P 500. In the second  quarter,  U.S.  equity  returns  were  supported  by
strengthening  employment  trends,  robust  manufacturing  activity  and  rising
corporate profits. At the same time,  uncertainty over the situation in Iraq and
the prospect of rising  interest  rates and  inflation  weighed on investors and
held back returns.  During the quarter, growth stocks outperformed value stocks,
and small-caps performed better than large-caps and mid-caps.

The Portfolio's modest  underperformance  during the quarter was attributable in
part to a relative  overweighting of certain weaker performing  industry groups,
specifically  specialty  retail  and  media.  In  addition,  the  Portfolio  was
underweight internet software and communications equipment stocks, which rallied
during the period.  Concerns about future trends in consumer spending caused the
Portfolio to trim its relative  overweighting of the  discretionary  and staples
sectors during the quarter. The Portfolio also reduced healthcare and technology
investments during the quarter, mainly in the lagging biotech and semi-conductor
groups. During the quarter, the Portfolio continued to overweight airfreight and
machinery holdings, which contributed positively to the Portfolio's performance.
The  Portfolio  benefited  from the  strong  performance  of stocks in the food,
staples retailing and commercial bank industries during the quarter,  as well as
from  increased  exposure  to energy  stocks.  Material  stocks  were also solid
performers  during the quarter and,  despite the Portfolio's  underweight of the
sector versus the S&P 500, the  performance of the  Portfolio's  holdings in the
metals  and  mining  group was  noteworthy.  Valuation  and  regulatory  concern
prompted a continued de-emphasis of multi-line utilities and diversified telecom
companies.

For the quarter  ended June 30, 2003,  the  Portfolio's  total return was 13.54%
compared to the 15.39% total return for the S&P 500. During the quarter, the S&P
500 posted its best quarterly  return in five years,  with favorable  fiscal and
monetary policy developments, progress in Iraq and signs of an improving economy
contributing to a stronger market. The Portfolio's relative underperformance was
attributable primarily to its lower exposure to higher-volatility, lower-quality
stocks that were the strongest performers in the sharp market rally.

PERFORMANCE OF REAL ESTATE  INVESTMENTS.  The Fund's real estate investments are
held through Belair Real Estate.  As of June 30, 2004,  real estate  investments
consisted  primarily of a portfolio of  Partnership  Preference  Units issued by
partnerships  affiliated with publicly traded and private real estate investment
trusts (REITs) and two real estate joint ventures,  Bel  Residential  Properties
Trust (Bel  Residential) and Elkhorn  Property Trust (Elkhorn).  Bel Residential
and  Elkhorn  are real  estate  joint  ventures  that  operate  multifamily  and
industrial properties, respectively (Real Estate Joint Ventures). As of June 30,
2004, the estimated fair value of the Fund's real estate investments represented
23.1% of the Fund's  total assets on a  consolidated  basis.  Adjusting  for the
minority  interests  in Bel  Residential  and  Elkhorn,  the Fund's  real estate
investments represented 29.9% of the Fund's net assets as of June 30, 2004.

At June 30, 2004, the estimated fair value of the Fund's Partnership  Preference
Units  was  approximately  $305.8  million.  This  compares  to  investments  in
Partnership Preference Units of approximately $414.4 million at June 30, 2003, a
net decrease of $108.6  million or 26%.  While the net decrease was  principally
due to  fewer  Partnership  Preference  Units  held at June  30,  2004,  the net
decrease also reflects the lower per unit values of Partnership Preference Units
held at June 30, 2004 due to their lower average  coupon  rates.  In the current
low  interest  rate  environment,   issuers  have  been  redeeming   Partnership
Preference  Units as call  protections  expire  or  restructuring  the  terms of
outstanding  Partnership  Preference  Units in advance of their call dates. As a
result, many of the higher-yielding  Partnership Preference Units held by Belair
Real Estate  during the quarter  ended June 30, 2003 were no longer held at June
30, 2004. Boston Management expects this trend to continue through 2004.

                                       18
<PAGE>
The  Fund  saw  unrealized  depreciation  in the  estimated  fair  value  in its
Partnership  Preference Units of  approximately  $5.7 million during the quarter
ended June 30,  2004  compared  to  approximately  $3.0  million  of  unrealized
appreciation for the quarter ended June 30, 2003.  During the quarter ended June
30, 2004,  Partnership  Preference Units values were negatively  affected by the
rising  trend in U.S.  interest  rates,  partly  offset by tighter  spreads  for
credit-sensitive income securities, including real estate-related securities. In
a rising  interest rate  environment,  values of  Partnership  Preference  Units
generally  can be expected to decline.  During the quarter  ended June 30, 2003,
Belair Real Estate's  investments  in  Partnership  Preference  Units  generally
benefited  from  declining  interest  rate  levels  and  tightening  spreads  in
credit-sensitive   income  securities,   particularly  in  real   estate-related
securities.

Distributions  from Partnership  Preference Units for the quarter ended June 30,
2004 totaled $7.0  million  compared to $9.7 million for the quarter  ended June
30, 2003, a decrease of $2.7 million or 28%. The decrease was principally due to
fewer Partnership  Preference Units held on average, as well as to lower average
distribution rates for the Partnership  Preference Units held during the quarter
ended June 30, 2004.

On June 30, 2004, Belair Real Estate's newly formed subsidiary  Elkhorn acquired
a  majority  interest  in  certain  industrial   properties  from  ProLogis,   a
publicly-traded  REIT,  for  approximately  $17.7 million.  ProLogis  retained a
minority  interest in the  properties.  In May 2004,  Belair Real Estate entered
into  agreements  with ProLogis to form ProLogis Six Rivers Limited  Partnership
(Six Rivers) (in association with subsidiaries of other investment funds advised
by Boston  Management)  and to merge Six Rivers with Keystone  Property Trust, a
publicly-traded  REIT  (Keystone).   The  transactions   contemplated  by  these
agreements were consummated on August 4, 2004. As a result of the  transactions,
Elkhorn  acquired a partnership  interest in Six Rivers.  In addition,  ProLogis
acquired a minority  interest  in Elkhorn.  Through its  interest in Six Rivers,
Elkhorn  owns 100% of the  economic  interest in certain  industrial  properties
acquired through the merger of Six Rivers and Keystone for approximately  $202.1
million. It is anticipated that in the third and fourth quarters of 2004 Elkhorn
will  obtain  first  mortgage  financing  secured  by the  properties  equal  to
approximately  60-65%  of the  property  value.  The Fund has  provided  interim
financing for Elkhorn, as described below in "Liquidity and Capital Resources."

Bel Residential's  rental income increased to approximately $5.6 million for the
quarter  ended June 30,  2004 from  approximately  $5.5  million for the quarter
ended June 30, 2003,  an increase of $0.1 million or 2%. This increase in rental
income was due to modest increases in apartment rental rates net of concessions.
Bel Residential's  property  operating  expenses were approximately $2.6 million
for the  quarter  ended June 30, 2004  compared to $2.5  million for the quarter
ended June 30, 2004, an increase of 4% (property  operating  expenses are before
certain operating  expenses of Belair Real Estate of approximately  $0.8 million
for the quarter  ended June 30, 2004 and $0.9 million for the quarter ended June
30, 2003). The near-term outlook for multifamily  property operations  continues
to be weak.  While the  recent  pick-up in  economic  and  employment  growth is
expected to lead to improved  supply-demand  balance in the apartment  industry,
oversupply  conditions  continue  to exist in most major  markets.  As a result,
Boston Management expects that multifamily real estate operating results in 2004
will continue to be similar to 2003.

Because  Elkhorn held no  investments in property until June 30, 2004, it had no
significant  impact on real estate  operations during the quarter then ended. As
of August 4, 2004, Elkhorn owns an interest in 22 industrial  properties,  which
consist of industrial distribution properties located in eight states. ProLogis,
currently the largest REIT specializing in industrial  distribution  properties,
provides day-to-day operating  management of these properties.  The terms of the
Elkhorn joint venture are similar to those of the Bel Residential joint venture.
Belair Real Estate's  investment in Elkhorn will be valued in substantially  the
same manner as its  investment in Bel  Residential  and it is subject to similar
risks, as well as risks  specifically  associated  with industrial  distribution
properties (such as changing  transportation  and logistics  patterns and tenant
credit). The mortgage financing to be obtained by Elkhorn will be secured by the
properties it owns and is expected to be without recourse to Belair Real Estate,
the Fund or its  Shareholders.  Pursuant  to an  agreement  between  Belair Real
Estate  and   ProLogis,   Belair  Real  Estate  is  obligated  to  make  capital
contributions to Elkhorn if required to fund certain items such as debt service,
insurance or property taxes. In 2004, industrial properties in the United States
have  experienced  increased demand for space after three years of occupancy and
rental rate declines in most markets.  However, reduced rent levels may continue
over the near  term as  above-market  leases  mature  and space is  released  at
current market rates. As a result,  Boston Management  expects that improvements
in industrial property operating performance will occur over the longer term.

At June 30, 2004,  the estimated  fair value of the real  properties  indirectly
held through Belair Real Estate was  approximately  $181.0  million  compared to
approximately  $158.7  million at June 30, 2003, a net increase of $22.3 million
or 14%.  The net  increase in estimated  real  property  values at June 30, 2004
resulted  principally from the properties  acquired by Elkhorn and the impact of
lower  capitalization  rates on the  estimated  fair value of Bel  Residential's
properties,  which  more than  offset  the  negative  impact of lower  near-term

                                       19
<PAGE>
earnings  expectations  on property  values.  The  capitalization  rate,  a term
commonly  used in the real  estate  industry,  is the rate of return  percentage
applied to actual or  projected  income  levels to estimate  the value of a real
estate investment.

The Fund saw net  unrealized  depreciation  of the  estimated  fair value of its
other real estate  investments  (which  includes Bel Residential and Elkhorn) of
approximately  $0.5 million  during the quarter  ended June 30, 2004 compared to
unrealized appreciation of approximately $0.7 million for the quarter ended June
30, 2003. During the quarter ended June 30, 2004, Belair Real Estate experienced
modest  declines in  estimated  property  values due to  declines  in  near-term
earnings  expectations.  During the  quarter  ended June 30,  2003,  Belair Real
Estate experienced modest increases in estimated property values as decreases in
capitalization rates largely offset declines in near-term earnings expectations.

PERFORMANCE  OF INTEREST  RATE SWAP  AGREEMENTS.  For the quarter ended June 30,
2004,  net  realized  and  unrealized  gains on the  Fund's  interest  rate swap
agreements  totaled  approximately  $6.6  million,  compared to net realized and
unrealized  losses of approximately  $0.7 million for the quarter ended June 30,
2003. Net realized and unrealized gains on swap agreements for the quarter ended
June 30,  2004  consisted  of $9.8  million of  unrealized  appreciation  due to
changes in swap agreement valuations offset by $3.2 million of periodic payments
made pursuant to outstanding  swap  agreements  (and  classified as net realized
losses on interest rate swap  agreements).  For the quarter ended June 30, 2003,
unrealized  appreciation of $4.2 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  quarter  ended  June 30,  2004 from
changes in swap  agreement  valuations was  attributable  to an increase in swap
rates during the quarter.  The positive  contribution for the quarter ended June
30, 2003 from changes in swap  valuations  was due  primarily to the exercise of
early  termination  options on a number of swap  agreements and remaining  swaps
approaching  their initial  optional  termination  dates.  The  appreciation was
offset in part by a slight decline in swap rates.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2003

PERFORMANCE  OF THE FUND.  The Fund's  total return was 3.28% for the six months
ended June 30,  2004.  This return  reflects an increase in the Fund's net asset
value per share from  $119.60 to $122.20 and a  distribution  of $1.28 per share
during the period. For comparison,  the S&P 500 had a total return of 3.44% over
the same period.  The  performance  of the Fund trailed that of the Portfolio by
approximately  0.17% during the period.  Last year,  the Fund had a total return
performance  of 11.99%  for the six  months  ended June 30,  2003.  This  return
reflected  an  increase  in the Fund's net asset  value per share from $92.38 to
$102.92 and a distribution of $0.49 per share. For comparison, the S&P 500 had a
total  return  of  11.75%  over the same  period.  The  performance  of the Fund
exceeded that of the Portfolio by 3.80% during that period.

PERFORMANCE  OF THE  PORTFOLIO.  For the six  months  ended June 30,  2004,  the
Portfolio's  total return was 3.45%,  in line with the 3.44% total return of the
S&P 500. In the period,  U.S.  equity returns were supported by a  strengthening
economy and rising corporate  profits.  Geopolitical  concerns,  higher interest
rates and rising inflation were negative factors that held back returns.  In the
period, small-cap stocks sharply outperformed large-caps and mid-caps, and value
stocks performed modestly better than growth stocks.

The  Portfolio's  performance  during  the first six  months of 2004 was  driven
primarily by its  diversified  industry  exposure and positive stock  selection.
Concerns about future trends in consumer  spending  caused the Portfolio to trim
its relative  overweighting of the  discretionary and staples sectors during the
period.  The Portfolio  also  decreased  positions in healthcare  and technology
stocks during the period.  The  underweighting  of  semiconductor  equipment and
software   industries  added  to  performance.   The  Portfolio   maintained  an
overweighting of industrials  stocks, and benefited from advances in airfreight,
machinery and building stocks. While the consumer staples and financials sectors
generally did not perform well during the period,  the  Portfolio's  holdings in
those  sectors were  positive  contributors  to  performance.  Another  positive
contributor  was the  Portfolio's  growing  exposure to the energy  sector.  The
Portfolio's  oil  exploration  and gas  investments  benefited  from the current
supply-demand  imbalances  and  associated  energy price  increases.  The strong
performance  of the  Portfolio's  holdings  in the  cyclical  metals  and mining
industries  during the period was also  noteworthy.  The Portfolio  continued to
underweight the utilities and telecom sectors.

For the six months ended June 30, 2003, the  Portfolio's  total return was 8.19%
compared to an 11.75% total return for the S&P 500.  Market  performance  during
the first six  months  of 2003 was  volatile,  with war  angst,  a  questionable
economic recovery and the SARS outbreak among the concerns weighing on investors
toward the beginning of the year. From mid-March  through the end of the period,
the U.S.  markets  rallied  sharply,  with favorable  fiscal and monetary policy
developments, progress in Iraq and signs of an improving economy contributing to
the strength.  The Portfolio's relative  underperformance  during the period was
attributable primarily to its lower exposure to higher-volatility, lower-quality
stocks that were the strongest performers in the market rally.

                                       20
<PAGE>
PERFORMANCE  OF REAL ESTATE  INVESTMENTS.  During the six months  ended June 30,
2004, Belair Real Estate sold (or experienced  scheduled redemptions of) certain
of its Partnership  Preference Units for approximately  $50.7 million (including
sales to another  investment  fund  advised by Boston  Management),  recognizing
gains of $2.4 million on the transactions.  During the six months ended June 30,
2004,  Belair Real Estate also  acquired  interests  in  additional  Partnership
Preference Units from another  investment fund advised by Boston  Management for
approximately $48.7 million.

At June 30, 2004, the estimated fair value of the Fund's Partnership  Preference
Units  was  approximately  $305.8  million.  This  compares  to  investments  in
Partnership Preference Units of approximately $414.4 million at June 30, 2003, a
net decrease of $108.6  million or 26%.  While the net decrease was  principally
due to  fewer  Partnership  Preference  Units  held at June  30,  2004,  the net
decrease also reflects the lower per unit values of Partnership Preference Units
held at June 30, 2004 due to their lower average  coupon  rates.  In the current
low  interest  rate  environment,   issuers  have  been  redeeming   Partnership
Preference  Units as call  protections  expire  or  restructuring  the  terms of
outstanding  Partnership  Preference  Units in advance of their call dates. As a
result, many of the higher-yielding  Partnership Preference Units held by Belair
Real  Estate  on June 30,  2003  were no longer  held at June 30,  2004.  Boston
Management expects this trend to continue through 2004.

The Fund saw net  unrealized  depreciation  in the  estimated  fair value in its
Partnership  Preference  Units of  approximately  $12.6  million  during the six
months ended June 30, 2004 compared to approximately $27.1 million of unrealized
appreciation  for the  six  months  ended  June  30,  2003.  The net  unrealized
depreciation  of $12.6  million  in the first six  months of 2004  consisted  of
approximately $9.0 million of unrealized  depreciation  resulting from decreases
in per unit  values of the  Partnership  Preference  Units  held by Belair  Real
Estate  at  June  30,  2004  and   approximately   $3.6  million  of  unrealized
depreciation  resulting  from  the  recharacterization  of  previously  recorded
unrealized appreciation to realized gains due to sales of Partnership Preference
Units  during the six months  ended June 30,  2004.  During the six months ended
June 30, 2004,  Partnership  Preference Unit values were negatively  affected by
the rising trend in U.S.  interest  rates,  partly offset by tighter spreads for
credit-sensitive income securities, including real estate-related securities. In
a rising interest rate environment,  values of oustanding Partnership Preference
Unit generally can be expected to decline.  During the six months ended June 30,
2003, Belair Real Estate's investments in Partnership Preference Units generally
benefited  from  declining  interest  rate  levels  and  tightening  spreads  in
credit-sensitive   income  securities,   particularly  in  real   estate-related
securities.

Distributions  from  Partnership  Preference Units for the six months ended June
30, 2004  totaled  $15.5  million  compared to $19.3  million for the six months
ended  June 30,  2003,  a decrease  of $3.8  million or 20%.  The  decrease  was
principally  due to fewer  Partnership  Preference  Units held on average and to
lower  average  distribution  rates for the  Partnership  Preference  Units held
during  the six  months  ended  June 30,  2004,  partially  offset by a one-time
special  distribution from one issuer made in connection with a restructuring of
its Partnership Preference Units.

Bel Residential's  rental income was approximately $11.1 million for each of the
six month  periods  ended June 30,  2004 and June 30,  2003.  Bel  Residential's
property  operating expenses were approximately $5.1 million for each of the six
month periods ended June 30, 2004 and June 30, 2003 (property operating expenses
are before  certain  operating  expenses of Belair Real Estate of  approximately
$1.6 million for the six months ended June 30, 2004 and $1.8 million for the six
months ended June 30, 2003).  The  near-term  outlook for  multifamily  property
operations continues to be weak. As discussed above, while the recent pick-up in
economic  and  employment  growth is expected to lead to improved  supply-demand
balance in the apartment  industry,  oversupply  conditions continue to exist in
most major markets. As a result, Boston Management expects that multifamily real
estate operating results in 2004 will continue to be similar to 2003.

As noted above,  in a series of transaction  on and after June 30, 2004,  Belair
Real  Estate's  newly  formed  subsidiary  Elkhorn  acquired  investments  in  a
portfolio of industrial  properties.  Elkhorn had no significant  impact on real
estate operations during the six months ended June 30, 2004.

At June 30, 2004,  the estimated  fair value of the real  properties  indirectly
held through Belair Real Estate was  approximately  $181.0  million  compared to
approximately  $158.7  million at June 30, 2003, a net increase of $22.3 million
or 14%.  The net  increase in estimated  real  property  values at June 30, 2004
resulted principally from the formation of Elkhorn noted above and the impact of
lower  capitalization  rates on the  estimated  fair value of Bel  Residential's
properties,  which  more than  offset  the  negative  impact of lower  near-term
earnings expectations on property values.

                                       21
<PAGE>
The Fund saw  unrealized  depreciation  in the estimated fair value of its other
real  estate  investments  (which  includes  Bel  Residential  and  Elkhorn)  of
approximately $2.4 million during the six months ended June 30, 2004 compared to
approximately  $0.2 million of unrealized  appreciation for the six months ended
June 30, 2003.  During the six months  ended June 30,  2004,  Belair Real Estate
experienced  modest  decreases in estimated  property  values due to declines in
near-term  earnings  expectation.  During  the six months  ended June 30,  2003,
Belair Real Estate  experienced modest increases in estimated property values as
decreases in capitalization  rates largely offset declines in near-term earnings
expectations.

PERFORMANCE OF INTEREST RATE SWAP AGREEMENTS.  For the six months ended June 30,
2004,  net  realized  and  unrealized  losses on the Fund's  interest  rate swap
agreements  totaled  approximately  $1.4  million,  compared to net realized and
unrealized  losses of  approximately  $1.5 million for the six months ended June
30, 2003.  Net realized and  unrealized  losses on swap  agreements  for the six
months ended June 30, 2004 consisted of $4.9 million of unrealized  appreciation
due to changes in swap agreement  valuations  offset by $6.3 million of periodic
payments made pursuant to outstanding  swap  agreements  (and  classified as net
realized losses on interest rate swap agreements). For the six months ended June
30, 2003,  unrealized  appreciation of $10.5 million on swap agreement valuation
changes were offset by $12.0 million of swap agreement  periodic  payments.  The
positive contribution to Fund performance for the six months ended June 30, 2004
from changes in swap  agreement  valuations was  attributable  to an increase in
swap rates during the period. The positive  contribution to Fund performance for
the six months  ended June 30, 2003 from changes in swap  valuations  was due to
the exercise of early termination options on a number of swap agreements and the
remaining swaps approaching their initial optional termination dates. Swap rates
declined  during the six  months  ended June 30,  2003,  offsetting  some of the
appreciation from approaching early termination dates.

(b) LIQUIDITY AND CAPITAL RESOURCES.

OUTSTANDING BORROWINGS.  The Fund has entered into credit arrangements with DrKW
Holdings,  Inc. and Merrill Lynch  Mortgage  Capital,  Inc.  (collectively,  the
Credit  Facility)  primarily  to finance  the Fund's  equity in its real  estate
investments and will continue to use the Credit Facility for such purpose in the
future.  The Credit Facility may also be used for other purposes,  including any
short-term liquidity needs of the Fund. In the future, the Fund may increase the
size of the  Credit  Facility  (subject  to lender  consent)  and the  amount of
outstanding borrowings thereunder. As of June 30, 2004, the Fund had outstanding
borrowings of $468.0 million and unused loan  commitments of $98.5 million under
the Credit Facility.

In August  2004,  the Fund made  borrowings  under its credit  arrangement  with
Merrill Lynch Mortgage Capital,  Inc. (MLMC) in the amount of $100.0 million. At
that time, the Fund also  temporarily  increased the amount  available under its
credit arrangement with MLMC by $13.0 million and borrowed that amount. The Fund
used the total  proceeds from these  borrowings to finance the  acquisitions  by
Elkhorn of interests in certain  industrial  properties.  The  additional  $13.0
million of borrowings is at a rate of LIBOR plus 0.90% and is for a period of up
to sixty-days  (subject to a 30-day  extension,  if needed).  Elkhorn expects to
obtain  first  mortgage  financing  for its  properties  in the third and fourth
quarters  of 2004,  the  proceeds  from which  will be used to repay  borrowings
obtained by the Fund in August 2004 to facilitate the Elkhorn acquisitions.

The Fund has entered into interest rate swap agreements with respect to its real
estate investments and associated borrowings.  Pursuant to these agreements, the
Fund makes periodic  payments to the counterparty at predetermined  fixed rates,
in exchange for floating-rate  payments at a predetermined spread plus one-month
LIBOR.  During  the terms of the  outstanding  interest  rate  swap  agreements,
changes in the  underlying  values of the  agreements are recorded as unrealized
appreciation or depreciation.  As of June 30, 2004, the unrealized  appreciation
related to the interest rate swap agreements was approximately $6.5 million.  As
of June 30, 2003, the unrealized  depreciation related to the interest rate swap
agreements was approximately $10.9 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST  RATE RISK.  The Fund's  primary  exposure to interest rate risk arises
from its real estate  investments  that are  financed by the Fund with  floating
rate  borrowings  under the Fund's  Credit  Facility and by  fixed-rate  secured
mortgage  debt  obligations  of the  Real  Estate  Joint  Ventures.  Partnership
Preference Units are fixed rate instruments whose values will generally decrease
when interest  rates rise and increase when  interest  rates fall.  The interest
rates on  borrowings  under the  Fund's  Credit  Facility  are reset at  regular
intervals based on one-month LIBOR. The Fund has entered into interest rate swap
agreements to fix the cost of its borrowings  under the Credit  Facility used to
acquire  Belair  Real  Estate's  equity in its real  estate  investments  and to
mitigate  in part the impact of  interest  rate  changes on the Fund's net asset
value. Under the terms of the interest rate swap agreements, the Fund makes cash
payments at fixed rates in exchange for floating rate  payments  that  fluctuate
with one and three month LIBOR.  The Fund's  interest rate swap  agreements will
generally  increase in value when interest rates rise and decrease in value when

                                       22
<PAGE>
interest rates fall. In the future, the Fund may use other interest rate hedging
arrangements (such as caps, floors and collars) to fix or limit borrowing costs.
The use of interest rate hedging arrangements is a specialized activity that can
expose the Fund to significant loss.

The following table summarizes the contractual  maturities and  weighted-average
interest rates  associated  with the Fund's  significant  non-trading  financial
instruments.  The Fund has no market risk sensitive instruments held for trading
purposes.  This information should be read in conjunction with Note 4 and Note 5
to the Fund's unaudited condensed  consolidated  financial  statements in Item 1
above.

                            Interest Rate Sensitivity
                        Cost, Principal (Notional) Amount
                    by Contractual Maturity and Callable Date
                      for the Twelve Months Ended June 30,*
<TABLE>
<CAPTION>
                                                                                                                    Estimated
                                                                                                                 Fair Value as of
                                                                                                                     June 30,
                                        2005      2006-2008     2009       Thereafter              Total               2004
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>       <C>           <C>        <C>                     <C>           <C>
Rate sensitive liabilities:
----------------------------------
Long-term debt:
----------------------------------
Fixed-rate mortgages                                                      $112,630,517           $112,630,517

Average interest rate                                                             8.33%                  8.33%
----------------------------------
Variable-rate Credit Facility                                             $468,000,000           $468,000,000      $468,000,000
Average interest rate                                                             1.67%                  1.67%
------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive derivative financial
instruments:
----------------------------------
Pay fixed/ receive variable
interest rate swap
agreements(**)                                                            $482,958,000           $482,958,000      $  6,529,868

Average pay rate(**)                                                              4.76%                  4.76%

Average receive rate(**)                                                          1.66%                  1.66%
------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive investments:
----------------------------------
Fixed-rate Partnership Preference
Units:
----------------------------------
Cabot Industrial Properties, L.P.,
8.625% Series B Cumulative
Redeemable Preferred Units,
Callable 4/29/04, Current Yield:
8.55%                               $28,455,170                                                  $ 28,455,170      $ 26,727,900

Colonial Realty Limited
Partnership, 7.25% Series B
Cumulative Redeemable Perpetual
Preferred Units, Callable 2/24/09,
Current
Yield: 7.68%                                                   $19,013,123                       $ 19,013,123      $ 21,249,000

                                       23
<PAGE>
                                                                                                                    Estimated
                                                                                                                 Fair Value as of
                                                                                                                     June 30,
                                        2005      2006-2008     2009       Thereafter              Total               2004
------------------------------------------------------------------------------------------------------------------------------------
Essex Portfolio, L.P., 9.3% Series
D Cumulative Redeemable Preferred
Units, Callable 7/28/10, Current
Yield: 9.16%(1)                                                           $ 20,212,880           $ 20,212,880      $ 20,304,480

Kilroy Realty, L.P., 7.45% Series A
Cumulative Redeemable Preferred
Units, Callable 9/30/09,
Current Yield: 7.88%                                                      $ 20,000,000           $ 20,000,000      $ 18,898,240

Liberty Property L.P., 9.25% Series
B Cumulative Redeemable Preferred
Units, Callable 7/28/04, Current
Yield: 9.18%                        $30,875,000                                                  $ 30,875,000      $ 31,109,650

MHC Operating Limited Partnership,
9% Series D Cumulative Redeemable
Perpetual Preference Units,
Callable 9/29/04, Current
Yield: 8.96%                        $50,000,000                                                  $ 50,000,000      $ 50,220,000

National Golf Operating
Partnership, L.P., 9.30% Series A
Cumulative Redeemable Preferred
Units, Callable 2/6/03, Current
Yield: 9.45%                        $31,454,184                                                  $ 31,454,184      $ 32,494,140

National Golf Operating
Partnership, L.P., 9.30% Series B
Cumulative Redeemable Preferred
Units, Callable 2/6/03, Current
Yield: 9.45%                        $ 5,000,000                                                  $  5,000,000      $  4,920,000

PSA Institutional Partners, L.P.,
6.4% Series NN Cumulative
Redeemable Perpetual Preferred
Units, Callable 3/17/10, Current
Yield: 7.04%                                                              $ 48,250,000           $ 48,250,000      $ 43,849,600

Price Development Company, L.P.,
8.95% Series B Cumulative
Redeemable Preferred Partnership
Units, Callable
7/28/04, Current Yield: 8.94%       $30,625,000                                                  $ 30,625,000      $ 30,674,000

Urban Shopping Centers, L.P.,
9.45% Series D Cumulative
Redeemable Perpetual Preferred
Units, Callable 10/1/04, Current    $25,000,000                                                  $ 25,000,000      $ 25,336,300
Yield: 9.32%
----------------------------------
Note Receivable:
----------------------------------
Fixed-rate note receivable, 8%
                                                                          $  2,070,580           $  2,070,580      $  2,306,993
</TABLE>

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

                                       24
<PAGE>
**   The terms disclosed are those of the interest rate swap agreements that are
     in  effect  as of June  30,  2004.  As  discussed  in Note 4 to the  Fund's
     unaudited  condensed  consolidated  financial  statements  in Item 1 above,
     during July 2004 certain  interest rate swap  agreements  were  terminated,
     resulting  in a change of the average pay rate and average  receive rate to
     4.73% and 1.67%, respectively.

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

ITEM 4. CONTROLS AND PROCEDURES.

Eaton Vance, as the Fund's manager, conducted an evaluation of the effectiveness
of the Fund's  disclosure  controls and procedures (as defined by Rule 13a-15(e)
of the 1934 Act) as of the end of the period  covered by this  report,  with the
participation of the Fund's Chief Executive Officer and Chief Financial Officer.
Based on that  evaluation,  the Chief  Executive  Officer  and  Chief  Financial
Officer  concluded  that the Fund's  disclosure  controls  and  procedures  were
effective.  There were no changes in the Fund's internal  control over financial
reporting  that  occurred  during  the  quarter  ended  June 30,  2004 that have
materially  affected,  or are reasonably likely to materially affect, the Fund's
internal control over financial reporting.

As the Fund's manager, the complete and entire management, control and operation
of the Fund are vested in Eaton Vance.  The Fund's Chief  Executive  Officer and
Chief  Financial  Officer  intend to report to the Board of  Directors  of Eaton
Vance, Inc. (the sole trustee of Eaton Vance) any significant  deficiency in the
design or operation of internal  control over  financial  reporting  which could
adversely  affect the Fund's  ability to record,  process,  summarize and report
financial data, and any fraud, whether or not material, that involves management
or other employees who have a significant  role in the Fund's  internal  control
over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Although in the ordinary  course of business,  the Fund,  Belair Real Estate and
Belair  Real  Estate's  controlled  subsidiaries  may become  involved  in legal
proceedings,  the Fund is not aware of any material pending legal proceedings to
which any of them is subject.

ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
SECURITIES.

As  described  in the  Fund's  Annual  Report  on Form  10-K for the year  ended
December 31, 2003,  shares of the Fund may be redeemed by Fund  shareholders  on
any business  day.  Redemptions  are met at the net asset value per share of the
Fund. The right to redeem is available to all  shareholders  and all outstanding
Fund shares are eligible.  During each month in the quarter ended June 30, 2004,
the total number of shares redeemed and the average price paid per share were as
follows:

                      Total No. of Shares     Average Price Paid
Month Ended              Redeemed(1)               Per Share
-------------------------------------------------------------------
April 30, 2004             39,361.68               $120.68
-------------------------------------------------------------------
May 31, 2004               41,150.73               $117.79
-------------------------------------------------------------------
June 30, 2004              49,939.70               $122.60
-------------------------------------------------------------------
Total                      130,452.11              $121.75
-------------------------------------------------------------------

(1)  All shares  redeemed  during the  periods  were  redeemed  at the option of
     shareholders  pursuant to the Fund's  redemption  policy.  The Fund has not
     announced  any plans or programs  to  repurchase  shares  other than at the
     option of shareholders.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security  holders during the three months
ended June 30, 2004.

                                       25
<PAGE>
ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:

(a)    The following is a list of all exhibits filed as part of this Form 10-Q:

4.2(b)    Form of  Amendment  No. 2 dated  August 3,  2004 to Loan and  Security
          Agreement  among the Fund,  Merrill Lynch Mortgage  Capital,  Inc., as
          Agent,  the Lenders  referred to therein  and  Merrill  Lynch  Capital
          Services, Inc.

31.1      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002

31.2      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002

32.1      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002

32.2      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002

(b)    Reports on Form 8-K:

       None.


                                       26
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned duly authorized officer on August 9, 2004.


                                        BELAIR CAPITAL FUND LLC

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


                                       27
<PAGE>
                                  EXHIBIT INDEX
                                  -------------

4.2(b)    Form of  Amendment  No. 2 dated  August 3,  2004 to Loan and  Security
          Agreement  among the Fund,  Merrill Lynch Mortgage  Capital,  Inc., as
          Agent,  the Lenders  referred to therein  and  Merrill  Lynch  Capital
          Services, Inc.

31.1      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002

31.2      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002

32.1      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002

32.2      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002

                                       28