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

                                    FORM 10Q

                Quarterly report pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                  For the quarterly period ended June 30, 1999


                      Belair Capital Fund LLC (the "Fund")
                      ------------------------------------
             (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

Securities  to be  registered  pursuant  to  Section  12(b)  of  the  Act:  None

Securities to be registered pursuant to Section 12(g) of the Act:

           Limited Liability Company Interests in the Fund ("Shares")
           ----------------------------------------------------------
                                (Title of class)



<PAGE>
                             Belair Capital Fund LLC
                                Index to Form 10Q

PART I - FINANCIAL  INFORMATION

Page Item 1.   Unaudited Consolidated Financial Statements                     2

               Consolidated  Statements of Assets and
               Liabilities as of June 30, 1999 (unaudited)
               and December 31, 1998                                           2

               Consolidated  Statements of Operations For
               the Three Months Ended June 30, 1999 and 1998
               (unaudited)  and for the Six Months Ended
               June 30, 1999 and the period ended
               June 30, 1998 (unaudited)                                       3

               Consolidated  Statements  of  Changes  in
               Net  Assets For the Six Months Ended
               June 30, 1999 and 1998 (unaudited)                              4

               Consolidated  Statements  of Cash Flows
               for the Six Months  Ended June 30, 1999
               and 1998 (unaudited)                                            5

               Notes to Financial Statements as of
               June 30, 1999 (unaudited)                                       6


Item 2.        Management's  Discussion and Analysis of
               Financial Condition and Results of Operations                  12

Item 3.        Quantitative and Qualitative Disclosures About
               Market Risk                                                    14

PART II - OTHER INFORMATION

Item 1.        Legal Proceedings                                              17

Item 2.        Changes in Securities and Use of Proceeds                      17

Item 3.        Defaults Upon Senior Securities                                17

Item 4.        Submission of Matters to a Vote of Security Holders            17

Item 5.        Other Information                                              17

Item 6.        Exhibits and Reports on Form 8-K                               17


SIGNATURES                                                                    18



<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------

BELAIR CAPITAL FUND LLC
 Consolidated Statements of Assets and Liabilities

<TABLE>
                                                                                   June 30,
                                                                                     1999               December 31,
                                                                                 (Unaudited)                1998
                                                                              ------------------     ------------------
 <S>                                                                             <C>                    <C>
 Assets:
     Total investments, at value (identified cost, $2,318,848,596 at             $2,697,580,106         $2,535,739,282
       June 30, 1999 and $2,304,223,436 at December 31, 1998)
     Cash                                                                               132,927              2,711,580
     Receivable for open swap contracts                                               9,940,292                      -
     Dividends receivable                                                             7,057,703              1,008,985
     Deferred organization expenses                                                     394,008                508,884
     Other receivable                                                                    12,089                      -
                                                                              ------------------     ------------------
            Total Assets                                                         $2,715,117,125         $2,539,968,731
                                                                              ------------------     ------------------

 Liabilities:
     Loan payable                                                                 $ 625,000,000          $ 583,000,000
     Payable for open swap contracts                                                          -             18,155,651
     Payable for fund shares redeemed                                                   631,313                      -
     Minority interest                                                                  208,000                      -
     Interest payable                                                                 5,134,939              4,926,762
     Other accrued expenses                                                             100,186              1,037,946
                                                                              ------------------     ------------------
            Total Liabilities                                                     $ 631,074,438          $ 607,120,359
                                                                              ------------------     ------------------
 Net assets                                                                      $2,084,042,687         $1,932,848,372
                                                                              ==================     ==================

 Sources of Net Assets:
     Paid-in capital                                                             $1,752,925,594         $1,779,879,517
     Accumulated net realized loss on investments (computed
       on the basis of identified cost)                                            (56,935,785)           (55,088,152)
     Accumulated distributions in excess of net investment income                     (618,924)            (5,303,188)
     Net unrealized appreciation of investments (computed
       on the basis of identified cost)                                             388,671,802            213,360,195
                                                                              -----------------     ------------------
            Total                                                                $2,084,042,687         $1,932,848,372
                                                                              ==================     ==================

 Shares outstanding                                                                  16,346,353             16,568,833

 Net Asset Value and Redemption
 Price Per Share                                                                    $    127.49            $    116.66
</TABLE>


                                       2
<PAGE>
BELAIR CAPITAL FUND LLC
<TABLE>
 Consolidated Statements of Operations (Unaudited)          Three months       Three months        Six months          Period
                                                                ended              ended              ended            ended
                                                              June 30,         June 30, 1998      June 30, 1999       June 30,
                                                                1999                                                   1998*
                                                           ---------------  ------------------- ----------------- ----------------
 <S>                                                          <C>                <C>                 <C>              <C>
 Investment Income:
   Dividends allocated from Belvedere Capital (net of         $ 4,740,033        $   2,834,092       $ 9,358,559      $ 4,611,779
     foreign taxes of $94,698, $85,328, $141,357 and
     $85,328, respectively)

   Interest allocated from Belvedere Capital                    1,165,695              776,836         2,419,528          776,836
   Expenses allocated from Belvedere Capital                   (3,217,522)          (2,021,159)       (6,363,843)      (2,698,532)
                                                           ---------------  ------------------- ----------------- ----------------
   Net investment income allocated from Belvedere               2,688,206            1,589,769         5,414,244        2,690,083
     Capital
   Dividends from partnership preference units                 11,934,026            5,727,753        23,656,074        5,727,753
   Interest                                                       125,136                    -           165,570                -
                                                           ---------------  ------------------- ----------------- ----------------
          Total investment income                             $14,747,368        $   7,317,522      $ 29,235,888     $  8,417,836
                                                           ---------------  ------------------- ----------------- ----------------

 Expenses:
  Investment advisor fees                                     $ 1,653,140         $    900,296      $  3,174,777      $ 1,167,237
  Service fees                                                    238,792              131,371           469,081          183,763
  Interest expense                                              8,586,283            5,454,923        16,930,903        7,313,858
  Interest expense on swap contracts                            1,809,076              521,966         3,472,568          681,436
  Custodian and transfer agent fees                                 9,874               12,905            31,951           18,586
  Legal and accounting services                                   394,053              279,668           426,416          296,238
  Printing and postage                                              3,631                3,805             4,860            5,728
  Amortization of organization expenses                             8,156               38,304            38,770           39,725
  Miscellaneous                                                         -              243,087             2,298          371,365
                                                           ---------------  ------------------- ----------------- ----------------
         Total expenses                                       $12,703,005        $   7,586,325      $ 24,551,624     $ 10,077,936
                                                           ---------------  ------------------- ----------------- ----------------
 Net investment income (loss)                                 $ 2,044,363        $   (268,803)      $  4,684,264    $ (1,660,100)
                                                           ---------------  ------------------- ----------------- ----------------

 Realized and Unrealized Gain (Loss)
 Net realized gain (loss) -
   Investment transactions from Belvedere Capital             $ 1,187,438        $   5,663,034      $  6,393,795     $  5,280,570
   Investment transactions in partnership preference
     units                                                     (2,940,672)                   -        (8,241,428)               -
   Investment transactions in copper and aluminum                       -                    -                 -       (1,315,184)
                                                           ---------------  ------------------- ----------------- ----------------
          Net realized gain (loss)                          $ (1,753,234)        $   5,663,034     $ (1,847,633)     $  3,965,386
                                                           ---------------  ------------------- ----------------- ----------------
 Change in unrealized appreciation (depreciation) -
   Investment in Belvedere Capital                           $109,647,685        $  12,885,176      $160,978,642     $ 74,024,528
   Investments in partnership preference units               (19,294,500)         (22,376,110)      (13,762,978)     (22,376,110)
   Interest rate swap contracts                                16,715,449          (2,176,669)        28,095,943      (3,883,337)
                                                           ---------------  ------------------- ----------------- ----------------
          Net change in unrealized appreciation              $107,068,634       $ (11,667,603)      $175,311,607     $ 47,765,081
          (depreciation)
                                                           ---------------  ------------------- ----------------- ----------------

   Net realized and unrealized gain (loss)                   $105,315,400       $  (6,004,569)      $173,463,974     $ 51,730,467
                                                           ---------------  ------------------ ----------------- ----------------
 Net increase (decrease) in net assets from operations       $107,359,763       $  (6,273,372)      $178,148,238     $ 50,070,367
                                                           ===============  =================== ================= ================
</TABLE>

*    For the period from the start of  business,  February 6, 1998,  to June 30,
     1998.


                                       3
<PAGE>
BELAIR CAPITAL FUND LLC
<TABLE>
 Consolidated Statements of Changes in Net Assets (Unaudited)
                                                                                 Six months            Period
                                                                                   ended                ended
                                                                               June 30, 1999        June 30, 1998*
                                                                              ----------------    -----------------
 <S>                                                                           <C>                   <C>
 Increase(Decrease) in Net Assets:
     Net investment income (loss)                                              $    4,684,264        $ (1,660,100)
     Net realized gain (loss) from investment transactions                        (1,847,633)            3,965,386
     Net change in unrealized appreciation (depreciation) of investments          175,311,607           47,765,081
                                                                              ----------------    -----------------
            Net increase (decrease) in net assets from operations                 178,148,238         $ 50,070,367
                                                                              ----------------    -----------------

 Transactions in fund shares -
     Investment securities and cash contributed                                      $      -       $1,848,831,750
     Less - selling commissions                                                             -          (8,512,168)
                                                                              ----------------    -----------------
     Net contributions                                                                      -        1,840,319,582
     Net asset value of shares redeemed                                          (26,953,923)         (13,216,046)
                                                                              ----------------    -----------------
            Net increase in net assets from Fund share transactions             $(26,953,923)       $1,827,103,536
                                                                              ----------------    -----------------

 Net increase in net assets                                                      $151,194,315       $1,877,173,903

 Net assets:
     Beginning of period                                                        1,932,848,372               10,100
                                                                              ---------------    -----------------
     End of period                                                            $2,084,042,687        $1,877,184,003
                                                                              ================    =================


 Accumulated distributions in excess of net investment
 income/(net investment loss) included in net assets at end of period              $  618,924        $ (1,660,100)
</TABLE>

*    For the period from the start of  business,  February 6, 1998,  to June 30,
     1998.


                                       4
<PAGE>
BELAIR CAPITAL FUND LLC
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
                                                                          Six months          Period
                                                                             ended             Ended
                                                                        June 30, 1999      June 30, 1998*
                                                                        ---------------  -----------------
<S>                                                                        <C>              <C>
Cash flows from (for) Operating Activities -
Net investment income (loss)                                               $ 4,684,264      $ (1,660,100)
Adjustments to reconcile net investment income to net
Cash flows from operations -
       Amortization of organization expense                                     38,770             39,725
       Net investment income allocated from Belvedere Capital               (5,414,244)        (2,690,083)
       Increase in dividends receivable                                     (6,048,718)        (3,901,110)
       Increase in other receivable                                           (12,089)           (93,269)
       Payment of organization expenses                                      (443,560)           (60,000)
       Increase in payable to affiliates                                            -             96,158
       Increase (decrease) in interest payable for open swap contracts         372,345            353,663
       Increase (decrease) in accrued interest and operating expenses        (374,262)          4,690,974
       Purchases of partnership preference units, copper and aluminum    (209,000,000)      (603,535,863)
       Sales of partnership preference units, copper and aluminum          168,858,572         47,220,679
       Net (increase) decrease in investment in Belvedere Capital           10,035,713          1,014,925
                                                                        ---------------  -----------------
       Net cash flows used for operating activities                      $(37,303,209)     $(558,524,301)
Cash Flows From Financing Activities -
       Proceeds from loan                                                 $ 42,000,000      $ 568,000,000
       Contribution from Manager                                                    -            100,000
       Payments on behalf of shareholders (selling commissions)                     -        (8,512,168)
       Payments for Fund shares redeemed                                   (7,275,444)        (1,073,631)
                                                                        ---------------  -----------------
       Net cash flows from financing activities                           $ 34,724,556       $558,514,201

Net increase (decrease) in cash                                            (2,578,653)           (10,100)

Cash beginning of period                                                     2,711,580             10,100
                                                                        ---------------  -----------------
Cash end of period                                                          $  132,927          $       -
                                                                        ===============  =================


Supplemental Disclosure and Non-cash Investing and
Financing Activities
       Securities contributed by shareholders, invested in Belvedere      $          -     $1,848,731,750
       Capital
       Unrealized appreciation of investments and open swap contracts      388,671,802         47,765,081
       Interest paid for loan                                               17,095,071          2,908,544
       Interest paid for swap contracts                                      3,100,223            327,773
       Market value of securities distributed in payment of redemptions     19,672,166         12,142,415
</TABLE>

*    For the period from the start of  business,  February 6, 1998,  to June 30,
     1998.


                                       5
<PAGE>
BELAIR CAPITAL FUND LLC As Of June 30, 1999
NOTE TO CONSOLIDATED FINANICIAL STATEMENTS (UNAUDITED)

1. Belair  Capital Fund LLC (Belair  Capital) is  organized  as a  Massachusetts
limited liability company to offer diversification and tax-sensitive  investment
management  to  persons  holding  large  and  concentrated  positions  in equity
securities of selected  publicly-traded  companies.  The investment objective of
Belair  Capital is to achieve  long-term,  after-tax  returns for  Shareholders.
Belair  Capital  pursues this  objective  primarily by investing  indirectly  in
Tax-Managed Growth Portfolio (the Portfolio), a diversified, open-end management
investment  company  registered  under the  Investment  Company Act of 1940,  as
amended.  The  Portfolio  is organized as a trust under the laws of the state of
New York.  Belair Capital maintains its investment in the Portfolio by investing
in  Belvedere  Capital  Fund  Company  LLC  (Belvedere   Capital),   a  separate
Massachusetts   limited  liability  company  that  invests  exclusively  in  the
Portfolio.  The performance of Belair Capital and Belvedere Capital are directly
and  substantially  affected by the performance of the Portfolio.  Separate from
its  investment in the Portfolio  through  Belvedere  Capital,  the Fund invests
indirectly  in  income-producing,  preferred  equity  interests  in real  estate
operating   partnerships   (partnership   preference   units)   affiliated  with
publicly-traded   real  estate  investment  trusts  (REITs).   Belair  Capital's
investment in partnership preference units is achieved through its investment in
Belair Real Estate Corporation (BREC).  BREC is a Delaware  corporation that has
been  organized  and  intends  to  operate  in such a manner as to  qualify  for
taxation as a REIT under the Internal  Revenue  Code.  At June 30, 1999,  Belair
Capital owned 100% of the common stock issued by BREC and intends to hold all of
BREC's  common stock at all times.  BREC began  operations on November 24, 1998.
Prior to November 24, 1998,  Belair  Capital  invested  directly in  partnership
preference units.

The  accompanying  consolidated  financial  statements  include the  accounts of
Belair  Capital  and BREC  (collectively,  the Fund) for  periods  ending  after
November 24, 1998. All material intercompany accounts and transactions have been
eliminated.  For informational purposes, a summary of the Portfolio's operations
is included with these consolidated financial statements (see Note 8).

The  following  is a summary of  significant  accounting  policies  consistently
followed  by  the  Fund  in  the  preparation  of  its  consolidated   financial
statements.  The policies are in conformity with generally  accepted  accounting
principles.

A Investment  Security Costs -- The Fund's  investment  assets were  principally
acquired  on  February  6,  1998,  April  20,  1998 and June  25,  1998  through
contributions of common stock by Shareholders in exchange for Shares of the Fund
and in private purchases of partnership  preference units,  copper and aluminum.
The Fund immediately exchanged the contributed securities into Belvedere Capital
for shares  thereof,  and Belvedere  Capital,  in turn,  immediately  thereafter
exchanged the  contributed  securities into the Portfolio for an interest in the
Portfolio. The cost at which the Fund's investments are carried on the books and
in the financial statements is the value of the contributed securities as of the
close of business on the day prior to their contribution to the Fund and, in the
case of purchased  securities,  the acquisition  price thereof.  The initial tax
basis of the Fund's investment in the Portfolio through Belvedere Capital is the
same as the contributing  Shareholders' basis in securities and cash contributed
to the Fund.  The initial tax basis of  securities  purchased by the Fund is the
purchase cost.

B  Investment   Valuations  --The  Fund's  investments  consist  of  partnership
preference units and shares of Belvedere Capital.  Belvedere Capital's exclusive
investment is an interest in the Portfolio, the value of which is derived from a
proportional interest therein.  Additionally, the Fund has entered into interest
rate  swap  contracts  (see  Note 7).  The  valuation  policy  that  follows  is
applicable  to the  assets of the Fund,  Belvedere  Capital  and the  Portfolio.
Marketable  securities,  including  options,  that are listed on foreign or U.S.
securities  exchanges  or in the  NASDAQ  National  Market  System are valued at
closing  sale prices,  on the exchange  where such  securities  are  principally
traded.  Futures  positions on securities or currencies are generally  valued at
closing settlement prices.  Unlisted or listed securities for which closing sale
prices are not available are valued at the mean between the latest bid and asked


                                       6
<PAGE>
prices.  Short-term debt securities with a remaining maturity of 60 days or less
are valued at amortized cost, which  approximates  value. Other fixed income and
debt  securities,  including  listed  securities  and securities for which price
quotations  are  available,  will  normally be valued on the basis of valuations
furnished by a pricing  service.  Investments  held by the  Portfolio  for which
valuations or market  quotations are  unavailable are valued at fair value using
methods  determined  in  good  faith  by or at the  direction  of the  Trustees.
Investments  held by the Fund for  which  valuations  or market  quotations  are
unavailable  are valued at fair value using methods  determined in good faith by
the  Investment  Adviser.  Interest rate swap  contracts are valued by obtaining
dealer or counterparty quotes.

C Income -- Dividend  income is recorded on the  ex-dividend  date and  interest
income is recorded on the accrual  basis.  Belvedere  Capital's  net  investment
income  or loss  consists  of  Belvedere  Capital's  pro-rata  share  of the net
investment  income of the  Portfolio,  less all  actual or accrued  expenses  of
Belvedere Capital,  determined in accordance with generally accepted  accounting
principles.  The Fund's net  investment  income or loss  consists  of the Fund's
pro-rata  share of the net  investment  income of  Belvedere  Capital,  plus all
income  earned on the Fund's  direct  investments,  less all actual and  accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.

D Income  Taxes -- Belair  Capital,  Belvedere  Capital  and the  Portfolio  are
treated as  partnerships  for federal income tax purposes.  As a result,  Belair
Capital,  Belvedere  Capital and the Portfolio do not incur  federal  income tax
liability,   and  the   shareholders   and  partners  thereof  are  individually
responsible for taxes on items of partnership income, gain, loss, and deduction.
BREC's policy is to comply with the Internal  Revenue Code  applicable to REITs.
BREC will  generally not be subject to federal  income tax to the extent that it
distributes its earnings to its shareholders and maintains its  qualification as
a REIT.

E  Deferred  Organization  Expenses  -- Costs  incurred  by  Belair  Capital  in
connection with its  organization  are being amortized on a straight-line  basis
over five years.  Costs incurred in connection with the organization of BREC are
expensed as incurred.

F Interest Rate Swaps -- The Fund has entered into interest rate swap agreements
with  respect  to its  borrowings  and  investments  in  fixed-rate  partnership
preference  units.  Pursuant  to  these  agreements,  the Fund  makes  quarterly
payments to the  counterparty  at  predetermined  fixed  rates,  in exchange for
floating-rate  payments  from the  counterparty  at a  predetermined  spread  to
three-month  LIBOR, based on notional values  approximately  equal to the Fund's
acquisition cost for the fixed-rate  partnership  preference  units.  During the
terms of the outstanding  swap agreements,  changes in the underlying  values of
the swaps are  recorded as  unrealized  gains or losses.  The Fund is exposed to
credit loss in the event of non-performance  by the swap counterparty.  However,
the Fund does not anticipate non-performance by the counterparty.

G  Written  Options  --  The  Portfolio  and  the  Fund  may  write  listed  and
over-the-counter call options on individual securities, on baskets of securities
and on stock market indices.  Upon the writing of a call option, an amount equal
to the premium received by the Portfolio or Fund is included in the Statement of
Assets  and  Liabilities  as  a  liability.  The  amount  of  the  liability  is
subsequently marked-to-market to reflect the current value of the option written
in accordance with the investment  valuation policies discussed above.  Premiums
received  from  writing  options  which  expire are treated as  realized  gains.
Premiums  received  from writing  options  which are exercised or are closed are
added to or offset  against the  proceeds or amount paid on the  transaction  to
determine  the realized  gain or loss.  The  Portfolio or Fund as a writer of an
option may have no control over whether the  underlying  securities  may be sold
and as a result bears the market risk of an  unfavorable  change in the price of
the securities underlying the written option.

H Purchased  Options -- Upon the  purchase of a put option,  the premium paid by
the Portfolio or Fund is included in the Statement of Assets and  Liabilities as
an investment. The amount of the investment is subsequently  marked-to-market to
reflect the current market value of the option purchased, in accordance with the
investment  valuation policies discussed above. If an option which the Portfolio


                                       7
<PAGE>
or Fund has purchased  expires on the stipulated  expiration date, the Portfolio
or Fund will  realize a loss in the  amount  of the cost of the  option.  If the
Portfolio or Fund enters into a closing sale transaction,  the Portfolio or Fund
will realize a gain or loss,  depending on whether the sales  proceeds  from the
closing sale transaction are greater or less than the cost of the option. If the
Portfolio  or Fund  exercises a put option,  it will realize a gain or loss from
the sale of the  underlying  security  and the  proceeds  from such sale will be
decreased by the premium originally paid.

I Other -- Investment transactions are accounted for on a trade date basis.

J Use of Estimates -- The preparation of financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the reported  amounts of assets and liabilities at
the date of the  financial  statements  and the  reported  amounts of income and
expense  during the  reporting  period.  Actual  results could differ from those
estimates.

K Interim Financial  Statements -- The interim financial  statements relating to
June 30,  1999 and June 30,  1998 and for the  periods  then ended have not been
audited by independent  certified public accountants,  but in the opinion of the
Fund's management, reflect all adjustments,  consisting only of normal recurring
adjustments, necessary for the presentation of the financial statements.

2 Distributions to Shareholders

The Fund intends to make annual income distributions  approximately equal to the
amount  of  its  net  investment  income,  if  any,  and  annual  capital  gains
distributions  equal to  approximately  22% of the  amount  of its net  realized
capital  gains,  if  any,  other  than  precontribution  gains  allocated  to  a
shareholder in connection with a tender offer or other  extraordinary  corporate
event with respect to a security  contributed by such shareholder,  for which no
capital gain distribution will be made. In addition,  whenever a distribution in
respect  of a  precontribution  gain  is  made,  the  Fund  intends  to  make  a
supplemental    distribution   to   compensate   shareholders   receiving   such
distributions  for taxes that may be due in connection with the  precontribution
gain and supplemental distributions.

3 Shareholder Transactions

The  Fund  may  issue  an  unlimited  number  of  full  and  fractional  shares.
Transactions in Fund shares,  including  contributions of securities and cash in
exchange for shares of the Fund were as follows:

                                   Six Months Ended     Period Ended
                                    June 30, 1999       June 30, 1998*
                                  ------------------- ------------------
   Issued at fund closings                       -           17,179,183
   Redemptions                             (222,480)          (124,049)
                                  ------------------- ------------------
   Net increase (decrease)                 (222,480)         17,055,134
                                  ------------------- ------------------

*    For the period from the start of  business,  February 6, 1998,  to June 30,
     1998.

Redemptions  of shares  held less than three  years are  generally  subject to a
redemption fee of 1% of the net asset value of shares  redeemed.  The redemption
fee is paid to the  Investment  Adviser  by the Fund on behalf of the  redeeming
Shareholder.  No charge is levied on redemptions of shares acquired  through the
reinvestment  of  distributions,  shares  redeemed in  connection  with a Tender
Security or shares redeemed following the death of all of the initial holders of
the  shares  redeemed.   In  addition,  no  fee  applies  to  redemptions  by  a
Shareholder,  who, during any 12-month period,  redeem less than 8% of the total
number of shares held by the  Shareholder  as of the  beginning  of the 12-month
period.  For the six months  ended June 30,  1999 and the period  ended June 30,
1998, the Investment  Adviser received $137,888 and $122,399,  respectively,  in
redemption fees.


                                       8
<PAGE>
4 Investment Transactions

Increases  and decreases of the Fund's  investment in Belvedere  Capital for the
six  months  ended  June  30,  1999  aggregated   $20,703,023  and  $49,785,902,
respectively,  and for the period ended June 30, 1998 aggregated  $1,863,625,148
and  $27,950,738,   respectively.  Purchases  and  sales  of  other  investments
aggregated $209,000,000 and $168,858,572, respectively, for the six months ended
June 30, 1999, and $603,535,863 and  $47,220,679,  respectively,  for the period
ended June 30, 1998. In addition,  investments  were  distributed  in payment of
Fund  shares   redeemed   resulting  in  realized   capital  gains  (losses)  of
$(1,402,664) and $2,527,529 for book purposes, for the six months ended June 30,
1999 and for the period ended June 30, 1998, respectively.

5 Management Fee and Other Transactions With Affiliates

The Fund and the Portfolio have engaged Boston  Management and Research (BMR), a
wholly-owned  subsidiary of Eaton Vance Management (EVM) as investment  adviser.
Under the terms of the advisory  agreement  with the  Portfolio,  BMR receives a
monthly fee of 5/96 of 1% (0.625%  annually) of the average  daily net assets of
the Portfolio up to $500,000,000 and at reduced rates as daily net assets exceed
that level. For the six months ended June 30, 1999 and the period ended June 30,
1998 the  advisory  fee  applicable  to the  Portfolio  was  0.46%  and  0.478%,
respectively,  of  average  net  assets for such  periods.  Belvedere  Capital's
allocated portion of the advisory fee amounted to $5,515,256 of which $2,322,751
was  allocated  to the Fund,  for the three  months  ended  June 30,  1999,  and
$2,278,261,  of which $1,380,097 was allocated to the Fund, for the three months
ended June 30, 1998.  Belvedere  Capital's allocated portion of the advisory fee
amounted to $10,155,976  of which  $4,619,261 was allocated to the Fund, for the
six  months  ended  June 30,  1999,  and  $4,017,324,  of which  $1,840,207  was
allocated to the Fund,  for the period ended June 30, 1998. In addition,  Belair
Capital pays BMR a monthly advisory and  administrative fee of 1/20 of 1% (0.60%
annually)  of the  average  daily  gross  investment  assets of  Belair  Capital
(including the value of all assets of Belair Capital other than Belair Capital's
investment in BREC, minus the sum of Belair Capital's liabilities other than the
principal  amount of money borrowed) and BREC pays BMR a monthly  management fee
at a rate of 1/20th of 1%  (equivalent  to 0.60%  annually) of its average gross
investment  assets  (including the value of all assets of BREC, minus the sum of
BREC's  liabilities  other than any liability  with respect to Belair  Capital's
Credit Facility). The advisory fee payable by the Portfolio in respect of Belair
Capital's  indirect  investment in the  Portfolio is credited  toward the Belair
Capital's advisory and  administrative fee payment.  For the three month periods
ended June 30, 1999 and 1998 the advisory and  administrative fee payable to BMR
by the Fund, less the Fund's  allocated  share of the Portfolio's  advisory fee,
totaled $1,653,140 and $900,296, respectively. For the six months ended June 30,
1999 and the period  ended June 30, 1998 the  advisory  and  administrative  fee
payable to BMR by the Fund,  less the Fund's  allocated share of the Portfolio's
advisory fee, totaled $3,174,777 and $1,167,237, respectively.

Eaton Vance Management (EVM) serves as manager of Belair Capital and receives no
separate compensation for services provided in such capacity.

Pursuant  to a servicing  agreement  between  Belvedere  Capital and Eaton Vance
Distributors,  Inc.  (EVD),  Belvedere  Capital pays a servicing  fee to EVD for
providing certain services and information to shareholders. The servicing fee is
paid on a  quarterly  basis at an annual  rate of 0.15% of  Belvedere  Capital's
average daily net assets and totaled $1,837,056 and $729,436 for the three month
periods  ended  June 30,  1999 and 1998,  respectively,  of which  $777,340  and
$447,327  was  allocated  to Belair  Capital  for the  respective  periods.  The
servicing fee totaled  $3,343,263  and  $1,255,273 for the six months ended June
30, 1999 and the period ended June 30, 1998,  respectively,  of which $1,521,913
and  $587,890  was  allocated  to Belair  Capital  for the  respective  periods.
Pursuant to a servicing agreement between Belair Capital and EVD, Belair Capital
pays a servicing  fee to EVD on a quarterly  basis at an annual rate of 0.20% of
Belair Capital's average daily net assets, less Belair Capital's allocated share


                                       9
<PAGE>
of the servicing fee payable by Belvedere  Capital.  For the three month periods
ended June 30, 1999 and 1998,  the servicing fee paid directly by Belair Capital
totaled $238,792 and $131,371,  respectively.  For the six months ended June 30,
1999 and the period  ended June 30,  1998 the  servicing  fee paid  directly  by
Belair  Capital  totaled  $469,081 and $183,763,  respectively.  For shares sold
through a  subagent,  EVD  assigns  servicing  responsibilities  and fees to the
applicable subagent beginning twelve months after the issuance of Fund shares to
such  persons.  For the three months ended June 30, 1999,  EVD paid  $637,333 in
service fees to  subagents.  For the six months  ended June 30,  1999,  EVD paid
$828,542 in service  fees to  subagents.  No service fees were paid to subagents
for the period ended June 30, 1998.

6 Credit Facility

The Fund has obtained a $625,000,000  Credit Facility with a term of seven years
from Merrill Lynch International Bank Limited.  The Fund's obligations under the
Credit  Facility  are  secured by a pledge of its  assets.  Interest on borrowed
funds is based on the prevailing  LIBOR rate for the respective  interest period
plus a spread of 0.45% per annum.  The Fund may borrow for  interest  periods of
one month to five years.  In addition,  the Fund pays a commitment fee at a rate
of 0.10%  per  annum  on the  unused  amount  of the  loan  commitment.  Initial
borrowings have been used to purchase qualifying assets (partnership  preference
units,  copper and  aluminum)  to pay  selling  commissions  and  organizational
expenses,  and to  provide  for the  short-term  liquidity  needs  of the  Fund.
Additional  borrowings  under the Credit  Facility may be made in the future for
these  purposes.  At June 30, 1999 and December 31,  1998,  amounts  outstanding
under the Credit Facility totaled $625,000,000 and $583,000,000, respectively.

On July 28, 1999, the Credit Facility was increased to $655,000,000.

7 Interest Rate Swap Agreements

The Fund has entered into  interest  rate swap  agreements  with  Merrill  Lynch
Capital  Services,  Inc.,  with respect to each of its  holdings of  partnership
preference units and the associated borrowings.  Under such agreements, the Fund
has agreed to pay a fixed rate of interest in  exchange  for a floating  rate of
interest.  The  notional or  contractual  amounts of these  instruments  may not
necessarily  represent the amounts  potentially subject to risk. The measurement
of  the  risks  associated  with  these  investments  is  meaningful  only  when
considered in conjunction  with all related assets,  liabilities and agreements.
The Fund has the right to terminate the interest rate swap agreements  beginning
in the first half of 2003, at dates  corresponding  approximately to the initial
call dates of the partnership preference units held by the Fund.


<TABLE>
                                                                          Unrealized      Unrealized
              NOTIONAL                             Initial               Appreciation/  Appreciation/
              AMOUNT                              Optional              (Depreciation)  (Depreciation)
    Effective  (000's     Fixed      Floating    Termination  Maturity    At June 30,  At December 31,
       Date   omitted)     Rate        Rate         Date        Date         1999            1998
    ----------------------------------------------------------------------------------------------------
       <S>      <C>        <C>      <C>             <C>         <C>          <C>           <C>
       2/98     $60,000     6.72%   Libor+.45%      2/03        2/05         $  906,460    $(1,845,506)
       2/98     120,000    6.715%   Libor+.45%      2/03        2/05          1,837,278     (3,665,804)
       4/98      50,000     6.84%   Libor+.45%      2/03        2/05            512,736     (1,788,985)
       4/98     150,000    6.835%   Libor+.45%      4/03        4/05          1,667,259     (5,584,296)
       6/98      20,000     6.67%   Libor+.45%      6/03        2/05            364,570       (620,177)
       6/98      75,000     6.68%   Libor+.45%      6/03        2/05          1,335,201     (2,358,284)
       6/98      80,000    6.595%   Libor+.45%      6/03        2/05          1,714,431     (2,219,084)
      11/98      14,709     6.13%   Libor+.45%      11/03       2/05            590,761        (73,515)
       2/99      34,951     6.34%   Libor+.45%      2/04        2/05          1,011,596       -
</TABLE>


                                       10
<PAGE>
8 Indirect Investment in Portfolio

Belvedere   Capital's   interest  in  the  Portfolio  at  June  30,  1999,   was
$5,209,972,269,  representing  45.0% of the Portfolio's net assets,  and at June
30,  1998 was  $3,088,405,661,  representing  45.1% of the  Portfolio's  assets.
Belair  Capital's   investment  in  Belvedere  Capital  at  June  30,  1999  was
$2,148,204,008,  representing  41.2% of Belvedere  Capital's net assets,  and at
June 30, 1998 was $1,917,569,591,  representing 62.1% of Belvedere Capital's net
assets.  Investment income allocated to Belvedere Capital from the Portfolio for
the six months ended June 30, 1999 totaled $26,073,997, of which $11,778,087 was
allocated to the Fund. Investment income allocated to Belvedere Capital from the
Portfolio  for the  period  ended June 30,  1998  totaled  $11,788,177  of which
$5,388,615 was allocated to the Fund.  Expenses  allocated to Belvedere  Capital
from the Portfolio  for the six months ended June 30, 1999 totaled  $10,461,875,
of which $4,769,940 was allocated to the Fund.  Expenses  allocated to Belvedere
Capital  from  the  Portfolio  for  the  period  ended  June  30,  1998  totaled
$4,526,155,  of which  $2,092,210 was allocated to the Fund.  Belvedere  Capital
allocated additional expenses to the Fund of $1,593,903 for the six months ended
June 30, 1999,  representing  $71,990 of operating  expenses and  $1,521,913  of
service fees.  Belvedere  Capital allocated  additional  expenses to the Fund of
$606,322 for the period ended June 30, 1998,  representing  $18,432 of operating
expenses and $587,890 of service fees (see Note 5).

A summary of the Portfolio's  Statement of Assets and  Liabilities,  at June 30,
1999,  December 31, 1998 and June 30, 1998 and its operations for the six months
ended June 30, 1999,  the year ended December 31, 1998 and the period ended June
30, 1998 follows:

<TABLE>
                                              June 30,        December 31,             June 30,
                                                1999                1998                 1998
                                          ------------------ -------------------- --------------------
   <S>                                      <C>                   <C>                  <C>
   Investments, at value                    $11,600,175,904       $8,713,317,160       $6,892,118,552
   Other Assets                                  23,965,371            7,040,200           11,299,149
   -------------------------------------- ------------------ -------------------- --------------------
   Total Assets                             $11,624,141,275      $ 8,720,357,360      $ 6,903,417,701
   Total Liabilities                             44,412,722           15,498,025           50,435,328
   -------------------------------------- ------------------ -------------------- --------------------
   Net Assets                               $11,579,728,553      $ 8,704,859,335      $ 6,852,982,373
   ====================================== ================== ==================== ====================
   Dividends and interest                      $ 58,144,116         $ 70,963,640         $ 28,668,064

   Investment adviser fee                        22,746,571           26,313,762            9,921,475
   Other expenses                                   682,895            1,306,076              894,052
   -------------------------------------- ------------------ -------------------- --------------------
   Total expenses                              $ 23,429,466         $ 27,619,838          $10,815,527
   -------------------------------------- ------------------ -------------------- --------------------
   Net investment income                       $ 34,714,650         $ 43,343,802          $17,852,537
   Net realized gains (losses)                   84,420,574         (69,097,723)           23,114,241
   Net unrealized gains                       1,849,522,596        1,226,948,293          519,246,541
   ====================================== ================== ==================== ====================
   Net increase in net assets from
   operations                               $ 1,968,657,820      $ 1,201,194,372         $560,213,319
   ====================================== ================== ==================== ====================
</TABLE>


                                       11
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     Increases and decreases in the Fund's net asset value per Share are derived
from net  investment  income,  and realized and  unrealized  gains and losses on
investments,  including securities  investments held through the Fund's indirect
interest  (through the Company) in the Portfolio,  real estate  investments held
through  BREC and any  direct  investments  of the  Fund.  Expenses  of the Fund
include its pro-rata share of the expenses of BREC, the Company,  and indirectly
the  Portfolio,  as well as the actual and  accrued  expenses  of the Fund.  The
Fund's most  significant  expense is interest  incurred on borrowings  under the
Credit  Facility and, to a lesser degree,  interest rate swap  agreements.  Fund
borrowings are used primarily to finance the purchase of Partnership  Preference
Units  through  BREC.  The  interest  paid on Fund  borrowings  is offset by the
dividends earned from the Fund's indirect  investment in Partnership  Preference
Units.  The Fund's  realized and unrealized  gains and losses on investments are
based on its allocated share of the realized and unrealized  gains and losses of
the Company,  and indirectly  the Portfolio,  as well as realized and unrealized
gains and losses on investments in  Partnership  Preference  Units through BREC.
The  realized  and  unrealized  gains and  losses on  investments  have the most
significant impact on the Fund's net asset value per share and result 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  United  States  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.  Through the impact of
interest  rates  on the  valuation  of the  Fund's  investments  in  Partnership
Preference   Units  through  BREC  and  its  positions  in  interest  rate  swap
agreements,  the  performance  of the  Fund is also  affected  by  movements  in
interest rates and, particularly,  changes in credit spread relationships.  On a
combined basis, the Fund's Partnership  Preference Units and interest rate swaps
generally  decline in value when credit  spreads widen (as fixed income  markets
grow more  risk-averse)  and  generally  increase in value when  credit  spreads
tighten.

Results of  Operations  For the  Quarter  ended June 30, 1999 and the Six Months
Ended June 30, 1999

     The Fund achieved a total return of 5.42% during the quarter ended June 30,
1999.  This return  reflects an increase in the Fund's net asset value per share
from  $120.94 to  $127.49.  For  comparison,  the S&P 500,  an  unmanaged  index
commonly used to measure the performance of U.S.  stocks,  had a total return of
7.05% over the same period.

     During the second  quarter of 1999,  the U.S.  equity market  experienced a
pronounced change in market  leadership.  Starting in early April,  value stocks
began to  outperform  growth  stocks and small  capitalization  stocks  began to
outperform big-cap stocks. Many of the large  capitalization  growth stocks that
had been  among  the best  performing  stocks  over the past few  quarters  were
significant  laggards in the second  quarter.  The performance of big-cap growth
stocks was  hampered  by rising  interest  rates and high  valuations.  Cyclical
stocks  benefited from rising  expectations  for global  economic  growth as the
recovery in Asia started to show signs of progress.

     In the fixed income  markets,  the second quarter saw a continuation of the
trend toward higher  interest rates on benchmark  government  bonds and a slight
narrowing of credit spreads for corporate issues that was established at the end
of 1998.  Fixed income  markets were hurt,  first,  by the fear of a hike in the
federal  funds  rate and,  second,  by the  reality of a 0.25%  increase  in the
Federal Funds rate late in the quarter.


                                       12
<PAGE>
     The Fund achieved a total return of 9.26% for the six months ended June 30,
1999.  This return  reflects an increase in the Fund's net asset value per share
from $116.66 to $127.49.  The S&P 500 had a total return of 12.38% over the same
period.

     During the six months ended June 30, 1999, U.S. equity markets continued to
move upward. Following the pattern of 1998, performance in the first quarter was
lead by the large  capitalization  growth stocks that dominate the S&P and, to a
lesser extent, the holdings of the Portfolio.  Starting in early April, the U.S.
equity market  experienced  a pronounced  change in market  leadership.  At that
time,  value stocks began to outperform  growth stocks and small  capitalization
stocks began to outperform  big-cap  stocks.  The  performance of big-cap growth
stocks was hurt by rising  interest rates and high  valuations.  Cyclical stocks
benefited from rising expectations for global economic growth

     In the  fixed  income  markets,  the  first  half of 1999 saw a  pronounced
increase in interest rates on benchmark government bonds, reversing the trend of
1998.  Fixed income markets were hurt by robust economic  conditions in the U.S.
and early fears of a rise in inflationary pressures in the domestic economy. The
Federal  Reserve  reacted  to the  perceived  threat to  monetary  stability  by
instituting  a 0.25%  increase  in the  Federal  Funds  rate late in the  second
quarter. The Fund's performance during the first half was positively impacted by
its holdings of Partnership  Preference  Units and the associated  interest rate
swap agreements, benefiting from the narrowing of credit spreads that took place
during the period.

Liquidity and Capital Resources

     As of June 30, 1999,  the Fund had  outstanding  borrowings of $625 million
under the Credit  Facility  established  with Merrill Lynch  International  Bank
Limited,  the term of which extends until February 6, 2005. The Credit  Facility
is being  used  primarily  to  finance  the Fund's  investments  in  Partnership
Preference  Units and will  continue to be used for such purposes in the future,
as well as to provide for 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 for these purposes.

     The Fund may redeem shares of the Company at any time. Both the Company and
the  Portfolio   follow  the  practice  of  normally   meeting   redemptions  by
distributing securities,  consisting,  in the case of the Company, of securities
drawn  from  the  Portfolio.  The  Company  and  the  Portfolio  may  also  meet
redemptions  by  distributing  cash. As of June 30, 1999, the Portfolio had cash
and short-term  investments totaling $605.9 million. The Portfolio  participates
in a $130 million multi-fund  unsecured line of credit agreement with a group of
banks.  The Portfolio may temporarily  borrow from the line of credit to satisfy
redemption requests in cash or to settle investment transactions.  The Portfolio
had no outstanding  borrowings under the $130 million line of credit at June 30,
1999,  and, as of that date, the net assets of the Portfolio  totaled  $11,579.7
million.  To ensure liquidity for investors in the Portfolio,  the Portfolio may
not invest  more than 15% of its net assets in illiquid  assets.  As of June 30,
1999, restricted securities, which are considered illiquid,  constituted 2.9% of
the net assets of the Portfolio.

     The Partnership  Preference Units held by BREC are not registered under the
Securities Act and are subject to substantial restrictions on transfer. As such,
they are considered illiquid.

     Redemptions  of Fund Shares are met  primarily by  distributing  securities
drawn from the Portfolio,  although cash may also be  distributed.  Shareholders
generally do not have the right to receive the proceeds of Fund  redemptions  in
cash.


                                       13
<PAGE>
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     The value of Fund Shares may not increase or may decline.  The  performance
of the Fund  fluctuates.  There can be no assurance that the  performance of the
Fund will match that of the United  States  stock market or that of other equity
funds.  In  managing  the  Portfolio  for  long-term,   after-tax  returns,  the
Portfolio's  investment  adviser  generally  seeks to avoid or minimize sales of
securities  with  large  accumulated   capital  gains,   including   contributed
securities.  Such securities  constitute a substantial  portion of the assets of
the Portfolio.  Although the Portfolio may utilize certain management strategies
in lieu of  selling  appreciated  securities,  the  Portfolio's,  and  hence the
Fund's,  exposure to losses  during stock market  declines  may  nonetheless  be
higher than that of funds that do not follow a general  policy of avoiding sales
of highly-appreciated securities.

     The  Portfolio  invests in securities  issued by foreign  companies and the
Fund may acquire foreign investments. Foreign investments involve considerations
and possible risks not typically associated with investing in the United States.
The value of foreign  investments to U.S. investors may be adversely affected by
changes in currency rates. Foreign brokerage commissions, custody fees and other
costs of investing are generally  higher than in the United States,  and foreign
investments  may be less liquid,  more  volatile and more subject to  government
regulation  than in the United States.  Foreign  investments  could be adversely
affected  by  other  factors  not  present  in  the  United  States,   including
expropriation,  confiscatory  taxation,  lack of uniform accounting and auditing
standards,  armed conflict,  and potential  difficulty in enforcing  contractual
obligations.

     In managing  the  Portfolio,  the  investment  adviser may purchase or sell
derivative   instruments  (which  derive  their  value  by  reference  to  other
securities,  indices,  instruments,  or currencies) to hedge against  securities
price declines and currency movements and to enhance returns.  Such transactions
may include,  without  limitation,  the purchase and sale of stock index futures
contracts  and options on stock index  futures;  the purchase of put options and
the sale of call options on securities held;  equity swaps; and the purchase and
sale of forward currency exchange contracts and currency futures.  The Portfolio
may make short sales of securities  provided that an equal amount is held of the
security  sold  short  (a  covered  short  sale)  and may  also  lend  portfolio
securities.  The Fund utilizes  interest rate swap agreements to fix the cost of
its borrowings over the term of the Credit Facility. 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 these  investment  techniques is a
specialized activity that may be considered speculative and which can expose the
Fund and the  Portfolio to  significant  risk of loss.  Successful  use of these
investment  techniques  is  subject  to  the  ability  and  performance  of  the
investment  adviser.  The  Fund's  and the  Portfolio's  ability  to meet  their
investment  objectives may be adversely affected by the use of these techniques.
The  writer  of an option or a party to an  equity  swap may incur  losses  that
substantially exceed the payments, if any, received from a counterparty.  Swaps,
caps,  floors,  collars and  over-the-counter  options are private  contracts in
which there is also a risk of loss in the event of a default on an obligation to
pay by the  counterparty.  Such  instruments  may be difficult to value,  may be
illiquid and may be subject to wide swings in valuation caused by changes in the
price of the underlying security, index, instrument or currency. In addition, if
the Fund or the Portfolio has  insufficient  cash to meet margin,  collateral or
settlement  requirements,  it may have to sell assets to meet such requirements.
Alternatively, should the Fund or the Portfolio fail to meet these requirements,
the counterparty or broker may liquidate positions of the Fund or the Portfolio.
The Portfolio may also have to sell or deliver securities  holdings in the event
that it is not able to purchase securities on the open market to cover its short
positions or to close out or satisfy an exercise  notice with respect to options
positions it has sold.  In any of these cases,  such sales may be made at prices
or in circumstances that the investment adviser considers unfavorable.

     The  Portfolio's  ability to utilize  covered short sales,  certain  equity
swaps and certain  equity  collar  strategies  (combining  the purchase of a put


                                       14
<PAGE>
option and the sale of a call option) as a  tax-efficient  management  technique
with respect to holdings of appreciated  securities is limited to  circumstances
in which the hedging  transaction is closed out within thirty days of the end of
the Portfolio's taxable year and the underlying  appreciated securities position
is held unhedged for at least the next sixty days after such hedging transaction
is closed.  There can be no assurance that  counterparties  will at all times be
willing to enter into covered short sales,  interest  rate hedges,  equity swaps
and other derivative  instrument  transactions on terms satisfactory to the Fund
or the  Portfolio.  The  Fund's and the  Portfolio's  ability to enter into such
transactions  may also be limited by covenants  under the Credit  Facility,  the
federal margin  regulations and other laws and regulations.  The Portfolio's use
of certain investment  techniques may be constrained  because the Portfolio is a
diversified,  open-end  management  investment company registered under the 1940
Act and because  other  investors  in the  Portfolio  are  regulated  investment
companies under Subchapter M of the Code.  Moreover,  the Fund and the Portfolio
are subject to restrictions  under the federal  securities laws on their ability
to enter  into  transactions  in  respect  of  securities  that are  subject  to
restrictions on transfer pursuant to the Securities Act.

     Although  intended to add to returns,  the  borrowing  of funds to purchase
Partnership  Preference Units through BREC exposes the Fund to the risk that the
returns achieved on the Partnership Preference Units will be lower than the cost
of borrowing to purchase such assets and that the  leveraging of the Fund to buy
such assets will therefore  diminish the returns to be achieved by the Fund as a
whole. In addition,  there is a risk that the  availability of financing will be
interrupted  at some  future  time,  requiring  the Fund to sell assets to repay
outstanding  borrowings or a portion  thereof.  It may be necessary to make such
sales at unfavorable  prices.  The Fund's  obligations under the Credit Facility
are secured by a pledge of its assets. In the event of default, the lender could
elect to sell assets of the Fund without regard to  consequences  of such action
for  Shareholders.  The rights of the lender to receive  payments of interest on
and  repayments  of  principal  of  borrowings  is senior  to the  rights of the
Shareholders.  Under the terms of the Credit Facility, the Fund is not permitted
to make  distributions of cash or securities while there is outstanding an event
of default under the Credit Facility. During such periods, the Fund would not be
able to honor redemption requests or make cash distributions.

     The Partnership Preference Units held by the Fund through its investment in
BREC  are  subject  to   restrictions  on  transfer,   including,   among  other
restrictions,  limitations on the manner of resale and the requirement  that the
general  partner of the issuer  consent to transfers.  In addition,  there is no
active  secondary  market for any Partnership  Preference Units that BREC holds.
Accordingly,  BREC's  investments in Partnership  Preference Units are illiquid.
The success of BREC's  investments  in Partnership  Preference  Units depends in
part on many  factors  related  to the real  estate  market  and to the  issuing
partnerships that may affect such partnerships'  profitability and their ability
to make distributions to holders of Partnership  Preference Units. These factors
include, without limitation,  general economic conditions, the supply and demand
for different types of real  properties,  the financial  health of tenants,  the
timing of lease expirations and  terminations,  fluctuations in rental rates and
operating costs,  exposure to adverse  environmental  conditions and losses from
casualty or condemnation,  interest rates, availability of financing, managerial
performance,  government rules and regulations, and acts of God. Although BREC's
investments in Partnership Preference Units are, to some degree,  insulated from
risk by virtue of their senior  position  relative to other equity  interests in
the issuing partnerships and by their diversification across a range of property
types and geographic  regions,  the  above-referenced  factors can substantially
affect the value and  marketability  of such investments over time. There can be
no assurance that the  investments in  Partnership  Preference  Units will be an
economic success.

     The valuations of Partnership Preference Units held by the Fund through its
investment in BREC fluctuate over time to reflect, among other factors,  changes
in interest rates,  changes in the perceived  riskiness of such units (including
call  risk),  changes  in the  perceived  riskiness  of  comparable  or  similar
securities trading in the public market and the relationship  between supply and
demand for  comparable  or  similar  securities  trading  in the public  market.
Increases in interest  rates and  increases in the  perceived  riskiness of such
units or comparable or similar securities will adversely affect the valuation of
the  Partnership  Preference  Units.  Fluctuations  in the value of  Partnership


                                       15
<PAGE>
Preference  Units derived from changes in general interest rates can be expected
to be offset in part (but not entirely) by changes in the value of interest rate
swap  agreements  or other  interest  rate hedges  entered into by the Fund with
respect to its borrowings under the Credit  Facility.  Fluctuations in the value
of  Partnership  Preference  Units  derived from other factors  besides  general
interest rate movements  (including  issuer-specific and sector-specific  credit
concerns and changes in interest rate spread  relationships)  will not be offset
by changes in the value of interest rate swap  agreements or other interest rate
hedges  entered into by the Fund.  Changes in the  valuation of the  Partnership
Preference  Units not offset by changes in the  valuation of interest  rate swap
agreements or other interest rate hedges entered into by the Fund will cause the
performance of the Fund to deviate from the  performance of the Portfolio.  Over
time,  the  performance of the Fund can be expected to be more volatile than the
performance of the Portfolio.


                                       16
<PAGE>
PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The Fund is not aware of any pending  legal  proceedings  to which the Fund is a
party or to which of their assets are subject.

Item 2. Changes in Securities and Use of Proceeds.

     None.

Item 3. Defaults Upon Senior Securities.

     None.

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

     None.

Item 5. Other Information.

     None.

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

     27 Financial Data Schedules


                                       17
<PAGE>
                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                              BELAIR CAPITAL FUND LLC


                              By:  /s/ James L. O'Connor
                                   --------------------------------
                                   James L. O'Connor
                                   Vice President and Treasurer


                                       18