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 September 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.   Consolidated Financial Statements                                    2

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

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

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

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

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


Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                 13

Item 3.   Quantitative and Qualitative Disclosures About Market Risk          15

PART  II  -    OTHER INFORMATION

Item 1.   Legal Proceedings                                                   18

Item 2.   Changes in Securities and Use of Proceeds                           18

Item 3.   Defaults Upon Senior Securities                                     18

Item 4.   Submission of Matters to a Vote of Security Holders                 18

Item 5.   Other Information                                                   18

Item 6.   Exhibits and Reports on Form 8-K                                    18


SIGNATURES                                                                    19



<PAGE>
PART I. FINANCIAL INFORMATION

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

BELAIR CAPITAL FUND LLC
Consolidated Statements of Assets and Liabilities

<TABLE>
                                                                              September 30,
                                                                                  1999             December 31,
                                                                               (Unaudited)             1998
                                                                           -------------------  -------------------
<S>                                                                            <C>                  <C>
 Assets:
     Total investments, at value (identified cost, $2,272,437,422 at           $2,479,188,542       $2,535,739,282
     September 30, 1999 and $2,304,223,436 at December 31,
     1998)
     Cash                                                                          25,914,060            2,711,580
     Receivable for open swap contracts                                             8,623,471                    -
     Dividends receivable                                                           6,103,940            1,008,985
     Deferred organization expenses                                                   366,343              508,884
     Other receivable                                                                  12,139                    -
                                                                               ---------------      --------------
             Total Assets                                                      $2,520,208,495       $2,539,968,731
                                                                               ---------------      --------------

 Liabilities:
     Loan payable                                                              $  645,000,000       $  583,000,000
     Payable for open swap contracts                                                        -           18,155,651
     Minority interest                                                                208,000                    -
     Interest payable                                                               5,682,113            4,926,762
     Other accrued expenses                                                           131,835            1,037,946
                                                                               ---------------      --------------
             Total Liabilities                                                 $  651,021,948       $  607,120,359
                                                                               ---------------      --------------
 Net assets                                                                    $1,869,186,547       $1,932,848,372
                                                                               ===============      ==============

 Sources of Net Assets:
     Paid-in capital                                                           $1,716,881,706       $1,779,879,517
     Accumulated net realized loss on investments (computed
       on the basis of identified cost)                                           (63,089,652)         (55,088,152)
     Accumulated (distributions in excess of) net investment
       income                                                                          19,902           (5,303,188)
     Net unrealized appreciation of investments (computed
       on the basis of identified cost)                                           215,374,591          213,360,195
                                                                               ---------------      --------------
             Total                                                             $1,869,186,547       $1,932,848,372
                                                                               ===============      ==============

 Shares outstanding                                                                16,053,481           16,568,833

 Net Asset Value and Redemption
 Price Per Share                                                               $       116.43       $       116.66
</TABLE>


                                       2
<PAGE>
<TABLE>
BELAIR CAPITAL FUND LLC
 Consolidated Statements of Operations
 (Unaudited)                                               Three months      Three months        Nine months          Period
                                                               ended             ended              ended              ended
                                                          September 30,      September 30,      September 30,     September 30,
                                                               1999              1998               1999              1998*
                                                         ----------------- ------------------ ------------------ -----------------
<S>                                                            <C>                <C>               <C>                <C>
 Investment Income:
     Dividends allocated from Belvedere Capital                $4,661,462         $5,137,565        $14,020,021        $9,749,344
        (net of foreign taxes of $148, $14,761,
         $141,505 and $100,089, respectively)
     Interest allocated from Belvedere Capital                  1,481,654            201,333          3,901,182           978,169
     Expenses allocated from Belvedere Capital                 (3,153,084)        (2,924,437)        (9,516,927)       (5,622,969)
                                                         ----------------- ------------------ ------------------ -----------------
     Net investment income allocated from
     Belvedere Capital                                          2,990,032          2,414,461          8,404,276         5,104,544
     Dividends from partnership preference units               10,757,794         11,145,598         34,413,868        16,873,351
     Interest                                                     109,384              4,559            274,954             4,559
                                                         ----------------- ------------------ ------------------ -----------------
             Total investment income                          $13,857,210        $13,564,618        $43,093,098       $21,982,454
                                                         ----------------- ------------------ ------------------ -----------------

 Expenses:
    Investment advisor fees                                    $1,672,556         $1,380,120         $4,847,333        $2,547,357
    Service fees                                                  222,936            188,953            692,017           372,716
    Interest expense                                            9,296,362          8,924,734         26,227,265        16,238,592
    Interest expense on swap contracts                          1,840,990            323,962          5,313,558         1,264,505
    Custodian and transfer agent fees                              17,886              9,680             49,837            28,266
    Legal and accounting services                                 128,007            187,981            554,423           484,219
    Printing and postage                                              419              3,277              5,279             9,005
    Amortization of organization expenses                          27,666             40,894             66,436            80,619
    Miscellaneous                                                  11,562             21,170             13,860           133,428
                                                         ----------------- ------------------ ------------------ -----------------
            Total expenses                                    $13,218,384        $11,080,771        $37,770,008       $21,158,707
                                                         ----------------- ------------------ ------------------ -----------------
 Net investment income                                           $638,826         $2,483,847         $5,323,090          $823,747
                                                         ----------------- ------------------ ------------------ -----------------

 Realized and Unrealized Gain (Loss)
 Net realized gain (loss) -
     Investment transactions from Belvedere                    $2,783,853       $(11,044,935)        $9,177,648       $(5,764,365)
     Capital
     Investment transactions in partnership                    (8,937,720)                 -        (17,179,148)                -
     preference units
     Investment transactions in copper and                              -                  -                  -        (1,315,184)
     aluminum
                                                         ----------------- ------------------ ------------------ -----------------
             Net realized gain (loss)                        $(6,153,867)       $(11,044,935)       $(8,001,500)      $(7,079,549)
                                                         ----------------- ------------------ ------------------ -----------------
 Change in unrealized appreciation
 (depreciation) -
     Investment in Belvedere Capital                       $(169,040,091)      $(204,833,907)      $ (8,061,449)    $(130,809,379)
     Investments in partnership preference units              (2,940,299)         (3,876,285)       (16,703,277)      (26,252,395)
     Interest rate swap contracts                             (1,316,821)        (23,715,420)         26,779,122      (27,598,757)
                                                         ----------------- ------------------ ------------------ -----------------
    Net change in unrealized
        appreciation/(depreciation)                        $(173,297,211)      $(232,425,612)        $2,014,396    $(18,660,531)
                                                         ----------------- ------------------ ------------------ -----------------

     Net realized and unrealized gain (loss)               $(179,451,078)      $(243,470,547)       $(5,987,104)  $(191,740,080)
                                                         ----------------- ------------------ ------------------ -----------------
Net decrease in net assets from  operations                $(178,812,252)      $(240,986,700)       %  (664,014)  $(190,916,333)
                                                         ================= ================== ================== =================

*For the period from the start of business,  February 6, 1998 to  September  30,1998.
</TABLE>

                                       3
<PAGE>
<TABLE>
BELAIR CAPITAL FUND LLC
Consolidated Statements of Changes in Net Assets (Unaudited)
                                                                        Nine months          Period
                                                                           ended              Ended
                                                                       September 30,     September 30,
                                                                           1999              1998*
                                                                     ------------------ -----------------
<S>                                                                      <C>              <C>
 Increase (Decrease) in Net Assets:
     Net investment income (loss)                                        $   5,323,090    $     823,747
     Net realized gain (loss) from investment transactions                  (8,001,500)      (7,079,549)
     Net change in unrealized appreciation (depreciation) of                 2,014,396     (184,660,531)
      investments
                                                                     ------------------ -----------------
             Net decrease in net assets from operations                       (664,014)   $(190,916,333)
                                                                     ------------------ -----------------

 Transactions in Fund shares -
     Investment securities and cash contributed                         $            -    $1,848,834,256
     Less - selling commissions                                                      -        (8,445,747)
                                                                     ------------------ -----------------
     Net contributions                                                               -     1,840,388,509
     Net asset value of shares redeemed                                    (62,997,811)      (56,260,295)
                                                                     ------------------ -----------------
        Net increase in net assets from Fund share transactions         $  (62,997,811)   $1,784,128,214
                                                                     ------------------ -----------------

 Net decrease in net assets                                             $  (63,661,825)   $1,593,211,881

 Net assets:
     Beginning of period                                                 1,932,848,372            10,100
                                                                     ------------------ -----------------
     End of period                                                      $1,869,186,547    $1,593,221,981
                                                                     ================== =================


 Accumulated net investment
 income included in net assets at end of period                         $       19,902    $      823,747

 *For the period from the start of business,  February 6, 1998 to September  30, 1998.
</TABLE>


                                       4
<PAGE>
<TABLE>
BELAIR CAPITAL FUND LLC
Consolidated Statements of Cash Flows (Unaudited)
                                                                             Nine months              Period
                                                                                ended                 ended
                                                                           September 30,          September 30,
                                                                                1999                  1998*
                                                                          -----------------     ------------------
<S>                                                                        <C>                   <C>
Cash flows from (for) Operating Activities -
Net investment income (loss)                                               $     5,323,090       $        823,747
Adjustments to reconcile net investment income to net
Cash flows from (used for) operations -
       Amortization of organization expense                                         66,436                 80,619
       Net investment income allocated from Belvedere Capital                   (8,404,276)            (5,104,544)
       Increase in dividends receivable                                         (5,094,955)            (5,787,657)
       Increase in other receivable                                                (12,139)                     -
       Payment of organization expenses                                           (443,560)               (90,000)
       Increase (decrease) in interest payable/receivable  for open swap           475,260                354,513
       contracts
       Increase (decrease) in accrued interest and operating expenses              101,646              4,496,827
       Purchases of partnership preference units, copper and aluminum         (409,000,000)          (603,535,863)
       Sales of partnership preference units, copper and aluminum              358,486,052             47,220,679
       Net (increase) decrease in investment in Belvedere Capital               43,557,536              7,185,736
                                                                          -----------------     ------------------
       Net cash flows used for operating activities                        $   (14,944,910)      $   (554,355,943)
Cash Flows From Financing Activities -
       Proceeds from loan                                                  $    62,000,000       $    568,000,000
       Contribution from Manager                                                         -                100,000
       Payments on behalf of shareholders (selling commissions)                          -             (8,445,747)
       Payments for Fund shares redeemed                                       (23,852,610)            (5,308,410)
                                                                          -----------------     ------------------
       Net cash flows from financing activities                            $    38,147,390       $    554,345,843

Net increase (decrease) in cash                                                 23,202,480                (10,100)

Cash beginning of period                                                         2,711,580                 10,100
                                                                          -----------------     ------------------
Cash end of period                                                         $    25,914,060       $              -
                                                                          =================     ==================

Supplemental Disclosure and Non-cash Investing and
Financing Activities
       Securities contributed by shareholders, invested in Belvedere       $             -       $  1,848,734,256
       Capital
       Unrealized appreciation (depreciation) of investments and open          215,374,591           (184,660,531)
       swap contracts
       Interest paid for loan                                                   25,947,174             11,790,694
       Interest paid for swap contracts                                          4,838,298                909,992
       Market value of securities distributed in payment of redemptions         39,145,201             50,758,986

 *For the period from the start of business,  February 6, 1998 to September  30, 1998.
</TABLE>


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

1 Significant Accounting Policies

Belair Capital Fund LLC (Belair  Capital) has been 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  September  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.

On November 24,  1998,  (the date BREC  commenced  operations),  Belair  Capital
acquired 2,100 shares of Class A preferred stock (the "preferred  stock") issued
by BREC.  For BREC to qualify as a REIT,  it must be  beneficially  owned in the
aggregate by 100 or more  persons.  BREC has  satisfied  this  requirement  as a
result of Belair Capital  donating 20 shares of BREC preferred  stock to each of
approximately  105  (currently  104)  charitable  organizations.  The charitable
organizations'  interest in the preferred  stock has been recorded as a minority
interest on the Statement of Assets and Liabilities.

The preferred  stock has a par value of $.01 per share and is redeemable by BREC
at a  redemption  price of $100 after the  occurrence  of certain  tax events or
after December 31, 2004. Dividends on the preferred stock will be cumulative and
will be  payable  annually  in  arrears  on  December  30 of each  year  (or the
immediately   preceding   business   day)  equal  to  $8  per  share  per  annum
(representing an annual dividend yield of 8%).

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 purchases of partnership  preference units,  copper and aluminum (held as
temporary   assets  until  replaced  by  additional   purchases  of  partnership
preference  units).  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


                                       6
<PAGE>
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
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 the
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.


                                       7
<PAGE>
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
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
September  30, 1999 and  September  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 distribute at the end of each year all of its net investment
income for the year, if any, and  approximately  22% of its net realized capital
gains for such year, 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  makes a  supplemental
distribution to compensate  shareholders  receiving such distributions for taxes
that may be due in connection  with the  precontribution  gain and  supplemental
distributions.


                                       8
<PAGE>
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:

                                        Nine Months
                                           Ended         Period Ended
                                       September 30,    September 30,
                                           1999             1998*
                                      ---------------- -----------------
         Issued at fund closings                   -         17,179,183
         Redemptions                        (515,352)          (559,560)
                                      ---------------- -----------------
         Net increase (decrease)            (515,352)        16,619,623
                                      ---------------- -----------------

*    For the period from the start of business,  February 6, 1998,  to September
     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 nine  months  ended  September  30,  1999 and the period  ended
September  30, 1998,  the  Investment  Adviser  received  $360,657 and $531,083,
respectively, in redemption fees.

4 Investment Transactions

Increases  and decreases of the Fund's  investment in Belvedere  Capital for the
nine months ended  September 30, 1999 aggregated  $21,680,018 and  $104,382,755,
respectively,   and  for  the  period  ended   September  30,  1998   aggregated
$1,872,948,483  and  $63,312,960,  respectively.  Purchases  and  sales of other
investments aggregated $409,000,000 and $358,486,052, respectively, for the nine
months ended September 30, 1999, and $603,535,863 and $47,220,679, respectively,
for  the  period  ended  September  30,  1998.  In  addition,  investments  were
distributed  in payment of Fund shares  redeemed  resulting in realized  capital
losses of $1,100,391 and $3,927,219 for book purposes, for the nine months ended
September 30, 1999 and for the period ended September 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 nine months ended  September  30, 1999 and the period ended
September  30, 1998 the  advisory  fee  applicable  to the  Portfolio  was 0.45%
(annualized)  and 0.47%  (annualized),  respectively,  of average net assets for
such periods.  Belvedere Capital's allocated portion of the advisory fee totaled
$6,318,309,  of which $2,284,355 was allocated to the Fund, for the three months
ended September 30, 1999, and $3,384,008,  of which  $2,111,021 was allocated to
the Fund,  for the three months ended  September 30, 1998.  Belvedere  Capital's
allocated portion of the advisory fee totaled  $16,474,285,  of which $6,903,616
was allocated to the Fund,  for the nine months ended  September  30, 1999,  and
$7,401,332,  of which $3,951,228 was allocated to the Fund, for the period ended
September 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


                                       9
<PAGE>
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 Belair Capital's advisory and administrative
fee payment.  For the three month periods ended  September 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  $1,672,556  and
$1,380,120,  respectively.  For the nine months ended September 30, 1999 and the
period ended September 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 $4,847,333 and $2,547,357, 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  $2,133,661  and  $1,102,276  for the three
month periods ended September 30, 1999 and 1998, respectively, of which $774,738
and $685,363 was allocated to Belair  Capital for the  respective  periods.  The
servicing  fee totaled  $5,476,924  and  $2,357,549  for the nine  months  ended
September  30, 1999 and the period ended  September 30, 1998,  respectively,  of
which  $2,296,651  and  $1,273,253  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 of the servicing fee payable by Belvedere Capital. For
the three month  periods ended  September  30, 1999 and 1998,  the servicing fee
paid directly by Belair Capital totaled $222,936 and $188,953, respectively. For
the nine months ended September 30, 1999 and the period ended September 30, 1998
the servicing fee paid directly by Belair Capital totaled $692,017 and $372,716,
respectively. Of the amounts allocated to and incurred by the Fund, $997,674 and
$1,835,305  was paid to subagents for the three months ended and the nine months
ended September 30, 1999,  respectively.  No service fees were paid to subagents
for the period ended September 30, 1998.

6 Credit Facility

The Fund has obtained a $655,000,000  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.  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
September 30, 1999 and December 31, 1998,  amounts  outstanding under the Credit
Facility totaled $645,000,000 and $583,000,000, respectively.


                                       10
<PAGE>
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 make periodic  payments at fixed rates in exchange for payments at
floating rates. The notional or contractual amounts of these instruments may not
necessarily  represent the amounts  potentially subject to risk. The measurement
of  the  risks  associated  with  these  investments  is  meaningful  only  when
considered in conjunction  with all related assets,  liabilities and agreements.
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 September 30, At December 31, 1998
     Date     omitted)      Rate          Rate           Date         Date           1999
  -------------------------------------------------------------------------------------------------------------------
     <S>         <C>         <C>       <C>               <C>          <C>           <C>                 <C>
     2/98        $60,000      6.72%    Libor+.45%        2/03         2/05          $  1,271,867        $(1,845,506)
     2/98        120,000     6.715%    Libor+.45%        2/03         2/05             2,568,733         (3,665,804)
     4/98         50,000      6.84%    Libor+.45%        2/03         2/05               822,389         (1,788,985)
     4/98        150,000     6.835%    Libor+.45%        4/03         4/05             3,109,687         (5,584,296)
     6/98         20,000      6.67%    Libor+.45%        6/03         2/05               434,539           (620,177)
     6/98         75,000      6.68%    Libor+.45%        6/03         2/05             1,600,583         (2,358,284)
     6/98         80,000     6.595%    Libor+.45%        6/03         2/05             1,982,655         (2,219,084)
     11/98        14,709      6.13%    Libor+.45%       11/03         2/05               632,382            (73,515)
     2/99         34,951      6.34%    Libor+.45%        2/04         2/05             1,168,058                  -
     4/99          5,191      6.49%    Libor+.45%        2/04         2/05               140,488                  -
     7/99         24,902     7.077%    Libor+.45%        7/04         2/05           (11,643,560)                 -
     9/99          4,902      7.27%    Libor+.45%        9/04         2/05             6,559,000                  -
     9/99         10,470      7.37%    Libor+.45%        9/04         2/05               (23,350)                 -
</TABLE>

8 Indirect Investment in Portfolio

Belvedere  Capital's  interest in the  Portfolio  at  September  30,  1999,  was
$6,567,348,215,  representing  51.5%  of  the  Portfolio's  net  assets,  and at
September 30, 1998 was  $2,701,775,938,  representing  41.6% of the  Portfolio's
assets.  The Fund's  investment  in Belvedere  Capital at September 30, 1999 was
$1,931,317,944,  representing  29.4% of Belvedere  Capital's net assets,  and at
September 30, 1998 was $1,678,166,323, representing 62.1% of Belvedere Capital's
net assets.  Investment income allocated to Belvedere Capital from the Portfolio
for the nine months  ended  September  30, 1999  totaled  $43,288,145,  of which
$17,921,203 was allocated to the Fund.  Investment income allocated to Belvedere
Capital  from the  Portfolio  for the period  ended  September  30, 1998 totaled
$20,374,240 of which $10,727,513 was allocated to the Fund.  Expenses  allocated
to Belvedere  Capital from the Portfolio for the nine months ended September 30,
1999  totaled  $16,940,614,  of which  $7,116,523  was  allocated  to the  Fund.
Expenses  allocated to Belvedere Capital from the Portfolio for the period ended
September 30, 1998 totaled $8,058,862,  of which $4,288,692 was allocated to the
Fund.  Belvedere Capital allocated additional expenses to the Fund of $2,400,404
for the nine months ended September 30, 1999, representing $103,753 of operating
expenses and $2,296,651 of service fees.  Belvedere Capital allocated additional
expenses to the Fund of  $1,334,277  for the period  ended  September  30, 1998,
representing  $61,024 of operating  expenses and $1,273,253 of service fees (see
Note 5).


                                       11
<PAGE>
A summary of the Portfolio's  Statement of Assets and Liabilities,  at September
30, 1999,  December 31, 1998 and September 30, 1998 and its  operations  for the
nine months ended  September 30, 1999,  the year ended December 31, 1998 and the
period ended September 30, 1998 follows:

<TABLE>
                                              September 30,      December 31, 1998     September 30,
                                                  1999                                     1998*
                                           -------------------- -------------------- -------------------
       <S>                                  <C>                  <C>                  <C>
       Investments, at value                $12,750,511,786      $ 8,713,317,160      $6,465,198,643
       Other Assets                              11,587,842            7,040,200          27,369,561
       ----------------------------------- -------------------- -------------------- -------------------
       Total Assets                         $12,762,099,628      $ 8,720,357,360      $6,492,568,204
       Total Liabilities                            174,903           15,498,025             168,659
       ----------------------------------- -------------------- -------------------- -------------------
       Net Assets                           $12,761,924,725      $ 8,704,859,335      $6,492,399,545
       =================================== ==================== ==================== ===================
       Dividends and interest               $    94,362,172      $    70,963,640      $   48,677,218
       Investment adviser fee                    36,125,499           26,313,762          17,776,926
       Other expenses                             1,022,728            1,306,076           1,242,548
       ----------------------------------- -------------------- -------------------- -------------------
       Total expenses                       $    37,148,227      $    27,619,838      $   19,019,474
       ----------------------------------- -------------------- -------------------- -------------------
       Net investment income                $    57,213,945      $    43,343,802      $   29,657,744
       Net realized gains (losses)               46,838,127          (69,097,723)        (19,318,669)
       Net unrealized gains (losses)           (205,241,641)       1,226,948,293        (254,912,952)
       ----------------------------------- -------------------- -------------------- -------------------
       Net increase (decrease) in net
       assets from operations               $  (101,189,569)     $ 1,201,194,372      $ (244,573,877)
       ----------------------------------- -------------------- -------------------- -------------------

*    For the period from the start of  business,  February 6, 1998 to  September 30, 1998.
</TABLE>


                                       12
<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 the Company,  and  indirectly the
Portfolio,  as well as the actual and accrued expenses of the Fund and BREC. 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  September  30, 1999 and the Nine
Months Ended September 30, 1999

     The Fund achieved  total return  performance of -8.7% for the quarter ended
September  30,  1999.  This  return  reflects a decrease in the Fund's net asset
value per share  from  $127.49  to  $116.43.  For  comparison,  the S&P 500,  an
unmanaged index of large capitalization  stocks commonly used as a benchmark for
the U.S. equity market, had a total return of -6.2% over the same period.

     During  the third  quarter  of 1999,  U.S.  equity  market  leadership  was
concentrated  in the  technology  sector,  continuing  the trend of the past two
years.  With only a few  exceptions  (cellular  telephone,  biotechnology,  gold
mining),  industry  groups  outside the technology  sector were uniformly  weak,
generating  negative  returns for the quarter.  Among the weakest groups was the
large financial sector,  hurt by a deteriorating  outlook for interest rates and
earnings disappointments.  The performance of the Fund versus the S&P 500 during
the quarter was  adversely  affected by the Fund's  overweighting  in  financial
stocks.

     In the fixed income  markets,  the third  quarter saw a slight  increase in
interest  rates on benchmark  government  bonds and a widening of credit spreads
for  corporate  issues.  The  performance  of the Fund  during the  quarter  was
adversely  affected  by the  widening  of  credit  spreads,  which  resulted  in
markdowns in value of the Fund's holdings of partnership preference units.


                                       13
<PAGE>
     The Fund  achieved  total return  performance  of -0.2% for the nine months
ended  September  30,  1999.  This return  reflects a decrease in the Fund's net
asset value per share from $116.66 to $116.43.  For comparison,  the S&P 500, an
unmanaged index of large capitalization  stocks commonly used as a benchmark for
U.S. stocks, had a total return of 5.4% over the same period.

     During the nine months ended September 30, 1999, a general deterioration in
the U.S.  market  was  masked by the  continued  strength  of a narrow  group of
technology-oriented,  mega-cap  stocks that  included  Microsoft,  Intel,  Cisco
Systems,  IBM and  America  Online.  Outside of the favored  technology  sector,
negative  returns  for the year to date were  widespread.  Among  the  declining
groups were financial  stocks and healthcare  stocks,  both areas of significant
investment by the Fund.

     In the  fixed  income  markets,  the  first  three  quarters  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  fears of a rise in  inflationary  pressures  in the  domestic
economy.  The Federal  Reserve  responded  to the  perceived  threat to monetary
stability by  instituting a 0.25% increase in the Federal Funds rate late in the
second  quarter and a second 0.25%  increase in the middle of the third quarter.
The Fund's  performance  during the nine months was  negatively  impacted by its
holdings of partnership  preference units and the associated  interest rate swap
agreements,  hurt by the  widening of credit  spreads that  occurred  during the
third quarter.

Liquidity and Capital Resources

     As of  September  30, 1999,  the Fund had  outstanding  borrowings  of $645
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 September 30, 1999, the Portfolio had
cash  and  short-term   investments   totaling  $648.7  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 September  30, 1999,  and, as of that date,  the net assets of
the Portfolio  totaled $12,761.9  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 September 30, 1999,  restricted  securities,  which are
considered illiquid, constituted 5.1% 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.


                                       14
<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
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


                                       15
<PAGE>
the Portfolio's taxable year and the underlying  appreciated securities position
is  held  unhedged  for at  least  the  next  Ninety  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
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


                                       16
<PAGE>
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.


                                       17
<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


                                       18
<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


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