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

                                   FORM 10-K/A

                                 Amendment No. 1

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 2003
                          Commission File No. 000-50258
                                              ---------

                       Belrose Capital Fund LLC (the Fund)
                       -----------------------------------
             (Exact name of registrant as specified in its charter)
          Securities registered pursuant to Section 12(g) of the Act:

               Delaware                                04-3613468
               --------                                ----------
        (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
                                                        ------------

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

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

                                   YES [X]      NO [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

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

                                   YES [ ]       NO [X]

Aggregate market value of the Shares held by non-affiliates of registrant, based
on the closing net asset value on June 30, 2003 was $1,431,666,761.  Calculation
of holdings by non-affiliates  is based upon the assumption,  for these purposes
only, that the registrant's  manager,  its executive  officers and directors and
persons holding 5% or more of the registrant's Shares are affiliates.

                           Incorporation by Reference:
                           ---------------------------

                                      None.

                    The Exhibit Index is located on page 69.

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                                EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (the  Amendment) is being filed to amend the
Annual Report on Form 10-K of Belrose Capital Fund LLC (the Fund) for the fiscal
year  ended  December  31,  2003 as  filed  with  the  Securities  and  Exchange
Commission on March 15, 2004 (the Original  10-K).  The purpose of the Amendment
is (i) to state that the  Estimated  Fair Value of  instruments  included in the
table in Item 7A is at December 31, 2003,  (ii) to amend Item 8 and Item 15, and
(iii) to include audited consolidated financial statements for the Fund prepared
in  accordance  with the  requirements  of Rules  3-01 and 3-02 of  Article 3 of
Regulation  S-X under the  Securities  Exchange  Act of 1934,  as  amended.  The
audited  consolidated  financial  statements  included in the Original 10-K were
prepared in accordance with Rule 3-18 of Article 3 of Regulation S-X.

While  only  certain  portions  of the  Original  10-K  have been  amended,  for
convenience  and ease of reference the Fund is filing the entire Form 10-K in an
amended and restated format. Unless stated otherwise,  all information contained
in the Amendment is as of December 31, 2003. We have not updated the  disclosure
contained in the Original  10-K to reflect any events that have  occurred  since
that date.

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                            Belrose Capital Fund LLC
                              Index to Form 10-K/A
Item                                                                       Page
                                     PART I
                                     ------

 1     Business............................................................  1
          Fund Overview....................................................  1
             Structure of the Fund.........................................  1
             Fund Management ..............................................  1
             The Fund's Offering...........................................  2

          The Fund's Investment in Belvedere Capital Fund Company LLC
          and Tax-Managed Growth Portfolio.................................  2
             Belvedere Company.............................................  2
             The Portfolio.................................................  2
             The Portfolio's Investment Objective and Policies.............  3
             The Portfolio's Tax-Sensitive Management Strategies...........  3

          The Fund's Real Estate Investments through Belrose Realty
          Corporation......................................................  4
             Real Estate Joint Venture Investments.........................  4
             Partnership Preference Units..................................  5
             Organization of Belrose Realty and the Real Estate
              Joint Ventures ..............................................  6

          Fund Borrowings..................................................  6
             Interest Rate Swap Agreements.................................  7

          The Eaton Vance Organization.....................................  7
             Conflicts of Interest ........................................  7

 2     Properties..........................................................  7

 3     Legal Proceedings...................................................  8

 4     Submission of Matters to a Vote of Security Holders.................  8

                                     PART II
                                     -------

 5     Determining Net Asset Value, Market for Fund Shares and
       Related Shareholder Matters.........................................  8
          Market Information, Restrictions on Transfers and Redemption
           of Shares.......................................................  8
             Transfers of Fund Shares......................................  8
             Redemption of Fund Shares.....................................  8
             Determining Net Asset Value ..................................  9
             Historic Net Asset Values .................................... 10
          Record Holders of Shares of the Fund............................. 10
          Distributions.................................................... 10
             Income and Capital Gain Distributions......................... 10
             Special Distributions......................................... 11

 6     Selected Financial Data............................................. 12
          Table of Selected Financial Data................................. 12

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 7     Management's Discussion and Analysis of Financial Condition
       and Results of Operations........................................... 12
          Results of Operations............................................ 12
             Performance of the Fund....................................... 13
             Performance of the Portfolio.................................. 13
             Performance of Real Estate Investments........................ 14
             Performance of Interest Rate Swap Agreements.................. 15
          Liquidity and Capital Resources.................................. 15
             Outstanding Borrowings........................................ 15
             Liquidity..................................................... 15
          Off-Balance Sheet Arrangements................................... 16
          The Fund's Contractual Obligations............................... 16
          Critical Accounting Estimates ................................... 17

 7A    Quantitative and Qualitative Disclosures About Market Risk.......... 19
          Quantitative Information About Market Risk....................... 19
             Interest Rate Risk............................................ 19
          Qualitative Information About Market Risk........................ 20
             Risks Associated with Equity Investing........................ 20
             Risks of Investing in Foreign Securities...................... 20
             Risks of Certain Investment Techniques........................ 20
             Risks of Real Estate Investments.............................. 21
             Risks of Interest Rate Swap Agreements........................ 23
             Risks of Leverage............................................. 23

 8     Financial Statements and Supplementary Data......................... 24

 9     Changes in and Disagreements with Accountants on
       Accounting and Financial Disclosures................................ 24

 9A    Controls and Procedures............................................. 25

                                    PART III
                                    --------

10     Directors and Executive Officers.................................... 25
          Management....................................................... 25
          Compliance with Section 16(a) of the Securities Exchange Act
           of 1934......................................................... 26
          Code of Ethics................................................... 26

11     Executive Compensation...............................................26

12     Security Ownership of Certain Beneficial Owners and Management...... 26
          Security Ownership of Certain Beneficial Owners.................. 26
          Security Ownership of Management................................. 27
          Changes in Control............................................... 27

13     Certain Relationships and Related Transactions...................... 27
          The Fund's Investment Advisory and Administrative Fee............ 27
          Belrose Realty's Management Fee.................................. 27
          The Portfolio's Investment Advisory Fee.......................... 28
          Servicing Fees Paid by the Fund.................................. 28
          Servicing Fees Paid by Belvedere Company ........................ 28
          Distribution Fees Paid to EV Distributors........................ 28

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          Redemption Fees.................................................. 28
          Selling Commissions.............................................. 28
          Certain Real Estate Investment Transactions...................... 29

14     Principal Accountant Fees and Services.............................. 29

                                     PART IV
                                     -------

15     Exhibits, Financial Statements and Reports on Form 8-K.............. 29

APPENDIX A................................................................. 31

FINANCIAL STATEMENTS....................................................... 32

SIGNATURES................................................................. 68

EXHIBIT INDEX.............................................................. 69

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                                     PART I
                                     ------

ITEM 1. BUSINESS.
-----------------

FUND OVERVIEW. The Fund is a private investment company organized by Eaton Vance
Management (Eaton Vance) to provide diversification and tax-sensitive investment
management  to  investors  holding  large and  concentrated  positions in equity
securities of selected public companies.  The Fund's investment  objective is to
achieve  long-term,  after-tax returns for persons who have invested in the Fund
(Shareholders).  The Fund, a Delaware limited liability  company,  commenced its
investment  operations on March 19, 2002. Limited liability company interests of
the Fund (Shares) were issued to  Shareholders  at six closings  during 2002 and
2003.  At each Fund  closing,  the Fund  accepted  contributions  of stock  from
investors in exchange  for Shares of the Fund.  The Fund  discontinued  offering
Shares on February 19, 2003 and, while the Fund is not prohibited from doing so,
no future  offering is  anticipated.  As of December 31, 2003,  the Fund had net
assets of approximately $1.6 billion.

STRUCTURE   OF  THE  FUND.   The  Fund  is   structured   to  provide   tax-free
diversification and tax-sensitive investment management to Shareholders. To meet
the  objective  of  tax-free  diversification,  the Fund must  satisfy  specific
requirements  of the Internal  Revenue Code of 1986,  as amended (the Code).  In
order for the  contributions of appreciated stock to the Fund by Shareholders to
be nontaxable,  not more than 80% of the Fund's assets (calculated in the manner
prescribed)  may consist of "stocks and  securities"  as defined in the Code. To
meet  this  requirement,  the Fund  invests  at least  20% of its  assets  as so
determined  in certain  real  estate  investments  (see "The  Fund's Real Estate
Investments through Belrose Realty  Corporation"  below). The Fund invests up to
80% of its assets in a  diversified  portfolio of common stocks (see "The Fund's
Investment  in  Belvedere  Capital  Fund  Company  LLC  and  Tax-Managed  Growth
Portfolio"  below).  The Fund acquired its real estate investments with borrowed
funds,  as described below under "Fund  Borrowings".  See Appendix A for a chart
detailing the investment structure of the Fund.

In its investment program,  the Fund balances investment  considerations and tax
considerations,  and takes into  account the taxes  payable by  Shareholders  on
allocated  investment  income  and  realized  capital  gains.  See  "The  Fund's
Investment  in  Belvedere  Capital  Fund  Company  LLC  and  Tax-Managed  Growth
Portfolio" below.

There is no trading  market for the Fund's  Shares.  As described  further under
"Redemption  of Fund  Shares" in Item 5(a),  Fund  Shares may be redeemed on any
business day. The Fund satisfies redemption requests principally by distributing
securities,  but may also  distribute  cash.  The value of  securities  and cash
distributed to satisfy a redemption will equal the net asset value of the number
of Shares redeemed less any applicable redemption fee. Under most circumstances,
a redemption from the Fund that is met by  distributing  securities as described
herein will not result in the recognition of capital gains by the Fund or by the
redeeming  Shareholder.  The redeeming  Shareholder  would  generally  recognize
capital gains upon the sale of the securities received upon the redemption.

The Fund intends to distribute each year the amount of its net investment income
for such  year,  if any.  The Fund also  intends  to make  annual  capital  gain
distributions  equal to  approximately  18% of the  amount  of its net  realized
capital gains, if any, other than precontribution gain. The Fund's distributions
generally are based on  determinations of net investment income and net realized
capital gains for federal income tax purposes.  Such amounts may differ from net
investment  income (or loss) and net realized gain (or loss) as set forth in the
Fund's consolidated  financial statements due to differences in the treatment of
various  income,  gain,  loss,  expense and other  items for federal  income tax
purposes and under generally accepted accounting  principles.  The Fund's income
distributions  are not expected to be  significant.  The Fund intends to pay any
distributions  on the last  business  day of each fiscal year of the Fund (which
concludes on December 31) or shortly  thereafter.  See  "Distributions"  in Item
5(c).

FUND  MANAGEMENT.  The  manager  of the Fund is  Eaton  Vance,  a  Massachusetts
business  trust  registered  as an  investment  adviser.  Eaton  Vance  and  its
subsidiary,   Boston  Management  and  Research  (Boston  Management),   provide
management and advisory services to the Fund, its real estate subsidiary and the
investment  portfolio  in  which  the  Fund  invests.  Eaton  Vance  and  Boston
Management provide advisory,  administration  and/or management services to over
170 investment companies, as well as individual and institutional  investors. As
of December 31, 2003, Eaton Vance and its affiliates  managed  approximately $80
billion on behalf of clients.  The fees payable to the Eaton Vance organization,
as well as other fees payable by the Fund,  are described in Item 13 below.  The
Eaton  Vance  organization  is subject  to  certain  conflicts  of  interest  in
providing services to the Fund, its subsidiaries and the investment portfolio in
which the Fund  invests.  See "The  Eaton  Vance  Organization  -  Conflicts  of
Interest" below.

                                        1
<PAGE>

THE FUND'S OFFERING.  Shares of the Fund were privately offered and sold only to
"accredited  investors"  as defined in Rule 501(a) under the  Securities  Act of
1933, as amended,  (the  Securities  Act) who were  "qualified  purchasers"  (as
defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended
(the 1940 Act)). The offering was conducted by Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance (EV Distributors), as placement agent and
by certain subagents  appointed by EV Distributors.  The Shares were offered and
sold in reliance upon an exemption from registration  provided by Rule 506 under
the Securities  Act. The Fund issued Shares to  Shareholders  at closings taking
place on March 19, 2002, May 22, 2002, July 30, 2002, October 9, 2002,  December
18, 2002 and February 19, 2003. At the six closings,  an aggregate of 17,590,033
Shares  were  issued  in  exchange  for   Shareholder   contributions   totaling
approximately $1.5 billion.

The Fund is registered  under the  Securities  Exchange Act of 1934, as amended,
(the 1934 Act) and files periodic reports (such as reports on Form 10-Q and Form
10-K) thereunder.  Copies of the reports filed by the Fund are available: at the
public  reference  room of the  Securities  and  Exchange  Commission  (SEC)  in
Washington,  DC (call  1-202-942-8090  for  information  on the operation of the
public  reference  room);  on the  EDGAR  Database  on the SEC's  Internet  site
(http:// www.sec.gov); or, upon payment of copying fees, by writing to the SEC's
public reference section,  Washington,  DC 20549-0102,  or by electronic mail at
publicinfo@sec.gov.  The Fund  does  not have a  website.  The Fund  intends  to
provide  Shareholders with an annual and semiannual report containing the Fund's
consolidated financial statements,  audited by the Fund's independent auditor in
the case of the annual report.

THE FUND'S  INVESTMENT  IN BELVEDERE  CAPITAL  FUND COMPANY LLC AND  TAX-MANAGED
GROWTH  PORTFOLIO.  At each Fund  closing,  all of the  securities  accepted for
contribution to the Fund were contributed by the Fund to Belvedere  Capital Fund
Company LLC, a Massachusetts  limited liability company (Belvedere Company),  in
exchange  for  shares  of  Belvedere  Company.   Belvedere  Company,   in  turn,
immediately  thereafter  contributed  the  securities  received from the Fund to
Tax-Managed  Growth Portfolio (the Portfolio) in exchange for an interest in the
Portfolio.  The  Portfolio  is a  diversified,  open-end  management  investment
company  registered  under the 1940 Act with net assets of  approximately  $17.6
billion as of December 31, 2003. As of December 31, 2003, the Fund's  investment
in the Portfolio  through  Belvedere  Company had a value of approximately  $1.6
billion  (equal  to  approximately  74.8%  of  the  Fund's  total  assets  on  a
consolidated basis).

BELVEDERE  COMPANY.  Belvedere  Company was  organized in 1997 by Eaton Vance to
offer  tax-free  diversification  and  tax-sensitive  investment  management  to
certain  qualified  investors who contributed  diversified  portfolios of equity
securities.  As of December 31, 2003, the investment assets of Belvedere Company
consisted  exclusively  of  an  interest  in  the  Portfolio  with  a  value  of
approximately $11.1 billion. As of such date, the Fund owned approximately 14.8%
of Belvedere  Company's  outstanding  shares.  The other  investors in Belvedere
Company  include  six  other  investment  funds  sponsored  by the  Eaton  Vance
organization  (investment  fund  investors),  as  well as  qualified  individual
investors who acquired shares of Belvedere Company in exchange for portfolios of
acceptable securities (non-investment fund investors).

Belvedere Company considers for acceptance equity securities that (i) are listed
on the New York Stock Exchange, the American Stock Exchange, the NASDAQ National
Market or a major foreign exchange, (ii) have a trading price of at least $10.00
per share and (iii) are issued by issuers having an equity market capitalization
of at least $500 million.  Because Belvedere Company only accepts  contributions
of diversified  baskets of securities (as described below), it is not subject to
the  requirement  that not more than 80% of its assets  consist  of "stocks  and
securities" as defined in the Code. For investors that own a diversified  basket
of securities,  investing in Belvedere  Company (rather than in the Fund) avoids
the costs and risks of  investing  in real estate and the  associated  financial
leverage to which the Fund is subject.

Belvedere   Company  provides  a  vehicle  through  which  investment  fund  and
non-investment fund investors  contributing a "diversified basket of securities"
can acquire an indirect  interest in the  Portfolio.  A  "diversified  basket of
securities"  means a group of securities that is diversified  such that not more
than 25% of the value of the securities are investments in the securities of any
one issuer and not more than 50% of the value of the securities are  investments
in the  securities  of five or fewer  issuers.  The  securities  contributed  to
Belvedere  Company at each Fund  closing  constituted  a  diversified  basket of
securities. Because the Fund is required to hold a percentage of its investments
in  non-Portfolio  assets  in  order  to  meet  certain  tax  requirements  (see
"Structure  of the Fund" above and "The Fund's Real Estate  Investments  through
Belrose Realty  Corporation"  below), it could not satisfy the conditions of the
1940 Act for investing directly in the Portfolio.

THE  PORTFOLIO.  The  Portfolio  was  organized  in 1995 by  Eaton  Vance as the
successor to the investment  operations of Eaton Vance  Tax-Managed  Growth Fund
1.0  (Tax-Managed  Growth 1.0), a mutual fund established in 1966 by Eaton Vance
and managed from inception for long-term,  after-tax returns. As of December 31,
2003, investors in the Portfolio included six investors in addition to Belvedere
Company and  Tax-Managed  Growth 1.0, each of which has acquired or is acquiring

                                        2
<PAGE>

on a continuous basis interests in the Portfolio with cash. All investors in the
Portfolio are sponsored by or  affiliated  with Eaton Vance.  As of December 31,
2003, Belvedere Company owned approximately 63.0% of the Portfolio.

The Fund  invests in the  Portfolio  (on an  indirect  basis  through  Belvedere
Company)  because  it is a  well-established  investment  portfolio  that has an
investment  objective  and policies  that are  compatible  to those of the Fund.
Investing in the Portfolio  enables the Fund to participate  in a  substantially
larger  and more  diversified  investment  portfolio  than it could  achieve  by
managing the contributed  securities directly.  The audited financial statements
of the Portfolio for the year ended December 31, 2003 are included in the Fund's
annual report to Shareholders  and  incorporated by reference into Item 8 below.
The Portfolio's  audited  financial  statements  include  information  about the
assets and liabilities of the Portfolio,  including  Portfolio  expenses.  For a
discussion of the Portfolio's  performance for the year ended December 31, 2003,
see "Management's  Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7. For the investment advisory fee payable by the Portfolio,
see "The Portfolio's Investment Advisory Fee" in Item 13.

THE PORTFOLIO'S  INVESTMENT OBJECTIVE AND POLICIES.  The investment objective of
the Portfolio is to achieve  long-term,  after-tax  returns for its investors by
investing  in a  diversified  portfolio  of  equity  securities.  The  Portfolio
primarily invests in common stocks of domestic and foreign growth companies that
are  considered  to be  high  in  quality  and  attractive  in  their  long-term
investment  prospects.  The Portfolio  seeks to invest in a broadly  diversified
portfolio  of stocks  and to invest  primarily  in  established  companies  with
characteristics of above-average  growth,  predictability and stability that are
acquired with the expectation of being held for a period of years.  Under normal
market  conditions,  the  Portfolio  invests  primarily  in common  stocks.  The
Portfolio has acquired  securities through  contributions from Belvedere Company
and Tax-Managed  Growth 1.0, and by purchasing  securities with cash invested in
the Portfolio by other investors.

Although the Portfolio may, in addition to investing in common stocks, invest in
investment-grade  preferred  stocks  and  debt  securities,  purchases  of  such
securities are normally limited to securities convertible into common stocks and
temporary  investments in short-term  notes and government  obligations.  During
periods in which the investment  adviser to the Portfolio  believes that returns
on common stock  investments  may be  unfavorable,  the  Portfolio  may invest a
portion of its assets in U.S. government obligations and high quality short-term
notes. The Portfolio's holdings represent a number of different industries.  Not
more than 25% of the  Portfolio's  assets may be invested in the  securities  of
issuers  having  their  principal   business  activity  in  the  same  industry,
determined as of the time of acquisition of any such securities.

THE PORTFOLIO'S  TAX-SENSITIVE  MANAGEMENT  STRATEGIES.  In its operations,  the
Portfolio seeks to achieve  long-term,  after-tax  returns in part by minimizing
the  taxes  incurred  by  investors  in the  Portfolio  in  connection  with the
Portfolio's  investment  income and realized capital gains.  Taxes on investment
income are minimized by investing  primarily in  lower-yielding  securities  and
stocks that pay  dividends  that qualify for  favorable  federal tax  treatment.
Taxes on realized capital gains are minimized by avoiding or minimizing the sale
of  securities  holdings with large  accumulated  capital  gains.  The Portfolio
generally seeks to avoid realizing short-term capital gains.

When a decision is made to sell a particular appreciated security, the Portfolio
will  select  for sale the  share  lots  resulting  in the  most  favorable  tax
treatment,  generally  those with  holding  periods  sufficient  to qualify  for
long-term capital gain treatment that have the highest cost basis. The Portfolio
may, when deemed prudent by its investment  adviser,  sell securities to realize
capital losses that can be used to offset  realized  gains.  While the Portfolio
generally  retains the  securities  contributed  to the  Portfolio  by Belvedere
Company,  the  Portfolio has the  flexibility  to sell  contributed  securities.
Securities  acquired by the Portfolio  with cash may be sold in accordance  with
the  tax-management  strategies  described above. In lieu of selling a security,
the Portfolio  may hedge its exposure to that  security by using the  techniques
described below. The Portfolio also disposes of contributed  securities  through
its  practice  of  settling  redemptions  by  investors  in the  Portfolio  that
contributed securities primarily by a distribution of securities as described in
Item 5(a) under "Redemption of Fund Shares." As described in Item 5(a), settling
redemptions with securities may result in certain tax benefits to the Portfolio,
Belvedere Company, the Fund and the redeeming Shareholder.

To protect against price declines in securities  holdings with large accumulated
capital gains, the Portfolio may use various investment  techniques,  including,
but not limited  to, the  purchase of put  options on  securities  held,  equity
collars  (combining the purchase of a put option and the sale of a call option),
equity  swaps,  covered  short  sales,  forward  sales of stocks  held,  and the
purchase and sale of futures  contracts on stocks and stock  indexes and options
thereon.  By using these  techniques  rather than selling such  securities,  the
Portfolio may, within certain  limits,  reduce its exposure to price declines in
the securities  without  realizing  substantial  capital gains under current tax
law.

The Portfolio's  ability to utilize  covered short sales,  certain equity swaps,
forward sales,  futures and certain equity collar  strategies as a tax-efficient
management  technique  with  respect to holdings of  appreciated  securities  is

                                        3
<PAGE>

limited to circumstances  in which the hedging  transaction is closed out within
30 days after the end of the taxable year of the  Portfolio in which the hedging
transaction was initiated and the underlying  appreciated securities position is
held  unhedged for at least the next 60 days after such hedging  transaction  is
closed.  In  addition,  dividends  received on stock for which the  Portfolio is
obligated to make related payments  (pursuant to a short sale or otherwise) with
respect to positions in substantially similar or related property are subject to
federal  income tax at  ordinary  rates and do not  qualify  for  favorable  tax
treatment. Also, holding periods required to receive tax-advantaged treatment of
qualified  dividends on a stock holding are suspended whenever the Portfolio has
an  option  or  contractual  obligation  to  sell  or  an  open  short  sale  of
substantially  identical stock, is the grantor of an option to buy substantially
identical  stock  or has  diminished  risk  of loss in  such  stock  by  holding
positions with respect to substantially similar or related property.  The use of
these  investment  techniques  may  require  the  Portfolio  to  commit  or make
available  cash  and,  therefore,  may not be  available  at such  times  as the
Portfolio has limited holdings of cash.  During 2003, the Portfolio held covered
short  positions  that were closed in January.  The  Portfolio did not otherwise
employ any of the techniques  described above on securities  holdings during the
year ended December 31, 2003.

THE FUND'S REAL ESTATE INVESTMENTS THROUGH BELROSE REALTY CORPORATION.  Separate
from its investment in the Portfolio through Belvedere Company, the Fund invests
in certain  real estate  investments  through  its  subsidiary,  Belrose  Realty
Corporation  (Belrose  Realty).  The  ownership  structure of Belrose  Realty is
described below under  "Organization of Belrose Realty and the Real Estate Joint
Ventures".  As referred to above under "Fund  Overview - Structure of the Fund",
the Fund invests in real estate  investments to satisfy certain  requirements of
the Code for contributions of appreciated  stocks to the Fund by Shareholders to
be nontaxable. As of December 31, 2003, the consolidated real estate investments
of Belrose Realty totaled  approximately $530.2 million and represented 24.2% of
the Fund's  assets on a  consolidated  basis.  The Fund acquired its real estate
investments with borrowed funds, as described below under "Fund Borrowings". The
Fund  seeks a return on its real  estate  investments  over the  long-term  that
exceeds the cost of the borrowings incurred to acquire such investments.

At December  31, 2003,  Belrose  Realty  invested in real estate joint  ventures
(Real Estate Joint  Ventures)  that are  controlled  by Belrose  Realty and in a
portfolio  of  income-producing   preferred  equity  interests  in  real  estate
operating partnerships that generally are affiliated with and controlled by real
estate  investment   trusts  (REITs)  that  are  publicly  traded   (Partnership
Preference  Units).  As  of  December  31,  2003,  approximately  89.3%  of  the
consolidated  real estate  investments of Belrose Realty was investments in Real
Estate Joint  Ventures and  approximately  10.7% was  investments in Partnership
Preference Units.

In the  future,  Belrose  Realty  may  invest  in  other  types  of real  estate
investments,  such as interests in real properties  subject to long-term  leases
(Net Leased  Properties).  Belrose  Realty may purchase real estate  investments
from,  and sell them to,  other  investment  funds  sponsored by the Eaton Vance
organization and REIT  subsidiaries of such investment funds that are similar to
Belrose Realty.  Certain of the Partnership Preference Units acquired by Belrose
Realty at during 2003 were acquired from one such REIT subsidiary.  See "Certain
Real Estate Investment Transactions" in Item 13.

Boston Management serves as manager of Belrose Realty. In that capacity,  Boston
Management  manages the investment and  reinvestment of Belrose  Realty's assets
and administers its affairs. See Item 13 for a description of the management fee
payable by Belrose Realty to Boston Management.

REAL ESTATE JOINT  VENTURE  INVESTMENTS.  At December 31, 2003,  Belrose  Realty
owned a controlling interest in three Real Estate Joint Ventures,  Bel Apartment
Properties   Trust  (Bel  Apartment),   Bel  Communities   Property  Trust  (Bel
Communities)  and Katahdin  Property Trust LLC (Katahdin).  With respect to each
Real Estate Joint  Venture,  Belrose  Realty owns a majority  economic  interest
therein and  controls a majority of its board of managers or  trustees.  Belrose
Realty's approval is required for all major decisions affecting each Real Estate
Joint Venture.

The day-to-day  operating  management of the real properties  owned by each Real
Estate  Joint  Venture is  provided by the real estate  operating  company  (the
Operating  Partner) that is the principal  minority  investor in the Real Estate
Joint Venture or an affiliated  company thereof.  Each Operating Partner (or its
affiliate)  receives a property management fee for the services rendered to such
properties.  For the year ended  December 31,  2003,  property  management  fees
relating to real  properties  held through the Real Estate Joint  Ventures  were
approximately $2.6 million.

At December 31, 2003, the assets of the Real Estate Joint Ventures  consisted of
a  total  of  28  multifamily   residential  communities  acquired  from  or  in
conjunction  with the  Operating  Partner of the  respective  Real Estate  Joint
Venture.  See Item 2.  Distributable  cash  flows  from each Real  Estate  Joint
Venture are allocated in a manner that provides  Belrose  Realty:  1) a priority
position versus the Operating  Partner with respect to a fixed annual  preferred

                                        4
<PAGE>

return;  and 2)  participation  on a pro rata or reduced basis in  distributable
cash flows in excess of the  annual  preferred  return of  Belrose  Realty and a
subordinated  preferred return of the Operating Partner.

Financing for the Real Estate Joint  Ventures  consists  primarily of fixed-rate
secured  mortgage  debt  obligations  of the Real  Estate  Joint  Ventures  that
generally are without  recourse to Belrose  Realty and the Fund, as described in
"Risks of Real Estate  Investments"  in Item 7A(b).  Both Belrose Realty and the
respective  Operating Partner invested equity in the Real Estate Joint Ventures.
Belrose Realty's equity in the Real Estate Joint Ventures was acquired using the
proceeds of Fund borrowings. At acquisition,  Belrose Realty's equity investment
in Bel Apartment,  Bel Communities and Katahdin was approximately $31.6 million,
approximately $37.9 and approximately $34.3 million, respectively.

A board of  managers or  trustees  controlled  by Belrose  Realty  oversees  the
performance  of the Operating  Partner and controls the major  decisions of each
Real Estate Joint  Venture.  In the case of Bel Apartment  and Bel  Communities,
Belrose Realty controls three of the four seats on the board of trustees. In the
case of Katahdin,  Belrose Realty  controls three out of five seats on the board
of  managers.  The persons  serving as managers or trustees on behalf of Belrose
Realty  are  employees  of  Boston  Management.  See  "Directors  and  Executive
Officers"  in Item 10. No director of Belrose  Realty or manager or trustee of a
Real Estate Joint Venture is a Shareholder of the Fund.  Each Operating  Partner
of Belrose  Realty's  Real Estate  Joint  Ventures  also serves as an  operating
partner of other Real Estate  Joint  Ventures  that are  majority  owned by REIT
subsidiaries  of other  similarly-structured  investment  funds sponsored by the
Eaton  Vance  organization.  Eaton Vance has no  financial  interest in the Real
Estate Joint Ventures.

The  Operating  Partner of Bel Apartment  and Bel  Communities  is ERP Operating
Limited   Partnership  (ERP),  an  affiliate  of  Equity   Residential.   Equity
Residential is a publicly owned, self-administered and self-managed REIT. Equity
Residential is the largest publicly traded apartment  company in America.  As of
December 31, 2003, Equity  Residential owned or had investments in 968 apartment
communities  in  34  states  consisting  of  207,506  apartment  units.   Equity
Residential's  corporate headquarters are located in Chicago,  Illinois.  Equity
Residential's  common shares are traded on the New York Stock Exchange under the
symbol "EQR". ERP owns 25% of the issued and outstanding shares of Bel Apartment
and Bel  Communities  that are  entitled to vote for election of trustees of Bel
Apartment and Bel Communities. Belrose Realty owns the balance of such shares.

The  Operating   Partner  of  Katahdin  is   Archstone-Smith   Operating  Trust.
Archstone-Smith  Trust  (Archstone-Smith),  the sole trustee of  Archstone-Smith
Operating  Trust, is a publicly owned REIT and a recognized  leader in apartment
investment and operations with a current market  capitalization of $10.3 billion
as of December  31,  2003.  Archstone-Smith  owns and  operates a  portfolio  of
high-rise  and  garden  apartment   communities   concentrated  in  the  greater
Washington,  D.C. metropolitan area, Southern California,  the San Francisco Bay
area, Chicago,  Boston, Southeast Florida, Seattle and the greater New York City
metropolitan  area.  As of December  31, 2003,  Archstone-Smith  owned or had an
ownership  position in 249  communities,  representing  88,183 units,  including
units under construction.  Archstone-Smith's  corporate headquarters are located
in Englewood, Colorado. Archstone-Smith is traded on the New York Stock Exchange
under the symbol "ASN".  Archstone-Smith  owns 25% of the issued and outstanding
shares of Katahdin  that are entitled to Board  representation.  Belrose  Realty
owns the balance of such shares.

The  Real  Estate  Joint  Ventures  include  a  buy/sell  provision  that can be
exercised by either Belrose Realty or the Operating Partner after a fixed period
of  years.  Pursuant  to the  buy/sell  provision  entered  into at the time Bel
Apartment was established,  either Belrose Realty or the Bel Apartment Operating
Partner  can give  notice on or after July 31,  2009  either to buy the  other's
equity  interest  in Bel  Apartment  or to sell its own equity  interest  in Bel
Apartment.  Bel Communities and Katahdin have similar  buy/sell  provisions with
their respective  Operating Partners.  The Bel Communities and Katahdin buy/sell
provisions  can be invoked on or after  November 27, 2009 and November 23, 2010,
respectively.

A  purchase  or  sale  pursuant  to a  buy/sell  provision  would  be  made at a
negotiated price. The agreement containing the buy/ sell provision applicable to
a Real Estate Joint Venture continues indefinitely, but could be terminated upon
the receipt of the requisite  approval of the owners of the voting  interests in
the Real  Estate  Joint  Venture.  The sale to Belrose  Realty by the  Operating
Partner of the Operating Partner's interest in Bel Apartment, Bel Communities or
Katahdin  would  not  affect  the  REIT  qualification  of  Bel  Apartment,  Bel
Communities or Katahdin.  If Belrose Realty were to dispose of its interest in a
Real Estate Joint Venture pursuant to a buy/sell provision, or otherwise, it may
acquire an  interest  in a  different  real  estate  investment  to replace  the
investment sold.

PARTNERSHIP  PREFERENCE  UNITS.  Belrose  Realty's  investments  in  Partnership
Preference  Units represent  preferred equity interests in real estate operating
partnerships  that are affiliated with publicly traded REITs.  The assets of the
partnerships  that  issued the  Partnership  Preference  Units  owned by Belrose
Realty on December 31, 2003 consisted of direct or indirect ownership  interests

                                        5
<PAGE>

in real properties,  including multifamily  properties and office and industrial
properties.  The  Partnership  Preference  Units  owned by Belrose  Realty as of
December 31, 2003 are described in Item 7A and in the consolidated  portfolio of
investments included in the Fund's consolidated financial statements,  which are
incorporated  by  reference  into Item 8. Eaton Vance is not,  and has not been,
involved  in  the   management  or  operation  of  the  real  estate   operating
partnerships  that  issued the  Partnership  Preference  Units  owned by Belrose
Realty.

The  Partnership  Preference  Units  held  by  Belrose  Realty  were  issued  by
partnerships  that are not  publicly-traded  partnerships  within the meaning of
Code Section  7704(b).  The  Partnership  Preference  Units are  perpetual  life
instruments  (subject to call  provisions) and are not, by their terms,  readily
convertible or  exchangeable  into cash or securities of the  affiliated  public
company.  Partnership Preference Units are not rated by a  nationally-recognized
rating  agency,  and such interests may not be as high in quality as issues that
are rated investment grade.

Each issue of Partnership  Preference  Units held by Belrose Realty pays regular
quarterly  distributions  at fixed  rates from the net  profits  of the  issuing
partnership,  with preferential rights over common and other subordinated units.
None of the  issues of  Partnership  Preference  Units is or will be  registered
under the  Securities  Act and each  issue is thus  subject to  restrictions  on
transfer.

ORGANIZATION  OF BELROSE  REALTY AND THE REAL  ESTATE  JOINT  VENTURES.  Belrose
Realty and each Real Estate Joint Venture operate in such a manner as to qualify
for  taxation as REITs under the Code.  As REITs,  Belrose  Realty and each Real
Estate Joint  Venture  generally  are not subject to federal  income tax on that
portion  of their  ordinary  income  or  taxable  gain  that is  distributed  to
stockholders each year. The Fund owns 100% of the common stock issued by Belrose
Realty,  and intends to hold all of Belrose  Realty's common stock at all times.
Belrose  Realty  and the  respective  Operating  Partners  own all of the common
shares or similar interests of each Real Estate Joint Venture.

Belrose  Realty and each Real Estate Joint  Venture  also have issued  preferred
shares to satisfy  certain  provisions of the Code,  which require  (among other
things)  that a REIT  be  beneficially  owned  in the  aggregate  by 100 or more
persons. The preferred shares of each such entity are owned by approximately 105
charitable  organizations  that  received the  preferred  shares as gifts.  Each
charitable  organization  that  received  preferred  stock  was  an  "accredited
investor" (as defined in the  Securities  Act) with total assets in excess of $5
million at the time the organization  received the preferred shares. Eaton Vance
selected  the  charitable  organizations  from the  charities  for  which it has
matched  employee  contributions  and/or  suggestions  from its employees or the
Operating  Partners.  As of December 31, 2003,  the total value of the preferred
shares  outstanding  of Belrose  Realty,  Bel  Apartment,  Bel  Communities  and
Katahdin was $210,000, $220,000, $220,000 and $216,000, respectively.  Dividends
on preferred shares are cumulative and payable annually at a dividend rate of 8%
per year. The dividends paid on preferred  shares have priority over payments on
common  shares.  For the year ended  December  31,  2003,  Belrose  Realty,  Bel
Apartment,  Bel  Communities  and  Katahdin  paid or  accrued  distributions  to
preferred shareholders of $16,800, $17,600, $17,600 and $17,280, respectively.

FUND  BORROWINGS.  To finance its real estate  investments  held through Belrose
Realty, the Fund has entered into credit  arrangements with DrKW Holdings,  Inc.
(the DrKW Credit  Facility) and Merrill Lynch Mortgage  Capital,  Inc. (the MLMC
Credit Facility)  (collectively,  the Credit  Facility).  The Credit Facility is
secured by a pledge of the Fund's assets, excluding the assets of Bel Apartment,
Bel  Communities  and Katahdin,  and expires in June 2010. At December 31, 2003,
the total  principal  amount  outstanding  under the Credit  Facility was $183.3
million.  The Credit  Facility is also used to provide for selling  commissions,
organizational  expenses and any short-term  liquidity needs of the Fund.  Under
certain circumstances, the Fund may increase the size of the Credit Facility and
the amount of outstanding borrowings thereunder.

Borrowings under the DrKW Credit Facility accrue interest at a rate of one-month
LIBOR plus 0.30% per annum.  As of December  31,  2003,  outstanding  borrowings
under the DrKW Credit Facility totaled $177.0 million.

The Fund may borrow up to $57.0 million under the MLMC Credit Facility, of which
up to $10  million  may be letters of credit.  Borrowings  under the MLMC Credit
Facility  accrue  interest at a rate of one-month LIBOR plus 0.38% per annum. As
of December  31, 2003,  outstanding  borrowings  under the MLMC Credit  Facility
totaled $6.3  million.  There were two letters of credit  issued  totaling  $2.1
million as of December 31, 2003. The unused loan commitment amount totaled $48.6
million.  A commitment  fee of 0.10% per annum is paid on the unused  commitment
amount. The Fund pays all fees associated with issuing letters of credit.

Obligations under the Credit Facility are without recourse to Fund Shareholders.
As described  above,  financing for the the Real Estate Joint Ventures  consists
primarily of fixed-rate secured mortgage debt obligations of the the Real Estate

                                        6
<PAGE>

Joint Ventures that are without recourse to Fund  Shareholders and are generally
without  recourse to Belrose  Realty and the Fund, as described  under "Risks of
Real Estate Investments" in Item 7A(b).

INTEREST  RATE SWAP  AGREEMENTS.  The Fund has entered into  interest  rate swap
agreements with Merrill Lynch Capital  Services,  Inc. (MLCS) to fix the cost of
borrowings  under the Credit Facility used to acquire Belrose Realty's equity in
its real estate investments.  Pursuant to the interest rate swap agreements, the
Fund makes cash  payments to MLCS at fixed rates in exchange for  floating  rate
payments from MLCS that fluctuate with one-month  LIBOR.  The interest rate swap
agreements entered into with respect to Belrose Realty's real estate investments
extend until June 25, 2010 and provide for the Fund to make  payments to MLCS at
fixed rates averaging  4.10%.  See Note 7 to the Fund's  consolidated  financial
statements incorporated by reference into Item 8.

THE EATON VANCE  ORGANIZATION.  The Eaton Vance organization  sponsors the Fund.
Eaton Vance serves as the Fund's manager. Boston Management serves as the Fund's
investment  adviser and as manager of Belrose Realty. EV Distributors  served as
the Fund's  placement  agent. The Fund's business affairs are conducted by Eaton
Vance (as its manager) and its  investment  operations  are  conducted by Boston
Management (as its adviser).  The Fund's  officers are employees of Eaton Vance.
Eaton Vance,  Boston  Management and EV Distributors  are indirect  wholly-owned
subsidiaries  of Eaton Vance Corp.,  a  publicly-traded  holding  company  that,
through  its  affiliates  and  subsidiaries,  engages  primarily  in  investment
management, administration and marketing activities.

As noted  above,  the Fund  pursues its  objective  primarily  by  investing  in
Belvedere  Company.  Belvedere  Company  invests  exclusively  in the Portfolio.
Boston  Management  acts as  investment  adviser of the Portfolio and manager of
Belvedere Company. EV Distributors acts as placement agent for Belvedere Company
and the Portfolio.  As of December 31, 2003, the assets of the Fund  represented
approximately 2.7% of assets under management by Eaton Vance and its affiliates.
The offices of the Fund, Eaton Vance,  Boston Management and EV Distributors are
located at 255 State Street, Boston, Massachusetts 02109.

CONFLICTS OF INTEREST.  Boston  Management and other Eaton Vance  affiliates are
subject to certain  conflicts  of  interests  in their  dealings  with the Fund,
Belrose  Realty,  Belvedere  Company and the  Portfolio.  Also  investing in the
Portfolio are other  investment  companies  sponsored by Eaton Vance.  Portfolio
management  activities  with respect to securities  contributed to the Portfolio
may  have  different  tax  consequences  for the  contributing  investor  in the
Portfolio than for other investors in the Portfolio.  Boston Management  manages
the  Portfolio in pursuit of long-term,  after-tax  returns for all investors in
the Portfolio  and, with respect to contributed  securities,  takes into account
the  tax  position  of the  contributing  investor  in the  Portfolio.  Whenever
conflicts of interest  arise,  Eaton Vance,  Boston  Management  and other Eaton
Vance  affiliates  will endeavor to exercise  their  discretion in a manner that
they believe is equitable to all interested persons.

Belrose Realty may purchase real estate  investments from the REIT  subsidiaries
of other funds  similar in purpose to the Fund that are  sponsored  by the Eaton
Vance organization. Belrose Realty may also co-invest with such entities in real
estate  investments  and sell real estate  investments to such entities.  In any
such transaction,  the assets purchased and sold will be valued in good faith by
Boston  Management,  after  consideration of factors,  data and information that
Boston Management  considers  relevant.  Transaction prices generally include an
allocation  of the  original  costs  incurred  in  creating  and  acquiring  the
transferred  assets.  Real estate  investments  are often difficult to value and
others could in good faith arrive at valuations  different  from those of Boston
Management.

ITEM 2. PROPERTIES.
-------------------

The Fund does not own any physical  properties,  other than  indirectly  through
Belrose  Realty's  investments.  As of December  31, 2003,  Belrose  Realty held
investments in Partnership  Preference  Units of three issuers.  At December 31,
2003, Belrose Realty owned majority interests in the Real Estate Joint Ventures,
Bel Apartment,  Bel Communities and Katahdin,  whose assets are reflected in the
consolidated   financial   statements  of  the  Fund.  Bel  Apartment  owns  ten
multifamily   residential   properties  located  in  seven  states  (Washington,
Tennessee, North Carolina, Arizona, Florida, Georgia and Texas). Bel Communities
owns twelve multifamily  residential properties located in eleven states (Texas,
Arizona,  Georgia,  North Carolina,  Oregon,  Minnesota,  Maryland,  Washington,
Oklahoma,  Tennessee and Florida).  Katahdin  owns six  multifamily  residential
properties located in five states (Florida,  Texas,  North Carolina,  New Mexico
and Washington).

                                        7
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.
--------------------------

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

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

No matters were submitted to a vote of security holders during the quarter ended
December 31, 2003.

                                     PART II
                                     -------

ITEM 5. DETERMINING  NET  ASSET  VALUE,  MARKET  FOR  FUND  SHARES  AND  RELATED
        SHAREHOLDER MATTERS.
--------------------------------------------------------------------------------

This Item and other Items in this report contain summaries of certain provisions
contained  in the  Limited  Liability  Company  Agreement  of the Fund  (the LLC
Agreement),  which was filed as an exhibit to the Fund's registration  statement
on Form 10. All such  summaries  are  qualified in their  entirety by the actual
provisions of the LLC Agreement, which are incorporated by reference herein.

(a) MARKET INFORMATION, RESTRICTIONS ON TRANSFERS AND REDEMPTION OF SHARES.
---------------------------------------------------------------------------

TRANSFERS OF FUND SHARES.  There is no established public trading market for the
Shares of the Fund. Other than transfers to the Fund in a redemption,  transfers
of Shares are expressly  prohibited by the LLC Agreement of the Fund without the
consent of Eaton Vance.  Eaton Vance's  consent to a transfer may be withheld in
its sole discretion for any reason or for no reason.

The Shares have not been and will not be registered  under the  Securities  Act,
and may not be resold unless an exemption from such  registration  is available.
Shareholders  have no right to require  registration  of the Shares and the Fund
does not intend to  register  the Shares  under the  Securities  Act or take any
action to cause an exemption (whether pursuant to Rule 144 of the Securities Act
or otherwise) to be available.

The Fund is not and will not be  registered  under the 1940 Act, and no transfer
of Shares may be made if, as  determined  by Eaton Vance or counsel to the Fund,
such transfer would result in the Fund being required to be registered under the
1940 Act. In addition,  no transfer of Shares may be made unless, in the opinion
of counsel for the Fund,  such transfer  would not result in  termination of the
Fund for purposes of Section 708 of the Code or result in the  classification of
the  Fund as an  association  or a  publicly  traded  partnership  taxable  as a
corporation under the Code.

In no event  shall all or any part of a  Shareholder's  Shares be  assigned to a
minor or an incompetent,  unless in trust for the benefit of such person. Shares
may be sold,  transferred,  assigned or otherwise  disposed of by a  Shareholder
only if it is  determined  by Eaton  Vance or  counsel  to the  Fund  that  such
transfer,  assignment or  disposition  would not violate  federal  securities or
state   securities  or  "blue  sky"  laws  (including   investor   qualification
standards).

There  are no  outstanding  options  or  warrants  to  purchase,  or  securities
convertible into, Shares of the Fund. Shares of the Fund cannot be sold pursuant
to Rule 144 under the Securities  Act, and the Fund does not propose to publicly
offer any of its Shares at any time.

REDEMPTION  OF FUND  SHARES.  Shares of the Fund may be redeemed on any business
day. The redemption price of Shares that are redeemed is based on the Fund's net
asset  value next  computed  after  receipt of the  redemption  request.  Shares
redeemed  within three years of issuance are  generally  subject to a redemption
fee equal to 1% of the net asset value of the Shares redeemed. See Item 13.

The Fund satisfies  redemption requests  principally by distributing  securities
drawn from the  Portfolio,  but may also  distribute  cash.  If  requested  by a
redeeming   Shareholder,   the  Fund  will  satisfy  a  redemption   request  by
distributing  securities  that were  contributed  by the redeeming  Shareholder,
provided  that  such  securities  are  held  in the  Portfolio  at the  time  of
redemption.  The securities contributed by a Shareholder will not be distributed
to any other  Shareholder  in the Fund (or to any other  investor  in  Belvedere
Company  or  the  Portfolio)  during  the  first  seven  years  following  their
contribution unless the contributing Shareholder has withdrawn from the Fund.

                                        8
<PAGE>

Under  most  circumstances,  a  redemption  from the Fund that is  settled  with
securities  as described  herein will not result in the  recognition  of capital
gains by the Fund or by the redeeming  Shareholder.  The  redeeming  Shareholder
would generally recognize capital gains upon the sale of the securities received
through  redemption.  If a redeeming  Shareholder  receives  cash in addition to
securities to settle a  redemption,  the amount of cash received will be taxable
to the Shareholder to the extent it exceeds such Shareholder's tax basis in Fund
Shares.   Shareholders   should   consult  their  tax  advisors  about  the  tax
consequences of redeeming Fund Shares.

A  Shareholder  redemption  request  within  seven  years of a  contribution  of
securities by such  Shareholder  will  ordinarily  be satisfied by  distributing
securities that were contributed by such  Shareholder,  prior to distributing to
such  Shareholder  any  other  securities  held  in  the  Portfolio.  Securities
contributed by a Shareholder  may be distributed  to other  Shareholders  in the
Fund (or to other  investors  in  Belvedere  Company or the  Portfolio)  after a
holding  period of at least  seven years and,  if so  distributed,  would not be
available  to meet  subsequent  redemption  requests  made  by the  contributing
Shareholder.

If  requested  by a redeeming  Shareholder  making a  redemption  of at least $1
million  occurring  more  than  seven  years  after  such  Shareholder's   final
contribution  of securities to the Fund, the Fund will  generally  distribute to
the  redeeming  Shareholder a diversified  basket of securities  representing  a
range of industry groups that is drawn from the Portfolio,  but the selection of
individual securities would be made by Boston Management in its sole discretion.
No interests  in Real Estate Joint  Ventures,  Partnership  Preference  Units or
other real estate investments held by Belrose Realty will be distributed to meet
a redemption  request,  and "restricted  securities" will be distributed only to
the Shareholder who contributed such securities or such Shareholder's  successor
in interest.

Other  than as set  forth  above,  the  allocation  of each  redemption  between
securities and cash and the selection of securities to be distributed will be at
the sole  discretion of Boston  Management.  Distributed  securities may include
securities  contributed  by  Shareholders  as well as other  readily  marketable
securities held in the Portfolio.  The value of securities and cash  distributed
to meet a  redemption  will  equal the net asset  value of the  number of Shares
being redeemed less any applicable  redemption  fee. The Fund's Credit  Facility
prohibits the Fund from honoring  redemption requests while there is an event of
default outstanding under the Credit Facility.

The Fund may compulsorily redeem all or a portion of the Shares of a Shareholder
if the Fund has determined  that such  redemption is necessary or appropriate to
avoid  registration  of the Fund or Belvedere  Company under the 1940 Act, or to
avoid adverse tax or other consequences to the Portfolio, Belvedere Company, the
Fund or Fund  Shareholders,  including those arising as the result of applicable
anti-money laundering requirements. No redemption fee is payable in the event of
compulsory redemption.

A capital  account for each  Shareholder is maintained on the books of the Fund.
The account reflects the value of such Shareholder's interest in the Fund, which
is adjusted for profits, liabilities and distributions allocable to such account
in accordance with Article 6 of the Fund's LLC Agreement.

Subject to the consent of the  manager of the Fund,  a  Shareholder  may make an
estate freeze election pursuant to which all or a portion of such  Shareholder's
Shares will be divided into  Preferred  Shares and Common Shares  (Estate Freeze
Shares).  Such  division  will be made in  accordance  with the terms of the LLC
Agreement.  Estate Freeze Shares are not transferable without the consent of the
Fund's manager and have no redemption rights or voting or consent rights.

DETERMINING  NET ASSET VALUE.  Boston  Management,  as  investment  adviser,  is
responsible  for  determining  the  value  of  the  Fund's  assets.  The  Fund's
custodian, Investors Bank & Trust Company, calculates the value of the assets of
the Fund,  Belvedere  Company and the Portfolio each day that the New York Stock
Exchange  (NYSE) is open for trading,  as of the close of regular trading on the
NYSE.  The Fund's net asset value per Share is  calculated by dividing the value
of the  Fund's  total  assets,  less its  liabilities,  by the  number of Shares
outstanding.

The  Fund's  net assets  are  valued in  accordance  with the  Fund's  valuation
procedures and reflect the value of its directly-held assets and liabilities, as
well as the net asset  value of the  Fund's  investment  in the  Portfolio  held
through  Belvedere  Company and in real estate  investments held through Belrose
Realty.  The Trustees of the Portfolio have established  procedures for the fair
valuation of the Portfolio's assets under normal market conditions.  Pursuant to
these  procedures,  marketable  securities listed on U.S.  securities  exchanges
generally  are valued at the last sale price on the day of the  valuation or, if
there  were no sales,  at the mean  between  the  closing  bid and asked  prices
therefor  on  the  exchange  where  such  securities  are  principally   traded.
Marketable  securities listed on the NASDAQ National Market System generally are
valued at the NASDAQ official closing price.  Unlisted or listed  securities for
which  closing sale prices are not  available are valued at the mean between the
last available bid and asked prices.  Exchange-traded  options are valued at the

                                        9
<PAGE>

last sale price for the day of valuation as quoted on the principal  exchange or
board of trade on which the options  are traded,  or in the absence of a sale on
such day, at the mean between the latest bid and asked prices therefor.  Futures
positions on securities or currencies are generally valued at closing settlement
prices.  Short-term debt securities with a remaining maturity of 60 days or less
are valued at amortized cost. If short-term debt securities were acquired with a
remaining  maturity  of more than 60 days,  their  amortized  cost value will be
based on their  value on the  sixty-first  day prior to  maturity.  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.

The daily  valuation of foreign  securities  held by the Portfolio  generally is
determined  as of the close of trading on the  principal  exchange on which such
securities  trade.  Events  occurring  after the  close of  trading  on  foreign
exchanges may result in  adjustments  to the valuation of foreign  securities to
more  accurately  reflect their fair value as of the close of regular trading on
the NYSE.  The Portfolio may rely on an independent  fair  valuation  service in
adjusting  the  valuations  of  foreign   securities.   Foreign  securities  and
currencies  held by the Portfolio are valued in U.S.  dollars,  as calculated by
the  Portfolio's  custodian based on foreign  currency  exchange rate quotations
supplied by an independent quotation service. All other securities are valued at
fair value as determined in good faith by or at the direction of the Portfolio's
Trustees considering relevant factors, data and information including the market
value of freely tradable securities of the same class in the principal market on
which such securities are normally traded.

The Fund's real estate  investments  are valued each day as  determined  in good
faith by Boston  Management,  as  investment  adviser to Belrose  Realty,  after
consideration  of relevant  factors,  data and  information.  The procedures for
valuing  Belrose  Realty's  assets  are  described  under  "Critical  Accounting
Estimates"  in Item 7 and under "Risks of Real Estate  Investments"  in Item 7A.
Boston  Management  values the Fund's interest rate swap  agreements  based upon
dealer and counterparty  quotes and pricing models which take into consideration
the market  trading  prices of interest rate swap  agreements  that have similar
terms to the Fund's interest rate swap agreements. Fixed liabilities of the Fund
generally are stated at principal value.

HISTORIC NET ASSET VALUES. Set forth below are the high and low net asset values
per  Share  (NAVs)  of the Fund for each  full  quarter  during  the year  ended
December 31, 2003 and the period from the start of business  March 19, 2002,  to
December  31,  2002,  the  closing  NAV on the last  business  day of each  full
quarter, and the percentage change in NAV during each such quarter.

                                             NAV at          Quarterly %
Quarter Ended     High NAV     Low NAV     Quarter End     Change in NAV(1)
-------------     --------     -------     -----------     ----------------
  12/31/03         $95.84      $87.50        $95.84             12.04%
   9/30/03         $89.11      $83.47        $85.54              2.53%
   6/30/03         $86.26      $74.16        $83.43             13.63%
   3/31/03         $80.32      $69.02        $73.42             -4.48%
  12/31/02         $80.81      $68.26        $76.86              6.71%
   9/30/02         $85.21      $69.13        $72.03            -16.20%
   6/30/02         $98.05      $84.30        $85.95            -12.44%

(1)  Past performance is no guarantee of future results.  Investment  return and
     principal  value will fluctuate so that Shares,  if redeemed,  may be worth
     more or less than  their  original  cost.  Changes  in NAV are  historical.
     Performance is for the stated time period only;  due to market  volatility,
     the Fund's current performance may be lower or higher. For more information
     about  the  performance  of the  Fund,  see  "Management's  Discussion  and
     Analysis of Financial Condition and Results of Operations" in Item 7.

(b) RECORD HOLDERS OF SHARES OF THE FUND.
-----------------------------------------

As of March 1, 2004, there were 627 record holders of Shares of the Fund.

(c) DISTRIBUTIONS.
------------------

INCOME AND CAPITAL GAIN DISTRIBUTIONS.  The Fund intends to distribute each year
the amount of its net  investment  income for such year,  if any.  The Fund also
intends to make annual capital gain  distributions  equal to  approximately  18%
(reduced  from 22% to reflect the reduction in federal  long-term  capital gains
rates) of the  amount of its net  realized  capital  gains,  if any,  other than
precontribution  gain  allocated to a Shareholder  in connection  with a taxable
tender offer or other taxable corporate event for a security  contributed to the
Fund by that  Shareholder or that  Shareholder's  predecessor  in interest.  The
Fund's net investment income and net realized gains include the Fund's allocated

                                       10
<PAGE>

share of the net  investment  income and net realized  gains of Belrose  Realty,
Belvedere  Company and,  indirectly,  the  Portfolio.  The Fund's  distributions
generally are based on  determinations of net investment income and net realized
capital gains for federal income tax purposes.  Such amounts may differ from net
investment  income (or loss) and net realized gain (or loss) as set forth in the
Fund's consolidated  financial statements due to differences in the treatment of
various  income,  gain,  loss,  expense and other  items for federal  income tax
purposes  and  under  generally  accepted  accounting  principles.  Because  the
Portfolio  invests  primarily in lower yielding  securities,  seeks to avoid net
realized short-term capital gains and bears certain ongoing expenses,  it is not
expected that income distributions will be significant.  The Fund intends to pay
distributions  (if any) on the last business day of each fiscal year of the Fund
(which concludes on December 31) or shortly thereafter.  The Fund's distribution
rates with  respect to  realized  gains may be adjusted in the future to reflect
changes in the effective maximum marginal individual federal tax rate applicable
to long-term capital gains.

Shareholder  distributions  with respect to net  investment  income and realized
post-contribution  gains are made pro rata in proportion to the number of Shares
held as of the record date of the  distribution.  All  distributions  (including
Special   Distributions   described  below)  are  paid  by  the  Fund  in  cash.
Distributions are generally not taxable to the recipient  Shareholder unless the
distributions  exceed the recipient  Shareholder's tax basis in Fund Shares. The
Fund's  Credit  Facility  prohibits  the Fund from  making any  distribution  to
Shareholders  while  there is an event of default  outstanding  under the Credit
Facility.

On  January  14,  2004,  the Fund  made a  distribution  of $0.77  per  Share to
Shareholders of record on January 13, 2004. On January 17, 2003, the Fund made a
distribution  of $0.05 per Share to  Shareholders of record on January 16, 2003.
The Fund made no  distributions  for the  period  from  March 19,  2002  through
December 31, 2002.

SPECIAL DISTRIBUTIONS.  In addition to the income and capital gain distributions
described  above,  the Fund also  makes  distributions  whenever  a  Shareholder
recognizes a precontribution  gain (other than precontribution gain allocated to
a Shareholder in connection with a tender offer or other extraordinary corporate
event  involving  a  security   contributed  by  such  Shareholder)  (a  Special
Distribution).  Special  Distributions  generally equal approximately 18% of the
amount of realized  precontribution gains plus approximately 4% of the allocated
precontribution   gain  or  such  other  percentage  as  deemed  appropriate  to
compensate  Shareholders  receiving such distributions for taxes that may be due
in connection with the precontribution gain and Special  Distributions.  Special
Distributions   will  be  made   solely   to  the   Shareholders   to  whom  the
precontribution  gain is  allocated.  The Fund does not  intend to make  Special
Distributions  to a  Shareholder  in respect of  realized  precontribution  gain
allocated  to  a  Shareholder  in  connection  with  a  tender  offer  or  other
extraordinary   corporate  event  involving  a  security   contributed  by  such
Shareholder. There were no Special Distributions for the year ended December 31,
2003 or for the period from the start of business,  March 19, 2002,  to December
31, 2002.

                                       11

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.
--------------------------------

TABLE OF  SELECTED  FINANCIAL  DATA.  The  consolidated  data  referred to below
reflects the Fund's historical results for the year ended December 31, 2003, and
for the period from March 19, 2002  through  December 31,  2002.  The  following
information should be read in conjunction with all of the consolidated financial
statements  and related notes  incorporated  by reference into Item 8. The other
consolidated data referred to below is as of each period end.

                                          Year Ended           Period Ended
                                       December 31, 2003   December 31, 2002(1)
                                       -----------------   --------------------
Total investment income                 $   82,312,956         $   44,487,727
Interest expense                        $   29,114,183         $   16,926,050
Net expenses (including interest
 expense)                               $   65,089,736         $   37,590,944
Net investment income                   $   15,279,642         $    5,431,684
Minority interests in net income of
 controlled subsidiaries                $   (1,943,578)        $   (1,465,099)
Net realized gain                       $    2,449,130         $    5,188,827
Net change in unrealized appreciation
 (depreciation)                         $  311,836,713         $ (129,398,897)
Net increase (decrease) in net assets
 from operations                        $  329,565,485         $ (118,778,386)
Total assets                            $2,193,109,315         $1,791,207,727
Loan payable                            $  183,300,000         $  155,300,000
Mortgages payable                       $  344,219,483         $  344,219,483
Net assets                              $1,632,454,758         $1,242,001,655
Shares outstanding                          17,032,796             16,160,271
Net asset value and redemption price
 per Share                              $        95.84         $        76.86
Net increase (decrease) in net assets
 from operations per Share              $        19.03         $       (23.14)
Distribution paid per Share             $         0.05(3)      $         0.00(2)

(1)  The Fund  commenced its  investment  operations on March 19, 2002.  Certain
     amounts   have  been   reclassified   to  conform  with  the  current  year
     presentation.

(2)  On January 17,  2003,  the Fund made a  distribution  of $0.05 per Share to
     Shareholders of record on January 16, 2003.

(3)  On January 14,  2004,  the Fund made a  distribution  of $0.77 per Share to
     Shareholders of record on January 13, 2004.



ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.
--------------------------------------------------------------------------------

THE INFORMATION IN THIS REPORT CONTAINS  FORWARD-LOOKING  STATEMENTS  WITHIN THE
MEANING OF THE FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS TYPICALLY ARE
IDENTIFIED BY USE OF TERMS SUCH AS "MAY," "WILL," "SHOULD,"  "MIGHT,"  "EXPECT,"
"ANTICIPATE,"  "ESTIMATE,"  AND SIMILAR  WORDS,  ALTHOUGH  SOME  FORWARD-LOOKING
STATEMENTS  ARE  EXPRESSED  DIFFERENTLY.  THE  ACTUAL  RESULTS OF THE FUND COULD
DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING  STATEMENTS DUE TO
A NUMBER OF FACTORS.  THE FUND  UNDERTAKES NO OBLIGATION TO UPDATE  PUBLICLY ANY
FORWARD-LOOKING  STATEMENTS,  WHETHER  AS A RESULT  OF NEW  INFORMATION,  FUTURE
EVENTS,  OR OTHERWISE,  EXCEPT AS REQUIRED BY APPLICABLE LAW. FACTORS THAT COULD
AFFECT THE FUND'S PERFORMANCE  INCLUDE A DECLINE IN THE U.S. STOCK MARKETS OR IN
GENERAL  ECONOMIC  CONDITIONS,  ADVERSE  DEVELOPMENTS  AFFECTING THE REAL ESTATE
INDUSTRY, OR FLUCTUATIONS IN INTEREST RATES. SEE "QUALITATIVE  INFORMATION ABOUT
MARKET RISK" IN ITEM 7A BELOW.

The  following  discussion  should  be  read  in  conjunction  with  the  Fund's
consolidated  financial  statements and related notes  incorporated by reference
into Item 8.

(a) RESULTS OF OPERATIONS.
--------------------------

Increases and decreases in the Fund's net asset value per Share are derived from
net investment  income or loss, and realized and unrealized  gains and losses on
investments.  The  Fund's  net  investment  income  (or loss) is  determined  by

                                       12
<PAGE>

subtracting  the  Fund's  total  expenses  from its  investment  income and then
deducting  the minority  interest in net income of Belrose  Realty's  controlled
subsidiaries.  The Fund's  investment  income includes the net investment income
allocated to the Fund from Belvedere Company,  rental income from the properties
owned by Belrose Realty's controlled subsidiaries,  partnership income allocated
to the Partnership  Preference Units owned by Belrose Realty and interest earned
on the Fund's  short-term  investments  (if any). The net  investment  income of
Belvedere  Company  allocated  to  the  Fund  includes  dividends  and  interest
allocated to Belvedere  Company by the Portfolio  less the expenses of Belvedere
Company  allocated  to the Fund.  The Fund's total  expenses  include the Fund's
investment   advisory  and  administrative   fees,   property  management  fees,
distribution  and  servicing  fees,  interest  expense from  mortgages  owned by
Belrose  Realty's  controlled  subsidiaries,  interest  expense  on  the  Credit
Facility,  property and  maintenance  expenses and property  taxes and insurance
expenses  relating  to the  properties  owned  by  Belrose  Realty's  controlled
subsidiaries,   and  other  miscellaneous  expenses.  The  Fund's  realized  and
unrealized  gains and losses are the  result of  transactions  in, or changes in
value of,  security  investments  held  through  the  Fund's  indirect  interest
(through  Belvedere  Company) in the  Portfolio,  real estate  investments  held
through Belrose  Realty,  the Fund's interest rate swap agreements and any other
direct  investments  of the Fund, as well as periodic  payments made by the Fund
pursuant to interest rate swap agreements.

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

PERFORMANCE  OF THE  FUND.(1)  The  Fund's  investment  objective  is to achieve
long-term,  after-tax  returns  for  Shareholders.  Eaton  Vance,  as the Fund's
manager,  measures the Fund's  success in achieving its  objective  based on the
investment  returns of the Fund, using the Standard & Poor's 500 Composite Index
(the S&P 500) as the  Fund's  primary  performance  benchmark.  The S&P 500 is a
broad-based  unmanaged index of common stocks commonly used as a measure of U.S.
stock market  performance.  Eaton Vance's primary focus in pursuing total return
is on the Fund's common stock portfolio, which consists of its indirect interest
in the  Portfolio.  In  measuring  the  performance  of the Fund's  real  estate
investments,  Eaton Vance considers whether, through current returns and changes
in  valuation,  the  real  estate  investments  achieve  returns  that  over the
long-term exceed the cost of the borrowing  incurred to acquire such investments
and thereby add to Fund  returns.  The Fund has entered into  interest rate swap
agreements to fix the cost of its borrowings  under the Credit  Facility used to
acquire Belrose  Realty's equity in its real estate  investments and to mitigate
in part the impact of interest rate changes on the Fund's net asset value.

The Fund's  total return for the year ended  December 31, 2003 was 24.77%.  This
return  reflects an increase in the Fund's net asset value per Share from $76.86
to  $95.84  and a  distribution  of $0.05  per  share  during  the  period.  For
comparison,  the S&P 500 had a total return of 28.67% over the same period.  The
combined impact on performance of the Fund's  investment  activities  outside of
the Portfolio was modestly  positive for the year ended  December 31, 2003.  The
performance of the Fund exceeded that of the Portfolio by approximately 0.9% for
the year.

The Fund  had a total  return  of  -23.14%  for the  period  from  the  start of
business, March 19, 2002, to December 31, 2002. This return reflected a decrease
in the Fund's net asset value per Share from $100.00 to $76.86.  For comparison,
the S&P 500 had a total return of -23.45%  over the same period.  For the period
from the  start  of  business,  March  19,  2002,  to  December  31,  2002,  the
performance of the Fund trailed that of the Portfolio by approximately 1.8%.

PERFORMANCE OF THE PORTFOLIO.  U.S. equities  experienced a successful 2003 with
most major indices posting their first annual gains since 1999.  Strength in the
broader market was a function of a favorable economic environment:  historically
low  inflation  and  interest  rates  coupled  with robust  earnings  growth and
continued  consumer  strength.  While the  Portfolio's  performance for the year
ended December 31, 2003 of 23.88% was strong, the Portfolio trailed the S&P 500,
which  had a total  return  of 28.67%  for the  year.  The  total  return of the
Portfolio for the period from March 19, 2002 to December 31, 2002 was -21.31%.

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

                                       13
<PAGE>

The Portfolio's sector allocation in 2003 was substantially  unaltered from 2002
in that the  Portfolio  continued  to  maintain  overweighted  positions  in the
industrial,  consumer  discretionary  and  financials  sectors.  Although  these
sectors  generally  performed well during 2003,  the sub-par  performance of the
Portfolio's  holdings across the constituent  industries,  and multi-line retail
and  aerospace/defense  names  in  particular,  hindered  its  performance.  The
Portfolio's  continued  underweight of the best  performing  sector of the year,
information  technology,  was another  factor  contributing  to the  Portfolio's
relative  underperformance  versus  the S&P 500.  As in 2002,  lack of  earnings
visibility and unattractive valuations caused Boston Management, the Portfolio's
investment  adviser,  to remain  cautious on the  technology  sector.  A similar
rationale  prompted  a  de-emphasis  of  the   telecommunications   sector,  the
underweighting of which had a positive impact on the Portfolio's return in 2003.

During the year, Boston Management increased the Portfolio's  allocation to more
economically  sensitive sectors, such as consumer discretionary and energy, from
2002  levels.   This  shift,   particularly   with  respect  to  investments  in
pro-cyclical  industries such as consumer electronics,  energy services, and oil
and gas, was particularly beneficial. Financial and health care investments also
contributed to relative performance in 2003, with strong performance by consumer
finance,  pharmaceuticals  and  biotechnology  investments.  While the Portfolio
remained  underweighted in the materials and the utilities  sectors during 2003,
stock  selections in the electric and gas utilities groups  positively  impacted
returns for the year.

Unlike  in  2002,  the  market  favored  lower  quality  and  higher  volatility
securities in 2003, something that is not unusual when coming out of an economic
slowdown or bear market. The Portfolio's policy of investing primarily in higher
quality   securities   and  its   valuation   discipline   contributed   to  its
underperformance  versus its benchmark and the Portfolio's more aggressive peers
during the past year. Looking forward,  Boston Management  believes the economic
recovery will continue at a  sustainable  pace,  and that the market will better
reward quality companies that can consistently deliver earnings. The longer-term
success of the Portfolio will be determined by the  performance  of U.S.  equity
markets  and the  ability  of  Boston  Management's  research  staff to  deliver
superior  stock  selection  versus the  Portfolio's  benchmark.  Higher  quality
investments are gradually  gaining  strength in the market,  and the Portfolio's
investment  focus  will  continue  to  be  in  companies  with  strong  business
franchises and solid long-term earnings prospects.

PERFORMANCE OF REAL ESTATE INVESTMENTS.  The Fund's real estate investments held
through Belrose Realty include majority  interests in Real Estate Joint Ventures
and investments in Partnership  Preference  Units.  During 2002,  Belrose Realty
acquired interests in Real Estate Joint Ventures,  which increased the number of
properties  held  through  Real  Estate  Joint   Ventures,   and  also  acquired
Partnership Preference Units during 2003 and 2002.

During the year ended  December  31,  2003,  the Fund's real  estate  operations
continued to be impacted by weak multifamily market  fundamentals.  While rental
income from real estate operations increased to $64.7 million for the year ended
December  31, 2003  compared  to $37.9  million for the period from the start of
business,  March 19, 2002, to December 31, 2002, an increase of $26.8 million or
71%, this increase was  principally due to the greater number of properties held
through Real Estate Joint Ventures  during the year ended December 31, 2003 (and
the  longer  period of time for which  investments  in such  Real  Estate  Joint
Ventures  were  held).  This  increase  was  offset  in part by  increased  rent
concessions  and/or reduced apartment rental rates and lower occupancy levels, a
trend that continued from 2002.

Property  operating  expenses  totaled $28.6 million for the year ended December
31, 2003  compared to $16.3  million for the period from the start of  business,
March 19,  2002,  to December  31,  2002,  an  increase of $12.3  million or 75%
(property  operating  expenses are before certain operating  expenses of Belrose
Realty of  approximately  $3.2 million for the year ended  December 31, 2003 and
approximately $1.7 million for the period from the start of business,  March 19,
2002, to December 31,  2002).  The increase in property  operating  expenses was
principally  due to the greater  number of  properties  held through Real Estate
Joint Ventures during the year ended December 31, 2003 (and the longer period of
time for which investments in such Real Estate Joint Ventures were held).  While
the U.S.  economy  showed signs of strength  during the year ended  December 31,
2003,  significant  employment  growth has not  occurred in most markets and low
interest  rates have  contributed to continued  apartment  move-outs (due to new
home  purchases) and ongoing  development of new  multifamily  properties.  As a
result,  Boston Management,  Belrose Realty's manager,  expects that real estate
operating results in 2004 will be modestly below the levels of 2003.

At December 31,  2003,  the  estimated  fair value of the real  properties  held
through Belrose Realty was $473.5 million compared to $470.6 million at December
31, 2002,  an increase of $2.9  million or 1%. The modest  increase in estimated
real   property   values  at  December  31,  2003   resulted  from  declines  in
capitalization rates in a lower-return  environment,  which more than offset the
impact of lower income expectations on property values. The capitalization rate,
a term  commonly  used in the  real  estate  industry,  is the  rate  of  return
percentage  applied to actual or estimated  income levels to determine the value
of a real estate investment.  Belrose Realty saw unrealized  appreciation in the

                                       14
<PAGE>

estimated fair value of its other real estate  investments  (which includes Real
Estate Joint  Ventures)  of  approximately  $3.6  million  during the year ended
December  31,  2003  compared  to  approximately   $1.0  million  in  unrealized
depreciation  during the period from the start of business,  March 19, 2002,  to
December 31, 2002.

For  the  year  ended  December  31,  2003,  Belrose  Realty's   investments  in
Partnership  Preference  Units  continued to benefit from low interest rates and
tighter spreads on real estate securities.  In addition,  because Belrose Realty
acquired  additional  Partnership  Preference Units over the past twelve months,
the fair value of Belrose Realty's  Partnership  Preference Units has increased.
At December 31, 2003,  the estimated  fair value of the  Partnership  Preference
Units totaled  $56.7 million  compared to $41.8 million at December 31, 2002, an
increase of $14.9  million or 36%. The increase in value,  due  primarily to the
greater number of Partnership  Preference  Units held at December 31, 2003, also
reflects  increases in the per unit value of the Partnership  Preference  Units.
The  Fund  saw  unrealized  appreciation  in the  estimated  fair  value  of its
Partnership Preference Units of approximately $6.8 million during the year ended
December 31, 2003  compared to unrealized  appreciation  of  approximately  $0.8
million for the period from the start of business,  March 19, 2002,  to December
31, 2002.

Distributions  received  from  Partnership  Preference  Units for the year ended
December 31, 2003  totaled $4.6 million  compared to $1.7 million for the period
from the start of business, March 19, 2002, to December 31, 2002, an increase of
$2.9 million. The increase was due to a larger number of Partnership  Preference
Units held during the year ended  December  31, 2003 and the longer  period they
were held.

PERFORMANCE  OF INTEREST RATE SWAP  AGREEMENTS.  For the year ended December 31,
2003,  net  realized  and  unrealized  losses on the Fund's  interest  rate swap
agreements  totaled  approximately  $3.7  million,  compared to net realized and
unrealized  losses of $13.6  million for the period from the start of  business,
March 19, 2002, to December 31, 2002. Net realized and unrealized losses on swap
agreements  in 2003  consisted of $0.8  million of net  realized and  unrealized
gains due to changes in swap  agreement  valuations,  offset by $4.5  million of
periodic  payments made pursuant to outstanding  swap agreements (and classified
as  net  realized  losses  on  interest  rate  swap  agreements  in  the  Fund's
consolidated  statement of  operations).  In 2002, the Fund had net realized and
unrealized  losses of $11.6 million due to swap agreement  valuation changes and
$2.0 million of swap agreement periodic payments.  The positive  contribution to
2003 Fund performance from changes in swap agreement valuations was attributable
to a rise in swap  rates  during the year.  The impact on 2002 Fund  performance
from changes in swap  valuations  was due primarily to a a decline in swap rates
during the period.

On  October  1,  2003,  the Fund  terminated  all of its then  outstanding  swap
agreements  and entered  into new  agreements  to fix the cost of a  substantial
portion of Fund borrowings under the Credit  Facility.  The Fund realized a loss
of approximately $12.2 million on the swap agreement terminations.

(b) LIQUIDITY AND CAPITAL RESOURCES.
------------------------------------

OUTSTANDING  BORROWINGS.  As of  December  31,  2003,  the Fund had  outstanding
borrowings of $183.3 million and unused loan  commitments of $48.6 million under
the Credit Facility. The Credit Facility is used primarily to finance the Fund's
equity in its real  estate  investments  and will  continue  to be used for such
purpose in the future.  The Credit  Facility may also be used 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.

As of December 31, 2003, Bel Apartment had outstanding  borrowings consisting of
fixed-rate secured mortgage debt obligations of $107.4 million. As of such date,
Bel Communities and Katahdin had outstanding borrowings consisting of fixed-rate
secured mortgage debt obligations of $121.0 million and $115.9 million.

LIQUIDITY.  The Fund may redeem  shares of Belvedere  Company at any time.  Both
Belvedere  Company and the Portfolio  normally follow the practice of satisfying
redemptions  by  distributing  securities  drawn from the  Portfolio.  Belvedere
Company and the Portfolio may also satisfy  redemptions by distributing cash. As
of December 31, 2003, the Portfolio had cash and short-term investments totaling
$122.4  million.  The  Portfolio  participates  in  a  $150  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  at December  31,  2003.  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 December  31,  2003,  illiquid  assets  (consisting  of
restricted securities not available for current public sale) constituted 0.3% of
the net assets of the Portfolio.

                                       15
<PAGE>

The  liquidity of Belrose  Realty's  Real Estate Joint  Venture  investments  is
extremely limited,  and relies  principally upon buy/sell  arrangements with the
Operating  Partners  that may be  exercised  on or after July 31,  2009 (for Bel
Apartment),  November 27, 2009 (for Bel  Communities) and November 23, 2010 (for
Katahdin).  See "Real Estate Joint Venuture  Investments" under "The Fund's Real
Estate Investments  through Belrose Realty  Corporation" in Item 1. Transfers of
Belrose  Realty's  interest in the Real Estate Joint  Ventures to parties  other
than the relevant  Operating  Partner are  restricted  by terms of the operating
management  agreements,  buy/sell arrangements with the Operating Partners,  and
lender consent  requirements.  The Partnership  Preference Units held by Belrose
Realty  are  not  registered  under  the  Securities  Act  and  are  subject  to
substantial restrictions on transfer. As such, they are illiquid.

(c) OFF-BALANCE SHEET ARRANGEMENTS.
------------------------------------

The Fund is required  to disclose  off-balance  sheet  arrangements  that either
have,  or are  reasonably  likely  to have,  a current  or future  effect on its
financial  condition,  changes in  financial  condition,  revenues or  expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to  Shareholders.  An  off-balance  sheet  arrangement  includes any
contractual  arrangement to which an unconsolidated  entity is a party and under
which the Fund has certain specified  obligations.  As of December 31, 2003, the
Fund did not have any such off-balance sheet arrangements.

(d) THE FUND'S CONTRACTUAL OBLIGATIONS.
----------------------------------------

The  following  table sets forth the amounts of payments due under the specified
contractual obligations outstanding on December 31, 2003:
<TABLE>
<CAPTION>
                                                                        Payments due:
-------------------------------------------------------------------------------------------------------------------
Type of Obligation                        Total     Less than 1 Year    1-3 Years     3-5 Years   More than 5 Years
-------------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>           <C>            <C>
Long Term Debt:
  Mortgage Debt(1)                     $344,219,483    $       --      $        --   $        --    $344,219,483
  Borrowings under Credit Facility(2)  $183,300,000    $       --      $        --   $        --    $183,300,000
Purchase Obligations(3)
Other Long Term Liabilities:
  Interest Rate Swap Agreements(4)     $ 40,634,108    $6,268,575      $12,537,151   $12,537,151    $  9,291,231
-------------------------------------------------------------------------------------------------------------------
Total                                  $568,153,591    $6,268,575      $12,537,151   $12,537,151    $536,810,714
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  The rental  property held by Belrose Realty is financed  through  mortgages
     issued to each Real Estate Joint  Venture.  Each mortgage is secured by the
     underlying  rental property and is generally  without recourse to the other
     assets of the Fund or Belrose  Realty as described in "Risks of Real Estate
     Investments"  in Item 7A(b).  The  mortgages  mature  during 2010 and 2011.
     Mortgage  obligations  cannot be prepaid or  otherwise  disposed of without
     incurring  a  substantial  prepayment  penalty or  without  the sale of the
     associated rental property.

(2)  To finance its real estate  investments  held through Belrose  Realty,  the
     Fund has entered into a Credit  Facility with $183.3  million of borrowings
     outstanding  as of December 31, 2003.  The Credit  Facility is secured by a
     pledge of the Fund's  assets,  excluding the assets of Bel  Apartment,  Bel
     Communities and Katahdin,  and expires in June 2010. The Credit Facility is
     primarily used to finance the Fund's equity in its real estate  investments
     and will continue to be used for such purpose in the future.

(3)  The Fund and Belrose  Realty have  entered  into  agreements  with  certain
     service providers pursuant to which the Fund and Belrose Realty pay fees as
     a percentage of assets. These fees include fees paid to Eaton Vance and its
     affiliates  (which are described in Item 13).  These  agreements  generally
     continue  indefinitely  unless terminated by the Fund or Belrose Realty (as
     applicable) or the service provider.  For the year ended December 31, 2003,
     these fees equaled  approximately  1.04% of the Fund's net assets.  Because
     these fees are based on the Fund's assets (which will  fluctuate over time)
     it is not possible to specify the dollar amounts payable in the future.

(4)  The Fund has entered into interest rate swap  agreements to fix the cost of
     borrowings  under the  Credit  Facility  used to acquire  Belrose  Realty's
     equity in its real estate  investments.  Pursuant to the interest rate swap
     agreements, the Fund makes cash payments to MLCS at fixed rates in exchange
     for floating rate payments from MLCS that fluctuate  with one-month  LIBOR.
     The amounts  disclosed in the table  represent the fixed  interest  amounts
     payable by the Fund.  The periodic  floating  rate  payments  that the Fund
     expects  to  receive  pursuant  to the  agreements  will  reduce  the fixed
     interest cost to the Fund. The swap agreements expire on June 25, 2010.

                                       16
<PAGE>

(e) CRITICAL ACCOUNTING ESTIMATES.
----------------------------------

The Fund's  consolidated  financial  statements are prepared in accordance  with
accounting  principles  generally accepted in the United States of America.  The
preparation of these financial  statements  requires the Fund to make estimates,
judgments  and  assumptions   that  affect  the  reported   amounts  of  assets,
liabilities,  revenues  and  expenses.  Estimates  are  deemed  critical  when a
different  estimate  could  have  reasonably  been used or where  changes in the
estimate are  reasonably  likely to occur from period to period,  and where such
different or changed  estimates  would  materially  impact the Fund's  financial
condition,  changes in financial condition or results of operations.  The Fund's
significant  accounting  policies  are  discussed  in  Note  2 of the  notes  to
consolidated   financial  statements;   critical  estimates  inherent  in  these
accounting policies are discussed in the following paragraphs.

The Fund has determined that the valuation of the Fund's real estate investments
(including the Real Estate Joint Ventures and the Partnership  Preference Units)
are critical  estimates.  The Fund's investments in real estate are an important
component of its total investment  program.  Market prices for these investments
are  not  readily  available  and  therefore  they  are  stated  in  the  Fund's
consolidated  financial  statements at estimated fair value.  The estimated fair
value of an  investment  represents  the amount at which Boston  Management  (as
manager of Belrose  Realty)  believes the investment  could be sold in a current
transaction  between willing parties in an orderly  disposition,  that is, other
than in a forced or liquidation  sale. The Fund reports the estimated fair value
of its real  estate  investments  on its  consolidated  statement  of assets and
liabilities  with any  changes to  estimated  fair value  charged to  unrealized
appreciation or depreciation in the Fund's consolidated statement of operations.

The need to  estimate  the fair  value of the  Fund's  real  estate  investments
introduces   uncertainty  into  the  Fund's  reported  financial  condition  and
performance because:

     *    such assets are, by their  nature,  difficult  to value and  estimated
          values may not  accurately  reflect  what the Fund could  realize in a
          current sale between willing parties;

     *    property  appraisals and other factors used to determine the estimated
          fair value of the Fund's real estate  investments  depend on estimates
          of future operating results and supply and demand assumptions that may
          not reflect actual performance;

     *    property  appraisals and other factors used to determine the estimated
          fair value of the Fund's real estate  investments are not continuously
          updated and therefore may not be current as of specific dates; and

     *    if the Fund were forced to sell illiquid assets on a distressed basis,
          the proceeds may be substantially less than stated values.

As of December  31,  2003,  the  estimated  fair value of the Fund's real estate
investments  represented  24.2% of the Fund's total  assets.  Adjusting  for the
minority  interests of the Operating  Partners of the Real Estate Joint Ventures
as of December 31, 2003, the Fund's real estate investments represented 27.0% of
the Fund's net  assets.  The  estimated  fair  value of the Fund's  real  estate
investments  may  change  due to changes  in market  conditions  and  changes in
valuation  assumptions  made by property  appraisers  and third party  valuation
service providers as described below.

As noted in Item 1, to satisfy certain requirements of the Code the Fund invests
at least 20% of its assets  (calculated in the manner prescribed) in real estate
investments (the 20% requirement). Should the estimated fair value of the Fund's
real estate investments decrease, the Fund may be required to acquire additional
real  estate  investments  to  satisfy  the 20%  requirement.  Because  the Fund
acquires real estate  investments  with  borrowings,  acquisitions of additional
real estate  investments would increase the Fund's  obligations under the Credit
Facility  and  thereafter  reduce the amounts  otherwise  available  to the Fund
thereunder.   Should  the  estimated  fair  value  of  the  Fund's  real  estate
investments   increase,   real  estate  investments  could  represent  a  larger
percentage of the Fund's investment portfolio.

PARTNERSHIP  PREFERENCE UNITS. Boston Management,  as manager of Belrose Realty,
determines the estimated fair value of the Fund's  Partnership  Preference Units
based on analysis and calculations  performed  primarily on a monthly basis by a
third party service provider. The service provider calculates an estimated price
and  yield  (before  accrued   distributions)  for  each  issue  of  Partnership
Preference  Units  based  on  descriptions  of such  issue  provided  by  Boston
Management and certain publicly available information including, but not limited
to,  the  trading  prices  of  publicly  issued  debt  and/or   preferred  stock
instruments of the same or similar issuers, which may be adjusted to reflect the
illiquidity and other structural  characteristics of the Partnership  Preference
Units (such as call  provisions).  Daily  valuations of  Partnership  Preference

                                       17
<PAGE>

Units are  determined by adjusting  prices from the service  provider to account
for accrued  distributions under the terms of the Partnership  Preference Units.
If changes in relevant markets, events that materially affect an issuer or other
events  that have a  significant  effect  on the  price or yield of  Partnership
Preference  Units occur,  relevant  prices or yields may be recalculated to take
such occurrences into account.

Valuations of Partnership Preference Units are inherently uncertain because they
are based on adjustments from the market prices of  publicly-traded  debt and/or
preferred  stock  instruments of the same or similar  issuers to account for the
Partnership  Preference Units'  illiquidity,  structural  features (such as call
provisions) and other relevant factors. Each month Boston Management reviews the
analysis and calculations  performed by the service provider.  Boston Management
generally  relies on the assumptions and judgments made by the service  provider
in  estimating  the  fair  value of the  Partnership  Preference  Units.  If the
assumptions and estimates used by the service  provider to calculate  prices for
Partnership  Preference  Units  were to  change,  it may  materially  impact the
estimated fair value of the Fund's holdings of Partnership Preference Units.

REAL ESTATE JOINT  VENTURES.  Boston  Management  determines  the estimated fair
value of the Fund's  interest in each Real Estate Joint Venture based  primarily
on annual  appraisals of the  multifamily  properties  owned by such Real Estate
Joint  Venture and an  allocation  of the equity  value of the Real Estate Joint
Venture  between the Fund and the Operating  Partner.  Appraisals of Real Estate
Joint Venture  properties may be conducted more  frequently  than once a year if
Boston Management determines that significant changes in economic  circumstances
that may materially  impact  estimated  property  values have occurred since the
most recent appraisal.

In deriving the estimated value of a property,  an appraiser  considers numerous
factors, including the expected future cash flows from the property, recent sale
prices for similar  properties and, if applicable,  the replacement  cost of the
property in order to derive an indication of the amount that a prudent, informed
purchaser-investor would pay for the property. More specifically,  the appraiser
considers  the revenues and  expenses of the property and the  estimated  future
growth  or  decline  thereof,  which may be based on  tenant  quality,  property
condition,  neighborhood change, market trends,  interest rates, inflation rates
or other factors  deemed  relevant by the  appraiser.  The  appraiser  estimates
operating  cash flows from the property and the sale proceeds of a  hypothetical
transaction  at the end of a  hypothetical  holding  period.  The cash flows are
discounted to their present values using a market-derived  discount rate and are
added together to obtain a value  indication.  This value indication is compared
to  the  value   indication   that  results  from   applying  a   market-derived
capitalization  rate to a single years'  stabilized net operating income for the
property.  The assumed  capitalization  rate may be extracted  from local market
transactions  or, when  transaction  evidence is  lacking,  obtained  from trade
sources.  The  appraiser  considers the value  indications  derived by these two
methods, as well as the value indicated by recent market transactions  involving
similar properties, in order to produce a final value estimate for the property.

Appraisals of  properties  owned by each Real Estate Joint Venture are conducted
by independent  appraisers who are licensed in their  respective  states and not
affiliated  with  Eaton  Vance or the  Operating  Partners.  Each  appraisal  is
conducted  in  accordance  with  the  Uniform  Standards  Board  and the Code of
Professional  Appraisal  Practice of the  Appraisal  Institute (as well as other
relevant  standards).  Boston Management  reviews the appraisal of each property
and generally  relies on the  assumptions  and judgments  made by the appraiser.
Property appraisals are inherently uncertain because they apply assumed discount
rates, capitalization rates, growth rates and inflation rates to the appraiser's
estimated  stabilized  cash flows,  and due to the unique  characteristics  of a
property,  which may affect its value but may not be taken into account.  If the
assumptions  and estimates  used by the appraisers to determine the value of the
properties owned by the Fund's Real Estate Joint Ventures were to change, it may
materially  impact the  estimated  fair value of the Fund's  Real  Estate  Joint
Ventures.

Boston  Management  determines  the  estimated  fair value of the Fund's  equity
interest  in  each  Real  Estate  Joint  Venture  based  on an  estimate  of the
allocation of equity interests  between the Fund and the Operating  Partner,  as
calculated  by a third  party  service  provider.  The service  provider  uses a
financial  model that  considers  the (i) terms of the joint  venture  agreement
relating to  allocation  of  distributable  cash flow,  (ii) the duration of the
joint venture;  and (iii) the projected  property values and cash flows from the
properties based on estimates made by the appraisers.  The estimated  allocation
of equity interests  between the Fund and the Operating Partner of a Real Estate
Joint Venture is prepared quarterly and reviewed by Boston  Management.  Interim
valuations  of Real  Estate  Joint  Venture  assets may be  adjusted  to reflect
significant changes in economic circumstances, and the results of operations and
distributions. If the estimate of the allocation of equity interests in the Real
Estate Joint  Ventures were to change  (because,  for example,  the  appraisers'
estimate of property  values or  projected  cash flows of the Real Estate  Joint
Ventures  changed),  it may  materially  impact the estimated  fair value of the
Fund's Real Estate Joint Ventures.

                                       18
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
--------------------------------------------------------------------

(a) QUANTITATIVE INFORMATION ABOUT MARKET RISK.
-----------------------------------------------

INTEREST  RATE RISK.  The Fund's  primary  exposure to interest rate risk arises
from its real estate  investments  that are  financed by the Fund with  floating
rate  borrowings  under the Fund's  Credit  Facility and by  fixed-rate  secured
mortgage debt  obligations  of the the Real Estate Joint  Ventures.  Partnership
Preference Units are fixed rate instruments whose values will generally increase
when interest  rates rise and decrease when  interest  rates fall.  The interest
rates on  borrowings  under the  Fund's  Credit  Facility  are reset at  regular
intervals based on one-month LIBOR. The Fund has entered into interest rate swap
agreements to fix the cost of its borrowings  under the Credit  Facility used to
acquire Belrose  Realty's equity in its real estate  investments and to mitigate
in part the impact of interest rate changes on the Fund's net asset value. Under
the terms of the interest rate swap agreements,  the Fund makes cash payments at
fixed rates in exchange for floating rate payments that fluctuate with one-month
LIBOR. The Fund's interest rate swap agreements will generally increase in value
when interest  rates rise and decrease in value when interest rates fall. In the
future, the Fund may use other interest rate hedging arrangements (such as caps,
floors and collars) to fix or limit  borrowing  costs.  The use of interest rate
hedging  arrangements  is a  specialized  activity  that can  expose the Fund to
significant loss.

The following table summarizes the contractual  maturities and  weighted-average
interest rates  associated  with the Fund's  significant  non-trading  financial
instruments.  The Fund has no market risk sensitive instruments held for trading
purposes.  This information  should be read in conjunction with Notes 7 and 8 to
the Fund's consolidated financial statements incorporated by reference into Item
8.

                            Interest Rate Sensitivity
                        Cost, Principal (Notional) Amount
                    by Contractual Maturity and Callable Date
                    for the Twelve Months Ended December 31,*

<TABLE>
<CAPTION>
                                                                                 Estimated
                                                                               Fair Value at
                                                                                December 31,
                           2004      2005-2008   Thereafter        Total            2003
----------------------------------------------------------------------------------------------
<S>                     <C>          <C>        <C>            <C>            <C>
Rate sensitive
liabilities:
------------------------
Long-term debt:
------------------------
Fixed-rate mortgages                            $344,219,483   $344,219,483     $393,000,000
Average interest rate                                   7.53%          7.53%
------------------------
Variable-rate Credit
Facility                                        $183,300,000   $183,300,000     $183,300,000
Average interest rate                                   1.42%          1.42%
----------------------------------------------------------------------------------------------
Rate sensitive derivative
financial instruments:
------------------------
Pay fixed/receive
variable interest rate
swap agreements                                 $152,838,000   $152,838,000     $  1,423,867
Average pay rate                                        4.10%          4.10%
Average receive rate                                    1.42%          1.42%
----------------------------------------------------------------------------------------------
Rate sensitive
investments:
------------------------
Fixed-rate Partnership
Preference Units:
------------------------
Essex Portfolio, L.P.,
7.875% Series B
Cumulative Redeemable
Preferred Units,
Callable 2/6/03,
Current Yield:
8.17%(1)              $16,616,170                            $ 16,616,170     $ 19,272,880

                                       19
<PAGE>

Kilroy Realty, L.P.,
8.075% Series A
Cumulative Redeemable
Preferred Units,
Callable 2/06/03,
Current Yield: 8.75%    $15,898,220                            $ 15,898,220     $ 18,457,880

Prentiss Properties
Acquisition Partners,
L.P., 8.30% Series B
Cumulative Redeemable
Perpetual Preferred
Units, Callable
6/25/03, Current
Yield: 8.45%            $16,519,510                            $ 16,519,510     $ 18,986,976
</TABLE>

*    The investments listed reflect holdings as of December 31, 2003. The Fund's
     current holdings may differ.

(1)  On January 8, 2004, the call date was changed to 12/31/09.

(b) QUALITATIVE INFORMATION ABOUT MARKET RISK.
-----------------------------------------------

RISKS  ASSOCIATED  WITH  EQUITY  INVESTING.  The  value of Fund  Shares  may not
increase and may  decline.  The  performance  of the Fund  fluctuates.  The Fund
invests  primarily in a  diversified  portfolio of common  stocks and is thereby
subject  to  general  stock  market  risk.  There can be no  assurance  that the
performance  of the Fund will  match  that of the U.S.  stock  market or that of
other equity funds. In managing the Portfolio for long-term,  after-tax returns,
Boston Management  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 funds that
do  not  follow  a  general  policy  of  avoiding  sales  of  highly-appreciated
securities.

RISKS OF INVESTING IN FOREIGN  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 subject to more  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.  These risks can be
more significant for investments in emerging markets.

RISKS OF CERTAIN  INVESTMENT  TECHNIQUES.  In  managing  the  Portfolio,  Boston
Management may purchase or sell derivative instruments (which derive their value
by reference to other securities,  indexes,  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
futures contracts on stocks and stock indexes and options thereon;  the purchase
of put options and the sale of call options on  securities  held;  equity swaps;
forward sales of stocks;  and the purchase and sale of forward currency exchange
contracts and currency futures. The Portfolio may make short sales of securities
provided that it holds an equal amount of the security sold short (or securities
convertible  into or  exchangeable  for an equal amount of the  securities  sold
short  without  payment of  additional  consideration)  or cash or other  liquid
securities in an amount equal to the current market value of the securities sold
short. The Portfolio may also lend portfolio securities.

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 achieve 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.  Forward sales,  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

                                       20
<PAGE>

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 Boston Management considers unfavorable.

The Portfolio's  ability to utilize  covered short sales,  certain equity swaps,
forward  sales,  futures 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
30 days of the end of the  taxable  year of the  Portfolio  in which the hedging
transaction was initiated and the underlying  appreciated securities position is
held  unhedged for at least the next 60 days after such hedging  transaction  is
closed.  In  addition,  dividends  received on stock for which the  Portfolio is
obligated to make related payments  (pursuant to a short sale or otherwise) with
respect to positions in substantially similar or related property are subject to
federal  income  taxation at ordinary rates and do not qualify for favorable tax
treatment.  There can be no assurance that  counterparties  will at all times be
willing to enter into covered  short sales,  forward  sales of stocks,  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 Fund's 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.

RISKS OF REAL ESTATE  INVESTMENTS.  The success of Belrose  Realty's real estate
investments  depends in part on many factors  related to the real estate market.
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,  fluctuations  in  interest  rates,
availability  of  financing,   managerial  performance,   government  rules  and
regulations,  and acts of God (whether or not insured against).  There can be no
assurance that Belrose Realty's  ownership of real estate investments will be an
economic success.

The success of investments in Partnership  Preference Units depends upon factors
relating  to  the  issuing  partnerships  that  may  affect  such  partnerships'
profitability and their ability to make  distributions to holders of Partnership
Preference Units.  Belrose Realty's  interests in the Real Estate Joint Ventures
and Partnership Preference Units are not registered under the federal securities
laws and are subject to restrictions on transfer. Due to their illiquidity, they
may be difficult to value and the ongoing value of the investments is uncertain.
Investments in Partnership  Preference Units are valued primarily by referencing
market  trading  prices for  comparable  preferred  equity  securities  or other
fixed-rate instruments having similar investment characteristics. The valuations
of Partnership  Preference  Units  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  respect to its  borrowings  under the Credit  Facility.  Because  the
Partnership  Preference  Units are not rated by a  nationally-recognized  rating
agency,  they may be subject to more credit risk than  securities that are rated
investment grade.

The performance of the Real Estate Joint Ventures is substantially influenced by
the property management capabilities of the Operating Partners and conditions in
the specific real estate  sub-markets in which the properties  owned by the Real
Estate  Joint  Ventures  are  located.  The  Operating  Partners  are subject to
substantial  conflicts of interest in structuring,  operating and winding up the
Real Estate Joint Ventures.  Each Operating Partner had an economic incentive to
maximize the prices at which it sold  properties  to a Real Estate Joint Venture
and has a similar  incentive  to  minimize  the  prices at which it may  acquire
properties from a Real Estate Joint Venture.  The Operating  Partners may devote
greater  attention or more resources to managing their  wholly-owned  properties
than  properties  held by the Real  Estate  Joint  Ventures.  Future  investment
opportunities  identified by the Operating  Partners will more likely be pursued

                                       21

<PAGE>

independently,  rather than through,  the Real Estate Joint Ventures.  Financial
difficulties encountered by the Operating Partners in their other businesses may
interfere with the operations of the Real Estate Joint Ventures.

Belrose  Realty's   investments  in  the  Real  Estate  Joint  Ventures  may  be
significantly  concentrated in terms of geographic  regions,  property types and
operators,  increasing  the  Fund's  exposure  to  regional,  property  type and
operator  specific  risks.  Given a lack of  stand-alone  operating  history and
relatively high financial  leverage,  the Real Estate Joint Ventures will not be
equivalent in quality to real estate  companies whose preferred equity or senior
debt securities are rated investment  grade.  Distributable  cash flows from the
Real Estate Joint  Ventures may not be sufficient  for Belrose Realty to receive
its fixed annual preferred return, or any returns in excess thereof.

The debt of the Real Estate Joint  Ventures  owned by Belrose Realty on December
31, 2003 is  fixed-rate,  secured by the  underlying  properties  and  generally
without  recourse to Belrose  Realty and the Fund.  In the case of Bel Apartment
and Bel  Communities,  Belrose Realty and the Fund may be directly or indirectly
responsible  for certain  liabilities  constituting  exceptions to the generally
non-recourse  nature  of  the  mortgage   indebtedness,   including  liabilities
associated with fraud,  misrepresentation,  misappropriation of funds, or breach
of material  covenants,  and liabilities  arising from environmental  conditions
involving  or  affecting  Real Estate  Joint  Venture  properties.  The Fund and
Belrose Realty have received  indemnification from the Operating Partners of Bel
Apartment and Bel  Communities  for certain of such potential  liabilities.  The
availability  of financing and other  financial  conditions  can have a material
impact on  property  values  and  therefore  on the value of Real  Estate  Joint
Venture assets.  Mortgage debt of the Real Estate Joint Ventures normally cannot
be refinanced prior to maturity without substantial penalties.

The ongoing  value of Belrose  Realty's  investments  in the Real  Estate  Joint
Ventures is  substantially  uncertain.  The real property  held through  Belrose
Realty's Real Estate Joint  Ventures is stated at estimated  fair value based on
independent  valuations,  assuming an orderly  disposition  of assets,  that is,
other  than in a forced or  liquidation  sale.  Independent  valuations  include
property  appraisals   performed  by  appraisers  that  are  licensed  in  their
respective states and not affiliated with Eaton Vance or the Operating  Partners
of the Real Estate Joint  Ventures.  Such appraisals are performed in accordance
with the Uniform Standards of Professional  Appraisal  Practice of the Appraisal
Standards  Board,  as well as the Code of  Professional  Ethics and Standards of
Professional  Appraisal Practice of the Appraisal  Institute (and other relevant
standards).

Detailed  investment  evaluations  are performed at least  annually and reviewed
periodically. The value of each Real Estate Joint Venture is estimated using the
property  valuations  and an  allocation  of the equity value of the Real Estate
Joint Venture  between  Belrose  Realty and the  Operating  Partner based on the
terms of the Real Estate Joint Venture.  Interim  valuations  reflect results of
operations and distributions, and may be adjusted to reflect significant changes
in economic  circumstances  since the most  recent  independent  valuation.  The
policies for valuing real estate investments involve significant  judgments that
are based  upon a number of  factors,  which may  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 and government
rules and  regulations.  Given that such  valuations  include many  assumptions,
including,  but not limited  to, an orderly  disposition  of assets,  values may
differ from amounts ultimately realized.

Investments  in Net Leased  Properties  will be subject to general  real  estate
market risks similar to Real Estate Joint Ventures.  Net Leased  Properties will
also be  subject  to risks  specific  to this type of  investment,  including  a
concentration of risk exposure to specific real estate submarkets and individual
properties  and  tenants.  Principal  among the risks of investing in Net Leased
Properties  is the  risk  that  a  major  tenant  fails  to  satisfy  its  lease
obligations due to financial  distress or other reasons.  A tenant's  failure to
meet its lease  obligations  would expose Belrose Realty to substantial  loss of
income  without  a  commensurate  reduction  in debt  service  costs  and  other
expenses,  and would  transfer  to Belrose  Realty all the costs,  expenses  and
liabilities of property  ownership and management  borne by the tenant under the
terms of the lease.  Re-leasing a property could involve  considerable  time and
expense.  Re-leasing  opportunities may be limited by the nature and location of
the  property,  which  may not be well  suited  to the  needs of other  possible
tenants.  Even if a  property  is  re-leased,  the  property  may  not  generate
sufficient rental income to cover debt service and other expenses.

Net Leased  Properties  are  generally  illiquid,  and the  ongoing  value of an
investment in Net Leased Properties will be substantially  uncertain. Net Leased
Properties  will be stated at estimated fair values based on annual  appraisals.
These appraisals are conducted by independent,  licensed  appraisers in a manner
similar to the appraisals of properties  owned by the Real Estate Joint Ventures
(described  above).  Because the value of Net Leased  Properties will reflect in
part the  creditworthiness  of their  principal  tenants,  any  reduction in the

                                       22
<PAGE>

credit  standing of a major tenant could have an adverse effect on the appraised
value  of a  property  and the  value  realized  upon  the  disposition  of such
property.  Tenants  may hold  rights to renew or  extend  expiring  leases,  and
exercise  of such  rights  would  extend  Belrose  Realty's  risk  exposure to a
particular  tenant beyond the initial lease term.  Tenants may also hold options
to purchase Net Leased Properties, including options to purchase at below market
levels.  The value received upon the  disposition of Net Leased  Properties will
depend on real estate market conditions, lease and mortgage terms, tenant credit
quality,  tenant purchase options,  lender approvals and other factors affecting
valuation  as may then apply.  Because  sales of Net Leased  Properties  are not
expected to occur for many years,  market conditions and other valuation factors
at the  time of  sale  cannot  be  predicted.  Since  valuations  of Net  Leased
Properties  assume an orderly  disposition  of  assets,  amounts  realized  in a
distressed  sale may differ  substantially  from stated  values.  Mortgage  debt
associated with Net Leased  Properties  normally  cannot be refinanced  prior to
maturity  without  substantial  penalties.  The terms of outstanding  leases and
mortgage debt  obligations and  restrictions on refinancing such debt will limit
Belrose Realty's ability to dispose of Net Leased Properties.

Because the mortgage debt obligations of Net Leased Properties will generally be
without  recourse to Belrose Realty,  the Fund and  Shareholders,  the potential
loss from investments in Net Leased Properties is normally limited to the amount
of equity invested in such  properties by Belrose  Realty.  The Fund and Belrose
Realty  may,  however,  be  directly  or  indirectly   responsible  for  certain
liabilities  constituting exceptions to the generally non-recourse nature of the
mortgage   indebtedness,    including   liabilities   associated   with   fraud,
misrepresentation,  misappropriation  of funds, or breach of material covenants,
and liabilities arising from environmental conditions involving or affecting the
Net Leased  Properties,  increasing  the potential for loss under  extraordinary
circumstances.  To the extent practicable, the Fund and Belrose Realty will seek
indemnification for certain of such potential liabilities.

Because all or substantially all of the rental payments on Net Leased Properties
generally  will be dedicated to servicing the associated  mortgage debt,  during
the initial lease term Belrose  Realty will not generate  significant  cash flow
from investments in Net Leased  Properties to offset Belrose Realty's  operating
expenses and the cost of Fund borrowings used to finance Belrose Realty's equity
in the Net Leased  Properties.  Such costs and  expenses  must be provided  from
other  sources of cash flow for Belrose  Realty and the Fund,  which may include
additional  Fund  borrowings  under the  Credit  Facility.  Realized  returns on
investments  in Net  Leased  Properties  generally  will be  deferred  until the
properties are sold or re-leased following the initial lease term.

Fluctuations in the value of Partnership  Preference  Units and Belrose Realty's
equity in Real Estate Joint Ventures and any Net Leased  Properties  acquired in
the future that are derived from other  factors  besides  general  interest rate
movements  (including   issuer-specific  and  sector-specific  credit  concerns,
property  or  tenant-specific  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 value of real estate  investments  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.  See  "Critical  Accounting
Estimates" in Item 7.

RISKS OF  INTEREST  RATE SWAP  AGREEMENTS.  Interest  rate swap  agreements  are
subject to changes in  valuation  caused  principally  by  movements in interest
rates.  Interest rate swap agreements are private  contracts in which there is a
risk  of  loss  in  the  event  of a  default  on an  obligation  to  pay by the
counterparty. Interest rate swap agreements may be difficult to value and may be
illiquid. 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 that may be entered  into by the Fund with  respect to its
borrowings.

RISKS OF LEVERAGE.  Although intended to add to returns,  the borrowing of funds
to  purchase  real  estate  investments  exposes  the Fund to the risk  that the
returns  achieved on the real estate  investments 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 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,  excluding  the assets of Bel  Apartment,
Bel Communities and Katahdin. 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  under the Credit  Facility are senior to
the rights of the Shareholders.

Under  the  terms of the  Credit  Facility,  the Fund is not  permitted  to make
distributions  of  cash  or  securities  while  there  is an  event  of  default
outstanding under the Credit Facility.  During such periods,  the Fund would not
be able to honor redemption  requests or make cash  distributions.  In addition,

                                       23
<PAGE>

the rights of lenders  under the  mortgages  used to finance  Real Estate  Joint
Venture properties are senior to Belrose Realty's right to receive distributions
from the Real Estate Joint Ventures.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
----------------------------------------------------

The Fund's  consolidated  financial  statements  for the year ended December 31,
2003, together with the auditors' report thereon,  appearing on pages 32 through
67  hereof,  are  incorporated  herein by  reference.  The  Portfolio's  audited
financial  statements  for the year ended December 31, 2003 accompany the Fund's
consolidated financial statements and are also incorporated herein by reference.
The following is a summary of unaudited  quarterly  results of operations of the
Fund for the year ended  December  31,  2003 and the period  from March 19, 2002
through December 31, 2002.

                                                    2003
                       ---------------------------------------------------------
                           First         Second         Third       Fourth
                          Quarter        Quarter       Quarter      Quarter
                       ---------------------------------------------------------
Investment income       $ 20,266,081   $ 20,405,058  $20,382,190  $ 21,259,627
Minority interest
 in net income
 of controlled
 subsidiaries           $   (514,701)  $   (458,996) $  (526,835) $   (443,046)
Net investment
 income(2)              $  3,627,943   $  3,482,999  $ 3,541,356  $  4,627,344
Net increase
 (decrease) in
 net assets
 from operations        $(55,429,997)  $172,791,201  $36,188,944  $176,015,337

Per share data:(1)
Investment income       $       1.22   $       1.18  $      1.19  $       1.24
Net investment
 income(2)              $       0.22   $       0.20  $      0.21  $       0.27
Net increase
 (decrease) in
 net assets
 from operations        $      (3.33)   $      10.03  $      2.11  $      10.30


                                                    2002
                       ---------------------------------------------------------
                           First         Second          Third        Fourth
                         Quarter(3)      Quarter        Quarter       Quarter
                       ---------------------------------------------------------
Investment income       $ 1,861,903    $  9,886,093  $  13,029,609  $19,710,122
Minority interest
 in net income
 of controlled
 subsidiaries           $   (69,656)   $   (369,566) $    (424,481) $  (601,396)
Net investment
income (loss)(4)        $  (533,820)   $    974,459  $   1,899,313  $ 3,091,732
Net increase
(decrease) in
 net assets
 from operations        $(5,281,384)   $(63,478,871) $(114,581,344) $64,563,213

Per share data:(1)
Investment income       $      0.65    $       2.24  $        1.43  $      1.46
Net investment
 income (loss)(4)       $     (0.19)   $       0.22  $        0.21  $      0.23
Net increase
(decrease) in
 net assets
 from operations        $     (1.83)   $     (14.37) $      (12.57) $      4.79

(1)  Based on average Shares outstanding.
(2)  Net investment  income is presented  without reduction for interest expense
     on swap agreements.  Such amounts were previously  presented as a reduction
     to net investment  income.  For the quarters ended March 31, 2003, June 30,
     2003 and September  30, 2003,  interest  expense on swap  agreements in the
     amount of $1,051,283,  $1,131,355 and $1,189,097 is presented as a realized
     loss  (see  Note  2  to  the  Fund's  consolidated   financial   statements
     incorporated herein by reference).
(3)  For the period from the start of  business,  March 19,  2002,  to March 31,
     2002.
(4)  Net investment  income is presented  without reduction for interest expense
     on swap agreements.  Such amounts were previously  presented as a reduction
     to net investment income. For the period from the start of business,  March
     19, 2002, to March 31, 2002 and the quarters ended June 30, 2002, September
     30, 2002 and December 31, 2002 interest  expense on swap  agreements in the
     amount of  $39,587,  $414,122,  $682,741  and  $908,223,  respectively,  is
     presented  as a  realized  loss  (see  Note  2 to the  Fund's  consolidated
     financial statements incorporated herein by reference).

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURES.
--------------------------------------------------------------------------------

There have been no changes in, or disagreements with,  accountants on accounting
and financial disclosures.

                                       24
<PAGE>

ITEM 9A.  CONTROLS AND PROCEDURES.
----------------------------------

Eaton Vance, as the Fund's manager, conducted an evaluation of the effectiveness
of the Fund's  disclosure  controls and procedures (as defined by Rule 13a-15(e)
of the 1934 Act) as of the end of the period  covered by this  report,  with the
participation of the Fund's Chief Executive Officer and Chief Financial Officer.
Based on that  evaluation,  the Chief  Executive  Officer  and  Chief  Financial
Officer  concluded  that the Fund's  disclosure  controls  and  procedures  were
effective.  There were no changes in the Fund's internal  control over financial
reporting  that occurred  during the quarter  ended  December 31, 2003 that have
materially  affected,  or are reasonably likely to materially affect, the Fund's
internal control over financial reporting.

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

                                    PART III
                                    --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
------------------------------------------

(a) MANAGEMENT.
---------------

Pursuant to the Fund's LLC Agreement,  the Fund's manager,  Eaton Vance, has the
authority to conduct the Fund's business.  Eaton Vance appointed Thomas E. Faust
Jr.  and  Michelle  A.  Alexander  to serve  indefinitely  as the  Fund's  Chief
Executive  Officer and Chief  Financial  Officer,  respectively,  on October 16,
2002.  Information about Mr. Faust appears below. Ms.  Alexander,  34, is a Vice
President  of Eaton  Vance  and  Boston  Management.  She also  serves  as Chief
Financial  Officer of Belair Capital Fund LLC, Belcrest Capital Fund LLC, Belmar
Capital  Fund LLC and  Belport  Capital  Fund LLC,  and as an officer of various
investment companies managed by Eaton Vance or Boston Management.  Ms. Alexander
has been an employee  of Eaton  Vance since 1997.  As members of the Eaton Vance
organization,  Mr. Faust and Ms. Alexander receive no compensation from the Fund
for serving as Fund officers.  There are no other officers of the Fund. The Fund
does not have a board of directors or similar governing body.

The Board of Directors of Eaton  Vance,  Inc.,  the sole trustee of Eaton Vance,
oversees the accounting and financial reporting processes of the Fund and audits
of the Fund's financial statements.  The Fund's audit committee financial expert
(as that term is defined in Item  7(d)(3)(iv) of Schedule 14A under the Exchange
Act) is William M. Steul.  Mr. Steul is a senior  officer of Eaton Vance and, as
such, is not independent of Fund management. Information about Mr. Steul appears
below.

Boston  Management  is  investment  adviser  to the Fund and the  Portfolio  and
manager of Belrose Realty.  The portfolio  manager of the Fund and the Portfolio
is Duncan W.  Richardson,  Senior Vice  President  and Chief  Equity  Investment
Officer of Eaton Vance and Boston  Management.  Mr. Richardson has been employed
by the Eaton Vance  organization  since 1987 and has served as portfolio manager
of the Fund since its inception and of the Portfolio and its  predecessor  since
1990. A majority of Mr.  Richardson's  time is spent  managing the Portfolio and
related  entities.  Boston  Management has an experienced  team of analysts that
provides Mr. Richardson with research and recommendations on investments.

The  directors  of Belrose  Realty are Mr.  Faust,  James B.  Hawkes and Alan R.
Dynner,  each of whom is described  below.  William R. Cross,  Vice President of
Belrose Realty,  is primarily  responsible  for providing  research and analysis
relating to the Fund's real estate  investments held through Belrose Realty. Mr.
Cross is a Vice  President  of Eaton  Vance and Boston  Management  and has been
employed by the Eaton Vance  organization  since 1996. Mr. Cross,  David Carlson
and Mr.  Dynner serve as managers or trustees of the Real Estate Joint  Ventures
owned by Belrose Realty. Mr. Dynner is also Vice President and Secretary of each
Real Estate  Joint  Venture  and Mr.  Cross  serves as Chairman of Katahdin  and
President and Chairman of Bel Apartment and Bel  Communities.  Mr.  Carlson is a
Vice President of Eaton Vance and Boston Management and has been employed by the
Eaton Vance  organization  since 2001. Prior to joining Eaton Vance, Mr. Carlson
was President of ILM Holding,  Inc., a real estate holding company.  Information
about Mr. Dynner appears below.

                                       25
<PAGE>

As  disclosed  under "The Eaton Vance  Organization"  in Item 1, Eaton Vance and
Boston  Management are indirect  wholly-owned  subsidiaries of Eaton Vance Corp.
The  non-voting  common  stock of Eaton Vance Corp.  is listed and traded on the
NYSE.  All shares of the voting common stock of Eaton Vance Corp.  are held in a
voting  trust,  the voting  trustees  of which are senior  officers of the Eaton
Vance organization.  Eaton Vance, Inc., a wholly-owned subsidiary of Eaton Vance
Corp.,  is the sole  trustee of Eaton  Vance and of Boston  Management,  each of
which is a Massachusetts business trust. The names of the executive officers and
the directors of Eaton Vance, Inc. and their ages and principal  occupations (in
addition to their responsibilities described above) are set forth below.

James B. Hawkes (62) is Chairman, President and Chief Executive Officer of Eaton
Vance, Boston Management, Eaton Vance Corp. and Eaton Vance, Inc. and a Director
of Eaton Vance Corp. and Eaton Vance,  Inc. He is Vice President and Director of
EV  Distributors.  He is also a Trustee  and an officer  of  various  investment
companies  managed by Eaton Vance or Boston  Management and has been employed by
Eaton Vance since 1970.

Thomas E.  Faust Jr.  (45) is  Executive  Vice  President  and Chief  Investment
Officer of Eaton Vance,  Boston  Management,  Eaton Vance Corp. and Eaton Vance,
Inc., and a Director of Eaton Vance Corp. He is also Chief Executive  Officer of
Belair Capital Fund LLC,  Belcrest Capital Fund LLC, Belmar Capital Fund LLC and
Belport  Capital  Fund LLC,  and is an officer of various  investment  companies
managed by Eaton Vance or Boston Management. Mr Faust has been employed by Eaton
Vance since 1985.

Alan R. Dynner (63) is Vice  President,  Chief Legal  Officer and  Secretary  of
Eaton Vance,  Boston  Management,  Eaton Vance Corp., EV Distributors  and Eaton
Vance,  Inc. He is also an officer of various  investment  companies  managed by
Eaton  Vance or Boston  Management  and has been  employed  by Eaton Vance since
1996.

William M. Steul (61) is Vice  President  and Chief  Financial  Officer of Eaton
Vance, Boston Management, Eaton Vance Corp. and Eaton Vance, Inc. and a Director
of Eaton Vance,  Inc. He is also Vice President of EV Distributors.  He has been
employed by Eaton Vance since 1994.

(b) COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
-------------------------------------------------------------------------

Section  16(a) of the 1934 Act requires the Fund's  officers and  directors  and
persons  who own more  than ten  percent  of the  Fund's  Shares  to file  forms
reporting their  affiliation  with the Fund and reports of ownership and changes
in ownership of the Fund's Shares with the SEC.  Eaton Vance,  as manager of the
Fund,  and the Directors and executive  officers of Eaton Vance,  Inc., the sole
trustee of Eaton  Vance,  also  comply with  Section  16(a).  These  persons and
entities are required by SEC  regulations to furnish the Fund with copies of all
Section 16(a) forms they file. To the best of the Fund's knowledge, based solely
on a review of the copies of such reports furnished to the Fund, during the year
ended December 31, 2003 all Section 16(a) filing requirements applicable to such
persons and entities were complied with for such year, except that each of James
B. Hawkes, Alan R. Dynner and William S. Steul, in their capacities as Directors
and/or  executive  officers of Eaton  Vance,  Inc.,  and Thomas E. Faust Jr. and
Michelle A. Alexander,  officers of the Fund, and Eaton Vance failed to file one
Form 3. Each such Form 3 reported no transactions in Fund Shares.

(c) CODE OF ETHICS.
-------------------

The Fund has adopted a Code of Ethics that  applies to the  principal  executive
officer  and  principal  financial  officer  (who is also the  Fund's  principal
accounting  officer).  A copy of the Code of Ethics is  available  at no cost by
request to the Fund's Chief  Financial  Officer,  255 State Street,  Boston,  MA
02109 or by calling (800) 225-6265. If the Fund makes any substantive amendments
to the Code of Ethics or grants any waiver, including an implicit waiver, from a
provision of the Code of Ethics as applicable to the principal executive officer
or  principal  financial  officer,  the Fund will  disclose  the  nature of such
amendment or waiver in a report on Form 8-K.

ITEM 11. EXECUTIVE COMPENSATION.
--------------------------------

As noted in Item 10, the officers of the Fund receive no  compensation  from the
Fund. The Fund's manager,  Eaton Vance, and its affiliates receive  compensation
from the Fund for services  provided to the Fund,  which is described in Item 13
below.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
------------------------------------------------------------------------

SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL OWNERS. To the knowledge of the Fund,
no person beneficially owns more than five percent of the Shares of the Fund.

                                       26
<PAGE>

SECURITY OWNERSHIP OF MANAGEMENT.  As of March 1, 2004, Eaton Vance, the manager
of the Fund,  beneficially  owned 100.87 Shares of the Fund. The Shares owned by
Eaton Vance represent less than 1% of the  outstanding  Shares of the Fund as of
March 1, 2004.  None of the other entities or  individuals  named in response to
Item 10 above beneficially owned Shares of the Fund as of such date.

CHANGES IN CONTROL. Not applicable.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------

The table below sets forth the fees,  paid or payable by, or  allocable  to, the
Fund and Belrose Realty for the year ended December 31, 2003 and the period from
March 19, 2002 through December 31, 2002 in connection with services rendered by
Eaton Vance and its affiliates. Each fee is described following the table.

                                              Year ended         Period ended
                                           December 31, 2003   December 31, 2002
--------------------------------------------------------------------------------
Fund Advisory and Administrative Fees*        $  922,781         $  344,298
--------------------------------------------------------------------------------
Belrose Realty Management Fees*               $2,639,629         $1,270,746
--------------------------------------------------------------------------------
Fund's Allocable Portion of the Portfolio's
Advisory Fees**                               $6,267,847         $2,454,868
--------------------------------------------------------------------------------
Fund Servicing Fees                           $1,385,329         $  519,494
--------------------------------------------------------------------------------
Fund's Allocable Portion of Belvedere
 Company's Servicing Fees                     $2,149,331         $  844,993
--------------------------------------------------------------------------------
Fund Distribution Fees*                       $1,415,111         $  548,124
--------------------------------------------------------------------------------
Redemption Fees paid by Redeeming
 Shareholders                                 $  139,527         $   91,020
--------------------------------------------------------------------------------
Aggregate Compensation Paid by the
 Fund to Eaton Vance and its Affiliates       $4,977,521         $2,163,168
--------------------------------------------------------------------------------
*    Boston  Management  has  agreed  to waive  the  portion  of the  investment
     advisory and administrative fee payable by the Fund to the extent that such
     fee,  together with the distribution fee payable by the Fund and the Fund's
     attributable  share of the investment  advisory and management fees payable
     by the Portfolio  and Belrose  Realty,  respectively,  exceeds 0.60% of the
     average  daily gross  assets of the Fund.  The amount shown  reflects  this
     waiver by Boston Management.

**   For year ended December 31, 2003 and the period from March 19, 2002 through
     December 31, 2002,  advisory fees paid or payable by the Portfolio  totaled
     $67,584,543 and $54,761,871,  respectively. For the year ended December 31,
     2003, Belvedere Company's allocable portion of that fee was $41,671,111, of
     which $6,267,847,  was allocable to the Fund. For the period ended December
     31,  2002,   Belvedere   Company's   allocable  portion  of  that  fee  was
     $31,748,787, of which $2,454,868 was allocable to the Fund.

THE FUND'S INVESTMENT  ADVISORY AND  ADMINISTRATIVE  FEE. Under the terms of the
Fund's investment  advisory and administrative  agreement,  Boston Management is
entitled to receive, subject to the fee waiver described in the next sentence, a
monthly advisory and administrative fee at the rate of 1/20 of 1% (equivalent to
0.60% annually) of the average daily gross assets of the Fund. Boston Management
has  agreed  to waive  that  portion  of the  monthly  investment  advisory  and
administrative  fee  payable by the Fund to the extent  that such fee,  together
with the distribution fees payable by the Fund (see  "Distribution  Fees Paid to
EV  Distributors"  below)  and the  Fund's  attributable  share  of the  monthly
investment  advisory and management fees for such month payable by the Portfolio
and Belrose Realty, respectively,  exceeds 1/20 of 1% of the average daily gross
assets of the Fund.  The term "gross  assets of the Fund" means the value of all
Fund assets  (including the Fund's interest in Belvedere  Company and the Fund's
ratable  share  of  the  assets  of  its  directly  and  indirectly   controlled
subsidiaries), without reduction by any liabilities.

BELROSE REALTY'S MANAGEMENT FEES. Under the terms of Belrose Realty's management
agreement  with  Boston  Management,   Boston  Management   receives  a  monthly
management fee at the rate of 1/20 of 1%  (equivalent to 0.60%  annually) of the
average daily gross assets of Belrose Realty.  The term "gross assets of Belrose
Realty"  means the  current  value of all  assets of Belrose  Realty  (including
Belrose  Realty's  ratable share of the assets of its  controlled  subsidiaries)
without reduction by any liabilities.

                                       27
<PAGE>

THE  PORTFOLIO'S  INVESTMENT  ADVISORY FEE.  Under the terms of the  Portfolio's
investment advisory agreement with Boston Management, Boston Management receives
a monthly advisory fee as follows:

                                            Annual Fee Rate
 Average Daily Net Assets for the Month    (for each level)
------------------------------------------------------------
 Up to $500 million                             0.6250%
 $500 million but less than $1 billion          0.5625%
 $1 billion but less than $1.5 billion          0.5000%
 $1.5 billion but less than $7 billion          0.4375%
 $7 billion but less than $10 billion           0.4250%
 $10 billion but less than $15 billion          0.4125%
 $15 billion and over                           0.4000%


In accordance with the terms of the 1940 Act, the Portfolio's  Board of Trustees
considers the  continuation of the  Portfolio's  investment  advisory  agreement
annually.

SERVICING FEES PAID BY THE FUND.  Pursuant to a servicing  agreement between the
Fund and EV  Distributors,  the Fund pays a servicing fee to EV Distributors for
providing  certain services and information to the Shareholders of the Fund. The
servicing  fee is paid on a  quarterly  basis at an annual  rate of 0.25% of the
Fund's  average daily net assets.  With respect to  Shareholders  who subscribed
through a subagent, EV Distributors has assigned servicing  responsibilities and
fees to the applicable  subagent,  beginning twelve months after the issuance of
Shares of the Fund to such persons.  The Fund's allocated share of the servicing
fee paid by  Belvedere  Company is  credited  toward the  Fund's  servicing  fee
payment, thereby reducing the amount of the servicing fee payable by the Fund.

SERVICING  FEES PAID BY  BELVEDERE  COMPANY.  Pursuant to a servicing  agreement
between  Belvedere  Company  and  EV  Distributors,  Belvedere  Company  pays  a
servicing fee to EV Distributors for providing  certain services and information
to direct and indirect investors in Belvedere Company. The servicing fee is paid
on a quarterly basis, at an annual rate of 0.15% of Belvedere  Company's average
daily  net  assets.   With  respect  to  investors  in  Belvedere   Company  and
Shareholders of the Fund who subscribed through a subagent,  EV Distributors has
assigned  servicing  responsibilities  and  fees  to  the  applicable  subagent,
beginning  twelve  months after the  issuance of shares of Belvedere  Company or
Shares of the Fund to such  persons.  The Fund  assumes its  allocated  share of
Belvedere  Company's  servicing fee. The servicing fee payable in respect of the
Fund's investment in Belvedere Company is credited toward the Fund servicing fee
described above.

DISTRIBUTION  FEES  PAID TO EV  DISTRIBUTORS.  Under  the  terms  of the  Fund's
placement  agreement with EV  Distributors,  EV Distributors  receives a monthly
distribution  fee at an annual rate of 0.10% of the average  daily net assets of
the Fund as compensation  for its services as placement  agent. The distribution
fee accrued from the Fund's  initial  closing and will  continue for a period of
ten years (subject to the annual approval of Eaton Vance, Inc.).

REDEMPTION FEES.  Shares of the Fund redeemed within three years of issuance are
generally  subject to a redemption fee equal to 1% of the net asset value of the
Fund Shares  redeemed.  The redemption fee is payable to EV Distributors in cash
by the Fund on behalf of the redeeming Shareholder. No redemption fee is imposed
on Shares of the Fund held for at least three years, Shares acquired through the
reinvestment of Fund distributions,  Shares redeemed in connection with a tender
offer or other extraordinary corporate event involving securities contributed by
the redeeming Shareholder,  or Shares redeemed following the death of all of the
initial  owners  of  the  Shares  redeemed.  In  addition,  no  fee  applies  to
redemptions  made  pursuant to a systematic  redemption  plan  established  by a
Shareholder with the Fund.

SELLING  COMMISSIONS.  Shares of the Fund were  privately  placed with qualified
purchasers  pursuant to a placement  agency  agreement  entered into between the
Fund and EV  Distributors  as exclusive  placement  agent.  EV Distributors is a
wholly-owned  subsidiary  of Eaton  Vance.  EV  Distributors  appointed  certain
securities  dealers  and  banks  as  subagents  to  participate  in the  private
offering. No selling commissions were paid by the Fund on behalf of Shareholders
making  investment  commitments of $5 million or more. The Fund generally paid a
1.5% selling  commission to EV Distributors on behalf of each Shareholder making
an investment  commitment of less than $2 million and a 1.0% selling  commission

                                       28
<PAGE>

to EV Distributors on behalf of each Shareholder making an investment commitment
of at least $2 million but less than $5 million.  The selling commission paid by
the Fund on behalf of a Shareholder  was deducted from the  contribution  to the
Fund by such  Shareholder,  thereby  reducing  the  number of Shares of the Fund
issued to the  Shareholder.  During the period  commencing with the start of the
Fund's  business,  March 19, 2002,  to December 31, 2003,  the Fund paid selling
commissions  aggregating  $6,730,019 pursuant to the placement agency agreement,
and such selling  commissions  were paid by EV  Distributors  to those subagents
through which Shareholders invested in the Fund.

CERTAIN REAL ESTATE INVESTMENT TRANSACTIONS.  During the year ended December 31,
2003,  Belrose Realty acquired  Partnership  Preference Units of one issuer from
Belmar Realty Corporation (Belmar), a REIT subsidiary of another investment fund
managed by Eaton Vance and advised by Boston Management,  for approximately $8.0
million.  Belmar realized a gain of  approximately  $639,000 on the transaction.
The purchase price for such Partnership  Preference Units was determined in good
faith by Boston Management after consideration of factors,  data and information
that it considered relevant

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
------------------------------------------------

The following table presents fees for the professional  audit services  rendered
by Deloitte & Touche LLP for the audit of the Fund's annual financial statements
for the years  ended  December  31,  2003 and for the  period  from the start of
business  March 19, 2002 to December 31, 2002 and fees billed for other services
rendered by Deloitte & Touche LLP during those periods.

                                             Year ended          Period ended
                                          December 31, 2003    December 31, 2002
--------------------------------------------------------------------------------
Audit fees                                   $   26,156            $  19,078
Audit related fees(1)                            35,040                   --
Tax fees(2)                                      72,117              123,060
All other fees(3)                                30,900              150,000
                                          --------------------------------------
Total                                        $  164,213            $ 292,138
                                          --------------------------------------

(1)  Audit  related  fees  consist of assurance  and related  services  that are
     reasonably   related  to  the  performance  of  the  audit  of  the  Fund's
     consolidated  financial  statements.  The category includes fees related to
     the  performance  of audits and attest  services not required by statute or
     regulation  and  accounting  consultations  regarding  the  application  of
     generally accepted accounting principles to proposed transactions.

(2)  Tax fees consist of the  aggregate  fees billed for  professional  services
     rendered  by Deloitte & Touche LLP for tax  compliance,  tax advice and tax
     planning.

(3)  Other fees consist  primarily of the aggregate fees billed for professional
     services  rendered  by  Deloitte  &  Touche  LLP  related  to  agreed  upon
     procedures for requirements by lenders.

                                     PART IV
                                    -------

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
----------------------------------------------------------------

(a)       The following is a list of all financial statements filed as a part of
          this report:

     (i)  Consolidated Portfolios of Investments as of December 31, 2003

          Consolidated Portfolios of Investments as of December 31, 2002

          Consolidated  Statements of Assets and  Liabilities as of December 31,
          2003 and December 31, 2002

          Consolidated  Statements of Operations for the year ended December 31,
          2003 and for the period from the start of business,  March 19, 2002 to
          December 31, 2002

          Consolidated  Statements  of  Changes in Net Assets for the year ended
          December 31, 2003 and the period from the start of business, March 19,
          2002 to December 31, 2002

                                       29
<PAGE>


          Consolidated  Statements of Cash Flows for the year ended December 31,
          2003 and the  period  from the start of  business,  March 19,  2002 to
          December 31, 2002

          Financial  Highlights  for the year ended  December  31,  2003 and the
          period from the start of business, March 19, 2002 to December 31, 2002

          Notes to Consolidated Financial Statements

          Independent Auditors' Report dated March 5, 2004

     (ii) Portfolio  of  Investments  of  Tax-Managed  Growth  Portfolio  as  of
          December 31, 2003

          Statement of Assets and Liabilities of Tax-Managed Growth Portfolio as
          of December 31, 2003

          Statement of Operations of Tax-Managed  Growth  Portfolio for the year
          ended December 31, 2003

          Statements of Changes in Net Assets of  Tax-Managed  Growth  Portfolio
          for the years ended December 31, 2003 and December 31, 2002

          Supplementary Data of Tax-Managed Growth Portfolio for the years ended
          December 31, 2003,  December 31, 2002, December 31, 2001, December 31,
          2000 and December 31, 1999

          Notes to Financial Statements

          Independent Auditors' Report dated February 20, 2004

(b)       Reports on Form 8-K:

                    None.

(c)       A list  of the exhibits filed as a part of  this Form 10-K is included
          in the Exhibit Index appearing on page 69 hereof.

                                       30

<PAGE>

BELROSE 2003

                                                                      Appendix A



Set forth  below is a chart  depicting  the  various  entities in which the Fund
invested  as of December  31,  2003.  Defined  terms used below have the meaning
ascribed to them in Item 1.




[Chart depicting (1) the Fund investing in Belvedere Company and Belrose Realty;
(2)  Belvedere  Company  investing  in the  Portfolio;  and (3)  Belrose  Realty
investing in Bel Communities,  Bel Apartment and Katahdin.  The Fund is followed
by footnote (A); Belvedere Company is followed by footnote (B); the Portfolio is
followed by footnote  (C);  Belrose  Realty is followed by footnote (D); and Bel
Communities,  Bel  Apartment and Katahdin are each followed by footnote (E). The
footnotes appear below.]









(A)  Eaton Vance is the  manager of the Fund;  Boston  Management  is the Fund's
     investment adviser.
(B)  Boston  Management  is the  manager  and  investment  adviser of  Belvedere
     Company.
(C)  Boston Management is the Portfolio's investment adviser.
(D)  Boston  Management is the manager of Belrose  Realty.  Belrose  Realty also
     holds investments in Partnership Preference Units.
(E)  Belrose  Realty  owns a  majority  interest  in  these  Real  Estate  Joint
     Ventures.

                                       31
<PAGE>

BELROSE CAPITAL FUND LLC

CONSOLIDATED PORTFOLIOS OF INVESTMENTS
AS OF DECEMBER 31, 2003

INVESTMENT IN BELVEDERE CAPITAL FUND COMPANY LLC -- 75.3%

SECURITY                                              SHARES       VALUE
--------------------------------------------------------------------------------
Investment in Belvedere Capital Fund
 Company LLC (Belvedere Capital)                    10,478,270   $ 1,640,828,100
--------------------------------------------------------------------------------

TOTAL INVESTMENT IN BELVEDERE CAPITAL
 (IDENTIFIED COST, $1,470,171,002)                               $ 1,640,828,100
--------------------------------------------------------------------------------

PARTNERSHIP PREFERENCE UNITS -- 2.6%


SECURITY                                               UNITS       VALUE
--------------------------------------------------------------------------------
Essex Portfolio, L.P. (California Limited
Partnership affiliate of Essex Property Trust,
Inc.), 7.875% Series B Cumulative
Redeemable Preferred Units, Callable from
2/6/03+(1)(2)                                          400,000   $ 19,272,880

Kilroy Realty, L.P. (Delaware Limited Partnership
affiliate of Kilroy Realty Corporation), 8.075%
Series A Cumulative Redeemable Preferred
Units, Callable from 2/6/03+(1)                        400,000     18,457,880

Prentiss Properties Acquisition Partners, L.P.
(Delaware Limited Partnership affiliate of
Prentiss Properties Trust), 8.30% Series B
Cumulative Redeemable Perpetual Preferred
Units, Callable from 6/25/03+(1)                       386,464     18,986,976
--------------------------------------------------------------------------------

TOTAL PARTNERSHIP PREFERENCE UNITS
 (IDENTIFIED COST, $49,033,900)                                  $ 56,717,736
--------------------------------------------------------------------------------

OTHER REAL ESTATE INVESTMENTS -- 21.7%


DESCRIPTION                                                          VALUE
--------------------------------------------------------------------------------
Rental property(1)(3)                                            $473,491,403
--------------------------------------------------------------------------------

TOTAL OTHER REAL ESTATE INVESTMENTS
   (IDENTIFIED COST, $473,683,334)                               $473,491,403
--------------------------------------------------------------------------------


SHORT-TERM INVESTMENTS -- 0.4%

                                                 PRINCIPAL
                                                 AMOUNT
                                                 (000'S
SECURITY                                         OMITTED)             VALUE
--------------------------------------------------------------------------------
Investors Bank & Trust Company -
Time Deposit, 1.01%, 1/2/04                      $ 7,614         $    7,614,214
--------------------------------------------------------------------------------

TOTAL SHORT-TERM INVESTMENTS
 (AT AMORTIZED COST, $7,614,214)                                 $    7,614,214
--------------------------------------------------------------------------------

TOTAL INVESTMENTS -- 100.0%
 (IDENTIFIED COST, $2,000,502,450)                               $2,178,651,453
--------------------------------------------------------------------------------

                 See notes to consolidated financial statements

                                       32

<PAGE>

BELROSE CAPITAL FUND LLC

CONSOLIDATED PORTFOLIOS OF INVESTMENTS CONT'D
AS OF DECEMBER 31, 2002

INVESTMENT IN BELVEDERE CAPITAL FUND COMPANY LLC -- 71.1%



SECURITY                                  SHARES          VALUE
--------------------------------------------------------------------
Investment in Belvedere Capital Fund
Company LLC (Belvedere Capital)           9,897,495   $1,264,314,536
--------------------------------------------------------------------
TOTAL INVESTMENT IN BELVEDERE CAPITAL
   (IDENTIFIED COST, $1,382,049,876)                  $1,264,314,536
--------------------------------------------------------------------

PARTNERSHIP PREFERENCE UNITS -- 2.4%


SECURITY                                      UNITS           VALUE
--------------------------------------------------------------------------
Essex Portfolio, L.P. (California
Limited Partnership affiliate of Essex
Property Trust, Inc.), 7.875% Series B
Cumulative Redeemable Preferred Units,
Callable from 2/6/03+(1)                        400,000   $ 17,168,880

Kilroy Realty, L.P. (Delaware Limited
Partnership affiliate of Kilroy Realty
Corporation), 8.075% Series A Cumulative
Redemable Preferred Units, Callable
from 2/6/03+(1)                                 200,000      8,111,940

Prentiss Properties Acquisition
Partners, L.P. (Delaware Limited
Partnership affiliate of Prentiss
Properties Trust), 8.30% Series B
Cumulative Redeemable Perpetual
Preferred Units, Callable
from 6/25/03+(1)                                386,464     16,568,485
--------------------------------------------------------------------------
TOTAL PARTNERSHIP PREFERENCE UNITS
   (IDENTIFIED COST, $41,000,300)                         $ 41,849,305
--------------------------------------------------------------------------

OTHER REAL ESTATE INVESTMENTS -- 26.5%


DESCRIPTION                                                VALUE
--------------------------------------------------------------------
Rental Property(1)(3)                                 $  470,597,295
--------------------------------------------------------------------
TOTAL OTHER REAL ESTATE INVESTMENTS
   (IDENTIFIED COST, $469,003,489)                    $  470,597,295
--------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
   (IDENTIFIED COST, $1,892,053,665)                  $1,776,761,136
--------------------------------------------------------------------

+    Security  exempt from  registration  under the  Securities  Act of 1933. At
     December  31,  2003  and  2002,  the  value  of  these  securities  totaled
     $56,717,736 and $41,849,305, or 3.5% and 3.4% of net assets, respectively.

(1)  Investment  valued at fair value using methods  determined in good faith by
     or at the direction of the Manager of Belrose Realty Corporation.

(2)  On January 8, 2004, the call date was changed to 12/31/09.

(3)  Rental property represents twenty-eight multi-family residential properties
     located in twelve states. None of the individual  properties represent more
     than 5% of net assets.

                 See notes to consolidated financial statements

                                       33
<PAGE>

BELROSE CAPITAL FUND LLC
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Assets                                                                  DECEMBER 31, 2003       DECEMBER 31, 2002
------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                     <C>
Investments, at value (identified cost, $2,000,502,450 and
   $1,892,053,665, respectively)                                          $ 2,178,651,453         $ 1,776,761,136
Cash                                                                            6,535,905               7,214,141
Escrow deposits -- restricted                                                   2,436,133               3,239,060
Distributions and interest receivable                                             400,960                 440,053
Other assets                                                                    3,660,997               3,553,337
Open interest rate swap agreements, at value                                    1,423,867                       -
------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                              $ 2,193,109,315         $ 1,791,207,727
------------------------------------------------------------------------------------------------------------------
Liabilities
------------------------------------------------------------------------------------------------------------------
Loan payable-Credit Facility                                              $   183,300,000         $   155,300,000
Mortgages payable                                                             344,219,483             344,219,483
Open interest rate swap agreements, at value                                            -              11,552,842
Distributions payable to minority shareholders                                     16,800                       -
Security deposits                                                                 968,110               1,012,016
Swap interest payable                                                              79,280                 129,883
Accrued expenses:
   Interest expense                                                             2,319,122               2,438,911
   Property taxes                                                               1,959,252               2,575,189
   Other expenses and liabilities                                               1,782,021               2,546,403
Minority interests in controlled subsidiaries                                  26,010,489              29,431,345
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                         $   560,654,557         $   549,206,072
------------------------------------------------------------------------------------------------------------------
NET ASSETS                                                                $ 1,632,454,758         $ 1,242,001,655
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' CAPITAL                                                     $ 1,632,454,758         $ 1,242,001,655
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
FUND SHARES OUTSTANDING                                                        17,032,796              16,160,271
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE (NOTE 4)                   $         95.84         $         76.86
------------------------------------------------------------------------------------------------------------------
</TABLE>
                 See notes to consolidated financial statements

                                       34
<PAGE>

BELROSE CAPITAL FUND LLC
CONSOLIDATED FINANCIAL STATEMENTS CONT'D

CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                          FOR THE YEAR ENDED   FOR THE PERIOD ENDED
Investment Income                                                                         DECEMBER 31, 2003      DECEMBER 31, 2002*
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>                    <C>
Dividends allocated from Belvedere Capital
   (net of foreign taxes, $248,681 and $69,347, respectively)                                 $   21,290,041         $    7,907,555
Interest allocated from Belvedere Capital                                                            335,885                233,924
Expenses allocated from Belvedere Capital                                                         (8,692,174)            (3,413,514)
------------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from Belvedere Capital                                        $   12,933,752         $    4,727,965
Rental income                                                                                     64,679,823             37,921,512
Distributions from Partnership Preference Units                                                    4,591,951              1,714,294
Interest                                                                                             107,430                123,956
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME                                                                       $   82,312,956         $   44,487,727
------------------------------------------------------------------------------------------------------------------------------------
Expenses
------------------------------------------------------------------------------------------------------------------------------------
Investment advisory and administrative fees                                                   $    4,977,521         $    2,163,168
Property management fees                                                                           2,590,322              1,523,512
Distribution and servicing fees                                                                    2,800,440              1,067,618
Interest expense on mortgages                                                                     26,317,765             15,144,576
Interest expense on Credit Facility                                                                2,796,418              1,781,474
Property and maintenance expenses                                                                 17,974,998             10,136,354
Property taxes and insurance                                                                       8,068,145              4,686,889
Organizational expenses                                                                                    -                666,365
Miscellaneous                                                                                        979,238                969,112
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES                                                                                $   66,504,847         $   38,139,068
------------------------------------------------------------------------------------------------------------------------------------
Deduct --
   Reduction of investment advisory and administrative fees                                   $    1,415,111         $      548,124
------------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES                                                                                  $   65,089,736         $   37,590,944
------------------------------------------------------------------------------------------------------------------------------------
Net investment income before minority interests in net income of                              $   17,223,220         $    6,896,783
   controlled subsidiaries
Minority interests in net income of controlled subsidiaries                                       (1,943,578)            (1,465,099)
------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                                         $   15,279,642         $    5,431,684
------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
   Investment transactions from Belvedere Capital
      (identified cost basis)                                                                 $   19,117,006         $    7,233,500
   Investment transactions (identified cost basis)                                                   (14,942)                     -
   Interest rate swap agreements                                                                 (16,652,934)            (2,044,673)
------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN                                                                             $    2,449,130         $    5,188,827
------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
   Investment in Belvedere Capital (identified cost basis)                                    $  288,392,438         $ (117,735,340)
   Investments in Partnership Preference Units (identified cost basis)                             6,834,831                849,005
   Investment in other real estate (net of minority interests in unrealized (loss) gain
      of controlled subsidiaries of $(5,418,472) and $2,553,526, respectively)                     3,632,735               (959,720)
   Interest rate swap agreements                                                                  12,976,709            (11,552,842)
------------------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)                                          $  311,836,713         $ (129,398,897)
------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)                                                       $  314,285,843         $ (124,210,070)
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS                                         $  329,565,485         $ (118,778,386)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

                 See notes to consolidated financial statements

                                       35
<PAGE>

BELROSE CAPITAL FUND LLC
CONSOLIDATED FINANCIAL STATEMENTS CONT'D

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease)                                                 YEAR ENDED          PERIOD ENDED
 in Net Assets                                                  DECEMBER 31, 2003    DECEMBER 31, 2002*
--------------------------------------------------------------------------------------------------------
<S>                                                               <C>                   <C>
Net investment income                                             $    15,279,642       $     5,431,684
Net realized gain from investment transactions                          2,449,130             5,188,827
Net change in unrealized appreciation
   (depreciation) of investments                                      311,836,713          (129,398,897)
--------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
   FROM OPERATIONS                                                $   329,565,485       $  (118,778,386)
--------------------------------------------------------------------------------------------------------
Transactions in Fund Shares --
   Investment securities contributed                              $    95,047,136       $ 1,378,394,239
   Less - Selling commissions                                            (325,083)           (6,404,936)
--------------------------------------------------------------------------------------------------------
   Net contributions                                              $    94,722,053       $ 1,371,989,303
   Net asset value of Fund Shares issued to Shareholders
       in payment of distributions declared                               348,050                     -
   Net asset value of Fund Shares redeemed                            (33,374,471)          (11,209,262)
--------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND
   SHARE TRANSACTIONS                                             $    61,695,632       $ 1,360,780,041
--------------------------------------------------------------------------------------------------------
Distributions --
   Distributions to Shareholders                                  $      (808,014)      $             -
--------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS                                               $      (808,014)      $             -
--------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS                                        $   390,453,103       $ 1,242,001,655
--------------------------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------------------------------
AT BEGINNING OF YEAR                                              $ 1,242,001,655       $             -
--------------------------------------------------------------------------------------------------------
AT END OF YEAR                                                    $ 1,632,454,758       $ 1,242,001,655
--------------------------------------------------------------------------------------------------------
</TABLE>
*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

                 See notes to consolidated financial statements

                                       36
<PAGE>

BELROSE CAPITAL FUND LLC
CONSOLIDATED FINANCIAL STATEMENTS CONT'D

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED                   PERIOD ENDED
Increase (Decrease) in Cash                                                         DECEMBER 31, 2003            DECEMBER 31,2002*
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                          <C>
Cash Flows From (For) Operating Activities -
Net increase (decrease) in net assets from operations                               $     329,565,485            $    (118,778,386)
Adjustments to reconcile net increase (decrease) in net assets from operations
   to net cash flows for operating activities -
      Net investment income allocated from Belvedere Capital                              (12,933,752)                  (4,727,965)
      Decrease in escrow deposits                                                             802,927                    1,670,179
      (Increase) decrease in other assets                                                    (107,660)                     426,784
      Decrease (increase) in distributions and interest receivable                             39,093                     (440,053)
      (Decrease) increase in interest payable for open swap agreements                        (50,603)                     129,883
      (Decrease) increase in security deposits, accrued interest and accrued
         other expenses and liabilities                                                      (928,077)                     256,032
      (Decrease) increase in accrued property taxes                                          (615,937)                     580,812
      Purchases of Partnership Preference Units                                            (8,033,600)                 (41,000,300)
      Proceeds from sale of common stock                                                   10,140,535                            -
      Payments for investments in other real estate                                                 -                 (103,804,186)
      Cash assumed in connection with acquisition of other real estate                              -                    5,131,583
      Improvements to rental property                                                      (4,679,844)                  (2,192,281)
      Increase in short-term investments                                                   (7,614,214)                           -
      Net decrease (increase) in investment in Belvedere Capital                            1,651,419                     (565,008)
      Net interest incurred on interest rate swap agreements                               (4,477,357)                  (2,044,673)
      Payment for termination of interest rate swap agreements                            (12,175,577)                           -
      Increase in minority interest                                                                 -                      210,000
      Minority interests in net income of controlled subsidiaries                           1,943,578                    1,465,099
      Net realized gain from investment transactions                                       (2,449,130)                  (5,188,827)
      Net change in unrealized (appreciation) depreciation of investments                (311,836,713)                 129,398,897
------------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FOR OPERATING ACTIVITIES                                             $     (21,759,427)          $     (139,472,410)
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From (For) Financing Activities -
   Proceeds from Credit Facility                                                    $      28,000,000           $      155,300,000
   Payments on behalf of investors (selling commissions)                                     (325,083)                  (6,404,936)
   Payments for Fund Shares redeemed                                                       (6,204,599)                  (2,338,426)
   Distributions paid to Shareholders                                                        (459,964)                           -
   Capital contributed to controlled subsidiaries                                              70,837                      129,913
------------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES                                            $      21,081,191           $      146,686,551
------------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH                                                     $        (678,236)          $        7,214,141
------------------------------------------------------------------------------------------------------------------------------------
CASH AT BEGINNING OF YEAR                                                           $       7,214,141           $                -
------------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR                                                                 $       6,535,905           $        7,214,141
------------------------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE AND NON-CASH INVESTING AND FINANCING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------------
Securities contributed by Shareholders, invested in Belvedere Capital               $      95,047,136           $    1,378,394,239
Interest paid on loan - Credit Facility                                             $       2,852,392           $        1,384,304
Interest paid on mortgages                                                          $      25,904,530           $       12,782,797
Interest paid on swap agreements                                                    $       4,527,960           $        1,914,790
Market value of securities distributed in payment of redemptions                    $      27,169,872           $        8,870,836
Market value of common stock received from Belvedere Capital                        $      10,155,477           $                -
Market value of real property and other assets, net of current liabilities,
   assumed in conjunction with acquisition of other real estate                     $               -           $      482,302,817
Mortgages assumed in conjunction with acquisition of other real estate              $               -           $      344,219,483
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

                 See notes to consolidated financial statements

                                       37
<PAGE>

BELROSE CAPITAL FUND LLC
CONSOLIDATED FINANCIAL STATEMENTS CONT'D

FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
                                                                                YEAR ENDED                  PERIOD ENDED
                                                                                DECEMBER 31, 2003           DECEMBER 31, 2002*
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                         <C>
Net asset value - Beginning of year                                             $          76.860           $         100.000
------------------------------------------------------------------------------------------------------------------------------------

INCOME (LOSS) FROM OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income (6)                                                       $           0.897           $           0.621
Net realized and unrealized gain (loss)                                                    18.133                     (23.761)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS                                             $          19.030           $         (23.140)
------------------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS
------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders                                                   $          (0.050)          $               -
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS                                                             $          (0.050)          $               -
------------------------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE - END OF YEAR                                                   $          95.840           $          76.860
------------------------------------------------------------------------------------------------------------------------------------

TOTAL RETURN (1)                                                                            24.77%                     (23.14)%
------------------------------------------------------------------------------------------------------------------------------------

RATIOS
------------------------------------------------------------------------------------------------------------------------------------
RATIOS (AS A PERCENTAGE OF AVERAGE NET ASSETS) (5):
Expenses of Consolidated Real Property Subsidiaries
   Interest and other borrowing costs (7)                                                    1.51%                       2.11% (9)
   Operating expenses (7)                                                                    1.65%                       2.31% (9)
Belrose Capital Fund LLC Expenses
   Interest and other borrowing costs (4)(8)                                                 0.20%                       0.32% (9)
   Investment advisory and administrative fees,
      servicing fees and other Fund operating expenses (3)(4)                                1.12%                       1.36% (9)
                                                                                ----------------------------------------------------
Total expenses                                                                               4.48%                       6.10% (9)

Net investment income                                                                        1.08%                       0.98% (9)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS (AS A PERCENTAGE OF AVERAGE GROSS ASSETS) (2)(5):
Expenses of Consolidated Real Property Subsidiaries
   Interest and other borrowing costs (7)                                                    1.14%                       1.50% (9)
   Operating expenses (7)                                                                    1.25%                       1.65% (9)
Belrose Capital Fund LLC Expenses
   Interest and other borrowing costs (4)(8)                                                 0.15%                       0.23% (9)
   Investment advisory and administrative fees,
      servicing fees and other Fund operating expenses (3)(4)                                0.84%                       0.97% (9)
                                                                                ----------------------------------------------------
Total expenses                                                                               3.38%                       4.35% (9)

Net investment income                                                                        0.81%                       0.70% (9)
------------------------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted)                                         $       1,632,455           $       1,242,002
Portfolio turnover of Tax-Managed Growth Portfolio (the Portfolio)                             15%                         23%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Returns are  calculated by determining  the percentage  change in net asset
     value with all distributions reinvested. Total return is not computed on an
     annualized basis.

(2)  Average  Gross Assets is defined as the average  daily amount of all assets
     of Belrose Capital Fund LLC (Belrose Capital)  (including Belrose Capital's
     interest in  Belvedere  Capital Fund  Company LLC  (Belvedere  Capital) and
     Belrose  Capital's  ratable  share  of  the  assets  of  its  directly  and
     indirectly  controlled  subsidiaries  (Note 1)),  without  reduction by any
     liabilities.  For this purpose,  the assets of Belrose Realty Corporation's
     (Belrose Realty)  controlled  subsidiaries are reduced by the proportionate
     interests therein of investors other than Belrose Realty.

(3)  Includes Belrose Capital's share of Belvedere Capital's allocated expenses,
     including those expenses allocated from the Portfolio.

(4)  Includes  the  expenses of Belrose  Capital and  Belrose  Realty.  Does not
     include expenses of the real estate subsidiaries  majority-owned by Belrose
     Realty.

(5)  For the purpose of calculating  ratios,  the income and expenses of Belrose
     Realty's controlled  subsidiaries are reduced by the proportionate interest
     therein of investors other than Belrose Realty.

(6)  Calculated using average shares outstanding.

(7)  Includes Belrose Realty's  proportional  share of expenses  incurred by its
     majority-owned subsidiaries.

(8)  Ratios do not include  interest  incurred in  connection  with the interest
     rate swap  agreements.  Had such  amounts  been  included,  ratios would be
     higher.

(9)  Annualized.

*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

                 See notes to consolidated financial statements

                                       38
<PAGE>

BELROSE CAPITAL FUND LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1    ORGANIZATION

     A INVESTMENT  OBJECTIVE -- Belrose Capital Fund LLC (Belrose  Capital) is a
     Delaware limited liability company established to offer diversification and
     tax-sensitive   investment   management  to  investors  holding  large  and
     concentrated  positions in equity  securities  of selected  publicly-traded
     companies.  The  investment  objective  of  Belrose  Capital  is to achieve
     long-term,    after-tax   returns   for   Belrose   Capital    shareholders
     (Shareholders).   Belrose  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.  Belrose  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
     Belrose  Capital  and  Belvedere  Capital  is  directly  and  substantially
     affected by the performance of the Portfolio.  Separate from its investment
     in the Portfolio through Belvedere Capital, Belrose Capital invests in real
     estate assets through a controlled  subsidiary,  Belrose Realty Corporation
     (Belrose  Realty).  Such  investments  include  income-producing  preferred
     equity  interests  in  real  estate  operating  partnerships   (Partnership
     Preference  Units) affiliated with  publicly-traded  real estate investment
     trusts (REITs) and interests in real properties held through joint ventures
     that are controlled subsidiaries of Belrose Realty.

     B  SUBSIDIARIES  -- Belrose  Capital  invests in real  estate  through  its
     subsidiary  Belrose Realty.  Belrose Realty invests directly in Partnership
     Preference  Units  and  indirectly  in  real  property  through  controlled
     subsidiaries,  Bel Apartment  Properties  Trust (Bel  Apartment),  Katahdin
     Property  Trust LLC  (Katahdin)  and Bel  Communities  Property  Trust (Bel
     Communities).

     Belrose  Realty -- Belrose  Capital owns 100% of the common stock issued by
     Belrose Realty and intends to hold all of Belrose  Realty's common stock at
     all times. Additionally,  2,100 shares of preferred stock of Belrose Realty
     are  outstanding at December 31, 2003 and 2002.  The preferred  stock has a
     par  value of $0.01  per share and is  redeemable  by  Belrose  Realty at a
     redemption  price of $100 per share  after the  occurrence  of certain  tax
     events or after  December 31, 2005.  Dividends on the  preferred  stock are
     cumulative  and payable  annually  equal to $8 per share.  The  interest in
     preferred  stock is  recorded  as  minority  interest  on the  Consolidated
     Statements of Assets and Liabilities.

     Bel  Apartment -- Bel  Apartment,  a  majority-owned  subsidiary of Belrose
     Realty  since  March 2002,  owns ten  multi-family  residential  properties
     consisting  of 2,530 units  (collectively,  the Bel  Apartment  Properties)
     located  in  seven  states  (Texas,   Arizona,   Georgia,  North  Carolina,
     Washington,   Tennessee  and  Florida).  The  average  occupancy  rate  was
     approximately  91% at December 31, 2003.  Belrose Realty owns Class A units
     of  Bel  Apartment,  representing  75%  of  the  voting  interests  in  Bel
     Apartment,   and  a  minority   shareholder  (the  Bel  Apartment  Minority
     Shareholder)  owns Class B units,  representing 25% of the voting interests
     in Bel  Apartment.  The Class B equity  interest  is  recorded  as minority
     interest on the  Consolidated  Statements  of Assets and  Liabilities.  The
     primary distinctions between the two classes of shares are the distribution
     priority and voting rights.  Belrose  Realty has priority in  distributions
     and has  greater  voting  rights  than  the  holder  of the  Class B units.
     Pursuant to a buy/sell agreement entered into at the time Bel Apartment was
     established,   either  Belrose   Realty  or  the  Bel  Apartment   Minority
     Shareholder  can give notice  after July 31, 2009 either to buy the other's
     equity  interest in Bel Apartment or to sell its own equity interest in Bel
     Apartment.

     Katahdin -- Katahdin,  a majority-owned  subsidiary of Belrose Realty since
     May 2002, owns six multi-family  residential properties consisting of 2,476
     units  (collectively,  the  Katahdin  Properties)  located  in five  states
     (Florida,  North Carolina,  New Mexico, Texas and Washington).  The average
     occupancy rate was approximately  96% at December 31, 2003.  Belrose Realty
     owns 100% of the Class A units of Katahdin and a minority  shareholder (the
     Katahdin Minority Shareholder) owns 100% of the Class B units. The units of
     Katahdin entitled to board of managers'  representation are currently owned
     75% by Belrose  Realty and 25% by the Katahdin  Minority  Shareholder.  The
     Class  B  equity   interest  is  recorded  as  minority   interest  on  the
     Consolidated Statements of Assets and Liabilities. The primary distinctions
     between the two classes of shares are the distribution  priority and voting
     rights. Belrose Realty has priority in distributions and has greater voting
     rights  than the  holder  of the  Class B  units.  Pursuant  to a  buy/sell
     agreement entered into at the time Katahdin was established, either Belrose
     Realty or the Katahdin Minority  Shareholder can give notice after November
     23, 2010 either to buy the other's  equity  interest in Katahdin or to sell
     its own equity interest in Katahdin.




     Bel Communities -- Bel Communities,  a majority-owned subsidiary of Belrose
     Realty since October 2002, owns twelve multi-family  residential properties
     consisting of 2,624 units  (collectively,  the Bel Communities  Properties)
     located  in  eleven  states  (Texas,  Arizona,   Georgia,  North  Carolina,

                                       39
<PAGE>

     Washington,  Tennessee, Minnesota, Maryland, Oregon, Oklahoma and Florida).
     The average  occupancy  rate was 93% at December 31, 2003.  Belrose  Realty
     owns  Class A units  of Bel  Communities,  representing  75% of the  voting
     interests  in  Bel  Communities,   and  a  minority  shareholder  (the  Bel
     Communities Minority  Shareholder) owns Class B units,  representing 25% of
     the voting  interests in Bel  Communities.  The Class B equity  interest is
     recorded as minority interest on the Consolidated  Statements of Assets and
     Liabilities. The primary distinctions between the two classes of shares are
     the distribution priority and voting rights. Belrose Realty has priority in
     distributions  and has  greater  voting  rights  than the holder of Class B
     units.  Pursuant  to a  buy/sell  agreement  entered  into at the  time Bel
     Communities was  established,  either Belrose Realty or the Bel Communities
     Minority  Shareholder can give notice after November 27, 2009 either to buy
     the other's  equity  interest in Bel  Communities or to sell its own equity
     interest in Bel Communities.

     The audited financial statements of the Portfolio,  including the Portfolio
     of Investments, are included elsewhere in this report and should be read in
     conjunction with these financial statements.

2    SIGNIFICANT ACCOUNTING POLICIES

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

     A PRINCIPLES OF  CONSOLIDATION  -- The  consolidated  financial  statements
     include  the   accounts  of  Belrose   Capital  and  its   majority   owned
     subsidiaries.   Belrose   Capital  and  Belrose  Realty   consolidate   all
     investments in affiliates in which their ownership exceeds 50 percent.  The
     accompanying  consolidated  financial  statements  include the  accounts of
     Belrose  Capital,   Belrose  Realty,   Bel  Apartment,   Katahdin  and  Bel
     Communities  (collectively,  the Fund). All material  intercompany accounts
     and transactions have been eliminated.

     B BASIS OF PRESENTATION -- Belrose Capital is an investment company and, as
     such,  presents its assets at fair value.  Fixed  liabilities are generally
     stated at their principal value.

     C  INVESTMENT  COSTS  -- The  Fund's  investment  assets  were  principally
     acquired through  contributions of common stock by Shareholders in exchange
     for Shares of the Fund,  through purchases of Partnership  Preference Units
     and other real estate investments, and through contributions of real estate
     investments  in exchange  for cash and a minority  interest  in  controlled
     subsidiaries.  Upon  receipt  of common  stock from  Shareholders,  Belrose
     Capital  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 initial cost at which the Fund's investments
     of  contributed   securities  is  carried  in  the  consolidated  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.  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
     contributed to the Fund. The initial tax and financial  reporting  basis of
     the Fund's investment in Partnership Preference Units and other real estate
     purchased by the Fund is the purchase  cost.  The initial cost at which the
     Fund's   investments   in  real  estate   contributed  is  carried  in  the
     consolidated financial statements is the market value on contribution date.
     The  initial  tax  basis  of real  estate  investments  contributed  is the
     contributor's tax basis at the time of contribution or value at the time of
     contribution, depending on the taxability of the contribution.

     D INVESTMENT AND OTHER VALUATIONS -- The Fund's  investments may consist of
     shares  of  Belvedere  Capital,  real  property  investments,   Partnership
     Preference Units and short-term debt securities.  Belvedere  Capital's only
     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 agreements  (Note 7). The valuation policy followed
     by the Fund, Belvedere Capital and the Portfolio is as follows:

     Securities listed on a U.S. securities exchange generally are valued at the
     last sale price on the day of valuation  or, if no sales took place on such
     date, at the mean between the closing bid and asked prices therefore on the
     exchange where such securities are principally  traded.  Equity  securities
     listed on the NASDAQ  National  Market  System  generally are valued at the
     official  NASDAQ  closing  price.  Unlisted or listed  securities for which
     closing sales prices or closing  quotations are not available are valued at
     the mean between the latest available bid and asked prices. Exchange-traded
     options  are  valued at the last sale  price  for the day of  valuation  as
     quoted on the principal exchange or board of trade on which the options are
     traded or, in the  absence of sales on such date,  at the mean  between the
     latest bid and asked prices therefore.  Futures positions on securities and
     currencies  generally are valued at closing settlement  prices.  Short-term
     debt securities with a  remaining maturity of 60 days or less are valued at

                                       40
<PAGE>

     amortized  cost.  If  short-term  debt  securities  were  acquired  with  a
     remaining maturity of more than 60 days, their amortized cost value will be
     based on their value on the sixty-first day prior to maturity.  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.  The daily  valuation  of
     foreign  securities  generally is  determined as of the close of trading on
     the principal  exchange on which such securities  trade.  Events  occurring
     after the close of trading on foreign  exchanges may result in  adjustments
     to the  valuation of foreign  securities to more  accurately  reflect their
     fair  value  as of the  close of  regular  trading  on the New  York  Stock
     Exchange.  The Portfolio may rely on an independent fair valuation  service
     in adjusting the valuations of foreign  securities.  Foreign securities and
     currencies are valued in U.S.  dollars,  based on foreign currency exchange
     rate quotations supplied by an independent  quotation 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  of  the  Portfolio  considering
     relevant  factors,  data and  information,  including  the market  value of
     freely  tradeable  securities of the same class in the principal  market on
     which such  securities are normally  traded.  Interest rate swap agreements
     are  valued by Boston  Management  and  Research  (Boston  Management),  as
     Investment  Adviser of Belrose Capital,  based upon dealer and counterparty
     quotes and pricing models which take into  consideration the market trading
     prices of interest  rate swap  agreements  that have  similar  terms to the
     interest rate swap agreements the Fund has entered.

     Market prices for the Fund's real estate investments (including Partnership
     Preference  Units  and  joint  ventures)  are  not  readily  available  and
     therefore they are stated in the Fund's consolidated  financial  statements
     at  estimated  fair  value.  The  estimated  fair  value  of an  investment
     represents  the amount at which  Boston  Management  (as manager of Belrose
     Realty)  believes  the  investment  could be sold in a current  transaction
     between willing parties in an orderly disposition, that is, other than in a
     forced or liquidation sale. In valuing these investments, Boston Management
     considers  relevant  factors,   data  and  information.   With  respect  to
     investments in Partnership  Preference Units,  Boston Management  considers
     information  from dealers and similar  firms with  knowledge of such issues
     and the prices of comparable preferred equity securities and other fixed or
     adjustable rate instruments having similar investment characteristics. Real
     estate  investments,  other than Partnership  Preference  Units, are valued
     based upon independent  valuations,  that represent the amount at which the
     investments could be sold in a current  transaction between willing parties
     and  assume an  orderly  disposition,  that is,  other  than in a forced or
     liquidation sale.  Detailed real property valuations are performed at least
     annually and reviewed periodically. The value of real estate investments in
     joint ventures is estimated  using a financial model that considers the (i)
     terms  of  the  joint   venture   agreements   relating  to  allocation  of
     distributable cash flow, (ii) the duration of the joint venture;  and (iii)
     the projected  property values and cash flows from the properties  based on
     estimates used in the independent  valuations.  Interim  valuations reflect
     results of operations and  distributions,  and may be adjusted if there has
     been a significant change in economic  circumstances  since the most recent
     independent  valuation.  The valuation of real estate investments  includes
     many  assumptions,  including,  but not limited  to, a current  transaction
     between  willing  parties  and an orderly  disposition  of  assets.  If the
     assumptions  used  to  value  a  real  estate  investment  change,  it  may
     materially impact the estimated fair value of that investment.

     A mortgage  note payable may be adjusted to the  estimated  amount at which
     the mortgage note could be settled in a current transaction.  If the rental
     property  securing  such  mortgage  note payable has a value lower than the
     outstanding  principal  balance,  is operating  at a deficit and  financial
     resources  are not expected to be provided to fund such  deficit,  then the
     mortgage  note payable may be adjusted to the  estimated  fair value of the
     property securing the mortgage note.

     Changes  in the fair  value  of the  Fund's  investments  are  recorded  as
     unrealized  appreciation or depreciation in the Consolidated  Statements of
     Operations.

     E INTEREST  RATE SWAPS -- Belrose  Capital has entered into  interest  rate
     swap agreements with respect to its borrowings and real estate investments.
     Pursuant to these  agreements,  Belrose Capital makes periodic  payments to
     the counterparty at predetermined fixed rates in exchange for floating-rate
     payments from the  counterparty  that fluctuate with one-month  LIBOR.  Net
     interest  paid and accrued or  received  and earned is recorded as realized
     gains or  losses  and  changes  in the  underlying  values of the swaps are
     recorded   as   unrealized   appreciation   (depreciation),   each  in  the
     Consolidated Statements of Operations. Belrose Capital is exposed to credit
     loss in the event of non-performance  by the swap  counterparty.  Risks may
     arise from the unanticipated movements in the value of interest rates.

     F RENTAL OPERATIONS -- The apartment units held by Bel Apartment,  Katahdin
     and Bel  Communities  are leased to residents  generally  for a term of one
     year  renewable  upon  consent  of  both  parties  on  a  year-to-year   or
     month-to-month basis.

                                       41
<PAGE>

     The mortgage  escrow  accounts  consist of deposits for real estate  taxes,
     insurance,  reserve for  replacements and capital repairs as required under
     the  mortgage  agreements.  The  mortgage  escrow  accounts are held by the
     respective financial  institutions and controlled by mortgage lenders (Note
     8).

     Costs  incurred in connection  with  acquisitions  of properties  have been
     capitalized.  Significant  betterments and  improvements are capitalized as
     part of real property.

     G INCOME -- Dividend income and distributions  from Partnership  Preference
     Units are recorded on the ex- dividend date and interest income is recorded
     on the accrual basis.  Rental income is recorded on the accrual basis based
     upon the terms of the lease agreements.

     Belvedere  Capital's  net  investment  income or loss consists of Belvedere
     Capital's  pro-rata  share  of the  net  investment  income  or loss of the
     Portfolio,  less all  actual or  accrued  expenses  of  Belvedere  Capital,
     determined in accordance with accounting  principles  generally accepted in
     the United  States of  America.  The Fund's net  investment  income or loss
     consists of the Fund's pro-rata share of the net investment  income or loss
     of  Belvedere  Capital,  plus all income  earned on the  Fund's  direct and
     indirect  investments  (including  Partnership  Preference  Units  and real
     property),  less all actual and accrued  expenses of the Fund determined in
     accordance  with  accounting  principles  generally  accepted in the United
     States of America.

     H DEFERRED COSTS -- Mortgage  origination  expenses  incurred in connection
     with the  financing  of Bel  Apartment,  Katahdin and Bel  Communities  are
     capitalized and amortized over the terms of the respective loans.  Deferred
     loan  costs are  included  in other  assets  and  amortization  expense  is
     included  in mortgage  interest  expense in the  accompanying  consolidated
     financial statements.

     I INCOME TAXES -- Belrose Capital,  Belvedere Capital and the Portfolio are
     treated as  partnerships  for  federal  income tax  purposes.  As a result,
     Belrose 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.  The policy of Belrose Realty, Bel Apartment,  Katahdin
     and Bel Communities is to comply with the Internal Revenue Code of 1986, as
     amended,  applicable to REITs. Belrose Realty, Bel Apartment,  Katahdin and
     Bel Communities  will generally not be subject to federal income tax to the
     extent that they distribute their earnings to their  stockholders each year
     and maintain their qualification as REITs.

     Net  investment  income and capital gains  determined  in  accordance  with
     income  tax  regulations  may  differ  from  such  amounts   determined  in
     accordance with generally accepted accounting principles.  Such differences
     could be significant and are primarily due to differences in the cost basis
     of securities  contributed,  depreciation  on real estate assets,  periodic
     payments made in connection  with  interest  rate swap  agreements  and the
     character of distributions  received from REITs and Partnership  Preference
     Units.

     J OTHER -- Investment transactions are accounted for on a trade date basis.

     K USE OF ESTIMATES -- The preparation of financial statements in conformity
     with  accounting  principles  generally  accepted  in the United  States of
     America  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.

     L  RECLASSIFICATIONS  -- Certain  amounts in the prior years'  consolidated
     financial  statements  have been  reclassified  to conform with the current
     year presentation.

     M  INDEMNIFICATIONS  -- Under Belrose  Capital's  Limited Liability Company
     Agreement, Belrose Capital's officers, its manager, investment adviser, and
     any affiliate,  associate,  officer,  employee or trustee thereof,  and any
     manager,  director,  officer or  employee  of  Belrose  Realty or any other
     controlled  subsidiary may be indemnified  against certain  liabilities and
     expenses arising out of their duties to the Fund.  Shareholders also may be
     indemnified  against  personal  liability  for the  liabilities  of Belrose
     Capital.  Additionally,  in the normal course of business,  the Fund enters
     into  agreements  with service  providers that may contain  indemnification
     clauses. The Fund's maximum exposure under these arrangements is unknown as
     this would  involve  future  claims that may be made  against the Fund that
     have not yet occurred.










3    DISTRIBUTIONS TO SHAREHOLDERS

     Belrose  Capital  intends to distribute at the end of each year, or shortly
     thereafter,  the amount of its net investment  income for the year, if any,
     and 18% of the  amount  of its net  realized  capital  gains  for such year
     (reduced  during the year ended  December  31, 2003 from 22% to reflect the
     reduction in federal long-term capital gains tax rates), if any, other than
     precontribution  gains  allocated to a  Shareholder  in  connection  with a
     tender  offer or other  extraordinary  event  with  respect  to a  security
     contributed  by that  Shareholder  or  such  Shareholder's  predecessor  in
     interest.   In  addition,   whenever  a   distribution   in  respect  of  a
     precontribution   gain  is  made,   Belrose   Capital  intends  to  make  a

                                       42
<PAGE>

     supplemental   distribution  to  compensate   Shareholders  receiving  such
     distributions  for taxes that may be due on income  specially  allocated in
     connection with the  precontribution  gain and supplemental  distributions.
     Capital  gain   distributions  that  are  made  with  respect  to  realized
     precontribution  gains  and  the  associated   supplemental   distributions
     (collectively,   Special   Distributions)   will  be  made  solely  to  the
     Shareholders to whom such realized precontribution gain is allocated. There
     were no  Special  Distributions  paid or  accrued  during  the  year  ended
     December 31, 2003 and for the period from the start of business,  March 19,
     2002, to December 31, 2002.

     The  Fund's  distributions  generally  are based on  determinations  of net
     investment  income and net realized  capital  gains for federal  income tax
     purposes.  Such amounts may differ from net investment income (or loss) and
     net realized gain (or loss) as set forth in the Fund's financial statements
     due to differences in the treatment of various income,  gain, loss, expense
     and  other  items for  federal  income  tax  purposes  and under  generally
     accepted accounting principles.

     In addition,  Belrose Realty,  Bel Apartment,  Katahdin and Bel Communities
     intend to distribute  substantially  all of their taxable  income earned by
     the respective entities during the year.

4    SHAREHOLDER TRANSACTIONS

     Belrose  Capital may issue an unlimited  number of full and fractional Fund
     Shares.  Transactions in Fund Shares, including contributions of securities
     in exchange for Shares of Belrose Capital, were as follows:


                                         YEAR ENDED          PERIOD ENDED
                                         DECEMBER 31, 2003   DECEMBER 31, 2002*
--------------------------------------------------------------------------------

Issued at Belrose Capital closings          1,283,497           16,306,636
Issued to Shareholders electing to
 receive payment of distributions
 in Fund Shares                                 4,413                   --
Redemptions                                  (415,385)            (146,365)
--------------------------------------------------------------------------------
     NET INCREASE                             872,525           16,160,271
--------------------------------------------------------------------------------
*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

     Redemptions of Fund Shares held less than three years are generally subject
     to a redemption  fee of 1% of the net asset value of Fund Shares  redeemed.
     The  redemption  fee  is  paid  to  Eaton  Vance  Distributors,   Inc.  (EV
     Distributors) by Belrose Capital on behalf of the redeeming Shareholder. No
     charge  is  levied on  redemptions  of Fund  Shares  acquired  through  the
     reinvestment  of  distributions,  Fund Shares redeemed in connection with a
     tender offer or other extraordinary corporate event or Fund Shares redeemed
     following  the  death of all of the  initial  holders  of the  Fund  Shares
     redeemed.  In addition,  no fee applies to  redemptions  made pursuant to a
     Systematic  Redemption  Plan,  whereby a Shareholder can redeem up to 2% of
     Fund Shares held on a quarterly basis. EV Distributors  received redemption
     fees of $139,527  and $91,020 for the year ended  December 31, 2003 and for
     the period from the start of  business,  March 19,  2002,  to December  31,
     2002, respectively.

     In connection with the offering of Fund Shares, for the year ended December
     31, 2003 and for the period from the start of business,  March 19, 2002, to
     December 31, 2002, EV Distributors,  the Placement Agent, received $325,083
     and $6,404,936, respectively in selling commissions paid by Belrose Capital
     on behalf of Shareholders.  EV Distributors, in turn, paid these amounts to
     the  applicable  subagent on behalf of  Shareholders  investing  in Belrose
     Capital through such subagent. In addition, for the year ended December 31,
     2003 and for the period  from the start of  business,  March 19,  2002,  to
     December 31, 2002, EV Distributors  made payments to subagents from its own
     resources  totaling $950,471 and $13,760,016,  respectively,  approximately
     equal to 1.0% of the value of investments  in Belrose  Capital made through
     subagents.

     Shareholders  in Belrose  Capital are  entitled to  restructure  their Fund
     Share interests under what is termed an Estate Freeze Election.  Under this
     election,  Fund Shares are divided into Preferred Shares and Common Shares.
     Preferred Shares have a preferential  right over the  corresponding  Common
     Shares  equal  to (i)  95% of the  original  capital  contribution  made in
     respect of the undivided  Shares from which the Preferred Shares and Common
     Shares were derived, plus (ii) an annuity priority return equal to 7.75% of
     the  Preferred  Shares'  preferential  interest  in  the  original  capital
     contribution of the undivided Fund Shares. The associated Common Shares are
     entitled  to the  remaining  5% of the  original  capital  contribution  in
     respect of the undivided Fund Shares, plus any returns thereon in excess of
     the fixed  annual  priority  of the  Preferred  Shares.  The  existence  of
     restructured Fund Shares does not adversely affect  Shareholders who do not
     participate  in the  election  nor do the  restructured  Fund  Shares  have
     preferential  rights  to Fund  Shares  that  have  not  been  restructured.
     Shareholders  who  subdivide  Fund  Shares  under this  election  sacrifice
     certain rights and privileges  that they would  otherwise have with respect
     to the Fund Shares so divided,  including  redemption rights and voting and
     consent  rights.  Upon the  twentieth  anniversary  of the  issuance of the
     associated undivided Fund Shares to the original holders thereof, Preferred
     and Common  Shares  will  automatically  convert  into full and  fractional
     undivided Fund Shares.

     The allocation of Belrose  Capital's net asset value per Share of $95.84 as
     of December 31, 2003,  between  Preferred  and Common Shares that have been
     restructured is as follows:


                               PER SHARE VALUE AT        PER SHARE VALUE AT
                               DECEMBER 31, 2003         DECEMBER 31, 2002*
                           -----------------------------------------------------
                             PREFERRED     COMMON     PREFERRED     COMMON
DATE OF CONTRIBUTION          SHARES       SHARES      SHARES       SHARES
--------------------------------------------------------------------------------
February 19, 2003             $74.80       $21.04      $     -      $     -
--------------------------------------------------------------------------------
*    There were no estate freeze participants at December 31, 2002.

                                       43
<PAGE>

5    INVESTMENT TRANSACTIONS

     The following table summarizes the Fund's  investment  transactions for the
     year ended December 31, 2003 and for the period from the start of business,
     March 19, 2002, to December 31, 2002:


                                              YEAR ENDED        PERIOD ENDED
INVESTMENT TRANSACTION                     DECEMBER 31, 2003  DECEMBER 31, 2002*
--------------------------------------------------------------------------------
Increases in investment in Belvedere
 Capital                                    $ 95,047,136      $ 1,389,421,823
Decreases in investment in Belvedere
 Capital(1)                                 $ 38,976,768      $    19,333,412
Acquisitions of other real estate(2)        $          -      $   103,804,186
Sale of common stock(1)                     $ 10,140,535      $             -
Purchase of Partnership Preference Units(2) $  8,033,600      $    41,000,300
--------------------------------------------------------------------------------
*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

(1)  Included in decreases in investment in Belvedere Capital for the year ended
     December  31,  2003 is the  receipt of common  stock  through a  redemption
     in-kind of $10,155,477.  Belrose Capital subsequently sold the common stock
     during the year ended  December 31, 2003  recognizing  a loss of $14,942 on
     the transaction.

(2)  Purchases of other real estate investments and Partnership Preference Units
     during the year ended  December  31,  2003 and the period from the start of
     business,  March 19, 2002 to December 31, 2002 represent  amounts purchased
     from other funds sponsored by Eaton Vance Management (Eaton Vance).

6    INDIRECT INVESTMENT IN PORTFOLIO

     The  following  table  summarizes  the Fund's  investment  in the Portfolio
     through Belvedere Capital, for the year ended December 31, 2003 and for the
     period from the start of business,  March 19,  2002,  to December 31, 2002,
     including  allocations of income,  expenses and net realized and unrealized
     gains (losses) for the year and period then ended:
<TABLE>
<CAPTION>
                                                                         YEAR ENDED           PERIOD ENDED
                                                                      DECEMBER 31, 2003    DECEMBER 31, 2002*
-------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>
Belvedere Capital's interest in the Portfolio(1)                      $  11,100,012,615    $   8,753,268,522
The Fund's investment in Belvedere Capital(2)                         $   1,640,828,100    $   1,264,314,536
Income allocated to Belvedere Capital from the Portfolio              $     143,671,130    $      98,462,745
Income allocated to the Fund from Belvedere Capital                   $      21,625,926    $       8,141,479
Expenses allocated to Belvedere Capital from the Portfolio            $      43,085,940    $      32,901,573
Expenses allocated to the Fund from Belvedere Capital(3)              $       8,692,174    $       3,413,514
Net realized gain allocated to Belvedere Capital from the Portfolio   $     128,352,887    $      61,658,923
Net realized gain allocated to the Fund from Belvedere Capital        $      19,117,006    $       7,233,500
Change in unrealized appreciation (depreciation)
 allocated to Belvedere Capital from the Portfolio                    $   1,892,271,872    $  (2,373,856,566)
Change in unrealized appreciation (depreciation)
 allocated to the Fund from Belvedere Capital                         $     288,392,438    $    (117,735,340)
-------------------------------------------------------------------------------------------------------------
</TABLE>
*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

(1)  As of December 31, 2003 and 2002, the value of Belvedere Capital's interest
     in the Portfolio  represents 63.0% and 60.1% of the Portfolio's net assets,
     respectively.

(2)  As of  December  31,  2003 and 2002,  the Fund's  investment  in  Belvedere
     Capital  represents  14.8% and 14.4% of  Belvedere  Capital's  net  assets,
     respectively.

(3)  Allocated  expenses include $6,481,012 and $2,547,591 of expenses allocated
     from the Portfolio,  operating expenses of $61,831 and $20,930, and service
     fees of $2,149,331  and $844,993,  for the year ended December 31, 2003 and
     for the period from the start of business  March 19, 2002,  to December 31,
     2002, respectively (Note 9).

7    INTEREST RATE SWAP AGREEMENTS

     Belrose Capital has entered into interest rate swap agreements with Merrill
     Lynch Capital Services, Inc. in connection with its real estate investments
     and the associated borrowings.  Under such agreements,  Belrose Capital has
     agreed to make periodic payments at fixed rates in exchange for payments at
     floating rates.  The notional or contractual  amounts of these  instruments
     may not necessarily  represent the amounts potentially subject to risk. The
     measurement of the risks  associated  with these  investments is meaningful
     only when considered in conjunction  with all related  assets,  liabilities
     and agreements. Interest rate swap agreements open at December 31, 2003 and
     2002 are listed below.


<TABLE>
<CAPTION>

              NOTIONAL                               INITIAL
              AMOUNT                                 OPTIONAL          FINAL            UNREALIZED             UNREALIZED
EFFECTIVE     (000'S       FIXED       FLOATING     TERMINATION     TERMINATION        APPRECIATION           DEPRECIATION
DATE          OMITTED)     RATE          RATE          DATE            DATE         AT DECEMBER 31, 2003   AT DECEMBER 31, 2002
------------------------------------------------------------------------------------------------------------------------------------
<S>           <C>          <C>       <C>              <C>              <C>              <C>
  10/03       $ 31,588     4.180%    LIBOR + 0.30%     7/09            6/10             $  210,531            $          -
  10/03         37,943     4.160%    LIBOR + 0.30%    11/09            6/10                252,843                       -
  10/03         83,307     4.045%    LIBOR + 0.30%      -              6/10                960,493                       -
   3/02         35,136     5.660%    LIBOR + 0.38%      -              3/07                      -              (3,478,871)
   3/07         31,588     7.140%    LIBOR + 0.38%      -              7/09                      -              (1,134,349)
   5/02         32,966     5.159%    LIBOR + 0.38%      -              3/07                      -              (2,591,755)
   3/07         32,966     6.874%    LIBOR + 0.38%      -             11/10                      -              (1,309,376)
   7/02         29,588     4.540%    LIBOR + 0.38%      -              3/07                      -              (1,580,735)
   3/07         29,588     6.500%    LIBOR + 0.38%      -              7/09                      -                (683,659)
  10/02         36,631     3.550%    LIBOR + 0.38%      -              3/07                      -                (480,992)
   3/07         36,631     5.480%    LIBOR + 0.38%      -             11/09                      -                 (67,648)
  12/02          7,865     3.685%    LIBOR + 0.38%      -              3/07                      -                (146,897)
   3/07          7,865     5.727%    LIBOR + 0.38%      -              7/09                      -                 (78,560)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL                                                                                   $1,423,867            $(11,552,842)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
     On October 1, 2003, new interest rate swap  agreements were entered into to
     fix a portion of the cost of Belrose Capital's  borrowings under the Credit
     Facility (Note 8B) established on July 15, 2003. Concurrently, all interest
     rate swap  agreements  outstanding  on September 30, 2003 were  terminated,
     resulting in realized losses of $12,175,577.

8    DEBT

     A  MORTGAGES  --  Rental  property  held  by  Belrose  Realty's  controlled
     subsidiaries  is  financed  through  mortgages  issued  to  the  controlled
     subsidiaries.  The  mortgages  are  secured  by the  rental  property.  The
     mortgages  are  generally  without  recourse to Belrose  Realty and Belrose
     Capital,  except,  in the case of Bel  Apartment and Bel  Communities,  for
     certain    liabilities    associated    with   fraud,    misrepresentation,
     misappropriation of funds, or breach of material covenants, and liabilities
     arising from  environmental  conditions  involving or affecting  the rental
     property subject to the mortgages.  Belrose Capital and Belrose Realty have
     received   indemnification   from  each  of  the  Bel  Apartment   Minority
     Shareholder  and  Bel  Communities   Minority  Shareholder  (Note  1B),  as
     applicable  for certain of such potential  liabilities.  The estimated fair
     value  of the  rental property  securing  the  loans was  $473,491,403  and

                                       44
<PAGE>
     $470,597,295 loans was at December 31, 2003 and 2002, respectively. Amounts
     outstanding at December 31, 2003 and 2002 are as follows:

                      ANNUAL    MONTHLY       BALANCE AT       BALANCE AT
                     INTEREST   INTEREST     DECEMBER 31,     DECEMBER 31,
MATURITY DATE          RATE     PAYMENT*         2003             2002
--------------------------------------------------------------------------------
May 1, 2010           8.330%   $  745,323    $107,369,483     $107,369,483
December 1, 2010      7.540%      760,283     121,000,000      121,000,000
June 1, 2011          6.765%      653,104     115,850,000      115,850,000
--------------------------------------------------------------------------------
                               $2,158,710    $344,219,483     $344,219,483
--------------------------------------------------------------------------------

*    Mortgages  provide  for  monthly  payments  of  interest  only  through the
     respective  maturity  date,  with the entire  principal  balance due on the
     respective maturity date.

     The estimated market value of the mortgage notes payable was  approximately
     $393,000,000  at December  31, 2003 and 2002.  The mortgage  notes  payable
     cannot be prepaid or otherwise  disposed of without incurring a substantial
     prepayment  penalty or without the sale of the rental property  financed by
     the mortgage  notes payable.  Management  generally has no current plans to
     prepay or  otherwise  dispose  of the  mortgage  notes  payable or sell the
     related rental property prior to the maturity date. The market value of the
     mortgages is based on estimates  using  discounted  cash flow  analysis and
     currently   prevailing  rates.   Considerable   judgment  is  necessary  in
     interpreting  market data to develop  estimates of market value. The use of
     different  assumptions  or  estimation  methodologies  may have a  material
     effect on the estimated market value.

     B CREDIT  FACILITY -- On July 15,  2003,  Belrose  Capital  refinanced  its
     credit  facility with Merrill  Lynch  Mortgage  Capital,  Inc. with two new
     credit  arrangements  (collectively,   the  Credit  Facility).  The  Credit
     Facility  has a  seven-year  maturity  and will  expire  on June 25,  2010.
     Belrose  Capital's  obligations  under the Credit Facility are secured by a
     pledge of its assets,  excluding the assets of Bel Apartment,  Katahdin and
     Bel Communities.

     At the date the  agreement  was  entered  into,  Belrose  Capital  borrowed
     $168,000,000  with DrKW Holdings,  Inc., which increased to $177,000,000 as
     of  November  4, 2003.  Borrowings  under this  credit  arrangement  accrue
     interest at a rate of one-month LIBOR plus 0.30% per annum.

     The $57,000,000  credit  arrangement  with Merrill Lynch Mortgage  Capital,
     Inc.  includes  the ability to issue  letters of credit up to  $10,000,000.
     This credit arrangement  accrues interest at a rate of one-month LIBOR plus
     0.38% per annum.  A commitment fee of 0.10% per annum is paid on the unused
     commitment  amount.  Belrose  Capital pays all fees associated with issuing
     the letters of credit.  The  letters of credit were issued as a  substitute
     for funding certain mortgage escrow accounts  required by the lender of Bel
     Communities  and Bel  Apartment.  The letters of credit  expire in 2004 and
     automatically  extend for  one-year  periods not to extend  beyond June 15,
     2010.

     Borrowings  under the Credit Facility have been used to purchase the Fund's
     interests  in real  estate  investments,  to pay  selling  commissions  and
     organizational  expenses, and to provide for the short-term liquidity needs
     of the Fund. Additional borrowings under the Credit Facility may be made in
     the future for these purposes.

     The following table summarizes Belrose Capital's Credit Facility.

                                 AT DECEMBER 31, 2003   AT DECEMBER 31, 2002 (1)
                               -------------------------------------------------
Total Credit Facility                $ 234,000,000        $ 300,000,000
Borrowings outstanding               $ 183,300,000        $ 155,300,000
Outstanding letters of credit        $   2,080,452        $   2,667,011
                               -------------------------------------------------

(1)  At December 31, 2002,  Belrose Capital had a credit facility which included
     the  ability  to utilize  letters of credit  with  Merrill  Lynch  Mortgage
     Capital,  Inc. Interest on borrowed funds was based on the prevailing LIBOR
     rate for the  respective  interest  period plus a spread of 0.38% per annum
     and the fees on  letters  of  credit  were  charged  at a rate of 0.98% per
     annum.  In addition,  Belrose  Capital  paid a commitment  fee at a rate of
     0.10% per annum on the unused amount of the loan commitment.

9    MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

     Belrose  Capital  and the  Portfolio  have  engaged  Boston  Management  as
     Investment  Adviser.  Under the terms of the  advisory  agreement  with the
     Portfolio,  Boston Management receives a monthly advisory 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 year ended  December  31, 2003 and for the period from the start of
     business, March 19, 2002, to December 31, 2002, the advisory fee applicable
     to the Portfolio was 0.44% (annually) of average daily net assets.



     In addition,  Boston Management is, subject to the fee cap described below,
     entitled to receive a monthly advisory and administrative fee of 1/20 of 1%
     (0.60% annually) of the average daily gross assets of Belrose Capital.  The
     term "gross  assets" with respect to Belrose  Capital is defined to include
     the current value of all of Belrose  Capital's  assets  (including  Belrose
     Capital's interest in Belvedere Capital and Belrose Capital's ratable share
     of the assets of its  directly  and  indirectly  controlled  subsidiaries),
     without reduction by any liabilities. Belrose Realty pays Boston Management
     a  monthly  management  fee at a rate of 1/20 of 1%  (equivalent  to  0.60%
     annually)  of the average  daily gross assets of Belrose  Realty.  The term
     "gross  assets"  with  respect to Belrose  Realty is defined to include the
     current value of all assets of Belrose Realty,  including  Belrose Realty's
     ratable  share  of the  assets  of  its  controlled  subsidiaries,  without
     reduction  by any  liabilities.  For this  purpose,  the  assets of Belrose
     Realty's controlled  subsidiaries are reduced by the proportionate interest
     therein of investors other than Belrose Realty.

                                       45
<PAGE>

     Eaton Vance and Boston Management do not receive separate  compensation for
     serving as Manager of Belrose  Capital  and Manager of  Belvedere  Capital,
     respectively.

     As compensation for its services as Placement  Agent,  Belrose Capital pays
     EV  Distributors  a  monthly  distribution  fee at a rate  of  1/120  of 1%
     (equivalent  to 0.10%  annually)  of Belrose  Capital's  average  daily net
     assets.

     Payments  to  the  Eaton  Vance   organization  for  investment   advisory,
     management,  administration and distribution services made by or in respect
     of Belrose  Capital on a direct or indirect  basis are subject to a monthly
     fee cap at a rate of 1/20th of 1%  (equivalent  to 0.60%  annually)  of the
     average daily gross assets of Belrose Capital (as defined above).  Payments
     subject  to the  monthly  fee  cap  are  the  distribution  fee  paid to EV
     Distributors,   Belrose  Capital's   attributable  share  of  advisory  and
     management  fees paid by the  Portfolio  and  Belrose  Realty,  and Belrose
     Capital's advisory and administrative  fee. Boston Management has agreed to
     waive a portion of the monthly  advisory and  administrative  fee otherwise
     payable by Belrose Capital as necessary to comply with the monthly fee cap.

     Pursuant  to  a  servicing  agreement  between  Belvedere  Capital  and  EV
     Distributors, Belvedere Capital pays a servicing fee to EV Distributors 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.  Pursuant  to a  servicing  agreement
     between  Belrose  Capital  and  EV  Distributors,  Belrose  Capital  pays a
     servicing fee to EV  Distributors on a quarterly basis at an annual rate of
     0.25% of Belrose Capital's average daily net assets, less Belrose Capital's
     allocated share of the servicing fee payable by Belvedere Capital.

     Management  services for the real property held by Bel Apartment,  Katahdin
     and Bel  Communities  are  provided  by an  affiliate  of  each  respective
     entity's Minority Shareholder (Note 1B). Each management agreement provides
     for a  management  fee and allows  for  reimbursement  of payroll  expenses
     incurred  by the  manager in  conjunction  with  managing  each  respective
     entity's properties (Note 1B).

     The table below sets forth the fees,  paid or payable by, or allocable  to,
     the Fund and Belrose  Realty for the year ended  December  31, 2003 and for
     the period from the start of business, March 19, 2002, to December 31, 2002
     in connection  with the services  rendered by Eaton Vance,  its affiliates,
     and affiliates of Belrose Realty's controlled subsidiaries.
<TABLE>
<CAPTION>
                                                                         YEAR ENDED             PERIOD ENDED
                                                                         DECEMBER 31, 2003      DECEMBER 31, 2002*
------------------------------------------------------------------------------------------------------------------
<S>     <C>    <C>

Advisory fee allocated to Belvedere Capital from the Portfolio          $      41,671,111      $      31,748,787
Advisory fee allocated to the Fund from Belvedere Capital               $       6,267,847      $       2,454,868
Advisory and administrative fee and management fee                      $       4,977,521      $       2,163,168
Distribution fees                                                       $       1,415,111      $         548,124
Reduction of advisory and administrative fees                           $       1,415,111      $         548,124
Servicing fees allocated to Belvedere Capital from the Portfolio        $      14,288,579      $      10,956,348
Servicing fees allocated to the Fund from Belvedere Capital             $       2,149,331      $         844,993
Servicing fees                                                          $       1,385,329      $         519,494
Servicing fees paid or accrued to subagents                             $       1,471,244      $               -
Property management fees                                                $       2,590,322      $       1,523,512
     --------------------------------------------------------------------------------------------------------------
</TABLE>
*    For the period from the start of business,  March 19, 2002, to December 31,
     2002.

10   SEGMENT INFORMATION

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

     Belrose Capital evaluates  performance of the reportable  segments based on
     the net increase (decrease) in net assets from operations of the respective
     segment,  which  includes net investment  income (loss),  net realized gain
     (loss) and unrealized appreciation (depreciation).  The accounting policies
     of the reportable  segments are the same as those for Belrose  Capital on a
     consolidated  basis (Note 2). No reportable  segments have been aggregated.
     Reportable information by segment is as follows:





<TABLE>
<CAPTION>
                                           TAX-
                                           MANAGED
     FOR THE YEAR ENDED                    GROWTH              REAL
     DECEMBER 31, 2003                     PORTFOLIO*          ESTATE            TOTAL
     ----------------------------------------------------------------------------------------------
     <S>                                   <C>                 <C>               <C>

     Revenue                               $      12,933,752   $    69,349,438   $       82,283,190
     Interest expense on mortgages                        --       (26,317,765)         (26,317,765)
     Interest expense on Credit Facility                  --        (2,572,705)          (2,572,705)
     Operating expenses                             (922,781)      (31,784,810)         (32,707,591)
     Minority interest in net income of
       controlled subsidiaries                            --        (1,943,578)          (1,943,578)
     ----------------------------------------------------------------------------------------------
     NET INVESTMENT INCOME                 $      12,010,971   $     6,730,580   $       18,741,551
     Net realized gain (loss)                     19,102,064       (16,652,934)           2,449,130
     Change in unrealized appreciation
       (depreciation)                            288,392,438        23,444,275          311,836,713
     ----------------------------------------------------------------------------------------------
     NET INCREASE IN NET ASSETS FROM
       OPERATIONS OF REPORTABLE SEGMENTS   $     319,505,473   $    13,521,921   $      333,027,394
     ----------------------------------------------------------------------------------------------


                                           TAX-
                                           MANAGED
     FOR THE PERIOD ENDED                  GROWTH              REAL
     DECEMBER 31, 2002(1)                  PORTFOLIO*          ESTATE            TOTAL
     ----------------------------------------------------------------------------------------------

     Revenue                               $       4,727,965     $  39,749,324      $    44,477,289
     Interest expense on mortgages                         -       (15,144,576)         (15,144,576)
     Interest expense on Credit Facility                   -        (1,692,400)          (1,692,400)
     Operating expenses                             (344,298)      (17,996,501)         (18,340,799)
     Minority interest in net income of
       controlled subsidiaries                             -        (1,465,099)          (1,465,099)
     ----------------------------------------------------------------------------------------------
     NET INVESTMENT INCOME                 $       4,383,667    $     3,450,748     $     7,834,415
     Net realized gain (loss)                      7,233,500         (2,044,673)          5,188,827
     Change in unrealized appreciation
       (depreciation)                           (117,735,340)       (11,663,557)       (129,398,897)
     -----------------------------------------------------------------------------------------------
     NET DECREASE IN NET ASSETS FROM
       OPERATIONS OF REPORTABLE SEGMENTS   $    (106,118,173)   $   (10,257,482)    $  (116,375,655)
     -----------------------------------------------------------------------------------------------
</TABLE>
(1)  For the period from the start of business,  March 19, 2002, to December 31,
     2002.

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

                                       46
<PAGE>
     The following table  reconciles the segment  information  reported above to
     the consolidated financial statements for the periods indicated.
<TABLE>
<CAPTION>
                                                                                         YEAR ENDED             PERIOD ENDED
                                                                                         DECEMBER 31, 2003      DECEMBER 31, 2002(1)
     ------------------------------------------------------------------------------------------------------------------------------
     <S>                                                                                 <C>                    <C>
     Revenue:
        Revenue from reportable segments                                                 $      82,283,190      $      44,477,289
        Unallocated amounts:
           Interest earned on cash not invested in the
              Portfolio or in subsidiaries                                                          29,766                 10,438
     ------------------------------------------------------------------------------------------------------------------------------
     TOTAL REVENUE                                                                       $      82,312,956      $      44,487,727
     ------------------------------------------------------------------------------------------------------------------------------
     Net increase (decrease) in net assets from operations:
        Net increase (decrease) in net assets from operations of reportable segments     $     333,027,394      $    (116,375,655)
        Unallocated amounts:
           Interest earned on cash not invested in the
              Portfolio or in subsidiaries                                                          29,766                 10,438
        Unallocated amounts(2):
           Distribution and servicing fees                                                      (2,800,440)            (1,067,618)
           Interest expense on Credit Facility                                                    (223,713)               (89,074)
           Audit, tax and legal fees                                                              (294,771)              (503,175)
           Other operating expenses                                                               (172,751)              (753,302)
     ------------------------------------------------------------------------------------------------------------------------------
     TOTAL NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS                         $     329,565,485      $    (118,778,386)
     ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  For the period from the start of business,  March 19, 2002, to December 31,
     2002.

(2)  Unallocated amounts represent expenses incurred that pertain to the overall
     operation  of  Belrose  Capital,  and do not  pertain  to either  operating
     segment.

                                 TAX-MANAGED GROWTH
AT DECEMBER 31, 2003                  PORTFOLIO*     REAL ESTATE      TOTAL
    ----------------------------------------------------------------------------
Segment assets                      $1,640,828,100  $544,254,775  $2,185,082,875
Segment liabilities                              -   533,483,765     533,483,765
--------------------------------------------------------------------------------
NET ASSETS OF REPORTABLE SEGMENTS   $1,640,828,100  $ 10,771,010  $1,651,599,11
--------------------------------------------------------------------------------


                              TAX-MANAGED GROWTH
AT DECEMBER 31, 2002               PORTFOLIO*     REAL ESTATE         TOTAL
-------------------------------------------------------------------------------
Segment assets                   $1,264,314,536   $524,810,142    $1,789,124,678
Segment liabilities                           -    542,037,048       542,037,048
--------------------------------------------------------------------------------
NET ASSETS (LIABILITIES) OF
 REPORTABLE SEGMENTS             $1,264,314,536   $(17,226,906)   $1,247,087,630
-------------------------------------------------------------------------------

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

     The following table  reconciles the segment  information  reported above to
     the consolidated financial statements for the periods indicated:

                                      DECEMBER 31, 2003      DECEMBER 31, 2002
--------------------------------------------------------------------------------
Net Assets:
 Net assets of reportable segments      $1,651,599,110         $1,247,087,630
 Unallocated cash(1)                           412,226              2,083,049
 Short-term investments(1)                   7,614,214                      -
 Loan payable - Credit Facility(2)         (27,026,426)            (7,071,301)
 Other liabilities                            (144,366)               (97,723)
--------------------------------------------------------------------------------
TOTAL NET ASSETS                        $1,632,454,758         $1,242,001,655
--------------------------------------------------------------------------------

(1)  Unallocated  cash  and  short-term  investments  represent  cash  and  cash
     equivalents not invested in the Portfolio or real estate assets.

(2)  Unallocated amount of loan payable-Credit  Facility  represents  borrowings
     not specifically used to fund real estate investments.  Such borrowings are
     generally used to pay selling commissions,  organization expenses and other
     liquidity needs of the Fund.

11   SUBSEQUENT EVENT (UNAUDITED)

     On January 14,  2004,  the Fund made a  distribution  of $0.77 per share to
     Shareholders of record on January 13, 2004.

                                       47
<PAGE>

BELROSE CAPITAL FUND LLC
REPORT OF INDEPENDNT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS
OF BELROSE CAPITAL FUND LLC AND SUBSIDIARIES

We  have  audited  the  accompanying   consolidated  statements  of  assets  and
liabilities,  including the  consolidated  portfolio of investments,  of Belrose
Capital Fund LLC and subsidiaries,  (collectively,  the Fund) as of December 31,
2003 and 2002, and the related consolidated statements of operations, changes in
net assets, cash flows, and financial highlights for the year ended December 31,
2003 and the period from the start of  business,  March 19, 2002 to December 31,
2002.  These  financial   statements  and  the  financial   highlights  are  the
responsibility  of the Fund's  management.  Our  responsibility is to express an
opinion on these financial statements based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  Our  procedures  included  confirmation  of securities  owned as of
December 31, 2003 and 2002 by correspondence  with the custodian.  An audit also
includes assessing the accounting principles used and significant estimates made
by  management,   as  well  as  evaluating  the  overall   financial   statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the consolidated  financial statements and financial highlights
referred to above  present  fairly,  in all  material  respects,  the  financial
position  of the Fund as of  December  31,  2003 and 2002,  the  results  of its
operations,  the changes in its net assets,  its cash flows,  and the  financial
highlights for the year ended December 31, 2003 and the period from the start of
business,  March 19, 2002 to December 31, 2002,  in conformity  with  accounting
principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 5, 2004

                                       48

<PAGE>

TAX-MANAGED GROWTH PORTFOLIO as of December 31, 2003
PORTFOLIO OF INVESTMENTS

COMMON STOCKS -- 99.2%
<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
AEROSPACE AND DEFENSE -- 2.5%

Boeing Company (The)                                                      797,051   $       33,587,729
General Dynamics                                                          735,000           66,436,650
Honeywell International, Inc.                                             275,998            9,226,613
Northrop Grumman Corp.                                                  1,684,522          161,040,303
Raytheon Company                                                          313,599            9,420,514
Rockwell Collins, Inc.                                                    203,032            6,097,051
Teledyne Technologies Incorporated(1)                                       6,117              115,305
United Technologies Corp.                                               1,582,098          149,935,427
------------------------------------------------------------------------------------------------------
                                                                                    $      435,859,592
------------------------------------------------------------------------------------------------------

AIR FREIGHT AND LOGISTICS -- 2.6%

FedEx Corporation                                                       2,106,578   $      142,194,015
Robinson (C.H.) Worldwide, Inc.                                         1,186,638           44,985,447
United Parcel Service, Inc. Class B                                     3,549,425          264,609,634
------------------------------------------------------------------------------------------------------
                                                                                    $      451,789,096
------------------------------------------------------------------------------------------------------

AIRLINES -- 0.0%

Southwest Airlines, Inc.                                                  126,393   $        2,039,983
------------------------------------------------------------------------------------------------------
                                                                                    $        2,039,983
------------------------------------------------------------------------------------------------------

AUTO COMPONENTS -- 0.2%

ArvinMeritor, Inc.                                                         33,635   $          811,276
Borg-Warner Automotive, Inc.                                              203,981           17,352,664
Dana Corp.                                                                 25,000              458,750
Delphi Automotive Systems Corp.                                             6,338               64,711
Johnson Controls, Inc.                                                    114,364           13,279,948
Visteon Corp.                                                              10,226              106,453
------------------------------------------------------------------------------------------------------
                                                                                    $       32,073,802
------------------------------------------------------------------------------------------------------

AUTOMOBILES -- 0.1%

DaimlerChrysler AG                                                          7,000   $          323,540
Ford Motor Co.                                                            145,884            2,334,144
General Motors Corp.                                                       13,896              742,046
Harley-Davidson, Inc.                                                     137,700            6,544,881
Honda Motor Co. Ltd. ADR                                                   20,000              450,000
------------------------------------------------------------------------------------------------------
                                                                                    $       10,394,611
------------------------------------------------------------------------------------------------------

BEVERAGES -- 3.9%

Anheuser-Busch Companies, Inc.                                          3,381,243   $      178,123,881
Coca-Cola Company (The)                                                 3,177,651          161,265,788
Coca-Cola Enterprises, Inc.                                             1,729,424   $       37,822,503
PepsiCo., Inc.                                                          6,531,299          304,489,159
------------------------------------------------------------------------------------------------------
                                                                                    $      681,701,331
------------------------------------------------------------------------------------------------------

BIOTECHNOLOGY -- 1.7%

Amgen, Inc.(1)                                                          3,861,137   $      238,618,267
Applera Corp. - Celera Genomics Group(1)                                   26,000              361,660
Genzyme Corp. - General Division(1)                                       464,926           22,939,449
Gilead Sciences, Inc.(1)                                                   39,362            2,288,507
Incyte Pharmaceuticals, Inc.(1)                                            14,294               97,771
Invitrogen Corp.(1)                                                       467,551           32,728,570
Vertex Pharmaceuticals, Inc.(1)                                            13,000              132,990
------------------------------------------------------------------------------------------------------
                                                                                    $      297,167,214
------------------------------------------------------------------------------------------------------






BUILDING PRODUCTS -- 0.9%

American Standard Companies, Inc.(1)                                      331,609   $       33,393,026
CRH plc                                                                   329,450            6,752,716
Masco Corporation                                                       4,145,436          113,626,401
Water Pik Technologies(1)                                                   2,141               26,270
------------------------------------------------------------------------------------------------------
                                                                                    $      153,798,413
------------------------------------------------------------------------------------------------------

CAPITAL MARKETS -- 3.8%

Affiliated Managers Group(1)                                               13,680   $          951,991
Bank of New York Co., Inc. (The)                                          441,413           14,619,599
Bear Stearns Companies, Inc.                                               83,352            6,663,992
Credit Suisse Group                                                       155,136            5,676,090
Federated Investors, Inc.                                               1,634,947           48,002,044
Franklin Resources, Inc.                                                1,508,429           78,528,814
Goldman Sachs Group, Inc.                                                   9,627              950,474
Investors Financial Services Corp.                                        475,402           18,260,191
Knight Trading Group, Inc.(1)                                           1,750,000           25,620,000
Legg Mason, Inc.                                                           17,641            1,361,532
Lehman Brothers Holdings, Inc.                                             57,486            4,439,069
Mellon Financial Corporation                                              221,912            7,125,594
Merrill Lynch & Co., Inc.                                               1,761,959          103,338,895
Morgan (J.P.) Chase & Co.                                                 394,005           14,471,804
Morgan Stanley Dean Witter & Co.                                        4,770,551          276,071,786
Northern Trust Corp.                                                      261,505           12,139,062
Nuveen Investments Class A                                                150,000            3,999,000
Price (T. Rowe) Group, Inc.                                               171,434            8,127,686
Raymond James Financial, Inc.                                              98,225            3,703,082
Schwab (Charles) & Co.                                                    946,055           11,201,291
</Table>

                      See notes to financial statements.

                                      49
<Page>
<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
CAPITAL MARKETS (CONTINUED)

State Street Corp.                                                        328,000   $       17,082,240
UBS AG                                                                     49,812            3,386,718
Waddell & Reed Financial, Inc., Class A                                   271,320            6,365,167
------------------------------------------------------------------------------------------------------
                                                                                    $      672,086,121
------------------------------------------------------------------------------------------------------

CHEMICALS -- 1.0%

Airgas, Inc.                                                              389,753   $        8,371,894
Arch Chemicals, Inc.                                                        4,950              127,017
Bayer AG ADR                                                               40,000            1,176,400
Dow Chemical Co. (The)                                                    267,064           11,101,850
DuPont (E.I.) de Nemours & Co.                                          1,302,039           59,750,570
Ecolab, Inc.                                                              318,168            8,708,258
MacDermid, Inc.                                                            61,937            2,120,723
Monsanto Company                                                           28,797              828,778
Olin Corp.                                                                  9,900              198,594
PPG Industries, Inc.                                                       23,542            1,507,159
Rohm and Haas, Co.                                                          2,601              111,089
RPM, Inc.                                                                  88,338            1,454,043
Sigma-Aldrich Corp.                                                       630,897           36,074,690
Solutia Inc.(1)                                                            20,293                7,407
Valspar Corp.                                                             818,316           40,441,177
------------------------------------------------------------------------------------------------------
                                                                                    $      171,979,649
------------------------------------------------------------------------------------------------------

COMMERCIAL BANKS -- 8.3%

AmSouth Bancorporation                                                    812,145   $       19,897,552
Associated Banc-Corp.                                                     749,148           31,951,162
Bank of America Corporation                                             2,257,529          181,573,057
Bank of Hawaii Corp.                                                       49,425            2,085,735
Bank of Montreal                                                          269,166           11,116,556
Bank One Corp.                                                          1,786,768           81,458,753
Banknorth Group, Inc.                                                      50,125            1,630,566
BB&T Corp.                                                              1,276,393           49,319,826
Charter One Financial, Inc.                                               251,993            8,706,358
City National Corp.                                                       273,260           16,974,911
Colonial Bancgroup, Inc. (The)                                            253,936            4,398,172
Comerica, Inc.                                                            241,725           13,551,103
Commerce Bancshares, Inc.                                                 147,766            7,243,489
Community First Bancshares, Inc.                                          360,184           10,423,725
Compass Bancshares, Inc.                                                  358,352           14,086,817
Fifth Third Bancorp                                                     1,209,520           71,482,632
First Citizens BancShares, Inc.                                            43,651            5,304,906
First Financial Bancorp.                                                   47,933              764,531
First Midwest Bancorp, Inc.                                               815,329   $       26,424,813
First Tennessee National Corporation                                      157,089            6,927,625
FleetBoston Financial Corporation                                         715,716           31,241,003
Hibernia Corp. Class A                                                    187,345            4,404,481
HSBC Holdings PLC ADR                                                     608,017           47,923,900
Huntington Bancshares, Inc.                                               578,423           13,014,517
Keycorp                                                                   625,951           18,352,883
M&T Bank Corp.                                                             37,734            3,709,252
Marshall & Ilsley Corp.                                                   683,798           26,155,273
National City Corp.                                                     1,598,288           54,245,895
National Commerce Financial Corp.                                       1,113,055           30,364,140
North Fork Bancorporation, Inc.                                            53,534            2,166,521
PNC Bank Corp.                                                            156,003            8,538,044
Popular, Inc.                                                                 716               32,177
Regions Financial Corp.                                                 1,624,786           60,442,039
Royal Bank of Scotland Group PLC                                           50,837            1,497,956
S&T Bancorp, Inc.                                                         100,000            2,990,000
SouthTrust Corp.                                                          506,253           16,569,661
Southwest Bancorporation of Texas, Inc.(1)                                815,601           31,686,099
SunTrust Banks, Inc.                                                      425,640           30,433,260
Synovus Financial Corp.                                                 1,345,581           38,914,203
TCF Financial Corporation                                                  28,000            1,437,800
U.S. Bancorp                                                            4,150,861          123,612,641
Union Planters Corp.                                                      703,729           22,160,426
Valley National Bancorp                                                   202,293            5,906,956
Wachovia Corp.                                                          1,901,325           88,582,732
Wells Fargo & Company                                                   3,129,623          184,303,498
Westamerica Bancorporation                                                268,474           13,343,158
Whitney Holding Corp.                                                     353,200           14,477,668
Zions Bancorporation                                                      252,271           15,471,780
------------------------------------------------------------------------------------------------------
                                                                                    $    1,457,300,252
------------------------------------------------------------------------------------------------------



COMMERCIAL SERVICES AND SUPPLIES -- 2.4%

Allied Waste Industries, Inc.(1)                                        1,674,390   $       23,240,533
Apollo Group, Inc. Class A(1)                                               7,599              516,732
Arbitron, Inc.(1)                                                          30,885            1,288,522
Avery Dennison Corp.                                                    1,350,977           75,681,732
Banta Corp.                                                                42,341            1,714,810
Block (H&R), Inc.                                                         732,354           40,550,441
Bowne & Company                                                           172,640            2,340,998
Cendant Corp.(1)                                                          549,359           12,234,225
Century Business Services, Inc.(1)                                        370,000            1,653,900
Cintas Corp.                                                            1,326,202           66,482,506
</Table>

                      See notes to financial statements.

                                      50
<Page>
<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
COMMERCIAL SERVICES AND SUPPLIES (CONTINUED)

Consolidated Graphics, Inc.(1)                                             70,215   $        2,217,390
Deluxe Corporation                                                         32,000            1,322,560
Donnelley (R.R.) & Sons Co.                                               200,521            6,045,708
Equifax, Inc.                                                              85,724            2,100,238
Gevity HR, Inc.                                                            78,125            1,737,500
Harland (John H.) Co.                                                      51,540            1,407,042
HON Industries, Inc.                                                    1,552,470           67,253,000
Hudson Highland Group, Inc.(1)                                             11,581              276,207
Imagistics International Inc.(1)                                            2,482               93,075
Manpower, Inc.                                                            112,000            5,272,960
Miller (Herman) Inc.                                                      541,800           13,149,486
Monster Worldwide Inc.(1)                                                 154,426            3,391,195
Navigant Consulting, Inc.(1)                                              463,017            8,732,501
Pitney Bowes, Inc.                                                         89,799            3,647,635
ServiceMaster Co.                                                       1,318,302           15,358,218
Steelcase Inc.                                                            123,000            1,766,280
Sylvan Learning Systems, Inc.(1)                                          538,458           15,502,206
United Rentals, Inc.(1)                                                   401,179            7,726,708
Waste Management, Inc.                                                  1,255,659           37,167,506
------------------------------------------------------------------------------------------------------
                                                                                    $      419,871,814
------------------------------------------------------------------------------------------------------

COMMUNICATIONS EQUIPMENT -- 1.3%

3Com Corp.(1)                                                             873,949   $        7,140,163
ADC Telecommunications, Inc.(1)                                           370,286            1,099,749
Advanced Fibre Communication, Inc.(1)                                      15,000              302,250
Alcatel S.A. ADR(1)                                                        43,728              561,905
Avaya, Inc.(1)                                                             56,960              737,062
Ciena Corp.(1)                                                            380,378            2,525,710
Cisco Systems, Inc.(1)                                                  3,441,441           83,592,602
Comverse Technology, Inc.(1)                                              386,378            6,796,389
Corning, Inc.(1)                                                          651,520            6,795,354
Enterasys Networks, Inc.(1)                                                55,945              209,794
JDS Uniphase Corp.(1)                                                      52,451              191,446
Lucent Technologies, Inc.(1)                                              555,464            1,577,518
McData Corp., Class A(1)                                                   18,562              176,896
Motorola, Inc.                                                            741,114           10,427,474
Nokia Corp., Class A, ADR                                               4,870,478           82,798,126
Nortel Networks Corp.(1)                                                1,306,729            5,527,464
Qualcomm, Inc.                                                            344,112           18,557,960
Riverstone Networks, Inc.(1)                                               28,706               31,864
Tellabs, Inc.(1)                                                          118,404              998,146
------------------------------------------------------------------------------------------------------
                                                                                    $      230,047,872
------------------------------------------------------------------------------------------------------

COMPUTERS AND PERIPHERALS -- 3.1%

Dell, Inc.(1)                                                           4,305,989   $      146,231,386
EMC Corp.(1)                                                            1,104,455           14,269,559
Gateway, Inc.(1)                                                           99,407              457,272
Hewlett-Packard Co.                                                     1,197,265           27,501,177
International Business Machines Corp.                                   2,286,121          211,877,694
Lexmark International Group, Inc.(1)                                    1,704,885          134,072,156
Network Appliance, Inc.(1)                                                488,000           10,018,640
Palmone, Inc.(1)                                                           65,230              766,453
Sun Microsystems, Inc.(1)                                                 370,670            1,664,308
------------------------------------------------------------------------------------------------------
                                                                                    $      546,858,645
------------------------------------------------------------------------------------------------------

CONSTRUCTION AND ENGINEERING -- 0.1%

Dycom Industries, Inc.(1)                                                 151,725   $        4,069,264
Jacobs Engineering Group, Inc.(1)                                         354,741           17,031,115
------------------------------------------------------------------------------------------------------
                                                                                    $       21,100,379
------------------------------------------------------------------------------------------------------

CONSTRUCTION MATERIALS -- 0.0%

Vulcan Materials Company                                                  184,512   $        8,777,236
------------------------------------------------------------------------------------------------------
                                                                                    $        8,777,236
------------------------------------------------------------------------------------------------------







CONSUMER FINANCE -- 0.9%

American Express Co.                                                      521,715   $       25,162,314
Capital One Financial Corp.                                             1,245,321           76,325,724
MBNA Corporation                                                          456,002           11,331,650
Providian Financial Corp.(1)                                              457,296            5,322,925
SLM Corp.                                                                 905,499           34,119,202
------------------------------------------------------------------------------------------------------
                                                                                    $      152,261,815
------------------------------------------------------------------------------------------------------

CONTAINERS AND PACKAGING -- 0.1%

Bemis Co.                                                                 207,593   $       10,379,650
Caraustar Industries, Inc.(1)                                             192,532            2,656,942
Sealed Air Corp.(1)                                                        37,014            2,003,938
Sonoco Products Co.                                                       160,690            3,956,188
Temple-Inland, Inc.                                                        57,962            3,632,479
------------------------------------------------------------------------------------------------------
                                                                                    $       22,629,197
------------------------------------------------------------------------------------------------------

DEPARTMENT STORES -- 0.0%

Neiman Marcus Group, Inc. (The)(1)                                         27,117   $        1,355,850
------------------------------------------------------------------------------------------------------
                                                                                    $        1,355,850
------------------------------------------------------------------------------------------------------
</Table>

                      See notes to financial statements.

                                      51
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
DISTILLERS AND VINTNERS -- 0.1%

Brown-Forman Corp. Class A                                                154,012   $       14,931,463
------------------------------------------------------------------------------------------------------
                                                                                    $       14,931,463
------------------------------------------------------------------------------------------------------

DISTRIBUTORS -- 0.0%

Genuine Parts Company                                                     188,609   $        6,261,819
------------------------------------------------------------------------------------------------------
                                                                                    $        6,261,819
------------------------------------------------------------------------------------------------------

DIVERSIFIED FINANCIAL SERVICES -- 1.6%

Citigroup Inc.                                                          4,030,512   $      195,641,052
Finova Group, Inc.(1)                                                     175,587              114,132
ING groep, N.V. ADR                                                       216,111            5,059,159
Moody's Corp.                                                              47,543            2,878,729
Royal Bank of Canada                                                      321,353           15,322,111
Societe Generale                                                          809,647           71,487,377
------------------------------------------------------------------------------------------------------
                                                                                    $      290,502,560
------------------------------------------------------------------------------------------------------

DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.3%

Alltel Corp.                                                            1,488,598   $       69,338,895
AT&T Corp.                                                                473,645            9,614,993
BCE, Inc.                                                               4,500,000          100,620,000
BellSouth Corp.                                                           457,572           12,949,288
Cincinnati Bell Inc.(1)                                                   169,013              853,516
Citizens Communications Co.(1)                                             14,252              177,010
Deutsche Telekom AG(1)                                                  1,956,790           35,476,603
PTEK Holdings, Inc.(1)                                                     28,000              246,680
Qwest Communications International, Inc.(1)                                59,924              258,872
RSL Communications Ltd.(1)                                                247,161                2,472
SBC Communications, Inc.                                                1,493,660           38,939,716
Sprint Corp. - FON Group                                                  167,078            2,743,421
Talk America Holdings, Inc.(1)                                             42,372              488,125
Telefonos de Mexico ADR                                                 3,000,000           99,090,000
Verizon Communications                                                    954,938           33,499,225
WorldCom, Inc.(1)                                                          98,634                1,302
WorldCom, Inc. - MCI Group(1)                                              42,805                2,097
------------------------------------------------------------------------------------------------------
                                                                                    $      404,302,215
------------------------------------------------------------------------------------------------------

ELECTRIC UTILITIES -- 0.2%

Ameren Corp.                                                                5,000   $          230,000
American Electric Power, Inc.                                                 960               29,290
Dominion Resources, Inc.                                                   10,464              667,917
Exelon Corp.                                                              500,000           33,180,000
PG&E Corp.(1)                                                              47,705            1,324,768
TECO Energy, Inc.                                                          35,511   $          511,714
TXU Corp.                                                                 250,196            5,934,649
Wisconsin Energy Corp.                                                      9,576              320,317
------------------------------------------------------------------------------------------------------
                                                                                    $       42,198,655
------------------------------------------------------------------------------------------------------

ELECTRICAL EQUIPMENT -- 0.6%

American Power Conversion Corp.                                            36,671   $          896,606
Baldor Electric Co.                                                       149,060            3,406,021
Emerson Electric Co.                                                    1,309,555           84,793,686
Rockwell International Corp.                                              179,520            6,390,912
Thomas & Betts Corp.                                                      114,600            2,623,194
------------------------------------------------------------------------------------------------------
                                                                                    $       98,110,419
------------------------------------------------------------------------------------------------------

ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.9%

Agilent Technologies, Inc.(1)                                             599,247   $       17,521,982
Arrow Electronics, Inc.(1)                                                  8,750              202,475
Flextronics International Ltd.(1)                                         282,653            4,194,571
Jabil Circuit, Inc.(1)                                                  2,127,971           60,221,579
Molex, Inc., Class A                                                      112,582            3,305,408
National Instruments Corp.                                                490,458           22,301,125
PerkinElmer, Inc.                                                         300,081            5,122,383
Plexus Corp.(1)                                                           209,946            3,604,773
Roper Industries, Inc.                                                     23,122            1,138,990
Sanmina Corp.(1)                                                        1,164,972           14,690,297
Solectron Corporation(1)                                                1,818,848           10,749,392
Waters Corp.(1)                                                           165,841            5,499,288
X-Rite Incorporated                                                       361,707            4,094,523
------------------------------------------------------------------------------------------------------
                                                                                    $      152,646,786
------------------------------------------------------------------------------------------------------

ENERGY EQUIPMENT AND SERVICES -- 0.5%

Baker Hughes, Inc.                                                        520,182   $       16,729,053
Core Laboratories N.V.(1)                                                 109,787            1,832,345
Grant Prideco, Inc.(1)                                                    124,234            1,617,527
Halliburton Company                                                       481,502           12,519,052
National-Oilwell, Inc.(1)                                                 686,929           15,359,732
Schlumberger Ltd.                                                         484,178           26,494,220
Smith International, Inc.(1)                                              140,000            5,812,800
Transocean Sedco Forex, Inc.(1)                                             6,315              151,623
------------------------------------------------------------------------------------------------------
                                                                                    $       80,516,352
------------------------------------------------------------------------------------------------------

FOOD AND STAPLES RETAILING -- 2.3%

Albertson's, Inc.                                                       1,172,238   $       26,551,191
</Table>

                      See notes to financial statements.

                                      52
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
FOOD AND STAPLES RETAILING (CONTINUED)

Casey's General Stores, Inc.                                               91,201   $        1,610,610
Costco Wholesale Corp.(1)                                               1,220,435           45,375,773
CVS Corp.                                                                 177,839            6,423,545
Kroger Co. (The)(1)                                                     1,201,784           22,245,022
Safeway, Inc.(1)                                                        1,270,912           27,845,682
Sysco Corp.                                                             1,601,774           59,634,046
Sysco Corp.(2)(3)                                                          32,036            1,190,911
Walgreen Co.                                                              665,292           24,203,323
Wal-Mart Stores, Inc.                                                   3,674,877          194,952,225
Winn-Dixie Stores, Inc.                                                   225,735            2,246,063
------------------------------------------------------------------------------------------------------
                                                                                    $      412,278,391
------------------------------------------------------------------------------------------------------

FOOD PRODUCTS -- 2.3%

Archer-Daniels-Midland Co.                                                316,652   $        4,819,443
Campbell Soup Co.                                                       1,243,047           33,313,660
Conagra Inc.                                                            1,638,964           43,252,260
Dean Foods Co.(1)                                                         504,216           16,573,580
Del Monte Foods, Co.(1)                                                   103,109            1,072,334
General Mills, Inc.                                                       286,539           12,980,217
Heinz (H.J.) Co.                                                          298,859           10,887,433
Hershey Foods Corp.                                                       244,744           18,842,841
JM Smucker Co.                                                             19,265              872,512
Kellogg Co.                                                                69,795            2,657,794
Kraft Foods, Inc.                                                             165                5,316
McCormick & Co., Inc.                                                     219,798            6,615,920
Nestle SA                                                                 200,000           49,969,679
Riviana Foods, Inc.                                                       250,000            6,847,500
Sara Lee Corp.                                                          2,601,502           56,478,608
Smithfield Foods, Inc.(1)                                               4,207,530           87,095,871
Tyson Foods, Inc.                                                         315,272            4,174,201
Wrigley (Wm.) Jr. Company Class A                                         933,873           52,493,001
------------------------------------------------------------------------------------------------------
                                                                                    $      408,952,170
------------------------------------------------------------------------------------------------------

GAS UTILITIES -- 0.6%

Kinder Morgan, Inc.                                                     1,781,672   $      105,296,815
------------------------------------------------------------------------------------------------------
                                                                                    $      105,296,815
------------------------------------------------------------------------------------------------------

HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.4%

Advanced Medical Optics(1)                                                  3,744   $           73,570
Bausch & Lomb, Inc.                                                        29,250            1,518,075
Baxter International, Inc.                                                201,413            6,147,125
Becton & Dickinson and Co.                                                 64,173   $        2,640,077
Biomet, Inc.                                                              411,340           14,976,889
Boston Scientific Corporation(1)                                        1,083,970           39,846,737
Dentsply International, Inc.                                               11,325              511,550
Edwards Lifesciences Corp.(1)                                              15,420              463,834
Guidant Corp.                                                              54,692            3,292,458
Hillenbrand Industries, Inc.                                              638,072           39,598,748
Lumenis Ltd.(1)                                                           100,000              135,000
Medtronic, Inc.                                                         2,259,696          109,843,823
Millipore Corporation(1)                                                   70,000            3,013,500
St. Jude Medical, Inc.(1)                                                  10,014              614,359
Steris Corp.(1)                                                            19,538              441,559
VISX, Inc.(1)                                                              50,000            1,157,500
Zimmer Holdings, Inc.(1)                                                  251,155           17,681,312
------------------------------------------------------------------------------------------------------
                                                                                    $      241,956,116
------------------------------------------------------------------------------------------------------

HEALTH CARE PROVIDERS AND SERVICES -- 2.0%

AmerisourceBergen Corp.                                                   104,493   $        5,867,282
Andrx Group(1)                                                            393,772            9,466,279
Beverly Enterprises, Inc.(1)                                              357,143            3,067,858
Cardinal Health, Inc.                                                   1,837,836          112,402,050
Cigna Corp.                                                                11,836              680,570
Express Scripts, Inc.(1)                                                   14,002              930,153
HCA Inc.                                                                  253,450           10,888,212
Health Management Associates, Inc., Class A                             1,036,833           24,883,992
IDX Systems Corp.(1)                                                       60,000            1,609,200
IMS Health, Inc.                                                          280,530            6,973,976
McKesson HBOC, Inc.                                                       101,169            3,253,595
Medco Health Solutions, Inc.(1)                                           131,480            4,469,005
Parexel International Corp.(1)                                             35,000              569,100
Quest Diagnostics, Inc.                                                     8,750              639,712
Renal Care Group, Inc.(1)                                                 371,007           15,285,488
Schein (Henry), Corp.(1)                                                1,272,548           85,998,794
Service Corp. International(1)                                            142,389              767,477
Stewart Enterprises, Inc.(1)                                              114,000              647,520
Sunrise Assisted Living, Inc.(1)                                          144,000            5,578,560
Tenet Healthcare Corp.(1)                                                   3,961               63,574
UnitedHealth Group, Inc.                                                  184,976           10,761,904
Ventiv Health, Inc.(1)                                                    160,833            1,471,622
Wellpoint Health Networks(1)                                              404,000           39,183,960
------------------------------------------------------------------------------------------------------
                                                                                    $      345,459,883
------------------------------------------------------------------------------------------------------
</Table>

                      See notes to financial statements.

                                      53
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
HOTELS, RESTAURANTS AND LEISURE -- 1.6%

Brinker International, Inc.(1)                                            459,469   $       15,235,992
Carnival Corporation                                                      559,353           22,223,095
CBRL Group, Inc.                                                           62,047            2,373,918
Darden Restaurants Inc.                                                   184,714            3,886,383
Evans (Bob) Farms, Inc.                                                    51,662            1,676,949
Gaylord Entertainment Co.(1)                                              428,482           12,790,188
International Game Technology                                             400,000           14,280,000
International Speedway Corporation                                        118,344            5,285,243
Jack in the Box, Inc.(1)                                                  500,000           10,680,000
Lone Star Steakhouse & Saloon, Inc.                                       145,981            3,383,840
Marriott International, Inc.                                              332,298           15,352,168
McDonald's Corp.                                                        1,176,299           29,207,504
MGM Grand, Inc.(1)                                                         94,445            3,552,076
Navigant International, Inc.(1)                                            44,278              613,250
Outback Steakhouse, Inc.                                                1,641,207           72,557,761
Papa John's International, Inc.(1)                                        199,488            6,658,909
Royal Caribbean Cruises Ltd.                                              500,000           17,395,000
Sonic Corp.(1)                                                            106,510            3,261,336
Starbucks Corp.(1)                                                      1,255,994           41,523,162
Yum! Brands, Inc.(1)                                                      241,659            8,313,070
------------------------------------------------------------------------------------------------------
                                                                                    $      290,249,844
------------------------------------------------------------------------------------------------------

HOUSEHOLD DURABLES -- 0.5%

Blyth Industries, Inc.                                                    742,373   $       23,919,258
Department 56, Inc.(1)                                                    255,162            3,342,622
Fortune Brands Inc.                                                       142,143           10,161,803
Helen of Troy Ltd.(1)                                                      20,000              463,000
Interface, Inc. Class A(1)                                                 75,467              417,333
Leggett & Platt, Inc.                                                   1,581,019           34,197,441
Maytag Corp.                                                               27,073              753,983
Newell Rubbermaid, Inc.                                                   438,432            9,983,097
Snap-On, Inc.                                                              51,429            1,658,071
------------------------------------------------------------------------------------------------------
                                                                                    $       84,896,608
------------------------------------------------------------------------------------------------------

HOUSEHOLD PRODUCTS -- 1.8%

Clorox Co. (The)                                                           53,688   $        2,607,089
Colgate-Palmolive Co.                                                     676,711           33,869,386
Energizer Holdings(1)                                                     168,981            6,346,926
Kimberly-Clark Corp.                                                    1,535,512           90,733,404
Procter & Gamble Co.                                                    1,877,616          187,536,286
------------------------------------------------------------------------------------------------------
                                                                                    $      321,093,091
------------------------------------------------------------------------------------------------------

INDUSTRIAL CONGLOMERATES -- 1.9%

3M Co.                                                                    564,132   $       47,968,144
General Electric Co.                                                    8,283,871          256,634,324
Teleflex, Inc.                                                             47,559            2,298,526
Tyco International Ltd.                                                 1,176,566           31,178,999
------------------------------------------------------------------------------------------------------
                                                                                    $      338,079,993
------------------------------------------------------------------------------------------------------

INSURANCE -- 6.3%

21st Century Insurance Group                                               70,700   $          972,125
Aegon N.V. ADR                                                          5,311,829           78,615,069
AFLAC Corp.                                                             2,092,063           75,690,839
Allstate Corp. (The)                                                      188,362            8,103,333
American International Group, Inc.                                      5,434,795          360,218,213
AON Corp.                                                                 826,887           19,795,675
Berkshire Hathaway, Inc., Class A(1)                                          393           33,110,250
Berkshire Hathaway, Inc., Class B(1)                                       40,126          112,954,690
Chubb Corporation                                                           3,901              265,658
Commerce Group, Inc.                                                      120,000            4,740,000
Delphi Financial Group Inc.                                                 9,672              348,192
Gallagher (Arthur J.) and Co.                                             991,627           32,217,961
Hartford Financial Services Group, Inc.                                    11,800              696,554
Jefferson-Pilot Corp.                                                     211,013           10,687,808
Kansas City Life Insurance Co.                                             70,800            3,270,960
Lincoln National Corp.                                                     52,903            2,135,694
Manulife Financial Corp.                                                   74,958            2,421,143
Marsh & McLennan Cos., Inc.                                             1,830,750           87,674,617
MetLife, Inc.                                                           1,969,700           66,319,799
Old Republic International Corp.                                          195,360            4,954,330
Progressive Corp.                                                       1,855,100          155,067,809
Safeco Corp.                                                              177,122            6,895,359
St. Paul Companies, Inc. (The)                                            325,275           12,897,154
Torchmark Corp.                                                           440,119           20,043,019
Travelers Property Casualty - Class A                                     196,364            3,294,988
Travelers Property Casualty - Class B                                     403,442            6,846,411
UICI(1)                                                                    43,597              578,968
UnumProvident Corp.                                                        53,710              847,007
XL Capital Ltd., Class A                                                   79,232            6,144,442
------------------------------------------------------------------------------------------------------
                                                                                    $    1,117,808,067
------------------------------------------------------------------------------------------------------

INTEGRATED TELECOMMUNICATION SERVICES -- 0.0%

McLeodUSA(1)                                                               35,538   $           52,596
------------------------------------------------------------------------------------------------------
                                                                                    $           52,596
------------------------------------------------------------------------------------------------------
</Table>

                      See notes to financial statements.

                                      54
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
INTERNET AND CATALOG RETAIL -- 0.4%

eBay, Inc(1)(2)(3)                                                        200,000   $       12,909,926
eBay, Inc.(1)                                                              89,632            5,789,331
eBay, Inc.(1)(2)(3)                                                       318,000           20,534,485
InterActiveCorp.(1)                                                       806,192           27,354,095
School Specialty Corp.(1)                                                  49,197            1,673,190
------------------------------------------------------------------------------------------------------
                                                                                    $       68,261,027
------------------------------------------------------------------------------------------------------

INTERNET SOFTWARE AND SERVICES -- 0.0%

Retek, Inc.(1)                                                            150,348   $        1,395,229
------------------------------------------------------------------------------------------------------
                                                                                    $        1,395,229
------------------------------------------------------------------------------------------------------

IT SERVICES -- 3.1%

Accenture Ltd.(1)                                                       3,638,000   $       95,752,160
Acxiom Corp.(1)                                                           647,804           12,029,720
Affiliated Computer Services(1)                                           200,654           10,927,617
Automatic Data Processing, Inc.                                         2,223,695           88,080,559
BISYS Group, Inc. (The)(1)                                                280,492            4,173,721
Ceridian Corp.(1)                                                         166,750            3,491,745
Certegy, Inc.                                                              42,862            1,405,874
Computer Sciences Corp.(1)                                                388,302           17,174,597
Concord EFS, Inc.(1)                                                      267,810            3,974,300
CSG Systems International, Inc.(1)                                         41,116              513,539
DST Systems, Inc.(1)                                                      391,034           16,329,580
eFunds Corp.(1)                                                            17,645              306,141
Electronic Data Systems Corp.                                             157,712            3,870,252
First Data Corp.                                                        4,920,602          202,187,536
Gartner Group, Inc., Class A(1)                                             4,811               54,412
Gartner Group, Inc., Class B(1)                                            92,416            1,005,486
Keane, Inc.(1)                                                             52,404              767,195
Paychex, Inc.                                                           1,379,399           51,313,643
Perot Systems Corp.(1)                                                    726,775            9,796,927
Safeguard Scientifics, Inc.(1)                                             26,579              107,379
SunGard Data Systems, Inc.(1)                                             822,160           22,782,054
------------------------------------------------------------------------------------------------------
                                                                                    $      546,044,437
------------------------------------------------------------------------------------------------------

LEISURE EQUIPMENT AND PRODUCTS -- 0.0%

Eastman Kodak Co.                                                         150,547   $        3,864,541
Mattel, Inc.                                                                9,739              187,671
------------------------------------------------------------------------------------------------------
                                                                                    $        4,052,212
------------------------------------------------------------------------------------------------------

MACHINERY -- 3.0%

Caterpillar, Inc.                                                          27,255   $        2,262,710
Danaher Corporation                                                     2,015,985   $      184,966,624
Deere & Co.                                                             3,450,000          224,422,500
Dionex Corp.(1)                                                           139,750            6,431,295
Donaldson Company, Inc.                                                    40,220            2,379,415
Dover Corp.                                                               375,527           14,927,198
Federal Signal Corp.                                                      283,471            4,966,412
Illinois Tool Works, Inc.                                                 756,502           63,478,083
ITT Industries, Inc.                                                        4,214              312,721
Nordson Corporation                                                       163,978            5,662,160
Parker-Hannifin Corporation                                                33,842            2,013,599
Tecumseh Products Co., Class A                                            156,420            7,575,421
Wabtec                                                                    232,061            3,954,319
------------------------------------------------------------------------------------------------------
                                                                                    $      523,352,457
------------------------------------------------------------------------------------------------------

MEDIA -- 7.0%

ADVO, Inc.                                                                794,552   $       25,234,972
Belo (A.H.) Corp.                                                         542,924           15,386,466
Cablevision Systems Corp.(1)                                              207,410            4,851,320
Catalina Marketing Corp.(1)                                                89,203            1,798,332
Clear Channel Communications, Inc.                                        424,444           19,876,713
Comcast Corp. Class A(1)                                                4,466,124          146,801,496
Comcast Corp. Class A Special(1)                                        2,280,622           71,337,856
Cox Communications, Inc., Class A(1)                                    1,265,627           43,600,850
Disney (Walt) Company                                                   6,250,933          145,834,267
EchoStar Communications, Class A(1)                                        35,150            1,195,100
Entercom Communications Corp.(1)                                          220,000           11,651,200
Gannett Co., Inc.                                                       1,447,727          129,079,339
Havas Advertising, S.A. ADR                                             3,142,938           18,417,617
Hughes Electronics Corp.(1)                                                    24                  397
Interpublic Group of Companies., Inc.(1)                                1,520,905           23,726,118
KnightRidder, Inc.                                                         18,123            1,402,177
Lamar Advertising Co.(1)                                                  243,271            9,078,874
Liberty Media Corp. Class A(1)                                            965,499           11,479,783
Liberty Media Corp. Class B(1)                                             32,876              453,689
MacClatchy Co. (The)                                                       48,066            3,306,941
McGraw-Hill Companies, Inc. (The)                                         246,964           17,267,723
Meredith Corp.                                                            190,000            9,273,900
New York Times Co. (The), Class A                                         282,204           13,486,529
News Corporation Ltd.                                                      93,967            2,842,502
Omnicom Group, Inc.                                                     2,334,382          203,861,580
Proquest Company(1)                                                       115,000            3,386,750
Publicis Groupe SA                                                        367,533           11,914,205
Reuters Holdings plc ADR                                                    1,431               36,319
</Table>

                      See notes to financial statements.

                                      55
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
MEDIA (CONTINUED)

Scripps (The E.W) Company                                                  25,533   $        2,403,677
Time Warner Inc.(1)                                                     3,754,241           67,538,796
Tribune Co.                                                             1,501,683           77,486,843
Univision Communications, Inc.(1)                                         917,233           36,404,978
Viacom, Inc., Class A                                                      29,774            1,318,095
Viacom, Inc., Class B                                                   1,383,821           61,413,976
Vivendi Universal S.A. ADR(1)                                             490,725           11,914,803
Washington Post Co. (The)                                                  14,970           11,847,258
Westwood One, Inc.(1)                                                     122,400            4,187,304
WPP Group plc                                                             139,450            1,369,256
WPP Group plc ADR                                                         209,454           10,294,664
------------------------------------------------------------------------------------------------------
                                                                                    $    1,232,762,665
------------------------------------------------------------------------------------------------------

METALS AND MINING -- 0.2%

Alcoa, Inc.                                                               558,287   $       21,214,906
Allegheny Technologies, Inc.                                               21,408              283,014
Nucor Corp.                                                               221,462           12,401,872
Phelps Dodge Corp.(1)                                                      14,862            1,130,850
Steel Dynamics, Inc.(1)                                                   311,800            7,324,182
Worthington Industries, Inc.                                              147,466            2,658,812
------------------------------------------------------------------------------------------------------
                                                                                    $       45,013,636
------------------------------------------------------------------------------------------------------

MULTILINE RETAIL -- 1.8%

99 Cents Only Stores(1)                                                 1,142,232   $       31,102,977
Dollar General Corp.                                                      101,456            2,129,561
Dollar Tree Stores, Inc.(1)                                               813,306           24,447,978
Family Dollar Stores, Inc.                                              2,618,411           93,948,587
Kohls Corp.(1)                                                                 55                2,472
May Department Stores Co. (The)                                           632,760           18,394,333
Nordstrom, Inc.                                                            65,692            2,253,236
Penney (J.C.) Company, Inc.                                               529,169           13,906,561
Sears, Roebuck & Co.                                                       16,950              771,055
Target Corp.                                                            3,576,019          137,319,130
------------------------------------------------------------------------------------------------------
                                                                                    $      324,275,890
------------------------------------------------------------------------------------------------------

MULTI-UTILITIES AND UNREGULATED POWER -- 0.1%

AES Corporation(1)                                                         49,542   $          467,676
Duke Energy Corp.                                                         419,154            8,571,699
Dynegy, Inc.(1)                                                            63,525              271,887
El Paso Corp.                                                             175,909            1,440,695
National Fuel Gas Co.                                                       4,000               97,760
Williams Companies. Inc. (The)                                            222,833   $        2,188,220
------------------------------------------------------------------------------------------------------
                                                                                    $       13,037,937
------------------------------------------------------------------------------------------------------

OFFICE ELECTRONICS -- 0.0%

Ikon Office Solutions, Inc.                                                83,040   $          984,854
Xerox Corp.(1)                                                             20,000              276,000
Zebra Technologies Corp., Class A(1)                                        9,000              597,330
------------------------------------------------------------------------------------------------------
                                                                                    $        1,858,184
------------------------------------------------------------------------------------------------------

OIL AND GAS -- 5.9%

Amerada Hess Corp.                                                         18,947   $        1,007,412
Anadarko Petroleum Corp.                                                2,557,003          130,432,723
Apache Corporation                                                      1,035,690           83,994,459
Ashland, Inc.                                                              85,716            3,776,647
BP plc ADR                                                              5,056,838          249,554,955
Burlington Resources, Inc.                                              2,130,802          118,003,815
ChevronTexaco Corporation                                                 123,875           10,701,561
ConocoPhillips                                                          1,790,067          117,374,693









Devon Energy Corp.                                                        507,678           29,069,642
Exxon Mobil Corp.                                                       5,811,941          238,289,581
Kerr - McGee Corp.                                                        267,327           12,428,032
Marathon Oil Corp.                                                          1,450               47,980
Murphy Oil Corporation                                                     13,200              862,092
Newfield Exploration Company(1)                                            60,000            2,672,400
Royal Dutch Petroleum Co.                                                  96,661            5,064,070
Total Fina Elf SA ADR                                                     400,000           37,004,000
Valero Energy Corp.                                                        51,510            2,386,973
------------------------------------------------------------------------------------------------------
                                                                                    $    1,042,671,035
------------------------------------------------------------------------------------------------------

PAPER AND FOREST PRODUCTS -- 0.2%

Georgia-Pacific Corp.                                                     647,002   $       19,843,551
International Paper Co.                                                   232,175           10,009,064
Louisiana-Pacific Corp.(1)                                                 70,750            1,265,010
MeadWestvaco Corp.                                                         84,358            2,509,651
Weyerhaeuser Co.                                                          119,608            7,654,912
------------------------------------------------------------------------------------------------------
                                                                                    $       41,282,188
------------------------------------------------------------------------------------------------------

PERSONAL PRODUCTS -- 1.4%

Avon Products, Inc.                                                       186,700   $       12,600,383
Gillette Company                                                        3,929,412          144,327,303
Lauder (Estee) Companies, Inc.                                          2,092,312           82,144,169
------------------------------------------------------------------------------------------------------
                                                                                    $      239,071,855
------------------------------------------------------------------------------------------------------
</Table>

                      See notes to financial statements.

                                      56
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
PHARMACEUTICALS -- 7.0%

Abbott Laboratories                                                     2,482,012   $      115,661,759
Allergan, Inc.                                                             38,840            2,983,300
Bristol-Myers Squibb Company                                            3,201,708           91,568,849
Elan Corp., PLC ADR(1)                                                     31,838              219,364
Forest Laboratories, Inc.(1)                                              656,800           40,590,240
GlaxoSmithKline plc                                                       433,759           20,221,845
Johnson & Johnson                                                       2,917,570          150,721,666
King Pharmaceuticals, Inc.(1)                                           1,481,117           22,601,845
Lilly (Eli) & Co.                                                       3,173,638          223,201,961
Merck & Co., Inc.                                                       1,611,471           74,449,960
Mylan Laboratories, Inc.                                                   27,992              707,078
Novo Nordisk ADR                                                          292,277           11,971,666
Pfizer, Inc.                                                            7,799,066          275,541,002
Schering AG ADR                                                            25,000            1,277,500
Schering-Plough Corp.                                                   2,478,438           43,100,037
Sepracor, Inc.(1)                                                           4,000               95,720
Teva Pharmaceutical Industries Ltd. ADR                                 1,200,000           68,052,000
Watson Pharmaceuticals, Inc.(1)                                           951,175           43,754,050
Wyeth Corp.                                                               974,196           41,354,620
------------------------------------------------------------------------------------------------------
                                                                                    $    1,228,074,462
------------------------------------------------------------------------------------------------------

REAL ESTATE -- 0.2%

AvalonBay Communities, Inc.                                                55,000   $        2,629,000
Catellus Development Corp.                                                441,282           10,643,722
Jones Lang Lasalle, Inc.(1)                                               154,567            3,204,174
Plum Creek Timber Co., Inc.                                               198,791            6,053,186
Trammell Crow Co.(1)                                                      804,200           10,655,650
------------------------------------------------------------------------------------------------------
                                                                                    $       33,185,732
------------------------------------------------------------------------------------------------------

ROAD AND RAIL -- 0.2%

ANC Rental Corporation(1)                                                 459,525   $               46
Burlington Northern Santa Fe Corp.                                        203,594            6,586,266
CSX Corporation                                                            38,134            1,370,536
Florida East Coast Industries, Inc.                                       121,978            4,037,472
Heartland Express, Inc.                                                   435,436           10,533,197
Kansas City Southern Industries, Inc.(1)                                   15,215              217,879
Norfolk Southern Corp.                                                      3,990               94,364
Union Pacific Corp.                                                        92,772            6,445,799
------------------------------------------------------------------------------------------------------
                                                                                    $       29,285,559
------------------------------------------------------------------------------------------------------

SEMICONDUCTORS AND SEMICONDUCTOR
EQUIPMENT -- 2.6%

Agere Systems, Inc.(1)                                                      6,495   $           19,810
Agere Systems, Inc., Class B(1)                                           159,398              462,254
Altera Corp.(1)                                                            66,116            1,500,833
Analog Devices, Inc.(1)                                                   555,525           25,359,716
Applied Materials, Inc.(1)                                                418,392            9,392,900
Applied Materials, Inc.(1)(2)(3)                                          543,250           12,183,767
Broadcom Corp.(1)                                                         234,000            7,977,060
Conexant Systems, Inc.(1)                                                 134,174              666,845
Cypress Semiconductor Corporation(1)                                      152,742            3,262,569
Intel Corp.                                                             9,103,378          293,128,772
KLA-Tencor Corp.(1)                                                       108,382            6,358,772
KLA-Tencor Corp.(1)(2)(3)                                                  50,000            2,929,100
Linear Technologies Corp.                                                  87,760            3,692,063
LSI Logic Corporation(1)                                                  132,810            1,178,025
Maxim Integrated Products Co.                                             274,351           13,662,680
Mindspeed Technologies Inc.(1)                                             44,724              306,359
Skyworks Solutions, Inc.(1)                                                98,685              858,560
Taiwan Semiconductor ADR(1)                                             1,000,000           10,240,000
Teradyne, Inc.(1)                                                          27,996              712,498
Texas Instruments, Inc.                                                 1,970,330           57,888,295
Xilinx, Inc.(1)                                                            68,518            2,654,387
------------------------------------------------------------------------------------------------------
                                                                                    $      454,435,265
------------------------------------------------------------------------------------------------------

SOFTWARE -- 2.5%

Adobe Systems, Inc.                                                       261,994   $       10,296,364
BMC Software, Inc.(1)                                                      27,000              503,550
Cadence Design Systems, Inc.(1)                                           900,000           16,182,000
Cognos, Inc.(1)                                                            77,000            2,357,740
Computer Associates International, Inc.                                    33,070              904,134
Compuware Corp.(1)                                                        150,944              911,702
Fair, Isaac and Co., Inc.                                                 707,571           34,784,190
Henry (Jack) & Associates                                                 201,006            4,136,703
I2 Technologies, Inc.(1)                                                  233,752              388,028
Intuit, Inc.(1)                                                         1,108,389           58,644,862
Microsoft Corp.                                                         9,489,802          261,349,147
Oracle Corp.(1)                                                           737,178            9,730,750
PalmSource, Inc.(1)                                                        20,208              440,332
Parametric Technology Corp.(1)                                             94,600              372,724
PeopleSoft, Inc.(1)                                                       300,680            6,855,504
Reynolds & Reynolds, Co.                                                  451,043           13,102,799
Siebel Systems, Inc.(1)                                                   816,061           11,318,766
Symantec Corporation(1)                                                    30,450            1,055,093
</Table>

                      See notes to financial statements.

                                      57
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
SOFTWARE (CONTINUED)

VERITAS Software Corp.(1)                                                  43,942   $        1,632,885
Wind River Systems, Inc.(1)                                                91,910              805,132
------------------------------------------------------------------------------------------------------
                                                                                    $      435,772,405
------------------------------------------------------------------------------------------------------

SPECIALTY RETAIL -- 2.2%

Abercrombie & Fitch Co.(1)                                                 14,915   $          368,550
AutoNation, Inc.(1)                                                     3,744,851           68,792,913
Best Buy Co., Inc.                                                        313,610           16,382,986
Boise Cascade Corporation                                                   2,192               72,029
Burlington Coat Factory Warehouse Corp.                                   609,010           12,886,652
Carmax, Inc.(1)                                                            67,797            2,096,961
Circuit City Stores, Inc.                                                 216,000            2,188,080
Gap, Inc. (The)                                                           541,012           12,556,889
Home Depot, Inc. (The)                                                  3,469,933          123,147,922
Limited Brands, Inc.                                                      813,017           14,658,697
Lowe's Companies                                                          963,356           53,360,289
Office Depot, Inc.(1)                                                     238,664            3,988,075
Payless Shoesource, Inc.(1)                                                23,100              309,540
Pep Boys - Manny, Moe & Jack (The)                                         83,415            1,907,701
Pier 1 Imports, Inc.                                                       44,982              983,307
RadioShack Corp.                                                          677,904           20,798,095
Sherwin-Williams Co. (The)                                                 80,569            2,798,967
Staples, Inc.(1)                                                           92,500            2,525,250
Tiffany & Co.                                                              88,000            3,977,600
TJX Companies, Inc. (The)                                               2,016,834           44,471,190
Too, Inc.(1)                                                               38,284              646,234
------------------------------------------------------------------------------------------------------
                                                                                    $      388,917,927
------------------------------------------------------------------------------------------------------

TEXTILES, APPAREL AND LUXURY GOODS -- 0.5%

Coach, Inc.(1)                                                            365,720   $       13,805,930
Nike Inc., Class B                                                      1,079,222           73,883,538
Unifi, Inc.(1)                                                             42,921              276,840
------------------------------------------------------------------------------------------------------
                                                                                    $       87,966,308
------------------------------------------------------------------------------------------------------

THRIFTS AND MORTGAGE FINANCE -- 0.8%

Countrywide Financial Corp.                                               133,333   $       10,113,308
Fannie Mae                                                                406,147           30,485,394
Freddie Mac                                                               135,586            7,907,376
Golden West Financial Corporation                                          21,845            2,254,186
GreenPoint Financial Corp.                                              1,081,474           38,197,662
MGIC Investment Corp.                                                      85,000            4,839,900
Radian Group, Inc.                                                         30,800            1,501,500
Sovereign Bancorporation, Inc.                                             23,766   $          564,443
Washington Mutual, Inc.                                                 1,204,074           48,307,449
------------------------------------------------------------------------------------------------------
                                                                                    $      144,171,218
------------------------------------------------------------------------------------------------------

TOBACCO -- 0.2%

Altria Group Inc.                                                         593,732   $       32,310,895
UST, Inc.                                                                     439               15,668
------------------------------------------------------------------------------------------------------
                                                                                    $       32,326,563
------------------------------------------------------------------------------------------------------

WIRELESS TELECOMMUNICATION SERVICES -- 0.1%

AT&T Wireless Services, Inc.(1)                                         1,321,244   $       10,556,740
Nextel Communications, Inc., Class A(1)                                    73,122            2,051,803
Sprint Corp. - PCS Group(1)                                                19,754              111,017
Telephone and Data Systems, Inc.                                           70,844            4,431,292
Vodafone Group plc ADR                                                    116,617            2,920,090
------------------------------------------------------------------------------------------------------
                                                                                    $       20,070,942
------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
   (IDENTIFIED COST $14,558,336,419)                                                $   17,461,971,848
------------------------------------------------------------------------------------------------------





CONVERTIBLE PREFERRED STOCKS -- 0.0%

MULTI-UTILITIES AND UNREGULATED POWER -- 0.0%

Enron Corp.(1)(2)                                                          11,050   $            8,448
------------------------------------------------------------------------------------------------------
                                                                                    $            8,448
------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
   (IDENTIFIED COST $4,500,777)                                                     $            8,448
------------------------------------------------------------------------------------------------------

PREFERRED STOCKS -- 0.0%

COMMERCIAL BANKS -- 0.0%

Wachovia Corp. (Dividend Equalization Preferred Shares)(1)                166,518   $              832
------------------------------------------------------------------------------------------------------
                                                                                    $              832
------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
   (IDENTIFIED COST $39,407)                                                        $              832
------------------------------------------------------------------------------------------------------

RIGHTS -- 0.0%

BANKS -- 0.0%

Bank United Corp. (Litigation Contingent Payment Rights)(1)               102,072   $           12,249
------------------------------------------------------------------------------------------------------
                                                                                    $           12,249
------------------------------------------------------------------------------------------------------
</Table>

                      See notes to financial statements.

                                      58
<Page>

<Table>
<Caption>
SECURITY                                                       SHARES                VALUE
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
COMPUTERS AND BUSINESS EQUIPMENT -- 0.0%

Seagate Technology, Inc. (Tax Refund Rights)(1)(2)                        197,392   $                0
------------------------------------------------------------------------------------------------------
                                                                                    $                0
------------------------------------------------------------------------------------------------------

INTEGRATED TELECOMMUNICATION SERVICES -- 0.0%

McLeodUSA (Escrow Rights)(1)(2)                                         1,592,200   $                0
------------------------------------------------------------------------------------------------------
                                                                                    $                0
------------------------------------------------------------------------------------------------------
TOTAL RIGHTS
   (IDENTIFIED COST $50,596)                                                        $           12,249
------------------------------------------------------------------------------------------------------

SHORT-TERM INVESTMENTS -- 0.3%

<Caption>
                                                               PRINCIPAL
                                                               AMOUNT
SECURITY                                                       (000'S OMITTED)       VALUE
------------------------------------------------------------------------------------------------------
<S>                                                            <C>                   <C>
Investors Bank & Trust Company -
Time Deposit, 1.01%, 1/2/04                                    $           47,415   $       47,415,330
------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
   (AT AMORTIZED COST, $47,415,330)                                                 $       47,415,330
------------------------------------------------------------------------------------------------------

COMMERCIAL PAPER -- 0.4%

<Caption>
                                                               PRINCIPAL
                                                               AMOUNT
SECURITY                                                       (000'S OMITTED)       VALUE
------------------------------------------------------------------------------------------------------
<S>                                                            <C>                   <C>
Old Line Funding Corp., 1.09%, 1/9/04                          $           25,000   $       24,993,944
Transamerica Finance Corp., 1.07%, 1/9/04                                  50,000           49,988,111
------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
   (AT AMORTIZED COST, $74,982,055)                                                 $       74,982,055
------------------------------------------------------------------------------------------------------

TOTAL INVESTMENTS -- 99.9%
   (IDENTIFIED COST $14,685,324,584)                                                $   17,584,390,762
------------------------------------------------------------------------------------------------------

OTHER ASSETS, LESS LIABILITIES -- 0.1%                                              $       25,198,243
------------------------------------------------------------------------------------------------------

NET ASSETS -- 100.0%                                                                $   17,609,589,005
------------------------------------------------------------------------------------------------------
</Table>

ADR - American Depositary Receipt

(1)  Non-income producing security.

(2)  Security valued at fair value using methods  determined in good faith by or
     at the direction of the Trustees.

(3)  Security  restricted  from resale for a period not exceeding two years.  At
     December 31, 2003,  the value of these  securities  totaled  $49,748,189 or
     0.3% of net assets.

                      See notes to financial statements.

                                      59
<Page>
TAX-MANAGED GROWTH PORTFOLIO as of December 31, 2003

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

AS OF DECEMBER 31, 2003

ASSETS

Investments, at value
   (identified cost, $14,685,324,584)                       $   17,584,390,762
Cash                                                                     5,669
Receivable for investments sold                                      2,552,453
Dividends and interest receivable                                   22,326,200
Tax reclaim receivable                                                 578,423
------------------------------------------------------------------------------
TOTAL ASSETS                                                $   17,609,853,507
------------------------------------------------------------------------------

LIABILITIES

Payable to affiliate for Trustees' fees                     $            8,252
Accrued expenses                                                       256,250
------------------------------------------------------------------------------
TOTAL LIABILITIES                                           $          264,502
------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO   $   17,609,589,005
------------------------------------------------------------------------------

SOURCES OF NET ASSETS

Net proceeds from capital contributions and withdrawals     $   14,710,453,882
Net unrealized appreciation (computed on the basis of
   identified cost)                                              2,899,135,123
------------------------------------------------------------------------------
TOTAL                                                       $   17,609,589,005
------------------------------------------------------------------------------

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2003

INVESTMENT INCOME

Dividends (net of foreign taxes, $2,599,762)                $      229,304,460
Interest                                                             3,621,452
------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME                                     $      232,925,912
------------------------------------------------------------------------------

EXPENSES

Investment adviser fee                                      $       67,584,543
Trustees' fees and expenses                                             30,403
Custodian fee                                                        1,909,174
Legal and accounting services                                           85,806
Miscellaneous                                                          270,270
------------------------------------------------------------------------------
TOTAL EXPENSES                                              $       69,880,196
------------------------------------------------------------------------------

NET INVESTMENT INCOME                                       $      163,045,716
------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN (LOSS)

Net realized gain (loss) --
   Investment transactions (identified cost basis)          $       73,809,988
   Securities sold short                                            (2,985,249)
   Foreign currency transactions                                        85,031
------------------------------------------------------------------------------
NET REALIZED GAIN                                           $       70,909,770
------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
   Investments (identified cost basis)                      $    3,174,871,573
   Securities sold short                                              (203,701)
   Foreign currency                                                     41,238
------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)        $    3,174,709,110
------------------------------------------------------------------------------

NET REALIZED AND UNREALIZED GAIN                            $    3,245,618,880
------------------------------------------------------------------------------

NET INCREASE IN NET ASSETS FROM OPERATIONS                  $    3,408,664,596
------------------------------------------------------------------------------
                      See notes to financial statements.
                                      60
<Page>

STATEMENTS OF CHANGES IN NET ASSETS


INCREASE (DECREASE)                     YEAR ENDED           YEAR ENDED
IN NET ASSETS                           DECEMBER 31, 2003    DECEMBER 31, 2002
------------------------------------------------------------------------------
From operations --
   Net investment income                $     163,045,716    $     139,150,041
   Net realized gain (loss)                    70,909,770         (459,996,840)
   Net change in unrealized
      appreciation (depreciation)           3,174,709,110       (3,312,547,564)
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
   NET ASSETS FROM OPERATIONS           $   3,408,664,596    $  (3,633,394,363)
------------------------------------------------------------------------------
Capital transactions --
   Contributions                        $   1,351,483,956    $   2,786,165,872
   Withdrawals                             (1,722,081,135)      (2,917,114,901)
------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
   FROM CAPITAL TRANSACTIONS            $    (370,597,179)   $    (130,949,029)
------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN NET ASSETS   $   3,038,067,417    $  (3,764,343,392)
------------------------------------------------------------------------------

NET ASSETS

At beginning of year                    $  14,571,521,588    $  18,335,864,980
------------------------------------------------------------------------------
AT END OF YEAR                          $  17,609,589,005    $  14,571,521,588
------------------------------------------------------------------------------

                      See notes to financial statements.

                                      61
<Page>

SUPPLEMENTARY DATA

<Table>
<Caption>
                                                                            YEAR ENDED DECEMBER 31,
                                           ----------------------------------------------------------------------------------------
                                                2003              2002               2001               2000              1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>               <C>                <C>                <C>               <C>
RATIOS/SUPPLEMENTAL DATA

Ratios (As a percentage of average
   daily net assets):
   Expenses                                          0.45%             0.45%              0.45%              0.45%             0.46%
   Net investment income                             1.05%             0.85%              0.64%              0.67%             0.72%
Portfolio Turnover                                     15%               23%                18%                13%               11%
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(1)                                     23.88%           (19.52)%            (9.67)%               --                --
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S OMITTED)    $   17,609,589    $   14,571,522     $   18,335,865     $   18,385,069    $   15,114,649
-----------------------------------------------------------------------------------------------------------------------------------
</Table>
(1)  Total return is required to be disclosed for fiscal years  beginning  after
     December 15, 2000.

                      See notes to financial statements.

                                      62
<Page>

TAX-MANAGED GROWTH PORTFOLIO as of December 31, 2003

NOTES TO FINANCIAL STATEMENTS

1    SIGNIFICANT ACCOUNTING POLICIES

     Tax-Managed  Growth  Portfolio  (the  Portfolio)  is  registered  under the
     Investment  Company Act of 1940,  as amended,  as a  diversified,  open-end
     management  investment  company.  The  Portfolio,  which was organized as a
     trust under the laws of the State of New York on December 1, 1995, seeks to
     provide long-term after-tax returns by investing in a diversified portfolio
     of equity  securities.  The  Declaration  of Trust  permits the Trustees to
     issue interests in the Portfolio. The following is a summary of significant
     accounting  policies   consistently   followed  by  the  Portfolio  in  the
     preparation  of its  financial  statements.  The policies are in conformity
     with  accounting  principles  generally  accepted  in the United  States of
     America.

     A INVESTMENT VALUATIONS -- Marketable  securities,  including options, that
     are listed on foreign or U.S.  securities  exchanges  are valued at closing
     sale prices on the exchange where such securities are  principally  traded.
     Marketable  securities  listed in the  NASDAQ  National  Market  System are
     valued at the NASDAQ official closing price.  Unlisted or listed securities
     for which closing sale prices are not available are generally valued at the
     mean  between  the  latest  bid and  asked  prices.  Futures  positions  on
     securities or currencies are generally valued at closing settlement prices.
     Short-term debt securities with a remaining maturity of 60 days or less are
     valued at amortized cost, which approximates fair 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.  Over-the-counter  options are
     normally  valued  at the mean  between  the  latest  bid and  asked  price.
     Investments 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.

     B INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
     purposes.  No provision is made by the Portfolio for federal or state taxes
     on any  taxable  income  of the  Portfolio  because  each  investor  in the
     Portfolio  is  ultimately  responsible  for the payment of any taxes on its
     share of such taxable income.  Since some of the Portfolio's  investors are
     regulated  investment  companies  that invest all or  substantially  all of
     their assets in the  Portfolio,  the  Portfolio  normally  must satisfy the
     applicable  source of income and  diversification  requirements  (under the
     Internal  Revenue  Code) in order for its  investors to satisfy  them.  The
     Portfolio  will  allocate,  at least  annually  among its  investors,  each
     investor's distributive share of the Portfolio's net investment income, net
     realized  capital  gains or losses,  and any other  items of income,  gain,
     loss, deduction or credit.

     C FUTURES  CONTRACTS -- Upon the entering of a financial  futures contract,
     the Portfolio is required to deposit either in cash or securities an amount
     (initial  margin)  equal to a  certain  percentage  of the  purchase  price
     indicated in the financial futures contract.  Subsequent  payments are made
     or received by the Portfolio (margin  maintenance)  each day,  dependent on
     daily  fluctuations  in the  value  of the  underlying  security,  and  are
     recorded for book purposes as unrealized  gains or losses by the Portfolio.
     The Portfolio's  investment in financial  futures  contracts is designed to
     hedge  against  anticipated  future  changes  in the  price of  current  or
     anticipated  portfolio  positions.  Should  prices move  unexpectedly,  the
     Portfolio may not achieve the anticipated benefits of the financial futures
     contracts and may realize a loss.

     D PUT OPTIONS -- Upon the  purchase of a put option by the  Portfolio,  the
     premium  paid is  recorded  as an  asset in the  Statement  of  Assets  and
     Liabilities, the value of which is marked-to-market daily. When a purchased
     option  expires,  the  Portfolio  will  realize a loss in the amount of the
     premium paid.  When the Portfolio  enters into a closing sale  transaction,
     the  Portfolio  will realize a gain or loss  depending on whether the sales
     proceeds  from the closing  sale  transaction  are greater or less than the
     premium paid. When the Portfolio exercises a put option, settlement is made
     in cash.  The risk  associated  with  purchasing  options is limited to the
     premium originally paid.

     E SECURITIES  SOLD SHORT -- The Portfolio  may sell a security  short if it
     owns at  least  an equal  amount  of the  security  sold  short or  another
     security  exchangeable  for an equal amount of the  security  sold short in
     anticipation of a decline in the market price of the securities or in order
     to hedge  portfolio  positions.  The Portfolio  will  generally  borrow the
     security  sold in order to make delivery to the buyer.  Upon  executing the
     transaction, the Portfolio records the proceeds as deposits with brokers in
     the  Statement of Assets and  Liabilities  and  establishes  an  offsetting
     payable for securities sold short for the securities due on settlement. The
     proceeds are retained by the broker as collateral  for the short  position.
     The liability is marked-to-market  and the Portfolio is required to pay the
     lending  broker any  dividend or  interest  income  earned  while the short
     position is open. A gain or loss is recorded when the security is delivered

                                      63
<Page>
     to the broker. The Portfolio may recognize a loss on the transaction if the
     market value of the  securities  sold  increases  before the securities are
     delivered.

     F FOREIGN CURRENCY TRANSLATION -- Investment  valuations,  other assets and
     liabilities  initially  expressed in foreign  currencies are converted each
     business day into U.S. dollars based upon current exchange rates. Purchases
     and sales of foreign  investment  securities  and income and  expenses  are
     converted into U.S.  dollars based upon currency  exchange rates prevailing
     on the respective dates of such transactions. Recognized gains or losses on
     investment transactions attributable to foreign currency exchange rates are
     recorded for financial  statement purposes as net realized gains and losses
     on investments.  That portion of unrealized gains and losses on investments
     that results from  fluctuations in foreign  currency  exchange rates is not
     separately disclosed.

     G INDEMNIFICATIONS -- Under the Portfolio's  organizational  documents, its
     officers and Trustees may be indemnified  against  certain  liabilities and
     expenses  arising out of the  performance of their duties to the Portfolio.
     Interestholders  in the Portfolio are jointly and severally  liable for the
     liabilities  and  obligations  of the  Portfolio  in  the  event  that  the
     Portfolio  fails to satisfy such  liabilities  and  obligations;  provided,
     however,  that, to the extent assets are  available in the  Portfolio,  the
     Portfolio may, under certain circumstances,  indemnify interestholders from
     and against any claim or liability to which such holder may become  subject
     by reason  of being or  having  been an  interestholder  in the  Portfolio.
     Additionally,  in the  normal  course of  business,  the Fund  enters  into
     agreements with service providers that may contain indemnification clauses.
     The  Portfolio's  maximum  exposure under these  arrangements is unknown as
     this would  involve  future  claims that may be made against the  Portfolio
     that have not yet occurred.

     H OTHER -- Investment transactions are accounted for on a trade-date basis.
     Dividend  income is  recorded  on the  ex-dividend  date.  However,  if the
     ex-dividend date has passed,  certain dividends from foreign securities are
     recorded as the  Portfolio is informed of the  ex-dividend  date.  Interest
     income is recorded on the accrual basis.

     I USE OF  ESTIMATES  -- The  preparation  of the  financial  statements  in
     conformity  with  accounting  principles  generally  accepted in the United
     States of America  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.

2    INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

     The  investment  adviser fee is earned by Boston  Management  and  Research
     (BMR),  a  wholly-owned  subsidiary  of Eaton Vance  Management  (EVM),  as
     compensation for management and investment  advisory  services  rendered to
     the  Portfolio.  Under  the  advisory  agreement,  BMR  receives  a monthly
     advisory fee in the amount of 0.625%  annually of 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 year ended  December  31,  2003,  the
     advisory fee was 0.44% of the Portfolio's average daily net assets.  Except
     for  Trustees  of the  Portfolio  who are not  members  of  EVM's  or BMR's
     organization, officers and Trustees receive remuneration for their services
     to the  Portfolio  out of such  investment  adviser  fee.  Trustees  of the
     Portfolio who are not affiliated  with the Investment  Adviser may elect to
     defer  receipt of all or a percentage  of their  annual fees in  accordance
     with the terms of the Trustees'  Deferred  Compensation  Plan. For the year
     ended December 31, 2003, no significant amounts have been deferred.

     Certain  officers and Trustees of the  Portfolio  are officers of the above
     organizations.

3    INVESTMENT TRANSACTIONS

     For the year ended December 31, 2003,  purchases and sales of  investments,
     other  than   short-term   obligations,   aggregated   $2,315,531,044   and
     $2,601,576,258,  respectively. In addition, investments having an aggregate
     market value of  $701,210,532  at dates of withdrawal  were  distributed in
     payment for capital  withdrawals.  During the year ended December 31, 2003,
     investors contributed securities with a value of $789,740,742.

4    FEDERAL INCOME TAX BASIS OF UNREALIZED APPRECIATION (DEPRECIATION)

     The  cost  and  unrealized  appreciation  (depreciation)  in  value  of the
     investments  owned at December 31, 2003 as computed on a federal income tax
     basis, were as follows:

    AGGREGATE COST                                          $   5,191,822,303
    -------------------------------------------------------------------------
    Gross unrealized appreciation                           $  12,396,006,523
    Gross unrealized depreciation                                  (3,438,064)
    -------------------------------------------------------------------------
    NET UNREALIZED APPRECIATION                             $  12,392,568,459
    -------------------------------------------------------------------------
                                      64
<Page>

5    FINANCIAL INSTRUMENTS

     The Portfolio may trade in financial  instruments  with  off-balance  sheet
     risk in the normal course of its investing activities to assist in managing
     exposure to various  market  risks.  These  financial  instruments  include
     written options,  forward foreign currency exchange contracts and financial
     futures contracts and may involve, to a varying degree, elements of risk in
     excess of the amounts recognized for financial statement purposes.

     The notional or  contractual  amounts of these  instruments  represent  the
     investment the Portfolio has in particular classes of financial instruments
     and does not necessarily represent the amounts potentially subject to risk.
     The  measurement  of  the  risks  associated  with  these   instruments  is
     meaningful   only  when  all  related  and  offsetting   transactions   are
     considered.  The  Portfolio did not have any open  obligations  under these
     financial instruments at December 31, 2003.

6    LINE OF CREDIT

     The Portfolio  participates  with other portfolios and funds managed by BMR
     and EVM and its  affiliates  in a $150  million  unsecured  line of  credit
     agreement with a group of banks.  Borrowings  will be made by the Portfolio
     solely  to  facilitate  the  handling  of  unusual   and/or   unanticipated
     short-term  cash  requirements.  Interest is charged to each  participating
     portfolio  or fund based on its  borrowings  at an amount  above either the
     Eurodollar  rate or Federal Funds rate.  In addition,  a fee computed at an
     annual rate of 0.10% on the daily  unused  portion of the line of credit is
     allocated among the  participating  portfolios and funds at the end of each
     quarter. The Portfolio did not have any significant borrowings or allocated
     fees during the year ended December 31, 2003.

7    RESTRICTED SECURITIES

     At  December  31,  2003,  the  Portfolio  owned  the  following  securities
     (representing 0.3% of net assets) which were restricted as to public resale
     and not  registered  under the  Securities  Act of 1933. The securities are
     valued at fair value using  methods  determined  in good faith by or at the
     direction of the Trustees.

<Table>
<Caption>
                               DATE OF
    DESCRIPTION                ACQUISITION      SHARES         COST         FAIR VALUE
    ------------------------------------------------------------------------------------
    <S>                           <C>            <C>       <C>             <C>
    Applied Materials, Inc.       12/17/03       543,250   $  11,575,935   $  12,183,767
    eBay, Inc                      5/13/03       200,000       9,466,769      12,909,926
    eBay, Inc.                     2/19/03       318,000      12,143,667      20,534,485
    KLA-Tencor Corp.              12/17/03        50,000       2,744,377       2,929,100
    Sysco Corp.                   12/17/03        32,036       1,157,644       1,190,911
    ------------------------------------------------------------------------------------
                                                           $  37,088,392   $  49,748,189
    ------------------------------------------------------------------------------------
</Table>

                                      65
<Page>

TAX-MANAGED GROWTH PORTFOLIO as of December 31, 2003

INDEPENDENT AUDITORS' REPORT

TO THE TRUSTEES AND INVESTORS
OF TAX-MANAGED GROWTH PORTFOLIO:

We have audited the accompanying statement of assets and liabilities,  including
the portfolio of investments, of Tax-Managed Growth Portfolio (the Portfolio) as
of December 31, 2003, and the related  statement of operations for the year then
ended,  the  statements of changes in net assets for the two years in the period
then ended and the  supplementary  data for each of the five years  ended in the
period then ended.  These financial  statements and  supplementary  data are the
responsibility of the Portfolio's  management.  Our responsibility is to express
an opinion on these  financial  statements and  supplementary  data based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements and supplementary  data are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003 by  correspondence  with the custodian.
An audit also includes assessing the accounting  principles used and significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial statements and supplementary data present fairly,
in all material respects, the financial position of Tax-Managed Growth Portfolio
at December 31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
its  supplementary  data for each of the five years in the period  then ended in
conformity with accounting principles generally accepted in the United States of
America.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 20, 2004

                                      66
<Page>

BELPORT CAPITAL FUND LLC

          INVESTMENT ADVISER OF
          TAX-MANAGED GROWTH PORTFOLIO
          AND BELPORT CAPITAL FUND LLC
          Boston Management and Research
          The Eaton Vance Building
          255 State Street
          Boston, MA 02109


          MANAGER OF BELPORT REALTY CORPORATION
          Boston Management and Research
          The Eaton Vance Building
          255 State Street
          Boston, MA 02109


          MANAGER OF BELPORT CAPITAL FUND LLC
          Eaton Vance Management
          The Eaton Vance Building
          255 State Street
          Boston, MA 02109


          CUSTODIAN AND TRANSFER AGENT
          Investors Bank & Trust Company
          200 Clarendon Street
          Boston, MA 02116


          INDEPENDENT AUDITORS
          Deloitte & Touche LLP
          200 Berkeley Street
          Boston, MA 02116

                                       67

<PAGE>

                                   SIGNATURES


Pursuant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on June 30, 2004.

                                          BELROSE CAPITAL FUND LLC
                                          (Registrant)

                                          By: /s/ Michelle A. Alexander
                                              -------------------------
                                              Michelle A. Alexander
                                              Duly Authorized Officer and
                                              Principal Accounting Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.



                                          By: /s/ Thomas E. Faust Jr.
                                              ------------------------
                                              Thomas E. Faust Jr.
                                              Chief Executive Officer

Date:  June 30, 2004



                                          By: /s/ Michelle A. Alexander
                                              -------------------------
                                              Michelle A. Alexander
                                              Chief Financial Officer

Date:  June 30, 2004

                                       68
<PAGE>

                                  EXHIBIT INDEX
                                  -------------

EXHIBIT NO.    DESCRIPTION
-----------    -----------

   3           Copy of Limited  Liability  Company  Agreement  of the Fund dated
               December  5,  2001  filed  as  Exhibit  3 to the  Fund's  Initial
               Registration  Statement  on Form 10 and  incorporated  herein  by
               reference.  (Note:  the LLC Agreement  also defines the rights of
               the holders of Shares of the Fund.)

   3(a)        Copy of Amendment No. 1 to the Fund's Limited  Liability  Company
               Agreement  dated  December  30, 2003 filed as Exhibit 3(a) to the
               Fund's  Report on Form 10-K for the year ended  December 31, 2003
               and incorporated herein by reference.

   4.1         Copy of Loan and  Security  Agreement  between  the Fund and DrKW
               Holdings,  Inc. dated as of June 30, 2003 filed as Exhibit 4.1 to
               the Fund's  Report on Form 10-Q  filed for the period  ended June
               30, 2003 and incorporated herein by reference.

   4.1(a)      Amendment dated September 29, 2003 to Loan and Security Agreement
               between the Fund and DrKW  Holdings, Inc. filed as Exhibit 4.1(a)
               to  the Fund's  Report on  Form 10-Q  filed for  the period ended
               September 30, 2003 and incorporated herein by reference.

   4.2         Copy of Loan and Security Agreement among the Fund, Merrill Lynch
               Mortgage  Capital,  Inc.,  the  lenders  referred  to therein and
               Merrill Lynch Capital  Services,  Inc., dated June 30, 2003 filed
               as Exhibit  4.2 to the Fund's  Report on Form 10-Q for the period
               ended June 30, 2003 and incorporated herein by reference.

   4.2(a)      Amendment dated September 29, 2003 to Loan and Security Agreement
               among Belport Capital Fund, Merrill Lynch Mortgage Capital, Inc.,
               as Agent,  the Lenders  referred  to  therein and  Merrill  Lynch
               Capital  Services, Inc.  filed as  Exhibit  4.2(a) to the  Fund's
               Report on Form 10-Q  for the period ended September 30, 2003  and
               incorporated herein by reference.

   9           Not applicable and not filed.

  10(1)        Copy of Investment Advisory and Administration  Agreement between
               the Fund and Boston  Management  and Research dated March 7, 2001
               filed  as  Exhibit  10(1)  to  the  Fund's  Initial  Registration
               Statement on Form 10 and incorporated herein by reference.

  10(2)        Copy of Management  Agreement between Belrose Realty  Corporation
               and Boston  Management and Research dated March 14, 2001 filed as
               Exhibit  10(2) to the Fund's  Initial  Registration  Statement on
               Form 10 and incorporated herein by reference.

  10(3)        Copy of Investor  Servicing  Agreement between the Fund and Eaton
               Vance Distributors,  Inc. dated December 5, 2000 filed as Exhibit
               10(3) the Fund's  Initial  Registration  Statement on Form 10 and
               incorporated herein by reference.

  10(4)        Copy of Custody and Transfer  Agency  Agreement  between the Fund
               and Investors  Bank & Trust Company dated  December 5, 2000 filed
               as Exhibit  10(4) the Fund's  Initial  Registration  Statement on
               Form 10 and incorporated herein by reference.

  11           Not applicable and not filed.

  12           Not applicable and not filed.

  21           List of  Subsidiaries  of the  Fund  filed as  Exhibit  21 to the
               Fund's  Report on Form 10-K for the year ended  December 31, 2003
               and incorporated herein by reference.

  24           Not applicable and not filed.

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

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

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

                                       69
<PAGE>

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

  99.3         Form N-CSR of Eaton Vance Tax-Managed  Growth Portfolio (File No.
               811-7409)   for  its  year   ended   December   31,   2003  filed
               electronically  with the Securities and Exchange Commission under
               the Investment Company Act of 1940 on March 8, 2004 (incorporated
               herein by reference pursuant to Rule 12b-32).

                                       70