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

FORM 10-K

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


Delaware 04-3613468
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(State of organization) (I.R.S. Employer Identification No.)


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


Registrant's telephone number: 617-482-8260
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Limited Liability Company Interests in the Fund (Shares)
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(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:
---------------------------

The financial statements contained in registrant's Form 10 filed with the
Securities and Exchange Commission on April 30, 2003 have been incorporated into
the following Parts of this report: Part II and Part IV.

The Exhibit Index is located on page 66.



Belrose Capital Fund LLC
Index to Form 10-K
Item Page
PART I
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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.................................................... 7

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

PART II
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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



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
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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.................................. 26
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
Redemption Fees................................................... 28
Selling Commissions............................................... 28
Certain Real Estate Investment Transactions....................... 29

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

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

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

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

SIGNATURES ............................................................... 65

EXHIBIT INDEX.............................................................. 66



PART I
------

ITEM 1. BUSINESS.
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FUND OVERVIEW. Belrose Capital Fund LLC (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


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

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
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
3


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 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


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
in real properties, including multifamily properties and office and industrial

5


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
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).

6


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).

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.

7


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.

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

8


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
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

9


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
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

10


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


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

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


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


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


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:



Payments due:
- -----------------------------------------------------------------------------------------------------------------------------
Type of Obligation Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
- -----------------------------------------------------------------------------------------------------------------------------

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
- -----------------------------------------------------------------------------------------------------------------------------

(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


(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


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


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,*



Estimated
2004 2005-2008 Thereafter Total Fair Value
- ------------------------------------------------------------------------------------------------------------------------

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

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

19


Estimated
2004 2005-2008 Thereafter Total Fair Value
- ------------------------------------------------------------------------------------------------------------------------


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

* 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
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

20


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
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.

21


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
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

22


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,
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.

23


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
64 hereof, are incorporated herein by reference. The Fund's consolidated
financial statements and auditors report thereon for the period ended December
31, 2002, appearing on pages 30 through 98 of the Fund's Form 10 filed with the
Securities and Exchange Commission on April 30, 2003, are also incorporated
herein by reference. The Portfolio's audited financial statements 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 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


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


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 M. 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.

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

26


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


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


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 incorporated
by reference into this report from the Fund's Form 10 filed April
30, 2003:

(1) (i) Consolidated Portfolio of Investments as of December 31, 2002

Consolidated Statement of Assets and Liabilities as of December
31, 2002

Consolidated Statement of Operations for the period from the
start of business, March 19, 2002, to December 31, 2002

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

Consolidated Statement of Cash Flows for the period from the
start of business, March 19, 2002, to December 31, 2002

29


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

Notes to Consolidated Financial Statements

Independent Auditors' Report dated February 28, 2003

Portfolio of Investments of Tax-Managed Growth Portfolio as of
December 31, 2002

Statement of Assets and Liabilities of Tax-Managed Growth
Portfolio as of December 31, 2002

Statement of Operations of Tax-Managed Growth Portfolio for the
period from the start of business, March 19, 2002, to December
31, 2002

Statements of Changes in Net Assets of Tax-Managed Growth
Portfolio for the years ended December 31, 2002 and December 31,
2001

Supplementary Data of Tax-Managed Growth Portfolio for the years
ended December 31, 2002, December 31, 2001, December 31, 2000,
December 31, 1999, the two month period ended December 31, 1998,
and the year ended October 31, 1998

Notes to Financial Statements

Independent Auditors' Report dated February 14, 2003

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

Consolidated Portfolio of Investments as of December 31, 2003

Consolidated Statement of Assets and Liabilities as of December
31, 2003

Consolidated Statement of Operations for the year ended December
31, 2003

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

Consolidated Statement of Cash Flows for the year ended December
31, 2003

Financial Highlights for the year ended December 31, 2003

Notes to Consolidated Financial Statements

Independent Auditors' Report dated March 5, 2004

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 66 hereof.

30

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


BELROSE CAPITAL FUND LLC as of December 31, 2003
CONSOLIDATED PORTFOLIO OF INVESTMENTS

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
- ------------------------------------------------------------------------------------












+ Security exempt from registration under the Securities Act of 1933. At
December 31, 2003, the value of these securities totaled $56,717,736, or
3.5% of net assets.
(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

32


BELROSE CAPITAL FUND LLC as of December 31, 2003
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

AS OF DECEMBER 31, 2003



ASSETS

Investments, at value (identified cost, $2,000,502,450) $ 2,178,651,453
Cash 6,535,905
Escrow deposits -- restricted 2,436,133
Distributions and interest receivable 400,960
Other assets 3,660,997
Open interest rate swap agreements, at value 1,423,867
- -------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,193,109,315
- -------------------------------------------------------------------------------------------

LIABILITIES

Loan payable -- New Credit Facility $ 183,300,000
Mortgages payable 344,219,483
Distributions payable to minority shareholders 16,800
Security deposits 968,110
Swap interest payable 79,280
Accrued expenses:
Interest expense 2,319,122
Property taxes 1,959,252
Other expenses and liabilities 1,782,021
Minority interests in controlled subsidiaries 26,010,489
- -------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 560,654,557
- -------------------------------------------------------------------------------------------
NET ASSETS FOR 17,032,796 FUND SHARES OUTSTANDING $ 1,632,454,758
- -------------------------------------------------------------------------------------------

SHAREHOLDERS' CAPITAL $ 1,632,454,758
- -------------------------------------------------------------------------------------------

NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE (NOTE 4)

($1,632,454,758 DIVIDED BY 17,032,796 FUND SHARES OUTSTANDING) $ 95.84
- -------------------------------------------------------------------------------------------


CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2003



INVESTMENT INCOME

Dividends allocated from Belvedere Capital
(net of foreign taxes, $248,681) $ 21,290,041
Interest allocated from Belvedere Capital 335,885
Expenses allocated from Belvedere Capital (8,692,174)
- -------------------------------------------------------------------------------------------
Net investment income allocated from Belvedere Capital $ 12,933,752
Rental income 64,679,823
Distributions from Partnership Preference Units 4,591,951
Interest 107,430
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 82,312,956
- -------------------------------------------------------------------------------------------

EXPENSES

Investment advisory and administrative fees $ 4,977,521
Property management fees 2,590,322
Distribution and servicing fees 2,800,440
Interest expense on mortgages 26,317,765
Interest expense on credit facilities 2,796,418
Property and maintenance expenses 17,974,998
Property taxes and insurance 8,068,145
Miscellaneous 979,238
- -------------------------------------------------------------------------------------------
TOTAL EXPENSES $ 66,504,847
- -------------------------------------------------------------------------------------------
Deduct --
Reduction of investment advisory and administrative fees $ 1,415,111
- -------------------------------------------------------------------------------------------
NET EXPENSES $ 65,089,736
- -------------------------------------------------------------------------------------------


Net investment income before minority interests in net income of
controlled subsidiaries $ 17,223,220
Minority interests in net income of controlled subsidiaries (1,943,578)
- -------------------------------------------------------------------------------------------

NET INVESTMENT INCOME $ 15,279,642
- -------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN (LOSS)

Net realized gain (loss) --
Investment transactions from Belvedere Capital (identified
cost basis) $ 19,117,006
Investment transactions (identified cost basis) (14,942)
Interest rate swap agreements (16,652,934)
- -------------------------------------------------------------------------------------------
NET REALIZED GAIN $ 2,449,130
- -------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment in Belvedere Capital (identified cost basis) $ 288,392,438
Investments in Partnership Preference Units (identified cost basis) 6,834,831
Investment in other real estate (net of minority interests in
unrealized loss of controlled subsidiaries of $5,418,472) 3,632,735
Interest rate swap agreements 12,976,709
- -------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 311,836,713
- -------------------------------------------------------------------------------------------

NET REALIZED AND UNREALIZED GAIN $ 314,285,843
- -------------------------------------------------------------------------------------------

NET INCREASE IN NET ASSETS FROM OPERATIONS $ 329,565,485
- -------------------------------------------------------------------------------------------


See notes to consolidated financial statements

33


CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS



INCREASE (DECREASE) YEAR ENDED PERIOD ENDED
IN NET ASSETS DECEMBER 31, 2003 DECEMBER 31, 2002*
- ----------------------------------------------------------------------------------------------

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
- ----------------------------------------------------------------------------------------------


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

CONSOLIDATED STATEMENT OF CASH FLOWS



YEAR ENDED
INCREASE (DECREASE) IN CASH DECEMBER 31, 2003
- --------------------------------------------------------------------------------------------

Cash Flows From (For) Operating Activities --
Net increase in net assets from operations $ 329,565,485
Adjustments to reconcile net increase in net assets from operations
to net cash flows for operating activities --
Net investment income allocated from Belvedere Capital (12,933,752)
Decrease in escrow deposits 802,927
Increase in other assets (107,660)
Decrease in distributions and interest receivable 39,093
Decrease in interest payable for open swap agreements (50,603)
Decrease in security deposits, accrued interest and accrued
other expenses and liabilities (928,077)
Decrease in accrued property taxes (615,937)
Purchases of Partnership Preference Units (8,033,600)
Proceeds from sale of common stock 10,140,535
Improvements to rental property (4,679,844)
Increase in short-term investments (7,614,214)
Net decrease in investment in Belvedere Capital 1,651,419
Net interest incurred on interest rate swap agreements (4,477,357)
Payment for termination of interest rate swap agreements (12,175,577)
Minority interests in net income of controlled subsidiaries 1,943,578
Net realized gain from investment transactions (2,449,130)
Net change in unrealized (appreciation) depreciation
of investments (311,836,713)
- --------------------------------------------------------------------------------------------
NET CASH FLOWS FOR OPERATING ACTIVITIES $ (21,759,427)
- --------------------------------------------------------------------------------------------






Cash Flows From (For) Financing Activities --
Proceeds from Credit Facility $ 28,000,000
Payments on behalf of investors (selling commissions) (325,083)
Payments for Fund Shares redeemed (6,204,599)
Distributions paid to Shareholders (459,964)
Capital contributed to controlled subsidiaries 70,837
- --------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES $ 21,081,191
- --------------------------------------------------------------------------------------------

NET DECREASE IN CASH $ (678,236)
- --------------------------------------------------------------------------------------------

CASH AT BEGINNING OF YEAR $ 7,214,141
- --------------------------------------------------------------------------------------------

CASH AT END OF YEAR $ 6,535,905
- --------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE AND NON-CASH
INVESTING AND FINANCING ACTIVITIES

Securities contributed by Shareholders, invested in
Belvedere Capital $ 95,047,136
Interest paid on loan -- credit facilities $ 2,852,392
Interest paid on mortgages $ 25,904,530
Interest paid on swap agreements $ 4,527,960
Market value of securities distributed in payment of redemptions $ 27,169,872
Market value of common stock received from Belvedere Capital $ 10,155,477


See notes to consolidated financial statements

34


FINANCIAL HIGHLIGHTS



FOR THE YEAR ENDED DECEMBER 31, 2003

Net asset value -- Beginning of year $ 76.860
- --------------------------------------------------------------------------------

INCOME (LOSS) FROM OPERATIONS

Net investment income(6) $ 0.897
Net realized and unrealized gain 18.133
- --------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 19.030
- --------------------------------------------------------------------------------

DISTRIBUTIONS

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

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

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




AS A PERCENTAGE OF AS A PERCENTAGE OF
RATIOS AVERAGE NET ASSETS(5) AVERAGE GROSS ASSETS(2)(5)
- --------------------------------------------------------------------------------------------------------------------------

Expenses of Consolidated Real Property Subsidiaries
Interest and other borrowing costs(7) 1.51% 1.14%
Operating expenses(7) 1.65% 1.25%
Belrose Capital Fund LLC Expenses
Interest and other borrowing costs(4)(8) 0.20% 0.15%
Investment advisory and administrative fees, servicing fees
and other Fund operating expenses(3)(4) 1.12% 0.84%
----------------------------------------------------
Total expenses 4.48% 3.38%

Net investment income 1.08% 0.81%
- --------------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DATA

Net assets, end of year (000's omitted) $ 1,632,455
Portfolio turnover of Tax-Managed Growth Portfolio (the Portfolio) 15%
- --------------------------------------------------------------------------------------------------------------------------


(1) Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested.
(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.

See notes to consolidated financial statements

35

BELROSE CAPITAL FUND LLC as of December 31, 2003
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. At December 31, 2003, Belrose Realty invested
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 -- At December 31, 2003, Belrose Capital owned 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. 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 Statement of Assets and Liabilities.

Bel Apartment -- Bel Apartment, a majority-owned subsidiary of Belrose
Realty, 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 Statement 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, 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
Statement 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, 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, Washington,
36


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 Statement 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 its 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

37


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 Statement 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 Statement 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.

38


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 year's 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 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

39


make a 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.

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. For the year ended December 31,
2003, EV Distributors received $139,527 in redemption fees.

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
DECEMBER 31, 2003
---------------------------------------
PREFERRED COMMON
DATE OF CONTRIBUTION SHARES SHARES
-------------------------------------------------------------------------------

February 19, 2003 $ 74.80 $ 21.04
-------------------------------------------------------------------------------


In connection with the offering of Fund Shares, EV Distributors, the
Placement Agent, received $325,083 in selling commissions paid by Belrose
Capital on behalf of Shareholders. EV Distributors, in turn, paid this
amount to the applicable subagent on behalf of Shareholders investing in
Belrose Capital through such subagent. In addition, EV Distributors made
payments to subagents from its own resources totaling $950,471
approximately equal to 1.0% of the value of investments in Belrose Capital
made through subagents.

40


5 INVESTMENT TRANSACTIONS

The following table summarizes the Fund's investment transactions for the
year ended December 31, 2003:



YEAR ENDED
INVESTMENT TRANSACTION DECEMBER 31, 2003
------------------------------------------------------------------------

Increases in investment in Belvedere Capital $ 95,047,136
Decreases in investment in Belvedere Capital(1) $ 38,976,768
Purchases of Partnership Preference Units(2) $ 8,033,600
Sale of common stock(1) $ 10,140,535
------------------------------------------------------------------------


(1) Included in decreases in investment in Belvedere Capital is the
receipt of common stock through a redemption in-kind of $10,155,477.
Belrose Capital subsequently sold the common stock recognizing a loss
of $14,942 on the transaction.
(2) Purchases of Partnership Preference Units for the year ended December
31, 2003 represent Partnership Preference Units 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, including
allocations of income, expenses and net realized and unrealized gains
(losses) for the year then ended:



YEAR ENDED
DECEMBER 31, 2003
-------------------------------------------------------------------------------------------

Belvedere Capital's interest in the Portfolio(1) $ 11,100,012,615
The Fund's investment in Belvedere Capital(2) $ 1,640,828,100
Income allocated to Belvedere Capital from the Portfolio $ 143,671,130
Income allocated to the Fund from Belvedere Capital $ 21,625,926
Expenses allocated to Belvedere Capital from the Portfolio $ 43,085,940
Expenses allocated to the Fund from Belvedere Capital(3) $ 8,692,174
Net realized gain allocated to Belvedere Capital from the Portfolio $ 128,352,887
Net realized gain allocated to the Fund from Belvedere Capital $ 19,117,006
Change in unrealized appreciation (depreciation)
allocated to Belvedere Capital from the Portfolio $ 1,892,271,872
Change in unrealized appreciation (depreciation)
allocated to the Fund from Belvedere Capital $ 288,392,438
-------------------------------------------------------------------------------------------


(1) As of December 31, 2003, the value of Belvedere Capital's interest in
the Portfolio represents 63.0% of the Portfolio's net assets.
(2) As of December 31, 2003, the Fund's investment in Belvedere Capital
represents 14.8% of Belvedere Capital's net assets.
(3) Allocated expenses include $6,481,012 of expenses from the Portfolio,
$61,831 of operating expenses and $2,149,331 of service fees (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 are
listed below.



NOTIONAL INITIAL UNREALIZED
AMOUNT OPTIONAL FINAL APPRECIATION AT
(000'S FIXED FLOATING TERMINATION TERMINATION DECEMBER 31,
OMITTED) RATE RATE DATE DATE 2003
-------------------------------------------------------------------------------------

$ 31,588 4.180% LIBOR + 0.30% 7/09 6/10 $ 210,531
37,943 4.160% LIBOR + 0.30% 11/09 6/10 252,843
83,307 4.045% LIBOR + 0.30% -- 6/10 960,493
-------------------------------------------------------------------------------------
TOTAL $ 1,423,867
-------------------------------------------------------------------------------------


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 New
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

41


loans was $473,491,403 at December 31, 2003. Amounts outstanding at
December 31, 2003 are as follows:



ANNUAL MONTHLY BALANCE AT
MATURITY INTEREST INTEREST DECEMBER 31,
DATE RATE PAYMENT* 2003
-------------------------------------------------------------------

May 1, 2010 8.330% $ 745,323 $ 107,369,483
December 1, 2010 7.540% 760,283 121,000,000
June 1, 2011 6.765% 653,104 115,850,000
-------------------------------------------------------------------
$ 2,158,710 $ 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 is approximately
$393,000,000 at December 31, 2003. 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 New Credit Facility). The New Credit
Facility has a seven-year maturity and will expire on June 25, 2010.
Belrose Capital's obligations under the New 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. As of December 31, 2003,
outstanding borrowings under this credit arrangement totaled $177,000,000.

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. As of December 31, 2003, outstanding borrowings
under this credit arrangement totaled $6,300,000, as well as letters of
credit outstanding for $2,080,452. 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 New 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 New Credit Facility may be
made in the future for these purposes.

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, the advisory fee applicable to the
Portfolio was 0.44% of average daily net assets. Belvedere Capital's
allocated portion of the advisory fee totaled $41,671,111 of which
$6,267,847 was allocated to Belrose Capital for the year ended December 31,
2003.










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. For the year ended December
31, 2003, the advisory and administrative fee paid or accrued to Boston
Management by Belrose Capital, plus the management fee paid or accrued to
Boston Management by Belrose Realty, totaled $4,977,521.

42


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. For the year ended December 31, 2003, Belrose Capital's
distribution fees paid or accrued to EV Distributors totaled $1,415,111.

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.
For the year ended December 31, 2003, Boston Management has waived
$1,415,111 of the advisory and administrative fees of Belrose Capital.

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 and totaled $14,288,579 for the year
ended December 31, 2003, of which $2,149,331 was allocated to Belrose
Capital. 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. For the year ended December 31, 2003, the
servicing fee paid directly by Belrose Capital totaled $1,385,329. Of the
servicing fee amounts allocated to and incurred by Belrose Capital for the
year ended December 31, 2003, $1,471,244 was paid or accrued to subagents.

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). For the year ended December 31, 2003,
Belrose Realty's controlled subsidiaries paid or accrued property
management fees of $2,590,322.

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:



TAX-
MANAGED
FOR THE YEAR ENDED GROWTH REAL
DECEMBER 31, 2003 PORTFOLIO* ESTATE TOTAL
----------------------------------------------------------------------------------------------

Revenue $ 12,933,752 $ 69,349,438 $ 82,283,190
Interest expense
on mortgages -- (26,317,765) (26,317,765)
Interest expense on
credit facilities -- (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
----------------------------------------------------------------------------------------------
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 $ 1,651,599,110
----------------------------------------------------------------------------------------------


43


The following tables reconcile the reported segment information to the
consolidated financial statements for the year ended December 31, 2003:



Revenue:
Revenue from reportable segments $ 82,283,190
Unallocated amounts:
Interest earned on cash not
invested in the Portfolio or in subsidiaries 29,766
---------------------------------------------------------------------------------
TOTAL REVENUE $ 82,312,956
---------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations:
Net increase in net assets from operations of
reportable segments $ 333,027,394
Unallocated amounts:
Interest earned on cash not invested
in the Portfolio or in subsidiaries 29,766
Unallocated amounts(1):
Distribution and servicing fees (2,800,440)
Audit, tax and legal fees (294,771)
Interest expense on credit facilities (223,713)
Other operating expenses (172,751)
---------------------------------------------------------------------------------
TOTAL NET INCREASE IN NET ASSETS FROM OPERATIONS $ 329,565,485
---------------------------------------------------------------------------------
Net assets:
Net assets of reportable Segments $ 1,651,599,110
Unallocated cash(2) 412,226
Short-term investments(2) 7,614,214
Loan payable -- New Credit Facility(3) (27,026,426)
Other liabilities (144,366)
---------------------------------------------------------------------------------
TOTAL NET ASSETS $ 1,632,454,758
---------------------------------------------------------------------------------


* Belrose Capital invests indirectly in Tax-Managed Growth Portfolio
through Belvedere Capital.
(1) Unallocated amounts represent expenses incurred that pertain to the
overall operation of Belrose Capital, and do not pertain to either
operating segment.
(2) Unallocated cash and short-term investments represent cash and cash
equivalents not invested in the Portfolio or real estate assets.
(3) Unallocated amount of loan payable-New 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.

44


BELROSE CAPITAL FUND LLC as of December 31, 2003
INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS
OF BELROSE CAPITAL FUND LLC AND SUBSIDIARIES

We have audited the accompanying consolidated statement 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 the related consolidated statements of operations and consolidated
cash flows for the year then ended, the 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, and financial highlights
for the year ended December 31, 2003. 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 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 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 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, the results of its operations,
the changes in its net assets, its cash flows, and the financial highlights
for the respective stated periods, in conformity with accounting principles
generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 5, 2004

45


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

COMMON STOCKS -- 99.2%



SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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


See notes to financial statements.

46




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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


See notes to financial statements.

47




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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
- --------------------------------------------------------------------------------------


See notes to financial statements.

48




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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


See notes to financial statements.

49




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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
- --------------------------------------------------------------------------------------


See notes to financial statements.

50




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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
- --------------------------------------------------------------------------------------


See notes to financial statements.

51




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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


See notes to financial statements.

52




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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
- --------------------------------------------------------------------------------------


See notes to financial statements.

53




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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


See notes to financial statements.

54




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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
- --------------------------------------------------------------------------------------


See notes to financial statements.

55




SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------

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%


PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------

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%


PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------

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
- --------------------------------------------------------------------------------------


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.

56


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.

57


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.

58


SUPPLEMENTARY DATA



YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------

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
- -------------------------------------------------------------------------------------------------------------------------


(1) Total return is required to be disclosed for fiscal years beginning after
December 15, 2000.

See notes to financial statements.

59


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
to

60


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
-----------------------------------------------------------------------------


61


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.



DATE OF
DESCRIPTION ACQUISITION SHARES COST FAIR VALUE
-------------------------------------------------------------------------------------

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
-------------------------------------------------------------------------------------


62


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

63


BELROSE CAPITAL FUND LLC as of December 31, 2003

INVESTMENT ADVISER OF
TAX-MANAGED GROWTH PORTFOLIO
AND BELROSE CAPITAL FUND LLC

Boston Management and Research
The Eaton Vance Building
255 State Street
Boston, MA 02109


MANAGER OF BELROSE REALTY CORPORATION

Boston Management and Research
The Eaton Vance Building
255 State Street
Boston, MA 02109


MANAGER OF BELROSE 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

64


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 March 15, 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: March 15, 2004



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

Date: March 15, 2004

65


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 herewith.

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.

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

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).

66