UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Act)

For the quarterly period ended March 31, 2010

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Act

For the transition period from _________ to _____________

Commission File Number 000-30509

Belcrest Capital Fund LLC

(Exact Name of Registrant as Specified in Its Charter)

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BELCREST CAPITAL FUND LLC as of March 31, 2010

Notes to Condensed Consolidated Financial Statements (Unaudited)

1 Basis of Presentation

The condensed consolidated interim financial statements of Belcrest Capital Fund LLC (Belcrest Capital) and its subsidiaries (collectively, the Fund) have been prepared, without audit, in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, cash flows and financial highlights as of the dates and for the periods presented. It is suggested that these interim financial statements be read in conjunction with the annual consolidated financial statements and notes for the year ended December 31, 2009 included in the Fund’s Annual Report on Form 10-K dated March 1, 2010. Results for interim periods are not necessarily indicative of those to be expected for the full fiscal year.

The condensed consolidated statement of assets and liabilities at December 31, 2009 and the condensed consolidated statement of changes in net assets and the financial highlights for the year then ended have been derived from the December 31, 2009 audited financial statements but do not include all of the information and footnotes required by GAAP for complete financial statements as permitted by the instructions to Form 10-Q and Article 10 of Regulation S-X.

2 Recently Issued Accounting Pronouncement

In January 2010, the Financial Accounting Standards Board (FASB) issued authoritative guidance on improving disclosures about fair value measurements that is effective for annual or interim reporting periods beginning after December 15, 2009. Under the new guidance, significant transfers in and/or out of Level 1 and Level 2 of the fair value hierarchy, and the reasons for the transfers should be disclosed. The guidance has an additional requirement that is effective for reporting periods beginning after December 15, 2010. This requirement states that information about certain purchases, sales, issuances, and settlements should be disclosed on a gross basis rather than on a net basis. The adoption of the new guidance will require new disclosure to the Fund’s financial statements, as applicable, but will not have an impact on the Fund’s net asset value, financial condition or results of operations.

3 Significant Accounting Policies

A. Investment and Other Valuations

The Fund invests in shares of Belvedere Capital Fund Company LLC (Belvedere Company). Belvedere Company’s only investment is an interest 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 1940 Act), the value of which is derived from a proportional interest therein. Valuation of the Portfolio’s securities is discussed in Note 1A of the Portfolio’s Notes to Financial Statements, which are included in the Fund’s Annual Report on Form 10-K dated March 1, 2010. The Fund also invests in real estate investments through a controlled subsidiary, Belcrest Realty Corporation (Belcrest Realty). Such investments include preferred equity interests in real estate operating partnerships (Partnership Preference Units) affiliated with publicly traded real estate investment trusts (REITs), investments in real estate joint ventures (Real Estate Joint Ventures) and a tenancy-in-common interest in real property (Co-

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owned Property). The Real Estate Joint Ventures and Co-owned Property are referred to herein collectively as Subsidiary Real Estate Investments. The Fund may also invest cash on a temporary basis in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund). Prior to February 2010, the Fund invested cash in Cash Management Portfolio (Cash Management). Cash Reserves Fund and Cash Management are affiliated investment companies managed by Eaton Vance Management (Eaton Vance) and Boston Management and Research (Boston Management), respectively. Boston Management is a subsidiary of Eaton Vance. Additionally, Belcrest Capital has interest rate swap agreements (Note 8). Boston Management makes valuation determinations in accordance with the Fund’s policies. The valuation policies followed by the Fund are as follows:

Market prices for the Fund’s investments in Partnership Preference Units and Subsidiary Real Estate Investments are not readily available. Such investments are stated in the Fund’s condensed consolidated financial statements at fair value which represents the amount at which Boston Management, as manager of Belcrest Realty, believes would be received to sell an asset in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants under current market conditions. In valuing these investments, Boston Management considers relevant factors, data and information.

Valuations of the Fund’s Partnership Preference Units and Subsidiary Real Estate Investments are inherently uncertain because they involve the use of assumptions and estimates. If the assumptions and estimates used in the valuations were to change, it could materially impact the fair value of the Fund’s holdings of Partnership Preference Units and Subsidiary Real Estate Investments.

The fair value of property held by the Fund’s Subsidiary Real Estate Investments is based on appraisals provided by independent, licensed appraisers (Appraisers) and valuations, if applicable, prepared by Boston Management.

The appraisals of properties are conducted by Appraisers on at least an annual basis. Appraisals of properties may be conducted more frequently than once a year if Boston Management determines that significant changes in economic circumstances, that may materially impact fair values, have occurred since the most recent appraisal. Each appraisal is conducted in accordance with the Uniform Standards of Professional Appraisal Practices (as well as other relevant standards). Boston Management reviews the appraisal of each property and generally relies on the assumptions and estimates made by the Appraiser when determining fair value.

In deriving the fair 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.

For those properties not appraised by Appraisers in a given quarter, Boston Management will review the fair values of such properties and, if Boston Management believes it is warranted based on the appraisals of appraised properties or for other reasons, Boston Management may prepare a valuation of such properties considering results of operations, market conditions, significant changes in economic circumstances, recent independent appraisals of similar properties and/or other relevant facts or circumstances. In determining valuations, Boston Management follows a process consistent with industry practice and the practice of Appraisers, as described above. Valuations may occur more frequently than quarterly if it is determined by Boston Management that the current property valuation has changed materially since the most recent appraisal or valuation.

Boston Management determines the fair value of the Fund’s equity interest in a Real Estate Joint Venture based on an estimate of the allocation of equity interests between Belcrest Realty and the unaffiliated

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minority investor of the Real Estate Joint Venture (the Operating Partner). This allocation is generally calculated by a third party specialist, using current valuations of the properties owned by the Real Estate Joint Venture. The specialist uses a financial model that considers (i) the terms of the joint venture agreement relating to allocation of distributable cash flow, (ii) the expected duration of the joint venture, and (iii) the projected property values and cash flows from the properties based on estimates used in the property valuations. The estimated allocation of equity interests between Belcrest Realty and the Operating Partner of a Real Estate Joint Venture is prepared quarterly and reviewed by Boston Management. Interim allocations of equity interests may be conducted more frequently than quarterly if Boston Management determines that significant changes in economic circumstances that may materially impact the allocation of equity interests have occurred since the most recent allocation.

Boston Management determines the fair value of the Fund’s interest in Co-owned Property by applying the Fund’s ownership interest to the fair value of the property, net of associated mortgage debt.

The fair value of the Partnership Preference Units is based on analysis and calculations performed on at least 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 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 adjusted to take such occurrences into account. Boston Management reviews the analysis and calculations performed by the service provider. Boston Management generally relies on the assumptions and estimates made by the service provider when determining the fair value of the Partnership Preference Units.

Cash Reserves Fund and Cash Management generally value their investment securities utilizing the amortized cost valuation technique permitted by Rule 2a-7 under the 1940 Act, pursuant to which Cash Reserves Fund and Cash Management must comply with certain conditions. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund and Cash Management may value their investment securities based on available market quotations provided by a third party pricing service.

Interest rate swap agreements are normally valued on the basis of valuations furnished daily by a third party pricing service. The valuations are based on the present value of fixed and projected floating rate cash flows over the term of the agreement. Future cash flows are discounted to their present value using swap quotations provided by electronic data services or by broker-dealers.

Changes in the fair value of the Fund’s investments are recorded as unrealized appreciation (depreciation) in the condensed consolidated statements of operations.

B. Redemption Price per Share

Pursuant to the Fund’s offering materials and operating agreement, redemptions of shares are made at a price based on the value of the Fund’s total assets, less accrued and allocated liabilities, as determined in good faith by the investment adviser. Subject to the foregoing, such determination is to be made in

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accordance with GAAP. Beginning in 2010, the investment adviser adjusted the fair value of the Fund’s assets from GAAP to reflect a reduction in a Real Estate Joint Venture’s liability for non-recourse mortgage debt payable in excess of the fair value of the properties securing such debt, based on the investment adviser’s determination that none of the Real Estate Joint Venture, Belcrest Realty or Belcrest Capital would be liable to the mortgage holder for amounts in excess of the fair value of the properties due to the non-recourse nature of the debt. As of March 31, 2010, this adjustment caused the Fund’s redemption price per share to exceed its net assets divided by shares outstanding as determined under GAAP by $0.75. A reconciliation of this adjustment as of March 31, 2010 follows:

4 Fair Value Measurements 

GAAP establishes a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three levels of the fair value hierarchy are described below.

• Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
• Level 2 – Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;
• Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

In determining the fair value of its investments, the Fund uses appropriate valuation techniques based on available inputs. The Fund maximizes its use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Accordingly, when available, the Fund measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. If market data is not readily available, fair value is based upon other significant unobservable inputs such as inputs that reflect the Fund’s own assumptions about the inputs market participants would use in valuing the investment. Investments valued using unobservable inputs are classified to the lowest level of any input that is most significant to the valuation. Thus, a valuation may be classified as Level 3 even though the valuation may include significant inputs that are readily observable.  The Fund’s assets classified as Level 3 as of March 31, 2010 and December 31, 2009 represent 15.6% and 16.9%, respectively, of the Fund’s total assets.

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The following tables present for each of the hierarchy levels, the Fund’s assets and liabilities that are measured at fair value as of March 31, 2010 and December 31, 2009.

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The following tables present the changes in the Level 3 fair value category for the three months ended March 31, 2010 and 2009.

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5 Investment Transactions

The following table summarizes the Fund’s investment transactions, other than short-term investments, for the three months ended March 31, 2010 and 2009.

The following table summarizes the Fund’s investment in the Portfolio through Belvedere Company for the three months ended March 31, 2010 and 2009, including allocations of income, expenses and net realized and unrealized gains (losses).

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A summary of the Portfolio’s Statement of Assets and Liabilities at March 31, 2010, December 31, 2009 and March 31, 2009 and its operations for the three months ended March 31, 2010, for the year ended December 31, 2009 and for the three months ended March 31, 2009 follows:

7 Investment in Real Estate Joint Ventures

At March 31, 2010 and December 31, 2009, Belcrest Realty held investments in two Real Estate Joint Ventures, Lafayette Real Estate LLC (Lafayette) and Allagash Property Trust (Allagash). Belcrest Realty held a majority economic interest of 68.5% and 68.9% in Lafayette and 87.5% and 87.1% in Allagash as of March 31, 2010 and December 31, 2009, respectively. Lafayette owns office properties and Allagash owns industrial distribution properties. Combined and condensed financial data of the Real Estate Joint Ventures is presented below.

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8 Interest Rate Swap Agreements

Belcrest Capital has entered into interest rate swap agreements with Merrill Lynch Capital Services, Inc. to fix the cost of a portion of its borrowings under the Credit Facility (Note 9). Pursuant to the agreements, Belcrest Capital makes periodic payments to the counterparty at predetermined fixed rates in exchange for floating rate payments that fluctuate with the one-month London Interbank Offered Rate (LIBOR). See Note 3 for additional information.  The notional or contractual amounts of these instruments may not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these investments is meaningful only when considered in conjunction with all related assets, liabilities and agreements. The risks of interest rate swap agreements include changes in market conditions that will affect the value of the agreement or the cash flows and the possible inability of the counterparty to fulfill its obligations under the agreement. Belcrest Capital’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the agreement’s remaining life, to the extent that the amount is positive. The following table summarizes Belcrest Capital’s interest rate swap agreements.

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9 Debt

Credit Facility — On March 24, 2010, Belcrest Capital terminated and repaid its credit arrangements with Dresdner Kleinwort Holdings I, Inc. and Merrill Lynch Mortgage Capital, Inc. using proceeds from its credit arrangement with Bank of America (the Credit Facility). The Credit Facility has a minimum initial term of 540 days but may be terminated by the lender any time thereafter upon 180 days’ notice. Belcrest Capital may terminate the Credit Facility upon 30 days’ notice subject to an early termination fee.

The aggregate amount available for borrowing under the Credit Facility is $230,000,000.

Belcrest Capital pays a rate of interest equal to three-month LIBOR plus 1.75% per annum on outstanding borrowings under the Credit Facility. A loan structure fee equal to 0.25% of the total amount available under the Credit Facility was paid at closing and is amortized over the term of the Credit Facility. A commitment fee is paid on the unused commitment amount, if any, equal to 0.25% per annum from January 1, 2010 through March 24, 2010 and 0.40% per annum thereafter. Belcrest Capital will incur an additional fee if outstanding borrowings fall below certain levels.

Obligations under the Credit Facility are without recourse to shareholders. Belcrest Capital is required under the Credit Facility to maintain at all times a specified asset coverage ratio. The rights of the lender to receive payments of interest on and repayments of principal of borrowings are senior to the rights of shareholders. Under the terms of the Credit Facility, Belcrest Capital is not permitted to make distributions of cash or securities while there is outstanding any event of default under the Credit Facility. During such periods, Belcrest Capital would not be able to honor redemption requests or make cash distributions. The Credit Facility is secured by a pledge of Belcrest Capital’s assets, excluding the Fund’s real estate investments.

The following table summarizes Belcrest Capital’s Credit Facility. The fair value of the Credit Facility approximates its carrying value.

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

Average Borrowings and Average Interest Rate — During the three months ended March 31, 2010, the average balance of borrowings under the Credit Facility was approximately $193,800,000 with a weighted average interest rate of 1.11%. The weighted average interest rate includes all costs of borrowings under the Credit Facility.

10 Segment Information

Belcrest Capital pursues its investment objective primarily by investing indirectly in the Portfolio through Belvedere Company. The Portfolio is a diversified investment company that emphasizes investments in common stocks of domestic and foreign growth companies that are considered by its investment adviser to be high in quality and attractive in their long-term investment prospects. The Fund’s investment income includes the Fund’s pro rata share of Belvedere Company’s net investment income. Separate from its investment in Belvedere Company, Belcrest Capital invests in real estate investments through Belcrest

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Realty. The Fund’s investment income from real estate investments primarily consists of distribution income from Partnership Preference Units, and net investment income from Real Estate Joint Ventures and Co-owned Property.

Belcrest 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 the net change in unrealized appreciation (depreciation).

The Fund’s Credit Facility borrowings and related interest expense are centrally managed by the Fund. A portion of the Credit Facility borrowings and related interest expense have been approximated and allocated to the real estate segment for presentation purposes herein. Credit Facility borrowings allocated to the real estate segment primarily represent estimated net amounts borrowed to purchase the Fund’s interest in real estate investments. The Fund’s interest rate swap agreement balances are presented as part of the real estate segment for presentation purposes herein. The accounting policies of the reportable segments are the same as those for Belcrest Capital on a consolidated basis. No reportable segments have been aggregated. Reportable information by segment is as follows:

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

The information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the Act). 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 Belcrest Capital Fund LLC (the Fund) could differ materially from those contained in the forward-looking statements due to a number of factors. The Fund undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Factors that could affect the Fund’s performance include a decline in the U.S. stock markets or in general economic conditions, adverse developments affecting the real estate industry, or fluctuations in interest rates.

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

MD&A for the Quarter Ended March 31, 2010 Compared to the Quarter Ended March 31, 2009.⁽¹⁾

Performance of the Fund. The Fund’s investment objective is to achieve long-term, after-tax returns for shareholders. Eaton Vance Management (Eaton Vance), as the Fund’s manager, measures the Fund’s success in achieving its objective based on the investment returns of the Fund, using the S&P 500 Index (the Index) as the Fund’s primary performance benchmark. The Index 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 Tax-Managed Growth Portfolio (the Portfolio). The Fund invests in the Portfolio through its interest in Belvedere Capital Fund Company LLC (Belvedere Company). The Fund’s performance will differ from that of the Portfolio primarily due to its investments outside 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 borrowings 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 a portion of its borrowings under the Credit Facility (described under "Liquidity and Capital Resources" below).

The Fund’s total return was 5.79% for the quarter ending March 31, 2010. This return reflects an increase in the Fund’s redemption price per share from $80.33 to $84.74 and a distribution of $0.25 per share during the period. The total return of the Index was 5.39% over the same period. Last year, the Fund had a total return of -18.33% for the quarter ending March 31, 2009. This return reflected a decrease in the Fund’s net asset value per share from $74.71 to $59.93 and a distribution of $1.23 per share during the period. The Index had a total return of -10.98% over the same period.

Performance of the Portfolio. In the first quarter of 2010 the stock market extended the rally that began in early March 2009, despite a pronounced February sell-off and lingering uncertainty and skepticism. The equity markets have now recorded gains in four consecutive quarters. The trends that helped the equity markets stage a recovery last year continued to provide a favorable backdrop. The battered U.S. economy showed signs of recovery from recession, and corporate earnings were strong, with expectations of acceleration. However, the gains came with volatility, as governments and central banks worked through the aftermath of the financial and banking crisis. Markets were rattled over debt fears in Greece, China’s tightening of bank lending standards and an unsettled political environment at home, including massive health-care reform and proposed bank regulation. Value stocks outperformed growth stocks across all market capitalizations during the first quarter, and small-cap stocks outperformed the large- and mid-cap segments of the market, though all three segments had strong positive returns.

The Portfolio invests on a long-term basis in a broadly diversified portfolio consisting primarily of common stocks of established growth companies. For the quarter ending March 31, 2010, the Portfolio had a total return of 5.86% compared to the Index, its benchmark, which had a total return of 5.39%. For comparison, the total return of the Portfolio in the first quarter of 2009 was -11.38% compared to the -10.98% return of the Index during the period.

Within the Index, eight of the ten economic sectors generated positive returns. Cyclical groups exhibited leadership while defensive areas lagged. The industrials, consumer discretionary and financials sectors posted the highest performance, while

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utilities and telecommunication services were the only sectors to exhibit negative returns. The Portfolio also experienced positive results in eight of the ten sectors in which it was invested during the quarter. Relative strength was driven by stock selection in the energy sector and allocation in the utilities, telecommunication services and industrials sectors. Positioning within the financials and health care sectors created a drag on return comparisons.

Stock selection in the energy and industrials sectors lifted the Portfolio’s relative returns. The Portfolio’s energy holdings outpaced those in the Index, a reflection of its positioning in discovery companies and particularly an investment in a specialty exploration and production firm that had a double-digit return during the quarter. Leaning away from some of the underperforming large oil conglomerates also proved beneficial during the quarter. In the industrials sector, investments in two aerospace and defense companies aided results. Additionally, positions in two of the world’s leading shipping companies added value as investors gravitated toward stocks levered to global economic improvement. Choosing to underweight the defensive-oriented utilities and telecommunication sectors also buoyed returns during the cyclical-led rally.

Despite solid double-digit gains in the financials sector, an underweight combined with some company-specific decisions detracted from performance. In particular, underweighting some of the strong-performing regional and money center banks dampened results. In the health care sector, positions in a few of the large and mega-cap pharmaceutical companies detracted from comparative performance, as some company-specific issues and controversy related to health care reform pressured these investments.

Performance of Real Estate Investments. The Fund’s real estate investments are held through Belcrest Realty Corporation (Belcrest Realty). As of March 31, 2010, real estate investments included: two real estate joint ventures (Real Estate Joint Ventures), Allagash Property Trust (Allagash) and Lafayette Real Estate LLC (Lafayette); a tenancy-in-common interest in real property (Co-owned Property), Bel Stamford I LLC (Bel Stamford I); and a portfolio of preferred equity interests in real estate operating partnerships (Partnership Preference Units) affiliated with publicly traded real estate investment trusts. Allagash owns industrial distribution properties, Lafayette owns office properties and Bel Stamford I owns an interest in an office property leased to a single tenant.

During the quarter ending March 31, 2010, Belcrest Realty did not acquire or dispose of any real estate investments. During the quarter ending March 31, 2009, Belcrest Realty sold certain of its Partnership Preference Units for approximately $23.0 million (representing sales to the respective issuers of such Partnership Preference Units), recognizing a loss of approximately $12.3 million on the sale transaction.

The Fund’s real estate investments produced negative returns for the quarter ending March 31, 2010, with decreases in the fair value of real property investments more than offsetting net investment income and increases in the fair value of Partnership Preference Units. Valuations of the real property investments decreased during the period, albeit at a more modest pace than seen in recent periods. The decline was due both to widening of capitalization rates and weakening in other market metrics. Despite signs of a recovery in the economy, most commercial real estate assets continue to face challenges from declining rental rates and a struggle to maintain occupancy. Valuations also reflect historically low levels of transactional activity and the limited availability of debt financing. The fair value of Partnership Preference Units increased from December 31, 2009 as credit spreads in general continued to narrow for preferreds and other fixed income securities during the quarter.

During the quarter ending March 31, 2010, the Fund’s net investment income from real estate investments held through Belcrest Realty was approximately $5.9 million compared to approximately $6.1 million for the quarter ending March 31, 2009, a decrease of $0.2 million or 3%. The decrease was due principally to decreases in the net investment income from Allagash. For the quarter ending March 31, 2009, the Fund’s net investment income from real estate investments decreased due to lower distributions from investments in Partnership Preference Units due principally to fewer average holdings of Partnership Preference Units during the quarter and a decrease in the net investment income of Allagash, partially offset by an increase in the net investment income of Lafayette and the acquisition of Bel Stamford I in June 2008.

The fair value of the Fund’s real estate investments was approximately $132.1 million at March 31, 2010 compared to approximately $144.2 million at December 31, 2009, a net decrease of $12.1 million or 8%. This net decrease was due principally to decreases in the fair value of Belcrest Realty’s investments in the Real Estate Joint Ventures.

Performance of Interest Rate Swap Agreements. For the quarter ending March 31, 2010, net realized and unrealized losses on the Fund’s interest rate swap agreements totaled approximately $0.1 million, compared to approximately $1.9 million of net realized and unrealized losses for the quarter ending March 31, 2009. Net realized and unrealized losses on

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swap agreements for the quarter ending March 31, 2010 consisted of $1.7 million of periodic net payments made pursuant to outstanding swap agreements (and classified as net realized losses on interest rate swap agreements in the Fund’s unau-dited condensed consolidated financial statements), partially offset by $1.6 million of net unrealized gains due to changes in swap agreement valuations. For the quarter ending March 31, 2009, net realized and unrealized losses on swap agreements consisted of $2.4 million of periodic net payments made pursuant to outstanding swap agreements and $1.7 million of net realized losses due to the early termination of a certain swap agreement, partially offset by $2.2 million of net unrealized gains consisting of approximately $1.7 million of net unrealized gains resulting from the recharacterization of previously recorded unrealized depreciation as realized losses due to the early termination of a certain swap agreement and approximately $0.5 million due to changes in swap agreement valuations. The positive contribution to Fund performance from changes in swap agreement valuations for the quarters ending March 31, 2010 and 2009 primarily was attributable to a decrease in the remaining term of the agreements.

Liquidity and Capital Resources.

Outstanding Borrowings. On March 24, 2010 (the Refinancing Date), the Fund terminated and repaid its credit arrangements with Dresdner Kleinwort Holdings I, Inc. and Merrill Lynch Mortgage Capital, Inc. using the proceeds from its credit arrangement with Bank of America (the Credit Facility). The Credit Facility has a minimum initial term of 540 days but may be terminated by the lender any time thereafter upon 180 days’ notice. The Fund may terminate the Credit Facility upon 30 days’ notice subject to an early termination fee.

The Fund may borrow up to $230.0 million under the Credit Facility (the Facility Limit) to finance its real estate investments, pay ordinary course Fund expenses and provide for ongoing liquidity needs of the Fund. Any increase in the Facility Limit will be subject to lender consent and may result in a change to the terms of the Credit Facility including to the interest rates and fees paid thereunder.

As of March 31, 2010, the Fund had outstanding borrowings under the Credit Facility of $193.0 million and the unused portion of the Facility Limit equaled $37.0 million.

The Fund pays a rate of interest equal to the three-month London Interbank Offered Rate (LIBOR) plus 1.75% per annum on outstanding borrowings under the Credit Facility. A loan structure fee equal to 0.25% of the total amount available under the Credit Facility was paid at closing. A commitment fee is paid on the amount of the undrawn portion of the Facility Limit, if any, equal to 0.25% per annum from January 1, 2010 through the Refinancing Date and 0.40% per annum thereafter. The Fund will incur an additional fee if outstanding borrowings fall below certain levels.

Obligations under the Credit Facility are without recourse to shareholders. The Fund is required under the Credit Facility to maintain at all times a specified asset coverage ratio. To comply with the terms of the Credit Facility, the Fund may be required to dispose of assets on unfavorable terms if market fluctuations or other factors reduce the required asset coverage to less than the prescribed amount. The rights of the lenders under the Credit Facility to receive payments of interest on and repayments of principal of borrowings 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 outstanding any event of default under the Credit Facility. During such periods, the Fund would not be able to honor redemption requests or make cash distributions. The Credit Facility is secured by a pledge of the Fund’s assets, excluding the Fund’s real estate investments. Following an event of default under the Credit Facility, the lender could elect to sell pledged assets of the Fund without regard to the tax or other consequences of such action for the shareholders.

The Fund has entered into interest rate swap agreements with Merrill Lynch Capital Services, Inc. to fix the cost of a portion of its borrowings under the Credit Facility. Pursuant to the agreements, the Fund makes periodic payments to the counterparty at predetermined fixed rates in exchange for floating rate payments that fluctuate with one-month LIBOR. Changes in the underlying values of the outstanding interest rate swap agreements are recorded as unrealized appreciation or depreciation in the unaudited condensed consolidated statements of operations. As of March 31, 2010, the accumulated unrealized depreciation related to the interest rate swap agreements was approximately $1.6 million. As of December 31, 2009, the accumulated unrealized depreciation related to the interest rate swap agreements was approximately $3.2 million.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk. The Fund’s primary exposure to interest rate risk arises from its real estate investments that are financed by the Fund with floating rate borrowings under the Credit Facility and by fixed-rate mortgage notes secured by the real property of the Real Estate Joint Ventures and Co-owned Property. Partnership Preference Units are fixed-rate instruments whose values will generally decrease when interest rates rise and increase when interest rates fall. The interest rates on borrowings under the 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 a portion of its borrowings under the Credit Facility. Pursuant to the agreements, the Fund makes periodic payments to the counterparty at predetermined 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 8 and 9 to the Fund’s unaudited condensed consolidated financial statements in Item 1.

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Risks of Interest Rate Swap Agreements. The risks of interest rate swap agreements include changes in market conditions that will affect the value of the agreement or the cash flows and the possible inability of the counterparty to fulfill its obligations under the agreement. Interest rate swap agreements may be difficult to value and may be illiquid. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the agreement’s remaining life, to the extent that amount is positive.

Item 4. Controls and Procedures.

Fund Governance. 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 Audit Committee of 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.

Disclosure Controls and Procedures. Eaton Vance, as the Fund’s manager, evaluated the effectiveness of the Fund’s disclosure controls and procedures (as defined by Rule 13a-15(e) of the 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. The Fund’s disclosure controls and procedures are the controls and other procedures that the Fund designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and

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reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based on that evaluation, the Fund’s Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2010, the Fund’s disclosure controls and procedures were effective.

Internal Control Over Financial Reporting. There were no changes in the Fund’s internal control over financial reporting that occurred during the quarter ending March 31, 2010 that have materially affected or are reasonably likely to materially affect the Fund’s internal control over financial reporting.

Although in the ordinary course of business the Fund and its subsidiaries may become involved in legal proceedings, the Fund is not aware of any material pending legal proceedings to which they are subject.

Item 1A. Risk Factors.

There have been no material changes from risk factors as previously disclosed in the Fund’s Form 10-K for the year ending December 31, 2009 in response to Item 1A to Part I of Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

As described in the Fund’s Annual Report on Form 10-K for the year ending December 31, 2009, shares of the Fund generally may be redeemed on any business day. The redemption price will be based on the net asset value next computed after receipt by the Fund of a written redemption request from a shareholder, including a proper form of signature guarantee and such other documentation the Fund and the transfer agent may then require. The Fund may, at its discretion, accept redemption requests submitted by facsimile transmission, although an original letter of instruction and supporting documents must be delivered before proceeds are delivered. Once accepted, a redemption request may not be revoked without the consent of the Fund. Settlement of redemptions will ordinarily occur within five business days of receipt by the Fund’s transfer agent of the original redemption request in good order, and (if applicable) promptly following registration and processing of stock certificates by the transfer agent of the issuer of the distributed securities. The right to redeem is available to all shareholders and all outstanding Fund shares generally are eligible for redemption. During each month in the quarter ending March 31, 2010, the total number of shares redeemed and the average price paid per share were as follows:

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Reserved).

Item 5. Other Information.

None.

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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized officer on May 7, 2010.

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