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

                                   Form 10-QSB


     (Mark One)

        [X]    QUARTERLY   REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF  THE
               SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2000


        [_]    TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF  THE
               SECURITIES EXCHANGE ACT OF 1934

               For the transition period ended ______________to________________


                        Commission file number 333-35063


                               Baron Capital Trust

        (Exact name of small business issuer as specified in its charter)


              Delaware                                        31-1574856

     (State or other jurisdiction                            (IRS Employer
   of incorporation or organization)                       Identification No.)

                       Cooper Road, Cincinnati, Ohio 45242

                    (Address of principal executive offices)

                                 (513) 984-5001
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [_]

As of the date of this Report,  the  Registrant has  outstanding  699,076 common
shares  of  beneficial  interest  ("Common  Shares"),  its only  class of common
equity.


<PAGE>


                         PART I - FINANCIAL INFORMATION


Item 1.   Financial Statements

          See the following pages.

<PAGE>

                               BARON CAPITAL TRUST


                          INDEX TO FINANCIAL STATEMENTS

                                                                          PAGE
                                                                          ----
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

   Balance Sheets                                                         F-2

   Statements of Operations                                               F-3

   Statements of Cash Flows                                             F-4-F-5

   Notes to Financial Statements                                        F-6-F-15


                                      F-1

<PAGE>


                               BARON CAPITAL TRUST
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                       March 31,          December 31,
                                                                                         2000                 1999
                                                                                      -----------         ------------
                                                                                      (Unaudited)
                                      ASSETS
<S>                                                                                   <C>                  <C>
Rental Apartments:
   Land                                                                               $ 1,178,693          $ 1,178,693
   Depreciable property                                                                 6,189,095            6,189,095
                                                                                      -----------          -----------
                                                                                        7,367,788            7,367,788
   Less accumulated depreciation                                                        1,488,141            1,453,177
                                                                                      -----------          -----------
                                                                                        5,879,647            5,914,611

Investments in Partnerships                                                               893,130              930,970

Cash and Cash Equivalents                                                                  50,439               33,774
Restricted Cash                                                                            80,786               52,089
Reimbursed Administrative Expenses Receivable, Affiliates                                  35,284               36,997
Due From Managing Shareholder                                                                --                 14,783
Other Receivables                                                                           3,724                3,724
Advances to Affiliates                                                                       --                  5,141
Other Property and Equipment                                                              137,055              134,981
Other Assets                                                                              163,086              209,128
                                                                                      -----------          -----------
                                                                                      $ 7,243,151          $ 7,336,198
                                                                                      ===========          ===========

                       LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Mortgages payable                                                                  $ 4,263,480          $ 4,278,117
   Accounts payable and accrued liabilities                                             1,238,492            1,295,092
   Note payable                                                                           100,000              100,000
   Notes payable, affiliates                                                               52,000               50,000
   Capital lease obligation                                                                42,369               42,369
   Security deposits                                                                       43,066               40,308
                                                                                      -----------          -----------
         Total liabilities                                                              5,739,407            5,805,886
                                                                                      -----------          -----------


Shareholders' Equity:
   Common shares of beneficial interest, no par value; 2,500,000
   shares authorized; 694,156 and 675,086 shares issued and outstanding                 6,846,720            6,616,806
Deficit                                                                                (5,000,469)          (4,743,987)
Distributions                                                                            (342,507)            (342,507)
                                                                                      -----------          -----------

         Total shareholders' equity                                                     1,503,744            1,530,312
                                                                                      -----------          -----------
                                                                                      $ 7,243,151          $ 7,336,198
                                                                                      ===========          ===========
</TABLE>


           See notes to condensed consolidated financial statements.
                                      F-2
<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                         Three                    Three
                                                                         Months                   Months
                                                                          Ended                   Ended
                                                                        March 31,                March 31,
                                                                          2000                     1999
                                                                        ---------               ---------
                                                                       (Unaudited)             (Unaudited)
<S>                                                                     <C>                     <C>
Revenues:
   Property:
      Rental                                                            $ 267,668               $ 257,350
      Equity in net loss of unconsolidated partnership                    (37,840)                 (3,426)
   Interest and other income                                               25,540                   5,227
                                                                        ---------               ---------
                                                                          255,368                 259,151
                                                                        ---------               ---------

Real Estate Expenses:
   Depreciation                                                            40,825                  36,453
   Interest                                                                85,459                  73,186
   Repairs and maintenance                                                 25,809                  17,476
   Personnel                                                               16,672                  29,040
   Property taxes                                                          19,904                  20,596
   Property insurance                                                       5,360                   7,206
   Utilities                                                               13,374                  11,551
   Other                                                                    5,860                   9,214
                                                                        ---------               ---------
                                                                          213,263                 204,722
                                                                        ---------               ---------

Administrative Expenses:
   Personnel, including officer's compensation                            159,618                 227,161
   Professional services                                                  161,120                 152,583
   Other                                                                  (22,151)                129,323
                                                                        ---------               ---------
                                                                          298,587                 509,067
                                                                        ---------               ---------

      Total expenses                                                      511,850                 713,789
                                                                        ---------               ---------

Net Loss                                                                $(256,482)              $(454,638)
                                                                        =========               =========

Net Loss Per Share                                                      $   (0.37)              $   (0.87)
                                                                        =========               =========
</TABLE>


            See notes to condensed consolidated financial statements.
                                      F-3
<PAGE>


                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                         Three               Three
                                                                                         Months              Months
                                                                                         Ended               Ended
                                                                                        March 31,          March 31,
                                                                                          2000               1999
                                                                                       ---------           ---------
<S>                                                                                    <C>                 <C>
                                                                                      (Unaudited)         (Unaudited)
Cash Flows from Operating Activities:
   Net loss                                                                            $(256,482)          $(454,638)
   Adjustments to reconcile net loss to
      net cash used by operating activities:
         Equity in net loss of unconsolidated partnership                                 37,840               3,426
         Credit for estimated fair value of services performed by officer                 54,270                --
         Depreciation                                                                     40,825              41,267
         Changes in operating assets and liabilities:
         (Increase) decrease in operating assets:
            Other receivables                                                             14,783             (19,642)
            Reimbursed administrative expenses receivable                                  1,713                --
            Other assets                                                                  46,042              15,437
          Increase (decrease) in operating liabilities:
            Accounts payable and accrued liabilities                                     (56,600)            (95,963)
            Security deposits                                                              2,758               2,529
                                                                                       ---------           ---------
               Net cash used by operating activities                                    (114,851)           (507,584)
                                                                                       ---------           ---------

Cash Flows from Investing Activities:
   Investments in partnerships                                                              --              (675,000)
   Purchases of other property and equipment                                              (7,935)            (30,421)
   Repayment of advances to affiliates                                                     5,141                --
   Increase in restricted cash                                                           (28,697)             (2,345)
                                                                                       ---------           ---------
               Net cash used in investing activities                                     (31,491)           (707,766)
                                                                                       ---------           ---------
</TABLE>


           See notes to condensed consolidated financial statements.
                                      F-4
<PAGE>


                               BARON CAPITAL TRUST
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)

<TABLE>
<CAPTION>
                                                                               Three                  Three
                                                                               Months                 Months
                                                                               Ended                  Ended
                                                                             March 31,               March 31,
                                                                               2000                   1999
                                                                            -----------            -----------
                                                                            (Unaudited)            (Unaudited)
<S>                                                                             <C>                  <C>
Cash Flows from Financing Activities:
   Proceeds from sale of common shares of beneficial interest                   175,644              1,132,402
   Distributions paid                                                              --                  (74,182)
   Proceeds from notes payable, affiliates                                        2,000                   --
   Payments on mortgages payable                                                (14,637)                (9,908)
                                                                            -----------            -----------
                                                                                163,007              1,048,312
                                                                            -----------            -----------

Net Decrease in Cash and Cash Equivalents                                        16,665               (167,038)

Cash and Cash Equivalents, Beginning                                             33,774                177,299
                                                                            -----------            -----------

Cash and Cash Equivalents, Ending                                           $    50,439            $    10,261
                                                                            ===========            ===========

Supplemental Disclosure of Cash Flow Information:
   Cash paid for mortgage and other interest                                $    85,459            $    73,186
                                                                            ===========            ===========
</TABLE>


           See notes to condensed consolidated financial statements.
                                       F-5
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                 MARCH 31, 2000


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Basis of Presentation

               The  condensed  consolidated  balance sheet as of March 31, 2000,
               the condensed consolidated statements of operations for the three
               months   ended  March  31,  2000  and  1999  and  the   condensed
               consolidated  statements of cash flows for the three months ended
               March 31, 2000 and 1999 have been  prepared by the Trust.  In the
               opinion   of   management,   all   adjustments   (which   include
               reclassifications and normal recurring  adjustments) necessary to
               present fairly the financial position,  results of operations and
               cash flows at March 31, 2000 and for the period  presented,  have
               been made.

               Certain information and footnote disclosures normally included in
               the financial  statements  prepared in accordance  with generally
               accepted accounting principles have been condensed or omitted. It
               is  suggested  that  these   condensed   consolidated   financial
               statements  be read in  conjunction  with the  Trust's  financial
               statements and notes thereto included in the Trust's December 31,
               1999 Form 10-KSB.  The results of operations for the three months
               ended  March  31,  2000  are not  necessarily  indicative  of the
               operating results for the full year.

          Organization and Capitalization

               Baron  Capital  Trust (the  "Trust") was  organized as a business
               trust in Delaware on July 31, 1997.  The Trust and its affiliate,
               Baron Capital  Properties,  L.P. (the "Operating  Partnership" or
               the  "Partnership"),  a Delaware limited  partnership,  have been
               organized to acquire equity  interests in  residential  apartment
               properties located in the United States and to provide or acquire
               debt mortgage loans secured by such types of property.

               The Managing Shareholder of the Trust is Baron Advisors,  Inc., a
               Delaware  corporation  which will  manage the  operations  of the
               Trust and the Operating  Partnership  subject to the  supervisory
               authority  of the Board of the Trust over the  activities  of the
               Trust  and  the  Operating  Partnership  and  the  Board's  prior
               approval authority in respect of certain actions of the Trust and
               the Operating  Partnership  specified in the Declaration of Trust
               of the Trust.

               The Trust's  Declaration  authorizes it to issue up to 25,000,000
               shares of beneficial interest, no par value per share, consisting
               of common  shares and of  preferred  shares of such  classes with
               such  preferences,  conversion  or other rights,  voting  powers,
               restrictions,  limitations  as to dividends,  qualifications,  or
               terms or conditions of redemption as the Managing Shareholder may
               create  and  authorize  from  time  to time  in  accordance  with
               Delaware law and the Declaration.

               The Trust commenced operations on February 3, 1998, at which time
               it received its initial capital contribution.


                                      F-6
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                 MARCH 31, 2000


NOTE 2.   BASIS OF PRESENTATION

               The  accompanying  consolidated  financial  statements  have been
               prepared  in  conformity  with  generally   accepted   accounting
               principles  which assume that the Trust will  continue on a going
               concern   basis,   including  the   realization   of  assets  and
               liquidation of  liabilities  in the ordinary  course of business.
               However,  for 1999 and 1998,  the Trust  incurred  net  losses of
               $3,166,937 and $1,577,060 and negative cash flows from operations
               of $1,022,587  and  $1,408,715,  respectively,  and for the three
               months ended March 31, 2000 had a net loss of $ 256,482,  and has
               limited  liquid  resources  as of March 31, 2000.  The  auditors'
               report for the year  ended  December  31,  1999 was  modified  to
               express a substantial doubt about the Trust's ability to continue
               as a going concern.

               Management's   plans  to  continue  its   operations  and  become
               profitable encompass the following:

               o    The Trust  plans to continue  to raise  capital  through its
                    Cash  Offering,  which has been extended to May 31, 2000 and
                    also intends to make additional  public or private offerings
                    of common shares and/or Operating  Partnership  units within
                    the  12  month  period  following  the  commencement  of the
                    proposed  Exchange  Offering,   whose  registration   became
                    effective on November 9, 1999.

               o    The Trust,  through its  Operating  Partnership,  intends to
                    continue to acquire  rental  properties  using proceeds from
                    the  Trust's  Cash  Offering  and in the  Exchange  Offering
                    described in Note 5. The operating  results of the Trust and
                    the Operating  Partnership will depend primarily upon income
                    from the  residential  apartment  properties  in which  they
                    directly  or  indirectly  acquire  an equity or  subordinate
                    mortgage  interest.  Operating  results in respect of equity
                    interests will be substantially influenced by the demand and
                    supply  of  residential  apartment  units in  their  primary
                    market  and  sub-markets,   and  operating  expense  levels.
                    Operating  results  in respect  of  mortgage  and other debt
                    interests will depend upon interest  income,  including,  in
                    certain cases,  participation  interest,  whose payment will
                    depend upon the operating  performance,  sale or refinancing
                    of the underlying  properties.  The operating results of the
                    Trust and  Operating  Partnership  will also depend upon the
                    pace and  price  at  which  they  can  acquire  and  improve
                    additional property interests.

               o    See Note 7 regarding the completion of the Exchange Offering
                    on  April  7,  2000  under  which  the  Trust,  through  the
                    Operating  Partnership,  acquired  additional  interests  in
                    residential apartment properties.

               In view of these  matters,  realization of a major portion of the
               assets  in  the  accompanying   consolidated   balance  sheet  is
               dependent  upon the continued  operations of the Trust,  which in
               turn is  dependent  upon the Trust's  ability to meet its capital
               and  financing  requirements,  and  the  success  of  its  future
               operations.  Management believes that the actions presently being
               taken by the  Trust  provide  the  opportunity  for the  Trust to
               continue as a going concern.  However,  there can be no assurance
               that management will be successful in the  implementation  of its
               plans  to  raise  adequate  amounts  of  capital  or that  future
               operations will become profitable.  The accompanying consolidated
               financial  statements do not include any  adjustments  that might
               result from the outcome of this uncertainty.


                                      F-7
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)


NOTE 3.   COMMITMENTS AND CONTINGENCIES

          Contract to Purchase Additional Properties

               In September  1998,  the Trust entered in an agreement with three
               real  estate   development   companies   to  acquire  two  luxury
               residential  apartment  properties in the development  stage upon
               the  completion  of  construction.   The  development   companies
               (Brentwood at Southgate,  Ltd., Burlington Residential,  Ltd. and
               The Shoppes at  Burlington,  Ltd.) are  controlled  by one of the
               Trust's founders and chief executive officer.  The properties are
               scheduled to have a total of 652 units, comprised of one, two and
               three bedroom/one or two bathroom apartments. Construction of one
               of the properties,  located in Louisville,  Kentucky, is expected
               to be completed prior to the end of 2000, and construction of the
               other  property,  located in  Burlington,  Kentucky  (part of the
               Cincinnati metropolitan area), is expected to be completed by the
               end of 2001. The aggregate  purchase price for the two properties
               is in the range of approximately $41,000,000 to $43,000,000.  The
               closing of each  acquisition,  which is expected to occur shortly
               following the  completion of  construction,  is  conditioned  on,
               among other things,  the completion of the  respective  apartment
               property,  the  availability of first mortgage  financing and the
               Trust's  raising  the  balance  of the  funds  necessary  for the
               acquisition  in its ongoing  Cash  Offering or  otherwise  having
               funds available to make the acquisition.

               In connection  with the  transaction  and in exchange for certain
               benefits described below, the Trust agreed to co-guarantee (along
               with the chief executive  officer),  up to 35% (or  approximately
               $12,500,000) of the development portion of long-term construction
               loans with an aggregate  principal amount of up to $36,000,000 to
               be provided by a bank to the development  companies.  As of March
               31, 2000,  approximately  $6,150,000 of such loans had been drawn
               down,  resulting  in  outstanding   guarantees  of  approximately
               $2,150,000.  Subject to the  fulfillment  of certain  closing and
               funding  conditions,  the construction  loans will be made to the
               development  companies in  connection  with the  development  and
               construction  of the two apartment  properties  and of an 111,000
               square  foot  shopping  center  being  developed  in  Burlington,
               Kentucky. The interest rates on the construction loans range from
               7.36% to 7.52%. The Trust also agreed that, if the loans were not
               repaid prior to the expiration of the guarantee,  it would either
               buy  out  the  bank's  position  on  the  entire  amount  of  the
               construction  loans or  arrange  for a third  party to do so. The
               construction  loans are  expected  to be  replaced by a long-term
               credit facility.

               The  Trust  expects  to  receive  significant  benefits  from the
               transaction  in addition to the  acquisition  of two large luxury
               apartment  properties  located  in  attractive  communities.   In
               exchange  for the  guarantee  of the  development  portion of the
               construction   loans,  the  Trust  will  receive  a  discount  of
               approximately  $212,500  (representing  a one-half of one percent
               reduction) on the purchase price of the properties. The Trust and
               the  development   companies  are  negotiating  a  further  price
               reduction,  which would apply if the  development  portion of the
               loans is not  repaid  prior to the  expiration  of the  guarantee
               period and the Trust is  required  to buy out or arrange  for the
               buyout of the lender's position on the loans.


                                      F-8
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)

NOTE 3.   COMMITMENTS AND CONTINGENCIES (Continued)

          Officers' Compensation

               A founder of the Trust and the  Operating  Partnership  serves as
               Chief Executive  Officer of the Trust, the Operating  Partnership
               and the  Managing  Shareholder.  He has  agreed  to serve a Chief
               Executive Officer for the first year in exchange for compensation
               in the  form of  common  shares  of the  Trust  or  units  of the
               Operating Partnership in an amount not to exceed 25,000 shares or
               units,   as  applicable,   to  be  determined  by  the  Executive
               Compensation Committee based upon his performance, in addition to
               benefits and eligibility for participation in any option plan and
               bonus incentive compensation plan which may be implemented by the
               Trust.  During  1999 and 1998,  no common  shares of the Trust or
               units of the  Operating  Partnership  were  issued  to the  Chief
               Executive Officer as compensation.  However,  in order to reflect
               all appropriate  administrative  expenses of the  Partnership,  a
               provision of $54,250 has been made in the accompanying  financial
               statements for the estimated fair value of the services  rendered
               by the Chief Executive Officer for the first quarters of 1999 and
               2000. This amount has been charged to compensation  expense, with
               corresponding  credits to partners' capital. This estimate of the
               fair value of such services was  determined  by management  based
               upon an analysis of compensation paid to chief executive officers
               of  a  number  of  comparable  real  estate  investment   trusts.
               Compensation  and  benefits for the Chief  Executive  Officer are
               determined  annually by the Executive  Compensation  Committee of
               the Board of the Trust.

               The other founder of the Trust and Operating  Partnership  serves
               as the  Chief  Operating  Officer  of the  Trust,  the  Operating
               Partnership  and the  Managing  Shareholder.  His initial  annual
               salary has been set at  $100,000,  in addition to  benefits,  and
               eligibility for participation in any common share option plan and
               bonus incentive compensation plan which may be implemented by the
               Trust.

          Underwriting Agreement

               In connection  with the Cash Offering,  the Trust issued to Sigma
               Financial Corporation (the Underwriter),  warrants to purchase an
               amount  equal to 8.5% of the  number of Common  Shares  sold on a
               best  effort  basis,  by  the   Underwriter   and   participating
               broker-dealers  selected by the  Underwriter  and the Trust.  The
               warrants  may be  purchased  at any time  and  from  time to time
               through  May 15,  2003 at an  exercise  price of $13 per  warrant
               share.   The  Trust  has  reserved   212,500   shares  under  the
               Underwriting  Agreement,  which  represents 8.5% of the 2,500,000
               shares  offered in the Cash  Offering.  As of March 31, 2000, the
               Underwriter has the option to purchase up to 57,613 shares at $13
               per share.


                                      F-9
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)


NOTE 4.   RELATED PARTY TRANSACTIONS

          Trust Management Agreement

               The Trust has entered into a Trust Management  Agreement with the
               Managing  Shareholder  under which the  Managing  Shareholder  is
               obligated to provide  management,  administrative  and investment
               advisory  services  to the Trust.  The  services  to be  rendered
               include, among other things,  communicating with and reporting to
               investors,  administering  accounts,  providing  to the  Trust of
               office  space,   equipment  and  facilities  and  other  services
               necessary for the Trust's  operation,  and representing the Trust
               in its  relations  with  custodians,  depositories,  accountants,
               attorneys, brokers and dealers, corporate fiduciaries,  insurers,
               banks and others, as required.  The Managing  Shareholder is also
               responsible  for  determining  which real estate  investments and
               non-real estate investments  (including the temporary  investment
               of the  Trust's  available  funds  prior to their  commitment  to
               particular real estate  investments)  the Trust will make and for
               making  divestment  decisions,  subject to the  provisions of the
               Declaration.  The Trust Management  Agreement has an initial term
               of one  year  and may be  extended  on a  year-to-year  basis  on
               approval of the Board or a majority of the stockholders  entitled
               to vote on such matter or a majority of the Independent Trustees.

               The Trust will reimburse the Managing  Shareholder  for all Trust
               expenses in an amount not to exceed 2% of gross proceeds from the
               sale  by the  Trust  of  common  shares  in the  Trust's  initial
               offering.  Under the Trust Management  Agreement,  the Trust will
               reimburse the Managing Shareholder, on a monthly basis during the
               term of the agreement, for its operating expenses relating to the
               business of the Trust and the Operating  Partnership in an amount
               up to the sum of 1% of the  gross  proceeds  from the sale by the
               Trust of common shares in the Trust's initial offering, and 1% of
               the initial  assigned value for each unit of limited  partnership
               interest  ("Unit")  in  the  Operating   Partnership   issued  in
               connection  with  a  proposed   Exchange  Offering  of  Units  as
               contemplated in the Trust's Prospectus.  The Managing Shareholder
               in its sole  discretion  may  elect to  receive  payment  for its
               service in the form of common  shares with an  equivalent  value.
               The Trust  will also  reimburse  the  Managing  Shareholders  for
               expenses  incurred  prior  to and  during  the Cash  Offering  in
               investigating   and  evaluating   investment   opportunities  and
               assisting the Trust in consummating  its investments in an amount
               not to exceed 4% of the gross proceeds from the sale by the Trust
               of common shares in the Trust's initial offering for the Managing
               Shareholder's services.

          Reimbursed Administrative Expenses

               The  Partnership  shares certain  administrative  expenses with a
               number of other  partnerships that are related to the Partnership
               by means  of a common  person  who is the  sole  stockholder  and
               officer  of the  general  partner  of these  partnerships  and an
               officer  of  the  general  partner  of  the  Partnership.   These
               administrative expenses are allocated as described below, and the
               allocated  expenses are  reimbursed to the  Partnership  by these
               other  partnerships.  The  allocation of the costs was determined
               based upon an analysis  of those  administrative  costs  directly
               associated with or reasonably allocated to the activities of each
               entity.  Personnel  costs were allocated  based upon estimates of
               the  time  devoted  by  individual  employees  to  each  entity's
               activities on a monthly basis.  Other  administrative  costs were
               allocated  on a direct basis to the extent  practicable,  and the
               balance on a pro rata basis. In the


                                      F-10
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)

NOTE 4.   RELATED PARTY TRANSACTIONS (Continued)

               opinion of  management,  the method used to allocate costs to all
               of  the  entities  was  considered  to be  reasonable  under  the
               circumstances.

               During  the  three  months  ended  March 31,  2000 and 1999,  the
               Partnership was reimbursed  approximately  $206,174 and $196,000,
               respectively,   for  administrative  expenses,  which  have  been
               presented  as a reduction  of the  specific  related  category of
               administrative expenses in the accompanying financial statements.

NOTE 5.   SHAREHOLDERS' EQUITY

          Cash Offering

               On May 15,  1998,  pursuant to a  registration  statement on Form
               SB-2, the Trust commenced an initial public offering of a maximum
               of 2,500,000 common shares of beneficial interest in the Trust at
               $10 per common share, which is payable in full upon subscription,
               for  proposed  total  gross  proceeds  of  $25,000,000  (the Cash
               Offering).  All of the common  shares to be issued or sold by the
               Trust in the offering will be tradable without  restriction under
               the Securities  Act, but will be subject to certain  restrictions
               designed to permit the Trust to qualify and  maintain  its status
               as a Real  Estate  Investment  Trust under the  Internal  Revenue
               Code. The Cash Offering, as amended, will terminate no later than
               May 31, 2000.

          Exchange Offering

               The Operating  Partnership has filed a registration  statement on
               Form  S-4  with  the  Securities  and  Exchange  Commission  (the
               "Commission")   covering  up  to   2,500,000   units  of  limited
               partnership   interest  ("Units")  to  be  registered  under  the
               Securities  Act  of  1933,  as  amended  (the  "Act")  ("Exchange
               Offering").

               It is proposed  that these units would be exchanged  for units of
               limited  partnership  interest  in 23 limited  partnerships  (the
               "Exchange Partnerships"), which directly or indirectly own equity
               and/or mortgage  interests in one or more  residential  apartment
               properties.  The Exchange  Partnerships  are managed by corporate
               general  partners who are affiliated  with one of the founders of
               the  Operating  Partnership,  who is  the  sole  stockholder  and
               director  of  the  Managing   Shareholder  of  the  Trust.   This
               registration  statement  was  declared  effective  on November 9,
               1999, and the Exchange Offering commenced shortly thereafter.

               The number of Units  being  offered in  exchange  for the limited
               partnership  interests in the Exchange Partnerships will be based
               on  appraisals  prepared by qualified  and  licensed  independent
               appraisal  firms  for  each  underlying   residential   apartment
               property.  For purposes of the Exchange  Offering,  each Unit has
               been  arbitrarily   assigned  an  initial  value  of  $10,  which
               corresponds  to the  offering  price of each Trust  Common  Share
               currently  being  offered  to the  public  pursuant  to the  Cash
               Offering.  The value of each Unit and  Common  Share  outstanding
               will be  substantially  identical  since Unit holders,  including
               recipients of Units in the Exchange Offering, will be entitled to
               exchange  all or a  portion  of their  Units at any time and from
               time to time for an equivalent  number of Trust Common Shares, so
               long as the exchange would not cause the exchanging  party to own
               (taking into account certain ownership


                                      F-11
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)


NOTE 5.   SHAREHOLDERS' EQUITY (Continued)

          Exchange Offering (Continued)

               attribution rules) in excess of 5% of the then outstanding shares
               in the Trust, subject to the Trust's right to cash out any holder
               of Units who  requests an exchange  and subject to certain  other
               exceptions.  To  facilitate  such  exchanges of Units into Common
               Shares,  2,500,000  Common  Shares (in addition to the  2,500,000
               Common  Shares being  offered by the Trust in the Cash  Offering)
               have been registered with the Commission.

               As its initial investment  targets in the Exchange Offering,  the
               Operating  Partnership  is  offering  to  acquire  equity  and/or
               subordinated  mortgage  interests in 26 properties (the "Exchange
               Properties")  directly  or  indirectly  owned by the 23  Exchange
               Partnerships. The Operating Partnership will acquire interests in
               a particular  property and/or mortgages by acquiring from limited
               partners  their  units of  limited  partnership  interest  in the
               respective   Exchange   Partnership.   Each   of   the   Exchange
               Partnerships  directly or indirectly  owns equity and/or mortgage
               interests  in one or more  properties.  Certain  of the  Exchange
               Partnerships  directly or indirectly  own equity  interests in 16
               properties,  which  consist of an aggregate of 1,012  residential
               units  (comprised  of studio,  one,  two,  three and four bedroom
               units).   Certain  of  the  Exchange   Partnerships  directly  or
               indirectly own mortgage interests in 10 properties, which consist
               of an aggregate of 813 existing residential units (studio and one
               and two  bedroom  units)  and 168 units  (two and  three  bedroom
               units)  under  development.   Of  the  Exchange  Properties,   21
               properties are located in Florida,  three  properties in Ohio and
               one property each in Georgia and Indiana.

               See Note 7 regarding the  completion of the Exchange  Offering on
               April 7,  2000  under  which the  Trust,  through  the  Operating
               Partnership,   acquired   additional   interests  in  residential
               apartment properties.

          Operating Partnership Limited Partnership Units

               In  connection  with the formation of the Trust and the Operating
               Partnership,  the Original  Investors each subscribed for 601,080
               limited  partnership units of the Operating  Partnership (a total
               of 1,202,160  units).  In consideration  for the units subscribed
               for by them,  the  Original  Investors  made a  $100,000  capital
               contribution to the Operating  Partnership.  If the Cash Offering
               and the Exchange Offering are fully subscribed, those Units would
               represent  19% of  the  total  Common  Shares  outstanding  after
               completion  of the Cash  Offering and  exchange by the  Operating
               Partnership  of  2,500,000  of its  Units  for  units of  limited
               partnership   interest  in  real  estate   limited   partnerships
               (including  any  exchange  pursuant  to the  Exchange  Offering),
               calculated on a fully diluted basis assuming all then outstanding
               Units  (other  than  those  acquired  by  the  Trust)  have  been
               exchanged  into  an  equivalent  number  of  Common  Shares.  If,
               however,  as of May  31,  2000,  the  Cash  Offering  and/or  the
               Exchange  Offering  has been  completed  and the  number of Units
               subscribed   for  by  each  Original   Investment   represents  a
               percentage  greater  than  19% of  the  then  outstanding  Common
               Shares,  calculated on a fully  diluted  basis  assuming that all
               then outstanding Units (other than those acquired by the Trust)


                                      F-12
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)

NOTE 5.   SHAREHOLDERS' EQUITY (Continued)

          Operating Partnership Limited Partnership Units (Continued)

               have been exchanged  into an equivalent  number of Common Shares,
               each  Original  Investor has agreed to return any excess Units to
               the  Operating   Partnership  for   cancellation.   The  Original
               Investors  have  deposited  Units  subscribed  for by them into a
               security escrow account for six to nine years, subject to earlier
               release under certain conditions.

               The fair  value of the  units  issued to the  Original  Investors
               amounted  to  $100,000,  based upon a  determination  made by the
               Independent  Trustees of the Trust as of the date of subscription
               for these units (February 3, 1998). The determination of the fair
               value   took  into   consideration   that  at  the  time  of  the
               subscription  for the units,  the Trust and the Partnership  were
               development  stage companies,  with no cash or other  significant
               tangible assets, operating history or revenue and no certainty of
               successful  offerings or future  operations;  the founders had at
               risk their initial capital  contributions plus certain additional
               unreimbursed  advances to cover  certain  offering and  operating
               expenses;  the founders have significant experience and developed
               know-how   critical   to  the   success  of  the  Trust  and  the
               Partnership;  and the founders'  units are subject to significant
               transfer  restrictions.  The  Partnership  has  accounted for the
               units as being  issued  and  outstanding,  but  subject to escrow
               restrictions,   in  the   accompanying   consolidated   financial
               statements,   and  has  included  the  units  as  outstanding  in
               determining the weighted average shares  outstanding for purposes
               of calculating net loss per partnership  unit in the accompanying
               consolidated  financial  statements.  Because  the release of the
               units from escrow is not dependent  upon the  achievement  of any
               specified level of profits,  the release of the units from escrow
               is  not  considered  to  be  compensatory  and,  accordingly,  no
               accounting  measurement will be given to the release of the units
               from escrow.

               Under the subscription  agreement,  the Original Investors agreed
               to waive future  administrative  fees for managing  participating
               Exchange   Partnerships;   agreed  to  assign  to  the  Operating
               Partnership  the right to receive all  residual  economic  rights
               attributable  to the general partner  interests in  participating
               Exchange Partnerships;  and, in order to permit management of the
               Exchange  Properties  by the  Operating  Partnership,  caused the
               Exchange  Partnerships to cancel the partnerships' prior property
               management  agreements  and  agreed to forego the right to have a
               property  management  firm  controlled by the Original  Investors
               assume the property  management  role in respect of properties in
               which the Trust or the Operating Partnership invest.

               After the exchange  with the limited  partners and  assignment of
               economic rights of the general partner, the Operating Partnership
               will control the participating Exchange Partnerships by virtue of
               its  ownership  of  at  least  90%  of  the  limited  partnership
               interests therein,  which will provide the Operating  Partnership
               the ability to remove the general partner under the provisions of
               the limited partnership  agreements that limited partners holding
               over 50% of total  partnership  interest have the right to remove
               the general partner.

          Distributions

               There were no  distributions  in the three months ended March 31,
               2000.


                                      F-13
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)


NOTE 6.   NET LOSS PER SHARE

               The Trust computes per share data in accordance with Statement of
               Financial  Accounting Standards No. 128 (SFAS 128), "Earnings Per
               Share".  SFAS 128 requires dual presentation of basic and diluted
               earnings per share on the face of the income statement.

               Basic net loss per share  equals net loss divided by the weighted
               average shares  outstanding  during the year. The  computation of
               diluted net loss per share that  includes  dilutive  common stock
               equivalents in the weighted  average shares  outstanding  has not
               been presented,  as it is anti-dilutive for both the three months
               ended March 31, 2000 and 1999.

               The components  used in calculating  basic net loss per share are
               as follows:


                                                          Weighted
                                                          Average        Loss
                                          Net Loss         Shares      Per Share
                                         ---------       ---------     ---------

Three Months Ended March 31, 2000        $(256,482)        694,156       $(.37)
                                         =========       =========      =====

Three Months Ended March 31, 1999        $(454,638)        522,495       $(.87)
                                         =========       =========      =====

NOTE 7.   COMPLETION OF EXCHANGE OFFERING

               In April 2000, pursuant to a registration  statement on Form S-4,
               the  Operating  Partnership  completed an exchange  offering (the
               "Exchange Offering") under which it acquired additional interests
               in residential  apartment  properties.  In the Exchange Offering,
               the Operating  Partnership issued 2,434,274  registered Operating
               Partnership Units (with an initial assigned value of $24,342,740)
               in exchange for  substantially  all outstanding  units of limited
               partnership   interest  owned  by  individual   limited  partners
               ("Exchange  Limited  Partners") in 23 limited  partnerships  (the
               "Exchange Partnerships"), which directly or indirectly own equity
               and/or debt interests in one or more of 26 residential  apartment
               properties  located in the southeast and mid-west  United States.
               Prior to the  completion of the Exchange  Offering,  the Exchange
               Partnerships  were managed by  corporate  general  partners  (the
               "Corporate General  Partners"),  which were controlled by Gregory
               K. McGrath,  who is the Chief  Executive,  sole  stockholder  and
               director of the Managing Shareholder of the Trust.

               Following the completion of the Exchange  Offering,  the Exchange
               Partnerships  continue to own the same  property  interests  they
               owned  prior to the  offering;  substantially  all of the limited
               partnership interests in the 23 Exchange Partnership are owned by
               the   Operating    Partnership;    Mr.   McGrath,   for   nominal
               consideration,  assigned to the Trust all of the equity  stock in
               18 of the Corporate  General Partners and granted to the Board of
               the Trust a management proxy coupled with an interest to vote the
               shares of the remaining  five  Corporate  General  Partners;  the
               Corporate  General  Partner of each of the Exchange  Partnerships
               has  assigned to the  Operating  Partnership  all of its economic
               interest  in the  partnership;  and Mr.  McGrath  has caused each
               Corporate  General Partner to waive its right to receive from its
               Exchange  Partnership any ongoing fees, effective upon completion
               of the  exchange.  As a result of the  foregoing,  the  Operating
               Partnership (and indirectly the Trust) own  substantially  all of
               the  economic  interest   represented  by  the  equity  and  debt
               interests  owned  by  the  Exchange   Partnerships   and  control
               management of such partnerships.


                                      F-14
<PAGE>


                               BARON CAPITAL TRUST

                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (Continued)

NOTE 7.   COMPLETION OF EXCHANGE OFFERING (Continued)

               The Exchange  Offering  expired on April 7, 2000. Under the terms
               of  the  Exchange  Offering,   Exchange  Limited  Partners  in  a
               particular  Exchange  Partnership were entitled to participate in
               the offering only if limited partners holding at least 90% of the
               units  of  limited  partnership   interest  in  that  partnership
               affirmatively  elected to accept the offering.  Exchange  Limited
               Partners holding  approximately 97.4% of the outstanding units of
               limited  partnership in such partnerships  accepted the offering,
               and  each  of  the   Exchange   Partnerships   exceeded  the  90%
               requirement.  As  a  result,  following  the  completion  of  the
               Exchange  Offering,  the limited  partnership  interests  of nine
               Exchange   Partnerships  are  owned  entirely  by  the  Operating
               Partnership  (in the case of nine Exchange  Partnership  in which
               all  Exchange  Limited   Partners   accepted  the  offering)  and
               substantially  all of the limited  partnership  interests  in the
               other  14  Exchange  Partnerships  are  owned  by  the  Operating
               Partnership,  with the remaining  limited  partnership  interests
               being  retained by Exchange  Limited  Partners who elected not to
               accept the offering or failed to respond to the offering.




                                      F-15
<PAGE>


Item 2.   Management's Discussion and Analysis or Plan of Operation

          The  following  discussion  should  be read in  conjunction  with  the
          Consolidated   Financial   Statements  of  Baron  Capital  Trust  (the
          "Registrant"  or the  "Trust")  and the Notes  thereto.  (See ITEM 1 -
          FINANCIAL STATEMENTS.)

          Forward-looking Statements

          This  Management's  Discussion  and Analysis or Plan of Operation  and
          other  sections  of  this  Report  contain   certain   forward-looking
          statements within the meaning of the Securities  Litigation Reform Act
          of  1995  that  are  based  on  current  expectations,  estimates  and
          projections  about the  Trust's  business,  management's  beliefs  and
          assumptions   made   by   management.   Words   such   as   "expects",
          "anticipates",  "intends", "plans", "believes",  "seeks", "estimates",
          and variations of such words and similar  expressions  are intended to
          identify such  forward-looking  statements.  These  statements are not
          guarantees  of  future   performance   and  involve   certain   risks,
          uncertainties   and   assumptions   that  are  difficult  to  predict.
          Therefore, actual outcomes and results may differ materially from what
          is expressed or forecasted in such  forward-looking  statements due to
          numerous  factors,  including,  but not limited to those  discussed in
          this Management's Discussion and Analysis or Plan of Operation section
          of this Report,  as well as those  discussed  elsewhere in this Report
          and from time to time in the Trust's  other  Securities  and  Exchange
          Commission filings and reports. In addition,  such statements could be
          affected by general domestic and  international  economic  conditions.
          The forward-looking  statements contained in this Report speak only as
          of the date on which they are made,  and the Trust does not  undertake
          any  obligation  to update any  forward-looking  statement  to reflect
          events or circumstances after the date of this Report.

          Results of Operations

          The Trust  commenced  operations in the first half of 1998.  The Trust
          and its  affiliate,  Baron Capital  Properties,  L.P. (the  "Operating
          Partnership"),   a  Delaware   limited   partnership,   constitute  an
          affiliated  real estate  company  which has been  organized to acquire
          equity interests in residential  apartment  properties  located in the
          United States and/or to provide or acquire  mortgage  loans secured by
          such types of property.  The Operating Partnership conducts all of the
          Trust's  real  estate  operations  and  holds all  direct or  indirect
          property interests acquired.  The Trust is the sole general partner of
          the Operating  Partnership,  and, in such capacity, the Trust controls
          the activities of the Operating  Partnership.  As of May 12, 2000, the
          Trust  owned  699,076  Operating   Partnership   Units,   representing
          approximately 37% of the then outstanding Units.

          As described below in this Report, in May 1998, the Trust commenced an
          offering of up to 2,500,000 shares of beneficial interest in the Trust
          at  a  purchase  price  of  $10.00  per  share  (maximum  proceeds  of
          $25,000,000).  The offering is scheduled to be  terminated  on May 31,
          2000. As of May 12, 2000, the Trust had sold and/or issued to


                                       3
<PAGE>


          the public 699,066 Common Shares for an aggregate  purchase price of $
          6,990,663,  and the Trust  intends to continue  to sell Common  Shares
          through the termination of the Cash Offering.

          Through  the  Operating  Partnership,   the  Trust  started  acquiring
          interests  in  properties  including  the entire  limited  partnership
          interests in Heatherwood I Apartments (67 studio,  one bedroom and two
          bedroom  units located in  Kissimmee,  Florida) in June 1998;  Crystal
          Court II  Apartments  (80 studio,  one  bedroom and two bedroom  units
          located in Lakeland,  Florida) in July 1998; and Riverwalk  Apartments
          (50 two bedroom  units  located in New Smyrna,  Florida) in  September
          1998.  In July 1998 it acquired a limited  partnership  interest in 13
          real estate limited  partnerships  managed by affiliates of Gregory K.
          McGrath (a founder  and Chief  Executive  Officer of the Trust and the
          Operating  Partnership).  During  1998 and 1999,  the  Trust  acquired
          limited partnership  interests in Alexandria  Apartments which totaled
          40% as of December  31, 1999 and  remained  unchanged  as of March 31,
          2000. The Alexandria  Apartments are a 168-unit residential  apartment
          property under construction in Alexandria, Kentucky. Ninety-six of the
          168 residential  units  (approximately  57%) have been completed as of
          March  31,  2000 and are in the  rent-up  stage.  Eighty-seven  of the
          completed  units have been rented.  The Trust has also entered into an
          agreement under which, subject to certain conditions,  it will acquire
          two  residential  apartment  properties  (totaling  652  units)  under
          development in Burlington and Louisville,  Kentucky upon completion of
          construction.

          In addition,  in April 2000,  pursuant to a registration  statement on
          Form S-4, the  Operating  Partnership  completed an exchange  offering
          (the "Exchange Offering") under which it acquired additional interests
          in residential  apartment  properties.  In the Exchange Offering,  the
          Operating  Partnership  issued  2,434,274  registered units of limited
          partnership  interest in the  Operating  Partnership  (the  "Operating
          Partnership Units") (with an initial assigned value of $24,342,740) in
          exchange  for   substantially   all   outstanding   units  of  limited
          partnership  interest owned by individual limited partners  ("Exchange
          Limited   Partners")  in  23  limited   partnerships   (the  "Exchange
          Partnerships").  The Exchange  Partnerships directly or indirectly own
          equity  and/or  debt  interests  in  one  or  more  of 26  residential
          apartment  properties  (the  "Exchange  Properties")  located  in  the
          southeast and mid-west United States. Holders of Operating Partnership
          Units (other than the Trust) are entitled to exchange all or a portion
          of their  Units at any  time and from  time to time for an  equivalent
          number of Common  Shares of the Trust,  so long as the exchange  would
          not cause the  exchanging  party to own (taking into  account  certain
          ownership  attribution  rules) in excess of 5% of the then outstanding
          Common Shares,  subject to the Trust's right to cash out any holder of
          Units  who  requests  an  exchange   and  subject  to  certain   other
          exceptions.

          Certain of the  Exchange  Partnerships  own direct or indirect  equity
          interests in 16 Exchange  Properties  which consist of an aggregate of
          1,012  residential  units (comprised of studio and one, two, three and
          four-bedroom units). Certain of the


                                       4
<PAGE>


          Exchange  Partnerships own direct or indirect mortgage interests in 10
          Exchange  Properties,  which  consist of an  aggregate of 813 existing
          residential  units (studio and one and two bedroom) and 168 units (two
          and three bedroom) under development.  Of the Exchange Properties,  21
          properties  are located in Florida,  three  properties in Ohio and one
          property each in Georgia and Indiana.

          Operations  for the Quarter  Ended March 31, 2000  Compared to Quarter
          Ended March 31, 1999 and  Consolidated  Balance Sheets as of March 31,
          2000 Compared to December 31, 1999

          Total  Assets  for the  Trust  at  March  31,  2000  were  $7,243,151,
          representing  a 1%  decrease in Total  Assets of $ 93,047  compared to
          December 31, 1999. The decrease was  principally  due to  depreciation
          and  reductions in other assets.  Total  Liabilities  for the Trust at
          March 31, 2000 were $ 5,739,407,  representing  a 1% decrease in Total
          Liabilities of $ 66,479  compared to December 31, 1999.  This decrease
          resulted    principally   from   reductions   of   accounts   payable.
          Shareholders'  Equity for the Trust at March 31, 2000 was  $1,503,744,
          representing a 2% decrease in Shareholders' Equity of $26,568 compared
          to December 31, 1999.  The decrease was  principally  due to the first
          quarter 2000 net loss of $256,482.

          Revenues  for the  Trust in the  quarter  ended  March  31,  2000 were
          $255,368, representing a 1% decrease in Revenues of $3,783 compared to
          the  quarter  ended  March 31,  1999.  Real  Estate  Expenses  for the
          properties owned by the Trust in the quarter ended March 31, 2000 were
          $213,263, representing a 4% increase in Real Estate Expenses of $8,541
          compared to the quarter ended March 31, 1999. The increase in Revenues
          and Real Estate Expenses was principally due to increased  repairs and
          maintenance.  Administrative  Expenses in the quarter  ended March 31,
          2000 were  $298,587,  representing  a 41%  decrease in  Administrative
          Expenses of $210,480 compared to the quarter ended March 31, 1999. The
          decrease in  Administrative  Expenses was  principally  due to reduced
          personnel costs and other office expenses.

          Liquidity and Capital Resources

          Net Cash Used by Operating  Activities  in the quarter ended March 31,
          2000 was  $114,851  representing  a 77%  decrease  in Net Cash Used by
          Operating  Activities of $392,733  compared to the quarter ended March
          31, 1999.  The decrease in Net Cash Used by Operating  Activities  was
          principally due to the reduction in net loss for the quarter. Net Cash
          Used in Investing  Activities  in the quarter ended March 31, 2000 was
          $31,491,  representing  a 96%  decrease in Net Cash Used by  Investing
          Activities  of $676,275  compared to the quarter ended March 31, 1999.
          The decrease in Net Cash Used by Investing  Activities was principally
          due to investments made in the Alexandria  Apartments during the first
          quarter of 1999 which were not repeated in the first  quarter of 2000.
          Cash Flow from  Financing  Activities  in the quarter  ended March 31,
          2000 was $163,007, representing a 84% decrease in Cash Flow from


                                       5
<PAGE>


          Financing  Activities of $885,305  compared to the quarter ended March
          31, 1999.  The  decrease in Cash Flow from  Financing  Activities  was
          principally  due to reduced sales of common shares in the Trust's Cash
          Offering.

          The Trust plans to continue  raising equity in its Cash Offering under
          its current  prospectus  dated June 11, 1999,  as it may be amended or
          supplemented,  through May 31, 2000.  The net cash  proceeds  from the
          issuance of Common Shares in  connection  with the offering have been,
          and the net cash proceeds of any subsequent  issuance of Common Shares
          will be,  contributed  by the Trust to the  Operating  Partnership  in
          exchange  for  an   equivalent   number  of  Units  in  the  Operating
          Partnership.  The Trust is the sole general  partner of the  Operating
          Partnership  and,  as  of  May  12,  2000,  owned  699,076   Operating
          Partnership  Units,   representing   approximately  37%  of  the  then
          outstanding Units.

          The Operating Partnership will use the future net cash proceeds of the
          Cash Offering,  unissued units of limited partnership  interest in the
          Operating  Partnership  or a  combination  of net  cash  proceeds  and
          unissued  units  to  acquire   interests  in   residential   apartment
          properties  or interests in other  partnerships  substantially  all of
          whose assets consist of residential apartment property interests,  and
          payment of applicable fees and expenses.

          Because of the net losses of  $3,166,927  and  $1,577,060  in 1999 and
          1998,   respectively;   the  $975,305  in  accounts  payable  owed  to
          professionals in connection with the Exchange  Offering as of December
          31, 1999,  and the limited  liquid  resources as of December 31, 1999,
          the Company's  independent auditors included an explanatory  paragraph
          in their auditors' report to reflect a going concern contingency.  The
          completion in April 2000 of the Exchange Offering described above has,
          in the opinion of management, provided the critical mass necessary for
          profitable  operations.  The Company is negotiating with the firms who
          are owed accounts  payable,  and expects to receive  extended  payment
          terms and possible  reductions of the amounts due.  Distributions will
          be made by the  Trust as cash  flow  allows,  but  will be  negatively
          impacted as the open accounts payable are reduced.

          The Trust and the Operating  Partnership intend to continue to acquire
          similar  property  interests  using  proceeds  from the  Trust's  Cash
          Offering,  securities  of the  Trust  and the  Operating  Partnership,
          including Common Shares and Units,  and available  operating cash flow
          and financing from other sources.

          The operating results of the Trust and the Operating  Partnership will
          depend primarily upon income from the residential apartment properties
          in which  they  directly  or  indirectly  own or  acquire an equity or
          subordinated mortgage interest. Operating results in respect of equity
          interests  will be  substantially  influenced  by the  demand  for and
          supply of  residential  apartment  units in their  primary  market and
          sub-markets,  and  operating  expense  levels.  Operating  results  in
          respect of mortgage and other debt interests will depend upon interest
          income, including, in certain cases, participation


                                       6
<PAGE>


          interest,  whose payment will depend upon the  operating  performance,
          sale  or  refinancing  of the  underlying  properties.  The  operating
          results of the Trust and the  Operating  Partnership  will also depend
          upon the  pace  and  price at  which  they  can  acquire  and  improve
          additional property interests.

          The target  metropolitan  markets and  sub-markets  have  benefited in
          recent periods from demographic  trends (including  population and job
          growth) which  increase the demand for  residential  apartment  units,
          while financing  constraints  (specifically,  reduced  availability of
          development   capital)  have  limited  new   construction   to  levels
          significantly   below   construction    activity   in   prior   years.
          Consequently,  rental  rates  for  residential  apartment  units  have
          increased  at or above the  inflation  rate for the last two years and
          are expected to continue to experience  such increases for the next 18
          months based on market  statistics made available to management of the
          Trust in terms of occupancy rates,  supply,  demographic  factors, job
          growth rates and recent rental  trends.  Expense levels also influence
          operating results,  and rental expenses (other than real estate taxes)
          for  residential  apartment  properties  have  generally  increased at
          approximately  the rate of inflation  for the past three years and are
          expected to increase at the rate of inflation  for the next 18 months.
          Changes  in  interest  rates are not  expected  to  materially  impact
          operations,  because the  majority of the real estate  mortgages  have
          fixed interest rates, as do all of the inter-company loans.

          The Trust believes that known trends,  events or  uncertainties  which
          will or are  reasonably  likely to affect the short-term and long-term
          liquidity  and  current  and  future  prospects  of the  Trust and the
          Operating  Partnership  include the performance of the economy and the
          building  of new  apartment  communities.  Although  the Trust  cannot
          reliably predict the effects of these trends, events and uncertainties
          on the property investments of the Trust and the Operating Partnership
          as a whole, some of the reasonably  anticipated  effects might include
          downward pressure on rental rates and occupancy levels.

          Generally,  there are no  seasonal  aspects of the  operations  of the
          Trust or the Operating  Partnership which might have a material effect
          on their financial  conditions or results of operation.  However,  for
          the last 36 months,  one 60-unit student housing property owned by one
          of the Exchange Partnerships involved in the Exchange Offering has had
          an average  occupancy  rate of 88% for nine months of the year and 61%
          for the remaining three months of the year.

          Subject to the  foregoing  discussion,  management  believes  that the
          Trust and the Operating  Partnership have the ability to satisfy their
          cash requirements for the foreseeable future.  However, the Trust will
          continue the Cash Offering through May 31, 2000, subject to extension,
          and it will also be necessary to raise  additional  capital during the
          12-month period  following the completion of the Cash Offering to make
          acquisitions and to meet management's revenue and cash flow goals. The
          Trust and the Operating  Partnership  intend to investigate  making an
          additional public or private


                                       7
<PAGE>


          offering of Common  Shares  and/or Units  within the  12-month  period
          following the completion of the Cash Offering.

          The Trust and the Operating  Partnership  expect no material change in
          the number of employees over the next 12 months.

          Year 2000

          The computer  systems of the Trust and the Operating  Partnership have
          been  tested for year 2000  problems  and the Trust and the  Operating
          Partnership  believe that such systems are year 2000  compatible.  The
          Trust and the Operating  Partnership have not experienced any material
          year 2000 problems so far in 2000. It is possible,  however,  that the
          computer  systems  of the  Trust  and the  Operating  Partnership  and
          certain computer systems or software products of their suppliers could
          experience  year 2000 problems and that such problems could  adversely
          affect them. With respect to their own computer systems, the Trust and
          the Operating  Partnership  have upgraded  their  principal  operating
          computer software to the most recent available  revision sold by their
          software supplier,  which the supplier has represented to be year 2000
          compliant.  The Trust and the Operating  Partnership believe that such
          upgrade  will solve any year 2000  problems  that could  affect  their
          operating  software.  The failure to identify  and solve all year 2000
          problems  affecting their business could have an adverse effect on the
          business,  financial  condition and results of operations of the Trust
          and the Operating Partnership.


                                       8
<PAGE>


                           PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          The  Registrant  is a claimant in the  Georgia  Pacific  class  action
          lawsuit. It is not a party to any other legal proceeding.

Item 2.   Changes in Securities and Use of Proceeds

          The Registrant's Form SB-2 Registration  Statement (the  "Registration
          Statement")  (Commission file number 333-35063) was declared effective
          by the  Commission  on May 15, 1998. On May 18, 1998,  the  Registrant
          commenced  its public  offering (the  "Offering")  of common shares of
          beneficial interest in the Registrant ("Common Shares"),  the class of
          securities   registered.   On  June  2,  1999,  the  Registrant  filed
          Post-Effective  Amendment No. 1 (the  "Amendment") to the Registration
          Statement,  which the Commission  declared effective on June 11, 1999.
          The  Registrant's  Offering is  currently  ongoing and is scheduled to
          terminate on May 31, 2000.

          The  name  of the  managing  underwriter  of  the  Offering  is  Sigma
          Financial  Corporation.  The  amount of Common  Shares  registered  is
          2,500,000 shares.  The offering price per Common Share is $10.00,  and
          the aggregate price of the offering amount  registered is $25,000,000.
          As of the date of this Report, 699,076 Common Shares have been sold in
          the Offering, for an aggregate offering price of $6,990,763.

          From the effective date of the  Registration  Statement  through March
          31,  2000,   the  following   expenses  have  been  incurred  for  the
          Registrant's  account in connection with the issuance and distribution
          of the registered Common Shares:
<TABLE>
<CAPTION>

<S>                                                           <C>
          Underwriting discounts and commissions:             $ 555,325 (plus five-year warrants to
                                                              acquire 59,241 Common Shares at an
                                                              exercise price of $13.00 per share)

          Finder's Fees:                                      $0

          Expenses Paid to or for Underwriter:                $0

          Other Expenses (reimbursement for advisory
          and investment expenses):                           $ 416,158

                               Total Expenses:                $ 971,483
</TABLE>


          Of such  expense  payments,  $  416,158  were made  directly  to Baron
          Advisors,  Inc.,  the  Managing  Shareholder  of the  Registrant.  The
          remaining  payments of $555,325  were made  directly or  indirectly to
          others.  The net offering  proceeds to the Registrant  after deducting
          the foregoing total expenses were $ 5,969,744.


                                       9
<PAGE>

          From the effective date of the  Registration  Statement  through March
          31, 2000, the net offering  proceeds to the  Registrant  were used for
          the following purposes:

          Improvements to buildings and facilities:                  $0

          Purchase and installation of equipment:                    $0

          Repayment of indebtedness:                                 $0

          Working capital:                                           $ 569,204

          Temporary investments:                                     $0

          Investment in Baron Capital Properties, L.P. (the
          Operating Partnership)                                     $ 5,400,540

          Other purposes for which 5% or more of net
          offering proceeds or $100,000 (whichever is less)
          have been used:                                            $0

          Of such net  proceeds,  $ 5,400,540  was directly  contributed  to the
          Operating  Partnership  in exchange  for Units of limited  partnership
          interest  therein.  The Operating  Partnership will conduct all of the
          real  estate  operations  of the  Registrant  and hold all of its real
          property assets.

Item 3.   Defaults upon Senior Securities

          None

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

          None

Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibit 27--Financial Data Schedule.

          (b)  The  Registrant  did not file  any  Current  Reports  on Form 8-K
               during the quarter for which this Report is filed.


                                       10
<PAGE>


     In accordance  with the  requirements  of the Exchange Act, the  Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

May 19, 2000

                                            BARON CAPITAL TRUST

                                            By:   /s/ Gregory K. McGrath
                                                  ------------------------------
                                                  Gregory K. McGrath
                                                  Chief Executive Officer

                                            By:   /s/  Mark L. Wilson
                                                  ------------------------------
                                                  Mark L. Wilson
                                                  Chief Financial Officer


                                       11