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

                                  Form 10-QSB/A


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

                  For the quarterly period ended June 30, 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.)

                    7826 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  824,552 common
shares  of  beneficial  interest  ("Common  Shares"),  its only  class of common
equity.

<PAGE>

                         PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements

         See following pages.



                                       2
<PAGE>

                               BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


                          INDEX TO FINANCIAL STATEMENTS



                                                                          PAGE
                                                                          ----

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

   Balance Sheets                                                         F-2

   Statements of Operations                                               F-3

   Statement of Shareholders' Equity                                      F-4

   Statements of Cash Flows                                               F-5

   Notes to Financial Statements                                        F-6-F-15


                                      F-1
<PAGE>

                               BARON CAPITAL TRUST
                           Consolidated Balance Sheets
                       June 30, 2000 and December 31, 1999


<TABLE>
<CAPTION>
                                                                                    June 30,             December 31,
                                                                                      2000                  1999
                                                                                      ----                  ----
                                                                                   (Unaudited)
<S>                                                                                <C>                   <C>
Assets:

Rental Apartments:
  Land                                                                              $7,695,392           $1,178,693
  Depreciable property                                                              31,873,043            6,189,095
                                                                                   --------------------------------
                                                                                    39,568,435            7,367,788
  Less accumulated depreciation                                                     (6,414,750)          (1,453,177)
                                                                                   --------------------------------
                                                                                    33,153,685            5,914,611

Investment in Partnerships                                                           4,277,247              930,970

Cash and Cash Equivalents                                                              127,372               33,774
Restricted  Cash                                                                       762,969               52,089
Interest Receivable                                                                  1,338,565               36,997
Due From Managing Shareholder                                                             --                 14,783
Other Receivables                                                                      113,798                3,724
Advances to Affiliates                                                               6,905,011                5,141
Other Property and Equipment                                                           281,221              134,981
Other Assets                                                                           809,827              209,128
                                                                                   --------------------------------
                                                                                    10,338,763              490,617
                                                                                   --------------------------------
                                                                                   $47,769,694           $7,336,198
                                                                                   ================================


Liabilities:

  Mortgages payable                                                                $25,203,107           $4,278,117
  Accounts payable and accrued liabilities                                           2,233,509            1,295,092
  Notes payable                                                                        190,000              100,000
  Notes payable, affiliates                                                          3,778,779               50,000
  Capital lease obligation                                                              40,775               42,369
  Security deposits                                                                    227,066               40,308
                                                                                   --------------------------------
     Total Liabilities                                                              31,673,236            5,805,886


Minority Partners                                                                      536,900                 --

Shareholders' Equity:

Common Shares of beneficial interest, no par value, 25,000,000 shares
authorized; 824,552 and 675,086 shares issued and outstanding or assumed
to be issued as of June 30, 2000 and December 31, 1999, respectively                29,928,339            6,616,806
Distributions                                                                         (342,507)            (342,507)
Deficit                                                                            (14,026,274)          (4,743,987)
                                                                                   --------------------------------
    Total Shareholders' Equity                                                      15,559,558            1,530,312
                                                                                   --------------------------------
                                                                                   $47,769,694           $7,336,198
                                                                                   ================================
</TABLE>

                 See notes to consolidated financial statements


                                      F-2
<PAGE>

                               BARON CAPITAL TRUST
                      Consolidated Statements of Operations
            For the Three and Six Months Ended June 30, 2000 and 1999


<TABLE>
<CAPTION>
                                                                       Six                Six               Three           Three
                                                                     Months             Months              Months         Months
                                                                      Ended              Ended              Ended           Ended
                                                                    June 30,           June 30,            June 30,       June 30,
                                                                      2000               1999                2000           1999
                                                                      ----               ----                ----           ----
                                                                   (unaudited)        (unaudited)        (unaudited)     (unaudited)
                                                                   -----------        -----------        -----------     -----------
<S>                                                                 <C>                 <C>              <C>               <C>
Revenue:

   Rental                                                           $1,744,759          $590,505         $1,477,091        $317,703
   Equity in net loss of unconsolidated partnership                    (78,994)          (29,093)           (41,154)        (25,667)
   Interest and other income                                           368,134             1,037            342,594             654
                                                                 ------------------------------------------------------------------
                                                                     2,033,899           562,449          1,778,531         292,690
                                                                 ------------------------------------------------------------------

Real Estate Expenses:
  Depreciation                                                         319,217            72,907            278,392          36,454
  Interest                                                             555,515           144,491            470,056          80,526
  Repairs and maintenance                                              280,564            37,727            107,251          18,176
  Personnel                                                            265,376            57,471            262,266          27,814
  Property Taxes                                                       147,818            41,276            127,914          20,680
  Property Insurance                                                    38,030            10,718             32,670           3,513
  Utilities                                                            144,154            29,601            130,780          16,714
  Other                                                                209,751           131,570            204,076          86,528
                                                                 ------------------------------------------------------------------
                                                                     1,960,425           525,760          1,613,405         290,404
                                                                 ------------------------------------------------------------------

Provision for Property Impairment                                    8,356,638              --            8,356,638            --

Administrative Expenses:
  Personnel, including officer's compensation                          535,461           465,509            375,843         132,711
  Professional services                                                254,039           258,889             92,919         188,187
  Other                                                                209,623           101,734            245,148          38,775
                                                                 ------------------------------------------------------------------
                                                                       999,122           826,132            713,909         359,673
                                                                 ------------------------------------------------------------------

     Total expenses                                                 11,316,186         1,351,892         10,683,953         650,077
                                                                 ------------------------------------------------------------------


Net Loss                                                           ($9,282,287)        ($789,443)       ($8,905,422)      ($357,387)
                                                                 ==================================================================

Net Loss per Common Share Basic and Diluted                            ($13.45)           ($1.39)           ($12.74)         ($0.58)
Weighted Average Number of Common Shares Outstanding                   690,306           567,840            698,947         614,813
</TABLE>

                 See notes to consolidated financial statements


                                      F-3
<PAGE>

                               BARON CAPITAL TRUST
                 Consolidated Statement of Shareholders' Equity
                     For the Six Months ended June 30, 2000

<TABLE>
<CAPTION>
                                                                  SHARES       AMOUNT   DISTRIBUTIONS     DEFICIT           TOTAL
                                                                  ------       ------   -------------     -------           -----
<S>                                                             <C>         <C>           <C>          <C>              <C>
Balance, December 31, 1999                                        675,086    $6,616,806   $(342,507)    $(4,743,987)     $1,530,312

Proceeds from sale of common shares of
    beneficial interest, net of offering costs                     26,990       230,118        --              --           230,118

Common Shares assumed to be issued net (see Note 6,
Exchange Offering)                                              2,449,525    22,972,875        --              --        22,972,875

Net Loss                                                             --            --          --        (9,282,287)     (9,282,287)

Credit for estimated fair value of services
     performed by officer                                            --         108,540        --              --           108,540
                                                              ---------------------------------------------------------------------
Balance, June 30, 2000                                          3,151,601   $29,928,339   $(342,507)   $(14,026,274)    $15,559,558
                                                              =====================================================================
</TABLE>

                 See notes to consolidated financial statements


                                      F-4
<PAGE>

                               BARON CAPITAL TRUST
                      Consolidated Statements of Cash Flows
                 For the Six Months Ended June 30, 2000 and 1999


<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                      June 30,                June 30,
                                                                        2000                    1999
                                                                  ---------------------------------------
                                                                     (Unaudited)            (Unaudited)
<S>                                                                 <C>                      <C>
Cash Flows from Operating Activities:
  Net Loss                                                          ($9,282,287)             ($789,443)
  Adjustments to reconcile net loss to
   net cash used by operating activities:
     Provision for officer's compensation                               108,540                   --
     Equity in net loss of unconsolidated partnership                    78,994                 29,093
     Depreciation                                                       319,217                 94,721
     Provision for Property Impairment                                8,356,638                   --
     Changes in operating assets and liabilities:
     (Increase) decrease in operating assets:
       Property management reimbursements                                  --                   38,476
       Other receivables                                                 (2,885)                80,984
       Other assets                                                     (63,667)               (30,894)
     Increase (decrease) in operating liabilities:
       Accounts payable and accrued liabilities                         149,742                (14,178)
       Security Deposits                                                  3,512                   (840)
                                                                  ---------------------------------------
         Net cash used by operating activities                         (332,196)              (592,081)
                                                                  ---------------------------------------


Cash Flows from Investing Activities:
  Investment in partnerships                                            (11,681)              (885,000)
  Cash distribution from partnerships                                   293,000                 27,000
  Purchases of other property and equipment                             (26,197)               (10,073)
  Increase in restricted cash                                           (48,610)                  --
  Advances to affiliates                                                   --                   10,750
                                                                  ---------------------------------------
          Net cash used in investing activities                         206,512               (857,323)
                                                                  ---------------------------------------

Cash Flows from Financing Activities:
  Proceeds from the sale of common shares of beneficial interest        230,118              1,681,653
  Distributions paid                                                       --                 (167,596)
  Proceeds from mortgage financing                                         --                  273,499
  Proceeds from notes payable                                            90,000                   --
  Payments on notes payable                                                   0               (275,000)
  Payments on mortgages payable                                         (99,242)               (22,141)
  Payments on capital lease obligation                                   (1,594)                  --
  Other                                                                    --                   20,000
                                                                  ---------------------------------------
          Net cash provided by financing activities                     219,282              1,510,415
                                                                  ---------------------------------------

Net Increase (Decrease) in Cash and Cash Equivalents                     93,598                 61,011

Cash and Cash Equivalents, Beginning                                     33,774                243,498
                                                                  ---------------------------------------

Cash and Cash Equivalents, Ending                                      $127,372               $304,509
                                                                  =======================================
</TABLE>

                 See notes to consolidated financial statements


                                      F-5
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Basis of Presentation

          The  consolidated  balance  sheet  as of June 30,  2000,  consolidated
          statements  of  operations  for the six months ended June 30, 2000 and
          1999 and three months ended June 30, 2000 and 1999,  the  consolidated
          statements  of cash flows for the six months  ended June 30,  2000 and
          1999, and the consolidated  statement of shareholders'  equity for the
          six months ended June 30, 2000 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 June 30, 2000 and for the period  presented,  have been made.
          The results of operations  for the three and six months ended June 30,
          2000 are not necessarily  indicative of the operating  results for the
          full year.

          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.

          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"),  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 mortgage loans secured by such types of property.

          The Trust's Declaration of Trust (the "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  Trust  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.

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.  For the six months ended June 30,
          2000 and the year  ended  December  31,  1999 the Trust  incurred  net
          losses of  $9,282,287  and  $3,166,927  and  negative  cash flows from
          operations of $332,196 and  $1,022,587.  The auditors'  report for the
          year ended December 31,


                                      F-6
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


          1999 was  qualified  to express  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 attempt to raise  capital  through  additional
               public or private  offerings of Common  Shares  and/or  Operating
               Partnership Units within the next 12 months.

          o    The Trust, through the Operating Partnership, intends to continue
               to acquire rental properties with proceeds from any future public
               or  private  offering  of  common  shares  ("Common  Shares")  of
               beneficial  interest  in the  Trust  and/or  units  ("Units")  of
               limited partnership  interest in the Operating  Partnership.  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 subordinated  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    The Trust intends to review its entire portfolio of properties to
               determine the potential for restructuring and refinancing various
               first  mortgage  loans and to  evaluate  certain  properties  for
               possible sale due to recent  performance that negatively  impacts
               overall operating  results.  The Trust will also explore possible
               business combinations with other apartment owners that would give
               it the  economies  of scale and the size that it requires to list
               its Common Shares on a recognized securities exchange.

          o    The Trust  will  also  negotiate  with the  firms  which are owed
               accounts  payable for services  performed in connection  with the
               Exchange Offering of the Operating Partnership in order to extend
               payment terms and, where possible, to reduce the amounts due.

          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
                                    (Cont'd)


NOTE 3.   RECENT ACCOUNTING PRONOUNCEMENTS

          In June 1998,  the FASB issued  SFAS 133,  Accounting  for  Derivative
          Instruments  and Hedging  Activities,  which has been deferred by SFAS
          137,  Accounting for Derivative  Instruments and Hedging  Activities -
          Deferral of the Effective  Date of FASB Statement No. 133, and amended
          by the  issuance  in June 2000 of SFAS  138,  Accounting  for  Certain
          Derivative Instruments and Certain Hedging Activities, an amendment of
          FASB  Statement  No.  133.  SFAS 133  requires  that every  derivative
          instrument  be recorded on the balance  sheet as an asset or liability
          measured  at its fair  value  and that  changes  in the fair  value of
          derivative  instruments  be  recognized  currently in earnings  unless
          specific hedge accounting  criteria are met. SFAS 133 is effective for
          fiscal years beginning after June 15, 2000.

          Historically,  the Trust has not entered into derivatives contracts to
          hedge existing risks or for  speculative  purposes.  Accordingly,  the
          Trust does not expect  adoption of the new standard on January 1, 2001
          to affect its financial statements.

NOTE 4.   COMMITMENTS AND CONTINGENCIES

          Contract to Purchase Additional Properties

          In September 1998, the Trust entered into an agreement with three real
          estate development companies (Brentwood at Southgate, Ltd., Burlington
          Residential,  Ltd. and The Shoppes at Burlington, Ltd.) to acquire two
          luxury residential  apartment properties in the development stage upon
          the completion of construction.  The three  development  companies are
          controlled by Mr. McGrath. One of the residential  properties has been
          sold to a third party with the Trust's consent. The remaining property
          is scheduled  to have a total of 396 units,  comprised of one, two and
          three  bedroom/one  or two bathroom  apartments.  Construction  of the
          property  (the  "Burgundy  Hills  Property"),   located  in  Florence,
          Kentucky (part of the Cincinnati metropolitan area), is expected to be
          completed  by the end of the first  quarter  of 2004.  The Trust has a
          right  of  first   negotiation  to  purchase  the  property  from  the
          development  company upon  completion  and a right of first refusal to
          purchase the property on the same terms offered by a third party.  The
          purchase  price is expected  to be  approximately  $30,000,000.  It is
          contemplated  that a  significant  portion  of that  amount  would  be
          covered by first  mortgage  financing.  At the current  time the Trust
          does not have adequate resources to close on the transaction and it is
          uncertain  whether the Trust will have adequate  resources to complete
          the transaction upon completion of construction.

          In connection  with the  transaction,  the Trust (along with its Chief
          Executive  Officer)  agreed to co-guarantee up to 35% (or a maximum of
          approximately   $6,000,000)  of  existing   long-term  first  mortgage
          construction   financing  provided  by  KeyBank  National  Association
          ("KeyBank").  As of February 12, 2001, approximately $5,300,000 of the
          loan had been drawn  down,  resulting  in  outstanding  guarantees  of
          approximately  $1,900,000.  The interest rate on the construction loan
          is KeyBank's  prime rate  (currently  8.5%) or the LIBOR rate plus 2%.
          The Trust also  agreed  that,  if the loan is 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  loan or arrange for
          a third party to do so.


                                      F-8
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


          In September  2000, the Trust received  notice from counsel to KeyBank
          that  Burlington  Residential,  Ltd.  ("Borrower"),  the  owner of the
          Burgundy Hills Property,  had defaulted on its loan for failure to pay
          current  interest  due  and  meet  certain  equity   requirements  and
          covenants under the loan  agreement,  adverse changes in the financial
          conditions of the Borrower and the Trust,  and the Trust's  failure to
          meet  certain   tangible  net  worth  tests  set  forth  in  the  loan
          agreements.  KeyBank  indicated  that it was  exercising  its right to
          accelerate  the loan. Mr. McGrath has indicated that KeyBank agreed to
          forego further  action for at least 60 days while the parties  attempt
          to reach an arrangement.  The extension  expired in November 2000 and,
          according  to  Mr.   McGrath,   is  currently   being  extended  on  a
          month-to-month  basis. The Borrower paid down the outstanding  accrued
          interest and a portion of the principal and is currently negotiating a
          new long-term  construction facility with another institutional lender
          to replace the KeyBank loan (and the Bank One loan  described  below).
          The  Trust  anticipates  completion  of the  refinancing  in the first
          quarter of 2001.

          Bank  One  has  provided  additional  institutional  financing  in the
          principal amount of $1,576,000 to the Borrower. The loan is secured by
          a security interest in partnership interests in the Borrower. Due to a
          default in payment of interest due, Bank One has been assigned  rental
          payments and has taken over  day-to-day  management  of the  property.
          This  loan is  expected  to be paid off with the  proposed  new  first
          mortgage financing referenced above.

          Officers' Compensation

          Gregory  K.  McGrath,  a  founder  of  the  Trust  and  the  Operating
          Partnership and the President,  sole  shareholder and sole director of
          Baron Advisors,  Inc., a Delaware corporation that serves as a trustee
          of the Board of the Trust,  serves as Chief  Executive  Officer of the
          Trust. He agreed to serve as Chief Executive  Officer of the Trust for
          its initial year of  operations  in exchange for  compensation  in the
          form of  Common  Shares or Units in an  amount  not to  exceed  25,000
          shares or units,  as  applicable,  to be  determined  by the Executive
          Compensation  Committee  of the  Board  of the  Trust  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 1998, 1999 and the first two quarters
          of 2000,  no Common  Shares or Units  were  issued to Mr.  McGrath  as
          compensation.   However,   in  order  to   reflect   all   appropriate
          administrative  expenses of the Operating Partnership,  a provision of
          $108,540 has been made in the  accompanying  financial  statements for
          the estimated  fair value of the services  rendered by Mr.  McGrath as
          Chief  Executive  Officer  for the first two  quarters  of 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.

          Robert S.  Geiger,  the  other  founder  of the  Trust  and  Operating
          Partnership,  serves as the Chief Operating  Officer of the Trust, the
          Operating  Partnership  and Baron  Advisors,  Inc. His initial  annual
          salary was set at $100,000,  in addition to benefits,  and eligibility
          for  participation in any Common Share option plan and bonus incentive
          compensation plan implemented by the Trust.  Since August 1, 2000, Mr.
          Geiger has received no compensation.


                                      F-9
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


          Underwriting Agreement

          In connection with the Cash Offering which  terminated on May 31, 2000
          (see "Note 6.  Shareholders'  Equity") and pursuant to an Underwriting
          Agreement,  the  Trust  issued  to Sigma  Financial  Corporation  (the
          "Underwriter"),  warrants to purchase Common Shares in an amount equal
          to 8.5% of the number of Common Shares sold on a best efforts basis by
          the  Underwriter  and  participating  broker-dealers  selected  by the
          Underwriter  and the Trust.  The warrants may be exercised at any time
          and from time to time  through May 15,  2003 at an  exercise  price of
          $13.00 per warrant share.  The Trust has reserved 59,676 Common Shares
          under the Underwriting  Agreement,  which is equivalent to 8.5% of the
          702,076 Common Shares sold in the Cash Offering.

NOTE 5.   RELATED PARTY TRANSACTIONS

          Trust Management Agreement

          Under a Trust Management  Agreement entered into with the Trust, Baron
          Advisors,  Inc.  (the  "Managing  Shareholder")   previously  provided
          management,  administrative  and investment  advisory  services to the
          Trust. The services included,  among other things,  communicating with
          and  reporting to  investors,  administering  accounts,  providing the
          Trust  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 was also responsible for
          determining   which  real  estate   investments  and  non-real  estate
          investments the Trust made (including the temporary  investment of the
          Trust's  available funds prior to their  commitment to particular real
          estate  investments) and for making divestment  decisions,  subject to
          the provisions of the Declaration.  The Trust Management Agreement had
          an  initial  term of one  year,  and was  renewed  for one  additional
          one-year period.  The agreement was terminated as of December 31, 2000
          by the mutual agreement of the Trust and the Managing Shareholder.

          Under the Trust  Management  Agreement,  the  Trust was  obligated  to
          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 Cash Offering,  and 1% of the initial  assigned value of
          each Unit in the Operating  Partnership  issued in connection with the
          Exchange Offering.

          Accrued Interest Receivable, Affiliates

          Certain  of  the  Exchange  Partnerships  acquired  by  the  Operating
          Partnership in the Exchange Offering hold subordinated  notes due from
          limited   partnerships   controlled  by  Mr.  McGrath.  See  "Note  6.
          Shareholders'  Equity." These debt  instruments  have varying interest
          rates and the interest is accrued and/or paid on a monthly  basis.  As
          of June 30, 2000, the Trust was due $1,338,564 on these notes.


                                      F-10
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


NOTE 6.   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 $10.00
          per Common Share (the "Cash Offering"). The Cash Offering, as amended,
          was  terminated  May 31, 2000. The Trust sold 702,076 Common Shares in
          the offering for an aggregate offering price of $7,020,763. All of the
          Common Shares issued by the Trust in the offering are tradable without
          restriction  under the  Securities  Act,  but are  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  Common  Shares  are not  listed  for  trading on any stock
          exchange, and no market currently exists for the Common Shares.

          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 2,449,525  registered  Operating  Partnership Units
          (with an  initial  assigned  value of  $24,495,249)  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 Officer 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  Partnerships  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 assigned to the Operating Partnership all of its economic
          interest in the  partnership;  and Mr.  McGrath  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.

          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


                                      F-11
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


          approximately  97.4% of the outstanding  units of limited  partnership
          interest 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.

          For financial statement  presentation purposes, it is assumed that the
          Units of limited  partnership  interest in the  Operating  Partnership
          issued to Exchange Limited Partners in the Exchange Offering have been
          issued  as Common  Shares of the  Trust,  since  the  unitholders  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,  so long
          as the exchange would not cause the exchanging  party to own in excess
          of 5% of the then  outstanding  Common Shares,  subject to the Trust's
          right to cash out any  unitholder who requests an exchange and subject
          to certain other exceptions.

          Operating Partnership Limited Partnership Units

          In  connection  with the  formation  of the  Trust  and the  Operating
          Partnership,  their two  founders,  Mr.  McGrath  and Mr.  Geiger (the
          "Original  Investors"),  each  subscribed for 601,080 Units of limited
          partnership  interest  in  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.  The number of Units subscribed for by the
          Original  Investors  represented 19% of the maximum Common Shares that
          would  have been  outstanding  following  the  completion  of the Cash
          Offering and the Exchange  Offering,  assuming that the Trust had sold
          all Common  Shares  (2,500,000)  offered in the Cash Offering and that
          the  Operating  Partnership  had  issued the  maximum  number of Units
          (2,500,000)  offered in the Exchange  Offering,  calculated on a fully
          diluted basis  assuming all then  outstanding  Units (other than those
          acquired by the Trust) had been exchanged into an equivalent number of
          Common Shares. The Original  Investors  deposited the Units subscribed
          for by them into an  institutional  security escrow account for six to
          nine years, subject to earlier release under certain conditions.

          The  subscription  agreement  entered into by the  Original  Investors
          provided that if, as of May 31, 2000,  the number of Units  subscribed
          for by the Original Investors represents a percentage greater than 19%
          of the then outstanding  Common Shares,  calculated on a fully diluted
          basis, each of the Original  Investors would be required to return any
          excess Units to the Operating Partnership for cancellation. Therefore,
          as of May 31, 2000, an  adjustment,  reducing the number of Units held
          in escrow by  444,414,  was made to  accurately  reflect the number of
          Units held by the Original Investors.

          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


                                      F-12
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


          the  time  of the  subscription  for  the  Units,  the  Trust  and the
          Operating  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
          Operating  Partnership;   and  the  founders'  Units  are  subject  to
          significant  transfer  restrictions.  The  Operating  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  share  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 Exchange  Partnerships
          which participated in the Exchange  Offering;  agreed to assign to the
          Operating  Partnership  the right to  receive  all  residual  economic
          rights  attributable to the general partner  interests in the Exchange
          Partnerships;  and,  in order to permit  management  by the  Operating
          Partnership  of the  properties  owned by the  Exchange  Partnerships,
          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.

          Following the Exchange Offering,  the Operating  Partnership  controls
          all of the  Exchange  Partnerships  by  virtue  of  its  ownership  of
          substantially all of the limited partnership interests therein,  which
          provides the Operating  Partnership  the ability to remove the general
          partner  under the  provisions  of the limited  partnership  agreement
          pertaining  to  each  Exchange   Partnership  that  authorize  limited
          partners holding over 50% of total partnership  interest to remove the
          general partner.

          Distributions

          There were no distributions in the six months ended June 30, 2000.

NOTE 7.   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 Share


                                      F-13
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


          equivalents in the weighted  average shares  outstanding  has not been
          presented,  as it is  anti-dilutive  for both the three and six months
          ended June 30, 2000 and 1999.

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

<TABLE>
<CAPTION>
                                                                                 Weighted         Loss
                                                                                  Average          Per
                                                                 Net Loss         Shares          Share
                                                                 --------         ------          -----
<S>                                                           <C>                <C>             <C>
          Three Months Ended June 30, 2000                    ($8,905,422)       698,947         ($12.74)
          Three Months Ended June 30, 1999                      ($357,387)       614,813          ($0.58)
          Six Months Ended June 30, 2000                      ($9,282,287)       690,306         ($13.45)
          Six Months Ended June 30, 1999                        ($789,443)       567,840          ($1.39)
</TABLE>

NOTE 8.   PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

          The  unaudited  pro  forma   condensed   consolidated   statements  of
          operations  for the six months ended June 30, 2000 have been  prepared
          assuming  that the  Exchange  Offering had been fully  subscribed  and
          occurred on January 1, 2000.

          The pro forma  information is not  necessarily  indicative of what the
          Trust's results of operations  would have been assuming the completion
          of the described transaction at the beginning of the period indicated,
          nor does it purport to project the Trust's  results of operations  for
          any future period.

       Unaudited Pro Forma Condensed Consolidated Statement of Operations
                     For the Six Months ended June 30, 2000

<TABLE>
<CAPTION>
                                                      Statement of
                                                    Operations as of        Pro Forma
                                                     June 30, 2000         Adjustments           Pro Forma
                                                     -------------         -----------           ---------
<S>                                                    <C>               <C>                   <C>
          Total Revenues                                $2,034,000        $1,486,000(1)         $3,520,000
          Cost and Expenses                             $2,960,000        $1,350,000(2)         $4,310,000
          Provision for Property Impairment             $8,357,000       ($8,357,000)(3)
                                                       ---------------------------------------------------
          Net Income (loss)                            ($9,282,000)                              ($790,000)
          Weighted Average Number
          of Common Shares                                 690,306                                 690,306
          Net Loss Per Share                               ($13.45)                                 ($1.14)
</TABLE>

          Pro Forma Adjustments

          The unaudited pro forma condensed  consolidated  financial  statements
          represent the  acquisition  of  substantially  all of the  partnership
          interests in the Exchange  Partnerships,  which will be accounted  for
          under the purchase  method of accounting.  The Trust has estimated the
          adjustments  necessary to allocate the aggregate  purchase  price over
          the recorded book value of these  partnerships.  Such


                                      F-14
<PAGE>

                              BARON CAPITAL TRUST

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (Cont'd)


          allocations are subject to final  determination  based upon valuations
          provided  by the Trust and other  valuations  of fair  value as if the
          acquisitions   were  effective   January  1,  2000.   Therefore,   the
          allocations   reflected   in  the   unaudited   pro  forma   condensed
          consolidated  financial  statements may differ from amounts ultimately
          determined.  Differences  between the amounts  included herein and the
          final  allocations  are not expected to have a material  effect on the
          unaudited pro forma financial statements.

          Pro forma  depreciation  for the period  ended June 30,  2000 is based
          upon  assets at fair value at January  1, 2000,  primarily  based upon
          30-year asset lives.

          Summary pro forma  adjustments to present  comparative  per share data
          assume that the Exchange Offering had been consummated January 1, 2000
          (assumes Units outstanding for entire period). The Original Investors'
          escrowed  Units are not  included  in the pro forma  computation  with
          basic loss per share because there is no assurance that the Units will
          be released from escrow and their inclusion would be antidilutive.

          The pro forma adjustments detailed above are as follows:

          1)   The Exchange  Partnerships  provide an additional $1.4 million in
               revenue if assumed to have been included from January 1, 2000.

          2)   The Exchange  Partnerships  incur an additional  $1.35 million in
               expenses if assumed to have been included from January 1, 2000.

          3)   A one-time Provision for Property  Impairment of $8.4 million was
               recognized  at the end of the second  quarter to account  for the
               excess of the exchanged value over the estimated  equity value of
               the Exchange Partnerships.

NOTE 9.   SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
          ACTIVITIES

          In April 2000,  in  connection  with the  completion  of the  Exchange
          Offering, the Operating Partnership acquired indirect equity interests
          in 13 rental  properties  and  subordinated  mortgage  interests in 10
          additional  properties  through the acquisition of  substantially  all
          partnership  interests in the Exchange Partnerships which own land and
          depreciable  property,  accrued  interest,   advances,  other  assets,
          mortgages and notes payable, as follows:

               Land and Depreciable Property                 $32,474,270
               Accrued Interest - Affiliate                    1,338,564
               Advances to Affiliates                          6,843,286
               Other Assets                                      736,604
                                                             -----------
               Total Assets                                  $41,392,724

               Mortgages Payable                             $19,725,536
               Notes Payable - Affiliate                       3,639,638
                                                             -----------
               Total Liabilities                             $23,365,174
                                                             -----------
               Equity                                        $18,027,550
                                                             ===========


                                      F-15
<PAGE>

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

          The  following  discussion  should  be read in  conjunction  with  the
          Condensed  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.  The Trust has  elected  to be taxed as a real
          estate investment trust for federal income tax purposes.

          As described below in this Report, in May 1998, the Trust commenced an
          offering  (the "Cash  Offering")  of up to 2,500,000  common shares of
          beneficial interest ("Common Shares") in the Trust at a purchase price
          of $10.00 per share (maximum


                                       3
<PAGE>

          proceeds of $25,000,000).  In the Cash Offering,  which expired on May
          31,  2000,  the Trust sold  702,076  Common  Shares  for an  aggregate
          purchase price of $7,020,763.

          The Trust  contributed  the net cash  proceeds  from the  issuance  of
          Common  Shares  in the Cash  Offering  ($5,467,858)  to the  Operating
          Partnership  in  exchange  for an  equivalent  number  of Units in the
          Operating  Partnership.  As of  February  12,  2001,  the Trust  owned
          702,076 Operating Partnership Units, representing  approximately 18.0%
          of the then outstanding Units. Since the Units comprise  substantially
          all of the assets of the Trust, the operating results of the Trust are
          primarily  dependent  upon  the  operating  results  of the  Operating
          Partnership.

          Through   the   Operating   Partnership,   the  Trust   has   acquired
          substantially all the beneficial interests in 16 residential apartment
          properties,  including the  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;  Riverwalk
          Apartments  (50 two bedroom units  located in New Smyrna,  Florida) in
          September  1998;  and 13  properties  acquired as part of the Exchange
          Offering in April 2000 (discussed  below).  In July 1998 the Operating
          Partnership also acquired a minority limited  partnership  interest in
          13 real estate  limited  partnerships  then managed by  affiliates  of
          Gregory  K.  McGrath  (a founder  and Chief  Executive  Officer of the
          Trust, a founder of the Operating Partnership, and the President, sole
          shareholder  and sole  director of Baron  Advisors,  Inc.,  a Delaware
          corporation  that  serves  as a trustee  of the  Board of the  Trust),
          including certain of the Exchange  Partnerships  which participated in
          the Exchange Offering and which are now managed by the Trust.

          During 1998 and 1999, the Operating  Partnership also acquired a total
          of 40% of the limited partnership interests in Alexandria Development,
          L.P. (the "Alexandria Partnership"), which owns Alexandria Apartments,
          a 168-unit residential apartment property (the "Alexandria  Property")
          under construction in Alexandria,  Kentucky.  As of February 12, 2001,
          112  of  the  168  residential  units  (approximately  67%)  had  been
          completed and were in the rent-up stage. Of the completed  units,  107
          units have been rented. In September 2000, the Alexandria  Partnership
          entered into an agreement to sell the Alexandria  Property in exchange
          for $510,000 cash,  record title to 20 acres of  undeveloped  property
          located in Vero Beach,  Florida and the assumption by the contemplated
          purchaser  of the  existing  first  mortgage  loan  secured by a first
          mortgage on the  Alexandria  Property  with a principal  balance as of
          February 12, 2001 of approximately  $8,650,000.  If the sale, which is
          subject to certain  closing  conditions,  is completed,  the Operating
          Partnership   will   receive  40%  of  the  net   proceeds  and  other
          consideration payable to the Alexandria Partnership.

          In September 1998, the Trust entered into an agreement with three real
          estate development companies (Brentwood at Southgate, Ltd., Burlington
          Residential,  Ltd. and The Shoppes at Burlington, Ltd.) to acquire two
          luxury residential  apartment properties in the development stage upon
          the completion of construction.  The three  development  companies are
          controlled by Mr. McGrath. One of the residential  properties has been
          sold to a third party with the Trust's consent. The remaining


                                       4
<PAGE>

          property is scheduled to have a total of 396 units,  comprised of one,
          two and three bedroom/one or two bathroom apartments.  Construction of
          the property (the  "Burgundy  Hills  Property"),  located in Florence,
          Kentucky (part of the Cincinnati metropolitan area), is expected to be
          completed  by the end of the first  quarter  of 2004.  The Trust has a
          right  of  first   negotiation  to  purchase  the  property  from  the
          development  company upon  completion  and a right of first refusal to
          purchase the property on the same terms offered by a third party.  The
          purchase  price is expected  to be  approximately  $30,000,000.  It is
          contemplated  that a  significant  portion  of that  amount  would  be
          covered by first  mortgage  financing.  At the current  time the Trust
          does not have adequate resources to close on the transaction and it is
          uncertain  whether the Trust will have adequate  resources to complete
          the transaction upon completion of construction.

          In connection  with the  transaction,  the Trust (along with its Chief
          Executive  Officer)  agreed to co-guarantee up to 35% (or a maximum of
          approximately  $6,000,000) of long-term  first  mortgage  construction
          financing provided by KeyBank National Association ("KeyBank").  As of
          February 12, 2001,  approximately  $5,300,000 of the construction loan
          had  been  drawn  down,   resulting  in   outstanding   guarantees  of
          approximately  $1,900,000.  The interest rate on the construction loan
          is KeyBank's  prime rate  (currently  8.5%) or the LIBOR rate plus 2%.
          The Trust also  agreed  that,  if the loan is 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  loan or arrange for
          a third party to do so.

          In September  2000, the Trust received  notice from counsel to KeyBank
          that  Burlington  Residential,  Ltd.  ("Borrower"),  the  owner of the
          Burgundy Hills Property,  had defaulted on its loan for failure to pay
          current  interest  due  and  meet  certain  equity   requirements  and
          covenants under the loan  agreement,  adverse changes in the financial
          conditions of the Borrower and the Trust,  and the Trust's  failure to
          meet  certain   tangible  net  worth  tests  set  forth  in  the  loan
          agreements.  KeyBank  indicated  that it was  exercising  its right to
          accelerate  the loan.  According  to Mr.  McGrath,  KeyBank  agreed to
          forego further action for at least 60 days while the parties attempted
          to reach an arrangement.  The extension  expired in November 2000 and,
          according  to  Mr.   McGrath,   is  currently   being  extended  on  a
          month-to-month  basis. The Borrower paid down the outstanding  accrued
          interest and a portion of the principal and is currently negotiating a
          new long-term  construction facility with another institutional lender
          to replace the KeyBank loan (and the Bank One loan  described  below).
          It anticipates  completion of the  refinancing in the first quarter of
          2001.

          Bank  One  has  provided  additional  institutional  financing  in the
          principal amount of $1,576,000 to the Borrower. The loan is secured by
          a security interest in partnership interests in the Borrower. Due to a
          default in payment of interest due, Bank One has been assigned  rental
          payments and has taken over  day-to-day  management  of the  property.
          This  loan is  expected  to be paid off with the  proposed  new  first
          mortgage  financing  referenced above.  There can be no assurance that
          refinancing  will be available  or will be  available on  commercially
          reasonable  terms,  that KeyBank will


                                       5
<PAGE>

          not seek to  enforce  its  right  to  accelerate  the  loan and  begin
          foreclosure  proceedings against the Burgundy Hills Property,  or that
          BankOne will not seek to enforce its right to take over control of the
          Borrower.

          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 2,449,525  registered units of limited  partnership
          interest in the  Operating  Partnership  (the  "Operating  Partnership
          Units" or "Units") (with an initial  assigned value of $24,495,249) 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.

          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
          of  the  Exchange  Partnerships  ("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 assigned to the Operating Partnership all of its economic
          interest in the  partnership;  and Mr.  McGrath  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.

          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 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.


                                       6
<PAGE>

          Of the  Exchange  Properties,  21  properties  are located in Florida,
          three properties in Ohio and one property each in Georgia and Indiana.

          Consolidated  Balance  Sheet as of June 30, 2000  Compared to December
          31, 1999

          Due to the completion of the Exchange Offering,  the balance sheet for
          the  Trust  reflects  large  increases  in  assets,   liabilities  and
          shareholders' equity. During the six months ended June 30, 2000, total
          assets increased to $47.8 million while liabilities increased to $31.7
          million.  As described  above,  the Exchange  Offering  increased  the
          number of  properties in which the  Operating  Partnership  indirectly
          owns  an  equity  and/or  mortgage  interest  by  adding  26  Exchange
          Properties.  The Operating Partnership now has rental apartment assets
          in excess of $39.5  million,  which are  subject  to $25.2  million in
          first mortgage debt.

          Shareholders' equity increased to $15.6 million due to the issuance in
          the  Exchange  Offering of  2,449,525  Units with an initial  assigned
          value of $24.5 million, reduced by a one-time write off charge of $1.7
          million  (which  represents  unamortized  loan costs  recorded  on the
          Exchange  Partnerships'  books  that  were in place at the time of the
          Exchange  Offering  from  the  syndication  of the  prior  partnership
          structure)  and a net loss of $9.3  million  for the six months  ended
          June 30, 2000.

          Operations  for the Six Months  Ended June 30,  2000  Compared  to Six
          Months Ended June 30, 1999

          Revenues,   real  estate  expenses  and  administrative  expenses  all
          increased  substantially  for the six months  ended  June 30,  2000 in
          comparison to the six months ended June 30, 1999 due to the completion
          of the Exchange  Offering  mentioned  above and the addition of the 26
          Exchange Properties and their related operating costs.

          The Trust  recognized a one-time  charge of $8.4 million to operations
          as a Provision for Property  Impairment in the second quarter of 2000.
          This  provision  is the  result  of  writing  off  the  excess  of the
          exchanged value of the Exchange Partnerships over the estimated equity
          value of the Exchange  Properties.  The equity value is  calculated by
          reducing  the  appraised  value  of  the  Exchange  Properties  by any
          mortgages or interest payables due on the Exchange Properties.

          Liquidity and Capital Resources

          Net cash used by operating activities in the six months ended June 30,
          2000 was  ($332,196)  compared to  ($592,081)  in the six months ended
          June 30,  1999.  A number of items,  including  an increase in certain
          liabilities  and a decrease  in  certain  assets,  contributed  to the
          reduced use of cash by operating activities.

          Net cash provided by investing activities in the six months ended June
          30, 2000 was $206,512  compared to  ($857,323) in the six months ended
          June 30, 1999.  The increase in cash for 2000 was due  primarily to an
          increase in cash  distributions  from the Exchange  Partnerships and a
          decrease in investments in partnerships.


                                       7
<PAGE>

          Net cash provided by financing activities in the six months ended June
          30, 2000 was $219,282  compared to $1,510,415 for the six months ended
          June 30, 1999.  The decrease in cash was due to a decrease in the sale
          of Trust  Common  Shares in the Cash  Offering,  which  expired in May
          2000.

          Because  of the net loss of  $3,166,927  incurred  by the Trust in the
          period ended December 31, 1999 and the $1,123,000 in accounts  payable
          owed to professionals  in connection with the Exchange  Offering as of
          December 31, 1999, and its limited liquid resources as of December 31,
          1999,  the Trust's  independent  auditors  qualified  their  auditors'
          report to reflect a going concern contingency.

          The completion in April 2000 of the Exchange Offering  described above
          has  completed  the first  effort,  in the opinion of  management,  to
          provide the critical mass  necessary for  profitable  operations.  The
          Company is negotiating  with the firms which are owed accounts payable
          in order to extend  payment  terms  and,  where  possible,  reduce the
          amounts  due.  Distributions  will be made by the  Trust as cash  flow
          allows,  but will be  negatively  impacted  until  the  open  accounts
          payable are reduced.  Management  does not  anticipate  that the Trust
          will  make  distributions  to its  shareholders  for the next  several
          quarters.

          The Trust and the Operating  Partnership  intend to use  securities of
          the Trust and the Operating  Partnership  (including Common Shares and
          Units),  proceeds from future sales of such securities,  and available
          operating  cash flow and  financing  from  other  sources  to  acquire
          interests in additional  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.

          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 debt
          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  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


                                       8
<PAGE>

          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  that 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,  management of
          the  Trust  believes  that it will be  necessary  to raise  additional
          capital  during  the next 12 months 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  offering of Common  Shares  and/or  Units  during the next 12
          months.

          As part of the Trust's ongoing operations, management is reviewing the
          entire   portfolio  of  properties  to  determine  the  potential  for
          restructuring   or   refinancing   various   first   mortgage   loans.
          Additionally,  properties  whose  recent  performance  has  materially
          negatively  impacted the Trust's operating results are being evaluated
          for possible sale.  Certain of these  properties  have been listed for
          sale. The Trust is also in discussions  with other  apartment  owners,
          and is exploring business combinations that will bring it economies of
          scale  and the  size it needs  for  listing  its  Common  Shares  on a
          recognized  securities  exchange.  Additional size would also give the
          Company  the  operating  margin  necessary  to  support  its  valuable
          management team that is believed necessary for its long-term growth.

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


                                       9
<PAGE>

          In an effort to  increase  profitability,  the Trust has also  entered
          into agreements with WaKuL, Inc. (formerly Rapid Transmit  Technology,
          Inc.),  a provider of  integrated  communications  services to owners,
          property managers and residents of residential  apartment  properties,
          including  discounted  local and long distance phone service,  digital
          cable TV, high speed  Internet  access,  monitored  security  systems,
          utility sub-metering and various property management  services.  WaKuL
          will provide these  services at no capital cost to the Trust,  and has
          entered into revenue sharing  relationships with the Trust.  (WaKuL is
          an affiliate of the Trust by virtue of the overlapping  management and
          ownership capacities in the Trust, the Operating Partnership and WaKuL
          of  Gregory  K.  McGrath,  a  founder  of  the  Trust,  the  Operating
          Partnership,  and WaKul.) The WaKuL  services  are expected to provide
          the Trust's properties with a significant marketing advantage over its
          competitors, and to provide significant rental and other revenues that
          the properties otherwise would not have generated.

          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. 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 software 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.


                                       10
<PAGE>

                           PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          The Trust is a claimant in the Georgia  Pacific class action  lawsuit,
          and is not a party to any other legal proceeding.


Item 2.   Changes in Securities and Use of Proceeds

          The  Trust'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  Trust
          commenced its public  offering (the "Cash  Offering") of common shares
          of beneficial  interest in the Trust ("Common  Shares"),  the class of
          securities registered. On June 2, 1999, the Trust filed Post-Effective
          Amendment No. 1 (the "Amendment") to the Registration Statement, which
          the Commission  declared effective on June 11, 1999. The Cash Offering
          expired on May 31, 2000.

          The managing  underwriter  of the Cash  Offering  was Sigma  Financial
          Corporation.  The amount of Common  Shares  registered  was  2,500,000
          shares.  The  offering  price per  Common  Share was  $10.00,  and the
          aggregate price of the offering amount registered was $25,000,000. The
          Trust  sold  702,076  Common  Shares  in  the  Cash  Offering,  for an
          aggregate offering price of $7,020,763.

          From the effective date of the Registration Statement through June 30,
          2000,  the  following  expenses  have been  incurred  for the  Trust's
          account  in  connection  with the  issuance  and  distribution  of the
          registered Common Shares:

          Underwriting discounts and commissions:       $565,557 (plus five-year
                                                        warrants to acquire
                                                        59,676 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):                     $521,008

                         Total Expenses:                $1,086,565

          Of such  expense  payments,  $471,472  were  made  directly  to  Baron
          Advisors,  Inc. The remaining  payments of $615,093 were made directly
          or indirectly to others.  The net offering proceeds to the Trust after
          deducting the foregoing total expenses were $5,934,198.


                                       11
<PAGE>

          From the effective date of the Registration Statement through June 30,
          2000,  the net  offering  proceeds  to the  Trust  were  used  for the
          following purposes:

          Improvements to buildings and facilities:              $0
          Purchase and installation of equipment:                $0
          Repayment of indebtedness:                             $0
          Working capital:                                       $466,340
          Temporary investments:                                 $0
          Investment in Baron Capital Properties, L.P. (the
          Operating Partnership)                                 $5,467,858
          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,  $5,467,858  was  directly  contributed  to the
          Operating  Partnership  in exchange  for Units of limited  partnership
          interest therein.  The Operating  Partnership conducts all of the real
          estate  operations  of the Trust  and  holds all of its real  property
          assets.  Thus,  the  operating  results  of the  Trust  are  primarily
          dependent upon the operating results of the Operating Partnership.

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
          Number        Description
          ------        -----------

            3.1         Certificate  of  Business  Trust   Registration  of  the
                        Registrant  (incorporated herein by reference to Exhibit
                        3.1 to the Form  SB-2  Registration  Statement  of Baron
                        Capital  Trust filed with the  Securities  and  Exchange
                        Commission on September 5, 1997).


                                       12
<PAGE>


            3.2         Amended  and  Restated  Declaration  of  Trust  for  the
                        Registrant  made as of  August  11,  1998  (incorporated
                        herein by reference  to Exhibit 10.2 to Amendment  No. 1
                        to the Form S-4 Registration  Statement of Baron Capital
                        Properties,  L.P. filed with the Securities and Exchange
                        Commission  on  September  22,  1998  (Registration  No.
                        333-55753)).

            3.3         Form of by-laws of the Registrant  (incorporated  herein
                        by reference  to Exhibit 3.3 to  Amendment  No. 3 to the
                        Form SB-2 Registration  Statement of Baron Capital Trust
                        filed with the Securities and Exchange Commission on May
                        15, 1998).

            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.


     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.

February 27, 2001

                                          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


                                       13