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

                                   Form 10-QSB

(Mark One)
   |X|         QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2003

   |_|        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                                  EXCHANGE ACT

        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.)

               3570 U.S. Highway 98 North, Lakeland, Florida 33809

                    (Address of principal executive offices)

                                 (863) 853-2882
                           (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 |_| No |X|

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

      See following pages.


                                       2
<PAGE>

                               BARON CAPITAL TRUST

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    (Unaudited)
                                                                      June 30,      December 31,
                                                                        2003            2002
                                                                    ------------    ------------
<S>                                                                 <C>             <C>
                                   ASSETS
Rental Properties:
   Land                                                             $  4,986,900    $  4,986,900
   Rental property held for sale (Note 4)                                     --       1,533,503
   Buildings and Improvements                                         24,451,373      24,353,960
                                                                    ------------    ------------
                                                                      29,438,273      30,874,363
   Less accumulated depreciation                                       4,743,441       4,279,172
                                                                    ------------    ------------
                                                                      24,694,832      26,595,191

Cash and cash equivalents                                                866,449       1,027,970
Restricted cash                                                          494,928         242,169
Receivables from affiliates                                            5,428,300       5,418,909
Other property and equipment                                              22,559          45,277
Other assets                                                             625,127         662,520
                                                                    ------------    ------------
                                                                    $ 32,132,195    $ 33,992,036
                                                                    ============    ============

                    LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Mortgages payable                                                $ 19,592,232    $ 19,753,903
   Mortgages payable - rental property held for sale (Note 4)                 --       1,486,736
   Accounts payable and accrued liabilities                              555,071         260,696
   Notes payable                                                         632,806         613,080
   Payables to affiliates (Note 5)                                     2,437,311       2,384,894
   Security deposits                                                     199,650         197,168
                                                                    ------------    ------------
         Total liabilities                                            23,417,070      24,696,477
                                                                    ------------    ------------

   Minority interest in consolidated partnerships                        356,601         342,405
   Interests of exchangeable partnership units                         5,916,556       6,294,526

Commitments and contingencies (Note 2)

Shareholders' Equity:
   Common shares of beneficial interest, no par value; 25,000,000
      shares authorized; 981,107 shares issued and outstanding        11,526,562      11,520,206
   Accumulated deficit                                                (8,675,993)     (8,519,071)
   Distributions                                                        (408,601)       (342,507)
                                                                    ------------    ------------
         Total shareholders' equity                                    2,441,968       2,658,628
                                                                    ------------    ------------
                                                                    $ 32,132,195    $ 33,992,036
                                                                    ============    ============
</TABLE>

                 See notes to consolidated financial statements.


                                      F-1
<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                           For the Three Months Ended         For the Six Months Ended
                                                                    June 30,                          June 30,
                                                                    --------                          --------
                                                                2003           2002              2003           2002
                                                                ----           ----              ----           ----
<S>                                                         <C>            <C>               <C>            <C>
Revenues:
   Rentals                                                  $ 1,212,116    $ 1,358,445       $ 2,476,956    $ 2,720,915
   Interest and other income                                    346,176        368,042           670,630        766,612
                                                            -----------    -----------       -----------    -----------
       Total Revenues                                         1,558,292      1,726,487         3,147,586      3,487,527
                                                            -----------    -----------       -----------    -----------

Real Estate Expenses:
   Depreciation                                                 274,997        210,235           545,794        474,063
   Amortization of loan costs                                    22,009         23,408            47,833         46,817
   Interest                                                     462,047        507,160           919,933        971,267
   Repairs and maintenance                                       85,662        226,092           176,488        450,676
   Personnel                                                    186,020        194,869           351,859        373,712
   Property taxes                                               106,972        115,962           220,172        230,742
   Property insurance                                            37,433         39,284            78,086         78,569
   Utilities                                                     89,089        105,986           188,638        209,416
   Other                                                         77,985         71,662           158,021        171,344
                                                            -----------    -----------       -----------    -----------
       Total Real Estate Expenses                             1,342,214      1,494,658         2,686,824      3,006,606
                                                            -----------    -----------       -----------    -----------

Administrative Expenses:
   Personnel, including officer's compensation                  188,468         76,965           376,472        201,555
   Professional services                                         93,059        126,208           164,108        172,778
   Other                                                        103,984        284,891           214,539        527,665
                                                            -----------    -----------       -----------    -----------
       Total Administrative Expenses                            385,511        488,064           755,119        901,998
                                                            -----------    -----------       -----------    -----------

Other (Income) Expenses:
   Provision (recovery) for loan losses                          43,785        129,501           150,457         94,379
   Loss on sale of property                                      69,526             --            69,526             --
                                                            -----------    -----------       -----------    -----------
       Total Other Expenses                                     113,311        129,501           219,983         94,379
                                                            -----------    -----------       -----------    -----------

Loss Before Other Interests                                    (282,744)      (385,736)         (514,340)      (515,456)
                                                            -----------    -----------       -----------    -----------

   Minority interests of limited partners                        (9,203)          (638)          (14,196)        (1,276)
   Interests of exchangeable partnership units                  205,245        288,185           371,614        380,625
                                                            -----------    -----------       -----------    -----------

Net Loss                                                    $   (86,702)   $   (98,189)      $  (156,922)   $  (136,107)
                                                            ===========    ===========       ===========    ===========

Loss Per Share - Basic and Diluted :
   Net Loss                                                 $     (0.09)   $     (0.10)      $     (0.16)   $     (0.14)
                                                            ===========    ===========       ===========    ===========

Weighted Average Number of Common Shares Outstanding            981,107        977,159           981,016        973,590
                                                            ===========    ===========       ===========    ===========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-2
<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         For the Six Months Ended
                                                                                 June 30,
                                                                            2003           2002
                                                                        -----------    -----------
<S>                                                                     <C>            <C>
Cash Flows from Operating Activities:
   Net Loss                                                             $  (156,922)   $  (136,107)
   Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
         Minority interests of limited partners                              14,196          1,276
         Depreciation                                                       568,956        501,979
         Provision for (recovery of) loan losses                            150,457         94,379
         Amortization of loan costs                                          47,833         46,817
         Loss on Disposal of Assets                                          69,526             --
         Interests in exchangeable partnership units                       (371,614)      (380,625)
         Changes in operating assets and liabilities:
            Increase (decrease) in operating assets:
               Other assets                                                 (20,270)      (209,775)
            Increase (decrease) in operating liabilities:
               Accounts payable and accrued liabilities                     294,375        (29,456)
               Security deposits                                             13,568         24,404
                                                                        -----------    -----------
                  Net cash provided by (used in) operating activities       610,105        (87,108)
                                                                        -----------    -----------

Cash Flows from Investing Activities:
   Proceeds from sale of rental property held for sale                      994,459             --
   Additions to rental properties                                           (97,412)            --
   Purchases (sale) of other property and equipment                            (444)         7,285
   (Advances to) collections from affiliates                               (159,848)       (66,492)
   Increase in restricted cash                                             (252,759)      (268,529)
                                                                        -----------    -----------
                  Net cash provided by (used in) investing activities       483,996       (327,736)
                                                                        -----------    -----------

Cash Flows from Financing Activities:
   Distributions paid to shareholders                                       (66,094)            --
   Payments on mortgages payable                                         (1,261,671)      (179,060)
   Proceeds from notes payable                                               19,726         42,771
   Increase in payables to affiliate, net                                    52,417         98,244
                                                                        -----------    -----------
                  Net cash used in financing activities                  (1,255,622)       (38,045)
                                                                        -----------    -----------

Net (Decrease) in Cash and Cash Equivalents                                (161,521)      (452,889)

Cash and Cash Equivalents, Beginning                                      1,027,970      1,426,375
                                                                        -----------    -----------

Cash and Cash Equivalents, Ending                                       $   866,449    $   973,486
                                                                        ===========    ===========

Supplemental Disclosure of Cash Flow Information:
   Cash paid for mortgage and other interest                            $   835,204    $   844,584
                                                                        ===========    ===========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-3
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Organization

      Baron Capital Trust (the "Trust"), a Delaware business trust, is the
      general partner of Baron Capital Properties L.P. (the "Partnership" or the
      "Operating Partnership"), a Delaware limited partnership. The Trust owns
      all of the outstanding capital stock of Barcap Realty Services Group,
      Inc., a Delaware corporation that is the Trust's Taxable REIT Subsidiary
      ("Barcap"). (The Trust, the Partnership and Barcap are referred to
      hereinafter collectively as the "Company".) Together they constitute an
      affiliated real estate company whose business purpose is to acquire, own,
      operate, manage and improve equity and debt interests in residential
      apartment properties located in the United States for long-term ownership,
      and thereby to seek to maximize current and long-term income and the value
      of its assets. As the Partnership's general partner, the Trust controls
      the activities of the Partnership. The Trust controls the operations of
      Barcap by virtue of owning all of its outstanding capital stock. The
      Partnership conducts all of the Trust's real estate operations and holds
      title to all property interests acquired. As of June 30, 2003, Barcap
      managed residential apartment properties totaling 1,499 units for third
      party owners, and shared personnel and space with the Partnership.

      The Trust also owns the largest limited partnership interest in the
      Partnership. As of June 30, 2003, the Trust owned a total of 981,107 units
      of limited partnership interest ("Units") in the Partnership (or
      approximately 29.7% of the then outstanding Units). Holders of Units
      (other than the Trust) are entitled to exchange all or a portion of their
      Units at any time and from time to time on a one-for-one basis 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.
      Since the Units held by the Trust comprise substantially all of its
      assets, the operating results of the Trust are primarily dependent upon
      the operating results of the Partnership. The Trust, which like the
      Partnership is an SEC reporting company, has elected to be taxed as a real
      estate investment trust (REIT) for federal income tax purposes.

      The Trust's Declaration authorizes it to issue up to 25,000,000 shares of
      beneficial interest, no par value per share, consisting of common shares
      and 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 Board of
      Trustees of the Trust may create and authorize from time to time in
      accordance with Delaware law and the Declaration.

      The accompanying consolidated financial statements include the accounts of
      the Trust, Barcap, and the Partnership, which controlled 20 limited
      partnerships that at June 30, 2003 had a direct or indirect equity and/or
      debt interest in 26 apartment communities.

      All significant intercompany transactions and balances have been
      eliminated in consolidation.

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


                                      F-4

<PAGE>

      As of June 30, 2003, the Partnership (through ownership of all or
      substantially all of the equity interests in single purpose limited
      partnerships) owned equity interests in 16 properties or phases of
      properties, consisting of 933 residential apartment units (comprised of
      studio, one, two and three bedroom units). In addition, the Partnership
      indirectly owned subordinated mortgage and other debt interests in 11
      properties or phases of properties consisting of 650 existing residential
      apartment units (studio and one and two bedroom units). Twenty-three
      properties or phases of properties are located in Florida and three
      properties are located in Ohio. In April 2003, the Partnership sold a
      property located in Anderson, Indiana consisting of 72 units (see NOTE 4.
      SALE OF RENTAL PROPERTY HELD FOR SALE), which had been identified and
      accounted for as an asset held for sale prior to the Partnership's
      adoption of Financial Accounting Standards Board (FASB) Statement of
      Financial Accounting Standards ("SFAS") No. 144.

      Basis of Presentation

      The unaudited consolidated balance sheet as of June 30, 2003, and the
      related unaudited consolidated statements of operations for the three and
      six months ended June 30, 2003 and 2002, and the unaudited consolidated
      statements of cash flows for the six months ended June 30, 2003 and 2002
      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, 2003 and for the periods
      presented, have been made. The results of operations for the three and six
      months ended June 30, 2003 are not necessarily indicative of the operating
      results for the full year.

      Certain information and footnote disclosures normally included in the
      consolidated financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted. It is suggested that these consolidated financial
      statements be read in conjunction with the Trust's financial statements
      and notes thereto included in its December 31, 2002 Annual Report on Form
      10-KSB.

      Certain reclassifications have been made to the three and six month
      periods ended June 30, 2002 condensed financial statements in order to
      conform to the 2003 presentation.

      The Trust previously restated its 2002 financial statements to allocate a
      portion of its net loss for the year ended December 31, 2002 to interests
      of exchangeable partnership units (see NOTE 2 to the financial statements
      included in the Trust's 2002 Annual Report filed on Form 10-KSB).
      Accordingly, $288,185 and $380,625 of the Trust's previously reported net
      loss for the three and six months ended June 30, 2002 has been
      correspondingly allocated to interests of exchangeable partnership units.
      For the Trust's 2002 quarterly reporting, loss per share was previously
      computed and presented assuming that exchangeable partnership units
      represented additional weighted average common shares outstanding.

      Receivables from Affiliates

      Receivables from affiliates are comprised mainly of second mortgages, and
      accrued interest thereon, whose timing and ultimate repayment is subject
      to the performance of the underlying property. Also included are other
      receivables comprised of notes, lines of credit and advances receivable.

      Second mortgages receivable are recorded at cost, less the related
      allowance for impairment, if any, of such notes receivable. The Trust
      accounts for such notes under the provisions of Statement of Financial
      Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
      Impairment of a Loan", as amended by SFAS No. 118, "Accounting by
      Creditors for Impairment of a Loan - Income Recognition and Disclosure".
      Management, considering current information and events regarding the
      borrowers' ability to repay their obligations, considers a note to be
      impaired when it is probable that the Trust will be unable to collect all
      amounts due according to the contractual terms of the note. When a loan is
      considered to be impaired, the amount of impairment is measured based upon
      the estimated liquidation value of the note's collateral


                                      F-5
<PAGE>

      reduced by expected selling costs and other notes secured by the same
      collateral. Loan impairment charges and subsequent recoveries are recorded
      as provision for (recovery of) loan losses in the consolidated statements
      of operations.

      Rental Properties and Depreciation

      Rental properties include residential apartment properties, which are
      stated at cost less accumulated depreciation. Ordinary repairs and
      maintenance are expensed as incurred; replacements having an estimated
      useful life of at least one year and improvements are capitalized and
      depreciated over their estimated useful lives.

      Depreciation is computed on a straight-line basis over the estimated
      useful lives of the properties as follows:

                                                  Estimated Useful Lives (Years)
                                                  ------------------------------

              Buildings                                        30
              Leasehold improvements                           10 or less
              Furniture and fixtures                            7
              Computer equipment and software                   3-5

      On January 1, 2002, the Trust adopted Statement of Financial Accounting
      Standards No. 144, "Accounting for the Impairment or Disposal of
      Long-Lived Assets" ("SFAS 144"). SFAS 144 provides guidance on the
      accounting for long-lived assets to be disposed of and broadens the scope
      of discontinued operations. There was no effect on the Trust's
      consolidated financial statements as a result of adopting SFAS 144.

      The Partnership's properties have operations and cash flows that can be
      clearly distinguished from the rest of the Partnership. Property
      dispositions which are newly initiated after January 1, 2002 will be
      reported in discontinued operations provided the operations from such
      properties are eliminated from the ongoing operations of the Partnership
      and the Partnership will not have any continuing involvement after
      disposition.

      Management evaluates its investment properties annually to assess whether
      any impairment indicators are present. If any such investment property is
      considered impaired, a loss is provided to reduce the carrying value of
      the property to its estimated fair value.

      Recent Accounting Pronouncements

      In January 2003, the Financial Accounting Standards Board (FASB) issued
      Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN
      46"). FIN 46 addresses consolidation by business enterprises of variable
      interest entities that do not effectively disperse risk among parties
      involved. FIN 46 requires an enterprise to consolidate the operations of a
      variable interest entity if the enterprise absorbs a majority of the
      variable interest entity's expected losses, receives a majority of its
      expected residual returns, or both. The Trust is evaluating the potential
      impact of implementing and adopting FIN 46.

NOTE 2. COMMITMENTS AND CONTINGENCIES

      Contracts to Purchase Additional Properties

      In 1998, former management caused the Trust to co-guarantee (together with
      Gregory K. McGrath, a founder and the former Chief Executive Officer of
      the Partnership and the Trust) a first mortgage construction loan secured
      by a residential apartment property referred to as Burgundy Hills
      Apartments under development in Florence, Kentucky (Cincinnati
      metropolitan


                                      F-6
<PAGE>

      area) (the "Burgundy Hills Property"). Assuming that the Borrower (defined
      below) completed the property development as originally planned and that
      certain other specified conditions were fulfilled, the Borrower would have
      been able to borrow up to a maximum principal amount of $19 million under
      the terms of the first mortgage loan. The Trust, as guarantor, may have a
      contingent liability for the full outstanding amount of the loan, which as
      of October 1, 2001 was $6,478,000 (the latest verified information
      available).

      Burlington Residential, Ltd., the owner of the Burgundy Hills Property
      development formerly controlled by Mr. McGrath (the "Borrower"), defaulted
      on the first mortgage loan and a separate subordinated mezzanine loan
      secured by all equity interests in the Borrower. The owner of the
      mezzanine loan filed a legal action to levy on the security interest, was
      awarded control of all equity interests in the Borrower and rental
      payments from the property, and took over day-to-day management and
      development of the property. It also later acquired the first mortgage
      loan from the original lender.

      According to its counsel, the current owner of the loans, Burgundy-Boone,
      LLC, an Illinois limited liability company, and its construction partner,
      Wallick Management Company (a construction and property management firm in
      Central Ohio), intend to complete construction of all or a portion of the
      Burgundy Hills Property development and then sell it. They appear to have
      completed construction on the last building in the first phase of the
      development and have listed the property for sale.

      Given the facts that Burgundy-Boone, LLC enforced its security interest
      and was awarded control of all equity interests in the Borrower and that
      Burgundy-Boone, LLC also owns the first mortgage loan and the mezzanine
      loan, management and legal counsel believe that it is not probable that
      the Trust's guaranty (described above) is still enforceable. However, due
      to the uncertainty as to the status of the first mortgage loan and
      mezzanine loan and as to the actions and intentions of Burgundy-Boone,
      LLC, and due to the Trust's inability to verify all information it has
      received from other parties, the Trust's exposure on the guaranty remains
      uncertain.

      Mortgages Payable

      The Trust controls the Partnership, which (through ownership of all or
      substantially all of the equity interests in single-purpose limited
      partnerships) owns equity interests in 16 residential apartment
      properties. Each property has a mortgage obligation that is secured by
      such property. The Trust believes that the Partnership's subsidiary
      partnerships are in substantial compliance with the repayment and other
      terms of the mortgage loans, although several of the loans may be deemed
      to be in technical default due to the failure of the partnerships to
      notify their lenders of a change in the managing agent of the underlying
      properties and the failure to obtain the prior approval of the lenders to
      the assignment by Mr. McGrath to the Trust of the equity interests in the
      corporate general partners of certain partnerships acquired by the
      Partnership, in which case the lenders may be deemed entitled to
      accelerate the payment of the loans. Management and its legal counsel
      believe the probability of payment acceleration because of such technical
      matters is remote.

      In addition, certain subordinated loans receivable and/or payable by
      partnerships controlled by the Partnership may be deemed to violate
      covenants in respect of related first mortgage loans. Although the Trust
      believes that steps the partnerships are taking will minimize this risk,
      its property investments could be materially affected if one or more first
      mortgage lenders determine to exercise their rights to accelerate payment
      of such loans due to such violations.

      Pending Litigation

      The Trust is a party to various legal actions resulting from its operating
      activities. These actions are routine litigation and administrative
      proceedings arising in the ordinary course of business, some of which are
      covered by liability insurance, and none of which are expected to have a


                                      F-7
<PAGE>

      material adverse effect on the consolidated financial condition or results
      of operations of the Trust taken as a whole.

      In July 2003, the Trust was dismissed from an action, Net Knowledge
      Technologies LLC d/b/a NK Soft.com Corporation v. Rapid Transmit
      Technologies, Inc. a/k/a Wakul, Inc. and Baron Capital V, Inc. f/k/a Baron
      Capital Trust, brought in the District Court of Dallas County, Texas in
      September 2002. In the action, the plaintiff, a website development
      service company, had alleged that the Trust was obligated to pay for
      services performed by the plaintiff for Wakul, Inc. (controlled by Mr.
      McGrath) to assist Wakul, Inc. in the development of an Internet system to
      be provided to the Trust and other companies engaged in the business of
      owning and managing multi-family apartment properties. The Trust was
      dismissed from the action without prejudice on the grounds that plaintiff
      failed to present evidence that the Trust was a party to the transaction,
      that the Trust is a successor to or an affiliate of Wakul, Inc. and liable
      for its obligations, or that the Trust performed any actions in or
      directed at Texas that might subject it to the jurisdiction of Texas
      courts. The plaintiff has the right to appeal the decision or to file suit
      against the Trust in Florida or any other state where it can prove minimum
      contacts with the forum state.

NOTE 3. NET LOSS PER COMMON 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 period. The computation of diluted net loss
      per share that includes dilutive common share equivalents in the weighted
      average shares outstanding has not been presented, as it is anti-dilutive
      for the three and six months ended June 30, 2003 and 2002.

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

<TABLE>
<CAPTION>
                                                                   Weighted          Loss
                                                  Net Loss      Average Shares     Per Share
                                                -------------   --------------   -------------
          For the three months ended June 30:
<S>                                             <C>                    <C>       <C>
            2003                                $     (86,702)         981,107   $       (0.09)
                                                =============    =============   =============
            2002                                $     (98,189)         977,159   $       (0.10)
                                                =============    =============   =============

          For the six months ended June 30:
            2003                                $    (156,922)         981,016   $       (0.16)
                                                =============    =============   =============
            2002                                $    (136,107)         973,590   $       (0.14)
                                                =============    =============   =============
</TABLE>

NOTE 4.  SALE OF RENTAL PROPERTY HELD FOR SALE

      On April 25, 2003, the Operating Partnership sold its equity interest in
      Steeplechase Apartments, a 72-unit residential apartment property located
      in Anderson, Indiana. The decision to sell Steeplechase was based on the
      property's lack of performance and its continuing need for cash to
      operate.

      The purchase price received from the sale of the property, net of closing
      costs and other adjustments was approximately $994,000. Various other
      assets and liabilities related to the property were also settled at
      closing. The Operating Partnership settled the remaining mortgage balance
      due of approximately $1,487,000 for $1,100,000 in cash, with the mortgage
      lender forgiving the difference.


                                      F-8
<PAGE>

      The sale resulted in a net loss of $69,526. In its 2002 Annual Report on
      Form 10-KSB, the Trust had disclosed as a subsequent event a gain on the
      sale of approximately $80,000, which did not include closing costs and
      final adjustments for property taxes and prepaid expenses. The Trust has
      determined that the previously reported gain was in error, and that the
      loss realized on the sale of Steeplechase should have been recorded as an
      impairment loss in 2002. The error resulted in an understatement of net
      loss for the Trust for 2002 by $20,642, net of interests in exchangeable
      partnership units. The Trust does not believe that this error is material
      to 2002 operations nor will it be material to 2003 operations. If the
      impairment loss had been recorded in 2002, net loss for the three and six
      months ended June 30, 2003 would have been $66,060 and $136,280
      respectively.

      The results of operations of Steeplechase for the three and six months
      ended June 30, 2003 were as follows:

                                     Three Months       Six Months
                                         Ended             Ended
                                     June 30, 2003     June 30, 2003
                                     -------------     -------------

        Rental and other income        $  19,229         $  91,300
        Expenses                          29,962           116,644
                                       ---------         ---------

        Net Loss                       $ (10,733)        $ (25,344)
                                       =========         =========

NOTE 5. SUBSEQUENT EVENTS

      Sigma Renaissance Corporation ("Sigma Renaissance"), a Michigan
      corporation controlled by Jerome S. Rydell, a member of the Board of
      Trustees of the Trust, controls certain real estate investment
      partnerships that as of June 30, 2003 were owed a total of approximately
      $2,437,000 (comprised of approximately $1,651,000 of principal and
      $786,000 of accrued unpaid interest) on second mortgage loans made to
      certain limited partnerships controlled by the Operating Partnership. Such
      amounts are included as payables to affiliates in the accompanying
      consolidated balance sheets. Affiliates of Sigma Renaissance originally
      sponsored two of the creditor partnerships. Affiliates of Gregory K.
      McGrath, a founder and the former Chief Executive Officer of the Trust and
      the Operating Partnership, originally sponsored the other creditor
      partnerships. In September 2001, Mr. McGrath caused his affiliates to
      assign all their general partnership interests in such partnerships to
      Sigma Renaissance. The limited partners in all the creditor partnerships
      retained their original limited partnership interests in such
      partnerships. The loans are currently in default, and, by letter dated
      October 14, 2003, Sigma Renaissance, on behalf of the creditor
      partnerships, notified the Trust's counsel that they were exercising their
      rights to accelerate payment of the entire principal amount of the loans
      and accrued and unpaid interest thereon. Subsequently, Sigma Renaissance,
      on behalf of the creditor partnerships, agreed to forebear from exercising
      such rights through November 2003 to allow Sigma Renaissance, the Trust,
      the Operating Partnership, the creditor partnerships and the debtor
      partnerships to attempt to negotiate terms and conditions of a mutually
      acceptable restructuring of the loans.

      Certain additional transactions involving the Trust, the Operating
      Partnership, limited partnerships controlled by the Operating Partnership,
      and affiliates of Sigma Renaissance are described in Items 9-12 of Part
      III of the Trust's 2002 Annual Report on Form 10-KSB filed with the
      Securities and Exchange Commission.

      By letter dated October 17, 2003, the State of Florida Financial Services
      Commission, Office of Financial Regulation, Bureau of Securities (the
      "Florida Commission"), requested that the Trust provide to it copies of
      certain records in its possession relating to: (i) the forensic audit
      prepared on behalf of the Trust as to certain transactions involving
      Gregory K. McGrath and Robert S.


                                      F-9
<PAGE>

      Geiger, the founders and former executive officers of the Trust and the
      Operating Partnership, during their tenure as management; (ii) expense
      accounts and other accounts controlled by Mr. McGrath and Mr. Geiger
      during their tenure as management; (iii) minutes of the Audit Committee of
      the Trust's Board of Trustees; (iv) the due diligence analysis conducted
      by Sigma Financial Corporation ("Sigma") and Mr. Rydell, a principal of
      Sigma, in connection with Sigma's underwriting of the Trust and the
      limited partnerships acquired by the Operating Partnership in connection
      with its exchange offering completed in April 2000; and (v) communications
      to, from and between Mr. McGrath and Mr. Rydell concerning the Trust or
      the Operating Partnership. The Trust intends to cooperate fully with the
      Florida Commission's document request.


                                      F-10
<PAGE>

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

      The following discussion should be read in conjunction with the
      Consolidated Financial Statements of Baron Capital Trust (the "Registrant"
      or the "Trust ") and 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 and
      the Operating Partnership'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 the
      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 apply 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. If the Trust does update one or more forward-looking
      statements, investors and others should not conclude that the Trust will
      make additional updates with respect thereto or with respect to other
      forward-looking statements.

      Critical Accounting Policies and Estimates

      The preparation of the Trust's financial statements requires that
      management make certain estimates that impact the balance of assets and
      liabilities at a financial statement date and the reported amount of
      income and expenses during a financial reporting period. These accounting
      estimates are based upon management's judgments and are considered to be
      critical because of their significance to the financial statements and the
      possibility that future events may differ from those judgments, or that
      the use of different assumptions could result in materially different
      estimates. Management reviews these estimates on a periodic basis to
      ensure reasonableness. However, the amounts ultimately realized could
      differ from such estimates.


                                       3
<PAGE>

      The Trust's long-lived assets, primarily interests in real estate held for
      investment, are carried at cost unless circumstances indicate that the
      carrying value of the assets may not be recoverable. Management reviews
      long-lived assets for impairment whenever events or changes in
      circumstances indicate such an evaluation is warranted. The review
      involves a number of assumptions and estimates used in determining whether
      impairment exists. Depending on the asset, management uses varying methods
      such as: (i) estimating future cash flows, (ii) determining resale values
      by market, or (iii) applying a capitalization rate to net operating income
      using prevailing rates in a given market. These methods of determining
      fair value can fluctuate up or down significantly as a result of a number
      of factors including changes in the general economy of those markets in
      which the Operating Partnership operates and demand for residential
      apartment unit rentals. If management determines that impairment exists
      due to the inability to recover an asset's carrying value, a provision for
      loss is recorded to the extent that the carrying value exceeds estimated
      fair value. Management determined that no adjustments were required to
      carrying values during the three months ended June 30, 2003.

      Operating Results

      Background Information

      Baron Capital Trust (the "Registrant" or the "Trust"), a Delaware business
      trust, is the general partner of Baron Capital Properties, L.P. (the
      "Operating Partnership" or the "Partnership"), a Delaware limited
      partnership. The Trust and the Operating Partnership began operations in
      1998. (The Trust, the Operating Partnership and Barcap Realty Services
      Group, Inc., a Delaware corporation that is the Trust's Taxable REIT
      Subsidiary ("Barcap"), are referred to hereinafter collectively as the
      "Company".) Together they constitute an affiliated real estate company
      whose business purpose is to acquire, own, operate, manage and improve
      equity and debt interests in residential apartment properties located in
      the United States for long-term ownership, and thereby to seek to maximize
      current and long-term income and the value of its assets. As the Operating
      Partnership's general partner, the Trust controls the activities of the
      Operating Partnership. The Operating Partnership conducts all of the
      Trust's real estate operations and holds title to all property interests
      acquired. The Trust controls Barcap by virtue of owning all of its
      outstanding capital stock. As of October 1, 2003, Barcap manages
      residential apartment properties totaling 1,577 units for third party
      owners, and shares personnel and space with the Operating Partnership.

      The Trust also owns the largest limited partnership interest in the
      Operating Partnership. As of October 1, 2003, the Trust owned 983,327
      units of limited partnership interest ("Units") in the Operating
      Partnership (or approximately 29.8% of the then outstanding Units).
      Limited partners of the Operating Partnership (other than the Trust) hold
      Units that are convertible by them into common shares of beneficial
      interest in the Trust ("Trust Shares") on a one-for-one basis, subject to
      certain limitations. Since the Units held by the Trust comprise
      substantially all of its assets, the operating results of the Trust are


                                       4
<PAGE>

      primarily dependent upon the operating results of the Operating
      Partnership. The Trust, which like the Operating Partnership is an SEC
      reporting company, has elected to be taxed as a real estate investment
      trust (REIT) for federal income tax purposes.

      As of June 30, 2003, the Operating Partnership (through ownership of all
      or substantially all of the equity interests in single purpose limited
      partnerships) owned equity interests in 16 properties or phases of
      properties, consisting of 933 residential apartment units (comprised of
      studio, one, two and three bedroom units). In addition, the Operating
      Partnership indirectly owned subordinated mortgage and other debt
      interests in 11 properties or phases of properties consisting of 650
      existing residential apartment units (studio and one and two bedroom
      units). Twenty-three properties or phases of properties are located in
      Florida and three properties are located in Ohio. In April 2003, the
      Operating Partnership sold a property located in Indiana consisting of 72
      units (see NOTE 4. SALE OF RENTAL PROPERTY HELD FOR SALE in the financial
      statements accompanying this Report). This property had been identified
      and accounted for as an asset held for sale prior to the adoption of
      Statement of Financial Accounting Standards (SFAS) No. 144.

      Initiatives of New Management

      In the second half of 2000, the Board of Trustees of the Trust replaced
      former management. Since that time, the new management team appointed by
      the Board of Trustees has reviewed operations and implemented several
      initiatives to improve the operating results of the Operating
      Partnership's properties.

      For the six months ended June 30, 2003, the Company has achieved positive
      operating cash flow, but has not met the financial targets of its 12-month
      operating plan proposed by management and adopted by the Board of
      Trustees. The shortfall in financial results continues to be driven
      primarily by weak results in Florida tourism and service sectors, which
      are the Company's principal markets. Although the situation has shown
      modest improvement since the first quarter, the Company does not envision
      a recovery through the balance of this year.

      Management has continued to implement several cost saving measures,
      following the consolidation of its principal offices to Lakeland, Florida
      and the sale of certain of its properties, including initiation of
      refinancing other properties and continued reduction of overhead.

      As part of the Company's ongoing operations, management identified three
      properties whose performance negatively impacted operating results and
      recommended the immediate disposition of these properties. Accordingly, in
      April 2001, the Operating Partnership sold its interests in the Glen Lake
      property, a 144-unit residential apartment property located in St.
      Petersburg, Florida; in September 2002, it sold its interests in the
      Stadium Club property, a 223-unit student apartment property located in
      Statesboro, Georgia; and in April 2003, it sold its interests in the
      Steeplechase Apartments property, a 72-unit residential apartment property
      located in Anderson, Indiana. The Operating Partnership sold the
      properties because the revenue from their operations did not cover


                                       5
<PAGE>

      operating expenses and they required substantial and frequent cash
      infusions. (See the Operating Partnership's 2002 Annual Report on Form
      10-KSB previously filed with the Securities and Exchange Commission and
      NOTE 4. SALE OF RENTAL PROPERTY HELD FOR SALE in the financial statements
      accompanying this Report.)

      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 the possible listing of Trust Shares on a recognized
      securities exchange. Additional size is also desirable to give the Trust
      and the Operating Partnership the operating margin necessary to support
      the professional management team necessary for ensuring an optimum level
      of performance and to cover the Company's expenses associated with being a
      public company, including legal, accounting and filing fees.

      The Operating Partnership has implemented the billing of tenants for their
      water usage at all locations where management believes such billing is
      possible. Barcap, the Trust's Taxable REIT Subsidiary, which reimburses
      the Operating Partnership for some of their shared administrative
      expenses, also has implemented an administrative fee on all third party
      property owners benefiting from the water billing program. Management
      anticipates completing an overhaul of the administrative billing software
      shortly, which also could yield modest cost reductions.

      As a result of the proven success of the Company's field management team
      and the Company's investment in residential apartment-oriented accounting
      software, Barcap has been successful in attracting and retaining a variety
      of fee management business from six outside property owners that
      controlled 1,499 apartment units at the end of the second quarter of 2003,
      and the growth of the outside management business remains an objective for
      the rest of 2003.

      During the second quarter of 2003, Barcap added two properties consisting
      of 128 apartment units, and has added one property consisting of 78 units
      so far in the third quarter. One fee management arrangement with a
      third-party property consisting of 96 units was lost during the second
      quarter of 2003, due to the foreclosure on the owner of the property.

      In October 2002, the Trustees of the Trust, together with management,
      adopted a strategy for the year ahead that includes:

      o     sustaining the level of financial performance achieved in 2002,

      o     building a climate of trust with Trust shareholders and Operating
            Partnership unit holders, and

      o     evaluating the current asset base to determine opportunities for
            additional value through property modernization.

      The Company's Chief Executive Officer, under the direction of the Board of
      Trustees, also has held discussions with other companies in the real
      estate business concerning opportunities to consolidate operations,
      improve profitability, and take advantage of the


                                       6
<PAGE>

      Trust's public company status. These discussions are exploratory in nature
      and are at a preliminary stage.

      Management believes that the actions presently being taken provide the
      long-term opportunity to improve the Company's profitability and
      liquidity. Consistent with the philosophy of the Company's Chief Executive
      Officer, a series of informal communications to registered Trust
      shareholders and Operating Partnership unit holders was begun in late
      2000. The favorable response generated by these communications has
      resulted in management organizing a regular quarterly informal
      communication beginning in the second quarter of 2002 that has continued
      to the present.

      Operations for the Three Months Ended June 30, 2003 Compared to the Three
      Months Ended June 30, 2002

      Rental revenues decreased by $146,329 from $1,358,445 for the three months
      ended June 30, 2002 to $1,212,116 for the three months ended June 30,
      2003. The decrease in rental revenues was the result of the sale of the
      Stadium Club property in September 2002, the sale of the Steeplechase
      property in April 2003 and the general downturn in the U.S. economy, which
      has translated into a softer apartment rental market. Interest and other
      income decreased by $21,866 from $368,042 for the three months ended June
      30, 2002 to $346,176 for the three months ended June 30, 2003. The
      decrease was primarily due to a substantial decrease in interest rates.
      Real Estate Expenses for the properties owned by the Partnership decreased
      by $152,444 from $1,494,658 for the three months ended June 30, 2002 to
      $1,342,214 for the three months ended June 30, 2003. The reduction in Real
      Estate Expenses was principally due to reduced repairs and maintenance
      following completion of the repairs at the Dolphin Cove (formerly named
      Riverwalk), Crystal Court and Laurel Oaks properties in the second quarter
      of 2002 and to elimination of the Stadium Club and Steeplechase property
      expenses upon the sales of the properties, partially offset by an increase
      in depreciation expense in the three months ended June 30, 2003.
      Administrative Expenses decreased by $102,553 from $488,064 for the three
      months ended June 30, 2002 to $385,511 for the three months ended June 30,
      2003, primarily due to reduced expenditures for professional services and
      other administrative expenses in the three months ended June 30, 2003.
      Other Expenses for the three months ended June 30, 2003 decreased by
      $16,190, from $129,501 for the three months ended June 30, 2002 to
      $113,311 for the three months ended June 30, 2003. The decrease in expense
      is the result of a $85,716 decrease in the provision for loan losses on
      mortgage notes receivable, partially offset by the loss on sale of the
      Steeplechase property. The Trust's Net Loss for the three months ended
      June 30, 2003 was $86,702 compared to a Net Loss of $98,189 for the three
      months ended June 30, 2002. The difference of $11,487 is primarily
      attributable to lower Real Estate and Administrative Expenses, partially
      offset by lower revenues in the three months ended June 30, 2003.


                                        7
<PAGE>

      Operations for the Six Months Ended June 30, 2003 Compared to the Six
      Months Ended June 30, 2002

      Rental revenues decreased by $243,959 from $2,720,915 for the six months
      ended June 30, 2002 to $2,476,956 for the six months ended June 30, 2003.
      The decrease in rental revenues was the result of the sale of the Stadium
      Club property in September 2002, the sale of the Steeplechase property in
      April 2003 and the general downturn in the U.S. economy, which has
      translated into a softer apartment rental market. Interest and other
      income decreased by $95,982 from $766,612 for the six months ended June
      30, 2002 to $670,630 for the six months ended June 30, 2003. The decrease
      was primarily due to a substantial decrease in interest rates. Real Estate
      Expenses for the properties owned by the Partnership decreased by $319,782
      from $3,006,606 for the six months ended June 30, 2002 to $2,686,824 for
      the six months ended June 30, 2003. The reduction in Real Estate Expenses
      was principally due to reduced repairs and maintenance following
      completion of the repairs at the Dolphin Cove (formerly named Riverwalk),
      Crystal Court and Laurel Oaks properties in the second quarter of 2002 and
      to elimination of the Stadium Club and Steeplechase property expenses upon
      the sale of the properties, partially offset by an increase in
      depreciation expense in the six months ended June 30, 2003. Administrative
      Expenses decreased by $146,879 from $901,998 for the six months ended June
      30, 2002 to $755,119 for the six months ended June 30, 2003, primarily due
      to reduced expenditures for professional services and other administrative
      expenses in the six months ended June 30, 2003. Other Expenses for the six
      months ended June 30, 2003 increased by $125,604, from $94,379 for the six
      months ended June 30, 2002 to $219,983 for the six months ended June 30,
      2003. The increase in expense is the result of an increase in the
      provision for loan losses on mortgage notes receivable and the loss on
      sale of the Steeplechase property compared to the lower loan losses in the
      prior year's six-month period. The Trust's Net Loss for the six months
      ended June 30, 2003 was $156,922 compared to a Net Loss of $136,107 for
      the six months ended June 30, 2002. The difference of $20,815 is primarily
      attributable to lower revenues and to the increase in Other Expenses,
      partially offset by the reduction of Real Estate Expenses and
      Administrative Expenses in the six months ended June 30, 2003.

      Liquidity and Capital Resources

      Net Cash Provided by (Used in) Operating Activities increased by $697,213
      from $87,108 cash used in the six months ended June 30, 2002 to $610,105
      cash provided in the six months ended June 30, 2003. The increase in Net
      Cash Provided by Operating Activities was principally due to the increase
      in accounts payable and accrued liabilities and a smaller increase in
      other assets. Net Cash Provided by (Used In) Investing Activities
      increased $811,732 from $327,236 cash used in the six months ended June
      30, 2002 to $483,996 cash provided in the six months ended June 30, 2003.
      The increase was principally due to the sale of the Steeplechase property,
      partially offset by improvements to rental apartments of $97,412 compared
      to no improvements to rental apartments in the prior year's six-month
      period, and an increase of $93,356 in advances to affiliates in the six
      months ended June 30, 2003. Net Cash Used in Financing Activities
      increased by $1,217,577 from $38,045 cash used in the six months ended
      June 30, 2002 to


                                       8
<PAGE>

      $1,255,622 cash used in the six months ended June 30, 2003. The increase
      was primarily due to settlement of the mortgage on the Steeplechase
      property and the distribution to shareholders of the Trust and general and
      limited partners of the Operating Partnership paid during the three months
      ended June 30, 2003.

      Management believes that the Trust and the Operating Partnership have the
      ability to satisfy their cash requirements for the existing properties for
      the foreseeable future. However, management also believes that it will be
      necessary to raise additional capital during the next 12 months to provide
      funds for acquisitions that will be needed to achieve an efficient size,
      which will meet management's revenue and cash flow goals. The Operating
      Partnership is presently negotiating the refinancing of first mortgages on
      several properties for which prepayment penalties and other restrictions
      have recently expired or will soon expire. These refinancings will
      significantly reduce interest rates and debt service costs for the
      affected properties, but are not expected to provide any additional cash
      proceeds from the loans to the limited partnerships owned by the Operating
      Partnership. Refinancing of two properties is expected to close during the
      fourth quarter of 2003. Refinancing of an additional four properties is
      expected to close by the end of the first quarter of 2004.

      See the first paragraph under Note 5. SUBSEQUENT EVENTS in the financial
      statements accompanying this Report for a description of certain
      non-performing second mortgage loans payable by limited partnerships
      controlled by the Operating Partnership to limited partnerships affiliated
      with Jerome S. Rydell, a Trustee of the Trust.

      Other Developments

      Contingent Liabilities

      In 1998, former management caused the Trust to co-guarantee (together with
      Gregory K. McGrath, a founder and the former Chief Executive Officer of
      the Partnership and the Trust) a first mortgage construction loan secured
      by a residential apartment property referred to as Burgundy Hills
      Apartments under development in Florence, Kentucky (Cincinnati
      metropolitan area). The Trust, as guarantor, may have a contingent
      liability for the full outstanding amount of the loan, which as of October
      1, 2001 was $6,478,000 (the latest verified information available).

      Burlington Residential, Ltd., the owner of the Burgundy Hills Apartments
      project (the "Borrower"), defaulted on the first mortgage loan and a
      separate subordinated mezzanine loan secured by all equity interests in
      the Borrower. The owner of the mezzanine loan filed a legal action to levy
      on the security interest, was awarded control of all equity interests in
      the Borrower and rental payments from the property, and took over
      day-to-day management and development of the property. It also later
      acquired the first mortgage loan from the original lender.


                                       9
<PAGE>

      According to its counsel, the current owner of the loans, Burgundy-Boone,
      LLC, an Illinois limited liability company, and its construction partner,
      Wallick Management Company (a construction and property management firm in
      Central Ohio), intend to complete construction of the Burgundy Hills
      Apartments project and then sell it. They appear to have completed
      construction on the last building in the first phase of the development
      and have listed the property for sale.

      Given the facts that Burgundy-Boone, LLC enforced its security interest
      and was awarded control of all equity interests in the Borrower and that
      Burgundy-Boone, LLC also owns the first mortgage loan and the mezzanine
      loan, management and legal counsel believe that it is not probable that
      the Trust's guaranty (described above) is still enforceable. However, due
      to the uncertainty as to the status of the first mortgage loan and
      mezzanine loan and as to the actions and intentions of Burgundy-Boone,
      LLC, and due to the Trust's inability to verify all information it has
      received from other parties, the Trust's exposure on the guaranty remains
      uncertain.

      Unresolved Issues with Founders and Former Management

      In February 2002, the Board of Trustees of the Trust received the
      preliminary findings of a report prepared by an independent auditing firm
      in which the firm opined that certain transactions of the Trust and the
      Operating Partnership (including the Alexandria and Dolphin Cove (formerly
      named Riverwalk) property investments) entered into by former management
      involved improper conduct. The Board has used the preliminary findings for
      discussions with former management of the Trust concerning the
      transactions and to investigate the rights and obligations of the Trust
      and the Operating Partnership in connection therewith.

      In the second and third quarter of 2002, the Trust and the Operating
      Partnership entered into separate settlement agreements with Gregory K.
      McGrath and Robert S. Geiger, the founders and former Chief Executive
      Officer and Chief Operating Officer of the Trust and the Operating
      Partnership, respectively. Pursuant to the agreements, each of them
      forfeited all 378,873 Operating Partnership Units he acquired and
      deposited into escrow in connection with the formation of the Trust and
      the Operating Partnership, in exchange for a limited release from
      liability in connection with the acquisition and operation of the
      Alexandria and Dolphin Cove properties (and, in the case of Mr. McGrath,
      from an additional immaterial liability). The terms of the settlement
      agreements are subject to confidentiality agreements, but management
      believes the terms to be of substantial benefit to the Company. As a
      result of the agreements, neither Mr. McGrath nor Mr. Geiger has any
      further interest in either the Trust or the Operating Partnership. In
      addition, because the settlements reduced the number of Units outstanding
      by a total of 757,746 Units, current holders of Units realized favorable
      accretion of net book value per unit on a pro rata basis. In connection
      with the settlements, the Operating Partnership reversed $243,339 of
      accrued liabilities payable to affiliates of Mr. McGrath which were
      forgiven by the terms of the settlement agreements.

      In light of the foregoing, the Company has reviewed its accounting records
      to ascertain whether certain expenses charged by Mr. McGrath and Mr.
      Geiger to the Company


                                       10
<PAGE>

      during their tenure were incurred by them other than in connection with
      the performance of their duties to the Company and thus improperly
      reimbursed. Management has determined that some expenses were improperly
      reimbursed and negotiated a confidential settlement agreement with Wakul,
      Inc. in October 2002 for repayment for payroll and benefits shared between
      the Company and McGrath-controlled entities. To date, all agreed payments
      have been made. The Company continues to review other transactions to
      determine whether former management was involved in any other improper
      conduct. If the Company determines that any expenses were improperly
      reimbursed or that former management involved the Company in additional
      improper conduct, the Company will seek repayment or restitution from the
      respective party.

      See the third paragraph under NOTE 5. SUBSEQUENT EVENTS in the financial
      statements accompanying this Report for a description of the recent
      request by the State of Florida Financial Services Commission, Office of
      Financial Regulation, Bureau of Securities, for copies of certain records
      in the Company's possession relating to prior management.

      Economic Concerns

      Four developments over the past two years are believed to have had a
      material impact on the performance of the Trust and the Operating
      Partnership.

      First and foremost is the substantial decrease in home mortgage interest
      rates, which has made home buying more affordable for a larger segment of
      the population, including many of the Company's traditional renters. New
      renters, especially in the Florida market, which has experienced a
      preponderance of new immigrants over the past 10 years, have a tendency to
      be more transient and less creditworthy. Occupancies and collections have
      been impacted for the last 21 months, and although they have improved
      recently, management does not anticipate any significant further
      improvement in the near term.

      The second development is the increasing lack of confidence of investors
      in the public securities markets due to recent well-publicized events at
      Enron Corp., Arthur Andersen, Adelphia Communications, Global Crossing,
      Tyco, and WorldCom Inc. This development will continue to hamper, for the
      foreseeable future, companies' access to the public markets and financial
      institutions for capital, which the Company seeks to enable it to grow.

      The third development is the increased aging of the Company's asset base,
      which has the potential to become functionally obsolete when compared to
      newer amenity-rich competitive apartment properties.

      The fourth development is increasing competition in the housing markets
      where the Company has traditionally enjoyed strong market share,
      particularly in the Company's operations in the metropolitan Florida
      markets. The greater competitive forces are due to the general
      overbuilding of certain tax-financed competitive apartment properties and
      strong sales of single-family homes driven by current low interest rates
      that have reached


                                       11
<PAGE>

      45-year lows and are expected to remain at relatively low levels for the
      foreseeable future.

      An overriding concern arises out of the horrible events of September 11,
      2001 and the related military actions in Afghanistan and Iraq. While
      management continues to believe it is still too early to understand how
      deeply these events will impact the confidence of Americans and their way
      of life, they are likely to result in a more cash conscientious consumer,
      which could result in downward pressure on rental rates and less tourism
      in Florida, which will reduce the number of potential customers for the
      Company's properties in Florida.

Item 3. Controls and Procedures

      The Trust maintains disclosure controls and procedures that are designed
      to ensure: (1) that information required to be disclosed by it in the
      reports it files or submits under the Securities Exchange Act of 1934, as
      amended (the "Exchange Act"), is recorded, processed, summarized, and
      reported within the time periods specified in the Securities and Exchange
      Commission's ("SEC") rules and regulations, and (2) that this information
      is accumulated and communicated to the Trust's management, including its
      Chief Executive Officer and Vice President-Accounting (principal
      accounting and financial officer), as appropriate, to allow timely
      decisions regarding required disclosure. In designing and evaluating the
      disclosure controls and procedures, management recognizes that any
      controls and procedures, no matter how well designed and operated, can
      provide only reasonable assurance of achieving the desired control
      objectives, and management necessarily was required to apply its judgment
      in evaluating the cost/benefit relationship of possible controls and
      procedures.

      Under the supervision and review of the Trust's Chief Executive Officer
      and Vice President-Accounting, the Trust conducted an evaluation of the
      effectiveness of its disclosure controls and procedures as of June 30,
      2003. Based on that evaluation, its Chief Executive Officer and Vice
      President-Accounting concluded that its disclosure controls and procedures
      are effective in alerting them in a timely manner to material information
      regarding the Trust (including its consolidated subsidiaries) that
      is required to be included in its periodic reports to the SEC.

      In addition, there have been no significant changes in the Trust's
      disclosure controls and procedures that could significantly affect those
      controls since its most recent evaluation. Also, there has been no
      significant change in the Trust's internal control over financial
      reporting that has materially affected, or is reasonably likely to
      materially affect, the Trust's internal control over financial reporting
      other than implementation of additional controls to segregate
      responsibilities related to expenditures of cash, following the departure
      of the Company's former Chief Financial Officer. These additional controls
      were implemented subsequent to June 30, 2003. The Trust cannot assure,
      however, that its system of disclosure controls and procedures and
      internal control over financial reporting will always achieve its stated
      goals under all future conditions, no matter how remote.


                                       12
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      The Trust is a party to various legal actions resulting from its operating
      activities. These actions are routine litigation and administrative
      proceedings arising in the ordinary course of business, some of which are
      covered by liability insurance, and none of which are expected to have a
      material adverse effect on the consolidated financial condition or results
      of operations of the Trust taken as a whole.

      See "NOTE 2. COMMITMENTS AND CONTINGENCIES - Pending Litigation" in the
      financial statements filed herewith (see ITEM 1 - FINANCIAL STATEMENTS)
      for a discussion of the Trust's dismissal from a legal action in July
      2003.

      See NOTE 5. SUBSEQUENT EVENTS in financial statements accompanying this
      Report for a description of: (1) certain non-performing second mortgage
      loans payable by limited partnerships controlled by the Operating
      Partnership to limited partnerships affiliated with Jerome S. Rydell, a
      Trustee of the Trust, and (2) the recent request by the State of Florida
      Financial Services Commission, Office of Financial Regulation, Bureau of
      Securities, for copies of certain records in the Company's possession
      relating to prior management.

Item 2. Changes in Securities

      Not Applicable.

Item 3. Defaults upon Senior Securities

      There were no defaults upon senior securities of the Trust in the first or
      second quarter of 2003 that remain uncured as of June 30, 2003.

      See "Other Developments" under Item 2 of Part I of this Report for a
      discussion of a contingent liability of the Trust relating to Burgundy
      Hills Apartments.

      See NOTE 5. SUBSEQUENT EVENTS in the financial statements accompanying the
      Report for a description of certain non-performing second mortgage loans
      payable by limited partnerships controlled by the Operating Partnership to
      limited partnerships affiliated with Jerome S. Rydell, a Trustee of the
      Trust.

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

      None.

Item 5. Other Information

      None.


                                       13
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

      (a)

      Exhibit      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 the Registrant filed with the
                   Securities and Exchange Commission on September 5, 1997).

       3.2*        Amended and Restated Declaration of Trust of the Registrant
                   made as of April 25, 2002 (incorporated herein by reference
                   to Exhibit 3.1 to the Current Report on Form 8-K of the
                   Registrant filed with the Securities and Exchange Commission
                   on May 6, 2002).

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

        20*        Annual Report under Section 13 or 15 (d) of the Securities
                   Exchange Act of 1934 for the fiscal year ended December 31,
                   2002 on Form 10-KSB of the Registrant (incorporated herein by
                   reference to such Annual Report filed with the Securities and
                   Exchange Commission on May 29, 2003 (Registration No.
                   333-35063)).

       31.1        Rule 13a-14(a)/15d-14(a) Certification.

       31.2        Rule 13a-14(a)/15d-14(a) Certification.

       32.1        Certification pursuant to Rule 13a-14(b)/15d-14(b) and 18
                   U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002.

       32.2        Certification pursuant to Rule 13a-14(b)/15d-14(b) and 18
                   U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002.

----------

*     Previously filed.

(b)   Reports on Form 8-K:


                                       14
<PAGE>

The Trust filed a Form 8-K with the Securities and Exchange Commission ("SEC")
on April 18, 2003, reporting that the Trust was unable to file its Annual Report
on Form 10-KSB for the year ended December 31, 2002 by April 15, 2003, due to:
(1) restatements to the prior years' financial statements concerning the
elimination of certain inter-company indebtedness owed to the Operating
Partnership by the Trust, and reclassification in such financial statements of
interests in consolidated partnerships as minority interests, rather than as
part of the Trust's equity and (2) the resignation in March 2003 of Mark L.
Wilson, who had served as the Trust's Chief Financial Officer since November
1998.


                                       15
<PAGE>

                                   SIGNATURES

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.

November 12, 2003

                                         BARON CAPITAL TRUST


                                         By:  /s/  Robert L. Astorino
                                            -------------------------------
                                            Robert L. Astorino
                                            Chief Executive Officer


                                         By:  /s/  J. Stephen Miller
                                            -------------------------------
                                            J. Stephen Miller
                                            Vice President-Accounting


                                       16