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

                                   FORM 10-KSB

      (MARK ONE)

      |X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
            ACT OF 1934
            FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

      |_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934
            FOR THE TRANSITION PERIOD FROM ______ TO ______

                        COMMISSION FILE NUMBER 333-35063

                               BARON CAPITAL TRUST
           (Name of Small Business Issuer as Specified in its Charter)

                    Delaware                           31-1574856
        (State or Other Jurisdiction of             (I.R.S. Employer
         Incorporation or Organization)            Identification No.)

                           3570 U.S. HIGHWAY 98 NORTH
                             LAKELAND, FLORIDA 33809
           (Address of Principal Executive Offices including Zip Code)

                                 (863) 853-2882
                (Issuer's Telephone Number, including Area Code)

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: NONE

Check whether the Issuer: (1) has 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 |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

The Issuer's revenues for its most recent fiscal year were $6,514,362

As of March 1, 2003, the aggregate market value of voting and non-voting common
shares of beneficial interest ("Common Shares") in the Registrant held by
non-affiliates (based on total Common Shares outstanding reduced by the number
of Common Shares held by trustees, officers, and other affiliates) of the
Registrant was $2,394,710. Since the Registrant's Common Shares are not actively
traded and are not traded on an exchange, for purposes of this Report only, the
883,657

<PAGE>

Common Shares held by non-affiliates as of March 1, 2003 have been valued based
on their $2.71 per share book value determined as of December 31, 2002.

      ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

      Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.

Yes______   No_______


                                       2
<PAGE>

                               BARON CAPITAL TRUST

                            FORM 10-KSB ANNUAL REPORT

                       FISCAL YEAR ENDED DECEMBER 31, 2002

                                                                        PAGE
PART I:
Item 1  Description of Business ......................................    4
Item 2  Description of Properties ....................................    6
Item 3  Legal Proceedings ............................................   35
Item 4  Submission of Matters to a Vote of
        Shareholders .................................................   35

PART II:
Item 5  Market for Common Equity and Related Shareholder Matters .....   35
Item 6  Management's Discussion and Analysis or Plan of Operation ....   36
Item 7  Financial Statements .........................................   42
Item 8  Changes In and Disagreements with Accountants on
        Accounting and Financial Disclosure ..........................   43

PART III:
Item 9  Trustees, Executive Officers, Promoters and Control Persons'
        Compliance with Section 16(a) of the Exchange Act ............   43
Item 10 Executive Compensation .......................................   45
Item 11 Security Ownership of Certain Beneficial Owners and Management   46
Item 12 Certain Relationships and Related Transactions ...............   47
Item 13 Exhibits and Reports on Form 8-K .............................   49
Item 14 Controls and Procedures ......................................   50


                                       3
<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

      Baron Capital Trust (the "Trust"), a Delaware business trust, and its
affiliate, Baron Capital Properties, L.P. (the "Operating Partnership"), a
Delaware limited partnership, began operations in 1998. (The Trust, the
Operating Partnership, and BARCAP Realty Services Group, Inc., 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 its 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. Barcap manages residential apartment properties totaling
1,263 units for third party owners, and shares personnel and space with the
Operating Partnership.

      Senior management of the Trust has discretion in day-to-day management and
control of the affairs of the Trust and the Operating Partnership, based on: (i)
general supervision and review by the Independent Trustees and the other member
of the Board of Trustees of the Trust and (ii) prior approval authority of a
majority of the Board and/or of a majority of the Independent Trustees in
respect of certain actions of the Trust and the Operating Partnership. The
Declaration of Trust of the Trust requires that a majority of the Board of
Trustees of the Trust be comprised of Independent Trustees. Two of the three
current members of the Board of Trustees are Independent Trustees.

      The Trust also owns the largest limited partnership interest in the
Operating Partnership. As of March 1, 2003, the Trust owned 981,107 units of
limited partnership interest ("Units") in the Operating Partnership (or
approximately 29.7% of the then outstanding Units). Such Units represent Units
acquired by the Trust from the Operating Partnership with the net proceeds from
the Trust's Cash Offering (described below) and Units assigned to the Trust by
holders of Units who have elected to convert their Units into common shares of
beneficial interest ("Trust Shares") in the Trust since the completion of the
Operating Partnership's Exchange Offering (described below). 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 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
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 the date of this Report, 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 in which the Operating Partnership owned an interest as of the date
of this Report are located in Florida and three are located in Ohio.

      The Operating Partnership acquired equity interests in four of its
properties (the "Acquired Properties") with the net cash proceeds from the
Trust's sale of 702,076 Trust Shares in a registered public offering (the "Cash
Offering") completed in May 2000. The Trust contributed the cash proceeds from
the Cash Offering to the Operating Partnership in exchange for an equivalent
number of Units (702,076).

      In April 2000, the Operating Partnership acquired its remaining equity and
debt property interests in its registered exchange offering (the "Exchange
Offering"). In the Exchange Offering, the Operating Partnership issued 2,449,492
registered Units in exchange for substantially all outstanding units of limited
partnership interest owned by individual limited partners in 23 limited
partnerships (the "Exchange Partnerships"). The limited partnership interests
not acquired by the Operating Partnership in the Exchange Offering were retained
by limited partners in certain Exchange Partnerships who elected not to accept
the offering or failed to respond to the offering. The Exchange Partnerships
directly or indirectly owned separate equity and/or debt interests in one or
more of 25 residential apartment properties and one condominium apartment
property


                                       4
<PAGE>

(collectively, the "Exchange Properties"). Prior to the completion of the
Exchange Offering, the Exchange Partnerships were managed by corporate general
partners controlled by Gregory K. McGrath, a founder and former Chief Executive
Officer of the Trust and the Operating Partnership and a former Unitholder in
the Operating Partnership. Mr. McGrath is no longer involved with the Company in
any capacity and does not own any equity or other interests in the Trust, the
Operating Partnership, Barcap, the Exchange Partnerships, or any of their
respective property interests or other assets.

      The Acquired Properties and the Exchange Properties in which the Operating
Partnership owns an interest are described in further detail under "ITEM 2 -
DESCRIPTION OF PROPERTIES" below.

      Since the completion of the Exchange Offering, the Operating Partnership
has sold its equity interests in three properties (Glen Lakes Apartments, a
144-unit residential apartment property located in St. Petersburg, Florida;
Stadium Club Apartments, a 223-unit student apartment property located in
Statesboro, Georgia; and Steeplechase Apartments, a 72-unit residential
apartment property located in Anderson, Indiana). The properties were sold
because the revenue from their operations did not cover operating expenses and
they required substantial and frequent cash infusions. In addition, in 2000 the
Operating Partnership wrote off its $1,285,000 investment in a 40% equity
interest in Alexandria Development, L.P., the owner of the Alexandria Property,
a residential apartment property under development in Alexandria, Kentucky, due
to defaults on indebtedness, recurring losses, contingent liabilities, a
partners' deficiency, and an updated appraisal that valued the property at an
amount less than related liabilities. In the second quarter of 2002, the first
mortgage lender on the Alexandria Property foreclosed on the property and sold
it to an unrelated third party.

      In April 2002, the Company moved its executive offices to 3570 U.S.
Highway 98 North, Lakeland, Florida 33809. The main telephone number at the
Lakeland offices is (863) 853-2882.

Competition

      The apartment industry is highly competitive and fragmented with numerous
owners, developers and property management companies competing with the
Operating Partnership, the Trust and Barcap on a national, regional and local
basis. Competition for residents of apartment communities is subject to the
conditions and pricing of individual units, local market conditions, the
location of the apartment community and other factors. In addition, other forms
of housing, including manufactured housing communities and single-family homes
provide alternatives to potential residents.

      The current portfolio of the Operating Partnership and the Trust is
located in metropolitan areas in Florida and Ohio. The properties of the
Operating Partnership and the Trust tend to be located in urban, suburban and
secondary markets, where they compete locally with other apartment communities.
The Operating Partnership faces increasing competition in the housing markets
where the Company has traditionally enjoyed strong market share. The greater
competitive forces are due to the general overbuilding of certain tax-financed
and amenity-rich competitive apartment properties and strong sales of
single-family homes to the Operating Partnership's traditional rental tenant
base driven by current low interest rates.

Americans with Disabilities Act

      Properties in which the Operating Partnership and the Trust invest must
comply with Title III of the Americans with Disabilities Act (the "ADA") to the
extent that such properties are public accommodations and/or commercial
facilities as defined by the ADA. Compliance with the ADA requirements could
require removal of structural barriers to handicapped access in certain public
areas of the properties where such removal is readily achievable. The ADA does
not, however, consider residential properties, such as residential apartment
properties, to be public accommodations or commercial facilities, except to the
extent portions of such facilities, such as the leasing office, are open to the
public. The Trust believes that the properties of the Operating Partnership and
the Trust comply with all present requirements under the ADA and applicable
state laws. Noncompliance could result in imposition of fines or an award of
damages to private litigants. If required to make material additional changes,
the results of operations of the Operating Partnership and the Trust could be
adversely affected.

Environmental

      The Operating Partnership and the Trust are subject to Federal, state, and
local environmental laws and regulations that apply to the development of real
property, including construction activities, the ownership of real property, and
the operation of multifamily apartment communities. Such laws and regulations
could affect the property interests acquired by the Operating Partnership and
the Trust and to be acquired by them in the future and/or operate to reduce the
number and attractiveness of investment opportunities available to them.


                                       5
<PAGE>

      The Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601, et seq. ("CERCLA"), and applicable state Superfund laws subject
the owner of real property to claims or liability for the costs of removal or
remediation of hazardous substances that are disposed of on real property in
amounts that require removal or remediation. Liability under CERCLA and
applicable state Superfund laws can be imposed on the owner of real property or
the operator of a facility without regard to fault or even knowledge of the
disposal of hazardous substances on the property or at the facility. The
presence of hazardous substances in amounts requiring response action or the
failure to undertake remediation where it is necessary may adversely affect an
owner's ability to sell real estate or borrow money using such real estate as
collateral. In addition to claims for cleanup costs, the presence of hazardous
substances on a property could result in a claim by a private party for personal
injury or a claim by an adjacent property owner for property damage.

      The Operating Partnership and the Trust, where required, intend to retain
a qualified environmental consultant to conduct an environmental investigation
of each property that they consider for investment. If there is any indication
of contamination, sampling of the property will be performed by the
environmental consultant. The environmental investigation report will be
reviewed by the Operating Partnership, the Trust and counsel prior to purchase
of an interest in any property.

      The effect upon the Operating Partnership and the Trust of the application
of the foregoing laws and regulations cannot be predicted. Such laws and
regulations have not had a material effect on the financial condition of the
Operating Partnership and the Trust and their respective results of operations
to date. The Trust is not aware of any environmental condition on any properties
of the Operating Partnership or the Trust which is likely to have a material
adverse effect on its financial condition and results of operations.

Employees

      The Trust and the Operating Partnership currently employ a total of 12
full-time employees.

ITEM 2. DESCRIPTION OF PROPERTIES

Description of Properties

      In April 2002, the Company moved its executive and administrative offices,
financial operations and a portion of property operations to approximately 2,800
square feet of office space located at 3570 U.S. Highway 98 North, Lakeland,
Florida 33809. The space was leased in March 2002 from Grove Associates
(Indianapolis, Indiana), an unrelated party, for a term of three years at a
monthly rent of $2,800 (subject to common area maintenance adjustments). The
Lakeland office telephone number is (863) 853-2882.

      As of March 1, 2003, the Trust owned 981,107 Units in the Operating
Partnership (or approximately 29.7% of the then outstanding Units). 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
Operating Partnership. The Operating Partnership has invested in equity and debt
interests in residential apartment properties. As of the date of this Report,
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 in which the Operating
Partnership owned an interest as of the date of this Report are located in
Florida and three are located in Ohio.

      The Operating Partnership acquired the property interests described below
under "- The Acquired Properties" with the net proceeds of the Trust's Cash
Offering, and it acquired the other property interests in connection with its
Exchange Offering described below under "- The Exchange Properties".

      The Acquired Properties

      Between June 1998 and June 1999, the Operating Partnership used the net
proceeds of the Trust's Cash Offering to acquire beneficial ownership of a
67-unit residential apartment property referred to as Heatherwood Apartments-
Phase I located in Kissimmee, Florida; an 80-unit residential apartment property
referred to as Crystal Court Apartments- Phase II located in Lakeland, Florida;
and a 50-unit residential apartment property referred to as Dolphin Cove
Apartments (formerly


                                       6
<PAGE>

named Riverwalk Apartments) located in New Smyrna Beach, Florida (collectively,
the "Acquired Properties").

      Set forth in the following tables entitled "Property Information - Equity
Property Interests", "Mortgage Information - Equity Property Interests" and
"Real Estate Property Tax and Depreciation Information" is information
pertaining to each of the three Acquired Properties (together with the Exchange
Properties acquired in the Exchange Offering that the Operating Partnership
continues to own), including: (i) the year of its completion, number and
composition of units, number of acres on which the property is sited, rentable
area of the units, average unit size, average rental rates and occupancy as of
December 31, 2002; (ii) first mortgage loan information (including principal
balance as of December 31, 2002, interest rate, annual and monthly debt service
amounts, amortization term, maturity date, principal balance due at maturity
assuming no prepayments, and name of lender); and (iii) current real estate tax
and depreciation information.

      The Exchange Properties

      In April 2000, in connection with the completion of the Exchange Offering,
the Operating Partnership issued 2,449,492 registered units of limited
partnership interest ("Units") in exchange for substantially all limited
partnership interests owned by individual limited partners (the "Exchange
Limited Partners") in 23 limited partnerships (the "Exchange Partnerships")
which directly or indirectly owned equity and/or subordinated mortgage or other
debt interests in 25 residential apartment properties and one condominium
apartment property (the "Exchange Properties"). In April 2001, September 2002,
and April 2003, the Operating Partnership sold its equity interests in three of
the properties, Glen Lakes Apartments, a 144-unit residential apartment property
located in St. Petersburg, Florida; Stadium Club Apartments, a 223-unit student
apartment property located in Statesboro, Georgia; and Steeplechase Apartments,
a 72-unit residential apartment property located in Anderson, Indiana,
respectively. The properties were sold because the revenue from their operations
did not cover operating expenses and they required substantial and frequent cash
infusions.

      The actual limited partnership interest percentage owned by the Operating
Partnership in each of the 20 Exchange Partnerships in which it currently owns
an interest is set forth below in the table under Exhibit 21 ("Subsidiaries of
the Registrant") to this Report. As of the date of this Report, the Operating
Partnership (through ownership of all or substantially all of the equity
interests in single purpose limited partnerships) owns equity interests in 13
Exchange Properties or phases of Exchange Properties, consisting of 736
residential apartment units (comprised of studio, one, two and three bedroom
units). In addition, the Operating Partnership indirectly owns subordinated
mortgage and other debt interests in 11 Exchange 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 in
which the Operating Partnership owns an interest as of the date of this Report
are located in Florida and three are located in Ohio.

      The sole asset of each of 10 Exchange Partnerships in which the Operating
Partnership currently holds an interest (individually, an "Exchange Equity
Partnership" and collectively, the "Exchange Equity Partnerships") is record
title to a residential apartment property or the entire limited partnership or
other equity interest in a limited partnership or other entity that owns record
title to a property. The sole asset of each of six Exchange Partnerships
(individually, an "Exchange Mortgage Partnership" and collectively, the
"Exchange Mortgage Partnerships") is the entire or an undivided subordinated
mortgage interest (and in one case, unsecured debt interests) in one or more
residential apartment properties (and in one case, a condominium apartment
property). Each of the remaining four Exchange Partnerships (individually, an
"Exchange Hybrid Partnership" and collectively, the "Exchange Hybrid
Partnerships") own a combination of: (i) all or a portion of the direct or
indirect equity interests in one or more properties and (ii) an undivided
subordinated mortgage interest in one or more properties (and in one case,
unsecured debt interests).

      Certain information relating to the 20 Exchange Properties currently owned
by the Operating Partnership (together with the three Acquired Properties it
currently owns) and mortgage indebtedness secured thereby is summarized in the
tables set forth below entitled "Property Information - Equity Property
Interests", "Mortgage Information - Equity Property Interests", "Real Estate
Property Tax and Depreciation Information", and "Mortgage Information - Mortgage
Properties" including: (i) the name of the associated Exchange Partnership,
property location, year of its completion, number and composition of units,
number of acres on which the property is sited, rentable area of the units,
average unit size, average rental rates and occupancy as of December 31, 2002;
(ii) first mortgage loan information (including principal balance as of December
31, 2002, interest rate, annual and monthly debt service amounts, amortization
term, maturity date, principal balance due at maturity assuming no prepayments,
and name of lender); (iii) current real estate tax and depreciation information;
and (iv) information relating to subordinated mortgage loans owned by certain of
the Exchange Partnerships.


                                       7
<PAGE>

                              Property Information
                            Equity Property Interests

The table below summarizes certain information relating to three Acquired
Properties whose record title owners the Operating Partnership acquired with the
net proceeds of the Trust's registered Cash Offering and each of the 13 Exchange
Properties in which Exchange Equity Partnerships and Exchange Hybrid
Partnerships involved in the Exchange Offering directly or indirectly own an
equity interest, including (i) the name of the partnership that owns the
respective property interest, (ii) the name and location of each property, (iii)
the year each property was completed, (iv) the number of units, acreage,
rentable area, average unit size and average rental rate per unit and per square
feet of rentable area as of December 31, 2002, and (v) physical occupancy of
each property as of December 31, 2002.

<TABLE>
<CAPTION>
                           Name of
                         Residential
                          Apartment
                        Property (and                                                                   Approx.
                             type                           Year                           Approx.   Rentable Area   Avg. Unit Size
Partnership              of interest)    Location        Completed       No. of Units       Acres     (Sq. Ft.)*       (Sq. Ft.)
-----------              ------------    --------        ---------       ------------       -----     ----------       ---------
<S>                    <C>               <C>                <C>        <C>            <C>   <C>         <C>         <C>      <C>
Acquired
Partnerships:

Heatherwood            Heatherwood       Kissimmee,         1981       Total          67    2.26        35,136       Avg.      524
Kissimmee, Ltd.        Apartments        Florida                       Studio         17                            Studio     288
                       (Phase I) (1)                                    1 BR          45                             1 BR      576
                                                                        2 BR           5                             2 BR      864

Crystal Court          Crystal Court     Lakeland,          1986       Total          80    6.80        42,048       Avg.      525
Apartments II, Ltd.    Apartments        Florida                       Studio         20                            Studio     288
                       (Phase II) (1)                                   1 BR          54                             1 BR      576
                                                                        2 BR           6                             2 BR      864

Riverwalk              Riverwalk         New Smyrna         1986       Total          50     5.1        51,024       Avg.    1,020
Enterprises, Ltd.      Apartments (1)    Beach,                         2 BR          50                             2 BR    1,020
                                         Florida
Exchange Equity
Partnerships:

Central Florida        Laurel Oaks       Deland,            1986       Total          56    6.21        45,216       Avg.      807
Income Appreciation    Apartments (1)    Florida                        1 BR          11                             1 BR      576
Fund, Ltd.                                                              2 BR          45                             2 BR      864

Florida Capital        Eagle Lake        Port Orange,       1987       Total          77    4.68        45,504       Avg.      591
Income Fund, Ltd.      Apartments (1)    Florida                        1 BR          73                             1 BR      576
                                                                        2 BR           4                             2 BR      864

<CAPTION>
                           Name of
                         Residential         12/31/2002
                          Apartment        Average Rental         Physical
                        Property (and        Rates/Month         Occupancy
                             type            (Per Unit)            as of
Partnership              of interest)       (Per Sq. Ft.)        12/31/2002
-----------              ------------       -------------        ----------
<S>                    <C>                <C>        <C>           <C>
Acquired
Partnerships:

Heatherwood            Heatherwood        $520       $0.99         95.5%
Kissimmee, Ltd.        Apartments
                       (Phase I) (1)

Crystal Court          Crystal Court      $403       $0.77         92.5%
Apartments II, Ltd.    Apartments
                       (Phase II) (1)

Riverwalk              Riverwalk          $598       $0.59         98.0%
Enterprises, Ltd.      Apartments (1)

Exchange Equity
Partnerships:

Central Florida        Laurel Oaks        $550       $0.68         98.2%
Income Appreciation    Apartments (1)
Fund, Ltd.

Florida Capital        Eagle Lake         $489       $0.83         96.1%
Income Fund, Ltd.      Apartments (1)
</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>
                           Name of
                         Residential
                          Apartment
                        Property (and                                                                   Approx.
                             type                           Year                           Approx.   Rentable Area   Avg. Unit Size
Partnership              of interest)    Location        Completed       No. of Units       Acres     (Sq. Ft.)*       (Sq. Ft.)
-----------              ------------    --------        ---------       ------------       -----     ----------       ---------
<S>                    <C>               <C>                <C>        <C>            <C>   <C>         <C>         <C>      <C>
Exchange Equity
Partnerships
(cont'd):

Florida Capital        Forest Glen       Daytona            1985       Total          52    6.85        62,692       Avg.    1,205
Income Fund II, Ltd.   Apartments        Beach,                         2 BR          28                             2 BR    1,075
                       (Phase I) (2)     Florida                        3 BR          24                             3 BR    1,358

Florida Capital        Bridge Point      Jacksonville,      1986       Total          48    3.39        27,360       Avg.      570
Income Fund III, Ltd.  Apartments        Florida                       Studio          6                            Studio     288
                       (Phase II) (1)                                   1 BR          37                             1 BR      576
                                                                        2 BR           5                             2 BR      864

Florida Income         Forest Glen       Daytona            1985       Total          26    6.85        29,931       Avg.    1,151
Advantage Fund I,      Apartments        Beach,                         2 BR          19                             2 BR    1,075
Ltd.                   (Phase III) (2)   Florida                        3 BR           7                             3 BR    1,358

Florida Income         Forest Glen       Daytona            1985       Total           8    6.85         9,166       Avg.    1,146
Appreciation Fund I,   Apartments        Beach,                         2 BR           6                             2 BR    1,075
Ltd.                   (Phase IV) (2)    Florida                        3 BR           2                             3 BR    1,358

Florida Income         Blossom Corners   Orlando,           1980       Total          70    3.67        39,300       Avg.      561
Growth Fund V, Ltd.    Apartments        Florida                       Studio         15                            Studio     300
                       (Phase I) (1)                                    1 BR          49                             1 BR      600
                                                                        2 BR           6                             2 BR      900

Florida Opportunity    Camellia Court    Daytona            1982       Total          60    5.15        34,848       Avg.      581
Income Partners, Ltd.  Apartments (1)    Beach,                         1 BR          59                             1 BR      576
                                         Florida                        2 BR           1                             2 BR      864

Midwest Income         Brookwood Way     Mansfield,         1974       Total          66    3.92        38,016       Avg.      576
Growth Fund VI, Ltd.   Apartments (1)    Ohio                          Studio          3                            Studio     288
                                                                        1 BR          60                             1 BR      576
                                                                        2 BR           3                             2 BR      864

Realty Opportunity     Forest Glen       Daytona            1985       Total          30    6.85        34,231       Avg.    1,141
Income Fund VIII,      Apartments        Beach,                         2 BR          23                             2 BR    1,075
Ltd.                   (Phase II) (2)    Florida                        3 BR           7                             3 BR    1,358

<CAPTION>


                           Name of
                         Residential          12/31/2002
                          Apartment         Average Rental         Physical
                        Property (and         Rates/Month         Occupancy
                             type             (Per Unit)            as of
Partnership              of interest)        (Per Sq. Ft.)        12/31/2002
-----------              ------------        -------------        ----------
<S>                    <C>                  <C>        <C>          <C>
Exchange Equity
Partnerships
(cont'd):

Florida Capital        Forest Glen          $695       $0.58         98.1%
Income Fund II, Ltd.   Apartments
                       (Phase I) (2)

Florida Capital        Bridge Point         $476       $0.84         93.8%
Income Fund III, Ltd.  Apartments
                       (Phase II) (1)


Florida Income         Forest Glen          $701       $0.61         96.2%
Advantage Fund I,      Apartments
Ltd.                   (Phase III) (2)

Florida Income         Forest Glen          $681       $0.59        100.0%
Appreciation Fund I,   Apartments
Ltd.                   (Phase IV) (2)

Florida Income         Blossom Corners      $513        $.91         85.7%
Growth Fund V, Ltd.    Apartments
                       (Phase I) (1)

Florida Opportunity    Camellia Court       $455        $.78        100.0%
Income Partners, Ltd.  Apartments (1)


Midwest Income         Brookwood Way        $370        $.64        100.0%
Growth Fund VI, Ltd.   Apartments (1)



Realty Opportunity     Forest Glen          $680       $0.59         96.7%
Income Fund VIII,      Apartments
Ltd.                   (Phase II) (2)
</TABLE>


                                       9
<PAGE>

<TABLE>
<CAPTION>
                           Name of
                         Residential
                          Apartment
                        Property (and                                                                   Approx.
                             type                           Year                           Approx.   Rentable Area   Avg. Unit Size
Partnership              of interest)    Location        Completed       No. of Units       Acres     (Sq. Ft.)*       (Sq. Ft.)
-----------              ------------    --------        ---------       ------------       -----     ----------       ---------
<S>                    <C>               <C>                <C>        <C>            <C>   <C>         <C>         <C>       <C>
Exchange Hybrid
Partnerships:

Baron Strategic        Pineview          Orlando,           1988       Total          91    4.38        46,656       Avg.      513
Investment Fund VI,    Apartments (3)    Florida                       Studio         26                            Studio     288
Ltd.                                                                    1 BR          59                             1 BR      576
                                                                        2 BR           6                             2 BR      864

Baron Strategic        Crystal Court     Lakeland,          1982       Total          72     4.5        43,776       Avg.      608
Investment Fund IX,    Phase I (4)       Florida                        1 BR          64                             1 BR      576
Ltd.                                                                    2 BR           8                             2 BR      864

Baron Strategic        Crystal Court     Lakeland,          1982       Total          72     4.5        43,776       Avg.      608
Investment Fund X,     Phase I (5)       Florida                        1 BR          64                             1 BR      576
Ltd.                                                                    2 BR           8                             2 BR      864

Baron Strategic        Pineview          Orlando,           1988       Total          91    4.38        46,656       Avg.      513
Investment Fund X,     Apartments (6)    Florida                       Studio         26                            Studio     288
Ltd. (cont'd)                                                           1 BR          59                             1 BR      576
                                                                        2 BR           6                             2 BR      864

Lamplight Court of     Lamplight         Bellefontaine,     1973       Total          80    6.00        46,944       Avg.      587
Bellefontaine          Apartments (7)    Ohio                          Studio         12                            Studio     288
Apartments, Ltd.                                                        1BR           53                             1 BR      576
                                                                        2 BR          15                             2 BR      864
                                                                                   ---------------------------                 ---
                       TOTAL
                       PROPERTIES**:                                                 933    62.9       641,314                 687
                                                                                   ===========================                 ===

<CAPTION>


                           Name of
                         Residential          12/31/2002
                          Apartment         Average Rental         Physical
                        Property (and         Rates/Month         Occupancy
                             type             (Per Unit)            as of
Partnership              of interest)        (Per Sq. Ft.)        12/31/2002
-----------              ------------        -------------        ----------
<S>                    <C>                  <C>        <C>          <C>
Exchange Hybrid
Partnerships:

Baron Strategic        Pineview             $516       $1.00         93.4%
Investment Fund VI,    Apartments (3)
Ltd.

Baron Strategic        Crystal Court        $417       $0.69         91.7%
Investment Fund IX,    Phase I (4)
Ltd.

Baron Strategic        Crystal Court        $417       $0.69         91.7%
Investment Fund X,     Phase I (5)
Ltd.

Baron Strategic        Pineview             $516       $1.00         93.4%
Investment Fund X,     Apartments (6)
Ltd. (cont'd)


Lamplight Court of     Lamplight            $391       $0.67         93.8%
Bellefontaine          Apartments (7)
Apartments, Ltd.
                                            -----------------------------
                       TOTAL
                       PROPERTIES**:        $492       $0.72         95.2%
                                            =============================
</TABLE>

*     Includes only residential apartment units and excludes common areas.

**    Properties in which more than one partnership has an interest are counted
      only once.

(1)   Operating Partnership owns the entire limited partnership interest in a
      limited partnership which holds fee simple title to the property.

(2)   Operating Partnership owns beneficial interest in an unrecorded land trust
      which holds fee simple title to the property.

(3)   Operating Partnership owns (i) a 57.29% limited partnership interest in a
      limited partnership which holds fee simple title to the property and (ii)
      debt interests in other property described below in "Mortgage Information
      - Mortgage Properties" table.

(4)   Operating Partnership owns (i) a 44.96% limited partnership interest in a
      limited partnership which holds fee simple title to the property and (ii)
      debt interests in other property described below in "Mortgage Information
      - Mortgage Properties" table.

(5)   Operating Partnership owns (i) a 47.59% limited partnership interest in a
      limited partnership which holds fee simple title to the property and (i)
      debt interests in other property described below in "Mortgage Information
      - Mortgage Properties" table.

(6)   Operating Partnership owns (i) a 41.71% limited partnership interest in a
      limited partnership which holds fee simple title to the property and (ii)
      debt interests in other property described below in "Mortgage Information
      - Mortgage Properties" table.

(7)   Operating Partnership owns (i) a 31.7% limited partnership interest in a
      limited partnership which holds fee simple title to the property and (ii)
      a debt interest in the property described below in "Mortgage Information -
      Mortgage Properties" table.


                                       10
<PAGE>

                              Property Information
                             Debt Property Interests

The table set forth below summarizes certain information relating to each of the
11 properties in which Exchange Mortgage Partnerships and Exchange Hybrid
Partnerships involved in the Exchange Offering own a mortgage interest,
including (i) the name of the respective partnership, (ii) the name and location
of each property, (iii) the year each property was completed, (iv) the number of
units, acreage, rentable area, average unit size and average rental rate per
unit and per square feet of rentable area as of December 31, 2002, and (v)
physical occupancy of each property as of December 31, 2002.

<TABLE>
<CAPTION>
                          Name of
                        Residential
                         Apartment
                       Property (and                                                                 Approx.
                            type                            Year                         Approx.  Rentable Area   Avg. Unit Size
Partnership             of interest)     Location         Completed       No. of Units    Acres     (Sq. Ft.)*       (Sq. Ft.)
-----------             ------------     --------         ---------       ------------    -----     ----------       ---------
<S>                   <C>                <C>                 <C>       <C>          <C>    <C>      <C>          <C>        <C>
Exchange Mortgage
Partnerships:

Baron Strategic       Blossom Corners     Orlando,           1981       Total        68    3.51       38,100      Avg.        557
Investment Fund,      Apartments          Florida                       Studio       16                          Studio       300
Ltd.                  (Phase II) (1)                                     1 BR        45                           1 BR        600
                                                                         2 BR         7                           2 BR        864

                      Villas at Lake      Cincinnati,         N/A       Total       164    20.2      217,300      Avg.      1,325
                      Sycamore (1)        Ohio                         Planned                                    2 BR
                      (condominiums                                      2 BR                                     3 BR
                      under                                              3 BR
                      development)

Baron Strategic       Country Square      Tampa, Florida     1981       Total        73    4.56       40,032      Avg.        548
Investment Fund IV,   Apartments                                        Studio       14                          Studio       288
Ltd.                  (Phase I) (1)                                      1 BR        52                           1 BR        576
                                                                         2 BR         7                           2 BR        864

Baron Strategic       Candlewood          Tampa, Florida     1984       Total        33    2.75       17,568      Avg.        532
Investment Fund V,    Apartments                                        Studio        6                          Studio       288
Ltd.                  (Phase II) (1)                                     1 BR        26                           1 BR        576
                                                                         2 BR         1                           2 BR        864

                      Curiosity Creek     Tampa, Florida     1982       Total        81    4.51       43,776      Avg.        540
                      Apartments (1)                                    Studio       16                          Studio       288
                                                                         1 BR        59                           1 BR        576
                                                                         2 BR         6                           2 BR        864

                      Sunrise             Titusville,        1981       Total        60    4.08       36,288      Avg.        604
                      Apartments          Florida                        1 BR        54                           1 BR        576
                      (Phase 1)                                          2 BR         6                           2 BR        864

<CAPTION>
                          Name of
                        Residential      12/31/2002
                         Apartment     Average Rental         Physical
                       Property (and     Rates/Month         Occupancy
                            type         (Per Unit)            as of
Partnership             of interest)    (Per Sq. Ft.)        12/31/2002
-----------             ------------    -------------        ----------
<S>                   <C>              <C>        <C>            <C>
Exchange Mortgage
Partnerships:

Baron Strategic       Blossom Corners  $522        $0.92         80.6%
Investment Fund,      Apartments
Ltd.                  (Phase II) (1)


                      Villas at Lake   N/A          N/A           N/A
                      Sycamore (1)
                      (condominiums
                      under
                      development)

Baron Strategic       Country Square   $488        $0.89         98.6%
Investment Fund IV,   Apartments
Ltd.                  (Phase I) (1)


Baron Strategic       Candlewood       $458        $0.86         97.0%
Investment Fund V,    Apartments
Ltd.                  (Phase II) (1)


                      Curiosity Creek  $465        $0.86         97.5%
                      Apartments  (1)



                      Sunrise          $423        $0.70         96.7%
                      Apartments
                      (Phase 1)
</TABLE>


                                       11
<PAGE>

<TABLE>
<CAPTION>
                          Name of
                        Residential
                         Apartment
                       Property (and                                                                 Approx.
                            type                            Year                         Approx.  Rentable Area   Avg. Unit Size
Partnership             of interest)     Location         Completed       No. of Units    Acres     (Sq. Ft.)*       (Sq. Ft.)
-----------             ------------     --------         ---------       ------------    -----     ----------       ---------
<S>                   <C>                 <C>                <C>       <C>          <C>    <C>       <C>         <C>        <C>
Exchange Mortgage
Partnerships
(cont'd):

Baron Strategic       Heatherwood         Kissimmee,         1982       Total        41    2.26       22,176      Avg.        541
Investment Fund       Apartments          Florida                       Studio       10                          Studio       288
VIII, Ltd.            (Phase II) (2)                                   1 BR/1B       26                          1 BR/1B      576
                                                                       2 BR/1B        4                          2 BR/1B      864
                                                                       2 BR/2B        1                          2 BR/2B      864

Baron Strategic       Longwood            Cocoa, Florida     1981       Total        59    4.00       36,288      Avg.        615
Investment Fund       Apartments                                         1 BR        51                           1 BR        576
VIII, Ltd. (cont'd)   (Phase I)  (1)                                     2 BR         8                           2 BR        864

                      Villas at Lake      Cincinnati,         N/A       Total       164    20.2      217,300      Avg.      1,325
                      Sycamore  (1)       Ohio                         Planned                                    2 BR
                      (condominiums                                      2 BR                                     3 BR
                      under development)                                 3 BR

Baron Strategic       Curiosity Creek     Tampa, Florida     1982       Total        81    4.51       43,776      Avg.        540
Vulture Fund I, Ltd.  Apartments  (1)                                   Studio       16                          Studio       288
                                                                         1 BR        59                           1 BR        576
                                                                         2 BR         6                           2 BR        864

Brevard Mortgage      Meadowdale          Melbourne,         1984       Total        64    4.81       39,168      Avg.        612
Program, Ltd.         Apartments (1)      Florida                        1 BR        56                           1 BR        576
                                                                         2 BR         8                           2 BR        864

Exchange Hybrid
Partnerships

Baron Strategic       Candlewood          Tampa, Florida     1988       Total        33    2.75       17,568      Avg.        532
Investment Fund VI,   Apartments                                        Studio        6                          Studio       288
Ltd.                  (Phase II) (3)                                     1 BR        26                           1 BR        576
                                                                         2 BR         1                           2 BR        864

                      Country Square                         1981       Total        73    4.56       40,032      Avg.        548
                      Apartments          Tampa, Florida                Studio       14                          Studio       288
                      (Phase I)  (3)                                     1 BR        52                           1 BR        576
                                                                         2 BR         7                           2 BR        864

<CAPTION>

                          Name of
                        Residential            12/31/2002
                         Apartment           Average Rental         Physical
                       Property (and           Rates/Month         Occupancy
                            type               (Per Unit)            as of
Partnership             of interest)          (Per Sq. Ft.)        12/31/2002
-----------             ------------          -------------        ----------
<S>                   <C>                    <C>        <C>           <C>
Exchange Mortgage
Partnerships
(cont'd):

Baron Strategic       Heatherwood            $525       $0.99         97.6%
Investment Fund       Apartments
VIII, Ltd.            (Phase II) (2)



Baron Strategic       Longwood               $456       $0.75         93.3%
Investment Fund       Apartments
VIII, Ltd. (cont'd)   (Phase I) (1)

                      Villas at Lake         N/A         N/A           N/A
                      Sycamore (1)
                      (condominiums
                      under development)

Baron Strategic       Curiosity Creek        $465       $.86          97.5%
Vulture Fund I, Ltd.  Apartments (1)


Brevard Mortgage      Meadowdale             $393       $0.64         98.4%
Program, Ltd.         Apartments (1)


Exchange Hybrid
Partnerships

Baron Strategic       Candlewood             $458       $0.86         97.0%
Investment Fund VI,   Apartments
Ltd.                  (Phase II) (3)

                      Country Square         $488       $0.89         98.6%
                      Apartments
                      (Phase I) (3)
</TABLE>


                                       12
<PAGE>

<TABLE>
<CAPTION>
                          Name of
                        Residential
                         Apartment
                       Property (and                                                                 Approx.
                            type                            Year                         Approx.  Rentable Area   Avg. Unit Size
Partnership             of interest)     Location         Completed      No. of Units    Acres     (Sq. Ft.)*       (Sq. Ft.)
-----------             ------------     --------         ---------      ------------    -----     ----------       ---------
<S>                   <C>                 <C>                <C>       <C>          <C>    <C>       <C>         <C>        <C>
Exchange Hybrid
Partnerships
(cont'd):

Baron Strategic       Garden Terrace      Tampa, Florida     1983       Total        91    6.00       54,720      Avg.        601
Investment Fund VI,   Apartments                                        Studio        8                          Studio       288
Ltd. (cont'd)         (Phase III) (3)                                    1 BR        67                           1 BR        576
                                                                         2 BR        16                           2 BR        864

Baron Strategic       Candlewood          Tampa, Florida     1984       Total        33    2.75       17,568      Avg.        532
Investment Fund IX,   Apartments                                        Studio        6                          Studio       288
Ltd.                  (Phase II) (3)                                     1 BR        26                           1 BR        576
                                                                         2 BR         1                           2 BR        864

                      Garden Terrace      Tampa, Florida     1983       Total        91    6.00       54,720      Avg.        601
                      Apartments                                        Studio        8                          Studio       288
                      (Phase III) (3)                                    1 BR        67                           1 BR        576
                                                                         2 BR        16                           2 BR        864

Baron Strategic       Villas at Lake      Cincinnati,         N/A       Total       164    20.2      217,300      Avg.      1,325
Investment Fund IX,   Sycamore  (30       Ohio                         Planned
Ltd. (cont'd)         (condominiums                                      2 BR
                      under development)                                 3 BR

Baron Strategic       Garden Terrace      Tampa, Florida     1983       Total        91    6.00       54,720      Avg.        601
Investment Fund X,    Apartments                                        Studio        8                          Studio       288
Ltd.                  (Phase III) (3)                                    1 BR        67                           1 BR        576
                                                                         2 BR        16                           2 BR        864

                      Heatherwood         Kissimmee,         1982       Total        41    2.26       22,176      Avg.        541
                      Apartments          Florida                       Studio       10                          Studio       288
                      (Phase II) (2)                                     1 BR        26                           1 BR        576
                                                                       2 BR/1B        4                          2 BR/1B      864
                                                                       2 BR/2B        1                          2 BR/2B      864

Lamplight Court of    Lamplight           Bellefontaine,     1973       Total        80    6.00       46,944      Avg.        587
Bellefontaine         Apartments (4)      Ohio                          Studio       12                          Studio       288
Apartments, Ltd.                                                         1 BR        53                           1 BR        576
                                                                         2 BR        15                           2 BR        864

                                                                                 ---------------------------                 -----
                      TOTAL
                      PROPERTIES**(5):                                              650    62.6      375,060                  577
                                                                                 ===========================                 =====

<CAPTION>

                          Name of
                        Residential               12/31/2002
                         Apartment              Average Rental         Physical
                       Property (and              Rates/Month         Occupancy
                            type                  (Per Unit)            as of
Partnership             of interest)             (Per Sq. Ft.)        12/31/2002
-----------             ------------             -------------        ----------
<S>                   <C>                       <C>        <C>           <C>
Exchange Hybrid
Partnerships
(cont'd):

Baron Strategic       Garden Terrace           $407        $.68          86.7%
Investment Fund VI,   Apartments
Ltd. (cont'd)         (Phase III) (3)


Baron Strategic       Candlewood               $458        $0.86         97.0%
Investment Fund IX,   Apartments
Ltd.                  (Phase II) (3)


                      Garden Terrace           $407        $.68          86.7%
                      Apartments
                      (Phase III) (3)


Baron Strategic       Villas at Lake           N/A          N/A           N/A
Investment Fund IX,   Sycamore (30
Ltd. (cont'd)         (condominiums
                      under development)

Baron Strategic       Garden Terrace           $407        $0.68         86.7%
Investment Fund X,    Apartments
Ltd.                  (Phase III) (3)


                      Heatherwood              $525        $0.99         97.6%
                      Apartments
                      (Phase II) (2)



Lamplight Court of    Lamplight                $391        $0.67         93.8%
Bellefontaine         Apartments (4)
Apartments, Ltd.


                                             ---------------------------------
                      TOTAL
                      PROPERTIES (5)            $448        $0.86         93.5%
                                             =================================
</TABLE>

--------------
*     Includes only apartment units and excludes common areas.

**    Properties in which more than one partnership has an interest are counted
      only once.


                                       13
<PAGE>

1.    The Partnership's sole real estate assets consist of an undivided second
      mortgage interest in the property or properties described in this table.
      The second mortgage interests are described below at "Mortgage
      Information-Mortgage Properties."

2.    The Partnership owns an undivided second mortgage interest in the property
      and unsecured indebtedness associated therewith. The indebtedness is
      described below at "Mortgage Information-Mortgage Properties."

3.    The Partnership owns (i) an undivided second mortgage interest in the
      property or properties described in this table and (ii) a direct or
      indirect equity interest in one or more properties. The second mortgage
      interests are described below at "Mortgage Information-Mortgage
      Properties" and the equity interest is described above at "Property
      Information-Equity Property Interests."

4.    The Partnership owns (i) an undivided second mortgage interest in the
      property described in this table and (ii) an undivided limited partnership
      interest in the limited partnership which owns fee simple title to the
      property. The second mortgage interest is described below at "Mortgage
      Information-Mortgage Properties," and the equity interest is described
      above at "Property Information-Equity Property Interests."

5.    Does not include information for Lake Sycamore, which is under
      development.


                                       14
<PAGE>

                              Mortgage Information
                            Equity Property Interests

The table below sets forth certain information relating to the first mortgage
indebtedness secured by or associated with the three Acquired Properties whose
record title owners were acquired by the Operating Partnership with the net
proceeds of the Trust's Cash Offering and the 13 Exchange Properties in which
Exchange Equity Partnerships and Exchange Hybrid Partnerships involved in the
Exchange Offering directly or indirectly own an equity interest, including (i)
name of partnership, (ii) name and location of the properties, (iii) principal
balances as of December 31, 2002, (iv) interest rates, (v) annual and monthly
debt service, (vi) amortization term, (vii) maturity dates, (viii) balances due
on maturity, and (ix) name of lending institution.

<TABLE>
<CAPTION>
                                                   12/31/2002               Annual
                                                    Principal   Interest     Debt       Monthly  Amortization  Maturity
Partnership        Property        Location          Balance      Rate     Payment      Payment      Term        Date
-----------        --------        --------          -------      ----     -------      -------      ----        ----
<S>                <C>             <C>             <C>           <C>      <C>           <C>         <C>          <C>
Acquired
Partnerships:

Heatherwood        Heatherwood     Kissimmee,      $1,870,224    7.51%    $159,576      $13,298     30 yrs.       2/11
Kissimmee, Ltd.    Apartments      Florida
                   (Phase I)

Crystal Court      Crystal Court   Lakeland,       $1,410,352     7.5%    $125,352      $10,446     30 yrs.      10/04
Apartments II,     Apartments      Florida
Ltd.               (Phase II)

Riverwalk          Dolphin Cove    New Smyrna      $1,485,029    8.77%    $168,860      $14,072     30 yrs.      10/04
Enterprises, Ltd.  (formerly       Beach,
                   Riverwalk)      Florida
                   Apartments)

Exchange Equity
Partnerships:

Central Florida    Laurel Oaks     Deland,         $1,521,502    6.54%    $121,863      $10,155     30 years     12/28
Income             Apartments      Florida
Appreciation
Fund, Ltd.

Florida Capital    Eagle Lake      Port Orange,    $1,852,456    7.51%    $168,636      $14,053     25 years     02/11
Income Fund, Ltd.  Apartments      Florida

<CAPTION>

                                    Balance
                                    Due on
Partnership        Property        Maturity    Lender
-----------        --------        --------    ------
<S>                <C>             <C>         <C>
Acquired
Partnerships:

Heatherwood        Heatherwood     $1,649,467  GMAC
Kissimmee, Ltd.    Apartments
                   (Phase I)

Crystal Court      Crystal Court   $1,366,490  GMAC
Apartments II,     Apartments
Ltd.               (Phase II)

Riverwalk          Dolphin Cove    $1,411,716  TMG Life Insurance Co.
Enterprises, Ltd.  (formerly
                   Riverwalk)
                   Apartments)

Exchange Equity
Partnerships:

Central Florida    Laurel Oaks         $0      Prudential Mortgage
Income             Apartments                  Capital
Appreciation
Fund, Ltd.

Florida Capital    Eagle Lake      $1,752,545  GMAC
Income Fund, Ltd.  Apartments
</TABLE>


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                   12/31/2002               Annual
                                                    Principal   Interest     Debt       Monthly  Amortization  Maturity
Partnership        Property        Location          Balance      Rate     Payment      Payment      Term        Date
-----------        --------        --------          -------      ----     -------      -------      ----        ----
<S>                <C>             <C>             <C>          <C>       <C>           <C>         <C>          <C>
Exchange Equity
Partnerships
(cont'd):

Florida Capital    Forest Glen     Daytona         $1,696,273   7.01%     $143,211      $11,934     30 years      3/05
Income Fund II,    Apartments      Beach,
Ltd.               (Phase I)       Florida

Florida Capital    Bridge Point    Jacksonville,     $671,489   9.52%      $77,183       $6,431     25 years      7/06
Income Fund III,   Apartments      Florida
Ltd.               (Phase II)

Florida Income     Forest Glen     Daytona           $848,137   7.01%      $71,605       $5,967     30 years      3/05
Advantage          III             Beach, FL
Fund I, Ltd.

Florida Income     Forest Glen     Daytona           $260,961   7.01%      $22,057       $1,838     30 years      3/05
Appreciation       Apartments      Beach,
Fund I, Ltd.       (Phase IV)      Florida

Florida Income     Blossom         Orlando,          $959,901   9.04%     $106,084       $8,840     25 years     11/06
Growth Fund V,     Corners         Florida
Ltd.               Apartments
                   (Phase I)

Florida            Camellia        Daytona         $1,005,610   9.04%     $111,132       $9,261     30 years     11/06
Opportunity        Court           Beach,
Income Partners,   Apartments      Florida
Ltd.

Midwest Income     Brookwood Way   Mansfield,        $984,391   9.04%     $108,612       $9,051     25 years     12/06
Growth Fund VI,    Apartments      Ohio
Ltd.

Realty             Forest Glen     Daytona           $978,591   7.01%      $82,794       $6,899     30 years      3/05
Opportunity        Apartments      Beach,
Income Fund        (Phase II)      Florida
VIII, Ltd.

<CAPTION>

                                    Balance
                                    Due on
Partnership        Property        Maturity    Lender
-----------        --------        --------    ------
<S>                <C>            <C>         <C>
Exchange Equity
Partnerships
(cont'd):

Florida Capital    Forest Glen    $1,641,716  Prudential Mortgage
Income Fund II,    Apartments                 Capital
Ltd.               (Phase I)

Florida Capital    Bridge Point     $625,327  Huntington Mortgage
Income Fund III,   Apartments                 Co.
Ltd.               (Phase II)

Florida Income     Forest Glen      $817,310  Prudential Mortgage
Advantage          III                        Capital
Fund I, Ltd.

Florida Income     Forest Glen      $251,112  Prudential Mortgage
Appreciation       Apartments                 Capital
Fund I, Ltd.       (Phase IV)

Florida Income     Blossom          $882,430  Column Financial, Inc.
Growth Fund V,     Corners
Ltd.               Apartments
                   (Phase I)

Florida            Camellia         $913,346  Column Financial, Inc.
Opportunity        Court
Income Partners,   Apartments
Ltd.

Midwest Income     Brookwood Way    $890,263  Mellon Bank
Growth Fund VI,    Apartments
Ltd.

Realty             Forest Glen      $943,051  Prudential Mortgage
Opportunity        Apartments                 Capital
Income Fund        (Phase II)
VIII, Ltd.
</TABLE>



                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                   12/31/2002               Annual
                                                    Principal   Interest     Debt       Monthly  Amortization  Maturity
Partnership        Property        Location          Balance      Rate     Payment      Payment      Term        Date
-----------        --------        --------          -------      ----     -------      -------      ----        ----
<S>                <C>             <C>             <C>          <C>       <C>           <C>         <C>          <C>
Exchange Hybrid
Partnerships:

Baron Strategic    Pineview        Orlando,        $2,632,437   7.51%     $239,644      $19,970     30 years     02/11
Investment Fund    Apartments      Florida
VI, Ltd. and
Baron Strategic
Investment Fund X,
Ltd.

Baron Strategic    Crystal Court   Lakeland,       $1,576,549   7.26%     $130,698      $10,891     30 years     07/11
Investment Fund    Apartments      Florida
IX, Ltd. and       (Phase I)
Baron Strategic
Investment Fund X,
Ltd.

Lamplight Court    Lamplight       Bellefontaine   $1,279,868   9.04%     $141,445      $11,787     25 years     11/06
of Bellefontaine   Court           Ohio
Apts., Ltd.
                                                  -----------           -----------------------
                   TOTAL
                   PROPERTIES:                    $21,033,771           $1,978,752     $164,896
                                                  ===========           =======================

<CAPTION>

                                    Balance
                                    Due on
Partnership        Property        Maturity    Lender
-----------        --------        --------    ------
<S>                <C>             <C>         <C>
Exchange Hybrid
Partnerships:

Baron Strategic    Pineview        $2,540,858  GMAC
Investment Fund    Apartments
VI, Ltd. and
Baron Strategic
Investment Fund X,
Ltd.

Baron Strategic    Crystal Court   $1,540,564  GMAC
Investment Fund    Apartments
IX, Ltd. and       (Phase I)
Baron Strategic
Investment Fund X,
Ltd.

Lamplight Court    Lamplight        $1,158,349  Column Financial
of Bellefontaine   Court
Apts., Ltd.
                                   -----------
                   TOTAL
                   PROPERTIES:     $18,384,544
                                   ===========
</TABLE>


                                       17
<PAGE>

              Real Estate Property Tax and Depreciation Information

The table below summarizes real estate property tax and depreciation information
as of December 31, 2002 relating to the 16 properties or phases of properties in
which the Operating Partnership owns a direct or indirect equity interest:

<TABLE>
<CAPTION>
                              Name of
                            Residential
                             Apartment
                           Property (and                      12/31/02
                              type of         Property        Federal       Depreciation     Depreciation    Depreciation
Partnership                  interest)        Location       Tax Basis         Method            Rate        Life Claimed
-----------                  ---------        --------       ---------         ------            ----        ------------
<S>                       <C>               <C>              <C>            <C>               <C>               <C>
Acquired
Partnerships:

Heatherwood Kissimmee,    Heatherwood       Kissimmee,       $1,150,627       Modified        27.5 yrs.         5 yrs.
Ltd.                      Apartments        Florida                          Accelerated
                          (Phase I) (1)                                     Cost Recovery
                                                                               System
                                                                              ("MACRS")

Crystal Court             Crystal Court     Lakeland,        $1,457,972         MACRS         27.5 yrs.         16 yrs.
Apartments II, Ltd.       Apartments        Florida
                          (Phase II) (1)

Riverwalk Enterprises,    Dolphin Cove      New Smyrna       $1,369,155         MACRS         27.5 yrs.         12 yrs.
Ltd.                      (formerly         Beach,
                          Riverwalk)        Florida
                          Apartments (1)
Exchange Equity
Partnerships:

Central Florida Income    Laurel Oaks       Deland,          $2,040,410         MACRS         27.5 yrs.         2 yrs.
Appreciation Fund, Ltd.   Apartments (1)    Florida

Florida Capital Income    Eagle Lake        Port Orange,     $1,887,892         MACRS         27.5 yrs.         2 yrs.
Fund, Ltd.                Apartments (1)    Florida

Florida Capital Income    Forest Glen       Daytona          $1,864,770         MACRS         27.5 yrs.         2 yrs.
Fund II, Ltd.             Apartments        Beach,
                          (Phase I) (2)     Florida

Florida Capital Income    Bridge Point      Jacksonville,    $1,096,189         MACRS         27.5 yrs.         2 yrs.
Fund III, Ltd.            Apartments        Florida
                          (Phase II) (1)

Florida Income            Forest Glen       Daytona          $1,161,348         MACRS         27.5 yrs.         2 yrs.
Advantage Fund I, Ltd.    Apartments        Beach,
                          (Phase III) (2)   Florida

<CAPTION>

                              Name of
                            Residential
                             Apartment
                           Property (and         Realty         2002
                              type of           Tax Rate      Property       Annual
Partnership                  interest)         (Millage)      Tax Value   Realty Taxes
-----------                  ---------         ---------      ---------   ------------
<S>                       <C>                 <C>            <C>             <C>
Acquired
Partnerships:

Heatherwood Kissimmee,    Heatherwood           20.2988      $1,470,508      $29,850
Ltd.                      Apartments
                          (Phase I) (1)



Crystal Court             Crystal Court         20.4050      $1,320,682      $26,949
Apartments II, Ltd.       Apartments
                          (Phase II) (1)

Riverwalk Enterprises,    Dolphin Cove          23.7515      $1,658,151      $39,384
Ltd.                      (formerly
                          Riverwalk)
                          Apartments (1)
Exchange Equity
Partnerships:

Central Florida Income    Laurel Oaks           24.0053      $1,415,152      $33,971
Appreciation Fund, Ltd.   Apartments (1)

Florida Capital Income    Eagle Lake            23.28712     $1,837,169      $42,782
Fund, Ltd.                Apartments (1)

Florida Capital Income    Forest Glen           25.50539     $3,472,856      $88,577
Fund II, Ltd.             Apartments         (all 4 phases)    (all 4        (all 4
                          (Phase I) (2)                        phases)       phases)

Florida Capital Income    Bridge Point          19.6047       $919,183       $18,020
Fund III, Ltd.            Apartments
                          (Phase II) (1)

Florida Income            Forest Glen           25.50539     $3,472,856      $88,577
Advantage Fund I, Ltd.    Apartments         (all 4 phases)    (all 4        (all 4
                          (Phase III) (2)                      phases)       phases)
</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>
                              Name of
                            Residential
                             Apartment
                           Property (and                      12/31/02
                              type of         Property        Federal       Depreciation     Depreciation    Depreciation
Partnership                  interest)        Location       Tax Basis         Method            Rate        Life Claimed
-----------                  ---------        --------       ---------         ------            ----        ------------
<S>                       <C>               <C>              <C>            <C>               <C>               <C>
Exchange Equity
Partnerships
(cont'd):

Florida Income            Forest Glen       Daytona           $385,443          MACRS         27.5 yrs.         2 yrs.
Appreciation Fund I,      Apartments        Beach,
Ltd.                      (Phase IV) (2)    Florida

Florida Income Growth     Blossom Corners   Orlando,         $1,735,624         MACRS         27.5 yrs.         2 yrs.
Fund V, Ltd.              Apartments        Florida
                          (Phase I) (1)

Florida Opportunity       Camellia Court    Daytona          $1,494,023         MACRS         27.5 yrs.         2 yrs.
Income Partners, Ltd.     Apartments (1)    Beach,
                                            Florida

Midwest Income Growth     Brookwood Way     Mansfield,       $1,261,936         MACRS         27.5 yrs.         2 yrs.
Fund VI, Ltd.             Apartments (1)    Ohio

Realty Opportunity        Forest Glen       Daytona          $1,321,226         MACRS         27.5 yrs.         2 yrs.
Income Fund VIII, Ltd.    Apartments        Beach,
                          (Phase II) (2)    Florida

Exchange Hybrid
Partnerships:

Baron Strategic           Pineview          Orlando,         $1,911,431         MACRS         27.5 yrs.         15 yrs.
Investment Fund VI, Ltd.  Apartments (3)    Florida

Baron Strategic           Crystal Court     Lakeland,        $1,034,934         MACRS         27.5 yrs.         5 yrs.
Investment Fund IX, Ltd.  Phase I (4)       Florida

Baron Strategic           Crystal Court     Lakeland,        $1,034,934         MACRS         27.5 yrs.         5 yrs.
Investment Fund X, Ltd.   Phase I (5)       Florida

                          Pineview          Orlando,         $1,911,431         MACRS         27.5 yrs.         15 yrs.
                          Apartments (6)    Florida

Lamplight Court of        Lamplight         Bellefontaine,   $1,240,000      Accelerated       19 yrs.          16 yrs.
Bellefontaine             Apartments (7)    Ohio                            Cost Recovery
Apartments, Ltd.                                                               System

<CAPTION>

                              Name of
                            Residential
                             Apartment
                           Property (and        Realty         2002
                              type of          Tax Rate      Property       Annual
Partnership                  interest)        (Millage)      Tax Value   Realty Taxes
-----------                  ---------        ---------      ---------   ------------
<S>                       <C>                <C>            <C>             <C>
Exchange Equity
Partnerships
(cont'd):

Florida Income            Forest Glen          25.50539     $3,472,856      $88,577
Appreciation Fund I,      Apartments        (all 4 phases)    (all 4        (all 4
Ltd.                      (Phase IV) (2)                      phases)       phases)

Florida Income Growth     Blossom Corners      19.6326      $1,337,859      $26,266
Fund V, Ltd.              Apartments
                          (Phase I) (1)

Florida Opportunity       Camellia Court       25.50539     $1,173,117      $29,921
Income Partners, Ltd.     Apartments (1)

Midwest Income Growth     Brookwood Way        66.26         $437,350       $26,082
Fund VI, Ltd.             Apartments (1)

Realty Opportunity        Forest Glen          25.50539     $3,472,856      $88,577
Income Fund VIII, Ltd.    Apartments        (all 4 phases)    (all 4        (all 4
                          (Phase II) (2)                      phases)       phases)

Exchange Hybrid
Partnerships:

Baron Strategic           Pineview             19.6326      $2,014,379      $39,548
Investment Fund VI, Ltd.  Apartments (3)

Baron Strategic           Crystal Court        20.4050      $1,272,061      $25,956
Investment Fund IX, Ltd.  Phase I (4)

Baron Strategic           Crystal Court        20.4050      $1,272,061      $25,956
Investment Fund X, Ltd.   Phase I (5)

                          Pineview             19.6326      $2,014,379      $39,548
                          Apartments (6)

Lamplight Court of        Lamplight            14.4409      $1,497,400      $21,624
Bellefontaine             Apartments (7)
Apartments, Ltd.
</TABLE>

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

This table has the same footnotes as the first table above entitled "Property
Information - Equity Property Interests," and it does not include information
for the Villas at Lake Sycamore condominium property, which is under
development.


                                       19
<PAGE>

                              Mortgage Information
                               Mortgage Properties

      The table below sets forth certain information relating to the second
mortgage loans (and in one case, other debt interests) owned by each of the six
Exchange Mortgage Partnerships and the four Exchange Hybrid Partnerships
substantially all of whose limited partnership interests the Operating
Partnership acquired in the Exchange Offering, including: (i) the name of the
lending Exchange Partnership, (ii) the name, location and number of units of the
underlying residential apartment property (and in one case, condominium
apartment property) securing the first and second mortgages, (iii) the name of
the debtor, (iv) the original principal amount of the second mortgage loan(s)
held by the Exchange Partnership and the principal balance as of December 31,
2002 and due at maturity, (v) the undivided interests of other Exchange
Partnerships in the second mortgage loans or the principal balance as of
December 31, 2002 of other second mortgage loans secured by the property and
owned by other Exchange Partnerships, (vi) the second mortgage loan interest
rate, maturity date, annual and monthly interest payable and participation
features, if any, and (vii) the principal balance of the institutional first
mortgage loan secured by the property as of December 31, 2002 and the terms
thereof.

      Additional information relating to the underlying residential apartment
property (and in one case, condominium apartment property) securing each second
mortgage loan described and the first mortgage loan with a senior position ahead
of the second mortgage loan is set forth above at "Property Information - Debt
Property Interests." The debtors of substantially all of the second mortgage
loans and other loans provided or acquired by the Exchange Mortgage Partnerships
and the Exchange Hybrid Partnerships are limited partnerships that own fee
simple title to the property that secures such mortgage loans. Sigma Renaissance
Corporation, a Michigan corporation controlled by Jerome S. Rydell, a member of
the Board of Trustees of the Trust, controls the corporate general partners (and
in some cases the limited partnership interests) of the debtor partnerships.
Affiliates of Gregory K. McGrath, a founder and former Chief Executive Officer
of the Trust and the Operating Partnership, originally controlled the corporate
general partners (and in certain cases the limited partnership interests) of
each of the debtor partnerships. In September 2001, Mr. McGrath's affiliates
assigned their general partnership interests (and limited partnership interests,
as the case may be) in the debtor partnerships to Sigma Renaissance Corporation.
Each second mortgage note described is non-recourse beyond the property and/or
other assets owned by the debtors.


                                       20
<PAGE>

                   Mortgage Properties - Mortgage Information

<TABLE>
<CAPTION>
                    Name/ Location/                                                                         12/31/02 Principal
  Baron Capital       No. Units of                                      Maturity                                Balance of
   Partnership          Property      Principal   Accrued   Monthly/      Date         Interest Rate/      First Mortgage Loan
  Owning Second         Securing       Balance   Interest    Annual     (Balance       Amortization/            Secured by
  Mortgage Loan     Second Mortgage     as of      as of    Interest     Due at         Prepayment         Property and Other
     (Debtor)             Loan        12/31/02   12/31/02   Payments    Maturity)        Provisions               Terms
     --------             ----        --------   --------   --------    ---------        ----------               -----
<S>                 <C>                <C>       <C>          <C>      <C>          <C>                   <C>
Exchange Mortgage
Partnerships:

Baron Strategic     Blossom Corners     $113,975        $0     $569/     4/02       Fixed interest rate   $1,838,484; the loan
Investment Fund,    Apartments                                $6,838   ($113,975)   of 6% as to           matures 5/2011, has a
Ltd.                (Phase II) (68                                                  $113,975 of           balance due at
(Blossom Corners    units) Orlando,                                                 principal (plus       maturity of
Apartments II,      FL                                                              non-cumulative        $1,605,738, bears
Ltd.)                                                                               participation         interest at a fixed
                                                                                    interest at the       annual rate of 7.26%,
                                                                                    rate of 3% on the     has annual and
                                                                                    unpaid principal      monthly debt service
                                                                                    balance to the        requirements of
                                                                                    extent of any         $152,413 and $12,701,
                                                                                    available cash flow   respectively, and
                                                                                    during the year and   amortizes on a
                                                                                    additional            30-year basis.
                                                                                    non-cumulative
                                                                                    participation
                                                                                    interest equal to
                                                                                    30% of any
                                                                                    remaining available
                                                                                    cash flow during
                                                                                    the year); the loan
                                                                                    requires payments
                                                                                    of interest only
                                                                                    until maturity;
                                                                                    prepayable without
                                                                                    penalty.

Baron Strategic     Villas at Lake      $230,000  $123,933     $2,300/   12/2003    Fixed interest rate   $1,022,990; bears
Investment Fund,    Sycamore (164                             $27,600  ($230,000)   of 12%; requires      interest at an annual
Ltd.                townhomes under                                                 quarterly payments    adjustable rate equal
(Sycamore Real      development)                                                    of interest only      to lender's prime
Estate              Cincinnati,                                                     until maturity;       rate plus 1%
Development, Ltd.)  Ohio (All 26                                                    prepayable without    (currently 5.25%),
                    units in Phase                                                  penalty.              has current annual
                    I built and 25 units                                                                  and monthly debt
                    sold; Phase II                                                                        service requirements
                    is 20 acres of                                                                        of $53,707 and
                    undeveloped                                                                           $4,475, respectively,
                    land)                                                                                 requires payments of
                                                                                                          interest only until
                                                                                                          maturity and is
                                                                                                          prepayable without
                                                                                                          penalty. The debtor
                                                                                                          defaulted on the loan
                                                                                                          upon its maturity in
                                                                                                          11/2001, and the lender
                                                                                                          accelerated the loan.
                                                                                                          Sigma Renaissance
                                                                                                          Corporation (controlled
                                                                                                          by Jerome S. Rydell, a
                                                                                                          member of the Board of
                                                                                                          Trustees of the
                                                                                                          Trust) has been
                                                                                                          assigned all the
                                                                                                          general partnership
                                                                                                          interests (and in
                                                                                                          certain cases,
                                                                                                          limited partnership
                                                                                                          interests) in the
                                                                                                          debtor by Gregory K.
                                                                                                          McGrath (a founder
                                                                                                          and former Chief
                                                                                                          Executive Officer of
                                                                                                          the Trust and the
                                                                                                          Operating
                                                                                                          Partnership) and his
                                                                                                          affiliate. In September
                                                                                                          2002, Mr. Rydell or an
                                                                                                          affiliate acquired the
                                                                                                          first mortgage loan from
                                                                                                          the lender.

Baron Strategic     Country Square    $1,372,237  $596,182   $13,689/    4/2008     Fixed interest rate   $1,519,410; the loan
Investment Fund     Apartments -                             $164,269               of 12%; requires      matures in 3/2008,
IV, Ltd.            Phase I  (73                                                    payments of           has a balance due at
(Country Square     units) Tampa,                                                   interest only until   maturity of
Apartments, Ltd.)   Florida                                                         maturity;             $1,385,953, bears
                                                                                    prepayable without    interest at a fixed
                                                                                    penalty.              annual rate of 7.41%,
                                                                                                          has annual and
                                                                                                          monthly debt service
                                                                                                          requirements of
                                                                                                          $133,068 and $11,089,
                                                                                                          respectively,
                                                                                                          amortizes on a
                                                                                                          30-year basis and is
                                                                                                          prepayable after the
                                                                                                          fourth anniversary of
                                                                                                          the loan, subject to
                                                                                                          yield maintenance
                                                                                                          until the sixth month
                                                                                                          prior to maturity,
                                                                                                          when it can be
                                                                                                          prepaid at par.
</TABLE>


                                       21
<PAGE>

<TABLE>
<CAPTION>
                    Name/ Location/                                                                         12/31/02 Principal
  Baron Capital       No. Units of                                      Maturity                                Balance of
   Partnership          Property      Principal   Accrued   Monthly/      Date         Interest Rate/      First Mortgage Loan
  Owning Second         Securing       Balance   Interest    Annual     (Balance       Amortization/            Secured by
  Mortgage Loan     Second Mortgage     as of      as of    Interest     Due at         Prepayment         Property and Other
     (Debtor)             Loan        12/31/02   12/31/02   Payments    Maturity)        Provisions               Terms
     --------             ----        --------   --------   --------    ---------        ----------               -----
<S>                 <C>               <C>        <C>          <C>      <C>          <C>                   <C>
Exchange Mortgage
Partnerships:
(cont'd)

Baron Strategic     N/A                  $17,000  $10,200       $170/      N/A      Fixed interest rate   N/A
Investment Fund                                                $2,040   ($17,000)   of 12%; requires
IV, Ltd.                                                                            payment of interest
(Baron Strategic                                                                    only until
Vulture Fund I,                                                                     maturity;
Ltd.)                                                                               prepayable without
                                                                                    penalty.

Baron Strategic     Candlewood           $21,000   $5,207       $210/    3/2003     Fixed interest rate   $526,711; the loan
Investment Fund     Apartments -                               $2,520   ($21,000)   of 12%; requires      matures in 12/2003,
V, Ltd.             Phase II (33                                                    payments of           has a balance due at
(Baron Strategic    units) Tampa,                                                   interest only until   maturity of $533,678,
Investment Fund     Florida                                                         maturity;             bears interest at a
III, Ltd.)                                                                          prepayable without    fixed annual rate of
                                                                                    penalty.              6.84%, payable
                                                                                                          quarterly, has annual
                                                                                                          and monthly debt
                                                                                                          service requirements
                                                                                                          of $56,153 and
                                                                                                          $4,679, respectively,
                                                                                                          amortizes on a
                                                                                                          25-year basis and is
                                                                                                          prepayable without
                                                                                                          penalty.

Baron Strategic     Curiosity Creek     $350,336  $66,495      $1,903/    4/2007    (i) Fixed interest    $1,937,327; the loan
Investment Fund     Apartments (81                            $22,836  ($350,336)   rate of 6% as to      matures in 8/2011,
V, Ltd.             units) Tampa,                                                   $212,145 of           has a balance due at
(Curiosity Creek    Florida                                                         principal (plus       maturity of
Apartments, Ltd.)                                                                   non-cumulative        $1,692,068, bears
                                                                                    participation         interest at the fixed
                                                                                    interest at the       annual rate of 7.26%,
                                                                                    rate of 3% on the     has annual and
                                                                                    unpaid principal to   monthly debt service
                                                                                    the extent of         requirements of
                                                                                    available cash        $160,607 and $13,384,
                                                                                    flow, plus            respectively,
                                                                                    additional            amortizes on a
                                                                                    non-cumulative        30-year basis, and is
                                                                                    participation         prepayable after the
                                                                                    interest equal to     fourth anniversary of
                                                                                    30% of any            the loan, subject to
                                                                                    remaining available   yield maintenance
                                                                                    cash flow), (ii)      until the sixth month
                                                                                    adjustable interest   prior to maturity,
                                                                                    rate of prime plus    when it may be
                                                                                    1% (currently         prepaid at par.
                                                                                    5.75%) as to
                                                                                    $108,858 of
                                                                                    principal, and
                                                                                    (iii) fixed
                                                                                    interest rate of
                                                                                    12.5% as to $29,333
                                                                                    of principal; the
                                                                                    loans require
                                                                                    payments of
                                                                                    interest only until
                                                                                    maturity;
                                                                                    prepayable without
                                                                                    penalty.

Baron Strategic     Sunrise           $1,020,913  $26,433     $4,383/    10/2007    (i) Fixed interest    $981,183; the loan
Investment Fund     Apartments -                              $52,592  ($1,020,913) rate of 6% as to      matures in 1/2005,
V, Ltd.             Phase I (60                                                     $335,000 of           has a balance due at
(Sunrise            units)                                                          principal (plus       maturity of $932,217,
Apartments I,       Titusville,                                                     non-cumulative        bears interest at a
Ltd.)               Florida                                                         participation         fixed annual rate of
                                                                                    interest at the       7.5%, has annual and
                                                                                    rate of 3% on the     monthly debt service
                                                                                    unpaid principal to   requirements of
                                                                                    the extent of         $174,020 and $14,502,
                                                                                    available cash flow   respectively,
                                                                                    plus additional       amortizes on a
                                                                                    non-cumulative        30-year basis, and is
                                                                                    participation         payable after the
                                                                                    interest equal to     fourth anniversary of
                                                                                    20% of any            the loan, subject to
                                                                                    remaining available   yield maintenance
                                                                                    cash flow), (ii)      until the sixth month
                                                                                    fixed interest rate   prior to maturity,
                                                                                    of 4% as to           when it can be
                                                                                    $621,515 of           prepaid at par.
                                                                                    principal, (iii)
                                                                                    fixed interest rate
                                                                                    of 12% as to
                                                                                    $62,931 of
                                                                                    principal, and (iv)
                                                                                    fixed interest rate
                                                                                    of 8.75% as to
                                                                                    $1,467 of
                                                                                    principal; the
                                                                                    loans require
                                                                                    payments of
                                                                                    interest only until
                                                                                    maturity;
                                                                                    prepayable without
                                                                                    penalty.

Baron Strategic         N/A              $44,500  $26,018       $445/      N/A      Fixed interest rate   N/A
Investment Fund V,                                             $5,340   ($44,000)   of 12%; requires
Ltd. (Baron Strategic                                                               payment of interest
Vulture Fund I, Ltd.)                                                               only until
                                                                                    maturity;
                                                                                    prepayable without
                                                                                    penalty.
</TABLE>


                                       22
<PAGE>

<TABLE>
<CAPTION>
                    Name/ Location/                                                                         12/31/02 Principal
  Baron Capital       No. Units of                                      Maturity                                Balance of
   Partnership          Property      Principal   Accrued   Monthly/      Date         Interest Rate/      First Mortgage Loan
  Owning Second         Securing       Balance   Interest    Annual     (Balance       Amortization/            Secured by
  Mortgage Loan     Second Mortgage     as of      as of    Interest     Due at         Prepayment         Property and Other
     (Debtor)             Loan        12/31/02   12/31/02   Payments    Maturity)        Provisions               Terms
     --------             ----        --------   --------   --------    ---------        ----------               -----
<S>                     <C>           <C>        <C>          <C>      <C>          <C>                   <C>
Exchange Mortgage
Partnerships:
(cont'd)

Baron Strategic         Heatherwood    $49,308         $0       $338/    10/2004    Fixed interest rate   $671,939; the loan
VIII, Ltd.              Apartments                             $4,060   ($53,308)   of 6% as to $53,308   matures in 11/2004,
(Heatherwood            - Phase II                                                  of principal (plus    has a balance due at
Apartments II,          (41 units)                                                  non-cumulative        maturity of $655,856,
Ltd.)                   Kissimmee,                                                  participation         bears interest at a
                        Florida                                                     interest at the       fixed annual rate of
                                                                                    rate of 3% on the     7.75%, has annual and
                                                                                    unpaid principal to   monthly debt service
                                                                                    the extent of         requirements of
                                                                                    available cash flow   $61,038 and $5,087,
                                                                                    plus additional       respectively,
                                                                                    non-cumulative        amortizes on a
                                                                                    participation         30-year basis, and is
                                                                                    interest equal to     prepayable after the
                                                                                    30% of any            fourth anniversary of
                                                                                    remaining available   the loan, subject to
                                                                                    cash flow); the       yield maintenance
                                                                                    loans require         until the sixth month
                                                                                    payments of           prior to maturity,
                                                                                    interest only until   when it can be
                                                                                    maturity;             prepaid at par.
                                                                                    prepayable without
                                                                                    penalty.

Baron Strategic         Longwood      $969,268   $109,692     $5,052/    10/2007    (i) Fixed interest    $981,411; the loan
Investment Fund VIII,   Apartments                            $60,628  ($969,268)   rate of 6% as to      matures in 11/2004,
Ltd.                    - Phase I                                                   $368,558 of           has a balance due at
(Longwood Apartments    (59 units)                                                  principal (plus       maturity of $962,715,
I, Ltd.)                Cocoa,                                                      non-cumulative        bears interest at a
                        Florida                                                     participation         fixed annual rate of
                                                                                    interest at the       7.75%, has annual and
                                                                                    rate of 3% on the     monthly debt service
                                                                                    unpaid principal to   requirements of
                                                                                    the extent of         $89,150 and $7,429,
                                                                                    available cash flow   respectively,
                                                                                    plus additional       amortizes on a
                                                                                    non-cumulative        30-year basis, and is
                                                                                    participation         prepayable after the
                                                                                    interest equal to     fourth anniversary of
                                                                                    30% of any            the loan, subject to
                                                                                    remaining available   yield maintenance
                                                                                    cash flow), (ii)      until the sixth month
                                                                                    adjustable interest   prior to maturity,
                                                                                    rate of 1% over       when it can be
                                                                                    prime rate            prepaid at par.
                                                                                    (currently 5.75%)
                                                                                    as to $526,465 of
                                                                                    principal, and
                                                                                    (iii) fixed
                                                                                    interest rate of
                                                                                    12% as to $74,245
                                                                                    of principal; the
                                                                                    loans require
                                                                                    payments of
                                                                                    interest only until
                                                                                    maturity;
                                                                                    prepayable without
                                                                                    penalty.

Baron Strategic         Villas at      $77,000     $37,214      $751/    12/2003    Fixed interest rate   $1,022,990; bears
Investment Fund VIII,   Lake                                   $9,014   ($77,000)   of 12%; requires      interest at an annual
Ltd.                    Sycamore                                                    quarterly payments    adjustable rate equal
(Sycamore Real Estate   (164                                                        of interest only      to lender's prime
Development, Ltd.)      townhomes                                                   until maturity;       rate plus 1%
                        under                                                       prepayable without    (currently 5.25%),
                        development)                                                penalty.              has current annual
                        Cincinnati,                                                                       and monthly debt
                        Ohio (all                                                                         service requirements
                        26 units in                                                                       of $53,707 and
                        Phase I                                                                           $4,475, respectively,
                        built and                                                                         requires payments of
                        25 units                                                                          interest only until
                        sold; Phase                                                                       maturity and is
                        II is 20                                                                          prepayable without
                        acres of                                                                          penalty.  The debtor
                        undeveloped                                                                       defaulted on the loan
                                                                                                          upon its maturity in
                                                                                                          11/2001, and the lender
                                                                                                          accelerated the
                                                                                                          loan. Sigma Renaissance
                                                                                                          Corporation (controlled by
                                                                                                          Jerome S. Rydell, a
                                                                                                          member of the Board of
                                                                                                          Trustees of the
                                                                                                          Trust) has been
                                                                                                          assigned all the
                                                                                                          general partnership
                                                                                                          interests (and in
                                                                                                          certain cases,
                                                                                                          limited partnership
                                                                                                          interests) in the
                                                                                                          debtor by Gregory K.
                                                                                                          McGrath (a founder
                                                                                                          and former Chief
                                                                                                          Executive Officer of
                                                                                                          the Trust and the
                                                                                                          Operating
                                                                                                          Partnership) and his
                                                                                                          affiliate. In September
                                                                                                          2002, Mr. Rydell or an
                                                                                                          affiliate acquired the
                                                                                                          first mortgage loan from
                                                                                                          the lender.
</TABLE>


                                       23
<PAGE>

<TABLE>
<CAPTION>
                     Name/Location/                                                                         12/31/02 Principal
  Baron Capital       No. Units of                                      Maturity                                Balance of
   Partnership          Property      Principal   Accrued   Monthly/      Date         Interest Rate/      First Mortgage Loan
  Owning Second         Securing       Balance   Interest    Annual     (Balance       Amortization/            Secured by
  Mortgage Loan         Mortgage        as of      as of    Interest     Due at         Prepayment         Property and Other
     (Debtor)         Second Loan     12/31/02   12/31/02   Payments    Maturity)        Provisions               Terms
     --------             ----        --------   --------   --------    ---------        ----------               -----
<S>                     <C>           <C>         <C>         <C>      <C>          <C>                   <C>
Exchange Mortgage
Partnerships:
(cont'd)

Baron Strategic         Curiosity       $904,693  $158,988    $5,832/    4/2007     (i) Fixed interest    $1,937,327; the loan
Vulture Fund I, Ltd.    Creek                                 $69,985  ($904,693)   rate of 6% as to      matures in 8/2011,
(Curiosity Creek        Apartments                                                  $431,064 of           has a balance due at
Apartments, Ltd.)       (81 units)                                                  principal (plus       maturity of
                        Tampa,                                                      non-cumulative        $1,692,068, bears
                        Florida                                                     participation         interest at the fixed
                                                                                    interest at the       annual rate of 7.26%,
                                                                                    rate of 3% on the     has annual and
                                                                                    unpaid principal to   monthly debt service
                                                                                    the extent of         requirements of
                                                                                    available cash flow   $160,607 and $13,384,
                                                                                    plus additional       respectively,
                                                                                    non-cumulative        amortizes on a
                                                                                    participation         30-year basis, and is
                                                                                    interest equal to     prepayable after the
                                                                                    30% of any            fourth anniversary of
                                                                                    remaining available   the loan subject to
                                                                                    cash flow), (ii)      defeasance provisions
                                                                                    adjustable interest   in the mortgage note.
                                                                                    rate of prime plus
                                                                                    1% (currently
                                                                                    5.25%) as to
                                                                                    $221,190 of
                                                                                    principal, (iii)
                                                                                    fixed interest rate
                                                                                    of 12.5% as to
                                                                                    $222,055 of
                                                                                    principal, and (iv)
                                                                                    fixed interest rate
                                                                                    of 12% as to
                                                                                    $30,384 of
                                                                                    principal; the
                                                                                    loans require
                                                                                    payments of
                                                                                    interest only until
                                                                                    maturity;
                                                                                    prepayable without
                                                                                    penalty.

Brevard Mortgage        Meadowdale    $1,048,861  $244,515    $5,240/    10/2007    (i) Fixed interest    $950,751; the loan
Program, Ltd.           Apartments                            $62,888  ($1,048,861) rate of 6% as to      matures in 1/2007,
(Florida Opportunity    (64 units)                                                  $752,747 of           has a balance due at
Income Fund III, Ltd.)  Melbourne,                                                  principal (plus       maturity of $801,776,
                        Florida                                                     non-cumulative        bears interest at an
                                                                                    participation         initial rate of 7.25%
                                                                                    interest at the       increasing by .125%
                                                                                    rate of 3% on the     each year for five
                                                                                    unpaid principal to   years, has annual and
                                                                                    the extent of         monthly debt service
                                                                                    available cash flow   requirements of
                                                                                    plus additional       $97,200 and $8,100 in
                                                                                    non-cumulative        year 1, respectively
                                                                                    participation         and amortizes on a
                                                                                    interest equal to     16-year basis.
                                                                                    20% of any
                                                                                    remaining available
                                                                                    cash flow), (ii)
                                                                                    adjustable interest
                                                                                    rate of 1% over
                                                                                    prime rate
                                                                                    (currently 5.25%)
                                                                                    as to $271,923 of
                                                                                    principal and (iii)
                                                                                    fixed rate of 12%
                                                                                    as to $24,191 of
                                                                                    principal;
                                                                                    prepayable without
                                                                                    penalty.
Exchange Hybrid
Partnerships:

Baron Strategic         Candlewood       $68,000  $25,867       $680/    3/2003     Fixed interest rate   $526,711; the loan
Investment Fund VI,     Apartments                             $8,160   ($68,000)   of 12%; requires      matures 12/2003, has
Ltd.                    - Phase II                                                  payments of           a balance due at
(Baron Strategic        (33 units)                                                  interest only until   maturity of $503,678,
Investment Fund III,    Tampa,                                                      maturity;             bears interest at a
Ltd.)                   Florida                                                     prepayable without    fixed annual rate of
                                                                                    penalty.              6.84%, payable
                                                                                                          quarterly, has annual
                                                                                                          and monthly debt
                                                                                                          service requirements
                                                                                                          of $56,153 and
                                                                                                          $4,679, respectively,
                                                                                                          amortizes on a
                                                                                                          25-year basis and is
                                                                                                          prepayable without
                                                                                                          penalty.
</TABLE>


                                       24
<PAGE>

<TABLE>
<CAPTION>
                     Name/Location/                                                                         12/31/02 Principal
  Baron Capital       No. Units of                                      Maturity                                Balance of
   Partnership          Property      Principal   Accrued   Monthly/      Date         Interest Rate/      First Mortgage Loan
  Owning Second         Securing       Balance   Interest    Annual     (Balance       Amortization/            Secured by
  Mortgage Loan         Mortgage        as of      as of    Interest     Due at         Prepayment         Property and Other
     (Debtor)         Second Loan     12/31/02   12/31/02   Payments    Maturity)        Provisions               Terms
     --------         -----------     --------   --------   --------    ---------        ----------               -----
<S>                     <C>           <C>         <C>         <C>      <C>            <C>                 <C>
Exchange Hybrid
Partnerships:
(cont'd)

Baron Strategic         Garden        $248,353     $24,250     $413/     1/2007       (i) Fixed           $896,109; the loan
Investment Fund VI,     Terrace                               $4,967   ($248,353)     interest rate of    matures in 5/2005,
Ltd.                    Apartments                                                    2% as to $147,000   has a balance due at
(Garden Terrace         - Phase                                                       of principal if     maturity of $822,063,
Apartments III,         III, (91                                                      cash flow           bears interest at the
Ltd.)                   units)                                                        available (plus     fixed annual rate of
                        Tampa,                                                        non-cumulative      8.31%, has annual and
                        Florida                                                       participation       monthly debt service
                                                                                      interest at the     requirements of
                                                                                      rate of 7% on the   $96,047 and $8,004,
                                                                                      unpaid principal    respectively,
                                                                                      to the extent of    amortizes on a
                                                                                      available cash      25-year basis and may
                                                                                      flow, plus          be prepaid beginning
                                                                                      additional          4/99 with a 5%
                                                                                      participation       prepayment fee, which
                                                                                      interest equal to   decreases 1% per year
                                                                                      30% of any          until maturity.
                                                                                      remaining cash
                                                                                      flow (payable to
                                                                                      holders of note
                                                                                      only after
                                                                                      payment of
                                                                                      interest due on
                                                                                      the note referred
                                                                                      to in (ii) below)
                                                                                      and (ii) fixed
                                                                                      interest rate of
                                                                                      9% as to $101,353
                                                                                      of principal,
                                                                                      payable only from
                                                                                      excess cash flow
                                                                                      after payment of
                                                                                      2% minimum
                                                                                      interest and 7%
                                                                                      participation
                                                                                      interest due on
                                                                                      the note referred
                                                                                      to in (i) above;
                                                                                      the loans require
                                                                                      payments of
                                                                                      interest only
                                                                                      until maturity;
                                                                                      prepayable
                                                                                      without penalty.

Baron Strategic         Country       $259,639    $193,141      $3,272/    9/2002     Fixed interest      $1,519,410; the loan
Investment Fund VI,     Square                                  $39,264  ($259,639)   rate of 15%;        matures in 3/2008,
Ltd.                    Apartments                                                    requires payments   has a balance due at
(Baron Strategic        - Phase I                                                     of interest only    maturity of
Investment IV,          (73 units)                                                    until maturity;     $1,385,953, bears
Ltd.)                   Tampa,                                                        prepayable          interest at a fixed
                        Florida                                                       without penalty.    annual rate of 7.41%,
                                                                                                          has annual and
                                                                                                          monthly debt service
                                                                                                          requirements of
                                                                                                          $133,068 and $11,089,
                                                                                                          respectively,
                                                                                                          amortizes on a
                                                                                                          30-year basis, and is
                                                                                                          prepayable after the
                                                                                                          fourth anniversary of
                                                                                                          the loan, subject to
                                                                                                          yield maintenance
                                                                                                          until the sixth month
                                                                                                          prior to maturity,
                                                                                                          when it can be
                                                                                                          prepaid at par.

Baron Strategic         Candlewood     $75,500     $29,345        $755/    3/2003     Fixed interest      $526,711; the loan
Investment Fund IX,     Apartments--                              $9,060   ($75,500)   rate of 12%;        matures  12/2003, has
Ltd.                    Phase II (33                                                  requires payments   a balance due at
(Baron Strategic        units)                                                        of interest only    maturity of $505,678,
Investment Fund III,    Tampa,                                                        until maturity;     bears interest at a
Ltd.)                   Florida                                                       prepayable          fixed annual rate of
                                                                                      without penalty.    6.84%, payable
                                                                                                          quarterly, has annual
                                                                                                          and monthly debt
                                                                                                          service requirements
                                                                                                          of $56,153 and
                                                                                                          $4,679, respectively,
                                                                                                          amortizes on a
                                                                                                          25-year basis and is
                                                                                                          prepayable without
                                                                                                          penalty.
</TABLE>


                                       25
<PAGE>

<TABLE>
<CAPTION>
                     Name/Location/                                                                         12/31/02 Principal
  Baron Capital       No. Units of                                      Maturity                                Balance of
   Partnership          Property      Principal   Accrued   Monthly/      Date         Interest Rate/      First Mortgage Loan
  Owning Second         Securing       Balance   Interest    Annual     (Balance       Amortization/            Secured by
  Mortgage Loan         Mortgage        as of      as of    Interest     Due at         Prepayment         Property and Other
     (Debtor)         Second Loan     12/31/02   12/31/02   Payments    Maturity)        Provisions               Terms
     --------         -----------     --------   --------   --------    ---------        ----------               -----
<S>                     <C>           <C>         <C>         <C>      <C>            <C>                 <C>
Exchange Hybrid
Partnerships:
(cont'd)

Baron Strategic         Garden        $310,442     $30,551     $517/     1/2007       (i) Fixed           $896,109; the loan
Investment Fund IX,     Terrace                               $6,209   ($310,442)     interest rate of    matures in 5/2005,
Ltd.                    Apartments                                                    2% as to $183,750   has a balance due at
(Garden Terrace         - Phase III                                                   of principal if     maturity of $822,063,
Apartments III, Ltd.)   (91 units)                                                    cash flow           bears interest at the
                        Tampa,                                                        available (plus     fixed annual rate of
                        Florida                                                       non-cumulative      8.31%, has annual and
                                                                                      participation       monthly debt service
                                                                                      interest at the     requirements of
                                                                                      rate of 7% on the   $96,047 and $8,004,
                                                                                      unpaid principal    respectively,
                                                                                      to the extent of    amortizes on a
                                                                                      available cash      25-year basis and may
                                                                                      flow, plus          be prepaid beginning
                                                                                      additional          4/99 with a 5%
                                                                                      participation       prepayment fee, which
                                                                                      interest equal to   decreases 1% per year
                                                                                      30% of any          until maturity.
                                                                                      remaining cash
                                                                                      flow (payable to
                                                                                      holders of note
                                                                                      only after
                                                                                      payment of
                                                                                      interest on the
                                                                                      note referred to
                                                                                      in (ii) below)
                                                                                      and (ii) fixed
                                                                                      interest rate of
                                                                                      9% as to $126,692
                                                                                      of principal,
                                                                                      payable only from
                                                                                      excess cash flow
                                                                                      after payment of
                                                                                      2% minimum
                                                                                      interest and 7%
                                                                                      participation
                                                                                      interest due on
                                                                                      the note referred
                                                                                      to in (i) above;
                                                                                      the loan requires
                                                                                      payments of
                                                                                      interest only
                                                                                      until maturity;
                                                                                      prepayable
                                                                                      without penalty.

Baron Strategic         Villas at     $243,500    $109,380      $2,435/    12/2003    Fixed interest      $1,022,990; bears
Investment Fund IX,     Lake                                    $29,220  ($243,500)   rate of 12%;        interest at the
Ltd.                    Sycamore                                                      requires            annual adjustable
(Sycamore Real Estate   (164                                                          quarterly           rate equal to
Development, Ltd.)      townhomes                                                     payments of         lender's prime rate
                        under                                                         interest only       plus 1% (currently
                        development)                                                  until maturity;     5.25%), has current
                        Cincinnati,                                                   prepayable          annual and monthly
                        Ohio (all                                                     without penalty.    debt service
                        26 units in                                                                       requirements of
                        Phase I                                                                           $53,707 and $4,475,
                        built and                                                                         respectively,
                        25 units                                                                          requires payments of
                        sold; Phase                                                                       interest only until
                        II is 20                                                                          maturity and is
                        acres of                                                                          prepayable without
                        undeveloped                                                                       penalty. The debtor
                        land)                                                                             defaulted on the loan
                                                                                                          upon its maturity in
                                                                                                          11/2001, and the lender
                                                                                                          accelerated the loan.
                                                                                                          Sigma Renaissance
                                                                                                          Corporation
                                                                                                          (controlled by Jerome
                                                                                                          S. Rydell, a member
                                                                                                          of the Board of
                                                                                                          Trustees of the
                                                                                                          Trust) has been
                                                                                                          assigned all the
                                                                                                          general partnership
                                                                                                          interests (and in
                                                                                                          certain cases,
                                                                                                          limited partnership
                                                                                                          interests) in the
                                                                                                          debtor by Gregory K.
                                                                                                          McGrath (a founder
                                                                                                          and former Chief
                                                                                                          Executive Officer of
                                                                                                          the Trust and the
                                                                                                          Operating
                                                                                                          Partnership) and his
                                                                                                          affiliate. In September
                                                                                                          2002, Mr. Rydell or an
                                                                                                          affiliate acquired the
                                                                                                          first mortgage loan from
                                                                                                          the lender.
</TABLE>


                                       26
<PAGE>

<TABLE>
<CAPTION>
                     Name/Location/                                                                              12/31/02 Principal
  Baron Capital       No. Units of                                            Maturity                               Balance of
   Partnership          Property          Principal     Accrued   Monthly/      Date         Interest Rate/     First Mortgage Loan
  Owning Second         Securing           Balance     Interest    Annual     (Balance       Amortization/           Secured by
  Mortgage Loan         Mortgage            as of        as of    Interest     Due at         Prepayment        Property and Other
     (Debtor)         Second Loan         12/31/02     12/31/02   Payments    Maturity)        Provisions              Terms
     --------         -----------         --------     --------   --------    ---------        ----------              -----
<S>                     <C>               <C>         <C>         <C>        <C>          <C>                 <C>
Exchange Hybrid
Partnerships:
(cont'd)

Baron Strategic         Heatherwood         $170,499          $0  $1,124/      10/2004    (i) Fixed           $671,939; the loan
Investment Fund X,      Apartments                                $13,499    ($170,499)   interest rate of    matures in 11/2004,
Ltd. (Heatherwood       - Phase II                                                        6% as to $128,475   has a balance due at
Apartments II,          (41 units)                                                        of principal        maturity of $655,856,
Ltd.)                   Kissimmee,                                                        (plus               bears interest at a
                        Florida                                                           non-cumulative      fixed annual rate of
                                                                                          participation       7.75%, has annual and
                                                                                          interest at the     monthly debt service
                                                                                          rate of 3% on the   requirements of
                                                                                          unpaid principal    $61,038 and $5,087,
                                                                                          to the extent of    respectively,
                                                                                          available cash      amortizes on a
                                                                                          flow plus           30-year basis, and is
                                                                                          additional          prepayable after the
                                                                                          non-cumulative      fourth anniversary of
                                                                                          participation       the loan, subject to
                                                                                          interest equal to   yield maintenance
                                                                                          30% of any          until the sixth month
                                                                                          remaining           prior to maturity,
                                                                                          available cash      when it can be
                                                                                          flow), (ii)         prepaid at par.
                                                                                          adjustable
                                                                                          interest rate of
                                                                                          1% over prime
                                                                                          rate (currently
                                                                                          5.25%) as to $732
                                                                                          of principal, and
                                                                                          (iii) fixed
                                                                                          interest rate of
                                                                                          12% as to $41,335
                                                                                          of principal; the
                                                                                          loans require
                                                                                          payments of
                                                                                          interest only
                                                                                          until maturity;
                                                                                          prepayable
                                                                                          without penalty.

Baron Strategic         Garden              $682,972     $67,402  $1,124/      1/2007     (i) Fixed           $896,109; the loan
Investment Fund X,      Terrace                                   $13,449    ($682,972)   interest rate of    matures in 5/05, has
Ltd. (Garden Terrace    Apartments                                                        2% as to $404,250   a balance due at
Apartments III, Ltd.)   - Phase III                                                       of principal if     maturity of $822,063,
                        (91 units)                                                        cash flow           bears interest at the
                        Orlando,                                                          available (plus     fixed annual rate of
                        Florida                                                           non-cumulative      8.31%, has annual and
                                                                                          participation       monthly debt service
                                                                                          interest at the     requirements of
                                                                                          rate of 7% on the   $96,047 and $8,004,
                                                                                          unpaid principal    respectively,
                                                                                          to the extent of    amortizes on a
                                                                                          available cash      25-year basis and may
                                                                                          flow, plus          be prepaid beginning
                                                                                          additional          4/99 with a 5%
                                                                                          participation       prepayment fee, which
                                                                                          interest equal to   decreases 1% per year
                                                                                          30% of any          until maturity.
                                                                                          remaining cash
                                                                                          flow (payable to
                                                                                          holders of note
                                                                                          only after
                                                                                          payment of
                                                                                          interest due on
                                                                                          the note referred
                                                                                          to in (ii) below)
                                                                                          and (ii) fixed
                                                                                          interest rate of
                                                                                          9% as to $278,722
                                                                                          of principal,
                                                                                          payable only from
                                                                                          excess cash flow
                                                                                          after payment of
                                                                                          2% minimum
                                                                                          interest and 7%
                                                                                          participation
                                                                                          interest due on
                                                                                          the note referred
                                                                                          to in (i) above;
                                                                                          the loans require
                                                                                          payments of
                                                                                          interest only
                                                                                          until maturity;
                                                                                          prepayable
                                                                                          without penalty.

Lamplight Court of      Lamplight           $678,302    $251,571  $3,590/      12/2006    (i) Adjustable      $1,279,868; the loan
Bellefontaine           Court                                     $43,078    ($678,302)   interest rate of    matures in 11/2006,
Apartments, Ltd.        Apartments                                                        1% over prime       has a balance due at
(Independence           (80 units)                                                        rate (currently     maturity of
Village, Ltd.)          Bellefontaine,                                                    5.25%) as to        $1,158,349, bears
                        Ohio                                                              $585,000 of         interest at a fixed
                                                                                          principal, and      annual rate of 9.04%,
                                                                                          (ii) fixed          has annual and
                                                                                          interest rate of    monthly debt service
                                                                                          12% as to $93,302   requirements of
                                                                                          of principal; the   $141,445 and $11,787,
                                                                                          loans require       respectively,
                                                                                          payments of         amortizes on a
                                                                                          interest only       25-year basis, and is
                                                                                          until maturity;     prepayable after the
                                                                                          prepayable          fifth anniversary of
                                                                                          without penalty.    the loan, provided
                                                                                                              that in the sixth and
                                                                                                              seventh years
                                                                                                              prepayment requires a
                                                                                                              fee equal to the
                                                                                                              greater of 1% of the
                                                                                                              prepaid amount or
                                                                                                              yield maintenance.
                                          ---------------------------------
               Total *                    $8,956,298  $2,136,384  $54,792/
                                                                  $657,504
</TABLE>

--------

*     The totals shown above do not foot to the total amount of receivables due
      from affiliates shown on the consolidated balance sheet of the Operating
      Partnership as of December 31, 2002 included in Item 7 of this Report
      because the amounts shown in the balance sheet are net amounts which take
      into account the allowance for bad debt and the discounted acquisition
      price of the receivables. In addition, one of the receivables shown in the
      table above is due from an unrelated third party.


                                       27

<PAGE>

      Other Property Investments

           Alexandria Apartments

      During 1998 and 1999, the Operating Partnership used a portion of the net
proceeds of the Trust's Cash Offering to acquire a 40% limited partnership
interest in Alexandria Development, L.P. (the "Alexandria Partnership"), a
Delaware limited partnership that formerly owned Alexandria Apartments, a
168-unit residential apartment property (the "Alexandria Property") under
development in Alexandria, Kentucky. The aggregate purchase price for the
limited partnership interest was $1,285,000. An affiliate of Mr. McGrath sold
the limited partnership interest to the Operating Partnership, and a separate
affiliate of Mr. McGrath formerly served as the managing general partner of the
Alexandria Partnership.

      The Alexandria Partnership defaulted on its first mortgage construction
loan when the loan matured in December 2000, and the lender exercised its right
to accelerate payment of the loan. In 2000, the Operating Partnership wrote off
its investment in the Alexandria Partnership due to the defaults on first
mortgage indebtedness, recurring losses incurred by the property, contingent
liabilities under an equipment lease, a partners' deficiency, and an updated
appraisal that valued the property at an amount less than the total liabilities
owed.

      In September 2001, Mr. McGrath's affiliate assigned the remaining 60%
limited partnership interest in the Alexandria Partnership and certain other
property interests to Sigma Renaissance Corporation ("Sigma Renaissance"), a
Michigan corporation controlled by Jerome S. Rydell, a member of the Board of
Trustees of the Trust. Sigma Renaissance also became the managing general
partner of the Alexandria Partnership and other partnerships owning the other
assigned property interests.

      In December 2001, a Kentucky court appointed a receiver to manage the
Alexandria Property. In 2002, Sigma Renaissance, acting as managing general
partner of the Alexandria Partnership, caused it to file for bankruptcy
protection. The first mortgage lender, however, was successful in lifting the
automatic stay in the bankruptcy proceeding. As a result, in the second quarter
of 2002, the bankruptcy proceeding was dismissed and the lender foreclosed on
the property and sold it to an unrelated third party.

           Acquisition of Limited Partnership Interests

      In July 1998, the Operating Partnership was admitted as a minority limited
partner in 13 real estate limited partnerships, including 10 of the Exchange
Partnerships that participated in the Exchange Offering and are now controlled
and managed by the Operating Partnership. The 13 limited partnerships were
formerly affiliated with Mr. McGrath. In September 2001, the remaining limited
partnership interests and the entire general partnership interest in the three
limited partnerships that are not Exchange Partnerships were assigned to Sigma
Renaissance Corporation, which is controlled by Jerome S. Rydell, a member of
the Board of Trustees of the Trust.

      The Operating Partnership acquired the interests in consideration of a
capital contribution ranging from approximately $2,900 to $83,300 in each such
partnership. The aggregate contribution made by the Operating Partnership was
approximately $341,000. The percentage interest acquired by the Operating
Partnership (less than 4% in each case) was calculated at fair market value. The
Operating Partnership has written off its minority interests in the three
limited partnerships that were not acquired by it in the Exchange Offering.

           Contract to Acquire Two 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, at the
Trust's option, two luxury residential apartment properties in the development
stage upon the completion of construction. At that time, Mr. McGrath controlled
the three development companies. One of the properties was sold to a third party
with the Trust's consent. In September 2001, Mr. McGrath assigned all of the
outstanding partnership interests in the three partnerships to Sigma Renaissance
Corporation, a Michigan corporation controlled by Jerome S. Rydell, a member of
the Board of Trustees of the Trust. The remaining residential property (the
"Burgundy Hills Property"), located in Florence, Kentucky (part of the
Cincinnati metropolitan area), was originally scheduled to have a total of 396
units, comprised of one, two and three bedroom/one or two bathroom apartments,
of which 98 have been completed and rented. Due to events described below, the
anticipated date of completion of the Burgundy Hills Property and whether the
development will be completed as originally planned are uncertain.


                                       28
<PAGE>

      In connection with the transaction, the Trust obtained a right of first
negotiation to purchase the Burgundy Hills Property from its owner, Burlington
Residential, Ltd., upon completion and a right of first refusal to purchase the
property on the same terms offered by a third party. At that time, the purchase
price was expected to be approximately $30 million, of which a significant
portion would be funded with first mortgage financing. Presently, the Trust does
not have adequate resources to close on the transaction even if it were
interested in doing so and even if construction were completed, and it is
uncertain whether the Trust will have adequate resources to complete the
transaction if construction is completed. In addition, as described below,
because the owner of the first mortgage on the property has acquired control of
the Borrower and the development of the property, management believes it is
unlikely that the Trust's purchase rights are still exercisable.

      In connection with the transaction, prior management caused the Trust to
co-guarantee (together with Mr. McGrath) the first mortgage construction loan
secured by the Burgundy Hills Property. Assuming that the Borrower 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, has a potential contingent liability for the full
outstanding amount of the loan, which, based on the most recent information
available to the Trust, had an outstanding principal balance of $6,478,000 as of
October 1, 2001.

      Burlington Residential, Ltd., the owner of the Burgundy Hills Apartments
project (the "Borrower"), defaulted on the first mortgage loan and on 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 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 believes that it is not probable that the guaranty 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.

Investment Objectives and Policies

   General

      The Trust and the Operating Partnership have 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. Such investments will consist primarily of: (i) the direct and
indirect acquisition, ownership, operation, management, improvement and
disposition of equity interests in such types of properties and/or (ii) mortgage
loans which the Trust and the Operating Partnership provide or acquire which are
secured by mortgages on such types of properties. BARCAP Realty Services Group,
Inc. ("Barcap"), the Trust's taxable REIT subsidiary, provides property
management services for residential apartment properties totaling 1,263 units
for third party owners.

      The Trust seeks to: (1) generate current cash flow for distribution to
Trust Shareholders and Operating Partnership Unitholders from rental payments
generated from the rental of residential apartment units which the Trust and the
Operating Partnership may acquire and/or principal and interest payments in
respect of mortgage loans which the Trust and the Operating Partnership may
provide or acquire; (2) provide the opportunity for capital appreciation of
residential apartment properties, and (iii) generate current cash flow from
property management services Barcap provides for third party property owners.
The Trust and the Operating Partnership will make pro rata distributions to
their Shareholders and Unitholders of net income, if any, generated from their
investments and Barcap's property management activities as cash flow allows.
Properties in which the Trust and the Operating Partnership acquire an interest
are expected to use the straight-line method of depreciation over 27.5 years.


                                       29
<PAGE>

      The Trust, the Operating Partnership and Barcap 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 for
long-term ownership, and thereby to seek to maximize current and long-term
income and the value of its assets. The strategy of the Trust and the Operating
Partnership is to pursue acquisitions of interests in properties that: (i) are
available at prices below estimated replacement cost; (ii) may provide
attractive returns with significant potential growth in cash flow from property
operations; (iii) are strategically located, of high quality and competitive in
their respective markets; (iv) have been under-managed or are otherwise capable
of improved performance through intensive management and leasing that will
result in increased occupancy and rental revenues, and (v) provide anticipated
total returns that will increase distributions by the Trust and the Operating
Partnership and their overall market value. The Trust makes property investments
indirectly through the Operating Partnership, which holds all of its real estate
assets and conducts all real estate operations. As of the date of this Report,
the Operating Partnership has acquired property interests using the net proceeds
from the Trust's Cash Offering and by issuing its Units in connection with its
own Exchange Offering. The Operating Partnership has not acquired any property
interests since the completion of the Exchange Offering in April 2000. Unless
the context otherwise requires, the term "Trust" as used below in this item
collectively refers to Baron Capital Trust, the Operating Partnership and
Barcap.

      As a result of the proven success of the Trust's field management team and
the Trust's investment in residential apartment-oriented accounting software,
Barcap has been successful in attracting and retaining a variety of fee
management business from four outside property owners that control 1,263
apartment units. Barcap's strategy is to expand its third party property
management business to achieve economies of scale and the optimum level of
performance of its professional management team.

      The primary business objective of the Trust is to make distributions to
Shareholders and Unitholders and to increase the value of the Trust's portfolio
of properties in which it acquires an interest. The Trust intends to achieve
these objectives by:

       (i) Acquiring interests in residential apartment properties located in
the United States that are available at prices below estimated replacement cost
and capable of enhanced performance, both in terms of cash flow and investment
value, through application of the Trust's management ability and strategic
capital improvements;

      (ii) Acquiring mortgage loans, including subordinated mortgage loans,
secured by mortgages on existing residential apartment properties located in the
United States;

      (iii) Increasing cash flow of the Trust's property interests through
active leasing, rent increases, improvement in tenant retention, expense
controls, effective property management, and regular maintenance and periodic
renovations, including additions to amenities;

      (iv) Managing operating expenses through the use of affiliated leasing,
marketing, financing, accounting, legal, and data processing functions;

      (v) Emphasizing capital improvements to enhance the Trust's competitive
advantages in its markets; and

      (vi) Expanding Barcap's property management services for third party
property owners to achieve economies of scale and the optimum level of
performance of its professional management team.

      The Trust may also provide or acquire subordinated mortgage loans which
provide for the payment of a fixed or adjustable rate of interest plus, in
certain cases, participation interest that is payable out of available cash flow
remaining after the payment of operating expenses and debt service requirements
and/or out of net proceeds from the sale or refinancing of such property
remaining after the payment of transaction expenses and indebtedness secured by
such property. The repayment of such loans would be secured by a subordinated
mortgage on the underlying property. Subordinated mortgages securing loans that
may be provided or acquired by the Trust may or may not be recorded. None of the
subordinated mortgage interests acquired by the Operating Partnership as of the
date of this Report have been recorded due to restrictions contained in the
underlying first mortgage loan documents. (See "- Trust Policies with Respect to
Certain Activities - Investment Policies" below). The Trust will not provide or
acquire mortgage loans in respect of any property where the amount invested by
the Trust or the Operating Partnership plus the amount of any existing
indebtedness in respect of such property exceeds 80% of the property's estimated
replacement cost new unless substantial justification exists.

      The properties owned by the Exchange Partnerships, substantially all of
whose equity interests the Operating Partnership acquired in the Exchange
Offering, are collectively managed by Barcap and share property management and


                                       30
<PAGE>

administrative expenses. Other properties in which the Operating Partnership
acquires an interest will be similarly managed. Barcap manages residential
apartment properties for third party owners.

      The Trust intends to utilize one or more sources of capital for future
acquisitions and capital improvements, which may include undistributed cash
flow, borrowings, issuance of debt or equity securities and other bank and/or
institutional borrowings. The Trust intends to investigate making an additional
public or private offering of Common Shares and/or Units within the next 12-24
month period if the Board of the Trust determines that suitable property
acquisition opportunities that meet its investment criteria are available to the
Trust at attractive prices and such an offering would fulfill its cost of funds
requirements. There can be no assurance, however, that the Trust will be able to
obtain capital for any such acquisitions or improvements on terms favorable to
the Trust.

      The Trust qualified as a REIT for federal income tax purposes beginning
with its taxable year ending December 31, 1998 and believes it remains qualified
as such.

   Trust Policies with Respect to Certain Activities

      The following is a discussion of the Trust's policies with respect to
investments, dispositions, financings, and conflicts of interest. These policies
have been determined by the Board of Trustees of the Trust and under the
Declaration of Trust may be amended or revised from time to time at the
discretion of the Board with approval of a majority in interest of the
Shareholders entitled to vote on such matters. Section 1.9 of the Declaration of
Trust for the Trust contains certain additional limitations on the Trust's
activities.

      At all times, the Trust intends to make investments and conduct its
operations in such a manner as to be consistent with the requirements of the
Code for the Trust to qualify as a REIT unless, because of changing
circumstances or changes in the Internal Revenue Code of 1986, as amended (the
"Code") (or in Treasury Regulations), the Board of Trustees of the Trust, with
the consent of a majority of the Shareholders entitled to vote on such matter
approving the Board's determination, determines that it is no longer in the best
interests of the Trust to qualify as a REIT. No assurance can be given that the
Trust's objectives will be attained.

      Investment Policies

      The Trust's investment objective is to provide periodic cash distributions
and achieve long-term appreciation through increases in cash flows and the value
of its property interests. In early June 2003, the Operating Partnership made
its inital semi-annual distribution on outstanding Units of record as of May 30,
2003, including Units owned by the Trust, in the amount of $.02 per Unit. The
Trust, in turn, distributed such amount to its record Shareholders as of that
date. In 1998 and 1999, the Trust declared and paid $72,159 and $270,348,
respectively, of distributions on its outstanding Common Shares, representing a
return of capital. The Trust has not made a distribution since September 1999.

      The Trust intends to pursue its investment objectives by directly or
indirectly acquiring equity interests in residential apartment properties
located in the United States and/or providing or acquiring mortgage loans and
other real estate interests related to such types of properties consistent with
its qualification as a REIT. The Trust may invest in first mortgage loans or
subordinated mortgage loans and participating or convertible mortgages if it
concludes that it may benefit from the cash flow or any appreciation in the
value of the subject property. Such mortgages are similar to equity
participation. The Trust may also retain a purchase money mortgage for a portion
of the sale price in connection with the disposition of properties from time to
time.

      The Operating Partnership's ability to make future distributions will be
determined by the net cash flow it has available to make distributions. The
Trust and the Operating Partnership will make pro rata distributions to their
Shareholders and Unitholders of net income, if any, generated from investments
in property interests and from Barcap's third party property management
activities as cash flow allows.

      Subject to the percentage of ownership limitations and gross income tests
necessary for REIT qualification, the Trust also may invest in securities of
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities. The Trust
may acquire all or substantially all of the securities or assets of other REITs
or similar entities where such investments would be consistent with the Trust's
investment policies.

      The Trust will not make an equity investment in respect of any property
where the amount invested by it plus the amount of any existing indebtedness or
refinancing indebtedness in respect of such property exceeds the appraised value
of the


                                       31
<PAGE>

property. In addition, the Trust will not provide or acquire debt financing in
respect of any property where the amount invested by the Trust plus the amount
of any existing indebtedness in respect of such property exceeds 80% of the
property's estimated replacement cost new as determined by the Board of Trustees
unless substantial justification exists. Repayment of any mortgage loans
provided or acquired by the Trust would typically be secured by a mortgage on
the land, apartment units, and other improvements financed by the Trust and be
non-recourse to the borrower beyond the underlying property and/or other assets
of the borrower. It is expected that in most cases where it will provide or
acquire a loan, the Trust will provide or acquire a subordinated mortgage loan
that is subordinate to a large-scale first mortgage loan provided by a lending
institution. In certain cases, mortgage loans provided or acquired by the Trust
may be in the form of first mortgage loans.

      Subordinated mortgages securing subordinated mortgage loans provided or
acquired by the Trust may or may not be recorded. None of the subordinated
mortgage interests acquired as of the date of this Report have been recorded due
to restrictions contained in first mortgage loan documents. Where a subordinated
mortgage in favor of the Trust is not recorded, the Trust's security interest in
the mortgage would be unperfected and, until the subordinated mortgage is
recorded, the Trust would be pari passu (i.e., on an equal basis) with all other
unsecured creditors of the borrower. Non-payment of any subordinated mortgage
loan that may be provided or acquired by the Trust may constitute an event of
default by the borrower under the underlying senior mortgage loan, and such
senior mortgage loan may have to be repaid by the borrower before Shareholders
and Unitholders will receive any return on their investment.

      The Board of the Trust has adopted a policy, described below at " -
Conflict of Interest Policies," designed to eliminate or minimize potential
conflicts of interest which may arise in respect of any residential apartment
property investment opportunity which an Independent Trustee, any other member
of the Board, any member of senior management, or any of their respective
affiliates may wish to pursue for his own account and which might be suitable
for the Trust and the Operating Partnership.

      The Trust will obtain and maintain insurance coverage on property in which
it acquires an equity interest (and, prior to providing or acquiring any
mortgage loan in respect of a property, will be listed as an additional insured
or loss payee in respect of such property), protecting against casualty loss up
to replacement cost (with a deductible per loss ranging between $1,000 and
$5,000 except in the case of flood and hurricane damage where the deductible
ranges between 1% to 2% per loss), and against public liability in an amount
that is reasonable taking into account the market value of the property at the
time insurance is obtained. There can be no assurance, however, that the Trust's
property interest would not sustain losses in excess of its applicable insurance
coverage, and it could sustain losses as a result of risks which are
uninsurable. There are certain types of losses (generally of a catastrophic
nature, such as earthquakes, floods and wars) which may be either uninsurable or
not economically insurable.

      The Operating Partnership does not intend to acquire an interest in any
property which requires major maintenance unless: (i) sufficient amounts have
been reserved to complete such maintenance and, in connection with the
acquisition, the Operating Partnership will receive the benefit of such reserves
or (ii) the acquisition price for the property interest reflects the cost of
required major maintenance items and the Operating Partnership has the ability
to fund such maintenance from its resources. The Operating Partnership intends
to review each of the properties in which it acquires an interest to determine
the costs and benefits of undertaking any capital improvements that may increase
the property's profitability.

      Pending the commitment of Trust and Operating Partnership funds for
business purposes, for distributions to Shareholders and Unitholders or for
application of reserve funds to their purposes, the Board of Trustees has full
authority and discretion to make short-term investments in: (i) obligations of
banks or savings and loan associations that either have assets in excess of $5
billion or are insured in their entirety by the United States government or its
agencies and (ii) obligations of or guaranteed by the United States government
or its agencies. Such short-term investments may earn rates of return which are
lower than those earned in respect of properties in which the Trust may invest.

      The Trust intends to make investments in such a manner that it will not be
treated as an investment company under the Investment Company Act of 1940.

      Disposition Policies

      The Board of Trustees of the Trust periodically reviews the portfolio of
assets which the Trust acquires. Disposition decisions relating to a particular
property will be made based on (but not limited to) the following factors: (i)
potential to continue to increase cash flow and value; (ii) the sale price;
(iii) strategic fit of the property with the rest of the Trust's portfolio; (iv)
potential for, or the existence of, any environmental or regulatory problems;
(v) alternative uses of capital; and


                                       32
<PAGE>

(vi) maintaining qualification as a REIT. Any decision to dispose of a property
will be made by the Board of Trustees. The prohibitions in the Code and related
regulations on a REIT holding property for sale may affect the Trust's ability
to sell properties without adversely affecting distributions to Shareholders and
Unitholders.

      In April 2001, September 2002, and April 2003, the Operating Partnership
completed the sale of its interests in three properties (Glen Lakes, a 144-unit
residential apartment property located in St. Petersburg, Florida; Stadium Club,
a 223-unit student apartment property located in Statesboro, Georgia; and
Steeplechase Apartments, a 72-unit residential apartment property located in
Anderson, Indiana, respectively) whose performance has had a materially adverse
effect on the operating results and cash flows of the Company.

      Financing Policies

      The Trust will have the right to borrow funds, and use the Trust's
available assets as security for any such loan, if the Trust's cash requirements
exceed its available cash. Under the Declaration of the Trust, the aggregate
borrowings of the Trust in relation to its net assets may not exceed 300%,
except where the Trust determines that a higher level of borrowing is
appropriate. It is expected that each property in which the Trust invests will
secure a first mortgage loan. The principal balance of any such first mortgage
loan typically would represent a substantial percentage of the Trust's basis in
any property in which the Trust owns an equity interest.

      To the extent that the Board of Trustees desires that the Trust obtain
additional capital, the Trust may raise such capital through additional public
and private equity offerings, debt financing, retention of cash flow (subject to
satisfying the Trust's distribution requirements under the REIT rules) or a
combination of these methods. The Trust may determine to issue securities senior
to the Common Shares, including Preferred Shares and debt securities (either of
which may be convertible into Common Shares or be accompanied by warrants to
purchase Common Shares). The Trust may also finance acquisitions of properties
or interests in properties through the exchange of properties, the issuance of
Shares, or the issuance of Units of limited partnership interest in the
Operating Partnership and any other partnerships the Trust may form or acquire
an equity interest in to conduct all or a portion of its real estate operations.

      The proceeds from any borrowings by the Trust may be used to pay
distributions, to provide working capital, to purchase additional interests in
the Operating Partnership, to refinance existing indebtedness or to finance
acquisitions or capital improvements of new properties.

      Conflict of Interest Policies

      The Trust has adopted certain policies designed to eliminate or minimize
potential conflicts of interest, as described below. However, there can be no
assurance that these policies always will be successful in eliminating the
influences of such conflicts, and if they are not successful, decisions could be
made that might fail to reflect the interests of all Shareholders and
Unitholders.

      Senior management of the Trust has discretion in day-to-day management and
control of the affairs of the Trust and the Operating Partnership, subject to:
(i) general supervision and review by the Independent Trustees and the other
members of the Board of Trustees of the Trust and (ii) prior approval authority
of a majority of the Board and/or of a majority of the Independent Trustees in
respect of certain actions of the Trust and the Operating Partnership. The
Declaration of the Trust requires that a majority of the Board of the Trust be
comprised of Independent Trustees. Two of the three current members of the Board
of Trustees are Independent Trustees.

      Actions of the Trust and the Operating Partnership requiring approval of
the Board and/or the Independent Trustees include, without limitation, the
payment of compensation to members of senior management, Independent Trustees,
any other members of the Board of Trustees or any of their respective affiliates
in amounts in excess of certain specified limits for services performed for the
Trust, and the acquisition of properties from, or the sale of properties to, any
such parties. For example, the Trust may not purchase property from a member of
senior management, a Trustee, any other member of the Board of Trustees or any
of their respective affiliates unless a majority of the members of the Board
and, in addition, a majority of the Independent Trustees who have no other
interest in the particular proposed transaction (beyond their role on the Board
or as Independent Trustees) review the proposed transaction and determine that
it is fair and reasonable to the Trust and that the purchase price to the Trust
for such property is no greater than the cost of the property to such proposed
seller, or if the purchase price to the Trust is in excess of such cost, that
substantial justification for such excess exists and such excess is reasonable,
provided, however, in no event may the purchase price for the property exceed
its then current appraised value.


                                       33
<PAGE>

      The Board of Trustees has adopted a policy designed to eliminate or
minimize potential conflicts of interests which may arise in respect of
investment opportunities suitable for the Trust and the Operating Partnership
which may be presented to members of senior management, an Independent Trustee,
any other member of the Board, or any of their respective affiliates. Under the
policy, such parties may pursue for their own account a residential apartment
property investment opportunity which may be suitable for the Trust and the
Operating Partnership (i.e., in accordance with the purposes for which they were
organized) only upon fulfillment of the following conditions. First, the
requesting party or parties must deliver to the Board of the Trust, at least 60
days prior to the consummation of any such transaction, a written investment
proposal identifying the parties to be involved in such transaction, specifying
in reasonable detail the proposed terms and conditions of the particular
investment opportunity intended to be pursued and granting the Trust and the
Operating Partnership a right of first refusal, exercisable within 30 days
following the delivery of such proposal, to participate in the proposed
transaction in the place of the requesting party or parties, on the terms and
conditions specified in the written proposal.

      In addition, the requesting party or parties either: (i) must receive
written notice from a majority of the disinterested members of the Board (i.e.,
those persons who have no other interest in any such transaction beyond their
role on the Board), or an authorized representative acting on their behalf,
which specifies that the Trust and the Operating Partnership have determined not
to participate in the proposed transaction or (ii) must have not received from
the disinterested members of the Board, or an authorized representative acting
on their behalf, written notice, within 30 days following the receipt of such
written proposal, which notifies the requesting party or parties that the Trust
or the Operating Partnership elects to exercise its right of first refusal to
participate in the proposed transaction on the terms and conditions specified in
the written proposal.

      The Board of Trustees and the Independent Trustees are responsible for
overseeing the conflicts policy under the circumstances described above to
insure that it is applied fairly to the Trust. However, there can be no
assurance that the policies of the Trust and the Operating Partnership will
always be successful in eliminating or minimizing the influence of such
conflicts, and, if they are not successful, decisions could be made that might
fail to reflect fully the interests of all Shareholders and Unitholders.

Property Description

      Information relating to the Acquired Properties and the Exchange
Properties in which the Operating Partnership currently owns an interest are
described in the tables set forth above. The properties are primarily garden
style, one and two-story residential apartment dwellings which range in size
from eight units to 91 units. The Trust believes that the Acquired Properties
and the Exchange Properties generally occupy strategic locations in growing
sub-markets. The average unit size for properties is 642 square feet, with 22%
of the units having two or more bedrooms. A majority of the units have
washer/dryer connections and walk-in closets. Certain of the properties have
improved their attractiveness by investing in extensive landscaping and
rehabilitating certain units. Other features included in certain properties are
swimming pools, playgrounds, volleyball courts, fitness centers and community
rooms.

      Each of the Acquired Properties and Exchange Properties is a residential
apartment property and in one case, a condominium apartment property; there is
no tenant who occupies 10% or more of the rentable square footage. There is no
business, occupation or profession taking place on the properties, with the
exception of any home businesses being conducted from units.

      There is no lease, option, or contract to purchase or sell any of the
properties. A renovation program is in place at several properties, involving
both interior and exterior improvements at a cost of approximately $1,000 to
$1,500 per unit. The costs will be paid from maintenance reserves established
with the proceeds of refinancings. Estimated taxes on proposed improvements are
not material.

Lease Agreements

      The Operating Partnership and its subsidiary limited partnerships use a
variety of lease forms to comply with applicable state and local laws and
customs. At some properties, leases provided or recommended by state or local
apartment associations are used. At other properties, a standard company lease
is used and modified if necessary to comply with local law or custom. The term
of a lease varies with local market conditions; however, one-year leases are
most common. Generally, the leases provide that unless the parties agree in
writing to a renewal, the tenancy will convert at the end of a lease term to a
month-to-month tenancy, subject to the terms and conditions of the lease, unless
either party gives the other party at least 30


                                       34
<PAGE>

days' prior notice of termination. All leases are terminable by the Operating
Partnership and its subsidiary limited partnerships for nonpayment of rent,
violation of property rules and regulations, or other specified defaults.

Competition

      In general, there are numerous other residential apartment properties
located in close proximity to each of the Acquired Properties and the Exchange
Properties owned by the Operating Partnership. The number of units available in
any target metropolitan market could have a material effect on a property's
capacity to rent units and on the rents charged. In addition, in many of the
Trust's proposed sub-markets, institutional investors and owners and developers
of residential apartment properties compete for the acquisition and leasing of
properties. Many of these persons have substantial resources and experience.

      The properties are located primarily located in Florida and, as such,
subject to the competitive nature of the state. The demand for Florida units is
high between October and April and much lower for the other months. This
situation overrides any other competitive factor.

      The Operating Partnership faces increasing competition in the housing
markets where the Company has traditionally enjoyed strong market share. The
greater competitive forces are due to the general overbuilding of certain
tax-financed and amenity-rich competitive apartment properties and strong sales
of single-family homes to the Company's traditional rental tenant base driven by
current low interest rates.

Insurance

      The Trust believes that all of the Acquired Properties and the Exchange
Properties in which it currently owns an interest are adequately insured;
however, an uninsured loss could result in loss of capital investment and
anticipated profits.

ITEM 3. LEGAL PROCEEDINGS

      In September 2002, the Trust was named a defendant in 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 the
action, the plaintiff alleges that it is owed payment of approximately
$1,450,000 for services performed by it for defendants, plus court costs and
legal fees relating to enforcement of its rights. The plaintiff, a website
development service company, alleges that pursuant to a written contract it
performed services for Wakul, Inc. (formerly named Rapid Transmit Technologies,
Inc. and controlled by Gregory K. McGrath, a founder and former Chief Executive
Officer of the Trust and the Operating Partnership and a former Unitholder in
the Operating Partnership) 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
believes that the action against it is without merit and has moved to be
dismissed from the action on the grounds that it was not a party to the contract
between the plaintiff and Wakul, Inc. and that it is not affiliated with or
related to Wakul, Inc.

      The Trust and the Operating Partnership are also parties to various other
legal actions resulting from their 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 Operating Partnership or the Trust
taken as a whole.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

      None.

                                         PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information


                                       35
<PAGE>

      There is no established public trading market for the Trust's Common
Shares.

Common Shareholders

      As of March 1, 2003, there were approximately 463 holders of record of the
Trust's Common Shares, its only class of equity.

Distributions

      In 1998 and 1999, the Trust declared and paid $72,159 and $270,348,
respectively, of distributions on its outstanding Common Shares, representing a
return of capital. In early June 2003, the Operating Partnership made its
initial semi-annual distribution on outstanding Units of record as of May 30,
2003, including Units owned by the Trust, in the amount of $.02 per Unit. The
Trust, in turn, distributed such amount to its Shareholders of record as of that
date. The Trust's ability to make future distributions will be determined by the
net cash flow it has available to make distributions. The Trust and the
Operating Partnership will make pro rata distributions to their Shareholders and
Unitholders of net income, if any, generated from investments in property
interests as cash flow allows. See "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION."

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      The following discussion should be read in conjunction with the Trust's
Consolidated Financial Statements and Notes thereto. (See "ITEM 7 - 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, 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. 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.

      The Trust's long-lived assets, primarily interests in rental properties,
are carried at cost less accumulated depreciation, 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.


                                       36
<PAGE>

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 Trust 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.

Results of Operations

      Background Information

      Baron Capital Trust (the "Trust"), a Delaware business trust, and its
affiliate, Baron Capital Properties, L.P. (the "Operating Partnership") began
operations in 1998. The Trust, the Operating Partnership, and BARCAP Realty
Services Group, Inc., the Trust's taxable REIT subsidiary ("Barcap"), together
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. (The Trust, the Operating Partnership and Barcap are
collectively referred to herein as the "Company".) As its 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. Barcap manages residential apartment
properties totaling 1,263 units for third party owners, and shares personnel and
space with the Operating Partnership.

      Background information relating to the Trust, the Operating Partnership,
Barcap and their property interests and operations is set forth above at "ITEM
1. DESCRIPTION OF BUSINESS" and "ITEM 2. DESCRIPTION OF PROPERTIES" and
incorporated herewith.

      Initiatives of New Management

      In the second half of 2000, 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. In 2002, the Company achieved
the financial targets of its 12-month operating plan proposed by management and
adopted by the Board of Trustees. Management has also implemented several cost
saving measures, including the consolidation of its principal offices in
Lakeland, Florida and the sale or refinancing of certain of its properties.

      In the first three quarters of 2001, new management refinanced four well
performing properties that had small loans in relation to their value. The
refinancings generated approximately $1,875,000 of cash for the Operating
Partnership, were completed at interest rates lower than the prior interest
rates, and permitted the Company to pay down accounts payable, including those
owed to professionals for services performed in connection with the Exchange
Offering, and set up a cash reserve. The Operating Partnership has identified
several additional properties that it intends to refinance later in 2003 at
currently available interest rates that are significantly lower than current
rates. Such refinancings will have a significant positive effect on the
Operating Partnership's cash flow.

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

      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 the Trust's Common Shares on a recognized securities
exchange. Additional size is also desirable to give the Operating Partnership
and the Trust the operating margin necessary to support the professional
management team necessary for ensuring an optimum level of performance.

      The Operating Partnership has also initiated billing tenants for their
water used at several locations and intends to continue implementation of the
strategy at other properties as the markets permit.

      In October 2002, the Trustees of the Trust, together with management,
adopted a strategy for 2003 that includes:


                                       37
<PAGE>

      o     sustaining the level of financial performance achieved in 2002,

      o     building a climate of trust with Trust Shareholders and Operating
            Partnership Unitholders, and

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

      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 Shareholders and Unitholders 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.

      The table below summarizes the results of operations of the Trust for the
years ended December 31, 2002 and 2001.

                                                2002           2001
                                                ----           ----
      Revenues                              $ 6,514,362    $ 7,181,005
      Real Estate Expenses                    5,618,967      6,308,058
                                            -----------    -----------
      Property Income                           895,395        872,947
      Administrative Expenses                 1,688,518      1,669,243
      Other (Income) Expense                    329,248       (153,576)
      Minority and Exchangeable Interests
      of Limited Partners                      (829,521)      (504,836)
                                            -----------    -----------
      Net Loss                              $  (292,850)   $  (137,884)
                                            ===========    ===========

Consolidated Balance Sheet as of December 31, 2002 Compared to December 31, 2001

      Total Assets for the Trust decreased by $3,393,911 from $37,385,947 at
December 31, 2001 to $33,992,036 at December 31, 2002. Total Liabilities for the
Trust decreased by $2,723,982 from $27,420,459 at December 31, 2001 to
$24,696,477 at December 31, 2002. Shareholders' Equity increased by $387,445
from $2,271,183 at December 31, 2001 to $2,658,628 at December 31, 2002.

Operations for the Fiscal Year Ended December 31, 2002 Compared to the Fiscal
Year Ended December 31, 2001

      Revenues decreased by $666,643 from $7,181,005 for the year ended December
31, 2001 to $6,514,362 for the year ended December 31, 2002. Real Estate
Expenses for the properties owned by the Trust decreased from $6,308,058 for the
year ended December 31, 2001 to $5,618,967 for the year ended December 31, 2002.
The decrease in Revenues was principally due to the sale of Glen Lakes during
2001 and the sale of Stadium Club in 2002. The decrease in Real Estate Expenses
was principally due to the sale of the two properties as well. Administrative
Expenses increased by $19,265 from $1,669,243 for the year ended December 31,
2001 to $1,688,518 for the year ended December 31, 2002. The increase in
Administrative Expenses was principally due to an increased payroll expense
associated with the move of the corporate offices in 2002. Other (Income)
Expenses for the year ended December 31, 2002 were $329,248. These expenses were
primarily the result of the recognition of the provision for loan losses or bad
debt expense associated with the Trust's debt interests. The Trust recognized
two components of minority interest, income from the change in basic minority
interests as well as the change in interest attributed to exchangeable
partnership units. Minority interest income increased by $324,685 in 2002 from
$504,836 in 2001 to $829,521 in 2002. Most of the increase is due to an
increased ownership percentage with the forfeiture of the original investors
units in the Operating Partnership. The Trust's Net Loss for the year ended
December 31, 2002 was $292,850 compared to $137,884 for the year ended December
31, 2001.

Liquidity and Capital Resources

      Net cash provided by Operating Activities increased by $644,537 from
$521,847 cash used in the year ended December 31, 2001 to $122,690 cash provided
in the year ended December 31, 2002. The increase in net cash provided by
Operating Activities was principally due to a reduction in the amount recognized
for extinguishing debt and a larger recognition of provision for loan losses in
2002. Net Cash Provided from Investing Activities decreased $1,455,013 from
$2,776,552 cash provided for the year ended December 31, 2001 to $1,321,539 cash
provided for the year ended December 31, 2002. The decrease was principally due
to a reduction in the proceeds from the sale of assets in 2002. Cash Flow used
in Financing Activities increased by $993,397 from $849,238 cash used in the
year ended December 31, 2001 to $1,842,635 cash used in the


                                       38
<PAGE>

year ended December 31, 2002. The increase was principally due to reduced
proceeds from mortgage refinancings that were experienced in 2001.

      The Trust and the Operating Partnership intend to use their securities
(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.

            Generally, the target metropolitan markets and sub-markets have
benefited in prior periods from demographic trends (including population and job
growth) which have increased the demand for residential apartment units, while
financing constraints (specifically, reduced availability of development
capital) have limited new construction to levels below construction activity in
prior years. Consequently, rental rates for residential apartment units have
increased at or above the inflation rate for the past two years. 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. In contrast,
rental rates in the Orlando market have softened due to the general overbuilding
of tax-financed and amenity-rich competitive apartment properties there at the
same time that the tourism industry has suffered following the tragic events of
September 11, 2001.

      Generally, 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 loans with affiliates. However, due to the significant
reduction in interest rates the past few years, the Operating Partnership
intends to seek refinancing of certain properties as associated prepayment
penalties and restrictions expire in the third quarter of 2003. When such
refinancings occur, the Operating Partnership will enjoy lower debt service
requirements going forward.

      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, the Company's properties are
located primarily located in Florida, where the demand for units is higher
between October and April than it is for the other months.

      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.

      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 and has identified several additional
properties that it intends to refinance later in 2003 at currently available
interest rates that are significantly lower than current rates. Such
refinancings will have a significant positive effect on the Trust's cash flow.
In April 2001, September 2002, and April 2003, the Operating Partnership
completed the sale of its interests in three properties (Glen Lakes, a 144-unit
residential apartment property located in St. Petersburg, Florida; Stadium Club,
a 223-unit student apartment property located in Statesboro, Georgia; and
Steeplechase Apartments, a 72-unit residential apartment property located in
Anderson, Indiana, respectively) whose performance has had a materially adverse
effect on the operating results of the Company.

      The Trust is currently 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 of its Common Shares on a recognized securities
exchange.


                                       39
<PAGE>

Additional size would also give the Trust and the Operating Partnership the
operating margin necessary to support their valuable management team that is
believed necessary for their long-term growth.

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

Expected Impact of Recently Announced Accounting Standards

      In November 2002, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45).
FIN 45 introduces new disclosure and liability recognition requirements for
guarantees of debt that fall within its scope. The Trust has adopted FIN 45. The
liability recognition requirements will be applied for all guarantees entered
into or modified after December 31, 2002.

      In January 2003, FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). FIN 46 addresses consolidation by business
enterprises of variable interest entities which 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 provisions of FIN 46 are effective for
financial statements issued after January 31, 2003 and the Trust has adopted FIN
46 as of that date. The Trust has not yet completed its evaluation of the
applicability of FIN 46 to its current structure.

Other Developments

      In 2000, the Operating Partnership wrote off its $1,285,000 investment in
a 40% equity interest in Alexandria Development, L.P. (the "Alexandria
Partnership"), the owner of the Alexandria Property, due to the defaults on
indebtedness, recurring losses incurred by the property, contingent liabilities
under an equipment lease, a partners' deficiency, and an updated appraisal that
valued the property at an amount less than the total liabilities owed.

      The Operating Partnership originally acquired its interest in the
Alexandria Partnership from an affiliate of Gregory K. McGrath, a founder and
former Chief Executive Officer of the Trust and the Operating Partnership and a
former Unitholder in the Operating Partnership. In September 2001, Mr. McGrath
caused his affiliates to assign the remaining 60% limited partnership interest
in the Alexandria Partnership and certain other property interests to Sigma
Renaissance Corporation ("Sigma Renaissance"), a Michigan corporation controlled
by Jerome S. Rydell, a member of the Board of Trustees of the Trust. Sigma
Renaissance also became the managing general partner of the Alexandria
Partnership and other partnerships owning the assigned properties.

      Sigma Renaissance recently caused the Alexandria Partnership to file for
bankruptcy protection. The lender, however, was successful in lifting the
automatic stay in the bankruptcy proceeding. As a result, in the second quarter
of 2002, the bankruptcy proceeding was dismissed and the lender foreclosed on
the property and sold it to an unrelated third party. See "ITEM 2 - DESCRIPTION
OF PROPERTIES - Description of Properties - The Acquired Properties - Alexandria
Apartments".

      In addition, in 1998, former management caused the Trust to co-guarantee
(together with Mr. McGrath) 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). Assuming that
the Borrower completed the property development as originally planned and that
certain other 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. Neither the Trust nor the Operating Partnership or any of
their respective subsidiaries owns any interest in the property or the limited
partnership that owns record title to the property. The Trust, as guarantor, has
a potential contingent liability for the full outstanding amount of the loan,
which based on the most recent information available to the Trust, had an
outstanding principal balance of $6,478,000 as of October 1, 2001.

      Burlington Residential, Ltd., the owner of the Burgundy Hills Apartments
project (the "Borrower"), defaulted on the first mortgage loan and on 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.


                                       40
<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 all or a portion 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 believes that it is not probable that the guaranty 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. See "ITEM 2 - DESCRIPTION OF PROPERTIES - Description of Properties -
The Acquired Properties - Contract to Acquire Two Additional Properties".

      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 quarters 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 (formerly named Riverwalk) 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 Unitholders 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
and Mr. Geiger which were forgiven by the terms of the settlement agreements.

      In light of the foregoing, the Company is reviewing its accounting records
to ascertain whether certain expenses charged by Mr. McGrath and Mr. Geiger to
the Company during their tenure were incurred by them other than in connection
with the performance of their duties to the Company and thus improperly
reimbursed. The Company is also reviewing 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.

Economic Concerns

      Four recent developments could have a material impact on the performance
of the Trust and the Operating Partnership. First is the general downturn in the
U.S. economy due in large part to the collapse of the technological sector and
weakening of the tourism industry. This has translated into a significantly
softer summer apartment rental market, particularly in Florida. Occupancies and
collections have been impacted for the last 12 months, and management does not
anticipate any 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 hamper, for the foreseeable future,
companies' access to the public markets and financial institutions for capital.

      The third development arises out of the tragic events of September 11,
2001. While management believes it is still too early to understand how deeply
this event will impact the confidence of Americans and their way of life, it is
likely to


                                       41
<PAGE>

result in a more cash conscientious consumer, which could result in downward
pressure on rental rates.

      The fourth development is increasing competition in the housing markets
where the Company has traditionally enjoyed strong market share. The greater
competitive forces are due to the general overbuilding of certain tax-financed
and amenity-rich competitive apartment properties and strong sales of
single-family homes to the Company's traditional rental tenant base driven by
current low interest rates.

ITEM 7. FINANCIAL STATEMENTS

      Set forth below.


                                       42
<PAGE>

                               BARON CAPITAL TRUST

                          INDEX TO FINANCIAL STATEMENTS

                                                                         PAGE

INDEPENDENT AUDITORS' REPORTS                                         F-1 to F-2

CONSOLIDATED FINANCIAL STATEMENTS

   Balance Sheet                                                          F-3

   Statements of Operations                                               F-4

   Statements of Shareholders' Equity                                     F-5

   Statements of Cash Flows                                               F-6

   Notes to Financial Statements                                      F-7  to 23

<PAGE>

                     INDEPENDENT AUDITORS' REPORT

To the Shareholders
Baron Capital Trust
Lakeland, Florida

We have audited the accompanying consolidated balance sheet of Baron Capital
Trust and subsidiaries (the "Trust") as of December 31, 2002, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year ended December 31, 2002. These consolidated financial statements are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Baron Capital Trust
and subsidiaries as of December 31, 2002, and the results of their operations
and their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, the Trust adopted Statement
of Financial Accounting Standards No. 145, "Rescission of FASB Statement Nos. 4,
44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
effective October 1, 2002.

                                                 KPMG  LLP

Orlando, Florida
March 14, 2003, except for Note 15,
as to which the date is May 9, 2003


                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders
Baron Capital Trust
Lakeland, Florida

We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Baron Capital Trust (the "Trust") for the
year ended December 31, 2001. These consolidated financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Baron Capital Trust for the year ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

As discussed in the first paragraph of Recent Accounting Pronouncements in Note
1, the Trust adopted Statement of Financial Accounting Standards No. 145,
"Rescission of FASB Statement Nos. 4, 44 and 64, Amendment of FASB Statement No.
13, and Technical Corrections," effective October 1, 2002.

The accompanying consolidated financial statemens for the year ended December
31, 2001 have been restated as discussed in Note 2.


                            RACHLIN COHEN & HOLTZ LLP

Miami, Florida
February 14, 2002, except for the first paragraph
of Recent Accounting Pronouncements of Note 1,
as to which the date is October 1, 2002, and Note 2,
as to which the date is March 14, 2003


                                      F-2
<PAGE>

                              BARON CAPITAL TRUST

                           CONSOLIDATED BALANCE SHEET

                                                       December 31,
                                                           2002
                                                           ----

                            ASSETS
Rental Properties:
   Land                                                $  4,986,900
   Rental property held for sale                          1,533,503
   Buildings and improvements                            24,353,960
                                                       ------------
                                                         30,874,363
   Less accumulated depreciation                          4,279,172
                                                       ------------
                                                         26,595,191

Cash and cash equivalents                                 1,027,970
Restricted cash                                             242,169
Receivables from affiliates                               5,418,909
Other property and equipment                                 45,277
Other assets                                                662,520
                                                       ------------
                                                       $ 33,992,036
                                                       ============

             LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Mortgages payable                                   $ 19,753,903
   Mortgages payable - rental property held for sale      1,486,736
   Accounts payable and accrued liabilities                 260,696
   Notes payable                                            613,080
   Payables to affiliates                                 2,384,894
   Security deposits                                        197,168
                                                       ------------
         Total liabilities                               24,696,477
                                                       ------------

   Minority interest in consolidated partnerships           342,405
   Interests in exchangeable partnership units            6,294,526

Commitments and contingencies (Note 12)

Shareholders' Equity:
   Common shares, no par value; 25,000,000 shares
   authorized; 978,767 shares issued and outstanding     11,520,206
   Accumulated deficit                                   (8,519,071)
   Distributions                                           (342,507)
                                                       ------------
         Total shareholders' equity                       2,658,628
                                                       ------------
                                                       $ 33,992,036
                                                       ============

                See notes to consolidated financial statements.


                                      F-3
<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                          Years Ended
                                                                                          December 31,
                                                                                          ------------
                                                                                       2002           2001
                                                                                       ----           ----
<S>                                                                                <C>         <C>
Revenues:                                                                                      (As restated, Note 2)
   Rental Revenues                                                                 $ 5,147,944    $ 5,738,562
   Interest and other income                                                         1,366,418      1,442,443
                                                                                   -----------    -----------
       Total Revenues                                                                6,514,362      7,181,005

Real Estate Expenses:
   Depreciation                                                                        977,293      1,105,507
   Amortization of loan costs                                                          127,421        143,191
   Interest                                                                          1,902,302      1,919,811
   Repairs and maintenance                                                             585,419        662,951
   Personnel                                                                           754,884        821,950
   Property taxes                                                                      468,547        499,139
   Property insurance                                                                  175,114        143,301
   Utilities                                                                           403,627        528,623
   Other                                                                               224,360        483,585
                                                                                   -----------    -----------
       Total Real Estate Expenses                                                    5,618,967      6,308,058
                                                                                   -----------    -----------

Administrative Expenses:
   Personnel, including officer's compensation                                         740,924        643,305
   Professional services                                                               346,503        238,165
   Other                                                                               601,091        787,773
                                                                                   -----------    -----------
       Total Administrative Expenses                                                 1,688,518      1,669,243
                                                                                   -----------    -----------

Other (Income) Expenses:
   Write-off of related party notes receivable                                              --      1,093,124
   Income from loan discount repayment                                                      --       (400,881)
   Provision for (recovery of) loan losses                                             367,379       (641,601)
   Mortgage prepayment penalties and write-off of loan costs on refinanced loans            --      1,003,782
   Loss on assets held for sale or sold                                                 98,291        275,975
   Extinguishment of debt - non-affiliates (Note 6)                                   (136,422)      (104,720)
   Extinguishment of debt - affiliates (Note 11)                                            --     (1,267,755)
   Extinguishment of debt - former chief executive officer (Note 11)                        --       (111,500)
                                                                                   -----------    -----------
     Total Other (Income) Expenses                                                     329,248       (153,576)
                                                                                   -----------    -----------
     Loss before other interests                                                    (1,122,371)      (642,720)
                                                                                   -----------    -----------

   Minority interests of limited partners                                                2,552         35,382
   Interests in exchangeable partnership units                                         826,969        469,454
                                                                                   -----------    -----------

Net Loss                                                                           $  (292,850)   $  (137,884)
                                                                                   ===========    ===========

Loss per common share
   Basic                                                                           $     (0.30)   $     (0.15)
                                                                                   ===========    ===========
   Diluted                                                                         $     (0.31)   $     (0.15)
                                                                                   ===========    ===========

Weighted average number of common shares
   Basic                                                                               967,167        953,058
                                                                                   ===========    ===========
   Diluted                                                                           3,655,186      4,080,006
                                                                                   ===========    ===========
</TABLE>

                See notes to consolidated financial statements.


                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                                                                 Common Shares
                                                            -------------------------   Accumulated
                                                               Number       Amount        Deficit     Distributions     Total
                                                            -----------     ------        -------     -------------     -----
<S>                                                             <C>       <C>           <C>            <C>            <C>
Shareholders' Equity, December 31, 2000 (As restated,
 Note 2)                                                        915,891   $10,724,272   $(8,088,337)   $  (342,507)     2,293,428

   Common shares issued - settlement of debt                     25,000        75,500            --             --         75,500
   Conversion of operating partnership units                                                                                   --
      for common shares                                          22,455        40,139            --             --         40,139
   Net loss                                                          --            --      (137,884)            --       (137,884)
                                                            -----------   -----------   -----------    -----------    -----------

Shareholders' Equity, December 31, 2001 (As restated,
 Note 2)                                                        963,346    10,839,911    (8,226,221)      (342,507)     2,271,183

   Conversion of operating partnership units
      for common shares                                          15,421        36,394            --             --         36,394
   Settlement of debt                                                --        32,120            --             --         32,120
   Settlement of amounts owed to original
       investors and surrender of operating partnership
       units held by original investors - by terms of
       settlement agreement (Note 13)                                --       243,339            --             --        243,339
   Reallocation of minority interest                                 --       368,442            --             --        368,442
   Net loss                                                          --            --      (292,850)            --       (292,850)
                                                            -----------   -----------   -----------    -----------    -----------

Shareholders' Equity, December 31, 2002                         978,767   $11,520,206   $(8,519,071)   $  (342,507)   $ 2,658,628
                                                            ===========   ===========   ===========    ===========    ===========
</TABLE>

                See notes to consolidated financial statements.


                                      F-5
<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                   For the Year Ended
                                                                                                       December 31,
                                                                                                   2002           2001
                                                                                                   ----           ----
                                                                                                          (As restated, Note 2)
<S>                                                                                            <C>            <C>
Cash Flows from Operating Activities:
   Net loss                                                                                    $  (292,850)   $  (137,884)
   Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
         Extinguishment of debt                                                                   (136,422)    (1,483,975)
         Depreciation                                                                            1,030,829      1,143,826
         Provision for (Recovery of) loan losses                                                   367,379       (641,602)
         Loss on assets held for sale or sold                                                       98,291        275,975
         Amortization of loan costs                                                                127,421        143,191
         Loss on disposal of assets                                                                 31,268             --
         Minority interests of limited partners                                                     (2,552)       (35,382)
         Interests of exchangeable partnership units                                              (826,969)      (469,454)
         Write-off of loan costs on refinanced mortgages                                                --        176,769
         Write-off of related party notes receivable                                                    --      1,093,124
         Changes in operating assets and liabilities:
            Decrease (Increase) in operating assets:
               Other assets                                                                         50,350         (5,152)
            Increase (decrease) in operating liabilities:
               Accounts payable and accrued liabilities                                           (309,272)      (594,788)
               Security deposits                                                                   (14,783)        13,505
               Accrued interest payable, affiliates                                                     --             --
                                                                                               -----------    -----------
                  Net cash provided by (used in) operating activities                              122,690       (521,847)
                                                                                               -----------    -----------

Cash Flows from Investing Activities:
   Proceeds from sale of investment held for sale                                                1,550,396      3,424,146
   Additions to rental properties                                                                 (290,849)      (638,529)
   Purchases of other property and equipment                                                       (23,760)       (38,680)
   Advances to affiliates                                                                           (2,358)            --
   Increase in restricted cash                                                                      88,110         29,615
                                                                                               -----------    -----------
                  Net cash provided by investing activities                                      1,321,539      2,776,552
                                                                                               -----------    -----------

Cash Flows from Financing Activities:
   Proceeds from mortgage refinancings                                                                  --      8,095,000
   Payments on mortgages payable                                                                (1,783,965)    (8,474,147)
   Payments on notes payable                                                                       (58,670)      (554,862)
   Increase in loans payable to affiliates, net                                                         --        (84,771)
                                                                                               -----------    -----------
                  Net cash used in financing activities                                         (1,842,635)      (849,238)
                                                                                               -----------    -----------

Net (Decrease) Increase in Cash and Cash Equivalents                                              (398,405)     1,405,467

Cash and Cash Equivalents, Beginning                                                             1,426,375         20,908
                                                                                               -----------    -----------

Cash and Cash Equivalents, Ending                                                              $ 1,027,970    $ 1,426,375
                                                                                               ===========    ===========

Supplemental Disclosure of Cash Flow Information:
   Cash paid for mortgage and other interest                                                   $ 1,902,302    $ 1,847,309
                                                                                               ===========    ===========


Non-Cash Activities:
    Settlement of Debt                                                                         $    32,120    $    75,500
                                                                                               ===========    ===========
    Settlement of amounts owed to Original Investors (Note 14)                                 $   243,339    $        --
                                                                                               ===========    ===========
</TABLE>

                See notes to consolidated financial statements.


                                      F-6
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001

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 partnership. The Trust, the
      Partnership, and BARCAP Realty Services Group, Inc., 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 its general
      partner, the Trust controls the activities of the Partnership. The
      Partnership conducts all of the Trust's real estate operations and holds
      title to all property interests acquired. Barcap manages residential
      apartment properties totaling 1,263 units for third party owners, and
      shares personnel and space with the Partnership.

      The Trust also owns the largest limited partnership interest in the
      Partnership. As of December 31, 2002, the Trust owned a total of 978,767
      Units in the Partnership (or approximately 29.6% of the then outstanding
      Units). Such Units represent Units acquired by the Trust from the
      Partnership with the net proceeds from the Trust's Cash Offering
      (described below) and Units assigned to the Trust by holders of Units who
      have elected to convert their Units into Common Shares of the Trust since
      the completion of the Partnership's Exchange Offering (described below).
      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 owns a controlling interest in the Partnership and has therefore
      included the assets and liabilities of the Partnership in its accompanying
      consolidated financial statements. As of December 31, 2002, the
      Partnership (through ownership of all or substantially all of the equity
      interests in single purpose limited partnerships) owns equity interests in
      17 properties or phases of properties, consisting of 1,005 residential
      apartment units (comprised of studio, one, two and three bedroom units).
      In addition, the Partnership indirectly owns 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, two properties are located in Ohio and one property is
      located in Indiana.


                                      F-7
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Basis of Presentation

      The accompanying consolidated financial statements include the accounts of
      the Trust, the assets, liabilities, minority interests in consolidated
      partnerships and interests in exchangeable partnership units of the
      Partnership, and Barcap Realty Services Group, Inc. The Partnership
      includes 24 controlled limited partnerships that at December 31, 2002 had
      an indirect equity interest in 26 apartment communities. Interest in 21 of
      the 24 limited partnerships was acquired as a result of the Exchange
      Offering that was consummated April 7, 2000 (see Note 3).

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

      The provisions of the limited partnership agreements of the limited
      partnerships described above provide, among other things, that limited
      partners holding over 50% of the total partnership interest have the right
      to remove the general partner. Inasmuch as the Partnership owns from 91%
      to 99% of the partnership interests in the above limited partnerships, the
      Trust believes that the substance of these partnership arrangements is
      that the Trust and Partnership are in control and, accordingly, the Trust
      has consolidated the financial statements of these limited partnerships in
      the accompanying consolidated financial statements and has displayed the
      interests of limited partners as minority interests in limited
      partnerships. The interests of unitholders who have not exchanged their
      Partnership units for Trust shares are reflected as interests in
      exchangeable partnership units and not as Trust shares or as shareholders'
      equity of the Trust.

      Concentrations of Credit Risk

      Financial instruments that potentially subject the Trust to concentrations
      of credit risk are comprised of cash and receivables from affiliates.

      Cash and Cash Equivalents

      At various times during the year the Trust had deposits in financial
      institutions in excess of the federally insured limits. The Trust
      maintains its cash with high quality financial institutions, which the
      Trust believes limits these risks.

      The Trust considers all investments purchased with an original maturity of
      three months or less to be cash equivalents.

      Receivables from Affiliates

      Receivables from affiliates are comprised mainly of second mortgages, and
      accrued interest thereon, whose ultimate repayment is subject to the
      performance of the underlying property and timing of repayments. Also
      included are other receivables comprised of notes, lines of credit and
      advances receivable (see Note 7).


                                      F-8
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Receivables from Affiliates (continued)

      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 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                                          27.5
           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 Trust's properties have operations and cash flows that can be clearly
      distinguished from the rest of the Trust. 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 Trust and the Trust will not have any
      continuing involvement after disposition.

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


                                      F-9
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Revenue Recognition

      Apartment units are leased under operating leases with terms of generally
      one year or less. Rental income is recognized when due from tenants.
      Interest and other income are recorded as earned on the accrual basis.

      Restricted Cash

      Restricted cash includes capital replacement reserves, and tax and
      insurance escrow accounts held by lenders.

      Loan Costs

      The Trust has capitalized those costs incurred in connection with
      obtaining financing on the investment properties. Such costs (included
      with other assets) are being amortized over the term of the financing.

      Use of Estimates

      The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting period. Actual
      results could differ from those estimates.

      Reclassifications

      Certain items included in the 2001 consolidated financial statements have
      been reclassified to conform to the 2002 presentation.

      Income Taxes

      The Trust has not provided for federal income taxes because the Trust
      believes it qualifies as a Real Estate Investment Trust (REIT) under the
      applicable Sections of the Internal Revenue Code. A REIT will generally
      not be subject to Federal income taxation on that portion of its income
      that qualities as REIT taxable income to the extent that it distributes
      substantially all of its taxable income to its shareholders and complies
      with certain other requirements.

      Fair Value of Financial Instruments

      The respective carrying value of certain on-balance-sheet financial
      instruments approximates their fair value. These instruments include cash,
      receivables from affiliates, accounts payable and accrued liabilities and
      notes and other payables to affiliates. Fair values were assumed to
      approximate carrying values for these financial instruments since they are
      short-term in nature and their carrying amounts approximate fair values or
      they are receivable or payable on demand.

      The fair value of mortgages payable has been estimated by using discounted
      cash flow models incorporating discount rates based on current market
      interest rates for similar types of instruments. At December 31, 2002, the
      fair value of all mortgages payable was approximately $22.7 million.

      Net Loss per Common Share

      For all periods presented, basic net loss per common share reflects the
      computation using only the weighted average number of outstanding Common
      Shares of the Trust. Diluted net loss per common share also includes the
      effects of outstanding Partnership Units, which are exchangeable into
      Common Shares of the Trust, when such Units are dilutive.


                                      F-10
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Recent Accounting Pronouncements

      In April 2002, the Financial Accounting Standards Board (the "FASB")
      issued SFAS No. 145, "Rescission of SFAS Nos. 4, 44 and 64, Amendment of
      SFAS No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145 eliminates
      the requirement that all gains and losses from the extinguishment of debt,
      if material, be classified as an extraordinary item. However, a gain or
      loss arising from such an event or transaction would continue to be
      classified as an extraordinary item if the event or transaction is both
      unusual in nature and infrequent in occurrence. The Trust has elected to
      early adopt the provisions of SFAS 145 in the fourth quarter of 2002 and,
      accordingly, has reclassified all gains and losses from debt
      extinguishment recorded as extraordinary items in prior periods to
      continuing operations for all periods presented. As a result, gains
      recorded on early debt extinguishments of $136,422 and $1,483,975 have
      been reclassified to continuing operations for the years ended December
      31, 2002 and 2001.

      In November 2002, the Financial Accounting Standards Board (FASB) issued
      Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
      for Guarantees, Including Indirect Guarantees of Indebtedness of Others"
      (FIN 45). FIN 45 introduces new disclosure and liability recognition
      requirements for guarantees of debt that fall within its scope. The
      Company has adopted FIN 45. The liability recognition requirements will be
      applied for all guarantees entered into or modified after December 31,
      2002.

      In January 2003, FASB issued Interpretation No. 46, "Consolidation of
      Variable Interest Entities" (FIN 46). FIN 46 addresses consolidation by
      business enterprises of variable interest entities which 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 provisions of FIN 46 are effective for financial statements
      issued after January 31, 2003 and the Trust has adopted FIN 46 as of that
      date. The Trust has not yet completed its evaluation of the applicability
      of FIN 46 to its current structure.

NOTE 2. RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

      During 2002, the Trust determined that misstatements were reported in its
      previously issued 2001 consolidated financial statements. As a result, the
      Trust has restated its 2001 consolidated financial statements to include
      the effect of certain items as discussed below. The effects of the
      restatement are as follows:


                                      F-11
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 2. RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS (Continued)

                                      As Previously
                                          Reported     As Restated
                                          --------     -----------
      Consolidated Balance Sheet:
          Total Assets                $ 37,421,329    $ 37,385,947

          Minority interests in
          consolidated partnerships         88,279         344,957

          Interests in exchangeable
          partnership units                     --       7,349,348

          Total Liabilities             27,508,738      27,420,459

          Total Shareholders'
          Equity, Beginning             10,444,429       2,293,428

          Total Shareholders'
          Equity, Ending                 9,912,591       2,271,183

      Consolidated Statement of
      Operations:

          Minority interests in
          consolidated partnerships             --          35,382

          Interests in exchangeable
          partnership units                     --         469,454

          Net loss                        (607,338)       (137,884)

          Net loss per share                 (0.64)          (0.15)

      The Trust determined that minority interests in consolidated partnerships
      was understated as of December 31, 2001 and 2000 by $256,678 and $342,587,
      respectively, and that deferred loan costs of $35,382 had not been
      appropriately amortized in 2001. The Trust also determined that ownership
      interests in the Partnership represented by exchangeable Partnership
      Units, which have not been converted to Common Shares, should be reflected
      as interests in exchangeable Partnership units and not as a component of
      Trust equity. In addition, the Trust has determined that it is appropriate
      to allocate a portion of the Trust's previously reported net loss to the
      interests in consolidated partnerships or exchangeable partnership units.
      As a result of these adjustments, the restated net loss of the Trust was
      $137,884 for the year ended December 31, 2001.


                                      F-12
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 3. EXCHANGE OFFERING

      On April 7, 2000, pursuant to a registration statement on Form S-4, the
      Partnership completed an exchange offering (the "Exchange Offering") under
      which it acquired additional interests in residential apartment properties
      and one condominium apartment property. In the Exchange Offering, the
      Partnership issued 2,449,492 registered Partnership Units 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
      owned equity and/or debt interests in one or more of 25 residential
      apartment properties and one condominium apartment property located in the
      southeast and mid-west United States (the "Exchange Properties"). 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 was a founder and former
      Chief Executive Officer of the Trust and the Partnership and was a former
      principal unit holder of the Partnership.

      Following the completion of the Exchange Offering, the Exchange
      Partnerships continued to own the same property interests they owned prior
      to the offering; substantially all of the limited partnership interests in
      the 23 Exchange Partnerships were owned by the Partnership; Mr. McGrath,
      for nominal consideration, assigned to the Trust all of the equity stock
      in all the Corporate General Partners of the Exchange Partnerships ; the
      Corporate General Partner of each of the Exchange Partnerships assigned to
      the 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 Partnership
      owned substantially all of the economic interest represented by the equity
      and debt interests owned by the Exchange Partnerships and controlled
      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 approximately 97.4% of the aggregate 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
      were owned entirely by the Partnership (in the case of nine Exchange
      Partnerships in which all Exchange Limited Partners accepted the
      offering), and substantially all of the limited partnership interests in
      the other 14 Exchange Partnerships were owned by the 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. The interests attributable to Exchange Limited Partners who
      elected not to accept the offering are designated as minority interests in
      the accompanying consolidated financial statements.

      Of the Exchange Properties in which the Partnership continues to own an
      interest, 23 properties are located in Florida, two properties are located
      in Ohio and one in Indiana.


                                      F-13
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 4. AGREEMENT OF OPERATING LIMITED PARTNERSHIP

      The following is a summary of the significant provisions of the Agreement
      of Limited Partnership (the "Agreement") for Baron Capital Properties,
      L.P., the Operating Partnership, made and entered in 1998.

      Term

      The Partnership will continue through December 31, 2098, unless sooner
      terminated by law or under certain provisions of the Agreement.

      General Partner

      A number of Partnership Units held by the General Partner (the Trust)
      equal to 1% of the outstanding Partnership Units shall at all times be
      deemed to be General Partner Units and shall constitute the General
      Partner's interest, and the remaining Partnership Units held by the
      General Partner shall be deemed to be Limited Partner Units and shall
      constitute a portion of the Limited Partners' interest.

      The Partnership Units owned by the Trust have been reallocated each year
      to adjust the General Partner's interest to 1% of the total outstanding
      Partnership Units.

      The following is a summary of Partnership Units owned by, and partners'
      capital attributable to, the Trust and other Unit holders, whose interests
      are identified as interests in exchangeable partnership units in the
      consolidated balance sheet as of December 31, 2002:

<TABLE>
<CAPTION>
        General and Limited Partner     Limited Partner Units Owned
          Units Owned by the Trust         by Other Unit Holders                Total
        ---------------------------     ---------------------------    -----------------------
           Units           Amount          Units          Amount         Units        Amount
           -----           ------          -----          ------         -----        ------
<S>                     <C>              <C>           <C>             <C>         <C>
          978,767       $ 2,648,795      2,325,916     $ 6,294,526     3,304,683   $ 8,943,321
</TABLE>

      Distributions

           Cash Distributions

           The General Partner shall distribute not less frequently than
           quarterly an amount equal to 100% of distributable cash generated by
           the Partnership during such quarter to the Partners who are Partners
           on the Partnership Record Date with respect to such quarter; first,
           with respect to any class of partnership interest, and thereafter, in
           accordance with their respective percentage interest on such
           Partnership Record Date.

      Allocation of Income and Loss

      Allocations of all items of income, gain, expense, loss, deduction and
      credit recognized by the Partnership for federal income tax purposes will
      be made as follows:


                                      F-14
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 4. AGREEMENT OF OPERATING LIMITED PARTNERSHIP (continued)

            Income

            After giving effect to the special allocations set forth in the
            Agreement, net income shall be allocated first, to the General
            Partner to the extent that, on a cumulative basis, net losses
            previously allocated to the General Partner exceed net income
            previously allocated to the General Partner, and thereafter, to the
            partners in accordance with their respective percentage interests.

            Losses

            After giving effect to certain allocations set forth in the
            Agreement, net losses shall be allocated to the Partners in
            accordance with their respective percentage interest; provided,
            however, that net losses shall not be allocated to any limited
            partner to the extent that such allocation would cause such limited
            partner to have an adjusted capital account deficit at the end of
            such taxable year. All net losses in excess of the limitations set
            forth in the preceding sentence shall be allocated to the General
            Partner.

      Dissolution

      The Partnership will be dissolved upon (a) the expiration of the term of
      the Agreement; (b) withdrawal of the General Partner, unless, within 90
      days after the withdrawal a majority interest of all the remaining
      partners agree in writing to continue the business of the Partnership and
      to the appointment, effective as of the date of withdrawal, of a
      substitute General Partner; (c) the election to dissolve the Partnership
      made by the General Partner with the consent of a majority of the
      percentage interest of the limited partners; (d) entry of judicial
      dissolution of the Partnership pursuant to the provisions of the Delaware
      Revised Uniform Limited Partnership Act (the "Act"); (e) the sale or
      disposition of all or substantially all of the Partnership's property; (f)
      the merger or other combination of the Partnership with or into another
      entity; (g) bankruptcy or insolvency of the General Partner; and (h) the
      occurrence of any other event which, by law, would require the Partnership
      to be dissolved.

      Winding Up

      Upon the dissolution of the Partnership, the General Partner will take
      full account of the Partnership's assets and liabilities, and the assets
      will be liquidated as promptly as is consistent with obtaining fair value
      of the assets, and the proceeds will be applied and distributed (a) first,
      to the payment and discharge of all of the Partnership's debts and
      liabilities to creditors, other than partners; (b) then, any loans owed by
      the Partnership to the partners shall be paid in proportion thereto; and
      (c) finally, to the limited partners and the General Partner in proportion
      to their respective capital accounts, after giving effect to all
      contributions, distributions, and allocations for all periods.


                                      F-15
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 5. RENTAL APARTMENTS HELD FOR SALE

      During 2001, the Trust decided to sell two residential apartment
      properties -Stadium Club Apartments, a 60-unit apartment building located
      in Georgia, and Steeplechase Apartments, a 72-unit apartment building
      located in Indiana. The decision to sell these properties was based on the
      properties' lack of performance and their continuing need for cash
      infusions to operate. Stadium Club Apartments was sold on September 30,
      2002 (see Note 6). Steeplechase Apartments was sold in April 2003 (see
      Note 15). The carrying value of Steeplechase Apartments as of December 31,
      2002 was $1,533,503.

      The results of operations of Steeplechase Apartments for the year ended
      December 31, 2002 were as follows:

         Revenue                                          $298,001
         Expenses                                          355,561
                                                          --------
         Net loss                                         $(57,560)
                                                          ========

NOTE 6. SALE OF PROPERTY

      On December 7, 2000, the Independent Trustees of the Trust accepted an
      offer to sell Glen Lake Arms Apartments (Glen Lake), a 144-unit apartment
      building located in St. Petersburg, Florida for approximately $3,900,000.
      The decision to sell Glen Lake was based on the property's lack of
      performance and its continuing need for cash infusions to operate. On
      April 30, 2001, the Partnership consummated the sale of Glen Lake
      resulting in a loss on the sale of $210,843.

      The results of operations of Glen Lake for the three months ended March
      31, 2001 were as follows:

      Revenue                                             $328,816
      Expenses                                             293,842
                                                          --------
      Net income                                          $ 34,974
                                                          ========

      On September 30, 2002, the Trust sold Stadium Club Apartments (Stadium
      Club) for $1,400,000 plus payment by the purchaser of $221,000 in real
      estate brokerage fees and other expenses of the property. The sale
      resulted in a loss of $98,291.

      The results of operations of Stadium Club for the nine months ended
      September 30, 2002 were as follows:

      Rental and other income                            $ 195,610
      Expenses                                             317,075
                                                         ---------

      Net loss                                           $(121,465)
                                                         =========

      In connection with the sale of Stadium Club Apartments, various notes to
      non-affiliated parties were extinguished resulting in a gain during 2002
      of $136,422.


                                      F-16
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 7. RECEIVABLES FROM/PAYABLES TO AFFILIATES

      Mortgage Notes Receivable

      As of December 31, 2002, the Trust held discounted mortgage notes,
      including accrued interest, with a carrying value of $4,768,756 net of
      allowance for loan losses of approximately $2,310,000. The total face
      value plus accrued interest on these notes amounted to approximately
      $7,080,000 at December 31, 2002. The notes accrue interest at interest
      rates ranging from 6% to 12% and are generally paid currently to the
      extent of available cash flows. As of December 31, 2002, accrued interest
      relating to these mortgage notes receivables amounted to $1,924,163. The
      notes mature at various dates through April 20, 2008. The notes are
      secured by unrecorded liens upon certain real and personal property and
      are subordinated to first mortgages, which in the aggregate amounted to
      approximately $12,620,000 at December 31, 2002.

      The changes in the allowance for loan losses during 2002 and 2001 were
      approximately as follows:

                                                         2002          2001
                                                         ----          ----
            Beginning balance                         $1,940,000   $ 2,580,000
            Provision for (recovery of) loan losses      370,000      (640,000)
                                                      ----------   -----------
               Ending balance                         $2,310,000   $ 1,940,000
                                                      ==========   ===========

      Lines of Credit

      The Trust extends lines of credit to affiliates and is liable under lines
      of credit extended to the Exchange Properties from affiliates. Amounts due
      from affiliates accrue interest at 12% per annum and are due on demand.
      The balance due from affiliates under lines of credit was $650,153,
      including accrued interest of $273,018, as of December 31, 2002. Amounts
      due to affiliates accrue interest at 10%. Amounts due to affiliates under
      the lines of credit were $129,683, including accrued interest of $6,000,
      as of December 31, 2002.

      Unsecured Notes Payable

      The Trust has unsecured notes payable to three entities (controlled by a
      Trustee of the Trust) with annual interest rates ranging from 10% to 10.4%
      which are due on demand. As of December 31, 2002, the principal balance
      outstanding on these notes was $1,561,926, with accrued interest of
      $693,285 totaling $2,255,211.

      Summary of Receivables/Payables - Affiliates:

<TABLE>
<CAPTION>
                                                                     Receivables      Payables
                                                                     -----------      --------
<S>                                                                  <C>            <C>
      Mortgage notes  receivable, net of allowance for loan losses   $   4,768,75   $         --
      Lines of credit                                                     650,153        129,683
      Unsecured notes payable, including accrued interest                      --      2,255,211
                                                                     ------------   ------------

          Total                                                      $  5,418,909   $  2,384,894
                                                                     ============   ============
</TABLE>


                                      F-17
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 8. OTHER PROPERTY AND EQUIPMENT

      Furniture and equipment                                     $ 79,922
      Computer equipment and software                               98,449
      Leasehold improvements                                         1,409
                                                                  --------
                                                                   179,780
      Less accumulated depreciation                                134,503
                                                                  --------
                                                                  $ 45,277
                                                                  ========

      Depreciation expense for other property and equipment for the years ended
      December 31, 2002 and 2001 was $53,536 and $38,319, respectively, and is
      included in other administration expenses in the consolidated statement of
      operations.

NOTE 9. MORTGAGES PAYABLE

      In 1998, the Partnership acquired interests in three limited partnerships
      each owning a residential apartment property. In connection with the
      Exchange Offering completed April 7, 2000, the Partnership acquired 16
      partnerships that directly owned interests in 15 residential properties.
      Each property had a mortgage obligation that is secured by such property.
      Two of the above properties have been subsequently sold. Total mortgage
      loans on the remaining 16 properties amount to $21,240,639 at December 31,
      2002. The mortgage loans bear interest at rates ranging from 6.5% to 9.5%
      and mature on various dates through August 2028.

      The Trust believes that its 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 the Exchange
      Partnerships following the completion of the Exchange Offering, 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.

      The aggregate scheduled maturities of mortgages payable and interest for
      each of the five years subsequent to December 31, 2002 and thereafter,
      without regard to the remote potential of acceleration as described above,
      are as follows:

                                   Principal      Interest       Total
                                   ---------      --------       -----
       Year ending December 31:
          2003                    $   338,236   $ 1,677,693   $ 2,015,930
          2004                      3,127,315     1,548,384     4,675,699
          2005                      5,370,691     1,139,884     6,510,575
          2006                      4,948,582       882,871     5,831,453
          2007                        143,052       555,505       698,557
          2008 and thereafter       7,312,763     1,731,706     9,044,469
                                  -----------   -----------   -----------
             Total                $21,240,639   $ 7,536,043   $28,776,683
                                  ===========   ===========   ===========


                                      F-18
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 10. MORTGAGE REFINANCING

      On February 5 and July 31, 2001, the Trust refinanced the first mortgages
      on four rental properties. The information pertaining to the mortgages is
      as follows:

<TABLE>
<CAPTION>
                                  Original     Interest    Term        Maturity       Monthly
         Property                Principal       Rate     (Years)        Date         Payments
         --------                ---------       ----     -------        ----         --------
<S>                             <C>              <C>        <C>    <C>                <C>
         Pineview               $2,700,000       7.51%      25     February 5, 2011   $19,970
         Heatherwood             1,900,000       7.51       30     February 5, 2011    13,298
         Eagle Lake              1,900,000       7.51       25     February 5, 2011    14,053
         Crystal Court I         1,595,000       7.26       30      July 30, 2011      10,892
</TABLE>

      The Trust received approximately $1,875,000 in proceeds from the
      refinancing of the first mortgages. In connection with the refinancings,
      the Trust paid one-time prepayment penalties and wrote off deferred loan
      costs of approximately $1,004,000, which is included in other expenses in
      the accompanying 2001 consolidated statement of operations.

NOTE 11. EXTINGUISHMENT OF INDEBTEDNESS TO FORMER CHIEF EXECUTIVE OFFICER AND
          AFFILIATES

      In connection with the sale of the Glen Lake property, the Trust
      extinguished approximately $1,268,000 of payables due to affiliates and
      $111,500 due to the Partnership's former Chief Executive Officer. These
      liabilities were owed by Florida Capital Income Fund IV, Ltd. (one of the
      Exchange Partnerships that formerly owned the Glen Lake property) to
      certain affiliates, which were owned or controlled by Gregory K. McGrath,
      the Trust's former Chief Executive Officer. These amounts are included in
      other expenses in the accompanying consolidated statement of operations
      for 2001.

      The Trust also wrote-off accrued interest payable of approximately
      $113,000 relating to the extinguished payables due to related parties and
      approximately $23,000 of accounts payable. These amounts were recorded as
      reductions to interest expense and other administrative expenses in the
      accompanying consolidated statement of operations for 2001.

      During 2002 and 2001, the Trust entered into settlements with parties who
      provided legal counsel during the Exchange Offering. These settlements
      resulted in the extinguishment of approximately $136,000 and $105,000,
      respectively, in obligations that were previously included in accounts
      payable. These amounts are recorded as a reduction of professional
      services in the accompanying consolidated statement of operations for 2002
      and 2001.


                                      F-19
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 12. COMMITMENTS AND CONTINGENCIES

      Contracts 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, at the
      Trust's option, two luxury residential apartment properties in the
      development stage upon the completion of construction. At that time, Mr.
      McGrath controlled the three development companies. One of the properties
      was sold to a third party with the Trust's consent. In September 2001, Mr.
      McGrath assigned all of the outstanding partnership interests in the three
      partnerships to Sigma Renaissance Corporation, a Michigan corporation
      controlled by Jerome S. Rydell, a member of the Board of Trustees of the
      Trust. The remaining residential property (the "Burgundy Hills Property"),
      located in Florence, Kentucky (part of the Cincinnati metropolitan area),
      was originally scheduled to have a total of 396 units, comprised of one,
      two and three bedroom/one or two bathroom apartments, of which 98 have
      been completed and rented. Due to events described below, the anticipated
      date of completion of the Burgundy Hills Property and whether the
      development will be completed as originally planned are uncertain.

      In connection with the transaction, the Trust obtained a right of first
      negotiation to purchase the Burgundy Hills Property from its owner,
      Burlington Residential, Ltd., upon completion and a right of first refusal
      to purchase the property on the same terms offered by any third party. At
      that time, the purchase price was expected to be approximately
      $30,000,000, of which a significant portion would be funded with first
      mortgage financing. At the current time, the Trust does not have adequate
      resources to close on the transaction even if it were interested in doing
      so and even if construction were completed, and it is uncertain whether
      the Trust will have adequate resources to complete the transaction if
      construction is completed. In addition, as described below, because the
      owner of the first mortgage on the property has assumed control of the
      management of the Borrower and the development of the property, management
      believes it is unlikely that the Trust's purchase rights are still
      exercisable.

      In connection with the transaction, prior management caused the Trust to
      co-guarantee (together with Mr. McGrath) the first mortgage construction
      loan secured by the Burgundy Hills Property. Assuming that the Borrower
      completed the property development as originally planned and that certain
      other 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, has a potential
      contingent liability for the full outstanding amount of the loan, which,
      based on the most recent information available to the Trust, had an
      outstanding principal balance of $6,478,000 as of October 1, 2001.

      Burlington Residential, Ltd., the owner of the Burgundy Hills Property
      development (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


                                      F-20
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 12. COMMITMENTS AND CONTINGENCIES (Continued)

      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 believes that it is not probable that the guaranty 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.

      Operating Leases

      During 2002, the Trust executed an operating lease for its office
      facilities. The lease, which expires on February 28, 2005, requires
      monthly payments of $3,076. Minimum future lease payments through February
      28, 2005 (January 2003 to February 2005) are $80,000.

      Rent expense was approximately $22,750 and $35,000 for 2002 and 2001,
      respectively.

      Pending Litigation

      In September 2002, the Trust was named a defendant in 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
      the action, the plaintiff alleges that it is owed payment of approximately
      $1,450,000 for services performed by it for defendants, plus court costs
      and legal fees relating to enforcement of its rights. The plaintiff, a
      website development service company, alleges that pursuant to a written
      contract it performed services for Wakul, Inc. (formerly named Rapid
      Transmit Technologies, Inc. and controlled by Gregory K. McGrath, a
      founder and former Chief Executive Officer of the Trust and the Operating
      Partnership and a former Unitholder in the Operating Partnership) 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 believes that the
      action against it is without merit and has moved to be dismissed from the
      action on the grounds that it was not a party to the contract between the
      plaintiff and Wakul, Inc. and that it is not affiliated with or related to
      Wakul, Inc.

      The Trust is a party to various other 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.


                                      F-21
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 13. 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 a total of 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 of 1933, as amended (the "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

      The number of Units offered in the Exchange Offering in exchange for the
      limited partnership interests in the Exchange Partnerships was based on
      appraisals prepared by qualified and licensed independent appraisal firms
      for each underlying residential apartment property. For purposes of the
      Exchange Offering, each Unit was arbitrarily assigned an initial value of
      $10.00, which corresponds to the offering price of each Trust Common Share
      that was being offered to the public pursuant to a prior cash offering
      (the "Cash Offering"). The value of each Unit and Common Share outstanding
      was substantially identical since Unit holders, including recipients of
      Units in the Exchange Offering, are entitled to exchange all or a portion
      of their Units at any time and from time to time for an equivalent number
      of Trust Common Shares, so long as the exchange would not cause the
      exchanging party to own (taking into account certain ownership attribution
      rules) in excess of 5% of the then outstanding shares in the Trust,
      subject to the Trust's right to cash out any holder of Units who requests
      an exchange and subject to certain other exceptions. To facilitate such
      exchanges of Units into Common Shares, 2,500,000 Common Shares (in
      addition to the 2,500,000 Common Shares offered by the Trust in the Cash
      Offering) have been registered with the Securities and Exchange
      Commission.

      Partnership Limited Partnership Units

      In connection with the formation of the Trust and the Partnership, the
      original investors, Gregory K. McGrath and Robert S. Geiger, each
      subscribed for 601,080 limited partnership units of the Partnership (a
      total of 1,202,160 units). In consideration for the units subscribed for
      by them, each of them made a $50,000 capital contribution to the
      Partnership. The number of units subscribed for by each of them
      represented 9.5% (total 19.0%) of the maximum Common Shares that would
      have been outstanding after completion of the Cash Offering and the
      Exchange Offering assuming that the Trust had sold all Common Shares
      offered in the Cash Offering and that the 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 number of Units issued to the original investors was subsequently
      reduced pursuant to the subscription agreement entered into by them which
      provided that if, as of May 31, 2000, the


                                      F-22
<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

NOTE 13. SHAREHOLDERS' EQUITY (Continued)

      number of units subscribed for by them represented a percentage greater
      than 19% of the then outstanding Common Shares calculated on a fully
      diluted basis, they would be required to return any excess Units to the
      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 original investors deposited
      Units subscribed for by them into a security escrow account for a
      specified term of up to nine years.

      During 2002, as part of separate settlement agreements, each of the
      original investors agreed to forfeit his right to the Units issued to him.
      As a result, the number of outstanding Partnership Units was reduced by
      757,746 units. In connection with the settlement agreements, the Trust
      reversed $243,339 of accrued liabilities payable to affiliates of the
      original investors which were forgiven by the terms of the settlement
      agreements.

NOTE 14. 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 year. The computation of diluted net loss
      per share includes dilutive limited partnership unit equivalents in the
      weighted average shares outstanding amount.

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

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

      2002
      Basic       $  (292,850)           976,167        $(0.30)
                  ============         =========        ======
      Diluted     $(1,119,819)         3,655,186        $(0.31)
                  ============         =========        ======

      2001
      Basic       $   (137,884)          953,058        $(0.15)
                  ============         =========        ======
      Diluted     $   (607,338)        4,080,006        $(0.15)
                  ============         =========        ======

NOTE 15. SUBSEQUENT EVENT

      Sale of Steeplechase

      On April 25, 2003, the Trust sold its equity interest in Steeplechase
      Apartments, a 72-unit residential apartment property located in Anderson,
      Indiana. The purchase price paid for the property was $1,250,000. The
      decision to sell Steeplechase was based on the property's lack of
      performance and its continuing need for cash to operate. The sale resulted
      in a gain of approximately $80,000.


                                      F-23

<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      The Trust filed a Form 8-K with the Commission on December 27, 2002 to
disclose the dismissal of Rachlin Cohen & Holtz LLP as its independent public
accountants and the engagement of KPMG LLP to serve as its certified public
accountants in respect of its annual audit for the calendar year 2002. The Trust
amended the Form 8-K by filing a Form 8-K/A on January 14, 2003, as requested by
the Commission, to use the specific language provided in Item 304(a) of
Regulation S-B relating to the foregoing.

                                         PART III

ITEM 9. TRUSTEES, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS' COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

      The names of the persons that serve as members of the Board of Trustees
and executive officers of the Trust and the Operating Partnership and their
respective ages and positions are set forth below. Each of the Trustees other
than Mr. Rydell has served since 1998; Mr. Rydell has served since 2001. The
term of each Trustee is one year or until a successor has been elected. There is
no limitation on the number of terms a Trustee may serve.

<TABLE>
<CAPTION>
Name                          Age               Position
----                          ---               --------
<S>                           <C>               <C>
James H. Bownas               55                Independent Trustee - Trust
Peter M. Dickson              53                Independent Trustee - Trust
Jerome S. Rydell              57                Trustee - Trust
Robert L. Astorino            56                Chief Executive Officer - Trust and Operating Partnership
J. Stephen Miller             52                Vice President - Accounting - Trust and Operating Partnership
</TABLE>

      The senior management of the Trust has discretion in day-to-day management
and control of the affairs of the Trust and the Operating Partnership, based on:
(i) general supervision and review by the Independent Trustees and the other
members of the Board of Trustees of the Trust and (ii) prior approval authority
of a majority of the Board and/or of a majority of the Independent Trustees in
respect of certain actions of the Trust and the Operating Partnership. The
Declaration of the Trust requires that a majority of the Board of the Trust be
comprised of Independent Trustees. Two of the three current members of the Board
are Independent Trustees. The term as Trustee of each of the current Trustees
expires in June 2003, and each of them is expected to be nominated by the Trust
for re-election at the annual meeting of Shareholders to be scheduled for June
2003.

      The management of the Trust and the Operating Partnership has substantial
prior experience in and knowledge of the residential apartment property market
and its financing and experience in the management of investment programs and in
directing their operations.

      James H. Bownas, an Independent Trustee on the Board of Trustees of the
Trust since 1998, has been a principal in Gamble Hartshorn Johnson Co. LPA, a
Columbus, Ohio law firm with a general practice since November 1996. Mr.
Bownas's practice is concentrated in securities, real estate, taxation,
corporate and estate planning. Between January 1996 and November 1996, Mr.
Bownas managed his own legal practice. Between 1989 and January 1996, Mr. Bownas
served as General Counsel, Vice President and Secretary of Lexford, Inc.
("Lexford") (formerly Cardinal Realty Services, Inc. and before that Cardinal
Industries, Inc.), a publicly traded company headquartered in Reynoldsburg, Ohio
which has sponsored numerous real estate investment limited partnerships. At
Lexford, Mr. Bownas developed significant experience in the syndication of real
estate investment limited partnerships, negotiated the resolution of over $2
billion of creditors' claims in connection with the bankruptcy reorganization of
Cardinal Industries, Inc., and coordinated the transition of Cardinal
Industries, Inc. from a bankruptcy creditor to a successful publicly traded
company. Since 1995, Lexford has engaged in several arms-length transactions
with affiliates of Baron Advisors, Inc., the former Managing Shareholder of the
Trust, pursuant to which multi-family real estate was sold to, purchased from
and managed by and for such entities. None of such transactions represented a
material portion of Lexford's assets, liabilities, revenues or expenditures.


                                       43
<PAGE>

      Peter M. Dickson, an Independent Trustee on the Board of Trustees of the
Trust since 1998, has been managing director of the Guardian Management Company
Limited, a global financial services corporation based in Bermuda, since January
1991. In addition, since 1994 Mr. Dickson has served as a director to Grosvenor
Trust Company Limited, another Bermuda-based financial services corporation.
Between 1985 and 1990, Mr. Dickson served as the Executive Vice President of
Finance for The Wraxall Group, Bermuda. Between 1979 and 1985, Mr. Dickson held
several positions with Peat, Marwick.

      Jerome S. Rydell, a Trustee on the Board of Trustees of the Trust since
2001, is President and sole director and beneficial owner of Sigma Financial
Corporation ("Sigma"), a NASD registered broker-dealer that acted as the
underwriter of the Trust's public Cash Offering that ended in May 2000 and
participated in the Operating Partnership's Exchange Offering, pursuant to which
limited partners of certain limited partnerships formerly managed by affiliates
of Mr. McGrath were offered the right to exchange their limited partnership
interests in such partnerships in exchange for units of limited partnership
interest in the Operating Partnership. Mr. Rydell is also President and sole
director and beneficial owner of Sigma Planning Corporation, a registered
investment advisor and a subsidiary of Sigma. Sigma was formed in 1983 and
currently is licensed in 48 states. Its main office is located in Ann Arbor,
Michigan and its 48-member staff supports more than 500 registered
representatives. Both Sigma and Sigma Planning Corporation are registered with
the Securities and Exchange Commission.

      Sigma is also participating in the private offering of units of limited
partnership interest in Baron Lakeside Construction Fund, L.P. ("Baron
Lakeside") and Baron SABH Construction Fund, L.P. ("Baron SABH"). As of the date
of this Report, the two partnerships have raised approximately $2,135,530 out of
a total maximum of $4,150,000. The partnerships were originally sponsored and
formerly managed by affiliates of Gregory K. McGrath, the former Chief Executive
Officer of the Trust and the Operating Partnership, and are now managed by Sigma
Renaissance Corporation ("Sigma Renaissance"), which Mr. Rydell controls). In
September 2001, Mr. McGrath assigned all of the outstanding interests in the two
partnerships and their corporate general partners to Sigma Renaissance. The net
proceeds of these offerings have been and will be used to make loans to
owner/developers of residential condominium and apartment development properties
to enable them to pay down first mortgage indebtedness secured by such
properties and to cover outstanding payables owed to general contractors and
other vendors of the projects, construction completion expenses, interest
payments prior to repayment of the loans, working capital, and/or certain
administrative expenses. The owner/developers of the properties to be developed
were formerly controlled and managed by affiliates of Mr. McGrath. In September
2001, Mr. McGrath assigned all of the outstanding interests in the affiliates to
Sigma Renaissance. Sigma Renaissance has significant authority in respect of the
funding of construction completion requests from owner/developers; the sale of
properties to be developed; the management of entities that are involved in the
transactions contemplated in the two offerings; and distributions to limited
partners of Baron Lakeside and Baron SABH.

      Mr. Rydell and other affiliates have also sponsored a number of securities
offerings in both real estate and radio stations. In addition, other affiliated
companies currently manage real estate assets comprised of 1,500 residential
sites and $22 million of land contracts and mortgages in the metropolitan
Detroit area. See also "ITEM 12 - CERTAIN RELATIONS AND RELATED TRANSACTIONS"
below.

      Robert L. Astorino has served as Chief Executive Officer of the Trust
since May 2001 and as Chief Executive Officer of the Operating Partnership since
May 1998. Between August 2000 and May 2001, he served as Chief Operating Officer
of the Trust. From February 1998 through May 1998, he served as President -
Property of Strategic Management Inc., a real estate management company
affiliated with Mr. McGrath. From 1992 through January 1998, he served as
President of The Housing Partnership, Inc., a Louisville, Kentucky-based real
estate investment and consulting company. Between 1991 and 1992, Mr. Astorino
served as Assistant Vice President, Real Estate Operations at Great Western Bank
in Beverly Hills, California, where his responsibilities included the operation
and sale of residential and commercial real estate obtained in foreclosure.

      J. Stephen Miller was elected Vice President - Accounting of the Trust and
the Operating Partnership in March 2003. Between April 2002 and March 2003, Mr.
Miller served as their Controller. Between January 2001 and November 2001, he
served as a Senior Financial Analyst for Morton Plant Hospital Group, a
healthcare company, where he was responsible for assisting in the preparation of
the company's consolidated financial statements. Between March 1996 and July
2000, Mr. Miller served as Chief Financial Officer of a wholesale and retail
financing company, where he was responsible for accounting for revenues and
expenses and preparation of consolidated financial statements.

      During 2002, Mark L. Wilson served as the Chief Financial Officer of the
Trust and the Operating Partnership. In March 2003, he resigned and was replaced
by J. Stephen Miller as the principal financial and accounting officer of the
Trust and the Operating Partnership.


                                       44
<PAGE>

      The Corporate Trustee of the Trust is BARCAP Realty Services Group, Inc.
("Barcap"), a Delaware corporation originally formed in July 1997 under the name
Baron Capital Properties, Inc. Barcap is a wholly-owned subsidiary of the Trust.
Barcap's primary duty as Corporate Trustee is to operate an office in the State
of Delaware as Delaware law requires that at least one of the trustees of a
Delaware business trust (such as the Trust) have an office in Delaware. Barcap,
as Corporate Trustee of the Trust, will act only at the direction of the Board
of Trustees of the Trust, and will not take independent discretionary action on
behalf of the Trust in its capacity as Corporate Trustee. Barcap will not be
compensated for its services performed as Corporate Trustee, but will be
reimbursed only for its reasonable out-of-pocket expenses in serving in such
capacity which are approved in advance by the Board of Trustees. Such expenses
are expected to be limited to those incurred in connection with the operation of
its Delaware office. Barcap may in the future serve as a trustee of other
similar entities that may be organized by the Trust or the Operating
Partnership. Barcap also serves as a taxable REIT subsidiary of the Trust,
transacting all non-REIT related transactions for the Trust. It manages
properties for third party owners. The Chief Executive Officer and sole director
of Barcap is Robert L. Astorino. The principal Delaware office of Barcap is at
1105 North Market Street, Suite 1300, Wilmington, Delaware 19899.

      The Board of Trustees of the Trust has determined that Peter Dickson, one
of the Independent Trustees serving on its Audit Committee, is an "audit
committee financial expert" as such term is defined under Item 401(e) of
Regulation S-B issued under the Securities Act of 1933, as amended. The Board of
Directors has also determined that Mr. Dickson is an independent trustee of the
Trust within the definition of "independent director" under Section 121(A) of
the American Stock Exchange's listing requirements.

      Counsel to the Trust and the Operating Partnership is in the process of
drafting a code of ethics that will apply to their respective Chief Executive
Officer, principal financial officer, principal accounting officer and persons
performing similar functions. A discussion draft of the code of ethics is
expected to be presented to the Board of Trustees at its annual meeting
scheduled in July 2003, and a final version thereof is expected to be adopted by
the Board no later than the end of the third quarter of 2003. Once it is adopted
by the Board, the Trust will provide a copy of the code of ethics, without
charge, to any person who delivers a written request to receive a copy thereof
addressed to the Trust as follows: Baron Capital Trust, 3570 U.S. Highway 98
North, Lakeland, Florida 33809, Attention: Chief Executive Officer.

Section 16(a) of the Exchange Act Beneficial Ownership Reporting Compliance

      No reports were required to be filed in the most recent fiscal year
pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended,
since the Trust's Common Shares are not registered under the act.

ITEM 10. EXECUTIVE COMPENSATION

                               Annual Compensation

<TABLE>
<CAPTION>
                                                                        Long Term      All Other
Name and Principal Position              Year     Salary     Bonus    Compensation    Compensation
---------------------------              ----     ------     -----    ------------    ------------
<S>                                      <C>     <C>        <C>            <C>         <C>
Robert L. Astorino,                      2002    $192,500      --          --              --
Chief Executive Officer- Trust and       2001    $173,356   $60,000        --          $7,385 (1)
Operating Partnership                    2000    $149,899      --          --          $9,600 (1)

Mark L. Wilson, Former                   2002    $101,725      --          --              --
Chief Financial Officer - Trust and      2001    $111,382   $40,000        --          $6,575 (1)
Operating Partnership                    2000    $72,729       --          --          $9,791 (1)
</TABLE>

      (1) Company car allowance

      Each Independent Trustee is entitled to be paid an annual fee of $6,000
for serving the Trust in such capacity and to be reimbursed for all reasonable
expenses incurred by him in connection with the performance of his services in
such capacity on behalf of the Trust. In respect of services performed in such
capacity in 2002, each Independent Trustee received $6,000.


                                       45
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information regarding the
beneficial ownership of Common Shares of the Trust by: (i) each Trustee of the
Trust, (ii) the Chief Executive Officer and each other executive officer of the
Trust and the Operating Partnership, (iii) all Trustees of the Trust and all
executive officers of the Trust and the Operating Partnership as a group, and
(iv) to the Trust's knowledge, by any person owning beneficially more than 5% of
the outstanding Common Shares, in each case at December 31, 2002. Except as
otherwise noted, each person named in the table has sole voting and investment
power with respect to all Common Shares shown as beneficially owned by such
person. There is currently no public trading market for the outstanding Common
Shares issued by the Trust or Units issued by the Operating Partnership.

<TABLE>
<CAPTION>
             Name, Position and Address of                          Amount and Nature
           Beneficial Owner of Common Shares                     of Beneficial Ownership            Percentage
           ---------------------------------                     -----------------------            ----------
<S>                                                                       <C>                          <C>
James H. Bownas
Independent Trustee - Trust                                                 --                          --
c/o Gamble Hartshorn Johnson Co. LPA
1 East Livingston Avenue
Columbus, Ohio 43215

Peter M. Dickson
Independent Trustee - Trust                                                 --                          --
c/o Guardian Management Company Limited
33 Church Street
Hamilton, Bermuda HM 12

Jerome S. Rydell
Trustee - Trust                                                           97,450 (2)                   10.0%
c/o Sigma Financial Corporation
4261 Park Road
Ann Arbor, MI 48103

Robert L. Astorino
Chief Executive Officer-Trust and Operating                                 --                          --
Partnership (1)

J. Stephen Miller
Vice President- Accounting - Trust and Operating                            --                          --
Partnership (1)

All Trustees and executive officers of the                                97,450                       10.0%
Trust and Operating Partnership, as a group (5 members)
</TABLE>

      (1) The address of Messrs. Astorino and Miller is c/o Baron Capital Trust,
3570 U.S. Highway 98 North, Lakeland, Florida 33809.

      (2) Mr. Rydell is the beneficial owner of 97,450 Common Shares of the
Trust by virtue of his ownership of Sigma Financial Corporation ("Sigma"), which
earned such shares as commissions in connection with the Exchange Offering. See
"ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" below.


                                       46
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      From 1998 through 2002, the Operating Partnership directly or indirectly
entered into several transactions described below in which the amount exceeded
$60,000 and in which Baron Capital Trust (the "Trust"), the General Partner of
the Operating Partnership, or existing or former executive officers or Trustees
of the Trust or the Operating Partnership had an interest.

      1. The Trust is the general partner of the Operating Partnership and also
owns the largest limited partnership interest in the Operating Partnership. As
of March 1, 2003, the Trust owned 981,107 units of limited partnership interest
("Units") in the Operating Partnership (or approximately 29.7% of the then
outstanding Units). Such Units represent Units acquired by the Trust from the
Operating Partnership with the proceeds from the Trust's Cash Offering and Units
assigned to the Trust by holders of Units who have elected to convert their
Units into common shares of beneficial interest ("Trust Shares") in the Trust
since the completion of the Operating Partnership's Exchange Offering.

      2. Gregory K. McGrath and Robert S. Geiger founded the Trust and the
Operating Partnership, and they formerly served as the Chief Executive Officer
of the Trust and the Operating Partnership and the Chief Operating Officer of
the Operating Partnership, respectively. In connection with the formation of the
Trust and the Operating Partnership, Mr. McGrath and Mr. Geiger subscribed for a
total 1,202,160 Units in the Operating Partnership in exchange for a total cash
payment of $100,000. On May 31, 2000 (the termination date of the Cash
Offering), pursuant to an agreement among Mr. McGrath, Mr. Geiger, the Trust and
the Operating Partnership, each of Mr. McGrath and Mr. Geiger returned to the
Operating Partnership all but 378,873 Units, representing 9.5% of the then
outstanding Common Shares, calculated on a fully diluted basis assuming that all
then outstanding Units (other than those acquired by the Trust) had been
exchanged into an equivalent number of Common Shares. In 2002, Mr. McGrath and
Mr. Geiger assigned back to the Company all of their Units in settlement of
their alleged improper activities relating to the Operating Partnership's
investment in Alexandria Development, L.P. and the Dolphin Cove (formerly named
Riverwalk) property. Mr. McGrath and Mr. Geiger are no longer involved with the
Company in any capacity and do not own any equity or other interests in the
Trust, the Operating Partnership, the Exchange Partnerships, or any of their
respective property interests or other assets. See "ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - Other Developments" above.

      3. During 1998 and 1999, the Operating Partnership acquired a 40% limited
partnership interest in Alexandria Development, L.P. (the "Alexandria
Partnership") from an affiliate of Mr. McGrath for a purchase price of
$1,285,000. The purchase price was funded with a portion of the net proceeds of
the Trust's Cash Offering. The Alexandria Partnership formerly owned record
title to a residential apartment property under development in Alexandria,
Kentucky referred to as Alexandria Apartments. In 2000, the Operating
Partnership wrote off its investment in the Alexandria Partnership due to the
defaults on indebtedness, recurring losses incurred by the property, contingent
liabilities under an equipment lease, a partners' deficiency, and an updated
appraisal that valued the property at an amount less than the total liabilities
owed.

      In September 2001, Mr. McGrath caused his affiliate to assign the
remaining 60% limited partnership interest in the Alexandria Partnership and
certain other property interests to Sigma Renaissance Corporation ("Sigma
Renaissance"), a Michigan corporation controlled by Jerome S. Rydell, a member
of the Board of Trustees of the Trust. Sigma Renaissance also became the
managing general partner of the Alexandria Partnership and other partnerships
owning the assigned properties. In 2002, Sigma Renaissance caused the Alexandria
Partnership to file for bankruptcy protection. The lender, however, was
successful in lifting the automatic stay in the bankruptcy proceeding. As a
result, in the second quarter of 2002, the bankruptcy proceeding was dismissed
and the lender foreclosed on the property and sold it. See above at "ITEM 2.
DESCRIPTION OF PROPERTIES".

      4. Described above under "ITEM 2 - DESCRIPTION OF PROPERTIES - Description
of Properties - The Acquired Properties - Contract to Acquire Two Additional
Properties" and "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION - Other Developments" are certain transactions involving Mr. McGrath,
certain of his affiliates, and the Trust relating to the Burgundy Hills
Property.

      5. As described in "ITEM 1 - DESCRIPTION OF BUSINESS" and "ITEM 2 -
DESCRIPTION OF PROPERTIES - Description of Properties - The Exchange
Properties", effective April 7, 2000, the Operating Partnership acquired equity
and debt interests in residential apartment properties and one condominium
apartment property in connection with the completion of an Exchange Offering
made to individual limited partners of 23 limited partnerships originally
sponsored by Mr. McGrath and whose corporate general partners were controlled by
him.


                                       47
<PAGE>

      6. Described below are certain additional transactions involving Jerome S.
Rydell (a Trustee of the Trust), and the Trust, the Operating Partnership, and
affiliates of Mr. McGrath.

      (a)   Mr. Rydell is the President, a director and a beneficial owner of
            Sigma Financial Corporation ("Sigma"), a registered securities
            broker-dealer. Sigma served as the underwriter in the sale of the
            Trust's Common Shares in its best-efforts public Cash Offering that
            ended in May 2000. Sigma earned approximately $560,000 in
            commissions for sales it completed in the offering. In addition,
            Sigma also earned five-year warrants (which expired in May 2003) to
            acquire 59,676 Common Shares at an exercise price of $13.00 per
            share. Sigma allocated a portion of the cash commissions and
            warrants to its registered representatives.

      (b)   Sigma also participated in the Exchange Offering completed in April
            2000 by the Operating Partnership. In exchange for its services
            during the offering, Sigma earned 97,450 Common Shares as
            commissions.

      (c)   Sigma has also participated as a broker-dealer in numerous private
            offerings by investment programs (including the Exchange
            Partnerships acquired by the Operating Partnership in the Exchange
            Offering and WaKul, Inc.) sponsored and managed by Mr. McGrath or
            his affiliates. Sigma, Mr. Rydell and certain of Sigma's registered
            representatives are owed more than $100,000 in respect of those
            programs for outstanding commissions, offering fees, reimbursable
            expenses, and advances.

      (d)   Sigma Renaissance controls certain real estate investment programs
            that as of December 31, 2002 are owed a total of approximately
            $2,400,000 (comprised of approximately $1,700,000 of principal and
            $700,000 of accrued unpaid interest) for second mortgage loans made
            to certain Exchange Partnerships acquired by the Operating
            Partnership in the Exchange Offering. Sigma originally sponsored two
            of the creditor programs. Affiliates of Mr. McGrath originally
            sponsored the other creditor programs, and in September 2001 he
            caused his affiliates to assign all their interests in such programs
            to Sigma Renaissance.

            Sigma, Sigma Renaissance, the debtor limited partnerships and the
            creditor limited partnerships have agreed in principle to enter into
            a refinancing arrangement under which: (i) the Operating Partnership
            would make an upfront cash payment upon signing definitive
            documentation of approximately $500,000 to pay down a portion of the
            outstanding principal balance; (ii) accrued and unpaid interest
            would be paid upon signing definitive documentation in either Trust
            Common Shares or Operating Partnership Units (at the discretion of
            Sigma Renaissance) with an assigned value of $3.80 per share or
            unit; (iii) the remaining principal balance of the loans
            ($1,200,000) would be payable over 32 quarters, together with
            interest at the annual rate of 8%; (iv) going forward interest would
            be payable in Common Shares or Units with an assigned value of $3.80
            per share or unit; (v) the current notes evidencing the loans would
            be cancelled and replaced with a new note evidencing the payment
            terms of the remaining principal balance and future interest
            thereon; and (vi) payment of the new note would be secured by Units
            owned by the Trust and by property management fees earned by the
            Operating Partnership in respect of third party properties, net of
            ordinary and necessary operating expenses. The agreement in
            principle is not binding, and the obligations of the parties in
            connection with the proposed refinancing will be binding only upon
            the execution by the parties of definitive documentation containing
            the proposed terms and conditions and any other provisions mutually
            agreed upon by the parties.

      (e)   Sigma is also participating in the private offering sale of units of
            limited partnership interest in Baron Lakeside Construction Fund,
            L.P. ("Baron Lakeside") and Baron SABH Construction Fund, L.P.
            ("Baron SABH"). As of the date of this Report, the two partnerships,
            sponsored and formerly managed by affiliates of Mr. McGrath (and now
            managed by Sigma Renaissance Corporation ("Sigma Renaissance"), of
            which Mr. Rydell is a principal), have raised approximately
            $2,135,530 out of a total maximum of $4,150,000. In September 2001,
            Mr. McGrath assigned all of the outstanding interests in the two
            partnerships and their corporate general partners to Sigma
            Renaissance.

            The net proceeds of these offerings will be used to make loans to
            owner/developers of residential condominium and apartment
            development properties to enable them to pay down first mortgage
            indebtedness secured by such properties and to cover outstanding
            payables owed to general contractors and other vendors of the
            projects, construction completion expenses, interest payments prior
            to repayment of the loans, working capital, and/or certain
            administrative expenses. The owner/developers of the properties to
            be developed were formerly controlled and managed by affiliates of
            Mr. McGrath. In September 2001, Mr. McGrath assigned all of the
            outstanding interests in the affiliates to Sigma Renaissance.


                                       48
<PAGE>

            Following their completion, the development properties will be
            listed for sale, and the new development loans and prior development
            loans made by other investment limited partnerships sponsored and
            formerly managed by affiliates of Mr. McGrath (and now managed by
            Sigma Renaissance) to owner/developers formerly controlled by
            McGrath will be repaid out of any net proceeds from any such sales
            and sales of certain other interests formerly beneficially owned by
            Mr. McGrath in other properties.

            Sigma Renaissance has significant authority in respect of the
            funding of construction completion requests from owner/developers;
            the sale of properties to be developed; the management of entities
            involved in the transactions contemplated in the two offerings; and
            distributions to limited partners of Baron Lakeside and Baron SABH.
            In exchange for a construction fee, Sigma Renaissance will also
            supervise construction and serve as the onsite construction manager
            for the completion of development and construction on the unfinished
            development properties to be completed with the proceeds of the new
            development loans. Mr. Rydell serves as the manager of Sigma
            Renaissance.

            The roles of Mr. Rydell, Sigma and Sigma Renaissance in the Baron
            Lakeside and Baron SABH transactions are designed: (i) to mitigate
            conflicts of interest which affect Mr. McGrath due to his role as a
            former affiliate of Baron Lakeside, Baron SABH, owner/developers
            which borrow development funds and prior borrower and lender
            partnerships sponsored by Mr. McGrath and (ii) to provide for
            repayment of the new and prior development loans prior to the
            distribution of any net profits or any other payments to Mr. McGrath
            or any affiliates beneficially owned entirely by him attributable to
            the development properties.

      (f)   One of the limited partnership owners/developers assigned by
            affiliates of Mr. McGrath to Sigma Renaissance in September 2001,
            Sycamore Real Estate Development, L.P. (the "Sycamore Partnership"),
            owes a total of approximately $821,027 of second mortgage
            indebtedness (comprised of approximately $550,500 of principal and
            $270,527 of delinquent accrued interest) to three Exchange
            Partnerships acquired by the Operating Partnership in the Exchange
            Offering. The Sycamore Partnership owns a residential condominium
            property under development in Cincinnati, Ohio. All 26 units in
            phase I of the project have been completed and 25 of them have been
            sold. Phase II of the property is comprised of 20 acres of
            undeveloped land. The loan matures in December 2003 and requires
            quarterly interest payments only until maturity. No interest
            payments have been made as of the date of this report. In November
            2001, the Sycamore Partnership defaulted on the first mortgage loan
            secured by the property, and the first mortgage lender accelerated
            the loan. In September 2002, Mr. Rydell or an affiliate acquired the
            first mortgage loan from the lender.

      (g)   Another limited partnership owner/developer assigned by affiliates
            of Mr. McGrath to Sigma Renaissance in September 2001, Independence
            Real Estate Development, Ltd. (the "Independence Partnership"), owes
            the Operating Partnership a total of approximately $150,000 for
            property management fees for services performed, for advances made
            by the Operating Partnership and for inter-company loans made among
            properties prior to such assignment. The Independence Partnership
            defaulted on its first mortgage loan and the lender foreclosed on
            the property earlier in May 2003.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

            Documents filed as part of this report:

            (a)   Exhibits are either attached as part of this Report or
                  incorporated by reference herein.


                                       49
<PAGE>

   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).

   3.2*         Amended and Restated Declaration of Trust for 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 Baron Capital
                Trust filed with the Securities and Exchange Commission on May
                6, 2002).

   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).

   4.1*         Form of Common Share Certificate (incorporated herein by
                reference to Exhibit 4.1 to Amendment No. 2 to the Form SB-2
                Registration Statement of Baron Capital Trust filed with the
                Securities and Exchange Commission on April 24, 1998).

   10.1*        Form of Indemnification Agreement among the Registrant and its
                Trustees and officers (included in Sections 3.6 and 3.7 of the
                Amended and Restated Declaration of Trust referenced above in
                Exhibit 3.2)

   10.2*        Agreement of Limited Partnership of Baron Capital Properties,
                L.P. dated as of May 15, 1998 (incorporated herein by reference
                to Exhibit 10.6 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).

   21**         Subsidiaries of the Registrant

   99.1**       Certification pursuant to 18 U.S.C. Section 1350 Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

   99.2**       Certification pursuant to 18 U.S.C. Section 1350 Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

-------------
*     Previously filed.

**    Filed herewith.

            (b)   Reports on Form 8-K:

                  The Trust filed a Form 8-K with the Commission on December 27,
                  2002 to disclose the dismissal of Rachlin Cohen & Holtz LLP as
                  the Trust's independent public accountants and the engagement
                  of KPMG LLP to serve as the Trust's certified public
                  accountants in respect of its annual audit for the calendar
                  year 2002. The Trust amended the Form 8-K by filing a Form
                  8-K/A on January 14, 2003, as requested by the Commission, to
                  use the specific language provided in Item 304(a) of
                  Regulation S-B relating to the foregoing.

ITEM 14. CONTROLS AND PROCEDURES

      The Registrant 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


                                       50
<PAGE>

Commission's ("Commission") rules and forms, and (2) that this information is
accumulated and communicated to the Registrant's management, including its Chief
Executive Officer and Vice President - Accounting, 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.

      In April 2003, under the supervision and review of the Registrant's Chief
Executive Officer and Vice President - Accounting, the Registrant conducted an
evaluation of the effectiveness of its disclosure controls and procedures. 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 Registrant
(including its consolidated subsidiaries) that is required to be included in its
periodic reports to the Commission.

      In addition, there have been no significant changes in the Registrant's
internal controls or in other factors that could significantly affect those
controls since its April 2003 evaluation. The Registrant cannot assure, however,
that its system of internal controls and procedures will always achieve its
stated goals under all future conditions, no matter how remote.

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                              BARON CAPITAL TRUST


June 6, 2003                             By:  /s/ Robert L. Astorino
                                              -------------------------------
                                                 Robert L. Astorino,
                                                 Chief Executive Officer

      In accordance with the Securities Exchange Act of 1934, this Report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

Signatures                     Title                              Date
----------                     -----                              ----


/s/ Robert L. Astorino         Chief Executive Officer            June 6, 2003
-----------------------        (Principal Executive Officer)
Robert L. Astorino


/s/ J. Stephen Miller          Vice President - Accounting       June 6, 2003
-----------------------        (Principal Financial and
J. Stephen Miller              Accounting Officer)


/s/ James H. Bownas            Trustee                            June 6, 2003
-----------------------
     James H. Bownas


/s/ Peter M. Dickson           Trustee                            June 6, 2003
-----------------------
     Peter M. Dickson


/s/ Jerome S. Rydell           Trustee                            June 6, 2003
-----------------------
     Jerome S. Rydell


                                       51
<PAGE>

                                 Certifications

I, Robert L. Astorino, the Chief Executive Officer of Baron Capital Trust (the
"Registrant"), certify that:

1.    I have reviewed this annual report on Form 10-KSB of the Registrant;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary in
      order to make the statements made, in light of the circumstances under
      which such statements were made, not misleading with respect to the period
      covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the Registrant as of, and for, the periods presented in this annual
      report;

4.    The Registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
      have:

(a)     Designed such disclosure controls and procedures to ensure that material
        information relating to the Registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities,
        particularly during the period in which this annual report is being
        prepared;

(b)     Evaluated the effectiveness of the Registrant's disclosure controls and
        procedures as of a date within 90 days prior to the filing date of this
        annual report (the "Evaluation Date"); and

(c)     Presented in this annual report our conclusions about the effectiveness
        of the disclosure controls and procedures based on our evaluation as of
        the Evaluation Date;

5.    The Registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the Registrant's auditors and the audit
      committee of the Board of Trustees of the Registrant:

(a)     All significant deficiencies in the design or operation of internal
        controls which could adversely affect the Registrant's ability to
        record, process, summarize and report financial data and have identified
        for the Registrant's auditors any material weaknesses in internal
        controls; and

(b)     Any fraud, whether or not material, that involves management or other
        employees who have a significant role in the Registrant's internal
        controls; and

6.    The Registrant's other certifying officer and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls
      subsequent to the date of our most recent evaluation, including any
      corrective actions with regard to significant deficiencies and material
      weaknesses.


Date: June 6, 2003                /s/ Robert L. Astorino
                                ------------------------------
                                    Robert L. Astorino
                                    Chief Executive Officer


                                       52
<PAGE>

                                 Certifications

I, J. Stephen Miller, the Vice President - Accounting of Baron Capital Trust
(the "Registrant"), certify that:

1.    I have reviewed this annual report on Form 10-KSB of the Registrant;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary in
      order to make the statements made, in light of the circumstances under
      which such statements were made, not misleading with respect to the period
      covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the Registrant as of, and for, the periods presented in this annual
      report;

4.    The Registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
      have:

(a)     Designed such disclosure controls and procedures to ensure that material
        information relating to the Registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities,
        particularly during the period in which this annual report is being
        prepared;

(b)     Evaluated the effectiveness of the Registrant's disclosure controls and
        procedures as of a date within 90 days prior to the filing date of this
        annual report (the "Evaluation Date"); and

(c)     Presented in this annual report our conclusions about the effectiveness
        of the disclosure controls and procedures based on our evaluation as of
        the Evaluation Date;

5.    The Registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the Registrant's auditors and the audit
      committee of the Board of Trustees of the Registrant:

(a)     All significant deficiencies in the design or operation of internal
        controls which could adversely affect the Registrant's ability to
        record, process, summarize and report financial data and have identified
        for the Registrant's auditors any material weaknesses in internal
        controls; and

(b)     Any fraud, whether or not material, that involves management or other
        employees who have a significant role in the Registrant's internal
        controls; and

6.    The Registrant's other certifying officer and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls
      subsequent to the date of our most recent evaluation, including any
      corrective actions with regard to significant deficiencies and material
      weaknesses.


Date: June 6, 2003                   /s/ J. Stephen Miller
                                   ----------------------------------
                                      J. Stephen Miller
                                      Vice President - Accounting
                                      (Principal Financial and Accounting
                                      Officer)


                                       53