<PAGE>


            SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A

(MARK ONE)

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


                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998


                                       OR

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


                        COMMISSION FILE NUMBER 333-35063
                            ------------------------


 BARON CAPITAL TRUST (Name of Small Business Issuer as Specified in its Charter)
<TABLE>
<CAPTION>

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


<PAGE>


    7826 COOPER ROAD CINCINNATI, OHIO 45242 (Address of Principal Executive
                          Offices including Zip Code)


         (513) 984-5001 (Issuer's Telephone Number, including Area Code)

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

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

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT: COMMON SHARES OF
BENEFICIAL INTEREST, NO PAR VALUE

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 pursuant 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 $396,884.

As of March 31, 1999 the aggregate market value of voting and non-voting equity
common stock held by non-affiliates (based on total shares outstanding reduced
by the number of shares held by trustees, officers, and other affiliates) of the
registrant was five million eight hundred thirty-eight thousand four hundred and
three dollars ($5,838,403) based on the actual cash paid for shares issued by
the four hundred and six (406) investors.

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_______


<PAGE>


         The purpose of this Form 10-KSB/A is to amend in its entirety Part
II-Item 7 Financial Statements contained in Form 10-KSB for the year ended
December 31, 1998 filed by Baron Capital Trust on May 14, 1999 with the
Commission under Commission file number 333-35063.


<PAGE>


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










                               BARON CAPITAL TRUST

                              FINANCIAL STATEMENTS

                                DECEMBER 31, 1998












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


<PAGE>

                               BARON CAPITAL TRUST


<TABLE>
<CAPTION>
                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------
                                                                                          PAGE
                                                                                          ----
<S>                                                                                      <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                                         F-1


CONSOLIDATED FINANCIAL STATEMENTS

   Balance Sheet                                                                           F-2

   Statement of Operations                                                                 F-3

   Statement of Shareholders' Equity                                                       F-4

   Statement of Cash Flows                                                                 F-5

   Notes to Financial Statements                                                         F-6-F-26
</TABLE>


<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Trustees and Shareholders
Baron Capital Trust
Cincinnati, Ohio


We have audited the accompanying consolidated balance sheet of Baron Capital
Trust (the "Trust") as of December 31, 1998 and the related consolidated
statements of operations, shareholders' equity and cash flows from inception
(February 3, 1998) to December 31, 1998. 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 generally accepted auditing standards.
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 financial position of Baron
Capital Trust as of December 31, 1998, and the consolidated results of their
operations and their cash flows from inception (February 3, 1998) to December
31, 1998, in conformity with generally accepted accounting principles.



                            RACHLIN COHEN & HOLTZ LLP

Miami, Florida
April 13, 1999


<PAGE>

                               BARON CAPITAL TRUST

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                 ASSETS
                                 ------
<S>                                                                                <C>
Rental Apartments:
   Land                                                                            $1,178,693
   Depreciable property                                                             6,189,095
                                                                                   ----------
                                                                                    7,367,788
   Less accumulated depreciation                                                    1,246,627
                                                                                   ----------
                                                                                    6,121,161

Investments in Partnerships                                                           709,970

Cash and Cash Equivalents                                                             177,299
Restricted Cash                                                                        66,199
Property Management Reimbursements Receivable, Affiliates                             155,071
Other Receivables                                                                      80,112
Advances to Affiliates                                                                 10,750
Other Property and Equipment                                                          168,982
Other Assets                                                                          212,761
                                                                                   ----------
                                                                                   $7,702,305
                                                                                   ----------
                                                                                   ----------
</TABLE>

<TABLE>
<CAPTION>

                  LIABILITIES AND SHAREHOLDERS' EQUITY
                  ------------------------------------
<S>                                                                                <C>
Liabilities:
   Mortgages payable                                                               $ 4,039,718
   Note payable                                                                        375,000
   Accounts payable and accrued liabilities, including
      $136,941 to Managing Shareholder                                                 388,385
   Capital lease obligation                                                             55,984
   Security deposits                                                                    38,336
                                                                                   -----------
         Total liabilities                                                           4,897,423
                                                                                   -----------

Commitments, Contingencies and Other Matters                                                 -

Shareholders' Equity:
   Common shares of beneficial interest, no par value; 2,500,000
      shares authorized; 463,650 shares issued and outstanding                       4,454,101
   Deficit                                                                          (1,577,060)
   Distributions                                                                       (72,159)
                                                                                   -----------
         Total shareholders' equity                                                  2,804,882
                                                                                   -----------
                                                                                   $ 7,702,305
                                                                                   -----------
                                                                                   -----------
</TABLE>


                See notes to consolidated financial statements.
                                      F-2


<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENT OF OPERATIONS

             FROM INCEPTION (FEBRUARY 3, 1998) TO DECEMBER 31, 1998

<TABLE>
<S>                                                                                <C>
Revenues:
   Property:
      Rental                                                                       $   358,949
      Other                                                                             35,155
   Equity in net loss of unconsolidated partnership                                    (20,360)
   Interest income                                                                       2,780
                                                                                   -----------
                                                                                       376,524
                                                                                   -----------

Real Estate Expenses:
   Depreciation                                                                         80,296
   Interest                                                                            164,333
   Repairs and maintenance                                                              86,349
   Personnel                                                                            53,860
   Property taxes                                                                       34,496
   Property insurance                                                                   20,477
   Utilities                                                                            27,299
   Other                                                                               138,905
                                                                                   -----------
                                                                                       606,015
                                                                                   -----------

Administrative Expenses:
   Personnel, including officer's compensation                                         718,715
   Management, investment and administrative fees, Managing Shareholder                324,213
   Professional services                                                               129,011
   Other                                                                               275,630
                                                                                   -----------
                                                                                     1,447,569
                                                                                   -----------

      Total expenses                                                                 2,053,584
                                                                                   -----------

Loss Before Minority Interest                                                       (1,677,060)

Minority Interest of Unitholders in Net Loss of Operating Partnership                  100,000
                                                                                   -----------

Net Loss                                                                           $(1,577,060)
                                                                                   -----------
                                                                                   -----------

Net Loss Per Common Share                                                          $     (7.41)
                                                                                   -----------
                                                                                   -----------
Weighted Average Number of Common Shares Outstanding                                   212,731
                                                                                   -----------
                                                                                   -----------
</TABLE>


                See notes to consolidated financial statements.
                                      F-3


<PAGE>

                               BARON CAPITAL TRUST

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

             FROM INCEPTION (FEBRUARY 3, 1998) TO DECEMBER 31, 1998


<TABLE>
<CAPTION>
                                                      Common Shares of
                                                     Beneficial Interest
                                                     -------------------
                                                    Shares          Amount         Deficit       Distributions        Total
                                                -------------   -------------   -------------    -------------    -------------
<S>                                             <C>             <C>             <C>              <C>              <C>
Initial Capital Contributions:

   Managing Shareholder                                    10   $         100   $           -    $           -    $         100

Proceeds from Sale of Common Shares of
   Beneficial Interest, Net of Offering Costs         463,640       4,257,001               -                -        4,257,001

Distributions Paid                                          -               -               -          (72,159)         (72,159)

Credit for Officer's Compensation                           -         197,000               -                -          197,000

Net Loss                                                    -               -      (1,577,060)               -       (1,577,060)
                                                -------------   -------------   -------------    -------------    -------------

Balance, December 31, 1998                            463,650   $   4,454,101   $  (1,577,060)   $     (72,159)   $   2,804,882
                                                -------------   -------------   -------------    -------------    -------------
                                                -------------   -------------   -------------    -------------    -------------
</TABLE>


                See notes to consolidated financial statements.
                                      F-4


<PAGE>

                               BARON CAPITAL TRUST

                      CONSOLIDATED STATEMENT OF CASH FLOWS

             FROM INCEPTION (FEBRUARY 3, 1998) TO DECEMBER 31, 1998

<TABLE>

<S>                                                                                     <C>
Cash Flows from Operating Activities:
   Net loss                                                                             $(1,577,060)
   Adjustments to reconcile net loss to
      net cash used by operating activities:
         Provision for officer's compensation                                               197,000
         Minority interest of unitholders in net loss of Operating Partnership             (100,000)
         Depreciation                                                                        80,296
         Equity in net loss of unconsolidated partnership                                    20,360
         Increase in operating assets and liabilities:
            Other receivables                                                               (80,112)
            Property management reimbursements receivable                                  (155,071)
            Other assets                                                                   (221,611)
            Accounts payable and accrued liabilities                                        388,385
            Security deposits                                                                38,336
         Other                                                                                  762
                                                                                        -----------
               Net cash used by operating activities                                     (1,408,715)
                                                                                        -----------

Cash Flows from Investing Activities:
   Acquisitions of rental apartments                                                     (1,559,162)
   Investment in partnerships                                                              (741,280)
   Cash distributions from partnerships                                                      10,950
   Purchases of other property and equipment                                               (117,771)
   Increase in restricted cash                                                              (66,199)
   Advances to affiliates                                                                   (10,750)
                                                                                        -----------
               Net cash used in investing activities                                     (2,484,212)
                                                                                        -----------

Cash Flows from Financing Activities:
   Proceeds from sale of common shares of beneficial interest                             4,265,089
   Distributions paid                                                                       (72,159)
   Initial capital contributions                                                            100,100
   Payment on note payable                                                                 (200,000)
   Payments on mortgages payable                                                            (19,019)
   Payments on capital lease obligation                                                      (3,785)
                                                                                        -----------
               Net cash provided by financing activities                                  4,070,226
                                                                                        -----------

Net Increase in Cash and Cash Equivalents                                                   177,299

Cash and Cash Equivalents, Beginning                                                              -
                                                                                        -----------
Cash and Cash Equivalents, Ending                                                       $   177,299
                                                                                        -----------
                                                                                        -----------

Supplemental Disclosure of Cash Flow Information:
   Cash paid for mortgage and other interest                                            $   164,333
                                                                                        -----------
                                                                                        -----------
</TABLE>


                See notes to consolidated financial statements.
                                      F-5


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1998



NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION AND CAPITALIZATION

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

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

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

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

         BASIS OF PRESENTATION

             The accompanying consolidated financial statements include the
             consolidated accounts of the Trust and the Operating Partnership.
             The Trust is the general partner of the Operating Partnership and
             owns approximately 81% of the limited partner units of the
             Operating Partnership. The consolidated accounts of the Operating
             Partnership include the accounts of three limited partnerships in
             which the Operating Partnership is the controlling limited partner,
             by virtue of its right to remove the general partner due to its
             majority ownership percentage in those limited partnerships.

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

             The minority interest of unitholders in the Operating Partnership
             represents the 1,202,160 limited partnership units owned by the
             Original Investors of the Operating Partnership (see Note 9), and
             is stated at the amount of the capital contribution by them to the
             Operating Partnership ($100,000), reduced by their proportionate
             share of the net loss of the Operating Partnership limited to the
             $100,000 contribution. During 1998, the proportionate share of the
             net loss of the Operating Partnership allocated to the minority
             unitholders was $100,000 with


                                       F-6


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

             BASIS OF PRESENTATION (Continued)

                the excess of approximately $71,000 being charged to the
                majority unitholders. As of December 31, 1998, the 1,202,160
                Operating Partnership limited partnership units issued to the
                Original Investors are subject to escrow restrictions and
                108,757 units are convertible into common shares of the Trust
                (see Note 9).

             CONCENTRATIONS OF CREDIT RISK

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

                CASH
                        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.

                PROPERTY MANAGEMENT REIMBURSEMENTS AND OTHER RECEIVABLES
                        Receivables are comprised mainly of property management
                        reimbursements due to the Operating Partnership from
                        various properties it manages and monthly rents due. The
                        Operating Partnership monitors exposure to credit losses
                        and does not maintain an allowance for these
                        receivables, as it believes that these receivables are
                        fully collectible.

             REAL ESTATE RENTAL PROPERTIES AND DEPRECIATION

                Real estate rental properties 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:

<TABLE>
<CAPTION>
                                                                                                    Estimated Useful
                                                                                                     Lives (Years)
                                                                                                     -------------
                  <S>                                                                                <C>
                  Building                                                                                 30
                  Leasehold improvements                                                                   10
                  Furniture and fixtures                                                                    7
                  Computer equipment and software                                                         3-5
</TABLE>

                Losses in carrying values of investment assets are provided by
                management when the losses become apparent and the investment
                asset is considered impaired in accordance with Statement of
                Financial Accounting Standards No. 121, "Accounting for the
                Impairment of


                                      F-7


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

             REAL ESTATE RENTAL PROPERTIES AND DEPRECIATION (Continued)

                Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
                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. No such losses have been required or provided in the
                accompanying consolidated financial statements.

             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.

             CASH AND CASH EQUIVALENTS

                For purposes of the statement of cash flows, the Trust considers
                all investments purchased with an original maturity of three
                months or less to be cash equivalents.

             INVESTMENTS IN PARTNERSHIPS

                The Trust, through the Operating Partnership, accounts for its
                investments in limited partnerships in which it is deemed not to
                have the controlling interest, but has more than a minor limited
                partnership interest, utilizing the equity method of accounting.
                The Operating Partnership's investment in Alexandria
                Development, L.P., which represents a 12.3% interest at December
                31, 1998, is accounted for using the equity method (see Note 3).

                Investments in partnerships in which the Operating Partnership's
                interest is so minor that the Partnership has virtually no
                influence over partnership operating and financial policies are
                accounted for utilizing the cost method. These investments
                generally represent less than 5% of the partnership interest
                (see Note 3). The Trust periodically assesses the estimated
                realizable value of these investments in order to ascertain that
                there has been no impairment in their recorded value.

             CAPITAL RESERVE

                In connection with the acquisition of the investment properties,
                as required by the lending institutions, the Trust has
                established a capital reserve account, which is to be used for
                significant improvements to the property.

             LOAN COSTS

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


                                      F-8


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

             USE OF ESTIMATES

                The preparation of financial statements in conformity with
                generally accepted accounting principles 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.

             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 Section 856 to 860 of the Internal Revenue Code. A
                REIT will generally not be subject to Federal income taxation on
                that portion of its income that qualifies as REIT taxable income
                to the extent that it distributes substantially all of its
                taxable income to its stockholders and complies with certain
                other requirements.

             FAIR VALUE OF FINANCIAL INSTRUMENTS

                The respective carrying value of certain on-balance-sheet
                financial instruments approximated their fair value. These
                instruments include cash, receivables, accounts payable and
                accrued liabilities. 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 debt instruments 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, 1998, the differences between
                estimated fair value and the carrying value of debt instruments
                were not material.

             RECENT ACCOUNTING PRONOUNCEMENTS

                In June 1997, the Financial Accounting Standards Board issued
                SFAS No. 130, "Reporting Comprehensive Income" and No. 131,
                "Disclosures about Segments of an Enterprise and Related
                Information." SFAS No. 130 establishes standards for reporting
                and displaying comprehensive income, its components, and
                accumulated balances. SFAS No. 131 establishes standards for the
                way that public companies report information about operating
                segments in annual financial statements and requires reporting
                of selected information about operating segments in interim
                financial statements issued to the public. Both SFAS No. 130 and
                SFAS No. 131 are effective for periods beginning after December
                15, 1997. The Trust adopted these new accounting standards in
                1998, and their adoption had no effect on the Trust's financial
                statements and disclosures.


                                      F-9


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

             RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

                In June 1998, the Financial Accounting Standards Board issued
                SFAS No. 133, "Accounting for Derivative Instruments and Hedging
                Activities." SFAS No. 133 requires companies to recognize all
                derivatives contracts as either assets or liabilities in the
                balance sheet and to measure them at fair value. If certain
                conditions are met, a derivative may be specifically designated
                as a hedge, the objective of which is to match the timing of the
                gain or loss recognition of the hedging derivative with the
                recognition of (i) the changes in the fair value of the hedged
                asset or liability that are attributable to the hedged risk or
                (ii) the earnings effect of the hedged forecasted transaction.
                For a derivative not designated as a hedging instrument, the
                gain or loss is recognized in income in the period of change.
                SFAS No. 133 is effective for all fiscal quarters of fiscal
                years beginning after June 15, 1999.

                Historically, the Trust has not entered into derivatives
                contracts to hedge existing risks or for speculative purposes.
                Accordingly, the Trust does not expect adoption of the new
                standard on January 1, 2000 to affect its financial statements.


NOTE 2.      RENTAL APARTMENTS

             HEATHERWOOD APARTMENTS

                On June 30, 1998, the Operating Partnership acquired the entire
                limited partnership interest, representing a 99% partnership
                interest, in Heatherwood Kissimmee, Ltd., (the "Heatherwood
                Property") a Florida limited partnership which owns fee simple
                title to a 67-unit residential property located at Kissimmee,
                Florida for a purchase price of approximately $830,000. The
                Heatherwood Property is subject to first mortgage financing with
                an original balance of approximately $1,250,000 collateralized
                by the property. The mortgage calls for monthly payments of
                principal and interest of $8,847 and bears a fixed interest rate
                of 7.625%. The entire balance, including accrued interest, is
                due on December 2004 and may be prepaid with a prepayment fee
                equal to 1% of the then outstanding principal balance. The
                principal balance outstanding as of December 31, 1998 was
                $1,238,755.

             CRYSTAL COURT APARTMENTS

                On July 31, 1998, the Operating Partnership acquired the entire
                limited partnership interest, representing a 91% partnership
                interest, in Crystal Court Apartments II, Ltd., (the "Crystal
                Court Property") a Florida limited Partnership which owns fee
                simple title to an 80-unit residential apartment property
                located in Lakeland, Florida for a purchase price of
                approximately $704,000. The Crystal Court Property is subject to
                first mortgage financing with an original balance of $1,494,000
                collateralized by the property. The mortgage calls for monthly
                payments of principal and interest of $10,446 and bears a fixed
                interest rate of 7.5%. The entire balance, including accrued
                interest, is due on October 2004 and may be prepaid with


                                      F-10


<PAGE>
                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

                a prepayment fee equal to 1% of the then outstanding principal
                balance. The principal balance outstanding as of December 31,
                1998 was $1,477,797.


                                      F-11


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 2.      RENTAL APARTMENTS (Continued)

             RIVERWALK APARTMENTS

                On September 1, 1998, the Operating Partnership acquired the
                entire limited partnership interest, representing a 99%
                partnership interest, in Riverwalk Enterprises, Ltd., (the
                "Riverwalk Property") a Florida limited partnership which owns
                fee simple title to a 50-unit residential property located at
                New Smyrna Beach, Florida for a purchase price of approximately
                $700,000. The Riverwalk Property is subject to first mortgage
                financing with an original balance of approximately $1,400,000
                collateralized by the property. The mortgage calls for monthly
                payments of principal and interest of $11,626 and bears a fixed
                interest rate of 8.75% amortized over 25 years. The holder of
                the first mortgage has the right to adjust the rate in October
                1999 for the remaining five years of the loan to a rate equal to
                200 basis points above the then current rate for five-year
                treasury notes. The entire balance, including accrued interest,
                is due on October 2004 and may be prepaid with a prescribed
                prepayment fee. The principal balance outstanding as of December
                31, 1998 was $1,323,166.

                In connection with the purchase of the Riverwalk Property, the
                Trust executed a promissory note payable to the sellers of the
                Riverwalk Property with an original balance of $575,000. The
                note called for a lump-sum payment of principal and accrued
                interest at a rate of 18% per annum on December 1, 1998. In
                December 1998, the Operating Partnership paid $226,163 of
                principal and interest towards the note and exercised its option
                to extend the maturity of the note to February 1, 1999 for an
                extension fee of 1% of the original loan amount or $5,750. The
                principal balance outstanding as of December 31, 1998 was
                $375,000.

                Subsequent to December 31, 1998, the Operating Partnership
                exercised another option to extend the note to June 1, 1999 and
                additional extensions to September 1, 1999 for an extension fee
                of 1% of the outstanding loan amount or $3,750 for the June
                extension and additional fees for the September extension.


NOTE 3.      INVESTMENTS IN PARTNERSHIPS

<TABLE>
             <S>                                                                     <C>
             Alexandria Property                                                     $368,690
             Other Limited Partnership Interests                                      341,280
                                                                                     --------
                                                                                     $709,970
                                                                                     --------
                                                                                     --------
</TABLE>

             ALEXANDRIA APARTMENTS

                On October 14, 1998, the Operating Partnership acquired an
                approximate 12% limited partnership interest in Alexandria
                Development, L.P. (the "Alexandria Property"), a Delaware
                limited partnership, which is the owner and developer of a
                168-unit residential apartment property under construction in
                Alexandria, Kentucky. The Operating Partnership paid $400,000
                for eight (8) units of limited partnership interest out of a
                total of sixty-five (65) units and retains an option to acquire
                the remaining fifty-seven (57) units of limited partnership


                                      F-12


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


                interests for $50,000 per unit or approximately $2,850,000. The
                option is exercisable as additional apartments are completed and
                rented and expires on October 15,


                                      F-13


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 3.      INVESTMENTS IN PARTNERSHIPS (Continued)

             ALEXANDRIA APARTMENTS (Continued)

                1999. An affiliate of the Trust sold the partnership interest in
                the Alexandria Property to the Operating Partnership and also
                serves as the managing general partner of the Alexandria
                Property. During the construction stage of the apartment
                property, the Operating Partnership's limited partnership
                interest in the Alexandria Property is entitled to an annual 12%
                preferential return, which is senior to the other limited
                partnership interests and the general partner's nominal 1%
                interest.

                Subsequent to December 31, 1998, the Operating Partnership
                exercised its option to purchase an additional eighteen (18)
                units of limited partnership interest for $885,000, thereby
                increasing its ownership interest to approximately 40%.

                The following is an analysis of the investment in the Alexandria
                Property from inception (February 3, 1998) to December 31,1998:

<TABLE>
                   <S>                                                      <C>
                   Balance, beginning                                       $      -
                   Investments                                               400,000
                   Distributions                                             (10,950)
                   Equity in net loss                                        (20,360)
                                                                            --------
                   Balance, ending                                          $368,690
                                                                            --------
                                                                            --------
</TABLE>

                The following is a summary of the financial position and results
                of operations of the Alexandria Property as of and for the
                period ended December 31, 1998:

<TABLE>
                   <S>                                                   <C>
                   Financial Position:
                      Rental apartments                                  $  2,790,402
                      Construction in progress                              6,497,912
                      Other assets                                          1,446,086
                                                                         ------------
                         Total assets                                    $ 10,734,400
                                                                         ------------
                                                                         ------------

                      Mortgage payable                                   $  7,750,000
                      Other liabilities                                     2,366,369
                                                                         ------------
                         Total liabilities                                 10,116,369
                      Partners' Capital                                       618,031
                                                                         $ 10,734,400
                                                                         ------------
                                                                         ------------

                   Results of Operations:
                      Rental income                                      $     85,971
                      Other income                                            266,685
                      Costs and expenses                                     (518,186)
                                                                         ------------
                         Net loss                                        $   (165,530)
                                                                         ------------
                                                                         ------------
</TABLE>


                                      F-14


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 3.      INVESTMENTS IN PARTNERSHIPS (Continued)

             OTHER LIMITED PARTNERSHIP INTERESTS

                In July 1998, the Operating Partnership also was admitted as a
                limited partner in 13 real estate limited partnerships managed
                by affiliates of the Managing Shareholder. 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. In each
                instance, the Operating Partnership agreed that its right to
                receive distributions from cash flow or from a capital event
                would be subordinate to the right of the existing limited
                partners to receive any preferred return described in the
                partnership agreement of the respective partnership.


NOTE 4.      OTHER PROPERTY AND EQUIPMENT

<TABLE>
             <S>                                                                                           <C>
             Furniture and equipment                                                                       $112,272
             Computer equipment and software                                                                 44,455
             Leasehold improvements                                                                          20,813
                                                                                                           --------
                                                                                                            177,540
                Less accumulated depreciation                                                                 8,558
                                                                                                           --------
                                                                                                           $168,982
                                                                                                           --------
                                                                                                           --------
</TABLE>


NOTE 5.      MORTGAGES PAYABLE
<TABLE>
<CAPTION>
                                                                                                            Balance at
                                                                  Original       Maturity     Interest     December 31,
                              Property                             Amount          Date         Rate           1998
                              --------                             ------          ----         ----           ----
              <S>                                               <C>             <C>           <C>          <C>
              Heatherwood Apartments                            $1,250,000      12/31/2004     7.625%       $1,238,755
              Crystal Court Apartments                           1,494,000      10/31/2004     7.5           1,477,797
              Riverwalk Apartments                               1,400,000      10/31/2004     8.75          1,323,166
                                                                 ---------                                   ---------
                 Total mortgage note payables                   $4,139,000                                  $4,039,718
                                                                 ---------                                   ---------
                                                                 ---------                                   ---------
</TABLE>

             All mortgage notes payable are collateralized by the underlying
             properties described in Note 2 above.

             The aggregate maturities of mortgages payable for each of the five
             years subsequent to December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                                                                            Principal
                                                                                                            ---------
              <S>                                                                                          <C>
              Year ending December 31:
                 1999                                                                                      $   50,544
                 2000                                                                                          54,799
                 2001                                                                                          59,415
                 2002                                                                                          64,420
                 2003                                                                                          69,872
</TABLE>


                                      F-15


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

<TABLE>
                 <S>                                                                                        <C>
                 Thereafter (2004)                                                                          3,740,668
                                                                                                           ----------
                    Total                                                                                  $4,039,718
                                                                                                           ----------
                                                                                                           ----------
</TABLE>


                                      F-16


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 6.      CAPITAL LEASE OBLIGATION

                During 1998, the Operating Partnership purchased office
                furniture financed through a capital lease obligation. The loan
                is non-interest bearing secured by the office furniture
                purchased and requires forty-eight (48) monthly payments of
                $1,245. Future minimum capital lease payments and the net
                present value of the future minimum lease payments at December
                31, 1998 are as follows:

<TABLE>
                   <S>                                                                                             <C>
                   Year Ending December 31:
                      1999                                                                                         $14,942
                      2000                                                                                          14,942
                      2001                                                                                          14,942
                      2002                                                                                          11,158
                                                                                                                   -------
                         Total minimum lease payments                                                              $55,984
                                                                                                                   -------
                                                                                                                   -------
</TABLE>

NOTE 7.      COMMITMENTS AND CONTINGENCIES

             CONTRACT TO PURCHASE ADDITIONAL PROPERTIES

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

                In connection with the transaction and in exchange for certain
                benefits described below, the Trust agreed to co-guarantee
                (along with the chief executive officer), up to 35% (or
                approximately $12,500,000) of the development portion of
                long-term construction loans with an aggregate principal amount
                of up to $36,000,000 to be provided by a bank to the development
                companies. As of December 31, 1998, approximately $4,600,000 of
                such loans had been drawn down, resulting in outstanding
                guarantees of approximately $1,600,000. Subject to the
                fulfillment of certain closing and funding conditions, the
                construction loans will be made to the development companies in
                connection with the development and construction of the two
                apartment properties and of an 111,000 square foot shopping
                center


                                      F-17


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 7.      COMMITMENTS AND CONTINGENCIES (Continued)

             CONTRACT TO PURCHASE ADDITIONAL PROPERTIES (Continued)

                being developed in Burlington, Kentucky. The interest rates on
                the construction loans range from 7.36% to 7.52%. The Trust also
                agreed that, if the loans were not repaid prior to the
                expiration of the guarantee, it would either buy out the bank's
                position on the entire amount of the construction loans or
                arrange for a third party to do so. The construction loans are
                expected to be replaced by a long-term credit facility.

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

             OFFICERS' COMPENSATION

                A founder of the Trust and the Operating Partnership serves as
                Chief Executive Officer of the Trust, the Operating Partnership
                and the Managing Shareholder. He has agreed to serve a Chief
                Executive Officer for the first year in exchange for
                compensation in the form of common shares or units of the
                Operating Partnership in an amount not to exceed 25,000 shares
                or units, as applicable, to be determined by the Executive
                Compensation Committee based upon his performance, in addition
                to benefits and eligibility for participation in any option plan
                and bonus incentive compensation plan which may be implemented
                by the Trust. During 1998, no common shares of the Trust or
                units of the Operating Partnership were issued to the Chief
                Executive Officer as compensation. However, in order to reflect
                all appropriate administrative expenses of the Partnership, a
                provision of $197,000 has made in the accompanying financial
                statement for the estimated fair value of the services rendered
                by the Chief Executive Officer for 1998. This amount has been
                charged to compensation expense for 1998, with a corresponding
                credit to partners' capital. This estimate of the fair value of
                such services was determined by management based upon an
                analysis of compensation paid to chief executive officers of a
                number of comparable real estate investment trusts during 1998.
                After the first year of operations, compensation and benefits
                for the Chief Executive Officer will be determined annually by
                the Executive Compensation Committee of the Board of the Trust.

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


                                      F-18


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 7.      COMMITMENTS AND CONTINGENCIES (Continued)

             OPERATING LEASES

                During 1998, the Operating Partnership executed an operating
                lease for its office facilities. The lease, which expires in
                June 15, 2003, requires monthly payments of $5,000. The
                Operating Partnership has three options of five years each to
                extend its lease for a total of fifteen additional years.

                Minimum future lease payments on this lease are as follows:

<TABLE>
                  <S>                                                                                        <C>
                  Year ending December 31:
                     1999                                                                                    $ 60,000
                     2000                                                                                      60,000
                     2001                                                                                      60,000
                     2002                                                                                      60,000
                     2003                                                                                      30,000
                                                                                                             --------
                        Total                                                                                $270,000
                                                                                                             --------
                                                                                                             --------
</TABLE>

                Rent expense was approximately $24,000 for 1998.


NOTE 8.      RELATED PARTY TRANSACTIONS

             TRUST MANAGEMENT AGREEMENT

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


                                      F-19


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 8.      RELATED PARTY TRANSACTIONS (Continued)

             TRUST MANAGEMENT AGREEMENT (Continued)

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

                During 1998, the Trust paid the Managing Shareholder $92,393 for
                reimbursable expenses incurred during the Cash Offering,
                $185,456 for reimbursable investment expenses and $46,364 for
                reimbursable management expenses. As of December 31, 1998,
                $136,941 is due to the Managing Shareholder for reimbursable
                expenses and investment fees.

             TRANSACTIONS WITH AFFILIATED ENTITIES

                During 1998, the Operating Partnership paid approximately
                $12,000 to an affiliated corporation for computers being used by
                the Operating Partnership.

             REIMBURSED ADMINISTRATIVE EXPENSES

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


                                      F-20


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 8.      RELATED PARTY TRANSACTIONS (Continued)

             REIMBURSED ADMINISTRATIVE EXPENSES (Continued)

                During 1998 the Partnership was reimbursed approximately
                $496,000 for administrative expenses, which has been presented
                as a reduction of the specific related category of
                administrative expenses in the accompanying financial
                statements.

             ADVANCES

                From time to time, the Operating Partnership advances funds to
                affiliates. These advances do not accrue interest and are due on
                demand. As of December 31, 1998, the Operating Partnership had
                advanced $10,750 to two affiliates.


NOTE 9.      SHAREHOLDERS' EQUITY

             CASH OFFERING

                On May 15, 1998, pursuant to a registration statement on Form
                SB-2, the Trust commenced an initial public offering of a
                maximum of 2,500,000 common shares of beneficial interest in the
                Trust at $10 per common share, which is payable in full upon
                subscription, for proposed total gross proceeds of $25,000,000
                (the Cash Offering). All of the common shares to be issued or
                sold by the Trust in the offering will be tradable without
                restriction under the Securities Act, but will be subject to
                certain restrictions designed to permit the Trust to qualify and
                maintain its status as a Real Estate Investment Trust under the
                Internal Revenue Code. The Cash Offering will terminate no later
                than November 30, 1999.

             EXCHANGE OFFERING

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

                It is proposed that these units would be exchanged for units of
                limited partnership interest in 23 limited partnerships (the
                "Exchange Partnerships"), which directly or indirectly own
                equity and/or mortgage interests in one or more residential
                apartment properties. The Exchange Partnerships are managed by
                corporate general partners who are affiliated with one of the
                founders of the Operating Partnership, who is the sole
                stockholder and director of the Managing Shareholder of the
                Trust. This registration statement has not yet become effective.


                                      F-21


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 9.      SHAREHOLDERS' EQUITY (Continued)

             EXCHANGE OFFERING (Continued)

                The number of Units being offered in exchange for the limited
                partnership interests in the Exchange Partnerships will be based
                on appraisals prepared by qualified and licensed independent
                appraisal firms for each underlying residential apartment
                property. For purposes of the Exchange Offering, each Unit has
                been arbitrarily assigned an initial value of $10, which
                corresponds to the offering price of each Trust Common Share
                currently being offered to the public pursuant to the Cash
                Offering. The value of each Unit and Common Share outstanding
                will be substantially identical since Unit holders, including
                recipients of Units in the Exchange Offering, will be entitled
                to exchange all or a portion of their Units at any time and from
                time to time for an equivalent number of Trust Common Shares, so
                long as the exchange would not cause the exchanging party to own
                (taking into account certain ownership attribution rules) in
                excess of 5% of the then outstanding shares in the Trust,
                subject to the Trust's right to cash out any holder of Units who
                requests an exchange and subject to certain other exceptions. To
                facilitate such exchanges of Units into Common Shares, 2,500,000
                Common Shares (in addition to the 2,500,000 Common Shares being
                offered by the Trust in the Cash Offering) have been registered
                with the Commission.

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

             OPERATING PARTNERSHIP LIMITED PARTNERSHIP UNITS

                In connection with the formation of the Trust and the Operating
                Partnership, the Original Investors each subscribed for 601,080
                limited partnership units of the Operating Partnership (a total
                of 1,202,160 units). In consideration for the units subscribed
                for by them, the Original Investors made a $100,000 capital
                contribution to the Operating Partnership. If the Cash Offering
                and the Exchange Offering are fully subscribed, those Units
                would represent 19% of the total Common Shares outstanding after
                completion of the Cash Offering and exchange by the Operating
                Partnership of 2,500,000 of its Units for units of limited
                partnership interest in real estate limited partnerships
                (including any exchange pursuant to the Exchange Offering),


                                      F-22


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


                calculated on a fully diluted basis assuming all then
                outstanding Units (other than those acquired by the Trust) have
                been exchanged into an equivalent number of


                                      F-23


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 9.      SHAREHOLDERS' EQUITY (Continued)

             OPERATING PARTNERSHIP LIMITED PARTNERSHIP UNITS (Continued)

                Common Shares. If, however, as of November 30, 1999, the Cash
                Offering and/or the Exchange Offering has been completed and the
                number of Units subscribed for by each Original Investment
                represents a percentage greater than 19% of the then outstanding
                Common Shares, calculated on a fully diluted basis assuming that
                all then outstanding Units (other than those acquired by the
                Trust) have been exchanged into an equivalent number of Common
                Shares, each Original Investor has agreed to return any excess
                Units to the Operating Partnership for cancellation. The
                Original Investors have deposited Units subscribed for by them
                into a security escrow account for six to nine years, subject to
                earlier release under certain conditions.

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

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


                                      F-24


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 9.      SHAREHOLDERS' EQUITY (Continued)

             OPERATING PARTNERSHIP LIMITED PARTNERSHIP UNITS (Continued)

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

             DISTRIBUTIONS

                During 1998, the Board of Trustees authorized the payment of two
                quarterly distributions aggregating $72,159 ($.225 per common
                share of beneficial interest) from the surplus of the Trust.
                This amount is presented in the accompanying consolidated
                financial statements as a deduction from shareholders' equity
                under the caption "Distributions".


NOTE 10.     NET LOSS PER SHARE

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

                Basic net loss per share equals net loss divided by the weighted
                average shares outstanding during the year. The computation of
                diluted net loss per share that includes dilutive common stock
                equivalents in the weighted average shares outstanding has not
                been presented, as it is anti-dilutive in 1998.

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

<TABLE>
<CAPTION>
                                                                                                   Weighted
                                                                                                   Average           Loss
                                                                               Net Loss             Shares         Per Share
                                                                             -----------         -----------     -----------
                  <S>                                                        <C>                 <C>             <C>
                  1998                                                       $(1,577,060)            212,731          $(7.41)
                                                                             -----------         -----------     -----------
                                                                             -----------         -----------     -----------
</TABLE>

                Assuming that the Original Investors had exchanged their limited
                partnership units for an equivalent net amount of 122,561 Common
                Shares, the net loss per share on an as-converted basis would
                have been $4.70 per share.


                                      F-25


<PAGE>

                               BARON CAPITAL TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 11.     SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
             ACTIVITIES

                During 1998, the Operating Partnership acquired three rental
                apartment properties through the assumption of mortgage payables
                and a note payable, as follows:

<TABLE>

                   <S>                                                                                          <C>
                   Mortgages payable                                                                            $4,058,737
                   Note payable                                                                                    575,000
                                                                                                                ----------
                                                                                                                $4,633,737
                                                                                                                ----------
                                                                                                                ----------
</TABLE>

                Also, the Operating Partnership acquired furniture and equipment
                in 1998 by means of capital lease financing in the amount of
                $59,769.


                                      F-26

<PAGE>


                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.


                               BARON CAPITAL TRUST

September 17, 1999             By:        /s/ GREGORY K. MCGRATH
                                          -----------------------
                                        Gregory K. McGrath
                                       Chief Executive Officer

    Pursuant to the requirements of 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.

<TABLE>
<CAPTION>

                   SIGNATURES                             TITLE                             DATE
            <S>                              <C>                                       <C>
            /s/ GREGORY K. MCGRATH           Chief Executive Officer                   September 17, 1999
            -------------------              (Principal Executive Officer)
            Gregory K. McGrath

            /s/ MARK L. WILSON               Interim Chief Financial Officer           September 17, 1999
            -------------------              (Principal Financial and Accounting
            Mark L. Wilson                   Officer)

            /s/ JAMES H. BOWNAS              Trustee                                   September 17, 1999
            -------------------
            James H. Bownas

            /s/ PETER M. DICKSON             Trustee                                   September 17, 1999
            --------------------
            Peter M. Dickson

            /s/ GREGORY K. MCGRATH           Corporate Trustee                         September 17, 1999
            ----------------------
            Gregory K. McGrath
            President, Chief Executive
            Officer of Baron Capital
            Properties, Inc.

</TABLE>