BARON CAPITAL FUNDS TRUST, N-30D, 1999-08-16

BARON CAPITAL FUNDS TRUST
N-30D, 1999-08-16

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[Registered Logo]

BARON CAPITAL FUNDS

PERFORMANCE.........................................................1

INVESTMENT STRATEGY.................................................2

PORTFOLIO HOLDINGS..................................................2

TABLES
FINANCIAL STATEMENTS................................................4

767 Fifth Avenue
NY, NY 10153
212-583-2100
1-800-99-BARON

<PAGE>

BARON CAPITAL ASSET FUND

SEMI-ANNUAL REPORT JUNE 30, 1999

Dear Baron Capital Asset Fund

Shareholder:
- --------------------------------------------------------------------------------
PERFORMANCE

Baron Capital Asset Fund performed well in the six-month period ended June 30,
1999, both absolutely and relative to the small cap averages. The Fund gained
19.7% in the first half of 1999 while the Russell 2000, an index of small cap
stocks gained 9.3% and the S&P 500 gained 12.2%. Since the Fund's inception on
October 1, 1998 the Fund has performed well, gaining 58.6% through June 30,
1999, and has significantly outperformed both the Russell 2000, which increased
32.0%, and the S&P 500, which gained 36.2%.
- --------------------------------------------------------------------------------
Small and Medium Sized
Companies

Although the Fund has only a limited history, its investment objective and
philosophy is similar to Baron Asset Fund's, a publicly offered "retail" fund
that has been managed by the same adviser since its inception June 1987. Baron
Capital Asset Fund invests in small and medium sized companies. The investment
performance for the past several years of smaller companies as compared to
larger, more established and better-recognized companies has, until recently,
been disappointing. The Russell 2000 underperformed the S&P 500 by over 30
percentage points in calendar 1998, an unprecedented gap for a single year. In
fact, small cap stocks have underperformed larger companies for most of the last
15 years. This relative underperformance of smaller companies has resulted in
relative valuations of smaller companies that are unusually compelling. Even
more importantly, we are identifying many investment opportunities in what we
believe are great businesses that are selling at very attractive prices on an
absolute basis as well as on a relative basis to larger cap stocks. Although
small cap stocks continued to perform poorly relative to larger companies during
the first quarter of 1999, this trend

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

[GRAPH]

- -------------------------------
PERFORMANCE
FOR THE 6 MONTHS ENDED
JUNE 30, 1999

BARON CAPITAL ASSET FUND 19.7%
S&P 500* 12.2%
RUSSELL 2000* 9.3%

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

[GRAPH]

- -------------------------------
PERFORMANCE
SINCE INCEPTION
OCTOBER 1, 1998 THROUGH JUNE 30, 1999

BARON CAPITAL ASSET FUND 58.6%
S&P 500* 36.2%
RUSSELL 2000* 32.0%

- ------------------------------
* THE S&P 500 AND RUSSELL 2000 ARE UNMANAGED INDEXES. THE S&P 500 MEASURES THE
PERFORMANCE OF THE STOCK MARKET IN GENERAL; THE RUSSELL 2000 OF SMALL AND
MID-SIZED COMPANIES.

<PAGE>

reversed during the second quarter. While the S&P 500 beat the Russell 2000 by
10 percentage points in the March quarter, it lagged the Russell 2000 by 8.6
percentage points in the June quarter.

- --------------------------------------------------------------------------------
A Few Major Winners; Poor Performing Investments Offer Opportunity

Baron Capital Asset Fund's performance in the six month period was favorably
impacted by its investment in Charles Schwab, the Fund's largest investment for
most of the period. Schwab's share price gained 94% in the six months ending
June, reflecting very strong customer asset flows and strong current earnings.
While the level of trading activity has declined from the unsustainable levels
reached earlier this year and Schwab's stock price has retreated from its
earlier highs, we remain optimistic regarding Schwab's longer-term prospects.
We believe Schwab can triple its customer assets to $1.8 trillion and quintuple
its earnings within the next five years. At current levels, Schwab's stock
price has increased about forty fold since Baron Asset Fund's initial purchases
in 1992.

Three communications-related investments favorably impacted the Fund's
performance for the six-month period. They were: NTL, +53%; CoreComm, + 206%;
and United Global Com, +251%. NTL, a longtime holding of Baron Asset Fund,
continues to provide a better telephony product than British Telecom and more
robust internet services to its U.K. cable subscribers. CoreComm was created as
a spin-off from Cellular Communications of Puerto Rico last fall. The company
had $13 per share in assets, mostly cash, an unstated business plan, but an
exceptional management team led by George Blumenthal and Barclay Knapp. We knew
this management team well, having successfully invested with them three times
previously. CoreComm's plan is to exploit the convergence of the
telecommunications and information services industries through a "Smart LEC"
strategy. CoreComm will offer consumers a one-stop shopping experience for
bundled voice and internet services using its own facilities and leasing
arrangements with other telecom network operators, a "virtual AT&T" without the
expense of owning the network. United Global, a cable consolidator in Europe,
is executing a strategy similar to NTL's U.K. strategy on the continent. It has
significant opportunities for greater telephony penetration, more cable
services and is developing its Internet backbone service "Chello", which could
become a large business by itself.

Baron Capital Asset Fund's performance was negatively impacted by two
investments that have been long-term holdings of Baron Asset Fund. Robert Half,
the temporary help company fell in price 42%, as the company had difficulty
hiring temps in the current exceptionally low unemployment environment. The
company is developing new strategies to attract potential employees in order to
meet the high levels of demand that still exist for their services. Half is
currently trading at very attractive levels, ignoring the rapid growth the

<PAGE>

company is experiencing in its non-core areas. HCR Manor Care, which fell in
price 18%, declined with the rest of the nursing home group. The industry has
been under pressure from the combination of more competition from new assisted
living beds and the impact of lower reimbursement polices from Washington. We
believe that HCR is one of very few survivors that can win in this environment.
As the best operator and most efficient provider of healthcare services in the
industry, we believe HCR can maintain strong margins. HCR will begin accepting
higher acuity patients and build up its census with a higher revenue generating
mix of patients. As the supply of new assisted living beds has been sharply
curtailed and Washington is considering a more favorable reimbursement policy,
HCR is well positioned for 20% plus earnings growth per year. The stock at 14
times earnings is, we believe,
very attractively priced.

- --------------------------------------------------------------------------------
INVESTMENT STRATEGY

Our philosophy is simple. Gain an investment advantage through our independent
research of companies. We seek investments in businesses that have substantial
long-term growth opportunities, small cap companies which we believe, over
time, will become much larger businesses. The companies in which we invest have
significant barriers to competitors and, we believe, sustainable competitive
advantage. These businesses are managed by experienced professional executives
who have gained our trust. We try to be opportunistic. We buy these great
businesses at what we believe are value prices. How? (1) We identify companies
whose long-term growth prospects are misunderstood. In many instances we have
earned five to ten times our original investment when our research focused on
long-term business opportunities that others missed. A few notable examples
include NTL, Charles Schwab, Robert Half, Heftel, DeVry, and Dollar Tree. (2)
We take advantage of falling stock prices when markets become obsessed with
short-term results. Vail Resorts, the ski resort, has fallen in price due to
poor snow in Colorado last winter. Traders sold Vail's stock despite that
company's long-term development strategies that promise substantial growth. We
assume Colorado will likely experience normal snow conditions again. (3) We
have conviction in our own research even though the "experts" may not agree.
Wall Street analysts, whose focus is projecting current earnings, often miss
the forest by studying trees. And, finally, invest for the long term in
businesses. Don't just trade stocks.

- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS

ChoicePoint, Inc., 5.8% of the portfolio, was established in 1997 through the
spin-off of the Insurance Services Group of Equifax. The Company provides most
major insurance companies with underwriting and claim information services to
assist in assessing the insurability of individuals and property. ChoicePoint
also offers pre-employment background investigations, drug testing

2
<PAGE>

services and public record information to other corporate and government
organizations. ChoicePoint's strategic goal is to be the leading provider of
risk management and fraud prevention information and related technology
solutions to a broad range of industries worldwide. The Company believes that
the Internet will become an important channel to distribute its extensive
assortment of database products directly to businesses and consumers.

Sun International, 4.1% of the portfolio, is an international resort/gaming
management and development company focused on creating premier, world-class
hotels and casinos. The company was founded and is directed by Sol Kerzner, who
is one of the pioneers in the destination gaming resort industry, having
developed the Lost City and Sun City resorts in South Africa and a total of 25
casinos around the world. Sun currently operates the Paradise Island resort,
Atlantis, in the Bahamas; Resorts Hotel & Casino in Atlantic City; manages as a
50% joint venture partner the Mohegan Sun Casino in Connecticut; and manages
several properties in the Indian Ocean. The company has pending the acquisition
of the Desert Inn Hotel, Casino and Country Club in Las Vegas. In barely four
years, Sun has emerged as one of the premier gaming companies in the world.
Anchored by Paradise Island, which generates 70% of the company's cash flow,
Sun has created a strong three property, East Coast customer base to which it
can cross-market. It will soon expand to Las Vegas with its acquisition of
Desert Inn. We believe Sun's strong balance sheet, growing cash flow and
sizeable land holding position the company well for many years for
above-average growth.

Natuzzi, 3.0% of the portfolio, designs and manufactures contemporary and
traditional leather and fabric upholstered furniture. The Company has the
leading market share and brand recognition in the upholstered leather furniture
market. All manufacturing operations are based in Southern Italy, where the
Company has very sophisticated, automated production facilities. For the last
few years, the Company has been involved in expanding and consolidating its
Italian manufacturing operations and the Italian government has given Natuzzi
significant tax breaks for expanding operations in the economically depressed
region. The Company has the leading market shares in its key markets -- 25% in
the U.S. and 5% in Europe, which still makes it number one in the highly
fragmented European furniture market. In order to compete in the inefficient
European furniture retail market, the Company founded 'Divani & Divani,' a
franchised chain of 115 furniture stores in Italy, Spain, Portugal, Greece,
France and Venezuela that sell exclusively Natuzzi products.

Descriptions of Polo Ralph Lauren, Sotheby's, Charles Schwab, Robert Half and
Vail Resorts can be found in Baron Capital Asset Fund's 1998 Annual Report to
Shareholders. All remain significant holdings of the Fund. Please call if you
would like a copy.

<PAGE>

Baron Funds Eighth Annual Investment Conference. October 15, 1999 New York City

The Eighth Annual Baron Investment Conference will take place Friday morning,
October 15, 1999 breakfast through lunch, at the Ballroom of The Grand Hyatt
New York Hotel in New York City. Shareholders of the Fund will have an
opportunity to listen to and ask questions of five senior executives of
companies in which we have established investments. Although our plans have not
been finalized, our speakers include: David Pottruck, President and Co-CEO of
Charles Schwab, Sol Kerzner, Founder, Chairman and CEO of Sun International
Hotels, Izzy Sharpe, Chairman and CEO of Four Seasons Hotel, Inc. and Michael
Marks, Chairman and CEO of Flextronics International. A fifth speaker will be
announced shortly. After lunch I will speak for roughly a half-hour and,
together with my research staff, be available to answer any and all questions
you may have regarding our investments.

Before we invest in a business on behalf of our shareholders, we attempt to
become as knowledgeable as possible about that business. Our due diligence, our
"kick the tires" research, includes not just studying public financial
information, but also meeting with company managements, both in our office and
theirs. This is to judge for ourselves their ability, competency, honesty,
integrity and business strategies. Our annual investment conferences give our
shareholders the opportunity to "kick the tires" of their investment in our
Funds.

The First Annual Baron Investment Conference in 1992 had 80 guests...most of
whom I had to ask as a personal favor to attend. Last year more than 1300
persons attended our meeting. Please RSVP at www.baronfunds.com or at
1-800-99-BARON or 212-583-2100 as soon as possible if you intend to come. All
shareholders are invited. Of course, there is no charge.

Thank you for investing in Baron Capital Asset Fund.

Sincerely,

/s/ Ronald Baron
- -------------------------
Ronald Baron
Chairman & CEO
August 10, 1999

<PAGE>

Table I
- --------------------------------------------------------------------------------
Portfolio Market Capitalization (Unaudited)
- --------------------------------------------------------------------------------
The Fund invests primarily in small and medium sized companies. Table I ranks
the Fund's investments by market capitalization and displays the percentage of
the Fund's portfolios invested in each market capitalization category. At times
the Fund will invest in companies with market capitalizations greater than $5
billion.
- --------------------------------------------------------------------------------

Equity
Market Cap % of
Company (in millions) Net Assets
- ------------------------------------------ --------------- -----------
Large Capitalization
- --------------------------------------------------------------------------
Charles Schwab Corp. ..................... $44,777 3.2%
NTL, Inc. ................................ 6,318 1.3
Univision Communications, Inc. Class A 5,983 0.1
----
4.6%
Medium Capitalization
- --------------------------------------------------------------------------
American Tower Corp. Class A ............. $ 3,734 0.3%
Century Communications Corp. ............. 3,460 0.7
Mirage Resorts, Inc. ..................... 3,330 1.6
DLJdirect, Inc. .......................... 2,980 1.1
United Intl. Hldgs., Inc. ................ 2,914 3.1
Citizens Utilities Co. ................... 2,892 1.7
Dollar Tree Stores, Inc. ................. 2,696 2.7
HCR Manor Care, Inc. ..................... 2,686 2.8
Flextronics Intl. Ltd. ................... 2,671 0.4
Lamar Advertising Co. .................... 2,506 1.6
Spieker Properties, Inc. ................. 2,461 0.5
Robert Half Intl., Inc. .................. 2,359 2.4
Crown Castle Intl. Corp. ................. 2,300 3.2
Sotheby's Holdings, Inc. Class A ......... 2,198 3.0
Apollo Group, Inc. ....................... 2,078 2.5
Polo Ralph Lauren Corp. .................. 1,892 1.5
DeVry, Inc. .............................. 1,553 2.3
Sun Intl. Hotels, Ltd. ................... 1,503 3.5
----
34.9%
Small Capitalization
- --------------------------------------------------------------------------
Aurora Foods, Inc. ....................... $ 1,173 2.4%
Prison Realty Trust, Inc. ................ 1,149 0.5
Industrie Natuzzi SPA ADR ................ 1,117 3.8
Choice Hotels Intl., Inc. ................ 1,091 0.9
ChoicePoint, Inc. ........................ 987 6.7
Citadel Communications Corp. ............. 942 0.6
Quorum Health Group, Inc. ................ 918 0.2
Metro Networks, Inc. ..................... 893 2.1
Radio One, Inc. .......................... 842 0.7
OM Group, Inc. ........................... 818 1.1
Cross Timbers Oil Co. .................... 665 0.2
ITT Educational Services, Inc. ........... 664 2.0
Seacor Smit, Inc. ........................ 650 1.7
CoreComm, Ltd. ........................... 648 3.0
Electric Lightwave, Inc. ................. 647 1.0
Southern Union Co. ....................... 646 1.2

<PAGE>

Equity
Market Cap % of
Company (in millions) Net Assets
- ------------------------------------------- --------------- -----------
Small Capitalization (Continued)
- -------------------------------------------------------------------------
Vail Resorts, Inc. Class A ................ $622 1.4%
Education Management Corp. ................ 612 1.9
DBT Online, Inc. .......................... 606 0.3
Gabelli Asset Management, Inc. ............ 474 1.2
Libbey, Inc. .............................. 471 0.7
American Classic Voyages Co. .............. 442 1.9
Budget Group, Inc. Class A ................ 442 0.2
Smart and Final, Inc. ..................... 305 1.2
DVI, Inc. ................................. 242 0.4
Saga Communications, Inc. Class A ......... 242 1.4
Learning Tree Intl., Inc. ................. 241 0.8
Counsel Corp. ............................. 170 0.2
Brass Eagle, Inc. ......................... 136 2.9
The Sports Club Co. ....................... 73 1.0
----
43.6%

Table II
- --------------------------------------------------------------------------------
Historical Information
(Unaudited)
- --------------------------------------------------------------------------------

Table II displays on a quarterly basis each class' closing net assets and net
asset value per share, dividend distributions and the value of $10,000 invested
in a class at the time of its inception.
- --------------------------------------------------------------------------------

Insurance Class
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Net Asset Value of Shares
Value Owned, if Initial
Date Class Net Assets Per Share Dividends Investment was $10,000*
- ---------- ------------------ ----------- ----------- ------------------------
<S> <C> <C> <C> <C>
10/01/98 $ 100,000 $ 10.00 $10,000
- -------- ---------- ------- -------
12/31/98 806,286 13.25 13,250
- -------- ---------- ------- -------
03/31/99 2,257,290 14.10 14,100
- -------- ---------- ------- -------
06/30/99 9,763,273 15.66 $ 0.196 15,861
- -------- ---------- ------- ------- -------
</TABLE>

* Assumes all dividends were reinvested and no shares were redeemed.

Retirement Class
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Net Asset Value of Shares
Value Owned, if Initial
Date Class Net Assets Per Share Dividends Investment was $10,000*
- ---------- ------------------ ----------- ----------- ------------------------
<S> <C> <C> <C> <C>
11/25/98 $2,400,000 $ 12.06 $10,000
- -------- ---------- ------- -------
12/31/98 2,638,488 13.26 10,995
- -------- ---------- ------- -------
03/31/99 2,809,738 14.11 11,700
- -------- ---------- ------- -------
06/30/99 3,158,955 15.67 $ 0.197 13,161
- -------- ---------- ------- ------- -------
</TABLE>

* Assumes all dividends were reinvested and no shares were redeemed.

4
<PAGE>

AVERAGE ANNUAL RETURN

Period ended June 30, 1999
Insurance Class
- --------------------------------------------------------------------------------
Since inception October 1, 1998 58.6%
- --------------------------------------------------------------------------------
Retirement Class
- --------------------------------------------------------------------------------
Since inception November 25, 1998 31.6%
- --------------------------------------------------------------------------------

The performance data represents past performance. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their cost. For more complete information about
Baron Capital Asset Fund including charges and expenses, contact your plan
administrator or participating insurance company for a copy of the Fund's
prospectus. Read it carefully before you invest or send money. This report is
not authorized for use as an offer of sale or a solicitation of an offer to buy
shares of Baron Capital Asset Fund unless accompanied or preceded by the Fund's
current prospectus.

5
<PAGE>

- --------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)

Shares Value
- --------------------------------------------------- ----------------
Common Stocks (83.11%)
- -----------------------------------------------------------------------
Amusement and Recreation Services (12.21%)
10,000 American Classic Voyages Co.* .......... $ 240,000
20,000 Brass Eagle, Inc.* ..................... 375,000
12,000 Mirage Resorts, Inc.* .................. 201,000
10,000 Sun Intl. Hotels, Ltd.* ................ 447,500
32,500 The Sports Club Co.* ................... 134,063
10,000 Vail Resorts, Inc. Class A* ............ 180,000
------------
1,577,563
Business Services (9.40%)
13,000 ChoicePoint, Inc.* ..................... 872,625
1,000 DBT Online, Inc.* ...................... 32,750
12,000 Robert Half Intl., Inc.* ............... 309,750
------------
1,215,125
Chemical (1.07%)
4,000 OM Group, Inc. ......................... 138,000

Communications (11.97%)
1,500 American Tower Corp. Class A* .......... 36,000
8,000 CoreComm, Ltd.* ........................ 386,000
20,000 Crown Castle Intl. Corp.* .............. 416,250
10,000 Electric Lightwave, Inc.* .............. 130,000
2,000 NTL, Inc.* ............................. 172,375
6,000 United Intl. Hldgs., Inc.* ............. 405,750
------------
1,546,375
Education (9.59%)
12,000 Apollo Group, Inc.* .................... 318,750
13,500 DeVry, Inc.* ........................... 302,062
12,000 Education Management Corp.* ............ 249,000
10,000 ITT Educational Services, Inc.* ........ 260,625
10,000 Learning Tree Intl., Inc.* ............. 109,375
------------
1,239,812
Energy (1.89%)
2,000 Cross Timbers Oil Co. .................. 29,750
4,000 Seacor Smit, Inc.* ..................... 214,000
------------
243,750
Financial (5.94%)
3,750 Charles Schwab Corp. ................... 411,328
5,000 DLJdirect, Inc.* ....................... 147,500
3,000 DVI, Inc.* ............................. 51,375
10,000 Gabelli Asset Management, Inc.* ........ 158,125
------------
768,328
Food & Agriculture (2.44%)
18,000 Aurora Foods, Inc.* .................... 315,000

Health Services (3.20%)
4,000 Counsel Corp.* ......................... 25,500
15,000 HCR Manor Care, Inc.* .................. 362,813
2,000 Quorum Health Group, Inc.* ............. 25,125
------------
413,438
Hotels and Lodging (0.92%)
6,000 Choice Hotels Intl., Inc.* ............. 118,500

Manufacturing (0.43%)
1,000 Flextronics Intl. Ltd.* ................ 55,500

<PAGE>

Shares Value
- -------- ------------

Media and Entertainment (7.16%)
2,000 Century Communications Corp.* .......... $ 92,000
2,000 Citadel Communications Corp.* .......... 72,375
5,000 Lamar Advertising Co.* ................. 204,687
5,000 Metro Networks, Inc.* .................. 266,875
100 Outdoor Systems, Inc.* ................. 3,650
2,000 Radio One, Inc.* ....................... 93,000
10,000 Saga Communications, Inc. Class A* ..... 186,250
100 Univision Communications, Inc.
Class A* ............................... 6,500
------------
925,337
Real Estate and REITs (0.91%)
6,000 Prison Realty Trust, Inc. .............. 58,875
1,500 Spieker Properties, Inc. ............... 58,313
------------
117,188
Retail Trade and Restaurants (8.42%)
8,000 Dollar Tree Stores, Inc.* .............. 352,000
10,000 Polo Ralph Lauren Corp.* ............... 190,000
15,439 Smart and Final, Inc. .................. 162,110
10,000 Sotheby's Holdings, Inc. Class A ....... 381,250
100 Williams-Sonoma, Inc.* ................. 3,481
------------
1,088,841
Transportation (0.23%)
2,400 Budget Group, Inc. Class A* ............ 29,550

Utility Services (2.90%)
20,000 Citizens Utilities Co.* ................ 222,500
7,000 Southern Union Co. ..................... 152,250
------------
374,750
Wholesale Trade (4.43%)
25,000 Industrie Natuzzi SPA ADR .............. 485,937
3,000 Libbey, Inc. ........................... 87,000
------------
572,937
------------
Total Common Stocks (83.11%)
(Cost $9,585,990**).............................. 10,739,994
------------
Cash and Other Assets
Less Liabilities (16.89%) ....................... 2,182,234
------------
Net Assets (100.00%) .............................. $ 12,922,228
============
Net Asset Value per Share
Insurance Class:
Net asset value, offering and redemption price per
share (based on net assets of $9,763,273 and
623,594 shares of beneficial interest
outstanding) .................................... $ 15.66
============
Retirement Class:
Net asset value, offering and redemption price per
share (based on net assets of $3,158,955 and
201,566 shares beneficial interest outstanding) .. $ 15.67
============

% Represents percentage of net assets
* Non-income producing securities
** For Federal income tax purposes the cost basis is identical. Aggregate
unrealized appreciation and depreciation of investments are $1,520,146 and
$366,142, respectively.

See Notes to Financial Statements.

6
<PAGE>
- --------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
- --------------------------------------------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)

<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $9,585,990) .............................. $10,739,994
Cash ............................................................................... 2,269,867
Dividends and interest receivable .................................................. 16,344
Receivable for shares sold ......................................................... 109,841
-----------
13,136,046
-----------
Liabilities:
Payable for secuities purchased .................................................... 211,167
Payable for shares redeemed ........................................................ 9
Accrued expenses and other payables ................................................ 2,642
-----------
213,818
-----------
Net Assets .......................................................................... $12,922,228
===========
Net Assets consist of:
Par value .......................................................................... 8,252
Paid-in capital .................................................................... 11,655,304
Accumulated net investment loss .................................................... (2,177)
Accumulated net realized gain ...................................................... 106,845
Net unrealized appreciation on investments ......................................... 1,154,004
-----------
Net Assets .......................................................................... $12,922,228
===========
Net Asset Value Per Share
Insurance Class
Net asset value, offering and redemption price per share (Based on net assets of
$9,763,273 and 623,594 shares outstanding) ......................................... $ 15.66
===========
Retirement Class
Net asset value, offering and redemption price per share (Based on net assets of
$3,158,955 and 201,566 shares outstanding) ......................................... $ 15.67
===========
</TABLE>

STATEMENT OF OPERATIONS
-----------------------------------------------------------------------------

For the Six Months Ended June 30, 1999 (Unaudited)

<TABLE>
<S> <C>
Investment income:
Income:
Interest ..................................................... $ 23,229
Dividends .................................................... 16,032
----------
Total income ................................................. 39,261
----------
Expenses:
Investment advisory fees ..................................... 29,993
Distribution fees -- Insurance Class ......................... 4,053
Shareholder servicing agent fees ............................. 8,235
Reports to shareholders ...................................... 9,074
Custodian fees ............................................... 2,055
Registration and filing fees ................................. 15,595
Professional fees ............................................ 6,480
Trustee fees ................................................. 350
Miscellaneous ................................................ 511
----------
Total expenses ............................................... 76,346
Less: Expense reimbursement by investment adviser ............ (34,802)
----------
Net expenses ................................................. 41,544
----------
Net investment loss .......................................... (2,283)
----------
Realized and unrealized gain on investments:
Net realized gain on investments sold .......................... 106,613
Change in net unrealized appreciation of investments ........... 973,543
----------
Net gain on investments ...................................... 1,080,156
----------
Net increase in net assets resulting from operations ......... $1,077,873
==========
</TABLE>

See Notes to Financial Statements.

7
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For The Period
For The Six October 1, 1998
Months Ended (Commencement
June 30, 1999 Of Operations) To
(Unaudited) December 31, 1998
--------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss) .......................................... $ (2,283) $ 4,187
Net realized gain on investments sold ................................. 106,613 148,527
Net change in unrealized appreciation on investments .................. 973,543 180,461
----------- ----------
Increase in net assets resulting from operations ..................... 1,077,873 333,175
----------- ----------
Distributions to shareholders from:
Net investment income:
Insurance Class ...................................................... (2,887)
Retirement Class ..................................................... (1,194)
Net realized gain on investments:
Insurance Class ...................................................... (110,285)
Retirement Class ..................................................... (38,010)
----------- ----------
(152,376)
----------- ----------
Capital share transactions:
Insurance Class:
Proceeds from the sale of shares ..................................... 9,125,161 793,298
Net asset value of shares issued in reinvestment of dividends ........ 113,172
Cost of shares redeemed .............................................. (725,304) (81,699)
Retirement Class:
Proceeds from the sale of shares ..................................... 2,080 2,400,000
Net asset value of shares issued in reinvestment of dividends ........ 39,204
Cost of shares redeemed .............................................. (2,356)
-----------
Increase in net assets derived from capital share transactions ....... 8,551,957 3,111,599
----------- ----------
Net increase in net assets ........................................... 9,477,454 3,444,774
Net assets:
Beginning of period .................................................. 3,444,774
-----------
End of period ........................................................ $12,922,228 $3,444,774
=========== ==========
Undistributed net investment income (loss) at the end of period ........ $ (2,177) $ 4,187
=========== ==========
Shares of Beneficial Interest:
Insurance Class:
Shares sold .......................................................... 608,545 67,411
Shares issued in reinvestment dividends .............................. 7,402
Shares redeemed ...................................................... (53,193) (6,571)
----------- ----------
Net increase in Insurance Class shares outstanding ................... 562,754 60,840
=========== ==========
Retirement Class:
Shares sold .......................................................... 154 199,005
Shares issued in reinvestment dividends .............................. 2,561
Shares redeemed ...................................................... (154)
-----------
Net increase in Retirement Class shares outstanding .................. 2,561 199,005
=========== ==========

</TABLE>

See Notes to Financial Statements.

8
<PAGE>

Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies

Baron Capital Funds Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the"1940 Act"), as a diversified, open-end
management investment company. The Trust currently consists of one series,
Baron Capital Asset Fund (the "Fund"). There are currently two classes of
shares: the Insurance Shares and the Retirement Shares. The Insurance Shares
are offered in connection with variable annuity contracts and variable life
insurance contracts offered by life insurance companies. The Retirement Shares
are offered to certain qualified retirement plans. The two classes of shares
differ in their respective shareholder servicing and distribution expenses. The
two classes have identical rights to earnings, assets and voting privileges,
except for class specific-expenses and exclusive voting rights with respect to
matters affecting that individual class. The following is a summary of
significant accounting policies followed by the Fund. The policies are in
conformity with generally accepted accounting principles.

(a) Security Valuation. Portfolio securities traded on any national stock
exchange or quoted on the NASDAQ National Market System are valued on the basis
of the last sale price on the date of valuation or, in the absence of any sale
on that date, the last sale price on the date the security last traded. Other
securities are valued at the mean of the most recent bid and asked prices if
market quotations are readily available. Where market quotations are not
readily available the securities are valued at their fair value as determined
in good faith by the Board of Trustees, or by the Adviser pursuant to
procedures established by the Trustees. Money market instruments held by the
Fund with a remaining maturity of sixty days or less are valued at amortized
cost, which approximates value.

(b) Securities Transactions, Investment Income and Expense Allocation.
Securities transactions are recorded on a trade date basis. Realized gain and
loss from securities transactions are recorded on an identified cost basis for
financial reporting and federal income tax purposes. Dividend income is
recognized on the ex-dividend date and interest income is recognized on an
accrual basis. Income, expenses (other than those attributable to a specific
class) and gains and losses are allocated daily to each class of shares based
upon the relative proportion of net assets represented by such class. Operating
expenses directly attributable to a specific class are charged against the
operations of that class.

(c) Federal Income Taxes. It is the policy of the Fund to continue to qualify
as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income, including net realized capital gains, if
any, to its shareholders. No federal income tax provision is therefore
required.

(d) Distributions. Income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.

(e) Use of Estimates. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of financial statements, and the amounts of income and
expenses during the period. Actual results could differ from those estimates.

(2) Purchases and Sales of Securities. For the six months ended June 30, 1999,
purchases and sales of securities, other than short term securities, aggregated
$9,443,453 and $1,544,533, respectively.

<PAGE>

(3) Investment Advisory Fees and Other Transactions with Affiliates

(a) Investment Advisory Fees. BAMCO, Inc. (the "Adviser"), a wholly owned
subsidiary of Baron Capital Group, Inc. ("BCG"), serves as investment adviser
to the Fund. As compensation for services rendered, the Adviser receives a fee
payable monthly from the assets of the Fund equal to 1% per annum of the Fund's
average daily net asset value. The Adviser has contractually agreed to reduce
its fee to the extent required to limit the operating expense to 1.25% for the
Retirement Shares and for the Insurance Shares, 1.5% for the first $250 million
of net assets; 1.35% for the next $250 million of net assets and 1.25% for net
assets over $500 million.

(b) Distribution Fees. Baron Capital, Inc. ("BCI"), a wholly owned subsidiary
of BCG, is a registered broker dealer and the distributor of the Insurance
Shares pursuant to a distribution plan under Rule 12b-1 of the 1940 Act. The
distribution plan authorizes the Fund to pay BCI a distribution fee equal on an
annual basis to 0.25% of average daily net assets of the Insurance Shares.

Brokerage transactions for the Fund may be effected by or through BCI. During
the six months ended June 30, 1999, BCI earned brokerage commissions of
$12,586.

(c) Organization Costs. Costs incurred in connection with the organization and
initial registration of the Fund have been paid by BAMCO, Inc.

(d) Trustee Fees. Certain Trustees of the Trust may be deemed to be affiliated
with or interested persons (as defined by the 1940 Act) of the Fund's Adviser
or of BCI. None of the Trustees so affiliated received compensation for his/her
services as a Trustee of the Trust. None of the Fund's officers received
compensation from the Fund.

9
<PAGE>

(4) Financial Highlights

Selected data for a share of beneficial interest outstanding throughout the
period:
- --------------------------------------------------------------------------------

Insurance Class:

<TABLE>
<CAPTION>
Six Months
ended
June 30, 1999
(Unaudited) 1998*
---------------------- --------------------
<S> <C> <C>
Net asset value, beginning of
period ............................... $ 13.25 $ 10.00
------------ --------
Income from investment
operations ...........................
Net investment income (loss) ............ (0.02) 0.02
Net realized and unrealized gains
on investments ....................... 2.63 3.23
------------ --------
Total from investment
operations ...................... 2.61 3.25
------------ --------
Less distributions ......................
Dividends from net investment
income ............................... (0.01) 0.00
Distributions from net realized
gains ................................ (0.19) 0.00
------------ --------
Total Distributions ................ (0.20) 0.00
------------ --------
Net asset value, end of period .......... $ 15.66 $ 13.25
============ ========
Total Return ....................... 19.7% 32.5%
------------ --------
Ratios/Supplemental Data ................
Net assets (in thousands), end of
period ............................... $ 9,763.3 $ 806.3
Ratio of total expenses to average
net assets ........................... 2.62%** 7.62%**
Less: expense reimbursement by
investment adviser ................... (1.14%)** (6.17%)**
------------ --------
Ratio of net expenses to average
net assets ........................... 1.48%** 1.45%**
============ ========
Ratio of net investment income
(loss) to average net assets ......... ( 0.19%)** 0.99%**
Portfolio turnover rate ................. 29.63% 37.11%
</TABLE>

- --------------------------------------------------------------------------------
* For the period October 1, 1998 (commencement of operations) to December 31,
1998.
** Annualized.

<PAGE>

Retirement Class:

<TABLE>
<CAPTION>
Six Months
ended
June 30, 1999
(Unaudited) 1998*
------------- ---------
<S> <C> <C>
Net asset value, beginning of
period .............................. $ 13.26 $ 12.06
------------ ---------
Income from investment
operations ..........................
Net investment income .................. 0.00 0.02
Net realized and unrealized gains
on investments ...................... 2.61 1.18
------------ ---------
Total from investment
operations ..................... 2.61 1.20
------------ ---------
Less distributions .....................
Dividends from net investment
income .............................. (0.01) 0.00
Distributions from net realized
gains ............................... (0.19) 0.00
------------- ---------
Total Distributions ............... (0.20) 0.00
------------- ---------
Net asset value, end of period ......... $ 15.67 $ 13.26
============= =========
Total Return ...................... 19.7% 10.0%
------------- ---------
Ratios/Supplemental Data ...............
Net assets (in thousands), end of
period .............................. $ 3,159.0 $ 2,638.5
Ratio of total expenses to average
net assets .......................... 2.37%** 7.38%**
Less: Expense reimbursement by
investment adviser .................. (1.14%)** (6.17%)**
------------- ---------
Ratio of net expenses to average
net assets .......................... 1.23%** 1.21%**
============= =========
Ratio of net investment income to
average net assets .................. 0.05%** 1.34%**
Portfolio turnover rate ................ 29.63% 37.11%
</TABLE>

- --------------------------------------------------------------------------------
* For the period November 25, 1998 (commencement of operations) to December
31, 1998.
** Annualized.

10
<PAGE>

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BARON CAPITAL FUNDS

767 Fifth Avenue
NY, NY 10153

2QR99