<PAGE> PAGE 1
000 B000000 09/30/98
000 C000000 0000810902
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008 D03AA01 10153
011 A00AA01 BARON CAPITAL, INC.
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012 A00AA01 DST SYSTEMS, INC.
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<PAGE> PAGE 2
012 C01AA01 KANSAS CITY
012 C02AA01 MO
012 C03AA01 84105
013 A00AA01 PRICEWATERHOUSECOOPERS, LLP
013 B01AA01 NEW YORK
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 7
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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SIGNATURE LINDA S. MARTINSON
TITLE GENERAL COUNSEL
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<NAME> BARON ASSET FUND
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<NAME> BARON ASSET FUND
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<NAME> BARON ASSET FUND
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<PER-SHARE-DISTRIBUTIONS> $( 0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> $ 20.32
<EXPENSE-RATIO> 0.014
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000810902
<NAME> BARON ASSET FUND
<SERIES>
<NUMBER> 3
<NAME> BARON SMALL CAP FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> $ 478,634,266
<INVESTMENTS-AT-VALUE> $ 403,116,276
<RECEIVABLES> $ 2,397,204
<ASSETS-OTHER> $ 23,179
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> $ 405,536,659
<PAYABLE-FOR-SECURITIES> $ 1,510,180
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> $ 298,481
<TOTAL-LIABILITIES> $ 1,808,661
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> $ 506,138,465
<SHARES-COMMON-STOCK> 46,886,613
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> $ 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> $( 26,892,477)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> $( 75,517,990)
<NET-ASSETS> $ 403,727,998
<DIVIDEND-INCOME> $ 1,729,757
<INTEREST-INCOME> $ 1,395,050
<OTHER-INCOME> $ 1,687,592
<EXPENSES-NET> $ 5,638,915
<NET-INVESTMENT-INCOME> $( 826,516)
<REALIZED-GAINS-CURRENT> $( 26,895,646)
<APPREC-INCREASE-CURRENT> $( 75,517,990)
<NET-CHANGE-FROM-OPS> $( 103,240,152)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 65,055,206
<NUMBER-OF-SHARES-REDEEMED> ( 18,168,593)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> $ 403,727,998
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> $ 4,041,420
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> $ 5,638,915
<AVERAGE-NET-ASSETS> $ 404,866,978
<PER-SHARE-NAV-BEGIN> $ 10.00
<PER-SHARE-NII> $( 0.02)
<PER-SHARE-GAIN-APPREC> $( 1.37)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> $ 8.61
<EXPENSE-RATIO> 0.139
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
PRICEWATERHOUSECOOPERS, L.L.P.
1301 Avenue of the Americas
New York, NY 10019-6013
Tel: 212-259-1000
Fax: 212-259-1301
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of Baron Asset Fund:
In planning and performing our audit of the financial statements and financial
highlights of Baron Asset Fund (comprising, respectively, Baron Asset Fund,
Baron Growth and Income, and Baron Small Cap), for the year ended
September 30, 1998, we considered its internal control, including control over
safeguarding securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and financial
highlights and to comply with the requirements for Form N-SAR, not to provide
assurance on internal control.
The management of Baron Asset Fund is responsible for establishing and
maintaining internal control. In fulfilling this responsibility, estimates
and
judgements by management are required to assess the expected benefits and
related costs of controls. Generally, controls that are relevant to an audit
pertain to the entity's objective of preparing financial statements and
financial highlights for external purposes that are fairly presented in
conformity with generally accepted accounting principles. Those controls
include the safeguarding of assets against unauthorized acquisition, use or
disposition.
Because of inherent limitations in internal controls, errors or fraud may
occur
and may not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of any
specific internal control component does not reduce to a relatively low level
the risk that errors or fraud in amounts that would be material in relation to
the financial statements and financial highlights being audited may occur and
not be detected within in timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters involving
internal control, including controls over safeguarding securities, that we
consider to be material weaknesses as defined above as of September 30, 1998.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
/s/ PricewaterhouseCoopers, LLP
-------------------------------
PricewaterhouseCoopers, LLP
New York, New York
November 23, 1998
