AFBA FIVE STAR FUND INC, 485BPOS, 1998-07-23

AFBA FIVE STAR FUND INC
485BPOS, 1998-07-23

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. _____ [ ]

Post-Effective Amendment No. 2 File No. 333-20637 [X]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 5 File No. 811-08035 [X]

AFBA FIVE STAR FUND, INC.
______________________________________________________________
(Exact Name of Registrant as Specified in Charter)

700 Karnes Blvd, Kansas City, MO 64108-3306
(Address of Principal Executive Office)
______________________________________________________________
Registrant's Telephone Number, including Area Code (816) 751-5900

Larry D. Armel, AFBA Five Star Fund, Inc.
700 Karnes Blvd, Kansas City, MO 64108-3306
______________________________________________________________
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: July 31, 1998

It is proposed that this filing become effective:

X On July 31, 1998, pursuant to paragraph (b)

Title of securities begin registered:

Common Stock, $1.00 par value

Please address inquiries and communications to:

Martin A. Cramer
Jones & Babson, Inc.
700 Karnes Blvd.
Kansas City, MO 64108-3306
Telephone: (816) 751-5900

and a carbon copy of all communications to:

Mark H. Plafker, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Telephone: (215) 564-8000

<PAGE>
AFBA FIVE STAR FUND, INC.

CROSS REFERENCE SHEET

Form N-1A Item Number Location in Prospectus

Item 1. Cover Page Cover Page

Item 2. Synopsis Not Applicable

Item 3. Condensed Financial Information Per Share Capital and
Income Changes

Item 4. General Description of Registrant Investment Objective
and Portfolio
Management Policy

Item 5. Management of the Fund Officers and Directors;
Management and
Investment Counsel

Item 6. Capital Stock and Other Securities How to Purchase Shares;
How to Redeem Shares;
How Share Price is
Determined; General
Information and
History; Dividends,
Distributions and their
Taxation

Item 7. Purchase of Securities being Offered Coverage Page; How to
Purchase Shares;
Shareholder Services
Item 8. Redemption or Repurchase How to Redeem Shares

Item 9. Pending Legal Proceedings Not Applicable

Item 10. Cover Page Cover Page

Item 11. Table of Contents Cover Page

Item 12. General Information and History Investment Objectives
and Policies;
Management and
Investment Counsel

Item 13. Investment Objectives and Policies Investment Objectives
and Policies;
Investment Restrictions

Item 14. Management of the Fund Management and
Investment Counsel

Item 15. Control Persons and Principal Management and
Holders of Securities Investment Counsel;
Officers and Directors

Item 16. Investment Advisory and Other Services Management and
Investment Counsel

Item 17. Brokerage Allocation Portfolio Transactions

Item 18. Capital Stock and Other Securities General Information and
History (Prospectus);
Financial Statements

Item 19. Purchase, Redemption and Pricing of How Share Purchases are
being Offered Handled; Redemption of
Shares Financial
Statements

Item 20. Tax Status Dividends, Distributions
and their taxation
(Prospectus)

Item 21. Underwriters How the Fund's Shares
are Distributed

Item 22. Calculation of Yield Quotations Not Applicable

Item 23. Financial Statements Financial Statements

AFBA Five Star Fund SM

100% pure no-load mutual funds

Prospectus
July 31, 1998

AFBA Five Star Balanced Fund
AFBA Five Star Equity Fund
AFBA Five Star High Yield Fund
AFBA Five Star USA Global Fund

Manager:
AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia 22314
1-800-243-9865

Investment Counsel:
Kornitzer Capital Management, Inc.
7715 Shawnee Mission Parkway
Shawnee Mission, Kansas 66202

Underwriter and Distributor:
Jones & Babson, Inc.
700 Karnes Blvd.
Kansas City, Missouri 64108-3306
For Shareholder Inquiries
1-888-578-2733

AFBA Five Star Balanced Fund (the "Balanced Fund") seeks both long-term
capital growth and high current income. Long-term capital growth is intended
to be achieved primarily by the Balanced Fund's investment in common stocks
and secondarily by the investment in convertible preferred stocks. High
current income is intended to be achieved by the Balanced Fund's investment in
corporate bonds, government bonds, mortgage-backed securities, convertible
bonds, preferred stocks and convertible preferred stocks.

AFBA Five Star Equity Fund (the "Equity Fund") seeks long-term capital
appreciation. Long-term capital appreciation is intended to be achieved
primarily by the Equity Fund's investment in common stocks. Realization of
dividend income is a secondary consideration to the extent that it supplements
the return on the Equity Fund's investments and investment in the dividend-
producing securities is consistent with achieving the objective of long-term
capital appreciation.

AFBA Five Star High Yield Fund (the "High Yield Fund") primarily seeks a
high level of current income and secondarily, capital growth. The High Yield
Fund invests primarily in a diversified portfolio of high-yielding fixed
income securities. The High Yield Fund will invest in debt securities and
preferred stock. The High Yield Fund may invest in any fixed income
securities, whether nonconvertible or convertible, without restriction.

The High Yield Fund will invest a significant portion, up to 100% of its
assets, in lower rated bonds, commonly known as "junk bonds," that entail
greater risks including default risks, than those found in higher rated
securities. The High Yield Fund's fixed income investments may consist totally
of securities rated below investment grade. Investors should carefully
consider these risks before investing. See "Investment Objectives and
Portfolio Management Policies," page 13; "Risk Factors," page 17;
"Investment Restrictions," page 19 and "Description of Securities
Ratings," page 29. Secondarily, the High Yield Fund may invest up to 10% of
the value of its total assets in common stocks and other equity securities.

AFBA Five Star USA Global Fund (the "USA Global Fund") seeks capital growth.
Capital growth is intended to be achieved primarily by the USA Global Fund's
investment in common stocks of companies based in the United States that
receive greater than 40% of their revenues or pre-tax income from
international operations, measured as of the preceding four completed quarters
of business or the companies' most recently completed fiscal year. At least
65% of the value of the USA Global Fund's total assets must be invested in at
least three different countries. This diversification is achieved through the
international operations of United States-based companies as described above.
The USA Global Fund will invest in common stocks considered by the manager to
have above average potential for appreciation; income is a secondary
consideration. The USA Global Fund will invest primarily in common stocks
listed on the New York Stock Exchange.

Purchase Information
Minimum Investment (each Fund selected)
Initial Purchase (unless Automatic Monthly) $ 500
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases (unless Automatic Monthly) $ 250
Subsequent Purchase (unless Automatic Monthly):
By Mail $ 100
By Telephone Purchase (ACH) $ 100
By Wire $ 500
Automatic Monthly Purchases (ACH):
Initial $ 100
Subsequent $ 50

Shares are purchased and redeemed at net asset value. There are no sales,
redemption or Rule 12b-1 distribution charges. If you need further
information, please call the Fund at the telephone number indicated above.

Additional Information

This prospectus should be read and retained for future reference. It contains
the information that you should know before you invest. A "Statement of
Additional Information" of the same date as this prospectus has been filed
with the U.S. Securities and Exchange Commission and is incorporated by
reference. Investors desiring additional information about the Funds may
obtain a copy without charge by calling the Fund at the telephone number
indicated above or by writing to the address on the cover.

These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

Table of Contents Page

Highlights 5
Fund Expenses 8
Financial Highlights 9
Investment Objectives and Portfolio Management Policies 13
Repurchase Agreements 16
Asset-Backed Securities 17
Risk Factors 17
Investment Restrictions 19
Performance Measures 19
How to Purchase Shares 20
Initial Investments 21
Investments Subsequent to Initial Investment 21
Telephone Investment Service 22
Automatic Monthly Investment Plan 22
How to Redeem Shares 22
Systematic Redemption Plan 24
How to Exchange Shares Between Funds 24
How Share Price is Determined 25
Officers and Directors 25
Management and Investment Counsel 25
General Information and History 27
Dividends, Distributions and Their Taxation 27
Description of Securities Ratings 29
Shareholder Services 30
Shareholder Inquiries 31

Highlights

For more information on this subject see page . . .

The Funds

The AFBA Five Star Balanced Fund, the AFBA Five Star Equity Fund, the AFBA
Five Star High Yield Fund and the AFBA Five Star USA Global Fund (the "AFBA
Funds," the "AFBA Five Star Funds" or individually, the "Fund") are
separate series of AFBA Five Star Fund, Inc. (the "Company"), which is an
open-end diversified management investment company commonly known as a mutual
fund. The Funds are sponsored and managed by AFBA Investment Management
Company (the "Manager") and Kornitzer Capital Management, Inc. (the
"Adviser") serves as investment counsel. Each share of a Fund represents an
interest in a diversified portfolio of investment securities invested in
accordance with the particular Fund's investment objective. 3

AFBA Five Star Balanced Fund seeks both long-term capital growth and high
current income. The Fund will invest in a diversified array of common stocks,
preferred stocks, convertible bonds, convertible preferred stocks, corporate
bonds and government bonds. 13

AFBA Five Star Equity Fund seeks long-term capital appreciation by investment
primarily in a broad array of common stocks, in terms of companies and
industries. 14

AFBA Five Star High Yield Fund primarily seeks a high level of current income
and secondarily, capital growth. The Fund invests primarily in high-yielding
fixed income securities and may invest in preferred stock. 15

AFBA Five Star USA Global Fund seeks capital growth by investing primarily in
common stocks of companies based in the United States that receive greater
than 40% of their revenues or pre-tax income from international operations.
16

How to Invest

Fund shares can only be purchased directly from the Funds through their
distributor, Jones & Babson, Inc. ("Jones & Babson" or the "Distributor").
Because no sales charges are added to the price of the shares, the full amount
of any purchase is invested for the benefit of the shareholder. The minimum
initial purchase is $500 ($250 for IRA and Uniform Transfers/Gifts to Minors
purchases). The minimum initial purchase is reduced to $100 when an Automatic
Monthly Investment Plan is established. Subsequent purchases by mail must be
at least $100. Wire purchases must be in the amount of $500 or more. 20

Telephone Investment - You may make investments of $100 or more by telephone
if you have authorized such investment on your application, or, subsequently,
on a special authorization form provided upon request. 22

Automatic Monthly Investment - You may elect to make monthly investments in a
constant dollar amount from your checking account ($50 minimum). The Fund will
draft your checking account on the same day each month in the amount you
authorize on your application, or, subsequently, on a special authorization
form provided upon request. 22

Redemption

Shares of the Funds are redeemable at net asset value next effective after
receipt by the Fund of a shareholder's request in good order. There are no
redemption charges or fees. 22

Exchange Privilege with Other Funds

Shareholders may exchange shares of their Fund, without charge for shares of
any other AFBA Five Star Fund or the D.L. Babson Money Market Fund, Inc.,
which is distributed by Jones & Babson, Inc. The minimum exchange amount is
$500 provided this meets the minimum investment requirement of the Fund into
which it is exchanged ($100 for Automatic Exchanges). Exchanges may or may not
be taxable depending on the shareholder's tax status. 24

The Management Fee Covers the Investment Advisory Fee and All Other Normal
Operating Costs

The Manager provides overall investment supervision of the Funds' portfolios
and of the activities of the Adviser. The Manager also provides certain
business management services to the Funds. Jones & Babson supplies the Funds
with all other normal services not provided by the Manager. The management fee
covers all normal operating costs, other than taxes, interest, fees and other
charges of governments and their agencies (including the cost of qualifying
the Funds' shares for sale in any jurisdiction), brokerage commissions, dues
and extraordinary costs, if any. For its services, the Manager charges each
Fund a fee based on an annual rate of one percent (1%) of average daily net
assets of the particular Fund from which the Manager pays the Adviser an
investment counsel fee of one-third of one percent (.33%) of average daily net
assets and Jones & Babson an administrative services fee of one-third of one
percent (.33%) of average daily net assets. 25

Dividend Policies

AFBA Five Star Balanced Fund and AFBA Five Star High Yield Fund will pay
substantially all of their net investment income quarterly, usually in March,
June, September and December. AFBA Five Star Equity Fund and AFBA Five Star
USA Global Fund will pay dividends from net investment income semiannually,
usually in June and December. It is contemplated that distributions from
capital gains, if any, will be declared annually on or before December 31 for
AFBA Five Star Balanced Fund. Distributions from capital gains, if any, will
be declared semiannually, usually in June and December for AFBA Five Star
Equity Fund, AFBA Five Star High Yield Fund and AFBA Five Star USA Global
Fund. 27

Taxes

The Funds will distribute substantially all of their net investment income
each year in order to be exempt from federal income tax. Dividend and capital
gains distributions will be taxable to each shareholder whether taken in cash
or reinvested in additional shares depending upon the shareholder's tax
status. 27

Risk Factors

For a discussion of risk factors applicable to common stocks. 17

For a discussion of risk factors applicable to high yielding high risk
debt securities. 17

For a discussion of risk factors applicable to global operations. 18

For a discussion of risk factors applicable to American Depository
Receipts (ADRs). 18

For a discussion of risk factors applicable to the Year 2000 Issue. 18

For a discussion of risk factors applicable to covered call options. 18

For a discussion of risk factors applicable to repurchase agreements. 19

Fund Expenses
<TABLE>
<CAPTION>
AFBA Five Star AFBA Five Star AFBA Five Star AFBA Five Star
Balanced Fund Equity Fund High Yield Fund USA Global Fund
</CAPTION>
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed
on purchases None None None None
Maximum sales load imposed
on reinvested dividends None None None None
Deferred sales load None None None None
Redemption fee None None None None
Exchange fee None None None None

Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees 1.00% 1.00% 1.00% 1.00%
12b-1 fees None None None None
Other expenses (after expense
limitation)* .08% .04% .08% .04%
Total Fund operating expenses* 1.08% 1.04% 1.08% 1.04%
</TABLE>

* Jones & Babson, Inc. has voluntarily agreed to assume certain expenses of
the Funds so that the total annual operating expenses of a Fund will not
exceed 1.08% of its average daily net assets. Absent Jones & Babson, Inc.'s
actions to limit the operating expenses, the total operating expenses of the
AFBA Five Star Balanced Fund and AFBA Five Star High Yield Fund would have
been 1.10% and 1.11%, respectively, of each Fund's average net assets on an
annualized basis. The expense percentages set forth above are based on each
Fund's operations from inception (June 3, 1997) through the fiscal year ended
March 31, 1998 and are shown on an annualized basis.

Examples

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:

1 Year 3 Years 5 Years 10 Years

AFBA Five Star Balanced Fund $11 $34 $60 $132
AFBA Five Star Equity Fund $11 $33 $57 $127
AFBA Five Star High Yield Fund $11 $34 $60 $132
AFBA Five Star USA Global Fund $11 $33 $57 $127

The above information is provided in order to assist you in understanding the
various costs and expenses that a shareholder of each Fund will bear directly
or indirectly. Such costs and expenses, including management fees, are
explained in more detail in this prospectus. (See "Management and Investment
Counsel.") The above Examples should not be considered a representation of
future expenses. Actual expenses may be greater or less than those shown. The
assumed 5% annual return in the Examples is hypothetical and should not be
considered a representation of future annual return. The actual return may be
greater or less than the assumed amount.

Financial Highlights

AFBA Five Star Balanced Fund

The following financial highlights for the period from June 3, 1997 (inception
date) to March 31, 1998 have been derived from audited financial statements of
AFBA Five Star Balanced Fund and should be read in conjunction with the
financial statements of the Fund and the report of Ernst & Young LLP,
independent auditors, appearing in the March 31, 1998 Annual Report to
Shareholders which is incorporated by reference into this prospectus.

June 3, 1997
(Inception Date)
to March 31, 1998*
Net asset value, beginning of period $ 10.01
Income from investment operations:
Net investment income 0.25
Net gains on securities (both realized and unrealized) 1.40
Total from investment operations 1.65
Less distributions:
Dividends from net investment income (0.23)
Distributions from capital gains (0.04)
Total distributions (0.27)
Net asset value, end of period $ 11.39

Total return 16.64%

Ratios/Supplemental Data
Net assets, end of period (in millions) $ 2
Ratio of expenses to average net assets 1.08%
Ratio of net investment income to average net assets 4.06%
Ratio of expenses to average net assets before
voluntary expense reimbursement 1.10%
Ratio of net investment income to average net assets
before voluntary expense reimbursement 4.04%
Portfolio turnover rate 57%
Average commission paid per equity share traded $ 0.0447

*The Fund was capitalized on May 16, 1997 with $100,000, representing 10,000
shares at a net asset value of $10.00 per share.
Initial public offering was made on June 3, 1997, at which time net asset
value was $10.01 per share.
Ratios are annualized, except total return.

AFBA Five Star Equity Fund

The following financial highlights for the period from June 3, 1997 (inception
date) to March 31, 1998 have been derived from audited financial statements of
AFBA Five Star Equity Fund and should be read in conjunction with the
financial statements of the Fund and the report of Ernst & Young LLP,
independent auditors, appearing in the March 31, 1998 Annual Report to
Shareholders which is incorporated by reference into this prospectus.

June 3, 1997
(Inception Date)
to March 31, 1998*
Net asset value, beginning of period $ 10.01
Income from investment operations:
Net investment income 0.06
Net gains on securities (both realized and unrealized) 1.81
Total from investment operations 1.87
Less distributions:
Dividends from net investment income (0.05)
Distributions from capital gains (0.06)
Total distributions (0.11)
Net asset value, end of period $ 11.77

Total return 18.81%

Ratios/Supplemental Data
Net assets, end of period (in millions) $ 4
Ratio of expenses to average net assets 1.04%
Ratio of net investment income to average net assets 0.94%
Portfolio turnover rate 76%
Average commission paid per equity share traded $ 0.0500

AFBA Five Star High Yield Fund

The following financial highlights for the period from June 3, 1997 (inception
date) to March 31, 1998 have been derived from audited financial statements of
AFBA Five Star High Yield Fund and should be read in conjunction with the
financial statements of the Fund and the report of Ernst & Young LLP,
independent auditors, appearing in the March 31, 1998 Annual Report to
Shareholders which is incorporated by reference into this prospectus.

June 3, 1997
(Inception Date)
to March 31, 1998*
Net asset value, beginning of period $ 10.01
Income from investment operations:
Net investment income 0.34
Net gains on securities (both realized and unrealized) 0.59
Total from investment operations 0.93
Less distributions:
Dividends from net investment income (0.32)
Distributions from capital gains -
Total distributions (0.32)
Net asset value, end of period $ 10.62

Total return 9.37%

Ratios/Supplemental Data
Net assets, end of period (in millions) $ 1
Ratio of expenses to average net assets 1.08%
Ratio of net investment income to average net assets 5.51%
Ratio of expenses to average net assets before
voluntary expense reimbursement 1.11%
Ratio of net investment income to average net assets
before voluntary expense reimbursement 5.48%
Portfolio turnover rate 31%

AFBA Five Star USA Global Fund

The following financial highlights for the period from June 3, 1997 (inception
date) to March 31, 1998 have been derived from audited financial statements of
AFBA Five Star USA Global Fund and should be read in conjunction with the
financial statements of the Fund and the report of Ernst & Young LLP,
independent auditors, appearing in the March 31, 1998 Annual Report to
Shareholders which is incorporated by reference into this prospectus.

June 3, 1997
(Inception Date)
to March 31, 1998*
Net asset value, beginning of period $ 10.01
Income from investment operations:
Net investment income 0.07
Net gains on securities (both realized and unrealized) 1.14
Total from investment operations 1.21
Less distributions:
Dividends from net investment income (0.05)
Distributions from capital gains -
Total distributions (0.05)
Net asset value, end of period $ 11.17

Total return 12.16%

Ratios/Supplemental Data
Net assets, end of period (in millions) $ 3
Ratio of expenses to average net assets 1.04%
Ratio of net investment income to average net assets 1.07%
Portfolio turnover rate 42%
Average commission paid per equity share traded $ 0.0498

Investment Objectives and Portfolio Management Policies

Each Fund's objectives and policies as described in this section will not be
changed without approval of a majority of the Fund's outstanding shares.

AFBA Five Star Balanced Fund

AFBA Five Star Balanced Fund seeks both long-term capital growth and high
current income. Long-term capital growth is intended to be achieved primarily
by the Fund's investment in common stocks and secondarily by the Fund's
investment in convertible bonds and convertible preferred stocks. High current
income is intended to be achieved by the Fund's investment in corporate bonds,
government bonds, mortgage-backed securities, convertible bonds, preferred
stocks and convertible preferred stocks.

AFBA Five Star Balanced Fund will normally invest in a broad array of
securities, diversified not only in terms of companies and industries, but
also in terms of types of securities. The types of securities include common
stocks, preferred stocks, convertible bonds, convertible preferred stocks,
corporate bonds and government bonds. It is expected that the majority of
common stocks purchased by the Fund will be large capitalization companies
with most, if not all, listed on the New York Stock Exchange. Large
capitalization stocks are considered to be those with capitalization in excess
of $1 billion.

It is not the manager's intention to make wide use of NASDAQ traded, smaller
capitalization common stocks. Smaller capitalization stocks are considered to
be those with capitalization of less than $1 billion. The Fund may invest up
to 75% of its assets in corporate bonds, convertible bonds, preferred stocks
and convertible preferred stocks. The manager expects that from time to time
these securities may be rated below investment grade (BBB) or its equivalent
by the major rating agencies. The manager believes this policy is justified
given the adviser's view that these securities from time to time offer
superior value and given the adviser's experience and substantial in-house
credit research capabilities with higher yielding securities.

Securities rated Baa or higher by Moody's or BBB by Standard & Poor's or
higher are classified as investment grade securities. Although securities
rated Baa by Moody's and BBB by Standard & Poor's have speculative
characteristics, they are considered to be investment grade. Such securities
carry a lower degree of risk than lower rated securities. (See "Risk Factors
Applicable to High Yielding High Risk Debt Securities.")

Securities rated below Baa by Moody's or BBB by Standard & Poor's are commonly
known as junk bonds and are considered to be high risk. Yields on such bonds
will fluctuate over time, and achievement of the Fund's investment objective
may be more dependent on the Fund's own credit analysis than is the case for
higher rated bonds. (See "Risk Factors Applicable to High Yielding High Risk
Debt Securities.")

The Fund may also invest in high-yielding, high-risk corporate debt securities
(so-called "junk bonds"). Up to 20% of the Fund's assets may be invested in
debt securities which are rated less than B or are unrated.

The Fund will not invest in securities that, at the time of initial
investment, are rated less than B by Moody's or Standard & Poor's. Securities
that are subsequently downgraded in quality below B may continue to be held by
the Fund, and will be sold only if the Fund's adviser believes it would be
advantageous to do so. In addition, the credit quality of unrated securities
purchased by the Fund must be, in the opinion of the Fund's adviser, at least
equivalent to a B rating by Moody's or Standard & Poor's.

Securities rated less than Baa by Moody's or BBB by Standard & Poor's are
classified as non-investment grade securities. Such securities carry a high
degree of risk and are considered speculative by the major credit rating
agencies. (See "Risk Factors Applicable to High Yielding High Risk Debt
Securities.")

The proportion of the Fund invested in each type of security is expected to
change over time in accordance with the Manager's and Adviser's
interpretations of economic conditions and underlying security values.
However, it is expected that a minimum of 25% of the Fund's total assets will
always be invested in fixed income senior securities and that a minimum of 25%
of its total assets will always be invested in equity securities. When, in the
Manager's and Adviser's judgment, market conditions warrant substantial
temporary investments in high-quality money market securities, the Fund may do
so.

The Fund is authorized to write (i.e. sell) covered call options on the
securities in which it invests and to enter into closing purchase transactions
with respect to certain of such options. A covered call option is an option
where the Fund, in return for a premium, gives another party a right to buy
specified securities owned by the Fund at a specified future date and price
set at the time of the contract. (See "Risk Factors Applicable to Covered
Call Options.")

Covered call options are intended to serve as a partial hedge against any
declining price of the underlying securities.

Investments in money market securities shall include government securities,
commercial paper, bank certificates of deposit and repurchase agreements
collateralized by government securities. Investment in commercial paper is
restricted to companies in the top two rating categories by Moody's (P-1, P-2)
and Standard & Poor's (A-1+, A-1, A-2).

The Fund may also invest in issues of the United States Treasury or a United
States government agency subject to repurchase agreements. The use of
repurchase agreements by the Fund involves certain risks. For a discussion of
these risks, see "Risk Factors Applicable to Repurchase Agreements."

There is no assurance that the Fund's objective of long-term growth of capital
and high current income can be achieved. Portfolio turnover will be no more
than is necessary to meet the Fund's objective.

AFBA Five Star Equity Fund

AFBA Five Star Equity Fund seeks long-term capital appreciation. Long-term
capital appreciation is intended to be achieved primarily by the Fund's
investment in common stocks. Realization of dividend income is a secondary
consideration to the extent that it supplements the return on the Fund's
investments and investment in the dividend-producing securities is consistent
with achieving the Fund's objective of long-term capital appreciation.

The Fund will normally invest in a broad array of common stocks, in terms of
companies and industries. It is expected that the majority of common stocks
purchased in the Fund will be large capitalization companies with most, if not
all, listed on the New York Stock Exchange. Large capitalization stocks are
considered to be those with capitalization in excess of $1 billion.

The Fund may purchase foreign securities through dollar-denominated American
Depository Receipts (ADRs), which do not involve the same direct currency and
liquidity risks as securities denominated in foreign currency and which are
issued by domestic banks and publicly traded in the United States. The Fund
does not intend to invest directly in foreign securities or foreign
currencies.

The Fund will invest at least 65% of its assets in common stocks under normal
circumstances. When, in the Manager's judgment, market conditions warrant
substantial temporary defensive investments in high-quality money market
securities, the Fund may do so.

Covered call options are intended to serve as a partial hedge against any
declining price of the underlying securities.

There is no assurance that the Fund's objective of long-term capital
appreciation can be achieved. Portfolio turnover will be no more than is
necessary to meet the Fund's objective.

AFBA Five Star High Yield Fund

AFBA Five Star High Yield Fund primarily seeks a high level of current income
and secondarily, capital growth. The Fund invests primarily in a diversified
portfolio of high-yielding fixed income securities. High current income is
intended to be achieved by the Fund's investment in any fixed income
securities, without restrictions, such as corporate bonds, government bonds,
convertible bonds, preferred stocks and convertible preferred stocks. The Fund
may not invest in foreign government bonds. Capital growth is intended to be
achieved by the appreciation of fixed income and equity investments held in
the Fund.

The Fund may invest up to 100% of its assets in any fixed income securities,
including without limitation, corporate bonds, convertible bonds, preferred
stocks and convertible preferred stocks. These securities may be rated below
investment grade (BB/Ba and B/B) by the major rating agencies or, if unrated,
are in the opinion of the Manager of similar quality. The Manager believes
this policy is justified given the Manager's view that these securities from
time to time offer superior value and given the Adviser's experience and
substantial in-house credit research capabilities with higher yielding
securities.

Securities rated Baa or higher by Moody's or BBB by Standard & Poor's or
higher are classified as investment grade securities. Although securities
rated Baa by Moody's and BBB by Standard & Poor's have speculative
characteristics, they are considered to be "medium" investment grade. Such
securities carry a lower degree of risk than lower rated securities.

Securities rated Baa and below by Moody's or BBB and below by Standard &
Poor's are commonly known as "junk bonds" and are considered to be high
risk. Yields on such bonds will fluctuate over time, and achievement of the
Fund's investment objective may be more dependent on the Fund's own credit
analysis than is the case for higher rated bonds. (See "Risk Factors
Applicable to High Yielding High Risk Debt Securities.")

Up to 20% of the Fund's assets may be invested in debt securities which are
rated less than B at the time of purchase or if unrated are in the opinion of
the manager of similar quality. Securities rated B or higher at the time of
purchase, which are subsequently downgraded, will not be subject to this
limitation.

The lowest rating that may be held in the Fund is D, or that of defaulted
securities. (See "Risk Factors Applicable to High Yielding High Risk Debt
Securities.") The Fund will not purchase obligations that are in default, but
may hold in the portfolio securities which go into default subsequent to
acquisition by the Fund.

The proportion of the Fund invested in each type of security is expected to
change over time in accordance with the manager's interpretation of economic
conditions and underlying security values. However, it is expected that a
minimum of 65% of the Fund's total assets will always be invested in fixed
income securities and that a maximum of 10% of its total assets will be
invested in equity securities. The Fund's flexible investment policy allows it
to invest in securities with varying maturities; however, it is anticipated
that the average maturity of securities acquired by the Fund will not exceed
15 years. The average maturity of the Fund will be generally ten years or
less. The manager may look at a number of factors in selecting securities for
the Fund's portfolio. These include the past, current and estimated future:
(1) financial strength of the issuer; (2) cash flow; (3) management; (4)
borrowing requirements; and (5) responsiveness to changes in interest rates
and business conditions. Sometimes the manager may believe that a full or
partial temporary defensive position is desirable, due to present or
anticipated market or economic conditions. To achieve a defensive posture, the
manager may take any one or more of the following steps with respect to assets
in the Fund's portfolio: (1) shortening the average maturity of the Fund's
debt portfolio; (2) holding cash or cash equivalents; and (3) emphasizing
high-grade debt securities. Taking a defensive posture as described above may
involve a reduction in the yield on the Fund's portfolio.

Covered call options are intended to serve as a partial hedge against any
declining price of the underlying securities.

The Fund may also invest in issues of the United States treasury or a United
States government agency subject to repurchase agreements. The use of
repurchase agreements by the Fund involves certain risks, see "Risk Factors
Applicable to Repurchase Agreements."

There is no assurance that the Fund's objective of a high level of current
income and secondarily capital growth can be achieved. Portfolio turnover will
be no more than is necessary to meet the Fund's objective.

AFBA Five Star USA Global Fund

AFBA Five Star USA Global Fund seeks capital growth. Capital growth is
intended to be achieved primarily by the Fund's investment in common stocks of
companies based in the United States that receive greater than 40% of their
revenues or pre-tax income from international operations, measured as of the
preceding four completed quarters of business or the respective company's most
recently completed fiscal year. At least 65% of the value of the Fund's total
assets must be invested in at least three different countries. This
diversification is achieved through the international operations of United
States - based companies as described above. The Fund will invest in common
stocks considered by the Manager to have above average potential for
appreciation; income is a secondary consideration. Under normal circumstances,
the Fund will invest a majority of its assets in common stocks listed on the
New York Stock Exchange.

The Fund's manager believes that the investment policies of the Fund reduce or
eliminate several risks associated with direct investment in foreign
securities. Trading costs are usually higher in foreign countries because
commission rates are generally fixed rather than negotiated, as in the United
States. Liquidity risk is generally lowered because trading volumes are
generally higher on United States exchanges. Many foreign stock exchanges
require extended clearance and settlement periods, which can impair a manager
from implementing specific investment policies. Finally, there is generally
less enforcement of security laws and supervision of developing country stock
exchanges.

When, in the manager's judgment, market conditions warrant substantial
temporary defensive investments in high quality money market securities, the
Fund may do so.

The Fund is authorized to write (i.e. sell) covered call options on the
securities in which it invests and to enter into closing purchased
transactions with respect to certain of such options. A covered call option is
an option where the Fund, in return for a premium, gives another party a right
to buy specified securities owned by the Fund at a specified future date and
price set at the time of the contract. (See "Risk Factors Applicable to
Covered Call Options.")

Covered call options are intended to serve as a partial hedge against any
declining price of the underlying securities.

There is no assurance that the Fund's objective of capital growth can be
achieved. Portfolio turnover will be no more than is necessary to meet the
Fund's objective.

Repurchase Agreements

A repurchase agreement involves the sale of securities to the Fund with the
concurrent agreement by the seller to repurchase the securities at the Fund's
cost plus interest at an agreed rate upon demand or within a specified time,
thereby determining the yield during the purchaser's period of ownership. The
result is a fixed rate of return insulated from market fluctuations during
such period. Under the Investment Company Act of 1940, repurchase agreements
are considered loans by a Fund.

A Fund will enter into such repurchase agreements only with United States
banks having assets in excess of $1 billion which are members of the Federal
Deposit Insurance Corporation, and with certain securities dealers who meet
the qualifications set from time to time by the Board of Directors of the
Fund. The term to maturity of a repurchase agreement normally will be no
longer than a few days. Repurchase agreements maturing in more than seven days
and other illiquid securities will not exceed 10% of the net assets of any
Fund.

Each of the AFBA Five Star Funds may invest up to 25% of its assets under
normal conditions in repurchase agreements. (See "Risk Factors Applicable to
Repurchase Agreements.")

Asset-Backed Securities

AFBA Five Star High Yield Fund may invest in asset-backed securities. Asset-
backed securities are collateralized by short maturity loans such as
automobile receivables, credit card receivables, other types of receivables or
assets. Credit support for asset-backed securities may be based on the
underlying assets and/or provided through credit enhancements by a third
party. Credit enhancement techniques include letters of credit, insurance
bonds, limited guarantees (which are generally provided by the issuer),
senior-subordinated structures and over-collateralization.

Risk Factors

Risk Factors Applicable to Common Stocks

AFBA Five Star Equity Fund, AFBA Five Star Balanced Fund and AFBA Five Star
USA Global Fund invest in common stocks. AFBA Five Star High Yield Fund may
invest up to 10% of its assets in common stocks. The Funds are subject to
market risk and perfor-mance risk. Market risk is the possibility that stock
prices in general will decline over short or even extended periods of time.
Stock markets tend to be cyclical, with periods when stock prices generally
rise and periods when stock prices generally decline. Performance risk is the
possibility that a fund's performance during a specific period may not meet or
exceed that of the stock market as a whole.

Risk Factors Applicable to High Yielding High Risk Debt Securities
AFBA Five Star Balanced Fund and AFBA Five Star High Yield Fund invest in
high-yielding, high-risk debt securities. Lower rated bonds involve a higher
degree of credit risk, the risk that the issuer will not make interest or
principal payments when due. In the event of an unanticipated default, a Fund
would experience a reduction in its income, and could expect a decline in the
market value of the securities so affected. More careful analysis of the
financial condition of each issuer of lower grade securities is therefore
necessary. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals and to obtain additional
financing.

The market prices of lower grade securities are generally less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic or political changes or, in the case of corporate issuers,
individual corporate developments. Periods of economic or political
uncertainty and change can be expected to result in volatility of prices of
these securities. Since the last major economic recession, there has been a
substantial increase in the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings, so past experience with
high-yield securities in a prolonged economic downturn may not provide an
accurate indication of future performance during such periods. Lower rated
securities also may have less liquid markets than higher rated securities, and
their liquidity as well as their value may be adversely affected by adverse
economic conditions. Adverse publicity and investor perceptions, as well as
new or proposed laws, may also have a negative impact on the market for high-
yield/high-risk bonds.

Credit quality of high-yield/high-risk securities (so-called "junk bonds")
can change suddenly and unexpectedly and even recently issued credit ratings
may not fully reflect the actual risks posed by a particular high-yield/high-
risk security. For these reasons, it is the Funds' policy not to rely
primarily on ratings issued by established credit rating agencies, but to
utilize such ratings in conjunction with the manager's own independent and
ongoing review of credit quality. As a mutual fund investing in fixed income
securities, each of the Funds is subject primarily to interest rate, income
and credit risk. Interest rate risk is the potential for a decline in bond
prices due to rising interest rates. In general, bond prices vary inversely
with interest rates. When interest rates rise, bond prices generally fall.
Conversely, when interest rates fall, bond prices generally rise. The change
in price depends on several factors, including the bond's maturity date. In
general, bonds with longer maturities are more sensitive to interest rates
than bonds with shorter maturities.

Each of the Funds is also subject to income risk, which is the potential for a
decline in the respective Fund's income due to falling market interest rates.

In addition to interest rate and income risks, each Fund is subject to credit
risk. Credit risk, also known as default risk, is the possibility that a bond
issuer will fail to make timely payments of interest or principal to a Fund.
The credit risk of a Fund depends on the quality of its investments.
Reflecting their higher risks, lower-quality bonds generally offer higher
yields (all other factors being equal). Ratings of debt securities are defined
under the caption "Fixed Income Securities Described and Ratings."
Risk Factors Applicable to Global Operations

The risks to which the U.S. companies in which AFBA Five Star USA Global Fund
plans to invest are exposed and, consequently, the concurrent risks
experienced by the Fund as a result of investing in such companies include:
the risk of fluctuations in the value of foreign currencies; adverse political
and economic developments; and the possibility of expropriation,
nationalization or confiscatory taxation or limitations on the removal of
funds or other assets. The performance of foreign currencies relative to the
U.S. dollar and the relative strength of the U.S. dollar may be an important
factor in the performance of the Fund.

Risk Factors Applicable to American Depository Receipts (ADRs)

Up to 25% of the AFBA Five Star Equity Fund's total assets may be invested in
ADRs. ADRs (sponsored or unsponsored) are receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying foreign
securities. Most ADRs are traded on a U.S. stock exchange. Issuers of
unsponsored ADRs are not contractually obligated to disclose material
information in the U.S. and, therefore, there may not be a correlation between
such information and the market value of the unsponsored ADR.

Risk Factors Applicable to Year 2000 Issue

Like other mutual funds, as well as other financial and business organizations
around the world, the Funds could be adversely affected if the computer
systems used by Jones & Babson, Inc., AFBA Investment Management Company,
Kornitzer Capital Management, Inc. and other service providers, in performing
their administrative functions do not properly process and calculate date-
related information and data as of and after January 1, 2000. This is commonly
known as the "Year 2000 Issue." Jones & Babson, Inc., AFBA Investment
Management Company and Kornitzer Capital Management, Inc. are taking steps
that they believe are reasonably designed to address the Year 2000 Issue with
respect to computer systems that they use and to obtain reasonable assurances
that comparable steps are being taken by the Funds' other major service
providers. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact to the Funds.

Risk Factors Applicable to Covered Call Options

Each of the AFBA Five Star Funds may engage in covered call option
transactions as described herein. Up to 25% of a Fund's total assets may be
subject to covered call options. By writing covered call options, the Fund
gives up the opportunity, while the option is in effect, to profit from any
price increase in the underlying security above the option exercise price. In
addition, a Fund's ability to sell the underlying security will be limited
while the option is in effect unless the Fund effects a closing purchase
transaction. A closing purchase transaction cancels out a Fund's position as
the writer of an option by means of an offsetting purchase of an identical
option prior to the expiration of the option it has written.

Upon the termination of a Fund's obligation under a covered call option other
than through exercise of the option, the Fund will realize a short-term
capital gain or loss. Any gain realized by a Fund from the exercise of an
option will be short- or long-term depending on the period for which the stock
was held. The writing of covered call options creates a straddle that is
potentially subject to the straddle rules, which may override some of the
foregoing rules and result in a deferral of some losses for tax purposes.

Risk Factors Applicable to Repurchase Agreements

Each of the AFBA Five Star Funds may enter into repurchase agreements. The use
of repurchase agreements involves certain risks. For example, if the seller of
the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, a Fund
may incur a loss when the securities are sold. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, disposition of the underlying securities may be
delayed pending court proceedings. Finally, it is possible that a Fund may not
be able to perfect its interest in the underlying securities. While the Fund's
management acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and careful
monitoring procedures.

Investment Restrictions

In addition to the investment objective and portfolio management policies set
forth under the caption "Investment Objectives and Portfolio Management
Policies," the Funds are subject to certain other restrictions which may not
be changed without approval of the lesser of: (1) at least 67% of the voting
securities present at a meeting if the holders of more than 50% of the
outstanding securities of the Fund are present or represented by proxy, or (2)
more than 50% of the outstanding voting securities of the Fund. Among these
restrictions, the more important ones are that the Fund will not purchase the
securities of any issuer if more than 5% of the Fund's total assets would be
invested in the securities of such issuer, or the Fund would hold more than
10% of any class of securities of such issuer; the Fund will not make any loan
(the purchase of a security subject to a repurchase agreement or the purchase
of a portion of an issue of publicly distributed debt securities is not
considered the making of a loan); and the Fund will not borrow or pledge its
credit under normal circumstances, except up to 10% of its total assets
(computed at the lower of fair market value or cost) temporarily for emergency
or extraordinary purposes, and not for the purpose of leveraging its
investments; and provided further that any borrowing in excess of 5% of the
total assets of the Fund shall have asset coverage of at least 3 to 1. The
Fund will not buy securities while borrowings are outstanding. The full text
of these restrictions is set forth in the "Statement of Additional
Information."

Performance Measures

From time to time, each of the Funds may advertise its performance in various
ways, as summarized below. Further discussion of these matters also appears in
the "Statement of Additional Information." A discussion of each Fund's
performance is included in the Funds' Annual Report to Shareholders which is
available from the Funds upon request at no charge.

Total Return

The Funds may advertise "average annual total return" over various periods
of time. Such total return figures show the average percentage change in value
of an investment in the respective Fund from the beginning date of the
measuring period to the end of the measuring period. These figures reflect
changes in the price of the Fund's shares and assume that any income dividends
and/or capital gains distributions made by the respective Fund during the
period were reinvested in shares of the Fund. Figures will be given for recent
one-, five- and ten-year periods (if applicable), and may be given for other
periods as well (such as from commencement of the Fund's operations, or on a
year-by-year basis). When considering "average" total return figures for
periods longer than one year, it is important to note that a Fund's annual
total return for any one year in the period might have been greater or less
than the average for the entire period.

Yield

AFBA Five Star Balanced Fund and AFBA Five Star High Yield Fund may advertise
a yield figure derived by dividing the Fund's net investment income per share
during a 30-day base period by the per share price on the last day of the base
period.

Performance Comparisons

In advertisements or in reports to shareholders, each of the Funds may compare
its performance to that of other mutual funds with similar investment
objectives and to stock or other relevant indices. For example, AFBA Five Star
Funds may compare their performance to rankings prepared by Lipper Analytical
Services, Inc. (Lipper), a widely recognized independent service which
monitors the performance of mutual funds. AFBA Five Star Balanced Fund, AFBA
Five Star Equity Fund and AFBA Five Star USA Global Fund may compare their
performance to the Standard & Poor's 500 Stock Index (S&P 500), an index of
unmanaged groups of common stocks; the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industrial companies listed
on the NYSE; or the Consumer Price Index. AFBA Five Star Balanced Fund may
compare its performance to a hypothetical equal weighted composite of the S&P
500 and the Merrill Lynch Bond Fund Index, an unmanaged index of corporate
bond funds. AFBA Five Star High Yield Fund may compare its performance to the
Shearson/Lehman Government/Corporate Index, an unmanaged index of government
and corporate bonds, the Merrill Lynch Corporate Bond Index, an unmanaged
index of corporate bonds, the Merrill Lynch High Yield Bond Fund Index, an
unmanaged index of high yield bond funds, or the Consumer Price Index.
Performance information, rankings, ratings, published editorial comments and
listings as reported in national financial publications such as Kiplinger's
Personal Finance Magazine, Business Week, Morningstar, Investor's Business
Daily, Institutional Investor, The Wall Street Journal, Mutual Fund
Forecaster, No-Load Investor, Money, Forbes, Fortune and Barron's, may also be
used in comparing performance of the Funds. Performance comparisons should not
be considered as representative of the future performance of any Fund. Further
information regarding the performance of the AFBA Five Star Funds is contained
in the "Statement of Additional Information."

Performance rankings, recommendations, published editorial comments and
listings reported in Money, Barron's, Kiplinger's Personal Finance Magazine,
Financial World, Forbes, U.S. News & World Report, Business Week, The Wall
Street Journal, Investors Business Daily, USA Today and Fortune, may also be
cited (if any of the Funds are listed in any such publication) or used for
comparison, as well as performance listings and rankings from Morningstar
Mutual Funds, Income and Safety, The Mutual Fund Letter, No-Load Fund
Investor, United Mutual Fund Selector, No-Load Fund Analyst, No-Load Fund X,
Louis Rukeyser's Wall Street Newsletter, Donoghue's Money Letter, CDA
Investment Technologies, Inc., Wiesenberger Investment Company Service and
Donoghue's Mutual Fund Almanac.

How to Purchase Shares

You must specify the Fund in which you desire to invest on your application
form. Failure to do so will result in the application and your check or bank
wire being returned to you.

Shares are purchased at net asset value (no sales charge) from the Fund
through its agent, Jones & Babson, Inc. To complete a purchase order by mail,
wire or telephone, please provide information detailed below. For information
or assistance call toll free 1-888-578-2733. If an investor wishes to engage
the services of any other broker to purchase (or redeem) shares of the Fund, a
fee may be charged by such broker. The Fund will not be responsible for the
consequences of delays including delays in the banking or Federal Reserve wire
systems.

You do not pay a sales commission when you buy shares of the Funds. Shares are
purchased at the Fund's net asset value (price) per share next effective after
a purchase order and payment have been received and accepted by the Fund. In
the case of certain institutions which have made satisfactory payment
arrangements with a Fund, orders may be processed at the net asset value per
share next effective after a purchase order has been received and accepted by
the Fund.

The Funds reserve the right in their sole discretion to withdraw all or any
part of the offerings made by this prospectus or to reject purchase orders
when, in the judgment of management, such withdrawal or rejection is in the
best interest of a Fund and its shareholders. The Funds also reserve the right
at any time to waive or increase the minimum requirements applicable to
initial or subsequent investments with respect to any person or class of
persons, which include shareholders of the Funds' special investment programs.
The Funds reserve the right to refuse to accept orders for Fund shares unless
accompanied by payment, except when a responsible person has indemnified the
Fund against losses resulting from the failure of investors to make payment.
In the event that a Fund sustains a loss as the result of failure by a
purchaser to make payment, the Fund's Distributor, Jones & Babson, will cover
the loss.

Initial Investments

Initial investments - By mail. You may open an account and make an investment
by completing and signing the application which accompanies this prospectus.
The minimum initial purchase is $500 unless your purchase is pursuant to an
IRA or the Uniform Transfers (Gifts) to Minors Act, in which case the minimum
initial purchase is $250. The minimum initial investment is reduced to $100
when an Automatic Monthly Investment Plan is established. Make your check
payable to UMB Bank c/f AFBA Five Star Fund. Mail your application and check
to:

The AFBA Five Star Fund
P.O. Box 419757
Kansas City, MO 64141-6757

Initial investments - By wire. You may purchase shares of a Fund by wiring
the purchase price ($500 minimum) through the Federal Reserve Bank to the
custodian, UMB Bank, n.a. Prior to sending your money, you must call the Fund
toll free 1-888-578-2733 and provide the identity of the registered account
owner, the registered address, the Social Security or Taxpayer Identification
Number of the registered owner, the amount being wired, the name and telephone
number of the wiring bank and the person to be contacted in connection with
the order. You will then be provided a Fund account number, after which you
should instruct your bank to wire the specified amount, along with the account
number and the account registration to:

UMB Bank, n.a.
Kansas City, Missouri, ABA #101000695

For:
AFBA Five Star Balanced Fund/AC= 987084-1061
AFBA Five Star Equity Fund/AC= 987084-1126
AFBA Five Star High Yield Fund/AC= 987084-1150
AFBA Five Star USA Global Fund/AC= 987084-1185
OBI=(assigned Fund number and name in which registered)

A completed application must be sent to the Fund as soon as possible so the
necessary remaining information can be recorded in your account. Payment of
redemption proceeds may be delayed until the completed application is received
by the Fund.

Investments Subsequent to Initial Investment

You may add to your Fund account at any time in amounts of $100 or more if
purchases are made by mail, or $500 or more if purchases are made by wire, or
$100 or more if purchases are made by telephone purchase. Automatic monthly
investments must be in amounts of $50 or more.

Checks should be made payable to UMB Bank c/f AFBA Five Star Fund and mailed
to the Fund at:

P.O. Box 419779
Kansas City, MO 64141-6779

Always identify your account number or include the detachable reminder stub
which accompanies each confirmation.

Wire share purchases should include your account registration, your account
number and the AFBA Five Star Fund in which you are purchasing shares. It also
is advisable to notify the Fund by telephone that you have sent a wire
purchase order to the bank.

Telephone Investment Service

To use the Telephone Investment Service, you must first establish your Fund
account and authorize telephone orders in the application form, or,
subsequently, on a special authorization form provided upon request. If you
elect the Telephone Investment Service, you may purchase Fund shares by
telephone and authorize the Fund to draft your checking account ($100 minimum)
for the cost of the shares so purchased. Debits to your checking account would
be processed through the Automated Clearing House (ACH). You will receive the
next available price after the Fund has received your telephone call.
Availability and continuance of this privilege is subject to acceptance and
approval by the Fund and all participating banks. During periods of increased
market activity, you may have difficulty reaching the Fund by telephone, in
which case you should contact the Fund by mail or telegraph. The Funds will
not be responsible for the consequences of delays, including delays in the
banking or Federal Reserve wire systems.

The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are followed,
the Funds will not be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to, requiring
personal identification prior to acting upon instructions received by
telephone, providing written confirmations of such transactions, and/or tape
recording of telephone instructions.

The Funds reserve the right to initiate a charge for this service and to
terminate or modify any or all of the privileges in connection with this
service at any time upon 15 days written notice to shareholders, and to
terminate or modify the privileges without prior notice in any circumstances
where such termination or modification is in the best interest of the Fund and
its shareholders.

Automatic Monthly Investment Plan

You may elect to make monthly investments in a constant dollar amount from
your checking account ($50 minimum, after an initial investment of $100 or
more for any account). The relevant Fund will draft your checking account on
the same day each month in the amount you authorize on your application, or,
subsequently, on a special authorization form provided upon request. Debits to
your checking account would be processed through the Automated Clearing House
(ACH). Availability and continuance of this privilege is subject to acceptance
and approval by the Fund and all participating banks. If the date selected
falls on a day upon which the Fund's shares are not priced, investment will be
made on the first date thereafter upon which the Fund's shares are priced. The
Funds will not be responsible for the consequences of delays, including delays
in the banking or Federal Reserve wire systems.

How to Redeem Shares

Each of the Funds will redeem shares at the price (net asset value per share)
next computed after receipt of a redemption request in "good order." (See
"How Share Price is Determined.")

A written request for redemption, together with an endorsed share certificate
where a certificate has been issued, must be received by the Fund in order to
constitute a valid tender for redemption. For authorization of redemptions by
a corporation, it will also be necessary to have an appropriate certified copy
of resolutions on file with the Fund before a redemption request will be
considered in "good order." In the case of certain institutions which have
made satisfactory redemption arrangements with a Fund, redemption orders may
be processed by facsimile or telephone transmission at net asset value per
share next effective after receipt by the Fund. If an investor wishes to
engage the services of any other broker to redeem (or purchase) shares of any
Fund, a fee may be charged by such broker.

To be in "good order" the request must include the following:

(1) A written redemption request or stock assignment (stock power)
containing the genuine signature of each registered owner
exactly as the shares are registered, with clear identification
of the account by registered name(s) and account number and the
number of shares or the dollar amount to be redeemed;

(2) any outstanding stock certificates representing shares to be
redeemed;

(3) signature guarantees as required (see Signature Guarantees); and

(4) any additional documentation which the Fund may deem necessary
to insure a genuine redemption.

Where additional documentation is normally required to support redemptions as
in the case of corporations, fiduciaries and others who hold shares in a
representative or nominee capacity such as certified copies of corporate
resolutions, or certificates of incumbency, or such other documentation as may
be required under the Uniform Commercial Code or other applicable laws or
regulations, it is the responsibility of the shareholder to maintain such
documentation on file and in a current status. A failure to do so will delay
the redemption. If you have questions concerning redemption requirements,
please write or telephone the Fund well ahead of an anticipated redemption in
order to avoid any possible delay.

Requests which are subject to special conditions or which specify an effective
date other than as provided herein cannot be accepted. All redemption requests
must be transmitted to the relevant Fund at:

P.O. Box 419757
Kansas City, MO 64141-6757

Each of the Funds will endeavor to transmit redemption proceeds to the proper
party, as instructed, as soon as practicable after a redemption request has
been received in "good order" and accepted, but in no event later than the
third business day thereafter. Transmissions are made by mail unless an
expedited method has been authorized and specified in the redemption request.
The Funds will not be responsible for the consequences of delays, including
delays in the banking or Federal Reserve wire systems.

Redemptions will not become effective until all documents in the form required
have been received. In the case of redemption requests made within 15 days of
the date of purchase, the Fund will delay transmission of proceeds until such
time as it is certain that unconditional payment in federal funds has been
collected for the purchase of shares being redeemed or 15 days from the date
of purchase, whichever occurs first. You can avoid the possibility of delay by
paying for all of your purchases with a transfer of federal funds.

Signature Guarantees are required in connection with all redemptions by mail,
or changes in share registration, except as hereinafter provided. These
requirements may be waived by a Fund in certain instances where it appears
reasonable to do so and will not unduly affect the interests of other
shareholders. Signature(s) must be guaranteed
by an "eligible guarantor institution" as defined Rule l7Ad-15 the
Securities Exchange Act of 1934. Eligible guarantor institutions include: (1)
national or state banks, savings associations, savings and loan associations,
trust companies, savings banks, industrial loan companies and credit unions;
(2) national securities exchanges, registered securities associations and
clearing agencies; or (3) securities broker/dealers which are members of a
national securities exchange or clearing agency or which have a minimum net
capital of $100,000. A notarized signature will not be sufficient for the
request to be in proper form.

Signature guarantees will be waived for mail redemptions of $10,000 or less,
but they will be required if the checks are to be payable to someone other
than the registered owner(s), or are to be mailed to an address different from
the registered address of the shareholder(s), or where there appears to be a
pattern of redemptions designed to circumvent the signature guarantee
requirement, or where a Fund has other reason to believe that this requirement
would be in the best interests of the Fund and its shareholders.

The right of redemption may be suspended or the date of payment postponed
beyond the normal three-day period when the New York Stock Exchange is closed
or under emergency circumstances as determined by the Securities and Exchange
Commission. Further, each of the Funds reserves the right to redeem its shares
in kind under certain circumstances. If shares are redeemed in kind, the
shareholder may incur brokerage costs when converting into cash. Redemptions
in kind must be in the form of readily marketable securities. Additional
details are set forth in the "Statement of Additional Information."

Due to the high cost of maintaining smaller accounts, the Board of Directors
has authorized each of the Funds to close shareholder accounts where their
value falls below the current minimum initial investment requirement at the
time of initial purchase as a result of redemptions and not as the result of
market action, and remains below this level for 60 days after each such
shareholder account is mailed a notice of: (1) the Fund's intention to close
the account, (2) the minimum account size requirement, and (3) the date on
which the account will be closed if the minimum size requirement is not met.
Since the minimum investment amount and the minimum account size are the same,
any redemption from an account containing only the minimum investment amount
may result in redemption of that account.

Systematic Redemption Plan

If you own shares in an open account valued at $10,000 or more, and desire to
make regular monthly or quarterly withdrawals without the necessity and
inconvenience of executing a separate redemption request to initiate each
withdrawal, you may enter into a Systematic Withdrawal Plan by completing
forms obtainable from the Fund. For this service, the manager may charge you a
fee not to exceed $1.50 for each withdrawal. Currently the manager assumes the
additional expenses arising out of this type of plan, but it reserves the
right to initiate such a charge at any time in the future when it deems it
necessary. If such a charge is imposed, participants will be provided 30 days
notice.

Subject to a $50 minimum, you may withdraw each period a specified dollar
amount. Shares also may be redeemed at a rate calculated to exhaust the
account at the end of a specified period of time.

Dividends and capital gains distributions must be reinvested in additional
shares. Under all withdrawal programs, liquidation of shares in excess of
dividends and distributions reinvested will diminish and may exhaust your
account, particularly during a period of declining share values.

You may revoke or change your plan or redeem all of your remaining shares at
any time. Withdrawal payments will be continued until the shares are exhausted
or until the Fund or you terminate the plan by written notice to the other.

How to Exchange Shares Between Funds

Shareholders may exchange their Fund shares, which have been held in open
account for 15 days or more, and for which good payment has been received and
accepted, for identically registered shares of any other AFBA Five Star Fund
or D.L. Babson Money Market Fund, Inc. which is authorized for sale in the
state of residence of the investor, provided that the minimum amount exchanged
has a value of $500 and meets the minimum investment requirement of the Fund
into which it is exchanged. Automatic exchanges ($100 minimum) are also
available and once started, will continue monthly until all shares are
exchanged or until you terminate the Automatic Exchange authorization.

To authorize the Telephone/Telegraph Exchange Privilege, all registered owners
must sign the appropriate section on the original application, or the Fund
must receive a special authorization form, provided upon request. During
periods of increased market activity, you may have difficulty reaching the
Fund by telephone, in which case you should contact the Fund by mail or
telegraph. The Funds reserve the right to initiate a charge for this service
and to terminate or modify any or all of the privileges in connection with
this service at any time and without prior notice under any circumstances,
where continuance of these privileges would be detrimental to the Fund or its
shareholders, such as an emergency, or where the volume of such activity
threatens the ability of the Fund to conduct business, or under any other
circumstances, upon 60 days written notice to shareholders. The Funds will not
be responsible for the consequences of delays including delays in the banking
or Federal Reserve wire systems.

The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are followed,
the Funds will not be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to requiring
personal identification prior to acting upon instructions received by
telephone, providing written confirmations of such transactions, and/or tape
recording of telephone instructions.

Exchanges by mail may be accomplished by a written request properly signed by
all registered owners identifying the account by name and number, the number
of shares or dollar amount to be redeemed for exchange and the Fund into which
the account is being transferred.

If you wish to exchange part or all of your shares in the Fund for shares of
another AFBA Five Star Fund or D.L. Babson Money Market Fund, Inc., you should
review the prospectus of the Fund to be purchased, which can be obtained from
Jones & Babson. Any such exchange will be based on the respective net asset
values of the shares involved. An exchange between Funds involves the sale of
an asset. Unless the shareholder account is tax-deferred, this is a taxable
event.

How Share Price is Determined

In order to determine the price at which new shares will be sold and at which
issued shares presented for redemption will be liquidated, the net asset value
per share of each Fund is computed once daily, Monday through Friday, at the
specific time during the day that the Board of Directors sets at least
annually, except on days on which changes in the value of portfolio securities
will not materially affect the net asset value, or days during which no
security is tendered for redemption and no order to purchase or sell such
security is received by a Fund, or customary holidays. For a list of the
holidays during which the Funds are not open for business, see "How Share
Price is Determined" in the "Statement of Additional Information."

The price at which new shares of a Fund will be sold and at which issued
shares presented for redemption will be liquidated is computed once daily at
4:00 P.M. (Eastern Time), except on those days when the Fund is not open for
business. The AFBA Five Star Equity Fund can be found in the financial press
under the ticker symbol AFBEX.

The per share calculation is made by subtracting from each of the Fund's total
assets any liabilities and then dividing into this amount the total
outstanding shares as of the date of the calculation. Each security listed on
an exchange is valued at its last sale price on that exchange on the date as
of which assets are valued. Where the security is listed on more than one
exchange, each of the Funds will use the price of that exchange which it
generally considers to be the principal exchange on which the security is
traded. Lacking sales, the security is valued at the mean between the current
closing bid and asked prices. An unlisted security for which over-the-counter
market quotations are readily available is valued at the mean between the last
current bid and asked prices. When market quotations are not readily
available, any security or other asset is valued at its fair value as
determined in good faith by the Board of Directors.

Officers and Directors

The officers of the Company manage its day-to-day operations. The Manager and
the officers of the Company are subject to the supervision and control of the
Board of Directors. A list of the officers and directors of the Company and a
brief statement of their present positions and principal occupations during
the past five years is set forth in the "Statement of Additional
Information."

Management and Investment Counsel
The Manager is registered as an investment adviser under the Investment
Advisers Act of 1940. It organized the Company in 1997, and acts as its
investment and business manager. Pursuant to the current Management Agreement
for the AFBA Five Star Fund, the Manager is responsible for providing or
obtaining all management, supervisory and administrative services required in
the normal operation of the Fund. This includes investment management and
supervision; fees of the custodian, independent auditors and legal counsel;
remuneration of officers, directors and other personnel; rent; shareholder
services, including the maintenance of the shareholder accounting system and
transfer agency; and such other items as are incidental to corporate
administration.

Not considered normal operating expenses and therefore payable by each of the
Funds are taxes; interest; fees and other charges of governments and their
agencies, including the cost of qualifying the Funds' shares for sale in any
jurisdiction; brokerage costs; dues; and all extraordinary costs and expenses
including but not limited to legal and accounting fees incurred in
anticipation of or arising out of litigation or administrative proceedings to
which a Fund, its officers or directors may be subject or a party thereto.

As part of the Management Agreement, the Manager employs at its own expense
Kornitzer Capital Management, Inc. (previously defined as the "Adviser") as
its investment counsel to assist in the investment advisory function for AFBA
Five Star Balanced Fund, AFBA Five Star Equity Fund, AFBA Five Star High Yield
Fund and AFBA Five Star USA Global Fund. The Adviser is an independent
investment counseling firm founded in 1989, which is registered as an
investment adviser under the Investment Advisers Act of 1940. It serves a
broad variety of individual, corporate and other institutional clients by
maintaining an extensive research and analytical staff. It has an experienced
investment analysis and research staff which eliminates the need for the
Manager and the Fund to maintain an extensive duplicate staff, with the
consequent increase in the cost of investment advisory service. The cost of
the services of the Adviser is included in the fee of the Manager under the
Management Agreement. The Management Agreement limits the liability of the
Manager and the Adviser, as well as their officers, directors and personnel,
to acts or omissions involving willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. The organizational
arrangements of the adviser require that all investment decisions be made by
committee, and no person is primarily responsible for making recommen-dations
to that committee.

As compensation for all the foregoing services, AFBA Five Star Balanced Fund,
AFBA Five Star Equity Fund, AFBA Five Star High Yield Fund and AFBA Five Star
USA Global Fund each pay the Manager a fee at the annual rate of one percent
(1%) of average daily net assets from which the Manager pays the Adviser a fee
of one-third of one percent (.33%) of average daily net assets for investment
counsel services, and also pays Jones & Babson a fee of one-third of one
percent (.33%) for administrative and other services provided to the Funds,
which are not otherwise provided by the Manager. These fees are computed
daily; the fee to the Manager is paid semimonthly, and the fees to the Adviser
and Jones & Babson are paid monthly. The total expenses of AFBA Five Star
Balanced Fund for the period ended March 31, 1998 amounted to 1.08%. The total
expenses of AFBA Five Star Equity Fund for the period ended March 31, 1998
amounted to 1.04%. The total expenses of AFBA Five Star High Yield Fund for
the period ended March 31, 1998 amounted to 1.08%. The total expenses of AFBA
Five Star USA Global Fund for the period ended March 31, 1998 amounted to
1.04%.

For the current fiscal year, Jones & Babson has voluntarily agreed to assume
certain expenses of the Funds so that a Fund's total annual operating expenses
will not exceed 1.08% of its average daily net assets.
Certain officers and directors of the Company are also officers or directors
or both of the Manager, Jones & Babson or the Adviser.

AFBA Investment Management Company is a wholly owned subsidiary of Armed
Forces Benefit Services, Inc. ("AFBSI"). The Manager has not previously
served as manager of an investment company. AFBSI is a for-profit services
entity which is wholly-owned by Armed Forces Benefit Association ("AFBA").
All voting stock of AFBSI is held in a voting trust, with sole voting power
for the trust held by Lieutenant General C.C. Blanton, a director of the
Company. AFBA is a voluntary employee benefit association organized under
Internal Revenue Code Section 501(c)(9), the membership of which is open to
federal employees and uniform services members and their dependents.

Kornitzer Capital Management, Inc. is a closely held corporation and has
limitations in the ownership of its stock designed to maintain control in
those who are active in management. Owners of 5% or more of Kornitzer Capital
Management, Inc. are John C. Kornitzer, Kent W. Gasaway, Willard R. Lynch,
Thomas W. Laming and Susan Stack.

Jones & Babson, Inc. is a wholly-owned subsidiary of Business Men's Assurance
Company of America, which is considered to be a controlling person under the
Investment Company Act of 1940. Assicurazioni Generali S.p.A., an insurance
organization founded in 1831 based in Trieste, Italy, is considered to be a
controlling person and is the ultimate parent of Business Men's Assurance
Company of America. Mediobanca is a 5% owner of Assicurazioni Generali S.p.A.

The current Management Agreement between the Company and the Manager, which
includes the Investment Counsel Agreement between the Manager and the Adviser,
will continue in effect until October 31, 1998. The Agreements will continue
automatically for successive annual periods ending each October 31 so long as
such continuance is specifically approved at least annually by the Board of
Directors of the Company or by the vote of a majority of the outstanding
voting securities of the respective Fund, and, provided also that such
continuance is approved by the vote of a majority of the directors who are not
parties to the Agreements or interested persons of any such party at a meeting
held in person and called specifically for the purpose of evaluating and
voting on such approval. Both Agreements provide that either party may
terminate by giving the other 60 days written notice. The Agreements terminate
automatically if assigned by either party, as required under the Investment
Company Act of 1940.

General Information and History

The Company was incorporated in Maryland on January 9, 1997. The Articles of
Incorporation permit the Directors to issue 40,000,000 shares of common stock
in various series or classes (sub-series), with a par value of $1.00 per
share. Each series of shares, in effect, represents a separate mutual fund,
with each share of a series representing a pro rata interest in a separate
pool of investments held by the series, managed according to specified
investment objectives and policies. The Company is currently authorized to
issue four series of shares (10,000,000 shares each) which consist of AFBA
Five Star Balanced Fund, AFBA Five Star Equity Fund, AFBA Five Star High Yield
Fund and the AFBA Five Star USA Global Fund. All shares of the same series
have like rights and privileges. Each full and fractional share, when issued
and outstanding, has: (1) equal voting rights with respect to matters which
affect the Company as a whole; (2) equal voting rights with other shares of
the series with respect to matters which only affect that series; and (3)
equal dividend, distribution and redemption rights to the assets of the
series. Shares when issued are fully paid and non-assessable. The Funds may
create other series of stock but will not issue any senior securities.
Shareholders do not have pre-exemptive or conversion rights.

Non-cumulative voting - The shares of the series of the Company have non-
cumulative voting rights, which means that the holders of more than 50% of the
Company's shares voting for the election of directors can elect 100% of the
directors, if they choose to do so, and in such event, the holders of the
remaining less than 50% of the shares voting will not be able to elect any
directors.

The Maryland General Corporation Law permits registered investment companies,
such as the Funds, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the Investment
Company Act of 1940. There are procedures whereby the shareholders may remove
directors. These procedures are described in the "Statement of Additional
Information" under the caption "Officers and Directors." The Company has
adopted the appropriate provisions in its By-Laws and may not, at its
discretion, hold annual meetings of shareholders for the following purposes
unless required to do so: (1) election of directors; (2) approval of any
investment management agreement; (3) ratification of the selection of
independent auditors; and (4) approval of a distribution plan. As a result,
the Company does not intend to hold annual meetings.

This prospectus omits certain of the information contained in the registration
statement filed with the Securities and Exchange Commission, Washington, D.C.
These items may be inspected at the offices of the Commission or obtained from
the Commission upon payment of the fee prescribed.

Dividends, Distributions and Their Taxation

The AFBA Five Star Balanced Fund and the AFBA Five Star High Yield Fund pay
dividends from net investment income quarterly, usually in March, June,
September and December. The AFBA Five Star Equity Fund and the AFBA Five Star
USA Global Fund pay dividends from net investment income semiannually, usually
in June and December. Distributions from capital gains realized on the sale of
securities, if any, will be declared by the AFBA Five Star Balanced Fund
annually on or before December 31 and by the AFBA Five Star Equity Fund, AFBA
Five Star High Yield Fund and AFBA Five Star USA Global Fund semiannually,
usually in June and December. Dividend and capital gains distributions will be
reinvested automatically in additional shares at the net asset value per share
computed and effective at the close of business on the day after the record
date, unless the shareholder has elected on the original application, or by
written instructions filed with the Fund, to have them paid in cash.

Each of the Funds has qualified and intends to continue to qualify for
taxation as a "regulated investment company" under the Internal Revenue Code
so that a Fund will not be subject to federal income tax to the extent that it
distributes its income to its shareholders. As such, a Fund will not be
subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Internal Revenue Code and by
satisfying certain other requirements relating to the sources of its income
and diversification of its assets. Dividends, either in cash or in reinvested
shares, paid by a Fund from net investment income will be taxable to
shareholders as ordinary income, and may qualify in part for the 70%
dividends-received deduction for corpora-
tions. The portion of the dividends so qualified depends on the aggregate
taxable qualifying dividend income received by the Fund from domestic (U.S.)
sources. Each Fund will send to shareholders information each year regarding
dividend income which qualifies for such treatment.

Dividends from net investment income or net short-term gains will be taxable
to those investors who are subject to income taxes as ordinary income, whether
received in cash or in additional shares. Whether paid in cash or additional
shares of a Fund, and regardless of the length of time Fund shares have been
owned by the shareholder, distributions from long-term capital gains are
taxable to shareholders as such, but are not eligible for the dividends-
received deduction for corporations. The Funds do not try to realize any
particular amount of capital gains during a year; rather, realized gains are a
by-product of the Funds' management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also,
for those investors subject to tax, if purchases of shares in a Fund are made
shortly before a record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.

The Taxpayer Relief Act of 1997 created a category of long-term capital gains
for individual taxpayers that will be taxed at new lower tax rates. For
investors who are in the 28% or higher federal income tax brackets, these
gains will be taxed at a maximum of 20%. For investors who are in the 15%
federal income tax bracket, these gains will be taxed at a maximum of 10%.
Capital gain distributions will qualify for these new maximum tax rates,
depending on when a Fund's portfolio securities were sold and how long they
were held by a Fund before they were sold. Investors who want more information
on holding periods and other qualifying rules relating to these new rates
should review the expanded discussion in the "Statement of Additional
Information," or should contact their personal tax advisors. Shareholders are
notified annually by the Funds as to federal tax status of dividends and
distributions paid by the Funds. Such dividends and distributions may also be
subject to state and local taxes.

Exchange and redemption of a Fund's shares are taxable events for federal
income tax purposes. Shareholders may also be subject to state and municipal
taxes on such exchanges and redemptions. Any loss incurred on a sale or
exchange of a Fund's shares held for six months or less will be treated as a
long-term capital loss to the extent of capital gain dividends received with
respect to such shares. You should consult your tax advisor with respect to
the tax status of distributions from a Fund in your state and locality.

Dividends declared in October, November or December and made payable to
shareholders of record in such a month are deemed to have been paid by the
Fund and received by shareholders on December 31 of such year, so long as the
dividends are actually paid before February 1 of the following year.

To comply with IRS regulations, the Funds are required by federal law to
withhold 31% of reportable payments (which may include dividends, capital
gains distributions and redemptions) paid to shareholders who have not
complied with IRS regulations. In order to avoid this withholding requirement,
shareholders must certify on their application, or on a separate form supplied
by the Fund, that their Social Security or Taxpayer Identification Number
provided is correct and that they are not currently subject to backup
withholding, or that they are exempt from backup withholding.

The federal income tax status of all distributions will be reported to
shareholders each January as a part of the annual statement of shareholder
transactions. Shareholders not subject to tax on their income will not be
required to pay tax on amounts distributed to them.

The tax discussion set forth above is included herein for general information
only. Prospective investors should consult their own tax advisors with respect
to the tax consequences to them of an investment in any Fund.

Description of Securities Ratings

Fixed Income Securities Described and Ratings

Description of Bond Ratings:

Standard & Poor's Corporation (S&P)

AAA - Highest Grade. These securities possess the ultimate degree of
protection as to principal and interest. Marketwise, they move with interest
rates, and hence provide the maximum safety on all counts.

AA - High Grade. Generally, these bonds differ from AAA issues only in a
small degree. Here too, prices move with the long-term money market.

A - Upper-medium Grade. They have considerable investment strength, but are
not entirely free from adverse effects of changes in economic and trade
conditions. Interest and principal are regarded as safe. They predominately
reflect money rates in their market behavior but, to some extent, also
economic conditions.

BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.

BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligations.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

Moody's Investors Service, Inc. (Moody's)
Aaa - Best Quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt-edge." Interest payments are
protected by a large, or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.

Aa - High Quality by All Standards. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat
greater.

A - Upper-medium Grade. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have predominantly speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Ca - Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

Shareholder Services

The Funds, the Manager and Jones & Babson offer shareholders a broad variety
of services described throughout this prospectus. In addition, the following
services are available:

Automatic Monthly Investment - You may elect to make monthly investments in a
constant dollar amount from your checking account ($50 minimum, after an
initial investment of $100 or more). A Fund will draft your checking account
on the same day each month in the amount you authorize in your application,
or, subsequently, on a special authorization form provided upon request.

Automatic Reinvestment - Dividends and capital gains distributions may be
reinvested automatically, or shareholders may elect to have dividends paid in
cash and capital gains reinvested, or to have both paid in cash.

Telephone Investments - You may make investments of $100 or more by telephone
if you have authorized such investments in your application, or, subsequently,
on a special authorization form provided upon request. (See "Telephone
Investment Service.")

Automatic Exchange - You may exchange shares from your account ($100 minimum)
in any of the AFBA Five Star Funds for shares to be held in an identically
registered account in any other AFBA Five Star Fund or the D.L. Babson Money
Market Fund, Inc., according to your instructions. Monthly exchanges will be
continued until all shares have been exchanged or until you terminate the
Automatic Exchange authorization. A special authorization form will be
provided upon request.

Transfer of Ownership - A shareholder may transfer shares to another
shareholder account. The requirements which apply to redemptions apply to
transfers. A transfer to a new account must meet initial investment
requirements.

Systematic Redemption Plan - Shareholders who own shares in open account
valued at $10,000 or more may arrange to make regular withdrawals without the
necessity of executing a separate redemption request to initiate each
withdrawal.

Sub-Accounting - Keogh and corporate tax qualified retirement plans, as well
as certain other investors who must maintain separate participant accounting
records, may meet these needs through services provided by the Funds'
Administrator, Jones & Babson, Inc. Investment minimums may be met by
accumulating the separate accounts of the group. Although there is currently
no charge for sub-accounting, the Funds and their Manager reserve the right to
make reasonable charges for this service.

Prototype Retirement Plans - Jones & Babson, Inc. offers a defined
contribution prototype plan - The Universal Retirement Plan - which is
suitable for all who are self-employed, including sole proprietors,
partnerships and corporations. The Universal Prototype includes both money
purchase pension and profit-sharing plan options.

Individual Retirement Accounts - Also available are the following Individual
Retirement Accounts (IRAs):

Traditional IRA: The IRS has increased the phase-out ranges for deductible
contributions. The IRA uses the IRS model form of plan and provides an
excellent way to accumulate a retirement fund which will earn tax-deferred
dollars until withdrawn. An IRA may also be used to defer taxes on certain
distributions from employer-sponsored retirement plans. You may contribute up
to $2,000 of compensation each year ($4,000 if a spousal IRA is established),
some or all of which may be deductible. Consult your tax advisor concerning
the amount of the tax deduction, if any, as well as the best IRA for your
financial goals.

Roth IRA: Unlike the traditional IRA, contributions are non-deductible,
however, distribution will be exempt from federal taxes provided that, at the
time of withdrawal, the IRA has been held for five years and (1) the account
holder is 59-1/2 years old or (2) the withdrawals are used to purchase a first
home. The maximum contribution to a Roth IRA is $2,000 and eligibility is
subject to restrictions. Traditional IRAs may be converted into Roth IRAs.
Consult your tax advisor to determine the best IRA for your financial goals.

Simplified Employee Pensions (SEPs) - The IRA may be used with IRS Form 5305
- - SEP to establish a SEP-IRA, to which the self-employed individual may
contribute up to 15% of net earned income or $30,000, whichever is less. A
SEP-IRA offers the employer the ability to make the same level of deductible
contributions as a Profit-Sharing Plan with greater ease of administration,
but less flexibility in plan coverage of employees.

Shareholder Inquiries

Telephone inquiries may be made toll free to the Funds, 1-800-243-9865.
Shareholders may address written inquiries to the
Funds at:

Mailing Addresses

For Subsequent Purchases:
AFBA Five Star Fund, Inc.
P.O. Box 419779
Kansas City, MO 64141-6779

For All Other Correspondence:
AFBA Five Star Fund, Inc.
P.O. Box 419757
Kansas City, MO 64141-6757

Overnight Deliveries
AFBA Five Star Fund, Inc.
c/o Jones & Babson, Inc.
700 Karnes Blvd.
Kansas City, MO 64108-3306

MANAGER
AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia

INVESTMENT COUNSEL
Kornitzer Capital Management, Inc.
Shawnee Mission, Kansas

INDEPENDENT AUDITORS
Ernst & Young LLP
Kansas City, Missouri

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
Philadelphia, Pennsylvania

CUSTODIAN
UMB Bank, n.a.
Kansas City, Missouri

UNDERWRITER AND DISTRIBUTOR
Jones & Babson Inc.
Kansas City, Missouri

AFBA Five Star Fund SM

AFBA Five Star Balanced Fund
AFBA Five Star Equity Fund
AFBA Five Star High Yield Fund
AFBA Five Star USA Global Fund

AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia 22314
1-800-243-9865

Shareholder Inquiries 1-888-578-2733

JB17D 7/98

PART B

AFBA FIVE STAR FUND, INC.

consisting of:

AFBA FIVE STAR BALANCED FUND
AFBA FIVE STAR EQUITY FUND
AFBA FIVE STAR HIGH YIELD FUND
AFBA FIVE STAR USA GLOBAL FUND

STATEMENT OF ADDITIONAL INFORMATION

July 31, 1998

This Statement is not a Prospectus but should be read
in conjunction with the Funds'
current Prospectus dated July 31, 1998. To obtain the
Prospectus please call the Fund
toll free at 1-800-243-9865.

TABLE OF CONTENTS

Page

Investment Objectives and Policies 1
Portfolio Transactions 1
Investment Restrictions 2
Performance Measures 2
How the Funds' Shares are Distributed 3
How Share Purchases are Handled 4
Redemption of Shares 4
Dividends, Distributions and Taxes 5
Signature Guarantees 6
Management and Investment Counsel 7
How Share Price is Determined 8
Officers and Directors 9
Custodian 10
Independent Auditors 11
Description of Commercial Paper Ratings 11
Financial Statements 12

JB55 7/98

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the Funds' investment
objectives and policies set forth in the prospectus.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for the Funds are made
by AFBA Investment Management Company (the "Manager")
pursuant to recommendations by Kornitzer Capital Management,
Inc., investment counsel to the Funds (the "Adviser").
Officers of the Funds and the Manager are generally
responsible for implementing or supervising these decisions,
including allocation of portfolio brokerage and principal
business and the negotiation of commissions and/or the price
of the securities. In instances where securities are
purchased on a commission basis, each of the Funds will seek
competitive and reasonable commission rates based on
circumstances of the trade involved and to the extent that
they do not detract from the quality of the execution.

Each of the Funds, in purchasing and selling portfolio
securities, will seek the best available combination of
execution and overall price (which shall include the cost of
the transaction) consistent with the circumstances which
exist at the time. The Funds do not intend to solicit
competitive bids on each transaction.

Each of the Funds believes it is in its best interest and
that of its shareholders to have a stable and continuous
relationship with a diverse group of financially strong and
technically qualified broker-dealers who will provide
quality executions at competitive rates. Broker-dealers
meeting these qualifications also will be selected for their
demonstrated loyalty to the respective Fund, when acting on
its behalf, as well as for any research or other services
provided to the respective Fund. The Funds may execute a
substantial portion of portfolio transactions through
brokerage firms which are members of the New York Stock
Exchange or through other major securities exchanges. When
buying securities in the over-the-counter market, each of
the Funds will select a broker who maintains a primary
market for the security unless it appears that a better
combination of price and execution may be obtained
elsewhere. The Funds normally will not pay a higher
commission rate to broker-dealers providing benefits or
services to it than it would pay to broker-dealers who do
not provide it such benefits or services. However, each of
the Funds reserves the right to do so within the principles
set out in Section 28(e) of the Securities Exchange Act of
1934 when it appears that this would be in the best
interests of the shareholders.

No commitment is made to any broker or dealer with regard to
placing of orders for the purchase or sale of Fund portfolio
securities, and no specific formula is used in placing such
business. Allocation is reviewed regularly by both the
Board of Directors of the AFBA Five Star Fund, Inc. (the
"Company") Company and the Manager.

Since the Funds do not market their shares through
intermediary brokers or dealers, it is not the Funds'
practice to allocate brokerage or principal business on the
basis of sales of their shares which may be made through
such firms. However, they may place portfolio orders with
qualified broker-dealers who recommend the Funds to other
clients, or who act as agent in the purchase of the Funds'
shares for their clients.

Research services furnished by broker-dealers may be useful
to the Funds' Manager or Adviser in serving other clients,
as well as the respective Funds. Conversely, the Funds may
benefit from research services obtained by the Manager or
Adviser from the placement of portfolio brokerage of other
clients.

When it appears to be in the best interest of its
shareholders, each of the Funds may join with other clients
of the Manager or Adviser in acquiring or disposing of a
portfolio holding. Securities acquired or proceeds obtained
will be equitably distributed among the Funds and other
clients participating in the transaction. In some
instances, this investment procedure may affect the price
paid or received by a Fund or the size of the position
obtained by a Fund.

AFBA Five Star Balanced Fund's annualized turnover for the
period from June 3, 1997 (inception) to March 31, 1998 was
57%. Commissions paid during the period ended March 31,
1998 amounted to $1,303.55.

AFBA Five Star Equity Fund's annualized turnover for the
period from June 3, 1997 (inception) to March 31, 1998 was
76%. Commissions paid during the period ended March 31,
1998 amounted to $5,507.30.

AFBA Five Star High Yield Fund's annualized turnover for the
period from June 3, 1997 (inception) to March 31, 1998 was
31%. Commissions paid during the period ended March 31,
1998 amounted to $123.60.

AFBA Five Star USA Global Fund's annualized turnover for the
period from June 3, 1997 (inception) to March 31, 1998 was
42%. Commissions paid during the period ended March 31,
1998 amounted to $3,051.80.

INVESTMENT RESTRICTIONS

In addition to the investment objective and portfolio
management policies set forth in the Prospectus under the
caption "Investment Objectives and Portfolio Management
Policies," the following restrictions also may not be
changed without approval by the "holders of a majority of
the outstanding shares" of a Fund.

Each Fund will not: (1) purchase the securities of any one
issuer, except the United States government, if immediately
after and as a result of such purchase (a) the value of the
holdings of the Fund in the securities of such issuer
exceeds 5% of the value of the Fund's total assets, or (b)
the Fund owns more than 10% of the outstanding voting
securities, or any other class of securities, of such
issuer; (2) engage in the purchase or sale of real estate,
commodities or futures contracts; (3) underwrite the
securities of other issuers; (4) make loans to any of its
officers, directors, or employees, or to its manager, or
general distributor, or officers or directors thereof; (5)
make any loan (the purchase of a security subject to a
repurchase agreement or the purchase of a portion of an
issue of publicly distributed debt securities is not
considered the making of a loan); (6) invest in companies
for the purpose of exercising control of management; (7)
purchase securities on margin, or sell securities short,
except that the Fund may write covered call options; (8)
purchase shares of other investment companies except in the
open market at ordinary broker's commission or pursuant to a
plan of merger or consolidation; (9) invest in the aggregate
more than 5% of the value of its gross assets in the
securities of issuers (other than federal, state,
territorial, or local governments, or corporations, or
authorities established thereby), which, including
predecessors, have not had at least three years' continuous
operations; (10) except for transactions in its shares or
other securities through brokerage practices which are
considered normal and generally accepted under circumstances
existing at the time, enter into dealings with its officers
or directors, its manager or underwriter, or their officers
or directors, or any organization in which such persons have
a financial interest; (11) borrow or pledge its credit under
normal circumstances, except up to 10% of its total assets
(computed at the lower of fair market value or cost)
temporarily for emergency or extraordinary purposes, and not
for the purpose of leveraging its investments, and provided
further that any borrowing in excess of 5% of the total
assets of the Fund shall have asset coverage of at least 3
to 1; (12) make itself or its assets liable for the
indebtedness of others; (13) invest in securities which are
assessable or involve unlimited liability; or (14) purchase
any securities which would cause 25% or more of the Fund's
total assets at the time of such purchase to be invested in
any one industry.

PERFORMANCE MEASURES

From time to time, the AFBA Five Star Balanced Fund and the
AFBA Five Star High Yield Fund may quote their yield in
advertisements, shareholder reports or other communications
to shareholders. Yield is calculated according to the
following SEC standardized formula.

Current yield reflects the income per share earned by a
Fund's investments.

Current yield is determined by dividing the net investment
income per share earned during a 30-day base period by the
maximum offering price per share on the last day of the
period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during
the base period.

The SEC standardized yield formula is as follows:

Yield = 2[(a-b+l)-l]
cd

Where:

a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
income distributions
d = the maximum offering price per share on the last
day of the period

Total Return

Each of the AFBA Five Star Fund's "average annual total
return" figures will be computed according to a formula
prescribed by the Securities and Exchange Commission. The
formula can be expressed as follows:

P(1+T)n = ERV

Where:

P = a hypothetical initial payment of $1000

T = average annual total return

n = number of years

ERV = Ending Redeemable Value of a hypothetical $1000
payment made at the beginning of the 1, 5 or 10
year (or other) periods at the end of the 1, 5 or
10 year (or other) periods (or fractional portions
thereof).

The table below shows the average total return for each of
the Funds for the specified period:

AFBA FIVE AFBA FIVE AFBA FIVE AFBA FIVE
STAR STAR STAR STAR
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND

From 6/3/97
(inception)
to 3/31/98
16.64% 18.81% 9.37% 12.16%

HOW THE FUNDS' SHARES ARE DISTRIBUTED

Jones & Babson, Inc. ("Jones & Babson"), as agent of the
Funds, agrees to supply its best efforts as sole distributor
of the Funds' shares and, at its own expense, pay all sales
and distribution expenses in connection with their offering
other than registration fees and other government charges.

Jones & Babson does not receive any fee or other
compensation under the Underwriting Agreement relating to
the AFBA Five Star Fund, which continues in effect until
October 31, 1998, and which will continue automatically for
successive annual periods ending each October 31, if
continued at least annually by the Company's Board of
Directors, including a majority of those Directors who are
not parties to such Agreement or interested persons of any
such party. The Agreement terminates automatically if
assigned by either party or upon 60 days written notice by
either party to the other.

Jones & Babson also acts as sole distributor of the shares
of David L. Babson Growth Fund, Inc., D. L. Babson Bond
Trust, D. L. Babson Money Market Fund, Inc., D. L. Babson
Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson Value Fund, Inc.,
Shadow Stock Fund, Inc., Babson-Stewart Ivory International
Fund, Inc., Scout Stock Fund, Inc., Scout Bond Fund, Inc.,
Scout Money Market Fund, Inc., Scout Tax-Free Money Market
Fund, Inc., Scout Regional Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc., Scout Capital Preservation
Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High
Yield Fund, Inc., Buffalo USA Global Fund, Inc. and Buffalo
Small Cap Fund, Inc.

HOW SHARE PURCHASES ARE HANDLED

Each order accepted will be fully invested in whole and
fractional shares, unless the purchase of a certain number
of whole shares is specified, at the net asset value per
share next effective after an order is accepted by a Fund.

Each investment is confirmed by a year-to-date statement
which provides the details of the transactions, in your
account during the current year. This includes the dollar
amount invested, the number of shares purchased or redeemed,
the price per share, and the aggregate shares owned. A
transcript of all activity in your account during the
previous year will be furnished each January. By retaining
each annual summary and the last year-to-date statement, you
have a complete detailed history of your account which
provides necessary tax information. A duplicate copy of a
past annual statement is available from Jones & Babson at
its cost, subject to a minimum charge of $5 per account, per
year requested.

Normally, the shares which you purchase are held by a Fund
in open account, thereby relieving you of the responsibility
of providing for the safekeeping of a negotiable share
certificate. Should you have a special need for a
certificate, one will be issued on request for all or a
portion of the whole shares in your account. There is no
charge for the first certificate issued. A charge of $3.50
will be made for any replacement certificates issued. In
order to protect the interests of the other shareholders,
share certificates will be sent to those shareholders who
request them only after a Fund has determined that
unconditional payment for the shares represented by the
certificate has been received by its custodian, UMB Bank,
n.a.

If an order to purchase shares must be canceled due to non-
payment, the purchaser will be responsible for any loss
incurred by a Fund arising out of such cancellation. To
recover any such loss, the Funds reserve the right to redeem
shares owned by any purchaser whose order is canceled, and
such purchaser may be prohibited or restricted in the manner
of placing further orders.

The Funds reserve the right in their sole discretion to
withdraw all or any part of the offering made by the
prospectus or to reject purchase orders when, in the
judgment of management, such withdrawal or rejection is in
the best interest of a Fund and its shareholders. The Funds
also reserve the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent
investments with respect to any person or class of persons,
which include shareholders of the Funds' special investment
programs.

REDEMPTION OF SHARES

The right of redemption may be suspended, or the date of
payment postponed beyond the normal three-day period with
respect to any Fund by the Company's Board of Directors
under the following conditions authorized by the Investment
Company Act of 1940: (1) for any period (a) during which the
New York Stock Exchange is closed, other than customary
weekend and holiday closing, or (b) during which trading on
the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which
(a) disposal by the Fund of securities owned by it is not
reasonably practicable, or (b) it is not reasonably
practicable for the Fund to determine the fair value of its
net assets; or (3) for such other periods as the Securities
and Exchange Commission may by order permit for the
protection of the Funds' shareholders.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Distributions of Net Investment Income. The Funds receive
income generally in the form of dividends, interest,
original issue, market and acquisition discount, and other
income derived from their investments. This income, less
expenses incurred in the operation of the Funds, constitutes
the net investment income from which dividends may be paid
to you. Any distributions by a Fund from such income will
be taxable to you, whether you take them in cash or in
additional shares.

Distributions of Capital Gains. A Fund may derive capital
gains and losses in connection with sales or other
dispositions of its portfolio securities. Distributions
derived from the excess of net short-term capital gains over
net long-term capital losses will be taxable to you as
ordinary income. Distributions paid from long-term capital
gains realized by a Fund will be taxable to you as long-term
capital gain, regardless of how long you have held your
shares in such Fund. Any net short-term or long-term
capital gains realized by a Fund (net of any capital loss
carryovers) will generally be distributed once each year,
and may be distributed more frequently, if necessary, in
order to reduce or eliminate federal excise or income taxes
on a Fund.

Under the Taxpayer Relief Act of 1997 (the "1997 Act"), each
Fund is required to track their sales of portfolio
securities and to report its capital gain distributions to
you according to the following categories of holding
periods:

"28 percent tax rate gains:" Securities sold by a Fund
after July 28, 1997 that were held for more than one year
but not more than 18 months, and under a transitional rule
securities sold by a Fund before May 7, 1997 that were held
for more than 12 months. These gains will be taxable to
individual investors at a maximum rate of 28%.

"20 percent tax rate gains:" Securities sold by a Fund after
July 28, 1997 that were held for more than 18 months, and
under a transitional rule securities sold by a Fund between
May 7, 1997 and July 28, 1997 that were held for more than
12 months. These gains will be taxable to individual
investors at a maximum rate of 20% for investors in the 28%
or higher federal income tax rate brackets, and at a maximum
rate of 10% for investors in the 15% federal income tax rate
bracket.

"Qualified 5-year gains:" For individuals in the 15%
federal income tax rate bracket, qualified 5-year gains are
net gains on securities held for more than 5 years which are
sold after December 31, 2000. For individuals who are
subject to tax at higher federal income tax rate brackets,
qualified 5-year gains are net gains on securities which are
purchased after December 31, 2000 and are held for more than
5 years. Taxpayers subject to tax at the higher federal
income tax rate brackets may also make an election for
shares held on January 1, 2001 to recognize gain on their
shares in order to qualify such shares as qualified 5-year
property. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28%
or higher federal income tax brackets, and at a maximum rate
of 8% for investors in the 15% federal income tax rate
bracket.

A Fund will advise you in its annual information reporting
at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal
tax rates for each calendar year. Questions concerning each
investor's personal tax reporting should be addressed to the
investor's personal tax advisor.

Election to be Taxed as a Regulated Investment Company.
Each Fund has elected to be treated as a regulated
investment company under Subchapter M of the Internal
Revenue Code ("Code"), has qualified as such for its most
recent fiscal year and intends to so qualify during the
current fiscal year. The directors reserve the right not to
maintain the qualification of the Fund as a regulated
investment company if they determine such course of action
to be beneficial to you. In such case, the Fund will be
subject to federal and possibly state corporate taxes on its
taxable income and gains, and distributions to you will be
taxed as ordinary dividend income to the extent of the
Fund's available earnings and profits.

In order to qualify as a regulated investment company for
federal income tax purposes, each Fund must meet certain
specific requirements, including:

The Fund must maintain a diversified portfolio of
securities, wherein no security (other than U.S.
Government securities and securities of other regulated
investment companies) can exceed 25% of the Fund's total
assets, and, with respect to 50% of the Fund's total
assets, no investment (other than cash and cash items,
U.S. Government securities and securities of other
regulated investment companies) can exceed 5% of the
Fund's total assets;

The Fund must derive at least 90% of its gross income
from dividends, interest, payments with respect to
securities loans and gains from the sale or disposition
of stock or securities or foreign currencies, or other
income derived with respect to its business of investing
in such stock, securities or currencies; and

The Fund must distribute to its shareholders at least 90%
of its net investment income and net tax-exempt income
for each of its fiscal years.

Excise Tax Distribution Requirements. The Code requires a
Fund to distribute at least 98% of its taxable ordinary
income earned during the calendar year and 98% of its
capital gain net income earned during the 12-month period
ending October 31 (in addition to amounts from the prior
year that were neither distributed nor taxed to a Fund) to
you by December 31 of each year in order to avoid federal
excise taxes. The Funds intend as a matter of policy to
declare and pay sufficient dividends in December or January
(which are treated by you as received in December) but do
not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such
taxes.

Dividends-Received Deduction for Corporations. Because a
Fund's income may be from dividends, a portion of its
distributions may be eligible for the intercorporate
dividends-received deduction. The dividends-received
deduction will be available only with respect to dividends
designated by a Fund as eligible for such treatment.
Dividends so designated by a Fund must be attributable to
dividends earned by the Fund from U.S. corporations which
are not debt-financed. A holding period requirement applies
both at the Fund level and the corporate shareholder level.
Under the 1997 Act, the amount that a Fund may designate as
eligible for the dividends-received deduction will be
reduced or eliminated if the shares on which the dividends
earned by a Fund are debt-financed or held by the Fund for
less than a 46-day period during a 90-day period beginning
45 days before the ex-dividend date and ending 45 days after
the ex-dividend date. Similarly, if your Fund shares are
debt-financed or held by you for less than a 46-day period
during a 90-day period beginning 45 days before the ex-
dividend date and ending 45 days after the ex-dividend date,
then the dividend-received deduction for fund dividends on
your shares may also be reduced or eliminated. Even if
designated as dividends eligible for the dividend-received
deduction, all dividends (including any deducted portion)
must be included in your alternative minimum taxable income
calculation.

SIGNATURE GUARANTEES

Signature guarantees normally reduce the possibility of
forgery and are required in connection with each redemption
method to protect shareholders from loss. Signature
guarantees are required in connection with all redemptions
by mail or changes in share registration, except as provided
in the Prospectus.

Signature guarantees must appear together with the
signature(s) of the registered owner(s) on:

(1) a written request for redemption;

(2) a separate instrument of assignment, which should
specify the total number of shares to be redeemed (this
"stock power" may be obtained from the Fund or from
most banks or stock brokers); or

(3) all stock certificates tendered for redemption.

MANAGEMENT AND INVESTMENT COUNSEL

As a part of the Management Agreement, AFBA Investment
Management Company employs at its own expense Kornitzer
Capital Management, Inc., as its investment counsel; and
Jones & Babson, Inc., for administrative and other services
not otherwise provided by AFBA Investment Management
Company. Kornitzer Capital Management, Inc., was founded in
1989. It is a private investment research and counseling
organization serving individual, corporate and other
institutional clients. Jones & Babson, Inc. was founded in
1960. It functions as an underwriter and distributor of
mutual funds. For the most recent fiscal year ended March
31, 1998 and for the current fiscal year, Jones & Babson,
Inc. has voluntarily agreed to assume certain expenses of
the Funds so that a Fund's total annual operating expenses
will not exceed 1.08% of its average daily net assets.

The aggregate management fee paid to AFBA Investment
Management Company by AFBA Five Star Balanced Fund during
the most recent period ended March 31, 1998, from which AFBA
Investment Management Company paid all the Fund's expenses
except those payable directly by the Fund, was $6,582. The
1% annual fee charged by AFBA Investment Management Company
covers all normal operating costs of the Fund.

The aggregate management fee paid to AFBA Investment
Management Company by AFBA Five Star Equity Fund during the
most recent period ended March 31, 1998, from which AFBA
Investment Management Company paid all the Fund's expenses
except those payable directly by the Fund, was $17,203. The
1% annual fee charged by AFBA Investment Management Company
covers all normal operating costs of the Fund.

The aggregate management fee paid to AFBA Investment
Management Company by AFBA Five Star High Yield Fund during
the most recent period ended March 31, 1998, from which AFBA
Investment Management Company paid all the Fund's expenses
except those payable directly by the Fund, was $5,759. The
1% annual fee charged by AFBA Investment Management Company
covers all normal operating costs of the Fund.

The aggregate management fee paid to AFBA Investment
Management Company by AFBA Five Star USA Global Fund during
the most recent period ended March 31, 1998, from which AFBA
Investment Management Company paid all the Fund's expenses
except those payable directly by the Fund, was $15,266. The
1% annual fee charged by AFBA Investment Management Company
covers all normal operating costs of the Fund.

For its investment supervisory services and counsel in
connection with AFBA Five Star Balanced Fund, AFBA Five Star
Equity Fund, AFBA Five Star High Yield Fund and AFBA Five
Star USA Global Fund, AFBA Investment Management Company
pays Kornitzer Capital Management, Inc. a fee computed on an
annual basis at the rate of .33% of the average daily total
net assets of each of the Funds.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Kornitzer Capital
Management, Inc. fees in connection with AFBA Five Star
Balanced Fund of $2,172.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Kornitzer Capital
Management, Inc. fees in connection with AFBA Five Star
Equity Fund of $5,677.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Kornitzer Capital
Management, Inc. fees in connection with AFBA Five Star High
Yield Fund of $1,900.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Kornitzer Capital
Management, Inc. fees in connection with AFBA Five Star USA
Global Fund of $5,038.

For administrative and other services not otherwise provided
by AFBA Investment Management Company to AFBA Five Star
Balanced Fund, AFBA Five Star Equity Fund, AFBA Five Star
High Yield Fund and AFBA Five Star USA Global Fund, AFBA
Investment Management Company pays Jones & Babson, Inc. a
fee computed on an annual basis at the rate of .33% of the
average daily total net assets of each of the Funds.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Jones & Babson, Inc. fees
in connection with AFBA Five Star Balanced Fund of $2,172.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Jones & Babson, Inc. fees
in connection with AFBA Five Star Equity Fund of $5,677.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Jones & Babson, Inc. fees
in connection with AFBA Five Star High Yield Fund of $1,900.

During the most recent period ended March 31, 1998, AFBA
Investment Management Company paid Jones & Babson, Inc. fees
in connection with AFBA Five Star USA Global Fund of $5,038.

Kornitzer Capital Management, Inc., has an experienced
investment analysis and research staff which eliminates the
need for the Manager and the Fund to maintain an extensive
duplicate staff, with the consequent increase in the cost of
investment advisory service. The cost of the services of
Kornitzer Capital Management, Inc. is included in the fee of
the Manager.

HOW SHARE PRICE IS DETERMINED

The net asset value per share of each Fund's portfolio is
computed once daily, Monday through Friday, at the specific
time during the day that the Board of Directors of the
Company sets at least annually, except on days on which
changes in the value of a Fund's portfolio securities will
not materially affect the net asset value, or days during
which no security is tendered for redemption and no order to
purchase or sell such security is received by a Fund, or the
following holidays:

New Year's Day January 1
Martin Luther King, Jr. Day Third Monday in January
Presidents' Holiday Third Monday in February
Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25

OFFICERS AND DIRECTORS

The Funds are managed by AFBA Investment Management Company
subject to the supervision and control of the Board of
Directors of the Company. The following table lists the
officers and directors of the Company, their age, address
and principal occupation.

* John A. Johnson (61), President and Director. 909 North
Washington Street, Alexandria, Virginia 22314.
President, Chief Executive Officer, Director, Armed
Forces Benefit Services, Inc.; President, Chief Executive
Officer, Director, AFBA Life Insurance Company;
President, Chief Executive Officer, Director, AFBA
Investment Management Company; AFBA Administrators, Inc.

* Larry D. Armel (56), Director. 700 Karnes Blvd., Kansas
City, Missouri 64108-3306. President and Director, Jones
& Babson, Inc., David L. Babson Growth Fund, Inc., D. L.
Babson Money Market Fund, Inc., D. L. Babson Tax-Free
Income Fund, Inc., Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory International
Fund, Inc., Scout Stock Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc., Scout
WorldWide Fund, Inc., Scout Balanced Fund, Inc., Scout
Capital Preservation Fund, Inc., Scout Kansas Tax-Exempt
Bond Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo
USA Global Fund, Inc., Buffalo Small Cap Fund, Inc.,
Investors Mark Series Fund, Inc.; President and Trustee,
D. L. Babson Bond Trust.

* John C. Kornitzer (52), Director. 7715 Shawnee Mission
Parkway, Shawnee Mission, Kansas 66202. President,
Kornitzer Capital Management, Inc.; formerly Vice
President of Investments, Employers Reinsurance Corp.

* Lieutenant General C.C. Blanton (68), USAF (Ret.),
Director and Chairman. 909 North Washington Street,
Alexandria, Virginia 22314. President, Chief Executive
Officer, Armed Forces Benefit Association; Chairman,
Armed Forces Benefit Services, Inc.; Chairman, AFBA
Industrial Bank; Chairman, AFBA Life Insurance Company;
Chairman, AFBA Investment Management Company.

General Monroe W. Hatch, Jr. (64), USAF (Ret.), Director.
8210 Thomas Ashleigh Lane, Clifton, Virginia 20124.
President, Professional Services, Consultant to Industry;
formerly Executive Director, Air Force Association.

Brigadier General Henry J. Sechler (66), USAF (Ret.),
Director. 3190 Fairview Park Drive, Falls Church,
Virginia 22030. Vice President, General Dynamics Corp.

General Louis C. Wagner, Jr. (66), USA (Ret.), Director.
6309 Chaucer Lane, Alexandria, Virginia 22304. Private
consultant.

__________________________

* Directors who are interested persons as that term is
defined in the Investment Company Act of 1940, as
amended.

P. Bradley Adams (37), Vice President and Chief Financial
Officer. 700 Karnes Blvd., Kansas City, Missouri 64108-
3306. Vice President and Treasurer, Jones & Babson,
Inc., David L. Babson Growth Fund, Inc., D. L. Babson
Money Market Fund, Inc., D. L. Babson Tax-Free Income
Fund, Inc., Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory International
Fund, Inc., D. L. Babson Bond Trust, Scout Stock Fund,
Inc., Scout Bond Fund, Inc., Scout Money Market Fund,
Inc., Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Scout Capital Preservation Fund,
Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo
High Yield Fund, Inc., Buffalo USA Global Fund, Inc.,
Buffalo Small Cap Fund, Inc.; Principal Financial
Officer, Investors Mark Series Fund, Inc.

Martin A. Cramer (48), Secretary. 700 Karnes Blvd.,
Kansas City, Missouri 64108-3306. Vice President and
Secretary, Jones & Babson, Inc., David L. Babson Growth
Fund, Inc., D. L. Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value
Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D. L. Babson Bond Trust, Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money Market Fund,
Inc., Scout Regional Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc., Scout Capital
Preservation Fund, Inc., Scout Kansas Tax-Exempt Bond
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc., Buffalo Small Cap Fund, Inc.;
Secretary, Investors Mark Series Fund, Inc.

Dionne D. McNamee (41), Treasurer. 909 North Washington
Street, Alexandria, Virginia 22314. Chief Financial
Officer, AFBA Life Insurance Company; AFBA Investment
Management Company. Formerly, Director, Price Waterhouse
LLP; Senior Technical Manager, American Institute of
CPAs.

None of the officers or directors will be remunerated by the
Funds for their normal duties and services. Their
compensation and expenses arising out of normal operations
will be paid by the Manager under the provisions of the
Management Agreement.

Messrs. Hatch, Wagner and Sechler have no financial interest
in, nor are they affiliated with AFBA Investment Management
Company, Jones & Babson, Inc. or Kornitzer Capital
Management, Inc.

The Audit Committee of the Board of Directors is composed of
Messrs. Hatch, Wagner and Sechler.

The officers and directors as a group own less than 1% of
any of the Funds.

The Company will not hold annual meetings except as required
by the Investment Company Act of 1940 and other applicable
laws. The Company is a Maryland corporation. Under
Maryland law, a special meeting of stockholders of a fund
must be held if the fund receives the written request for a
meeting from the stockholders entitled to cast at least 25%
of all the votes entitled to be cast at the meeting. The
Company has undertaken that its directors will call a
meeting of stockholders if such a meeting is requested in
writing by the holders of not less than 10% of the
outstanding shares of the Fund. To the extent required by
the undertaking, the Company will assist shareholder
communications in such matters.

CUSTODIAN

The Funds' assets are held for safekeeping by an independent
custodian, UMB Bank, n.a. This means UMB Bank, n.a., rather
than the Funds, has possession of the Funds' cash and
securities. UMB Bank, n.a. is not responsible for the
Funds' investment management or administration. But, as
directed by the officers of the Company, it delivers cash to
those who have sold securities to the Funds in return for
such securities, and to those who have purchased portfolio
securities from the Funds, it delivers such securities in
return for their cash purchase price. It also collects
income directly from issuers of securities owned by the
Funds and holds this for payment to shareholders after
deduction of the Funds' expenses. The custodian bank is
compensated for its services by the Manager. There is no
charge to the Funds.

INDEPENDENT AUDITORS

The Company's financial statements are audited annually by
independent auditors approved by the directors each year,
and in years in which an annual meeting is held the
directors may submit their selection of independent auditors
to the shareholders for ratification. Ernst & Young LLP,
One Kansas City Place, 1200 Main Street, Suite 2000, Kansas
City, Missouri 64105, is the Company's present independent
auditor.

Reports to shareholders will be published at least
semiannually.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

Moody's- Moody's commercial paper rating is an opinion of
the ability of an issuer to repay punctually promissory
obligations not having an original maturity in excess of
nine months. Moody's has one rating - prime. Every such
prime rating means Moody's believes that the commercial
paper note will be redeemed as agreed. Within this single
rating category are the following classifications:

Prime - 1 Highest Quality
Prime - 2 Higher Quality
Prime - 3 High Quality

The criteria used by Moody's for rating a commercial paper
issuer under this graded system include, but are not limited
to the following factors:

(1) evaluation of the management of the issuer;

(2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative type risks
which may be inherent in certain areas;

(3) evaluation of the issuer's products in relation to
competition and customer acceptance;

(4) liquidity;

(5) amount and quality of long-term debt;

(6) trend of earnings over a period of ten years;

(7) financial strength of a parent company and
relationships which exist with the issue; and

(8) recognition by the management of obligations which
may be present or may arise as a result of public
interest questions and preparations to meet such
obligations.

S&P- Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely repayment of debt
having an original maturity of no more than 270 days.
Ratings are graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the lowest.
The four categories are as follows:

"A" Issues assigned this highest rating are regarded as
having the greatest capacity for timely payment.
Issues in this category are further refined with the
designations 1, 2, and 3 to indicate the relative
degree of safety.

"A-1" This designation indicates that the degree of
safety regarding timely payment is very strong.

"A-2" Capacity for timely payment on issues with
this designation is strong. However, the relative
degree of safety is not as overwhelming.

"A-3" Issues carrying this designation have a
satisfactory capacity for timely payment. They
are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than
obligations carrying the higher designations.

"B" Issues rated "B" are regarded as having only an
adequate capacity for timely payment. Furthermore,
such capacity may be damaged by changing conditions or
short-term adversities.

"C" This rating is assigned to short-term debt obligations
with a doubtful capacity for payment.

"D" This rating indicates that the issuer is either in
default or is expected to be in default upon maturity.

FINANCIAL STATEMENTS

The audited financial statements of AFBA Five Star Fund,
Inc. which are contained in the March 31, 1998 Annual Report
to Shareholders, are incorporated herein by reference.

PART C

OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements

Included in Part A - Prospectus:

Per Share Capital and Income Changes

Included in Part B - Statement of Additional Information:

The audited financial statements contained in
the most recent Annual Report to Shareholders of
AFBA Five Star Fund, Inc. are incorporated by
reference into Part B of this Registration Statement.

Included in Part C - Other Information:

Consent of Independent Public Accountant
Ernst & Young LLP

(b) (1) (a) Registrant's Articles of Incorporation*

(b) Articles Supplementary*

(2) Form of Registrant's By-laws*

(3) Not applicable, because there is no voting trust
agreement.

(4) Specimen copy of each security to be issued by the
registrant.*

(5) (a) Form of Management Agreement between
AFBA Investment Management Company and
the Registrant*

(b) Form of Investment Counsel Agreement
between AFBA Investment Management
Company and Kornitzer Capital
Management, Inc.*

(6) Form of principal Underwriting Agreement between
Jones & Babson, Inc. and the Registrant*

(7) Not applicable, because there are no pension,
bonus or other agreement for the benefit of
directors and officers.

(8) Form of Custodian Agreement between Registrant and
UMB Bank, n.a.*

(9) Form of Transfer Agency Agreement between AFBA
Investment Management Company and Jones & Babson,
Inc.*

(10) Opinion and consent of counsel as to the legality
of the Registrant's securities being registered.*

(11) (a) Powers of Attorney*

(b) Auditors Consent

(12) Not applicable.

(13) Form of letter from contributors of initial
capital to the Registrant that purchase was made
for investment purposes without any present
intention of redeeming or selling.*

(14) Not applicable.

(15) Not applicable.

(16) Schedule for computation of performance
quotations.

(17) Financial Data Schedules for the AFBA Five Star Fund,
Inc. - Balanced, Equity, High Yield, and USA Global
Funds.

*Previously filed via EDGAR and incorporated by reference herein.

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE REGISTRANT.

NONE

Item 26. NUMBER OF HOLDERS OF SECURITIES.

The number of record holders of each series of securities of
the Registrant as of July 17, 1998, is as follows:

(1) (2)
Title of Class
Common Stock Number of Record Holders
$1.00 par value

AFBA Five Star Balanced Fund 504
AFBA Five Star Equity Fund 877
AFBA Five Star USA Global Fund 610
AFBA Five Star High Yield Fund 314

Item 27. INDEMNIFICATION.

Under the terms of the Maryland General Corporation Law and the
Company's By-laws, the Company shall indemnify any person who was
or is a director, officer or employee of the Company to the
maximum extent permitted by the Maryland General Corporation Law;
provided however, that any such indemnification (unless ordered
by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of such
persons is proper in the circumstances. Such determination shall
be made:

(i) by the Board of Directors by a majority vote of a quorum
which consists of the directors who are neither "interested
persons" of the Company as defined in Section 2(a)(19) of the
1940 Act, nor parties to the proceedings, or

(ii) if the required quorum is not obtainable or if a quorum of
such directors so directs, by independent legal counsel in a
written opinion.

No indemnification will be provided by the Company to any
director or officer of the Company for any liability to the
company or shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duty.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.

AFBA Investment Management Company, which serves as
investment manager to the Registrant, is a wholly-owned
subsidiary of Armed Forces Benefit Services, Inc. ("AFBSI").
AFBSI is a for-profit services entity which is wholly-owned by
Armed Forces Benefit Association, a voluntary employee benefit
association.

The principal business of Kornitzer Capital Management, Inc. is
to provide investment counsel and advice to a wide variety of
clients. Kornitzer Capital Management, Inc. has $1.3 billion
under management.

The information required by this Item 28 with respect to each
director, officer, or partner of the Manager and the Investment
Adviser of the Registrant is incorporated by reference to the
Form ADV, as filed and amended, by the Manager and Investment
Adviser, respectively, with the SEC:

AFBA Investment Management Company
SEC File No. 801-54247

Kornitzer Capital Management, Inc.
SEC File No. 801-34933

Item 29. PRINCIPAL UNDERWRITERS.

(a) Jones & Babson, Inc., the only principal underwriter of the
Registrant, also acts as principal underwriter for the David
L. Babson Growth Fund, Inc., D.L. Babson Money Market Fund,
Inc., D.L. Babson Tax-Free Income Fund, Inc., D.L. Babson
Bond Trust, Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enteprise Fund II, Inc., Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout Money Market
Fund, Inc, Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Scout Capital Preservation Fund, Inc.,
Scout Kansas Tax-Exempt Bond Fund, Inc., Buffalo Balanced Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo USA Global Fund, Inc. and Buffalo Small Cap Fund, Inc.

(b) Herewith is the information required by the following table
with respect to each director, officer or partner of the
only underwriter named in answer to Item 21 of Part B:

Name and Position and Positions and
Principal Offices with Offices with
Business Address Underwriter Registrant

Stephen S. Soden Chairman and None
700 Karnes Blvd. Director
Kansas City, MO 64108-3306

Larry D. Armel President and Director
700 Karnes Blvd. Director
Kansas City, MO 64108-3306

Giorgio Balzer Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306

Robert T. Rakich Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306

Edward S. Ritter Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306

Robert N. Sawyer Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306

Vernon W. Voorhees Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306

P. Bradley Adams Vice President Vice President
700 Karnes Blvd. and Treasurer and
Kansas City, MO 64108-3309 Chief Financial
Officer

Martin A. Cramer Vice President Secretary
700 Karnes Blvd. and Secretary
Kansas City, MO 64108-3306

(c) The principal underwriter does not receive any remuneration
or compensation for the duties or services rendered to the
Registrant pursuant to the principal Underwriting Agreement.

Item 30. LOCATION OF ACCOUNTS AND RECORDS.

Each account, book or other document required to be maintained by
Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder is in the physical possession of
Jones & Babson, Inc., at 700 Karnes Blvd., Kansas City, Missouri
64108-3306.

Item 31. MANAGEMENT SERVICES

All management services are covered in the Management Agreement
between the Registrant and AFBA Investment Management Company
which are discussed in Parts A and B.

Item 32. UNDERTAKINGS

Not Applicable.

EXHIBIT INDEX

11(b) Consent of Auditors

11(c) 485(b) Letter from Counsel

27 Financial Data Schedules

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to its registration statement to be signed on its behalf by the
undersigned, thereunto authorized, in the City of Alexandria, and State of
Virginia on the 23rd day of July, 1998.

AFBA FIVE STAR FUND, INC.
(Registrant)

By /s/John A. Johnson
John A. Johnson, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-effective Amendment #1 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.

/s/John A. Johnson President, Principal July 23, 1998
John A. Johnson Executive Officer and
Director

/s/C.C. Blanton Director July 23, 1998
C.C. Blanton

/s/Monroe W. Hatch, Jr.* Director July 23, 1998
Monroe W. Hatch, Jr.

/s/Louis C. Wagner, Jr.* Director July 23, 1998
Louis C. Wagner, Jr.

/s/Henry J. Sechler* Director July 23, 1998
Henry J. Sechler

/s/John C. Kornitzer* Director July 23, 1998
John C. Kornitzer

/s/Larry Armel Director July 23, 1998
Larry Armel

/s/P. Bradley Adams Vice President and July 23, 1998
P. Bradley Adams Principal Financial
and Accounting Officer

*Signed pursuant to Power of
Attorney

By /s/C.C. Blanton
C.C. Blanton
Attorney-in-Fact

Consent of Independent Auditors

We consent to the references to our firm under the captions
"Financial Highlights" in the Prospectus and "Independent
Auditors" in the Statement of Additional Information and to the
incorporation by reference of our report dated May 8, 1998, in the
Registration Statement (Form N-1A) and related Prospectus of
AFBA Five Star Fund, Inc. filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 2 under the
Securities Act of 1933 (Registration No. 333-20637) and Amendment
No. 5 under the Investment Company Act of 1940 (Registration No.
811-08035).

/s/Ernst & Young LLP
Ernst & Young LLP

Kansas City, Missouri
July 17, 1998

Law Offices

Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000

July 23, 1998

FILED VIA EDGAR
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attn: Filing Desk

Re: AFBA Five Star Fund, Inc.
SEC File No. 811-08035
CIK No. 1030802

Dear Sir or Madam:

Included for filing via EDGAR is Post-Effective Amendment No. 2
to the Registration Statement on Form N-1A for AFBA Five Star Fund, Inc.
This post-effective amendment is being filed under Rule 485(b) for the
purpose of bring the Financial Statements and other information up-to-date,
and in conjunction therewith, making other appropriate non-material changes.
No material event requiring disclosure in the Prospectus has occurred since
the effective date of the most recent Post-Effective Amendment. The amendment
does not contain disclosures which would render it ineligible to become
effective pursuant to Rule 485(b). Questions related to this filing should
be directed to me at the number above.

Very truly yours,
Michael P. O'Hare
/s/Michael P. O'Hare

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</TABLE>