BUFFALO SMALL CAP FUND INC, N-1A, 1997-11-24

BUFFALO SMALL CAP FUND INC
N-1A, 1997-11-24

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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. _____ File No. _____ [ ]

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

Amendment No. File No. _____ [ ]

BUFFALO SMALL CAP FUND, INC.

(Exact Name of Registrant as Specified in Charter)

BMA Tower, 700 Karnes Boulevard, Kansas City, MO 64108

(Address of Principal Executive Office)

Registrant's Telephone Number, including Area Code (816) 751-5900

Larry D. Armel, President, BUFFALO SMALL CAP FUND, INC.
BMA Tower, 700 Karnes Boulevard, Kansas City, MO 64108

(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Upon effective date of this
registration statement

Title of Securities Being Registered: Common Stock 1.00 par value

The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective on such date as the Commission acting pursuant
to Section 8(a) of the Investment Company Act of 1940 may determine.

Please address inquiries and a carbon copy of all
and communications to: communications to:
John G. Dyer, Esq. Mark H. Plafker, Esq.
Buffalo Small Cap Fund, Inc. Stradley, Ronon, Stevens & Young, LLP
BMA Tower 2600 One Commerce Square
700 Karnes Blvd. Philadelphia, PA 19103-7098
Kansas City, MO 64108 Telephone: (215) 564-8024
Telephone: (816) 471-5200

<PAGE>
BUFFALO SMALL CAP FUND, INC.

CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A Item Number Location in Prospectus
<S> <C>
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........................................ Cover Page; How to
being Offered Purchase Shares; Shareholder
Services

Item 8. Redemption or Repurchase...................................... How to Redeem Shares

Item 9. Pending Legal Proceedings..................................... Not Applicable

<PAGE>

BUFFALO SMALL CAP FUND, INC.

CROSS REFERENCE SHEET (Continued)

Form N-1A Item Number Location in Statement of
Additional Information

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........................ Management and
Services 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..................... How Share Purchases
of Securities Being Offered.......................... are 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
of Money Market Fund

Item 23. Financial Statements................................. (To be supplied by further
Amendment)
</TABLE>

<PAGE>

PROSPECTUS
(DATE)

BUFFALO SMALL CAP FUND, INC.

Toll-Free 1-800-49-BUFFALO
(1-800-492-8332)

Managed and Distributed By: Investment Counsel:
Jones & Babson, Inc. Kornitzer Capital Management, Inc.
BMA Tower Shawnee Mission, Kansas
700 Karnes Blvd.
Kansas City, Missouri 64108

INVESTMENT OBJECTIVE

The Buffalo Small Cap Fund seeks long-term capital growth. Long-term
capital growth is intended to be achieved primarily by the Fund's investment in
equity securities of small companies.

PURCHASE INFORMATION
Minimum Investment

Initial Purchase.............................................$ 2,500
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchase:........................................$ 250
Subsequent Purchase:
By Mail....................................................$ 100
By Telephone or Wire.......................................$ 1,000
All Automatic Purchases....................................$ 100

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.

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 Securities and Exchange Commission and is incorporated by reference.
Investors desiring additional information about the Fund may obtain a copy
without charge by writing or calling the Fund.

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.

1
<PAGE>
TABLE OF CONTENTS

Page

Fund Expenses.........................................................
Investment Objective and Portfolio Management Policies................
Repurchase Agreements.................................................
Risk Factors..........................................................
Investment Restrictions...............................................
Performance Measures..................................................
How to Purchase Shares................................................
Initial Investments...................................................
Investments Subsequent to Initial Investment..........................
Telephone Investment Service..........................................
Automatic Monthly Investment Plan.....................................
How to Redeem Shares..................................................
Systematic Redemption Plan............................................
How to Exchange Shares Between Funds..................................
How Share Price is Determined.........................................
Officers and Directors................................................
Management and Investment Counsel.....................................
General Information and History.......................................
Dividends, Distributions and Their Taxation...........................
Shareholder Services..................................................
Shareholder Inquiries.................................................

2
<PAGE>

BUFFALO SMALL CAP FUND, INC.

FUND EXPENSES

The following information is provided in order to assist you in
understanding the various costs and expenses that a shareholder of the Fund will
bear directly or indirectly. The expenses set forth below are estimates for the
initial fiscal year of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees 1.00%
12b-1 fees None
Other expenses [____]%
Total Fund operating expenses [____]%
</TABLE>

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 Year
$____ $____

The above examples should not be considered a representation of past or
future expenses, as actual expenses may be greater or less than those shown. The
assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual return. The actual return may be greater
or less than the assumed amount.

The purpose of the foregoing fee tables is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The various costs and expenses are explained in
more detail in this prospectus. "Other Expenses" is based on estimated amounts
for the current fiscal year. Management fees are discussed in greater detail
under "Management and Investment Counsel."

INVESTMENT OBJECTIVE AND PORTFOLIO MANAGEMENT POLICIES

The Buffalo Small Cap Fund seeks long-term capital growth. Long-term
capital growth is intended to be achieved primarily by the Fund's investment in
equity securities of small companies. Equity securities include common stock,
preferred stock and securities convertible into common stock or preferred stock.

3
<PAGE>

The Buffalo Small Cap Fund will normally invest in a broad array of
securities, diversified in terms of companies and industries. The Fund invests
at least 65% of its total assets in equity securities of small companies, during
normal market conditions. Small companies are considered to be issuers with
individual market capitalizations of up to $1 billion, or issuers whose
individual market capitalizations would place them at the time of purchase in
the lowest 20% total market capitalization of companies that have equity
securities listed on a U.S. national securities exchange or traded in the NASDAQ
system.

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 is authorized to write (i.e., sell) covered call options on
the securities in which it may invest 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.

Covered call options serve as a partial hedge against the price of the
underlying security declining. (See "Risk Factors Applicable to Covered Call
Options.")

Investments in money market securities shall include government
securities, commercial paper, bank certificates of deposit and government
collateralized repurchase agreements. Investment in commercial paper shall be
restricted to companies in the top two rating categories by Moody's and Standard
& Poor's.

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 can be achieved. Portfolio turnover will be no more than is necessary to
meet the Fund's objective. Under normal circumstances, it is anticipated that
portfolio turnover for common stocks in the Fund's portfolio will not exceed
approximately 100% on an annual basis, and that portfolio turnover for other
securities will not exceed 100% on an annual basis.

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 the Fund.

4
<PAGE>

The 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 total assets of the Fund.

RISK FACTORS

Risk Factors Applicable To 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,
the 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 the Fund may
not be able to substantiate 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.

Risk Factors Applicable to Covered Call Options

The Fund may engage in covered call option transactions as described
herein. Up to 25% of the 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, the 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 the 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 the 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 the 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 ADRs

Up to 25% of the 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.

5
<PAGE>

Risk Factors Applicable to Common Stocks

The Fund is subject to market risk and fund risk. Market risk is the
possibility that stock prices in general will decline over shorter 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. Fund 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.

INVESTMENT RESTRICTIONS

In addition to the policies set forth under the caption "Investment
Objective and Portfolio Management Policies," the Fund is 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 shareholder's 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 gross
assets (computed at the lower of fair market value or cost) for temporary or
emergency 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
are set forth in the "Statement of Additional Information."

PERFORMANCE MEASURES

From time to time, the Fund 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 Fund performance is
included in the Fund's Annual Report to Shareholders which is available from the
Fund upon request at no charge.

Total Return

The Fund 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 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 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.

6
<PAGE>

Performance Comparisons

In advertisements or in reports to shareholders, the Fund may compare
its performance to that of other mutual funds with similar investment objectives
and to stock or other relevant indices. For example, it may compare its
performance to rankings prepared by Lipper Analytical Services, Inc. (Lipper), a
widely recognized independent service which monitors the performance of mutual
funds. The Fund may compare its performance to the Standard & Poor's 600 Small
Cap Index (S&P 600), an index of unmanaged groups of common stocks, 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 Fund. Performance comparisons
should not be considered as representative of the future performance of the
Fund. Further information regarding the performance of the Fund 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, Fortune and Stanger's, may
also be cited (if the Fund is listed in any such publication) or used for
comparison, as well as performance listings and rankings from Morningstar Mutual
Funds, Personal Finance, Income and Safety, The Mutual Fund Letter, No-Load Fund
Investor, United Mutual Fund Selector, No-Load Fund Analyst, No-Load Fund X,
Louis Rukeyeser'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

Shares are purchased at net asset value (no sales charge) from the Fund
through its agent, Jones & Babson, Inc., BMA Tower, 700 Karnes Blvd., Kansas
City, MO 64108. For information call toll free 1-800-49-BUFFALO
(1-800-492-8332). 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 Fund.
Shares are purchased at the Fund's net asset value (price) per share next
effective after a purchase order and payment have been received by the Fund. In
the case of certain institutions which have made satisfactory payment
arrangements with the Fund, orders may be processed at the net asset value per
share next effective after a purchase order has been received by the Fund.

The Fund reserves the right in its sole discretion to withdraw all or
any part of the offering 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 the Fund and its shareholders. The Fund also reserves 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

7
<PAGE>

of the Fund's special investment programs. The Fund reserves the right to refuse
to accept orders for 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 the Fund sustains a loss
as the result of failure by a purchaser to make payment, the Fund's underwriter,
Jones & Babson, Inc. 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. Make your check ($2,500 minimum 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) payable to United Missouri Bank, n.a. Mail your
application and check to:

The Buffalo Fund Group
BMA Tower
700 Karnes Blvd.
Kansas City, Missouri 64108

Initial investments -- By wire. You may purchase shares of the Fund by
wiring funds ($1,000 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
1-800-49-BUFFALO (1-800-492-8332) and provide it with the identity of the
registered account 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 Buffalo Small Cap Fund, Inc./
AC=[ ]
For Account No. = __________________
(insert assigned Fund number and
name in which account is 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 will 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 purchase are made by mail, or $1,000 or more if purchases are made by wire or
telephone. Automatic monthly investments must be in amounts of $100 or more.

8
<PAGE>
Checks should be mailed to the Fund at its address, but made payable to
UMB Bank, n.a. 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 name of the Fund. 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 for the cost of
the shares so purchased. 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 Fund will not be responsible for the consequences
of delays including delays in the banking or Federal Reserve wire systems.

The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are not followed,
the Fund may 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 Fund reserves 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 investors.

AUTOMATIC MONTHLY INVESTMENT PLAN

You may elect to make monthly investments in a constant dollar amount
from your checking account ($100 minimum). The 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. 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 shares are not priced, investment will be made on
the first date thereafter upon which Fund shares are priced. The Fund will not
be responsible for the consequences of delays including delays in the banking or
Federal Reserve wire systems.

The Fund reserves 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

9
<PAGE>

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 investors.

HOW TO REDEEM SHARES

The Fund 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 the 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 the 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 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 Fund at BMA Tower, 700 Karnes Blvd., Kansas
City, Missouri 64108.

10
<PAGE>

The Fund 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 seventh
day thereafter or earlier if required by applicable law. Transmissions are made
by mail unless an expedited method has been authorized and specified in the
redemption request. The Fund 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 30
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. This normally will take up
to 15 days; however, under unusual circumstances this may take up to 30 days.
The Fund reserves the right to delay payment for the balance of the 30-day
period beginning on the date of purchase as circumstances require. Requests for
redemption which occur within 30 days after the purchase of the shares being
redeemed will be subject to this verification. You can avoid the possibility of
delay by paying for all 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 the 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 under Rule 17Ad-15 under 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 the 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 seven-day period when the New York Stock Exchange is
closed or under emergency circumstances as determined by the Securities and
Exchange Commission. Further, the Fund 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. 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 the Fund 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

11
<PAGE>

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.

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 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,
for identically registered shares of any Fund in the Buffalo or Babson Fund
Group which is legally registered for sale in the state of residence of the
investor, except Babson Enterprise Fund, Inc., provided that the minimum amount
exchanged has a value of $1,000 or more and meets the minimum investment
requirement of the Fund or Portfolio into which it is exchanged.

Effective at the close of business on January 31, 1992, the Directors
of the Babson Enterprise Fund, Inc. took action to limit the offering of that
Fund's shares. Babson Enterprise Fund will not accept any new accounts,
including IRAs and other retirement plans, until further notice, nor will Babson
Enterprise Fund accept transfers from shareholders of other Babson Funds, who
were not shareholders of record of Babson Enterprise Fund at the close of
business on January 31, 1992.

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

<PAGE>

reaching the Fund by telephone, in which case you should contact the Fund by
mail or telegraph. The Fund reserves 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 Fund will not be
responsible for the consequences of delays including delays in the banking or
Federal Reserve wire systems.

Exchanges by mail may be accomplished by a written request properly
signed by all registered owners identifying the account, the number of shares or
dollar amount to be redeemed for exchange, and the Buffalo or Babson 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 a Fund in the Buffalo or Babson Fund Group, you should review the
prospectus of the Fund to be purchased, which can be obtained from Jones &
Babson, Inc. Any such exchange will be based on the respective net asset values
of the shares involved. Any 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 the 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 the Fund, or customary holidays. For a list of the holidays during
which the Fund is not open for business, see "How Share Price is Determined" in
the "Statement of Additional Information."

The price at which new shares of the 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 per share calculation is made by subtracting from 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, the Fund
will use the price of that exchange which it generally considers to be the
principal exchange on which the stock is traded. Lacking sales, the security is
valued at the mean between the current closing bid and

13
<PAGE>

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 Fund manage its day-to-day operations. The Fund's
manager and officers are subject to the supervision and control of the Board of
Directors. A list of the officers and directors of the Fund 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

Jones & Babson, Inc. was founded in 1960. It organized the Fund in 1997
and acts as its manager and principal underwriter. Pursuant to the current
Management Agreement, Jones & Babson, Inc. provides or pays the cost of 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 the
Fund, are taxes, interest, fees and other charges of governments and their
agencies, including the cost of qualifying the Fund's 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 the Fund,
its officers or directors may be subject or a party thereto.

As a part of the Management Agreement, Jones & Babson, Inc. employs at
its own expense Kornitzer Capital Management, Inc. as its investment counsel to
assist in the investment advisory function for the Fund. Kornitzer Capital
Management, Inc. is an independent investment counseling firm founded in 1989.
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
Jones & Babson, Inc. 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
Jones & Babson, Inc. The Management Agreement limits the liability of the
manager and its investment counsel, as well as their officers, directors and
personnel, to acts or omissions involving willful malfeasance, bad faith, gross
negligence, or reckless disregard of their duties. The organizational
arrangements of Kornitzer Capital Management, Inc. require that all investment
decisions be made by committee, and no person is primarily responsible for
making recommendations to that committee.

As compensation for all the foregoing services, the Fund pays Jones &
Babson, Inc. a fee at the annual rate of one percent (1%) of average daily net
assets from which Jones & Babson, Inc.

14
<PAGE>

pays Kornitzer Capital Management, Inc. a fee of 50/100 of one percent (.50%) of
the average daily total net assets.

The annual fee charged by Jones & Babson, Inc. is higher than the fees
of most other investment advisers whose charges cover only investment advisory
services with all remaining operational expenses absorbed directly by the Fund.
Yet, it compares favorably with these other advisers when all expenses to Fund
shareholders are taken into account.

Certain officers and directors of the Fund are also officers or
directors or both of other Buffalo Funds, Jones & Babson, Inc. or Kornitzer
Capital Management, Inc.

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 Generali.

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. Those who own 5% or more of Kornitzer
Capital Management, Inc. are John C. Kornitzer, Kent W. Gasaway, Willard R.
Lynch, Thomas W. Laming and Susan Stack.

The current Management Agreement between the Fund and Jones & Babson,
Inc., which includes the Investment Counsel Agreement between Jones & Babson,
Inc. and Kornitzer Capital Management, Inc. will continue in effect until
October 31, 1999. 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 Fund or
by the vote of a majority of the outstanding voting securities of the 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.

GENERAL INFORMATION AND HISTORY

The Fund was incorporated in Maryland on [__________,] 1997. The Fund
has a present authorized capitalization of 10,000,000 shares of $1 par value
common stock. All shares are of the same class with 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 Fund; and (2) equal
dividend, distribution and redemption rights to the assets of the Fund. Shares
when issued are fully paid and non-assessable. The Fund may create other series
of stock but will not issue any senior securities. Shareholders do not have
preemptive or conversion rights.

Non-cumulative voting - These shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of directors can elect 100% of

15
<PAGE>

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 Fund, 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 Fund has adopted the appropriate provisions in its By-Laws so
that it may choose to not hold annual meetings of shareholders for the following
purposes unless required to do so: (1) election of directors; (2) approval of
any investment advisory agreement; (3) ratification of the selection of
independent auditors; and (4) approval of a distribution plan.

The Fund may use the name "Buffalo" in its name so long as Kornitzer
Capital Management, Inc. is continued as its investment counsel. Complete
details with respect to the use of the name are set out in the Management
Agreement between the Fund and Jones & Babson, Inc.

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 Fund pays dividends from net investment income and capital gains
realized on the sale of securities, if any, semi-annually, usually in June and
December. Dividend and capital gains distributions will be reinvested
automatically in additional shares at the net asset value per share next
computed and effective 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.

On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes to the
Internal Revenue Code. Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they are discussed in
the Statement of Additional Information. Changes in the treatment of capital
gains, however, are discussed in this section.

The Fund intends to qualify for taxation as a "regulated investment
company" under Subchapter M of the Internal Revenue Code ("Code") so that the
Fund will not be subject to federal income tax to the extent that it distributes
its income to its shareholders. As such, the 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 Code and by satisfying certain other requirements relating to
the sources of its income and diversification of its assets. Dividends, either
in cash or reinvested in shares, paid by the Fund from net investment income
will be taxable to shareholders as ordinary income, and will generally qualify
in part for the 70% dividends-received deduction for corporations. The portion
of the dividends so qualified depends on the aggregate taxable qualifying
dividend income received by

16
<PAGE>

the Fund from domestic (U.S.) sources. The Fund will send to shareholders a
statement each year advising the amount of the 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 the 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 Fund does not try to realize
any particular amount of capital gains during a year; rather, realized gains are
a by-product of Fund 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 1997
Act creates a category of long-term capital gain 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 10%. 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 the Fund's securities were sold and how
long they were held by the 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 SAI, or should contact their
personal tax advisors. The Fund will advise you in its annual information
reporting at calendar year end of the amount of its capital gains distributions
which will qualify for these maximum federal tax rates. Shareholders are
notified annually by the Fund as to federal tax status of dividends and
distributions paid by the Fund. Such dividends and distributions may also be
subject to state and local taxes.

Exchange and redemption of Fund 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 of exchange
of Fund 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 adviser with respect to the tax status
of distributions from the Fund in your state and locality.

The Fund intends to declare and pay dividends and capital gains
distributions so as to avoid imposition of the federal excise tax. To do so, the
Fund expects to distribute during each calendar year an amount equal to: (1) 98%
of its calendar year ordinary income; (2) 98% of its capital gains net income
(the excess of short- and long-term capital gain over short- and long-term
capital loss) for the one-year period ending each October 31; and (3) 100% of
any undistributed ordinary or capital gain net income from the prior calendar
year. 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.

<PAGE>

To comply with IRS regulation, the Fund is 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 ADVISERS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE FUND.

* * *

SHAREHOLDER SERVICES

The Fund and its manager 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 ($100
minimum). The 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 $1,000 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 Buffalo Funds to an identically registered account in any
other fund in the Buffalo or Babson Group 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.

18
<PAGE>

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 Fund's
manager, 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 Fund and its 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 is an Individual
Retirement Account (IRA). 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 adviser concerning the
amount of the tax deduction, if any.

Simplified Employee Pensions (SEPs) - The Jones & Babson 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 Fund, 1-800-49-BUFFALO
(1-800-492- 8332).

Shareholders may address written inquiries to the Fund at:

The Buffalo Group of Funds, Inc.
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108

<PAGE>

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

JOHN G. DYER
Kansas City, Missouri

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

TRANSFER AGENT
JONES & BABSON, INC.
Kansas City, Missouri

Buffalo Small Cap Fund

Prospectus

_______________, 1998

<PAGE>

Part B

BUFFALO SMALL CAP FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

January __, 1998

This Statement is not a prospectus but should be read in conjunction
with the Fund's current Prospectus dated January ___, 1998. To obtain the
Prospectus please call the Fund toll-free 1-800-49-BUFFALO (1-800-492-8332).

TABLE OF CONTENTS

Page

INVESTMENT OBJECTIVE AND POLICIES......................................... 2
PORTFOLIO TRANSACTIONS.................................................... 2
INVESTMENT RESTRICTIONS................................................... 3
PERFORMANCE MEASURES...................................................... 4
HOW THE FUND'S SHARES ARE DISTRIBUTED..................................... 4
HOW SHARE PURCHASES ARE HANDLED........................................... 4
REDEMPTION OF SHARES...................................................... 6
ADDITIONAL INFORMATION ABOUT DISTRIBUTIONS AND TAXES......................
SIGNATURE GUARANTEES...................................................... 6
MANAGEMENT AND INVESTMENT COUNSEL......................................... 6
HOW SHARE PRICE IS DETERMINED............................................. 7
OFFICERS AND DIRECTORS.................................................... 7
CUSTODIAN.................................................................11
INDEPENDENT AUDITORS......................................................11
OTHER BUFFALO FUNDS.......................................................11
DESCRIPTION OF COMMERCIAL PAPER RATINGS...................................14
FINANCIAL STATEMENTS......................................................15

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The following policies supplement the Fund's investment objective and
policies set forth in the Prospectus.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for the Fund are made by Jones &
Babson, Inc. pursuant to recommendations by Kornitzer Capital Management, Inc.
Officers of the Fund and Jones & Babson, Inc. 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, the Fund 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.

The Fund, 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 Fund does not intend to solicit competitive bids on each
transaction.

The Fund 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 Fund,
when acting on its behalf, as well as for any research or other services
provided to the Fund. The Fund may execute a substantial portion of its
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, the Fund 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 Fund 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, the Fund 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 Fund and Jones & Babson, Inc.

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

2
<PAGE>

Research services furnished by broker-dealers may be useful to the Fund
manager and its investment counsel in serving other clients, as well as the
Fund. Conversely, the Fund may benefit from research services obtained by the
manager or its investment counsel from the placement of portfolio brokerage of
other clients.

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

INVESTMENT RESTRICTIONS

In addition to the investment objective and portfolio management
policies set forth in the Prospectus under the caption "Investment Objective and
Portfolio Management Policy," the following restrictions also may not be changed
without approval of the "holders of a majority of the outstanding shares" of the
Fund. The Fund will not: (1) as to 75% of its total assets, 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 or commodities; (3) underwrite the
securities of other issuers; (4) make loans to other persons, except by the
purchase of debt obligations which are permitted under its policy (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); (5) purchase securities on margin, or sell securities short, except
that the Fund may write covered call options; (6) borrow or pledge its credit
under normal circumstances, except up to 10% of its gross assets (computed at
the lower of fair market value or cost) for temporary or emergency 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; or (7) purchase any securities which would cause
more than 25% of the value of a Portfolio's total net assets at the time of such
purchase to be invested in any one industry.

The following are "non-fundamental" restrictions which can be changed
by the Board of Directors of the Fund without shareholder approval. The Fund may
not: (1) invest in companies for the purpose of exercising control of
management; (2) purchase shares of other investment companies except as
permitted under the Investment Company Act of 1940, as amended from time to time
or pursuant to a plan of merger or consolidation or similar transaction; (3)
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; or (4) 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
organizations in which such persons have a financial interest.

3
<PAGE>

PERFORMANCE MEASURES

TOTAL RETURN

The 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).

HOW THE FUND'S SHARES ARE DISTRIBUTED

Jones & Babson, Inc., as agent of the Fund, agrees to supply its best
efforts as sole distributor of the Fund's 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, Inc. does not receive any fee or other compensation
under the distribution agreement 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 Fund's Board of Directors,
including a majority of those Directors who are not parties to such Agreements
or interested persons of any such party. It terminates automatically if assigned
by either party or upon 60 days written notice by either party to the other.

Jones & Babson, Inc. also acts as sole distributor of the shares for
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 World Wide Fund, Inc.,
Scout Balanced Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., Scout
Capital Preservation Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo USA Global Fund, Inc. and
AFBA Five Star Fund, Inc.

4
<PAGE>

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 the order is accepted by the
Fund.

Each investment is confirmed by a year-to-date statement which provides
the details of the immediate transaction, plus all prior 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, Inc. at its cost, subject to
a minimum charge of $5 per account, per year requested.

Normally, the shares which you purchase are held by the 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 the 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 the Fund arising out of
such cancellation. To recover any such loss, the Fund reserves 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 Fund reserves the rights in its 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 the Fund and its shareholders. The Fund also reserves 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 Fund's special investment programs.

REDEMPTION OF SHARES

The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period by the Fund'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)

5
<PAGE>

for such other periods as the Securities and Exchange Commission may by order
permit for the protection of the Fund's shareholders.

The Fund may satisfy redemption requests by distributing securities
in-kind. The method of valuing securities used to make redemptions in kind will
be the same as the method of valuing portfolio securities described under "How
Share Price is Determined" in the Prospectus, and such valuation will be made as
of the same time the redemption price is determined.

DISTRIBUTIONS AND TAXES

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

Distributions of Capital Gains--The 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 the Fund will be
taxable to you as long-term capital gain, regardless of how long you have held
your shares in the Fund. Any net short-term or long-term capital gains realized
by the 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 the Fund.

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

"28 percent rate gains": securities sold by the 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 the 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%.

"1997 Act long-term capital gains" (or "20 percent rate gains") : securities
sold by the Fund after July 28, 1997 that were held for more than 18 months, and
under a transitional rule securities sold by the 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

6
<PAGE>

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.

The 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--The 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, the Fund must meet certain specific requirements, including:

(i) 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;

(ii) 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;

(iii) 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; and

(iv) The Fund must realize less than 30% of its gross income for each fiscal
year from gains from the sale of securities and certain other assets that have
been held by the Fund for less than three months ("short-short income"). The
Taxpayer Relief Act of 1997 repealed the 30% short-short income test for tax
years of regulated investment companies beginning after August 5, 1997; however,
this rule may have continuing effect in some states for purposes of classifying
the Fund as a regulated investment company.

Excise Tax Distribution Requirements--The Code requires the 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 twelve month period ending
October 31 (in addition to amounts from the prior year

7
<PAGE>

that were neither distributed nor taxed to the Fund) to you by December 31 of
each year in order to avoid federal excise taxes. The Fund intends 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 does not guarantee and can give
no assurances that its distributions will be sufficient to eliminate all such
taxes.

Dividends-Received Deduction for Corporations--Because the Fund's income is
derived primarily from dividends, a portion of its distributions will generally
be eligible for the intercorporate dividends-received deduction. The
dividends-received deduction will be available only with respect to dividends
designated by the Fund as eligible for such treatment. Dividends so designated
by the 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 the Fund may designate as eligible for the dividends-received
deduction will be reduced or eliminated if the shares on which the dividends
earned by the 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.

8
<PAGE>

MANAGEMENT AND INVESTMENT COUNSEL

As a part of the Management Agreement, Jones & Babson, Inc. employs at
its own expense Kornitzer Capital Management, Inc., as its investment counsel.
Kornitzer Capital Management, Inc., was founded in 1989. It is a private
investment research and counseling organization serving individual, corporate
and other institutional clients.

The aggregate management fee to be paid to Jones & Babson, Inc. by the
Fund during the current fiscal year is 1%. The annual fee charged by Jones &
Babson, Inc. covers all normal operating costs of the Fund.

Kornitzer Capital Management, Inc., has an experienced investment
analysis and research staff which eliminates the need for Jones & Babson, Inc.
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 Jones & Babson,
Inc.

HOW SHARE PRICE IS DETERMINED

The net asst value per share of the Fund portfolio is computed once
daily, Monday through Friday, 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 the Fund, or the following
holidays:

New Year's Day January 1

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 Fund is managed by Jones & Babson, Inc. subject to the supervision
and control of the Board of Directors. The following table list the Officers and
Directors of the Fund and their ages. Unless noted otherwise, the address of
each Officer and Director is BMA Tower, 700 Karnes Blvd., Kansas City, Missouri
64108. Except as indicated, each has been an employee of Jones & Babson, Inc.
for more than five years.

9
<PAGE>

*Larry D. Armel (55) - President and Director. 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 Fund, Inc., Scout Regional Fund, Inc., Scout WorldWide Fund, Inc.; Scout
Balanced Fund, Inc.; Scout Kansas Tax-Exempt Bond Fund, Inc.; Scout Capital
Preservation Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo USA Global Fund, Inc., Buffalo High Yield Fund, Inc., Director, AFBA
Five Star Fund; President and Trustee of D.L. Babson Bond Trust.

*Kent W. Gasaway (__) - Director. Senior Vice President, Kornitzer
Capital Management, Inc., KCM Building, Shawnee Mission, Kansas 66201. Director,
Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo USA Global Fund,
Inc. and Buffalo High Yield Fund, Inc.; Formerly Assistant Vice President,
Waddell & Reed, Inc., 6300 Lamar Avenue, Shawnee Mission, Kansas 66202

*Stephen S. Soden (__) - Director. President, BMA Financial Services,
BMA Tower, One Penn Valley Park, Kansas City, Missouri, 64141, Chairman and
Director, Jones & Babson, Inc., Director, Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo USA Global Fund, Inc.
and Buffalo High Yield Fund, Inc.

Thomas S. Case (__) - Director. Formerly, President and Chief Executive
Officer, the Frankona American Companies, 2405 Grant Blvd., Suite 900, Kansas
City, Missouri 64108; Director, Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo USA Global Fund, Inc.

Francis C. Rood (__) - Director. Retired, 6429 West 92nd Street,
Overland Park, Kansas 66212. Formerly, Group Vice President-Administration,
Hallmark Cards, Inc.; Director, 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., Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo USA Global Fund, Inc., Buffalo High Yield Fund, Inc., Trustee of D.L.
Babson Bond Trust.

William H. Russell (__) - Director. Financial consultant, 645 West 67th
Street, Kansas City, Missouri 64113; Director, 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. and Babson-Stewart Ivory International
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo USA
Global Fund, Inc., Buffalo High Yield Fund, Inc., Trustee of D.L. Babson Bond
Trust.

H. David Rybolt (__) - Director. Consultant, HDR Associates, P.O. Box
2468, Shawnee Mission, Kansas 66202; Director, David L. Babson Growth Fund,
Inc., D.L. Babson Money Market

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

10
<PAGE>

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., Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo USA
Global Fund, Inc., Buffalo High Yield Fund, Inc., Trustee of D.L. Babson Bond
Trust.

P. Bradley Adams (37) - Vice President and Treasurer. 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., 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 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., Vice President and Chief
Financial Officer, AFBA Five Star Fund, Inc.

Michael A. Brummel (40) - Vice President, Assistant Secretary and
Assistant Treasurer. Vice President, 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; Vice President, Assistant Secretary and Assistant Treasurer,
Scout Stock Fund, Inc., Scout Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout Regional Fund, Inc., WorldWide
Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., Scout Capital Preservation
Fund, Inc.; Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High
Yield Fund, Inc., Buffalo USA Global Fund, Inc.

Martin A. Cramer (47) - Vice President and Secretary. Vice President
and Secretary, 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 Kansas Tax-Exempt Bond Fund, Inc., Scout Capital
Preservation Fund, Inc.; Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA Global Fund, Inc., Secretary, AFBA
Five Star Fund, Inc.

Constance E. Martin (36) - Vice President. Assistant Vice President,
Jones & Babson, Inc. Vice President, 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 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.

11
<PAGE>

John G. Dyer (52) - Vice President. Vice President, Scout Stock Fund,
Inc., Scout Bond Fund, Inc., Scout Tax-Free Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout Regional Fund, Inc., Scout WorldWide
Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., Scout Capital Preservation
Fund, Inc.; Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High
Yield Fund, Inc., Buffalo USA Global Fund, Inc.

None of the officers or directors will be remunerated by the Fund for
their normal duties and services. Their compensation and expenses arising out of
normal operations will be paid by Jones & Babson, Inc. under the provisions of
the Management Agreement.

Messrs. Case, Rood, Russell and Rybolt have no financial interest in,
nor are they affiliated with, either Jones & Babson, Inc. or Kornitzer Capital
Management, Inc.

The Audit Committee of the Board of Directors is composed of Messrs.
Case, Rood, Russell and Rybolt.

The Officers and Directors of the Fund as a group own less than 1% of
the Fund.

<TABLE>
<CAPTION>
COMPENSATION TABLE

Aggregate Pension or Retirement Estimated Annual Total Compensation
Compensation Benefits Accrued As Benefits Upon From all Buffalo Fund
Name of Director From The Fund Part of Fund Expenses Retirement Paid to Directors**
<S> <C> <C> <C> <C>
Larry D. Armel* -- -- -- --

Kent W. Gasaway* -- -- -- --

Thomas S. Case $5,250 -- -- $5,250

Stephen S. Soden* -- -- -- --

Francis C. Rood $2,000 -- -- $2,000

William H. Russell $2,000 -- -- $2,000

H. David Rybolt $2,000 -- -- $2,000
</TABLE>

* As "interested directors," Messrs. Armel, Gasaway and Soden receive no
compensation for their services as directors.

** The amounts reported in this column reflect the total compensation
paid to each director for his services as a director of four Buffalo
Funds during the fiscal year ended March 31, 1997. Directors fees are
paid by the Funds' manager and not by the Funds themselves.

The Fund will not hold annual meetings except as required by the
Investment Company Act of 1940 and other applicable laws. The Fund is a Maryland
corporation. Under Maryland law, a special meeting of stockholders of the 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. To the extent required under Maryland law, the Fund will assist
shareholder communications in such matters.

12
<PAGE>
CUSTODIAN

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

INDEPENDENT AUDITORS

The Fund'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 Fund's present
independent auditors.

Reports to shareholders will be published at least semiannually.

OTHER BUFFALO FUNDS

Jones & Babson, Inc. sponsors and manages the four additional no-load
funds described below in association with Kornitzer Capital Management, Inc.

Buffalo Balanced Fund, Inc. was organized in 1994 with the objective of
long-term capital growth and high current income through investing in common
stocks and secondarily by investing in convertible bonds, preferred stocks and
convertible preferred stocks.

Buffalo High Yield Fund, Inc. was organized in 1994 with the objective
of a high level of current income and secondarily, capital growth by investing
primarily in high-yielding fixed income securities.

Buffalo USA Global Fund, Inc. was organized in 1994 with the objective
of capital growth by investing in common stocks of U.S. companies that receive
greater than 40% of their revenues or pre-tax income from international
operations.

Buffalo Equity Fund, Inc. was organized in 1994 with the objective of
long-term capital appreciation by investing 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.

13
<PAGE>

A prospectus for any of the Funds may be obtained from Jones & Babson,
Inc., BMA Tower, 700 Karnes Boulevard, Kansas City, Missouri 64108.

Jones & Babson, Inc. also sponsors and manages nine-no-load funds
comprising the Babson Mutual Fund Group managed by Jones & Babson Mutual Fund
Group managed by Jones & Babson, Inc. in association with its investment
counsel, David L. Babson & Co., Inc. The funds are: David L. Babson Growth Fund,
Inc., Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory International Fund, Inc., Babson Value
Fund, Inc., D. L. Babson Bond Trust, D. L. Babson Money Market Fund, Inc. and D.
L. Babson Tax-Free Income Fund, Inc.

Jones & Babson, Inc. also sponsors and manages eight mutual funds which
especially seek to provide services to customers of affiliate banks of UMB
Financial Corporation. They are 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 Kansas Tax- Exempt Bond
Fund, Inc. and Scout Capital Preservation Fund, Inc.

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;

14
<PAGE>

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

(TO BE SUPPLIED BY FURTHER AMENDMENT)

15
<PAGE>

PART C

OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial statements: (To be included in the Statement of
Additional Information in a further amendment)

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

(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 Jones & Babson,
Inc. and the Registrant

(b) Form of Investment Counsel Agreement between Jones &
Babson, Inc. 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 agreements for the benefit of directors and
officers

(8) Form of Custodian Agreement between Registrant and United
Missouri Bank of Kansas City, N.A.

(9) There are no other material contracts not made in the
ordinary course of business between the Registrant and
others

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

(11) Not applicable. (To be supplied by further amendment as
necessary)

(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. (To be supplied by further amendment if
applicable.)

16
<PAGE>

(14) Not applicable.

(15) Not applicable.

(16) Schedule for computation of performance quotations. (To
be supplied by further amendment)

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 class of securities of
the Registrant as of November 20, 1997, is as follows:

(1) (2)
Title of Class Number of Record Holders
Common Stock $1.00 par No securities have been
value issued

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.

17
<PAGE>

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.

The principal business of Jones & Babson, Inc. is the
management of the Babson, Buffalo and Scout families of mutual
funds. It also has expertise in the tax and pension plan
field. It supervises a number of prototype and profit-sharing
plan programs sponsored by various organizations eligible to
be prototype plan sponsors.

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

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., Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout Money Market
Fund, Inc. and Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout Kansas
Tax-Exempt Bond Fund, Inc., Scout Capital Preservation Fund,
Inc., Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo USA Global Fund, Inc., Buffalo High Yield Fund, Inc.
and AFBA Five Star 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:

<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant

<S> <C> <C>
Larry D. Armel President and Director President and Director
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

Kent W. Gasaway None None
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

<PAGE>

Stephen S. Soden Chairman and Director Director
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

Thomas S. Case None None
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

Francis C. Rood None None
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

William H. Russell None None
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

H. David Rybolt Director None
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

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

Michael A. Brummel Vice President Vice President
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108

Martin A. Cramer Vice President and Secretary
BMA Tower Secretary
700 Karnes Blvd.
Kansas City, MO 64108
</TABLE>

(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.

19
<PAGE>
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 BMA Tower, 700 Karnes
Blvd., Kansas City, Missouri 64108.

Item 31. MANAGEMENT SERVICES.

All management services are covered in the management
agreement between the Registrant and Jones & Babson, Inc.,
which are discussed in Parts A and B.

Item 32. UNDERTAKINGS.

Registrant undertakes to file a post-effective amendment using
uncertified financial statements within four to six months
from the commencement of the Fund's investment operations
after the effective date of Registrant's 1933 Act Registration
Statement.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto authorized,
in Kansas City, Missouri on the 19th day of November, 1997.

BUFFALO SMALL CAP FUND, INC.
(Registrant)

By: /s/ Larry D. Armel
Larry D. Armel, President

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

<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Larry D. Armel President, Principal Executive November 19, 1997
Larry D. Armel Officer and Director

/s/Kent W. Gasaway Director November 19, 1997
Kent W. Gasaway*

/s/ Stephen S. Soden Director November 19, 1997
Stephen S. Soden*

/s/ Thomas S. Case Director November 19, 1997
Thomas S. Case*

/s/ Francis C. Rood Director November 19, 1997
Francis C. Rood*

/s/ William H. Russell Director November 19, 1997
William H. Russell*

/s/ H. David Rybolt Director November 19, 1997
H. David Rybolt*

/s/ P. Bradley Adams Vice President and Principal November 19, 1997
P. Bradley Adams Financial and Accounting Officer

</TABLE>

* by Larry D. Armel, pursuant to Power of Attorney filed herewith

21
<PAGE>

Item 24(b) EXHIBITS

(1) Articles of Incorporation
(2) Bylaws
(4) Specimen Stock Certificate
(5)(a) Form of Management Agreement
(b) Form of Investment Counsel Agreement
(6) Form of Underwriting Agreement
(8) Form of Custodian Agreement
(10) Opinion and Consent of Counsel
(13) Form of letter from Contributors of Initial Capital

ARTICLES OF INCORPORATION

BUFFALO SMALL CAP FUND, INC.

FIRST: I, the undersigned, John G. Dyer, whose Post-office address is
L-36 Route 1, Lake Lotawana, Missouri, 64086, being at least twenty-one years of
age, do, under and by virtue of the general laws of the state of Maryland
authorizing the formation of corporations, associate myself as Incorporator with
the intention of forming a corporation (hereinafter called the "Corporation").

SECOND: The name of the Corporation is BUFFALO SMALL CAP FUND, INC.

THIRD: The purpose for which the Corporation is formed is to act as an
open-end, diversified management investment company under the Investment Company
Act of 1940, as amended, and to exercise and enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations of a similar character by
the general laws of the state of Maryland now or hereafter in force.

FOURTH: The Post-Office address of the principal office of the
Corporation in this state is C/O the Corporation Trust incorporated, 32 South
Street, Baltimore, Maryland, 21202. The name of the Resident Agent of the
Corporation in this state is the Corporation Trust Incorporated, a corporation
of this state, and the Post-office address of the Resident Agent is 32 South
Street, Baltimore, Maryland, 21202.

FIFTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 10,000,000 shares of a par value of
one dollar ($1.00) per share and an aggregate par value of $10,000,000. The
number of the shares of stock of each class is such number, if any, of shares of
unissued stock as is classified or reclassified into such class by the
Corporation's Board of Directors pursuant to the authority contained in Section
2-105 of the Maryland General Corporation Law as filed by the Corporation as
Articles Supplementary under Section 2-208 of the Maryland General Corporation
Law (or any successor provisions). The Board of Directors of the Corporation
shall have the power to classify or reclassify unissued shares into one or more
classes which together with the issued shares of stock of the corporation shall
have such designations as the board may determine and (subject to any applicable
rule, regulation or order of the Securities and Exchange Commission or other
applicable law or regulation) shall have such preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine (or in the absence of contrary determination, such as
set forth herein) . At any time when there are no shares outstanding or
subscribed for a particular class previously established and designated by the
Board of

<PAGE>

Directors, the class may be liquidated by similar means. If the Board so
determines, one or more classes of stock may be treated for all purposes other
than dividends as if all shares of such classes were shares of one class. The
dividends payable to the holders of any class (subject to any applicable rule,
regulation or order of the securities and Exchange Commission or any other
applicable law or regulation) shall be determined by the Board and need not be
individually declared, but may be declared and paid in accordance with a formula
adopted by the Board. Each share of a class shall have equal rights with each
other share of that class of stock with respect to the assets of the Corporation
pertaining to that class. Any fractional shares of capital stock issued by the
corporation shall have proportionately, all the rights of full shares. Except as
otherwise provided herein, all references in these articles of incorporation to
capital stock or class of stock shall apply without discrimination to the shares
of each class of stock.

(A) The holders of each share of stock of the Corporation
shall be entitled to one vote for each full share, and a fractional vote for
each fractional share of stock, irrespective of the class then standing in his
or her name in the books of the Corporation. On any matter submitted to a vote
of shareholders, all shares of the Corporation then issued and outstanding and
entitled to vote, irrespective of the class, shall be voted in the aggregate and
not by class, except (1) when otherwise expressly provided by the Maryland
General Corporation Law or (2) when required by the Investment Company Act of
1940, as amended, shares shall be voted by individual class; and (3) when the
matter does not affect any interest of a particular class, then only
shareholders of the affected class or classes shall be entitled to vote thereon.

(B) Each class of stock of the Corporation shall have the
following powers, preferences and participating, voting, or other special rights
and the qualifications, restrictions, and limitations thereof shall be as
follows:

(1) All consideration received by the Corporation
for the issue or sale of stock of each class, together with all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the class of shares of stock with respect to which such
assets, payments or funds were received by the Corporation for all purposes,
subject only to the rights of creditors, and shall be so handled upon the books
of account of the Corporation. Such assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof and any assets derived from any reinvestment of such
proceeds, in

-2-

<PAGE>

whatever form the same may be, are herein referred to as "assets belonging to"
such class.

(2) The Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all classes of stock,
the amount of such dividends and the payment of them being wholly in the
discretion of the Board of Directors.

(I) Dividends or distributions on shares of any class of
stock shall be paid only out of earnings, surplus, or other lawfully available
assets belonging to such class.

(II) Inasmuch as one goal of the corporation is to qualify
as a "regulated investment company" under the Internal Revenue code of 1986, as
amended, or any successor or Comparable statute thereto and regulations
promulgated thereunder; and inasmuch as the computation of not income and gains
for federal income tax purposes may vary from the computation thereof on the
books of the corporation, the Board of Directors shall have the power in its
discretion to distribute in any fiscal year as dividends, including designated
in whole or in part as capital gain distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company and to avoid liability for the Corporation for
federal income tax in respect of that year.

(3) In the event of the liquidation or dissolution of the
corporation, shareholders of each class shall be entitled to receive, as a
class, out of the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
class of stock, the assets belonging to such class; and the assets so
distributable to the shareholders of any class shall be distributed among such
shareholders in proportion to the number of shares of such class held by them
and recorded on the books of the Corporation. In the event that there are any
general asset,% not belonging to any particular class of stock and available for
distribution, such distribution shall be made to the holders of stock of all
classes in proportion to the asset value of the respective classes determined as
hereinafter provided.

(4) The assets belonging to any class of stock shall be charged
with the liabilities in respect to such class, and shall also be charged with
its share of the general liabilities of the Corporation, in proportion to the
asset value of the respective classes determined as hereinafter set out. The
determination of the Board of Directors shall be conclusive as to the amount of
liabilities, including accrued expenses and reserves, as to the allocation of
the same as to a given class, and as to whether the same or-general assets of
the Corporation are allocable to one or more classes.

-3-

<PAGE>

(C) Each holder of any class of stock of the Corporation,
who shall surrender his certificate in good delivery form to the Corporation or
who, if the shares in question are not represented by certificates, shall
deliver to the Corporation a written request in good order signed by the
shareholder, shall be entitled to require the Corporation, to the extent that
the class of stock in question has assets lawfully available therefor and out of
such assets, but not otherwise, to redeem all or any part of the shares of such
stock standing in the name of such holder on the books of the Corporation, at
the net asset value of such shares, determined in the manner and as of the time,
and payable as provided in the Investment Company Act of 1940, as amended. The
Corporation shall make payment for any such shares to be redeemed as aforesaid,
in cash, or if in the opinion of the Board of Directors, which shall be
conclusive, conditions exist which make payment wholly in cash unwise or
undesirable, the Corporation may make payment wholly or partly in securities
belonging to the class to provide for such redemption by it of the shares of
such class.

(1) The Board of Directors of the Corporation may, in
accordance with the Investment Company Act of 1940, as amended, suspend the
right of the holders of any class of stock of the Corporation to require the
Corporation to redeem shares of such class.

(2) The Board of Directors, in the economic best
interest of the Corporation and in order to reduce the disproportionately
burdensome expenses in servicing shareholder accounts, may from time to time,
establish uniform standards with respect to the minimum value of a stockholder
account or a minimum investment which may be made by a stockholder. The Board of
Directors, by resolution and without the vote or consent of stockholders, may
require that the aggregate net asset value of a stockholder account shall not be
less than the minimum initial investment requirement of the Corporation at the
time of the resolution. The resolution may authorize the Corporation to close
those stockholder accounts not meeting the specified minimum standards of value
by redeeming all of the shares in such accounts, provided there is mailed to
each affected stockholder account, at least sixty (60) days prior to the planned
redemption date, a notice setting forth the minimum account size requirement and
the date on which the account will be closed if the minimum size requirement is
not met prior to said closing date.

(D) Each holder of any class of stock of the Corporation,
who surrenders his certificate in good delivery form to the Corporation or, if
the shares in question are not represented by certificates, who delivers to the
Corporation a written request in good order signed by the shareholder, shall be
entitled to convert the shares in question on the basis hereinafter set forth,
into shares of stock of any other class of the Corporation. The Corporation
shall determine the net asset value,

-4-
<PAGE>

as hereinafter defined, of the shares to be converted and shall deduct therefrom
such conversion cost, hereinafter described and within five (5) business days
after such surrender and payment, shall issue to the shareholder such number of
shares of stock of the class desired taken at the net asset value thereof
determined in the same manner and at the same time as that of the shares
surrendered, which shall equal the net asset value of the shares surrendered
less conversion cost as aforesaid. Any amount representing a fraction of a share
may be paid in cash at the option of the Corporation. The conversion cost above
mentioned shall be determined by adding a transaction charge as determined by
the Board of Directors. The transaction charge may be paid and/or assigned by
the Corporation to the underwriter and/or any other agency, as it may elect.
Upon any conversion taking place, proper transfer shall be made between the
assets belonging to the respective classes of stock. The Board of Directors may
limit this conversion privilege to shares which have been held for such
reasonable period of time as the Directors may determine.

(E) The aggregate net asset value per share of a class of
the Corporation's capital stock shall be determined in accordance with the
Investment Company Act of 1940, as amended, and with generally accepted
accounting principles, by adding the market or appraised value of all
securities, cash and other assets of the Corporation pertaining to that class,
subtracting the liabilities determined by the Board of Directors to be
applicable to that class, and dividing the net result by the number of shares of
the class outstanding. Securities and other investments and assets will be
valued at fair value as determined in good faith by the Board of Directors.

SIXTH: The shares of stock of the Corporation may be issued to such
persons and at such prices from time to time as the Board of Directors may
determine. Such issuance shall be on a non-assessable basis. No holder of shares
of stock shall have pre-emptive rights and the Corporation shall have the right
to issue and sell to any person or persons and shares of its stock or any option
rights exercisable for, or securities convertible into shares of its stock
without first offering such shares, rights or securities to the holders of any
shares.

SEVENTH: The number of Directors of the Corporation and their terms of
office shall be determined from time to time by the Directors pursuant to the
by-laws of the corporation. Such number initially shall be seven and shall never
be less than three. The names of the initial Directors are:

-5-

<PAGE>

Larry D. Armel
Kent W. Gasaway
Stephen S. Soden
Thomas S. Case
Francis C. Rood
William H. Russell
H. David Rybolt

who shall serve until their respective successors are elected and qualified.

(A) If a vacancy occurs on the Board of Directors by reason of
death, resignation, or otherwise, the Board of Directors may fill such vacancy
for the remainder of the unexpired term by majority vote of the remaining
directors; provided that after filling any such vacancy, at least two thirds of
the Directors shall have been elected by the stockholders, and provided further
that if at any time less than a majority of the Directors then holding office
were elected by the stockholders, a stockholders' meeting shall be called as
promptly as possible and, in any event, within sixty days, for the purpose of
electing Directors to fill existing vacancies.

EIGHTH: The Corporation is expressly empowered as follows:

(A) The Corporation may enter into a written contract or
contracts with any person, including any firm, corporation, trust, or
association in which any officer, other employee, director or stockholder of
this corporation may be interested, providing for a delegation of the management
of all or part of this corporation's securities portfolio (or portfolios) and
also for the delegation of the performance of administrative corporate
functions, subject always to the direction of the Board of Directors of this
corporation. The compensation payable by this corporation under such contracts
shall be such as is deemed fair and equitable to both parties by the said Board
of Directors. Each such contract shall in all respects be consistent with and
subject to the requirements of the Investment Company Act of 1940, as amended,
as then in effect and regulations of the securities and exchange commission or
any succeeding governmental authority promulgated thereunder.

(B) The Corporation may appoint one or more distributors or
agents or both for the sale of the shares of the Corporation, may allow such
person or persons a commission on the sale of such shares, and may enter into
such contract or contracts with such person or persons as the Board of Directors
of this Corporation in its discretion may deem reasonable and proper. Any such
contract or contracts for the sale of the shares of this corporation may be made
with any person even though such person may be an officer, other employee,
director or stockholder of this corporation or a corporation, partnership, trust
or association in which any such

-6-

<PAGE>

officer, other employee, director or stockholder nay be interested, or such
person-may be the same as that person retained pursuant to the powers granted in
Section (A) of this Article EIGHTH. Each such contract shall in all respects be
consistent with and subject to the requirements of the Investment Company Act of
1940, as amended, as then in effect and regulations of the Securities and
Exchange Commission or any succeeding governmental authority promulgated
thereunder.

(C) The Corporation may employ such custodian or custodians
for the safekeeping of the property of the corporation and of its shares, such
dividend disbursing agent or agents, and such transfer agent or agents and
registrar or registrars for its shares, and may make and perform such contracts
for the aforesaid purposes as in the opinion of the Board of Directors of this
Corporation may be reasonable, necessary or proper for the conduct of the
affairs of the Corporation, and may pay the fees and disbursements of such
custodian, dividend disbursing agents, transfer agents, and registrars out of
the income and/or any other property of the Corporation. Notwithstanding any
other provisions of these articles of incorporation or the by-laws of the
Corporation, the Board of Directors may cause any or all of the property of the
Corporation to be transferred to, or be acquired and held in the name of, a
custodian so appointed or any nominees of this Corporation or nominee or
nominees of such custodian satisfactory to the Board of Directors of this
Corporation.

(D) The same person, partnership (general or limited),
association, trust or corporation may be employed in any multiple capacity under
subsections (A), (B) and (C) of this article EIGHTH and may receive compensation
from the corporation in as many capacities in which such person, partnership
(general or limited), association, trust or corporation shall serve the
Corporation.

NINTH: (A) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.

(B) The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Board of Directors may by Bylaw, resolution or agreement make further
provisions for indemnification of directors, officers,

-7-

<PAGE>

employees and agents to the fullest extent permitted by the Maryland General
Corporation Law.

(C) No provision of this Article shall be effective to protect
or purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.

(D) References to the Maryland General corporation Law in this
Article are to the law as from time to time amended. No further amendment to the
Articles of Incorporation of the Corporation shall affect any right of any
person under this Article based on any event, omission or proceeding prior to
such amendment.

(E) Each provision of this Article NINTH shall be severable
from the remainder, and the invalidity of any such provision shall not affect
the validity of the remainder of this Article NINTH.

TENTH: The Corporation may purchase and maintain insurance on its
behalf and on behalf of any person who is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, trust, joint venture,
association or other enterprise against any liability asserted against him and
incurred by him in any such capacity.

ELEVENTH: In furtherance, and not in limitation, of the powers
conferred by the laws of the state of Maryland, the Board of Directors is
expressly authorized:

(A) To make, alter or repeal the by-laws of the Corporation,
except where such power is reserved by the by-laws to the stockholders, and
except as otherwise required by the Investment Company Act of 1940, as amended.

(B) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them other than the stock ledger,
shall be open to the inspection of the stockholder, and no stockholder shall
have any right to inspect any account or book or document of the Corporation,
except as conferred by law or authorized by resolution of the Board of Directors
or of the stockholders.

(C) To authorize and issue obligations of the Corporation,
secured and unsecured, without assent or vote of the stockholders, as the Board
of Directors may determine, and to authorize and cause to be executed mortgages
and liens upon the property of the Corporation, real and/or personal, but only
to the

-8-

<PAGE>

extent permitted by the fundamental policies of the Corporation set out in its
registration statement filed with the Federal Securities and Exchange Commission
or any succeeding governmental authority, pursuant to the Investment Company Act
of 1940, as amended.

(D) In addition to the powers and authorities granted herein
an(f by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the provisions
of Maryland law, these Articles of Incorporation, and the by-laws of the
corporation.

TWELFTH: The books of the Corporation may be kept (subject to any
provisions of Maryland law) outside the state of Maryland at such place or
places as may be designated from time to time by the Board of Directors or in
the by-laws of the Corporation. Elections of directors need not be by ballot
unless the by-laws of the Corporation so provide.

THIRTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein @e granted subject to this reservation.

FOURTEENTH: Notwithstanding any provision of Maryland law requiring
more than a majority vote of the common stock in connection with any corporate
action including, but not limited to, amendment of these Articles of
Incorporation, unless otherwise provided in these Articles of Incorporation the
Corporation may take or authorize such action upon the favorable vote of the
holders of a majority of the outstanding shares of common stock.

FIFTEENTH: The duration of the Corporation shall be perpetual.

IN WITNESS WHEREOF, the undersigned Incorporator of the BUFFALO SMALL
CAP FUND, INC. who executed the foregoing Articles

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<PAGE>

of Incorporation hereby acknowledges that to the best of his knowledge the
matters and facts set forth herein are true in all material respects under
penalties of perjury.

Dated the 3rd day of October, 1997.

/s/ John G. Dyer
John G. Dyer

-10-

BY-LAWS

BUFFALO SMALL CAP FUND, INC.

ARTICLE I

FISCAL YEAR AND OFFICES

Section 1. Fiscal Year. Unless otherwise provided by resolution of the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of April and end on the last day of March.

Section 2. Registered Office. The registered office of the corporation
in Maryland shall be C/O the CORPORATION TRUST, INCORPORATED, 32 South Street,
Baltimore, Maryland, 21202.

Section 3. Other Offices. The corporation shall have a place of
business in the State of Maryland, and the corporation shall have the power to
open additional offices for the conduct of its business, either within or
outside the states of Maryland and Missouri, at such places as the Board of
Directors may from time to time designate.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Place of Meeting. Meetings of the stockholders for the
election of directors shall be held in such place as the Board of Directors may
by resolution establish. In the absence of any specific resolution, annual
meetings of stockholders shall be held at the corporation's principal office in
the State of Missouri. Meetings of stockholders for any other purpose may be
held at such place and time as shall be stated in the notice of the meeting, or
in a duly executed waiver of notice thereof.

Section 2. Annual Meetings. The annual meetings of stockholders, if
held, shall be held at such time during the month of September as may be fixed
by the Board of Directors by resolution each year. At any annual meeting, the
stockholders shall elect a Board of Directors and transact any other business
which may properly be brought before the meeting. No annual meeting of
stockholders shall be required in any year in which the only business to be
transacted at such meeting does not require action by stockholders on any one or
more of the following:

(1) the election of directors;

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(2) approval of the investment advisory agreement;

(3) ratification of the selection of independent public accountants;

(4) approval of a distribution agreement.

Section 3. Special Meetings. At any time in the interval between annual
meetings, special meetings of the stockholders may be called by the president or
by a majority of the Board of Directors and shall be called by the president or
secretary upon written request of the holders of shares entitled to cast not
less than ten percent of all the votes entitled to be cast at such meeting.

Section 4. Notice. Not less than ten nor more than ninety days before
the date of every annual or special stockholders' meeting, the secretary shall
give to each stockholder entitled to vote at such meeting written notice stating
the time and place of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.

Section 5. Record Date for Meetings. The Board of Directors may fix in
advance a date not more than ninety days, nor less than ten days, prior to the
date of any annual or special meeting of the stockholders as a record date for
the determination of the stockholders entitled to receive notice of, and to vote
at any meeting and any adjournment thereof; and in such case such stockholders
and only such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to receive notice of and to vote only such shares held
and outstanding on such record date that continue to be held and outstanding at
the time of voting.

Section 6. Quorum. At any meeting of stockholders, the presence in
person or by proxy of the holders of a majority of the aggregate shares of stock
at the time outstanding shall constitute a quorum. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting originally notified.

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Section 7. Majority. The vote of the holders of a majority of the stock
having voting power, as measured by the applicable quorum requirements set forth
in Section 6, present in person or represented by proxy, at a meeting duly
called and at which a quorum is present, shall be sufficient to take or
authorize action upon any matter which may properly come before the meeting,
unless otherwise required by the Investment Company Act of 1940, as amended.

Section 8. Voting. Each stockholder shall have one vote for each full
share and a fractional vote for each fractional share of stock having voting
power held by such stockholder on each matter submitted to a vote at a meeting
of stockholders. A stockholder may cast his vote in person or by proxy, but no
proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. At all meetings of stockholders, unless the voting is
conducted by inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided by the chairman of the meeting.

Section 9. Inspectors. At any election of directors, the Board of
Directors prior thereto may, or, if they have not so acted, the chairman of the
meeting may, and upon the request of the holders of ten percent (10%) of the
shares entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath of affirmation to execute faithfully
the duties of inspectors at such election with strict impartiality and according
to the best of their ability, and shall after the election make a certificate of
the result of the vote taken. No candidate for the office of director shall be
appointed such inspector. The chairman of the meeting may cause a vote by ballot
to be taken upon any election or matter, and such vote shall be taken upon the
request of the holders of ten percent (10%) of the stock entitled to vote on
such election or matter.

Section 10. Stockholder List. The officer who has charge of the stock
ledger of the corporation shall, at least ten days before every election of
directors, prepare and make a complete list of the stockholders entitled to vote
at said election, arranged in alphabetical order, showing the address and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, during ordinary business hours, for
a period of at least ten days prior to the election, either at a place within
the city, town or village where the election is to be held and which place shall
be specified in the notice of meeting, or if not specified, at the place where
said meeting is to be held, and the list shall be produced and kept at the time
and place of election during the whole time thereof, and

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subject to the inspection of any stockholder who may be present.

ARTICLE III

DIRECTORS

Section 1. General Powers. The business of the corporation shall be
managed by its Board of Directors, which may exercise all powers of the
corporation, except such as are by statute, or the Articles of Incorporation, or
by these By-laws conferred upon or reserved to the stockholders.

Section 2. Number and Term of Office. The number of directors which
shall constitute the whole Board shall be determined from time to time by the
Board of Directors, but shall not be fewer than three. Each director elected
shall hold office until his successor is elected and qualified.
Directors need not be stockholders.

Section 3. Elections. The Directors shall all be of one class and shall
serve until their respective successors are elected and qualified.

Section 4. Place of Meeting. Meetings of the Board of Directors,
regular or special, may be held at any place in or out of the State of Maryland
as the Board may from time to time determine.

Section 5. Quorum. At all meetings of the Board of Directors a majority
of the entire Board of Directors shall constitute a quorum for the transaction
of business and the action of a majority of the directors present at any meeting
at which a quorum is present shall be the action of the Board of Directors
unless the concurrence of a greater proportion is required for such action by
the laws of the State of Maryland, these By-laws or the Articles of
Incorporation or a different number is required by the Investment Company Act of
1940, as amended. If a quorum shall not be present at any meeting of directors,
the directors present thereat may by a majority vote adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.

Section 6. First Meeting. The first meeting of each newly constituted
Board of Directors shall be held as soon as practicable after the annual meeting
of stockholders in each year, at such time and place as shall be specified in a
notice given as hereinafter provided for meetings of the Board of Directors, or
as shall be specified in a written waiver signed by all of the directors.

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Section 7. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.

Section 8. Special Meetings. Special meetings of the Board of Directors
may be called by the president on one day's notice to each director; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two directors.

Section 9. Telephonic Meetings. Regular or special meetings, except for
meetings to approve an investment advisory agreement or a distribution plan, of
the Board of Directors or any committee thereof, may be held by means of a
conference telephone or similar communications equipment so that all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the meeting.

Section 10. Informal Actions. Any action, except approval of an
investment advisory agreement, or a distribution plan, required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting, if written consent to such action is signed in one
or more counterparts by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board or committee.

Section 11. Committees. The Board of Directors may by resolution passed
by a majority of the whole Board appoint from among its members an executive
committee and other committees composed of two or more directors, and may
delegate to such committees, in the intervals between meetings of the Board of
Directors, any or all of the power of the Board of Directors in the management
of the business and affairs of the corporation, except the power to declare
dividends, to issue stock or to recommend to stockholders any action requiring
stockholders' approval. In the absence of any member of such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a member of the Board of Directors to act in the place of such
absent member.

Section 12. Action of Committees. The committees shall keep minutes of
their proceedings and shall report the same to the Board of Directors at the
meeting next succeeding, and any action by committees shall be subject to
revision and alteration by the Board of Directors, provided that no rights of
third persons shall be affected by any such revision or alteration.

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Section 13. Compensation. Any director, whether or not he is a salaried
officer or employee of the corporation, may be compensated for his services as a
director or as a member of a committee of directors, or as chairman of the Board
or chairman of a committee by fixed or periodic payments or by fees for
attendance at meetings or by both, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the Board
of Directors may from time to time determine.

Section 14. Removal. The stockholders of this corporation may remove
any director with or without cause by the affirmative vote of a majority of all
the votes entitled to be cast for the election of directors.

ARTICLE IV

NOTICES

Section 1. Form. Notices to stockholders shall be in writing and
delivered personally or mailed to the stockholders at their addresses appearing
on the books of the corporation. Notice by mail shall be deemed to be given at
the time when the same shall be mailed. Notice to directors need not state the
purpose of a regular or special meeting.

Section 2. Waiver. Whenever any notice of the time, place or purpose of
any meeting of stockholders, directors or committee is required to be given
under the provisions of Maryland law or under the provisions of the Articles of
Incorporation or these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of stockholders in person or by proxy, or at the meeting of
directors or committee in person, shall be deemed equivalent to the giving of
such notice to such persons.

ARTICLE V

OFFICERS

Section 1. Officers of the Corporation. The officers of the corporation
shall be elected by the Board of Directors and shall include a president, who
shall be a director, a secretary and a treasurer. The Board of Directors may,
from time to time, elect or appoint a controller, one or more vice-presidents,
assistant secretaries and assistant treasurers. The president shall preside at
meetings of the Board of Directors, unless the Board of Directors, at its
discretion, elects a chairman of the Board to preside at such meetings. In
addition, such chairman shall perform and

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execute such executive and administrative duties and have such powers as the
Board of Directors may from time to time prescribe. Two or more offices may be
held by the same person but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by law, the
Articles of Incorporation or these By-laws to be executed, acknowledged or
verified by two or more officers.

Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a president, a secretary and a
treasurer.

Section 3. Compensation. The salaries or other compensation of all
officers and agents of the corporation paid directly by the corporation shall be
fixed by the Board of Directors, except that the Board of Directors may delegate
to any person or group of persons the power to fix such salaries or other
compensation.

Section 4. Tenure. The officers of the corporation shall serve for one
year and until their successors are chosen and qualify. Any officer or agent may
be removed by the affirmative vote of a majority of the Board of Directors
whenever, in its judgment, the best interests of the corporation will be served
thereby. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors.

Section 5. President. The president, unless the chairman has been so
designated, shall be the chief executive officer of the corporation. He shall
preside at all meetings of the stockholders and directors and shall see that all
orders and resolutions of the Board are carried into effect. The president shall
also be the chief administrative officer of the corporation and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.

Section 6. Vice-Presidents. The vice-presidents, in the order of their
seniority, shall in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties as the Board of Directors may from time to time prescribe.

Section 7. Secretary. The secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings thereof and shall perform like duties for any committee when
required. In the absence of the secretary or an assistant secretary, proceedings
of such meetings shall be recorded by a person selected by the chairman of the
meeting. He shall give, or

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<PAGE>

cause to be given, notice of meetings of the stockholders and of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or president, under whose supervision he shall be. He shall keep in
safe custody the seal of the corporation and, when authorized by the Board of
Directors, affix and attest the same to any instrument requiring it. The Board
of Directors may give general authority to any other officer to affix the seal
of the corporation and to attest the same by affixing his signature.

Section 8. Assistant Secretaries. The assistant secretaries, in order
of their seniority, shall in the absence or disability of the secretary, perform
the duties and exercise the powers of the secretary and shall perform such other
duties as the Board of Directors shall prescribe.

Section 9. Treasurer. The treasurer, unless another officer has been so
designated, shall be the chief financial officer of the corporation. He shall be
responsible for the maintenance of its accounting records and shall render to
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all the corporation's financial transactions and a
report of the financial condition of the corporation.

Section 10. Controller. The controller shall be under the direct
supervision of the treasurer. He shall maintain adequate records of all assets,
liabilities and transactions of the corporation, establish and maintain internal
accounting control and, in cooperation with the independent public accountants
selected by the Board of Directors, shall supervise internal auditing. He shall
have such further powers and duties as may be conferred upon him from time to
time by the president or the Board of Directors.

Section 11. Assistant Treasurers. The assistant treasurers, in the
order of their seniority, shall in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties as the president or the Board of Directors may from time to
time prescribe.

Section 12. Other Officers. The Board of Directors from time to time
may appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
The Board of Directors from time to time may delegate to one or more officers or
agents the power to appoint any such subordinate officers or agents, except

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<PAGE>

assistant treasurers and to prescribe the respective rights, terms of office,
authorities and duties.

ARTICLE VI

NET ASSET VALUE

The net asset value per share of stock of the corporation shall be
determined at least once each day at the close of business on the New York Stock
Exchange on each day the New York Stock Exchange is open for trading. Net asset
value shall be calculated by adding the value of all securities and other assets
of the Fund, deducting its liabilities and dividing by the number of shares
outstanding.

ARTICLE VII

RESTRICTIONS

Section 1. Dealings. The officers and directors of the corporation and
its investment adviser shall have no dealings for or on behalf of the
corporation with themselves as principal or agent, or with any corporation,
partnership, trust, joint venture or association in which they have a financial
interest, provided that this section shall not prevent:

(A) Officers or directors of the corporation from having a financial
interest in the corporation, in any sponsor, manager, investment adviser or
promoter of the corporation, or in any underwriter or securities issued by the
corporation.

(B) The purchase of securities for the portfolio of the corporation, or
sale of securities owned by the corporation through a security dealer, one or
more of whose partners, officers, directors or security holders is an officer or
director of the corporation, provided such transactions are handled in a
brokerage capacity only, and provided commissions charged do not exceed
customary brokerage charges for such services.

(C) The employment of any legal counsel, registrar, transfer agent,
dividend disbursing agent or custodian having a partner, officer, director or
security holder who is an officer or director of the corporation; provided only
customary fees are charged for services rendered to or for the benefit of the
corporation.

(D) The purchase for the portfolio of the corporation of securities
issued by an issuer having an officer, director or security holder who is an
officer or director of the corporation or of any manager of the corporation,
unless the

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retention of such securities in the portfolio of the corporation would otherwise
be a violation of these By-laws or the Articles of Incorporation of the
corporation.

ARTICLE IX

STOCK

Section 1. Certificates. Each stockholder shall be entitled to a
certificate or certificates which shall certify the number of shares owned by
him in the corporation. Each certificate shall be signed by the president or a
vice-president and countersigned by the secretary or an assistant secretary or
the treasurer or an assistant treasurer and shall be sealed with the corporate
seal.

Section 2. Signature. When a certificate is signed by a transfer agent
or an assistant transfer agent or by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president,
vice-president, treasurer, assistant treasurer, secretary or assistant secretary
may be facsimile. In case any officer who has signed any certificate ceases to
be an officer of the corporation before the certificate is issued, the
certificate may nevertheless be issued by the corporation with the same effect
as if the officer had not ceased to be such officer as of the date of its issue.

Section 3. Recording and Transfer Without Certificates. Notwithstanding
the foregoing provisions of this article, the corporation shall have full power
to participate in any program approved by the Board of Directors providing for
the recording and transfer of ownership of shares of the corporation's stock by
electronic or other means without the issuance of certificates.

Section 4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been stolen,
lost or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be stolen, lost or destroyed, or upon other
satisfactory evidence of such loss or destruction. When authorizing such
issuance of a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such stolen, lost or destroyed certificate or certificates, or his
legal representative to advertise the same in such manner as it shall require
and to give the corporation a bond with sufficient surety, to the corporation to
indemnify it against any loss or claim that may be made by reason of the
issuance of a new certificate.

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Section 5. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except, as otherwise provided by the laws of Maryland.

Section 6. Transfer Agents and Registrars. The corporation may act as
its own transfer agent and/or registrar, or it may delegate those duties to
others. The Board of Directors may from time to time, appoint or remove transfer
agents and/or registrars of stock of the corporation, and it may appoint the
same person as both transfer agent and registrar. Upon any such appointment
being made all certificates representing shares of stock thereafter issued shall
be countersigned by one of such transfer agents or by one of such registrars or
by both and shall not be valid unless so countersigned. If the same person shall
be both transfer agent and registrar, only countersignature by such person shall
be required.

Section 7. Stock Ledger. The corporation shall maintain an original
stock ledger containing the names and addresses of all stockholders and the
number and class of shares held by each stockholder. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection.

Section 8. Transfers of Stock. The corporation shall transfer or
otherwise change the registration of its issued and outstanding shares in its
stock ledger upon receipt of an authorization in a form proper and acceptable to
it or its duly appointed agent. To the extent such shares are evidenced by a
certificate or certificates, the surrender of such certificate properly endorsed
shall be required where necessary. Upon receipt of the transfer instructions in
proper order by the corporation, the corporation shall change its stock ledger
records accordingly and record the transaction upon its books.

ARTICLE X

GENERAL PROVISIONS

Section 1. Dividends. With respect to dividends (including "dividends"
designated as "short" or "long" term "capital gains" distributions to satisfy
requirements of the Investment Company Act of 1940, as amended, or the Internal
Revenue Code of 1954, as amended from time to time):

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(A) Such dividends, at the election of the stockholders, may be
automatically reinvested in additional shares (or fractions thereof) of the
corporation at the "net asset value" determined on the reinvestment date fixed
by the Board of Directors.

(B) The Board of Directors in declaring any dividend, may fix a record
date not earlier than the date of declaration or more than 40 days prior to the
date of payment, as of which the stockholders entitled to receive such dividend
shall be determined, notwithstanding any transfer or the repurchase or issue (or
sale) of any shares after such record date.

(C) Dividends or distributions on shares of stock whether payable in
stock or cash, shall be paid out of earnings, surplus or other lawfully
available assets; provided that no dividend payment, or distribution in the
nature of a dividend payment, may be made wholly or partly from any source other
than accumulated, undistributed net income, determined in accordance with good
accounting practice, and not including profits or losses realized in the sale of
securities or other properties, unless such payment is accompanied by a written
statement clearly indicating what portion of such payment per share is made from
the following sources:

(i) accumulated or undistributed net income not including
profits or losses from the sale of securities or other properties;

(ii) accumulated undistributed net profits from the sale of
securities or other properties;

(iii) net profits from the sale of securities or other
properties during the then current fiscal year; and

(iv) paid-in surplus or other capital source.

(D) In declaring dividends and in recognition that the one goal of the
corporation is to qualify as a "regulated investment company" under the Internal
Revenue Code of 1954, as amended, the Board of Directors shall be entitled to
rely upon estimates made in the last two months of the fiscal year as to the
amounts of distribution necessary for this purpose; and the Board of Directors,
acting consistently with good accounting practice and with the express
provisions of these By-laws, may credit receipts and charge payments to income
or otherwise, as it may seem proper.

(E) Any dividends declared, except as aforesaid, shall be deemed
liquidating dividends and the stockholders shall be so informed to whatever
extent may be required by law. A notice that dividends have been paid from
paid-in surplus, or

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a notice that dividends have been paid from paid-in capital, shall be deemed to
be a sufficient notice that the same constitutes liquidating dividends.

(F) Anything in these By-laws to the contrary notwithstanding, the
Board of Directors may at any time declare and distribute pro rata among the
stockholders of a record date fixed as above, a "stock dividend" out of either
authorized but unissued, or treasury shares of the corporation, or both.

Section 2. Rights in Securities. The Board of Directors, on behalf of
the corporation, shall have the authority to exercise all of the rights of the
corporation as owners of any securities which might be exercised by any
individual owning such securities in his own right; including but not limited
to, the rights to vote by proxy for any and all purposes (including the right to
authorize any officer of the manager to execute proxies), to consent to the
reorganization, merger or consolidation of any company or to consent to the
sale, lease or mortgage of all or substantially all of the property and assets
of any company; and to exchange any of the shares of stock of any company for
shares of stock issued therefor upon any such reorganization, merger,
consolidation, sale, lease or mortgage.

Section 3. Custodianship. Securities owned by the corporation and cash
representing (A) the proceeds from sales of securities owned by the corporation
and of shares issued by the corporation, (B) payments of principal upon
securities owned by the corporation, or (C) capital distributions in respect of
securities owned by the corporation shall be held by one or more custodians, as
permitted by the Investment Company Act of 1940, as amended, to be selected by
the Board of Directors. Each bank and/or trust company selected as a custodian
shall be organized and existing under a state banking and/or trust company law,
or shall be a national banking association incorporated under the laws of the
United States of America and qualified to act as a trust company, and shall have
an aggregate capital, surplus and undivided profits of not less than $2,000,000.
Each custodian shall enter into an agreement with the corporation to serve as a
custodian of such securities and cash on terms consistent with the provisions of
these By-laws. From the time any such trust company, banking association or
other permissible entity becomes a custodian of such securities and cash, it
shall:

(A) Deliver securities owned by the corporation, only upon sale of such
securities for the account of the corporation and receipt of payment therefor by
the custodian, or when such securities may be called, redeemed, retired or

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otherwise become payable, provided that this provision shall not prevent:

(i) Delivery of securities for examination to the broker
selling the same, in accordance with the "street delivery" custom,
whereby such securities are delivered to such broker in exchange for a
delivery receipt exchanged on the same day for an uncertified check of
such broker to be presented on the same day for certification.

(ii) Delivery of securities of an issuer in exchange for or
for conversion into, other securities alone, or cash and other
securities, pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment of the securities of
such issuer or for deposit with a reorganization committee or
protective committee, pursuant to a deposit agreement.

(iii) The conversion by the custodian of securities owned by
the corporation, pursuant to the provisions of such securities into
other securities.

(iv) The surrender by the custodian of warrants, rights or
similar securities owned by the corporation in the exercise of such
warrants, rights or similar securities, or the surrender of interim
receipts or temporary securities for definitive securities.

(v) The delivery of securities as collateral on borrowing
affected by the corporation, subject to the limitations of Article VII
of these By-laws.

(vi) The delivery of securities owned by the corporation, as a
complete or partial redemption in kind of securities issued by the
corporation.

(B) Deliver funds of the corporation only upon the purchase of
securities for the portfolio of the corporation, and the delivery of such
securities to the custodian; provided always, that such limitation shall not
prevent the release of funds by the custodian for redemption of shares issued by
the corporation, for payment of interest, dividend disbursements, taxes,
management fees, custodian fees, other operating expenses properly authorized by
an officer or officers as required by the custodian agreement, payments in
connection with conversion, exchange or surrender of securities owned by the
corporation (as set forth in Subsection A of this Section) and for
organizational and such other obligations as approved by the Board of Directors
certified in writing.

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(C) Upon the resignation or inability of a custodian to serve as
custodian of the assets of the corporation, the corporation shall use its best
efforts to obtain a successor custodian, to require that the cash and securities
owned by the corporation be delivered directly to such successor custodian and,
in the event that no such successor can be found, to submit to the stockholders
- -- before permitting delivery of the cash and securities owned by the
corporation to anyone other than a successor custodian -- the question of
whether the corporation shall be liquidated or shall function without such
custodian.

(D) Nothing hereinbefore contained shall prevent any such custodian
from delivering assets of the corporation to a successor custodian having the
qualifications hereinabove prescribed.

(E) No directors, officers, employees or agents of the corporation
shall be authorized or permitted to withdraw any assets held by the custodian,
except as permitted in this Article X and in the Custodian Agreement.
Directions, notices or instructions to the custodian, with respect to delivery
of securities, payment of cash or otherwise, shall be given by such officer or
officers and/or such person or persons, and in such manner, as the Board of
Directors may from time to time designate.

Section 4. Reports. The corporation shall transmit to the stockholders,
at least semiannually, a report of the operations of the corporation based at
least annually upon an audit by independent public accountants. Said report
shall clearly set forth the information customarily furnished in a balance sheet
and profit and loss statement, and in addition, shall clearly set forth a
statement of all amounts paid directly to securities dealers, legal counsel,
transfer agents, disbursing agents, registrars, custodians or trustees, where
such payments are made to a firm, corporation, bank or trust company having an
officer, director or partner who is also an officer or director of this
corporation. A copy or copies, of all reports submitted to the stockholders of
this corporation shall also be sent, as required to the regulatory agencies of
the United States of America and the states in which the securities of this
corporation are registered and sold.

Section 5. Bonding of Officers and Employees. All officers and
employees of the corporation shall be bonded to such extent, and in such manner,
as may be required by law.

Section 6. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Maryland." The

-15-

<PAGE>

seal may be used by causing it or a facsimile thereof to be impressed or affixed
or otherwise reproduced.

ARTICLE XI

AMENDMENTS

These By-laws may be altered, amended, repealed or restated at any
regular or special meeting of the Board of Directors, provided that the
provisions of Article VII may not be altered, amended, repealed or restated
without the consent of a majority of the holders of the corporation's
outstanding common stock (as defined in the Investment Company Act of 1940, as
amended, and the corporation's Articles of Incorporation) and provided further
that the right of the Board of Directors to alter, amend, repeal or restate and
the procedures therefor meet the requirements of the Investment Company Act of
1940, as amended, if any.

-16-

A MARYLAND CORPORATION

BUFFALO SMALL CAP FUND, INC.

Common Stock Par Value One Dollar Per Share

CUSIP
COM

THIS CERTIFIES THAT ___________________________________________________ is the
registered holder of ______________________________________________ Shares

BUFFALO SMALL CAP FUND, INC.

transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.

IN WITNESS WHEREOF, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ___________day of _____________________A.D. 19__.

- ---------------------------- ---------------------------
Secretary President

Registered and Countersigned

By ________________________________
Authorized Person

<PAGE>

DEMAND FOR REDEMPTION

THE UNDERSIGNED SHAREHOLDER hereby surrenders to the Corporation this
certificate and the shares evidenced thereby and demands redemption in
accordance with the provisions of Article Five of the Articles of Incorporation
and as described in the Prospectus.

__________________________, 19__ ______________________________
Date Shareholder

______________________________
Witness

THE SHAREHOLDER SHOULD REFER TO THE PROSPECTUS
FOR SIGNATURE GUARANTEE REQUIREMENTS

ASSIGNMENT

For Value Received, _________ hereby sell, assign and transfer unto
_______________________________________
_______________________________________________ Shares represented by the within
Certificate, and do hereby irrevocably constitute and appoint
________________________________________ Attorney to transfer the said Shares on
the Books of the within named Corporation with full powers of substitution in
the premises.

Dated _____________________, 19__

In the presence of

_______________ _________________

NOTICE: THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER.
232034.1

MANAGEMENT AGREEMENT

between

JONES & BABSON, INC.

AND

BUFFALO SMALL CAP FUND, INC.

THIS AGREEMENT, made and entered into this ____ day of ____________,
1997, by and between BUFFALO SMALL CAP FUND, INC., (a Maryland corporation,
hereinafter referred to as the "Fund") and JONES & BABSON, INC., a corporation
organized under the laws of the State of Maryland (hereinafter referred to as
the "Manager"), and which Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one instrument.

WHEREAS, the Fund was founded and incorporated by the Manager for the
purpose of engaging in the business of investing and reinvesting its property
and assets and to operate as an open-end, diversified, management investment
company, as defined in the Investment Company Act of 1940 as amended (the
"Act"), under which it is registered with the Securities and Exchange
Commission, and

WHEREAS, the Manager was formed for and is engaged in the business of
supplying investment advice and management service to the Fund, as an
independent contractor, and

WHEREAS, the Fund Manager desires to enter into a contractual
arrangement whereby the Manager provides investment advice and management
service to the Fund for a fee,

NOW THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, receipt of which is hereby
acknowledged, it is mutually agreed and contracted by and between the parties
hereto that:

1. The Fund hereby employs the Manager, for the period set forth in
Paragraph 5 hereof, and on the terms set forth herein, to render investment
advice and management service to the Fund, subject to the supervision and
direction of the Board of Directors of the Fund. The Manager hereby accepts such
employment and agrees, during such period, to render the services and assume the
obligations herein set forth, for the compensation herein provided. The
Management shall, for all purposes herein, be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized, have
no authority to act for or represent the Fund in any way, or in any other way be
deemed an agent of the Fund.

Page 1

<PAGE>

The Manager shall furnish the Fund investment management and
administrative services. Investment management shall include analysis, research
and portfolio recommendations consistent with the Fund's objectives and
policies. Administrative services shall include the services and compensation of
such members of the Manager's organization as shall be duly elected officers
and/or Directors of the Fund and such other personnel as shall be necessary to
carry out its normal operations; fees of the independent Directors, the
custodian, the independent public accountant and legal counsel (but not legal
and audit fees and other costs in contemplation of or arising out of litigation
or administrative actions to which the Fund, its officers or Directors are a
party or incurred in anticipation of becoming a party); rent; the cost of a
transfer and dividend disbursing agent or similar in-house services;
bookkeeping; accounting; and all other clerical and administrative functions as
may be reasonable and necessary to maintain the Fund's records and for it to
operate as an open-end management investment company. Exclusive of the
management fee, the Fund shall bear the cost of any interest, taxes, dues, fees
and other charges of governments and their agencies including the cost of
qualifying the Fund's shares for sale in any jurisdiction, brokerage
commissions, or any other expenses incurred by it which are not assumed herein
by the Manager.

All property, equipment and information used by the Manager in the
management and administration of the Fund shall belong to the Manager. Should
the management and administrative relationship between the Fund and the Manager
terminate, the Fund shall be entitled to, and the Manager shall provide the
Fund, a copy of all information and records in the Manager's file necessary for
the Fund to continue its functions, which shall include computer systems and
programs in use as of the date of such termination; but nothing herein shall
prohibit thereafter the use of such information, systems or programs by the
manager, so long as such does not unfairly interfere with the continued
operation of the Fund.

2. As compensation for the services to be rendered to the Fund by the
Manager under the provisions of this agreement, the Fund agrees to pay
semimonthly to the Manager an annual fee based on the average total net assets
of the Fund computed daily in accordance with its Certificate of Incorporation
and By-Laws as follows:

a. one percent (1%) of the average total net assets of the Fund.

b. Should the Fund's normal operating expenses exclusive of taxes,
interest, brokerage commission and extraordinary costs exceed limits established
by any law, rule or regulation of any jurisdiction in which the Fund's shares
are

Page 2

<PAGE>

registered for sale, the Manager shall reimburse the Fund in the
amount of the excess.

3. It is understood and agreed that the services to be rendered by the
Manager to the Fund under the provisions of the Agreement are not to be deemed
exclusive, and the Manager shall be free to render similar or different services
to others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.

4. It is understood and agreed that the Directors, officers, agents,
employees, and shareholders of the Fund may be interested in the Manager as
owners, employees, agents or otherwise, and that owners, employees and agents of
the Manager may be interested in the Fund as shareholders or otherwise. It is
understood and agreed that shareholders, officers, Directors, and other
personnel of the Manager are and may continue to be officers and Directors of
the Fund, but that they receive no remuneration from the Fund solely for acting
in those capacities.

5. This Agreement shall become effective pursuant to its approval by
the Fund's Board of Directors and by the vote of a majority of the outstanding
shares of the Fund as prescribed by the Act. It shall remain in force through
the 31st day of October, 1999, and thereafter may be renewed for successive
periods not exceeding one year only so long as such renewal and continuance is
specifically approved at least annually by the Board of Directors or by vote of
a majority of the outstanding shares of the Fund as prescribed by the Act, and
only if the terms and the renewal of this Agreement have been approved by a vote
of a majority of the Directors of the Fund including a majority of the Directors
who are not parties to the Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
No amendment to this Agreement shall be effective unless the terms thereof have
been approved by the vote of a majority of outstanding shares of the Fund as
prescribed by the Act and by vote of a majority of the Directors of the Fund who
are not parties to the Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval. It
shall be the duty of the Directors of the Fund to request and evaluate, and the
duty of the Manager to furnish, such information as may reasonably be necessary
to evaluate the terms of this Agreement and any amendment thereto. This
Agreement may be terminated at any time, without the payment of any penalty, by
the Directors of the Fund, or by the vote of a majority of the outstanding
voting shares of the Fund as prescribed by the Act on not more than sixty days
written notice to the Manager, and it may be terminated by the Manager upon not
less than sixty days written notice to the Fund. It shall terminate
automatically in the event of its assignment by either party unless the parties
hereby, by agreement, obtain an exemption from the Securities and Exchange
Commission from the provisions of the Act pertaining to the subject

Page 3

<PAGE>

matter of this paragraph. Any notice, request or instruction provided for
herein, or for the giving of which, the occasion may arise hereunder, shall be
deemed duly given, if in writing and mailed by registered mail, postage prepaid,
addressed to the regular executive office of the Fund or the Manager as the case
may be. As used in this Agreement, the terms "assignment", "a majority of the
outstanding voting shares", and "interested persons" shall have the same meaning
as similar terms contained in the Act.

6. It is specifically provided in this Agreement that the Manager is to
secure the services of KORNITZER CAPITAL MANAGEMENT, INC. of Shawnee Mission,
Kansas (at the sole expense of the Manager), as its Investment Counsel to
furnish advice and recommendations with respect to the purchase and sale of
securities and the making of portfolio commitments; to place at the disposal of
the Manager such statistical information as may reasonably be required and in
general to superintend the investments of the Fund, subject to the control and
approval of the Board of Directors of the Manager and the Board of Directors of
the Fund.

It is also specifically provided in this Agreement that the
Manager is to provide all clerical and administrative functions (at its own
expense) as may be reasonable and necessary to maintain the Fund's records and
for it to operate as an open-end management investment company, including
serving as transfer and dividend disbursing agent.

7. As a condition of this agreement, the Fund shall have the right to
use the name "BUFFALO" as part of its name, so long as the Manager, or any
successor in interest, continues as a manager to the Fund. However, nothing
herein shall prohibit the right of the Manager from granting to another
investment company with the Manager as its manager, and which has investment
objectives and policies different from those of the Fund, to use in its name the
name "BUFFALO". Should the Fund terminate the Manager, or its successor, as its
investment manager, either KORNITZER CAPITAL MANAGEMENT, INC., or its respective
successors in interest, may elect to notify the Fund in writing that permission
to use the name "BUFFALO" has been withdrawn, whereupon the Fund, its officers,
directors and shareholders, expressly agree to take all necessary corporate
action and to proceed expeditiously to change the name of the Fund and not use
any other name or take any other action which would indicate the Fund's
continued association with the Manager. If the use of the name "BUFFALO" is so
withdrawn as aforesaid, the Fund, its officers, directors and shareholders,
understand and agree that there shall be no limitation with respect to the
future use of the name "BUFFALO" by the Manager, or its successor in interest,
or with the permission of the Manager, or its successor.

8. It is further agreed that the provisions of Paragraph 7 shall inure
to the benefit of the Manager and may be imposed by it

Page 4

<PAGE>

or any successor in interest as if it or such successor in interest
were parties to this Agreement.

10. The Manager shall not be liable for any error in judgment or
mistake at law for any loss suffered by the Fund in connection with any matters
to which this Agreement relates, except that nothing herein contained shall be
construed to protect the Investment Manager against any liability by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reckless disregard of its obligations or duties under this Agreement.

11. This Agreement may not be amended, transferred, assigned, sold or
in any manner hypothecated or pledged nor may any new Agreement become effective
without affirmative vote or written consent of the holders of a majority of the
shares of the Fund.

BUFFALO SMALL CAP FUND, INC.

By
ATTEST:

JONES & BABSON, INC.

By
ATTEST:

Page 5

INVESTMENT COUNSEL AGREEMENT

between

JONES & BABSON, INC.

and

KORNITZER CAPITAL MANAGEMENT, INC.

THIS AGREEMENT by and between JONES & BABSON, INC., a Missouri
corporation with its principal office at 2440 Pershing Road, Kansas City, MO
64108 (hereinafter referred to as the "Manager") and KORNITZER CAPITAL
MANAGEMENT, INC., a Kansas corporation with its principal office at KCM
Building, Shawnee Mission, Kansas 66201-0918 (hereinafter referred to as the
"Investment Counsel"), is made pursuant to the approval and direction of the
parties' respective Board of Directors and may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one instrument.

WITNESSETH:

WHEREAS, the Manager has entered into a Management Agreement with the
BUFFALO SMALL CAP FUND, INC. ("Fund") of concurrent date to provide management
services, including investment advisory services, the Manager desires the
assistance of the Investment Counsel which can supply the following services:

Research, analysis, advice and recommendations with respect to the
purchase and sale of securities and the making of investment commitments;
statistical information and reports as may reasonably be required, and general
assistance in the supervision of the investments of the Fund, subject to the
control of the Directors of the Fund and the Directors of JONES & BABSON, INC.

NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:

1. During the term of this Agreement, or any extension or extensions
thereof, the Investment Counsel will, to the best of its ability, furnish the
foregoing services.

2. As compensation, the Manager will pay Investment Counsel for its
services the following annual fee computed daily as determined by the Fund's
price make-up sheet and which shall be payable monthly or at such other
intervals as agreed by the parties.

Page 1
<PAGE>

a. fifty one-hundredths of one percent (50/100%) of the average daily
total net assets of the Fund.

3. This Agreement shall become effective and run concurrently with the
Management Agreement of the same date between the Manager and the Fund, an
executed copy of which shall be supplied the Investment Counsel.

4. The last day of the initial period of this Agreement shall coincide
with the last day of the Management Agreement which shall be the 31st day of
October, 1999. Thereafter this Agreement may be renewed in conjunction with the
Management Agreement for successive periods not exceeding one year only so long
as such renewal and continuance is specifically approved at least annually by
the Board of Directors of the Fund or by a vote of the majority of the
outstanding voting securities of the Fund as prescribed by the Investment
Company Act of 1940 ("Act") and provided further that such continuance is
approved at least annually thereafter by a vote of a majority of the Directors
who are not parties to such Agreement or interested persons (as defined by the
Act) of such party, cast in person at a meeting called for the purpose of voting
on such approval. The Investment Counsel shall provide the Manager such
information as may be reasonably necessary to assist the Directors of the Fund
to evaluate the terms of the Management Agreement. This Agreement automatically
will terminate with the Management Agreement without the payment of any penalty,
upon sixty days written notice by the Fund to the Manager that the Board of
Directors or the shareholders by vote of a majority of the outstanding voting
securities of the Fund, as provided by the Act, has terminated the Management
Agreement. This Agreement shall automatically terminate in the event of its
assignment or assignment of the Management Agreement unless such assignment is
approved by the Directors and the shareholders of the Fund as hereinbefore
provided or unless an exemption is obtained from the Securities and Exchange
Commission from the provisions of the Act pertaining to the subject matter of
this paragraph. The Manager shall promptly notify the Investment Counsel of any
notice of termination or of any circumstances which are likely to result in a
termination of the Management Agreement.

5. It is understood and agreed that the services to be rendered by the
Investment Counsel to the Manager under the provisions of this Agreement are not
to be deemed to be exclusive, and the Investment Counsel shall be free to render
similar or different services to others so long as its ability to render the
services provided for in this Agreement shall not be impaired thereby, and
provided further that the services to be rendered by the Investment Counsel to
the Manager under this Agreement and the compensation provided for in Paragraph
2 here of shall be limited solely to services with reference to the Fund.

Page 2
<PAGE>

6. The Manager agrees that it will furnish currently to Investment
Counsel all information reasonably necessary to permit Investment Counsel to
give the advice called for under this Agreement and such information with
reference to the Fund that is reasonably necessary to permit Investment Counsel
to carry out its responsibilities under this Agreement, and the parties agree
that they will from time to time consult and make appropriate arrangements as to
specific information that it is required under this paragraph and the frequency
and manner with which it shall be supplied.

7. The Investment Counsel shall not be liable for any error of judgment
or mistake at law or for any loss suffered by Manager of the Fund in connection
with any matters to which this Agreement relates except that nothing herein
contained shall be construed to protect the Investment Counsel against ant
liability by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reckless disregard of its obligations or duties
under this agreement.

8. In compliance with the provisions of the Management Agreement
between the Fund and JONES & BABSON, INC., Investment Counsel agrees with the
Manager that subject to the terms and conditions of this Paragraph 8, the Fund
may use the name of "BUFFALO" as part of its name so long as JONES & BABSON,
INC., or any successor in interest, continues as Manager. Should the Fund
terminate JONES & BABSON, INC., or its successor as Manager, JONES & BABSON,
INC., or its successor in interest, may elect to notify the Fund in writing that
permission to use the name "BUFFALO" has been withdrawn. It is understood that
the Fund has, in its Management Agreement with JONES & BABSON, INC., expressly
agreed that it, its officers, directors and shareholders will take all necessary
corporate action and proceed expeditiously to change the name of the Fund and
not use any other name or take any action which would indicate the Fund's
continued association with the Manager. If the use of the name "BUFFALO" is so
withdrawn as aforesaid, it is understood and agreed that there shall be no
limitation with respect to the future use of the name "BUFFALO" by the Manager,
or its successor in interest.

Page 3
<PAGE>

Each party hereby executes this Agreement as of the ____ day of
_______________, 1997, pursuant to the authority granted by its Board of
Directors.

KORNITZER CAPITAL MANAGEMENT, INC.

By
ATTEST:

JONES & BABSON, INC.

By
ATTEST:

Page 4

UNDERWRITING AGREEMENT

between

BUFFALO SMALL CAP FUND, INC.

and

JONES & BABSON, INC.

THIS AGREEMENT, made and entered into this ____ day of _____________,
1997, by and between BUFFALO SMALL CAP FUND, INC., (a Maryland corporation,
hereinafter referred to as the "Fund") and JONES & BABSON, INC. (a Missouri
corporation, hereinafter referred to as "Principal Underwriter").

1. Subject to the provisions of its Certificate of Incorporation and
By-Laws, copies of which have been delivered to and are acknowledged by the
Principal Underwriter, the Board of Directors of the Fund hereby appoint the
firm of Jones & Babson, Inc. as the Principal Underwriter and sole distributor
of the shares of the Fund, except for shares which the Fund may elect pursuant
to authority of its Board of Directors to issue direct to registered owners,
which shall include by definition but not by limitation stock issued by virtue
of reinvestment of dividends, or as the result of a splitting of shares, or as
the result of the Fund merging or consolidating with another organization, or in
return for acquisition of assets, or as the result of shares issued in
connection with a contractual plan for which the Fund is the underlying
investment, or for the purpose of complying with the registration laws of a
particular state or jurisdiction.

2. In consideration of its appointment under this Agreement as
Principal Underwriter, Jones & Babson, Inc. agrees to pay all costs of all
administrative services required in the normal operation of the Fund. This
includes 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 the Fund, are taxes, interest, fees and other charges
of governments and their agencies including the cost of qualifying the Fund's
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 the Fund, its directors or officers may be subject or a
party thereto.

3. The Fund agrees to prepare and file registration statements with the
Securities and Exchange Commission and the Securities Departments of the various
states and other jurisdictions in which the shares may be offered, and do such
other

Page 1

<PAGE>

things and to take such other actions as may be mutually agreed upon by and
between the parties as shall be reasonably necessary in order to effect the
registration and the sale of the Fund's shares.

4. The Principal Underwriter agrees to place its full facilities at the
disposal of the Fund and to assist and cooperate fully with respect to the
registration and qualification of the Fund's shares, as well as perform all
functions required in connection with any offering including, but not limited
to, the creation and preparation of literature, advertising, and any other
promotional material for the purpose of selling the Fund's shares.

5. Principal Underwriter will act as agent of the Fund and not as
principal in the solicitation and sale of the shares of the Fund unless
expressly agreed to in writing by the Principal Underwriter and the Fund.

6. Normally, the Fund shall not exercise any direction or control over
the time and place of solicitation, the persons to be solicited, or the manner
of solicitation; but the Principal Underwriter agrees that solicitations shall
be in a form acceptable to the Fund and shall be subject to such terms and
conditions as may be prescribed from time to time by the Fund, the Registration
Statement, the Prospectus, the Certificate of Incorporation, and By-Laws of the
Fund, and shall not violate any provision of the laws of the United States or of
any other jurisdiction to which solicitations are subject, or violate any rule
or regulation promulgated by any lawfully constituted authority to which the
Fund or Principal Underwriter may be subject.

7. The Fund agrees to issue new shares direct to the registered owner
pursuant to this Agreement and according to instructions from the Principal
Underwriter, subject to the net asset value of such shares next effective after
acceptance of the order by the Fund and as more fully set out in paragraph 8.

8. The Fund hereby authorizes the Principal Underwriter to sell its
shares in accordance with the following schedule of prices:

The applicable price will be the net asset value per share next
effective after receipt and acceptance by the Fund of a proper offer to
purchase, determined in accordance with the Certificate of Incorporation,
By-Laws, Registration Statement and Prospectus of
the Fund.

9. The Fund agrees that, as long as this Agreement is in effect, it
will not authorize anyone else to offer or solicit applications for shares of
the Fund and will not accept any such application if submitted by or through
anyone other than the Principal Underwriter, unless the Principal Underwriter
shall first have agreed in writing to such authorization.

Page 2

<PAGE>

10. This Agreement (i) may be terminated without the payment of any
penalty, either by vote of the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of the Fund, on sixty (60) days
written notice to the Principal Underwriter; (ii) may be terminated without
penalty by the Principal Underwriter on sixty (60) days written notice to the
Fund; and (iii) shall immediately terminate in the event of its assignment.

11. The Principal Underwriter agrees that it will not take either a
short or long position with respect to shares of the Fund; that it will not
place orders for more shares than are required to fill the requests received by
it as agent of the Fund; and that it will expeditiously transmit all such orders
to the Fund.

12. Nothing contained in this Agreement shall be deemed to protect the
Principal Underwriter against any liability to the Fund or to its securities
holders to which the Principal Underwriter would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the performance of its
duties hereunder, or by reason of its reckless disregard of its obligations and
duties hereunder.

13. This Agreement shall become effective on the date first above
written, and continue in effect through the 31st day of October, 1998 and
thereafter shall continue automatically for successive annual periods ending
with each 31st day of October, provided that such continuance is specifically
approved at least annually by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund and provided further that this
Agreement or any renewal thereof shall be approved by the vote of a majority of
the Directors who are not parties to the Agreement or interested persons of any
such party, cast in person, at a meeting called for the purpose of voting on
such approval.

BUFFALO SMALL CAP FUND, INC.

ATTEST:

JONES & BABSON, INC.

ATTEST:

Page 3

CUSTODY AGREEMENT

Dated ___________, 1997

Between

UMB BANK, n.a.

and

BUFFALO SMALL CAP FUND, INC.

Registered Investment Company

<PAGE>
<TABLE>
<CAPTION>
Table of Contents
SECTION PAGE

<S> <C>
1. Appointment of Custodian 1

2. Definitions 1
Securities 1
Assets 1
Instructions and Special Instructions 1

3. Delivery of Corporate Documents 2

4. Powers and Duties of Custodian and Domestic
Subcustodian 3
Safekeeping 4
Manner of Holding Securities 4
Free Delivery of Assets 6
Exchange of Securities 6
Purchases of Assets 6
Sales of Asset 7
Options 8
Futures Contracts 9
Segregated Accounts 9
Depositary Receipts 10
Corporate Actions, Put Bonds, Called Bonds, Etc. 10
Interest Bearing Deposits 11
Foreign Exchange Transactions Other than as
Principal 11
Pledges or Loans of Securities 12
Stock Dividends, Rights, Etc. 12
Routine Dealings 12
Collections 13
Bank Accounts 13
Dividends, Distributions and Redemptions 13
Proceeds from Shares Sold 14
Proxies and Notices; Compliance with
the Shareholders Communication Act of 1985 14
Books and Records 14
Opinion of Fund's Independent Certified
Public Accountants 15
Reports by Independent Certified
Public Accountants 15
Bills and Others Disbursements 15

5. Subcustodians 15
(a) Domestic Subcustodians 16
(b) Foreign Subcustodians 16
(c) Interim Subcustodians 17
(d) Special Subcustodians 17

<PAGE>

(e) Termination of a Subcustodian 18
(f) Certification Regarding Foreign
Subcustodians 18

6. Standard of Care 18
General Standard of Care 18
Actions Prohibited by Applicable
Law, Events Beyond Custodian's Control,
Armed Conflict, Sovereign Risk, Etc. 18
Liability for Past Records 19
Advice of Counsel 19
Advice of the Fund and Others 19
Instructions Appearing to be Genuine 19
Exceptions from Liability 20

7. Liability of the Custodian for Actions of Others 20
(a) Domestic Subcustodians 20
(b) Liability for Acts and Omissions
of Foreign Subcustodians 20
(c) Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities Depositories
and Clearing Agencies 21
(d) Defaults or Insolvencies of Brokers,
Banks, Etc. 21
(e) Reimbursement of Expenses 21

8. Indemnification 21
(a) Indemnification by Fund 21
(b) Indemnification by Custodian 22

9. Advances 22

10. Liens 23

11. Compensation 23

12. Powers of Attorney 23

13. Termination and Assignment 23

14. Notices 24

15. Miscellaneous 24
</TABLE>
<PAGE>
CUSTODY AGREEMENT

This agreement made as of this ____ day of ___________, 1997 between
Buffalo Small Cap Fund, Inc. with its principal place of business located at BMA
Tower, 700 Karnes Boulevard, Kansas City, Missouri, (hereinafter "Fund"), and
UMB Bank, n.a., a national banking association with its principal place of
business located at Kansas City, Missouri (hereinafter "Custodian").

WITNESSETH:

WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and

WHEREAS, the Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by the Fund which Assets are to
be held in such accounts as the Fund may establish from time to time; and

WHEREAS, Custodian is willing to accept such appointment on the terms
and conditions hereof.

NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:

1. APPOINTMENT OF CUSTODIAN.

The Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to the Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.

2. DEFINITIONS.

For purposes of this Agreement, the following terms shall have the meanings so
indicated:

(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
scrip, warrants, interim certificates and all negotiable or nonnegotiable paper
commonly known as Securities and other instruments or obligations.

(b) "Assets" shall mean Securities, monies and other property held by
the Custodian for the benefit of the Fund.

(c)(l) "Instructions", as used herein, shall mean: (i) a
tested telex, a written (including, without limitation, facsimile

<PAGE>

transmission) request, direction, instruction or certification signed or
initialed by or on behalf of the Fund by an Authorized Person; (ii) a telephonic
or other oral communication from a person the Custodian reasonably believes to
be an Authorized Person; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) on behalf of the Fund. Instructions in the form of oral
communications shall be confirmed by the Fund by tested telex or in writing in
the manner set forth in clause (i) above, but the lack of such confirmation
shall in no way affect any action taken by the Custodian in reliance upon such
oral Instructions prior to the Custodian's receipt of such confirmation. The
Fund authorizes the Custodian to record any and all telephonic or other oral
Instructions communicated to the Custodian.

(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of the Fund or any other person designated by the Treasurer of the
Fund in writing, which countersignature or confirmation shall be included on the
same instrument containing the Instructions or on a separate instrument relating
thereto.

(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and the Fund.

(c)(4) Where appropriate, Instructions and Special
Instructions shall be continuing instructions.

3. DELIVERY OF CORPORATE DOCUMENTS.

Each of the parties to this Agreement represents that its execution
does not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.

The Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:

(a) Certificate of Incorporation (or equivalent document) of the
Fund as in effect on the date hereof;

(b) By-Laws of the Fund as in effect on the date hereof;

<PAGE>

(c) Resolutions of the Board of Directors of the Fund appointing
the Custodian and approving the form of this Agreement; and

(d) The Fund's current prospectus and statements of additional
information.

The Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.

In addition, the Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of the Fund who will have continuing
authority to certify to the Custodian: (a) the names, titles, signatures and
scope of authority of all persons authorized to give Instructions or any other
notice, request, direction, instruction, certificate or instrument on behalf of
the Fund, and (b) the names, titles and signatures of those persons authorized
to countersign or confirm Special Instructions on behalf of the Fund (in both
cases collectively, the "Authorized Persons" and individually, an "Authorized
Person"). Such Resolutions and certificates may be accepted and relied upon by
the Custodian as conclusive evidence of the facts set forth therein and shall be
considered to be in full force and effect until delivery to the Custodian of a
similar Resolution or certificate to the contrary. Upon delivery of a
certificate which deletes or does not include the name(s) of a person previously
authorized to give Instructions or to countersign or confirm Special
Instructions, such persons shall no longer be considered an Authorized Person
authorized to give Instructions or to countersign or confirm Special
Instructions. Unless the certificate specifically requires that the approval of
anyone else will first have been obtained, the Custodian will be under no
obligation to inquire into the right of the person giving such Instructions or
Special Instructions to do so. Notwithstanding any of the foregoing, no
Instructions or Special Instructions received by the Custodian from the Fund
will be deemed to authorize or permit any director, trustee, officer, employee,
or agent of the Fund to withdraw any of the Assets of the Fund upon the mere
receipt of such authorization, Special Instructions or Instructions from such
director, trustee, officer, employee or agent.

4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.

Except for Assets held by any Subcustodian appointed pursuant to
Sections 5(b), (c), or (d) of this Agreement, the Custodian shall have and
perform the powers and duties hereinafter set forth in this Section 4. For
purposes of this Section 4 all references to powers and duties of the
"Custodian"

<PAGE>

shall also refer to any Domestic Subcustodian appointed pursuant to Section
5(a).

(a) Safekeeping.

The Custodian will keep safely the Assets of the Fund which are delivered to it
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.

(b) Manner of Holding Securities.

(1) The Custodian shall at all times hold Securities of the Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.

(2) The Custodian may hold registrable portfolio Securities which have
been delivered to it in physical form, by registering the same in the name of
the Fund or its nominee, or in the name of the Custodian or its nominee, for
whose actions the Fund and Custodian, respectively, shall be fully responsible.
Upon the receipt of Instructions, the Custodian shall hold such Securities in
street certificate form, so called, with or without any indication of fiduciary
capacity. However, unless it receives Instructions to the contrary, the
Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the Fund or only assets held by the
Custodian as a fiduciary, provided that the records of the Custodian shall
indicate at all times the Fund or other customer for which such Securities are
held in such accounts and the respective interests therein.

(3) The Custodian may deposit and/or maintain domestic Securities owned
by the Fund in, and the Fund hereby approves use of: (a) The Depository Trust
Company; (b) The Participants Trust Company; and (c) any book-entry system as
provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by the Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred

4
<PAGE>

to in this Agreement as a "Securities system", and all such Securities Systems
shall be listed on the attached Appendix A. Use of a Securities System shall be
in accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:

(i) The Custodian may deposit the Securities directly or through one or
more agents or Subcustodians which are also qualified to act as custodians
for investment companies.

(ii) The Custodian shall deposit and/or maintain the Securities in a
Securities System, provided that such Securities are represented in an
account ("Account") of the Custodian in the Securities System that includes
only assets held by the Custodian as a fiduciary, custodian or otherwise
for customers.

(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to the Fund which are maintained in a
Securities System.

(iv) The Custodian shall pay for Securities purchased for the account
of the Fund only upon (a) receipt of advice from the Securities System that
such Securities have been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of
an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall transfer
Securities sold for the account of the Fund only upon (a) receipt of advice
from the Securities System that payment for such Securities has been
transferred to the Account of the Custodian in accordance with the rules of
the Securities System, and (b) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System relating to transfers of
Securities for the account of the Fund shall be maintained for the Fund by
the Custodian. The Custodian shall deliver to the Fund on the next
succeeding business day daily transaction reports which shall include each
day's transactions in the Securities System for the account of the Fund.
Such transaction reports shall be delivered to the Fund or any agent
designated by the Fund pursuant to Instructions, by computer or in such
other manner as the Fund and Custodian may agree.

(v) The Custodian shall, if requested by the Fund pursuant to
Instructions, provide the Fund with reports obtained by the Custodian or
any Subcustodian with respect to a Securities System's accounting system,
internal

<PAGE>
accounting control and procedures for safeguarding Securities deposited in
the Securities System.

(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of the Fund as
promptly as practicable and shall take all actions reasonably practicable
to safeguard the Securities of the Fund maintained with such Securities
System.

Notwithstanding any other provision of this Agreement and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with the Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.

(d) Exchange of Securities.

Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for the Fund for other Securities or cash paid in
connection with any reorganization, recapitalization, merger, consolidation, or
conversion of convertible Securities, and will deposit any such Securities in
accordance with the terms of any reorganization or protective plan.

Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.

(e) Purchases of Assets.

(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for the Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has received
Special Instructions to the contrary, such payment will be made only upon
receipt of Securities by the Custodian, a clearing corporation of a national
Securities exchange of which the Custodian is a member, or a Securities System
in accordance with

<PAGE>

the provisions of Section 4(b)(3) hereof. Notwithstanding the foregoing, upon
receipt of Instructions: (i) in connection with a repurchase agreement, the
Custodian may release funds to a Securities System prior to the receipt of
advice from the Securities System that the Securities underlying such repurchase
agreement have been transferred by book-entry into the Account maintained with
such Securities System by the Custodian, provided that the Custodian's
instructions to the Securities System require that the Securities System may
make payment of such funds to the other party to the repurchase agreement only
upon transfer by book-entry of the Securities underlying the repurchase
agreement into such Account; (ii) in the case of Interest Bearing Deposits,
currency deposits, and other deposits, foreign exchange transactions, futures
contracts or options, pursuant to Sections 4(g), 4(h), 4(1), and 4(m) hereof,
the Custodian may make payment therefor before receipt of an advice of
transaction; and (iii) in the case of Securities as to which payment for the
Security and receipt of the instrument evidencing the Security are under
generally accepted trade practice or the terms of the instrument representing
the Security expected to take place in different locations or through separate
parties, such as commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar Securities, the Custodian may make payment for
such Securities prior to delivery thereof in accordance with such generally
accepted trade practice or the terms of the instrument representing such
Security.

(2) Other Assets Purchased. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of the Fund as provided in Instructions.

(f) Sales of Assets.

(1) Securities Sold. In accordance with Instructions, the Custodian
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, Securities held in physical form may be delivered
and paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for,

<PAGE>

or return of, such Securities by the broker or its clearing agent, and provided
further that the Custodian shall not be responsible for the selection of or the
failure or inability to perform of such broker or its clearing agent or for any
related loss arising from delivery or custody of such Securities prior to
receiving payment therefor.

(2) Other Assets Sold. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of the Fund as provided in Instructions.

(g) Options.

(1) Upon receipt of Instructions relating to the purchase of an option
or sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by the Fund; (b) if the transaction involves the sale of a covered
call option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of the Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"j, the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.

(2) Upon receipt of Instructions relating to the sale of a naked option
including stock index and commodity options), the Custodian, the Fund and the
broker-dealer shall enter into an agreement to comply with the rules of the OCC
or of any registered national securities exchange or similar organizations(s).
Pursuant to that agreement and the Fund's Instructions, the Custodian shall: (a)
receive and retain confirmations or other documents, if any, evidencing the
writing of the option; (b) deposit and maintain in a segregated account,
Securities (either physically or by book-entry in a Securities System), cash
and/or other Assets; and (c) pay, release and/or transfer such Securities, cash
or other Assets in accordance with any such agreement and with any notices or
other communications evidencing the expiration, termination or exercise of such
option which are furnished to the Custodian by the OCC, the securities or
options exchanges on which such options were traded, or such other organization
as may be responsible for handling such option transactions. The Fund and the
broker-dealer shall be responsible for determining the quality and quantity of
assets held in any segregated account established in compliance with applicable

<PAGE>

margin maintenance requirements and the performance of other terms of any option
contract.

(h) Futures Contracts.

Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the Fund, the Custodian and the designated
futures commission merchant (a "Procedural Agreement"). Under the Procedural
Agreement the Custodian shall: (a) receive and retain confirmations, if any,
evidencing the purchase or sale of a futures contract or an option on a futures
contract by the Fund; (b) deposit and maintain in a segregated account cash,
Securities and/or other Assets designated as initial, maintenance or variation
"margin" deposits intended to secure the Fund's performance of its obligations
under any futures contracts purchased or sold, or any options on futures
contracts written by the Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements. The
Fund and such futures commission merchant shall be responsible for determining
the type and amount of Assets held in the segregated account or paid to the
broker-dealer in compliance with applicable margin maintenance requirements and
the performance of any futures contract or option on a futures contract in
accordance with its terms.

(i) Segregated Accounts.

Upon receipt of Instructions, the Custodian shall establish and
maintain on its books a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred Assets of the Fund,
including Securities maintained by the Custodian in a Securities System pursuant
to Paragraph (b)(3) of this Section 4, said account or accounts to be maintained
(i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and (ii) for the
purpose of compliance by the Fund with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.

<PAGE>

(j) Depositary Receipts.

Upon receipt of Instructions, the Custodian shall surrender or cause to
be surrendered Securities to the depositary used for such Securities by an
issuer of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.

Upon receipt of Instructions, the Custodian shall surrender or cause to
be surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.

(k) Corporate Actions, Put Bonds, Called Bonds, Etc.

Upon receipt of Instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar Securities to the issuer or trustee
thereof (or to the agent of such issuer or trustee) for the purpose of exercise
or sale, provided that the new Securities, cash or other Assets, if any,
acquired as a result of such actions are to be delivered to the Custodian; and
(b) deposit Securities upon invitations for tenders thereof, provided that the
consideration for such Securities is to be paid or delivered to the Custodian,
or the tendered Securities are to be returned to the Custodian.

Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the Fund of such action in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing.

The Fund agrees that if it gives an Instruction for the performance of
an act on the last permissible date of a period established by any optional
offer or on the last permissible date for the performance of such act, the Fund
shall hold the Bank harmless from any adverse consequences in connection with
acting upon or failing to act upon such Instructions.

<PAGE>

(1) Interest Bearing Deposits.

Upon receipt of Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to,
collectively, as "Interest Bearing Deposits") for the account of the Fund, the
Custodian shall purchase such Interest Bearing Deposits in the name of the Fund
with such banks or trust companies, including the Custodian, any Subcustodian or
any subsidiary or affiliate of the Custodian (hereinafter referred to as
"Banking Institutions"), and in such amounts as the Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in US Dollars or
other currencies, as the Fund may determine and direct pursuant to Instructions.
The responsibilities of the Custodian to the Fund for Interest Bearing Deposits
issued by the Custodian shall be that of a US bank for a similar deposit. With
respect to Interest Bearing Deposits other than those issued by the Custodian,
(a) the Custodian shall be responsible for the collection of income and the
transmission of cash to and from such accounts; and (b) the Custodian shall have
no duty with respect to the selection of the Banking Institution or for the
failure of such Banking Institution to pay upon demand.

(m) Foreign Exchange Transactions Other than as Principal.

(1) Upon receipt of Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies for spot
and future delivery on behalf of and for the account of the Fund with such
currency brokers or Banking Institutions as the Fund may determine and direct
pursuant to Instructions. The Fund accepts full responsibility for its use of
third party foreign exchange brokers and for execution of said foreign exchange
contracts and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred as a result of the failure or
delay of its third party broker to deliver foreign exchange. The Custodian shall
have no responsibility with respect to the selection of the currency brokers or
Banking Institutions with which the Fund deals or, so long as the Custodian acts
in accordance with Instructions, for the failure of such brokers or Banking
Institutions to comply with the terms of any contract or option.

(2) Notwithstanding anything to the contrary contained herein, upon
receipt of Instructions the Custodian may, in connection with a foreign exchange
contract, make free outgoing payments of cash in the form of U.S. Dollars or
foreign currency prior to receipt of confirmation of such foreign exchange
contract or confirmation that the countervalue currency completing such contract
has been delivered or received.

<PAGE>

(n) Pledges or Loans of Securities.

(1) Upon receipt of Instructions from the Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by the Fund with various lenders including but not limited to UMB
Bank, n.a.; provided, however, that the Securities shall be released only upon
payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions, the
Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu of
delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.

(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the Fund to the borrower thereof
only upon receipt of the collateral for such borrowing. The Custodian shall have
no responsibility or liability for any loss arising from the delivery of
Securities prior to the receipt of collateral. Upon receipt of Instructions and
the loaned Securities, the Custodian will release the collateral to the
borrower.

(o) Stock Dividends, Rights Etc.

The Custodian shall receive and collect all stock dividends, rights,
and other items of like nature and, upon receipt of Instructions, take action
with respect to the same as directed in such Instructions.

(p) Routine Dealings.

The Custodian will, in general, attend to all routine and
mechanical matters in accordance with industry standards in
connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with Securities or other property of
the Fund except as may be otherwise provided in this Agreement or
directed from time to time by Instructions from the Fund. The

<PAGE>

Custodian may also make payments to itself or others from the Assets for
disbursements and out-of-pocket expenses incidental to handling Securities or
other similar items relating to its duties under this Agreement, provided that
all such payments shall be accounted for to the Fund.

(q) Collections.

The Custodian shall (a) collect amounts due and payable to the Fund
with respect to portfolio Securities and other Assets; (b) promptly credit to
the account of the Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and the Fund; (c) promptly endorse and deliver any instruments
required to effect such collection; and (d) promptly execute ownership and other
certificates and affidavits for all federal, state, local and foreign tax
purposes in connection with receipt of income or other payments with respect to
portfolio Securities and other Assets, or in connection with the transfer of
such Securities or other Assets; provided, however, that with respect to
portfolio Securities registered in so-called street name, or physical Securities
with variable interest rates, the Custodian shall use its best efforts to
collect amounts due and payable to the Fund. The Custodian shall notify the Fund
in writing by facsimile transmission or in such other manner as the Fund and
Custodian may agree in writing if any amount payable with respect to portfolio
Securities or other Assets is not received by the Custodian when due. The
Custodian shall not be responsible for the collection of amounts due and payable
with respect to portfolio Securities or other Assets that are in default.

(r) Bank Accounts.

Upon Instructions, the Custodian shall open and operate a bank account
or accounts on the books of the Custodian; provided that such bank account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
the Fund, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit.

(s) Dividends, Distributions and Redemptions.

To enable the Fund to pay dividends or other distributions to
shareholders of the Fund and to make payment to shareholders who have requested
repurchase or redemption of their shares of the Fund (collectively, the
"Shares"), the Custodian shall release cash or Securities insofar as available.
In the case of cash, the Custodian shall, upon the receipt of Instructions,

<PAGE>

transfer such funds by check or wire transfer to any account at any bank or
trust company designated by the Fund in such Instructions. In the case of
Securities, the Custodian shall, upon the receipt of Special Instructions, make
such transfer to any entity or account designated by the Fund in such Special
Instructions.

(t) Proceeds from Shares Sold.

The Custodian shall receive funds representing cash payments received
for shares issued or sold from time to time by the Fund, and shall credit such
funds to the account of the Fund. The Custodian shall notify the Fund of
Custodian's receipt of cash in payment for shares issued by the Fund by
facsimile transmission or in such other manner as the Fund and the Custodian
shall agree. Upon receipt of Instructions, the Custodian shall: (a) deliver all
federal funds received by the Custodian in payment for shares as may be set
forth in such Instructions and at a time agreed upon between the Custodian and
the Fund; and (b) make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian, in the amount of
checks received in payment for shares which are deposited to the accounts of the
Fund.

(u) Proxies and Notices: Compliance with the Shareholders Communication
Act of 1985.

The Custodian shall deliver or cause to be delivered to the Fund all
forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by the Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt c Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.

The Custodian will not release the identity of the Fund to an issuer
which requests such information pursuant to the Shareholder Communications Act
of 1985 for the specific purpose of direct communications between such issuer
and the Fund unless the Fund directs the Custodian otherwise in writing.

(v) Books and Records.

The Custodian shall maintain such records relating to its activities
under this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule

<PAGE>

31a-2 under the 1940 Act. These records shall be open for inspection by duly
authorized officers, employees or agents (including independent public
accountants) of the Fund during normal business hours of the Custodian.

The Custodian shall provide accountings relating to its activities
under this Agreement as shall be agreed upon by the Fund and the Custodian.

(w) Opinion of Fund's Independent Certified Public Accountants.

The Custodian shall take all reasonable action as the Fund may request
to obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of the Fund's periodic reports
to the SEC and with respect to any other requirements of the SEC.

(x) Reports by Independent Certified Public Accountants.

At the request of the Fund, the Custodian shall deliver to the Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
the Fund and as may reasonably be obtained by the Custodian.

(y) Bills and Other Disbursements.

Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of the Fund.

5. SUBCUSTODIANS.

From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of the Fund. A Domestic Subcustodian, in
accordance with the provisions of this Agreement, may also appoint a Foreign
Subcustodian, Special Subcustodian, or Interim Subcustodian to act on behalf of
the Fund. For purposes of this Agreement, all Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians and Interim Subcustodians shall be referred
to collectively as "Subcustodians".

<PAGE>

(a) Domestic Subcustodians.

The Custodian may, at any time and from time to time, appoint any bank
as defined in Section 2(a)(5) of the 1940 Act or any trust company or other
entity, any of which meet the requirements of a custodian under Section 17(f) of
the 1940 Act and the rules and regulations thereunder, to act for the Custodian
on behalf of the Fund as a subcustodian for purposes of holding Assets of the
Fund and performing other functions of the Custodian within the United States (a
"Domestic Subcustodian"). The Fund shall approve in writing the appointment of
the proposed Domestic Subcustodian; and the Custodian's appointment of any such
Domestic Subcustodian shall not be effective without such prior written approval
of the Fund. Each such duly approved Domestic Subcustodian shall be listed on
Appendix A attached hereto, as it may be amended, from time to time.

(b) Foreign Subcustodians.

The Custodian may at any time appoint, or cause a Domestic Subcustodian
to appoint, any bank, trust company or other entity meeting the requirements of
an "eligible foreign custodian" under Section 17(f) of the 1940 Act and the
rules and regulations thereunder to act for the Custodian on behalf of the Fund
as a subcustodian or sub-subcustodian (if appointed by a Domestic Subcustodian)
for purposes of holding Assets of the Fund and performing other functions of the
Custodian in countries other than the United States of America (hereinafter
referred to as a "Foreign Subcustodian" in the context of either a subcustodian
or a sub-subcustodian); provided that the Custodian shall have obtained written
confirmation from the Fund of the approval of the Board of Directors or other
governing body of the Fund (which approval may be withheld in the sole
discretion of such Board of Directors or other governing body or entity) with
respect to (i) the identity of any proposed Foreign Subcustodian (including
branch designation), (ii) the country or countries in which, and the securities
depositories or clearing agencies (hereinafter "Securities Depositories and
Clearing Agencies"), if any, through which, the Custodian or any proposed
Foreign Subcustodian is authorized to hold Securities and other Assets of the
Fund, and (iii) the form and terms of the subcustodian agreement to be entered
into with such proposed Foreign Subcustodian. Each such duly approved Foreign
Subcustodian and the countries where and the Securities Depositories and
Clearing Agencies through which they may hold Securities and other Assets of the
Fund shall be listed on Appendix A attached hereto, as it may be amended, from
time to time. The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held in a
country in which no Foreign Subcustodian is authorized to act, in order that
there shall be sufficient time for the Custodian, or any Domestic Subcustodian,
to effect the appropriate arrangements with a proposed Foreign Subcustodian,

<PAGE>

including obtaining approval as provided in this Section 5(b). In connection
with the appointment of any Foreign Subcustodian, the Custodian shall, or shall
cause the Domestic Subcustodian to, enter into a subcustodian agreement with the
Foreign Subcustodian in form and substance approved by the Fund. The Custodian
shall not consent to the amendment of, and shall cause any Domestic Subcustodian
not to consent to the amendment of, any agreement entered into with a Foreign
Subcustodian, which materially affects the Fund's rights under such agreement,
except upon prior written approval of the Fund pursuant to Special Instructions.

Notwithstanding the foregoing, in the event that the Fund shall invest
in an Asset to be held in a country in which no Foreign Subcustodian is
authorized to act, the Custodian shall notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian shall agree in
writing of the unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from the Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an n Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.

(d) Special Subcustodians.

Upon receipt of Special Instructions, the Custodian shall, on behalf of
the Fund, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act for the Custodian on behalf of
the Fund as a subcustodian for purposes of: (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities through the use of a
common custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
the Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the Fund in Special Instructions. The Custodian shall not
amend any subcustodian agreement entered into with a Special Subcustodian, or
waive any rights under such agreement, except upon prior approval pursuant to
Special Instructions.

<PAGE>

(e) Termination of a Subcustodian.

The Custodian may, at any time in its discretion upon notification to
the Fund, terminate any Subcustodian of the Fund in accordance with the
termination provisions under the applicable subcustodian agreement, and upon the
receipt of Special Instructions, the Custodian will terminate any Subcustodian
in accordance with the termination provisions under the applicable subcustodian
agreement.

(f) Certification Regarding Foreign Subcustodians.

Upon request of the Fund, the Custodian shall deliver to the Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of the Fund; and (iii) such
other information as may be requested by the Fund, and as the Custodian shall be
reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.

6. STANDARD OF CARE.

(a) General Standard of Care.

The Custodian shall be liable to the Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by the Fund resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.

(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Sovereign Risk, Etc.

In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder if the Custodian or any Subcustodian or Securities System,
or any subcustodian, Securities System, Securities Depository or Clearing Agency
utilized by the Custodian or any such Subcustodian, or any nominee of the
Custodian or any Subcustodian (individually, a "Person") is prevented, forbidden
or delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason of:
(i) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or of any foreign country, or
political subdivision thereof or of any court of competent jurisdiction (and
neither the Custodian nor any other Person shall be obligated to take any action
contrary thereto); or (ii) any event beyond the control of the Custodian or
other Person such as armed conflict, riots, strikes, lockouts,

18
<PAGE>

labor disputes, equipment or transmission failures, natural disasters, or
failure of the mails, transportation, communications or power supply; or (iii)
any "Sovereign Risk." A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting the Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.

Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by the Fund,
insofar as such loss, damage or expense arises from the performance of the
Custodian or any * Domestic Subcustodian in reliance upon records that were
maintained for the Fund by entities other than the Custodian or any Domestic
Subcustodian prior to the Custodian's employment hereunder.

(d) Advice of Counsel.

On a mutually agreeable basis, the Custodian and all Domestic
Subcustodians shall be entitled to receive and act upon advice of counsel on all
matters. The Custodian and all Domestic Subcustodians shall be without liability
for any actions taken or omitted in good faith pursuant to the advice of
counsel.

(e) Advice of the Fund and Others.

The Custodian and any Domestic Subcustodian may rely upon the advice of
the Fund and upon statements of the Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.

(f) Instructions Appearing to be Genuine.

The Custodian and all Domestic Subcustodians shall be fully protected
and indemnified in acting as a custodian hereunder upon any Resolutions of the
Board of Directors or Trustees, Instructions, Special Instructions, advice,
notice, request, consent, certificate, instrument or paper appearing to it to be
genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from the Fund hereunder a certificate
signed by any officer of

<PAGE>

the Fund authorized to countersign or confirm Special Instructions.

(g) Exceptions from Liabilities.

Without limiting the generality of any other provisions hereof, neither
the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:

(i) the validity of the issue of any Securities purchased by or for the
Fund, the legality of the purchase thereof or evidence of ownership
required to be received by the Fund, or the propriety of the decision
to purchase or amount paid therefor;

(ii) the legality of the sale of any Securities by or for the Fund, or
the propriety of the amount for which the same were sold; or

(iii) any other expenditures, encumbrances of Securities, borrowings or
similar actions with respect to the Fund's Assets;

and may, until notified to the contrary, presume that all Instructions
or Special Instructions received by it are not in conflict with or in
any way contrary to any provisions of the Fund's Declaration of Trust,
Partnership Agreement, Articles of Incorporation or By-Laws or votes or
proceedings of the shareholders, trustees, partners or directors of the
Fund, or the Fund's currently effective Registration Statement on file
with the SEC.

7. LIABILITY OP THE CUSTODIAN FOR ACTIONS OF OTHERS.

(a) Domestic Subcustodians

The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.

(b) Liability for Acts and Omissions of Foreign Subcustodians.

The Custodian shall be liable to the Fund for any loss or damage to the
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian

<PAGE>

recovers from the Foreign Subcustodian under the applicable subcustodian
agreement.

The Custodian shall not be liable to the Fund for any loss, damage or
expense suffered or incurred by the Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the negligence or willful
misfeasance of the Custodian.

(d) Defaults or Insolvency's of Brokers, Banks, Etc.

The Custodian shall not be liable for any loss, damage or expense
suffered or incurred by the Fund resulting from or occasioned by the actions,
omissions, neglects, defaults or insolvency of any broker, bank, trust company
or any other person with whom the Custodian may deal (other than any of such
entities acting as a Subcustodian, Securities System or Securities Depository
and Clearing Agency, for whose actions the liability of the Custodian is set out
elsewhere in this Agreement) unless such loss, damage or expense is caused by,
or results from, the gross negligence or willful misfeasance of the Custodian.

(e) Reimbursement of Expenses.

The Fund agrees to reimburse the Custodian for all reasonable
out-of-pocket expenses incurred by the Custodian in connection with this
Agreement, but excluding salaries and usual overhead expenses.

8. INDEMNIFICATION.

(a) Indemnification by Fund.

Subject to the limitations set forth in this Agreement, the Fund agrees
to indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.

21
<PAGE>

If the Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.

(b) Indemnification by Custodian.

Subject to the limitations set forth in this Agreement and in addition
to the obligations provided in Sections 6 and 7, the Custodian agrees to
indemnify and hold harmless the Fund from all losses, damages and expenses
suffered or incurred by the Fund caused by or resulting from the negligence or
willful misfeasance of the Custodian.

9. ADVANCES.

In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of the Fund as to which there would
be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of the Fund, the Custodian
may, in its discretion without further Instructions, provide an advance
("Advance") to the Fund in an amount sufficient to allow the completion of the
transaction by reason of which such payment or transfer of funds is to be made.
In addition, in the event the Custodian is directed by Instructions to make any
payment or transfer of funds on behalf of the Fund as to which it is
subsequently determined that the Fund has overdrawn its cash account with the
Custodian as of the close of business on the date of such payment or transfer,
said overdraft shall constitute an Advance. Any Advance shall be payable by the
Fund on demand by Custodian, unless otherwise agreed by the Fund and the
Custodian, and shall accrue interest from the date of the Advance to the date of
payment by the Fund to the Custodian at a rate agreed upon in writing from time
to time by the Custodian and the Fund. It is understood that any transaction in
respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund, and not, by reason of such Advance, deemed to be a transaction
undertaken by the Custodian for its own account and risk. The Custodian and the
Fund acknowledge that the purpose of Advances is to finance temporarily the
purchase or sale of Securities for prompt delivery in accordance with the
settlement terms of such

<PAGE>

transactions or to meet emergency expenses not reasonably foreseeable by the
Fund. The Custodian shall promptly notify the Fund of any Advance. Such
notification shall be sent by facsimile transmission or in such other manner as
the Fund and the Custodian may agree.

10. LIENS.

The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of its duties hereunder, except such as may arise from its or
its nominee's negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the Custody Account shall be security therefor
and the Fund hereby grants security interest therein to the Bank. The Fund shall
promptly reimburse the Bank for any such advance of cash or securities or any
such taxes, charges, expenses, assessments, claims or liabilities upon request
for payment, but should the Fund fail to so reimburse the Bank, the Bank shall
be entitled to dispose of such Property to the extent necessary to obtain
reimbursement. The Bank shall be entitled to debit any account of the Fund with
the Bank including, without limitation, the Custody Account, in connection with
any such advance and any interest on such advance as the Bank deems reasonable.

11. COMPENSATION.

The Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and the Fund from time to time. Such compensation,
together with all amounts for which the Custodian is to be reimbursed in
accordance with Section 7(e), shall be billed to the Fund and paid in cash to
the Custodian.

12. POWERS OF ATTORNEY.

Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.

13. TERMINATION AND ASSIGNMENT.

The Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall

<PAGE>

take effect. Upon termination of this Agreement, the Fund shall pay to the
Custodian such fees as may be due the Custodian hereunder as well as its
reimbursable disbursements, costs and expenses paid or incurred. Upon
termination of this Agreement, the Custodian shall deliver, at the terminating
party's expense, all Assets held by it hereunder to the Fund or as otherwise
designated by the Fund by Special Instructions Upon such delivery, the Custodian
shall have no further obligations or liabilities under this Agreement except as
to the final resolution of matters relating to activity occurring prior to the
effective date of termination.

This Agreement may not be assigned by the Custodian or the Fund without
the respective consent of the other, duly authorized by a resolution by its
Board of Directors or Trustees.

14. NOTICES.

Notices, requests, instructions and other writings delivered to the
Fund at BMA Tower, 700 Karnes Boulevard, Kansas City, Missouri 64108, postage
prepaid, or to such other address as the Fund may have designated to the
Custodian in writing, shall be deemed to have been properly delivered or given
to the Fund.

Notices, requests, instructions and other writings delivered to the
Securities Administration Department of the Custodian at its office at 928 Grand
Avenue, Kansas City, Missouri, or mailed postage prepaid, to the Custodian's
Securities Administration Department, Post Office Box 226, Kansas City, Missouri
64141, or to such other addresses as the Custodian may have designated to the
Fund in writing, shall be deemed to have been properly delivered or given to the
Custodian hereunder; provided, however, that procedures for the delivery of
Instructions and Special Instructions shall be governed by Section 2(c) hereof.

15. MISCELLANEOUS.

(a) This Agreement is executed and delivered in the State of
Missouri and shall be governed by the laws of such state.

(b) All of the terms and provisions of this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto.

(c) No provisions of this Agreement may be amended, modified or
waived, in any manner except in writing, properly executed by both
parties hereto; provided, however, Appendix A may be amended from time
to time as Domestic Subcustodians, Foreign Subcustodians, Special
Subcustodians, and Securities Depositories and Clearing Agencies are

<PAGE>

approved or terminated according to the terms of this Agreement.

(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.

(e) This Agreement shall be effective as of the date of execution

(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.

(g) The following terms are defined terms within the meaning of
this Agreement, and the definitions thereof are found in the following
sections of the Agreement:

Term Section

Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2(b)
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2(c)(1)
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liens 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2(a)
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2(c)(2)
Special Subcustodian 5(d)
Subcustodian 5
1940 Act 4(v)

<PAGE>

(h) If any part, term or provision of this Agreement is held
to be illegal, in conflict with any law or otherwise invalid by any court of
competent jurisdiction, the remaining portion or portions shall be considered
severable and shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or invalid.

(i) This Agreement constitutes the entire understanding and
agreement the parties hereto with respect to the subject matter hereof, and
accordingly supersedes, as of the effective date of this Agreement, any
custodian agreement heretofore in effect between the Fund and the Custodian.

IN WITNESS WHEREOF, the parties hereto have caused this Custody
Agreement be executed by their duly respective authorized officers.

BUFFALO SMALL CAP FUND, INC.

By:

ATTEST:

UMB Bank, n.a.

By:

ATTEST:

<PAGE>

APPENDIX A

DOMESTIC SUBCUSTODIANS:

United Missouri Bank Trust Company of New York

Morgan Stanley Trust Company (Foreign Securities Only)

SECURITIES SYSTEMS:

Federal Book Entry

Depository Trust Company

Participant's Trust Company

SPECIAL SUBCUSTODIANS:

SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS AND CLEARING AGENCIES
Euroclear

BUFFALO SMALL CAP FUND, INC.

By:

Title:

Date:

UMB Bank, n.a.

By:

Title:

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

Direct Dial: (215) 564-8024

November 21, 1997

Buffalo Small Cap Fund, Inc.
c/o Jones & Babson, Inc.
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108

Re: Buffalo Small Cap Fund, Inc.

Ladies and Gentlemen:

We have examined the Articles of Incorporation and Bylaws of
Buffalo Small Cap Fund, Inc. (the "Company"), a Maryland corporation formed on
October 16, 1997 and other proceedings of the Company that we deem material. We
have also examined the Notification of Registration and the Registration
Statement to be filed under the Investment Company Act of 1940 ("Investment
Company Act") and the Securities Act of 1933 ("Securities Act"), as well as
other items we deem material to this opinion.

The Company is authorized by its Articles of Incorporation to
issue 10,000,000 shares of common stock, par value $1.00 per share. The Articles
of Incorporation authorize the Board of Directors to divide the shares into
separate series and to divide the series into separate classes.

<PAGE>

Buffalo Small Cap Fund, Inc.
November 21, 1997
Page 2

The Company's filing with the U.S. Securities and Exchange
Commission of its Registration Statement under the Securities Act will register
an indefinite number of shares of its common stock pursuant to the provisions of
Rule 24f-2 under the Investment Company Act. You have further advised us that
each year hereafter the Company will timely file a Notice pursuant to Rule 24f-2
perfecting the registration of the shares of common stock sold by the Company
during each fiscal year.

You have also informed us that the shares of common stock of
the Company will be sold in accordance with the Company's usual method of
distributing its registered shares of common stock, under which prospectuses are
made available for delivery to offerees and purchasers of such shares in
accordance with Section 5(b) of the Securities Act.

Based upon the foregoing information and examination, it is
our opinion that the Company is a valid and subsisting corporation under the
laws of the State of Maryland, and that the shares of the Company's common stock
when issued for the consideration set by the Board of Directors pursuant to the
Articles of Incorporation, and subject to compliance with Rule 24f-2, will be
legally outstanding, fully-paid, and non-assessable shares of common stock of
the Company and the holders of such shares will have all the rights provided for
with respect to such holding by the Articles of Incorporation and the laws of
the State of Maryland.

We hereby consent to the filing of this opinion with the U.S.
Securities and Exchange Commission as an exhibit to the Company's Registration
Statement under the Securities Act, and to any reference to us in such
Registration Statement as legal counsel who have passed upon the legality of the
offering of the Company's shares of common stock. We also consent to the filing
of this opinion with the securities regulatory agencies of any states or other
jurisdictions in which shares of the Company are offered for sale.

Very truly yours,

STRADLEY, RONON, STEVENS & YOUNG, LLP

BY: /s/ Mark H. Plafker
Mark H. Plafker, a partner

MPO/cdj
232996.1
cc: Larry D. Armel, Esq.
John G. Dyer, Esq.
Michael P. O'Hare, Esq.

POWER OF ATTORNEY

WHEREAS the undersigned is a Director of Buffalo Small Cap Fund, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and

WHEREAS the Buffalo Small Cap Fund, Inc., intends to register its shares with
the Securities and Exchange Commission under the Securities Act of 1933 and the
Investment Company Act of 1940 and with the Securities Departments of the
various states and the District of Columbia.
Now, therefore,

KNOW ALL MEN BY THESE PRESENTS:

THAT the undersigned does hereby appoint each of the persons hereinafter set out
as his attorney each with the power to act severally in the name of the
undersigned and to execute on his behalf all forms and documents required by the
Securities and Exchange Commission, or any state of the United States of
America, or the District of Columbia, in connection with the initial
registration of the securities of the Buffalo Small Cap Fund, Inc. and in the
maintenance of such registrations.

Larry D. Armel
Martin A. Cramer

IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.

/s/Kent W. Gasaway
Kent W. Gasaway

Sworn to before me this 19th day of November, 1997.

/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri

My commission expires April 20, 2001.

SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001

<PAGE>

POWER OF ATTORNEY

WHEREAS the undersigned is a Director of Buffalo Small Cap Fund, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and

KNOW ALL MEN BY THESE PRESENTS:

Larry D. Armel
Martin A. Cramer

IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.

/s/Stephen S. Soden
Stephen S. Soden

Sworn to before me this 19th day of November, 1997.

/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri

My commission expires April 20, 2001.

SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001

<PAGE>

POWER OF ATTORNEY

WHEREAS the undersigned is a Director of Buffalo Small Cap Fund, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and

KNOW ALL MEN BY THESE PRESENTS:

Larry D. Armel
Martin A. Cramer

IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of November, 1997.

/s/Thomas S. Case
Thomas S. Case

Sworn to before me this 17th day of November, 1997.

/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri

My commission expires April 20, 2001.

SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001

<PAGE>

POWER OF ATTORNEY

WHEREAS the undersigned is a Director of Buffalo Small Cap Fund, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and

KNOW ALL MEN BY THESE PRESENTS:

Larry D. Armel
Martin A. Cramer

IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.

/s/Francis C. Rood
Francis C. Rood

Sworn to before me this 19th day of November, 1997.

/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri

My commission expires April 20, 2001.

SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001

<PAGE>

POWER OF ATTORNEY

WHEREAS the undersigned is a Director of Buffalo Small Cap Fund, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and

KNOW ALL MEN BY THESE PRESENTS:

Larry D. Armel
Martin A. Cramer

IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.

/s/William H. Russell
William H. Russell

Sworn to before me this 19th day of November, 1997.

/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri

My commission expires April 20, 2001.

SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001

<PAGE>

POWER OF ATTORNEY

WHEREAS the undersigned is a Director of Buffalo Small Cap Fund, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and

KNOW ALL MEN BY THESE PRESENTS:

Larry D. Armel
Martin A. Cramer

IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of November, 1997.

/s/H. David Rybolt
H. David Rybolt

Sworn to before me this 12th day of November, 1997.

/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri

My commission expires April 20, 2001.

SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001