BABSON STEWART IVORY INTERNATIONAL FUND INC, 497J, 1997-11-06

BABSON STEWART IVORY INTERNATIONAL FUND INC
497J, 1997-11-06

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BABSON-
STEWART IVORY
INTERNATIONAL
FUND

Prospectus
October 31, 1997

A no-load mutual fund invested
primarily in equities of established
companies outside the United States.

JONES & BABSON
MUTUAL FUNDS

PROSPECTUS
October 31, 1997
BABSON-STEWART IVORY
INTERNATIONAL FUND, INC.

Managed and Distributed By:
JONES & BABSON, INC.
BMA Tower
700 Karnes Blvd.
Kansas City, Missouri 64108-3306

Toll-Free 1-800-4-BABSON
(1-800-422-2766)
In the Kansas City area 751-5900

Investment Counsel:
BABSON-STEWART IVORY INTERNATIONAL
Cambridge, Massachusetts

INVESTMENT OBJECTIVE

A no-load diversified mutual fund that seeks a favorable total return (from
market appreciation and income) by investing primarily in a diversified
portfolio of equity securities (common stocks and securities convertible into
common stocks) of established companies whose primary business is carried on
outside the United States. The Fund diversifies its investments among various
countries and a number of different industries. (See "Investment Objective and
Portfolio Management Policy" on page 4 of this prospectus.) There is no
guarantee that the Fund's objective will be achieved. (For a discussion of
special risk considerations see page 5 of this prospectus.)

PURCHASE INFORMATION

Minimum Investment
Initial Purchase (unless Automatic Monthly) $ 2,500
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases (unless Automatic Monthly) $ 250
Subsequent Purchase (unless Automatic Monthly):
By Mail or Telephone Purchase (ACH) $ 100
By Wire $ 1,000
Automatic Monthly Purchases:
Initial $ 100
Subsequent $ 50

Shares are purchased and redeemed at net asset value. There are no sales,
redemption or Rule 12b-1 distribution charges. If you need further
information, please call the Fund at the telephone numbers 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

TABLE OF CONTENTS

Page

Fund Expenses 2
Financial Highlights 3
Investment Objective and
Portfolio Management Policy 4
Special Risk Considerations 5
Investment Restrictions 6
Performance Measures 6
How to Purchase Shares 7
Initial Investments 7
Investments Subsequent to Initial Investment 7
Telephone Investment Service 8
Automatic Monthly Investment Plan 8
How to Redeem Shares 8
Systematic Redemption Plan 10
How to Exchange Shares Between Funds 11
How Share Price is Determined 11
Officers and Directors 12
Management and Investment Counsel 12
Custodian 13
General Information and History 13
Dividends, Distributions and Their Taxation 14
Shareholder Services 14
Shareholder Inquiries 15

BABSON-STEWART IVORY INTERNATIONAL FUND, INC.
FUND EXPENSES

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 .95%
12b-1 fees None
Other expenses .24%
Total Fund operating expenses 1.19%

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 5 Year 10 Year
$12 $38 $65 $144

The above 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 above are for the fiscal year ended June
30, 1997. The example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.

FINANCIAL HIGHLIGHTS

The following financial highlights for the nine fiscal years ended June 30,
1997, and the period from inception (December 7, 1987) to June 30, 1988, have
been derived from audited financial statements of Babson-Stewart Ivory
International Fund, Inc. Such information should be read in conjunction with
the financial statements of the Fund and the report of Arthur Andersen LLP,
independent public accountants, appearing in the June 30, 1997, Annual Report
to Shareholders which is incorporated by reference in this prospectus. The
information for the periods ended June 30, 1992, and prior is not covered by
the report of Arthur Andersen LLP.

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 18.04 $ 15.96 $ 16.41 $ 13.97 $ 13.68 $ 11.65 $ 13.18 $ 10.77 $ 9.65 $ 10.00
Income from investment operations:
Net investment income (loss) 0.07 0.07 0.16 0.05 0.11 0.13 0.13 0.05 0.06 (0.09)
Net gains or losses on securities and
foreign currency transactions
(both realized and unrealized) 1.70 2.85 0.23 3.01 0.30 2.03 (1.39) 2.46 1.41 (0.26)
Total from investment operations 1.77 2.92 0.39 3.06 0.41 2.16 (1.26) 2.51 1.47 (0.35)
Less distributions:
Dividends from net
investment income (0.05) (0.08) (0.17) (0.04) (0.09) (0.13) (0.12) (0.04) (0.05) -
Distributions from capital gains (0.23) (0.65) (0.67) (0.58) (0.03) -* (0.15) (0.06) (0.30) -
Distributions in excess of realized
capital gains - (0.11) - - - - - - - -
Total distributions (0.28) (0.84) (0.84) (0.62) (0.12) (0.13) (0.27) (0.10) (0.35) -
Net asset value, end of year $ 19.53 $ 18.04 $ 15.96 $ 16.41 $ 13.97 $ 13.68 $ 11.65 $ 13.18 $ 10.77 $ 9.65

Total return 10% 19% 3% 22% 3% 19% (10)% 23% 15% (4)%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 111 $ 80 $ 65 $ 47 $ 32 $ 18 $ 12 $ 11 $ 4 $ 2
Ratio of expenses to average
net assets 1.19% 1.26% 1.30% 1.32% 1.57% 1.58% 1.75% 1.75% 2.68% 4.77%**
Ratio of net investment income
(loss) to average net assets 0.47% 0.44% 1.13% 0.34% 0.88% 1.16% 1.10% 0.36% 0.62% (2.41)%**
Portfolio turnover rate 40% 33% 37% 60% 49% 44% 52% 42% 40% 18%**
***Average commission paid
per equity share traded $ .0242 ****- - - - - - - - -
</TABLE>

*Capital gain distribution of .0003 not significant for per share table.
**Ratios for this initial period of operations are annualized.
***Disclosure required for fiscal years beginning after September 1, 1995.
****Represents total dollar amount of commissions paid on security
transactions divided by total number of security shares purchased and sold for
which commissions were paid.

INVESTMENT OBJECTIVE AND PORTFOLIO MANAGEMENT POLICY

Babson-Stewart Ivory International Fund is a no-load open-end, diversified
management investment company, commonly known as a mutual fund. The Fund seeks
a favorable total return (from market appreciation and income) by investing
primarily in a diversified portfolio of equity securities (common stocks and
securities convertible into common stocks) of established companies whose
primary business is carried on outside the United States. The Fund will use
the portfolio management policies described below to generate a favorable
total return consisting of interest, dividend and other current income and
appreciation in the value of the Fund's portfolio securities by investing in
equity securities which offer good growth potential and in many cases pay
dividends. The Fund will look at such factors as the location of the company's
assets, personnel, sales and earnings, to determine whether a company's
primary business is carried on outside the United States. The Fund diversifies
its investments among various countries and a number of different industries.
There is no guarantee that the Fund's objective will be achieved. Investments
in international securities markets involve risks in addition to those risks
associated with investments in the United States (see "Special Risk
Considerations"). Therefore, the Fund should be considered only as a means for
international diversification and not as a complete investment program. The
Fund is designed for long-term investors who are able to accept the risks of
international investing. The Fund's investment objective and policy as
described in this section will not be changed without approval of a majority
of the Fund's outstanding shares.

The Fund is designed to provide investors with a diversified participation in
international businesses. Over the years, some foreign businesses have been
especially successful in their particular industries and some foreign stock
markets have outperformed the American markets. Foreign securities markets do
not always move in parallel with the U.S. securities markets, so investing in
international securities can provide diversification advantages. Because the
securities in which the Fund invests trade primarily in foreign markets, any
rise or fall of the U.S. dollar in relation to foreign currencies will affect
their U.S. dollar value and thereby will affect the investment performance of
the Fund. A change in the value of any foreign currency relative to the dollar
will result in a corresponding change in the dollar value of Fund assets
denominated or traded in that currency.

The Fund primarily invests in equity securities of seasoned companies which
are listed on foreign stock exchanges and which the investment counsel
considers to have attractive characteristics in terms of profitability, growth
and financial resources. "Seasoned" and "established" companies are those
companies which, in the opinion of the investment counsel, are known for the
quality and acceptance of their products or services and for their ability to
generate profits and in many cases pay dividends. The Fund may invest in
fixed-income securities of foreign governments or companies when the
investment counsel believes that prevailing market, economic, political or
currency conditions warrant such investments. While most foreign securities
are not subject to standard credit ratings, the investment counsel intends to
select "investment grade" issues of foreign debt securities which are
comparable to a Baa or higher rating by Moody's Investors Service, Inc. or a
BBB or higher rating by Standard and Poor's Corporation, based on available
information, and taking into account liquidity and quality issues. Securities
rated BBB or Baa are considered to be medium grade and may have speculative
characteristics. From time to time the Fund may purchase American Depository
Receipts ("ADR's"), which represent foreign securities traded on U.S.
exchanges or in the over-the-counter market, European Depository Receipts
("EDR's") and International Depository Receipts ("IDR's"), in bearer form,
which are designed for use in European and other securities markets. The Fund
may invest in securities which are not listed on an exchange. Generally, the
volume of trading in an unlisted common stock is less than the volume of
trading in a listed stock. This means that the degree of market liquidity of
some stocks in which the Fund invests may be relatively limited. When the Fund
disposes of such a stock it may have to offer the shares at a discount from
recent prices or sell the shares in small lots over an extended period of
time.

In order to expedite settlement of portfolio transactions and to minimize
currency value fluctuations, the Fund may purchase foreign currencies and/or
engage in forward foreign currency transactions. The Fund will not engage in
forward foreign currency exchange contracts for speculative purposes. A
forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. These contracts may be bought or sold to protect
the Fund, to some degree, against a possible loss resulting from an adverse
change in the relationship between foreign currencies and the U.S. dollar.
This method of protecting the value of the Fund's investment securities
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It establishes a rate of exchange
which one can achieve at some future point in time. Although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.

The Fund intends to diversify investments broadly among countries and normally
to have represented in the portfolio business activities of not less than
three foreign countries. Generally, the Fund does not intend to invest more
than 35% of its total assets in any one particular country. However, the Fund
may, at times, temporarily invest a substantial portion of its assets in one
or more of such countries if economic and business conditions warrant such
investments.

From time to time, the Fund may invest in companies located in developing
countries. A developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. Compared to investment in the United States and other
developed countries, investing in the equity and fixed income markets of
developing countries involves exposure to relatively unstable governments,
economic structures that are generally less mature and based on only a few
industries and securities markets which trade a small number of securities.
Prices on securities exchanges in developing countries tend to be more
volatile than those in developed countries. The Fund will not invest more than
20% of its total assets in companies located in developing countries.

Under normal circumstances the Fund will invest at least 65% of its assets in
equity securities of foreign issuers. However, to meet the liquidity needs of
the Fund or when the Fund believes that investments should be deployed in a
temporary defensive posture because of economic or market conditions, the Fund
may invest all or a major portion of its assets in short-term debt securities
denominated in U.S. dollars, including U.S. Treasury Bills and other
securities of the U.S. government and its agencies, bankers' acceptances and
certificates of deposit, meeting the quality ratings set forth under the
heading "Investment Objectives and Policies" in the "Statement of Additional
Information," as well as enter into repurchase agreements maturing in seven
days or less with U.S. banks and broker-dealers which are collateralized by
such securities. The Fund may also hold cash and time deposits in foreign
banks, denominated in any major foreign currency.

Repurchase agreements involve investments in debt securities where the seller
(broker-dealer or bank) agrees to repurchase the securities from the Fund at
cost plus an agreed-to interest rate within a specified time. A risk of
repurchase agreements is that if the seller seeks the protection of the
bankruptcy laws, the Fund's ability to liquidate the security involved could
be temporarily impaired, and it subsequently might incur a loss if the value
of the security declines or if the other party to a repurchase agreement
defaults on its obligation. There is also the risk that the Fund may be
delayed or prevented from exercising its rights to dispose of the collateral.

For the three years ended June 30, 1997, the total dollar amount of brokerage
commissions paid by the Fund and the annual portfolio turnover rates were as
follows:

Portfolio
Fiscal Brokerage Turnover
Year Commissions Rate
1995 $ 175,425 37%
1996 $ 119,296 33%
1997 $ 229,337 40%

SPECIAL RISK CONSIDERATIONS

Investing in foreign securities involves special risk considerations including
those described herein which are not normally associated with investing in
United States securities. These considerations include: changes in currency
rates; exchange control regulations; costs incurred in connection with
conversions between various currencies (fees may also be incurred when
converting foreign investments to U.S. dollars); availability of less
financial information than comparable United States companies; lack of uniform
accounting, auditing and financial reporting requirements; less liquidity and
more volatility than securities listed on the New York Stock Exchange due to
substantially lower trading volume; possibly lower sales prices in the event
of forced liquidation of securities in order to meet unanticipated cash
requirements; fixed commissions on foreign stock exchanges which are generally
higher than negotiated commissions on United States exchanges, in addition to
less supervision and regulation of such exchanges; additional custodial costs
associated with maintaining foreign portfolio securities; and the possibility
of expropriation of assets; confiscatory taxation; imposition of withholding
of taxes prior to payment of dividends or other distributions; political or
social instability; or diplomatic developments which could affect United
States investments in those countries. The Fund may invest in countries which
are known to experience delays in settlements. Under such circumstances, the
Fund pays for securities on the settlement date, even though physical delivery
of the securities to the Fund's custodian will occur at a later date. The
delay in settlement could result in losses to the Fund when it is unable to
sell portfolio securities because the securities have not been delivered to
the Fund.

INVESTMENT RESTRICTIONS

In addition to the investment objective and portfolio management policies set
forth under the caption "Investment Objective and Portfolio Management
Policy," 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 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 one issuer, excluding obligations of the U.S. government, if
more than 5% of the Fund's total assets would be invested in the securities of
such issuer, or the Fund would hold more than 10% of any class of securities
of such issuer; the Fund will not make any loan (the purchase of a security
subject to a repurchase agreement or the purchase of a portion of an issue of
publicly distributed debt securities is not considered the making of a loan);
and the Fund will not borrow or pledge its credit under normal circumstances,
except up to 10% of its total assets (computed at the lower of fair market
value or cost) for temporary or emergency purposes, and not for the purpose of
leveraging its investments; and provided further that any borrowings 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.

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
500 Stock Index (S&P 500), an index of unmanaged groups of common stocks, the
Dow Jones Industrial Average, a recognized unmanaged index of common stocks of
30 industrial companies listed on the New York Stock Exchange, the Morgan
Stanley EAFE Index, an index of companies located in Europe, Australia and the
Far East, 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 Mutual Funds, 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 any 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 Rukeyser's Wall Street newsletter, Donoghue's Money Letter,
CDA Investment Technologies, Inc., Wiesenberger Investment Companies 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 64108-3306. For information call toll free 1-800-4-BABSON (1-800-422-
2766), or in the Kansas City area 751-5900. If an investor wishes to engage
the services of any other broker to purchase (or redeem) shares of the Fund, a
fee maybe 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 of the Fund's special investment programs. The Fund
reserves the right to refuse to accept orders for Fund shares unless
accompanied by payment, except when a responsible person has indemnified the
Fund against losses resulting from the failure of investors to make payment.
In the event that 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.
The minimum initial purchase is $2,500 unless your purchase is pursuant to an
IRA or the Uniform Transfers (Gifts) to Minors Act, in which case the minimum
initial purchase is $250. However, if electing the Automatic Monthly
Investment Plan, the minimum initial purchase is reduced to $100 for all
accounts. Make your check payable to UMB Bank, n.a. Mail your application and
check to:

Babson-Stewart Ivory International Fund, Inc.
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306

Initial investments - By wire. You may purchase shares of the Fund by wiring
the purchase price ($2,500 minimum) through the Federal Reserve Bank to UMB
Bank, n.a. Prior to sending your money, you must call the Fund toll free 1-
800-4-BABSON (1-800-422-2766), or in the Kansas City area 751-5900 and provide
it with the identity of the registered account owner, the registered address,
the Social Security or Taxpayer Identification Number of the registered owner,
the amount being wired, the name and telephone number of the wiring bank and
the person to be contacted in connection with the order. You will then be
provided a Fund account number, after which you should instruct your bank to
wire the specified amount, along with the account number and the account
registration to:

UMB Bank, n.a.
Kansas City, Missouri, ABA #101000695
/CTR/BNF=State Street Bank & Trust,

Babson-Stewart Ivory International Fund, Inc./AC=987015-6105
OBI=(assigned Fund number and name
in which registered)

A completed application must be sent to the Fund as soon as possible so the
necessary remaining information can be recorded in your account. Payment of
redemption proceeds 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
purchases are made by mail or telephone purchase (ACH), or $1,000 or more if
purchases are made by wire. Automatic monthly investments must be in amounts
of $50 or more.

Checks should be mailed to the Fund at its address, and make them 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 Babson Fund in which you are purchasing shares. It also is
advisable to notify the Fund by telephone that you have sent a wire purchase
order to the bank.

TELEPHONE INVESTMENT SERVICE

To use the Telephone Investment Service, you must first establish your Fund
account and authorize telephone orders in the application form, or,
subsequently, on a special authorization form provided upon request. If you
elect the Telephone Investment Service, you may purchase Fund shares by
telephone and authorize the Fund to draft your checking account ($100 minimum)
for the cost of the shares so purchased. 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 ($50 minimum, after an initial investment of $100 or
more for any account). 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.

HOW TO REDEEM SHARES

The Fund will redeem shares at the price (net asset value per share) effective
after receipt of a redemption request in "good order." (See "How Share Price
is Determined.") Shares can be redeemed by written request or if previously
authorized by telephone toll free 1-800-4-BABSON(1-800-422-2766), or in the
Kansas City area 751-5900.

All telephone requests to redeem shares, the proceeds of which are to be paid
by check, made within 30 days of our receipt of an address change (including
requests to redeem that accompany an address change) must be in writing. The
request must be signed by each person in whose name the shares are owned, and
all signatures must be guaranteed.

In each instance you must comply with the general requirements relating to all
redemptions as well as with specific requirements set out for the particular
redemption method you select. If you wish to expedite redemptions by using the
telephone/telegraph privilege, you should carefully note the special
requirements and limitations relating to these methods. 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.

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,
MO 64108-3306. 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.")

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 third
business day thereafter. 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 15 days of
the date of purchase, the Fund will delay transmission of proceeds until such
time as it is certain that unconditional payment in federal funds has been
collected for the purchase of shares being redeemed or 15 days from the date
of purchase. You can avoid the possibility of delay by paying for all of your
purchases with a transfer of federal funds.

Signature Guarantees are required in connection with all redemptions of
$50,000 or more by mail or changes in share registration except as hereinafter
provided. These requirements may be waived by the Fund in certain in-stances
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 in 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 $50,000 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 three-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 shareholders
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 of market
action, and remains below this level for 60 days after each such shareholder
account is mailed a notice of: (1) the Fund's intention to close the account,
(2) the minimum account size requirement, and (3) the date on which the
account will be closed if the minimum size requirement is not met. Since the
minimum investment amount and the minimum account size are the same, any
redemption from an account containing only the minimum investment amount may
result in redemption of that account.

Withdrawal By Mail - Shares may be redeemed by mailing your request to the
Fund. To be in "good order" the request must include the following:

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.

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

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

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

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

Withdrawal By Telephone or Telegraph - You may withdraw any amount ($1,000
minimum if wired) or more by telephone toll free 1-800-4-BABSON (1-800-422-
2766), or in the Kansas City area 751-5900, or by telegram to the Fund's
address. Telephone/telegraph redemption authorization signed by all registered
owners with signatures guaranteed must be on file with the Fund before you may
redeem by telephone or telegraph. Funds will be sent only to the address of
record. The signature guarantee requirement may be waived by the Fund if the
request for this redemption method is made at the same time the initial
application to purchase shares is submitted.

All communications must include the Fund's name, your account number, the
exact registration of your shares, the number of shares or dollar amount to be
redeemed, and the identity of the bank and bank account (name and number) to
which the proceeds are to be wired. This procedure may only be used for non-
certificated shares held in open account. For the protection of shareholders,
your redemption instructions can only be changed by filing with the Fund new
instructions on a form obtainable from the Fund which must be properly signed
with signature(s) guaranteed.

Telephone or telegraph redemption proceeds may be transmitted to your pre-
identified bank account. Requests received prior to 4:00 P.M. (Eastern Time),
normally will be wired the following business day. Once the funds are
transmitted, the time of receipt and the funds' availability are not under our
control. If your request is received during the day thereafter, proceeds
normally will be wired on the second business day following the day of receipt
of your request. Wired funds are subject to a $10 fee to cover bank wire
charges, which is deducted from redemption proceeds, but this charge may be
reduced or waived in connection with certain accounts. The Fund reserves the
right to change this policy or to refuse a telephone or telegraph redemption
request or require additional documentation to assure a genuine redemption,
and, at its option, may pay such redemption by wire or check and may limit the
frequency or the amount of such request. The Fund reserves the right to
terminate or modify any or all of the services in connection with this
privilege at any time without prior notice. Neither the Fund nor Jones &
Babson, Inc. assumes responsibility for the authenticity of withdrawal
instructions, and there are provisions on the authorization form limiting
their liability in this respect.

Further, the Fund reserves the right to redeem its shares in kind under
certain circumstances. The Fund has elected to be governed by Rule 18f-1 under
the Investment Company Act of 1940 pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period for any one shareholder. Should
redemptions by any shareholder exceed such limitation, the Fund may redeem the
excess in kind. If shares are redeemed in kind, the redeeming shareholder may
incur brokerage costs when converting the assets into cash. 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. Additional details are set forth in
the "Statement of Additional Information."

SYSTEMATIC REDEMPTION PLAN

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

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

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

You may revoke or change your plan to redeem all of your remaining shares at
any time. Withdrawal payments will continue 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 other Babson Fund or Buffalo Fund 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 meets the minimum investment requirement of
the Fund 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, Inc. 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. Investors may want to consider
purchasing shares in Babson Enterprise Fund II, Inc. as an alternative.

To authorize the Telephone/Telegraph Exchange Privilege, all registered owners
must sign the appropriate section on the original application, or the Fund
must receive a special authorization form, provided upon request. During
periods of increased market activity, you may have difficulty reaching the
Fund by telephone, in which case you should contact the Fund by mail or
telegraph. The 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 or 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 Fund into which the account is
being transferred.

If you wish to exchange part or all of your shares in the Fund for shares of
another Babson Fund or Buffalo Fund, 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 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 a U.S. Exchange is valued at its last sale price on
the exchange on the date as of which assets are valued. Securities listed on a
foreign exchange are valued at the latest quoted sales price available before
the time when 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
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.

For the purposes of determining the Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies will be
translated into U.S. dollars at the exchange rate in London last quoted by a
major bank. If such quotations are not available as of 4:00 P.M. (Eastern
Time), the rate of exchange will be determined in accordance with policies
established 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 its 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 1987, 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 independent public accountants 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 fees for pricing services, custodian fees, taxes, interest, governmental
charges and fees, including registration of the Fund and its shares with the
Securities and Exchange Commission and the Securities Departments of the
various States, 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 Babson-Stewart Ivory International, a partnership formed in 1987, by
David L. Babson & Co. of Cambridge, Massachusetts and Stewart Ivory & Company
(International) Ltd., a wholly owned subsidiary of Stewart Ivory (Holdings),
Ltd., of Edinburgh, Scotland, as its investment counsel to assist in the
investment advisory function. David L. Babson & Co. Inc. is an investment
counseling firm founded in 1940. It serves a broad variety of individual,
corporate and other institutional clients by maintaining an extensive research
and analytical staff. Stewart Ivory & Company (International) Ltd. and its
predecessor organizations have been managing investments internationally from
Edinburgh since 1873, when the first Scottish investment trust, The Scottish
American Investment Company, PLC, was formed. It remains a client of the
present day Stewart Ivory & Company Ltd. The partnership, Babson-Stewart Ivory
International, has an experienced investment management 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 its services 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. John G.L. Wright has been the portfolio
manager of Babson-Stewart Ivory International Fund since its inception in
1988. He joined Stewart Fund Managers (which became Stewart-Ivory) in 1971,
and has 29 years of international investment management experience.

As compensation for the services provided by Jones & Babson, Inc., the Fund
pays Jones & Babson, Inc. a fee at the annual rate of 95/100 of one percent
(.95%) of its average daily 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. The fee, from which Jones &
Babson, Inc. pays Babson-Stewart Ivory International a fee of 475/1000 of one
percent (.475%) of average daily total net assets, is computed daily and paid
semimonthly. The total expenses of the Fund for the fiscal year ended June 30,
1997, amounted to 119/100 of one percent (1.19%) of the average net assets.
The cost of the services of Babson-Stewart Ivory International is included in
the fee of Jones & Babson, Inc.

Certain officers and directors of the Fund are also officers or directors or
both of other Babson Funds, Jones & Babson, Inc., David L. Babson & Co. Inc.,
Babson-Stewart Ivory International or Stewart Ivory (Holdings) Ltd. or its
subsidiaries.

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.

David L. Babson & Co. Inc. is a wholly-owned subsidiary of Massachusetts
Mutual Life Insurance Company headquartered in Springfield, Massachusetts.
Massachusetts Mutual Life Insurance Company is an insurance organization
founded in 1851 and is considered to be a controlling person of David L.
Babson & Co. Inc., under the Investment Company Act of 1940.

Stewart Ivory (Holdings) Ltd. 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.

The current Management Agreement between the Fund and Jones & Babson, Inc.,
which includes the Investment Counsel Agreement between Jones & Babson, Inc.
and Babson-Stewart Ivory International, will continue in effect until October
31, 1998, and 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 a vote of the 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. Each Agreement provides that either party may
terminate by giving the other 60 days written notice. The Agreements terminate
automatically if assigned by either party, as required under the Investment
Company Act of 1940.

CUSTODIAN

State Street Bank and Trust Company of Boston, Massachusetts is the custodian
of the assets of the Fund. The names of the sub-custodians for foreign
securities and a description of how they were selected are set forth under the
heading "Custodian" in the "Statement of Additional Information."

GENERAL INFORMATION AND HISTORY

The Fund, incorporated in Maryland on October 2, 1987, and 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 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 pre-emptive
or conversion rights.

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

The Maryland Statutes permit 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 and may not, at its discretion, hold
annual meetings of shareholders for the following purposes unless required to
do so: (1) election of directors; (2) approval of any investment advisory
agreement; (3) ratification of the selection of independent public
accountants; and (4) approval of a distribution plan. As a result, the Fund
does not intend to hold annual meetings.

The Fund may use "Babson-Stewart Ivory" in its name so long as Babson-Stewart
Ivory International, or an affiliate thereof, acts 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, usually in June. Any
capital gains realized during a fiscal year will be distributed with the
fiscal year-end dividend in June. Dividend and capital gains distributions
will be reinvested automatically in additional shares at the net asset value
per share next computed and effective at the close of business on the day
after the record date, unless the shareholder has elected on the original
application, or by written instructions filed with the Fund, to have them paid
in cash.

The Fund has qualified and intends to continue to qualify for taxation as a
"regulated investment company" under the Internal Revenue Code so that the
Fund will not be subject to Federal income tax to the extent that it
distributes its income to its shareholders. 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 may 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 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.

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. Shareholders
are notified annually by the Fund as to the 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. 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 gain 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 fiscal year.
Dividends declared in December will be deemed to have been paid by the Fund
and received by shareholders on the record date so long as the dividends are
actually paid before February 1 of the following year.

To comply with IRS regulations, 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.

Foreign Income Taxes. The investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes withheld at
the source. The U.S. has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of tax or exemption from tax on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested within various
countries is not known. The Fund intends to operate so as to qualify for
treaty-reduced rates of tax where applicable. A full description of foreign
income taxes is contained in the "Statement of Additional Information" under
the heading "Foreign Income Taxes."

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 ($50 minimum, after an
initial investment of $100 or more). 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 $100 or more by telephone
if you have authorized such investments in your application, or, subsequently,
on a special authorization form provided upon request. (See "Telephone
Investment Service.")

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

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

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

Sub-Accounting - Keogh and corporate tax qualified retirement plans, as well
as certain other investors who must maintain separate participant accounting
records, may meet these needs through services provided by the 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, 1-800-4-BABSON (1-800-
422-2766), or in the Kansas City area 751-5900.

Shareholders may address written inquiries to the Fund at:

Babson-Stewart Ivory International Fund, Inc.
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306

AUDITORS

ARTHUR ANDERSEN LLP
Kansas City, Missouri

LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG
Philadelphia, Pennsylvania

JOHN G. DYER
Kansas City, Missouri

CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
Boston, Massachusetts

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

Equities
Growth Fund
Enterprise Fund*
Enterprise Fund II
Value Fund
Shadow Stock Fund
International Fund

Fixed Income
Bond Trust
Money Market Fund
Tax-Free Income Fund

*Closed to new investors.

JONES & BABSON
MUTUAL FUNDS

BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
816-751-5900

1-800-4-BABSON
(1-800-422-2766)

http://www.jbfunds.com

JB3B 10/97

PART B

BABSON-STEWART IVORY
INTERNATIONAL FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

October 31, 1997

This Statement is not a Prospectus but should be read in conjunction
with the Fund's current Prospectus dated October 31, 1997. To obtain the
Prospectus please call the Fund toll-free 1-800-4-BABSON (1-800-422-2766),
or in the Kansas City area 751-5900.

TABLE OF CONTENTS

Page
Investment Objective and Policies 2
Portfolio Transactions 4
Investment Restrictions 5
Performance Measures 6
How the Fund's Shares Are Distributed 7
How Share Purchases Are Handled 7
Redemption of Shares 8
Signature Guarantees 8
Dividends, Distributions and Their Taxation 8
Management and Investment Counsel 9
How Share Price is Determined 10
Officers and Directors 10
Custodian 12
Independent Public Accountants 13
Other Jones & Babson Funds 14
Financial Statements 15

JB64 10/97

<PAGE>

INVESTMENT OBJECTIVE
AND POLICIES

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

Although Babson-Stewart Ivory International
Fund intends to invest its assets primarily in
equity securities, for liquidity purposes, or if, in
the judgment of the Investment Counsel,
extremely abnormal conditions persist in the
markets for such securities, management retains
the authority to adopt a temporary defensive
posture by investing in short-term debt
securities, including securities of the U.S.
government, its agencies, authorities or
instrumentalities (such as U.S. Treasury
obligations, which differ only in their interest
rates, maturities and times of issuance, and
obligations issued or guaranteed by U.S.
government agencies or instrumentalities which
are backed by the full faith and credit of the U.S.
Treasury or which are supported by the right of
the issuer to borrow from the U.S. government),
high quality commercial paper, bankers'
acceptances and repurchase agreements with
banks and brokers for U.S. government
securities. Any repurchase agreements entered
into by the Fund will be fully collateralized and
marked-to-market daily.

Foreign Investments. Investors should
recognize that investing in foreign companies
involves certain special considerations which are
not typically associated with investing in U.S.
Companies. Since the stocks of foreign
companies are frequently denominated in
foreign currencies, and since the Fund may
temporarily hold uninvested reserves in bank
deposits in foreign currencies, the Fund will be
affected favorably or unfavorably by changes in
currency rates and in exchange control
regulations, and may incur costs in connection
with conversions between various currencies.
The investment policies of the Fund permit it to
enter into forward foreign currency exchange
contracts in order to hedge the Fund's holdings
and commitments against changes in the level of
future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency
at a future date at a price set at the time of the
contract.

As foreign companies are not generally
subject to uniform accounting, auditing and
financial reporting standards and practices
comparable to those applicable to domestic
companies, there may be less publicly available
information about certain foreign companies
than about domestic companies. Securities of
some foreign companies are generally less liquid
and more volatile than securities of comparable
domestic companies. There is generally less
government supervision and regulation of stock
exchanges, brokers and listed companies than in
the U.S. In addition, with respect to certain
foreign countries, there is the possibility of
expropriation or confiscatory taxation, political
or social instability, or diplomatic developments
which could affect U.S. investments in those
countries.

Although the Fund will endeavor to achieve
most favorable execution costs in its portfolio
transactions, fixed commissions on many
foreign stock exchanges are generally higher
than negotiated commissions on U.S.
Exchanges. In addition, it is expected that the
expenses of custodian arrangements of the
Fund's foreign securities will be somewhat
greater than the expenses for the custodian
arrangements for handling the Fund's securities
of equal value.

Certain foreign governments levy withholding
taxes against dividend and interest income.
Although in some countries a portion of these
taxes are recoverable, the nonrecovered portion
of foreign withholding taxes will reduce the
income received from the companies comprising
the Fund's portfolio.

Repurchase Agreements. The Fund may
invest in repurchase agreements with
commercial banks, brokers or dealers either for
defensive purposes due to market conditions or
to generate income from its excess cash
balances. A repurchase agreement is an
agreement under which the Fund acquires a
money market instrument (generally a security
issued by the U.S. government or an agency
thereof, a banker's acceptance or a certificate of
deposit) from a commercial bank, broker or
dealer, subject to resale to the seller at an agreed
upon price and date (normally, the next business
day). A repurchase agreement may be

2
<PAGE>

considered a loan collateralized by securities.
The resale price reflects an agreed upon interest
rate effective for the period the instrument is
held by the Fund and is unrelated to the interest
rate on the underlying instrument. In these
transactions, the securities acquired by the Fund
(including accrued interest earned thereon) must
have a total value in excess of the value of the
repurchase agreements and are held by the
Fund's custodian bank until repurchased. In
addition, the Fund's Board of Directors will
monitor the Fund's repurchase agreement
transactions generally and will establish
guidelines and standards for review by the
investment counsel of the creditworthiness of
any bank, broker or dealer party to a repurchase
agreement with the Fund. No more than an
aggregate of 10% of the Fund's assets, at the
time of investment, will be invested in
repurchase agreements having maturities longer
than seven days and securities subject to legal or
contractual restrictions on resale, or for which
there are no readily available market quotations.

The use of repurchase agreements involves
certain risks. For example, if the other party to
the agreement defaults on its obligations to
repurchase the underlying securities at a time
when the value of the securities has declined,
the Fund may incur a loss upon disposition of
them. If the seller becomes insolvent and subject
to liquidation or reorganization under the
applicable bankruptcy or other laws, a
bankruptcy court may determine that the
underlying security is collateral for a loan by the
Fund not within the control of the Fund and
therefore subject to sale by the trustee in
bankruptcy. 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
careful monitoring procedures.

Foreign Currency Transactions. The value of
the assets of the Fund as measured in United
States dollars may be affected favorably or
unfavorably by changes in foreign currency
exchange rates and exchange control
regulations, and the Fund may incur costs in
connection with conversions between various
currencies.

The Fund will conduct its foreign currency
exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through
the use of forward contracts to purchase or sell
foreign currencies. A forward foreign currency
exchange contract will involve an obligation by
the Fund to purchase or sell a specific amount of
currency at a future date, which may be any
fixed number of days, from the date of the
contract agreed upon by the parties, at a price
set at the time of the contract. These contracts
are transferable in the interbank market
conducted directly between currency traders
(usually large commercial banks) and their
customers. A forward contract generally has no
deposit requirements, and no commissions are
charged at any stage for trades. Neither type of
foreign currency transaction will eliminate
fluctuations in the prices of the Fund's portfolio
securities or prevent loss if the prices of such
securities should decline.

The Fund may enter into forward foreign
currency exchange contracts only under two
circumstances. First, when the Fund enters into
a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire
to "lock in" the U.S. dollar price of the security.
The Fund will then enter into a forward contract
for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency
involved in the underlying securities
transaction; in this manner the Fund will be
better able to protect itself against a possible loss
resulting from an adverse change in the
relationship between the U.S. dollar and the
subject foreign currency during the period
between the date the securities are purchased or
sold and the date on which payment is made or
received.

Second, when the Investment Counsel
believes that the currency of a particular foreign
country may suffer a substantial decline against

3
<PAGE>

the U.S. dollar, it may enter into a forward
contract to sell, for a fixed amount of dollars,
the amount of foreign currency approximating
the value of some or all of the Fund's securities
denominated in such foreign currency. The
precise matching of the forward contract
amounts and the value of the securities involved
will not generally be possible since the future
value of such securities in foreign currencies
will change as a consequence of market
movements in the value of those securities
between the date the forward contract is entered
into and the date it matures. The projection of
short-term currency market movement is
extremely difficult, and the successful execution
of a short-term hedging strategy is highly
uncertain. The Investment Counsel does not
intend to enter into such forward contracts under
this second circumstance on a regular or
continuous basis. The Fund will also not enter
into such forward contracts or maintain a net
exposure to such contracts when the
consummation of the contracts would obligate
the Fund to deliver an amount of foreign
currency in excess of the value of the Fund's
securities or other assets denominated in that
currency. The Investment Counsel believes that
it is important to have the flexibility to enter
into such forward contracts when it determines
that to do so is in the best interests of the Fund.
The Fund's custodian bank segregates cash or
equity or debt securities in an amount not less
than the value of the Fund's total assets
committed to forward foreign currency exchange
contracts entered into under this second type of
transaction. If the value of the securities
segregated declines, additional cash or securities
is added so that the segregated amount is not
less than the amount of the Fund's commitments
with respect to such contracts. Under normal
circumstances, the Fund expects that any
appreciation (depreciation) on such forward
exchange contracts will be approximately offset
by the depreciation (appreciation) in translation
of the underlying foreign investment arising
from fluctuations in foreign currency exchange
rates.

The Fund will recognize the unrealized
appreciation or depreciation from the fluctuation
in a foreign currency forward contract as an
increase or decrease in the Fund's net assets on a
daily basis, thereby providing an appropriate
measure of the Fund's financial position and
changes in financial position.

PORTFOLIO TRANSACTIONS

Fund transactions will be placed with a view
to receiving the best price and execution. The
Fund does not intend to solicit competitive bids
on each transaction. The Investment Counsel
will monitor the performance of brokers which
effect transactions for the Fund to check the
rates of commission being paid by the Fund to
brokers to ascertain that they are competitive
with those charged by other brokers for similar
services. Transactions also may be placed with
brokers who provide the Investment Counsel
with investment research, such as reports
concerning individual issuers, industries and
general economic and financial trends and other
research services and the Investment Counsel
may knowingly pay commissions to such
brokers that may be higher than another broker
might charge, if in good faith the Investment
Counsel determines that the commissions paid
are reasonable in relation to the brokerage and
research services provided.

Although commissions paid on brokerage
transactions executed on United States
exchanges are currently on a negotiated basis,
commissions on transactions executed on
foreign exchanges are generally on a fixed basis.
The Investment Counsel endeavors to obtain the
rate of such commission in good faith so as to
achieve, in its judgment, the most favorable
result available to the Fund under the
circumstances of each transaction.

When it appears to be in the best interest of its
shareholders, the Fund may join with other
clients of the manager and its investment
counsel in acquiring or disposing of a portfolio

4
<PAGE>

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) 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 any of its officers, directors, or
employees, or to its manager, or general
distributor, or officers or directors thereof; (5)
make loans to other persons, except by the
purchase of debt obligations which are permitted
under its investment policy; (6) invest in
companies for the purpose of exercising control
of management; (7) purchase securities on
margin, or sell securities short; (8) purchase
shares of other investment companies except
shares of closed-end investment companies,
purchased in the open market at ordinary
broker's commission, but not in excess of 5% of
the Fund's assets, or investment company shares
acquired pursuant to a plan of merger or
consolidation; (9) invest in the aggregate more
than 5% of the value of its gross assets in the
securities of issuers (other than federal, state,
territorial, or local governments, or
corporations, or authorities established thereby),
which, including predecessors, have not had at
least three years' continuous operations nor
invest more than 25% of the Fund's assets in
any one industry; (10) enter into dealings with
its officers or directors, its manager or
underwriter, or their officers or directors, or any
organization in which such persons have a
financial interest except for transactions in the
Fund's own shares or other securities through
brokerage practices which are considered
normal and generally accepted under
circumstances existing at the time; (11)
purchase or retain securities of any company in
which any Fund officers or directors, or Fund
manager, its partner, officer, or director
beneficially owns more than 1/2 of 1% of said
company's securities, if all such persons owning
more than 1/2 of 1% of such company's
securities, own in the aggregate more than 5%
of the outstanding securities of such company;
(12) 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; (13) make itself or its assets liable for the
indebtedness of others; (14) invest in securities
which are assessable or involve unlimited
liability; or (15) issue senior securities except for
those investment procedures permissible under
the Fund's other restrictions.

Although not fundamental policies subject to
shareholder vote, the Fund may not engage in
any of the following activities:

1. Invest directly in oil, gas, or other mineral
exploration or development programs;

2. Invest more than 5% of its total assets in
securities which are restricted as to future sale;

3. Invest more than 5% of its total assets in
puts, calls, straddles, spreads, and any
combination thereof (the Fund will engage in
options transactions for hedging purposes only);
and

5
<PAGE>

4. Purchase warrants, valued at the lower of
cost or market, in excess of 5% of the value of
the Fund's net assets. Included within that
amount, but not to exceed 2% of the value of the
Fund's net assets, may be warrants which are not
listed on the New York or American Stock
Exchange. Warrants acquired by the Fund at
any time in units or attached to securities are not
subject to this restriction.

PERFORMANCE MEASURES

Total Return

The Fund's "average annual total return"
figures described and shown below are
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 years (or other) periods
at the end of the 1, 5, or 10
years (or other) periods (or
fractional portions thereof);

The table below shows the average total return
for the Fund for the specified periods.

For the one year 7/1/96-6/30/97 9.91%

For the five years 7/1/92-6/30/97 10.94%

From commencement
of operation to 6/30/97* 9.95%
_______________________________________
* The Fund commenced operation on
December 7, 1987.

In spite of the strong performance of the U.S.
market over the past year, long-term
comparisons still show that rates of return in
several international markets have outperformed
the U.S. market in past years. Although past
performance does not indicate future results,
tables like the one below may be used to
illustrate the performance of various national
equity markets relative to that of the United
States.
World Stock Market Values
June 30, 1997

____________________________

(PIE CHART)

Hong Kong 2.0%
Others 9.8%
Germany 4.4%
USA 45.9%
Switzerland 3.4%
France 3.3%
Japan 17.3%
Netherlands 2.6%
Canada 2.4%
UK 9.5%
___________________________

Source: Morgan Stanley Capital International

Average Annual Total Returns
1987 - 1996
(In U.S. Dollars)

___________________________

(BAR CHART)

Norway 13.6
Denmark 14.3
USA 15.3
UK 15.8
Ireland 16.7
Netherlands 17.6
Singapore 17.8
Sweden 18.1
Hong Kong 22.4
Malaysia 22.5
___________________________

Source: UBS Phillips & Drew

6
<PAGE>

Weights in MSCI World Market
Capitalization Index June 30, 1997

Weight as Percentage of Index

Australia 1.5
Austria 0.2
Belgium 0.6
Canada 2.4
Denmark 0.5
Finland 0.4
France 3.3
Germany 4.4
Hong Kong 2.0
Ireland 0.2
Italy 1.6
Japan 17.3
Malaysia 1.1
Netherlands 2.6
New Zealand 0.2
Norway 0.3
Singapore 0.5
Spain 1.2
Sweden 1.3
Switzerland 3.4
UK 9.5
USA 45.5
100.0

Source: Morgan Stanley Capital International

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 of David L. Babson
Growth Fund, Inc., D.L. Babson Bond Trust,
D.L. Babson Money Market Fund, Inc., D.L.
Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow Stock
Fund, Inc., Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc., Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc. and AFBA Five Star Fund,
Inc.

HOW SHARE PURCHASES
ARE HANDLED

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

7
<PAGE>

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,
State Street Bank and Trust Company of Boston,
Massachusetts.

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

The Fund has elected to be governed by Rule
18f-1 under the Investment Company Act of
1940 pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of
$250,000 or 1% of the Fund's net asset value
during any 90-day period for any one
shareholder. Should redemptions by any
shareholder exceed such limitation, the Fund
may redeem the excess in kind. If shares are
redeemed in kind, the redeeming shareholder
may incur brokerage costs in converting the
assets to cash. 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.

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 of $50,000 or more 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.

DIVIDENDS, DISTRIBUTIONS
AND THEIR TAXATION

Whether taken in cash or reinvested, normally
distributions are taxable to the shareholder
during the current year unless the shareholder

8
<PAGE>

has a tax-exempt or tax-deferred status. Long-
term capital gains distributions are taxable as
long-term capital gains to the shareholder
regardless of the length of time the shareholder
has owned the Fund shares on which they were
paid. Information concerning the source and
taxability of distributions will be supplied
shareholders at the time the annual summary of
account is provided each January.

Any dividend or capital gains distribution
reduces the net asset value per share by the per
share amount of such distribution. With respect
to shares purchased just before payment of a
distribution, such distributions are in effect a
return of capital but are taxable as income or
capital gain to the shareholder unless the
shareholder is otherwise exempt from taxes.

Foreign Income Taxes. Investment income
received by the Fund from sources within
foreign countries such as non-United States
companies may be subject to foreign income
taxes withheld at the source. Many foreign
countries have tax treaties with the U.S.
entitling the Fund to a reduced rate of or
exemption from tax on such income. The
effective rate of foreign tax cannot be
determined in advance since the size of the
Fund's investment within each of the foreign
countries would not be known in advance.
Nevertheless, it is the Fund's intention to operate
in a manner qualifying for treaty-reduced rates
of tax where applicable.

If, as expected, more than 50% of the value of
the Fund's total assets at the end of its fiscal year
is represented by foreign securities, the Fund
may file an election with the Internal Revenue
Service under Section 853 of the Internal
Revenue Code to "pass through" pro rata to the
Fund's shareholders the amount of foreign
income taxes paid by the Fund. Under this
election, shareholders will be required to: (a)
Include in gross income, even though not
actually received, their respective pro rata share
of foreign taxes paid by the Fund; (b) treat their
pro rata share of foreign taxes as paid by them;
and (c) either deduct their pro rata share of
foreign taxes in computing their taxable income,
or use it as foreign tax credit against U.S.
income taxes (but not both). No deduction for
foreign taxes may be claimed by a shareholder
who does not itemize deductions.

Each shareholder will be notified within 60
days after the close of each taxable year of the
Fund if the foreign taxes paid by the Fund will
"pass through" for that year, and, if so, the
amount of each shareholder's pro rata share of
(a) the foreign taxes paid, and (b) the Fund's
gross income from foreign sources. Of course,
shareholders who are not liable for federal
income taxes, such as retirement plans qualified
under Section 401 of the code, will not be able
to claim a deduction, tax credit, or refund of
foreign tax credits passed through.

MANAGEMENT AND
INVESTMENT COUNSEL

As a part of the Management Agreement,
Jones & Babson, Inc. employs at its own
expense Babson-Stewart Ivory International, a
partnership formed in 1987 by David L. Babson
& Co. Inc. and Stewart Ivory & Company Ltd.,
as its investment counsel. David L. Babson &
Co. Inc. was founded in 1940 as a private
investment research and counseling
organization. David L. Babson & Co. Inc. is a
wholly-owned subsidiary of Massachusetts
Mutual Life Insurance Company. David L.
Babson & Co. Inc. participates with Jones &
Babson, Inc. in the management of nine Babson
no-load mutual funds.

Stewart Ivory & Company Ltd. and its
predecessor organizations have been managing
investments internationally since 1873. David L.
Babson & Co. 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 costs of the
services of Babson-Stewart Ivory International
are included in the services of Jones & Babson,
Inc.

As compensation for its services, the Fund
pays Jones & Babson, Inc. a fee at the annual
rate of 95/100 of 1% (.95%) of its average daily
net assets. The fee, from which Jones & Babson,
Inc. pays Babson-Stewart Ivory International a
fee of 475/1000 of 1% (.475%) of average daily
total net assets, is computed daily and paid
semimonthly.

The aggregate management fees paid to Jones
& Babson, Inc. during the most recent fiscal

9
<PAGE>

year ended June 30, 1997, from which Jones &
Babson, Inc. paid all the Fund's expenses except
those payable directly by the Fund was
$857,963. The annual fee charged by Jones &
Babson, Inc. covers all normal operating costs of
the Fund.

The cost of the services of Babson-Stewart
Ivory International is included in the services of
Jones & Babson, Inc. During the most recent
fiscal year ended June 30, 1997 Jones & Babson,
Inc. paid Babson-Stewart Ivory International
fees amounting to $428,982.

HOW SHARE PRICE IS DETERMINED

The net asset value per share of the
Fund portfolio is computed once daily, Monday
through Friday, at the specific time during the
day that the Board of Directors of the Fund sets
at least annually, except for days on which
changes in the value of the 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

Trading in securities on European and Far
Eastern securities exchanges and over-the-
counter markets is normally completed well
before the close of business on each business day
in the U.S. (Eastern Time). In addition,
European and Far Eastern securities trading

generally or in a particular country or countries
may not take place on all days on which the
Fund is open for business. Furthermore, trading
takes place in Japanese markets on certain
Saturdays and in various foreign markets on
days which are not days on which the Fund is
open for business and on which the Fund's net
asset value is not calculated.

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 lists the
Officers and Directors of the Fund. Unless noted
otherwise, the address of each Officer and
Director is BMA Tower, 700 Karnes Blvd.,
Kansas City, Missouri 64108-3306. Except as
indicated, each has been an employee of Jones &
Babson, Inc. for more than five years.

* Larry D. Armel, President and Director
(55). 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., Scout Stock Fund,
Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc.;
President and Trustee, D. L. Babson Bond
Trust; Director, AFBA Five Star Fund, Inc.

Stephen W. Harris, Director (76). Private
Investor, 6100 Reinhardt Dr., Fairway,
Kansas 66205.
_____________________________________

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

10
<PAGE>

James T. Jensen, Director (68). Chief
Executive Officer, Jensen Associates, Inc., 129
South Street, Third Floor, Boston,
Massachusetts 02111.

Richard J. Phelps, Director (69). Chairman,
Phelps Industries, Inc., 122 Quincy Shore Drive,
Quincy, Massachusetts 02171. Trustee, The
DLB Fund Group; Director, Superior Pet
Products (Aust.) Pty. Ltd. and Superior Pet
Products, Ltd. (England); Member, Board of
Overseers, Tufts University School of Veterinary
Medicine.

William H. Russell, Director (74). Financial
Consultant, 645 West 67th Street, Kansas City,
Missouri 64113; formerly, Vice President,
Sprint; 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 High Yield Fund,
Inc., Buffalo USA Global Fund, Inc.; Trustee,
D. L. Babson Bond Trust.

P. Bradley Adams, Vice President and
Treasurer (37). 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., D.L. Babson
Bond Trust, Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc., 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, Vice President,
Assistant Secretary and Assistant Treasurer
(40). Vice President, 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., D.L. Babson Bond Trust, Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc.

Martin A. Cramer, Vice President and
Secretary (47). Vice President and Secretary,
Jones & Babson, Inc., David L. Babson Growth
Fund, Inc., D.L. Babson Money Market Fund,
Inc., D.L. Babson Tax-Free Income Fund, Inc.,
Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund,
Inc., Shadow Stock Fund, Inc., D.L. Babson
Bond Trust, Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc., Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc.; Secretary and Assistant Vice
President, AFBA Five Star Fund, Inc.

Constance E. Martin, Vice President (36).
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., D.L. Babson
Bond Trust, Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc., Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc.

Ronald E. Gwozdz, Vice President (58).
Executive Vice President and Director, David L.
Babson & Co. Inc., One Memorial Drive,
Cambridge, Massachusetts 02142; President
and Trustee, The DLB Fund Group; Managing
Director, Babson-Stewart Ivory International.

11
<PAGE>

Remuneration of Officers and Directors.
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.

<TABLE>
<CAPTION>
COMPENSATION TABLE

Pension or Estimated Total
Aggregate Retirement Annual Compensation
Name of Compensation Benefits Accrued Benefits From All Babson
Director From the As Part of Fund Upon Funds Paid to
Fund Expenses Retirement Directors**
______________ ____________ ________________ ___________ _____________
</CAPTION>
<S> <C> <C> <C> <C>
Larry D. Armel* -- -- -- --
Stephen W. Harris $3,625 -- -- $3,625
James T. Jensen $3,625 -- -- $3,625
Richard J. Phelps $3,500 -- -- $3,500
William H. Russell $3,625 -- -- $7,625
</TABLE>
______________ ____________ ________________ ___________ _____________

* As an "interested director," Mr. Armel received no compensation for
his services as a director.
** The amounts reported in this column reflect the total compensation
paid to Messrs. Harris, Jensen and Phelps for services as directors
of one Babson Fund and to Mr. Russell for services as a director
of nine Babson Funds during the fiscal year ended June 30, 1997.
Directors' fees are paid by the Funds' manager and not by the Funds
themselves.

Messrs. Harris, Jensen, Phelps, and Russell
have no financial interest in, nor are they
affiliated with either Jones & Babson, Inc. or
Babson-Stewart Ivory International.

The Audit Committee of the Board of
Directors is composed of Messrs. Harris, Jensen,
Phelps and Russell.

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

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 percent
of all the votes entitled to be cast at the meeting.
The Fund has undertaken that its Directors will
call a meeting of stockholders if such a meeting
is requested in writing by the holders of not less
than 10% of the outstanding shares of the Fund.
To the extent required by the undertaking, the
Fund will assist shareholder communications in
such matters.

CUSTODIAN

The Fund's assets are held for safekeeping by
an independent custodian, State Street Bank and
Trust Company of Boston, Massachusetts and
the subcustodian set forth below. 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
Fund.

Pursuant to rules adopted under the 1940 Act,
the Fund may maintain its foreign securities and
cash in the custody of certain eligible foreign
banks and securities depositories. Selection of
these foreign custodial institutions is made by
the Board of Directors following a consideration

12
<PAGE>

of a number of factors, including (but not
limited to) the reliability and financial stability
of the institution; the ability of the institution to
perform capably custodial services for the Fund;
the reputation of the institution in its national
market; the political and economic stability of
the country in which the institution is located;
and further risks of potential nationalization or
expropriation of Fund assets.

Sub-custodians: the sub-custodians may differ
from time to time depending upon the countries
in which the Fund has invested. Currently the
subcustodians include: Citibank, N.A.
(Argentina), Westpac Banking Corporation
(Australia), GiroCredit Bank Aktiengesellschaft
der Sparkassen (Austria), The British Bank of
the Middle East (as delegate of the Hongkong
and Shanghai Banking Corporation Limited)
(Bahrain), Standard Chartered Bank
(Bangladesh), Generale Bank (Belgium), The
Bank of Bermuda Limited (Bermuda), Barclays
Bank of Botswana Limited (Botswana),
Citibank, N.A. (Brazil), Canada Trustco
Mortgage Company (Canada), Citibank, N.A.
(Chile), The Hongkong and Shanghai Banking
Corporation Limited, Shanghai and Shenzhen
branches (People's Republic of China), Cititrust
Colombia S.A. Sociedad Fiduciaria (Colombia),
Barclays Bank PLC Cyprus Offshore Banking
Unit (Cyprus), Ceskoslovenska Obchodni
Banka, A.S. (Czech Republic), Den Danske
Bank (Denmark), Citibank, N.A. (Ecuador),
National Bank of Egypt (Egypt), Merita Bank
Limited (Finland), Banque Paribas (France),
Dresdner Bank AG (Germany), Barclays Bank
of Ghana Limited (Ghana), National Bank of
Greece S.A. (Greece), Standard Chartered Bank
(Hong Kong), Citibank Budapest Rt. (Hungary),
Deutsche Bank AG and The Hongkong and
Shanghai Banking Corporation Limited (India),
Standard Chartered Bank (Indonesia), Bank of
Ireland (Ireland), Bank Hapoalim B.M. (Israel),
Banque Paribas (Italy), Societe Generale de
Banques en Cote d'Ivoire (Ivory Coast), The
Daiwa Bank, Limited, The Fuji Bank, Limited,
and The Sumitomo Trust & Banking Co., Ltd.
(Japan), The British Bank of the Middle East (as
delegate of the Hongkong and Shanghai
Banking Corporation Limited) (Jordan),
Barclays Bank of Kenya Limited (Kenya),
SEOULBANK (Republic of Korea), The British
Bank of the Middle East (as delegate of the
Hongkong and Shanghai Banking Corporation
Ltd.) (Lebanon), Standard Chartered Bank
Malaysia Berhad (Malaysia), The Hongkong
and Shanghai Banking Corporation Limited
(Mauritius), Citibank Mexico, S.A. (Mexico),
Banque Commerciale du Maroc (Morocco),
MeesPierson N.V. (Netherlands), ANZ Banking
Group (New Zealand) Limited (New Zealand),
Christiania Bank og Kreditkasse (Norway), The
British Bank of the Middle East (as delegate of
the Hongkong and Shanghai Banking
Corporation Limited) (Oman), Deutsche Bank
AG (Pakistan), Citibank, N.A.(Peru), Standard
Chartered Bank (Philippines), Citibank Poland
S.A. (Poland), Banco Comercial Portugues
(Portugal), Credit Suisse First Boston, Zurich
via Credit Suisse First Boston Limited, Moscow
(Russia), The Development Bank of Singapore
Ltd. (Singapore), Ceskoslovenska Obchodna
Banka A.S. (Slovak Republic), Standard Bank
of South Africa Limited (South Africa), Banco
Santander, S.A. (Spain), The Hongkong and
Shanghai Banking Corporation Limited (Sri
Lanka), Barclays Bank of Swaziland Limited
(Swaziland), Skandinaviska Enskilda Banken
(Sweden), Union Bank of Switzerland
(Switzerland), Central Trust of China (Taiwan),
Standard Chartered Bank (Thailand), Citibank,
N.A. (Turkey), State Street Bank and Trust
Company (United Kingdom), Citibank, N.A.
(Uruguay), Citibank, N.A. (Venezuela),
Barclays Bank of Zambia Limited (Zambia),
Barclays Bank of Zimbabwe Limited
(Zimbabwe), State Street London Limited
(Euroclear), State Street London Limited
(Cedel).

INDEPENDENT PUBLIC
ACCOUNTANTS

The Fund's financial statements are examined
annually by independent public accountants
approved by the directors each year, and in years
in which an annual meeting is held the directors
may submit their selection of independent public
accountants to the shareholders for ratification.
Arthur Andersen LLP, P.O. Box 13406, Kansas
City, Missouri 64199, is the Fund's present
independent public accountant.

13
<PAGE>

Reports to shareholders will be published at
least semiannually.

OTHER JONES & BABSON FUNDS

The Fund is one of nine no-load funds
comprising the Babson Mutual Fund Group
managed by Jones & Babson, Inc. in association
with its Investment Counsel, Babson-Stewart
Ivory International. The other Funds are:

EQUITY FUNDS

DAVID L. BABSON GROWTH FUND,
INC. was organized in 1960, with the
objective of long-term growth of both capital
and dividend income through investment in
the common stocks of well-managed
companies which have a record of long-term
above-average growth of both earnings and
dividends.

BABSON ENTERPRISE FUND, INC. was
organized in 1983, with the objective of long-
term growth of capital by investing in a
diversified portfolio of common stocks of
smaller, faster-growing companies with
market capital of $15 million to $300 million
at the time of purchase. This Fund is intended
to be an investment vehicle for that part of an
investor's capital which can appropriately be
exposed to above-average risk in anticipation
of greater rewards. This Fund is currently
closed to new shareholders.

BABSON ENTERPRISE FUND II, INC.
was organized in 1991, with the objective of
long-term growth of capital by investing in a
diversified portfolio of common stocks of
smaller, faster-growing companies which at
the time of purchase are considered by the
Investment Adviser to be realistically valued
in the smaller company sector of the market.
This Fund is intended to be an investment
vehicle for that part of an investor's capital
which can appropriately be exposed to above-
average risk in anticipation of greater
rewards.

BABSON VALUE FUND, INC. was
organized in 1984, with the objective of long-
term growth of capital and income by
investing in a diversified portfolio of common
stocks which are considered to be undervalued
in relation to earnings, dividends and/or
assets.

SHADOW STOCK FUND, INC. was
organized in 1987, with the objective of long-
term growth of capital that can be exposed to
above-average risk in anticipation of greater-
than-average rewards. The Fund expects to
reach its objective by investing in small
company stocks called "Shadow Stocks", i.e.,
stocks that combine the characteristics of
"small stocks" (as ranked by market
capitalization) and "neglected stocks" (least
held by institutions and least covered by
analysts).

FIXED INCOME FUNDS

D.L. BABSON BOND TRUST was
organized in 1944, and has been managed by
Jones & Babson, Inc. Since 1972, with the
objective of a high level of current income and
reasonable stability of principal. It offers two
portfolios Portfolio L and Portfolio S.

D. L. BABSON MONEY MARKET FUND,
INC. was organized in 1979, to provide
investors the opportunity to manage their
money over the short term by investing in
high-quality short-term debt instruments for
the purpose of maximizing income to the
extent consistent with safety of principal and
maintenance of liquidity. It offers two
portfolios - Prime and Federal. Money market
funds are neither insured nor guaranteed by
the U.S. Government and there is no
assurance that the funds will maintain a stable
net asset value.

D. L. BABSON TAX-FREE INCOME
FUND, INC. was organized in 1979, to
provide shareholders the highest level of
regular income exempt from federal income
taxes consistent with investing in quality
municipal securities. It offers three separate
high-quality portfolios (including a money
market portfolio) which vary as to average
length of maturity. Income from the Tax-Free
Money Market portfolio may be subject to
state and local taxes, as well as the
Alternative Minimum Tax.

14
<PAGE>

BUFFALO FUNDS

Jones & Babson also sponsors and manages
the Buffalo Group of Mutual Funds. They are:

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 EQUITY FUND, INC. was
organized in 1994, with the objective of long-
term capital appreciation to be achieved
primarily by investment in common stocks.
Realization of dividend income is a secondary
consideration.

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 companies based in the United States that
receive greater than 40% of their revenues or
pre-tax income from international operations.

A prospectus for any of the Funds may be
obtained from Jones & Babson, Inc., BMA
Tower, 700 Karnes Blvd., Kansas City, MO
64108-3306.

Jones & Babson, Inc. also sponsors seven
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. and Scout
Balanced Fund, Inc.

Jones & Babson, Inc. also sponsors the AFBA
Five Star Fund, Inc.

FINANCIAL STATEMENTS

The audited financial statements of the Fund
which are contained in the June 30, 1997,
Annual Report to Shareholders, are incorporated
herein by reference.