BABSON ENTERPRISE FUND II INC /MO/, 497J, 1998-04-02

BABSON ENTERPRISE FUND II INC /MO/
497J, 1998-04-02

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Babson
Enterprise
Fund II

Prospectus
March 31, 1998

A no-load mutual fund invested
in common stocks of smaller,
faster growing companies.

BABSON FUNDS
JONES & BABSON DISTRIBUTORS
A member of the Generali Group

PROSPECTUS
March 31, 1998

BABSON
ENTERPRISE
FUND II, 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:
DAVID L. BABSON & CO. INC.
Cambridge, Massachusetts

INVESTMENT OBJECTIVE

A no-load mutual fund that seeks 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. The 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. There
is no guarantee that the Fund's objective will be achieved. This Fund is
not intended to be a complete investment program. (For a discussion of
risk factors see page 6 of this prospectus.)

PURCHASE INFORMATION

Minimum Investment

Initial Purchase (unless Automatic Monthly) $ 1,000
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases (unless Automatic Monthly) $ 250
Subsequent Purchase (unless Automatic Monthly):
By Mail $ 100
By Telephone Purchase (ACH) $ 100
By Wire $ 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

TABLE OF CONTENTS
Page
Fund Expenses 3
Financial Highlights 4
Investment Objective and Portfolio Management Policy 5
Repurchase Agreements 5
Risk Factors 6
Investment Restrictions 6
Performance Measures 7
How to Purchase Shares 8
Initial Investments 8
Investments Subsequent to Initial Investment 9
Telephone Investment Service 9
Automatic Monthly Investment Plan 10
How to Redeem Shares 10
Systematic Redemption Plan 12
How to Exchange Shares Between Funds 13
How Share Price is Determined 14
Officers and Directors 14
Management and Investment Counsel 14
General Information and History 16
Dividends, Distributions and Their Taxation 16
Shareholder Services 18
Shareholder Inquiries 19

BABSON ENTERPRISE FUND II, 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 1.25%
12b-1 fees None
Other expenses .03%
Total Fund operating expenses 1.28%

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
$13 $41 $70 $154

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 November 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 period from August 5, 1991
(date of initial public offering) to Novem-
ber 30, 1991, and each of the past six fiscal years have been derived
from audited financial statements of Babson Enterprise Fund II, Inc.
Such information for the most recent five fiscal years should be read in
conjunction with the financial statements of the Fund and the report of
Ernst & Young LLP, independent auditors, appearing in the November 30,
1997, Annual Report to Shareholders which is incorporated by reference
in this prospectus. The information for the fiscal year ended November
30, 1992 and the period ended November 30, 1991, is not covered by the
report of Ernst & Young LLP.

<TABLE>
<CAPTION>
For the period from
August 5, 1991
1997 1996 1995 1994 1993 1992 to November 30, 1991**
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.75 $ 19.19 $ 16.22 $ 16.92 $ 14.47 $ 12.07 $ 12.19
Income (loss) from investment operations:
Net investment income (loss) .081 .115 .053 .020 (.019) (.020) .052
Net gains or losses on securities
(both realized and unrealized) 6.969 4.448 3.024 (.392) 2.501 2.455 (.172)
Total from investment operations 7.05 4.563 3.077 (.372) 2.482 2.435 (.120)
Less distributions:
Dividends from net investment income (.112) (.055) (.022) - - (.035) -
Distributions from capital gains (2.988) (.948) (.085) (.328) (.032) - -
Total distributions (3.100) (1.003) (.107) (.328) (.032) (.035) -
Net asset value, end of period $ 26.70 $ 22.75 $ 19.19 $ 16.22 $ 16.92 $ 14.47 $ 12.07

Total return 35.29% 25.04% 19.11% (2.32)% 17.19% 20.24% (0.98)%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 82 $ 46 $ 40 $ 36 $ 29 $ 11 $ 3
Ratio of expenses to average net assets 1.28% 1.38% 1.45% 1.50% 1.60% 1.83% 1.49%
Ratio of net investment income (loss)
to average net assets .27% .55% .30% .14% (.14)% (.11)% .76%
Portfolio turnover rate 21% 30% 15% 9% 18% 14% 13%

*Average commission paid per equity share traded $ .0510 $ .0514 - - - - -
</TABLE>

*Disclosure required for fiscal years beginning after September 1, 1995.

**The Fund was capitalized on April 17, 1991, with $366,705,
representing 30,000 shares at a net asset value of $12.22
per share. Initial public offering was made on August 5, 1991, at which
time net asset value was $12.19 per share.
Ratios for this initial period of operation are annualized.

INVESTMENT OBJECTIVE AND
PORTFOLIO MANAGEMENT POLICY

Babson Enterprise Fund II's investment objective is to seek long-term
growth of capital by investing principally
in a diversified portfolio of common stocks of smaller, faster-growing
companies whose securities at the time of purchase are considered by the
investment adviser to be realistically valued in the smaller company
sector of the market. A stock will be considered to be realistically
valued if it is trading at a price which the investment
adviser believes is reasonable relative to its own past valuation
history as well as compared to a large universe
of stocks as selected by the investment adviser, based on one or more of
the following comparisons:

1. price relative to earnings,
2. price relative to sales,
3. price relative to assets as measured by book value.

The Fund is a diversified investment company and
generally intends to invest at least 65% of its total assets
in stocks of smaller companies with market capitalization of $250
million to $1 billion at the time of purchase and which are listed on a
national or regional exchange or over-
the-counter with prices quoted daily in the financial press. The Fund's
management believes, however, that there
may be times when the shareholders' interests are best served by
investing temporarily in preferred stocks, bonds or other defensive
issues. Normally, however, the Fund will maintain at least 80% of the
portfolio in common stocks. There are no restrictions or guidelines
regarding the
investment of Fund assets in shares listed on an exchange
or traded over-the-counter.

Smaller companies are typically in an early phase of
their development. They are in or nearer the entrepreneur-
ial stage than the institutionalized, professional management status of
larger companies. Generally, smaller
companies offer the possibility of more rapid sales and profit
expansion-if they are successful-than larger, older and more mature
businesses. At the same time, smaller, less-seasoned firms are generally
subject to greater busi-
ness risk. (See "Risk Factors.")

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

There is no assurance that the Fund's objective of long-term growth of
capital can be achieved. Portfolio turnover will be no more than is
necessary to meet the Fund's
objectives. Under normal circumstances, it is anticipated
that it will not exceed 100%. For the fiscal years ended November 30,
1997, 1996 and 1995, the total dollar amount
of brokerage commissions paid by the Fund and the annual portfolio
turnover rate were as follows:

Portfolio
Fiscal Brokerage Turnover
Year Commissions Rate

1997 $95,748 21%
1996 $52,014 30%
1995 $24,631 15%

REPURCHASE AGREEMENTS

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

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

RISK FACTORS

The Fund is intended to be an investment vehicle for that part of an
individual or institutional investor's capital
which can appropriately be exposed to above-average risk in anticipation
of greater rewards. The Fund is not de-
signed to offer a complete or balanced investment program suitable for
all investors.

While smaller companies generally have potential for rapid growth, they
often involve higher risk because they may lack the management
experience, financial resources, product diversification and competitive
strengths of larger corporations. While management cannot eliminate
this risk, it will seek to minimize it by diversifying its investments
among a broad list of companies.

In many instances, the securities of smaller companies are traded only
over-the-counter or on a regional securi-
ties exchange, and the frequency and volume of their
trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject
to wider price fluctuations. When making larger sales, the Fund may have
to sell portfolio holdings
at discounts from quoted prices or may have to make a series of small
sales over an extended period of time. The Fund does not intend to
invest in any security which, at the time of purchase, is not readily
marketable.

Risk Factors Applicable to
Repurchase Agreements

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

Risk Factors Applicable to
Year 2000 Issue

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

INVESTMENT RESTRICTIONS

In addition to the investment objective and portfolio management
policies set forth under the caption "Invest-
ment 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 issuer if more
than 5% of the Fund's total assets would be
invested in the securities of such issuer, or the Fund would hold more
than 10% of any class of securities of such
issuer; the Fund will not make any loan (the purchase of a security
subject to a repurchase agreement or the pur-
chase 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 (com-
puted 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 perfor-
mance 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 Share-
holders 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 Aver-
age, a recognized unmanaged index of common stocks of 30 industrial
companies listed on the NYSE, the Russell 2000 Index, a small company
stock index, 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 Fore-
caster, 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, Finan-
cial 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 Invest-
ment Technologies, Inc., Wiesenberger Investment Compa-
nies 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 may be charged by such broker. The
Fund will not be responsible for the consequences of delays including
delays in the banking or Federal Reserve wire systems.

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

The Fund may accept investments in kind of stocks on the Fund's buy list
for purchase of the Fund's shares. Accep-
tance of such stocks will be at the discretion of the Manager and
Investment Counsel based on judgments as to whether, in each case,
acceptance of stock will allow the Fund to acquire the stock at no more
than the net cost of acquiring
it through normal channels, and whether the stock has restrictions on
its sale by the Fund under the Securities Act of 1933. Fund shares
purchased in exchange for stocks are issued at net asset value.

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 $1,000 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 Enterprise Fund II, Inc.
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306

Initial investments - By wire. You may purchase shares of the Fund by
wiring funds ($1,000 minimum) through the Federal Reserve Bank to the
custodian, UMB Bank, n.a. Prior to sending your money, you must call the
Fund toll free 1-800-4-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
For Babson Enterprise Fund II, Inc./
AC=987036-6517
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, $1,000 or more if purchases are made by
wire, or $100 or more if purchases are made by telephone purchase (ACH).
Automatic monthly investments must be in amounts of
$50 or more.

Checks should be mailed to the Fund at its address, made payable to UMB
Bank, n.a. Always identify your account number or include the detachable
reminder stub which accompanies each confirmation.

Wire share purchases should include your account regis-tration, 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 pur-
chase 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 in-
structions 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 con-
stant 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 de-
lays in the banking or Federal Reserve wire systems.

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

HOW TO REDEEM SHARES

The Fund will redeem shares at the price (net asset value per share)
next computed after receipt of a redemption request in "good order."
(See "How Share Price is Determined.") 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, fiducia-
ries 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 con-cerning
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 pro-
ceeds 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 de-
lays 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 pur-
chase. 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 instances where it appears reasonable to do so and will not
unduly affect the interests of other shareholders. Signature(s) must be
guaranteed by an "eligible guarantor institution" as defined 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 shareholder
may incur brokerage costs when converting into cash. Additional details
are set forth in the "Statement of
Additional Information."

Due to the high cost of maintaining smaller accounts,
the Board of Directors has authorized the Fund to close shareholder
accounts where their value falls below the current minimum initial
investment requirement at the
time of initial purchase as a result of redemptions and not as the
result 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 redemp-
tions 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.

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 as-
sumes 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 pro-
grams, liquidation of shares in excess of dividends and
distributions reinvested will diminish and may exhaust
your account, particularly during a period of declining share values.

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

HOW TO EXCHANGE SHARES
BETWEEN FUNDS

Shareholders may exchange their Fund shares, which have been held in
open account for 15 days or more, and for which good payment has been
received, for identically
registered shares of any 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 and 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 will not
accept any new accounts, including IRAs and other retirement plans,
until further notice, nor will Babson Enterprise Fund accept transfers
from shareholders of other Babson Funds, who were not shareholders of
record of Babson Enterprise Fund at the close of business on January 31,
1992.

To authorize the Telephone/Telegraph Exchange Privi-
lege, all registered owners must sign the appropriate
section on the original application, or the Fund must
receive a special authorization form, provided upon re-
quest. 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
and without prior notice under any circumstances where con-
tinuance 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. An exchange between Funds involves
the sale of an asset. Unless the shareholder account is tax-deferred,
this is a taxable event.

HOW SHARE PRICE IS DETERMINED

In order to determine the price at which new shares will be sold and at
which issued shares presented for redemp-
tion 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 Deter-
mined" in the "Statement of Additional Information."

The price at which new shares of the Fund will be sold and at which
issued shares presented for redemption will
be liquidated is computed once daily at 4:00 P.M. (Eastern Time), except
on those days when the Fund is not open for business.

The per share calculation is made by subtracting from
the Fund's total assets any liabilities and then dividing
into this amount the total outstanding shares as of the date of the
calculation.

Each security listed on an Exchange is valued at its last sale price on
that Exchange on the date as of which assets are valued. Where the
security is listed on more than one Exchange, the Fund will use the
price of that Exchange which it generally considers to be the principal
Exchange on which the stock is traded. Lacking sales, the security is
valued at the mean between the last current closing bid
and asked prices. An unlisted security for which over-the-counter market
quotations are readily available is valued at the mean between the last
current bid and asked prices. When market quotations are not readily
available, any security or other asset is valued at its fair value as
determined in good faith by the Board of Directors.

OFFICERS AND DIRECTORS

The officers of the 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 "State-
ment of Additional Information."

MANAGEMENT AND INVESTMENT COUNSEL

Jones & Babson, Inc. was founded in 1960. It organized the Fund in 1991,
and acts as its manager and principal underwriter. Pursuant to the
current Management Agreement, Jones & Babson, Inc. provides or pays the
cost of all management, supervisory and administrative services
required in the normal operation of the Fund. This includes investment
management and supervision; fees of the
custodian, independent auditors and legal counsel; remuneration of
officers, directors and other personnel; rent; shareholder services,
including the maintenance of the shareholder accounting system and
transfer agency;
and such other items as are incidental to corporate
administration.

Not considered normal operating expenses, and there-
fore payable by the Fund, are taxes, interest, governmen-
tal 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 David L. Babson & Co. Inc. 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. It has an experienced investment analysis and research
staff which eliminates the need for Jones & Babson, Inc. and the Fund to
maintain an extensive duplicate staff, with the consequent increase in
the cost of
investment advisory service. The cost of the services of David L. Babson
& Co. Inc. is included in the fee of Jones & Babson, Inc. The Management
Agreement limits the
liability of the manager and its investment counsel, as
well as their officers, directors and personnel, to acts or omissions
involving willful malfeasance, bad faith,
gross negligence or reckless disregard of their duties.
Lance F. James and Peter C. Schliemann have been the
co-managers of Babson Enterprise Fund II since its
inception in 1991. Mr. James joined David L. Babson & Co. in 1986, and
has 19 years of investment management experience. Mr. Schliemann joined
the Babson organization in 1979, and has 29 years of investment
management
experience.

As compensation for all the foregoing services, the Fund pays Jones &
Babson, Inc. a fee at the annual rate of
150/100 of one percent (1.50%) of the first $30 million and 1% of
amounts in excess of $30 million 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.
Jones & Babson, Inc. pays David L. Babson & Co. Inc. a fee of 70/100 of
one percent (.70%) of the first $30 million and 50/100 of 1% (.50%) of
amounts in excess of $30 million of average daily total net assets,
which is computed daily and paid semimonthly. The total expenses of the
Fund for the fiscal year ended November 30, 1997, amounted to 128/100 of
one percent (1.28%) of the average net assets.

Certain officers and directors of the Fund are also officers or
directors or both of other Babson Funds, Jones & Babson, Inc. or David
L. Babson & Co. Inc.

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

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.

The current Management Agreement between the Fund and Jones & Babson,
Inc., which includes the Investment Counsel Agreement between Jones &
Babson, Inc. and David L. Babson & Co. Inc., 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 annu-
ally by the Board of Directors of the Fund or by the vote of a majority
of the outstanding voting securities of the Fund, and, provided also
that such continuance is approved by the vote of a majority of the
directors who are not parties to the Agreements or interested persons of
any such party at a meeting held in person and called specifically for
the purpose of evaluating and voting on such approval. Both Agreements
provide that either party may terminate by
giving the other 60 days written notice. The Agreements terminate
automatically if assigned by either party, as required under the
Investment Company Act of 1940.

GENERAL INFORMATION AND HISTORY

The Fund, incorporated in Maryland on February 5,
1991, has a present authorized capitalization of 10,000,000 shares of $1
par value common stock. All shares are of the same class with like
rights and privileges. Each full and fractional share, when issued and
outstanding, has:
(1) equal voting rights with respect to matters which affect the Fund,
and (2) equal dividend, distribution and
redemption rights to the assets of the Fund. Shares when issued are
fully paid and non-assessable. The Fund may create other series of stock
but will not issue any senior securities. Shareholders do not have pre-
emptive or
conversion rights.

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

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

The Fund may use the name "Babson" in its name so
long as Jones & Babson, Inc. is continued as manager and David L. Babson
& Co. Inc. 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

On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law made significant changes to
the Internal Revenue Code. Because many of these changes are complex,
they are discussed in the "Statement of Additional Information."

Distributions from net investment income and from capital gains realized
on the sale of securities, if any, will
be declared annually on or before December 31. Dividend and capital
gains distributions will be reinvested auto-
matically 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 or to any excise 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 and short-term capital gains will
be taxable to shareholders as ordinary income, and will generally
qualify in part for the 70%
dividends-received deduction for corporations. The portion of the
dividends so qualified depends on the aggregate
taxable qualifying dividend income received by the Fund from domestic
(U.S.) sources and, under the 1997 Act, compliance with certain holding
period requirements. 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 corpo-
rations. Shareholders are notified annually by the Fund as to federal
tax status of dividends and distributions paid by the Fund. Under the
1997 Act, the Fund is required to tell shareholders how much of their
capital gain distribution is subject to the 28% tax rate. The remainder
of the capital gain would be subject to the 20% tax rate. 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 gains net income (the excess of short-
and long-term
capital gain over short- and long-term capital loss) for the one-year
period ending each November 30; and (3) 100% of any undistributed
ordinary or capital gain net income from the prior calendar year.
Dividends declared in Octo-
ber, November or December and made payable to shareholders of record in
such a month are deemed to have been paid by the Fund and received by
shareholders on Decem-
ber 31 of such year, so long as the dividends are actually paid before
February 1 of the following year.

To comply with IRS regulations, the 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. Share-
holders not subject to tax on their income will not be required to pay
tax on amounts distributed to them.

THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT
IN THE FUND.

SHAREHOLDER SERVICES

The Fund and its manager offer shareholders a broad variety of services
described throughout this prospectus.
In addition, the following services are available:

Automatic Monthly Investment - You may elect to make monthly
investments in a constant dollar amount from your checking account ($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
require-
ments.

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 Univer-
sal Retirement Plan - which is suitable for all who are self-employed,
including sole proprietors, partnerships and corporations. The Universal
Prototype includes both money purchase pension and profit-sharing plan
options.

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

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

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

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 indi-
vidual 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 Enterprise Fund II, Inc.
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306

INDEPENDENT AUDITORS
ERNST & YOUNG LLP
Kansas City, Missouri

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

JOHN G. DYER
Kansas City, Missouri

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

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

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.

BABSON FUNDS
JONES & BABSON DISTRIBUTORS
A member of the Generali Group

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

JB2B 3/98

PART B

BABSON ENTERPRISE FUND II, INC.

STATEMENT OF ADDITIONAL
INFORMATION

March 31, 1998

This Statement is not a prospectus but should be read in
conjunction with the Fund's current Prospectus dated March 31,
1998. To obtain the Prospectus please call the Fund toll-free at
1-800-4-BABSON (1-800-422-2766), or in the Kansas City area
751-5900.

TABLE OF CONTENTS

Investment Objective and Policies 2
Portfolio Transactions 2
Investment Restrictions 3
Performance Measures 4
How the Fund's Shares are Distributed 4
How Share Purchases are Handled 4
Redemption of Shares 5
Signature Guarantees 5
Management and Investment Counsel 6
How Share Price is Determined 6
Officers and Directors 6
Dividends, Distributions and Their Taxation 8
Custodian 11
Independent Auditors 12
Other Jones & Babson Funds 12
Financial Statements 13

JB53 3/98

INVESTMENT OBJECTIVE AND POLICIES

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

All assets of the Fund will be invested in
marketable securities composed principally of
common stocks and securities convertible into
common stock. Necessary reserves will be held in
cash or high-quality short-term debt obligations
readily changeable to cash, such as treasury bills,
commercial paper or repurchase agreements. The
Fund retains the freedom to administer the portfolio
of the Fund accordingly when, in its judgment,
economic and market conditions make such a course
desirable. Normally, however, the Fund will
maintain at least 80% of the portfolio in common
stocks. There are no restrictions or guidelines
regarding the investment of Fund assets in shares
listed on an exchange or traded over-the-counter.

The overall income return on the Portfolio may be
low because smaller companies frequently need to
retain all or most of their profits to finance their
growth. Thus, a number of the stocks held by the
Fund will have small dividend yields, or none. If the
companies are successful, this plow-back of earnings
and internal financing of growth without the need to
issue additional shares ultimately should enhance the
companies' per share earnings and dividend
capability and make their shares more attractive in
the marketplace.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for the Fund
are made by Jones & Babson, Inc. pursuant to
recommendations by David L. Babson & Co. Inc.
Officers of the Fund and Jones & Babson, Inc. are
generally responsible for implementing or
supervising these decisions, including allocation of
portfolio brokerage and principal business as well as
the negotiation of commissions and/or the price of
the securities. In instances where securities are
purchased on a commission basis, the Fund will seek
competitive and reasonable commission rates based
on circumstances of the trade involved and to the
extent that they do not detract from the quality of the
execution.

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

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

No commitment is made to any broker or dealer
with regard to placing of orders for the purchase or
sale of Fund portfolio securities, and no specific
formula is used in placing such business. Allocation
is reviewed regularly by both the Board of Directors
of the Fund and Jones & Babson, Inc.

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

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

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

INVESTMENT RESTRICTIONS

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

The Fund will not: (1) purchase the securities of
any one issuer, except the United States
Government, if immediately after and as a result of
such purchase (a) the value of the holdings of the
Fund in the securities of such issuer exceeds 5% of
the value of the Fund's total assets, or (b) the Fund
owns more than 10% of the outstanding voting
securities, or any other class of securities, of such
issuer; (2) engage in the purchase or sale of real
estate, commodities or futures contracts; (3)
underwrite the securities of other issuers; (4) make
loans to any of its officers, directors, or employees,
or to its manager, or general distributor, or officers
or directors thereof; (5) make 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 in the open market at
ordinary broker's commission, but not in excess of
5% of the Fund's assets, or pursuant to a plan of
merger or consolidation; (9) invest in the aggregate
more than 5% of the value of its gross assets in the
securities of issuers (other than federal, state,
territorial, or local governments, or corporations, or
authorities established thereby), which, including
predecessors, have not had at least three years'
continuous operations nor invest 25% or more of the
Fund's total 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.

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
year (or other) periods at the
end of the 1, 5 or 10 year (or
other) periods (or fractional
portions thereof).

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

For the one year 12/1/96-11/30/97 35.29%

For the five years 12/1/92-11/30/97 18.19%

From commencement of
operation to 11/30/97* 17.31%
__________________________________________
*The Fund commenced operation August 5, 1991.

HOW THE FUND'S SHARES ARE
DISTRIBUTED

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

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

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

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

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

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

The Fund reserves the 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.

MANAGEMENT AND INVESTMENT
COUNSEL

As a part of the Management Agreement, Jones &
Babson, Inc. employs at its own expense David L.
Babson & Co. Inc., as its investment counsel. David
L. Babson & Co. Inc. was founded in 1940 as a
private investment research and counseling organ-
ization. David L. Babson & Co. Inc. is a wholly-
owned subsidiary of Massachusetts Mutual Life
Insurance Company. David L. Babson & Co. Inc.
serves individual, corporate and other institutional
clients. It participates with Jones & Babson in the
management of nine Babson no-load mutual funds.

The aggregate management fees paid to Jones &
Babson, Inc. during the most recent fiscal year
ended November 30, 1997, and from which Jones &
Babson, Inc. paid all the Fund's expenses except
those payable directly by the Fund, were $760,997.
The annual fee charged by Jones & Babson, Inc.
covers all normal operating costs of the Fund.

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 cost of the services of David
L. Babson & Co. Inc., is included in the services of
Jones & Babson, Inc. During the most recent fiscal
year ended November 30, 1997, Jones & Babson,
Inc. paid David L. Babson & Co. Inc. fees
amounting to $365,461.

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
on days on which changes in the value of a Fund's
portfolio securities will not materially affect the net
asset value, or days during which no security is
tendered for redemption and no order to purchase or
sell such security is received by the Fund, or the
following holidays:

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

OFFICERS AND DIRECTORS

The 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 and their ages. 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 (56), President and Director.
President and Director, Jones & Babson, Inc.,
David L. Babson Growth Fund, Inc., D.L. Babson
Money Market Fund, Inc., D.L. Babson Tax-Free
Income Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund,
Inc., Scout Stock Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout Tax-
Free Money Market Fund, Inc., Scout Regional
Fund, Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Scout Capital Preservation
Fund, Inc., Scout Kansas Tax-Exempt Bond Fund,
Inc., Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo
USA Global Fund, Inc., Buffalo Small Cap Fund,
Inc., Investors Mark Series Fund, Inc.; President
and Trustee, D.L. Babson Bond Trust; Director,
AFBA Five Star Fund, Inc.
________________________________________

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

Francis C. Rood (63), Director. Retired, 73-395
Agave Lane, Palm Desert, California 92260-6653.
Formerly Vice President of Finance, Hallmark
Cards, Inc.; Director, David L. Babson Growth
Fund, Inc., D.L. Babson Money Market Fund, Inc.,
D.L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson 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., Buffalo
Small Cap Fund, Inc., Investors Mark Series Fund,
Inc.; Trustee, D.L. Babson Bond Trust.

William H. Russell (74), Director. Financial
Consultant, 645 West 67th Street, Kansas City,
Missouri 64113; previously 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 Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund, Inc.,
Buffalo Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc., Buffalo Small Cap Fund, Inc.,
Investors Mark Series Fund, Inc.; Trustee, D.L.
Babson Bond Trust.

H. David Rybolt (55), Director. Consultant, HDR
Associates, P.O. Box 2468, Shawnee Mission,
Kansas 66201; 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 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., Buffalo
Small Cap Fund, Inc., Investors Mark Series Fund,
Inc.; Trustee, D.L. Babson Bond Trust.

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

Michael A. Brummel (40), Vice President,
Assistant Secretary and Assistant Treasurer.
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
Value Fund, Inc., Shadow Stock Fund, Inc., Babson-
Stewart Ivory International Fund, Inc., D.L. Babson
Bond Trust, Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout Regional
Fund, Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Scout Capital Preservation
Fund, Inc., Scout Kansas Tax-Exempt Bond Fund,
Inc., Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo
USA Global Fund, Inc., Buffalo Small Cap Fund,
Inc.

Martin A. Cramer (48), Vice President and
Secretary. 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 Value Fund, Inc., Shadow Stock
Fund, Inc., Babson-Stewart Ivory International Fund,
Inc., D.L. Babson Bond Trust; Scout Stock Fund,
Inc., Scout Bond Fund, Inc., Scout Money Market
Fund, Inc., Scout Tax-Free Money Market Fund,
Inc., Scout Regional Fund, Inc., Scout WorldWide
Fund, Inc., Scout Balanced Fund, Inc., Scout Capital
Preservation Fund, Inc., Scout Kansas Tax-Exempt
Bond Fund, Inc., Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc., Buffalo Small
Cap Fund, Inc.; Secretary and Assistant Vice
President, AFBA Five Star Fund, Inc.; Secretary,
Investors Mark Series Fund, Inc.

Constance E. Martin (36), Vice President.
Assistant Vice President, Jones & Babson, Inc.; Vice
President, David L. Babson Growth Fund, Inc., D.L.
Babson Money Market Fund, Inc., D.L. Babson Tax-
Free Income Fund, Inc., Babson Enterprise Fund,
Inc., Babson Value Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D.L. Babson Bond Trust,
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., Scout Capital
Preservation Fund, Inc., Scout Kansas Tax-Exempt
Bond Fund, Inc., Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc., Buffalo Small
Cap Fund, Inc.

Lance F. James (43), Vice President-Portfolio.
Senior Vice President, David L. Babson & Co. Inc., One
Memorial Drive, Cambridge, Massachusetts 02142.

Peter C. Schliemann (52), Vice President-
Portfolio. Executive Vice President and Director,
David L. Babson & Co. Inc., One Memorial Drive,
Cambridge, Massachusetts 02142; Vice President -
Portfolio, Babson Enterprise Fund, Inc., Shadow
Stock Fund, Inc.

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.

COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Total Compensation
Compensation Benefits Accrued As Annual Benefits From All Babson Funds
Name of Director From the Fund Part of Fund Expenses Upon Retirement Paid to Directors**
______________ _____________ __________________ _____________ ___________________
</CAPTION>
<S> <C> <C> <C> <C>
Larry D. Armel* -- -- -- --
Francis C. Rood $500 -- -- $7,250
William H. Russell $500 -- -- $7,625
H. David Rybolt $500 -- -- $7,250
</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. Rood and Rybolt for services as directors or trustees
of eight Babson Funds and to Mr. Russell for services as a director
or trustee of nine Babson Funds during the fiscal year ended
November 30, 1997. Directors' fees are paid by the Funds'
manager and not by the Funds themselves.

Messrs. Rood, Russell and Rybolt have no
financial interest in, nor are they affiliated with
either Jones & Babson, Inc. or David L. Babson &
Co. Inc.

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

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% 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.

DIVIDENDS, DISTRIBUTIONS
AND THEIR TAXATION

Distributions

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

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

Under the Taxpayer Relief Act of 1997 (the 1997
Act), the Fund is required to report the capital gain
distributions paid to you from gains realized on the
sale of portfolio securities using the following
categories:

28% tax rate gains: Gains resulting from
securities sold by the Fund after July 28, 1997 that
were held for more than one year but not more than
18 months, and securities sold by the Fund before
May 7, 1997 that were held for more than one year.
These gains will be taxable to individual investors at
a maximum rate of 28%.

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

The 1997 Act also provides for a new maximum
rate of tax on capital gains of 18% for individuals in
the 28% or higher federal income tax brackets and
8% for individuals in the 15% federal income tax
bracket for qualified 5-year gains. For individuals
in the 15% bracket, qualified 5-year gains are net
gains on securities held for more than 5 years which
are sold after December 31, 2000. For individuals
who are subject to tax at higher rates, qualified 5-
year gains are net gains on securities which are
purchased after December 31, 2000 and are held for
more than 5 years. Taxpayers subject to tax at the
higher rates may also make an election for shares
held on January 1, 2001 to recognize gain on their
shares in order to qualify such shares as qualified 5-
year property.

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

Certain Distributions Paid in January.
Distributions which are declared in October,
November or December and paid to you in January
of the following year will be treated for tax purposes
as if they had been received by you on December 31
of the year in which they were declared. The Fund
will report this income to you on your Form 1099-
DIV for the year in which these distributions were
declared.

Information on the Tax Character of
Distributions. The Fund will inform you of the
amount and character of your distributions at the
time they are paid, and will advise you of the tax
status for federal income tax purposes of such
distributions shortly after the close of each calendar
year. If you have not held Fund shares for a full
year, you may have designated and distributed to you
as ordinary income or capital gain a percentage of
income that is not equal to the actual amount of such
income earned during the period of your investment
in the Fund.

Taxes

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

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

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

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

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

Excise Tax Distribution Requirements. The
Code requires the Fund to distribute at least 98% of
its taxable ordinary income earned during the
calendar year and 98% of its capital gain net income
earned during the 12-month period ending
November 30 (in addition to undistributed amounts
from the prior year) to you by December 31 of each
year in order to avoid federal excise taxes. The Fund
intends to declare and pay sufficient dividends in
December (or in January that are treated by you as
received in December) but does not guarantee and
can give no assurances that its distributions will be
sufficient to eliminate all such taxes.

Redemption of Fund Shares. Redemptions and
exchanges of Fund shares are taxable transactions
for federal and state income tax purposes. The tax
law requires that you recognize a gain or loss in an
amount equal to the difference between your tax
basis and the amount you received in exchange for
your shares, subject to the rules described below. If
you hold your shares as a capital asset, the gain or
loss that you realize will be capital gain or loss, and
will be long-term for federal income tax purposes if
you have held your shares for more than one year at
the time of redemption or exchange. Any loss
incurred on the redemption or exchange of shares
held for six months or less will be treated as a long-
term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those
shares. The holding periods and categories of
capital gain that apply under the 1997 Act are
described above in the Distributions section.

All or a portion of any loss that you realize upon
the redemption of your Fund shares will be
disallowed to the extent that you purchase other
shares in the Fund (through reinvestment of
dividends or otherwise) within 30 days before or
after your share redemption. Any loss disallowed
under these rules will be added to your tax basis in
the new shares you purchase.

U.S. Government Obligations. Many states grant
tax-free status to dividends paid to you from interest
earned on direct obligations of the U.S. Government,
subject in some states to minimum investment
requirements that must be met by the Fund.
Investments in GNMA/FNMA securities, bankers'
acceptances, commercial paper and repurchase
agreements collateralized by U.S. Government
securities do not generally qualify for tax-free
treatment. At the end of each calendar year, the
Fund will provide you with the percentage of any
dividends paid that may qualify for tax-free
treatment on your personal income tax return. You
should consult with your own tax advisor to
determine the application of your state and local
laws to these distributions. Because the rules on
exclusion of this income are different for
corporations, corporate shareholders should consult
with their corporate tax advisors about whether any
of their distributions may be exempt from corporate
income or franchise taxes.

Dividends-Received Deduction for Corpora-
tions. As a corporate shareholder, you should note
that a percentage of the dividends paid by the Fund
for the most recent calendar year qualified for the
dividends-received deduction. You will be permitted
in some circumstances to deduct these qualified
dividends, thereby reducing the tax that you would
otherwise be required to pay on these dividends. The
dividends-received deduction will be available only
with respect to dividends designated by the Fund as
eligible for such treatment. Dividends so designated
by the Fund must be attributable to dividends earned
by the Fund from U.S. corporations that were not
debt-financed.

Under the 1997 Act, the amount that the Fund
may designate as eligible for the dividends-received
deduction will be reduced or eliminated if the shares
on which the dividends were earned by the Fund
were debt-financed or held by the Fund for less than
a 46 day period during a 90 day period beginning 45
days before the ex-dividend date of the corporate
stock. Similarly, if your Fund shares are debt-
financed or held by you for less than this same 46
day period, then the dividends-received deduction
may also be reduced or eliminated. Even if
designated as dividends eligible for the dividends-
received deduction, all dividends (including the
deducted portion) must be included in your
alternative minimum taxable income calculation.

Conversion Transactions. Gains realized by a
Fund from transactions that are deemed to be
conversion transactions under the Code, and that
would otherwise produce capital gain may be
recharacterized as ordinary income to the extent that
such gain does not exceed an amount defined as the
applicable imputed income amount. A conversion
transaction is any transaction in which substantially
all of the Fund's expected return is attributable to the
time value of the Fund's net investment in such
transaction, and any one of the following criteria are
met:

(1) there is an acquisition of property with a
substantially contemporaneous agreement to
sell the same or substantially identical
property in the future;

(2) the transaction is an applicable straddle;

(3) the transaction was marketed or sold to the
Fund on the basis that it would have the
economic characteristics of a loan but would
be taxed as capital gain; or

(4) the transaction is specified in Treasury
regulations to be promulgated in the future.

The applicable imputed income amount, which
represents the deemed return on the conversion
transaction based upon the time value of money, is
computed using a yield equal to 120% of the
applicable federal rate, reduced by any prior
recharacterizations under this provision or the
provisions of Section 263(g) of the Code dealing
with capitalized carrying costs.

Stripped Preferred Stock. Occasionally, the
Fund may purchase stripped preferred stock that is
subject to special tax treatment. Stripped preferred
stock is defined as certain preferred stock issues
where ownership of the stock has been separated
from the right to receive dividends that have not yet
become payable. The stock must have a fixed
redemption price, must not participate substantially
in the growth of the issuer and must be limited and
preferred as to dividends. The difference between
the redemption price and purchase price is taken into
Fund income over the term of the instrument as if it
were original issue discount. The amount that must
be included in each period generally depends on the
original yield to maturity, adjusted for any
prepayments of principal.

Defaulted Obligations. The Fund may be
required to accrue income on defaulted obligations
and to distribute such income to you even though it
is not currently receiving interest or principal
payments on such obligations. In order to generate
cash to satisfy these distribution requirements, the
Fund may be required to dispose of portfolio
securities that it otherwise would have continued to
hold or to use cash flows from other sources such as
the sale of Fund shares.

CUSTODIAN

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

INDEPENDENT AUDITORS

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

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, David L. Babson & Co. Inc. 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 ap-
propriately be exposed to above-average risk in
anticipation of greater rewards. This Fund is
currently closed to new shareholders.

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).

BABSON-STEWART IVORY INTERNATIONAL
FUND, INC. was organized in 1987, with the
objective of seeking 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.

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.

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.

BUFFALO SMALL CAP FUND, INC. was
organized in 1998, with the objective of long-term
capital growth by investment in equity securities of
small companies.

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 nine mutual
funds which especially seek to provide services to
customers of affiliate banks of UMB Financial
Corporation. They are: Scout Stock Fund, Inc.,
Scout Bond Fund, Inc., Scout Money Market Fund,
Inc., Scout Tax-Free Money Market Fund, Inc.,
Scout Regional Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc., Scout Capital
Preservation Fund, Inc. and Scout Kansas Tax-
Exempt Bond 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 November 30, 1997, Annual
Report to Shareholders are incorporated herein by
reference.