BABSON D L BOND TRUST, 497J, 1998-04-02

BABSON D L BOND TRUST
497J, 1998-04-02

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Babson
Bond Trust

Prospectus
March 31, 1998

A no-load mutual fund
with primary emphasis
on current regular income.

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

PROSPECTUS
March 31, 1998

D. L. BABSON
BOND TRUST

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

The D.L. Babson Bond Trust offers two Portfolios with differing maturity
lengths to investors who share the Fund's objective of providing maximum
current income and reasonable stability of principal, consistent with
its quality and maturity standards, by investing in a diversified
portfolio of fixed income securities, and who especially want the
portfolio supervision of the staff of David L. Babson & Co. Inc. This
Fund is not intended to be a complete investment program. (For a
discussion of risk factors see page 9 of this prospectus.)

PURCHASE INFORMATION

Minimum Investment
(each Portfolio selected)

Initial Purchase (unless Automatic Monthly) $ 500
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases (unless Automatic Monthly) $ 250
Subsequent Purchase (unless Automatic Monthly):
By Mail $ 50
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 dis-
tribution charges. If you need further information, please call the
Trust 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 Trust may obtain a copy without charge by writing
or calling the Trust.

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 5
Investment Objective and Portfolio Management Policy 7
Repurchase Agreements 9
Risk Factors 9
Investment Restrictions 10
Performance Measures 10
How to Purchase Shares 11
Initial Investments 11
Investments Subsequent to Initial Investment 12
Telephone Investment Service 12
Automatic Monthly Investment Plan 13
How to Redeem Shares 13
Systematic Redemption Plan 15
How to Exchange Shares Between Funds and Portfolios 16
How Share Price is Determined 17
Trustees and Officers 17
Management and Investment Counsel 17
General Information and History 19
Dividends, Distributions and Their Taxation 20
Shareholder Services 22
Shareholder Inquiries 23

D.L. BABSON BOND TRUST

FUND EXPENSES

Portfolio L

Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None

Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .95%
12b-1 fees None
Other expenses .02%
Total Fund operating expenses .97%

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
$10 $31 $54 $119

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.

D.L. BABSON BOND TRUST

FUND EXPENSES

Portfolio S

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 .65%*
12b-1 fees None
Other expenses .02%
Total Fund operating expenses .67%

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
$7 $22 $37 $84
*Reduced from .95% by the Board of Trustees through March 31, 1999.

FINANCIAL HIGHLIGHTS
The following financial highlights for each of the past ten fiscal years
have been derived from audited financial statements of D.L. Babson Bond
Trust. 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 each of the five
fiscal years from the period ended November 30, 1988 to November 30,
1992, is not covered by the report of Ernst & Young LLP.

PORTFOLIO L 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 1.55 $ 1.58 $ 1.47 $ 1.67 $ 1.62 $ 1.60 $ 1.53 $ 1.57 $ 1.52 $ 1.58
Income from investment
operations:
Net investment income .098 .107 .108 .108 .116 .124 .130 .134 .140 .154
Net gains or losses on securities
(both realized and unrealized) .010 (.030) .110 (.149) .061 .020 .071 (.039) .051 (.018)
Total from investment
operations .108 .077 .218 (.041) .177 .144 .201 .095 .191 .136
Less distributions:
Dividends from net
investment income (.098) (.107) (.108) (.108) (.116) (.124) (.131) (.135) (.141) (.196)
Distributions from
capital gains - - - (.051) (.011) - - - - -
Total distributions (.098) (.107) (.108) (.159) (.127) (.124) (.131) (.135) (.141) (.196)
Net asset value, end of year $ 1.56 $ 1.55 $ 1.58 $ 1.47 $ 1.67 $ 1.62 $ 1.60 $ 1.53 $ 1.57 $ 1.52

Total return 7.26% 5.17% 15.28% (2.71)% 11.25% 9.29% 13.70% 6.32% 13.13% 8.42%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 132 $ 142 $ 161 $ 140 $ 162 $ 142 $ 114 $ 90 $ 77 $ 66
Ratio of expenses to average
net assets .97% .97% .97% .97% .98% .99% .98% .97% .97% .97%
Ratio of net investment income to
average net assets 6.38% 6.96% 7.06% 6.95% 7.00% 7.67% 8.42% 8.81% 9.19% 9.99%
Portfolio turnover rate 59% 61% 50% 40% 80% 54% 75% 51% 51% 43%

FINANCIAL HIGHLIGHTS

</TABLE>
<TABLE>
<CAPTION>

PORTFOLIO S 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 9.77 $ 9.90 $ 9.43 $10.48 $10.33 $10.30 $ 9.85 $10.01 $ 9.82 $10.00
Income from investment
operations:
Net investment income .618 .692 .726 .694 .718 .753 .808 .853 .810 .457
Net gains or losses on securities
(both realized and unrealized) .010 (.130) .470 (.899) .207 .054 .450 (.160) .190 (.18)
Total from investment
operations .628 .562 1.196 (.205) .925 .807 1.258 .693 1.00 .277
Less distributions:
Dividends from net
investment income (.618) (.692) (.726) (.694) (.718) (.753) (.808) (.853) (.810) (.457)
Distributions from
capital gains - - - (.151) (.057) (.024) - - - -
Total distributions (.618) (.692) (.726) (.845) (.775) (.777) (.808) (.853) (.810) (.457)
Net asset value, end of year $ 9.78 $ 9.77 $ 9.90 $ 9.43 $10.48 $10.33 $10.30 $ 9.85 $10.01 $ 9.82

Total return 6.70% 5.96% 13.10% (2.06)% 9.19% 8.07% 13.35% 7.07% 10.67% 2.92%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 41 $ 34 $ 33 $ 30 $ 36 $ 31 $ 14 $ 7 $ 5 $ 3
Ratio of expenses to average
net assets .67% .66% .67% .67% .68% .67% .66% .78% .91% .70%
Ratio of net investment income to
average net assets 6.42% 7.10% 7.47% 7.02% 6.80% 7.22% 7.98% 8.65% 8.28% 7.68%
Ratio of expenses to average net assets
before voluntary reduction of
management fee .97% .96% .97% .97% .98% .97% .96% 1.08% 1.21% -
Portfolio turnover rate 65% 48% 57% 42% 147% 47% 60% 35% 27% 4%
</TABLE>

* Portfolio S became effective on March 31, 1988. On April 19, 1988,
10,875 shares were issued at a net asset value of $10.00 per share.
The percentage amounts for the period from April 19, 1988 to November
30, 1988 have been annualized.

INVESTMENT OBJECTIVE AND
PORTFOLIO MANAGEMENT POLICY

Babson Bond Trust's investment objective is to provide shareholders with
maximum current income and reasonable stability of principal, consistent
with its quality and maturity standards, by investing in a diversified
portfolio of fixed-income securities. (The Babson Bond Trust is a mutual
fund organized as a common law trust and may also be referred to
throughout this Prospectus as the Trust or the Fund.) The Trust offers
two portfolios: Portfolio L is expected to have a weighted average
maturity beyond five years, and Portfolio S is expected to have a
weighted average maturity of five years or less.

Each Portfolio normally will invest at least 80% of its assets in debt
securities such as: (1) direct or guaranteed obligations of the U.S.
government and its agencies, and (2) investment quality debt securities
issued by corporations or other business organizations including notes
and bonds.

In order to provide for unexpected redemptions and to enhance portfolio
flexibility, each Portfolio may, from time to time, maintain a
significant portion of its assets in reserves. These reserves will be
held in cash or short-term debt obligations such as U.S. treasury bills,
commercial paper, certificates of deposit, bankers' acceptances and
repurchase agreements.

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.

Although short-term trading profits are not a goal of the Trust, it is
possible that it may engage in trading activity in order to take
advantage of opportunities to enhance yield, protect principal or
improve liquidity.

For the fiscal years ended November 30, 1997, Novem-
ber 30, 1996 and November 30, 1995, the total dollar amount of brokerage
commissions paid by the Trust and the annual portfolio turnover rate
were as follows:

Portfolio L
Portfolio
Fiscal Brokerage Turnover
Year Commissions Rate

1997 None 59%
1996 None 61%
1995 None 50%

Portfolio S
Portfolio
Fiscal Brokerage Turnover
Year Commissions Rate

1997 None 65%
1996 None 48%
1995 None 57%

The Trust cannot guarantee that its objective will be achieved because
there are inherent risks in the ownership of fixed-income investments.
The value of each Portfolio's shares will reflect changes in the market
values of its investments which will vary inversely with changes in
interest rates. Dividends paid by the Trust will vary accor-
ding to the income it receives from its investments. However, the Trust
will seek, through careful management and diver-
sification, to reduce these risks and enhance the opportunities for
maximizing current income.

Portfolio Quality Standards

Each Portfolio's investments in securities issued by corporations or
other business organizations will usually be rated at the time of
purchase within the top three classifications of either Moody's
Investors Service, Inc. (Moody's) (Aaa, Aa and A) or Standard & Poor's
Corp. (S&P) (AAA, AA and A).

Up to 25% of a Portfolio's assets, however, may be invested in
securities rated Baa by Moody's or BBB by S&P. Bonds in this category
are regarded as having an
adequate capacity to pay principal and interest. Such bonds are
considered investment grade but have speculative
characteristics. This policy may be changed by the Trust's Board of
Trustees. It is anticipated that the Trust will
use obligations secured by specific assets of the issuing
corporation (such as mortgage bonds and equipment trusts) as well as
unsecured debentures which represent claims on the general credit of the
issuer.

Each Portfolio will invest only in the following "U.S. Government
Securities:"

1. Direct obligations of the U.S. Government such as bills,
notes, bonds and other debt securities issued by the U.S. Treasury.

2. Obligations of U.S. Government agencies and in-
strumentalities which are secured by the full faith and credit of the
U.S. Treasury, such as securities of the Government National Mortgage
Association, the Export-Import Bank, or the Student Loan Mar-
keting Association, or which are secured by the right of the issuer to
borrow from the Treasury such as securities issued by the Federal
Financing Bank or the U.S. Postal Service; or are supported by the
credit of the government agency or instrumentality itself, such as
securities of the Federal Home Loan Banks, Federal Farm Credit Banks, or
the Federal National Mortgage Association.

Each Portfolio may also invest, at the time of purchase, up to 25% of
its assets in Yankee Bonds - securities of
foreign-domiciled entities who register with the Securities and Exchange
Commission and borrow U.S. dollars via issues underwritten by a U.S.
syndicate for delivery in the United States - provided that such issues
are rated at the time of purchase within the top four classifications of
either Moody's (Aaa, Aa, A and Baa) or S&P (AAA, AA, A and BBB).

Each Portfolio may invest in commercial paper, including variable rate
master demand notes, of companies whose commercial paper is rated P-1 or
P-2 by Moody's or A-1
or A-2 by S&P. If not rated by either Moody's or S&P,
a company's commercial paper, including variable rate
master demand notes, may be purchased if the company has an outstanding
bond issue rated A or higher by Moody's or by S&P.

Each Portfolio may invest in variable rate master demand notes which
represent a borrowing arrangement under a
letter of agreement between a commercial paper issuer and an
institutional lender. Applicable interest rates are determined on a
formula basis and are adjusted on a monthly, quarterly, or other term as
set out in the agreement. They vary as to the right of the lender to
demand payment. It is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes,
although they are redeemable (and thus immediately repayable by the
borrower) at face value, plus accrued interest, at any time. In
connection with variable rate master demand notes, the Trust's
investment manager will monitor on an on-going basis the earning power,
cash flow and other liquidity ratios of the issuer, and the borrower's
ability to pay principal and interest on demand.

Each Portfolio may invest in certificates of deposit, bankers'
acceptances, and other commercial bank short-term obligations issued
domestically by United States banks having assets of at least $1 billion
and which are members of the Federal Deposit Insurance Corporation, or
such
securities which may be issued by holding companies of such banks.

Each Portfolio may invest in issues of the United States Treasury or a
United States Government agency subject to repurchase agreements. The
use of repurchase agreements by the Fund involves certain risks. For a
discussion of these risks see "Risk Factors Applicable to Repurchase
Agree-
ments."

Portfolio Maturity Standards

In general, the average weighted maturity of Portfolio L will be kept
within a range of 7 to 15 years, and the average weighted maturity of
Portfolio S will be kept within a range of 2 to 5 years. It will be the
policy of each Portfolio to include maturities outside these ranges when
they appear to be best suited to its investment objective. Changes in
interest rates affect the price of each Portfolio's shares inversely.
Normally, an interest rate decline will result in a share price
increase. Conversely, as interest rates rise, share prices are likely to
decline. Future interest rates cannot be accurately and consistently
forecast. Nevertheless, when management believes that interest rates are
likely to rise in the future, it will tend to shorten portfolio
maturities so that it may reinvest maturing holdings as soon as possible
and thereby obtain higher yields. When management believes that interest
rates are likely to fall in the future, it will seek to preserve and
extend the Trust's yields by lengthening the maturities of the portfolio
holdings.

REPURCHASE AGREEMENTS

A repurchase agreement involves the sale of securities to the Trust with
the concurrent agreement by the seller to repurchase the securities at
the Trust'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. This 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
Trust.

The Trust 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 Trustees of the
Trust. 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 Trust.

RISK FACTORS

Risk Factors Peculiar to
Fixed Income Obligations

The yield and the principal value of fixed income instruments are
sensitive to fluctuations in interest rates, and it is possible that an
issuer may default. Each Portfolio will seek to minimize these risks
through diversification and careful selection among securities
considered to be high quality.

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 Trust 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 pos-
sible that the Trust may not be able to perfect its interest in the
underlying securities. While the Trust's management acknowledges these
risks, it is expected that they can be controlled through stringent
security selection criteria
and careful monitoring procedures.

Risk Factors Applicable to
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 Trust 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 voting
securities of the Trust are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of the Trust. Among these
restrictions, the more important ones are that the Trust will not
purchase the securities of any issuer if more than 5% of the Trust's
total assets would be invested in the securities of such issuer, or the
Trust would hold more than 10% of any class of voting securities of such
issuer; the Fund will not make any loan (the purchase of a security
subject to a repurchase agreement or the purchase of a portion of an
issue of publicly distributed debt securities is not considered the
making of a loan); and the Trust will not borrow money, securities or
other property in any event or for any purpose whatsoever; or issue any
security senior to the shares authorized by the Trust Indenture. The
full text of these restrictions is set forth in the "Statement of
Additional Information."

There is no limitation with respect to investments in U.S. Treasury
Bills, or other obligations issued or guaranteed by the federal
government, its agencies and instrumentalities.

PERFORMANCE MEASURES

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

Total Return

The Fund may advertise "average annual total return" for each Portfolio
over various periods of time. Such total return figures show the average
percentage change in value of an investment in a Portfolio from the
beginning date of the measuring period to the end of the measuring
period. These figures reflect changes in the price of the Funds' shares
and assume that any income dividends and/or capital gains distributions
made by a Portfolio during the period were reinvested in shares of the
Portfolio. 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 a Portfolio's operations, or on a year-by-
year basis). When considering "average" total re-
turn figures for periods longer than one year, it is important to note
that a Portfolio'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, each Portfolio may
compare its performance to that of other mutual funds with similar
investment objectives and to bond or other relevant indices. For
example, the Fund 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 Shearson/Lehman
Government/Corporate Index, an unmanaged index of government and
corporate bonds. Performance information, rankings, ratings, published
editorial comments and listings as reported in national financial
publications such as Kiplinger's Personal Finance Magazine, Business
Week, Morningstar Mutual Funds, Investor's Business Daily, Institutional
Investor, The Wall Street Journal, Mutual Fund Forecaster, No- Load
Investor, Money, Forbes, Fortune and Barron's may also be used in
comparing performance of the Fund. Performance com-
parisons should not be considered as representative of the future
performance of any Fund. Further information re-
garding the performance of the Fund is contained in the "Statement of
Additional Information."

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

HOW TO PURCHASE SHARES

Shares are purchased at net asset value (no sales
charge) from the Fund through its agent, Jones & Babson, Inc., BMA
Tower, 700 Karnes Blvd., Kansas City,
MO 64108-3306. For information call toll free
1-800-4-BABSON (1-800-422-2766), or in the Kansas City area 751-5900. If
an investor wishes to engage the
services of any other broker to purchase (or redeem) shares of the Fund,
a fee 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 each Portfolio'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 pro-
cessed at the net asset value per share next effective after a purchase
order has been received by the Fund.

The Fund reserves the right in its sole discretion to
withdraw all or any part of the offering made by this prospectus or to
reject purchase orders when, in the judgment of management, such
withdrawal or rejection is in the best interest of the Fund and its
shareholders. The Fund also reserves the right at any time to waive or
increase the
minimum requirements applicable to initial or subsequent investments
with respect to any person or class of persons, which include
shareholders of the Fund's special investment programs. The Fund
reserves the right to refuse to accept orders for Fund shares unless
accompanied by payment, except when a responsible person has indemnified
the Fund against losses resulting from the failure of inves-
tors 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 for each Portfolio
selected is $500 unless your purchase is pursuant to an IRA or the
Uniform Transfers (Gifts) to Minors Act, in which case the minimum
initial purchase is $250 for each Portfolio selected. However, if
electing the Automatic Monthly Investment Plan, the minimum initial
purchase for each Portfolio selected is reduced to $100 for all
accounts. Make your check payable to UMB Bank, n.a. Mail your
application and check to:

D.L. Babson Bond Trust
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306

Initial investments - By wire. You may purchase shares of a Portfolio
by wiring funds ($1,000 minimum for each Portfolio selected) 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 D.L. Babson Bond Trust (insert name
and number of Portfolio)
Portfolio L /AC=987032-6256
Portfolio S /AC=987032-6248
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 $50 or more
if purchases are made by mail, $1,000 or more if purchases are made by
wire, or $100 or more if pur-
chases 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 registration, your
account number and the Babson Fund (Portfo-
lio) in which you are purchasing shares. It also is advisable to notify
the Fund by telephone that you have sent a wire purchase order to the
bank.

TELEPHONE INVESTMENT SERVICE

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

The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are not
followed, the Fund may be liable for losses due to unauthorized or
fraudulent instructions. Such procedures may include, but are not
limited to requiring personal identification prior to acting upon 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 constant dollar amount
from your checking account ($50 minimum, after an initial investment of
$100 or more for any account). The Fund will draft your checking account
on the same day each month in the amount you authorize in your
application, or, subsequently, on a special authorization form provided
upon request. Availability and continuance of this privilege is subject
to acceptance and approval by the Fund and all participating banks. If
the date selected falls on a day upon which the Fund shares are not
priced, investment will be made on the first date thereafter upon which
Fund shares are priced. The Fund will not be responsible for the
consequences of delays, including delays in the banking or Federal
Reserve wire systems.

HOW TO REDEEM SHARES

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

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

In each instance you must comply with the general requirements relating
to all redemptions as well as with specific requirements set out for the
particular redemption method you select. If you wish to expedite
redemptions by using the telephone/telegraph privilege, you should
carefully note the special requirements and limitations relating to
these methods. If an investor wishes to engage the services of any other
broker to redeem (or purchase) shares of the Fund, a fee may be charged
by such broker.

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

Requests which are subject to special conditions or which specify an
effective date other than as provided
herein cannot be accepted. All redemption requests
must be transmitted to the Fund at BMA Tower, 700 Karnes Blvd., Kansas
City, MO 64108-3306. The Fund will redeem shares at the price (net asset
value per share) next computed after receipt of a redemption request in
"good order." (See "How Share Price is Determined.")

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

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

Signature Guarantees are required in connection with all redemptions of
$50,000 or more by mail, or changes in share registration, except as
hereinafter provided. These requirements may be waived by the Fund in
certain 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.

Due to the high cost of maintaining smaller accounts, the Board of
Trustees 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 assumes the additional expenses arising out of
this type of plan, but it reserves the right to initiate such a charge
at any time in the future when it deems it necessary. If such a charge
is imposed, participants will be provided 30 days notice.

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

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

You may revoke or change your plan or redeem all of your shares
remaining 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 AND PORTFOLIOS

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
Portfolio, 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 or Portfolio into
which it is exchanged.

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

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 request. During periods of
increased market activity, you may have diffi-
culty reaching the Fund by telephone, in which case you should contact
the Fund by mail or telegraph. The Fund reserves the right to initiate a
charge for this service and to terminate or modify any or all of the
privileges in connection with this service at any time and without prior
notice under any circumstances where continuance of these privileges
would be detrimental to the Fund or its shareholders such as an
emergency, or where the volume of such activity threatens the ability of
the Fund to conduct business, or under any other circumstances, upon 60
days written notice to shareholders. The Fund will not be responsible
for the consequences of delays including delays in the banking or
Federal Reserve wire systems.

Exchanges by mail may be accomplished by a written request properly
signed by all registered owners identifying the account, the number of
shares or dollar amount to be redeemed for exchange and the Fund or
Portfolio 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 Portfolio, 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 or Portfolios 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 of each Portfolio
will be sold and at which issued shares
presented for redemption will be liquidated, the net asset value per
share is computed once daily, Monday through Friday, at the specific
time during the day that the Board of Trustees sets at least annually,
except on days on which changes in the value of portfolio securities
will not materially affect the net asset value, or days during which no
security is tendered for redemption and no order to purchase or sell
such security is received by the Fund, or customary holidays. For a list
of the holidays during which the Fund is not open for business, see "How
Share Price is Determined" in the "Statement of Additional Information."

The price at which new shares of each Portfolio 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 each Portfolio's
total assets any liabilities and then dividing into this amount the
total outstanding shares as of the date of the calculation.

Debt securities (other than short-term obligations), in-
cluding listed issues, are valued on the basis of valuations furnished
by a pricing service which utilizes both dealer-supplied valuations and
electronic data processing techniques which take into account
appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive
reliance upon exchange or over-the-counter prices, since such valuations
are believed to reflect more accurately the fair value of such
securities. Use of the pricing service has been approved by the Trust's
Board of Trustees. Short-term obligations are valued at amortized cost,
which constitutes fair value as determined by the Board of Trustees. If
acquired, preferred stocks, common stocks and warrants, if listed on an
exchange, will be valued at the last sale price on the principal
exchange upon which the security is traded on the Trust evaluation date.
If not traded, or if unlisted, the security is valued at the mean
between the last current bid and asked prices. Portfolio securities for
which there are no such quotations or valuations are valued at fair
value as determined in good faith by or at the direction of the Board of
Trustees.

TRUSTEES AND OFFICERS

The officers of the Trust manage its day-to-day operations. The Trust's
manager and its officers are subject to the supervision and control of
the Board of Trustees. A list of the trustees and officers of the Trust
and a brief statement of their present positions and principal
occupations during the past five years is set forth in the "Statement of
Additional Information."

MANAGEMENT AND INVESTMENT COUNSEL

Jones & Babson, Inc. was founded in 1960. It assumed the management of
the Trust on March 1, 1972. Jones & Babson, Inc. also acts as the
Trust's 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 Trust. This includes investment management and
supervision; fees of the custodian, independent auditors and legal
counsel; remuneration of Trust-
ees, officers and other personnel; rent; shareholder ser-
vices, including the maintenance of the shareholder ac-
counting system and transfer agency; and such other items as are
incidental to the Trust's administration.

Not considered normal operating expenses, and therefore payable by the
Trust, are taxes, fees and other charges of governments and their
agencies including the cost of qualifying the Trust's shares for sale in
any jurisdiction, interest, brokerage costs, dues, and all 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 Trust, its trustees or officers
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
institu-
tional 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 Trust
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. Edward L. Martin became the manager of Babson Bond
Trust in 1984, and also heads the Babson fixed income department. A
Chartered Financial Analyst with 27 years of investment management
experience, he joined David L. Babson & Co. in 1984.

As compensation for all the foregoing services, Portfolio L and
Portfolio S pay Jones & Babson, Inc. a fee amounting to 95/100 of one
percent (.95%) of each Portfolio's average daily net assets except that
during the period from May 1, 1988 through March 31, 1999 Jones & Babson
has waived 30/100 of one percent (.30%) of the fee for Portfolio S with
the effect that the fee charged for Portfolio S is 65/100 of one percent
(.65%).

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 Trust shareholders are taken into account.
Jones & Babson, Inc. pays David L. Babson & Co. Inc. a fee of 25/100 of
one percent (.25%) of the average daily total net assets, which is
computed daily and paid semimonthly. This fee has been reduced to 15/100
of one percent (.15%) for Portfolio S until March 31, 1999. The total
expenses of Portfolio L for the fiscal year ended November 30, 1997
amounted to 97/100 of one percent (.97%) of its average net assets. The
total expenses of Portfolio S for the fiscal year ended November 30,
1997 amounted to 67/100 of one percent (.67%) of its average net assets.
In order to reduce the expense ratio of Portfolio S during its initial
periods of operations, while expenses relative to income may otherwise
be higher than anticipated, the Fund's manager, Jones & Babson, Inc.,
has waived 30/100 of one percent (.30%) of the fee for Portfolio S with
the effect that the fee charged for Portfolio S is
65/100 of one percent (.65%) during the period from
May 1, 1988 through March 31, 1999.

Certain officers and trustees of the Trust 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 Trust 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 annually by the Board of
Trustees of the Trust or by the vote of
a majority of the outstanding voting securities of the Trust, and
provided also that such continuance is approved by a vote of the
majority of the Trustees 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 Trust was organized in Kansas City, Missouri, as a common law trust
under an Agreement and Declaration of Trust dated November 2, 1944,
which was amended and restated on February 24, 1989. It originally was
known as Mutual Trust. When it came under the management of Jones &
Babson, Inc., its name was changed to Babson (D.L.) Income Trust. On
February 14, 1984, shareholders changed its name to D.L. Babson Bond
Trust. On March 31, 1988, the issued and outstanding shares of
beneficial interest of the Trust were redesignated as "Portfolio L"
(longer term) and a second class or series of shares known as "Portfolio
S" (shorter term) was created. The Trust is an open-end, diversified,
fully-managed investment company commonly known as a mutual fund. Each
full and fractional share, when issued and outstanding, has: (1) equal
voting rights with respect to matters which affect the Trust in general
and with respect to matters relating solely to the interests of the
Portfolio for which issued, and (2) equal dividend, distribution and
redemption rights to the assets of the Portfolio for which issued and to
general assets, if any, of the Trust which are not specifically
allocated to either Portfolio. Shares when issued are fully paid and
non-assessable. Except for
the priority of each share in the assets of its Portfolio, the Fund will
not issue any class of securities senior to any other class. The initial
par value of the shares was $1.00 each. On September 30, 1955, this was
changed to $0.25 each, and three additional shares at that time were
issued for each share then outstanding. 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 Trustees can elect 100% of the Trustees, 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 Trustees.

The Fund's Agreement and Declaration of Trust permits 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
re-
move trustees. These procedures are described in the
"Statement of Additional Information" under the caption "Officers and
Trustees." 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 trustees; (2) approval 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."

At the close of each business day, dividends consisting of substantially
all of each Portfolio's net investment income are declared payable to
shareholders of record at the close of the previous business day, and
credited to their accounts. All daily dividends declared during a given
month will be distributed on the last day of the month. Distribution
from capital gains realized on the sale of securities, if any, will be
declared annually on or before December 31. Dividends and capital gains
distributions are automatically reinvested in additional shares at net
asset value, unless the share-
holder has elected in writing to receive cash. The method of payment
elected remains in effect until the Fund is notified in writing to the
contrary. If at the time of a
complete redemption and closing of a shareholder account, there is net
undistributed income to the credit of the shareholder, it will be paid
by separate check on the next dividend distribution date. In the case of
a partial redemption, any net undistributed credit will be distributed
on the next dividend date according to the shareholder's instructions on
file with the Fund. Shares begin earning income on the day following the
effective date of purchase. Income earned by the Fund on weekends,
holidays and other days on which the Fund is closed for business is
declared as a dividend on the next day on which the Fund is open for
business, except for month-ends when such dividend is declared as of the
last day of the month.

The Fund paid dividends each quarter from its inception to March, 1988,
and has paid monthly dividends from April, 1988, through the end of its
current fiscal year, November 30, 1997. Past dividends, however, are no
guarantee of future payouts.

Each Portfolio within the Fund has qualified and intends to continue to
qualify for taxation as a "regulated investment company" under the
Internal Revenue Code so that each Portfolio will not be subject to
federal income tax or to any excise tax to the extent it distributes its
income to shareholders. Dividends, either in cash or reinvested in
shares, paid by a Portfolio from net investment income and short-term
capital gains will be taxable to shareholders as ordinary income. Due to
the make-up of each Portfolio, it is anticipated that only a small
portion, if any, of dividends paid will qualify 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 each Portfolio 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, if
any, of the dividend income which qualifies for such treatment.

Whether paid in cash or additional shares of a Portfolio, and regardless
of the length of time the shares in such Portfolio have been owned by
the shareholder, distributions from long-term capital gains are taxable
to shareholders as such, but are not eligible for the dividends-received
deduction for corporations. Shareholders are notified annually by the
Fund as to federal tax status of dividends and distributions paid by a
Portfolio. 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.

Many states grant tax-free status to dividends paid from interest earned
on direct obligations of the U.S. Government, subject to certain
restrictions. The Fund will provide you with information at the end of
each calendar year on the amount of such dividends that may qualify for
exemption on your individual tax return.

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 ex-
changes and redemptions. You should consult your tax adviser with
respect to the tax status of distributions from the Fund in your state
and locality.

Each Portfolio intends to declare and pay dividends and capital gains
distributions so as to avoid imposition of the federal excise tax. To do
so, each Portfolio expects to
distribute 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 October, November or Decem-
ber and made payable to shareholders of record in such a month are
deemed to have been paid by the Fund and received by shareholders on
December 31 of such year, so long as the dividends are actually paid
before February 1 of the following year.

To comply with IRS regulations, the 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 Applica-
tion, or on a separate form supplied by the Fund, that their Social
Security or Taxpayer Identification Number pro-
vided is correct and that they are not currently subject to backup
withholding, or that they are exempt from backup withholding.

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

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

SHAREHOLDER SERVICES

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

Automatic Monthly Investment - You may elect to make monthly
investments in a constant dollar amount from your checking account ($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 share-
holders 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 Portfolio, or Buffalo Fund, except Babson
Enterprise Fund, Inc., according to your instructions. Monthly exchanges
will be continued until all shares have been exchanged or until you
terminate the Automatic Exchange authorization. A special authorization
form will be provided upon request.

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

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

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

Prototype Retirement Plans - Jones & Babson, Inc. offers a defined
contribution prototype plan - The 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

JB7B 3/98

PART B

D. L. BABSON BOND TRUST

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 at
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 5
Redemption of Shares 5
Signature Guarantees 5
Management and Investment Counsel 5
How Share Price is Determined 6
Trustees and Officers 6
Dividends, Distributions and Their Taxation 8
Custodian 11
Independent Auditors 11
Other Jones & Babson Funds 12
Fixed Income Securities Described and Ratings 13
Financial Statements 15

JB62 3/98

INVESTMENT OBJECTIVE AND
POLICIES

The following policies supplement the Fund's
investment objective and policies set forth in the
Prospectus. The D. L. Babson Bond Trust is a
mutual fund organized as a common law trust
and may also be referred to throughout the
Prospectus and this "Statement of Additional
Information" as the Trust or the Fund.

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. Trustees of the Fund and
officers of Jones & Babson, Inc. are generally
responsible for implementing or supervising
these decisions, including allocation of portfolio
brokerage and principal business and the
negotiation of commissions and/or the price of
the securities. In instances where securities are
purchased on a commission basis the Fund will
seek competitive and reasonable commission
rates based on the circumstances of the trade
involved and to the extent that they do not
detract from the quality of the execution.

The Fund, in purchasing and selling portfolio
securities, will seek the best available
combination of execution and overall price
(which shall include the cost of the transaction)
consistent with the circumstances which exist at
the time. The Fund does not intend to solicit
competitive bids on each transaction. The Fund
expects that purchases and sales of portfolio
securities usually will be principal transactions
from a principal market maker for the securities,
unless it appears that a better combination of
price and execution may be obtained elsewhere.
Usually there will be no brokerage commission
paid by the Fund for such purchases. Purchases
from underwriters of portfolio securities will
include a commission or concession paid by the
issuer to the underwriter, and purchases from
dealers serving as market makers will include
the spread between the bid and asked price.

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. When
buying securities in over-the-counter markets,
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 share-
holders.

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 Trustees of the Trust 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
or the affected Portfolio series.

The Fund will not: (1) purchase any
investment security for credit or on margin,
except such short-term credits as are necessary
for the clearance of transactions; (2) participate
on a joint or a joint-and-several basis in any
trading account in securities; (3) sell any
securities short; (4) borrow money, securities or
other property in any event or for any purpose
whatsoever, or issue any security senior to the
shares authorized by the Trust Indenture; (5)
lend money, securities or other assets of the
Trust for any purpose whatsoever, provided
however, that the acquisition of any publicly
distributed securities shall not be held or
construed to be the making of a loan; (6)
mortgage, pledge, hypothecate or encumber in
any manner whatsoever any investment
securities at any time owned or held by the
Trust; (7) underwrite or participate in the
underwriting of any securities; (8) purchase
shares of other investment companies except in
the open market at ordinary broker's
commission or pursuant to a plan of merger or
consolidation; (9) acquire any security issued by
any issuer in which an officer, director or
stockholder of such issuer is a Trustee of the
Trust or an officer or director of a principal
underwriter (as defined in the Investment
Company Act of 1940) if after the purchase of
such security one or more of the Trustees owns
beneficially more than one-half (1/2) of one per
centum (1%) of the capital stock of such
issuer and such Trustees together own
beneficially more than five per centum (5%) of
the capital stock of such issuer; (10) acquire any
security of another issuer if immediately after
and as a result of such acquisition the market
value of such securities of such other issuer
shall exceed five per centum (5%) of the
market value of the total assets of the Trust
or the Trust shall own more than ten per
centum (10%) of the outstanding voting
securities of such issuer. This restriction does
not apply to securities issued by the United
States or any state, county, or municipality
thereof; (11) invest more than 25% of the value
of its assets in any one industry; (12) engage in
the purchase or sale of real estate or
commodities; (13) invest in companies for the
purpose of exercising control of management; or
(14) purchase any securities which are subject to
legal or contractual restrictions, i.e., restricted
securities which may not be distributed publicly
without registration under the Securities Act of
1933.

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.

Portfolio L Portfolio S

For the one year
12/1/96-11/30/97 7.26% 6.70%

For the five years
12/1/92-11/30/97 7.07% 6.46%

For the ten years
12/1/87-11/30/97 8.61% N/A

From
commencement
of operation
to 11/30/97* 7.69% 7.71%
_______________________________________

* Portfolio L commenced operation
November 2, 1944.
* Portfolio S commenced operation
April 19, 1988.

HOW THE FUND'S SHARES ARE
DISTRIBUTED

Jones & Babson, Inc., as agent of the Trust,
agrees to supply its best efforts as sole
distributor of the Trust'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 Trustees, including a majority of
those Trustees 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 dis-
tributor of the shares for David L. Babson
Growth Fund, Inc., D.L. Babson Money Market
Fund, Inc., D. L. Babson Tax-Free Income
Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson Value
Fund, Inc., Shadow Stock Fund, Inc., Babson-
Stewart Ivory International Fund, Inc., Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout Regional Fund,
Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Scout Capital Preservation
Fund, Inc., Scout Kansas Tax-Exempt Bond
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc., Buffalo
Small Cap Fund, Inc. and AFBA Five Star
Fund, Inc.

HOW SHARE PURCHASES ARE
HANDLED

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

Each investment is confirmed by a year-to-
date statement which provides the details of the
immediate transaction, plus all prior
transactions in your account during the current
year. This includes the dollar amount invested,
the number of shares purchased or redeemed,
the price per share, and the aggregate shares
owned. A transcript of all activity in your
account during the previous year will be
furnished each January. By retaining each
annual summary and the last year-to-date
statement, you have a complete detailed history
of your account 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 certi-
ficate. 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
Trustees 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.

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 stockbrokers); or

(3) all stock certificates tendered for redemp-
tion.

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 organiza-
tion. 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 and participates with Jones
& Babson, Inc. 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 $1,275,822 for Portfolio L and
$254,164 for Portfolio S. The annual fee
charged by Jones & Babson, Inc. covers all
normal operating costs of the Fund.

David L. Babson & Co. Inc. has an experi-
enced 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 $335,133 for Portfolio L and
$58,337 for Portfolio S.

HOW SHARE PRICE IS DETERMINED

The net asset value per share of each Fund
Portfolio is computed once daily, Monday
through Friday, at the specific time during the
day that the Board of Trustees 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

TRUSTEES AND OFFICERS

The Fund is managed by Jones & Babson, Inc.
subject to the supervision and control of the
Board of Trustees. Following is a list of the
officers and trustees of the Fund and their ages.
Unless noted otherwise, the address of each
officer and trustee 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 Trustee.
President and Director, Jones & Babson, Inc.,
David L. Babson Growth Fund, Inc. , D. L.
Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., Scout Stock Fund,
Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., Scout Capital Preservation Fund,
Inc., Scout Kansas Tax-Exempt Bond Fund,
Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc., Buffalo
Small Cap Fund, Inc., Investors Mark Series
Fund, Inc.; Director, AFBA Five Star Fund,
Inc.

Francis C. Rood (63), Trustee. 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 Enterprise
Fund II, Inc., Babson Value Fund, Inc.,
Shadow Stock Fund, Inc., Buffalo Balanced
Fund, Inc., Buffalo Equity Fund, Inc., Buffalo
High Yield Fund, Inc., Buffalo USA Global
Fund, Inc., Buffalo Small Cap Fund, Inc.,
Investors Mark Series Fund, Inc.

_______________________________________

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

William H. Russell (74), Trustee. 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 Enterprise Fund
II, 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.

H. David Rybolt (55), Trustee. 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 Enterprise Fund II, Inc., Babson
Value Fund, Inc., Shadow Stock Fund, Inc.,
Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc., Buffalo Small
Cap Fund, Inc., Investors Mark Series Fund,
Inc.

P. Bradley Adams (37), Vice President and
Treasurer. Vice President and Treasurer, Jones
& Babson, Inc., David L. Babson Growth Fund,
Inc., D.L. Babson Money Market Fund, Inc.,
D.L. Babson Tax-Free Income Fund, Inc.,
Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart
Ivory International Fund, Inc., Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout 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 Enterprise Fund II, Inc., Babson
Value Fund, Inc., Shadow Stock Fund, Inc.,
Babson-Stewart Ivory International Fund, Inc.,
Scout Stock Fund, Inc., Scout Bond Fund, Inc.,
Scout Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout Regional Fund,
Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Scout Capital Preservation
Fund, Inc., Scout Kansas Tax-Exempt Bond
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc., Buffalo
Small Cap Fund, Inc.

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
Enterprise Fund II, Inc., Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart
Ivory International Fund, Inc., Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., Scout Capital Preservation Fund,
Inc., Scout Kansas Tax-Exempt Bond Fund,
Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc., Buffalo
Small Cap Fund, Inc.; 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
Enterprise Fund II, Inc., Babson Value Fund,
Inc., Babson-Stewart Ivory International Fund,
Inc., Shadow Stock Fund, Inc., Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., 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.

Edward L. Martin (48), Vice President-
Portfolio. Executive Vice President and Director, David L.
Babson & Co. Inc., One Memorial Drive,
Cambridge, Massachussetts 02142; Vice
President, D. L. Babson Money Market Fund,
Inc., D. L. Babson Tax-Free Income Fund, Inc.

Remuneration of Officers and Trustees. None
of the officers or trustees of the Fund 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 Trustee From the Fund Part of Fund Expenses Upon Retirement Paid to Trustees**
______________ _____________ __________________ _____________ ___________________
</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 trustee, Mr. Armel received no compensation for his
services as a trustee.

** 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. Trustees' 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 Trustees is
composed of Messrs. Rood, Russell and Rybolt.

The trustees of the Trust 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 common law trust
organized under the laws of Missouri. Under the terms
of the Declaration of Trust, a special meeting of
shareholders of the Fund must be held if the Fund
receives the written request for a meeting from the
shareholders entitled to cast at least 25% of all the
votes entitled to be cast at the meeting. The Fund has
undertaken that its Trustees will call a meeting of
shareholders 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 com-
munications 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
additional shares.

Distributions of Capital Gains. The Fund may
derive capital gains and losses in connection with sales
or other dispositions of its portfolio securities.
Distributions derived from the excess of net short-term
capital gains over net long-term capital losses will be
taxable to you as ordinary income. Distributions paid
from long-term capital gains realized by the Fund will
be taxable to you as long-term capital 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. Distribu-
tions 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 Distribu-
tions. 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 trustees
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 Corporations.
Because the Fund's income is derived primarily from
interest rather than dividends, it is anticipated that
only a small percentage, if any, of the dividends paid
by the Fund for the most recent calendar year will
qualify 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.

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.

Investments in Original Issue Discount (OID) and
Market Discount (MD) Bonds. The Fund's
investments in zero coupon bonds, bonds issued or
acquired at a discount, delayed interest bonds or bonds
that provide for payment of interest-in-kind (PIK) may
cause the Fund to recognize income and make
distributions to you prior to its receipt of cash
payments. Zero coupon and delayed interest bonds are
normally issued at a discount and are, therefore,
generally subject to tax reporting as OID obligations.
The Fund is required to accrue as income a portion of
the discount at which these securities were issued, and
to distribute such income each year (as ordinary
dividends) in order to maintain its qualification as a
regulated investment company and to avoid income
and excise taxes at the Fund level. PIK bonds are
subject to similar tax rules concerning the amount,
character and timing of income required to be accrued
by the Fund. Bonds acquired in the secondary market
for a price less than their stated redemption price, or
revised issue price in the case of a bond having OID,
are said to have been acquired with market discount.
For these bonds, the Fund may elect to accrue market
discount on a current basis, in which case the Fund
will be required to distribute any such accrued
discount. If the Fund does not elect to accrue market
discount into income currently, gain recognized on sale
will be recharacterized as ordinary income instead of
capital gain to the extent of any accumulated market
discount on the obligation.

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
Trustees, 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 trustees each
year, and in years in which an annual meeting is held
the trustees 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 appropriately be
exposed to above-average risk in anticipation of
greater rewards. This Fund is currently closed to new
shareholders.

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

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

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

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 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.

FIXED INCOME SECURITIES
DESCRIBED AND RATINGS

Description of Bond Ratings:

Standard & Poor's Corporation (S&P).

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

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

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

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

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

Moody's Investors Service, Inc. (Moody's).

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

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

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

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

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

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

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

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

Description of Commercial Paper Ratings:

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

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

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

(1) evaluation of the management of the issuer;

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

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

(4) liquidity;

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

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

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

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

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

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

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

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

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

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

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

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

The Fund may invest a portion of its assets in lower
rated fixed-income securities and unrated securities of
comparable quality. The market values of such
securities tend to reflect individual corporate
developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the
general level of interest rates. Such lower rated
securities also tend to be more sensitive to economic
conditions than higher rated securities. These lower
rated fixed-income securities are considered by S&P
and Moody's, on balance, to be predominantly
speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the
obligation and will generally involve more credit risk
than securities in the higher rating categories. Even
securities rated BBB by S&P or Baa by Moody's, which
are considered investment grade, possess some
speculative characteristics.

The risk of loss due to default by the issuer may be
significantly greater for the holders of high yielding
securities, because such securities are generally
unsecured and are often subordinated to other creditors
of the issuer. In addition, since the high yield bond
market is relatively new, its growth has paralleled a
long economic expansion, and it has not weathered a
recession in its present size and form. An economic
downturn could disrupt the market for high yield bonds
and adversely affect the value of outstanding bonds and
the ability of issuers of such bonds to repay principal
and interest.

The Fund may have difficulty disposing of certain
high yielding securities because there may be a thin
trading market for a particular security at any given
time. To the extent a secondary trading market for
high yielding, fixed-income securities does exist, it is
generally not as liquid as the secondary market for
higher rated securities. Reduced liquidity in the
secondary market may have an adverse impact on
market price and the Fund's ability to dispose of
particular issues, when necessary, to meet the Fund's
liquidity needs or in response to a specific economic
event, such as the deterioration in the creditworthiness
of the issuer. Reduced liquidity in the secondary
market for certain securities may also make it more
difficult for the Fund to obtain market quotations based
on actual trades for purposes of valuing the Fund's
portfolio.

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.