BABSON D L BOND TRUST, 497, 1999-11-02

BABSON D L BOND TRUST
497, 1999-11-02

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BABSON FUNDS

PROSPECTUS
October 31, 1999

Equities
Enterprise Fund
Enterprise Fund II
Growth Fund
Shadow Stock Fund
Value Fund
International Fund
Fixed Income
Bond Trust
Money Market Fund
Tax-Free Income Fund

Babson Funds
Jones & Babson Distributors
A Member of the Generali Group

Shares of the Funds have not been approved or disapproved by
the Securities and Exchange Commission nor has the
Commission passed on the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.

<PAGE>
Equity Funds
Babson Enterprise Fund, Inc.
Babson Enterprise Fund II, Inc.
Babson Growth Fund, Inc.
Shadow Stock Fund, Inc.
Babson Value Fund, Inc.
Babson-Stewart Ivory
International Fund, Inc.

Fixed
Income Funds
D.L. Babson Bond Trust
D.L. Babson Money Market Fund, Inc.
D.L. Babson Tax-Free Income Fund, Inc.

PROSPECTUS
October 31, 1999

BABSON FUNDS

INVESTMENT ADVISER:
David L. Babson & Co., Inc.
Cambridge, Massachusetts

MANAGED AND DISTRIBUTED BY:
Jones & Babson, Inc.
Kansas City, Missouri

TABLE OF CONTENTS
Information About the Funds
Investment Objective and
Principal Investment Strategies 2
Principal Risk Factors 6
Past Performance 7
Fees and Expenses 11
Management and Investment Advisor 12
Financial Highlights 13

Information about Investing
How to Purchase Shares 20
How to Redeem Shares 20
Shareholder Services 21
How Share Price is Determined 21
Dividends, Distributions and their Taxation 22
Additional Policies about Transactions 24
Conducting Business with the Babson Funds 26

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

BABSON FUND:

Babson Enterprise Fund
Babson Enterprise Fund II
Shadow Stock Fund

OBJECTIVE:

Long term growth of capital.

PRINCIPAL RISKS:

Market Risks
Small Company Risks

BABSON FUND:

Babson Growth Fund

OBJECTIVE:

Above average total return over longer
periods of time through the growth
of both capital and dividend income.

PRINCIPAL RISKS:

Market Risks

BABSON FUND:

Babson Value Fund

OBJECTIVE:

Long term growth of capital and income.

PRINCIPAL RISKS:

Market Risks

BABSON FUND:

Babson-Stewart Ivory
International Fund

OBJECTIVE:

Favorable total return
(market appreciation and income).

PRINCIPAL RISKS:

Market Risks
International Risks

BABSON FUNDS:

Babson Bond Trust
Portfolio S - Shorter Term
Babson Bond Trust
Portfolio L - Longer Term

OBJECTIVE:

Maximum current income and reasonable
stability of principal, consistent with its
quality and maturity standards.

PRINCIPAL RISKS:

Fixed Income Risks
Credit Risks

BABSON FUNDS:

Babson Money Market Fund
Federal Portfolio
Babson Money Market Fund
Prime Portfolio

OBJECTIVE:

Maximizing income consistent with safety of
principal and liquidity. Seeks to maintain
liquidity and a one dollar net asset value.

PRINCIPAL RISKS:

Fixed Income Risks

BABSON FUND:

Babson Tax-Free Income Fund
Portfolio MM - Money Market
Babson Tax-Free Income Fund
Portfolio S - Shorter Term
Babson Tax-Free Income Fund
Portfolio L - Longer Term

OBJECTIVE:

Providing the highest level of regular income
exempt from federal income tax consistent
with their quality and maturity standards.
The Money Market Portfolio seeks to maintain
a one dollar
net asset value.

PRINCIPAL RISKS:

Fixed Income Risks

The Principal Risks associated with each
Fund or Portfolio are described more fully
below in the section titled Principal Risk
Factors.

PRINCIPAL INVESTMENT STRATEGIES:

Each Fund and Portfolio will normally invest
for the long term (but may sell a stock at
any time the Advisor considers it overvalued
or otherwise unfavorable). They intend to
pursue their objectives by principally
investing as described below:

Babson Enterprise Fund - This Fund will
invest at least 80% in common stocks of
small, faster-growing companies (referred to
as micro-cap) worth between $15 million and
$300 million in stock market capitalization
at the time of purchase. The Fund will select
companies whose stocks are selling at prices
it believes are reasonable in relation to the
company's fundamental financial
characteristics and business prospects. The
primary valuation ratios used are:

price relative to earnings
price relative to sales
price relative to assets as measured by book value
price relative to cash flow

Babson Enterprise Fund II - This Fund will
invest substantially the same way as Babson
Enterprise Fund with the exception that it
will target companies larger relative to net
worth of between $250 million and $1 billion
in stock market capitalization at the time of
purchase. The Fund generally invests in
stocks listed on national or regional
exchanges or listed over-the-counter (e.g.,
NASDAQ) with prices quoted daily in the
financial press.

Babson Growth Fund - This Fund will remain
80% invested in a diversified list of common
stocks representing companies selected for
their long-term possibilities of both capital
and dividend income growth. The Investment
Adviser defines "above-average total return"
as total return that is higher than return
generated by traditional investment vehicles
other than equity products.

Babson Growth Fund will invest at time of
initial purchase in stocks of well-managed
companies in growing industries which have
demonstrated both a consistent and an above-
average ability to increase their earnings
and dividends and which have favorable
prospects of sustaining such growth.
Measurements used for selection screening
include:

earning power
dividend paying ability
assets of the company

Shadow Stock Fund - This Fund will invest in
small company stocks called "Shadow Stocks".
These are stocks that combine the
characteristics of "small stocks" and
"neglected stocks". Small stocks are those
stocks that have market capitalization of
between $20 million and $213 million and have
annual net profits of at least $1 million for
the three most recent fiscal years.
"Neglected Stocks" are those that have below
average institutional holdings and below
average coverage by analysts and newsletters.
It is estimated that the Shadow Stock Fund
will contain about 250 stocks at any one
time.

The Fund will screen "small and neglected
stocks" and will not buy a stock or will sell
part or all of a stock it owns if the
Investment Adviser believes:

the financial condition of the company is in jeopardy
that liquidity is insufficient
that total acquisition costs are unreasonably high
the stock is selling for less than $5 per share (stock will not be sold for
this reason alone but additional stock will not be bought below $4 per
share)

The Fund will also sell stock based on:

potential negative earnings
tenders or potential mergers
not meeting criteria for "neglected stocks" for three semi-annual evaluations
not meeting criteria for "small stocks" by having market capitalization
below $10 million or above $426 million

Babson Value Fund - This Fund will invest at
least 90% in common stocks that are
considered to be undervalued in relation to
earnings, dividends and/or assets. The Fund
will invest at time of initial purchase in
stocks that meet each of the following
criteria:

stocks that the Fund considers to be undervalued based on their earnings,
dividends and/or assets, or other widely recognized stock valuation
measurements
stocks of companies the Fund believes are sound businesses with good future
potential based on their fundamental characteristics
stocks of companies with an investment quality rating (growth and stability
of earnings and dividends) of "B-" or better by Standard & Poor's, or a
financial strength rating of "B" or better by Value Line.
stocks of any price range that may or may not be paying current dividends

Babson-Stewart Ivory International Fund -
This Fund will invest at least 80% in equity
securities (common stocks and securities
convertible into common stocks) of
established companies whose primary business
is carried on outside the United States. It
will invest in at least 3 foreign countries
and no more than 35% of its assets in any one
country. Securities purchased will primarily
be listed on foreign stock exchanges and will
have attractive characteristics in terms of:

growth
financial resources
quality
acceptance of products or services
ability to generate profits and in many cases - dividends

Babson-Steward Ivory International Fund from
time to time will also purchase:

investment grade fixed income securities of foreign governments or
corporations
American Depository Receipts
European Depository Receipts
International Depository Receipts
Foreign currency or foreign currency forwards (the latter only for hedging)
Securities not listed on an exchange (which may be more difficult to sell)

D.L. Babson Bond Trust - Portfolio L and
portfolio S - D.L. Babson Bond Trust offers
shares of two separate fixed income
portfolios. Portfolio L (Longer Term) will
have a dollar weighted average maturity of
more than five years. Portfolio S (Shorter
Term) will have a dollar weighted average
maturity of five years or less. Each
Portfolio may invest at time of purchase:

At least 80% of its assets in debt securities to include: (1) direct or
guaranteed obligations of the U.S. government and its agencies, and (2)
investment grade debt securities issued by corporations or other business
organizations, including notes and bonds. The Portfolios will limit its
investment in securities rated BBB or Baa to no more than 25% of their
assets.
In debt securities secured by specific assets of the issuing corporation
(such as mortgage bonds and equipment trusts) as well as unsecured debt
securities that represent claims on the general credit of the issuer.
Up to 25% of their assets in Yankee Bonds. Yankee Bonds are issued by
foreign-domiciled entities and underwritten by a U.S. syndicate for delivery
in the U.S.
In cash or short term debt obligations.
In variable rate master demand notes, which represent a borrowing agreement
between an institutional lender and borrower.

Currently, the average weighted maturity
range of Portfolio L is 7 to 15 years and
Portfolio S is 2 to 5 years, but maturities
may be shortened or lengthened to respond to
interest rate changes.

D.L. Babson Money Market Fund - Federal
Portfolio and Prime Portfolio - D.L. Babson
Money Market Fund offers shares of two
separate portfolios. The Federal Portfolio
only invests in U.S. government securities,
while the Prime Portfolio may also invest in
other money market securities. Each invests
in high quality short-term debt instruments
for the purpose of maximizing income
consistent with safety of principal and
liquidity. Each Portfolio will have an
expected weighted average maturity 90 days or
less. Net asset value is expected to remain
constant at $1.00 per share. Each Portfolio
may invest at time of purchase:

In direct obligations of the U.S. Government
In obligations of U.S. government agencies and instrumentalities which are
secured by the full faith and credit of the U.S. Treasury such as Government
National Mortgage Association, Export-Import Bank, or the Student Loan
Marketing 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, or the Federal National Mortgage Association.
In repurchase agreements collateralized by issues of the United States
Treasury or United States government agencies

In addition, Prime Portfolio may invest at
time of purchase:

In short term obligations issued domestically by U.S. commercial banks or
savings and loan associations having assets of at least $1 billion and are
members of FDIC or Federal Home Loan Banks Association
In high quality commercial paper or variable rate master demand notes of
corporations
In high quality non-convertible short-term debt obligations

D.L. Babson Tax-Free Income Fund - Portfolio
L and Portfolio S - D.L. Babson Tax-Free
Income Fund offers shares of three separate
fixed income portfolios exempt from federal
income tax. Portfolio L (Longer Term) will
have an expected weighted average maturity
between ten and twenty five years with
maturities being longer than five years at
time of purchase. Portfolio S (Shorter Term)
will have an expected weighted average
maturity between two and five years with no
maturities more than ten years at time of
purchase. Each Portfolio may invest at time
of purchase:

At least 80% of its assets (exclusive of cash) in municipal securities,
such as bonds and other debt instruments issued by or on behalf of states,
territories and possessions of the United States, including their
subdivisions, authorities, agencies and instrumentalities. The interest
they pay is expected to be exempt from federal income tax including the
alternative minimum tax.
At least 90% of the municipal bonds bought by Portfolio L and Portfolio S
will be rated within the three top rating categories of Moody's (Aaa, Aa or
A) or Standard & Poor's (AAA, AA or A).
Investments by Portfolio L and Portfolio S in short term municipal
obligations and notes will be (1) backed by the full faith and credit of the
United States; or (2) rated MIG-1, MIG-2 or MIG-3 by Moody's; or (3) A-1 or
A-2 by Standard & Poor's; or (4) if unrated short-term then the issuer's
long-term bond rating must be at least A as determined by Moody's or
Standard & Poor's.
In cash or short term money market obligations (including taxable money
market obligations on a temporary basis) that are rated in the top two
categories (A-1/Prime-1 or A-2/Prime-2).

D.L. Babson Tax-Free Income Fund - Portfolio
MM - Portfolio MM is a portfolio of money
market securities exempt from federal income
tax. It will have an expected weighted
average maturity 90 days or less. Net asset
value is expected to remain constant at $1.00
per share. Portfolio MM may invest at time of
purchase:

Only in securities that satisfy the requirements of Rule 2a-7 of the
Investment Company Act of 1940.
At least 80% of its assets (exclusive of cash) in municipal securities,
such as bonds and other debt instruments issued by or on behalf of states,
territories and possessions of the United States. Most interest is expect
to be exempt from federal income tax including the alternative minimum tax.
In cash or short term money market obligations.

PRINCIPAL RISK FACTORS

As with any mutual fund, there is a risk that
you could lose money by investing in the
Funds or Portfolios. Investments are not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.

Market Risks

Common stocks fluctuate in price. Since
Growth, Enterprise, Enterprise II, Value,
Shadow and International Funds invest
primarily in common stocks, the value of the
Funds may go down.

Small Company Risks

Generally, smaller and less seasoned
companies have more potential for rapid
growth. However, they often involve greater
risk than larger companies. They may not have
the management experience, financial
resources, product diversification and
competitive strengths of larger companies.

Smaller company stocks tend to be bought and
sold less often and in smaller amounts than
larger company stocks. Because of this, if a
Fund wants to sell a large quantity of a
small company stock it may have to sell at a
lower price than its Adviser might prefer, or
it may have to sell in small quantities over
a period of time. Enterprise and Enterprise
II Funds try to minimize this risk by
investing in stocks that are readily bought
and sold. However, the lower liquidity of the
neglected stocks in which Shadow Stock Fund
invests carry greater risk in the event of a
weak stock market and substantial
liquidations by the Fund.

Fixed Income Risks

The yields and principal values of debt
securities fluctuate. Generally, values of
debt securities change inversely with changes
in interest rates. When interest rates go up,
the values of debt securities tend to go
down. As a result, the values of the
Portfolios L and S of Bond Trust and Tax-Free
Income Fund may go down. The fluctuations
that are experienced by Portfolios L will
likely be greater than those of Portfolios S,
since longer-term bond prices tend to
fluctuate more in response to interest rate
changes. Future interest rates cannot be
accurately and consistently forecast.

The amount of the dividends paid by a
Portfolio of Bond Trust, Tax-Free Income Fund
and Money Market Funds will change based on
the amount of income it earns on its
investments. Also, it is possible that the
issuer of a debt security may default on the
interest and principal payments due to a
Portfolio.

CREDIT RISKS

Fixed income securities rated in the fourth
classification by Moody's (Baa) and S&P (BBB)
may be purchased by Bond Trust. These
securities have speculative characteristics
and changes in economic conditions or other
circumstances are more likely to lead to a
weakened capacity of those issuers to make
principal or interest payments, as compared
to issuers of more highly rated securities.

International Risks

International investing by the "International
Fund" poses additional risks such as currency
fluctuation and political instability. These
risks are inherently passed on to the
company's shareholders and in turn, to the
Fund's shareholders.

Investing in developing countries may pose
additional risks. Securities issued by
companies in developing countries may not be
as liquid as those in more developed
countries. In addition, regulations in
developing countries may not be as strong nor
information as readily available. Babson-
Stewart Ivory International Fund intends to
limit purchases of securities issued by
developing countries to no more than 20% of
the Fund.

Year 2000 Risks

Computer systems that cannot process and
calculate date-related information as of and
after January 1, 2000 are a concern for
financial and business organizations around
the world including "all the Funds." We are
taking steps to address the Year 2000 issue
with respect to the computers we use, and
have asked that our major service providers
take comparable steps. Also, the Funds'
Adviser is using its best efforts to evaluate
any potential adverse effects from the Year
2000 issue that may affect companies whose
stock may be purchased by the Funds. However,
there is no way to be sure that these steps
will completely protect the Funds from being
affected.

Temporary Defensive Strategy

Each Fund may respond to adverse market,
economic, political or other conditions by
investing up to 100% of its assets in
temporary defensive investments, such as
cash, short-term debt obligations or other
high quality investments. During such
periods, the Funds may not achieve their
investment objectives.

PAST PERFORMANCE

The tables on the following page provide an
indication of the risks of investing in the
Funds. The tables below show how the total
returns generated by the respective Funds
have changed for each calendar year and how
the Funds' average annual returns for certain
periods compare with those of an appropriate
benchmark. Each table reflects all expenses
of each Fund and assumes that all dividends
and capital gains distributions have been
reinvested in new shares of the same Fund.
Past performance is not necessarily an
indication of how a Fund will perform in the
future.

Babson Enterprise Fund - Chart

Babson Enterprise Fund II - Chart

Babson Growth Fund - Chart

Babson Value Fund - Chart

Shadow Stock Fund - Chart

Babson-Stewart Ivory International Fund - Chart

Babson Bond Trust - Portfolio L - Chart

Babson Bond Trust - Portfolio S - Chart

Babson Money Market Fund - Prime Portfolio - Chart

Babson Money Market Fund - Federal Portfolio - Chart

Babson Tax-Free Income Fund - Portfolio L - Chart

Babson Tax-Free Income Fund - Portfolio MM - Chart

Babson Tax-Free Income Fund - Portfolio S - Chart

FEES & EXPENSES

The following tables describe the fees and expenses that you may pay if you buy
and hold shares of the Funds.
<TABLE>
<CAPTION>
BABSON BABSON BABSON SHADOW BABSONSTEWART IVORY
ENTERPRISEENTERPRISE GROWTH STOCK VALUE INTERNATIONAL
FUND FUND II FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases None None None None None None
Maximum Deferred Sales Charge (Load) None None None None None None
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends None None None None None None
Redemption Fee None* None* None* None* None* None*
Exchange Fee None None None None None None
*A $10 fee is imposed for redemptions
by wire.

Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets)
Management Fees 1.10% 1.20% .78% 1.00% .95% .95%
Distribution (12b-1) Fees None None None None None None
Other Expenses .01% .03% .01% .10% .01% .28%
Total annual Fund Operating Expenses 1.11% 1.23% .79% 1.10% .96% 1.23%
</TABLE>

<TABLE>
<CAPTION>
BABSON BABSON
BABSON BABSON MONEY MARKETMONEY MARKETBABSON BABSON BABSON
BOND BOND FUND FUND TAX-FREE TAX-FREE TAX-FREE
TRUST TRUST PRIME FEDERALINCOME FUNDINCOME FUNDINCOME FUND
PORTFOLIO LPORTFOLIO SPORTFOLIO PORTFOLIOPORTFOLIO LPORTFOLIO SPORTFOLIO MM
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Shareholder Fees
(fees paid directly from your
investment)
Maximum Sales Charge (Load)
Imposed on Purchases None None None None None None None
Maximum Deferred Sales Charge
(Load) None None None None None None None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends None None None None None None None
Redemption Fee None* None* None* None* None* None* None*
Exchange Fee None None None None None None None
*A $10 fee is imposed for
redemptions by wire.

Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .95% .95%** .85% .85% .95% .95% .50%
Distribution (12b-1) Fees None None None None None None None
Other Expenses .02% .02% .03% .03% .08% .06% .05%
Total Annual Fund Operating
Expenses .97% .97% .88% .88% 1.03% 1.01% .55%
</TABLE>
**The Manager has voluntarily agreed to a reduction in the management fee paid
by the portfolio to .65% through March 31, 2000.

Fee Examples
These examples are intended to help you
compare the cost of investing in each Fund
with the cost of investing in other mutual
funds. They assume you invest $10,000 and
receive a 5% return each year. Although your
actual costs may be higher or lower, based on
the assumptions below your costs would be:

1 Year 3 Years 5 Years 10 Years
Babson Enterprise Fund 113 353 612 1,352
Babson Enterprise Fund II 125 390 676 1,489
Babson Growth Fund 81 252 439 978
Shadow Stock Fund 112 350 606 1,340
Babson Value Fund 98 306 531 1,178
Babson-Stewart Ivory International Fund 125 390 676 1,489
Babson Bond Trust - Portfolio L 99 309 536 1,190
Babson Bond Trust - Portfolio S 99 309 536 1,190
Babson Money Market - Federal Portfolio 90 281 488 1,084
Babson Money Market - Prime Portfolio 90 281 488 1,084
Babson Tax-Free Income - Portfolio L 105 328 569 1,259
Babson Tax-Free Income - Portfolio S 103 322 558 1,236
Babson Tax-Free Income - Portfolio MM 56 176 307 689

MANAGEMENT AND INVESTMENT ADVISER

Jones & Babson, Inc. was founded in 1959.
Jones & Babson, Inc. acts as the Manager and
principal underwriter of the Babson Fund
family. 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 Funds. This includes
investment management and supervision; fees
of the custodian, independent auditors and
legal counsel; officers, directors and other
personnel; rent; shareholder services; and
other items incidental to corporate
administration.

Operating expenses not required in the normal
operation of the Funds are payable by the
Funds. These expenses include taxes,
interest, governmental charges and fees,
including registration of the Fund with the
Securities and Exchange Commission and the
fees payable to various States, brokerage
costs, dues, and all extraordinary costs
including expenses arising out of anticipated
or actual litigation or administrative
proceedings.

As a part of the Management Agreement, Jones
& Babson, Inc. employs at its own expense
David L. Babson & Co., Inc., an investment
advisory firm founded in 1940, as its
Investment Adviser to assist in the
investment advisory function. To assist in
the investment advisory function related to
Babson-Stewart Ivory International Fund,
Jones & Babson, Inc. employs at its own
expense Babson-Stewart Ivory International, a
partnership formed in 1987, by David L.
Babson & Co. of Cambridge, Massachusetts and
Stewart Ivory & Company (International) Ltd,
a wholly owned subsidiary of Stewart Ivory
(Holdings), Ltd., of Edinburgh, Scotland.

James B. Gribbell has been the manager of
Babson Growth Fund since 1996. He is a
Chartered Financial Analyst ("CFA"). He
joined David L. Babson & Co. in 1991. Lance
F. James has been the manager of Babson
Enterprise II since its inception in 1991 and
manager of Enterprise since 1999. He joined
David L. Babson & Co. in 1986. Anthony M.
Maramarco, CFA, has been the manager of
Babson Value Fund and the Shadow Stock Fund
since 1999. He joined David L. Babson & Co.
in 1996 and has over 18 years investment
management experience, previously at Concept
Capital Management, Inc., from 1993-1996.
John G.L. Wright has been the manager of
Babson-Stewart Ivory International Fund since
its inception in 1988. He joined Stewart Fund
Managers (which became Stewart-Ivory) in
1971, and has over 30 years of investment
management experience. As of October 1999,
Mr. Wright co-manages the Fund with James W.
Burns. Mr. Burns joined Stewart Fund Managers
in 1990, and has 18 years of investment
management experience. Babson Bond Trust has
been managed by a committee of fixed income
professionals since October 1999. Joanne E.
Keers, CFA, has been the manager of Babson
Tax-Free Income Fund since 1999. She joined
David L. Babson & Co. in 1987.

For its services, Babson Growth Fund pays
Jones & Babson, Inc. a fee at the annual rate
of .85% of the first $250 million and .70% of
amounts in excess of $250 million of average
daily net assets. Babson Enterprise Fund and
Enterprise Fund II pay Jones & Babson, Inc. a
fee at the annual rate of 1.50% of the first
$30 million and 1% of amounts in excess of
$30 million of its average daily net assets.
Babson Value Fund, Babson-Stewart Ivory
International Fund and Babson Bond Trust pay
Jones & Babson, Inc. a fee at the annual rate
of .95% of average daily net assets. However,
during the period from May 1, 1988 through
March 31, 2000, Jones & Babson has agreed to
voluntarily waive .30% of the fee for
Portfolio S bringing its total to .65%.
Babson Tax-Free Income Fund Portfolio L and
Portfolio S pay Jones & Babson, Inc. a fee at
the annual rate of .95% of average daily net
assets. Shadow Stock Fund pays Jones &
Babson, Inc. a fee of 1.00% of average daily
assets. Babson Tax-Free Income Fund Portfolio
MM pays Jones & Babson, Inc. a fee at the
annual rate of .50% of average daily net
assets. Babson Money Market Fund Portfolio
Prime and Portfolio Federal pay Jones &
Babson, Inc. a fee at the annual rate of
0.85% of average daily assets. The Management
Agreement limits the liability of the Manager
or its Investment Adviser, 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.

Jones & Babson, Inc. is located at 700 Karnes
Blvd., Kansas City, MO 64108-3306 and David
L. Babson & Co., Inc. is located at One
Memorial Drive, Cambridge, MA 02142.

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended
to help you understand each Fund's financial
performance for the five years ended June 30,
1999, except for Babson Enterprise Fund,
Babson Enterprise Fund II, Babson Value Fund
and Babson Bond Trust (Portfolio L &
Portfolio S) which is for the seven months
ended June 30, 1999 and the five years ended
November 30, 1998. Certain information
reflects financial results for a single share
of a Fund. The total returns in the tables
represent the rate that an investor would
have earned on an investment in a Fund
(assuming reinvestment of all dividends and
distributions). The financial highlights for
Babson Growth Fund, Shadow Stock Fund, Babson-
Stewart Ivory International Fund, Babson
Money Market Fund (Portfolio Prime and
Portfolio Federal) and Babson Tax-Free Income
Fund (Portfolio L, Portfolio S and Portfolio
MM) have been audited by Ernst & Young LLP
for the year ended June 30, 1999.
Additionally, the financial highlights for
Babson Enterprise Fund, Babson Enterprise
Fund II, Babson Value Fund and Babson Bond
Trust (Portfolio L and Portfolio S) were
audited by Ernst & Young LLP for the periods
indicated above. The financial highlights for
Babson Growth Fund, Shadow Stock Fund, Babson-
Stewart Ivory International Fund, Babson
Money Market Fund, (Portfolio Prime and
Portfolio Federal) and Babson Tax-Free Income
Fund (Portfolio L, Portfolio S and Portfolio
MM) for the years ended on or before June 30,
1998 have been audited by other auditors.
This information, along with the Funds'
financial statements, are included in the
annual report, which is available upon
request.

BABSON ENTERPRISE FUND

Condensed data for a share of capital stock
outstanding throughout each period.

<TABLE>
<CAPTION>
SEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.63 $ 21.22 $ 18.51 $ 17.35 $ 16.64 $ 17.20
Income from investment operations:
Net investment income .03 .04 .06 .06 .10 .03
Net gains (losses) on securities
(both realized and unrealized) .58 (2.15) 5.31 3.06 2.34 .57
Total from investment operations .61 (2.11) 5.37 3.12 2.44 .60
Less distributions:
Dividends from net investment income (.05) (.06) - (.12) (.04) (.05)
Distributions from capital gains (2.47) (2.42) (2.66) (1.84) (1.69) (1.11)
Total distributions (2.52) (2.48) (2.66) (1.96) (1.73) (1.16)
Net asset value, end of period $ 14.72 $ 16.63 $ 21.22 $ 18.51 $ 17.35 $ 16.64
Total return* 4.70% (11.05%) 33.49% 20.17% 16.42% 3.70%

Ratios/Supplemental Data
Net assets, end of period (in millions) $ 155 $ 179 $ 216 $ 202 $ 202 $ 188
Ratio of expenses to average net assets** 1.11% 1.09% 1.08% 1.08% 1.09% 1.08%
Ratio of net investment income to
average net assets** .32% .29% .30% .35% .67% .22%
Portfolio turnover rate 12% 22% 22% 24% 13% 15%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year

BABSON ENTERPRISE FUND II

Ratios/Supplemental Data
Net assets, end of period (in millions) $ 77 $ 83 $ 82 $ 46 $ 40 $ 36
Ratio of expenses to average net assets** 1.23% 1.22% 1.28% 1.38% 1.45% 1.50%
Ratio of net investment income to
average net assets** .11% .40% .27% .55% .30% .14%
Portfolio turnover rate 14% 25% 25% 30% 15% 9%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year

BABSON GROWTH FUND

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>

YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 20.77 $ 17.80 $ 14.42 $ 13.43 $ 11.78
Income from investment operations:
Net investment income .02 .06 .09 .12 .18
Net gains (losses) on securities
(both realized and unrealized) 3.25 4.41 4.16 2.91 2.18
Total from investment operations 3.27 4.47 4.25 3.03 2.36
Less distributions:
Dividends from net investment income (.02) (.06) (.09) (.13) (.18)
Distributions from capital gains (4.01) (1.44) (.78) (1.91) (.53)
Total distributions (4.03) (1.50) (.87) (2.04) (.71)
Net asset value, end of year $ 20.01 $ 20.77 $ 17.80 $ 14.42 $ 13.43
Total return 17.04% 26.73% 30.10% 22.99% 20.23%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 490 $ 451 $ 365 $ 280 $ 247
Ratio of expenses to average net assets .79% .80% .83% .85% .85%
Ratio of net investment income to
average net assets .09% .30% .61% .82% 1.42%
Portfolio turnover rate 39% 35% 20% 33% 17%
</TABLE>

SHADOW STOCK FUND
<TABLE>
<CAPTION>

YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.24 $ 12.57 $ 11.31 $ 10.55 $ 9.67
Income from investment operations:
Net investment income .11 .08 .12 .09 .10
Net gains (losses) on securities
(both realized and unrealized) (.24) 2.54 2.44 1.67 1.42
Total from investment operations (.13) 2.62 2.56 1.76 1.52
Less distributions:
Dividends from net investment income (.07) (.10) (.09) (.10) (.10)
Distributions from capital gains (.98) (1.85) (1.21) (.90) (.54)
Total distributions (1.05) (1.95) (1.30) (1.00) (.64)
Net asset value, end of year $ 12.06 $ 13.24 $ 12.57 $ 11.31 $ 10.55
Total return (.25%) 21.98% 23.63% 17.13% 16.16%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 50 $ 52 $ 41 $ 39 $ 39
Ratio of expenses to average net assets 1.10% 1.16% 1.13% 1.14% 1.13%
Ratio of net investment income
to average net assets .97% .56% 1.00% .79% 1.01%
Portfolio turnover rate 21% 43% 0% 25% 19%
</TABLE>

BABSON VALUE FUND

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 47.42 $ 47.73 $ 38.65 $ 31.78 $ 25.19 $ 25.36
Income from investment operations:
Net investment income .45 .62 .51 .55 .59 .56
Net gains (losses) on securities
(both realized and unrealized) 5.90 1.09 9.65 7.20 7.20 .58
Total from investment operations 6.35 1.71 10.16 7.75 7.79 1.14
Less distributions:
Dividends from net investment income (.44) (.56) (.47) (.53) (.60) (.40)
Distributions from capital gains (1.97) (1.46) (.61) (.35) (.60) (.91)
Total distributions (2.41) (2.02) (1.08) (.88) (1.20) (1.31)
Net asset value, end of period $ 51.36 $ 47.42 $ 47.73 $ 38.65 $ 31.78 $ 25.19
Total return* 14.14% 3.85% 26.89% 24.91% 32.07% 4.51%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 1,244 $ 1,494 $ 1,419 $ 764 $ 293 $ 120
Ratio of expenses to average net assets** .96% .98% .97% .96% .98% .99%
Ratio of net investment income
to average net assets** 1.05% 1.28% 1.22% 1.63% 2.12% 2.32%
Portfolio turnover rate 13% 42% 17% 11% 6% 14%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year

BABSON-STEWART IVORY INTERNATIONAL FUND

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>

YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 19.65 $ 19.53 $ 18.04 $ 15.96 $ 16.41
Income from investment operations:
Net investment income .03 .08 .07 .07 .16
Net gains (losses) on securities
(both realized and unrealized) .66 1.07 1.70 2.85 .23
Total from investment operations .69 1.15 1.77 2.92 .39
Less distributions:
Dividends from net investment income (.04) (.07) (.05) (.08) (.17)
Distributions from capital gains (.82) (.96) (.23) (.65) (.67)
Distributions in excess of
realized capital gains - - - (.11) -
Total distributions (.86) (1.03) (.28) (.84) (.84)
Net asset value, end of year $ 19.48 $ 19.65 $ 19.53 $ 18.04 $ 15.96
Total return 3.76% 6.48% 9.91% 18.66% 2.54%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 89 $ 104 $ 111 $ 80 $ 65
Ratio of expenses to average net assets 1.23% 1.16% 1.19% 1.26% 1.30%
Ratio of net investment income
to average net assets .24% .37% .47% .44% 1.13%
Portfolio turnover rate 51% 48% 40% 33% 37%
</TABLE>

BABSON BOND TRUST - PORTFOLIO L

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.59 $ 1.56 $ 1.55 $ 1.58 $ 1.47 $ 1.67
Income from investment operations:
Net investment income .05 .09 .10 .11 .11 .11
Net gains (losses) on securities
(both realized and unrealized) (.07) .03 .01 (.03) .11 (.15)
Total from investment operations (.02) .12 .11 .08 .22 (.04)
Less distributions:
Dividends from net investment income (.05) (.09) (.10) (.11) (.11) (.11)
Distributions from capital gains - - - - - (.05)
Total distributions (.05) (.09) (.10) (.11) (.11) (.16)
Net asset value, end of period $ 1.52 $ 1.59 $ 1.56 $ 1.55 $ 1.58 $ 1.47
Total return* (1.16%) 8.13% 7.26% 5.17% 15.28% (2.71%)
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 121 $ 128 $ 132 $ 142 $ 161 $ 140
Ratio of expenses to average net assets** .97% .97% .97% .97% .97% .97%
Ratio of net investment income
to average net assets** 5.73% 5.93% 6.38% 6.96% 7.06% 6.95%
Portfolio turnover rate 38% 43% 59% 61% 50% 40%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year

BABSON BOND TRUST - PORTFOLIO S

Ratios/Supplemental Data
Net assets, end of period (in millions) $ 37 $ 38 $ 41 $ 34 $ 33 $ 30
Ratio of expenses to average net assets** .67% .67% .66% .66% .67% .67%
Ratio of net investment income
to average net assets** 5.75% 5.90% 6.42% 7.10% 7.47% 7.02%
Ratio of expenses to average net assets
before voluntary reduction of
management fee ** .97% .97% .97% .96% .97% .97%
Portfolio turnover rate 54% 60% 65% 48% 57% 42%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year

BABSON MONEY MARKET FUND - PRIME PORTFOLIO

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>

YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .04 .05 .05 .05 .05

Less distributions:
Dividends from net investment income (.04) (.05) (.05) (.05) (.05)

Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 4.38% 4.82% 4.61% 4.83% 4.66%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 39 $ 37 $ 38 $ 36 $ 40
Ratio of expenses to average net assets .88% .91% .92% .92% .92%
Ratio of net investment income
to average net assets 4.30% 4.73% 4.58% 4.75% 4.58%
</TABLE>

BABSON MONEY MARKET FUND - FEDERAL PORTFOLIO

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>

Less distributions:
Dividends from net investment income (.04) (.05) (.04) (.05) (.04)

Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 4.31% 4.75% 4.58% 4.77% 4.56%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 13 $ 12 $ 13 $ 10 $ 10
Ratio of expenses to average net assets .88% .91% .91% .91% .92%
Ratio of net investment income
to average net assets 4.23% 4.65% 4.51% 4.67% 4.48%
</TABLE>

BABSON TAX-FREE INCOME FUND - PORTFOLIO L

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>

YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.22 $ 8.96 $ 8.74 $ 8.67 $ 8.52
Income from investment operations:
Net investment income .40 .40 .42 .41 .42
Net gains (losses) on securities
(both realized and unrealized) (.24) .28 .24 .07 .17
Total from investment operations .16 .68 .66 .48 .59
Less distributions:
Dividends from net investment income (.40) (.40) (.42) (.41) (.42)
Distributions from capital gains (.07) (.02) (.02) - (.02)
Total distributions (.47) (.42) (.44) (.41) (.44)
Net asset value, end of year $ 8.91 $ 9.22 $ 8.96 $ 8.74 $ 8.67
Total return 1.70% 7.82% 7.67% 5.60% 7.21%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 26 $ 27 $ 27 $ 27 $ 28
Ratio of expenses to average net assets 1.03% 1.06% 1.01% 1.01% 1.02%
Ratio of net investment income
to average net assets 4.36% 4.46% 4.71% 4.67% 4.98%
Portfolio turnover rate 9% 18% 21% 39% 34%
</TABLE>

BABSON TAX-FREE INCOME FUND - PORTFOLIO S
<TABLE>
<CAPTION>

YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.79 $ 10.74 $ 10.69 $ 10.71 $ 10.62
Income from investment operations:
Net investment income .42 .44 .44 .44 .45
Net gains (losses) on securities
(both realized and unrealized) (.21) .08 .10 .01 .10
Total from investment operations .21 .52 .54 .45 .55
Less distributions:
Dividends from net investment income (.42) (.44) (.44) (.44) (.45)
Distributions from capital gains (.03) (.03) (.05) (.03) (.01)
Total distributions (.44) (.47) (.49) (.47) (.46)
Net asset value, end of year $ 10.56 $ 10.79 $ 10.74 $ 10.69 $ 10.71
Total return 1.96% 4.84% 5.18% 4.25% 5.32%

Ratios/Supplemental Data
Net assets, end of year (in millions) $ 19 $ 21 $ 23 $ 25 $ 28
Ratio of expenses to average net assets 1.01% 1.06% 1.01% 1.01% 1.01%
Ratio of net investment income
to average net assets 3.82% 4.00% 4.12% 4.13% 4.28%
Portfolio turnover rate 22% 21% 23% 41% 34%
</TABLE>

BABSON TAX-FREE INCOME FUND - PORTFOLIO MM

Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>

Less distributions:
Dividends from net investment income (.03) (.03) (.03) (.03) (.03)

Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 2.70% 3.06% 3.03% 3.15% 3.05%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 10 $ 10 $ 9 $ 8 $ 16
Ratio of expenses to average net assets .55% .61% .58% .58% .59%
Ratio of net investment income
to average net assets 2.65% 3.06% 3.10% 3.15% 3.07%
</TABLE>

HOW TO PURCHASE SHARES

No Load Funds

There are no sales commissions or Rule 12b-1 fees

How to Buy Shares (see accompanying chart on page 24 for details)

By phone, mail or wire
Through Automatic Monthly Investments
Through exchanges from a Babson or Buffalo Fund (non fiduciary accounts only)

Minimum Initial Investment

$1,000 for most accounts
$250 for IRA and Uniform Transfer (Gift) to Minors accounts
$100 with an Automatic Monthly Investment
$1,000 for exchanges from another fund ($100 for IRAs and Uniform Gifts to
Minors accounts)

Minimum Additional Investment

$100 by phone, mail or ACH
$1,000 By Wire
$50 for Automatic Monthly Investments
$1,000 for exchanges from another fund ($100 for IRAs and Uniform Gifts to
Minors accounts)

Minimum Account Size

You must maintain a minimum account value
equal to the current minimum initial
investment ($1,000). If your account falls
below this amount due to redemptions (not
market action) we may notify you and ask you
to increase the account to the minimum. We
will close the account and send your money if
you do not bring the account up to the
minimum within 60 days after we mail you the
notice.

HOW TO REDEEM SHARES

You may withdraw from your Fund's account at
any time in the following amounts:
any amount for redemptions requested by
mail or phone to address of record
$50,000 for fund web site redemptions
$1,000 or more for redemptions wired to
your account ($10 fee) ($100 minimum for ACH
to bank account)
$50 or more for redemptions by a systematic
redemption plan (there may be a fee)
$1,000 or more for exchanges to another
fund ($100 for IRAs and Uniform Gifts to
Minors accounts)
$100 or more for redemptions by automatic
monthly exchange to another fund

SHAREHOLDER SERVICES

The following services are also available to
shareholders. Please call 1-800-4-BABSON (1-
800-422-2766) for more information:
Uniform Transfers (Gifts) to Minors
accounts
Accounts for corporations or partnerships
Sub-Accounting Services for tax qualified
retirement plans and others
Prototype Retirement Plans for the self-
employed, partnerships and corporations.
Traditional IRA accounts
Roth IRA accounts
Simplified Employee Pensions (SEPs)

HOW SHARE PRICE IS DETERMINED

Shares of the Funds are purchased or redeemed
at the net asset value per share next
calculated after your purchase order and
payment or redemption order is received in
good order (see "Additional Policies" below).
In the case of certain institutions which
have made satisfactory payment or redemption
arrangements with the Funds, orders may be
processed at the net asset value per share
next effective after receipt by that
institution.

The per share calculation is made by
subtracting from the Fund's total assets any
liabilities and then dividing into this
amount the total outstanding shares as of the
date of the calculation. The net asset value
per share (except for portfolio MM) is
computed once daily, Monday through Friday,
at 4:00 p.m. (Eastern Time) on days when the
Funds are open for business (generally the
same days that the New York Stock Exchange is
open for trading). The net asset value per
share for Portfolio MM is computed at 1:00
p.m. (Eastern Standard Time).

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

Short-term instruments maturing within 60
days may be valued at amortized cost. The
Portfolios of the Money Market Fund and
Portfolio MM of the Tax-Free Income Fund
value assets on the basis of amortized cost.

DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION

Your distributions will be reinvested
automatically in additional shares of the
same Fund unless you have elected on your
original application, or by written
instructions filed with the Funds, to have
them paid in cash ($10 minimum check amount).
There are no fees or sales charges on
reinvestments.

If you buy shares of any fund shortly before
the record date, please keep in mind that any
distribution will lower the value of the
fund's shares by the amount of the
distribution and you will then receive a
portion of the price back in the form of a
taxable distribution.

DISTRIBUTIONS - Bond Trust, Tax Free Income
Fund and Money Market Fund - At the end of
each day, the Portfolios declare dividends
from their net investment income. These
dividends are payable to those who were
shareholders of record at the end of the
previous business day. On the last day of the
month, all dividends declared during that
month are credited to the accounts of those
shareholders. Distributions from capital
gains, if any, will be declared annually by
December 31.

Shares begin earning income on the day
following the effective date of purchase.
Income earned by a Portfolio on weekends,
holidays and other days on which the Funds is
closed for business is declared as a dividend
on the next day on which the Fund is open for
business. However, on month-ends such
dividend is declared as of the last day of
the month.

Value Fund - The Value Fund pays shareholders
distributions from its net investment income
quarterly, usually in March, June, September
and December. Distributions from any net
capital gains that it has realized on the
sale of securities will be declared annually
on or before December 31.

Stewart Ivory International Fund, Growth Fund
and Shadow Stock Fund - The Funds pay
dividends from net investment income and
capital gains, if any, semiannually, usually
in June and December.

Enterprise Fund and Enterprise Fund II - The
Funds pay shareholders distributions from its
net investment income and from any net
capital gains that it has realized on the
sale of the securities. Each of these
distributions will be declared annually on or
before December 31.

TAX CONSIDERATIONS - In general, fund
distributions are taxable to you as either
ordinary income or capital gains. This is
true whether you reinvest your distributions
in additional fund shares or receive them in
cash. Any capital gains a fund distributes
are taxable to you as long-term capital gains
no matter how long you have owned your
shares.

Distributions from Portfolios S and L of the
Tax-Free Income Fund will consist primarily
of exempt- interest dividends from interest
earned on municipal securities. In general,
exempt-interest dividends are exempt from
federal income tax. These portfolios,
however, may invest a portion of their assets
in securities that pay income that is not tax-
exempt.

By law, a fund must withhold 31% of your
taxable distributions and proceeds if you do
not provide your correct social security or
taxpayer identification number, or if the IRS
instructs the fund to do so.

Every January, you will receive a statement
that shows the tax status of distributions
you received for the previous year.
Distributions declared in December but paid
in January are taxable as if they were paid
in December.

In general, when you sell your shares of a
fund, you may have a capital gain or loss.
For tax purposes, an exchange of your fund
shares for shares of a different Babson Fund
is the same as a sale. The individual tax
rate on any gain from the sale or exchange of
your fund shares depends on your marginal tax
bracket and on how long the shares have been
held. However, because the Federal and Prime
Portfolios of the Money Market Fund and
Portfolio MM of the Tax-Free Income Fund
expect to maintain a $1.00 net asset value
per share, investors in these Portfolios
should not have any gain or loss on the sale
of such shares.

Exempt-interest dividends paid by Portfolios
S and L of the Tax-Free Income Fund are taken
into account when determining the taxable
portion of an investor's social security or
railroad retirement benefits. These
Portfolios may invest a portion of their
assets in private activity bonds. The income
from these bonds will be a preference item
when determining an investor's alternative
minimum tax.

Many states grant tax-free status to
dividends paid from interest earned on direct
obligations of the U.S. government, subject
to certain restrictions.

Exempt-interest dividends from interest
earned on municipal securities of a state, or
of its political subdivisions, generally will
be exempt from that state's personal income
taxes. Most states, however, do not grant tax-
free treatment to interest on investments in
municipal securities of other states.

Fund distributions and gains from the sale or
exchange of your fund shares generally will
be subject to state and local income tax. Any
foreign taxes paid by the Stewart-Ivory
International Fund on its investments may be
passed through to you as a foreign tax
credit. Non-U.S. investors may be subject to
U.S. withholding and estate tax. You should
consult your tax advisor about the federal,
state, local or foreign tax consequences of
your investment in a fund.

ADDITIONAL POLICIES ABOUT TRANSACTIONS

We cannot process transaction requests that
are not complete and in good order as
described in this section. We may cancel or
change our transaction policies without
notice. To avoid delays, please call us if
you have any questions about these policies.

If you wish to purchase (or redeem) shares of
a Babson Fund through a broker, a fee may be
charged by that broker. In addition, you may
be subject to other policies or restrictions
of the broker such as higher minimum account
value, etc.

Purchases - We may reject orders when not
accompanied by payment or when in the best
interest of the Funds and their shareholders.

Redemptions - The Funds try to send
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 reserves the right
under certain circumstances to delay
redemption transactions up to seven days, or
as required by applicable law. The Fund
Manager believes that certain investors who
try to "time the market" by purchasing and
redeeming shares from the Funds on a regular
basis, may disrupt the investment process and
pose additional transactions costs to the
Funds. In those cases the Fund Managers may
delay redemption proceeds as described above
or take other actions it deems necessary to
discourage such activity.

If you request a redemption within 15 days of
purchase, we will delay sending your proceeds
until we are certain that we have collected
unconditional payment, which may take up to
15 days from the date of purchase. For your
protection, if your account address has been
changed within the last 30 days, your
redemption request must be in writing and
signed by each account owner, with signature
guarantees. The right to redeem shares may be
temporarily suspended in emergency situations
only as permitted under Federal law.

Withdrawal by Draft ("check") is limited to
open account shares of Babson Money Market
Fund or Babson Tax-Free Income Fund Portfolio
MM. Draft amounts may range from $500 to
$100,000.

We cannot accept requests that contain
special conditions or effective dates. We may
request additional documentation to insure
that a request is genuine. Under certain
circumstances, we may pay you proceeds in the
form of portfolio securities owned by the
Fund being redeemed. If you receive
securities instead of cash, you may incur
brokerage costs when converting into cash.

Signature Guarantees - You can get a
signature guarantee from most banks or
securities dealers, but not a notary public.
For your protection, we require a guaranteed
signature if you request:

A redemption check sent to a different
payee, bank or address than we have on file.

A redemption check mailed to an address
that has been changed within the last 30
days.

A redemption for $50,000 or more in
writing.

A change in account registration or
redemption instructions (including withdrawal
by draft election).

Corporations, Trusts and Other Entities -
Additional documentation is normally required
for corporations, fiduciaries and others who
hold shares in a representative or nominee
capacity. We cannot process your request
until we have all documents in the form
required. Please call us first to avoid
delays.

Exchanges to Another Fund - You must meet the
minimum investment requirement of the fund
you are exchanging into. The names and
registrations on the two accounts must be
identical. Your shares must have been held in
an open account for 15 days or more and we
must have received good payment before we
will exchange shares.

Telephone and fund web site Services - During
periods of increased market activity, you may
have difficulty reaching us by telephone. If
this happens, contact us by mail or web site.
We may refuse a telephone request, including
a telephone redemption request. We will use
reasonable procedures to confirm that
telephone or Fund web site instructions are
genuine. If such procedures are not followed,
the Funds may be liable for losses due to
unauthorized or fraudulent instructions. At
our option, we may limit the frequency or the
amount of telephone redemption requests.
Neither the Funds nor Jones & Babson, Inc.
assumes responsibility for the authenticity
of telephone and Fund web site redemption
requests.

CONDUCTING BUSINESS WITH THE BABSON FUNDS

BY PHONE

1-800-4-BABSON
(1-800-422-2766)
in the Kansas City area 751-5900

You must authorize each type of telephone
transaction
on your account application or the
appropriate form,
available from us. All account owners must
sign. When you call, we may request personal
identification and tape record the call.

HOW TO OPEN AN ACCOUNT BY PHONE

If you already have an account with us and
you have authorized telephone exchanges, you
may call to open an account in another Babson
or Buffalo Fund by exchange ($1,000 minimum).
The names and registrations on the accounts
must be identical.

HOW TO ADD TO AN ACCOUNT BY PHONE

You may make investments ($100 minimum) by
telephone. After we have received your
telephone call, we will deduct from your
checking account the cost of the shares.

Availability of this service is subject to
approval by the Funds and participating
banks.

HOW TO SELL SHARES BY PHONE

You may withdraw any amount ($1,000 minimum
if wired) by telephone or telegram. We will
send funds only to the address or bank
account on file with us. Provide the Fund's
name, your account number, the names of each
account owner (exactly as registered), and
the number of shares or dollar amount to be
redeemed. For wires, also provide the bank
name and bank account number.

HOW TO EXCHANGE SHARES BY PHONE

You may exchange shares ($1,000 minimum or
the initial minimum fund requirement) for
shares in another Babson Fund which have been
held in open account for 15 days or more.

All account owners are automatically granted
telephone and Fund web site exchange
privileges unless they decline them
explicitly in writing, either on the account
application or by writing to the Babson
Funds.

CONDUCTING BUSINESS WITH THE BABSON FUNDS

BY MAIL

Initial Purchases, Redemptions and all
Correspondence:
The Babson Fund Group
P.O. Box 219757
Kansas City, MO 64121-9779

Subsequent Purchases:
The Babson Fund Group
P.O. Box 219779
Kansas City, MO 64121-9779

HOW TO OPEN AN ACCOUNT BY MAIL

Complete and sign the application which
accompanies this Prospectus. Your initial
investment must meet the minimum amount. Make
your check payable to UMB Bank, n.a.

HOW TO ADD TO AN ACCOUNT BY MAIL

Make your check ($50 minimum) payable to UMB
Bank, n.a. and mail it to us. Always identify
your account number or include the detachable
reminder stub (from your confirmation
statement).

HOW TO SELL SHARES BY MAIL

In a letter, include the genuine signature of
each registered owner (exactly as
registered), the name of each account owner,
the account number and the number of shares
or the dollar amount to be redeemed. We will
send funds only to the address of record.

HOW TO EXCHANGE SHARES BY MAIL

In a letter, include the genuine signature of
each registered owner,
the account number, the number of shares or
dollar amount to
be exchanged ($1,000 minimum) and the Babson
Fund into which
the amount is being transferred.

CONDUCTING BUSINESS WITH THE BABSON FUNDS

BY WIRE

UMB Bank, n.a.,
Kansas City, Missouri, ABA #101000695
For Account Number 9870326213

Please provide:
(Fund Number)/(Babson Account Number)/(Name
on Account)

HOW TO OPEN AN ACCOUNT BY WIRE

Call us first to get an account number. We
will require information such as your Social
Security or Taxpayer Identification Number,
the amount being wired ($1,000 minimum), and
the name and telephone number of the wiring
bank. Then tell your bank to wire the amount.
You must send us a completed application as
soon as possible or payment of your
redemption proceeds will be delayed.

HOW TO ADD TO AN ACCOUNT BY WIRE

Wire share purchases ($1,000 minimum) should
include the names of each account owner, your
account number and the Babson Fund in which
you are purchasing shares. You should notify
us by telephone that you have sent a wire
purchase order to UMB Bank, n.a.

HOW TO SELL SHARES BY WIRE

Redemption proceeds ($1,000 minimum) may be
wired to your pre-identified bank account. A
$10 fee is deducted. If we receive your
request before 4:00 P.M. (Eastern Time) we
will normally wire funds the following
business day. If we receive your request
later in the day, we will normally wire funds
on the second business day. Contact your bank
about the time of receipt and availability.

HOW TO EXCHANGE SHARES BY WIRE

Not applicable.

CONDUCTING BUSINESS WITH THE BABSON FUNDS

THROUGH AUTOMATIC TRANSACTION PLANS

You must authorize each type of automatic
transaction on your account application or
complete an authorization form, available
from us upon request. All registered
owners must sign.

HOW TO OPEN AN ACCOUNT THROUGH AUTOMATIC
TRANSACTION PLANS

Not applicable.

HOW TO ADD TO AN ACCOUNT THROUGH AUTOMATIC
TRANSACTION PLANS

Automatic Monthly Investment:
You may authorize automatic monthly
investments in a constant dollar amount ($50
minimum) from your checking account. We will
draft your checking account on the same day
each month in the amount you authorize.

HOW TO SELL SHARES THROUGH AUTOMATIC
TRANSACTION PLANS

Systematic Redemption Plan:
You may specify a dollar amount ($50 minimum)
to be withdrawn monthly or quarterly or have
your shares redeemed at a rate calculated to
exhaust the account at the end of a specified
period. A fee of $1.50 or less may be charged
for each withdrawal. You must own shares in
an open account valued at $10,000 when you
first authorize the systematic redemption
plan. You may cancel or change your plan or
redeem all your shares at any time. We will
continue withdrawals until your shares are
gone or until the Fund or you cancel the
plan.

HOW TO EXCHANGE SHARES THROUGH AUTOMATIC
TRANSACTION PLANS

Monthly Exchanges:
You may authorize monthly exchanges from your
account ($100 minimum) to another Babson
Fund. Exchanges will be continued until all
shares have been exchanged or until you
terminate the service.

ADDITIONAL INFORMATION

The Statement of Additional Information (SAI)
contains additional information about the
Funds and is incorporated by reference into
this Prospectus. The Funds' annual and semi-
annual reports to shareholders contain
additional information about each Funds'
investments. In the Funds' annual report, you
will find a discussion of the market
conditions and investment strategies that
significantly affected each Fund's
performance during the last fiscal year.
You may obtain a free copy of these documents
by calling, writing or e-mailing the Funds as
shown below. You also may call the toll free
number given below to request other
information about the Funds and to make
shareholder inquiries.
You may review and copy the SAI and other
information about the Funds by visiting the
Securities and Exchange Commission's Public
Reference Room in Washington, DC (1-800-SEC-
0330) or by visiting the Commission's
Internet site at http://www.sec.gov. Copies
of this information also may be obtained,
upon payment of a duplicating fee, by writing
to the Public Reference Section of the
Commission, Washington, DC 20549-6009.

811-3823 Enterprise Fund
811-6258 Enterprise Fund II
811-901 Growth Fund
811-5218 Shadow Stock Fund
811-4114 Value Fund
811-5386 International Fund
811-495 Bond Trust
811-2963 Money Market Fund
811-2948 Tax-Free Income Fund

BABSON FUNDS
Jones & Babson Distributors
A Member of the Generali Group

1-800-4-BABSON
(1-800-422-2766)
www.babsonfunds.com

<PAGE>
PART B

BABSON GROWTH FUND, INC. BABSON BOND TRUST
BABSON ENTERPRISE FUND, INC. BABSON MONEY MARKET FUND, INC.
BABSON ENTERPRISE FUND II, INC. BABSON TAX-FREE INCOME FUND, INC.
BABSON VALUE FUND, INC.
SHADOW STOCK FUND, INC.
BABSON-STEWART IVORY INTERNATIONAL FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

October 31, 1999

This Statement is not a Prospectus but should be read in conjunction
with the Funds' current combined Prospectus dated October 31, 1999. To
obtain the Prospectus or Annual Report to Shareholders, please call the
Funds toll-free at 1-800-4-BABSON (1-800-422-2766), or in the Kansas City
area 751-5900. Certain information from the Annual Report to Shareholders
is incorporated by reference into this Statement.

TABLE OF CONTENTS
Page

Investment Strategies and Risks 2
Fund Strategies 2
Repurchase Agreements - All Funds 6
Risks for Babson-Stewart Ivory International Fund 6
Cash Management - All Funds 8
Fundamental Investment Restrictions 8
Portfolio Transactions 11
Performance Measures 12
Total Return 13
How the Fund's Shares are Distributed 14
Purchase and Redemption Services 14
How Share Purchases are Handled 15
Redemption of Shares 15
Management and Investment Counsel 16
Officers and Directors 17
Compensation Table 19
Holidays 19
Dividends, Distributions and their Taxation 19
General Information and History 22
Custodian 23
Transfer Agent 23
Independent Auditors 23
Other Jones & Babson Funds 24
Description of Stock Ratings 24
Ratings of Municipal and Taxable Securities 26
Description of Commercial Paper Ratings 27
Financial Statements 28

INVESTMENT STRATEGIES AND RISKS

The Funds are open-ended, diversified
management investment companies commonly
known as mutual funds. The following information
supplements the Prospectus which describes each
Fund's investment objective, and principal strategies
and risks. None of the Funds will invest more than
25% of its assets in a single industry. In addition,
none of the Funds intend to borrow in excess of 5%
of its total assets.

FUND STRATEGIES

Babson Growth Fund. Current yield is
secondary objective. The Fund generally defines
"above average total return" as total return that is
higher than return generated by traditional investment
vehicles other than equity products, including but not
limited to, passbook savings accounts, certificates of
deposit, bonds, U.S. government securities and
traditional insurance products, such as whole life
policies and annuities. All assets of the Fund will be
invested in marketable securities composed
principally of common stocks and securities
convertible into common stock. Necessary reserves
will be held in cash or high-quality short-term debt
obligations readily changeable to cash, such as
treasury bills, commercial paper or repurchase
agreements. The Fund reserves the freedom to invest
in preferred stocks, high grade bonds or other
defensive issues when, in management's judgment,
economic and market conditions make such a course
desirable. Normally, however, the Fund will
maintain at least 80% of the portfolio in common
stocks.

D.L. Babson Bond Trust. Babson Bond
Trust will limit its investments in securities rated in
the fourth classification (Baa and BBB) to a
maximum of 25% of its assets since these securities
may have speculative characteristics and changes in
economic conditions or other circumstances are more
likely to lead to a weakened capacity of those issuers
to make principal or interest payments.

The Portfolios may shorten or lengthen
portfolio maturities as interest rates change. If the
bond rating of a security purchased by a Portfolio is
subsequently downgraded, the Portfolio will take any
necessary steps designed to bring the Portfolio into
compliance with its investment policies as soon as
reasonably practicable. The Portfolios may also
respond to adverse market, economic, political or
other considerations by investing up to 100% of its
assets in cash or short-term debt obligations for
temporary defensive purposes.

Portfolio L will generally have a duration of
between 3.5 and 7 years (excluding short-term
investments). Portfolio S will generally have a
duration of between 2 and 4 years (excluding short-
term investments). Duration is a portfolio
management tool used to determine the price
sensitivity of an individual bond or portfolio of fixed
income securities to a change in interest rates.
Unlike maturity, which only states when the final
payment is received, the duration of a fixed income
security is the weighted average maturity, expressed
in years, of the present value of all future cash flows,
including coupon payments and principal
repayments. The Portfolios may include securities
with maturities and durations outside these ranges.

Babson Enterprise Fund and Babson
Enterprise Fund II. Since Babson Enterprise
Fund's and Babson Enterprise Fund II's focus on
smaller companies, the overall income return on
these Funds may be low. Smaller companies
frequently need to retain all or most of their profits to
finance their growth and will pay small dividend
yields, or none. If the companies are successful, this
plow-back of earnings and internal financing of
growth without the need to issue additional shares
ultimately should enhance the companies' per share
earnings and dividend capability and make their
shares more attractive in the marketplace.

Effective July 1, 1999, the Babson
Enterprise Fund was opened to new investors. This
means that investors may open new accounts with the
Fund through direct purchases, or through exchanges
from any other fund in the Babson Funds family or
the Buffalo Funds family. Investors whose accounts
were open in 1992 when the Fund was closed to new
investors have been permitted to add to their accounts
since that time. It is anticipated that the Fund will
again close to new investors when it reaches $280
million in assets.

Babson Value Fund. Under normal
conditions, the Fund will invest at least 90% of its
assets in common stocks. In addition, the Fund
intends to hold a small percentage of cash or high
quality, short term debt obligations for reserves to
cover redemptions and unanticipated expenses.

Babson Shadow Stock Fund, Inc. "Small
stocks" were originally defined as those in the bottom
quintile of stocks listed on the New York Stock
Exchange ("NYSE") when ranked by market
capitalization (number of shares outstanding times
price per share). At present this would be a market
capitalization of below $213 million, but this level
changes as market prices rise and fall. Currently, this
concept is also applied to stocks listed on the
American Stock Exchange ("AMEX") and over-the-
counter ("OTC") stocks. The Fund defines "small
stocks" to include stocks listed on the NYSE, AMEX
and OTC stocks that have market capitalization of
between $20 million and $213 million and have
annual net profits of at least $1 million for the three
most recent fiscal years. "Neglected stocks" are
those that have below average institutional holdings
and below average coverage by analysts and
newsletters. The term "neglected" has not had a
consistent definition, but the Fund's Manager and
Investment Adviser define it as meaning the fifty
percent of "small stocks" which have the least
coverage by institutions and analysts. The Fund's
Manager and Investment Adviser will use their
judgment in determining the methods of measuring
analyst and institutional interest. It is estimated that
Shadow Stock Fund's portfolio will contain about
250 stocks and thus be very diversified.

It is the intention of the Fund to maintain
ownership of the Shadow Stocks approximately in
proportion to their respective market capitalizations,
but this approach may be departed from for the
following reasons. First, acquisition of the shares of
smaller companies is sometimes difficult without
disrupting the supply/demand relationship and
thereby increasing transaction costs. For this reason,
shares of companies on the buy list may be purchased
when opportunities for block trades present
themselves even if purchases of such a company's
stock would not otherwise be the highest priority on a
market capitalization basis. Conversely, high priority
shares might be avoided if they cannot be acquired at
the time without disrupting the market. Second, the
Fund will attempt to purchase shares in optimal lot
sizes which precludes fine tuning of the weighting.
Third, the Fund's Manager and Investment Adviser
will take a long-term view and do not feel it prudent
to constantly purchase and sell stocks for short-term
balancing. Guideline relative weights will be
reviewed in detail twice a year.

Shares of stock will be considered for
elimination from the portfolio in the following bases:
(1) on the basis of the $5 minimum price criterion (a
stock will not be sold for this reason alone, but
additional shares will not be purchased below $4 per
share which may result in a disproportionate
representation in terms of ideal weighting); (2) on the
basis or profitability (a company's stock will be sold
as soon as the Fund's Manager and Investment
Adviser feel it is highly unlikely that there will be
negative earnings in the current fiscal year); (3) on
the basis of tenders or potential mergers (the Fund's
Manager and Investment Adviser will use their
judgment as to the best time to sell or tender); (4) on
the basis on neglect (shares will be sold when the
company has been beyond the Manager's and
Investment Adviser's criteria for a neglected stock
for three successive semiannual evaluation periods);
or (5) on the basis of capitalization a stock will be
sold if, at a semiannual evaluation, either the market
capitalization is twice the current acceptable
maximum or one-half the current minimum. In the
case of portfolio companies whose capitalization has
gone beyond the current maximum or minimum, the
Fund's Investment Adviser may keep the portfolio
weighting at the level appropriate for the current
maximum or minimum. If funds beyond current
liquid assets are necessary to meet redemptions,
stocks not meeting current initial criteria will be
liquidated first.

While the objectives of the Fund would
favor a fully invested position in Shadow Stocks, the
practicality of Fund management requires liquidity.
An average of about 5% of the Fund's assets may be
invested in cash or cash equivalents including:
securities that are issued or guaranteed as to principal
and interest by the U.S. government, its agencies,
authorities or instrumentalities (such as U.S. Treasury
obligations, which differ only in their interest rates,
maturities and times of issuance, and obligations
issued or guaranteed by U.S. government agencies or
instrumentalities which are backed by the full faith
and credit of the U.S. Treasury or which are
supported by the right of the issuer to borrow from
the U.S. government), repurchase agreements,
certificates of deposit, time deposits, commercial
paper and other high quality short-term debt
securities. The Fund may adopt a temporary
defensive position by investing it assets in debt
securities, such as money market obligations,
including securities of the U.S. government and its
agencies, high quality commercial paper, bankers'
acceptances and repurchase agreements with banks
and brokers for U.S. government securities.

Babson-Stewart Ivory International
Fund, Inc. The Fund will look at such factors as the
location of the company's assets, personnel, sales and
earnings, to determine whether a company's primary
business is carried on outside the United States. The
Fund diversifies its investments among various
countries and a number of different industries. The
Fund is designed to provide investors with a
diversified participation in international businesses.
Over the years, some foreign businesses have been
especially successful in their particular industries and
some foreign stock markets have outperformed the
American markets. Foreign securities markets do not
always move in parallel with the U.S. securities
markets, so investing in international securities can
provide diversification advantages.

The Fund primarily invests in equity
securities of seasoned companies which are listed on
foreign stock exchanges and which the investment
counsel considers to have attractive characteristics in
terms of profitability, growth and financial resources.
"Seasoned" and "established" companies are those
companies which, in the opinion of the investment
counsel, are known for the quality and acceptance of
their products or services and for their ability to
generate profits and in many cases pay dividends.
The Fund may invest in fixed-income securities of
foreign governments or companies when the
investment counsel believes that prevailing market,
economic, political or currency conditions warrant
such investments. While most foreign securities are
not subject to standard credit ratings, the investment
counsel intends to select "investment grade" issued of
foreign debt securities which are comparable to a Baa
or higher rating by Moody's Investors Service, Inc.
or a BBB or higher rating by Standard and Poor's
Corporation based on available information, and
taking into account liquidity and quality issues.
Securities rated BBB or Baa are considered to be
medium grade and may have speculative
characteristics.

The Fund may also purchase American
Depository Receipts ("ADRs") which represent
foreign securities traded on U.S. exchanges or in the
over-the-counter market, European Depository
Receipts ("EDRs"), and International Depository
Receipts ("IDRs"), in bearer form, which are
designed for use in European and other securities
markets. The fund may also invest in securities that
are not listed on an exchange. Generally, the volume
of trading in an unlisted common stock is less than
the volume of trading in a listed stock. This means
that the degree of market liquidity of some stocks in
which the Fund invests may be relatively limited.
When the Fund disposes of such a stock it may have
to offer the shares at a discount from recent prices or
sell the shares in small lots over an extended period
of time.

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

Generally, the Fund does not intend to invest
more than 35% of its total assets in any one particular
country. However, the Fund may, at times,
temporarily invest a substantial portion of its assets in
one or more of such countries if economic and
business conditions warrant such investments,
although it currently does not intend to do so to any
principal extent. The Fund may also invest up to
20% of its assets in companies located in developing
countries. A developing country is generally
considered to be a country which is in the initial
stages of its industrialization cycle with a low per
capita gross national product. Compared to
investment in the United States and other developed
countries, investing in the equity and fixed income
markets of developing countries involves exposure to
relatively unstable governments, economic structures
that are generally less mature and based on only a
few industries, and securities markets which trade a
small number of securities. Prices on securities
exchanges in developing countries tend to be more
volatile than those in developed countries. The Fund
will not invest more than 20% of its total assets in
companies located in developing countries.

Under normal conditions, the Fund will
invest at least 65% of its assets in equity securities of
foreign issuers. However, to meet the liquidity needs
of the Fund or when the Fund believes that
investments should be deployed in a temporary
defensive position because of economic or market
conditions, the Fund may invest all or a major portion
of its assets in short-term debt securities denominated
in U.S. dollars, including U.S. Treasury bills and
other securities of the U.S. government and its
agencies, bankers' acceptances, certificates of
deposit, and repurchase agreements maturing in
seven days or less with U.S. banks and broker-
dealers. The Fund may also hold cash and time
deposits in foreign banks, denominated in any major
foreign currency.

Babson Money Market Fund. To achieve
its objectives the Fund may engage in trading activity
in order to take advantage of opportunities to enhance
yield, protect principal or improve liquidity. This
trading activity should not increase the Fund's
expenses since there are normally no broker's
commissions paid by the Fund for the purchase or
sale of money market instruments. However, a
markup or spread may be paid to a dealer from which
the Fund purchases a security.

To assure compliance with the adopted
procedures pursuant to Rule 2a-7 under the
Investment Company Act of 1940, the Fund will only
invest in U.S. dollar denominated securities with
remaining maturities of 397 days or less, maintain the
dollar weighted average maturity of the securities in
the Fund's portfolio at 90 days or less and limit its
investments to those instruments which the Directors
of the Fund determine to present minimal credit risks
and which are eligible investments under the rule.

Babson Tax-Free Income Fund. Each
Portfolio will have substantially all of its assets
invested in investment-grade municipal securities, the
interest on which is deemed exempt from federal
income tax (including the alternative minimum tax).
The essential difference in the Portfolios will be the
time to maturity of their holdings. The Portfolios are:

Portfolio L - Longer term: There
is no maximum maturity. Longer
maturities produce higher income
but carry greater possibility of price
fluctuation compared to obligations
with shorter terms.

Portfolio S - Shorter Term:
Shorter maturities usually result in
lower income but provide more
stability in price when compared to
obligations with longer maturities.

Portfolio MM - Money Market:
Maturities will conform to Rule 2a-
7 at the time of purchase.

During periods of normal market conditions,
the Fund will invest at least 80% of the total assets of
each Portfolio (exclusive of cash) in municipal
securities. The Fund may invest any remaining
balance in taxable money market instruments on a
temporary basis, if management believes this actions
would be in the best interest of shareholders.
Included in this category are: obligations of the U.S.,
its agencies or instrumentalities; certificates of
deposit; bankers' acceptances and other short-term
debt obligations of U.S. banks with total assets of $1
billion or more; and commercial paper rated A-2 or
better by Standard & Poor's Corp. ("S&P") or Prime-
2 or better by Moody's Investors Services, Inc.
("Moody's"), or certain rights to acquire these
securities.

The Fund reserves the right to deviate
temporarily from this policy during extraordinary
circumstances when, in the opinion of management,
it is advisable to do so in the best interests of
shareholders.

At least 90% of the municipal bonds in
Portfolio L and Portfolio S will be rated at the time of
purchase within the top three classifications of
Moody's (Aaa, Aa and A), or by S&P (AAA, AA,
and A). Any municipal bond backed by the full faith
and credit of the federal government shall be
considered to have a rating of AAA. Investments in
short-term municipal obligations and notes are
limited to those obligations which at the time of
purchase: (1) are backed by the full faith and credit of
the U.S.; or (2) are rated MIG-1, MIG-2 or MIG-3 by
Moody's; or (3) if the notes are not rated, then the
issuer's long-term bond rating must be at least A as
determined by Moody's or by S&P. Short-term
discount notes are limited to those obligations rated
A-1 or A-2 by S&P, or Prime-1 or Prime-2 by
Moody's or their equivalents as determined by the
Board of Directors. With respect to short-term
discount notes which are not rated, the issuer's long-
term bond rating must be at least A by S&P or
Moody's.

One hundred percent of the bonds in Portfolio MM
must be rated at the time of purchase within the two
highest grades assigned by Moody's (Aaa and Aa) or
by S&P (AAA and AA) or of comparable quality as
determined by the Board of Directors. Any
municipal bond held in Portfolio MM that is backed
by the full faith and credit of the federal government
shall be considered to have a rating of AAA.
Investments in short-term municipal obligations and
notes will be limited to those obligations which at the
time of purchase: (1) are backed by the full faith and
credit of the U.S.; (2) are rated MIG-1 or MIG-2 by
Moody's; or (3) if the obligations or notes are not
rated, then of comparable quality as determined by
the Board of Directors. Short-term discount notes
will be limited to those obligations rated A-1 by S&P
or Prime-1 by Moody's or their equivalents as
determined by the Board of Directors. If short-term
discount notes are not rated, then they must be of
comparable quality as determined by the Board of
Directors

It is the policy of the Fund not to invest
more than 25% of its assets in any one classification
of municipal securities, except tax-exempt
obligations which are backed by the U.S.
governments. Should the rating organizations used
by the Fund cease to exist or change their systems,
the Fund will attempt to use other comparable ratings
as standards for its investments in municipal
securities in accordance with its investment policies.

REPURCHASE AGREEMENTS - ALL FUNDS

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

The Funds will enter into such repurchase
agreements only with United States banks having
assets in excess of $1 billion which are members of
the Federal Deposit Insurance Corporation, and with
certain securities dealers who meet the qualifications
set from time to time by the Board of Directors of the
Funds. 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 Funds.

Repurchase Agreement Risk Factors. 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 Funds may incur a loss upon disposition of them.
If the seller of the agreement becomes insolvent and
subject to liquidation or reorganization under the
Bankruptcy Code or other laws, disposition of the
underlying securities may be delayed pending court
proceedings. Finally, it is possible that the Funds may
not be able to perfect its interest in the underlying
securities. While the Funds' management
acknowledges these risks, it is expected that they can
be controlled through stringent security selection
criteria and careful monitoring procedures.

RISKS FOR BABSON-STEWART IVORY
INTERNATIONAL FUND

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

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

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

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

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

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

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

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

For purposes including but not limited to meeting
redemptions and unanticipated expenses, the Funds
may invest a portion of their assets in cash or high-
quality, short-term debt obligations readily
changeable into cash such as:

(1) certificates of deposit, bankers' acceptances and
other short-term obligations issued domestically
by United States commercial banks having assets
of at least $1 billion and which are members of
the Federal Deposit Insurance Corporation or
holding companies of such banks; (2)
commercial paper of companies rated P-2/MIG-2
or higher by Moody's Investors Service, Inc.
(Moody's) or A-2 or higher by Standard and
Poor's Corporation (S&P), or if not rated by
either Moody's or S&P, a company's
commercial paper may be purchased by the Fund
if the company has an outstanding bond issue
rated A or higher by Moody's or A or higher by
S&P; (3) short-term debt securities which are
non-convertible and which have one year or less
remaining to maturity at the date of purchase and
which are rated A or higher by Moody's or A or
higher by S&P; (4) negotiable certificates of
deposit and other short-term debt obligations of
savings and loan associations having assets of at
least $1 billion and which are members of the
Federal Home Loan Banks Association and
insured by the Federal Deposit Insurance
Corporation.

FUNDAMENTAL INVESTMENT
RESTRICTIONS

In addition to the investment objective and portfolio
management policies set forth in the Prospectus
under the caption "Investment Objective and
Principal Investment Strategies," the Funds are
subject to certain other restrictions which may not be
changed without approval of the lesser of: (1) at least
67% of the voting securities present at a meeting if
the holders of more than 50% of the outstanding
securities of the Fund are present or represented by
proxy, or (2) more than 50% of the outstanding
voting securities of the Fund.

Babson Growth Fund and Babson Value Fund
will not: (1) purchase the securities of any one
issuer, except the United States government, if
immediately after and as a result of such purchase (a)
the value of the holdings of the Fund in the securities
of such issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than 10% of
the outstanding voting securities, or any other class of
securities, of such issuer; (2) engage in the purchase
or sale of real estate or commodities; (3) underwrite
the securities of other issuers; (4) make loans to any
of its officers, directors, or employees, or to its
manager, or general distributor, or officers or
directors thereof; (5) make any loan (the purchase of
a security subject to a repurchase agreement or the
purchase of a portion of an issue of publicly
distributed debt securities is not considered the
making of a loan); (6)invest in companies for the
purpose of exercising control of management; (7)
purchase securities on margin or sell securities short;
(8) purchase shares of other investment companies
except in the open market at ordinary broker's
commission, but, with respect to the Growth Fund,
not in excess of 5% of the Growth Fund's assets, or,
for either Fund, pursuant to a plan of merger or
consolidation; (9) invest in the aggregate more than
5% of the value of its gross assets in the securities of
issuers (other than federal, state, territorial, or local
governments, or corporations, or authorities
established thereby), which including predecessors,
have not had at least three years' continuous
operations nor, with respect to the Growth Fund,
invest more than 25% of the Growth Fund's assets in
any one industry; (10) enter into dealings with its
officers or directors, its manager or underwriter, or
their officers or directors or any organization in
which such persons have a financial interest except
for transactions in the Fund's own shares or other
securities through brokerage practices which are
considered normal and generally accepted under
circumstances existing at the time; (11) purchase or
retain securities of any company in which any Fund
officers or directors, or Fund manager, its partner,
officer, or director beneficially owns more than 1/2 of
1% of said company's securities, if all such persons
owning more than 1/2 of 1% of such company's
securities, own in the aggregate more than 5% of the
outstanding securities of such company; (12) borrow
or pledge its credit under normal circumstances
except up to 10% of its gross assets (computed at the
lower of fair market value or cost) for temporary or
emergency purposes, and not for the purpose of
leveraging its investments, and provided further that
any borrowing in excess of 5% of the total assets of
the Fund shall have asset coverage of at least 3 to1;
(13) make itself or its assets liable for the
indebtedness of others; or (14) invest in securities
which are assessable or involve unlimited liability.

Babson Enterprise Fund, Babson Enterprise Fund
II and Shadow Stock Fund will not: (1) purchase
the securities of any one issuer, except the United
States government, if immediately after and as a
result of such purchase (a) the value of the holdings
of the Fund in the securities of such issuer exceeds
5% of the value of the Fund's total assets, or (b) the
Fund owns more than 10% of the outstanding voting
securities, or any other class of securities, of such
issuer; (2) engage in the purchase or sale of real
estate or commodities or, with respect to Enterprise
Fund II, futures contracts; (3) underwrite the
securities of other issuers; (4) make loans to any of
its officers, directors, or employees, or to its
manager, or general distributor, or officers or
directors thereof; (5) make loans to other persons,
except by the purchase of debt obligations which are
permitted under its investment policy; (6)invest in
companies for the purpose of exercising control of
management; (7) purchase securities on margin or
sell securities short; (8) purchase shares of other
investment companies except in the open market at
ordinary broker's commission, but not in excess of
5% of the Fund's assets, or pursuant to a plan of
merger or consolidation; (9) invest in the aggregate
more than 5% of the value of its gross assets in the
securities of issuers (other than federal, state,
territorial, or local governments, or corporations, or
authorities established thereby), which including
predecessors, have not had at least three years'
continuous operations nor invest more than 25% of
the Fund's assets in any one industry; (10) enter into
dealings with its officers or directors, its manager or
underwriter, or their officers or directors or any
organization in which such persons have a financial
interest except for transactions in the Fund's own
shares or other securities through brokerage practices
which are considered normal and generally accepted
under circumstances existing at the time; (11)
purchase or retain securities of any company in
which any Fund officers or directors, or Fund
manager, its partner, officer, or director beneficially
owns more than 1/2 of 1% of said company's
securities, if all such persons owning more than 1/2 of
1% of such company's securities, own in the
aggregate more than 5% of the outstanding securities
of such company; (12) borrow or pledge its credit
under normal circumstances, except up to 10% of its
gross assets (computed at the lower of fair market
value or cost) for temporary or emergency purposes,
and not for the purpose of leveraging its investments,
and provided further that any borrowing in excess of
5% of the total assets of the Fund shall have asset
coverage of at least 3 to1; (13) make itself or its
assets liable for the indebtedness of others; (14)
invest in securities which are assessable or involve
unlimited liability; or (15) issue senior securities
except for those investment procedures permissible
under the Fund's other restrictions.

Babson-Stewart Ivory International Fund will not:
(1) purchase the securities of any one issuer, except
the United States government, if immediately after
and as a result of such purchase (a) the value of the
holdings of the Fund in the securities of such issuer
exceeds 5% of the value of the Fund's total assets, or
(b) the Fund owns more than 10% of the outstanding
voting securities, or any other class of securities, of
such issuer; (2) engage in the purchase or sale of real
estate or commodities; (3) underwrite the securities
of other issuers; (4) make loans to any of its officers,
directors, or employees, or to its manager, or general
distributor, or officers or directors thereof; (5) make
loans to other persons, except by the purchase of debt
obligations which are permitted under its investment
policy; (6) invest in companies for the purpose of
exercising control of management; (7) purchase
securities on margin or sell securities short; (8)
purchase shares of other investment companies
except shares of closed-end investment companies,
purchased in the open market at ordinary broker's
commission, but not in excess of 5% of the Fund's
assets, or pursuant to a plan of merger or
consolidation; (9) invest in the aggregate more than
5% of the value of its gross assets in the securities of
issuers (other than federal, state, territorial, or local
governments, or corporations, or authorities
established thereby), which including predecessors,
have not had at least three years' continuous
operations nor invest more than 25% of the Fund's
assets in any one industry; (10) enter into dealings
with its officers or directors, its manager or
underwriter, or their officers or directors or any
organization in which such persons have a financial
interest except for transactions in the Fund's own
shares or other securities through brokerage practices
which are considered normal and generally accepted
under circumstances existing at the time; (11)
purchase or retain securities of any company in
which any Fund officers or directors, or Fund
manager, its partner, officer, or director beneficially
owns more than 1/2 of 1% of said company's
securities, if all such persons owning more than 1/2 of
1% of such company's securities, own in the
aggregate more than 5% of the outstanding securities
of such company; (12) borrow or pledge its credit
under normal circumstances, except up to 10% of its
gross assets (computed at the lower of fair market
value or cost) for temporary or emergency purposes,
and not for the purpose of leveraging its investments,
and provided further that any borrowing in excess of
5% of the total assets of the Fund shall have asset
coverage of at least 3 to1; (13) make itself or its
assets liable for the indebtedness of others; (14)
invest in securities which are assessable or involve
unlimited liability; or (15) issue senior securities
except for those investment procedures permissible
under the Fund's other restrictions.

Although not fundamental policies subject to
shareholder vote, Babson-Stewart Ivory International
Fund may not engage in any of the following
activities: (1) invest directly in oil, gas, or other
mineral exploration or development programs: (2)
invest more than 5% of its total assets in securities
which are restricted as to future sale; (3) invest more
than 5% of its total assets in puts, calls, straddles,
spreads, and any combination thereof (the Fund will
engage in options transactions for hedging purposes
only); and (4) purchase warrants, valued at the lower
of cost or market, in excess of 5% of the value of the
Fund's net assets. Included within that amount, but
not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the
New York or American Stock Exchange. Warrants
acquired by the Fund at any time in units or attached
to securities are not subject to this restriction.

Babson Bond Trust 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 1/2 of 1% of the capital stock of such issuer and
such Trustees together own beneficially more than
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 5%
of the market value of the total assets of the Trust or
the Trust shall own more than 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.

Babson Money Market Fund will not: (1) invest in
equity securities or securities convertible into
equities; (2) purchase the securities of any issuer
(other than obligations issued or guaranteed as to
principal and interest by the government of the
United States, its agencies or instrumentalities), if as
a result, (a) more than 5% of the Fund's total assets
(taken at current value) would be invested in the
securities of such issuer, or (b) the Fund would hold
more than 10% of any class of securities of such
issuer (for this purpose, all debts and obligations of
an issuer maturing in less than one year are treated as
a single class of securities); (3) borrow money in
excess of 15% of its total assets taken at market
value, and then only from banks as a temporary
measure for extraordinary or emergency purposes;
the Fund will not borrow to increase income
(leveraging) but only to facilitate redemption requests
which might otherwise require untimely dispositions
of Portfolio securities; the Fund will repay all
borrowings before making additional investments,
and interest paid on such borrowings will reduce net
income; (4) mortgage, pledge or hypothecate its
assets except in an amount up to 15% (10% as long
as the Fund's shares are registered for sale in certain
states) of the value of its total assets but only to
secure borrowings for temporary or emergency
purposes; (5) issue senior securities, as defined in the
Investment Company Act of 1940, as amended; (6)
underwrite securities issued by other persons; (7)
purchase or sell real estate, but this shall not prevent
investment in obligations secured by real estate; (8)
make loans to other persons, except by the purchase
of debt obligations which are permitted under its
investment policy; (9) purchase securities on margin
or sell short; (10) purchase or retain securities of an
issuer if to the knowledge of the Fund's management
those directors of the Fund, each of whom owns more
than 1/2 of 1% of such securities, together own more
than 5% of the securities of such issuer; (11)
purchase or sell commodities or commodity
contracts; (12) write or invest in put, call, straddle or
spread options or invest in interests in oil, gas or
other mineral exploration or development programs;
(13) invest in companies for the purpose of
exercising control; (14) invest in securities of other
investment companies, except as they may be
acquired as part of a merger, consolidation or
acquisition of assets; (15) invest more than 5% of the
value of its total assets at the time of investment in
the securities of any issuer or issuers which have
records of less than three years continuous operation,
including the operation of any predecessor, but this
limitation does not apply to securities issued or
guaranteed as to interest and principal by the U.S.
government or its agencies or instrumentalities; or
(16) purchase any securities which would cause more
than 25% of the value of a Portfolio's total net assets
at the time of such purchase to be invested in any one
industry; provided, however, the Prime Portfolio does
not consider assets in certificates of deposit or
bankers' acceptances of domestic branches of U.S.
banks to be investments in a single industry.

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.

Babson Tax-Free Income Fund will not: (1) invest
in equity securities or securities convertible into
equities; (2) purchase more than 10% of the
outstanding publicly issued debt obligations of any
issuer; (3) borrow money in any Portfolio except for
temporary emergency purposes, and then only in an
amount not exceeding 10% of the value of the total
assets of that Portfolio; (4) mortgage, pledge or
hypothecate the assets of any Portfolio to an extent
greater than 10% of the value of the net assets of that
Portfolio; (5) issue senior securities, as defined in the
Investment Company Act of 1940, as amended; (6)
underwrite any issue of securities; (7) purchase or
sell real estate, but this shall not prevent investment
in municipal bonds secured by real estate; (8) make
loans to other persons, except by the purchase of
bonds, debentures or similar obligations which are
publicly distributed; (9) purchase securities on
margin or sell short; (10) purchase or retain
securities of an issuer if to the knowledge of the
Fund's management those directors of the Fund, each
of whom owns more than 1/2 of 1% of such securities,
together own more than 5% of the securities of such
issuer; (11) purchase or sell commodities or
commodity contracts; (12) invest in put, call, straddle
or special options; (13) purchase securities of any
issuer (except the U.S. government, its agencies and
instrumentalities, and any municipal bond guaranteed
by the U.S. government) in any Portfolio if, as a
result, more than 5% of the total assets of that
Portfolio would be invested in the securities of such
issuer; for purposes of this limitation, "issuer" will be
based on a determination of the source of assets and
revenues committed to meeting interest and principal
payments of each security, and a government entity
which guarantees the securities issued by another
entity is also considered an issuer of that security;
(14) invest in companies for the purpose of
exercising control; (15) invest in securities of other
investment companies, except as they may be
acquired as part of a merger, consolidation or
acquisition of assets; (16) invest more than 5% of the
value of its total assets at the time of investment in
the securities of any issuer or issuers which have
records of less than three years continuous operation,
including the operation of any predecessor, but this
limitation does not apply to securities issued or
guaranteed as to interest and principal by the U.S.
government or its agencies or instrumentalities.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for the Funds are
made by Jones & Babson, Inc. pursuant to
recommendations by David L. Babson & Co. Inc. and
Babson-Stewart Ivory International. Officers of the
Funds and Jones & Babson, Inc. are generally
responsible for implementing or supervising these
decisions, including allocation of portfolio brokerage
and principal business and the negotiation of
commissions and/or the price of the securities.
Portfolio turnover will be no more than is necessary
to meet the Funds' investment objectives. Under
normal circumstances, it is anticipated that the
Funds' portfolio turnover will not exceed 100%.

In instances where securities are purchased on a
commission basis, the Funds will seek competitive
and reasonable commission rates based on
circumstances of the trade involved and to the extent
that they do not detract from the quality of the
execution. The Funds, in purchasing and selling
portfolio securities, will seek the best available
combination of execution and overall price (which
shall include the cost of the transaction) consistent
with the circumstances which exist at the time. The
Funds do not intend to solicit competitive bids on
each transaction.

The Funds believe it is in its best interest and that
of their 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
Funds, when acting on their behalf, as well as for any
research or other services provided to the Funds.
Substantially all of the equity portfolio transactions
(except for the Babson-Stewart Ivory International
Fund) are through brokerage firms which are
members of the New York Stock Exchange which is
typically the most active market in the size of the
Fund's transactions and for the types of securities
predominant in the Fund's portfolio. Commissions of
transactions executed on foreign exchanges are
generally on a fixed basis. The Babson-Stewart Ivory
International Fund endeavors to obtain the rate of
such commission in good faith so as to achieve the
most favorable results under the circumstances of
each transaction. When buying securities in the over-
the-counter market, the Funds will select a broker
who maintains a primary market for the security
unless it appears that a better combination of price
and execution may be obtained elsewhere. The
Funds normally will not pay a higher commission
rate to broker-dealers providing benefits or services
to it than it would pay to broker-dealers who do not
provide it such benefits or services. However, the
Funds reserve the right to do so within the principles
set out in Section 28(e) of the Securities Exchange
Act of 1934 when it appears that this would be in the
best interests of the shareholders.

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

Since the Funds do not currently market shares
through intermediary brokers or dealers, it is not the
Funds' 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 Funds to other clients, or who act as
agents in the purchase of the Funds' shares for their
clients.

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

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

For the past three fiscal years each year, the total
dollar amount of brokerage commissions paid by the
Funds were as follows:

Growth - $488,655, $208,141 and $129,998 for
1999, 1998 and 1997 respectively; Enterprise -
$ 92,129*, $264,561 and $306,945; Enterprise II -
$64,350*, $95,748 and $52,014; Value - $866,352*,
$1,103,306 and $669,271; Shadow $ 38,503,
$81,743 and $8,350; International - $260,815,
$268,815 and $229,337.

*Denotes seven month figures.

PERFORMANCE MEASURES

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

From time to time, the Babson Money Market Fund
and the Babson Tax-Free Income Fund Portfolio MM
may quote their yields in advertisements, shareholder
reports or other communications to shareholders.
Yield information is generally available by calling
the Funds toll free 1-800-4-BABSON (1-800-422-
2766), or in the Kansas City area 751-5900. The
current annualized yield for the Money Market Fund
and Portfolio MM is computed by: (a) determining
the net change in the value of a hypothetical pre-
existing account in each Fund or Portfolio having a
balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted,
(b) dividing the net change by the value of the
account at the beginning of the period to obtain the
base period return, and (c) annualizing the results
(i.e., multiplying the base period return by 365/7).
The net change in value of the account reflects the
value of additional shares purchased with dividends
declared on the original share and any such additional
shares, but does not include realized gains and losses
or unrealized appreciation and depreciation. In
addition, each Fund may calculate a compound
effective yield by adding 1 to the base period return
(calculated as described above, raising the sum to a
power equal to 465/7 and subtracting 1). For the
seven-day period ended June 30, 1999, the current
annualized yield and compound effective yield of
Money Market Portfolio Prime was 4.09% and
4.10%, of Money Market Portfolio Federal was
3.96% and 4.00% and of Tax-Free Income Portfolio
MM was 2.91% and 3.03%. At June 30, 1999, the
average maturity of Federal was 35 days, of Prime
was 38 days and of Portfolio MM was 42 days.

Performance Comparisons. In advertisements or in
reports to shareholders, the Funds may compare their
performance to that of other mutual funds with
similar investment objectives and to stock or other
relevant indices. For example, they may compare
their performance to rankings prepared by Lipper
Analytical Services, Inc. (Lipper) or Morningstar,
Inc., two widely recognized independent services
which monitor the performance of mutual funds. The
Funds may compare their performance to the
Standard & Poor's 500 Stock Index (S&P 500), an
index of unmanaged groups of common stocks, the
Dow Jones Industrial Average, a recognized
unmanaged index of common stocks of 30 industrial
companies listed on the NYSE, the MSCI/EAFE, an
index of unmanaged stocks from 20 international
markets, the S&P Barra Value, a capitalization
weighted index associated with "value" stocks, the
S&P Barra Growth, a capitalization weighted index
associated with "growth" stocks, the Russell 2000
Index, an index that measures the performance of the
smallest 2000 publicly traded companies, the Lehman
Brothers Aggregate Bond Index, an index of
government, corporate and agency bonds, the
Lehman Brothers Intermediate Government
Corporate Index, an index of government, agency and
corporate notes between 1 and 10 years maturities, or
the Consumer Price Index. Performance information,
rankings, ratings, published editorial comments and
listings as reported in national financial publications
such as Kiplinger's Personal Finance Magazine,
Business Week, Morningstar Mutual Funds,
Investor's Business Daily, Institutional Investor, The
Wall Street Journal, Mutual Fund Forecaster, No-
Load Investor, Money, Forbes, Fortune and Barron's
may also be used in comparing performance of the
Fund. Performance comparisons should not be
considered as representative of the future
performance of any Fund.

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 Funds
are 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.

TOTAL RETURN

The Funds' "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 $1,000

T = average annual total return

n = number of years

ERV = Ending Redeemable Value of a
hypothetical $1,000 payment
made at the beginning of the 1,
5 or 10 year (or other) periods
at the end of the 1, 5 or 10 year
(or other) periods (or fractional
portions thereof).
The table below shows the average total return for
each Fund for the specified periods.

For the one year 7/1/98-6/30/99

Growth 17.04%
Enterprise -11.30%
Enterprise II 0.00%
Value 5.63%
Shadow Stock -0.25%
Stewart Ivory International 3.76%
Bond Trust - L 1.88%
Bond Trust - S 3.22%
Tax-Free Income - L 1.70%
Tax-Free Income - S 1.96%
Tax-Free Income - MM 2.70%
Money Market - Federal 4.31%
Money Market - Prime 4.38%

For the five years 7/1/94 - 6/30/99

Growth 23.33%
Enterprise 12.54%
Enterprise II 15.65%
Value 19.95%
Shadow Stock 15.40%
Stewart Ivory International 8.12%
Bond Trust - L 6.86%
Bond Trust - S 6.61%
Tax-Free Income - L 5.98%
Tax-Free Income - S 4.30%
Tax-Free Income - MM 3.00%
Money Market - Federal 4.60%
Money Market - Prime 4.66%

For the ten years 7/1/89 - 6/30/99

Growth 14.89%
Enterprise 12.44%
Enterprise II 14.30%*
Value 15.51%
Shadow Stock 11.35%
Stewart Ivory International 9.41%
Bond Trust - L 7.51%
Bond Trust - S 7.16%
Tax-Free Income - L 6.46%
Tax-Free Income - S 5.20%
Tax-Free Income - MM 3.31%
Money Market - Federal 4.65%
Money Market - Prime 4.72%
*Inception date 8/5/91.

HOW THE FUND'S SHARES ARE
DISTRIBUTED

Jones & Babson, Inc., as agent of the Funds agrees
to supply its best efforts as sole distributor of the
Funds' shares and, at its own expense, pay all sales
and distribution expenses in connection with their
offering other than registration fees and other
government charges. Jones & Babson, Inc. is located
at BMA Tower, 700 Karnes Blvd., Kansas City, MO
64108-3306.

Jones & Babson, Inc. does not receive any fee or
other compensation under the distribution agreement
which continues in effect until October 31, 1999, and
which will continue automatically for successive
annual periods ending each October 31, if continued
at least annually by the Funds' Board of Directors,
including a majority of those Directors who are not
parties to such Agreements or interested persons of
any such party. It terminates automatically if
assigned by either party or upon 60 days written
notice by either party to the other.

Jones & Babson, Inc. also acts as sole distributor of
the shares for UMB Scout Stock Fund, Inc., UMB
Scout Bond Fund, Inc., UMB Scout Money Market
Fund, Inc., UMB Scout Tax-Free Money Market
Fund, Inc., UMB Scout Regional Fund, Inc., UMB
Scout WorldWide Fund, Inc., UMB Scout Balanced
Fund, Inc., UMB Scout Capital Preservation Fund,
Inc., UMB 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.
PURCHASE AND REDEMPTION SERVICES

We reserve the right to:

Waive or increase the minimum investment
requirements with respect to any person or class of
persons, which include shareholders of the Funds'
special investment programs.
Cancel or change the telephone/Fund web site
investment service, the telephone/internet exchange
service and the automatic monthly investment plan
without prior notice to you where in the best interest
of the Funds and theirs investors.
Cancel or change the telephone/Fund web site
redemption service at any time without notice.
Begin charging a fee for the telephone investment
service or the automatic monthly investment plan and
to cancel or change these services upon 15 days
written notice to you.
Begin charging a fee for the telephone/Fund web
site service and to cancel or change the service upon
60 days written notice to you.
Begin charging a fee for the systematic redemption
plan upon 30 days written notice to you.
Waive signature guarantee requirements in certain
instances where it appears reasonable to do so and
will not unduly affect the interests of other
shareholders. We may waive the signature guarantee
requirement if you authorize the telephone/Fund web
site redemption method at the same time you submit
the initial application to purchase shares.
Require signature guarantee if there appears to be a
pattern of redemptions designed to avoid the
signature guarantee requirement, or if we have other
reason to believe that this requirement would be in
the best interests of the Funds and their shareholders.

HOW SHARE PURCHASES ARE HANDLED

We will not be responsible for the consequences of
delays, including delays in the banking or Federal
Reserve wire systems. We cannot process
transaction requests that are not complete and in good
order as described in the prospectus. If you use the
services of any other broker to purchase or redeem
shares of the Funds, that broker may charge you a
fee. 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 Funds.

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.

The shares which you purchase are held by the
Funds in open account, thereby relieving you of the
responsibility of providing for the safekeeping of a
negotiable share certificate. Jones & Babson does
not intend to issue new certificated shares for any
accounts.

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

The Funds reserve the right in 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 Funds and their
shareholders.

The Funds may accept investments in kind of
stocks based on judgments as to whether, in each
case, acceptance of stock will allow the Fund to
acquire the stock at no more than net cost of
acquiring it through normal channels, and whether
the stock has restrictions on its sale by the Fund
under the Securities Act of 1933. Fund shares
purchased in exchange for stock are issued at net
asset value.

The Funds reserve the right to refuse to accept
orders for Fund shares unless accompanied by
payment, except when a responsible person has
indemnified the Fund against losses resulting from
the failure of investors to make payment. In the event
that the Funds sustain a loss as the result of failure by
a purchaser to make payment, the Funds'
underwriter, Jones & Babson, Inc., will cover the
loss.

REDEMPTION OF SHARES

The Telephone/Fund Web Site Redemption Service
may only be used for non certificated shares held in
an open account. We reserve the right to refuse a
telephone or Fund web site redemption request. At
our option, we may pay such redemption by wire or
check. We may reduce or waive the $10 charge for
wiring redemption proceeds in connection with
certain accounts.

To participate in the Systematic Redemption Plan
your dividends and capital gains distributions must be
reinvested in additional shares of the Funds.

The right of redemption may be suspended, or the
date of payment postponed beyond the normal three-
day period 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 Funds of securities
owned by it is not reasonably practicable, or (b) it is
not reasonably practicable for the Funds to determine
the fair value of its net assets; or (3) under certain
circumstances where certain shareholders are
attempting to "time the market" by purchasing and
redeeming shares from the Funds on a regular basis;
or (4) for such other periods as the Securities and
Exchange Commission may by order permit for the
protection of the Fund's shareholders.

Babson Money Market Fund and Portfolio MM of
Babson Tax-Free Income Fund may accept drafts
(checks) on the form provided by the Fund without
the necessity of an accompanying guarantee of
signature, and drawn on the registered shareholder
account, to redeem sufficient shares in the registered
shareholder account and to deposit the proceeds in a
special account at UMB Bank, n.a. for transmission
through the commercial banking system to the credit
of the draft payee. The drafts must be in at least the
amount of $500, and may be drawn only against
shares held in open account (no certificate
outstanding). The Funds and their Manager may
refuse to honor drafts where there are insufficient
open account shares in the registered account, or
where shares to be redeemed which were purchased
by check have been held for less than 15 days, and to
the specific conditions relating to this privilege as
well as the general conditions set out above.

The Funds have elected to be governed by Rule
18f-1 under the Investment Company Act of 1940
pursuant to which the Funds are obligated to redeem
shares solely in cash up to the lesser of $250,000 or
1% of the Funds' net asset value during any 90-day
period for any one shareholder. Should redemptions
by any shareholder exceed such limitation, the Funds
may redeem the excess in kind. If shares are
redeemed in kind, the redeeming shareholder may
incur brokerage costs in converting the assets to cash.
The method of valuing securities used to make
redemptions in kind will be the same as the method
of valuing portfolio securities described under "How
Share Price is Determined" in the Prospectus, and
such valuation will be made as of the same time the
redemption price is determined.

MANAGEMENT AND
INVESTMENT ADVISER

As a part of the Management Agreement, Jones &
Babson, Inc. employs at its own expense David L.
Babson & Co. Inc. and for the Babson-Stewart Ivory
International Fund, Babson-Stewart Ivory
International, as its investment advisers. David L.
Babson & Co. Inc. was founded in 1940 as a private
investment research and counseling organization.
David L. Babson & Co. Inc. serves individual,
corporate and other institutional clients. It
participates with Jones & Babson in the management
of nine Babson no-load mutual funds. Babson-
Stewart Ivory International is a partnership formed in
1987, by David L. Babson & Co. of Cambridge,
Massachusetts and Stewart Ivory & Company
(International) Ltd, a wholly owned subsidiary of
Stewart Ivory (Holdings), Ltd., of Edinburgh,
Scotland.

The aggregate management fees paid to Jones &
Babson, Inc. by the Funds during the three most
recent fiscal years ended June 30, 1999, 1998, and
1997 (from which Jones & Babson, Inc. paid all the
Funds' expenses except those payable directly by the
Funds) were $3,699,538, $3,251,137, and
$2,566,555, respectively for the Growth Fund;
$990,364*, $2,199,612 and $2,176,042 for the
Enterprise Fund; $513,015*, $998,783 and $760,997
for the Enterprise Fund II; $7,202,092*, $5,468,960
and $3,911,594 for the Value Fund; $374,771,
$527,001 and $379,685 for the Shadow Stock Fund;
$884,366, $995,338 and $857,963 for the Stewart
Ivory International Fund; $691,818*, $1,226,260 and
$1,275,822 for the Bond Trust Portfolio L;
$215,212*, $370,143 and $254,164 for the Bond
Trust Portfolio S (does not include the effect of fee
waiver); $448,280, $426,396 and $436,044 for the
Money Market Fund; $513,722, $530,401 and
$535,180 for the Tax-Free Income Fund. Figures
followed by an asterisk (*) denote 7 month figures
due to a change in fiscal year end from November 30
to June 30. The annual fee charged by Jones &
Babson, Inc. covers all normal operating costs of the
Funds. 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 Funds. Yet, it
compares favorably with these other advisers when
all expenses to Funds shareholders are taken into
account.

David L. Babson & Co. Inc. has an experienced
investment analysis and research staff which
eliminates the need for Jones & Babson, Inc. and the
Funds to maintain an extensive duplicate staff, with
the consequent increase in the cost of investment
advisory service. Jones & Babson, Inc. pays David
L. Babson & Co. Inc. a fee of 30/100 of one percent
(0.30%) for the first $100 million, 25/100 of one
percent (0.25%) on the next $150 million and 20/100
of one percent (0.20%) for amounts in excess of $250
million of Growth Fund's average daily total net
assets; 70/100 of one percent (0.70%) of the first $30
million and 50/100 of one percent (0.50%) of
amounts in excess of $30 million of Enterprise
Fund's; 70/100 of one percent (0.70%) of the first $30
million and 50/100 of one percent (0.50%) of
amounts in excess of $30 million of Enterprise Fund
II's; 35/100 of one percent (0.35%) of Value Fund's;
25/100 of one percent (0.25%) of Shadow Stock
Fund's; 475/1000 of one percent (0.475%) of Stewart
Ivory International Fund's; 25/100 of one percent
(0.25%) of Bond Trust Portfolio L's; 15/100 of one
percent (0.15%) of Bond Trust Portfolio S's (through
March 1, 2000); 20/100 of one percent (0.20%) of
Money Market Fund Portfolio Federal and Prime's;
25/100 of one percent (0.25%) of Tax-Free Income
Fund Portfolio L's, 25/100 of one percent (0.25%) of
Tax-Free Income Fund Portfolio S's, 10/100 of one
percent (0.10%) of Tax-Free Income Fund Portfolio
MM's, which is computed daily and paid
semimonthly. The cost of the services of David L.
Babson & Co. Inc. is included in the services of
Jones & Babson, Inc. During the three most recent
fiscal years ended June 30, 1999, 1998 and 1997,
Jones & Babson, Inc. paid David L. Babson & Co.
Inc. fees amounting to $1,128,746, $1,003,328, and
$800,947, respectively for the Growth Fund,
$486,539*, $1,088,793 and $1,088,713 for the
Enterprise Fund; $249,077*, $486,060 and $365,461
for the Enterprise Fund II; $2,652,720*, $5,468,960
and $3,911,594 for the Value Fund; $117,145,
$131,750 and $94,921 for the Shadow Stock Fund;
$93,716, $497,669 and $428,982 for the Stewart
Ivory International Fund; $182,021*, $323,879 and
$335,133 for the Bond Trust Portfolio L; $33,198*,
$58,443 and $58,337 for the Bond Trust Portfolio S;
$105,477, $100,325 and $102,869 for the Money
Market Fund; $131,478, $136,416 and $137,997 for
the Tax-Free Income Fund, related to services
provided to the Funds. Figures followed by an
asterisk (*) denote seven month figures due to a
change in fiscal year end from November 30 to June
30.

Controlling Persons. Certain officers and directors
of the Funds are also officers or directors or both of
Jones & Babson, Inc., Babson-Stewart Ivory
International 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 DLB Acquisition Corporation, an
indirect, majority 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. Babson-Stewart
Ivory International is a partnership formed in 1987 by
David L. Babson & Co. Inc. and Stewart Ivory &
Company Ltd.

OFFICERS AND DIRECTORS

The officers of the Funds manage their day-to-day
operations. The Funds' manager and their officers
are subject to the supervision and control of the
Board of Directors.
The following table lists the officers and directors
of the Funds and their ages. Unless noted otherwise,
the address of each officer and director is BMA
Tower, 700 Karnes Blvd., Kansas City, Missouri
64108-3306. Except as indicated, each has been an
employee of Jones & Babson, Inc. for more than five
years.

* Larry D. Armel (58), President and Director.
President and Director, Jones & Babson, Inc., and of
each of the Babson Funds, UMB Scout Funds,
Buffalo Funds and the Investors Mark Series Fund,
Inc.; President and Trustee, D.L. Babson Bond Trust;
Director, AFBA Five Star Fund, Inc.

Francis C. Rood (65), Director. Retired, 73-395
Agave Lane, Palm Desert, California 92260-6653.
Formerly Vice President of Finance, Hallmark Cards,
Inc.; Director, of each of the Babson Funds, Buffalo
Funds and the Investors Mark Series Fund, Inc.;
Trustee, D.L. Babson Bond Trust.

William H. Russell (75), Director. Financial
Consultant, 645 West 67th Street, Kansas City,
Missouri 64113; previously Vice President, Sprint;
Director, of each of the Babson Funds, Buffalo Funds
and the Investors Mark Series Fund, Inc.; Trustee,
D.L. Babson Bond Trust.

H. David Rybolt (57), Director. Consultant, HDR
Associates, P.O. Box 2468, Shawnee Mission,
Kansas 66201; Director, of each of the Babson
Funds, (except the Babson-Stewart Ivory
International Fund, Inc.) Buffalo Funds and the
Investors Mark Series Fund, Inc.; Trustee, D.L.
Babson Bond Trust.

James T. Jensen (70), Director. Chief Executive
Officer, Jensen Associates, Inc., 892 Worcester
Street, Suite 210, Wellesley, Massachusetts 02482;
Director, of Babson-Stewart Ivory International
Fund, Inc.

Richard J. Phelps (71), Director. Chairman, Phelps
Industries, Inc., 122 Quincy Shore Drive, Quincy,
Massachusetts 02171. Trustee, The DLB Fund
Group; Director, Superior Pet Products (Aust.) Pty.
Ltd. And Superior Pet Products, Ltd. (England);
Member, Board of Overseers, Tufts University
School of Veterinary Medicine and Dean's Council,
Harvard Graduate School of Education; Director, of
Babson-Stewart Ivory International Fund, Inc.

P. Bradley Adams (39), Vice President and
Treasurer. Vice President and Treasurer, Jones &
Babson, Inc., and each of the Babson Funds, UMB
Scout Funds and Buffalo Funds; Vice President and
Chief Financial Officer, AFBA Five Star Fund, Inc.;
Principal Financial Officer, Investors Mark Series
Fund, Inc.

Martin A. Cramer (49), Vice President and
Secretary. Vice President and Secretary, Jones &
Babson, Inc., and of each of the Babson Funds, UMB
Scout Funds and Buffalo Funds; Secretary and
Assistant Vice President, AFBA Five Star Fund, Inc.;
Secretary, Investors Mark Series Fund, Inc.;

Constance E. Martin (38), Vice President.
Shareholder Operations Vice President and Director,
Jones & Babson, Inc.; Vice President, of each of the
Babson Funds, UMB Scout Funds, Buffalo Funds
and AFBA Five Star Fund, Inc.

Rhonda L. Grimes (39), Vice President. Vice
President and Director Control and Technology
Integration, Jones & Babson, Inc.; Vice President, of
each of the Babson Funds, AFBA Five Star Fund and
Buffalo Funds. She joined Jones & Babson in 1998.

W. Guy Cooke (38), Vice President. Chief
Compliance Officer, Jones & Babson, Inc.; Vice
President, of each of the Babson Funds, AFBA Five
Star Fund and Buffalo Funds. He joined Jones &
Babson in 1998.

Anthony M. Maramarco (50), Vice President-
Portfolio. Senior Vice President and Director, David
L. Babson & Co. Inc., One Memorial Drive,
Cambridge, Massachusetts 02142; Vice President-
Babson Value Fund, Inc. and Shadow Stock Fund,
Inc.

James B. Gribbell (32), Vice President-Portfolio.
Vice President, David L. Babson & Co. Inc., One
Memorial Drive, Cambridge, Massachusetts 02142;
Vice President-Babson Growth Fund, Inc.

Lance F. James (45), Vice President-Portfolio.
Executive Vice President and Director, David L.
Babson & Co. Inc., One Memorial Drive, Cambridge,
Massachusetts 02142; Vice President-Babson
Enterprise Fund, Inc. and Babson Enterprise Fund II,
Inc.

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

Messrs. Rood, Russell, Rybolt, Jensen and Phelps
have no financial interest in, nor are they affiliated
with either Jones & Babson, Inc. or David L. Babson
& Co. Inc. The Audit Committee of the Board of
Directors for Babson-Stewart Ivory International
Fund, Inc. is composed of Messrs. Jensen, Phelps,
Rood and Russell. The Audit Committee of the
Board of Directors for the other Babson Funds is
composed of Messrs. Rood, Russell and Rybolt.

The officers, directors and trustees of the Funds as
a group own less than 1% of the Fund. To the best
information available to the Manager, there are no
"Controlling Persons", shareholders that constitute
5% or 25% of the Funds.

COMPENSATION TABLE

Pension or Total
Retirement Estimated Compensation
Benefits Annual From All Babson
Aggregate Accrued As Benefits Funds Paid to
Compensation Part of Fund Upon Directors**
Name of DirectorFrom the Fund Expenses Retirement
______________ _____________ ____________ __________ ___________________

Larry D. Armel* -- -- -- --
Francis C. Rood $500 -- -- $7,250
William H. Russell $500 -- -- $7,250
H. David Rybolt $500 -- -- $7,000
James T. Jensen $3375 -- -- $3,375
Richard J. Phelps $3250 -- -- $3,250

* As an "interested director," Mr. Armel received no compensation
for his services as a director.

** The amounts reported in this column reflect the total compensation
paid to Messrs. Jensen and Phelps for services as directors of Babson-Stewart
Ivory International Fund, Inc. Mr. Rybolt for services as director or
trustee of eight Babson Funds and to Messrs. Rood and Russell for services
as a directors or trustees of nine Babson Funds during the fiscal year ended
June 30, 1999. Directors' fees are paid by the Funds' manager and
not by the Funds themselves.

HOLIDAYS

The net asset value per share is computed once
daily, Monday through Friday, at 4:00 p.m.
(Eastern Time) except: days when the Funds are
not open for business; days on which changes in
the value of portfolio securities will not materially
affect the net asset value; days during which no
purchase or redemption order is received by the
Funds; and customary holidays.

The Funds do not compute their net asset value
on the following customary 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

DIVIDENDS, DISTRIBUTIONS AND
THEIR TAXATION

Distributions and Taxes

Distributions of net investment income In
general, the Funds receive income in the form of
dividends or interest on their investments. This
income, less expenses incurred in the operation of a
fund, constitutes a fund's net investment income
from which dividends may be paid to investors.
Any distributions by a fund from such income will
be taxable to investors as ordinary income, whether
the investors take them in cash or in additional
shares.

By meeting certain requirements of the Internal
Revenue Code, Portfolios S and L of the Tax-Free
Income Fund have qualified and continue to
qualify to pay exempt-interest dividends. These
dividends are derived from interest income exempt
from regular federal income tax, and are not
subject to regular federal income tax when they are
distributed. In addition, to the extent that exempt-
interest dividends are derived from interest on
obligations of a state or its political subdivisions, or
from interest on qualifying U.S. territorial
obligations (including qualifying obligations of
Puerto Rico, the U.S. Virgin Islands or Guam),
they also will be exempt from such state's personal
income taxes. A state generally does not grant tax-
free treatment to interest on state and municipal
securities of other states.

Portfolios S and L of the Tax-Free Income Fund
may earn taxable income on any temporary
investments, on the discount from stripped
obligations or their coupons, on income from
securities loans or other taxable transactions, or on
ordinary income derived from the sale of market
discount bonds. Any fund distributions from such
income will be taxable as ordinary income,
whether received by investors in cash or in
additional shares.

The Federal and Prime Portfolios of the Money
Market Fund, Portfolio MM of the Tax-Free
Income Fund and Portfolios S and L of the Bond
Trust declare dividends for each day that their net
asset value is calculated. These dividends will
equal all of the daily net income payable to
shareholders of record as of the close of business
the preceding day. The daily net income includes
accrued interest and any original issue or
acquisition discount, plus or minus any gain or loss
on the sale of portfolio securities and changes in
unrealized appreciation or depreciation in portfolio
securities (to the extent required to maintain a
constant net asset value per share), less the
estimated expenses of the funds.

Distributions of capital gains In general, the
funds may derive capital gains and losses in
connection with sales or other dispositions of their
portfolio securities. Distributions from net short-
term capital gains will be taxable as ordinary
income. Distributions from net long-term capital
gains will be taxable as long-term capital gain,
regardless of how long the fund shares have been
held. Any net capital gains realized by a fund
generally will be distributed once each year, and
may be distributed more frequently, if necessary, in
order to reduce or eliminate excise or income taxes
on the fund. Because the Federal and Prime
Portfolios of the Money Market Fund and Portfolio
MM of the Tax-Free Income Fund are money
market funds, they do not anticipate realizing any
long-term capital gains.

Effect of foreign investments on distributions
Most foreign exchange gains realized on the sale of
debt securities are treated as ordinary income by a
fund for tax purposes. Similarly, foreign exchange
losses realized by a fund on the sale of debt
securities are generally treated as ordinary losses
by the fund for tax purposes. These gains when
distributed will be taxable as ordinary dividends,
and any losses will reduce a fund's ordinary
income otherwise available for distribution. This
treatment could increase or reduce a fund's
ordinary income distributions, and may cause some
or all of a fund's previously distributed income to
be classified as a return of capital.

The funds may be subject to foreign withholding
taxes on income from certain of their foreign
securities. If more than 50% of a fund's total
assets at the end of the fiscal year are invested in
securities of foreign corporations, the fund may
elect to pass-through each investor's pro rata share
of foreign taxes paid by the fund. If this election is
made, the year-end statement investors receive
from the fund will show more taxable income than
was actually distributed. However, investors will
be entitled to either deduct their share of such taxes
in computing their taxable income or (subject to
limitations) claim a foreign tax credit for such
taxes against their U.S. federal income tax. The
fund will provide investors with the information
necessary to complete their individual income tax
returns if it makes this election.

Information on the tax character of
distributions The funds will inform you of the
amount of your ordinary income dividends and
capital gains distributions at the time they are paid,
and will advise you of their tax status for federal
income tax purposes shortly after the close of each
calendar year. If you have not held fund shares for
a full year, a fund may designate and distribute 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.

Election to be taxed as a regulated investment
company Each fund has elected to be treated as a
regulated investment company under Subchapter M
of the Internal Revenue Code, has qualified as such
for its most recent fiscal year, and intends to so
qualify during the current fiscal year. As regulated
investment companies, the funds generally pay no
federal income tax on the income and gains they
distribute to you. The board reserves the right not
to maintain the qualification of a fund as a
regulated investment company if it determines such
course of action to be beneficial to shareholders.
In such case, a 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
such fund's earnings and profits.

Excise tax distribution requirements To avoid
federal excise taxes, the Internal Revenue Code
requires a fund to distribute to you by December 31
of each year, at a minimum, the following
amounts: 98% of its taxable ordinary income
earned during the calendar year; 98% of its capital
gain net income earned during the twelve month
period ending October 31; and 100% of any
undistributed amounts from the prior year. Each
fund intends to declare and pay these amounts in
December (or in January that are treated by you as
received in December) to avoid these excise taxes,
but can give no assurances that its distributions will
be sufficient to eliminate all taxes.

Redemption of fund shares Redemptions and
exchanges of fund shares are taxable transactions
for federal and state income tax purposes. If you
redeem your fund shares, or exchange your fund
shares for shares of a different Babson Fund, the
IRS will require that you report a gain or loss on
your redemption or exchange. 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 or short-term, generally depending on how
long you hold your shares. 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.

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 buy other shares
in such 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 buy.

As to Portfolios S and L of the Tax-Free Income
Fund, any loss incurred on the redemption or
exchange of shares held for six months or less will
be disallowed to the extent of any exempt-interest
dividends distributed to investors with respect to
his or her fund shares and any remaining loss will
be treated as a long-term capital loss to the extent
of any long-term capital gains distributed to the
investor by the fund on those shares.

As to the Federal and Prime Portfolios of the
Money Market Fund and Portfolio MM of the Tax-
Free Income Fund, because the funds seek to
maintain a constant $1.00 per share net asset value,
investors should not expect to realize a capital gain
or loss upon redemption or exchange of fund
shares.

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 a
fund. Investments in Government National
Mortgage Association or Federal National
Mortgage Association securities, bankers'
acceptances, commercial paper and repurchase
agreements collateralized by U.S. government
securities do not generally qualify for tax-free
treatment. The rules on exclusion of this income
are different for corporations.

Dividends-received deduction for corporations
If you are a corporate shareholder, you should note
that dividends paid by the following funds for the
most recent fiscal year qualified for the dividends-
received deduction as set forth below:
Value Fund 33%

Growth Fund 19%

Shadow Stock Fund 100%

Enterprise Fund 100%

Enterprise Fund II 70%

In some circumstances, you will be allowed 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 such fund as eligible for
such treatment. All dividends (including the
deducted portion) must be included in your
alternative minimum taxable income calculation.

Because the Stewart-Ivory International Fund's
income is derived primarily from investments in
foreign rather than domestic U.S securities, no
portion of its distributions will generally be eligible
for the dividends-received deduction. None of the
dividends paid by the fund for the most recent
calendar year qualified for such deduction, and it is
anticipated that none of the current year's
dividends will so qualify.

Because the Money Market Fund's (Federal and
Prime Portfolios), the Tax-Free Income Fund's
(Portfolios S, L and MM) and the Bond Trust's
(Portfolios S and L) income consists of interest
rather than dividends, no portion of their
distributions will generally be eligible for the
dividends-received deduction. None of the
dividends paid by the funds for the most recent
calendar year qualified for such deduction, and it is
anticipated that none of the current year's
dividends will so qualify.

Investment in complex securities The funds may
invest in complex securities. These investments
may be subject to numerous special and complex
tax rules. These rules could affect whether gains
and losses recognized by a fund are treated as
ordinary income or capital gain, accelerate the
recognition of income to a fund and/or defer a
fund's ability to recognize losses, and, in limited
cases, subject a fund to U.S. federal income tax on
income from certain of its foreign securities. In
turn, these rules may affect the amount, timing or
character of the income distributed to you by a
fund.

GENERAL INFORMATION AND
HISTORY

The Babson Bond 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. 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 Trust 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.

The other Babson Funds were incorporated in
Maryland as follows: The Growth Fund, originally
incorporated in Delaware in 1959 and was merged
into a Maryland corporation in 1978, has a present
authorized capitalization of 100,000,000 shares of
$1 par value common stock; the Enterprise Fund
on July 5, 1983, has a present authorized
capitalization of 20,000,000 shares of $1 par value
common stock; the Enterprise Fund II on February
5, 1991, has a present authorized capitalization of
10,000,000 shares of $1 par value common stock;
the Value Fund on July 24, 1984, has a present
authorized capitalization of 50,000,000 shares of
$1 par value common stock; the Shadow Stock
Fund on June 3, 1987, has a present authorized
capitalization of 10,000,000 shares of $1 par value
common stock; the Stewart Ivory International
Fund on October 2, 1987, has a present authorized
capitalization of 10,000,000 shares of $1 par value
common stock; the Money Market Fund on
October 19, 1979, has a present authorized
capitalization of 2,000,000,000 shares of $.01 par
value common stock to be issued in two separate
classes; and the Tax-Free Income Fund on August
22, 1979, has a present authorized capitalization of
200,000,000 shares of $.10 par value common
stock to be issued in three separate classes. All
shares are of the same class unless otherwise stated
and with like rights and privileges. Each full and
fractional share, when issued and outstanding, has:
(1) equal voting rights with respect to matters
which affect the Fund, and (2) equal dividend,
distribution and redemption rights to the assets of
the Fund. Shares when issued are fully paid and
non-assessable. The Funds may create other series
of stock but will not issue any senior securities.
Shareholders do not have pre-emptive or
conversion rights.

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

The Funds may not, at their discretion, hold
annual meetings of shareholders for the following
purposes unless required to do so: (1) election of
directors; (2) approval of continuance of any
investment advisory agreement; (3) ratification of
the selection of independent auditors; and (4)
approval of a distribution plan. As a result, the
Funds do not intend to hold annual meetings.

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

The Funds may use the name "Babson" in their
names so long as Jones & Babson, Inc. continues
as manager and David L. Babson & Co. Inc. as its
investment adviser. Complete details with respect
to the use of the name are set out in the
Management Agreement between the Funds and
Jones & Babson, Inc.

Shadow Stock Fund has an exclusive and
perpetual license to use the name "Shadow Stock"
in its name so long as Analytic Systems, Inc. or an
affiliate thereof or of James B. Cloonan, acts as its
Investment Adviser. Complete details with respect
to the use of the name are set out in the
Management Agreement between the Fund and
Jones & Babson, Inc.

CUSTODIAN

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

The Babson-Stewart Ivory International Fund's
assets are held for safekeeping by an independent
custodian, State Street Bank and Trust Company of
Boston, Massachusetts and foreign subcustodians
as discussed below. This means State Street Bank
and Trust Company, rather than the Fund, has
possession of the Fund's cash and securities. State
Street Bank and Trust Company is not responsible
for the Fund's investment management or
administration. But, as directed by the Fund's
officers, it delivers cash to those who have sold
securities to the Fund in return for such securities,
and to those who have purchased portfolio
securities from the Fund, it delivers such securities
in return for their cash purchase price. It also
collects income directly from issuers of securities
owned by the Fund and holds this for payment to
shareholders after deduction of the Fund's
expenses. The custodian is compensated for its
services by the Fund.

Pursuant to rules adopted under the 1940 Act, the
Fund may maintain its foreign securities and cash
in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign
custodial institutions is made by the Board of
Directors following a consideration of a number of
factors, including (but not limited to) the eligibility
and financial stability of the institution; the ability
of the institution to perform capably custodial
services for the fund; the reputation of the
institution in its national market; the political and
economic stability of the country in which the
institution is located; and further risks of potential
nationalization or expropriation of Fund assets.

TRANSFER AGENT

Jones & Babson, Inc. also serves as transfer
agent to the Funds.

INDEPENDENT AUDITORS

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

OTHER JONES & BABSON 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: UMB Scout Stock Fund,
Inc., UMB Scout Bond Fund, Inc., UMB Scout
Money Market Fund, Inc., UMB Scout Tax-Free
Money Market Fund, Inc., UMB Scout Regional
Fund, Inc., UMB Scout WorldWide Fund, Inc.,
UMB Scout Balanced Fund, Inc., UMB Scout
Capital Preservation Fund, Inc. and UMB Scout
Kansas Tax-Exempt Bond Fund, Inc.

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

DESCRIPTION OF STOCK RATINGS

Standard & Poor's Earnings and Dividend
Rankings for Common Stocks (S&P) - Growth and
stability of earnings and dividends are deemed key
elements in establishing Standard & Poor's
earnings and dividend rankings for common stocks.
Basic scores are computed for earnings and
dividends, then adjusted by a set of predetermined
modifiers for growth, stability within long-term
trend, and cyclically. Adjusted scores for earnings
and dividends are then combined to yield a final
score. The final score is measured against a
scoring matrix determined by an analysis of the
scores of a large and representative sample of
stocks. The rankings are:

A+ Highest
A High
A- Above Average
B+ Average
B Below Average
B- Lower
C Lowest
D In Reorganization

Value Line Ratings of Financial Strength - The
financial strength of each of the companies
reviewed by Value Line is rated relative to all the
others. The ratings are:

A++ The very highest relative financial
strength.
A+ Excellent financial position relative to
other companies.
A High grade relative financial strength.
B++ Superior financial health on a relative
basis.
B+ Very good relative financial structure.
B Good overall relative financial structure.
C++ Satisfactory finances relative to other
companies.
C+ Below-average relative financial position.
C Poorest financial strength relative to other
major companies.

The ratings are based upon computer analysis of
a number of key variables that determine: (a)
financial leverage, (b) business risk and (c)
company size plus the judgment of their analysts
and senior editors regarding factors that cannot be
quantified across-the-board for all stocks. The
primary variables that are indexed and studied
include equity coverage of debt, equity coverage of
intangibles, "quick ratio" accounting methods,
variability of return, quality of fixed charge
coverage, stock price stability and company size.

MUNICIPAL SECURITIES DESCRIBED
AND RATINGS

In evaluating investment suitability, each investor
must relate the characteristics of a particular
investment under consideration to personal
financial circumstances and goals.

Municipal securities include bonds and other debt
obligations issued by or on behalf of states,
territories and possessions of the United States of
America and the District of Columbia including
their political subdivisions or their duly constituted
authorities, agencies and instrumentalities, the
interest on which is exempt from federal income
tax.

Municipal securities are issued to obtain funds for
various public purposes, including the construction
of a wide range of public facilities, such as airports,
bridges, highways, housing, hospitals, mass
transportation, schools, streets, waterworks and
sewer systems. Municipal securities also may be
issued in connection with the refunding of
outstanding obligations and obtaining funds to lend
to other public institutions and facilities or for
general operating expenses.

The two principal classifications of municipal
bonds are "general obligation" and "revenue".
General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest.
Revenue bonds are payable only from the revenues
derived from a particular facility or class of
facilities, or in some cases, from the proceeds of a
special excise tax or other specific revenue source.

The Fund may invest in industrial development
bonds, the interest from which is exempt from
federal income tax. Under certain circumstances,
"substantial users" of the facilities financed with
such obligations, or persons related to "substantial
users" of the facilities financed with such
obligations, or persons related to "substantial
users," may be required to pay federal income tax
on this otherwise exempted interest. Such persons
should consult the Internal Revenue Code and their
financial adviser to determine whether or not the
Fund is an appropriate investment for them.

There are a variety of hybrid and special types of
municipal obligations, as well as numerous
differences in the security of municipal bonds, both
within and between the two principal
classifications of general obligation and revenue.

Municipal notes include tax, revenue and bond
anticipation notes of short maturity, generally less
than three years, which are issued to obtain
temporary funds for various public purposes. Also
included in this category are Construction Loan
Notes, Short-Term Discount Notes and Project
Notes issued by a state or local housing agency but
secured by the full faith and credit of the United
States.

Yields on municipal securities depend on a variety
of factors, such as the size of a particular offering,
the maturity and the rating of the obligation,
economic and monetary conditions, and conditions
of the municipal securities market, including the
volume of municipal securities available. Market
values of municipal securities will vary according
to the relation of their yields available.
Consequently, the net asset value of the Fund and
its shares can be expected to change as the level of
interest rates fluctuates.

Municipal obligations, like all other debt
obligations, carry a risk of default. Through
careful selection and supervision, and
concentration in the higher-quality investment
grade issues, management intends to reduce this
risk.

Prices of outstanding municipal securities will
fluctuate with changes in the interest rates on new
issues. Thus, the price of the Fund's shares will
tend to increase as the rates on new issues decline,
and decrease whenever the current rate is rising.
Management will seek to minimize such share
price fluctuation to the extent this can be achieved
without detracting from the Fund's primary
objective of the highest quality and maturity
characteristics of the Portfolio.

Municipal securities are not traded as actively as
other securities. Even though municipal securities
will be redeemed at face value upon maturity, from
time to time, when there has been no active trading
in a particular Portfolio holding, its interim pricing
for the purpose of the daily valuation of the Fund
shares may have to be based on other sources of
information and methods deemed fair and
reasonable by the Board of Directors. One
principal method which is commonly used by
Funds and other investors who own municipal
securities is called matrix pricing.

From time to time, proposals have been introduced
in Congress to restrict or eliminate the federal
income tax exemption for interest on municipal
securities. Similar proposals may be introduced in
the future. If such a proposal was enacted, the
availability of municipal securities for investment
by the Fund would be adversely affected. In such
event, the Fund would reevaluate its investment
objective and policies and submit possible changes
in the structure of the Fund for the consideration of
the shareholders.

RATINGS OF MUNICIPAL AND TAXABLE
SECURITIES

The ratings of bonds by Moody's and Standard and
Poor's Corporation represent their opinions of
quality of the municipal bonds they undertake to
rate. These ratings are general and are not absolute
standards. Consequently, municipal bonds with the
same maturity, coupon and rating may have
different yields, while municipal bonds of the same
maturity and coupon with different ratings may
have the same yield.

Both Moody's and S&P's Municipal Bond Ratings
cover obligations of states and political
subdivisions. Ratings are assigned to general
obligation and revenue bonds. General obligation
bonds are usually secured by all resources available
to the municipality and the factors outlined in the
rating definitions below are weighted in
determining the rating. Because revenue bonds in
general are payable form specifically pledged
revenues, the essential element in the security for a
revenue bond is the quantity and quality of the
pledged revenues available to pay debt service.

S&P'S BOND RATINGS

AAA Prime - These are obligations of the highest
quality. They have the strongest capacity for timely
payment of debt service.

General Obligation Bonds - In a period of
economic stress, the issuers will suffer the
smallest declines in income and will be
susceptible to autonomous decline. Debt burden
is moderate. A strong revenue structure appears
more than adequate to meet future expenditure
requirements. Quality of management appears
superior.

Revenue Bonds - Debt service coverage has
been, and is expected to remain, substantial.
Stability of the pledged revenues is also
exceptionally strong, due to the competitive
position of the municipal enterprise or to the
nature of the revenues. Basic security provisions
(including rate covenant, earnings test for
issuance of additional bonds, debt service,
reserve requirements) are rigorous. There is
evidence of superior management.

AA - High Grade - The investment characteristics
of general obligation and revenue bonds in this
group are only slightly less marked than those of
the prime quality issues. Bonds rated "AA" have
the second strongest capacity for payment of debt
service.

A - Good Grade - Principal and interest payments
on bonds in this category are regarded as safe.
This rating describes the third strongest capacity
for payment of debt service. It differs from the two
higher ratings because:

General Obligation Bonds - There is some
weakness, either in the local economic base, in
debt burden, in the balance between revenues
and expenditures, or in quality of management.
Under certain adverse circumstances, any one
such weakness might impair the ability of the
issuer to meet debt obligations at some future
date.

Revenue Bonds - Debt service coverage is
good, but not exceptional. Stability of the
pledged revenues could show some variations
because of increased competition or economic
influences on revenues. Basic security
provisions, while satisfactory, are less stringent.
Management performance appears adequate.

BBB Adequate Grade - These are obligations
regarded as having adequate capacity to pay
interest and repay principal. Whereas it
normally exhibits adequate protection
parameters, adverse economic conditions or
changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay
principal for debt in this category than in higher
rated categories.

MOODY'S RATINGS OF
BONDS

Aaa - Bonds which are rated Aaa are judged to be
the 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 - Bonds which are rated Aa are judged to be of
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 - Bonds which are rated A possess many
favorable investment attributes and are to be
considered as upper medium grade obligations.
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 Adequate Grade - These are obligations
regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this
category than in higher rated categories.

MOODY'S RATINGS
OF MUNICIPAL NOTES

MIG 1: The best quality, enjoying strong
protection from established cash flow of funds for
their servicing or from established and broad based
access to the market for refinancing, or both.

MIG 2: High quality with margins of protection
ample, although not so large as in the preceding
group,

MIG 3: Favorable quality, with all security
elements accounted for, but lacking the undeniable
strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well
established.

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
overwhelming.

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

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

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

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

FINANCIAL STATEMENTS

The audited financial statements of the Funds
which are contained in the June 30, 1999, Annual
Report to Shareholders are incorporated herein by
reference.