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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 2 [X]
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 [X]
Amendment No. 4 [X]
BUFFALO EQUITY FUND, INC.
FILE NOS. 33-87346; 811-8900
(Exact Name of Registrant as Specified in Charter)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
BUFFALO HIGH YIELD FUND, INC.
FILE NOS. 33-87148; 811-8898
(Exact Name of Registrant as Specified in Charter)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
BUFFALO USA GLOBAL FUND, INC.
FILE NOS. 33-87146; 811-8896
(Exact Name of Registrant as Specified in Charter)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
BUFFALO BALANCED FUND, INC.
FILE NOS. 33-75476; 811-8364
(Exact Name of Registrant as Specified in Charter)
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2440 Pershing Road, G-15, Kansas City, MO 64108
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (816) 471-5200
Larry D. Armel, President, BUFFALO GROUP OF FUNDS
2440 Pershing Road, G-15, Kansas City, Missouri 64108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Upon
effectiveness of this Registration Statement. It is proposed that this
filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
X on July 31, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
Each of the Registrants has previously made an election
pursuant to Rule 24f-2 to register an indefinite number of its shares.
Buffalo Balanced Fund, Inc. filed its 24f-2 notice on or about May 11,
1995.
Please address inquiries and and a carbon copy of all
communicaions to: communicatios to:
John G. Dyer, Esq. Mark H. Plafker, Esq.
Buffalo Group of Funds Stradley, Ronon, Stevens & Young
2440 Pershing Road, G-15 2600 One Commerce Square
Kansas City, MO 64108 Philadelphia, PA 19103-7098
Telephone: (816) 471-5200 Telephone: (215) 564-8024
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BUFFALO EQUITY FUND, INC.
BUFFALO HIGH YIELD FUND, INC.
BUFFALO USA GLOBAL FUND, INC.
BUFFALO BALANCED FUND, INC.
CROSS REFERENCE SHEET
Form N-1A Item Number Location in Prospectus
Item 1. Cover Page Cover Page
Item 2. Synopsis Not Applicable
Item 3. Condensed Financial Per Share Capital and
Information Income Changes
Item 4. General Description Investment Objective
of Registrant and Portfolio
Management Policy
Item 5. Management of Officers and Directors;
the Fund Management and
Investment Counsel
Item 6. Capital Stock and How to Purchase Shares;
Other Securities How to Redeem Shares;
How Share Price is
Determined; General
Information and
History; Dividends,
Distributions and their
Taxation
Item 7. Purchase of Coverage Page; How to
Securities Purchase Shares;
being Offered Shareholder Services
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Pending Legal Proceedings Not Applicable
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BUFFALO EQUITY FUND, INC.
BUFFALO HIGH YIELD FUND, INC.
BUFFALO USA GLOBAL FUND, INC.
BUFFALO BALANCED FUND, INC.
CROSS REFERENCE SHEET (Continued)
Form N-1A Item Number Location in Statement
of Additional
Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information Investment Objectives
and History and Policies;
Management and
Investment Counsel
Item 13. Investment Investment Objectives
Objectives and Policies and Policies;
Investment
Restrictions
Item 14. Management Management and
of the Fund Investment Counsel
Item 15. Control Persons Management and
and Principal Investment Counsel;
Holders of Securities Officers and Directors
Item 16. Investment Advisory Management and
and other Services Investment Counsel
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock General Information and
and Other History (Prospectus);
Securities Financial Statements
Item 19. Purchase, Redemption How Share Purchases are
and Pricing of Handled; Redemption of
Securities Being Shares Financial
Offered Statements
Item 20. Tax Status Dividends, Distributions
and their taxation
(Prospectus)
Item 21. Underwriters How the Fund's Shares
are Distributed
Item 22. Calculation of Not Applicable
Yield Quotations of
Money Market Fund
Item 23. Financial (To be supplied by
Statements further Amendment)
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PROSPECTUS
July 31, 1995
Buffalo Balanced Fund, Inc. Buffalo High Yield Fund, Inc.
Buffalo Equity Fund, Inc. Buffalo USA Global Fund, Inc.
Managed and Distributed By: Toll-Free 1-800-49-BUFFALO
Jones & Babson, Inc. (1-800-492-8332)
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Investment Counsel: KORNITZER CAPITAL MANAGEMENT, INC.
Shawnee Mission, Kansas
INVESTMENT OBJECTIVES
Buffalo Balanced Fund seeks both long-term capital growth and high
current income. Long-term capital growth is intended to be achieved
primarily by the Fund's investment in common stocks and secondarily
by the Fund's investment in convertible bonds and convertible
preferred stocks. High current income is intended to be achieved
by the Fund's investment in corporate bonds, government bonds,
convertible bonds, preferred stocks and convertible preferred stocks.
This Fund will invest up to 75% of its assets in lower rated bonds,
commonly known as junk bonds that entail greater risks including
default risks, than those found in higher rated securities.
Investors should carefully consider these risks before investing.
See Investment Objective and Portfolio Management Policy, page _;
Risk Factors, page _; Investment Restrictions, page _ and Fixed
Income Securities Described and Ratings, page 17.
Buffalo Equity Fund seeks long-term capital appreciation.
Long-term capital appreciation is intended to be achieved
primarily by the Fund's investment in common stocks. Realization
of dividend income is a secondary consideration to the extent that
it supplements the return on the Fund's investments and investment
in the dividend-producing securities is consistent with achieving
the Fund's objective of long-term capital appreciation.
Buffalo High Yield Fund primarily seeks a high level of current
income and secondarily, capital growth. The Fund invests primarily
in a diversified portfolio of high-yielding fixed income securities.
The Fund will invest in debt securities and preferred stock. The
Fund may invest in any fixed income securities, whether nonconvertible
or convertible without restriction.
This Fund will invest in a significant portion, up to 100% of its
assets, in lower rated bonds, commonly known as "junk bonds,"
that entail greater risks including default risks, than those found
in higher rated securities. The Fund's fixed income investments may consist
totally of securities rated below investment grade. Investors should carefully
consider these risks before investing. See "Investment Objective and Portfolio
Management Policy," page; "Risk Factors," page; "Investment
Restrictions," page and "Fixed Income Securities Described and Ratings,"
page. Secondarily, the Fund may invest up to 10% of the value of its total
assets in common stocks and other equity securities.
Buffalo USA Global Fund seeks capital growth. Capital growth is intended
to be achieved primarily by the Fund's investment 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, measured
as of the preceding four completed quarters of business or the companies' most
recently completed fiscal year. At least 65% of the value of the Fund's
total assets must be invested in at least three different countries.
This diversification is achieved through the international operations of
United States-based companies as described above. The Fund will invest
in common stocks considered by the manager to have above average
potential for appreciation; income is a secondary consideration. The Fund
will invest primarily in common stocks listed on the New York Stock Exchange.
PURCHASE INFORMATION
Minimum Investment
Initial Purchase $2,500
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases $250
Subsequent Purchase:
By Mail $100
By Telephone or Wire $1,000
All Automatic Purchases $100
Shares are purchased and redeemed at net asset value. There are no sales,
redemption or Rule 12b-1 distribution charges. If you need further
information, please call the Fund at the telephone number indicated.
ADDITIONAL INFORMATION
This prospectus should be read and retained for future reference. It
contains the information that you should know before you invest.
A "Statement of Additional Information" of the same date as this
prospectus has been filed with the Securities and Exchange Commission
and is incorporated by reference. Investors desiring additional
information about the Fund may obtain a copy without charge by writing
or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Highlights
Fund Expenses
Financial Highlights
Investment Objectives and Portfolio Management
Policies
Repurchase Agreements
Risk Factors
Investment Restrictions
Performance Measures
How to Purchase Shares
Initial Investments
Investments Subsequent to Initial Investment
Telephone Investment Service
Automatic Monthly Investment Plan
How to Redeem Shares
Systematic Redemption Plan
How to Exchange Shares Between Buffalo Funds
How Share Price is Determined
Officers and Directors
Management and Investment Counsel
General Information and History
Dividends, Distributions and Their Taxation
Description of Securities Ratings
Shareholder Services
Shareholder Inquiries
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For more information on
HIGHLIGHTS this subject see page...
The Funds
The Buffalo Funds are a group of four open-end diversified investment
companies sponsored by Jones & Babson, Inc., for which Kornitzer
Capital Management, Inc. serves as investment counsel.
Buffalo Balanced Fund, Inc. was incorporated in Maryland on January 25, 1994.
Buffalo Equity Fund, Inc., Buffalo High Yield Fund, Inc. and Buffalo
USA Global Fund, Inc. were incorporated in Maryland on November 23, 1994.
Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High
Yield Fund, Inc. and Buffalo USA Global Fund, Inc. each offer one class
of non-assessable common shares with equal voting rights.
Buffalo Balanced Fund, Inc. seeks both long-term capital growth and high
current income. The Fund will invest in a diversified array of
common stocks, preferred stocks, convertible bonds, convertible preferred
stocks, corporate bonds and government bonds.
Buffalo Equity Fund, Inc. seeks long-term capital appreciation by
investment in a broad array of common stocks, in terms of companies and
industries.
Buffalo High Yield Fund, Inc. primarily seeks a high level of current
income and secondarily, capital growth. The Fund invests primarily in
debt securities and may invest in preferred stock.
Buffalo USA Global Fund, Inc. seeks 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.
How to Invest
Fund shares can only be purchased directly from the Funds through their
manager and principal underwriter, Jones & Babson, Inc. Because no sales
charges are added to the price of the shares, the full amount of any
purchase is invested for the benefit of the shareholder. The minimum
initial purchase is $2,500. Subsequent purchases must be at least $100,
except wire purchases which must be in the amount of $1,000 or more.
Telephone Investment - You may make investments of $1,000 or more by
telephone if you have authorized such investments in your application,
or, subsequently, on a special authorization form provided upon request.
Automatic Monthly Investment - You may elect to make monthly investments
in a constant dollar amount from your checking account ($100 minimum).
The Fund will draft your checking account on the same day each month
in the amount you authorize in your application, or, subsequently, on a
special authorization form provided upon request.
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Redemption
Shares of the Funds are redeemable at net asset value next effective
after receipt by the Fund of a shareholder's request in good order.
No redemption charge is made.
Exchange
Privilege
with Other
Buffalo Funds
Shareholders may transfer their investments without charge to any other
Buffalo Fund sponsored by Jones & Babson, Inc. This exchange involves
the liquidation of shares from one Fund and a purchase of shares in the
Fund to which the investment is being transferred. This is a transaction
which may or may not be taxable depending on the shareholder's tax status.
Automatic Exchange - You may exchange shares from your account
($100 minimum) in any of the Buffalo Funds to an identically
registered account in any other Fund in the Buffalo Group according
to your instructions. Monthly exchanges will be continued until all
shares have been exchanged or until you terminate the Automatic
Exchange authorization. A special authorization form will be provided
upon request.
Management
of the Funds
The Funds are managed by Jones & Babson, Inc. which employs Kornitzer Capital
Management, Inc. to assist in the investment advisory function.
The Management
Fee Covers the
Investment
Advisory Fee
and All Other
Normal Operating
Costs
Jones & Babson, Inc., as manager, agrees to supply to the Funds all
normal services necessary for their functions as open-end diversified
investment companies, exclusive of taxes and other charges of governments
and their agencies (including the cost of qualifying the Fund's shares for
sale in any jurisdiction), certain fees, dues, interest, brokerage
commissions and extraordinary costs, if any. For this it charges the
Funds a fee based on an annual rate of one percent (1%) of average daily
net assets from which Jones & Babson pays Kornitzer Capital Management,
Inc. an investment counsel fee of 50/100 (.50%) of average daily net assets.
Although these fees are higher than the fees of most other advisers
whose charges cover only investment advisory services with all remaining
operational expenses absorbed directly by the Fund, Jones & Babson's
charges compare favorably with other advisers when all expenses to Fund
shareholders are taken into account.
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Dividend
Policies
Buffalo Balanced Fund, Inc. and Buffalo High Yield Fund, Inc. will pay
substantially all of their net investment income quarterly, usually
in March, June, September and December. It is contemplated that
distributions from capital gains, if any, will be declared annually
on or before December 31 for Buffalo Balanced Fund, Inc. Distributions
from capital gains, if any, will be declared semiannually, usually in
June and December for Buffalo High Yield Fund, Inc.
Buffalo Equity Fund, Inc. and Buffalo USA Global Fund, Inc. will pay
dividends from net investment income and capital gains semiannually,
usually in June and December.
Taxes
The Funds will distribute substantially all of their net income each
year in order to be exempt from federal income tax. Dividend and
capital gains distributions will be taxable to each shareholder
whether taken in cash or reinvested in additional shares in accordance
with the shareholder's tax status.
Risk Factors
For a discussion of risk factors applicable to repurchase agreements.
For a discussion of risk factors applicable to covered call options.
For a discussion of risk factors applicable to ADRs.
For a discussion of risk factors applicable to common stocks.
For a discussion of risk factors applicable to global operations.
For a discussion of risk factors applicable to high yield high risk debt
securities.
<PAGE>
FUND EXPENSES
The following information is provided in order to assist you in
understanding the various costs and expenses that a shareholder of
a Buffalo Fund will bear directly or indirectly.
BUFFALO BALANCED FUND, INC.
The expenses set forth below are for the fiscal
year ended March 31, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed
on purchase None
Maximum sales load imposed
on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees 1.00%
12b-1 fees None
Other expenses .06%
Total Fund operating expenses 1.06%
You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of
each time period:
1 Year 3 Year
$11 $34
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BUFFALO EQUITY FUND, INC.
The expenses set forth below are estimated for
the current fiscal year.
Shareholder Transaction Expenses
Maximum sales load imposed
on purchase None
Maximum sales load imposed
on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees 1.00%
12b-1 fees None
Other expenses .08%
Total Fund operating expenses 1.08%
You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of
each time period:
1 Year 3 Year
$11 $34
BUFFALO HIGH YIELD FUND, INC.
The expenses set forth below are estimated for
the current fiscal year.
Shareholder Transaction Expenses
Maximum sales load imposed
on purchase None
Maximum sales load imposed
on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees 1.00%
12b-1 fees None
Other expenses .08%
Total Fund operating expenses 1.08%
You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of
each time period:
1 Year 3 Year
$11 $34
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BUFFALO USA GLOBAL FUND, INC.
The expenses set forth below are estimated for
the current fiscal year.
Shareholder Transaction Expenses
Maximum sales load imposed
on purchase None
Maximum sales load imposed
on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees 1.00%
12b-1 fees None
Other expenses .08%
Total Fund operating expenses 1.08%
You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of
each time period:
1 Year 3 Year
$11 $34
The above information is provided in order to
assist you in understanding the various costs and
expenses that a shareholder of the Fund will
bear directly or indirectly. The above
examples should not be considered a
representation of past or future expenses.
Actual expenses may be greater or less than
those shown. The assumed 5% annual return
is hypothetical and should not be considered a
representation of past or future annual return.
The actual return may be greater or less than
the assumed amount.
The purpose of the foregoing fee tables
is to assist the investor in understanding the
various costs and expenses that an investor in a
Fund will bear directly or indirectly. The
various costs and expenses are explained in
more detail in this prospectus. Management
fees are discussed in greater detail under
"Management and Investment Counsel".
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FINANCIAL HIGHLIGHTS
BUFFALO BALANCED FUND, INC.
The following financial highlights for the fiscal
period ended March 31, 1995, have been
derived from audited financial statements of
Buffalo Balanced Fund, Inc. and should be read
in conjunction with the financial statements of
the Fund and the report of Ernst & Young
LLP, independent public accountants, appearing
in the March 31, 1995 annual report to
shareholders which is incorporated by reference
in this prospectus.
August 12, 1994 (Inception Date) to March 31, 1995*
Net Asset Value, beginning of period $10.07
Income from investment operations:
Net investment income .32
Net gains (or losses) on securities (both
realized and unrealized) (.03)
Total from Investment Operations .29
Less distributions:
Dividends from net investment income (.30)
Distributions from capital gains -
Total Distributions (.30)
Net asset value, end of period $10.06
Total Return 3%
Ratios/Supplemental Data
Net assets, end of year (in millions) $38
Ratio of expenses to average net assets 1.06%
Ratio of net investment income to average net
assets 8.89%
Portfolio turnover rate 33%
*The Fund was capitalized on June 6, 1994
with $100,000, representing 10,000 shares at a
net asset value of $10.00 per share.
Initial public offering was made on August 12,
1994, at which time net asset value was $10.07
per share.
Ratios for this initial period of operations are
annualized.
Total return is not annualized.
Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc. and Buffalo USA Global Fund, Inc.
commenced operations after the March 31, 1995
fiscal year end.
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INVESTMENT OBJECTIVES AND
PORTFOLIO MANAGEMENT POLICIES
Each Fund's objectives and policies as described
in this section will not be changed without
approval of a majority of the Fund's outstanding
shares.
BUFFALO BALANCED FUND
Buffalo Balanced Fund seeks both long-term
capital growth and high current income. Long-
term capital growth is intended to be achieved
primarily by the Fund's investment in common
stocks and secondarily by the Fund's investment
in convertible bonds and convertible preferred
stocks. High current income is intended to be
achieved by the Fund's investment in corporate
bonds, government bonds, mortgage-backed
securities, convertible bonds, preferred stocks
and convertible preferred stocks.
Buffalo Balanced Fund will normally invest in a
broad array of securities, diversified not only in
terms of companies and industries, but also in
terms of types of securities. The types of
securities includes common stocks, preferred
stocks, convertible bonds, convertible preferred
stocks, corporate bonds and government bonds.
It is expected that the majority of common
stocks purchased in the Fund will be large
capitalization companies with most if not all
listed on the New York Stock Exchange. Large
capitalization stocks are considered to be those
with capitalization in excess of $1 billion.
It is not the manager's intention to make wide
use of NASDAQ traded, smaller capitalization
common stocks. Smaller capitalization stocks
are considered to be those with capitalization of
less than $1 billion. The Fund may invest up
to 75% of its assets in corporate bonds,
convertible bonds, preferred stocks and
convertible preferred stocks. The manager
expects that from time-to-time these securities
may be rated below investment grade (BBB) by
the major rating agencies. The manager
believes this policy is justified given the
manager's view that these securities from time-
to-time offer superior value and the manager's
experience and substantial in-house credit
research capabilities with higher yielding
securities.
Securities rated Baa or higher by Moody's or
BBB by Standard & Poor's or higher are
classified as investment grade securities.
Although securities rated Baa by Moody's and
BBB by Standard & Poor's have speculative
characteristics, they are considered to be
investment grade. Such securities carry a lower
degree of risk than lower rated securities. (See
"Risk Factors Applicable to High Yielding High
Risk Debt Securities.")
Securities rated below Baa by Moody's or BBB
by Standard & Poor's are commonly known as
junk bonds and are considered to be high risk.
Yields on such bonds will fluctuate over time,
and achievement of the Fund's investment
objective may be more dependent on the Fund's
own credit analysis than is the case for higher
rated bonds. (See "Risk Factors Applicable to
High Yielding High Risk Debt Securities.")
The Fund may also invest in high-yielding,
high-risk corporate debt securities (so-called
"junk bonds"). Up to 20% of the Fund's assets
may be invested in debt securities which are
rated less than B or unrated.
The Fund will not invest in securities that, at
the time of initial investment, are rated less
than B by Moody's or Standard & Poor's.
Securities that are subsequently downgraded in
quality below B may continue to be held by the
Fund, and will be sold only if the Fund's
adviser believes it would be advantageous to do
so. In addition, the credit quality of unrated
securities purchased by the Fund must be, in
the opinion of the Fund's adviser, at least
equivalent to a B rating by Moody's or
Standard & Poor's.
Securities rated less than Baa by Moody's or
BBB by Standard & Poor's are classified as
non-investment grade securities. Such securities
carry a high degree of
<PAGE>
risk and are considered
speculative by the major credit rating agencies.
(See "Risk Factors Applicable to High Yielding
Debt Securities.")
The proportion of the Fund invested in each
type of security is expected to change over time
in accordance with the investment manager's
interpretation of economic conditions and
underlying security values. However, it is
expected that a minimum of 25% of the Fund's
total assets will always be invested in fixed
income senior securities and that a minimum
of 25% of its total assets will always be
invested in equity securities. When, in the
manager's judgment, market conditions warrant
substantial temporary investments in high-quality
money market securities, the Fund may do so.
The Fund is authorized to write (i.e. sell)
covered call options on the securities in which
it may invest and to enter into closing purchase
transactions with respect to certain of such
options. A covered call option is an option
where the Fund in return for a premium gives
another party a right to buy specified securities
owned by the Fund at a specified future date
and price set at the time of the contract. (See
"Risk Factors Applicable to Covered Call
Options.")
Covered call options serve as a partial hedge
against the price of the underlying security
declining.
Investments in money market securities shall
include government securities, commercial
paper, bank certificates of deposit and
repurchase agreements collateralized by
government securities. Investment in
commercial paper is restricted to companies in
the top two rating categories by Moody's and
Standard & Poor's.
The Fund may also invest in issues of the
United States Treasury or a United States
government agency subject to repurchase
agreements. The use of repurchase agreements
by the Fund involves certain risks. For a
discussion of these risks, see "Risk Factors
Applicable to Repurchase Agreements."
There is no assurance that the Fund's objective
of long-term growth of capital and high current
income can be achieved. Portfolio turnover
will be no more than is necessary to meet the
Fund's objective. Under normal circumstances,
it is anticipated that portfolio turnover for
common stocks in the Fund's portfolio will not
exceed 100% on an annual basis, and that
portfolio turnover for other securities will not
exceed 100% on an annual basis.
BUFFALO EQUITY FUND
Buffalo Equity Fund seeks long-term capital
appreciation. Long-term capital appreciation is
intended to be achieved primarily by the Fund's
investment in common stocks. Realization of
dividend income is a secondary consideration to
the extent that it supplements the return on the
Funds investments and investment in the
dividend-producing securities is consistent with
achieving the Fund's objective of long-term
capital appreciation.
Buffalo Equity Fund will normally invest in a
broad array of common stocks, in terms of
companies and industries. It is expected that
the majority of common stocks purchased in the
Fund will be large capitalization companies with
most, if not all, listed on the New York Stock
Exchange. Large capitalization stocks are
considered to be those with capitalization in
excess of $1 billion.
The Fund may purchase foreign securities
through dollar-denominated American Depository
Receipts (ADRs), which do not involve the
same direct currency and liquidity risks as
securities denominated in foreign currency and
which are issued by domestic banks and
publicly traded in the United States. The Fund
does not intend to invest directly in foreign
securities or foreign currencies.
The Fund will invest at least 65% of its assets
in common stocks under normal circumstances.
When, in
<PAGE>
the manager's judgment, market
conditions warrant substantial temporary
defensive investments in high-quality money
market securities, the Fund may do so.
The Fund is authorized to write (i.e. sell)
covered call options on the securities in which
it may invest and to enter into closing purchase
transactions with respect to certain of such
options. A covered call option is an option
where the Fund in return for a premium gives
another party a right to buy specified securities
owned by the Fund at a specified future date
and price set at the time of the contract. (See
"Risk Factors Applicable to Covered Call
Options.")
Covered call options serve as a partial hedge
against the price of the underlying security
declining.
Investments in money market securities shall
include government securities, commercial
paper, bank certificates of deposit and
repurchase agreements collateralized by
government securities. Investment in commercial
paper is restricted to companies in the top two
rating categories by Moody's and Standard &
Poor's.
The Fund may also invest in issues of the
United States Treasury or a United States
government agency subject to repurchase
agreements. The use of repurchase agreements
by the Fund involves certain risks. For a
discussion of these risks, see "Risk Factors
Applicable to Repurchase Agreements."
There is no assurance that the Fund's objective
of long-term capital appreciation can be
achieved. Portfolio turnover will be no more
than is necessary to meet the Fund's objective.
Under normal circumstances, it is anticipated
that portfolio turnover will not exceed 100% on
an annual basis.
BUFFALO HIGH YIELD FUND
Buffalo High Yield Fund primarily seeks a high
level of current income and secondarily, capital
growth. The Fund invests primarily in a
diversified portfolio of high-yielding fixed
income securities. High current income is
intended to be achieved by the Fund's
investment in any fixed income securities,
without restriction, such as corporate bonds,
government bonds, convertible bonds, preferred
stocks and convertible preferred stocks. The
Fund may not invest in foreign government
bonds. Capital growth is intended to be
achieved by the appreciation of fixed income
and equity investments held in the Fund.
The Fund may invest up to 100% of its assets in
any fixed income securities, including without
limitation, corporate bonds, convertible bonds,
preferred stocks and convertible preferred
stocks. These securities may be rated below
investment grade (BB/Ba and B/B) by the major
rating agencies or, if unrated, are in the
opinion of the manager of similar quality. The
manager believes this policy is justified given
the manager's view that these securities from
time-to-time offer superior value and given the
manager's experience and substantial in-house
credit research capabilities with higher yielding
securities.
Securities rated Baa or higher by Moody's or
BBB by Standard & Poor's or higher are
classified as investment grade securities.
Although securities rated Baa by Moody's and
BBB by Standard & Poor's have speculative
characteristics, they are considered to be
"medium" investment grade. Such securities
carry a lower degree of risk than lower rated
securities.
Securities rated Baa and below by Moody's or
BBB and below by Standard & Poor's are
commonly known as "junk bonds" and are
considered to be high risk. Yields on such
bonds will fluctuate over time, and achievement
of the Fund's investment objective may be more
dependent on the Fund's own credit analysis
than is the case for higher rated bonds. (See
"Risk Factors Applicable to High Yielding High
Risk Debt Securities.")
Up to 20% of the Fund's assets may be
invested in debt securities which are rated less
than B at the time
<PAGE>
of purchase or if unrated
are in the opinion of the manager of similar
quality. Securities rated B or higher at the
time of purchase, which are subsequently
downgraded, will not be subject to this
limitation.
The lowest rating that may be held in the Fund
is D, or that of defaulted securities. (See
"Risk Factors Applicable to High Yielding High
Risk Debt Securities.") The Fund will not
purchase obligations that are in default, but may
hold in the portfolio securities which go into
default subsequently to acquisition by the Fund.
The proportion of the Fund invested in each
type of security is expected to change over time
in accordance with the investment manager's
interpretation of economic conditions and
underlying security values. However, it is
expected that a minimum of 65% of the Fund's
total assets will always be invested in fixed
income securities and that a maximum of 10%
of its total assets will be invested in equity
securities. The Fund's flexible investment
policy allows it to invest in securities with
varying maturities; however, it is anticipated
that the average maturity of securities acquired
by the Fund will not exceed 15 years. The
average maturity of the Fund will be generally
ten years or less. The manager may look at a
number of factors in selecting securities for the
Fund's portfolio. These include the past,
current and estimated future: (1) financial
strength of the issuer; (2) cash flow; (3)
management; (4) borrowing requirements; and
(5) responsiveness to changes in interest rates
and business conditions. Sometimes the
manager may believe that a full or partial
temporary defensive position is desirable, due to
present or anticipated market or economic
conditions. To achieve a defensive posture, the
manager may take any one or more of the
following steps with respect to assets in the
Fund's portfolio: (1) shortening the average
maturity of the Fund's debt portfolio; (2)
holding cash or cash equivalents; and (3)
emphasizing high-grade debt securities. Taking
a defensive posture as described above may
involve a reduction in the yield on the Fund's
portfolio.
The table below shows the percentage of the
Fund's assets to be invested in securities
assigned to the various rating categories by
Moody's and Standard & Poor's and in unrated
securities determined by the Investment Counsel
to the Fund to be of comparable quality.
* The investments in securities with this rating are subject to an aggregate
maximum limit of 20% of all securities so noted. Securities rated B or
higher at the time of purchase, which are subsequently downgraded,
will not be subject to this limitation.
<PAGE>
Unrated securities of
Rated Securities, comparable quality,
as a percentage of as percentage of
Rating Fund's assets Fund's assets
AAA/Aaa up to 20% up to 20%
AA/Aa up to 20% up to 20%
A/A up to 20% up to 20%
BBB/Baa up to 100% up to 100%
BB/Ba up to 100% up to 100%
B/B up to 100% up to 100%
CCC/Caa* up to 20% up to 20%
CC/Ca* up to 20% up to 20%
D/D* up to 20% up to 20%
* THE INVESTMENTS IN SECURITIES WITH THIS RATING ARE SUBJECT TO AN AGGREGATE
MAXIMUM LIMIT OF 20% OF ALL SECURITIES SO NOTED. SECURITIES RATED B OR HIGHER
AT THE TIME OF PURCHASE, WHICH ARE SUBSEQUENTLY DOWNGRADED, WILL NOT BE
SUBJECT TO HIS LIMITATION.
The Fund is authorized to write (i.e. sell)
covered call options on the securities in which
it may invest and to enter into closing purchase
transactions with respect to certain of such
options. A covered call option is an option
where the Fund in return for a premium gives
another party a right to buy specified securities
owned by the Fund at a specified future date
and price set at the time of the contract. (See
"Risk Factors Applicable to Covered Call
Options.")
Covered call options serve as a partial hedge
against the price of the underlying security
declining.
Investments in money market securities shall
include government securities, commercial
paper, bank certificates of deposit and
repurchase agreements collateralized by
government securities. Investment in commercial
paper is restricted to companies in the top
<PAGE>
two rating categories by Moody's and
Standard & Poor's.
The Fund may also invest in issues of the
United States Treasury or a United States
government agency subject to repurchase
agreements. The use of repurchase agreements
by the Fund involves certain risks, see "Risk
Factors Applicable to Repurchase Agreements."
There is no assurance that the Fund's objective
of a high level of current income and
secondarily capital growth can be achieved.
Portfolio turnover will be no more than is
necessary to meet the Fund's objective. Under
normal circumstances, it is anticipated that
portfolio turnover will not exceed 100% on an
annual basis.
BUFFALO USA GLOBAL FUND
Buffalo USA Global Fund seeks capital growth.
Capital growth is intended to be achieved
primarily by the Fund's investment 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,
measured as of the preceding four completed
quarters of business or the respective company's
most recently completed fiscal year. At least
65% of the value of the Fund's total assets
must be invested in at least three different
countries. This diversification is achieved
through the international operations of United
States-based companies as described above. The
Fund will invest in common stocks considered
by the manager to have above average potential
for appreciation; income is a secondary
consideration. Under normal circumstances, the
Fund will invest in a majority of its assets in
common stocks listed on the New York Stock
Exchange.
The Fund's manager believes that the investment
policies of the Fund reduce or eliminate several
risks associated with direct investment in foreign
securities. Trading costs are usually higher in
foreign countries because commission rates are
generally fixed rather than negotiated as in the
U.S. Liquidity risk is generally lowered because
trading volumes are typically higher on U.S.
exchanges. Many foreign stock exchanges
require extended clearance and settlement
periods, which can impair a manager from
implementing specific investment policies.
Finally, there is generally less enforcement of
security laws and supervision of developing
country stock exchanges.
When, in the manager's judgment, market
conditions warrant substantial temporary
defensive investments in high quality money
market securities, the Fund may do so.
The Fund is authorized to write (i.e. sell)
covered call options on the securities in which
it may invest and to enter into closing
purchased transactions with respect to certain of
such options. A covered call option is an
option where the Fund in return for a premium
gives another party a right to buy specified
securities owned by the Fund at a specified
future date and price set at the time of the
contract. (See "Risk Factors Applicable to
Covered Call Options.")
Covered call options serve as a partial hedge
against the price of the underlying security
declining.
Investments in money market securities shall
include government securities, commercial
paper, bank certificates of deposit and
repurchase agreements collateralized by
government securities. Investment in
commercial paper is restricted to companies in
the top two rating categories by Moody's and
Standard & Poor's.
The Fund may also invest in issues of the
United States Treasury or a United States
government agency subject to repurchase
agreements. The use of repurchase agreements
by the Fund involves certain risks. For a
discussion of these risks, see "Risk Factors
Applicable to Repurchase Agreements."
<PAGE>
There is no assurance that the Fund's objective
of capital growth can be achieved. Portfolio
turnover will be no more than is necessary to
meet the Fund's objective. Under normal
circumstances, it is anticipated that portfolio
turnover for the Fund will not exceed 100% on
an annual basis.
REPURCHASE AGREEMENTS
A repurchase agreement involves the sale of
securities to the Fund with the concurrent
agreement by the seller to repurchase the
securities at the Fund's cost plus interest at an
agreed rate upon demand or within a specified
time, thereby determining the yield during the
purchaser's period of ownership. The result is
a fixed rate of return insulated from market
fluctuations during such period. Under the
Investment Company Act of 1940, repurchase
agreements are considered loans by a Fund.
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. The term to
maturity of a repurchase agreement normally
will be no longer than a few days. Repurchase
agreements maturing in more than seven days
and other illiquid securities will not exceed 10%
of the total assets of any Fund.
During the initial month of operations, it is
anticipated that a Fund may be invested up to
100% in repurchase agreements, however under
normal circumstances, a Fund may invest up to
25% of its assets in repurchase agreements.
(See "Risk Factors Applicable to Repurchase
Agreements.") Each of the Buffalo Funds may
enter into repurchase agreements.
ASSET-BACKED SECURITIES
The Buffalo High Yield Fund may invest in
asset-backed securities. Asset-backed securities
are collateralized by short maturity loans such
as automobile receivables, credit card
receivables, other types of receivables or assets.
Credit support for asset-backed securities may
be based on the underlying assets and/or
provided through credit enhancements by a third
party. Credit enhancement techniques include
letters of credit, insurance bonds, limited
guarantees (which are generally provided by the
issuer), senior-subordinated structures and over-
collateralization.
RISK FACTORS
Risk Factors Applicable To Covered Call
Options
Each of the Buffalo Funds may engage in
covered call option transactions as described
herein. Up to 25% of a Fund's total assets
may be subject to covered call options. By
writing covered call options, the Fund gives up
the opportunity, while the option is in effect, to
profit from any price increase in the underlying
security above the option exercise price. In
addition, a Fund's ability to sell the underlying
security will be limited while the option is in
effect unless the Fund effects a closing purchase
transaction. A closing purchase transaction
cancels out a Fund's position as the writer of
an option by means of an offsetting purchase of
an identical option prior to the expiration of the
option it has written.
Upon the termination of a Fund's obligation
under a covered call option other than through
exercise of the option, the Fund will realize a
short-term capital gain or loss. Any gain
realized by a Fund from the exercise of an
option will be short- or long-term depending on
the period for which the stock was held. The
writing of covered call options creates a
straddle that is potentially subject to the straddle
rules, which may override some of the
foregoing rules and result in a deferral of some
losses for tax purposes.
<PAGE>
Risk Factors Applicable To Repurchase
Agreements
The Funds may enter into repurchase
agreements. The use of repurchase agreements
involves certain risks. For example, if the seller
of the agreement defaults on its obligation to
repurchase the underlying securities at a time
when the value of these securities has declined,
a Fund may incur a loss upon disposition of
them. If the seller of the agreement becomes
insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or
other laws, disposition of the underlying
securities may be delayed pending court
proceedings. Finally, it is possible that a Fund
may not be able to perfect its interest in the
underlying securities. While the Fund
management acknowledges these risks, it is
expected that they can be controlled through
stringent security selection criteria and careful
monitoring procedures.
Risk Factors Applicable To ADRs
Up to 25% of Buffalo Equity Fund's total assets
may be invested in ADRs. ADRs (sponsored
or unsponsored) are receipts typically issued by
a U.S. bank or trust company evidencing
ownership of the underlying foreign securities.
Most ADRs are traded on a U.S. stock
exchange. Issuers of unsponsored ADRs are
not contractually obligated to disclose material
information in the U.S. and, therefore, there
may not be a correlation between such
information and the market value of the
unsponsored ADR.
Risk Factors Applicable To Common Stocks
Buffalo Equity Fund, Buffalo Balanced Fund and
Buffalo USA Global Fund invest in common
stocks. Buffalo High Yield Fund may invest up
to 10% of it assets in common stocks. The
Funds are subject to market risk and fund risk.
Market risk is the possibility that stock prices
in general will decline over short or even
extended periods of time. Stock markets tend
to be cyclical, with periods when stock prices
generally rise and periods when stock prices
generally decline. Fund risk is the possibility
that a Fund's performance during a specific
period may not meet or exceed that of the
stock market as a whole.
Risk Factors Applicable To High Yielding High
Risk Debt Securities
Buffalo Balanced Fund and Buffalo High Yield
Fund invest in high-yielding, high-risk debt
securities. Lower rated bonds involve a higher
degree of credit risk, the risk that the issuer
will not make interest or principal payments
when due. In the event of an unanticipated
default, a Fund would experience a reduction in
its income, and could expect a decline in the
market value of the securities so affected.
More careful analysis of the financial condition
of each issuer of lower grade securities is
therefore necessary. During an economic
downturn or substantial period of rising interest
rates, highly leveraged issuers may experience
financial stress which would adversely affect
their ability to service their principal and
interest payment obligations, to meet projected
business goals and to obtain additional
financing.
The market prices of lower grade securities are
generally less sensitive to interest rate changes
than higher rated investments, but more
sensitive to adverse economic or political
changes or, in the case of corporate issuers,
individual corporate developments. Periods of
economic or political uncertainty and change
can be expected to result in volatility of prices
of these securities. Since the last major
economic recession, there has been a substantial
increase in the use of high-yield debt securities
to fund highly leveraged corporate acquisitions
and restructurings, so past experience with high-
yield securities in a prolonged economic
downturn may not provide an accurate
indication of future performance during such
periods. Lower rated securities also may have
less liquid markets than higher rated securities,
and their liquidity as well as their value may
be adversely affected by adverse economic
conditions. Adverse publicity and investor
perceptions as well as new or proposed laws
may also have a negative impact on the market
for high-yield/high-risk bonds.
<PAGE>
Credit quality of high-yield high-risk securities
(so-called "junk bonds") can change suddenly
and unexpectedly and even recently issued credit
ratings may not fully reflect the actual risks
posed by a particular high-yield high-risk
security. For these reasons, it is the Funds'
policy not to rely primarily on ratings issued by
established credit rating agencies, but to utilize
such ratings in conjunction with the investment
adviser's own independent and ongoing review
of credit quality. As a mutual fund investing
in fixed income securities each of the Funds is
subject primarily to interest rate income and
credit risk. Interest rate risk is the potential
for a decline in bond prices due to rising
interest rates. In general, bond prices vary
inversely with interest rates. When interest
rates rise, bond prices generally fall.
Conversely, when interest rates fall, bond prices
generally rise. The change in price depends in
several factors, including the bond's maturity
date. In general, bonds with longer maturities
are more sensitive to interest rates than bonds
with shorter maturities.
The Funds are also subject to income risk
which is the potential for a decline in the
respective Fund's income due to falling market
interest rates.
In addition to interest rate and income risks,
each Fund is subject to credit risk. Credit
risk, also known as default risk, is the
possibility that a bond issuer will fail to make
timely payments of interest or principal to a
Fund. The credit risk of a Fund depends on
the quality of its investments. Reflecting their
higher risks, lower-quality bonds generally offer
higher yields (all other factors being equal).
Rating of debt securities are defined under the
caption "Fixed Income Securities Described and
Ratings."
Risk Factors Applicable To Global Operations
The risks to which the U.S. companies in
which Buffalo USA Global Fund plans to invest
are exposed and, consequently, the concurrent
risks experienced by the Fund as a result of
investing in such companies include: the risk of
fluctuations in the value of foreign currencies;
adverse political and economic developments;
and the possibility of expropriation,
nationalization or confiscatory taxation or
limitations on the removal of funds or other
assets. The performance of foreign currencies
relative to the U.S. dollar and the relative
strength of the U.S. dollar may be an important
factor in the performance of the Fund.
INVESTMENT RESTRICTIONS
In addition to the policies set forth under the
caption "Investment Objectives and Portfolio
Management Policies," 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. Among these restrictions, the more
important ones are that the Fund will not
purchase the securities of any issuer if more
than 5% of the Fund's total assets would be
invested in the securities of such issuer, or the
Fund would hold more than 10% of any class
of securities of such issuer; the Fund will not
make any loan (the purchase of a security
subject to a repurchase agreement or the
purchase of a portion of an issue of publicly
distributed debt securities is not considered the
making of a loan); and the Fund will not
borrow or pledge its credit under normal
circumstances, except up to 10% of its total
assets (computed at the lower of fair market
value or cost) temporarily for emergency or
extraordinary purposes, and not for the purpose
of leveraging its investments; and provided
further that any borrowings shall have asset
coverage of at least 3 to 1. The Fund will not
buy securities while borrowings are outstanding.
The full text of these restrictions are set forth
in the "Statement of Additional Information."
<PAGE>
PERFORMANCE MEASURES
From time to time, each of the Funds may
advertise its performance in various ways, as
summarized below. Further discussion of these
matters also appears in the "Statement of
Additional Information." A discussion of
Buffalo Balanced Fund, Buffalo Equity Fund,
Buffalo High Yield Fund and Buffalo USA
Global Fund performance will be included in
the Fund's Annual Report to Shareholders which
will be available from the Fund upon request at
no charge.
Total Return
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
respective Fund from the beginning date of the
measuring period to the end of the measuring
period. These figures reflect changes in the
price of the Fund's shares and assume that any
income dividends and/or capital gains
distributions made by the respective Fund during
the period were reinvested in shares of the
Fund. Figures will be given for recent one-,
five- and ten-year periods (if applicable), and
may be given for other periods as well (such as
from commencement of the Fund's operations,
or on a year-by-year basis). When considering
"average" total return figures for periods longer
than one year, it is important to note that a
Fund's annual total return for any one year in
the period might have been greater or less than
the average for the entire period.
Yield
The Buffalo High Yield Fund may advertise a
yield figure derived by dividing the Fund's net
investment income per share during a 30-day
base period by the per share price on the last
day of the base period.
Performance Comparisons
In advertisements or in reports to shareholders,
each of the Funds may compare its performance
to that of other mutual funds with similar
investment objectives and to stock or other
relevant indices. For example, the Buffalo
Funds may compare their performance to
rankings prepared by Lipper Analytical Services,
Inc. (Lipper), a widely recognized independent
service which monitors the performance of
mutual funds. Buffalo Balanced Fund, Buffalo
Equity Fund and Buffalo USA Global Fund 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, or the
Consumer Price Index. Buffalo High Yield
Fund may compare its performance to the
Shearson/Lehman Government/Corporate Index,
an unmanaged index of government and
corporate bonds, 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 Funds.
Performance comparisons should not be
considered as representative of the future
performance of any Fund. Further information
regarding the performance of the Buffalo Funds
is contained in the "Statement of Additional
Information."
Performance rankings, recommendations,
published editorial comments and listings
reported in Money, Barron's, Kiplinger's
Personal Finance Magazine, Financial World,
Forbes, U.S. News & World Report, Business
Week, The Wall Street Journal, Investors
Business Daily, USA Today, Fortune and Stanger's,
<PAGE>
may also be cited (if any of the
Funds is listed in any such publication) or used
for comparison, as well as performance listings
and rankings from Morningstar Mutual Funds,
Personal Finance, Income and Safety, The
Mutual Fund Letter, No-Load Fund Investor,
United Mutual Fund Selector, No-Load Fund
Analyst, No-Load Fund X, Louis Rukeyeser's
Wall Street newsletter, Donoghue's Money
Letter, CDA Investment Technologies, Inc.,
Wiesenberger Investment Company Service and
Donoghue's Mutual Fund Almanac.
HOW TO PURCHASE SHARES
You must specify the Fund in which you desire
to invest on your application form. Failure to
do so will result in the application and your
check or bank wire being returned to you.
Shares are purchased at net asset value (no
sales charge) from the Fund through its agent,
Jones & Babson, Inc., Three Crown Center,
2440 Pershing Road, Suite G-15, Kansas City,
MO 64108. For information call toll free 1-800-
49-BUFFALO (1-800-492-8322). If an investor
wishes to engage the services of any other
broker to purchase (or redeem) shares of the
Fund, a fee may be charged by such broker.
The Fund will not be responsible for the
consequences of delays including delays in the
banking or Federal Reserve wire systems.
You do not pay a sales commission when you
buy shares of the Fund. Shares are purchased at
the Fund's net asset value (price) per share next
effective after a purchase order and payment
have been received by the Fund. In the case of
certain institutions which have made satisfactory
payment arrangements with a Fund, orders may
be processed at the net asset value per share
next effective after a purchase order has been
received by the Fund.
The Funds reserve the right in their sole
discretion to withdraw all or any part of the
offerings made by this prospectus or to reject
purchase orders when, in the judgment of
management, such withdrawal or rejection is in
the best interest of a Fund and its shareholders.
The Funds also reserve the right at any time
to waive or increase the minimum requirements
applicable to initial or subsequent investments
with respect to any person or class of persons,
which include shareholders of the Funds' special
investment programs. 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 a
Fund sustains a loss as the result of failure by
a purchaser to make payment, the Funds'
underwriter, Jones & Babson, Inc. will cover
the loss.
INITIAL INVESTMENTS
Initial investments - By mail. You may open an
account and make an investment by completing
and signing the application which accompanies
this prospectus. Make your check ($2,500
minimum unless your purchase is pursuant to an
IRA or the Uniform Transfers (Gifts) to Minors
Act in which case the minimum initial purchase
is $250) payable to UMB Bank, n.a. Mail your
application and check to:
The Buffalo Fund Group
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Initial investments - By wire. You may
purchase shares of a Fund by wiring funds
($2,500 minimum) through the Federal Reserve
Bank to the custodian, UMB Bank, n.a. Prior
to sending your money, you must call the Fund
toll free 1-800-49-BUFFALO (1-800-492-8322)
and provide it with the identity of the registered
account owner, the registered address, the
Social Security or Taxpayer Identification
Number of the registered owner, the amount
being wired, the name and telephone number of
the wiring bank and the person to be contacted
in connection with the order.
<PAGE>
You will then be
provided a Fund account number, after which
you should instruct your bank to wire the
specified amount, along with the account
number and the account registration to:
UMB Bank, n.a.
Kansas City, Missouri, ABA #101000695
For:
Buffalo Balanced Fund, Inc./AC= 987059-5095
Buffalo Equity Fund, Inc./AC= 987071-5880
Buffalo High Yield Fund, Inc./AC= 987071-5899
Buffalo USA Global Fund, Inc./AC= 987071-5902
(As appropriate)
For Account No. (insert assigned Fund account
number and name in which account is
registered.)
A completed application must be sent to the
Fund as soon as possible so the necessary
remaining information can be recorded in your
account. Payment of redemption proceeds will
be delayed until the completed application is
received by the Fund.
INVESTMENTS SUBSEQUENT TO
INITIAL INVESTMENT
You may add to your Fund account at any time
in amounts of $100 or more if purchases are
made by mail, or $1,000 or more if purchases
are made by wire or telephone. Automatic
monthly investments must be in amounts of
$100 or more.
Checks should be mailed to the Fund at its
address, but make them payable to UMB Bank,
n.a. Always identify your account number or
include the detachable reminder stub which
accompanies each confirmation.
Wire share purchases should include your
account registration, your account number and
the Buffalo Fund in which you are purchasing
shares. It also is advisable to notify the Fund
by telephone that you have sent a wire purchase
order to the bank.
TELEPHONE INVESTMENT SERVICE
To use the Telephone Investment Service, you
must first establish your Fund account and
authorize telephone orders in the application
form, or, subsequently, on a special
authorization form provided upon request. If
you elect the Telephone Investment Service, you
may purchase Fund shares by telephone and
authorize the Fund to draft your checking
account for the cost of the shares so purchased.
You will receive the next available price after
the Fund has received your telephone call.
Availability and continuance of this privilege is
subject to acceptance and approval by the Fund
and all participating banks. During periods of
increased market activity, you may have
difficulty reaching the Fund by telephone, in
which case you should contact the Fund by mail
or telegraph. The Fund will not be responsible
for the consequences of delays including delays
in the banking or Federal Reserve wire systems.
The Fund will employ reasonable procedures to
confirm that instructions communicated by
telephone are genuine, and if such procedures
are not followed, the Fund may be liable for
losses due to unauthorized or fraudulent
instructions. Such procedures may include, but
are not limited to, requiring personal
identification prior to acting upon instructions
received by telephone, providing written
confirmations of such transactions, and/or tape
recording of telephone instructions.
The Fund reserves the right to initiate a charge
for this service and to terminate or modify any
or all of the privileges in connection with this
service at any time upon 15 days written notice
to shareholders, and to terminate or modify the
privileges without prior notice in any
circumstances where such termination or
modification is in the best interest of the Fund
and its investors.
<PAGE>
AUTOMATIC MONTHLY
INVESTMENT PLAN
You may elect to make monthly investments in
a constant dollar amount from your checking
account ($100 minimum). The Fund will draft
your checking account on the same day each
month in the amount you authorize in your
application, or, subsequently, on a special
authorization form provided upon request.
Availability and continuance of this privilege is
subject to acceptance and approval by the Fund
and all participating banks. If the date selected
falls on a day upon which the Fund shares are
not priced, investment will be made on the first
date thereafter upon which Fund shares are
priced. The Fund will not be responsible for
the consequences of delays including delays in
the banking or Federal Reserve wire systems.
The Funds reserve the right to initiate a charge
for this service and to terminate or modify any
or all of the privileges in connection with this
service at any time upon 15 days written notice
to shareholders, and to terminate or modify the
privileges without prior notice in any
circumstances where such termination or
modification is in the best interest of the Fund
and its investors.
HOW TO REDEEM SHARES
The Funds will redeem shares at the price (net
asset value per share) next computed after
receipt of a redemption request in "good order."
(See "How Share Price is Determined."
A written request for redemption, together with
an endorsed share certificate where a certificate
has been issued, must be received by the Fund
in order to constitute a valid tender for
redemption. For authorization of redemptions by
a corporation, it will also be necessary to have
an appropriate certified copy of resolutions on
file with the Fund before a redemption request
will be considered in "good order." In the case
of certain institutions which have made
satisfactory redemption arrangements with a
Fund, redemption orders may be processed by
facsimile or telephone transmission at net asset
value per share next effective after receipt by
the Fund. If an investor wishes to engage the
services of any other broker to redeem (or
purchase) shares of any Fund, a fee may be
charged by such broker.
To be in "good order" the request must include
the following:
(1) A written redemption request or
stock assignment (stock power) containing the
genuine signature of each registered owner
exactly as the shares are registered, with clear
identification of the account by registered
name(s) and account number and the number of
shares or the dollar amount to be redeemed;
(2) any outstanding stock certificates
representing shares to be redeemed;
(3) signature guarantees as required;
and (See Signature Guarantees.)
(4) any additional documentation
which the Fund may deem
necessary to insure a genuine
redemption.
Where additional documentation is normally
required to support redemptions as in the case
of corporations, fiduciaries, and others who hold
shares in a representative or nominee capacity
such as certified copies of corporate resolutions,
or certificates of incumbency, or such other
documentation as may be required under the
Uniform Commercial Code or other applicable
laws or regulations, it is the responsibility of
the shareholder to maintain such documentation
on file and in a current status. A failure to do
so will delay the redemption. If you have
questions concerning redemption requirements,
please write or telephone the Fund well ahead
of an anticipated redemption in order to avoid
any possible delay.
<PAGE>
Requests which are subject to special conditions
or which specify an effective date other than as
provided herein cannot be accepted. All
redemption requests must be transmitted to the
Fund at Three Crown Center, 2440 Pershing
Road, Suite G-15, Kansas City, Missouri 64108.
Each of the Funds will redeem shares at the
price (net asset value per share) next computed
after receipt of a redemption request in "good
order." (See "How Share Price is Determined.")
The Funds will endeavor to transmit redemption
proceeds to the proper party, as instructed, as
soon as practicable after a redemption request
has been received in "good order" and
accepted, but in no event later than the fifth
day thereafter. Transmissions are made by mail
unless an expedited method has been authorized
and specified in the redemption request. The
Funds will not be responsible for the
consequences of delays including delays in the
banking or Federal Reserve wire systems.
Redemptions will not become effective until all
documents in the form required have been
received. In the case of redemption requests
made within 15 days of the date of purchase,
the Fund will delay transmission of proceeds
until such time as it is certain that
unconditional payment in federal funds has been
collected for the purchase of shares being
redeemed or 15 days from the date of purchase.
You can avoid the possibility of delay by
paying for all of your purchases with a transfer
of federal funds.
Signature Guarantees are required in connection
with all redemptions by mail, or changes in
share registration, except as hereinafter
provided. These requirements may be waived by
a Fund in certain instances where it appears
reasonable to do so and will not unduly affect
the interests of other shareholders. Signature(s)
must be guaranteed by an "eligible Guarantor
institution" as defined under Rule l7Ad-15 under
the Securities Exchange Act of 1934. Eligible
guarantor institutions include: (1) national or
state banks, savings associations, savings and
loan associations, trust companies, savings
banks, industrial loan companies and credit
unions; (2) national securities exchanges,
registered securities associations and clearing
agencies; or (3) securities broker/dealers which
are members of a national securities exchange
or clearing agency or which have a minimum
net capital of $100,000. A notarized signature
will not be sufficient for the request to be in
proper form.
Signature guarantees will be waived for mail
redemptions of $10,000 or less, but they will
be required if the checks are to be payable to
someone other than the registered owner(s), or
are to be mailed to an address different from
the registered address of the shareholder(s), or
where there appears to be a pattern of
redemptions designed to circumvent the
signature guarantee requirement, or where a
Fund has other reason to believe that this
requirement would be in the best interests of
the Fund and its shareholders.
The right of redemption may be suspended or
the date of payment postponed beyond the
normal five-day period when the New York
Stock Exchange is closed or under emergency
circumstances as determined by the Securities
and Exchange Commission. Further, each of the
Funds reserves the right to redeem its shares in
kind under certain circumstances. If shares are
redeemed in kind, the shareholder may incur
brokerage costs when converting into cash.
Redemptions in-kind must be in the form of
readily marketable securities. Additional details
are set forth in the "Statement of Additional
Information."
Due to the high cost of maintaining smaller
accounts, the Board of Directors has authorized
each of the Funds to close shareholder accounts
where their value falls below the current
minimum initial investment requirement at the
time of initial purchase as a result of
redemptions and not as the result of market
action, and remains below this level for 60 days
after each such shareholder account is mailed a notice
<PAGE>
of: (1) the Fund's intention to close the
account, (2) the minimum account size
requirement, and (3) the date on which the
account will be closed if the minimum size
requirement is not met.
SYSTEMATIC REDEMPTION PLAN
If you own shares in an open account valued at
$10,000 or more, and desire to make regular
monthly or quarterly withdrawals without the
necessity and inconvenience of executing a
separate redemption request to initiate each
withdrawal, you may enter into a Systematic
Withdrawal Plan by completing forms obtainable
from the Fund. For this service, the manager
may charge you a fee not to exceed $1.50 for
each withdrawal. Currently the manager assumes
the additional expenses arising out of this type
of plan, but it reserves the right to initiate such
a charge at any time in the future when it
deems it necessary. If such a charge is
imposed, participants will be provided 30 days
notice.
Subject to a $50 minimum, you may withdraw
each period a specified dollar amount. Shares
also may be redeemed at a rate calculated to
exhaust the account at the end of a specified
period of time.
Dividends and capital gains distributions must be
reinvested in additional shares. Under all
withdrawal programs, liquidation of shares in
excess of dividends and distributions reinvested
will diminish and may exhaust your account,
particularly during a period of declining share
values.
You may revoke or change your plan or
redeem all of your remaining shares at any
time. Withdrawal payments will be continued
until the shares are exhausted or until the Fund
or you terminate the plan by written notice to
the other.
HOW TO EXCHANGE SHARES
BETWEEN BUFFALO FUNDS
Shareholders may exchange their Fund shares,
which have been held in open account for 30
days or more, and for which good payment has
been received, for identically registered shares
of any Fund in the Buffalo Fund Group which
is legally registered for sale in the state of
residence of the investor, provided that the
minimum amount exchanged has a value of
$1,000 or more and meets the minimum
investment requirement of the Fund into which
it is exchanged.
To authorize the Telephone/Telegraph Exchange
Privilege, all registered owners must sign the
appropriate section on the original application,
or the Fund must receive a special authorization
form, provided upon request. During periods of
increased market activity, you may have
difficulty reaching the Fund by telephone, in
which case you should contact the Fund by mail
or telegraph. The Fund reserves the right to
initiate a charge for this service and to
terminate or modify any or all of the privileges
in connection with this service at any time and
without prior notice under any circumstances,
where continuance of these privileges would be
detrimental to the Fund or its shareholders,
such as an emergency, or where the volume of
such activity threatens the ability of the Fund to
conduct business, or under any other
circumstances, upon 60 days written notice to
shareholders. The Fund will not be responsible
for the consequences of delays including delays
in the banking or Federal Reserve wire systems.
The Fund will employ reasonable procedures to
confirm that instructions communicated by
telephone are genuine, and if such procedures
are not followed, the Fund may be liable for
losses due to unauthorized or fraudulent
instructions. Such procedures may include, but
are not limited to requiring personal
identification prior to acting upon instructions
received by telephone, providing written
confirmations of such
<PAGE>
transactions, and/or tape
recording of telephone instructions.
Exchanges by mail may be accomplished by a
written request properly signed by all registered
owners identifying the account, the number of
shares or dollar amount to be redeemed for
exchange, and the Buffalo Fund into which the
account is being transferred.
If you wish to exchange part or all of your
shares in the Fund for shares of a Fund in the
Buffalo Fund Group, you should review the
prospectus of the Fund to be purchased, which
can be obtained from Jones & Babson, Inc.
Any such exchange will be based on the
respective net asset values of the shares
involved. Any exchange between Funds involves
the sale of an asset. Unless the shareholder
account is tax-deferred, this is a taxable event.
HOW SHARE PRICE IS DETERMINED
In order to determine the price at which new
shares will be sold and at which issued shares
presented for redemption will be liquidated, the
net asset value per share of each Fund is
computed once daily, Monday through Friday,
at the specific time during the day that the
Board of Directors sets at least annually, except
on days on which changes in the value of
portfolio securities will not materially affect the
net asset value, or days during which no
security is tendered for redemption and no
order to purchase or sell such security is
received by a Fund, or customary holidays. For
a list of the holidays during which the Funds
are not open for business, see "How Share
Price is Determined" in the "Statement of
Additional Information."
The price at which new shares of a Fund will
be sold and at which issued shares presented for
redemption will be liquidated is computed once
daily at 4:00 P.M. (Eastern Time), except on
those days when the Fund is not open for
business.
The per share calculation is made by subtracting
from each of the Fund's total assets any
liabilities and then dividing into this amount the
total outstanding shares as of the date of the
calculation. Each security listed on an exchange
is valued at its last sale price on that exchange
on the date as of which assets are valued.
Where the security is listed on more than one
exchange, each of the Funds will use the price
of that exchange which it generally considers to
be the principal Exchange on which the security
is traded. Lacking sales, the security is valued
at the mean between the current closing bid and
asked prices. An unlisted security for which
over-the-counter market quotations are readily
available is valued at the mean between the last
current bid and asked prices. When market
quotations are not readily available, any security
or other asset is valued at its fair value as
determined in good faith by the Board of
Directors.
OFFICERS AND DIRECTORS
The officers of the Funds manage its day-to-day
operations. The Funds' manager and officers are
subject to the supervision and control of the
respective Boards of Directors. A list of the
officers and directors of the Funds and a brief
statement of their present positions and principal
occupations during the past five years is set
forth in the "Statement of Additional
Information."
MANAGEMENT AND
INVESTMENT COUNSEL
Jones & Babson, Inc. was founded in 1960. It
organized the Funds in 1994, and acts as their
manager and principal underwriter. Pursuant to
the current Management Agreement for each of
the Buffalo Funds, 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
<PAGE>
of the custodian, independent auditors and
legal counsel; remuneration of officers, directors
and other personnel; rent; shareholder services,
including the maintenance of the shareholder
accounting system and transfer agency; and such
other items as are incidental to corporate
administration.
Not considered normal operating expenses, and
therefore payable by the Funds, are taxes,
interest, governmental charges and fees,
including registration of a Fund and its shares
with the Securities and Exchange Commission
and the Securities Departments of the various
States, brokerage costs, dues, and all
extraordinary costs and expenses including but
not limited to legal and accounting fees incurred
in anticipation of or arising out of litigation or
administrative proceedings to which a Fund, its
officers or directors may be subject or a party
thereto.
As a part of the Management Agreement, Jones
& Babson, Inc. employs at its own expense
Kornitzer Capital Management, Inc. as its
investment counsel to assist in the investment
advisory function for the Funds. Kornitzer
Capital Management, Inc. is an independent
investment counseling firm founded in 1989. It
serves a broad variety of individual, corporate
and other institutional clients by maintaining an
extensive research and analytical staff. It has an
experienced investment analysis and research
staff which eliminates the need for Jones &
Babson, Inc. and the Fund to maintain an
extensive duplicate staff, with the consequent
increase in the cost of investment advisory
service. The cost of the services of Kornitzer
Capital Management, Inc. is included in the fee
of Jones & Babson, Inc. The Management
Agreement limits the liability of the manager
and its investment counsel, as well as their
officers, directors and personnel, to acts or
omissions involving willful malfeasance, bad
faith, gross negligence, or reckless disregard of
their duties. The organizational arrangements of
the investment counsel require that all
investment decisions be made by committee, and
no person is primarily responsible for making
recommendations to that committee.
As compensation for all the foregoing services,
the Funds pay Jones & Babson, Inc. a fee at
the annual rate of one percent (1%) of average
daily net assets from which Jones & Babson,
Inc. pays Kornitzer Capital Management, Inc. a
fee of 50/100 (.50%) of average daily net
assets. The fees are computed daily and paid
semimonthly. The total expenses of Buffalo
Balanced Fund for the fiscal period ended
March 31, 1995, amounted to 1.06% of the
Fund. Investment counsel fees of $43,124 were
paid to Kornitzer Capital Management. Buffalo
Equity Fund, Buffalo High Yield Fund and
Buffalo USA Global Fund were not in operation
during the fiscal period ended March 31, 1995.
The annual fee charged by Jones & Babson,
Inc. is higher than the fees of most other
investment advisers whose charges cover only
investment advisory services with all remaining
operational expenses absorbed directly by the
Fund, however, it is anticipated that the total
expenses of the Fund will compare favorably
with those of other mutual funds whose
advisers' fees cover only investment advisory
services with all remaining operational expenses
absorbed by the Funds.
Certain officers and directors of the Fund are
also officers or directors or both of other
Buffalo Funds, Jones & Babson, Inc. or
Kornitzer Capital Management, Inc.
Jones & Babson, Inc. is a wholly-owned
subsidiary of Business Men's Assurance
Company of America, which is considered to be
a controlling person under the Investment
Company Act of 1940. Assicurazioni Generali
S.p.A., an insurance organization founded in
1831 based in Trieste, Italy, is considered to be
a controlling person and is the ultimate parent
of Business Men's Assurance Company of
America. Mediobanca is a 5% owner of
Generali.
Kornitzer Capital Management, Inc. is a closely
held corporation and has limitations in the
ownership of its stock designed to maintain
control in those who are active in management.
Owners of 5% or more of Kornitzer Capital
Management, Inc. are John C. Kornitzer,
<PAGE>
Kent
W. Gasaway, Willard R. Lynch, Thomas W.
Laming and Susan Stack.
The current Management Agreements between
the Funds and Jones & Babson, Inc., which
include the Investment Counsel Agreements
between Jones & Babson, Inc. and Kornitzer
Capital Management, Inc. will continue in effect
until October 31, 1996, except the Buffalo
Balanced Fund Agreements which will continue
in effect until October 31, 1995. The
Agreements will continue automatically for
successive annual periods ending each October
31 so long as such continuance is specifically
approved at least annually by the Board of
Directors of the respective Fund or by the vote
of a majority of the outstanding voting
securities of the respective Fund, and, provided
also that such continuance is approved by the
vote of a majority of the directors who are not
parties to the Agreements or interested persons
of any such party at a meeting held in person
and called specifically for the purpose of
evaluating and voting on such approval. Both
Agreements provide that either party may
terminate by giving the other 60 days written
notice. The Agreements terminate automatically
if assigned by either party.
GENERAL INFORMATION
AND HISTORY
Buffalo Balanced Fund was incorporated in
Maryland on January 25, 1994. Buffalo Equity
Fund, Buffalo High Yield Fund and Buffalo
USA Global Fund were incorporated in
Maryland on November 23, 1994. Each of the
Buffalo Funds has a present authorized
capitalization of 10,000,000 shares of $1 par
value common stock. All shares are of the same
class with like rights and privileges. Each full
and fractional share, when issued and
outstanding, has: (1) equal voting rights with
respect to matters which affect the Fund; and
(2) equal dividend, distribution and redemption
rights to the assets of the Fund. Shares when
issued are fully paid and non-assessable. The
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 - These shares have non-
cumulative voting rights, which means that the
holders of more than 50% of the shares voting
for the election of directors can elect 100% of
the directors, if they choose to do so, and in
such event, the holders of the remaining less
than 50% of the shares voting will not be able
to elect any directors.
The Maryland Statutes permit registered
investment companies, such as the Funds, to
operate without an annual meeting of
shareholders under specified circumstances if an
annual meeting is not required by the
Investment Company Act of 1940. There are
procedures whereby the shareholders may
remove directors. These procedures are
described in the "Statement of Additional
Information" under the caption "Officers and
Directors." The Funds have adopted the
appropriate provisions in its By-Laws and may
not, at its discretion, hold annual meetings of
shareholders for the following purposes unless
required to do so: (1) election of directors; (2)
approval of any investment advisory agreement;
(3) ratification of the selection of independent
auditors; and (4) approval of a distribution plan.
As a result, the Funds do not intend to hold
annual meetings.
The Funds may use the name "Buffalo" in its
name so long as Kornitzer Capital Management,
Inc. is continued as its investment counsel.
Complete details with respect to the use of the
name are set out in the Management
Agreements between the Funds and Jones &
Babson, Inc.
This prospectus omits certain of the information
contained in the registration statement filed with
the Securities and Exchange Commission,
Washington, D.C. These items may be inspected
at the offices of the Commission or obtained
from the Commission upon payment of the fee
prescribed.
<PAGE>
In the opinion of the staff of the Securities and
Exchange Commission, the use of this combined
Prospectus may possibly subject all Funds to a
certain amount of liability for any losses arising
out of any statement or omission in this
Prospectus regarding a particular Fund. In the
opinion of the Funds' management, however,
the risk of such liability is not materially
increased by the use of a combined Prospectus.
DIVIDENDS, DISTRIBUTIONS AND THEIR
TAXATION
Buffalo Balanced Fund and Buffalo High Yield
Fund pay dividends from net investment income
quarterly, usually in March, June, September
and December. Distribution from capital gains
realized on the sale of securities, if any, will
be declared by Buffalo Balanced Fund annually
on or before December 31 and by Buffalo High
Yield Fund semiannually, usually in June and
December. The Buffalo Equity Fund and
Buffalo USA Global Fund pay dividends from
net investment income and capital gains
semiannually, usually in June and December.
Dividend and capital gains distributions will be
reinvested automatically in additional shares at
the net asset value per share next computed and
effective at the close of business on the day
after the record date, unless the shareholder has
elected on the original application, or by written
instructions filed with the Fund, to have them
paid in cash.
The Funds intend to qualify for taxation as a
"regulated investment company" under the
Internal Revenue Code so that the Fund will
not be subject to federal income tax to the
extent that it distributes its income to its
shareholders. Dividends, either in cash or
reinvested in shares, paid by a Fund from net
investment income will be taxable to
shareholders as ordinary income, and will
generally qualify in part for the 70% dividends-
received deduction for corporations. The portion
of the dividends so qualified depends on the
aggregate taxable qualifying dividend income
received by a Fund from domestic (U.S.)
sources. The Funds will send to shareholders a
statement each year advising the amount of the
dividend income which qualifies for such
treatment.
Whether paid in cash or additional shares of a
Fund, and regardless of the length of time Fund
shares have been owned by the shareholder,
distributions from long-term capital gains are
taxable to shareholders as such, but are not
eligible for the dividends-received deduction for
corporations. Shareholders are notified annually
by the Funds as to federal tax status of
dividends and distributions paid by the Fund.
Such dividends and distributions may also be
subject to state and local taxes.
Exchange and redemption of Fund shares are
taxable events for federal income tax purposes.
Shareholders may also be subject to state and
municipal taxes on such exchanges and
redemptions. You should consult your tax
adviser with respect to the tax status of
distributions from the Fund in your state and
locality.
The Funds intend to declare and pay dividends
and capital gains distributions so as to avoid
imposition of the federal excise tax. To do so,
each Fund expects to distribute during each
calendar year an amount equal to: (1) 98% of
its calendar year ordinary income; (2) 98% of
its capital gains net income (the excess of short-
and long-term capital gain over short- and long-
term capital loss) for the one-year period ending
each October 31; and (3) 100% of any
undistributed ordinary or capital gain net income
from the prior calendar year. Dividends
declared in October, November or December
and made payable to shareholders of record in
such a month are deemed to have been paid by
the Fund and received by shareholders on
December 31 of such year, so long as the
dividends are actually paid before February 1 of
the following year.
To comply with IRS regulations, the Funds are
required by federal law to withhold 31% of reportable
<PAGE>
payments (which may include
dividends, capital gains distributions, and
redemptions) paid to shareholders who have not
complied with IRS regulations. In order to
avoid this withholding requirement, shareholders
must certify on their Application, or on a
separate form supplied by the Fund, that their
Social Security or Taxpayer Identification
Number provided is correct and that they are
not currently subject to backup withholding, or
that they are exempt from backup withholding.
The federal income tax status of all distributions
will be reported to shareholders each January as
a part of the annual statement of shareholder
transactions. Shareholders not subject to tax on
their income will not be required to pay tax on
amounts distributed to them.
THE TAX DISCUSSION SET FORTH ABOVE
IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR
OWN TAX ADVISERS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF
AN INVESTMENT IN THE FUNDS.
DESCRIPTION OF SECURITIES RATINGS
FIXED INCOME SECURITIES
DESCRIBED AND RATINGS
Description of Bond Ratings:
Standard & Poor's Corporation (S&P).
AAA - Highest Grade. These securities possess
the ultimate degree of protection as to principal
and interest. Marketwise, they move with
interest rates, and hence provide the maximum
safety on all counts.
AA - High Grade. Generally, these bonds
differ from AAA issues only in a small degree.
Here too, prices move with the long-term
money market.
A - Upper-medium Grade. They have
considerable investment strength, but are not
entirely free from adverse effects of changes in
economic and trade conditions. Interest and
principal are regarded as safe. They
predominately reflect money rates in their
market behavior but, to some extent, also
economic conditions.
BBB - Bonds rated BBB are regarded as
having an adequate capacity to pay principal
and interest. Whereas they normally exhibit
protection parameters, adverse economic
conditions or changing circumstances are more
likely to lead to a weakened capacity to pay
principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B,
CCC and CC are regarded, on balance, as
predominantly speculative with respect to the
issuer's capacity to pay interest and repay
principal in accordance with the terms of the
obligations. BB indicates the lowest degree of
speculation and CC the highest degree of
speculation. While such bonds will likely have
some quality and protective characteristics, these
are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Moody's Investors Service, Inc. (Moody's).
Aaa - Best Quality. These securities carry the
smallest degree of investment risk and are
generally referred to as "gilt-edge." Interest
payments are protected by a large, or by an
exceptionally stable margin, and principal is
secure. While the various protective elements
are likely to change, such changes as can be
visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - High Quality by All Standards. They
are rated lower than the best bonds because
margins of protection may not be as large as in
Aaa securities, fluctuation of protective elements
may be of greater amplitude, or there may be
other elements present which make the long-
term risks appear somewhat greater.
A - Upper-medium Grade. Factors giving
security to principal and interest are considered
adequate, but elements may be present which
suggest a susceptibility to impairment sometime
in the future.
<PAGE>
Baa - Bonds which are rated Baa are
considered as medium grade obligations, i. e.,
they are neither highly protected nor poorly
secured. Interest payments and principal security
appear adequate for the present, but certain
protective elements may be lacking or may be
characteristically unreliable over any great
length of time. Such bonds lack outstanding
investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to
have predominantly speculative elements; their
future cannot be considered as well assured.
Often the protection of interest and principal
payments may be very moderate and thereby
not well safeguarded during both good and bad
times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack
characteristics of the desirable investment.
Assurance of interest and principal payments or
maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds which are rated Caa are of poor
standing. Such issues may be in default or
there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent
obligations which are speculative in a high
degree. Such issues are often in default or
have other marked shortcomings.
SHAREHOLDER SERVICES
The Funds and their manager offer shareholders
a broad variety of services described throughout
this prospectus. In addition, the following
services are available:
Automatic Monthly Investment - You may elect
to make monthly investments in a constant
dollar amount from your checking account ($100
minimum). The Fund will draft your checking
account on the same day each month in the
amount you authorize in your application, or,
subsequently, on a special authorization form
provided upon request.
Automatic Reinvestment - Dividends and capital
gains distributions may be reinvested
automatically, or shareholders may elect to have
dividends paid in cash and capital gains
reinvested, or to have both paid in cash.
Telephone Investments - You may make
investments of $1,000 or more by telephone if
you have authorized such investments in your
application, or, subsequently, on a special
authorization form provided upon request. See
"Telephone Investment Service."
Automatic Exchange - You may exchange shares
from your account ($100 minimum) in any of
the Buffalo Funds to an identically registered
account in any other Fund in the Buffalo Group
according to your instructions. Monthly
exchanges will be continued until all shares
have been exchanged or until you terminate the
Automatic Exchange authorization. A special
authorization form will be provided upon
request.
Transfer of Ownership - A shareholder may
transfer shares to another shareholder account.
The requirements which apply to redemptions
apply to transfers. A transfer to a new account
must meet initial investment requirements.
Systematic Redemption Plan - Shareholders who
own shares in open account valued at $10,000
or more may arrange to make regular
withdrawals without the necessity of executing
& separate redemption request to initiate each
withdrawal.
<PAGE>
Sub-Accounting - Keogh and corporate tax
qualified retirement plans, as well as certain
other investors who must maintain separate
participant accounting records, may meet these
needs through services provided by the Funds'
manager, Jones & Babson, Inc. Investment
minimums may be met by accumulating the
separate accounts of the group. Although there
is currently no charge for sub-accounting, the
Funds and their manager reserve the right to
make reasonable charges for this service.
Prototype Retirement Plans - Jones & Babson,
Inc. offers a defined contribution prototype plan
- - The Universal Retirement Plan - which is
suitable for all who are self-employed, including
sole proprietors, partnerships, and corporations.
The Universal Prototype includes both money
purchase pension and profit-sharing plan options.
Individual Retirement Accounts - Also available
is an Individual Retirement Account (IRA). The
IRA uses the IRS model form of plan and
provides an excellent way to accumulate a
retirement fund which will earn tax-deferred
dollars until withdrawn. An IRA may also be
used to defer taxes on certain distributions from
employer-sponsored retirement plans. You may
contribute up to $2,000 of compensation each
year ($2,250 if a spousal IRA is established),
some or all of which may be deductible.
Consult your tax adviser concerning the amount
of the tax deduction, if any.
Simplified Employee Pensions (SEPs) - The
Jones & Babson IRA may be used with IRS
Form 5305 - SEP to establish a SEP-IRA, to
which the self-employed individual may
contribute up to 15% of net earned income or
$30,000, whichever is less. A SEP-IRA offers
the employer the ability to make the same level
of deductible contributions as a Profit-Sharing
Plan with greater ease of administration, but
less flexibility in plan coverage of employees.
SHAREHOLDER INQUIRIES
Telephone inquiries may be made toll free to
the Fund, 1-800-49-BUFFALO (1-800-492-8332).
Shareholders may address written inquiries to
the Funds at:
The Buffalo Group of Funds
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, MO 64108
BUFFALO BALANCED FUND
BUFFALO EQUITY FUND
BUFFALO HIGH YIELD FUND
BUFFALO USA GLOBAL FUND
No Load Mutual Funds
INVESTMENT COUNSEL
KORNITZER CAPITAL MANAGEMENT, INC.
Shawnee Mission, Kansas
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
Kansas City, Missouri
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG
Philadelphia, Pennsylvania
JOHN G. DYER
Kansas City, Missouri
CUSTODIAN
UMB BANK, n.a.
Kansas City, Missouri
TRANSFER AGENT
JONES & BABSON, INC.
Kansas City, Missouri
PROSPECTUS
JULY 31, 1995
<PAGE>
PART B
BUFFALO BALANCED FUND, INC.
BUFFALO EQUITY FUND, INC.
BUFFALO HIGH YIELD FUND, INC.
BUFFALO USA GLOBAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
July 31, 1995
This Statement is not a Prospectus but should be read in conjunction with
the Funds' current Prospectus dated July 31, 1995. To obtain the Prospectus
please call the Fund toll-free 1-800-49-BUFFALO (1-800-492-8332).
TABLE OF CONTENTS
Page
Investment Objectives and Policies
Portfolio Transactions
Investment Restrictions
Buffalo Balanced Fund
Buffalo Equity Fund
Buffalo High Yield Fund
Buffalo USA Global Fund
Performance Measures
How the Fund's Shares are Distributed
How Share Purchases are Handled
Redemption of Shares
Signature Guarantees
Management and Investment Counsel
How Share Price is Determined
Officers and Directors
Custodian
Independent Auditors
Other Funds
Description of Commercial Paper Ratings
Financial Statements
<PAGE>
INVESTMENT OBJECTIVES
AND POLICIES
The following policies supplement the Fund's
investment objective and policies set forth in the
Prospectus.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the
Funds are made by Jones & Babson, Inc.
pursuant to recommendations by Kornitzer
Capital Management, Inc. 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 as well as the
negotiation of commissions and/or the price of
the securities. In instances where securities are
purchased on a commission basis, the 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 their 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 respective
Fund, when acting on its behalf, as well as for
any research or other services provided to the
respective Fund. Substantially all of the
portfolio transactions are through brokerage
firms which are members of the New York
Stock Exchange because usually the most active
market in the size of the Funds' transactions
and for the types of securities predominant in
the Funds' respective portfolios is to be found
there. 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 Boards of Directors of the Funds and
Jones & Babson, Inc.
Since the Funds do not market their shares
through intermediary brokers or dealers, it is
not the Funds' practice to allocate brokerage or
principal business on the basis of sales of their
shares which may be made through such firms.
However, they may place portfolio orders with
qualified broker-dealers who recommend the
Funds to other clients, or who act as agent in
the purchase of the Funds' shares for their
clients.
Research services furnished by broker-dealers
may be useful to the Funds' manager and its
investment counsel in serving other clients, as
well as the respective Funds. Conversely, the
Funds may benefit from research services
obtained by the manager or its investment
counsel from the placement of portfolio
brokerage of other clients.
When it appears to be in the best interest of
their shareholders, the Funds may join with
other clients of the manager and its investment
counsel in acquiring or disposing of a portfolio
holding. Securities acquired or proceeds
obtained will be equitably distributed among the
Funds and other clients participating in the
transaction. In some instances, this investment
procedure may affect the price paid or received
by a Fund or the size of the position obtained
by a Fund.
<PAGE>
INVESTMENT RESTRICTIONS
In addition to the investment objective and
portfolio management policies set forth in the
Prospectus under the caption "Investment
Objective and Portfolio Management Policies,"
the following restrictions also may not be
changed without approval of the "holders of a
majority of the outstanding shares" of the Fund.
The Buffalo Balanced Fund will not: (1)
purchase the securities of any one issuer, except
the United States government, if immediately
after and as a result of such purchase (a) the
value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the
value of the Fund's total assets, or (b) the Fund
owns more than 10% of the outstanding voting
securities, or any other class of securities, of
such issuer; (2) engage in the purchase or sale
of real estate, commodities or futures contracts;
(3) underwrite the securities of other issuers; (4)
make loans to any of its officers, directors, or
employees, or to its manager, or general
distributor, or officers or directors thereof; (5)
make 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, except that the Fund
may write covered call options; (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) 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; (10)
except for transactions in its shares or other
securities through brokerage practices which are
considered normal and generally accepted under
circumstances existing at the time, enter into
dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest; (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) temporarily for emergency or
extraordinary purposes, and not for the purpose
of leveraging its investments, and provided
further that any borrowing in excess of 5% of
the total assets of the Fund shall have asset
coverage of at least 3 to 1; (13) make itself or
its assets liable for the indebtedness of others;
(14) invest in securities which are assessable or
involve unlimited liability; or (15) purchase any
securities which would cause 25% or more of
the Fund's total assets at the time of such
purchase to be invested in any one industry.
In addition to the fundamental investment
restrictions set out above, in order to comply
with the law or regulations of various States,
the Fund will not engage in the following
practices: (1) invest in securities which are not
readily marketable or in securities of foreign
issuers which are not listed on a recognized
domestic or foreign securities exchange (the
Fund does not intend to invest in foreign
securities; this policy is not fundamental); (2)
invest in puts, calls, straddles, spreads, and any
combination thereof if by reason thereof the
value of its aggregate investment in such classes
of securities will exceed 5% of its total assets,
except that the Fund may write covered call
options in excess of this limitation; (3) invest in
oil, gas and other mineral leases or arbitrage
transactions; (4) purchase or sell real estate
(including limited partnership interests, but
excluding readily marketable interests in real
estate investment trusts or readily marketable
securities of companies which invest in real
estate); or (5) purchase securities, including
144(a) securities, of issuers which the company
is restricted from selling to the public without
registration under the securities Act of 1933.
Certain States also require that the Fund's
investments in warrants, valued at the lower of
cost or market, may not exceed 5% of the
value of the Fund's net assets. Included within
<PAGE>
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
in units or attached to securities may be
deemed to be without value for purposes of this
limitation. In addition, the Fund has
undertaken to the state of California to comply
with the expense limitations set forth in Rule
260.140.84(a) of Title 10 of the California
Administrative Code.
The Buffalo Equity Fund will not: (1)
purchase the securities of any one issuer, except
the United States government, if immediately
after and as a result of such purchase (a) the
value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the
value of the Fund's total assets, or (b) the Fund
owns more than 10% of the outstanding voting
securities, or any other class of securities, of
such issuer; (2) engage in the purchase or sale
of real estate, commodities or futures contracts;
(3) underwrite the securities of other issuers; (4)
make loans to any of its officers, directors, or
employees, or to its manager, or general
distributor, or officers or directors thereof; (5)
make 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, except that the Fund
may write covered call options; (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) 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; (10)
except for transactions in its shares or other
securities through brokerage practices which are
considered normal and generally accepted under
circumstances existing at the time, enter into
dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest; (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) temporarily for emergency or
extraordinary purposes, and not for the purpose
of leveraging its investments, and provided
further that any borrowing in excess of 5% of
the total assets of the Fund shall have asset
coverage of at least 3 to 1; (13) make itself or
its assets liable for the indebtedness of others;
(14) invest in securities which are assessable or
involve unlimited liability; or (15) purchase any
securities which would cause 25% or more of
the Fund's total assets at the time of such
purchase to be invested in any one industry.
In addition to the fundamental investment
restrictions set out above, in order to comply
with the law or regulations of various States,
the Fund will not engage in the following
practices: (1) invest in securities which are not
readily marketable or in securities of foreign
issuers which are not listed on a recognized
domestic or foreign securities exchange (as a
non-fundamental policy, the Fund does not
intend to invest directly in foreign securities or
foreign currencies but, may purchase foreign
securities through dollar-denominated American
Depository Receipts); (2) invest in puts, calls,
straddles, spreads, and any combination thereof
if by reason thereof the value of its aggregate
investment in such classes of securities will
exceed 5% of its total assets, except that the
Fund may write covered call options in excess
of this limitation; (3) invest in oil, gas and
other mineral leases or arbitrage transactions;
(4) purchase or sell real estate (including
limited partnership interests, but excluding
readily marketable interests in real estate
investment trusts or readily marketable securities
of companies which invest in real estate); or (5)
purchase securities, including 144(a) securities,
of issuers which the company is restricted from
selling to the public without registration under
the securities Act of 1933. The Fund intends
to limit calls to writing calls issued by the
Options Clearing Corporation.
Certain States also require that the Fund's
investments in warrants, valued at the lower of
cost or market, may not exceed 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
in units or attached to securities may be
deemed to be without value for purposes of this
limitation. In addition, the Fund has
undertaken to the state of California to comply
with the expense limitations set forth in Rule
260.140.84(a) of Title 10 of the California
Administrative Code.
The Buffalo High Yield Fund will not: (1)
purchase the securities of any one issuer, except
the United States government, if immediately
after and as a result of such purchase (a) the
value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the
value of the Fund's total assets, or (b) the Fund
owns more than 10% of the outstanding voting
securities, or any other class of securities, of
such issuer; (2) engage in the purchase or sale
of real estate, commodities or futures contracts;
(3) underwrite the securities of other issuers; (4)
make loans to any of its officers, directors, or
employees, or to its manager, or general
distributor, or officers or directors thereof; (5)
make 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, except that the Fund
may write covered call options; (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) 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; (10)
except for transactions in its shares or other
securities through brokerage practices which are
considered normal and generally accepted under
circumstances existing at the time, enter into
dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest; (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) temporarily for emergency or
extraordinary purposes, and not for the purpose
of leveraging its investments, and provided
further that any borrowing in excess of 5% of
the total assets of the Fund shall have asset
coverage of at least 3 to 1; (13) make itself or
its assets liable for the indebtedness of others;
(14) invest in securities which are assessable or
involve unlimited liability; or (15) purchase any
securities which would cause 25% or more of
the Fund's total assets at the time of such
purchase to be invested in any one industry.
In addition to the fundamental investment
restrictions set out above, in order to comply
with the law or regulations of various States,
the Fund will not engage in the following
practices: (1) invest in securities which are not
readily marketable or in securities of foreign
issuers which are not listed on a recognized
domestic or foreign securities exchange (the
Fund does not intend to invest in foreign
securities; this policy is not fundamental); (2)
invest in puts, calls, straddles, spreads, and any
combination thereof if by reason thereof the
value of its aggregate investment in such classes
of securities will exceed 5% of its total assets,
except that the Fund may write covered call
options in excess of this limitation; (3) invest in
oil, gas and other mineral leases or arbitrage
transactions; (4) purchase or sell real estate
(including limited partnership interests, but
excluding readily marketable interests in real
estate investment trusts or readily marketable
securities of companies which invest in real
<PAGE>
estate); or (5) purchase securities, including
144(a) securities, of issuers which the company
is restricted from selling to the public without
registration under the securities Act of 1933.
Certain States also require that the Fund's
investments in warrants, valued at the lower of
cost or market, may not exceed 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
in units or attached to securities may be
deemed to be without value for purposes of this
limitation. In addition, the Fund has
undertaken to the state of California to comply
with the expense limitations set forth in Rule
260.140.84(a) of Title 10 of the California
Administrative Code.
The Buffalo USA Global Fund will not: (1)
purchase the securities of any one issuer, except
the United States government, if immediately
after and as a result of such purchase (a) the
value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the
value of the Fund's total assets, or (b) the Fund
owns more than 10% of the outstanding voting
securities, or any other class of securities, of
such issuer; (2) engage in the purchase or sale
of real estate, commodities or futures contracts;
(3) underwrite the securities of other issuers; (4)
make loans to any of its officers, directors, or
employees, or to its manager, or general
distributor, or officers or directors thereof; (5)
make 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, except that the Fund
may write covered call options; (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) 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; (10)
except for transactions in its shares or other
securities through brokerage practices which are
considered normal and generally accepted under
circumstances existing at the time, enter into
dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest; (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) temporarily for emergency or
extraordinary purposes, and not for the purpose
of leveraging its investments, and provided
further that any borrowing in excess of 5% of
the total assets of the Fund shall have asset
coverage of at least 3 to 1; (13) make itself or
its assets liable for the indebtedness of others;
(14) invest in securities which are assessable or
involve unlimited liability; or (15) purchase any
securities which would cause 25% or more of
the Fund's total assets at the time of such
purchase to be invested in any one industry.
In addition to the fundamental investment
restrictions set out above, in order to comply
with the law or regulations of various States,
the Fund will not engage in the following
practices: (1) invest in securities which are not
readily marketable or in securities of foreign
issuers which are not listed on a recognized
domestic or foreign securities exchange (the
Fund does not intend to invest in foreign
securities; this policy is not fundamental); (2)
invest in puts, calls, straddles, spreads, and any
combination thereof if by reason thereof the
value of its aggregate investment in such classes
of securities will exceed 5% of its total assets,
except that the Fund may write covered call
options in excess of this limitation; (3) invest in
oil, gas and other mineral leases or arbitrage
transactions; (4) purchase or sell real estate
<PAGE>
(including limited partnership interests, but
excluding readily marketable interests in real
estate investment trusts or readily marketable
securities of companies which invest in real
estate); or (5) purchase securities, including
144(a) securities, of issuers which the company
is restricted from selling to the public without
registration under the securities Act of 1933.
The Fund intends to limit calls to writing calls
issued by the Options Clearing Corporation.
Certain States also require that the Fund's
investments in warrants, valued at the lower of
cost or market, may not exceed 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
in units or attached to securities may be
deemed to be without value for purposes of this
limitation. In addition, the Fund has
undertaken to the state of California to comply
with the expense limitations set forth in Rule
260.140.84(a) of Title 10 of the California
Administrative Code.
PERFORMANCE MEASURERS
From time to time, the Buffalo High Yield
Fund may quote its yield in advertisements,
shareholder reports or other communications to
shareholders. Yield is calculated according to
the following SEC standardized formula.
Current yield reflects the income per share
earned by a Fund's investments.
Current yield is determined by dividing the
net investment income per share earned during
a 30-day base period by the maximum offering
price per share on the last day of the period
and annualizing the result. Expenses accrued
for the period include any fees charged to all
shareholders during the base period.
The SEC standardized yield formula is as
follows:
Yield = 2[(a-b+1)-1]
cd
where: a = dividends and interest earned
during the period
b = expenses accrued for the
period (net of reimbursements)
c = the average daily number of
shares outstanding during the
period that were entitled to
receive income distributions
d = the maximum offering price
per share on the last day of
the period.
TOTAL RETURN
Each of the Buffalo Fund's "average annual
total return" figures will be computed according
to a formula prescribed by the Securities and
Exchange Commission. The formula can be
expressed as follows:
P(1+T)n = ERV
Where P = a hypothetical initial
payment of $1000
T = average annual total
return
n = number of years
ERV = Ending Redeemable
Value of a hypothetical
$1000 payment made at
the beginning of the 1,
5 or 10 year (or other)
periods at the end of
the 1, 5, or 10 year
(or other) periods (or
fractional portions
thereof).
Buffalo Balanced Fund total return from
inception of the Fund through March 31, 1995
was 3%.
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. does not receive any
fee or other compensation under the distribution
agreements with the Buffalo Funds, which
<PAGE>
continue in effect until October 31, 1995, and
which will continue automatically for successive
annual periods ending each October 31, if
continued at least annually by the Funds' Boards
of Directors, including a majority of those
Directors who are not parties to such
Agreements or interested persons of any such
party. It terminates automatically if assigned by
either party or upon 60 days written notice by
either party to the other.
Jones & Babson, Inc. also acts as sole
distributor of the shares of David L. Babson
Growth Fund, Inc., D. L. Babson Bond Trust,
D. L. Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., Scout Stock Fund,
Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-free Money
Market Fund, Inc., Scout Regional Fund, Inc.
and Scout WorldWide Fund, Inc.
HOW SHARE PURCHASES
ARE HANDLED
Each order accepted will be fully invested in
whole and fractional shares, unless the purchase
of a certain number of whole shares is
specified, at the net asset value per share next
effective after an order is accepted by a Fund.
Each investment is confirmed by a year-to-
date statement which provides the details of the
immediate transaction, plus all prior transactions
in your account during the current year. This
includes the dollar amount invested, the number
of shares purchased or redeemed, the price per
share, and the aggregate shares owned. A
transcript of all activity in your account during
the previous year will be furnished each
January. By retaining each annual summary
and the last year-to-date statement, you have a
complete detailed history of your account which
provides necessary tax information. A duplicate
copy of a past annual statement is available
from Jones & Babson, Inc. at its cost, subject
to a minimum charge of $5 per account, per
year requested.
Normally, the shares which you purchase are
held by the Fund in open account, thereby
relieving you of the responsibility of providing
for the safekeeping of a negotiable share
certificate. Should you have a special need for
a certificate, one will be issued on request for
all or a portion of the whole shares in your
account. There is no charge for the first
certificate issued. A charge of $3.50 will be
made for any replacement certificates issued.
In order to protect the interests of the other
shareholders, share certificates will be sent to
those shareholders who request them only after
the Fund has determined that unconditional
payment for the shares represented by the
certificate has been received by its custodian,
UMB Bank, n.a.
If an order to purchase shares must be
canceled due to non-payment, the purchaser will
be responsible for any loss incurred by the
Fund arising out of such cancellation. To
recover any such loss, the Fund reserves the
right to redeem shares owned by any purchaser
whose order is canceled, and such purchaser
may be prohibited or restricted in the manner
of placing further orders.
The Fund reserves the right in its sole
discretion to withdraw all or any part of the
offering made by the prospectus or to reject
purchase orders when, in the judgment of
management, such withdrawal or rejection is in
the best interest of the Fund and its
shareholders. The Fund also reserves the right
at any time to waive or increase the minimum
requirements applicable to initial or subsequent
investments with respect to any person or class
of persons, which include shareholders of the
Fund's special investment programs.
REDEMPTION OF SHARES
The right of redemption may be suspended,
or the date of payment postponed beyond the
normal five-day period by the Funds' Boards of
Directors under the following conditions
authorized by the Investment Company Act of
1940: (1) for any period (a) during which the
New York Stock Exchange is closed, other than
customary weekend and holiday closing, or (b)
during which trading on the New York Stock
Exchange is restricted; (2) for any period
during which an emergency exists as a result of
which (a) disposal by the Fund of securities
owned by it is not reasonably practicable, or
(b) it is not reasonably practicable for the Fund
to determine the fair value of its net assets; or
(3) for such other periods as the Securities and
Exchange Commission may by order permit for
the protection of the Fund's shareholders.
Each of the Funds has elected to be governed
by Rule 18f-1 under the Investment Company
Act of 1940 pursuant to which the Fund is
obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period for any
one shareholder. Should redemptions by any
shareholder exceed such limitation, the Fund
may redeem the excess in kind. If shares are
redeemed in kind, the redeeming shareholder
may incur brokerage costs in converting the
assets to cash. The method of valuing
securities used to make redemptions in kind will
be the same as the method of valuing portfolio
securities described under "How Share Price is
Determined" in the Prospectus, and such
valuation will be made as of the same time the
redemption price is determined.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the
possibility of forgery and are required in
connection with each redemption method to
protect shareholders from loss. Signature
guarantees are required in connection with all
redemptions by mail or changes in share
registration, except as provided in the
Prospectus.
Signature guarantees must appear together
with the signature(s) of the registered owner(s),
on:
(1) a written request for redemption,
(2) a separate instrument of assignment,
which should specify the total number
of shares to be redeemed (this "stock
power" may be obtained from the Fund
or from most banks or stock brokers),
or
(3) all stock certificates tendered for
redemption.
MANAGEMENT AND
INVESTMENT COUNSEL
As a part of the Management Agreement,
Jones & Babson, Inc. employs at its own
expense Kornitzer Capital Management, Inc., as
its investment counsel. Kornitzer Capital
Management, Inc., was founded in 1989. It is
a private investment research and counseling
organization serving individual, corporate and
other institutional clients.
The annual fee charged by Jones & Babson,
Inc. covers all normal operating costs of the
Fund.
Kornitzer Capital Management, Inc., has an
experienced investment analysis and research
staff which eliminates the need for Jones &
Babson, Inc. and the Fund to maintain an
extensive duplicate staff, with the consequent
increase in the cost of investment advisory
service. The cost of the services of Kornitzer
Capital Management, Inc. is included in the fee
of Jones & Babson, Inc.
HOW SHARE PRICE
IS DETERMINED
The net asset value per share of each of the
Fund's portfolio is computed once daily,
Monday through Friday, at the specific time
during the day that the Boards of Directors of
the Funds sets at least annually, except on days
on which changes in the value of a Fund's
portfolio securities will not materially affect the
net asset value, or days during which no
security is tendered for redemption and no
order to purchase or sell such security is
received by a Fund, or the following holidays:
New Year's Day January 1
Presidents' Holiday Third Monday
in February
Good Friday Friday before Easter
Memorial Day Last Monday
in May
Independence Day July 4
Labor Day First Monday
in September
<PAGE>
Thanksgiving Day Fourth Thursday
in November
Christmas Day December 25
OFFICERS AND DIRECTORS
The Fund is managed by Jones & Babson,
Inc. subject to the supervision and control of
the Board of Directors. The following table
lists the Officers and Directors of the Fund.
Unless noted otherwise, the address of each
Officer and Director is Three Crown Center,
2440 Pershing Road, Suite G-15, Kansas City,
Missouri 64108. Except as indicated, each has
been an employee of Jones & Babson, Inc. for
more than five years.
* Larry D. Armel, President and Director.
President and Director, Jones & Babson,
Inc.; David L. Babson Growth Fund, Inc.,
D. L. Babson Money Market Fund, Inc.,
D.L. Babson Tax-Free Income Fund, Inc.,
Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc. Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-
Stewart Ivory International Fund, Inc;
Buffalo Balanced Fund, Inc. Buffalo High
Yield Fund, Inc., Buffalo USA Global Fund,
Inc., Buffalo Equity Fund; Inc., Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout Regional
Fund, Inc., Scout WorldWide Fund, Inc.;
President and Trustee, D. L. Babson Bond
Trust.
* Kent W. Gasaway, Director.
Senior Vice President, Kornitzer Capital
Management, Inc., KCM Building, Shawnee
Mission, Kansas 66201. Formerly Assistant
Vice President, Waddell & Reed, Inc., 6300
Lamar Avenue, Shawnee Mission, Kansas
66202; Director, Buffalo Balanced Fund, Inc.
Buffalo Equity Fund, Inc., Buffalo High
Yield Fund, Inc., Buffalo USA Global Fund,
Inc., Buffalo Equity Fund, Inc.
Thomas S. Case, Director.
Director, Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High
Yield Fund, Inc., Buffalo USA Global Fund,
Inc.; Formerly President and Chief Executive
Officer, the Frankona American Companies,
2405 Grant Blvd., Suite 900, Kansas City,
Missouri 64108.
* Stephen S. Soden, Director.
President, BMA Financial Services, BMA
Tower, One Penn Valley Park, Kansas City,
Missouri, 64141, Chairman and Director,
Jones & Babson, Inc.; Director, Buffalo
Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo
USA Global Fund, Inc.
Francis C. Rood, Director.
Retired, 6429 West 92nd Street, Overland
Park, Kansas 66212. Formerly, Group Vice
President-Administration, Hallmark Cards,
Inc.; Director, David L. Babson Growth
Fund, Inc., D. L. Babson MoneyMarket
Fund, Inc., D. L. Babson Tax-Free Income
Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson
Value Fund, Inc., Shadow Stock Fund, Inc.;
Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc., Trustee,
D.L. Babson Bond Trust.
William H. Russell, Director.
Financial consultant, 645 West 67th Street,
Kansas City, Missouri 64113; Director,
David L. Babson Growth Fund, Inc., D. L.
Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise
Fund II; Inc., Babson Value Fund, Inc.,
Shadow Stock Fund, Inc. and Babson-Stewart
Ivory International Fund, Inc.; Buffalo
Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo
USA Global Fund, Inc., Trustee, D. L.
Babson Bond Trust.
________________________________________
* Directors who are interested persons as
that term is defined in the Investment Company
Act of 1940, as amended.
<PAGE>
H. David Rybolt, Director.
Consultant, HDR Associates, P.O. Box 2468,
Shawnee Mission, Kansas 66202; Director,
David L. Babson Growth Fund, Inc., D. L.
Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc.; Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc.;
Trustee, D. L. Babson Bond Trust.
P. Bradley Adams, Vice President and
Treasurer.
Vice President and Treasurer, Jones & Babson,
Inc., David L. Babson Growth Fund, Inc., D.
L. Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D. L. Babson Bond
Trust, Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc.,
Scout Regional Fund, Inc., Scout WorldWide
Fund, Inc.; Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc.
Michael A. Brummel, Vice President,
Assistant Secretary and Assistant Treasurer.
Vice President, Assistant Secretary and Assistant
Treasurer, Jones & Babson, Inc., David L.
Babson Growth Fund, Inc., D. L. Babson
Money Market Fund, Inc., D. L. Babson Tax-
Free Income Fund, Inc., Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc.,
Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund,
Inc., D. L. Babson Bond Trust, Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout Regional
Fund, Inc, Scout WorldWide Fund, Inc.;
Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc.
Martin A. Cramer, Vice President and
Secretary.
Vice President and Secretary, Jones & Babson,
Inc., David L. Babson Growth Fund, Inc., D.L.
Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D. L. Babson Bond
Trust, Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc.,
Scout Regional Fund, Inc., Scout WorldWide
Fund, Inc.; Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc.
John G. Dyer, Vice President.
Vice President, Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund,
Inc., Scout Tax-Free Money Market Fund, Inc.,
Scout Heartland Fund, Inc. , Scout WorldWide
Fund, Inc.; Buffalo Balanced Fund,, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc.
Ruth Evans, Vice President.
Vice President, Jones & Babson, Inc.; David L.
Babson Growth Fund, Inc., D. L. Babson
Money Market Fund, Inc., D. L. Babson Tax-
Free Income Fund, Inc., Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc.,
Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund,
Inc., D. L. Babson Bond Trust, Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout Regional
Fund, Inc., Scout WorldWide Fund, Inc.;
Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc.
None of the officers or directors will be
remunerated by the 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.
<PAGE>
Messrs. Rood, Russell and Rybolt have no
financial interest in, nor are they affiliated with,
either Jones & Babson, Inc. or Kornitzer
Capital Management, Inc.
The Audit Committee of the Board of
Directors is composed of Messrs. Case, Rood,
Russell and Rybolt.
The Officers and Directors of each of the
Funds as a group own less than 1% of each of
the respective Funds.
The Funds will not hold annual meetings
except as required by the Investment Company
Act of 1940 and other applicable laws. The
Funds are Maryland corporations. Under
Maryland law, a special meeting of stockholders
of a Fund must be held if the Fund receives
the written request for a meeting from the
stockholders entitled to cast at least 25 percent
of all the votes entitled to be cast at the
meeting. The 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 the Fund. To the extent required by
the undertaking, each Fund will assist
shareholder communications in such matters.
CUSTODIAN
The Funds' assets are held for safekeeping by
an independent custodian, UMB Bank, n.a.
This means the bank, rather than the Fund, has
possession of the Funds' cash and securities.
The custodian bank is not responsible for the
Funds' investment management or
administration. But, as directed by the Fund's
officers, it delivers cash to those who have sold
securities to the Fund in return for such
securities, and to those who have purchased
portfolio securities from the Fund, it delivers
such securities in return for their cash purchase
price. It also collects income directly from
issuers of securities owned by the Fund and
holds this for payment to shareholders after
deduction of the Fund's expenses. The
custodian is compensated for its services by the
manager. There is no charge to the 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, is each Fund's present independent
auditor.
Reports to shareholders will be published at
least semiannually.
OTHER JONES & BABSON FUNDS
Jones & Babson, Inc. also sponsors and
manages nine no-load funds comprising the
Babson Mutual Fund Group managed by Jones
& Babson, Inc. in association with David L.
Babson & Co. Inc. The funds are: David L.
Babson Growth Fund, Inc., Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc.,
Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., Babson Value Fund,
Inc., D. L. Babson Bond Trust, D. L. Babson
Money Market Fund, Inc. and D. L. Babson
Tax-Free Income Fund, Inc.
Jones & Babson, Inc. also sponsor and manages
six mutual funds which especially seek to
provide services to customers of affiliate banks
of UMB Financial Corporation (UMB). They
are: Scout Stock Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc. and Scout WorldWide
Fund, Inc.
A prospectus for any of the Funds may be
obtained from Jones & Babson, Inc., Three
Crown Center, 2440 Pershing Road, Suite G-15,
Kansas City, Missouri 64108.
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
<PAGE>
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
issue; 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 STATEMENTSI
The audited financial statements of Buffalo
Balanced Fund, Inc. contained in the March 31, 1995
Annual Report to Shareholders are incorporated
herein by reference.
<PAGE>
Buffalo Equity Fund, Inc.
Report of Independent Auditors
The Shareholder and Board of Directors
Buffalo Equity Fund, Inc.
We have audited the accompanying statement of net assets of Buffalo Equity
Fund,Inc. (the Company) as of February 14, 1995. This statement of net assets
is the responsibility of the Company's management. Our responsibility is to
express anopinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. Our procedures
included confirmation of cash as of February 14, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement of net assets presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Buffalo Equity Fund, Inc. at
February 14, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
February 14,1995
<PAGE>
Buffalo Equity Fund, Inc.
Statement of Net Assets
February 14, 1995
Assets
Cash $100,000
--------
Net assets applicable to outstanding shares $100,000
========
Capital shares, $1.00 par value
Authorized 10,000,000
==========
Outstanding 10,000
======
Net asset value per share $10.00
======
Note
Buffalo Equity Fund, Inc. (the Company) was organized as a Maryland corporation
on November 23, 1994 and is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. Shares
outstanding on February 14, 1995 for the Company were issued to Jones & Babson,
Inc., the Company's investment manager. The costs of organization will be paid
by Jones & Babson, Inc.
<PAGE>
Buffalo High Yield Fund, Inc.
Report of Independent Auditors
The Shareholder and Board of Directors
Buffalo Premium Income Fund, Inc.
We have audited the accompanying statement of net assets of Buffalo Premium
Income Fund, Inc. (the Company) as of February 14, 1995. This statement of net
assets is the responsibility of the Company's management. Our responsibility is
to express an opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. Our procedures
included confirmation of cash as of February 14, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement of net assets presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Buffalo Premium Income Fund,
Inc. at February 14, 1995, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
February 14,1995
<PAGE>
Buffalo Premium Income Fund, Inc.
Statement of Net Assets
February 14, 1995
Assets
Cash $100,000
--------
Net assets applicable to outstanding shares $100,000
========
Capital shares, $1.00 par value
Authorized 10,000,000
==========
Outstanding 10,000
======
Net asset value per share $10.00
======
Note
Buffalo Premium Income Fund, Inc. (the Company) was organized as a Maryland
corporation on November 23, 1994 and is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. Shares outstanding on February 14, 1995 for the Company were issued to
Jones & Babson, Inc., the Company's investment manager. The costs of
organization will be paid by Jones & Babson, Inc.
<PAGE>
Buffalo USA Global Fund, Inc.
Report of Independent Auditors
The Shareholder and Board of Directors
Buffalo USA Global Fund, Inc.
We have audited the accompanying statement of net assets of Buffalo USA Global
Fund, Inc. (the Company) as of February 14, 1995. This statement of net assets
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. Our procedures
included confirmation of cash as of February 14, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement of net assets presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Buffalo USA Global Fund,
Inc. at February 14, 1995, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
February 14, 1995
<PAGE>
Buffalo USA Global Fund, Inc.
Statement of Net Assets
February 14, 1995
Assets
Cash $100,000
--------
Net assets applicable to outstanding shares $100,000
========
Capital shares, $1.00 par value
Authorized 10,000,000
==========
Outstanding 10,000
======
Net asset value per share $10.00
======
Note
Buffalo USA Global Fund, Inc. (the Company) was organized as a Maryland
corporation on November 23, 1994 and is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. Shares outstanding on February 14, 1995 for the Company were issued to
Jones & Babson, Inc., the Company's investment manager. The costs of
organization will be paid by Jones & Babson, Inc.
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Included in Part A - Prospectus:
Per Share Capital and Income Changes
Included in Part B - Statement of Additional
Information:
The audited financial statements contained in
the most recent Annual Report to Shareholders of
Buffalo Balanced Fund, Inc. are incorporated by
reference into Part B. of this Registration
Statement. The Reports of Independent Public Accountants
and the initial financial statements of Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc. and Buffalo
USA Global Fund, Inc. are included in Part B.
Included in Part C - Other Information:
Consents of Independent Public Accountants Arthur
Andersen & Co.
(b) (1) Registrants's Articles of Incorporation*
(2) Form of Registrant's By-laws*
(3) Not applicable, because there is
not voting trust agreement.
(4) Specimen copy of each security to
be issued by the registrant.*
(5) (a) Form of Management Agreement between
Jones & Babson, Inc. and the Registrant*
(b) Form of Investment Counsel Agreement
between Jones & Babson,Inc. and Kornitzer
Capital Management, Inc.*
(6) Form of principal Underwriting Agreement between
Jones & Babson, Inc. and the Registrant*
(7) Not applicable, because there are no pension,
bonus or other agreement for the benefit of
directors and officers.
(8) Forms of Custodian Agreement between Registrant
and United Missouri Bank of Kansas City, N.A.*
(9) There are no other material contracts not made in
the ordinary course of business between the
Registrant and others
(10) Opinion and consent of counsel as to the legality
of the registrant's securities being registered.
(To be supplied annually pursuant to Rule 24f-2
of the Investment Company Act of 1940.)
(11) (a) Powers of Attorney*
(b) Auditors Consent (to be supplied by
amendment)
(12) Not applicable.
(13) Form of letter from contributors of initial
capital to the Registrant that purchase was made
for investment purposes without any present
intention of redeeming or selling.
(14) Not applicable.
(15) Not applicable.
(16) Schedule for computation of performance
quotations.
(17) Financial Data Schedule for Buffalo Balanced Fund, Inc.
* Incorporated by reference to Registrant's Registration on N-1A.
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE
REGISTRANT.
NONE
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The number of record holders of each class of securities of the
Registrant as of May 31, 1995, is as follows:
(1)
Title of Class
Common Stock (2)
$1.00 par value Number of Record Holders
Buffalo Balanced Fund
Buffalo Equity Fund
Buffalo USA Global Fund
Buffalo High Yield Fund
Item 27. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law and the
company's By-laws, the company shall indemnify any person who
was or is a director, officer, or employee of the company to
the maximum extent permitted by the Maryland General
Corporation Law; provided however, that any such
indemnification (unless ordered by a court) shall be made by
the company only as authorized in the specific case upon a
determination that indemnification of such persons is proper in
the circumstances. Such determination shall be made.
(i) by the Board of Directors by a majority vote of a quorum
which consists of the directors who are neither "interested
persons" of the company as defined in Section 2(a)(19) of the
1940 Act, nor parties to the proceedings, or
(ii) if the required quorum is not obtainable or if a quorum
of such directors so directs, by independent legal counsel in a
written opinion.
No indemnification will be provided by the company to any
director or officer of the company for any liability to the
company or shareholders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duty.
<PAGE>
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
The principal business of Jones & Babson, Inc. is the
management of the Babson and UMB family of mutual funds. It
also has expertise in the tax and pension plan field. It
supervises a number of prototype and profit-sharing plan
programs sponsored by various organizations eligible to be
prototype plan sponsors.
The principal business of Kornitzer Capital Management, Inc. is
to provide investment counsel and advice to a wide variety of
clients. Kornitzer Capital Management has $850,000,000 under
management.
Item 29. PRINCIPAL UNDERWRITERS.
(a) Jones & Babson, Inc., the only principal
underwriter of the Registrant, also acts as principal
underwriter for the David L. Babson Growth Fund, Inc.,
D.L. Babson Money Market Fund, Inc., D.L. Babson Tax-
Free Income Fund, Inc., D.L. Babson Bond Trust, Babson
Value Fund, Inc., Shadow Stock Fund, Inc., Babson-
Stewart Ivory International Fund, Inc., Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money Market
Fund, Inc. and Scout Tax-Free Money Market Fund, Inc.,
Scout Regional Fund, Inc., Scout WorldWide Fund, Inc.,
Buffalo Balanced Fund, Buffalo High Yield Fund, Buffalo
Equity Fund and Buffalo USA Global Fund.
(b) Herewith is the information required by the
following table with respect to each director, officer
or partner of the only underwriter named in answer to
Item 21 of Part B:
Name and Position and Positions and
Principal Offices with Offices with
Business Address Underwriter Registrant
Stephen S. Soden Chairman and Director
BMA Tower Director
One Penn Value Park
Kansas City, MO 64141
Larry D. Armel President and President and
Three Crown Center Director Director
2440 Pershing Road
Kansas City, MO 64108
Giorgio Balzer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
J. William Sayler Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Edward S. Ritter Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
<PAGE>
Robert N. Sawyer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Vernon W. Voorhees Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Richard S. Graver Sr. Vice President - None
Three Crown Center Marketing and
2440 Pershing Road, Director
G-15
Kansas City, MO 64108
P. Bradley Adams Vice President Vice President
Three Crown Center and Treasurer and Treasurer
2440 Pershing Road, G-15
Kansas City, MO 64108
Michael A. Brummel Vice President Vice President
Three Crown Center
2440 Pershing Road, G-15
Kansas City, MO 64108
Ruth Evans Vice President Vice President
Three Crown Center
2440 Pershing Road, G-15
Kansas City, MO 64108
Martin A. Cramer Vice President Vice President
Three Crown Center and Secretary and Secretary
2440 Pershing Road, G-15
Kansas City, MO 64108
(c) The principal underwriter does not receive any remuneration or
compensation for the duties or services rendered to the Registrant
pursuant to the principal underwriting Agreement.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be maintained by
Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder is in the physical possession of
Jones & Babson, Inc., at Three Crown Center, 2440 Pershing Road,
G-15, Kansas City, Missouri 64108.
Item 31. MANAGEMENT SERVICES.
All management services are covered in the management agreement
between the Registrant and Jones & Babson, Inc., which are
discussed in Parts A and B.
<PAGE>
Item 32. UNDERTAKINGS.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, each Registrant certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto authorized, in the City of Kansas City, and State of
Missouri on the 27th day of July, 1995.
BUFFALO BALANCED FUND, INC.
BUFFALO USA GLOBAL FUND, INC.
BUFFALO HIGH YIELD FUND, INC.
BUFFALO EQUITY FUND, INC.
__________________________________
(Registrant)
By Larry D. Armel
__________________________________
(Larry D. Armel, President)**
Pursuant to the requirements of the Securities Act of 1933, this Post
- -effective Amendment No. 2 to each Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Larry D. Armel President, Principal July 27, 1995
Larry D. Armel Executive Officer,
and Director**
Kent W. Gasaway Director** July 27, 1995
Kent W. Gasaway*
Stephen S. Soden Director** July 27, 1995
Stephen S. Soden*
Thomas S. Case Director** July 27, 1995
Thomas S. Case*
Francis C. Rood Director** July 27, 1995
Francis C. Rood*
William H. Russell Director** July 27, 1995
William H. Russell*
H. David Rybolt Director** July 27, 1995
H. David Rybolt*
P. Bradley Adams Treasurer and July 27, 1995
P. Bradley Adams Principal Financial
and Accounting Officer**
*
Larry D. Armel
By Larry D. Armel, pursuant
to Power of Attorney
REPRESENTATIONS OF COUNSEL
I assisted in the preparation of this Post Effective Amendment to the
Funds' Registration Statements filed under the Securities Act of 1933 and
the Amendment to the Fund's Registration Statement filed under the
Investment Company Act of 1940. Based on my review it is my opinion that
this amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b) of Rule 485 under
the Securities Act of 1933.
_________________________ Attorney** July 27, 1995
John G. Dyer
** Position held with each registrant
EXHIBIT INDEX
Item 24 (b).
Exhibit Page No.
(11) Consents of Auditors
(16) Schedule for computation of total return
for Buffalo Balanced Fund, Inc.
(17) Financial Data Schedule for Buffalo
Balanced Fund, Inc. (Submitted separately via EDGAR.)
Exhibit (11)
CONSENT OF INDEPENDENT AUDTORS
We consent to the references to our firm under the captions
"Financial Highlights" and "Independent Auditors" and to
incorporation by reference of our report dated April 26,
1995 in this post-effective amendment to the Registration
Statement (Form N-1A) and related Prospectus of Buffalo
Balanced Fund, Inc. filed with the Securities and
Exchange Commission under the Securities Act of 1933.
ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
July 24, 1995
<PAGE>
CONSENT OF INDEPENDENT AUDTORS
We consent to the references to our firm under the caption
"Independent Auditors" and to the use our report dated
February 14, 1995 in this post-effective amendment to the
Registration Statement (Form N-1A) and related Prospectus of
Buffalo Equity Fund, Inc. filed with the Securities and
Exchange Commission under the Securities Act of 1933.
ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
July 24, 1995
<PAGE>
CONSENT OF INDEPENDENT AUDTORS
We consent to the references to our firm under the caption
"Independent Auditors" and to the use our report dated
February 14, 1995 in this post-effective amendment to the
Registration Statement (Form N-1A) and related Prospectus of
Buffalo High Yield Fund, Inc. filed with the Securities and
Exchange Commission under the Securities Act of 1933.
ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
July 24, 1995
<PAGE>
CONSENT OF INDEPENDENT AUDTORS
We consent to the references to our firm under the caption
"Independent Auditors" and to the use our report dated
February 14, 1995 in this post-effective amendment to the
Registration Statement (Form N-1A) and related Prospectus of
Buffalo USA Global Fund, Inc. filed with the Securities and
Exchange Commission under the Securities Act of 1933.
ERNST & YOUNG
ERNST & YOUNG
Kansas City, Missouri
July 24, 1995
<PAGE>
EXHIBIT (16)
n
P(1+T)^ = ERV
P = $1,000
T = 6.28%
n = 1
ERV = $1,063
1
1,000(1+.0628)= 1,063
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919228
<NAME> BUFFALO BALANCED FUND, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
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<SHARES-REINVESTED> 0
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<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 10.07
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> 0
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<PER-SHARE-NAV-END> 10.06
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
