MESSAGE
To Our Shareholders
We are excited to be reporting to you for the first time for the entire
Buffalo Group of Mutual Funds. As many of you know, we added three new Funds
_ Buffalo Equity, Buffalo High Yield and Buffalo USA Global on May 19, 1995.
The new Funds have been well received garnering nearly $10 million in total
assets by the end of September. Including the Balanced Fund, the Buffalo
group now has nearly $55 million in combined assets. Our new line-up of Funds
now positions us to better satisfy the varied investment needs of our existing
and future customers. For ease of tracking, all the Funds are now listed daily
under "Buffalo" in the mutual fund section of local and national newspapers.
The six months ended September 1995 marked a very successful period for the
stock and bond markets. Common stocks were particularly robust with market
averages soaring to record highs. Stocks reacted favorably to low inflation,
falling interest rates, strong corporate earnings comparisons and the
appearance of a "soft landing" by the U.S. economy. We believe the favorable
outlook for inflation is sustainable and provides a strong underpinning for
both the stock and bond markets longer-term. However, in the near-term, we
believe the risk level of the stock market has increased.
As common stocks hit new highs over the past few months we have taken a more
gradual approach to investing new cash in equities. While we don't necessarily
think the market averages will undergo a major correction, we do believe
numerous industries and companies may have difficulty meeting earnings
expectations in coming quarters. Our concern for corporate earnings stems
from weakened consumer demand (due to high debt levels), non-existent pricing
power by corporations, less favorable currency translations and very tough
comparisons against robust conditions a year ago.
Whether short-term earnings ultimately matter to investors may largely depend
on the actions of Alan Greenspan and the Federal Reserve. Any near-term move
to lower interest rates may cause investors to ignore current earnings and
focus on an improved outlook for the economy in 1996. However, if the Federal
Reserve puts further rate cuts on hold, the outlook for the economy in 1996
becomes less certain and the risk level of the stock market increases. It is
unclear which path the Fed will take and therefore, we believe it is prudent
to continue our gradual investment approach. If the stock market does
experience a correction or if we sense the Fed will ease rates sooner rather
than later, then we will become much more aggressive purchasing stocks.
Longer-term we remain very optimistic on the financial markets given the
favorable outlook for inflation, the strong worldwide competitive positions
of U.S. corporations and the potential for progress on the U.S. budget
deficit.
We appreciate your confidence as a Buffalo Fund shareholder and we look
forward to tracking the group's progress for you in future periods. The
following is a snapshot and
comment on how each fund has performed in 1995 and
since inception. Performance data contained in this report is for past
periods only. Past performance is not predictive of future performance.
Investment return and share value will fluctuate, and redemption value may be
more or less than original cost.
Sincerely,
Larry D. Armel
President
Buffalo Balanced Fund
The Balanced Fund generated a total return (price change and reinvested
distributions) of 10.27% for the six months ending September 30, 1995. Year-
to-date the Fund is now up 17.07%. The average balanced fund, as measured by
Lipper Analytical Services, registered returns of 12.78% and 19.53% for the
respective periods. The Buffalo Balanced Fund lagged the performance of the
average balanced fund due to it's relatively low exposure to common stocks
(29% at September 30). The Fund's strategy of maintaining a more conservative
position in common stocks, but a much higher than average current yield has
not changed. While this may cause the Fund to lag during strong equity market
upturns, it's healthy 6.1% net current yield as of September 30 (annual cash
income less fund expenses dividend by market price) should allow for lower
volatility and more consistent returns over time.
The Balanced Fund continues to make strong use of convertible securities,
with convertible bonds and preferreds making up 40% of the portfolio.
Corporate bonds made up 23% of the portfolio and the Fund held roughly 8%
cash and other assets at September 30. The Fund made two distributions during
the six months ending September 30, 1995. On June 30 the Balanced Fund paid a
$.19 dividend and a $.24 capital gains distribution. On September 30 the Fund
paid a $.15 dividend.
Investment Results _ Total Return
Six Months Year Since
Ended to Date Inception
9/30/95 9/30/95 1 Year 8/12/94
BUFFALO
BALANCED FUND 10.27% 17.07% 13.82% 11.79%
Lipper Balanced
Fund Index 12.78% 19.53% 18.07% n/a
Buffalo Equity Fund
The Equity Fund generated a total return (price change and reinvested
distributions) of 16.37% for the period from fund inception (May 19, 1995) to
September 30, 1995. This return slightly outpaced the average capital
appreciation fund, as measured by Lipper Analytical Services, which generated
a return of 16.29% for the same period. It should be noted that the Equity
Fund carried a large cash position during this period. At September 30, 1995
the Fund was 59% invested in equities and held 41% cash. The Fund's stock
holdings were widely diversified with no market segment representing over
12% of total equities.
Investment Results _ Total Return
Return since
Inception 5/19/95
BUFFALO EQUITY FUND 16.37%
Lipper Capital Appreciation Fund Index 16.29%
Buffalo High Yield Fund
The High Yield Fund produced a total return (price change and reinvested
distributions) of 9.67% for the period from fund inception (May 19, 1995)
to September 30, 1995. This return far exceeded the average high yield bond
fund, as measured by Lipper Analytical Services, which recorded a return of
3.98% for the same period. The Fund experienced meaningful price appreciation
in a number of convertible securities, corporate bonds and stocks which
accounted for the favorable performance. At September 30, the Fund's asset
mix was allocated as follows: convertible securities 32%, corporate bonds 27%
and cash and other securities 41%. It is our intention to have the Fund fully
invested as soon as possible. However, we will not break our investment
discipline of locating high yielding, underfollowed companies with favorable
business trends and strong cashflow. The supply of this product ebbs and
flows, but we remain confident in our ability to find attractive issues.
At September 30, the Fund's
net current yield stood at 6.3%. We would expect this yield
to rise steadily as the Fund gets closer to a fully invested position.
Investment Results _ Total Return
Return since
Inception 5/19/95
BUFFALO HIGH YIELD FUND 9.67%
Lipper High Current Yield Fund Index 3.98%
Buffalo USA Global Fund
The USA Global Fund generated a total return (price change and reinvested
distributions) of 8.28% for the period from fund inception (May 19, 1995) to
September 30, 1995. Given the Fund's unique strategy of investing in U.S.
companies with high international exposure, there really is no natural
benchmark upon which to compare the Fund. For purposes of having some index
to measure against we will use both the Lipper Capital Appreciation fund and
Global Equity fund indices. During this period the Fund underperformed both
indices, but more closely matched the return by the Global Equity fund index.
Like the Buffalo Equity Fund, the USA Global Fund also carried a high level
of cash during the period. We are enthusiastic about this investment concept
and our research has led us to many exciting companies. At September 30, 1995
the Fund had 54% of total assets invested in common stocks and held 46% in
cash and other assets.
Investment Results _ Total Return
Return since
Inception 5/19/95
BUFFALO USA GLOBAL FUND 8.28%
Lipper Global Equity Fund Index 9.04%
Lipper Capital Appreciation Fund Index 16.29%
Buffalo
Balanced Fund
STATEMENT OF NET ASSETS
September 30, 1995 (unaudited)**
SHARES COMPANY MARKET VALUE
COMMON STOCKS _ 29.47%
BASIC MATERIALS _ 3.14%
100,000 Bethlehem Steel Corp. $ 1,412,500
CAPITAL GOODS _ 5.85%
10,000 Allied-Signal, Inc. 441,250
20,000 General Electric Co. 1,275,000
10,000 Tenneco, Inc. 462,500
10,000 Trinity Industries, Inc. 310,000
5,000 WMX Technologies, Inc. 142,500
2,631,250
CONSUMER CYCLICAL _ 3.47%
15,000 Chrysler Corp. 795,000
10,000 Goodyear Tire & Rubber Co. 393,750
15,000 Wal-Mart Stores, Inc. 373,125
1,561,875
CONSUMER STAPLES _ 3.53%
10,000 Dial Corp. Arizona 247,500
10,000 Philip Morris Cos., Inc. 835,000
10,000 Wrigley, (Wm.) Jr. Co. 505,000
1,587,500
ENERGY _ 3.60%
6,000 Chevron Corp. 291,750
20,000 Noble Drilling Corp. 155,000
5,000 Texaco, Inc. 323,125
10,000 Triton Energy Corp. 483,750
20,000 Union Texas Petroleum Holdings, Inc. 365,000
1,618,625
FINANCIAL _ 0.38%
5,000 Keycorp New 171,250
TECHNOLOGY _ 5.71%
15,000 A T & T Corp. 986,250
15,000 National Semiconductor Corp. 414,375
5,000 Pitney Bowes, Inc. 210,000
10,000 Sybase, Inc. 321,250
40,000 Western Digital Corp. 635,000
2,566,875
UTILITIES _ 3.79%
10,000 NICOR, Inc. 272,500
50,500 Pacific Enterprises 1,268,812
5,000 Questar Corp. 160,625
1,701,937
TOTAL COMMON STOCKS 13,251,812
CONVERTIBLE PREFERRED STOCKS _ 3.55%
10,000 ICO Inc., dep. shrs.
repstg. 1/4 pfd. cv. 208,750
32,400 Maxus Energy Corp., $4.00 1,287,900
10,200 Westmoreland Coal Co., dep. shrs.
repstg. 1/4 pfd. cv., Series A 102,000
TOTAL CONVERTIBLE PREFERRED STOCKS 1,598,650
FACE
AMOUNT DESCRIPTION MARKET VALUE
CORPORATE BONDS _ 23.15%
$ 100,000 Bethlehem Steel Corp., 8.45% deb., due 3-1-05 97,375
1,115,000 Color Tile Inc., 10.75% sr. note, due 12-15-01 462,725
1,740,000 CompUSA, Inc., 9.50% gtd.
sr. sub. note, due 6-15-00 1,740,000
1,850,000 Dual Drilling Co., 9.875%
sr. sub. note, due 1-15-04 1,739,000
110,000 Energy Ventures Inc., 10.25%
sr. note, due 3-15-04 114,675
1,000,000 Giant Industries, Inc., 9.75% gtd.
sr. sub. note, due 11-15-03 990,000
885,000 HS Resources, Inc., 9.875%
sr. sub. note, due 12-1-03 870,619
200,000 Kaiser Aluminum & Chemical Corp.,
9.875% sr. note, due 2-15-02 201,000
150,000 Navistar Financial Corp., 8.875%
sr. sub. note, due 11-15-98 150,750
100,000 Noble Drilling Corp., 9.25%
sr. note, due 10-1-03 103,500
500,000 Nortek Inc., 9.875% sr. sub. note,
due 3-1-04 456,250
365,000 Payless Cashways, Inc., 9.125%
sr. sub. note, due 4-15-03 290,631
510,000 RJR Nabisco Inc., 8.75% gtd.
sr. note, due 4-15-04 515,100
270,000 RJR Nabisco Inc., 8.75% note, due 8-15-05 269,778
350,000 Rohr Inc., 11.625% sr. note, due 5-15-03 374,500
805,000 Santa Fe Energy Resources, Inc., 11.00%
sr. sub. deb., due 5-15-04 865,375
250,000 Stone Container Corp., 10.75% 1st mtg. note,
due 10-1-02 260,000
100,000 Triangle Pacific Corp. Delaware,
10.50% sr. note, due 8-1-03 102,500
75,000 Tuboscope Vetco International, Inc.,
10.75% gtd. sr. sub. note, due 4-15-03 75,000
32,000 Wainoco Oil Corp., 10.75% sub. deb.,
due 10-1-98 32,000
700,000 Wainoco Oil Corp., 12.00% sr. note,
due 8-1-02 703,500
TOTAL CORPORATE BONDS 10,414,278
CONVERTIBLE CORPORATE BONDS _ 35.87%
$ 2,020,000 Air & Water Technologies Corp.,
8.00% sub. deb., due 5-15-15 1,711,950
930,000 Allwaste Inc., 7.25% sub. deb.,
due 6-1-14 837,000
1,700,000 Argosy Gaming Co., 12.00%
sub. note, due 6-1-01 1,723,375
1,720,000 Bally Entertainment Corp., 10.00%
sub. deb., due 12-15-06 1,634,000
245,000 Bally Entertainment Corp.,
8.00% sr. sub. deb., due 12-15-20 249,900
750,000 Beverly Enterprises Inc.,
7.625% sub. deb., due 3-15-03 735,000
372,000 Conner Peripherals Inc.,
6.75% sub. deb., due 3-1-01 339,915
1,235,000 Conner Peripherals Inc.,
6.50% sub. deb., due 3-1-02 1,157,813
120,000 Hudson General Corp., 7.00%
sub. deb., due 7-15-11 111,600
55,000 Moran Energy Inc., 8.75% sub. deb.,
due 1-15-08 40,563
1,805,000 OHM Corp., 8.00% sub. deb., due 10-1-06 1,665,112
1,900,000 Oryx Energy Co., 7.50% sub. deb., due 5-15-14 1,686,250
280,000 Quixote Corp., 8.00% sub. deb., due 4-15-11 254,800
1,000,000 Rohr Inc., 7.00% sub. deb., due 10-1-12 845,000
919,000 Swift Energy Co., 6.50% sub. deb.,
due 6-30-03 871,901
200,000 UNC Inc., 7.50% sub. deb., due 3-31-06 176,000
1,513,000 Wainoco Oil Corp., 7.75% sub. deb.,
due 6-1-14 1,278,485
1,000,000 Weston (Roy F.) Inc., 7.00% sub. deb.,
due 4-15-02 813,750
TOTAL CONVERTIBLE CORPORATE BONDS 16,132,414
REPURCHASE AGREEMENT _ 7.11%
3,200,000 UMB Bank, n.a., 6.00%, due 10-2-95
(Collateralized by U.S. Treasury Notes,
7.75%, due 3-31-96) 3,200,000
TOTAL INVESTMENTS _ 99.15% $ 44,597,154
Other assets less liabilities _ 0.85% 381,520
TOTAL NET ASSETS _ 100.00%
(equivalent to $10.49 per share; 10,000,000 shares of
$1.00 par value capital shares authorized;
4,286,471 shares outstanding) $ 44,978,674
Buffalo EQUITY Fund
STATEMENT OF NET ASSETS
September 30, 1995 (unaudited)**
SHARES COMPANY MARKET VALUE
COMMON STOCKS _ 58.59%
BASIC MATERIALS _ 1.87%
4,000 Bethlehem Steel Corp. $ 56,500
CAPITAL GOODS _ 11.20%
1,000 Allied-Signal, Inc. 44,125
1,000 General Electric Co. 63,750
1,500 Minnesota Mining & Manufacturing Co. 84,750
1,000 Rockwell International Corp. 47,250
1,500 Tenneco, Inc. 69,375
1,000 WMX Technologies, Inc. 28,500
337,750
CONSUMER CYCLICAL _ 8.07%
3,000 Argosy Gaming Co. 36,000
1,000 Chrysler Corp. 53,000
1,500 General Motors Corp. 70,312
1,500 Goodyear Tire & Rubber Co. 59,063
1,000 Wal-Mart Stores, Inc. 24,875
243,250
CONSUMER STAPLES _ 6.66%
1,000 American Brands, Inc. 42,250
1,000 Dial Corp. Arizona 24,750
1,000 Philip Morris Cos., Inc. 83,500
1,000 Wrigley, (Wm.) Jr. Co. 50,500
201,000
ENERGY _ 11.27%
1,000 Chevron Corp. 48,625
315 Cooper Cameron Corp. 8,150
10,000 Noble Drilling Corp. 77,500
1,000 Schlumberger, Ltd. 65,250
1,000 Texaco, Inc. 64,625
1,000 Triton Energy Corp. 48,375
1,500 Union Texas Petroleum Holdings, Inc. 27,375
339,900
FINANCIAL _ 2.86%
1,000 Allstate Corp. 35,375
1,000 First Union Corp. 51,000
86,375
TECHNOLOGY _ 10.58%
1,100 A T & T Corp. . 72,325
3,000 Datalogix International, Inc. 42,750
2,000 National Semiconductor Corp. 55,250
1,000 Nexgen, Inc. 18,750
1,000 Pitney Bowes, Inc. 42,000
1,000 Sybase, Inc. 32,125
3,500 Vantive Corp. 56,000
319,200
UTILITIES _ 6.08%
1,000 MAPCO, Inc. 51,500
2,700 Pacific Enterprises 67,838
1,000 Questar Corp. 32,125
1,000 Sonat Inc. 32,000
183,463
TOTAL COMMON STOCKS 1,767,438
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT _ 49.72%
$ 1,500,000 UMB Bank, n.a., 6.00%, due 10-2-95
(Collateralized by U.S. Treasury Notes,
7.75%, due 3-31-96) 1,500,000
TOTAL INVESTMENTS _ 108.31% $ 3,267,438
Other assets less liabilities _ (8.31%) (250,649)
TOTAL NET ASSETS _ 100.00%
(equivalent to $11.80 per share; 10,000,000 shares of
$1.00 par value capital shares authorized;
255,765 shares outstanding) $ 3,016,789
Buffalo High yield Fund
STATEMENT OF NET ASSETS
September 30, 1995 (unaudited)**
SHARES COMPANY MARKET VALUE
COMMON STOCK _ 0.14%
300 Nexgen Inc. $ 5,625
CONVERTIBLE PREFERRED STOCKS _ 6.99%
7,000 ICO Inc., dep. shrs. repstg. 1/4 pfd. cv. 146,125
200 Maxus Energy Corp., $2.50 5,050
2,000 Maxus Energy Corp., $4.00 79,500
3,000 Sante Fe Energy Resources, Inc. 57,000
TOTAL CONVERTIBLE PREFERRED STOCKS 287,675
FACE
AMOUNT DESCRIPTION MARKET VALUE
CORPORATE BONDS _ 26.63%
$ 65,000 Bethlehem Steel Corp., 10.375%
sr. note, due 9-1-03 67,437
165,000 CompUSA, Inc., 9.50% gtd. sr.
sub. note, due 6-15-00 165,000
150,000 Dual Drilling Co., 9.875% sr.
sub. note, due 1-15-04 141,000
150,000 Giant Industries, Inc., 9.75%
gtd. sr. sub. note, due 11-15-03 148,500
175,000 HS Resources, Inc., 9.875% sr. sub.
note, due 12-1-03 172,156
25,000 Kaiser Aluminum & Chemical Corp.,
9.875% sr. note, due 2-15-02 25,125
10,000 Maxus Energy Corp., 11.50% deb.,
due 11-15-15 10,150
145,000 Nortek Inc., 9.875% sr. sub. note, due 3-1-04 132,312
175,000 Payless Cashways, Inc., 9.125% sr.
sub. note, due 4-15-03 139,344
20,000 Repap Wisconsin, Inc., 9.875% 2nd priority
sr. secd. note, due 5-1-06 19,400
75,000 Wainoco Oil Corp., 12.00% sr. note,
due 8-1-02 75,375
TOTAL CORPORATE BONDS 1,095,799
CONVERTIBLE CORPORATE BONDS _ 25.42%
130,000 Air & Water Technologies Corp.,
8.00% sub. deb., due 5-15-15 110,175
130,000 Argosy Gaming Co., 12.00% sub.
note, due 6-1-01 131,788
15,000 Bally Entertainment Corp., 6.00%
sub. deb., due 9-15-98 13,669
127,000 Bally Entertainment Corp., 10.00%
sub. deb., due 12-15-06 120,650
20,000 Bally Entertainment Corp., 8.00% sr.
sub. deb., due 12-15-20 20,400
133,000 Conner Peripherals Inc., 6.75% sub. deb.,
due 3-1-01 121,529
111,000 Moran Energy Inc., 8.75% sub. deb.,
due 1-15-08 81,863
50,000 OHM Corp., 8.00% sub. deb., due 10-1-06 46,125
160,000 Oryx Energy Co., 7.50% sub. deb., due 5-15-14 142,000
150,000 Quixote Corp., 8.00% sub. deb., due 4-15-11 136,500
50,000 Swift Energy Co., 6.50% sub. deb., due 6-30-03 47,437
73,000 Wainoco Oil Corp., 7.75% sub. deb., due 6-1-14 61,685
12,000 Western Investment Real Estate Trust,
8.00% deb., due 6-30-08 11,910
TOTAL CONVERTIBLE CORPORATE BONDS 1,045,731
REPURCHASE AGREEMENT _ 41.32%
1,700,000 UMB Bank, n.a., 6.00%, due 10-3-95
(Collateralized by U.S. Treasury Notes,
7.375%, due 2-29-96) 1,700,000
TOTAL INVESTMENTS _ 100.50% $ 4,134,830
Other assets less liabilities _ (0.50%) (20,580)
TOTAL NET ASSETS _ 100.00%
(equivalent to $11.12 per share; 10,000,000 shares of
$1.00 par value capital shares authorized;
369,949 shares outstanding) $ 4,114,250
Buffalo USA Global Fund
STATEMENT OF NET ASSETS
September 30, 1995 (unaudited)**
SHARES COMPANY MARKET VALUE
COMMON STOCKS _ 54.25%
CAPITAL GOODS _ 6.19%
1,000 Minnesota Mining & Manufacturing Co. $ 56,500
1,000 Modine Manufacturing Co. 28,500
1,000 United Technologies Corp. 88,375
173,375
CONSUMER CYCLICAL _ 3.08%
1,000 General Motors Corp. 46,875
1,000 Goodyear Tire & Rubber Co. 39,375
86,250
CONSUMER STAPLES _ 14.34%
1,000 American Brands, Inc. 42,250
2,000 Bausch & Lomb, Inc. 82,750
1,000 Coca-Cola Co. 69,000
1,000 Johnson & Johnson 74,125
1,500 McDonald's Corp. 57,375
1,500 Wrigley, (Wm.) Jr. Co. 75,750
401,250
ENERGY _ 7.02%
1,000 Schlumberger, Ltd. 65,250
1,000 Texaco, Inc. 64,625
1,000 Triton Energy Corp. 48,375
1,000 Union Texas Petroleum Holdings, Inc. 18,250
196,500
TECHNOLOGY _ 23.62%
1,500 AMP, Inc. 57,750
1,200 Cisco Systems, Inc. 82,800
3,500 Conner Peripherals 58,188
1,000 Inference Corp. Cl. A 15,000
1,000 Intel Corp. 60,125
1,000 Lam Research Corp. 59,750
1,000 Motorola, Inc. 76,375
1,500 National Semiconductor Corp. 41,438
1,500 Oracle Systems Corp. 57,562
2,500 Perkin-Elmer Corp. 89,062
500 Pinnacle Systems, Inc. 15,375
3,000 Western Digital Corp. 47,625
661,050
TOTAL COMMON STOCKS 1,518,425
REPURCHASE AGREEMENT _ 64.13%
$ 1,795,000 UMB Bank, n.a., 6.00%, due 10-2-95
(Collateralized by U.S. Treasury Notes,
7.75%, due 3-31-96) 1,795,000
TOTAL INVESTMENTS _ 118.38% $ 3,313,425
Other assets less liabilities _ (18.38%) (514,433)
TOTAL NET ASSETS _ 100.00%
(equivalent to $10.98 per share; 10,000,000 shares of
$1.00 par value capital shares authorized;
255,018 shares outstanding) $ 2,798,992
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1995 (unaudited)
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (identified cost $42,473,597,
$3,217,629, $3,285,702, and $4,098,715, respectively) $ 44,597,154 $ 3,267,438 $ 4,134,830 $ 3,313,425
Dividends receivable 57,249 3,378 _ 865
Interest receivable 788,554 _ 59,382 _
Total assets 45,442,957 3,270,816 4,194,212 3,314,290
LIABILITIES AND NET ASSETS:
Cash overdraft 357,983 252,777 37,818 497,532
Payable for investments purchased 100,000 _ 42,144 _
Call options written 6,300 1,250 _ 17,766
Total liabilities 464,283 254,027 79,962 515,298
NET ASSETS $ 44,978,674 $ 3,016,789 $ 4,114,250 $ 2,798,992
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 42,149,926 $ 2,889,437 $ 4,005,336 $ 2,710,301
Accumulated undistributed income:
Undistributed net investment income 9,593 24,467 59,619 18,893
Accumulated net realized gain on investment transactions 675,106 51,466 13,180 46,301
Net unrealized appreciation in value of investments 2,144,049 51,419 36,115 23,497
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 44,978,674 $ 3,016,789 $ 4,114,250 $ 2,798,992
Capital shares, $1.00 par value
Authorized 10,000,000 10,000,000 10,000,000 10,000,000
Outstanding 4,286,471 255,765 369,949 255,018
NET ASSET VALUE PER SHARE $ 10.49 $ 11.80 $ 11.12 $ 10.98
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Six Months Ended September 30, 1995 (unaudited)
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 238,343 $ 7,072 $ 2,375 $ 2,483
Interest 1,269,399 23,820 66,203 22,282
1,507,742 30,892 68,578 24,765
Expenses (Note 2):
Management fees 207,761 7,057 9,496 6,504
Registration fees and expenses 36,499 19 114 19
244,260 7,076 9,610 6,523
Net investment income 1,263,482 23,816 58,968 18,242
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 13,587,457 243,277 109,693 313,619
Cost of investments sold 12,273,838 191,811 96,513 267,318
Net realized gain from investment transactions 1,313,619 51,466 13,180 46,301
Unrealized appreciation on investments:
Beginning of period 742,764 _ _ _
End of period 2,144,049 51,419 36,115 23,497
Increase in net unrealized appreciation
on investments 1,401,285 51,419 36,115 23,497
Net gain on investments 2,714,904 102,885 49,295 69,798
Increase in net assets resulting from operations $ 3,978,386 $ 126,701 $ 108,263 $ 88,040
</TABLE>
Equity, High Yield and USA Global are for the period from May 19, 1995
(inception) through September 30, 1995.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended September 30, 1995 (unaudited)
and Year Ended March 31, 1995
and Year Ended March 31, 1995
Balanced Equity HIGH YIELD USA GlobaL
FUND FUND FUND FUND
SEPTEMBER MARCH SEPTEMBER SEPTEMBER SEPTEMBER
1995 1995 1995 1995 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,263,482 $ 1,153,648 $ 23,816 $ 58,968 $ 18,242
Net realized gain from investment transactions 1,313,619 284,096 51,466 13,180 46,301
Unrealized appreciation of investments
during the period 1,401,285 742,764 51,419 36,115 23,497
Net increase in net assets resulting
from operations 3,978,386 2,180,508 126,701 108,263 88,040
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (1,346,783) (1,060,755) _ _ _
Net realized gain from investment transactions (922,609) _ _ _ _
Total distributions to shareholders (2,269,392) (1,060,755) _ _ _
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 9,396,742 36,952,975 2,947,308 4,114,128 2,780,189
Net asset value of shares issued for
reinvestment of distributions 2,225,317 993,105 _ _ _
11,622,059 37,946,080 2,947,308 4,114,128 2,780,189
Cost of shares repurchased (6,604,910) (913,964) (157,871) (208,792) (169,888)
Net increase from capital share transactions 5,017,149 37,032,116 2,789,437 3,905,336 2,610,301
Total increase in net assets 6,726,143 38,151,869 2,916,138 4,013,599 2,698,341
net assets:
Beginning of period 38,252,531 100,662 100,651 100,651 100,651
End of period (including undistributed net
investment income of $9,593, $24,467,
$18,893, and $59,619, respectively) $ 44,978,674 $ 38,252,531 $ 3,016,789 $ 4,114,250 $ 2,798,992
Shares issued and repurchased:
Number of shares sold 898,357 3,784,559 269,337 388,919 270,693
Number of shares issued for reinvestment
of distributions 214,352 101,936 _ _ _
Number of shares repurchased (630,058) (92,675) (13,572) (18,970) (15,675)
Net increase 482,651 3,793,820 255,765 369,949 255,018
Distributions to shareholders:
Income dividends per share $ .34 $ .30 $ _ $ _ $ _
Capital gains distribution per share $ .243 $ _ $ _ $ _ $ _
</TABLE>
Balanced is for the period from August 12, 1994 (inception) to March 31, 1995
and six months ended September 30, 1995.
Equity, High Yield and USA Global are for the period from May 19,
1995 (inception) through September 30, 1995.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Funds are registered under the Investment Company Act of 1940, as amended,
as diversified open-end management investment companies. The following is a
summary of significant accounting policies consistently followed by the Funds
in the preparation of their financial statements.
A. Security Valuation _ Corporate stocks, bonds and options traded on a
national securities exchange or national market are
valued at the latest sales price thereof, or if no sale was reported on that
date, the mean between the closing bid and asked price is used.
Securities which are traded over-the-counter are priced at the mean between
the latest bid and asked price. Securities not currently
traded are valued at fair value as determined by the Board of Directors.
B. Federal and State Taxes _ The Funds complied with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
therefore, no provision for federal or state tax is required.
C. Options _ In order to produce incremental earnings and
protect gains, the Funds may write covered call options on portfolio
securities. When Funds write an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect the
current market value of the option written. If an option which a Fund has
written either expires on its stipulated expiration date, or if a Fund enters
into a closing purchase transaction, the Fund realizes a gain (or loss if the
cost of a closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a call option which the Fund has written is exercised, the Fund realizes a
capital gain or loss from the sale of the underlying security and the proceeds
from such sale are increased by the premium originally received.
D. Other _ As is common in the industry, security transactions are accounted
for on the date the securities are purchased or sold. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Realized
gains and losses from investment transactions and unrealized appreciation and
depreciation of investments are reported on the identified cost basis.
2. MANAGEMENT FEES:
Management fees were paid to Jones & Babson, Inc. at the rate of 1% per annum
of the average daily net asset value of the Funds for services which include
administration, and all other operating expenses of the Funds except the cost
of acquiring and disposing of portfolio securities, the taxes, if any, imposed
directly on the Funds and its shares and the cost of qualifying the Fund's
shares for sale in any jurisdiction. Certain officers and/or directors of
the Funds are also officers and/or directors of Jones & Babson, Inc.
3. INVESTMENT TRANSACTIONS:
Investment transactions for the period ended September 30, 1995 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Balanced Fund
Purchases $ 18,631,255
Proceeds from sales 13,587,457
Equity Fund
Purchases $ 1,909,440
Proceeds from sales 243,277
High Yield Fund
Purchases $ 2,495,228
Proceeds from sales 109,693
USA Global Fund
Purchases $ 1,758,020
Proceeds from sales 313,619
4. COVERED CALL OPTIONS:
Covered Call Options Written as of September 30, 1995
Shares
Common Stocks/ Subject to
Expiration Date/Exercise Price Call Value
Balanced Fund
Chevron Corp/Oct/50 2,000 $ 625
National Semiconductor/Oct/35 15,000 1,875
Sybase Corp/Oct/40 10,000 3,750
Western Digital/Nov/20 400 50
Total (premiums received $26,793) $ 6,300
Value of shares subject to call $832,875
Equity Fund
National Semiconductor/Oct/35 2,000 $ 250
Schlumberger/Nov/70 1,000 625
Sybase Corp/Oct/40 1,000 375
Total (premiums received $2,860) $ 1,250
Value of shares subject to call $152,625
USA Global Fund
American Brands/Nov/45 1,000 $ 469
Conner Peripherals: Pacific/Oct/15 2,200 2,209
Intel Corp./Nov/65 1,000 2,000
Lam Research/Nov/70 1,000 1,375
Minnesota Min'g & Mfg/Jan/55 1,000 3,625
Motorola/Oct/75 400 1,400
National Semiconductor/Oct/35 1,500 188
Oracle Corp./Nov/40 1,500 3,000
Schlumberger/Nov/70 1,000 875
Triton Energy/Nov/50 1,000 2,250
Western Digital/Nov/20 3,000 375
Total (premiums received $13,539) $ 17,766
Value of shares subject to call $546,000
Transactions in call options written for the period ended September 30, 1995
were as follows:
Number of Premium
Contracts Amount
Balanced Fund
Balance at March 31, 1995 1,330 $ 60,203
Opened 1,089 72,431
Closed and expired (2,145) (105,841)
Balance at September 30, 1995 274 $ 26,793
Equity Fund
Balance at March 31, 1995 _ $ _
Opened 40 2,860
Closed and expired _ _
Balance at September 30, 1995 40 $ 2,860
USA Global Fund
Balance at March 31, 1995 _ $ _
Opened 146 13,539
Closed and expired _ _
Balance at September 30, 1995 146 $ 13,539
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
Buffalo Balanced Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the statement of net assets, of Buffalo Balanced Fund, Inc.
(the Fund) as of March 31, 1995, and the related statements of operations
and changes in net assets, and the financial highlights for the period from
August 12, 1994 (date of inception) to March 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights 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 financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments owned as of March 31, 1995, by correspondence with the custodian.
As to securities relating to uncompleted transactions, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Buffalo Balanced Fund, Inc. at March 31, 1995, the results of its operations,
the changes in its net assets, and the financial highlights for the period
from August 12, 1994 (date of inception) to March 31, 1995, in conformity
with generally accepted accounting principles.
Kansas City, Missouri
April 26, 1995
