BUFFALO
FUNDS
Balanced Fund
Equity Fund
High Yield Fund
USA Global Fund
SEMIANNUAL REPORT
September 30, 1996
MESSAGE
To Our Shareholders
We are excited to be reporting to you after a very successful period for the
Buffalo Funds. The Fund group continues to grow in size and the Buffalo name
is becoming more widely recognized in the industry due to the Fund's strong
investment performance thus far in 1996 and since inception.
We believe the success of the Funds this year can be largely attributed to
their unique investment strategies, which in some cases varies widely from the
average fund in their peer group. Let us give you some examples. The Buffalo
Balanced Fund is one of only a few funds in the industry which invests in a
combination of common stocks, convertible bonds and non-investment grade
corporate bonds. The Buffalo USA Global Fund is another example of a fund with
a unique investment strategy. The USA Global Fund invests only in U.S. based
companies which generate at least 40% of total revenues or profits outside the
U.S. The Fund has been riding a powerful wave in 1996. This emanates from a
robust demand for U.S. goods and services by numerous rapidly developing
overseas economics such as China, S.E. Asia and South America. We have seen
these trends developing for years and believe that some of the biggest
beneficiaries might well be U.S. companies, particularly those with powerful
brands and well developed overseas distribution. We feel these trends, as
strong as they have been this year, are still in their early stages.
Our overall view of the U.S. stock and bond markets remains quite optimistic.
We feel the Federal Reserve's recent decision not to raise short-term interest
rates, in the face of very strong GDP (Gross Domestic Product) growth in the
second quarter, sends a strong and bullish signal to the market that the
economy can continue to enjoy reasonable growth without inflationary
consequences. Another positive sign in our view is the recent slowing in the
growth of consumer credit. We have worried in the past that elevated consumer
debt burdens might trigger the next recession. However, the current numbers
point to a consumer which is reliquifying short-term. This bodes well for
economic growth in 1997 given the recent strong picture for job growth.
We would list two major caveats to our favorable forecast for the financial
markets. One would be any changes to current expectations for the upcoming
elections, that being a Democratic President balanced by a Republican
Congress. Finally, we see the other potential risk being a major flare-up of
oil prices which have climbed and remained much higher than anticipated for
most of 1996. Strong world economic growth fueling strong oil demand may be
the current driving force versus Middle East politics which have been the
primary catalyst in the past. As a hedge to this possibility, certain Buffalo
Funds may continue to carry an overweighted position in energy-related
securities.
We appreciate your confidence as a Buffalo Fund Shareholder and we look
forward to tracking the group's progress with you in future periods. The
following is a snapshot and comment on how each Fund has performed over the
past six months, one year and since inception.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
Buffalo Balanced Fund
Buffalo Balanced Fund generated total returns (price change and reinvested
distributions) of 8.38% and 15.85% for the six months and year ended September
30, 1996. Since inception (August 12, 1994) the Fund has produced an average
annualized return of 13.66%. The average balanced fund, as measured by Lipper
Analytical Services, registered returns of 4.70%, 11.83% and 14.11%, for the
respective periods. The Fund's 30-day current yield for the period ended
September 30, 1996, was 6.59%.
The portfolio manager shifted more of the Fund's assets toward high yield
corporate bonds during the period as the rise in interest rates created a
number of attractive buying opportunities. Convertible securities were
modestly de-emphasized since our last report, largely due to limited
availability. At September 30, 1996, the Fund held 30.3% of Fund assets in
common stocks, 34.6% in corporate bonds, 29.5% in convertible securities and
5.6% in cash and other investments. The Fund made two distributions during the
six months ended September 30, 1996. On June 28 and September 30 the Balanced
Fund paid dividends of $.16 and $.18, respectively.
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.
Investment Results - Total Return
SIX MONTHS ONE SINCE
ENDED YEAR INCEPTION
9/30/96 9/30/96 8/12/94
BUFFALO
BALANCED FUND 8.38% 15.85% 13.66%
Lipper Balanced
Fund Index 4.70% 11.83% 14.11%
Buffalo Equity Fund
Buffalo Equity Fund generated total returns (price change and reinvested
distributions) of 13.51% and 25.94% for the six months and year ended
September 30, 1996. Since inception (May 19, 1995) the Fund has produced an
average annualized return of 32.18%. The average capital appreciation fund, as
measured by Lipper Analytical Services, registered returns of 6.94%, 15.54%
and 24.06%, for the respective periods.
The Fund's investment results were enhanced by certain strategic moves made by
the portfolio manager during the period. In the March annual report we
mentioned two specific industries which were targeted for heavy weighting -
energy and technology. The relative outperformance of these sectors accounted
for a good portion of the Fund's relative strength during the past six months.
Recently, more Fund assets have been shifted toward certain cyclical stocks,
particularly autos, transportation and conglomerates. With the Federal Reserve
less inclined to raise interest rates and more apt to let the economy grow, we
believe investors could return to certain cyclical industries given their
strong earnings and low stock valuations.
Investment Results - Total Return
SIX MONTHS ONE SINCE
ENDED YEAR INCEPTION
9/30/96 9/30/96 5/19/95
BUFFALO
EQUITY FUND 13.51% 25.94% 32.18%
Lipper Capital Appreciation
Fund Index 6.94% 15.54% 24.06%
Buffalo High Yield Fund
Buffalo High Yield Fund generated total returns (price change and reinvested
distributions) of 7.26% and 14.11% for the six months and year ended September
30, 1996. Since inception (May 19, 1995) the Fund produced an average
annualized return of 17.79%. The average high yield fund, as measured by
Lipper Analytical Services, produced returns of 6.30%, 12.04% and 11.99%, for
the respective periods. The Fund's 30-day current yield at September 30, 1996,
was 8.11%.
The High Yield Fund, like the Balanced Fund, emphasized high yield corporate
bond purchases during the period as the supply of convertible securities
remained relatively light. The Fund benefited from a general tightening of
interest rate spreads between lower-rated and higher-rated corporate bonds,
thus the sharp increase in Treasury rates during the period had little impact
on the Fund. Given the positive outlook for the U.S. economy, there should be
continued strong demand for high yield securities in 1997. The Fund made two
distributions during the six months ended September 30, 1996. On June 28 and
September 30 the Fund paid dividends of $.18 and $.20, respectively.
Investment Results - Total Return
SIX MONTHS ONE SINCE
ENDED YEAR INCEPTION
9/30/96 9/30/96 5/19/95
BUFFALO
HIGH YIELD FUND 7.26% 14.11% 17.79%
Lipper High Current Yield
Fund Index 6.30% 12.04% 11.99%
Buffalo USA Global Fund
Buffalo USA Global Fund generated total returns (price change and reinvested
distributions) of 19.72% and 29.90% for the six months and year ended
September 30, 1996. Since inception (May 19, 1995) the Fund produced an
average annualized return of 28.28%. The average capital appreciation fund, as
measured by Lipper Analytical Services, produced returns of 6.94%, 15.54% and
24.06%, for the respective periods.
During the period, the portfolio manager continued to identify exciting large
and medium sized U.S. companies which met the Fund's 40% international sales
and/or profit exposure criteria. Technology, consumer non-durable and capital
goods stocks continued to represent the Fund's heaviest weightings. Since
quarter end the Fund has added to it's energy holdings. Overall, these sectors
appear to be the best positioned to benefit from the growing overseas demand
for U.S. goods and services. They generally have large foreign infrastructures
in place for both manufacturing and sales. The positive international sales
trends of these companies seem to be in their early stages.
Investment Results - Total Return
SIX MONTHS ONE SINCE
ENDED YEAR INCEPTION
9/30/96 9/30/96 5/19/95
BUFFALO
USA GLOBAL FUND 19.72% 29.90% 28.28%
Lipper Capital Appreciation
Fund Index 6.94% 15.54% 24.06%
BUFFALO
BALANCED FUND
STATEMENT OF NET ASSETS
September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
</CAPTION>
<S> <C> <C>
COMMON STOCKS - 30.27%
CAPITAL GOODS - 7.01%
10,000 Allied-Signal, Inc. $ 658,750
1,062 Hudson General Corp. 42,480
10,000 Tenneco, Inc. 501,250
24,000 Trinity Industries, Inc. 801,000
25,000 WMX Technologies, Inc. 821,875
2,825,355
CONSUMER CYCLICAL - 5.88%
50,000 Chrysler Corp. 1,431,250
10,000 General Motors Corp. 480,000
10,000 Goodyear Tire & Rubber Co. 461,250
2,372,500
CONSUMER NON-CYCLICAL - 0.79%
5,000 Walt Disney Co. 316,875
CONSUMER STAPLES - 1.61%
40,000 Entremed, Inc. 650,000
ENERGY - 9.18%
10,000 Amoco Corp. 705,000
5,000 British Petroleum PLC Sh F ADR 625,000
10,000 Chevron Corp. 626,250
10,000 Coastal Corp. 412,500
10,000 Nabors Industries, Inc. 136,250
20,000 Noble Drilling Corp. 302,500
20,000 Triton Energy Ltd. 895,000
3,702,500
TECHNOLOGY - 5.80%
15,000 A T & T Corp. 783,750
5,000 Intel Corp. 477,188
10,000 Pitney Bowes, Inc. 527,500
10,000 Sybase, Inc. 148,750
10,000 Western Digital Corp 401,250
2,338,438
TOTAL COMMON STOCKS 12,205,668
CONVERTIBLE PREFERRED STOCK - 1.13%
20,000 ICO Inc., dep. shrs. repstg. 1/4 pfd. cv. 455,000
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
</CAPTION>
CORPORATE BONDS - 34.60%
$ 1,300,000 CompUSA, Inc., 9.50% gtd. sr. sub. note, due 6-15-00 1,340,625
1,000,000 Giant Industries, Inc., 9.75% gtd. sr. sub. note, due 11-15-03 1,012,500
1,300,000 Harris Chemical North America, Inc., 10.25% gtd. sr. secd. note,
due 7-15-01 1,332,500
1,500,000 HS Resources, Inc., 9.875% sr. sub. note, due 12-1-03 1,481,250
1,000,000 Kaiser Aluminum & Chemical Corp., 9.875% sr. note, due 2-15-02 1,025,000
500,000 Maxus Energy Corp., 9.875% note, due 10-15-02 511,250
500,000 Nortek Inc., 9.875% sr. sub. note, due 3-1-04 487,500
365,000 Payless Cashways, Inc., 9.125% sr. sub. note, due 4-15-03 237,250
415,000 Pilgrim's Pride Corp., 10.875% sr. sub. note, due 8-1-03 417,075
460,000 RJR Nabisco Inc., 8.75% gtd. sr. note, due 4-15-04 457,125
200,000 RJR Nabisco Inc., 8.75% note, due 8-15-05 194,898
805,000 Santa Fe Energy Resources, Inc., 11.00% sr. sub. deb., due 5-15-04 893,550
150,000 Stone Container Corp., 10.75% 1st mtg. note, due 10-1-02 157,875
1,700,000 Stone Container Corp., 11.50% sr. note, due 10-1-04 1,808,375
100,000 Triangle Pacific Corp. Delaware, 10.50% sr. note, due 8-1-03 105,500
75,000 Tuboscope Vetco International, Inc., 10.75% gtd. sr. sub. note,
due 4-15-03 79,875
52,000 Wainoco Oil Corp., 10.75% sub. deb., due 10-1-98 52,390
1,795,000 Wainoco Oil Corp., 12.00% sr. note, due 8-1-02 1,880,263
500,000 Wheeling-Pittsburgh Corp., 9.375% sr. note, due 11-15-03 477,500
TOTAL CORPORATE BONDS 13,952,301
CONVERTIBLE CORPORATE BONDS - 28.34%
1,500,000 Air & Water Technologies Corp., 8.00% sub. deb., due 5-15-15 1,323,750
935,000 Allwaste Inc., 7.25% sub. deb., due 6-1-14 797,087
1,870,000 Argosy Gaming Co., 12.00% sub. note, due 6-1-01 1,664,300
500,000 Ashland Inc., 6.75% sub. deb., due 7-1-14 507,500
2,000,000 Bally Entertainment Corp., 10.00% sub. deb., due 12-15-06 2,080,000
500,000 Beverly Enterprises Inc., 7.625% sub. deb., due 3-15-03 470,000
360,000 Key Energy Group, Inc., 7.00% sub. deb., due 7-1-03 372,600
500,000 Moran Energy Inc., 8.75% sub. deb., due 1-15-08 427,500
1,355,000 OHM Corp., 8.00% sub. deb., due 10-1-06 1,221,194
1,595,000 Oryx Energy Co., 7.50% sub. deb., due 5-15-14 1,475,375
1,000,000 Rohr Industries, Inc., 7.00% sub. deb., due 10-1-12 900,000
200,000 UNC Inc., 7.50% sub. deb., due 3-31-06 188,500
TOTAL CONVERTIBLE CORPORATE BONDS 11,427,806
REPURCHASE AGREEMENT - 2.10%
845,000 UMB Bank, n.a., 5.08%, due 10-1-96
(Collateralized by U.S. Treasury Notes, 6.50%,
due 11-30-96) 845,000
TOTAL INVESTMENTS - 96.44% $ 38,885,775
Other assets less liabilities - 3.56% 1,434,671
TOTAL NET ASSETS -100.00%
(equivalent to $11.25 per share; 10,000,000 shares of $1.00 par value
capital shares authorized; 3,584,035 shares outstanding) $ 40,320,446
</TABLE>
See accompanying Notes to Financial Statements.
BUFFALO
EQUITY FUND
STATEMENT OF NET ASSETS
September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
</CAPTION>
<S> <C> <C>
COMMON STOCKS - 90.19%
BASIC MATERIALS - 5.18%
5,000 ASARCO, Inc $ 133,125
5,000 Cyprus Amax Minerals Co. 107,500
1,500 Eastman Chemical Co. 87,563
5,000 Georgia Gulf Corp. 149,375
5,000 Weyerhaeuser Co. 230,625
708,188
CAPITAL GOODS - 10.55%
2,500 Allied-Signal, Inc. 164,687
1,000 Ingersoll-Rand Co. 47,500
10,000 Rockwell International Corp. 563,750
10,000 Tenneco, Inc. 501,250
5,000 WMX Technologies, Inc. 164,375
1,441,562
CONSUMER CYCLICAL - 13.46%
10,000 Argosy Gaming Co. 68,750
20,000 Chrysler Corp. 572,500
12,000 General Motors Corp. 576,000
10,000 Goodyear Tire & Rubber Co. 461,250
1,000 Toys "R" Us, Inc. 29,125
5,000 Wal-Mart Stores, Inc. 131,875
1,839,500
CONSUMER NON-CYCLICAL - 0.93%
2,000 Walt Disney Co. 126,750
CONSUMER STAPLES - 5.52%
5,000 Dial Corp. New 68,750
13,000 McDonald's Corp. 615,875
5,000 Viad Corp. 70,000
754,625
ENERGY - 29.23%
3,000 Amoco Corp. 211,500
5,000 British Petroleum PLC Sh F ADR 625,000
5,000 Chevron Corp. 313,125
10,000 Coastal Corp. 412,500
10,000 Mapco, Inc. 596,250
25,000 Nabors Industries, Inc. 340,625
10,000 Noble Drilling Corp. 151,250
5,000 Oryx Energy Co. 86,250
5,000 Questar Corp. 176,875
7,500 Schlumberger, Ltd. 633,750
10,000 Triton Energy Ltd. 447,500
3,994,625
FINANCIAL - 2.07%
500 Allstate Corp. 24,625
2,000 Hambrecht & Quist Group, Inc. 38,750
5,000 KeyCorp New 220,000
283,375
TECHNOLOGY - 16.85%
5,000 A T & T Corp. 261,250
1,000 AMP, Inc. 38,750
1,000 Applied Materials, Inc. 27,625
18,000 Claremont Technology Group, Inc. 648,000
6,000 Datalogix International Inc. 46,500
6,500 General Electric 591,500
1,000 Intel Corp. 95,438
1,650 Lucent Technologies, Inc. 75,693
10,000 National Semiconductor Corp. 201,250
2,500 Pitney Bowes, Inc. 131,875
5,000 Sybase, Inc. 74,375
5,000 Sync Research, Inc. 77,500
3,000 Visigenic Software, Inc. 33,750
2,303,506
TRANSPORTATION & SERVICES - 6.40%
15,000 Southwest Airlines Co. 343,125
5,000 Trinity Industries, Inc. 166,875
5,000 Union Pacific Corp. 363,750
873,750
TOTAL COMMON STOCKS 12,325,881
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
</CAPTION>
REPURCHASE AGREEMENT - 33.80%
$ 4,620,000 UMB Bank, n.a., 5.08%, due 10-1-96
(Collateralized by U.S. Treasury Notes, 6.50%,
due 11-30-96) 4,620,000
TOTAL INVESTMENTS - 123.99% $ 16,945,881
Other assets less liabilities - (23.99%) (3,278,797)
TOTAL NET ASSETS - 100.00%
(equivalent to $14.02 per share; 10,000,000 shares of $1.00 par value
capital shares authorized; 974,731 shares outstanding) $ 13,667,084
</TABLE>
See accompanying Notes to Financial Statements.
BUFFALO
HIGH YIELD FUND
STATEMENT OF NET ASSETS
September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
</CAPTION>
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 3.36%
9,800 ICO, Inc., dep. shrs. repstg. 1/4 pfd. cv. $ 222,950
10,000 Sante Fe Energy Resources, Inc. 230,000
TOTAL CONVERTIBLE PREFERRED STOCKS 452,950
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
</CAPTION>
CORPORATE BONDS - 49.71%
$ 200,000 Argosy Gaming Co., 13.25% 1st mtg. note, due 6-1-04 201,000
65,000 Bethlehem Steel Corp., 10.375% sr. note, due 9-1-03 68,575
565,000 CompUSA, Inc., 9.50% gtd. sr. sub. note, due 6-15-00 582,656
500,000 Exide Corp., 10.00% sr. note, due 4-15-05 515,000
410,000 Giant Industries, Inc., 9.75% gtd. sr. sub. note, due 11-15-03 415,125
450,000 Harris Chemical North America, Inc., 10.25% gtd. sr. secd. note,
due 7-15-01 461,250
595,000 HS Resources, Inc., 9.875% sr. sub. note, due 12-1-03 587,563
500,000 Interface, Inc., 9.50% sr. sub. note, Series B, due 11-15-05 502,500
560,000 Kaiser Aluminum & Chemical Corp., 9.875% sr. note, due 2-15-02 574,000
100,000 Maxus Energy Corp., 9.875% note, due 10-15-02 102,250
10,000 Maxus Energy Corp., 11.50% deb., due 11-15-15 10,450
255,000 Nortek Inc., 9.875% sr. sub. note, due 3-1-04 248,625
290,000 Payless Cashways, Inc., 9.125% sr. sub. note, due 4-15-03 188,500
575,000 Pilgrim's Pride Corp., 10.875% sr. sub. note, due 8-1-03 577,875
370,000 RJR Nabisco, Inc., 8.75% note, due 8-15-05 360,562
160,000 RJR Nabisco, Inc., 9.25% deb., due 8-15-13 157,466
475,000 Stone Container Corp., 11.50% sr. note, due 10-1-04 505,281
250,000 Wainoco Oil Corp., 12.00% sr. note, due 8-1-02 261,875
400,000 Wheeling-Pittsburgh Corp., 9.375% sr. note, due 11-15-03 382,000
TOTAL CORPORATE BONDS 6,702,553
CONVERTIBLE CORPORATE BONDS - 34.50%
560,000 Air & Water Technologies Corp., 8.00% sub. deb., due 5-15-15 494,200
400,000 Argosy Gaming Co., 12.00% sub. note, due 6-1-01 356,000
490,000 Bally Entertainment Corp., 10.00% sub. deb., due 12-15-06 509,600
595,000 Key Energy Group, Inc., 7.00% sub. deb., due 7-1-03 615,825
635,000 Moran Energy Inc., 8.75% sub. deb., due 1-15-08 542,925
515,000 OHM Corp., 8.00% sub. deb., due 10-1-06 464,143
535,000 Oryx Energy Co., 7.50% sub. deb., due 5-15-14 494,875
25,000 Plains Resources, Inc., 10.25% sr. sub. note, Series B, due 3-15-06 26,188
50,000 Repap Wisconsin, Inc., 9.875% 2nd priority sr. secd. note, due 5-1-06 49,250
500,000 Rohr Industries, Inc., 7.00% sub. deb., due 10-1-12 450,000
300,000 UNC, Inc., 7.50% sub. deb., due 3-31-06 282,750
440,000 Wainoco Oil Corp., 7.75% sub. deb., due 6-1-14 365,200
TOTAL CONVERTIBLE CORPORATE BONDS 4,650,956
REPURCHASE AGREEMENT - 8.49%
1,145,000 UMB Bank, n.a., 5.08%, due 10-1-96
(Collateralized by U.S. Treasury Notes, 6.50%, due 11-30-96) 1,145,000
TOTAL INVESTMENTS - 96.06% $ 12,951,459
Other assets less liabilities - 3.94% 531,784
TOTAL NET ASSETS - 100.00%
(equivalent to $11.60 per share; 10,000,000 shares of $1.00 par value
capital shares authorized; 1,162,008 shares outstanding) $ 13,483,243
</TABLE>
See accompanying Notes to Financial Statements.
BUFFALO
USA GLOBAL FUND
STATEMENT OF NET ASSETS
September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
</CAPTION>
<S> <C> <C>
COMMON STOCKS - 84.69%
BASIC MATERIALS - 2.43%
9,700 Nalco Chemical Co. $ 351,625
CAPITAL GOODS - 18.23%
12,000 Cincinnati Milacron, Inc. 226,500
9,100 Commercial Intertech Corp. 104,650
6,200 Cummins Engine Inc. 244,125
5,000 Eaton Corp. 301,875
2,500 Emerson Electric Co. 225,313
2,500 Fluor Corp. 153,750
9,000 Ingersoll-Rand Co. 427,500
8,500 Lear Seating Corp. 280,500
4,500 Teleflex, Inc. 223,312
1,200 United Technologies Corp. 144,150
6,400 York International Corp. New 309,600
2,641,275
CONSUMER CYCLICAL - 4.56%
3,000 Exide Corp. 77,625
15,500 Interface Inc. Cl. A 267,375
12,000 Modine Manufacturing 315,000
660,000
CONSUMER STAPLES - 22.28%
5,000 Bausch & Lomb, Inc. 183,750
6,500 Baxter International Inc. 303,875
2,200 Bristol-Myers Squibb Co. 212,025
3,000 CPC International, Inc. 224,625
3,000 Coca-Cola Co. 152,625
2,500 Gillette Co. 180,312
6,500 Johnson & Johnson 333,125
9,500 McDonald's Corp. 450,062
4,500 Pfizer, Inc. 356,062
10,000 Sara Lee Corp. 357,500
3,500 Schering-Plough Corp. 215,250
4,300 Wrigley, (Wm.) Jr. Co. 259,075
3,228,286
ENERGY - 4.31%
3,700 Mobil Corp. 428,275
1,000 Schlumberger, Ltd. 84,500
2,500 Triton Energy Ltd. 111,875
624,650
FINANCIAL - 6.30%
11,000 AFLAC, Inc. 390,500
4,100 American International Group, Inc. 413,075
1,200 Citicorp 108,750
912,325
TECHNOLOGY - 26.58%
7,000 AMP, Inc. 271,250
11,250 Analog Devices, Inc. 305,156
4,500 Applied Materials, Inc. 124,313
1,500 Ascend Communications, Inc. 99,188
7,500 Autodesk, Inc. 194,063
4,000 Bay Networks, Inc. 109,000
6,000 Cirrus Logic, Inc. 125,250
5,000 Cisco Systems, Inc. 310,313
5,500 Compaq Computer Corp. 352,688
5,000 Dallas Semiconductor Corp. 91,250
5,000 Farallon Communications, Inc. 52,500
2,500 Informix Corp. 69,687
8,500 Integrated Device Technology, Inc. 84,469
3,000 Intel Corp. 286,312
12,000 Interlink Computer Sciences, Inc. 112,500
1,250 Microsoft Corp. 164,844
2,000 Motorola, Inc. 103,250
13,000 National Semiconductor Corp. 261,625
3,250 Oracle Systems Corp. 138,328
4,500 Seagate Technology 251,437
3,000 Sybase, Inc. 44,625
7,000 Technology Modeling Associates, Inc. 91,000
5,400 VLSI Technology Inc. 87,750
3,000 Western Digital Corp. 120,375
3,851,173
TOTAL COMMON STOCKS 12,269,334
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
</CAPTION>
REPURCHASE AGREEMENT - 13.81%
$ 2,000,000 UMB Bank, n.a., 5.08%, due 10-1-96
(Collateralized by U.S. Treasury Notes, 6.50%,
due 11-30-96) 2,000,000
TOTAL INVESTMENTS - 98.50% $ 14,269,334
Other assets less liabilities - 1.50% 217,969
TOTAL NET ASSETS - 100.00%
(equivalent to $13.60 per share; 10,000,000 shares of $1.00 par value
capital shares authorized; 1,065,107 shares outstanding) $ 14,487,303
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF ASSETS
AND LIABILITIES
September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (identified cost
$35,546,893, $16,299,855,
$12,622,172, and $13,231,967,
respectively) $ 38,885,775 $ 16,945,881 $ 12,951,459 $ 14,269,334
Cash 156,310 87,890 152,885 223,618
Dividends receivable 45,814 19,571 4,092 10,167
Interest receivable 883,658 - 346,459 -
Receivables for investments sold 388,202 244,125 303,848 144,099
Total assets 40,359,759 17,297,467 13,758,743 14,647,218
LIABILITIES AND NET ASSETS:
Payable for investments purchased - 3,610,600 275,500 156,915
Call options written 39,313 19,783 - 3,000
Total liabilities 39,313 3,630,383 275,500 159,915
NET ASSETS $ 40,320,446 $ 13,667,084 $ 13,483,243 $ 14,487,303
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 34,233,236 $ 12,148,218 $ 12,990,547 $ 12,708,424
Accumulated net investment income 134,700 73,149 2,391 21,425
Accumulated net realized gain on investment
transactions 2,604,681 798,214 161,008 715,214
Net unrealized appreciation in value
of investments 3,347,829 647,503 329,287 1,042,240
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 40,320,446 $ 13,667,084 $ 13,483,243 $ 14,487,303
Capital shares, $1.00 par value
Authorized 10,000,000 10,000,000 10,000,000 10,000,000
Outstanding 3,584,035 974,731 1,162,008 1,065,107
NET ASSET VALUE PER SHARE $ 11.25 $ 14.02 $ 11.60 $ 13.60
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS
OF OPERATIONS
Six months ended September 30, 1996 (unaudited)
<TABLE>
<CAPTION>
BALANCED EQUITY HIGH YIELD USA GLOBAL
FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 258,264 $ 63,695 $ 27,498 $ 53,626
Interest 1,489,348 72,387 412,736 36,440
1,747,612 136,082 440,234 90,066
Expenses (Note 2):
Management fees 233,154 46,792 47,097 44,295
Registration fees and expenses 22,032 15,666 24,620 24,023
255,186 62,458 71,717 68,318
Net investment income 1,492,426 73,624 368,517 21,748
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 17,337,775 2,771,658 1,402,472 3,019,372
Cost of investments sold 15,500,960 2,039,934 1,241,454 2,315,621
Net realized gain from sales
of investments 1,836,815 731,724 161,018 703,751
Gain from option contracts written 166,938 66,490 - 11,463
Net realized gain
from investment
transactions 2,003,753 798,214 161,018 715,214
Unrealized appreciation on investments:
Beginning of period 3,194,398 314,492 84,281 209,331
End of period 3,347,829 647,503 329,287 1,042,240
Increase in net unrealized
appreciation on investments 153,431 333,011 245,006 832,909
Net gain on investments 2,157,184 1,131,225 406,024 1,548,123
Increase in net assets
resulting from
operations $ 3,649,610 $ 1,204,849 $ 774,541 $ 1,569,871
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
Six Months Ended September 30, 1996 (unaudited)
and Year/Periods Ended March 31, 1996
<TABLE>
<CAPTION>
BALANCED FUND EQUITY FUND HIGH YIELD FUND USA GLOBAL FUND
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
FROM FROM FROM
MAY 19, MAY 19, MAY 19,
FOR THE 1995 1995 1995
YEAR (INCEPTION) (INCEPTION) (INCEPTION)
ENDED TO TO TO
SEPTEMBER MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER MARCH 31,
1996 1996 1996 1996 1996 1996 1996 1996
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income $1,492,426 $2,770,884 $73,624 $75,612 $368,517 $274,689 $21,748 $49,722
Net realized gain from
investment transactions 2,003,753 1,933,420 798,214 219,023 161,018 79,136 715,214 149,721
Unrealized appreciation
of investments during
the period 153,431 2,451,634 333,011 314,492 245,006 84,281 832,909 209,331
Net increase in net
assets resulting
from operations 3,649,610 7,155,938 1,204,849 609,127 774,541 438,106 1,569,871 408,774
DISTRIBUTIONS TO
SHAREHOLDERS FROM:**
Net investment income (1,343,097) (2,863,777) - (76,262) (365,432) (275,340) - (50,373)
In excess of net invest-
ment income - (14,629) - (475) - (694) - (323)
Net realized gain from
investment transactions - (1,616,588) - (219,023) - (79,136) - (149,721)
Total distributions to
shareholders (1,343,097) (4,494,994) - (295,760) (365,432) (355,170) - (200,417)
INCREASE (DECREASE) FROM
CAPITAL SHARE
TRANSACTIONS:*
Proceeds from shares
sold 5,011,988 17,922,485 7,257,393 5,779,023 6,930,520 7,417,075 8,321,621 5,092,206
Net asset value of shares
issued for reinvestment
of distributions 655,405 4,322,228 - 276,620 121,306 316,259 - 190,594
5,667,393 22,244,713 7,257,393 6,055,643 7,051,826 7,733,334 8,321,621 5,282,800
Cost of shares
repurchased (17,726,840) (13,084,808) (740,557) (524,262) (1,278,357) (616,256) (418,394) (577,603)
Net increase (decrease)
from capital share
transactions (12,059,447) 9,159,905 6,516,836 5,531,381 5,773,469 7,117,078 7,903,227 4,705,197
Total increase
(decrease) in net
assets (9,752,934) 11,820,849 7,721,685 5,844,748 6,182,578 7,200,014 9,473,098 4,913,554
NET ASSETS:
Beginning of period 50,073,380 38,252,531 5,945,399 100,651 7,300,665 100,651 5,014,205 100,651
End of period
(including undis-
tributed net
investment income
of $134,700, $73,149,
$2,391, and $21,425,
respectively) $40,320,446 $50,073,380 $13,667,084 $5,945,399 $13,483,243 $7,300,665 $14,487,303 $5,014,205
* Shares issued and
repurchased:
Number of shares sold 454,292 1,695,938 549,198 492,584 608,464 671,559 657,007 466,457
Number of shares
issued for reinvest-
ment of distributions 59,528 413,155 - 22,492 10,773 28,449 - 17,014
Number of shares
repurchased (1,608,119) (1,234,579) (55,681) (43,862) (112,200) (55,037) (33,285) (52,086)
Net increase
(decrease) (1,094,299) 874,514 493,517 471,214 507,037 644,971 623,722 431,385
** Distributions to
shareholders:
Income dividends per
share $0.18 $0.678 $ - $0.203 $0.20 $0.534 $ - $0.1465
Capital gains
distribution per
share $ - $0.402 $ - $0.514 $ - $0.134 $ - $0.392
</TABLE>
See accompanying Notes to Financial Statements.
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 a Fund
writes 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 - 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 values 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 Funds'
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, 1996, (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Balanced Fund
Purchases $ 6,418,860
Proceeds from sales 17,337,775
Equity Fund
Purchases $ 8,940,020
Proceeds from sales 2,771,658
High Yield Fund
Purchases $ 6,510,238
Proceeds from sales 1,402,472
USA Global Fund
Purchases $ 9,373,308
Proceeds from sales 3,019,372
4. COVERED CALL OPTIONS:
The following Covered Call Options Written remained outstanding
as of September 30, 1996:
Shares
Common Stocks/ Subject to
Expiration Date/Exercise Price Call Value
Balanced Fund
Allied-Signal, Inc/Nov/70 4,000 $ 3,000
Amoco Corp/Oct/75 10,000 938
British Petroleum/Oct/125 4,000 5,125
Sybase, Inc/Dec/30 10,000 1,250
Trinity Industries, Inc/Oct/35 14,000 5,250
Triton Energy Ltd/Oct/50 10,000 1,250
Western Digital Corp/Oct/40 10,000 22,500
Total (premiums received $48,260) $ 39,313
Value of shares subject to call $2,933,250
Equity Fund
Amoco Corp/Oct/75 3,000 $ 281
ASARCO, Inc/Oct/30 5,000 1,250
AT&T Corp/Oct/60 5,000 157
Cyprus Amax Minerals Co/Oct/25 5,000 157
General Electric/Nov/95 2,000 2,062
General Motors Corp/Oct/55 2,000 63
Goodyear Tire & Rubber Co/Oct/50 2,000 750
MAPCO, Inc/Oct/60 4,000 6,500
National Semiconductor Corp/Oct/22.5 10,000 1,250
Oryx Energy Co/Nov/20 5,000 781
Questar Corp/Oct/40 5,000 156
Schlumberger, Ltd/Nov/90 2,000 2,000
Trinity Industries, Inc/Oct/35 4,000 1,500
Triton Energy Ltd/Nov/60 6,000 563
Wal-Mart Stores, Inc/Nov/27.5 2,000 1,000
Walt Disney Co/Oct/65 2,000 688
WMX Technologies, Inc/Oct/35 5,000 625
Total (premiums received $21,260) $ 19,783
Value of shares subject to call $3,181,375
USA Global Fund
Cincinnati Milacron, Inc/Nov/22.5 12,000 $ 3,000
Total (premiums received $7,873) $ 3,000
Value of shares subject to call $226,500
Transactions in call options written for the period ended
September 30, 1996, were as follows:
Number of Premium
Contracts Amount
Balanced Fund
Balance at March 31, 1996 800 $ 32,111
Opened 3,170 183,088
Closed and expired (3,350) (166,939)
Balance at September 30, 1996 620 $ 48,260
Equity Fund
Balance at March 31, 1996 50 $ 1,495
Opened 1,981 86,255
Closed and expired (1,341) (66,490)
Balance at September 30, 1996 690 $ 21,260
USA Global Fund
Balance at March 31, 1996 10 $ 611
Opened 181 18,725
Closed and expired (71) (11,463)
Balance at September 30, 1996 120 $ 7,873
This report has been prepared for the information of the Shareholders of the
Buffalo Funds, and is not to be construed as an offering of the shares of the
Funds. Shares of the Funds are offered only by the Prospectus, a copy of which
may be obtained from Jones & Babson, Inc.
BUFFALO MUTUAL FUNDS
Balanced Fund
Equity Fund
High Yield Fund
USA Global Fund
BUFFALO
FUNDS
Jones & Babson
2440 Pershing Road
Kansas City, Missouri 64108-2518
1-800-49-BUFFALO
(1-800-492-8332)
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