BUFFALO FUNDS
Balanced Fund
Equity Fund
High Yield Fund
Small Cap Fund
USA Global Fund
SEMIANNUAL REPORT
September 30, 1998
MESSAGE
To Our Shareholders
The six months ended September 30, 1998 has been a challenging time for
mutual fund shareholders. Various stock indices have declined
significantly, and market volatility has perplexed even professional
investors.
As pointed out in the Portfolio Management Review section following this
letter, such market conditions can be an opportunity to establish a
foundation for significant future gain. Please read this section
carefully, as it contains information concerning Fund performance,
economic and market trends, and other items of interest to investors.
The newest member of the group, Buffalo Small Cap Fund, became available
on April 14, 1998, and information about its performance since inception
is included in this report.
We appreciate the opportunity to serve all of our investors, both old
and new, and will be happy to answer your questions and comments, or to
provide additional information about your investments.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
Portfolio Management Review
Rarely have we seen investor attitudes change more rapidly than in the
past several months. In this short period sentiment toward the U.S.
economy and stock market has gone from a state of near nirvana to one of
fear and panic. The Asian flu, which at the time of our March annual
report appeared to be contained, has since spread like a firestorm
hitting Russia, Latin America and now the United States and Europe. With
a growing proportion of the world's major continents now in or heading
into recession the U.S. and European stock markets are beginning to
anticipate the same. We have little doubt that the U.S. economy will
slow down in coming quarters. We could even see a mild recession in
early 1999. However, the stock market routinely discounts events some
six months into the future. Therefore, this bear market should be closer
to the end for most stocks, particularly those of both smaller and
beaten-down cyclical companies. While the market could remain range-
bound at these lower levels for some time, we would view any significant
decline from here as a major, long-term
buying opportunity.
Our advice to shareholders is don't panic. We believe new
purchases should be dollar-cost averaged* during this downturn. If you
analyze the history of the stock market, statistics show that purchases
made during downturns are generally viewed favorably 2-3 years later.
Since the Great Depression, according to Stocks, Bonds & Inflation by
Ibbotson & Associates, there have been 16 separate years in which large
company stocks ended with a negative return. This works out to a
negative return about once every 4 years. However, in the two years
following a negative year the returns have historically been very good,
averaging roughly 18% annually. The message is very simple, but often
emotionally difficult - you want to put new money to work when times
are tough and uncertainty is high.
While the past does not dictate the future, we believe the fundamental
backdrop for the U.S. stock market is only temporarily derailed and
stocks could be poised for a powerful recovery by the year 2000. To gain
the proper perspective for this forecast we believe it is necessary to
understand what is presently going on around the globe. It is
particularly important to understand the circumstances and prospects for
recovery in those emerging countries whose economies, currencies and
financial markets have collapsed to only a fraction of their former levels.
Let's start with East Asia. Up until mid 1997 no other region of the
world was experiencing more rapid economic growth. Taiwan, Korea, China,
Singapore, Thailand, Malaysia, Indonesia and Hong Kong all contributed
to the "Asian Miracle" so often referred to in the press. Having
learned from the economic success of Japan and the failure of Russia,
Asian leaders decided throughout the 1970s and 1980s that various forms
of capitalism, not communism, were the path to growth. Asian capitalism
suffered from too much corruption, but in general they established
relatively free markets for goods and services. These countries still
have many things going for them including: huge population bases,
educated work forces, low taxation and high savings rates.
In a world where an increasingly free flow of capital was chasing the
highest returns available, Asia got more than its fair share in the mid
1990s. This included a flood of loans from Japanese, American and
European banks, and massive inflows from U.S. based and other foreign
corporations, mutual funds, pension funds and hedge funds. Many Asian
companies were so confident in the strength and stability of their own
currencies that they borrowed money in U.S. dollars. The end result was
too much easy money which led to rampant asset inflation and a
construction boom throughout Asia, which paralleled the Japanese and
U.S. real estate booms of the mid 1980s. In each of the latter cases the
boom led to a bust. This is exactly what is happening throughout East
Asia at the present.
Boom/bust cycles are a part of history for all countries and typically
are self-correcting over time. For Asia the biggest uncertainty for
recovery is the element of time. The great influx of capital to Asia led
to heavy overbuilding of manufacturing capacity, office space, hotels,
etc. In many cases capital was misallocated based on the close ties
between politicians and corporate leaders. In other cases companies were
simply driven by greed and overconfidence. As foreign investors began to
sense problems in various Asian countries they began to withdraw their
capital. They started by selling the stocks and debt of Thai and
Malaysian companies. Speculators followed by outright selling of their
currencies. This forced a de-pegging of their currencies to the U.S.
dollar. Just as the free flow of capital came in, it began to flow out.
Because their financial markets were relatively illiquid to begin with,
the selling soon led to free-falling markets. Problems intensified when
the crisis spread to Korea. The largest companies in Korea were quasi-
government entities and were highly leveraged, many having borrowed
money in U.S. dollars. As the Korean Won collapsed, dollar denominated
debt ballooned and it quickly became evident it could not be repayed
without external help.
Having been burned in East Asia, developing country lenders and
investors have since pulled their money out of Russia and more recently
Latin America. In the wake of this capital flight, currencies and stock
markets have been decimated in the short term. In the case of Latin
America, previously growing economies are now suffering because of high
interest rates set in place to defend their currencies. Problems in
Latin America finally proved to be too much for the resilient U.S. and
European stock markets. The current declines appear to be due to an
anticipation of much slower growth of the U.S. and European economies
and a downturn in corporate profits. With another ratcheting down in
exports going to Latin America this appears to be a reasonable reaction.
So how do we get out of this mess and why do we believe the U.S. bull
market will resume by the year 2000? The bottom line; we believe one way
or another Asia will outgrow and fix its problems. We also believe there
remains powerful demographic forces in the U.S. that should reemerge as
this crisis subsides - pushing stocks much higher as baby boomers save
for retirement. In Asia there are near term problems that must be
solved. These include reducing corruption and establishing improved
legal, accounting and regulatory infrastructures. They must also
overcome the current wave of anti-capitalism sentiment affecting certain
countries. However, most of the positives that were of great benefit to
these countries before they got in trouble still exist. The countries'
high savings rates should gradually replace the foreign capital that
left. They remain formidable exporters and entrepreneurs. Asian
consumers who tasted the improved lifestyle of the middle and upper
class before the crisis will not soon forget it and will likely strive
to get it back. Excess capacity should be absorbed over time through
increased demand, partnerships and shutdowns. As unlikely as it seems
today, particularly given the sad state of the Japanese banking system,
foreign lenders and investors will again return to Asia to finance
companies with bright futures. The process will take time, probably
years, but if you believe free markets contain self-correcting
mechanisms for boom/bust cycles (we do!) then the outlook for world
economic growth will eventually brighten. A useful time in history to
remember is 1973-74 - the worst U.S. stock market downturn since the
Depression. The Dow was at 600, but at the time people could not see an
upturn on the horizon. Over the next 25 years, however, the market
proceeded to go up fifteen fold.
On a near-term basis the U.S. stock market may enjoy a bounce if the
Federal Reserve further cuts short-term interest rates. Lower short
rates will be positive from the standpoint that they will benefit banks.
In past months banks and bond investors have been charging much higher
rates on loans to corporations and generally making credit less
available due to the higher volatility and uncertainty in the financial
markets. Banks have also felt a need to charge higher rates due to the
flat yield curve. Margins have been squeezed because short-term deposit
rates have not fallen in tandem with long-term government rates. If the
Fed lowers short rates bank profit margins could improve and perhaps
ease the current rationing of credit. However, it is our opinion that
the U.S. market will not resume its previous uptrend just based on a Fed
easing. The market will likely remain volatile and range-bound until it
becomes more evident that international economies have clearly bottomed.
The last subject we want to address is the high yield bond
market. Recently this market has been negatively affected by the turmoil
in the financial markets. As mentioned earlier the risk premium charged
by banks and bond investors has risen sharply, which has increased
corporate bond yields and negatively affected bond prices. The impact
has been severe enough that the average high yield fund now has a
negative return for the year (prices have fallen more than the income
generated). We view this downturn as a great long-term opportunity for
income oriented investors. The high yield bond market is much less
liquid than the stock market or government bond market and will
occasionally experience huge price swings that are not commensurate with
underlying fundamentals. Certainly the profitability of high yield
issuers will be negatively impacted if we have even a mild recession,
thus it is necessary that we scrutinize our purchases very closely.
However, we believe our research efforts and experience will pay off
over the next several years as we lock in very attractive yields for the
funds.
The following is a snapshot and comment on how each of the Buffalo Funds
have performed over the past three and twelve months and since
inception.
Buffalo Balanced Fund
Buffalo Balanced Fund generated total returns (price change and
reinvested distributions) of -12.52% and -8.20% for the three months and
year ended September 30, 1998. Since inception (August 12, 1994) the
Fund has produced an average annualized return of 10.21%. The Lipper
Balanced Fund Index registered returns of -5.79%, 4.82% and 14.31%, for
the respective periods.
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
Three Months One Since
Ended Year Inception
9/30/98 9/30/98 8/12/94
BUFFALO
BALANCED FUND -12.52% -8.20% 10.21%
Lipper Balanced
Fund Index -5.79% 4.82% 14.31%
Buffalo Equity Fund
Buffalo Equity Fund generated total returns (price change and reinvested
distributions) of -15.66% and -9.93% for the three months and year ended
September 30, 1998. Since inception (May 19, 1995) the Fund has produced
an average annualized return of 19.65%. The Lipper Capital Appreciation
Fund Index registered returns of -14.35%, -4.10% and 15.25%, for the
respective periods.
Investment Results - Total Return
Three Months One Since
Ended Year Inception
9/30/98 9/30/98 5/19/95
BUFFALO
EQUITY FUND -15.66% -9.93% 19.65%
Lipper Capital Appreciation
Fund Index -14.35% -4.10% 15.25%
Buffalo High Yield Fund
Buffalo High Yield Fund generated total returns (price change and
reinvested distributions) of -8.17% and -4.89% for the three months and
year ended September 30, 1998. Since inception (May 19, 1995) the Fund
has produced an average annualized return of 11.53%. The Lipper High
Yield Bond Fund Index registered returns of -7.55%, -1.65% and 8.75%,
for the respective
periods.
Investment Results - Total Return
Three Months One Since
Ended Year Inception
9/30/98 9/30/98 5/19/95
BUFFALO
HIGH YIELD FUND -8.17% -4.89% 11.53%
Lipper High Yield Bond
Fund Index -7.55% -1.65% 8.75%
Buffalo Small Cap Fund
Buffalo Small Cap Fund generated total returns (price change and
reinvested distributions) of -11.70% for the three month period ended
September 30, 1998. Since inception (April 14, 1998) the Fund has
produced an average annualized return of -16.20%. The Lipper Small-Cap
Fund Index registered returns of -21.40% and -24.97%, for the respective
periods.
Investment Results - Total Return
Three Months Since
Ended Inception
9/30/98 4/14/98
BUFFALO
SMALL CAP FUND -11.70% -16.20%
Lipper Small-Cap
Fund Index -21.40% -24.97%
Buffalo USA Global Fund
Buffalo USA Global Fund generated total returns (price change and
reinvested distributions) of -12.98% and -11.73% for the three months
and year ended September 30, 1998. Since inception (May 19, 1995) the
Fund has produced an annualized return of 16.69%. The Lipper Capital
Appreciation Fund Index registered returns of -14.35%, -4.10% and 15.25%,
for the respective periods.
Investment Results - Total Return
Three Months One Since
Ended Year Inception
9/30/98 9/30/98 5/19/95
BUFFALO
USA GLOBAL FUND -12.98% -11.73% 16.69%
Lipper Capital Appreciation
Fund Index -14.35% -4.10% 15.25%
All of us on the KCM team appreciate your support of the Buffalo Funds
and as fellow shareholders we will continue our drive to make ownership
of the Funds a rewarding experience over the long term. When you discuss
investments with your friends, family and business associates we hope
you will mention the Buffalo Funds. We look forward to tracking each
Fund's progress for you in future letters.
Sincerely,
/s/John C. Kornitzer /s/Kent W. Gasaway
John C. Kornitzer Kent W. Gasaway
President Sr. Vice President
/s/Tom W. Laming
Tom W. Laming
Sr. Vice President
*This strategy does not assure a profit and does not protect against
loss in declining markets. An investor should be prepared to continue
his or her program of investing at regular intervals, even during
economic down-turns, in order to fully utilize a dollar cost averaging
program.
BUFFALO
BALANCED FUND
STATEMENT OF NET ASSETS
September 30, 1998 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 31.62%
BASIC MATERIALS - 1.17%
40,000 Republic Group, Inc. $ 532,500
CAPITAL GOODS - 2.23%
7,500 Lockheed Martin Corp. 756,094
5,000 Raytheon Co. Cl. B 256,960
1,013,054
CONSUMER CYCLICAL - 8.11%
5,000 Brunswick Corp. 64,687
10,000 Carnival Corp. Cl. A 318,125
25,000 Dillard's, Inc. Cl. A 707,812
30,000 Elcor Corp. 633,750
10,000 Ethan Allen Interiors, Inc. 362,500
30,000 Interface, Inc. Cl. A 360,000
55,000 Kmart Corp. 656,562
20,000 Modine Manufacturing Co. 580,000
3,683,436
CONSUMER STAPLES - 0.32%
5,000 PepsiCo, Inc. 147,188
ENERGY - 6.75%
211,200 Frontier Oil Corp. 1,372,800
49,676 McDermott International, Inc. 1,338,147
27,150 Ocean Energy, Inc. 356,344
3,067,291
FINANCIAL - 4.71%
20,000 Allstate Corp. 833,750
8,700 CIT Group, Inc. Cl. A 222,938
10,000 Fleet Financial Group, Inc. 734,375
10,000 Kansas City Southern Industries, Inc. 350,000
2,141,063
HEALTH CARE - 2.10%
6,300 Merck & Company, Inc. 816,244
1,300 Pfizer, Inc. 137,719
953,963
TECHNOLOGY - 2.92%
8,000 Alcatel Alsthom ADR 136,000
25,000 Diebold, Inc. 550,000
5,000 International Business Machines Corp. 640,000
1,326,000
TRANSPORTATION & SERVICES - 1.49%
33,750 Southwest Airlines Co. 675,000
UTILITIES - 1.82%
15,000 GTE Corp. 825,000
TOTAL COMMON STOCKS 14,364,495
CONVERTIBLE PREFERRED STOCKS - 8.97%
16,500 Bethlehem Steel Corp., $3.50, 144A 645,563
15,000 Cyprus Amax Minerals Co., $4, Series A 618,750
10,000 Freeport-McMoran Copper & Gold Inc.,
dep. shrs. repstg. 0.05 pfd. 161,250
53,900 ICO Holdings, Inc.,
dep. shrs. repstg. 1/4 pfd. cv. 976,937
14,900 Kmart Financing I, 7.750% tr. cv. pfd. secs. 745,000
10,000 Loral Space & Communications Ltd., Series C 445,000
15,000 TXI Captial Trust I, 5.50% tr. pfd. sec. 483,750
TOTAL CONVERTIBLE PREFERRED STOCKS 4,076,250
FACE
AMOUNT DESCRIPTION MARKET VALUE
CORPORATE BONDS - 35.81%
$ 500,000 Advance Stores, Inc., 10.25%
sr. sub. note 144A, due 4-15-08 485,000
690,000 Argosy Gaming Co., 13.25%
1st. mtg. note, due 6-1-04 734,850
1,500,000 Callon Petroleum Co. Delaware,
10.125% sr. sub. note, due 9-15-02 1,473,750
500,000 Chiles Offshore LLC/ Chiles Offshore Finance Corp.,
10.00% sr. note 144A, due 5-1-08 405,000
800,000 Clark Material Handling Co.,
10.75% sr. note, due 11-15-06 818,000
1,000,000 Eagle Geophysical, Inc.,
10.75% sr. note Cl. 144A, due 7-15-08 1,000,000
750,000 Fairchild Semiconductor Corp.,
10.125% sr. sub. note, due 3-15-07 678,750
750,000 Frontier Oil Corp.,
9.125% sr. note, due 2-15-06 701,250
1,000,000 Giant Industries, Inc.,
9.75% gtd. sr. sub. note, due 11-15-03 1,005,000
1,785,000 HS Resources, Inc.,
9.875% sr. sub. note, due 12-1-03 1,749,300
250,000 ICO, Inc., Series A, 10.375% sr. note, due 6-1-07 237,500
1,000,000 Kaiser Aluminum & Chemical Corp.,
9.875% sr. note, due 2-15-02 955,000
500,000 Kaiser Aluminum & Chemical Corp.,
12.75% sr. sub. note, due 2-1-03 492,500
750,000 Nationwide Credit, Inc.,
10.25% sr. sub. note 144A, due 1-15-08 712,500
750,000 Nortek, Inc., 9.875% sr. sub. note, due 3-1-04 751,875
415,000 Pilgrim's Pride Corp.,
10.875% sr. sub. note, due 8-1-03 421,225
500,000 Purina Mills, Inc.,
9.00% sr. sub. note, due 3-15-10 500,000
675,000 Rutherford-Moran Oil Corp.,
10.75% sr. sub. note 144A, due 10-1-04 622,687
300,000 Specialty Retailers, Inc.,
9.00% sr. sub. note, due 7-15-07 268,500
1,550,000 United Refining Co.,
10.75% sr. note, Series A, due 6-15-07 1,247,750
1,300,000 Wiser Oil Co.,
9.50% sr. sub. note 144A, due 5-15-07 1,007,500
TOTAL CORPORATE BONDS 16,267,937
CONVERTIBLE CORPORATE BONDS - 22.07%
1,500,000 Air & Water Technologies Corp.,
8.00% sub. deb., due 5-15-15 1,190,625
1,099,000 Allwaste, Inc., 7.25% sub. deb., due 6-1-14 318,710
1,870,000 Argosy Gaming Co., 12.00% sub. note, due 6-1-01 1,862,988
1,292,000 Exide Corp., 2.90% sr. sub. note, due 12-15-05 647,615
1,500,000 HMT Technology Corp.,
5.75% sub. note, due 1-15-04 986,250
1,658,000 Integrated Device Technology, Inc,
5.50% sub. note, due 6-1-02 1,127,440
1,700,000 Intevac, Inc., 6.50% sub. note 144A, due 3-1-04 1,194,250
1,300,000 Key Energy Group, Inc.,
5.00% sub. note 144A, due 9-15-04 809,250
500,000 Lomak Petroleum, Inc., 6.00% sub. deb., due 2-1-07 395,000
250,000 Micron Technology, Inc.,
7.00% sub. deb., due 7-1-04 232,187
500,000 Moran Energy, Inc., 8.75% sub. deb., due 1-15-08 487,500
500,000 National Semiconductor Corp.,
6.50% sub. note, due 10-1-02 442,500
380,000 VLSI Technology, Inc.,
8.25% sub. note, due 10-1-05 329,650
TOTAL CONVERTIBLE CORPORATE BONDS 10,023,965
TOTAL INVESTMENTS - 98.47% $ 44,732,647
Other assets less liabilities - 1.53% 695,429
TOTAL NET ASSETS - 100.00%
(equivalent to $9.76 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
4,656,786 shares outstanding) $ 45,428,076
See accompanying Notes to Financial Statements.
BUFFALO
EQUITY FUND
STATEMENT OF NET ASSETS
September 30, 1998 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 83.65%
BASIC MATERIALS - 3.35%
18,000 Republic Group, Inc. $ 239,625
25,300 Sigma Aldrich Corp. 730,538
970,163
CAPITAL GOODS - 2.73%
16,400 Allied-Signal, Inc. 580,150
2,100 Lockheed Martin Corp. 211,706
791,856
CONSUMER CYCLICAL - 10.51%
19,500 Brunswick Corp. 252,281
32,800 CompUSA, Inc. 567,850
23,100 Dillard's, Inc. Cl. A 654,019
17,300 Elcor Corp. 365,463
11,600 Ethan Allen Interiors, Inc. 420,500
26,000 Interface, Inc. Cl. A 312,000
39,700 Kmart Corp. 473,919
3,046,032
CONSUMER STAPLES - 9.77%
11,500 McDonald's Corp. 686,406
19,300 PepsiCo, Inc. 568,144
13,000 Sara Lee Corp. 702,000
32,700 Viad Corp. 876,769
2,833,319
ENERGY - 10.57%
8,150 British Petroleum PLC Sh F ADR 711,088
21,800 Enron Corp. 1,151,312
12,000 Royal Dutch Petroleum Co.,
NY Registry Shr Par N Gldr 1.25 571,500
12,500 Schlumberger Ltd. 628,906
3,062,806
FINANCIAL - 18.86%
6,700 Aetna, Inc. 465,650
17,700 Allstate Corp. 737,869
9,000 American Express Co. 698,625
17,500 American Financial Group, Inc. 566,562
26,900 CIT Group, Inc. Cl. A 689,312
12,100 Fleet Financial Group, Inc. 888,594
7,600 Golden West Financial Corp. Delaware 621,775
7,400 PNC Bank Corp. 333,000
9,300 Union Planters Corp. 467,325
5,468,712
HEALTH CARE - 9.12%
14,000 Johnson & Johnson 1,095,500
5,800 Merck & Company, Inc. 751,462
7,700 Schering-Plough Corp. 797,431
2,644,393
TECHNOLOGY - 10.51%
18,300 Cisco Systems, Inc. 1,131,169
24,500 Diebold, Inc. 539,000
18,500 HMT Technology Corp. 144,531
13,300 Loral Space & Communications, Ltd. 196,175
6,300 Microsoft Corp. 693,394
35,300 National Semiconductor Corp. 341,969
3,046,238
TRANSPORTATION & SERVICES - 5.06%
11,850 FDX Corp. 534,731
46,650 Southwest Airlines Co. 933,000
1,467,731
UTILITIES - 3.17%
16,700 GTE Corp. 918,500
TOTAL COMMON STOCKS 24,249,750
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 13.45%
$ 3,900,000 UMB Bank, n.a., 4.85%, due 10-1-98
(Collateralized by U.S. Treasury Notes,
5.875%, due 3-31-99) 3,900,000
TOTAL INVESTMENTS - 97.10% $ 28,149,750
Other assets less liabilities - 2.90% 840,561
TOTAL NET ASSETS - 100.00%
(equivalent to $14.43 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
2,008,400 shares outstanding) $ 28,990,311
See accompanying Notes to Financial Statements.
BUFFALO
HIGH YIELD FUND
STATEMENT OF NET ASSETS
September 30, 1998 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 1.50%
CONSUMER CYCLICAL - 0.71%
96,233 Fedders Corp. Cl. A (non-voting) $ 445,078
ENERGY - 0.79%
18,439 McDermott International, Inc. 496,700
TOTAL COMMON STOCKS 941,778
CONVERTIBLE PREFERRED STOCKS - 13.30%
22,000 Bethlehem Steel Corp., $3.50, 144A 860,750
30,270 Cyprus Amax Minerals Co., $4, Series A 1,248,637
32,600 Freeport-McMoran Copper & Gold, Inc.,
dep. shrs. repstg. 0.05 pfd. cv. step up 525,675
15,000 Hollinger International, Inc.,
9.75% pfd. increased div. equity sec. 191,250
56,000 ICO Holdings, Inc.,
dep. shrs. repstg. 1/4 pfd. cv. 1,015,000
30,900 Kmart Financing I, 7.750% tr. cv. pfd. secs. 1,545,000
26,000 Lomak Financing Trust, tr. cv. pfd. secs. 144A 715,000
17,300 Loral Space & Communications Ltd., Series C 769,850
40,000 Tesoro Petroleum Corp.,
prem. income equity secs.-pies. dep. shrs. 570,000
15,100 TXI Capital Trust I, 5.50% trust pfd. sec. 486,975
10,000 Union Pacific Capital Trust,
6.25% term income deferrable equity secs. 450,000
TOTAL CONVERTIBLE PREFERRED STOCKS 8,378,137
FACE
AMOUNT DESCRIPTION MARKET VALUE
CORPORATE BONDS - 46.21%
$ 1,250,000 Advance Stores, Inc.,
10.25% sr. sub. note 144A, due 4-15-08 1,212,500
400,000 Argosy Gaming Co.,
13.25% 1st. mtg. note, due 6-1-04 426,000
65,000 Bethlehem Steel Corp.,
10.375% sr. note, due 9-1-03 68,900
1,000,000 Callon Petroleum Co. Delaware,
10.125% sr. sub. note, due 9-15-02 982,500
2,000,000 Chiles Offshore LLC/ Chiles Offshore Finance Corp.,
10.00% sr. note 144A, due 5-1-08 1,620,000
950,000 Clark Material Handling Co.,
10.75% unrestricted sr. note 144A,
Series C, due 11-15-06 973,250
500,000 Cliffs Drilling Co., 10.25% sr. note,
Series B, due 5-15-03 540,000
1,245,000 CompUSA, Inc.,
9.50% gtd. sr. sub. note, due 6-15-00 1,238,775
600,000 Duane Reade, Inc.,
9.25% sr. sub. note, due 2-15-08 588,000
2,000,000 Eagle Geophysical, Inc.,
10.75% sr. note Cl. 144A, due 7-15-08 2,000,000
500,000 Exide Corp., 10.00% sr. note, due 4-15-05 478,750
535,000 Fairchild Semiconductor Corp.,
10.125% sr. sub. note, due 3-15-07 484,175
2,000,000 Frontier Oil Corp., 9.125% sr. note, due 2-15-06 1,870,000
435,000 Giant Industries, Inc.,
9.75% gtd. sr. sub. note, due 11-15-03 437,175
765,000 HS Resources, Inc.,
9.875% sr. sub. note, due 12-1-03 749,700
500,000 ICO Holdings, Inc., 10.375% sr. note, due 6-1-07 475,000
500,000 Interface, Inc., 9.50% sr. sub. note,
Series B, due 11-15-05 517,500
121,000 Kmart Corp., pass thru trust 9.78% mtg.
pass thru ctf., Series 95K-2, due 1-15-20 125,235
575,000 Kmart Corp., 8.25% note, due 1-1-22 574,229
65,000 Kmart Funding Corp., 9.44% secd. lease bd.,
Series G, due 7-1-18 69,872
650,000 Kaiser Aluminum & Chemical Corp.,
9.875% sr. note, due 2-15-02 620,750
450,000 Kaiser Aluminum & Chemical Corp.,
12.75% sr. sub. note, due 2-1-03 443,250
750,000 Nationwide Credit, Inc.,
10.75% sr. sub. note 144A, due 1-15-08 712,500
505,000 Nortek, Inc., 9.875% sr. sub. note, due 3-1-04 506,263
100,000 Parker Drilling Co., 9.75% sr. note,
Series B, due 10-15-06 93,000
600,000 Pilgrim's Pride Corp.,
10.875% sr. sub. note, due 8-1-03 609,000
25,000 Plains Resources, Inc.,
10.25% sr. sub. note, Series B, due 3-15-06 24,125
250,000 Premier Parks, Inc., 9.25%, due 4-1-06 247,500
150,000 Premier Parks, Inc., 9.75% sr. note, due 1-15-07 159,750
1,250,000 Purina Mills, Inc.,
9.00% sr. sub. note, due 3-15-10 1,250,000
2,400,000 Republic Group, Inc., 9.50%, due 7-15-08 2,406,000
1,000,000 Rutherford-Moran Oil Corp.,
10.75% sr. sub. note 144A, due 10-1-04 922,500
500,000 Southdown, Inc.,
10.00% sr. sub. note, Series B, due 3-1-06 542,500
1,000,000 Specialty Retailers, Inc.,
9.00% sr. sub. note, due 7-15-07 895,000
1,000,000 Telecommunications Techniques Co. LLC,
9.75% sr. sub. note 144A, due 5-15-08 1,000,000
2,415,000 United Refining Co.,
10.75% sr. note, Series A, due 6-15-07 1,944,075
25,000 URS Corp. New, 8.625% sr. sub. deb., due 1-15-04 25,125
1,650,000 Wiser Oil Co.,
9.50% sr. sub. note 144A, due 5-15-07 1,278,750
TOTAL CORPORATE BONDS 29,111,649
CONVERTIBLE CORPORATE BONDS - 28.77%
570,000 Air & Water Technologies Corp.,
8.00% sub. deb., due 5-15-15 452,437
1,076,000 Allwaste, Inc., 7.25% sub. deb., due 6-1-14 312,040
1,056,000 Argosy Gaming Co., 12.00% sub. note, due 6-1-01 1,052,040
2,950,000 Exide Corp., 2.90% sr. sub. note, due 12-15-05 1,478,688
2,580,000 HMT Technology Corp.,
5.75% sub. note 144A, due 1-15-04 1,696,350
1,470,000 Integrated Device Technology, Inc.,
5.50% sub. note, due 6-1-02 999,600
2,705,000 Intevac, Inc., 6.50% sub. note 144A, due 3-1-04 1,900,263
215,000 Kmart Corp., pass thru trust,
9.35% pass thru ctf., Series 95-K-4, due 1-2-20 225,750
2,135,000 Key Energy Group, Inc.,
5.00% sub. note 144A, due 9-15-04 1,329,037
915,000 Lomak Petroleum, Inc., 6.00% sub. deb., due 2-1-07 722,850
1,760,000 Micron Technology, Inc.,
7.00% sub. note, due 7-1-04 1,634,600
761,000 Moran Energy, Inc., 8.75% sub. deb., due 1-15-08 741,975
1,700,000 National Semiconductor Corp.,
6.50% sub. note 144A, due 10-1-02 1,504,500
550,000 OHM Corp., 8.00% sub. deb., due 10-1-06 497,062
635,000 Oryx Energy Co., 7.50% sub. deb., due 5-15-14 593,725
200,000 Southern Mineral Corp., 6.875% deb., due 10-1-07 122,500
525,000 Swift Energy Co., 6.25% sub. note, due 11-15-06 423,938
1,905,000 VLSI Technology, Inc.,
8.25% sub. note, due 10-1-05 1,652,588
2,000,000 Western Digital Corp., zero cpn.
sub. deb. 144A, due 2-18-18 435,000
378,000 Weston (Roy F.), Inc.,
7.00% sub. deb., due 4-15-02 353,902
TOTAL CONVERTIBLE CORPORATE BONDS 18,128,845
REPURCHASE AGREEMENT - 8.71%
5,490,000 UMB Bank, n.a., 4.85%, due 10-1-98
(Collateralized by U.S. Treasury Notes,
7.00%, due 4-15-99) 5,490,000
TOTAL INVESTMENTS - 98.49% $ 62,050,409
Other assets less liabilities - 1.51% 951,630
TOTAL NET ASSETS - 100.00%
(equivalent to $11.39 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
5,533,279 shares outstanding) $ 63,002,039
See accompanying Notes to Financial Statements.
BUFFALO
SMALL CAP FUND
STATEMENT OF NET ASSETS
September 30, 1998 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 59.48%
BASIC MATERIALS - 3.03%
8,400 Republic Group, Inc. $ 111,825
7,000 Steel Dynamics, Inc. 91,000
202,825
CONSUMER CYCLICAL - 13.91%
5,400 CompUSA, Inc. 93,488
7,500 Elcor Corp. 158,437
2,300 Ethan Allen Interiors, Inc. 83,375
5,000 Fedders Corp. Cl. A (non-voting) 23,125
9,000 Hollinger International, Inc. Cl. A 129,375
12,000 Interface, Inc. Cl. A 144,000
4,500 Modine Manufacturing Co. 130,500
8,100 Paper Warehouse, Inc. 14,175
11,400 Paul Harris Stores, Inc. . 82,650
6,000 Stage Stores, Inc. 73,125
932,250
CONSUMER STAPLES - 1.22%
35,500 Argosy Gaming Co. 82,094
ENERGY - 15.78%
6,000 Callon Petroleum Co. Delaware 88,125
8,000 Dril-Quip, Inc. 140,000
10,000 Eagle Geophysical, Inc. 76,094
25,000 Frontier Oil Corp. 162,500
3,000 Giant Industries, Inc. 36,188
7,000 Global Industries, Inc. 80,938
8,600 ICO Holdings, Inc. 22,038
9,500 Key Energy Group, Inc. 88,469
8,000 Marine Drilling Companies, Inc. 92,000
4,000 McDermott International, Inc. 107,750
6,000 Nabors Industries, Inc. 91,125
5,500 Ocean Energy, Inc. 72,187
1,057,414
FINANCIAL - 7.50%
2,500 Everest Reinsurance Holdings, Inc. 93,281
3,200 Executive Risk, Inc. 144,200
5,000 Heller Financial, Inc. Cl. A 120,000
2,300 PMI Group, Inc. 105,225
1,700 Paula Financial Delaware 16,362
1,600 Stirling Cooke Brown 23,600
502,668
HEALTH CARE - 0.91%
4,000 Combichem, Inc. 16,000
1,500 Human Genome Sciences, Inc. 45,000
61,000
TECHNOLOGY - 16.55%
4,500 Analog Devices, Inc. 72,281
2,500 Applied Micro Circuits Corp. 37,188
2,500 Atlantic Data Services, Inc. 37,500
12,000 Atmel Corp. 108,750
900 Ciena Corp. 12,881
3,700 Diebold, Inc. 81,400
16,400 HMT Technology Corp. 128,125
4,000 Integrated Device Technology, Inc. 21,250
8,100 Intevac, Inc. 57,712
5,000 Loral Space & Communications, Ltd. 73,750
900 Meta Group, Inc. 29,419
1,700 Nanophase Technologies Corp. 3,294
14,200 National Semiconductor Corp. 137,562
3,300 Orbital Sciences Corp. 92,606
6,500 Remec, Inc. 51,797
2,500 SCC Communications Corp. 7,500
1,200 Silicon Valley Group, Inc. 9,600
2,000 Sungard Data Systems, Inc. 63,000
11,000 VLSI Technology, Inc. 83,875
1,109,490
TRANSPORTATION & SERVICES - 0.58%
700 Expeditors International Washington, Inc. 19,425
1,100 Fritz Companies, Inc. 7,494
1,000 United Road Services, Inc. 11,937
38,856
TOTAL COMMON STOCKS 3,986,597
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 39.83%
$ 2,670,000 UMB Bank, n.a., 4.85%, due 10-1-98
(Collateralized by U.S. Treasury Notes,
5.875%, due 3-31-99) 2,670,000
TOTAL INVESTMENTS - 99.31% $ 6,656,597
Other assets less liabilities - 0.69% 46,313
TOTAL NET ASSETS - 100.00%
(equivalent to $8.38 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
799,934 shares outstanding) $ 6,702,910
See accompanying Notes to Financial Statements.
BUFFALO
USA GLOBAL FUND
STATEMENT OF NET ASSETS
September 30, 1998 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 81.66%
BASIC MATERIALS - 1.75%
19,000 Praxair, Inc. $ 621,063
CAPITAL GOODS - 7.91%
28,000 Air Products & Chemicals, Inc. 833,000
17,950 Boeing Co. 615,909
39,000 Teleflex, Inc. 1,365,000
2,813,909
CONSUMER CYCLICAL - 4.89%
68,900 Interface, Inc. Cl. A 826,800
20,900 Lear Corp. 914,375
1,741,175
CONSUMER STAPLES - 15.59%
16,800 Bestfoods, Inc. 813,750
9,200 Coca-Cola Co. 530,150
20,350 McDonald's Corp. 1,214,641
27,500 Sara Lee Corp. 1,485,000
19,800 Wrigley, (Wm.) Jr. Co. 1,503,562
5,547,103
ENERGY - 7.37%
20,000 McDermott International, Inc. 538,750
10,000 McDermott (J. Ray) SA 300,000
11,400 Mobil Corp. 865,688
17,700 Pride International, Inc. 141,600
12,400 Texaco, Inc. 777,325
2,623,363
FINANCIAL - 0.27%
3,400 AFLAC, Inc. 97,113
HEALTH CARE - 13.82%
14,600 American Home Products Corp. 764,675
10,700 Bristol-Myers Squibb Co. 1,111,463
18,200 Johnson & Johnson 1,424,150
15,600 Schering-Plough Corp. 1,615,575
4,915,863
TECHNOLOGY - 30.06%
31,000 AMP, Inc. 1,108,250
37,900 Analog Devices, Inc. 608,769
17,900 Applied Micro Circuits Corp. 266,262
25,650 Cisco Systems, Inc. 1,585,491
22,200 Hewlett-Packard Co. 1,175,212
100,300 HMT Technology Corp. 783,594
39,800 Integrated Device Technology, Inc. 211,437
4,500 Intel Corp. 385,875
TECHNOLOGY (Continued)
75,500 Intevac, Inc. 537,937
8,000 Microsoft Corp. 880,500
12,100 Motorola, Inc. 516,519
43,600 National Semiconductor Corp. 422,375
8,300 OSI Systems, Inc. 63,287
24,400 Rockwell International Corp. 881,450
21,600 Seagate Technology, Inc. 541,350
2,000 SED International Holdings, Inc. 10,125
22,600 Thermoquest Corp. 220,350
45,900 Western Digital Corp. 493,425
10,692,208
TOTAL COMMON STOCKS 29,051,797
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 17.26%
$ 6,140,000 UMB Bank, n.a., 4.85%, due 10-1-98
(Collateralized by U.S. Treasury Notes,
8.875%, due 11-15-98) 6,140,000
TOTAL INVESTMENTS - 98.92% $ 35,191,797
Other assets less liabilities - 1.08% 383,292
TOTAL NET ASSETS - 100.00%
(equivalent to $14.48 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
2,456,856 shares outstanding) $ 35,575,089
See accompanying Notes to Financial Statements.
STATEMENTS OF ASSETS
AND LIABILITIES
September 30, 1998 (unaudited)
<TABLE>
<CAPTION> SMALL CAP FUND
PERIOD FROM
April 14, 1998
(inception)
TO
SEPTEMBER 30
BALANCED EQUITY HIGH YIELD (inception) USA GLOBAL
FUND FUND FUND 1998 FUND
</CAPTION>
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (identified cost $49,272,789,
$28,415,239, $68,670,047, $7,300,093 and
$36,176,176, respectively) $ 44,732,647 $ 28,149,750 $ 62,050,409 $ 6,656,597 $ 35,191,797
Cash - 20,995 - 43,955 -
Dividends receivable 62,077 42,026 49,339 2,358 26,760
Interest receivable 810,472 - 1,251,984 - -
Receivable for investments sold - 777,540 - - 373,186
Total assets 45,605,196 28,990,311 63,351,732 6,702,910 35,591,743
LIABILITIES AND NET ASSETS:
Cash overdraft 177,120 - 43,793 - 16,654
Payable for investments purchased - - 305,900 - -
Total liabilities 177,120 - 349,693 - 16,654
NET ASSETS $ 45,428,076 $ 28,990,311 $ 63,002,039 $ 6,702,910 $ 35,575,089
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 46,052,289 $ 28,227,151 $ 68,235,499 $ 7,325,986 $ 33,683,918
Accumulated undistributed net investment income 135,256 28,434 298,832 24,306 41,021
Accumulated undistributed net realized gain (loss)
on investment transactions 3,780,673 1,000,215 1,087,346 (3,886) 2,834,529
Net unrealized depreciation in value of investments (4,540,142) (265,489) (6,619,638) (643,496) (984,379)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 45,428,076 $ 28,990,311 $ 63,002,039 $ 6,702,910 $ 35,575,089
Capital shares, $1.00 par value
Authorized 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Outstanding 4,656,786 2,008,400 5,533,279 799,934 2,456,856
NET ASSET VALUE PER SHARE $ 9.76 $ 14.43 $ 11.39 $ 8.38 $ 14.48
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS
OF OPERATIONS
Six months ended September 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
April 14, 1998
(inception)
TO
SEPTEMBER 30
BALANCED EQUITY HIGH YIELD (inception) USA GLOBAL
FUND FUND FUND 1998 FUND
</CAPTION>
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 266,513 $ 191,932 $ 306,430 $ 5,849 $ 215,221
Interest 1,475,242 42,551 2,332,585 34,544 84,875
1,741,755 234,483 2,639,015 40,393 300,096
Expenses (Note 2):
Management fees 263,235 168,810 348,905 16,087 210,317
Registration fees and expenses 14,855 17,802 32,775 - 19,826
278,090 186,612 381,680 16,087 230,143
Net investment income 1,463,665 47,871 2,257,335 24,306 69,953
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain (loss) from investment
transactions
(excluding repurchase agreements):
Proceeds from sales of investments 17,233,051 18,325,025 5,331,868 483,381 10,787,429
Cost of investments sold 14,669,468 18,190,630 4,627,990 487,267 9,286,305
Net realized gain (loss) from sales
of investments 2,563,583 134,395 703,878 (3,886) 1,501,124
Gain from option contracts written - 131,784 - - 146,331
Net realized gain (loss) from
investment transactions 2,563,583 266,179 703,878 (3,886) 1,647,455
Unrealized appreciation (depreciation)
on investments:
Beginning of period 6,226,301 5,061,945 2,438,312 - 7,774,430
End of period (4,540,142) (265,489) (6,619,638) (643,496) (984,379)
Increase in net unrealized depreciation
on investments (10,766,443) (5,327,434) (9,057,950) (643,496) (8,758,809)
Net loss on investments (8,202,860) (5,061,255) (8,354,072) (647,382) (7,111,354)
Decrease in net assets resulting
from operations $ (6,739,195) $ (5,013,384) $ (6,096,737) $ (623,076) $ (7,041,401)
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED FUND
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(unaudited) MARCH 31, 1998
</CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,463,665 $ 2,756,228
Net realized gain (loss) from investment transactions 2,563,583 3,252,742
Net unrealized appreciation (depreciation) of investments
during the period (10,766,443) 4,622,864
Net increase (decrease) in net assets resulting from operations (6,739,195) 10,631,834
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (1,347,119) (2,775,972)
Net realized gain from investment transactions - (3,860,703)
Total distributions to shareholders (1,347,119) (6,636,675)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 5,317,057 12,885,564
Net asset value of shares issued for reinvestment of distributions 553,851 6,520,617
5,870,908 19,406,181
Cost of shares repurchased (7,790,373) (11,716,138)
Net increase (decrease) from capital share transactions (1,919,465) 7,690,043
Total increase (decrease) in net assets (10,005,779) 11,685,202
NET ASSETS:
Beginning of period 55,433,855 43,748,653
End of period (including undistributed net investment income
of $135,256, $28,434, $298,832, $24,306 and
$41,021, respectively) $ 45,428,076 $ 55,433,855
*Shares issued and repurchased:
Number of shares sold 414,122 1,120,147
Number of shares issued for reinvestment of distributions 127,576 595,174
Number of shares repurchased (705,492) (1,033,780)
Net increase (decrease) (163,794) 681,541
**Distributions to shareholders:
Income dividends per share $ .29 $ .6501
Capital gains distribution per share $ - $ .9079
</TABLE>
See accompanying Notes to Financial Statements.
(STATEMENTS OF CHANGES
IN NET ASSETS continued)
<TABLE>
<CAPTION>
SMALL CAP FUND
PERIOD FROM
APRIL 14,
EQUITY FUND HIGH YIELD FUND 1998 USA GLOBAL FUND
SIX MONTHS ENDED SIX MONTHS ENDED (INCEPTION) SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED TO SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED
1998 MARCH 31, 1998 MARCH 31, 1998 1998 MARCH 31,
(unaudited) 1998 (unaudited) 1998 (unaudited) (unaudited) 1998
</CAPTION>
<C> <C> <C> <C> <C> <C> <C>
$ 47,871 $ 163,013 $ 2,257,335 $ 2,212,557 $ 24,306 $ 69,953 $ 202,448
266,179 2,896,922 703,878 785,270 (3,886) 1,647,455 3,042,358
(5,327,434) 5,310,379 (9,057,950) 2,131,299 (643,496) (8,758,809) 6,945,488
(5,013,384) 8,370,314 (6,096,737) 5,129,126 (623,076) (7,041,401) 10,190,294
(83,534) (161,898) (2,018,084) (2,186,837) - (103,881) (175,131)
- (3,468,742) - (642,456) - - (2,940,660)
(83,534) (3,630,640) (2,018,084) (2,829,293) - (103,881) (3,115,791)
4,877,373 12,516,901 19,356,944 55,449,764 7,858,807 4,289,858 23,849,303
82,638 3,566,498 958,992 2,687,187 - 101,402 3,019,319
4,960,011 16,083,399 20,315,936 58,136,951 7,858,807 4,391,260 26,868,622
(6,105,722) (5,659,255) (20,456,768) (8,765,697) (532,821) (7,146,324) (15,559,371)
(1,145,711) 10,424,144 (140,832) 49,371,254 7,325,986 (2,755,064) 11,309,251
(6,242,629) 15,163,818 (8,255,653) 51,671,087 6,702,910 (9,900,346) 18,383,754
35,232,940 20,069,122 71,257,692 19,586,605 - 45,475,435 27,091,681
$ 28,990,311 $ 35,232,940 $ 63,002,039 $ 71,257,692 $ 6,702,910 $ 35,575,089 $ 45,475,435
300,747 759,078 1,548,551 4,360,648 862,808 264,831 1,466,815
5,005 234,208 76,231 212,697 - 6,236 198,067
(377,653) (354,109) (1,643,900) (690,445) (62,874) (443,642) (957,318)
(71,901) 639,177 (19,118) 3,882,900 799,934 (172,575) 707,564
$ .04 $ .0977 $ .37 $ .8004 $ - $ .04 $ .0653
$ - $ 1.8186 $ - $ .2365 $ - $ - $ 1.0157
</TABLE>
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 are 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, 1998,
(excluding maturities of short-term commercial notes and repurchase
agreements) are as follows:
Balanced Fund
Purchases $ 16,119,796
Proceeds from sales 17,233,051
Equity Fund
Purchases $ 13,888,098
Proceeds from sales 18,325,025
High Yield Fund
Purchases $ 27,504,277
Proceeds from sales 5,331,868
Small Cap Fund
Purchases $ 5,117,361
Proceeds from sales 483,381
USA Global Fund
Purchases $ 5,400,614
Proceeds from sales 10,787,429
4. COVERED CALL OPTIONS:
There were no outstanding covered call options as of September 30, 1998.
Transactions in call options written for the period ended
September 30, 1998, were as follows:
Number of Premium
Contracts Amount
Equity Fund
Balance at March 31, 1998 - $ -
Opened 806 131,784
Expired (806) (131,784)
Balance at September 30, 1998 - $ -
USA Global Fund
Balance at March 31, 1998 - $ -
Opened 1,485 146,331
Expired (1,485) (146,331)
Balance at September 30, 1998 - $ -
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
Small Cap Fund
USA Global Fund
Buffalo Funds
Jones & Babson Distributors
A member of the Generali Group
P.O. Box 419757
Kansas City, MO 64141-6757
1-800-49-BUFFALO
(1-800-492-8332)
JB9C-1 11/98
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919228
<NAME> BUFFALO BALANCED FUND INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 49272789
<INVESTMENTS-AT-VALUE> 44732647
<RECEIVABLES> 872549
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45605196
<PAYABLE-FOR-SECURITIES> 0
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