<PAGE> 1
REA-GRAHAM
FUND, INC.
LOGO
REA-GRAHAM BALANCED FUND
10966 Chalon Road, Los Angeles, California 90077
(800) 433-1998 (310) 442-2660
- --------------------------------------------------------------------------------
November 30, 1996
Dear Shareholders,
We are pleased to present this Semi-Annual Report and to include an update
on performance*.
For fiscal year-to-date (3/31/96 through 11/30/96), our Fund is UP 6.13%.
For the trailing 24 months (ending 11/30/96), the Rea-Graham Balanced Fund has
gained 22.21% total return. From inception 6/30/76, the Fund has provided
investors with a cumulative return of 473.14% -- a compound annual rate of
return of 8.93%. These results were achieved with low risk, low volatility, and
consistent application of the investment principles of our founding partners,
Benjamin Graham and James Rea, Sr.
At September 30, 1996, our Fund held:
26% Common Stocks
26% Medium-Term Treasury Notes
48% Liquid Cash Instruments
During much of this year, we have diligently captured capital gains on
portfolio stocks by selling selected issues at a profit. Consequently, the Fund
now holds only 17% of assets in common stocks. We view this as a temporary
situation. Many of the common stocks held in the portfolio provided superior
gains of 30% to 60%. For instance:
<TABLE>
<S> <C>
Fremont General +31% Norwest +46%
KCS Energy +35% Barnett Banks +50%
Keycorp. +43% Fleet Financial +55%
MBIA +60%
</TABLE>
The good news is our Fund is up nicely this year, and our assets are well
protected. Allocation to Treasury Notes (1 to 3 year maturities) has provided
income, and the cash portion has temporarily been increased and we anticipate
that this strong buying power will be used to purchase both additional stocks
and bonds at bargain prices.
When I wrote to Shareholders at this time a year ago, I cautioned that "U.S.
stocks provide few bargain opportunities at these levels." If that assessment
had merit then, and I believe it did, then U.S. equities are now overvalued and
added caution is required.
Our important message is one of safety, coupled with growth and income.
Since formation more than 20 years ago, the Rea-Graham Balanced Fund has
provided Shareholders with attractive risk-adjusted returns, while at the same
time maintaining a track record of asset protection at times when stock prices
are falling sharply.
We wish you a happy Holiday Season, and a prosperous New Year.
Sincerely,
/s/ JAMES B. REA, JR
James B. Rea, Jr.
President
Rea-Graham Balanced Fund, Inc.
*Performance information is based on total return including reinvestment of
dividend distributions and excluding sales charges.
<PAGE> 2
REA-GRAHAM BALANCED FUND
[A Mountain Chart Appears Here]
Pursuant to Rule 304(a) of Regulation S-T, the following narrative
description replaces the chart that appears on this page of the Semi-Annual
Report:
The chart that appears here is a "mountain chart" that depicts the cumulative
change in value of a $10,000 investment in the Fund made on June 30, 1976,
assuming the reinvestment of net investment income and capital gains
distributions. For the period ended November 30, 1996, the ending value was
$57,314, which represents a cumulative total return of 473.14% and an annual
compound return of 8.93%, measured from June 30, 1976.
The following chart is depicted in conjunction with the mountain chart:
Illustration of an assumed investment of $10,000* with net investment income and
capital gains distributions reinvested.
1996 Fiscal Year-to-Date: +6.13%
(3/31/96 thru 11/30/96)
<TABLE>
<CAPTION>
Period Total
Ended Value
-------- -------
<C> <C>
06/30/76 $10,000
12/31/76 $10,846
12/31/77 $11,194
12/31/78 $12,355
12/31/79 $14,362
12/31/80 $15,837
12/31/81 $18,391
08/19/82** $18,856
03/31/83 $23,035
03/31/84 $23,789
03/31/85 $26,928
03/31/86 $34,380
03/31/87 $37,602
03/31/88 $38,273
03/31/89 $41,182
03/31/90 $43,010
03/31/91 $43,477
03/31/92 $46,797
03/31/93 $49,662
03/31/94 $48,213
03/31/95 $48,291
03/31/96 $54,005
09/30/96 $56,035
11/30/96 $57,314
</TABLE>
* Net amount invested. The maximum initial sales charge payable on an
investment in the Fund is 4.75%. The public offering price of $10,000 net
investment in the Fund would be $10,499, assuming no waiver or reduction of
sales charges. No adjustment has been made for income taxes payable by
shareholders on net investment income or capital gains distributions. The
average annual total return for 1, 5, and 10 years ended September 30, 1996
was +6.46%, +4.48% and +4.78%, respectively, reflecting the deduction of the
one-time maximum sales charge, deduction of all Fund expenses on an annual
basis and assuming that all distributions are reinvested when paid. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
initial cost. The Fund's future performance, as to which there can be no
guarantee.
** Pro forma information through April 29, 1982, the date the Fund succeeded to
the business of Rea, Graham-Plan Fund.
Initial public offering date was August 19, 1982.
2
<PAGE> 3
REA-GRAHAM BALANCED FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
NAME OF ISSUER OF SHARES VALUE
-------------- --------- ----------
<S> <C> <C>
COMMON STOCKS -- 25.94%
BANKS -- 7.73%
Barnett Banks (U.S.A.).... 7,000 $ 236,250
Fleet Financial
(U.S.A.)................ 4,000 178,000
Keycorp. (U.S.A.)......... 5,386 236,984
Norwest CP (U.S.A.)....... 6,000 245,250
---------
896,484
---------
BEEF SLAUGHTER/PRODUCTS
-- 0.80%
IBP Inc. (U.S.A.)......... 4,000 93,000
---------
FINANCIAL SERVICES -- 1.19%
Advanta Corp. CL. A
(U.S.A.)................ 3,000 138,000
---------
FLEET MANAGEMENT/
LEASING -- 0.97%
Rollins Truck Lease
(U.S.A.)................ 10,000 112,500
---------
INDUSTRIALS -- 4.86%
AUTO PARTS -- 1.90%
Excel Industries Inc.
(U.S.A.).............. 13,000 221,000
SPRING MANUFACTURING --
2.03%
Leggett & Platt
(U.S.A.).............. 8,000 235,000
TIRES -- 0.93%
Cooper Tire (U.S.A.).... 5,000 108,125
---------
564,125
---------
<CAPTION>
NUMBER
NAME OF ISSUER OF SHARES VALUE
-------------- --------- ----------
<S> <C> <C>
INSURANCE/SERVICES -- 1.85%
MBIA Inc. (U.S.A.)........ 2,500 $ 214,375
---------
JET FUEL/OIL RECOVERY --
1.01%
World Fuel Services
(U.S.A.)................ 7,000 117,250
---------
RESTAURANTS -- 1.17%
Cracker Barrel............ 6,000 135,750
---------
STORES (RETAIL/WHSL.) --
0.86%
Cash American
International
(U.S.A.)................ 14,000 99,750
---------
TECHNOLOGY-ENERGY -- 1.38%
Wheelabrator Tech
(U.S.A.)................ 10,500 160,125
---------
UTILITIES -- 4.12%
Delmarva Pwr & Lt Co.
(U.S.A.)................ 7,500 153,750
N.Y. State Electric & Gas
(U.S.A)................. 5,000 110,000
Nipsco Industries
(U.S.A.)................ 6,000 214,500
---------
478,250
---------
TOTAL COMMON STOCKS
(Cost $2,662,047)......... $3,009,609
---------
</TABLE>
3
<PAGE> 4
REA-GRAHAM BALANCED FUND
STATEMENT OF INVESTMENTS, CONTINUED
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
NAME OF ISSUER AMOUNT VALUE
-------------- ---------- -----------
<S> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS -- 75.65%
LONG-TERM U.S. GOVERNMENT
OBLIGATIONS -- 25.52%
U.S. Treasury Note,
5.375%, 11/30/97..... $1,000,000 $ 994,061
U.S. Treasury Note,
5.03%, 1/31/98....... 1,000,000 987,812
U.S. Treasury Note,
5.125%, 12/31/98..... 1,000,000 979,061
-----------
2,960,934
-----------
SHORT-TERM U.S.
GOVERNMENT
OBLIGATIONS -- 50.13%
U.S. Treasury Bills,
5.10%, 10/3/96....... 825,000 824,766
U.S. Treasury Bills,
5.015%, 10/17/96..... 1,000,000 997,771
U.S. Treasury Bills,
4.90%, 10/31/96...... 425,000 423,265
U.S. Treasury Bills,
5.08%, 11/29/96...... 1,275,000 1,264,385
<CAPTION>
PRINCIPAL
NAME OF ISSUER AMOUNT VALUE
-------------- ---------- -----------
<S> <C> <C>
U.S. Treasury Bills,
5.17%, 11/29/96...... 2,325,000 $ 2,305,300
-----------
5,815,487
-----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS(Cost
$8,813,365)............ 8,776,421
-----------
OTHER SHORT-TERM
INVESTMENTS -- 0.07%
Chase Institutional
Money Market (Cost
$7,802).............. 7,802
-----------
TOTAL INVESTMENTS (Cost
$11,483,214+) -- 101.66%.. 11,793,832
OTHER ASSETS LESS
LIABILITIES -- (1.66%)... (192,253)
-----------
NET ASSETS -- 100%....... $11,601,579
===========
</TABLE>
+ Aggregate cost for federal income tax purpose is identical.
See Notes to Financial Statements.
4
<PAGE> 5
REA-GRAHAM BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at value (cost $11,483,214)................................................. $11,793,832
Dividends and interest receivable....................................................... 43,794
Other................................................................................... 6,789
-----------
Total assets............................................................................ 11,844,415
-----------
LIABILITIES:
Payables:
Securities purchased.................................................................. 185,775
Capital shares redeemed............................................................... 9,841
Accrued expenses and other.............................................................. 47,220
-----------
Total liabilities....................................................................... 242,836
-----------
NET ASSETS:
Net assets, equivalent to $14.90 per share on 778,788 shares outstanding (Note 4)....... $11,601,579
===========
</TABLE>
REA-GRAHAM BALANCED FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends............................................................................. $ 38,041
Interest.............................................................................. 234,955
Other................................................................................. 1,436
-----------
Total income..................................................................... 274,432
-----------
Expenses:
Investment advisory fee (Note 3)...................................................... 58,509
Distribution fee (Note 3)............................................................. 20,613
Custodian fees........................................................................ 10,830
Transfer agency fees and expenses..................................................... 9,525
Administrative expenses............................................................... 13,974
Registration and filing fees.......................................................... 10,378
Legal................................................................................. 5,259
Audit and accounting.................................................................. 13,537
Recordkeeping and pricing fees........................................................ 8,895
Directors' fees and meeting expenses.................................................. 3,982
Printing and postage.................................................................. 7,226
Other................................................................................. 3,105
-----------
Total expenses................................................................... 165,833
-----------
Net investment income............................................................ 108,599
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments........................................................ 123,576
Unrealized appreciation of investments for the period................................... 199,835
-----------
Net gain on investments.......................................................... 323,411
-----------
Net increase in net assets from operations.............................................. $ 432,010
===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
REA-GRAHAM BALANCED FUND
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
1996 1996
------------- -----------
<S> <C> <C>
Increase in Net Assets from Operations:
Net investment income...................................................... $ 108,599 $ 271,374
Net realized gain on investments........................................... 123,576 1,056,147
Unrealized appreciation for the period..................................... 199,835 212,662
------------ -----------
Net increase in net assets from operations.......................... 432,010 1,540,183
Dividends paid to shareholders from net investment income.................... -- (285,223)
Capital share transactions (Note 4).......................................... (1,107,517) (3,219,767)
------------ -----------
Total decrease...................................................... (675,507) (1,964,807)
NET ASSETS:
Beginning of period........................................................ 12,277,086 14,241,893
------------ -----------
End of period (including undistributed net investment income of $166,932
and $58,333)............................................................. $11,601,579 $12,277,086
============ ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE> 7
REA-GRAHAM BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Rea-Graham Balanced Fund (the Fund) is the only series of shares of
Rea-Graham Funds, Inc., a diversified open-end management investment company
registered under the Investment Company Act of 1940. It was organized in 1982 to
succeed to the business of Rea, Graham-Plan Fund, an investment company
organized as a limited partnership which commenced operations June 30, 1976 for
the purpose of investing the partners' capital in securities under professional
investment management. This succession occurred on April 29, 1982 when the
partnership's net assets aggregating $3,436,275 were transferred to the Fund in
exchange for 300,000 shares of the Fund's capital stock. The Fund seeks as its
investment objectives medium-term capital growth, income and safety through
balanced investments in common stocks, preferred stocks, U.S. Government
securities and money market instruments.
The selected financial information, for the periods prior to April 29, 1982
(Note 6), gives effect to the assumed issuance of shares for partners' capital
contributions based upon the 300,000 shares issued on April 29, 1982 as
described above.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(a) Valuation of securities. Investments are stated at value based on
latest sales prices reported on national securities exchanges on the
last business day of the period. Investments for which no sale is
reported, or which are traded over the counter, are valued at the mean
between bid and asked prices.
(b) Income taxes. The Fund intends to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income to its shareholders. Therefore
no provision has been made for federal income taxes.
(c) Use of estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(d) Other. Securities transactions are recorded on the trade date basis.
Interest is accrued as earned and dividend income is recorded on the
ex-dividend date, except that certain dividends from foreign
securities are recorded as soon as information is available to the
Fund. Dividends and capital gain distributions to shareholders are
recorded on the ex-dividend date.
3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains James Buchanan Rea, Inc. (Adviser) as its investment
adviser. Under the terms of the agreement the Adviser receives a monthly fee of
1/12 of 1% of the first $20,000,000 of the Fund's net assets on the last
business day of the month, 1/12 of .75% of the next $80,000,000, 1/12 of .5% of
the next $100,000,000, and 1/12 of .45% of monthly net assets in excess of
$200,000,000. The Adviser has agreed to reduce its advisory fee for all expenses
(excluding certain defined expenses) in excess of limitations set under
applicable state securities laws. No reduction in fee was required for the
period ended September 30, 1996.
7
<PAGE> 8
REA-GRAHAM BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
Pursuant to a Plan of Distribution the Fund pays monthly to James Buchanan
Rea, Inc., as Principal Underwriter, a distribution fee equal on an annual basis
to 0.35% of the Fund's average daily net assets. There were no additional
expenses borne by the Fund pursuant to the Plan of Distribution.
During this period, James Buchanan Rea, Inc. earned commissions of $55 as
principal underwriter and authorized dealer in Fund shares.
4. CAPITAL STOCK
At September 30, 1996, there were 20,000,000 shares of capital stock ($1
par value) authorized and capital paid-in amounted to $12,634,328. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.................... 3,354 $ 48,647 8,496 $ 119,521
Issued on reinvestment
of dividends.......... -- -- 18,700 266,474
Redeemed................ (79,271) (1,156,164) (258,015) (3,605,762)
-------- ----------- -------- -----------
Net decrease............ (75,917) $(1,107,517) (230,819) $(3,219,767)
========= =========== ========= ===========
</TABLE>
5. INVESTMENT TRANSACTIONS
During the six months ended September 30, 1996, purchase and sales of
investment securities, excluding short-term obligations, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
COST OF OF
PURCHASES SALES
-------- ----------
<S> <C> <C>
U.S. Government Obligations.................... $ 0 $ 999,688
Other securities............................... 185,775 297,183
-------- ----------
$185,775 $1,296,871
========= ==========
</TABLE>
The aggregate portfolio turnover of the Fund for the six months ended
September 30, 1996 was 3%. Portfolio turnover on stocks was 7%. Portfolio
turnover on U.S. Government Obligations was 0%.
Realized gains and losses are reported on an identified cost basis.
Accumulated undistributed net realized losses at September 30, 1996 were
$1,510,299. Such amounts represent tax basis capital losses which may be carried
forward to offset future capital gains. Such losses expire in varying amounts
from March 31, 1999 to March 31, 2003.
At September 30, 1996, the aggregate gross unrealized appreciation and
(depreciation) of portfolio securities, based on cost for federal income tax
purposes, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................. $ 403,779
Unrealized depreciation.................................. (93,161)
---------
$ 310,618
==========
</TABLE>
8
<PAGE> 9
REA-GRAHAM BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
6. SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEARS ENDED MARCH 31,
SEPTEMBER -------------------------------------------------------------------------
30, 1996 1996 1995 1994 1993 1992 1991 1990
--------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD)
Net asset value, beginning of
period............................ $ 14.36 $ 13.12 $ 13.20 $ 13.68 $ 13.14 $ 12.84 $ 13.56 $ 13.90
------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income............. 0.15 0.31 0.15 0.07 0.21 0.59 0.75 0.90
Net realized and unrealized gain
(loss) on investments........... 0.39 1.24 (0.13) (0.47) 0.59 0.37 (0.65) (0.27)
------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations.... 0.54 1.55 0.02 (0.40) 0.80 0.96 0.10 0.63
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income.......................... 0.00 (0.31) (0.10) (0.08) (0.26) (0.66) (0.82) (0.96)
Dividends from net realized
gains........................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.01)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions................. 0.00 (0.31) (0.10) (0.08) (0.26) (0.66) (0.82) (0.97)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period...... $ 14.90 $ 14.36 $ 13.12 $ 13.20 $ 13.68 $ 13.14 $ 12.84 $ 13.56
======= ======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)... $11,602 $12,277 $14,242 $17,877 $24,771 $28,281 $34,758 $43,386
Ratios to average net assets:
Expenses.......................... 2.79%* 2.65% 2.52% 2.37% 2.16% 2.06% 2.04% 1.60%
Net investment income............. 1.83%* 2.02% 1.08% 0.49% 1.45% 4.05% 5.27% 5.82%
Aggregate portfolio turnover rate... 3% 223% 93% 106% 87% 109% 100% 125%
Portfolio turnover rate on
stocks**.......................... 7% 88% 36%
Net asset value adjusted for
reinvestment of dividends and
distributions:
Beginning of period............... $ 32.58 $ 29.14 $ 29.09 $ 29.97 $ 28.24 $ 26.23 $ 25.95 $ 24.85
======= ======= ======= ======= ======= ======= ======= =======
End of period..................... $ 33.81 $ 32.58 $ 29.14 $ 29.09 $ 29.97 $ 28.24 $ 26.23 $ 25.95
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN........................ 3.76% 11.81% 0.17% (2.94)% 6.13% 7.66% 1.08% 4.43%
<CAPTION>
1989 1988 1987 1986
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD)
Net asset value, beginning of
period............................ $ 13.83 $ 15.56 $ 16.45 $ 13.65
------- ------- ------- -------
Income from investment operations:
Net investment income............. 0.78 0.66 0.43 0.50
Net realized and unrealized gain
(loss) on investments........... 0.25 (0.46) 0.98 3.06
------- ------- ------- -------
Total from investment operations.... 1.03 0.20 1.41 3.56
------- ------- ------- -------
Less distributions:
Dividends from net investment
income.......................... (0.68) (1.03) (0.47) (0.53)
Dividends from net realized
gains........................... (0.28) (0.90) (1.83) (0.23)
------- ------- ------- -------
Total distributions................. (0.96) (1.93) (2.30) (0.76)
------- ------- ------- -------
Net asset value, end of period...... $ 13.90 $ 13.83 $ 15.56 $ 16.45
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)... $50,554 $49,287 $48,141 $31,531
Ratios to average net assets:
Expenses.......................... 1.43% 1.41% 1.48% 1.50%
Net investment income............. 5.46% 4.82% 3.54% 4.78%
Aggregate portfolio turnover rate... 88% 226% 111% 208%
Portfolio turnover rate on
stocks**..........................
Net asset value adjusted for
reinvestment of dividends and
distributions:
Beginning of period............... $ 23.10 $ 22.69 $ 20.73 $ 16.24
======= ======= ======= =======
End of period..................... $ 24.85 $ 23.10 $ 22.69 $ 20.73
======= ======= ======= =======
TOTAL RETURN........................ 7.58% 1.81% 9.45% 27.65%
</TABLE>
- ------------
* Annualized
** Provided for additional information. Portfolio turnover rate on stocks for
periods prior to 1995 not available.
9
<PAGE> 10
6. SELECTED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
PRO FORMA INFORMATION + (UNAUDITED)
---------------------------------------------
YEARS ENDED APRIL 30,
MARCH 31, 1982 TO JANUARY 1, YEARS ENDED DECEMBER 31,
--------------------- MARCH 31, TO APRIL 29, ----------------------------
1985 1984 1983 1982 1981 1980 1979
------- --------- --------- ------------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD)
Net asset value, beginning of
period........................ $ 13.09 $ 13.89 $ 11.45 $11.09 $ 9.55 $ 8.66 $ 7.45
------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income......... 0.46 0.72 0.43 0.05 0.59 0.56 0.30
Net realized and unrealized
gain (loss) on investments.. 1.12 (0.27) 2.01 0.31 0.95 0.33 0.91
------- ------ ------ ------ ------ ------ ------
Total from investment
operations.................... 1.58 0.45 2.44 0.36 1.54 0.89 1.21
------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income...................... (0.74) (0.33) 0.00 0.00 0.00 0.00 0.00
Dividends from net realized
gains....................... (0.28) (0.92) 0.00 0.00 0.00 0.00 0.00
------- ------ ------ ------ ------ ------ ------
Total distributions............. (1.02) (1.25) 0.00 0.00 0.00 0.00 0.00
------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period........................ $ 13.65 $ 13.09 $ 13.89 $11.45 $11.09 $ 9.55 $ 8.66
======= ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)....................... $13,627 $ 9,842 $ 6,863 $3,436 $3,200 $2,631 $3,063
Ratios to average net assets:
Expenses...................... 2.28% 2.45% 1.50%* 3.62%* 2.70% 3.10% 3.07%
Net investment income......... 4.68% 6.46% 5.49%* 2.90%* 6.48% 3.85% 4.63%
Portfolio turnover rate......... 196% 261% 187% 9% 135% 151% 101%
Net asset value adjusted for
reinvestment of dividends and
distributions:
Beginning of period........... $ 14.35 $ 13.89 $ 11.45 $11.09 $ 9.55 $ 8.66 $ 7.45
======= ====== ====== ====== ====== ====== ======
End of period................. $ 16.24 $ 14.35 $ 13.89 $11.45 $11.09 $ 9.55 $ 8.66
======= ====== ====== ====== ====== ====== ======
TOTAL RETURN.................... 13.17% 3.31% 21.31% 3.25% 16.13% 10.28% 16.24%
<CAPTION>
JUNE 30, 1976
(COMMENCEMENT
OF OPERATIONS)
TO DECEMBER 31,
1978 1977 1976
------ ------ ---------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD)
Net asset value, beginning of
period........................ $ 6.75 $ 6.54 $ 6.03
------ ------ ------
Income from investment
operations:
Net investment income......... 0.12 0.18 0.00
Net realized and unrealized
gain (loss) on investments.. 0.58 0.03 0.51
------ ------ ------
Total from investment
operations.................... 0.70 0.21 0.51
------ ------ ------
Less distributions:
Dividends from net investment
income...................... 0.00 0.00 0.00
Dividends from net realized
gains....................... 0.00 0.00 0.00
------ ------ ------
Total distributions............. 0.00 0.00 0.00
------ ------ ------
Net asset value, end of
period........................ $ 7.45 $ 6.75 $ 6.54
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)....................... $2,169 $1,458 $ 1,093
Ratios to average net assets:
Expenses...................... 2.90% 2.77% 4.92%*
Net investment income......... 2.72% 2.98% --
Portfolio turnover rate......... 135% 148% 22%
Net asset value adjusted for
reinvestment of dividends and
distributions:
Beginning of period........... $ 6.75 $ 6.54 $ 6.03
====== ====== ======
End of period................. $ 7.45 $ 6.75 $ 6.54
====== ====== ======
TOTAL RETURN.................... 10.37% 3.21% 8.46%
</TABLE>
- ------------
* Annualized
+ Prepared as if the predecessor partnership (Note 1) had been organized as a
corporation on June 30, 1976, the date of commencement of its operations, and
had initially issued capital stock at a net asset value of $6.03 per share.
10
<PAGE> 11
REA-GRAHAM
- ------------------------------------- FUND, INC.
PLEASE CONTACT US LOGO
REA-GRAHAM FUNDS, INC.
10966 Chalon Road
Los Angeles, California 90077
(800) 433-1998
Transfer Agent
PFPC, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
(800) 348-5032
Principal Underwriter
JAMES BUCHANAN REA, INC.
10966 Chalon Road
Los Angeles, California 90077
(310) 442-2660
- -------------------------------------
This report must be preceded or
accompanied by the Prospectus of
Rea-Graham Balanced Fund.
------------------------------------
REA-GRAHAM
BALANCED FUND
SEMI-ANNUAL REPORT
September 30, 1996
