ANNUAL REPORT
SEPTEMBER 30, 1996
REYNOLDS FUNDS
100% NO-LOAD MUTUAL FUNDS
REYNOLDS
BLUE CHIP GROWTH FUND
SEEKING LONG-TERM CAPITAL APPRECIATION,
WITH CURRENT INCOME A SECONDARY OBJECTIVE
REYNOLDS
OPPORTUNITY FUND
SEEKING LONG-TERM CAPITAL APPRECIATION
REYNOLDS
U.S. GOVERNMENT BOND FUND
SEEKING A HIGH LEVEL OF CURRENT INCOME
REYNOLDS
MONEY MARKET FUND
SEEKING A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH A STABLE NET ASSET VALUE
REYNOLDS FUNDS
Dear Fellow Shareholders: October 28, 1996
The Reynolds Blue Chip Growth and Opportunity Funds had strong appreciation
for the twelve months ended September 30, 1996:
October 1, 1995 through September 30, 1996
REYNOLDS BLUE CHIP GROWTH FUND +18.1%
REYNOLDS OPPORTUNITY FUND +10.4%
These Funds had strong appreciation for the three years ended September 30,
1996:
Average Annual Total Returns
October 1, 1993 through September 30, 1996
REYNOLDS BLUE CHIP GROWTH FUND +17.9%
REYNOLDS OPPORTUNITY FUNDS +16.9%
VALUATIONS
The stocks that are held in the Blue Chip and Opportunity Funds are currently
good values. One of the best measures of valuation for high quality growth
stocks is:
The ratio of a company's growth rate to its price/earnings ratio (p/e
ratio). In the past, a high quality growth stock has been high priced when
it was valued at a p/e ratio which was twice its growth rate. It has been
reasonably valued when it was valued at a p/e ratio the same as or less
than its growth rate. Currently, our high quality growth stocks are good
values as they generally are selling at p/e ratios that are the same as or
less than their growth rates.
Another useful measure of valuation is:
The p/e ratio of the stock market averages. Over the last seventy five
years the U.S. stock market has been valued at an average p/e ratio of 16
times earnings. The U.S. stock market is currently valued at a p/e ratio of
16 times next twelve months estimated earnings. The U.S. stock market is
currently valued at about its normal average historical valuation and is at
an attractive valuation for long-term purchases.
A useful factor for valuation analysis is:
The level of short-term interest rates. When short-term interest rates
approach 10%, the valuations of stocks are affected as some investors
decide that they would rather have the surer return that shorter term money
market instruments offer, rather than the more uncertain higher return that
stocks might provide. However, inflation currently is at a low level and
short-term interest rates are around 5%. This is a positive factor for
stocks.
INVESTMENT OUTLOOK
There are currently many investment positives. Among them are: (1) the U.S.
budget deficit has been cut in about half since the early 1990s, (2) U.S.
industry is more competitive now than at any time in the past quarter century,
(3) U.S. companies are the leaders in the majority of industries worldwide,
including technology, (4) the three most important U.S. economic statistics -
economic growth, inflation and interest rates - are currently very positive,
creating a solid foundation for the financial markets, and (5) valuations are
reasonable.
THE REYNOLDS BLUE CHIP GROWTH FUND
The Blue Chip Fund has investments in many of the premier larger worldwide
growth companies. These companies have proven management, leading research,
outstanding products, strong financial structures and high profitability. In
addition, many of these companies are not significantly affected by economic
fluctuations and investors don't become overly concerned about them during
uncertain periods. The probabilities highly favor that the diversified group of
industry leading companies held in the Blue Chip Fund will remain industry
leaders, continue to strongly increase their earnings and continue to
significantly increase future shareholder wealth.
The Blue Chip Fund's return was +18.1% for the nine months ended September
30, 1996. The Blue Chip Fund's return was +69.1% for the five years ended
September 30, 1996. This was an average annual compounded rate of return of
+11.1%. The Blue Chip Fund increased +146.0% from August 12, 1988 (effective
date of the Fund's registration statement) through September 30, 1996. This was
an average annual compounded rate of return of +11.7%.
The Blue Chip Fund has received many awards for its recent performance. Among
them are:
(1) An A rating by The Wall Street Journal for its most recent one and
three year performance.
(2) An A rating by Investor's Business Daily for its most recent three
year performance.
(3) A Four Star rating by Morningstar for its most recent one and three
year performance.
(4) A top 2% ranking from Morningstar for tax efficiency.
The Board of Directors declared a distribution of $0.3475 from net long-term
realized gains on October 25, 1996. This distribution was paid on October 28,
1996 to shareholders of record on October 24, 1996.
THE REYNOLDS OPPORTUNITY FUND
A long-term investment in the Reynolds Opportunity Fund is intended to be a
good complement to a long-term investment in the Blue Chip Fund. The Opportunity
Fund emphasizes high quality investments in small to medium size, rapidly
growing companies. The Opportunity Fund has investments in many of the best
emerging growth companies worldwide. The Fund generally invests in companies
which already have proven themselves in the marketplace and already are leaders
in their industries. These companies generally have sales of $75 million to $1
billion or more and are demonstrating strong earnings growth from proprietary
products. We are making a high probability bet with the companies in the
Opportunity Fund, just as we are with the companies in the Blue Chip Fund, that
the majority of the companies within a well diversified group of proven
worldwide leading companies will continue to be leaders and strongly increase
their earnings and shareholder wealth in the future.
The Opportunity Fund's return was +12.2% for the nine months ended September
30, 1996. The Fund increased +56.4% from January 30, 1992 (effective date of the
Fund's registration statement) to September 30, 1996. This was an average annual
compounded rate of return of +10.1%.
The Opportunity Fund is not yet ranked by The Wall Street Journal and
Investor's Business Daily because it does not have $25 million of net assets. We
look forward to this Fund having the same rankings as the Blue Chip Fund when it
reaches this level of assets.
THE REYNOLDS U.S. GOVERNMENT BOND FUND
The Reynolds U.S. Government Bond Fund emphasizes high quality investments in
U.S. Treasury Bonds, Treasury Notes and Treasury Bills of varying maturities. As
of September 30, 1996, the assets were invested approximately 95% in U.S.
Treasury Securities and 4% in high quality cash equivalents.
The Bond Fund had a dollar weighted average maturity of 1.9 years on
September 30, 1996. The average maturity of the bonds in the Fund is continually
reevaluated and adjusted based on short- and long-term economic, inflation and
interest rate forecasts.
THE REYNOLDS MONEY MARKET FUND
As of September 30, 1996, the assets of the Reynolds Money Market Fund were
invested approximately 55% in high quality commercial paper, 30% in Federal
Agencies, and 15% in high quality cash equivalents. As of September 30, 1996,
the dollar weighted average days to maturity of the Money Market Fund was 37.7
days.
The Reynolds Money Market Fund's yield is usually higher than or
approximately the same as most brokerage firm sponsored money market funds
because those funds typically have higher expense structures due to their higher
marketing costs. The Reynolds Money Market Fund's yield is almost always higher
than rates paid by most bank accounts. The rates paid by banks are lower because
banks typically have higher overhead.
For ease of redemption, the Money Market Fund offers: (1) free check writing
(in amounts of $500 or more); or (2) telephone redemption where either a check
is mailed to the shareholder, or money may be wired to the shareholder's bank
account ($10.00 wiring charge).
ECONOMIC DISCUSSION
THE WORLD ECONOMY
Most economies around the world are enjoying steady growth. It is the first
economic expansion that most of the world is sharing. Strong worldwide growth
patterns are forecast for many industries in the next few years. There are more
than 1.5 billion people in the world who will be experiencing a higher standard
of living as capitalism grows and Communism declines in China, Eastern Europe
and Russia. Many other countries, such as India and Latin America, have rapidly
emerging middle classes, which desire western goods and services and governments
that are encouraging foreign investments.
Worldwide inflation remains low. There are many reasons for this including:
(1) committed central bankers, (2) fiscal restraint by governments, (3)
worldwide competition for products and labor is keeping costs low, (4) the
collapse of Communism is making economic systems more efficient, (5) cost
cutting and restructuring are spreading to many countries, (6) more efficient
private-sector operations are replacing inefficient state-run enterprises, (7)
excess capacity exists in many markets, and (8) advances in technology are
helping to improve efficiency. The Blue Chip and Opportunity Funds are well
positioned to participate in these strong worldwide growth trends through their
investments in U.S. headquartered and foreign headquartered companies.
THE U.S. ECONOMY
Alan Greenspan, the Chairman of the Federal Reserve Board, forecasts that the
U.S. economy will continue to have moderate, but not excessive, growth and
inflation. The majority of government and private-sector data still indicate
modest, but broad based growth. Gross Domestic Product (GDP) is forecast to
increase 2.5% in 1996 and 2% in 1997 after increasing 2% in 1995.
U.S. inflation is at its lowest level since the 1960s as the Federal Reserve
continues to do a good job of keeping inflationary pressures down. The Federal
Reserve has been willing to act at the first sign that a rise in inflation could
be near. This policy allows the Federal Reserve to use milder rather than
harsher remedies which often stop economic growth later on. The current absence
of widespread labor and raw materials shortages should keep inflation in check.
Also, there seems to be enough hesitation on the part of consumers that demand
for goods shouldn't be higher than supply. In addition, rising business
investment in efficient plant and equipment should help to prevent inflation
from quickening its pace. U.S. inflation is estimated to increase at a
manageable 2.5% rate in 1996 and 2.7% in 1997, after increasing at a 2.5% rate
in 1995. As a result, near term monetary policy has remained unchanged.
INFORMATION ABOUT THE REYNOLDS FUNDS
TO SPEAK TO A FUND REPRESENTATIVE REGARDING QUESTIONS, CURRENT DAILY NET
ASSET VALUES AND CURRENT ACCOUNT INFORMATION: Call 1-800-773-9665 (1-800-
7REYNOLDS) and press "0" during normal business hours.
FOR AUTOMATIC CURRENT DAILY NET ASSET VALUES: Call 1-800-773-9665 (twenty-
four hours-a-day, seven days-a-week) and press "2". The updated current net
asset values for all of the Reynolds Funds are usually available each business
day after 5 P.M. (PST)
FOR SHAREHOLDERS TO AUTOMATICALLY ACCESS THEIR CURRENT ACCOUNT INFORMATION:
Call 1-800-773-9665 (twenty-four hours-a-day, seven days-a-week), press "3" and
enter your 16 digit account number which appears at the top of your statement.
FOR REYNOLDS MONEY MARKET FUND CURRENT ONE AND SEVEN DAY YIELDS: Call 1-800-
773-9665 and press "2".
SHAREHOLDER STATEMENT FREQUENCY: Consolidated statements summarizing all
Reynolds Funds held by a shareholder are sent quarterly. In addition, individual
Fund statements are sent whenever a transaction occurs. These transactions are:
(1) Reynolds Money Market and U.S. Government Bond Fund statements are sent
monthly when each months' accrued dividends are posted, (2) Reynolds Blue Chip
and Opportunity Fund statements are sent twice a year when any ordinary income
or capital gains are distributed, and (3) statements are sent for any of the
Funds when a shareholder purchases or redeems shares.
TAX BASIS REPORTING: Individual 1099 forms which summarize any dividend
income, and any long- or short-term capital gains are sent annually to
shareholders each January. The percentage of income earned from various
government securities, if any, for the Reynolds Funds is also reported in
January.
NEWSPAPER LISTING OF NET ASSET VALUE: The Blue Chip Fund is listed
alphabetically, with the symbol Rey BC, ReynBlCh, or Rnlds Bl Ch Gth, in many
major daily newspapers including Investor's Business Daily, USA Today and The
Wall Street Journal. The Opportunity Fund is listed in USA Today. The
Opportunity Fund and the U.S. Government Bond Fund will be listed in other
newspapers once they have either $25 million of net assets or 1,000
shareholders.
NASDAQ SYMBOL FOR THE BLUE CHIP FUND: RBCGX.
THE REYNOLDS FUNDS ARE 100% NO-LOAD: No front end sales commissions or
redemption fees are charged.
THE REYNOLDS FUNDS DO NOT HAVE A 12(B)-1 PLAN: No marketing fees are charged
to the Funds.
MINIMUM INVESTMENT: $1,000 ($100 for additional investments - except for the
Automatic Investment Plan which is $50) for regular and retirement plan
accounts.
PROTOTYPE PLANS FOR RETIREMENT PLANS: All types are offered.
AUTOMATIC INVESTMENT PLAN: There is no charge to automatically debit your
checking account or your account in any of the Reynolds Funds at periodic
intervals to make automatic purchases in any of the Reynolds Funds. This is
useful for dollar cost averaging.
SYSTEMATIC WITHDRAWAL PLAN: For shareholders with a $10,000 minimum starting
balance, there is no charge to automatically redeem shares ($100 minimum) in any
of the Reynolds Funds as often as monthly and send a check to you or wire to
your bank account.
EXCHANGES OR REGULAR REDEMPTIONS: As often as desired - no charge.
One hundred percent of our company's pension plan is invested in the Reynolds
Funds. We appreciate your continued confidence in the Reynolds Funds and would
like to welcome our new shareholders. We look forward to strong results in the
future.
Sincerely,
/s/ Frederick L. Reynolds
Frederick L. Reynolds
President
80 East Sir Francis Drake Blvd. o Larkspur, CA 94939 o 415-461-7860
REYNOLDS FUNDS, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402
(PRICE WATERHOUSE LLP LOGO)
October 25, 1996
To the Shareholders and Board of Directors
of Reynolds Funds, Inc.
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Reynolds Blue Chip Growth Fund, Reynolds Opportunity Fund, Reynolds U.S.
Government Bond Fund and Reynolds Money Market Fund (constituting Reynolds
Funds, Inc., hereafter referred to as the "Funds") at September 30, 1996, the
results of each of their operations for the year then ended, the changes in each
of their net assets for each of the two years in the period then ended and the
financial highlights for each of the eight years in the period ended September
30, 1996 and for the period August 10, 1988 (commencement of operations) through
September 30, 1988 for Reynolds Blue Chip Growth Fund, for the five years ended
September 30, 1996 and for the period January 30, 1991 (commencement of
operations) through September 30, 1991 for Reynolds Money Market Fund and for
the four years ended September 30, 1996 and the period January 30, 1992
(commencement of operations) through September 30, 1992 for Reynolds Opportunity
Fund and Reynolds U.S. Government Bond Fund, all in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1996 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
REYNOLDS BLUE CHIP GROWTH FUND
STATEMENT OF NET ASSETS
September 30, 1996
QUOTED
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
- -------------------------- ------------
LONG-TERM INVESTMENTS -- 99.4% (A)<F2>
COMMON STOCKS -- 99.3% (A)<F2>
AUTOMOTIVE -- 0.0%
500 Chrysler Corp. $14,312
BANKS -- 1.0%
500 BankAmerica Corp. 41,062
500 Citicorp 45,312
500 J.P. Morgan & Co. Inc. 44,438
500 NationsBank Corporation 43,438
500 Wells Fargo & Co. 130,000
---------
304,250
BEVERAGES -- 8.0%
1,000 Anheuser-Busch Companies, Inc. 37,625
25,000 The Coca-Cola Company 1,271,875
41,000 PepsiCo, Inc. 1,158,250
----------
2,467,750
BIOTECHNOLOGY -- 1.0%
4,000 Amgen Inc.*<F1> 252,500
2,468 Chiron Corp.*<F1> 46,892
----------
299,392
BUILDING -- 1.4%
7,500 The Home Depot, Inc. 426,562
CHEMICALS -- 0.5%
500 AlliedSignal Inc. 32,937
500 Dow Chemical Co. 40,125
500 E.I du Pont de Nemours & Co. 44,125
500 Minnesota Mining & Manufacturing Co. 34,938
---------
152,125
COMPUTER NETWORKING -- 9.9%
15,000 3Com Corp.*<F1> 900,945
4,000 Ascend Communications, Inc.*<F1> 264,500
8,000 Bay Networks, Inc.*<F1> 218,000
3,500 Cabletron Systems, Inc.*<F1> 239,312
23,000 Cisco Systems Inc.*<F1> 1,427,449
----------
3,050,206
COMPUTER & PERIPHERALS -- 2.7%
1,500 Compaq Computer Corp.*<F1> 96,187
9,000 Hewlett-Packard Co. 438,750
1,500 International Business Machines Corp. 186,750
2,000 Sun Microsystems, Inc.*<F1> 124,250
---------
845,937
COMPUTER SOFTWARE & SERVICES -- 9.5%
3,750 Computer Associates International, Inc. 224,062
14,250 Microsoft Corp.*<F1> 1,879,219
15,375 Oracle Corp.*<F1> 654,406
2,000 PeopleSoft, Inc.*<F1> 166,500
----------
2,924,187
DRUGS -- 17.5%
2,500 Bristol-Myers Squibb Co. 240,937
8,000 Eli Lilly & Co. 516,000
24,100 Merck & Co., Inc. 1,696,038
16,500 Pfizer Inc. 1,305,562
17,000 Schering-Plough Corp. 1,045,500
9,000 Warner-Lambert Co. 594,000
----------
5,398,037
ELECTRICAL EQUIPMENT -- 1.5%
2,000 Emerson Electric Co. 180,250
3,000 General Electric Co. (U.S.) 273,000
---------
453,250
ELECTRONICS -- 0.2%
4,000 Teradyne, Inc.*<F1> 66,500
ENERGY -- 1.9%
500 Amoco Corp. 35,250
500 Chevron Corp. 31,313
500 Exxon Corp. 41,625
2,000 Mobil Corp. 231,500
1,000 Royal Dutch Petroleum Co. ADR 156,125
500 Schlumberger Ltd. 42,250
500 Texaco Inc. 46,000
---------
584,063
FINANCIAL SERVICES -- 0.4%
500 American Express Co. 23,125
500 Diebold, Inc. 29,188
2,000 Federal National Mortgage Association 69,750
500 Intuit Inc.*<F1> 15,750
---------
137,813
FOODS -- 4.8%
500 Campbell Soup Co. 39,000
500 CPC International Inc. 37,438
20 The Earthgrains Company 770
1,000 General Mills, Inc. 60,375
1,000 H.J. Heinz Co. 33,750
5,000 Kellogg Co. 344,375
10,000 Philip Morris Companies Inc. 897,500
1,000 Quaker Oats Co. 36,625
500 Sara Lee Corp. 17,875
----------
1,467,708
FOOD WHOLESALERS -- 0.1%
1,000 Sysco Corp. 33,625
GOLD -- 0.1%
500 Newmont Mining Corp. 23,625
GROCERY STORES -- 0.3%
1,000 Albertson's, Inc. 42,125
1,000 Safeway Inc.*<F1> 42,625
----------
84,750
HEALTH MAINTENANCE ORGANIZATIONS -- 1.8%
617 Aetna Inc. 43,421
6,000 Oxford Health Plans, Inc.*<F1> 298,500
4,500 United HealthCare Corp. 187,313
----------
529,234
HOUSEHOLD PRODUCTS -- 8.2%
4,000 American Home Products Corp. 255,000
8,500 Colgate-Palmolive Co. 738,438
5,000 Gillette Company 360,625
12,000 Procter & Gamble Co. 1,170,000
----------
2,524,063
INSURANCE -- 1.5%
3,750 American International Group, Inc. 377,813
500 General Re Corp. 70,875
---------
448,688
MACHINERY -- 0.2%
500 Caterpillar Inc. 37,688
500 Deere & Co. 21,000
----------
58,688
MEDICAL SUPPLIES -- 7.5%
15,000 Abbott Laboratories 738,750
31,000 Johnson & Johnson 1,588,750
----------
2,327,500
OFFICE EQUIPMENT & SUPPLIES -- 0.6%
5,000 Office Depot, Inc.*<F1> 118,125
1,000 Xerox Corp. 53,625
----------
171,750
PAPER & FOREST PRODUCTS -- 1.0%
500 Georgia-Pacific Corp. 39,562
500 International Paper Co. 21,250
2,780 Kimberly-Clark Corp. 244,988
----------
305,800
PHOTOGRAPHY -- 0.1%
500 Eastman Kodak Co. 39,250
PUBLISHING -- 0.2%
1,000 Gannett Co., Inc. 70,375
RAILROADS -- 0.4%
500 Burlington Northern Santa Fe Corp. 42,187
500 CSX Corp. 25,250
500 Norfolk Southern Corp. 45,688
----------
113,125
RECREATION -- 1.6%
8,049 Walt Disney Co. 510,105
RESTAURANTS -- 1.6%
10,500 McDonald's Corp. 497,437
RETAIL - SPECIALTY -- 0.9%
2,000 Best Buy Co., Inc.*<F1> 45,500
1,500 NIKE, Inc. Cl B 182,250
1,000 Toys 'R' Us, Inc.*<F1> 29,125
1,000 Walgreen Co. 37,000
----------
293,875
RETAIL STORES -- 1.3%
1,500 Dayton Hudson Corp. 49,500
5,000 Gap, Inc. 144,375
500 The May Department Stores Co. 24,313
500 Nordstrom, Inc. 19,000
500 Sears, Roebuck and Co. 22,375
5,000 Wal-Mart Stores, Inc. 131,875
----------
391,438
SEMICONDUCTORS -- 6.6%
1,000 Altera Corp.*<F1> 50,625
3,000 Atmel Corp.*<F1> 92,625
18,000 Intel Corp. 1,717,884
2,000 LSI Logic Corp.*<F1> 46,500
1,000 Texas Instruments Inc. 55,125
2,000 Xilinx, Inc.*<F1> 68,000
-----------
2,030,759
SEMICONDUCTOR/CAPITAL SPENDING -- 0.5%
2,500 Applied Materials, Inc.*<F1> 69,063
2,000 KLA Instruments Corp.*<F1> 45,000
1,000 Novellus Systems, Inc.*<F1> 42,625
---------
156,688
TELECOMMUNICATIONS -- 4.4%
1,500 America Online Inc. 53,437
2,000 L.M. Ericsson Telephone Co. ADR 50,750
10,500 Motorola, Inc. 542,063
10,000 Tellabs, Inc.*<F1> 706,250
----------
1,352,500
TRANSPORTATION -- 0.1%
500 Boeing Co. 47,250
----------
Total common stocks
(cost $14,703,141) 30,602,617
205 Aetna Inc. 6.25% Class C
Voting Preferred 14,939
----------
Total preferred stocks
(cost $13,386) 14,939
----------
Total long-term investments
(cost $14,716,527) 30,617,556
SHORT-TERM INVESTMENTS -- 0.7% (A)<F2>
VARIABLE RATE DEMAND NOTES
$ 205,419 Wisconsin Electric Power Co. 205,419
----------
Total short-term investments
(cost $205,419) 205,419
----------
Total investments
(cost $14,921,946) 30,822,975
Liabilities, less cash and
receivables (0.1%) (A)<F2> (15,672)
----------
NET ASSETS $30,807,303
----------
----------
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering
and redemption price
($30,807,303 / 1,357,876
shares outstanding) $22.69
-------
-------
*<F1>Non-income producing security.
(a)<F2>Percentages for the various classifications relate to net assets.
REYNOLDS BLUE CHIP GROWTH FUND
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1996
INCOME:
Dividends $370,141
Interest 21,885
---------
Total income 392,026
---------
EXPENSES:
Management fee 298,941
Administrative services 59,223
Transfer agent fees 26,681
Professional fees 16,888
Custodian fees 11,709
Printing and postage expense 9,209
Registration fees 5,254
Other expenses 7,759
---------
Total expenses 435,664
---------
NET INVESTMENT LOSS (43,638)
---------
NET REALIZED GAIN ON INVESTMENTS 502,046
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 4,345,211
---------
NET GAIN ON INVESTMENTS 4,847,257
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,803,619
---------
---------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
1996 1995
----- -----
OPERATIONS:
Net investment (loss) income $(43,638) $35,153
Net realized gain on investments 502,046 47,749
Net increase in unrealized appreciation
on investments 4,345,211 7,502,425
---------- ----------
Net increase in net assets resulting
from operations 4,803,619 7,585,327
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.01851 and $0.0633 per share, respectively) (28,542) (106,402)
Distribution from net realized gains
($0.02704 and $0.1705 per share) (43,289) (284,893)
---------- ----------
Total distributions (71,831)** (391,295)*
<F4> <F3>
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(501,004 and 243,750 shares, respectively) 9,970,902 4,363,154
Net asset value of shares issued in distributions
(3,629 and 26,950 shares, respectively) 69,920 388,744
Cost of shares redeemed (671,882 and
458,419 shares, respectively) (13,322,076) (7,360,639)
---------- ----------
Net decrease in net assets derived from
Fund share activities (3,281,254) (2,608,741)
---------- ----------
TOTAL INCREASE 1,450,534 4,585,291
NET ASSETS AT THE BEGINNING OF THE YEAR 29,356,769 24,771,478
---------- ----------
NET ASSETS AT THE END OF THE YEAR
(including undistributed net investment income
of $0 and $28,529, respectively) $30,807,303 $29,356,769
---------- ----------
---------- ----------
*<F3>Total distributions include $112,931 of ordinary income, of which 100% is
eligible for the corporate dividends received deduction.
**<F4>Total distributions include $54,499 of ordinary income, of which 52% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of these
statements.
REYNOLDS BLUE CHIP GROWTH FUND
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988*<F5>
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $19.25 $14.46 $14.22 $14.98 $13.96 $11.14 $11.92 $10.06 $10.00
Income from investment operations:
Net investment (loss) income (0.03) 0.02 0.09 0.12 0.09 0.14 0.07 0.25 0.03
Net realized and unrealized
gain (loss) on investments 3.52 5.00 0.28 (0.79) 1.02 2.83 (0.65) 1.73 0.03
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations 3.49 5.02 0.37 (0.67) 1.11 2.97 (0.58) 1.98 0.06
Less distributions:
Dividends from net investment income (0.02) (0.06) (0.13) (0.09) (0.09) (0.15) (0.15) (0.12) --
Distributions from net realized gains (0.03) (0.17) -- -- -- -- (0.05) -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from distributions (0.05) (0.23) (0.13) (0.09) (0.09) (0.15) (0.20) (0.12) --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 22.69 $ 19.25 $ 14.46 $ 14.22 $ 14.98 $ 13.96 $ 11.14 $ 11.92 $ 10.06
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT RETURN 18.1% 35.3% 2.6% (4.5%) 8.0% 26.9% (5.0%) 19.9% 4.6%**
<F6>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 30,807 29,357 24,771 38,929 40,580 27,735 10,009 5,260 366
Ratio of expenses (after reimbursement)
to average net assets***<F7> 1.5% 1.5% 1.5% 1.4% 1.5% 1.7% 2.1% 2.0% 2.0%**
Ratio of net investment <F6>
income to average net assets****<F8> (0.1%) 0.1% 0.5% 0.8% 0.6% 1.2% 0.8% 2.7% 4.5%**
<F6>
Portfolio turnover rate 21.5% 49.2% 43.3% 38.1% 0.2% 0.9% 66.2% 32.5% --
Average commission rate paid*****<F9> $0.1047
*<F5>For the period from August 10, 1988 (commencement of operations) to
September 30, 1988.
**<F6>Annualized.
***<F7>Computed after giving effect to adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been 2.7% for the
year ended September 30, 1989.
****<F8>If the Fund had paid all of its expenses, the ratio would have been 2.0%
for the year ended September 30, 1989.
*****<F9>Disclosure required for fiscal years beginning after September 1, 1995.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
REYNOLDS OPPORTUNITY FUND
STATEMENT OF NET ASSETS
September 30, 1996
QUOTED
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
- -------------------------- ------------
LONG-TERM INVESTMENTS -- 98.8% (A)<F11>
COMMON STOCKS -- 98.6% (A)<F11>
APPAREL -- 3.3%
600 AnnTaylor Stores Corp.*<F10> $10,125
500 The Buckle, Inc.*<F10> 15,875
900 Claire's Stores, Inc. 19,237
400 Designs, Inc.*<F10> 2,650
400 Fila Holding S. p. A. ADR 38,450
600 Gadzooks, Inc. 20,850
300 Gucci Group, N.V. 21,750
500 Gymboree Corp.*<F10> 15,188
300 Jones Apparel Group, Inc.*<F10> 19,125
675 Just For Feet, Inc.*<F10> 33,834
1,000 Kenneth Cole Productions Inc.*<F10> 18,875
400 Liz Claiborne, Inc. 14,900
600 The Men's Wearhouse Inc.*<F10> 15,000
800 Nautica Enterprises Inc.*<F10> 25,800
1,000 NIKE, Inc. Cl B 121,500
400 Nine West Group Inc.*<F10> 21,700
800 St. John Knits, Inc. 40,100
900 Talbots, Inc. 27,000
1,000 Tommy Hilfiger Corp.*<F10> 59,250
500 The Wet Seal, Inc.*<F10> 18,000
---------
559,209
BEVERAGES -- 1.7%
500 Coca-Cola FEMSA, S.A. de C.V. ADR 11,875
2,500 The Coca-Cola Company 127,187
1,400 Cott Corp. 10,588
300 Grupo Embotellador de Mexico,
S.A. de C.V. GDR*<F10> 2,550
500 Panamerican Beverages Inc. 20,563
4,000 PepsiCo, Inc. 113,000
---------
285,763
BIOTECHNOLOGY -- 2.0%
300 Agouron Pharmaceuticals, Inc.*<F10> 13,087
800 Amgen Inc.*<F10> 50,500
300 BioChem Pharma Inc.*<F10> 12,037
1,000 Biogen, Inc.*<F10> 76,000
2,000 Bio-Vascular, Inc.*<F10> 14,750
700 Centocor, Inc.*<F10> 24,850
500 Cephalon Inc.*<F10> 12,063
1,236 Chiron Corp.*<F10> 23,484
500 Gensia Inc.*<F10> 2,500
800 Genzyme Corp.*<F10> 20,400
400 Human Genome Sciences, Inc.*<F10> 15,100
500 Immunex Corp.*<F10> 6,500
600 Liposome Co., Inc.*<F10> 11,325
300 Quintiles Transnational, Corp.*<F10> 21,975
700 Regeneron Pharmaceuticals, Inc.*<F10> 14,088
500 Serologicals Corp.*<F10> 17,375
----------
336,034
BUILDING -- 0.5%
800 Fastenal Co. 39,600
866 The Home Depot, Inc. 49,254
---------
88,854
CABLE TV/BROADCASTING -- 0.9%
600 C-COR Electronics, Inc.*<F10> 9,750
600 Clear Channel Communications, Inc.*<F10> 53,100
300 General Instrument Corp.*<F10> 7,425
300 Grupo Televisa, S.A. GDR*<F10> 8,662
900 Infinity Broadcasting Corp.*<F10> 28,350
250 LIN Television Corp.*<F10> 10,250
300 Viacom Inc.*<F10> 10,575
628 Viacom Inc. Ser. B*<F10> 22,294
---------
150,406
CELLULAR -- 0.3%
500 BRIGHTPOINT INC.*<F10> 12,062
400 Grupo Iusacell, S.A. de
C.V. ADR Ser L*<F10> 3,000
300 Nokia Corp. "A" ADR 13,275
800 Paging Network, Inc.*<F10> 16,000
---------
44,337
CHEMICALS - SPECIALTY -- 1.1%
306 Desc, S.A. de C.V. ADR*<F10> 6,808
1,000 Dionex Corp.*<F10> 38,000
500 Exide Corp. 12,938
600 Ionics, Inc.*<F10> 28,275
600 Millipore Corp. 23,700
400 Pall Corp. 11,300
300 Raychem Corp. 22,500
600 Sealed Air Corp.*<F10> 22,350
300 Sigma-Aldrich Corp. 17,100
156 Tetra Tech, Inc.*<F10> 3,705
----------
186,676
COMPUTERS - INTERNET -- 0.3%
300 CyberCash, Inc.*<F10> 9,075
600 Netscape Communications Corp.*<F10> 27,825
200 Security Dynamics Technologies, Inc.*<F10> 14,350
400 Spyglass, Inc.*<F10> 7,550
---------
58,800
COMPUTER NETWORKING -- 10.9%
6,695 3Com Corp.*<F10> 402,122
600 Amati Communications Corp.*<F10> 13,200
3,500 Ascend Communications, Inc.*<F10> 231,437
4,260 Bay Networks, Inc.*<F10> 116,085
1,250 Cabletron Systems, Inc.*<F10> 85,469
2,700 Cascade Communications Corp.*<F10> 220,050
800 CIBER, Inc.*<F10> 30,400
8,900 Cisco Systems Inc.*<F10> 552,361
400 Citrix Systems, Inc.*<F10> 20,500
1,000 CrossComm Corp.*<F10> 7,125
700 CTC Communications Corp.*<F10> 7,875
400 Digi International Inc.*<F10> 5,700
1,800 FORE Systems, Inc.*<F10> 74,475
874 FTP Software, Inc.*<F10> 6,446
400 Legato Systems, Inc.*<F10> 19,000
793 Madge Networks N.V.*<F10> 10,011
600 Network General Corp.*<F10> 13,725
300 Newbridge Networks Corp.*<F10> 19,125
800 Optical Data Systems, Inc.*<F10> 13,600
400 Raptor Systems, Inc.*<F10> 6,800
200 Xylan Corp.*<F10> 10,850
----------
1,866,356
COMPUTER & PERIPHERALS -- 4.1%
500 Apple Computer, Inc. 11,094
600 Auspex Systems, Inc.*<F10> 9,225
900 Brooktrout Technology, Inc.*<F10> 32,850
1,000 Compaq Computer Corp.*<F10> 64,125
500 Comverse Technology, Inc.*<F10> 19,437
400 Cyrix Corp.*<F10> 6,550
600 Dell Computer Corp.*<F10> 46,650
600 ENCAD, Inc.*<F10> 25,125
400 Exabyte Corp.*<F10> 6,000
500 FileNet Corp.*<F10> 12,750
400 Franklin Electronic Publishers Inc.*<F10> 5,100
400 Gateway 2000, Inc.*<F10> 19,150
2,000 Hewlett-Packard Co. 97,500
500 International Business Machines Corp. 62,250
2,400 Iomega Corp.*<F10> 58,200
600 MicroTouch Systems, Inc.*<F10> 11,250
600 Oak Technology, Inc.*<F10> 6,225
500 Read-Rite Corp.*<F10> 7,875
500 Seagate Technology, Inc.*<F10> 27,937
900 Shiva Corp.*<F10> 51,638
500 Silicon Graphics, Inc.*<F10> 11,063
700 Solectron Corp.*<F10> 34,300
500 Stratus Computer, Inc.*<F10> 9,875
900 Sun Microsystems, Inc.*<F10> 55,913
400 SyQuest Technology, Inc.*<F10> 2,525
----------
694,607
COMPUTER SOFTWARE & SERVICES -- 15.1%
800 Adaptec, Inc.*<F10> 48,000
1,560 Adobe Systems Inc. 58,110
900 American Management Systems, Inc. 25,200
200 Arbor Software Corp.*<F10> 8,550
500 Aspen Technology, Inc.*<F10> 33,875
500 Astea International Inc.*<F10> 2,812
2,300 Autodesk, Inc. 59,512
450 Avant! Corporation*<F10> 13,500
600 Baan Company N.V.*<F10> 20,025
1,000 BMC Software, Inc.*<F10> 79,500
400 Broderbund Software, Inc.*<F10> 11,600
1,125 Cadence Design Systems, Inc.*<F10> 40,219
300 Cheyenne Software, Inc.*<F10> 6,450
600 Computer Horizon Corp.*<F10> 17,100
200 Computer Sciences Corp.*<F10> 15,375
1,625 Computer Associates
International, Inc. 97,094
300 Compuware Corp.*<F10> 13,725
600 Comshare, Inc. 9,225
500 Datastream Systems, Inc.*<F10> 15,125
900 Electronics for Imaging, Inc.*<F10> 64,575
400 EMC Corp. (Mass.)*<F10> 9,050
400 FIserv, Inc.*<F10> 15,300
500 Gupta Corp.*<F10> 2,187
400 Hummingbird Communications Ltd.*<F10> 11,500
600 Hyperion Software Corporation*<F10> 9,225
4,000 Informix Corp.*<F10> 111,500
600 INSO Corp.*<F10> 32,550
600 Integrated Systems, Inc.*<F10> 19,800
600 Macromedia, Inc.*<F10> 12,450
300 MapInfo Corp.*<F10> 3,112
975 McAffee Associates, Inc.*<F10> 67,275
400 Merix Corp.*<F10> 7,700
600 Microcom, Inc.*<F10> 5,100
5,100 Microsoft Corp.*<F10> 672,563
800 MRV Communications, Inc.*<F10> 20,600
1,000 NetManage, Inc.*<F10> 8,781
1,000 Number Nine Visual Technology Corp.*<F10> 7,500
7,650 Oracle Corp.*<F10> 325,607
2,000 Parametric Technology Corp.*<F10> 98,750
1,900 PeopleSoft, Inc.*<F10> 158,175
500 PHAMIS, Inc.*<F10> 8,375
1,000 Policy Management Systems Corp.*<F10> 34,000
463 Pure Atria Corporation*<F10> 17,478
400 Rational Software Corp.*<F10> 13,650
200 Remedy Corp.*<F10> 16,000
400 Siebel Systems, Inc.*<F10> 16,650
500 Softdesk, Inc.*<F10> 3,438
400 Softkey International Inc.*<F10> 7,750
500 SPSS Inc.*<F10> 13,875
300 Sterling Software, Inc.*<F10> 22,913
1,000 SunGard Data Systems Inc.*<F10> 45,000
2,800 Sybase, Inc.*<F10> 41,650
400 Symantec Corp.*<F10> 4,350
1,000 Synopsys, Inc.*<F10> 46,125
450 System Software Associates, Inc. 5,963
400 Systems & Computer
Technology Corp.*<F10> 4,900
400 Trident Microsystems, Inc.*<F10> 6,050
300 Veritas Software Corp.*<F10> 21,225
300 Wall Data Inc.*<F10> 6,825
300 Wind River Systems, Inc.*<F10> 13,275
400 Wonderware Corp.*<F10> 4,100
---------
2,591,889
DRUGS -- 4.3%
500 Curative Health Services Inc.*<F10> 9,625
400 Elan Corp. plc ADR*<F10> 11,950
400 Interneuron Pharmaceuticals, Inc.*<F10> 11,300
900 Jones Medical Industries, Inc. 43,650
1,000 Eli Lilly & Co. 64,500
400 Medicis Pharmaceutical Corp.*<F10> 19,300
4,022 Merck & Co., Inc. 283,048
300 PDT, Inc.*<F10> 9,375
500 Perrigo Co.*<F10> 4,938
2,000 Pfizer Inc. 158,250
1,500 Schering-Plough Corp. 92,250
400 Warner-Lambert Co. 26,400
---------
734,586
EDUCATION -- 0.4%
600 Computer Learning Centers, Inc.*<F10> 16,800
500 ITT Educational Services, Inc.*<F10> 17,500
700 National Education Corp.*<F10> 13,387
400 Sylvan Learning Systems, Inc.*<F10> 16,400
---------
64,087
ELECTRONICS -- 1.0%
675 Analog Devices, Inc.*<F10> 18,309
300 Arrow Electronics, Inc.*<F10> 13,350
300 Avnet, Inc. 14,550
600 Gentex Corp.*<F10> 13,650
800 International Rectifier Corp.*<F10> 11,100
400 Logicon, Inc. 14,050
600 Loral Space & Communications Corp.*<F10> 9,450
400 Marshall Industries*<F10> 12,050
468 Molex Inc. 17,433
300 Philips Electronics N.V. ADR 10,763
900 Pioneer-Standard Electronics, Inc. 10,125
400 SCI Systems, Inc.*<F10> 22,500
400 Spectrian Corp.*<F10> 5,000
454 Teradyne, Inc.*<F10> 7,548
--------
179,878
ENERGY -- 1.1%
300 Chesapeake Energy Corporation*<F10> 18,787
300 Halliburton Co. 15,487
400 Helmerich & Payne, Inc. 17,450
1,600 Input/Output, Inc.*<F10> 47,600
500 Newpark Resources, Inc.*<F10> 18,188
800 Rowan Companies, Inc.*<F10> 14,900
500 Seitel, Inc.*<F10> 18,563
400 Tidewater Inc. 14,950
300 Transocean Offshore Inc. 18,375
---------
184,300
ENGINEERING & CONSTRUCTION -- 0.0%
300 Bufete Industrial, S.A. ADR*<F10> 5,250
300 Grupo Tribasa, S.A. de C.V. ADR*<F10> 1,650
---------
6,900
ENVIRONMENTAL -- 0.7%
400 United Waste Systems, Inc.*<F10> 13,900
1,449 United States Filter Corp.*<F10> 49,447
1,180 USA Waste Services, Inc.*<F10> 37,170
500 WMX Technologies, Inc. 16,438
---------
116,955
FINANCIAL SERVICES -- 3.5%
400 Associates First Capital Corporation 16,400
700 Atalanta/Sosnoff Capital Corp. 6,650
400 BARRA, Inc.*<F10> 10,300
400 BISYS Group, Inc.*<F10> 16,400
400 Ceridian Corp.*<F10> 20,000
400 DST Systems, Inc.*<F10> 12,800
600 Equifax Inc. 15,825
600 Fair, Isaac and Co., Inc. 23,250
975 First Data Corp. 79,584
400 First USA, Inc. 22,150
300 Franklin Resources, Inc. 19,913
800 Green Tree Financial Corp. 31,400
400 Jack Henry & Associates, Inc. 12,700
800 Intuit Inc.*<F10> 25,200
800 Medaphis Corp.*<F10> 12,000
750 The Money Store, Inc. 19,875
1,125 Paychex, Inc. 65,250
750 PMT Services, Inc.*<F10> 15,188
600 T. Rowe Price Associates, Inc. 19,500
400 Primark Corp.*<F10> 10,950
2,250 Charles Schwab Corp. 52,031
300 Shared Medical Systems Corp. 17,100
500 SunAmerica, Inc. 17,250
500 Total System Services, Inc. 13,000
500 VeriFone, Inc.*<F10> 22,375
400 Waterhouse Investor Services, Inc. 15,150
---------
592,241
FOODS -- 0.2%
600 Hershey Foods Corp. 30,150
HEALTH MAINTENANCE ORGANIZATIONS -- 3.2%
303 Aetna Inc. 21,324
300 Coventry Corp.*<F10> 3,581
400 Foundation Health Corp.*<F10> 13,550
600 Healthsource, Inc.*<F10> 8,850
6,000 Oxford Health Plans, Inc.*<F10> 298,500
700 PacifiCare Health Systems, Inc.*<F10> 57,925
500 Physician Corp. of America*<F10> 6,062
400 Sierra Health Services, Inc.*<F10> 13,750
2,694 United HealthCare Corp. 112,138
300 United Wisconsin Services, Inc. 8,775
500 United American Healthcare Corp.*<F10> 4,250
--------
548,705
HOTELS --0.2%
600 HFS Incorporated*<F10> 40,125
HOUSEHOLD PRODUCTS -- 1.4%
1,000 American Home Products Corp. 63,750
500 Colgate-Palmolive Co. 43,437
300 Estee Lauder Companies Inc. 13,463
500 Paragon Trade Brands, Inc.*<F10> 11,687
1,000 Parlux Fragrances, Inc.*<F10> 4,750
1,000 Procter & Gamble Co. 97,500
---------
234,587
MACHINERY -- 0.1%
750 IDEX Corp. 24,938
MEDICAL SERVICES -- 4.5%
300 Access Health, Inc.*<F10> 16,875
1,000 American Physicians Service Group, Inc.*<F10> 7,250
600 Apria Healthcare Group Inc.*<F10> 11,250
600 Cerner Corp.*<F10> 9,300
1,344 Columbia/HCA Healthcare Corp. 76,440
1,000 Coram Healthcare Corp.*<F10> 3,875
300 Express Scripts, Inc.*<F10> 10,875
600 Genesis Health Ventures, Inc.*<F10> 16,875
400 Grupo Casa Autrey, S.A. de C.V. ADR 8,950
800 Gulf South Medical Supply, Inc.*<F10> 20,600
1,244 HBO & Co. 83,037
500 HealthCare COMPARE Corp.*<F10> 23,687
900 Health Management Systems, Inc.*<F10> 26,325
600 Health Care & Retirement Corp.*<F10> 14,100
1,687 Health Management Associates, Inc.*<F10> 41,964
1,786 HEALTHSOUTH Corp.*<F10> 68,538
500 Horizon/CMS Healthcare Corporation*<F10> 6,000
400 Integrated Health Services, Inc. 10,100
400 Lincare Holdings Inc.*<F10> 16,000
400 Living Centers of America, Inc.*<F10> 10,000
400 Manor Care, Inc. 15,350
400 MedCath Inc.*<F10> 6,800
500 OrNda HealthCorp*<F10> 13,687
800 Orthodontic Centers of America Inc.*<F10> 16,300
1,350 PhyCor, Inc.*<F10> 51,385
600 Physician Reliance Network, Inc.*<F10> 9,150
500 Physicians Resource Group, Inc.*<F10> 11,813
900 Physician Sales & Service, Inc.*<F10> 21,150
800 Prime Medical Services, Inc.*<F10> 10,600
600 Renal Treatment Centers, Inc.*<F10> 19,950
800 RoTech Medical Corp.*<F10> 13,200
600 Target Therapeutics, Inc.*<F10> 25,650
800 Universal Health Services, Inc. Cl B*<F10> 21,800
549 Value Health, Inc.*<F10> 10,294
500 Vencor Inc.*<F10> 16,125
500 Vivra Inc.*<F10> 16,313
---------
761,608
MEDICAL SUPPLIES -- 4.9%
1,500 Abbott Laboratories 73,875
400 Arrow International, Inc. 13,800
2,207 Boston Scientific Corp.*<F10> 126,902
503 Cardinal Health, Inc. 41,560
600 Cryolife, Inc.*<F10> 7,650
400 Empi, Inc.*<F10> 5,600
400 Guidant Corp. 22,100
400 Helix Technology Corp. 11,400
600 IDEXX Laboratories, Inc.*<F10> 27,150
3,000 Imatron Inc.*<F10> 13,875
4,676 Johnson & Johnson 239,645
400 Lunar Corp.*<F10> 12,800
1,600 Medtronic, Inc. 102,600
800 Nellcor Puritan Bennett Inc.*<F10> 17,600
600 Omnicare, Inc. 18,300
800 OrthoLogic Corp.*<F10> 8,500
600 Protocol Systems, Inc.*<F10> 9,975
500 Sofamor/Danek Group, Inc.*<F10> 15,438
450 St. Jude Medical, Inc.*<F10> 18,169
500 STERIS Corp.*<F10> 16,938
600 Stryker Corp. 18,075
500 Ventritex, Inc.*<F10> 8,750
---------
830,702
OFFICE EQUIPMENT & SUPPLIES -- 2.3%
600 Boise Cascade Office Products Corp.*<F10> 10,500
300 CDW Computer Centers, Inc.*<F10> 20,475
1,000 CompuCom Systems Inc.*<F10> 8,750
1,000 CompUSA Inc.*<F10> 54,000
500 Corporate Express, Inc.*<F10> 19,437
500 Danka Business Systems PLC ADR 19,875
400 Global DirectMail Corp.*<F10> 19,100
500 Merisel, Inc.*<F10> 969
400 Micro Warehouse, Inc.*<F10> 10,300
3,000 Office Depot, Inc.*<F10> 70,875
675 OfficeMax, Inc.*<F10> 9,450
5,062 Staples, Inc.*<F10> 112,316
400 U.S. Office Products Co.*<F10> 14,350
1,000 Viking Office Products, Inc. 30,000
---------
400,397
PUBLISHING -- 0.2%
800 Indigo N.V.*<F10> 5,800
300 Scholastic Corp.*<F10> 21,750
800 Steck-Vaughn Publishing Corp.*<F10> 8,600
---------
36,150
RECREATION -- 1.8%
400 Autotote Corp.*<F10> 450
1,000 Callaway Golf Co. 34,125
400 Circus Circus Enterprises, Inc.*<F10> 14,150
500 Coastcast Corp.*<F10> 7,750
2,097 CUC International Inc.*<F10> 83,618
400 Discovery Zone, Inc.*<F10> 150
1,000 Walt Disney Co. 63,375
400 Electronic Arts Inc.*<F10> 14,950
500 International Game Technology 10,250
1,000 Mirage Resorts, Inc.*<F10> 25,625
500 PLATINUM technology, inc.*<F10> 6,312
400 PolyGram N.V. 22,300
1,350 Regal Cinemas, Inc.*<F10> 33,750
---------
316,805
RESTAURANTS -- 1.2%
500 Applebee's International Inc. 13,250
500 Boston Chicken, Inc.*<F10> 17,625
1,500 Checkers Drive-In Restaurants, Inc.*<F10> 1,453
600 Dave & Buster's, Inc.*<F10> 13,350
500 Landry's Seafood Restaurants, Inc.*<F10> 12,500
500 Lone Star Steakhouse & Saloon, Inc.*<F10> 15,219
500 Longhorn Steaks, Inc.*<F10> 7,625
500 McDonald's Corp. 23,688
1,500 Outback Steakhouse, Inc.*<F10> 36,188
600 Papa John's International, Inc.*<F10> 31,500
500 Quality Dining, Inc.*<F10> 14,250
400 Rainforest Cafe, Inc.*<F10> 12,400
1,000 Rally's Hamburgers Inc.*<F10> 3,094
---------
202,142
RETAIL - SPECIALTY -- 3.7%
500 Autozone, Inc.*<F10> 14,500
300 Baby Superstore, Inc.*<F10> 6,225
300 Barnes & Noble Inc.*<F10> 10,312
800 Bed Bath & Beyond Inc.*<F10> 21,900
1,000 Best Buy Co., Inc.*<F10> 22,750
300 Blyth Industries, Inc.*<F10> 14,550
1,125 Bombay Co., Inc.*<F10> 6,328
500 Books-A-Million, Inc.*<F10> 4,062
500 Borders Group, Inc.*<F10> 18,625
500 Casey's General Stores, Inc. 8,750
1,000 Chico's FAS, Inc.*<F10> 7,500
400 Consolidated Stores Corp.*<F10> 16,000
500 Damark International, Inc.*<F10> 6,437
300 Department 56, Inc.*<F10> 7,462
468 Dollar General Corp. 14,567
450 Dollar Tree Stores, Inc.*<F10> 17,325
800 Eckerd Corp.*<F10> 22,400
500 Ethan Allen Interiors Inc. 15,563
800 General Nutrition Companies, Inc.*<F10> 14,050
600 Hollywood Entertainment Corp.*<F10> 12,300
600 Intimate Brands, Inc. 10,950
600 Kohl's Corp.*<F10> 21,600
700 Lands' End, Inc.*<F10> 15,050
300 Luxottica Group ADR 21,825
500 Manhattan Bagel Co., Inc.*<F10> 5,875
500 NBTY Inc.*<F10> 8,250
300 Oakley Inc.*<F10> 12,750
500 Payless ShoeSource, Inc.*<F10> 16,813
400 Pep Boys-Manny, Moe & Jack 14,250
1,500 PETsMART, Inc.*<F10> 38,813
1,050 Pier 1 Imports, Inc. 16,931
500 Proffitt's Inc.*<F10> 19,750
400 Rexall Sundown, Inc.*<F10> 14,600
500 Rhodes, Inc.*<F10> 3,750
400 Ross Stores, Inc. 14,400
2,000 Starbucks Corp.*<F10> 66,000
2,000 Sunglass Hut International, Inc.*<F10> 31,876
400 Tiffany & Co.*<F10> 16,000
400 West Marine, Inc.*<F10> 13,200
500 Williams-Sonoma, Inc.*<F10> 14,188
---------
638,477
RETAIL STORES -- 0.8%
500 Dillard Department Stores, Inc. 16,125
1,000 Gap, Inc. 28,875
500 Neiman-Marcus Group, Inc.*<F10> 17,625
400 Saks Holdings Inc.*<F10> 14,000
2,000 Wal-Mart Stores, Inc. 52,750
----------
129,375
SEMICONDUCTORS -- 8.0%
450 Alliance Semiconductor Corp.*<F10> 3,347
1,800 Altera Corp.*<F10> 91,125
2,200 Atmel Corp.*<F10> 67,925
600 Cirrus Logic, Inc.*<F10> 12,525
800 Cree Research, Inc.*<F10> 9,800
400 EPIC Design Technology, Inc.*<F10> 10,000
300 Exar Corp.*<F10> 4,312
400 Flextronics International Ltd.*<F10> 11,050
500 Hadco Corp.*<F10> 16,000
1,000 Integrated Device Technology, Inc.*<F10> 9,938
300 Integrated Silicon Solution, Inc.*<F10> 3,431
5,800 Intel Corp. 553,540
1,500 Lattice Semiconductor Corp.*<F10> 43,312
500 Level One Communications Inc.*<F10> 17,125
600 Linear Technology Corp. 22,125
6,500 LSI Logic Corp.*<F10> 151,125
400 Micrel, Inc.*<F10> 9,500
850 Microchip Technology Inc.*<F10> 31,769
2,500 Micron Technology, Inc. 76,250
500 National Semiconductor Corp.*<F10> 10,063
400 OPTi Inc.*<F10> 2,350
600 Park Electrochemical Corp. 12,225
300 SGS-THOMSON Microelectronics N.V.*<F10> 14,213
1,000 Sierra Semiconductor Corp.*<F10> 12,000
1,000 Texas Instruments Inc. 55,125
400 Vitesse Semiconductor Corp.*<F10> 15,450
3,000 Xilinx, Inc.*<F10> 102,000
300 Zilog, Inc.*<F10> 5,738
----------
1,373,363
SEMICONDUCTOR/CAPITAL SPENDING -- 1.6%
2,000 Applied Materials, Inc.*<F10> 55,250
300 Asyst Technologies, Inc.*<F10> 5,775
300 Credence Systems Corp.*<F10> 4,725
600 Electroglas, Inc.*<F10> 8,250
600 FSI International, Inc.*<F10> 6,600
600 GaSonics International Corp.*<F10> 4,800
500 Integrated Process Equipment Corp.*<F10> 7,937
1,800 KLA Instruments Corp.*<F10> 40,500
600 Kulicke & Soffa Industries, Inc.*<F10> 6,825
1,000 Lam Research Corp.*<F10> 26,625
600 Mattson Technology, Inc.*<F10> 6,525
300 Novellus Systems, Inc.*<F10> 12,788
600 Photronics, Inc.*<F10> 18,600
800 Sanmina Corp.*<F10> 32,200
450 Semitool Inc.*<F10> 5,344
400 Silicon Valley Group, Inc.*<F10> 7,100
800 Tencor Instruments*<F10> 14,450
600 Ultratech Stepper, Inc.*<F10> 11,325
----------
275,619
SERVICES -- 3.9%
300 ABR Information Services, Inc.*<F10> 21,600
1,200 AccuStaff Inc.*<F10> 31,050
600 Acxiom Corp.*<F10> 24,675
300 BBN Corporation*<F10> 5,137
900 Cambridge Technology Partners*<F10> 27,225
400 Career Horizons, Inc.*<F10> 15,550
1,000 Checkpoint Systems, Inc.*<F10> 26,500
300 ClinTrials Research Inc.*<F10> 12,225
1,200 Corrections Corp. of America*<F10> 37,500
400 CRA Managed Care, Inc.*<F10> 21,600
1,000 Employee Solutions, Inc.*<F10> 17,250
400 Franklin Quest Co.*<F10> 7,500
500 Fritz Companies, Inc.*<F10> 7,250
1,600 Gartner Group, Inc.*<F10> 54,400
800 General DataComm Industries, Inc.*<F10> 9,000
505 Information Resources, Inc.*<F10> 6,628
400 Manpower Inc. 13,300
400 Medic Computer Systems, Inc.*<F10> 14,550
400 MICROS Systems, Inc.*<F10> 11,800
400 National Data Corp. 17,450
600 Norrell Corp. 18,900
450 Olsten Corp. 11,194
300 Omnicom Group Inc. 14,025
700 Personnel Group of America, Inc.*<F10> 18,200
500 Pittston Brink's Group 15,687
2,100 Robert Half International Inc.*<F10> 77,438
800 Romac International, Inc.*<F10> 24,400
400 Sensormatic Electronics Corp. 7,150
400 Structural Dynamics Research Corp.*<F10> 9,550
400 Symbol Technologies, Inc.*<F10> 18,400
1,000 Synthetech, Inc.*<F10> 7,875
800 Ultrak, Inc.*<F10> 22,000
500 Uniforce Services, Inc. 10,813
600 Wackenhut Corrections Corp.*<F10> 13,350
600 Zebra Technologies Corp.*<F10> 15,375
----------
662,484
TECHNOLOGY -- 1.1%
800 BI Inc.*<F10> 6,600
300 Burr-Brown Corp.*<F10> 6,000
600 Cognex Corp.*<F10> 9,750
300 Coherent, Inc.*<F10> 10,575
400 Fusion Systems Corp.*<F10> 7,200
600 General Scanning Inc.*<F10> 6,675
500 In Focus Systems, Inc.*<F10> 7,187
600 Kent Electronics Corp.*<F10> 12,975
450 Kronos Inc.*<F10> 13,837
500 Lumisys Inc.*<F10> 5,008
800 Maxim Integrated Products Inc.*<F10> 28,300
800 Optical Coating Laboratory, Inc. 9,700
300 Pacific Scientific Co. 3,863
300 Perceptron, Inc.*<F10> 7,575
300 Proxima Corp.*<F10> 3,488
1,000 S3 Incorporated*<F10> 19,750
450 Thermo Electron Corp. 18,225
300 Three-Five Systems, Inc.*<F10> 3,600
441 Vishay Intertechnology, Inc.*<F10> 10,198
300 Watkins-Johnson Co. 6,075
----------
196,581
TELECOMMUNICATIONS -- 8.3%
300 ADC Telecommunications, Inc.*<F10> 19,200
600 ADTRAN, Inc.*<F10> 30,150
1,400 America Online Inc.*<F10> 49,875
1,125 Andrew Corp.*<F10> 56,109
400 APAC TeleServices, Inc.*<F10> 20,500
600 Aspect Telecommunications Corp.*<F10> 37,350
400 BroadBand Technologies, Inc.*<F10> 8,200
1,300 C-Cube Microsystems, Inc.*<F10> 57,687
400 California Amplifier, Inc.*<F10> 5,450
400 CIDCO, Inc.*<F10> 8,300
400 CMG Information Services, Inc. 5,800
900 Cognos Inc.*<F10> 29,362
600 Coherent Communication
Systems Corp.*<F10> 11,400
500 Dialogic Corp.*<F10> 17,750
1,400 DSC Communications Corp.*<F10> 35,175
600 DSP Communications Inc.*<F10> 33,525
500 ECI Telecom Ltd. 10,500
500 EIS International, Inc.*<F10> 7,000
800 L.M. Ericsson Telephone Co. ADR 20,300
500 Galileo Electro-Optics Corp.*<F10> 12,375
1,650 Glenayre Technologies, Inc.*<F10> 37,950
300 Globalstar Telecommunications Ltd.*<F10> 15,450
1,000 Global Village Communication, Inc.*<F10> 8,125
500 InterVoice, Inc.*<F10> 7,375
600 MasTec, Inc.*<F10> 20,550
1,133 MFS Communications Co., Inc.*<F10> 49,427
2,000 Motorola, Inc. 103,250
300 NETCOM On-Line Communication
Services, Inc.*<F10> 5,137
500 Network Equipment
Technologies, Inc.*<F10> 6,812
1,251 NEXTEL Communications, Inc.*<F10> 23,144
800 Octel Communications Corp.*<F10> 23,200
800 PairGain Technologies, Inc.*<F10> 62,500
2,000 PictureTel Corp.*<F10> 70,500
400 Plantronics, Inc.*<F10> 15,050
300 Premisys Communications, Inc.*<F10> 11,025
500 PSINet Inc.*<F10> 5,438
500 QUALCOMM Inc.*<F10> 21,250
500 Quarterdeck Corp.*<F10> 3,438
500 Reuters Holdings PLC ADR 34,625
800 Smith Micro Software, Inc.*<F10> 5,000
300 Stanford Telecommunications, Inc.*<F10> 15,000
600 Tekelec*<F10> 8,700
3,000 Tellabs, Inc.*<F10> 211,875
500 Trimble Navigation Ltd.*<F10> 8,313
500 U.S. Long Distance Corp. 4,469
1,600 U.S. Robotics Corp.*<F10> 103,400
400 Westell Technologies, Inc.*<F10> 17,700
2,476 WorldCom Inc.*<F10> 52,925
---------
1,427,636
Total common stocks
(cost $11,664,233) 16,875,785
PREFERRED STOCKS -- 0.2%
101 Aetna Inc., 6.25%, Class C
07/19/00 Series 7,360
800 FHP International Corp., 5%, Series A 24,900
---------
Total preferred stocks
(cost $20,730) 32,260
Total long-term investments
(cost $11,684,963) 16,908,045
SHORT-TERM INVESTMENTS -- 1.6% (A)<F11>
VARIABLE RATE DEMAND NOTES
$268,714 Wisconsin Electric Power Co. 268,714
----------
Total short-term investments
(cost $268,714) 268,714
----------
Total investments
(cost $11,953,677) 17,176,759
Liabilities, less cash and
receivables (0.4%) (A)<F11> (72,333)
----------
NET ASSETS $17,104,426
----------
----------
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering
and redemption price
($17,104,426 / 1,093,502
shares outstanding) $15.64
------
------
*<F10>Non-income producing security.
(a)<F11>Percentages for the various classifications relate to net assets.
REYNOLDS OPPORTUNITY FUND
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1996
INCOME:
Dividends $41,710
Interest 11,704
----------
Total income 53,414
----------
EXPENSES:
Management fees 137,069
Administrative services 27,414
Professional fees 10,786
Transfer agent fees 10,599
Custodian fees 9,569
Registration fees 4,909
Printing and postage expense 3,830
Amortization of organizational expenses 2,756
Other expenses 2,625
----------
Total expenses 209,557
----------
NET INVESTMENT LOSS (156,143)
----------
NET REALIZED GAIN ON INVESTMENTS 18,753
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,557,990
----------
NET GAIN ON INVESTMENTS 1,576,743
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,420,600
---------
---------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
1996 1995
----- -----
OPERATIONS:
Net investment loss $(156,143) $(117,160)
Net realized gain (loss) on investments 18,753 (125,223)
Net increase in unrealized appreciation
on investments 1,557,990 3,122,966
---------- ---------
Net increase in net assets resulting
from operations 1,420,600 2,880,583
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (389,197 and
265,966 shares, respectively) 5,726,048 3,063,971
Cost of shares redeemed (70,945
and 98,163 shares, respectively) (1,025,039) (1,093,553)
---------- ----------
Net increase in net assets derived from
Fund share activities 4,701,009 1,970,418
---------- ----------
TOTAL INCREASE 6,121,609 4,851,001
NET ASSETS AT THE BEGINNING OF THE YEAR 10,982,817 6,131,816
---------- ----------
NET ASSETS AT THE END OF THE YEAR $17,104,426 $10,982,817
---------- ----------
---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
REYNOLDS OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEARS JANUARY 30, 1992*<F12>
EENDED SEPTEMBER 30, TO SEPTEMBER 30,
------------------------------------------- ----------------
1996 1995 1994 1993 1992
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $14.17 $10.09 $9.78 $8.85 $10.00
Income from investment operations:
Net investment (loss) income (0.06) (0.11) (0.09) (0.10) 0.00
Net realized and unrealized
gain (loss) on securities 1.53 4.19 0.40 1.03 (1.15)
------- ------- ------- ------- --------
Total from investment operations 1.47 4.08 0.31 0.93 (1.15)
Less distributions:
Dividend from net investment income -- -- -- 0.00 --
------- ------- ------- ------- --------
Net asset value, end of period $15.64 $14.17 $10.09 $9.78 $8.85
------- ------- ------- ------- --------
------- ------- ------- ------- --------
TOTAL INVESTMENT RETURN 10.4% 40.4% 3.2% 10.5% (16.8%)**<F13>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 17,104 10,983 6,132 3,834 1,844
Ratio of expenses (after reimbursement)
to average net assets***<F14> 1.5% 1.9% 2.0% 2.0% 2.0%**<F13>
Ratio of net investment (loss) income
to average net assets****<F15> (1.1%) (1.5%) (1.6%) (1.3%) 0.0%**<F13>
Portfolio turnover rate 11.8% 38.4% 16.8% 67.6% 30.1%
Average commission rate paid*****<F16> $0.1269
*<F12>Commencement of Operations.
**<F13>Annualized.
***<F14>Computed after giving effect to adviser's limitation undertaking. If
the Fund had paid all of its expenses, the ratio would have been, for the years
ended September 30, 1994 and 1993 and for the period ended September 30, 1992,
2.1%, 2.4% and 3.8%**, respectively.
****<F15>The ratio of net investment income prior to adviser's expense
limitation undertaking to average net assets for the years ended September 30,
1994 and 1993 and for the period ended September 30, 1992 would have been
(1.7%), (1.7%) and (1.8%)**, respectively.
*****<F16>Disclosure required for fiscal years beginning after
September 1, 1995.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
REYNOLDS U.S. GOVERNMENT BOND FUND
STATEMENT OF NET ASSETS
September 30, 1996
QUOTED
PRINCIPAL MARKET
AMOUNT VALUE
--------- -------
LONG-TERM INVESTMENTS -- 66.2% (A)<F17>
U.S. TREASURY SECURITIES -- 66.2%
$300,000 U.S. Treasury Notes,
6.250%, due 06/30/98 $300,797
200,000 U.S. Treasury Notes,
6.125%, due 08/31/98 199,969
200,000 U.S. Treasury Notes,
6.000%, due 09/30/98 199,594
200,000 U.S. Treasury Notes,
7.125%, due 10/15/98 203,844
200,000 U.S. Treasury Notes,
6.750%, due 05/31/99 202,406
400,000 U.S. Treasury Notes,
6.375%, due 07/15/99 401,312
300,000 U.S. Treasury Notes,
8.500%, due 11/15/00 322,219
----------
Total long-term investments
(cost $1,843,138) 1,830,141
SHORT-TERM INVESTMENTS -- 32.7% (A)<F17>
U.S. TREASURY SECURITIES -- 29.0%
200,000 U.S. Treasury Notes,
6.125%, due 12/31/96 200,375
300,000 U.S. Treasury Notes,
6.375%, due 06/30/97 301,500
300,000 U.S. Treasury Notes,
5.500%, due 07/31/97 299,390
----------
Total government securities
(cost $798,812) 801,265
VARIABLE RATE DEMAND NOTES -- 3.7%
102,373 Wisconsin Electric Power Co. 102,373
----------
Total variable rate demand notes
(cost $102,373) 102,373
---------
Total short-term investments
(cost $901,185) 903,638
Total investments
(cost $2,744,323) 2,733,779
Cash and receivables, less
liabilities -- 1.1% (A)<F17> 31,749
----------
NET ASSETS $2,765,528
----------
----------
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering
and redemption price
($2,765,528 / 283,568
shares outstanding) $9.75
------
------
(a)<F17>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
REYNOLDS U.S. GOVERNMENT BOND FUND
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1996
INCOME:
Interest $162,757
---------
EXPENSES:
Management fees 19,280
Professional fees. 15,188
Transfer agent fees 10,369
Registration fees 4,009
Amortization of organizational expenses 2,756
Administrative services 2,571
Printing and postage expense 1,465
Custodian fees 667
Other expenses 1,387
---------
Total expenses before reimbursement 57,692
Less expenses assumed by adviser (34,556)
---------
Net expenses 23,136
---------
NET INVESTMENT INCOME 139,621
---------
NET REALIZED LOSS ON INVESTMENTS (2,669)
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (16,703)
---------
NET LOSS ON INVESTMENTS (19,372)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $120,249
---------
---------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
1996 1995
------ -----
OPERATIONS:
Net investment income $139,621 $166,986
Net realized loss on investments (2,669) (144,952)
Net (decrease) increase in unrealized
appreciation on investments (16,703) 203,951
---------- ---------
Net increase in net assets resulting
from operations 120,249 225,985
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.5333 and $0.5441 per share, respectively) (139,621) (169,574)
---------- ---------
Total distributions (139,621) (169,574)
---------- ---------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (61,092
and 14,454 shares, respectively) 595,638 141,920
Net asset value of shares issued in distributions
(12,488 and 16,429 shares, respectively) 123,166 158,139
Cost of shares redeemed (74,161 and
201,217 shares, respectively) (732,525) (1,925,062)
--------- ----------
Net decrease in net assets derived from
Fund share activities (13,721) (1,625,003)
--------- ----------
TOTAL DECREASE (33,093) (1,568,592)
NET ASSETS AT THE BEGINNING OF THE YEAR 2,798,621 4,367,213
---------- ----------
NET ASSETS AT THE END OF THE YEAR $2,765,528 $2,798,621
---------- ----------
---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
REYNOLDS U.S. GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEARS JANUARY 30, 1992*<F18>
ENDED SEPTEMBER 30, TO SEPTEMBER 30,
--------------------------------------------- ----------------
1996 1995 1994 1993 1992
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $9.85 $9.61 $10.76 $10.36 $10.00
Income from investment operations:
Net investment income 0.5333 0.5350 0.5609 0.5498 0.2979
Net realized and unrealized (loss) gain
on investments (0.1000) 0.2491 (1.1432) 0.4001 0.3602
-------- ------- -------- ------- --------
Total from investment operations 0.4333 0.7841 (0.5823) 0.9499 0.6581
Less distributions:
Dividends from net investment income (0.5333) (0.5441) (0.5607) (0.5499) (0.2981)
Distribution from net realized gains -- -- (0.0070) -- --
-------- ------- -------- ------- --------
Total from distributions (0.5333) (0.5441) (0.5677) (0.5499) (0.2981)
-------- ------- -------- ------- --------
Net asset value, end of period $9.75 $9.85 $9.61 $10.76 $10.36
-------- ------- -------- ------- --------
-------- ------- -------- ------- --------
TOTAL INVESTMENT RETURN 4.49% 8.42% (5.54%) 9.48% 10.20%**<F19>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 2,766 2,799 4,367 6,376 3,223
Ratio of expenses (after reimbursement)
to average net assets***<F20> 0.90% 0.91% 0.86% 0.83% 0.75%**<F19>
Ratio of net investment income
to average net assets****<F21> 5.43% 5.6% 5.4% 5.3% 5.0%**<F19>
Portfolio turnover rate 28.6% 0.0% 19.6% 6.3% --
*<F18>Commencement of Operations.
**<F19>Annualized.
***<F20>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
2.2%, 2.0%, 1.5% and 1.5% for the years ended September 30, 1996, 1995, 1994 and
1993, respectively, and 2.8%** for the period ended September 30, 1992.
****<F21>The ratio of net investment income prior to adviser's expense
limitation undertaking to average net assets for the years ended September 30,
1996, 1995, 1994 and 1993 and the period ended September 30, 1992 would have
been 4.1%, 4.5%, 4.8%, 4.6% and 2.9%**, respectively.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
REYNOLDS MONEY MARKET FUND
STATEMENT OF NET ASSETS
September 30, 1996
PRINCIPAL
AMOUNT RATING VALUE
--------- ------ ------
COMMERCIAL PAPER -- 54.9% (A)<F22>
$200,000 General Electric Capital Corp.,
5.43%, due 10/11/96 A1+P1 $199,698
200,000 Associates Corporation, 5.43%, due 10/15/96 A1+P1 199,578
200,000 IBM Credit Corporation, 5.37%, due 10/21/96 A1P1 199,403
195,000 Prudential Funding Corp., 5.40%, due 10/23/96 A1+P1 194,357
195,000 Norwest Financial, Inc., 5.35%, due 10/28/96 A1+P1 194,218
205,000 The CIT Group Holdings, Inc.,
5.28%, due 11/13/96 A1P1 203,707
205,000 John Deere Capital Corporation,
5.28%, due 11/26/96 A1P1 203,316
205,000 American General Finance Corporation,
5.29%, due 12/11/96 A1+P1 202,861
195,000 Merrill Lynch & Co., Inc.,
5.48%, due 12/02/96 A1+P1 193,160
200,000 Chevron Oil Finance Company,
5.25%, due 12/09/96 A1+P1 197,988
200,000 American Express Credit Corp.,
5.31%, due 01/07/97 A1P1 197,109
---------
Total commercial paper 2,185,395
FEDERAL AGENCIES -- 30.0% (A)<F22>
300,000 Federal Home Loan Banks, 5.20%, due 10/30/96 298,743
300,000 Federal National Mortgage Association,
5.20%, due 11/04/96 298,527
300,000 Federal National Mortgage Association,
5.07%, due 11/12/96 298,225
300,000 Federal National Mortgage Association,
5.15%, due 11/26/96 297,597
---------
Total federal agencies 1,193,092
VARIABLE RATE DEMAND NOTES -- 15.4% (A)<F22>
190,000 American Family Financial Services A1P1 190,000
190,000 Johnson Controls, Inc. A1P1 190,000
43,902 Pitney Bowes Credit Corp. A1P1 43,902
190,000 Wisconsin Electric Power Co. A1P1 190,000
---------
Total variable rate demand notes 613,902
----------
Total investments (amortized cost $3,992,389) 3,992,389
Liabilities, less cash and receivables -- (0.3%)(A)<F22> (11,930)
----------
NET ASSETS $3,980,459
---------
---------
Net Asset Value Per Share ($0.01 par value
500,000,000 shares authorized),
offering and redemption price
($3,980,459 / 3,980,459 shares outstanding) $1.00
-----
-----
(a)<F22>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
REYNOLDS MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1996
INCOME:
Interest $271,591
--------
EXPENSES:
Management fees 24,986
Professional fees 15,689
Transfer agent fees 9,352
Administrative services 4,997
Printing and postage expenses 4,025
Registration fees 3,839
Custodian fees 2,758
Amortization of organizational expenses 1,593
Other expenses 2,118
---------
Total expenses before reimbursement 69,357
Less expenses assumed by adviser (36,875)
---------
Net expenses 32,482
---------
NET INVESTMENT INCOME 239,109
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $239,109
---------
---------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
1996 1995
------ -----
OPERATIONS:
Net investment income $239,109 $151,412
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.0477 and $0.0510 per share, respectively) (239,109) (151,412)
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (11,997,282 and
6,565,456 shares, respectively) 11,997,282 6,565,456
Net asset value of shares issued in distributions
(234,567 and 146,040 shares, respectively) 234,567 146,040
Cost of shares redeemed (11,994,546 and
6,160,428 shares, respectively) (11,994,546) (6,160,428)
----------- ----------
Net increase in net assets derived from
Fund share activities. 237,303 551,068
---------- ----------
TOTAL INCREASE 237,303 551,068
NET ASSETS AT THE BEGINNING OF THE YEAR 3,743,156 3,192,088
----------- ----------
NET ASSETS AT THE END OF THE YEAR $3,980,459 $3,743,156
----------- ----------
----------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
REYNOLDS MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------
1996 1995 1994 1993 1992 1991*<F23>
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income 0.0477 0.0510 0.0304 0.0255 0.0364 0.0358
Less distributions:
Dividends from net investment income (0.0477) (0.0510) (0.0304) (0.0255) (0.0364) (0.0358)
-------- ------- ------- -------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ------- ------- -------- ------- -------
-------- ------- ------- -------- ------- -------
TOTAL INVESTMENT RETURN 4.9% 5.2% 3.1% 2.6% 3.6% 5.5%**<F24>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 3,980 3,743 3,192 6,798 6,166 3,617
Ratio of expenses (after reimbursement)
to average net assets***<F25> 0.65% 0.65% 0.63% 0.67% 0.64% 0.61%**<F24>
Ratio of net investment income to
average net assets****<F26> 4.78% 5.08% 2.84% 2.62% 3.53% 5.43%**<F24>
*<F23>For the period from January 30, 1991 (commencement of operations) to
September 30, 1991.
**<F24>Annualized.
***<F25>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
1.39%, 1.95%, 1.47%, 1.22% and 1.73% for the years ended September 30, 1996,
1995, 1994, 1993 and 1992, respectively, and 1.85%** for the period ended
September 30, 1991.
****<F26>If the Fund had paid all of its expenses, the ratio would have been
4.05%, 3.79%, 2.01%, 2.08% and 2.44% for the years ended September 30, 1996,
1995, 1994, 1993 and 1992, respectively, and 4.18%** for the
period ended September 30, 1991.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
REYNOLDS FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The following is a summary of significant accounting policies of the Reynolds
Funds, Inc. (the "Company"), which is registered as an open-end management
investment company under the Investment Company Act of 1940. This Company
consists of a series of four funds: the Reynolds Blue Chip Growth Fund ("Blue
Chip Fund"), the Reynolds Money Market Fund ("Money Market Fund"), the
Reynolds Opportunity Fund ("Opportunity Fund") and the Reynolds U.S.
Government Bond Fund ("Government Bond Fund") (collectively the "Funds").
The assets and liabilities of each Fund are segregated and a shareholder's
interest is limited to the Fund in which the shareholder owns shares. The
Company was incorporated under the laws of Maryland on April 28,1988.
The investment objective of the Blue Chip Fund is to produce long-term growth
of capital, with current income as a secondary objective, by investing in
common stocks of well-established growth companies commonly referred to as
"blue chip" companies; the investment objective of the Money Market Fund is
to provide a high level of current income, consistent with liquidity, the
preservation of capital and a stable net asset value, by investing in a
diversified portfolio of high-quality, highly liquid money market
instruments; the investment objective of the Opportunity Fund is to produce
long-term growth of capital by investing in a diversified portfolio of common
stocks of companies having above average growth characteristics; and the
investment objective of the Government Bond Fund is to provide a high level
of current income by investing in a diversified portfolio of securities
issued or guaranteed as to principal by the U.S. Government, its agencies or
instrumentalities.
(a) Each security for the Blue Chip Fund, Opportunity Fund and Government
Bond Fund, excluding short-term investments, is valued at the last sale price
reported by the principal security exchange on which the issue is traded, or
if no sale is reported, the latest bid price. Securities which are traded
over-the-counter are valued at the latest bid price. Short-term investments
held by these Funds and all instruments held by the Money Market Fund are
valued at amortized cost which approximates quoted market value. Securities
for which quotations are not readily available are valued at fair value as
determined by the investment adviser under the supervision of the Board of
Directors. Investment transactions are recorded no later than the first
business day after the trade date. The cost amounts of securities for
Federal income tax purposes aggregates $14,967,277 and $11,973,098,
respectively, for the Blue Chip Fund and the Opportunity Fund. The
differences between cost amounts for book purposes and tax purposes is due to
deferred wash losses. Cost amounts, as reported on the statements of net
assets for the Government Bond Fund and the Money Market Fund, are the same
for Federal income tax purposes.
(b) Net realized gains and losses on common stock of the Blue Chip Fund and
the Opportunity Fund are computed on the basis of the cost of specific
certificates.
(c) Provision has not been made for Federal income taxes since the Funds
have elected to be taxed as "regulated investment companies" and intend to
distribute substantially all income to shareholders and otherwise comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies. The Opportunity Fund has $272, $102,040, $53,303 and
$103,349 of net capital losses which expire September 30, 2000, 2002, 2003
and 2004, respectively, and $3,456 of 1996 post-October losses, that may be
used to offset capital gains in future years to the extent provided by tax
regulations. The Government Bond Fund has $231,245 and $19,651 of net capital
losses which expire September 30, 2003 and 2004, respectively, and $2,669 of
1996 post-October losses, that may be used to offset future realized capital
gains.
(d) The Blue Chip Fund and the Opportunity Fund record dividend income on
the ex-dividend date and interest income on the accrual basis. The
Government Bond Fund and the Money Market Fund record interest income on the
accrual basis.
(e) The Funds have significant investments in short-term variable rate
demand notes, which are unsecured instruments. The Funds may be susceptible
to credit risk with respect to these notes to the extent the issuer defaults
on its payment obligation. The Funds' policy is to monitor the
creditworthiness of the issuer and does not anticipate nonperformance by
these counterparties.
(f) Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to capital stock.
(g) 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 revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Funds have management agreements with Reynolds Capital Management
("RCM"), with whom certain officers and directors of the Funds are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreements, the Blue Chip Fund and the Opportunity Fund will pay RCM a
monthly management fee at the annual rate of 1% of such Funds' daily net
assets; from the Government Bond Fund a monthly fee of 0.75% of such Fund's
daily net assets; and from the Money Market Fund a monthly fee of 0.5% of
such Fund's daily net assets. For the year ended September 30, 1996, RCM
voluntarily waived $19,280 and $24,986 of the management fees due from the
Government Bond Fund and the Money Market Fund, respectively, under the
agreements. Additionally, RCM assumed $15,276 and $11,889 of other expenses
of the Government Bond Fund and the Money Market Fund, respectively.
RCM reimburses the Funds for annual expenses in excess of the lowest expense
limitation imposed by the states. In addition to the reimbursement required
under the management agreements, RCM has voluntarily reimbursed the
Government Bond Fund and the Money Market Fund for expenses over 0.90% and
0.65% of the daily net assets of the Funds', respectively. These voluntary
reimbursements to the Government Bond Fund and the Money Market Fund may be
modified or discontinued at any time by RCM.
The Funds have administrative agreements with Fiduciary Management, Inc.
("FMI"), with whom certain officers of the Funds are affiliated, to supervise
all aspects of the Funds' operations except those performed by RCM pursuant
to the management agreements. Under the terms of the agreements, the Blue
Chip Fund and the Opportunity Fund will pay FMI a monthly administrative fee
at the annual rate of 0.2% of such Funds' daily net assets up to and
including $30,000,000 and 0.1% of such Funds' daily net assets in excess of
$30,000,000; and the Government Bond Fund and the Money Market Fund will pay
FMI a monthly administrative fee at the annual rate of 0.1% of such Funds'
daily net assets.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed to
shareholders. The Blue Chip Fund declared a distribution of $472,386 from
net long-term realized gains ($0.3475 per share) on October 25, 1996. The
distribution will be paid on October 28, 1996, to shareholders of record on
October 24, 1996. The percentage of ordinary income which is eligible for the
corporate dividends received deduction for this income distribution is 0%.
Dividends from net investment income for the Government Bond Fund and the
Money Market Fund are declared daily and paid monthly. Distributions of net
realized gains, if any, will be declared at least once each year.
(4) DEFERRED EXPENSES --
Organizational expenses were deferred and are being amortized on a straight-
line basis over a period of not more than five years. These expenses were
advanced by RCM who will be reimbursed by the Funds over a period of not more
than five years. The proceeds of any redemption of the initial shares by the
original shareholder will be reduced by a pro-rata portion of any then
unamortized deferred expenses in the same proportion as the number of initial
shares being redeemed bears to the number of initial shares outstanding at
the time of such redemption. The unamortized organizational expenses at
September 30, 1996 were $1,145, and $1,145, respectively, for the Opportunity
Fund and the Government Bond Fund.
(5) INVESTMENT TRANSACTIONS --
For the year ended September 30, 1996, purchases and proceeds of sales of
investment securities of the Blue Chip Fund (excluding short-term securities)
were $6,369,032 and $9,654,289, respectively; purchases and proceeds of sales
of investment securities of the Opportunity Fund (excluding short-term
securities) were $5,986,414 and $1,608,001, respectively; purchases and
proceeds of sales of investment securities of the Government Bond Fund
(excluding short-term securities) were $699,260 and $710,500, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of September 30, 1996, liabilities of the Funds included the following:
BLUE CHIP MONEY MARKET OPPORTUNITY GOVERNMENT
FUND FUND FUND BOND FUND
--------- ----------- ----------- ----------
Payable to brokers for
investments purchased $70,580 $-- $49,080 $--
Payable to RCM for management
fees and deferred expenses 24,409 -- 14,509 1,145
Dividends payable -- 13,620 -- 11,364
Other liabilities 18,904 758 15,121 715
(7) SOURCES OF NET ASSETS --
As of September 30, 1996, the sources of net assets were as follows:
BLUE CHIP MONEY MARKET OPPORTUNITY GOVERNMENT
FUND FUND FUND BOND FUND
--------- ------------ ----------- ----------
Fund shares issued
and outstanding $14,479,219 $3,980,459 $12,163,185 $3,029,637
Net unrealized appreciation
(depreciation) on
investments 15,901,029 -- 5,223,082 (10,544)
Accumulated net realized gain
(loss) on investments 427,055 -- (281,841) (253,565)
---------- ---------- ----------- ----------
$30,807,303 $3,980,459 $17,104,426 $2,765,528
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Aggregate net unrealized appreciation (depreciation) for the Funds as of
September 30, 1996 consisted of the following:
BLUE CHIP OPPORTUNITY GOVERNMENT
FUND FUND BOND FUND
--------- ----------- ----------
Aggregate gross unrealized
appreciation $16,174,201 $6,642,447 $8,877
Aggregate gross unrealized
depreciation (273,172) (1,419,365) (19,421)
---------- ---------- ----------
Net unrealized appreciation
(depreciation) $15,901,029 $5,223,082 $(10,544)
---------- ---------- ----------
---------- ---------- ----------
REYNOLDS FUNDS
Wood Island, Third Floor
80 East Sir Francis Drake Boulevard
Larkspur, California 94939
1-415-461-7860
BOARD OF DIRECTORS
FREDERICK L. REYNOLDS
ROBERT E. SNADER
ROBERT E. STAUDER
INVESTMENT ADVISER
REYNOLDS CAPITAL MANAGEMENT
Wood Island, Third Floor
80 East Sir Francis Drake Boulevard
Larkspur, California 94939
ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-773-9665
or 1-800-7REYNOLDS
1-414-765-4124
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
