SEMIANNUAL REPORT
MARCH 31, 1997
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
1-800-773-9665
REYNOLDS FUNDS
May 28, 1997
Dear Fellow Shareholders:
The Reynolds Blue Chip Growth Fund had strong appreciation for the one year
ended March 31, 1997 and for the three years ended March 31, 1997:
AVERAGE ANNUAL TOTAL RETURNS
APRIL 1, 1996 APRIL 1, 1994
THROUGH THROUGH
MARCH 31, 1997 MARCH 31, 1997
+27.5% +22.5%
Reynolds Reynolds
Blue Chip Blue Chip
Growth Fund Growth Fund
The Reynolds Blue Chip Growth Fund also had strong appreciation for the one
year ended April 30, 1997 and for the three years ended April 30, 1997:
AVERAGE ANNUAL TOTAL RETURNS
MAY 1, 1996 MAY 1, 1994
THROUGH THROUGH
APRIL 30, 1997 APRIL 30, 1997
+33.2% +25.9%
Reynolds Reynolds
Blue Chip Blue Chip
Growth Fund Growth Fund
The Blue Chip Fund has received recognition from many sources for its recent
performance including:
(1) Barron's - The Blue Chip Fund was featured in the 05/26/97 edition of
Barron's.
(2) Consumer Reports - Selected the Blue Chip Fund as one of 101 stock funds
that have demonstrated the best combination of safety and solid performance. In
making its selections Consumer Reports considers 3-year risk adjusted
performance, availability to retail investors, a fund's expense ratio and
excludes funds with sales loads and 12b-1 fees.
(3) Fortune - Selected the Blue Chip Fund as one of the very best mutual
funds for its Investor's Guide '97. In making its selections Fortune considers a
--------------------
fund's 3-year performance after sales load and taxes, fund manager turnover and
availability to retail investors.
(4) Investor's Business Daily - The Blue Chip Fund has received an A+ ranking
from Investor's Business Daily. Investor's Business Daily ranks mutual funds on
the basis of a moving 36 month performance. The top 5% of all mutual funds
receive an A+ ranking. Investor's Business Daily considered 3,261 mutual funds
for the three years ended April 30, 1997 in determining this ranking.
INVESTMENT OUTLOOK
There are currently many investment positives. Among them are: (1) the U.S.
budget deficit has been cut about in half since the early 1990s and continuing
progress is being made, (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, (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, (5) U.S.
consumer confidence is strong, and (6) 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 +11.6% for the six months ended March 31,
1997 and +18.5% for the six months ended April 30, 1997. The Blue Chip Fund's
return was +74.7% for the five years ended March 31, 1997 and +90.0% for the
five years ended April 30, 1997. These were average annual compounded rates of
return of +11.8% and +13.7% respectively. The Blue Chip Fund increased +174.5%
from August 12, 1988 (effective date of the Fund's registration statement)
through March 31, 1997 and increased +198.2% from August 12, 1988 through April
30, 1997. These were average annual compounded rates of return of +12.4% and
+13.4% respectively.
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 -4.8% for the six months ended March 31,
1997 and +4.3% for the six months ended April 30, 1997. The Opportunity Fund's
return was +3.7% for the one year ended March 31, 1997 and +2.3% for the one
year ended April 30, 1997. The Opportunity Fund's return was +53.5% for the
three years ended March 31, 1997 and +64.7% for the three years ended April 30,
1997. These were average annual compounded rates of return of +15.4% and +18.1%,
respectively. The Opportunity Fund increased +53.5% for the five years ended
March 31, 1997 and +70.9% for the five years ended April 30, 1997. These were
average annual compounded rates of return of +9.0% and +11.3%, respectively. The
Opportunity Fund increased +48.9% from January 30, 1992 (effective date of the
Fund's registration statement) through March 31, 1997 and increased +59.3% from
January 30, 1992 through April 30, 1997. These were average annual compounded
rates of return of +8.0% and +9.3% respectively.
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 March 31, 1997, the assets were invested approximately 99% in U.S. Treasury
Securities and 1% in high quality cash equivalents.
The Bond Fund had a dollar weighted average maturity of 1.6 years on March
31, 1997. 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 March 31, 1997, the assets of the Reynolds Money Market Fund were
invested approximately 50% in high quality commercial paper, 35% in Federal
Agencies, and 15% in high quality cash equivalents. As of March 31, 1997, the
dollar weighted average days to maturity of the Money Market Fund was 81.7 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 continuing to enjoy 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 labor and products 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
The majority of government and private-sector data still indicate that the
U.S. economy will continue to have moderate, but not excessive, broad based
growth. Gross Domestic Product (GDP) is forecast to increase 3-4% in 1997 after
increasing 2.4% in 1996.
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, as evidenced by their recent increase in short-term interest rates.
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 worldwide labor and raw materials shortages should keep inflation in
check. 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 2.5-3% rate in 1997, after increasing at a
3.3% rate in 1996.
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. (PT).
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 are also reported in
January.
NEWSPAPER LISTING OF NET ASSET VALUE: The Blue Chip Fund is listed
alphabetically - with the symbol Reynolds BC, Reynolds BCG, Rey BC, ReynBlCh or
ReynBluCh - in many major daily newspapers including Investor's Business Daily,
The New York Times, The Wall Street Journal and USA Today. The Opportunity Fund
and the U.S. Government Bond Fund will be listed in newspapers once they have
either $25 million of net assets or 1,000 shareholders.
NASDAQ SYMBOLS: Reynolds Blue Chip Growth Fund - RBCGX, Reynolds Opportunity
Fund - ROPPX, Reynolds U.S. Government Bond Fund - RUSGX, Reynolds Money Market
Fund - REYXX.
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 including the
new Simple IRA Plans.
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.
THE REYNOLDS FUNDS ARE 100% NO-LOAD: No front end sales commission or
redemption fees "loads" are charged.
THE REYNOLDS FUNDS DO NOT HAVE A 12(B)-1 PLAN: No marketing fees are charged
to the Funds.
Over 65% of all mutual funds impose one or more marketing charges which are
ultimately paid by the shareholder. These marketing charges are either: (1) a
front-end fee or load in which up to 8% of a shareholder's assets are deducted
from the original investment (some funds even charge a fee when a shareholder
reinvests capital gains or dividends); or (2) a back-end penalty fee or load
which is typically deducted from a shareholder's account if a shareholder
redeems within five years of the original investment. In addition, many funds
charge against their assets an annual fee called a 12b-1 fee to pay for
marketing costs. This annual fee can be anywhere from 0.25% to 1.00% of assets.
All of these fees reduce a shareholder's return. The Reynolds Funds are 100% No-
Load as they do not have these extra charges.
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.
/s/ Frederick L. Reynolds
Frederick L. Reynolds
President
80 East Sir Francis Drake Blvd. Larkspur, CA 94939 415-461-7860
Reynolds Blue Chip Growth Fund
STATEMENT OF NET ASSETS
March 31, 1997 (Unaudited)
QUOTED
SHARES MARKET VALUE
------ ------------
LONG-TERM INVESTMENTS -- 86.2% (A)<F2>
COMMON STOCKS -- 86.2% (A)<F2>
BANKS -- 1.3%
1,000 BankAmerica Corp. $100,750
1,000 Bank of New York Co., Inc. 36,750
500 Citicorp 54,125
1,500 J.P. Morgan & Co. Inc. 147,375
1,500 NationsBank Corporation 83,062
500 State Street Boston Corp. 34,687
500 Wells Fargo & Co. 142,063
-----------
598,812
BEVERAGES -- 6.7%
2,500 Anheuser-Busch Companies, Inc. 105,312
26,000 The Coca-Cola Company 1,452,750
44,000 PepsiCo, Inc. 1,435,500
-----------
2,993,562
BIOTECHNOLOGY -- 0.5%
3,500 Amgen Inc.*<F1> 195,562
2,468 Chiron Corp.*<F1> 45,967
-----------
241,529
BUILDING -- 0.9%
7,500 The Home Depot, Inc. 401,250
CHEMICALS -- 0.7%
1,000 AlliedSignal Inc. 71,250
1,500 E.I du Pont de Nemours & Co. 159,000
1,000 Minnesota Mining &
Manufacturing Co. 84,500
-----------
314,750
COMPUTER NETWORKING -- 4.9%
16,000 3Com Corp.*<F1> 524,000
4,000 Ascend Communications, Inc.*<F1> 163,000
4,000 Bay Networks, Inc.*<F1> 71,500
6,500 Cabletron Systems, Inc.*<F1> 190,125
1,000 Cascade Communications Corp.*<F1> 26,375
24,500 Cisco Systems Inc.*<F1> 1,179,062
-----------
2,154,062
COMPUTER & PERIPHERALS -- 2.9%
3,500 Compaq Computer Corp.*<F1> 268,187
500 Dell Computer Corp.*<F1> 33,813
8,000 Hewlett-Packard Co. 426,000
3,000 International Business
Machines Corp. 412,125
5,000 Sun Microsystems, Inc.*<F1> 144,375
-----------
1,284,500
COMPUTER SOFTWARE & SERVICES -- 8.1%
3,750 Computer Associates
International, Inc. 145,781
28,500 Microsoft Corp.*<F1> 2,613,108
15,875 Oracle Corp.*<F1> 612,188
5,500 PeopleSoft, Inc.*<F1> 220,000
-----------
3,591,077
DRUGS -- 15.7%
9,000 Bristol-Myers Squibb Co. 531,000
9,000 Eli Lilly & Co. 740,250
24,100 Merck & Co., Inc. 2,030,425
18,500 Pfizer Inc. 1,556,312
17,500 Schering-Plough Corp. 1,273,125
10,000 Warner-Lambert Co. 865,000
-----------
6,996,112
ELECTRICAL EQUIPMENT -- 1.8%
6,000 Emerson Electric Co. 270,000
5,500 General Electric Co. (U.S.) 545,875
-----------
815,875
ELECTRONICS -- 0.3%
4,000 Teradyne, Inc.*<F1> 115,500
ENERGY -- 2.6%
500 Amoco Corp. 43,312
500 Chevron Corp. 34,812
1,500 Exxon Corp. 161,625
2,500 Mobil Corp. 326,563
1,000 Royal Dutch Petroleum Co. ADR 175,000
3,000 Schlumberger Ltd. 321,750
1,000 Texaco Inc. 109,500
-----------
1,172,562
ENGINEERING/CONSTRUCTION -- 0.1%
500 Fluor Corp. 26,250
FINANCIAL SERVICES -- 0.8%
4,000 American Express Co. 239,500
2,000 Fannie Mae (formerly Federal
National Mortgage Association) 72,250
1,000 Intuit Inc.*<F1> 23,250
-----------
335,000
FOODS -- 4.0%
1,000 Campbell Soup Co. 46,375
500 CPC International Inc. 41,000
2,000 General Mills, Inc. 124,250
3,000 H.J. Heinz Co. 118,500
1,000 Kellogg Co. 67,250
10,000 Philip Morris Companies Inc. 1,141,250
2,000 Quaker Oats Co. 73,000
4,500 Sara Lee Corp. 182,250
-----------
1,793,875
FOOD WHOLESALERS -- 0.1%
1,000 Sysco Corp. 34,125
GROCERY STORES -- 0.2%
1,000 Albertson's, Inc. 34,000
1,500 Safeway Inc.*<F1> 69,563
-----------
103,563
HEALTH MAINTENANCE ORGANIZATIONS -- 1.3%
6,000 Oxford Health Plans, Inc.*<F1> 351,750
4,500 United HealthCare Corp. 214,313
-----------
566,063
HOUSEHOLD PRODUCTS -- 7.2%
5,500 American Home Products Corp. 330,000
1,000 Avon Products, Inc. 52,500
8,500 Colgate-Palmolive Co. 846,812
5,500 Gillette Company 399,438
13,500 Procter & Gamble Co. 1,552,500
-----------
3,181,250
INSURANCE -- 1.2%
3,750 American International Group, Inc. 440,156
500 General Re Corp. 79,000
-----------
519,156
MACHINERY -- 0.6%
3,000 Caterpillar Inc. 240,750
500 Deere & Co. 21,750
-----------
262,500
MEDICAL SUPPLIES -- 6.1%
18,000 Abbott Laboratories 1,010,250
32,000 Johnson & Johnson 1,692,000
-----------
2,702,250
OFFICE EQUIPMENT & SUPPLIES -- 0.5%
5,000 Office Depot, Inc.*<F1> 101,875
1,000 Pitney Bowes Inc. 58,750
1,000 Xerox Corp. 56,875
-----------
217,500
PAPER & FOREST PRODUCTS -- 1.0%
1,000 Georgia-Pacific Corp. 72,500
1,000 International Paper Co. 38,875
3,280 Kimberly-Clark Corp. 325,950
-----------
437,325
PUBLISHING -- 0.2%
1,000 Gannett Co., Inc. 85,875
RECREATION -- 1.8%
9,049 Walt Disney Co. 660,577
1,500 Eastman Kodak Co. 113,813
-----------
774,390
RESTAURANTS -- 0.9%
8,500 McDonald's Corp. 401,625
RETAIL - SPECIALTY -- 0.6%
2,000 Best Buy Co., Inc.*<F1> 20,500
3,500 NIKE, Inc. Cl B 217,000
1,000 Walgreen Co. 41,875
-----------
279,375
RETAIL STORES -- 1.2%
1,500 Dayton Hudson Corp. 62,625
4,500 Gap, Inc. 150,750
12,000 Wal-Mart Stores, Inc. 334,500
-----------
547,875
SEMICONDUCTORS -- 7.2%
4,000 Altera Corp.*<F1> 172,000
4,000 Atmel Corp.*<F1> 95,752
18,000 Intel Corp. 2,504,250
3,500 LSI Logic Corp.*<F1> 121,625
3,000 Texas Instruments Inc. 224,625
2,000 Xilinx, Inc.*<F1> 97,500
-----------
3,215,752
SEMICONDUCTOR/CAPITAL SPENDING -- 0.6%
2,500 Applied Materials, Inc.*<F1> 115,938
2,000 KLA Instruments Corp.*<F1> 73,000
1,000 Novellus Systems, Inc.*<F1> 69,000
-----------
257,938
TELECOMMUNICATIONS -- 3.7%
2,500 America Online Inc.*<F1> 105,938
2,000 L.M. Ericsson Telephone Co. ADR 67,626
500 Lucent Technologies Inc. 26,375
12,000 Motorola, Inc. 724,500
20,000 Tellabs, Inc.*<F1> 722,500
-----------
1,646,939
TELEPHONE SERVICES -- 0.2%
1,000 AT&T Corp. 34,750
1,000 BellSouth Corp. 42,250
-----------
77,000
TRANSPORTATION -- 0.3%
500 Boeing Co. 49,313
1,000 United Technologies Corp. 75,250
-----------
124,563
-----------
Total common stocks
(cost $19,372,169) 38,269,780
PREFERRED STOCKS -- 0.0%
205 Aetna Inc., 6.25%, Cl C
07/19/00 Series 16,861
-----------
Total preferred stocks
(cost $13,386) 16,861
-----------
Total long-term investments
(cost $19,385,555) 38,286,641
SHARES OR QUOTED
PRINCIPAL AMOUNT MARKET VALUE
- ---------------- ------------
SHORT-TERM INVESTMENTS -- 13.8% (A)<F2>
VARIABLE RATE DEMAND NOTES
$2,250,000 American Family Financial Services 2,250,000
480,784 General Mills, Inc. 480,784
2,250,000 Johnson Controls, Inc. 2,250,000
900,000 Pitney Bowes Credit Corp. 900,000
240,000 Wisconsin Electric Power Co. 240,000
-----------
Total short-term investments
(cost $6,120,784) $6,120,784
-----------
Total investments
(cost $25,506,339) 44,407,425
Cash and receivables, less
liabilities -- 0.0% (A)<F2> 12,954
-----------
NET ASSETS $44,420,379
===========
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering and
redemption price ($44,420,379 /
1,781,852 shares outstanding) $24.93
======
*<F1>Non-income producing security.
(A)<F2>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Blue Chip Growth Fund
STATEMENT OF OPERATIONS
For the Six Months Ending March 31, 1997 (Unaudited)
INCOME:
Dividends $201,265
Interest 51,459
---------
Total income 252,724
---------
EXPENSES:
Management fee 187,842
Administrative services 33,743
Transfer agent fees 13,592
Professional fees 9,193
Printing and postage expense 8,233
Custodian fees 6,531
Registration fees 5,393
Other expenses 2,558
---------
Total expenses 267,085
---------
NET INVESTMENT LOSS (14,361)
---------
NET REALIZED LOSS ON INVESTMENTS (11,233)
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 3,000,057
---------
NET GAIN ON INVESTMENTS 2,988,824
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,974,463
==========
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Blue Chip Growth Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1997 (Unaudited) and For the Year Ended
September 30, 1996
1997 1996
------ -----
OPERATIONS:
Net investment loss $(14,361) $(43,638)
Net realized (loss) gain on investments (11,233) 502,046
Net increase in unrealized appreciation
on investments 3,000,057 4,345,211
---------- ----------
Net increase in net assets resulting
from operations 2,974,463 4,803,619
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
(- 0 - and $0.01851 per share, respectively) -- (28,542)
Distributions from net realized gains ($0.3475
and $0.02704 per share, respectively) (472,452) (43,289)
---------- ----------
Total distributions (472,452) (71,831)*<F3>
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (654,183 and
501,004 shares, respectively) 17,081,557 9,970,902
Net asset value of shares issued in distributions
(20,696 and 3,629 shares, respectively) 465,659 69,920
Cost of shares redeemed (250,903 and
671,882 shares, respectively) (6,436,151)(13,322,076)
---------- ----------
Net increase (decrease) in net assets
derived from Fund share activities 11,111,065 (3,281,254)
---------- ----------
TOTAL INCREASE 13,613,076 1,450,534
NET ASSETS AT THE BEGINNING OF THE PERIOD 30,807,303 29,356,769
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $44,420,379 $30,807,303
========== ==========
*<F3>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>
(UNAUDITED)
FOR THE SIX
MONTHS
ENDING
MARCH 31, YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------
1997 1996 1995 1994 1993 1992
--------- ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $22.69 $19.25 $14.46 $14.22 $14.98 $13.96
Income from investment operations:
Net investment (loss) income (0.00) (0.03) 0.02 0.09 0.12 0.09
Net realized and unrealized
gain (loss) on investments 2.59 3.52 5.00 0.28 (0.79) 1.02
------- ------- ------- ------- -------- -------
Total from investment operations 2.59 3.49 5.02 0.37 (0.67) 1.11
Less distributions:
Dividends from net investment
income -- (0.02) (0.06) (0.13) (0.09) (0.09)
Distributions from net realized gains (0.35) (0.03) (0.17) -- -- --
------- ------- ------- ------- -------- -------
Total from distributions (0.35) (0.05) (0.23) (0.13) (0.09) (0.09)
------- ------- ------- ------- -------- -------
Net asset value, end of period $24.93 $22.69 $19.25 $14.46 $14.22 $14.98
======= ======== ======== ======== ======== =======
TOTAL INVESTMENT RETURN 24.6%**<F5> 18.1% 35.3% 2.6% (4.5%) 8.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 44,420 30,807 29,357 24,771 38,929 40,580
Ratio of expenses (after reimbursement)
to average net assets***<F6> 1.4%**<F5> 1.5% 1.5% 1.5% 1.4% 1.5%
Ratio of net investment (loss) income
to average net assets****<F7> (0.1%)**<F5> (0.1%) 0.1% 0.5% 0.8% 0.6%
Portfolio turnover rate 4.4% 21.5% 49.2% 43.3% 38.1% 0.2%
Average commission rate paid*****<F8> $0.0868 $0.1047
YEARS ENDED SEPTEMBER 30,
--------------------------------
1991 1990 1989 1988*<F4>
------- ------- ------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.14 $11.92 $10.06 $10.00
Income from investment operations:
Net investment (loss) income 0.14 0.07 0.25 0.03
Net realized and unrealized
gain (loss) on investments 2.83 (0.65) 1.73 0.03
------- ------- ------- --------
Total from investment operations 2.97 (0.58) 1.98 0.06
Less distributions:
Dividends from net investment
income (0.15) (0.15) (0.12) --
Distributions from net realized gains -- (0.05) -- --
------- ------- ------- --------
Total from distributions (0.15) (0.20) (0.12) --
------- ------- ------- --------
Net asset value, end of period $13.96 $11.14 $11.92 $10.06
======= ======= ======== ========
TOTAL INVESTMENT RETURN 26.9% (5.0%) 19.9% 4.6%**<F5>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 27,735 10,009 5,260 366
Ratio of expenses (after reimbursement)
to average net assets***<F6> 1.7% 2.1% 2.0% 2.0%**<F5>
Ratio of net investment (loss) income
to average net assets****<F7> 1.2% 0.8% 2.7% 4.5%**<F5>
Portfolio turnover rate 0.9% 66.2% 32.5% --
Average commission rate paid*****<F8>
*<F4>For the period from August 10, 1988 (commencement of operations) to
September 30, 1988.
**<F5>Annualized.
***<F6>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.
****<F7>If the Fund had paid all of its expenses, the ratio would have been 2.0%
for the year ended September 30, 1989.
*****<F8>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
March 31, 1997 (Unaudited)
QUOTED
SHARES MARKET VALUE
------ ------------
LONG-TERM INVESTMENTS -- 98.6% (A)<F10>
COMMON STOCKS -- 98.5% (A)<F10>
APPAREL -- 1.0%
400 Fila Holding S. p. A. ADR $21,750
600 Jones Apparel Group, Inc.*<F9> 22,275
1,000 Kenneth Cole Productions Inc.*<F9> 21,000
800 Nautica Enterprises Inc.*<F9> 20,100
800 St. John Knits, Inc. 34,600
1,000 Tommy Hilfiger Corp.*<F9> 52,250
-----------
171,975
BANKS -- 0.3%
500 J.P. Morgan & Co. Inc. 49,125
BEVERAGES -- 2.9%
500 Coca-Cola FEMSA, S.A. de C.V. ADR 18,000
4,000 The Coca-Cola Company 223,500
1,400 Cott Corp.*<F9> 13,825
500 Panamerican Beverages Inc. 26,812
6,500 PepsiCo, Inc. 212,063
-----------
494,200
BIOTECHNOLOGY -- 1.4%
300 Agouron Pharmaceuticals, Inc.*<F9> 21,187
800 Amgen Inc.*<F9> 44,700
300 BioChem Pharma Inc.*<F9> 12,900
2,500 Biogen, Inc.*<F9> 93,437
700 Centocor, Inc.*<F9> 21,350
400 Human Genome Sciences, Inc*<F9> 13,000
600 IDEXX Laboratories, Inc.*<F9> 8,400
300 Quintiles Transnational, Corp.* <F9> 16,163
700 Regeneron Pharmaceuticals, Inc.* <F9> 5,600
-----------
236,737
BUILDING -- 0.8%
800 Fastenal Co. 28,000
1,866 The Home Depot, Inc. 99,831
-----------
127,831
CABLE TV/BROADCASTING -- 0.4%
1,200 Clear Channel Communications, Inc.*<F9> 51,450
250 LIN Television Corp.*<F9> 9,062
-----------
60,512
CHEMICALS - SPECIALTY -- 0.7%
1,000 Dionex Corp.*<F9> 45,500
600 Ionics, Inc.*<F9> 27,825
600 Millipore Corp. 25,425
300 Raychem Corp. 24,713
-----------
123,463
COMPUTER NETWORKING -- 7.3%
7,695 3Com Corp.*<F9> 252,011
4,000 Ascend Communications, Inc.*<F9> 163,000
1,500 Bay Networks, Inc.*<F9> 26,812
2,500 Cabletron Systems, Inc.*<F9> 73,125
3,200 Cascade Communications Corp.*<F9> 84,400
800 CIBER, Inc.*<F9> 20,200
10,900 Cisco Systems Inc.*<F9> 524,562
400 Citrix Systems, Inc.*<F9> 5,300
1,000 CrossComm Corp.*<F9> 8,125
400 Digi International Inc.*<F9> 2,850
1,800 FORE Systems, Inc.*<F9> 27,000
874 FTP Software, Inc.*<F9> 5,081
793 Madge Networks N.V.*<F9> 6,890
800 Optical Data Systems, Inc.*<F9> 10,000
400 Raptor Systems, Inc.*<F9> 5,250
200 Xylan Corp.*<F9> 3,850
-----------
1,218,456
COMPUTER & PERIPHERALS -- 3.6%
1,000 Compaq Computer Corp.*<F9> 76,625
1,200 Dell Computer Corp.*<F9> 81,150
600 ENCAD, Inc.*<F9> 17,925
400 Gateway 2000, Inc.* <F9> 20,500
1,000 Hewlett-Packard Co. 53,250
1,000 International Business
Machines Corp. 137,375
2,400 Iomega Corp.*<F9> 39,000
600 MicroTouch Systems, Inc.*<F9> 11,850
600 Oak Technology, Inc.*<F9> 6,075
500 Read-Rite Corp.*<F9> 12,625
1,500 Seagate Technology, Inc.*<F9> 67,312
900 Shiva Corp.*<F9> 7,932
1,800 Sun Microsystems, Inc. 51,975
400 SyQuest Technology, Inc.*<F9> 1,000
300 Western Digital Corp.*<F9> 16,988
-----------
601,582
COMPUTER SOFTWARE & SERVICES -- 15.1%
1,600 Adaptec, Inc.*<F9> 57,200
1,300 Adobe Systems Inc. 52,162
900 American Management
Systems, Inc.*<F9> 19,800
200 Arbor Software Corp.*<F9> 5,000
1,000 Aspen Technology, Inc.*<F9> 27,250
800 Autodesk, Inc. 24,800
600 Baan Company N.V.*<F9> 26,775
2,500 BMC Software, Inc.*<F9> 115,312
1,125 Cadence Design Systems, Inc.* <F9> 38,672
900 Cambridge Technology Partners*<F9> 20,812
600 Computer Horizon Corp.*<F9> 18,600
1,625 Computer Associates
International, Inc. 63,172
300 Compuware Corp.*<F9> 18,825
300 CyberCash, Inc.*<F9> 5,325
1,800 Electronics for Imaging, Inc.* <F9> 71,775
400 EMC Corp. (Mass.)*<F9> 14,200
400 FIserv, Inc.*<F9> 14,900
1,000 Informix Corp.*<F9> 15,125
600 INSO Corp.*<F9> 22,538
600 Macromedia, Inc.* <F9> 5,438
1,462 McAffee Associates, Inc.* <F9> 64,694
600 Microcom, Inc.*<F9> 5,325
11,500 Microsoft Corp.*<F9> 1,054,412
800 MRV Communications, Inc.*<F9> 17,800
1,000 NetManage, Inc.*<F9> 2,844
600 Netscape Communications Corp.*<F9> 18,038
1,000 Number Nine Visual
Technology Corp.*<F9> 3,125
8,150 Oracle Corp.*<F9> 314,288
2,500 Parametric Technology Corp.*<F9> 112,813
4,800 PeopleSoft, Inc.* <F9> 192,000
500 PLATINUM technology, inc.* <F9> 5,938
400 Rational Software Corp.*<F9> 8,250
400 Remedy Corp.* <F9> 15,300
800 Siebel Systems, Inc.*<F9> 13,400
400 Spyglass, Inc.*<F9> 2,850
1,000 SunGard Data Systems Inc.* <F9> 43,500
800 Sybase, Inc.* <F9> 11,200
500 Synopsys, Inc.* <F9> 12,500
300 Wall Data Inc.*<F9> 4,800
400 Wonderware Corp.*<F9> 3,900
-----------
2,544,658
DRUGS -- 11.3%
400 Interneuron Pharmaceuticals, Inc.*<F9> 7,050
900 Jones Medical Industries, Inc. 21,600
3,000 Eli Lilly & Co. 246,750
600 Medicis Pharmaceutical Corp.*<F9> 17,850
10,522 Merck & Co., Inc. 886,479
5,000 Pfizer Inc. 420,625
2,500 Schering-Plough Corp. 181,875
1,400 Warner-Lambert Co. 121,100
-----------
1,903,329
EDUCATION -- 0.1%
600 Computer Learning Centers, Inc.*<F9> 19,650
ELECTRICAL EQUIPMENT -- 0.6%
1,000 General Electric Co. (U.S.) 99,250
ELECTRONICS -- 0.2%
400 SCI Systems, Inc.*<F9> 20,250
454 Teradyne, Inc.*<F9> 13,109
-----------
33,359
ENERGY -- 1.5%
1,000 Baker Hughes Inc. 38,375
300 BJ Services Co.*<F9> 14,362
400 Camco International Inc. 17,600
300 Flores & Rucks, Inc.*<F9> 12,150
400 Helmerich & Payne, Inc. 18,500
1,600 Input/Output, Inc.*<F9> 23,200
500 Newpark Resources, Inc.*<F9> 21,875
1,000 Noble Drilling Corp.* <F9> 17,250
300 Noble Affiliates, Inc. 11,325
500 Reading & Bates Corp.*<F9> 11,313
800 Rowan Companies, Inc.*<F9> 18,100
500 Seitel, Inc.*<F9> 17,688
400 Smith International, Inc.*<F9> 18,250
400 Tidewater Inc. 18,400
-----------
258,388
ENGINEERING & CONSTRUCTION -- 0.0%
300 Grupo Tribasa, S.A. de C.V. ADR*<F9> 1,837
ENVIRONMENTAL -- 0.6%
400 United Waste Systems, Inc.*<F9> 14,900
1,449 United States Filter Corp.*<F9> 44,738
1,180 USA Waste Services, Inc.*<F9> 41,890
-----------
101,528
FINANCIAL SERVICES -- 3.0%
1,500 American Express Co. 89,812
400 Ceridian Corp.*<F9> 14,350
600 Equifax Inc. 16,350
600 Fair, Isaac and Co., Inc. 21,675
1,950 First Data Corp. 66,056
800 First USA, Inc. 33,900
450 Franklin Resources, Inc. 22,950
800 Green Tree Financial Corp. 27,000
800 Intuit Inc.*<F9> 18,600
800 Medaphis Corp.*<F9> 8,200
1,125 Paychex, Inc. 46,266
600 T. Rowe Price Associates, Inc. 22,275
2,750 Charles Schwab Corp. 87,656
500 SunAmerica, Inc. 18,813
500 VeriFone, Inc.*<F9> 16,375
-----------
510,278
FOODS -- 0.7%
1,000 Philip Morris Companies Inc. 114,125
HEALTH MAINTENANCE ORGANIZATIONS -- 3.5%
303 Aetna Inc. 26,020
300 Coventry Corp.*<F9> 3,412
600 Healthsource, Inc.*<F9> 12,300
6,000 Oxford Health Plans, Inc.*<F9> 351,750
700 PacifiCare Health Systems, Inc.*<F9> 57,837
500 Physician Corp. of America*<F9> 2,313
2,694 United HealthCare Corp. 128,302
500 United American Healthcare Corp.*<F9> 2,375
-----------
584,309
HOTELS -- 0.3%
800 HFS Inc.*<F9> 47,100
HOUSEHOLD PRODUCTS -- 4.1%
2,500 American Home Products Corp. 150,000
3,000 Colgate-Palmolive Co. 298,875
1,000 Parlux Fragrances, Inc.*<F9> 2,438
2,000 Procter & Gamble Co. 230,000
-----------
681,313
MACHINERY -- 0.2%
1,125 IDEX Corp. 26,437
MEDICAL SERVICES -- 2.7%
2,016 Columbia/HCA Healthcare Corp. 67,788
600 Genesis Health Ventures, Inc.*<F9> 18,750
800 Gulf South Medical Supply, Inc.*<F9> 15,500
1,244 HBO & Co. 59,090
500 HealthCare COMPARE Corp.*<F9> 20,312
1,687 Health Management
Associates, Inc.*<F9> 40,066
4,572 HEALTHSOUTH Corp.*<F9> 87,440
500 Horizon/CMS Healthcare
Corporation*<F9> 7,750
400 MedCath Inc.*<F9> 5,950
1,350 PhyCor, Inc.*<F9> 36,788
600 Physician Reliance Network, Inc.*<F9> 3,075
600 Target Therapeutics, Inc.*<F9> 39,450
675 Tenet Healthcare Corp.* <F9> 16,622
675 Tenet Healthcare Corp. Rights*<F9>
(attached) expiration 12/98 0
800 Universal Health Services, Inc. Cl B* <F9> 26,300
-----------
444,881
MEDICAL SUPPLIES -- 7.2%
7,000 Abbott Laboratories 392,875
2,207 Boston Scientific Corp.*<F9> 136,282
754 Cardinal Health, Inc. 40,999
400 Guidant Corp. 24,600
3,000 Imatron Inc.*<F9> 5,625
9,176 Johnson & Johnson 485,181
1,600 Medtronic, Inc. 99,600
800 OrthoLogic Corp.*<F9> 3,800
450 St. Jude Medical, Inc.*<F9> 15,019
500 Ventritex, Inc.*<F9> 8,375
-----------
1,212,356
OFFICE EQUIPMENT & SUPPLIES -- 1.7%
800 CDW Computer Centers, Inc.* <F9> 36,050
1,000 CompuCom Systems Inc.* <F9> 6,000
2,000 CompUSA Inc.*<F9> 31,500
500 Danka Business Systems PLC ADR 15,719
500 Merisel, Inc.*<F9> 1,063
400 Micro Warehouse, Inc.*<F9> 5,250
3,000 Office Depot, Inc.*<F9> 61,125
5,062 Staples, Inc.*<F9> 101,873
1,000 Viking Office Products, Inc.* <F9> 19,375
-----------
277,955
PAPER & FOREST PRODUCTS -- 0.3%
500 Kimberly-Clark Corp. 49,687
PUBLISHING -- 0.0%
800 Indigo N.V.*<F9> 3,900
RECREATION -- 1.5%
2,000 Walt Disney Co. 146,000
1,000 Eastman Kodak Co. 75,875
1,350 Regal Cinemas, Inc.*<F9> 36,450
-----------
258,325
RESTAURANTS -- 0.9%
2,000 McDonald's Corp. 94,500
1,000 Outback Steakhouse, Inc.*<F9> 20,000
900 Papa John's International, Inc.*<F9> 23,738
500 Quality Dining, Inc.*<F9> 5,750
1,000 Rally's Hamburgers Inc.* <F9> 3,625
-----------
147,613
RETAIL - SPECIALTY -- 2.8%
1,000 Best Buy Co., Inc.*<F9> 10,250
1,000 Borders Group, Inc.*<F9> 18,875
1,000 Chico's FAS, Inc.*<F9> 3,000
3,145 CUC International Inc.*<F9> 70,762
500 Dollar General Corp. 15,625
450 Dollar Tree Stores, Inc.*<F9> 16,650
300 Gucci Group, N.V.* <F9> 21,638
1,012 Just For Feet, Inc.* <F9> 17,457
2,500 NIKE, Inc. Cl B 155,000
400 Nine West Group Inc.*<F9> 17,900
1,500 PETsMART, Inc.*<F9> 30,375
800 Ross Stores, Inc. 20,300
2,000 Starbucks Corp.*<F9> 59,250
2,000 Sunglass Hut International, Inc.* <F9> 14,000
-----------
471,082
RETAIL STORES -- 0.6%
1,000 Gap, Inc. 33,500
600 Kohl's Corp.*<F9> 25,425
400 Saks Holdings Inc.* <F9> 11,500
1,000 Wal-Mart Stores, Inc. 27,875
-----------
98,300
SEMICONDUCTORS -- 10.7%
4,100 Altera Corp.*<F9> 176,300
2,200 Atmel Corp.*<F9> 52,664
500 Hadco Corp.*<F9> 19,375
6,400 Intel Corp. 890,400
1,500 Lattice Semiconductor Corp.*<F9> 68,625
500 Level One Communications Inc.*<F9> 13,750
600 Linear Technology Corp. 26,550
6,500 LSI Logic Corp.* <F9> 225,875
400 Micrel, Inc.* <F9> 11,600
1,275 Microchip Technology Inc.* <F9> 38,250
1,000 Micron Technology, Inc.* <F9> 40,500
300 SGS-THOMSON
Microelectronics N.V.*<F9> 19,837
1,000 Texas Instruments Inc. 74,875
3,000 Xilinx, Inc.*<F9> 146,250
-----------
1,804,851
SEMICONDUCTOR/CAPITAL SPENDING -- 2.4%
2,000 Applied Materials, Inc.* <F9> 92,750
600 FSI International, Inc.*<F9> 6,750
1,800 KLA Instruments Corp.*<F9> 65,700
600 Kulicke & Soffa Industries, Inc.* <F9> 12,675
1,000 Lam Research Corp.*<F9> 33,750
600 Mattson Technology, Inc.*<F9> 5,550
1,300 Novellus Systems, Inc.*<F9> 89,700
600 Photronics, Inc.*<F9> 17,625
800 Sanmina Corp.*<F9> 35,800
800 Tencor Instruments*<F9> 28,900
600 Ultratech Stepper, Inc.*<F9> 13,275
-----------
402,475
SERVICES -- 1.2%
600 Acxiom Corp.*<F9> 8,625
1,000 Checkpoint Systems, Inc. 17,125
1,200 Corrections Corp. of America*<F9> 29,100
1,000 Employee Solutions, Inc.*<F9> 6,375
500 Fritz Companies, Inc.*<F9> 4,844
2,100 Gartner Group, Inc.* <F9> 45,412
600 Norrell Corp. 14,775
2,100 Robert Half International Inc.*<F9> 73,238
-----------
199,494
TECHNOLOGY -- 0.5%
300 Coherent, Inc.* <F9> 14,344
600 General Scanning Inc.*<F9> 5,325
500 In Focus Systems, Inc.* <F9> 8,625
800 Maxim Integrated Products Inc.*<F9> 38,700
800 Optical Coating Laboratory, Inc. 7,900
1,000 S3 Incorporated* <F9> 13,000
-----------
87,894
TELECOMMUNICATIONS -- 6.4%
1,100 ADTRAN, Inc.*<F9> 27,500
400 America Online Inc.* <F9> 16,950
1,687 Andrew Corp.*<F9> 60,943
1,687 Andrew Corp. Rights* <F9>
(attached) expiration 12/16/06 0
2,200 Aspect Telecommunications Corp.*<F9> 42,900
1,300 C-Cube Microsystems, Inc.*<F9> 33,150
400 California Amplifier, Inc.*<F9> 1,325
400 CIDCO, Inc.*<F9> 5,700
400 CMG Information Services, Inc.*<F9> 4,850
900 DSC Communications Corp.*<F9> 18,844
500 EIS International, Inc.*<F9> 2,687
1,800 L.M. Ericsson Telephone Co. ADR* <F9> 60,863
1,650 Glenayre Technologies, Inc.* <F9> 16,294
300 Globalstar Telecommunications Ltd.*<F9> 16,050
1,000 Global Village Communication, Inc.* <F9> 1,641
400 Grupo Iusacell, S.A.
de C.V. ADR Ser L*<F9> 4,150
500 InterVoice, Inc.*<F9> 5,375
900 MasTec, Inc.*<F9> 25,425
2,000 Motorola, Inc. 120,750
300 NETCOM On-Line
Communication Services, Inc.*<F9> 2,887
1,251 NEXTEL Communications, Inc.*<F9> 16,732
800 Nokia Corp. "A" ADR 46,600
5,100 PairGain Technologies, Inc.*<F9> 151,087
1,500 PictureTel Corp.*<F9> 17,813
300 Premisys Communications, Inc.*<F9> 2,438
500 PSINet Inc.* <F9> 3,688
500 Quarterdeck Corp.* <F9> 1,282
500 Reuters Holdings PLC ADR 29,094
800 Smith Micro Software, Inc.*<F9> 2,400
600 Stanford Telecommunications, Inc.*<F9> 10,050
6,000 Tellabs, Inc.* <F9> 216,750
1,600 U.S. Robotics Corp.*<F9> 88,600
400 Westell Technologies, Inc.*<F9> 5,350
1,000 WorldCom Inc.*<F9> 22,000
-----------
1,082,168
-----------
Total common stocks
(cost $11,790,167) 16,550,423
PREFERRED STOCKS -- 0.1%
101 Aetna Inc., 6.25% Cl C
07/19/00 Series 8,307
400 PacifiCare Holding Series "A" 13,500
-----------
Total preferred stocks
(cost $11,546) 21,807
RIGHTS -- 0.0%
33 Globalstar Telecommunications
Ltd. Rights* expiration 04/30/97 891
-----------
Total rights
(cost $0) 891
-----------
Total long-term investments
(cost $11,801,713) 16,573,121
PRINCIPAL QUOTED
AMOUNT MARKET VALUE
- --------- ------------
SHORT-TERM INVESTMENTS -- 1.4% (A)<F10>
VARIABLE RATE DEMAND NOTES -- 1.4%
$631 American Family Financial Services 631
140,000 Johnson Controls, Inc. 140,000
95,000 Wisconsin Electric Power Co. 95,000
-----------
Total short-term investments
(cost $235,631) 235,631
-----------
Total investments
(cost $12,037,344) 16,808,752
Liabilities, less cash and
receivables -- (0.0%) (A)<F10> (403)
-----------
Net Assets $16,808,349
===========
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering
and redemption price
($16,808,349 / 1,128,830
shares outstanding) $14.89
=======
*<F9>Non-income producing security.
(A)<F10>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Opportunity Fund
STATEMENT OF OPERATIONS
For the Six Months Ending March 31, 1997 (Unaudited)
INCOME:
Dividends $35,280
Interest 4,906
----------
Total income 40,186
----------
EXPENSES:
Management fees 90,916
Administrative services 18,183
Custodian fees 8,485
Transfer agent fees 5,282
Printing and postage expense 3,727
Registration fees 3,316
Professional fees 3,192
Amortization of organizational expenses 1,145
Other expenses 2,153
----------
Total expenses 136,399
----------
NET INVESTMENT LOSS (96,213)
----------
NET REALIZED LOSS ON INVESTMENTS (333,216)
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (451,674)
----------
NET LOSS ON INVESTMENTS (784,890)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(881,103)
==========
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1997 (Unaudited) and For the Year Ended
September 30, 1996
1997 1996
------- ------
OPERATIONS:
Net investment loss $(96,213) $(156,143)
Net realized (loss) gain on investments (333,216) 18,753
Net (decrease) increase in unrealized
appreciation on investments (451,674) 1,557,990
---------- ----------
Net (decrease) increase in net assets
resulting from operations (881,103) 1,420,600
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (105,109 and
389,197 shares, respectively) 1,726,095 5,726,048
Cost of shares redeemed (69,781 and 70,945
shares, respectively) (1,141,069) (1,025,039)
---------- ----------
Net increase in net assets derived from
Fund share activities 585,026 4,701,009
---------- ----------
TOTAL (DECREASE) INCREASE (296,077) 6,121,609
NET ASSETS AT THE BEGINNING OF THE PERIOD 17,104,426 10,982,817
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $16,808,349 $17,104,426
========== ===========
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>
(UNAUDITED) FOR THE
FOR THE PERIOD FROM
PERIOD ENDING FOR THE YEARS JANUARY 30, 1992*<F11>
MARCH 31, ENDED SEPTEMBER 30, TO SEPTEMBER 30,
------------------------------------- ----------------
1997 1996 1995 1994 1993 1992
------------ ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $15.64 $14.17 $10.09 $9.78 $8.85 $10.00
Income from investment operations:
Net investment (loss) income (0.07) (0.06) (0.11) (0.09) (0.10) 0.00
Net realized and unrealized (loss)
gain on securities (0.68) 1.53 4.19 0.40 1.03 (1.15)
-------- ------- ------ ------- ------- --------
Total from investment operations (0.75) 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 $14.89 $15.64 $14.17 $10.09 $9.78 $8.85
======== ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN (9.4%)**<F12> 10.4% 40.4% 3.2% 10.5% (16.8%)**<F12>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 16,808 17,104 10,983 6,132 3,834 1,844
Ratio of expenses (after reimbursement)
to average net assets***<F13> 1.5%**<F12> 1.5% 1.9% 2.0% 2.0% 2.0%**<F12>
Ratio of net investment (loss) income
to average net assets****<F14> (1.1%)**<F12> (1.1%) (1.5%) (1.6%) (1.3%) 0.0%**<F12>
Portfolio turnover rate 26.1% 11.8% 38.4% 16.8% 67.6% 30.1%
Average commission rate paid*****<F15> $0.0870 $0.1269
*<F11>Commencement of Operations.
**<F12>Annualized.
***<F13>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%**<F12>, respectively.
****<F14>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%)**<F12>, respectively.
*****<F15>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
March 31, 1997 (Unaudited)
PRINCIPAL QUOTED
AMOUNT MARKET VALUE
- ---------- -------------
LONG-TERM INVESTMENTS -- 74.1% (A)<F16>
U.S. TREASURY SECURITIES -- 74.1%
$300,000 U.S. Treasury Notes,
6.250%, due 06/30/98 $300,234
200,000 U.S. Treasury Notes,
6.125%, due 08/31/98 199,594
200,000 U.S. Treasury Notes,
6.000%, due 09/30/98 199,156
200,000 U.S. Treasury Notes,
7.125%, due 10/15/98 202,344
200,000 U.S. Treasury Notes,
6.750%, due 05/31/99 201,000
400,000 U.S. Treasury Notes,
6.375%, due 07/15/99 399,125
300,000 U.S. Treasury Notes,
8.500%, due 11/15/00 317,578
----------
Total long-term investments
(cost $1,843,324) 1,819,031
SHORT-TERM INVESTMENTS -- 24.8% (A)<F16>
U.S. TREASURY SECURITIES -- 24.4%
$300,000 U.S. Treasury Notes,
6.375%, due 06/30/97 300,563
300,000 U.S. Treasury Notes,
5.500%, due 07/31/97 299,859
----------
Total government securities
(cost $598,562) 600,422
VARIABLE RATE DEMAND NOTES -- 0.4%
9,886 Wisconsin Electric Power Co. 9,886
----------
Total short-term investments
(cost $608,448) 610,308
----------
Total investments
(cost $2,451,772) 2,429,339
Cash and receivables, less
liabilities -- 1.1% (A)<F16> 26,928
----------
NET ASSETS $2,456,267
==========
Net Asset Value Per Share
($0.01 par value, 20,000,000
shares authorized), offering and
redemption price ($2,456,267 /
253,163 shares outstanding) $9.70
======
A)<F16>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 Six Months Ending March 31, 1997 (Unaudited)
INCOME:
Interest $84,068
--------
EXPENSES:
Management fees 9,998
Professional fees 8,640
Transfer agent fees 5,201
Registration fees 2,741
Printing and postage expense 1,382
Administrative services 1,333
Amortization of organizational expenses 1,145
Custodian fees 276
Other expenses 1,396
--------
Total expenses before reimbursement 32,112
Less expenses assumed by adviser (20,115)
--------
Net expenses 11,997
--------
NET INVESTMENT INCOME 72,071
--------
NET REALIZED GAIN ON INVESTMENTS --
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (11,889)
--------
NET LOSS ON INVESTMENTS (11,889)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $60,182
=======
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1997 (Unaudited) and For the Year Ended
September 30, 1996
1997 1996
------- -------
OPERATIONS:
Net investment income $72,071 $139,621
Net realized loss on investments -- (2,669)
Net decrease in unrealized appreciation on
investments (11,889) (16,703)
--------- ----------
Net increase in net assets resulting from
operations 60,182 120,249
--------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.2639 and $0.5333 per share, respectively) (72,071) (139,621)
--------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (6,208 and 61,092
shares, respectively) 60,800 595,638
Net asset value of shares issued in distributions
(5,874 and 12,488 shares, respectively) 57,493 123,166
Cost of shares redeemed (42,487 and 74,161
shares, respectively) (415,665) (732,525)
--------- ----------
Net decrease in net assets derived from Fund
share activities (297,372) (13,721)
--------- ----------
TOTAL DECREASE (309,261) (33,093)
NET ASSETS AT THE BEGINNING OF THE PERIOD 2,765,528 2,798,621
--------- ----------
NET ASSETS AT THE END OF THE PERIOD $2,456,267 $2,765,528
========== =========
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>
(UNAUDITED) FOR THE
FOR THE PERIOD FROM
SIX MONTHS ENDING FOR THE YEARS JANUARY 30, 1992*<F17>
MARCH 31, ENDED SEPTEMBER 30, TO SEPTEMBER 30,
-------------------------------------
1997 1996 1995 1994 1993 1992
------------ ------- ------ ------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.75 $9.85 $9.61 $10.76 $10.36 $10.00
Income from investment operations:
Net investment income 0.2628 0.5333 0.5350 0.5609 0.5498 0.2979
Net realized and unrealized
(loss) gain on investments (0.0489) (0.1000) 0.2491 (1.1432) 0.4001 0.3602
--------- --------- ------- -------- ------- --------
Total from investment operations 0.2139 0.4333 0.7841 (0.5823) 0.9499 0.6581
Less distributions:
Dividends from net investment income (0.2639) (0.5333) (0.5441) (0.5607) (0.5499) (0.2981)
Distribution from net realized gains -- -- -- (0.0070) -- --
--------- --------- ------- -------- ------- --------
Total from distributions (0.2639) (0.5333) (0.5441) (0.5677) (0.5499) (0.2981)
--------- --------- ------- -------- ------- --------
Net asset value, end of period $9.70 $9.75 $9.85 $9.61 $10.76 $10.36
======== ======== ======== ======= ======== =======
TOTAL INVESTMENT RETURN 4.46%**<F18> 4.49% 8.42% (5.54%) 9.48% 10.20%**<F18>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 2,456 2,766 2,799 4,367 6,376 3,223
Ratio of expenses (after reimbursement)
to average net assets***<F19> 0.90%**<F18> 0.90% 0.91% 0.86% 0.83% 0.75%**<F18>
Ratio of net investment income
to average net assets****<F20> 5.4%**<F18> 5.43% 5.6% 5.4% 5.3% 5.0%**<F18>
Portfolio turnover rate 0.0% 28.6% 0.0% 19.6% 6.3% --
*<F17>Commencement of Operations.
**<F18>Annualized.
***<F19>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
2.4%**<F18>, 2.2%, 2.0%, 1.5% and 1.5% for the period ending March 31, 1997 and
for the years ended September 30, 1996, 1995, 1994 and 1993, respectively, and
2.8%**<F18> for the period ended September 30, 1992.
****<F20>The ratio of net investment income prior to adviser's expense
limitation undertaking to average net assets for the period ending March 31,
1997 and for the years ended September 30, 1996, 1995, 1994 and 1993 and the
period ended September 30, 1992 would have been 3.9%**, 4.1%, 4.5%, 4.8%,
4.6% and 2.9%**<F18>, respectively.
The accompanying notes to financial statements are an integral part of this
statement.
</TABLE>
Reynolds Money Market Fund
STATEMENT OF NET ASSETS
March 31, 1997 (Unaudited)
PRINCIPAL
AMOUNT RATING VALUE
--------- ------ ------
COMMERCIAL PAPER -- 49.9% (A)<F21>
$150,000 John Deere Capital Corporation, 5.27%,
due 04/03/97 A1P1 $149,956
140,000 American General Finance Corporation,
5.31%, due 04/09/97 A1P1 139,835
145,000 Chevron Oil Finance Company, 5.26%,
due 04/15/97 A1+P1 144,704
135,000 American Express Credit Corp., 5.30%,
due 05/06/97 A1P1 134,305
140,000 Associates Corporation, 5.24%, due 06/24/97 A1+P1 138,288
140,000 IBM Credit Corporation, 5.25%, due 06/24/97 A1P1 138,285
145,000 General Electric Capital Corp., 5.28%,
due 06/25/97 A1+P1 143,192
140,000 Prudential Funding Corp., 5.24%, due 07/02/97 A1+P1 138,125
145,000 The CIT Group Holdings, Inc., 5.28%,
due 07/10/97 A1P1 142,873
145,000 Beneficial Corp., 5.30%, due 07/17/97 A1P1 142,716
140,000 Norwest Financial, Inc., 5.25%, due 07/24/97 A1+P1 137,673
150,000 Merrill Lynch & Co., Inc., 5.45%, due 08/12/97 A1+P1 146,980
---------
Total commercial paper 1,696,932
FEDERAL AGENCIES -- 34.6% (A)<F21>
300,000 Federal National Mortgage Association, 5.23%,
due 05/29/97 297,472
300,000 Federal Home Loan Banks, 5.18%, due 08/12/1997 294,259
300,000 Federal Farm Credit Corp., 5.23%, due 09/10/1997 292,939
300,000 Federal Home Loan Banks, 5.29%, due 09/18/1997 292,506
----------
Total federal agencies 1,177,176
VARIABLE RATE DEMAND NOTES -- 15.8% (A)<F21>
160,000 American Family Financial Services A1P1 160,000
160,000 Johnson Controls, Inc. A1P1 160,000
55,336 Pitney Bowes Credit Corp. A1P1 55,336
160,000 Wisconsin Electric Power Co. A1P1 160,000
---------
Total variable rate demand notes 535,336
---------
Total investments (amortized cost $3,409,444) 3,409,444
Liabilities, less cash and receivables -- (0.3%)(A)<F21> (11,853)
---------
NET ASSETS $3,397,591
==========
Net Asset Value Per Share ($0.01 par value
500,000,000 shares authorized),
offering and redemption price
($3,397,591 / 3,397,591 shares outstanding) $1.00
=======
(A)<F21>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 Six Months Ending March 31, 1997 (Unaudited)
INCOME:
Interest $85,480
--------
EXPENSES:
Professional fees 8,640
Management fees 7,981
Transfer agent fees 5,151
Registration fees 3,809
Printing and postage 2,814
Administrative services 1,596
Custodian fees 896
Other expenses 98
--------
Total expenses before reimbursement 30,985
Less expenses assumed by adviser (20,610)
--------
Net expenses 10,375
--------
NET INVESTMENT INCOME 75,105
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $75,105
=======
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1997 (Unaudited) and For the Year Ended
September 30, 1996
1997 1996
------- ------
OPERATIONS:
Net investment income $75,105 $239,109
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ($0.0235
and $0.0477 per share, respectively) (75,105) (239,109)
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (3,846,950 and
11,997,282 shares, respectively) 3,846,950 11,997,282
Net asset value of shares issued in distributions
(73,606 and 234,567 shares, respectively) 73,606 234,567
Cost of shares redeemed (4,503,424 and 11,994,546
shares, respectively) (4,503,424)(11,994,546)
---------- ----------
Net (decrease) increase in net assets derived
from Fund share activities (582,868) 237,303
---------- ----------
TOTAL (DECREASE) INCREASE (582,868) 237,303
NET ASSETS AT THE BEGINNING OF THE PERIOD 3,980,459 3,743,156
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $3,397,591 $3,980,459
========== ==========
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>
(UNAUDITED)
FOR THE
SIX MONTHS ENDING
MARCH 31, YEARS ENDED SEPTEMBER 30,
-----------------------------------------------
1997 1996 1995 1994 1993 1992 1991*<F22>
-------------- ------ ------ ------ ------ ------- -------
<S> <C> <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 $1.00
Income from investment operations:
Net investment income 0.0235 0.0477 0.0510 0.0304 0.0255 0.0364 0.0358
Less distributions:
Dividends from net investment income (0.0235) (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 $1.00
======= ====== ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN 4.8%**<F23> 4.9% 5.2% 3.1% 2.6% 3.6% 5.5%**<F23>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 3,398 3.980 3,743 3,192 6,798 6,166 3,617
Ratio of expenses (after reimbursement)
to average net assets***<F24> 0.65%**<F23>0.65% 0.65% 0.63% 0.67% 0.64% 0.61%**<F23>
Ratio of net investment income to
average net assets****<F25> 4.71%**<F23>4.78% 5.08% 2.84% 2.62% 3.53% 5.43%**<F23>
*<F22>For the period from January 30, 1991 (commencement of operations) to
September 30, 1991.
**<F23>Annualized.
***<F24>Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would have been
1.94%**<F23>, 1.39%, 1.95%, 1.47%, 1.22% and 1.73% for the period ending
March 31, 1997 and for the years ended September 30, 1996, 1995, 1994, 1993 and
1992, respectively, and 1.85%**<F23> for the period ended September 30, 1991.
****<F25>If the Fund had paid all of its expenses, the ratio would have been
3.42%**<F23>, 4.05%, 3.79%, 2.01%, 2.08% and 2.44% for the period ending
March 31, 1997 and for the years ended September 30, 1996, 1995, 1994, 1993 and
1992, respectively, and 4.18%**<F23> 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
March 31, 1997 (Unaudited)
(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.
(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 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 six months ending March 31, 1997, RCM
voluntarily waived $9,998 and $7,981 of the management fees due from the
Government Bond Fund and the Money Market Fund, respectively, under the
agreements. Additionally, RCM assumed $10,117 and $12,629 of other expenses
of the Government Bond Fund and the Money Market Fund, respectively.
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. 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 for the Opportunity Fund and the Government Bond Fund
were deferred and were amortized on a straight-line basis over a period of
five years ending February, 1997. These expenses were advanced by RCM who
was reimbursed by the Funds over the amortization period.
(5) INVESTMENT TRANSACTIONS --
For the period ending March 31, 1997, purchases and proceeds of sales of
investment securities of the Blue Chip Fund (excluding short-term securities)
were $6,244,192 and $1,560,457, respectively; purchases and proceeds of sales
of investment securities of the Opportunity Fund (excluding short-term
securities) were $5,084,380 and $4,628,941, respectively; purchases and
proceeds of sales of investment securities of the Government Bond Fund
(excluding short-term securities) were $ - 0 - and $200,000, respectively.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of March 31, 1997, liabilities of the Funds included the following:
BLUE MONEY OPPORTUNITY GOVERNMENT
CHIP MARKET BOND
FUND FUND FUND FUND
------ ------ ------ -----
Payable to brokers for
investments purchased $-- $-- $68,245 $--
Payable to RCM for management fees 39,548 -- 15,250 --
Dividends payable -- 11,932 -- 10,958
Other liabilities 23,332 1,944 11,670 1,724
(7) SOURCES OF NET ASSETS --
As of March 31, 1997, the sources of net assets were as follows:
BLUE MONEY OPPORTUNITY GOVERNMENT
CHIP MARKET BOND
FUND FUND FUND FUND
------ ------ ------ -----
Fund shares issued and
outstanding $25,575,910 $3,397,591 $12,651,998 $2,732,265
Net unrealized appreciation
(depreciation)
on investments 18,901,086 -- 4,771,408 (22,433)
Accumulated net realized loss
on investments (56,617) -- (615,057) (253,565)
----------- ---------- ----------- ----------
$44,420,379 $3,397,591 $16,808,349 $2,456,267
=========== ========== =========== ==========
Aggregate net unrealized appreciation (depreciation) for the Funds as of
March 31, 1997 consisted of the following:
BLUE GOVERNMENT
CHIP OPPORTUNITY BOND
FUND FUND FUND
------ ----- -----
Aggregate gross unrealized
appreciation $19,489,944 $6,024,021 $3,929
Aggregate gross unrealized
depreciation (588,858) (1,252,613) (26,362)
----------- ---------- ----------
Net unrealized appreciation
(depreciation) $18,901,086 $4,771,408 $(22,433)
=========== ========== ==========
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
