SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as
permitted by Rule 14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
REYNOLDS FUNDS, INC.
(Name of Registrant as Specified in Its Charter)
Not Applicable
------------------------
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
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transaction applies:
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transaction applies:
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transaction computed pursuant to Exchange Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it was
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
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4) Date Filed:
REYNOLDS FUNDS, INC.
WOOD ISLAND, THIRD FLOOR
80 EAST SIR FRANCIS DRAKE BOULEVARD
LARKSPUR, CALIFORNIA 94939
------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 23, 1998
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Meeting")
of REYNOLDS FUNDS, INC. (the "Company"), will be held at 80 East Sir Francis
Drake Boulevard, Larkspur, California 94939, on Wednesday, September 23, 1998,
at 10:00 A.M., Pacific Time. The Company consists of four mutual funds, the
Reynolds Blue Chip Growth Fund, (the "Blue Chip Fund"), the Reynolds Opportunity
Fund (the "Opportunity Fund"), the Reynolds U.S. Government Bond Fund (the "Bond
Fund") and the Reynolds Money Market Fund (the "Money Market Fund"). (The Blue
Chip Fund, the Opportunity Fund, the Bond Fund and the Money Market Fund are
collectively referred to as the "Funds"). The purposes of the Meeting are:
1. With respect to the shareholders of all of the Funds, to elect 3
directors to serve an indefinite term until their successors are chosen and
qualified (Proposal No. 1).
2. With respect to the shareholders of each of the Blue Chip Fund and
Opportunity Fund, to consider and act upon a proposal to approve the Reynolds
Funds 12b-1 Plan (Proposal Nos. 2(a) and 2(b)).
3. To transact such other business as may properly come before the
Meeting or any adjournment(s) thereof.
IMPORTANT
Please mark, sign, date and return the enclosed proxy in the accompanying
envelope as soon as possible in order to ensure a full representation at the
Meeting.
The Meeting will have to be adjourned without conducting any business if less
than a majority of the eligible shares is represented, and the Company will have
to continue to solicit votes until a quorum is obtained. The Meeting also may
be adjourned, if necessary, to continue to solicit votes if less than the
required shareholder vote has been obtained to approve Proposal Nos. 2(a) and
2(b).
Your vote, then, could be critical in allowing the Company to hold the
Meeting as scheduled. By marking, signing and promptly returning the enclosed
proxy, you may eliminate the need for additional solicitation. Your cooperation
is appreciated.
By Order of the Board of Directors,
/s/ FREDERICK L. REYNOLDS
FREDERICK L. REYNOLDS
President
Larkspur, California
August 10, 1998
Only shareholders of record of the Company at the close of business on July
31, 1998, the record date for the Meeting, will be entitled to notice of, and to
vote at, the Meeting or any adjournments thereof.
REYNOLDS FUNDS, INC.
WOOD ISLAND, THIRD FLOOR
80 EAST SIR FRANCIS DRAKE BOULEVARD
LARKSPUR, CALIFORNIA 94939
-----------------------
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 23, 1998
INTRODUCTION
The enclosed proxy is being solicited by the Board of Directors (the "Board"
or the "Directors") of Reynolds Funds, Inc. (the "Company") for use in
connection with the special meeting of shareholders (the "Meeting") to be held
at 10:00 A.M. Pacific Time, on Wednesday, September 23, 1998, at 80 East Sir
Francis Drake Boulevard, Larkspur, California 94939, and at any adjournment(s)
thereof for the purpose set forth in the foregoing notice. The Company consists
of four mutual funds, the Reynolds Blue Chip Growth Fund, (the "Blue Chip
Fund"), the Reynolds Opportunity Fund (the "Opportunity Fund"), the Reynolds
U.S. Government Bond Fund (the "Bond Fund") and the Reynolds Money Market Fund
(the "Money Market Fund"). (The Blue Chip Fund, the Opportunity Fund, the Bond
Fund and the Money Market Fund are collectively referred to as the "Funds").
The Company will present the following proposals to the shareholders at the
Meeting:
Proposal No. 1 Election of Directors
Proposal Nos. 2(a) and 2(b) Approval of the Reynolds Funds 12b-1
an (the "Plan")
The record holder of each outstanding share of a Fund is entitled to one vote
on all matters submitted to shareholders of that Fund. The table below sets
forth the Proposals for which shareholders of each Fund are being solicited:
Proposal No. Blue Chip Fund Opportunity Fund Bond Fund Money Market Fund
---------- ------------- --------------- ---------- ----------------
1 YES YES YES YES
2(a) YES No No No
2(b) No YES No No
See "Vote Required" under each Proposal for information as to the required
vote on each Proposal.
Only shareholders of record of the Funds on the close of business on July 31,
1998 are entitled to notice of and to vote at the Meeting. On that date there
were issued and outstanding 2,320,017 shares of the Blue Chip Fund, 1,272,577
shares of the Opportunity Fund, 304,637 shares of the Bond Fund and 4,031,898
shares of the Money Market Fund.
Whether you expect to be personally present at the Meeting or not,
please complete, sign, date and return the accompanying form of proxy. If the
enclosed form of proxy is duly executed and returned in time to be voted at the
Meeting, and not subsequently revoked, all shares represented by the proxy will
be voted in accordance with your instructions marked thereon. If no
instructions are given, proxies will be voted FOR the election of the nominees
for the Board of Directors of the Company (Proposal No. 1) and FOR approval of
the Plan (Proposal Nos. 2(a) and 2(b)). A majority of the outstanding shares of
the Funds, represented in person or by proxy, will constitute a quorum at the
Meeting.
Execution of the enclosed proxy card will not affect a shareholder's right to
attend the Meeting and vote in person, and a shareholder giving a proxy has the
power to revoke it (by written notice to the Company, execution of a subsequent
proxy card, or oral revocation at the Meeting) at any time before it is
exercised. Presence at the Meeting of a shareholder who has signed a proxy does
not in itself revoke a proxy.
In addition to the solicitations or proxies by use of the mail, proxies may
be solicited by officers of the Company. The cost of soliciting proxies will be
borne by the Funds. The Funds do not anticipate specifically engaging anyone to
solicit proxies or to pay any special compensation for that purpose.
The Board may seek one or more adjournments of the Meeting to solicit
additional shareholders, if necessary, to obtain a quorum for the Meeting, or to
obtain the required vote to approve Proposal Nos. 2(a) and 2(b). An adjournment
would require the affirmative vote of the holders of a majority of the shares
present at the Meeting (or an adjournment thereof) in person or by proxy and
entitled to vote. If adjournment is proposed in order to obtain the required
vote on Proposal Nos. 2(a) and 2(b), the person named as proxy will vote in
favor of adjournment those shares which he is entitled to vote in favor of such
proposal and will vote against adjournment those shares which he is required to
vote against such proposal.
The Notice of Special Meeting of Shareholders, this Proxy Statement and the
accompanying form of proxy were first mailed to shareholders of the Funds on or
about August 10, 1998.
THE COMPANY WILL FURNISH WITHOUT CHARGE, ITS ANNUAL REPORT FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1997 AND ITS SEMIANNUAL REPORT FOR THE FISCAL PERIOD
ENDED MARCH 31, 1998 TO ANY SHAREHOLDER UPON REQUEST. REQUESTS FOR SUCH REPORT
SHOULD BE DIRECTED TO FREDERICK L. REYNOLDS AT WOOD ISLAND, THIRD FLOOR, 80 EAST
SIR FRANCIS DRAKE BOULEVARD, LARKSPUR, CALIFORNIA 94939 OR BY CALLING 1-800-
773-9665.
1. PROPOSAL TO ELECT THREE DIRECTORS
Three Directors are to be elected at the Meeting to serve an indefinite term
until their respective successors are chosen and qualified. The table set forth
below identifies the three nominees for election as Directors of the Company and
provides information as to their ages, principal occupations and background for
the last five years. All of the nominees, Frederick L. Reynolds, Robert E.
Snader and Robert E. Stauder, are members of the present Board of Directors.
Messrs. Reynolds and Stauder have been Directors of the Company since its
incorporation on April 21, 1988 and Mr. Snader was appointed to the Board of
Directors on February 3, 1994 to fill a vacancy.
The table below sets forth information regarding the nominees for the Board
of Directors:
<TABLE>
NAME OF PRINCIPAL OCCUPATION
NOMINEE AND AGE POSITION WITH THE COMPANY DURING PAST 5 YEARS
- ---------------- ------------------------- --------------------
<C> <C> <C>
Frederick L. Reynolds*<F1> President, Treasurer Sole Proprietor of Reynolds Capital Management, the
55 and Director investment adviser to the Funds, (the "Adviser")
Robert E. Snader Director President of R.E. Snader & Associates, a distributor
57 of professional, industrial and broadcast video and computer/video
equipment
Robert E. Stauder Director Retired; formerly a principal of Robinson Mills &
67 Williams, an architectural and interior design firm
</TABLE>
- ------------------
*<F1>Interested person as defined in the Investment Company Act of 1940.
Mr. Reynolds is deemed to be an "interested person" of the Company as that
term is defined in the Investment Company Act of 1940 because he is an officer
of the Company and the sole proprietor of the Adviser.
The officers of the Company are Mr. Frederick L. Reynolds, 55, President and
Treasurer, and Ms. Camille F. Wildes, 45, Secretary. Both Mr. Reynolds and Ms.
Wildes serve for an indefinite term. Mr. Reynolds has served in such capacities
since 1988 and Ms. Wildes has served in such capacity since December 9, 1989.
The Company does not compensate any of its officers or Directors for their
services to the Company, except those Directors who are not "interested persons"
of the Company. The Company's standard method of compensating the Directors who
are not "interested persons" of the Company is to pay each such Director a fee
of $550 for each meeting of the Board of Directors attended. The Company does
not provide pension or retirement benefits to its Directors or officers.
The table below sets forth the compensation paid to Directors during the
fiscal year ended September 30, 1997:
<TABLE>
TOTAL
AGGREGATE PENSION OR RETIREMENT ESTIMATED COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL FROM THE COMPANY
FROM THE AS PART OF THE BENEFITS UPON PAID TO
NAME OF PERSON, POSITION FUND COMPANY'S EXPENSES RETIREMENT TO DIRECTORS
- ------------------------- ------------- ------------------- ------------ -----------------
<S> <C> <C> <C> <C>
Frederick L. Reynolds, $0 $0 $0 $0
President, Treasurer and
Director
Robert E. Snader, $2,200 $0 $0 $2,200
Director
Robert E. Stauder, $2,200 $0 $0 $2,200
Director
</TABLE>
- ------------------
The Board of Directors has no audit, nominating, compensation or other
similar committees. The Board of Directors met four times during the fiscal
year ended September 30, 1997. All of the nominees attended each meeting. None
of the Directors serve on the board of directors of any reporting companies
other than the Company.
VOTE REQUIRED
Each nominee has consented to being named in this Proxy Statement and to
serve if elected. The Company has no reason to believe that any of the nominees
will be unable to serve as Director. However, in such event, the person named
as proxy will have discretionary authority to select and vote for substituted
nominees. It is the intention of the person named in the enclosed proxy to vote
the shares represented by the proxies FOR the election of the nominees named
above, unless shareholders specify that their vote be withheld as to all
nominees or individual nominees. The Company's Board of Directors recommends a
vote FOR all nominees.
Directors will be elected by a plurality of votes of the shareholders
(assuming a quorum is present). "Plurality" means that the individuals receiving
the largest number of votes are elected as Directors, up to the maximum number
of Directors to be chosen at the Meeting. Consequently, any shares not voted at
the Meeting, whether due to abstentions, broker non-votes or otherwise, will
have no impact on the election of Directors.
2. PROPOSAL TO APPROVE THE PLAN
DESCRIPTION OF THE PLAN
On July 21, 1998 the Board of Directors adopted the Plan. The Plan permits
each Fund whose shareholders approve the Plan to use Fund assets to finance the
distribution of its shares. (Funds whose shareholders have approved the Plan
are referred to as "Approving Funds"). The Plan permits each Approving Fund to
pay a distribution and service fee on an annualized basis of up to 0.25% of such
Approving Fund's average daily net assets. The distribution and servicing fee
may be spent on any activities primarily intended to result in the sale of
shares of the Approving Fund. Examples of such activities include:
o Compensation of securities dealers, financial institutions or similar
persons ("Shareholder Organizations") who render personal service to
shareholders, assist in the maintenance of shareholder accounts or who
render assistance in distributing or promoting the sale of shares
o Advertising, including maintenance of a website on the Internet
o Printing and distributing prospectuses to prospective investors
o Purchasing and distributing other promotional material
The Plan contains a number of safeguards that are intended to insure that
payments pursuant to the Plan accomplish the objectives of the Plan. All
agreements with Shareholder Organizations must be approved by the Board of
Directors of the Company, including a majority of those Directors who are not
interested persons of the Company (the "12b-1 Directors"). Assuming their
election at the Meeting, Messrs. Snader and Stauder will be the 12b-1 Directors.
The Directors anticipate that substantially all agreements with Shareholder
Organizations will provide for compensation based on a percentage of the value
of their clients' investments in the applicable Approving Fund. Other
expenditures under the Plan, such as advertising, printing and mailing costs
must be authorized by an officer of the Company.
The Adviser will provide to the Board on a quarterly basis, and the Board
will review, a written report of amounts expended pursuant to the Plan and the
purpose of the expenditures. The Plan further provides that with respect to
each Approving Fund, it may be terminated by a vote of the majority of the 12b-1
Directors or by a vote of a majority of the outstanding voting securities of the
Approving Fund. The Board must approve the continuation of the Plan annually,
and if it does not, the Plan will terminate automatically. So long as the Plan
continues in effect, the selection and nomination of Directors who are not
interested persons of the Company will be committed to the discretion of the
12b-1 Directors. The Plan may not be amended to increase materially the
permitted amount of payments with respect to an Approving Fund without the
approval of a majority of the 12b-1 Directors and a majority of the outstanding
voting securities of the Approving Fund. Any material amendments to the Plan
not related to increasing the amount of permitted payments must be approved by
the 12b-1 Directors.
Because of the small size of the Bond Fund and the Money Market Fund, the
Board of Directors has determined not to seek the approval of the shareholders
of these Funds for adoption of the Plan at this time. However if the assets of
these Funds increase significantly, it may do so in the future.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
In voting to approve the Plan and submitting it to the shareholders of the
Blue Chip Fund and the Opportunity Fund for their approval, the Directors,
including the 12b-1 Directors, considered a number of factors. Prior to
approving the Plan, the Directors had the opportunity to review a draft of the
Plan and discuss with the Adviser possible expenditures that might be made
pursuant to the Plan. The Company's legal counsel reviewed with the Directors
the provisions of the Plan and legal and regulatory considerations in adopting
the Plan.
Initially the Board considered the nature of the circumstances that made
implementation of the Plan necessary or appropriate. The Adviser reviewed with
the Directors the performance of the Blue Chip Fund and the Opportunity Fund and
their growth in net assets. The Adviser noted that despite the positive
performance of these Funds, their net assets had grown slowly. The Adviser
noted that a faster growth in net assets might enable the Funds to offer the
following benefits to shareholders:
o Lower per share transaction costs that would result if the Adviser
were able to effect larger transactions
o More efficient portfolio management as it is easier for the Funds to
process redemption requests without disrupting their investment strategy
if they have net cash inflows
o Increased flexibility of the Funds in pursuing their investment
objectives in that they may be able to establish meaningful positions in
the various stocks in which the Adviser would like to invest without
reducing positions then currently held by the Funds
o Lowering the Funds' expense ratios with respect to its fixed expenses
which would be spread over a larger base
o Increased communications with shareholders and prospective
shareholders such as by maintenance of a website on the Internet
The Board then considered the causes of the slow growth in net assets of the
Blue Chip Fund and the Opportunity Fund. The Adviser informed the Board that
no-load mutual funds were increasingly being sold through the efforts of third
parties such as brokerage firms, banks, investment advisers, consultants and
others. No-load mutual funds have increasingly employed 12b-1 plans to
compensate these third parties. Since the Funds have not had a 12b-1 plan, they
have been at a competitive disadvantage in attracting the interest of third
parties to promote the Funds. The Adviser also informed the Board that
advertising in financial publications continues to be a means employed by no-
load mutual funds to promote the sale of their shares and that a source of funds
for such advertising is payment made pursuant to 12b-1 plans. This funding
source has heretofore not been available to the Funds and the Adviser has not
had the resources to commit to an advertising program in financial publications.
The Board then considered whether the Plan would address the aforementioned
problems and alleviate them. The Adviser informed the Board that if the Plan
were approved, it would undertake on behalf of the Blue Chip Fund and the
Opportunity Fund marketing efforts similar to those undertaken by other no-load
mutual funds. The Adviser indicated that it would undertake to identify
Shareholder Organizations that would distribute shares of the Funds and, in
appropriate circumstances, would be willing to supplement the Funds' payments to
Shareholder Organizations with payments from its own resources. Additionally
the Board determined that the Funds should advertise in financial publications
to supplement the Adviser's promotional activities. The Adviser represented to
the Board that it would not reduce its effort to promote sales of shares of the
Funds and that through advertising the increased name recognition of the Fund
would afford the Adviser additional marketing opportunities. IN APPROVING THE
PLAN, THE DIRECTORS DETERMINED, IN THE EXERCISE OF THEIR BUSINESS JUDGMENT AND
IN LIGHT OF THEIR FIDUCIARY DUTIES UNDER STATE LAW AND THE INVESTMENT COMPANY
ACT OF 1940, THAT THE PLAN IS REASONABLY LIKELY TO BENEFIT THE FUNDS AND THEIR
SHAREHOLDERS.
Although the Board concluded that the Plan is reasonably likely to benefit
the Funds and their shareholders, it also considered possible alternatives. The
Board considered the possibility of the Funds imposing a front-end sales load
and retaining a brokerage firm to serve as principal underwriter for them. The
Board concluded that adoption of the Plan would be more likely to result in
increased sales than converting the Funds to load funds.
The Board recognized that the Adviser would benefit from increased management
fees as a result of growth in the Funds' assets. The Board concluded that such
benefits would not be disproportionate to the above-described anticipated
benefits to each Fund and its shareholders because the Adviser would have
increased portfolio management responsibilities as a result of the growth of the
assets of the Funds. The Board also recognized that the Adviser had heretofore
utilized its own resources to finance distribution of shares of the Funds and
would continue to do so if the Plan is approved by the shareholders of the Blue
Chip Fund and the Opportunity Fund. The Board determined that payments by the
Fund of investment advisory fees to the Adviser did not constitute indirect
financing of distribution of the Funds because the advisory fees paid by the
Funds were not out of line with the investment advisory fees paid by comparable
funds.
A. PROPOSAL TO APPROVE THE PLAN (BLUE CHIP FUND)
In addition to considering the potential benefits of the Plan to the Blue
Chip Fund and the Opportunity Fund and their shareholders, the Board also
considered the impact of the Plan on the expenses of both the Blue Chip Fund and
the Opportunity Fund.
The following table shows the actual operating expenses expressed as a
percentage of average net assets incurred by the Blue Chip Fund during the
fiscal year ended September 30, 1997, and the expenses expressed as a percentage
of average net assets that would have been incurred had the Plan been in effect
for such period:
ACTUAL PRO FORMA
------ ----------
Management Fees 1.00% 1.00%
12b-1 Fees 0.00% 0.25%
Other Expense 0.38% 0.38%
----- -----
Total Fund Operating Expenses 1.38% 1.63%
----- -----
----- -----
EXAMPLE
The following example illustrates the expenses on a $1,000 investment in the
Blue Chip Fund both without the Plan and with the Plan assuming (i) a 5% annual
return and (ii) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------- -------
Without the Plan $14 $44 $76 $166
With the Plan $17 $51 $89 $193
The purpose of the above example and table is to assist you in understanding
how the various costs and expenses of the Blue Chip Fund will change as a result
of the adoption of the Plan. The example should not be considered a
representation of past or future expenses. The Blue Chip Fund's actual expenses
and investment performance vary from year to year and will result in expenses
that may be higher or lower than those shown above.
The Board concluded that the modest increase in the expenses of the Blue Chip
Fund resulting from implementation of the Plan did not outweigh the potential
benefits of the Plan described above.
B. PROPOSAL TO APPROVE THE PLAN (OPPORTUNITY FUND)
The following table shows the actual operating expenses expressed as a
percentage of average net assets incurred by the Opportunity Fund during the
fiscal year ended September 30, 1997, and the expenses expressed as a percentage
of average net assets that would have been incurred had the Plan been in effect
for such period:
ACTUAL PRO FORMA
------ ----------
Management Fees 1.00% 1.00%
12b-1 Fees 0.00% 0.25%
Other Expense 0.50% 0.50%
----- -----
Total Fund Operating Expenses 1.50% 1.75%
----- -----
----- -----
EXAMPLE
The following example illustrates the expenses on a $1,000 investment in the
Opportunity Fund both without the Plan and with the Plan assuming (i) a 5%
annual return and (ii) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------- -------
Without the Plan $15 $47 $82 $179
With the Plan $18 $55 $95 $206
The purpose of the above example and table is to assist you in understanding
how the various costs and expenses of the Opportunity Fund will change as a
result of the adoption of the Plan. The example should not be considered a
representation of past or future expenses. The Opportunity Fund's actual
expenses and investment performance vary from year to year and will result in
expenses that may be higher or lower than those shown.
Again the Board concluded that the modest increase in the expenses of the
Opportunity Fund resulting from the implementation of the Plan did not outweigh
the potential benefits of the Plan described above.
VOTE REQUIRED
The favorable vote of the holders of a "majority" (as defined in the
Investment Company Act of 1940) of the outstanding shares of the Blue Chip Fund
is required for the approval of the Plan by the Blue Chip Fund. Similarly the
favorable vote of a "majority" of the outstanding shares of the Opportunity Fund
is required for the approval of the Plan by the Opportunity Fund. Under the
Investment Company Act of 1940, the vote of the holders of a "majority" of the
outstanding shares of a Fund means the vote of the holders of the lesser of (a)
67% or more of its shares present at the Meeting or represented by proxy if the
holders of 50% or more of its shares are so present or represented; or (b) more
than 50% of its outstanding shares. Abstentions and broker non-votes will not
be counted for or against the proposal but will be counted as votes present for
purposes of determining whether or not more than 50% of the outstanding shares
are present or represented at the Meeting. The failure to vote (other than by
broker non-votes or abstentions), assuming more than 50% of the outstanding
shares of a Fund are present, has no effect if (a) above is applicable and has
the same effect as a vote against the proposal if (b) above is applicable.
Abstentions and broker non-votes have the same effect as a vote against the
proposal.
If the Plan is approved by either the Blue Chip Fund or the Opportunity Fund,
but not both, the Plan will be implemented with respect to the Approving Fund.
With respect to an Approving Fund, the Plan will take effect on the first
business day of the month following the month in which shareholder approval is
received.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH OF THE BLUE CHIP FUND AND THE OPPORTUNITY FUND VOTE FOR THE
APPROVAL OF THE PLAN.
PRINCIPAL SHAREHOLDERS
As of July 31, 1998, no person is known to the Company to own beneficially
more than 5% of the outstanding shares of any Fund except as indicated below:
<TABLE>
NAME AND ADDRESS OF
FUND BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF FUND
- ---- -------------------- ----------------- ---------------
<S> <C> <C> <C>
Opportunity Fund Frederick L. Reynolds
Wood Island, Third Floor
80 East Sir Francis Drake Blvd.
Larkspur, CA 94939 249,119 19.58%
Roy L. Curry, M.D.
Professional Corp. Profit Sharing Plan
2545 Green Street
San Francisco, CA 94123 64,042 5.03%
Bond Fund The Joel W. Renbaum, M.D., Inc.
Profit Sharing Trust
1145 Bush Street
San Francisco, CA 94109 59,203 19.43%
Chambers Family Insurance Trust
650 California Street, Floor 33
San Francisco, CA 94108 28,316 9.30%
Forest Resources Profit-Sharing Plan
200 Tamal Plaza #200
Corte Madera, CA 94925 22,686 7.45%
William B. Stewart
47 Starbuck Drive
Muir Beach, CA 94965 19,167 6.29%
Louise Posner Test Trust
P. O. Box 1077
Ross, CA 94957 18,482 6.07%
DDS Inc. Profit Sharing Trust
476 West 25th Avenue
San Mateo, CA 94403 16,099 5.28%
Money Market Fund Peter H. Peracca
1 Pomeroy Road
Ross, CA 94957 416,134 10.32%
Hollis Bascom
1558 San Remo Street
Livermore, CA 94550 354,266 8.79%
Jean M. Stark
814 Kealaolu Avenue
Honolulu, HI 96816 293,972 7.29%
</TABLE>
As of July 31, 1998 the Directors and executive officers of the Company
beneficially owned shares of the Funds as set forth below:
<TABLE>
NUMBER OF SHARES AND PERCENT OWNED OF EACH FUND
--------------------------------------------------------------------------------
NAME OF BENEFICIAL OWNER BLUE CHIP FUND OPPORTUNITY FUND BOND FUND MONEY MARKET FUND
- ------------------------ ------------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frederick L. Reynolds 16,581 *<F2> 249,119 19.58% 1,417 *<F2> 1,203 *<F2>
Robert E. Snader 18,623 *<F2> 2,311 *<F2> -- -- 54,177 1.34%
Robert E. Stauder 35,970 1.55% 19,160 1.51% -- -- 30 *<F2>
Camille F. Wildes -- -- -- -- -- -- -- --
Officers and Directors as a
Group (Four Persons) 71,174 3.06% 270,590 21.27% 1,417 *<F2> 55,410 1.37%
*<F2>Less than 1%
</TABLE>
INVESTMENT ADVISER AND ADMINISTRATOR
The Company's investment adviser is Reynolds Capital Management, Wood Island,
Third Floor, 80 East Sir Francis Drake Boulevard, Larkspur, California 94939.
Reynolds Capital Management is a sole proprietorship for which Frederick L.
Reynolds is sole proprietor.
The administrator of the Company is Fiduciary Management, Inc., 225 East
Mason Street, Milwaukee, Wisconsin 53202.
The Company has no principal underwriter.
RECEIPT OF SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission, shareholder
proposals meeting tests contained in those rules may, under certain conditions,
be included in the Company's proxy materials for a particular meeting of
shareholders. One of these conditions relates to the timely receipt by the
Company of any such proposal. Since the Company does not have regular annual
meetings of shareholders, under these rules, proposals submitted for inclusion
in the proxy materials for a particular meeting must be received by the Company
a reasonable time before the solicitation of proxies for the meeting is made.
The fact that the Company receives a shareholder proposal in a timely manner
does not insure its inclusion in the Company's proxy materials since there are
other requirements in the proxy rules relating to such inclusion.
OTHER MATTERS
The Company's Board of Directors knows of no other matters that may come
before the Meeting. If any other matters properly come before the Meeting, it
is the intention of the person acting pursuant to the enclosed form of proxy to
vote the shares represented by said proxies in accordance with his best judgment
with respect to such matters.
By Order of the Board of Directors
/S/ FREDERICK L. REYNOLDS
FREDERICK L. REYNOLDS
President
Larkspur, California
August 10, 1998
