SEMIANNUAL REPORT
March 31, 1998
(REYNOLDS FUNDS logo)
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 logo)
Dear Fellow Shareholders: April 28, 1998
The Reynolds Blue Chip Growth and Opportunity Funds had strong appreciation
for the three months ended March 31, 1998:
December 31, 1997 through March 31, 1998
Reynolds Blue Chip Growth Fund +16.9%
Reynolds Opportunity Fund +17.1%
The Blue Chip and Opportunity Funds had strong appreciation for the twelve
months ended March 31, 1998:
April 1, 1997 through March 31, 1998
Reynolds Blue Chip Growth Fund +49.7%
Reynolds Opportunity Fund +43.4%
The Blue Chip and Opportunity Funds also had strong appreciation for the
three years ended March 31, 1998:
Average Annual Total Returns
April 1, 1995 through March 31, 1998
Reynolds Blue Chip Growth Fund +35.3%
Reynolds Opportunity Fund +24.9%
The Blue Chip and Opportunity Funds also had strong appreciation for the five
years ended March 31, 1998:
Average Annual Total Returns
April 1, 1993 through March 31, 1998
Reynolds Blue Chip Growth Fund +20.8%
Reynolds Opportunity Fund +18.9%
The Blue Chip Fund has received many awards for its recent performance
including:
(1) Barron's - The Blue Chip Fund was featured in the May 26, 1997 edition of
Barron's.
(2) CNBC - Featured on February 5, 1998, October 29, 1997 and May 12, 1997.
(3) 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 3,852 mutual funds
for the three years ending April 6, 1998 in determining this ranking.
(4) Mutual Funds Magazine - Featured in the September 1997 edition.
(5) Wall Street Journal - Featured in the April 21, 1998 edition.
INVESTMENT OUTLOOK
There are currently many investment positives. Among them are: (1) the U.S.
budget is now running a surplus versus a deficit in 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;
and (5) U.S. consumer confidence is strong.
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 companies in the Blue
Chip Fund are estimated to be increasing their earnings at an average annual
rate of +17%.
The Blue Chip Fund increased +310.8% from August 12, 1988 (effective date of
the Fund's registration statement) through March 31, 1998. This was an average
annual compounded rate of return of +15.8%.
THE REYNOLDS OPPORTUNITY FUND
Medium size growth companies are starting to outperform the overall stock
market. In this environment, the Reynolds Opportunity Fund should have
exceptionally strong performance. This Fund emphasizes investments in the best
emerging growth companies worldwide - the blue chips of tomorrow. The
Opportunity Fund generally invests in companies which already have proven
themselves in the marketplace and are leaders in their industries. These
companies generally have sales of more than $500 million and are demonstrating
strong earnings growth from proprietary products. The companies in the
Opportunity Fund are estimated to be increasing their earnings at an average
annual rate of +21%.
A long-term investment in the Reynolds Opportunity Fund should be a good
complement to a long-term investment in the Reynolds Blue Chip Growth Fund. 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
shareholders wealth in the future.
The Opportunity Fund increased +113.5% from January 30, 1992 (effective date
of the Fund's registration statement) through March 31,1998. This was an
average annual compounded rate of return of +13.1%.
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, 1998, the assets were invested approximately 91% in U.S.
Treasury Securities and 9% in high quality cash equivalents.
The Bond Fund had a dollar weighted average maturity of 1.4 years on March
31, 1998. 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, 1998, the assets of the Reynolds Money market Fund were
invested approximately 52% in high quality commercial paper, 29% in Federal
Agencies, and 19% in high quality cash equivalents. As of March 31,1998, the
dollar weighted average days to maturity of the Money market Fund was 49.2 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 ($12.00 wiring charge).
ECONOMIC DISCUSSION
THE WORLD ECONOMY
Strong worldwide growth patterns are forecast for many industries in the next
few years. There are more than 1.5 billion people in the world who will be
experiencing a higher standard of living as capitalism grows and Communism
declines in China, Eastern Europe and Russia. Many other countries,such as
India and Latin America, have rapidly emerging middle classes, which desire
western goods and services and governments that are encouraging foreign
investments.
Worldwide inflation remains low. There are many reasons for this including:
(1) committed central bankers; (2) fiscal restraint by governments; (3)
worldwide competition for products and labor is keeping costs low; (4) the
collapse of Communism is making economic systems more efficient; (5) cost
cutting and restructuring are spreading to many countries; (6) more efficient
private-sector operations are replacing inefficient state-run enterprises; (7)
excess capacity exists in many markets; and (8) advances in technology are
helping to improve efficiency. The Blue Chip and Opportunity Funds are well
positioned to participate in these strong worldwide growth trends through their
investments in U.S. headquartered and foreign headquartered companies.
THE U.S. ECONOMY
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 2.8% in 1998 after
increasing 3.8% in 1997.
U.S. inflation is at its lowest level since the 1960s as the Federal Reserve
continues to do a good job of keeping inflationary pressures down. The Federal
Reserve has been willing to act at the first sign that a rise in inflation could
be near. This policy allows the Federal Reserve to use milder rather than
harsher remedies which often stop economic growth later on. The current absence
of widespread worldwide labor and raw materials shortages and the slowdown in
Asia 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 1.8% rate in
1998, after increasing at a 1.7% rate in 1997.
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 "1" then "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 "1" then "2". The updated
current net asset values for all of the Reynolds Funds are usually available
each business day after 5 P.M. (PST).
FOR SHAREHOLDERS TO AUTOMATICALLY ACCESS THEIR CURRENT ACCOUNT INFORMATION:
Call 1-800-773-9665 (twenty-four hours-a-day, seven days-a-week), press "1" then
"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 "1" then "2".
SHAREHOLDER STATEMENT FREQUENCY: Consolidate 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 and Opportunity Funds are
listed in many major daily newspapers including Investor's Business Daily, The
New York Times, The Wall Street Journal and USA Today. Many newspapers have a
separate heading listed alphabetically for the Reynolds Funds. The Blue Chip
Fund and Opportunity Funds appear under that heading. The Blue Chip Fund has
the symbol Reynolds BC, Reynolds BCG, Rey BC, ReynBlCh, ReynBluCh or Blue Chip.
The Opportunity Fund has the symbol Reynolds Opport, Reynolds Opp or
Opportunity. The U.S. Government Bond Fund will be listed in newspapers once it
has 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
Roth IRA, Education IRA and SIMPLE IRA Plan.
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 $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.
PORTFOLIO MANAGER: Frederick Reynolds is the portfolio manager of each of the
Reynolds Funds.
CUSTODIAN: Firstar Trust Company is the custodian of the Reynolds Funds'
assets.
THE REYNOLDS FUNDS ARE NO-LOAD: No front end sales commissions or redemption
fees "loads" are charged. Over 50% of all mutual funds impose 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. These
fees reduce a shareholder's return. The Reynolds Funds are 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 continue confidence in the Reynolds Funds and would
like to welcome our new shareholders. We look forward to strong results in the
future.
Sincerely,
/s/ Frederick L. Reynolds
Frederick L. Reynolds
President
80 East Sir Francis Drake Blvd. o Larkspur, CA 94939 o 415-461-7860
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Reynolds Funds unless accompanied or preceded by
the Funds' current prospectus. Past performance is not indicative of future
performance. Investment return and principal value of an investment may
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
Reynolds Blue Chip Growth Fund
STATEMENT OF NET ASSETS
March 31, 1998 (Unaudited)
- -----------------------------
Quoted
Shares Market Value
------- -------------
LONG-TERM INVESTMENTS -- 99.5% (A) <F2>
COMMON STOCKS -- 99.5% (A)<F2>
AUTOMOTIVE -- 0.2%
1,000 Ford Motor Co. $ 64,813
1,000 General Motors Corporation 67,438
-----------
132,251
BANKS -- 1.3%
3,000 BankAmerica Corp. 247,875
500 Citicorp 71,000
1,500 J.P. Morgan & Co. Inc. 201,469
1,000 Norwest Corp. 41,563
1,000 State Street Corp. 68,063
1,000 Wells Fargo & Co. 331,250
-----------
961,220
BEVERAGES -- 6.2%
34,000 The Coca-Cola Company 2,632,892
42,000 PepsiCo, Inc. 1,792,896
-----------
4,425,788
BUILDING -- 1.6%
17,250 The Home Depot, Inc. 1,163,305
CHEMICALS -- 0.2%
1,500 Minnesota Mining &
Manufacturing Co. 136,782
COMPUTER NETWORKING -- 5.2%
9,000 3Com Corp.*<F1> 323,442
49,500 Cisco Systems Inc.*<F1> 3,384,562
-----------
3,708,004
COMPUTER & PERIPHERALS -- 3.6%
17,500 Compaq Computer Corp. 452,812
8,000 Dell Computer Corp.*<F1> 542,000
7,500 Hewlett-Packard Co. 475,312
7,000 International Business
Machines Corp. 727,125
8,500 Sun Microsystems, Inc.*<F1> 354,612
-----------
2,551,861
COMPUTER SOFTWARE & SERVICES -- 11.0 %
2,000 Automatic Data Processing, Inc. 136,126
1,000 Baan Company N.V.* <F1> 47,875
1,000 BMC Software, Inc.*<F1> 83,813
6,000 Computer Sciences Corp.*<F1> 330,000
20,625 Computer Associates
International, Inc. 1,191,094
12,312 Oracle Corp.*<F1> 388,603
15,000 PeopleSoft, Inc.*<F1> 790,320
-----------
7,890,33
DRUGS -- 21.2%
13,100 Bristol-Myers Squibb Co. 1,366,500
21,000 Eli Lilly & Co. 1,252,125
30,100 Merck & Co., Inc. 3,864,087
41,500 Pfizer Inc. 4,137,052
32,000 Schering-Plough Corp. 2,614,016
11,500 Warner-Lambert Co. 1,958,600
-----------
15,192,380
ELECTRICAL EQUIPMENT -- 2.2%
3,000 Emerson Electric Co. 195,564
16,000 General Electric Co. (U.S.) 1,379,008
-----------
1,574,572
ELECTRONICS -- 0.2%
4,000 Teradyne, Inc.*<F1> 160,252
ENERGY -- 2.4%
1,000 Chevron Corp. 80,313
1,500 Exxon Corp. 101,437
4,500 Mobil Corp. 344,813
5,000 Royal Dutch Petroleum Co. ADR 284,065
11,000 Schlumberger Ltd. 833,250
1,000 Smith International, Inc.*<F1> 55,063
1,000 Texaco Inc. 60,250
-----------
1,759,191
FINANCIAL SERVICES -- 2.0%
10,500 American Express Co. 964,036
1,000 First Data Corporation 32,500
4,000 Fannie Mae 253,000
1,500 Merrill Lynch & Co., Inc. 124,500
1,000 Paychex, Inc. 57,688
-----------
1,431,724
FOODS -- 2.5%
500 Bestfoods 58,437
4,500 Campbell Soup Co. 255,375
2,500 General Mills, Inc. 190,000
1,000 H.J. Heinz Co. 58,375
1,000 Hershey Foods Corporation 71,625
1,500 Kellogg Co. 64,688
9,500 Philip Morris Companies Inc. 396,036
5,500 Quaker Oats Co. 314,875
6,500 Sara Lee Corp. 400,563
450 Vlasic Foods International, Inc.*<F1> 11,503
-----------
1,821,477
FOOD WHOLESALERS -- 0.1%
2,000 Sysco Corp. 51,250
GROCERY STORES -- 0.2%
1,000 Albertson's, Inc. 52,625
2,000 Safeway Inc.*<F1> 73,876
-----------
126,501
HEALTH MAINTENANCE ORGANIZATIONS -- 0.2%
6,500 Oxford Health Plans, Inc.*<F1> 97,097
500 United Healthcare Corporation 32,375
-----------
129,472
HOUSEHOLD PRODUCTS -- 8.5%
9,000 American Home Products Corp. 858,375
1,000 Clorox Co. 85,688
21,000 Colgate-Palmolive Co. 1,819,125
6,500 Gillette Company 771,472
1,000 Newell Co. 48,438
29,500 Procter & Gamble Co. 2,489,063
-----------
6,072,161
INSURANCE -- 1.9%
7,625 American International Group, Inc. 960,277
500 General Re Corp. 110,313
5,000 The Travelers Group, Inc. 300,000
-----------
1,370,590
MACHINERY -- 0.4%
4,500 Caterpillar Inc. 247,784
1,000 Deere & Co 61,938
-----------
309,722
MEDICAL SUPPLIES -- 6.7%
26,000 Abbott Laboratories 1,958,138
39,000 Johnson & Johnson 2,859,207
-----------
4,817,345
OFFICE EQUIPMENT & SUPPLIES -- 0.7%
2,000 Office Depot, Inc.*<F1> 62,250
5,000 Pitney Bowes Inc. 250,940
2,000 Xerox Corp. 212,876
-----------
526,066
PAPER & FOREST PRODUCTS -- 0.4%
1,000 Georgia-Pacific Corporation 64,750
4,560 Kimberly-Clark Corp. 228,570
-----------
293,320
PUBLISHING -- 0.2%
2,000 Gannett Co., Inc. 143,750
RAILROADS -- 0.1%
1,000 Burlington Northern Santa Fe
Corporation 104,000
RECREATION -- 2.0%
13,049 Walt Disney Co. 1,392,981
1,000 Time Warner Inc. 72,000
-----------
1,464,981
RESTAURANTS -- 1.3%
11,000 McDonald's Corp. 660,000
9,000 Tricon Global Restaurants, Inc.*<F1> 270,567
-----------
930,567
RETAIL - SPECIALTY -- 0.4%
1,000 Circuit City Stores-
Circuit City Group 42,750
625 Dollar General Corporation 24,180
2,000 NIKE, Inc. Class B 88,500
1,000 Rite Aid Corp. 34,250
2,000 Walgreen Co. 70,376
-----------
260,056
RETAIL STORES -- 4.8%
2,000 Costco Companies, Inc.*<F1> 107,000
7,500 Dayton Hudson Corp. 660,000
15,500 Gap, Inc. 697,500
2,000 Kohl's Corporation*<F1> 163,500
1,000 The Neiman Marcus Group, Inc.*<F1> 41,063
4,500 Nordstrom, Inc. 287,159
29,000 Wal-Mart Stores, Inc. 1,473,577
-----------
3,429,799
SEMICONDUCTORS -- 5.1%
3,500 Altera Corporation*<F1> 132,125
36,500 Intel Corporation 2,849,300
10,000 Texas Instruments Inc. 541,250
3,000 Xilinx, Inc.*<F1> 112,314
-----------
3,634,989
SEMICONDUCTOR CAPITAL SPENDING -- 0.7%
9,000 Applied Materials, Inc.*<F1> 317,817
4,000 KLA-Tencor Corp.*<F1> 153,000
1,000 Novellus Systems, Inc.*<F1> 43,250
-----------
514,067
TELECOMMUNICATIONS -- 5.3%
14,000 America Online Inc.*<F1> 956,382
2,000 L.M. Ericsson Telephone Co. ADR 95,126
1,500 Lucent Technologies Inc. 191,813
17,000 Motorola, Inc. 1,030,625
2,000 Nokia Corp. "A" ADR 215,876
2,000 Northern Telecom Limited 129,250
16,000 Tellabs, Inc.*<F1> 1,074,000
1,000 Vodafone Group plc ADR 103,875
1,000 WorldCom, Inc.*<F1> 43,063
-----------
3,840,010
TELEPHONE SERVICES -- 0.4%
1,000 Ameritech Corporation 49,438
1,000 AT&T Corp. 65,625
1,000 BellSouth Corp. 67,563
500 Bell Atlantic Corp. 51,250
1,000 Sprint Corporation 67,688
-----------
301,564
TRANSPORTATION -- 0.3%
1,000 Boeing Company 52,125
500 FDX Corporation*<F1> 35,562
1,000 United Technologies Corporation 92,313
-----------
180,000
-----------
Total common stocks
(cost $30,002,391) 71,409,348
PREFERRED STOCKS -- 0.0% (A)<F2>
205 Aetna Inc., 6.25%, Cl C
07/19/00 Series 16,413
-----------
Total preferred stocks
(cost $13,386) 16,413
-----------
Total long-term investments
(cost $30,015,777) 71,425,761
SHORT-TERM INVESTMENTS -- 0.4% (A)<F2>
VARIABLE RATE DEMAND NOTES
$324,264 Johnson Controls, Inc. 324,264
-----------
Total short-term investments
(cost $324,264) 324,264
-----------
Total investments
(cost $30,340,041) 71,750,025
Cash and receivables, less
liabilities -- 0.1% (A)<F2> 40,808
-----------
NET ASSETS $71,790,833
-----------
-----------
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering and
redemption price ($71,790,833 /
1,949,428 shares outstanding) $ 36.83
----------
----------
* <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, 1998 (Unaudited)
- ----------------------------------------------------
INCOME:
Dividends $ 287,589
Interest 12,203
------------
Total income 299,792
------------
EXPENSES:
Management fee 317,178
Administrative services 46,676
Registration fees 14,049
Professional fees 13,575
Transfer agent fees 13,469
Custodian fees 10,558
Printing and postage expense 10,219
Other expenses 10,930
------------
Total expenses 436,654
------------
NET INVESTMENT LOSS (136,862)
------------
NET REALIZED GAIN ON INVESTMENTS 800,725
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 9,519,257
------------
NET GAIN ON INVESTMENTS 10,319,982
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,183,120
------------
------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1998 (Unaudited) and For the Year Ended
September 30, 1997
- ---------------------------------------------------------------------------
1998 1997
---------- ----------
OPERATIONS:
Net investment loss $ (136,862) $ (44,311)
Net realized gain on investments 800,725 466,891
Net increase in unrealized
appreciation on investments 9,519,257 15,989,698
---------- ----------
Net increase in net assets
resulting from operations 10,183,120 16,412,278
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net
investment income ($0.008 per share) (15,315) --
Distributions from net realized gains ($0.378067
and $0.3475 per share, respectively) (722,590) (472,452)
---------- ----------
Total distributions (737,905) (472,452)
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(391,639 and 1,528,496 shares, respectively) 13,134,262 43,146,360
Net asset value of shares issued in
distributions (23,530 and 20,696 shares,
respectively) 699,554 465,659
Cost of shares redeemed (412,520 and 960,289
shares, respectively) (13,782,556) (28,064,790)
---------- ----------
Net increase in net assets derived
from Fund share activities 51,260 15,547,229
---------- ----------
TOTAL INCREASE 9,496,475 31,487,055
NET ASSETS AT THE BEGINNING OF THE PERIOD 62,294,358 30,807,303
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $71,790,833 $62,294,358
---------- ----------
---------- ----------
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>
(Unaudited)
For the Six
Months
Ending
March 31, Years Ended September 30,
---------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988+<F4>
----- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period $ 32.00 $ 22.69 $ 19.25 $ 14.46 $ 14.22 $ 14.98 $ 13.96 $ 11.14 $ 11.92 $ 10.06 $ 10.00
Income from investment
operations:
Net investment
(loss) income (0.06) (0.01) (0.03) 0.02 0.09 0.12 0.09 0.14 0.07 0.25 0.03
Net realized and
unrealized gain (loss)
on investments 5.28 9.67 3.52 5.00 0.28 (0.79) 1.02 2.83 (0.65) 1.73 0.03
----- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 5.22 9.66 3.49 5.02 0.37 (0.67) 1.11 2.97 (0.58) 1.98 0.06
Less distributions:
Dividends from net
investment income (0.01) -- (0.02) (0.06) (0.13) (0.09) (0.09) (0.15) (0.15) (0.12) --
Distributions from
net realized gains (0.38) (0.35) (0.03) (0.17) -- -- -- -- (0.05) -- --
----- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
distributions (0.39) (0.35) (0.05) (0.23) (0.13) (0.09) (0.09) (0.15) (0.20) (0.12) --
----- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $36.83 $ 32.00 $ 22.69 $ 19.25 $ 14.46 $ 14.22 $ 14.98 $ 13.96 $ 11.14 $ 11.92 $ 10.06
----- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------
----- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT
RETURN 16.6%*<F5>43.2% 18.1% 35.3% 2.6% (4.5%) 8.0% 26.9% (5.0%) 19.9% 0.6%*<F5>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's $) 71,791 62,294 30,807 29,357 24,771 38,929 40,580 27,735 10,009 5,260 366
Ratio of expenses (after
reimbursement) to average
net assets***<F7> 1.4%**<F6> 1.4% 1.5% 1.5% 1.5% 1.4% 1.5% 1.7% 2.1% 2.0% 2.0%**<F6>
Ratio of net investment
(loss) income to average
net assets****<F8> (0.4%)**<F6> (0.1%) (0.1%) 0.1% 0.5% 0.8% 0.6% 1.2% 0.8% 2.7% 4.5%**<F6>
Portfolio turnover rate 17.0% 25.0% 21.5% 49.2% 43.3% 38.1% 0.2% 0.9% 66.2% 32.5% --
Average commission
rate paid*****<F9> $0.0578 $0.0728 $0.1047
</TABLE>
+<F4> For the period from August 10, 1988 (commencement of operations)
to September 30, 1988.
*<F5> Not Annualized.
**<F6> Annualized.
***<F7> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio would
have been 2.7% for the year ended September 30, 1989.
****<F8> If the Fund had paid all of its expenses, the ratio would have been
2.0% for the year ended September 30, 1989.
*****<F9>Disclosure required for fiscal years beginning after September 1,
1995.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Opportunity Fund
STATEMENT OF NET ASSETS
March 31, 1998 (Unaudited)
- --------------------------
Quoted
Shares Market Value
- ------- -----------
LONG-TERM INVESTMENTS -- 92.1% (A)<F11>
COMMON STOCKS -- 92.1% (A)<F11>
BANKS -- 0.2%
50 BankAmerica Corp. $ 41,312
BEVERAGES -- 5.4%
13,500 The Coca-Cola Company 1,045,413
8,000 PepsiCo, Inc. 341,504
----------
1,386,917
BUILDING -- 1.5%
5,799 The Home Depot, Inc. 391,073
CABLE TV/BROADCASTING -- 0.5%
1,200 Clear Channel
Communications, Inc.*<F10> 117,600
CHEMICALS - SPECIALTY -- 0.2%
1,000 Raychem Corp. 41,563
Computer - Networking -- 6.5%
7,995 3Com Corp.*<F10> 287,324
20,100 Cisco Systems Inc.*<F10> 1,374,338
----------
1,661,662
COMPUTER & PERIPHERALS -- 6.4%
6,500 Compaq Computer Corp. 168,187
11,800 Dell Computer Corp.*<F10> 799,450
1,000 EMC Corporation (Mass.)*<F10> 37,813
2,800 Hewlett-Packard Co. 177,450
1,700 International Business Machines Corp. 176,588
8,800 Iomega Corp.*<F10> 60,500
4,800 Sun Microsystems, Inc.*<F10> 200,251
----------
1,620,239
COMPUTER SOFTWARE & SERVICES -- 14.2%
1,500 BMC Software, Inc.*<F10> 125,720
6,187 Computer Associates International, Inc. 357,299
1,200 Compuware Corp.*<F10> 59,250
23,000 Microsoft Corp.*<F10> 2,058,500
9,725 Oracle Corp.* <F10> 306,950
6,000 Parametric Technology Corp.*<F10> 199,878
9,600 PeopleSoft, Inc.*<F10> 505,805
----------
3,613,402
DRUGS -- 16.1%
2,500 Bristol-Myers Squibb Co. 260,783
8,000 Eli Lilly & Co. 477,000
10,022 Merck & Co., Inc. 1,286,574
12,000 Pfizer Inc. 1,196,256
6,000 Schering-Plough Corp. 490,128
2,400 Warner-Lambert Co. 408,751
----------
4,119,492
ELECTRICAL EQUIPMENT -- 0.7%
2,000 General Electric Co. (U.S.) 172,376
ELECTRONICS -- 0.2%
1,500 Teradyne, Inc.*<F10> 60,094
ENERGY -- 1.7%
1,500 Halliburton Company 75,282
4,500 Schlumberger Ltd. 340,875
500 Smith International, Inc.*<F10> 27,531
----------
443,688
FINANCIAL SERVICES -- 3.3%
4,000 American Express Co. 367,252
1,025 Banc One Corp. 64,831
1,000 Diebold, Inc. 44,000
2,000 Fannie Mae 126,500
900 Franklin Resources, Inc. 47,700
600 T. Rowe Price Associates, Inc. 42,225
4,125 Charles Schwab Corp. 156,750
----------
849,258
FOODS -- 0.4%
1,000 Campbell Soup Co. 56,750
1,000 Philip Morris Companies Inc. 41,688
100 Vlasic Foods International, Inc.*<F10> 2,556
----------
100,994
HEALTH MAINTENANCE ORGANIZATIONS -- 0.4%
6,000 Oxford Health Plans, Inc.*<F10> 89,628
Household Products -- 5.5%
4,000 American Home Products Corp. 381,500
6,000 Colgate-Palmolive Co. 519,750
1,000 Gillette Company 118,688
4,500 Procter & Gamble Co. 379,688
----------
1,399,626
INSURANCE -- 0.4%
750 American International Group, Inc. 94,454
MEDICAL SERVICES -- 1.2%
2,849 Boston Scientific Corp.*<F10> 192,308
1,400 HBO & Co. 84,525
1,350 PhyCor, Inc.*<F10> 30,460
----------
307,293
MEDICAL SUPPLIES -- 5.5%
9,500 Abbott Laboratories 715,473
800 Guidant Corp. 58,700
8,676 Johnson & Johnson 636,064
----------
1,410,237
OFFICE EQUIPMENT & SUPPLIES -- 0.9%
2,000 CompUSA Inc.*<F10> 52,000
1,000 Corporate Express, Inc.*<F10> 9,969
3,000 Staples, Inc.*<F10> 69,564
1,000 Xerox Corp. 106,438
----------
237,971
RECREATION -- 2.1%
5,000 Walt Disney Co. 533,750
RESTAURANTS -- 1.0%
3,000 McDonald's Corp. 180,000
900 Papa John's International, Inc.*<F10> 34,537
900 Tricon Global Restaurants, Inc.*<F10> 27,057
----------
241,594
RETAIL - SPECIALTY -- 1.3%
1,000 Best Buy Co., Inc.*<F10> 66,625
1,000 Borders Group, Inc.*<F10> 34,063
1,250 Dollar General Corporation 48,360
1,500 NIKE, Inc. Class B 66,375
1,000 Proffitt's Inc.*<F10> 36,250
2,000 Rite Aid Corp. 68,500
500 Starbucks Corp.*<F10> 22,657
----------
342,830
RETAIL STORES -- 2.9%
1,500 Dayton Hudson Corp. 132,000
5,250 Gap, Inc. 236,250
2,500 Nordstrom, Inc. 159,533
4,000 Wal-Mart Stores, Inc. 203,252
----------
731,035
SEMICONDUCTORS -- 7.2%
4,100 Altera Corporation*<F10> 154,775
13,300 Intel Corporation 1,038,238
1,500 Lattice Semiconductor Corp.*<F10> 77,157
600 Linear Technology Corp. 41,400
1,500 LSI Logic Corp.*<F10> 37,875
1,600 Maxim Integrated Products Inc.*<F10> 58,301
6,000 Texas Instruments Inc. 324,750
3,000 Xilinx, Inc.*<F10> 112,314
----------
1,844,810
SEMICONDUCTOR/CAPITAL SPENDING -- 2.0%
8,000 Applied Materials, Inc.*<F10> 282,504
2,600 KLA-Tencor Corp.*<F10> 99,450
1,600 Novellus Systems, Inc.*<F10> 69,200
800 Sanmina Corp.*<F10> 55,950
----------
507,104
SERVICES -- 0.2%
1,000 Cendant Corporation*<F10> 39,625
600 Corrections Corporation of America*<F10> 20,475
----------
60,100
TELECOMMUNICATIONS -- 4.0%
4,000 America Online Inc.*<F10> 273,252
6,000 Motorola, Inc. 363,750
500 Nokia Corp. "A" ADR 53,969
5,000 Tellabs, Inc.*<F10> 335,625
----------
1,026,596
TRANSPORTATION -- 0.2%
1,000 Boeing Company 52,125
----------
Total common stocks
(cost $12,170,427) 23,498,823
PREFERRED STOCKS -- 0.0% (A)<F11>
101 Aetna Inc., 6.25% Cl C
07/19/00 Series 8,086
----------
Total preferred stocks
(cost $6,595) 8,086
----------
Total long-term investments
(cost $12,177,022) 23,506,909
SHORT-TERM INVESTMENTS -- 8.0% (A)<F11>
VARIABLE RATE DEMAND NOTES
$1,054,454 General Mills, Inc. 1,054,454
1,000,000 Johnson Controls, Inc. 1,000,000
----------
Total short-term investments
(cost $2,054,454) 2,054,454
----------
Total investments
(cost $14,231,476) 25,561,363
Liabilities, less cash and
receivables -- (0.1%) (A)<F11> (32,198)
----------
Net Assets $25,529,165
----------
----------
Net Asset Value Per Share
($0.01 par value 20,000,000
shares authorized), offering
and redemption price
($25,529,165 / 1,195,685
shares outstanding) $ 21.35
----------
----------
*<F10> Non-income producing security.
(a)<F11>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, 1998 (Unaudited)
- ----------------------------------------------------
INCOME:
Dividend $ 68,403
Interest 10,166
----------
Total income 78,569
----------
EXPENSES:
Management fees 110,678
Administrative services 22,136
Professional fees 12,750
Registration fees 11,296
Custodian fees 6,929
Transfer agent fees 6,728
Printing and postage expenses 3,507
Other expenses 4,290
----------
Total expenses 178,314
----------
NET INVESTMENT LOSS (99,745)
----------
NET REALIZED GAIN ON INVESTMENTS 459,833
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,719,680
----------
NET GAIN ON INVESTMENTS 2,179,513
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,079,768
----------
----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1998 (Unaudited) and For the Year Ended
September 30, 1997
- ------------------------------------------------------------------------------
1998 1997
------ ------
OPERATIONS:
Net investment loss $ (99,745) $ (178,090)
Net realized gain on investments 459,833 94,586
Net increase in unrealized appreciation
on investments 1,719,680 4,387,125
---------- ----------
Net increase in net assets resulting
from operations 2,079,768 4,303,621
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (193,561 and
214,277 shares, respectively) 3,943,181 3,736,722
Cost of shares redeemed (162,409 and
143,246 shares, respectively) (3,195,348) (2,443,205)
---------- ----------
Net increase in net assets derived
from Fund share activities 747,833 1,293,517
---------- ----------
TOTAL INCREASE 2,827,601 5,597,138
NET ASSETS AT THE BEGINNING OF THE PERIOD 22,701,564 17,104,426
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $25,529,165 $22,701,564
---------- ----------
---------- ----------
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>
(Unaudited) For the
For the Six Months Period From
Ending For the Years January 30, 1992+<F12>
March 31, Ended September 30, to September 30,
----------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.49 $ 15.64 $ 14.17 $ 10.09 $ 9.78 $ 8.85 $ 10.00
Income from investment operations:
Net investment (loss) income (0.07) (0.13) (0.06) (0.11) (0.09) (0.10) 0.00
Net realized and unrealized
gain (loss) on securities 1.93 3.98 1.53 4.19 0.40 1.03 (1.15)
------ ------ ------ ------ ------ ------ ------
Total from investment operations 1.86 3.85 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 $ 21.35 $ 19.49 $ 15.64 $ 14.17 $ 10.09 $ 9.78 $ 8.85
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 9.5%*<F13>24.6% 10.4% 40.4% 3.2% 10.5% (11.5%)*<F13>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 25,529 22,702 17,104 10,983 6,132 3,834 1,844
Ratio of expenses (after reimbursement)
to average net assets***<F15> 1.6%**<F14>1.5% 1.5% 1.9% 2.0% 2.0% 2.0%**<F14>
Ratio of net investment (loss) income
to average net assets****<F16> (0.9%)**<F14> (0.9%) (1.1%) (1.5%) (1.6%) (1.3%) 0.0%**<F14>
Portfolio turnover rate 17.2% 60.2% 11.8% 38.4% 16.8% 67.6% 30.1%
Average commission rate paid*****<F17> $0.0537 $0.0791 $0.1269
</TABLE>
+<F12> Commencement of Operations.
*<F13> Not Annualized.
**<F14> Annualized.
***<F15> 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%**<F14>, respectively.
****<F16>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%)**<F14>, respectively.
*****<F17>Disclosure required for fiscal years beginning after September 1,
1995.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds U.S. Government Bond Fund
STATEMENT OF NET ASSETS
March 31, 1998 (Unaudited)
- ---------------------------
Principal Quoted
Amount Market Value
- ------- ------------
LONG-TERM INVESTMENTS -- 57.2% (A)<F18>
U.S. TREASURY SECURITIES -- 45.8%
$ 200,000 U.S. Treasury Notes,
6.750%, due 05/31/99 $ 202,500
400,000 U.S. Treasury Notes,
6.375%, due 07/15/99 403,812
300,000 U.S. Treasury Notes,
6.000%, due 08/15/00 302,485
300,000 U.S. Treasury Notes,
8.500%, due 11/15/00 320,672
-----------
Total U.S. treasury securities
(cost $1,234,261) 1,229,469
FEDERAL AGENCIES -- 11.4%
300,000 Federal Farm Credit,
6.280%, due 6/20/01
(cost $300,160) 304,338
----------
Total long-term investments
(cost $1,534,421) 1,533,807
SHORT-TERM INVESTMENTS -- 41.8% (A)<F18>
U.S. TREASURY SECURITIES -- 33.6%
300,000 U.S. Treasury Notes,
6.250%, due 06/30/98 300,609
200,000 U.S. Treasury Notes,
6.125%, due 08/31/98 200,500
200,000 U.S. Treasury Notes,
6.000%, due 09/30/98 200,531
200,000 U.S. Treasury Notes,
7.125%, due 10/15/98 201,719
----------
Total government securities
(cost $909,171) 903,359
COMMERCIAL PAPER -- 4.8%
130,000 General Electric Capital Corp.,
5.48%, due 06/16/98
(cost $128,496) 128,496
VARIABLE RATE DEMAND NOTES -- 3.4%
90,927 General Mills, Inc.
(cost $90,927) 90,927
----------
Total short-term investments
(cost $1,128,594) 1,122,782
----------
Total investments
(cost $2,663,015) 2,656,589
Cash and receivables, less
liabilities -- 1.0% (A)<F18> 27,432
----------
NET ASSETS $2,684,021
----------
----------
Net Asset Value Per Share
($0.01 par value, 20,000,000
shares authorized), offering and
redemption price ($2,684,021 /
274,859 shares outstanding) $ 9.77
----------
----------
(a)<F18> 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, 1998 (Unaudited)
- ----------------------------------------------------
INCOME:
Interest $ 84,609
----------
EXPENSES:
Professional fees 10,261
Management fees. 9,978
Transfer agent fees 5,338
Registration fees 2,721
Administrative services 1,330
Printing and postage expense 621
Custodian fees 275
Other expenses 1,485
----------
Total expenses before reimbursement 32,009
Less expenses assumed by adviser (20,036)
----------
Net expenses 11,973
----------
NET INVESTMENT INCOME 72,636
----------
NET REALIZED GAIN ON INVESTMENTS ---
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (58)
----------
NET LOSS ON INVESTMENTS (58)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 72,578
----------
----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1998 (Unaudited) and For the Year Ended
September 30, 1997
- --------------------------------------------------------------------------------
1998 1997
---------- ----------
OPERATIONS:
Net investment income $ 72,636 $143,167
Net realized gain on investments --- 264
Net (decrease) increase in unrealized
appreciation on investments (58) 4,176
---------- ----------
Net increase in net assets
resulting from operations 72,578 147,607
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment
income ($0.2663 and $0.5322 per
share, respectively) (72,636) (143,167)
---------- ----------
Total distributions (72,636) (143,167)
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(16,339 and 39,516 shares, respectively) 159,898 385,277
Net asset value of shares issued in
distributions (6,382 and 12,071
shares, respectively) 62,410 117,814
Cost of shares redeemed (16,778 and
66,239 shares, respectively) (163,995) (647,293)
---------- ----------
Net increase (decrease) in
net assets derived from Fund
share activities 58,313 (144,202)
---------- ----------
TOTAL INCREASE (DECREASE) 58,255 (139,762)
NET ASSETS AT THE BEGINNING OF THE PERIOD 2,625,766 2,765,528
---------- ----------
NET ASSETS AT THE END OF THE PERIOD $ 2,684,021 $ 2,625,766
---------- ----------
---------- ----------
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>
(Unaudited) For the
For thix Months Period From
Ending For the Years January 30, 1992+<F19>
March 31, Ended September 30, to September 30,
-------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 9.75 $ 9.85 $ 9.61 $10.76 $10.36 $10.00
Income from investment operations:
Net investment income 0.2663 0.5322 0.5333 0.5350 0.5609 0.5498 0.2979
Net realized and unrealized
gain (loss) on investments 0.0100 0.0100 (0.1000) 0.2491 (1.1432) 0.4001 0.3602
------ ------ ------ ------ ------ ------ -------
Total from investment operations 0.2763 0.5422 0.4333 0.7841 (0.5823) 0.9499 0.6581
Less distributions:
Dividends from net investment income (0.2663) (0.5322) (0.5333) (0.5441) (0.5607) (0.5499) (0.2981)
Distribution from net realized gains -- -- -- -- (0.0070) -- --
------ ------ ------ ------ ------ ------ -------
Total from distributions (0.2663) (0.5322) (0.5333) (0.5441) (0.5677) (0.5499) (0.2981)
------ ------ ------ ------ ------ ------ -------
Net asset value, end of period $ 9.77 $ 9.76 $ 9.75 $ 9.85 $ 9.61 $10.76 $10.36
------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ -------
TOTAL INVESTMENT RETURN 2.86%*<F20>5.70% 4.49% 8.42% (5.54%) 9.48% 6.68%*<F20>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 2,684 2,626 2,766 2,799 4,367 6,376 3,223
Ratio of expenses (after reimbursement)
to average net assets***<F22> 0.90%**<F21> 0.90% 0.90% 0.91% 0.86% 0.83% 0.75%**<F21>
Ratio of net investment income
to average net assets****<F23> 5.46%**<F21> 5.45% 5.43% 5.6% 5.4% 5.3% 5.0%**<F21>
Portfolio turnover rate 0.0% 25.3% 28.6% 0.0% 19.6% 6.3% --
</TABLE>
+<F19> Commencement of Operations.
*<F20> Not Annualized.
**<F21> Annualized.
***<F22> 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%**<F21>, 2.3%, 2.2%, 2.0%, 1.5% and 1.5% for the six months ending
March 31, 1998 and for the years ended September 30, 1997, 1996, 1995, 1994
and 1993, respectively, and 2.8%**<F21> for the period ended September 30, 1992.
****<F23>The ratio of net investment income prior to adviser's expense
limitation undertaking to average net assets for the six months ending March
31, 1998 and for the years ended September 30, 1997, 1996, 1995, 1994 and 1993
and the period ended September 30, 1992 would have been 3.95%**<F21>, 4.0%,
4.1%, 4.5%, 4.8%, 4.6% and 2.9%**<F21>, respectively.
The accompanying notes to financial statements are an integral
part of this statement.
Reynolds Money Market Fund
STATEMENT OF NET ASSETS
March 31, 1998 (Unaudited)
- --------------------------
PRINCIPAL
AMOUNT RATING VALUE
-------- ------ -----
COMMERCIAL PAPER -- 51.8% (A)<F24>
$155,000 Texaco Inc., 5.38%, 04/03/98 A1P1 $ 154,953
140,000 Merrill Lynch & Co., Inc., 5.46%, 04/09/98 A1+P1 139,830
130,000 The CIT Group Holdings, Inc., 5.65%, 04/14/98 A1P1 129,734
140,000 Beneficial Corp., 5.65%, 04/15/98 A1P1 139,692
155,000 IBM Credit Corporation, 5.38%,04/15/98 A1P1 154,675
150,000 American General Finance Corporation,
5.46%, 04/28/98 A1P1 149,386
150,000 General Motors Acceptance Corp., 5.46%, 04/28/98 A1P1 149,386
140,000 General Electric Capital Corp., 5.52%, 05/04/98 A1+P1 139,292
155,000 John Deere Capital Corporation, 5.38%, 05/14/98 A1P1 154,004
155,000 Norwest Financial, Inc., 5.35%, 05/14/98 A1+P1 154,009
140,000 Prudential Funding Corp., 5.51%, 05/14/98 A1P1 139,079
155,000 Associates Corporation, 5.46%, 05/15/98 A1+P1 153,966
160,000 American Express Credit Corp., 5.42%, 05/19/98 A1P1 158,844
200,000 Chevron USA Inc., 5.46%, 06/12/98 A1+P1 197,816
---------
Total commercial paper 2,114,666
FEDERAL AGENCIES -- 29.0% (A)<F24>
300,000 Federal Home Loan Banks, 5.17%, due 07/07/1998 295,821
300,000 Federal National Mortgage Association, 5.28%, 07/13/9 295,468
300,000 Federal National Mortgage Association, 5.25%, 07/14/9 295,450
300,000 Federal National Mortgage Association, 5.32%, 07/28/98 294,769
---------
Total federal agencies 1,181,508
VARIABLE RATE DEMAND NOTES -- 19.5% (A)<F24>
200,000 General Mills, Inc. A1P1 200,000
200,000 Johnson Controls, Inc. A1P1 200,000
200,000 Pitney Bowes Credit Corp. A1+P1 200,000
194,869 Sara Lee Corp. A1+P1 194,869
---------
Total variable rate demand notes 794,869
---------
Total investments (amortized cost $4,091,043) 4,091,043
Liabilities, less cash and receivables -- (0.3%)(A)<F24> (10,975)
---------
NET ASSETS $4,080,068
---------
---------
Net Asset Value Per Share ($0.01 par
value 500,000,000 shares authorized),
offering and redemption price ($4,080,068
4,080,068 shares outstanding) $ 1.00
---------
---------
(a)<F24> 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
INCOME:
Interest $88,586
--------
EXPENSES:
Professional fees 10,728
Management fees 8,007
Transfer agent fees 6,381
Registration fees 3,689
Printing and postage 2,316
Administrative services 1,601
Custodian fees 809
Other expenses 1,905
--------
Total expenses before reimbursement 35,436
Less expenses assumed by adviser (25,028)
--------
Net expenses 10,408
--------
NET INVESTMENT INCOME 78,178
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $78,178
--------
--------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ending March 31, 1998 (Unaudited) and For the Year
Ended September 30, 1997
- --------------------------------------------------------------------------------
1998 1997
------ ------
OPERATIONS:
Net investment income $ 78,178 $ 149,477
----------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment
income ($0.0244 and $0.0477 per
share, respectively) (78,178) (149,477)
----------- ---------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (4,837,396
and 9,021,337 shares, respectively) 4,837,396 9,021,337
Net asset value of shares issued in
distributions (73,208 and 145,723
shares, respectively) 73,208 145,723
Cost of shares redeemed (3,863,013
and 10,115,042 shares, respectively) (3,863,013) (10,115,042)
----------- ---------
Net increase (decrease) in net assets
derived from Fund share activities. 1,047,591 (947,982)
TOTAL INCREASE (DECREASE) 1,047,591 (947,982)
NET ASSETS AT THE BEGINNING OF THE PERIOD 3,032,477 3,980,459
----------- ---------
NET ASSETS AT THE END OF THE PERIOD $ 4,080,068 $ 3,032,477
----------- ---------
----------- ---------
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>
(Unaudited)
For the Six Months
Ending
March 31, Years Ended September 30,
------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991+<F25>
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <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 $ 1.00
Income from investment
operations:
Net investment income 0.0244 0.0477 0.0477 0.0510 0.0304 0.0255 0.0364 0.0358
Less distributions:
Dividends from net
investment income (0.0244) (0.0477) (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 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 2.5%*<F26> 4.9% 4.9% 5.2% 3.1% 2.6% 3.6% 3.6%*<F26>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's $) 4,080 3,032 3,980 3,743 3,192 6,798 6,166 3,617
Ratio of expenses (after
reimbursement)
to average net
assets***<F28> 0.65%**<F27> 0.65% 0.65% 0.65% 0.63% 0.67% 0.64% 0.61%**<F27>
Ratio of net investment
income to average
net assets****<F29> 4.88%**<F27> 4.77% 4.78% 5.08% 2.84% 2.62% 3.53% 5.43%**<F27>
</TABLE>
+<F25> For the period from January 30, 1991 (commencement of operations) to
September 30, 1991.
*<F26> Not Annualized.
**<F27> Annualized.
***<F28> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratio
would have been 2.21%**<F27>, 2.02%, 1.39%, 1.95%, 1.47%, 1.22% and
1.73% for the six months ending March 31, 1998 and for the years
ended September 30, 1997, 1996, 1995, 1994, 1993 and 1992,
respectively, and 1.85%**<F27> for the period ended September 30, 1991.
****<F29>If the Fund had paid all of its expenses, the ratio would have been
3.32%**<F27>, 3.39%, 4.05%, 3.79%, 2.01%, 2.08% and 2.44% for the
six months ending March 31, 1998 and for the years ended
September 30, 1997, 1996, 1995, 1994, 1993 and 1992, respectively, and
4.18%**<F27> for the period ended September 30, 1991.
The accompanying notes to financial statements are an integral
part of this statement.
Reynolds Funds, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998 (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 fou 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 $16,468, $53,303 and $103,349 of net
capital losses which expire September 30, 2002, 2003 and 2004, respectively.
The Government Bond Fund has $231,244, $19,651 and $2,405 of net capital
losses which expire September 30, 2003, 2004, and 2005, respectively.
(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, 1998,
RCM voluntarily waived $9,978 and $8,007 of the management fees due from
the Government Bond Fund and the Money Market Fund, respectively, under the
agreements. Additionally, RCM assumed $10,058 and $17,021 of other expenses
of the Government Bond Fund and the Money Market Fund, respectively.
In addition to the reimbursement requirement under the management agreements,
RCM has voluntarily reimbursed the Government Bond Fund and the Money Market
Fund for expenses over 0.90% and 0.65% of the daily net assets of the Funds',
respectively. These voluntary reimbursements to the Government Bond Fund and
the Money Market Fund may be modified or discontinued at any time by RCM.
The Funds have administrative agreements with Fiduciary Management, Inc.
("FMI"), with whom certain officers of the Funds are affiliated, to supervise
all aspects of the Funds' operations except those performed by RCM pursuant
to the management agreements. Under the terms of the agreements, the Blue Chip
Fund and the Opportunity Fund will pay FMI a monthly administrative fee at the
annual rate of 0.2% of such Funds' daily net assets up to and including
$30,000,000 and 0.1% of such Funds' daily net assets in excess of $30,000,000;
and the Government Bond Fund and the Money Market Fund will pay FMI a monthly
administrative fee at the annual rate of 0.1% of such Funds' daily net assets.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed to
shareholders. The Blue Chip Fund declared a distribution of $15,315 from
net investment income ($0.008 per share) and $252,692 from net long-term
realized gains ($0.132 per share) on December 29, 1997. The distributions
were paid on December 30, 1997, to shareholders of record on December 26,
1997. 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) INVESTMENT TRANSACTIONS --
For the six months ending March 31, 1998, purchases and proceeds of sales of
investment securities of the Blue Chip Fund (excluding short-term securities)
were $10,832,399 and $11,676,571, respectively; purchases and proceeds of
sales of investment securities of the Opportunity Fund (excluding short-term
securities) were $3,781,654 and $4,997,945, respectively; there were no
purchases or proceeds of sales of investment securities for the Government
Bond Fund.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of March 31, 1998, liabilities of the Funds included the following:
<TABLE>
Blue Chip Money Market Opportunity Government
Fund Fund Fund Bond Fund
<S> ---------- ------------ ---------- -----------
<C> <C> <C> <C>
Payable to brokers for investments purchased $ 382,468 $ - $ - $ -
Payable to RCM for management fees 60,149 -- 20,690 --
Dividends payable -- 14,298 -- 12,148
Other liabilities 24,552 356 29,474 306
</TABLE>
(6) SOURCES OF NET ASSETS --
<TABLE>
As of March 31, 1998, the sources of net assets were as follows:
Blue Chip Money Market Opportunity Government
Fund Fund Fund Bond Fund
<S> ---------- ------------ ---------- -----------
<C> <C> <C> <C>
Fund shares issued and outstanding $30,033,397 $ 4,080,068 $13,926,700 $ 2,943,748
Net unrealized appreciation
(depreciation) on investments 41,409,984 -- 11,329,887 (6,426)
Accumulated net realized gain
(loss) on investments 347,452 -- 272,578 (253,301)
---------- ----------- ---------- ----------
$71,790,833 $ 4,080,068 $25,529,165 $ 2,684,021
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
</TABLE>
Aggregate net unrealized appreciation (depreciation) for the Funds as of
March 31, 1998 consisted of the following:
<TABLE>
Blue Chip Opportunity Government
Fund Fund Bond Fund
<S> ---------- ------------ ----------
<C> <C> <C>
Aggregate gross unrealized appreciation $41,606,606 $11,473,272 $ 16,558
Aggregate gross unrealized depreciation (196,622) (143,385) (22,984)
---------- ---------- ----------
Net unrealized appreciation (depreciation) 41,409,984 11,329,887 (6,426)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
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
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 55402
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
