ANNUAL REPORT
SEPTEMBER 30, 1999
REYNOLDS FUNDS
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
Dear Fellow Shareholders: November 3, 1999
We appreciate your continued confidence in the Reynolds Funds and would like
to welcome our many new shareholders. The Reynolds Blue Chip Growth Fund was
ranked #1 among Growth and Income Funds by Lipper Inc. for the five years ended
September 30, 1999. The Web Site for the Reynolds Funds is
www.reynoldsfunds.com.
We are pleased to introduce a new investment option, the Reynolds Fund. This
Fund is No-Load and is now available for investment. I am the portfolio manager
of this Fund in addition to continuing to manage the four other No-Load Reynolds
Funds. The Reynolds Fund is a general stock fund and is intended to be a core
investment holding. The Fund may own common stocks of all types and sizes and
will mainly invest in common stocks of U.S. headquartered companies. While the
Fund will generally invest in "growth companies", it may also invest in "value
stocks".
The Reynolds Blue Chip Growth and Opportunity Funds had strong appreciation
for the twelve months ended September 30, 1999:
October 1, 1998 through September 30, 1999
+48.6%
REYNOLDS
BLUE CHIP
GROWTH FUND
+60.0%
REYNOLDS
OPPORTUNITY FUND
The Blue Chip and Opportunity Funds also had strong appreciation for the
three years ended September 30, 1999:
Average Annual Total Returns
October 1, 1996 through September 30, 1999
+35.5%
REYNOLDS
BLUE CHIP
GROWTH FUND
+30.8%
REYNOLDS
OPPORTUNITY FUND
The Blue Chip and Opportunity Funds also had strong appreciation for the five
years ended September 30, 1999:
Average Annual Total Returns
October 1, 1994 through September 30, 1999
+31.8%
REYNOLDS
BLUE CHIP
GROWTH FUND
+28.2%
REYNOLDS
OPPORTUNITY FUND
The Blue Chip Fund has received many awards for its recent performance
including:
(1) America Online - Featured on Sage Online - September 8, 1999.
(2) American Association of Individual Investor's Magazine - featured in the
May, 1999 issue.
(3) CNBC - Featured on October 22, 1999.
(4) Investor's Business Daily - The Blue Chip Fund has received an A+ ranking
from Investor's Business Daily. Investor's Business Daily ranks mutual
funds on the basis of a moving 36-month performance. The top 5% of all
mutual funds receive an A+ ranking. Investor's Business Daily considered
4,929 mutual funds for the three years ended September 30, 1999 in
determining this ranking.
(5) Lipper Inc. - #1 ranking out of 347 Growth & Income funds for the five
years ended September 30, 1999, ranked #2 out of 537 funds for the three
years ended September 30, 1999 and ranked #2 out of 150 funds for the ten
years ended September 30, 1999, and ranked #5 out of 859 funds for the
one year ended September 30, 1999.
(6) Mutual Funds Magazine - Chosen as the #1 growth mutual fund for 2000 in
the December, 1999 edition.
(7) Standard & Poor's The Outlook - Recommended in the July 28, 1999 issue.
THE REYNOLDS BLUE CHIP GROWTH FUND
The Reynolds Blue Chip Growth Fund has investments in many of the premier
larger worldwide growth companies. These companies have proven management,
strong financials including low debt and high return on equity, leading research
and development, and dominant worldwide products with good unit growth. In
addition, many of these companies are not significantly affected by economic
fluctuations. The probabilities highly favor that the diversified group of
industry leading companies held in the Blue Chip Fund will remain industry
leaders over the long-term, continue to strongly increase their earnings, and
continue to significantly increase future shareholder wealth.
The Blue Chip Fund's return was +13.1% for the nine months ended September
30, 1999. The Blue Chip Fund's return was +48.6% for the one-year ended
September 30, 1999, +148.9% for the three years ended September 30, 1999 and
+297.8% for the five years ended September 30, 1999. These were average annual
compounded rates of return of +35.5% and +31.8%, respectively. The Blue Chip
Fund's return was +407.5% for the ten years ended September 30, 1999. This was
an average annual compounded rate of return of +17.6%. The Blue Chip Fund
increased +512.3% since inception (August 12, 1988) through September 30, 1999.
This was an average annual compounded rate of return of +17.7%.
The Board of Directors declared a distribution of $0.00526 from net long-term
realized gains on October 27, 1999. This distribution was paid on October 28,
1999 to shareholders of record on October 26, 1999.
THE REYNOLDS OPPORTUNITY FUND
The Reynolds Opportunity Fund generally invests in medium and large size high
quality companies that have proven themselves in the marketplace and are leaders
in their industries. These well-managed companies usually have sales of more
than $500 million and are demonstrating strong earnings growth from proprietary
innovative products.
A long-term investment in the Reynolds Opportunity Fund should be a good
complement to a long-term investment in the new Reynolds Fund and 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 shareholder wealth in the future.
The Reynolds Opportunity Fund increased +20.7% for the nine months ended
September 30, 1999 and +60.0% for the one-year year ended September 30, 1999.
The Opportunity Fund increased +123.8% for the three years ended September 30,
1999 and increased +246.9% for the five years ended September 30, 1999. These
were average annual compounded rates of return of +30.8% and 28.2%,
respectively. The Opportunity Fund increased +250.1% since inception (January
30, 1992) through September 30, 1999. This was an average annual compounded
rate of return of +17.8%.
The Board of Directors declared a distribution of $0.01118 from net long-term
realized gains and $0.09367 from net short-term realized gains on October 27,
1999. These distributions were paid on October 28, 1999 to shareholders of
record on October 26, 1999.
THE REYNOLDS U.S. GOVERNMENT BOND FUND
The Reynolds U.S. Government Bond Fund emphasizes high quality investments in
U.S. Treasury Bonds, Treasury Notes and Treasury Bills of varying maturities.
As of September 30, 1999, the assets were invested approximately 91% in U.S.
Treasury Securities and 9% in high quality cash equivalents.
The Reynolds U.S. Government Bond Fund is designed to satisfy many of the
fixed income objectives of investors. For example, the Bond Fund is actively
managed and is invested in bonds of many different maturities, which reduces the
risk that a large percentage of the bonds in the Fund mature at an inopportune
time for reinvestment. The Bond Fund had a dollar weighted average maturity of
1.6 years on September 30, 1999. 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 U.S. Government Bond Fund's return was +3.2% for the one-year
ended September 30, 1999. The Bond Fund's return was +15.7% for the three years
ended September 30, 1999 and +31.1% for the five years ended September 30, 1999.
These were average annual compounded rates of return of +5.0% and +5.6%,
respectively. The Bond Fund's return was +44.6% since inception (January 30,
1992) through September 30, 1999. This was an average annual compounded rate of
return of +4.9%.
THE REYNOLDS MONEY MARKET FUND
The Reynolds Money Market Fund is designed to provide for investor's short-
term cash management needs. 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). As of September
30, 1999, the assets of the Reynolds Money Market Fund were invested
approximately 78% in high quality commercial paper and 22% in high quality cash
equivalents. As of September 30, 1999, the dollar weighted average days to
maturity of the Money Market Fund was 65 days.
The Reynolds Money Market Fund's yield should vary with the rate of inflation
over the years. Its yield is usually higher than inflation and higher than or
approximately the same as most brokerage-firm sponsored money market funds.
Brokerage-firm sponsored money market 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 short-term bank
accounts. The rates paid by banks are lower because banks typically have higher
overhead.
The Reynolds Money Market Fund's return was +4.5% for the one-year ended
September 30, 1999. The Money Market's return was +15.0% for the three years
ended September 30, 1999 and +26.9% for the five years ended September 30, 1999.
These were average annual compounded rates of returns of +4.8% and +4.9%,
respectively. The Money Market Fund returned +44.3% since inception (January
30, 1991) through September 30, 1999. This was an average annual compounded
rate of return of +4.3%.
ECONOMIC DISCUSSION
THE WORLD ECONOMY
Economic growth has slowed in several regions of the world. However, some of
these economies are beginning to improve and others should improve in the
future. Over the long-term, there are more than 1.5 billion people in the world
who will be experiencing a higher standard of living and using and consuming
many products as capitalism grows and Communism declines in many countries such
as China and Eastern Europe. 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 investment.
Worldwide inflation remains low. There are many reasons for this including:
the current slowdown in worldwide growth; committed central bankers; fiscal
restraint by governments; worldwide competition for products and labor is
keeping costs low; and the collapse of Communism is making economic systems more
efficient. In addition, cost cutting and restructuring is spreading to many
countries, more efficient private-sector operations are replacing inefficient
state-run enterprises, excess capacity exists in many markets and advances in
technology and the internet are helping to improve efficiencies. The Blue Chip
and Opportunity Funds and the new Reynolds Fund are well positioned to
participate in these long-term 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 indicate that the U.S.
economy will continue to have moderate, but not excessive, broad based growth.
Gross Domestic Product (GDP) increased 4.3% in 1998 after increasing 4.5% in
1997. GDP is estimated to increase 4.0% in 1999 and 3.0% in 2000. The U.S.
economy is affected by the strengths and weaknesses of other economies, but not
as much as is sometimes implied in the financial press. For example, exports
are only 14% of U.S. GDP.
U.S. inflation is low relative to the last thirty years due to slowing
worldwide growth and good decisions made by the Federal Reserve. U.S. inflation
increased at a manageable 1.6% rate in 1998 after increasing 2.3% in 1997. U.S.
inflation is estimated to increase 2.1% in 1999 and 2.3% in 2000.
INVESTMENT OUTLOOK
There are many investment positives. Among them are: (1) the current
environment of moderate U.S. economic growth, inflation and interest rates is a
strong positive; (2) U.S. industry is more competitive than at any time in the
past quarter century; (3) U.S. companies are the leaders in the majority of
industries worldwide; (4) the U.S. budget is running a surplus versus a deficit
in the early 1990s; and (5) productivity is increasing.
INFORMATION ABOUT THE REYNOLDS FUNDS
FOR AUTOMATIC CURRENT DAILY NET ASSET VALUES: Call 1-800-773-9665 (1-800-
7REYNOLDS) 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 REYNOLDS MONEY MARKET FUND AND U.S. GOVERNMENT BOND FUND CURRENT ONE AND
SEVEN DAY YIELDS: Call 1-800-773-9665 and press "1" then "2".
FOR SHAREHOLDERS TO AUTOMATICALLY ACCESS THEIR CURRENT ACCOUNT INFORMATION:
Call 1-800-773-9665 (twenty-four hours-a-day, seven days a week) and press "1"
then "3" and enter your 16 digit account number which appears at the top of your
statement.
TO SPEAK TO A FUND REPRESENTATIVE REGARDING QUESTIONS, CURRENT DAILY NET
ASSET VALUES AND CURRENT ACCOUNT INFORMATION: Call 1-800-773-9665 and press "1"
then "0" from 6 A.M. to 5 P.M. (PST).
INFORMATION AVAILABLE ON THE REYNOLDSFUNDS.COM WEB SITE: Most recent
quarterly top ten holdings and industry percentages, current net asset values
(usually available about one hour earlier than by calling the Reynolds Funds 800
number), detailed financial statistics and graphs of past performance.
SHAREHOLDER STATEMENT FREQUENCY: Consolidated statements summarizing all
Reynolds Funds held by a shareholder are sent quarterly. In addition,
individual Fund statements are sent whenever a transaction occurs. These
transactions are: (1) Reynolds Money Market and U.S. Government Bond Fund
statements are sent monthly when each month's accrued dividends are posted; (2)
Reynolds Fund, 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 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 for the Reynolds Funds, if any, is 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 Fund appear under that heading. The Blue Chip Fund has the
symbol Reynlds BC, Reynlds BCG, Rey BC, ReynBlCh, ReynBluCh or Blue Chip. The
Opportunity Fund has the symbol Reynlds Op, Reynlds Opport or Opportunity. The
new Reynolds Fund and the U.S. Government Bond Fund will be listed in newspapers
once they have either $25 million of net assets or 1,000 shareholders.
NASDAQ SYMBOLS: Reynolds Blue Chip Growth Fund - RBCGX, Reynolds Opportunity
Fund - ROPPX, Reynolds U.S. Government Bond Fund - RUSGX, Reynolds Money Market
Fund - REYXX, Reynolds Fund - no symbol yet.
MINIMUM INVESTMENT: $1,000 for regular and retirement accounts. ($100 for
additional investments for all accounts - 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
Roth IRA, Education IRA, SIMPLE IRA Plan, 401k, SEPIRA, 403b and Keogh Plans.
AUTOMATIC INVESTMENT PLAN: There is no charge to automatically debit your
checking account or your account in any of the Reynolds Funds at periodic
intervals to make automatic purchases in any of the Reynolds Funds. This is
useful for dollar cost averaging.
SYSTEMATIC WITHDRAWAL PLAN: For shareholders with a $10,000 minimum starting
balance, there is no charge to automatically redeem shares ($100 minimum) in any
of the Reynolds Funds as often as monthly and send a check to you or wire to
your bank account.
EXCHANGES OR REGULAR REDEMPTIONS: As often as desired - no charge.
PORTFOLIO MANAGER: Frederick Reynolds is the portfolio manager of each of the
Reynolds Funds.
THE REYNOLDS FUNDS ARE NO-LOAD: No front-end sales commissions or redemption
fees "loads" are charged. Over 40% of all mutual funds impose these marketing
charges that are ultimately paid by the shareholder. These marketing charges
are either: (1) a front-end fee or "load" in which up to 5% 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 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
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Blue Chip Growth Fund's performance was positively affected in the fiscal
year ended September 30, 1999 by the strong earnings growth of many of the
stocks in its portfolio and by the market leadership of high quality growth
companies. Throughout the fiscal year ended September 30, 1999 much of the
gains in the equity markets were attributable to a relatively small group of
larger capitalization growth companies. Many of these stocks were held by the
Blue Chip Growth Fund as its principal investment strategy is to invest in "blue
chip" companies like these market leaders. The Blue Chip Growth Fund was also
positively affected by the continuing economic recovery which positively
influenced equity markets during the fiscal year.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
REYNOLDS BLUE CHIP GROWTH FUND AND S&P 500 INDEX(1)<F1>
DATE REYNOLDS BLUE CHIP GROWTH FUND S&P 500 INDEX
9/30/89 $10,000 $10,000
9/30/90 $9,500 $9,070
9/30/91 $12,056 $11,918
9/30/92 $13,020 $13,241
9/30/93 $12,434 $14,962
9/30/94 $12,757 $15,501
9/30/95 $17,261 $20,120
9/30/96 $20,385 $24,225
9/30/97 $29,191 $34,084
9/30/98 $34,145 $37,203
9/30/99 $50,726 $47,545
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 5-YEAR 10-YEAR
------ ------ -------
48.6% 31.8% 17.6%
(1)<F1> The Standard & Poor's 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The
Standard & Poor's Ratings Group designates the stocks to be included
in the Index on a statistical basis. A particular stock's weighting
in the Index is based on its relative total market value (i.e., its
market price per share times the number of shares outstanding).
Stocks may be added or deleted from the Index from time to time.
Reynolds Blue Chip Growth Fund
STATEMENT OF NET ASSETS
September 30, 1999
QUOTED
SHARES MARKET VALUE
------ ------------
LONG-TERM INVESTMENTS -- 97.2% (A)<F3>
COMMON STOCKS -- 97.2% (A)<F3>
AIRLINES/AEROSPACE -- 0.9%
2,000 AlliedSignal Inc. $ 119,875
12,000 AMR Corp.*<F2> 654,000
16,000 Boeing Co. 682,000
12,500 Delta Air Lines, Inc. 606,250
2,000 General Motors Corp. Cl H*<F2> 114,500
10,500 UAL Corp.*<F2> 685,781
11,000 United Technologies Corp. 652,438
------------
3,514,844
AUTOMOTIVE -- 0.1%
2,000 Federal-Mogul Corp. 55,125
6,500 General Motors Corp. 409,094
------------
464,219
BANKS -- 1.1%
16,526 Bank of America Corp. 920,292
48,375 Citigroup Inc. 2,128,500
7,500 J.P. Morgan & Co. Inc. 856,875
11,000 Wells Fargo Co. 435,875
------------
4,341,542
BEVERAGES -- 2.6%
16,000 Anheuser-Busch Companies, Inc. 1,121,000
115,000 The Coca-Cola Co. 5,527,187
107,000 PepsiCo, Inc. 3,236,750
------------
9,884,937
BIOTECHNOLOGY -- 0.7%
21,000 Amgen Inc.*<F2> 1,711,500
12,000 Biogen, Inc.*<F2> 945,750
2,000 Human Genome Sciences, Inc.*<F2> 147,500
------------
2,804,750
BUILDING -- 1.6%
76,500 The Home Depot, Inc. 5,249,812
23,000 Lowe's Companies, Inc. 1,121,250
------------
6,371,062
CABLE TV/BROADCASTING -- 0.3%
2,000 Clear Channel
Communications, Inc.*<F2> 159,750
13,000 Cox Communications, Inc.*<F2> 542,750
4,000 General Instrument Corp.*<F2> 192,500
2,000 Jones Intercable Inc. Cl A*<F2> 108,125
------------
1,003,125
CHEMICALS -- 0.5%
2,000 Dow Chemical Co. 227,250
4,000 E.I. du Pont de Nemours & Co. 243,500
9,500 Minnesota Mining &
Manufacturing Co. 912,594
8,000 Waters Corp.*<F2> 484,500
------------
1,867,844
COMPUTER NETWORKING -- 4.8%
53,000 3Com Corp.*<F2> 1,523,750
223,500 Cisco Systems Inc.*<F2> 15,323,719
8,000 Citrix Systems, Inc.*<F2> 495,500
31,000 Legato Systems, Inc.*<F2> 1,351,404
------------
18,694,373
COMPUTER & PERIPHERALS -- 10.0%
16,000 Apple Computer, Inc.*<F2> 1,013,000
109,500 Compaq Computer Corp. 2,511,656
145,000 Dell Computer Corp.*<F2> 6,062,812
4,000 Electronics for Imaging, Inc.*<F2> 205,625
61,000 EMC Corp. (Mass.)*<F2> 4,357,688
45,000 Gateway, Inc.*<F2> 1,999,688
57,500 Hewlett-Packard Co. 5,290,000
77,000 International Business
Machines Corp. 9,345,875
7,000 Iomega Corp.*<F2> 23,625
14,000 Lexmark International
Group, Inc.*<F2> 1,127,000
5,000 Network Appliance, Inc.*<F2> 358,125
70,000 Sun Microsystems, Inc.*<F2> 6,510,000
------------
38,805,094
COMPUTER SOFTWARE & SERVICES -- 6.7%
5,500 Adobe Systems Inc. 624,250
21,000 Automatic Data Processing, Inc. 937,125
6,000 BMC Software, Inc.*<F2> 429,375
35,625 Computer Associates
International, Inc. 2,182,031
16,000 Computer Sciences Corp.*<F2> 1,125,000
500 Fiserv, Inc.*<F2> 16,250
7,000 Intuit Inc.*<F2> 613,593
159,000 Microsoft Corp.*<F2> 14,399,437
10,000 Networks Associates, Inc.*<F2> 191,250
59,716 Oracle Corp.*<F2> 2,717,078
21,000 PeopleSoft, Inc.*<F2> 355,688
500 Red Hat, Inc.*<F2> 48,000
8,000 SAP AG ADR 302,000
15,000 Siebel Systems, Inc.*<F2> 999,375
13,000 VERITAS Software Corp.*<F2> 987,188
------------
25,927,640
DRUGS -- 8.2%
54,200 Bristol-Myers Squibb Co. 3,658,500
48,000 Eli Lilly & Co. 3,072,000
118,200 Merck & Co., Inc. 7,660,838
216,500 Pfizer Inc. 7,780,469
104,000 Schering-Plough Corp. 4,537,000
77,393 Warner-Lambert Co. 5,136,960
------------
31,845,767
ELECTRICAL EQUIPMENT -- 1.4%
5,000 Emerson Electric Co. 315,938
40,500 General Electric Co. 4,801,781
2,000 Hitachi Ltd. ADR 218,250
------------
5,335,969
ELECTRONICS -- 0.0%
2,000 Solectron Corp.*<F2> 143,625
ENERGY -- 1.9%
14,000 Chevron Corp. 1,242,500
7,000 Cooper Cameron Corp.*<F2> 264,250
8,000 Exxon Corp. 607,500
6,000 Halliburton Co. 246,000
10,500 Mobil Corp. 1,057,875
4,000 Noble Affiliates, Inc. 116,000
5,000 Rowan Companies, Inc.*<F2> 81,250
9,000 Royal Dutch Petroleum Co. ADR 531,562
37,000 Schlumberger Ltd. 2,305,563
14,000 Smith International, Inc.*<F2> 567,000
5,000 Texaco Inc. 315,625
2,000 Tidewater Inc. 51,000
4,000 Transocean Offshore Inc. 122,500
------------
7,508,625
ENTERTAINMENT/MEDIA -- 1.8%
127,147 Walt Disney Co. 3,289,929
7,000 Sony Corp. ADR 1,050,437
38,000 Time Warner Inc. 2,308,500
2,000 Univision Communications Inc.*<F2> 162,750
------------
6,811,616
FINANCIAL SERVICES -- 2.8%
29,000 American Express Co. 3,904,125
14,500 AmeriTrade Holding Corp.*<F2> 266,437
7,500 Donaldson, Lufkin &
Jenrette, Inc.-DLJ 296,719
5,000 DST Systems, Inc.*<F2> 284,375
22,000 E*TRADE Group, Inc.*<F2> 517,000
6,000 Equifax Inc. 168,750
6,000 Fair, Isaac and Co., Inc. 168,375
7,000 Fannie Mae 438,812
5,000 First Data Corp. 219,375
1,000 The Goldman Sachs Group, Inc. 61,000
2,500 Knight/Trimark Group, Inc.*<F2> 74,063
13,500 Merrill Lynch & Co., Inc. 907,031
10,500 Morgan Stanley Dean
Witter & Co. 936,469
63,000 Charles Schwab Corp. 2,122,313
5,000 State Street Corp. 323,125
------------
10,687,969
FOODS -- 1.1%
8,000 Campbell Soup Co. 313,000
15,000 General Mills, Inc. 1,216,875
2,000 H.J. Heinz Co. 86,000
18,000 Kellogg Co. 673,875
36,000 Philip Morris Companies Inc. 1,230,750
8,000 Quaker Oats Co. 495,000
2,000 Sara Lee Corp. 46,875
4,000 Wm. Wrigley Jr. Co. 275,250
------------
4,337,625
GROCERY STORES -- 0.4%
6,000 Albertson's, Inc. 237,375
28,000 The Kroger Co.*<F2> 617,750
14,000 Safeway Inc.*<F2> 532,875
2,000 Whole Foods Market, Inc.*<F2> 65,437
------------
1,453,437
HOUSEHOLD PRODUCTS -- 3.8%
47,000 American Home Products Corp. 1,950,500
21,000 Clorox Co. 803,250
103,000 Colgate-Palmolive Co. 4,712,250
56,000 Gillette Co. 1,900,500
56,000 Procter & Gamble Co. 5,250,000
------------
14,616,500
INSURANCE -- 0.9%
40,671 American International
Group, Inc. 3,535,835
1 Berkshire Hathaway Inc. Cl A*<F2> 55,000
22 Berkshire Hathaway Inc. Cl B*<F2> 40,832
------------
3,631,667
INTERNET -- 13.3%
44,000 Amazon.com, Inc.*<F2> 3,517,250
164,300 America Online Inc.*<F2> 17,087,200
1,000 Ask Jeeves, Inc.*<F2> 34,500
82,382 At Home Corp. - Series A*<F2> 3,413,704
5,500 Broadcom Corp.*<F2> 599,500
3,000 CDnow, Inc.*<F2> 37,312
23,000 CMGI Inc.*<F2> 2,357,500
14,000 CNET, Inc.*<F2> 784,000
1,500 Critical Path, Inc.*<F2> 60,516
22,500 DoubleClick Inc.*<F2> 2,680,312
1,000 drkoop.com, Inc.*<F2> 14,187
15,500 EarthLink Network, Inc.*<F2> 665,531
3,000 EarthWeb Inc.*<F2> 118,500
17,000 eBay Inc.*<F2> 2,398,062
1,000 eToys Inc.*<F2> 66,562
4,000 Exodus Communications, Inc.*<F2> 288,250
9,500 Go2Net, Inc.*<F2> 615,125
15,500 Infoseek Corp.*<F2> 478,563
10,000 Inktomi Corp.*<F2> 1,200,312
4,000 iVillage Inc.*<F2> 141,000
71,000 Lycos, Inc.*<F2> 3,558,875
4,000 Marimba, Inc.*<F2> 119,500
2,000 MarketWatch.com, Inc.*<F2> 94,500
13,000 MindSpring Enterprises, Inc.*<F2> 359,938
1,000 Net2Phone, Inc.*<F2> 52,125
2,000 Network Solutions, Inc.*<F2> 183,750
2,000 ONSALE, Inc.*<F2> 27,250
1,500 Priceline.com Inc.*<F2> 96,750
5,000 PSINet Inc.*<F2> 179,844
1,000 Razorfish Inc.*<F2> 43,500
9,500 RealNetworks, Inc.*<F2> 993,344
1,500 Redback Networks, Inc.*<F2> 162,000
1,000 Stamps.com Inc.*<F2> 34,750
2,000 theglobe.com, inc.*<F2> 27,375
1,000 uBid, Inc.*<F2> 26,375
8,000 USWeb Corp.*<F2> 274,500
23,000 Verio Inc.*<F2> 713,000
3,000 VeriSign, Inc.*<F2> 319,500
11,000 VerticalNet, Inc.*<F2> 407,000
1,000 Xoom.com, Inc.*<F2> 49,625
39,133 Yahoo! Inc.*<F2> 7,024,374
------------
51,305,761
MACHINERY -- 0.1%
4,000 Caterpillar Inc. 219,250
MEDICAL SERVICES -- 0.3%
2,500 Cardinal Health, Inc. 136,250
1,000 Express Scripts, Inc.*<F2> 78,250
3,500 Healtheon Corp.*<F2> 129,500
2,000 KeraVision, Inc.*<F2> 26,000
17,370 McKesson HBOC, Inc. 503,730
25,500 Oxford Health Plans Inc.*<F2> 318,750
1,500 Shared Medical Systems Corp. 70,125
------------
1,262,605
MEDICAL SUPPLIES -- 3.0%
86,000 Abbott Laboratories 3,160,500
16,000 Boston Scientific Corp.*<F2> 395,000
9,000 Guidant Corp. 482,625
79,500 Johnson & Johnson 7,304,062
11,000 Medtronic, Inc. 390,500
------------
11,732,687
OFFICE EQUIPMENT & SUPPLIES -- 0.5%
51,000 Office Depot, Inc.*<F2> 519,562
5,000 Pitney Bowes Inc. 304,688
20,500 Staples, Inc.*<F2> 447,156
11,000 Xerox Corp. 461,313
------------
1,732,719
PAPER & FOREST PRODUCTS -- 0.5%
27,000 Georgia-Pacific Group 1,093,500
4,000 International Paper Co. 192,250
2,000 Kimberly-Clark Corp. 105,000
7,000 Weyerhaeuser Co. 403,375
------------
1,794,125
PUBLISHING -- 0.4%
11,000 Gannett Co., Inc. 761,062
2,000 The McGraw-Hill Companies, Inc. 96,750
2,000 Reuters Group PLC ADR 137,750
14,000 Tribune Co. 696,500
------------
1,692,062
RESTAURANTS -- 1.2%
89,000 McDonald's Corp. 3,827,000
17,000 Tricon Global Restaurants, Inc.*<F2> 695,937
------------
4,522,937
RETAIL-SPECIALTY -- 1.6%
4,000 Barnes & Noble, Inc.*<F2> 104,000
7,000 Bed Bath & Beyond Inc.*<F2> 244,562
50,000 Best Buy Co., Inc.*<F2> 3,103,125
2,000 Borders Group, Inc.*<F2> 29,375
13,000 Circuit City Stores-Circuit
City Group 548,438
4,000 Jones Apparel Group, Inc.*<F2> 115,000
5,000 Linens 'n Things, Inc.*<F2> 168,750
12,000 NIKE, Inc. Cl B 682,500
4,000 PC Connection, Inc.*<F2> 60,000
14,000 Rite Aid Corp. 193,375
15,000 Starbucks Corp.*<F2> 371,718
9,000 Tommy Hilfiger Corp.*<F2> 253,687
17,000 Walgreen Co. 431,375
------------
6,305,905
RETAIL STORES -- 5.4%
41,500 Costco Wholesale Corp.*<F2> 2,988,000
54,000 Dayton Hudson Corp. 3,243,375
97,625 Gap, Inc. 3,124,000
27,000 Kohl's Corp.*<F2> 1,785,375
57,000 Nordstrom, Inc. 1,539,000
175,000 Wal-Mart Stores, Inc. 8,323,438
------------
21,003,188
SEMICONDUCTORS -- 6.6%
32,000 Altera Corp.*<F2> 1,388,000
2,000 Atmel Corp.*<F2> 67,625
7,000 Cypress Semiconductor Corp.*<F2> 150,500
172,440 Intel Corp. 12,814,448
2,000 Lattice Semiconductor Corp.*<F2> 59,375
4,000 Linear Technology Corp. 235,125
21,000 LSI Logic Corp.*<F2> 1,081,500
2,000 Maxim Integrated Products Inc.*<F2> 126,187
8,000 Micron Technology, Inc.*<F2> 532,500
1,000 Rambus Inc.*<F2> 66,250
84,000 Texas Instruments Inc. 6,909,000
4,000 Vitesse Semiconductor Corp.*<F2> 341,500
24,000 Xilinx, Inc.*<F2> 1,572,749
------------
25,344,759
SEMICONDUCTOR CAPITAL SPENDING -- 1.6%
43,000 Applied Materials, Inc.*<F2> 3,340,562
14,500 KLA-Tencor Corp.*<F2> 942,500
12,000 Novellus Systems, Inc.*<F2> 809,250
2,500 Sanmina Corp.*<F2> 193,438
22,000 Teradyne, Inc.*<F2> 775,500
------------
6,061,250
SERVICES -- 0.2%
16,000 FDX Corp.*<F2> 620,000
1,000 Omnicom Group Inc. 79,188
------------
699,188
TELECOMMUNICATIONS -- 8.7%
13,000 CIENA Corp.*<F2> 474,500
2,000 EchoStar Communications Corp.*<F2> 181,625
9,000 L.M. Ericsson Telephone Co. ADR 281,250
94,750 Lucent Technologies Inc. 6,146,906
63,000 Motorola, Inc. 5,544,000
20,000 Nextel Communications, Inc.*<F2> 1,356,250
87,000 Nokia Corp. "A" ADR 7,813,687
58,000 Nortel Networks Corp. 2,958,000
16,000 QUALCOMM Inc.*<F2> 3,027,000
15,000 Qwest Communications
International, Inc.*<F2> 443,438
3,000 Telefonos de Mexico, S.A. 213,750
68,000 Tellabs, Inc.*<F2> 3,871,750
6,500 Vodafone AirTouch
PLC SP ADR 1,545,375
------------
33,857,531
TELEPHONE SERVICES -- 2.2%
2,000 Ameritech Corp. 134,375
36,250 AT&T Corp. 1,576,875
4,000 Bell Atlantic Corp. 269,250
4,000 BellSouth Corp. 180,000
2,000 GTE Corp. 153,750
45,000 MCI WorldCom Inc.*<F2> 3,234,375
5,000 SBC Communications Inc. 255,313
40,000 Sprint Corp. 2,170,000
6,000 Sprint Corp. (PCS Group)*<F2> 447,375
------------
8,421,313
------------
Total common stocks
(cost $276,777,846) 376,007,510
PREFERRED STOCKS -- 0.0% (A)<F3>
3,000 Motorola Capital Trust
6.68% Pfd. Ser A 63,937
------------
Total preferred stocks
(cost $75,000) 63,937
------------
Total long-term investments
(cost $276,852,846) 376,071,447
PRINCIPAL AMOUNT
- ----------------
SHORT-TERM INVESTMENTS -- 1.6% (A)<F3>
VARIABLE RATE DEMAND NOTES
$4,866,759 Firstar Bank U.S.A., N.A. 4,866,759
1,174,466 Wisconsin Corporate Central
Credit Union 1,174,466
------------
Total short-term investments
(cost $6,041,225) 6,041,225
------------
Total investments
(cost $282,894,071) 382,112,672
Cash and receivables, less
liabilities -- 1.2% (A)<F3> 4,838,243
------------
NET ASSETS $386,950,915
------------
------------
Net Asset Value Per Share
($0.01 par value, 40,000,000
shares authorized), offering
and redemption price
($386,950,915 / 7,168,982
shares outstanding) $ 53.98
------------
------------
*<F2> Non-income producing security.
(a)<F3> Percentages for the various classifications relate to net assets.
ADR - American Depository Receipt
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Blue Chip Growth Fund
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
INCOME:
Dividends $ 1,525,980
Interest 765,904
-----------
Total income 2,291,884
-----------
EXPENSES:
Management fee 2,778,271
Distribution fees 469,775
Administrative services 307,827
Registration fees 137,097
Transfer agent fees 106,068
Custodian fees 102,171
Printing and postage expense 52,905
Professional fees 46,112
Board of Directors fees 2,500
Other expenses 25,547
-----------
Total expenses 4,028,273
-----------
NET INVESTMENT LOSS (1,736,389)
-----------
NET REALIZED GAIN ON INVESTMENTS 1,586,354
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 60,282,375
-----------
NET GAIN ON INVESTMENTS 61,868,729
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $60,132,340
-----------
-----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1999 and 1998
1999 1998
------------ -----------
OPERATIONS:
Net investment loss $ (1,736,389) $ (323,508)
Net realized gain on investments 1,586,354 2,116,406
Net increase in unrealized appreciation
on investments 60,282,375 7,045,499
------------ -----------
Net increase in net assets resulting
from operations 60,132,340 8,838,397
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividend from net investment income
($0.008 per share) -- (15,315)
Distributions from net realized gains
($0.6495 and $0.3781 per share,
respectively) (1,651,594) (722,590)
------------ -----------
Total distributions (1,651,594)*<F5> (737,905)
------------ -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (7,038,893
and 1,609,369 shares, respectively) 357,704,329 61,280,880
Net asset value of shares issued in
distributions (38,410 and 23,530 shares,
respectively) 1,473,014 699,554
Cost of shares redeemed (2,331,430 and
1,156,569 shares, respectively) (120,240,381) (42,842,077)
------------ -----------
Net increase in net assets derived from
Fund share activities 238,936,962 19,138,357
------------ -----------
TOTAL INCREASE 297,417,708 27,238,849
NET ASSETS AT THE BEGINNING OF THE YEAR 89,533,207 62,294,358
------------ -----------
NET ASSETS AT THE END OF THE YEAR $386,950,915 $89,533,207
------------ -----------
------------ -----------
*<F5> See Note 7.
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 year)
<TABLE> YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of year $36.95 $32.00 $22.69 $19.25 $14.46
Income from investment operations:
Net investment (loss) income (0.33)*<F6> (0.12) (0.01) (0.03) 0.02
Net realized and unrealized gain on investments 18.01 5.46 9.67 3.52 5.00
------ ------ ------ ------ ------
Total from investment operations 17.68 5.34 9.66 3.49 5.02
Less distributions:
Dividends from net investment income -- (0.01) -- (0.02) (0.06)
Distributions from net realized gains (0.65) (0.38) (0.35) (0.03) (0.17)
------ ------ ------ ------ ------
Total from distributions (0.65) (0.39) (0.35) (0.05) (0.23)
------ ------ ------ ------ ------
Net asset value, end of year $53.98 $36.95 $32.00 $22.69 $19.25
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 48.6% 17.0% 43.2% 18.1% 35.3%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 386,951 89,533 62,294 30,807 29,357
Ratio of expenses to average net assets 1.5% 1.4% 1.4% 1.5% 1.5%
Ratio of net investment (loss) income to average net assets (0.6%) (0.4%) (0.1%) (0.1%) 0.1%
Portfolio turnover rate 6.2% 35.5% 25.0% 21.5% 49.2%
</TABLE>
*<F6> Net investment loss per share is calculated using average shares
outstanding.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Opportunity Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Opportunity Fund's performance was positively affected by the strong
earnings growth of many of the stocks in its portfolio in its fiscal year ended
September 30, 1999. The Opportunity Fund was also positively affected by the
market leadership of high quality growth companies. Throughout the fiscal year
ended September 30, 1999 much of the gains in the equity markets were
attributable to a relatively small group of larger capitalization growth
companies. Many of these stocks were held by the Opportunity Fund as one of its
principal investment strategies is to invest in "blue chip" companies like these
market leaders. The Opportunity Fund also invested in stocks of smaller
capitalization companies that during the fiscal year outperformed the market
leaders. In addition, the Opportunity Fund was positively affected by the
continuing economic recovery which positively influenced equity markets during
the fiscal year.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
REYNOLDS OPPORTUNITY FUND AND S&P 500 INDEX(1)<F8>
DATE REYNOLDS OPPORTUNITY FUND S&P 500 INDEX
1/30/92*<F7> $10,000 $10,000
9/30/92 $8,850 $10,270
9/30/93 $9,779 $11,605
9/30/94 $10,092 $12,023
9/30/95 $14,169 $15,606
9/30/96 $15,643 $18,789
9/30/97 $19,491 $26,436
9/30/98 $21,881 $28,855
9/30/99 $35,005 $36,877
*<F7> inception date
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION
1-YEAR 5-YEAR 1/30/92
------ ------ -------
60.0% 28.2% 17.8%
(1)<F8> The Standard & Poor's 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The
Standard & Poor's Ratings Group designates the stocks to be included
in the Index on a statistical basis. A particular stock's weighting
in the Index is based on its relative total market value (i.e., its
market price per share times the number of shares outstanding).
Stocks may be added or deleted from the Index from time to time.
Reynolds Opportunity Fund
STATEMENT OF NET ASSETS
September 30, 1999
QUOTED
SHARES MARKET VALUE
------ ------------
COMMON STOCKS -- 96.7% (A)<F10>
AIRLINES/AEROSPACE -- 0.0%
1,000 Boeing Co. $ 42,625
BANKS -- 0.2%
2,025 Bank One Corp. 70,495
3,500 Citigroup Inc. 154,000
-----------
224,495
BEVERAGES -- 1.3%
19,500 The Coca-Cola Co. 937,219
11,000 PepsiCo, Inc. 332,750
-----------
1,269,969
BIOTECHNOLOGY -- 0.8%
5,000 Amgen Inc.*<F9> 407,500
3,000 Biogen, Inc.*<F9> 236,437
2,000 Immunex Corp.*<F9> 86,750
-----------
730,687
BUILDING -- 1.5%
20,598 The Home Depot, Inc. 1,413,538
1,000 Lowe's Companies, Inc. 48,750
-----------
1,462,288
CABLE TV/BROADCASTING -- 0.2%
2,400 Clear Channel
Communications, Inc.*<F9> 191,700
COMPUTER NETWORKING -- 6.6%
9,995 3Com Corp.*<F9> 287,356
84,300 Cisco Systems Inc.*<F9> 5,779,819
2,000 Citrix Systems, Inc.*<F9> 123,875
5,000 Legato Systems, Inc.*<F9> 217,969
-----------
6,409,019
COMPUTER & PERIPHERALS -- 11.8%
1,000 Apple Computer, Inc.*<F9> 63,312
10,500 Compaq Computer Corp. 240,844
71,200 Dell Computer Corp.*<F9> 2,977,050
20,000 EMC Corp. (Mass.)*<F9> 1,428,750
21,000 Gateway, Inc.*<F9> 933,187
5,300 Hewlett-Packard Co. 487,600
14,900 International Business
Machines Corp. 1,808,488
10,800 Iomega Corp.*<F9> 36,450
37,600 Sun Microsystems, Inc.*<F9> 3,496,800
-----------
11,472,481
COMPUTER SOFTWARE & SERVICES -- 9.9%
1,000 Adobe Systems Inc. 113,500
3,000 BMC Software, Inc.*<F9> 214,687
8,187 Computer Associates
International, Inc. 501,454
2,000 Computer Sciences Corp.*<F9> 140,625
2,400 Compuware Corp.*<F9> 62,550
7,500 Intuit Inc.*<F9> 657,421
65,500 Microsoft Corp.*<F9> 5,931,844
5,000 Networks Associates, Inc.*<F9> 95,625
20,587 Oracle Corp.*<F9> 936,709
2,000 Parametric Technology Corp.*<F9> 27,000
11,600 PeopleSoft, Inc.*<F9> 196,475
4,000 Siebel Systems, Inc.*<F9> 266,500
7,000 VERITAS Software Corp.*<F9> 531,562
-----------
9,675,952
DRUGS -- 7.5%
9,000 Bristol-Myers Squibb Co. 607,500
16,000 Eli Lilly & Co. 1,024,000
30,044 Merck & Co., Inc. 1,947,227
50,000 Pfizer Inc. 1,796,875
21,000 Schering-Plough Corp. 916,125
15,200 Warner-Lambert Co. 1,008,900
-----------
7,300,627
ELECTRICAL EQUIPMENT -- 0.6%
5,000 General Electric Co. 592,812
ENERGY -- 0.8%
1,500 Halliburton Co. 61,500
8,500 Schlumberger Ltd. 529,656
3,500 Smith International, Inc.*<F9> 141,750
-----------
732,906
ENTERTAINMENT/MEDIA -- 1.2%
22,000 Walt Disney Co. 569,250
1,000 Sony Corp. ADR 150,063
7,000 Time Warner Inc. 425,250
-----------
1,144,563
FINANCIAL SERVICES -- 3.5%
10,500 American Express Co. 1,413,562
9,000 AmeriTrade Holding Corp.*<F9> 165,375
9,000 E*TRADE Group, Inc.*<F9> 211,500
900 Franklin Resources, Inc. 27,675
3,000 Knight/Trimark Group, Inc.*<F9> 88,875
3,000 Merrill Lynch & Co., Inc. 201,562
3,000 Morgan Stanley
Dean Witter & Co. 267,563
1,200 T. Rowe Price Associates, Inc. 32,925
27,374 Charles Schwab Corp. 922,162
1,100 Southwest Securities Group, Inc. 29,700
-----------
3,360,899
HOUSEHOLD PRODUCTS -- 2.0%
10,000 American Home Products Corp. 415,000
1,000 Clorox Co. 38,250
16,000 Colgate-Palmolive Co. 732,000
10,000 Gillette Co. 339,375
4,000 Procter & Gamble Co. 375,000
-----------
1,899,625
INSURANCE -- 0.3%
3,906 American International
Group, Inc. 339,578
INTERNET -- 17.8%
2,500 About.com, Inc.*<F9> 141,250
20,000 Amazon.com, Inc.*<F9> 1,598,750
43,850 America Online Inc.*<F9> 4,560,400
1,000 Ask Jeeves, Inc.*<F9> 34,500
31,962 At Home Corp. - Series A*<F9> 1,324,425
1,000 Broadcom Corp.*<F9> 109,000
1,000 China.com Corp.*<F9> 65,000
11,000 CMGI Inc.*<F9> 1,127,500
5,000 CNET, Inc.*<F9> 280,000
1,500 Critical Path, Inc.*<F9> 60,516
6,000 DoubleClick Inc.*<F9> 714,750
7,000 EarthLink Network, Inc.*<F9> 300,562
2,500 EarthWeb Inc.*<F9> 98,750
8,000 eBay Inc.*<F9> 1,128,500
500 Go2Net, Inc.*<F9> 32,375
7,000 Infoseek Corp.*<F9> 216,125
4,000 Inktomi Corp.*<F9> 480,125
1,500 iVillage Inc.*<F9> 52,875
500 Juniper Networks, Inc.*<F9> 91,031
16,000 Lycos, Inc.*<F9> 802,000
2,000 Marimba, Inc.*<F9> 59,750
500 MarketWatch.com, Inc.*<F9> 23,625
8,500 MindSpring Enterprises, Inc.*<F9> 235,344
1,000 Net2Phone, Inc.*<F9> 52,125
1,000 ONSALE, Inc.*<F9> 13,625
1,500 Priceline.com Inc.*<F9> 96,750
2,000 PSINet Inc.*<F9> 71,937
500 RealNetworks, Inc.*<F9> 52,281
1,000 USWeb Corp.*<F9> 34,313
3,000 Verio Inc.*<F9> 93,000
4,500 VeriSign, Inc.*<F9> 479,250
2,000 VerticalNet, Inc.*<F9> 74,000
15,816 Yahoo! Inc.*<F9> 2,838,972
-----------
17,343,406
MEDICAL SERVICES -- 0.2%
3,000 KeraVision, Inc.*<F9> 39,000
3,406 McKesson HBOC, Inc. 98,774
6,000 Oxford Health Plans, Inc.*<F9> 75,000
-----------
212,774
MEDICAL SUPPLIES -- 2.3%
24,000 Abbott Laboratories 882,000
5,698 Boston Scientific Corp.*<F9> 140,669
1,600 Guidant Corp. 85,800
12,676 Johnson & Johnson 1,164,608
-----------
2,273,077
OFFICE EQUIPMENT & SUPPLIES -- 0.3%
2,000 CompUSA Inc.*<F9> 12,250
1,500 Office Depot, Inc.*<F9> 15,281
10,500 Staples, Inc.*<F9> 229,032
-----------
256,563
PAPER & FOREST PRODUCTS -- 0.2%
5,000 Georgia-Pacific Group 202,500
RESTAURANTS -- 0.9%
17,600 McDonald's Corp. 756,800
1,900 Tricon Global Restaurants, Inc.*<F9> 77,781
-----------
834,581
RETAIL-SPECIALTY -- 1.3%
16,000 Best Buy Co., Inc.*<F9> 993,000
3,500 NIKE, Inc. Cl B 199,063
4,000 Rite Aid Corp. 55,250
1,000 Starbucks Corp.*<F9> 24,781
-----------
1,272,094
RETAIL STORES -- 3.5%
10,500 Costco Wholesale Corp.*<F9> 756,000
7,000 Dayton Hudson Corp. 420,438
31,562 Gap, Inc. 1,009,984
3,000 Kohl's Corp.*<F9> 198,375
4,000 Nordstrom, Inc. 108,000
20,000 Wal-Mart Stores, Inc. 951,250
-----------
3,444,047
SEMICONDUCTORS -- 8.9%
10,200 Altera Corp.*<F9> 442,425
51,600 Intel Corp. 3,834,525
1,000 Linear Technology Corp. 58,781
6,500 LSI Logic Corp.*<F9> 334,750
2,600 Maxim Integrated Products Inc.*<F9> 164,044
2,000 Micron Technology, Inc.*<F9> 133,125
500 Rambus Inc.*<F9> 33,125
34,000 Texas Instruments Inc. 2,796,500
1,000 Vitesse Semiconductor Corp.*<F9> 85,375
12,000 Xilinx, Inc.*<F9> 786,374
-----------
8,669,024
SEMICONDUCTOR CAPITAL SPENDING -- 2.0%
10,000 Applied Materials, Inc.*<F9> 776,875
9,600 KLA-Tencor Corp.*<F9> 624,000
2,600 Novellus Systems, Inc.*<F9> 175,338
3,600 Sanmina Corp.*<F9> 278,550
2,000 Teradyne, Inc.*<F9> 70,500
-----------
1,925,263
TELECOMMUNICATIONS -- 9.7%
2,000 EchoStar Communications Corp.*<F9> 181,625
28,950 Lucent Technologies Inc. 1,878,131
21,500 Motorola, Inc. 1,892,000
2,000 Nextel Communications, Inc.*<F9> 135,625
19,000 Nokia Corp. "A" ADR 1,706,437
6,000 Nortel Networks Corp. 306,000
9,500 QUALCOMM Inc.*<F9> 1,797,281
1,000 Qwest Communications
International, Inc.*<F9> 29,563
22,000 Tellabs, Inc.*<F9> 1,252,625
1,000 Vodafone AirTouch PLC SP ADR 237,750
2,000 Westell Technologies, Inc.*<F9> 16,250
-----------
9,433,287
TELEPHONE SERVICES -- 1.4%
4,500 AT&T Corp. 195,750
11,000 MCI WorldCom Inc.*<F9> 790,625
6,000 Sprint Corp. 325,500
1,000 Sprint Corp. (PCS Group)*<F9> 74,563
-----------
1,386,438
-----------
Total long-term investments
(cost $60,622,278) 94,103,280
PRINCIPAL AMOUNT
- ----------------
SHORT-TERM INVESTMENTS -- 2.2% (A)<F10>
VARIABLE RATE DEMAND NOTE
$2,148,411 Firstar Bank U.S.A., N.A. 2,148,411
-----------
Total short-term investments
(cost $2,148,411) 2,148,411
-----------
Total investments
(cost $62,770,689) 96,251,691
Cash and receivables, less
liabilities -- 1.1% (A)<F10> 1,065,306
-----------
NET ASSETS $97,316,997
-----------
-----------
Net Asset Value Per Share
($0.01 par value, 40,000,000
shares authorized), offering
and redemption price
($97,316,997 / 2,842,984
shares outstanding) $34.23
------
------
*<F9> Non-income producing security.
(a)<F10> Percentages for the various classifications relate to net assets.
ADR - American Depository Receipt
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Opportunity Fund
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
INCOME:
Dividends $ 270,578
Interest 52,971
-----------
Total income 323,549
-----------
EXPENSES:
Management fees 718,479
Distribution fees 122,048
Administrative services 101,735
Registration fees 42,014
Transfer agent fees 31,492
Professional fees 30,771
Custodian fees 29,226
Printing and postage expense 9,236
Board of Directors fees 1,850
Other expenses 5,211
-----------
Total expenses 1,092,062
-----------
NET INVESTMENT LOSS (768,513)
-----------
NET REALIZED GAIN ON INVESTMENTS 743,672
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 22,020,669
-----------
NET GAIN ON INVESTMENTS 22,764,341
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $21,995,828
-----------
-----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1999 and 1998
1999 1998
----------- -----------
OPERATIONS:
Net investment loss $ (768,513) $ (198,376)
Net realized gain on investments 743,672 1,014,034
Net increase in unrealized appreciation
on investments 22,020,669 1,850,126
----------- -----------
Net increase in net assets resulting
from operations 21,995,828 2,665,784
----------- -----------
DISTRIBUTION TO SHAREHOLDERS:
Distribution from net realized gains
($0.50355 per share) (689,257)*<F12> --
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (2,618,497 and
490,190 shares, respectively) 83,448,456 10,516,157
Net asset value of shares issued in
distribution (27,402 shares) 610,241 --
Cost of shares redeemed (1,135,443 and
322,195 shares, respectively) (37,202,490) (6,729,286)
----------- -----------
Net increase in net assets derived from
Fund share activities 46,856,207 3,786,871
----------- -----------
TOTAL INCREASE 68,162,778 6,452,655
NET ASSETS AT THE BEGINNING OF THE YEAR 29,154,219 22,701,564
----------- -----------
NET ASSETS AT THE END OF THE YEAR $97,316,997 $29,154,219
----------- -----------
----------- -----------
*<F12> See Note 7.
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 year)
<TABLE>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $21.88 $19.49 $15.64 $14.17 $10.09
Income from investment operations:
Net investment loss (0.34)*<F13> (0.09)*<F13> (0.13) (0.06) (0.11)
Net realized and unrealized gain on securities 13.19 2.48 3.98 1.53 4.19
------ ------ ------ ------ ------
Total from investment operations 12.85 2.39 3.85 1.47 4.08
Less distributions:
Dividend from net investment income -- -- -- -- --
Distribution from net realized gains (0.50) -- -- -- --
------ ------ ------ ------ ------
Total from distributions (0.50) -- -- -- --
------ ------ ------ ------ ------
Net asset value, end of year $34.23 $21.88 $19.49 $15.64 $14.17
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 60.0% 12.3% 24.6% 10.4% 40.4%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 97,317 29,154 22,702 17,104 10,983
Ratio of expenses to average net assets 1.5% 1.5% 1.5% 1.5% 1.9%
Ratio of net investment loss to average net assets (1.1%) (0.8%) (0.9%) (1.1%) (1.5%)
Portfolio turnover rate 30.3% 39.4% 60.2% 11.8% 38.4%
</TABLE>
*<F13> In 1999, net investment loss per share is calculated using average
shares outstanding. In 1998, net investment loss per share is
calculated using ending balances prior to consideration of adjustments
for permanent book and tax differences.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds U.S. Government Bond Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The U.S. Government Bond Fund's short average maturity during a period of
rising interest rates was the main factor contributing to the Bond Fund's
performance in the fiscal year ended September 30, 1999. The Federal Reserve
raised interest rates during the second half of the Fund's fiscal year ended
September 30, 1999 to head off inflationary pressures. The U.S. Government Bond
Fund's portfolio of U.S. Government securities had an average maturity of
approximately two years on September 30, 1999, which was at the low end of its
expected average maturity. Consequently by keeping its average maturity short
the U.S. Government Bond Fund reduced portfolio risk.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
REYNOLDS U.S. GOVERNMENT BOND FUND AND LEHMAN GOVERNMENT BOND INDEX(1)<F15>
REYNOLDS
U.S. GOVERNMENT LEHMAN GOVERNMENT
DATE BOND FUND BOND INDEX
1/30/92*<F14> $10,000 $10,000
9/30/92 $10,668 $10,890
9/30/93 $11,679 $12,088
9/30/94 $11,032 $11,604
9/30/95 $11,961 $13,183
9/30/96 $12,498 $13,763
9/30/97 $13,211 $15,029
9/30/98 $14,014 $17,071
9/30/99 $14,460 $16,781
*<F14> inception date
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION
1-YEAR 5-YEAR 1/30/92
------ ------ -------
3.2% 5.6% 4.9%
(1)<F15> The Lehman Government Bond Index is made up of the Treasury Bond Index
(all public obligations at the U.S. Treasury, excluding flower bonds
and foreign-targeted issues) and the Agency Bond Index (all publicly
issued debt of U.S. Government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. Government).
All issues have at least one year to maturity and an outstanding par
value of at least $100 million.
Reynolds U.S. Government Bond Fund
STATEMENT OF NET ASSETS
September 30, 1999
PRINCIPAL QUOTED
AMOUNT MARKET VALUE
------ ------------
LONG-TERM INVESTMENTS -- 74.4% (A)<F16>
U.S. TREASURY SECURITIES -- 7.5%
$300,000 U.S. Treasury Notes,
8.50%, due 11/15/00
(cost $336,063) $ 309,656
FEDERAL AGENCIES -- 66.9%
500,000 Federal Home Loan Bank,
5.215%, due 05/03/01 494,121
500,000 Federal Home Loan Bank,
5.57%, due 05/25/01 496,578
300,000 Federal Farm Credit,
6.28%, due 06/20/01 301,143
500,000 Federal Home Loan Bank,
5.50%, due 08/13/01 495,287
400,000 Federal Home Loan Bank,
4.66%, due 10/15/01 389,372
300,000 Federal Farm Credit Bank,
6.20%, due 07/01/02 300,122
300,000 Federal Home Loan Bank,
5.37%, due 01/16/03 292,107
----------
Total federal agencies
(cost $2,789,218) 2,768,730
----------
Total long-term investments
(cost $3,125,281) 3,078,386
SHORT-TERM INVESTMENTS -- 24.6% (A)<F16>
U.S. TREASURY SECURITIES -- 7.3%
300,000 U.S. Treasury Notes,
6.00%, due 08/15/00
(cost $299,901) 301,500
FEDERAL AGENCIES -- 9.5%
400,000 Federal Home Loan Bank,
5.40%, due 01/27/00
(cost $392,920) 392,807
VARIABLE RATE DEMAND NOTES -- 7.8%
120,878 Firstar Bank U.S.A., N.A. 120,878
200,100 Wisconsin Corporate
Central Credit Union 200,100
----------
Total variable rate demand notes
(cost $320,978) 320,978
----------
Total short-term investments
(cost $1,013,799) 1,015,285
----------
Total investments
(cost $4,139,080) 4,093,671
Cash and receivables, less
liabilities -- 1.0% (A)<F16> 41,566
----------
NET ASSETS $4,135,237
----------
----------
Net Asset Value Per Share
($0.01 par value, 20,000,000
shares authorized), offering
and redemption price
($4,135,237 / 428,616
shares outstanding) $ 9.65
----------
----------
(a)<F16> Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds U.S. Government Bond Fund
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
INCOME:
Interest $209,096
--------
EXPENSES:
Management fees 27,602
Professional fees 21,415
Transfer agent fees 12,560
Registration fees 5,596
Administrative services 3,680
Printing and postage expense 2,014
Custodian fees 1,112
Board of Directors fees 700
Other expenses 4,420
--------
Total expenses before reimbursement and
management fee waiver 79,099
Less expenses assumed by adviser (45,977)
--------
Net expenses 33,122
--------
NET INVESTMENT INCOME 175,974
--------
NET REALIZED LOSS ON INVESTMENTS (8,750)
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (54,979)
--------
NET LOSS ON INVESTMENTS (63,729)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $112,245
--------
--------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1999 and 1998
1999 1998
---------- ----------
OPERATIONS:
Net investment income $ 175,974 $ 147,987
Net realized loss on investments (8,750) --
Net (decrease) increase in unrealized
appreciation on investments (54,979) 15,938
---------- ----------
Net increase in net assets resulting
from operations 112,245 163,925
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.4651
and $0.5281 per share, respectively) (175,974) (147,987)
---------- ----------
Total distributions (175,974) (147,987)
---------- ----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (172,202 and
71,430 shares, respectively) 1,676,978 697,445
Net asset value of shares issued in distributions
(16,722 and 13,420 shares, respectively) 162,660 131,107
Cost of shares redeemed (73,473 and 40,601
shares, respectively) (714,363) (396,565)
---------- ----------
Net increase in net assets derived from
Fund share activities 1,125,275 431,987
---------- ----------
TOTAL INCREASE 1,061,546 447,925
NET ASSETS AT THE BEGINNING OF THE YEAR 3,073,691 2,625,766
---------- ----------
NET ASSETS AT THE END OF THE YEAR $4,135,237 $3,073,691
---------- ----------
---------- ----------
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 year)
<TABLE>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of year $ 9.81 $ 9.76 $ 9.75 $ 9.85 $ 9.61
Income from investment operations:
Net investment income 0.47 0.53 0.53 0.53 0.54
Net realized and unrealized (loss) gain on investments (0.16) 0.05 0.01 (0.10) 0.24
------ ------ ------ ------ ------
Total from investment operations 0.31 0.58 0.54 0.43 0.78
Less distributions:
Dividends from net investment income (0.47) (0.53) (0.53) (0.53) (0.54)
Distribution from net realized gains -- -- -- -- --
------ ------ ------ ------ ------
Total from distributions (0.47) (0.53) (0.53) (0.53) (0.54)
------ ------ ------ ------ ------
Net asset value, end of year $ 9.65 $ 9.81 $ 9.76 $ 9.75 $ 9.85
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 3.18% 6.08% 5.70% 4.49% 8.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 4,135 3,074 2,626 2,766 2,799
Ratio of expenses (after reimbursement) to
average net assets*<F17> 0.90% 0.90% 0.90% 0.90% 0.91%
Ratio of net investment income to
average net assets**<F18> 4.78% 5.40% 5.45% 5.43% 5.59%
Portfolio turnover rate -- -- 25.28% 28.65% --
</TABLE>
*<F17> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios
would have been 2.15%, 2.37%, 2.33%, 2.24% and 2.02% for the years
ended September 30, 1999, 1998, 1997, 1996 and 1995, respectively.
**<F18> The ratios of net investment income prior to adviser's expense
limitation undertaking to average net assets for the years ended
September 30, 1999, 1998, 1997, 1996 and 1995 would have been 3.53%,
3.93%, 4.02%, 4.09% and 4.48%, respectively.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Money Market Fund
STATEMENT OF NET ASSETS
September 30, 1999
<TABLE>
PRINCIPAL
AMOUNT RATING VALUE
------ ------ -----
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 101.6% (A)<F19>
COMMERCIAL PAPER -- 78.0%
$540,000 Johnson & Johnson, 4.70%, due 10/04/99 A1+P1 $ 539,789
500,000 Ford Motor Credit Corp., 5.04%, due 10/06/99 A1P1 499,650
500,000 Associates Corp. of North America, 4.90%, due 10/08/99 A1+P1 499,524
500,000 General Motors Acceptance Corp., 5.03%, due 10/12/99 A1P1 499,231
550,000 Procter & Gamble Co., 5.02%, due 10/29/99 A1+P1 547,852
515,000 Prudential Funding Corp., 4.94%, due 11/01/99 A1P1 512,809
560,000 Coca Cola Co., 5.03%, due 11/12/99 A1+P1 556,714
500,000 EI duPont de Nemours, 5.03%, due 11/16/99 A1+P1 496,786
500,000 American Home Products, 5.03%, due 11/19/99 A1P1 496,577
700,000 Hewlett Packard, 5.23%, due 11/24/99 A1+P1 694,509
500,000 Motorola Credit Corp., 5.20%, due 11/24/99 A1P1 496,100
300,000 John Deere Capital Corp., 5.18%, due 12/10/99 A1P1 296,979
500,000 American General Corp., 5.60%, due 01/18/00 A1+P1 491,522
300,000 PG&E Corp., 5.68%, due 01/19/00 A1P1 294,793
400,000 Times Mirror, 5.62%, due 01/21/00 A1P1 393,006
500,000 Weyerhaeuser Real Estate, 5.66%, due 01/25/00 A1P1 490,881
750,000 BellSouth Telecommunications, 5.60%, due 01/27/00 A1+P1 736,233
300,000 Fluor Corp., 5.73%, due 01/27/00 A1P1 294,366
600,000 General Electric Capital Corp., 5.72%, due 02/01/00 A1+P1 588,274
400,000 Rockwell International, 5.58%, due 02/01/00 A1P1 392,374
700,000 Norwest Financial, Inc., 5.60%, due 02/04/00 A1P1 686,280
575,000 IBM Credit Corp., 5.71%, due 02/09/00 A1P1 563,053
220,000 Coca Cola Co., 5.60%, due 02/11/00 A1+P1 215,448
800,000 American Express Credit Corp., 5.73%, due 02/18/00 A1P1 782,173
300,000 HomeDepot Real Estate Funding, 5.68%, due 02/22/00 A1+P1 293,220
500,000 Pfizer Corp., 5.57%, due 03/15/00 A1+P1 487,158
-----------
Total commercial paper 12,845,301
VARIABLE RATE DEMAND NOTES -- 23.6%
780,000 American Family Financial Services A1+P1 780,000
780,000 Firstar Bank U.S.A., N.A. A1+P1 780,000
113,783 Pitney Bowes Credit Corp. A1+P1 113,783
780,000 Warner-Lambert Co. A1+P1 780,000
780,000 Wisconsin Electric Power Co. A1+P1 780,000
648,200 Wisconsin Corporate Central Credit Union A1+P1 648,200
-----------
Total variable rate demand notes 3,881,983
-----------
Total investments (amortized cost $16,727,284) 16,727,284
-----------
Liabilities, less cash and receivables -- (1.6%) (A)<F19> (265,523)
-----------
NET ASSETS $16,461,761
-----------
-----------
Net Asset Value Per Share ($0.01 par value, 500,000,000 shares authorized),
offering and redemption price ($16,461,761 / 16,461,761 shares outstanding) $ 1.00
-----------
-----------
</TABLE>
(a)<F19> Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Money Market Fund
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
INCOME:
Interest $487,359
--------
EXPENSES:
Management fees 48,719
Professional fees 20,935
Registration fees 18,190
Transfer agent fees 17,295
Administrative services 9,744
Printing and postage expense 8,302
Custodian fees 3,474
Board of Directors fees 1,650
Other expenses 5,171
--------
Total expenses before reimbursement and
management fee waiver 133,480
Less expenses assumed by adviser (70,146)
--------
Net expenses 63,334
--------
NET INVESTMENT INCOME 424,025
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $424,025
--------
--------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1999 and 1998
1999 1998
----------- -----------
OPERATIONS:
Net investment income $ 424,025 $ 184,522
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.0437
and $0.0488 per share, respectively) (424,025) (184,522)
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (55,837,068 and
10,462,294 shares, respectively) 55,837,068 10,462,294
Net asset value of shares issued in
distributions (365,895 and 172,920 shares,
respectively) 365,895 172,920
Cost of shares redeemed (44,620,471 and
8,788,422 shares, respectively) (44,620,471) (8,788,422)
----------- -----------
Net increase in net assets derived from
Fund share activities. 11,582,492 1,846,792
----------- -----------
TOTAL INCREASE 11,582,492 1,846,792
NET ASSETS AT THE BEGINNING OF THE YEAR 4,879,269 3,032,477
----------- -----------
NET ASSETS AT THE END OF THE YEAR $16,461,761 $ 4,879,269
----------- -----------
----------- -----------
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 year)
<TABLE>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.04 0.05 0.05 0.05 0.05
Less distributions:
Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------ ------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN 4.46% 4.99% 4.87% 4.87% 5.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's $) 16,462 4,879 3,032 3,980 3,743
Ratio of expenses (after reimbursement) to
average net assets*<F20> 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income to
average net assets**<F21> 4.35% 4.88% 4.77% 4.78% 5.08%
</TABLE>
*<F20> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses, the ratios
would have been 1.37%, 1.96%, 2.02%, 1.39% and 1.95% for the years
ended September 30, 1999, 1998, 1997, 1996 and 1995, respectively.
**<F21> If the Fund had paid all of its expenses, the ratios would have been
3.63%, 3.57%, 3.40%, 4.04% and 3.78% for the years ended September 30,
1999, 1998, 1997, 1996 and 1995, respectively.
The accompanying notes to financial statements are an integral part of this
statement.
Reynolds Funds, Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(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 a diversified,
open-end management investment company under the Investment Company Act of
1940. This Company consists of a series of four funds: the Reynolds Blue
Chip Growth Fund ("Blue Chip Fund"), the Reynolds Money Market Fund ("Money
Market Fund"), the Reynolds Opportunity Fund ("Opportunity Fund") and the
Reynolds U.S. Government Bond Fund ("Government Bond Fund") (collectively
the "Funds"). The assets and liabilities of each Fund are segregated and a
shareholder's interest is limited to the Fund in which the shareholder owns
shares. The Company was incorporated under the laws of Maryland on April
28, 1988.
The investment objective of the Blue Chip Fund is to produce long-term
growth of capital, with current income as a secondary objective, by
investing in a diversified portfolio of common stocks issued by 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 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 and interest 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 with maturities of 60 days or less 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. For
financial reporting purposes, investment transactions are recorded on trade
date. Cost amounts for the Blue Chip Fund and the Opportunity Fund, as
reported on the statements of net assets are substantially the same for
Federal income tax purposes. Cost amounts, as reported on the statements
of net assets for the Government Bond Fund and the Money Market Fund, are
the same for Federal income tax purposes.
(b) Net realized gains and losses on common stock of the Blue Chip Fund
and the Opportunity Fund are computed on the identified cost basis.
(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 Government Bond Fund has $231,244, $19,651,
$2,405 and $9,179 of net capital losses which expire September 30, 2003,
2004, 2005 and 2007, 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 the Funds do not anticipate nonperformance by these
counterparties.
(f) Generally accepted accounting principles require that permanent
differences between income for financial reporting and tax purposes be
reclassified in the capital accounts.
(g) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Funds have management agreements with Reynolds Capital Management
("RCM"), with whom certain officers and directors of the Funds are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreements, the Blue Chip Fund and the Opportunity Fund will pay RCM a
monthly management fee at the annual rate of 1% of such Funds' daily net
assets; from the Government Bond Fund a monthly fee of 0.75% of such Fund's
daily net assets; and from the Money Market Fund a monthly fee of 0.5% of
such Fund's daily net assets. For the year ended September 30, 1999, RCM
voluntarily waived $27,602 and $48,719 of the management fees due from the
Government Bond Fund and the Money Market Fund, respectively, under the
agreements. Additionally, RCM assumed $18,375 and $21,427 of other expenses
of the Government Bond Fund and the Money Market Fund, respectively.
In addition to the reimbursement required under the management agreements,
RCM has voluntarily reimbursed the Government Bond Fund and the Money
Market Fund for expenses over 0.90% and 0.65% of the daily net assets of
the Funds, respectively. These voluntary reimbursements to the Government
Bond Fund and the Money Market Fund may be modified or discontinued at any
time by RCM.
The Funds have administrative agreements with Fiduciary Management, Inc.
("FMI"), with whom certain officers of the Funds are affiliated, to
supervise all aspects of the Funds' operations except those per#formed 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.
The Blue Chip Fund and Opportunity Fund have adopted a Service and
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The Plan provides that each Fund adopting it may
incur certain costs which may not exceed a maximum amount equal to 0.25%
per annum of such Fund's average daily net assets. Payments made pursuant
to the Plan may only be used to pay distribution expenses incurred in the
current year.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed to
shareholders. The distributions were declared on October 27, 1999, and
were paid on October 28, 1999 to shareholders of record on October 26,
1999.
BLUE CHIP OPPORTUNITY
FUND FUND
-------- --------
Dividend from net investment income $ -- $ --
$ per share -- --
Short-term gains -- 257,535
$ per share -- 0.09367
Long-term capital gains taxed at 20% 37,972 30,716
$ per share 0.00526 0.01118
(4) INVESTMENT TRANSACTIONS --
For the year ended September 30, 1999, purchases and proceeds of sales of
investment securities of the Blue Chip Fund (excluding short-term
securities) were $242,642,411 and $16,064,846, respectively; purchases and
proceeds of sales of investment securities of the Opportunity Fund
(excluding short-term securities) were $63,761,168 and $21,371,408,
respectively; purchases and proceeds of sales of long-term investment
securities for the Government Bond Fund (excluding short-term securities)
were $2,488,313 and $0, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of September 30, 1999, liabilities of the Funds included the following:
<TABLE>
BLUE CHIP OPPORTUNITY GOVERNMENT MONEY MARKET
FUND FUND BOND FUND FUND
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Payable to brokers for investments purchased $ 238,060 $ -- $ -- $ --
Payable to RCM for management fees 325,588 80,319 -- --
Payable for distribution fees 164,535 68,274 -- --
Payable to shareholders for redemptions 131,785 -- -- --
Other liabilities 198,042 52,307 1,293 5,508
</TABLE>
(6) SOURCES OF NET ASSETS --
As of September 30, 1999, the sources of net assets were as follows:
<TABLE>
BLUE CHIP OPPORTUNITY GOVERNMENT MONEY MARKET
FUND FUND BOND FUND FUND
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Fund shares issued and outstanding $287,943,109 $63,878,994 $4,443,126 $ 16,461,761
Net unrealized appreciation (depreciation)
on investments 99,218,601 33,481,002 (45,409) --
Accumulated net realized loss on investments (210,795) (42,999) (262,480) --
------------ ----------- ---------- ------------
$386,950,915 $97,316,997 $4,135,237 $ 16,461,761
------------ ----------- ---------- ------------
------------ ----------- ---------- ------------
</TABLE>
Aggregate net unrealized appreciation (depreciation) for the Funds as of
September 30, 1999 consisted of the following:
<TABLE>
BLUE CHIP OPPORTUNITY GOVERNMENT
FUND FUND BOND FUND
------------ ----------- ----------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation $122,412,474 $37,250,446 $ 2,658
Aggregate gross unrealized depreciation (23,193,873) (3,769,444) (48,067)
------------ ----------- ----------
Net unrealized appreciation (depreciation) $ 99,218,601 $33,481,002 $ (45,409)
------------ ----------- ----------
------------ ----------- ----------
</TABLE>
(7) REQUIRED FEDERAL INCOME TAX DISCLOSURES (UNAUDITED) --
In early 1999, shareholders received information regarding all
distributions paid to them by the Funds during the fiscal year ended
September 30, 1999. The Funds hereby designate the following amounts as
long-term capital gains distributions.
BLUE CHIP OPPORTUNITY
FUND FUND
---------- --------
Capital gains taxed at 20% $1,449,438 $689,257
For the Blue Chip Fund, the percentage of ordinary income which is eligible
for the corporate dividend received deduction for the fiscal year ended
September 30, 1999, was 100%.
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
Reynolds Funds, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
(PRICEWATERHOUSECOOPERS LOGO)
October 28, 1999
To the Shareholders and Board of Directors
of Reynolds Funds, Inc.
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Reynolds Blue Chip Growth Fund, Reynolds Opportunity Fund, Reynolds U.S.
Government Bond Fund and Reynolds Money Market Fund (constituting Reynolds
Funds, Inc., hereafter referred to as the "Funds") at September 30, 1999, the
results of each of their operations, the changes in each of their net assets and
the financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers and application of alternative
auditing procedures where confirmations were not received, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
REYNOLDS FUNDS
Wood Island, Third Floor
80 East Sir Francis Drake Boulevard
Larkspur, California 94939
www.reynoldsfunds.com
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
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
FIRSTAR MUTUAL FUND SERVICES, LLP
615 East Michigan Street
Milwaukee, Wisconsin 53202
1-800-773-9665
OR 1-800-7REYNOLDS
1-414-765-4124
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
