UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05549 Reynolds Funds, Inc. -------------------- (Exact name of registrant as specified in charter) Wood Island, 3rd Floor 80 East Sir Francis Drake Blvd. Larkspur, CA 94939 ------------------- (Address of principal executive offices) (Zip code) Frederick L. Reynolds Reynolds Capital Management Wood Island, Third Floor 80 East Sir Francis Drake Blvd. Larkspur, California 94939 --------------------------- (Name and address of agent for service) (415) 461-7860 -------------- Registrant's telephone number, including area code: Date of fiscal year end: September 30 Date of reporting period: 03/31/2005 ITEM 1. REPORTS TO STOCKHOLDERS. - -------------------------------- SEMIANNUAL REPORT MARCH 31, 2005 REYNOLDS FUNDS NO-LOAD MUTUAL FUNDS REYNOLDS BLUE CHIP GROWTH FUND SEEKING LONG-TERM CAPITAL APPRECIATION REYNOLDS OPPORTUNITY FUND SEEKING LONG-TERM CAPITAL APPRECIATION REYNOLDS FUND SEEKING LONG-TERM CAPITAL APPRECIATION REYNOLDS BALANCED FUND (F/K/A/ REYNOLDS U.S. GOVERNMENT BOND FUND) SEEKING CAPITAL APPRECIATION AND INCOME REYNOLDS MONEY MARKET FUND SEEKING A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL AND A STABLE NET ASSET VALUE 1-800-773-9665 www.reynoldsfunds.com REYNOLDS FUNDS May 23, 2005 Dear Fellow Shareholders: The Reynolds U. S. Government Bond Fund has a new name and new investment objectives. It is now the Reynolds Balanced Fund and its new investment objectives are "Seeking Capital Appreciation and Income". The Balanced Fund will invest in both fixed income securities and common stocks-most of which provide dividend income. Most of the time, the Balanced Fund's portfolio will consist of 20% to 80% fixed income securities and 20 to 80% equity securities. As of March 31, 2005 its investments were 59.8% fixed income securities (bonds), 17.2% equity securities and 23.0% short term money market instruments. The Fund's new NASDAQ symbol is RBALX. The U.S. economy continues in an expansionary mode. Gross Domestic Product (GDP) grew at a 3.1% rate in the three months ended March 31, 2005. GDP is estimated to increase 3.5% in calendar 2005 after increasing 4.4% in calendar 2004. Inflation increased at a rate of 2.5% in the three months ended March 31, 2005 as measured by the GDP Deflator. Inflation is estimated to increase 2.3% in calendar 2005 after increasing 2.4% in 2004. Spending by consumers and capital spending by companies have been some of the strongest sectors of the economy. In the twelve months ended March 31, 2005 nearly 2.2 million jobs have been created and during the first four months of 2005 nearly 844,000 jobs were created showing an accelerating pace of job creation. The Federal Reserve has raised short term interest rates eight times starting in June 2004 through May 2005. However, interest rates are still at 41 year lows. We believe that raising interest rates is the correct thing for the Federal Reserve to do. Previously they reduced interest rates to an artificially low level to stimulate the economy. Now that the economy is strong and jobs are being created the Fed should move toward a more normal level of interest rates to protect against future economic imbalances including inflation. Other problems have been recent negative geopolitical news including terrorism, negative events in Iraq and attempts to slow down China's strong growth, which has been a key driver of Asian and worldwide growth. Oil prices have risen during the past 9 months. Higher oil prices are a tax on consumers in terms of higher fuel prices. However, the U.S economy is now more service oriented and is not as dependent on oil as it was twenty years ago when it was more heavily industrial oriented. Oil consumption currently accounts for 12% of GDP. Twenty years ago it accounted for 18% of GDP. Alan Greenspan, the Chairman of the Federal Reserve Board, recently estimated that these higher oil prices would make the GDP growth rate 1/2% less than it would have been. In the long run, the strength of the economy and the level of corporate profitability have been key factors in determining the valuations of common stocks. We believe that these factors, which are currently positive, are the more important factors at the present time. Over the long term, interest rates have typically risen during economic expansions and typically the stock market has appreciated. If interest rates do not go up too rapidly from here (the Federal Reserve has indicated that it will raise rates slowly) or too far, it should not be a significant negative for stocks. OPPORTUNISTIC INVESTING IN COMPANIES OF VARIOUS SIZES The three Reynolds Stock Funds invest in companies of various sizes as classified by their market capitalizations. A company's market capitalization is calculated by taking the number of shares the company has outstanding multiplied by its current market price. This is one way that the Reynolds Stock Funds differentiate their investment styles. Other considerations in selecting companies for the portfolios include revenue growth rates, product innovations, financial strength, management's knowledge and experience plus the overall economic and geopolitical environments and interest rates. REYNOLDS BLUE CHIP GROWTH FUND Portfolio as of March 31, 2005 ------------------------------ Giant 25.42% Large 36.72% Medium 28.42% Small 8.01% Micro 1.43% REYNOLDS OPPORTUNITY FUND Portfolio as of March 31, 2005 ------------------------------ Giant 4.81% Large 16.48% Medium 33.35% Small 25.42% Micro 19.94% REYNOLDS FUND Portfolio as of March 31, 2005 ------------------------------ Giant 0.89% Large 4.88% Medium 23.09% Small 34.15% Micro 36.99% Source: Morningstar web site and Morningstar Market Cap Breakpoints Giant-cap stocks are defined as the group that accounts for the top 40% of the capitalization of the Morningstar domestic stock universe; large-cap stocks represent the next 30%; mid-cap stocks represent the next 20%; and small-cap stocks represent the balance. Micro is defined as smaller than the "small" breakpoint. Market caps are the minimum in each cap group; therefore, the minimum large market cap is the large-medium breakpoint and medium is the medium-small breakpoint. As of March 31, 2005 the minimums in each cap group are as follows: (in millions) Giant $47260.59 Large $9043.16 Medium $1587.56 Small $455.30 Micro <$455.30 LOW INTEREST RATES BY HISTORICAL STANDARDS ARE A SIGNIFICANT POSITIVE FOR STOCK VALUATIONS Since January 2001, the Federal Reserve Board lowered short-term interest rates twelve times to help stimulate the economy. Although interest rates have been rising, they remain at historically low levels. Low interest rates usually result in higher stock valuations for many reasons including: (1) Borrowing costs of corporations are lower resulting in higher business confidence and profits. (2) Borrowing costs of individuals are lower which increases consumer confidence and spending. (3) Cash is not as attractive as an alternative investment to stocks. (4) A company's stock is usually valued by placing a present value on that company's future stream of earnings and dividends. The present value should be higher when interest and inflation rates are low. THE REYNOLDS BLUE CHIP GROWTH FUND The long-term strategy of the Reynolds Blue Chip Growth Fund is to emphasize investment in growth companies. Occasionally, these companies go out of favor for a while. However, these companies should continue to build value if their earnings grow and their stocks should begin appreciating again when they return to favor. THE REYNOLDS OPPORTUNITY FUND The Reynolds Opportunity Fund usually invests in medium to smaller size growth companies. 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 and the Reynolds Fund. THE REYNOLDS FUND The Reynolds Fund is a general stock fund and is intended to be a long-term 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" stocks, it may also invest in "value" stocks. THE REYNOLDS BALANCED FUND The Reynolds Balanced Fund emphasizes quality investments in high yielding equities and U.S. Treasury and Federal Agency Bonds (issued by the Federal Home Loan Bank - FHLB, Federal Home Loan Mortgage Corp. - FHLMC and Federal National Mortgage Association - FNMA), Treasury Notes and Treasury Bills of varying maturities. The Reynolds Balanced Fund is designed to satisfy many of the income objectives of investors. For example, the Balanced Fund is actively managed and the fixed income portion of the fund in invested in bonds having different maturities, which reduces the risk that a large percentage of the bonds in the Fund mature at an inopportune time for reinvestment. 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. REYNOLDS BALANCED FUND Portfolio as of March 31, 2005 ------------------------------ Cash 4.52% Stocks 17.20% Federal Agencies 59.84% U.S. Treasury Bills 18.44% REYNOLDS MONEY MARKET FUND Portfolio as of March 31, 2005 ------------------------------ U.S. Treasury Bills 92.20% Cash 7.80% THE REYNOLDS MONEY MARKET FUND The Reynolds Money Market Fund offers unlimited check writing with no minimum amount per check. 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) check writing ($0.20 printing charge per check); or (2) telephone redemption where either a check is mailed to the shareholder, or money may be wired to the shareholder's bank account ($15.00 wiring charge - no charge if part of the Systematic Withdrawal Plan which has a $100 minimum withdrawal). The Reynolds Money Market Fund's yield should vary with the rate of inflation over the years. As of March 31, 2005, the dollar weighted average days to maturity of the Money Market Fund was 33.3 days. ECONOMIC DISCUSSION THE WORLD ECONOMY There are more than 1.5 billion people in the world who will be experiencing a higher standard of living and using and consuming more products as capitalism grows in China, Eastern Europe and Russia. Many other countries, such as India and the democratic countries in Latin America, have rapidly emerging middle classes that desire western goods and services and governments that are encouraging foreign investment. Worldwide inflation remains low. There are many reasons for this, including: (1) committed central bankers; (2) fiscal restraint by governments; (3) economic systems are more efficient; (4) cost cutting and restructuring is spreading to many countries; (5) more efficient private-sector operations are replacing inefficient state-run enterprises; and (6) excess capacity exists in many markets. The Blue Chip, Opportunity and Reynolds Funds are well positioned to participate in these long-term worldwide growth trends through their investments in U.S. headquartered and foreign headquartered companies whose stocks or American Depository Receipts (ADRs) trade in the United States. We have some investments in foreign headquartered companies in the Reynolds Stock Funds at the present time. We are planning on increasing our investments in foreign headquartered companies in the future where we believe that the long-term fundamentals are positive and their stock prices are attractive. THE U.S. ECONOMY The U.S. economy continues in a positive mode. The efficiencies of the economy resulting from such things as technology enhancements and productivity increases are impressive. Consumer spending represents approximately 65% of GDP and has been a positive. GDP increased 4.4% in 2004 compared to 3.0% in 2003, 1.9% in 2002, 0.8% in 2001, 3.7% in 2000 and 4.4% in 1999. GDP is estimated to increase 3.5% in 2005. U.S. inflation is low relative to the last thirty-five years due to such factors as global competition, advances in technology resulting in increasing productivity and technology innovations that are helping to lower production and distribution costs. U.S. inflation increased 2.4% in 2004 after increasing 2.3% in 2003, 1.6% in 2002, 2.8% in 2001, 3.4% in 2000 and 2.2% in 1999. U.S. inflation is estimated to increase 2.3% in 2005. INVESTMENT OUTLOOK There are many investment positives. Among them are: (1) the economy is growing; (2) corporate profits are rising; (3) job growth is strong; (4) even though interest rates are probably going to climb, they are increasing from a very low level, so there's room for them to go up and not slow down the economy in a dangerous way; (5) U.S. industry is more competitive than at any time in the past quarter century and U.S. companies are the leaders in the majority of industries worldwide; (6) U. S. productivity continues to increase; (7) the Internet is beginning to produce efficiencies; (8) consumer spending has remained high; (9) most indicators in the economy are positive; (10) corporate cost cutting has been very successful; and (11) price-earnings ratios are in line with historical averages. Some possible investment negatives, which we are closely watching are: (1) the possibility of higher inflation resulting in such things as higher interest rates; (2) high energy prices; (3) large federal spending and federal deficits; (4) possible terrorist attacks; (5) dollar weakness; (6) Iraq; and (7) efforts to slow China's economic boom. INFORMATION ABOUT THE REYNOLDS FUNDS REYNOLDSFUNDS.COM WEB SITE: You can now access current information about your investment holdings via our web site, reynoldsfunds.com. You must first request a personal identification number (PIN) by calling our shareholder service representatives at (800) 773-9665. You will be able to view your account list, account detail (including balances), transaction history, distributions, and current Fund prices. Additional information available includes quarterly updates of the returns of the Reynolds Funds, top ten holdings of each equity portfolio, and industry percentages. Also detailed statistics and graphs of past performances with a link to Quicken.com for the various 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 "any key" then "1". 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 CURRENT ONE AND SEVEN DAY YIELDS: Call 1-800- 773-9665 and press "any key" then "1". FOR SHAREHOLDERS TO AUTOMATICALLY ACCESS THEIR CURRENT ACCOUNT INFORMATION: Call 1-800-773-9665 (twenty-four hours-a-day, seven days a week), press "any key" then "2" and enter your 16 digit account number which appears at the top right of your statement. TO SPEAK TO A FUND REPRESENTATIVE REGARDING QUESTIONS, CURRENT ACCOUNT INFORMATION AND CURRENT DAILY NET ASSET VALUES: Call 1-800-773-9665 and press "0" from 6 A.M. to 5 P.M. (PST). 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) Blue Chip, Opportunity and Reynolds Fund statements are sent twice a year if and when any ordinary income or capital gains are distributed; and (2) 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, if any, for the Reynolds Funds are also reported in January. 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, Coverdell Education Savings Account, SIMPLE IRA Plan, 401k, SEP IRA, 403b and Fund Sponsored Qualified Retirement Plans. AUTOMATIC INVESTMENT PLAN: There is no charge to automatically debit your checking account to invest in any of the Reynolds Funds ($50 minimum) 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 transfer funds to your bank account. EXCHANGES OR REGULAR REDEMPTIONS: As often as desired - no charge. NASDAQ SYMBOLS: Reynolds Blue Chip Growth Fund - RBCGX, Reynolds Opportunity Fund - ROPPX, Reynolds Fund - REYFX, Reynolds Balanced Fund - RBALX, Reynolds Money Market Fund - REYXX. 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 deferred sales charges ("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. We appreciate your continued confidence in the Reynolds Funds and would like to welcome our new shareholders. 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. Performance data quoted represents past --------------------------------------- performance; past performance does not guarantee future results. The investment - ---------------------------------------------------------------- return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.reynoldsfunds.com. Reynolds Funds, Inc. COST DISCUSSION As a shareholder of the Reynolds Funds, you do not incur (except as described below) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees, but do incur ongoing costs, including management fees; distribution [and/or service] (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Reynolds Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 30, 2004 through March 31, 2005. ACTUAL EXPENSES The first line for each Fund in the table below provides information about actual account values and actual expenses for that particular Reynolds Fund. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition to the costs highlighted and described below, the only Reynolds Funds transaction costs you might currently incur would be wire fees ($15 per wire), if you choose to have proceeds from a redemption wired to your bank account instead of receiving a check. Additionally, U.S. Bank charges an annual processing fee ($15) if you maintain an IRA account with a Reynolds Fund. To determine your total costs of investing in a Reynolds Fund, you would need to add any applicable wire or IRA processing fees you've incurred during the period to the costs provided in the example below. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on a particular Reynolds Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Reynolds Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Beginning Account Ending Account Expenses Paid During Value 9/30/04 Value 3/31/05 Period*<F1> 9/30/04-3/31/05 ------------- ------------- ----------------------- Reynolds Blue Chip Growth Fund Actual $1,000 $1,000.00 $1,036.70 $ 9.60 Hypothetical (5% return before expenses) $1,000.00 $1,025.00 $ 9.54 Reynolds Opportunity Fund $1,000.00 $1,014.70 $10.40 Hypothetical (5% return before expenses) $1,000.00 $1,025.00 $10.45 Reynolds Fund Actual $1,000 $1,000.00 $ 996.30 $16.92 Hypothetical (5% return before expenses) $1,000.00 $1,025.00 $17.17 Reynolds Balanced Fund Actual $1,000 $1,000.00 $ 986.80 $ 4.90 Hypothetical (5% return before expenses) $1,000.00 $1,025.00 $ 5.00 Reynolds Money Market Fund Actual $1,000 $1,000.00 $1,006.10 $ 3.30 Hypothetical (5% return before expenses) $1,000.00 $1,025.00 $ 3.33 *<F1> Expenses are equal to the Funds' annualized expense ratio of 1.89%, 2.07%, 3.40%, 0.99% and 0.66%, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period between September 30, 2004 and March 31, 2005). Reynolds Blue Chip Growth Fund SCHEDULE OF INVESTMENTS March 31, 2005 (Unaudited) SHARES VALUE ------ ----- LONG-TERM INVESTMENTS 97.7% (A)<F3> COMMON STOCKS -- 97.7% (A)<F3> AIRLINES/AEROSPACE -- 1.3% 3,500 Boeing Co. $ 204,610 1,000 General Dynamics Corp. 107,050 5,000 United Technologies Corp. 508,300 ----------- 819,960 APPLICATION SOFTWARE -- 3.6% 14,500 Adobe Systems Inc. 973,965 9,000 SAP AG SP-ADR 360,720 40,000 VERITAS Software Corp.*<F2> 928,800 ----------- 2,263,485 AUTOMOTIVE -- 0.2% 3,000 CarMax, Inc.*<F2> 94,500 BANKS -- 0.8% 4,500 Bank of America Corp. 198,450 3,500 Citigroup Inc. 157,290 2,000 Wells Fargo & Co. 119,600 ----------- 475,340 BEVERAGES -- 0.7% 8,000 PepsiCo, Inc. 424,240 BIOTECHNOLOGY -- 0.8% 3,000 Affymetrix, Inc.*<F2> 128,520 1,500 Amgen Inc.*<F2> 87,315 3,000 Genentech, Inc.*<F2> 169,830 1,500 Sepracor Inc.*<F2> 86,115 ----------- 471,780 BUILDING -- 2.0% 17,000 Home Depot, Inc. 650,080 11,000 Lowe's Companies, Inc. 627,990 ----------- 1,278,070 BUSINESS SOFTWARE & SERVICES -- 2.1% 7,000 CheckFree Corp.*<F2> 285,320 3,000 Comverse Technology, Inc.*<F2> 75,660 13,000 Rockwell Automation Inc. 736,320 26,000 TIBCO Software Inc.*<F2> 193,700 ----------- 1,291,000 CABLE TV/BROADCASTING -- 2.7% 6,500 Grupo Televisa S.A. SP-ADR 382,200 62,000 Sirius Satellite Radio Inc.*<F2> 348,440 5,000 Viacom Inc. Cl B 174,150 24,000 XM Satellite Radio Holdings Inc.*<F2> 756,000 ----------- 1,660,790 CHEMICALS -- 1.2% 1,000 3M Co. 85,690 5,500 Dow Chemical Co. 274,175 5,500 E.I. du Pont de Nemours and Co. 281,820 2,000 Monsanto Co. 129,000 ----------- 770,685 COMMUNICATION EQUIPMENT -- 1.3% 14,000 L.M. Ericsson Telephone Co. ADR 394,800 10,500 QUALCOMM Inc.*<F2> 384,825 ----------- 779,625 COMPUTER & PERIPHERALS -- 4.1% 24,000 Apple Computer, Inc.*<F2> 1,000,080 16,500 Dell Inc.*<F2> 633,930 6,400 International Business Machines Corp. 584,832 11,500 Network Appliance, Inc.*<F2> 318,090 ----------- 2,536,932 COMPUTER NETWORKING -- 1.3% 14,000 Juniper Networks, Inc.*<F2> 308,840 17,000 Sierra Wireless, Inc.*<F2> 139,740 18,000 WebEx Communications, Inc.*<F2> 388,620 ----------- 837,200 COMPUTER SOFTWARE & SERVICES -- 0.2% 4,000 Macromedia, Inc.*<F2> 134,000 DRUGS -- 0.6% 2,000 Bristol-Myers Squibb Co. 50,920 1,500 Eli Lilly & Co. 78,150 3,000 Merck & Co. Inc. 97,110 5,500 Pfizer Inc. 144,485 ----------- 370,665 ELECTRICAL EQUIPMENT -- 1.5% 1,500 Emerson Electric Co. 97,395 15,500 General Electric Co. 558,930 12,000 PerkinElmer, Inc. 247,560 ----------- 903,885 ENERGY -- 2.1% 500 Anadarko Petroleum Corp. 38,050 2,000 Burlington Resources Inc. 100,140 3,000 ChevronTexaco Corp. 174,930 1,500 ConocoPhillips 161,760 2,500 Exxon Mobil Corp. 149,000 3,000 Marathon Oil Corp. 140,760 1,500 Murphy Oil Corp. 148,095 3,000 Noble Energy, Inc. 204,060 1,000 Royal Dutch Petroleum Co. NYS 60,040 2,000 Unocal Corp. 123,380 ----------- 1,300,215 ENERGY-SERVICES -- 5.5% 10,500 Baker Hughes Inc. 467,145 3,000 BJ Services Co. 155,640 1,000 Cooper Cameron Corp.*<F2> 57,210 4,500 Diamond Offshore Drilling, Inc. 224,550 3,000 Helmerich & Payne, Inc. 119,070 3,500 Nabors Industries, Ltd.*<F2> 206,990 3,500 Noble Corp. 196,735 5,000 Rowan Companies, Inc. 149,650 9,000 Schlumberger Ltd. 634,320 7,500 Smith International, Inc. 470,475 5,000 Tesoro Corp.*<F2> 185,100 8,500 Transocean Inc.*<F2> 437,410 2,000 Valero Energy Corp. 146,540 ----------- 3,450,835 ENTERTAINMENT/MEDIA -- 1.7% 12,754 The Walt Disney Co. 366,423 1,000 DreamWorks Animation SKG, Inc.*<F2> 40,710 5,000 Electronic Arts Inc.*<F2> 258,900 5,000 Harrah's Entertainment, Inc. 322,900 500 Pixar, Inc.*<F2> 48,775 ----------- 1,037,708 FINANCIAL SERVICES -- 3.6% 7,000 American Express Co. 359,590 1,000 A.G. Edwards, Inc. 44,800 2,000 Goldman Sachs Group, Inc. 219,980 2,500 Lehman Brothers Holdings Inc. 235,400 12,000 Merrill Lynch & Co., Inc. 679,200 12,000 Morgan Stanley 687,000 1,500 Paychex, Inc. 49,230 ----------- 2,275,200 FOOD WHOLESALERS -- 0.1% 2,000 Sysco Corp. 71,600 FOODS -- 1.5% 3,500 Altria Group, Inc. 228,865 9,500 Hershey Foods Corp. 574,370 1,000 The J. M. Smucker Co. 50,300 1,500 Wm. Wrigley Jr. Co. 98,355 ----------- 951,890 GOLD & SILVER -- 0.3% 5,000 Newmont Mining Corp. 211,250 HEALTH MAINTENANCE ORGANIZATIONS -- 0.1% 1,000 Community Health Systems Inc.*<F2> 34,910 HOME BUILDERS -- 0.7% 1,500 Beazer Homes USA, Inc. 74,790 500 KB Home, Inc. 58,730 1,000 Meritage Homes Corp.*<F2> 58,920 1,000 Pulte Homes, Inc. 73,630 1,000 Ryland Group, Inc. 62,020 1,000 Toll Brothers, Inc.*<F2> 78,850 ----------- 406,940 HOTEL -- 2.1% 1,000 Four Seasons Hotels Inc. 70,700 15,000 Hilton Hotels Corp. 335,250 2,000 Marriott International, Inc. 133,720 11,000 Starwood Hotels & Resorts Worldwide, Inc 660,330 1,500 Wynn Resorts, Ltd.*<F2> 101,610 ----------- 1,301,610 HOUSEHOLD PRODUCTS -- 0.9% 3,500 Clorox Co. 220,465 5,000 Procter & Gamble Co. 265,000 2,000 Tupperware Corp. 40,720 1,500 Wyeth 63,270 ----------- 589,455 INSURANCE -- 1.9% 8,000 Aetna Inc. 599,600 1,500 Allstate Corp. 81,090 5,500 CIGNA Corp. 491,150 ----------- 1,171,840 INTERNET INFORMATION PROVIDERS -- 1.8% 3,000 Google Inc.*<F2> 541,530 18,000 Yahoo! Inc.*<F2> 610,200 ----------- 1,151,730 INTERNET SERVICE PROVIDERS -- 0.7% 15,000 SINA Corp.*<F2> 465,900 INTERNET SOFTWARE & SERVICES -- 0.2% 2,000 Priceline.com Inc.*<F2> 50,400 1,000 Websense, Inc.*<F2> 53,800 ----------- 104,200 MACHINERY -- 0.9% 4,000 Caterpillar Inc. 365,760 1,500 Deere & Co. 100,695 1,500 Ingersoll-Rand Co. 119,475 ----------- 585,930 MEDICAL SERVICES -- 2.6% 8,000 HCA, Inc. 428,560 6,000 McKesson Corp. 226,500 1,000 Quest Diagnostics Inc. 105,130 6,500 UnitedHealth Group Inc. 619,970 4,000 Universal Health Services, Inc. Cl B 209,600 500 WellPoint Inc.*<F2> 62,675 ----------- 1,652,435 MEDICAL SUPPLIES -- 1.8% 2,000 Abbott Laboratories 93,240 15,500 Johnson & Johnson 1,040,980 ----------- 1,134,220 METALS -- 0.8% 4,000 Commercial Metals Co. 135,560 3,500 Nucor Corp. 201,460 2,000 Peabody Energy Corp. 92,720 500 Phelps Dodge Corp. 50,865 ----------- 480,605 PAPER & FOREST PRODUCTS -- 0.2% 1,500 Weyerhaeuser Co. 102,750 PUBLISHING -- 0.1% 1,500 Reuters Group PLC - SP-ADR 69,150 RESTAURANTS -- 4.6% 1,500 Brinker International, Inc.*<F2> 54,330 2,500 California Pizza Kitchen, Inc.*<F2> 58,600 2,000 CBRL Group, Inc. 82,600 14,500 The Cheesecake Factory Inc.*<F2> 514,025 1,000 Darden Restaurants, Inc. 30,680 2,500 IHOP Corp. 119,200 8,500 McDonald's Corp. 264,690 6,500 Outback Steakhouse, Inc. 297,635 4,500 P.F. Chang's China Bistro, Inc.*<F2> 269,100 4,000 Panera Bread Co.*<F2> 226,120 6,500 Papa John's International, Inc.*<F2> 225,680 14,500 Yum! Brands, Inc. 751,245 ----------- 2,893,905 RETAIL-SPECIALTY -- 15.2% 12,500 Abercrombie & Fitch Co. 715,500 10,500 Amazon.com, Inc.*<F2> 359,835 25,000 American Eagle Outfitters, Inc. 738,750 500 AutoZone, Inc.*<F2> 42,850 14,000 bebe stores, inc. 475,300 9,000 Bed Bath & Beyond Inc.*<F2> 328,860 15,000 Best Buy Co., Inc. 810,150 16,500 Chico's FAS, Inc.*<F2> 466,290 18,000 Circuit City Stores, Inc. 288,900 4,500 Coach, Inc.*<F2> 254,835 4,000 Dollar Tree Stores, Inc.*<F2> 114,920 33,000 eBay Inc.*<F2> 1,229,580 2,500 Foot Locker, Inc. 73,250 1,500 Liz Claiborne, Inc. 60,195 2,500 The Men's Wearhouse, Inc.*<F2> 105,525 2,500 Michaels Stores, Inc. 90,750 5,500 NIKE, Inc. Cl B 458,205 3,000 Office Depot, Inc.*<F2> 66,540 3,500 Pacific Sunwear of California, Inc.*<F2> 97,930 4,000 PC Connection, Inc.*<F2> 23,480 5,000 PETCO Animal Supplies, Inc.*<F2> 184,050 4,000 PETsMART, Inc. 115,000 5,000 Pier 1 Imports, Inc. 91,150 12,500 Ross Stores, Inc. 364,250 4,000 Sharper Image Corp.*<F2> 66,440 11,500 Staples, Inc. 361,445 16,000 Starbucks Corp.*<F2> 826,560 2,500 Tiffany & Co. 86,300 9,500 Urban Outfitters, Inc.*<F2> 455,715 1,500 Whole Foods Market, Inc. 153,195 ----------- 9,505,750 RETAIL STORES -- 6.0% 1,500 BJ's Wholesale Club, Inc.*<F2> 46,590 19,000 Costco Wholesale Corp. 839,420 1,500 Dillard's, Inc. 40,350 3,000 The Gap, Inc. 65,520 3,000 Kohl's Corp.*<F2> 154,890 4,000 Longs Drug Stores Corp. 136,880 6,500 Neiman Marcus Group, Inc. 594,815 18,500 Nordstrom, Inc. 1,024,530 3,000 Target Corp. 150,060 3,000 Walgreen Co. 133,260 11,500 Wal-Mart Stores, Inc. 576,265 ----------- 3,762,580 SECURITY SOFTWARE & SERVICES -- 2.7% 14,000 Check Point Software Technologies Ltd.*<F2> 304,360 4,000 Internet Security Systems, Inc.*<F2> 73,200 20,000 RSA Security Inc.*<F2> 317,000 35,000 VeriSign, Inc.*<F2> 1,004,500 ----------- 1,699,060 SEMICONDUCTOR CAPITAL SPENDING -- 1.7% 7,500 KLA-Tencor Corp. 345,075 11,000 Novellus Systems, Inc.*<F2> 294,030 30,000 Teradyne, Inc.*<F2> 438,000 ----------- 1,077,105 SEMICONDUCTORS -- 6.1% 8,000 Broadcom Corp.*<F2> 239,360 11,000 Cypress Semiconductor Corp.*<F2> 138,600 12,000 Integrated Device Technology, Inc.*<F2> 144,360 15,880 Intel Corp. 368,892 17,500 Lam Research Corp.*<F2> 505,050 28,000 Mattson Technology, Inc.*<F2> 222,320 7,000 Maxim Integrated Products, Inc. 286,090 10,500 QLogic Corp.*<F2> 425,250 16,000 Rambus Inc.*<F2> 241,120 16,500 Texas Instruments Inc. 420,585 76,000 Vitesse Semiconductor Corp.*<F2> 203,680 22,000 Xilinx, Inc. 643,060 ----------- 3,838,367 SERVICES -- 1.4% 4,000 FedEx Corp. 375,800 8,000 Taser International, Inc.*<F2> 96,000 5,500 United Parcel Service, Inc. Cl B 400,070 ----------- 871,870 SYSTEM SOFTWARE -- 1.1% 23,000 Autodesk, Inc. 684,480 TELEPHONE SERVICES -- 0.4% 1,500 Verizon Communications Inc. 53,250 7,000 Vodafone Group PLC - SP-ADR 185,920 ----------- 239,170 TRANSPORTATION -- 2.1% 11,000 Burlington Northern Santa Fe Corp. 593,230 3,000 CSX Corp. 124,950 5,000 Kansas City Southern*<F2> 96,300 4,500 Norfolk Southern Corp. 166,725 6,000 Yellow Roadway Corp.*<F2> 351,240 ----------- 1,332,445 UTILITIES -- 0.4% 3,000 Kinder Morgan, Inc. 227,100 WIRELESS COMMUNICATION -- 2.0% 12,000 Nextel Communications, Inc.*<F2> 341,040 2,000 Nextel Partners, Inc.*<F2> 43,920 8,500 Research In Motion Ltd.*<F2> 649,570 4,000 Sprint Corp. (FON Group) 91,000 4,000 Western Wireless Corp.*<F2> 151,840 ----------- 1,277,370 ----------- Total common stocks (cost $51,725,694) 61,071,732 ----------- Total long-term investments (cost $51,725,694) 61,071,732 PRINCIPAL AMOUNT VALUE - ---------------- ----- SHORT-TERM INVESTMENTS -- 2.3% (A)<F3> U.S. TREASURY SECURITIES -- 2.2% $800,000 U.S. Treasury Bills, 2.12%, due 4/07/05 $ 799,717 600,000 U.S. Treasury Bills, 2.47%, due 4/14/05 599,465 ----------- Total U.S. treasury securities (cost $1,399,182) 1,399,182 VARIABLE RATE DEMAND NOTE -- 0.1% 35,326 U.S. Bank, N.A., 2.60% 35,326 ----------- Total variable rate demand note (cost $35,326) 35,326 ----------- Total short-term investments (cost $1,434,508) 1,434,508 ----------- Total investments -- 100% (cost $53,160,202) $62,506,240 ----------- ----------- *<F2> Non-income producing security. (A)<F3> Percentages for the various classifications relate to total investments. ADR - American Depository Receipt NYS - New York Registered Shares The accompanying notes to financial statements are an integral part of this schedule. Reynolds Blue Chip Growth Fund STATEMENT OF ASSETS AND LIABILITIES March 31, 2005 (Unaudited) ASSETS: Investments in securities, at value (cost $53,160,202) $62,506,240 Receivable from investments sold 3,365,158 Dividends and interest receivable 32,401 Receivable from shareholders for purchases 3,426 ----------- Total assets $65,907,225 ----------- ----------- LIABILITIES: Payable to brokers for securities purchased $1,979,912 Due to custodian 62,994 Payable to adviser for management fees 55,356 Payable to administrator for administrative fees 8,083 Payable to shareholders for redemptions 4,449 Interest payable 431 Other liabilities 156,849 ----------- Total liabilities 2,268,074 ----------- NET ASSETS: Capital Stock, $0.01 par value; 40,000,000 shares authorized; 2,275,556 shares outstanding 160,331,574 Net unrealized appreciation on investments 9,346,038 Accumulated net realized loss on investments (106,038,461) ----------- Net assets 63,639,151 ----------- Total liabilities and net assets $65,907,225 ----------- ----------- CALCULATION OF NET ASSET VALUE PER SHARE: Net asset value, offering and redemption price per share ($63,639,151 / 2,275,556 shares outstanding) $ 27.97 ----------- ----------- 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, 2005 (Unaudited) INCOME: Dividends $ 190,074 Interest 7,958 ---------- Total income 198,032 ---------- EXPENSES: Management fees 406,695 Transfer agent fees 85,575 Distribution fees 59,150 Administrative services 57,462 Printing and postage expense 45,770 Custodian fees 26,836 Insurance expense 23,106 Professional fees 19,582 Registration fees 18,504 Board of Directors fees 2,500 Other expenses 8,343 ---------- Total operating expenses before interest expense 753,523 Interest expense 11,564 ---------- Total expenses 765,087 ---------- NET INVESTMENT LOSS (567,055) ---------- NET REALIZED LOSS ON INVESTMENTS (2,878,549) NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 7,651,396 ---------- NET GAIN ON INVESTMENTS 4,772,847 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,205,792 ---------- ---------- The accompanying notes to financial statements are an integral part of this statement. Reynolds Blue Chip Growth Fund STATEMENTS OF CHANGES IN NET ASSETS For the Six Months Ending March 31, 2005 (Unaudited) and For the Year Ended September 30, 2004 2005 2004 ---- ---- OPERATIONS: Net investment loss $ (567,055) $(1,569,629) Net realized (loss) gain on investments (2,878,549) 667,155 Net change in unrealized appreciation on investments 7,651,396 1,230,289 ----------- ----------- Net increase in net assets resulting from operations 4,205,792 327,815 ----------- ----------- FUND SHARE ACTIVITIES: Proceeds from shares issued (309,463 and 1,748,524 shares, respectively) 8,755,147 54,718,743 Cost of shares redeemed (1,155,213 and 3,599,902 shares, respectively) (33,531,439) (109,740,156) ----------- ----------- Net decrease in net assets derived from Fund share activities (24,776,292) (55,021,413) ----------- ----------- TOTAL DECREASE (20,570,500) (54,693,598) NET ASSETS AT THE BEGINNING OF THE PERIOD 84,209,651 138,903,249 ----------- ----------- NET ASSETS AT THE END OF THE PERIOD $63,639,151 $84,209,651 ----------- ----------- ----------- ----------- FINANCIAL HIGHLIGHTS (Selected data for each share of the Fund outstanding throughout each period) (UNAUDITED) FOR THE SIX FOR THE YEARS ENDED SEPTEMBER 30, MONTHS ENDING ------------------------------------------------------------ MARCH 31, 2005 2004 2003 2002 2001 2000 -------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $26.98 $27.93 $19.61 $29.73 $66.57 $53.98 Income from investment operations: Net investment loss*<F4> (0.20) (0.40) (0.22) (0.25) (0.38) (0.51) Net realized and unrealized gain (loss) on investments 1.19 (0.55)**<F5> 8.54 (9.87) (36.46) 13.11 ------ ------ ------ ------ ------ ------ Total from investment operations 0.99 (0.95) 8.32 (10.12) (36.84) 12.60 Less distributions: Dividend from net investment income -- -- -- -- -- -- Distribution from net realized gains -- -- -- -- -- (0.01) ------ ------ ------ ------ ------ ------ Total from distributions -- -- -- -- -- (0.01) ------ ------ ------ ------ ------ ------ Net asset value, end of period $27.97 $26.98 $27.93 $19.61 $29.73 $66.57 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN 3.67%(1)<F6> (3.44%) 42.43% (34.04%) (55.34%) 23.34% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's $) 63,639 84,210 138,903 80,033 182,742 583,884 Ratio of operating expenses before interest expense to average net assets 1.86%(2)<F7> 1.61% 1.72% 1.49% 1.34% 1.29% Ratio of interest expense to average net assets 0.03%(2)<F7> 0.02% 0.02% 0.02% 0.01% 0.00% Ratio of net investment loss to average net assets (1.40%)(2)<F7> (1.33%) (0.88%) (0.82%) (0.82%) (0.84%) Portfolio turnover rate 67.4% 94.0% 83.7% 67.0% 35.8% 17.3% *<F4> In 2005, 2004, 2003, 2002 and 2001, net investment loss per share is calculated using average shares outstanding. In 2000 net investment loss per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. **<F5> The amount shown may not correlate with the aggregate gains and losses of portfolio securities due to the timing of subscriptions and redemptions of Fund shares. (1)<F6> Not Annualized. (2)<F7> Annualized. The accompanying notes to financial statements are an integral part of these statements. Reynolds Opportunity Fund SCHEDULE OF INVESTMENTS March 31, 2005 (Unaudited) SHARES VALUE ------ ----- LONG-TERM INVESTMENTS 75.4% (A)<F9> COMMON STOCKS -- 75.4% (A)<F9> APPLICATION SOFTWARE -- 1.3% 4,000 Business Objects S.A. - SP-ADR*<F8> $ 107,560 7,000 Compuware Corp.*<F8> 50,400 6,000 Novell, Inc.*<F8> 35,760 ----------- 193,720 BIOTECHNOLOGY -- 4.5% 10,000 Altair Nanotechnologies, Inc.*<F8> 35,700 15,000 AVANIR Pharmaceuticals*<F8> 33,000 24,000 Biomira, Inc.*<F8> 44,640 5,000 Incyte Corp.*<F8> 34,150 5,800 Orchid Biosciences, Inc.*<F8> 68,208 3,000 Protein Design Labs, Inc.*<F8> 47,970 2,000 Sepracor Inc.*<F8> 114,820 3,000 Serologicals Corp.*<F8> 73,320 4,000 StemCells, Inc.*<F8> 12,600 7,000 Transkaryotic Therapies, Inc.*<F8> 174,755 10,000 Vion Pharmaceuticals, Inc.*<F8> 28,500 ----------- 667,663 BUSINESS SOFTWARE & SERVICES -- 8.9% 13,000 Akamai Technologies, Inc.*<F8> 165,490 6,000 Aspen Technology, Inc.*<F8> 34,080 5,000 CheckFree Corp.*<F8> 203,800 18,000 Commtouch Software Ltd.*<F8> 12,600 7,000 Comverse Technology, Inc.*<F8> 176,540 500 CryptoLogic Inc. 15,490 3,000 Digital River, Inc.*<F8> 93,480 3,000 Monster Worldwide Inc.*<F8> 84,150 6,000 Radiant Systems, Inc.*<F8> 58,800 20,000 Sapient Corp.*<F8> 146,900 8,000 Sonic Solutions*<F8> 120,400 20,000 Sonus Networks, Inc.*<F8> 84,800 8,000 TIBCO Software Inc.*<F8> 59,600 22,000 Viewpoint Corp.*<F8> 61,600 ----------- 1,317,730 CABLE TV/BROADCASTING -- 3.6% 9,000 Crown Media Holdings, Inc.*<F8> 81,090 28,000 Sirius Satellite Radio Inc.*<F8> 157,360 3,840 UnitedGlobalCom, Inc.*<F8> 36,327 8,000 XM Satellite Radio Holdings Inc.*<F8> 252,000 ----------- 526,777 CHEMICALS-SPECIALTY -- 0.4% 5,000 W.R. Grace & Co.*<F8> 42,600 8,000 Isonics Corp.*<F8> 19,360 ----------- 61,960 COMMUNICATION EQUIPMENT -- 5.4% 7,000 Brocade Communications Systems, Inc.*<F8> 41,440 10,000 Corning Inc.*<F8> 111,300 4,000 Endwave Corp.*<F8> 95,040 5,000 L.M. Ericsson Telephone Co. ADR 141,000 20,000 Harmonic Inc.*<F8> 191,200 5,000 NETGEAR, Inc.*<F8> 75,450 4,000 QUALCOMM Inc.*<F8> 146,600 ----------- 802,030 COMMUNICATIONS SERVICES -- 0.3% 3,000 Crown Castle International Corp.*<F8> 48,180 COMPUTER & PERIPHERALS -- 2.1% 2,000 Apple Computer, Inc.*<F8> 83,340 5,000 Network Appliance, Inc.*<F8> 138,300 3,350 PalmOne, Inc.*<F8> 85,023 ----------- 306,663 COMPUTER NETWORKING -- 2.9% 6,600 Cisco Systems Inc.*<F8> 118,074 7,000 Foundry Networks, Inc.*<F8> 69,300 3,000 Juniper Networks, Inc.*<F8> 66,180 8,000 WebEx Communications, Inc.*<F8> 172,720 ----------- 426,274 COMPUTER SOFTWARE & SERVICES -- 0.3% 3,000 Wind River Systems, Inc.*<F8> 45,240 DIVERSIFIED -- 1.8% 17,000 Crown Holdings, Inc.*<F8> 264,520 DRUGS -- 0.7% 9,000 ARIAD Pharmaceuticals, Inc.*<F8> 50,400 1,000 Covance Inc.*<F8> 47,610 ----------- 98,010 ELECTRICAL EQUIPMENT -- 0.3% 2,000 PerkinElmer, Inc. 41,260 ELECTRONICS -- 0.5% 3,000 Brightpoint, Inc.*<F8> 56,190 10,000 GigaMedia Ltd.*<F8> 15,500 ----------- 71,690 ENERGY -- 0.2% 500 EOG Resources, Inc. 24,370 ENERGY-SERVICES -- 1.6% 1,500 Fiserv, Inc.*<F8> 59,700 1,500 NS Group, Inc.*<F8> 47,115 16,000 Parker Drilling Co.*<F8> 92,000 1,000 Veritas DGC Inc.*<F8> 29,960 ----------- 228,775 ENTERTAINMENT/MEDIA -- 1.0% 2,000 The Walt Disney Co. 57,460 4,000 Lions Gate Entertainment Corp.*<F8> 44,200 10,000 WorldGate Communications, Inc.*<F8> 39,000 ----------- 140,660 FINANCIAL SERVICES -- 1.9% 7,000 Ameritrade Holding Corp.*<F8> 71,470 8,000 E*TRADE Financial Corp.*<F8> 96,000 21,000 HomeStore, Inc.*<F8> 46,620 4,000 Providian Financial Corp.*<F8> 68,640 ----------- 282,730 GOLD & SILVER -- 1.1% 10,000 Coeur d'Alene Mines Corp.*<F8> 36,700 5,000 Pan American Silver Corp.*<F8> 79,275 14,000 Wheaton River Minerals Ltd.*<F8> 49,700 ----------- 165,675 HOUSEHOLD PRODUCTS -- 0.1% 2,000 Royal Group Technologies Ltd.*<F8> 21,100 INSTRUMENTS -- 0.3% 1,500 Itron, Inc.*<F8> 44,460 INSURANCE -- 0.4% 3,000 Danielson Holding Corp.*<F8> 51,750 INTERNET INFORMATION PROVIDERS -- 2.7% 3,000 Ask Jeeves, Inc.*<F8> 84,240 5,000 CNET Networks, Inc.*<F8> 47,200 2,000 InfoSpace, Inc.*<F8> 81,660 20,000 iVillage Inc.*<F8> 121,800 7,000 WebMD Corp.*<F8> 59,500 ----------- 394,400 INTERNET SERVICE PROVIDERS -- 0.4% 7,000 EarthLink, Inc.*<F8> 63,000 INTERNET SOFTWARE & SERVICES -- 2.7% 24,000 CMGI Inc.*<F8> 49,920 10,000 Openwave Systems Inc.*<F8> 121,900 9,000 Red Hat, Inc.*<F8> 98,190 2,500 Websense, Inc.*<F8> 134,500 ----------- 404,510 MEDICAL SERVICES -- 0.8% 1,000 Health Management Associates, Inc. 26,180 500 Lincare Holdings Inc.*<F8> 22,115 1,500 Triad Hospitals, Inc.*<F8> 75,150 ----------- 123,445 METALS -- 0.4% 3,000 Metals USA, Inc.*<F8> 58,770 PHOTOGRAPHY -- 0.5% 3,000 Komag, Inc.*<F8> 67,050 RETAIL-SPECIALTY -- 3.2% 2,000 Best Buy Co., Inc. 108,020 8,000 Circuit City Stores, Inc. 128,400 2,000 Foot Locker, Inc. 58,600 2,000 J. Jill Group Inc.*<F8> 27,520 8,000 Navarre Corp.*<F8> 63,600 3,000 PC Connection, Inc.*<F8> 17,610 3,000 Pep Boys-Manny, Moe & Jack 52,740 1,000 Saks Inc.*<F8> 18,050 ----------- 474,540 RETAIL STORES -- 0.3% 2,000 The Gap, Inc. 43,680 SECURITY SOFTWARE & SERVICES -- 4.2% 4,000 Check Point Software Technologies Ltd.*<F8> 86,960 4,000 Internet Security Systems, Inc.*<F8> 73,200 6,000 McAfee, Inc.*<F8> 135,360 11,000 VeriSign, Inc.*<F8> 315,700 ----------- 611,220 SEMICONDUCTOR CAPITAL SPENDING -- 1.6% 5,000 ASML Holding N.V. - NYS*<F8> 83,850 10,000 Semitool, Inc.*<F8> 102,000 3,000 Teradyne, Inc.*<F8> 43,800 ----------- 229,650 SEMICONDUCTORS -- 10.9% 11,000 Atmel Corp.*<F8> 32,450 4,000 Broadcom Corp.*<F8> 119,680 10,000 Cirrus Logic, Inc.*<F8> 45,200 6,000 Cypress Semiconductor Corp.*<F8> 75,600 4,000 Flextronics International Ltd.*<F8> 48,160 8,000 Integrated Device Technology, Inc.*<F8> 96,240 4,200 Intel Corp. 97,566 4,000 Lam Research Corp.*<F8> 115,440 1,500 Marvell Technology Group Ltd.*<F8> 57,510 17,000 Mattson Technology, Inc.*<F8> 134,980 9,666 Mindspeed Technologies Inc.*<F8> 21,555 10,000 MIPS Technologies, Inc.*<F8> 115,000 3,000 NVIDIA Corp.*<F8> 71,280 12,000 PLX Technology, Inc.*<F8> 126,000 18,000 PMC-Sierra, Inc.*<F8> 158,400 12,000 Rambus Inc.*<F8> 180,840 5,000 SIPEX Corp.*<F8> 11,600 4,000 Texas Instruments Inc. 101,960 ----------- 1,609,461 SERVICES -- 0.5% 10,000 EVCI Career Colleges Holding Corp.*<F8> 76,000 SYSTEM SOFTWARE -- 0.5% 13,000 Parametric Technology Corp.*<F8> 72,670 TELECOMMUNICATIONS -- 1.3% 6,000 Avaya Inc.*<F8> 70,080 10,000 Lucent Technologies Inc.*<F8> 27,500 16,000 Nortel Networks Corp.*<F8> 43,680 7,000 Tellabs, Inc.*<F8> 51,100 ----------- 192,360 TRANSPORTATION -- 0.1% 2,000 MC Shipping, Inc. 16,220 WIRELESS COMMUNICATION -- 5.7% 8,500 Motorola, Inc. 127,245 5,000 Research In Motion Ltd.*<F8> 382,100 3,000 Sprint Corp. (FON Group) 68,250 9,000 Telesystem International Wireless Inc.*<F8> 137,250 18,000 UbiquiTel Inc.*<F8> 120,600 ----------- 835,445 ----------- Total common stocks (cost $6,402,264) 11,103,658 ----------- Total long-term investments (cost $6,402,264) 11,103,658 PRINCIPAL AMOUNT --------- SHORT-TERM INVESTMENTS -- 24.6% (A)<F9> U.S. TREASURY SECURITIES -- 20.3% $750,000 U.S. Treasury Bills, 2.50%, due 4/07/05 749,688 750,000 U.S. Treasury Bills, 2.51%, due 4/14/05 749,320 750,000 U.S. Treasury Bills, 2.55%, due 4/21/05 748,933 750,000 U.S. Treasury Bills, 2.56%, due 4/28/05 748,560 ----------- Total U.S. treasury securities (cost $2,996,501) 2,996,501 ----------- Variable Rate Demand Note -- 4.3% 635,121 U.S. Bank, N.A., 2.60% 635,121 ----------- Total variable rate demand note (cost $635,121) 635,121 ----------- Total short-term investments (cost $3,361,622) 3,631,622 ----------- Total investments -- 100% (cost $10,033,886) $14,735,280 ----------- ----------- *<F8> Non-income producing security. (A)<F9> Percentages for the various classifications relate to total investments. ADR - American Depository Receipt N.V. - Netherlands Antilles Limited Liability Corporation NYS - New York Registered Shares The accompanying notes to financial statements are an integral part of this schedule. Reynolds Opportunity Fund STATEMENT OF ASSETS AND LIABILITIES March 31, 2005 (Unaudited) ASSETS: Investments in securities, at value (cost $10,033,886) $14,735,280 Receivable from investments sold 1,030,324 Dividends and interest receivable 2,661 ----------- Total assets $15,768,265 ----------- ----------- LIABILITIES: Payable to brokers for securities purchased $ 770,832 Payable to adviser for management fees 12,946 Payable to shareholders for redemptions 7,997 Due to custodian 5,334 Payable to administrator for administrative fees 2,589 Interest payable 258 Other liabilities 56,399 ----------- Total liabilities 856,355 ----------- NET ASSETS: Capital Stock, $0.01 par value; 40,000,000 shares authorized; 937,924 shares outstanding 11,237,702 Net unrealized appreciation on investments 4,701,394 Accumulated net realized loss on investments (1,027,186) ----------- Net assets 14,911,910 ----------- Total liabilities and net assets $15,768,265 ----------- ----------- CALCULATION OF NET ASSET VALUE PER SHARE: Net asset value, offering and redemption price per share ($14,911,910 / 937,924 shares outstanding) $ 15.90 ----------- ----------- 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, 2005 (Unaudited) INCOME: Dividends $ 5,225 Interest 4,647 ---------- Total income 9,872 ---------- EXPENSES: Management fees 90,720 Administrative services 19,608 Transfer agent fees 15,540 Distribution fees 13,650 Professional fees 11,787 Registration fees 8,884 Printing and postage expense 8,423 Custodian fees 6,136 Insurance expense 4,447 Board of Directors fees 2,500 Other expenses 769 ---------- Total operating expenses before interest expense 182,464 Interest expense 5,325 ---------- Total expenses 187,789 ---------- NET INVESTMENT LOSS (177,917) ---------- NET REALIZED LOSS ON INVESTMENTS (749,117) NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,571,411 ---------- NET GAIN ON INVESTMENTS 822,294 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 644,377 ---------- ---------- The accompanying notes to financial statements are an integral part of this statement. Reynolds Opportunity Fund STATEMENTS OF CHANGES IN NET ASSETS For the Six Months Ending March 31, 2005 (Unaudited) and For the Year Ended September 30, 2004 2005 2004 ---- ---- OPERATIONS: Net investment loss $ (177,917) $ (566,724) Net realized (loss) gain on investments (749,117) 2,004,803 Net change in unrealized appreciation on investments 1,571,411 (2,992,834) ----------- ----------- Net increase (decrease) in net assets resulting from operations 644,377 (1,554,755) ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net realized gains ($1.30480 and $0.73628 per share, respectively) (1,432,499) (1,226,731)*<F10> ----------- ----------- FUND SHARE ACTIVITIES: Proceeds from shares issued (311,657 and 1,920,545 shares, respectively) 5,457,373 40,315,699 Net asset value of shares issued in distributions reinvested (82,940 and 57,761 shares, respectively) 1,389,237 1,193,946 Cost of shares redeemed (572,949 and 2,308,497 shares, respectively) (10,001,928) (46,318,679) ----------- ----------- Net decrease in net assets derived from Fund share activities (3,155,318) (4,809,034) ----------- ----------- TOTAL DECREASE (3,943,440) (7,590,520) NET ASSETS AT THE BEGINNING OF THE PERIOD 18,855,350 26,445,870 ----------- ----------- NET ASSETS AT THE END OF THE PERIOD $14,911,910 $18,855,350 ----------- ----------- ----------- ----------- *<F10> See Note 7 FINANCIAL HIGHLIGHTS (Selected data for each share of the Fund outstanding throughout each period) (UNAUDITED) FOR THE SIX FOR THE YEARS ENDED SEPTEMBER 30, MONTHS ENDING ------------------------------------------------------------- MARCH 31, 2005 2004 2003 2002 2001 2000 -------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $16.89 $18.28 $11.24 $16.82 $43.31 $34.23 Income from investment operations: Net investment loss*<F11> (0.17) (0.38) (0.23) (0.23) (0.37) (0.56) Net realized and unrealized gain (loss) on investments 0.48 (0.27) 7.27 (5.31) (25.47) 9.74 ------ ------ ------ ------ ------ ------ Total from investment operations 0.31 (0.65) 7.04 (5.54) (25.84) 9.18 Less distributions: Dividend from net investment income -- -- -- -- -- -- Distributions from net realized gains (1.30) (0.74) -- (0.04) (0.65) (0.10) ------ ------ ------ ------ ------ ------ Total from distributions (1.30) (0.74) -- (0.04) (0.65) (0.10) ------ ------ ------ ------ ------ ------ Net asset value, end of period $15.90 $16.89 $18.28 $11.24 $16.82 $43.31 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN 1.47%(1)<F12> (4.29%) 62.63% (33.02%) (60.44%) 26.91% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's $) 14,912 18,855 26,446 14,065 27,794 104,610 Ratio of operating expenses before interest expense to average net assets 2.01%(2)<F13> 1.91% 1.98% 1.84% 1.69% 1.31% Ratio of interest expense to average net assets 0.06%(2)<F13> 0.05% 0.04% 0.03% 0.05% 0.00% Ratio of net investment loss to average net assets (1.96%)(2)<F13> (1.87%) (1.56%) (1.33%) (1.29%) (0.97%) Portfolio turnover rate 16.0% 65.7% 88.4% 195.0% 74.0% 8.8% *<F11> In 2005, 2004, 2003, 2002 and 2001, net investment loss per share is calculated using average shares outstanding. In 2000 net investment loss per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. (1)<F12> Not Annualized. (2)<F13> Annualized. The accompanying notes to financial statements are an integral part of these statements. Reynolds Fund SCHEDULE OF INVESTMENTS March 31, 2005 (Unaudited) SHARES VALUE ------ ----- LONG-TERM INVESTMENTS -- 96.8% (A)<F15> COMMON STOCKS -- 96.8% (A)<F15> ADVERTISING -- 1.2% 24,000 ValueClick, Inc.*<F14> $ 254,640 APPLICATION SOFTWARE -- 1.2% 500 Cognos, Inc.*<F14> 20,970 10,000 Compuware Corp.*<F14> 72,000 10,000 Novell, Inc.*<F14> 59,600 5,000 VERITAS Software Corp.*<F14> 116,100 ----------- 268,670 BIOTECHNOLOGY -- 4.3% 19,000 AVANIR Pharmaceuticals*<F14> 41,800 19,000 The Immune Response Corp.*<F14> 14,820 18,000 Incyte Corp.*<F14> 122,940 16,800 Orchid Biosciences, Inc.*<F14> 197,568 42,000 Peregrine Pharmaceuticals, Inc.*<F14> 61,740 5,000 Protein Design Labs, Inc.*<F14> 79,950 5,000 Serologicals Corp.*<F14> 122,200 16,000 StemCells, Inc.*<F14> 50,400 4,000 Transkaryotic Therapies, Inc.*<F14> 99,860 47,000 Vion Pharmaceuticals, Inc.*<F14> 133,950 ----------- 925,228 BUSINESS SOFTWARE & SERVICES -- 7.9% 10,000 Akamai Technologies, Inc.*<F14> 127,300 10,000 Aspen Technology, Inc.*<F14> 56,800 3,000 Comverse Technology, Inc.*<F14> 75,660 72,000 I-many, Inc.*<F14> 114,480 18,000 Manugistics Group, Inc.*<F14> 30,240 15,000 Onstream Media Corp.*<F14> 24,750 30,466 OpenTV Corp.*<F14> 86,523 2,000 Quest Software, Inc.*<F14> 27,680 27,000 Radiant Systems, Inc.*<F14> 264,600 11,000 Sapient Corp.*<F14> 80,795 5,000 Sonic Solutions*<F14> 75,250 45,000 Sonus Networks, Inc.*<F14> 190,800 45,000 TIBCO Software Inc.*<F14> 335,250 53,000 Viewpoint Corp.*<F14> 148,400 11,000 webMethods, Inc.*<F14> 60,280 ----------- 1,698,808 CABLE TV/BROADCASTING -- 4.6% 5,000 Crown Media Holdings, Inc.*<F14> 45,050 70,000 Sirius Satellite Radio Inc.*<F14> 393,400 16,640 UnitedGlobalCom, Inc.*<F14> 157,414 12,500 XM Satellite Radio Holdings Inc.*<F14> 393,750 ----------- 989,614 CHEMICALS -- 0.3% 4,000 Wellman, Inc. 57,840 CHEMICALS-SPECIALTY -- 0.9% 19,000 Isonics Corp.*<F14> 45,980 7,000 KFx Inc.*<F14> 93,800 5,000 Star Scientific, Inc.*<F14> 26,450 4,000 Terra Industries Inc.*<F14> 31,040 ----------- 197,270 COMMUNICATION EQUIPMENT -- 5.8% 13,000 Brocade Communications Systems, Inc.*<F14> 76,960 12,000 Concurrent Computer Corp.*<F14> 24,720 12,000 Corning Inc.*<F14> 133,560 61,000 Digital Lightwave, Inc.*<F14> 48,190 8,000 Endwave Corp.*<F14> 190,080 3,000 L.M. Ericsson Telephone Co. ADR 84,600 52,000 Harmonic Inc.*<F14> 497,120 8,000 Network Equipment Technologies, Inc.*<F14> 45,040 5,000 Plexus Corp.*<F14> 57,550 21,000 Terayon Communication Systems, Inc.*<F14> 64,680 12,100 Zhone Technologies, Inc.*<F14> 30,855 ----------- 1,253,355 COMMUNICATION SERVICES -- 0.4% 5,000 Crown Castle International Corp.*<F14> 80,300 COMPUTER & PERIPHERALS -- 3.3% 7,000 Network Appliance, Inc.*<F14> 193,620 6,710 PalmOne, Inc.*<F14> 170,300 28,000 Quantum Corp.*<F14> 81,480 7,000 SimpleTech, Inc.*<F14> 27,580 9,000 Symbol Technologies, Inc. 130,410 8,000 Western Digital Corp.*<F14> 102,000 ----------- 705,390 COMPUTER NETWORKING -- 3.4% 9,000 Computer Network Technology Corp.*<F14> 41,580 15,000 Extreme Networks, Inc.*<F14> 88,350 9,000 Foundry Networks, Inc.*<F14> 89,100 5,000 Juniper Networks, Inc.*<F14> 110,300 13,000 Sierra Wireless, Inc.*<F14> 106,860 14,000 WebEx Communications, Inc.*<F14> 302,260 ----------- 738,450 COMPUTER SOFTWARE & SERVICES -- 2.1% 11,000 Borland Software Corp.*<F14> 89,320 29,000 Silicon Graphics, Inc.*<F14> 34,510 14,000 VA Software Corp.*<F14> 23,100 21,000 Wind River Systems, Inc.*<F14> 316,680 ----------- 463,610 DIVERSIFIED -- 2.0% 27,500 Crown Holdings, Inc.*<F14> 427,900 DRUGS -- 0.8% 49,000 Alteon Inc.*<F14> 28,910 18,000 ARIAD Pharmaceuticals, Inc.*<F14> 100,800 68,000 Questcor Pharmaceuticals, Inc.*<F14> 38,760 ----------- 168,470 ELECTRICAL EQUIPMENT -- 0.2% 32,000 Arotech Corp.*<F14> 44,480 ELECTRONICS -- 2.2% 39,000 Alanco Technologies, Inc.*<F14> 44,850 40,000 GigaMedia Ltd.*<F14> 62,000 18,000 Micrel, Inc.*<F14> 165,960 20,000 Powerwave Technologies, Inc.*<F14> 154,800 13,000 SRS Labs, Inc.*<F14> 51,870 ----------- 479,480 ENERGY -- 0.7% 60,000 Harken Energy Corp.*<F14> 29,400 18,000 TransGlobe Energy Corp.*<F14> 115,560 ----------- 144,960 ENERGY-SERVICES -- 1.6% 38,000 Parker Drilling Co.*<F14> 218,500 4,000 Veritas DGC Inc.*<F14> 119,840 ----------- 338,340 ENTERTAINMENT/MEDIA -- 1.8% 12,000 Napster Inc.*<F14> 78,120 82,000 WorldGate Communications, Inc.*<F14> 319,800 ----------- 397,920 FINANCIAL SERVICES -- 1.6% 50,000 HomeStore, Inc.*<F14> 111,000 4,000 Knight Trading Group, Inc.*<F14> 38,560 10,000 Providian Financial Corp.*<F14> 171,600 3,000 The Charles Schwab Corp. 31,530 ----------- 352,690 GOLD & SILVER -- 2.4% 11,000 Coeur d'Alene Mines Corp.*<F14> 40,370 23,000 Northgate Minerals Corp.*<F14> 32,890 8,000 Pan American Silver Corp.*<F14> 126,840 90,000 Wheaton River Minerals Ltd.*<F14> 319,500 ----------- 519,600 HOTEL -- 0.5% 139,000 Wyndham International, Inc.*<F14> 111,200 HOUSEHOLD PRODUCTS -- 0.2% 14,000 Revlon, Inc.*<F14> 40,320 INSTRUMENTS -- 0.4% 4,000 Clinical Data, Inc. 65,600 10,000 Therma-Wave Inc.*<F14> 19,300 ----------- 84,900 INSURANCE -- 0.7% 4,000 Danielson Holding Corp.*<F14> 69,000 35,000 SCOR SP-ADR*<F14> 74,550 ----------- 143,550 INTERNET -- 0.2% 3,000 Jupitermedia Corp.*<F14> 46,530 INTERNET INFORMATION PROVIDERS -- 4.6% 5,000 Autobytel Inc.*<F14> 25,200 45,000 BackWeb Technologies Ltd.*<F14> 24,750 25,000 CNET Networks, Inc.*<F14> 236,000 45,000 iVillage Inc.*<F14> 274,050 3,000 Sohu.com Inc.*<F14> 52,740 63,000 theglobe.com, inc.*<F14> 9,135 96,000 Verticalnet, Inc.*<F14> 83,520 23,000 WebMD Corp.*<F14> 195,500 3,000 Yahoo! Inc.*<F14> 101,700 ----------- 1,002,595 INTERNET SERVICE PROVIDERS -- 1.0% 100,000 Internap Network Services Corp.*<F14> 59,000 5,000 SINA Corp.*<F14> 155,300 ----------- 214,300 INTERNET SOFTWARE & SERVICES -- 6.2% 10,000 Art Technology Group, Inc.*<F14> 10,500 111,000 CMGI Inc.*<F14> 230,880 15,333 Openwave Systems Inc.*<F14> 186,909 7,000 RealNetworks, Inc.*<F14> 40,460 17,000 Red Hat, Inc.*<F14> 185,470 44,000 Safeguard Scientifics, Inc.*<F14> 62,480 8,500 SkyTerra Communications, Inc.*<F14> 328,525 14,000 SonicWALL, Inc.*<F14> 71,260 38,000 Youbet.com, Inc.*<F14> 222,680 ----------- 1,339,164 MEDICAL SERVICES -- 0.1% 5,000 Delcath Systems Inc.*<F14> 11,700 MEDICAL SUPPLIES -- 0.8% 3,000 Cytyc Corp.*<F14> 69,030 25,000 HearUSA, Inc.*<F14> 49,750 7,000 Sonic Innovations, Inc.*<F14> 39,060 26,000 Vasomedical, Inc.*<F14> 24,440 ----------- 182,280 METALS -- 0.7% 2,000 Commercial Metals Co. 67,780 3,000 NS Group, Inc.*<F14> 94,230 ----------- 162,010 OFFICE EQUIPMENT & SUPPLIES -- 0.6% 8,000 Xerox Corp.*<F14> 121,200 PHOTOGRAPHY -- 0.7% 7,000 Komag, Inc.*<F14> 156,450 RESTAURANTS -- 0.8% 16,000 Luby's, Inc.*<F14> 124,000 2,000 O'Charley's Inc.*<F14> 43,480 ----------- 167,480 RETAIL-SPECIALTY -- 2.3% 85,000 Ableauctions.com, Inc.*<F14> 49,300 22,000 Charming Shoppes, Inc.*<F14> 178,860 2,000 eBay Inc.*<F14> 74,520 8,000 Navarre Corp.*<F14> 63,600 9,000 PC Connection, Inc.*<F14> 52,830 3,000 Stein Mart, Inc.*<F14> 67,500 ----------- 486,610 SECURITY SOFTWARE & SERVICES -- 4.7% 3,000 Check Point Software Technologies Ltd.*<F14> 65,220 4,000 Internet Security Systems, Inc.*<F14> 73,200 6,000 McAfee, Inc.*<F14> 135,360 12,000 RSA Security Inc.*<F14> 190,200 2,350 SafeNet, Inc.*<F14> 68,879 5,000 Secure Computing Corp.*<F14> 42,850 6,000 VASCO Data Security International, Inc.*<F14> 37,740 11,000 VeriSign, Inc.*<F14> 315,700 66,000 Vignette Corp.*<F14> 86,460 ----------- 1,015,609 SEMICONDUCTOR CAPITAL SPENDING -- 3.3% 15,000 Asyst Technologies, Inc.*<F14> 71,850 32,000 ISCO International Inc.*<F14> 9,920 6,000 Ixia*<F14> 106,740 15,000 Kulicke and Soffa Industries, Inc.*<F14> 94,350 10,000 Semitool, Inc.*<F14> 102,000 12,000 Teradyne, Inc.*<F14> 175,200 113,000 TranSwitch Corp.*<F14> 154,810 ----------- 714,870 SEMICONDUCTORS -- 11.5% 4,000 ATI Technologies Inc.*<F14> 69,040 21,000 Atmel Corp.*<F14> 61,950 6,000 Cirrus Logic, Inc.*<F14> 27,120 28,336 Conexant Systems, Inc.*<F14> 42,504 12,000 Integrated Device Technology, Inc.*<F14> 144,360 21,000 LSI Logic Corp.*<F14> 117,390 24,000 Mattson Technology, Inc.*<F14> 190,560 5,000 MEMC Electronic Materials, Inc.*<F14> 67,250 43,666 Mindspeed Technologies Inc.*<F14> 97,375 10,000 MIPS Technologies, Inc.*<F14> 115,000 4,000 Multi-Fineline Electronix, Inc.*<F14> 70,600 3,000 NVIDIA Corp.*<F14> 71,280 35,000 Oplink Communications, Inc.*<F14> 54,950 21,000 PLX Technology, Inc.*<F14> 220,500 25,000 PMC-Sierra, Inc.*<F14> 220,000 4,000 Rambus Inc.*<F14> 60,280 24,000 RF Micro Devices, Inc.*<F14> 125,280 26,000 SIPEX Corp.*<F14> 60,320 11,000 Solectron Corp.*<F14> 38,170 50,000 TriQuint Semiconductor, Inc.*<F14> 169,000 11,321 United Microelectronics Corp. SP-ADR*<F14> 38,152 88,000 Vitesse Semiconductor Corp.*<F14> 235,840 6,000 Xilinx, Inc. 175,380 ----------- 2,472,301 SERVICES -- 1.5% 24,000 EVCI Career Colleges Holding Corp.*<F14> 182,400 6,000 Ventiv Health, Inc.*<F14> 138,000 ----------- 320,400 SYSTEM SOFTWARE -- 0.2% 9,000 Parametric Technology Corp.*<F14> 50,310 TELECOMMUNICATIONS -- 0.8% 5,000 Avaya Inc.*<F14> 58,400 90,000 McLeodUSA Inc.*<F14> 16,200 14,000 McLeodUSA Inc. ESCROW SHRS*<F14> 0 8,400 Nortel Networks Corp.*<F14> 22,932 12,000 Qiao Xing Universal Telephone, Inc.*<F14> 71,760 ----------- 169,292 TELEPHONE SERVICES -- 1.2% 5,000 Cable & Wireless PLC - SP-ADR 36,400 2,000 MCI Inc. 49,840 31,000 Primus Telecommunications Group, Inc.*<F14> 48,670 33,000 Time Warner Telecom Inc.*<F14> 131,010 ----------- 265,920 TIRE & RUBBER -- 1.7% 25,000 Titan International, Inc. 359,250 UTILITIES -- 0.4% 93,000 Beacon Power Corp.*<F14> 95,790 WIRELESS COMMUNICATION -- 3.0% 4,000 Sprint Corp. (FON Group) 91,000 6,000 TeleCommunication Systems, Inc.*<F14> 16,020 10,500 Telesystem International Wireless Inc.*<F14> 160,125 31,000 Tumbleweed Communications Corp.*<F14> 85,560 44,000 UbiquiTel Inc.*<F14> 294,800 ----------- 647,505 ----------- Total common stocks (cost $17,153,758) 20,888,551 ----------- RIGHTS -- 0.0% (A)<F15> 3,280 VI Technologies, Inc.*<F14> 0 6,800 Virologic, Inc. CVR*<F14> 2,040 ----------- Total rights (cost $0) 2,040 ----------- Total long-term investments (cost $17,153,758) 20,890,591 PRINCIPAL AMOUNT --------- SHORT-TERM INVESTMENTS -- 3.2% (A)<F15> U.S. TREASURY SECURITIES -- 3.2% $700,000 U.S. Treasury Bills, 2.18%, due 4/07/05 $ 699,873 ----------- Total U.S. treasury securities (cost $699,873) 699,873 ----------- VARIABLE RATE DEMAND NOTE -- 0.0% 671 U.S. Bank, N.A., 2.60% 671 ----------- Total variable rate demand note (cost $671) 671 ----------- Total short-term investments (cost $700,544) 700,544 ----------- Total investments -- 100% (cost $17,854,302) $21,591,135 ----------- ----------- *<F14> Non-income producing security. (A)<F15> Percentages for the various classifications relate to total investments. ADR - American Depository Receipt CVR - Contingent Value Right The accompanying notes to financial statements are an integral part of this schedule. Reynolds Fund STATEMENT OF ASSETS AND LIABILITIES March 31, 2005 (Unaudited) ASSETS: Investments in securities, at value (cost $17,854,302) $21,591,135 Receivable from investments sold 4,945,367 Receivable from shareholders for purchases 5,500 Dividends and interest receivable 1,361 ----------- Total assets $26,543,363 ----------- ----------- LIABILITIES: Payable to U.S. Bank, loan $ 2,531,000 Payable to brokers for securities purchased 699,873 Interest payable 23,547 Payable to adviser for management fees 21,127 Due to custodian 16,214 Payable for shareholders redemptions 7,627 Payable to administrator for administrative fees 4,225 Other liabilities 53,981 ----------- Total liabilities 3,357,594 ----------- NET ASSETS: Capital Stock, $0.01 par value; 40,000,000 shares authorized; 4,320,692 shares outstanding 73,063,218 Net unrealized appreciation on investments 3,736,833 Accumulated net realized loss on investments (53,614,282) ----------- Net assets 23,185,769 ----------- Total liabilities and net assets $26,543,363 ----------- ----------- CALCULATION OF NET ASSET VALUE PER SHARE: Net asset value, offering and redemption price per share ($23,185,769 / 4,320,692 shares outstanding) $ 5.37 ----------- ----------- The accompanying notes to financial statements are an integral part of this statement. Reynolds Fund STATEMENT OF OPERATIONS For the Six Months Ending March 31, 2005 (Unaudited) INCOME: Dividends $ 7,405 Interest 5 ----------- Total income 7,410 ----------- EXPENSES: Management fees 165,292 Administrative services 31,773 Distribution fees 22,750 Transfer agent fees 20,357 Custodian fees 15,843 Professional fees 13,212 Printing and postage expense 12,504 Registration fees 12,382 Insurance expense 8,723 Board of Directors fees 2,500 Other expenses 1,100 ----------- Total operating expenses before interest expense 306,436 Interest expense 254,982 ----------- Total expenses 561,418 ----------- NET INVESTMENT LOSS (554,008) ----------- NET REALIZED LOSS ON INVESTMENTS (9,035,832) NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 10,684,841 ----------- NET GAIN ON INVESTMENTS 1,649,009 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,095,001 ----------- ----------- The accompanying notes to financial statements are an integral part of this statement. Reynolds Fund STATEMENT OF CASH FLOWS For the Six Months Ending March 31, 2005 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets from operations $ 1,095,001 Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities: Unrealized appreciation on securities (10,684,841) Net realized loss from investments 9,035,832 Purchase of investment securities (5,974,412) Increase in payable for securities purchased 699,873 Purchase of short-term investment securities, net (699,574) Proceeds from disposition of investment securities 33,421,447 Increase in receivables for securities sold (4,837,752) Change in receivables/payables related to operations, net (11,831) ----------- Net cash used in operating activities 22,043,743 ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in loan payable (10,240,000) Proceeds from shares sold 8,324,306 Payment on shares redeemed (19,933,881) Decrease in amount due to custodian (194,168) ----------- Net cash provided by financing activities (22,043,743) ----------- NET CHANGE IN CASH -- CASH: Beginning balance -- ----------- Ending balance $ -- ----------- ----------- The accompanying notes to financial statements are an integral part of this statement. Reynolds Fund STATEMENTS OF CHANGES IN NET ASSETS For the Six Months Ending March 31, 2005 (Unaudited) and For the Year Ended September 30, 2004 2005 2004 ---- ---- OPERATIONS: Net investment loss $ (554,008) $(1,259,324) Net realized loss on investments (9,035,832) (4,840,330) Net change in unrealized appreciation on investments 10,684,841 (10,266,707) ----------- ----------- Net increase (decrease) in net assets resulting from operations 1,095,001 (16,366,361) ----------- ----------- FUND SHARE ACTIVITIES: Proceeds from shares issued (1,346,787 and 17,693,276 shares, respectively) 8,230,306 133,527,947 Cost of shares redeemed (3,297,889 and 16,871,426 shares, respectively) (19,933,401) (116,096,075) ----------- ----------- Net (decrease) increase in net assets derived from Fund share activities (11,703,095) 17,431,872 ----------- ----------- TOTAL (DECREASE) INCREASE (10,608,094) 1,065,511 NET ASSETS AT THE BEGINNING OF THE PERIOD 33,793,863 32,728,352 ----------- ----------- NET ASSETS AT THE END OF THE PERIOD $23,185,769 $33,793,863 ----------- ----------- ----------- ----------- FINANCIAL HIGHLIGHTS (Selected data for each share of the Fund outstanding throughout each period) (UNAUDITED) FOR THE SIX FOR THE YEARS ENDED SEPTEMBER 30, MONTHS ENDING ------------------------------------------------------- MARCH 31, 2005 2004 2003 2002 2001 2000+<F16> -------------- ---- ---- ---- ---- ---------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 5.39 $ 6.01 $ 3.01 $ 4.35 $13.14 $10.00 Income from investment operations: Net investment loss (0.10) (0.16) (0.11) (0.06) (0.09) (0.12) Net realized and unrealized gain (loss) on investments 0.08 (0.46) 3.11 (1.28) (8.70) 3.26 ------ ------ ------ ------ ------ ------ Total from investment operations (0.02) (0.62) 3.00 (1.34) (8.79) 3.14 Less distributions: Dividend from net investment income -- -- -- -- -- -- Distribution from net realized gains -- -- -- -- -- -- ------ ------ ------ ------ ------ ------ Total from distributions -- -- -- -- -- -- ------ ------ ------ ------ ------ ------ Net asset value, end of period $ 5.37 $ 5.39 $ 6.01 $ 3.01 $ 4.35 $13.14 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN (0.37%)(1)<F19> (10.17%) 99.67% (30.80%) (66.89%) 31.40% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's $) 23,186 33,794 32,728 10,481 20,136 69,255 Ratio of operating expenses before interest expense (after reimbursement) to average net assets*<F17> 1.86%(2)<F20> 1.72% 1.93% 1.85% 1.51% 1.45% Ratio of interest expense to average net assets 1.54%(2)<F20> 0.57% 0.89% 0.22% 0.15% 0.00% Ratio of net investment loss to average net assets**<F18> (3.36%)(2)<F20> (2.24%) (2.41%) (1.41%) (0.89%) (1.16%) Portfolio turnover rate 13.8% 79.5% 119.9% 408.5% 275.5% 23.6% +<F16> Commencement of operations October 1, 1999. *<F17> Computed after giving effect to adviser's expense limitation undertaking. If the Fund had paid all of its expenses for the year ended September 30, 2003, the ratio would have been 1.99%. **<F18> If the Fund had paid all of its expenses for the year ended September 30, 2003, the ratio would have been (2.47%). (1)<F19> Not Annualized. (2)<F20> Annualized. The accompanying notes to financial statements are an integral part of these statements. Reynolds Balanced Fund STATEMENT OF NET ASSETS March 31, 2005 (Unaudited) SHARES VALUE ------ ----- LONG-TERM INVESTMENTS -- 77.0% (A)<F22> COMMON STOCKS -- 17.2% (A)<F22> BANKS -- 3.4% 400 Bank of America Corp. $ 17,640 200 Citigroup Inc. 8,988 500 JPMorgan Chase & Co. 17,300 200 Wells Fargo & Co. 11,960 ---------- 55,888 BEVERAGES -- 0.8% 300 The Coca-Cola Co. 12,501 CHEMICALS -- 0.6% 200 E.I. du Pont de Nemours and Co. 10,248 DRUGS -- 1.8% 300 Bristol-Myers Squibb Co. 7,638 400 Merck & Co. Inc. 12,948 300 Pfizer Inc. 7,881 ---------- 28,467 ELECTRICAL EQUIPMENT -- 0.7% 300 General Electric Co. 10,818 ENERGY -- 0.7% 200 Royal Dutch Petroleum Co. NYS 12,008 FINANCIAL SERVICES -- 1.8% 200 PNC Financial Services Group, Inc. 10,296 200 Wachovia Corp. 10,182 200 Washington Mutual, Inc. 7,900 ---------- 28,378 FOODS -- 1.3% 200 Altria Group, Inc. 13,078 300 ConAgra Foods, Inc. 8,106 ---------- 21,184 GROCERY STORES -- 0.4% 300 Albertson's, Inc. 6,195 HOME APPLIANCES -- 0.3% 400 Maytag Corp. 5,588 HOUSEHOLD PRODUCTS -- 1.2% 400 Newell Rubbermaid Inc. 8,776 500 Tupperware Corp. 10,180 ---------- 18,956 TELEPHONE SERVICES -- 1.7% 300 BellSouth Corp. 7,887 400 SBC Communications Inc. 9,476 300 Verizon Communications Inc. 10,650 ---------- 28,013 UTILITIES -- 2.5% 300 Hawaiian Electric Industries, Inc. 7,656 200 Kinder Morgan, Inc. 15,140 400 Puget Energy, Inc. 8,816 300 Southern Co. 9,549 ---------- 41,161 ---------- Total common stocks (cost $290,432) 279,405 ---------- PRINCIPAL AMOUNT ------ FEDERAL AGENCIES -- 59.8% (A)<F22> $300,000 Federal Home Loan Bank, 3.00%, due 12/10/05 (B)<F23> 291,429 200,000 Federal Home Loan Mortgage Corp., 3.50%, due 3/26/06 (B)<F23> 196,037 200,000 Federal Home Loan Bank, 3.00%, due 3/30/06 (B)<F23> 195,149 300,000 Federal Home Loan Bank, 3.30%, due 12/18/08 289,710 ---------- Total federal agencies (cost $998,571) 972,325 ---------- Total long-term investments (cost $1,289,003) 1,251,730 SHORT-TERM INVESTMENTS -- 22.6% (A)<F22> U.S. TREASURY SECURITIES -- 18.4% 100,000 U.S. Treasury Bills, 2.50%, due 4/07/05 99,958 100,000 U.S. Treasury Bills, 2.51%, due 4/14/05 99,910 100,000 U.S. Treasury Bills, 2.55%, due 4/21/05 99,858 ---------- Total U.S. treasury securities (cost $299,726) 299,726 ---------- VARIABLE RATE DEMAND NOTE -- 4.2% 67,986 U.S. Bank, N.A., 2.60% 67,986 ---------- Total variable rate demand note (cost $67,986) 67,986 ---------- Total short-term investments (cost $367,712) 367,712 ---------- Total investments (cost $1,656,715) 1,619,442 Cash and receivables, less liabilities -- 0.4% (A)<F22> 5,462 ---------- NET ASSETS $1,624,904 ---------- ---------- Net Asset Value Per Share ($0.01 par value, 20,000,000 shares authorized), offering and redemption price ($1,624,904 / 172,367 shares outstanding) $ 9.43 ---------- ---------- (A)<F22> Percentages for the various classifications relate to net assets. (B)<F23> Variable Rate Security - the rate reported is the rate in effect as of March 31, 2005. The date shown is the next interest adjustment date. NYS - New York Registered Shares The accompanying notes to financial statements are an integral part of this statement. Reynolds Balanced Fund STATEMENT OF OPERATIONS For the Six Months Ending March 31, 2005 (Unaudited) INCOME: Dividends $ 980 Interest 30,710 -------- Total income 31,690 -------- EXPENSES: Professional fees 15,747 Transfer agent fees 9,942 Management fees 7,525 Registration fees 5,115 Administrative services 2,050 Printing and postage expense 1,217 Custodian fees 756 Board of Directors fees 625 Insurance expense 520 Other expenses 620 -------- Total expenses before reimbursement and management fee waiver 44,117 Less expenses assumed by adviser (34,159) -------- Net expenses 9,958 -------- NET INVESTMENT INCOME 21,732 -------- NET REALIZED LOSS ON INVESTMENTS (19,172) NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (18,539) -------- NET LOSS ON INVESTMENTS (37,711) -------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(15,979) -------- -------- The accompanying notes to financial statements are an integral part of this statement. Reynolds Balanced Fund STATEMENTS OF CHANGES IN NET ASSETS For the Six Months Ending March 31, 2005 (Unaudited) and For the Year Ended September 30, 2004 2005 2004 ---- ---- OPERATIONS: Net investment income $ 21,732 $ 69,456 Net realized loss on investments (19,172) (4,459) Net change in unrealized appreciation on investments (18,539) (7,757) ---------- ---------- Net (decrease) increase in net assets resulting from operations (15,979) 57,240 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income ($0.1014 and $0.2202 per share, respectively) (21,532) (69,456) ---------- ---------- FUND SHARE ACTIVITIES: Proceeds from shares issued (1,292 and 60,298 shares, respectively) 12,406 578,789 Net asset value of shares issued in distributions reinvested (2,732 and 7,168 shares, respectively) 26,169 68,728 Cost of shares redeemed (123,053 and 115,953 shares, respectively) (1,183,716) (1,109,783) ---------- ---------- Net decrease in net assets derived from Fund share activities (1,145,141) (462,266) ---------- ---------- TOTAL DECREASE (1,182,652) (474,482) NET ASSETS AT THE BEGINNING OF THE PERIOD 2,807,556 3,282,038 ---------- ---------- NET ASSETS AT THE END OF THE PERIOD (including undistributed net investment income of $200 and $0, respectively) $1,624,904 $2,807,556 ---------- ---------- ---------- ---------- FINANCIAL HIGHLIGHTS (Selected data for each share of the Fund outstanding throughout each period) (UNAUDITED) FOR THE SIX FOR THE YEARS ENDED SEPTEMBER 30, MONTHS ENDING ------------------------------------------------------------ MARCH 31, 2005 2004 2003 2002 2001 2000 -------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 9.63 $ 9.66 $ 9.72 $ 9.77 $ 9.62 $ 9.65 Income from investment operations: Net investment income 0.10 0.22 0.15 0.22 0.43 0.49 Net realized and unrealized (loss) gain on investments (0.20) (0.03) (0.06) (0.05) 0.15 (0.03) ------ ------ ------ ------ ------ ------ Total from investment operations (0.10) 0.19 0.09 0.17 0.58 0.46 Less distributions: Dividends from net investment income (0.10) (0.22) (0.15) (0.22) (0.43) (0.49) Distribution from net realized gains -- -- -- -- -- -- ------ ------ ------ ------ ------ ------ Total from distributions (0.10) (0.22) (0.15) (0.22) (0.43) (0.49) ------ ------ ------ ------ ------ ------ Net asset value, end of period $ 9.43 $ 9.63 $ 9.66 $ 9.72 $ 9.77 $ 9.62 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN (1.32%)(1)<F26> 1.48% 0.80% 1.72% 6.19% 4.85% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's $) 1,625 2,808 3,282 3,733 4,586 4,575 Ratio of expenses (after reimbursement) to average net assets*<F24> 0.99%(2)<F27> 0.90% 0.90% 0.90% 0.90% 0.90% Ratio of net investment income to average net assets**<F25> 2.17%(2)<F27> 2.29% 1.55% 2.24% 4.50% 5.04% Portfolio turnover rate 18.2% 46.1% 190.0% 138.1% 18.6% 17.0% *<F24> Computed after giving effect to adviser's expense limitation undertaking. If the Fund had paid all of its expenses, the ratios would have been 4.40%(2)<F27>, 3.19%, 2.21%, 2.00%, 2.09% and 1.93% for the six months ending March 31, 2005 and for the years ended September 30, 2004, 2003, 2002, 2001 and 2000, respectively. **<F25> The ratios of net investment income prior to adviser's expense limitation undertaking to average net assets for the six months ending March 31, 2005 and for the years ended September 30, 2004, 2003, 2002, 2001 and 2000 would have been (1.24%)(2)<F27>, 0.00%, 0.24%, 1.14%, 3.31% and 4.01%, respectively. (1)<F26> Not Annualized. (2)<F27> Annualized. The accompanying notes to financial statements are an integral part of these statements. Reynolds Money Market Fund STATEMENT OF NET ASSETS March 31, 2005 (Unaudited) PRINCIPAL AMOUNT VALUE ------ ----- SHORT-TERM INVESTMENTS -- 100.2% (A)<F28> U.S. TREASURY SECURITIES -- 92.2% $500,000 U.S. Treasury Bills, 2.34%, due 4/07/05 $ 499,805 500,000 U.S. Treasury Bills, 2.47%, due 4/14/05 499,554 500,000 U.S. Treasury Bills, 2.41%, due 4/21/05 499,330 500,000 U.S. Treasury Bills, 2.45%, due 4/28/05 499,081 500,000 U.S. Treasury Bills, 2.51%, due 5/05/05 498,815 500,000 U.S. Treasury Bills, 2.51%, due 5/12/05 498,571 500,000 U.S. Treasury Bills, 2.55%, due 5/19/05 498,300 500,000 U.S. Treasury Bills, 2.60%, due 5/26/05 498,014 500,000 U.S. Treasury Bills, 2.59%, due 6/09/05 497,518 ---------- Total U.S. treasury securities (amortized cost $4,488,988) 4,488,988 VARIABLE RATE DEMAND NOTES -- 8.0% 180,349 U.S. Bank, N.A., 2.60% 180,349 209,000 Wisconsin Corporate Central Credit Union, 2.52% 209,000 ---------- Total variable rate demand notes (cost $389,349) 389,349 ---------- Total investments (amortized cost $4,878,337) 4,878,337 Liabilities, less cash and receivables -- (0.2%)(A)<F28> (9,361) ---------- NET ASSETS $4,868,976 ---------- ---------- Net Asset Value Per Share ($0.01 par value, 500,000,000 shares authorized), offering and redemption price ($4,868,976 / 4,868,976 shares outstanding) $ 1.00 ---------- ---------- (A)<F28> 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, 2005 (Unaudited) INCOME: Interest $ 48,100 -------- EXPENSES: Registration fees 15,660 Management fees 12,868 Professional fees 12,850 Transfer agent fees 10,831 Administrative services 5,208 Printing and postage expense 2,536 Board of Directors fees 1,875 Insurance expense 1,486 Custodian fees 1,078 Other expenses 789 -------- Total operating expenses before interest expense, reimbursement and management fee waiver 65,181 Interest expense 303 -------- Total expenses before reimbursement and management fee waiver 65,484 Less expenses assumed by adviser (48,452) -------- Net expenses 17,032 -------- NET INVESTMENT INCOME 31,068 NET REALIZED LOSS ON INVESTMENTS (37) -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 31,031 -------- -------- The accompanying notes to financial statements are an integral part of this statement. Reynolds Money Market Fund STATEMENTS OF CHANGES IN NET ASSETS For the Six Months Ending March 31, 2005 (Unaudited) and For the Year Ended September 30, 2004 2005 2004 ---- ---- OPERATIONS: Net investment income $ 31,068 $ 12,290 Net realized loss on investments (37) -- ---------- ---------- Net increase in net assets resulting from operations 31,031 12,290 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income ($0.0061 and $0.0022 per share, respectively) (31,031) (12,290) ---------- ---------- FUND SHARE ACTIVITIES: Proceeds from shares issued (4,085,207 and 11,742,156 shares, respectively) 4,085,207 11,742,156 Net asset value of shares issued in distributions reinvested (25,282 and 9,169 shares, respectively) 25,282 9,169 Cost of shares redeemed (5,968,337 and 10,212,049 shares, respectively) (5,968,337) (10,212,049) ---------- ---------- Net (decrease) increase in net assets derived from Fund share activities (1,857,848) 1,539,276 ---------- ---------- TOTAL (DECREASE) INCREASE (1,857,848) 1,539,276 NET ASSETS AT THE BEGINNING OF THE PERIOD 6,726,824 5,187,548 ---------- ---------- NET ASSETS AT THE END OF THE PERIOD $4,868,976 $6,726,824 ---------- ---------- ---------- ---------- FINANCIAL HIGHLIGHTS (Selected data for each share of the Fund outstanding throughout each period) (UNAUDITED) FOR THE SIX FOR THE YEARS ENDED SEPTEMBER 30, MONTHS ENDING ----------------------------------------------------------------- MARCH 31, 2005 2004 2003 2002 2001 2000 -------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations: Net investment income 0.01 0.00*<F29> 0.00*<F29> 0.01 0.04 0.05 Less distributions: Dividends from net investment income (0.01) (0.00)*<F29> (0.00)*<F29> (0.01) (0.04) (0.05) ------ ------ ------ ------ ------ ------ Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN 0.61%(1)<F32> 0.22% 0.38% 1.03% 4.29% 5.34% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's $) 4,869 6,727 5,188 9,716 15,467 28,210 Ratio of operating expenses before interest expense (after reimbursement) to average net assets**<F30> 0.65%(2)<F33> 0.65% 0.65% 0.65% 0.65% 0.65% Ratio of interest expense to average net assets 0.01%(2)<F33> 0.03% 0.03% 0.02% 0.01% 0.01% Ratio of net investment income to average net assets***<F31> 1.21%(2)<F33> 0.22% 0.42% 1.08% 4.29% 5.24% *<F29> Less than $0.005 per share. **<F30> Computed after giving effect to adviser's expense limitation undertaking. If the Fund had paid all of its expenses, the ratios would have been 2.53%(2)<F33>, 2.34%, 1.72%, 1.22%, 1.09% and 1.16% for the six months ending March 31, 2005 and for the years ended September 30, 2004, 2003, 2002, 2001 and 2000, respectively. ***<F31> If the Fund had paid all of its expenses, the ratios would have been (0.66%)(2)<F33>, (1.44%), (0.62%), 0.51%, 3.85% and 4.74% for the six months ending March 31, 2005 and for the years ended September 30, 2004, 2003, 2002, 2001 and 2000, respectively. (1)<F32> Not Annualized. (2)<F33> Annualized. The accompanying notes to financial statements are an integral part of these statements. Reynolds Funds, Inc. NOTES TO FINANCIAL STATEMENTS March 31, 2005 (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 a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. This Company consists of a series of five funds: the Reynolds Blue Chip Growth Fund ("Blue Chip Fund"), the Reynolds Opportunity Fund ("Opportunity Fund"), the Reynolds Fund ("Reynolds Fund"), the Reynolds Balanced Fund ("Balanced Fund") and the Reynolds Money Market Fund ("Money Market 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 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 Opportunity Fund is to produce long-term growth of capital by investing in a diversified portfolio of common stocks having above average growth characteristics; the investment objective of the Reynolds Fund is to produce long-term growth of capital; the investment objective of the Balanced Fund is to seek capital appreciation and income by investing in common stocks and fixed income securities; and 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. (a) Each security for the Blue Chip Fund, Opportunity Fund, Reynolds Fund and Balanced 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 on the Nasdaq National Market or the Nasdaq SmallCap Market are valued at the Nasdaq Official Closing Price, or if no sale is reported, 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 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. The fair value of a security is the amount which the Fund might receive upon a current sale. The fair value of a security may differ from the last quoted price and the Fund may not be able to sell a security at the fair value. Market quotations may not be available, for example, if trading in particular securities was halted during the day and not resumed prior to the close of trading on the New York Stock Exchange. For financial reporting purposes, investment transactions are recorded on the trade date. (b) Net realized gains and losses on sales of securities are computed on the identified cost basis. (c) The Funds record dividend income on the ex-dividend date and interest income on an accrual basis. (d) 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 nonperformance by these counterparties is not anticipated. (e) Accounting principles generally accepted in the United States of America ("GAAP") require that permanent differences between income for financial reporting and tax purposes be reclassified in the capital accounts. (f) The preparation of financial statements in conformity with GAAP 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. (g) No provision has 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. (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, the Opportunity Fund and the Reynolds Fund will pay RCM a monthly management fee at the annual rate of 1% of such Funds' daily net assets; from the Balanced Fund a monthly fee of 0.75% of such Fund's daily net assets; and from the Money Market Fund a monthly fee of 0.50% of such Fund's daily net assets. For the six months ending March 31, 2005, RCM voluntarily waived $5,538 and $12,868 of the management fees due from the Balanced Fund and the Money Market Fund, respectively, under the agreements. In addition, RCM has voluntarily reimbursed the Money Market Fund for expenses over 0.65%, of the daily net assets of the Fund totaling $35,584. Prior to January 31, 2005, RCM voluntarily reimbursed the Balanced Fund (f/k/a Reynolds U.S. Government Bond Fund) for expenses over 0.90% and effective January 31, 2005, RCM has agreed to reimburse the Balanced Fund to the extent necessary to insure that total annual fund operating expenses do not exceed 2.00%. In addition to the reimbursement required under the terms of the agreement, RCM will voluntarily reimburse the Balanced Fund to the extent necessary to insure that total annual fund operating expenses do not exceed 1.25% for the fiscal year ending September 30, 2005. For the six months ending March 31, 2005, RCM has voluntarily reimbursed the Balanced Fund $28,621. Reimbursements to the Balanced Fund and the Money Market Fund are voluntary and 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, the Opportunity Fund, the Reynolds Fund and the Balanced Fund will pay FMI a monthly administrative fee at the annual rate of 0.20% of such Funds' daily net assets up to and including $30,000,000 and 0.10% of such Funds' daily net assets in excess of $30,000,000; subject to a fiscal year minimum of twenty thousand dollars. FMI has voluntarily waived the minimum for the fiscal year ending September 30, 2005. Prior to January 31, 2005, the Balanced Fund paid FMIa monthly administrative fee at the annual rate of 0.10% of daily net assets. The Money Market Fund will pay FMI a monthly administrative fee at the annual rate of 0.10% of daily net assets. The Blue Chip Fund, Opportunity Fund and the Reynolds 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. In the normal course of business the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. (3) CREDIT FACILITY -- U.S. Bank, N.A. has made available to the Blue Chip Fund, Opportunity Fund, Reynolds Fund and Money Market Fund a credit facility pursuant to the respective Credit Agreements dated August 7, 2000 for the purpose of having cash available to cover incoming redemptions. The Reynolds Fund can also use the credit facility to purchase securities. The Credit Agreements expire July 31, 2005. The terms of the respective agreements are as follows: BLUE CHIP OPPORTUNITY REYNOLDS MONEY MARKET FUND FUND FUND FUND -------------- -------------- -------------- -------------- Payment Terms Due in 45 days Due in 45 days Due in 90 days Due in 45 days Interest Prime Rate - 1% Prime Rate - 1% Prime Rate - 1% Prime Rate - 1% Unused Line Fees 0.10% 0.10% 0.10% 0.10% Credit Limit $5,000,000 $3,000,000 $15,000,000 $600,000 Average Daily Balance Outstanding $446,714 $188,665 $13,509,808 $0 Maximum Amount Outstanding $4,786,000 $902,000 $15,000,000 $0 Interest Expense $11,564 $5,325 $254,982 $303 (4) DISTRIBUTION TO SHAREHOLDERS -- Net investment income, if any, for the Blue Chip, Opportunity and Reynolds Funds are distributed to shareholders at least annually. The Balanced Fund distributes substantially all of its net investment income quarterly and the Money Market Fund distributes substantially all of its net investment income monthly. All Funds will distribute net realized gains, if any, to shareholders at least annually. On March 30, 2005 the Balanced Fund distributed $4,663 from net investment income ($0.02713 per share). The distribution was paid on March 31, 2005 to shareholders of record on March 29, 2005. (5) INVESTMENT TRANSACTIONS -- For the six months ending March 31, 2005, purchases and proceeds of sales of investment securities (excluding short-term securities) were as follows: PURCHASES SALES --------- ----- Blue Chip Fund $53,509,905 $82,222,267 Opportunity Fund 2,772,497 11,046,727 Reynolds Fund 5,974,412 33,421,447 Balanced Fund 334,579 1,624,479 (6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES -- As of March 31, 2005, liabilities of the Funds included the following: BLUE CHIP OPPORTUNITY REYNOLDS BALANCED MONEY MARKET FUND FUND FUND FUND FUND --------- ---------- -------- -------- ------------ Payable to brokers for securities purchased $1,979,912 $770,832 $ 699,873 $ -- $ -- Payable to RCM for management fees 55,356 12,946 21,127 1,040 -- Payable to FMI for administrative fees 8,083 2,589 4,225 278 424 Payable to shareholders for redemptions 4,449 7,997 7,627 -- -- Due to custodian 62,994 5,334 16,214 -- -- Interest payable 431 258 23,547 -- 52 Other liabilities 156,849 56,399 53,981 239 4,755 Loan payable -- -- 2,531,000 -- -- (7) SOURCES OF NET ASSETS -- As of March 31, 2005, the sources of net assets were as follows: BLUE CHIP OPPORTUNITY REYNOLDS BALANCED MONEY MARKET FUND FUND FUND FUND FUND --------- ----------- -------- -------- ------------ Fund shares issued and outstanding $ 160,331,574 $11,237,702 $73,063,218 $1,719,179 $4,868,976 Net unrealized appreciation (depreciation) on investments 9,346,038 4,701,394 3,736,833 (37,273) -- Accumulated net realized loss on investments (106,038,461) (1,027,186) (53,614,282) (57,202) -- Accumulated net investment income -- -- -- 200 -- ------------- ----------- ----------- ---------- ---------- $ 63,639,151 $14,911,910 $23,185,769 $1,624,904 $4,868,976 ------------- ----------- ----------- ---------- ---------- ------------- ----------- ----------- ---------- ---------- (8) INCOME TAX INFORMATION -- The following information for the Funds is presented on an income tax basis as of March 31, 2005: NET UNREALIZED GROSS GROSS APPRECIATION COST OF UNREALIZED UNREALIZED (DEPRECIATION) INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS ----------- ------------ ------------ -------------- Blue Chip Fund $53,514,353 $11,135,177 $2,143,290 $8,991,887 Opportunity Fund 10,238,246 4,665,702 168,668 4,497,034 Reynolds Fund 18,382,654 6,629,220 3,420,739 3,208,481 Balanced Fund 1,656,715 1,822 39,095 (37,273) Money Market Fund 4,878,337 -- -- -- The following information for the Funds is presented on an income tax basis as of September 30, 2004: NET UNREALIZED GROSS GROSS (DEPRECIATION) DISTRIBUTABLE DISTRIBUTABLE COST OF UNREALIZED UNREALIZED APPRECIATION ORDINARY LONG-TERM INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS INCOME CAPITAL GAINS ----------- ------------ ------------ -------------- ------------ ------------ Blue Chip Fund $86,638,505 $19,711,871 $21,312,971 $(1,601,100) $ -- $ -- Opportunity Fund 16,079,653 6,233,245 3,381,315 2,851,930 -- 1,432,482 Reynolds Fund 54,698,168 8,275,275 16,276,917 (8,001,642) -- -- Government Bond Fund 2,816,025 3,532 22,266 (18,734) -- -- Money Market Fund 6,732,872 -- -- -- -- -- The difference, if any, between the cost amount for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in security transactions and for mark to market for Passive Foreign Investment Companies ("PFICs"). The tax components of dividends paid during the year ended September 30, 2004, capital loss carryovers, which may be used to offset future capital gains, subject to Internal Revenue Code limitations (expiring in varying amounts through 2012), as of September 30, 2004, and tax basis post-October losses as of September 30, 2004, which are not recognized for tax purposes until the first day of the following fiscal year are: SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------------------------------------------------- ------------------------------ ORDINARY LONG-TERM NET CAPITAL ORDINARY LONG-TERM INCOME CAPITAL GAINS LOSS POST-OCTOBER INCOME CAPITAL GAINS DISTRIBUTIONS DISTRIBUTIONS CARRYOVERS LOSSES DISTRIBUTIONS DISTRIBUTIONS ------------- ------------- ------------ ----------- ------------- ------------- Blue Chip Fund $ -- $ -- $92,835,683 $7,028,488 $ -- $ -- Opportunity Fund -- 1,226,731 -- -- -- -- Reynolds Fund -- -- 37,924,836 5,599,986 -- -- Government Bond Fund 69,456 -- 33,570 4,459 55,669 -- Money Market Fund 12,290 -- -- -- 30,282 -- The Blue Chip Fund, Reynolds Fund and Government Bond Fund have utilized $2,128,294, $525,443 and $2,622, respectively, of their post-October losses from the prior year to increase current year net capital losses or reduce any net capital gains. The Government Bond Fund had capital loss carryovers of $19,651 which expired September 30, 2004. Since there were no ordinary distributions paid for the year ended September 30, 2004 for the Blue Chip, Opportunity or Reynolds Funds, there are no distributions designated as qualifying for the dividends received deduction for corporate shareholders nor as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003. Reynolds Funds, Inc. ADVISORY AGREEMENTS On March 16, 2005, the Board of Directors of Reynolds Funds, Inc. approved the continuation of the investment advisory agreements for the Reynolds Blue Chip Fund, Reynolds Opportunity Fund and Reynolds Fund with Reynolds Capital Management and on May 18, 2005, approved the continuation of the investment advisory agreements for the Reynolds Balanced Fund and Reynolds Money Market Fund with Reynolds Capital Management. Prior to approving the continuation of the advisory agreements, the Directors considered: o the nature, extent and quality of the services provided by Reynolds Capital Management o the investment performance of the Funds o the costs of the services to be provided and profits to be realized by Reynolds Capital Management from its relationship with the Funds o the extent to which economies of scale would be realized as the Funds grow and whether fee levels reflect those economies of scale o the expense ratios of the Funds In considering the nature, extent and quality of the services provided by Reynolds Capital Management, the Directors reviewed a report describing the portfolio management, shareholder communication and servicing and regulatory compliance services provided by Reynolds Capital Management to the Funds. The Directors concluded that Reynolds Capital Management was providing essential services to the Funds as well as services that were in addition to services typically provided non-mutual fund clients. The Directors compared the performance of the Funds to benchmark indices over various periods of time and concluded that the performance of the Funds warranted the continuation of the advisory agreements. The Directors noted that in addition to the absolute performance of the Funds, they also considered the fact that the Funds adhered to the investment style expected by their shareholders. In concluding that the advisory fees payable by the Funds were reasonable, the Directors reviewed reports of the costs of services provided by, and the profits realized by, Reynolds Capital Management from its relationship with the Funds and concluded that such profits were reasonable and not excessive. They noted that Reynolds Capital Management was not realizing a profit from its relationship with either the Balanced Fund or the Money Market Fund. The Directors also reviewed reports comparing the expense ratios of, and the advisory fees paid by, the Funds, to those of, and paid by, other comparable mutual funds and concluded that the advisory fees paid by the Funds and the expense ratios of the Funds were comparable to those of comparable mutual funds. The Directors also considered whether the fee schedules of the investment advisory agreements should be adjusted for an increase in assets under management. They concluded that "breakpoints" were not warranted at this time given the anticipated growth of the Funds in the next year and the other factors considered. For additional information about the Directors and Officers or for a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities, please call (800) 773-9665 and request a Statement of Additional Information. One will be mailed to you free of charge. The Statement of Additional Information is also available on the website of the Securities and Exchange Commission (the "Commission") at http://www.sec.gov. ------------------ Information on how the Funds voted proxies relating to portfolio securities during the twelve month period ending June 30, 2004 is available on the Funds' website at http://www.reynoldsfunds.com or the website of the Commission. The ---------------------------- Funds' file their complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q; (ii) the Funds' Form N-Q is available on the Commission's website; and (iii) the Funds' Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. REYNOLDS FUNDS Wood Island, Third Floor 80 East Sir Francis Drake Boulevard Larkspur, California 94939 www.reynoldsfunds.com BOARD OF DIRECTORS DENNIS N. MOSER FREDERICK L. REYNOLDS 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. 100 East Wisconsin Avenue, Suite 2200 Milwaukee, Wisconsin 53202 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT U.S. BANCORP FUND SERVICES, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 1-800-773-9665 OR 1-800-7REYNOLDS 1-414-765-4124 CUSTODIAN U.S. Bank, N.A. 425 Walnut Street Cincinnati, Ohio 45202 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PRICEWATERHOUSECOOPERS LLP 100 East Wisconsin Avenue Suite 1500 Milwaukee, Wisconsin 53202 LEGAL COUNSEL FOLEY & LARDNER LLP 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 ITEM 2. CODE OF ETHICS. - ----------------------- Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. - ----------------------------------------- Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. - ----------------------------------------------- Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. - ---------------------------------------------- Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. - -------------------------------- Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END - ------------------------------------------------------------------------- MANAGEMENT INVESTMENT COMPANIES. - -------------------------------- Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. - ------------------------------------------------------------------------- Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT - -------------------------------------------------------------------------- COMPANY AND AFFILIATED PURCHASERS. - ---------------------------------- Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------- None. ITEM 11. CONTROLS AND PROCEDURES. - --------------------------------- (a) The disclosure controls and procedures of the Reynolds Funds, Inc. are periodically evaluated. As of April 18, 2005, the date of the last evaluation, we concluded that our disclosure controls and procedures are adequate. (b) The internal controls of the Reynolds Funds, Inc. are periodically evaluated. Since, April 18, 2005, the date of the last evaluation, there have been no significant changes in the Reynolds Funds' internal controls or in other factors that could have had a significant effect on such controls. There have also been no significant deficiencies or material weaknesses identified since the last evaluation that required any corrective action. ITEM 12. EXHIBITS. - ------------------ (a) Any code of ethics or amendment thereto. Not applicable. (b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Reynolds Funds, Inc. -------------------- Registrant By /s/Frederick L. Reynolds ------------------------ Frederick L. Reynolds, Principal Executive Officer Date 05/20/05 -------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Reynolds Funds, Inc. -------------------- Registrant By /s/Frederick L. Reynolds ------------------------ Frederick L. Reynolds, Principal Financial Officer Date 05/20/05 --------