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: March 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------
SEMIANNUAL REPORT
MARCH 31, 2006
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
1-800-773-9665
WWW.REYNOLDSFUNDS.COM
REYNOLDS FUNDS
May 16, 2006
Dear Fellow Shareholders:
We appreciate your continued confidence in the Reynolds Funds and would like
to welcome our new shareholders.
The Reynolds Blue Chip Growth, Reynolds Opportunity and Reynolds Fund had
strong appreciation for the twelve months ended March 31, 2006:
March 31, 2005 through March 31, 2006
Reynolds Blue Chip Growth Fund 15.09%
Reynolds Opportunity Fund 25.08%
Reynolds Fund 29.80%
TWELVE MONTH RETURNS
The Reynolds Blue Chip Growth, Reynolds Opportunity and Reynolds Fund had
strong average annualized appreciation for the three years ended March 31, 2006:
March 31, 2003 through March 31, 2006
Reynolds Blue Chip Growth Fund 13.82%
Reynolds Opportunity Fund 23.29%
Reynolds Fund 30.31%
3 YEAR AVERAGE ANNUAL RETURNS
The strong near term performance of the Reynolds Stock Funds has recently
been featured in many financial publications and internet sites including
Barron's, Investor's Business Daily, MarketWatch from Dow Jones, Morningstar,
MSN Money, The Wall Street Journal, USA Today.com, and Yahoo! Finance.
This past year can be characterized as a period of many crosscurrents for the
U.S. economy including rising interest rates, rising energy prices and a strong
domestic economy. The U.S. economy continues in an expansionary mode. Gross
Domestic Product (GDP) grew at a 4.8% rate in the three months ended March 31,
2006. GDP is estimated to increase 3.6% in calendar 2006 after increasing 3.5 %
in calendar 2005. Inflation increased at a rate of 2.2% in the three months
ended March 31, 2006 as measured by the GDP Deflator. Inflation is estimated to
increase 3.6% in calendar 2006 after increasing 3.4% in 2005. 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, 2006 nearly 2.1
million jobs were created.
The Federal Reserve has raised short-term interest rates sixteen times
starting in June 2004. However, long-term interest rates are still at 39 year
lows. We believe that raising interest rates has been 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 needed to move toward a more normal level of interest
rates to protect against future economic imbalances including inflation.
Oil prices have risen 32% in the last 12 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. So far, higher oil
prices have not appeared to inordinately affect economic growth as the economy
is still very strong. However, if oil prices were to go a lot higher than
current levels there would be a stronger affect. Other investment considerations
have recently included negative geopolitical news including terrorism, hurricane
damage, negative events in Iran, Iraq and North Korea, and attempts to slow down
China's strong economic growth, which has been a key driver of Asian and
worldwide growth.
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 usually risen during economic expansions and typically the stock market has
appreciated. If interest rates do not go up too much from here (the Federal
Reserve seems to be indicating this) it should not be a significant negative for
stocks.
OPPORTUNISTIC INVESTING IN COMPANIES OF VARIOUS SIZES
The 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, 2006
- ------------------------------
Giant 18.05%
Large 30.76%
Medium 33.06%
Small 16.76%
Micro 1.37%
REYNOLDS OPPORTUNITY FUND
Portfolio as of March 31, 2006
- ------------------------------
Giant 5.99%
Large 8.14%
Medium 29.92%
Small 37.34%
Micro 18.61%
REYNOLDS FUND
Portfolio as of March 31, 2006
- ------------------------------
Giant 1.98%
Large 10.53%
Medium 33.09%
Small 34.38%
Micro 20.02%
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%; medium-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, 2006 the minimums in each
cap group are as follows:
(in millions)
Giant $40,964.51
Large $9,112.10
Medium $1,633.29
Small $471.77
Micro <$471.77
LOW INTEREST RATES BY HISTORICAL STANDARDS ARE A SIGNIFICANT POSITIVE FOR STOCK
VALUATIONS
Since June 2004, the Federal Reserve Board has raised short-term interest
rates sixteen times to stabilize the economy. Although interest rates have been
rising, they remain at 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. In the long-term these companies build value as
their earnings grow. This growth in value should ultimately be recognized in
higher stock prices for these companies. The Blue Chip Fund's total return was
7.59% for the three months ended March 31, 2006.
PERFORMANCE HIGHLIGHTS (AS OF MARCH 31, 2006)
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
------------ --------------
One Year 15.09% 15.09%
Three years 47.46% 13.82%
Five Years -12.41% -2.61%
Ten Years 69.66% 5.43%
Since inception (August 12, 1988) 265.15% 7.62%
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 Opportunity Fund's total return was
18.86% for the three months ended March 31, 2006.
PERFORMANCE HIGHLIGHTS (AS OF MARCH 31, 2006)
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
------------ --------------
One Year 25.08% 25.08%
Three years 87.39% 23.29%
Five Years 2.70% 0.53%
Ten Years 61.91% 4.94%
Since inception (January 30, 1992) 132.53% 6.14%
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. While
the Fund will generally invest in "growth" stocks, it may also invest in "value"
stocks. The Reynolds Fund's total return was 24.69% for the three months ended
March 31, 2006.
PERFORMANCE HIGHLIGHTS (AS OF MARCH 31, 2006)
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
------------ --------------
One Year 29.80% 29.80%
Three years 121.27% 30.31%
Five Years 22.07% 4.07%
Since inception (October 1, 1999) -30.30% -5.40%
ECONOMIC DISCUSSION
THE WORLD ECONOMY
There are more than 1.3 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 Depositary 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 3.5% in 2005 after increasing 4.2% in 2004, 2.7% in
2003, 1.9% in 2002, 0.8% in 2001, 3.7% in 2000 and 4.4% in 1999. GDP is
estimated to increase 3.6% in 2006.
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 3.4% in 2005 after increasing 2.7%
in 2004, 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 3.6% in 2006.
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)
interest rate increases appear to be nearing a pause or ending; (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 and confidence has remained high;
(9) most indicators in the economy are positive; (10) corporate cost cutting has
been very successful; (11) price-earnings ratios are in line with historical
averages; and (12) Ben Bernanke, who recently replaced Alan Greenspan as head of
the Federal Reserve Board, appears to be very capable.
Some possible investment negatives, which we are 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) high housing prices; (5) possible terrorist attacks; (6) U. S. dollar
weakness; (7) problems with Iran, Iraq, North Korea and Venezuela; (8) efforts
to slow China's economic boom; and (9) possible natural disasters such as
hurricanes and earthquakes.
LINKED MONEY MARKET FUND
The First American Treasury Obligations Fund is a money market fund offered
by an affiliate of our transfer agent, U.S. Bancorp Fund Services, LLC. This
Fund is offered as a money market alternative to our shareholders. The First
American Treasury Obligations Fund offers many free shareholder conveniences
including automatic investment and withdrawal plans and check writing access to
your funds and is linked to any holdings you have in the Reynolds Funds. This
Fund will also be included on your quarterly statements.
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 (PIN number not needed)
includes quarterly updates of the returns of the Reynolds Funds, top ten
holdings of each portfolio and industry percentages. Also, detailed statistics
and graphs of past performances from a link to MSN Money for the three 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 FIRST AMERICAN TREASURY OBLIGATIONS 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 CURRENT DAILY NET ASSET VALUES,
CURRENT ACCOUNT INFORMATION AND ANY OTHER QUESTIONS: 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 and First American Treasury Obligations Fund accounts held by a
shareholder are sent quarterly. In addition, individual Fund statements are sent
whenever a transaction occurs. These transactions are: (1) statements are sent
for any of the Funds when a shareholder purchases or redeems shares; (2) Blue
Chip, Opportunity and Reynolds Fund statements are sent twice a year if and when
any ordinary income or capital gains are distributed; and (3) First American
Treasury Obligations Fund statements are sent quarterly.
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 and the First American Treasury Obligations Fund 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, 401(k), 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 or the First American
Treasury Obligations Fund ($50 minimum for any of these Funds) at periodic
intervals to make automatic purchases in any of these 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 or the First American Treasury Obligations Fund as often
as monthly and send a check to you or transfer funds to your bank account.
FREE CHECK WRITING: Free check writing ($100 minimum) is offered for accounts
invested in the First American Treasury Obligations Fund.
EXCHANGES OR REGULAR REDEMPTIONS BETWEEN THE REYNOLDS FUNDS AND/OR THE FIRST
AMERICAN TREASURY OBLIGATIONS FUND: As often as desired - no charge.
NASDAQ SYMBOLS: Reynolds Blue Chip Growth Fund - RBCGX, Reynolds Opportunity
Fund - ROPPX, Reynolds Fund - REYFX, and First American Treasury Obligations
Fund - FATXX.
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.
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 October 1, 2005 through March 31,
2006.
ACTUAL EXPENSES
The first line of 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 10/1/05 Value 3/31/06 Period*<F1> 10/1/05-3/31/06
---------------- -------------- ---------------------------
Reynolds Blue Chip Growth Fund Actual $1,000.00 $1,091.90 $10.33
Hypothetical (5% return before expenses) $1,000.00 $1,015.10 $ 9.95
Reynolds Opportunity Fund Actual $1,000.00 $1,167.80 $10.87
Hypothetical (5% return before expenses) $1,000.00 $1,014.90 $10.10
Reynolds Fund Actual $1,000.00 $1,210.10 $17.47
Hypothetical (5% return before expenses) $1,000.00 $1,009.10 $15.88
*<F1> Expenses are equal to the Funds' annualized expense ratios of 1.98%,
2.01% and 3.17%, respectively, multiplied by the average account value
over the period, multiplied by 182/365 (to reflect the one-half year
period between October 1, 2005 and March 31, 2006).
Reynolds Blue Chip Growth Fund
STATEMENT OF NET ASSETS
March 31, 2006 (Unaudited)
SHARES VALUE
------ -----
LONG-TERM INVESTMENTS -- 99.5% (A)<F3>
COMMON STOCKS -- 98.6% (A)<F3>
ADVERTISING -- 0.6%
16,500 ValueClick, Inc.*<F2> $ 279,180
AIRLINES/AEROSPACE -- 4.2%
3,500 AMR Corp.*<F2> 94,675
1,500 Aviall, Inc.*<F2> 57,120
2,000 Boeing Co. 155,860
3,500 Continental Airlines, Inc. Cl B*<F2> 94,150
4,000 General Dynamics Corp. 255,920
1,500 Kaman Corp. 37,740
1,000 Lockheed Martin Corp. 75,130
5,500 Northrop Grumman Corp. 375,595
3,500 Rockwell Collins, Inc. 197,225
2,500 Textron Inc. 233,475
7,500 United Technologies Corp. 434,775
-----------
2,011,665
APPAREL -- 0.7%
4,500 Gildan Activewear Inc.*<F2> 213,840
2,000 Zumiez Inc.*<F2> 122,200
-----------
336,040
APPLICATION SOFTWARE -- 0.4%
3,500 SAP AG SP-ADR 190,120
BEVERAGES -- 0.3%
1,000 Hansen Natural Corp.*<F2> 126,050
BIOTECHNOLOGY -- 0.2%
1,000 Genentech, Inc.*<F2> 84,510
500 Gilead Sciences, Inc.*<F2> 31,110
-----------
115,620
BROKERAGE -- 0.3%
3,000 International Securities
Exchange, Inc. 124,950
BUILDING -- 1.1%
3,000 Fastenal Co. 142,020
3,500 Home Depot, Inc. 148,050
3,500 Lowe's Companies, Inc. 225,540
-----------
515,610
BUSINESS SOFTWARE & SERVICES -- 2.3%
3,500 Akamai Technologies, Inc.*<F2> 115,115
6,000 American Reprographics Co.*<F2> 208,140
10,000 BEA Systems, Inc.*<F2> 131,300
1,000 CheckFree Corp.*<F2> 50,500
1,000 First Data Corp. 46,820
7,500 Rockwell Automation Inc. 539,325
-----------
1,091,200
CABLE TV/BROADCASTING -- 0.2%
4,000 Grupo Televisa S.A. SP-ADR 79,600
CHEMICALS-SPECIALTY -- 0.9%
5,000 H.B. Fuller Co. 256,700
2,500 W.R. Grace & Co.*<F2> 33,250
3,500 NewMarket Corp. 166,565
-----------
456,515
COMMUNICATION EQUIPMENT -- 5.9%
2,000 American Tower Corp.*<F2> 60,640
5,000 Brocade Communications
Systems, Inc.*<F2> 33,400
10,000 Corning Inc.*<F2> 269,100
2,000 L.M. Ericsson Telephone Co. ADR 75,440
50,000 JDS Uniphase Corp.*<F2> 208,500
500 L-3 Communications
Holdings, Inc. 42,895
11,000 Plexus Corp.*<F2> 413,270
11,500 Powerwave Technologies, Inc.*<F2> 155,135
1,500 QUALCOMM Inc. 75,915
13,000 Seagate Technology*<F2> 342,290
75,000 Tellabs, Inc.*<F2> 1,192,500
-----------
2,869,085
COMMUNICATION SERVICES -- 0.2%
3,500 Crown Castle International Corp.*<F2> 99,225
COMPUTER & PERIPHERALS -- 4.4%
15,500 Apple Computer, Inc.*<F2> 972,160
1,500 International Business
Machines Corp. 123,705
11,500 Komag, Inc.*<F2> 547,400
6,500 Maxtor Corp.*<F2> 62,140
1,500 Network Appliance, Inc.*<F2> 54,045
5,000 Palm, Inc.*<F2> 115,800
12,000 Sun Microsystems, Inc.*<F2> 61,560
9,000 Western Digital Corp.*<F2> 174,870
-----------
2,111,680
COMPUTER NETWORKING -- 2.4%
20,000 Broadwing Corp.*<F2> 294,800
8,000 Cisco Systems Inc.*<F2> 173,360
1,500 Citrix Systems, Inc.*<F2> 56,850
3,000 Foundry Networks, Inc.*<F2> 54,480
17,500 WebEx Communications, Inc.*<F2> 589,225
-----------
1,168,715
COMPUTER SOFTWARE & SERVICES -- 0.3%
4,380 Adobe Systems Inc. 152,949
3,000 VA Software Corp.*<F2> 14,370
-----------
167,319
DIVERSIFIED -- 0.9%
5,500 The Andersons, Inc. 430,265
DRUGS -- 1.3%
500 AmerisourceBergen Corp. 24,135
3,000 Celgene Corp.*<F2> 132,660
1,000 Covance Inc.*<F2> 58,750
1,000 IDEXX Laboratories, Inc.*<F2> 86,360
3,000 Pfizer Inc. 74,760
7,500 Vertex Pharmaceuticals Inc.*<F2> 274,425
-----------
651,090
ELECTRICAL EQUIPMENT -- 0.6%
3,500 Encore Wire Corp.*<F2> 118,580
4,500 General Cable Corp.*<F2> 136,485
500 Raytheon Co. 22,920
-----------
277,985
ELECTRONICS -- 1.1%
1,500 Agilent Technologies, Inc.*<F2> 56,325
4,000 Evergreen Solar, Inc.*<F2> 61,600
500 Garmin Ltd. 39,715
5,000 Jabil Circuit, Inc.*<F2> 214,300
3,000 Thomas & Betts Corp.*<F2> 154,140
-----------
526,080
ENERGY-SERVICES -- 7.2%
5,500 Baker Hughes Inc. 376,200
3,500 BJ Services Co. 121,100
4,000 Cooper Cameron Corp.*<F2> 176,320
4,000 Diamond Offshore Drilling, Inc. 358,000
5,000 Helmerich & Payne, Inc. 349,100
500 Nabors Industries, Ltd.*<F2> 35,790
1,000 Noble Corp. 81,100
20,000 Parker Drilling Co.*<F2> 185,400
3,000 Rowan Companies, Inc. 131,880
8,000 Schlumberger Ltd. 1,012,560
6,500 Smith International, Inc. 253,240
1,000 Tidewater Inc. 55,230
2,500 Transocean Inc.*<F2> 200,750
3,000 Veritas DGC Inc.*<F2> 136,170
-----------
3,472,840
ENGINEERING/CONSTRUCTION -- 0.8%
4,500 Fluor Corp. 386,100
FINANCIAL SERVICES -- 9.7%
1,000 American Express Co. 52,550
1,000 Bear Stearns Companies Inc. 138,700
33,000 E*TRADE Financial Corp.*<F2> 890,340
3,500 Goldman Sachs Group, Inc. 549,360
17,000 HomeStore, Inc.*<F2> 111,520
1,000 Investment Technology
Group, Inc.*<F2> 49,800
30,000 Knight Capital Group, Inc.*<F2> 417,900
4,000 Lehman Brothers Holdings Inc. 578,120
15,000 Merrill Lynch & Co., Inc. 1,181,400
1,500 NYSE Group Inc.*<F2> 118,875
17,500 Charles Schwab Corp. 301,175
1,000 State Street Corp. 60,430
12,500 TD Ameritrade Holding Corp. 260,875
-----------
4,711,045
FOODS -- 0.1%
2,000 Hain Celestial Group Inc.*<F2> 52,380
GOLD & SILVER -- 1.0%
21,000 Coeur d'Alene Mines Corp.*<F2> 137,760
10,000 Crystallex International Corp.*<F2> 41,100
5,000 Newmont Mining Corp. 259,450
18,000 Northgate Minerals Corp.*<F2> 43,380
-----------
481,690
GROCERY STORES -- 0.3%
2,000 Pantry, Inc.*<F2> 124,780
HEALTH MAINTENANCE ORGANIZATIONS -- 1.2%
2,000 CIGNA Corp. 261,240
3,200 UnitedHealth Group Inc. 178,752
2,000 WellPoint Inc.*<F2> 154,860
-----------
594,852
HOTEL -- 0.8%
9,000 Choice Hotels International, Inc. 412,020
INDUSTRIAL METALS & MINERALS -- 2.5%
1,500 Allegheny Technologies, Inc. 91,770
2,500 Commercial Metals Co. 133,725
500 Nucor Corp. 52,395
5,000 Peabody Energy Corp. 252,050
500 Tenaris S.A. ADR 90,335
12,000 Titanium Metals Corp.*<F2> 582,600
-----------
1,202,875
INSTRUMENTS -- 0.1%
1,000 Daktronics, Inc. 36,500
500 Trimble Navigation Ltd.*<F2> 22,525
-----------
59,025
INSURANCE -- 0.8%
7,000 Aetna Inc. 343,980
1,000 W. R. Berkley Corp. 58,060
-----------
402,040
INTEGRATED OIL & GAS -- 0.5%
500 Marathon Oil Corp. 38,085
2,000 Noble Energy, Inc. 87,840
1,000 Occidental Petroleum Corp. 92,650
-----------
218,575
INTERNET INFORMATION PROVIDERS -- 1.9%
1,700 Google Inc.*<F2> 663,000
8,500 Yahoo! Inc.*<F2> 274,210
-----------
937,210
INTERNET SOFTWARE & SERVICES -- 2.7%
18,500 24/7 Real Media, Inc.*<F2> 193,510
3,500 Openwave Systems Inc.*<F2> 75,530
9,500 Red Hat, Inc.*<F2> 265,810
33,000 Redback Networks Inc.*<F2> 715,770
1,000 Salesforce.com, Inc.*<F2> 36,330
-----------
1,286,950
MACHINERY -- 2.8%
9,000 Caterpillar Inc. 646,290
1,000 Ingersoll-Rand Company Ltd. 41,790
9,000 JLG Industries, Inc. 277,110
2,500 Joy Global Inc. 149,425
1,500 Regal-Beloit Corp. 63,405
2,500 Terex Corp.*<F2> 198,100
-----------
1,376,120
MEDICAL SERVICES -- 2.5%
4,000 Express Scripts, Inc.*<F2> 351,600
3,000 Manor Care, Inc. 133,050
500 Pediatrix Medical Group, Inc.*<F2> 51,320
3,500 Psychiatric Solutions, Inc.*<F2> 115,955
5,000 Quality Systems, Inc. 165,500
7,500 Sierra Health Services, Inc.*<F2> 305,250
2,500 Ventiv Health, Inc.*<F2> 83,050
-----------
1,205,725
MEDICAL SUPPLIES -- 0.9%
3,000 Abbott Laboratories 127,410
1,000 Guidant Corp. 78,060
1,000 Schick Technologies, Inc.*<F2> 49,900
3,500 Varian Medical Systems, Inc.*<F2> 196,560
-----------
451,930
NATURAL GAS -- 0.7%
2,000 EOG Resources, Inc. 144,000
6,000 Southwestern Energy Co.*<F2> 193,140
-----------
337,140
OIL & GAS REFINING & MARKETING -- 2.4%
2,000 Frontier Oil Corp. 118,700
4,500 Holly Corp. 333,540
1,000 Murphy Oil Corp. 49,820
3,500 Sunoco, Inc. 271,495
2,500 Tesoro Corp. 170,850
4,000 Valero Energy Corp. 239,120
-----------
1,183,525
RAILROADS -- 1.6%
3,500 Burlington Northern
Santa Fe Corp. 291,655
1,000 Freightcar America Inc. 63,600
2,500 Norfolk Southern Corp. 135,175
3,000 Union Pacific Corp. 280,050
-----------
770,480
RESTAURANTS -- 2.1%
2,500 Bob Evans Farms, Inc. 74,275
2,000 Darden Restaurants, Inc. 82,060
1,500 Landry's Restaurants, Inc. 52,995
4,000 McDonald's Corp. 137,440
1,500 Panera Bread Co.*<F2> 112,770
12,000 Papa John's International, Inc.*<F2> 393,720
1,500 Sonic Corp.*<F2> 52,695
2,000 Wendy's International, Inc. 124,120
-----------
1,030,075
RETAIL-SPECIALTY -- 6.9%
1,500 Abercrombie & Fitch Co. 87,450
13,500 Best Buy Co., Inc. 755,055
5,500 Charming Shoppes, Inc.*<F2> 81,785
6,000 Chico's FAS, Inc.*<F2> 243,840
1,500 Coach, Inc.*<F2> 51,870
3,500 Coldwater Creek Inc.*<F2> 97,300
1,500 Gaiam, Inc.*<F2> 24,165
4,500 Guess?, Inc.*<F2> 175,995
2,000 Gymboree Corp.*<F2> 52,080
2,000 NIKE, Inc. Cl B 170,200
10,000 Office Depot, Inc.*<F2> 372,400
1,500 Staples, Inc. 38,280
19,500 Starbucks Corp.*<F2> 733,980
21,500 United Retail Group, Inc.*<F2> 402,695
2,500 Urban Outfitters, Inc.*<F2> 61,350
-----------
3,348,445
RETAIL STORES -- 1.5%
8,500 Costco Wholesale Corp. 460,360
2,000 J.C. Penney Company,
Inc. (Holding Co.) 120,820
4,000 Nordstrom, Inc. 156,720
-----------
737,900
SECURITY SOFTWARE & SERVICES -- 0.1%
2,000 RSA Security Inc.*<F2> 35,880
SEMICONDUCTOR CAPITAL SPENDING -- 1.7%
2,000 KLA-Tencor Corp. 96,720
30,500 Kulicke and Soffa Industries, Inc.*<F2> 290,970
5,000 LTX Corp.*<F2> 27,000
4,000 Novellus Systems, Inc.*<F2> 96,000
19,500 Teradyne, Inc.*<F2> 302,445
-----------
813,135
SEMICONDUCTORS -- 8.5%
11,500 Advanced Micro Devices, Inc.*<F2> 381,340
5,000 Applied Micro Circuits Corp.*<F2> 20,350
44,000 Atmel Corp.*<F2> 207,680
10,000 Avanex Corp.*<F2> 32,600
11,250 Broadcom Corp.*<F2> 485,550
18,000 Conexant Systems, Inc.*<F2> 62,100
4,000 Cypress Semiconductor Corp.*<F2> 67,800
7,500 Intersil Corp. 216,900
8,000 Lam Research Corp.*<F2> 344,000
27,000 LSI Logic Corp.*<F2> 312,120
2,500 Marvell Technology Group Ltd.*<F2> 135,250
28,000 Mattson Technology, Inc.*<F2> 336,000
4,000 MEMC Electronic Materials, Inc.*<F2> 147,680
6,000 Micron Technology, Inc.*<F2> 88,320
1,500 Multi-Fineline Electronix, Inc.*<F2> 87,735
1,000 Netlogic Microsystems Inc.*<F2> 41,210
7,500 NVIDIA Corp.*<F2> 429,450
30,500 PMC-Sierra, Inc.*<F2> 374,845
5,000 RF Micro Devices, Inc.*<F2> 43,250
2,000 Standard Microsystems Corp.*<F2> 51,960
4,000 Supertex, Inc.*<F2> 150,480
1,500 Trident Microsystems, Inc.*<F2> 43,590
11,000 Vitesse Semiconductor Corp.*<F2> 39,380
-----------
4,099,590
SERVICES -- 2.1%
2,500 FedEx Corp. 282,350
7,500 Monster Worldwide Inc.*<F2> 373,950
9,000 Taser International, Inc.*<F2> 95,310
3,200 United Parcel Service, Inc. Cl B 254,016
-----------
1,005,626
TELECOMMUNICATION SERVICES -- 0.4%
30,000 Qwest Communications
International Inc.*<F2> 204,000
TELECOMMUNICATIONS -- 0.9%
70,000 CIENA Corp.*<F2> 364,700
10,000 Level 3 Communications, Inc.*<F2> 51,800
-----------
416,500
TELEPHONE SERVICES -- 3.2%
86,000 Time Warner Telecom Inc.*<F2> 1,543,700
TRANSPORTATION -- 0.9%
3,500 CSX Corp. 209,300
4,000 Celadon Group, Inc.*<F2> 87,560
500 Expeditors International
of Washington, Inc. 43,195
8,000 Quality Distribution Inc.*<F2> 104,240
-----------
444,295
WIRELESS COMMUNICATION -- 1.5%
11,750 Brightpoint, Inc.*<F2> 364,955
10,000 Motorola, Inc. 229,100
3,500 Nokia Corp. SP-ADR 72,520
2,245 Sprint Nextel Corp. 58,011
-----------
724,586
-----------
Total common stocks
(cost $37,685,844) 47,699,028
-----------
REITS -- 0.9% (A)<F3>
4,500 Starwood Hotels &
Resorts Worldwide, Inc. 304,785
3,500 Tanger Factory
Outlet Centers, Inc. 120,435
-----------
Total reits
(cost $308,487) 425,220
-----------
Total long-term investments
(cost $37,994,331) 48,124,248
PRINCIPAL AMOUNT
- ----------------
SHORT-TERM INVESTMENTS -- 0.8% (A)<F3>
VARIABLE RATE DEMAND NOTE -- 0.8%
$385,428 U.S. Bank, N.A., 4.57% 385,428
-----------
Total short-term investments
(cost $385,428) 385,428
-----------
Total investments
(cost $38,379,759) 48,509,676
Liabilities, less cash and
Receivables -- (0.3%) (A)<F3> (132,754)
-----------
NET ASSETS $48,376,922
-----------
-----------
Net Asset Value Per Share
($0.01 par value, 40,000,000
shares authorized), offering
and redemption price
($48,376,922 / 1,502,821
shares outstanding) $ 32.19
-----------
-----------
*<F2> Non-income producing security.
(A)<F3> Percentages for the various classifications relate to net assets.
ADR - American Depositary Receipt
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, 2006 (Unaudited)
INCOME:
Dividends $ 182,992
Interest 53,047
----------
Total income 236,039
----------
EXPENSES:
Management fees 252,523
Transfer agent fees 70,472
Administrative services 43,883
Custodian fees 33,472
Printing and postage expense 32,219
Distribution fees 19,800
Professional fees 18,404
Registration fees 16,380
Insurance expense 5,256
Board of Directors fees 3,500
Other expenses 2,842
----------
Total expenses 498,751
----------
NET INVESTMENT LOSS (262,712)
----------
NET REALIZED GAIN ON INVESTMENTS 5,240,782
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (680,029)
----------
NET GAIN ON INVESTMENTS 4,560,753
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,298,041
----------
----------
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, 2006 (Unaudited) and for the Year Ended
September 30, 2005
2006 2005
-------- --------
OPERATIONS:
Net investment loss $ (262,712) $ (818,186)
Net realized gain (loss) on investments 5,240,782 (1,254,985)
Net change in unrealized appreciation on investments (680,029) 9,115,304
------------ ------------
Net increase in net assets resulting from operations 4,298,041 7,042,133
------------ ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (35,032 and 326,996 shares, respectively) 1,091,157 9,250,294
Cost of shares redeemed (378,952 and 1,601,561 shares, respectively) (11,453,706) (46,060,648)
------------ ------------
Net decrease in net assets derived from Fund share activities (10,362,549) (36,810,354)
------------ ------------
TOTAL DECREASE (6,064,508) (29,768,221)
NET ASSETS AT THE BEGINNING OF THE PERIOD 54,441,430 84,209,651
------------ ------------
NET ASSETS AT THE END OF THE PERIOD (Includes accumulated
net investment loss of $0 and $0, respectively) $ 48,376,922 $ 54,441,430
------------ ------------
------------ ------------
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, 2006 2005 2004 2003 2002 2001
-------------- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $29.48 $26.98 $27.93 $19.61 $29.73 $66.57
Income from investment operations:
Net investment loss*<F4> (0.16) (0.34) (0.40) (0.22) (0.25) (0.38)
Net realized and unrealized
gains (losses) on investments 2.87 2.84 (0.55)**<F5> 8.54 (9.87) (36.46)
------ ------ ------ ------ ------ ------
Total from investment operations 2.71 2.50 (0.95) 8.32 (10.12) (36.84)
Less distributions:
Dividend from net investment income -- -- -- -- -- --
Distribution from net realized gains -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total from distributions -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net asset value, end of period $32.19 $29.48 $26.98 $27.93 $19.61 $29.73
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN 9.19%(1) 9.27% (3.44%) 42.43% (34.04%) (55.34%)
<F6>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 48,377 54,441 84,210 138,903 80,033 182,742
Ratio of expenses to average net assets 1.98%(2) 1.80% 1.63% 1.74% 1.51% 1.35%
<F7>
Ratio of net investment loss
to average net assets (1.04%)(2) (1.18%) (1.33%) (0.88%) (0.82%) (0.82%)
<F7>
Portfolio turnover rate 133.9% 167.6% 94.0% 83.7% 67.0% 35.8%
*<F4> Net investment loss per share is calculated using average shares
outstanding.
**<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
STATEMENT OF NET ASSETS
March 31, 2006 (Unaudited)
SHARES VALUE
------ -----
LONG-TERM INVESTMENTS -- 100.3% (A)<F9>
COMMON STOCKS -- 100.3% (A)<F9>
ADVERTISING -- 0.3%
2,500 ValueClick, Inc.*<F8> $ 42,300
APPAREL -- 0.9%
1,000 Charlotte Russe Holding Inc.*<F8> 21,400
6,500 Iconix Brand Group, Inc.*<F8> 94,575
-----------
115,975
APPLICATION SOFTWARE -- 0.1%
7,000 Sonic Foundry, Inc.*<F8> 13,020
BIOTECHNOLOGY -- 5.5%
3,000 Exelixis, Inc.*<F8> 36,030
10,000 Generex Biotechnology Corp.*<F8> 30,700
18,000 Genta Inc.*<F8> 38,880
7,000 Hana Biosciences, Inc.*<F8> 73,500
1,000 Illumina, Inc.*<F8> 23,750
1,500 Mannkind Corp.*<F8> 30,660
2,000 Nabi Biopharmaceuticals*<F8> 11,280
7,000 NeoRx Corp.*<F8> 9,240
4,500 PDL BioPharma Inc.*<F8> (Formerly
Protein Design Labs, Inc.) 147,600
5,000 Peregrine Pharmaceuticals, Inc.*<F8> 7,700
9,000 Savient Pharmaceuticals Inc.*<F8> 47,970
1,000 Sepracor Inc.*<F8> 48,810
3,000 Serologicals Corp.*<F8> 73,380
12,500 ViroPharma Inc.*<F8> 158,750
-----------
738,250
BUSINESS SOFTWARE & SERVICES -- 8.9%
4,000 Agile Software Corp.*<F8> 30,520
4,500 Akamai Technologies, Inc.*<F8> 148,005
18,500 Aspen Technology, Inc.*<F8> 234,025
6,000 BEA Systems, Inc.*<F8> 78,780
3,000 CheckFree Corp.*<F8> 151,500
5,500 Comverse Technology, Inc.*<F8> 129,415
16,000 I-many, Inc.*<F8> 25,600
1,500 Kenexa Corp.*<F8> 46,125
5,000 Manugistics Group, Inc.*<F8> 10,800
4,000 Nuance Communications, Inc.*<F8> 47,240
5,000 Radiant Systems, Inc.*<F8> 67,600
6,000 Sapient Corp.*<F8> 45,780
4,000 Sonic Solutions*<F8> 72,440
4,000 Sonus Networks, Inc.*<F8> 21,920
9,000 webMethods, Inc.*<F8> 75,780
-----------
1,185,530
CABLE TV/BROADCASTING -- 0.3%
4,000 Sirius Satellite Radio Inc.*<F8> 20,320
1,000 XM Satellite Radio Holdings Inc.*<F8> 22,270
-----------
42,590
CHEMICALS-SPECIALTY -- 0.5%
5,000 W.R. Grace & Co.*<F8> 66,500
COMMUNICATION EQUIPMENT -- 12.3%
2,000 American Tower Corp.*<F8> 60,640
8,000 ANADIGICS, Inc.*<F8> 63,200
9,000 Brocade Communications
Systems, Inc.*<F8> 60,120
11,000 Concurrent Computer Corp.*<F8> 35,530
10,000 Corning Inc.*<F8> 269,100
3,000 Endwave Corp.*<F8> 44,070
2,500 L.M. Ericsson
Telephone Co. ADR 94,300
38,500 Finisar Corp.*<F8> 190,575
11,000 JDS Uniphase Corp.*<F8> 45,870
3,000 McDATA Corp.*<F8> 13,860
5,500 Plexus Corp.*<F8> 206,635
15,000 Powerwave Technologies, Inc.*<F8> 202,350
25,000 Stratex Networks, Inc.*<F8> 153,750
11,000 Tellabs, Inc.*<F8> 174,900
1,500 Vyyo Inc.*<F8> 10,890
7,000 Zhone Technologies, Inc.*<F8> 18,760
-----------
1,644,550
COMPUTER & PERIPHERALS -- 4.0%
1,000 Apple Computer, Inc.*<F8> 62,720
7,500 Komag, Inc.*<F8> 357,000
4,000 Maxtor Corp.*<F8> 38,240
1,000 Network Appliance, Inc.*<F8> 36,030
4,000 Quantum Corp.*<F8> 14,960
1,500 Western Digital Corp.*<F8> 29,145
-----------
538,095
COMPUTER NETWORKING -- 3.7%
4,000 Broadwing Corp.*<F8> 58,960
2,600 Cisco Systems Inc.*<F8> 56,342
10,000 Glenayre Technologies, Inc.*<F8> 52,500
1,000 Juniper Networks, Inc.*<F8> 19,120
9,000 MRV Communications, Inc.*<F8> 36,900
7,000 Sierra Wireless Inc.*<F8> 81,760
5,500 WebEx Communications, Inc.*<F8> 185,185
-----------
490,767
COMPUTER SOFTWARE & SERVICES -- 0.3%
3,000 Wind River Systems, Inc.*<F8> 37,350
DIVERSIFIED -- 2.0%
15,000 Crown Holdings, Inc.*<F8> 266,100
DRUGS -- 1.4%
23,000 InSite Vision Inc.*<F8> 49,910
4,000 Ligand Pharmaceuticals Inc. Cl B*<F8> 51,080
12,000 Questcor Pharmaceuticals, Inc.*<F8> 18,840
2,000 Vertex Pharmaceuticals Inc.*<F8> 73,180
-----------
193,010
ELECTRICAL EQUIPMENT -- 1.1%
3,000 Capstone Turbine Corp.*<F8> 10,920
6,000 Fuel-Tech N.V.*<F8> 95,940
1,500 General Cable Corp.*<F8> 45,495
-----------
152,355
ELECTRONICS -- 1.4%
3,500 Evergreen Solar, Inc.*<F8> 53,900
23,000 GigaMedia Ltd.*<F8> 130,640
-----------
184,540
ENERGY -- 0.4%
12,000 Northern Orion Resources Inc.*<F8> 54,240
ENERGY-SERVICES -- 0.9%
12,000 Parker Drilling Co.*<F8> 111,240
3,000 Rentech, Inc.*<F8> 13,050
-----------
124,290
FINANCIAL SERVICES -- 2.7%
6,000 E*TRADE Financial Corp.*<F8> 161,880
8,000 HomeStore, Inc.*<F8> 52,480
7,000 TD Ameritrade Holding Corp.
(Formerly Ameritrade
Holding Corp.) 146,090
-----------
360,450
GOLD & SILVER -- 1.7%
4,000 Kimber Resources Inc.*<F8> 11,880
8,000 Miramar Mining Corp.*<F8> 27,120
29,000 Northgate Minerals Corp.*<F8> 69,890
5,000 Silver Standard Resources Inc.*<F8> 102,800
8,000 Taseko Mines Ltd.*<F8> 18,000
-----------
229,690
HOME BUILDERS -- 0.8%
13,000 U.S. Home Systems, Inc.*<F8> 112,060
INSTRUMENTS -- 0.1%
6,000 Therma-Wave Inc.*<F8> 9,720
INSURANCE -- 0.1%
6,000 SCOR SP-ADR 15,120
INTEGRATED OIL & GAS -- 0.4%
6,000 TransGlobe Energy Corp.*<F8> 32,280
4,000 VAALCO Energy, Inc.*<F8> 26,800
-----------
59,080
INTERNET INFORMATION PROVIDERS -- 1.3%
3,000 CDC Corp.*<F8> 13,200
200 Google Inc.*<F8> 78,000
10,000 iVillage Inc.*<F8> 84,100
8,000 Verticalnet, Inc.*<F8> 3,958
-----------
179,258
INTERNET SERVICE PROVIDERS -- 0.9%
17,000 Internap Network Services Corp.*<F8> 15,980
19,000 SAVVIS, Inc.*<F8> 28,310
6,000 Sify Ltd. SP-ADR*<F8> 79,440
-----------
123,730
INTERNET SOFTWARE & SERVICES -- 9.1%
8,000 24/7 Real Media, Inc.*<F8> 83,680
3,000 Ariba, Inc.*<F8> 29,340
40,000 Art Technology Group, Inc.*<F8> 128,400
4,000 Internet Capital Group, Inc.*<F8> 37,680
23,000 Loudeye Corp.*<F8> 11,778
9,000 Openwave Systems Inc.*<F8> 194,220
11,000 Red Hat, Inc.*<F8> 307,780
15,000 Redback Networks Inc.*<F8> 325,350
4,000 Saba Software, Inc.*<F8> 25,800
10,000 Safeguard Scientifics, Inc.*<F8> 24,700
1,500 Salesforce.com, Inc.*<F8> 54,495
-----------
1,223,223
MACHINERY -- 0.9%
4,000 JLG Industries, Inc. 123,160
MEDICAL SERVICES -- 1.2%
1,000 Quality Systems, Inc. 33,100
5,500 Quidel Corp.*<F8> 70,785
2,000 Radiation Therapy Services, Inc.*<F8> 51,020
-----------
154,905
MEDICAL SUPPLIES -- 0.4%
1,000 Schick Technologies, Inc.*<F8> 49,900
RECREATION -- 0.9%
4,000 Six Flags, Inc.*<F8> 40,720
13,000 Smith & Wesson Holding Corp.*<F8> 78,650
-----------
119,370
RETAIL-SPECIALTY -- 2.2%
1,500 Best Buy Co., Inc. 83,895
1,000 Dress Barn, Inc.*<F8> 47,950
8,500 United Retail Group, Inc.*<F8> 159,205
-----------
291,050
SECURITY SOFTWARE & SERVICES -- 0.7%
4,000 RSA Security Inc.*<F8> 71,760
2,000 Secure Computing Corp.*<F8> 23,080
-----------
94,840
SEMICONDUCTOR CAPITAL SPENDING -- 1.5%
9,500 Asyst Technologies, Inc.*<F8> 98,895
7,000 Kulicke and Soffa
Industries, Inc.*<F8> 66,780
11,000 TranSwitch Corp.*<F8> 28,600
-----------
194,275
SEMICONDUCTORS -- 17.6%
15,000 Applied Micro Circuits Corp.*<F8> 61,050
20,000 Atmel Corp.*<F8> 94,400
10,000 Avanex Corp.*<F8> 32,600
4,500 Broadcom Corp.*<F8> 194,220
32,000 Conexant Systems, Inc.*<F8> 110,400
7,000 Cypress Semiconductor Corp.*<F8> 118,650
16,000 EMCORE Corp.*<F8> 163,520
4,500 Lam Research Corp.*<F8> 193,500
9,000 Lattice Semiconductor Corp.*<F8> 59,940
14,000 Mattson Technology, Inc.*<F8> 168,000
1,000 MEMC Electronic
Materials, Inc.*<F8> 36,920
9,000 Merix Corp.*<F8> 110,700
16,000 Mindspeed Technologies Inc.*<F8> 63,680
1,500 Multi-Fineline Electronix, Inc.*<F8> 87,735
4,500 Netlogic Microsystems Inc.*<F8> 185,445
4,000 NVIDIA Corp.*<F8> 229,040
13,500 PLX Technology, Inc.*<F8> 169,425
3,500 PMC-Sierra, Inc.*<F8> 43,015
12,000 RF Micro Devices, Inc.*<F8> 103,800
1,500 Texas Instruments Inc. 48,705
12,000 Transmeta Corp.*<F8> 24,360
2,000 Trident Microsystems, Inc.*<F8> 58,120
-----------
2,357,225
SERVICES -- 2.8%
8,000 Home Solutions of America, Inc.*<F8> 54,080
3,000 Monster Worldwide Inc.*<F8> 149,580
2,000 Napco Security Systems, Inc.*<F8> 33,180
5,500 Spherion Corp.*<F8> 57,200
7,000 Taser International, Inc.*<F8> 74,130
-----------
368,170
TELECOMMUNICATION SERVICES -- 0.3%
5,000 Qwest Communications
International Inc.*<F8> 34,000
TELECOMMUNICATIONS -- 1.7%
27,000 CIENA Corp.*<F8> 140,670
9,000 Covad Communications
Group, Inc.*<F8> 17,370
8,000 eOn Communications Corp.*<F8> 21,622
10,000 Level 3 Communications, Inc.*<F8> 51,800
-----------
231,462
TELEPHONE SERVICES -- 2.5%
9,000 Primus Telecommunications
Group, Inc.*<F8> 6,929
18,000 Time Warner Telecom Inc.*<F8> 323,100
-----------
330,029
UTILITIES -- 0.3%
4,000 Companhia Paranaense
de Energia-Copel SP-ADR 39,280
WIRELESS COMMUNICATION -- 6.2%
11,250 Brightpoint, Inc.*<F8> 349,425
8,500 Motorola, Inc. 194,735
8,000 RELM Wireless Corp.*<F8> 77,920
1,500 Research In Motion Ltd.*<F8> 127,320
3,500 SBA Communications Corp.*<F8> 81,935
-----------
831,335
-----------
Total common stocks
(cost $7,921,770) 13,420,794
-----------
Total long-term investments
(cost $7,921,770) 13,420,794
PRINCIPAL AMOUNT
- ----------------
SHORT-TERM INVESTMENTS -- 0.1% (A)<F9>
VARIABLE RATE DEMAND NOTE -- 0.1%
$8,757 U.S. Bank, N.A., 4.57% 8,757
-----------
Total short-term investments
(cost $8,757) 8,757
-----------
Total investments
(cost $7,930,527) 13,429,551
Liabilities, less cash and
Receivables -- (0.4%) (A)<F9> (57,338)
-----------
NET ASSETS $13,372,213
-----------
-----------
Net Asset Value Per Share
($0.01 par value, 40,000,000
shares authorized), offering
and redemption price
($13,372,213 / 673,762
shares outstanding) $ 19.85
-----------
-----------
*<F8> Non-income producing security.
(A)<F9> Percentages for the various classifications relate to net assets.
ADR - American Depositary Receipt
N.V. - Netherlands Antilles Limited Liability Corp.
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, 2006 (Unaudited)
INCOME:
Dividends $ 52,623
Interest 8,123
----------
Total income 60,746
----------
EXPENSES:
Management fees 62,060
Professional fees 17,601
Administrative services 15,979
Transfer agent fees 15,331
Registration fees 12,402
Distribution fees 10,150
Custodian fees 10,118
Printing and postage expense 7,365
Board of Directors fees 2,500
Insurance expense 1,306
Other expenses 909
----------
Total expenses before reimbursement 155,721
Less expenses reimbursed by adviser (31,020)
----------
Net expenses 124,701
----------
NET INVESTMENT LOSS (63,955)
----------
NET REALIZED GAIN ON INVESTMENTS 1,212,791
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 761,265
----------
NET GAIN ON INVESTMENTS 1,974,056
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,910,101
----------
----------
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, 2006 (Unaudited) and for the Year Ended
September 30, 2005
2006 2005
-------- --------
OPERATIONS:
Net investment loss $ (63,955) $ (275,496)
Net realized gain on investments 1,212,791 190,428
Net change in unrealized appreciation on investments 761,265 1,607,776
----------- -----------
Net increase in net assets resulting from operations 1,910,101 1,522,708
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains ($0.03002 and $1.3048 per share, respectively) (22,906) (1,432,499)*
<F10>
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (45,646 and 345,706 shares, respectively) 839,067 5,983,960
Net asset value of shares issued in distributions reinvested (1,394 and 82,940 shares, respectively) 21,855 1,389,237
Cost of shares redeemed (143,441 and 774,759 shares, respectively) (2,493,706) (13,200,954)
----------- -----------
Net decrease in net assets derived from Fund share activities (1,632,784) (5,827,757)
----------- -----------
TOTAL INCREASE(DECREASE) 254,411 (5,737,548)
NET ASSETS AT THE BEGINNING OF THE PERIOD 13,117,802 18,855,350
----------- -----------
NET ASSETS AT THE END OF THE PERIOD (Includes accumulated
net investment loss of $0 and $0, respectively) $13,372,213 $13,117,802
----------- -----------
----------- -----------
*<F10> See Note 8
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, 2006 2005 2004 2003 2002 2001
-------------- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $17.03 $16.89 $18.28 $11.24 $16.82 $43.31
Income from investment operations:
Net investment loss*<F11> (0.09) (0.29) (0.38) (0.23) (0.23) (0.37)
Net realized and unrealized
gains (losses) on investments 2.94 1.73 (0.27) 7.27 (5.31) (25.47)
------ ------ ------ ------ ------ ------
Total from investment operations 2.85 1.44 (0.65) 7.04 (5.54) (25.84)
Less distributions:
Dividend from net investment income -- -- -- -- -- --
Distributions from net realized gains (0.03) (1.30) (0.74) -- (0.04) (0.65)
------ ------ ------ ------ ------ ------
Total from distributions (0.03) (1.30) (0.74) -- (0.04) (0.65)
------ ------ ------ ------ ------ ------
Net asset value, end of period $19.85 $17.03 $16.89 $18.28 $11.24 $16.82
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN 16.78%(1) 8.68% (4.29%) 62.63% (33.02%) (60.44%)
<F14>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 13,372 13,118 18,855 26,446 14,065 27,794
Ratio of expenses (after reimbursement)
to average net assets**<F12> 2.01%(2) 2.07% 1.96% 2.02% 1.87% 1.74%
<F15>
Ratio of net investment loss
to average net assets***<F13> (1.03%)(2) (1.74%) (1.87%) (1.56%) (1.33%) (1.29%)
<F15>
Portfolio turnover rate 83.7% 97.5% 65.7% 88.4% 195.0% 74.0%
*<F11> Net investment loss per share is calculated using average shares
outstanding.
**<F12> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses for the six
months ending March 31, 2006 and for the year ended September 30,
2005, the ratios would have been 2.51%(2)<F15> and 2.22%,
respectively.
***<F13> If the Fund had paid all of its expenses for the six months ending
March 31, 2006 and for the year ended September 30, 2005, the ratios
would have been (1.53%)(2)<F15> and (1.89%), respectively.
(1)<F14> Not Annualized.
(2)<F15> Annualized.
The accompanying notes to financial statements are an integral part of these
statements.
Reynolds Fund
STATEMENT OF NET ASSETS
March 31, 2006 (Unaudited)
SHARES VALUE
------ -----
LONG-TERM INVESTMENTS -- 125.1% (A)<F17>
COMMON STOCKS -- 124.9% (A)<F17>
APPAREL -- 2.1%
2,500 Charlotte Russe Holding Inc.*<F16> $ 53,500
500 Gildan Activewear Inc.*<F16> 23,760
16,000 Tefron Ltd.*<F16> 180,000
3,000 Zumiez Inc.*<F16> 183,300
-----------
440,560
APPLICATION SOFTWARE -- 0.7%
17,000 Novell, Inc.*<F16> 130,560
5,000 Sonic Foundry, Inc.*<F16> 9,300
-----------
139,860
AUTOMOTIVE -- 1.0%
4,000 Amerigon Inc.*<F16> 31,080
15,000 Fiat S.p.A. SP-ADR*<F16> 189,600
-----------
220,680
BEVERAGES -- 0.6%
1,000 Hansen Natural Corp.*<F16> 126,050
BIOTECHNOLOGY -- 5.8%
3,250 AVANIR Pharmaceuticals*<F16> 47,515
6,000 AVI BioPharma, Inc.*<F16> 45,540
8,000 BioCryst Pharmaceuticals, Inc.*<F16> 144,480
10,000 Genaera Corp.*<F16> 14,000
500 Genentech, Inc.*<F16> 42,255
40,000 Generex Biotechnology Corp.*<F16> 122,800
26,000 Genta Inc.*<F16> 56,160
1,000 Gilead Sciences, Inc.*<F16> 62,220
19,500 Hana Biosciences, Inc.*<F16> 204,750
5,000 Hemispherx Biopharma, Inc.*<F16> 18,000
4,500 Mannkind Corp.*<F16> 91,980
6,000 Novavax, Inc.*<F16> 47,880
4,000 PDL BioPharma Inc.*<F16> (Formerly
Protein Design Labs, Inc.) 131,200
21,000 Pingchuan Pharmaceutical Inc.*<F16> 12,075
8,000 Sangamo BioSciences, Inc.*<F16> 47,600
4,000 Savient Pharmaceuticals Inc.*<F16> 21,320
9,000 ViroPharma Inc.*<F16> 114,300
12,000 XOMA Ltd.*<F16> 27,480
-----------
1,251,555
BUILDING -- 0.8%
12,500 Comfort Systems USA, Inc. 168,750
BUSINESS SOFTWARE & SERVICES -- 7.9%
8,000 Agile Software Corp.*<F16> 61,040
6,000 Akamai Technologies, Inc.*<F16> 197,340
3,500 Answerthink Inc.*<F16> 22,505
40,500 Aspen Technology, Inc.*<F16> 512,325
15,500 BEA Systems, Inc.*<F16> 203,515
1,500 Comverse Technology, Inc.*<F16> 35,295
3,000 Copart, Inc.*<F16> 82,350
4,500 Kenexa Corp.*<F16> 138,375
4,000 Manugistics Group, Inc.*<F16> 8,640
8,000 Nuance Communications, Inc.*<F16> 94,480
10,000 Radiant Systems, Inc.*<F16> 135,200
4,000 Sapient Corp.*<F16> 30,520
5,000 Sonus Networks, Inc.*<F16> 27,400
6,500 TIBCO Software Inc.*<F16> 54,340
17,000 Viewpoint Corp.*<F16> 23,460
2,000 Vital Images, Inc.*<F16> 68,160
-----------
1,694,945
CABLE TV/BROADCASTING -- 0.3%
20,000 Charter Communications, Inc.*<F16> 21,800
10,000 Sirius Satellite Radio Inc.*<F16> 50,800
-----------
72,600
CAPITAL EQUIPMENT -- 0.3%
2,000 Mobile Mini, Inc.*<F16> 61,840
CHEMICALS-SPECIALTY -- 0.2%
1,000 NewMarket Corp. 47,590
COMMUNICATION EQUIPMENT -- 9.6%
1,500 American Tower Corp.*<F16> 45,480
23,000 Brocade Communications
Systems, Inc.*<F16> 153,640
4,000 C-COR Inc.*<F16> 34,960
22,000 Concurrent Computer Corp.*<F16> 71,060
4,500 Corning Inc.*<F16> 121,095
7,500 Endwave Corp.*<F16> 110,175
73,000 Finisar Corp.*<F16> 361,350
40,000 JDS Uniphase Corp.*<F16> 166,800
4,000 McDATA Corp.*<F16> 18,480
5,000 Plexus Corp.*<F16> 187,850
8,000 Powerwave Technologies, Inc.*<F16> 107,920
2,000 QUALCOMM Inc. 101,220
1,500 Seagate Technology 39,495
14,500 Stratex Networks, Inc.*<F16> 89,175
28,500 Tellabs, Inc.*<F16> 453,150
-----------
2,061,850
COMPUTER & PERIPHERALS -- 3.3%
500 Apple Computer, Inc.*<F16> 31,360
9,500 Komag, Inc.*<F16> 452,200
7,500 Maxtor Corp.*<F16> 71,700
1,000 Network Appliance, Inc.*<F16> 36,030
2,000 Palm, Inc.*<F16> 46,320
12,000 Sun Microsystems, Inc.*<F16> 61,560
-----------
699,170
COMPUTER NETWORKING -- 3.6%
5,000 3Com Corp.*<F16> 25,600
10,000 Adaptec, Inc.*<F16> 55,300
6,500 Broadwing Corp.*<F16> 95,810
3,500 Citrix Systems, Inc.*<F16> 132,650
8,000 Foundry Networks, Inc.*<F16> 145,280
10,000 Glenayre Technologies, Inc.*<F16> 52,500
20,500 MRV Communications, Inc.*<F16> 84,050
9,000 Sierra Wireless Inc.*<F16> 105,120
9,000 Sycamore Networks, Inc.*<F16> 42,300
1,000 WebEx Communications, Inc.*<F16> 33,670
-----------
772,280
COMPUTER SOFTWARE & SERVICES -- 0.5%
4,000 Interwoven, Inc.*<F16> 35,960
13,000 VA Software Corp.*<F16> 62,270
-----------
98,230
DRUGS -- 2.8%
6,000 CollaGenex
Pharmaceuticals, Inc.*<F16> 88,800
5,000 Cortex Pharmaceuticals, Inc.*<F16> 26,250
1,500 First Horizon
Pharmaceutical Corp.*<F16> 37,815
57,000 InSite Vision Inc.*<F16> 123,690
7,000 Ligand Pharmaceuticals Inc. Cl B*<F16> 89,390
16,000 Questcor Pharmaceuticals, Inc.*<F16> 25,120
13,000 SciClone Pharmaceuticals, Inc.*<F16> 46,410
4,500 Vertex Pharmaceuticals Inc.*<F16> 164,655
-----------
602,130
ELECTRICAL EQUIPMENT -- 2.0%
14,000 ABB Ltd. SP-ADR*<F16> 175,700
4,000 Capstone Turbine Corp.*<F16> 14,560
500 Encore Wire Corp.*<F16> 16,940
12,500 Fuel-Tech N.V.*<F16> 199,875
2,500 FuelCell Energy, Inc.*<F16> 28,675
-----------
435,750
ELECTRONICS -- 2.6%
1,500 Agilent Technologies, Inc.*<F16> 56,325
11,500 Evergreen Solar, Inc.*<F16> 177,100
39,500 GigaMedia Ltd.*<F16> 224,360
1,500 InfoSonics Corp.*<F16> 15,330
1,000 Jabil Circuit, Inc.*<F16> 42,860
1,500 Technitrol, Inc. 35,970
-----------
551,945
ENERGY -- 0.8%
16,000 Ivanhoe Energy Inc.*<F16> 43,520
26,000 Northern Orion Resources Inc.*<F16> 117,520
-----------
161,040
ENERGY-SERVICES -- 7.5%
1,000 Baker Hughes Inc. 68,400
6,000 Cooper Cameron Corp.*<F16> 264,480
2,000 Diamond Offshore Drilling, Inc. 179,000
9,000 ENGlobal Corp.*<F16> 131,490
3,000 Global Industries, Ltd.*<F16> 43,470
1,000 Halliburton Co. 73,020
500 Noble Corp. 40,550
24,000 Parker Drilling Co.*<F16> 222,480
1,500 Rowan Companies, Inc. 65,940
3,000 Smith International, Inc. 116,880
1,000 Transocean Inc.*<F16> 80,300
7,000 Veritas DGC Inc.*<F16> 317,730
-----------
1,603,740
ENGINEERING/CONSTRUCTION -- 0.8%
1,000 Foster Wheeler Ltd.*<F16> 47,310
6,500 Mitcham Industries, Inc.*<F16> 108,160
500 URS Corp.*<F16> 20,125
-----------
175,595
ENTERTAINMENT/MEDIA -- 0.3%
4,000 Multimedia Games, Inc.*<F16> 59,520
FINANCIAL SERVICES -- 3.7%
12,000 E*TRADE Financial Corp.*<F16> 323,760
1,000 First Cash Financial
Services, Inc.*<F16> 19,990
26,022 HomeStore, Inc.*<F16> 170,704
7,000 Knight Capital Group, Inc.*<F16> 97,510
4,000 TD Ameritrade Holding Corp. 83,480
7,000 U.S. Global Investors, Inc.*<F16> 109,060
-----------
804,504
GOLD & SILVER -- 7.1%
24,000 Bema Gold Corp.*<F16> 106,320
9,000 Cambior Inc.*<F16> 29,430
21,500 Coeur d'Alene Mines Corp.*<F16> 141,040
6,000 Crystallex International Corp.*<F16> 24,660
14,000 Eldorado Gold Corp.*<F16> 66,920
12,000 Gammon Lake Resources Inc.*<F16> 217,200
3,500 Gold Fields Ltd. SP-ADR 76,930
2,500 Goldcorp Inc. 73,125
8,000 Golden Star Resources Ltd.*<F16> 25,520
2,000 Hecla Mining Co.*<F16> 13,220
4,000 Kinross Gold Corp.*<F16> 43,720
6,500 Pan American Silver Corp.*<F16> 165,100
8,000 Silver Standard Resources Inc.*<F16> 164,480
34,000 Silver Wheaton Corp.*<F16> 362,780
10,000 Taseko Mines Ltd.*<F16> 22,500
-----------
1,532,945
HEALTH MAINTENANCE ORGANIZATION -- 0.3%
1,000 UnitedHealth Group Inc. 55,860
HOME BUILDERS -- 0.3%
7,000 U.S. Home Systems, Inc.*<F16> 60,340
HOUSEHOLD PRODUCTS -- 0.2%
1,000 Parlux Fragrances, Inc.*<F16> 32,250
INDUSTRIAL METALS & MINERALS -- 2.2%
500 Allegheny Technologies, Inc. 30,590
1,000 Dynamic Materials Corp. 35,640
1,000 Tenaris S.A. ADR 180,670
2,000 TETRA Technologies, Inc.*<F16> 94,080
2,000 Titanium Metals Corp.*<F16> 97,100
2,000 U.S. Concrete, Inc.*<F16> 28,920
-----------
467,000
INSTRUMENTS -- 0.4%
1,500 Daktronics, Inc. 54,750
3,000 Input/Output, Inc.*<F16> 29,130
-----------
83,880
INSURANCE -- 0.4%
33,000 SCOR SP-ADR 83,160
INTEGRATED OIL & GAS -- 1.8%
500 Devon Energy Corp. 30,585
5,000 Gastar Exploration Ltd.*<F16> 21,300
40,000 Harken Energy Corp.*<F16> 26,400
1,500 Noble Energy, Inc. 65,880
2,000 Swift Energy Co.*<F16> 74,920
18,000 TransGlobe Energy Corp.*<F16> 96,840
9,000 VAALCO Energy, Inc.*<F16> 60,300
-----------
376,225
INTERNET INFORMATION PROVIDERS -- 0.5%
21,000 CDC Corp.*<F16> 92,400
38,000 Verticalnet, Inc.*<F16> 18,799
-----------
111,199
INTERNET SERVICE PROVIDERS -- 1.2%
27,000 Internap Network Services Corp.*<F16> 25,380
19,000 SAVVIS, Inc.*<F16> 28,310
15,500 Sify Ltd. SP-ADR*<F16> 205,220
-----------
258,910
INTERNET SOFTWARE & SERVICES -- 6.3%
20,500 24/7 Real Media, Inc.*<F16> 214,430
12,000 Ariba, Inc.*<F16> 117,360
67,000 Art Technology Group, Inc.*<F16> 215,070
4,000 Internet Capital Group, Inc.*<F16> 37,680
22,000 Loudeye Corp.*<F16> 11,266
10,000 On2 Technologies, Inc.*<F16> 8,000
2,000 Openwave Systems Inc.*<F16> 43,160
12,500 Red Hat, Inc.*<F16> 349,750
9,500 Redback Networks Inc.*<F16> 206,055
8,000 Saba Software, Inc.*<F16> 51,600
30,000 Safeguard Scientifics, Inc.*<F16> 74,100
5,000 Youbet.com, Inc.*<F16> 27,300
-----------
1,355,771
MEDICAL SERVICES -- 1.4%
14,000 Delcath Systems Inc.*<F16> 64,400
4,813 Emdeon Corp.*<F16> 51,980
1,000 Quality Systems, Inc. 33,100
3,000 Quidel Corp.*<F16> 38,610
1,000 Radiation Therapy Services, Inc.*<F16> 25,510
1,000 Sierra Health Services, Inc.*<F16> 40,700
1,500 Ventiv Health, Inc.*<F16> 49,830
-----------
304,130
MEDICAL SUPPLIES -- 2.2%
3,000 Align Technology, Inc.*<F16> 27,510
1,000 Digene Corp.*<F16> 39,100
3,500 Neurometrix Inc.*<F16> 136,290
4,500 Schick Technologies, Inc.*<F16> 224,550
500 Varian Medical Systems, Inc.*<F16> 28,080
12,000 Vasogen Inc.*<F16> 25,320
-----------
480,850
NATURAL GAS -- 0.9%
500 Newfield Exploration Co.*<F16> 20,950
1,000 Questar Corp. 70,050
3,500 Southwestern Energy Co.*<F16> 112,665
-----------
203,665
OIL & GAS REFINING & MARKETING -- 2.4%
2,000 Frontier Oil Corp. 118,700
1,500 Sunoco, Inc. 116,355
4,000 Tesoro Corp. 273,360
-----------
508,415
PHOTOGRAPHY -- 0.4%
11,000 Lexar Media, Inc.*<F16> 94,380
RECREATION -- 0.3%
3,500 Dover Motorsports, Inc. 19,215
8,000 Smith & Wesson Holding Corp.*<F16> 48,400
-----------
67,615
RESTAURANTS -- 0.6%
4,000 Papa John's International, Inc.*<F16> 131,240
RETAIL-SPECIALTY -- 2.4%
3,250 Best Buy Co., Inc. 181,772
1,500 Dress Barn, Inc.*<F16> 71,925
1,500 Starbucks Corp.*<F16> 56,460
9,500 United Retail Group, Inc.*<F16> 177,935
1,000 Urban Outfitters, Inc.*<F16> 24,540
-----------
512,632
SECURITY SOFTWARE & SERVICES -- 2.1%
11,500 RSA Security Inc.*<F16> 206,310
10,000 Secure Computing Corp.*<F16> 115,400
15,500 VASCO Data Security
International, Inc.*<F16> 126,790
-----------
448,500
SEMICONDUCTOR CAPITAL SPENDING -- 2.3%
20,000 Asyst Technologies, Inc.*<F16> 208,200
5,500 Kulicke and Soffa Industries, Inc.*<F16> 52,470
11,000 LTX Corp.*<F16> 59,400
7,500 Teradyne, Inc.*<F16> 116,325
23,000 TranSwitch Corp.*<F16> 59,800
-----------
496,195
SEMICONDUCTORS -- 18.9%
4,500 Advanced Micro Devices, Inc.*<F16> 149,220
36,000 Applied Micro Circuits Corp.*<F16> 146,520
41,000 Atmel Corp.*<F16> 193,520
19,000 Avanex Corp.*<F16> 61,940
5,000 Axcelis Technologies, Inc.*<F16> 29,300
3,000 Bookham, Inc.*<F16> 28,620
1,500 Broadcom Corp.*<F16> 64,740
47,000 Conexant Systems, Inc.*<F16> 162,150
1,500 Cypress Semiconductor Corp.*<F16> 25,425
39,000 EMCORE Corp.*<F16> 398,580
2,000 Lam Research Corp.*<F16> 86,000
13,000 Lattice Semiconductor Corp.*<F16> 86,580
4,000 LSI Logic Corp.*<F16> 46,240
500 Marvell Technology Group Ltd.*<F16> 27,050
3,000 Mattson Technology, Inc.*<F16> 36,000
2,500 MEMC Electronic
Materials, Inc.*<F16> 92,300
6,000 Merix Corp.*<F16> 73,800
1,000 Microchip Technology Inc. 36,300
45,000 Mindspeed Technologies Inc.*<F16> 179,100
9,500 Netlogic Microsystems Inc.*<F16> 391,495
7,500 NVIDIA Corp.*<F16> 429,450
15,500 ON Semiconductor Corp.*<F16> 112,530
4,000 Pixelworks, Inc.*<F16> 19,880
13,500 PLX Technology, Inc.*<F16> 169,425
13,000 PMC-Sierra, Inc.*<F16> 159,770
5,000 Rambus Inc.*<F16> 196,700
17,000 RF Micro Devices, Inc.*<F16> 147,050
3,000 SIPEX Corp.*<F16> 8,550
23,000 Solectron Corp.*<F16> 92,000
4,000 Transmeta Corp.*<F16> 8,120
6,000 Trident Microsystems, Inc.*<F16> 174,360
17,000 TriQuint Semiconductor, Inc.*<F16> 83,640
39,000 Vitesse Semiconductor Corp.*<F16> 139,620
-----------
4,055,975
SERVICES -- 3.1%
3,000 Layne Christensen Co.*<F16> 100,560
1,000 Monster Worldwide Inc.*<F16> 49,860
7,250 Napco Security Systems, Inc.*<F16> 120,278
5,000 On Assignment, Inc.*<F16> 54,900
5,000 SITEL Corp.*<F16> 21,000
24,000 Spherion Corp.*<F16> 249,600
6,500 Taser International, Inc.*<F16> 68,835
-----------
665,033
TELECOMMUNICATION SERVICES -- 0.3%
3,000 Koninklijke (Royal)
KPN N.V. SP-ADR 33,840
4,000 Qwest Communications
International Inc.*<F16> 27,200
-----------
61,040
TELECOMMUNICATIONS -- 1.8%
37,000 CIENA Corp.*<F16> 192,770
27,000 Covad Communications
Group, Inc.*<F16> 52,110
26,000 Level 3 Communications, Inc.*<F16> 134,680
-----------
379,560
TELEPHONE SERVICES -- 3.5%
42,000 Time Warner Telecom Inc.*<F16> 753,900
UTILITIES -- 0.2%
1,500 Energen Corp. 52,500
WIRELESS COMMUNICATION -- 4.2%
8,750 Brightpoint, Inc.*<F16> 271,775
13,000 Lightbridge, Inc.*<F16> 144,300
1,000 NII Holdings Inc.*<F16> 58,970
20,500 RELM Wireless Corp.*<F16> 199,670
7,500 SBA Communications Corp.*<F16> 175,575
4,000 UbiquiTel Inc.*<F16> 40,400
-----------
890,690
-----------
Total common stocks
(cost $20,566,698) 26,774,044
-----------
REITS -- 0.2% (A)<F17>
1,500 Tanger Factory
Outlet Centers, Inc. 51,615
-----------
Total reits
(cost $52,172) 51,615
-----------
RIGHTS -- 0.0% (A)<F17>
6,800 Monogram
Biosciences, Inc. CVR*<F16> 4,284
-----------
Total rights
(cost $0) 4,284
-----------
Total long-term investments
(cost $20,618,870) 26,829,943
PRINCIPAL AMOUNT
- ----------------
SHORT-TERM INVESTMENTS -- 0.0% (A)<F17>
VARIABLE RATE DEMAND NOTE -- 0.0%
$907 U.S. Bank, N.A., 4.57% 907
-----------
Total short-term investments
(cost $907) 907
-----------
Total investments
(cost $20,619,777) 26,830,850
Liabilities, less cash and
Receivables -- (25.1%) (A)<F17> (5,375,182)
-----------
NET ASSETS $21,455,668
-----------
-----------
Net Asset Value Per Share
($0.01 par value, 40,000,000
shares authorized), offering
and redemption price
($21,455,668 / 3,080,347
shares outstanding) $ 6.97
-----------
-----------
*<F16> Non-income producing security.
(A)<F17> Percentages for the various classifications relate to net assets.
ADR - American Depositary Receipt
CVR - Contingent Value Right
N.V. - Netherlands Antilles Limited Liability Corp.
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, 2006 (Unaudited)
INCOME:
Dividends $ 63,225
Interest 14,258
----------
Total income 77,483
----------
EXPENSES:
Interest expense 112,908
Management fees 92,228
Custodian fees 23,741
Administrative services 20,937
Professional fees 17,334
Transfer agent fees 14,133
Registration fees 9,648
Printing and postage expense 7,643
Distribution fees 4,600
Board of Directors fees 2,500
Insurance expense 1,906
Other expenses 348
----------
Total expenses before reimbursement 307,926
Less expenses reimbursed by adviser (15,734)
----------
Net expenses 292,192
----------
NET INVESTMENT LOSS (214,709)
----------
NET REALIZED GAIN ON INVESTMENTS 2,049,943
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,729,155
----------
NET GAIN ON INVESTMENTS 3,779,098
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,564,389
----------
----------
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, 2006 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets from operations $ 3,564,389
Adjustments to reconcile net increase in net assets from
operations to net cash provided by operating activities:
Unrealized appreciation on securities (1,729,155)
Net realized gain from investments (2,045,126)
Purchase of investment securities (33,739,227)
Decrease in payable for securities purchased (506,804)
Purchase of short-term investment securities, net (1)
Proceeds from disposition of investment securities 34,125,447
Decrease in receivables for securities sold 1,163,403
Change in receivables/payables related to operations, net (10,136)
------------
Net cash provided by operating activities 822,790
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loan payable 647,000
Proceeds from shares sold 2,858,261
Payment on shares redeemed (4,306,576)
Increase in amount due to custodian (21,475)
------------
Net cash used in financing activities (822,790)
------------
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, 2006 (Unaudited) and for the Year Ended
September 30, 2005
2006 2005
-------- --------
OPERATIONS:
Net investment loss $ (214,709) $ (805,220)
Net realized gain (loss) on investments 2,049,943 (8,227,893)
Net change in unrealized appreciation on investments 1,729,155 11,429,926
----------- -----------
Net increase in net assets resulting from operations 3,564,389 2,396,813
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued (464,843 and 1,667,540 shares, respectively) 2,929,861 9,988,700
Cost of shares redeemed (727,431 and 4,596,399 shares, respectively) (4,303,254) (26,914,704)
----------- -----------
Net decrease in net assets derived from Fund share activities (1,373,393) (16,926,004)
----------- -----------
TOTAL INCREASE (DECREASE) 2,190,996 (14,529,191)
NET ASSETS AT THE BEGINNING OF THE PERIOD 19,264,672 33,793,863
----------- -----------
NET ASSETS AT THE END OF THE PERIOD (Includes accumulated
net investment loss of $0 and $0, respectively) $21,455,668 $19,264,672
----------- -----------
----------- -----------
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, 2006 2005 2004 2003 2002 2001
-------------- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 5.76 $ 5.39 $ 6.01 $ 3.01 $ 4.35 $13.14
Income from investment operations:
Net investment loss*<F18> (0.07) (0.17) (0.16) (0.11) (0.06) (0.09)
Net realized and unrealized
gains (losses) on investments 1.28 0.54 (0.46) 3.11 (1.28) (8.70)
------ ------ ------ ------ ------ ------
Total from investment operations 1.21 0.37 (0.62) 3.00 (1.34) (8.79)
Less distributions:
Dividend from net investment income -- -- -- -- -- --
Distribution from net realized gains -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total from distributions -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net asset value, end of period $ 6.97 $ 5.76 $ 5.39 $ 6.01 $ 3.01 $ 4.35
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN 21.01%(1) 6.86% (10.17%) 99.67% (30.80%) (66.89%)
<F21>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's $) 21,456 19,265 33,794 32,728 10,481 20,136
Ratio of expenses to average net assets**<F19> 3.17%(2) 3.29% 2.29% 2.82% 2.07% 1.66%
<F22>
Ratio of net investment loss
to average net assets***<F20> (2.33%)(2) (3.02%) (2.24%) (2.41%) (1.41%) (0.89%)
<F22>
Portfolio turnover rate 154.3% 142.9% 79.5% 119.9% 408.5% 275.5%
*<F18> Net investment loss per share is calculated using average shares
outstanding.
**<F19> Computed after giving effect to adviser's expense limitation
undertaking. If the Fund had paid all of its expenses for the six
months ending March 31, 2006 and for the year ended September 30,
2003, the ratios would have been 3.34%(2)<F22> and 2.88%,
respectively.
***<F20> If the Fund had paid all of its expenses for the six months ending
March 31, 2006 and for the year ended September 30, 2003, the ratios
would have been (2.50%)(2)<F22> and (2.47%), respectively.
(1)<F21> Not Annualized.
(2)<F22> Annualized.
The accompanying notes to financial statements are an integral part of these
statements.
Reynolds Funds, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 2006 (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 three funds: the
Reynolds Blue Chip Growth Fund ("Blue Chip Fund"), the Reynolds Opportunity
Fund ("Opportunity Fund") and the Reynolds Fund ("Reynolds 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; and the
investment objective of the Reynolds Fund is to produce long-term growth of
capital.
(a) Each security for the Blue Chip Fund, Opportunity Fund and Reynolds
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 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 a director of the Funds are
affiliated, to serve as investment adviser and manager. Under the terms of
the agreements, the Funds' will pay RCM a monthly management fee at the
annual rate of 1% of such Funds' daily net assets.
For the six months ending March 31, 2006, RCM has reimbursed the
Opportunity Fund for expenses over 2.00% of the daily net assets of the
Fund totaling $31,020 and the Reynolds Fund for expenses over 1.95%, of the
daily net assets of the Fund totaling $15,734.
The Funds have administrative agreements with Fiduciary Management, Inc.
("FMI"), with whom an officer of the Funds is affiliated, to supervise all
aspects of the Funds' operations except those performed by RCM pursuant to
the management agreements. Under the terms of the agreements, the Funds'
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.
The Funds' 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
and Reynolds 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,
2006. The terms of the respective agreements are as follows:
BLUE CHIP OPPORTUNITY REYNOLDS
FUND FUND FUND
--------------- --------------- ---------------
Payment Terms Due in 45 days Due in 45 days Due in 90 days
Interest Prime Rate - 1% Prime Rate - 1% Prime Rate - 1%
Unused Line Fees 0.10% 0.10% 0.10%
Credit Limit $5,000,000 $975,000 $10,000,000
Variable Limit
Average Daily Balance Outstanding $7,753 $11,945 $3,443,434
Maximum Amount Outstanding $232,000 $396,000 $5,417,000
Interest Expense $2,767 $852 $112,908
(4) DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income and net realized gains, if any, for the Funds are
distributed to shareholders at least annually.
(5) INVESTMENT TRANSACTIONS --
For the six months ending March 31, 2006, purchases and proceeds of sales
of investment securities (excluding short-term securities) were as follows:
PURCHASES SALES
--------- -----
Blue Chip Fund $64,112,648 $73,329,636
Opportunity Fund 10,164,797 11,631,118
Reynolds Fund 33,739,227 34,125,447
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of March 31, 2006, liabilities of the Funds included the following:
BLUE CHIP OPPORTUNITY REYNOLDS
FUND FUND FUND
------------ ------------ ------------
Payable to brokers for securities purchased $92,850 $ -- $ 120,435
Payable to RCM for management fees 40,714 11,039 17,197
Payable to FMI for administrative fees 6,619 2,208 3,439
Payable to shareholders for redemptions 917 -- 5,589
Due to custodian 36,257 24,955 --
Interest payable 535 106 27,047
Other liabilities 95,968 40,002 14,625
Loan payable -- -- 5,330,000
(7) SOURCES OF NET ASSETS --
As of March 31, 2006, the sources of net assets were as follows:
BLUE CHIP OPPORTUNITY REYNOLDS
FUND FUND FUND
------------ ------------ ------------
Fund shares issued and outstanding $137,421,120 $ 6,778,175 $66,003,354
Net unrealized appreciation
on investments 10,129,917 5,499,024 6,211,073
Accumulated net realized (loss) gain
on investments (99,174,115) 1,095,014 (50,758,759)
------------ ----------- -----------
$ 48,376,922 $13,372,213 $21,455,668
------------ ----------- -----------
------------ ----------- -----------
(8) INCOME TAX INFORMATION --
The following information for the Funds is presented on an income tax basis
as of March 31, 2006:
GROSS GROSS NET UNREALIZED
COST OF UNREALIZED UNREALIZED APPRECIATION
INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS
----------- ------------ ------------ --------------
Blue Chip Fund $38,552,655 $10,473,065 $516,044 $9,957,021
Opportunity Fund 7,978,305 5,581,333 130,087 5,451,246
Reynolds Fund 20,737,213 6,517,869 424,232 6,093,637
The following information for the Funds is presented on an income tax basis
as of September 30, 2005:
GROSS GROSS NET UNREALIZED DISTRIBUTABLE DISTRIBUTABLE
COST OF UNREALIZED UNREALIZED APPRECIATION ORDINARY LONG-TERM
INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS INCOME CAPITAL GAINS
----------- ------------ ------------ -------------- ------------- -------------
Blue Chip Fund $42,374,337 $11,228,675 $628,478 $10,600,197 $ -- $ --
Opportunity Fund 8,441,603 4,778,132 156,440 4,621,692 -- 21,195
Reynolds Fund 19,208,165 4,783,708 548,966 4,234,742 -- --
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.
The tax components of dividends paid during the year ended September 30,
2005, capital loss carryovers, which may be used to offset future capital
gains, subject to Internal Revenue Code limitations (expiring in varying
amounts through 2013), as of September 30, 2005, and tax basis post-October
losses as of September 30, 2005, which are not recognized for tax purposes
until the first day of the following fiscal year are:
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
----------------------------------------------------------------- -------------------------------
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 $ -- $ -- $104,205,149 $ -- $ -- $ --
Opportunity Fund -- 1,432,499 -- -- -- 1,226,731
Reynolds Fund -- -- 43,507,952 9,053,580 -- --
The Blue Chip Fund and Reynolds Fund have utilized $7,028,488 and
$5,599,986, respectively, of their post-October losses from the prior year
to increase current year net capital losses.
Since there were no ordinary distributions paid for the year ended
September 30, 2005 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 December 21, 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. 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. 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. The Directors concluded that "break points" were not warranted at
this time given the anticipated growth of the Funds in the next year and 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 is
available on the Funds' website at http://www.reynoldsfunds.com or the website
----------------------------
of the Commission no later than August 31 for the prior 12 months ending June
30. 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.
The Funds' Form N-Q is available on the Commission's website. The Funds' Form
N-Q may be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C., 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 1800
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 March 24, 2006, 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. There were no changes to Reynolds Funds' internal control over
financial reporting that occurred during the first fiscal quarter of the
period covered by this report that have materially affected, or are
reasonably likely to materially affect, such controls.
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 May 17, 2006
------------------------------------------------
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 May 17, 2006
-------------------------------------------------