Reynolds Opportunity Fund
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REYNOLDS FUNDS Dear Fellow Shareholders: November 3, 1999 We app re c i a te your continued confidence in the Reynolds Funds and would like to welcome our many new share- holders. The Reynolds Blue Chip Growth Fund was ranked #1 among Growth and Income Funds by Lipper Inc. for the five years ended September 30, 1999. The Web Site for the Reynolds Funds is www.reynoldsfunds.com. We are pleased to introduce a new investment option, the Reynolds Fund. This Fund is No-Load and is now available for investment. I am the portfolio manager of this Fund in addition to continuing to manage the four other No-Load Reynolds Funds. The Reynolds Fund is a general stock fund and is intended to be a core i nvestment holding. The Fund may own common stocks of all types and sizes and will mainly invest in common stocks of U. S. headquart e red companies. While the Fund will ge n e ra l ly invest in “grow t h companies”, it may also invest in “value stocks”. The Reynolds Blue Chip Growth and Op p o r tunity Funds had strong app re c i a tion for the twelve months ended September 30, 1999: October 1, 1998 through September 30, 1999 +48.6% +60.0% Reynolds Reynolds Blue Chip Opportunity Growth Fund Fund The Blue Chip and Opportunity Funds also The Blue Chip and Opportunity Funds also had strong appreciation for the three years ended had strong ap p re c i ation for the five ye a rs ended September 30, 1999: September 30, 1999: Average Annual Total Returns Average Annual Total Returns October 1, 1996 through September 30, 1999 October 1, 1994 through September 30, 1999 +35.5% +30.8% +31.8% +28.2% Reynolds Reynolds Reynolds Reynolds Blue Chip Opportunity Blue Chip Opportunity Growth Fund Fund Growth Fund Fund – 1 – The Blue Chip Fund has received many awards for its recent performance including: (1) America Online – Featured on Sage Online - September 8, 1999. (2) American Association of Individual Investor’s Magazine – featured in the May, 1999 issue. (3) CNBC – Featured on October 22, 1999. (4) Investor’s Business Daily – The Blue Chip Fund has received an A+ ranking from Investor’s Business Daily. Investor’s Business Daily ranks mutual funds on the basis of a moving 36-month performance. The top 5% of all mutual funds receive an A+ ranking. Investor’s Business Daily considered 4,929 mutual funds for the three years ended September 30, 1999 in determining this ranking. (5) Lipper Inc. – #1 ranking out of 347 Growth & Income funds for the five years ended September 30, 1999, ranked #2 out of 537 funds for the three years ended September 30, 1999 and ranked #2 out of 150 funds for the ten years ended September 30, 1999, and ranked #5 out of 859 funds for the one year ended September 30, 1999. (6) Mutual Funds Magazine – Chosen as the #1 growth mutual fund for 2000 in the December, 1999 edition. (7) Standard & Poor’s The Outlook – Recommended in the July 28, 1999 issue. The Reynolds Blue Chip Growth Fund The Reynolds Blue Chip Growth Fund has investments in many of the premier larger worldwide growth companies. These companies have proven management, strong financials including low debt and high return on equity, leading re s e a rch and development, and dominant wo rl dwide products with good unit growth. In addition, many of these companies are not significantly affected by economic fluctuations. The probabilities highly favor that the diversified group of industry leading companies held in the Blue Chip Fund will remain industry leaders over the long-term, continue to strongly increase their earnings, and continue to significantly increase future shareholder wealth. The Blue Chip Fund’s return was +13.1% for the nine months ended September 30, 1999. The Blue Chip F u n d ’s re t u rn was +48.6% for the one-year ended September 30, 1999, +148.9% for the three ye a rs ended September 30, 1999 and +297.8% for the five years ended September 30, 1999. These were average annual compounded rates of return of +35.5% and +31.8%, respectively. The Blue Chip Fund’s return was +407.5% for the ten years ended September 30, 1999. This was an average annual compounded rate of return of +17.6%. The Blue Chip Fund increased +512.3% since inception (August 12, 1988) through September 30, 1999. This was an average annual compounded rate of return of +17.7%. The Board of Directors declared a distribution of $0.00526 from net long-term realized gains on October 27, 1999. This distribution was paid on October 28, 1999 to shareholders of record on October 26, 1999. The Reynolds Opportunity Fund The Reynolds Opportunity Fund generally invests in medium and large size high quality companies that have proven themselves in the marketplace and are leaders in their industries. These well-managed companies usually have sales of more than $500 million and are demonstrating strong earnings growth from proprietary innovative products. A long-term investment in the Reynolds Opportunity Fund should be a good complement to a long-term i nvestment in the new Reynolds Fund and the Reynolds Blue Chip Growth Fund. We are making a high probability bet with the companies in the Opportunity Fund, just as we are with the companies in the Blue Chip F u n d, that the majority of the companies within a well dive rs i fied group of proven wo rl dwide leading companies will continue to be leaders and strongly increase their earnings and shareholder wealth in the future. – 2 – The Reynolds Opportunity Fund increased +20.7% for the nine months ended September 30, 1999 and +60.0% for the one-year year ended September 30, 1999. The Opportunity Fund increased +123.8% for the three years ended September 30, 1999 and increased +246.9% for the five years ended September 30, 1999. These were average annual compounded rates of return of +30.8% and 28.2%, respectively. The Opportunity Fund increased +250.1% since inception (January 30, 1992) through September 30, 1999. This was an average annual compounded rate of return of +17.8%. The Board of Directors declared a distribution of $0.01118 from net long-term realized gains and $0.09367 from net short-term realized gains on October 27, 1999. These distributions were paid on October 28, 1999 to shareholders of record on October 26, 1999. The Reynolds U.S. Government Bond Fund The Reynolds U.S. Government Bond Fund emphasizes high quality investments in U.S. Treasury Bonds, Treasury Notes and Treasury Bills of varying maturities. As of September 30, 1999, the assets were invested approximately 91% in U.S. Treasury Securities and 9% in high quality cash equivalents. The Reynolds U.S. Government Bond Fund is designed to satisfy many of the fixed income objectives of i nve s t o rs. For ex a m p l e, the Bond Fund is active ly managed and is invested in bonds of many diffe re n t maturities, which reduces the risk that a large percentage of the bonds in the Fund mature at an inopportune time for reinvestment. The Bond Fund had a dollar weighted average maturity of 1.6 years on September 30, 1999. The average maturity of the bonds in the Fund is continually reevaluated and adjusted based on short and long-term economic, inflation and interest rate forecasts. The Reynolds U. S. Gove rnment Bond Fund’s re t u rn was +3.2% for the one-year ended September 30, 1999. The Bond Fund’s return was +15.7% for the three years ended September 30, 1999 and +31.1% for the five years ended September 30, 1999. These were average annual compounded rates of return of +5.0% and +5.6%, re s p e c t ive ly. The Bond Fund’s re t u rn was +44.6% since inception (Ja nu a ry 30, 1992) thro u g h September 30, 1999. This was an average annual compounded rate of return of +4.9%. The Reynolds Money Market Fund The Reynolds Money Market Fund is designed to provide for inve s t o r ’s short - t e rm cash manage m e n t needs. For ease of redemption, the Money Market Fund offers: (1) free check writing (in amounts of $500 or more); or (2) telephone redemption where either a check is mailed to the shareholder, or money may be wired to the share h o l d e r ’s bank account ($12.00 wiring ch a rge). As of September 30, 1999, the assets of the Reynolds Money Market Fund were invested approximately 78% in high quality commercial paper and 22% in high quality cash equivalents. As of September 30, 1999, the dollar weighted average days to maturity of the Money Market Fund was 65 days. The Reynolds Money Market Fund’s yield should vary with the rate of inflation over the years. Its yield is u s u a l ly higher than infl ation and higher than or ap p rox i m at e ly the same as most bro ke rage - fi rm sponsore d money market funds. Brokerage-firm sponsored money market funds typically have higher expense structures due to their higher marketing costs. The Reynolds Money Market Fund’s yield is almost always higher than rates paid by most short-term bank accounts.