The Reynolds Balanced Fund

Reynolds
Balanced Fund

REYNOLDS BALANCED FUND

The Reynolds Balanced Fund is the successor to the Reynolds U. S. Government Bond Fund and its new investment objectives are “Seeking Capital Appreciation and Income”. The Balanced Fund is designed to satisfy many of the income objectives of our investors. The Balanced Fund will invest in both fixed income securities and common stocks, most of which provide dividend income. Most of the time, the Balanced Fund’s portfolio will consist of 20% to 80% fixed income securities and 20% to 80% equity securities. The fixed income portion of the portfolio emphasizes quality investments in U.S. Treasury and Federal Agency Bonds (issued by the Federal Home Loan Bank - FHLB, Federal Home Loan Mortgage Corp. - FHLMC and Federal National Mortgage Association - FNMA), Treasury Notes and Treasury Bills of varying maturities. The Balanced Fund is actively managed and the fixed income portion of the Fund is invested in bonds having different maturities, which reduces the risk that a large percentage of the bonds in the Fund mature at an inopportune time for reinvestment. The average maturity of the bonds in the Fund is continually reevaluated and adjusted based on short- and long-term economic, inflation, and interest rate forecasts. Common stocks will be evaluated based on current earnings and dividends and the future earnings prospects for the companies. The portfolio will be diversified by industry and generally include companies with larger market capitalizations.

As of September 30, 2005 the Fund’s investments were 53.6% fixed income securities (bonds), 44.8% equity securities and 1.6% short-term money market instruments and receivables. The Fund’s total return was 2.15% for the twelve months ended September 30, 2005.

Performance Discussion & Analysis
For our latest market comments, please see the latest Annual Report

Portfolio Manager
Frederick L. Reynolds

Investment Objective
Capital appreciation and income

General

Category:	Balanced Fund	Minimum Investment
Symbol:	RBALX	Initial:	$1000
Inception Date:	1/30/92	Subsequent:	$100
Net Assets in Millions:	$2.0	Initial IRA:	$1000
(as of 12/31/05)		Subsequent IRA:	$100
		Automatic Investment Plan:	$50

Performance Data

Average Annual Total Return (as of 02/28/06)
	Return
Year to Date	(1.13)%
1 Year	(0.19)%
3 Year	+0.59%
5 Year	+1.40%
10 Year	+3.15%
Life of Fund	+3.73%

Average Annual Total Return (as of 12/31/05)		Cumulative Total Return (as of 12/31/05)
	Return		Return
1 Year	+0.39%	1 Year	+0.39%
3 Year	+1.01%	3 Year	+3.08%
5 Year	+1.89%	5 Year	+9.83%
10 Year	+3.27%	10 Year	+38.00%
Life of Fund	+3.86%	Life of Fund	+69.51%

	Calendar Year End Data
Year	2005	2004	2003	2002	2001	2000	1999	1998
Total Return	+0.39%	+2.23%	+0.4%	+1.6%	+4.9%	+6.1%	+2.9%	+5.5%
Capital Gains	0	0	0	0	0	0	0	0
Dividends	0.1984	0.2213	0.164	0	0.3759	0.4230	0.4642	0.5156
Total Assets ($millions)	$2.0	$1.7	$3.2	$3.7	$4.3	$4.5	$4.3	$3.4
Value $10,000	$16,951	$16,885	$16,517	$16,445	$16,190	$15,435	$14,533	$14,147
invested on 1/30/92

Operations Data
Front end Load: None
Redemption Fee: None
Expense Ratio: 1.11%
(as of 09/30/05)

	Asset Allocation
Date	12/31/05	09/30/05	06/30/05	03/31/05	12/31/04
Equities	34.83%	43.67%	31.67%	17.0%	0
Cash	16.61%	2.73%	8.07%	22.8%	6.1%
Fixed Income	48.53%	53.60%	60.26%	60.0%	93.9%

Turnover Rate:53.0%
(as of 09/30/05)

Top Ten Holdings		Industry Weighting
(as of 12/31/05)		(as of 12/31/05)
Federal Home Loan Bank	48.5%	Utilities	10.4%
Telefonos de Mexico SA	1.5%	Banks	6.9%
General Electric Co.	1.4%	Financial Services	4.4%
Bank of America Corp.	1.4%	Household Products	3.5%
Kinder Morgon, Inc.	1.4%	Electrical Equipment	2.1%
Edison International	1.3%	Telephone Services	1.9%
Wahsington Mutual, Inc.	1.3%	Natural Gas	1.4%
PG&E Corp.	1.3%	Office Equipment	0.9%
Wells Fargo & Co.	1.3%	Medical Supplies	0.9%
PNC Financial Services Grp.	1.2%	Drugs	0.8%

Past performance is not a guarantee of future performance. 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.